What changed in this filing

/stocks — the workspaceLOADING

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2024-02-28 compared with 2023-02-28 · 204 added, 156 removed, 1046 unchanged (26% of the section changed)

10 unchanged sentences

Refer to “Note 9 — Derivative Instruments” to the Company’s consolidated financial statements.

Foreign currency translation adjustments on our underlying assets and liabilities resulted in an accumulated other comprehensive loss of $20.7 million for the year ended December 31, 2022, due to the effects of the strengthening United States Dollar in relation to almost all other countries, The loss was offset by $32.3 million in accumulated other comprehensive gains from foreign currency forward contracts.

Foreign currency translation adjustments on our underlying assets and liabilities resulted in an accumulated other comprehensive gain of $19.7 million for the year ended December 31, 2023, due to the effects of the strengthening United States Dollar in relation to almost all o ther countries.

The gain was partially offset by $25.7 million in accumulated other comprehensive losses from foreign currency forward contracts.

Refer to “Note 5 — Stockholders Equity” to the Company’s consolidated financial statements.

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In the normal course of business, we are exposed to market risk related to our purchase of steel, a significant raw material upon which our manufacturing depends.

Steel cost started decreasing at the end of 2022 relative to the significant increases experienced in 2021 and 2020 due to the worldwide raw material shortage stemming from the COVID-19 pandemic .

Steel cost started decreasing at the end of 2022 with prices stabilizing by the end of 2023 .

While steel is typically available from numerous suppliers, the price of steel is a commodity subject to fluctuations that apply across broad spectrums of the steel market.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

Board of Directors and Stockholders

Simpson Manufacturing Co., Inc.

Opinion on the financial statement s

We have audited the accompanying consolidated balance sheets of Simpson Manufacturing Co., Inc., (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and financial statement schedule (collectively referred to as the “financial statements”).

We have audited the accompanying consolidated balance sheets of Simpson Manufacturing Co., Inc.

(a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2023, and the related notes and financial statement schedule included under Item 15 (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

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We believe that our audits provide a reasonable basis for our opinion.

Critical audit matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of acquired customer relationships intangible asset – ETANCO acquisition

As described further in Note 3 to the financial statements, the Company completed the acquisition of Fixco Invest S.A.S (“ETANCO”) for $805.4 million in cash consideration, which resulted in $225.0 million of customer relationships being recorded.

The transaction was accounted for as a business combination using the acquisition method of accounting.

We identified the valuation of the acquired customer relationships intangible asset as a critical audit matter.

The principal considerations for our determination that the Company’s assessment of the fair value of the customer relationships intangible asset represents a critical audit matter are that the judgments and key assumptions made in assessing the fair value of customer relationships are complex and subjective, resulting in estimation uncertainty.

The significant assumptions utilized to determine the fair value included prospective financial information, long-term growth, discount and customer attrition rates.

Auditor subjectivity and effort was required to evaluate management’s judgments and assumptions.

Our audit procedures related to the valuation of the customer relationships intangible asset included the following, among others.

• We inspected the purchase agreement and evaluated management’s process for identifying and estimating the fair value of the customer relationships intangible asset.

• We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company's controls over its valuation of the customer relationships intangible asset and the determination of the significant assumptions.

• We evaluated the Company's selection of the valuation methodology and the significant assumptions for reasonableness.

Evaluating the reasonableness of the significant assumptions involved consideration of industry data, historical results and evidence obtained in other areas of the audit.

• We evaluated the qualifications of the external third-party valuation specialist engaged by management in the fair value determination.

Critical audit matters

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

We determined that there are no critical audit matters.

/s/ Grant Thornton LLP

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We believe that our audit provides a reasonable basis for our opinion.

Our audit of, and opinion on, the Company’s internal control over financial reporting does not include the internal control over financial reporting of FIXCO Invest S.A.S.

(“ETANCO”), a wholly owned subsidiary, whose financial statements reflect total assets and revenues constituting 26 percent and 10 percent, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2022.

As indicated in Management’s Report, ETANCO was acquired during 2022.

Management’s assertion on the effectiveness of the Company’s internal control over financial reporting excluded internal control over financial reporting of ETANCO.

Definition and limitations of internal control over financial reporting

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Long-term debt, net of current portion and issuance costs 458,791 554,539

Operating lease liabilities 46,882 37,091

Deferred income tax and other long-term liabilities 140,608 18,434

Operating lease liabilities, net of current portion

55,324 46,882

Deferred income tax

98,170 112,901

Other long-term liabilities

51,436 27,707

Total liabilities 1,024,978 1,090,592

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Retained earnings 1,426,554 1,118,030

Treasury stock ( 50,363 ) —

Accumulated other comprehensive loss ( 9,990 ) ( 4,059 )

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Income from operations $ 475,149 $ 459,067 $ 367,793

Interest expense, net and other ( 7,594 ) ( 1,386 ) ( 2,012 )

Interest income (expense), net and other financing costs

3,391 ( 7,594 ) ( 1,386 )

Other & foreign exchange loss, net ( 1,993 ) ( 3,408 ) ( 7,858 )

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Other comprehensive income

Translation adjustment ( 20,733 ) ( 7,313 ) 14,172

Translation adjustment and other, net of tax 19,690 ( 20,733 ) ( 7,313 )

Unamortized pension adjustments, net of tax 73 2,065 404

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Comprehensive

Income (Loss)

Common Stock Retained

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Net income — — — 266,447 — — 266,447

Translation adjustment, net of tax — — — — 14,172 — 14,172

Translation adjustment and other, net of tax — — — — ( 7,313 ) — ( 7,313 )

Pension adjustment, net of tax — — — — 404 — 404

Adoption of new accounting standards — — — — 390 — 390

Cash flow hedges, net of tax

— — — — ( 268 ) — ( 268 )

Stock-based compensation expense — — 15,029 — — — 15,029

6 unchanged sentences

Net income — — — 333,995 — 333,995

Translation adjustment, net of tax — — — — ( 7,313 ) — ( 7,313 )

Translation adjustment and other, net of tax — — — — ( 20,733 ) — ( 20,733 )

Pension adjustment, net of tax — — — — 2,065 — 2,065

Derivative instrument adjustment, net of tax — — — — ( 268 ) — ( 268 )

Cash flow hedges, net of tax

— — — — 32,214 — 32,214

Stock-based compensation expense — — 12,422 — — — 12,422

6 unchanged sentences

Net income — — — 353,987 — 353,987

Translation adjustment, net of tax — — — — ( 20,733 ) — ( 20,733 )

Translation adjustment and other, net of tax — — — — 19,690 — 19,690

Pension adjustment, net of tax — — — — 73 — 73

Derivative instrument adjustments, net of tax — — — — 32,214 — 32,214

Cash flow hedges, net of tax

— — — — ( 25,694 ) — ( 25,694 )

Stock-based compensation expense — — 19,627 — — — 19,627

Repurchase of common stock ( 811 ) — — — — ( 78,622 ) ( 78,622 )

Retirement of common stock — ( 8 ) — ( 78,614 ) — 78,622 —

Repurchase of common stock including excise tax ( 361 ) — — — — ( 50,363 ) ( 50,363 )

Cash dividends declared on common stock, $1.07 per share — — — ( 45,463 ) — — ( 45,463 )

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Noncash compensation related to stock plans 23,859 14,980 17,715

Provision for (benefit from ) doubtful accounts 1,146 393 ( 98 )

Provision for doubtful accounts

730 1,146 393

Deferred hedge gain ( 3,860 ) ( 2,690 ) —

9 unchanged sentences

Capital expenditures ( 88,824 ) ( 62,362 ) ( 43,738 )

Acquisitions, net of cash acquired (See Note 3) ( 805,904 ) ( 218 ) ( 2,797 )

Acquisitions, net of cash acquired

( 23,353 ) ( 805,904 ) ( 218 )

Purchases of intangible assets — ( 4,861 ) ( 5,856 )

Purchases of equity investments

( 1,361 ) ( 3,178 ) ( 9,829 )

Termination forward contracts — 3,535 —

Proceeds from sale of property and equipment 1,743 2,526 836

Proceeds from sale of a business

Net cash used in investing activities ( 103,251 ) ( 870,244 ) ( 58,805 )

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Proceeds from lines of credit 2,276 717,268 16,752

Repayments of line of credit and capital leases ( 134,120 ) ( 16,408 ) ( 170,680 )

Repayments of line of credit

( 98,679 ) ( 134,120 ) ( 16,408 )

Termination of cash flow hedge — 21,252 —

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Noncash capital expenditures $ 11,139 $ 1,671 $ 99

Contingent consideration for intangible acquisition 6,500 — 547

Contingent consideration for acquisitions

1,189 6,500 —

Issuance of Company’s common stock for compensation 1,940 960 691

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All significant intercompany transactions have been eliminated.

Certain amounts in the Consolidated Balance Sheets of prior year's have been reclassified to conform to the fiscal 2023 presentation.

These reclassifications had no impact on the Company's Total Assets, Total Stockholders' Equity, Net sales or Net income in its Consolidated Financial Statements.

Use of Estimates

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

Management believes that these consolidated financial statements include all normal and recurring adjustments necessary for a fair presentation under GAAP.

1 unchanged sentence

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 December 31, 2022, and 2021, the value of these investments was $ 125.1 million and $ 26.4 million, respectively, consisting of U.S.

Treasury securities and money market funds.

As of December 31, 2023, and 2022, the value of these investments was $ 163.6 million and $ 125.1 million, respectively, consisting of money market funds.

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

6 unchanged sentences

as of Balance

(in thousands) December 31, 2021 Expense (Deductions), net

(in thousands) December 31, 2022 Expense (Deductions), net Write-Offs 1

December 31, 2023

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• In-process products and finished goods — the cost of direct materials and labor plus attributable overhead based on a normal level of activity.

The Company applies net realizable value and makes estimates for obsolescence to the gross value of the inventory.

Estimated net realizable value is based on estimated selling price less further costs to completion and disposal.

The Company applies net realizable value when making estimates for obsolescence to the gross value of inventory.

Estimated net realizable value is based on estimated selling price less further costs expected to be incurred through completion and disposal.

The Company impairs slow-moving products by comparing inventories on hand to projected demand.

10 unchanged sentences

Equity Investments

The Company accounts for investments and ownership interests under equity method accounting when it has the ability to exercise significant influence but does not have a controlling financial interest.

The Company accounts for investments and ownership interests under the equity method accounting when it has the ability to exercise significant influence but does not have a controlling financial interest.

The Company records its interest in the net earnings of its equity method investees, along with adjustments for unrealized profits or losses within earnings or loss from equity interests in the consolidated statement of operations.

10 unchanged sentences

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 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

The fair values of the Company’s contingent consideration related to acquisitions is 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 the financial assets and financial liabilities measured at fair value for the Company as of December 31, 2023 and 2022:

(in millions)

Level 1 Level 2 Level 3 Level 1

(in thousands)

Level 1 Level 2 Level 3 Level 1 Level 2 Level 3

Cash equivalents (1)

1 unchanged sentence

Term loan due 2027 (2)

— 410,625 — — 433,125

Revolver due 2027 (2)

— 75,038 — — 150,038

Derivative instruments - assets (3)

— 21,835 — — 43,885 —

Derivative instruments - liabilities (3)

— 30,111 — — 8,026 —

Contingent considerations — — 6,600 — — 6,500

(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 December 31, 2023 and 2022 as a component of "Cash and cash equivalents".

(2) The carrying amounts of our term loan and revolver approximate fair value as of December 31, 2022 based upon their terms and conditions as disclosed in Note 14 in comparison to debt instruments with similar terms and conditions available on the same date.

(2) The carrying amounts of our term loan and revolver approximate fair value as of December 31, 2023 and 2022 based upon their terms and conditions as disclosed in Note 14 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 9.

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and are reclassified into the line item in the consolidated statement of operations 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.

Recognition in earnings of amounts previously recorded to OCI are limited to circumstances such as complete or substantially complete liquidation of the net investment in the hedged

foreign operation.

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.

Recognition in earnings of amounts previously recorded to OCI are limited to circumstances such as complete or substantially complete liquidation of the net investment in the hedged foreign operation.

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

5 unchanged sentences

Accordingly, goodwill is never recognized in an asset acquisition.

