Item 1. Financial Statements

​

O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

​

​	​	​	​	​	​	​
​		September 30, 2022			December 31, 2021
​	​	(Unaudited)		​	(Note)
Assets		​			​
Current assets:		​			​
Cash and cash equivalents	​	$	67,060	​	$	362,113
Accounts receivable, net	​		338,122	​		272,562
Amounts receivable from suppliers	​		135,584	​		113,112
Inventory	​		4,137,945	​		3,686,383
Other current assets	​		82,045	​		70,092
Total current assets	​		4,760,756	​		4,504,262
​	​	​	​	​	​	​
Property and equipment, at cost	​		7,291,681	​		6,948,038
Less: accumulated depreciation and amortization	​		2,947,861	​		2,734,523
Net property and equipment	​		4,343,820	​		4,213,515
​	​	​	​	​	​	​
Operating lease, right-of-use assets	​	​	2,109,581	​	​	1,982,478
Goodwill	​		881,102	​		879,340
Other assets, net	​		142,769	​		139,112
Total assets	​	$	12,238,028	​	$	11,718,707
​	​	​	​	​	​	​
Liabilities and shareholders’ deficit	​			​
Current liabilities:	​			​
Accounts payable	​	$	5,574,098	​	$	4,695,312
Self-insurance reserves	​		142,390	​		128,794
Accrued payroll	​		109,095	​		107,588
Accrued benefits and withholdings	​		167,452	​		234,872
Income taxes payable	​		63,916	​		—
Current portion of operating lease liabilities	​	​	360,529	​	​	337,832
Other current liabilities	​		423,999	​		370,217
Total current liabilities	​		6,841,479	​		5,874,615
​	​	​	​	​	​	​
Long-term debt	​		4,370,772	​		3,826,978
Operating lease liabilities, less current portion	​	​	1,809,241	​	​	1,701,757
Deferred income taxes	​		218,087	​		175,212
Other liabilities	​		203,912	​		206,568
​	​	​	​	​	​	​
Shareholders’ equity (deficit):	​			​
Common stock, $0.01 par value:	​		​	​	​	​
Authorized shares – 245,000,000	​	​	​	​	​	​
Issued and outstanding shares –	​	​	​	​	​	​
62,798,821 as of September 30, 2022, and	​	​	​	​	​	​
67,029,042 as of December 31, 2021	​	​	628	​		670
Additional paid-in capital	​		1,292,725	​		1,305,508
Retained deficit	​		(2,494,833)	​		(1,365,802)
Accumulated other comprehensive loss	​	​	(3,983)	​	​	(6,799)
Total shareholders’ deficit	​		(1,205,463)	​		(66,423)
​	​	​	​	​	​	​
Total liabilities and shareholders’ deficit	​	$	12,238,028	​	$	11,718,707

​

Note: The balance sheet at December 31, 2021, has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by United States generally accepted accounting principles for complete financial statements.

See accompanying Notes to condensed consolidated financial statements.

​

O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In thousands, except per share data)

​

​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	For the Three Months Ended					​	For the Nine Months Ended
​	​	September 30,					​	September 30,
​		2022			2021			2022			2021
Sales	​	$	3,798,619	​	$	3,479,570	​	$	10,765,367	​	$	10,036,070
Cost of goods sold, including warehouse and distribution expenses	​		1,863,657	​		1,661,330	​		5,237,615	​		4,750,657
Gross profit	​		1,934,962	​		1,818,240	​		5,527,752	​		5,285,413
​	​	​	​	​	​	​	​	​	​	​	​	​
Selling, general and administrative expenses	​		1,130,768	​		1,063,641	​		3,255,478	​		3,044,126
Operating income	​		804,194	​		754,599	​		2,272,274	​		2,241,287
​	​	​	​	​	​	​	​	​	​	​	​	​
Other income (expense):	​			​			​			​
Interest expense	​		(43,164)	​		(34,873)	​		(115,389)	​		(110,036)
Interest income	​		1,435	​		485	​		2,627	​		1,478
Other, net	​		(616)	​		318	​		(7,104)	​		4,961
Total other expense	​		(42,345)	​		(34,070)	​		(119,866)	​		(103,597)
​	​	​	​	​	​	​	​	​	​	​	​	​
Income before income taxes	​		761,849	​		720,529	​		2,152,408	​		2,137,690
Provision for income taxes	​		176,411	​		161,877	​		508,330	​		491,978
Net income	​	$	585,438	​	$	558,652	​	$	1,644,078	​	$	1,645,712
​	​	​	​	​	​	​	​	​	​	​	​	​
Earnings per share-basic:	​			​			​			​
Earnings per share	​	$	9.25	​	$	8.14	​	$	25.30	​	$	23.67
Weighted-average common shares outstanding – basic	​		63,288	​		68,608	​		64,979	​		69,529
​	​	​	​	​	​	​	​	​	​	​	​	​
Earnings per share-assuming dilution:	​			​			​			​
Earnings per share	​	$	9.17	​	$	8.07	​	$	25.08	​	$	23.45
Weighted-average common shares outstanding – assuming dilution	​		63,860	​		69,240	​		65,566	​		70,174

​

See accompanying Notes to condensed consolidated financial statements.

​

​

O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In thousands)

​

​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	For the Three Months Ended					​	For the Nine Months Ended
​	​	September 30,					​	September 30,
​		2022			2021			2022			2021
Net income	​	$	585,438	​	$	558,652	​	$	1,644,078	​	$	1,645,712
Other comprehensive income (loss):	​	​	​	​	​	​	​	​	​	​	​	​
Foreign currency translation adjustments	​		(372)	​		(5,237)	​		2,816	​		(5,673)
Total other comprehensive (loss) income	​	​	(372)	​	​	(5,237)	​	​	2,816	​	​	(5,673)
​	​		​	​	​	​	​	​	​	​	​	​
Comprehensive income	​	$	585,066	​	$	553,415	​	$	1,646,894	​	$	1,640,039

​

See accompanying Notes to condensed consolidated financial statements.

