What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-02-04 compared with 2024-08-06 · 47 added, 117 removed, 154 unchanged (52% of the section changed)

8 unchanged sentences

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

Our Harvey, Illinois collective bargaining agreement with the United Steelworkers Union, which represents approximately 370 employees expired in April 2024.

As of February 3, 2025, the United Steelworkers Unions employees have continued to work while negotiations for a new contract are ongoing.

While both sides continue to negotiate, no assurance can be given that a mutual agreement will be reached without the United Steelworks Union approving and implementing a strike.

RESULTS OF OPERATIONS

The consolidated results of operations for the three months ended June 28, 2024 and June 30, 2023 were as follows:

The consolidated results of operations for the three months ended December 27, 2024 and December 29, 2023 were as follows:

Three months ended

(in thousands) June 28, 2024 June 30, 2023 Change % Change

(in thousands) December 27, 2024 December 29, 2023 Change % Change

Net sales $ 661,597 $ 798,481 $ (136,884) (17.1) %

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Average selling prices (12.0) %

Solar energy tax credits (0.8) %

Foreign exchange (0.1) %

Net sales (17.1) %

Net sales decreased by $96.8 million or 10.5% to $822.4 million for the three months ended June 28, 2024, compared to $919.1 million for the three months ended June 30, 2023.

The decrease in net sales is primarily attributed to decreased average selling prices across the Company’s products of $87.5 million, the increased economic value of solar energy tax credits to be transferred to certain customers of $7.2 million, and decreased sales volume of $1.2 million.

Net sales decreased by $136.9 million or 17.1% to $661.6 million for the three months ended December 27, 2024, compared to $798.5 million for the three months ended December 29, 2023.

The decrease in net sales is primarily attributed to decreased average selling prices across the Company’s products of $96.2 million and decreased sales volume of $43.8 million.

Cost of sales

Volume (6.0) %

Average input costs 1.4 %

Solar energy tax credits (5.1) %

Freight 1.0 %

Cost of sales (3.4) %

Cost of sales decreased by $25.6 million, or 4.5%, to $542.7 million for the three months ended June 28, 2024 compared to $568.3 million for the three months ended June 30, 2023.

The decrease was primarily due to the increased benefit of solar energy tax credits of $29.0 million and lower input costs of $2.9 million, partially offset by higher sales volume of $0.6 million and higher freight costs of $4.8 million.

Cost of sales decreased by $17.4 million, or 3.4%, to $490.5 million for the three months ended December 27, 2024 compared to $507.9 million for the three months ended December 29, 2023.

The decrease was primarily due to decreased sales volume of $30.9 million partially offset by increased input costs of $7.0 million and increased freight costs of $4.9 million.

Selling, general and administrative

Selling, general and administrative expenses decreased by $5.0 million, or 4.9%, to $98.0 million for the three months ended June 28, 2024 compared to $103.0 million for the three months ended June 30, 2023.

The decrease was primarily due to decreased commissions of $1.2 million, decreased variable compensation of $1.8 million, decreased stock compensation of $1.6 million and decreased spending across a variety of other spend categories of $0.4 million.

Selling, general and administrative expenses decreased by $9.2 million, or 9.1%, to $91.5 million for the three months ended December 27, 2024 compared to $100.6 million for the three months ended December 29, 2023.

The decrease was primarily due to lower medical and insurance expense of $6.6 million, lower commissions of $2.9 million, lower costs across other expense categories of $2.3 million and impacts of foreign exchange rates of $1.7 million, partially offset by increased investments in people and software of $3.2 million and increased stock compensation expense of $1.1 million.

Intangible asset amortization

Intangible asset amortization expense decreased to $13.2 million for the three months ended June 28, 2024 compared to $15.2 million for the three months ended June 30, 2023.

Intangible asset amortization expense decreased to $11.7 million for the three months ended December 27, 2024 compared to $14.5 million for the three months ended December 29, 2023.

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

Interest expense, net

Interest expense, net increased by $1.3 million, or 14.5% to $9.9 million for the three months ended June 28, 2024 compared to $8.7 million for the three months ended June 30, 2023.

Interest expense, net increased by $0.4 million, or 5.3% to $8.2 million for the three months ended December 27, 2024 compared to $7.8 million for the three months ended December 29, 2023.

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

Other expense, net

Other expense, net decreased to $0.6 million for the three months ended June 28, 2024 compared to $3.7 million other expense for the three months ended June 30, 2023.

This decrease is due to impairments recognized in the three months ended June 30, 2023 in connection with the Company’s plans to exit from operations in Russia of $3.9 million.

Other expense, net increased to $1.1 million for the three months ended December 27, 2024 compared to $12.2 thousand other expense for the three months ended December 29, 2023.

