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White Cap Supply Holdings, Inc. – ‘10-12B’ on 7/17/20 – ‘EX-99.1’

On:  Friday, 7/17/20, at 1:44pm ET   ·   Accession #:  1047469-20-4138   ·   File #:  1-39393

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  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 7/17/20  White Cap Supply Holdings, Inc.   10-12B                 2:2.6M                                   Toppan Merrill-FA

Document/Exhibit                   Description                      Pages   Size 

 1: 10-12B      Registration of Securities (General Form)           HTML     23K 
 2: EX-99.1     Miscellaneous Exhibit                               HTML   1.60M 

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Exhibit 99.1

3400 Cumberland Boulevard SE
Atlanta, Georgia 30339
United States

              , 2020

Dear Fellow HD Supply Stockholder:

        We are pleased to inform you that the board of directors of HD Supply Holdings, Inc. has approved the spinoff to stockholders of our White Cap Construction & Industrial business unit. White Cap shares will be distributed to HD Supply stockholders on            , 2020 as a distribution intended to be tax-free to our stockholders (except for fractional shares).

        White Cap is a leading distributor of specialty concrete and construction products and services in North America serving professional contractors. Its common stock will be listed on The Nasdaq Stock Market LLC ("NASDAQ") under the symbol "WCAP."

        As a HD Supply stockholder, you will receive            White Cap common shares for every            HD Supply common share you hold as of the record date. Stockholder approval of the distribution is not required, nor are you required to take any action to receive your White Cap common shares.

        Following completion of the spinoff, HD Supply common shares will continue to trade on NASDAQ under the symbol "HDS" and HD Supply will continue to operate its Facilities Maintenance business unit.

        We invite you to learn more about White Cap and the spinoff by reviewing the enclosed information statement, which contains important information about White Cap, including financial information.

        Thank you for your continued support of HD Supply and your future support of White Cap.

Enclosure

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Information contained herein is subject to completion or amendment. A Registration Statement on Form 10 relating to these securities has been filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended.

Subject to Completion, dated July 17, 2020

INFORMATION STATEMENT

White Cap Supply Holdings, Inc.

               Shares of Common Stock

        HD Supply Holdings, Inc. ("HD Supply") is sending this information statement to its stockholders in connection with the distribution of all the outstanding shares of White Cap Supply Holdings, Inc.'s ("White Cap") common stock to holders of HD Supply's common stock. As of the date of this information statement, HD Supply owns all of White Cap's outstanding common stock.

        Holders of HD Supply's common stock will be entitled to receive            share[s] of White Cap common stock for every            share of HD Supply common stock owned as of 5:00 p.m., Atlanta, Georgia time, on the record date,            , 2020. The distribution date for the spinoff will be            , 2020. After the spinoff, White Cap will be an independent, publicly traded company. HD Supply expects that, for U.S. federal income tax purposes, no gain or loss will be recognized by you, and no amount will be included in your income, in connection with the distribution, except to the extent of any cash you receive in lieu of fractional shares.

        You will not be required to pay anything for the White Cap common stock that will be distributed to you or to surrender or exchange your HD Supply common stock to receive White Cap common stock in the spinoff. The spinoff will not affect the number of shares of HD Supply common stock that you hold. White Cap common stock will be issued in book-entry form only, which means that no physical stock certificates will be issued. No approval by HD Supply stockholders of the spinoff is required or is being sought. You are not being asked for a proxy and you are requested not to send a proxy.

        As discussed under "The Spinoff—Trading of HD Supply Common Stock After the Record Date and Prior to the Distribution," if you sell your HD Supply common stock in the "regular way" market after the record date and before or on the distribution date, you will be selling your right to receive White Cap common stock in connection with the spinoff. You are encouraged to consult with your financial advisor regarding the specific implications of selling your HD Supply common stock before or on the distribution date.

        There is no current trading market for White Cap common stock. However, we expect that a limited market, commonly known as a "when-issued" trading market, for White Cap common stock will begin on or about            , 2020, and we expect that "regular way" trading of White Cap common stock will begin the first day of trading after the distribution date. We have applied to list White Cap common stock on The Nasdaq Stock Market LLC under the symbol "WCAP."

        In reviewing this information statement, you should carefully consider the matters described under the caption "Risk Factors" beginning on page 17 of this information statement.

        Neither the Securities and Exchange Commission (the "SEC"), nor any state securities commission has approved or disapproved these securities or determined if this information statement is truthful or complete. Any representation to the contrary is a criminal offense.

        This information statement does not constitute an offer to sell or the solicitation of an offer to buy any securities.

        HD Supply first mailed this information statement to its stockholders on or about            , 2020.

 C:     

The date of this information statement is            , 2020.

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Presentation of Information

        Unless we otherwise state or the context otherwise indicates, all references in this information statement to "White Cap," the "Company," "us," "our," or "we" mean White Cap Supply Holdings, Inc. and its subsidiaries, and all references to "HD Supply" mean HD Supply Holdings, Inc. and its subsidiaries, other than, for all periods following the spinoff, White Cap. When referenced individually, HD Supply Holdings, Inc. is referred to as "HDS Holdings" and HD Supply, Inc. is referred to as "HDS." When referenced individually, Construction & Industrial will refer to the business pre-spinoff, and White Cap will refer to the business post-spinoff, unless the context otherwise specifies.

        Our fiscal year is a 52- or 53-week period ending on the Sunday nearest to January 31. The fiscal years ending January 31, 2021 ("fiscal 2020") and February 2, 2020 ("fiscal 2019") both include 52 weeks. The three months ended May 3, 2020 ("first quarter 2020") and May 5, 2019 ("first quarter 2019") both include 13 weeks. The fiscal year ended February 3, 2019 ("fiscal 2018") includes 53 weeks. The fiscal years ended January 28, 2018 ("fiscal 2017") and January 29, 2017 ("fiscal 2016") both include 52 weeks.

        The term "GAAP" refers to generally accepted accounting principles in the United States of America (the "U.S.").

        The transaction in which White Cap will be separated from HD Supply (the "separation") and become an independent, publicly traded company is referred to in this information statement as the "spinoff." The distribution of White Cap common stock to stockholders of HD Supply to effect the spinoff is referred to in this information statement as the "distribution."

        This information statement is being sent solely to provide information to HD Supply stockholders who will receive White Cap common stock in connection with the spinoff. It is not provided as an inducement or encouragement to buy or sell any securities. You should not assume that the information contained in this information statement is accurate as of any date other than the date set forth on the cover. Changes to the information contained in this information statement may occur after that date, and we undertake no obligation to update the information contained in this information statement, unless we are so required by applicable securities laws.

Trademarks

        We use various trademarks, service marks, trade names, and brand names, such as White Cap, Brafasco, Brigade, A.H. Harris, Kenseal, and Contractors' Warehouse, that we deem particularly important to the advertising activities and operation of our business, and some of these marks are registered in the U.S. and, in some cases, other jurisdictions. This information statement also refers to the brand names, trademarks, or service marks of other companies. All brand names and other trademarks or service marks cited in this information statement are the property of their respective holders.

Market and Industry Data

        This information statement includes estimates regarding market and industry data and forecasts, which are based on publicly available information, industry publications and surveys, reports from government agencies, reports by market research firms, and our own estimates based on our management's knowledge of, and experience in, the markets in which we compete. We have not independently verified market and industry data from third-party sources. This information cannot always be verified with complete certainty due to the limits on the availability and reliability of raw data, the voluntary nature of the data gathering process, and other limitations and uncertainties inherent in surveys of market size.

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QUESTIONS AND ANSWERS ABOUT THE SPINOFF

Q:    What is the spinoff?

A:

The spinoff is the method by which White Cap will separate from HD Supply. To complete the spinoff, HD Supply will distribute to its stockholders all of the shares of White Cap common stock that it owns. Following the spinoff, we will be an independent, publicly traded company, and HD Supply will not retain any ownership interest in us. You do not have to pay any consideration or give up any portion of your HD Supply common stock to receive our common stock in the spinoff.

Q:    Why am I receiving this document?

A:

HD Supply is delivering this document to you because you are a holder of HD Supply common stock. This document is intended to help you understand how the spinoff will affect your investment in HD Supply and your investment in White Cap after the spinoff.

Q:    What is the expected date for the completion of the spinoff?

A:

The completion and timing of the spinoff are dependent on a number of conditions, but if the conditions are timely met, we expect the spinoff to be completed on                 , 2020. See "The Spinoff—Spinoff Conditions and Termination."

Q:    What are the reasons for the spinoff?

A:

HD Supply's board of directors and management believe that our separation from HD Supply will provide the following benefits: (i) position ourselves within our industry as a focused, independent company; (ii) pursue both organic growth and acquisition opportunities aligned with our strategic priorities; (iii) create a more optimal capital structure and capital allocation consistent with our own independent financial profile; and (iv) align our incentive compensation with our financial performance.

Q:    What is the Company?

A:

The Company is a Delaware corporation that was formed on January 10, 2020 for the purpose of holding the White Cap businesses following the spinoff. Prior to the transfer by HD Supply to us of these businesses, which will occur in connection with the spinoff, we will have had no operations other than those incidental to our formation or undertaken in preparation for the spinoff.

Q:    Who will manage White Cap after the spinoff?

A:

We will benefit from an experienced leadership team after the spinoff. James A. Rubright, a current independent director of HD Supply, will serve as our independent Board Chairman. Mr. Rubright has significant experience in public company management and board leadership, and a deep understanding of operations, strategy, and risk management. John A. Stegeman, formerly President of the Construction & Industrial reporting segment of HD Supply, will serve as Chief Executive Officer of White Cap bringing his 34+ years of relevant experience to the job. Mr. Stegeman will also serve as a director. Alan W. Sollenberger, formerly Chief Operating Officer of the Construction & Industrial reporting segment of HD Supply, will serve as President of White Cap bringing his 12+ years of industrial distribution experience to the job. Shawn G. Meredith, who has over 12 years of experience as a chief financial officer, and over 13 years of industrial products experience, seven of which have been focused on distribution, will serve as Chief Financial Officer of White Cap. Susan V. Stucker, who has over 30 years of legal experience, including 12 years with HD Supply leading labor and employment law teams, and, since January 2016, has also led HD Supply's litigation, labor and employment law, and risk management teams,

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will serve as White Cap's General Counsel and Corporate Secretary. Elizabeth H. Malkin, who has nearly 20 years of experience in the human resources field and, since October 2006, has held various roles in the areas of talent acquisition, organizational effectiveness, talent management, and learning at HD Supply, will serve as White Cap's Chief Human Resources Officer. We will also benefit from the knowledge, experience, and skills of our full board of directors. For more information regarding our management team and our board of directors following the spinoff, see "Management."

Q:    What is being distributed in the spinoff?

A:

HD Supply will distribute            share[s] of White Cap common stock for every            share of HD Supply common stock outstanding as of the record date for the spinoff. The number of HD Supply shares you own and your proportionate interest in HD Supply will not change as a result of the spinoff. Immediately following the spinoff, your proportionate interest in White Cap will be identical to your proportionate interest in HD Supply (as adjusted for any fractional shares).

Q:    What is the record date for the spinoff, and when will the spinoff occur?

A:

The record date is              , 2020, and ownership is determined as of 5:00 p.m., Atlanta, Georgia time, on that date. White Cap common stock will be distributed on the distribution date,              , 2020.

Q:    Is a stockholder vote required to approve the distribution or spinoff?

A:

No stockholder vote is required to approve the distribution or spinoff.

Q:    Can HD Supply decide to cancel the spinoff even if all the conditions have been met?

A:

Yes. The spinoff is subject to the satisfaction or waiver by HD Supply, at the direction of its board of directors, of certain conditions, including, among others, approval of the HD Supply board of directors, declaration of the effectiveness of our registration statement on Form 10 of which this information statement is a part, and receipt of an opinion from our tax counsel to the effect that the distribution of all of the shares of White Cap common stock owned by HD Supply to the stockholders of HD Supply will qualify under the Internal Revenue Code of 1986, as amended (the "Code") as a transaction that is generally tax-free to the HD Supply stockholders, except with respect to any cash received in lieu of fractional shares. See "The Spinoff—Spinoff Conditions and Termination." Even if all the conditions are met, HD Supply has the right not to complete the spinoff if, at any time prior to the distribution, the board of directors of HD Supply determines, in its sole and absolute discretion, that the spinoff is not in the best interests of HD Supply or its stockholders or that market conditions or other circumstances are such that it is not advisable to separate the White Cap business from HD Supply at that time. In the event HD Supply, at the direction of its board of directors, waives a material condition or amends, modifies, or abandons the spinoff, HD Supply will notify its stockholders in a manner reasonably calculated to inform them of such modification with a press release, Current Report on Form 8-K, or other similar means.

Q:    As a holder of HD Supply common stock as of the record date, what do I have to do to participate in the spinoff?

A:

You are not required to take any action to participate in the distribution, although you are urged to read this entire document carefully. You will receive               share[s] of White Cap common stock for every              share of HD Supply common stock held as of the record date and retained through the distribution date. You may also participate in the distribution if you purchase HD

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Supply common stock in the "regular way" market after the record date and retain your HD Supply common stock through the distribution date. See "The Spinoff—Trading of HD Supply Common Stock After the Record Date and Prior to the Distribution."

Q:

If I sell my shares of HD Supply common stock before or on the distribution date, will I still be entitled to receive shares of White Cap common stock in the spinoff?

A:

If you own shares of HD Supply common stock on the record date and hold such shares through the distribution date, you will receive shares of White Cap common stock. However, if you sell your shares of HD Supply common stock after the record date and before or on the distribution date, you will also be selling your right to receive shares of White Cap common stock. See "The Spinoff—Trading of HD Supply Common Stock After the Record Date and Prior to the Distribution." You are encouraged to consult with your financial advisor regarding the specific implications of selling your HD Supply common stock before or on the distribution date.

Q:    How will fractional shares be treated in the spinoff?

A:

Any fractional shares of common stock otherwise issuable to you will be sold on your behalf, and you will receive a cash payment with respect to that fractional share. For an explanation of how the cash payments for fractional shares will be determined, see "The Spinoff—Treatment of Fractional Shares."

Q:    Will the spinoff affect the trading price of my HD Supply common stock?

A:

Yes, the trading price of HD Supply common stock immediately following the spinoff is expected to be lower than immediately prior to the spinoff because the trading price of HD Supply's common stock will no longer reflect the value of White Cap and HD Supply. However, we cannot provide you with any guarantees as to the prices at which the HD Supply common stock or White Cap common stock will trade following the spinoff.