​

​

​

O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)

(Unaudited)

(In thousands)

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	For the Three Months Ended September 30, 2022
​		​	​	​	​		​	​		​	​	​	Accumulated			​	​
​	​	​	​	​	​	​	Additional		​	​	​	​	Other		​	​	​
​	​	Common Stock				​	Paid-In		​	Retained		​	Comprehensive		​	​	​
​		Shares		Par Value			Capital			Deficit		​	Loss			Total
Balance at June 30, 2022		63,753	​	$	638	​	$	1,286,651	​	$	(2,391,108)	​	$	(3,611)	​	$	(1,107,430)
Net income		—	​		—	​		—	​		585,438	​	​	—	​		585,438
Total other comprehensive loss	​	—	​	​	—	​	​	—	​	​	—	​	​	(372)	​	​	(372)
Issuance of common stock under employee benefit plans, net of forfeitures and shares withheld to cover taxes		7	​		—	​		4,698	​		—	​	​	—	​		4,698
Net issuance of common stock upon exercise of stock options		78	​		1	​		16,765	​		—	​	​	—	​		16,766
Share based compensation		—	​		—	​		5,752	​		—	​	​	—	​		5,752
Share repurchases, including fees		(1,039)	​		(11)	​		(21,141)	​		(689,163)	​	​	—	​		(710,315)
Balance at September 30, 2022		62,799	​	$	628	​	$	1,292,725	​	$	(2,494,833)	​	$	(3,983)	​	$	(1,205,463)
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	For the Nine Months Ended September 30, 2022
​		​	​	​	​		​			​	​	​	Accumulated			​	​
​	​	​	​	​	​	​	Additional		​	​	​	​	Other		​	​	​
​	​	Common Stock				​	Paid-In		​	Retained		​	Comprehensive		​	​	​
​		Shares		Par Value			Capital			Deficit		​	Loss			Total
Balance at December 31, 2021		67,029	​	$	670	​	$	1,305,508	​	$	(1,365,802)	​	$	(6,799)	​	$	(66,423)
Net income		—	​		—	​		—	​		1,644,078	​	​	—	​		1,644,078
Total other comprehensive income	​	—	​	​	—	​	​	—	​	​	—	​	​	2,816	​	​	2,816
Issuance of common stock under employee benefit plans, net of forfeitures and shares withheld to cover taxes		26	​		—	​		15,272	​		—	​	​	—	​		15,272
Net issuance of common stock upon exercise of stock options		169	​		2	​		42,786	​		—	​	​	—	​		42,788
Share-based compensation		—	​		—	​		17,563	​		—	​	​	—	​		17,563
Share repurchases, including fees		(4,425)	​		(44)	​		(88,404)	​		(2,773,109)	​	​	—	​		(2,861,557)
Balance at September 30, 2022		62,799	​	$	628	​	$	1,292,725	​	$	(2,494,833)	​	$	(3,983)	​	$	(1,205,463)
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	For the Three Months Ended September 30, 2021
​		​	​	​	​		​			​	​	​	Accumulated			​	​
​	​	​	​	​	​	​	Additional		​	​	​	​	Other		​	​	​
​	​	Common Stock				​	Paid-In		​	Retained		​	Comprehensive		​	​	​
​		Shares		Par Value			Capital			Deficit		​	Loss			Total
Balance at June 30, 2021		69,133	​	$	691	​	$	1,295,363	​	$	(1,075,769)	​	$	(2,591)	​	$	217,694
Net income		—	​		—	​		—	​		558,652	​	​	—	​		558,652
Total other comprehensive loss	​	—	​	​	—	​	​	—	​	​	—	​	​	(5,237)	​	​	(5,237)
Issuance of common stock under employee benefit plans, net of forfeitures and shares withheld to cover taxes		10	​		1	​		4,722	​		—	​	​	—	​		4,723
Net issuance of common stock upon exercise of stock options		125	​		1	​		20,718	​		—	​	​	—	​		20,719
Share based compensation		—	​		—	​		5,568	​		—	​	​	—	​		5,568
Share repurchases, including fees		(1,583)	​		(16)	​		(30,013)	​		(912,943)	​	​	—	​		(942,972)
Balance at September 30, 2021		67,685	​	$	677	​	$	1,296,358	​	$	(1,430,060)	​	$	(7,828)	​	$	(140,853)
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	For the Nine Months Ended September 30, 2021
​		​	​	​	​		​			​	​	​	Accumulated			​	​
​	​	​	​	​	​	​	Additional		​	​	​	​	Other		​	​	​
​	​	Common Stock				​	Paid-In		​	Retained		​	Comprehensive		​	​	​
​		Shares		Par Value			Capital			Deficit		​	Loss			Total
Balance at December 31, 2020		71,123	​	$	711	​	$	1,280,841	​	$	(1,139,139)	​	$	(2,155)	​	$	140,258
Net income		—	​		—	​		—	​		1,645,712	​	​	—	​		1,645,712
Total other comprehensive loss	​	—	​	​	—	​	​	—	​	​	—	​	​	(5,673)	​	​	(5,673)
Issuance of common stock under employee benefit plans, net of forfeitures and shares withheld to cover taxes		32	​		1	​		14,152	​		—	​	​	—	​		14,153
Net issuance of common stock upon exercise of stock options		331	​		3	​		54,488	​		—	​	​	—	​		54,491
Share-based compensation		—	​		—	​		17,367	​		—	​	​	—	​		17,367
Share repurchases, including fees		(3,801)	​		(38)	​		(70,490)	​		(1,936,633)	​	​	—	​		(2,007,161)
Balance at September 30, 2021		67,685	​	$	677	​	$	1,296,358	​	$	(1,430,060)	​	$	(7,828)	​	$	(140,853)

​

See accompanying Notes to condensed consolidated financial statements.

