What changed in this filing

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Item 1. Financial Statements

2024-08-02 compared with 2024-05-03 · 248 added, 145 removed, 562 unchanged (41% of the section changed)

4 unchanged sentences

Three months ended

June 30, Six months ended

2024 2023 2024 2023

Sales $ 182,820 $ 184,110 $ 343,357 $ 344,984

6 unchanged sentences

Interest expense, net 12,895 9,168 26,304 19,000

Other expense (income), net 216 ( 427 )

Income (loss) before income taxes 2,400 ( 524 )

Debt extinguishment costs 4,560 — 4,560 —

Other expense, net 410 610 627 182

Income before income taxes 11,375 34,909 13,775 34,385

Provision for income taxes 3,080 8,787 4,259 9,734

Net income (loss) $ 1,221 $ ( 1,471 )

Net income (loss) per share:

Basic income (loss) per share $ 0.01 $ ( 0.01 )

Diluted income (loss) per share $ 0.01 $ ( 0.01 )

Net income $ 8,295 $ 26,122 $ 9,516 $ 24,651

Net income per share:

Basic income per share $ 0.07 $ 0.22 $ 0.08 $ 0.20

Diluted income per share $ 0.07 $ 0.22 $ 0.08 $ 0.20

Weighted average shares outstanding:

6 unchanged sentences

Three months ended

Net income (loss) $ 1,221 $ ( 1,471 )

June 30, Six months ended

2024 2023 2024 2023

Net income $ 8,295 $ 26,122 $ 9,516 $ 24,651

Other comprehensive income (loss), net of tax:

Pension and postretirement costs ( 6 ) ( 24 )

Net gain (loss) from hedging activities 3,864 ( 7,920 )

Pension and postretirement benefits 530 465 524 441

Net (loss) gain from hedging activities ( 1,075 ) 5,399 2,789 ( 2,521 )

Foreign currency translation ( 679 ) 828 ( 2,363 ) 3,013

Total other comprehensive income (loss) 2,174 ( 5,759 )

Comprehensive income (loss) $ 3,395 $ ( 7,230 )

Total other comprehensive (loss) income ( 1,224 ) 6,692 950 933

Comprehensive income $ 7,071 $ 32,814 $ 10,466 $ 25,584

See accompanying notes to condensed consolidated financial statements.

29 unchanged sentences

authorized shares 450,000,000 ;

issued shares 140,872,846 and 140,744,045 on March 31, 2024 and December 31, 2023, respectively;

outstanding shares 117,001,446 and 116,116,895 on March 31, 2024 and December 31, 2023, respectively

issued shares 140,872,846 and 140,744,045 on June 30, 2024 and December 31, 2023, respectively;

outstanding shares 116,466,232 and 116,116,895 on June 30, 2024 and December 31, 2023, respectively

Preferred stock ($ 0.01 par);

authorized shares 50,000,000 ;

no shares issued or outstanding on March 31, 2024 and December 31, 2023

no shares issued or outstanding on June 30, 2024 and December 31, 2023

Additional paid-in capital 1,100,749 1,102,581

1 unchanged sentence

Treasury stock, at cost;

shares 23,871,400 and 24,627,150 on March 31, 2024 and December 31, 2023, respectively

shares 24,406,614 and 24,627,150 on June 30, 2024 and December 31, 2023, respectively

( 223,527 ) ( 226,710 )

Accumulated other comprehensive income (loss) 1,216 ( 958 )

Accumulated other comprehensive loss ( 8 ) ( 958 )

Total equity 717,283 705,464

16 unchanged sentences

Balance, March 31, 2024 $ 1,409 $ 1,096,965 $ ( 169,635 ) $ ( 218,599 ) $ 1,216 $ 711,356

Net income — — 8,295 — — 8,295

Other comprehensive loss — — — — ( 1,224 ) ( 1,224 )

Repurchases of common shares — — — ( 5,010 ) — ( 5,010 )

Stock compensation expense — 3,827 — — — 3,827

Shares issued under equity incentive plan, net of forfeitures — ( 43 ) — 82 — 39

Balance, June 30, 2024 $ 1,409 $ 1,100,749 $ ( 161,340 ) $ ( 223,527 ) $ ( 8 ) $ 717,283

stock Additional

10 unchanged sentences

Balance, March 31, 2023 $ 1,406 $ 1,096,333 $ ( 243,481 ) $ ( 180,340 ) $ 233 $ 674,151