Q:    Will my HD Supply common stock continue to trade on a stock market?

A:

Yes, HD Supply common stock will continue to be listed on The Nasdaq Stock Market LLC ("NASDAQ") under the symbol "HDS."

Q:

What are the U.S. federal income tax consequences to me of the distribution of shares of White Cap common stock pursuant to the spinoff?

A:

The spinoff is conditioned upon the receipt by HD Supply of an opinion of counsel to the effect that the distribution of all of the shares of White Cap common stock owned by HD Supply to the stockholders of HD Supply will qualify under the Code as a distribution that is generally tax-free to the HD Supply stockholders. On the basis that the distribution so qualifies, for U.S. federal income tax purposes, you will not recognize any gain or loss, and no amount will be included in your income in connection with the distribution, except with respect to any cash received in lieu of fractional shares. See "The Spinoff—Material U.S. Federal Income Tax Consequences of the Distribution."

Q:

When will I receive my shares of White Cap common stock? Will I receive a stock certificate for my shares of White Cap common stock distributed as a result of the spinoff?

A:

Registered holders of HD Supply common stock who are entitled to participate in the spinoff will receive a book-entry account statement reflecting their ownership of White Cap common stock. For additional information, registered stockholders in the U.S., Canada, or Puerto Rico should contact HD Supply's transfer agent, American Stock Transfer & Trust Company, LLC, at (800) 937-5449 or through email at help@astfinancial.com. Stockholders located outside the U.S.,

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Canada, and Puerto Rico may call (718) 921-8137. If you would like to receive physical certificates evidencing your shares of White Cap common stock, please contact White Cap's transfer agent, American Stock Transfer & Trust Company, LLC, at (800) 937-5449 or through email at help@astfinancial.com. Stockholders located outside the U.S., Canada, and Puerto Rico may call (718) 921-8137. See "The Spinoff—When and How You Will Receive White Cap Shares."

Q:    What if I hold my shares of common stock through a broker, bank, or other nominee?

A:

HD Supply stockholders who hold their shares of common stock through a broker, bank, or other nominee will have their brokerage account credited with shares of White Cap common stock. For additional information, those stockholders should contact their broker, bank, or other nominee directly.

Q:

What if I have stock certificates reflecting my shares of HD Supply common stock? Should I send them to the transfer agent or to HD Supply?

A:

No, you should not send your stock certificates to the transfer agent or to HD Supply. You should retain your HD Supply stock certificates.

Q:    Will White Cap incur any debt prior to or at the time of the spinoff?

A:

As part of the spinoff, we expect to incur approximately $750 million of new debt, which we expect to consist of $150.0 million of borrowings under the $600 million ABL Facility (as defined in "Description of Certain Indebtedness—ABL Facility") providing for senior secured revolving loans and letters of credit of up to a maximum aggregate principal amount of $600 million and approximately $600 million in aggregate principal amount of senior notes. See "Description of Certain Indebtedness."

Q:    Are there risks to owning common stock of White Cap?

A:

Yes. Ownership of White Cap common stock is subject to both general and specific risks relating to White Cap's business, the industry in which it operates, its ongoing contractual relationships with HD Supply, and its status as a separate, publicly traded company. Ownership of White Cap common stock is also subject to risks relating to the spinoff. See "Risk Factors."

Q:    Does White Cap intend to pay cash dividends?

A:

We do not currently expect to declare or pay dividends on our common stock for the foreseeable future. Instead, we intend to retain earnings for use in the operation and expansion of our business. Any future payment of dividends will be at the discretion of our board of directors and will depend upon various factors then existing, including earnings, financial condition, results of operations, 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 deem relevant. See "Dividend Policy."

Q:    Will White Cap common stock trade on a stock market?

A:

Yes. Currently, there is no public market for our common stock. We will apply to list our common stock on NASDAQ under the symbol "WCAP." We cannot predict the trading price for our common stock when such trading begins.

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Q:

What will happen to HD Supply stock options, restricted stock, performance awards, restricted stock units, and deferred stock units?

A:

In general, it is currently anticipated that each outstanding HD Supply equity incentive award held by a White Cap employee or White Cap director as of the spinoff will be adjusted or converted into an award with respect to White Cap common stock and each other HD Supply equity incentive award will also be adjusted or converted but will continue to relate to HD Supply common stock. In each case, the award will be equitably adjusted or converted in a manner intended to preserve the aggregate intrinsic value of the original HD Supply equity award and, other than regarding performance awards described below, the terms of the equity awards, such as vesting dates, will generally remain substantially the same. For information regarding the performance awards, see "Compensation Discussion and Analysis—Components of Compensation—Annual Equity Incentives—Performances Awards." For further information regarding the treatment of equity awards in the spinoff, see "The Spinoff—Stock-Based Plans."

Q:    What will the relationship between HD Supply and White Cap be following the spinoff?

A:

In connection with the spinoff, we and HD Supply will enter into a number of short-term agreements that will govern our future relationship. As a result of these agreements, among other things, following the spinoff, (i) we and HD Supply will indemnify the other's affiliates and their respective past and present directors, officers and employees, and each of their successors and assigns, against certain liabilities incurred in connection with the spinoff and our and HD Supply's respective businesses, (ii) we and HD Supply will provide and/or make available various administrative services and assets to each other, and (iii) we and HD Supply will enter into several agreements to govern our relationship following the distribution. See "Relationship with HD Supply After the Spinoff—Agreements Between HD Supply and Us."

Q:    Will I have appraisal rights in connection with the spinoff?

A:

No. Holders of HD Supply common stock are not entitled to appraisal rights in connection with the spinoff.

Q:    Who is the transfer agent for your shares of common stock?

A:

American Stock Transfer & Trust Company, LLC.

Q:    Who is the distribution agent for the spinoff?

A:

American Stock Transfer & Trust Company, LLC.

Q:    Whom can I contact for more information?

A:

If you have questions relating to the mechanics of the distribution of White Cap common stock, you should contact the distribution agent:

By Mail, Overnight Courier, or Hand-Delivery to:

American Stock Transfer & Trust Company, LLC
6201 15th Avenue
Brooklyn, NY 11219

By Phone or Email:

Telephone: (800) 937-5449 or (718) 921-8137

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Outside the U.S., Canada and Puerto Rico: (718) 921-8137
Email: help@astfinancial.com

Before the distribution, if you have questions relating to the spinoff, you should contact HD Supply at:

HD Supply
3400 Cumberland Blvd SE
Atlanta, Georgia
Attention: General Counsel and Corporate Secretary
Telephone: (770) 852-9000

After the distribution, if you have questions relating to White Cap, you should contact White Cap at:

White Cap
6250 Brook Hollow Parkway
Norcross, Georgia 30071
Attention: General Counsel and Corporate Secretary
Telephone: (404) 879-7740

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RISK FACTORS

        The following are certain risk factors that could affect our business, financial condition, results of operations, and cash flows. The risks that are highlighted below are not the only risks that we face. You should carefully consider each of the following risks and all of the other information contained in this information statement. Some of these risks relate principally to our spinoff from HD Supply, while others relate principally to our business and the industry in which we operate or to the securities markets generally and ownership of our common stock. If any of the following risks actually occur, our business, financial condition, results of operations, or cash flows could be negatively affected.

Risks Relating to the Spinoff

We may not realize the potential benefits from the spinoff.

        We may not realize the potential benefits that we expect from our spinoff from HD Supply. We have described those anticipated benefits elsewhere in this information statement. See "The Spinoff—Reasons for the Spinoff." In addition, as described elsewhere in this information statement, we will incur additional costs related to our separation from HD Supply. We also expect to incur additional ongoing costs related to operating as an independent public company and replacing the services previously provided by HD Supply. We currently estimate those additional costs will range from approximately $20 million to $25 million in excess of our fiscal 2019 reported Selling, general, and administrative expenses, excluding items impacting comparability. Our estimate of ongoing costs takes into consideration the benefit that we will receive from the elimination of cost allocations from HD Supply after the spinoff is completed. The costs associated with performing or outsourcing these functions may exceed these amounts. A significant increase in the costs of performing or outsourcing these functions could materially and adversely affect our business, financial condition, results of operations, and cash flows.

We have no history operating as an independent public company. We will incur additional expenses to create the corporate infrastructure necessary to operate as an independent public company and we will experience increased ongoing costs in connection with being an independent public company.

        Our business has historically used HD Supply's corporate infrastructure and services to support our business functions. The expenses related to establishing and maintaining this infrastructure have been spread across each of HD Supply's businesses and charged to us on a cost-allocation basis. Except as described under the caption "Relationship with HD Supply After the Spinoff," after the distribution date we will no longer have access to HD Supply's infrastructure or services and we will need to establish our own. Following the spinoff, HD Supply will continue to provide some services to us on a transitional basis pursuant to a transition services agreement. For more information regarding the transition services agreement, see "Relationship with HD Supply After the Spinoff—Agreements Between HD Supply and Us—Transition Services Agreement." However, we cannot assure you that all such functions will be successfully executed by HD Supply during the transition period or that we will not have to expend significant efforts or costs materially in excess of those estimated in the transition services agreement. Any interruption in these services could have a material adverse effect on our business, financial condition, results of operations, and cash flows. In addition, at the end of this transition period, we will need to perform these functions ourselves or hire third parties to perform these functions on our behalf.

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Our historical combined and pro forma financial information are not necessarily indicative of our future financial condition, results of operations, or cash flows nor do they reflect what our financial condition, results of operations, or cash flows would have been as an independent public company during the periods presented.

        The historical combined financial information we have included in this information statement does not necessarily reflect what our financial condition, results of operations, or cash flows would have been as an independent public company during the periods presented and is not necessarily indicative of our future financial condition, future results of operations, or future cash flows. This is primarily a result of the following factors:

•

our historical combined financial results reflect allocations of expenses for services historically provided by HD Supply, and may not fully reflect the increased costs associated with being an independent public company, including significant changes that will occur in our cost structure, management, financing arrangements, and business operations as a result of our spinoff from HD Supply;



•

our working capital and capital expenditure requirements historically have been satisfied as part of HD Supply's corporate-wide capital access, capital allocation, and cash management programs; our debt structure and cost of debt and other capital may be significantly different from that reflected in our historical combined financial statements; and



•

the historical combined financial information may not fully reflect the effects of certain liabilities that will be incurred or assumed by us and may not fully reflect the effects of certain assets that will be transferred to, and liabilities that will be assumed by, HD Supply.

        The pro forma adjustments are based on available information and assumptions that we believe are reasonable; however, our assumptions may prove not to be accurate. In addition, our unaudited pro forma combined financial information may not give effect to various ongoing additional costs that we may incur in connection with being an independent public company. Accordingly, our unaudited pro forma combined financial information does not reflect what our financial condition, results of operations, or cash flows would have been as an independent public company and are not necessarily indicative of our future financial condition, future results of operations, or future cash flows. Please refer to "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Unaudited Pro Forma Combined Financial Data" and our combined financial statements and corresponding notes included elsewhere in this information statement.

If the distribution does not qualify as a distribution that is tax-free for U.S. federal income tax purposes, HD Supply and holders of HD Supply common stock could be subject to significant tax liability.

        As described under "The Spinoff—Material U.S. Federal Income Tax Consequences of the Distribution," it is intended that the distribution will qualify as a tax-free distribution within the meaning of Section 355 of the Code. The distribution is conditioned upon the receipt of an opinion of tax counsel to the effect that such transactions will qualify for its intended tax treatment. An opinion of tax counsel does not preclude the Internal Revenue Service (the "IRS") or the courts from adopting a contrary position. The tax opinion will rely on certain representations, covenants, and assumptions, including those relating to our and HD Supply's past and future conduct; if any of those representations, covenants, or assumptions is inaccurate, tax counsel may not be able to provide the required tax opinion or the tax consequences of the distribution could differ from the intended tax treatment. If the separation and/or certain related transactions fail to qualify for tax-free treatment, for any reason, HD Supply and/or holders of HD Supply common stock would be subject to tax as a result of the separation and certain related transactions, including the distribution. See "The Spinoff—Material U.S. Federal Income Tax Consequences of the Distribution."

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If the distribution is taxable to HD Supply as a result of a breach by us of any covenant or representation made by us in the tax matters agreement, we will generally be required to indemnify HD Supply; the obligation to make a payment on this indemnification obligation could have a material adverse effect on us.

        As described above, it is intended that the distribution qualify as generally tax-free to HD Supply and tax-free to holders of HD Supply common stock, except with respect to any cash received in lieu of fractional shares. If the distribution is not so treated or is taxable to HD Supply (see "The Spinoff—Material U.S. Federal Income Tax Consequences of the Distribution—The Distribution") due to a breach by us (or any of our subsidiaries) of any covenant or representation made by us in the tax matters agreement, we will generally be required to indemnify HD Supply for all tax-related liabilities incurred by HD Supply in connection with the spinoff. In addition, we will not control the resolution of any tax contest relating to taxes suffered by HD Supply in connection with the spinoff, and we may not control the resolution of tax contests relating to any other taxes for which we may ultimately have an indemnity obligation under the tax matters agreement. In the event that HD Supply suffers tax-related liabilities in connection with the spinoff that must be indemnified by us under the tax matters agreement, the indemnification liability could have a material adverse effect on us.

We may be affected by significant restrictions following the spinoff imposed on us under the tax matters agreement.

        The tax matters agreement generally will prohibit us from taking certain actions that could cause the distribution to fail to qualify as tax-free transactions, including:

•

during the two-year period following the distribution date (or otherwise pursuant to a "plan" within the meaning of Section 355(e) of the Code), we may be prevented from allowing or permitting certain business combinations or transactions to occur;



•

during the two-year period following the distribution date (or otherwise pursuant to a "plan" within the meaning of Section 355(e) of the Code), we may not sell or otherwise issue our common stock, other than pursuant to issuances that satisfy certain regulatory safe harbors set forth in U.S. Department of the Treasury ("Treasury") regulations;



•

during the two-year period following the distribution date (or otherwise pursuant to a "plan" within the meaning of Section 355(e) of the Code), we may not redeem or otherwise acquire any of our common stock, other than pursuant to certain open-market repurchases of less than 20% of our common stock (in the aggregate);



•

during the two-year period following the distribution date (or otherwise pursuant to a "plan" within the meaning of Section 355(e) of the Code), we may not amend our Amended and Restated Certificate of Incorporation (as defined in "Description of Capital Stock") (or other organizational documents) or take any other action, whether through a stockholder vote or otherwise, affecting the voting rights of our common stock; and



•

more generally, we may not take any action that could reasonably be expected to cause the distribution to fail to qualify as tax-free under Section 355 of the Code.