​

​

O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

​

​	​	​	​	​	​	​
​	​	For the Nine Months Ended
​	​	September 30,
​		2022			2021
Operating activities:		​			​
Net income	​	$	1,644,078	​	$	1,645,712
Adjustments to reconcile net income to net cash provided by operating activities:	​			​		​
Depreciation and amortization of property, equipment and intangibles	​		258,048	​		237,654
Amortization of debt discount and issuance costs	​		3,490	​		3,294
Deferred income taxes	​		42,673	​		18,053
Share-based compensation programs	​		18,913	​		18,544
Other	​		716	​		1,803
Changes in operating assets and liabilities:	​		​	​		​
Accounts receivable	​		(69,965)	​		(56,743)
Inventory	​		(450,991)	​		6,420
Accounts payable	​		878,501	​		424,710
Income taxes payable	​		73,853	​		141,273
Other	​		(46,296)	​		124,607
Net cash provided by operating activities	​		2,353,020	​		2,565,327
​	​	​	​	​	​	​
Investing activities:	​			​
Purchases of property and equipment	​		(388,820)	​		(340,687)
Proceeds from sale of property and equipment	​		10,829	​		6,643
Investment in tax credit equity investments	​	​	(5,262)	​	​	(1,795)
Other	​		(448)	​		(1,897)
Net cash used in investing activities	​		(383,701)	​		(337,736)
​	​	​	​	​	​	​
Financing activities:	​			​
Proceeds from borrowings on revolving credit facility	​		785,800	​		—
Payments on revolving credit facility	​		(785,800)	​		—
Proceeds from the issuance of long-term debt	​		847,314	​		—
Principal payments on long-term debt	​	​	(300,000)	​	​	(300,000)
Payment of debt issuance costs	​		(6,442)	​		(3,404)
Repurchases of common stock	​		(2,861,557)	​		(2,007,161)
Net proceeds from issuance of common stock	​		56,575	​		67,361
Other	​		(350)	​		(313)
Net cash used in financing activities	​		(2,264,460)	​		(2,243,517)
​	​	​	​	​	​	​
Effect of exchange rate changes on cash	​	​	88	​	​	(412)
Net decrease in cash and cash equivalents	​		(295,053)	​		(16,338)
Cash and cash equivalents at beginning of the period	​		362,113	​		465,640
Cash and cash equivalents at end of the period	​	$	67,060	​	$	449,302
​	​	​	​	​	​	​
Supplemental disclosures of cash flow information:	​			​
Income taxes paid	​	$	392,490	​	$	333,360
Interest paid, net of capitalized interest	​		99,674	​		107,971

​

See accompanying Notes to condensed consolidated financial statements.

​

​

​

O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

September 30, 2022

​

NOTE 1 – BASIS OF PRESENTATION

​

The accompanying unaudited condensed consolidated financial statements of O’Reilly Automotive, Inc. and its subsidiaries (the “Company” or “O’Reilly”) have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2022, are not necessarily indicative of the results that may be expected for the year ended December 31, 2022. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

​

Principles of consolidation:

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All inter-company balances and transactions have been eliminated in consolidation.

​

NOTE 2 – VARIABLE INTEREST ENTITIES

​

The Company invests in certain tax credit funds that promote renewable energy. These investments generate a return primarily through the realization of federal tax credits and other tax benefits. The Company accounts for the tax attributes of its renewable energy investments using the deferral method. Under this method, realized investment tax credits and other tax benefits are recognized as a reduction of the renewable energy investments.

​

The Company has determined its investment in these tax credit funds were investments in variable interest entities (“VIEs”). The Company analyzes any investments in VIEs at inception and again if certain triggering events are identified to determine if it is the primary beneficiary. The Company considers a variety of factors in identifying the entity that holds the power to direct matters that most significantly impact the VIEs’ economic performance including, but not limited to, the ability to direct financing, leasing, construction and other operating decisions and activities. As of September 30, 2022, the Company had invested in five unconsolidated tax credit fund entities that were considered to be VIEs and concluded it was not the primary beneficiary of any of the entities, as it did not have the power to control the activities that most significantly impact the entities, and has therefore accounted for these investments using the equity method. The Company’s maximum exposure to losses associated with these VIEs is generally limited to its net investment, which was $25.0 million as of September 30, 2022, and was included in “Other assets, net” on the accompanying Condensed Consolidated Balance Sheets.

​

As of September 30, 2022, the Company had commitments to make certain additional capital contributions to one of its tax credit funds totaling approximately $122.0 million upon achievement of project milestones by the solar energy farms, the timing of which is uncertain and outside of the Company’s control. Subsequent to September 30, 2022, the Company entered into an agreement to invest in an additional tax credit fund, which promotes renewable energy through the development of solar energy farms, primarily for the purpose of receiving renewable energy tax credits. Per the terms of this agreement, the Company is required to make capital contributions totaling approximately $60.0 million upon achievement of project milestones by the solar energy farms, the timing of which is uncertain and outside of the Company’s control.

​

NOTE 3 – FAIR VALUE MEASUREMENTS

​

The Company uses the fair value hierarchy, which prioritizes the inputs used to measure the fair value of certain of its financial instruments. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The Company uses the income and market approaches to determine the fair value of its assets and liabilities. The three levels of the fair value hierarchy are set forth below:

	●	Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity can access at the measurement date.

	●	Level 2 – Inputs other than quoted prices in active markets included within Level 1 that are observable for the asset or liability, either directly or indirectly.

	●	Level 3 – Unobservable inputs for the asset or liability.

​

Financial assets and liabilities measured at fair value on a recurring basis:

The Company invests in various marketable securities with the intention of selling these securities to fulfill its future unsecured obligations under the Company’s nonqualified deferred compensation plan. See Note 10 for further information concerning the Company’s benefit plans.

​

The Company’s marketable securities were accounted for as trading securities and the carrying amount of its marketable securities were included in “Other assets, net” on the accompanying Condensed Consolidated Balance Sheets as of September 30, 2022, and December 31, 2021. The Company recorded a decrease in fair value related to its marketable securities in the amount of $2.0 million and $0.2 million for the three months ended September 30, 2022 and 2021, respectively, which were included in “Other income (expense)” on the accompanying Condensed Consolidated Statements of Income. The Company recorded a decrease in fair value related to its marketable securities in the amount of $11.2 million and an increase in fair value related to its marketable securities in the amount of $3.8 million for the nine months ended September 30, 2022 and 2021, respectively, which were included in “Other income (expense)” on the accompanying Condensed Consolidated Statements of Income.

