Notes to Financial Statements
December 31, 2021 and 2020
1. Description of the Plan
The following description of the SiteOne Savings
and Investment Plan (the “Plan”) provides only general information. More complete information regarding the Plan may be found
in the Plan document, which is available to all participants upon request.
General
The Plan is a defined contribution plan covering
substantially all employees, except leased employees, employees covered by a collective bargaining agreement, certain nonresident aliens,
and seasonal employees, of SiteOne Landscape Supply, Inc. and its subsidiaries (the “Company”). Employees are immediately
eligible to participate in the Plan upon their date of hire. The Plan is subject to the provisions of the Employee Retirement Income Security
Act of 1974 (“ERISA”).
In early March 2020, COVID-19 was characterized
as a pandemic by the World Health Organization. The Plan permitted COVID-19-related distributions and suspension of participant loan repayments
in accordance with the Coronavirus Aid, Relief and Economic Security Act as well as suspended 2020 required minimum distributions payable
after April 1, 2020 and allowed 2020 to be disregarded for purposes of the five-year required minimum distribution deadline.
Plan Amendment and Restatement
During the Plan year, the Plan was amended and
restated to comply with the Internal Revenue Service’s (“IRS”) Cycle 3 restatement requirements.
Contributions
Eligible employees are automatically enrolled
into the Plan after 30 days of employment, unless the employee elects otherwise. Pre-tax contributions are withheld at 3% of eligible
compensation and increased by 1% each year until it reaches 50% of eligible compensation, unless the employee elects differently. Participants
may elect to make pre-tax and/or Roth contributions of up to 50% of eligible compensation as defined by the Plan document, not to exceed
a maximum of $19,500 for the Plan year. Additional catch-up contributions of up to $6,500 may be made by those participants who have attained
age 50 prior to the end of the Plan year.
SiteOne Savings and Investment Plan
Notes to Financial Statements (continued)
1. Description of the Plan (continued)
Contributions (continued)
Participants may also contribute amounts representing
distributions from other qualified defined benefit or defined contribution plans (i.e., participant rollovers).
The Company may make discretionary matching contributions.
For the year ended December 31, 2021, the Company made matching contributions equal to 120% of the first 2% of the participant’s
pre-tax annual compensation plus 40% for the next 4% of the participant’s annual pre-tax compensation. Participants direct the investment
of their contributions and Company contributions into various investment options offered by the Plan.
Participant Accounts
Each participant’s account is credited with
the participant’s contribution, the Company’s matching contribution, earnings and losses on the investments in their account
and charged with certain administrative expenses.
Participants direct the investment of their account
into various investment options offered by the Plan. Self-directed brokerage accounts cannot invest in tax-exempt securities, mutual funds
already offered by the Plan, Company stock, annuities, physical certificates, U.S. savings bonds, precious metals, limited partnerships,
exchange traded funds, futures contracts, commodities, or various types of options. Participants may change their investment options on
a daily basis. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s vested
account.
Vesting
Participants are vested immediately in their contributions
plus actual earnings thereon. A participant is 100% vested after three years of credited service if employed after December 23, 2013.
If employed prior to that date, they are always 100% vested in the employer matching contribution. Matching contributions from prior employers
of merged plans are subject to vesting schedules in place at the time of the merger.
SiteOne Savings and Investment Plan
Notes to Financial Statements (continued)
1. Description of the Plan (continued)
Notes Receivable from Participants
Participants may borrow from their vested balances
in the Plan a minimum of $1,000 up to a maximum equal to the lesser of $50,000 or 50% of their vested account balance. The loans are secured
by the balance in the participant’s account and must bear a reasonable rate of interest. Only one loan may be outstanding at any
time. Interest rates on outstanding loans generated by the Plan ranged from 4.25% to 7.50% for the year ended December 31, 2021. Principal
and interest are paid ratably through payroll deductions.
Benefit Payments
On termination of service due to separation, death,
disability, or retirement, a participant may elect to receive a lump-sum amount equal to the value of the participant’s vested interest
in their account. Upon termination of service, only the vested portion of the participant’s account becomes payable. In the event
of the participant’s death or permanent and total disability, their interest in the Plan will become fully vested.
In-service withdrawals are available in limited
circumstances, as defined by the Plan. Hardship withdrawals are allowed for participants incurring an immediate financial need and who
meet one of the specific circumstances defined in the Plan document. Hardship withdrawals are strictly regulated by the IRS, and before
requesting a hardship withdrawal, all requirements must be met in order for a request to be approved.
Administrative Expenses
Participants are charged an asset-based service
fee for administrative expenses of the Plan related to recordkeeping services. Participants also pay certain administrative fees for participant-initiated
transactions. Investment-related expenses are included in net change in fair value of investments. The Plan document permits certain administrative
expenses to be paid by the Plan. Expenses paid by the Plan in 2021 included recordkeeping fees, audit fees, and advisory fees. The Company
pays all other administrative expenses of the Plan. The Company does not expect reimbursement from the Plan for these expenses.
SiteOne Savings and Investment Plan
Notes to Financial Statements (continued)
1. Description of the Plan (continued)
Forfeited Accounts
Forfeited non-vested account balances totaled
$153,422 and $140,723 as of December 31, 2021 and 2020, respectively. These accounts are first used to pay administrative expenses and
then to reduce future Company contributions. During the year ended December 31, 2021, $51,484 was used to pay administrative expenses
and $826,872 was used to reduce employer contributions.
Company Stock Fund
The Plan invests in common stock of the Company
through its Company Stock Fund. The Company Stock Fund may also hold cash or other short-term securities, although these are expected
to be a small percentage of the fund. Dividends received by the Company Stock Fund are reinvested in Company common stock.
The Plan limits the amount a participant can invest
in the Company Stock Fund to encourage diversification of participants’ accounts. Contribution limits were set at a maximum of 10%
of a participant’s contributions. In addition, a participant may not transfer amounts from other investment funds into the Company
Stock Fund to the extent the transfer would result in more than 10% of the participant’s total account balance being invested in
the Company Stock Fund.
Plan Termination
Although it has not expressed any intent to do
so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions
set forth in ERISA. In the event of Plan termination, participants would become fully vested in their Company contributions. The Plan’s
assets would be distributable to the participants in accordance with the respective values of their accounts.
2. Summary of Significant Accounting Policies
Basis of Accounting
The financial statements of the Plan have been
prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
SiteOne Savings and Investment
Plan
Notes to Financial Statements (continued)
2. Summary of Significant Accounting Policies
(continued)
Use of Estimates
The preparation of financial statements in conformity
with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
Risks and Uncertainties
The Plan invests in various investments. Investments
are exposed to various risks such as interest rate, market, and credit volatility. Market risks include U.S. and global events that could
impact the value of Plan investments. Such events may include public health emergencies such as a pandemic, as well as international conflicts,
cybersecurity attacks, supply chain disruptions, global monetary policy decisions, inflation, significant economic influences, and other
adverse credit and market events and conditions. Due to the level of risk associated with certain investments, it is at least reasonably
possible that changes in the values of investments will occur in the near term and that such changes could materially affect participants’
account balances and the amounts reported in the statements of net assets available for benefits.
Investment Valuation and Income Recognition
Investments are stated at fair value. Fair value
is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date (i.e., an exit price). Management of the Plan determines the Plan's valuation policies utilizing information provided
by the investment advisers and trustee. See Note 3 for further discussion of fair value measurements.
Purchases and sales of common stock are recorded
on a trade-date basis. Interest income is recorded when received. Dividends on common stock are recorded on the ex-dividend date and are
included in investment income. Investment income includes the Plan’s gains and losses on investments bought and sold as well as
held during the year.
Payment of Benefits
Benefits are recorded when paid.
SiteOne Savings and Investment
Plan
Notes to Financial Statements (continued)
2. Summary of Significant Accounting Policies
(continued)
Notes Receivable from Participants
Notes receivable from participants are carried
at their outstanding balance. Interest income is recognized when received by the Plan. No allowance for credit losses has been recorded
as of December 31, 2021 or 2020. If a participant ceases to make loan repayments and the plan administrator deems the participant loan
to be in default the participant loan balance is reduced, and a benefit payment is recorded.
Recently Adopted Accounting Pronouncements
In August 2018, the Financial Accounting Standards
Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-13, Fair Value Measurement (Topic 820) –
Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), which
amended certain disclosure requirements of Accounting Standards Codification (“ASC”) 820. The ASU removed the requirement
to disclose the amount of and reasons for transfers between level 1 and level 2 of the fair value hierarchy as well as the policy for
the timing of transfers between levels. The ASU also modified the disclosure for investments in certain entities that calculate net asset
value (“NAV”) to disclose the timing of liquidation of an investee’s assets and the date when restrictions from redemption
might lapse only if the investee has communicated the timing to the Plan or announced the timing publicly. It also clarified the measurement
uncertainty disclosure to communicate information about the uncertainty in measurement as of the reporting date. The Company adopted ASU
2018-13 in the first quarter of 2020. The adoption of ASU 2018-13 did not have a material impact on the Plan’s financial statements
or related disclosures.
3. Fair Value Measurements
Fair value is defined as the price that would
be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement
date. The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest
priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1) and the lowest priority to unobservable
inputs (level 3). The three levels of the fair value hierarchy are described below:
Level 1 - Unadjusted quoted prices in active
markets that are accessible to the reporting entity at the measurement date for identical assets and liabilities.
SiteOne Savings and Investment Plan
Notes to Financial Statements (continued)
3. Fair Value Measurements (continued)
Level 2 - Inputs other than quoted prices in
active markets for identical assets and liabilities that are observable either directly or indirectly for substantially the full term
of the asset or liability. Level 2 inputs include the following:
| · | Quoted prices for similar assets or liabilities in active markets; |
| · | Quoted prices for identical or similar assets or liabilities in markets that are not active; |
| · | Observable inputs other than quoted prices that are used in the valuation of the asset or liability (e.g.,
interest rate and yield curve quotes at commonly quoted intervals); and |
| · | Inputs that are derived principally from or corroborated by observable market data by correlation or other
means. |
Level 3 - Unobservable inputs for the asset
or liability (i.e., supported by little or no market activity). Level 3 inputs include management’s own assumption about the assumptions
that market participants would use in pricing the asset or liability (including assumptions about risk).
The asset’s or liability’s fair value
measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.
The following is a description of the valuation
methodologies used for assets measured at fair value. There have been no changes in the methodologies used at December 31, 2021 and 2020.
Managed income portfolio: The managed income portfolio
account trades daily at the NAV per share of the fund. The managed income portfolio has redemption restrictions that limit the timing
of withdrawals. Participant directed withdrawals may be made on any business day, provided that the exchange is not directed into a competing
fund. Transferred amounts must hold a non-competing investment option for 90 days before funds may be transferred to a competing fund.
In addition, redemptions of the Fidelity Management Trust Company (“Fidelity”) managed income portfolio directed by the Company
must be preceded by 12 months written notice to Fidelity.
SiteOne Savings and Investment Plan
Notes to Financial Statements (continued)
3. Fair Value Measurements (continued)
Mutual funds, money market fund, self-directed
brokerage accounts, and Company common stock: valued at the daily closing price as reported by the investment and are deemed to be actively
traded. Mutual funds held by the Plan are open-end mutual funds that are registered with the Securities and Exchange Commission. These
funds are required to publish their NAV and to transact at that price.
The methods described above may produce a fair
value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Plan
believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions
to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.
The following tables set forth by level and investment
category, within the fair value hierarchy, the Plan’s assets at fair value as of December 31, 2021 and 2020:
| |
Assets at Fair Value as of December 31, 2021 | |
| |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total | |
Mutual funds | |
$ | 356,155,795 | | |
$ | – | | |
$ | – | | |
$ | 356,155,795 | |
Company stock fund | |
| 6,191,065 | | |
| – | | |
| – | | |
| 6,191,065 | |
Money market fund | |
| 6,167,922 | | |
| – | | |
| – | | |
| 6,167,922 | |
Self-directed brokerage accounts | |
| 4,940,357 | | |
| – | | |
| – | | |
| 4,940,357 | |
Managed income portfolio | |
| 2,064,512 | | |
| – | | |
| – | | |
| 2,064,512 | |
| |
$ | 375,519,651 | | |
$ | – | | |
$ | – | | |
$ | 375,519,651 | |
| |
Assets at Fair Value as of December 31, 2020 | |
| |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total | |
Mutual funds | |
$ | 291,533,946 | | |
$ | – | | |
$ | – | | |
$ | 291,533,946 | |
Company stock fund | |
| 3,727,375 | | |
| – | | |
| – | | |
| 3,727,375 | |
Money market fund | |
| 5,929,992 | | |
| – | | |
| – | | |
| 5,929,992 | |
Self-directed brokerage accounts | |
| 3,978,685 | | |
| – | | |
| – | | |
| 3,978,685 | |
Managed income portfolio | |
| 2,596,843 | | |
| – | | |
| – | | |
| 2,596,843 | |
| |
$ | 307,766,841 | | |
$ | – | | |
$ | – | | |
$ | 307,766,841 | |
SiteOne Savings and Investment Plan
Notes to Financial Statements (continued)
4. Income Tax Status
The Company adopted a pre-approved plan with cash
or deferral arrangement that received a favorable opinion letter from the IRS on June 30, 2020, which stated that the Plan is designed
in accordance with applicable sections of the Internal Revenue Code (“IRC”). Although the Plan has been amended since receiving
the opinion letter, the plan administrator believes that the Plan is designed and is currently being operated in compliance with the applicable
requirements of the IRC and has no income subject to unrelated business income tax.
5. Transactions with Parties-in-Interest
The Plan held 25,547 and 23,489 shares of Company
common stock valued at $6,191,065 and $3,727,375 at December 31, 2021 and 2020, respectively. There were no dividends declared on the
Company common stock during 2021.
Plan investments include shares of mutual funds,
a money market fund, and units of the managed income portfolio fund managed by Fidelity. Fidelity is the custodian as defined by the Plan;
therefore, transactions in these investments qualify as party-in-interest transactions. Fees incurred by the Plan for investment management
services are included in investment income, as they are paid through revenue sharing rather than a direct payment.
6. Subsequent Events
There has been significant volatility in the financial
markets since December 31, 2021 resulting in an overall market decline, which has resulted in a substantial decrease in the value of the
Plan investment portfolio.
Supplemental Schedule
SiteOne Savings and Investment Plan
EIN: 34-4485550 Plan No.:002
Column (d) has not been presented as all investments
are participant directed.
* Indicates a party-in-interest to the Plan.