What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-11-09 compared with 2023-08-10 · 127 added, 121 removed, 401 unchanged (38% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

Second Quarter Ended Six Months Ended

(In thousands, except per share data) July 2, 2023 June 26, 2022 July 2, 2023 June 26, 2022

Third Quarter Ended Nine Months Ended

($ in thousands, except per share data) October 1, 2023 September 25, 2022 October 1, 2023 September 25, 2022

NET SALES $ 866,073 $ 1,112,089 $ 2,686,858 $ 3,929,957

18 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

Second Quarter Ended Six Months Ended

(In thousands) July 2, 2023 June 26, 2022 July 2, 2023 June 26, 2022

Third Quarter Ended Nine Months Ended

($ in thousands) October 1, 2023 September 25, 2022 October 1, 2023 September 25, 2022

NET INCOME $ 39,550 $ 58,819 $ 112,080 $ 288,016

7 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(In thousands) July 2, 2023 December 31, 2022

($ in thousands) October 1, 2023 December 31, 2022

Current Assets

31 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

Six Months Ended

(In thousands) July 2, 2023 June 26, 2022

Nine Months Ended

($ in thousands) October 1, 2023 September 25, 2022

CASH FLOWS FROM OPERATING ACTIVITIES

14 unchanged sentences

Purchases of property, plant and equipment ( 47,430 ) ( 63,437 )

Proceeds from sale of property and equipment and other investing activities 728 7,296

Proceeds from sale of property, plant and equipment 946 7,441

Business acquisitions, net of cash acquired ( 26,009 ) ( 152,888 )

Purchases of intangible assets and other investing activities ( 2,947 ) —

Purchases of intangible assets ( 2,970 ) —

Net cash used in investing activities ( 75,463 ) ( 208,884 )

7 unchanged sentences

Taxes paid for share-based payment arrangements ( 8,762 ) ( 10,036 )

Payment of deferred financing costs and other — ( 2,142 )

Payment of contingent consideration from a business acquisition ( 1,430 ) ( 4,780 )

1 unchanged sentence

Other financing activities ( 82 ) —

Net cash (used in) provided by financing activities ( 101,740 ) 67,440

Increase (decrease) in cash and cash equivalents 11,064 ( 45,824 )

Net cash used in financing activities ( 224,764 ) ( 90,504 )

Decrease in cash and cash equivalents ( 6,397 ) ( 69,580 )

Cash and cash equivalents at beginning of year 22,847 122,849

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)

Second Quarter Ended July 2, 2023

Third Quarter Ended October 1, 2023

($ in thousands) Common

2 unchanged sentences

Earnings Total

Balance April 2, 2023 $ 194,753 $ — $ ( 704 ) $ 775,773 $ 969,822

Balance July 2, 2023 $ 196,912 $ — $ ( 794 ) $ 801,304 $ 997,422

Net income — — — 39,550 39,550

5 unchanged sentences

Stock-based compensation expense 5,729 — — — 5,729

Balance July 2, 2023 $ 196,912 $ — $ ( 794 ) $ 801,304 $ 997,422

Second Quarter Ended June 26, 2022

Balance October 1, 2023 $ 201,680 $ — $ ( 804 ) $ 830,427 $ 1,031,303

Third Quarter Ended September 25, 2022

($ in thousands) Common

2 unchanged sentences

Earnings Total

Balance March 27, 2022 $ 188,433 $ — $ ( 1,442 ) $ 612,981 $ 799,972

Balance June 26, 2022 $ 191,295 $ — $ ( 1,517 ) $ 707,812 $ 897,590

Net income — — — 58,819 58,819

5 unchanged sentences

Stock-based compensation expense 5,352 — — — 5,352

Balance June 26, 2022 191,295 — ( 1,517 ) 707,812 897,590

PATRICK INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)

Six Months Ended July 2, 2023

Balance September 25, 2022 $ 195,367 $ — $ ( 1,635 ) $ 752,944 $ 946,676

Nine Months Ended October 1, 2023

($ in thousands) Common

5 unchanged sentences

Dividends declared — — — ( 29,927 ) ( 29,927 )

Other comprehensive income, net of tax — — ( 99 ) — ( 99 )

Other comprehensive loss, net of tax — — ( 109 ) — ( 109 )

Share repurchases under buyback program ( 1,649 ) — — ( 10,587 ) ( 12,236 )

2 unchanged sentences

Stock-based compensation expense 13,675 — — — 13,675

Balance July 2, 2023 $ 196,912 $ — $ ( 794 ) $ 801,304 $ 997,422

Six Months Ended June 26, 2022

Balance October 1, 2023 $ 201,680 $ — $ ( 804 ) $ 830,427 $ 1,031,303

Nine Months Ended September 25, 2022

($ in thousands) Common

11 unchanged sentences

Stock-based compensation expense 15,596 — — — 15,596

Balance June 26, 2022 191,295 — ( 1,517 ) 707,812 897,590

Balance September 25, 2022 $ 195,367 $ — $ ( 1,635 ) $ 752,944 $ 946,676

See accompanying Notes to Condensed Consolidated Financial Statements.

3 unchanged sentences

The accompanying unaudited condensed consolidated financial statements of Patrick Industries, Inc.

(“Patrick”, the “Company”, "we", "our") contain all adjustments (consisting of normal recurring adjustments) that we believe are necessary to present fairly the Company’s financial position as of July 2, 2023 and December 31, 2022, its results of operations for the second quarter and six months ended July 2, 2023 and June 26, 2022, and its cash flows for the six months ended July 2, 2023 and June 26, 2022.

Patrick’s unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission and in accordance with accounting principles generally accepted in the United States of America (“U.S.

The preparation of the condensed consolidated financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes.

Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S.

GAAP have been condensed or omitted pursuant to those rules or regulations.

Intercompany balances and transactions have been eliminated in consolidation.

For a description of significant accounting policies used by the Company in the preparation of its consolidated financial statements, please refer to Note 1 to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

The December 31, 2022 condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S.

Operating results for the second quarter and six months ended July 2, 2023 are not necessarily indicative of the results that we will realize or expect for the full year ending December 31, 2023.

(“Patrick”, the “Company”, "we", "our") contain all adjustments (consisting of normal recurring adjustments) that we believe are necessary to present fairly the Company’s financial position as of October 1, 2023 and December 31, 2022, its results of operations for the third quarter and nine months ended October 1, 2023 and September 25, 2022, and its cash flows for the nine months ended October 1, 2023 and September 25, 2022.

Patrick's unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("U.S.

The accompanying unaudited condensed consolidated financial statements for Patrick do not include all of the information and notes required by U.S.

GAAP for complete financial statements.

In the opinion of management, all adjustments (consisting of normal recurring accruals) and disclosures considered necessary for a fair presentation have been included.

For further information, refer to Patrick’s Audited Consolidated Financial Statements for the year ended December 31, 2022, and corresponding notes in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 24, 2023.

The Company maintains its financial records on the basis of a fiscal year ending on December 31, with the fiscal quarters spanning approximately thirteen weeks.

1 unchanged sentence

The second and third quarters are thirteen weeks in duration and the fourth quarter is the remainder of the year.

The second quarter of fiscal year 2023 ended on July 2, 2023 and the second quarter of fiscal year 2022 ended on June 26, 2022.

In preparation of Patrick’s condensed consolidated financial statements as of and for the second quarter and six months ended July 2, 2023, management evaluated all subsequent events and transactions that occurred after the balance sheet date through the date of issuance of the Form 10-Q that required recognition or disclosure in the condensed consolidated financial statements.

The third quarter of fiscal year 2023 ended on October 1, 2023 and the third quarter of fiscal year 2022 ended on September 25, 2022.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of significant accounting policies is included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 24, 2023

New Accounting Standards

Changes to U.S.

GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of Accounting Standards Updates (“ASUs”) to the FASB’s Accounting Standards Codification.

The Company considers the applicability and impact of all ASUs.

ASUs not listed below were assessed and determined to be either not applicable or are expected to have an immaterial impact on the Company’s unaudited condensed consolidated financial statements.

Accounting Pronouncements Not Yet Adopted

In October 2023, the FASB issued ASU 2023-06, "Disclosure Improvements." The amendments in this update modify the disclosure or presentation requirements of a variety of topics in the codification.

Certain of the amendments represent clarifications to or technical corrections of the current requirements.

The amendments in this ASU are effective for public business entities for interim periods beginning after June 30, 2027.

The Company is currently evaluating the impacts of the provisions of ASU 2023-06.

