What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-10-28 compared with 2021-07-29 · 98 added, 23 removed, 324 unchanged (27% of the section changed)

3 unchanged sentences

(In thousands, except per share data)

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

3 unchanged sentences

Selling and administrative expenses 206,023 180,465 591,223 495,186

Impairment of goodwill and other assets — — — 6,944

(Recovery) impairment of goodwill and other assets ( 1,400 ) — ( 1,400 ) 6,944

Operating income 237,276 148,233 704,893 389,677

15 unchanged sentences

(In thousands)

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

Net income $ 184,665 $ 119,098 $ 543,015 $ 307,565

Other comprehensive income (loss):

Foreign currency translation gains (losses) 1,302 2,134 34 ( 3,296 )

Other comprehensive (loss) income:

Foreign currency translation (losses) gains ( 3,555 ) 2,976 ( 3,522 ) ( 320 )

Change in unrealized gains (losses) on interest rate swaps, net of change in taxes of $( 491 ), $( 51 ), $( 2,818 ), and $ 3,641

1,473 154 8,453 ( 10,923 )

Total other comprehensive income (loss) ( 855 ) ( 433 ) 7,014 ( 14,373 )

Total other comprehensive (loss) income ( 2,082 ) 3,130 4,931 ( 11,243 )

Comprehensive income $ 182,583 $ 122,228 $ 547,946 $ 296,322

3 unchanged sentences

(In thousands, except share data)

June 30, June 30, December 31,

September 30, September 30, December 31,

2021 2020 2020 (1)

30 unchanged sentences

40,079,584 , 40,153,287 and 40,232,210 shares issued and

outstanding at June 30, 2021, June 30, 2020 and

outstanding at September 30, 2021, September 30, 2020 and

December 31, 2020, respectively

9 unchanged sentences

(In thousands)

Six Months Ended

Nine Months Ended

September 30,

Operating activities

73 unchanged sentences

Balance at June 30, 2021 40,131 40 535,046 346,667 ( 7,005 ) 874,748

— — — 184,665 — 184,665

Foreign currency translation

— — — — ( 3,555 ) ( 3,555 )

Interest rate swaps, net of the change in taxes of $( 491 )

— — — — 1,473 1,473

Repurchases of common stock, net of retirements

( 100 ) — — ( 47,840 ) — ( 47,840 )

Share-based compensation

— — 4,206 — — 4,206

Issuance of stock under share-based compensation plans

49 — 3,606 — — 3,606

Declaration of cash dividends

— — — ( 32,091 ) — ( 32,091 )

Balance at September 30, 2021 40,080 $ 40 $ 542,858 $ 451,401 $ ( 9,087 ) $ 985,212

Common Stock Additional

31 unchanged sentences

Balance at June 30, 2020 40,042 40 503,271 8,212 ( 24,732 ) 486,791

— — — 119,098 — 119,098

Foreign currency translation

— — — — 2,976 2,976

Interest rate swaps, net of the change in taxes of $( 51 )

— — — — 154 154

Repurchases of common stock, net of retirements

( 20 ) — — ( 5,990 ) — ( 5,990 )

Share-based compensation

— — 3,874 — — 3,874

Issuance of stock under share-based compensation plans

131 — 5,885 — — 5,885

Declaration of cash dividends

— — — ( 23,287 ) — ( 23,287 )

Balance at September 30, 2020 40,153 $ 40 $ 513,030 $ 98,033 $ ( 21,602 ) $ 589,501

The accompanying Notes are an integral part of the Consolidated Financial Statements.

9 unchanged sentences

You should read the interim Consolidated Financial Statements in conjunction with the Consolidated Financial Statements and accompanying notes in our 2020 Annual Report on Form 10-K.

The results for our three and six month periods ended June 30, 2021 are not necessarily indicative of the expected results for our fiscal year ending December 31, 2021.

The results for our three and nine month periods ended September 30, 2021 are not necessarily indicative of the expected results for our fiscal year ending December 31, 2021.

Newly Adopted Accounting Pronouncements

5 unchanged sentences

To the extent realized tax deductions exceed the amount of previously recognized deferred tax benefits related to share-based compensation, we record an excess tax benefit.

We record all excess tax benefits as a component of income tax benefit or expense on the Consolidated Statements of Income in the period in which stock options are exercised or restrictions on awards lapse.

We recorded excess tax benefits of $ 7.7 million in the second quarter of 2021 compared to $ 6.2 million in the second quarter of 2020 and $ 11.7 million in the six months ended June 30, 2021 compared to $ 14.2 million in the six months ended June 30, 2020.

We recorded excess tax benefits of $ 4.2 million in the third quarter of 2021 compared to $ 8.5 million in the third quarter of 2020 and $ 15.9 million in the nine months ended September 30, 2021 compared to $ 22.6 million in the nine months ended September 30, 2020.

Retained Earnings

We account for the retirement of treasury shares as a reduction of Retained earnings.

As of June 30, 2021, the Retained earnings on our Consolidated Balance Sheets reflects cumulative net income, the cumulative impact of adjustments for changes in accounting pronouncements, treasury share retirements since the inception of our share repurchase programs of $ 1.6 billion and cumulative dividends of $ 726.2 million.

As of September 30, 2021, the Retained earnings on our Consolidated Balance Sheets reflects cumulative net income, the cumulative impact of adjustments for changes in accounting pronouncements, treasury share retirements since the inception of our share repurchase programs of $ 1.7 billion and cumulative dividends of $ 758.3 million.

Accumulated Other Comprehensive Loss

The table below presents the components of our Accumulated other comprehensive loss balance (in thousands):

June 30, December 31,

September 30, December 31,

2021 2020 2020

23 unchanged sentences

The table below presents the computation of EPS, including the reconciliation of basic and diluted weighted average shares outstanding (in thousands, except EPS):

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

30 unchanged sentences

The table below presents the estimated fair values of our interest rate swap contracts, our forward-starting interest rate swap contracts and our contingent consideration liabilities (in thousands):

Fair Value at June 30,

Fair Value at September 30,

Unrealized gains on interest rate swaps $ 5,488 $ —

18 unchanged sentences

Interest rate swap 3 February 5, 2020 February 26, 2021 February 28, 2025 $ 150.0 1.3800 %

For the interest rate swap contracts in effect at June 30, 2021, a portion of the change in the estimated fair value between periods relates to future interest expense.

For the interest rate swap contracts in effect at September 30, 2021, a portion of the change in the estimated fair value between periods relates to future interest expense.

Recognition of the change in fair value between periods attributable to accrued interest is reclassified from Accumulated other comprehensive loss on the Consolidated Balance Sheets to Interest and other non-operating expenses, net on the Consolidated Statements of Income.

This amount was not material in the six-month period ended June 30, 2021.

This amount was not material in the nine-month period ended September 30, 2021.

We have entered into forward-starting interest rate swap contracts to extend the hedged period for future interest payments on our variable rate borrowings.

13 unchanged sentences

In addition to our assets and liabilities that we measure at fair value on a recurring basis, our assets and liabilities are also subject to nonrecurring fair value measurements.

Generally, our assets, including long-lived assets, goodwill and intangible assets, are recorded at fair value on a nonrecurring basis as a result of impairment charges.

In the six months ended June 30, 2021, we did not record any significant nonrecurring fair value measurements for assets or liabilities in periods subsequent to their initial recognition.

Generally, our assets, including long-lived assets, goodwill and intangible assets, are recorded at fair value on a nonrecurring basis as a result of impairment charges or business combinations.

In the nine months ended September 30, 2021, we did not record any significant nonrecurring fair value measurements for assets or liabilities in periods subsequent to their initial recognition.

The carrying values of cash, receivables, accounts payable and accrued liabilities approximate fair value due to the short maturity of those instruments.

3 unchanged sentences

The table below presents the components of our debt (in thousands):

September 30,

Variable rate debt

10 unchanged sentences

Total debt $ 362,819 $ 339,934

Revolving Credit Facility

On September 27, 2021, we entered into the Second Amended and Restated Credit Agreement (the “Credit Agreement”) among us, as U.S.

Borrower, SCP Distributors Canada Inc., as Canadian Borrower, SCP International, Inc., as Euro Borrower, Wells Fargo Bank, National Association, as Administrative Agent (the “Agent”), and certain other lenders party thereto.

The Credit Agreement amended and restated the predecessor senior credit facility (as amended, the “Credit Facility”) principally by increasing the total borrowing capacity from $750.0 million to $1.0 billion through the addition of a delayed-draw term loan facility of $250.0 million.

Under this term loan facility, we may draw term loans at any time prior to March 25, 2022.

Any such term loans would require quarterly amortization payments aggregating to 20% of the original principal amount of the loan during the third, fourth and fifth years of the loan, with all remaining principal due on September 25, 2026.

All other terms of any such term loans would be substantially similar to those governing revolving credit loans under the Credit Agreement.

In addition, the Credit Agreement further amended and restated the Credit Facility in the following ways:

• extending the maturity of the Credit Facility from September 29, 2022 to September 25, 2026;

• making available lower interest rates;

• increasing the amount of incremental facility commitments that we can request from $75.0 million to $250.0 million;

• providing additional capacity under certain negative covenants related to indebtedness, liens, investments, acquisitions, share repurchases and dividends.

All obligations under the Credit Agreement continue to be guaranteed on an unsecured basis by substantially all of our existing and future domestic subsidiaries.

The Credit Agreement also continues to contain various customary affirmative and negative covenants and events of default.

The occurrence of any of these events of default would permit the lenders to, among other things, require immediate payment of all amounts outstanding under the Credit Agreement.

Revolving borrowings under the Credit Facility bear interest, at our option, at either of the following and, in each case, plus an applicable margin:

a base rate, which is the highest of (i) the Agent's prime rate, (ii) the Federal Funds Rate plus 0.500% and (iii) (a) prior to the USD LIBOR Transition Date, the Adjusted Eurocurrency Rate for Dollars for a one-month term in effect on such day plus 1.00% and (b) on and after the USD LIBOR Transition Date, Daily Simple RFR for Dollars in effect on such day plus 1.00%;

(i) prior to the USD LIBOR Transition Date, the Eurocurrency Rate and (ii) on or after the USD LIBOR Transition Date or a Benchmark Transition Event, the applicable Benchmark Replacement.

Borrowings by the Canadian Borrower bear interest, at the Canadian Borrower’s option, at either of the following and, in each case, plus an applicable margin:

a base rate, which is the greatest of (i) the Canadian Reference Bank prime rate and (ii) the Canadian Dealer Offered Rate (“CDOR”) plus 1.00%;

Borrowings by the Euro Borrower bear interest at the Eurocurrency rate plus an applicable margin.

Borrowings under any swingline loans under the Credit Facility bear interest, at our option, at either of the following and, in each case, plus an applicable margin:

the LIBOR Market Index Rate;

The interest rate margins on borrowings and letters of credit issued under the Credit Agreement are based on our leverage ratio and will range from 0.000% to 0.425% on Base Rate and Canadian Base Rate loans and from 0.910% to 1.425% on CDOR, LIBOR and swingline loans (with all such rates being calculated in accordance with the terms and by reference to the definitions specified in the Credit Agreement).

We are also required to pay an annual facility fee with respect to the lenders' aggregate revolving credit commitment, the amount of which is based on our leverage ratio.

Term Facility

On October 12, 2021, we entered into the First Amendment to the Credit Agreement (as amended, the “Term Facility Agreement”) among us, as Borrower and Bank of America, N.A., as the Lender.

Among other items, the amendment provides additional capacity under certain negative covenants related to indebtedness, liens, investments, acquisitions, share repurchases and dividends.

All obligations under the Term Facility Agreement, which matures on December 30, 2026, continue to be guaranteed on an unsecured basis by substantially all of our existing and future domestic subsidiaries.

The Term Facility Agreement also continues to contain various customary affirmative and negative covenants and events of default.

The occurrence of any of these events of default would permit the lenders to, among other things, require immediate payment of all amounts outstanding under the Term Facility Agreement.

Borrowings under the term loan facility (the “Term Facility”) available under the Term Facility Agreement bear interest, at our option, at either of the following and, in each case, plus an applicable margin:

a base rate, which is the greatest of (i) the rate per annum equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System, as published by the Federal Reserve Bank of New York on the business day next succeeding such day plus 0.50%, (ii) Bank of America's prime rate, or (iii) the Eurodollar Rate (defined below) plus 1.00%;

the Eurodollar Rate, which is the greater of (i) the rate per annum equal to the USD LIBOR as administered by the ICE Benchmark Administration, or a comparable or successor administrator approved by the Lender or (ii) a floor rate specified in the Term Facility Agreement.

The interest rate margins on the borrowings under the Term Facility Agreement are based on our leverage ratio and will range from 0.000% to 0.625% on Base Rate borrowings and 1.000% to 1.625% on Eurodollar Rate borrowings (with all such rates being calculated in accordance with the terms and by reference to the definitions specified in the Term Facility Agreement).

Receivables Securitization Facility

Our accounts receivable securitization facility (the “Receivables Facility”) provides for the sale of certain of our receivables to a wholly owned subsidiary (the “Securitization Subsidiary”).

4 unchanged sentences

We present the receivables that collateralize the cash proceeds separately as Receivables pledged under receivables facility on our Consolidated Balance Sheets.

Financial Covenants

Following their recent amendments, the Credit Facility and Term Facility continue to require us to maintain a maximum average total leverage ratio and a minimum fixed charge coverage ratio consistent with the terms in effect prior to the amendment.

As amended, the Credit Facility and Term Facility limit the declaration and payment of dividends on our common stock to a manner consistent with past practice, provided no default or event of default has occurred and is continuing, or would result from the payment of dividends.

We may declare and pay quarterly dividends so long as (i) the amount per share of such dividends is not greater than the most recently publicly announced amount dividends per share and (ii) our Average Total Leverage Ratio is less than 3.25 to 1.00 both immediately before and after giving pro forma effect to such dividends.

Under the Credit Facility and Term Facility, we may repurchase shares of our common stock provided no default or event of default has occurred and is continuing, or would result from the repurchase of shares, and our maximum average total leverage ratio (determined on a pro forma basis) is less than 3.25 to 1.00.

Other covenants include restrictions on our ability to grant liens, incur indebtedness, make investments, merge or consolidate, and sell or transfer assets.

Failure to comply with any of our financial covenants or any other terms of any of our debt facilities could result in higher interest rates on our borrowings or the acceleration of the maturities of our outstanding debt.

As of September 30, 2021, we were in compliance with all material covenants and financial ratio requirements under our Credit Facility, our Term Facility and our Receivables Facility.

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