Zurn Elkay Water Solutions Corp 10-Q

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General On July 1, 2022, we completed our combination with Elkay Manufacturing Company (“Elkay”) through the Merger of Elkay with and into a newly created subsidiary of Zurn, with Elkay surviving as a wholly owned subsidiary of Zurn Elkay (the “Merger” or "Elkay Transaction"). In conjunction with the Merger, we changed our name from Zurn Water Solutions Corporation to Zurn Elkay Water Solutions Corporation. Our results of operations include the acquired operations subsequent to July 1, 2022. See Item 1, Note 2, Acquisition, for additional information on the Elkay Merger. Zurn Elkay Water Solutions Corporation is a growth-oriented, pure-play water management business that designs, procures, manufactures, and markets what we believe to be the broadest sustainable product portfolio of specification-driven water management solutions to improve health, hydration, human safety and the environment. Our product portfolio includes professional grade water safety and control products, flow systems products, hygienic and environmental products, and filtered drinking water products for public and private spaces that deliver superior value to building owners, positively impact the environment and human hygiene and reduce product installation time. Zurn Elkay's heritage of innovation and specification has allowed us to provide highly-engineered, mission-critical solutions to customers for decades and affords us the privilege of having long-term, valued relationships with market leaders. We operate in a disciplined way and the Zurn Elkay Business System (“ZEBS”) is our operating philosophy. Grounded in the spirit of continuous improvement, ZEBS creates a scalable, process-based framework that focuses on driving superior customer satisfaction and financial results by targeting world-class operating performance throughout all aspects of our business. The following information should be read in conjunction with the audited consolidated financial statements and notes thereto, along with Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), in our Annual Report on Form 10-K for the year ended December 31, 2023. Critical Accounting Policies and Estimates The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP"), which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities on the date of the financial statements and revenues and expenses during the periods reported. Actual results could differ from those estimates. Refer to Item 7, MD&A, of our Annual Report on Form 10-K for the year ended December 31, 2023 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 September 30, 2024, and during the period from January 1, 2024 through September 30, 2024, there has been no material change to this information. Recent Accounting Pronouncements See Item 1, Note 1, Basis of Presentation and Significant Accounting Policies regarding recent accounting pronouncements. Divestiture of Asbestos Liabilities and Certain Assets On December 15, 2023, Zurn Holdings, Inc. (“Holdings”) sold all of the equity interests of its direct subsidiary Zurn Industries, LLC (“Zurn Industries”), together with Zurn Industries’ direct and indirect subsidiaries that primarily held asbestos liabilities, certain assets and cash, in a stock sale transaction to an unaffiliated buyer (“Sale Transaction”). As a result of the Sale Transaction, all asbestos obligations and liabilities, related insurance assets and associated deferred taxes, and other assets sold to the buyer, have been removed from the Company’s consolidated balance sheet effective December 15, 2023 and the Company no longer has any obligation with respect to pending and future asbestos claims related to the divested entities. A loss on the divestiture of asbestos liabilities and certain assets of $11.4 million was recognized in the consolidated statements of operations for the twelve months ended December 31, 2023. See Item 1, Note 15, Commitments and Contingencies for additional information on this divestiture. 24 Table of Contents Acquisitions On July 1, 2022, we completed the Elkay Merger for a purchase price (after final purchase price adjustments) of $1,457.8 million. 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 common stock, which represented approximately 29% of outstanding shares immediately following the Merger. During the first quarter of 2023, we completed the final price adjustments and the adjusted purchase price 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. As of June 30, 2023, the measurement period was complete. Our results of operations include Elkay subsequent to the Merger date. See Item 1, Note 2, Acquisition for additional information on the Elkay Merger. Spin-Off of Process & Motion Control Segment On October 4, 2021, the Company completed a Reverse Morris Trust tax-free spin-off transaction (the “Spin-Off Transaction”) in which (i) substantially all the assets and liabilities of the Company's Process & Motion Control ("PMC") business were transferred to a newly created subsidiary, Land Newco, Inc. (“Land”), (ii) the shares of Land were distributed to the Company's stockholders pro rata, and (iii) Land was merged with a subsidiary of Regal Rexnord Corporation (formerly known as Regal Beloit Corporation), in which the stock of Land was converted into a specified number of shares of Regal Rexnord Corporation in accordance with the exchange ratio. 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 nine months ended September 30, 2024 and September 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 nine months ended September 30, 2024 and September 30, 2023, are as follows (in millions): Three Months Ended Nine Months Ended September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023 Selling, general and administrative income (1) $ — $ 6.6 $ 0.7 $ 8.4 Income from discontinued operations before income tax — 6.6 0.7 8.4 Income tax (expense) benefit — (0.4) 0.3 (0.3) Income from discontinued operations, net of tax $ — $ 6.2 $ 1.0 $ 8.1 (1) Selling, general and administrative income includes 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 Charges During the three and nine months ended September 30, 2024, 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 mergers and acquisitions, including Elkay, on the Company's overall manufacturing capacity and the refinement of its overall product portfolio. These restructuring actions primarily resulted in workforce reductions, lease termination costs and other facility rationalization costs. Management expects to continue executing similar initiatives to optimize the Company's operating margin and manufacturing footprint. 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 and nine months ended September 30, 2024, restructuring charges totaled $2.7 million and $9.7 million, respectively. For the three and nine months ended September 30, 2023, restructuring charges totaled $2.2 million and $11.9 million, respectively. Refer to Item 1, Note 3, Restructuring and Other Similar Charges for further information. 25 Table of Contents Results of Operations Three Months Ended September 30, 2024 compared with the Three Months Ended September 30, 2023: Net sales (Dollars in Millions) Three Months Ended September 30, 2024 September 30, 2023 Change % Change Net sales $ 410.0 $ 398.4 $ 11.6 2.9 % Net sales were $410.0 million and $398.4 million during the three months ended September 30, 2024 and September 30, 2023, respectively, an increase of 3% year over year. Core sales growth of 3%, including growth in all product categories, was offset by a 100 basis point impact from the planned exit of certain residential sink products. Income from operations (Dollars in Millions) Three Months Ended September 30, 2024 September 30, 2023 Change % Change Income from operations $ 70.2 $ 60.1 $ 10.1 16.8 % % of net sales 17.1 % 15.1 % 2.0 % During the three months ended September 30, 2024, income from operations was $70.2 million compared to $60.1 million during the three months ended September 30, 2023. Income from operations as a percentage of net sales increased by 200 basis points year over year due to the benefits from delivering the synergies related to the Elkay Merger, as well as lower material costs. Interest expense, net Interest expense, net was $8.3 million for the three months ended September 30, 2024, compared to $9.9 million for the three months ended September 30, 2023. The decrease in interest expense, net as compared to the prior year period is due to interest earned on higher cash balances and reduced interest expense due to the prior year prepayment of $60 million. Other expense, net Other expense, net for the three months ended September 30, 2024 and 2023, was $1.5 million and $2.5 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 lower defined benefit plan costs in the current year and increased accruals for estimated environmental remediation costs in the prior year. Provision for income taxes The income tax provision was $16.9 million for the three months ended September 30, 2024, compared to $12.5 million for the three months ended September 30, 2023. The effective income tax rate for the three months ended September 30, 2024 was 28.0% versus 26.2% for the three months ended September 30, 2023. The effective income tax rate for the three months ended September 30, 2024 and the three months ended September 30, 2023 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. federal and state capital loss carryforwards. In conjunction with this analysis, we weigh both positive and negative evidence for purposes of determining the proper balances of such valuation allowances. 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. 26 Table of Contents Net income Net income for the three months ended September 30, 2024, was $43.5 million compared to net income of $41.4 million for the three months ended September 30, 2023. Diluted net income per share for the three months ended September 30, 2024 and September 30, 2023, was $0.25 and $0.24, respectively. The year-over-year change is the result of the factors described above. Net loss from discontinued operations, net of tax, was $0.0 million for the three months ended September 30, 2024 compared to net income from discontinued operations, net of tax, of $6.2 million for the three months ended September 30, 2023. Diluted net income per share from discontinued operations for the three months ended September 30, 2024 and September 30, 2023, was $0.00 and $0.04, respectively. Nine Months Ended September 30, 2024 compared with the Nine Months Ended September 30, 2023: Net sales (Dollars in Millions) Nine Months Ended September 30, 2024 September 30, 2023 Change % Change Net sales $ 1,195.8 $ 1,173.7 $ 22.1 1.9 % Net sales were $1,195.8 million during the nine months ended September 30, 2024, an increase of 2% year-over-year. The 2% core sales growth across nearly all product categories was offset by t he 200 basis point im pact from the planned exit of certain residential sink products. Income from operations (Dollars in Millions) Nine Months Ended September 30, 2024 September 30, 2023 Change % Change Income from operations 195.3 158.6 36.7 23.1 % % of net sales 16.3 % 13.5 % 2.8 % Income from operations during the nine months ended September 30, 2024 was $195.3 million compared to $158.6 million during the nine months ended September 30, 2023. Income from operations as a percentage of net sales increased by 280 basis points year over year due to the benefits resulting from productivity synergies and restructuring actions related to the Elkay Merger, as well as lower material and restructuring costs . Interest expense, net Interest expense, net was $25.6 million during the nine months ended September 30, 2024, compared to $29.8 million during the nine months ended September 30, 2023. The decrease in interest e xpense, net as compared to the prior year period is due to interest earned on higher cash balances and reduced interest expense due to the prior year prepayment of $60 million . Other expense, net Other expense, net during the nine months ended September 30, 2024 was $4.5 million compared to $3.3 million during the nine months ended September 30, 2023. 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 income recognized in connection with an insurance settlement in the prior year, partly offset by accruals for estimated environmental remediation costs in the prior year and lower defined benefit plan costs in the current year. 27 Table of Contents Provision for income taxes The income tax provision was $42.4 million for the nine months ended September 30, 2024, compared to $34.8 million for the nine months ended September 30, 2023. The effective income tax rate for the nine months ended September 30, 2024 was 25.7% versus 27.7% for the nine months ended September 30, 2023. The effective income tax rate for the nine months ended September 30, 2024 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 certain previously unrecognized tax benefits due to the lapse of the applicable statutes of limitations and income tax benefits associated with share-based payments. The effective income tax rate for the nine months ended September 30, 2023 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. Net income Net income for the nine months ended September 30, 2024, was $123.8 million compared to $98.8 million for the nine months ended September 30, 2023. Diluted net income per share for the nine months ended September 30, 2024 and September 30, 2023, was $0.71 and $0.56, respectively. Net income from discontinued operations, net of tax, was $1.0 million for the nine months ended September 30, 2024 compared to $8.1 million for the nine months ended September 30, 2023. Diluted net income per share from discontinued operations for the nine months ended September 30, 2024 and September 30, 2023, was $0.01 and $0.05, respectively. Non-GAAP Financial Measures Non-GAAP financial measures are intended to supplement and not replace financial measures prepared in accordance with GAAP. The following non-GAAP financial measures are utilized by management in comparing our operating performance on a consistent basis. We believe that these financial measures are appropriate to enhance an overall understanding of our underlying operating performance trends compared to historical and prospective periods and our peers. Management also believes that these measures are useful to investors in their analysis of our results of operations and provide improved comparability between fiscal periods as well as insight into the compliance with our debt covenants. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information calculated in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures. Core sales Core sales excludes the impact of mergers, acquisitions, divestitures and foreign currency translation. Management believes that core sales facilitates easier and more meaningful comparisons of our net sales performance with prior and future periods and to our peers. We exclude the effect of mergers, acquisitions and divestitures because the nature, size and number can vary dramatically from period to period and between us and our peers and can also obscure underlying business trends and make comparisons of long-term performance difficult. We exclude the effect of foreign currency translation from this measure because the volatility of currency translation is not under management's control. EBITDA EBITDA represents earnings before interest and other debt related activities, taxes, depreciation and amortization. EBITDA is presented because it is an important supplemental measure of performance and it is frequently used by analysts, investors and other interested parties in the evaluation of companies in our industry. EBITDA is also presented and compared by analysts and investors in evaluating our ability to meet debt service obligations. Other companies in our industry may calculate EBITDA differently. EBITDA is not a measurement of financial performance under GAAP and should not be considered as an alternative to cash flow from operating activities or as a measure of liquidity or an alternative to net income as indicators of operating performance or any other measures of performance derived in accordance with GAAP. Because EBITDA is calculated before recurring cash charges, including interest expense and taxes, and is not adjusted for capital expenditures or other recurring cash requirements of the business, it should not be considered as a measure of discretionary cash available to invest in the growth of the business. 28 Table of Contents Adjusted EBITDA 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 (see "Covenant Compliance" for additional discussion of this ratio, including a reconciliation to our net income). "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 in the "Covenant Compliance" section. 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. It is also provided to aid investors in understanding our compliance with our debt covenants. Adjusted EBITDA is not a presentation made in accordance with GAAP, and our use of the term Adjusted EBITDA varies from others in our industry. This measure should not be considered as an alternative to net income, income from operations or any other performance measures derived in accordance with GAAP. Adjusted EBITDA has important limitations as an analytical tool, and should not be considered in isolation, or as a substitute for analysis of our results as reported under GAAP. For example, Adjusted EBITDA does not reflect: (a) our capital expenditures, future requirements for capital expenditures or contractual commitments; (b) changes in, or cash requirements for, our working capital needs; (c) the significant interest expenses, or the cash requirements necessary to service interest or principal payments, on our debt; (d) tax payments that represent a reduction in cash available to us; (e) any cash requirements for the assets being depreciated and amortized that may have to be replaced in the future; or (f) the impact of earnings or charges resulting from matters that we and the lenders under our credit agreement may not consider indicative of our ongoing operations. In particular, our definition of Adjusted EBITDA allows us to add back certain non-cash, non-operating or non-recurring charges that are deducted in calculating net income, even though these are expenses that may recur, vary greatly and are difficult to predict and can represent the effect of long-term strategies as opposed to short-term results. In addition, certain of these expenses added back in calculating Adjusted EBITDA can represent the reduction of cash that could be used for other corporate purposes. Further, although not included in the calculation of Adjusted EBITDA in the "Covenant Compliance" section below, the measure may at times allow us to add estimated cost savings and operating synergies related to operational changes ranging from mergers, acquisitions or dispositions to restructuring, and/or exclude one-time transition expenditures that we anticipate incurring to realize cost savings before such savings have occurred. The calculation of Adjusted EBITDA under our credit agreement as of September 30, 2024, is presented in the table in the "Covenant Compliance" section 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. For the nine months ended September 30, 2024, we reported net income of $123.8 million and Adjusted EBITDA for the same period of $299.3 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. 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 meet a maximum total Net First Lien Leverage Ratio (consolidated indebtedness to Adjusted EBITDA) of 5.00 to 1.00 as of the end of each fiscal quarter. As of September 30, 2024, our Net First Lien Leverage Ratio was 0.89 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. 29 Table of Contents Set forth below is a reconciliation of net income to Adjusted EBITDA for the periods indicated below. (in millions) Nine months ended September 30, 2023 Twelve months ended December 31, 2023 Nine months ended September 30, 2024 Twelve months ended September 30, 2024 Net income $ 98.8 $ 112.7 $ 123.8 $ 137.7 Income from discontinued operations, net of tax (1) (8.1) (8.5) (1.0) (1.4) Provision for income taxes 34.8 42.6 42.4 50.2 Actuarial gain on pension and postretirement benefit obligations — (2.0) — (2.0) Other expense, net (2) 3.3 7.2 4.5 8.4 Loss on the extinguishment of debt — 0.9 — 0.9 Interest expense 29.8 38.5 25.6 34.3 Depreciation and amortization 66.3 87.9 65.2 86.8 EBITDA 224.9 279.3 260.5 314.9 Adjustments to EBITDA Restructuring and other similar charges (3) 11.9 15.3 9.7 13.1 Stock-based compensation expense 30.5 40.0 29.2 38.7 Last-in first-out ("LIFO") adjustments (4) (11.9) (6.5) (0.5) 4.9 Loss on divestiture of asbestos liabilities and certain assets (5) — 11.4 — 11.4 Other, net (6) — — 0.4 0.4 Subtotal of adjustments to EBITDA 30.5 60.2 38.8 68.5 Adjusted EBITDA $ 255.4 $ 339.5 $ 299.3 $ 383.4 Consolidated indebtedness (7) $ 340.6 Net First Lien Leverage Ratio (8) 0.89 __________________________________ (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 expense, net 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 as defined in our credit agreement. (3) In accordance with the terms in our credit agreement, 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. (4) Last-in first-out (LIFO) inventory adjustments are excluded in calculating Adjusted EBITDA as defined in our credit agreement. (5) Loss on divestiture of asbestos liabilities and certain assets are excluded in calculating Adjusted EBITDA as defined in our credit agreement. (6) Other, net consists of gains and losses on the disposition of long-lived assets per the credit agreement. (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 $155.1 million (as defined by the credit agreement) at September 30, 2024. (8) Our credit agreement defines the Net First Lien Leverage Ratio as the ratio of consolidated indebtedness (as described above) to Adjusted EBITDA for the trailing four fiscal quarters. 30 Table of Contents Liquidity and Capital Resources 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 September 30, 2024, we had $187.9 million of cash and cash equivalents and $188.7 million of additional borrowing capacity under our revolving credit facility. As of September 30, 2024, the available borrowings under our credit facility were reduced by $11.3 million due to outstanding letters of credit. As of December 31, 2023, we had $136.7 million of cash and cash equivalents and $189.0 million of additional borrowing capacity under our revolving credit facility. As of December 31, 2023, the available borrowings under our credit facility were reduced by $11.0 million due to outstanding letters of credit. Our revolving credit facility is available to fund our working capital requirements, capital expenditures and other general corporate purposes. We believe this resource is adequate for our expected short-term and long-term needs. Cash Flows Net cash provided by operating activities was $229.9 million and $195.7 million during the nine months ended September 30, 2024 and 2023, respectively. The change in year-over-year operating cash flows was primarily the result of an increase in net income, a lower use of cash for trade working capital, and the timing of accrued expenses during the nine months ended September 30, 2024. Cash used for investing activities was $11.1 million during the nine months ended September 30, 2024 and $6.6 million during the nine months ended September 30, 2023. Investing activities during the nine months ended September 30, 2024, consisted of $12.7 million of capital expenditures, which were partially offset by $1.6 million from the sale of certain long-lived assets. Investing activities during the nine months ended September 30, 2023, consisted of $15.9 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. Cash used for financing activities was $165.8 million during the nine months ended September 30, 2024, compared to $141.5 million during the nine months ended September 30, 2023. During the nine months ended September 30, 2024, we utilized $0.6 million of cash for payments on finance leases, $129.9 million to repurchase outstanding shares of our common stock, and $41.3 million for the payment of common stock dividends, which was partially offset by $6.0 million of proceeds from the exercise of stock options and ESPP contributions, net of taxes withheld and paid on employees' share-based awards. During the nine months ended September 30, 2023, we utilized a net $4.7 million of cash for payments on outstanding debt, $100.2 million to repurchase outstanding shares of our common stock, and $36.6 million for the payment of common stock dividends. Indebtedness As of September 30, 2024, we had $495.6 million of total indebtedness outstanding as follows (in millions): Total Debt at September 30, 2024 Current Maturities of Debt Long-term Portion Term loan (1) $ 474.6 $ — $ 474.6 Finance leases 21.0 0.9 20.1 Total $ 495.6 $ 0.9 $ 494.7 ___________________________________________ (1) Includes unamortized original issue discount and debt issuance costs of $5.7 million at September 30, 2024. See Item 1, Note 13, Long-Term Debt for a description of our outstanding indebtedness. 31 Table of Contents