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Pool Corporation Reports Year End and Fourth Quarter 2022 Results; Provides 2023 Earnings Guidance
Источник: Nasdaq GlobeNewswire / 16 фев 2023 06:00:01 America/Chicago
Highlights include:
- Record annual net sales of $6.2 billion, up 17% from 2021
- Operating income of $1.0 billion, up 23% from 2021 with a 90 bps improvement in operating margin
- Record 2022 diluted EPS of $18.70, an increase of 17% over 2021 or an increase of 21% to $18.43 without tax benefits in both periods
- 2023 diluted EPS guidance range of $16.03 - $17.03, including an estimated $0.03 tax benefit
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COVINGTON, La., Feb. 16, 2023 (GLOBE NEWSWIRE) -- Pool Corporation (Nasdaq/GSM:POOL) today announced full year and fourth quarter 2022 results.
“I am proud to present another year of record results with annual sales growth of 17% to $6.2 billion, nearly double our 2019 sales. The relentless focus of our highly talented team on capacity creation and their dedication to serving our customers drove our operating income for the full year up 23% to a record $1.0 billion on top of 79% growth in 2021. We leveraged our strong capital position and operating capabilities to invest in inventory ahead of challenging supply chain and inflationary conditions to serve our customers and bring new products to the market in a dynamic environment. Our results speak to the strength of our team who work collaboratively with our customers and suppliers to make POOLCORP such an incredible business. We celebrate our successes over the past year and remain well-positioned to execute our long-term growth strategy and grow our industry-leading position,” commented Peter D. Arvan, president and CEO.
Year ended December 31, 2022 compared to the year ended December 31, 2021
Net sales increased 17% to a record $6.2 billion for the year ended December 31, 2022 compared to $5.3 billion in 2021. Base business sales increased 12%. Net sales benefited approximately 10% from inflationary product cost increases and were aided by solid consumer demand for outdoor living products throughout the year. Net sales were also unfavorably impacted 1% from currency exchange rate fluctuations, 1% from softness in our European markets and generally less favorable weather conditions on a year-over-year comparison.
Gross profit reached a record $1.9 billion for the year ended December 31, 2022, a 20% increase over gross profit of $1.6 billion in 2021. Gross margin improved 80 basis points to 31.3% in 2022 compared to 30.5% in 2021, reflecting benefits from acquisitions, increased pricing and supply chain management initiatives to address inflation. These increases were partially offset by $13.0 million recorded within Cost of sales in the fourth quarter of 2022 related to increased duties and tariffs for certain imported chemicals. Given supply chain improvements through the latter half of 2022, we do not expect to import a significant portion of this product in 2023.
Selling and administrative expenses (operating expenses) increased 16%, or $123.3 million, to $907.6 million in 2022, including a 1% benefit from currency exchange rate fluctuations. As a percentage of net sales, operating expenses declined 10 basis points to 14.7% in 2022 compared to 14.8% in 2021. Our operating expenses have generally increased in line with sales growth to support our business, including recent acquisitions.
Operating income for the year increased 23% to $1.0 billion, up from $832.8 million in 2021. Operating margin increased 90 basis points to 16.6% in 2022 compared to 15.7% in 2021.
Interest and other non-operating expenses, net for the year increased $32.3 million compared to 2021, primarily reflecting higher average debt levels and higher average interest rates.
We recorded a $10.8 million, or $0.27 per diluted share, tax benefit from Accounting Standards Update (ASU) 2016-09, Improvements to Employee Share-Based Payment Accounting, for the year ended December 31, 2022 compared to a tax benefit of $30.0 million, or $0.74 per diluted share, realized in 2021.
Net income increased 15% to a record $748.5 million in 2022 compared to $650.6 million in 2021. Earnings per share increased 17% to a record $18.70 per diluted share compared to $15.97 per diluted share in 2021. Without the impact from ASU 2016-09 in both periods, earnings per diluted share increased 21% to $18.43 per diluted share compared to $15.23 per diluted share in 2021.
Adjusted EBITDA increased 23% to $1.1 billion in 2022 compared to $874.8 million in 2021 and was 17.5% of net sales in 2022 compared to 16.5% of net sales in 2021.
