What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-05-07 compared with 2024-02-01 · 117 added, 49 removed, 155 unchanged (52% of the section changed)

9 unchanged sentences

RESULTS OF OPERATIONS

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

The consolidated results of operations for the three months ended March 29, 2024 and March 31, 2023 were as follows:

Three months ended

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

(in thousands) March 29, 2024 March 31, 2023 Change % Change

Net sales $ 792,911 $ 895,934 $ (103,023) (11.5) %

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Average selling prices (9.5) %

Solar tax credits (1.8) %

Foreign exchange 0.2 %

Acquisitions 0.3 %

Solar energy tax credits (1.2) %

Net sales (11.5) %

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 sales volume of $106.2 million.

Net sales decreased by $103.0 million or 11.5% to $792.9 million for the three months ended March 29, 2024, compared to $895.9 million for the three months ended March 31, 2023.

The decrease in net sales is primarily attributed to decreased average selling prices across the Company’s products of $85.5 million as a result of expected pricing normalization, the economic value of solar energy tax credits to be transferred to certain customers of $10.8 million, and decreased sales volume of $7.5 million.

Cost of sales

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Average input costs (6.3) %

Solar tax credits (3.8) %

Acquisitions 0.3 %

Solar energy tax credits (2.4) %

Freight 1.7 %

Other (0.1) %

Cost of sales (7.7) %

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.

Cost of sales decreased by $41.7 million, or 7.7%, to $501.3 million for the three months ended March 29, 2024 compared to $543.1 million for the three months ended March 31, 2023.

The decrease was primarily due to lower input costs of $34.0 million, the benefit of solar energy tax credits of $12.8 million, and lower sales volume of $3.5 million, partially offset by higher freight costs of $9.4 million.

Selling, general and administrative

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.

Selling, general and administrative expenses increased by $0.3 million, or 0.3%, to $98.5 million for the three months ended March 29, 2024 compared to $98.2 million for the three months ended March 31, 2023.

The increase was primarily due to increased general spending on business improvement initiatives of $6.8 million partially offset by decreased spending across a variety of other spend categories of $6.5 million.

Intangible asset amortization

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.

Intangible asset amortization expense decreased to $14.2 million for the three months ended March 29, 2024 compared to $14.8 million for the three months ended March 31, 2023.

The decrease in amortization expense resulted from older intangibles becoming fully amortized.

Interest expense, net

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.

Interest expense, net decreased by $0.2 million, or 1.8% to $8.3 million for the three months ended March 29, 2024 compared to $8.5 million for the three months ended March 31, 2023.

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.

Other expense, net decreased to $0.7 million for the three months ended March 29, 2024 compared to $3.9 million other expense for the three months ended March 31, 2023.

This decrease is due to impairments recognized in the three months ended March 31, 2023 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 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.

The Company ’ s income tax rate decreased to 18.7% for the three months ended March 29, 2024 compared to 23.5% for the three months ended March 31, 2023.

The decrease in the current period effective tax rate was driven by an increase in the excess tax benefit associated with stock compensation and the benefit related to solar energy tax credits enacted as part of the IRA.

SEGMENT RESULTS

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Three months ended

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

(in thousands) March 29, 2024 March 31, 2023 Change % Change

Net sales $ 590,820 $ 680,965 $ (90,145) (13.2) %

3 unchanged sentences

Average selling prices (12.8) %

Acquisitions 0.3 %

Net sales (13.2) %

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.

Net sales decreased by $90.1 million, or 13.2%, to $590.8 million for the three months ended March 29, 2024 compared to $681.0 million for the three months ended March 31, 2023.

The decrease in net sales is primarily attributed to decreased average selling prices of $87.1 million as a result of expected pricing normalization and decreased sales volume of $3.8 million.

Adjusted EBITDA

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.

Adjusted EBITDA for the three months ended March 29, 2024 decreased by $61.1 million, or 23.8%, to $195.8 million from $256.9 million for the three months ended March 31, 2023.

Adjusted EBITDA margin decreased to 33.1% for the three months ended March 29, 2024 compared to 37.7% for the three months ended March 31, 2023.

The decrease in Adjusted EBITDA and Adjusted EBITDA margin was largely due to the decrease in average selling prices outpacing decreases in input costs.