Net income — — 26,122 — — 26,122

Other comprehensive income — — — — 6,692 6,692

Repurchases of common shares — — — ( 43,524 ) — ( 43,524 )

Excise tax on repurchases of common shares — — — ( 630 ) — ( 630 )

Stock compensation expense — 4,739 — — — 4,739

Shares issued under equity incentive plan, net of forfeitures 1 213 — — — 214

Balance, June 30, 2023 $ 1,407 $ 1,101,285 $ ( 217,359 ) $ ( 224,494 ) $ 6,925 $ 667,764

See accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

(in thousands)

Three months ended

Six months ended

Cash flows from operating activities:

Net income (loss) $ 1,221 $ ( 1,471 )

Net income $ 9,516 $ 24,651

Adjustments to reconcile net income to net cash provided by operating activities:

2 unchanged sentences

Amortization of deferred financing costs and original issue discount 1,052 1,024

Debt extinguishment costs 90 —

Foreign currency exchange loss (gain) 155 ( 632 )

Deferred income tax provision 156 2,790

Deferred income tax (benefit) provision ( 1,690 ) 1,283

Net loss on asset disposals 614 2,306

3 unchanged sentences

Other, net 2,216 6,255

Working capital changes that provided (used) cash:

Working capital changes that used cash:

Receivables ( 4,076 ) ( 3,019 )

6 unchanged sentences

Purchases of property, plant and equipment ( 36,649 ) ( 39,227 )

Other, net ( 200 ) —

Net cash used in investing activities ( 36,849 ) ( 39,227 )

Cash flows from financing activities:

Draw down of revolving credit facilities — 14,500

Repayments of revolving credit facilities — ( 14,500 )

Issuance of long-term debt, net of discount 870,817 —

Repayments of long-term debt ( 877,500 ) ( 4,500 )

21 unchanged sentences

Ecoservices also provides chemical waste handling and treatment services, as well as ex-situ catalyst activation services for the refining and petrochemical industry.

Advanced Materials & Catalysts provides finished silica catalysts, catalyst supports and functionalized silicas necessary to produce high performing plastics and to enable sustainable chemistry, and through the Zeolyst Joint Venture, innovates and supplies specialty zeolites used for catalysts that support the production of sustainable fuels, remove nitrogen oxides from diesel engine emissions and that are broadly applied in refining and petrochemical processes.

Advanced Materials & Catalysts, through its Advanced Silicas business, provides finished silica catalysts, catalyst supports and functionalized silicas necessary to produce high performing plastics and to enable sustainable chemistry, and through the Zeolyst Joint Venture, innovates and supplies specialty zeolites used for catalysts that support the production of sustainable fuels, remove nitrogen oxides from diesel engine emissions and that are broadly applied in refining and petrochemical processes.

The Company’s regeneration services product group, which is a part of the Company’s Ecoservices segment, typically experiences seasonal fluctuations as a result of higher demand for gasoline products in the summer months and lower demand in the winter months.

52 unchanged sentences

• Treatment services

Industrial, mining & automotive • Sulfuric acid for mining

• Sulfur derivatives for industrial production

• Sulfuric derivatives for nylon production

Industrial, mining & automotive • Virgin sulfuric acid for mining

• Virgin sulfuric derivatives for industrial production

• Virgin sulfuric derivatives for nylon production

AND SUBSIDIARIES

1 unchanged sentence

(Dollars in thousands, except share and per share amounts)

The following tables disaggregate the Company’s sales, by segment and end uses, for the three months ended March 31, 2024 and 2023, respectively:

Three months ended March 31, 2024

The following tables disaggregate the Company’s sales, by segment and end uses, for the three and six months ended June 30, 2024 and 2023, respectively:

Three months ended June 30, 2024

Ecoservices Advanced Materials & Catalysts (2)

Clean fuels, emission control & other $ 8,614 $ — $ 8,614

Polyethylene, polymers & engineered plastics — 28,862 28,862

Regeneration and treatment services (1)

95,365 — 95,365

Industrial, mining & automotive 49,979 — 49,979

Total segment sales $ 153,958 $ 28,862 $ 182,820

Three months ended June 30, 2023

Ecoservices Advanced Materials & Catalysts (2)

Clean fuels, emission control & other $ 8,426 $ — $ 8,426

Polyethylene, polymers & engineered plastics — 26,045 26,045

Regeneration and treatment services (1)

98,494 — 98,494

Industrial, mining & automotive 51,145 — 51,145

Total segment sales $ 158,065 $ 26,045 $ 184,110

Six months ended June 30, 2024

Ecoservices Advanced Materials & Catalyst (2)

5 unchanged sentences

Total segment sales $ 295,560 $ 47,797 $ 343,357

Three months ended March 31, 2023

Six months ended June 30, 2023

Ecoservices Advanced Materials & Catalyst (2)

28 unchanged sentences

Unobservable inputs reflect the Company’s best estimate of what hypothetical market participants would use to determine a transaction price for the asset or liability at the reporting date.

The following tables present information about the Company’s assets and liabilities that were measured at fair value on a recurring basis as of March 31, 2024 and December 31, 2023, and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.

The following tables present information about the Company’s assets and liabilities that were measured at fair value on a recurring basis as of June 30, 2024 and December 31, 2023, and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.

2024 Quoted Prices in

29 unchanged sentences

For OTC derivatives that trade in liquid markets, such as forward contracts, swaps and options, model inputs can generally be corroborated by observable market data by correlation or other means, and model selection does not involve significant management judgment.

As of March 31, 2024, th e Company had interest rate c aps th at were fair valued using Level 2 inputs.

As of June 30, 2024, th e Company had interest rate c aps th at were fair valued using Level 2 inputs.

In addition, the Company applies a credit valuation adjustment to reflect credit risk which is calculated based on credit default swaps.

4 unchanged sentences

Accumulated Other Comprehensive Income (Loss)

The following tables present the tax effects of each component of other comprehensive income (loss) for the three months ended March 31, 2024 and 2023, respectively:

Three months ended March 31,

The following tables present the tax effects of each component of other comprehensive income (loss) for the three and six months ended June 30, 2024 and 2023, respectively:

Three months ended June 30,

amount Tax benefit/

(expense) After-tax amount Pre-tax

amount Tax benefit After-tax amount

amount Tax benefit/

(expense) After-tax amount

Defined benefit and other postretirement plans:

Net loss $ ( 1 ) $ — $ ( 1 ) $ ( 1 ) $ — $ ( 1 )

Net gain $ 714 $ ( 178 ) $ 536 $ 651 $ ( 162 ) $ 489

Net prior service cost ( 7 ) 1 ( 6 ) ( 31 ) 7 ( 24 )

Benefit plans, net 707 ( 177 ) 530 620 ( 155 ) 465

Net gain (loss) from hedging activities 5,152 ( 1,288 ) 3,864 ( 10,303 ) 2,383 ( 7,920 )

Net (loss) gain from hedging activities ( 1,433 ) 358 ( 1,075 ) 7,059 ( 1,660 ) 5,399

Foreign currency translation ( 679 ) — ( 679 ) 828 — 828

Other comprehensive income (loss) $ ( 1,405 ) $ 181 $ ( 1,224 ) $ 8,507 $ ( 1,815 ) $ 6,692

Six months ended June 30,

amount Tax benefit/

(expense) After-tax amount Pre-tax

amount Tax benefit/

(expense) After-tax amount

Defined benefit and other postretirement plans:

Net gain $ 713 $ ( 178 ) $ 535 $ 650 $ ( 162 ) $ 488

Net prior service cost ( 15 ) 4 ( 11 ) ( 62 ) 15 ( 47 )

Benefit plans, net 698 ( 174 ) 524 588 ( 147 ) 441

Net gain (loss) from hedging activities 3,719 ( 930 ) 2,789 ( 3,244 ) 723 ( 2,521 )

Foreign currency translation ( 2,363 ) — ( 2,363 ) 3,013 — 3,013

Other comprehensive income $ 2,054 $ ( 1,104 ) $ 950 $ 357 $ 576 $ 933

AND SUBSIDIARIES

1 unchanged sentence

(Dollars in thousands, except share and per share amounts)

The following tables present the changes in accumulated other comprehensive income, net of tax, by component for the three months ended March 31, 2024 and 2023, respectively:

The following tables present the changes in accumulated other comprehensive income (loss), net of tax, by component for the six months ended June 30, 2024 and 2023, respectively:

Defined benefit

8 unchanged sentences

Net current period other comprehensive income (loss) 524 2,789 ( 2,363 ) 950

March 31, 2024 $ 606 $ 16,410 $ ( 15,800 ) $ 1,216

June 30, 2024 $ 1,136 $ 15,335 $ ( 16,479 ) $ ( 8 )

December 31, 2022 $ ( 508 ) $ 24,672 $ ( 18,172 ) $ 5,992

Other comprehensive income (loss) before reclassifications ( 48 ) ( 7,394 ) 2,185 ( 5,257 )

Other comprehensive income before reclassifications 412 6,392 3,013 9,817

Amounts reclassified from accumulated other comprehensive income (loss) (1)

1 unchanged sentence

Net current period other comprehensive income (loss) 441 ( 2,521 ) 3,013 933

March 31, 2023 $ ( 532 ) $ 16,752 $ ( 15,987 ) $ 233

June 30, 2023 $ ( 67 ) $ 22,151 $ ( 15,159 ) $ 6,925

(1) See the following table for details about these reclassifications.

Amounts in parentheses indicate debits.

The following table presents the reclassifications out of accumulated other comprehensive income for the three months ended March 31, 2024 and 2023, respectively:

The following table presents the reclassifications out of accumulated other comprehensive income (loss) for the three and six months ended June 30, 2024 and 2023, respectively:

Details about Accumulated Other Comprehensive Income Components Amounts reclassified from Accumulated Other

3 unchanged sentences

Three months ended

June 30, Six months ended

2024 2023 2024 2023

Amortization of defined benefit and other postretirement items:

Net loss (gain) $ 1 $ ( 1 ) Other (expense) income (2)

Net loss $ 6 $ 29 $ 7 $ 28 Other (expense) income (2)

Net prior service cost (credit) 7 ( 31 ) 15 ( 62 ) Other (expense) income (2)

3 unchanged sentences

Gains and losses on cash flow hedges:

Interest rate caps $ 4,656 $ 698 Interest income

Interest rate caps $ 4,662 $ 11,187 $ 9,318 $ 11,885 Interest income (expense)

( 1,166 ) ( 2,800 ) ( 2,329 ) ( 2,972 ) Tax expense

2 unchanged sentences

(1) Amounts in parentheses indicate debits to profit/loss.

(2) These accumulated other comprehensive income (loss) components are components of net periodic pension and other postretirement cost (see Note 14 to these condensed consolidated financial statements for additional details).

AND SUBSIDIARIES

1 unchanged sentence

(Dollars in thousands, except share and per share amounts)

Treasury Stock Repurchases

2 unchanged sentences

Under the plan, the Company is permitted to repurchase shares from time to time for cash in open market transactions or in privately negotiated transactions with an equity sponsor in accordance with applicable federal securities laws, with the Company determining the timing and the amount of any repurchases based on its evaluation of market conditions, share price and other factors.

During the three months ended March 31, 2024, the Company did no t repurchase any of its common stock pursuant to the stock repurchase program.

As of March 31, 2024, $ 234,592 was available for share repurchases under the program.

During the three m onths ended March 31, 2023, in connection with a secondary offering of the Company’s common stock by an equity sponsor in March 2023, the Company repurchased 3,000,000 shares of its common stock sold in the offering from underwriters at a price of $ 9.95 per share concurrently with the closing of the offering, for a total of $ 29,850 , excluding brokerage commissions and accrued excise tax .

During the six months ended June 30, 2024, the Company repurchased 552,081 shares on the open market at an average price of $ 9.05 per share, for a total of $ 4,998 , excluding brokerage commissions and accrued excise tax.

As of June 30, 2024, $ 229,594 was available for share repurchases under the program.

During the six months ended June 30, 2024, the Company did not accrue excise tax related to these repurchases, net of shares issued under the Company’s equity incentive program (see Note 18 to these condensed consolidated financial statements).

During the six m onths ended June 30, 2023, in connection with secondary offerings of the Company’s common stock by an equity sponsor in March and May 2023, the Company repurchased 7,000,000 shares of its common stock sold in the offerings from the underwriters at a weighted average price of $ 10.48 per share concurrently with the closing of the offerings, for a total of $ 73,373 , excluding accrued excise tax .