Balance Sheet and Liquidity
On the balance sheet at December 31, 2022, total net receivables, including pledged receivables, decreased 7% compared to 2021. Inventory levels increased 19% to $1.6 billion, compared to $1.3 billion at December 31, 2021, reflecting increased purchasing to stock new locations and ensure product availability across our sales center network and impacts from inflation. Total debt outstanding increased $203.5 million to $1.4 billion as we have utilized debt proceeds over the past year to supplement cash provided by operating activities and fund a portion of $471.2 million in share repurchases, $150.6 million in dividends paid to our shareholders and $342.4 million of investments in working capital.
Net cash provided by operations was $484.9 million in 2022 compared to $313.5 million in 2021, an increase of $171.4 million, primarily driven by an increase in net income and changes in working capital. Our operating cash flows were also impacted by federal tax payments of $79.5 million in 2022, which were allowed to be deferred and included in accrued expenses and other liabilities at December 31, 2021.
Fourth quarter ended December 31, 2022 compared to the fourth quarter ended December 31, 2021
Net sales increased 6% to $1.1 billion in the fourth quarter of 2022 compared to $1.0 billion in the fourth quarter of 2021. Base business net sales increased 1%. Net sales benefited approximately 8% from inflationary product cost increases versus 10% last year. Weather conditions, particularly in the month of December when an Arctic blast moved across the U.S., were much less favorable compared to the fourth quarter of 2021. Weather conditions were especially impactful in Canada and the Northeast where sales were down in the mid-teens. Net sales were also unfavorably impacted 1% from currency exchange rate fluctuations and 1% from softness in our European markets.
Gross margin decreased 230 basis points to 28.8% in the fourth quarter of 2022 compared to the fourth quarter of 2021 when gross margin increased 260 basis points to 31.1% (over the same period in 2020). The decline in our gross margin reflects lower inflationary benefits from vendor price increases compared to last year, lower incentives earned under our volume-based vendor programs and an impact of 120 basis points from the $13.0 million increase in duties and tariffs discussed above.
Operating expenses increased 7% to $208.4 million in the fourth quarter of 2022 compared to $194.5 million in the fourth quarter of 2021, including a 1% benefit from currency exchange rate fluctuations. As a percentage of net sales, operating expenses were 19.0% in the fourth quarter of 2022 compared to 18.8% in the same period of 2021.
Operating income in the fourth quarter of 2022 decreased 16% to $107.3 million compared to $127.9 million in the same period of 2021 as gross margin declined, which is typical in our fourth quarter, and we lapped higher inflationary benefits from the fourth quarter of 2021. Operating margin decreased 250 basis points in the fourth quarter.
Interest and other non-operating expenses, net for the fourth quarter of 2022 increased $13.7 million compared to the fourth quarter of 2021, primarily reflecting higher average debt levels and higher average interest rates.
We recorded a $1.2 million, or $0.03 per diluted share, tax benefit from ASU 2016-09 in the fourth quarter of 2022 compared to a tax benefit of $14.2 million, or $0.35 per diluted share, realized in the fourth quarter of 2021. Net income decreased 33% in the fourth quarter of 2022 to $71.9 million compared to $107.6 million in 2021. Earnings per diluted share decreased 31% to $1.82 in the fourth quarter of 2022 compared to $2.65 for the same period in 2021. Without the impact from ASU 2016-09 in both periods, earnings per diluted share decreased 22% to $1.79 compared to $2.30 in 2021.
2023 Outlook
“Thinking about the year ahead, we believe that increasing demand for non-discretionary maintenance products, expansion of the installed base of pools and continued renovation activity, combined with our extensive sales center network, will enable us to deliver solid results even if new pool construction levels are challenged against the higher comparison we saw over the last two years. Consumer preferences for smart pool products and our expanded ability to efficiently serve the DIY market will be a focus as we expect inflation to moderate in 2023. We are well-positioned and confident in our ability to continue our long-term trends of consistent growth and exceptional shareholder return despite the current uncertainty presented by short-term market concerns. We expect earnings for 2023 will be in the range of $16.03 to $17.03 per diluted share, including an estimated $0.03 favorable impact from ASU 2016-09,” added Arvan.
(Unaudited) 2023 Guidance Range 2022 Floor %
ChangeCeiling %
ChangeDiluted EPS $ 18.70 $ 16.03 (14)% $ 17.03 (9)% Less: ASU 2016-09 tax benefit 0.27 0.03 0.03 Adjusted Diluted EPS $ 18.43 $ 16.00 (13)% $ 17.00 (8)% We estimate that we have approximately $1.1 million in unrealized excess tax benefits related to stock options that will expire and restricted stock awards that will vest in the first quarter of 2023, adding $0.03 in diluted earnings per share in that period. We have included the estimated first quarter benefit in our annual earnings guidance; however, additional tax benefits could be recognized related to stock option exercises in 2023 from grants that expire in years after 2023, for which we have not included any expected benefits.
Non-GAAP Financial Measures
This press release contains certain non-GAAP measures (adjusted EBITDA, adjusted diluted EPS and projected adjusted diluted EPS). See the addendum to this release for definitions of our non-GAAP measures and reconciliations of our non-GAAP measures to GAAP measures.
About Pool Corporation
POOLCORP is the world’s largest wholesale distributor of swimming pool and related backyard products. As of December 31, 2022, POOLCORP operates 420 sales centers in North America, Europe and Australia, through which it distributes more than 200,000 national brand and private label products to roughly 125,000 wholesale customers. For more information, please visit www.poolcorp.com.
Forward-Looking Statements
This news release includes “forward-looking” statements that involve risks and uncertainties that are generally identifiable through the use of words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “project,” “should,” “will,” “may,” and similar expressions and include projections of earnings. The forward-looking statements in this release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements speak only as of the date of this release, and we undertake no obligation to update or revise such statements to reflect new circumstances or unanticipated events as they occur. Actual results may differ materially due to a variety of factors, including the sensitivity of our business to weather conditions; changes in economic conditions, consumer discretionary spending, the housing market, inflation or interest rates; our ability to maintain favorable relationships with suppliers and manufacturers; the extent to which home-centric trends will moderate or reverse; competition from other leisure product alternatives or mass merchants; our ability to continue to execute our growth strategies; changes in the regulatory environment; new or additional taxes, duties or tariffs; excess tax benefits or deficiencies recognized under ASU 2016-09 and other risks detailed in POOLCORP’s 2021 Annual Report on Form 10-K, 2022 Quarterly Reports on Form 10-Q and other reports and filings filed with the Securities and Exchange Commission (SEC) as updated by POOLCORP’s subsequent filings with the SEC.
Curtis J. Scheel
Director of Investor Relations
985.801.5341
curtis.scheel@poolcorp.comPOOL CORPORATION
Consolidated Statements of Income
(Unaudited)
(In thousands, except per share data)Three Months Ended Year Ended December 31, December 31, 2022 2021 2022 2021 (1) Net sales $ 1,095,920 $ 1,035,557 $ 6,179,727 $ 5,295,584 Cost of sales 780,189 713,181 4,246,315 3,678,492 Gross profit 315,731 322,376 1,933,412 1,617,092 Percent 28.8 % 31.1 % 31.3 % 30.5 % Selling and administrative expenses (2) 208,436 194,485 907,629 784,308 Operating income 107,295 127,891 1,025,783 832,784 Percent 9.8 % 12.3 % 16.6 % 15.7 % Interest and other non-operating expenses, net 15,482 1,777 40,911 8,639 Income before income taxes and equity in earnings 91,813 126,114 984,872 824,145 Provision for income taxes 20,076 18,572 236,763 173,812 Equity in earnings of unconsolidated investments, net 126 67 353 291 Net income $ 71,863 $ 107,609 $ 748,462 $ 650,624 Earnings per share attributable to common stockholders: (3) Basic $ 1.84 $ 2.68 $ 18.89 $ 16.21 Diluted $ 1.82 $ 2.65 $ 18.70 $ 15.97 Weighted average common shares outstanding: Basic 38,843 39,877 39,409 39,876 Diluted 39,168 40,418 39,806 40,480 Cash dividends declared per common share $ 1.00 $ 0.80 $ 3.80 $ 2.98 (1) Derived from audited financial statements. (2) Selling and administrative expenses include a note receivable recovery, which was $1.1 million for the three months ended December 31, 2021 and $2.5 million for the year ended December 31, 2021. (3) Earnings per share under the two-class method is calculated using net income attributable to common stockholders (net income reduced by earnings allocated to participating securities), which was $71.5 million and $106.9 million for the three months ended December 31, 2022 and December 31, 2021, respectively, and $744.3 million and $646.3 million for the years ended December 31, 2022 and December 31, 2021, respectively. Participating securities excluded from weighted average common shares outstanding were 216 thousand and 260 thousand for the three months ended December 31, 2022 and December 31, 2021, respectively, and 221 thousand and 268 thousand for the years ended December 31, 2022 and December 31, 2021, respectively.