        If we take any of the actions above and such actions cause tax-related liabilities to be incurred by HD Supply, we generally will be required to indemnify HD Supply for such tax-related liabilities under the tax matters agreement. See "Relationship with HD Supply After the Spinoff—Agreements Between HD Supply and Us—Tax Matters Agreement." Due to these restrictions and indemnification obligations under the tax matters agreement, we may be limited in our ability to pursue strategic transactions, equity, or convertible debt financings or other transactions that may otherwise be in our best interests. Also, our potential indemnity obligation to HD Supply might discourage, delay, or prevent a change of control that our stockholders may consider favorable.

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We will be subject to continuing contingent liabilities following the spinoff, including potential indemnification liabilities to HD Supply, and these liabilities could materially and adversely affect our business, financial condition, results of operations, and cash flows.

        We will enter into a separation and distribution agreement with HD Supply that will provide for, among other things, the principal corporate transactions required to effect the spinoff, certain conditions to the spinoff, and provisions governing the relationship between our Company and HD Supply with respect to and resulting from the spinoff. For a description of the separation and distribution agreement, see "Relationship with HD Supply After the Spinoff—Agreements Between HD Supply and Us—Separation and Distribution Agreement." Among other things, the separation and distribution agreement provides for indemnification obligations designed to make us financially responsible for substantially all liabilities that may exist relating to the White Cap business, whether incurred prior to or after the spinoff, and whether known or unknown at the time of the spinoff, as well as those obligations of HD Supply assumed by us pursuant to the separation and distribution agreement. If we are required to indemnify HD Supply under the circumstances set forth in the separation and distribution agreement, or meaningful unknown liabilities surface, we may be subject to substantial liabilities.

        In addition, under the Code and applicable Treasury regulations, each corporation that was a member of the HD Supply consolidated tax reporting group during any taxable period or portion of any taxable period ending on or before the completion of the spinoff is severally liable for the U.S. federal income tax liability of the entire HD Supply consolidated tax reporting group for that taxable period. Similar rules may apply for state, local, and non-U.S. tax purposes. In connection with the spinoff, we will enter into a tax matters agreement with HD Supply that will allocate the responsibility for prior period taxes of any HD Supply consolidated, combined, unitary, or other tax reporting group between us and HD Supply. See "Relationship with HD Supply After the Spinoff—Agreements Between HD Supply and Us—Tax Matters Agreement." However, if HD Supply is unable to pay any prior period taxes for which it is responsible under the tax matters agreement, we could be required to pay the entire amount of such taxes.

In connection with the spinoff, HD Supply will indemnify us for certain liabilities. However, there can be no assurance that the indemnity will be sufficient to insure us against the full amount of such liabilities, or that HD Supply's ability to satisfy its indemnification obligations will not be impaired in the future.

        Pursuant to the separation and distribution agreement, HD Supply will agree to indemnify us for certain liabilities. However, third parties could seek to hold us responsible for any of the liabilities that HD Supply has agreed to retain, and there can be no assurance that the indemnity from HD Supply will be sufficient to protect us against the full amount of such liabilities, or that HD Supply will be able to fully satisfy its indemnification obligations. Moreover, even if we ultimately succeed in recovering from HD Supply any amounts for which we are held liable, we may be temporarily required to bear these losses ourselves. If HD Supply is unable to satisfy its indemnification obligations, the underlying liabilities could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

        After the spinoff, HD Supply's insurers may deny coverage to us for liabilities associated with occurrences prior to the spinoff. Even if we ultimately succeed in recovering from such insurance providers, we may be required to temporarily bear such loss of coverage.

The terms of the distribution and the agreements we will enter into with HD Supply in connection with the spinoff were determined solely by HD Supply.

        The agreements that we will enter into with HD Supply in connection with the spinoff were prepared in the context of the spinoff while our business was still operated by and part of HD Supply,

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and the terms were determined by HD Supply as our sole stockholder. Because these agreements were negotiated in the context of a parent-subsidiary relationship prior to the spinoff where actual or perceived conflicts of interest may have been present, the terms of these agreements may be more or less favorable to us than those that would have resulted from arm's-length negotiations between unaffiliated third parties. See "Relationship with HD Supply After the Spinoff—Agreements Between HD Supply and Us."

Our accounting, enterprise resource planning, and other management systems and resources may not be adequately prepared to meet the financial reporting and other requirements to which we will be subject following the spinoff. If we are unable to achieve and maintain effective internal controls, our business, financial condition, results of operations, and cash flows could be materially adversely affected.

        Our financial results are currently included within the consolidated results of HD Supply, and we believe that our reporting and control systems are appropriate for a subsidiary of a public company. However, until the spinoff, we will not have been directly subject to the reporting and other requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). As a result of the spinoff, we will be directly subject to reporting and other obligations under the Exchange Act, including the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act"). These reporting and other obligations will place significant demands on our management and administrative and operational resources, including our accounting resources. To comply with these requirements, we anticipate that we will need to upgrade our systems, including IT and enterprise resource planning systems, implement additional financial and management controls, reporting systems and procedures, and hire additional accounting and finance staff. If we are unable to do so in a timely and effective fashion, our ability to comply with our financial reporting requirements and other rules that apply to reporting companies under the Exchange Act could be impaired. Any failure to achieve and maintain effective internal controls could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

HD Supply, at the direction of its board of directors, may abandon the spinoff at any time, and HD Supply, at the direction of its board of directors, may determine to amend or modify any and all terms of the spinoff related agreements at any time prior to the distribution date.

        No assurance can be given that the spinoff will occur or, if it occurs, that it will occur on the terms described in this information statement. In addition to the conditions to the spinoff described herein (certain of which may be waived by HD Supply, at the direction of its board of directors in its sole discretion), HD Supply, at the direction of its board of directors, may abandon the spinoff at any time before the distribution date for any reason or for no reason. In addition, HD Supply, at the direction of its board of directors, may amend or modify any and all terms of the spinoff and the related transactions and agreements at any time prior to the distribution date. If any condition to the spinoff is waived or if any material amendments or modifications are made to the terms of the spinoff or to the ancillary agreements thereto before the distribution date, HD Supply will notify its stockholders in a manner reasonably calculated to inform them of such modifications with a press release, Current Report on Form 8-K, or other similar means.

After the distribution, certain members of management, directors, and stockholders will hold stock in both HD Supply and us, and as a result may face actual or potential conflicts of interest.

        After the distribution, certain members of management and directors of each of HD Supply and us will own both HD Supply common stock and our common stock. See "Security Ownership of Certain Beneficial Owners and Management." This ownership overlap could create, or appear to create, potential conflicts of interest when our management and directors and HD Supply's management and directors face decisions that could have different implications for us and HD Supply. For example,

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potential conflicts of interest could arise in connection with the resolution of any dispute between HD Supply and us regarding the terms of the agreements governing the distribution and our relationship with HD Supply thereafter. Potential conflicts of interest may also arise out of any commercial arrangements that we or HD Supply may enter into in the future.

No vote of HD Supply stockholders is required in connection with the spinoff.

        No vote of HD Supply stockholders is required in connection with the spinoff. Accordingly, if this transaction occurs and you do not want to receive our common stock in the distribution, your only recourse will be to divest yourself of your HD Supply common stock prior to the record date for the distribution or to sell your HD Supply common stock in the "regular way" market in between the record date and the distribution date.

Risks Relating to Our Business

Our results of operations have been and will in the future be adversely impacted by the COVID-19 and other potential pandemics, and the duration and extent to which it will impact our results of operations remains uncertain.

        The global spread of COVID-19 has created significant market volatility, uncertainty, and economic disruption. The extent to which the COVID-19 pandemic impacts our business, operations, financial results, and financial condition will depend on numerous evolving factors which are uncertain, including: the duration and scope of the pandemic; governmental, business, and individuals' actions taken in response; the effect on our customers and customers' demand for our services and products; the effect on our suppliers and disruptions to the global supply chain; our ability to sell and provide our services and products, including as a result of travel restrictions and people working from home; disruptions to our operations resulting from the illness of any of our associates, including associates at our branches and distribution centers; restrictions or disruptions to transportation, including reduced availability of ground transport; the ability of our customers to pay for our services and products disruptions to our operations and increased costs resulting from increased cleaning and sanitization and the installation of personal protective barriers; and any closures of our and our suppliers' and customers' facilities. These effects of the COVID-19 pandemic have resulted and will result in lost or delayed revenue to us. In addition, the impact of COVID-19 on macroeconomic conditions may impact the proper functioning of financial and capital markets, commodity and energy prices, and interest rates. Even after the COVID-19 pandemic has subsided, we may continue to experience adverse impacts to our business as a result of any economic recession or depression that has occurred or may occur in the future.

We are subject to inherent risks of the non-residential and residential construction markets, including risks related to general economic conditions.

        Demand for our products and services depends to a significant degree on spending in our markets. The level of activity in our markets depends on a variety of factors that we cannot control.

        Historically, both new housing starts and residential remodeling have decreased in slow economic periods. In addition, residential construction activity can impact the level of non-residential construction activity. Other factors impacting the level of activity in the non-residential and residential construction markets include:

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changes in interest rates;



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unemployment rates;



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availability of skilled labor;

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high foreclosure rates and unsold/foreclosure housing inventory;



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unsold new housing inventory;



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availability of financing (including the impact of disruption in the mortgage markets);



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adverse changes in industrial economic outlook;



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a decrease in the affordability of homes;



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vacancy rates;



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capacity utilization;



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capital spending;



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commercial investment;



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corporate profitability;



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local, state, and federal government regulation (including tax laws); and



•

shifts in populations away from the markets that we serve.

        Because our markets are sensitive to changes in the economy, downturns (or lack of substantial improvement) in the economy in any region in which we operate have adversely affected and could again adversely affect our business, financial condition, results of operations, and cash flows, and could require us to close under-performing locations.

        While we operate in many markets in the U.S. and Canada, our business is particularly impacted by changes in California. According to the U.S. Bureau of Economic Analysis, California is the largest construction market in the U.S. based on private construction spending. Our business started in California, which is where the largest number of our customer-facing locations are located. Accordingly, impacts to the non-residential and residential construction markets in California specifically could have a more significant impact on our business.

        In addition, the markets in which we compete are sensitive to general business and economic conditions in the U.S. and worldwide, including availability of credit, changes in interest rates, fluctuations in capital, credit, and mortgage markets, and changes in business and consumer confidence. Adverse developments in global financial markets and general business and economic conditions, including through recession, downturn or otherwise, could have a material adverse effect on our business, financial condition, results of operations, and cash flows, including our ability and the ability of our customers and suppliers to access capital. Weakness in the non-residential building construction market and the new residential construction market could have a significant adverse effect on our business, financial condition, results of operations, and cash flows. In addition, because of these factors, there may be fluctuations in our results of operations, and the results for any historical period may not be indicative of results for any future period.

We may be unable to maintain profitability.

        We have set goals to progressively improve our profitability over time by growing our sales, increasing our Gross profit as a percentage of Net sales ("gross margin"), and reducing our expenses as a percentage of sales. There can be no assurance that we will achieve our enhanced profitability goals. Factors that could significantly adversely affect our efforts to achieve these goals include, but are not limited to, the failure to:

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grow our revenue organically or through acquisitions;

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improve our revenue mix by investing (including through acquisitions) in businesses that provide higher margins than we have been able to generate historically;



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achieve improvements in purchasing or maintain or increase our rebates from vendors through our vendor consolidation and/or low-cost country initiatives;



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improve our gross margins through the utilization of improved pricing practices and technology and sourcing savings;



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control our overhead and support expenses as we grow;



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effectively evaluate future inventory reserves;



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maintain an appropriate product mix, particularly with respect to our outlook, budgeting, and strategic planning;



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collect monies owed to us from customers; and



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integrate any businesses acquired.

Any of these failures or delays may adversely affect our ability to increase our profitability.

We may be required to take impairment charges relating to our operations which could impact our future operating results.

        As of February 2, 2020, goodwill represented approximately 24% of our total assets. Goodwill is not amortized and is subject to impairment testing at least annually using a fair value based approach. The identification and measurement of impairment involves the estimation of the fair value of reporting units. The estimates of fair value of reporting units are based on the best information available as of the date of the assessment and incorporate management assumptions about expected future cash flows and other valuation techniques. Future cash flows can be affected by changes in industry or market conditions among other things.

        The recoverability of goodwill is evaluated at least annually and when events or changes in circumstances indicate that the fair value of a reporting unit has more likely than not declined below its carrying value. Our annual impairment test resulted in no impairment of goodwill during fiscal 2019, fiscal 2018, or fiscal 2017.

        We cannot accurately predict the amount and timing of any impairment of assets, and we may be required to take goodwill or other asset impairment charges relating to certain of our reporting units and asset groups in the event we experience weakness in the non-residential and/or residential construction markets and/or the general U.S. economy. Similarly, certain Company transactions could result in goodwill impairment charges being recorded. Any such non-cash charges would have an adverse effect on our financial results.

We occupy most of our locations under long-term, non-cancelable leases. We may be unable to renew leases on favorable terms or at all. Also, if we close a location, we may remain obligated under the applicable lease.

        Most of our locations are located in leased premises. Many of our current leases are non-cancelable and typically have terms ranging from three to seven years, with options to renew for specified periods of time. We believe that leases we enter into in the future will likely be long-term and non-cancelable and have similar renewal options. However, there can be no assurance that we will be able to renew our current or future leases on favorable terms or at all which could have an adverse effect on our ability to operate our business and on our results of operations. In addition, if we close a location, we generally remain committed to perform our obligations under the applicable lease, which include, among other things, payment of the base rent for the balance of the lease term. Our obligation

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to continue making rental payments in respect of leases for closed locations could have a material adverse effect on our business and results of operations.

The markets in which we operate are highly competitive and fragmented, and demand for our products and services could decrease if we are not able to compete effectively.

        The markets in which we operate are fragmented and highly competitive. Our competition includes other distributors and manufacturers that sell products directly to their respective customer bases. To a limited extent, retailers of electrical and plumbing fixtures and supplies, building materials, and tools and equipment also compete with us. We also expect that new competitors may develop over time as internet-based enterprises become more reliable and refine their service capabilities. Competition varies depending on product offerings, customer classification, and geographic area.

        We compete with many local, regional, and, in several markets and product categories, other national distributors. No assurance can be given that we will be able to effectively respond to these competitive pressures. Increased competition by existing and future competitors could result in reductions in sales, prices, volumes, and gross margins that could materially adversely affect our business, financial condition, and results of operations. Furthermore, our success will depend, in part, on our ability to maintain our market share and gain market share from competitors.