During the six months ended June 30, 2023 , the Company accrued excise tax of $ 630 related to these repurchases, net of shares issued under the Company’s equity incentive program.

This amount was included in accrued liabilities in the condensed consolidated balance sheet and is treated by the Company as a cost of the treasury stock transactions in equity.

Tax Withholdings on Equity Award Vesting

1 unchanged sentence

These transactions, when they occur, are accounted for as stock repurchases by the Company, with the shares returned to treasury stock at a cost representing the payment by the Company of the tax obligations on behalf of the employees in lieu of shares for the vesting unit.

There were 128,801 and 95,269 shares delivered to the Company to cover tax payments for the three months ended March 31, 2024 and 2023, respectively and the fair value of those shares withheld were $ 1,218 and $ 866 for the three months ended March 31, 2024 and 2023, respectively.

The change in the carrying amount of goodwill for the three months ended March 31, 2024 is summarized as follows:

There were 128,801 and 95,269 shares delivered to the Company to cover tax payments for the six months ended June 30, 2024 and 2023, respectively and the fair value of those shares withheld were $ 1,218 and $ 866 for the six months ended June 30, 2024 and 2023, respectively.

The change in the carrying amount of goodwill for the six months ended June 30, 2024 is summarized as follows:

Ecoservices Advanced Materials & Catalysts Total

1 unchanged sentence

Foreign exchange impact — ( 195 ) ( 195 )

Balance as of March 31, 2024 $ 326,589 $ 77,663 $ 404,252

Balance as of June 30, 2024 $ 326,589 $ 77,686 $ 404,275

The Company completes its annual goodwill and indefinite-lived intangible assets impairment test during the fourth quarter of each year, or more frequently if triggering events indicate a possible impairment.

The Company determines the fair value of its reporting units using both a market approach and an income, or discounted cash flow, approach.

As of October 1, 2023, the date of the Company’s most recent quantitative assessments, the fair values of each of the Company’s reporting units and the fair values of the Company’s indefinite-lived trade names and trademarks exceeded their respective carrying values.

During the six months ended June 30, 2024, the Company did not identify any events or circumstances that would more likely than not reduce the fair value of the Company's reporting units below their respective carrying values.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

Although the estimated fair value of the Advanced Materials & Catalysts reporting unit exceeded its carrying value on October 1, 2023 by over 30 %, the Company has experienced unfavorable effects on current operations resulting from certain macroeconomic and industry factors in specific end uses during the six months ended June 30, 2024.

Prolonged unfavorable effects could adversely impact the estimated fair value of the Advanced Materials & Catalysts reporting unit in future periods and may result in impairment charges.

Other Operating Expense, Net:

1 unchanged sentence

Three months ended

June 30, Six months ended

2024 2023 2024 2023

Amortization expense $ 2,644 $ 2,643 $ 5,289 $ 5,280

1 unchanged sentence

Restructuring, integration and business optimization costs 159 1,106 385 2,129

Net loss on asset disposals 648 1,178

Net (gain) loss on asset disposals ( 34 ) 1,128 614 2,306

Other, net 199 195 288 641

$ 3,108 $ 6,262 $ 6,774 $ 12,980

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

Inventories, Net:

9 unchanged sentences

$ 52,027 $ 45,115

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

Investments in Affiliated Companies:

The Company accounts for investments in affiliated companies under the equity method.

Affiliated companies accounted for on the equity basis as of March 31, 2024 are as follows:

Affiliated companies accounted for on the equity basis as of June 30, 2024 are as follows:

Company Country Percent

3 unchanged sentences

Three months ended

June 30, Six months ended

2024 2023 2024 2023

Sales $ 70,644 $ 99,188 $ 127,505 $ 155,085

4 unchanged sentences

the Company’s share of the net assets and net income of affiliates is calculated based on the percent ownership specified in the table above.

The Company’s investments in affiliated companies balance as of March 31, 2024 and December 31, 2023 includes net purchase accounting fair value adjustments of $ 223,014 and $ 224,614 , respectively, related to a prior business combination, consisting primarily of goodwill and intangible assets such as customer relationships, technical know-how and trade names.

Consolidated equity in net income from affiliates is net of $ 1,601 of amortization expense related to purchase accounting fair value adjustments for the three months ended March 31, 2024 and 2023, respectively.

The Company had receivables due from affiliates of $ 3,136 and $ 3,231 as of March 31, 2024 and December 31, 2023, respectively, which are included in prepaid and other current assets.

The Company had no payables from affiliates as of March 31, 2024 and $ 1,351 as of December 31, 2023, which is included in accrued liabilities.

The Company’s investments in affiliated companies balance as of June 30, 2024 and December 31, 2023 includes net purchase accounting fair value adjustments of $ 222,073 and $ 224,614 , respectively, related to a prior business combination, consisting primarily of goodwill and intangible assets such as customer relationships, technical know-how and trade names.

Consolidated equity in net income from affiliates is net of $ 940 and $ 2,541 of amortization expense related to purchase accounting fair value adjustments for the three and six months ended June 30, 2024, respectively.

Consolidated equity in net income from affiliates is net of $ 1,601 and $ 3,201 of amortization expense related to purchase accounting fair value adjustments for the three and six months ended June 30, 2023, respectively.

The Company had receivables due from affiliates of $ 5,018 and $ 3,231 as of June 30, 2024 and December 31, 2023, respectively, which were included in prepaid and other current assets in the condensed consolidated balance sheets.

The Company had payables from affiliates of $ 2,859 and $ 1,351 as of June 30, 2024 and December 31, 2023, which were included in accrued liabilities in the condensed consolidated balance sheets.

Receivables and payables due from affiliates are generally non-trade.

There were no sales to affiliates for the three months ended March 31, 2024 and $ 1,700 for the three months ended March 31, 2023, respectively.

There were no purchases from affiliates for the three months ended March 31, 2024 and immaterial for the three months ended March 31, 2023, respectively.

Sales to affiliates were $ 2,110 for the three and six months ended June 30, 2024, respectively and $ 757 and $ 2,457 for the three and six months ended June 30, 2023, respectively.

There were no purchases from affiliates for the three and six months ended June 30, 2024 and 2023, respectively.

AND SUBSIDIARIES

11 unchanged sentences

$ 573,559 $ 576,904

Depreciation expense was $ 18,415 and $ 16,692 for the three months ended March 31, 2024 and 2023, respectively.

Depreciation expense was $ 18,108 and $ 36,523 for the three and six months ended June 30, 2024, respectively.

Depreciation expense was $ 17,455 and $ 34,147 for the three and six months ended June 30, 2023, respectively.

Long-term Debt:

1 unchanged sentence

2024 December 31,

Senior Secured Term Loan Facility due June 2028 (the “2021 Term Loan Facility”) $ 875,250 $ 877,500

2024 Term Loan Facility $ 873,000 $ 877,500

ABL Facility — —

5 unchanged sentences

Total long-term debt, excluding current portion $ 855,857 $ 858,946

The 2021 Term Loan Facility bears interest at an adjusted term Secured Overnight Financing Rate (“SOFR”) (with a 0.50 % minimum floor and a credit spread adjustment of 10 basis points) plus 2.75 % per annum (or, depending on the borrower’s first lien net leverage ratio, 2.50 %).

The interest rate on the 2021 Term Loan Facility was 7.91 % as of March 31, 2024.

Term Loan Facility

In June 2024, the Company amended its Term Loan Credit Agreement dated as of June 9, 2021 to, among other things, (a) reduce the interest rate applicable to all outstanding Secured Overnight Financing Rate (“SOFR”) term loans to term SOFR plus 2.25 % per annum from a maximum of adjusted term SOFR plus 2.75 % per annum, (b) reduce the interest rate applicable to all outstanding base rate term loans to the alternate base rate plus 1.25 % per annum from a maximum of the alternate base rate plus 1.75 % per annum and (c) extend the maturity date of all outstanding term loans to June 12, 2031 (the amended term loans, the “2024 Term Loan Facility”).

As a result of the amendment, there is no longer a credit spread adjustment of 10 basis points.

The Company evaluated the terms of the amendment in accordance with ASC 470-50 Debt - Modification and Extinguishment and determined that the amendment was primarily a modification of debt.

As a result, the Company recorded $ 4,471 of third-party financing costs as debt extinguishment costs in the condensed consolidated income statement for the three and six months ended June 30, 2024 and capitalized $ 2,183 of original issued discount within long-term debt, excluding current portion on the condensed consolidated balance sheets as of June 30, 2024.

In addition, previous unamortized deferred financing costs of $ 30 and original issue discount of $ 59 associated with the previously outstanding debt were written off as debt extinguishment costs for the three and six months ended June 30, 2024.

The interest rate on the 2024 Term Loan Facility was 7.59 % as of June 30, 2024.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

The borrowings under the senior secured asset-based lending revolving credit facility (“ABL Facility”) bears interest at a rate equal to an adjusted term SOFR, which includes a credit spread adjustment of 10 basis points or the base rate plus a margin of between 1.25 % to 1.75 % or 0.25 % to 0.75 %, respectively.

The interest rate on the ABL Facility was 8.75 % as of March 31, 2024.

The interest rate on the ABL Facility was 8.75 % as of June 30, 2024.

Fair Value of Debt

The fair value of a financial instrument is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants.

As of March 31, 2024 and December 31, 2023, the fair value of the 2021 Term Loan Facility was $ 873,062 and $ 876,403 , respectively.

As of June 30, 2024 and December 31, 2023, the fair value of the Company’s term loan facility was $ 873,000 and $ 876,403 , respectively.

The fair value is classified as Level 2 based upon the fair value hierarchy (see Note 4 to these condensed consolidated financial statements for further information on fair value measurements).

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

Financial Instruments:

19 unchanged sentences

The following table provides a summary of the Company’s interest rate cap agreements:

Financial instrument Number of instruments In effect as of March 31, 2024

Financial instrument Number of instruments In effect as of June 30, 2024

Current notional amount of instruments in effect Annuitized premium of instruments in effect

Interest rate cap 4 3 $ 650,000 $ 24,817

The current notional amounts of the three interest rate cap agreements in effect at March 31, 2024 are $ 250,000 , $ 250,000 and $ 150,000 .

The current notional amounts of the three interest rate cap agreements in effect at June 30, 2024 are $ 250,000 , $ 250,000 and $ 150,000 .

The Company entered into a $ 250,000 interest rate cap to mitigate interest rate volatility from August 2022 to October 2024, a $ 250,000 interest rate cap agreement to mitigate interest rate volatility from September 2023 to October 2025 and a $ 150,000 interest rate cap agreement to mitigate interest rate volatility from August 2023 to July 2024.

The $ 150,000 interest rate cap agreement will increase to $ 175,000 to mitigate interest rate volatility from August 2024 to July 2026.

The cap rate in effect at March 31, 2024 for all agreements in effect was 1.00 %.

The Company has also entered into a forward starting interest rate cap agreement to mitigate interest volatility from November 2024 to October 2026.

In February 2023, the Company amended all existing interest rate cap agreements to replace LIBOR with SOFR as the benchmark interest rate, with all other terms of the agreements remaining the same.

This amendment changed the previously annuitized premiums on the existing interest rate cap agreements.

The cap rate in effect at June 30, 2024 for all agreements in effect was 1.00 %.

The Company also entered into a forward starting interest rate cap agreement to mitigate interest volatility from November 2024 to October 2026.

AND SUBSIDIARIES

1 unchanged sentence

(Dollars in thousands, except share and per share amounts)

The fair values of derivative instruments held as of March 31, 2024 and December 31, 2023, respectively are shown below:

Balance sheet location March 31,

In February 2023, the Company amended all existing interest rate cap agreements to replace LIBOR with SOFR as the benchmark interest rate, with all other terms of the agreements remaining the same.

This amendment changed the previously annuitized premiums on the existing interest rate cap agreements.

The fair values of derivative instruments held as of June 30, 2024 and December 31, 2023, respectively are shown below:

Balance sheet location June 30,

2024 December 31,

8 unchanged sentences

Total derivative liabilities $ 403 $ 2,496

The following table shows the effect of the Company’s derivative instruments designated as cash flow hedges on AOCI for the three months ended March 31, 2024 and 2023, respectively:

Three months ended March 31,

The following table shows the effect of the Company’s derivative instruments designated as cash flow hedges on AOCI for the three and six months ended June 30, 2024 and 2023, respectively:

Three months ended June 30,

Location of gain (loss) reclassified from AOCI into income Amount of gain (loss) recognized in OCI on derivatives Amount of gain (loss) reclassified from AOCI into income Amount of gain (loss) recognized in OCI on derivatives Amount of gain (loss) reclassified from AOCI into income

Interest rate caps Interest (expense) income $ 3,229 $ ( 4,662 ) $ 18,246 $ 11,187

The following table shows the effect of the Company’s cash flow hedge accounting on the condensed consolidated statements of income for the three months ended March 31, 2024 and 2023, respectively:

Six months ended June 30,

Interest rate caps Interest (expense) income $ 13,037 $ ( 9,318 ) $ 8,641 $ 11,885

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

The following table shows the effect of the Company’s cash flow hedge accounting on the condensed consolidated statements of income for the three and six months ended June 30, 2024 and 2023, respectively:

Location and amount of gain (loss) recognized in income on cash flow hedging relationships

Three months ended

June 30, Six months ended

2024 2023 2024 2023

Total amounts of income and expense line items presented in the statement of income in which the effects of cash flow hedges are recorded in interest (expense) income $ ( 12,895 ) $ ( 9,168 ) $ ( 26,304 ) $ ( 19,000 )

2 unchanged sentences

Interest contracts:

Amount of loss reclassified from AOCI into income 4,656 698

The amount of unrealized losses in AOCI related to the Company’s cash flow hedges that is expected to be reclassified to the condensed consolidated statement of income over the next twelve months is $ 9,199 as of March 31, 2024.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

Amount reclassified from AOCI into income 4,662 11,187 9,318 11,885

Income Taxes:

The effective income tax rate for the three months ended March 31, 2024 was 49.1 %, compared to ( 180.7 )% for the three months ended March 31, 2023.

The Company’s effective income tax rate for the three months ended March 31, 2024 was different from the effective tax rate for the three months ended March 31, 2023 primarily due to a stock compensation shortfall recognized discretely in the respective quarters with lower profits before tax in the prior year.

The effective income tax rate for the three months ended June 30, 2024 was 27.1 %, compared to 25.2 % for the three months ended June 30, 2023.

The effective income tax rate for the six months ended June 30, 2024 was 30.9 %, compared to 28.3 % for the six months ended June 30, 2023.

The Company’s effective income tax rates for the three and six months ended June 30, 2024 and 2023, respectively, fluctuated primarily due to the increased discrete tax impact relative to pre-tax book income related to a stock compensation shortfall and tax expense associated with the recording of accrued penalties and interest on historical uncertain tax positions.

The difference between the U.S.

federal statutory income tax rate and the Company’s effective income tax rate for the three months ended March 31, 2024 was mainly due to state and local taxes, a discrete shortfall tax expense related to stock compensation and a discrete tax expense associated with the recording of accrued penalties and interest on historical uncertain tax positions.

federal statutory income tax rate and the Company’s effective income tax rate for the six months ended June 30, 2024 was mainly due to state and local taxes, a discrete shortfall tax expense related to stock compensation and a discrete tax expense associated with the recording of accrued penalties and interest on historical uncertain tax positions.

The difference between the U.S.

federal statutory income tax rate and the Company’s effective income tax rate for the three months ended March 31, 2023 was mainly due to state and local taxes, a discrete shortfall tax expense related to stock compensation and a discrete tax expense associated with the recording of accrued penalties and interest on historical uncertain tax positions.

federal statutory income tax rate and the Company’s effective income tax rate for the six months ended June 30, 2023 was mainly due to state and local taxes, a discrete shortfall tax expense related to stock compensation, a discrete tax expense associated with the recording of accrued penalties and interest associated with historical uncertain tax positions, and a discrete tax benefit connected to state and local tax law changes.

Benefit Plans:

The following tables present the components of net periodic expense (benefit) for the Company-sponsored defined benefit pension and postretirement plans, which cover certain employees and retirees located in the U.S.

The following tables present the components of net periodic (benefit) expense for the Company-sponsored defined benefit pension and postretirement plans, which cover certain employees and retirees located in the U.S.

Defined Benefit Pension Plans

Three months ended

June 30, Six months ended

2024 2023 2024 2023

Interest cost $ 808 $ 871 $ 1,616 $ 1,742

Expected return on plan assets ( 827 ) ( 837 ) ( 1,654 ) ( 1,674 )

Settlement (gain) loss ( 6 ) 29 ( 6 ) 29

Net periodic (benefit) expense $ ( 25 ) $ 63 $ ( 44 ) $ 97

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

What changed 10-Q

Item 1. Financial Statements