Tractor Supply 10-Q 2023-09-30

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

or

Commission file number 000-23314

TRACTOR SUPPLY COMPANY

(Exact Name of Registrant as Specified in Its Charter)

5401 Virginia Way, Brentwood, Tennessee 37027

(Address of Principal Executive Offices and Zip Code)

(615) 440-4000

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former name, former address, and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)

Yes ☐ No ☑

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.

TRACTOR SUPPLY COMPANY

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PART I. FINANCIAL INFORMATION

TRACTOR SUPPLY COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share amounts)

(Unaudited)

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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TRACTOR SUPPLY COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

(Unaudited)

Preferred Stock (shares in thousands): $1.00 par value; 40 shares authorized; no shares were issued or outstanding during any period presented.

Common Stock (shares in thousands): $0.008 par value; 400,000 shares authorized for all periods presented. 177,288, 176,876, and 176,771 shares issued; 108,474, 110,251, and 110,587 shares outstanding at September 30, 2023, December 31, 2022

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General

The following discussion and analysis should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (the “2022 Form 10-K”) and subsequent Quarterly Reports on Form 10-Q. This Quarterly Report on Form 10-Q contains forward-looking statements and information. The forward-looking statements included herein are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 (the “PSLRA”). All statements, other than statements of historical facts, which address activities, events, or developments that we expect or anticipate will or may occur in the future, including sales and earnings growth, new store growth, estimated results of operations in future periods (including, but not limited to, sales, comparable store sales, operating margins, net income, and earnings per diluted share), the declaration and payment of dividends, the timing and amount of share repurchases, future capital expenditures (including their timing, amount and nature), sale-leasebacks, acquisitions, business strategy, strategic initiatives, expansion and growth of our business operations, and other such matters are forward-looking statements. Forward-looking statements are usually identified by or are associated with such words as “will,” “plans,” “intend,” “expect,” “believe,” “anticipate,” “optimistic,” “forecasted” and similar terminology. These forward-looking statements may be affected by certain risks and uncertainties, any one, or a combination of which, could materially affect the results of our operations. To take advantage of the safe harbor provided by the PSLRA, we have identified certain factors, in Part I, Item 1A. “Risk Factors” in our 2022 Form 10-K, which may cause actual results to differ materially from those expressed in any forward-looking statements. These “Risk Factors” may be updated from time to time in our quarterly reports on Form 10-Q or other subsequent filings with the SEC.

Forward-looking statements made by or on behalf of the Company are based on our knowledge of our business and the environment in which we operate, but because of the factors listed above or other factors, actual results could differ materially from those reflected by any forward-looking statements. Consequently, all of the forward-looking statements made are qualified by these cautionary statements and those contained in the Company’s 2022 Form 10-K and other filings with the Securities and Exchange Commission (the “SEC”). There can be no assurance that the actual results or developments anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequences to or effects on the Company or our business and operations. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We do not undertake any obligation to release publicly any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events, except as required by law.

Seasonality and Weather

Our business is seasonal. Historically, our sales and profits are the highest in the second and fourth fiscal quarters due to the sale of seasonal products. We usually experience our highest inventory and accounts payable balances during our first fiscal quarter for purchases of seasonal products to support the higher sales volume of the spring selling season, and again during our third fiscal quarter to support the higher sales volume of the cold weather selling season. We believe that our business can be more accurately assessed by focusing on the performance of the halves, not the quarters, due to the fact that different weather patterns from year-to-year can shift the timing of sales and profits between quarters, particularly between the first and second fiscal quarters and the third and fourth fiscal quarters.

Historically, weather conditions, including unseasonably warm weather in the fall and winter months and unseasonably cool weather in the spring and summer months, have unfavorably affected the timing and volume of our sales and results of operations. In addition, extreme weather conditions, including snow and ice storms, flood and wind damage, hurricanes, tornadoes, extreme rain, and droughts have impacted operating results both negatively and positively, depending on the severity and length of these conditions. Our strategy is to manage product flow and adjust merchandise assortments and depth of inventory to capitalize on seasonal demand trends, but there is no guarantee that we will be able to successfully execute this strategy. For more information regarding the risks we face in this regard, see Item 1A. “Risk Factors—Weather and Climate Risks” in our 2022 Form 10-K.

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Performance Metrics

Comparable Store Metrics

Comparable store metrics are a key performance indicator used in the retail industry and by the Company to measure the performance of the underlying business. Our comparable store metrics are calculated on an annual basis using sales generated from all stores open at least one year and all online sales and exclude certain adjustments to net sales. Stores closed during either of the years being compared are removed from our comparable store metrics calculations. Stores relocated during either of the years being compared are not removed from our comparable store metrics calculations. If the effect of relocated stores on our comparable store metrics calculations became material, we would remove relocated stores from the calculations. An Orscheln store will be considered a comparable store one year after its point-of-sale system conversion. Fiscal 2023 includes 52 weeks and fiscal 2022 includes 53 weeks. For our calculation of comparable store sales in fiscal 2023, we compare weeks 1 through 52 in fiscal 2023 against weeks 2 through 53 in fiscal 2022. Comparable store sales is intended only as supplemental information and is not a substitute for net sales presented in accordance with U.S. GAAP.

Transaction Count and Transaction Value

Transaction count and transaction value metrics are used by the Company to measure sales performance. Transaction count represents the number of customer transactions during a given period. Transaction value represents the average amount paid per transaction and is calculated as net sales divided by the total number of customer transactions during a given period.

Results of Operations

The following table sets forth, for the periods indicated, certain items in the Consolidated Statements of Income expressed as a percentage of net sales.

Fiscal Three Months (Third Quarter) Ended September 30, 2023 and September 24, 2022

Net sales for the third quarter of fiscal 2023 increased 4.3% to $3.41 billion from $3.27 billion for the third quarter of fiscal 2022. The increase in net sales was driven by contributions from the acquisition of Orscheln Farm and Home and new store openings. Comparable store sales for the third quarter of fiscal 2023 decreased 0.4%. In the third quarter of fiscal 2022, net sales increased 8.4% and comparable store sales increased 5.7%.

The comparable store sales results for the third quarter of fiscal 2023 included a flat comparable average transaction count and a decrease in comparable average transaction value of 0.3%. Comparable store sales performance reflects continued strength in core year-round merchandise, including consumable, usable and edible (“C.U.E.”) products which significantly outpaced the chain average. This performance largely offset declines in demand for seasonal goods and big-ticket items.

Sales from stores open less than one year, including stores from the Orscheln acquisition, were $157.5 million for the third quarter of fiscal 2023, which represented 4.8 percentage points of the 4.3% net sales increase over third quarter fiscal 2022 net

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sales. For the third quarter of fiscal 2022, sales from stores open less than one year were $71.9 million, which represented 2.4 percentage points of the 8.4% increase over third quarter fiscal 2021 net sales.

The following table summarizes store growth for the fiscal three months ended September 30, 2023 and September 24, 2022:

The following table indicates the percentage of net sales represented by each of our major product categories for the fiscal three months ended September 30, 2023 and September 24, 2022:

Note: Net sales by major product categories for prior periods have been reclassified to conform to the current year presentation.

Gross profit increased 7.3% to $1.25 billion for the third quarter of fiscal 2023 from $1.17 billion for the third quarter of fiscal 2022. As a percent of net sales, gross margin in the third quarter of fiscal 2023 increased 101 basis points to 36.7% from 35.6% in the third quarter of fiscal 2022. Gross margin continued to benefit from the Company’s ongoing execution of an everyday low price strategy, complemented by the use of its Neighbor’s Club loyalty program as a value driver in a sustained higher-cost environment. The gross margin rate increase was primarily attributable to lower transportation costs driven by improvement in the global supply chain and efficiencies from a new distribution center, modestly offset by negative product mix.

Selling, general and administrative (“SG&A”) expenses, including depreciation and amortization, increased 5.8% to $909.6 million for the third quarter of fiscal 2023 from $859.4 million for the third quarter of fiscal 2022. As a percent of net sales, SG&A expenses increased 38 basis points to 26.7% from 26.3% in the third quarter of fiscal 2022. The increase in SG&A as a percent of net sales was primarily attributable to the Company’s planned growth investments, which included higher depreciation and amortization and the onboarding of a new distribution center, as well as higher medical claims and fixed cost deleverage. During the third quarter of 2023, the Company completed its strategically planned sale-leaseback of 10 Tractor Supply store locations, benefiting SG&A by approximately 70 basis points, net of transaction and repair costs. Additionally, the increase in SG&A was partially offset by a one-time benefit of approximately 35 basis points attributed to increases in the useful lives of leasehold improvements for certain stores that were remodeled in prior periods due to a change in the related lease term.

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Operating income for the third quarter of fiscal 2023 increased 11.3% to $340.9 million from $306.4 million in the third quarter of fiscal 2022.

The effective income tax rate was 23.0% in the third quarter of fiscal 2023 compared to 22.0% in the third quarter of fiscal 2022. The increase in the effective income tax rate in the third quarter of fiscal 2023 compared to the third quarter of fiscal 2022 was driven primarily by state audit settlements and decreased state tax credits.

Net income for the third quarter of fiscal 2023 increased 8.9% to $255.0 million, or $2.33 per diluted share, as compared to net income of $234.1 million, or $2.10 per diluted share, for the third quarter of fiscal 2022.

During the third quarter of fiscal 2023, we repurchased approximately 0.6 million shares of the Company’s common stock at a total cost of $135.4 million, excluding the 1% excise tax, as part of our share repurchase program and paid quarterly cash dividends totaling $112.0 million, returning $247.4 million to our stockholders.

Fiscal Nine Months Ended September 30, 2023 and September 24, 2022

Net sales for the first nine months of fiscal 2023 increased 6.8% to $10.90 billion from $10.20 billion for the first nine months of fiscal 2022. The increase in net sales was driven by contributions from the acquisition of Orscheln Farm and Home, new store openings and growth in comparable store sales. Comparable store sales for the first nine months of fiscal 2023 increased 1.5%. In the first nine months of fiscal 2022, net sales increased 8.4% and comparable store sales increased 5.5%.

The comparable store sales results for the first nine months of fiscal 2023 included an increase in comparable average transaction value of 1.0% and an increase in comparable average transaction count of 0.4%. Comparable store sales growth reflects continued strength in core year-round merchandise, including C.U.E. products which significantly outpaced the chain average. This performance largely offset declines in seasonal goods and big-ticket items.

In addition to comparable store sales growth for the first nine months of fiscal 2023, sales from stores open less than one year, including stores from the Orscheln acquisition, were $498.2 million for the first nine months of fiscal 2023, which represented 4.9 percentage points of the 6.8% net sales increase over the first nine months of fiscal 2022 net sales. For the first nine months of fiscal 2022, sales from stores open less than one year were $236.5 million, which represented 2.5 percentage points of the 8.4% increase over the first nine months of fiscal 2021 net sales.

The following table summarizes store growth for the fiscal nine months ended September 30, 2023 and September 24, 2022:

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The following table indicates the percentage of net sales represented by each of our major product categories for the fiscal nine months ended September 30, 2023 and September 24, 2022:

Note: Net sales by major product categories for prior periods have been reclassified to conform to the current year presentation*.*

Gross profit increased 9.1% to $3.94 billion for the first nine months of fiscal 2023 from $3.61 billion for the first nine months of fiscal 2022. As a percent of net sales, gross margin in the first nine months of fiscal 2023 increased 74 basis points to 36.1% from 35.4% in the first nine months of fiscal 2022. The gross margin rate increase was primarily attributable to the Company’s consistent execution of an everyday low price strategy, lower transportation costs and other margin-driving initiatives that were able to more than offset the impact from product cost inflation pressures and product mix from the robust growth of C.U.E. products.

SG&A expenses, including depreciation and amortization, increased 10.2% to $2.79 billion for the first nine months of fiscal 2023 from $2.53 billion for the first nine months of fiscal 2022. As a percent of net sales, SG&A expenses increased 77 basis points to 25.6% from 24.8% in the first nine months of fiscal 2022. The increase in SG&A as a percent of net sales was primarily attributable to the Company’s planned growth investments, which included higher depreciation and amortization and the onboarding of a new distribution center, as well as higher medical claims and fixed cost deleverage. During the first nine months of fiscal 2023, the Company completed its strategically planned sale-leaseback of 10 Tractor Supply store locations, benefiting SG&A by approximately 22 basis points, net of transaction and repair costs. Additionally, the increase in SG&A was further partially offset by a one-time benefit of approximately 10 basis points attributed to increases in the useful lives of leasehold improvements for certain stores that were remodeled in prior periods due to a change in the related lease term.

Operating income for the first nine months of fiscal 2023 increased 6.4% to $1.14 billion from $1.08 billion in the first nine months of fiscal 2022.

The effective income tax rate was 22.6% in the first nine months of fiscal 2023 compared to 22.5% in the first nine months of fiscal 2022. The increase in the effective income tax rate in the first nine months of fiscal 2023 compared to the first nine months of fiscal 2022 was driven primarily by state audit settlements and decreased state tax credits.

Net income for the first nine months of fiscal 2023 increased 5.1% to $859.3 million, or $7.81 per diluted share, as compared to net income of $817.8 million, or $7.27 per diluted share, for the first nine months of fiscal 2022.

During the first nine months of fiscal 2023, we repurchased approximately 2.2 million shares of the Company’s common stock at a total cost of $486.5 million, excluding the 1% excise tax, as part of our share repurchase program and paid quarterly cash dividends totaling $338.2 million, returning $824.7 million to our stockholders.

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Liquidity and Capital Resources

In addition to normal operating expenses, our primary ongoing cash requirements are for new store expansion, existing store remodeling and improvements, store relocations, distribution facility capacity and improvements, information technology, inventory purchases, repayment of existing borrowings under our debt facilities, share repurchases, cash dividends, and selective acquisitions as opportunities arise.

Our primary ongoing sources of liquidity are existing cash balances, cash provided from operations, remaining funds available under our debt facilities, operating and finance leases, and normal trade credit. Our inventory and accounts payable levels typically build in the first and third fiscal quarters to support the higher sales volume of the spring and cold-weather selling seasons, respectively.

We believe that our existing cash balances, expected cash flow from future operations, funds available under our debt facilities, operating and finance leases, normal trade credit, and access to the long-term debt capital markets will be sufficient to fund our operations and our capital expenditure needs, including new store openings, existing store remodeling and improvements, store relocations, distribution facility capacity and improvements, and information technology improvements, for the foreseeable future.

Debt

The following table summarizes the Company’s outstanding debt as of the dates indicated (in millions):

(a) Also referred to herein as the “Note Purchase Facility,” referring to the Note Purchase and Private Shelf Agreement dated as of August 14, 2017 by and among the Company, PGIM, Inc. and the noteholders party thereto, as amended through November 2, 2022, under which the notes were purchased.

(b) Outstanding balances as of September 30, 2023 and December 31, 2022 represent amounts drawn under the 2022 Senior Credit Facility. Outstanding balance as of September 24, 2022 represents amounts drawn under the previous senior credit facility.

For additional information about the Company’s debt and credit facilities, refer to Note 6 to the Condensed Consolidated Financial Statements.

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Cash Flows Provided by Operating Activities

Operating activities provided net cash of $937.9 million and $626.3 million in the first nine months of fiscal 2023 and fiscal 2022, respectively. The $311.6 million increase in net cash provided by operating activities in the first nine months of fiscal 2023 compared to the first nine months of fiscal 2022 is due to changes in the following operating activities (in millions):

Note: Amounts may not sum to totals due to rounding.

The $311.6 million increase in net cash provided by operating activities in the first nine months of fiscal 2023 compared to the first nine months of fiscal 2022 was primarily driven by our management of inventory and accounts payable.

Cash Flows Used in Investing Activities

Investing activities used net cash of $454.6 million and $451.0 million in the first nine months of fiscal 2023 and fiscal 2022, respectively. The $3.6 million increase in net cash used in investing activities primarily reflects an increase in capital expenditures, primarily related to the onboarding and construction of new distribution centers, remodeling of existing stores, and new store growth, partially offset by proceeds from the sale-leaseback transactions, in the first nine months of fiscal 2023 compared to fiscal 2022.

Investing activities, including capital expenditures, for the first nine months of fiscal 2023 and fiscal 2022 were as follows (in millions):

Note: Amounts may not sum to totals due to rounding.

The increase in spending for existing stores in the first nine months of fiscal 2023 as compared to the first nine months of fiscal 2022 primarily reflects our strategic initiatives related to store remodels, including internal space productivity, side lot garden

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center transformations and Orscheln store conversions. Spending in the first nine months of both fiscal 2023 and fiscal 2022 also includes routine refresh activity.

The increase in spending for distribution center capacity and improvements in the first nine months of fiscal 2023 as compared to the first nine months of fiscal 2022 is primarily related to the ongoing construction of a new distribution center in Maumelle, Arkansas.

In the first nine months of fiscal 2023, the Company opened 51 new Tractor Supply stores compared to 24 new Tractor Supply stores during the first nine months of fiscal 2022. The Company also opened 10 new Petsense by Tractor Supply stores during the first nine months of fiscal 2023 compared to three stores during the first nine months of fiscal 2022.

Expenditures for information technology represent continued support for improvements in mobility in our stores, our omni-channel initiatives, increased security and compliance, and other strategic initiatives.

In the first nine months of fiscal 2023, the Company sold and subsequently leased back 10 of its retail locations, resulting in proceeds of $55.8 million.

Our projected capital expenditures for fiscal 2023 are currently estimated to be in the range of $800 million to $850 million, which is partially funded by the proceeds from the sale of existing Company-owned stores. The capital expenditures include plans to open a total of approximately 70 new Tractor Supply stores, complete the Orscheln conversions to Tractor Supply, continue Project Fusion remodels and garden center transformations, build our 10th distribution center and open a total of 10 to 15 new Petsense by Tractor Supply stores.

Cash Flows Used in Financing Activities

Financing activities used net cash of $264.1 million in the first nine months of fiscal 2023 compared to used net cash of $842.1 million in the first nine months of fiscal 2022. The $578.0 million change in net cash used in financing activities in the first nine months of fiscal 2023 compared to the first nine months of fiscal 2022 is due to changes in the following (in millions):

Note: Amounts may not sum to totals due to rounding.

The $578.0 million change in net cash used in financing activities in the first nine months of fiscal 2023 compared to the first nine months of fiscal 2022 is primarily due to net borrowings under the debt facilities and a decrease in the repurchase of common stock, partially offset by an increase in cash dividends paid to stockholders.

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Dividends

During the first nine months of fiscal 2023 and fiscal 2022, the Company's Board of Directors declared the following cash dividends:

It is the present intention of the Company’s Board of Directors to continue to pay a quarterly cash dividend; however, the declaration and payment of future dividends will be determined by the Company’s Board of Directors in its sole discretion and will depend upon the earnings, financial condition, and capital needs of the Company, along with any other factors that the Company’s Board of Directors deem relevant.

On November 8, 2023, the Company’s Board of Directors declared a quarterly cash dividend of $1.03 per share of the Company’s outstanding common stock. The dividend will be paid on December 12, 2023, to stockholders of record as of the close of business on November 27, 2023.

Share Repurchase Program

The Company’s Board of Directors has authorized common stock repurchases under a share repurchase program which was announced in February 2007. The total authorized amount of the program, which has been increased from time to time, is currently $6.50 billion, exclusive of any fees, commissions, or other expenses related to such repurchases. The share repurchase program does not have an expiration date. The repurchases may be made from time to time on the open market or in privately negotiated transactions. The timing and amount of any shares repurchased under the program will depend on a variety of factors, including price, corporate and regulatory requirements, capital availability, and other market conditions. Repurchased shares are accounted for at cost and will be held in treasury for future issuance. The program may be limited, temporarily paused, or terminated at any time without prior notice. As of September 30, 2023, the Company had remaining authorization under the share repurchase program of $1.16 billion, exclusive of any fees, commissions, or other expenses.

The following table provides the number of shares repurchased, average price paid per share, and total amount paid for share repurchases during the fiscal three months and fiscal nine months ended September 30, 2023 and September 24, 2022, respectively (in thousands, except per share amounts):

(a) Effective January 1, 2023, the Company’s share repurchases are subject to a 1% excise tax as a result of the Inflation Reduction Act of 2022. Excise taxes incurred on share repurchases represent direct costs of the repurchase and are recorded as a part of the cost basis of the shares within treasury stock. The cost of shares repurchased may differ from the repurchases of common stock amounts in the consolidated statements of cash flows due to unsettled share repurchases at the end of a period and excise taxes incurred on share repurchases.

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Significant Contractual Obligations and Commercial Commitments

For a description of the Company’s significant contractual obligations and commercial commitments, refer to Note 12 to the Consolidated Financial Statements included under Part II, Item 8 in our 2022 Form 10-K for the fiscal year ended December 31, 2022. As of September 30, 2023, the Company had contractual commitments of approximately $48.4 million related to the construction and onboarding of new distribution centers. As of September 30, 2023, there has been no other material change in the information disclosed in the 2022 Form 10-K for the fiscal year ended December 31, 2022.

Critical Accounting Policies and Estimates

Management’s discussion and analysis of the Company’s financial position and results of operations are based upon its Condensed Consolidated Financial Statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires management to make informed estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. The Company’s critical accounting policies, including areas of critical management judgments and estimates, have primary impact on the following financial statement areas:

See Note 1 to the Consolidated Financial Statements in our 2022 Form 10-K, for a discussion of the Company’s critical accounting policies. The Company’s financial position and/or results of operations may be materially different when reported under different conditions or when using different assumptions in the application of such policies. In the event estimates or assumptions prove to be different from actual amounts, adjustments are made in subsequent periods to reflect more current information. There have been no changes to our critical accounting policies and estimates as previously disclosed in our 2022 Form 10-K.

New Accounting Pronouncements

For recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted as of September 30, 2023, refer to Note 1 to the Condensed Consolidated Financial Statements included under Part I, Item 1 of this Quarterly Report on Form 10-Q.

For a description of the Company’s quantitative and qualitative disclosures about market risks, see Part II, Item 7A. “Quantitative and Qualitative Disclosures About Market Risk” included in our 2022 Form 10-K for the fiscal year ended December 31, 2022. As of September 30, 2023, there has been no material change in this information.

Disclosure Controls and Procedures

Our management carried out an evaluation required by the Securities Exchange Act of 1934, as amended (the “1934 Act”), under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the 1934 Act) as of September 30, 2023. Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of September 30, 2023, our disclosure controls and procedures were effective.

Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the last fiscal quarter covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

For a description of the Company's legal proceedings, refer to Note 10 to the Condensed Consolidated Financial Statements included under Part I, Item 1 of this Quarterly Report on Form 10-Q.

The risk factors described in Part I, Item 1A “Risk Factors” in our 2022 Form 10-K should be carefully considered, together with the other information contained or incorporated by reference in this Quarterly Report on Form 10-Q and in our other filings with the SEC, in connection with evaluating the Company, our business, and the forward-looking statements contained in this Quarterly Report on Form 10-Q. There have been no material changes to our risk factors as previously disclosed in our 2022 Form 10-K. Other risks that we do not presently know about or that we presently believe are not material could also adversely affect us.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

Share repurchases were made pursuant to the share repurchase program, which is described under Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report on Form 10-Q under the heading “Share Repurchase Program.” Additionally, the Company withholds shares from vested restricted stock units and performance-based restricted share units to satisfy employees’ minimum statutory tax withholding requirements. Stock repurchase activity during the third quarter of fiscal 2023 was as follows:

(a) The number of shares purchased and average price paid per share includes 186, 3,697, and 43 shares withheld from vested stock awards to satisfy employees’ minimum statutory tax withholding requirements for the period of July 2, 2023 - July 29, 2023, July 30, 2023 - August 26, 2023, and August 27, 2023 - September 30, 2023, respectively.

(b) Excludes excise taxes incurred on share repurchases.

We expect to implement the balance of the share repurchase program through purchases made from time to time either in the open market or through private transactions, in accordance with regulations of the SEC and other applicable legal requirements. The timing and amount of any common stock repurchased under the program will depend on a variety of factors including price, corporate and regulatory requirements, capital availability, and other market conditions.

Any additional share repurchase programs will be subject to the discretion of the Company’s Board of Directors and will depend upon earnings, financial condition, and capital needs of the Company, along with any other factors which the Company’s Board of Directors deems relevant. The program may be limited, temporarily paused, or terminated at any time, without prior notice.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

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None. Without limiting the generality of the foregoing, during the Company’s three fiscal months ended September 30, 2023, none of the Company’s directors or officers adopted, modified or terminated any “Rule 10b5-1 trading arrangement” or any “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Regulation S-K.

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Exhibit

31.1* Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002.

31.2* Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002.

32.1** Certification of Chief Executive Officer and Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002.

101* The following financial information from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, formatted in Inline XBRL (Extensible Business Reporting Language) includes: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Income, (iii) the Condensed Consolidated Statements of Comprehensive Income, (iv) the Condensed Consolidated Statements of Stockholders' Equity, (v) the Condensed Consolidated Statements of Cash Flows, and (vi) the Notes to Consolidated Financial Statements. The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document.

104* The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, formatted in Inline XBRL (included in Exhibit 101).

• Filed herewith

** Furnished herewith

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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