Safety & Infrastructure

Three months ended

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

(in thousands) March 29, 2024 March 31, 2023 Change % Change

Net sales $ 202,419 $ 215,054 $ (12,635) (5.9) %

3 unchanged sentences

Average selling prices 0.7 %

Solar tax credits (7.7) %

Solar energy tax credits (5.0) %

Net sales (5.9) %

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.

Net sales decreased by $12.6 million, or 5.9%, for the three months ended March 29, 2024 to $202.4 million compared to $215.1 million for the three months ended March 31, 2023.

The decrease is primarily attributed to lower volumes of $3.7 million, and the economic value of solar energy tax credits to be transferred to certain customers of $10.8 million, partially offset by increased average selling prices of $1.6 million.

Adjusted EBITDA

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.

Adjusted EBITDA decreased by $7.7 million, or 23.1%, to $25.5 million for the three months ended March 29, 2024 compared to $33.2 million for the three months ended March 31, 2023.

Adjusted EBITDA margin decreased to 12.6% for the three months ended March 29, 2024 compared to 15.4% for the three months ended March 31, 2023.

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

The consolidated results of operations for the six months ended March 29, 2024 and March 31, 2023 were as follows:

Six months ended

(in thousands) March 29, 2024 March 31, 2023 Change % Change

Net sales $ 1,591,392 $ 1,729,755 $ (138,363) (8.0) %

Cost of sales 1,009,277 1,042,520 (33,243) (3.2) %

Gross profit 582,115 687,235 (105,120) (15.3) %

Selling, general and administrative 199,160 188,178 10,982 5.8 %

Intangible asset amortization 28,688 27,586 1,102 4.0 %

Operating income 354,267 471,471 (117,204) (24.9) %

Interest expense, net 16,114 17,963 (1,849) (10.3) %

Other expense, net 742 3,899 (3,157) (81.0) %

Income before income taxes 337,411 449,609 (112,198) (25.0) %

Income tax expense 61,076 101,923 (40,847) (40.1) %

Net income $ 276,335 $ 347,686 $ (71,351) (20.5) %

Average selling prices (12.5) %

Solar energy tax credits to be transferred (1.5) %

Net sales (8.0) %

Net sales decreased by $138.4 million, or 8.0%, to $1,591.4 million for the six months ended March 29, 2024, compared to $1,729.8 million for the six months ended March 31, 2023.

The decrease in net sales is primarily attributed to decreased average selling prices of $215.9 million and the economic value of solar energy tax credits to be transferred to certain customers of $25.7 million.

These decreases are partially offset by increased sales volume of $98.3 million across varying product categories within both the Electrical and the Safety & Infrastructure segments.

Cost of sales

Average input costs (9.4) %

Solar energy tax credits generated (3.1) %

Freight 2.0 %

Cost of sales (3.2) %

Cost of sale s decreased by $33.2 million, or 3.2% to $1,009.3 million for the six months ended March 29, 2024 compared to $1,042.5 million for the six months ended March 31, 2023.

The decrease in cost of sales was primarily due to lower input costs of $97.2 million and the benefit of solar energy tax credits of $31.9 million.

This was partially offset by higher sales volume of $65.5 million across varying product categories within both the Electrical and the Safety & Infrastructure segments and higher freight costs of $20.5 million.

Selling, general and administrative

Selling, general and administrative expenses increased by $11.0 million, or 5.8% to $199.2 million for the six months ended March 29, 2024, compared to $188.2 million for the six months ended March 31, 2023.

The increase was primarily due to increased general spending on business improvement initiatives of $19.4 million, higher commissions and variable compensation of $1.6 million, partially offset by lower costs of $10.0 million spread across a variety of other spend categories.

Intangible asset amortization

Intangible asset amortization expense increased to $28.7 million for the six months ended March 29, 2024, compared to $27.6 million for the six months ended March 31, 2023.

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

Interest expense, net

Interest expense, net, decreased by $1.8 million, or 10.3% to $16.1 million for the six months ended March 29, 2024, compared to $18.0 million for the six months ended March 31, 2023.

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

Other expense, net

Other expense, net decreased to $0.7 million of other expense for the six months ended March 29, 2024, compared to $3.9 million of other income for the six months ended March 31, 2023.

This decrease is due to impairments recognized in the three months ended March 31, 2023 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 18.1% for the six months ended March 29, 2024, compared to 22.7% for the six months ended March 31, 2023.