​

The tables below identify the estimated fair value of the Company’s marketable securities, determined by reference to quoted market prices (Level 1), as of September 30, 2022, and December 31, 2021 (in thousands):

​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	September 30, 2022
​	​	Quoted Priced in Active Markets		​	Significant Other		​	Significant		​	​	​
​	​	for Identical Instruments		​	Observable Inputs		​	Unobservable Inputs		​	​	​
​		(Level 1)			(Level 2)			(Level 3)			Total
Marketable securities	​	$	45,897	​	$	—	​	$	—	​	$	45,897

​

​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	December 31, 2021
​	​	Quoted Prices in Active Markets		​	Significant Other		​	Significant		​	​
​	​	for Identical Instruments		​	Observable Inputs		​	Unobservable Inputs		​	​
​		(Level 1)			(Level 2)			(Level 3)			Total
Marketable securities	​	$	52,456	​	$	—	​	$	—	​	$	52,456

​

Non-financial assets and liabilities measured at fair value on a nonrecurring basis:

Certain long-lived non-financial assets and liabilities may be required to be measured at fair value on a nonrecurring basis in certain circumstances, including when there is evidence of impairment. These non-financial assets and liabilities may include assets acquired in a business combination or property and equipment that are determined to be impaired. As of September 30, 2022, and December 31, 2021, the Company did not have any non-financial assets or liabilities that had been measured at fair value subsequent to initial recognition.

​

Fair value of financial instruments:

The carrying amounts of the Company’s senior notes and unsecured revolving credit facility borrowings are included in “Long-term debt” on the accompanying Condensed Consolidated Balance Sheets as of September 30, 2022, and December 31, 2021.

​

The table below identifies the estimated fair value of the Company’s senior notes, using the market approach. The fair value as of September 30, 2022, and December 31, 2021, was determined by reference to quoted market prices of the same or similar instruments (Level 2) (in thousands):

​

​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	September 30, 2022					​	December 31, 2021
​	​	Carrying Amount		​	Estimated Fair Value		​	Carrying Amount		​	Estimated Fair Value
Senior Notes	​	$	4,370,772	​	$	4,022,512	​	$	3,826,978	​	$	4,135,629

​

The carrying amount of the Company’s unsecured revolving credit facility approximates fair value (Level 2), as borrowings under the facility bear variable interest at current market rates. See Note 5 for further information concerning the Company’s senior notes and unsecured revolving credit facility.

​

The accompanying Condensed Consolidated Balance Sheets include other financial instruments, including cash and cash equivalents, accounts receivable, amounts receivable from suppliers and accounts payable. Due to the short-term nature of these financial instruments, the Company believes that the carrying values of these instruments approximate their fair values.

​

NOTE 4 – LEASES

​

The Company leases certain office space, retail stores, distribution centers and equipment under long-term, non-cancelable operating leases. The following table summarizes Total lease cost for the three and nine months ended September 30, 2022 and 2021, which were primarily included in “Selling, general and administrative expenses” on the accompanying Condensed Consolidated Statements of Income (in thousands):

​

​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	For the Three Months Ended					​	For the Nine Months Ended
​	​	September 30,					​	September 30,
​		2022		​	2021			2022		​	2021
Operating lease cost	​	$	92,677	​	$	87,601	​	$	273,475	​	$	262,183
Short-term operating lease cost	​		2,594	​		1,803	​		7,710	​		5,397
Variable operating lease cost	​		23,547	​		22,436	​		70,650	​		67,025
Sublease income	​		(1,553)	​		(1,177)	​		(3,975)	​		(3,560)
Total lease cost	​	$	117,265	​	$	110,663	​	$	347,860	​	$	331,045

​

The following table summarizes other lease-related information for the nine months ended September 30, 2022 and 2021:

​

​	​	​	​	​	​	​	​
​			For the Nine Months Ended
​		​	September 30,
​		​	2022		​	2021
Cash paid for amounts included in the measurement of operating lease liabilities:			​		​	​	​
​	Operating cash flows from operating leases	​	$	272,620	​	$	256,282
Right-of-use assets obtained in exchange for new operating lease liabilities		​	​	341,272	​	​	216,825

​

​

​

​

NOTE 5 – FINANCING

​

The following table identifies the amounts included in “Long-term debt” on the accompanying Condensed Consolidated Balance Sheets as of September 30, 2022, and December 31, 2021 (in thousands):

​

​	​	​	​	​	​	​
​		September 30, 2022			December 31, 2021
3.800% Senior Notes due 2022, effective interest rate of 3.845%	​	$	—	​	$	300,000
3.850% Senior Notes due 2023, effective interest rate of 3.851%	​		300,000	​		300,000
3.550% Senior Notes due 2026, effective interest rate of 3.570%	​		500,000	​		500,000
3.600% Senior Notes due 2027, effective interest rate of 3.619%	​		750,000	​		750,000
4.350% Senior Notes due 2028, effective interest rate of 4.383%	​		500,000	​		500,000
3.900% Senior Notes due 2029, effective interest rate of 3.901%	​	​	500,000	​	​	500,000
4.200% Senior Notes due 2030, effective interest rate of 4.205%	​	​	500,000	​	​	500,000
1.750% Senior Notes due 2031, effective interest rate of 1.798%	​	​	500,000	​	​	500,000
4.700% Senior Notes due 2032, effective interest rate of 4.740%	​	​	850,000	​	​	—
Total principal amount of debt	​	​	4,400,000	​	​	3,850,000
Less: Unamortized discount and debt issuance costs	​	​	29,228	​	​	23,022
Total long-term debt	​	$	4,370,772	​	$	3,826,978

​

Unsecured revolving credit facility:

The Company is party to a credit agreement dated June 15, 2021 (the “Credit Agreement”). The Credit Agreement provides for a five-year $1.8 billion unsecured revolving credit facility (the “Revolving Credit Facility”) arranged by JPMorgan Chase Bank, N.A., which is scheduled to mature in June of 2026. The Credit Agreement includes a $200 million sub-limit for the issuance of letters of credit and a $75 million sub-limit for swing line borrowings under the Revolving Credit Facility. As described in the Credit Agreement governing the Revolving Credit Facility, the Company may, from time to time, subject to certain conditions, increase the aggregate commitments under the Revolving Credit Facility by up to $900 million, provided that the aggregate amount of the commitments does not exceed $2.7 billion at any time.

