Cadre Holdings Inc

Previous wording

In March 2024, the Company acquired Alpha Safety Intermediate, LLC (“Alpha Safety”) for$106.6 million.

Current wording

In March 2024, the Company acquired Alpha Safety Intermediate, LLC (“Alpha Safety”) for$107.1 million.

Previous wording

On April 1, 2024, the underwriters exercised the full amount of their over-allotment option and purchased an additional 545,719 shares of common stock at a price of $35.00 per share, resulting in net proceeds to the Company of $18.2 million after underwriter discounts and commissions, fees and expenses of $0.9 million.

Current wording

On April 1, 2024, the underwriters exercised the full amount of their over-allotment option and purchased an additional 545,719 shares of common stock at a price of $35.00 per share, resulting in net proceeds to the Company of $18.3 million after underwriter discounts and commissions, fees and expenses of $0.8 million.

Previous wording

Orders backlog increased by $32.4 million as of March 31, 2024 compared to December 31, 2023, primarily due to increases of $42.7 million from recent acquisitions and $2.3 million from duty gear, partially offset by reductions of $10.2 million from explosive ordnance disposal products and $2.6 million from armor products, both due to large orders delivered in the first quarter of 2024.

Current wording

Orders backlog increased by $24.5 million as of June 30, 2024 compared to December 31, 2023, primarily due to an increase of $41.3 million from recent acquisitions, partially offset by reductions of $14.0 million from explosive ordnance disposal products due to large orders delivered in 2024 and $3.3 million from duty gear due to large government and international orders delivered in 2024.

Previous wording

The following table presents data from our results of operations for the three months ended March 31, 2024 and 2023 (in thousands unless otherwise noted):

Current wording

The following table presents data from our results of operations for the three and six months ended June 30, 2024 and 2023 (in thousands unless otherwise noted):

Previous wording

The following tables present segment data for the three months ended March 31, 2024 and 2023 (in thousands):

Current wording

The following tables present segment data for the three and six months ended June 30, 2024 and 2023 (in thousands):

Previous wording

*Cost of goods sold and gross profit.*Product segment cost of goods sold increased by $15.2 million, or 28.8%, from $52.6 million to $67.8 million for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023, primarily due to increased volume, increased costs to manufacture product (principally material and labor), and increases from the amortization of inventory step up adjustments related to 2024 acquisitions, partially offset by product mix. Product segment gross profit as a percentage of net sales decreased by 60 basis points to 43.0% for the three months ended March 31, 2024 from 43.6% for the three months ended March 31, 2023, mainly driven by increases from the amortization of inventory step up adjustments related to the recent acquisitions and inflation, partially offset by favorable pricing and product mix. Distribution segment cost of goods sold increased by $2.9 million, or 15.3%, from $18.7 million to $21.6 million for the three months ended March 31, 2024 as compared to the same period in 2023, primarily due to increased volume. Distribution segment gross profit as a percentage of net sales decreased by 65 basis points to 23.5% for the three months ended March 31, 2024 from 24.2% for the three months ended March 31, 2023, mainly driven by unfavorable mix. Reconciling items consisting primarily of intercompany eliminations were $9.1 million and $6.2 million for the three months ended March 31, 2024 and 2023, respectively.

Current wording

*Cost of goods sold and gross profit.*Product segment cost of goods sold increased by $17.4 million, or 29.9%, from $58.2 million to $75.6 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023, primarily due to increased volume, increased costs to manufacture product (principally material and labor), and increases from the amortization of inventory step up adjustments related to 2024 acquisitions. Product segment gross profit as a percentage of net sales decreased by 260 basis points to 41.1% for the three months ended June 30, 2024 from 43.7% for the three months ended June 30, 2023, mainly driven by increases from the amortization of inventory step up adjustments related to the recent acquisitions and inflation, partially offset by favorable pricing and product mix. Distribution segment cost of goods sold decreased by $0.1 million, or 0.3%, from $19.8 million to $19.7 million for the three months ended June 30, 2024 as compared to the same period in 2023, primarily due to decreased volume. Distribution segment gross profit as a percentage of net sales decreased by 20 basis points to 22.9% for the three months ended June 30, 2024 from 23.1% for the three months ended June 30, 2023, mainly driven by unfavorable mix. Reconciling items consisting primarily of intercompany eliminations were $9.7 million and $7.7 million for the three months ended June 30, 2024 and 2023, respectively.

Previous wording

*Selling, general and administrative.*Selling, general and administrative increased by $5.5 million, or 15.5%, for the three months ended March 31, 2024 as compared to the same period in 2023, primarily due to recent acquisitions, employee compensation and related benefits, and professional services.

Current wording

*Selling, general and administrative.*Selling, general and administrative increased by $4.5 million, or 13.3%, for the three months ended June 30, 2024 as compared to the same period in 2023, primarily due to recent acquisitions, employee compensation and related benefits, and professional services.

Previous wording

*Other (expense) income, net.*Other expense, net was $1.4 million for the three months ended March 31, 2024 as compared to $0.4 million for the three months ended March 31, 2023, primarily due to changes in foreign currency exchange rates.

Current wording

*Other (expense) income, net.*Other expense, net was $0.3 million for the three months ended June 30, 2024 as compared to Other income, net of $0.3 million for the three months ended June 30, 2023, primarily due to changes in foreign currency exchange rates.

Previous wording

Provision for income taxes. Provision for income taxes was $2.0 million for the three months ended March 31, 2024 compared to $2.9 million for the three months ended March 31, 2023. The effective tax rate was 22.1% for the three months ended March 31, 2024 and was lower than the statutory rate primarily due to the vesting of stock compensation, partially offset by non-deductible executive compensation. The effective tax rate was 29.6% for the three months ended March 31, 2023 and higher than the statutory rate primarily due to state taxes and non-deductible executive compensation, partially offset by research and development tax credits.

Current wording

*Provision for income taxes.*Provision for income taxes was $5.0 million for the three months ended June 30, 2024 compared to $4.2 million for the three months ended June 30, 2023. The effective tax rate was 28.7% for the three months ended June 30, 2024 and was higher than the statutory rate primarily due to non-deductible executive compensation. The effective tax rate was 27.8% for the three months ended June 30, 2023 and higher than the statutory rate primarily due to state taxes and non-deductible executive compensation, partially offset by research and development tax credits.

Previous wording

*Net sales.*Product segment net sales increased by $25.6 million, or 27.5%, from $93.2 million to $118.8 million for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023, primarily due to increases of $10.8 million from higher domestic demand for armor products, $8.6 million as a result of recent acquisitions and $3.8 million from higher demand for explosive ordnance disposal products. Distribution segment net sales increased by $3.5 million, or 14.3%, from $24.7 million to $28.2 million for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023, primarily due to increased agency demand for hard goods. Reconciling items consisting primarily of intercompany eliminations were $9.1 million and $6.1 million for the three months ended March 31, 2024 and 2023, respectively.

Current wording

*Net sales.*Product segment net sales increased by $50.6 million, or 25.8%, from $196.6 million to $247.2 million for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023, primarily due to increases of $25.8 million as a result of recent acquisitions, $14.8 million from higher North American demand for armor products and $7.8 million from higher demand for duty gear products. Distribution segment net sales increased by $3.4 million, or 6.7%, from $50.4 million to $53.8 million for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023, primarily due to increased agency demand for hard goods. Reconciling items consisting primarily of intercompany eliminations were $18.8 million and $14.1 million for the six months ended June 30, 2024 and 2023, respectively.

Previous wording

*Restructuring and transaction costs.*Restructuring and transaction costs were $3.1 million for the three months ended March 31, 2024 primarily due to costs incurred associated with the ICOR and Alpha Safety acquisitions.

Current wording

*Restructuring and transaction costs.*Restructuring and transaction costs increased by $2.4 million, or 348.2%, for the six months ended June 30, 2024 primarily due to costs incurred associated with the ICOR and Alpha Safety acquisitions.

Previous wording

*Related party expense.*Related party expense, which ordinarily consists of rent expense related todistribution warehouses and retail stores that we lease from related parties, increased by $1.7 million for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023 primarily due to a$1.8 million transaction fee paid to Kanders & Company, Inc., a company controlled by our Chief Executive Officer, in connection with the acquisition of Alpha Safety.

Current wording

*Related party expense.*Related party expense, which ordinarily consists of rent expense related todistribution warehouses and retail stores that we lease from related parties, increased by $1.7 million for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023 primarily due to a$1.8 million transaction fee paid to Kanders & Company, Inc., a company controlled by our Chief Executive Officer, in connection with the acquisition of Alpha Safety.

Previous wording

Net income decreased by $0.1 million for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023, primarily as a result of an increase in selling, general and administrative expenses due to acquisitions and transaction expenses, partially offset by an increase in gross profit and recent acquisitions.

Current wording

Adjusted EBITDA increased by $5.5 million for the three months ended June 30, 2024 as compared to 2023, primarily due to an increase in gross profit and recent acquisitions, partially offset by an increase in selling, general and administrative expenses. Adjusted EBITDA increased by $11.4 million for the six months ended June 30, 2024 as compared to 2023, primarily due to an increase in gross profit and recent acquisitions, partially offset by an increase in selling, general and administrative expenses.

Previous wording

For the three months ended March 31, 2024, net cash provided from operating activities totaled $2.1 million and as of March 31, 2024, cash and cash equivalents totaled $87.1 million. We believe that our cash flows from operations and cash on hand, and available borrowing capacity under our existing credit facilities (as described below) will be adequate to meet our liquidity requirements for at least the 12 months following the date of this Quarterly Report on Form 10-Q. Our future capital requirements will depend on several factors, including future acquisitions and investments in our manufacturing facilities and equipment. We could be required, or could elect, to seek additional funding through public or private equity or debt financings; however, additional funds may not be available on terms acceptable to us, if at all.

Current wording

For the six months ended June 30, 2024, net cash provided from operating activities totaled $13.3 million and as of June 30, 2024, cash and cash equivalents totaled $105.9 million. We believe that our cash flows from operations and cash on hand, and available borrowing capacity under our existing credit facilities (as described below) will be adequate to meet our liquidity requirements for at least the 12 months following the date of this Quarterly Report on Form 10-Q. Our future capital requirements will depend on several factors, including future acquisitions and investments in our manufacturing facilities and equipment. We could be required, or could elect, to seek additional funding through public or private equity or debt financings; however, additional funds may not be available on terms acceptable to us, if at all.

Previous wording

As of March 31, 2024 and December 31, 2023, we had $215.8 million and $140.1 million in outstanding debt, net of debt discounts and debt issuance costs, respectively, primarily related to the term loan facilities.

Current wording

As of June 30, 2024 and December 31, 2023, we had $211.4 million and $140.1 million in outstanding debt, net of debt discounts and debt issuance costs, respectively, primarily related to the term loan facilities.

Previous wording

On August 20, 2021 (the “Closing Date”), the Company refinanced its existing credit facilities and entered into a new credit agreement whereby Safariland, LLC, as borrower (the “Borrower”), the Company and certain domestic subsidiaries of the Borrower, as guarantors (the “Guarantors”), closed on and received funding under a credit agreement (initially entered into on July 23, 2021), pursuant to a First Amendment to Credit Agreement (collectively, the “2021 Credit Agreement”) with PNC Bank, National Association (“PNC”), as administrative agent, and the several lenders from time to time party thereto (together with PNC, the “Lenders”) pursuant to which the Borrower (i) borrowed $200.0 million under a term loan (the “Term Loan”), and (ii) may borrow up to $100.0 million under a revolving credit facility (including up to $15.0 million for letters of credit and up to $10.0 million for swing line loans) (the “Revolving Loan”). Each of the Term Loan and the Revolving Loan mature on July 23, 2026. Commencing December 31, 2021, the New Term Loan requires scheduled quarterly payments in amounts equal to 1.25% per quarter of the original aggregate principal amount of the Term Loan, with the balance due at maturity. The 2021 Credit Agreement is guaranteed, jointly and severally, by the Guarantors and, subject to certain exceptions, secured by a first-priority security interest in substantially all of the assets of the Borrower and the Guarantors pursuant to a Security and Pledge Agreement and a Guaranty and Suretyship Agreement, each dated as of the Closing Date.

Current wording

On August 20, 2021 (the “Closing Date”), the Company refinanced its existing credit facilities and entered into a new credit agreement whereby Safariland, LLC, as borrower (the “Borrower”), the Company and certain domestic subsidiaries of the Borrower, as guarantors (the “Guarantors”), closed on and received funding under a credit agreement (initially entered into on July 23, 2021), pursuant to a First Amendment to Credit Agreement (collectively, the “2021 Credit Agreement”) with PNC Bank, National Association (“PNC”), as administrative agent, and the several lenders from time to time party thereto (together with PNC, the “Lenders”) pursuant to which the Borrower (i) borrowed $200.0 million under a term loan (the “Term Loan”), and (ii) may borrow up to $100.0 million under a revolving credit facility (including up to $15.0 million for letters of credit and up to $10.0 million for swing line loans) (the “Revolving Loan”). Each of the Term Loan and the Revolving Loan mature on July 23, 2026. Commencing

Previous wording

On October 14, 2021, Med-Eng Holdings ULC and Pacific Safety Products Inc., the Company’s Canadian subsidiaries, as borrowers (the “Canadian Borrowers”), and Safariland, LLC, as guarantor (the “Canadian Guarantor”), closed on a line of credit pursuant to a Loan Agreement (the “Canadian Loan Agreement”) and a Revolving Line of Credit Note (the “Note”) with PNC Bank Canada Branch (“PNC Canada”), as lender pursuant to which the Canadian Borrowers may borrow up to CDN$10.0 million under a revolving line of credit (including up to $3.0 million for letters of credit) (the “Revolving Canadian Loan”). The Revolving Canadian Loan matures on July 23, 2026. The Canadian Loan Agreement is guaranteed by the Canadian Guarantor pursuant to a Guaranty and Suretyship Agreement.

Current wording

Canada Branch (“PNC Canada”), as lender pursuant to which the Canadian Borrowers may borrow up to CDN$10.0 million under a revolving line of credit (including up to $3.0 million for letters of credit) (the “Revolving Canadian Loan”). The Revolving Canadian Loan matures on July 23, 2026. The Canadian Loan Agreement is guaranteed by the Canadian Guarantor pursuant to a Guaranty and Suretyship Agreement.

Previous wording

margin for these borrowings will range from 0.50% to 1.50% per annum, in the case of base rate borrowings and Canadian Prime Rate borrowings, and 1.50% to 2.50% per annum, in the case of SOFR borrowings and CDOR borrowings. The Canadian Loan Agreement also requires the Canadian Borrowers to pay (i) an unused line fee on the unused portion of the loan commitments in an amount ranging between 0.175% and 0.25% per annum, based upon the level of the Company’s consolidated total net leverage ratio, and (ii) an upfront fee equal to 0.25% of the principal amount of the Note.

Current wording

The Canadian Borrowers may elect to have borrowings either in United States dollars or Canadian dollars under the Canadian Loan Agreement, which will bear interest at a base rate or SOFR, in each case, plus an applicable margin, in the case of borrowings in United States dollars, or at a Canadian Prime Rate (as announced from time to time by PNC Canada) or a Canadian deposit offered rate (“CDOR”) as determined from time to time by PNC Canada in accordance with the Canadian Loan Agreement. The applicable margin for these borrowings will range from 0.50% to 1.50% per annum, in the case of base rate borrowings and Canadian Prime Rate borrowings, and 1.50% to 2.50% per annum, in the case of SOFR borrowings and CDOR borrowings. The Canadian Loan Agreement also requires the Canadian Borrowers to pay (i) an unused line fee on the unused portion of the loan commitments in an amount ranging between 0.175% and 0.25% per annum, based upon the level of the Company’s consolidated total net leverage ratio, and (ii) an upfront fee equal to 0.25% of the principal amount of the Note.

Previous wording

During the three months ended March 31, 2024, net cash provided by operating activities of $2.1 million resulted primarily from net income of $6.9 million, a $3.9 million add back to net income for depreciation and amortization, a $2.1 million add back to net income for stock-based compensation and a net deduction to net income of $15.2 million for changes in operating assets and liabilities. Changes in operating assets and liabilities were primarily driven by a decrease in accounts payable and other liabilities of $21.7 million, a decrease in accounts receivable of $2.7 million and a decrease in prepaid expenses and other assets of $2.0 million.

Current wording

During the six months ended June 30, 2024, net cash provided by operating activities of $13.3 million resulted primarily from net income of $19.5 million, a $8.6 million add back to net income for depreciation and amortization, a $4.2 million add back to net income for stock-based compensation and a net deduction to net income of $22.3 million for changes in operating assets and

Previous wording

During the three months ended March 31, 2023, net cash provided by operating activities of $12.7 million resulted primarily from net income of $7.0 million, a $2.7 million add back to net income for stock-based compensation, a $4.3 million add back to net income for depreciation and amortization anda net deduction to net income of $1.2 million for changes in operating assets and liabilities. Changes in operating assets and liabilities were primarily driven by a decrease in accounts receivable of $9.1 million, an increase in inventories of $5.8 million and a decrease in accounts payable and other liabilities of $3.9 million.

Current wording

During the six months ended June 30, 2023, net cash provided by operating activities of $28.3 million resulted primarily from net income of $18.0 million, a $8.2 million add back to net income for depreciation and amortization, a $4.9 million add back to net income for stock-based compensation and changes in operating assets and liabilities of $2.0 million. Changes in operating assets and liabilities were primarily driven by a decrease in accounts receivable of $7.6 million, an increase in inventories of $12.0 million and a decrease in prepaid expenses and other assets of $3.4 million.

Previous wording

During the three months ended March 31, 2024, we used $142.6 million of cash in investing activities, primarily consisting of $141.3 million for the acquisition of ICOR and Alpha Safety.

Current wording

During the six months ended June 30, 2024, we used $145.1 million of cash in investing activities, primarily consisting of $141.8 million for the acquisition of ICOR and Alpha Safety.

Previous wording

During the three months ended March 31, 2023, we used $0.6 million of cash in investing activities, primarily consisting of $0.8 million for purchases of property and equipment.

Current wording

During the six months ended June 30, 2023, we used $2.2 million of cash in investing activities, primarily consisting of $2.4 million for purchases of property and equipment.

Previous wording

During the three months ended March 31, 2024, net cash provided by financing activities of $139.8 million resulted primarily from proceeds from term loans of $80.0 million and proceeds from the secondary offering of $73.5 million, partially offset by taxes paid in connection with employee stock transactions of $5.3 million and dividends distributed of $3.3 million.

Current wording

During the six months ended June 30, 2024, net cash provided by financing activities of $149.9 million resulted primarily from proceeds from term loans of $80.0 million and proceeds from the secondary offering, including option exercise, of $91.8 million, partially offset byprincipal payments on term loans of $6.1 million, taxes paid in connection with employee stock transactions of $5.3 million and dividends distributed of $6.8 million.

Previous wording

During the three months ended March 31, 2023, we used $9.3 million of cash in financing activities, primarily consisting of principal payments on term loans of $2.5 million, taxes paid in connection with employee stock transactions of $2.7 million and dividends distributed of $3.0 million.

Current wording

During the six months ended June 30, 2023, we used $15.9 million of cash in financing activities, primarily consisting of principal payments on term loans of $5.0 million, taxes paid in connection with employee stock transactions of $2.7 million and dividends distributed of $6.0 million.

Previous wording

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As such, we are eligible for exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies, including, but not limited to, presenting only two years of audited financial statements, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation, and an exemption from the requirements to obtain a non-binding advisory vote on executive compensation or golden parachute arrangements.

Current wording

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As such, we are eligible for exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation, and an exemption from the requirements to obtain a non-binding advisory vote on executive compensation or golden parachute arrangements.