What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-08 compared with 2023-05-09 · 71 added, 74 removed, 215 unchanged (40% of the section changed)

9 unchanged sentences

RESULTS OF OPERATIONS

The consolidated results of operations for the three months ended March 31, 2023 and March 25, 2022 were as follows:

The consolidated results of operations for the three months ended June 30, 2023 and June 24, 2022 were as follows:

Three months ended

(in thousands) March 31, 2023 March 25, 2022 Change % Change

(in thousands) June 30, 2023 June 24, 2022 Change % Change

Net sales $ 919,117 $ 1,061,590 $ (142,473) (13.4) %

10 unchanged sentences

Average selling prices (18.5) %

Solar tax credits to be transferred (1.1) %

Foreign exchange (0.2) %

Acquisitions 4.5 %

Other (0.3) %

Net sales (13.4) %

Net sales decreased by $86.6 million, or 8.8%, to $895.9 million for the three months ended March 31, 2023, compared to $982.6 million for the three months ended March 25, 2022.

The decrease in net sales is primarily attributed to decreased average selling prices across the Company’s products of $168.7 million as a result of expected pricing normalization.

Net sales decreased by $142.5 million, or 13.4%, to $919.1 million for the three months ended June 30, 2023, compared to $1,061.6 million for the three months ended June 24, 2022.

The decrease in net sales is primarily attributed to decreased average selling prices across the Company’s products of $196.3 million as a result of expected pricing normalization and the economic value of solar tax credits to be transferred to certain customers of $11.5 million.

This decrease was partially offset by increased net sales of $47.7 million from companies acquired during fiscal 2022 and fiscal 2023 and increased sales volume of $19.6 million.

1 unchanged sentence

Average input costs (15.1) %

Foreign exchange (0.9) %

Solar tax credits adjustment 1.0 %

Acquisitions 5.6 %

Other (0.4) %

Cost of sales (6.4) %

Cost of sales decreased by $23.1 million, or 4.1%, to $543.1 million for the three months ended March 31, 2023 compared to $566.2 million for the three months ended March 25, 2022.

The decrease was primarily due to lower input costs of steel, copper and PVC resin of $91.8 million.

Cost of sales decreased by $39.0 million, or 6.4%, to $568.3 million for the three months ended June 30, 2023 compared to $607.3 million for the three months ended June 24, 2022.

The decrease was primarily due to lower input costs of steel, copper and PVC resin of $91.7 million and adjustments to solar tax credit accounting from the second quarter of fiscal 2023 of $6.0 million.

This was partially offset by recent acquisitions during fiscal 2022 and fiscal 2023 of $34.1 million and higher sales volume of $10.5 million.

Selling, general and administrative

Selling, general and administrative expenses increased by $9.3 million, or 10.4%, to $98.2 million for the three months ended March 31, 2023 compared to $88.9 million for the three months ended March 25, 2022.

Selling, general and administrative expenses increased by $7.1 million, or 7.4%, to $103.0 million for the three months ended June 30, 2023 compared to $96.0 million for the three months ended June 24, 2022.

The increase was primarily due to increased general spending on business improvement initiatives of $12.1 million, recent acquisitions in fiscal 2022 and 2023 of $3.4 million and $2.2 million spread across a variety of other spend categories, partially offset by lower variable compensation and commissions of $8.8 million and by lower transaction costs of $1.8 million,

Intangible asset amortization

Intangible asset amortization expense increased to $14.8 million for the three months ended March 31, 2023 compared to $8.7 million for the three months ended March 25, 2022.

Increased amortization expense resulted from additional intangible assets acquired in business combinations in fiscal 2022 and 2023.

Intangible asset amortization expense increased to $15.2 million for the three months ended June 30, 2023 compared to $8.6 million for the three months ended June 24, 2022.

The increase in amortization expense resulted from additional intangible assets acquired in business combinations in fiscal 2022 and 2023.