SEGMENT RESULTS

Six months ended

(in thousands) March 29, 2024 March 31, 2023 Change % Change

Net sales $ 1,184,481 $ 1,319,670 $ (135,189) (10.2) %

Adjusted EBITDA $ 400,112 $ 500,720 $ (100,608) (20.1) %

Adjusted EBITDA margin 33.8 % 37.9 %

Average selling prices (15.2) %

Net sales (10.2) %

Net sales decreased by $135.2 million, or 10.2%, to $1,184.5 million for the six months ended March 29, 2024, compared to $1,319.7 million for the six months ended March 31, 2023.

The decrease in net sales is primarily attributed to decreased average selling prices of $201.4 million partially offset increased sales volume of $61.6 million.

Adjusted EBITDA

Adjusted EBITDA for the six months ended March 29, 2024 decreased by $100.6 million, or 20.1%, to $400.1 million from $500.7 million for the six months ended March 31, 2023.

Adjusted EBITDA margin decreased to 33.8% for the six months ended March 29, 2024, compared to 37.9% for the six months ended March 31, 2023.

The decrease in Adjusted EBITDA and Adjusted EBITDA margin was largely due to the decrease in average selling prices outpacing decreases in input costs.

Safety & Infrastructure

Six months ended

(in thousands) March 29, 2024 March 31, 2023 Change % Change

Net sales $ 407,545 $ 410,313 $ (2,768) (0.7) %

Adjusted EBITDA $ 45,042 $ 66,597 $ (21,555) (32.4) %

Adjusted EBITDA margin 11.1 % 16.2 %

Average selling prices (3.7) %

Solar energy tax credits to be transferred (6.5) %

Net sales (0.7) %

Net sales decreased by $2.8 million, or 0.7%, to $407.5 million for the six months ended March 29, 2024, compared to $410.3 million for the six months ended March 31, 2023.

The decrease is primarily attributed to decreased average selling prices of $14.5 million and the economic value of solar energy tax credits to be transferred to certain customers of $25.7 million.

This was partially offset by higher volumes of $36.7 million.

Adjusted EBITDA

Adjusted EBITDA decreased $21.6 million, or 32.4%, to $45.0 million for the six months ended March 29, 2024, compared to $66.6 million for the six months ended March 31, 2023.

Adjusted EBITDA margin decreased to 11.1% for the six months ended March 29, 2024, compared to 16.2% for the six months ended March 31, 2023.

The decrease in Adjusted EBITDA and Adjusted EBITDA margin was largely due to lower average selling prices over increased 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 $380.9 million as of December 29, 2023, of which $83.6 million was held at non-U.S.

Our cash and cash equivalents were $368.1 million as of March 29, 2024, of which $94.6 million was held at non-U.S.

subsidiaries.

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

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.

As of March 29, 2024, 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 29, 2024.

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:

Three months ended

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

Six months ended

(in thousands) March 29, 2024 March 31, 2023

Cash flows provided by (used in):

3 unchanged sentences

Operating activities

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.

During the six months ended March 29, 2024, the Company was provided $245.3 million by operating activities compared to $403.4 million during the six months ended March 31, 2023.

The $158.1 million decrease in cash provided was primarily due to decreased operating income, and an increase of $58.0 million cash used in working capital.

Investing activities

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.

During the six months ended March 29, 2024, the Company used $79.0 million in investing activities compared to $156.1 million during the six months ended March 31, 2023.

Cash used in acquisitions decreased in the first quarter of fiscal 2024 by $77.4 million primarily as a result of the acquisition of Elite Polymer Solutions in the first quarter of fiscal 2023 and no acquisitions in fiscal 2024.

Financing Activities

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.

During the six months ended March 29, 2024, the Company used $187.5 million in financing activities compared to $284.3 million used during the six months ended March 31, 2023.

The decrease in cash used in financing activities is primarily due to $113.2 million less cash used to repurchase common stock during the six months ended March 29, 2024 compared to the same period in the prior year partially offset by fiscal 2024 dividends paid of $11.7 million and $4.5 million more in issuance of common stock, net of shares withheld for tax.

CHANGES IN CRITICAL ACCOUNTING POLICIES AND ESTIMATES

16 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 Report 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:

42 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