During the year ended December 31, 2023, the Company completed the purchase of certain intangible assets and completed a business acquisition that were not material to the Company's consolidated financial statements, individually and in aggregate.

Accordingly, pro forma historical results of operations related to these business acquisitions during the year ended December 31, 2023 have not been presented.

The Company has included the financial results of these business acquisitions in its consolidated financial statements from their respective dates of acquisition.

Property, Plant and Equipment

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Purchased intangible assets with finite useful lives are amortized using the straight-line method over the estimated useful lives of the assets.

The weighted-average amortization period for all amortizable intangibles on a combined basis is 9.1 years.

Preferred Stock

The Company’s Board of Directors has the authority to issue authorized and unissued preferred stock in one or more series with such designations, rights and preferences as may be determined from time to time by the Board of Directors.

The Company’s Board of Directors has the authority to issue authorized and unissued preferred stock in one or more s eries with such designations, rights and preferences as may be determined from time to time by the Board of Directors.

Accordingly, the Board of Directors is empowered, without stockholder approval, to issue preferred stock with dividend, redemption, liquidation, conversion, voting or other rights that could adversely affect the voting power or other rights of the holders of the Company’s common stock.

2 unchanged sentences

Subject to the rights of any preferred stock that may be issued in the future, the holders of common stock are entitled to one vote per share on any matter submitted to a vote of the stockholders.

A director in an uncontested election is elected if the votes cast “for” such director’s election exceed the votes cast “against” such director’s election, except that, if a stockholder properly nominates a candidate for election to the Board of Directors, the candidates with the highest number of affirmative votes (up to the number of directors to be elected) are elected.

A director in an uncontested election is elected if the votes cast “for” such director’s election exceed the votes cast

“against” such director’s election, except that, if a stockholder properly nominates a candidate for election to the Board of Directors, the candidates with the highest number of affirmative votes (up to the number of directors to be elected) are elected.

There are no redemption or sinking fund provisions applicable to common stock.

19 unchanged sentences

The Company presents taxes collected and remitted to governmental authorities on a net basis in the consolidated statements of operations.

Additionally, all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected from a customer (e.g., sales, use, value added, and some excise taxes) are excluded from revenue.

Cost of Sales

7 unchanged sentences

Product research and development expenses include all related personnel costs including salary, benefits, retirement, stock-based compensation costs, as well as computer and software costs, professional fees, supplies, tools and maintenance costs.

In 2022, 2021 and 2020, the Company incurred software development expenses related to its ongoing expansion into the plated truss market and some of the software development costs were capitalized.

See "Note 8 — Property, Plant and Equipment." The Company amortizes acquired patents over their remaining lives and performs periodic reviews for impairment.

In 2023, 2022 and 2021, the Company incurred software development expenses related to its ongoing expansion into the plated truss and Cold Form Steel markets as

well as ongoing development of Building Information Modeling ("BIM") applications that serve multiple end markets, and some of the software development costs were capitalized.

S ee "Note 10 — Property, Plant and Equipment." Th e Company amortizes acquired patents over their remaining lives and performs periodic reviews for impairment.

The cost of internally developed patents is expensed as incurred.

7 unchanged sentences

Accounting for Leases

The Company has operating and finance leases for certain facilities, equipment, autos and data centers.

The Company has operating leases for certain facilities, equipment, autos and data centers.

As an accounting policy for short-term leases, the Company elected to not recognize a right-of-use asset ("ROU asset") and liability if, at the commencement date, the lease (1) has a term of 12 months or less and (2) does not include renewal and purchase options that the Company is reasonably certain to exercise.

3 unchanged sentences

Stock-based compensation 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 .

The performance conditions are based on the Company's achievement of revenue growth and return on invested capital over the performance period and are evaluated for the probability of vesting at the end of each reporting period with changes in expected results recognized as an adjustment to expense.

The assumptions used to calculate the fair value of restricted stock grants are evaluated and revised, as necessary, to reflect market conditions and the Company’s experience.

7 unchanged sentences

Accounting Standards Not Yet Adopted

Newly issued and effective accounting standards during 2022 were determined to be not relevant or material to the Company.

In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07 requiring enhanced segment disclosures.

The ASU requires disclosure of significant segment expenses regularly provided to the chief operating decision maker ("CODM") included within segment operating profit or loss.

Additionally, the

ASU requires a description of how the CODM utilizes segment operating profit or loss to assess segment performance.

The requirements of the ASU are effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

The Company's annual reporting requirements will be effective for fiscal 2024 and interim reporting requirements will be effective beginning with the first quarter of fiscal 2025.

Early adoption is permitted and retrospective application is required for all periods presented.

The Company is in the process of analyzing the impact of the ASU on related disclosures.

In December 2023, the FASB issued ASU 2023-09 requiring enhanced income tax disclosures.

The ASU requires disclosure of specific categories and disaggregation of information in the rate reconciliation table.

The ASU also requires disclosure of disaggregated information related to income taxes paid, income or loss from continuing operations before income tax expense or benefit, and income tax expense or benefit from continuing operations.

The requirements of the ASU are effective for annual periods beginning after December 15, 2024.

Early adoption is permitted and the amendments should be applied on a prospective basis.

Retrospective application is permitted.

The Company is in the process of analyzing the impact of the ASU on related disclosures.

The Company does not believe any other new accounting pronouncements issued by the FASB that have not become effective will have a material impact on its consolidated financial statements.

Revenue from Contracts with Customers

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Principal versus Agent.

The Company considered the principal versus agent guidance of the new revenue recognition standard and concluded that the Company is the principal in a third-party transaction.

The Company considered the principal versus agent guidance of the revenue recognition standard and concluded that the Company is the principal in a third-party transaction.

The Company manufactures its products and has control over the transfer of its products to Dealer Distributors, Contract Distributors, and end customers.

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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.

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 consolidated financial statements from the April 1, 2022 acquisition date, and as such, only includes ETANCO's results of operations for the nine months ending December 31, 2022.

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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 $ 66.0 million was collected, in excess of the original collectible estimate of $ 63.6 million.

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

1 unchanged sentence

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.

There were no such adjustments during the twelve months ended December 31, 2023.

Property and equipment, net

Acquired property and equipment includes land of $ 16.1 million, buildings and site improvements of $ 32.5 million, and machinery, equipment, and software of $ 41.1 million.

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

The estimated fair value of property and equipment was determined primarily using market and/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 , and 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 $ 5.4 million for the nine months ended December 31, 2022.

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

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

Goodwill was allocated to components within ETANCO.

Intangible assets, net

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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 $ 13.0 million of amortization expense on these assets during the nine months ended December 31, 2022.

Deferred taxes

1 unchanged sentence

Acquisition and integration related costs

During the twelve months ended December 31, 2022, and December 31, 2021, the Company incurred acquisition and/or integration related expenses of $ 17.3 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 year ended December 31, 2022, the Company incurred acquisition and integration related expenses of $ 17.3 million.

These costs were included in the Company's income from operations.

Unaudited pro forma results

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1) Acquisition and integration related costs of $ 17.3 million which were incurred during the twelve months ended December 31, 2022, were adjusted as if such costs were incurred during the twelve months ended December 31, 2021.

2) The $ 14.3 million amortization related to the fair value adjustment for inventory and recognized during the twelve months ended December 31, 2022, were adjusted as if incurred during the twelve months ended December 31, 2021.

2) The $ 13.6 million fair value adjustment for inventory recognized during the twelve months ended December 31, 2022, was adjusted as if incurred during the twelve months ended December 31, 2021.

3) Net income for ETANCO includes adjustments of $ 0.4 million and $ 3.2 million to conform ETANCO’s historical financial results prepared under French GAAP to U.S.

15 unchanged sentences

Stock Repurchases

For the fiscal year ended December 31, 2022, the Company repurchased 811,330 shares of the Company’s common stock in the open market at an average price of $ 96.91 per share, for a total of $ 78.6 million under the previously announced $ 100.0 million share repurchase authorization (which expired at the end of 2022).

On December 15, 2022, the Company’s Board of Directors authorized the Company to repurchase up to $ 100.0 million of the Company’s common stock from January 1, 2023 through December 31, 2023.

As of December 31, 2022, the Company retired a total of 811,330 of its common stock and therefore had zero shares of its common stock as treasury shares.

On August 16, 2022, the Inflation Reduction Act of 2022 ("IRA") was signed into law.

This legislation introduces a 1% excise tax on stock repurchases, net of shares issued under compensation programs, among its key tax provisions.

The IRA is effective for years beginning after December 31, 2022.

For the fiscal year ended December 31, 2023, the Company repurchased approximately 361 thousand shares of the Company’s common stock in the open market at an average price of $ 138.60 per share, for a total of $ 50.0 million under the previously announced $ 100.0 million share repurchase authorization (which expired at the end of 2023).

As of December 31, 2023, the Company accrued $ 0.4 M for the excise tax, which is included as a cost of treasury stock;

however, this is not reflected in the share repurchase amounts above.

Comprehensive Income or Loss

3 unchanged sentences

Balance as of January 1, 2021 $ ( 7,908 ) $ ( 2,910 ) $ — $ 390 $ ( 10,428 )

Other comprehensive gain/(loss), net of tax effect 14,172 ( 161 ) — 390 14,401

Other comprehensive gain/(loss) net of tax benefit (expense) of $0, ($52), $0 and ($68), respectively ( 7,313 ) 404 — 204 ( 6,705 )

Amounts reclassified from accumulative other comprehensive income, net of $0 tax — — — ( 472 ) ( 472 )

Balance as of December 31, 2021 ( 15,221 ) ( 2,506 ) — 122 ( 17,605 )

Other comprehensive gain/(loss), net of tax effect ( 7,313 ) 404 — 204 ( 6,705 )

Other comprehensive gain/(loss) net of tax benefit (expense) of $0, ($133), ($10,264) and ($951), respectively.

( 20,942 ) 2,065 42,740 11,898 35,761

Amounts reclassified from accumulative other comprehensive income, net of $0 tax 209 — ( 18,987 ) ( 3,437 ) ( 22,215 )

Balance at December 31, 2022 ( 35,954 ) ( 441 ) 23,753 8,583 ( 4,059 )

Other comprehensive gain/(loss), net of tax effect ( 20,942 ) 2,065 42,740 11,898 35,761

Other comprehensive gain/(loss), net of tax benefit (expense) of $0, ($1), $6,254 and $2,711, respectively.

19,690 73 ( 3,815 ) ( 8,785 ) 7,163

Amounts reclassified from accumulative other comprehensive income, net of $0 tax — — ( 8,187 ) ( 4,907 ) ( 13,094 )

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Stock-based compensation expense, net of tax $ 14,918 $ 9,370 $ 11,249

Fair value of shares vested $ 25,565 $ 15,701 $ 21,921

The Company allocates stock-based compensation expense amongst cost of sales, research and development and other engineering expense, selling expense, or general and administrative expense based on the job functions performed by the employees to whom the stock-based compensation is awarded.

2 unchanged sentences

(in thousands) Weighted-

Price Aggregate

Exercise Price Aggregate

(in thousands)

13 unchanged sentences

Time- and performance-based RSUs granted to the Company’s employees excluding officers and certain key employees, vest ratably over the four-year life of the award and through 2020, required the underlying shares of the Company's common stock to be subject to a performance-based adjustment during the first year and starting in 2021, were time-based awards which vest ratable over the four-year life of the award.

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

The Company’s nine non-employee directors are entitled to receive approximately $ 1.1 million in equity compensation annually.

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

In May and June 2022, the Company granted 6 thousand 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 total expense of $ 655 thousand.

In April and June 2023, the Company granted 10 thousand shares of the Company's common stock to the non-employee directors, based on the average closing price of $ 122.50 per share and recognized total expense of $ 1.2 million.

The total intrinsic value of RSUs and PSUs vested during the years ended December 31, 2023, 2022 and 2021 was $ 20.3 million, $ 25.6 million and $ 15.7 million, respectively, based on the market value on the vest date.

8 unchanged sentences

Shares settled with cash (foreign employees) 4,900 7,400 6,500

Total award 16,700 13,400 12,600

Total awards 14,700 16,700 13,400

As a result, we recorded pre-tax compensation charges of $ 1.9 million, $ 1.5 million, and $ 1.7 million for years ended December 31, 2023, 2022, and 2021, respectively.

