Carlisle Companies Inc: Form 10-K for the period ended Dec 31, 2023

Overview

Carlisle Companies Incorporated (“Carlisle”, the “Company”, “we”, “us” or “our”) is a leading manufacturer and supplier of innovative building envelope products and solutions that enable greater energy efficiency in buildings. Through our family of leading brands in our building products businesses, we provide labor-reducing and environmentally responsible solutions to contractors and building owners with a keen focus on delivering the best-in-class Carlisle Experience to all channel partners.

Our Company website is www.carlisle.com (http://www.carlisle.com), through which we make available, free of charge, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K and all amendments to those reports, as soon as reasonably practicable after these reports are electronically filed with or furnished to the Securities and Exchange Commission (“SEC”). Information on, or that can be accessed through, our website is not incorporated by reference and should not be considered part of this Annual Report on Form 10-K. All references to "Notes" refer to our Notes to Consolidated Financial Statements in this Annual Report on Form 10-K.

Business Strategy

We strive to be a leading manufacturer and supplier of innovative building envelope products and solutions that enable greater energy efficiency in buildings in the various markets we serve. Our recently launched strategic plan, Vision 2030, builds on our track record of success following the pivot of Carlisle’s portfolio of general industrial businesses to a pure play building products company. Vision 2030 aims to leverage mega trends around energy efficiency, labor savings and the re-roofing cycle to generate above market growth driven by innovation, the Carlisle Experience and the Carlisle Operating System ("COS").

Key pillars of this strategic plan, which provides clarity, alignment, and are well-ingrained throughout the Company to guide our value-creating strategy going forward, include (1) dedication to driving above market organic revenue growth through continued investment in innovation and maintaining best-in-class production, service, and delivery capabilities, (2) utilizing COS, an operating structure and strategy deployment system based on lean enterprise and six sigma principles, consistently to drive efficiencies and operating leverage, (3) building scale with synergistic acquisitions, (4) continuing to invest in and develop exceptional talent, and (5) maintaining a balanced, returns-focused approach to capital deployment which includes returning excess capital to stockholders.

We utilize COS to drive improving operational performance. COS is a continuous improvement process that defines the way we do business and is deeply embedded in our culture throughout Carlisle’s operations. Waste is eliminated and efficiencies are improved enterprise-wide, driving both improvements to our sustainability efforts by reducing our carbon footprint and increasing profitability. These efforts expand beyond production areas, as COS drives new product innovation, engineering, supply chain management, warranty and product rationalization.

With accelerating demand for energy-efficient solutions for sustainable buildings of the future, we will continue to seek ways to improve our manufacturing processes to lower carbon emissions through COS. Importantly, we will continue to emphasize the development of products that help reduce carbon emissions with energy-efficient systems and solutions on building rooftops and throughout the building envelope as a natural offset to the current built environment, which is estimated to contribute as much as 30% of annual greenhouse gas ("GHG") emissions.

We intend to continue to seek synergistic acquisitions that will enhance our ability to service our customers with a broader set of energy-efficient solutions, while also seeking to divest businesses that no longer fit well into the strategic direction of Carlisle. Refer to Notes 3 and 4 for further discussion of acquisitions made during the past three years and our discontinued operations.

We believe our proactive approach to continuous improvement initiatives and focus on delivering the Carlisle Experience to our customers demonstrated our ability to maintain margin resiliency in 2023. We remain focused on continuing our value-creating journey with the proven foundational pillars of Vision 2030 ingrained in our Carlisle culture of continuous improvement and returns-focused capital deployment.

Description of Business by Segment

Carlisle Construction Materials (“CCM”)

Products, Markets and Locations

The CCM segment has evolved from a supplier of the first single-ply ethylene propylene diene monomer (“EPDM”) roofing membranes in the early 1960s to today, where we deliver innovative, easy-to-install and energy-efficient solutions through the Carlisle Experience for customers who are creating the sustainable building of the future. CCM is a diversified manufacturer and supplier of premium roofing products and related technologies primarily for the commercial construction market. CCM offers high-performance, single-ply roofing solutions that include EPDM, thermoplastic polyolefin (“TPO”), polyvinyl chloride (“PVC”), architectural metal and roof garden systems.

EPDM, TPO and PVC membrane and polyisocyanurate ("polyiso") insulation are sold together in warranted systems or separately in non-warranted systems to the new construction, replace and remodel, and general construction markets. These products are primarily sold under the Carlisle SynTec, Versico, Weatherbond and Hunter Panels brands in the United States of America (“U.S.” or “United States”) and throughout the world, and EPDM membranes under the Resitrix and Hertalan brands primarily in Europe.

CCM operates manufacturing facilities located throughout the United States, its primary market, and in Canada, Germany, the Netherlands, United Kingdom ("U.K.") and Romania. The majority of CCM’s products are sold through a network of authorized sales representatives and distributors in North America and Europe.

Key Raw Materials

Key raw materials for this segment include methylene diphenyl diisocyanate (“MDI”), polyol, EPDM polymer, TPO polymer, carbon black and coated steel. These raw materials generally have at least two vendor sources. The vendor typically has multiple processing facilities for key raw materials that are single sourced.

Seasonality

Revenues and earnings for CCM have historically been higher in the second and third quarters due to increased construction activity during those periods from favorable weather conditions.

Market Factors

CCM serves a large and diverse customer base; however, in 2023 CCM's two largest customers represented 31.7% of the Company’s consolidated revenues. The loss of either of these customers could have a material adverse effect on the Company's consolidated revenues and operating income. Both of these customers' business is covered under a number of independent local agreements.

Demand for CCM’s energy-efficient roofing solutions is primarily driven by the need to replace older, existing roofs on non-residential structures, and to a lesser extent, new construction. Notably, CCM’s backlog of orders is not a significant factor for the segment, and thus not a reliable indicator of intermediate-term revenue as most products have relatively short order-to-delivery periods.

This segment faces competition from several competitors that produce roofing systems predominantly for commercial and building applications. The level of competition within this market varies by product line and region. As one of four major manufacturers in the single-ply industry, CCM competes through innovative products, long-term warranties and customer service. CCM offers separately priced extended warranty contracts on certain of its products ranging from five to 40 years, the most significant being those offered on its installed single-ply roofing systems primarily in the United States, subject to certain exclusions, that covers leaks in the roofing system attributable to a problem with the particular product or the installation of the product.

Strategy

Our strategy for the CCM segment is to:

• Leverage mega-trends around energy efficiency, labor savings, and the re-roofing cycle supported by initiatives to accelerate innovation, and the Carlisle Experience;
• Continue to support its above average margin profile through COS; and
• Further expand our offering of innovative solutions to U.S. commercial roofing markets, including broadening our product breadth and geographic reach into architectural metals.

Key growth initiatives include:

• Grow profitability through the creation of value, based on labor and energy efficiency;
• Continue to drive and leverage the Carlisle Experience to deliver superior customer service;
• Drive innovation through enhanced focus on research and development to continue to introduce proprietary, differentiated, value-add products and solutions;
• Continue to invest in training employees and customers to drive a culture of continuous learning that creates brand loyalty; and
• Focus mergers and acquisitions on synergistic building envelope opportunities.

Carlisle Weatherproofing Technologies (“CWT”)

Products, Markets and Locations

The CWT segment was created in early 2022 to incorporate our acquisition of Henry Company LLC ("Henry") on September 1, 2021 and align our segments around our products and applications for the building envelope. CWT is a leading provider of high-performance waterproofing and moisture protection products, protective roofing underlayments, integrated air and vapor barriers, spray polyurethane foam and coating systems, and block-molded expanded polystyrene insulation for the building envelope. CWT offers an enhanced set of solutions and systems to aid in the design of efficient building envelope construction projects, backed by industry-leading product innovations and a focus on environmentally responsible principles.

CWT operates manufacturing facilities and distribution locations throughout the United States and Canada, its primary markets. The majority of CWT’s products are sold through distribution and retail outlets throughout North America.

Key Raw Materials

Key raw materials for this segment include MDI, silicone polymer, asphalt, glass mat and expanded polystyrene insulation bead. These raw materials generally have at least two vendor sources. The vendor typically has multiple processing facilities for key raw materials that are single sourced.

Seasonality

Revenues and earnings for CWT have historically been higher in the second and third quarters due to increased construction activity during those periods from favorable weather conditions.

Market Factors

This segment faces competition from numerous, usually local or regional competitors, that typically produce a subset of CWT’s broader suite of weatherproofing technologies used in both commercial and residential markets. The level of competition within these markets varies by product line, region and channel. As a market-leader in air and vapor barriers, waterproofing, spray foam and other insulation solutions, CWT competes through innovative products, long-term warranties and customer service. CWT's backlog of orders is not a significant factor for the segment, and thus not a reliable indicator of intermediate-term revenue as most products have relatively short order-to-delivery periods. The warranties offered on CWT products vary by solution.

Strategy

Our strategy for the CWT segment is to:

• Further expand our value proposition to building owners, contractors and home builders with our comprehensive suite of energy-efficient building products;
• Capture significant aftermarket opportunities as both residential and non-residential buildings are in need of both repair and energy-efficiency upgrades;
• Continue to expand margins through implementation of COS, strong incremental margins on volume growth and investments into our factories; and
• Further expand our presence in niche high-growth and high-margin opportunities including retail product expansion, advanced air, water, and vapor barriers, and enhancement of other building envelope adjacencies.

