Item 7. Management’s Discussion and Analysis
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the Company’s Consolidated Financial Statements and Notes thereto included in Item 8 of this Report. In addition, this MD&A contains certain statements relating to future results that are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. See “Information Concerning Forward-Looking Statements” on page 3 of this Report.
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EXECUTIVE SUMMARY
Overview of Markets and Related Industry Performance
Recreational Vehicle ("RV") Industry
The RV industry is our primary market and comprised 43% of the Company’s consolidated net sales in 2023 . Net sales to the RV industry decreased 42% in 2023 compared to 2022. Following a dealer inventory restocking in the first half of 2022, OEMs dramatically reduced production in the second half of 2022 and throughout 2023 as retail demand decreased and dealer inventory needs decreased, with the OEMs demonstrating operating discipline to maintain a balanced inventory channel for the long-term health and stability of the industry.
According to the RV Industry Association (“RVIA”), wholesale industry unit shipments totaled approximately 313,200 units in 2023, a decrease of 37% compared to approximately 493,300 units in 2022. RV industry retail unit sales totaled approximately 377,500 units in 2023, a decrease of 15% compared to 2022 retail unit sales of approximately 446,300 units according to Statistical Surveys, Inc. ("SSI").
Marine Industry
Net sales to the marine industry, which represented approximately 27% of the Company's consolidated net sales in 2023, decreased 11% in 2023 compared to 2022. Our marine revenue is generally correlated to marine wholesale powerboat unit shipments, which decreased 2% to approximately 192,300 units in 2023 compared to approximately 196,500 units in 2022, according to Company estimates based on data published by the National Marine Manufacturers Association ("NMMA"). Estimated marine retail powerboat shipments totaled approximately 178,100 units in 2023 , a decrease of 5% compared to 2022 retail powerboat shipments of approximately 188,100 units, according to SSI as economic uncertainty and higher interest rates impacted demand.
Manufactured Housing ("MH") Industry
Net sales to the MH industry, which represented 16% of the Company’s consolidated net sales in 2023 , decreased 19% in 2023 compared to 2022. MH sales are generally correlated to MH industry wholesale unit shipments. Based on industry data from the Manufactured Housing Institute, MH wholesale industry unit shipments totaled 89,200 units in 2023 , a decrease of 21% compared to 2022 MH wholesale industry unit shipments of 112,900 units. Demand for MH units in 2023 was impacted by a decrease in housing affordability caused by elevated interest rates and higher raw material costs.
Industrial Market
The industrial market is comprised primarily of the solid surface countertop industry, kitchen cabinet industry, high-rise, hospitality, retail and commercial fixtures market, office and household furniture market and regional distributors. Net sales to this market represented 14% of our consolidated net sales in 2023 , decreasing 14% in 2023 compared to 2022. Overall, our revenues in these markets are focused on the residential housing, hospitality, high-rise housing and office, commercial construction and institutional furniture markets. We estimate that approximately 70% to 80% of our industrial business is directly tied to the residential housing market, with the remaining industrial sales directly tied to the non-residential and commercial markets.
Combined new housing starts decreased 9% in 2023 compared to 2022, with single family housing starts decreasing 6% and multifamily residential starts decreasing 14% for the same period. Our industrial products are generally among the last components installed in new unit construction and as such our related sales typically trail new housing starts by four to six months.
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CONSOLIDATED OPERATING RESULTS
The following table sets forth the percentage relationship to net sales of certain items on the Company’s consolidated statements of income for the years ended December 31, 2023, 2022 and 2021.
Year Ended December 31,
($ in thousands) 2023 2022 2021
Net sales $ 3,468,045 100.0 % $ 4,881,872 100.0 % $ 4,078,092 100.0 %
Cost of goods sold 2,685,812 77.4 3,821,934 78.3 3,276,898 80.4
Gross profit 782,233 22.6 1,059,938 21.7 801,194 19.6
Warehouse and delivery expenses 143,921 4.1 163,026 3.3 139,606 3.4
Selling, general and administrative expenses 299,418 8.6 327,513 6.7 253,547 6.2
Amortization of intangible assets 78,694 2.3 73,229 1.5 56,329 1.4
Operating income 260,200 7.5 496,170 10.2 351,712 8.6
Interest expense, net 68,942 2.0 60,760 1.2 57,890 1.4
Income taxes 48,361 1.5 107,214 2.2 68,907 1.7
Net income $ 142,897 4.1 $ 328,196 6.7 $ 224,915 5.5
Year Ended December 31, 2023 Compared to 2022
Net Sales. Net sales in 2023 decreased approximately $1.41 billion, or 29%, to $3.47 billion from $4.88 billion in 2022. The decrease was attributable to a 42% decrease in net sales to our RV end market, a 11% decrease in net sales to our marine end market, a 19% decrease in net sales to our MH end market, and a 14% decrease in net sales to our industrial end market.
In 2023 and 2022 , net sales attributable to acquisitions completed in each of those years was $17.7 million and $121.8 million , respectively.
The Company’s RV content per wholesale unit for 2023 decreased 9% to $4,800 from $5,257 in 2022. The Company's marine powerboat content per wholesale unit for 2023 decreased 5% to $4,803 from $5,032 in 2022. The Company's MH content per wholesale unit for 2023 increased 2% to $6,372 in 2023 from $6,243 in 2022.
Cost of Goods Sold. Cost of goods sold decreased $1.14 billion, or 30%, to $2.69 billion in 2023 from $3.82 billion in 2022. As a percentage of net sales, cost of goods sold decreased 90 basis points during 2023 to 77.4% from 78.3% in 2022.
Cost of goods sold as a percentage of net sales decreased for 2023 compared to 2022 primarily as a result of (i) continued cost reduction and automation initiatives we deployed throughout 2022 and 2023 that positively impacted overall costs, (ii) improved labor efficiencies as a result of investment in human capital and improved retention rates, (iii) synergies and different cost profiles from acquisitions completed in 2023 and 2022 and (iv) changes in certain commodity prices, partially offset by reduced sales volumes resulting in less favorable fixed cost absorption when compared to the prior year periods. For 2023, these factors contributed to a 50-basis point decrease in labor as a percentage of net sales and a 330-basis point decrease in materials cost as a percentage of net sales, partially offset by a 300-basis point increase in overhead as a percentage of net sales due to lower sales volumes. In general, the Company's cost of goods sold percentage can be impacted from period-to-period by demand changes in certain market sectors that can result in fluctuating costs of certain raw materials and commodity-based components that are utilized in production.
Gross Profit. Gross profit decreased $277.7 million or 26%, to $782.2 million in 2023 from $1,059.9 million in 2022. As a percentage of net sales, gross profit increased to 22.6% in 2023 from 21.7% in 2022. The increase in gross profit as a percentage of net sales in 2023 compared to 2022 reflects the impact of the factors discussed above under “Cost of Goods Sold”.
Economic or industry-wide factors affecting the profitability of our RV, marine, MH and industrial businesses include the costs of commodities and supply chain constraints and the labor used to manufacture our products, the competitive
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environment and the impact of different gross margin profiles of acquired companies, all of which can cause gross margins to fluctuate from quarter-to-quarter and year-to-year.
Warehouse and Delivery Expenses. Warehouse and delivery expenses decreased $19.1 million, or 12%, to $143.9 million in 2023 from $163.0 million in 2022. As a percentage of net sales, warehouse and delivery expenses were 4.1% in 2023 and 3.3% in 2022. The decrease in warehouse and delivery expenses is attributable to the decrease in sales, and the increase as a percentage of net sales is primarily attributed to the fixed nature of certain expenses such as personnel wages, building charges, fleet expense, insurance, and depreciation among others as well as a decrease in load efficiency.
Selling, General and Administrative ("SG&A") Expenses. SG&A expenses decreased $28.1 million, or 9%, to $299.4 million in 2023 from $327.5 million in 2022. As a percentage of net sales, SG&A expenses were 8.6% in 2023 and 6.7% in 2022.
The decrease in SG&A expenses in 2023 compared to 2022 is primarily due to lower variable expenses, such as commissions, associated with the decrease in net sales. The increase in SG&A expenses as a percentage of net sales is primarily a result of the fixed nature of certain other expenses such as wages, payroll taxes, stock compensation, and insurance, as well as an increase in software and technology expenses. Additionally, certain 2022 and 2023 acquisitions operate with comparatively higher SG&A as a percentage of sales when compared to the consolidated percentage.
Amortization of Intangible Assets. Amortization of intangible assets increased $5.5 million, or 8%, in 2023 compared to 2022. The increase in 2023 compared to 2022 reflects the impact of intangible assets of businesses acquired in 2023 and 2022.
Operating Income. Operating income decreased $236.0 million, or 48%, to $260.2 million in 2023 from $496.2 million in 2022. Operating income in 2023 and 2022 included $1.0 million and $19.4 million, respectively, from the businesses acquired in each respective year. Operating income as a percentage of net sales decreased 270 basis points to 7.5% in 2023 from 10.2% in 2022. The decrease in operating income and operating margin is primarily attributable to lower net sales and the items discussed above.
Interest Expense, Net. Interest expense, net, increased $8.2 million, or 13%, to $68.9 million in 2023 from $60.8 million in 2022. The increase in interest expense is primarily attributable to the increase in interest rates on our debt subject to variable interest rates and the repayment of our 1.00% Convertible Senior Notes due 2023 (the “1.00% Convertible Notes”) in February 2023, with borrowings under our revolving credit facility (the "Revolver due 2027") which has a comparatively higher interest rate, partially offset by lower average debt levels compared to 2022.
Income Taxes. Income tax expense decreased $58.9 million, or 55%, to $48.4 million in 2023 from $107.2 million in 2022 as a result of the decrease in pre-tax income and an increase in the effective tax rate. For 2023, the effective tax rate was 25.3% compared to 24.6% in 2022. The increase in the effective tax rate in 2023 was mostly attributable to an increased impact from stock compensation Section 162(m) permanent addback.
See our Form 10-K for the year ended December 31, 2022 for a discussion of our consolidated operating results for the year ended December 31, 2022 compared to 2021.
Use of Financial Metrics
Our MD&A includes financial metrics, such as RV, marine and MH content per unit, which we believe are important measures of the Company's business performance. Content per unit metrics are generally calculated using our market sales divided by Company estimates of industry unit volume, which are derived from third-party industry data. These metrics should not be considered alternatives to accounting principles generally accepted in the United States of America ("U.S. GAAP"). Our computations of content per unit may differ from similarly titled measures used by others. These metrics should not be considered in isolation or as substitutes for an analysis of our results as reported under U.S. GAAP.
BUSINESS SEGMENTS
The Company's reportable segments, manufacturing and distribution, are based on its method of internal reporting. The Company regularly evaluates the performance of the manufacturing and distribution segments and allocates resources to them based on a variety of indicators including net sales and operating income. The Company does not measure profitability at the end market (RV, marine, MH and industrial) level.
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• Manufacturing – This segment includes the following products: laminated products that are utilized to produce furniture, shelving, walls, countertops and cabinet products; cabinet doors; fiberglass bath fixtures and tile systems; hardwood furniture; vinyl printing; RV and marine furniture; audio systems and accessories, including amplifiers, tower speakers, soundbars, and subwoofers; decorative vinyl and paper laminated panels; solid surface, granite, and quartz countertop fabrication; RV painting; fabricated aluminum products; fiberglass and plastic components; fiberglass bath fixtures and tile systems; softwoods lumber; custom cabinetry; polymer-based and other flooring; electrical systems components including instrument and dash panels; wrapped vinyl, paper and hardwood profile mouldings; interior passage doors; air handling products; slide-out trim and fascia; thermoformed shower surrounds; specialty bath and closet building products; fiberglass and plastic helm systems and components products; treated, untreated and laminated plywood; wiring and wire harnesses; adhesives and sealants; boat towers, tops, trailers and frames; marine hardware and accessories; protective covers for boats, RVs, aircraft, and military and industrial equipment; aluminum and plastic fuel tanks; CNC molds and composite parts; slotwall panels and components; and other products.
• Distribution – This segment includes the distribution of pre-finished wall and ceiling panels; drywall and drywall finishing products; electronics and audio systems components; appliances; marine accessories and components; wiring, electrical and plumbing products; fiber reinforced polyester products; cement siding; raw and processed lumber; interior passage doors; roofing products; laminate and ceramic flooring; tile; shower doors; furniture; fireplaces and surrounds; interior and exterior lighting products; and other miscellaneous products in addition to providing transportation and logistics services.
Net sales pertaining to the manufacturing and distribution segments as stated in the table below and in the following discussions include intersegment sales. Gross profit includes the impact of intersegment operating activity.
The table below presents information about the net sales, gross profit, and operating income of the Company’s segments. Reconciliations of the amounts below to consolidated totals are presented in Note 16 "Segment Information" of the Notes to Consolidated Financial Statements included elsewhere in this Form 10-K.
Year Ended December 31,
($ in thousands) 2023 2022 2021
Sales
Manufacturing $ 2,653,257 $ 3,681,412 $ 3,002,107
Distribution $ 889,408 $ 1,287,597 $ 1,154,654
Gross Profit
Manufacturing $ 577,284 $ 818,960 $ 598,942
Distribution $ 195,506 $ 254,886 $ 211,241
Operating Income
Manufacturing $ 321,096 $ 531,547 $ 379,885
Distribution $ 90,095 $ 136,889 $ 106,241
Year Ended December 31, 2023 Compared to 2022
Manufacturing
Net Sales. Sales decreased $1.03 billion, or 28%, to $2.65 billion in 2023 from $3.68 billion in 2022. This segment accounted for approximately 75% of the Company’s consolidated net sales in 2023 compared to approximately 74% of the Company's consolidated net sales in 2022. The sales decrease reflects decreased net sales across all of our end markets.
In 2023 and 2022, net sales attributable to acquisitions completed in each of those periods was approximately $3.6 million and $121.3 million, respectively.
Gross Profit. Gross profit decreased $241.7 million, or 30%, to $577.3 million in 2023 from $819.0 million in 2022. As a percentage of net sales, gross profit was 21.8% in 2023 compared to 22.2% in 2022.
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Gross profit margin decreased in 2023 compared to 2022 due to increases in labor and manufacturing overhead expense as a percentage of net sales primarily due to reduced sales volumes, partially offset by an improvement in material costs as a percentage of net sales.
Operating Income. Operating income decreased $210.4 million, or 40%, to $321.1 million in 2023 from $531.5 million in 2022. Operating income for the manufacturing segment attributable to acquisitions completed in 2023 and 2022 was approximately $(0.6) million and $19.4 million, respectively. The decrease in operating income primarily reflects the decrease in gross profit mentioned above.
Distribution
Net Sales. Sales decreased $398.2 million, or 31%, to $889.4 million in 2023 from $1,287.6 million in 2022. This segment accounted for approximately 25% of the Company’s consolidated net sales for 2023 compared to 26% of the Company's consolidated net sales in 2022. The decrease in sales in 2023 is attributed to decreased net sales across all of our end markets. In 2023 and 2022, net sales attributable to acquisitions completed in each of those periods was approximately $14.1 million and $0.5 million, respectively.
Gross Profit. Gross profit decreased $59.4 million, or 23%, to $195.5 million in 2023 from $254.9 million in 2022. As a percentage of net sales, gross profit was 22.0% in 2023 compared to 19.8% in 2022. The increase in gross profit as a percentage of net sales for 2023 is primarily attributed to decreases in labor as a percentage of net sales partly offset by increases in material costs as a percentage of net sales.
Operating Income. Operating income in 2023 decreased $46.8 million, or 34%, to $90.1 million from $136.9 million in 2022. Operating income for the Distribution segment attributable to acquisitions completed in 2023 and 2022 was immaterial. The decrease in operating income in 2023 primarily reflects the items discussed above.
Unallocated Corporate Expenses
As presented in Note 16 "Segment Information" of the Notes to Consolidated Financial Statements included elsewhere in this Form 10-K, unallocated corporate expenses in 2023 decreased $26.7 million, or 27%, to $72.3 million from $99.0 million in 2022. The decrease in 2023 was mostly attributed to decreases in incentive compensation, wages, professional fees and amortization of inventory step-up adjustments.
LIQUIDITY AND CAPITAL RESOURCES
Our liquidity as of December 31, 2023 consisted of cash and cash equivalents of $11.4 million and $768.1 million of availability under our credit facility. The Company's primary sources of liquidity are cash flows from operations, which includes selling its products and collecting receivables, available cash reserves and borrowing capacity available under the 2021 Credit Facility as discussed in Note 7 "Debt" of the Notes to Consolidated Financial Statements.
As of December 31, 2023, the Company's existing cash and cash equivalents, cash generated from operations, and available borrowings under its 2021 Credit Facility are expected to be sufficient to meet anticipated cash needs for working capital and capital expenditures for at least the next 12 months, exclusive of any acquisitions, based on its current cash flow budgets and forecast of short-term and long-term liquidity needs.
Principal uses of cash are to support working capital demands, meet debt service requirements and support the Company's capital allocation strategy, which includes acquisitions, capital expenditures, dividends and repurchases of the Company’s common stock, among others.
Working capital requirements vary from period to period depending on manufacturing volumes primarily related to the RV, marine, MH and industrial markets we serve, the timing of deliveries, and the payment cycles of customers. In the event that operating cash flow is inadequate and one or more of the Company's capital resources were to become unavailable, the Company would seek to revise its operating strategies accordingly. The Company will continue to assess its liquidity position and potential sources of supplemental liquidity in view of operating performance, current economic and capital market conditions, and other relevant circumstances.
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In February 2023, the Company utilized available borrowing capacity under the Revolver due 2027 and cash on hand to satisfy its repayment obligation at maturity for the 1.00% Convertible Notes. See Note 7 "Debt" of the Notes to Consolidated Financial Statements included elsewhere in this Form 10-K for further discussion of the 1.00% Convertible Notes. Throughout the course of the year, the Company made payments on the Revolver due 2027, with the balance repaid in full as of December 2023.
In January 2024, the Company utilized available borrowing capacity under the Revolver due 2027 and cash on hand to fund its acquisition of Sportech, as discussed in Note 17 "Subsequent Events" of the Notes to Consolidated Financial Statements.
As of and for the reporting period ended December 31, 2023, the Company was in compliance with its financial covenants as required under the terms of its 2021 Credit Agreement. The required maximum consolidated secured net leverage ratio and the required minimum consolidated fixed charge coverage ratio, as such ratios are defined in the 2021 Credit Agreement, compared to the actual amounts as of December 31, 2023 and for the fiscal period then ended are as follows:
Required Actual
Consolidated secured net leverage ratio (12-month period) 2.75 0.27
Consolidated fixed charge coverage ratio (12-month period) 1.50 3.01
In addition, as of December 31, 2023, the Company's consolidated total net leverage ratio (12-month period) was 2.38. While this ratio was a covenant under the Company’s previous credit agreement and is not a covenant under the 2021 Credit Agreement, it is used in the determination of the applicable borrowing margin under the 2021 Credit Agreement.
Cash Flows
Year Ended December 31, 2023 Compared to 2022
Operating Activities
Cash flows from operating activities are one of the Company's primary sources of liquidity, representing the net income the Company earned in the reported periods, adjusted for non-cash items and changes in operating assets and liabilities.
Net cash provided by operating activities decreased $3.0 million, or 1%, to $408.7 million in 2023 from $411.7 million in 2022 primarily due to a decrease in net income of $185.3 million, substantially offset by an increase in depreciation and amortization of $13.7 million and a $98.9 million source of cash from operating assets and liabilities compared to a $60.7 million use of cash from operating assets and liabilities in the prior period.
Investing Activities
Net cash used in investing activities decreased $235.0 million, or 73%, to $86.5 million in 2023 from $321.5 million in 2022 primarily due to a decrease in cash used in business acquisitions of $223.0 million and a decrease in cash used for capital expenditures of $20.9 million, partly offset by a $6.2 million decrease in cash received on disposals of property, plant, and equipment.
Financing Activities
Net cash flows used in financing activities increased $143.3 million to $333.6 million in 2023 compared to $190.3 million in 2022. The increase in cash flows used in financing activities was primarily due to the $172.5 million repayment of the 1.00% Convertible Notes and $25.6 million in net repayments on the Revolver due 2027, partially offset by a $58.3 million reduction in stock repurchases in 2023 compared to 2022.
See our Form 10-K for the year ended December 31, 2022 for a discussion of cash flows for the year ended December 31, 2022 compared to 2021.
Off-Balance Sheet Arrangements
None.
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CRITICAL ACCOUNTING POLICIES
The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The SEC has defined a company’s critical accounting policies as those that are most important to the portrayal of its financial condition and results of operations, and which require the Company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Although management believes that its estimates and assumptions are reasonable, they are based upon information available when they are made. Actual results may differ materially from these estimates under different assumptions or conditions. The Company has identified the following critical accounting policies and estimates:
Goodwill and Other Intangible Assets. The Company’s acquisitions include purchased goodwill and other intangible assets. Goodwill represents the excess of cost over the fair value of the net assets acquired. Other intangible assets acquired are classified as customer relationships, non-compete agreements, patents and trademarks.
Goodwill and indefinite-lived intangible assets, representing acquired trademarks, are not amortized but are subject to an annual (or under certain circumstances more frequent) impairment test in the fourth quarter based on their estimated fair value. We test more frequently, if there are indicators of impairment, or whenever such circumstances suggest that the carrying value of goodwill or trademarks may not be recoverable. These indicators include a sustained material decline in our share price and market capitalization, a decline in expected future cash flows, or a material adverse change in the business climate. A material adverse change in the business climate could result in a material loss of market share or the inability to achieve previously projected revenue growth.
Impairment reviews of goodwill are performed at the reporting unit level. The Company’s reporting units are defined as one level below our operating segments, Manufacturing and Distribution, which are the same as our reportable segments. In evaluating goodwill for impairment, either a qualitative or quantitative assessment is performed. If the qualitative assessment indicates it is more likely than not that the fair value of the reporting unit is less than its carrying value, the Company performs a quantitative assessment. When estimating reporting unit fair value with the quantitative assessment, the Company uses a combination of market and income-based methodologies. The market approach includes a comparison of the multiple of a reporting unit's carrying value to its earnings before interest, taxes, depreciation and amortization with the multiples of similar businesses or guideline companies whose securities are actively traded in the public markets. When calculating the present value of future cash flows under the income approach, the Company takes into consideration multiple variables, including forecasted sales volumes and operating income, current industry and economic conditions, and historical results. The income approach fair value estimate also includes estimates of long-term growth rates and discount rates that are commensurate with the risks and uncertainty inherent in the respective reporting units and internally-developed forecasts.
Impairment reviews of indefinite-lived intangible assets (trademarks) consist of a comparison of the fair value of the trademark to its carrying value. Fair value is measured using a relief-from-royalty approach, a form of discounted cash flow method. Estimated royalty rates applied to projected revenues are based on comparable industry studies and consideration of operating margins. Discount rates are derived in a manner similar to what is done in testing goodwill for impairment.
Based on the results of the Company's analyses, the estimated fair value of each of the Company's reporting units and trademarks was determined to exceed the carrying value for each of the years ended December 31, 2023, 2022 and 2021 and so no impairments were recognized. Further, based on the results of the impairment analyses, none of the Company’s reporting units or trademarks were at risk of failing the impairment assessments discussed above that would have a material effect on the Company’s Consolidated Financial Statements for any period presented.
Business Combinations. From time to time, we may enter into business combinations. We recognize the identifiable assets acquired and the liabilities assumed at their fair values as of the date of acquisition. We measure goodwill as the excess of consideration transferred, which we also measure at fair value, over the net of the acquisition date fair values of the identifiable assets acquired and liabilities assumed. The acquisition method of accounting requires us to make significant estimates and assumptions regarding the fair values of the elements of a business combination as of the date of acquisition, including the fair values of property, plant and equipment, identifiable intangible assets, contingent consideration and other financial assets and liabilities. Significant estimates and assumptions include subjective and/or complex judgments regarding items such as discount rates, customer attrition rates, royalty rates, and other factors, including estimated future cash flows that we expect to generate from the acquired assets.
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The acquisition method of accounting also requires us to refine these estimates over a measurement period not to exceed one year to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. If we are required to adjust provisional amounts that we have recorded for the fair values of assets and liabilities in connection with acquisitions, these adjustments could have a material impact on our financial condition and results of operations. No changes in the year ended December 31, 2023 to provisional fair value estimates of assets acquired and liabilities assumed in acquisitions were material. If the subsequent actual results and updated projections of the underlying business activity change compared with the assumptions and projections used to develop the acquisition date fair value estimates, we could record future impairment charges. In addition, we estimate the economic lives of certain acquired assets and these lives are used to calculate depreciation and amortization expense. If our estimates of the economic lives change, depreciation or amortization expenses could be increased or decreased, or the acquired assets could be impaired.