​

As of September 30, 2022, and December 31, 2021, the Company had outstanding letters of credit, primarily to support obligations related to workers’ compensation, general liability and other insurance policies, under the Credit Agreement in the amounts of $5.1 million and $84.0 million, respectively, reducing the aggregate availability under the Credit Agreement by those amounts. Substantially all of these outstanding letters of credit have a one-year term from the date of issuance. As of September 30, 2022, and December 31, 2021, the Company had no outstanding borrowings under its Revolving Credit Facility.

​

Borrowings under the Revolving Credit Facility (other than swing line loans) bear interest, at the Company’s option, at either an Alternate Base Rate or an Adjusted LIBO Rate (both as defined in the Credit Agreement) plus an applicable margin. The Credit Agreement includes customary provisions to provide for the eventual replacement of LIBOR as a benchmark interest rate. Swing line loans made under the Revolving Credit Facility bear interest at an Alternate Base Rate plus the applicable margin for Alternate Base Rate loans. In addition, the Company pays a facility fee on the aggregate amount of the commitments under the Credit Agreement in an amount equal to a percentage of such commitments. The interest rate margins and facility fee are based upon the better of the ratings assigned to the Company’s debt by Moody’s Investor Service, Inc. and Standard & Poor’s Ratings Services, subject to limited exceptions. As of September 30, 2022, based upon the Company’s current credit ratings, its margin for Alternate Base Rate loans was 0.000%, its margin for Eurodollar Revolving Loans was 0.900% and its facility fee was 0.100%.

​

The Credit Agreement contains certain covenants, including limitations on subsidiary indebtedness, a minimum consolidated fixed charge coverage ratio of 2.50:1.00 and a maximum consolidated leverage ratio of 3.50:1.00. The consolidated fixed charge coverage ratio includes a calculation of earnings before interest, taxes, depreciation, amortization, rent and non-cash share-based compensation expense to fixed charges. Fixed charges include interest expense, capitalized interest and rent expense. The consolidated leverage ratio includes a calculation of adjusted debt to earnings before interest, taxes, depreciation, amortization, rent and non-cash share-based compensation expense. Adjusted debt includes outstanding debt, outstanding stand-by letters of credit and similar instruments, five-times rent expense and excludes any premium or discount recorded in conjunction with the issuance of long-term debt. In the event that the Company should default on any covenant (subject to customary grace periods, cure rights and materiality thresholds) contained in the Credit Agreement, certain actions may be taken, including, but not limited to, possible termination of commitments, immediate payment of outstanding principal amounts plus accrued interest and other amounts payable under the Credit Agreement and litigation from lenders. As of September 30, 2022, the Company remained in compliance with all covenants under the Credit Agreement.

​

In addition to the letters of credit issued under the Credit Agreement described above, as of September 30, 2022, the Company had additional outstanding letters of credit, primarily to support obligations under workers’ compensation, general liability and other insurance policies, in the amount of $96.6 million. Substantially all of these letters of credit have a one-year term from the date of issuance and were not issued under the Company’s Credit Agreement or another committed facility.

​

Senior notes:

On June 15, 2022, the Company issued $850 million aggregate principal amount of unsecured 4.700% Senior Notes due 2032 (“4.700% Senior Notes due 2032”) at a price to the public of 99.684% of their face value with U.S. Bank Trust Company, National Association (f/k/a U.S. Bank National Association) (“U.S. Bank”) as trustee. Interest on the 4.700% Senior Notes due 2032 is payable on June 15 and December 15 of each year, beginning on December 15, 2022, and is computed on the basis of a 360–day year.

​

On September 1, 2022, the Company’s $300 million aggregate principal amount of unsecured 3.800% Senior Notes due 2022 matured, and the Company repaid these notes using available cash on hand.

​

As of September 30, 2022, the Company has issued and outstanding a cumulative $4.4 billion aggregate principal amount of unsecured senior notes, which are due between 2023 and 2032, with UMB Bank, N.A. and U.S. Bank as trustees. Interest on the senior notes, ranging from 1.750% to 4.700%, is payable semi-annually and is computed on the basis of a 360-day year. The $300 million aggregate principal amount of unsecured 3.850% Senior Notes due 2023 was included in “Long-term debt” on the accompanying Condensed Consolidated Balance Sheet as of September 30, 2022, as the Company has the ability and intent to refinance these notes on a long-term basis. None of the Company’s subsidiaries is a guarantor under the senior notes. Each of the senior notes is subject to certain customary covenants, with which the Company complied as of September 30, 2022.

​

NOTE 6 – WARRANTIES

​

The Company provides warranties on certain merchandise it sells with warranty periods ranging from 30 days to limited lifetime warranties. The risk of loss arising from warranty claims is typically the obligation of the Company’s suppliers. Certain suppliers provide upfront allowances to the Company in lieu of accepting the obligation for warranty claims. For this merchandise, when sold, the Company bears the risk of loss associated with the cost of warranty claims. Differences between supplier allowances received by the Company, in lieu of warranty obligations and estimated warranty expense, are recorded as an adjustment to cost of sales. Estimated warranty costs, which are recorded as obligations at the time of sale, are based on the historical failure rate of each individual product line. The Company’s historical experience has been that failure rates are relatively consistent over time and that the ultimate cost of warranty claims to the Company has been driven by volume of units sold as opposed to fluctuations in failure rates or the variation of the cost of individual claims.