Key growth initiatives include:

• Drive sales and commercial excellence using system and bundle sales to leverage enhanced product breadth and the Carlisle Experience;
• Accelerate innovation to develop new integrated system solutions across the building envelope;
• Grow profitability through the creation of value, based on labor and energy efficiency, and leveraging COS throughout CWT’s manufacturing footprint;
• Continue development of proprietary, differentiated products;
• Utilize training to drive a culture of continuous learning that creates brand loyalty; and
• Focus mergers and acquisitions on synergistic building envelope opportunities.

Intellectual Property

We own or hold the right to use a variety of patents, trademarks, licenses, inventions, trade secrets and other intellectual property rights. We have adopted a variety of measures and programs to maintain the continued validity and enforceability of our various intellectual property rights.

Research and Development

Research and development activities include the development of new product lines, the modification of existing product lines to comply with regulatory changes, and the research of cost efficiencies through raw material substitution and process improvements. Our research and development expenses were $28.7 million, $19.0 million and $16.4 million, representing 0.6%, 0.3% and 0.4% of revenues in 2023, 2022 and 2021, respectively.

Compliance with Government Regulations

We are subject to various government regulations, including environmental regulations. To date, our costs of complying with these regulations have not had a material effect on our capital expenditures, earnings or competitive position of any business segment. We do not expect to incur any material capital expenditures for environmental control facilities for the current fiscal year or any other subsequent period.

Sustainability

Carlisle’s sustainability history is fundamental to our culture. Our journey began in the early 1900’s when we recycled rubber from our first inner tube production line, and now, over 100 years later, we consider sustainability a core attribute to the value we provide our customers. Our century-long legacy of responsible stewardship will help enable us to meet our net-zero GHG emission goal and informs the three pillars of our sustainability strategy: producing energy-efficient products, reducing our operational and value-chain emissions, and diverting construction material waste from landfills. In order to facilitate these actions, we work with the Science Based Targets Initiative ("SBTi"), an independent body that works with the United Nations and CDP (formerly the Carbon Disclosure Project), which provides companies with the guidance and tools to establish emission reduction initiatives using targets grounded in climate-based science.

In 2023, Carlisle achieved more than a 250,000 metric ton of CO2e reduction in our emissions due to the reformulation of our products, including transitioning hydrofluorocarbon ("HFC") blowing agents to hydrofluoroolefin ("HFO") alternatives that have minimal global warming potential. Additionally, we have increased the volume of recycled raw materials that are used in the manufacture of our products, including the use of carbon black made from recycled tires and polyiso facer paper made from post-consumer corrugate waste. These initiatives ultimately decrease the embodied carbon in our finished good products.

This year also marked the opening of our Sikeston, Missouri polyiso manufacturing plant, the very first domestic manufacturing plant built to Leadership in Energy and Environmental Design ("LEED") Platinum standards. Contributing LEED attributes include solar power generation, LED motion sensor lighting, daylighting, noise isolation and control systems, and the restoration of local wetlands. Additionally, Carlisle certified nine manufacturing facilities to the ISO 14001 Environmental Management System standard, bringing our total ISO 14001 certified footprint to over 25 facilities. The ISO 14001 standard contributes to the management of our environmental impacts, mitigating our operational and value-chain emissions.

Through 2023, Carlisle recycling programs diverted an additional 75,000 tons of material through various operational recycling and purchased recycled content programs. Additionally, in April 2023, Carlisle launched our rooftop insulation and membrane take-off recycling program. Through 2023, the program contributed to the reclamation of over one million square feet of roofing material, diverting over 200 tons of construction materials from landfills.

As we continue our sustainability journey, we continue to rely on the tenets of the Carlisle Environmental Sustainability Policy, which specifies the collection of detailed data from our facilities across the globe. Through evaluating the data, we can measure factors, like GHG emissions, which we will use to monitor our progress towards achieving our established targets. The policy further establishes a process to engage our supply chain and monitor compliance with Carlisle policies for fair labor practices and our Code of Business Conduct and Ethics.

The Chair, President, and Chief Executive Officer reviews and approves the strategic direction for Carlisle’s sustainability approach. Carlisle’s sustainability approach is guided to execution through the Vice President of Sustainability and the Sustainability Steering Committee. The Vice President of Sustainability, reporting to the Chair, President and Chief Executive Officer, leads the Sustainability Steering Committee, which is composed of key executives in the areas of human resources, COS, legal and finance. The Sustainability Steering Committee develops strategy, provides oversight, and monitors accountability in our sustainability and climate-related initiatives through the deployment of the Carlisle Environmental Sustainability Policy. On a periodic basis, Carlisle's Board of Directors (the "Board") reviews the status of the Company's sustainability initiatives. The Vice President of Sustainability and members of the Sustainability Steering Committee work with senior leadership within Carlisle’s business units to deploy and accelerate Carlisle’s sustainability strategy.

Our environmental sustainability initiatives and strategy are discussed further in our 2022 Corporate Sustainability Report, which can be found on our website at www.carlisle.com (http://www.carlisle.com); this report is not incorporated by reference and should not be considered part of this Form 10-K.

Human Capital Resources

Investing in Our People

As of December 31, 2023, we employed approximately 11,000 people, including approximately 5,100 employees in our core building products businesses and excluding approximately 200 contractors.

We believe that talent attraction and retention are critical to our ability to achieve our strategy and that a trained, diverse and inspired workforce is integral to delivering value to our stakeholders. We begin with a recruiting process that reaches a wide array of potential employees and includes the engagement of specialized, diverse recruiting firms such as The Standard Diversity Network, Jobs4Women.net, Asian American Jobsite, African American Jobsite, Women in Manufacturing and many others.

We also partner with universities in the U.S. and outside the U.S., recruiting for functional talent in management, sales, finance, information technology and other functions from the communities in which we work. In addition, we engage certain of these universities in collaborative research and development, and training efforts. Each business segment works with high schools and trade schools in their respective locations to educate young people about, and attract them to, manufacturing careers.

We offer several training programs for current employees intended to develop talent, including:

• Carlisle Leadership Summit, a leadership development program intended to identify and prepare high-performing employees for senior leadership roles and to recognize and continue to develop our most seasoned employees;
• Carlisle Leadership Program, a partnership with The Wharton School of the University of Pennsylvania, a program for Director and VP level employees who are leading teams and demonstrating future potential for senior leadership roles intended to develop business and leadership skills in both applied and classroom environments; and
• Carlisle Leadership Foundations, a leadership development program designed for employees who have recently advanced, or are expected to advance, to their first leadership roles and have the potential to take on greater roles in the future and intended to help these employees to define their own leadership style, to enable their future success and to build key leadership capabilities.

Diversity, Equity & Inclusion

Carlisle has pledged to take action to cultivate a workplace where diverse perspectives and experiences are welcomed and respected. In May 2018, Carlisle joined the CEO Action for Diversity & Inclusion™, a coalition of more than 2,500 CEOs pledging to advance diversity and inclusion in the workplace. By signing on to this commitment, Carlisle pledged to take action to cultivate a workplace where diverse perspectives and experiences are welcomed and respected. CEO Action for Diversity & Inclusion™ is cultivating an ecosystem centered around collaboration and sharing.

Carlisle’s commitment to diversity and inclusion in the workforce includes a policy of non-discriminatory treatment and respect of human rights for all current and prospective employees. Discrimination on the basis of an individual’s race, religion, creed, color, sex, sexual orientation, age, marital status, disability, national origin or veteran’s status is not permitted by Carlisle and is illegal in many jurisdictions. Carlisle respects the human rights of all employees and strives to treat them with dignity consistent with standards and practices recognized by the international community. Carlisle is committed to respecting all human rights, as articulated in the Universal Declaration of Human Rights, the International Covenant on Civil and Political Rights, the International Covenant on Economic, Social and Cultural Rights, and the International Labor Organization’s Declaration on Fundamental Principles and Rights at Work.

In addition to policies for fair treatment, Carlisle also works to address inclusion in the workplace. In 2023, Carlisle offered a series of required quarterly trainings on inclusion. These trainings provided awareness of the need for an inclusive work environment and a forum for employees to explore how Carlisle can strengthen our culture of inclusion. This has contributed to an effort to gain equal diversity representation throughout Carlisle.

Since 2021, we have achieved gender and race pay equity across our U.S. workforce. This means compensating employees the same when they perform the same job duties, while accounting for other factors, such as their experience level, job performance and tenure with the Company. Carlisle's minimum starting wage is $15 per hour for our entire U.S. workforce.

As of December 31, 2023, Carlisle's global workforce was composed of 19% women, and our U.S. building products workforce was composed of 20% women and 33% racially or ethnically diverse individuals.

Health and Safety

Through COS, we have launched “Path to Zero,” an initiative to drive our safety incident rate to zero. At Carlisle, safety is everyone’s responsibility. This includes our own employees, as well as contractors, suppliers, customers and others. Carlisle is committed to adhering to safety policies, procedures and training to incorporate safety into all aspects of business operations. All safety incidents are investigated to reduce safety risks and share lessons learned. Carlisle measures and reviews safety performance and strives for continuous improvement along the Path to Zero.

Throughout 2023, our teams continued to support each other and focus on safety, as evidenced by our industry leading 0.68% OSHA Incident Rate. Carlisle continues to lead in safety performance and has consistently outperformed the industry since we started tracking this metric on a consolidated basis in 2018.

Labor Matters

Employees represented by unions, local work councils or collective bargaining agreements as of December 31, 2023, are listed below, with the number of employees represented and the expiration date of the applicable agreements:

8

The Company’s business, financial condition, results of operations and cash flows can be affected by a number of factors including those material factors set forth below, those set forth in our “Forward Looking Statements” disclosure in Item 7 and those set forth elsewhere in this Annual Report on Form 10-K, any one of which could cause the Company’s actual results to vary materially from recent results or from anticipated future results and make an investment in the Company speculative or risky.

Strategic, Business and Operational Risks

The Company’s earnings growth strategy is partially dependent on the acquisition and successful integration of other businesses.

The Company has a history of acquiring businesses as part of its earnings growth strategy. Typically, the Company considers acquiring companies that can be integrated within an existing business. Acquisitions of this type involve numerous risks, which may include a failure to realize expected revenue growth and operating and cost synergies from integration initiatives, increasing dependency on the markets served by the combined businesses or increased debt to finance the acquisitions.

The Company also considers the acquisition of businesses that may operate independent of existing businesses. Acquisitions of this type involve risks similar to those encountered when acquiring companies that can be integrated within an existing business, including a failure to realize expected revenue growth or operating and cost reductions within the acquired business, and could increase the possibility of diverting corporate management’s attention from its existing operations.

The successful realization of revenue growth, cost reductions and synergies with our existing businesses, and within acquired stand-alone businesses, and increases in profitability overall, are dependent upon successful integration initiatives. If these integration initiatives are not fully realized, there may be a negative effect on the Company’s business, financial condition, results of operations and cash flows, including goodwill and/or intangible asset impairments, which may be material.

Refer to Note 3 for recent acquisition information.

The loss of, a significant decline in business with, or pricing pressure from, one or more of the Company’s key customers could adversely affect the Company’s business, financial condition, results of operations and cash flows.

The Company's CCM segment operates in several niche markets in which a large portion of the segment’s revenues are attributable to a few large customers. See “Item 1. Business—Overview—Description of Businesses by Segment” for a discussion of customer concentrations for CCM. A significant reduction in purchases by one or more of these customers could have an adverse effect on the business, financial condition, results of operations or cash flows of one or more of the Company’s segments.

Some of the Company’s key customers enjoy significant purchasing power that may be used to exert pricing pressure on the Company. Additionally, as many of the Company’s businesses are part of a long supply chain to the ultimate consumer, the Company’s business, financial condition, results of operations or cash flows could be adversely affected if one or more key customers elects to in-source or find alternative suppliers for the production of a product or products that the Company currently provides.

Failure to successfully complete dispositions or restructuring activities could negatively affect the Company.

From time to time, the Company, as part of its commitment to concentrate on its core business, may dispose of all or a portion of certain businesses. Such dispositions involve a number of risks and present financial, managerial and operational challenges, including diversion of management's attention from the Company’s core businesses, increased expense associated with the dispositions, potential disputes with the customers or suppliers of the disposed businesses, potential disputes with the acquirers of the disposed businesses and a potential dilutive effect on the Company’s earnings per share. If dispositions are not completed in a timely manner, there may be a negative effect on the Company’s cash flows and/or the Company’s ability to execute its strategy.

Additionally, from time to time, the Company may undertake consolidation and other restructuring projects in an effort to reduce costs and streamline its operations. Such restructuring activities may divert management's attention from the Company’s core businesses, increase expenses on a short-term basis and lead to potential disputes with the employees, customers or suppliers of the affected businesses. If restructuring activities are not completed in a timely manner or if anticipated cost savings, synergies and efficiencies are not realized, there may be a negative effect on the Company’s business, financial condition, results of operations and cash flows.

Refer to Note 4 for a discussion of disposition matters.

Industry and Macroeconomic Risks

Several of the market segments that the Company serves are cyclical and sensitive to domestic and global economic conditions.

Several of the market segments in which the Company sells its products are, to varying degrees, cyclical and may experience periodic downturns in demand. For example, the CCM and CWT segments are susceptible to downturns in the commercial construction industry, particularly in the construction repair and replacement sectors, and the CWT segment is susceptible to downturns in the residential construction industry.

Uncertainty regarding global economic conditions may have an adverse effect on the businesses, results of operations and financial condition of the Company and its customers, distributors and suppliers. Among the economic factors which may affect performance are: manufacturing activity, commercial and residential construction, difficulties entering new markets and general economic conditions such as inflation, deflation, interest rates and credit availability. These effects may, among other things, negatively impact the level of purchases, capital expenditures and creditworthiness of the Company’s customers, distributors and suppliers, and therefore, the Company’s results of operations, margins and orders. The Company cannot predict if, when or how much worldwide economic conditions will fluctuate. These conditions are highly unpredictable and beyond the Company's control. If these conditions deteriorate, however, the Company’s business, financial condition, results of operations and cash flows could be adversely affected.

The Company is subject to risks arising from international economic, political, legal and business factors.

The Company operates in global markets. Approximately 10% of the Company’s revenues in 2023 were generated outside the United States. In addition, to compete globally, both of the Company’s segments have manufacturing facilities outside the United States. In 2023, approximately 11% of cost of goods sold was derived from facilities outside of the United States.

The Company’s reliance on international revenues and international manufacturing bases exposes its business, financial condition, operating results and cash flows to a number of risks, including price and currency controls; government embargoes or foreign trade restrictions, including import and export tariffs; extraterritorial effects of U.S. laws such as the Foreign Corrupt Practices Act; expropriation of assets; war, civil uprisings, acts of terror and riots; political instability; nationalization of private enterprises; hyperinflationary conditions; the necessity of obtaining governmental approval for new and continuing products and operations, currency conversion or repatriation of assets; legal systems of decrees, laws, taxes, regulations, interpretations and court decisions that are not always fully developed and that may be retroactively or arbitrarily applied; cost and availability of international labor, materials and shipping channels; and customer loyalty to local companies.

The Company has significant concentrations in the construction market.

Most of the Company’s revenues and operating income are generated from the construction market. Construction spending is affected by economic conditions, changes in interest rates, demographic and population shifts, new housing starts and changes in construction spending by federal, state and local governments. A decline in the construction market, particularly in construction repair and replacement activities, could adversely affect the Company’s business, financial condition, results of operations and cash flows. Additionally, adverse weather conditions such as heavy or sustained rainfall, cold weather and snow can limit construction activity and reduce demand for roofing materials.

The CCM and CWT segments compete through pricing, among other factors. Competition in these segments may increase pricing pressure on the Company which may negatively affect operating results in future periods.

Raw material costs are a significant component of the Company’s cost structure and are subject to volatility, including cost increases, significant disruptions to the Company's supply chains or significant shortages of materials.

The Company utilizes petroleum-based products, chemicals, resins and other commodities in its manufacturing processes. Raw materials, including inbound freight, accounted for approximately 67% of the Company’s cost of goods sold in 2023. Significant increases in the costs of these materials may not be recovered through selling price increases and significant disruption to the Company's supply chains or significant shortages of materials could adversely affect the Company’s business, financial condition, results of operations and cash flows. The Company also relies on global sources of raw materials, which could be adversely impacted by unfavorable shipping or trade arrangements, including import and export tariffs and global economic conditions. Refer to “Part II—Item 7A. Quantitative and Qualitative Disclosures About Market Risk” for additional information regarding commodity price risk.

Currency fluctuation could have a material impact on the Company’s reported results of business operations.

The Company’s global revenues and other activities are translated into U.S. Dollars ("USD") for reporting purposes. The strengthening or weakening of the USD could result in unfavorable translation effects as the results of transactions in foreign countries are translated into USD. In addition, sales and purchases in currencies other than our subsidiaries' functional currencies (primarily the USD, Euro, Chinese Renminbi and British Pound) expose the Company to fluctuations in foreign currencies relative to those functional currencies. Increased strength of the functional currency will decrease the Company’s reported revenues or margins in respect of sales conducted in foreign currencies to the extent the Company is unable or determines not to increase local currency prices. Likewise, decreased strength of the functional currency could have a material adverse effect on the cost of materials and products. Many of the Company’s sales that are exported by its USD functional subsidiaries to foreign countries are denominated in USD, reducing currency exposure. However, increased strength of the USD may decrease the competitiveness of our U.S. subsidiaries’ products that are sold in USD within foreign locations.

The Company has entered into foreign currency forward contracts to mitigate the exposure of certain of our results of operations and cash flows to such fluctuations. See “Part II—Item 7A. Quantitative and Qualitative Disclosures About Market Risk” for a discussion on foreign currency exchange risk.

Environmental, Regulatory and Legal Risks

The Company's operations are subject to risks related to environmental laws and regulations.

We are subject to increasingly stringent environmental laws and regulations, including those relating to air emissions, wastewater discharges, and chemical and hazardous waste management and disposal. Some of these environmental laws hold owners or operators of land or businesses liable for their own and for previous owners’ or operators’ releases of hazardous or toxic substances or wastes. Other environmental laws and regulations require the obtainment of, and compliance with, environmental permits. To date, costs of complying with environmental, health and safety requirements have not been material, and the Company did not have any significant accruals related to potential future costs of environmental remediation as of December 31, 2023 and 2022, nor are any material asset retirement obligations recorded as of that date. However, the nature of the Company’s operations and its long history of industrial activities at certain of its current or former facilities, as well as those acquired, could potentially result in material environmental liabilities or asset retirement obligations.

