What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-02-01 compared with 2023-08-08 · 54 added, 136 removed, 150 unchanged (56% of the section changed)

5 unchanged sentences

Incremental Market Uncertainties

Recent events, including central bank interest rate increases, inflation and the Russia-Ukraine conflict, are creating additional uncertainty in the global economy, generally, and in the markets we operate in.

The Russia-Ukraine conflict and other factors have had and will continue to have adverse effects on global supply chains, which may impact some aspects of our business.

Recent events, including central bank interest rate increases, inflation, and conflicts in Ukraine and the Middle East are creating additional uncertainty in the global economy, generally, and in the markets we operate in.

The aforementioned conflicts and other factors have had and will continue to have adverse effects on global supply chains, which may impact some aspects of our business.

Furthermore, we are mindful of the effects that adverse weather can have on our domestic supply chain.

RESULTS OF OPERATIONS

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

The consolidated results of operations for the three months ended December 29, 2023 and December 30, 2022 were as follows:

Three months ended

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

(in thousands) December 29, 2023 December 30, 2022 Change % Change

Net sales $ 798,481 $ 833,821 $ (35,340) (4.2) %

5 unchanged sentences

Interest expense, net 7,793 9,488 (1,695) (17.9) %

Other (income) and expense, net 3,689 150 3,539 2,359.3 %

Other expense, net 12 41 (29) (70.7) %

Income before income taxes 167,653 222,051 (54,398) (24.5) %

1 unchanged sentence

Net income $ 138,381 $ 173,492 $ (35,111) (20.2) %

Volume 12.6 %

Average selling prices (15.5) %

Solar tax credits to be transferred (1.1) %

Solar tax credits (1.8) %

Foreign exchange 0.2 %

1 unchanged sentence

Net sales (4.2) %

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.

Net sales decreased by $35.3 million or 4.2% to $798.5 million for the three months ended December 29, 2023, compared to $833.8 million for the three months ended December 30, 2022.

The decrease in net sales is primarily attributed to decreased average selling prices across the Company’s products of $130.4 million as a result of expected pricing normalization and the economic value of solar tax credits to be transferred to certain customers of $14.9 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.

This decrease was partially offset by increased sales volume of $106.2 million.

Cost of sales

Volume 14.6 %

Average input costs (12.5) %

Solar tax credits adjustment 1.0 %

Solar tax credits (3.8) %

Acquisitions 0.3 %

Cost of sales 1.7 %

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.

Cost of sales increased by $8.5 million, or 1.7%, to $507.9 million for the three months ended December 29, 2023 compared to $499.5 million for the three months ended December 30, 2022.

The increase was primarily due to higher sales volume of $72.7 million and higher freight costs of $11.1 million, partially offset by lower input costs of steel, copper and PVC resin of $62.3 million and the benefit of solar tax credits of $19.1 million.

Selling, general and administrative

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,

Selling, general and administrative expenses increased by $10.6 million, or 11.8%, to $100.6 million for the three months ended December 29, 2023 compared to $90.0 million for the three months ended December 30, 2022.

The increase was primarily due to increased general spending on business improvement initiatives of $12.6 million, higher variable compensation and commissions of $1.0 million.

and partially offset by decreased spending across a variety of other spend categories of $3.0 million.

Intangible asset amortization

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.

Intangible asset amortization expense increased to $14.5 million for the three months ended December 29, 2023 compared to $12.8 million for the three months ended December 30, 2022.

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

Interest expense, net

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 $3.7 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.

Interest expense, net decreased by $1.7 million, or 17.9% to $7.8 million for the three months ended December 29, 2023 compared to $9.5 million for the three months ended December 30, 2022.

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

Other expense, net

Other expense, net remained consistent at $12.2 thousand for the three months ended December 29, 2023 compared to $41.0 thousand other expense for the three months ended December 30, 2022.

Income tax expense

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.

The Company ’ s income tax rate decreased to 17.5% for the three months ended December 29, 2023 compared to 21.9% for the three months ended December 30, 2022.

The decrease in the current period effective tax rate was driven by an increase in the excess tax benefit associated with stock compensation.

SEGMENT RESULTS

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Three months ended

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

(in thousands) December 29, 2023 December 30, 2022 Change % Change

Net sales $ 593,661 $ 638,705 $ (45,044) (7.1) %

1 unchanged sentence

Adjusted EBITDA margin 34.4 % 38.2 %

Volume 10.3 %

Average selling prices (18.0) %

Acquisitions 0.3 %

Other (0.4) %

Net sales (7.1) %

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.

Net sales decreased by $45.0 million, or 7.1%, to $593.7 million for the three months ended December 29, 2023 compared to $638.7 million for the three months ended December 30, 2022.

The decrease in net sales is primarily attributed to decreased average selling prices of $114.3 million as a result of expected pricing normalization and partially offset by increased sales volume of $65.5 million.

Adjusted EBITDA

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.

Adjusted EBITDA for the three months ended December 29, 2023 decreased by $39.5 million, or 16.2%, to $204.4 million from $243.8 million for the three months ended December 30, 2022.

Adjusted EBITDA margins decreased to 34.4% for the three months ended December 29, 2023 compared to 38.2% for the three months ended December 30, 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) June 30, 2023 June 24, 2022 Change % Change

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

Adjusted EBITDA $ 21,493 $ 45,669 $ (24,176) (52.9) %

Adjusted EBITDA margin 10.1 % 18.9 %

Average selling prices (14.6) %

Solar tax credits to be transferred (4.8) %

Net sales (11.7) %

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 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) %

Cost of sales 1,610,836 1,659,416 (48,580) (2.9) %

Gross profit 1,038,036 1,225,547 (187,511) (15.3) %

Selling, general and administrative 291,198 263,020 28,178 10.7 %

Intangible asset amortization 42,778 25,554 17,224 67.4 %

Operating income 704,061 936,973 (232,912) (24.9) %

Interest expense, net 26,645 21,676 4,969 22.9 %

Other (income) and expense, net 7,588 (964) 8,552 (887.1) %

Income before income taxes 669,828 916,261 (246,433) (26.9) %

Income tax expense 120,854 223,630 (102,776) (46.0) %

Net income $ 548,974 $ 692,631 $ (143,657) (20.7) %

Average selling prices (16.4) %

Solar tax credits to be transferred (0.5) %

Foreign exchange (0.6) %

Acquisitions 5.5 %

Net sales (8.2) %

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

Average input costs (14.9) %

Foreign exchange (0.8) %

Acquisitions 7.3 %

Cost of sales (2.9) %

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 $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.

These increases were partially offset by lower commissions and variable compensation of $18.7 million and lower transaction costs of $2.4 million.

Intangible asset amortization

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 $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 $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 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

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) %

Adjusted EBITDA $ 767,276 $ 961,983 $ (194,707) (20.2) %

Adjusted EBITDA margin 37.9 % 43.3 %

Average selling prices (15.4) %

Foreign exchange (0.7) %

Acquisitions 6.8 %

Other (0.1) %

Net sales (8.8) %

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.

These decreases were partially offset by companies acquired during fiscal 2022 and fiscal 2023 of $149.9 million and increased sales volume of $14.0 million.

Adjusted EBITDA

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

Nine months ended

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

(in thousands) December 29, 2023 December 30, 2022 Change % Change

Net sales $ 205,127 $ 195,259 $ 9,868 5.1 %

3 unchanged sentences

Average selling prices (8.3) %

Acquisitions 1.3 %

Other (1.9) %

Solar tax credits (7.7) %

Net sales 5.1 %

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.

Net sales increased by $9.9 million, or 5.1%, for the three months ended December 29, 2023 to $205.1 million compared to $195.3 million for the three months ended December 30, 2022.

The increase is primarily attributed to higher volumes of $40.8 million, partially offset by decreased average selling prices of $16.1 million driven by lower input costs of steel and the economic value of solar tax credits to be transferred to certain customers of $14.9 million.

Adjusted EBITDA

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.

Adjusted EBITDA decreased by $13.9 million, or 41.6%, to $19.5 million for the three months ended December 29, 2023 compared to $33.4 million for the three months ended December 30, 2022.

Adjusted EBITDA margins decreased to 9.5% for the three months ended December 29, 2023 compared to 17.1% for the three months ended December 30, 2022.

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

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 $317.8 million as of June 30, 2023, of which $72.4 million was held at non-U.S.

Our cash and cash equivalents were $380.9 million as of December 29, 2023, of which $83.6 million was held at non-U.S.

subsidiaries.

Those cash balances at foreign subsidiaries may be subject to withholding or local country taxes if the Company ’ s intention to permanently reinvest such income were to change and cash was repatriated to the United States.

In general, we require cash to fund working capital investments, acquisitions, capital expenditures, debt repayment, interest payments, taxes and share repurchases.

In general, we require cash to fund working capital investments, acquisitions, capital expenditures, debt repayment, interest payments, taxes, share repurchases and dividend payments.

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

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.

As of December 29, 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 December 29, 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:

Nine months ended

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

Three months ended

(in thousands) December 29, 2023 December 30, 2022

Cash flows provided by (used in):

3 unchanged sentences

Operating activities

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.

During the three months ended December 29, 2023, the Company was provided $158.1 million by operating activities compared to $198.9 million during the three months ended December 30, 2022.

The $40.8 million decrease in cash provided was primarily due to decreased operating income and $24.7 million of tax impacts partially offset by a $32.6 million decrease in cash used in working capital.

Investing activities

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.

During the three months ended December 29, 2023, the Company used $50.3 million in investing activities compared to $117.2 million during the three months ended December 30, 2022.

Cash used in acquisitions decreased in the first quarter of fiscal 2024 by $76.2 million primarily as a result of the acquisition of Elite Polymer Solutions in the first quarter of fiscal 2023 and no acquisitions in the first quarter of fiscal 2024.

This decrease in cash used in investing activities was partially offset by higher cash used of $9.3 million related to capital expenditures in the first quarter of fiscal 2024.

Financing Activities

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.

During the three months ended December 29, 2023, the Company used $118.2 million in financing activities compared to $164.8 million used during the three months ended December 30, 2022.

The decrease in cash used in financing activities is primarily due to $53.6 million less cash used to repurchase common stock during the three months ended December 29, 2023 compared to the same period in the prior year partially offset by $6.5 million more 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;

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;

7 unchanged sentences

A number of important factors, including, without limitation, the risks and uncertainties disclosed in the Company’s filings with the U.S.

Securities and Exchange Commission, including but not limited to the Company’s most recent Annual Reports on Form 10-K and reports on Form 10-Q and Form 8-K, could cause actual results and outcomes to differ materially from those reflected in the forward-looking statements.

Securities and Exchange Commission, including but not limited to the Company’s most recent Annual Reports on Form 10-K and reports on Form 10-Q and Form 8-K, could cause actual

results and outcomes to differ materially from those reflected in the forward-looking statements.

Additional factors that could cause actual results and outcomes to differ from those reflected in forward-looking statements include, without limitation:

30 unchanged sentences

• failure to generate cash sufficient to pay the principal of, interest on, or other amounts due on our debt;

• failure to generate the significant amount of cash needed to pay dividends;

• challenges attracting and retaining key personnel or high-quality employees;

9 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