Financial Data and Key Metrics Changes - The negative EBITDA impact in Q4 from Monterrey challenges was $8 million, which was higher than the previously estimated $5 million [5] - EBITDA margins for the Hardware Solutions segment would have been in the 16% range without the negative impact [5] - A $3 million hit is expected in the first quarter due to ongoing challenges [6] Business Line Data and Key Metrics Changes - The Hardware Solutions segment faced increased costs due to a shift to 24/7 operations and higher labor and freight costs [5] - The company anticipates a flat revenue outlook for the next year, with potential for improved EBITDA due to reduced costs from Mexico and additional synergies [9] Market Data and Key Metrics Changes - The company has not observed irrational pricing behavior in the market, indicating a stable demand environment [20] - Commodity prices are expected to stabilize, but there may be pricing pressure as they come down [21] Company Strategy and Development Direction - The company is focusing on operational improvements and sharing best practices across its divisions to enhance efficiency [25] - There is potential for insourcing demand in the Custom Solutions group to mitigate tariff risks [24] - The company is balancing cash flow generation, stock repurchases, and debt paydown, especially in the first quarter, which is typically a low cash flow period [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in their ability to manage costs and operational efficiency despite inflationary pressures [35] - The company is optimistic about the recovery in the repair and remodel market, which is expected to lead new construction recovery [54] Other Important Information - The company has been proactive in addressing operational issues in its facilities, ensuring that similar risks are mitigated [32] - SG&A expenses are expected to be around $73 million in Q1, reflecting higher costs due to inflation and benefits [34] Q&A Session Summary Question: Impact of Monterrey challenges on EBITDA - The negative EBITDA impact was confirmed to be $8 million, higher than expected, affecting margins in the Hardware Solutions segment [5] Question: Future outlook on market volume and procurement synergies - The informal outlook suggests flat volumes with flat pricing, but improved EBITDA due to reduced costs and synergies [9] Question: Concerns about stock repurchase limitations - The company focused on debt repayment over stock repurchases, but will be opportunistic in the future [11] Question: Competitive pricing behavior in the market - No irrational pricing has been observed, with supply chain risks being prioritized by customers [20] Question: Expected product performance in 2026 - The Custom Solutions group may see opportunities due to tariff impacts, while other segments are in a wait-and-see mode [24] Question: Benefits from resegmentation - Early operational improvements have been noted, with potential for mid- to long-term growth opportunities [26] Question: SG&A expense clarification - SG&A is expected to be higher due to inflation and benefit costs, but operational efficiency is a focus to offset these increases [35] Question: Pricing stability and cost outlook - Pricing is primarily driven by inflationary pressures, and the company expects to maintain pricing due to justified cost increases [50] Question: Demand outlook for new residential vs. repair and remodel - Both markets are currently impacted similarly, but repair and remodel is expected to lead the recovery [54] Question: Cash flow expectations for Q1 - Slightly negative free cash flow is possible in Q1, depending on volume and CapEx timing [55]

Financial Data and Key Metrics Changes - Total sales for the quarter were $6.2 billion, up 0.6% compared to the previous year, with a 6.9% increase on a 16-week basis [19][7] - Earnings per share (EPS) decreased by 5.6%, but adjusted for the previous year's extra week, EPS grew by 1.3% [7][19] - Excluding an $80 million LIFO charge, EPS would have increased by 8.7% on a 16-week basis [8][19] - Net income for the quarter was $837 million, down 0.5% year-over-year on a 16-week basis [30] Business Line Data and Key Metrics Changes - Domestic commercial sales grew by 12.5% on a 16-week basis, with same-store sales growth of 4.8% [5][19] - Domestic DIY same-store sales increased by 2.2%, with a positive average ticket growth of 3.9% [11][23] - International same-store sales were up 7.2% on a constant currency basis, but faced a 5-point currency headwind, resulting in a 2.1% unadjusted comp [8][19] Market Data and Key Metrics Changes - Domestic same-store sales showed a positive trend with a cadence of 4.4%, 2.4%, 6%, and 6.4% over the four segments of the quarter [10] - The company opened 90 net new domestic stores and 51 international stores during the quarter, totaling 304 net new stores for the year, the highest since 1996 [14][16] Company Strategy and Development Direction - The company plans to continue aggressive store openings, targeting 325 to 350 new stores in the Americas for FY26 [34][81] - Focus areas for FY26 include growing share in the domestic commercial business and maintaining momentum in international markets [35][38] - Investments in technology, customer service, and supply chain improvements are prioritized to enhance operational efficiency and customer experience [17][38] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about sales growth and market share gains, particularly in the domestic commercial segment [9][15] - The company anticipates continued inflationary pressures but remains confident in maintaining gross margins through disciplined pricing strategies [55][85] - Management highlighted the importance of customer service and execution as key drivers for future growth [35][39] Other Important Information - The company invested approximately $1.4 billion in capital expenditures for strategic growth priorities, with plans for similar investments in the upcoming year [17][30] - Free cash flow generated for the quarter was $511 million, contributing to a total of $1.8 billion for FY2025 [30][31] - The liquidity position remains strong, with a leverage ratio of 2.5 times EBITDA [31] Q&A Session Summary Question: Inflation expectations and pricing strategy - Management expects inflation to be at least 3% and possibly higher, using pricing strategies to cover costs while remaining competitive [45][55] Question: Growth in discretionary categories - Recent growth in discretionary categories is noted, but management cautions that the lower-end consumer remains under pressure [46] Question: LIFO charges outlook - LIFO charges are expected to be around $120 million in Q1, with potential pressure in subsequent quarters [51][53] Question: SG&A growth dynamics - SG&A growth is primarily due to investments in new stores, with expectations for mid-single-digit growth moving forward [56][58] Question: Growth opportunities in Mexico - Management sees significant growth potential in Mexico, with plans to accelerate store openings and expand market share [73][77]