POOL CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)December 31, December 31, Change 2022 2021 (1) $ % Assets Current assets: Cash and cash equivalents $ 45,591 $ 24,321 $ 21,270 87 % Receivables, net (2) 128,247 155,259 (27,012 ) (17 ) Receivables pledged under receivables facility 223,201 221,312 1,889 1 Product inventories, net (3) 1,591,060 1,339,100 251,960 19 Prepaid expenses and other current assets 30,892 29,093 1,799 6 Total current assets 2,018,991 1,769,085 249,906 14 Property and equipment, net 193,709 179,008 14,701 8 Goodwill 691,993 688,364 3,629 1 Other intangible assets, net 305,450 312,814 (7,364 ) (2 ) Equity interest investments 1,248 1,231 17 1 Operating lease assets 269,608 241,662 27,946 12 Other assets 84,438 37,967 46,471 122 Total assets $ 3,565,437 $ 3,230,131 $ 335,306 10 % Liabilities and stockholders’ equity Current liabilities: Accounts payable $ 406,667 $ 398,697 $ 7,970 2 % Accrued expenses and other current liabilities 168,521 264,877 (96,356 ) (36 ) Short-term borrowings and current portion of long-term debt 25,042 11,772 13,270 113 Current operating lease liabilities 75,484 69,070 6,414 9 Total current liabilities 675,714 744,416 (68,702 ) (9 ) Deferred income taxes 58,759 35,840 22,919 64 Long-term debt, net 1,361,761 1,171,578 190,183 16 Other long-term liabilities 35,471 31,545 3,926 12 Non-current operating lease liabilities 198,538 175,359 23,179 13 Total liabilities 2,330,243 2,158,738 171,505 8 Total stockholders’ equity 1,235,194 1,071,393 163,801 15 Total liabilities and stockholders’ equity $ 3,565,437 $ 3,230,131 $ 335,306 10 % (1) Derived from audited financial statements.
(2) The allowance for doubtful accounts was $9.5 million at December 31, 2022 and $5.9 million at December 31, 2021.
(3) The inventory reserve was $21.2 million at December 31, 2022 and $15.2 million at December 31, 2021.
POOL CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)Year Ended December 31, 2022 2021 (1) Change Operating activities Net income $ 748,462 $ 650,624 $ 97,838 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 30,381 28,287 2,094 Amortization 8,644 1,739 6,905 Share-based compensation 14,879 15,187 (308 ) Equity in earnings of unconsolidated investments, net (353 ) (291 ) (62 ) Net losses on foreign currency transactions 48 325 (277 ) Goodwill impairment 605 — 605 Other 24,563 9,962 14,601 Changes in operating assets and liabilities, net of effects of acquisitions: Receivables 19,685 (79,940 ) 99,625 Product inventories (263,567 ) (525,207 ) 261,640 Prepaid expenses and other assets (52,815 ) (51,199 ) (1,616 ) Accounts payable 7,597 114,893 (107,296 ) Accrued expenses and other liabilities (53,275 ) 149,110 (202,385 ) Net cash provided by operating activities 484,854 313,490 171,364 Investing activities Acquisition of businesses, net of cash acquired (9,264 ) (811,956 ) 802,692 Purchase of property and equipment, net of sale proceeds (43,619 ) (37,658 ) (5,961 ) Other investments, net 2,013 — 2,013 Net cash used in investing activities (50,870 ) (849,614 ) 798,744 Financing activities Proceeds from revolving line of credit 1,917,173 1,438,408 478,765 Payments on revolving line of credit (1,970,388 ) (974,506 ) (995,882 ) Proceeds from term loan under credit facility 250,000 250,000 — Proceeds from asset-backed financing 220,000 495,000 (275,000 ) Payments on asset-backed financing (205,500 ) (430,000 ) 224,500 Payments on term facility (9,250 ) (9,250 ) — Proceeds from short-term borrowings and current portion of long-term debt 28,445 9,279 19,166 Payments on short-term borrowings and current portion of long-term debt (27,675 ) (9,377 ) (18,298 ) Payments of deferred acquisition consideration (1,374 ) (362 ) (1,012 ) Payments of deferred financing costs (170 ) (2,638 ) 2,468 Proceeds from stock issued under share-based compensation plans 8,934 17,197 (8,263 ) Payments of cash dividends (150,624 ) (119,581 ) (31,043 ) Purchases of treasury stock (471,229 ) (138,039 ) (333,190 ) Net cash (used in) provided by financing activities (411,658 ) 526,131 (937,789 ) Effect of exchange rate changes on cash and cash equivalents (1,056 ) 186 (1,242 ) Change in cash and cash equivalents 21,270 (9,807 ) 31,077 Cash and cash equivalents at beginning of period 24,321 34,128 (9,807 ) Cash and cash equivalents at end of period $ 45,591 $ 24,321 $ 21,270 (1) Derived from audited financial statements.
ADDENDUM
Base Business
The following tables break out our consolidated results into the base business component and the excluded components (sales centers excluded from base business):
(Unaudited) Base Business Excluded Total (in thousands) Three Months Ended Three Months Ended Three Months Ended December 31, December 31, December 31, 2022 2021 2022 2021 2022 2021 Net sales $ 1,045,186 $ 1,031,230 $ 50,734 $ 4,327 $ 1,095,920 $ 1,035,557 Gross profit 292,747 320,785 22,984 1,591 315,731 322,376 Gross margin 28.0 % 31.1 % 45.3 % 36.8 % 28.8 % 31.1 % Operating expenses 189,616 191,901 18,820 2,584 208,436 194,485 Expenses as a % of net sales 18.1 % 18.6 % 37.1 % 59.7 % 19.0 % 18.8 % Operating income (loss) 103,131 128,884 4,164 (993 ) 107,295 127,891 Operating margin 9.9 % 12.5 % 8.2 % (22.9 )% 9.8 % 12.3 % (Unaudited) Base Business Excluded Total (in thousands) Year Ended Year Ended Year Ended December 31, December 31, December 31, 2022 2021 2022 2021 2022 2021 Net sales $ 5,889,497 $ 5,281,773 $ 290,230 $ 13,811 $ 6,179,727 $ 5,295,584 Gross profit 1,804,744 1,613,252 128,668 3,840 1,933,412 1,617,092 Gross margin 30.6 % 30.5 % 44.3 % 27.8 % 31.3 % 30.5 % Operating expenses 830,525 779,897 77,104 4,411 907,629 784,308 Expenses as a % of net sales 14.1 % 14.8 % 26.6 % 31.9 % 14.7 % 14.8 % Operating income (loss) 974,219 833,355 51,564 (571 ) 1,025,783 832,784 Operating margin 16.5 % 15.8 % 17.8 % (4.1 )% 16.6 % 15.7 % We have excluded the results of the following acquisitions from base business for the periods identified:
Acquired
Acquisition
DateNet
Sales Centers
Acquired
Periods
ExcludedTri-State Pool Distributors April 2022 1 May - December 2022 Porpoise Pool & Patio, Inc. December 2021 1 January - December 2022 and December 2021 Wingate Supply, Inc. December 2021 1 January - December 2022 and December 2021 Vak Pak Builders Supply, Inc. June 2021 1 January - August 2022 and June - August 2021 Pool Source, LLC April 2021 1 January - June 2022 and April - June 2021 TWC Distributors, Inc. December 2020 10 January - February 2022 and January - February 2021 When calculating our base business results, we exclude sales centers that are acquired, closed or opened in new markets for a period of 15 months. We also exclude consolidated sales centers when we do not expect to maintain the majority of the existing business and existing sales centers that are consolidated with acquired sales centers.
We generally allocate corporate overhead expenses to excluded sales centers on the basis of their net sales as a percentage of total net sales. After 15 months of operations, we include acquired, consolidated and new market sales centers in the base business calculation including the comparative prior year period.
The table below summarizes the changes in our sales centers during 2022.
December 31, 2021 410 Acquired location 1 New locations 10 Closed location (1 ) December 31, 2022 420 Reconciliation of Non-GAAP Financial Measures
The non-GAAP measures described below should be considered in the context of all of our other disclosures in this press release.
Adjusted EBITDA
We define Adjusted EBITDA as net income or net loss plus interest and other non-operating expenses, income taxes, depreciation, amortization, share-based compensation, goodwill and other impairments (recoveries) and equity in earnings or loss of unconsolidated investments. Other companies may calculate Adjusted EBITDA differently than we do, which may limit its usefulness as a comparative measure.
Adjusted EBITDA is not a measure of performance as determined by generally accepted accounting principles (GAAP). We believe Adjusted EBITDA should be considered in addition to, not as a substitute for, operating income or loss, net income or loss, net cash flows provided by or used in operating, investing and financing activities or other income statement or cash flow statement line items reported in accordance with GAAP.
We have included Adjusted EBITDA as a supplemental disclosure because management uses it to monitor our performance, we believe that it is widely used by our investors, industry analysts and others as a useful supplemental performance measure. We believe that Adjusted EBITDA, when viewed with our GAAP results and the accompanying reconciliations, provides an additional measure that enables management and investors to monitor factors and trends affecting our ability to service debt, pay taxes and fund capital expenditures.
The table below presents a reconciliation of net income to Adjusted EBITDA.
(Unaudited) Year Ended December 31, (in thousands) 2022 2021 Net income $ 748,462 $ 650,624 Add: Interest and other non-operating expenses (1) 40,863 8,314 Provision for income taxes 236,763 173,812 Share-based compensation 14,879 15,187 Goodwill impairment 605 — Equity in earnings of unconsolidated investments, net (353 ) (291 ) Note receivable recovery — (2,500 ) Depreciation 30,381 28,287 Amortization (2) 7,826 1,325 Adjusted EBITDA $ 1,079,426 $ 874,758 (1) Shown net of losses on foreign currency transactions of $48 for 2022 and $325 for 2021.
(2) Excludes amortization of deferred financing costs of $818 for 2022 and $414 for 2021, which is included in Interest and other non-operating expenses, net on the Consolidated Statements of Income.
Adjusted Diluted EPSWe have included adjusted diluted EPS, a non-GAAP financial measure, in this press release as a supplemental disclosure, because we believe this measure is useful to management, investors and others in assessing our year-over-year operating performance.
Adjusted diluted EPS is a key measure used by management to demonstrate the impact of tax benefits from ASU 2016-09 on our diluted EPS and to provide investors and others with additional information about our potential future operating performance to supplement GAAP measures.
We believe this measure should be considered in addition to, not as a substitute for, diluted EPS presented in accordance with GAAP, and in the context of our other disclosures in this press release. Other companies may calculate this non-GAAP financial measure differently than we do, which may limit its usefulness as a comparative measure.
The table below presents a reconciliation of diluted EPS to adjusted diluted EPS.
Three Months Ended Year Ended (Unaudited) December 31, December 31, 2022 2021 2022 2021 Diluted EPS $ 1.82 $ 2.65 $ 18.70 $ 15.97 Less: ASU 2016-09 tax benefit 0.03 0.35 0.27 0.74 Adjusted diluted EPS $ 1.79 $ 2.30 $ 18.43 $ 15.23
Adjusted 2023 Diluted EPS GuidancePlease see page 3 for a reconciliation of projected 2023 diluted EPS to adjusted projected 2023 diluted EPS. We have included adjusted projected 2023 diluted EPS, which is a non-GAAP financial measure, in this press release as a supplemental disclosure to demonstrate the impact of projected tax benefits from ASU 2016-09 on our projected 2023 diluted EPS and to provide investors and others with additional information about our potential future operating performance. We believe adjusted projected 2023 diluted EPS should be considered in addition to, not as a substitute for, projected 2023 diluted EPS presented in accordance with GAAP and in the context of our other forward-looking and cautionary statements in this press release.