Global climate change and related regulations could negatively affect the Company.

Changes in environmental and climate change laws or regulations, including laws relating to GHG emissions, could lead to new or additional investment in the Company’s products or facilities and could increase environmental compliance expenditures. Changes in climate change concerns including GHG emissions, and the regulation of such concerns including climate-related disclosures, could subject the Company to additional costs and restrictions, including increased energy and raw material costs and other compliance requirements which could negatively impact the Company’s reputation, business, capital expenditures, results of operations and financial position.

As of the date of this filing, we have made several public commitments regarding our intended reduction of GHG emissions, including commitments to achieve net zero GHG emissions by 2050 and the establishment of science-based targets to reduce GHG emissions from our operations and the operations of our value chain. Although we intend to meet these commitments, we may be required to expend significant resources to do so, which could increase our operational costs. Further, there can be no assurance of the extent to which any of our commitments will be achieved, or that any future investments we make in furtherance of achieving such targets and goals will meet investor expectations or any binding or non-binding legal standards regarding sustainability performance. Moreover, we may determine that it is in the best interest of the Company and our stockholders to prioritize other business, social, governance or sustainable investments over the achievement of our current commitments based on economic, regulatory and social factors, business strategy or pressure from investors, activist groups or other stakeholders. If we are unable to meet these commitments, then we could incur adverse publicity and reaction from investors, activist groups and other stakeholders, which could adversely impact the perception of our brands and our products and services by current and potential customers, as well as investors, which could in turn adversely impact our results of operations.

General Risk Factors

The Company is subject to risks arising from widespread health emergencies.

The Company’s businesses operate in market segments impacted by widespread health emergencies, including the COVID-19 pandemic. Operating during a widespread health emergency exposes the Company to a number of risks, including diminished demand for our products and our customers’ products, suspensions in the operations of our manufacturing facilities, maintenance of appropriate labor levels, our ability to ship products to our customers, interruptions in our supply chains and distribution systems, increases in operating costs related to pay and benefits for our employees, collection of trade receivables in accordance with their terms, and potential impairment of goodwill and long-lived assets, any of which, individually or in the aggregate, could have a material adverse effect on the Company’s business, financial condition, results of operations and cash flows.

While these risks have not to date, in the aggregate, had a material adverse impact on the Company, we are unable to predict the extent or duration of impacts from widespread health emergencies as they will depend on future developments, which are highly uncertain and cannot be predicted at this time, such as the duration and frequency of, and government responses to, such emergencies.

Cybersecurity breaches or significant disruptions of our information technology systems or violations of data privacy laws could adversely affect our business.

We rely on information technology systems, some of which are managed by third parties, to process, transmit and store electronic information, and to manage or support critical business processes. Security breaches of these systems could result in the unauthorized or inappropriate access to confidential information or personal data entrusted to us by our business partners. While we have experienced, and expect to continue to experience, cybersecurity breaches to our information technology systems, none of them to date has had a material impact on the Company. Additionally, these systems may be disrupted as a result of attacks by computer hackers or viruses, human error or wrongdoing, operational failures or other catastrophic events. The Company leverages its internal information technology infrastructures, and those of its business partners, to enable, sustain and protect its global business interests. However, any of the aforementioned breaches or disruptions could result in legal claims, liability or penalties under privacy laws or damage to operations or to the Company's reputation, which could adversely affect our business.

We are subject to data privacy and security laws, regulations and customer-imposed controls as a result of having access to and processing confidential, personal and/or sensitive data in the ordinary course of business. If we are unable to maintain reliable information technology systems and appropriate controls with respect to privacy and security requirements, we may suffer regulatory consequences that could be costly or otherwise adversely affect our business.

The Company’s processes to assess, identify, and manage material cybersecurity risks are included as part of the Company’s overall risk management program and include documented procedures and protocols to identify and monitor material cybersecurity risks, provide cybersecurity training and awareness, implement protective controls, and established incident response procedures. The Company also engages third-party professional cybersecurity consultants to assist with its cybersecurity processes, including conducting periodic tabletop exercises and system penetration testing. The Company maintains processes to oversee and identify certain risks from cybersecurity threats associated with its use of these third-party service providers and maintains protections in its vendor risk management process. Risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have not materially affected, nor are reasonably likely to materially affect, the Company, including its business strategy, results of operations, or financial condition.

The Audit Committee of the Company’s Board of Directors oversees the assessment and management of the Company’s major financial risk exposures, including cybersecurity risk, and reviews the steps management has taken to monitor, control and mitigate such exposures. No less than annually, the Director of Information Security attends an Audit Committee meeting and presents for review and discussion the Company’s processes to assess, identify, manage and mitigate material cybersecurity risks. The Audit Committee subsequently reports on the presentation to the full Board of Directors.

The Company’s cybersecurity processes are managed by a dedicated department led by the Director of Information Security. The Director of Information Security has 10 years of cybersecurity work experience and carries a number of cybersecurity and security-related certifications. The dedicated department is responsible for developing and implementing the strategies, policies and procedures to manage and mitigate cybersecurity risks. The dedicated department utilizes documented incident response procedures to become informed of and monitor the prevention, detection, mitigation and remediation of cybersecurity incidents. The dedicated department is comprised of a nine-person staff, several of whose members carry multiple cybersecurity and other security-related certifications. The Company’s internal audit department also provides support to the Company’s cybersecurity processes.

The number, location and size of the Company’s principal properties as of December 31, 2023, by segment follows:

The Company considers its principal properties, as well as the related machinery and equipment, to be generally well maintained, and suitable and adequate for its intended purposes.

The Company is a party to certain lawsuits in the ordinary course of business. Information about legal proceedings is included in Note 16.

Carlisle Companies Incorporated (“Carlisle”, the “Company”, “we”, “us” or “our”) is a leading manufacturer and supplier of innovative building envelope products and solutions for more energy-efficient buildings. Through our building products businesses, Carlisle Construction Materials ("CCM") and Carlisle Weatherproofing Technologies ("CWT"), and family of leading brands, we deliver innovative, labor-reducing and environmentally responsible products and solutions to customers through the Carlisle Experience. Carlisle is committed to generating superior stockholder returns and maintaining a balanced capital deployment approach, including investments in our businesses, strategic acquisitions, share repurchases and continued dividend increases.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is designed to provide a reader of our financial statements with a narrative from the perspective of Company management. All references to “Notes” refer to our Notes to Consolidated Financial Statements in this Annual Report on Form 10-K.

Executive Overview

We are pleased by the Carlisle team’s results, achieving full year 2023 income from continuing operations of $718.9 million, an operating margin of 21.4% and an adjusted EBITDA margin of 25.1%. Despite destocking by distributors and contractors during the first half of the year, Carlisle had a strong finish to 2023 with results driven by stronger CCM sales and higher profitability at CWT. We continue to emphasize execution in our businesses through the Carlisle Operating System ("COS"), providing value to our customers by delivering innovative solutions for the building envelope, and delivering the Carlisle Experience to our customers.

With our strong finish to 2023 and the end of the past year’s inventory destocking in our channels, our team enters 2024 energized and clearly aligned with our recently launched Vision 2030. The announced sale agreement of our Carlisle Interconnect Technologies ("CIT") business serves as a critical last step in our pivot to a best-in-class pure play building products company. As part of our capital allocation philosophy, we made the strategic decision in 2021 to allocate future cash flow and human capital to maximize total returns by focusing on our building products businesses, which have consistently delivered the highest returns. With the expected proceeds from the sale, we begin 2024 with an eye toward significant value creation to deliver another year of superior returns to our stockholders.

We expect combined benefits from a backlog of roofing projects due to constrained labor and tailwinds from prior year customer destocking to help mitigate potential macro-economic risks. We have entered 2024 with a positive growth outlook that we believe is reasonable, achievable and fully supported by our Vision 2030 strategic objectives. We are confident that innovation with a focus on energy efficiency and labor-saving solutions puts us on the right path to drive above-market growth and earn a premium price in the marketplace.

We remain balanced and disciplined in our approach to capital deployment and plan to elevate our level of capital expenditures and research and development to drive future growth. We continue to manage an active merger and acquisition pipeline focused on synergistic businesses with attractive growth characteristics that complement our high-margin product lines. In 2023, we returned value to our stockholders by repurchasing $900.0 million of shares, adding to our cumulative share repurchases since 2017 of over $3.1 billion. As of December 31, 2023, we had 7.4 million shares available for repurchase under our share repurchase program. We also raised our dividend for the 47th consecutive year using cash generated from operations to return $160.3 million to stockholders in the form of cash dividends.

Summary Financial Results

(in millions, except per share amounts and percentages)

(1) Adjusted EBITDA and adjusted EBITDA margin are intended to provide investors and others with information about Carlisle's and our segments' performance without the effect of items that, by their nature, tend to obscure core operating results due to potential variability across periods based on the timing, frequency and magnitude of such items. Refer to Non-GAAP Financial Measures in this MD&A for more information about, and a detailed reconciliation of, these items.

Consolidated Results of Operations

Revenues

2023 Compared with 2022

(in millions, except percentages)

The decrease in revenues in 2023 primarily reflects lower sales in the non-residential construction end market of $667.6 million and residential construction end market of $128.4 million, as project delays and uncertainty caused by higher interest rates during the year led to a broad market underperformance and distributors continued to adjust inventory to pre-pandemic levels. Additionally, sales were lower in the general industrial end market by $64.9 million, primarily from the exit of a non-core business.

2022 Compared with 2021

(in millions, except percentages)

The increase in revenues in 2022 primarily reflected organic revenue growth of nearly $1.2 billion and contributions from the acquisition of Henry of $444.1 million in the CWT segment, partially offset by unfavorable foreign currency impacts of $28.3 million.

Revenues by Geographic Area

(in millions, except percentages)

17

Gross Margin

2023 Compared with 2022

(in millions, except percentages)

Gross margin percentage (gross margin expressed as a percentage of revenues) increased in 2023, driven by operating efficiencies gained through targeted restructuring, strategic sourcing and realized synergies, primarily from the acquisition of Henry on September 1, 2021.

2022 Compared with 2021

(in millions, except percentages)

Gross margin percentage (gross margin expressed as a percentage of revenues) increased in 2022, driven by favorable price to raw materials inflation across both segments.

Selling and Administrative Expenses

2023 Compared with 2022

(in millions, except percentages)

Selling and administrative expenses was relatively flat in 2023 as increases related to employee benefits of $8.5 million, professional fees of $4.4 million and travel expenses of $3.4 million were offset by a reduction in sales and marketing expenses of $14.0 million, as lower sales resulted in a lower commissions expense.

2022 Compared with 2021

(in millions, except percentages)

Selling and administrative expenses increased in 2022 primarily reflecting an increase in sales and marketing expense of $39.7 million, amortization expense of acquired intangible assets of $35.0 million, facility and services expense of $12.5 million, travel expense of $10.6 million and professional fees of $8.0 million.

Research and Development Expenses

2023 Compared with 2022

(in millions, except percentages)

Research and development expenses were higher in 2023 primarily reflecting higher new product development expenses of $6.8 million at our CCM segment and $2.9 million at our CWT segment.

2022 Compared with 2021

(in millions, except percentages)

Research and development expenses were higher in 2022 primarily reflecting higher new product development expenses of $2.2 million at our CWT segment and $0.4 million at our CCM segment.

Other Operating (Income) Expense, net

2023 Compared with 2022

(in millions, except percentages)

The change in other operating (income) expense, net, primarily reflected intangible asset impairments of $18.6 million and fixed asset impairments of $6.2 million recorded in 2022 in our rubber asset group partially offset by an increase in the loss on sale of fixed assets of $2.3 million in 2023 compared to 2022.

2022 Compared with 2021

(in millions, except percentages)

The change in other operating expense (income), net, primarily reflected intangible asset impairments of $18.6 million and fixed asset impairments of $6.2 million recorded in 2022 in our rubber asset group partially offset by an impairment loss of $3.2 million recorded in 2021.

Operating Income

2023 Compared with 2022

(in millions, except percentages)

Refer to Segment Results of Operations within this MD&A for further information related to segment operating income results.

2022 Compared with 2021

(in millions, except percentages)

Refer to Segment Results of Operations within this MD&A for further information related to segment operating income results.

Interest Expense, net

2023 Compared with 2022

(in millions, except percentages)

Interest expense, net of capitalized interest, decreased during 2023 primarily reflecting lower long-term debt balances associated with the redemption in full of $350.0 million of our 3.75% unsecured senior notes due November 15, 2022 (the "2022 Notes") in October 2022 and the redemption in full of $300.0 million of our 0.55% unsecured senior notes due September 1, 2023 (the "2023 Notes") in September 2023. Refer to Note 13 for further information on our long-term debt.

2022 Compared with 2021

(in millions, except percentages)

Interest expense, net of capitalized interest, increased during 2022 primarily reflecting higher long-term debt balances associated with our public offering of $550.0 million of 2.20% unsecured senior notes and the 2023 Notes completed in September 2021, partially offset by the redemption in full of the 2022 Notes in October 2022. Refer to Note 13 for further information on our long-term debt.

Interest Income

2023 Compared with 2022

(in millions, except percentages)

Interest income increased during 2023 primarily relating to higher yields compared to the prior year.

2022 Compared with 2021

(in millions, except percentages)

Interest income increased during 2022 primarily relating to higher yields and a higher invested cash balance compared to the prior year.

Other Non-operating (Income) Expense, net

2023 Compared with 2022

(in millions, except percentages)

Other non-operating (income) expense, net in 2023 primarily reflected favorable changes to Rabbi Trust investments of $3.3 million and favorable changes in foreign currencies against the U.S. Dollar of $2.6 million, partially offset by unfavorable changes to pension assets of $0.8 million.

2022 Compared with 2021

(in millions, except percentages)

Other non-operating expense, net in 2022 primarily reflected a favorable change related to the release of the remaining indemnification assets related to the acquisitions of Petersen Aluminum Corporation and Accella Holdings LLC resulting from escrow expirations of $3.6 million and favorable changes to pension assets of $2.5 million. These changes were partially offset by unfavorable changes to Rabbi Trust investments of $2.9 million and unfavorable changes in foreign currencies against the U.S. Dollar of $1.6 million.

Income Taxes

2023 Compared with 2022

(in millions, except percentages)

The provision for income taxes on continuing operations for 2023 is lower than 2022, primarily reflecting lower pre-tax income which equated to lower taxes of $54.2 million.

Refer to Note 8 for further information related to income taxes.

2022 Compared with 2021

(in millions, except percentages)

The provision for income taxes on continuing operations for 2022 is higher than 2021 primarily reflecting higher pre-tax income which equated to higher taxes of $161.4 million.

Refer to Note 8 for further information related to income taxes.

Income from Discontinued Operations

2023 Compared with 2022

(in millions, except percentages)

Income from discontinued operations in 2023 primarily reflects operating results from the CIT and Carlisle Fluid Technologies ("CFT") businesses of $141.6 million, partially offset by the loss on sale of CFT, net of tax, of $61.8 and an impairment of goodwill of $24.8 million. Income from discontinued operations in 2022 primarily reflects operating results from the CIT and CFT businesses of $70.9 million.

Refer to Note 4 for additional information related to discontinued operations.

2022 Compared with 2021

(in millions, except percentages)

Income from discontinued operations in 2022 primarily reflects operating results from the CIT and CFT businesses of $70.9 million. Income from discontinued operations in 2021 primarily reflects income from the sale of Carlisle Brake and Friction ("CBF"), net of tax, of $19.1 million and operating results from the CIT, CFT and CBF businesses of $12.1 million.

Refer to Note 4 for additional information related to discontinued operations.

Segment Results of Operations

Carlisle Construction Materials (“CCM”)

This segment produces a complete line of premium energy-efficient single-ply roofing products and warranted roof systems and accessories for the commercial building industry, including ethylene propylene diene monomer (“EPDM”), thermoplastic polyolefin (“TPO”) and polyvinyl chloride (“PVC”) membrane, polyisocyanurate ("polyiso") insulation, and engineered metal roofing and wall panel systems for commercial and residential buildings.

(in millions, except percentages)

(1) Adjusted EBITDA and adjusted EBITDA margin are intended to provide investors and others with information about Carlisle's and our segments' performance without the effect of items that, by their nature, tend to obscure core operating results due to potential variability across periods based on the timing, frequency and magnitude of such items. Refer to Non-GAAP Financial Measures in this MD&A for more information about, and a detailed reconciliation of, these items.

CCM’s revenue decreased in 2023 primarily reflecting lower sales in non-residential end market of $597.8 million from project delays and uncertainty caused by higher interest rates, and prolonged distributor destocking during the first part of the year. CCM’s operating margin and adjusted EBITDA margin decrease in 2023 primarily reflected higher per unit cost as a result of lower volumes.

(in millions, except percentages)

(1) Adjusted EBITDA and adjusted EBITDA margin are intended to provide investors and others with information about Carlisle's and our segments' performance without the effect of items that, by their nature, tend to obscure core operating results due to potential variability across periods based on the timing, frequency and magnitude of such items. Refer to Non-GAAP Financial Measures in this MD&A for more information about, and a detailed reconciliation of, these items.

CCM’s revenue increase in 2022 primarily reflected higher organic revenues from strength in U.S. commercial roofing and price realization across all markets. CCM’s operating margin and adjusted EBITDA margin increase in 2022 primarily reflected favorable price to raw materials inflation.

Carlisle Weatherproofing Technologies ("CWT")

This segment produces building envelope solutions that drive energy efficiency and sustainability in commercial and residential applications. Products include high-performance waterproofing and moisture protection products, protective roofing underlayments, fully integrated liquid and sheet applied air/vapor barriers, sealants/primers and flashing systems, roof coatings and mastics, spray polyurethane foam and coating systems for a wide variety of thermal protection applications and other premium polyurethane products, block-molded expanded polystyrene insulation, engineered products for HVAC applications, and premium products for a variety of industrial and surfacing applications.

(in millions, except percentages)

(1) Adjusted EBITDA and adjusted EBITDA margin are intended to provide investors and others with information about Carlisle's and our segments' performance without the effect of items that, by their nature, tend to obscure core operating results due to potential variability across periods based on the timing, frequency and magnitude of such items. Refer to Non-GAAP Financial Measures in this MD&A for more information about, and a detailed reconciliation of, these items.

CWT’s revenue decreased in 2023 primarily reflecting broad market underperformance from project delays and uncertainty caused by higher interest rates. CWT’s operating margin and adjusted EBITDA margin increase in 2023 primarily reflected operating efficiencies gained through targeted restructuring, strategic sourcing and realized synergies from the acquisition of Henry. Included in CWT's operating margin for 2022 are intangible asset impairments of $18.6 million and fixed asset impairments of $6.2 million.

(in millions, except percentages)

(1) Adjusted EBITDA and adjusted EBITDA margin are intended to provide investors and others with information about Carlisle's and our segments' performance without the effect of items that, by their nature, tend to obscure core operating results due to potential variability across periods based on the timing, frequency and magnitude of such items. Refer to Non-GAAP Financial Measures in this MD&A for more information about, and a detailed reconciliation of, these items.

CWT’s revenue increased in 2022 primarily reflecting contributions from the Henry acquisition of $444.1 million and organic revenue growth of $135.0 million. CWT’s operating margin increase in 2022 primarily reflected favorable price to raw material inflation. Operating margin also included definite-lived intangible asset impairments of $18.6 million and plant, property and equipment impairments of $6.2 million in 2022 and transaction related expenses of $24.4 million from the acquisition of Henry in 2021. CWT’s adjusted EBITDA margin increase in 2022 primarily reflected favorable price to raw material inflation.

Liquidity and Capital Resources

A summary of our cash and cash equivalents by region follows:

(in millions)

We maintain liquidity sources primarily consisting of cash and cash equivalents as well as availability under the Company's Fourth Amended and Restated Credit Agreement (as amended, the "Facility"). In the near term, cash on hand is our primary source of liquidity. The increase in cash and cash equivalents compared to December 31, 2022, is primarily related to cash received from the sale of the CFT business and cash generated from operations, partially offset by cash used on share repurchases, repayment of senior notes, capital expenditures and payment of dividends to stockholders.

In certain countries, primarily China, our cash is subject to local laws and regulations that require government approval for conversion of such cash to U.S. Dollars, as well as for transfer of such cash, both temporarily and permanently outside of that jurisdiction. In addition, upon permanent transfer of cash outside of certain jurisdictions, primarily in Canada, we may be subject to withholding taxes, and as such we have accrued $5.8 million in anticipation of those taxes as of December 31, 2023.

We believe we have sufficient cash on hand, availability under the Facility and operating cash flows to meet our anticipated business requirements for at least the next 12 months. At the discretion of management, the Company may use available cash on capital expenditures, dividends, common stock repurchases, acquisitions and strategic investments.

We also anticipate we will have sufficient cash on hand, availability under the Facility and operating cash flows to meet our anticipated long-term business requirements and to pay outstanding principal balances of our existing notes by the respective maturity dates. Another potential source of liquidity is access to public capital markets, subject to market conditions. We may access the capital markets for a variety of reasons, including to repay the outstanding balances of our outstanding debt and fund acquisitions. Refer to Note 13 for further information on long-term debt.

Sources and Uses of Cash and Cash Equivalents

(in millions)

Operating Activities

We generated operating cash flows totaling $1,201.3 million for 2023 (including working capital sources of $107.6 million), compared with $1,000.9 million for 2022 (including working capital uses of $222.0 million). Higher operating cash flows of $200.4 million in 2023 primarily reflected lower working capital uses of $329.6 million related to decreased inventory of $323.2 million, reflecting reduced purchases to manage inventory balances, partially offset by lower net income of $156.6 million as a result of a decline in revenues.

We generated operating cash flows totaling $1,000.9 million for 2022 (including working capital uses of $222.0 million), compared with $421.7 million for 2021 (including working capital uses of $275.2 million). Higher operating cash flows of $579.2 million in 2022 primarily reflected higher net income of $502.3 million reflecting improved operating results, and a reduction in working capital uses of $53.2 million related to collection of accounts receivable of $181.0 million reflecting increased revenues, partially offset by a reduction in accounts payable of $145.9 million reflecting reduced purchases to manage inventory balances as we return to normal seasonal buying patterns.

Investing Activities

Cash provided by investing activities of $352.4 million for 2023 primarily reflected net cash received from the sale of CFT of $510.6 million and proceeds from the sale of assets of $19.0 million, partially offset by capital expenditures of $142.2 million and the acquisition of a business for $36.1 million.

Cash used in investing activities of $61.1 million for 2022 primarily reflected capital expenditures of $183.5 million and the acquisition of MBTechnology for $24.7 million, partially offset by the proceeds of the contingent consideration from the earn out payment and sale of real estate associated with the 2021 sale of CBF for $132.0 million and proceeds from investment in securities of $10.3 million.

Cash used in investing activities of $1,486.4 million for 2021 primarily reflected the acquisition of Henry for $1,571.3 million, net of cash acquired, capital expenditures of $134.8 million and investment in securities of $30.2 million, partially offset by proceeds of $247.7 million from the sale of CBF.

Financing Activities

Cash used in financing activities of $1,349.7 million for 2023 primarily reflected share repurchases of $900.0 million, the redemption of the 2023 Notes of $300.0 million and cash dividend payments of $160.3 million, reflecting the increased annual dividend rate of $3.40 per share.

Cash used in financing activities of $862.0 million for 2022 primarily reflected share repurchases of $400.0 million, the redemption of the 2022 Notes of $350.0 million and cash dividend payments of $134.4 million.

Cash provided by financing activities of $488.1 million for 2021 primarily reflected net proceeds from our September public offering of $850.0 million in aggregate principal amount of unsecured senior notes and proceeds from the exercise of stock options, net of withholding tax, of $77.4 million, partially offset by share repurchases of $315.6 million and cash dividend payments of $112.5 million.

Share Repurchases

On August 3, 2023, the Board approved a 7.5 million share increase in the Company's share repurchase program. We repurchased approximately 3.5 million shares in 2023 as part of our plan to return capital to stockholders, utilizing $900.0 million of our cash on hand. As of December 31, 2023, we had authority to repurchase 7.4 million shares.

Purchases may occur from time to time over an indefinite period of time in the open market, in privately negotiated transactions and through block trades, and no maximum purchase price has been set. The decision to repurchase shares depends on price, availability and other corporate developments and is subject to the discretion of the Board. The Company plans to continue to repurchase shares in 2024 on an opportunistic basis.

Debt Instruments

Senior Notes

On September 1, 2023, the Company redeemed in full the 2023 Notes at the redemption price of $300.8 million, consisting of the principal amount of $300.0 million and $0.8 million of interest.

We also have unsecured senior notes outstanding of $400.0 million due December 1, 2024 (at a stated interest rate of 3.5%), $600.0 million due December 1, 2027 (at a stated interest rate of 3.75%), $750 million due March 1, 2030 (at a stated interest rate of 2.75%) and $550.0 million due March 1, 2032 (at a stated interest rate of 2.20%) that are rated BBB by Standard & Poor’s and Baa2 by Moody’s.

Revolving Credit Facility

During 2023, we had $84.0 million in borrowings and repayments under the Facility with a weighted average interest rate of 6.61%. During 2022, we had no borrowings or repayments under the Facility. As of December 31, 2023 and December 31, 2022, there were no borrowings under the Facility and $1.0 billion of availability.

Debt Covenants

We are required to meet various covenants and limitations under our senior notes and Facility, including certain leverage ratios, interest coverage ratios and limits on outstanding debt balances held by certain subsidiaries. We were in compliance with all covenants and limitations as of December 31, 2023 and 2022.

Refer to Note 13 for further information on our debt instruments.

Critical Accounting Estimates

Our significant accounting policies are more fully described in Note 1. In preparing the Consolidated Financial Statements in conformity with U.S. Generally Accepted Accounting Principles (“GAAP”), the Company’s management must make informed decisions which impact the reported amounts and related disclosures. Such decisions include the selection of the appropriate accounting principles to be applied and assumptions on which to base estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosure of contingent assets and liabilities. We evaluate our estimates, including those related to goodwill and indefinite-lived intangible assets, valuation of long-lived assets, revenue recognition, income taxes and extended product warranties on an ongoing basis. The Company bases its estimates on historical experience, terms of existing contracts, our observation of trends in the industry, information provided by our customers and information available from other outside sources, that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions.

Business Combinations

As noted in "Item 1. Business. Business Strategy", we have a history and a strategy of acquiring businesses. We account for these business combinations as required by GAAP under the acquisition method of accounting, which requires us to recognize the assets acquired and the liabilities assumed at their acquisition date fair values. Deferred taxes are recorded for any differences between fair value and tax basis of assets acquired and liabilities assumed and can vary based on the structure of the acquisition as to whether it is a taxable or non-taxable transaction. To the extent the purchase price of the acquired business exceeds the fair values of the assets acquired and liabilities assumed, including deferred income taxes recorded in connection with the transaction, such excess is recognized as goodwill (see further below for our critical accounting estimate regarding post-acquisition accounting for goodwill). The most critical areas of judgment in applying the acquisition method include selecting the appropriate valuation techniques and assumptions that are used to measure the acquired assets and assumed liabilities at fair value, particularly for intangible assets, contingent consideration, acquired tangible assets such as property, plant and equipment, and inventory.