Interest expense, net

Interest expense, net increased by $1.0 million, or 12.8% to $8.5 million for the three months ended March 31, 2023 compared to $7.5 million for the three months ended March 25, 2022.

Interest expense, net increased by $1.4 million, or 19.9% to $8.7 million for the three months ended June 30, 2023 compared to $7.2 million for the three months ended June 24, 2022.

The increase is primarily due to increased interest rates on the Company’s Senior Secured Term Loan Facility.

Other (income) and expense, net

Other (income) and expense, net increased to $3.9 million other expense for the three months ended March 31, 2023 compared to $0.8 million other income for the three months ended March 25, 2022.

Other (income) and expense, net increased to $3.7 million other expense for the three months ended June 30, 2023 compared to $0.2 million other expense for the three months ended June 24, 2022.

The increase in expense is primarily due to impairments recognized in connection with the Company’s plans to exit from operations in Russia of $3.7 million.

Income tax expense

The Company ’ s income tax rate decreased to 23.5% for the three months ended March 31, 2023 compared to 25.2% for the three months ended March 25, 2022.

The decrease in the current period

effective tax rate was driven by a decrease in state tax expense and an increase in the excess tax benefit associated with stock compensation.

The Company ’ s income tax rate decreased to 8.6% for the three months ended June 30, 2023 compared to 25.7% for the three months ended June 24, 2022.

The decrease in the current period effective tax rate was driven by a year to date correction of $39.8 million in the third quarter of fiscal 2023 which reflected the benefit of solar tax credits as part of the annual effective tax rate.

This amount included $24.8 million of benefit related to the first two quarters of fiscal 2023.

SEGMENT RESULTS

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Three months ended

(in thousands) March 31, 2023 March 25, 2022 Change % Change

(in thousands) June 30, 2023 June 24, 2022 Change % Change

Net sales $ 705,617 $ 821,566 $ (115,949) (14.1) %

1 unchanged sentence

Adjusted EBITDA margin 37.8 % 42.8 %

Volume (0.6) %

Average selling prices (19.6) %

Foreign exchange (0.7) %

Acquisitions 5.7 %

1 unchanged sentence

Net sales (14.1) %

Net sales decreased by $78.9 million, or 10.4%, to $681.0 million for the three months ended March 31, 2023 compared to $759.9 million for the three months ended March 25, 2022.

The decrease in net sales is primarily attributed to decreased average selling prices of $115.0 million as a result of expected pricing normalization, decreased sales volume of $4.9 million and the unfavorable impact of foreign exchange rates of $5.4 million.

These decreases were partially offset by increased net sales of $47.9 million from companies acquired during fiscal 2022 and fiscal 2023.

Net sales decreased by $115.9 million, or 14.1%, to $705.6 million for the three months ended June 30, 2023 compared to $821.6 million for the three months ended June 24, 2022.

The decrease in net sales is primarily attributed to decreased average selling prices of $160.9 million as a result of expected pricing normalization, partially offset by increased net sales of $46.9 million from companies acquired during fiscal 2022 and fiscal 2023 and increased sales volume of $1.8 million.

Adjusted EBITDA

Adjusted EBITDA for the three months ended March 31, 2023 decreased by $74.1 million, or 22.4%, to $256.9 million from $331.0 million for the three months ended March 25, 2022.

Adjusted EBITDA margins decreased to 37.7% for the three months ended March 31, 2023 compared to 43.6% for the

three months ended March 25, 2022.

Adjusted EBITDA for the three months ended June 30, 2023 decreased by $84.9 million, or 24.2%, to $266.6 million from $351.5 million for the three months ended June 24, 2022.

Adjusted EBITDA margins decreased to 37.8% for the three months ended June 30, 2023 compared to 42.8% for the three months ended June 24, 2022.

The decrease in Adjusted EBITDA and Adjusted EBITDA margins was largely due to lower average selling prices over input costs.