        Additionally, customers historically have exerted pressure on their outside suppliers to keep prices low in the highly fragmented, competitive bid-based specialty concrete supply industry. If we are unable to generate sufficient cost savings to offset any price reductions, our financial condition, results of operations, and cash flows may be adversely affected.

Our competitors continue to consolidate, which could cause markets to become more competitive and could negatively impact our business.

        Although the markets in which we operate are currently highly fragmented, our competitors in the U.S. and Canada continue to consolidate. This consolidation is being driven by customer needs and supplier capabilities, which could cause markets to become more competitive as greater economies of scale are achieved by distributors, or as competitors with new business models are willing and able to operate with lower gross profits. Customers are increasingly aware of the total costs of fulfillment and of the need to have consistent sources of supply at multiple locations. We believe these customer needs could result in fewer distributors as the remaining distributors become larger and more capable of being consistent sources of supply.

        There can be no assurance that we will be able to take advantage effectively of this trend toward consolidation. The trend in our industry toward consolidation could make it more difficult for us to maintain operating margins and could also increase competition for our potential acquisition targets and result in higher purchase price multiples.

The majority of our Net sales are credit sales which are made primarily to customers whose ability to pay is dependent, in part, upon the economic strength of the industry and geographic areas in which they operate, and the failure to collect monies owed from customers could adversely affect our financial condition.

        The majority of our Net sales volume is facilitated through the extension of credit to our customers whose ability to pay is dependent, in part, upon the economic strength of the industry in the areas where they operate. Our business offers credit to customers, either through unsecured credit that is based solely upon the creditworthiness of the customer or secured credit for materials sold for a specific job where the security lies in lien rights associated with the material used in the job. The type of credit offered depends both on the financial strength of the customer and the nature of the business in which the customer is involved. The inability of our customers to pay off their credit lines in a timely manner, or at all, would adversely affect our financial condition, results of operations, and cash flows.

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Furthermore, our collections efforts with respect to non-paying or slow-paying customers could negatively impact our customer relations going forward.

        Because we depend on the creditworthiness of certain of our customers, if the financial condition of our customers declines, our credit risk could increase. Significant contraction in our markets, coupled with tightened credit availability and financial institution underwriting standards, could adversely affect certain of our customers and could adversely affect the collectability of our accounts receivable, bad debt reserves, and Net income.

Future strategic transactions could impact our reputation, business, financial position, results of operations, and cash flows, and we may not achieve the acquisition component of our growth strategy.

        We may pursue strategic transactions in the future, which could involve acquisitions or dispositions of businesses or assets. Any future strategic transaction could involve integration or implementation challenges, business disruption, or other risks, or change our business profile significantly. Any inability on our part to successfully implement strategic transactions could have an adverse impact on our reputation, business, financial position, results of operations, and cash flows. Any acquisition that we make may not provide us with the benefits that were anticipated when entering into such acquisition. Any future disposition transactions could also impact our business and may subject us to various risks, including failure to obtain appropriate value for the disposed operations, post-closing claims being levied against us, and disruption to our continuing operations during the sale process or thereafter.

        In addition, although acquisitions may continue to be a component of our growth strategy, there can be no assurance that we will be able to continue to grow our business through acquisitions as we have done historically 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. Future acquisitions may result in the incurrence of debt and contingent liabilities, an increase in interest expense and amortization expense, and significant charges relative to integration costs. Our strategy could be impeded if we do not identify suitable acquisition candidates, and our financial condition and results of operations will be adversely affected if we overpay for acquisitions.

        Acquisitions involve a number of special risks, including:

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problems implementing disclosure controls and procedures for the newly acquired business;



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unforeseen difficulties extending internal control over financial reporting and performing the required assessment at the newly acquired business;



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potential adverse short-term effects on results of operations through increased costs or otherwise;

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diversion of management's attention and failure to recruit new, and retain existing, key personnel of the acquired business;



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failure to successfully integrate infrastructure, logistics, and systems;



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our business growth could outpace the capability of our systems; and



•

the risks inherent in the systems of the acquired business and risks associated with unanticipated events or liabilities, any of which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

        In addition, we may not be able to obtain the financing necessary to complete acquisitions on attractive terms or at all.

The non-residential and residential construction markets are seasonal and cyclical.

        Our highest volume of Net sales historically has occurred in our second and third fiscal quarters. Generally, during the winter months, construction and renovation activity declines due to inclement weather and shorter daylight hours. As a result, our results of operations may vary significantly from period to period as a result of this seasonality. To the extent that hurricanes, forest fires, severe storms, floods, other natural disasters, or similar events occur in the geographic regions in which we operate, our business may be adversely affected. We anticipate that fluctuations from period to period will continue in the future.

        Disruptions at our locations or generally at shipping ports, due to events such as work stoppages, as well as disruptions caused by tornadoes, hurricanes, blizzards and other storms, and natural disasters from time to time, may affect our ability to both maintain key products in inventory and deliver products to our customers on a timely basis, which may in turn adversely affect our results of operations.

        In addition, the non-residential and residential construction markets are subject to cyclical market pressures. The length and magnitude of these cycles have varied over time and by market. Prices of the products we sell are historically volatile and subject to fluctuations arising from changes in supply and demand, national and international economic conditions, labor costs, competition, market speculation, government regulation and trade policies, as well as from periodic delays in the delivery of our products. We have a limited ability to control the timing and amount of changes to prices that we pay for our products. In addition, the supply of our products fluctuates based on available manufacturing capacity. A shortage of capacity, or excess capacity, in the industry can result in significant increases or declines in market prices for those products, respectively, often within a short period of time. Such price fluctuations can adversely affect our financial condition, results of operations, and cash flows.

Fluctuating commodity prices may adversely impact our results of operations.

        The cost of steel and other commodities used in the products we distribute can be volatile, including as a result of international trade policies and tariffs. Although we attempt to pass on cost increases by our suppliers via increased costs to our customers, we are not always able to do so quickly or at all. To date, we have not utilized commodity hedging instruments to manage commodity cost fluctuations. In addition, if prices decrease for commodities used in products we distribute, we may have inventories purchased at higher prices than prevailing market prices. Significant fluctuations in the cost of the commodities used in products we distribute have in the past adversely affected, and in the future may adversely affect, our results of operations, and financial condition.

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If petroleum prices increase, our results of operations could be adversely affected. Conversely, prolonged weakness in the oil and gas industry could negatively impact our financial condition, results of operations, and cash flows.

        Petroleum prices have fluctuated significantly in recent years. Prices and availability of petroleum products are subject to political, economic, and market factors that are outside our control. Political events in petroleum-producing regions as well as hurricanes and other weather-related events may cause the price of fuel to increase. We deliver products to our customers via our own trucks as well as third-party carriers. Our operating profit will be adversely affected if we are unable to obtain the fuel we require or to fully offset the anticipated impact of higher fuel prices through increased prices or fuel surcharges to our customers. Besides passing fuel costs on to customers, we have not entered into any hedging arrangements that protect against fuel price increases, and we do not have any long-term fuel purchase contracts. If shortages occur in the supply of necessary petroleum products and we are not able to pass along the full impact of increased petroleum prices to our customers, our results of operations would be adversely affected.

        A number of our locations serve customers that are either direct or indirect participants in the oil and gas industry. Additionally, a number of our locations are also geographically located in or near areas where the oil and gas industry is a significant component of the overall local economy, such as in Texas and in the various shale gas producing regions within the U.S. and Canada. If the prices of oil and gas remain relatively low and our customers are negatively impacted, then our customers' demand for our products and services could also be negatively impacted which would have an adverse effect on our financial condition, results of operations, and cash flows.

Product shortages may impair our results of operations.

        Our ability to offer a wide variety of products to our customers is dependent upon our ability to obtain adequate product supply from manufacturers or other suppliers. Generally, our products are available from various sources and in sufficient quantities. However, the loss of, or substantial decrease in the availability of, products from our suppliers, or the loss of our key supplier agreements, could adversely impact our financial condition, results of operations, and cash flows. In addition, supply interruptions could arise from shortages of raw materials (including petroleum products), labor disputes, actions taken to combat contagious disease and viral outbreaks, or weather conditions affecting products or shipments, transportation disruptions, adjustments to our inventory levels, or other factors within and beyond our control.

        Short- and long-term disruptions in our supply chain would result in a need to maintain higher inventory levels as we replace similar product, a higher cost of product, and ultimately a decrease in our Net sales and profitability. A disruption in the timely availability of our products by our key suppliers would result in a decrease in our revenues and profitability. Although in many instances we have agreements with our suppliers, these agreements are generally terminable by either party on limited notice. Failure by our suppliers to continue to supply us with products on commercially reasonable terms, or at all, would put pressure on our operating margins and have a material adverse effect on our financial condition, results of operations, and cash flows. Short-term changes in the cost of these materials, some of which are subject to significant fluctuations, are sometimes, but not always, passed on to our customers. Our inability to pass on material price increases to our customers could adversely impact our financial condition, results of operations, and cash flows.

We rely on third-party suppliers and, in some instances, international supply chains due to transportation. If we fail to identify and develop relationships with a sufficient number of qualified suppliers, or if there is a significant interruption in our logistics network and supply chains, our ability to timely and efficiently access products that meet our standards for quality and service our customers could be adversely affected.

        We buy the vast majority of our products and supplies from suppliers located in the U.S. and Canada. These suppliers manufacture and source products from the U.S. and abroad. The products

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sourced by our suppliers are transported by truck, rail, barge or ship by third-party providers. Products sourced internationally by our suppliers require longer supply chains. The length and complexity of these supply chains make those products subject to certain risks, many of which are beyond our control, which could cause significant interruptions or delays in delivery of our products.

        The occurrence of one or more natural disasters or extreme weather such as earthquakes, blizzards, storms, hurricanes, floods, fires, droughts, tornadoes; viral contagions or pandemic diseases, such as the recent outbreak of a novel strain of coronavirus, now known as COVID-19; geopolitical events, such as civil unrest, acts of terrorism or war (including security measures that could disrupt or impede our distribution networks and supply chains) in a country in which we operate or in which our suppliers are located or in which we or our suppliers source products could result in a disruption of our logistics or supply chain network. For example, should the COVID-19 outbreak continue or spread, it could disrupt our operations and those of our customers and suppliers. Any of these or other natural disasters, catastrophic events, or disruptions could cause any of our locations to become non-operational, adversely affect our ability to timely obtain or deliver products and services, impair our ability to meet customer demand for products and services, or result in lost sales, additional costs, or penalties, and/or damage our reputation. Any of these adverse consequences could have a significant impact on our financial condition, results of operations, and cash flows.

        Furthermore, our ability to identify and develop relationships with qualified suppliers who can satisfy our standards for quality and our need to access products and supplies in a timely and efficient manner is a significant challenge. We may be required to replace a supplier if their products do not meet our quality or safety standards. In addition, our suppliers could discontinue selling products at any time for reasons that may or may not be in our control or the suppliers' control. Our results of operations and inventory levels could suffer if we are unable to promptly replace a supplier who is unwilling or unable to satisfy our requirements with a supplier providing similar products. Our suppliers' ability to deliver products may also be affected by financing constraints caused by credit market conditions, which could negatively impact our revenue and cost of products sold, at least until alternate sources of supply are arranged.

Our suppliers source their products and supplies from around the world, including China.

        We buy our products and supplies from suppliers located in the U.S. and Canada, with limited exceptions. Our suppliers source their products and supplies from around the world, including China, and may assemble their products outside of North America. If any restrictions or significant increases in tariffs are imposed related to such products and supplies sourced from or assembled in China, or elsewhere, as a result of amendments to existing trade agreements, and our product and supply costs consequently increase, we may be required to raise our prices, which may result in decreased margins, the loss of customers, and a material adverse effect on our financial results. The extent to which our margins could decrease in response to any future tariffs is uncertain. We continue to evaluate the impact of the effective tariffs, including potential future retaliatory tariffs, as well as other recent changes in foreign trade policy on our supply chain, costs, sales and profitability, and are actively working through strategies to mitigate such impact, including reviewing sourcing options and working with our suppliers. In addition, COVID-19 has resulted in increased travel restrictions and the extended shutdown of certain businesses throughout the world. The impact of COVID-19 on our business is uncertain at this time and will depend on future developments; however, prolonged closures in China, and elsewhere, may disrupt the operations of certain of our suppliers, which could, in turn, negatively impact our business. Any such impact could be material.

We have substantial fixed costs and, as a result, our operating income is sensitive to changes in our Net sales.

        A significant portion of our expenses are fixed costs (including personnel), which do not fluctuate with Net sales. Consequently, a percentage decline in our Net sales could have a greater percentage effect on our operating income if we do not act to reduce personnel or take other cost reduction

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actions. Any decline in our Net sales would cause our profitability to be adversely affected. Moreover, a key element of our strategy is managing our assets, including our substantial fixed assets, more effectively, including through sales or other disposals of excess assets. Our failure to rationalize our fixed assets in the time, and within the costs, we expect could have an adverse effect on our results of operations and financial condition.

The development of alternatives to distributors in the supply chain could cause a decrease in our sales and results of operations and limit our ability to grow our business.

        Our customers could begin fulfilling more of their product needs directly from manufacturers, which would result in decreases in our Net sales and earnings. Our suppliers could invest in infrastructure to expand their own local sales force and sell more products directly to our customers, which also would negatively impact our business.

        In addition to these factors, our customers may elect to establish their own building products and distribution facilities, or give advantages to manufacturing or distribution intermediaries in which they have an economic stake. These changes in the supply chain could adversely affect our financial condition, results of operations, and cash flows.

Because our business is working capital intensive, we rely on our ability to manage our product purchasing and customer credit policies.

        Our operations are working capital intensive, and our inventories, accounts receivable, and accounts payable are significant components of our net asset base. We manage our inventories and accounts payable through our purchasing policies and our accounts receivable through our customer credit policies. If we fail to adequately manage our product purchasing or customer credit policies, our working capital and financial condition may be adversely affected.

The implementation of our technology initiatives could disrupt our operations in the near term, and our technology initiatives might not provide the anticipated benefits or might fail.

        We have made, and will continue to make, significant technology investments in our business, including our administrative functions. Our technology initiatives are designed to streamline our operations to allow our associates to continue to provide high quality service to our customers and to provide our customers with a better experience, while improving the quality of our internal control environment. The cost and potential problems and interruptions associated with the implementation of our technology initiatives could disrupt or reduce the efficiency of our operations in the near term. In addition, our new or upgraded technology might not provide the anticipated benefits, it might take longer than expected to realize the anticipated benefits or the technology might fail altogether.

Interruptions in the proper functioning of our IT systems, including from cybersecurity threats, could disrupt operations and cause unanticipated increases in costs or decreases in revenues, or both.

        We use our information systems to, among other things, manage inventories and accounts receivable, make purchasing decisions, and monitor our results of operations, process, transmit, and store sensitive electronic data, including employee, supplier, and customer records. As a result, the proper functioning of our IT systems is critical to the successful operation of our business. Our IT systems include proprietary systems developed and maintained by us. In addition, we depend on IT systems of third parties, such as suppliers, retailers, and original equipment manufacturers to, among other things, market and distribute products, develop new products and services, operate our website, host and manage our services, store data, process transactions, respond to customer inquiries, and manage inventory and our supply chain. Although our IT systems are protected through physical and software safeguards and remote processing capabilities exist, our IT systems or those of third parties upon whom we depend are still vulnerable to natural disasters, power losses, unauthorized access, telecommunication failures, and other problems. Despite our policies, procedures, and programs

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designed to ensure the integrity of our IT systems, we may not be effective in identifying and mitigating every risk to which we are exposed. Furthermore, from time to time, we rely on IT systems which may be managed, hosted, provided, and/or accessed by third parties or their vendors, to assist in conducting our business. Such relationships and access may create difficulties in anticipating and implementing adequate preventative measures or fully mitigating harms after a breach. If critical proprietary or third-party IT systems fail or are otherwise unavailable, including as a result of system upgrades and transitions, our ability to process orders, track credit risk, identify business opportunities, maintain proper levels of inventories, collect accounts receivable, pay expenses, and otherwise manage our business would be adversely affected.

        Cybersecurity incidents can result from deliberate attacks or unintentional events. These incidents can include, but are not limited to, gaining unauthorized access to digital systems for purposes of misappropriating assets or sensitive information, collecting ransoms, corrupting data, or causing operational disruption. Cybersecurity attacks in particular are becoming more sophisticated and include, but are not limited to, malicious software, attempts to gain unauthorized access to data (either directly or through our vendors and customers), denial of service attacks, and other electronic security breaches. Despite our security measures, our IT systems and infrastructure or those of our third parties may be vulnerable to such cybersecurity incidents. The result of these incidents could include, but are not limited to, disrupted operations, misstated or misappropriated financial data, theft of our intellectual property or other confidential information (including of our customers, suppliers, and employees), liability for stolen assets or information, increased cybersecurity protection costs, and reputational damage adversely affecting customer or investor confidence. In addition, if any information about our customers, including payment information, were the subject of a successful cybersecurity attack against us, we could be subject to litigation or other claims by the affected customers or by governments enforcing data privacy regulations. Such claims may result in significant sanctions, monetary costs, or other harm to us. Furthermore, we have incurred costs and may incur significant additional costs in order to implement the security measures we feel are appropriate to protect our IT systems.

Our costs of doing business could increase as a result of changes in U.S. federal, state, or local regulations.

        Our operations are principally affected by various statutes, regulations, and laws in the U.S. states and Canadian provinces in which we operate, as well as federal laws and regulations. While we are not engaged in a regulated industry, we are subject to various laws applicable to businesses generally, including laws affecting land usage, zoning, the environment, health and safety, transportation, labor and employment practices, competition, immigration, and other matters. Additionally, building codes may affect the products our customers are allowed to use, and consequently, changes in building codes may affect the salability of our products. Changes in U.S. federal, state, or local regulations governing the sale of our products could increase our costs of doing business. In addition, changes to U.S. federal, state, and local tax regulations could increase our costs of doing business. We cannot provide assurance that we will not incur material costs or liabilities in connection with regulatory requirements.

        We deliver products to many of our customers through our own fleet of vehicles. The U.S. Department of Transportation (the "DOT") regulates our operations in domestic interstate commerce. We are subject to safety requirements governing interstate operations prescribed by the DOT. Vehicle dimensions and driver hours of service also remain subject to both federal and state regulation. More restrictive limitations on vehicle weight and size, trailer length and configuration, or driver hours of service could increase our costs, which, if we are unable to pass these cost increases on to our customers, would reduce our gross margins, increase our Selling, general, and administrative expenses, and reduce our Net income.

        We cannot predict whether future developments in law and regulations concerning our business will affect our business, financial condition, and results of operations in a negative manner. Similarly, we cannot assess whether our business will be successful in meeting future demands of regulatory

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agencies in a manner which will not materially adversely affect our business, financial condition, or results of operations.

The nature of our business exposes us to construction defect and product liability claims as well as other legal proceedings.

        We rely on manufacturers and other suppliers to provide us with 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 or to have caused personal injury, subjecting us to potential claims from customers or third parties. From time to time, we are involved in construction defect and product liability claims relating to the products we distribute and fabricate, among other things. In certain situations, we have undertaken to voluntarily remediate any defects, which can be a costly measure. We also operate a large fleet of trucks and other vehicles and therefore face the risk of traffic 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. Further, while we seek indemnification against potential liability for product liability claims from relevant parties, including but not limited to manufacturers and suppliers, we cannot guarantee that we will be able to recover under such indemnification agreements. Moreover, if we increase the number of private label products we distribute, our exposure to potential liability for products liability claims may increase. Product liability claims can be expensive to defend and can divert the attention of management and other personnel for significant time periods, regardless of the ultimate outcome. An unsuccessful product liability defense could be highly costly and accordingly result in a decline in profitability. In addition, uncertainties with respect to the Chinese legal system may adversely affect us in resolving claims arising from our proprietary brand products manufactured in China. Because many laws and regulations are relatively new and the Chinese legal system is still evolving, the interpretations of many laws, regulations, and rules are not always uniform. Finally, even if we are successful in defending any claim relating to the products we distribute, claims of this nature could negatively impact customer confidence in our products and our Company.

        From time to time, we are also involved in government inquiries and investigations, as well as class action, consumer, employment, and tort proceedings, and other litigation. We cannot predict with certainty the outcomes of these legal proceedings and other contingencies, including environmental remediation and other proceedings commenced by government authorities. The outcome of some of these legal proceedings and other contingencies could require us to take, or refrain from taking, actions which could adversely affect our operations or could require us to pay substantial amounts of money. Additionally, defending against these lawsuits and proceedings may involve significant expense and diversion of management's attention and resources from other matters.

If we become subject to material liabilities under our self-insured programs, our financial results may be adversely affected.

        We provide workers' compensation, automobile, and product/general liability coverage through a high deductible insurance program. In addition, we are self-insured for our health benefits and maintain per employee stop-loss coverage. Although we believe that we have adequate stop-loss coverage for catastrophic claims to cap the risk of loss, our results of operations, and financial condition may be adversely affected if the number and severity of claims that are not covered by stop-loss insurance increases.

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Our success depends upon our ability to attract, train, and retain highly qualified associates and key personnel.

        To be successful, we must attract, train, and retain a large number of highly qualified associates while controlling related labor costs. Our ability to control labor costs is subject to numerous external factors, including prevailing wage rates and health and other insurance costs. We compete with other businesses for these associates and invest significant resources in training and motivating them. There is no assurance that we will be able to attract or retain highly qualified associates in the future, including, in particular, those employed by companies we acquire. A very small proportion of our employees (within our recent acquisition of A.H. Harris) are currently covered by collective bargaining or other similar labor agreements. Historically, the effects of collective bargaining and other similar labor agreements on us have not been significant. However, if our employees were to unionize, including in the wake of any future legislation that makes it easier for employees to unionize, the effect on us may be adverse. Any inability by us to negotiate acceptable new contracts under these collective bargaining arrangements could cause strikes or other work stoppages, and new contracts could result in increased operating costs. If any such strikes or other work stoppages occur, or if other employees become represented by a union, we could experience a disruption of our operations and higher labor costs. Labor relations matters affecting our suppliers of products and services could also adversely affect our business from time to time.

        In addition, our business results depend largely upon our chief executive officer and senior management team as well as our branch managers and sales personnel and their experience, knowledge of local market dynamics and specifications, and long-standing customer relationships. We customarily sign employment letters providing for an agreement not to compete with key personnel of companies we acquire in order to maintain key customer relationships and manage the transition of the acquired business. Our inability to retain or hire qualified branch managers or sales personnel at economically reasonable compensation levels would restrict our ability to grow our business, limit our ability to continue to successfully operate our business, and result in lower results of operations and profitability.

Fluctuations in foreign currency exchange rates may reduce our revenues and profitability.

        As an industrial distributor of manufactured products, our profitability is tied to the prices we pay to the manufacturers from which we purchase our products. Some of our suppliers price their products in currencies other than the U.S. dollar or incur costs of production in non-U.S. currencies. Accordingly, depreciation of the U.S. dollar against foreign currencies increases the prices we pay for these products. Even short-term currency fluctuations could adversely impact revenues and profitability if we are unable to pass higher supply costs on to our customers. Our delayed ability to pass on material price increases to our customers could adversely impact our financial condition, results of operations, and cash flows.

If we are unable to protect our intellectual property rights, or we infringe on the intellectual property rights of others, our ability to compete could be negatively impacted.

        Our ability to compete effectively depends, in part, upon our ability to protect and preserve proprietary aspects of our intellectual property, including our trademarks and customer lists. The use of our intellectual property or similar intellectual property by others could adversely impact our ability to compete, cause us to lose Net sales or otherwise harm our business. If it became necessary for us to resort to litigation to protect these rights, any proceedings could be burdensome and costly, and we may not prevail.

        Also, we cannot be certain that the products that we sell do not and will not infringe issued patents or other intellectual property rights of others. Further, we are subject to legal proceedings and claims in the ordinary course of our business, including claims of alleged infringement of the trademarks, patents, and other intellectual property rights of third parties by us or our customers in connection with their use of the products that we distribute. Should we be found liable for

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infringement, we (or our suppliers) may be required to enter into licensing agreements (if available on acceptable terms or at all) or pay damages and cease making or selling certain products. Moreover, we may need to redesign or sell different products to avoid future infringement liability. Any of the foregoing could cause us to incur significant costs, prevent us from selling our products, or negatively impact our ability to compete.

Income tax payments may ultimately differ from amounts currently recorded by us. Future tax law changes may materially increase our prospective income tax expense.

        We are subject to income taxation in many jurisdictions in the U.S., as well as Canada. Judgment is required in determining our worldwide income tax provision and, accordingly, there are many transactions and computations for which our final income tax determination is uncertain. We are routinely audited by income tax authorities in many tax jurisdictions. Although we believe our recorded tax estimates are reasonable, the ultimate outcome from any audit (or related litigation) could be materially different from amounts reflected in our income tax provisions and accruals. Future settlements of income tax audits may have a material effect on earnings between the period of initial recognition of tax estimates in the financial statements and the point of ultimate tax audit settlement. Additionally, it is possible that future income tax legislation and/or import tariffs or border adjustment proposals in any jurisdiction to which we are subject may be enacted that could have a material impact on our worldwide income tax provision beginning with the period that such legislation becomes effective.

We may not be able to identify new products and new product lines and integrate them into our distribution network, which may impact our ability to compete.

        Our business depends in part on our ability to identify future products and product lines that complement existing products and product lines and that respond to our customers' needs. We may not be able to compete effectively unless our product selection keeps up with trends in the markets in which we compete or trends in new products. In addition, our ability to integrate new products and product lines into our distribution network could impact our ability to compete. Furthermore, the success of new products and new product lines will depend on market demand and there is a risk that new products and new product lines will not deliver expected results, which could negatively impact our future sales and results of operations. Our expansion into new markets may present competitive, distribution, and regulatory challenges that differ from current ones. We may be less familiar with the target customers and may face different or additional risks, as well as increased or unexpected costs, compared to existing operations. Growth into new markets may also bring us into direct competition with companies with whom we have little or no past experience as competitors. To the extent we are reliant upon expansion into new geographic, industry, and product markets for growth and do not meet the new challenges posed by such expansion, our future sales growth could be negatively impacted, our operating costs could increase, and our business operations and financial results could be negatively affected.

We could incur significant costs in complying with environmental, health, and safety laws or permits or as a result of satisfying any liability or obligation imposed under such laws or permits.

        Our operations are subject to various federal, state, local, and foreign environmental, health, and safety laws and regulations. Among other things, these laws regulate the emission or discharge of materials into the environment, govern the use, storage, treatment, disposal, and management of hazardous substances and wastes, protect the health and safety of our employees and the end users of our products, regulate the materials used in and the recycling of products and impose liability for the costs of investigating and remediating, and damages resulting from, present and past releases of hazardous substances. Violations of these laws and regulations or non-compliance with any conditions contained in any environmental permit can result in substantial fines or penalties, injunctive relief, requirements to install pollution or other controls or equipment, civil and criminal sanctions, permit

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revocations, and/or facility shutdowns. We could be held liable for the costs to address contamination of any real property we have ever owned, operated, or used as a disposal site. We could also incur fines, penalties, sanctions, or be subject to third-party claims for property damage, personal injury or nuisance, or otherwise as a result of violations of or liabilities under environmental laws in connection with releases of hazardous or other materials. In addition, changes in, or new interpretations of, existing laws, regulations, or enforcement policies, the discovery of previously unknown contamination, or the imposition of other environmental liabilities or obligations in the future, including additional investigation or other obligations with respect to any potential health hazards of our products or business activities, or the imposition of new permit requirements, may lead to additional compliance or other costs that could have material adverse effects on our business, financial condition, or results of operations.

We may be affected by global climate change or by legal, regulatory, or market responses to such potential change.

        Concern over climate change, including the impact of global warming, has led to significant federal, state, and international legislative and regulatory efforts to limit greenhouse gas ("GHG") emissions. For example, over the past several years, the U.S. Congress has considered various bills that would regulate GHG emissions. While these bills have not yet received sufficient Congressional support for enactment, some form of federal climate change legislation could be possible in the future. Even in the absence of such legislation, the Environmental Protection Agency, spurred by judicial interpretation of the Clean Air Act, may regulate GHG emissions, especially diesel engine emissions, and this could impose substantial costs on us. These costs include an increase in the cost of the fuel and other energy we purchase and capital costs associated with updating or replacing our internal fleet of trucks and other vehicles prematurely. In addition, new laws or future regulation could directly and indirectly affect our customers and suppliers (through an increase in the cost of production or their ability to produce satisfactory products) and our business (through the impact on our inventory availability, cost of sales, operations, or demands for the products we sell). Until the timing, scope, and extent of any future regulation becomes known, we cannot predict its effect on our cost structure or our results of operations. Notwithstanding our dedication to being a responsible corporate citizen, it is reasonably possible that such legislation or regulation could impose material costs on us. Moreover, even without such legislation or regulation, increased awareness, and any adverse publicity in the global marketplace about the GHGs emitted by companies involved in the transportation of goods could harm our reputation and reduce customer demand for our products and services.

Failure to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act could materially and adversely affect us.

        As a public company, we will become subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and will be required to prepare our financial statements according to the rules and regulations required by the SEC. In addition, the Exchange Act requires that we file annual, quarterly, and current reports. Our failure to prepare and disclose this information in a timely manner or to otherwise comply with applicable law could subject us to penalties under federal securities laws, expose us to lawsuits, and restrict our ability to access financing. In addition, the Sarbanes-Oxley Act requires that, among other things, we establish and maintain effective internal controls and procedures for financial reporting and disclosure purposes. Internal control over financial reporting is complex and may be revised over time to adapt to changes in our business, or changes in applicable accounting rules. We cannot assure you that our internal control over financial reporting will be effective in the future or that a material weakness will not be discovered with respect to a prior period for which we had previously believed that internal controls were effective. If we are not able to maintain or document effective internal control over financial reporting, our independent registered public accounting firm will not be able to certify as to the effectiveness of our internal control over financial reporting. While we have been

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adhering to these laws and regulations as a subsidiary of HD Supply, after the distribution we will need to demonstrate our ability to manage our compliance with these corporate governance laws and regulations as an independent, public company.

        Matters affecting our internal controls may cause us to be unable to report our financial information on a timely basis, or may cause us to restate previously issued financial information, and thereby subject us to adverse regulatory consequences, including sanctions or investigations by the SEC, or violations of applicable stock exchange listing rules. There could also be a negative reaction in the financial markets due to a loss of investor confidence in us and the reliability of our financial statements. Confidence in the reliability of our financial statements is also likely to suffer if we or our independent registered public accounting firm reports a material weakness in our internal control over financial reporting. This could have a material and adverse effect on us by, for example, leading to a decline in our share price and impairing our ability to raise additional capital.

Our future debt may limit cash flow available to invest in the ongoing needs of our business and could prevent us from fulfilling our debt obligations.

        In connection with the completion of the spinoff, we expect that we will incur debt. Our level of debt could have important consequences. For example, it could:

•

require us to dedicate a substantial portion of our cash flow from operations to the payment of debt service, reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions, and other general corporate purposes;



•

increase our vulnerability to adverse economic or industry conditions;



•

limit our ability to obtain additional financing in the future to enable us to react to changes in our business; or



•

place us at a competitive disadvantage compared to businesses in our industry that have less debt.

        Additionally, any failure to meet required payments on our debt, or failure to comply with any covenants in the instruments governing our debt, could result in an event of default under the terms of those instruments and a downgrade to our credit ratings. A downgrade in our credit ratings would increase our borrowing costs. In the event of a default, the holders of our debt could elect to declare all the amounts outstanding under such instruments to be due and payable. Any default under the agreements governing our debt and the remedies sought by the holders of such debt could render us unable to pay principal and interest on our debt.

Risks Relating to Ownership of Our Common Stock

Because there has not been any public market for our common stock, the market price and trading volume of our common stock may be volatile and you may not be able to resell your shares at or above the initial market price of our common stock following the spinoff.

        Prior to the spinoff, there will have been no trading market for our common stock. We cannot assure you that an active trading market will develop or be sustained for our common stock after the spinoff, nor can we predict the price at which our common stock will trade after the spinoff. The market price of our common stock could fluctuate significantly due to a number of factors, many of which are beyond our control, including:

•

fluctuations in our quarterly or annual earnings results or those of other companies in our industry;



•

failures of our results of operations to meet the estimates of securities analysts or the expectations of our stockholders, or changes by securities analysts in their estimates of our future earnings;

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•

announcements by us or our customers, suppliers, or competitors;



•

changes in laws or regulations which adversely affect our industry or us;



•

general economic, industry, and stock market conditions;



•

future sales of our common stock by our stockholders;



•

future issuances of our common stock by us;



•

our ability to pay dividends in the future; and



•

the other factors described in these "Risk Factors" and other parts of this information statement.

A large number of shares of our common stock are or will be eligible for future sale, which may cause the market price for our common stock to decline.

        Upon completion of the spinoff, we will have outstanding an aggregate of                        approximately             shares of common stock. Virtually all of those shares will be freely tradable without restriction or registration under the Securities Act of 1933, as amended (the "Securities Act"). We are unable to predict whether large amounts of our common stock will be sold in the open market following the spinoff. We are also unable to predict whether a sufficient number of buyers would be in the market at that time. Certain HD Supply stockholders may be required to sell the shares of White Cap common stock that they receive in the spinoff. For example, index funds currently holding HD Supply common stock may be required to sell the White Cap common stock they receive in the spinoff. In addition, it is possible that other HD Supply stockholders will sell the shares of White Cap common stock they receive in the spinoff for various reasons. For example, such stockholders may not believe that our business profile, capital structure, or level of market capitalization as an independent company fits their investment objectives. We can provide no assurance that there will be sufficient new buying interest to offset the potential sale of common stock of White Cap. Accordingly, our common stock could experience a high level of volatility immediately following the spinoff and, as a result, the price of our common stock could be adversely affected.

Anti-takeover provisions in our charter documents and Delaware law could discourage, delay, or prevent a change in 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 (as defined in "Description of Capital Stock") will 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, our Amended and Restated Certificate of Incorporation and Amended and Restated By-laws will:

•

authorize the issuance of "blank check" preferred stock that could be issued by our board of directors to thwart a takeover attempt;



•

for five years following            , provide for the division of our board of directors into three classes serving staggered three-year terms, with one class being elected each year;



•

for five years following            , provide that directors may be removed only for cause and then only by the affirmative vote of the holders of at least three-fourths (75%) of the shares then entitled to vote in an election of directors;



•

provide that vacancies on our board of directors, including newly-created directorships, may be filled only by a majority vote of directors then in office;



•

prohibit stockholders from calling special meetings of stockholders;



•

prohibit stockholder action by written consent, thereby requiring all actions to be taken at a meeting of the stockholders;

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•

establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings; and



•

for five years following            , require the approval of holders of at least three-fourths (75%) of the outstanding shares of our common stock, voting together as a single class, to amend our Amended and Restated By-laws and certain provisions of our Amended and Restated Certificate of Incorporation.

        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. 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 may not determine 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.

        We may not declare and pay dividends on our common stock in the near future. In the absence of a dividend, the success of an investment in shares of our common stock would depend upon any future appreciation in their value. There is no guarantee that shares of our common stock will appreciate in value.

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 common 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 would likely decline. If one or more of these analysts ceases coverage of our Company or fails to publish reports on us regularly, demand for our common stock could decrease, which could cause our common stock price or trading volume to decline.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INFORMATION

        This information statement and other materials we and HD Supply have filed or will file with the SEC include or will include forward-looking statements. Some of the forward-looking statements can be identified by the use of terms such as "believes," "expects," "may," "will," "should," "could," "seeks," "intends," "plans," "estimates," "anticipates," or other comparable terms. These forward-looking statements include all matters that are not related to present facts or current conditions or that are not historical facts. They appear in a number of places throughout this information statement and include statements regarding our intentions, beliefs, or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects and growth strategies, and the industries in which we operate and include, without limitation, statements relating to our future performance.

        Forward-looking statements are subject to known and unknown risks and uncertainties, many of which are beyond our control. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and industry development may differ materially from those made in or suggested by the forward-looking statements contained in this information statement. In addition, even if our results of operations, financial condition and liquidity, and industry development are consistent with the forward-looking statements contained in this information statement, those results or developments may not be indicative of results or developments in subsequent periods. A number of important factors could cause actual results to differ materially from those contained in or implied by the forward-looking statements, including the risks and uncertainties discussed in "Risk Factors."

        Factors that could cause actual results to differ from those reflected in forward-looking statements relating to our operations and business include, but are not limited to the following, many of which are, and will be, amplified by the COVID-19 pandemic:

•

the impact of the COVID-19 pandemic on our sales, operations and supply chain, as well as the impacts on our customers, suppliers, vendors, and business partners;



•

if we do not realize some or all of the benefits expected to result from the spinoff, or if such benefits are delayed;



•

we have no history operating as an independent public company;



•

our ongoing businesses may be adversely affected and subject to certain risks and consequences as a result of pursuing the spinoff;



•

HD Supply's ability to successfully complete the spinoff on a tax-free basis, within the expected time frame or at all;



•

HD Supply's ability to change the terms of the spinoff and the related transactions and agreements in ways that may be unfavorable to us;



•

our accounting, enterprise resource planning, and other management systems and resources may not be adequately prepared to meet the financial reporting and other requirements to which we will be subject following the spinoff;



•

after the distribution, certain members of management, directors, and stockholders will hold stock in both HD Supply and us, and as a result may face actual or potential conflicts of interest;



•

certain contracts that will need to be assigned from HD Supply or its affiliates to us in connection with the spinoff require the consent of the counterparty to such an assignment, and failure to obtain these consents could increase our expenses or otherwise reduce our profitability;

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•

our ability to successfully implement our business strategies and execute our long-term value creation strategy;



•

inherent risks of the non-residential and residential construction markets;



•

our ability to maintain profitability;



•

the competitive markets in which we operate and demand for our products and services in highly competitive and fragmented industries (including competitive pricing pressure from our customers);



•

the loss of any of our significant customers;



•

our ability to identify and acquire suitable acquisition candidates on favorable terms;



•

cyclicality and seasonality of the non-residential and residential construction markets;



•

our ability to manage fixed costs;



•

our ability to identify and develop relationships with a sufficient number of qualified suppliers and to maintain our supply chains;



•

the development of alternatives to distributors in the supply chain;



•

our ability to manage our working capital through product purchasing and customer credit policies;



•

cybersecurity breaches, disruptions, or failures in our IT systems and our failure to protect the security of personal information about our customers;



•

potential material liabilities under our self-insured programs;



•

our ability to attract, train, and retain highly qualified associates and key personnel;



•

laws and governmental regulations increasing our legal and regulatory expenses;



•

new and/or proposed trade policies could make sourcing product from foreign countries more difficult and more costly;



•

our ability to generate the cash needed to fund our operations and service our debt obligations to be incurred;



•

increased borrowing costs due to lowering or withdrawal of the ratings, outlook, or watch assigned to us, our debt securities to be issued, or our credit facilities to be incurred;



•

limitations and restrictions in the agreements to be entered into governing our indebtedness; and



•

other factors described in this information statement and from time to time in documents that we file with the SEC.

        All forward-looking statements are made only as of the date of this information statement and we do not undertake any obligation, other than as may be required by law, to update or revise any forward-looking statements to reflect future events or developments. Comparisons of results for current and any prior periods are not intended to express any future trends, or indications of future performance, unless expressed as such, and should only be viewed as historical data.

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THE SPINOFF

Reasons for the Spinoff

        On September 24, 2019, HD Supply announced its intention to separate its Facilities Maintenance and Construction & Industrial businesses into two independent, publicly traded companies through a distribution of our common stock to HD Supply's stockholders in a spinoff. The transaction is subject to certain customary conditions, including, among others, the conditions described below under "—Spinoff Conditions and Termination."

        White Cap is currently an indirect wholly owned subsidiary of HD Supply. HD Supply will transfer, or cause its subsidiaries to transfer, to us all the assets and generally all the liabilities relating to HD Supply's Construction & Industrial business, which HD Supply intends to separate from its other operations.

        Based on our audited combined statements of operations and comprehensive income included elsewhere in this information statement: for the fiscal years ended February 2, 2020, February 3, 2019 and January 28, 2018, White Cap's Net sales as a percent of HD Supply's total Net sales was 49.1%, 49.0% and 44.5%, respectively. Based on our audited combined balance sheet as of February 2, 2020 and February 3, 2019 included elsewhere in this information statement, total assets and total liabilities attributable to White Cap as a percent of HD Supply's total assets and total liabilities was 34.4% and 18.5% and 33.1% and 12.5%, respectively.

        HD Supply's Facilities Maintenance and Construction & Industrial businesses operate largely autonomously, although they have benefitted by sharing executive management and some overhead costs. The spinoff will permit each of HD Supply and White Cap to focus exclusively on its individual business and enable investors to obtain and, if they so choose, retain direct exposure to each separate business.

        Among other things, following the spinoff, each of HD Supply and White Cap is expected to be able to:

•

position itself within its industry as a focused, independent company;



•

pursue both organic growth and acquisition opportunities aligned with its particular strategic priorities;



•

create a more optimal capital structure and capital allocation priorities consistent with its own financial profile; and



•

align its particular incentive compensation with its financial performance.

        There necessarily can be no assurance that the expected benefits of the spinoff will be realized. See "Risk Factors—Risks Relating to the Spinoff."

Results of the Spinoff

        After the spinoff, we will be an independent, publicly traded company. Immediately after the distribution date, we expect that              million shares of our common stock will be issued and outstanding, based on the distribution of            share [s] of our common stock for every             share of HD Supply common stock outstanding and the anticipated number of shares of HD Supply common stock outstanding as of the record date. The actual number of shares of our common stock to be distributed will be determined based on the number of shares of HD Supply common stock outstanding as of the record date.

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        We and HD Supply will be parties to a number of short-term agreements that will govern the spinoff and our future relationship. For a more detailed description of these agreements, please see "Relationship with HD Supply After the Spinoff—Agreements Between HD Supply and Us."

        You will not be required to make any payment for the shares of White Cap common stock you receive, nor will you be required to surrender or exchange your shares of HD Supply common stock or take any other action in order to receive the White Cap common stock to which you are entitled. The spinoff will not affect the number of outstanding shares of HD Supply common stock or any rights of HD Supply stockholders, although it is expected to affect the market value of the outstanding shares of HD Supply common stock.

Manner of Effecting the Spinoff

        The general terms and conditions relating to the spinoff will be set forth in a separation and distribution agreement between HD Supply and us. For a description of the terms of that agreement, see "Relationship with HD Supply After the Spinoff—Agreements Between HD Supply and Us—Separation and Distribution Agreement." Under the separation and distribution agreement, the distribution will occur on the distribution date. Each holder of HD Supply common stock will be entitled to receive             share[s] of our common stock for every            share of HD Supply common stock owned by such holder as of 5:00 p.m., Atlanta, Georgia time, on the record date. As discussed under "—Trading of HD Supply Common Stock After the Record Date and Prior to the Distribution," if a holder of record of HD Supply common stock sells those shares in the "regular way" market after the record date and before or on the distribution date, that stockholder will be selling the right to receive our common stock in the distribution. The distribution will be made in book-entry form. For registered HD Supply stockholders, our transfer agent will credit their shares of White Cap common stock to book-entry accounts established to hold their White Cap common stock. Book-entry refers to a method of recording stock ownership in our records in which no physical certificates are issued. For stockholders who own HD Supply common stock through a bank or brokerage firm, their White Cap common stock will be credited to their accounts by the bank or broker. See "—When and How You Will Receive White Cap Shares" below. Each White Cap share of common stock that is distributed will be validly issued, fully paid, and nonassessable.

        Holders of White Cap common stock will not be entitled to preemptive rights. See "Description of Capital Stock." Following the spinoff, stockholders whose shares are held in book-entry form may request the transfer of their White Cap common stock to a brokerage or other account at any time, without charge.

When and How You Will Receive White Cap Shares

        On the distribution date, HD Supply will release its White Cap common stock for distribution by American Stock Transfer & Trust Company, LLC, the distribution agent. The distribution agent will cause the shares of White Cap common stock to which you are entitled to be registered in your name or in the "street name" of your bank or brokerage firm.

        "Street Name" Holders.    Many HD Supply stockholders have HD Supply common stock held in an account with a bank or brokerage firm. If this applies to you, that bank or brokerage firm is the registered holder that holds the shares on your behalf. For stockholders who hold their HD Supply common stock in an account with a bank or brokerage firm, shares of our common stock being distributed will be registered in the "street name" of your bank or broker, who in turn will electronically credit your account with the shares that you are entitled to receive in the distribution. We anticipate that banks and brokers will generally credit their customers' accounts with shares of our common stock on or shortly after the distribution date. We encourage you to contact your bank or

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broker if you have any questions regarding the mechanics of having your shares credited to your account.

        Registered Holders.    If you are the registered holder of HD Supply common stock and hold your HD Supply common stock either in physical form or in book-entry form, the White Cap common stock distributed to you will be registered in your name and you will become the holder of record of that number of shares of our common stock. Our distribution agent will send you a statement reflecting your ownership of our common stock.

        Direct Registration System.    As part of the spinoff, we will be adopting a direct registration system for book-entry share registration and transfer of our common stock. Our common stock to be distributed in the spinoff will be distributed as uncertificated shares registered in book-entry form through the direct registration system. No certificates representing your shares will be mailed to you in connection with the spinoff. Under the direct registration system, instead of receiving stock certificates, you will receive a statement reflecting your ownership interest in our shares. If at any time you want to receive a physical certificate evidencing your shares, you may do so by contacting our transfer agent and registrar. Contact information for our transfer agent and registrar is provided under "Description of Capital Stock—Transfer Agent, Distribution Agent, and Registrar." The distribution agent will begin mailing book-entry account statements reflecting your ownership of shares promptly after the distribution date. You can obtain more information regarding the direct registration system by contacting our transfer agent and registrar.

Treatment of Fractional Shares

        The transfer agent will aggregate all fractional shares and sell them on behalf of those holders who otherwise would be entitled to receive a fractional share. The transfer agent will determine, in its sole discretion, when, how, and through which broker-dealers such sales will be made without any influence by HD Supply or us. We anticipate that these sales will occur as soon as practicable after the distribution date. Those holders will then receive a cash payment in an amount equal to their pro rata share of the total net proceeds of those sales.

        It is expected that all fractional shares held in street name will be aggregated and sold by brokers or other nominees according to their standard procedures. You should contact your broker or other nominee for additional details.

        Neither HD Supply, nor we, nor the transfer agent will guarantee any minimum sale price for any fractional shares. Neither we nor HD Supply will pay any interest on the proceeds from the sale of fractional shares. The receipt of cash in lieu of fractional shares will generally be taxable to the recipient stockholders for U.S. federal income tax purposes. See "—Material U.S. Federal Income Tax Consequences of the Distribution" below.

Transferability of Shares You Receive

        Our common stock distributed to HD Supply stockholders will be freely transferable, except for shares received by persons who may be deemed to be our "affiliates" under the Securities Act. Persons who may be deemed to be our affiliates after the spinoff generally include individuals or entities that control, are controlled by, or are under common control with us, and include our directors and certain of our officers. Our affiliates will be permitted to sell their White Cap common stock only pursuant to an effective registration statement under the Securities Act or an exemption from the registration requirements of the Securities Act, such as the exemption afforded by Rule 144.

        Under Rule 144, an affiliate may not sell within any three-month period shares of White Cap common stock in excess of the greater of:

•

1% of the then outstanding number of shares of White Cap common stock; and

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•

the average reported weekly trading volume of shares of White Cap common stock on NASDAQ during the four calendar weeks preceding the filing of a notice with the SEC on Form 144 with respect to such sale or, if no such notice is required, certain other applicable dates.

        Sales under Rule 144 are also subject to certain provisions regarding the manner of sale, notice requirements, the availability of current public information about us, and holding periods.

Stock-Based Plans

Treatment of Equity-Based Compensation

        With respect to HD Supply equity incentive awards held by White Cap employees, including White Cap's named executive officers and White Cap directors, that are outstanding on the distribution date and for which the underlying security is shares of HD Supply's common stock, it is currently anticipated that each outstanding HD Supply stock option, restricted stock, performance award, restricted stock unit, and deferred stock unit award will be equitably adjusted or converted into an award with respect to White Cap common stock. Each other HD Supply equity incentive award will also be equitably adjusted or converted, but will continue to relate to HD Supply common stock. In each case, the award will be equitably adjusted or converted in a manner intended to preserve the aggregate intrinsic value of the original HD Supply equity award, and will be subject to substantially the same terms and conditions after the spinoff as the terms and conditions applicable to the original HD Supply award prior to the distribution date, except:

•

with respect to each adjusted or converted stock option award, the per-share exercise price for each White Cap stock option and each HD Supply stock option will be adjusted or established, as applicable, so that each will retain, in the aggregate, the same intrinsic value that the original HD Supply stock option award had immediately prior to the distribution date (subject to rounding);



•

with respect to each adjusted or converted award covering White Cap common stock or HD Supply common stock, the number of underlying shares subject to such award will be determined based on application of (1) the ratio of HD Supply's pre-spinoff stock price to (a) the post-spinoff share price of White Cap in the case where the adjusted or converted award covers White Cap common stock or (b) the post-spin-off share price of HD Supply in the case where the adjusted award covers HD Supply common stock to (2) the number of HD Supply common shares subject to the original HD Supply award prior to the distribution date;



•

with respect to the performance awards, see "Compensation Discussion and Analysis—Components of Compensation—Annual Equity Incentives—Performances Awards." Further information with respect to the performance awards will be provided in an amendment to this information statement.

        To the extent that an affected employee is employed in a non-U.S. jurisdiction, and the adjustments or grants contemplated above could result in adverse tax consequences or other adverse regulatory consequences, HD Supply may determine that a different equitable adjustment or grant will apply in order to avoid any such adverse consequences.

        We expect that the compensation committee of our board of directors will maintain a program to deliver long-term incentive awards to our executives and other employees that is appropriate for our business needs. However, the types of awards provided, the allocation of grant date values among the mix of awards, and the performance measures to be used may differ from HD Supply's past practice.

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White Cap Omnibus Plan

        We anticipate that we will adopt the White Cap Omnibus Plan as defined in "Compensation Discussion and Analysis—Components of Compensation—Annual Equity Incentives." The White Cap Omnibus Plan will generally be administered by our compensation committee (or the board of directors in the case of non-employee director awards) and will generally enable our compensation committee (or the board of directors, as applicable) to provide equity incentive compensation to our employees, our non-employee directors, and eligible consultants. Pursuant to the White Cap Omnibus Plan, we may grant stock options (including "incentive stock options" as defined in Section 422 of the Code), stock appreciation rights, restricted stock, restricted stock units, performance awards, deferred stock units, and certain other awards based on or related to our common stock, subject to certain share and dollar limitations as described in the White Cap Omnibus Plan.

        The White Cap Omnibus Plan will authorize the grant of "adjusted awards" to certain current holders of HD Supply equity awards under the HD Supply equity compensation plans, as described above. In connection with the distribution of White Cap common stock to HD Supply stockholders, our compensation committee intends to authorize adjusted awards of White Cap stock options, restricted stock, performance awards, restricted stock units, and deferred stock units under the White Cap Omnibus Plan to White Cap employees and directors who hold corresponding awards covering HD Supply equity.

        Subject to adjustment as described in the White Cap Omnibus Plan, total awards under the White Cap Omnibus Plan will be limited to             million shares of White Cap common stock. These shares may be shares of original issuance or treasury shares or a combination of the foregoing.

        The White Cap Omnibus Plan also provides that, subject to adjustment as described in the White Cap Omnibus Plan:

•

no participant in any calendar year will be granted stock options, stock appreciation rights, or any other award based solely on an increase in the value of the shares from the grant date in respect of more than                 shares;



•

no participant in any calendar year will be granted more than                performance awards to be settled in shares;



•

no participant in any calendar year will receive a payment in excess of                in respect of performance awards to be settled in cash; and



•

no non-employee director of White Cap will be granted in any board compensation year awards under the White Cap Omnibus Plan having an aggregate maximum value, taken together with any cash fees payable to such non-employee director for such year, in excess of $            .

        All awards and shares that are distributed pursuant to awards are subject to the terms and conditions of any recoupment or clawback policy adopted by our compensation committee, our board of directors or us, including any policy adopted to comply with applicable law.

        Our compensation committee generally will be able to amend the White Cap Omnibus Plan, subject to stockholder approval in certain circumstances.

Cash-Based Incentive Program

        We expect that we will adopt a short-term incentive program that will permit us to provide annual cash-based incentive awards to certain officers and other key employees based on performance against pre-established annual goals. Under the short-term incentive program, we expect that participants will have an annual target award opportunity established by the White Cap Compensation Committee expressed as a percentage of each participants' base salary.

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Material U.S. Federal Income Tax Consequences of the Distribution

        The following is a discussion of the material U.S. federal income tax consequences of the distribution to U.S. Holders (as defined below) of HD Supply common stock. This discussion is based on the Code, applicable Treasury regulations, administrative authorities and court decisions, all as in effect as of the date of this information statement, any of which may change, possibly with retroactive effect. For purposes of this discussion, a "U.S. Holder" is a beneficial owner of HD Supply common stock that is for U.S. federal income tax purposes:

•

a citizen or resident of the U.S.;



•

a corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the U.S., any state therein or the District of Columbia;



•

a trust (1) that is subject to the primary supervision of a court within the U.S. and all the substantial decisions of which are controlled by one or more U.S. persons or (2) that has a valid election in effect under applicable Treasury regulations to be treated as a U.S. person; or



•

an estate the income of which is subject to U.S. federal income taxation regardless of its source.

        This discussion addresses only the consequences of the distribution to U.S. Holders that hold HD Supply common stock as a capital asset within the meaning of Section 1221 of the Code (generally, property held for investment). It does not address all aspects of U.S. federal income taxation that may be important to a U.S. Holder in light of that stockholder's particular circumstances or to a U.S. Holder subject to special rules, such as:

•

banks or other financial institutions, underwriters, or insurance companies;



•

traders in securities who elect to apply a mark-to-market method of accounting;



•

real estate investment trusts and regulated investment companies;



•

tax-exempt organizations, qualified retirement plans, individual retirement accounts, or other tax-deferred accounts;



•

expatriates or former long-term residents of the U.S.;



•

partnerships or other pass-through entities or investors in such entities;



•

dealers or traders in securities, commodities, or currencies;



•

grantor trusts;



•

persons subject to the alternative minimum tax;



•

U.S. persons whose "functional currency" is not the U.S. dollar;



•

persons who received HD Supply shares through the issuance of restricted stock under an equity incentive plan or through a tax-qualified retirement plan or otherwise as compensation;



•

persons who own (directly or through attribution) 5% or more (by vote or value) of the outstanding HD Supply shares, or, after the distribution, the outstanding White Cap ordinary shares; or



•

holdings of HD Supply shares, or, after the spinoff, White Cap ordinary shares, as a position in a "straddle" as part of a "synthetic security" or "hedge" as part of a "conversion transaction" or other integrated investment or risk reduction transaction.

        If a partnership, or any entity treated as a partnership for U.S. federal income tax purposes, holds HD Supply common stock, the tax treatment of a partner in such partnership generally will depend on

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the status of the partners and the activities of the partnership. A partner in a partnership holding HD Supply common stock should consult his, her, or its tax advisor.

        This discussion of material U.S. federal income tax consequences is not a complete analysis or description of all potential U.S. federal income tax consequences of the distribution. This discussion does not address tax consequences that may vary with, or are contingent on, individual circumstances. In addition, it does not address any U.S. federal, estate, gift, or other non-income tax or any non-U.S. state or local tax consequences of the distribution. Accordingly, each holder of HD Supply common stock should consult his, her, or its tax advisor to determine the particular U.S. federal, state, or local or non-U.S. income or other tax consequences of the distribution to such holder.

Tax Opinions

        The consummation of the distribution is conditioned upon the receipt of an opinion of tax counsel substantially to the effect that the distribution of all of the shares of White Cap common stock owned by HD Supply to the stockholders of HD Supply will qualify as a tax-free distribution to such stockholders within the meaning of Section 355 of the Code (the "Tax Opinion"). In rendering the Tax Opinion to be given as of the date of the distribution of White Cap common stock to the HD Supply stockholders (the "Closing Tax Opinion"), tax counsel will rely, on (i) customary representations, warranties, and covenants made by us and HD Supply, including those contained in certificates of officers of us and HD Supply, and (ii) specified assumptions, including an assumption regarding the completion of the spinoff and certain related transactions in the manner contemplated by the transaction agreements. In addition, tax counsel's ability to provide the Closing Tax Opinion will depend on the absence of changes in existing facts or law between the date of our registration statement on Form 10, of which this information statement is a part, and the closing date of the spinoff. If any of the representations, warranties, covenants, or assumptions on which tax counsel will rely is inaccurate, tax counsel may not be able to provide the Closing Tax Opinion or the tax consequences of the distribution could differ from those described below. An opinion of tax counsel does not preclude the IRS or the courts from adopting a contrary position. HD Supply does not intend to obtain a ruling from the IRS regarding the tax consequences of the distribution.

The Distribution

        Assuming that the distribution of all of the shares of White Cap common stock owned by HD Supply to the stockholders of HD Supply qualifies as a tax-free distribution within the meaning of Section 355 of the Code, in general, for U.S. federal income tax purposes:

•

no gain or loss will be recognized by, and no amount will be included in the income of, U.S. Holders of HD Supply common stock upon the receipt of our common stock;



•

the aggregate tax basis of the shares of our common stock distributed in the spinoff to a U.S. Holder of HD Supply common stock will be determined by allocating the aggregate tax basis such U.S. Holder has in the shares of HD Supply common stock immediately before such spinoff between such HD Supply common stock and our common stock in proportion to the relative fair market value of each immediately following the spinoff;



•

the holding period of any shares of our common stock received by a U.S. Holder of HD Supply common stock in the spinoff will include the holding period of the shares of HD Supply common stock with respect to which the distribution is made; and



•

a U.S. Holder of HD Supply common stock that receives cash in lieu of a fractional share of our common stock, if any, will generally recognize capital gain or loss, measured by the difference between the cash received for such fractional share and the U.S. Holder's tax basis in that fractional share, determined as described above, and such gain or loss will be long-term capital

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gain or loss if the U.S. Holder's holding period for such fractional share is more than one year as of the closing date of the spinoff.

        In general, if the distribution does not qualify as a tax-free distribution within the meaning of Section 355 of the Code, the distribution will be treated as a taxable dividend to holders of HD Supply common stock in an amount equal to the fair market value of our common stock received, to the extent of such holder's ratable share of HD Supply's earnings and profits. In addition, if the spinoff does not qualify as a tax-free distribution within the meaning of Section 355 of the Code, HD Supply will recognize taxable gain, which could result in significant tax liability to HD Supply.

        Even if the distribution were otherwise to qualify as a tax-free distribution within the meaning of Sections 355 of the Code, the distribution will be taxable to HD Supply under Section 355(e) of the Code if 50% or more of either the total voting power or the total fair market value of the stock of HD Supply or our common stock is acquired as part of a plan or series of related transactions that includes the distribution. If Section 355(e) applies as a result of such an acquisition, HD Supply would recognize taxable gain as described above, but the distribution would generally remain tax-free to you. Under some circumstances, the agreement between HD Supply and us related to taxes allocable between HD Supply and us would require us to indemnify HD Supply for the tax liability associated with such taxable gain. Under that agreement, we will generally be required to indemnify HD Supply for the resulting taxes in the event that the distribution fails to qualify for its intended tax treatment due to any action by us or any of our subsidiaries. If the distribution were to be taxable to HD Supply, the liability for payment of such tax by HD Supply or by us under such agreement could have a material adverse effect on HD Supply or us, as the case may be.

Information Reporting and Backup Withholding

        Treasury regulations generally require holders who own at least five percent of the total outstanding stock of HD Supply (by vote or value) and who receive our common stock pursuant to the distribution to attach to their U.S. federal income tax return for the year in which the spinoff occurs a detailed statement setting forth certain information relating to the spinoff. HD Supply and/or we will provide the appropriate information to each holder upon request, and each such holder is required to retain permanent records of this information. In addition, payments of cash to a U.S. Holder of HD Supply common stock in lieu of fractional shares of our common stock in the spinoff may be subject to information reporting, unless the U.S. Holder provides the withholding agent with proof of an applicable exemption. Such payments that are subject to information reporting may also be subject to backup withholding, unless such U.S. Holder provides the withholding agent with a correct taxpayer identification number and otherwise complies with the requirements of the backup withholding rules. Backup withholding does not constitute an additional tax, but merely an advance payment, which may be refunded or credited against a U.S. Holder's U.S. federal income tax liability, provided the required information is timely supplied to the IRS.

Market for Our Common Stock

        There is currently no public market for our common stock. We have applied to list our common stock on NASDAQ under the symbol "WCAP." We anticipate that trading of our common stock will commence on a "when-issued basis" approximately two trading days before the record date. When-issued trading refers to a sale or purchase made conditionally because the security has been authorized but not yet issued. Generally, shares of common stock may trade on NASDAQ on a when-issued basis after they have been authorized but not yet formally issued, which is often initiated by NASDAQ prior to the record date relating to the issuance of such common stock. When-issued transactions are settled after shares of our common stock have been issued to HD Supply stockholders. On the first trading day following the distribution date, when-issued trading with respect to our common stock will end and regular way trading will begin. Regular way trading refers to trading after a

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security has been issued. We cannot predict what the trading price for our common stock will be before or after the distribution date. See "Risk Factors—Risks Relating to Ownership of Our Common Stock." In addition, we cannot predict any change that may occur in the trading price of HD Supply's common stock, which will continue to trade on NASDAQ under the symbol "HDS," as a result of the spinoff.

Trading of HD Supply Common Stock After the Record Date and Prior to the Distribution

        Beginning on or shortly before the record date and through the distribution date, we anticipate that there will be two concurrent markets in which to trade shares of HD Supply common stock: a regular way market and an ex-distribution market. Shares of HD Supply common stock that trade in the regular way market will trade with an entitlement to our common stock distributed in connection with the spinoff. Shares that trade in the ex-distribution market will trade without an entitlement to our common stock distributed in connection with the spinoff. Therefore, if you owned HD Supply common stock at 5:00 p.m., Atlanta, Georgia time, on the record date and sell those shares in the regular way market on or prior to the distribution date, you also will be selling your right to receive our common stock that would have been distributed to you in connection with the spinoff. If you sell those shares of HD Supply common stock in the ex-distribution market on or prior to the distribution date, you will still receive shares of our common stock that were to be distributed to you in connection with the spinoff as a result of your ownership of the HD Supply common stock on the record date. You are encouraged to consult with your financial advisor regarding the financial implications of selling your shares of HD Supply common stock before or on the distribution date.

Spinoff Conditions and Termination

        We expect that the spinoff will be completed on            , 2020, provided that, among other things:

•

the transactions as contemplated by the separation and distribution agreement will have been completed;



•

the HD Supply board of directors will, in its sole and absolute discretion, have authorized and approved the separation and the distribution and will not have withdrawn that authorization and approval;



•

the HD Supply board of directors will have declared the distribution of all of our outstanding shares of common stock to HD Supply stockholders;



•

HD Supply and we will have executed and delivered the separation and distribution agreement, employee matters agreement, transition services agreements, tax matters agreement, and all other ancillary agreements related to the spinoff;



•

the SEC shall have declared effective our registration statement on Form 10, of which this information statement is a part, under the Exchange Act, with no stop order in effect with respect to the Form 10, and this information statement shall have been sent to HD Supply stockholders;



•

no order, injunction, or decree that would prevent the consummation of the distribution will be threatened, pending or issued (and still in effect) by any governmental entity of competent jurisdiction, no other legal restraint or prohibition preventing the consummation of the distribution will be in effect, and no other event outside the control of HD Supply will have occurred or failed to occur that prevents the consummation of the distribution;



•

our common stock shall have been approved for listing on NASDAQ, subject to official notice of issuance;



•

HD Supply will have received an opinion of counsel, reasonably satisfactory to HD Supply, to the effect that, for U.S. federal income tax purposes, the distribution of all of the shares of

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White Cap common stock owned by HD Supply to the stockholders of HD Supply will qualify as a tax-free distribution within the meaning of Section 355 of the Code; and

•

prior to the spinoff, our Amended and Restated Certificate of Incorporation and Amended and Restated By-laws, each in substantially the form filed as an exhibit to our registration statement on Form 10, of which this information statement is a part, will be in effect.

        HD Supply may waive one or more of these conditions, at the direction of its board of directors in its sole and absolute discretion, and the determination by the HD Supply board of directors regarding the satisfaction of these conditions will be conclusive. The fulfillment of these conditions will not create any obligation on HD Supply's part to effect the distribution, and HD Supply has reserved the right to amend, modify, or abandon any and all terms of the distribution and the related transactions at any time prior to the distribution date, at the direction of its board of directors. HD Supply does not intend to notify its stockholders of any modifications to the terms or the conditions to the separation that, in the judgment of its board of directors, are not material. To the extent that the HD Supply board of directors determines that any such modifications materially change the terms and conditions of the distribution, HD Supply will notify its stockholders in a manner reasonably calculated to inform them of such modifications with a press release, Current Report on Form 8-K, or other similar means.

Reason for Sending this Information Statement

        This information statement is being sent solely to provide information to HD Supply stockholders who will receive White Cap common stock in the spinoff. It is not to be construed as an inducement or encouragement to buy or sell any of our securities. We believe that the information contained in this information statement is accurate as of the date set forth on the cover. Changes may occur after that date and neither we nor HD Supply undertake any obligation to update the information, except to the extent so required by applicable securities laws.

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CAPITALIZATION

        The following table sets forth White Cap's cash and cash equivalents and capitalization as of May 3, 2020 on a historical basis and on an as adjusted basis to give effect to the pro forma adjustments included in White Cap's unaudited pro forma combined financial information included elsewhere in this information statement. The information below is not necessarily indicative of what White Cap's cash and cash equivalents and capitalization would have been had the spinoff been completed as of May 3, 2020. In addition, this information is not indicative of White Cap's future cash and cash equivalents and capitalization. This table should be read in conjunction with the sections entitled "Selected Historical Combined Financial Data," "Unaudited Pro Forma Combined Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our combined financial statements and corresponding notes included elsewhere in this information statement.

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DIVIDEND POLICY

        We do not currently expect to declare or pay dividends on our common stock for the foreseeable future. Instead, we intend to retain earnings for use in the operation and expansion of our business. Any future payment of dividends will be at the discretion of our board of directors and will depend upon various factors then existing, including earnings, financial condition, results of operations, 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 deem relevant.

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SELECTED HISTORICAL COMBINED FINANCIAL DATA

        The following table presents White Cap's selected historical combined financial data. The selected historical combined financial data for the three months ended May 3, 2020 and May 5, 2019 and the selected historical balance sheet as of May 3, 2020 are derived from White Cap's unaudited combined financial statements included elsewhere in this information statement. The selected historical combined financial data as of February 2, 2020 and February 3, 2019, and for the years ended February 2, 2020, February 3, 2019, and January 28, 2018, are derived from White Cap's audited combined financial statements included elsewhere in this information statement. The selected historical combined balance sheet as of January 28, 2018 and May 5, 2019 and the selected historical combined financial data as of January 29, 2017 and January 31, 2016 and for the years then ended are derived from White Cap's unaudited combined financial information that are not included in this information statement.

        The selected historical combined financial data include certain expenses related to HD Supply that were allocated to White Cap for certain corporate functions including IT, finance, legal, insurance, compliance, and human resources activities. These costs may not be representative of the future costs White Cap will incur as an independent, publicly traded company. In addition, White Cap's historical financial information does not reflect changes that White Cap expects to experience in the future as a result of the spinoff from HD Supply, including changes in White Cap's cost structure, personnel needs, capital structure, financing, and business operations. Consequently, the financial information included here may not necessarily reflect what White Cap's financial position, results of operations, and cash flows would have been had it been an independent, publicly traded company during the periods presented. Accordingly, these historical results should not be relied upon as an indicator of White Cap's future performance.

        For a better understanding, this section should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the "Unaudited Pro Forma Combined Financial Data" and corresponding notes and the combined financial statements and accompanying notes included elsewhere in this information statement.

Selected combined financial information

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        The following table presents a reconciliation of Net income, the most directly comparable financial measure under GAAP, to Adjusted EBITDA for the periods presented (amounts in millions):

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UNAUDITED PRO FORMA COMBINED FINANCIAL DATA

        The Unaudited Pro Forma Combined Financial Data of White Cap consist of unaudited pro forma combined statements of income for fiscal 2019 and for the three months ended May 3, 2020, and an unaudited pro forma combined balance sheet as of May 3, 2020. The Unaudited Pro Forma Combined Financial Data reported below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Selected Historical Combined Financial Data" and the combined financial statements and corresponding notes included elsewhere in this information statement.

        The following Unaudited Pro Forma Combined Financial Data are subject to assumptions and adjustments described in the accompanying notes. White Cap's management believes these assumptions and adjustments are reasonable under the circumstances and given the information available at this time. However, these adjustments are subject to change as HD Supply and White Cap finalize the terms of the spinoff, including the separation and distribution agreement and related transaction agreements. The Unaudited Pro Forma Combined Financial Data do not purport to represent what White Cap's financial position and results of operations actually would have been had the spinoff occurred on the dates indicated, or to project White Cap's financial performance for any future period following the spinoff.

        The unaudited pro forma combined statements of income give effect to the spinoff as if it had occurred on February 4, 2019 for fiscal 2019 and the three months ended May 3, 2020. The unaudited pro forma combined balance sheet as of May 3, 2020 gives effect to the spinoff as if it had occurred on May 3, 2020. These Unaudited Pro Forma Combined Financial Data include adjustments to reflect the following:

•

the contribution by HD Supply to White Cap, pursuant to the separation and distribution agreement, of its ownership of all the assets and liabilities that comprise our business;



•

the inclusion of $750 million of debt at an estimated weighted average interest rate of 5%;



•

a cash distribution of approximately $670 million to HD Supply;



•

the pro-rata distribution of approximately             million shares of common stock of White Cap to HD Supply stockholders; and



•

the impact of the separation and distribution agreement, tax matters agreement, employee matters agreement, and other commercial agreements between White Cap and HD Supply, as more fully described in "Relationship with HD Supply After the Spinoff—Agreements Between HD Supply and Us."

        HD Supply expects to incur approximately $50 million to $70 million of non-recurring costs in connection with the spinoff. These amounts are expected to cover matters such as investment advisory, recruiting, consulting, legal, auditing, and IT related services incurred to complete the spinoff. These amounts exclude costs related to White Cap's issuance of debt as part of the spinoff, which have been incorporated in the accompanying Unaudited Pro Forma Combined Financial Data.

        White Cap's combined financial statements include expense allocations for certain support functions that are currently provided on a centralized basis within HD Supply, such as expenses for business shared services, and other Selling, general, and administrative expenses that benefit White Cap. We expect to incur additional ongoing costs after the spinoff related to operating as an independent public company and replacing the services previously provided by HD Supply. We currently estimate those additional costs will range from approximately $20 million to $25 million in excess of fiscal 2019 reported Selling, general, and administrative expenses, excluding items impacting comparability. Our estimate takes into consideration the benefit that we will receive from the elimination of cost allocations from HD Supply after the spinoff is completed. The estimated additional

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costs are not reflected in the accompanying Unaudited Pro Forma Combined Financial Data as they are projected amounts based on estimates and would not be factually supportable.

        Due to the scope and complexity of these activities, the amount of the above-described costs could increase or decrease materially from those as currently estimated.

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Unaudited Pro Forma Combined Balance Sheet
As of May 3, 2020
(in millions)