This increase is primarily due to increased foreign exchange losses of $1.0 million on intercompany loans.

Income tax expense

The Company ’ s income tax rate increased to 21.9% for the three months ended June 28, 2024 compared to 8.6% for the three months ended June 30, 2023.

The increase in the current period effective tax rate was driven by a decrease in the benefit related to solar energy tax credits.

In the third quarter of fiscal 2023, the Company recognized a one time $39,799 benefit in its income tax expense related to the credits available as part of the IRA.

The Company ’ s income tax rate increased to 20.9% for the three months ended December 27, 2024 compared to 17.5% for the three months ended December 29, 2023.

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

SEGMENT RESULTS

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Three months ended

(in thousands) June 28, 2024 June 30, 2023 Change % Change

(in thousands) December 27, 2024 December 29, 2023 Change % Change

Net sales $ 465,355 $ 593,661 $ (128,306) (21.6) %

3 unchanged sentences

Average selling prices (16.1) %

Other (0.1) %

Net sales (21.6) %

Net sales decreased by $99.7 million, or 14.1%, to $606.0 million for the three months ended June 28, 2024 compared to $705.6 million for the three months ended June 30, 2023.

Net sales decreased by $128.3 million, or 21.6%, to $465.4 million for the three months ended December 27, 2024 compared to $593.7 million for the three months ended December 29, 2023.

The decrease in net sales is primarily attributed to decreased average selling prices of $95.7 million and decreased sales volume of $33.3 million.

Adjusted EBITDA

Adjusted EBITDA for the three months ended June 28, 2024 decreased by $84.0 million, or 31.5%, to $182.6 million from $266.6 million for the three months ended June 30, 2023.

Adjusted EBITDA margin decreased to 30.1% for the three months ended June 28, 2024 compared to 37.8% for the three months ended June 30, 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.

Adjusted EBITDA for the three months ended December 27, 2024 decreased by $112.0 million, or 54.8%, to $92.4 million from $204.4 million for the three months ended December 29, 2023.

Adjusted EBITDA margin decreased to 19.9% for the three months ended December 27, 2024 compared to 34.4% for the three months ended December 29, 2023.

The decreases in Adjusted EBITDA and Adjusted EBITDA margin were largely due to the decreases in average selling prices and sales volume.

Safety & Infrastructure

Three months ended

(in thousands) June 28, 2024 June 30, 2023 Change % Change

Net sales $ 217,024 $ 213,606 $ 3,418 1.6 %

Adjusted EBITDA $ 30,042 $ 21,493 $ 8,549 39.8 %

Adjusted EBITDA margin 13.8 % 10.1 %

Average selling prices (3.2) %

Solar energy tax credits (3.4) %

Net sales 1.6 %

Net sales increased by $3.4 million, or 1.6%, for the three months ended June 28, 2024 to $217.0 million compared to $213.6 million for the three months ended June 30, 2023.

The increase is primarily attributed to higher volumes of $17.0 million, partially offset by the increased economic value of solar energy tax credits to be transferred of $7.2 million and decreased average selling prices of $6.8 million.

Adjusted EBITDA

Adjusted EBITDA increased by $8.5 million, or 39.8%, to $30.0 million for the three months ended June 28, 2024 compared to $21.5 million for the three months ended June 30, 2023.

Adjusted EBITDA margin increased to 13.8% for the three months ended June 28, 2024 compared to 10.1% for the three months ended June 30, 2023.

The increase in Adjusted EBITDA and Adjusted EBITDA margin was largely due to higher sales volume and the increased net benefit of solar energy tax credits.

The consolidated results of operations for the nine months ended June 28, 2024 and June 30, 2023 were as follows:

Nine months ended

(in thousands) June 28, 2024 June 30, 2023 Change % Change

Net sales $ 2,413,756 $ 2,648,872 $ (235,116) (8.9) %

Cost of sales 1,551,986 1,610,836 (58,850) (3.7) %

Gross profit 861,770 1,038,036 (176,266) (17.0) %

Selling, general and administrative 297,147 291,198 5,949 2.0 %

Intangible asset amortization 41,904 42,778 (874) (2.0) %

Operating income 522,719 704,061 (181,342) (25.8) %

Interest expense, net 26,058 26,645 (587) (2.2) %

Other expense, net 1,302 7,588 (6,286) (82.8) %

Income before income taxes 495,359 669,828 (174,469) (26.0) %

Income tax expense 95,606 120,854 (25,248) (20.9) %

Net income $ 399,753 $ 548,974 $ (149,221) (27.2) %

Average selling prices (11.4) %

Solar energy tax credits to be transferred (1.2) %

Net sales (8.9) %

Net sales decreased by $235.1 million, or 8.9%, to $2,413.8 million for the nine months ended June 28, 2024, compared to $2,648.9 million for the nine months ended June 30, 2023.