1 unchanged sentence

Three months ended

(in thousands) March 31, 2023 March 25, 2022 Change % Change

(in thousands) June 30, 2023 June 24, 2022 Change % Change

Net sales $ 213,606 $ 241,909 $ (28,303) (11.7) %

1 unchanged sentence

Adjusted EBITDA margin 10.1 % 18.9 %

Volume 20.3 %

Average selling prices (14.6) %

Acquisitions 0.7 %

Other (1.2) %

Solar tax credits to be transferred (4.8) %

Net sales (11.7) %

Net sales decreased by $9.2 million, or 4.1%, for the three months ended March 31, 2023 to $215.1 million compared to $224.3 million for the three months ended March 25, 2022.

The decrease is primarily attributed to decreased average selling prices of $53.7 million driven by lower input costs of steel partially offset by higher volumes of $45.8 million, primarily in the mechanical tube, construction and metal framing product lines, and increased net sales of $1.6 million from companies acquired during fiscal 2022.

Net sales decreased by $28.3 million, or 11.7%, for the three months ended June 30, 2023 to $213.6 million compared to $241.9 million for the three months ended June 24, 2022.

The decrease is primarily attributed to decreased average selling prices of $35.4 million driven by lower input costs of steel and the economic value of solar tax credits to be transferred to certain customers of $11.5 million, partially offset by higher volumes of $17.8 million, primarily in the mechanical tube, construction and metal framing product lines.

Adjusted EBITDA

Adjusted EBITDA increased by $4.3 million, or 14.8%, to $33.2 million for the three months ended March 31, 2023 compared to $28.9 million for the three months ended March 25, 2022.

Adjusted EBITDA margins increased to 15.4% for the three months ended March 31, 2023 compared to 12.9% for the three months ended March 25, 2022.

The Adjusted EBITDA increase is primarily due to increased volume.

The consolidated results of operations for the six months ended March 31, 2023 and March 25, 2022 were as follows:

Six months ended

(in thousands) March 31, 2023 March 25, 2022 Change % Change

Adjusted EBITDA decreased by $24.2 million, or 52.9%, to $21.5 million for the three months ended June 30, 2023 compared to $45.7 million for the three months ended June 24, 2022.

Adjusted EBITDA margins decreased to 10.1% for the three months ended June 30, 2023 compared to 18.9% for the three months ended June 24, 2022.

The decrease in Adjusted EBITDA and Adjusted EBITDA margin was largely due to lower average selling prices over input costs and the impacts of solar tax credit accounting.

The impacts of solar tax credit accounting included an $11.5 million reduction of sales as well as an increase of cost of sales of $6.0 million for tax credits that had previously been recorded as a reduction of cost of sales.

The consolidated results of operations for the nine months ended June 30, 2023 and June 24, 2022 were as follows:

Nine months ended

(in thousands) June 30, 2023 June 24, 2022 Change % Change

Net sales $ 2,648,872 $ 2,884,963 $ (236,091) (8.2) %

10 unchanged sentences

Average selling prices (16.4) %

Solar tax credits to be transferred (0.5) %

Foreign exchange (0.6) %

1 unchanged sentence

Net sales (8.2) %

Net sales decreased by $93.6 million, or 5.1%, to $1,729.8 million for the six months ended March 31, 2023, compared to $1,823.4 million for the six months ended March 25, 2022.

The decrease in net sales is primarily attributed to decreased average selling prices of $277.0 million, the unfavorable impact of foreign exchange rates of $13.0 million.

These decreases are offset by increased net sales of $110.8 million from companies acquired during fiscal 2022 and fiscal 2023 and increased sales volume of $86.4 million across varying product categories within both the Electrical and the Safety & Infrastructure segments.

Net sales decreased by $236.1 million, or 8.2%, to $2,648.9 million for the nine months ended June 30, 2023, compared to $2,885.0 million for the nine months ended June 24, 2022.

The decrease in net sales is primarily attributed to decreased average selling prices of $472.8 million, the unfavorable impact of foreign exchange rates of $16.2 million and the economic value of solar tax credits to be transferred to certain customers of $15.9 million.

These decreases are partially offset by increased net sales of $158.5 million from companies acquired during fiscal 2022 and fiscal 2023 and increased sales volume of $105.8 million across varying product categories within both the Electrical and the Safety & Infrastructure segments.

Cost of sales

3 unchanged sentences

Cost of sales (2.9) %

Cost of sales decreased by $9.6 million, or 0.9% to $1,042.5 million for the six months ended March 31, 2023 compared to $1,052.2 million for the six months ended March 25, 2022.

The decrease in cost of sales was primarily due to lower input costs for steel, copper and resin of $153.7 million.

Cost of sale s decreased by $48.6 million, or 2.9% to $1,610.8 million for the nine months ended June 30, 2023 compared to $1,659.4 million for the nine months ended June 24, 2022.

The decrease in cost of

sales was primarily due to lower input costs for steel, copper and resin of $250.1 million.

This was partially offset by recent acquisitions in fiscal 2022 and fiscal 2023 of $121.5 million and by higher sales volume of $79.6 million across varying product categories within both the Electrical and the Safety & Infrastructure segments.

Selling, general and administrative

Selling, general and administrative expenses increased by $21.1 million, or 12.6% to $188.2 million for the six months ended March 31, 2023 compared to $167.1 million for the six months ended March 25, 2022.

Selling, general and administrative expenses increased by $28.2 million, or 10.7% to $291.2 million for the nine months ended June 30, 2023 compared to $263.0 million for the nine months ended June 24, 2022.

The increase was primarily due to increased general spending on business improvement initiatives of $26.2 million, recent acquisitions in fiscal 2022 and 2023 of $13.2 million, and $9.9 million spread across a variety of other spend categories.

1 unchanged sentence

Intangible asset amortization

Intangible asset amortization expense increased to $27.6 million for the six months ended March 31, 2023 compared to $16.9 million for the six months ended March 25, 2022.

Intangible asset amortization expense increased to $42.8 million for the nine months ended June 30, 2023 compared to $25.6 million for the nine months ended June 24, 2022.

Increased amortization expense resulted from additional intangible assets acquired in business combinations in fiscal 2022 and 2023.

Interest expense, net

Interest expense, net, increased by $3.5 million, or 24.5% to $18.0 million for the six months ended March 31, 2023 compared to $14.4 million for the six months ended March 25, 2022.

Interest expense, net, increased by $5.0 million, or 22.9% to $26.6 million for the nine months ended June 30, 2023 compared to $21.7 million for the nine months ended June 24, 2022.

The increase is primarily due to increased interest rates on the Company’s Senior Secured Term Loan Facility.

Other (income) and expense, net

Other (income) and expense, net increased to $3.9 million of other expense for the six months ended March 31, 2023 compared to $1.1 million of other income for the six months ended March 25, 2022.

Other (income) and expense, net increased to $7.6 million of other expense for the nine months ended June 30, 2023 compared to $1.0 million of other income for the nine months ended June 24, 2022.

The increase in expense is primarily due to impairments recognized in connection with the Company’s plans to exit from operations in Russia of $7.6 million.

Income tax expense

The Company ’ s income tax rate decreased to 22.7% for the six months ended March 31, 2023 compared to 23.6% for the six months ended March 25, 2022.

The decrease in the current period effective tax rate was driven by a decrease in state tax expense partially offset by a decrease in the excess tax benefit associated with stock compensation.

The Company ’ s income tax rate decreased to 18.0% for the nine months ended June 30, 2023 compared to 24.4% for the nine months ended June 24, 2022.

The decrease in the current period effective tax rate was driven by the benefit related to solar energy tax credits enacted as part of the IRA legislation.

