What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-11-03 compared with 2023-08-03 · 88 added, 80 removed, 200 unchanged (46% of the section changed)

37 unchanged sentences

Company Overview

was incorporated in Florida in 1956, and, together with its subsidiaries (collectively, “Watsco,” or “we,” “us,” or “our”) is the largest distributor of air conditioning, heating, and refrigeration equipment, and related parts and supplies (“HVAC/R”) in the HVAC/R distribution industry in North America.

At June 30, 2023, we operated from 673 locations in 42 U.S.

was incorporated in Florida in 1956, and, together with its subsidiaries (collectively, “Watsco,” the “Company,” or “we,” “us,” or “our”) is the largest distributor of air conditioning, heating, and refrigeration equipment, and related parts and supplies (“HVAC/R”) in the HVAC/R distribution industry in North America.

At September 30, 2023, we operated from 691 locations in 42 U.S.

States, Canada, Mexico, and Puerto Rico with additional market coverage on an export basis to portions of Latin America and the Caribbean.

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Based on estimates validated by independent sources, we averted an estimated 18.3 million metric tons of CO 2

e emissions from January 1, 2020 to June 30, 2023 through the sale of replacement residential HVAC systems at higher-efficiency standards.

e emissions from January 1, 2020 to September 30, 2023 through the sale of replacement residential HVAC systems at higher-efficiency standards.

Federal Tax Credits and State Incentives

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This legislation is intended, in part, to promote the replacement of existing systems in favor of high-efficiency heat pump systems that reduce greenhouse gas emissions, as compared to older systems, and thereby combat climate change.

Programs under the IRA include enhanced tax credits for homeowners who install qualifying HVAC equipment and tax deductions for owners of commercial buildings that are upgraded to achieve defined energy

The IRA also sets aside $4.3 billion for state-administered consumer rebate programs designed to promote energy savings for low and medium-income households, including HVAC systems.

Further details, including qualifying products, specific programs, and other regulatory requirements contemplated by the IRA are being determined and are expected to be launched during 2023.

Final details, including qualifying products, specific programs, states participating, and other regulatory requirements contemplated by the IRA are still being finalized.

Economic and Marketplace Dynamics

The global economic recovery from the COVID-19

pandemic has included challenges such as inflationary

pressure and supply chain disruptions.

pandemic has included challenges such as inflationary pressure and supply chain disruptions.

Certain of our manufacturers and suppliers continue to experience some level of supply chain disruptions caused by reduced component availability, labor shortages, transportation delays, and other logistical challenges, resulting in longer lead times and constrained availability of HVAC/R products.

These challenges were exacerbated by the regulatory transition to higher SEER products that became effective in 2023.

Revenues for the first half of 2023 reflected temporary production and availability delays by one of our primary OEM partners.

We estimate that revenues were negatively impacted by approximately 4% both during the quarter and six months ended June 30, 2023, in each case due to constrained availability of inventory.

Revenues for the first nine months of 2023 reflected temporary production and availability delays by one of our primary OEM partners.

We estimate that revenues were negatively impacted by approximately 1% and 3% during the quarter and nine months ended September 30, 2023, respectively, in each case due to constrained availability of inventory.

Our OEMs are working to improve their supply chains and product availability in order to help us meet our customers’ needs.

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for the year ended December 31, 2022, as filed with the SEC on February 24, 2023.

We believe that there have been no significant changes during the quarter ended June 30, 2023 to the critical accounting estimates disclosed in our Annual Report on Form 10-K

We believe that there have been no significant changes during the quarter ended September 30, 2023 to the critical accounting estimates disclosed in our Annual Report on Form 10-K

for the year ended December 31, 2022.

Results of Operations

The following table summarizes information derived from our condensed consolidated unaudited statements of income, expressed as a percentage of revenues, for the quarters and six months ended June 30, 2023 and 2022:

Ended June 30,

Quarter Ended

September 30,

Nine Months Ended

September 30,

Cost of sales

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The following narratives reflect our acquisition of Capitol District Supply Co., Inc.

(“Capitol”) in March 2023.

We did not acquire any businesses during the quarter ended June 30, 2023 or the quarter or six months ended June 30, 2022.

(“Capitol”) in March 2023 and Gateway Supply Company, Inc.

(“GWS”) in September 2023.

We did not acquire any businesses during the quarter or nine months ended September 30, 2022.