​

The Company’s product warranty liabilities are included in “Other current liabilities” on the accompanying Condensed Consolidated Balance Sheets as of September 30, 2022, and December 31, 2021; the following table identifies the changes in the Company’s aggregate product warranty liabilities for the nine months ended September 30, 2022 (in thousands):

​

​	​	​	​
Warranty liabilities, balance at December 31, 2021	​	$	77,199
Warranty claims	​		(113,167)
Warranty accruals	​		121,373
Foreign currency translation	​	​	8
Warranty liabilities, balance at September 30, 2022	​	$	85,413

​

​

NOTE 7 – SHARE REPURCHASE PROGRAM

​

In January of 2011, the Company’s Board of Directors approved a share repurchase program. Under the program, the Company may, from time to time, repurchase shares of its common stock, solely through open market purchases effected through a broker dealer at prevailing market prices, based on a variety of factors such as price, corporate trading policy requirements and overall market conditions. The Company’s Board of Directors may increase or otherwise modify, renew, suspend or terminate the share repurchase program at any time, without prior notice. As announced on November 17, 2021, and May 16, 2022, the Company’s Board of Directors each time approved a resolution to increase the authorization amount under the share repurchase program by an additional $1.5 billion, resulting in a cumulative authorization amount of $20.3 billion. The additional authorizations are effective for three years, beginning on their respective announcement date.

​

The following table identifies shares of the Company’s common stock that have been repurchased as part of the Company’s publicly announced share repurchase program for the three and nine months ended September 30, 2022 and 2021 (in thousands, except per share data):

​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	For the Three Months Ended					​	For the Nine Months Ended
​	​	September 30,					​	September 30,
​		2022			2021			2022			2021
Shares repurchased		​	1,039	​	​	1,583		​	4,425	​	​	3,801
Average price per share	​	$	683.09	​	$	595.96	​	$	646.61	​	$	528.09
Total investment	​	$	710,304	​	$	942,955	​	$	2,861,513	​	$	2,007,122

​

As of September 30, 2022, the Company had $644.0 million remaining under its share repurchase authorization. Subsequent to the end of the third quarter and through November 8, 2022, the Company repurchased 0.3 million additional shares of its common stock under its share repurchase program, at an average price of $735.72, for a total investment of $184.5 million. The Company has repurchased a total of 90.2 million shares of its common stock under its share repurchase program since the inception of the program in January of 2011 and through November 8, 2022, at an average price of $219.33, for a total aggregate investment of $19.8 billion.

​

NOTE 8 – ACCUMULATED OTHER COMPREHENSIVE LOSS

​

Accumulated other comprehensive income (loss) includes adjustments for foreign currency translations. The tables below summarize activity for changes in accumulated other comprehensive income (loss) for the three and nine months ended September 30, 2022 and 2021 (in thousands):

​

​	​	​	​	​	​	​
​	​	Foreign		​	Total Accumulated Other
​	​	Currency (1)		​	Comprehensive Loss
Accumulated other comprehensive loss, balance at June 30, 2022	​	$	(3,611)	​	$	(3,611)
Change in accumulated other comprehensive loss	​	​	(372)	​	​	(372)
Accumulated other comprehensive loss, balance at September 30, 2022	​	$	(3,983)	​	$	(3,983)

​

​	​	​	​	​	​	​
​	​	Foreign		​	Total Accumulated Other
​	​	Currency (1)		​	Comprehensive Loss
Accumulated other comprehensive loss, balance at December 31, 2021	​	$	(6,799)	​	$	(6,799)
Change in accumulated other comprehensive income	​	​	2,816	​	​	2,816
Accumulated other comprehensive loss, balance at September 30, 2022	​	$	(3,983)	​	$	(3,983)

​

​	​	​	​	​	​	​
​	​	Foreign		​	Total Accumulated Other
​	​	Currency (1)		​	Comprehensive Loss
Accumulated other comprehensive loss, balance at June 30, 2021	​	$	(2,591)	​	$	(2,591)
Change in accumulated other comprehensive loss	​	​	(5,237)	​	​	(5,237)
Accumulated other comprehensive loss, balance at September 30, 2021	​	$	(7,828)	​	$	(7,828)

​

​	​	​	​	​	​	​
​	​	Foreign		​	Total Accumulated Other
​	​	Currency (1)		​	Comprehensive Loss
Accumulated other comprehensive loss, balance at December 31, 2020	​	$	(2,155)	​	$	(2,155)
Change in accumulated other comprehensive loss	​	​	(5,673)	​	​	(5,673)
Accumulated other comprehensive loss, balance at September 30, 2021	​	$	(7,828)	​	$	(7,828)

(1)	Foreign currency translation is not shown net of additional U.S. tax, as other basis differences of non-U.S. subsidiaries are intended to be permanently reinvested.

​

NOTE 9 – REVENUE

​

The table below identifies the Company’s revenues disaggregated by major customer type for the three and nine months ended September 30, 2022 and 2021 (in thousands):

​

​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	For the Three Months Ended					​	For the Nine Months Ended
​	​	September 30,					​	September 30,
​		2022			2021			2022			2021
Sales to do-it-yourself customers	​	$	2,086,201	​	$	1,992,778	​	$	5,914,238	​	$	5,773,345
Sales to professional service provider customers		​	1,630,571		​	1,408,747		​	4,601,111		​	4,032,050
Other sales and sales adjustments		​	81,847		​	78,045		​	250,018		​	230,675
Total sales	​	$	3,798,619	​	$	3,479,570	​	$	10,765,367	​	$	10,036,070

​

See Note 6 for information concerning the expected costs associated with the Company’s assurance warranty obligations.

​

NOTE 10 – SHARE-BASED COMPENSATION AND BENEFIT PLANS

​

The Company recognizes share-based compensation expense based on the fair value of the grants, awards or shares at the time of the grant, award or issuance. Share-based compensation includes stock option awards, restricted stock awards and stock appreciation rights issued under the Company’s incentive plans and stock issued through the Company’s employee stock purchase plan.

​

Stock options:

The Company’s incentive plans provide for the granting of stock options for the purchase of common stock of the Company to certain key employees of the Company. Employee stock options are granted at an exercise price that is equal to the closing market price of the Company’s common stock on the date of the grant. Employee stock options granted under the plans expire after 10 years and typically vest 25% per year, over four years. The Company records compensation expense for the grant date fair value of the option awards evenly over the vesting period or minimum required service period.

​

The table below identifies stock option activity under these plans during the nine months ended September 30, 2022 (in thousands, except per share data):

​

​	​	​	​	​	​
​	​	Shares	​	Weighted- Average
​	​	(in thousands)	​	Exercise Price
Outstanding at December 31, 2021		1,206	​	$	300.09
Granted		124	​		670.98
Exercised		(169)	​		253.89
Forfeited or expired		(12)	​		456.32
Outstanding at September 30, 2022		1,149	​	$	345.21
Exercisable at September 30, 2022		808	​	$	271.82

​

The fair value of each stock option award is estimated on the date of the grant using the Black-Scholes option pricing model. The Black-Scholes model requires the use of assumptions, including the risk free rate, expected life, expected volatility and expected dividend yield.

	●	Risk-free interest rate – The United States Treasury rates in effect at the time the options are granted for the options’ expected life.

	●	Expected life – Represents the period of time that options granted are expected to be outstanding. The Company uses historical experience to estimate the expected life of options granted.

	●	Expected volatility – Measure of the amount, by which the Company’s stock price is expected to fluctuate, based on a historical trend.

	●	Expected dividend yield – The Company has not paid, nor does it have plans in the foreseeable future to pay, any dividends.

​

The table below identifies the weighted-average assumptions used for grants awarded during the nine months ended September 30, 2022 and 2021:

​

​	​	​	​	​	​	​
​	​	September 30,
​		2022		​	2021
Risk free interest rate		2.00	%	​	0.81	%
Expected life		6.3	Years	​	6.0	Years
Expected volatility		28.8	%	​	30.0	%
Expected dividend yield		—	%	​	—	%

​

The following table summarizes activity related to stock options awarded by the Company for the three and nine months ended September 30, 2022 and 2021 (in thousands, except per share data):

​

​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	For the Three Months Ended					​	For the Nine Months Ended
​	​	September 30,					​	September 30,
​		2022			2021			2022		​	2021
Compensation expense for stock options awarded	​	$	4,924	​	$	4,736	​	$	15,134	​	$	15,103
Income tax benefit from compensation expense related to stock options	​		1,222	​		1,169	​		3,756	​		3,727

​

The weighted-average grant-date fair value of options granted during the nine months ended September 30, 2022, was $219.30, compared to $144.99 for the nine months ended September 30, 2021. The remaining unrecognized compensation expense related to unvested stock option awards at September 30, 2022, was $40.4 million, and the weighted-average period of time over which this cost will be recognized is 2.7 years.

​

Other share-based compensation plans:

The Company sponsors other share-based compensation plans: an employee stock purchase plan and incentive plans that provide for the awarding of shares of restricted stock to certain key employees and directors. The Company’s employee stock purchase plan (the “ESPP”) permits eligible employees to purchase shares of the Company’s common stock at 85% of the fair market value. The fair value of shares issued under the ESPP is based on the average of the high and low market prices of the Company’s common stock during the offering periods, and compensation expense is recognized based on the discount between the fair value and the employee purchase price for the shares sold to employees. Restricted stock awarded under the incentive plans to certain key employees and directors vests after one-year or evenly over a three-year period and is held in escrow until such vesting has occurred. The fair value of shares awarded under the incentive plans is based on the closing market price of the Company’s common stock on the date of the award, and compensation expense is recorded evenly over the vesting period or the minimum required service period.

​

The table below summarizes activity related to the Company’s other share-based compensation plans for the three and nine months ended September 30, 2022 and 2021 (in thousands):

​

​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	For the Three Months Ended					​	For the Nine Months Ended
​	​	September 30,					​	September 30,
​		2022			2021			2022			2021
Compensation expense for shares issued under the ESPP	​	$	828	​	$	832	​	$	2,429	​	$	2,264
Income tax benefit from compensation expense related to shares issued under the ESPP	​	​	205	​	​	205	​	​	603	​	​	559
Compensation expense for restricted shares awarded	​	​	459	​	​	401	​	​	1,350	​	​	1,177
Income tax benefit from compensation expense related to restricted awards	​	$	114	​	$	99	​	$	335	​	$	291

​

Profit sharing and savings plan:

The Company sponsors a contributory profit sharing and savings plan (the “401(k) Plan”) that covers substantially all employees who are at least 21 years of age and have completed one year of service. The Company makes matching contributions equal to 100% of the first 2% of each employee’s wages that are contributed and 25% of the next 4% of each employee’s wages that are contributed. An employee generally must be employed on December 31 to receive that year’s Company matching contribution, with the matching contribution funded annually at the beginning of the subsequent year following the year in which the matching contribution was earned. The Company may also make additional discretionary profit sharing contributions to the plan on an annual basis as determined by the Board of Directors. The Company did not make any discretionary contributions to the 401(k) Plan during the nine months ended September 30, 2022 or 2021. The Company expensed matching contributions under the 401(k) Plan in the amount of $9.5 million and $8.7 million for the three months ended September 30, 2022 and 2021, respectively, which were primarily included in “Selling, general and administrative expenses” on the accompanying Condensed Consolidated Statements of Income. The Company expensed matching contributions under the 401(k) Plan in the amount of $27.3 million and $24.6 million for the nine months ended September 30, 2022 and 2021, respectively, which were primarily included in “Selling, general and administrative expenses” on the accompanying Condensed Consolidated Statements of Income.

​

Nonqualified deferred compensation plan:

The Company sponsors a nonqualified deferred compensation plan (the “Deferred Compensation Plan”) for highly compensated employees whose contributions to the 401(k) Plan are limited due to the application of the annual limitations under the Internal Revenue Code. The Deferred Compensation Plan provides these employees with the opportunity to defer the full 6% of matched compensation, including salary and incentive based compensation that was precluded under the Company’s 401(k) Plan, which is then matched by the Company using the same formula as the 401(k) Plan. An employee generally must be employed on December 31 to receive that year’s Company matching contribution, with the matching contribution funded annually at the beginning of the subsequent year following the year in which the matching contribution was earned. In the event of bankruptcy, the assets of this plan are available to satisfy the claims of general creditors. The Company has an unsecured obligation to pay, in the future, the value of the deferred compensation and Company match, adjusted to reflect the performance, whether positive or negative, of selected investment measurement options chosen by each participant during the deferral period. The liability for compensation deferred under the Deferred Compensation Plan was $45.9 million and $52.5 million as of September 30, 2022, and December 31, 2021, respectively, which was included in “Other liabilities” on the accompanying Condensed Consolidated Balance Sheets. The Company expensed matching contributions under the Deferred Compensation Plan in the amount of $0.1 million for each of the three months ended September 30, 2022 and 2021, which were included in “Selling, general and administrative expenses” on the accompanying Condensed Consolidated Statements of Income. The Company expensed matching contributions under the Deferred Compensation Plan in the amount of $0.2 million for each of the nine months ended September 30, 2022 and 2021, which were included in “Selling, general and administrative expenses” on the accompanying Condensed Consolidated Statements of Income.

​

Stock appreciation rights:

The Company’s incentive plans provide for the granting of stock appreciation rights, which expire after 10 years and vest 25% per year, over four years, and are settled in cash. As of September 30, 2022, there were 12,867 stock appreciation rights outstanding, and during the nine months ended September 30, 2022, there were 3,056 stock appreciation rights granted. The liability for compensation to be paid for redeemed stock appreciation rights was $1.7 million and $1.3 million as of September 30, 2022, and December 31, 2021, respectively, which were included in “Other liabilities” on the Condensed Consolidated Balance Sheets. The Company recorded compensation expense for stock appreciation rights in the amount of $0.6 million and $0.2 million for the three months ended September 30, 2022 and 2021, respectively, which were included in “Selling, general and administrative expenses” on the accompanying Condensed Consolidated Statements of Income. The Company recorded compensation expense for stock appreciation rights in the amount of $0.4 million and $0.6 million for the nine months ended September 30, 2022 and 2021, respectively, which were included in “Selling, general and administrative expenses” on the accompanying Condensed Consolidated Statements of Income.

​

NOTE 11 – EARNINGS PER SHARE

​

The following table illustrates the computation of basic and diluted earnings per share for the three and nine months ended September 30, 2022 and 2021 (in thousands, except per share data):

​

​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	For the Three Months Ended					​	For the Nine Months Ended
​	​	September 30,					​	September 30,
​		2022			2021			2022			2021
Numerator (basic and diluted):		​			​			​			​
Net income	​	$	585,438	​	$	558,652	​	$	1,644,078	​	$	1,645,712
​	​	​	​	​	​	​	​	​	​	​	​	​
Denominator:	​			​			​			​
Weighted-average common shares outstanding – basic	​		63,288	​		68,608	​		64,979	​		69,529
Effect of stock options (1)	​		572	​		632	​		587	​		645
Weighted-average common shares outstanding – assuming dilution	​		63,860	​		69,240	​		65,566	​		70,174
​	​	​	​	​	​	​	​	​	​	​	​	​
Earnings per share:	​			​			​			​
Earnings per share-basic	​	$	9.25	​	$	8.14	​	$	25.30	​	$	23.67
Earnings per share-assuming dilution	​	$	9.17	​	$	8.07	​	$	25.08	​	$	23.45
​	​	​	​	​	​	​	​	​	​	​	​	​
Antidilutive potential common shares not included in the calculation of diluted earnings per share:	​			​			​			​
Stock options (1)	​		139	​		133	​		145	​		48
Weighted-average exercise price per share of antidilutive stock options (1)	​	$	660.74	​	$	467.03	​	$	658.74	​	$	502.49

(1)	See Note 10 for further information concerning the terms of the Company’s share-based compensation plans.

​

For the three and nine months ended September 30, 2022 and 2021, the computation of diluted earnings per share did not include certain securities. These securities represent underlying stock options not included in the computation of diluted earnings per share, because the inclusion of such equity awards would have been antidilutive.

​

See Note 7 for information concerning the Company’s subsequent share repurchases.

​

NOTE 12 – LEGAL MATTERS

​

The Company is currently involved in litigation incidental to the ordinary conduct of the Company’s business. Based on existing facts and historical patterns, the Company accrues for litigation losses in instances where an adverse outcome is probable and the Company is able to reasonably estimate the probable loss in accordance with Accounting Standard Codification 450-20. The Company also accrues for an estimate of legal costs to be incurred for litigation matters. Although the Company cannot ascertain the amount of liability that it may incur from legal matters, it does not currently believe that, in the aggregate, these matters, taking into account applicable insurance and accruals, will have a material adverse effect on its consolidated financial position, results of operations or cash flows in a particular quarter or annual period.

​

NOTE 13 – RECENT ACCOUNTING PRONOUNCEMENTS

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In September of 2022, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standard Update (“ASU”) No. 2022-04, “Liabilities – Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations.” ASU 2022-04 enhances the transparency of supplier finance programs. Under ASU 2022-04, a buyer in a supplier finance program would be required to disclose sufficient information about the program to allow a user of financial statements to understand the program’s nature, activity during the period, changes from period to period and potential magnitude. ASU 2022-04 is effective for annual reporting periods beginning after December 15, 2022, including interim periods within that reporting period, except for the amendent on rollforward information, which is effective for fiscal years beginning after December 15, 2023. ASU 2022-04 allows for early adoption and requires retrospective adoption, except on rollforward information, which should be applied prospectively. The Company will adopt this guidance beginning with its first quarter ending March 31, 2023. The application of this new guidance is not expected to have a material impact on the Company’s consolidated financial condition, results of operations or cash flows, as the guidance pertains to disclosure.

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