What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-07 compared with 2024-07-26 · 87 added, 88 removed, 143 unchanged (55% of the section changed)

3 unchanged sentences

This discussion contains forward-looking statements that are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Forward-looking statements include all statements that are not historical statements of fact and those regarding our intent, belief or expectations for our business, operations, financial performance or financial condition in addition to statements regarding our general business strategies, the market potential of our brands, trends in the housing market, the potential impact of costs, including material and labor costs, the potential impact of inflation, expected capital spending, expected pension contributions, the expected impact of acquisitions, dispositions and other strategic transactions.

Statements preceded by, followed by or that otherwise include the words “believes,” “expects,” “anticipates,” “intends,” “projects,” “estimates,” “plans,” “outlook,” “positioned,” "confident," "opportunity" and similar expressions or future or conditional verbs such as “will,” “should,” “would,” “may,” and “could” are generally forward-looking in nature and not historical facts.

Forward-looking statements include all statements that are not historical statements of fact and those regarding our intent, belief or expectations for our business, operations, financial performance or financial condition in addition to statements regarding our general business strategies, the market potential of our brands, trends in the housing market, the potential impact of costs, including material and labor costs, the potential impact of inflation, expected capital spending, expected pension contributions or de-risking initiatives, and the expected impact of acquisitions, dispositions and other strategic transactions.

Statements preceded by, followed by, or that otherwise include the words “believes,” “expects,” “anticipates,” “intends,” “projects,” “estimates,” “plans,” “outlook,” “positioned,” "confident," "opportunity," “focus” and similar expressions or future or conditional verbs such as “will,” “should,” “would,” “may,” and “could” are generally forward-looking in nature and not historical facts.

Where, in any forward-looking statement, we express an expectation or belief as to future results or events, such expectation or belief is based on current expectations, estimates, assumptions and projections of our management about our industry, business and future financial results, available at the time this report is filed with the Securities and Exchange Commission.

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and its consolidated subsidiaries as a whole, unless the context otherwise requires.

The Company is a leading innovation company focused on creating smarter, safer and more beautiful homes and improving lives that competes in attractive long-term growth markets in our product categories.

The Company is a leading innovation company dedicated to creating smarter, safer and more beautiful homes and improving lives that competes in attractive long-term growth markets in our product categories.

The Company’s driving purpose is to elevate every life by transforming spaces into havens.

We believe that the Company has certain competitive advantages including market-leading brands, a diversified mix of channels, lean and flexible supply chains, a strong capital structure, as well as a tradition of strong innovation and customer service.

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However, we believe we are well positioned to manage what we expect to be a short-term slow-down in the housing market as we believe the fundamental drivers of the housing market remain intact.

We have been and may continue to be impacted by near-term supply, labor and freight constraints, a volatile global supply chain environment, as well as sustained but easing increased rates of inflation, increased interest rates, unfavorable fluctuations in foreign exchange rates and the ongoing costs of tariffs.

We have been and may continue to be impacted by near-term supply, labor and freight constraints, a volatile global supply chain environment, as well as sustained but easing increased rates of inflation, changes in interest rates, unfavorable fluctuations in foreign exchange rates and the ongoing costs of tariffs.

We continue to manage these challenges and are diligently working to offset potential unfavorable impacts of these items through continuous productivity improvement initiatives and price increases.

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The Company completed the acquisition for a total purchase price of approximately $813.9 million, net of cash acquired of $21.9 million.

During the second quarter, legal title to international operations in Vietnam transferred to us, which included a payment of approximately $23.5 million, net of cash of $5.6 million (which amount is already included in the overall purchase price).

During the second quarter of 2024, legal title to international operations in Vietnam transferred to us, which included a payment of approximately $23.5 million, net of cash of $5.6 million (which amount is already included in the overall purchase price).

We financed the transaction with cash on hand.

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RESULTS OF OPERATIONS

Twenty-Six Weeks Ended June 29, 2024 Compared To Twenty-Six Weeks Ended July 1, 2023

Thirty-Nine Weeks Ended September 28, 2024 Compared To Thirty-Nine Weeks Ended September 30, 2023

(In millions)

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Operating income

The following discussion of consolidated results of operations and segment results refers to the twenty-six weeks ended June 29, 2024 compared to the twenty-six weeks ended July 1, 2023.

The following discussion of consolidated results of operations and segment results refers to the thirty-nine weeks ended September 28, 2024 compared to the thirty-nine weeks ended September 30, 2023.

Consolidated results of operations should be read in conjunction with segment results of operations.

Net sales increased by $145.8 million, or 6.6%, due to the benefit from the acquisitions of SpringWell and the Acquired Businesses ($202.7 million), partially offset by lower sales in our international markets ($37.0 million), higher customer sales incentives, and unfavorable foreign exchange ($4.4 million).

Net sales increased by $39.9 million, or 1.2%, primarily due to the benefit from the acquisitions of SpringWell and the Acquired Businesses ($199.1 million), partially offset by lower sales in our international markets ($91.9 million), higher customer sales incentives and unfavorable foreign exchange ($5.0 million).

Cost of products sold

Cost of products sold decreased by $6.3 million, or .5%, due to raw material cost deflation, lower transportation costs and productivity improvements in all of our segments as a result of strategic sourcing initiatives and manufacturing efficiencies.

Cost of products sold decreased by $102.0 million, or 5.0%, primarily due to raw material cost deflation, lower transportation costs and productivity improvements in all of our segments as a result of strategic sourcing initiatives and manufacturing efficiencies.

These factors were partially offset by the impact of the acquisitions of SpringWell and the Acquired Businesses.

Selling, general and administrative expenses

Selling, general and administrative expenses increased by $89.6 million, or 16.5%, due to higher headcount related costs and higher advertising and marketing costs mainly as a result of the acquisitions of SpringWell and the Acquired Businesses.

Selling, general and administrative expenses increased by $66.9 million, or 7.8%, primarily due to the acquisition of SpringWell and the Acquired Businesses, higher advertising and marketing costs, higher headcount related costs and higher distribution expenses.

Restructuring charges

Restructuring charges of $6.7 million in the twenty-six weeks ended June 29, 2024 are largely related to costs associated with the previously announced planned closure of a manufacturing facility within our Security segment, a product line rationalization within our Outdoors segment and headcount actions across all segments.

Restructuring charges of $25.2 million in the twenty-six weeks ended July 1, 2023 are largely related to costs associated with the planned closure of a manufacturing facility within our Security segment and headcount actions across all segments.

Restructuring charges of $14.1 million in the thirty-nine weeks ended September 28, 2024 are largely related to costs associated with a product line rationalization within our Outdoors segment, the previously announced closure of a manufacturing facility within our Security segment, and headcount actions across all segments.

Restructuring charges of $28.9 million in the thirty-nine weeks ended September 30, 2023 are largely related to costs associated with the closure of a manufacturing facility within our Security segment and headcount actions across all segments.

Operating income

Operating income increased by $70.1 million, or 24.6%, primarily due to the impacts of the acquisitions of SpringWell and the Acquired Businesses, raw material cost deflation, lower transportation costs and productivity improvements in all of our segments as a result of strategic sourcing initiatives and manufacturing efficiencies.

These factors were partially offset by increased intangible amortization expense as a result of the acquisitions of SpringWell and the Acquired Businesses ($12.2 million), higher customer sales incentives, higher headcount related costs, and unfavorable foreign exchange of approximately $2.1 million.

Operating income increased by $78.6 million, or 16.3%, primarily due to the impacts of the acquisitions of SpringWell and the Acquired Businesses, raw material cost deflation, lower transportation costs, lower restructuring charges and productivity improvements in all of our segments as a result of strategic sourcing initiatives and manufacturing efficiencies.

These factors were partially offset by increased intangible amortization expense as a result of the acquisitions of SpringWell and the Acquired Businesses ($18.4 million), higher customer sales incentives, higher advertising and marketing costs, higher headcount related costs and higher distribution expenses.

Interest expense

Interest expense increased by $7.8 million to $62.4 million due to higher floating rate debt balances ($229.2 million outstanding as of June 29, 2024) and higher fixed rate debt interest rates with the issuance of the $600 million outstanding principal amount of 5.875% Senior Notes due in June 2033 relative to the maturity and settlement of the $600 million outstanding principal amount of 4.000% Senior Notes due in September 2023.

Interest expense increased by $4.7 million to $92.6 million primarily due to higher floating rate debt balances ($104.7 million outstanding as of September 28, 2024) and higher fixed rate debt interest rates with the issuance of the $600 million outstanding principal amount of 5.875% Senior Notes due in June 2033 relative to the maturity and settlement of the $600 million outstanding principal amount of 4.000% Senior Notes due in September 2023.

Other income, net

Other income, net, was $3.6 million in the twenty-six weeks ended June 29, 2024, compared to $11.6 million in the twenty-six weeks ended July 1, 2023.

The decrease in other income, net is primarily due to a decrease in foreign currency transaction income and interest income.

The effective income tax rates for the twenty-six weeks ended June 29, 2024 and twenty-six weeks ended July 1, 2023 were 22.2% and 22.2%, respectively.

The difference between the Company’s effective income tax rate for the twenty-six weeks ended June 29, 2024, and the U.S.

statutory rate of 21% primarily relates to state income taxes and foreign income taxed at higher rates, partially offset by a favorable benefit related to a valuation allowance release, decreases in uncertain tax positions, and tax credits.

The difference between the Company’s effective tax rate for the twenty-six weeks ended July 1, 2023, and the U.S.

federal statutory rate of 21% primarily relates to state income taxes (net of federal income tax benefits), foreign income taxed at higher rates, partially offset by a favorable benefit related to decreases in uncertain tax positions and a valuation allowance release.

Other income, net, was $5.2 million in the thirty-nine weeks ended September 28, 2024, compared to $20.9 million in the thirty-nine weeks ended September 30, 2023.

The decrease in other income, net is primarily due to a decrease in foreign currency transaction income and lower interest income, partially offset by an increase in net periodic benefit income.

The effective income tax rates for the thirty-nine weeks ended September 28, 2024 and thirty-nine weeks ended September 30, 2023 were 22.3% and 21.7%, respectively.

The difference between the Company’s effective income tax rate for the thirty-nine weeks ended September 28, 2024, and the U.S.

statutory rate of 21% primarily relates to state income taxes and foreign income taxed at higher rates, partially offset by favorable benefits related to a valuation allowance release, provision to return adjustments, decreases in uncertain tax positions, and tax credits.

The difference between the Company’s effective tax rate for the thirty-nine weeks ended September 30, 2023, and the U.S.

federal statutory rate of 21% primarily relates to state income taxes and foreign income taxed at higher rates, partially offset by favorable benefits related to provision to return adjustments, decreases in uncertain tax positions, and tax credits.

Income from continuing operations, net of tax

Income from continuing operations, net of tax, was $230.2 million in the twenty-six weeks ended June 29, 2024, compared to $187.7 million in the twenty-six weeks ended July 1, 2023.

The increase was due to higher operating income, partly offset by higher interest expense, higher income tax expense and lower other income.

Income from continuing operations, net of tax, was $366.8 million in the thirty-nine weeks ended September 28, 2024, compared to $324.2 million in the thirty-nine weeks ended September 30, 2023.

The increase was due to higher operating income, partly offset by higher interest expense, higher income tax expense and lower other income, net.

Results By Segment

Net sales increased by $73.6 million, or 6.1%, due to the benefit from the acquisitions of SpringWell and the Acquired Businesses ($144.4 million) partially offset by higher customer sales incentives, lower sales unit volume and unfavorable foreign exchange ($4.2 million).

Operating income increased by $21.7 million, or 8.0%, primarily due to the benefit from the acquisitions of SpringWell and the Acquired Businesses, productivity improvements as a result of strategic sourcing initiatives and manufacturing efficiencies, lower transportation costs and raw material cost deflation.

These factors were partially offset by increased intangible amortization expense due to the impact of the acquisitions of SpringWell and the Acquired Businesses ($10.4 million) and higher headcount related costs.

Net sales increased by $38.9 million, or 5.8%, due to higher sales unit volume for our exterior doors products, partially offset by higher customer sales incentives and unfavorable channel mix.

Operating income increased by $11.8 million, or 15.9%, due to the higher sales unit volume and productivity improvements as a result of strategic sourcing initiatives and manufacturing efficiencies.

Net sales increased by $33.3 million, or 10.2%, due to the benefit from the acquisition of the Acquired Businesses ($58.3 million), partially offset by lower sales unit volume.

Operating income increased by $32.7 million, or 157.2%, due to the benefit from the acquisition of the Acquired Businesses, productivity improvements as a result of strategic sourcing initiatives and manufacturing efficiencies, partially offset by lower sales unit volume.

Corporate expenses decreased by $3.9 million, or 4.8%, due to nonrecurring costs related to the acquisition of the Acquired Businesses, partially offset by higher headcount related costs and costs related to our digital transformation efforts.

Thirteen Weeks Ended June 29, 2024 Compared To Thirteen Weeks Ended July 1, 2023

Net sales increased by $20.8 million, or 1.1%, primarily due to the benefit from the acquisitions of SpringWell and the Emtek and Schaub Business ($140.8 million) partially offset by lower organic sales volume, higher customer sales incentives and unfavorable foreign exchange ($4.6 million).

Operating income increased by $8.9 million, or 2.0%, primarily due to the benefit from the acquisitions of SpringWell and the Emtek and Schaub Business, productivity improvements as a result of strategic sourcing initiatives and manufacturing efficiencies, lower transportation costs and raw material cost deflation.

These factors were partially offset by increased intangible amortization expense due to the impact of the acquisitions of SpringWell and the Emtek and Schaub Business ($15.9 million) and higher headcount related costs.

Net sales increased by $15.2 million, or 1.5%, primarily due to higher sales unit volume, partially offset by higher customer sales incentives and unfavorable channel mix.

Operating income increased by $17.7 million, or 14.0%, primarily due to the higher sales unit volume, raw material deflation and productivity improvements as a result of strategic sourcing initiatives and manufacturing efficiencies, partially offset by higher headcount related costs.

Net sales increased by $3.9 million, or 0.7%, primarily due to the benefit from the acquisition of the Yale and August Business ($58.3 million), partially offset by lower sales unit volume and higher customer sales incentives.

Operating income increased by $48.7 million, or 128.8%, primarily due to lower restructuring charges, the benefit from the acquisition of the Yale and August Business, and productivity improvements as a result of strategic sourcing initiatives and manufacturing efficiencies, partially offset by lower sales unit volume.

Corporate expenses decreased by $3.3 million, or 2.8%, primarily due to the absence in the current period of nonrecurring costs related to the acquisition of the Acquired Businesses, partially offset by higher headcount related costs and costs related to our digital transformation efforts.

Thirteen Weeks Ended September 28, 2024 Compared To Thirteen Weeks Ended September 30, 2023

(In millions)

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Operating income

The following discussion of consolidated results of operations and segment results refers to the thirteen weeks ended June 29, 2024 compared to the thirteen weeks ended July 1, 2023.

The following discussion of consolidated results of operations and segment results refers to the thirteen weeks ended September 28, 2024 compared to the thirteen weeks ended September 30, 2023.

Consolidated results of operations should be read in conjunction with segment results of operations.

Net sales increased by $76.3 million, or 6.6%, due to the benefit from the acquisitions of SpringWell and the Acquired Businesses ($106.2 million), partially offset by lower sales in our international markets ($47.3 million), higher customer sales incentives, and unfavorable foreign exchange ($3.6 million).

Net sales decreased by $105.9 million, or 8.4%, primarily due to lower sales in our international markets ($55.7 million), higher customer sales incentives, and unfavorable foreign exchange ($0.6 million).

Cost of products sold

Cost of products sold increased by $3.4 million, or .5%, due to the impact of the acquisitions of SpringWell and the Acquired Businesses, partially offset by raw material cost deflation, lower transportation costs and productivity improvements in all of our segments as a result of strategic sourcing initiatives and manufacturing efficiencies.

Cost of products sold decreased by $95.6 million, or 13.3%, primarily due to the lower sales volume, raw material cost deflation, lower transportation costs and productivity improvements in all of our segments as a result of strategic sourcing initiatives and manufacturing efficiencies, partially offset by unfavorable product mix.

Selling, general and administrative expenses

Selling, general and administrative expenses increased by $39 million, or 13.9%, due to higher headcount related costs and higher advertising and marketing costs mainly as a result of the acquisitions of SpringWell and the Acquired Businesses.

Selling, general and administrative expenses decreased by $22.9 million, or 7.1%, primarily due to lower headcount related costs, partially offset by higher selling, advertising and marketing costs.

Restructuring charges

Restructuring charges of $3.9 million in the thirteen weeks ended June 29, 2024 are largely related to costs associated with the previously announced planned closure of a manufacturing facility within our Security segment, a product line rationalization within our Outdoors segment and headcount actions across all segments.

Restructuring charges of $22.2 million in the thirteen weeks ended July 1, 2023 are largely related to costs associated with the planned closure of a manufacturing facility within our Security segment.

Restructuring charges of $7.4 million in the thirteen weeks ended September 28, 2024 are largely related to costs associated with headcount actions across all segments, a product line rationalization within our Outdoors segment, and the previously announced closure of a manufacturing facility within our Security segment.

Restructuring charges of $3.7 million in the thirteen weeks ended September 30, 2023 relate to costs associated with the closure of a manufacturing facility within our Security segment.

Operating income

Operating income increased by $46.5 million, or 30.5%, primarily due to the impacts of the acquisitions of SpringWell and the Acquired Businesses, raw material cost deflation, and lower transportation costs and productivity improvements in all of our segments as a result of strategic sourcing initiatives and manufacturing efficiencies.

These factors were partially offset by increased intangible

amortization expense as a result of the acquisition of SpringWell and the Acquired Businesses ($6.1 million), higher customer sales incentives, higher headcount related costs, and unfavorable foreign exchange of approximately $1 million.

Operating income increased by $8.6 million, or 4.4%, primarily due to raw material cost deflation, lower transportation costs, lower restructuring charges, and productivity improvements in all of our segments as a result of strategic sourcing initiatives and manufacturing efficiencies.

These factors were partially offset by lower sales unit volume, higher customer sales incentives, higher headcount related costs and increased intangible amortization expense as a result of the acquisitions of SpringWell and the Acquired Businesses ($6.2 million).

Interest expense

Interest expense increased by $4.6 million to $32.3 million due to higher floating rate debt balances ($229.2 million outstanding as of June 29, 2024) and higher fixed rate debt interest rates with the issuance of the $600 million outstanding principal amount of 5.875% Senior Notes due in June 2033 relative to the maturity and settlement of the $600 million outstanding principal amount of 4.000% Senior Notes due in September 2023.

Interest expense decreased $3.1 million to $30.2 million primarily due to lower average fixed rate debt balances, partially offset by higher floating rate debt balances ($104.7 million outstanding as of September 28, 2024).

Other income, net

Other income, net, was $3.7 million in the thirteen weeks ended June 29, 2024, compared to $5.2 million in the thirteen weeks ended July 1, 2023.

Other income, net, was $1.6 million in the thirteen weeks ended September 28, 2024, compared to $9.4 million in the thirteen weeks ended September 30, 2023.

The decrease in other income, net is primarily due to a decrease in foreign currency transaction income and interest income.

The effective income tax rates for the thirteen weeks ended June 29, 2024 and thirteen weeks ended July 1, 2023 were 21.5% and 21.5%, respectively.

The difference between the Company’s effective income tax rate for the thirteen weeks ended June 29, 2024, and the U.S.

statutory rate of 21% primarily relates to state income taxes and foreign income taxed at higher rates, partially offset by a favorable benefit related decreases in uncertain tax positions and tax credits.

The difference between the Company’s effective income tax rate for the thirteen weeks ended July 1, 2023, and the U.S.

statutory rate of 21% primarily relates to state income taxes, foreign income taxed at higher rates, partially offset by a favorable benefit related to decreases in uncertain tax positions .

The effective income tax rates for the thirteen weeks ended September 28, 2024 and thirteen weeks ended September 30, 2023 were 22.6% and 20.9%, respectively.

The difference between the Company’s effective income tax rate for the thirteen weeks ended September 28, 2024, and the U.S.

statutory rate of 21% primarily relates to state income taxes and foreign income taxed at higher rates, partially offset by favorable benefits related to provision to return adjustments and tax credits.

The difference between the Company’s effective income tax rate for the thirteen weeks ended September 30, 2023, and the U.S.

statutory rate of 21% primarily relates to state income taxes and foreign income taxed at higher rates, more than offset by favorable benefits related to decreases in uncertain tax positions and provision to return adjustments .

Income from continuing operations, net of tax

Income from continuing operations, net of tax, was $133.9 million in the thirteen weeks ended June 29, 2024, compared to $102.1 million in the thirteen weeks ended July 1, 2023.

The increase was due to higher operating income, partly offset by higher interest expense, higher income tax expense and lower other income.

Income from continuing operations, net of tax, was $136.6 million in the thirteen weeks ended September 28, 2024, compared to $136.5 million in the thirteen weeks ended September 30, 2023.

The increase was due to higher operating income and lower interest expense, partially offset by higher income tax expense and lower other income, net.

Results By Segment

Net sales increased by $42.5 million, or 6.9%, due to the benefit from the acquisitions of SpringWell and the Acquired Businesses ($74.0 million) partially offset by lower sales unit volume and unfavorable foreign exchange ($3.1 million).

Operating income increased by $8.8 million, or 6.2%, primarily due to the benefit from the acquisitions of SpringWell and the Acquired Businesses, productivity improvements as a result of strategic sourcing initiatives and manufacturing efficiencies, lower transportation costs and raw material cost deflation.

These factors were partially offset by lower sales unit volume, increased intangible amortization expense due to the impact of the acquisition of SpringWell and the Acquired Businesses ($5.4 million), and higher headcount related costs.

Net sales increased by $13.8 million, or 3.7%, due to higher sales unit volume for our exterior doors products, partially offset by higher customer sales incentives and unfavorable channel mix.

Operating income decreased by $9.4 million, or 15.4%, due to higher restructuring and other charges related to a product line rationalization and higher headcount related costs.

These factors were partially offset by higher sales unit volume, productivity improvements as a result of strategic sourcing initiatives and manufacturing efficiencies, and raw material deflation.

Net sales increased by $20.0 million, or 11.7%, due to the benefit from the acquisition of the Acquired Businesses ($32.2 million) partially offset by lower sales unit volume.

Operating income increased by $34.8 million, due to the benefit from the acquisition of the Acquired Businesses, lower restructuring and other charges associated with the planned closure of a manufacturing facility, partially offset by lower sales unit volume.

Corporate expenses decreased by $12.3 million, or 24.5%, due to nonrecurring costs related to the acquisition of the Acquired Businesses, partially offset by higher headcount related costs and costs related to our digital transformation efforts.

Net sales decreased by $52.9 million, or 7.7%, primarily due to lower sales volume as well as higher customer sales incentives.

Operating income decreased by $12.8 million, or 7.8%, primarily due to lower sales volume, higher customer incentive costs, higher restructuring charges, higher headcount related costs and increased intangible amortization expense due to the impact of the acquisitions of SpringWell and the Emtek and Schaub Business ($5.4 million).

These factors were partially offset by productivity improvements as a result of strategic sourcing initiatives and manufacturing efficiencies, lower transportation costs and raw material cost deflation.

Net sales decreased by $23.7 million, or 6.5%, due to lower sales unit volume and higher customer sales incentives, partially offset by favorable channel mix.

Operating income increased by $5.8 million, or 11.2%, primarily due to productivity improvements as a result of strategic sourcing initiatives and manufacturing efficiencies, partially offset by lower sales unit volume and higher headcount related costs.

Net sales decreased by $29.3 million, or 14.2%, primarily due to lower sales unit volume and higher customer sales incentives.

Operating income increased by $16.0 million, or 94.1%, primarily due to lower restructuring and other charges associated with the closure of a manufacturing facility as well as productivity improvements as a result of strategic sourcing initiatives and manufacturing efficiencies, partially offset by lower sales unit volume.

Corporate expenses increased by $0.4 million, or 1.1%, primarily due to higher headcount related costs and costs related to our digital transformation efforts.

LIQUIDITY AND CAPITAL RESOURCES

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Long-Term Debt

At June 29, 2024, the Company had aggregate outstanding notes in the principal amount of $2.7 billion, with varying maturities (the “Notes”).

At September 28, 2024, the Company had aggregate outstanding notes in the principal amount of $2.7 billion, with varying maturities (the “Notes”).

The Notes are unsecured senior obligations of the Company.

In addition, we believe that we have the ability to obtain alternative sources of financing if required.

The following table provides a summary of the Company’s outstanding Notes, including the net carrying value of the Notes, net of underwriting commissions, price discounts and debt issuance costs as of June 29, 2024 and December 30, 2023:

Net Carrying Value

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Maturity Date

June 29, 2024

September 28, 2024

December 30, 2023

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In addition, the Company's ratio of consolidated debt minus certain cash and cash equivalents to consolidated EBITDA generally may not exceed 3.5 to 1.0.

There were no outstanding borrowings under this facility as of June 29, 2024 and December 30, 2023.

As of June 29, 2024, we were in compliance with all covenants under this facility.

We currently have uncommitted bank lines of credit in China, which provide for unsecured borrowings for working capital of up to $30.5 million in aggregate as of June 29, 2024 and December 30, 2023, respectively.

There were no outstanding balances as of June 29, 2024 and December 30, 2023.

There were no outstanding borrowings under this facility as of September 28, 2024 and December 30, 2023.

As of September 28, 2024, we were in compliance with all covenants under this facility.

We currently have uncommitted bank lines of credit in China, which provide for unsecured borrowings for working capital of up to $30.5 million in aggregate as of September 28, 2024 and December 30, 2023.

There were no outstanding balances as of September 28, 2024 and December 30, 2023.

Commercial Paper

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for general corporate purposes.

Outstanding borrowings under the Commercial Paper Program as of June 29, 2024 and December 30, 2023 were $229.2 million and zero, respectively.

Outstanding borrowings under the Commercial Paper Program as of September 28, 2024 and December 30, 2023 were $104.7 million and zero, respectively.

Cash and Seasonality

On June 29, 2024, we had cash and cash equivalents of $352.6 million, of which $276.2 million was held at non-U.S.

On September 28, 2024, we had cash and cash equivalents of $344.8 million, of which $314.9 million was held at non-U.S.

subsidiaries.

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We typically generate most of our operating cash flow in the third and fourth fiscal quarters of each year.

We believe that our current cash position, cash flow generated from operations, and amounts available under our revolving credit facility should be sufficient for our operating requirements and enable us to fund our capital expenditures, share repurchases, dividend payments, and any required long-term debt payments.

We believe that our current cash position, cash flow generated from operations, and amounts available under our revolving credit facility should be sufficient for our operating requirements and enable us to fund our capital expenditures and service of indebtedness, as well as to finance acquisitions, repurchase shares of our common stock and pay dividends to stockholders, as the Board of Directors deems appropriate.

Share Repurchases and Dividends

On January 29, 2024, the Company's Board of Directors authorized the repurchase of up to $650 million of shares of the Company’s outstanding common stock over the next two years on the open market or in privately negotiated transactions or otherwise (including pursuant to a Rule 10b5-1 trading plan, block trades and accelerated share repurchase transactions), in accordance with applicable securities laws.

In the first twenty-six weeks of 2024, we repurchased 2.0 million shares of our outstanding common stock under the Company’s share repurchase program for $155.2 million.

As of June 29, 2024, the Company’s total remaining share repurchase authorization under its share repurchase program was approximately $570 million.

In the first thirty-nine weeks of 2024, we repurchased 2.6 million shares of our outstanding common stock under the Company’s share repurchase program for $190.4 million.

As of September 28, 2024, the Company’s total remaining share repurchase authorization under its share repurchase program was approximately $534 million.

The share repurchase program does not obligate the Company to repurchase any specific dollar amount or number of shares and may be suspended or discontinued at any time.

In the first twenty-six weeks of 2024, we paid dividends in the amount of $60.2 million to the Company’s stockholders.

In the first thirty-nine weeks of 2024, we paid dividends in the amount of $90.0 million to the Company’s stockholders.

Our Board of Directors will continue to evaluate dividend payment opportunities on a quarterly basis.

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We financed the transaction with cash on hand.

During the second quarter 2024, legal title to international operations in Vietnam transferred to us, which included a payment of approximately $23.5 million, net of cash of $5.6 million (which amount is already included in the overall purchase price).

The results of the Emtek and Schaub Business are reported as part of the Water segment and the results of the Yale and August Business are reported as part of the Security segment.

We periodically review our portfolio of brands and evaluate potential strategic transactions and other capital initiatives to increase stockholder value.

Below is a summary of cash flows for the twenty-six weeks ended June 29, 2024 and July 1, 2023.

Below is a summary of cash flows for the thirty-nine weeks ended September 28, 2024 and September 30, 2023.

'(In millions)

Twenty-Six Weeks Ended

June 29, 2024

Twenty-Six Weeks Ended July 1, 2023

Thirty-Nine Weeks Ended September 28, 2024

Thirty-Nine Weeks Ended September 30, 2023

Net cash provided by operating activities

Net cash used in investing activities

Net cash provided by financing activities

Net cash used in financing activities

Effect of foreign exchange rate changes on cash

Net (decrease) increase in cash and cash equivalents

Net cash provided by operating activities was $190.2 million in the twenty-six weeks ended June 29, 2024, compared to net cash provided by operating activities of $503.6 million in the twenty-six weeks ended July 1, 2023.

The decrease in cash provided of $313.4 million was primarily due to an increase in inventory balances compared to the prior period as result of our 2023 initiative to decrease inventory balances to align with the U.S.

home product market activity.

Net decrease in cash and cash equivalents

Net cash provided by operating activities was $395.5 million in the thirty-nine weeks ended September 28, 2024, compared to net cash provided by operating activities of $835.6 million in the thirty-nine weeks ended September 30, 2023.

The decrease in cash provided by operating activities of $440.1 million was primarily due to an increase in inventory balances compared to the prior period as result of our 2023 initiative to decrease inventory balances to align with the U.S.

home product market activity, as well as a decrease in accounts payable.

The $84.2 million settlement of our interest rate swaps in 2023 and decreased accrued expenses and other liabilities also contributed to the decrease in cash provided by operating activities.

The decrease in cash provided by operating activities was partially offset by higher net income in 2024.

Net cash used in investing activities was $230.2 million in the twenty-six weeks ended June 29, 2024, compared to net cash used in investing activities of $891.3 million in the twenty-six weeks ended July 1, 2023.

The decrease in cash used of $661.1 million reflects the acquisition of the Acquired Businesses for approximately $800 million in June 2023 as compared to the acquisition of SpringWell for $105.6 million in 2024.

Net cash provided by financing activities was $9.7 million in the twenty-six weeks ended June 29, 2024, compared to cash provided by financing activities of $427.8 million in the twenty-six weeks ended July 1, 2023.

The decrease in cash provided of $418.1 million was primarily due to higher net borrowings in 2024 as compared to 2023 ($365.1 million) and higher share repurchases in 2024 compared to 2023 ($50.2 million).

Net cash used in investing activities was $258.7 million in the thirty-nine weeks ended September 28, 2024, compared to net cash used in investing activities of $957.0 million in the thirty-nine weeks ended September 30, 2023.

The decrease in cash used investing activities of $698.3 million reflects the acquisition of the Acquired Businesses for approximately $800 million in June 2023 as compared to the acquisition of SpringWell for $105.6 million in 2024, as well as a decrease in capital expenditures of $42.6 million.

Net cash used in financing activities was $183.1 million in the thirty-nine weeks ended September 28, 2024, compared to cash used in financing activities of $60.6 million in the thirty-nine weeks ended September 30, 2023.

The increase in cash used in financing activities of $122.5 million was primarily due to higher share repurchases in 2024 as compared to 2023 ($70.3 million) and lower net borrowings in 2024 as compared to 2023 ($50.1 million).

Pension Plans

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As of December 30, 2023, the fair value of our total pension plan assets was $468.0 million, representing funding of about 96% of the accumulated benefit obligation liability.

During the twenty-six weeks ended June 29, 2024, we made no pension contributions.

During the thirty-nine weeks ended September 28, 2024, we made no pension contributions.

For the foreseeable future, we believe that we have sufficient liquidity to meet the minimum funding that may be required by the Pension Protection Act of 2006.

Refer to Note 18, "Subsequent Events," in Item 1 for a discussion of the settlement of a portion of the Company's pension obligations as a part of our de-risking strategy.

Foreign Exchange

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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