The decrease in net sales is primarily attributed to decreased average selling prices of $302.0 million and the increased economic value of solar energy tax credits to be transferred to certain customers of $32.9 million, partially offset by increased sales volume of $95.7 million.

Cost of sales

Average input costs (6.4) %

Solar energy tax credits generated (3.8) %

Freight 1.6 %

Cost of sales (3.7) %

Cost of sale s decreased by $58.9 million, or 3.7% to $1,552.0 million for the nine months ended June 28, 2024 compared to $1,610.8 million for the nine months ended June 30, 2023.

The decrease in cost of sales was primarily due to lower input costs of $102.1 million and the increased benefit of solar energy tax credits of $61.0 million, partially offset by higher sales volume of $67.0 million and higher freight costs of $25.4 million.

Selling, general and administrative

Selling, general and administrative expenses increased by $5.9 million, or 2.0% to $297.1 million for the nine months ended June 28, 2024, compared to $291.2 million for the nine months ended June 30, 2023.

The increase was primarily due to increased general spending on business improvement initiatives of $24.0 million and higher variable compensation of $2.6 million, partially offset by lower costs of commissions of $4.1 million, lower stock compensation of $3.3 million and lower costs of $13.3 million spread across a variety of other spend categories.

Intangible asset amortization

Intangible asset amortization expense decreased to $41.9 million for the nine months ended June 28, 2024, compared to $42.8 million for the nine months ended June 30, 2023.

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

Interest expense, net

Interest expense, net, decreased by $0.6 million, or 2.2% to $26.1 million for the nine months ended June 28, 2024, compared to $26.6 million for the nine months ended June 30, 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 $1.3 million of other expense for the nine months ended June 28, 2024, compared to $7.6 million of other expense for the nine months ended June 30, 2023.

This decrease is due to impairments recognized in the nine months ended June 30, 2023 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 increased to 19.3% for the nine months ended June 28, 2024, compared to 18.0% for the nine months ended June 30, 2023.

The increase in the current period effective tax rate was driven by a decrease in the benefit related to solar energy tax credits.

In the third quarter of fiscal 2023, the Company recognized a one time $39,799 benefit in its income tax expense related to the credits available as part of the IRA.

SEGMENT RESULTS

Nine months ended

(in thousands) June 28, 2024 June 30, 2023 Change % Change

Net sales $ 1,790,443 $ 2,025,287 $ (234,844) (11.6) %

Adjusted EBITDA $ 582,679 $ 767,276 $ (184,597) (24.1) %

Adjusted EBITDA margin 32.5 % 37.9 %

Average selling prices (13.9) %

Net sales (11.6) %

Net sales decreased by $234.8 million, or 11.6%, to $1,790.4 million for the nine months ended June 28, 2024, compared to $2,025.3 million for the nine months ended June 30, 2023.

The decrease in net sales is primarily attributed to decreased average selling prices of $282.2 million partially offset increased sales volume of $43.4 million.

Adjusted EBITDA

Adjusted EBITDA for the nine months ended June 28, 2024 decreased by $184.6 million, or 24.1%, to $582.7 million from $767.3 million for the nine months ended June 30, 2023.

Adjusted EBITDA margin decreased to 32.5% for the nine months ended June 28, 2024, compared to 37.9% for the nine months ended June 30, 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

Nine months ended

(in thousands) June 28, 2024 June 30, 2023 Change % Change

(in thousands) December 27, 2024 December 29, 2023 Change % Change

Net sales $ 196,724 $ 205,127 $ (8,403) (4.1) %

1 unchanged sentence

Adjusted EBITDA margin 7.9 % 9.5 %

Volume (5.1) %

Average selling prices (0.3) %

Solar energy tax credits to be transferred (5.3) %

Net sales (4.1) %

Net sales increased by $0.7 million, or 0.1%, to $624.6 million for the nine months ended June 28, 2024, compared to $623.9 million for the nine months ended June 30, 2023.

The increase is primarily due to higher volumes of $52.3 million, partially offset by decreased average selling prices of $19.8 million and the increased economic value of solar energy tax credits to be transferred to certain customers of $32.9 million.

Net sales decreased by $8.4 million, or 4.1%, for the three months ended December 27, 2024 to $196.7 million compared to $205.1 million for the three months ended December 29, 2023.

The decrease is primarily attributed to lower sales volume of $10.5 million.

Adjusted EBITDA

Adjusted EBITDA decreased $13.0 million, or 14.8%, to $75.1 million for the nine months ended June 28, 2024, compared to $88.1 million for the nine months ended June 30, 2023.

Adjusted EBITDA margin decreased to 12.0% for the nine months ended June 28, 2024, compared to 14.1% for the nine months ended June 30, 2023.

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

Adjusted EBITDA decreased by $3.9 million, or 20.2%, to $15.6 million for the three months ended December 27, 2024 compared to $19.5 million for the three months ended December 29, 2023.

Adjusted EBITDA margin decreased to 7.9% for the three months ended December 27, 2024 compared to 9.5% for the three months ended December 29, 2023.

The decrease in Adjusted EBITDA and Adjusted EBITDA margin were largely due to lower sales volume.

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 $303.7 million as of June 28, 2024, of which $99.7 million was held at non-U.S.

Our cash and cash equivalents were $310.4 million as of December 27, 2024, of which $96.3 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 June 28, 2024, there were no outstanding borrowings under the ABL Credit Facility and no letters of credit issued under the ABL Credit Facility.

The borrowing base was estimated to be $325.0 million and approximately $325.0 million was available under the ABL Credit Facility as of June 28, 2024.

As of December 27, 2024, there were no outstanding borrowings under the ABL Credit Facility and no letters of credit issued under the ABL Credit Facility.

The borrowing base was estimated to be $325.0 million and approximately $325.0 million was available under the ABL Credit Facility as of December 27, 2024.

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

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

Nine months ended

(in thousands) June 28, 2024 June 30, 2023

Three months ended

(in thousands) December 27, 2024 December 29, 2023

Cash flows provided by (used in):

3 unchanged sentences

Operating activities

During the nine months ended June 28, 2024, the Company was provided $350.0 million by operating activities compared to $563.7 million during the nine months ended June 30, 2023.

The $213.7 million decrease in cash provided was primarily due to decreased operating income, and an increase of $94.2 million cash used in working capital.

During the three months ended December 27, 2024, the Company was provided $74.4 million by operating activities compared to $158.1 million during the three months ended December 29, 2023.

The $83.7 million decrease in cash provided was primarily due to decreased operating income of $109.1 million partially offset by less working capital used of $10.2 million and the impact of taxes of $12.8 million.

Investing activities

During the nine months ended June 28, 2024, the Company used $110.7 million in investing activities compared to $205.9 million during the nine months ended June 30, 2023.

The $95.2 million decrease in cash used in investing activities was primarily due to a decrease of $77.3 million cash used in acquisitions as a result of the acquisition of Elite Polymer solutions in the first quarter of fiscal 2023 and no acquisitions in fiscal 2024 and a decrease of $17.4 million in capital expenditures.

During the nine months ended June 28, 2024, the Company paid out $6,036 of accrued purchase price primarily related to the fiscal 2022 acquisition of Cascade Poly Pipe & Conduit and Northwest Polymers.

During the three months ended December 27, 2024, the Company used $41.1 million in investing activities compared to $50.3 million during the three months ended December 29, 2023.

The $9.2 million decrease in cash used in investing activities was primarily due to a decrease of $3.0 million in capital expenditures and proceeds from the sale of equipment of $0.1 million.

Additionally, in fiscal 2024, the Company paid $6.0 million of purchase price payable related to the fiscal 2022 acquisition of Cascade Pipe and Poly & Conduit and Northwest Polymers.

No additional activity related to acquisitions occurred during the three months ended December 27, 2024.

Financing Activities

During the nine months ended June 28, 2024, the Company used $324.6 million in financing activities compared to $431.6 million used during the nine months ended June 30, 2023.

The decrease in cash used in financing activities is primarily due to $135.0 million less cash used to repurchase common stock during the nine months ended June 28, 2024 compared to the same period in the prior year partially offset by fiscal 2024 dividends paid of $23.2 million and $4.3 million more in issuance of common stock, net of shares withheld for tax.

During the three months ended December 27, 2024, the Company used $67.7 million in financing activities compared to $118.2 million used during the three months ended December 29, 2023.

The decrease in cash used in financing activities is primarily due to $46.4 million less cash used to repurchase common stock during the three months ended December 27, 2024 and $15.4 million less in issuance of common stock, net of shares withheld for tax partially offset by an increase in dividends paid of $11.1 million.

CHANGES IN CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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In addition, even if our results of operations, financial condition and cash flows, and the development of the market in which we operate, are consistent with the forward-looking statements contained in this Quarterly Report, those results or developments may not be indicative of results or developments in subsequent periods.

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

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 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.

24 unchanged sentences

• our inability to introduce new products effectively or implement our innovation strategies;

• our inability to continue importing raw materials, component parts or finished goods;

• our inability to continue importing raw materials, component parts and/or finished goods;

• the incurrence of liabilities and the issuance of additional debt or equity in connection with acquisitions, joint ventures or divestitures and the failure of indemnification provisions in our acquisition agreements to fully protect us from unexpected liabilities;

4 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;

• failure to generate cash sufficient 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