What changed in this filing

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Item 1. Financial Statements

2023-05-08 compared with 2022-11-08 · 130 added, 218 removed, 474 unchanged (42% of the section changed)

4 unchanged sentences

(In thousands, unaudited)

September 30, December 31,

March 31, December 31,

2023 2022 2022

35 unchanged sentences

(In thousands except per-share amounts, unaudited)

Three Months Ended Nine Months Ended

September 30, September 30,

2022 2021 2022 2021

Three Months Ended

Net sales $ 534,430 $ 493,570

32 unchanged sentences

(In thousands except per-share data, unaudited)

Three Months Ended September 30, 2022 and 2021

Common Stock Additional Paid-in Retained Accumulated Other Comprehensive Treasury

Shares Par Value Capital Earnings Income (Loss) Stock Total

Balance at June 30, 2022 42,906 $ 433 $ 293,720 $ 1,072,959 $ ( 36,193 ) $ ( 46,281 ) $ 1,284,638

Net income — — — 88,243 — — 88,243

Translation adjustment, net of tax — — — — ( 26,476 ) — ( 26,476 )

Pension adjustment and other,

net of tax — — — — 459 — 459

Cash flow hedges, net of tax — — — — 26,823 — 26,823

Stock-based compensation — — 3,236 — — — 3,236

Shares issued from release of Restricted Stock Units 1 — — — — — —

Repurchase of common stock ( 309 ) — — — — ( 28,281 ) ( 28,281 )

Cash dividends declared on common stock, $0.26 per share — — — ( 11,087 ) — — ( 11,087 )

Balance at September 30, 2022 42,598 $ 433 $ 296,956 $ 1,150,115 $ ( 35,387 ) $ ( 74,562 ) $ 1,337,555

Balance at June 30, 2021 43,437 $ 435 $ 289,261 $ 822,497 $ ( 11,778 ) $ ( 13,510 ) $ 1,086,905

Net income — — — 73,778 — — 73,778

Translation adjustment and other,

net of tax — — — — ( 4,889 ) — ( 4,889 )

Pension adjustment and other,

net of tax — — — — ( 335 ) — ( 335 )

Stock-based compensation — — 2,606 — — — 2,606

Shares issued from release of Restricted Stock Units 2 — ( 134 ) — — — ( 134 )

Repurchase of common stock ( 222 ) — — — — ( 24,125 ) ( 24,125 )

Cash dividends declared on common stock, $0.25 per share — — — ( 10,803 ) — — ( 10,803 )

Balance at September 30, 2021 43,217 $ 435 $ 291,733 $ 885,472 $ ( 17,002 ) $ ( 37,635 ) $ 1,123,003

The accompanying notes are an integral part of these condensed consolidated financial statements

Simpson Manufacturing Co., Inc.

and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands except per-share data, unaudited)

Nine Months Ended September 30, 2022 and 2021

Three Months Ended March 31, 2023 and 2022

Common Stock Additional Paid-in Retained Accumulated Other Comprehensive Treasury

8 unchanged sentences

Shares issued from release of Restricted Stock Units 103 1 ( 7,397 ) — — — ( 7,396 )

Repurchase of common stock ( 764 ) — — — — ( 74,562 ) ( 74,562 )

Cash dividends declared on common stock, $0.26 per share — — — ( 10,991 ) — — ( 10,991 )

Common stock issued at $139.07 per share for stock bonus 7 — 960 — — — 960

Balance at September 30, 2022 42,598 $ 433 $ 296,956 $ 1,150,115 $ ( 35,387 ) $ ( 74,562 ) $ 1,337,555

Balance at March 31, 2023 42,663 $ 426 $ 295,976 $ 1,194,993 $ ( 3,986 ) $ — $ 1,487,409

Balance at December 31, 2021 43,217 $ 432 $ 294,330 $ 906,841 $ ( 17,605 ) $ — $ 1,183,998

Net income — — — 94,576 — — 94,576

Translation adjustment, net of tax — — — — ( 6,649 ) — ( 6,649 )

Translation adjustment and other,

net of tax — — — — ( 3 ) — ( 3 )

Derivative instrument adjustments, net of tax — — — — ( 9,946 ) — ( 9,946 )

Pension adjustment and other,

5 unchanged sentences

Common stock issued at $139.07 per share for stock bonus 7 — 960 — — — 960

Balance at September 30, 2021 43,217 $ 435 $ 291,733 $ 885,472 $ ( 17,002 ) $ ( 37,635 ) $ 1,123,003

Balance at March 31, 2022 43,159 $ 433 $ 289,773 $ 990,611 $ ( 27,725 ) $ ( 21,281 ) $ 1,231,811

The accompanying notes are an integral part of these condensed consolidated financial statements

3 unchanged sentences

(In thousands, unaudited)

Nine Months Ended

September 30,

Three Months Ended

Cash flows from operating activities

1 unchanged sentence

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

Loss/(gain) on sale of assets and other ( 1,227 ) ( 38 )

Gain on sale of assets and other ( 50 ) ( 1,083 )

Depreciation and amortization 17,746 10,795

Noncash lease expense 2,946 2,477

Inventory step-up expense 12,151 —

(Gain) Loss in equity method investment, before tax 136 ( 184 )

3 unchanged sentences

Deferred hedge gain ( 896 ) —

Changes in operating assets and liabilities (net of amounts acquired from ETANCO.

Changes in operating assets and liabilities

Trade accounts receivable ( 69,990 ) ( 89,799 )

7 unchanged sentences

Capital expenditures ( 18,758 ) ( 17,823 )

Acquisitions, net of cash (see Note 3) ( 806,544 ) ( 218 )

Asset acquisitions, net of cash acquired ( 8,329 ) ( 488 )

Equity method investments — ( 600 )

Proceeds from sale of property and equipment 44 1,830

Terminated forward contract 3,535 —

Net cash used in investing activities ( 27,043 ) ( 17,081 )

Cash flows from financing activities

Termination of cash flow hedge 21,252 —

Repurchase of common stock — ( 21,281 )

Proceeds from borrowing under lines of credit and term loan 271 700,038

Repayments of lines of credit and capital leases ( 27,816 ) ( 8,632 )

Repayments of lines of credit and term loan ( 5,625 ) ( 1,024 )

Debt issuance costs — ( 6,804 )

3 unchanged sentences

Effect of exchange rate changes on cash and cash equivalents ( 299 ) 5,019

Net increase in cash and cash equivalents 8,107 19,541

Net increase (decrease) in cash and cash equivalents ( 48,201 ) 683,217

Cash and cash equivalents at beginning of period 300,742 301,155

15 unchanged sentences

Management believes that these Condensed Consolidated Financial Statements include all normal and recurring adjustments necessary for a fair presentation under GAAP.