In the following narratives, computations and other information referring to “same-store basis” exclude the effects of locations closed, acquired, or locations opened, in each case during the immediately preceding 12 months, unless such locations are within close geographical proximity to existing locations.

At June 30, 2023 and 2022, four and nine locations, respectively, that we opened during the immediately preceding 12 months were near existing locations and were therefore included in “same-store basis” information.

The table below summarizes the changes in our locations for the 12 months ended June 30, 2023:

June 30, 2022

At September 30, 2023 and 2022, three and eleven locations, respectively, that we opened during the immediately preceding 12 months were near existing locations and were therefore included in “same-store basis” information.

The table below summarizes the changes in our locations for the 12 months ended September 30, 2023:

September 30, 2022

December 31, 2022

June 30, 2023

Second Quarter of 2023 Compared to Second Quarter of 2022

Quarters Ended June 30,

September 30, 2023

Third Quarter of 2023 Compared to Third Quarter of 2022

Quarters Ended September 30,

(in millions)

The decrease in revenues for the second quarter of 2023 included $2.4 million from locations closed, offset by $3.6 million attributable to new locations acquired and $3.1 million from other locations opened during the preceding 12 months.

Quarters Ended June 30,

The increase in revenues for the third quarter of 2023 included $17.9 million attributable to new locations acquired and $1.7 million from other locations opened during the preceding 12 months, offset by $2.5 million from locations closed.

Quarters Ended September 30,

(in millions)

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Commercial refrigeration products

HVAC equipment sales reflect a 12% decrease in residential products, which is composed of unitary compressor-bearing systems, furnaces, and other indoor components, (13% decrease in U.S.

markets and a 2% decrease in international markets) and an 18% increase in sales of commercial HVAC equipment (17% increase in U.S.

HVAC equipment sales (excluding acquisitions) reflect a 4% increase in residential products, which is composed of unitary compressor-bearing systems, furnaces, and other indoor components, (3% increase in U.S.

markets and a 15% increase in international markets) and a 14% increase in sales of commercial HVAC equipment (12% increase in U.S.

markets and a 19% increase in international markets).

Domestic sales of unitary compressor-bearing systems declined 12%, reflecting a 21% decrease in units and a 9% increase in average selling price.

Quarters Ended June 30,

Domestic sales of unitary compressor-bearing systems increased 4%, reflecting an 8% increase in average selling price and a 4% decrease in units.

Quarters Ended September 30,

(in millions)

Gross profit margin improved 20 basis-points primarily due to the timing of price increases in 2023 as compared to the same period in 2022.

Gross profit margin declined 40 basis-points primarily due to product mix, reflecting a stronger 6% sales growth rate of HVAC equipment (70% of sales) versus a 3% decline in sales of other HVAC products ( 26% of sales

) in 2023 as compared to the same period in 2022.

Generally, HVAC equipment drives lower gross profit margins than other HVAC products.

Selling, General and Administrative Expenses

Quarters Ended June 30,

Quarters Ended September 30,

(in millions)

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Selling, general and administrative expenses as a percentage of revenues

Selling, general and administrative expenses for the second quarter of 2023 decreased primarily due to lower revenues.

On a same-store basis, selling, general and administrative expenses decreased 4% as compared to 2022, primarily due to decreased variable costs commensurate with decreased revenues.

Other income of $7.2 million and $6.3 million for the second quarters of 2023 and 2022, respectively, represents our share of the net income of Russell Sigler, Inc.

Selling, general and administrative expenses decreased 1% for the third quarter of 2023.

On a same-store basis, selling, general and administrative expenses decreased 2% as compared to 2022, primarily due to improved operating efficiencies.

Other income of $9.5 million and $6.9 million for the third quarters of 2023 and 2022, respectively, represents our share of the net income of Russell Sigler, Inc.

(“RSI”), in which we have a 38.1% equity interest.

Interest Expense, Net

Interest expense, net for the second quarter of 2023 increased $2.3 million, or 208%, primarily due to a higher effective interest rate and higher average borrowings under our revolving credit facility for the 2023 period as compared to the same period in 2022.

Quarters Ended June 30,

Interest expense, net for the third quarter of 2023 increased $1.4 million, or 291%, primarily due to a higher effective interest rate and higher average borrowings under our revolving credit facility for the 2023 period as compared to the same period in 2022.

Quarters Ended September 30,

(in millions)

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therefore, Carrier is responsible for its proportionate share of income taxes attributable to its share of earnings from these joint ventures.

The increase in the effective income tax rate was primarily due to higher state income taxes and lower share-based compensation deductions in 2023 as compared to the same period in 2022.

Net Income Attributable to Watsco, Inc.

Net income attributable to Watsco, Inc.

for the quarter ended June 30, 2023 decreased $19.8 million, or 10%, compared to the same period in 2022.

The decrease was primarily driven by lower revenues and gross profit and higher interest expense, net, partially offset by lower selling, general and administrative expenses, higher other income, and lower income taxes.

First Half of 2023 Compared to First Half of 2022

Six Months Ended June 30,

for the quarter ended September 30, 2023 increased $13.3 million, or 8%, compared to the same period in 2022.

The increase was primarily driven by higher revenues, gross profit and higher other income, lower selling, general and administrative expenses, partially offset by higher interest expense, net, and higher income taxes.

Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022

Nine Months Ended September 30,

(in millions)

The decrease in revenues for the first half of 2023 included $4.0 million from locations closed, offset by $4.7 million attributable to new locations acquired and $6.3 million from other locations opened during the preceding 12 months.

Six Months Ended June 30,

The decrease in revenues for the nine months ended September 30, 2023 included $6.5 million from locations closed, offset by $22.6 million attributable to new locations acquired and $8.0 million from other locations opened during the preceding 12 months.

Nine Months Ended September 30,

(in millions)

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Commercial refrigeration products

HVAC equipment sales reflect a 9% decrease in residential products, which is composed of unitary compressor-bearing systems, furnaces, and other indoor components, (9% decrease in U.S.

markets and a 4% decrease in international markets) and a 21% increase in sales of commercial HVAC equipment (21% increase in U.S.

HVAC equipment sales (excluding acquisitions) reflect a 4% decrease in residential products, which is composed of unitary compressor-bearing systems, furnaces, and other indoor components, (5% decrease in U.S.

markets and a 2% increase in international markets) and a 17% increase in sales of commercial HVAC equipment (17% increase in U.S.

markets and a 19% increase in international markets).

Domestic sales of unitary compressor-bearing systems declined 3%, reflecting a 12% decrease in units and a 9% increase in average selling price.

Six Months Ended June 30,

Nine Months Ended September 30,

(in millions)

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Selling, General and Administrative Expenses

Six Months Ended June 30,

Nine Months Ended September 30,

(in millions)

1 unchanged sentence

Selling, general and administrative expenses as a percentage of revenues

Selling, general and administrative expenses for the first half of 2023 decreased primarily due to lower variable costs commensurate with the decline in revenues.

Other income of $10.9 million and $10.4 million for the first half of 2023 and 2022, respectively, represents our share of the net income of RSI, in which we have a 38.1% equity interest.

Selling, general and administrative expenses for the nine months ended September 30, 2023 decreased primarily due to lower revenues.

On a same-store basis, selling, general and administrative expenses decreased 2% as compared to the same period in 2022, primarily due to decreased variable costs commensurate with decreased revenues and improved operating efficiencies.

Other income of $20.4 million and $17.3 million for the nine months ended September 30, 2023 and 2022, respectively, represents our share of the net income of RSI, in which we have a 38.1% equity interest.

Interest Expense, Net

Interest expense, net for the first half of 2023 increased $2.4 million, or 142%, primarily due to a higher effective interest rate, partially offset by lower average outstanding borrowings, in each case under our revolving credit facility, for the 2023 period as compared to the same period in 2022.

Six Months Ended June 30,

Interest expense, net for the nine months ended September 30, 2023 increased $3.8 million, or 175%, for the 2023 period as compared to the same period in 2022, primarily due to a higher effective interest rate and higher average outstanding borrowings under our revolving credit facility.

Nine Months Ended September 30,

(in millions)

Effective income tax rate

Income taxes represent a composite of the income taxes attributable to our wholly owned operations and income taxes attributable to our joint ventures with Carrier Global Corporation (“Carrier”), which are primarily taxed as partnerships for income tax purposes;

Income taxes represent a composite of the income taxes attributable to our wholly owned operations and income taxes attributable to our joint ventures with Carrier, which are primarily taxed as partnerships for income tax purposes;

therefore, Carrier is responsible for its proportionate share of income taxes attributable to its share of earnings from these joint ventures.

The increase in the effective income tax rate was primarily due to higher state income taxes partially offset by higher share-based compensation deductions in 2023 as compared to the same period in 2022.

The increase in the effective income tax rate was primarily due to higher state income taxes partially offset by higher share-based compensation deductions and tax credits in 2023 as compared to the same period in 2022.

Net Income Attributable to Watsco, Inc.

Net income attributable to Watsco, Inc.

for the first half of 2023 decreased $23.0 million, or 8%, compared to the same period in 2022.

for the nine months ended September 30, 2023 decreased $9.7 million, or 2%, compared to the same period in 2022.

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Additionally, we may also generate cash through the issuance and sale of our Common stock.

As of June 30, 2023, we had $162.5 million of cash and cash equivalents, of which $116.2 million was held by foreign subsidiaries.

As of September 30, 2023, we had $175.0 million of cash and cash equivalents, of which $152.6 million was held by foreign subsidiaries.

The repatriation of cash balances from our foreign subsidiaries could have adverse tax impacts or be subject to capital controls;

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Our access to funds under our revolving credit agreement depends on the ability of the syndicate banks to meet their respective funding commitments.

Disruptions in the credit and capital markets could adversely affect our ability to draw on our revolving credit agreement and may also adversely affect the determination of interest rates, particularly rates based on the Secured Overnight

Financing Rate (“SOFR”), which is one of the base rates under our revolving credit agreement.

SOFR has limited historical data and is a secured lending rate, which could give rise to uncertainties and volatility in the benchmark rates.

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Working Capital

Working capital increased to $1,926.6 million at June 30, 2023 from $1,392.2 million at December 31, 2022, due to:

(i) higher inventory balances driven by the seasonal ramp-up

in inventories in connection with our selling season, new inventory requirements pertaining to the transition to higher minimum efficiency levels for residential HVAC systems that went into effect on January 1, 2023, greater inventory carry as a consequence of various supply chain disruptions, and inflation;

(ii) higher accounts receivable due to the seasonality of our business;

and (iii) the classification of borrowings under our revolving credit agreement as long-term at June 30, 2023, which were offset by an increase in accounts payable consistent with the change in inventory.

The following table summarizes our cash flow activity for the six months ended June 30, 2023 and 2022 (in millions):

Cash flows (used in) provided by operating activities

Working capital increased to $1,842.9 million at September 30, 2023 from $1,392.2 million at December 31, 2022, due to:

(i) a customary increase in inventory concurrent with our selling season, new inventory requirements pertaining to the transition to higher minimum efficiency levels for residential HVAC systems that went into effect on January 1, 2023, and an increase of safety stock as a consequence of supply chain disruptions;

(ii) higher accounts receivable consistent with the seasonality of our business;

and (iii) the classification of borrowings under our revolving credit agreement as a long-term liability at September 30, 2023, which were offset by an increase in accounts payable consistent with the change in inventory.

The following table summarizes our cash flow activity for the nine months ended September 30, 2023 and 2022 (in millions):

Cash flows provided by operating activities

Cash flows used in investing activities

Cash flows provided by (used in) financing activities

Cash flows used in financing activities

The individual items contributing to cash flow changes for the periods presented are detailed in the condensed consolidated unaudited statements of cash flows contained in this Quarterly Report on Form 10-Q.

Operating Activities

The decrease in net cash provided by operating activities was primarily due to the timing of vendor payments and lower net income in 2023 as compared to 2022, partially offset by the timing of collections and inventory purchases.

Investing Activities

Net cash used in investing activities was lower primarily due to lower capital expenditures and higher proceeds from the sale of property and equipment partially offset by cash consideration paid for our acquisition of Capitol in 2023.

Net cash used in investing activities was higher primarily due to cash consideration paid for our acquisitions of Capitol and GWS in 2023.

Financing Activities

Net cash provided by financing activities increased primarily due to higher borrowings under our revolving credit agreement and proceeds from the sale of Common stock used for repayments under our revolving credit agreement, partially offset by an increase in dividends paid in 2023.

Net cash used in financing activities decreased primarily due to higher borrowings under our revolving credit agreement and proceeds from the sale of Common stock used for repayments under our revolving credit agreement, partially offset by an increase in dividends paid in 2023.

Revolving Credit Agreement

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Additional proceeds may be used for, among other things, funding seasonal working capital needs and for other general corporate purposes, including acquisitions, dividends (if and as declared by our Board of Directors), capital expenditures, stock repurchases, and issuances of letters of credit.

The revolving credit facility has a seasonal component from October 1 to March 31, during which the borrowing capacity may be reduced to $500.0 million at our discretion (which effectively reduces fees payable in respect of the unused portion of the commitment).

Included in the revolving credit facility are a $125.0 million swingline loan sublimit, a $10.0 million letter of credit sublimit, a $75.0 million alternative currency borrowing sublimit, and an $10.0 million Mexican borrowing subfacility.

The credit agreement matures on March 16, 2028.

Borrowings under the revolving credit facility bear interest at either Term SOFR or Daily Simple SOFR-based rates plus 0.10%, plus a spread which ranges from 100.0 to 137.5 basis-points (Term SOFR and Daily Simple SOFR plus 100.0 basis-points at June 30, 2023), depending on our ratio of total debt to EBITDA, or on rates based on the highest of the Federal Funds Effective Rate plus 0.5%, the Prime Rate or Term SOFR plus 1.0%, in each case plus a spread which ranges from 0 to 50.0 basis-points (0 basis-points at June 30, 2023), depending on our ratio of total debt to EBITDA.

We pay a variable commitment fee on the unused portion of the commitment under the revolving credit agreement, ranging from 12.5 to 27.5 basis-points (12.5 basis-points at June 30, 2023).

Borrowings under the revolving credit facility bear interest at either Term SOFR or Daily Simple SOFR-based rates plus 0.10%, plus a spread which ranges from 100.0 to 137.5 basis-points (Term SOFR and Daily Simple SOFR plus 100.0 basis-points at September 30, 2023), depending on our ratio of total debt to EBITDA, or on rates based on the highest of the Federal Funds Effective Rate plus 0.5%, the Prime Rate or Term SOFR plus 1.0%, in each case plus a spread which ranges from 0 to 50.0 basis-points (0 basis-points at September 30, 2023), depending on our ratio of total debt to EBITDA.

We pay a variable commitment fee on the unused portion of the commitment under the revolving credit agreement, ranging from 12.5 to 27.5 basis-points (12.5 basis-points at September 30, 2023).

We paid fees of $0.8 million in connection with entering into the revolving credit agreement, which are being amortized ratably through the maturity of the facility in March 2028.

At June 30, 2023, $342.9 million was outstanding under the revolving credit agreement.

At September 30, 2023, $105.6 million was outstanding under the revolving credit agreement.

The revolving credit agreement contains customary affirmative and negative covenants, including financial covenants with respect to consolidated leverage and interest coverage ratios, and other customary restrictions.

We believe we were in compliance with all covenants at June 30, 2023.

We believe we were in compliance with all covenants at September 30, 2023.

At-the-Market

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On February 25, 2022, we entered into an amended and restated sales agreement with Robert W.

and Goldman Sachs & Co.

LLC, which enables the Company to issue and sell shares of Common stock in one or more negotiated transactions or transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”), for a maximum aggregate offering amount of up to $300.0 million (the “ATM Program”).

(“Baird”) and Goldman Sachs & Co.

LLC (“GS”), which enables the Company to issue and sell shares of Common stock in one or more negotiated transactions or transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”), for a maximum aggregate offering amount of up to $300.0 million (the “ATM Program”).

The offer and sale of our Common stock pursuant to the ATM Program has been registered under the Securities Act pursuant to our automatically effective shelf registration statement on Form S-3

During the quarter and six months ended June 30, 2023, we issued and sold 45,000 shares of Common stock under the ATM Program for net proceeds of $15.2 million.

During the nine months ended September 30, 2023, we issued and sold 45,000 shares of Common stock under the ATM Program for net proceeds of $15.2 million.

Direct costs of $0.4 million incurred in connection with the offering were charged against the proceeds from the sale of Common stock and reflected as a reduction of paid-in

At June 30, 2023, $284.7 million remained available for sale under the ATM Program.

At September 30, 2023, $284.7 million remained available for sale under the ATM Program.

On November 3, 2023, we entered into a second amended and restated sales agreement with Baird, which removed GS as a sales agent under the ATM Program.

See Item 5 of this Quarterly Report on Form 10-Q

for additional information.

Investment in Unconsolidated Entity

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The RSI Shareholders may transfer their respective shares of RSI common stock only to members of the Sigler family or to Carrier Enterprise I, and, at any time from and after the date on which Carrier Enterprise I owns 85% or more of RSI’s outstanding common stock, it has the right, but not the obligation, to purchase from the RSI Shareholders the remaining outstanding shares of RSI common stock.

At June 30, 2023, using the criteria set forth in the Shareholders’ Agreement, the valuation of the RSI Shareholders’ RSI common stock was approximately $374.0 million.

In July 2023, the Company, Carrier Enterprise I and the RSI Majority Holders entered into an agreement that (1) provides Carrier Enterprise I the discretion, but not the obligation, to fund up to 80% of any purchase from the RSI Majority Holders of their RSI shares, as required under the Shareholders’ Agreement, using Watsco Common stock, (2) provides that any such Watsco common stock actually issued would be valued based on the average volume-weighted average price of the Watsco Common stock for the ten trading days immediately preceding the payment date for the applicable RSI shares and (3) limits the amount of RSI shares that may be collectively sold by the RSI Majority Holders to Carrier Enterprise I under the Shareholders’ Agreement to $125.0 million during any rolling 12-month period.

At September 30, 2023, using the criteria set forth in the Shareholders’ Agreement, the valuation of the RSI Shareholders’ RSI common stock was approximately $426.0 million.

We believe that our operating cash flows, cash on hand, funds available for borrowing under our revolving credit agreement, or use of the ATM Program would be sufficient to purchase any additional ownership interests in RSI.

On July 28, 2023, Watsco, Carrier Enterprise I, and the RSI Majority Holders entered into an agreement that (1) provides Carrier Enterprise I the discretion, but not the obligation, to fund up to 80% of any purchase from the RSI Majority Holders of their RSI common stock, as required under the Shareholders’ Agreement, using Watsco Common stock (the “Offered Shares”), (2) provides that any Offered Shares actually issued would be valued based on the average volume-weighted average price of Watsco’s Common stock for the ten trading days immediately preceding the payment date for the applicable RSI shares, and (3) limits the amount of RSI shares that may be collectively sold by the RSI Majority Holders to Carrier Enterprise I under the Shareholders’ Agreement to $125.0 million during any rolling 12-month

We have not issued or sold any Offered Shares, and there is no assurance that we will issue and sell any Offered Shares, nor is the number of Offered Shares that may be issued and sold currently determinable.

On September 1, 2023, we acquired substantially all the assets and assumed certain of the liabilities of Gateway Supply Company, Inc., a plumbing and HVAC distributor operating from 16 locations in South Carolina and North Carolina.

Consideration for the net purchase price consisted of $4.0 million in cash and 280,215 shares of Common stock having a fair value of $102.3 million, net of cash acquired of $3.1 million.

On March 3, 2023, one of our wholly owned subsidiaries acquired Capitol, a distributor of air conditioning and heating products with annual sales of approximately $13.0 million, operating from three locations in New York.

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Common Stock Dividends

We paid cash dividends of $4.90 and $4.15 per share of Common stock and Class B common stock during the six months ended June 30, 2023 and 2022, respectively.

On July 3, 2023, our Board of Directors declared a regular quarterly cash dividend of $2.45 per share of both Common and Class B common stock that was paid on July 31, 2023 to shareholders of record as of July 17, 2023.

We paid cash dividends of $7.35 and $6.35 per share on both Common and Class B common stock during the nine months ended September 30, 2023 and 2022, respectively.

On October 2, 2023, our Board of Directors declared a regular quarterly cash dividend of $2.45 per share on both Common and Class B common stock that was paid on October 31, 2023 to shareholders of record as of October 17, 2023.

Future dividends and changes in dividend rates are at the sole discretion of the Board of Directors and depend upon factors including, but not limited to, cash flow generated by operations, profitability, financial condition, cash requirements, and future prospects.

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In aggregate, 6,370,913 shares of Common and Class B common stock have been repurchased at a cost of $114.4 million since the inception of the program.

At June 30, 2023, there were 1,129,087 shares remaining authorized for repurchase under the program.

At September 30, 2023, there were 1,129,087 shares remaining authorized for repurchase under the program.

The IRA includes, among other provisions, a 1% excise tax on stock repurchases effective January 1, 2023.

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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 2. Management’s Discussion and Analysis