The key techniques and assumptions utilized by type of major acquired asset or liability generally include:

In selecting techniques and assumptions noted above, we generally engage third-party, independent valuation professionals to assist us in developing the assumptions and applying the valuation techniques to a particular business combination transaction. In particular, the discount rates selected are compared to and evaluated with (i) the industry weighted-average cost of capital, (ii) the inherent risks associated with each type of asset and (iii) the level and timing of future cash flows appropriately reflecting market participant assumptions.

As noted above, goodwill represents a residual amount of purchase price. However, the primary items that generate goodwill include the value of the synergies between the acquired company and our existing businesses and the value of the acquired assembled workforce, neither of which qualifies for recognition as an intangible asset. Refer to Note 3 for more information regarding business combinations, specifically the items that generated goodwill in our recent acquisitions.

Subsequent Measurement of Goodwill

Goodwill is not amortized but is tested annually, or more often if impairment indicators are present, for impairment at a reporting unit level. Goodwill is tested for impairment via a one-step process by comparing the fair value of goodwill with its carrying value. We recognize an impairment for the amount by which the carrying amount exceeds the fair value. We estimate the fair value of our reporting units based on the income approach utilizing the discounted cash flow method and the market approach utilizing the public company market multiple method. The key techniques and assumptions generally include:

26

We have determined that we have four reporting units and have allocated goodwill to those following reporting units as follows:

(in millions)

Annual Impairment Test

We test our goodwill for impairment annually as of November 1. For the November 1, 2023 impairment test, the CCM - Commercial Roofing, CCM - Architectural Metals, and CWT reporting units were tested for impairment using a qualitative approach. Under this approach, an entity may assess qualitative factors as well as relevant events and circumstances to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Through the results of our analysis, we determined that it is not more likely than not that the fair value of the aforementioned reporting units were less than their carrying values and thus, a quantitative analysis was not performed. The CCM - Europe reporting unit was tested for impairment using the quantitative approach described above, resulting in a fair value that exceeded the carrying value by less than 10%.

We will continue to closely monitor actual results versus expectations as well as whether and to what extent any significant changes in current events or conditions result in corresponding changes to our expectations about estimated future cash flows, discount rates and market multiples. If our adjusted expectations of the operating results, both in size and timing, of CCM - Europe do not materialize, if the discount rate increases (based on increases in interest rates, market rates of return or market volatility) or if market multiples decline, we may be required to record goodwill impairment charges.

While we believe our conclusions regarding the estimates of fair value of our reporting units are appropriate, these estimates are subject to uncertainty and by nature include judgments and estimates regarding various factors. These factors include the rate and extent of growth in the markets that our reporting units serve, the realization of future sales price and volume increases, fluctuations in exchange rates, fluctuations in price and availability of key raw materials, future operating efficiencies and, as it pertains to discount rates, the volatility in interest rates and costs of equity.

Refer to Note 11 for more information regarding goodwill.

Subsequent Measurement of Indefinite-Lived Intangible Assets

As discussed above, indefinite-lived intangible assets are recognized and recorded at their acquisition-date fair value. Intangible assets with indefinite useful lives are not amortized but are tested annually at the appropriate unit of account, which generally equals the individual asset, or more often if impairment indicators are present. Indefinite-lived intangible assets are tested for impairment via a one-step process by comparing the fair value of the intangible asset with its carrying value. We recognize an impairment charge for the amount by which the carrying amount exceeds the intangible asset's fair value. We generally estimate the fair value of our indefinite-lived intangible assets consistent with the techniques noted above using our expectations about future cash flows, discount rates and royalty rates for purposes of the annual test. We monitor for significant changes in those assumptions during interim reporting periods. We also periodically re-assess indefinite-lived intangible assets as to whether its useful lives can be determined, and if so, we would begin amortizing any applicable intangible asset.

Annual Impairment Test

We test our indefinite-lived intangible assets for impairment annually as of November 1. For the November 1, 2023 impairment test, all indefinite-lived intangible assets, except for the Henry trade name within the CWT reportable segment, were tested for impairment using the qualitative approach. The Henry trade name, with an aggregate carrying value of $218.9 million, was tested for impairment using the quantitative approach described above, resulting in a fair value that exceeded its carrying amount by less than 10%.

We will continue to closely monitor actual results versus expectations as well as whether and to what extent any significant changes in current events or conditions result in corresponding changes to our expectations about future estimated revenues and discount rates. If our adjusted expectations of the revenues of this trade name does not materialize or if the discount rate increases (based on increases in interest rates, market rates of return or market volatility), we may be required to record intangible asset impairment charges, which may be material.

Refer to Note 11 for more information regarding intangible assets.

Revenue Recognition

Revenue is recognized when obligations under the terms of a contract with a customer are satisfied; generally, this occurs with the transfer of control of our products or services. Revenue is measured as the amount of total consideration expected to be received in exchange for transferring goods or providing services. Total expected consideration, in certain cases, is estimated at each reporting period, including interim periods, and is subject to change with variability dependent on future events, such as customer behavior related to future purchase volumes, returns, early payment discounts and other customer allowances. Estimates for rights of return, discounts and rebates to customers, and other adjustments for variable consideration are provided for at the time of sale as a deduction to revenue, based on an analysis of historical experience and actual sales data. Changes in these estimates are reflected as an adjustment to revenue in the period identified. Sales, value added and other taxes collected concurrently with revenue-producing activities are excluded from revenue.

We receive payment at the inception of the contract for separately priced extended service warranties, and revenue is deferred and recognized on a straight-line basis over the life of the contracts. The term of these warranties ranges from five to 40 years. The weighted average life of the contracts as of December 31, 2023, is approximately 20 years.

Additionally, critical judgments and estimates related to revenue recognition relative to certain customer contracts in our CIT and CFT businesses, which are classified as discontinued operations, in which they are contract manufacturers or where they have entered into an agreement to provide both services (engineering and design) and products resulting from those services, include the following:

• Determination of whether revenue is earned at a "point-in-time" or "over time": Where contracts provide for the manufacture of highly customized products with no alternative use and provide CIT or CFT the right to payment for work performed to date, including a normal margin for that effort, we have concluded those contracts require the recognition of revenue over time.
• For performance obligations satisfied over time, revenue is determined using the input method as we believe that best depicts the transfer of control to the customer, as the customer controls the inventory as it is produced. Measurement of revenue uses the key inputs of inventory in our possession and expected gross margin. We believe inventory reflects an appropriate measure of cost incurred to date, relative to total costs, to which we apply an expected gross margin to determine revenues. We utilize an estimate of expected gross margin based on historical margin patterns and management’s experience, which may vary based on the customers and end markets being evaluated. There are multiple unique customer contracts at CIT or CFT. Accordingly, the estimate of expected margin is done for each customer discretely. We review the margins for these categories as contracts, customers and product profiles change over time so that the margin expectations reflect the best available data for each category.

Income Taxes

Our income tax expense, deferred tax assets and liabilities, and liabilities for unrecognized tax benefits reflect management’s best estimate of current and future taxes to be paid. We are subject to income taxes in the U.S. and numerous foreign jurisdictions. Significant judgments and estimates are required in the determination of the consolidated income tax expense.

Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and its reported amounts in the financial statements, which will result in taxable or deductible amounts in the future. In evaluating our ability to recover our deferred tax assets in the jurisdiction from which they arise, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies and results of recent operations.

We believe that it is more likely than not that the benefit from certain U.S. federal, state and foreign net operating loss, and credit carryforwards will not be realized. In recognition of this risk, we have provided a valuation allowance of $15.1 million on the deferred tax assets related to these carryforwards.

We (1) record unrecognized tax benefits as liabilities in accordance with Accounting Standards Codification 740, Income Taxes ("ASC 740") and (2) adjust these liabilities when our judgment changes as a result of the evaluation of new information not previously available. Because of the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from our current estimate of the unrecognized tax benefit liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which new information is available.

Extended Product Warranty Reserves

We offer extended warranty contracts on sales of certain products, the most significant being those offered on our installed roofing and weatherproofing systems within the CCM and CWT segments. Current costs of services performed under these contracts are expensed as incurred. We also record an additional loss and a corresponding reserve if the total expected costs of providing services under the contract exceed unamortized deferred revenues equal to such excess. We estimate total expected warranty costs using actuarially derived estimates of future costs of servicing the warranties. The key inputs that are utilized to develop these estimates include historical claims experience by type of product, location, and labor and material costs. The estimates of the volume and severity of these claims and associated costs are dependent upon the above assumptions and future results could differ from our current expectations. We currently do not have any material loss reserves recorded associated with our extended product warranties.

Non-GAAP Financial Measures

EBIT, Adjusted EBIT, Adjusted EBITDA and Adjusted EBITDA Margin

Earnings before interest and taxes ("EBIT"), adjusted EBIT, adjusted earnings before interest, taxes, depreciation and amortization ("EBITDA") and adjusted EBITDA margin are intended to provide investors and others with information about our performance and our segments' performance without the effect of items that, by their nature, tend to obscure core operating results due to potential variability across periods based on the timing, frequency and magnitude of such items. As a result, management believes that these measures enhance the ability of investors to analyze trends in our business and evaluate our performance relative to similarly-situated companies. This information differs from net income, operating income, and operating margin determined in accordance with GAAP and should not be considered in isolation or as a substitute for measures of performance determined in accordance with GAAP. Our and our segments' EBIT, adjusted EBIT, adjusted EBITDA and adjusted EBITDA margin follows. These non-GAAP financial measures may not be comparable to similarly titled measures reported by other companies.

(in millions, except percentages)

29

(in millions, except percentages)

(1) Includes other non-operating (income) expense, net, which may be presented in separate line items on the Consolidated Statements of Income and Comprehensive Income.

(in millions, except percentages)

(1) Includes other non-operating (income) expense, net, which may be presented in separate line items on the Consolidated Statements of Income and Comprehensive Income.

(in millions, except percentages)

(1) Includes other non-operating (income) expense, net, which may be presented in separate line items on the Consolidated Statements of Income and Comprehensive Income.

Outlook

Revenues

Our expectations for segment revenues in 2024 follows:

Cash Flows

Our priorities for the use of cash are to invest in growth and performance improvement opportunities for our existing businesses through capital expenditures, pursue strategic acquisitions that meet our stockholder return criteria, pay dividends to stockholders and return value to stockholders through share repurchases.

Capital expenditures in 2024 are expected to be approximately $160 million to $180 million. Planned capital expenditures for 2024 include new product and capacity expansion, business sustaining projects and cost reduction efforts.

Forward-Looking Statements

This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally use words such as "expect," "foresee," "anticipate," "believe," "project," "should," "estimate," "will," "plans," "intends," "forecast," and similar expressions, and reflect our expectations concerning the future. Such statements are made based on known events and circumstances at the time of publication and, as such, are subject in the future to unforeseen risks and uncertainties. It is possible that our future performance may differ materially from current expectations expressed in these forward-looking statements, due to a variety of factors such as: increasing price and product/service competition by foreign and domestic competitors, including new entrants; technological developments and changes; the ability to continue to introduce competitive new products and services on a timely, cost-effective basis; our mix of products/services; increases in raw material costs that cannot be recovered in product pricing; domestic and foreign governmental and public policy changes including environmental and industry regulations; the ability to meet our goals relating to our intended reduction of greenhouse gas emissions, including our net zero commitments; threats associated with and efforts to combat terrorism; protection and validity of patent and other intellectual property rights; the identification of strategic acquisition targets and our successful completion of any transaction and integration of our strategic acquisitions; our successful completion of strategic dispositions; the cyclical nature of our businesses; the impact of information technology, cybersecurity or data security breaches at our businesses or third parties; the outcome of pending and future litigation and governmental proceedings; the emergence or continuation of widespread health emergencies such as the COVID-19 pandemic, including, for example, expectations regarding their impact on our businesses, including on customer demand, supply chains and distribution systems, production, our ability to maintain appropriate labor levels, our ability to ship products to our customers, our future results, or our full-year financial outlook; and the other factors discussed in the reports we file with or furnish to the Securities and Exchange Commission from time to time. In addition, such statements could be affected by general industry and market conditions and growth rates, the condition of the financial and credit markets and general domestic and international economic conditions, including inflation and interest rate and currency exchange rate fluctuations. Further, any conflict in the international arena, including the Russian invasion of Ukraine and war in the Middle East, may adversely affect general market conditions and our future performance. Any forward-looking statement speaks only as of the date on which that statement is made, and we undertake no duty to update any forward-looking statement to reflect events or circumstances, including unanticipated events, after the date on which that statement is made, unless otherwise required by law. New factors emerge from time to time and it is not possible for management to predict all of those factors, nor can it assess the impact of each of those factors on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement.

We are exposed to market risk in the form of changes in interest rates, foreign currency exchange rates and commodity prices for raw materials. We may, from time to time, enter into derivative financial instruments to manage these risks; however, we do not utilize such instruments or contracts for speculative or trading purposes. In the event that we enter into a derivative financial instrument, it is possible that such future dated contracts could no longer serve as a hedge if the projected cash flow does not occur as anticipated at the time of contract initiation.

Interest Rate Risk

We are exposed to interest rate risks as a result of our borrowing and investing activities, which principally includes long-term borrowings used to maintain liquidity and to fund our business operations and capital requirements. We may enter into interest rate swaps from time to time to manage our mix of fixed and variable interest rate debt effectively. We may enter into other interest rate derivatives such as treasury locks or zero cost collars to manage forecasted interest rates associated with bond offerings. As of December 31, 2023 and 2022, there were no interest rate swaps or other derivative instruments in place and, at both dates, all of our long-term debt was fixed-rate and U.S. Dollar denominated. We also have a revolving credit facility that allows for borrowings of up to $1.0 billion at a variable interest rate. We had no outstanding borrowings under this facility as of December 31, 2023 and 2022. The nature and amount of our long-term debt may vary from time to time as a result of business requirements, market conditions and other factors. We consider the risk to our results of operations from changes in market rates of interest to be minimal as our interest bearing debt instruments are fixed-rate.

Foreign Currency Exchange Risk

A portion of our operating cash flows are denominated in foreign currencies. As such we are exposed to market risk from changes in foreign currency exchange rates. We are primarily exposed to the exchange rates of currencies including the Chinese Renminbi, Euro, British Pound, Mexican Peso, Canadian Dollar and Japanese Yen. We continually evaluate our foreign currency exposure based on current market conditions and the locations in which we conduct our business. We manage most of our foreign currency exposure on a consolidated basis, which allows us to net certain exposures and take advantage of natural offsets. In order to mitigate foreign currency risk, we may, from time to time, enter into derivative financial instruments, generally foreign currency forward contracts, to hedge the cash flows related to certain foreign currency denominated sales and purchase transactions expected in the near term and the related recognized trade receivable or payable. The gains and losses on these contracts offset changes in the value of the related exposures. It is our policy to enter into foreign currency derivative financial instruments only to the extent considered necessary to meet the objectives set forth above. We generally do not hedge the risk of foreign currency net investments into U.S. Dollars for financial reporting.

We had foreign exchange contracts with maturities less than one year for instruments that are designated and qualify as an accounting cash flow hedge with an aggregate U.S. Dollar equivalent notional value of $26.6 million and $17.5 million as of December 31, 2023 and 2022, respectively. The gross fair value was $(0.9) million and $0.7 million as of December 31, 2023 and 2022, respectively. The effective portion of changes in the fair value of the contracts is recorded in accumulated other comprehensive income (loss) and is recognized in operating income when the underlying forecasted transaction impacts earnings. We also had foreign exchange contracts with maturities less than one year for instruments that are not designed as a cash flow hedge, but nonetheless are entered into as an economic hedge of certain foreign currency risk with an aggregate U.S. Dollar equivalent notional value of $56.4 million and $49.1 million as of December 31, 2023 and 2022, respectively. The gross fair value was $(0.6) million and $(0.2) million as of December 31, 2023 and 2022, respectively. The unrealized gains and losses resulting from these contracts are not significant and are recognized in other non-operating expense, net and partially offset corresponding foreign exchange gains and losses on the underlying items being economically hedged.

The near-term sensitivity of these contracts to changes in foreign currency exchange rates is also minimal as they are scheduled to mature within 12 months. Further, changes in the fair value of these contracts will be offset by changes in the cash flows of the underlying foreign currency denominated sales, purchases, assets and liabilities which the contracts are intended to mitigate (both accounting and economic hedges).

Commodity Price Risk

We continually address the impact of changes in commodity prices on our results of operations and cash flow. Our exposure to changes in commodity prices is principally indirect as we do not directly purchase exchange-traded commodities, but rather purchase raw materials that are a result of further downstream processing (as noted in Item 1 of this Form 10-K), primarily inputs resulting from processing crude oil, natural gas, iron ore, gold, silver and copper. We generally manage the risk of changes in commodity prices that impact our raw material costs by seeking to (i) offset increased costs through increases in prices, (ii) alter the nature and mix of raw materials used to manufacture our finished goods or (iii) enter into commodity-linked sales or purchase contracts, all to the extent possible based on competitive and other economic factors. We may also from time to time enter into derivative financial instruments to mitigate such impact; however, as of December 31, 2023 and 2022, we had no derivative financial instruments in place.

(a) Evaluation of disclosure controls and procedures. Under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, the Company carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15. Based upon that evaluation and as of December 31, 2023, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective.

Management has prepared a report on the Company’s internal control over financial reporting in which management has determined that the Company’s controls are effective. A copy of management’s report is set forth below.

(b) Changes in internal controls. During the fourth quarter of 2023, there were no changes in the Company's internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

Management’s Report on Internal Control over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting. Under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, the Company evaluated the effectiveness of the design and operation of its internal control over financial reporting based on the framework in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s internal control over financial reporting was effective as of December 31, 2023.

As discussed in Note 3 to the Consolidated Financial Statements in Item 8, the Company completed the acquisition of select assets of Polar Industries, Inc., Fox Transport, Inc. and LRH, LLC (collectively “Polar”) on November 8, 2023. Management's assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Polar, which represented less than 1% of total assets as of December 31, 2023, and revenues for the year then ended.

The Company's internal control over financial reporting has been audited by Deloitte & Touche LLP, whose report with respect to the effectiveness of internal control over financial reporting is included in Item 8.