The Company assessed certain accounting matters that require the use of estimates and assumptions in context with the known and projected future impacts of COVID-19.

The Company's actual results could differ materially from those estimates.

Interim Reporting Period

2 unchanged sentences

These interim statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (the “2022 Form 10-K”).

The unaudited quarterly condensed consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements and, in the opinion of management, contain all adjustments (consisting of only normal recurring adjustments) necessary to state fairly the financial information set forth therein in accordance with GAAP.

The unaudited quarterly Condensed Consolidated Financial Statements have been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, contain all adjustments (consisting of only normal recurring adjustments) necessary to state fairly the financial information set forth therein in accordance with GAAP.

Certain prior period amounts in the Condensed Consolidated Financial Statements and the accompanying notes have been reclassified to conform to the current period’s presentation.

The year-end condensed consolidated balance sheet data provided herein were derived from audited financial statements included in the 2021 Form 10-K, but do not include all disclosures required by GAAP.

The year-end Condensed Consolidated Balance Sheet data provided herein were derived from audited consolidated financial statements included in the 2022 Form 10-K, but do not include all disclosures required by GAAP.

The Company’s quarterly results fluctuate.

As a result, the Company believes the results of operations for this interim period presented are not indicative of the results to be expected for any future periods.

As a result, the Company believes the results of operations for this interim period presented are not necessarily indicative of the results to be expected for any future periods.

Revenue Recognition

16 unchanged sentences

Accounting for Stock-Based Compensation

The Company recognizes stock-based compensation expense related to the estimated fair value of restricted stock awards on a straight-line basis, net of estimated forfeitures, over the requisite service period of the awards, which is generally the vesting term of four years .

Stock-based expense related to performance share grants are measured based on grant date fair value and expensed on a graded basis over the service period of the awards, which is generally a performance period of three years .

10 unchanged sentences

The carrying amounts of trade accounts receivable, accounts payable, accrued liabilities and other current liabilities approximate fair value due to the short-term nature of these instruments.

The fair values of the interest rate and foreign currency contracts are classified as Level 2 within the fair value hierarchy.

The fair values of the Company's interest rate and foreign currency contracts are classified as Level 2 within the fair value hierarchy.

The fair values of the Company’s contingent consideration related to acquisitions and equity investments are classified as Level 3 within the fair value hierarchy, as these amounts are based on unobserved inputs such as management estimates and entity-specific assumptions and are evaluated on an ongoing basis.

The following tables summarize financial assets and liabilities measured at fair value as of March 31, 2023 and 2022:

(in millions)

Level 1 Level 2 Level 3 Level 1 Level 2

Cash equivalents (1)

$ 120.5 $ — $ — $ 32.6 —

Term loan due 2027 (2)

— 427.5 — — 450.0

Revolver due 2027 (2)

— 150.0 — — 250.0

Derivative instruments - assets (3)

— 35.6 — — 9.7

Derivative instruments - liabilities (3)

— ( 11.5 ) — — ( 25.8 )

Contingent considerations — — 6.5 — —

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 consolidated balance sheet as of March 31, 2023 and 2022 as a component of "Cash and cash equivalents".

(2) The carrying amounts of the term loan and revolver approximate fair value as of March 31, 2023 based upon the terms and conditions as disclosed in Note 12 in comparison to debt instruments with similar terms and conditions available on the same date.

(3) Derivatives for interest rate, foreign exchange and forward swap contracts are discussed in Note 8.

Derivative Instruments

The Company uses derivative instruments as a risk management tool to mitigate the potential impact of certain market risks.

Foreign currency and interest rate risk are the primary market risks the Company manages through the use of derivative instruments, which are accounted for as cash flow hedges or net investment hedges under the accounting standards and carried at fair value as other current or noncurrent assets or as other current or other long-term liabilities in the condensed consolidated balance sheets.

Assets and liabilities with the legal right of offset are not offset in the condensed consolidated balance sheets.

Net deferred gains and losses related to changes in fair value of cash flow hedges are included in accumulated other comprehensive income/loss ("OCI"), a component of stockholders' equity in the condensed consolidated balance sheets, and are reclassified into the line item in the condensed consolidated statement of earnings and comprehensive income in which the hedged items are recorded in the same period the hedged item affects earnings.

Assets and liabilities with the legal right of offset are not offset.

Net deferred gains and losses related to changes in fair value of cash flow hedges are included in accumulated other comprehensive income/loss ("OCI"), a component of stockholders' equity, and are reclassified into the line item in the Condensed Consolidated Statement Of Earnings And Comprehensive Income in which the hedged items are recorded in the same period the hedged item affects earnings.

The effective portion of gains and losses attributable to net investment hedges is recorded net of tax to OCI to offset the change in the carrying value of the net investment being hedged.

3 unchanged sentences

The Company classifies investments that are highly liquid and have maturities of three months or less at the date of purchase as cash equivalents.

As of September 30, 2022 and 2021, the values of these investments were $ 31.9 million and $ 28.6 million, respectively, consisting of United States Treasury securities and money market funds.

As of March 31, 2023 and 2022, the values of these investments were $ 120.5 million and $ 32.6 million, respectively, consisting of United States Treasury securities and money market funds.

The value of the investments is based on cost, which approximates fair value based on Level 1 inputs .

4 unchanged sentences

Every quarter, the Company evaluates the customer group using the accounts receivable aging report and its best judgment when considering changes in customers' credit ratings, level of delinquency, customers' historical payments and loss experience, current market and economic conditions, and expectations of future market and economic conditions.

The changes in the allowance for doubtful accounts receivable for the nine months ended September 30, 2022 are outlined in the table below:

The changes in the allowance for doubtful accounts receivable for the three months ended March 31, 2023 are outlined in the table below:

(in thousands)

December 31, 2022 Expense (Deductions), net

September 30, 2022

March 31, 2023

Allowance for Doubtful Accounts

7 unchanged sentences

Accounting Standards Not Yet Adopted

In March 2020, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") 2020-04, Reference Rate Reform (Topic 848).

ASU 2020-04 provides optional guidance to ease the potential burden in accounting for reference rate reform on financial reporting in response to the market transition from the London Interbank Offered Rate (“LIBOR”).

The Company's primary credit facility, which was amended and restated on March 30, 2022, is composed of $ 450.0 million revolving line of credit and a $ 450.0 million term loan (the "Amended and Restated Credit Facility"), which matures on March 30, 2027.

Borrowings under the Amended and Restated Credit Facility bear interest using Secured Overnight Financing Rate ("SOFR") plus an applicable margin in lieu of LIBOR.

The Company does not expect the impacts of adopting ASU 2020-04 to be material to its financial position, results of operations and cash flows

All other newly issued and effective accounting standards during the third quarter of 2022 were determined to be not relevant or material to the Company.

We believe that all recently issued accounting pronouncements from the Financial Accounting Standards Board ("FASB") do not apply to us or will not have a material impact to the Condensed Consolidated Financial Statements.

Revenue from Contracts with Customers

2 unchanged sentences

Wood Construction Products Revenue .

Wood construction products represented 87 % and 86 %, respectively, of total net sales for the nine months ended September 30, 2022 and 2021.

Wood construction products represented approximately 85 % and 88 % of total net sales for the three months ended March 31, 2023 and 2022, respectively.

Concrete Construction Products Revenue.

Concrete construction products represented 13 % and 14 %, respectively, of total net sales for both the nine months ended September 30, 2022 and 2021.

Concrete construction products represented approximately 14 % and 12 % of total net sales for the three months ended March 31, 2023 and 2022 respectively.

Customer Acceptance Criteria.

13 unchanged sentences

Contract liabilities are recorded for any services billed to customers and not yet recognizable if the contract period has commenced or for the amount collected from customers in advance of the contract period commencing.

As of September 30, 2022, the Company had no contract assets or contract liabilities from contracts with customers .

On April 1, 2022, the Company completed its acquisition of 100 % of the outstanding equity interest of FIXCO Invest S.A.S.

(together with its subsidiaries, "ETANCO") for total purchase consideration of $ 805.4 million, net of cash acquired (the "Acquisition").

The Acquisition was completed pursuant to the securities purchase agreement dated January 26, 2022, as amended (the “SPA”), by and among the Company, Fastco Investment, Fastco Financing, LRLUX and certain other security holders.

As of March 31, 2023, the Company had no contract assets or contract liabilities from contracts with customers .

On April 1, 2022, the Company completed its acquisition (the "Acquisition") of 100 % of the outstanding equity interest of FIXCO Invest S.A.S.

(together with its subsidiaries, "ETANCO") for total purchase consideration of $ 805.4 million, net of cash acquired.

The Acquisition was completed pursuant to the securities purchase agreement dated January 26, 2022, as amended, by and among the Company, Fastco Investment, Fastco Financing, LRLUX and certain other security holders.

The purchase price for the Acquisition was paid using cash on hand and borrowings in the amount of $ 250.0 million under the revolving credit facility and $ 450.0 million under the term loan facility.

See Note 13 for further information on the Amended and Restated Credit Facility.

ETANCO is a manufacturer and distributor of fastener and fixing products headquartered in France and its primary product applications directly align with the addressable markets in which the Company operates.

The Acquisition will allow the Company to enter into new commercial building markets such as façades, waterproofing, safety and solar, as well as grow its share of direct business sales in Europe.

ETANCO’s results of operations were included in the Company's consolidated financial statements from April 1, 2022 acquisition date.

The Company's three and nine months ended September 30, 2022 results of operation only includes ETANCO's results of operations for the six months ending September 30, 2022, subsequent to the acquisition.

ETANCO had net sales of $ 67.5 million and a net loss of $ 1.8 million, and net sales of $ 147.8 million and a net loss of $ 3.7 million, for the

three and nine months ended September 30, 2022, respectively, which includes costs related to fair-value adjustments for acquired inventory, amortization of acquired intangible assets, and expenses incurred for integration.

The allocation of the purchase price is preliminary and subject to change, including any costs and expenses already recognized, as the Company refines its estimates over the measurement period, which is expected to be finalized by the end of the 2022 fiscal year.

The Acquisition allows the Company to enter into new commercial building markets such as façades, waterproofing, safety and solar, as well as grow its share of direct business sales in Europe.

ETANCO’s results of operations were included in the Company's Condensed Consolidated Financial Statements from April 1, 2022 the acquisition date, and as such, only includes ETANCO's results of operations for the three months ending March 31, 2023.

ETANCO had net sales of $ 80.0 million and a net income of $ 5.3 million, for the three months ended March 31, 2023, which includes costs related to the amortization of acquired intangible assets, and expenses incurred for integration.

Purchase price allocation

The Acquisition was accounted for using the acquisition method of accounting in accordance with Accounting Standards Codification 805, Business Combinations ("ASC 805") which requires, among other things, that assets acquired and liabilities assumed in a business combination be recorded at fair value as of the acquisition date with limited exceptions.

Preliminary fair value estimates of the net assets acquired are based upon preliminary calculations and valuations as of April 1, 2022.

Due to the timing and significance of the Acquisition, the estimates and assumptions regarding certain tangible assets acquired and liabilities assumed, the valuation of intangible assets acquired, income taxes, contingent liabilities, goodwill and useful lives of intangible assets are subject to change as the Company obtains additional information during the measurement period of up to 12 months from the acquisition date.

The preliminary allocation of the $ 824.4 million purchase price to the estimated fair values of the tangible and intangible assets acquired and liabilities assumed is as follows:

The allocation of the $ 824.4 million purchase price, including cash, to the estimated fair values of the tangible and intangible assets acquired and liabilities assumed is as follows:

(in thousands) Amount

15 unchanged sentences

Trade accounts receivable, net

The gross amount of trade receivables acquired was approximately $ 67.4 million, of which $ 63.6 million is estimated to be recoverable based on ETANCO's historical trend for collections.

The gross amount of trade receivables acquired was approximately $ 67.4 million, of which $ 63.6 million was estimated to be recoverable based on ETANCO's historical trend for collections.

Acquired inventory primarily consists of raw materials and finished goods consisting of building and construction materials products.

The Company adjusted acquired finished goods higher by $ 14.3 million to estimated fair value based on expected selling prices less a reasonable amount for selling efforts.

The fair value adjustment is recognized as a component of cost of sales over the inventory’s expected turnover period and was $ 3.6 million and $ 12.8 million during the three and nine months ended September 30, 2022, respectively.

The fair value adjustment was fully recognized as a component of cost of sales over the inventory’s estimated turnover period during the nine months ended December 31, 2022.

Property and equipment, net

1 unchanged sentence

The estimated fair value of property and equipment was determined primarily using market and/or or cost approach methodologies.

The acquired fair value for buildings and site improvements will depreciate on a straight-line basis over the estimated useful lives of the assets for a period of up to sixteen years , machinery, equipment and software will depreciate on an accelerated basis over an estimated useful life of three to ten years .

Depreciation expense associated with the acquired property and equipment amounted to $ 2.2 million and $ 3.6 million for the three and nine months ended September 30, 2022, respectively.

The excess of purchase price over the net assets acquired is recognized as goodwill and relates to the value that is expected from the acquired assembled workforce as well as the increased scale and synergies resulting from the integration of both businesses.

The acquired fair value for buildings and site improvements depreciate on a straight-line basis over the estimated useful lives of the assets for a period of up to sixteen years , machinery, equipment and software will depreciate on an accelerated basis over an estimated useful life of three to ten years .

Depreciation expense associated with the acquired property and equipment amounted to $ 1.8 million for the three months ended March 31, 2023.

The excess of purchase price over the net assets acquired was recognized as goodwill and relates to the value that is expected from the acquired assembled workforce as well as the increased scale and synergies resulting from the integration of both businesses.

The goodwill recognized from the Acquisition is not deductible for local income tax purposes.

Goodwill will be allocated to reporting units within the European reporting segment when the purchase price allocation is finalized during the measurement period.

Goodwill has been allocated to components within the ETANCO reporting unit.

Intangible assets, net

The estimated fair value of intangible assets acquired was determined primarily using income approach methodologies.

The preliminary values allocated to intangible assets and the useful lives are as follows:

The values allocated to intangible assets and the useful lives were as follows:

(in thousands, except useful lives) Weighted-average useful life (in years) Amount

3 unchanged sentences

Patents 8 3,862

The acquired definite-lived intangible assets will be amortized on a straight-line basis over estimated useful lives, which approximates the pattern in which these assets are utilized.

The Company recognized $ 4.4 million and $ 8.6 million of amortization expense on these assets during the three and nine ended September 30, 2022, respectively.

The acquired definite-lived intangible assets are being amortized on a straight-line basis over estimated useful lives, which approximates the pattern in which these assets are utilized.

The Company recognized $ 4.4 million of amortization expense on these assets during the three months ended March 31, 2023.

Deferred taxes

1 unchanged sentence

Acquisition and integration related costs

During the three months and nine ended September 30, 2022 and the year ended December 31, 2021, the Company incurred acquisition and integration related expenses of $ 1.9 million, $ 14.7 million and $ 2.3 million, respectively.

The fiscal 2022 amounts have been included in acquisition and integration related costs in the Company’s income from operations, while the 2021 amounts were included in interest expense, net and other.

These acquisition and integration related costs consisted of investment banking, legal, accounting, advisory, and consulting fees.

During the three months ended March 31, 2023, the Company incurred integration related expenses of $ 1.4 million.

During the three months ended March 31, 2022, the Company incurred acquisition related costs of $ 7.0 million for investment banking, legal, accounting, advisory, and consulting fees.

Acquisition and integration related costs have been included in the Company’s income from operations.

Unaudited pro forma results

3 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

(in thousands) 2022 2021 2022 2021

(in thousands, except per share amounts) 2023 2022

Net sales $ 534,430 $ 572,754

6 unchanged sentences

Diluted 42,827 43,376

The unaudited pro forma results above includes the following non-recurring charges to net income:

1) Acquisition and integration related costs of $ 1.9 million, $ 14.7 million, and $ 2.3 million, which were incurred during the three months ended September 30, 2022, nine months ended September 30, 2022, and three months ended December 31, 2021, respectively, were adjusted as if such costs were incurred during the three months ended March 31, 2021.

2) The $ 3.6 million and $ 12.8 million of amortization related to the fair value adjustment for inventory and recognized during the three and nine months ended September 30, 2022, respectively, were adjusted as if incurred during the nine months ended September 30, 2021.

3) Net income for ETANCO includes adjustments of $ 0.6 million and $ 2.7 million to conform ETANCO’s historical financial results prepared under French GAAP to U.S.

GAAP for the three and nine months ended September 30, 2021, respectively.

In addition, $ 0.4 million in French to U.S.

GAAP adjustments were made for the nine months ended September 30, 2022.

The unaudited pro forma results above includes the following adjustments to net income:

1) Integration related costs of $ 1.4 million and acquisition related costs $ 7.0 million, which were incurred during the three months ended March 31, 2023 and March 31, 2022, respectively, were adjusted as if such costs were incurred during the twelve months ended December 31, 2021.

2) Net income for ETANCO includes adjustments of $ 0.4 million to conform ETANCO’s historical financial results prepared under French GAAP to U.S.

GAAP for the three months ended March 31, 2022.

GAAP adjustments are primarily related to share-based payments expense on awards that were settled prior to the Acquisition, and costs incurred and capitalized by ETANCO on its historical acquisitions.

2 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

(in thousands, except per share amounts) 2023 2022

3 unchanged sentences

Diluted weighted-average shares outstanding 42,827 43,376

Net income per common share:

Net earnings per common share:

Basic $ 2.06 $ 2.19

Diluted $ 2.05 $ 2.18

Stockholders' Equity

Treasury Shares

As of September 30, 2022, the Company held 763,530 shares of its common stock as treasury shares, which were repurchased during the nine months ended September 30, 2022, in the open market at an average price of $ 97.65 per share, for a total of $ 74.6 million.

As of September 30, 2022, approximately $ 25.4 million remains available for repurchase of shares of the Company's common stock under the previously announced $ 100.0 million share repurchase authorization (which expires at the end of 2022).

Stock-Based Compensation

1 unchanged sentence

Stock-based compensation capitalized in inventory was immaterial for all periods presented.

The Company recognized stock-based compensation expense related to its equity plans for employees of $ 3.5 million and $ 2.6 million for the three months ended September 30, 2022 and 2021, respectively, and $ 13.0 million and $ 12.4 million for the nine months ended September 30, 2022 and 2021, respectively.

During the nine months ended September 30, 2022, the Company granted 119,169 RSUs and PSUs to the Company's employees, including officers at an estimated weighted average fair value of $ 119.60 per share based on the closing price (adjusted for the present value of dividends) of the Company's common stock on the grant date.

The RSUs and PSUs granted to the Company's employees may be time-based, performance-based or time- and performance-based.

Certain of the PSUs are granted to officers and key employees, where the number of performance-based awards to be issued is based on the achievement of certain Company performance criteria established in the award agreement over a cumulative three year period.

These awards cliff vest after three years .

The Company recognized stock-based compensation expense related to its equity plans for employees of $ 4.6 million and $ 4.9 million for the three months ended March 31, 2023 and 2022, respectively.

During the three months ended March 31, 2023, the Company granted 261,760 restricted stock units (RSUs) and performance stock units (PSUs) to the Company's employees, including officers at an estimated weighted average fair value of $ 98.49 per share based on the closing price (adjusted for the present value of dividends) of the Company's common stock on the grant date.

The RSUs and PSUs granted to the Company's employees may be time-based or time and performance-based.

In addition, these same officers and key employees also receive time-based RSUs, which vest pursuant to a three-year graded vesting schedule.

Time-based RSUs that are granted to the Company's employees excluding officers and certain key employees, vest ratably over the four year vesting-term of the award.

The Company’s seven non-employee directors are entitled to receive approximately $ 704 thousand in equity compensation annually.

The number of shares ultimately granted are based on the average closing share price for the Company over the 60 day period prior to approval of the award in the second quarter of each year.

In May 2022, the Company granted 6,206 shares of the Company's common stock to the non-employee directors, based on the average closing price of $ 105.50 per share and recognized $ 655 thousand of expense.

As of September 30, 2022, the Company's aggregate unamortized stock compensation expense was approximately $ 24.2 million which is expected to be recognized in expense over a weighted-average period of 2.2 years.

As of March 31, 2023, the Company's aggregate unamortized stock compensation expense was approximately $ 32.2 million which is expected to be recognized in expense over a weighted-average period of 2.7 years.

Trade Accounts Receivable, net

Trade accounts receivable consisted of the following:

At September 30, At December 31,

As of March 31, As of December 31,

(in thousands)

8 unchanged sentences

The components of inventories are as follows:

At September 30, At December 31,

As of March 31, As of December 31,

(in thousands)

11 unchanged sentences

The Company only enters into derivative instrument agreements with counterparties who have highly rated credit.

Beginning in March 2022, the Company entered into a forward foreign currency contract expiring in March 2029 to hedge its exposure to adverse foreign currency exchange rate movements for its operations in Europe and elected the spot method for designating this contract as a net investment hedge with the excluded forward point amortized to interest expense.

During May 2022, the Company settled the March 2022 forward foreign currency contract for $ 3.9 million in cash, which included $ 0.4 million in recognized forward points, terminated the hedge accounting treatment and simultaneously entered into a new forward foreign currency contract expiring in March 2029 with the same notional amount at a new forward rate.

The Company also elected the spot method for designating the May 2022 contract as a net investment hedge.

The $ 3.5 million gain recognized on the March 2022 contract excluding recognized forward points is deferred in OCI and will remain in OCI until either the sale or substantially complete liquidation of the hedged subsidiaries.

Beginning in March 2022, the Company also converted a Euro-denominated ("EUR"), fixed rate obligation into a U.S.

Dollar fixed rate obligation using a receive fixed, pay fixed cross currency swap, which was designated as a cash flow hedge.

During May 2022, the Company settled the March 2022 cross currency swap for $ 22.4 million in cash, which was comprised of $ 21.3 million gain on the swap excluding accrued interest and $ 1.1 million of net interest income accrued according to the terms of the swap.

The Company terminated the hedge accounting treatment and simultaneously entered into a new cross currency swap expiring in March 2029 with a lower notional amount for the US dollar denominated leg at a new US dollar interest rate.

An amount of $ 28.3 million was reclassified out of OCI into earnings to offset the currency loss on the underlying security being hedged resulting in a net $ 7.0 million hedge accounting reserve balance within OCI, which is being amortized to interest expense in the Condensed Consolidated Statement of Earnings and Comprehensive Income through the termination of the underlying hedged intercompany debt in March 2029.

In addition, the Company has converted its domestic U.S.

variable rate debt to fixed rate debt using a receive variable, pay fixed interest rate swap expiring March 2027.

The interest rate swap contract is also designated as a cash flow hedge.

As of September 30, 2022, the aggregate notional amount of the Company's outstanding interest rate contracts, cross currency swap contracts and forward contract were $ 688.8 million, $ 460.0 million and $ 321.7 million, respectively.

As of September 30, 2021, the aggregate notional amount of the Company's outstanding forward contracts used to hedge variability in cash flows on its Chinese Yuan denominated purchases were $ 2.0 million, all of which expired by December 31, 2021.

As of September 30, 2022 there were no outstanding forward contracts on its Chinese Yuan denominated purchases.

As of March 31, 2023, the aggregate notional amount of the Company's outstanding interest rate contracts, cross currency swap contracts, EUR forward contract and CNY forward contracts were $ 577.5 million, $ 448.2 million, $321.7 million and $ 9.9 million, respectively.

As of March 31, 2022, the aggregate notional amount of the Company's outstanding forward contracts used to hedge variability in cash flows on its Chinese Yuan denominated purchases were CNY 68.3 million, all of which expired by December 31, 2022.

Changes in fair value of any forward contracts that are determined to be ineffective are immediately reclassified from OCI into earnings.

There were no amounts recognized due to ineffectiveness during the nine-months ended September 30, 2022.

T he effects of fair value and cash flow hedge accounting on the Condensed Consolidated Statement of Earnings and Comprehensive Income for the periods ended September 30, were as follows:

(in thousands) Cost of sales Interest expense, net Other & foreign exchange loss, net Cost of sales

There were no amounts recognized due to ineffectiveness during the three-months ended March 31, 2023.

The effects of fair value and cash flow hedge accounting on the Condensed Consolidated Statement of Earnings and Comprehensive Income for the periods ended March 31, were as follows:

(in thousands) Interest expense, net Other & foreign exchange loss, net Cost of sales Interest expense, net Other & foreign exchange loss, net

Total amounts of income and expense line items presented in the Condensed Consolidated Statement of Earnings in which the effects of fair value or cash flow hedges are recorded $ ( 570 ) $ ( 398 ) 256,789 ( 212 ) ( 216 )

7 unchanged sentences

Amount of gain or (loss) reclassified from OCI to earnings — — 163 — —

The effects of derivative instruments on the Condensed Consolidated Statement of Earnings and Comprehensive Income for the three months ended September 30, 2022 and 2021 were as follows:

The effects of derivative instruments on the Condensed Consolidated Statement of Earnings and Comprehensive Income for the three months ended March 31, 2023 and 2022 were as follows:

Cash Flow Hedging Relationships Gain (Loss) Recognized in OCI Location of Gain (Loss) Reclassified from OCI into Earnings Gain (Loss) Reclassified from OCI into Earnings

2 unchanged sentences

Cross currency contracts ( 2,279 ) ( 7,548 ) Interest expense 1,339 21

FX gain (loss) 28,437 —

Forward contracts $ — $ 207 Cost of goods sold — 228

Total $ 42,673 $ 207 $ 22,121 $ 228

The effects of derivative instruments on the Condensed Consolidated Statement of Earnings and Comprehensive Income for the nine months ended September 30, 2022 and 2021were as follows:

Cash Flow Hedging Relationships Gain (Loss) Recognized in OCI Location of Gain (Loss) Reclassified from OCI into Earnings Gain (Loss) Reclassified from OCI into Earnings

2022 2021 2022 2021

Interest rate contracts $ 25,571 $ — Interest expense $ ( 3,315 ) $ —

Cross currency contracts 46,692 — Interest expense ( 4,020 ) —

FX gain (loss) 57,560 —

Forward contracts — 207 Cost of goods sold 163 428

Forward contracts $ ( 35 ) $ — FX gain (loss) ( 1,816 ) ( 2,967 )

FX gain (loss) $ — $ — Cost of goods sold — 163

Total $ ( 6,357 ) $ ( 9,353 ) $ 2,719 $ ( 2,812 )

For the three and nine months ending September 30, 2022, gains on the net investment hedge of $ 16.9 million and $ 28.2 million were included in OCI, respectively.

For the three and nine months ending September 30, 2022, excluded gains of $ 1.3 million and $ 2.4 million, respectively, were reclassified from OCI to interest expense.

As of September 30, 2022, the aggregate fair values of the Company’s derivative instruments were comprised of an asset of $ 82.1 million, of which $ 19.9 million is included in other current assets on the condensed consolidated balance sheet, and the balance, or $ 62.2 million as an Other non-current assets on the condensed consolidated balance sheet.

For the three months ending March 31, 2023 losses on the net investment hedge and March 31, 2022 gains on net investment hedge of $ 0.2 million and $ 6.8 million were included in OCI, respectively.

For the three months ending March 31, 2023, excluded gains of $ 1.2 million were reclassified from OCI to interest expense, while none were reported for the three months ended March 31, 2022.

As of March 31, 2023, the aggregate fair values of the Company’s derivative instruments on the Condensed Consolidated Balance Sheet were comprised of an asset of $ 35.6 million, of which $ 18.0 million is included in other current assets, and the balance, or $ 17.7 million as other non-current assets, and a non-current liability of $ 11.5 million.

Property, Plant and Equipment, net

Property, plant and equipment consisted of the following:

At September 30, At December 31,

As of March 31, As of December 31,

(in thousands) 2023 2022 2022

15 unchanged sentences

Goodwill consisted of the following:

At September 30, At December 31,

As of March 31, As of December 31,

(in thousands) 2023 2022 2022

3 unchanged sentences

Total $ 500,749 $ 133,651 $ 495,672

Goodwill totaled $ 468.0 million as of September 30, 2022, including $ 337.3 million attributable to the ETANCO acquisition.

Amortizable i ntangible assets, net, consisted of the following:

At September 30, 2022

Goodwill totaled $ 500.7 million as of March 31, 2023, including $ 360.0 million attributable to the Acquisition.

I ntangible assets, net, consisted of the following:

As of March 31, 2023

Carrying Accumulated Carrying

4 unchanged sentences

378,158 ( 38,824 ) 339,334

Asia/Pacific 4,179 — 4,179

$ 435,690 $ ( 69,568 ) $ 366,122

At September 30, 2021

As of March 31, 2022

(in thousands)

5 unchanged sentences

Total $ 72,916 $ ( 47,895 ) $ 25,021

At December 31, 2021

As of December 31, 2022

(in thousands)

7 unchanged sentences

Definite-lived intangible assets include customer relationships, patents, unpatented technology, and non-compete agreements.

Amortization expense of definite-lived intangible assets was $ 5.4 million and $ 1.5 million for the three months ended September 30, 2022 and 2021, respectively and was $ 11.8 million and $ 5.0 million for the nine months ended September 30, 2022 and 2021, respectively.

Amortization of definite-lived intangible assets was $ 5.7 million and $ 1.1 million for the three months ended March 31, 2023 and 2022, respectively.

The weighted-average amortization period for all amortizable intangibles on a combined basis is 8.9 years.

Indefinite-lived intangible assets totaled $ 83.4 million as of September 30, 2022, including $ 82.8 million attributable to trade names acquired in the ETANCO acquisition.

At September 30, 2022, the estimated future amortization of definite-lived intangible assets was as follows:

Indefinite-lived intangible assets totaled $ 93.0 million as of March 31, 2023, including $ 92.3 million attributable to trade names acquired in the Acquisition.

At March 31, 2023, the estimated future amortization of definite-lived intangible assets was as follows:

(in thousands)

Remaining three months of 2022 $ 5,272

Remaining nine months of 2023 $ 15,748

Thereafter 158,943

The changes in the carrying amount of goodwill and intangible assets for the nine months ended September 30, 2022, were as follows:

The changes in the carrying amount of goodwill and intangible assets for the three months ended March 31, 2023, were as follows:

(in thousands) Goodwill Assets

Balance at December 31, 2022 $ 495,672 $ 362,917

Acquisition of ETANCO 368,673 357,402

Acquisition — 4,179

Reclassifications — ( 21 )

1 unchanged sentence

Foreign exchange 5,077 4,715

Balance at September 30, 2022 $ 467,990 $ 330,533

Balance at March 31, 2023 $ 500,749 $ 366,122

The Company has operating leases for certain facilities, equipment and automobiles.

The existing operating leases expire at various dates through 2026, some of which include options to extend the leases for up to 5 years.

The existing operating leases expire at various dates through 2027, some of which include options to extend the leases for up to five years .

The Company measured the lease liability at the present value of the lease payments to be made over the lease term.

The lease payments are discounted using the Company's incremental borrowing rate.

The Company measured the ROU assets at the amount at which the lease liability is recognized plus initial direct costs incurred or prepayment amounts.

The Company measured the right-of-use ("ROU") assets at the amount at which the lease liability is recognized plus initial direct costs incurred or prepayment amounts.

The ROU assets are amortized on a straight-line basis over the lease term.

The following table provides a summary of leases included on the condensed consolidated balance sheets as of September 30, 2022 and 2021 and December 31, 2021, condensed consolidated statements of earnings and comprehensive income, and condensed consolidated statements of cash flows for the nine months ended September 30, 2022 and 2021, respectively:

Condensed Consolidated Balance Sheets Line Item September 30, December 31,

The following table provides a summary of leases included on the Condensed Consolidated Balance Sheets as of March 31, 2023 and 2022 and December 31, 2022, Condensed Consolidated Statements Of Earnings and Comprehensive Income, and Condensed Consolidated Statements Of Cash Flows for the three months ended March 31, 2023 and 2022:

Condensed Consolidated Balance Sheets Line Item March 31, December 31,

(in thousands) 2023 2022 2022

9 unchanged sentences

The components of lease expense were as follows:

Condensed Consolidated Statements of Earnings and Comprehensive Income Line Item Three Months Ended September 30, Nine Months Ended September 30,

Condensed Consolidated Statements of Earnings and Comprehensive Income Line Item Three Months Ended March 31,

(in thousands) 2023 2022

1 unchanged sentence

cost of sales $ 3,959 $ 3,128

Finance lease cost:

Amortization of right-of-use

assets General administrative expenses $ — $ 2 $ — $ 215

Interest on lease liabilities Interest expense, net — — — 2

Total finance lease $ — $ 2 $ — $ 217

Other Information

Supplemental cash flow information related to leases is as follows:

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands) 2023 2022

1 unchanged sentence

Operating cash flows for operating leases $ 3,653 $ 3,097

Finance cash flows for finance leases — 2 — 291

Operating right-of-use assets obtained in exchange for lease

obligations during the current period 1,272 2,196

The following is a schedule, by years, of maturities of lease liabilities as of September 30, 2022:

The following is a schedule, by years, of maturities of lease liabilities as of March 31, 2023:

(in thousands) Operating Leases

Remaining three months of 2022 $ 3,391

Remaining nine months of 2023 $ 10,840

Thereafter 16,680

2 unchanged sentences

Total lease liabilities $ 56,980

The following table summarizes the Company's lease terms and discount rates as of September 30, 2022 and 2021:

The following table summarizes the Company's lease terms and discount rates as of March 31, 2023 and 2022:

Weighted-average remaining lease terms (in years):

2 unchanged sentences

Operating leases 4.67 % 5.17 %

On March 30, 2022, the Company entered into the Amended and Restated Credit Facility, which amends and restates the Company's previous Credit Agreement, dated as of July 27, 2012.

The Amended and Restated Credit Facility provides for a 5-year revolving credit facility of $ 450.0 million revolving line of credit, which includes a letter of credit-sub-facility up to $ 50.0 million, and a 5-year term loan facility of $ 450.0 million.

The Company borrowed $ 250.0 million, under the revolving credit facility and $ 450.0 million under the term loan facility to finance a portion of the purchase price of the Acquisition.

In addition, the Company incurred $ 6.8 million of debt issuance costs, which are classified in long-term debt on the condensed consolidating balance sheet, that have been deferred and will amortize over the 5-year terms of the Amended and Restated Credit Facility.

The Company is required to pay an annual revolving credit facility fee of 0.10 % to 0.25 % per annum on the available commitments under the terms of the Amended and Restated Revolving Credit Facility, regardless of usage, with the applicable

fee determined on a quarterly basis based on the Company’s net leverage ratio.

The fee is included within Interest expense, net and other in the Company's Condensed Consolidated Statements of Earnings and Comprehensive Income.

Amounts borrowed under the Amended and Restated Credit Facility will bear interest from time to time at either the Base Rate, Spread Adjusted Daily Simple SOFR, Spread Adjusted Term SOFR, Adjusted Eurocurrency Rate or Daily Simple RFR, in each case, as calculated under and as in effect from time to time under the Amended and Restated Credit Facility, plus the Applicable Margin, as defined in the Amended and Restated Credit Facility.

The Applicable Margin is determined based on the Company’s net leverage ratio, and ranges (i) from 0.00 % to 0.75 % per annum for amounts borrowed under the term loan facility that bear interest at Base Rate, (ii) from 0.75 % to 1.75 % per annum for amounts borrowed under the term loan facility that bear interest at Adjusted Eurocurrency Rate, Spread Adjusted Daily Simple SOFR or Spread Adjusted Term SOFR, (iii) from 0.00 % to 0.50 % per annum for amounts borrowed under the revolving credit facility that bear interest at Base Rate, (iv) from 0.68 % to 1.53 % per annum for amounts borrowed under the revolving credit facility that bear interest at Daily Simple RFR (solely to the extent denominated in pound sterling) and (v) from 0.65 % to 1.50 % per annum for amounts borrowed under the revolving credit facility that bear interest at Daily Simple RFR (other than loans denominated in pound sterling) or Adjusted Eurocurrency Rate.

Loans outstanding under the Amended and Restated Credit Facility may be prepaid at any time without penalty except for customary breakage costs and expenses.

Based on current principal payment expectations, the annual interest rate on the outstanding debt will be approximately 2.00 % over the life of the debt including the effects of the interest rate swap and other derivatives noted above.

As of September 30, 2022, in addition to the Amended and Restated Credit Facility, certain of the Company’s domestic subsidiaries are guarantors for a credit agreement between certain of its foreign subsidiaries and institutional lenders.

Together, all of its credit facilities provide the Company with a total of $ 205.1 million in available revolving credit lines and an irrevocable standby letter of credit in support of various insurance deductibles.

The Company has $ 688.8 million, excluding deferred financing costs, outstanding under the Amended and Restated Credit Facility, which is the estimated the fair value as of September 30, 2022.

There were no outstanding balances under the Amended and Restated Credit Facility as of September 30, 2021, and December 31, 2021.

The following is a schedule, by years, of maturities for the remaining term loan facility as of September 30, 2022:

As of March 31, 2023, the Company has $ 577.5 million, excluding deferred financing costs, outstanding under its Amended and Restated Credit Facility, which is the estimated fair value as of March 31, 2023.

The Company had outstanding balances of $ 700.0 million and $ 583.2 million under the Amended and Restated Credit Facility as of March 31, 2022, and December 31, 2022, respectively.

The following is a schedule, by years, of maturities for the remaining term loan facility as of March 31, 2023:

(in thousands) 5-Year Term Loan

Remaining three months of 2022 $ 5,625

Remaining nine months of 2023 $ 16,875

Total loan outstanding $ 427,500

The $ 250.0 million borrowed under the revolving credit facility is due on March 31, 2027.

The Company was in compliance with its financial covenants under the Amended and Restated Credit Facility as of September 30, 2022.

The $ 150.0 million outstanding under the revolving credit facility is due on March 31, 2027.

The Company was in compliance with its financial covenants under the Amended and Restated Credit Facility as of March 31, 2023.

As of March 31, 2023, in addition to the Amended and Restated Credit Facility, certain of the Company’s domestic subsidiaries are guarantors for a credit agreement between certain of its foreign subsidiaries and institutional lenders.

Together, all of its credit facilities provide the Company with a total of $ 305.7 million in available borrowing capacity and an irrevocable standby letter of credit in support of various insurance deductibles.

Commitments and Contingencies

8 unchanged sentences

Segment Information

The Company is organized into three reporting segments defined by the regions where the Company’s products are manufactured, marketed and distributed to the Company’s customers.

The Company is organized into three reporting segments defined by the regions where the Company’s products are manufactured, marketed and distributed to its customers.

The three reporting segments are the North America segment (comprised primarily of the Company’s operations in the U.S.

and Canada), the Europe segment, which includes ETANCO, and the Asia/Pacific segment (comprised of the Company’s operations in Asia, the South Pacific, and the Middle East).

These segments are similar in several ways, including the types of materials used, the production processes, the distribution channels and the product applications.

The Administrative & All Other column primarily includes expenses such as self-insured workers compensation claims for employees, stock-based compensation for certain members of management, interest expense, foreign exchange gains or losses and income tax expense, as well as revenues and expenses related to real estate activities.

and Canada), the Europe segment, which includes ETANCO, and the Asia/Pacific segment (comprised of the Company’s operations in Asia and the South Pacific, These segments are similar in several ways, including the types of materials used, the production processes, the distribution channels and the product applications.

The Administrative & All Other line item primarily includes expenses such as self-insured workers compensation claims for employees, stock-based compensation for certain members of management, interest expense, foreign exchange gains or losses and income tax expense, as well as revenues and expenses related to real estate activities.

The following tables illustrate certain measurements used by management to assess the performance of its reportable segments as of or the following periods:

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands) 2023 2022

15 unchanged sentences

* Sales to other segments are eliminated in consolidation.

** Beginning in 2022, the Company changed its presentation of its North America and Administrative and all other segment's statement of operations to display allocated expenses and management fees as a separate item below income from operations.

During 2021, allocated expenses and management fees between the two segments were previously included in gross profit, operating expenses and in income from operations and been adjusted herein to conform to 2022 presentation.

Consolidated income of operations, income before tax and net income for all periods presented below are not affected by the change of operations.

At September 30, December 31,

As of March 31, December 31,

(in thousands) 2023 2022 2022

5 unchanged sentences

Cash collected by the Company’s U.S.

subsidiaries is routinely transferred into the Company’s cash management accounts and, therefore is in the total assets of “Administrative and all other.” Cash and cash equivalent balances in the “Administrative and all other” segment were $ 236.3 million, $ 219.7 million, and $ 223.5 million, as of September 30, 2022 and 2021, and December 31, 2021, respectively.

subsidiaries is routinely transferred into the Company’s cash management accounts and, therefore is in the total assets of “Administrative and all other.” Cash and cash equivalent balances in the “Administrative and all other” segment were $ 189.8 million, $ 96.1 million, and $ 222.5 million, as of March 31, 2023 and 2022, and December 31, 2022, respectively.

Also included in the total assets of "Administrative and all other" are intercompany borrowings due from the Europe segment, which were used by the Europe segment in the acquisition of ETANCO.

3 unchanged sentences

The table below illustrates the distribution of the Company’s sales by product group as additional information for the following periods:

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands) 2023 2022

5 unchanged sentences

Dividend Declared

On October 21, 2022, the Company’s Board of Directors (the "Board") declared a quarterly cash dividend of $ 0.26 per share, estimated to be $ 11.1 million in total.

The dividend will be payable on January 26, 2023, to the Company's stockholders of record on January 5, 2023.

On April 26, 2023, the Company’s Board of Directors (the "Board") declared a quarterly cash dividend of $ 0.27 per share, estimated to be $ 11.5 million in total.

The dividend will be payable on July 27, 2023, to the Company's stockholders of record on July 6, 2023.

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