REVENUE RECOGNITION

In the following table, revenue from contracts with customers, net of intersegment sales, is disaggregated by market type and by reportable segment:

Second Quarter Ended July 2, 2023

Third Quarter Ended October 1, 2023

($ in thousands) Manufacturing Distribution Total

4 unchanged sentences

Total $ 641,185 $ 224,888 $ 866,073

Second Quarter Ended June 26, 2022

Third Quarter Ended September 25, 2022

($ in thousands) Manufacturing Distribution Total

4 unchanged sentences

Total $ 828,410 $ 283,679 $ 1,112,089

Six Months Ended July 2, 2023

Nine Months Ended October 1, 2023

($ in thousands) Manufacturing Distribution Total

4 unchanged sentences

Total $ 2,021,679 $ 665,179 $ 2,686,858

Six Months Ended June 26, 2022

Nine Months Ended September 25, 2022

($ in thousands) Manufacturing Distribution Total

7 unchanged sentences

Inventories consist of the following:

(In thousands) July 2, 2023 December 31, 2022

($ in thousands) October 1, 2023 December 31, 2022

Raw materials $ 276,681 $ 348,670

8 unchanged sentences

GOODWILL AND INTANGIBLE ASSETS

Changes in the carrying amount of goodwill for the six months ended July 2, 2023 by segment are as follows:

Changes in the carrying amount of goodwill for the nine months ended October 1, 2023 by segment are as follows:

($ in thousands) Manufacturing Distribution Total

2 unchanged sentences

Adjustments to preliminary purchase price allocations 2,008 217 2,225

Balance - July 2, 2023

Balance - October 1, 2023

$ 560,370 $ 77,023 $ 637,393

Intangible assets, net consist of the following as of July 2, 2023 and December 31, 2022:

(In thousands) July 2, 2023 December 31, 2022

Intangible assets, net consist of the following as of October 1, 2023 and December 31, 2022:

($ in thousands) October 1, 2023 December 31, 2022

Customer relationships $ 729,764 $ 722,503

2 unchanged sentences

Trademarks 197,027 195,957

1,025,258 1,008,036

Intangible assets, gross 1,017,662 1,008,036

accumulated amortization ( 346,899 ) ( 287,806 )

Intangible assets, net $ 670,763 $ 720,230

Changes in the carrying value of intangible assets for the six months ended July 2, 2023 by segment are as follows:

Changes in the carrying value of intangible assets for the nine months ended October 1, 2023 by segment are as follows:

($ in thousands) Manufacturing Distribution Total

3 unchanged sentences

Adjustments to preliminary purchase price allocations ( 4,359 ) ( 85 ) ( 4,444 )

Balance - July 2, 2023

Balance - October 1, 2023

$ 570,353 $ 100,410 $ 670,763

The Company completed three acquisitions in the second quarter and first six months of 2023 (the "2023 Acquisitions").

For the second quarter and six months ended July 2, 2023, net sales included in the Company's condensed consolidated statements of income related to the 2023 Acquisitions were $ 2.3 million, and operating income was $ 0.2 million.

Business combinations generally take place to gain key technology, expand into additional markets, or strengthen Patrick's positions in existing markets.

Acquisitions are accounted for under the acquisition method of accounting.

For each acquisition, the excess of the purchase consideration over the fair value of the net assets acquired is recorded as goodwill, which generally represents the combined value of the Company’s existing purchasing, manufacturing, sales, and systems resources with the organizational talent and expertise of the acquired companies’ respective management teams to maximize efficiencies, market share growth and net income.

The Company completed three acquisitions in the first nine months of 2023 (the "2023 Acquisitions").

For the third quarter and nine months ended October 1, 2023, net sales included in the Company's condensed consolidated statements of income related to the 2023 Acquisitions were $ 7.3 million and $ 9.8 million, respectively, and operating income was $( 0.1 ) million and $ 0.1 million, respectively.

Acquisition-related costs associated with the 2023 Acquisitions were immaterial.

1 unchanged sentence

For each acquisition, the Company completes its allocation of the purchase price to the fair value of acquired assets and liabilities within a one year measurement period.

The Company completed two acquisitions in the second quarter of 2022 and completed three acquisitions in the six months ended June 26, 2022.

For the second quarter and six months ended June 26, 2022, net sales included in the Company's condensed consolidated statements of income related to the acquisition completed in the second quarter and first six months of 2022 were $ 40.8 million and $ 49.2 million, respectively, and operating income was $ 7.6 million and $ 9.0 million, respectively.

