Installed Building Products Inc

Previous wording

Net revenue increased 5.1%, or $33.6 million to $692.9 million, while gross profit increased 11.5% to $234.5 million during the three months ended March 31, 2024 compared to 2023. The increase in net revenue was primarily due to the 13.6% increase in Installation multi-family revenue, recent acquisitions and selling price increases. The increase in gross profit was primarily driven by selling price and product mix improvements and improved material costs, which were partially offset by higher labor costs and a (1.4)% decline in same-branch job volume. The 3.8% increase in our price/mix metric for our Installation segment was primarily due to a higher mix of multi-family jobs. Gross profit margin grew faster than revenue as we continued to prioritize profitability over sales volume. Specifically, gross profit outpaced sales growth due to higher selling prices compared to the prior year. Certain net revenue and industry metrics we use to monitor our operations are discussed in the "Key Measures of Performance" section below, and further details regarding results of our various end markets are discussed further in the "Net Revenue, Cost of Sales and Gross Profit" section below.

Current wording

Net revenue increased 6.6%, or $45.5 million to $737.6 million, while gross profit increased 8.1% to $251.4 million during the three months ended June 30, 2024 compared to 2023. The increase in net revenue was primarily due to the 10.4% increase in revenue of our largest end market, residential single-family new construction, and also by recent acquisitions and selling price increases. The increase in gross profit was primarily driven by selling price and product mix improvements and improved material costs, partially offset by higher labor costs and an unfavorable contract settlement that affected a single branch operating in a non-core product line that reduced revenue and gross profit in our commercial end market. The 6.4% increase in our price/mix metric for our Installation segment was primarily due to residential end market price growth. Gross profit margin grew faster than revenue as we continued to prioritize profitability over sales volume. Specifically, gross profit outpaced sales growth due to higher selling prices compared to the prior year. Certain net revenue and industry metrics we use to monitor our operations are discussed in the "Key Measures of Performance" section below, and further details regarding results of our various end markets are discussed further in the "Net Revenue, Cost of Sales and Gross Profit" section below.

Previous wording

As of March 31, 2024, we had $399.9 million of cash and cash equivalents and we have not drawn on our revolving line of credit. This strong liquidity position allowed us to return capital to shareholders by increasing our regular quarterly dividend 6% over the first quarter of 2023 to $0.35 per share, or $10.0 million in the aggregate, during the three months ended March 31, 2024. We also increased our annual special dividend from $0.90 per share paid in the first quarter of 2023 to $1.60 a share, or a 78% increase, during the three months ended March 31, 2024.

Current wording

As of June 30, 2024, we had $380.3 million of cash and cash equivalents and we have not drawn on our revolving line of credit. This strong liquidity position allowed us to return capital to shareholders by increasing our regular quarterly dividend 6% over the second quarter of 2023 to $0.35 per share, or $9.8 million in the aggregate, and by repurchasing $45.7 million of our outstanding common stock during the three months ended June 30, 2024.

Previous wording

Net revenue increased during the three months ended March 31, 2024 over the same period in 2023 as we increased same branch sales in both our single-family and multi-family residential new construction end markets combined with revenue contributions from our recent acquisitions. Same branch sales growth from the residential end markets showed an overall increase of 3.8% for the three months ended March 31, 2024 over the same period ended March 31, 2023. Installation selling price and product mix improvements also increased 3.8%, partially offset by same branch sales volume decline of (1.4)%. Multi-family same branch sales remained strong with period-over-period growth of 13.0%. Lastly, the Distribution operating segment, combined with our Manufacturing operating segment, further supported net revenue growth as it experienced 4.1% growth during the three months ended March 31, 2024.

Current wording

Net revenue increased during the three months ended June 30, 2024 over the same period in 2023 as we increased same branch sales in both our single-family and multi-family residential new construction end markets combined with revenue contributions from our recent acquisitions. Same branch sales growth from the residential end markets showed an overall increase of 7.3% for the three months ended June 30, 2024 over the same period ended June 30, 2023. Installation selling price and product mix improvements also increased 6.4%, partially offset by same branch sales volume decline of (1.4)%. Multi-family same branch sales remained strong with period-over-period growth of 5.2%. Lastly, the Distribution operating segment, combined with our Manufacturing operating segment, further supported net revenue growth as it experienced 4.3% growth during the three months ended June 30, 2024.

Previous wording

As a percentage of net revenue, gross profit improved during the three months ended March 31, 2024 compared to the corresponding prior year period primarily on the strength of price/mix growth as well as leverage gained on material costs compared to the prior year. We continued to focus on profitability over volume gains, and the moderation of inflation and material supply chain issues that affected our business and industry in recent years contributed to our gross margin improvements. We will continue to work with our suppliers to lessen the impact on our margins and with our customers to offset further cost increases through selling price adjustments.

Current wording

As a percentage of net revenue, gross profit improved during the three and six months ended June 30, 2024 compared to the corresponding prior year period primarily on the strength of price/mix growth as well as leverage gained on material costs compared to the prior year. Net revenue and gross profit were negatively impacted by an unfavorable contract settlement in the commercial end-market that affected a single branch operating in a non-core product line during the three and six months ended June 30, 2024. We continued to focus on profitability over volume gains, and the moderation of inflation and material supply chain issues that affected our business and industry in recent years contributed to our gross margin improvements. We will continue to work with our suppliers to lessen the impact on our margins and with our customers to offset further cost increases through selling price adjustments.

Previous wording

The dollar increase in selling expenses for the three months ended March 31, 2024 compared to 2023 was primarily driven by an increase in selling wages, bonuses and commissions to support our increased net revenue. Selling expense as a percentage of sales decreased for the three months ended March 31, 2024 compared to 2023 primarily due to decreased compensation from changes in product mix and more profitable completed jobs.

Current wording

The dollar increase in selling expenses for the three and six months ended June 30, 2024 compared to 2023 was primarily driven by an increase in selling compensation and commissions to support our increased net revenue. Selling expense as a percentage of sales decreased for the three and six months ended June 30, 2024 compared to 2023 primarily due to increased leverage on selling compensation.

Previous wording

The dollar increase in administrative expenses for the three months ended March 31, 2024 compared to 2023 was primarily due to an increase in wages and benefits, whichwas attributable to both acquisitions and organic growth as well as favorable company performance. Facility and insurance cost increases due to inflationary pressures also factored into the overall increase in administrative operating expenses. Administrative expenses increased as a percentage of sales for the three months ended March 31, 2024 compared to 2023 primarily due to higher salaries and bonuses due to higher profitability.

Current wording

The dollar increase in administrative expenses for the three and six months ended June 30, 2024 compared to 2023 was primarily due to an increase in wages and benefits, whichwas attributable to both acquisitions and organic growth as well as favorable company performance. Facility and insurance cost increases due to inflationary pressures also factored into the overall increase in administrative operating expenses. Administrative expenses increased as a percentage of sales for the six months ended June 30, 2024 compared to 2023 primarily due to higher salaries and bonuses due to higher profitability.

Previous wording

The increase in interest expense, net during the three months ended March 31, 2024 compared to 2023 was primarily due to increased interest expense due to term loan refinancing costs, partially offset by increased interest income on various bank accounts.

Current wording

The increase in interest expense, net during the six months ended June 30, 2024 compared to 2023 was primarily due to increased interest expense associated with term loan refinancing costs, partially offset by increased interest income on various bank accounts.

Previous wording

The effective tax rate for each of the three months ended March 31, 2024 and 2023 was unfavorably impacted by certain expenses not being deductible for income tax reporting purposes.

Current wording

The effective tax rate for each of the three and six months ended June 30, 2024 and 2023 was favorably impacted by recognition of a windfall tax benefit from equity vesting.

Previous wording

During the three months ended March 31, 2024, we recorded unrealized gains of $3.9 million, net of taxes, on our cash flow hedges due to the changes in the market's expectations for future long-term interest rates relative to our three active interest rate swaps and our two forward interest rate swaps. During the three months ended March 31, 2023, we recorded unrealized losses of $7.1 million, net of tax, on our cash flow hedges due to the market's expectations for lower interest rates in the future relative to our three existing interest rate swaps and our two forward interest rate swaps.

Current wording

During the three and six months ended June 30, 2024, we recorded an unrealized loss of $0.8 million and an unrealized gain of $3.1 million, net of taxes, respectively, on our cash flow hedges due to the changes in the market's expectations for future long-term interest rates relative to our three active interest rate swaps and our two forward interest rate swaps. We also amortized $1.0 million and $2.1 million of our remaining unrealized gains and losses, net, on our terminated cash flow hedges to interest expense during the three and six months ended June 30, 2024, respectively, not including the offsetting tax effects of $0.2 million and $0.5 million, respectively.

Previous wording

During each of the three months ended March 31, 2024 and 2023, we amortized $1.1 million of our remaining unrealized gains and losses, net, on our terminated cash flow hedges to interest expense, not including the offsetting tax effects of $0.3 million in each period.

Current wording

During the three and six months ended June 30, 2023, we recorded an unrealized gain of $4.6 million and an unrealized loss of $2.5 million, net of taxes, respectively, on our cash flow hedges due to the changes in market's expectations for future long-term interest rates relative to our three existing interest rate swaps and our two forward interest rate swaps. We also amortized $1.1 million and $2.2 million of our remaining unrealized gains and losses, net, on our terminated cash flow hedges to interest expense during the three and six months ended June 30, 2023, respectively, not including the offsetting tax effects of $0.3 million and $0.6 million, respectively.

Previous wording

Inflation that affected the economy as a whole in 2022 began moderating in 2023 as the Federal Reserve took actions to stabilize inflation by raising the federal funds rate multiple times through July 2023. Since September 2022, this raised the 30-year fixed rate mortgage average in the United States to over 6% for the first time since 2008. These rate-driven pressures began to curtail housing demand beginning in the second half of 2022 as mortgage financing affordability was reduced. Inflation rates in 2024 have remained above the 2% stated target, leading the Federal Reserve to signal plans to keep the federal funds rate higher for longer than the market was anticipating. We expect to be somewhat impacted by these headwinds in 2024.

Current wording

Inflation that affected the economy as a whole in 2022 began moderating in 2023 as the Federal Reserve took actions to stabilize inflation by raising the federal funds rate multiple times through July 2023. Since September 2022, this raised the 30-year fixed rate mortgage average in the United States to over 7% for the first time since 2008. These rate-driven pressures began to curtail housing demand beginning in the second half of 2022 as mortgage financing affordability was reduced. Inflation rates in 2024 have remained above the 2% stated target, leading the Federal Reserve to signal plans to keep the federal funds rate higher for longer than the market was anticipating. We expect to be somewhat impacted by these headwinds in 2024 but anticipate pressures to lessen over time if rates remain level or are reduced in the coming months.

Previous wording

Activity in the residential homebuilding market remains resilient as non-seasonally adjusted single-family starts, our largest end market, increased 27.1% per the U.S. Census Bureau for the three months ended March 31, 2024 compared to the same period in 2023. Overall, stable employment and near historic lows in existing home inventory levels continue to support demand for residential new construction activity despite the affordability concerns. As a result, while we expect cyclicality to continue in the housing industry, we believe the long-term opportunities in our residential and commercial end markets are favorable. Our largest customers are publicly traded homebuilders, and these builders have been able to increase affordability by offering mortgage rate buydowns as incentives to their customers. Regarding the repair and remodel markets, many existing homeowners are locked into low interest mortgages and an aging housing stock exists in many areas of the United States. We expect these two factors, combined with incentives from the Inflation Reduction Act of 2022, to drive growth in the repair and remodel markets we service.

Current wording

Activity in the residential homebuilding market remains resilient as non-seasonally adjusted single-family starts, our largest end market, increased 16.1% per the U.S. Census Bureau for the six months ended June 30, 2024 compared to the same period in 2023. Overall, stable employment and near historic lows in existing home inventory levels continue to support demand for residential new construction activity despite the affordability concerns. As a result, while we expect cyclicality to continue in the housing industry, we believe the long-term opportunities in our residential and commercial end markets are favorable. Our largest customers are publicly traded homebuilders, and these builders have been able to increase affordability by offering mortgage rate buydowns as incentives to their customers. Regarding the repair and remodel markets, many existing homeowners are locked into low interest mortgages and an aging housing stock exists in many areas of the United States. We expect these two factors, combined with incentives from the Inflation Reduction Act of 2022, to drive growth in the repair and remodel markets we service.

Previous wording

We typically purchase the materials we use in our business directly from manufacturers. The industry supply of these materials has experienced multiple periods of supply shortages since 2020 due to strong demand and effects from the COVID-19 pandemic. In order to meet customer demand during these shortages, we have purchased a limited amount of materials from distributors and home centers at a premium to what we typically would purchase directly from manufacturers, therefore reducing gross profit. The supply chain issues for some products have moderated, however, we expect these challenges to persist to a certain degree in 2024.

Current wording

We typically purchase the materials we use in our business directly from manufacturers. The industry supply of these materials has experienced multiple periods of supply shortages since 2020 due to strong demand and effects from the COVID-19 pandemic. In order to meet customer demand during these shortages, we have purchased a limited amount of materials from distributors and home centers at a premium to what we typically would purchase directly from manufacturers, therefore reducing gross profit. The supply chain issues for some of the products we install have moderated, however, we expect these challenges to persist to a certain degree throughout 2024.

Previous wording

In addition, we experience price increases due to supply shortages and general economic inflationary pressures from our suppliers from time to time, and we anticipate that we will experience additional price increases in 2024. Increased market pricing, regardless of the catalyst, has and could continue to impact our results of operations in 2024, to the extent that price increases cannot be passed on to our customers. Our selling price increases were able to support most material cost increases in 2023 and the first quarter of 2024, but we may have more difficulty raising prices throughout the 2024 fiscal year if housing demand slows. We will continue to work with our customers to adjust selling prices to offset higher costs as they occur.

Current wording

In addition, we experience price increases due to supply shortages and general economic inflationary pressures from our suppliers from time to time, and we anticipate that we will experience additional price increases in 2024. Increased market pricing, regardless of the catalyst, has and could continue to impact our results of operations in 2024, to the extent that price increases cannot be passed on to our customers. Our selling price increases were able to support most material cost increases in 2023 and the first half of 2024, but we may have more difficulty raising prices throughout the 2024 fiscal year if housing demand slows. We will continue to work with our customers to adjust selling prices to offset higher costs as they occur.

Previous wording

Our business is labor intensive and the majority of our employees work as installers on local construction sites. We expect to spend more to hire, train and retain installers to support our growing business in 2024, as tight labor availability continues within the construction industry. Our workers’ compensation costs also continue to rise as we increase our coverage for additional personnel. Inflation and market competition caused our labor costs as a percentage of revenue to increase during the three months ended March 31, 2024 compared to 2023.

Current wording

Our business is labor intensive and the majority of our employees work as installers on local construction sites. We expect to spend more to hire, train and retain installers to support our growing business in 2024, as tight labor availability continues within the construction industry. Our workers’ compensation costs also continue to rise as we increase our coverage for additional personnel. Inflation and market competition caused our labor costs as a percentage of revenue to increase during the six months ended June 30, 2024 compared to 2023.

Previous wording

Our employee retention rates remained better than industry averages in the three months ended March 31, 2024. We believe this is a result of our strong culture and the various programs meant to benefit our employees, including our financial wellness plan, emotional well-being coaching, longevity stock compensation plan and comprehensive benefit packages we offer. We also provide assistance from the Installed Building Products Foundation meant to benefit our employees, their families and their communities. While improved retention drives lower costs to recruit and train new employees, resulting in greater installer productivity, these improvements are somewhat offset by the additional costs of these incentives.

Current wording

Our employee retention rates remained better than industry averages in the six months ended June 30, 2024. We believe this is a result of our strong culture and the various programs meant to benefit our employees, including our financial wellness plan, emotional well-being coaching, longevity stock compensation plan and comprehensive benefit packages we offer. We also provide assistance from the Installed Building Products Foundation meant to benefit our employees, their families and their communities. While improved retention drives lower costs to recruit and train new employees, resulting in greater installer productivity, these improvements are somewhat offset by the additional costs of these incentives.

Previous wording

Our capital resources primarily consist of cash from operations and borrowings under our various debt agreements and capital equipment leases and loans. As of March 31, 2024, we had cash and cash equivalents of $399.9 million as well as access to $250.0 million under our asset-based lending credit facility (as defined below), less $5.8 million of outstanding letters of credit, resulting in total liquidity of $644.1 million. Liquidity may also be limited in the future by certain cash collateral limitations under our asset-based credit facility (as defined below), depending on the status of our borrowing base availability.

Current wording

Our capital resources primarily consist of cash from operations and borrowings under our various debt agreements and capital equipment leases and loans. As of June 30, 2024, we had cash and cash equivalents of $380.3 million as well as access to $250.0 million under our asset-based lending credit facility (as defined below), less $5.8 million of outstanding letters of credit, resulting in total liquidity of $624.5 million. Liquidity may also be limited in the future by certain cash collateral limitations under our asset-based credit facility (as defined below), depending on the status of our borrowing base availability.

Previous wording

We believe that our cash flows from operations, combined with our current cash levels and available borrowing capacity, will be adequate to support our ongoing operations and to fund our business needs, commitments and contractual obligations for at least the next 12 months as evidenced by our net positive cash flows from operations for the three months ended March 31, 2024. We believe that we have access to additional funds, if needed, through the capital markets to obtain further debt financing under the current market conditions, but we cannot guarantee that such financing will be available on favorable terms, or at all. In the short-term, we expect the seasonal trends we typically experience to return, including higher sales in the spring and summer than the fall and winter. This could affect the timing of cash collections and payments during each quarter of 2024.

Current wording

We believe that our cash flows from operations, combined with our current cash levels and available borrowing capacity, will be adequate to support our ongoing operations and to fund our business needs, commitments and contractual obligations for at least the next 12 months as evidenced by our net positive cash flows from operations for the six months ended June 30, 2024. We believe that we have access to additional funds, if needed, through the capital markets to obtain further debt financing under the current market conditions, but we cannot guarantee that such financing will be available on favorable terms, or at all. In the short-term, we expect the seasonal trends we typically experience to return, including higher sales in the spring and summer than the fall and winter. This could affect the timing of cash collections and payments during each quarter of 2024.

Previous wording

In "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our 2023 Form 10-K, we disclosed that we had $1.1 billion aggregate long-term material cash requirements as of December 31, 2023. In addition to these commitments, we have a long-term commitment to purchase 43.7 million pounds of material with variable pricing through March 2026. See Note 16, Commitments and Contingencies, for more information on this commitment. Additionally, we extended our term loan via a refinancing during the three months ended March 31, 2024 which will extend the maturity date by more than 2 years and require an additional $10.0 million in principal payments. No other material changes to our cash requirements during the period covered by this Quarterly Report on Form 10-Q outside of the normal course of our business.

Current wording

In "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our 2023 Form 10-K, we disclosed that we had $1.1 billion aggregate long-term material cash requirements as of December 31, 2023. In addition to these commitments, we have a long-term commitment to purchase 43.7 million pounds of material with variable pricing through March 2026. See Note 16, Commitments and Contingencies, for more information on this commitment. Additionally, we extended our term loan via a refinancing during the six months ended June 30, 2024 which will extend the maturity date by more than 2 years and require an additional $10.0 million in principal payments. There were no other material changes to our cash requirements during the period covered by this Quarterly Report on Form 10-Q outside of the normal course of our business.

Previous wording

We carefully manage our working capital and operating expenses. As of March 31, 2024 and December 31, 2023, our working capital including cash and cash equivalents was $739.5 million and $723.6 million, respectively. The increase in 2024 was primarily due to additional cash of $13.4 million resulting from the $84.8 million of cash earned from operations and $4.4 million in net proceeds from the New Term Loan offset by the payment of our annual and quarterly dividends, acquisition activity and purchases of capital equipment. Inventories increased by $8.3 million as a result of higher warehoused material levels due to consolidated sales growth. Accrued compensation decreased by $12.4 million primarily due to lower accrued bonus and incentive compensation during the first quarter. These increases were partially offset by other current assets decreasing by $14.7 million resulting from decreases in certain receivables and prepaid assets.

Current wording

We carefully manage our working capital and operating expenses. As of June 30, 2024 and December 31, 2023, our working capital including cash and cash equivalents was $734.8 million and $723.6 million, respectively. The increase in 2024 was primarily due to additional accounts receivable of $16.3 million resulting from higher year-over-year net revenue and increased inventory of $12.8 million as a result of higher warehoused material levels due to consolidated sales growth. Cash decreased

Previous wording

Net cash provided by operating activities increased from 2023 to 2024 primarily due to the increases in net income, changes in certain working capital requirements and various noncash adjustments, partially offset by increases of our accounts receivable and inventory balances.

Current wording

Net cash provided by operating activities increased from 2023 to 2024 primarily due to the increases in net income, changes in certain working capital requirements and various non-cash adjustments, partially offset by increases of our accounts receivable and inventory balances.

Previous wording

Net cash used in investing activities decreased from 2023 to 2024 primarily due to less spending on acquisitions during the three months ended March 31, 2024, partially offset by the increase in spending on property and equipment in 2024 to support our growing business.

Current wording

Net cash used in investing activities decreased from 2023 to 2024 primarily due to less spending on acquisitions during the six months ended June 30, 2024, partially offset by the increase in spending on property and equipment in 2024 to support our growing business.

Previous wording

Net cash used in financing activities increased from 2023 to 2024 primarily due to dividends paid and debt issuance costs during the three months ended March 31, 2024. The increase was partially offset by net proceeds from the New Term Loan. See Note 12, Stockholders' Equity, for more information on the dividends paid.

Current wording

Net cash used in financing activities increased from 2023 to 2024 primarily due to dividends paid and repurchases of common stock during the six months ended June 30, 2024. The increase was partially offset by net proceeds from the New Term Loan. See Note 12, Stockholders' Equity, for more information on the dividends paid and stock repurchases.

Previous wording

(ii) pay dividends on, redeem or repurchase stock in an aggregate amount exceeding the greater of 2.0% of market capitalization per fiscal year or certain applicable restricted payment basket amounts; (iii) prepay subordinated debt; (iv) create liens; (v) make specified types of investments; (vi) apply net proceeds from certain asset sales; (vii) engage in transactions with affiliates; (viii) merge, consolidate or sell substantially all of our assets; and (ix) pay dividends and make other distributions from subsidiaries.

Current wording

create liens; (v) make specified types of investments; (vi) apply net proceeds from certain asset sales; (vii) engage in transactions with affiliates; (viii) merge, consolidate or sell substantially all of our assets; and (ix) pay dividends and make other distributions from subsidiaries.

Previous wording

In March 2024, we entered into Amendment No. 3 to our Term Loan Credit Agreement ("Third Amendment"). The Third Amendment amended certain terms of the existing Term Loan Credit Agreement and allowed for the issuance of a new term loan ("New Term Loan") in the amount of $500.0 million which will mature on March 28, 2031. Net proceeds of the New Term Loan were used to refinance the remaining $490.0 million on our previous term loan, pay fees and increase working capital. The New Term Loan does not have any financial maintenance covenants, eliminates the credit spread adjustment and the floor is reduced to 0.00%. The New Term Loan bears interest, at our option, at a rate equal to either: Term SOFR plus 2.00% per annum, or an alternative base rate plus 1.00%. The New Term Loan also includes (i) a six-month “soft call” protection provision during which a 1.00% premium will be charged in connection with certain repricing transactions, and (ii) a 50 basis points most favored nation protection for 12 months following the effective date. The New Term Loan amortizes in quarterly principal payments of $1.25 million starting on June 30, 2024, with any remaining unpaid balances due on the maturity date of March 28, 2031. As of March 31, 2024, we had $495.4 million, net of unamortized debt issuance costs, due on our New Term Loan.

Current wording

In March 2024, we entered into Amendment No. 3 to our Term Loan Credit Agreement ("Third Amendment"). The Third Amendment amended certain terms of the existing Term Loan Credit Agreement and allowed for the issuance of a new term loan ("New Term Loan") in the amount of $500.0 million which will mature on March 28, 2031. Net proceeds of the New Term Loan were used to refinance the remaining $490.0 million on our previous term loan, pay fees and increase working capital. The New Term Loan does not have any financial maintenance covenants, eliminates the credit spread adjustment and the floor is reduced to 0.00%. The New Term Loan bears interest, at our option, at a rate equal to either: Term SOFR plus 2.00% per annum, or an alternative base rate plus 1.00%. The New Term Loan also includes (i) a six-month “soft call” protection provision during which a 1.00% premium will be charged in connection with certain repricing transactions, and (ii) a 50 basis points most favored nation protection for 12 months following the effective date. The New Term Loan amortizes in quarterly principal payments of $1.25 million starting on June 30, 2024, with any remaining unpaid balances due on the maturity date of March 28, 2031. As of June 30, 2024, we had $494.3 million, net of unamortized debt issuance costs, due on our New Term Loan.

Previous wording

The indenture covering the Senior Notes contains restrictive covenants that, among other things, limit the ability of the Company and certain of our subsidiaries (subject to certain exceptions) to: (i) incur additional debt and issue preferred stock; (ii) pay dividends on, redeem or repurchase stock in an aggregate amount exceeding 2.0% of market capitalization per fiscal year, or in an aggregate amount exceeding certain applicable restricted payment baskets; (iii) prepay subordinated debt; (iv) create liens; (v) make specified types of investments; (vi) apply net proceeds from certain asset sales; (vii) engage in transactions with affiliates; (viii) merge, consolidate or sell substantially all of our assets; and (ix) pay dividends and make other distributions from subsidiaries.

Current wording

The ABL Credit Agreement contains a financial covenant requiring the satisfaction of a minimum fixed charge coverage ratio of 1.0x in the event that we do not meet a minimum measure of availability under the ABL Revolver. The ABL Credit Agreement and the Term Loan Agreement contain restrictive covenants that, among other things, limit the ability of the Company and certain of our subsidiaries (subject to certain exceptions) to: (i) incur additional debt and issue preferred stock; (ii) pay dividends on, redeem or repurchase stock in an aggregate amount exceeding the greater of 2.0% of market capitalization per fiscal year or certain applicable restricted payment basket amounts; (iii) prepay subordinated debt; (iv) create liens; (v) make specified types of investments; (vi) apply net proceeds from certain asset sales; (vii) engage in transactions with affiliates; (viii) merge, consolidate or sell substantially all of our assets; and (ix) pay dividends and make other distributions from subsidiaries.

Previous wording

Total outstanding loan balances relating to our Master Loan and Equipment Agreements were $80.7 million as of March 31, 2024 and $83.0 million as of December 31, 2023, respectively. Depreciation of assets held under these agreements is included within cost of sales on the Condensed Consolidated Statements of Operations and Comprehensive Income.

Current wording

Total outstanding loan balances relating to our Master Loan and Equipment Agreements were $83.1 million as of June 30, 2024 and $83.0 million as of December 31, 2023, respectively. Depreciation of assets held under these agreements is included within cost of sales on the Condensed Consolidated Statements of Operations and Comprehensive Income.

Previous wording

Management’s discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. Certain accounting policies involve judgments and uncertainties to such an extent that there is a reasonable likelihood that materially different amounts could have been reported using different assumptions or under different conditions. We evaluate our estimates and assumptions on a regular basis. We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of our assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates and assumptions used in preparation of our consolidated financial statements. There have been no significant changes to our critical accounting policies and estimates during the three months ended March 31, 2024 from those disclosed in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our 2023 Form 10-K.

Current wording

Management’s discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. Certain accounting policies involve judgments and uncertainties to such an extent that there is a reasonable likelihood that materially different amounts could have been reported using different assumptions or under different conditions. We evaluate our estimates and assumptions on a regular basis. We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of our assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates and assumptions used in preparation of our consolidated financial statements. There have been no significant changes to our critical accounting policies and estimates during the six months ended June 30, 2024 from those disclosed in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our 2023 Form 10-K.