Cadre (US:CDRE)2023-08-07 16:00Financial Performance - Net sales increased by $2.9 million for the three months ended June 30, 2023, compared to the same period in 2022, primarily due to the Cyalume acquisition and increased demand for armor and holster products [57]. - Net income for the three months ended June 30, 2023, was $10.992 million, a 147.3% increase from $4.445 million in the same period in 2022 [64]. - Adjusted EBITDA for the six months ended June 30, 2023, was $41.397 million, up from $32.605 million for the same period in 2022 [28]. - Gross profit for the six months ended June 30, 2023, was $97.4 million, compared to $83.4 million for the same period in 2022, reflecting an increase of $14 million [66]. - Adjusted EBITDA increased by $4.4 million for the three months ended June 30, 2023, and by $8.8 million for the six months ended June 30, 2023, primarily due to increased gross profit and the Cyalume acquisition [79]. Sales and Revenue Breakdown - Net sales for the product segment increased by $3.6 million, or 3.5%, from $99.8 million to $103.4 million for the three months ended June 30, 2023, driven by higher demand for armor and crowd control products and the Cyalume acquisition [66]. - Distribution segment net sales rose by $2.0 million, or 8.4%, from $23.7 million to $25.7 million for the same period, primarily due to agency demand for hard goods [66]. Cost and Profit Margins - The gross profit margin for the Product segment increased by 470 basis points to 43.7% for the three months ended June 30, 2023, compared to 39.0% for the same period in 2022 [38]. - The Distribution segment's gross profit margin increased by 490 basis points to 23.1% for the three months ended June 30, 2023, from 18.2% in the same period in 2022 [38]. - The cost of goods sold for the Product segment decreased by $2.7 million, or 4.5%, for the three months ended June 30, 2023, compared to the same period in 2022 [38]. Debt and Financing - The company’s long-term debt as of June 30, 2023, was $132.712 million, a decrease from $137.476 million as of December 31, 2022 [55]. - The Company refinanced its credit facilities, borrowing $200.0 million under a term loan and may borrow up to $100.0 million under a revolving credit facility [109]. - As of June 30, 2023, the Company had $143.6 million in outstanding floating rate debt, with an interest rate of 5.16% plus 1.75% [128]. - The applicable margin for borrowings under the 2021 Credit Agreement ranges from 0.50% to 1.50% per annum for base rate borrowings [111]. Cash Flow and Operating Activities - Net cash provided from operating activities totaled $28.3 million for the six months ended June 30, 2023, with cash and cash equivalents at $55.8 million as of the same date [107]. - Net cash provided by operating activities for the six months ended June 30, 2023, was $28.3 million, driven by a net income of $18.0 million [146]. - The Company used $2.2 million in cash for investing activities during the six months ended June 30, 2023, primarily for property and equipment purchases [148]. - During the six months ended June 30, 2023, the company used $15.9 million in cash for financing activities, including $5.0 million in principal payments on term loans, $2.7 million in taxes related to employee stock transactions, and $6.0 million in dividends distributed [149]. Operational Efficiency - Selling, general and administrative expenses decreased by $17.4 million, or 20.1%, for the six months ended June 30, 2023, mainly due to a reduction in stock-based compensation [70]. - Interest expense decreased by $0.3 million, or 9.4%, for the six months ended June 30, 2023, due to a decrease in outstanding borrowings [71]. - Restructuring and transaction costs decreased by $1.1 million for the six months ended June 30, 2023, compared to the same period in 2022, due to prior year acquisition costs [98]. Tax and Accounting - The effective tax rate was 27.8% for the three months ended June 30, 2023, compared to 25.4% for the same period in 2022, influenced by state taxes and executive compensation [69]. - There have been no significant changes to the company's critical accounting policies as described in the Annual Report for the year ended December 31, 2022 [152]. Other Considerations - The company is classified as an "emerging growth company" under the JOBS Act, allowing it to benefit from reduced reporting requirements [155]. - The company entered into Swap Agreements to manage interest rate risk by converting a portion of floating rate debt to fixed, designated as cash flow hedges [156]. - A 10% increase in the value of the Canadian dollar would have increased reported net sales by approximately $0.4 million for the three months ended June 30, 2023 [133]. - The Company recorded a cumulative gain of $6,507 in accumulated other comprehensive income as of June 30, 2023 [141]. - The Company expects approximately $4,416 to be reclassified from accumulated other comprehensive income into interest expense over the next 12 months [144]. - The Company had no amounts outstanding under the Revolving Canadian Loan as of June 30, 2023 [116]. - Changes in operating assets and liabilities for the six months ended June 30, 2023, were primarily driven by a decrease in accounts receivable of $7.6 million [146].