Business combinations generally take place to gain key technology, expand into additional markets, or strengthen Patrick's positions in existing markets.

Acquisitions are accounted for under the acquisition method of accounting.

each acquisition, the excess of the purchase consideration over the fair value of the net assets acquired is recorded as goodwill, which generally represents the combined value of the Company’s existing purchasing, manufacturing, sales, and systems resources with the organizational talent and expertise of the acquired companies’ respective management teams to maximize efficiencies, market share growth and net income.

The Company completed three acquisitions in the first nine months of 2022.

For the third quarter and nine months ended September 25, 2022, net sales included in the Company's condensed consolidated statements of income related to the acquisitions completed in the first nine months 2022 were $ 38.0 million and $ 87.3 million, respectively, and operating income was $ 6.9 million and $ 15.9 million, respectively.

Contingent Consideration

In connection with certain acquisitions, if certain financial results for the acquired businesses are achieved, the Company is required to pay additional cash consideration.

In connection with certain acquisitions, the Company is required to pay additional cash consideration if certain financial results of the acquired businesses are achieved.

The Company records a liability for the estimated fair value of the contingent consideration related to each of these acquisitions as part of the initial purchase price based on the present value of the expected future cash flows and the probability of future payments at the date of acquisition.

Changes in the fair value of contingent consideration for the six months ended July 2, 2023 are as follows:

Changes in the fair value of contingent consideration for the nine months ended October 1, 2023 are as follows:

($ in thousands)

3 unchanged sentences

Settlements ( 5,180 )

Balance - July 2, 2023

(1) The Company records non-cash fair value adjustments to contingent consideration based on expected results, which are included in Selling, general and administrative expenses in the Company's condensed consolidated statements of income for the first six months of 2023.

The following table shows the balance sheet location of the fair value of contingent consideration and the maximum amount of contingent consideration payments the Company may be subject to at July 2, 2023 and December 31, 2022:

(In thousands) July 2, 2023 December 31, 2022

Balance - October 1, 2023

(1) The Company records non-cash fair value adjustments to contingent consideration based on expected results, which are included in selling, general and administrative expenses in the Company's condensed consolidated statements of income for the first nine months of 2023.

($ in thousands) October 1, 2023 December 31, 2022

Accrued liabilities $ 7,583 $ 5,250

3 unchanged sentences

2023 Acquisitions

The Company completed three acquisitions in the six months ended July 2, 2023, including the following previously announced acquisition:

The Company completed three acquisitions in the first nine months ended October 1, 2023, including the following previously announced acquisition:

Company Segment Description

BTI Transport Distribution Provider of transportation and logistics services to marine original equipment manufacturers ("OEMs") and dealers, based in Elkhart, Indiana, acquired in April 2023.

The acquired business will now operate under the Patrick Marine Transport brand.

The acquired business operates under the Patrick Marine Transport brand.

Inclusive of two acquisitions not discussed above, total cash consideration for the 2023 Acquisitions was approximately $ 26.4 million, plus contingent consideration over a two-year period based on future performance in connection with certain acquisitions.

The preliminary purchase price allocations are subject to valuation activities being finalized, and thus certain purchase accounting adjustments are subject to change within the measurement period as the Company finalizes its estimates.

Changes to preliminary purchase accounting estimates recorded in the second quarter and six months ended July 2, 2023 related to the 2023 Acquisitions were immaterial.

Changes to preliminary purchase accounting estimates recorded in the third quarter and nine months ended October 1, 2023 related to the 2023 Acquisitions were immaterial.

2022 Acquisitions

5 unchanged sentences

Inclusive of two acquisitions not discussed above, total cash consideration for the 2022 Acquisitions was approximately $ 248.1 million, plus contingent consideration over a one to two-year period based on future performance in connection with certain acquisitions.

Purchase price allocations and all valuation activities in connection with the acquisition completed in the first six months of 2022 have been finalized.

Changes to preliminary purchase accounting estimates recorded in the second quarter and six months ended July 2, 2023 related to the 2022 Acquisitions were immaterial.

Purchase price allocations and all valuation activities in connection with the 2022 Acquisitions have been finalized, and adjustments made during the year related to changes in the preliminary purchase price allocation recorded in all periods related to the 2022 Acquisitions were immaterial and relate primarily to the valuation of intangible and fixed assets.

The following table summarizes the fair values of the assets acquired and the liabilities assumed as of the date of acquisition for the 2023 Acquisitions and 2022 Acquisitions:

42 unchanged sentences

Pro Forma Information

The following pro forma information for the second quarter and six months ended July 2, 2023 and June 26, 2022 assumes the 2023 Acquisitions and 2022 Acquisitions occurred as of the beginning of the year immediately preceding each such acquisition.

The following pro forma information for the third quarter and nine months ended October 1, 2023 and September 25, 2022 assumes the 2023 Acquisitions and 2022 Acquisitions occurred as of the beginning of the year immediately preceding each such acquisition.

The pro forma information contains the actual operating results of the 2023 Acquisitions and 2022 Acquisitions combined with the results prior to their respective acquisition dates, adjusted to reflect the pro forma impact of the acquisitions occurring as of the beginning of the year immediately preceding each such acquisition.

The pro forma information includes financing and interest expense charges based on incremental borrowings incurred in connection with each transaction.

In addition, the pro forma information includes amortization expense, in the aggregate, related to intangible assets acquired in connection with the transactions of $ 0.1 million and $ 0.4 million, respectively, for the second quarter and six months ended July 2, 2023, and $ 1.1 million and $ 3.8 million, respectively, for the second quarter and six months ended June 26, 2022.

Second Quarter Ended

Six Months Ended

(In thousands, except per share data) July 2, 2023 June 26, 2022 July 2, 2023 June 26, 2022

In addition, the pro forma information includes amortization expense, in the aggregate, related to intangible assets acquired in connection with the transactions of $ 0.0 million and $ 0.4 million, respectively, for the third quarter and nine months ended October 1, 2023, and $ 1.0 million and $ 5.1 million, respectively, for the third quarter and nine months ended September 25, 2022.

Third Quarter Ended

Nine Months Ended

($ in thousands, except per share data) October 1, 2023 September 25, 2022 October 1, 2023 September 25, 2022

Revenue $ 866,073 $ 1,124,619 $ 2,702,753 $ 4,029,451

4 unchanged sentences

STOCK-BASED COMPENSATION

The Company recorded expense, net of forfeitures, of approximately $ 2.7 million and $ 7.9 million in the second quarter and six months ended July 2, 2023, respectively, for its stock-based compensation plans in the condensed consolidated statements of income.

Stock-based compensation expense of $ 5.1 million and $ 10.2 million was recorded in the second quarter and six months ended June 26, 2022, respectively.

The Company's Board of Directors (the "Board") approved various stock-based grants under the Company’s 2009 Omnibus Incentive Plan in the six months ended July 2, 2023 totaling 328,059 shares in the aggregate at an average fair value of $ 56.20 at grant date for a total fair value at grant date of $ 18.4 million.

As of July 2, 2023, there was approximately $ 27.1 million of total unrecognized compensation cost related to stock-based compensation arrangements granted under incentive plans.

The Company's Board of Directors (the "Board") approved various stock-based grants under the Company’s 2009 Omnibus Incentive Plan in the nine months ended October 1, 2023 totaling 330,359 shares in the aggregate at an average fair value of $ 56.28 at grant date for a total fair value at grant date of $ 18.6 million.

The Company recorded expense, net of forfeitures, of approximately $ 5.8 million and $ 13.7 million in the third quarter and nine months ended October 1, 2023, respectively, for its stock-based compensation plans in the condensed consolidated statements of income.

Stock-based compensation expense of $ 5.4 million and $ 15.6 million was recorded in the third quarter and nine months ended September 25, 2022, respectively.

As of October 1, 2023, there was approximately $ 24.1 million of total unrecognized compensation cost related to stock-based compensation arrangements granted under incentive plans.

That cost is expected to be recognized over a weighted-average period of 12.4 months.

EARNINGS PER COMMON SHARE

Earnings per common share calculated for the second quarter and first six months of 2023 and 2022 is as follows:

Second Quarter Ended

Six Months Ended

(thousands except per share data) July 2, 2023 June 26, 2022 July 2, 2023 June 26, 2022

Earnings per common share calculated for the third quarter and first nine months of 2023 and 2022 is as follows:

Third Quarter Ended

Nine Months Ended

($ in thousands, except per share data) October 1, 2023 September 25, 2022 October 1, 2023 September 25, 2022

Earnings for basic earnings per common share calculation $ 39,550 $ 58,819 $ 112,080 $ 288,016

8 unchanged sentences

Diluted earnings per common share $ 1.81 $ 2.43 $ 5.09 $ 11.78

An immaterial amount of securities was not included in the computation of diluted earnings per common share as they are considered anti-dilutive under the treasury stock method for all periods presented.

A summary of total debt outstanding at July 2, 2023 and December 31, 2022 is as follows:

(In thousands) July 2, 2023 December 31, 2022

A summary of total debt outstanding at October 1, 2023 and December 31, 2022 is as follows:

($ in thousands) October 1, 2023 December 31, 2022

Long-term debt:

18 unchanged sentences

All noteholders elected to receive cash in repayment of the 1.00 % Convertible Notes.

The interest rate for incremental borrowings under the Revolver due 2027 at July 2, 2023 was SOFR plus 1.50 % (or 6.70 %) for the SOFR-based option.

The fee payable on committed but unused portions of the Revolver due 2027 was 0.20 % at July 2, 2023.

Total cash interest paid for the second quarter of 2023 and 2022 was $ 26.9 million and $ 23.9 million, respectively, and $ 32.7 million and $ 27.1 million for the comparative six month periods, respectively.

The interest rate for incremental borrowings under the Revolver due 2027 at October 1, 2023 was the Secured Overnight Financing Rate (“SOFR”) plus 1.75 % (or 7.17 %) for the SOFR-based option.

The fee payable on committed but unused portions of the Revolver due 2027 was 0.23 % at October 1, 2023.

Total cash interest paid for the third quarter of 2023 and 2022 was $ 8.1 million and $ 3.8 million, respectively, and $ 40.8 million and $ 30.9 million for the comparative nine months periods, respectively.

Lease expense, supplemental cash flow information, and other information related to leases were as follows:

Second Quarter Ended

Six Months Ended

(In thousands) July 2, 2023 June 26, 2022 July 2, 2023 June 26, 2022

Third Quarter Ended

Nine Months Ended

($ in thousands) October 1, 2023 September 25, 2022 October 1, 2023 September 25, 2022

Operating lease cost $ 14,350 $ 12,801 $ 41,602 $ 37,528

4 unchanged sentences

Balance sheet information related to leases was as follows:

(In thousands, except lease term and discount rate) July 2, 2023 December 31, 2022

($ in thousands, except lease term and discount rate) October 1, 2023 December 31, 2022

Operating lease right-of-use assets $ 170,128 $ 163,674

4 unchanged sentences

Weighted average discount rate, operating leases 5.1 % 4.4 %

Maturities of lease liabilities were as follows at July 2, 2023:

Maturities of lease liabilities were as follows at October 1, 2023:

($ in thousands)

2023 (excluding the six months ended July 2, 2023) $ 27,622

2023 (excluding the nine months ended October 1, 2023) $ 14,289

Thereafter 35,136

2 unchanged sentences

Total $ 173,493

As of July 2, 2023, outstanding leases have remaining lease terms ranging from 1 year to 16 years.

The Company has additional operating leases that have not yet commenced as of July 2, 2023 and, therefore, were not included as operating right-of-use assets and corresponding operating lease liabilities on our condensed consolidated balance sheet at July 2, 2023.

These operating leases are anticipated to commence in the third and fourth quarters of fiscal 2023 with lease terms of 5 years to 7 years.

As of October 1, 2023, outstanding leases have remaining lease terms ranging from one year to 16 years.

The Company has additional operating leases that have not yet commenced as of October 1, 2023 and, therefore, were not included as operating right-of-use assets and corresponding operating lease liabilities on our condensed consolidated balance sheet at October 1, 2023.

These operating leases are anticipated to commence in the first quarter of fiscal 2024 with lease terms of five years .

The estimated fair value of these operating lease right-of-use assets and corresponding operating lease liabilities to be recorded on our balance sheet upon lease commencement is approximately $ 2.8 million.

FAIR VALUE MEASUREMENTS

The following table presents fair values of certain assets and liabilities at July 2, 2023 and December 31, 2022:

July 2, 2023 December 31, 2022

The following table presents fair values of certain assets and liabilities at October 1, 2023 and December 31, 2022:

October 1, 2023 December 31, 2022

($ in millions) Level 1 Level 2 Level 3 Level 1 Level 2 Level 3

15 unchanged sentences

$ — $ — $ 8.6 $ — $ — $ 9.2

(1) The carrying amounts of cash equivalents, representing government and other money market funds traded in an active market with relatively short maturities, are reported on the condensed consolidated balance sheet as of July 2, 2023 and December 31, 2022 as a component of "Cash and cash equivalents".

(2) The amounts of these notes listed above are the current fair values for disclosure purposes only, and they are recorded in the Company's condensed consolidated balance sheets as of July 2, 2023 and December 31, 2022 using the interest rate method.

Repayment of the 1.00 % Convertible Notes at maturity is discussed further in Note 8.

(3) The carrying amounts of our Term loan due 2027 and Revolver due 2027 approximate fair value as of July 2, 2023 and December 31, 2022 based upon their terms and conditions in comparison to the terms and conditions of debt instruments with similar terms and conditions available at those dates.

(4) The estimated fair value of the Company's contingent consideration is discussed further in Note 5.

The effective tax rate in the second quarter of 2023 and 2022 was 26.1 % and 26.8 %, respectively, and the effective tax rate for the comparable six month periods was 23.7 % and 25.1 %, respectively.

The first six months of 2023 and 2022 rates include the impact of the recognition of excess tax benefits on share-based compensation that was recorded as a reduction to income tax expense in the amount of $ 1.8 million and $ 4.0 million, respectively.

Cash paid for income taxes, net of refunds, was $ 31.9 million and $ 49.0 million, respectively, in the second quarter and first six months of 2023 and $ 58.1 million and $ 76.5 million, respectively, in the second quarter and first six months of 2022.

(1) The carrying amounts of cash equivalents, representing government and other money market funds traded in an active market with relatively short maturities, are reported on the condensed consolidated balance sheet as of October 1, 2023 and December 31, 2022 as a component of "Cash and cash equivalents".

(2) The amounts of these notes listed above are the current fair values for disclosure purposes only, and they are recorded in the Company's condensed consolidated balance sheets as of October 1, 2023 and December 31, 2022 using the interest rate method.

Repayment of the 1.00 % Convertible Notes at maturity is discussed further in Note 9 "Debt".

(3) The carrying amounts of our Term loan due 2027 and Revolver due 2027 approximate fair value as of October 1, 2023 and December 31, 2022 based upon their terms and conditions in comparison to the terms and conditions of debt instruments with similar terms and conditions available at those dates.

(4) The estimated fair value of the Company's contingent consideration is discussed further in Note 6 "Acquisitions".

The effective tax rate in the third quarter of 2023 and 2022 was 27.0 % and 24.1 %, respectively, and the effective tax rate for the comparable nine months periods was 24.9 % and 24.9 %, respectively.

The first nine months of 2023 and 2022

rates include the impact of the recognition of excess tax benefits on share-based compensation that was recorded as a reduction to income tax expense in the amount of $ 2.3 million and $ 4.0 million, respectively.

Cash paid for income taxes, net of refunds, was $ 16.9 million and $ 65.9 million, respectively, in the third quarter and first nine months of 2023 and $ 38.4 million and $ 114.9 million, respectively, in the third quarter and first nine months of 2022.

SEGMENT INFORMATION

The Company has two reportable segments, Manufacturing and Distribution, which are based on its method of internal reporting, which segregates its businesses based on the manner in which its chief operating decision maker allocates resources, evaluates financial results, and determines compensation.

Financial results for the Company's reportable segments have been prepared using a management approach, which is consistent with the basis and manner in which financial information is evaluated by the Company's Chief Operating Decision Maker (CODM) in allocating resources and in assessing performance.

The Company has two reportable segments, Manufacturing and Distribution.

The operating results of the operating segments are regularly reviewed by the Company’s CODM, the Chief Executive Officer, to assess the performance of the individual operating segments and to make decisions about resources to be allocated to the operating segments.

The tables below present information about the sales and operating income of those segments.

Second Quarter Ended July 2, 2023

Third Quarter Ended October 1, 2023

($ in thousands) Manufacturing Distribution Total

3 unchanged sentences

Operating income $ 80,777 $ 24,026 $ 104,803

Second Quarter Ended June 26, 2022

Third Quarter Ended September 25, 2022

($ in thousands) Manufacturing Distribution Total

3 unchanged sentences

Operating income $ 109,462 $ 27,228 $ 136,690

Six Months Ended July 2, 2023

Nine Months Ended October 1, 2023

($ in thousands) Manufacturing Distribution Total

3 unchanged sentences

Operating income $ 263,146 $ 68,172 $ 331,318

Six Months Ended June 26, 2022

Nine Months Ended September 25, 2022

($ in thousands) Manufacturing Distribution Total

4 unchanged sentences

The following table presents a reconciliation of segment operating income to consolidated operating income:

Second Quarter Ended Six Months Ended

(In thousands) July 2, 2023 June 26, 2022 July 2, 2023 June 26, 2022

Third Quarter Ended Nine Months Ended

($ in thousands) October 1, 2023 September 25, 2022 October 1, 2023 September 25, 2022

Operating income for reportable segments $ 104,803 $ 136,690 $ 331,318 $ 577,526

5 unchanged sentences

In December 2022, the Board authorized an increase in the amount of the Company's common stock that may be acquired over the next 24 months under the current stock repurchase program to $ 100 million, including the $ 38.2 million remaining under the previous authorization.

Approximately $ 84.6 million remains in the amount of the Company's common stock that may be acquired under the current stock repurchase program as of July 2, 2023.

Approximately $ 84.1 million remains in the amount of the Company's common stock that may be acquired under the current stock repurchase program as of October 1, 2023.

Under the stock repurchase plan, the Company made repurchases of common stock as follows for the respective periods:

Second Quarter Ended

Six Months Ended

July 2, 2023 June 26, 2022 July 2, 2023 June 26, 2022

Third Quarter Ended

Nine Months Ended

October 1, 2023 September 25, 2022 October 1, 2023 September 25, 2022

Shares repurchased 6,184 154,388 185,993 808,642

8 unchanged sentences

In the Company's Form 10-K for the year ended December 31, 2022, the Company described the current status of litigation concerning the Lusher Site Remediation Group.

In early July 2023, the court granted the Company’s Rule 54(b) Motion for Final Judgment on previously dismissed claims and granted the Company’s Motion to Dismiss the plaintiff’s remaining claims against the defendants, without prejudice (the Company’s Motion to Dismiss having been joined by the remaining defendants in the litigation.) The sole issue pending in the litigation for the Court’s determination is the plaintiff’s motion to bar contribution claims.

In early July 2023, the court granted the Company’s Rule 54(b) Motion for Final Judgment on previously dismissed claims and granted the Company’s Motion to Dismiss the plaintiff’s remaining claims against the defendants, without prejudice (the Company’s Motion to Dismiss having been joined by the remaining defendants in the litigation.) The only remaining issue pending in the litigation for the Court’s determination is the plaintiff’s motion to bar contribution claims.

The Company has also been named as a potentially responsible party for the related Lusher Street Groundwater Contamination Superfund Site (the "Superfund Site") by the U.S.

Environmental Protection Agency (the "EPA").

The proceedings remain subject to a court-approved stay, granted in September 2021, pending negotiations with the EPA.

The Company sold certain parcels of real property that the EPA contends are connected to the Superfund Site (the "Divested Properties") in January 2022 for a pretax gain on disposal of $ 5.5 million that is included in Selling, general and administrative expenses in the Company's condensed consolidated

statements of income for the first six months of 2022.

The Company sold certain parcels of real property that the EPA contends are connected to the Superfund Site (the "Divested Properties") in January 2022 for a pretax gain on disposal of $ 5.5 million that is included in selling, general and administrative expenses in the Company's condensed consolidated statements of income for the first nine months of 2022.

The purchaser agreed to indemnify, defend and hold the Company harmless for all liability and exposure, both private and to all EPA claims, concerning and relating to the Divested Properties.

The Company does not currently believe that the litigation or the Superfund Site matter are likely to have a material adverse impact on its financial condition, results of operations, or cash flows.

The Company does not currently believe that the litigation or the Superfund Site matter are likely to

have a material adverse impact on its financial condition, results of operations, or cash flows.

However, any litigation is inherently uncertain, the EPA has yet to select a final remedy for the Superfund Site, and any judgment or injunctive relief entered against us or any adverse settlement could materially and adversely impact our business, results of operations, financial condition, and prospects.

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 1. Financial Statements