21 unchanged sentences

Dollar and the Chinese Yuan (CNY).

In November 2022, the Company entered into a series of foreign currency derivative contracts that mature monthly between January 2023 and, December 2023 to buy CNY 102.4 million in the aggregate by selling a total of $ 14.8 million .

In November 2022, the Company entered into a series of foreign currency derivative contracts that matured monthly between January 2023 and December 2023.

These forward contracts are accounted for as cash flow hedges under the accounting standards, and fair value is included in other current assets or other current liabilities, as applicable, in the consolidated balance sheet.

Net deferred gains and losses on these contracts relating to changes in fair value are included in accumulated other OCI and are reclassified into cost of sales in the consolidated statements of operations in the which the hedged items are recorded in the same period the hedged item affects earnings.

There were no amounts recognized for gains or losses on these contracts during the year ended December 31, 2022.

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

The amounts deferred in OCI are expected to be recognized as a component of cost of sales in the consolidated statements of operations during 2023 and 2024.

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.

There were no amounts recognized for gains or losses on these contracts during the year ended December 31, 2022 and $ 0.2 million in losses recorded on these contracts during the year ending December 31, 2023.

The amounts deferred in OCI are expected to be recognized as a component of cost of sales in the consolidated statements of operations during 2024.

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 net interest income from forward points excluded and 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.

The $ 3.5 million gain recognized on the March 2022 contract from 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.

2 unchanged sentences

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 consolidated statements of operations through the termination of the underlying hedged intercompany debt in March 2029.

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 balance reserved within OCI, which is being amortized to interest expense in the consolidated statements of operations through the termination of the underlying hedged intercompany debt in March 2029.

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

1 unchanged sentence

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

As of December 31, 2022, the aggregate notional amount of the Company's outstanding interest rate contracts, cross currency swap contracts, EUR forward contract and CNY forward contracts were $ 583.2 million, $ 454.1 million, $ 321.7 million and $ 14.8 million, respectively.

As of December 31, 2023, the aggregate notional amount of the Company's outstanding interest rate contracts, cross currency swap contracts and EUR forward contracts were $ 410.6 million, $ 430.5 million, and $ 321.7 million, respectively.

As of December 31, 2022, there were no outstanding forward contracts on its Chinese Yuan denominated purchases.

1 unchanged sentence

There were no amounts recognized due to ineffectiveness during the twelve months ended December 31, 2023.

The effects of fair value and cash flow hedge accounting on the consolidated statements of operations for the periods ended December 31, were as follows:

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

Th e effects of fair value and cash flow hedge accounting on the consolidated statements of operations for the periods ended December 31, were as follows:

(in thousands) Cost of sales 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 Consolidated Statements of Operations in which the effects of fair value or cash flow hedges are recorded $ 1,170,048 $ 3,391 $ ( 1,993 ) $ 1,174,794 $ ( 7,594 ) $ ( 3,408 )

12 unchanged sentences

Cross currency contracts ( 14,737 ) 26,174 Interest expense 5,170 5,650

FX gain (loss) 14,349 —

Forward contracts 231 163 Cost of goods sold — 472

Forward contracts ( 124 ) 231 FX gain (loss) ( 12,704 ) 14,349

Cost of goods sold ( 155 ) —

Total $ ( 10,193 ) $ 53,235 $ 8,033 $ 18,987

For the twelve months ended December 31, 2022, gains on the net investment hedge of $ 13.0 million were included in OCI.

For the twelve months ended December 31, 2022, gains excluded of $ 3.3 million, were reclassified from OCI to interest expense.

As of December 31, 2022, the aggregate fair values of the Company’s derivative instruments were comprised of assets totaling $ 43.9 million, and liabilities of $ 8.0 million on the consolidated balance sheets.

As of December 31, 2022, the Company expects it will reclassify net gains of approximately $ 20.2 million, currently recorded in AOCI, into interest expense in earnings within the next twelve months.

For the twelve months ended December 31, 2023 and December 31, 2022, gains on the net investment hedge of $ 11.4 million and $ 13.0 million, respectively, were included in OCI.

For the twelve months ended December 31, 2023 and December 31, 2022, deferred gains from the forward points of $ 5.1 million and $ 3.3 million, were reclassified from OCI to interest expense.

As of December 31, 2023, the aggregate fair values of the Company’s derivative instruments on the Consolidated Balance Sheet were comprised of an asset of $ 21.9 million, of which $ 14.5 million is included in other current assets , and the balance of $ 7.4 million as other non-current assets , and of a noncurrent liability of $ 30.1 million included as deferred income tax and other long-term liabilities .

As of December 31, 2022, the aggregate fair values of the Company’s derivative instruments on the Consolidated Balance Sheet were comprised of an asset of $ 43.9 million, of which $ 20.4 million is included in other current assets , and the balance of

$ 23.5 million as other non-current assets , and of a noncurrent liability of $ 8.0 million included as deferred income tax and other long-term liabilities .

As of December 31, 2023, the Company expects it will reclassify net gains of approximately $ 15.7 million, currently recorded in Accumulated Other Comprehensive Income (AOCI), into interest expense in earnings within the next twelve months.

However, the actual amount reclassified could vary due to future changes in the fair value of these derivatives.

14 unchanged sentences

As of December 31, 2023, and 2022, the Company had capitalized software development costs net of accumulated amortization of $ 33.8 million and $ 33.3 million, respectively, included in machinery and equipment and as of December 31, 2023, and 2022, $ 9.7 million and $ 7.0 million, respectively, was included in capital projects in progress.