SEGMENT RESULTS

Six months ended

(in thousands) March 31, 2023 March 25, 2022 Change % Change

Nine months ended

(in thousands) June 30, 2023 June 24, 2022 Change % Change

Net sales $ 2,025,287 $ 2,220,482 $ (195,195) (8.8) %

6 unchanged sentences

Net sales (8.8) %

Net sales decreased by $81.9 million, or 5.8%, to $1,319.7 million for the six months ended March 31, 2023 compared to $1,401.6 million for the six months ended March 25, 2022.

Net sales decreased by $195.2 million, or 8.8%, to $2,025.3 million for the nine months ended June 30, 2023 compared to $2,220.5 million for the nine months ended June 24, 2022.

The decrease in net sales is primarily attributed to decreased average selling prices of $342.2 million and the unfavorable impact of foreign exchange rates of $15.4 million.

1 unchanged sentence

Adjusted EBITDA

Adjusted EBITDA for the six months ended March 31, 2023 decreased by $109.8 million, or 18.0%, to $500.7 million from $610.5 million for the six months ended March 25, 2022.

Adjusted EBITDA margins decreased to 37.9% for the six months ended March 31, 2023 compared to 43.6% for the six months ended March 25, 2022.

Adjusted EBITDA for the nine months ended June 30, 2023 decreased by $194.7 million, or 20.2%, to $767.3 million from $962.0 million for the nine months ended June 24, 2022.

Adjusted EBITDA margins decreased to 37.9% for the nine months ended June 30, 2023 compared to 43.3% for the nine months ended June 24, 2022.

The decrease in Adjusted EBITDA and Adjusted EBITDA margins was largely due to lower average selling prices over input costs.

Safety & Infrastructure

Six months ended

(in thousands) March 31, 2023 March 25, 2022 Change % Change

Nine months ended

(in thousands) June 30, 2023 June 24, 2022 Change % Change

Net sales $ 623,919 $ 666,704 $ (42,785) (6.4) %

6 unchanged sentences

Net sales (6.4) %

Net sales decreased by $14.5 million, or 3.4%, for the six months ended March 31, 2023 to $410.3 million compared to $424.8 million for the six months ended March 25, 2022.

The decrease is primarily attributed to decreased average selling prices of $95.3 million.

Net sales decreased by $42.8 million, or 6.4%, for the nine months ended June 30, 2023 to $623.9 million compared to $666.7 million for the nine months ended June 24, 2022.

The decrease is primarily attributed to decreased average selling prices of $130.7 million and the economic value of solar tax credits to be transferred to certain customers of $15.9 million.

This was partially offset by higher volumes of $91.9 million and net sales of $8.6 million from companies acquired during fiscal 2022.

Adjusted EBITDA

Adjusted EBITDA increased $10.2 million, or 18.2%, to $66.6 million for the six months ended March 31, 2023 compared to $56.3 million for the six months ended March 25, 2022.

Adjusted EBITDA margins increased to 16.2% for the six months ended March 31, 2023 compared to 13.3% for the six months ended March 25, 2022.

The Adjusted EBITDA increase is primarily due to increased volume.

Adjusted EBITDA decreased $13.9 million, or 13.7%, to $88.1 million for the nine months ended June 30, 2023 compared to $102.0 million for the nine months ended June 24, 2022.

Adjusted EBITDA margins decreased to 14.1% for the nine months ended June 30, 2023 compared to 15.3% for the nine months ended June 24, 2022.

The decrease in Adjusted EBITDA and Adjusted EBITDA margins was largely due to lower average selling prices over input costs and the impacts of solar tax credit accounting.

LIQUIDITY AND CAPITAL RESOURCES

We believe we have sufficient liquidity to support our ongoing operations and to invest in future growth and create value for stockholders.

Our cash and cash equivalents were $354.3 million as of March 31, 2023, of which $67.2 million was held at non-U.S.

Our cash and cash equivalents were $317.8 million as of June 30, 2023, of which $72.4 million was held at non-U.S.

subsidiaries.

2 unchanged sentences

We have access to the ABL Credit Facility to fund operational needs.

As of March 31, 2023, there were no outstanding borrowings under the ABL Credit Facility and $2.6 million of letters of credit issued under the ABL Credit Facility.

The borrowing base was estimated to be $325.0 million and approximately $322.4 million was available under the ABL Credit Facility as of March 31, 2023.

As of June 30, 2023, there were no outstanding borrowings under the ABL Credit Facility and $2.6 million of letters of credit issued under the ABL Credit Facility.

The borrowing base was estimated to be $325.0 million and approximately $322.4 million was available under the ABL Credit Facility as of June 30, 2023.

Outstanding letters of credit count as utilization of the commitments under the ABL Credit Facility and reduce the amount available for borrowings.

19 unchanged sentences

The table below summarizes cash flow information derived from our statements of cash flows for the periods indicated:

Six months ended

(in thousands) March 31, 2023 March 25, 2022

Nine months ended

(in thousands) June 30, 2023 June 24, 2022

Cash flows provided by (used in):

3 unchanged sentences

Operating activities

During the six months ended March 31, 2023, the Company was provided $403.4 million by operating activities compared to $161.2 million during the six months ended March 25, 2022.

During the nine months ended June 30, 2023, the Company was provided $563.7 million by operating activities compared to $371.8 million during the nine months ended June 24, 2022.

The $192.0 million increase in cash provided was primarily due to $278.8 million decrease in cash used in working capital primarily due to lower inventory and accounts receivable as well as $133.2 million of tax impacts, partially offset by decreased operating income.

Investing activities

During the six months ended March 31, 2023, the Company used $156.1 million in investing activities compared to $60.8 million during the six months ended March 25, 2022.

Cash used in acquisitions increased in fiscal 2022 by $47.3 million primarily as a result of the acquisition of Elite Polymer in the first quarter of fiscal 2023.

The remaining increase in cash used in investing activities was driven by $47.3 million of additional capital expenditures.

During the nine months ended June 30, 2023, the Company used $205.9 million in investing activities compared to $336.7 million during the nine months ended June 24, 2022.

Cash used in acquisitions decreased in fiscal 2023 by $172.0 million primarily as a result of the acquisition of United Poly Systems in the third quarter of fiscal 2022.

This decrease in cash used in investing activities was partially offset by higher cash used of $40.5 million related to capital expenditures in fiscal 2023.

Financing Activities

During the six months ended March 31, 2023, the Company used $284.3 million in financing activities compared to $285.6 million used during the six months ended March 25, 2022.

The decrease in cash used in financing activities is primarily due to $10.0 million less in issuance of common stock, net of shares withheld for tax partially offset by $8.0 million more cash used to repurchase common stock during the six months ended March 31, 2023 compared to the same period in the prior year.

During the nine months ended June 30, 2023, the Company used $431.6 million in financing activities compared to $421.2 million used during the nine months ended June 24, 2022.

The increase in cash used in financing activities is primarily due to $19.1 million more cash used to repurchase common stock during the nine months ended June 30, 2023 compared to the same period in the prior year partially offset by $9.7 million less in issuance of common stock, net of shares withheld for tax.

CHANGES IN CRITICAL ACCOUNTING POLICIES AND ESTIMATES

6 unchanged sentences

Forward-looking statements include, without limitation, all matters that are not historical facts.

They appear in a number of places throughout this Quarterly Report on Form 10-Q and include, without limitation, statements regarding our intentions, beliefs, assumptions or current expectations concerning, among other things, financial position;

of operations;

They appear in a number of places throughout this Quarterly Report on Form 10-Q and include, without limitation, statements regarding our intentions,

beliefs, assumptions or current expectations concerning, among other things, financial position;

results of operations;

growth strategies or expectations;

50 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis