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Item 2. Management’s Discussion and Analysis

2023-07-24 compared with 2023-04-25 · 102 added, 78 removed, 125 unchanged (59% of the section changed)

14 unchanged sentences

Refer to Item 7, MD&A, of our Annual Report on Form 10-K for the year ended December 31, 2022 for information with respect to our critical accounting policies which we believe could have the most significant effect on our reported results and require subjective or complex judgments by management.

Except for the items reported below, management believes that as of March 31, 2023, and during the period from January 1, 2023 through March 31, 2023, there has been no material change to this information.

Except for the items reported below, management believes that as of June 30, 2023, and during the period from January 1, 2023 through June 30, 2023, there has been no material change to this information.

Recent Accounting Pronouncements

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On July 1, 2022, we completed the Elkay Merger for a purchase price of $1,457.8 million.

Elkay, a market leader of commercial sinks and drinking water solutions, complements our existing product portfolio.

Elkay, a market leader of drinking water solutions and commercial sinks, complements our existing product portfolio.

The purchase price includes $1,411.9 million of Zurn's common stock based on Zurn's closing stock price of $27.48 on July 1, 2022, and $45.9 million of net cash payments for the repayment of Elkay's term loan and Elkay's transaction related costs outstanding that were in excess of Elkay's cash and cash equivalents at the time of closing.

Pursuant to the terms of the merger agreement, we issued 51,564,524 shares of its common stock, which represented approximately 29% of outstanding shares immediately following the Merger.

During the three months ended March 31, 2023, the preliminary purchase price was adjusted and is reflected in the purchase price amounts above, following the return of 186,020 of the shares we issued at closing as a result of lower working capital and cash balances at closing compared to targets stipulated in the Merger Agreement.

During the six months ended June 30, 2023, the purchase price was adjusted and is reflected in the purchase price amounts above, following the return of 186,020 of the shares we issued at closing as a result of lower working capital and cash balances at closing compared to targets stipulated in the merger agreement.

The shares returned were canceled upon receipt.

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The operating results of PMC are reported as discontinued operations in our condensed consolidated statements of operations for all periods presented.

The condensed consolidated statements of cash flows for the period ended March 31, 2023 have not been adjusted to separately disclose cash flows related to the discontinued operations.

See Item 1, Note 4, Discontinued Operations for additional information on cash flows associated with the discontinued operations.

The major components of the Income from discontinued operations, net of tax presented in the condensed consolidated statements of operations for the three months ended March 31, 2023 and March 31, 2022, are as follows (in millions):

Three Months Ended

March 31, 2023 March 31, 2022

The condensed consolidated statements of cash flows for the period ended June 30, 2023 have not been adjusted to separately disclose cash flows related to the discontinued operations.

The major components of the Income from discontinued operations, net of tax presented in the condensed consolidated statements of operations for the three and six months ended June 30, 2023 and June 30, 2022, are as follows (in millions):

Three Months Ended Six Months Ended

June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022

Selling, general and administrative expenses (1) $ 1.8 $ — $ 1.8 $ —

Income from discontinued operations before income tax 1.8 — 1.8 —

Income tax benefit 0.2 0.8

Income tax (expense) benefit (0.1) — 0.1 0.8

Income from discontinued operations, net of tax $ 1.7 $ — $ 1.9 $ 0.8

(1) Selling, general and administrative expenses include the reversal of certain accruals as a result of costs the Company will no longer incur related to the Spin-Off Transaction.

See Item 1, Note 4, Discontinued Operations for additional information.

Restructuring and Other Similar Costs

During the three months ended March 31, 2023, the Company continued to execute various restructuring actions.

During the three and six months ended June 30, 2023, the Company continued to execute various restructuring actions.

These initiatives were implemented to drive efficiencies and reduce operating costs while also modifying the Company's footprint to reflect changes in the markets it serves, the impact of acquisitions, including Elkay, on the Company's overall manufacturing capacity and the refinement of its overall product portfolio.

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As such, the Company expects further expenses related to workforce reductions, potential impairment or accelerated depreciation of assets, lease termination costs and other facility rationalization costs.

For the three months ended March 31, 2023, restructuring charges totaled $1.9 million.

For the three months ended March 31, 2022, restructuring charges totaled $1.1 million.

For the three and six months ended June 30, 2023, restructuring charges totaled $7.8 million and $9.7 million, respectively.

For the three and six months ended June 30, 2022, restructuring charges totaled $0.3 million and $1.4 million, respectively.

Refer to Item 1, Note 3, Restructuring and Other Similar Charges for further information.

Results of Operations

Three Months Ended March 31, 2023 compared with the Three Months Ended March 31, 2022:

Three Months Ended June 30, 2023 compared with the Three Months Ended June 30, 2022:

(Dollars in Millions)

Three Months Ended

March 31, 2023 March 31, 2022 Change % Change

June 30, 2023 June 30, 2022 Change % Change

Net Sales $ 403.2 $ 284.2 $ 119.0 41.9 %

Net sales were $372.1 million and $239.6 million during the three months ended March 31, 2023 and March 31, 2022, respectively, an increase of 55% year-over-year.

Excluding a 53% increase in sales associated with our combination with Elkay and a 1% decrease in sales associated with foreign currency translation, core sales increased 3% year-over-year as nearly all of our product categories, with the exception of products sold into the residential end market, contributed to the sales growth.

Net sales were $403.2 million and $284.2 million during the three months ended June 30, 2023 and June 30, 2022, respectively, an increase of 42% year-over-year.

Excluding a 47% increase in sales associated with our combination with Elkay, core sales decreased 5% year-over-year as a result of lower year over year market demand associated with products sold into our residential end markets as well as timing of shipments in the prior year as we began working down an elevated backlog during the three months ended June 30, 2022.

Income from operations

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Three Months Ended

March 31, 2023 March 31, 2022 Change % Change

June 30, 2023 June 30, 2022 Change % Change

Income from operations $ 54.8 $ 53.5 $ 1.3 2.4 %

% of net sales 13.6 % 18.8 % (5.2) %

During the three months ended March 31, 2023, income from operations was $43.7 million compared to $43.9 million during the three months ended March 31, 2022.

Income from operations as a percentage of net sales decreased by 660 basis points year over year as the benefits of productivity actions were offset by higher non-cash stock-based compensation expense, incremental depreciation, and intangible asset amortization resulting from the merger with Elkay, as well as the sell-through of higher cost inventory in the quarter.

During the three months ended June 30, 2023, income from operations was $54.8 million compared to $53.5 million during the three months ended June 30, 2022.

Income from operations as a percentage of net sales decreased by 520 basis points year over year as the benefits of productivity actions were offset by higher restructuring costs, non-cash stock-based compensation expense, incremental depreciation and intangible asset amortization resulting from the merger with Elkay, as well as the sell-through of higher cost inventory in the quarter.

Interest expense, net

Interest expense, net was $9.6 million for the three months ended March 31, 2023, compared to $4.8 million for the three months ended March 31, 2022.

Interest expense, net was $10.3 million for the three months ended June 30, 2023, compared to $5.2 million for the three months ended June 30, 2022.

The increase in interest expense as compared to the prior year period is primarily a result of higher year-over-year interest rates.

See Item 1, Note 13 Long-Term Debt for more information.

Other (expense) income, net

Other (expense) income, net for the three months ended March 31, 2023 and 2022, was $(2.4) million and $0.3 million, respectively.

Other (expense) income, net consists primarily of foreign currency transaction gains and losses and the non-service cost components associated with our defined benefit plans.

The year-over-year change is primarily driven by changes in foreign currency rates and higher interest cost within the non-service cost components of our defined benefit plans.

Other income (expense), net

Other income (expense), net for the three months ended June 30, 2023 and 2022, was $1.6 million and $(0.6) million, respectively.

Other income (expense), net consists primarily of foreign currency transaction gains and losses, the non-service cost components associated with our defined benefit plans and other non-operational gains and losses.

The year-over-year change is primarily driven by higher income recognized in connection with an insurance settlement, partly offset by higher interest cost within the non-service cost components of our defined benefit plans and accruals for estimated environmental remediation costs.

Provision for income taxes

The income tax provision was $9.1 million for the three months ended March 31, 2023, compared to $10.0 million for the three months ended March 31, 2022.

The effective income tax rate for the three months ended March 31, 2023 was 28.7% versus 25.4% for the three months ended March 31, 2022.

The effective income tax rate for the three months ended March 31, 2023 was above the U.S.

federal statutory rate of 21% primarily due to the accrual of foreign income taxes, which are generally above the U.S.

federal statutory rate, the accrual of additional income taxes associated with compensation deduction limitations under Section 162(m) of the Internal Revenue Code and the accrual of various state income taxes, partially offset by the recognition of certain previously unrecognized tax benefits due to the lapse of the applicable statutes of limitations.

The effective income tax rate for the three months ended March 31, 2022 was above the U.S.

federal statutory rate of 21% primarily due to the accrual of foreign income taxes, which are generally above the U.S.

The income tax provision was $13.2 million for the three months ended June 30, 2023, compared to $11.3 million for the three months ended June 30, 2022.

The effective income tax rate for the three months ended June 30, 2023 was 28.6% versus 23.7% for the three months ended June 30, 2022.

The effective income tax rate for the three months ended June 30, 2023 and the three months ended June 30, 2022 was above the U.S.

federal statutory rate of 21% primarily due to the accrual of additional income taxes associated with compensation deduction limitations under Section 162(m) of the Internal Revenue Code, the accrual of various state income taxes and the accrual of foreign income taxes, which are generally above the U.S.

federal statutory rate, partially offset by the recognition of income tax benefits associated with share-based payments.

On a quarterly basis, we review and analyze our valuation allowances associated with deferred tax assets relating to certain foreign and state net operating loss carryforwards as well as U.S.

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Future changes to the balances of these valuation allowances, as a result of our continued review and analysis, could impact the financial statements for such period of change.

Net income for the three months ended March 31, 2023, was $22.8 million compared to net income of $30.2 million for the three months ended March 31, 2022.

Diluted net income per share for the three months ended March 31, 2023 and March 31, 2022, was $0.13 and $0.24, respectively.

Net income for the three months ended June 30, 2023, was $34.6 million compared to net income of $36.4 million for the three months ended June 30, 2022.

Diluted net income per share for the three months ended June 30, 2023 and June 30, 2022, was $0.20 and $0.28, respectively.

The year-over-year change is the result of the factors described above.

Net income from discontinued operations, net of tax, was $0.2 million for the three months ended March 31, 2023 compared to $0.8 million for the three months ended March 31, 2022.

Diluted net income per share from discontinued operations for the three months ended March 31, 2023 and March 31, 2022, was $0.00 and $0.01, respectively.

Net income from discontinued operations, net of tax, was $1.7 million for the three months ended June 30, 2023 compared to $0.0 million for the three months ended June 30, 2022.

Diluted net income per share from discontinued operations for the three months ended June 30, 2023 and June 30, 2022, was $0.01 and $0.00, respectively.

Six Months Ended June 30, 2023 compared with the Six Months Ended June 30, 2022:

(Dollars in Millions)

Six Months Ended

June 30, 2023 June 30, 2022 Change % Change

Net Sales $ 775.3 $ 523.8 $ 251.5 48.0 %

Net sales were $775.3 million during the six months ended June 30, 2023, an increase of 48% year-over-year.

Excluding a 50% increase in sales associated with our combination with Elkay and a 1% decrease associated with foreign currency translation, core sales decreased 1% year-over-year as a result of lower year over year market demand associated with products sold into our residential end markets as well as timing of shipments in the prior year as we began working down an elevated backlog during the second quarter of 2022.

Income from operations

(Dollars in Millions)

Six Months Ended

June 30, 2023 June 30, 2022 Change % Change

Income from operations 98.5 97.4 1.1 1.1 %

% of net sales 12.7 % 18.6 % (5.9) %

Income from operations during the six months ended June 30, 2023 was $98.5 million during the six months ended June 30, 2023 compared to $97.4 million during the six months ended June 30, 2022.

Income from operations as a percentage of net sales decreased by 590 basis points year over year as the benefits of productivity actions were offset by higher restructuring costs, non-cash stock-based compensation expense, incremental depreciation and intangible asset amortization resulting from the merger with Elkay, as well as the sell-through of higher cost inventory during the six months ended June 30, 2023.

Interest expense, net

Interest expense, net was $19.9 million during the six months ended June 30, 2023, compared to $10.0 million during the six months ended June 30, 2022.

The increase in interest expense as compared to the prior year period is primarily a result of higher year-over-year interest rates.

See Item 1, Note 13 Long-Term Debt for more information.

Other expense, net

Other expense, net during the six months ended June 30, 2023 and 2022 was $0.8 million and $0.3 million, respectively.

Other expense, net consists primarily of foreign currency transaction gains and losses, the non-service cost components associated with our defined benefit plans and other non-operational gains and losses.

The year-over-year change is primarily driven by higher interest cost within the non-service cost components of our defined benefit plans and accruals for estimated environmental remediation costs, partially offset by income recognized in connection with an insurance settlement.

Provision for income taxes

The income tax provision was $22.3 million for the six months ended June 30, 2023, compared to $21.3 million for the six months ended June 30, 2022.

The effective income tax rate for the six months ended June 30, 2023 was 28.7% versus 24.5% for the six months ended June 30, 2022.

The effective income tax rate for the six months ended June 30, 2023 and the six months ended June 30, 2022 was above the U.S.

federal statutory rate, partially offset by the recognition of income tax benefits associated with share-based payments.

Net income for the six months ended June 30, 2023, was $57.4 million compared to $66.6 million for the six months ended June 30, 2022.

Diluted net income per share for the six months ended June 30, 2023 and June 30, 2022, was $0.32 and $0.52, respectively.

Net income from discontinued operations, net of tax, was $1.9 million for the six months ended June 30, 2023 compared to $0.8 million for the six months ended June 30, 2022.

Diluted net income per share from discontinued operations for each of the six months ended June 30, 2023 and June 30, 2022, was $0.01 and $0.01, respectively.

Non-GAAP Financial Measures

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Adjusted EBITDA

Adjusted EBITDA (as described below in “Covenant Compliance”) is an important measure because, under our credit agreement, our ability to incur certain types of acquisition debt and certain types of subordinated debt, make certain types of acquisitions or asset exchanges, operate our business and make dividends or other distributions, all of which will impact our financial performance, is impacted by our Adjusted EBITDA, as our lenders measure our performance with a net first lien leverage ratio by comparing our senior secured bank indebtedness to our Adjusted EBITDA (see “Covenant Compliance” for additional discussion of this ratio, including a reconciliation to our net income).

We reported net income in the three months ended March 31, 2023, of $22.8 million and Adjusted EBITDA for the same period of $72.4 million.

See “Covenant Compliance” for a reconciliation of Adjusted EBITDA to GAAP net income.

Covenant Compliance

Our credit agreement, which governs our senior secured credit facilities, contains, among other provisions, restrictive covenants regarding indebtedness, payments and distributions, mergers and acquisitions, asset sales, affiliate transactions, capital expenditures and the maintenance of certain financial ratios.

Payment of borrowings under the credit agreement may be accelerated if there is an event of default.

Events of default include the failure to pay principal and interest when due, a material breach of a representation or warranty, certain non-payments or defaults under other indebtedness, covenant defaults, events of bankruptcy and a change of control.

Lien Leverage Ratio of 5.00 to 1.00 as of the end of each fiscal quarter.

At March 31, 2023, our Net First Lien Leverage Ratio was 1.63 to 1.00.

Failure to comply with these covenants could limit our long-term growth prospects by hindering our ability to borrow under the revolver, to obtain future debt and/or to make acquisitions.

Adjusted EBITDA is the term we use to describe EBITDA as defined and adjusted in our credit agreement, which is net income, adjusted for the items summarized in the table below.

Adjusted EBITDA is intended to show our unleveraged, pre-tax operating results and therefore reflects our financial performance based on operational factors, excluding non-operational, non-cash or non-recurring losses or gains.

Adjusted EBITDA is an important measure because, under our credit agreement, our ability to incur certain types of acquisition debt and certain types of subordinated debt, make certain types of acquisitions or asset exchanges, operate our business and make dividends or other distributions, all of which will impact our financial performance, is impacted by our Adjusted EBITDA, as our lenders measure our performance with a net first lien leverage ratio by comparing our senior secured bank indebtedness to our Adjusted EBITDA.

It also is intended to show our unleveraged, pre-tax operating results and therefore reflects our financial performance based on operational factors, excluding non-operational, non-cash or non-recurring losses or gains.

It is also provided to aid investors in understanding our compliance with our debt covenants.

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Further, although not included in the calculation of Adjusted EBITDA below, the measure may at times allow us to add estimated cost savings and operating synergies related to operational changes ranging from acquisitions or dispositions to restructuring, and/or exclude one-time transition expenditures that we anticipate we will need to incur to realize cost savings before such savings have occurred.

The calculation of Adjusted EBITDA under our credit agreement as of March 31, 2023, is presented in the table below.

For the six months ended June 30, 2023, we had net income of $57.4 million and Adjusted EBITDA for the same period of $159.4 million.

The calculation of Adjusted EBITDA under our credit agreement as of June 30, 2023, is presented in the table below.

However, the results of such calculation could differ in the future based on the different types of adjustments that may be included in such respective calculations at the time.

Set forth below is a reconciliation of net income attributable to Zurn Elkay common stockholders to Adjusted EBITDA for the periods indicated below.

(in millions) Three months ended

March 31, 2022 Twelve months ended

December 31, 2022 Three months ended

March 31, 2023 Twelve months ended

March 31, 2023

Covenant Compliance

Payment of borrowings under the credit agreement may be accelerated if there is an event of default.

Certain covenants contained in the credit agreement restrict our ability to take certain actions, such as incurring additional debt or making acquisitions, if we are unable to comply with a maximum total Net First Lien Leverage Ratio (consolidate indebtedness to Adjusted EBITDA) of 5.00 to 1.00 as of the end of each fiscal quarter.

At June 30, 2023, our Net First Lien Leverage Ratio was 1.54 to 1.00.

Failure to comply with these covenants could limit our long-term growth prospects by hindering our ability to borrow under the revolver, to obtain future debt and/or to make acquisitions.

Set forth below is a reconciliation of net income to Adjusted EBITDA for the periods indicated below.

(in millions) Six months ended

June 30, 2022 Twelve months ended

December 31, 2022 Six months ended

June 30, 2023 Twelve months ended

June 30, 2023

Net income $ 66.6 $ 61.7 $ 57.4 $ 52.5

2 unchanged sentences

Actuarial gain on pension and postretirement benefit obligations — (1.9) — (1.9)

Other (income) expense, net (2) (0.3) (1.7) 2.4 1.0

Other expense (income), net (2) 0.3 (1.7) 0.8 (1.2)

Interest expense 10.0 26.9 19.9 36.8

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Adjusted EBITDA $ 116.3 $ 264.6 $ 159.4 $ 307.7

Pro forma adjustment for acquisitions (7)

Pro forma Adjusted EBITDA 309.0

Consolidated indebtedness (7) $ 474.3

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(1) Income from discontinued operations, net of tax is not included in Adjusted EBITDA in accordance with the terms of our credit agreement.

(2) Other (income) expense, net for the periods indicated, consists primarily of gains and losses from foreign currency transactions and the non-service cost components of net periodic benefit costs associated with our defined benefit plans.

(3) Restructuring and other similar charges is comprised of costs associated with workforce reductions, lease termination costs, and other facility rationalization costs.

(2) Other expense (income), net for the periods indicated, consists primarily of gains and losses from foreign currency transactions, the non-service cost components of net periodic benefit costs associated with our defined benefit plans and other non-operational gains and losses .

(3) Restructuring and other similar charges is comprised of costs associated with workforce reductions, asset impairments, lease termination costs, and other facility rationalization costs.

See Item 1, Note 3 , Restructuring and Other Similar Charges for more information.

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(6) Other, net consists of gains and losses on the disposition of long-lived assets.

(7) Represents a pro forma adjustment to include Adjusted EBITDA related to the Elkay Merger, which was permitted by our credit agreement.

The pro forma adjustment includes the period from April 1, 2022, through the date of the Elkay Merger.

See Item 1, Note 2 , Acquisition for more information.

(8) Our credit agreement defines our consolidated indebtedness as the sum of all indebtedness (other than letters of credit or bank guarantees, to the extent undrawn) consisting of indebtedness for borrowed money and capitalized lease obligations, less unrestricted cash, which was $51.9 million (as defined by the credit agreement) at March 31, 2023.

(7) Our credit agreement defines our consolidated indebtedness as the sum of all indebtedness (other than letters of credit or bank guarantees, to the extent undrawn) consisting of indebtedness for borrowed money and capitalized lease obligations, less unrestricted cash, which was $81.1 million (as defined by the credit agreement) at June 30, 2023.

(8) Our credit agreement defines the total Net First Lien Leverage Ratio as the ratio of consolidated indebtedness (as described above) to Adjusted EBITDA for the trailing four fiscal quarters.

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Our primary sources of liquidity are available cash and cash equivalents, cash flow from operations, and borrowing availability of up to $200.0 million under our revolving credit facility.

As of March 31, 2023, we had $74.8 million of cash and cash equivalents and $193.7 million of additional borrowing capacity.

As of March 31, 2023, the available borrowings under our credit facility were reduced by $6.3 million due to outstanding letters of credit.

As of June 30, 2023, we had $103.0 million of cash and cash equivalents and $194.2 million of additional borrowing capacity.

As of June 30, 2023, the available borrowings under our credit facility were reduced by $5.8 million due to outstanding letters of credit.

As of December 31, 2022, we had $124.8 million of cash and cash equivalents and approximately $192.5 million of additional borrowing capacity under our revolving credit facility.

Our revolving credit facility is available to fund our working capital requirements, capital expenditures and for other general corporate purposes.

We believe this resource is adequate for our expected needs.

Cash provided by (used for) operating activities was $5.0 million and $(53.9) million during the three months ended March 31, 2023 and 2022, respectively.

The change in year-over-year operating cash flows was primarily the result of a lower use of cash for trade working capital and the timing of accrued expenses during the three months ended March 31, 2023.

Cash (used for) provided by investing activities was $(5.2) million during the three months ended March 31, 2023 and $35.5 million during the three months ended March 31, 2022.

Investing activities during the three months ended March 31, 2023, consisted of $5.2 million of capital expenditures.

Investing activities during the three months ended March 31, 2022, included $0.8 million of capital expenditures which was offset by the receipt of $35.0 million from Regal Rexnord Corporation in connection with the final net assets transferred in the PMC Spin-Off Translation and the receipt of $1.3 million in connection with the sale of certain long-lived assets.

Cash used for financing activities was $50.3 million during the three months ended March 31, 2023, compared to $5.2 million during the three months ended March 31, 2022.

During the three months ended March 31, 2023, we utilized a net $1.6 million of cash for payments on outstanding debt, $37.0 million to repurchase outstanding shares of our common stock and $12.3 million for the payment of common stock dividends, which was partially offset by $0.6 million of proceeds from the exercise of stock options.

During the three months ended March 31, 2022, we utilized $1.4 million of cash for payments on outstanding debt and $3.8 million for the payment of common stock dividends.

As of March 31, 2023, we had $556.6 million of total indebtedness outstanding as follows (in millions):

We believe this resource is adequate for our expected short-term and long-term needs.

Cash provided by (used for) operating activities was $92.2 million and $(12.0) million during the six months ended June 30, 2023 and 2022, respectively.

The change in year-over-year operating cash flows was primarily the result of a lower use of cash for trade working capital and the timing of accrued expenses during the six months ended June 30, 2023.

Cash (used for) provided by investing activities was $(1.8) million during the six months ended June 30, 2023 and $35.4 million during the six months ended June 30, 2022.

Investing activities during the six months ended June 30, 2023, consisted of $11.1 million of capital expenditures, which were partially offset by the receipt of $9.0 million in connection with an insurance settlement and $0.3 million from the sale of certain long-lived assets.

Investing activities during the six months ended June 30, 2022, included $2.0 million of capital expenditures which was offset by the receipt of $35.0 million from Regal Rexnord Corporation in connection with the final net assets transferred in the PMC Spin-Off Transaction, the receipt of $1.3 million in connection with the sale of certain long-lived assets, and the receipt of $1.1 million in connection with finalizing the acquisition date trade working capital associated with our 2021 acquisition of Wade Drains.

Cash used for financing activities was $113.5 million during the six months ended June 30, 2023, compared to $9.3 million during the six months ended June 30, 2022.

During the six months ended June 30, 2023, we utilized a net $3.1 million of cash for payments on outstanding debt, $87.1 million to repurchase outstanding shares of our common stock and $24.5 million for the payment of common stock dividends, which was partially offset by $1.2 million of proceeds from the exercise of stock options, net of taxes withheld and paid on employees' share-based awards.

During the six months ended June 30, 2022, we utilized a net $3.0 million of cash for payments on outstanding debt and $7.6 million for the payment of common stock dividends, which was partially offset by $1.3 million of proceeds from the exercise of stock options, net of taxes withheld and paid on employees' share-based awards.

As of June 30, 2023, we had $555.4 million of total indebtedness outstanding as follows (in millions):

Total Debt at

March 31, 2023

June 30, 2023

Current Maturities of Debt Long-term

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___________________________________________

(1) Includes unamortized debt issuance costs of $8.8 million at March 31, 2023.

(1) Includes unamortized debt issuance costs of $8.4 million at June 30, 2023.

See Item 1, Note 13, Long-Term Debt for a description of our outstanding indebtedness.

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