Depreciation expense, including depreciation of equipment and amortization of internally developed software and software acquired through capital lease arrangements, was $ 43.4 million, $ 36.1 million, and $ 32.1 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Depreciation expense, including depreciation of equipment and amortization of internally developed and acquired software, was $ 51.2 million, $ 43.4 million, and $ 36.1 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Goodwill and Intangible Assets

4 unchanged sentences

Balance as of January 1, 2022 $ 96,307 $ 36,331 $ 1,384 $ 134,022

Goodwill acquired 7,444 365,591 — 373,035

Foreign exchange ( 179 ) ( 11,123 ) ( 83 ) ( 11,385 )

Reclassifications — ( 106 ) — ( 106 )

Balance as of December 31, 2022 103,572 390,799 1,301 495,672

Goodwill acquired ( 2,077 ) 3 1,497 — ( 580 )

Goodwill disposed — ( 5,678 ) 4 — ( 5,678 )

Foreign exchange 63 13,075 ( 2 ) 13,136

Reclassifications — — — —

Balance as of December 31, 2023 $ 101,558 $ 399,693 $ 1,299 $ 502,550

1 unchanged sentence

The Company tests goodwill for impairment at the reporting unit level on an annual basis (in the fourth quarter).

Our goodwill balance is not amortized to expense, and we may assess qualitative factors and quantitative factors to determine whether it is more likely than not that the fair value of each reporting unit is less than its carrying amount as a basis for determining whether it is necessary to complete quantitative impairment assessment s

We assessed the qualitative factors related to the goodwill of the reporting units to determine whether it is necessary to perform an impairment test.

During fiscal year 2022, we revised our European reporting units due to the acquisition of ETANCO and changes to the management, product distribution and operations structure of our legacy European operations.

Subsequent to this change, all European reporting units, including the S&P Clever reporting unit, but excluding ETANCO, were consolidated for reporting purposes into one overall Europe reporting unit.

ETANCO will remain as its own reporting unit until it is fully integrated into our other European operations, and there are sufficient economic similarities between the ETANCO and European reporting units.

During fiscal year 2023, we re-evaluated our European reporting units after a full year of operations from our acquisition of ETANCO as it has become further integrated into our other European operations resulting in changes to the management, product distribution, and operations structure of our European operations.

As a result of this re-evaluation, all European reporting units were consolidated for reporting purposes into one overall Europe reporting unit.

A qualitative assessment was performed immediately preceding the reporting unit change and determined that it was not more likely than not that any impairment existed prior to the reporting unit change.

11 unchanged sentences

In 2022, we completed our annual impairment assessment by performing a qualitative assessment.

For this qualitative assessment, we assessed various assumptions, events and circumstances that would have affected the estimated fair value of the reporting units as compared to the quantitative fair value measurement determined in the fourth quarter of 2021.

For this qualitative assessment, we assessed various assumptions, events and circumstances that would have affected the estimated fair value of the reporting units.

Based on the qualitative assessment performed, the Company concluded that there was no evidence of events or circumstances that would indicate a material change from the Company’s prior year quantitative assessment by reporting unit and therefore, it was more likely than not that the estimated fair value of reporting units exceeded their respective carrying values.

2 unchanged sentences

Amortizable Intangible Assets

3 During the year ended December 31, 2023, the Company finalized an acquisition of a business that resulted in $ 2.1 million decrease in goodwill with $ 0.9 million reclassified to intangible asset and a corresponding decrease of $ 1.2 million in a contingent consideration liability.

The final amounts are measurement period adjustments for conditions that existed at the acquisition date.

4 During the year ended December 31, 2023, the Company finalized a sale of a business that did not result in material gain or loss.

Intangible assets from acquired businesses or asset purchases are recognized at their estimated fair values on the date of acquisition and consist of patents, unpatented technology, non-compete agreements, trademarks, customer relationships and other intangible assets.

3 unchanged sentences

The aggregate amount of amortization expense of intangible assets for the years ended December 31, 2023, 2022 and 2021 was $ 23.5 million, $ 17.4 million and $ 6.4 million, respectively.

The weighted-average remaining amortization period for all amortizable intangibles on a combined basis is 9.1 years as of December 31, 2022.

The weighted-average remaining amortization period for all amortizable intangibles on a combined basis is 11.0 y ears as of December 31, 2023.

The annual changes in the carrying amounts of patents, unpatented technologies, customer relationships and non-compete agreements and other intangible assets subject to amortization for the years ended December 31, 2023 and 2022 were as follows:

5 unchanged sentences

Amortization — ( 771 ) ( 771 )

Foreign exchange ( 376 ) — ( 376 )

Balance as of December 31, 2022 24,172 ( 2,803 ) 21,369

10 unchanged sentences

Reclassifications

( 49 ) — ( 49 )

Foreign exchange 56 — 56

1 unchanged sentence

Amortization — ( 820 ) ( 820 )

Reclassifications ( 49 ) — ( 49 )

Foreign exchange 98 — 98

6 unchanged sentences

Balance as of January 1, 2022 $ 21,434 $ ( 10,355 ) $ 11,079

Purchases 6,880 ( 5 ) 6,875

Amortization — ( 2,572 ) ( 2,572 )

Foreign exchange ( 162 ) — ( 162 )

Reclassifications 149 — 149

Balance as of December 31, 2022 28,301 ( 12,932 ) 15,369

Purchases of intangible assets 6,880 ( 5 ) 6,875

Assets acquisitions, net of cash acquired ( 380 ) 5 — ( 380 )

Amortization — ( 2,813 ) ( 2,813 )

Reclassifications 149 — 149

Foreign exchange 226 — 226

5 unchanged sentences

Balance as of January 1, 2022 $ 17,789 $ ( 16,361 ) $ 1,428

Disposal ( 217 ) — ( 217 )

Purchases 249,767 ( 12,223 ) 237,544

Amortization — ( 386 ) ( 386 )

Reclassifications ( 151 ) — ( 151 )

Foreign exchange ( 6,946 ) — ( 6,946 )

Removal of fully amortized assets — — —

Balance as of December 31, 2022 260,459 ( 28,970 ) 231,489

Purchases of intangible assets 249,767 ( 12,223 ) 237,544

Purchases 1,300 — 1,300

Amortization — ( 17,429 ) ( 17,429 )

Reclassifications ( 151 ) — ( 151 )

Foreign exchange 7,407 — 7,407

4 unchanged sentences

Thereafter 161,269

Total $ 271,142

Indefinite-Lived Intangible Assets

Indefinite-lived intangible assets totaled $ 91.7 million as of December 31, 2022, including $ 91.1 million, net of an unfavorable foreign exchange impact of $ 2.7 million, attributable to trade names acquired in the ETANCO acquisition.

Indefinite-lived intangible assets totaled $ 94.2 million a s of December 31, 2023, including $ 96.3 million, net of an unfavorable foreign exchange impact of $ 2.5 million, attributable to trade names acquired in the ETANCO acquisition.

5 During the year ended December 31, 2023, the Company finalized an acquisition of a business that resulted in a $0.4 million decrease in the intangible with an offset of $1.3 million to customer relationships.

The final amounts are measurement period adjustments for conditions that existed at the acquisition date.

Definite-lived and indefinite-lived assets, net, by segment as of December 31, 2023, and 2022 were as follows:

14 unchanged sentences

Europe 384,432 ( 53,493 ) 330,939

Asia/Pacific 4,240 ( 290 ) 3,950

Total $ 452,862 $ ( 87,523 ) $ 365,339

5 unchanged sentences

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 consolidated balance sheets as of December 31, 2022, and 2021, and consolidated statements of operations, and consolidated statements of cash flows for the year ended December 31, 2022 and 2021:

The following table provides a summary of leases included on the consolidated balance sheets as of December 31, 2023, and 2022, and consolidated statements of operations, and consolidated statements of cash flows for the years ended December 31, 2023 and 2022:

Consolidated Balance Sheets Line Item As of December 31,

5 unchanged sentences

Total operating lease liabilities $ 70,278 $ 58,426

Finance leases

Property and equipment, gross Property, plant and equipment, net $ 3,569 $ 3,569

Accumulated amortization Property, plant and equipment, net ( 3,569 ) ( 3,416 )

Property and equipment, net Property, plant and equipment, net $ — $ 153

The components of lease expense were as follows:

3 unchanged sentences

cost of sales $ 16,936 $ 13,794

Finance lease cost:

Amortization of right-of-use assets General administrative expenses $ — $ 324

Interest on lease liabilities Interest expense, net — 2

Total finance lease cost $ — $ 326

Other information

3 unchanged sentences

Operating cash flows for operating leases $ 15,859 $ 13,355

Finance cash flows for finance leases $ — $ 437

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

27 unchanged sentences

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 for the acquisition of ETANCO.

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

During 2022, the Company made principal payments of $ 100.0 million and $ 16.9 million of the Company's outstanding Revolving and Term Credit Facility, respectively.

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

During 2023 and 2022, the Company made principal payments of $ 97.5 million and $ 116.9 million on the Company's outstanding Revolving and Term Credit Facility, respectively.

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.

7 unchanged sentences

The Company has $ 485.7 million, excluding deferred financing costs, outstanding under the Amended and Restated Credit Facility, which is the estimated fair value as of December 31, 2023.

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

There was $ 583.2 million outstanding balances under the Amended and Restated Credit Facility as of December 31, 2022.

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

13 unchanged sentences

In addition to the debt and lease obligations described elsewhere in the footnotes, the Company has certain purchase obligations in the ordinary course of business.

These purchase obligations are primarily related to the acquisition, construction or expansion of facilities and equipment, and minimum purchase quantities of certain raw materials.

These purchase obligations are primarily related to the acquisition, and construction or expansion of facilities and equipment.

The Company is not a party to any long-term supply contracts with respect to the purchase of raw materials or finished goods.

As of December 31, 2022, these purchase obligations were $ 148.2 million, of which $ 73.9 million is payable in 2023 and the remainder over the following three years .

As of December 31, 2023, the Company has steel purchase obligations that are expected to be settled during the year.

The Company also has long term purchase obligations of $104.2 million for the construction of a new facility in Gallatin, Tennessee and the expansion of our Columbus, Ohio facility that are expected to completed in 2025.

Debt interest obligations include annual facility fees on the Company’s primary line-of-credit facility in the amount of $ 29.0 million at December 31, 2023.

Employee Relations

As of December 31, 2022, approximately 9 % of our employees are represented by labor unions and are covered by collective bargaining agreements in the U.S.

As of December 31, 2023, approximatel y 9 % o f our employees are represented by labor unions and are covered by collective bargaining agreements in the U.S.

The Company has two-facility locations with collective bargaining agreements covering tool and die craftsmen, maintenance workers, and sheet-metal workers.

In Stockton, California, two union contracts will expire in September 2023 and June 2023, respectively.

In Stockton, California, two union contracts will expire in June 2027 and September 2028, respectively.

Also, the Company has two contracts in San Bernardino County, California that will expire in February 2025 and in June 2026, respectively.

29 unchanged sentences

As of December 31, 2023, and 2022, the Company has valuation allowances of $ 10.4 million and $ 11.2 million, respectively.

The valuation allowance decreased by $ 0.8 million and increased by $ 0.7 million for the years ended December 31, 2022, and December 31, 2021, respectively.

The decrease in the 2022 valuation allowances was primarily a result of exchange rate fluctuation.

The increase in the 2021 valuation allowances was primarily the result of an impairment on a foreign equity investment.

The valuation allowance decreased by $ 0.8 million for the years ended December 31, 2023, and December 31, 2022, respectively.

The decrease in the 2023 valuation allowances was primarily due to expiration of certain U.S.

foreign tax credit.

The decrease in the 2022 valuation allowances was primarily the result of exchange rate fluctuation.

As of December 31, 2023, the Company asserts that its accumulated undistributed earnings generated by our foreign subsidiaries are permanently reinvested and as such, has not recognized a US deferred tax liability on its investment in foreign subsidiaries.

6 unchanged sentences

State taxes, net of federal benefit 3.8 % 4.4 % 4.3 %

Change in valuation allowance — % — % 0.1 %

Change in U.S.

tax rate applied to deferred taxes 0.6 % — % — %

True-up of prior year tax returns to tax provision ( 0.1 ) % — % ( 0.1 ) %

37 unchanged sentences

Balance as of December 31 $ 4,641 $ 7,232 $ 944

During 2022, the Company’s uncertain tax positions increased by $ 6.5 million, primarily due to positions for open years of which were assumed in the Company’s acquisition of ETANCO.

Tax positions of $ 0.2 , $ 0.3 , and $ 0.3 million are included in the balance of unrecognized tax benefits as of December 31, 2022, 2021, and 2020, respectively, which if recognized, would reduce the effective tax rate.

During 2023, the Company’s uncertain tax positions decreased by $ 3.0 million, primarily due to positions for open years of which were assumed in the Company’s acquisition of ETANCO.

Tax positions of $ 2.0 million, $ 0.2 million, and $ 0.3 million are included in the balance of unrecognized tax benefits as of December 31, 2023, 2022, and 2021, respectively, which if recognized, would reduce the effective tax rate.

The Company accrues interest and penalties related to unrecognized tax benefits in income tax expense in accordance with the Company’s historical accounting policy.

During the years ended December 31, 2022, 2021 and 2020, accrued interest increased by $ 673 thousand, and decreased by $ 39 thousand and $ 108 thousand, respectively.

During the years ended December 31, 2023, 2022 and 2021, accrued interest decreased by $ 0.2 million, and increased by $ 0.7 million and an insignificant amount, respectively.

The Company had accrued $ 0.7 million, $ 0.9 million and $ 0.2 million as of December 31, 2023, 2022 and 2021, respectively for the potential payment of interest and penalties before income tax benefits.

5 unchanged sentences

The provisions include the new Corporate Alternative Minimum Tax "CAMT", an excise tax on stock buybacks, and significant tax incentives for energy and climate initiatives, all effective for tax year 2023.

The Company is not subject to the provisions of CAMT but will evaluate the impact, if any, of the other provisions under the IRA when they become effective in tax year 2023.

The Company is not subject to the provisions of CAMT and does not expect the impact of the remaining provisions to be material.

Retirement Plans

14 unchanged sentences

Related Party Transactions

During 2022, the Company identified certain purchases of goods and services from companies where the current and former Chief Executive Officers of the Company serves as a director on the respective company's board providing the goods or services.

The amount of goods and services purchased by the Company pursuant to these arrangements was not material to the Company’s consolidated statements of operations and cash flows for the year ended December 31, 2022.

During 2023 and 2022, the Company identified certain purchases of goods and services from companies where the former Chief Executive Officer of the Company served as a director on the respective company's board providing the goods or services.

The Company identified certain services provided by a firm where an immediate family member of a current board member serves as a principal.

The total expenses were not material to the Company, and the expenses were recorded within general and administrative expenses on our Consolidated Statement of Operations during the years ended December 31, 2023 and 2022.

Segment Information

10 unchanged sentences

Net sales $ 1,716,422 $ 480,756 $ 16,625 $ — $ 2,213,803

Wood Products

1,482,099 385,134 14,467 — 1,881,700

Concrete Products

222,720 95,621 2,159 — 320,500

Sales to other segments * 4,718 5,900 29,040 — 39,658

3 unchanged sentences

Provision for income taxes 109,722 11,435 1,313 90 122,560

Business acquisitions, net of cash acquired, capital expenditures, asset acquisition, and equity

Business acquisitions, net of cash acquired;

capital expenditures;

asset acquisitions;

investments 92,725 21,975 6,402 ( 7,605 ) 113,497

5 unchanged sentences

Net sales $ 1,701,041 $ 400,303 $ 14,743 $ — $ 2,116,087

Wood Products

1,496,062 323,065 12,453 — 1,831,580

Concrete Products

202,687 77,228 2,290 — 282,205

Sales to other segments * 4,862 5,732 32,979 — 43,573

3 unchanged sentences

Provision for income taxes 112,537 1,193 1,091 ( 751 ) 114,070

Capital expenditures, including purchases of

intangible assets, 45,817 2,403 603 988 49,811

Business acquisitions, net of cash acquired;

capital expenditures;

asset acquisitions;

and equity investments 54,594 817,163 1,173 2,871 875,801

Total assets 1,393,968 675,634 34,599 399,770 2,503,971

4 unchanged sentences

Net sales $ 1,362,941 $ 196,996 $ 13,280 $ — $ 1,573,217

Wood Products

1,189,264 160,657 11,192 — 1,361,113

Concrete Products

172,353 36,339 2,088 — 210,780

Sales to other segments * 2,237 5,696 27,109 — 35,042

6 unchanged sentences

Total assets 1,352,988 202,631 31,832 ( 103,326 ) 1,484,125

* Sales to other segments are eliminated in consolidation.

* Sales to other segments are eliminated upon 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 and 2020, 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.

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

6 unchanged sentences

The Company’s measure of profit or loss for its reportable segments is income (loss) from operations.

The reconciling amounts between consolidated income before tax and consolidated income from operations are net interest income (expense), net and other, foreign exchange gain (loss), certain legal and professional fees associated with the acquisition of ETANCO, refer to Note 3 "Acquisitions," and loss on disposal of a business.

Interest income (expense) is primarily attributed to “Administrative & All Other.”

19 unchanged sentences

$ 2,213,803 $ 451,092 $ 2,116,087 $ 404,049 $ 1,573,217 $ 274,562

Net sales and long-lived assets, excluding intangible assets, are attributable to the country where the sales or manufacturing operations are located.

Net sales and long-lived assets, excluding intangible assets and goodwill, are attributable to the country where the sales or manufacturing operations are located.

The Company’s wood construction products include connectors, truss plates, fastening systems, fasteners and pre-fabricated shearwalls and are used for connecting and strengthening wood-based construction primarily in the residential construction market.

7 unchanged sentences

Total $ 2,213,803 $ 2,116,087 $ 1,573,217

No customers accounted for at least 10% of net sales for the years ended 2022, 2021 and 2020.

No customers accounted for more than 10% of net sales for the years ended 2023, 2022 and 2021.

Subsequent Events

Effective January 1, 2023, Mike Olosky, the Company’s President and Chief Operating Officer ("COO") was promoted as the Company’s President and Chief Executive Officer ("CEO").

Dividend Declaration

On January 19, 2024, the Company's Board of Directors (the "Board") declared a quarterly cash dividend of $ 0.27 per share of the Company's common stock, estimated to be $ 11.5 million in total.

The record date for the dividend will be April 4, 2024, and will be paid on April 25, 2024.

Treasury Share Retirement

On January 19, 2024, the Board adopted a resolution to retire 360,746 shares held as treasury account in Stockholders' Equity .

Simpson Manufacturing Co., Inc.

20 unchanged sentences

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-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk