CARLISLE COMPANIES INC (CSL) FY 2023 MD&A

Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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

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

Executive Overview

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

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

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

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

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Summary Financial Results

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

Consolidated Results of Operations

Revenues

2023 Compared with 2022

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

2022 Compared with 2021

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

Revenues by Geographic Area

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Gross Margin

2023 Compared with 2022

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

2022 Compared with 2021

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

Selling and Administrative Expenses

2023 Compared with 2022

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

2022 Compared with 2021

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

Research and Development Expenses

2023 Compared with 2022

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

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2022 Compared with 2021

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

Other Operating (Income) Expense, net

2023 Compared with 2022

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

2022 Compared with 2021

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

Operating Income

2023 Compared with 2022

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

2022 Compared with 2021

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

Interest Expense, net

2023 Compared with 2022

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

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2022 Compared with 2021

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

Interest Income

2023 Compared with 2022

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

2022 Compared with 2021

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

Other Non-operating (Income) Expense, net

2023 Compared with 2022

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

2022 Compared with 2021

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

Income Taxes

2023 Compared with 2022

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

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

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2022 Compared with 2021

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

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

Income from Discontinued Operations

2023 Compared with 2022

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

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

2022 Compared with 2021

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

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

Segment Results of Operations

Carlisle Construction Materials (“CCM”)

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

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

CCM’s revenue decreased in 2023 primarily reflecting lower sales in non-residential end market of $597.8 million from project delays and uncertainty caused by higher interest rates, and prolonged distributor destocking during the

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first part of the year. CCM’s operating margin and adjusted EBITDA margin decrease in 2023 primarily reflected higher per unit cost as a result of lower volumes.

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

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

Carlisle Weatherproofing Technologies ("CWT")

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

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

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

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

CWT’s revenue increased in 2022 primarily reflecting contributions from the Henry acquisition of $444.1 million and organic revenue growth of $135.0 million. CWT’s operating margin increase in 2022 primarily reflected favorable price to raw material inflation. Operating margin also included definite-lived intangible asset impairments of $18.6

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million and plant, property and equipment impairments of $6.2 million in 2022 and transaction related expenses of $24.4 million from the acquisition of Henry in 2021. CWT’s adjusted EBITDA margin increase in 2022 primarily reflected favorable price to raw material inflation.

Liquidity and Capital Resources

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

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

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

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

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

Sources and Uses of Cash and Cash Equivalents

Operating Activities

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

We generated operating cash flows totaling $1,000.9 million for 2022 (including working capital uses of $222.0 million), compared with $421.7 million for 2021 (including working capital uses of $275.2 million). Higher operating

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cash flows of $579.2 million in 2022 primarily reflected higher net income of $502.3 million reflecting improved operating results, and a reduction in working capital uses of $53.2 million related to collection of accounts receivable of $181.0 million reflecting increased revenues, partially offset by a reduction in accounts payable of $145.9 million reflecting reduced purchases to manage inventory balances as we return to normal seasonal buying patterns.

Investing Activities

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

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

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

Financing Activities

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

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

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

Share Repurchases

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

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

Debt Instruments

Senior Notes

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

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

Revolving Credit Facility

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

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Debt Covenants

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

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

Critical Accounting Estimates

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

Business Combinations

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

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

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

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

Subsequent Measurement of Goodwill

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

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

Annual Impairment Test

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

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

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

Refer to Note 11 for more information regarding goodwill.

Subsequent Measurement of Indefinite-Lived Intangible Assets

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

Annual Impairment Test

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

We will continue to closely monitor actual results versus expectations as well as whether and to what extent any significant changes in current events or conditions result in corresponding changes to our expectations about future estimated revenues and discount rates. If our adjusted expectations of the revenues of this trade name does not

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materialize or if the discount rate increases (based on increases in interest rates, market rates of return or market volatility), we may be required to record intangible asset impairment charges, which may be material.

Refer to Note 11 for more information regarding intangible assets.

Revenue Recognition

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

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

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

•Determination of whether revenue is earned at a "point-in-time" or "over time": Where contracts provide for the manufacture of highly customized products with no alternative use and provide CIT or CFT the right to payment for work performed to date, including a normal margin for that effort, we have concluded those contracts require the recognition of revenue over time.

•For performance obligations satisfied over time, revenue is determined using the input method as we believe that best depicts the transfer of control to the customer, as the customer controls the inventory as it is produced. Measurement of revenue uses the key inputs of inventory in our possession and expected gross margin. We believe inventory reflects an appropriate measure of cost incurred to date, relative to total costs, to which we apply an expected gross margin to determine revenues. We utilize an estimate of expected gross margin based on historical margin patterns and management’s experience, which may vary based on the customers and end markets being evaluated. There are multiple unique customer contracts at CIT or CFT. Accordingly, the estimate of expected margin is done for each customer discretely. We review the margins for these categories as contracts, customers and product profiles change over time so that the margin expectations reflect the best available data for each category.

Income Taxes

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

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

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

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

Extended Product Warranty Reserves

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

Non-GAAP Financial Measures

EBIT, Adjusted EBIT, Adjusted EBITDA and Adjusted EBITDA Margin

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

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

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

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

Outlook

Revenues

Our expectations for segment revenues in 2024 follows:

Cash Flows

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

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

Forward-Looking Statements

This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally use words such as "expect," "foresee," "anticipate," "believe," "project," "should," "estimate," "will," "plans," "intends," "forecast," and similar expressions, and reflect our expectations concerning the future. Such statements are made based on known events and circumstances at the time of publication and, as such, are subject in the future to unforeseen risks and uncertainties. It is possible that our future performance may differ materially from current expectations expressed in these forward-looking statements, due to a variety of factors such as: increasing price and product/service competition by foreign and domestic competitors, including new entrants; technological developments and changes; the ability to continue to introduce competitive new products and services on a timely, cost-effective basis; our mix of products/services; increases in raw material costs that cannot be recovered in product pricing; domestic and foreign governmental and public policy changes including environmental and industry regulations; the ability to meet

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our goals relating to our intended reduction of greenhouse gas emissions, including our net zero commitments; threats associated with and efforts to combat terrorism; protection and validity of patent and other intellectual property rights; the identification of strategic acquisition targets and our successful completion of any transaction and integration of our strategic acquisitions; our successful completion of strategic dispositions; the cyclical nature of our businesses; the impact of information technology, cybersecurity or data security breaches at our businesses or third parties; the outcome of pending and future litigation and governmental proceedings; the emergence or continuation of widespread health emergencies such as the COVID-19 pandemic, including, for example, expectations regarding their impact on our businesses, including on customer demand, supply chains and distribution systems, production, our ability to maintain appropriate labor levels, our ability to ship products to our customers, our future results, or our full-year financial outlook; and the other factors discussed in the reports we file with or furnish to the Securities and Exchange Commission from time to time. In addition, such statements could be affected by general industry and market conditions and growth rates, the condition of the financial and credit markets and general domestic and international economic conditions, including inflation and interest rate and currency exchange rate fluctuations. Further, any conflict in the international arena, including the Russian invasion of Ukraine and war in the Middle East, may adversely affect general market conditions and our future performance. Any forward-looking statement speaks only as of the date on which that statement is made, and we undertake no duty to update any forward-looking statement to reflect events or circumstances, including unanticipated events, after the date on which that statement is made, unless otherwise required by law. New factors emerge from time to time and it is not possible for management to predict all of those factors, nor can it assess the impact of each of those factors on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement.