Market Newsdesk

July 26, 2022 4:21 pm

CHIPOTLE ANNOUNCES SECOND QUARTER 2022 RESULTS

PR Newswire

OPERATING INCOME INCREASES 37.5% AND COMPARABLE RESTAURANT SALES INCREASE 10.1% AS MARGINS EXPAND

NEWPORT BEACH, Calf., July 26, 2022 /PRNewswire/ — Chipotle Mexican Grill, Inc. (NYSE: CMG) today reported financial results for its second quarter ended June 30, 2022.

Second quarter highlights, year over year:

Total revenue increased 17.0% to $2.2 billion
Comparable restaurant sales increased 10.1%
In-restaurant sales increased 35.9%, while digital sales¹ represented 39.0% of food and beverage revenue
Operating margin was 15.3%, an increase from 13.0%
Restaurant level operating margin was 25.2%², an increase of 70 basis points
Diluted earnings per share was $9.25, a 40.2% increase from $6.60. Adjusted diluted earnings per share, which excluded a $0.05 after-tax impact from expenses related to certain legal proceedings, expenses related to the 2018 performance share COVID-19 related modification, corporate restructuring costs, restaurant asset impairment and closure costs, offset by an unrealized gain on investments was $9.30, a 24.7% increase from $7.46²
Opened 42 new restaurants with 32 locations including a Chipotlane

“We are pleased with our second quarter performance during a period of inflation and consumer uncertainty,” said Brian Niccol, Chairman and CEO, Chipotle. “Our pricing power and value proposition remain strong as our culinary and food with integrity commitment continues to be a key point of differentiation.”

Results for the three months ended June 30, 2022:

Total revenue in the second quarter was $2.2 billion, an increase of 17.0% compared to the second quarter of 2021. The increase in total revenue was driven by a 10.1% increase in comparable restaurant sales and new restaurant openings. Our in-restaurant sales increased 35.9% in the three months ended June 30, 2022, as compared to the three months ended June 30, 2021, while digital sales represented 39.0% of total food and beverage revenue.

We opened 42 new restaurants during the second quarter with 32 locations including a Chipotlane. These formats continue to perform very well and are helping enhance guest access and convenience, as well as increase new restaurant sales, margins, and returns.

Food, beverage and packaging costs in the second quarter remained flat at 30.4% of total revenue compared to the second quarter of 2021. In the second quarter of 2022 the benefit of menu price increases was offset by inflation across the menu primarily due to higher costs for avocados, packaging, dairy, beef and chicken.

Restaurant level operating margin was 25.2%, an increase from 24.5% in the second quarter of 2021. The increase was primarily due to the benefit of menu price increases and, to a lesser extent, lower delivery fees associated with a lower volume of delivery transactions, partially offset by higher food costs and increases in hourly wages.

General and administrative expenses for the second quarter were $140.8 million on a GAAP basis, or $130.4 million² on a non-GAAP basis, excluding $6.8 million of certain legal proceedings, $2.8 million for a COVID-19 related modification to our 2018 performance shares made in December 2020, and $0.9 million related to transformation expenses. GAAP and non-GAAP general and administrative expenses for the second quarter of 2022 also include $105.8 million of underlying general and administrative expenses, and $25.0 million of non-cash stock compensation.

The GAAP effective income tax rate was 25.3% for the second quarter, which increased from 23.7% in the second quarter of 2021, primarily due to a decrease in tax benefits related to option exercises and equity vesting.

Net income for the second quarter was $259.9 million, or $9.25 per diluted share, an increase from $188.0 million, or $6.60 per diluted share, in the second quarter of 2021. Excluding the after-tax impact of expenses related to certain legal proceedings, modification expenses related to our 2018 performance shares, corporate restructuring, restaurant asset impairment and closure costs, offset by an unrealized gain on investments, adjusted net income was $261.2 million² and adjusted diluted earnings per share was $9.30².

During the second quarter, our Board of Directors approved the investment of up to an additional $300 million, exclusive of commissions, to repurchase shares of our common stock, subject to market conditions. Including this repurchase authorization, $319.7 million was available as of June 30, 2022. The repurchase authorization may be modified, suspended, or discontinued at any time. We repurchased $261.1 million of stock at an average price per share of $1,350 during the second quarter.

More information will be available in our Quarterly Report on Form 10-Q, which will be filed with the SEC by the end of July.

Outlook

For 2022, management is anticipating the following:

Third quarter comparable restaurant sales growth, including planned price increases in August, in the mid to high-single digits.
Between 235 to 250 new restaurant openings (including 10 to 15 relocations to add a Chipotlane), which assumes construction, permit and material supply delays don’t worsen
An estimated underlying effective full year tax rate between 25% and 27% before discrete items

Definitions

The following definitions apply to these terms as used throughout this release:

Comparable restaurant sales, or sales comps, and comparable restaurant transactions, represent the change in period-over-period total revenue or transactions for restaurants in operation for at least 13 full calendar months.
Average restaurant sales refer to the average trailing 12-month food and beverage revenue for restaurants in operation for at least 12 full calendar months.
Restaurant level operating margin represents total revenue less direct restaurant operating costs, expressed as a percent of total revenue.
Digital sales represent food and beverage revenue generated through the Chipotle website, Chipotle app or third-party delivery aggregators. Digital sales includes revenue deferrals associated with Chipotle Rewards.
In-restaurant sales represent food and beverage revenue generated on-premise. In-restaurant sales includes revenue deferrals associated with Chipotle Rewards.

Conference Call Details

Chipotle will host a conference call on Tuesday, July 26, 2022, at 4:30 PM Eastern time to discuss second quarter 2022 financial results as well as provide a business update for the third quarter 2022.

The conference call can be accessed live over the phone by dialing 1-888-317-6003, or for international callers by dialing 1-412-317-6061, and use code: 8631266. The call will be webcast live from the company’s website on the investor relations page at ir.chipotle.com/events. An archived webcast will be available approximately one hour after the end of the call.

About Chipotle

Chipotle Mexican Grill, Inc. (NYSE: CMG) is cultivating a better world by serving responsibly sourced, classically-cooked, real food with wholesome ingredients without artificial colors, flavors or preservatives. Chipotle had over 3,000 restaurants as of June 30, 2022, in the United States, Canada, the United Kingdom, France and Germany and is the only restaurant company of its size that owns and operates all its restaurants. Chipotle is ranked on the Fortune 500 and is recognized on the 2022 list for Fortune’s Most Admired Companies. With over 100,000 employees passionate about providing a great guest experience, Chipotle is a longtime leader and innovator in the food industry. Chipotle is committed to making its food more accessible to everyone while continuing to be a brand with a demonstrated purpose as it leads the way in digital, technology and sustainable business practices. For more information or to place an order online, visit WWW.CHIPOTLE.COM.

Forward-Looking Statements

Certain statements in this press release and in the July 26, 2022 conference call are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, including statements about our goals for number of future Chipotle restaurants, restaurants with Chipotlanes and rate of expansion, future comparable restaurant sales, future estimated tax rates, future cash flow, and future long-term prospects. We use words such as “anticipate”, “believe”, “could”, “should”, “may”, “approximately”, “estimate”, “expect”, “potential”, “intend”, “project”, “encouraged”, “target”, and similar terms and phrases, including references to assumptions, to identify forward-looking statements. The forward-looking statements in this press release are based on currently available operating, financial and competitive information available to us as of the date of this release and we assume no obligation to update these forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those described in the statements, including but not limited to: uncertainty regarding the duration and severity of the ongoing COVID-19 pandemic, the resurgence of COVID-19 infections, the circulation of novel variants of COVID-19 and its ultimate impact on our business, including supply chain disruptions and difficulties in acquiring restaurant equipment, impact on guest traffic, restaurant sales and operating costs and the ability of our third-party suppliers and business partners to fulfill their responsibilities and commitments; increasing wage inflation and the competitive labor market, which impacts our ability to attract and retain qualified employees and has resulted in occasional staffing shortages; the impact of any union organizing efforts and our responses to such efforts; increasing supply costs (including beef, avocados and packaging); risks of food safety incidents and food-borne illnesses; risks associated with our reliance on certain information technology systems and potential material failures or interruptions; privacy and cyber security risks related to our acceptance of electronic payments or electronic processing of confidential customer or employee information, including through our digital app; the impact of competition, including from sources outside the restaurant industry; the financial impact of increasing our average hourly wages; the impact of federal, state or local government regulations relating to our employees, employment practices, restaurant design and construction, and the sale of food or alcoholic beverages; our ability to achieve our planned growth, such as the availability of suitable new restaurant sites and the availability of construction materials and contractors; increases in ingredient and other operating costs due to our Food With Integrity philosophy, tariffs or trade restrictions and supply shortages; the uncertainty of our ability to achieve expected levels of comparable restaurant sales due to factors such as changes in consumers’ perceptions of our brand, including as a result of actual or rumored food safety concerns or other negative publicity, decreased overall consumer spending (including as a result of the increase in inflation and higher gas prices), or the inability to increase menu prices or realize the benefits of menu price increases; risks associated with our increased focus on our digital business, including risks arising from our reliance on third party delivery services; risks relating to litigation, including possible governmental actions related to food safety incidents and potential class action litigation regarding employment laws, advertising claims or other matters; and other risk factors described from time to time in our SEC reports, including our annual report on Form 10-K and quarterly reports on Form 10-Q, all of which are available on the investor relations page of our website at ir.Chipotle.com.

1	Refer to definition of digital sales below. We updated the definition of digital sales in the first quarter of 2022 to include revenue deferrals related to Chipotle Rewards. We made this change to allow for a reconciliation to total food and beverage revenue as we now present In-restaurant sales.

2	Restaurant level operating margin, adjusted diluted earnings per share, adjusted net income, non-GAAP general and administrative expenses, and non-GAAP effective income tax rate are non-GAAP financial measures. Reconciliations to GAAP measures and further information are set forth in the table at the end of this press release.

CHIPOTLE MEXICAN GRILL, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share data) (unaudited)

	Three months ended June 30,
	2022				2021
Food and beverage revenue	$	2,192,802	99.1	%	$	1,869,365	98.8	%
Delivery service revenue		20,537	0.9			23,173	1.2
Total revenue		2,213,339	100.0			1,892,538	100.0
Restaurant operating costs (exclusive of depreciation and amortization shown separately below):
Food, beverage and packaging		673,928	30.4			574,478	30.4
Labor		549,926	24.8			464,506	24.5
Occupancy		113,919	5.1			103,430	5.5
Other operating costs		317,481	14.3			287,242	15.2
General and administrative expenses		140,820	6.4			146,044	7.7
Depreciation and amortization		69,733	3.2			62,082	3.3
Pre-opening costs		5,253	0.2			4,965	0.3
Impairment, closure costs, and asset disposals		4,681	0.2			4,266	0.2
Total operating expenses		1,875,741	84.7			1,647,013	87.0
Income from operations		337,598	15.3			245,525	13.0
Interest and other income (expense), net		10,572	0.5			851	–
Income before income taxes		348,170	15.7			246,376	13.0
Provision for income taxes		(88,228)	(4.0)			(58,402)	(3.1)
Net income	$	259,942	11.7	%	$	187,974	9.9	%
Earnings per share:
Basic	$	9.32			$	6.68
Diluted	$	9.25			$	6.60
Weighted-average common shares outstanding:
Basic		27,905				28,134
Diluted		28,092				28,501

CHIPOTLE MEXICAN GRILL, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share data) (unaudited)

	Six months ended June 30,
	2022				2021
Food and beverage revenue	$	4,191,758	99.0	%	$	3,585,355	98.7	%
Delivery service revenue		42,120	1.0			48,758	1.3
Total revenue		4,233,878	100.0			3,634,113	100.0
Restaurant operating costs (exclusive of depreciation and amortization shown separately below):
Food, beverage and packaging		1,300,854	30.7			1,097,149	30.2
Labor		1,081,866	25.6			898,175	24.7
Occupancy		225,951	5.3			205,199	5.6
Other operating costs		648,176	15.3			581,952	16.0
General and administrative expenses		288,222	6.8			301,147	8.3
Depreciation and amortization		141,398	3.3			125,204	3.4
Pre-opening costs		10,601	0.3			8,386	0.2
Impairment, closure costs, and asset disposals		8,991	0.2			9,934	0.3
Total operating expenses		3,706,059	87.5			3,227,146	88.8
Income from operations		527,819	12.5			406,967	11.2
Interest and other income (expense), net		10,359	0.2			(1,317)	(0.0)
Income before income taxes		538,178	12.7			405,650	11.2
Provision for income taxes		(119,942)	(2.8)			(90,575)	(2.5)
Net income	$	418,236	9.9	%	$	315,075	8.7	%
Earnings per share:
Basic	$	14.95			$	11.20
Diluted	$	14.83			$	11.04
Weighted-average common shares outstanding:
Basic		27,974				28,130
Diluted		28,196				28,542

CHIPOTLE MEXICAN GRILL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except per share data)

	June 30,		December 31,
	2022		2021
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	520,933	$	815,374
Accounts receivable, net		83,636		99,599
Inventory		29,456		32,826
Prepaid expenses and other current assets		73,716		78,756
Income tax receivable		97,874		94,064
Investments		240,684		260,945
Total current assets		1,046,299		1,381,564
Leasehold improvements, property and equipment, net		1,813,348		1,769,278
Long-term investments		359,911		274,311
Restricted cash		30,895		30,856
Operating lease assets		3,209,934		3,118,294
Other assets		63,010		56,716
Goodwill		21,939		21,939
Total assets	$	6,545,336	$	6,652,958
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable	$	158,581	$	163,161
Accrued payroll and benefits		161,052		162,405
Accrued liabilities		148,614		173,052
Unearned revenue		132,446		156,351
Current operating lease liabilities		230,930		218,713
Total current liabilities		831,623		873,682
Long-term operating lease liabilities		3,393,423		3,301,601
Deferred income tax liabilities		126,239		141,765
Other liabilities		39,852		38,536
Total liabilities		4,391,137		4,355,584
Shareholders’ equity:
Preferred stock, $0.01 par value, 600,000 shares authorized, no shares issued as of June 30, 2022 and December 31, 2021, respectively		–		–
Common stock, $0.01 par value, 230,000 shares authorized, 37,284 and 37,132 shares issued as of June 30, 2022 and December 31, 2021, respectively		373		371
Additional paid-in capital		1,782,303		1,729,312
Treasury stock, at cost, 9,480 and 9,052 common shares as of June 30, 2022 and December 31, 2021, respectively		(3,969,221)		(3,356,102)
Accumulated other comprehensive loss		(6,639)		(5,354)
Retained earnings		4,347,383		3,929,147
Total shareholders’ equity		2,154,199		2,297,374
Total liabilities and shareholders’ equity	$	6,545,336	$	6,652,958

CHIPOTLE MEXICAN GRILL, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)

	Six months ended
	June 30,
	2022		2021
Operating activities
Net income	$	418,236	$	315,075
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		141,398		125,204
Deferred income tax provision		(15,537)		(15,884)
Impairment, closure costs, and asset disposals		8,851		8,235
Provision for credit losses		(876)		(220)
Stock-based compensation expense		52,221		102,680
Other		(11,909)		2,467
Changes in operating assets and liabilities:
Accounts receivable		12,353		37,286
Inventory		3,320		1,309
Prepaid expenses and other current assets		948		(18,186)
Operating lease assets		112,505		105,485
Other assets		(3,014)		117
Accounts payable		(2,972)		12,525
Accrued payroll and benefits		(583)		21,068
Accrued liabilities		(22,293)		(20,102)
Unearned revenue		(20,062)		(11,487)
Income tax payable/receivable		(3,832)		(1,851)
Operating lease liabilities		(100,024)		(101,818)
Other long-term liabilities		958		955
Net cash provided by operating activities		569,688		562,858
Investing activities
Purchases of leasehold improvements, property and equipment		(196,495)		(212,123)
Purchases of investments		(195,242)		(190,920)
Maturities of investments		142,540		162,045
Proceeds from sale of equipment		–		2,885
Net cash used in investing activities		(249,197)		(238,113)
Financing activities
Acquisition of treasury stock		(521,910)		(203,151)
Tax withholding on stock-based compensation awards		(91,905)		(58,860)
Other financing activities		(588)		(2,208)
Net cash used in financing activities		(614,403)		(264,219)
Effect of exchange rate changes on cash, cash equivalents and restricted cash		(490)		(216)
Net change in cash, cash equivalents, and restricted cash		(294,402)		60,310
Cash, cash equivalents, and restricted cash at beginning of period		846,230		635,836
Cash, cash equivalents, and restricted cash at end of period	$	551,828	$	696,146
Supplemental disclosures of cash flow information
Income taxes paid	$	139,177	$	108,247
Purchases of leasehold improvements, property, and equipment accrued in accounts payable and accrued liabilities	$	61,072	$	50,403
Acquisition of treasury stock accrued in accounts payable and accrued liabilities	$	6,999	$	3,372

CHIPOTLE MEXICAN GRILL, INC. SUPPLEMENTAL FINANCIAL AND OTHER DATA (dollars in thousands) (unaudited)

	For the three months ended
	Jun. 30,		Mar. 31,		Dec. 31,		Sep. 30,		Jun. 30,
	2022		2022		2021		2021		2021
Number of restaurants opened		42		51		78		41		56
Restaurant closures		(1)		(1)		–		–		(5)
Restaurant relocations		(3)		(2)		(4)		(2)		(1)
Number of restaurants at end of period		3,052		3,014		2,966		2,892		2,853
Average restaurant sales	$	2,747	$	2,684	$	2,641	$	2,554	$	2,466
Average restaurant sales, excluding delivery MPD⁽¹⁾	$	2,657	$	2,598	$	2,562	$	2,479	$	2,405
Comparable restaurant sales increase		10.1 %		9.0 %		15.2 %		15.1 %		31.2 %

(1) Average restaurant sales, excluding delivery menu price differential (“MPD”) represents average restaurant sales, as defined above, adjusted to remove the differential of delivery menu prices. This is intended to illustrate our underlying food and beverage sales per restaurant.

CHIPOTLE MEXICAN GRILL, INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

The following tables provide a reconciliation of non-GAAP financial measures presented in the text above to the most directly comparable financial measures calculated and presented in accordance with GAAP.

Adjusted net income is net income excluding expenses related to restaurant asset impairment, corporate restructuring, legal proceedings, stock-based compensation modification expense, unrealized gains on equity investments, and certain other costs. Adjusted general and administrative expense is general and administrative expense excluding transformation expenses, legal proceedings, stock-based compensation modification expense, and certain other costs. The adjusted effective income tax rate is the effective income tax rate adjusted to reflect the after tax impact of non-GAAP adjustments. Restaurant Level Operating Margin, a non-GAAP financial measure, is equal to the revenues generated by our restaurants less their direct operating costs which consist of food, beverage and packaging, labor, occupancy and other operating costs. This performance measure primarily includes the costs that restaurant level managers can directly control and excludes other costs that are essential to conduct our business. Management uses restaurant level operating margin as a measure of restaurant performance. Management believes restaurant level operating margin is useful to investors in that it highlights trends in our core business that may not otherwise be apparent to investors when relying solely on GAAP financial measures. We present these non-GAAP measures in order to facilitate meaningful evaluation of our operating performance across periods. These adjustments are intended to provide greater transparency of underlying performance and to allow investors to evaluate our business on the same basis as our management, which uses these non-GAAP measures in evaluating the company’s performance. Our adjusted net income, adjusted diluted earnings per share, adjusted general and administrative expenses, adjusted effective income tax rate and restaurant level operating margin measures may not be comparable to other companies’ adjusted measures. These adjustments are not necessarily indicative of what our actual financial performance would have been during the periods presented and should be viewed in addition to, and not as an alternative to, our results prepared in accordance with GAAP. Further details regarding these adjustments are included in the tables below.

CHIPOTLE MEXICAN GRILL, INC. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Adjusted Net Income and Adjusted Diluted Earnings per Share (in thousands, except per share amounts) (unaudited)

	Three months ended
	June 30,
	2022		2021
Net income	$	259,942	$	187,974
Non-GAAP adjustments:
Restaurant costs:
Operating lease asset impairment and other restaurant costs⁽¹⁾		309		115
Duplicate rent expense⁽²⁾		–		51
Corporate Restructuring:
Duplicate rent expense⁽²⁾		856		1,070
Employee related restructuring costs⁽³⁾		–		129
Legal proceedings⁽⁴⁾		6,798		2,092
Stock-based compensation modification expense⁽⁵⁾		2,770		23,473
Unrealized gain on equity investments⁽⁶⁾		(10,410)		–
Other adjustments⁽⁷⁾		–		850
Total non-GAAP adjustments	$	323	$	27,780
Tax effect of non-GAAP adjustments above⁽⁸⁾		920		(3,002)
After tax impact of non-GAAP adjustments	$	1,243	$	24,778
Adjusted net income	$	261,185	$	212,752

Diluted weighted-average number of common shares outstanding		28,092		28,501
Diluted earnings per share	$	9.25	$	6.60
Adjusted diluted earnings per share	$	9.30	$	7.46

(1) Operating lease asset impairment charges and other expenses for restaurants due to closures, relocations, or underperformance.
(2) Duplicate rent expense for the corporate headquarter relocation and office consolidation announced in May 2018 and rent expense for closed restaurants announced in June 2018.
(3) Costs for recruitment, relocation costs, third party and other employee-related costs.
(4) Charges relate to estimated settlements for distinct legal matters that exceeded or are expected to exceed typical costs for these types of legal proceedings.
(5) Charges for a COVID-19 related modification made in December 2020 to our 2018 performance shares.
(6) Unrealized gain on equity investments based on a subsequent investment by an unrelated party in one of our investees, which subsequent investment represents an observable price change in an orderly transaction for a similar investment of the same issuer.
(7) For the three months ended June 30, 2021, other adjustments consist of asset impairment charges for equipment related to a discontinued restaurant initiative, and certain corporate equipment.
(8) Adjustments relate to the tax effect of non-GAAP adjustments, which were determined based on the nature of the underlying non-GAAP adjustments and their relevant jurisdictional tax rates.

CHIPOTLE MEXICAN GRILL, INC. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Adjusted General and Administrative Expenses (in thousands) (unaudited)

	Three months ended
	June 30,
	2022		2021
General and administrative expenses	$	140,820	$	146,044
Non-GAAP adjustments:
Transformation expenses⁽¹⁾		(856)		(1,250)
Legal proceedings⁽²⁾		(6,798)		(23,473)
Stock-based compensation modification expense⁽³⁾		(2,770)		(2,092)
Total non-GAAP adjustments	$	(10,424)	$	(26,815)
Adjusted general and administrative expenses	$	130,396	$	119,229

(1) Duplicate rent expense for office and restaurant closures announced in June 2018 due to the corporate restructuring and underperformance of $856 and $1,121 for the three months ended June 30, 2022 and 2021, respectively; and employee related restructuring costs of $0 and $129 for the three months ended June 30, 2022 and 2021, respectively.
(2) Charges related to estimated settlements for distinct legal matters that exceeded or are expected to exceed typical costs for these types of legal proceedings.
(3) Charges for a COVID-19 related modification made in December 2020 to our 2018 performance shares.

CHIPOTLE MEXICAN GRILL, INC. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Adjusted Effective Income Tax Rate (unaudited)

	Three months ended
	June 30,
	2022		2021
Effective income tax rate	25.3	%	23.7	%
Tax impact of non-GAAP adjustments⁽¹⁾	(0.2)		(1.3)
Adjusted effective income tax rate	25.1	%	22.4	%

(1) Adjustments relate to the tax effect of non-GAAP adjustments, which were determined based on the nature of the underlying non-GAAP adjustments and their relevant jurisdictional tax rates.

CHIPOTLE MEXICAN GRILL, INC. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Restaurant Level Operating Margin (in thousands) (unaudited)

	Three months ended June 30,
	2022		Percent of total revenue		2021		Percent of total revenue
Income from operations	$	337,598	15.3	%	$	245,525	13.0	%
Non-GAAP Adjustments:
General and administrative expenses		140,820	6.4			146,044	7.7
Depreciation and amortization		69,733	3.2			62,082	3.3
Pre-opening costs		5,253	0.2			4,965	0.3
Impairment, closure costs, and asset disposals		4,681	0.2			4,266	0.2
Total non-GAAP Adjustments	$	220,487	10.0	%	$	217,357	11.5	%
Restaurant level operating margin	$	558,085	25.2	%	$	462,882	24.5	%

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SOURCE Chipotle Mexican Grill, Inc.

July 26, 2022 4:21 pm

eHealth, Inc. to Announce Second Quarter 2022 Earnings Results on August 8 at 5:00 p.m. Eastern Time

PR Newswire

SANTA CLARA, Calif.
, July 26, 2022 /PRNewswire/ — eHealth, Inc. (NASDAQ: EHTH), a leading private online health insurance marketplace, today announced that the company plans to release second quarter 2022 financial results on August 8, 2022.

The company will hold an earnings conference call beginning at 5:00 p.m. Eastern Time on August 8th to discuss these results. The call will be hosted by eHealth’s chief executive officer, Fran Soistman and eHealth’s chief financial officer, Christine Janofsky.

Individuals interested in listening to the conference call may do so by dialing (800) 715-9871. The participant passcode is 3075186.

A live webcast of the earnings call will also be available at www.ehealthinsurance.com under the Investor Relations section. The webcast replay will be available on our investor relations website two hours following the conclusion of the call and will be archived for a period of one year. The company suggests participants for both the conference call and those listening via the web dial in or sign on at least 15 minutes in advance of the call.

About eHealth, Inc.

eHealth, Inc. (NASDAQ: EHTH) operates a leading health insurance marketplace at eHealth.com and eHealthMedicare.com with technology that provides consumers with health insurance enrollment solutions. Since 1997, we have connected more than eight million members with quality, affordable health insurance, Medicare options, and ancillary plans. Our proprietary marketplace offers Medicare Advantage, Medicare Supplement, Medicare Part D prescription drug, individual, family, small business, and other plans from approximately 200 health insurance carriers across 50 states and the District of Columbia.

Investor Contact:

Kate Sidorovich, CFA

SVP, Investor Relations and Strategy
650-210-3111

[email protected]

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SOURCE eHealth, Inc.

July 26, 2022 4:21 pm

First Horizon Declares Cash Dividends on Common and Preferred Stock

PR Newswire

MEMPHIS, Tenn.
, July 26, 2022 /PRNewswire/ — First Horizon Corporation (NYSE: FHN) or the “Company” today announced that its board of directors has declared a quarterly common stock dividend of $0.15 per share. The dividend is payable on October 3, 2022 to shareholders of record at the close of business on September 9, 2022.

Preferred Dividend Information

Cash dividends were also declared on the Company’s Series C, Series D, Series E and Series F Preferred Stock, and on First Horizon Bank’s Class A Non-Cumulative Perpetual Preferred Stock, as follows:

FHN Series C

Quarterly cash dividend of $165.00 per share on FHN’s 6.60% Fixed to Floating Non-Cumulative Perpetual Preferred Stock, Series C (“Series C Preferred Stock”). This equates to a cash dividend of $0.4125 per Depositary Share (NYSE: FHN PRC), which each represent a 1/400th interest in a share of the Series C Preferred Stock. The dividend is payable on November 1, 2022 to shareholders of record at the close of business on October 17, 2022.

FHN Series D

Semi-annual cash dividend of $305.00 per share on FHN’s 6.10% Fixed to Floating Non-Cumulative Perpetual Preferred Stock, Series D (“Series D Preferred Stock”). This equates to a cash dividend of $0.7625 per Depositary Share (NYSE: FHN PRD), which each represent a 1/400th interest in a share of the Series D Preferred Stock. The dividend is payable on November 1, 2022 to shareholders of record at the close of business on October 17, 2022.

FHN Series E

Quarterly cash dividend of $1,625.00 per share on FHN’s 6.50% Non-Cumulative Perpetual Preferred Stock, Series E (“Series E Preferred Stock”). This equates to a cash dividend of $0.40625 per Depositary Share (NYSE: FHN PRE), which each represent a 1/4,000th interest in a share of the Series E Preferred Stock. The dividend is payable on October 11, 2022 to shareholders of record at the close of business on September 23, 2022.

FHN Series F

Quarterly cash dividend of $1,175.00 per share on FHN’s 4.70% Non-Cumulative Perpetual Preferred Stock, Series F (“Series F Preferred Stock”). This equates to a cash dividend of $0.29375 per Depositary Share (NYSE: FHN PRF), which each represent a 1/4,000th interest in a share of the Series F Preferred Stock. The dividend is payable on October 11, 2022 to shareholders of record at the close of business on September 23, 2022.

First Horizon Bank Class A

Quarterly cash dividend of $9.58333 per share on First Horizon Bank’s Class A Non-Cumulative Perpetual Preferred Stock. The dividend is payable on October 11, 2022 to shareholders of record at the close of business on September 23, 2022.

About First Horizon

First Horizon Corp. (NYSE: FHN), with $85.1 billion in assets as of June 30, 2022, is a leading regional financial services company, dedicated to helping our clients, communities and associates unlock their full potential with capital and counsel. Headquartered in Memphis, TN, the banking subsidiary First Horizon Bank operates in 12 states across the southern U.S. The Company and its subsidiaries offer commercial, private banking, consumer, small business, wealth and trust management, retail brokerage, capital markets, fixed income, mortgage, and title insurance services. First Horizon has been recognized as one of the nation’s best employers by Fortune and Forbes magazines and a Top 10 Most Reputable U.S. Bank. More information is available at www.FirstHorizon.com.

FHN-G

CONTACT: Investor Relations, Ellen Taylor, (901) 523-4450
Media Relations, Beth Ardoin, (337) 278-6868

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SOURCE First Horizon Corporation

July 26, 2022 4:21 pm

Deneen DeFiore, Vice President and Global Chief Information Security Officer for United Airlines, Joins Blackbaud Board of Directors

PR Newswire

CHARLESTON, S.C.
, July 26, 2022 /PRNewswire/ — Blackbaud (NASDAQ: BLKB), the world’s leading cloud software company powering social good, today announced that Deneen DeFiore, vice president and global chief information security officer for United Airlines, has joined its board of directors.

DeFiore brings more than 20 years of experience in technology and cybersecurity. Prior to her role at United Airlines, DeFiore served as senior vice president, global chief information and product security officer at GE Aviation.

“We’re delighted to welcome Deneen to the Blackbaud board of directors,” said Andrew M. Leitch, chairman of the Blackbaud board. “She brings invaluable experience in cybersecurity as well as a strong track record of executive leadership, and she will be a great asset to the board.”

“Cybersecurity is a top priority for our company as we continue to grow and invest in our program, and we look forward to having Deneen’s expertise as we navigate this area,” said Mike Gianoni, president and CEO, Blackbaud. “In addition, Deneen has an extensive background in helping corporations grow, working across both the private and public sector, and innovating cutting-edge technology solutions. We’re thrilled to welcome her.”

During her 19-year tenure at General Electric, DeFiore held various leadership positions across GE Corporate, GE Aviation and GE Power. She was instrumental in helping to build cybersecurity capabilities on a corporate level and worked closely with the U.S. Department of Defense, multiple government agencies and policy groups, and became an active voice in the industry to shape policies for defense department implementations. In her current role at United Airlines, DeFiore is responsible for cybersecurity strategy, overseeing and reducing risk and improving cyber resilience. She led the company’s COVID-19 technology crisis response efforts and implemented and enabled secure remote workforce capabilities across all business operations.

“I’m looking forward to joining the Blackbaud board as the company continues to provide technology and solutions for the global social good community,” said DeFiore. “Blackbaud is well positioned for success, their customers are making a real difference in our world, and I am excited to be a part of it.”

In addition to DeFiore, Blackbaud’s board of directors includes Andrew M. Leitch (chairman), George H. Ellis, Timothy Chou, Ph.D., Michael (Mike) P. Gianoni, D. Roger Nanney, Sarah E. Nash and Joyce M. Nelson.

About Blackbaud

Blackbaud (NASDAQ: BLKB) is the world’s leading cloud software company powering social good. Serving the entire social good community—nonprofits, higher education institutions, K–12 schools, healthcare organizations, faith communities, arts and cultural organizations, foundations, companies and individual change agents—Blackbaud connects and empowers organizations to increase their impact through cloud software, services, expertise and data intelligence. The Blackbaud portfolio is tailored to the unique needs of vertical markets, with solutions for fundraising and CRM, marketing, advocacy, peer-to-peer fundraising, corporate social responsibility (CSR) and environmental, social and governance (ESG), school management, ticketing, grantmaking, financial management, payment processing and analytics. Serving the industry for more than four decades, Blackbaud is a remote-first company headquartered in Charleston, South Carolina, with operations in the United States, Australia, Canada, Costa Rica and the United Kingdom. For more information, visit www.blackbaud.com or follow us on Twitter, LinkedIn, Instagram and Facebook.

Media Inquiries

[email protected]

Forward-looking Statements

Except for historical information, all of the statements, expectations, and assumptions contained in this news release are forward-looking statements that involve a number of risks and uncertainties, including statements regarding expected benefits of products and product features. Although Blackbaud attempts to be accurate in making these forward-looking statements, it is possible that future circumstances might differ from the assumptions on which such statements are based. In addition, other important factors that could cause results to differ materially include the following: general economic risks; uncertainty regarding increased business and renewals from existing customers; continued success in sales growth; management of integration of acquired companies and other risks associated with acquisitions; risks associated with successful implementation of multiple integrated software products; the ability to attract and retain key personnel; risks associated with management of growth; lengthy sales and implementation cycles, particularly in larger organization; technological changes that make our products and services less competitive; and the other risk factors set forth from time to time in the SEC filings for Blackbaud, copies of which are available free of charge at the SEC’s website at www.sec.gov or upon request from Blackbaud’s investor relations department. All Blackbaud product names appearing herein are trademarks or registered trademarks of Blackbaud, Inc.

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SOURCE Blackbaud, Inc.

July 26, 2022 4:21 pm

Palomar Holdings, Inc. Announces New Partnership with Omaha National Group, Inc.

– Expands PLMR-FRONT to Consist of Four Program Partners Since Formation in the Third Quarter 2021 –

– Firmly Positions Palomar to Achieve 2022 Gross Written Premium Target in PLMR-FRONT –

LA JOLLA, Calif., July 26, 2022 (GLOBE NEWSWIRE) — Palomar Holdings, Inc. (NASDAQ:PLMR) (“Palomar” or the “Company”) today announced it has entered into a two-year arrangement with new partner Omaha National Group, Inc. (“Omaha National”), a leading tech-enabled provider of workers’ compensation insurance.

Palomar’s partnership provides a key entry point through its admitted subsidiary, Palomar Specialty Insurance Company (“PSIC”), acting as the insurer in California, supporting Omaha National’s workers compensation product in California’s admitted market. Omaha National, through its managing general agent, Omaha National Underwriters, will be overseeing the insurance operations including underwriting, risk management and claims. This partnership represents further progress towards Palomar’s strategic growth initiatives in PLMR-FRONT. Palomar operates with a significant competitive advantage and is a key resource in permitting non-licensed insurance companies and reinsurers to access the United States primary insurance market.

Mac Armstrong, Chairman & Chief Executive Officer of Palomar, commented, “Palomar is keenly focused on the strategic initiatives conveyed at the outset of the year, namely, building a best-in-class franchise through PLMR-FRONT. This new partnership with Omaha National allows us to not only extend the franchise but to partner with a market leader in the workers compensation space.”

“We’re pleased to be teaming up with Palomar as we continue to grow our presence on the West Coast and provide great service to the small and midsize businesses that keep California running,” said Omaha National President and Chief Executive Officer Reagan Pufall. “Palomar is a highly respected company that is filled with exceptionally talented professionals, and we’ve formed a great partnership.”

“We are thrilled to partner with Omaha National which provides a renowned tech enabled service and subject expertise in the workers compensation business line,” said Jason Sears, Executive Vice President and Head of Programs at Palomar. “Omaha National’s management team has developed an outstanding reputation and a proven track record within the workers compensation market.”

About Palomar Holdings, Inc.

Palomar Holdings, Inc. is the holding company of subsidiaries Palomar Specialty Insurance Company (“PSIC”), Palomar Specialty Reinsurance Company Bermuda Ltd., Palomar Insurance Agency, Inc. and Palomar Excess and Surplus Insurance Company (“PESIC”). Palomar is an innovative insurer that focuses on the provision of specialty insurance for residential and commercial clients. Palomar’s underwriting and analytical expertise allow it to concentrate on certain markets that it believes are underserved by other insurance companies, such as the markets for earthquake, hurricane and flood insurance. Palomar’s insurance subsidiaries, Palomar Specialty Insurance Company, Palomar Specialty Reinsurance Company Bermuda Ltd., and Palomar Excess and Surplus Insurance Company, have a financial strength rating of “A-” (Excellent) from A.M. Best.

To learn more, visit PLMR.com.

Follow Palomar on Facebook, LinkedIn and Twitter: @PLMRInsurance

About Omaha National

Omaha National serves the businesses that build America and keep it running; small to mid-size companies where people work with their hands and have a greater risk of being injured. Our proprietary software enhances our operations to better serve our customers and their injured workers. Omaha National offers AM Best A- (Excellent) rated workers’ compensation coverage through more than 2,500 agencies. Since our launch in 2016, the company has grown to more than 200 employees and more than $150 million of in-force premiums.

Safe Harbor Statement

Palomar cautions you that statements contained in this press release may regard matters that are not historical facts but are forward-looking statements. These statements are based on the company’s current beliefs and expectations. The inclusion of forward-looking statements should not be regarded as a representation by Palomar that any of its plans will be achieved. Actual results may differ from those set forth in this press release due to the risks and uncertainties inherent in the Company’s business. The forward-looking statements are typically, but not always, identified through use of the words “believe,” “expect,” “enable,” “may,” “will,” “could,” “intends,” “estimate,” “anticipate,” “plan,” “predict,” “probable,” “potential,” “possible,” “should,” “continue,” and other words of similar meaning. Actual results could differ materially from the expectations contained in forward-looking statements as a result of several factors, including unexpected expenditures and costs, unexpected results or delays in development and regulatory review, regulatory approval requirements, the frequency and severity of adverse events and competitive conditions. These and other factors that may result in differences are discussed in greater detail in the Company’s filings with the Securities and Exchange Commission. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof, and the Company undertakes no obligation to update such statements to reflect events that occur or circumstances that exist after the date hereof. All forward-looking statements are qualified in their entirety by this cautionary statement, which is made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Contact

Media Inquiries
Bill Bold
1-619-890-5972
[email protected]

Investor Relations
Jamie Lillis
1-203-428-3223
[email protected]
Source: Palomar Holdings, Inc.

July 26, 2022 4:21 pm

Taro Annual Report on Form 20-F Available For Fiscal Year Ended March 31, 2022

Taro Annual Report on Form 20-F Available For Fiscal Year Ended March 31, 2022

HAWTHORNE, N.Y.–(BUSINESS WIRE)–
Taro Pharmaceutical Industries Ltd. (NYSE: TARO) (“Taro”) announced that its Annual Report on Form 20-F for the fiscal year ended March 31, 2022, filed with the Securities and Exchange Commission (the “SEC”), is available within the Investor Relations section of Taro’s website at www.taro.com.

Hard copies of the report may be ordered free of charge by sending requests to:

Taro Pharmaceuticals U.S.A., Inc.

3 Skyline Drive

Hawthorne, NY 10532

Attn.: William J. Coote or

via email to [email protected]

Additionally, the report may be accessed on the SEC’s website at www.sec.gov.

****

Taro Pharmaceutical Industries Ltd. is a multinational, science-based pharmaceutical company, dedicated to meeting the needs of its customers through the discovery, development, manufacturing and marketing of the highest quality healthcare products. For further information on Taro Pharmaceutical Industries Ltd., please visit Taro’s website at www.taro.com.

View source version on businesswire.com: https://www.businesswire.com/news/home/20220726006103/en/

William J. Coote

VP, CFO

(914) 345-9001

[email protected]

KEYWORDS: United States North America New York

INDUSTRY KEYWORDS: Health Pharmaceutical

MEDIA:

July 26, 2022 4:21 pm

Snap One Holdings Corp. to Report Fiscal Second Quarter 2022 Financial Results on Thursday, August 11, 2022 at 4:30 p.m. ET

CHARLOTTE, N.C., July 26, 2022 (GLOBE NEWSWIRE) — Snap One Holdings Corp. (Nasdaq: SNPO) (“Snap One” or the “Company”), a provider of smart living products, services and software to professional integrators, will hold a conference call on Thursday, August 11, 2022 at 4:30 p.m. Eastern time (1:30 p.m. Pacific time) to discuss its financial results for the fiscal second quarter ended July 1, 2022. Financial results will be issued in a press release prior to the call.

Snap One management will host the presentation, followed by a question-and-answer period.

Date: Thursday, August 11, 2022
Time: 4:30 p.m. Eastern time (1:30 p.m. Pacific time)
Registration Link: Click here to register

Please register online at least 10 minutes prior to the start time. If you have any difficulty with registration or connecting to the conference call, please contact Gateway Investor Relations at 949-574-3860.

The conference call will be broadcast live and available for replay here and via the Investor Relations section of Snap One’s website.

About Snap One

As a leading distributor of smart living technology, Snap One empowers its vast network of professional integrators to deliver entertainment, connectivity, automation, and security solutions to residential and commercial end users worldwide. Snap One distributes an expansive portfolio of proprietary and third-party products through its intuitive online portal and local branch network, blending the benefits of e-commerce with the convenience of same-day pickup. The company provides software, award-winning support, and digital workflow tools to help its integrator partners build thriving and profitable businesses. Additional information about Snap One can be found at snapone.com.

Contacts

Media:

Abigail Hanlon
Director, Marketing Events & Public Relations
[email protected]

Investors:

Tom Colton and Matt Glover
Gateway Investor Relations
949-574-3860
[email protected]

July 26, 2022 4:21 pm

Zurn Elkay Water Solutions Reports Second Quarter 2022 Financial Results

Zurn Elkay Water Solutions Reports Second Quarter 2022 Financial Results

Investor call scheduled for Wednesday, July 27, 2022 at 8:30 a.m. Eastern Time

MILWAUKEE–(BUSINESS WIRE)–
Zurn Elkay Water Solutions Corporation (NYSE:ZWS), a leader in sustainable water solutions, reported today second-quarter 2022 financial results.

Second Quarter Highlights

On July 1, 2022 Zurn Elkay Water Solutions Corporation (“Zurn Elkay” or the “Company”) formerly known as Zurn Water Solutions, completed the combination with Elkay Manufacturing Company (“Elkay”), a market leader of commercial drinking water solutions.
Net sales in the quarter increased 17% to $284 million compared with $244 million in last year’s June quarter (+15% core sales⁽¹⁾, +2% acquisitions).
Net income from continuing operations was $36 million (diluted EPS from continuing operations of $0.28) compared with net income from continuing operations of $21 million (diluted EPS from continuing operations of $0.17) in the year-ago quarter.
Adjusted EPS⁽¹⁾ was $0.32 compared with $0.22 in the year-ago quarter.
Adjusted EBITDA⁽¹⁾ was $64 million (22.6% of net sales) compared with $56 million (22.8% of net sales) in last year’s second quarter. Corporate costs were $7 million compared to $10 million in last year’s second quarter.
Increased quarterly dividend from $0.03 per share to $0.07 per share.
Net debt leverage of 2.0x as of June 30, 2022.

Todd A. Adams, Chairman and Chief Executive Officer of Zurn Elkay Water Solutions Corporation, commented, “We are pleased to have successfully completed the combination with Elkay right after the second quarter closed. Elkay is a strong, strategic fit and the combination of Zurn and Elkay will drive significant value for both our shareholders and customers as we have created a North American leader with a suite of high-quality commercial water solutions that is unmatched in the marketplace. The Elkay combination puts us well on our way to doubling the size of the business over the next couple of years while enhancing both our competitive advantage within specified water solutions and our commitment to sustainability. Our newly combined teams are energized about the opportunity to serve our customers as one Zurn Elkay and remain committed to delivering on the $50 million of synergies by 2025.”

“In the second quarter, which does not include any impact from Elkay, we delivered another quarter of strong growth as year over year sales grew 17% with our core sales growing 15% on top of core growth of 29% in the prior year second quarter. Operationally, we continue to execute well as we delivered an adjusted EBITDA margin, excluding corporate costs, of 25.1% which was above the high-end of our expectations heading into the quarter.”

“As we look to the back half of the year, we continue to have confidence in generating double digit sales growth in our core business and we are well positioned to deliver solid EBITDA margins and cash flow in the combined business while driving our net debt leverage close to one times by the end of the calendar year.”

Third Quarter Outlook

Adams continued, “For the third quarter of 2022 we expect Zurn sales to increase by a high-teens percentage over the prior year third quarter and for Elkay sales to be between $145 and $155 million in the quarter. We anticipate the consolidated Zurn Elkay Adjusted EBITDA margin, excluding corporate costs, to range between 21.0% and 22.0% and for our corporate expenses to approximate $7 million. The consolidated Adjusted EBITDA margin outlook anticipates at least 100 bps of margin expansion from the Zurn Elkay proforma combined Adjusted EBITDA margin in the prior year third quarter.”

Second Quarter 2022 Overview

Net sales were $284 million during the three months ended June 30, 2022, an increase of 17% year over year. Excluding a 2% increase to net sales resulting from our prior-year acquisition, core sales increased 15% year over year as all of our product categories contributed to the sales growth.

Income from operations, excluding corporate costs of $9 million, was $63 million during the three months ended June 30, 2022, or 22.1% of net sales. Income from operations excluding corporate costs as a percentage of net sales increased by 40 basis points primarily as a result of the favorable impact of year-over-year sales growth (inclusive of price realization), productivity savings and the lower intangible asset amortization and stock option expense, all of which was partially offset by the year-over-year increases in material and transportation costs, as well as incremental growth and productivity investments.

Adjusted EBITDA⁽¹⁾, excluding corporate costs of $7 million, was $71 million, or 25.1% of net sales during the three months ended June 30, 2022 compared to $65 million, excluding corporate costs of $10 million, or 26.8% of net sales during the three months ended June 30, 2021.

(1)

Refer to “Non-GAAP Financial Measures” for a definition of this non-GAAP metric, as well as the accompanying reconciliations to GAAP.

Non-GAAP Financial Measures

The following non-GAAP financial measures are utilized by management in comparing our operating performance on a consistent basis. We believe that these financial measures are appropriate to enhance an overall understanding of our underlying operating performance trends compared to historical and prospective periods and our peers. Management also believes that these measures are useful to investors in their analysis of our results of operations and provide improved comparability between fiscal periods as well as insight into the compliance with our debt covenants. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information calculated in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures. A reconciliation of non-GAAP financial measures presented above to our GAAP results has been provided in the financial tables included in this press release.

Core Sales

Core sales excludes the impact of acquisitions (such as the Wade Drains acquisition), divestitures and foreign currency translation. Management believes that core sales facilitates easier and more meaningful comparison of our net sales performance with prior and future periods and to our peers. We exclude the effect of acquisitions and divestitures because the nature, size and number of acquisitions and divestitures can vary dramatically from period to period and between us and our peers, and can also obscure underlying business trends and make comparisons of long-term performance difficult. We exclude the effect of foreign currency translation from this measure because the volatility of currency translation is not under management’s control.

Adjusted Net Income and Adjusted Earnings Per Share

Adjusted net income and adjusted earnings per share (calculated on a diluted basis) exclude actuarial gains and losses on pension and postretirement benefit obligations, restructuring and other similar charges, gains or losses on divestitures, discontinued operations, gains or losses on extinguishment of debt, the impact of acquisition-related fair value adjustments in connection with purchase accounting, amortization of intangible assets, the adjustment to state inventories at last-in first-out costs, and other non-operational, non-cash or non-recurring losses, net of their income tax impact. The tax rates used to calculate adjusted net income and adjusted earnings per share are based on a transaction specific basis. We believe that adjusted net income and adjusted earnings per share are useful in assessing our financial performance by excluding items that are not indicative of our core operating performance or that may obscure trends useful in evaluating our continuing results of operations. All references to Net Income and EPS within this earnings release refer to net income attributable to Zurn Elkay Water Solutions common stockholders and net income per diluted share attributable to Zurn Elkay Water Solutions common stockholders, respectively.

EBITDA

EBITDA represents earnings from continuing operations before interest and other debt related activities, taxes, depreciation and amortization. EBITDA is presented because it is an important supplemental measure of performance and it is frequently used by analysts, investors and other interested parties in the evaluation of companies in our industry. EBITDA is also presented and compared by analysts and investors in evaluating our ability to meet debt service obligations. Other companies in our industry may calculate EBITDA differently. EBITDA is not a measurement of financial performance under GAAP and should not be considered as an alternative to cash flow from operating activities or as a measure of liquidity or an alternative to net income as an indicator of operating performance or any other measures of performance derived in accordance with GAAP. Because EBITDA is calculated before recurring cash charges, including interest expense and taxes, and is not adjusted for capital expenditures or other recurring cash requirements of the business, it should not be considered as a measure of discretionary cash available to invest in the growth of the business.

Adjusted EBITDA

“Adjusted EBITDA” is the term we use to describe EBITDA as defined and adjusted in our credit agreement, which is net income, adjusted for the items summarized in the Reconciliation of GAAP to Non-GAAP Financial Measures table below. Adjusted EBITDA is intended to show our unleveraged, pre-tax operating results and therefore reflects our financial performance based on operational factors, excluding non-operational, non-cash or non-recurring losses or gains. In view of our debt level, it is also provided to aid investors in understanding our compliance with our debt covenants. Adjusted EBITDA is not a presentation made in accordance with GAAP, and our use of the term Adjusted EBITDA varies from others in our industry. In addition to Adjusted EBITDA we also use the term “Adjusted EBITDA excluding corporate costs” which is used to described our total Adjusted EBITDA at the operating level without being burdened by the EBITDA costs associated with our corporate functions. Adjusted EBITDA should not be considered as an alternative to net income, income from operations or any other performance measures derived in accordance with GAAP. Adjusted EBITDA has important limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for, analysis of our results as reported under GAAP. For example, Adjusted EBITDA does not reflect: (a) our capital expenditures, future requirements for capital expenditures or contractual commitments; (b) changes in, or cash requirements for, our working capital needs; (c) the significant interest expenses, or the cash requirements necessary to service interest or principal payments, on our debt; (d) tax payments that represent a reduction in cash available to us; (e) any cash requirements for the assets being depreciated and amortized that may have to be replaced in the future; or (f) the impact of earnings or charges resulting from matters that we and the lenders under our credit agreement may not consider indicative of our ongoing operations. In particular, our definition of Adjusted EBITDA allows us to add back certain non-cash, non-operating or non-recurring charges that are deducted in calculating net income, even though these are expenses that may recur, vary greatly and are difficult to predict and can represent the effect of long-term strategies as opposed to short-term results.

In addition, certain of these expenses can represent the reduction of cash that could be used for other corporate purposes. Further, although not included in the calculation of Adjusted EBITDA below, the measure may at times allow us to add estimated cost savings and operating synergies related to operational changes ranging from acquisitions to dispositions to restructurings and/or exclude one-time transition expenditures that we anticipate we will need to incur to realize cost savings before such savings have occurred. Further, management and various investors use the ratio of total debt less cash to Adjusted EBITDA (which includes a full pro-forma last-twelve-month impact of acquisitions), which we refer to as “net debt leverage”, as a measure of our financial strength and ability to incur incremental indebtedness when making key investment decisions and evaluating us against peers. Lastly, management and various investors use the ratio of the change in Adjusted EBITDA divided by the change in net sales (referred to as “incremental margin” in the case of an increase in net sales or “decremental margin” in the case of a decrease in net sales) as an additional measure of our financial performance and this ratio is utilized by management when making key investment decisions and evaluating us against peers.

Free Cash Flow

We define Free Cash Flow as cash flow from operations less capital expenditures, and we use this metric in analyzing our ability to service and repay our debt and to forecast future periods. However, this measure does not represent funds available for investment or other discretionary uses since it does not deduct cash used to service our debt. We define Free Cash Flow Conversion as Free Cash Flow divided by net income.

Return on Invested Capital (“ROIC”)

ROIC is used because we believe it is an important supplemental measure of financial performance and it is also currently a performance measure under our long-term incentive plan. ROIC is frequently used by analysts, investors and other interested parties in the evaluation of companies in our industry. ROIC is also used by investors and analysts to evaluate management’s deployment of capital to create shareholder value. We define ROIC as tax-effected net operating income for the last 12 months divided by average total invested capital over a rolling four-quarter period. Total invested capital is defined as stockholders’ equity plus debt, less cash and cash equivalents. Other companies may not define or calculate ROIC in the same way.

About Zurn Elkay Water Solutions

Headquartered in Milwaukee, Wisconsin, Zurn Elkay Water Solutions is a growth-oriented, pure-play water business that designs, procures, manufactures, and markets what we believe is the broadest sustainable product portfolio of solutions to improve health, human safety, and the environment. The Zurn Elkay product portfolio includes professional grade water control and safety, water distribution and drainage, drinking water, finish plumbing, hygienic, environmental and site works products for public and private spaces. Visit www.zurn-elkay.com for additional information about the Company.

Conference Call Details

Zurn Elkay Water Solutions will hold a conference call on Wednesday, July 27, 2022, at 8:30 a.m. Eastern Time to discuss its second quarter 2022 results, provide a general business update and respond to investor questions. Zurn Elkay Chairman and CEO, Todd Adams, and Senior Vice President and CFO, Mark Peterson, will co-host the call and webcast. The conference call can be accessed via telephone as follows:

		Domestic toll-free: 888-510-2359
		International toll: 646-960-0215
		Access Code: 7660247

A live webcast of the call will also be available on the Company’s investor relations website. Please go to the website (investors.zurn-elkay.com) at least 15 minutes prior to the start of the call to register, download and install any necessary audio software.

If you are unable to participate during the live teleconference, a replay of the conference call will be available from 9:30 a.m. Central Time July 27, 2022 until 10:59 p.m. Central Time, August 3, 2022. To access the replay, please dial 800-770-2030 (domestic) or 647-362-9199 (international). The Conference ID for the replay is: 7660247. The replay will also be available as a webcast on the Company’s investor relations website.

Cautionary Statement on Forward-Looking Statements

Information in this release may involve outlook, expectations, beliefs, plans, intentions, strategies or other statements regarding the future, which are forward-looking statements. These forward-looking statements involve risks and uncertainties. All forward-looking statements included in this release are based on information available to Zurn Elkay Water Solutions Corporation as of the date of the release, and Zurn Elkay assumes no obligation to update any such forward-looking statements. The statements in this release are not guarantees of future performance, and actual results could differ materially from current expectations. Numerous factors could cause or contribute to such differences. Please refer to “Risk Factors” and “Cautionary Notice Regarding Forward-Looking Statements” in our Annual Report on Form 10-K for the year ended December 31, 2021, as well as the Company’s subsequent annual, quarterly and current reports filed on Forms 10-K, 10-Q and 8-K from time to time with the Securities and Exchange Commission for a further discussion of the factors and risks associated with the business. In addition, our Merger with Elkay Manufacturing Company involves various risks, uncertainties, and factors including those described in Part II, Item 1A, “Risk Factors” in the Company’s Quarterly Reporting on Form 10-Q for the quarterly period ended June 30, 2022.

Zurn Elkay Water Solutions Corporation and Subsidiaries Condensed Consolidated Statements of Operations (in Millions, except share and per share amounts) (Unaudited)

	Three Months Ended						Six Months Ended
	June 30, 2022			June 30, 2021			June 30, 2022			June 30, 2021
Net sales	$	284.2		$	243.7		$	523.8		$	448.9
Cost of sales		170.4			139.9			308.1			256.7
Gross profit		113.8			103.8			215.7			192.2
Selling, general and administrative expenses		58.4			60.4			112.3			118.1
Restructuring and other similar charges		0.3			0.3			1.4			0.9
Amortization of intangible assets		1.6			5.8			4.6			11.9
Income from operations		53.5			37.3			97.4			61.3
Non-operating expense:
Interest expense, net		(5.2	)		(10.1	)		(10.0	)		(19.7	)
Other expense, net		(0.6	)		(0.4	)		(0.3	)		(0.1	)
Income before income taxes		47.7			26.8			87.1			41.5
Provision for income taxes		(11.3	)		(6.2	)		(21.3	)		(10.9	)
Net income from continuing operations		36.4			20.6			65.8			30.6
Income from discontinued operations, net of tax		—			52.6			0.8			92.6
Net income attributable to Zurn Elkay common stockholders	$	36.4		$	73.2		$	66.6		$	123.2

Basic net income per share:
Continuing operations	$	0.29		$	0.17		$	0.52		$	0.25
Discontinued operations	$	—		$	0.44		$	0.01		$	0.77
Net income	$	0.29		$	0.61		$	0.53		$	1.03
Diluted net income per share:
Continuing operations	$	0.28		$	0.17		$	0.51		$	0.25
Discontinued operations	$	—		$	0.42		$	0.01		$	0.75
Net income	$	0.28		$	0.59		$	0.52		$	0.99
Weighted-average number of shares outstanding (in thousands):
Basic		126,419			120,465			126,350			120,138
Effect of dilutive equity awards		1,972			3,832			2,063			3,953
Diluted		128,391			124,297			128,413			124,091

Zurn Elkay Water Solutions Corporation and Subsidiaries Reconciliation of GAAP to Non-GAAP Financial Measures Three Months Ended June 30, 2022 (in Millions) (Unaudited)

	Three Months Ended June 30, 2022
	Reported Results					Adjustments						Non-GAAP Results

Net Sales	$	284.2				$	—					$	284.2

EBITDA		57.5					6.8		(a)				64.3
Depreciation and amortization		(4.0	)				—						(4.0	)
Income from operations		53.5					6.8		(b)				60.3

Income before income taxes		47.7					5.2		(c)				52.9
Provision for income taxes and indicated rate		(11.3	)	23.7	%		(1.1	)		21.2	%		(12.4	)	23.4	%
Net income from continuing operations		36.4					4.1						40.5

Income from discontinued operations, net of tax		—					—						—
Net income attributable to Zurn Elkay common stockholders	$	36.4				$	4.1					$	40.5

	EBITDA Adjustments (a)					Income from Operations Adjustments (b)						Income before Income Taxes Adjustments (c)
Restructuring and other similar charges	$	0.3				$	0.3					$	0.3
Acquisition-related fair value adjustment		0.3					0.3						0.3
Last-in-first-out inventory adjustments		2.4					2.4						2.4
Stock-based compensation expense		3.8					3.8						—
Amortization of intangible assets		—					—						1.6
Other expense, net (1)		—					—						0.6
Total Adjustments	$	6.8				$	6.8					$	5.2

____________________
(1)		Other expense, net for the periods indicated, consists primarily of gains and losses from foreign currency transactions and the non-service cost components of net periodic benefit credits associated with our defined benefit plans.

Zurn Elkay Water Solutions Corporation and Subsidiaries Reconciliation of GAAP to Non-GAAP Financial Measures Six Months Ended June 30, 2022 (in Millions) (Unaudited)

	Six Months Ended June 30, 2022
	Reported Results					Adjustments						Non-GAAP Results

Net Sales	$	523.8				$	—					$	523.8

EBITDA		106.7					9.6		(a)				116.3
Depreciation and amortization		(9.3	)				—						(9.3	)
Income from operations		97.4					9.6		(b)				107.0

Income before income taxes		87.1					6.8		(c)				93.9
Provision for income taxes and indicated rate		(21.3	)	24.5	%		(1.5	)		22.1	%		(22.8	)	24.3	%
Net income from continuing operations		65.8					5.3						71.1

Income from discontinued operations, net of tax		0.8					(0.8	)					—
Net income attributable to Zurn Elkay common stockholders	$	66.6				$	4.5					$	71.1

	EBITDA Adjustments (a)					Income from Operations Adjustments (b)						Income before Income Taxes Adjustments (c)
Restructuring and other similar charges	$	1.4				$	1.4					$	1.4
Acquisition-related fair value adjustment		0.6					0.6						0.6
Other, net (1)		0.3					0.3						0.3
Last-in-first-out inventory adjustments		(0.4	)				(0.4	)					(0.4	)
Stock-based compensation expense		7.7					7.7						—
Amortization of intangible assets		—					—						4.6
Other expense, net (2)		—					—						0.3
Total Adjustments	$	9.6				$	9.6					$	6.8

____________________
(1)		Other, net includes the gains and losses from sale of long-lived assets.
(2)		Other expense, net for the periods indicated, consists primarily of gains and losses from foreign currency transactions and the non-service cost components of net periodic benefit credits associated with our defined benefit plans.

Zurn Elkay Water Solutions Corporation and Subsidiaries Reconciliation of GAAP to Non-GAAP Financial Measures Three Months Ended June 30, 2021 (in Millions) (Unaudited)

	Three Months Ended June 30, 2021
	Reported Results					Adjustments						Non-GAAP Results

Net Sales	$	243.7				$	—					$	243.7

EBITDA		45.5					10.0		(a)				55.5
Depreciation and amortization		(8.2	)				—						(8.2	)
Income from operations		37.3					10.0		(b)				47.3

Income before income taxes		26.8					9.1		(c)				35.9
Provision for income taxes and indicated rate		(6.2	)	23.1	%		(2.3	)		25.3	%		(8.5	)	23.7	%
Net income from continuing operations		20.6					6.8						27.4

Income from discontinued operations, net of tax		52.6					(52.6	)					—
Net income attributable to Zurn Elkay common stockholders	$	73.2				$	(45.8	)				$	27.4

	EBITDA Adjustments (a)					Income from Operations Adjustments (b)						Income before Income Taxes Adjustments (c)
Restructuring and other similar charges	$	0.3				$	0.3					$	0.3
Last-in-first-out inventory adjustments		2.6					2.6						2.6
Stock-based compensation expense		7.1					7.1						—
Amortization of intangible assets		—					—						5.8
Other expense, net (1)		—					—						0.4
Total Adjustments	$	10.0				$	10.0					$	9.1

____________________
(1)		Other expense, net for the periods indicated, consists primarily of gains and losses from foreign currency transactions and the non-service cost components of net periodic benefit credits associated with our defined benefit plans.

Zurn Elkay Water Solutions Corporation and Subsidiaries Reconciliation of GAAP to Non-GAAP Financial Measures Six Months Ended June 30, 2021 (in Millions) (Unaudited)

	Six Months Ended June 30, 2021
	Reported Results					Adjustments						Non-GAAP Results

Net Sales	$	448.9				$	—					$	448.9

EBITDA		77.8					22.0		(a)				99.8
Depreciation and amortization		(16.5	)				—						(16.5	)
Income from operations		61.3					22.0		(b)				83.3

Income before income taxes		41.5					17.8		(c)				59.3
Provision for income taxes and indicated rate		(10.9	)	26.3	%		(4.4	)		24.7	%		(15.3	)	25.8	%
Net income from continuing operations		30.6					13.4						44.0

Income from discontinued operations, net of tax		92.6					(92.6	)					—
Net income attributable to Zurn Elkay common stockholders	$	123.2				$	(79.2	)				$	44.0

	EBITDA Adjustments (a)					Income from Operations Adjustments (b)						Income before Income Taxes Adjustments (c)
Restructuring and other similar charges	$	0.9				$	0.9					$	0.9
Acquisition-related fair value adjustment		0.6					0.6						0.6
Last-in-first-out inventory adjustments		4.3					4.3						4.3
Stock-based compensation expense		16.2					16.2						—
Amortization of intangible assets		—					—						11.9
Other expense, net (1)		—					—						0.1
Total Adjustments	$	22.0				$	22.0					$	17.8

____________________
(1)		Other expense, net for the periods indicated, consists primarily of gains and losses from foreign currency transactions and the non-service cost components of net periodic benefit credits associated with our defined benefit plans.

Zurn Elkay Water Solutions Corporation and Subsidiaries Reconciliation of GAAP to Non-GAAP Financial Measures Three and Six Months Ended June 30, 2022 and June 30, 2021 (in Millions, except share and per share amounts) (Unaudited)

	Three Months Ended						Six Months Ended
Adjusted EBITDA	June 30, 2022			June 30, 2021			June 30, 2022			June 30, 2021
Net income attributable to Zurn Elkay common stockholders	$	36.4		$	73.2		$	66.6		$	123.2
Income from discontinued operations, net of tax (1)		—			(52.6	)		(0.8	)		(92.6	)
Provision for income taxes		11.3			6.2			21.3			10.9
Other expense, net (2)		0.6			0.4			0.3			0.1
Interest expense		5.2			10.1			10.0			19.7
Income from operations	$	53.5		$	37.3		$	97.4		$	61.3

*Adjustments*
Depreciation and amortization	$	4.0		$	8.2		$	9.3		$	16.5
Restructuring and other similar charges		0.3			0.3			1.4			0.9
Stock-based compensation expense		3.8			7.1			7.7			16.2
Last-in first-out inventory adjustment		2.4			2.6			(0.4	)		4.3
Acquisition-related fair value adjustment		0.3			—			0.6			0.6
Other, net (3)		—			—			0.3			—
Subtotal of adjustments		10.8			18.2			18.9			38.5
Adjusted EBITDA	$	64.3		$	55.5		$	116.3		$	99.8
Corporate costs	$	(7.0	)	$	(9.8	)	$	(13.8	)	$	(18.8	)
Adjusted EBITDA before corporate costs	$	71.3		$	65.3		$	130.1		$	118.6

____________________
(1)		Income from discontinued operations, net of tax is not included in Adjusted EBITDA in accordance with the terms of our credit agreement.
(2)		Other expense, net for the periods indicated, consists primarily of gains and losses from foreign currency transactions and the non-service cost components of net periodic benefit credits associated with our defined benefit plans.
(3)		Other, net includes the gains and losses from sale of long-lived assets.

	Three Months Ended						Six Months Ended
Adjusted Net Income and Earnings Per Share	June 30, 2022			June 30, 2021			June 30, 2022			June 30, 2021
Net income attributable to Zurn Elkay common stockholders	$	36.4		$	73.2		$	66.6		$	123.2
Income from discontinued operations, net of tax		—			(52.6	)		(0.8	)		(92.6	)
Amortization of intangible assets		1.6			5.8			4.6			11.9
Restructuring and other similar charges		0.3			0.3			1.4			0.9
Acquisition-related fair value adjustment		0.3			—			0.6			0.6
Last-in first-out inventory adjustment		2.4			2.6			(0.4	)		4.3
Other expense, net (1)		0.6			0.4			0.3			0.1
Other, net (2)		—			—			0.3			—
Tax effect on above items		(1.1	)		(2.3	)		(1.5	)		(4.4	)
Adjusted net income	$	40.5		$	27.4		$	71.1		$	44.0

GAAP diluted net income per share from continuing operations	$	0.28		$	0.17		$	0.51		$	0.25
Adjusted earnings per share – diluted	$	0.32		$	0.22		$	0.55		$	0.35

Weighted-average number of shares outstanding (in thousands)
GAAP basic weighted-average shares		126,419			120,465			126,350			120,138
Effect of dilutive equity securities		1,972			3,832			2,063			3,953
Adjusted diluted weighted-average shares		128,391			124,297			128,413			124,091

____________________
1.		Other expense, net for the periods indicated, consists primarily of gains and losses from foreign currency transactions and the non-service cost components of net periodic benefit credits associated with our defined benefit plans.
2.		Other, net includes the gains and losses from the sale of long-lived assets.

	Three Months Ended⁽¹⁾						Six Months Ended⁽¹⁾
	June 30, 2022			June 30, 2021			June 30, 2022			June 30, 2021
Cash provided by (used for) operating activities	$	41.9		$	145.0		$	(12.0	)	$	145.0
Expenditures for property, plant and equipment		(1.2	)		(14.0	)		(2.0	)		(14.0	)
Free cash flow	$	40.7		$	131.0		$	(14.0	)	$	131.0

(1)

The condensed consolidated statements of cash flows for the periods ended June 30, 2021 have not been adjusted to separately disclose cash flows related to the discontinued operations.

Zurn Elkay Water Solutions Corporation and Subsidiaries Condensed Consolidated Statements of Comprehensive Income (in Millions) (Unaudited)

	Three Months Ended						Six Months Ended
	June 30, 2022			June 30, 2021			June 30, 2022		June 30, 2021
Net income	$	36.4		$	73.2		$	66.6	$	123.2
Other comprehensive income (loss):
Foreign currency translation adjustments		(2.0	)		5.4			—		3.7
Change in pension and postretirement defined benefit plans, net of tax		—			(0.1	)		—		(0.2	)
Other comprehensive (loss) income, net of tax		(2.0	)		5.3			—		3.5
Total comprehensive income	$	34.4		$	78.5		$	66.6	$	126.7

Zurn Elkay Water Solutions Corporation and Subsidiaries Condensed Consolidated Balance Sheets (in Millions, except share amounts)

	(Unaudited)
	June 30, 2022			December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	110.4		$	96.6
Receivables, net		188.9			144.1
Inventories		243.4			184.5
Income taxes receivable		20.1			33.1
Other current assets		25.6			16.5
Total current assets		588.4			474.8
Property, plant and equipment, net		61.6			64.4
Intangible assets, net		174.8			179.1
Goodwill		252.6			254.1
Insurance for asbestos claims		66.0			66.0
Other assets		32.9			39.3
Total assets	$	1,176.3		$	1,077.7
Liabilities and stockholders’ equity
Current liabilities:
Current maturities of debt	$	5.6		$	5.6
Trade payables		126.1			105.1
Compensation and benefits		9.2			22.0
Current portion of pension and postretirement benefit obligations		1.3			1.3
Other current liabilities		99.0			106.4
Total current liabilities		241.2			240.4

Long-term debt		531.9			533.9
Pension and postretirement benefit obligations		55.9			57.3
Deferred income taxes		9.9			3.1
Operating lease liability		5.9			8.9
Reserve for asbestos claims		66.0			66.0
Other liabilities		36.1			41.7
Total liabilities		946.9			710.9

Stockholders’ equity:
Common stock, $0.01 par value; 200,000,000 shares authorized; shares issued and outstanding: 126,182,246 at June 30, 2022 and 125,720,068 at December 31, 2021		1.3			1.3
Additional paid-in capital		1,438.3			1,436.9
Retained deficit		(1,135.3	)		(1,236.9	)
Accumulated other comprehensive loss		(74.9	)		(74.9	)
Total stockholders’ equity		229.4			126.4
Total liabilities and stockholders’ equity	$	1,176.3		$	1,077.7

Zurn Elkay Water Solutions Corporation and Subsidiaries Condensed Consolidated Statements of Cash Flows (in Millions) (Unaudited)

	Six Months Ended ⁽¹⁾
	June 30, 2022			June 30, 2021
Operating activities
Net income	$	66.6		$	123.2
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation		4.7			28.1
Amortization of intangible assets		4.6			18.5
Loss (gain) on dispositions of long-lived assets		0.3			(9.2	)
Deferred income taxes		6.8			(4.0	)
Other non-cash expenses (income)		1.7			(1.1	)
Stock-based compensation expense		7.7			27.0
Changes in operating assets and liabilities:
Receivables		(45.0	)		(61.7	)
Inventories		(58.9	)		(30.7	)
Other assets		7.8			(8.9	)
Accounts payable		21.1			62.1
Accruals and other		(29.4	)		1.7
Cash (used for) provided by operating activities		(12.0	)		145.0

Investing activities
Expenditures for property, plant and equipment		(2.0	)		(14.0	)
Acquisitions, net of cash acquired		1.1			(3.4	)
Proceeds from dispositions of long-lived assets		1.3			13.0
Proceeds associated with divestiture of discontinued operations		35.0			—
Cash provided by (used for) investing activities		35.4			(4.4	)

Financing activities
Proceeds from borrowings of debt		10.0			—
Repayments of debt		(13.0	)		(1.1	)
Proceeds from exercise of stock options		1.8			19.4
Taxes withheld and paid on employees’ share-based payment awards		(0.5	)		(1.4	)
Repurchase of common stock		—			(0.9	)
Payment of common stock dividends		(7.6	)		(21.6	)
Cash used for financing activities		(9.3	)		(5.6	)
Effect of exchange rate changes on cash, cash equivalents and restricted cash		(0.3	)		0.1
Increase in cash, cash equivalents and restricted cash		13.8			135.1
Cash, cash equivalents and restricted cash at beginning of period		96.6			255.6
Cash, cash equivalents and restricted cash at end of period	$	110.4		$	390.7

(1)

The condensed consolidated statements of cash flows for the period ended June 30, 2021 have not been adjusted to separately disclose cash flows related to the discontinued operations.

View source version on businesswire.com: https://www.businesswire.com/news/home/20220726006076/en/

Dave Pauli

Vice President – Investor Relations

414.223.7770

KEYWORDS: Wisconsin United States North America

INDUSTRY KEYWORDS: Other Energy Utilities Natural Resources Other Manufacturing Alternative Energy Energy Other Natural Resources Manufacturing

MEDIA:

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July 26, 2022 4:21 pm

First Interstate BancSystem, Inc. Reports Second Quarter Earnings

First Interstate BancSystem, Inc. Reports Second Quarter Earnings

BILLINGS, Mont.–(BUSINESS WIRE)–
First Interstate BancSystem, Inc. (NASDAQ: FIBK) today reported financial results for the second quarter of 2022. For the quarter, the Company reported a net income of $64.1 million, or $0.59 per share, which compares to a net loss of $33.4 million, or $(0.36) per share, for the first quarter of 2022, and net income of $42.5 million, or $0.69 per share, for the second quarter of 2021.

Earnings include pre-tax acquisition costs of $45.8 million and $65.2 million for the second and first quarters of 2022, respectively, related to the acquisition of Great Western Bancorp, Inc. (“Great Western”), the parent company of Great Western Bank (“GWB”), which reduced earnings by $0.34 and $0.57 per common share for the second and first quarters of 2022, respectively. The second quarter of 2021 did not include comparable costs.

HIGHLIGHTS

Completed the merger and core system conversion of GWB on May 23, 2022, which we anticipate will result in cost savings in the second half of 2022.
Net income of $64.1 million, or $0.59 per share, driven by an increase in net interest income and a $1.7 million reduction in credit losses.
Net interest margin ratio, on a fully taxable equivalent basis, increased to 3.25% for the second quarter of 2022, a 45 basis point increase from the first quarter of 2022. Excluding income related to the Payroll Protection Program (PPP) and interest accretion income, the adjusted net interest margin ratio¹, on a fully taxable equivalent basis, increased to 3.01% for the second quarter of 2022, a 36 basis point increase from the first quarter of 2022.
Efficiency ratio of 71.4% for the second quarter of 2022 compared to 89.6% for the first quarter of 2022. Excluding acquisition related expenses and other intangibles amortization, the adjusted efficiency ratio¹ was 55.8% for the second quarter of 2022 compared to 62.2% for the first quarter of 2022.
Return on average common stockholders’ equity of 7.5% for the second quarter of 2022. Excluding after-tax acquisition-related costs, recovery in the credit valuation discount on derivatives, and investment securities gains, adjusted return on average tangible common stockholders’ equity¹ was 11.7% for the second quarter of 2022.
Loans held for investment increased $217.5 million, or an annualized 5.15% during the second quarter of 2022. Excluding PPP loans, loans held for investment increased $262.4 million, or an annualized 6.4% during the second quarter of 2022.
A reduction of provisional goodwill of approximately $37.8 million, primarily as a result of the fair value re-evaluation of certain loans held for investment and loans held for sale in the second quarter of 2022 acquired in the GWB acquisition.
Criticized loans declined $73.1 million, to $780.0 million as of June 30, 2022, from $853.1 million as of March 31, 2022.
Repurchased 1.7 million shares of common stock at a weighted average price of $37.38, including costs and commissions, pursuant to the newly announced stock repurchase program.
Tangible book value per common share¹ of $18.92 as of June 30, 2022, compared to $19.78 as of March 31, 2022 and $20.49 as of June 30, 2021.

“As expected, we saw an acceleration in loan growth, significant expansion in our net interest margin, and further improvement in asset quality during the second quarter, all of which resulted in a substantial increase in our profitability, excluding acquisition-related expenses,” said Kevin P. Riley, President and Chief Executive Officer of First Interstate BancSystem, Inc. “We continue to effectively capitalize on strong economic conditions and healthy loan demand across our markets, which resulted in an increase in most of our major loan portfolios during the second quarter. Our higher level of loan growth enabled us to redeploy more of our excess liquidity into higher earning assets, while our asset-sensitive balance sheet benefited from the increase in interest rates, resulting in a 45 basis point increase in our net interest margin.

“Our markets remain very resilient and we have not yet seen higher rates or inflationary pressures having a material impact on economic activity, loan demand, or asset quality. Our loan pipeline remains strong and we expect to see a continuation of the positive trends in loan growth and margin expansion. Having completed the Great Western system conversion in late May, we will now start to see more of the synergies projected for this transaction, which should lead to further improvement in our profitability. With the addition of Great Western and the strong performance we are seeing in our historical markets, we believe we are well positioned to generate profitable growth and further enhance the value of our franchise in the years ahead,” said Mr. Riley.

DIVIDEND DECLARATION

On July 25, 2022, the Company’s board of directors declared a dividend of $0.41 per common share, payable on August 19, 2022, to common stockholders of record as of August 9, 2022. The dividend equates to a 4.6% annualized yield based on the $35.65 per share average closing price of the Company’s common stock as reported on NASDAQ during the second quarter of 2022.

RECENT ACQUISITION

On February 1, 2022, the Company completed its acquisition of Great Western, the parent company of GWB, a Sioux Falls, South Dakota based community bank with 174 banking offices across Arizona, Colorado, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, and South Dakota. Consideration for the acquisition totaled approximately $1.7 billion consisting of the issuance of 46.9 million shares of the Company’s Class A common stock valued at $36.76 per share, the opening price of the Company’s Class A common stock as quoted on the NASDAQ stock market on the acquisition date. GWB was merged with our existing bank subsidiary, First Interstate Bank, contemporaneously with the closing of the parent company merger. The core system conversion was completed on May 23, 2022.

As of the acquisition date, Great Western had total assets with fair values of $13,352.6 million, loans held for investment with fair values of $7,705.0 million and deposits with fair values of $11,688.0 million. Adjustments to the fair value marks for loans held for sale, loans held for investment, allowance for credit losses, core deposit intangibles, premises and equipment, deferred tax assets, and accounts payable and accrued expenses were made since the prior quarter. The adjustments resulted in a net decrease to goodwill of $37.8 million from the first quarter reported balances. The fair values of the assets and liabilities acquired from GWB are provisional and the Company will finalize the amounts during the one-year measurement period. As of June 30, 2022, the Company recorded provisional goodwill of $478.2 million, customer relationship intangible assets of $22.8 million, and core deposit intangible assets of $50.1 million.

NET INTEREST INCOME

Net interest income increased $59.9 million, or 33.7%, to $237.9 million, during the second quarter of 2022, compared to $178.0 million during the first quarter of 2022, resulting from growth in average earning assets and the increase in our net interest margin. Net interest income increased $119.1 million, or 100.3%, during the second quarter of 2022, from $118.8 million during the second quarter of 2021, primarily as a result of the impact of the GWB acquisition, which was partially offset by a decrease of $6.7 million in PPP loan income compared to the second quarter of 2021.

Interest accretion attributable to the fair valuation of acquired loans from acquisitions contributed $16.7 million, $7.6 million, and $2.5 million to net interest income during the second quarter of 2022, the first quarter of 2022, and the second quarter of 2021, respectively.

The net interest margin ratio was 3.25% for the second quarter of 2022 compared to 2.80% reported during the first quarter of 2022 and 2.82% during the second quarter of 2021. Excluding interest accretion from the fair value of acquired loans and PPP income, on a quarter-over-quarter basis the net interest margin increased 36 basis points which was primarily the result of a shift in the mix of earning assets toward loans, and an increase in the yield on loans, investment securities and cash. On the same basis year-over-year, the increase in net interest margin was the result of increased yields on earning assets, due to a shift in the mix of earning assets toward investment securities and away from cash, and higher yields on both loans and investment securities and cash.

PROVISION FOR (REDUCTION OF) CREDIT LOSSES

During the second quarter of 2022, the Company recorded a reduction of credit losses of $1.7 million, compared to a provision for credit losses of $61.3 million during the first quarter of 2022. The Company recorded no provision for credit losses during the second quarter of 2021.

The allowance for credit losses is updated quarterly based on the current loan portfolio, asset quality metrics, and the results of the current economic outlook. For the second quarter of 2022, the allowance for credit losses was impacted by net charge-offs of $0.3 million, or an annualized 0.01% of average loans outstanding, compared to net charge-offs of $16.7 million, or an annualized 0.47% of average loans outstanding, for the first quarter of 2022, and net charge-offs of $1.1 million, or an annualized 0.04% of average loans outstanding, for the second quarter of 2021.

The Company’s allowance for credit losses as a percentage of period-end loans was 1.28%, 1.46%, and 1.38% at June 30, 2022, March 31, 2022, and June 30, 2021, respectively. The decrease in the percentage from March 31, 2022 is primarily a result of improved credit performance and fair value re-evaluation of certain loans which reduced the provisional allowance for credit losses on acquired GWB loans, partially offset by an assumed deterioration of the economic outlook. Coverage of non-performing loans decreased to 200.5% at June 30, 2022, compared to 203.3% at March 31, 2022 and decreased from 380.6% at June 30, 2021. The year-over-year decrease is a result of higher levels of non-performing loans related to the GWB acquisition.

NON-INTEREST INCOME

Non-interest income increased $1.8 million, or 3.7%, to $51.0 million during the second quarter of 2022, as compared to $49.2 million during the first quarter of 2022, partially driven by an additional month of GWB income compared to the first quarter of 2022. Non-interest income increased $15.7 million, or 44.5%, from $35.3 million during the second quarter of 2021, primarily as a result of the GWB acquisition.

Payment services revenues increased $4.7 million, or 31.8%, to $19.5 million during the second quarter of 2022, when compared to the $14.8 million during the first quarter of 2022 and increased $8.1 million, or 71.1%, during the second quarter of 2022, when compared to the $11.4 million during the second quarter of 2021. These increases are mainly the result of increased credit card interchange revenues driven by increases in business volume and increased debit card interchange revenues during the second quarter of 2022 as compared to the first quarter of 2022 and the second quarter of 2021.

Mortgage banking revenues decreased $3.4 million, or 40.5%, to $5.0 million during the second quarter of 2022, as compared to $8.4 million during the first quarter of 2022 as a result of the $3.4 million mortgage servicing recovery of impairment during the first quarter of 2022. No recovery or impairment was recorded during the second quarter of 2022. Mortgage banking revenues decreased $4.6 million, or 47.9%, during the second quarter of 2022 from $9.6 million during the second quarter of 2021, primarily due to lower volumes of loans sold.

Wealth management revenues increased $1.2 million, or 14.8%, to $9.3 million during the second quarter of 2022, as compared to $8.1 million during the first quarter of 2022, primarily due to increases in trust and investment service revenues. Wealth management revenues increased $3.0 million, or 47.6%, during the second quarter of 2022 from $6.3 million during the second quarter of 2021, primarily due to the acquisition of GWB and trust service revenues.

Service charges on deposit accounts decreased $1.4 million, or 18.2%, to $6.3 million during the second quarter of 2022, as compared to $7.7 million during the first quarter of 2022 as a result of lower overdraft fees related to the previously announced reduction to the Company’s non-sufficient funds and overdraft practices. Service charges on deposits increased $2.4 million, or 61.5%, during the second quarter of 2022 from $3.9 million during the second quarter of 2021, mainly due to the GWB acquisition.

Other service charges, commissions, and fees decreased $0.7 million, or 16.3%, to $3.6 million during the second quarter of 2022, when compared to $4.3 million during the first quarter of 2022, mainly due to a decrease in swap fee revenues. Other service charges, commissions, and fees increased $2.0 million, or 125.0%, during the second quarter of 2022 from $1.6 million during the second quarter of 2021, primarily due to the acquisition of GWB and increases in swap fee revenues.

Other income increased $1.4 million, or 23.3%, to $7.4 million during the second quarter of 2022, as compared to $6.0 million during the first quarter of 2022. Other income increased $4.8 million, or 184.6%, during the second quarter of 2022 from $2.6 million during the second quarter of 2021, primarily due to an increase in the cash surrender value of life insurance, gains on the sale of premises and equipment, and a recovery in the credit valuation discount on derivatives acquired in the GWB acquisition.

NON-INTEREST EXPENSE

Non-interest expense increased $3.1 million, or 1.5%, to $210.3 million during the second quarter of 2022, as compared to $207.2 million during the first quarter of 2022, which included $45.8 million and $65.2 million in acquisition related costs during the second and first quarter of 2022, respectively. Exclusive of acquisition related expenses, non-interest expense increased $22.5 million during the second quarter of 2022, compared to the first quarter of 2022, primarily as a result of an additional month of GWB ongoing operating expenses. Non-interest expense increased $111.3 million, or 112.4%, from $99.0 million during the second quarter of 2021, primarily due to $45.8 million in acquisition related costs and operating expenses of GWB. Exclusive of acquisition related expenses, non-interest expense increased $65.5 million during the second quarter of 2022, compared to the second quarter of 2021, primarily as a result of ongoing operating expenses of GWB.

Salaries and wages expenses increased $14.8 million, or 24.7%, to $74.8 million during the second quarter of 2022, compared to $60.0 million during the first quarter of 2022, primarily as a result of one month of additional employee-related expenses as a result of the acquisition of GWB and increased incentive accruals. Salaries and wages expenses increased $33.2 million, or 79.8%, from $41.6 million in the second quarter of 2021, primarily as a result of the additional employee-related expenses as a result of the acquisition of GWB, which were partially offset by lower commission expenses.

Employee benefit expenses decreased $1.8 million, or 8.5%, to $19.4 million during the second quarter of 2022, as compared to $21.2 million during the first quarter of 2022, primarily due to lower medical insurance costs and a decrease in payroll tax costs. Employee benefit expenses increased $4.7 million, or 32.0%, from $14.7 million during the second quarter of 2021, primarily due to an increase in expense related to the GWB acquisition.

Occupancy and equipment expenses increased $1.6 million, or 10.4%, to $17.0 million during the second quarter of 2022, compared to $15.4 million during the first quarter of 2022 and increased $5.8 million, or 51.8%, from $11.2 million during the second quarter of 2021, due to the expansion of our branch network related to the GWB acquisition.

Other intangible amortization expense increased $0.5 million, or 13.9%, to $4.1 million during the second quarter of 2022, as compared to $3.6 million during the first quarter of 2022 and increased $1.6 million, or 64.0%, during the second quarter of 2022 from $2.5 million during the second quarter of 2021. These increases are attributable to the amortization of the $50.1 million of core deposit intangibles and $22.8 million customer relationship intangibles acquired in the GWB acquisition.

Other expenses increased $7.5 million, or 18.0%, to $49.2 million during the second quarter of 2022, as compared to $41.7 million during the first quarter of 2022, primarily due to increases in technology services, professional fees, debit and credit card processing fees, loan expenses, and other normal increases as a result of a full quarter related to the GWB acquisition. Other expenses increased $20.2 million, or 69.7%, during the second quarter of 2022 from $29.0 million during the second quarter of 2021, primarily due to increases in technology services, debit and credit card processing fees, FDIC insurance premiums, loan expenses, credit card rewards, professional fees, and other normal increases as a result of the GWB acquisition during the first quarter of 2022.

BALANCE SHEET

Total assets decreased $1,123.5 million, or 3.4%, to $32,038.7 million as of June 30, 2022, from $33,162.2 million as of March 31, 2022, primarily due to a decrease in deposits and cash and cash equivalents. Total assets increased $13,098.2 million, or 69.2%, from $18,940.5 million as of June 30, 2021, primarily due to $13,352.6 million of assets acquired in the acquisition of GWB.

Investment securities increased $1,368.6 million, or 14.4%, to $10,871.1 million as of June 30, 2022, from $9,502.5 million as of March 31, 2022, and increased $5,227.8 million, or 92.6%, from $5,643.3 million as of June 30, 2021. The increases were primarily due to the redeployment of cash and cash equivalents into the securities portfolio and the year-over-year increase includes $2,699.0 million of securities acquired as a result of the GWB acquisition.

Loans held for sale decreased $50.7 million, or 28.5%, to $127.4 million as of June 30, 2022, from $178.1 million as of March 31, 2022, primarily due to resolutions of loans acquired from GWB and by a measurement period adjustment during the second quarter of 2022 for loans classified as held for sale. Loans held for sale increased $78.6 million, or 161.1%, from $48.8 million as of June 30, 2021, primarily due to the loans acquired from GWB.

The following table presents the composition and comparison of loans held for investment:

																				GWB Acquired Loans as of February 1, 2022
	June 30, 2022			March 31, 2022			$ Change			% Change		June 30, 2021			$ Change			% Change		GWB Acquired Loans as of February 1, 2022
Real estate loans:
Commercial	$	7,857.7		$	7,805.7		$	52.0		0.7	%	$	3,753.4		$	4,104.3		109.3	%	$	3,968.8
Construction loans:
Land acquisition & development		355.7			344.8			10.9		3.2			261.1			94.6		36.2			116.4
Residential		444.8			406.0			38.8		9.6			263.5			181.3		68.8			122.1
Commercial		959.0			844.8			114.2		13.5			632.0			327.0		51.7			245.1
Total construction loans		1,759.5			1,595.6			163.9		10.3			1,156.6			602.9		52.1			483.6
Residential		2,060.4			1,997.5			62.9		3.1			1,577.7			482.7		30.6			495.0
Agricultural		821.5			833.6			(12.1	)	(1.5	)		223.5			598.0		267.6			631.8
Total real estate loans		12,499.1			12,232.4			266.7		2.2			6,711.2			5,787.9		86.2			5,579.2
Consumer loans:
Indirect		733.9			739.6			(5.7	)	(0.8	)		773.7			(39.8	)	(5.1	)		13.5
Direct and advance lines		157.3			142.5			14.8		10.4			134.8			22.5		16.7			17.0
Credit card		74.8			73.5			1.3		1.8			64.4			10.4		16.1			11.9
Total consumer loans		966.0			955.6			10.4		1.1			972.9			(6.9	)	(0.7	)		42.4
Commercial		3,036.0			3,017.9			18.1		0.6			1,959.4			1,076.6		54.9			1,503.3
Agricultural		672.0			744.3			(72.3	)	(9.7	)		217.7			454.3		208.7			580.1
Other, including overdrafts		—			4.6			(4.6	)	(100.0	)		6.0			(6.0	)	(100.0	)		—
Deferred loan fees and costs		(10.6	)		(9.8	)		(0.8	)	8.2			(32.5	)		21.9		(67.4	)		—
Loans held for investment, net of deferred loan fees and costs	$	17,162.5		$	16,945.0		$	217.5		1.3	%	$	9,834.7		$	7,327.8		74.5	%		7,705.0

Loans held for investment included PPP loans, net of deferred fees, which were $11.8 million, $56.7 million, and $545.9 million as of June 30, 2022, March 31, 2022, and June 30, 2021, respectively. Excluding the impact of PPP loans, loans held for investment as of June 30, 2022, increased from March 31, 2022, primarily due to an increase in loans in our real estate portfolio.

The loans held for investment to deposit ratio increased to 63.9%, as of June 30, 2022, compared to 60.3% as of March 31, 2022.

Total deposits decreased $1,224.5 million, or 4.4%, to $26,863.8 million as of June 30, 2022, from $28,088.3 million as of March 31, 2022, primarily due to the decline in higher-cost acquired deposit balances held in interest-bearing savings. Total deposits increased $11,298.1 million, or 72.6%, from $15,565.7 million as of June 30, 2021, primarily due to $11,688.0 million of deposits acquired in the acquisition of GWB, partially offset by a decrease in interest-bearing savings.

Securities sold under repurchase agreements increased $163.7 million, or 15.3%, to $1,234.7 million as of June 30, 2022, from $1,071.0 million as of March 31, 2022 and increased $196.0 million, or 18.9%, from $1,038.7 million as of June 30, 2021. Exclusive of $74.0 million in such securities acquired in the GWB acquisition, securities sold under repurchase agreements increased $122.0 million, or 11.7% from June 30, 2021. Fluctuations in repurchase agreement balances correspond with fluctuations in the liquidity of the Company’s clients.

Other liabilities increased $106.5 million, or 38.3%, to $384.8 million as of June 30, 2022, from $278.3 million as of March 31, 2022, primarily due to an increase in derivative liabilities of $36.3 million, an increase in accrued expenses of $32.0 million, and the deferral of $35.0 million in payment service incentives primarily related to the GWB acquisition, with the remaining activity due to normal fluctuations in other liabilities. Year-over-year, other liabilities increased $219.0 million, or 132.1%, as of June 30, 2022, from $165.8 million as of June 30, 2021. Exclusive of other liabilities acquired from GWB of $110.1 million, other liabilities increased $108.9 million as compared to June 30, 2021.

The Company is considered to be “well-capitalized” as of June 30, 2022, having exceeded all regulatory capital adequacy requirements. During the second quarter of 2022, the Company paid regular common stock dividends of approximately $44.8 million, or $0.41 per share, and repurchased 1,720,700 shares of common stock at a weighted average price of $37.38, including costs and commissions, pursuant to its newly announced stock repurchase program.

CREDIT QUALITY

As of June 30, 2022, non-performing assets decreased $12.4 million, or 8.9%, to $126.7 million, compared to $139.1 million as of March 31, 2022, primarily driven by a decrease in non-accrual loans of $11.9 million, or 10.0% and a decrease in other real estate owned of $0.7 million, or 4.0%, partially offset by an increase in loans past due 90 days or more of $0.2 million.

Criticized loans decreased $73.1 million, or 8.6%, to $780.0 million as of June 30, 2022, from $853.1 million as of March 31, 2022, driven by loan upgrades in commercial real estate, agricultural real estate, and agricultural loans. This decrease in criticized loans was partially offset by down grades in construction and commercial loans.

Net loan charge-offs decreased $16.4 million, or 98.2%, to $0.3 million during the second quarter of 2022 as compared to $16.7 million during the first quarter of 2022. The net loan charge-offs in the second quarter of 2022 were composed of charge-offs of $3.7 million and recoveries of $3.4 million. Net charge-offs related to loans acquired from GWB amounted to $15.4 million during the first quarter of 2022.

NON-GAAP FINANCIAL MEASURES

In addition to results presented in accordance with accounting principles generally accepted in the United States of America, or GAAP, this press release contains the following non-GAAP financial measures that management uses to evaluate our performance relative to our capital adequacy standards: (i) tangible common stockholders’ equity; (ii) tangible assets; (iii) tangible book value per common share; (iv) tangible common stockholders’ equity to tangible assets; (v) average tangible common stockholders’ equity; (vi) return on average tangible common stockholders’ equity; (vii) adjusted net interest margin; and (viii) adjusted efficiency ratio. Tangible common stockholders’ equity is calculated as total common stockholders’ equity less goodwill and other intangible assets (excluding mortgage servicing rights). Tangible assets are calculated as total assets less goodwill and other intangible assets (excluding mortgage servicing rights). Tangible book value per common share is calculated as tangible common stockholders’ equity divided by common shares outstanding. Tangible common stockholders’ equity to tangible assets is calculated as tangible common stockholders’ equity divided by tangible assets. Average tangible common stockholders’ equity is calculated as average stockholders’ equity less average goodwill and other intangible assets (excluding mortgage servicing rights). Return on average tangible common stockholders’ equity is calculated as net income available to common shareholders divided by average tangible common stockholders’ equity. Adjusted net interest margin ratio (FTE) is calculated as adjusted net FTE interest income divided by adjusted average interest earning assets. Adjusted efficiency ratio is calculated as adjusted total non-interest expense divided by adjusted revenue. These non-GAAP financial measures may not be comparable to similarly titled measures reported by other companies because other companies may not calculate these non-GAAP measures in the same manner. They also should not be considered in isolation or as a substitute for measures prepared in accordance with GAAP.

The Company adjusts the most directly comparable capital adequacy GAAP financial measures to the non-GAAP financial measures described in subclauses (i) through (vi) above to exclude goodwill and other intangible assets (except mortgage servicing rights). To derive the non-GAAP financial measure identified in subclause (vii) above, the Company adjusts its net interest income to include its FTE interest income and exclude purchase accounting interest accretion on acquired loans and PPP loan income, and it adjusts average interest-earning assets to exclude average PPP loan balances. To derive the non-GAAP financial measure identified in subclause (viii) above, the Company adjusts its total non-interest expense to exclude acquisition-related expenses, litigation accruals (recoveries), intangible amortization expenses, and other real estate owned (income), and it adjusts net interest income to include total non-interest income and exclude net gain (loss) from investment securities, MSR recoveries (impairments) and other identified income. Management believes these non-GAAP financial measures, which are intended to complement the capital ratios defined by banking regulators and to present on a consistent basis our and our acquired companies’ organic continuing operations without regard to acquisition costs and other adjustments that we consider to be unpredictable and dependent on a significant number of factors that are outside our control, are useful to investors in evaluating the Company’s performance because, as a general matter, they either do not represent an actual cash expense and are inconsistent in amount and frequency depending upon the timing and size of our acquisitions (including the size, complexity and/or volume of past acquisitions, which may drive the magnitude of acquisition related costs, but may not be indicative of the size, complexity and/or volume of future acquisitions or related costs), or they cannot be anticipated or estimated in a particular period (in particular as it relates to unexpected recovery amounts). This impacts the ratios that are important to analysts and allows investors to compare certain aspects of the Company’s capitalization to other companies.

See the Non-GAAP Financial Measures table included herein and the textual discussion for a reconciliation of the above described non-GAAP financial measures to their most directly comparable GAAP financial measures.

Cautionary Note Regarding Forward-Looking Statements and Factors that Could Affect Future Results

This press release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Rule 175 promulgated thereunder, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and Rule 3b-6 promulgated thereunder, that involve inherent risks and uncertainties. Any statements about our, Great Western’s or the combined company’s plans, objectives, expectations, strategies, beliefs, or future performance or events constitute forward-looking statements. Such statements are identified by words or phrases such as “believes,” “expects,” “anticipates,” “plans,” “trends,” “objectives,” “continues” or similar expressions, or future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” “may,” or similar expressions. Forward-looking statements involve known and unknown risks, uncertainties, assumptions, estimates and other important factors that change over time and could cause actual results to differ materially from any results, performance or events expressed or implied by such forward-looking statements. Such forward-looking statements include statements about the business combination transaction between FIBK and Great Western (the “Transaction”), including future financial and operating results, the combined company’s plans, objectives, expectations and intentions, and other statements that are not historical facts. Furthermore, the following factors, among others, may cause actual results to differ materially from current expectations in the forward-looking statements, including those set forth in this press release:

new, or changes in, governmental regulations or policies;
tax legislative initiatives or assessments;
more stringent capital requirements, to the extent they may become applicable to us;
changes in accounting standards;
any failure to comply with applicable laws and regulations, including the Community Reinvestment Act and fair lending laws, the USA PATRIOT ACT, Office of Foreign Asset Control guidelines and requirements, the Bank Secrecy Act, and the related Financial Crimes Enforcement Network and Federal Financial Institutions Examination Council’s guidelines and regulations;
lending risks and risks associated with loan sector concentrations;
supply-chain disruptions, labor shortages, and any other decline in economic conditions that could reduce demand for our products and services and negatively impact the credit quality of loans;
loan credit losses exceeding estimates;
the soundness of other financial institutions;
changes in oil and gas prices, and declining demand for coal could negatively impact the demand and credit quality of loans;
the availability of financing sources for working capital and other needs;
a loss of deposits or a change in product mix that increases the Company’s funding costs;
changes in interest rates;
changes in inflationary pressures;
changes to United States trade policies, including the imposition of tariffs and retaliatory tariffs;
competition from new or existing competitors;
variable interest rates tied to London Interbank Offered Rate that may no longer be available or may become unreliable;
cyber-security risks, including “denial-of-service attacks,” “hacking,” and “identity theft” that could result in the disclosure of confidential information;
privacy, information security, and data protection laws, rules, and regulations that affect or limit how we collect and use personal information;
the potential impairment of our goodwill;
exposure to losses in collateralized loan obligation securities;
our reliance on other companies that provide key components of our business infrastructure;
events that may tarnish our reputation;
the loss of the services of our management team and directors;
our ability to attract and retain qualified employees to operate our business;
costs associated with repossessed properties, including environmental remediation;
the effectiveness of our systems of internal operating controls;
our ability to implement new technology-driven products and services or be successful in marketing these products and services to our clients;
our ability to execute on our intended expansion plans;
difficulties we may face in combining the operations of acquired entities or assets with our own operations or assessing the effectiveness of businesses in which we make strategic investments or with which we enter into strategic contractual relationships;
the volatility in the price and trading volume of our common stock;
“anti-takeover” provisions and the regulations, which may make it more difficult for a third party to acquire control of us even in circumstances that could be deemed beneficial to stockholders;
changes in our dividend policy or our ability to pay dividends;
our common stock not being an insured deposit;
the potential dilutive effect of future equity issuances;
the subordination of our common stock to our existing and future indebtedness;
the COVID-19 pandemic and the U.S. government’s response to the pandemic;
changes in general economic conditions caused by inflation, recession, acts of terrorism, an outbreak of hostilities, or other international or domestic calamities, including wars or international conflicts with respect to which the United States may or may not be directly involved, unemployment, or other economic and geopolitical factors; and
the effect of global conditions, earthquakes, tsunamis, floods, fires, and other natural catastrophic events.

These factors are not necessarily all the factors that could cause our actual results, performance or achievements to differ materially from those expressed in or implied by any of our forward-looking statements. Other unknown or unpredictable factors also could harm our results.

All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements set forth above and included and described in more detail in our periodic reports filed with the Securities and Exchange Commission, or SEC, under the Securities Exchange Act of 1934, as amended, under the caption “Risk Factors.” Interested parties are urged to read in their entirety such risk factors prior to making any investment decision with respect to the Company. Forward-looking statements speak only as of the date they are made and we do not undertake or assume any obligation to update publicly any of these statements to reflect actual results, new information or future events, changes in assumptions or changes in other factors affecting forward-looking statements, except to the extent required by applicable laws. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.

Second Quarter 2022 Conference Call for Investors

First Interstate BancSystem, Inc. will host a conference call to discuss the results for the second quarter of 2022 at 11 a.m. Eastern Time (9 a.m. Mountain Time) on Wednesday, July 27, 2022. The conference call will be accessible by telephone and through the Internet. Participants may join the call by dialing 1-844-200-6205; the access code is 813026. To participate via the Internet, visit www.FIBK.com. The call will be recorded and made available for replay after 1 p.m. Eastern Time (11 a.m. Mountain Time) on July 27, 2022 through 9 a.m. Eastern Time (7 a.m. Mountain Time) on August 26, 2022, by dialing 1-866-813-9403. The replay access code is 671673. The call will also be archived on our website, www.FIBK.com, for one year.

About First Interstate BancSystem, Inc.

First Interstate BancSystem, Inc. is a financial and bank holding company focused on community banking. Incorporated in 1971 and headquartered in Billings, Montana, the Company operates banking offices, including detached drive-up facilities, in communities across Arizona, Colorado, Idaho, Iowa, Kansas, Montana, Nebraska, Missouri, Minnesota, North Dakota, Oregon, South Dakota, Washington, and Wyoming, in addition to offering online and mobile banking services. Through our bank subsidiary, First Interstate Bank, the Company delivers a comprehensive range of banking products and services to individuals, businesses, municipalities, and others throughout the Company’s market areas.

FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Consolidated Statements of Income
*(Unaudited)*

	Quarter Ended														% Change
*(In millions, except % and per share data)*	Jun 30, 2022			Mar 31, 2022			Dec 31, 2021			Sep 30, 2021		Jun 30, 2021			2Q22 vs 1Q22		2Q22 vs 2Q21
Net interest income	$	237.9		$	178.0		$	121.8		$	126.9	$	118.8		33.7	%	100.3	%
Net interest income on a fully-taxable equivalent (“FTE”) basis		240.0			179.6			122.3			127.5		119.2		33.6		101.3
Provision for (reduction in) credit losses		(1.7	)		61.3			(9.5	)		—		—		NM		NM
Non-interest income:
Payment services revenues		19.5			14.8			11.3			12.2		11.4		31.8		71.1
Mortgage banking revenues		5.0			8.4			8.0			11.6		9.6		(40.5	)	(47.9	)
Wealth management revenues		9.3			8.1			7.2			6.5		6.3		14.8		47.6
Service charges on deposit accounts		6.3			7.7			4.4			4.4		3.9		(18.2	)	61.5
Other service charges, commissions, and fees		3.6			4.3			2.8			1.4		1.6		(16.3	)	125.0
Total fee-based revenues		43.7			43.3			33.7			36.1		32.8		0.9		33.2
Investment securities (loss) gain		(0.1	)		(0.1	)		0.9			0.3		(0.1	)	—		—
Other income		7.4			6.0			2.8			3.3		2.6		23.3		184.6
Total non-interest income		51.0			49.2			37.4			39.7		35.3		3.7		44.5
Non-interest expense:
Salaries and wages		74.8			60.0			42.3			42.0		41.6		24.7		79.8
Employee benefits		19.4			21.2			12.1			12.9		14.7		(8.5	)	32.0
Occupancy and equipment		17.0			15.4			11.6			11.8		11.2		10.4		51.8
Other intangible amortization		4.1			3.6			2.5			2.4		2.5		13.9		64.0
Other expenses		49.2			41.7			28.8			30.2		29.0		18.0		69.7
Other real estate owned expense (income)		—			0.1			(0.1	)		—		—		NM		NM
Acquisition related expenses		45.8			65.2			5.0			6.6		—		(29.8	)	NM
Total non-interest expense		210.3			207.2			102.2			105.9		99.0		1.5		112.4
Income (loss) before income tax		80.3			(41.3	)		66.5			60.7		55.1		(294.4	)	45.7
Provision for (benefit from) income tax		16.2			(7.9	)		15.4			13.6		12.6		(305.1	)	28.6
Net income (loss)	$	64.1		$	(33.4	)	$	51.1		$	47.1	$	42.5		(291.9	)%	50.8	%

Weighted-average basic shares outstanding		109,107			92,855			61,677			61,674		61,658		17.5	%	77.0	%
Weighted-average diluted shares outstanding		109,132			92,855			61,763			61,748		61,728		17.5		76.8
Earnings (loss) per share – basic	$	0.59		$	(0.36	)	$	0.83		$	0.76	$	0.69		(263.9	)	(14.5	)
Earnings (loss) per share – diluted		0.59			(0.36	)		0.83			0.76		0.69		(263.9	)	(14.5	)

NM – not meaningful

FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
*(Unaudited)*

														% Change
*(In millions, except % and per share data)*	Jun 30, 2022			Mar 31, 2022			Dec 31, 2021			Sep 30, 2021		Jun 30, 2021		2Q22 vs 1Q22		2Q22 vs 2Q21
Assets:
Cash and due from banks	$	425.3		$	387.6		$	168.6		$	227.6	$	238.8	9.7	%	78.1	%
Interest bearing deposits in banks		633.9			3,423.6			2,176.1			2,005.8		1,709.5	(81.5	)	(62.9	)
Federal funds sold		0.1			0.1			0.1			0.1		0.1	—		—
Cash and cash equivalents		1,059.3			3,811.3			2,344.8			2,233.5		1,948.4	(72.2	)	(45.6	)
Securities purchased under agreement to resell		202.2			102.0			—			—		—	98.2		100.0
Investment securities, net		10,871.1			9,502.5			6,508.1			6,021.7		5,643.3	14.4		92.6
Loans held for sale, at fair value		127.4			178.1			30.1			42.5		48.8	(28.5	)	161.1
Loans held for investment		17,162.5			16,945.0			9,331.7			9,622.5		9,834.7	1.3		74.5
Allowance for credit losses		220.4			247.2			122.3			135.1		135.5	(10.8	)	62.7
Net loans held for investment		16,942.1			16,697.8			9,209.4			9,487.4		9,699.2	1.5		74.7
Goodwill and intangible assets (excluding mortgage servicing rights)		1,232.9			1,275.2			690.9			693.3		695.7	(3.3	)	77.2
Company owned life insurance		492.8			490.1			301.5			300.5		299.0	0.6		64.8
Premises and equipment		442.7			444.4			299.6			297.3		299.1	(0.4	)	48.0
Other real estate owned		16.8			17.5			2.0			2.3		2.0	(4.0	)	740.0
Mortgage servicing rights		32.1			32.7			28.2			27.0		27.4	(1.8	)	17.2
Other assets		619.3			610.6			257.3			266.7		277.6	1.4		123.1
Total assets	$	32,038.7		$	33,162.2		$	19,671.9		$	19,372.2	$	18,940.5	(3.4	)%	69.2	%

Liabilities and stockholders’ equity:
Deposits	$	26,863.8		$	28,088.3		$	16,269.6		$	16,007.3	$	15,565.7	(4.4	)%	72.6	%
Securities sold under repurchase agreements		1,234.7			1,071.0			1,051.1			1,007.5		1,038.7	15.3		18.9
Long-term debt		120.4			120.4			112.4			112.4		112.4	—		7.1
Subordinated debentures held by subsidiary trusts		163.1			163.1			87.0			87.0		87.0	—		87.5
Other liabilities		384.8			278.3			165.2			173.2		165.8	38.3		132.1
Total liabilities		28,766.8			29,721.1			17,685.3			17,387.4		16,969.6	(3.2	)	69.5
Stockholders’ equity:
Common stock		2,607.9			2,668.6			945.0			943.6		941.6	(2.3	)	177.0
Retained earnings		993.8			974.5			1,052.6			1,026.9		1,005.2	2.0		(1.1	)
Accumulated other comprehensive (loss) income		(329.8	)		(202.0	)		(11.0	)		14.3		24.1	63.3		NM
Total stockholders’ equity		3,271.9			3,441.1			1,986.6			1,984.8		1,970.9	(4.9	)	66.0
Total liabilities and stockholders’ equity	$	32,038.7		$	33,162.2		$	19,671.9		$	19,372.2	$	18,940.5	(3.4	)%	69.2	%

Common shares outstanding at period end		107,758			109,503			62,200			62,231		62,240	(1.6	)%	73.1	%
Book value per common share at period end	$	30.36		$	31.42		$	31.94		$	31.89	$	31.67	(3.4	)	(4.1	)
Tangible book value per common share at period end**		18.92			19.78			20.83			20.75		20.49	(4.3	)%	(7.7	)%


**Non-GAAP financial measure – see Non-GAAP Financial Measures included herein for a reconciliation of book value per common share at period end (GAAP) to tangible book value per common share at period end (non-GAAP).

FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Loans and Deposits
*(Unaudited)*

																% Change
*(In millions, except %)*	Jun 30, 2022			Mar 31, 2022			Dec 31, 2021			Sep 30, 2021			Jun 30, 2021			2Q22 vs 1Q22		2Q22 vs 2Q21
Loans:
Real Estate:
Commercial real estate	$	7,857.7		$	7,805.7		$	3,971.5		$	3,883.2		$	3,753.4		0.7	%	109.3	%
Construction:
Land acquisition and development		355.7			344.8			247.8			260.2			261.1		3.2		36.2
Residential		444.8			406.0			262.0			268.4			263.5		9.6		68.8
Commercial		959.0			844.8			498.0			610.2			632.0		13.5		51.7
Total construction		1,759.5			1,595.6			1,007.8			1,138.8			1,156.6		10.3		52.1
Residential real estate		2,060.4			1,997.5			1,538.2			1,554.9			1,577.7		3.1		30.6
Agricultural real estate		821.5			833.6			213.9			229.9			223.5		(1.5	)	267.6
Total real estate		12,499.1			12,232.4			6,731.4			6,806.8			6,711.2		2.2		86.2
Consumer:
Indirect		733.9			739.6			737.6			756.8			773.7		(0.8	)	(5.1	)
Direct		157.3			142.5			129.2			132.9			134.8		10.4		16.7
Credit card		74.8			73.5			64.9			64.1			64.4		1.8		16.1
Total consumer		966.0			955.6			931.7			953.8			972.9		1.1		(0.7	)
Commercial		3,036.0			3,017.9			1,475.5			1,668.7			1,959.4		0.6		54.9
Agricultural		672.0			744.3			203.9			212.4			217.7		(9.7	)	208.7
Other		—			4.6			1.5			1.3			6.0		(100.0	)	(100.0	)
Deferred loan fees and costs		(10.6	)		(9.8	)		(12.3	)		(20.5	)		(32.5	)	8.2		(67.4	)
Loans held for investment	$	17,162.5		$	16,945.0		$	9,331.7		$	9,622.5		$	9,834.7		1.3	%	74.5	%

Deposits:
Non-interest bearing	$	8,295.4		$	8,240.6		$	5,568.3		$	5,617.9		$	5,416.8		0.7	%	53.1	%
Interest bearing:
Demand		8,133.3			8,245.0			4,753.2			4,496.5			4,389.0		(1.4	)	85.3
Savings		8,939.4			10,004.3			4,981.6			4,904.9			4,748.4		(10.6	)	88.3
Time, $250 and over		272.1			359.8			186.7			186.3			185.8		(24.4	)	46.4
Time, other		1,223.6			1,238.6			779.8			801.7			825.7		(1.2	)	48.2
Total interest bearing		18,568.4			19,847.7			10,701.3			10,389.4			10,148.9		(6.4	)	83.0
Total deposits	$	26,863.8		$	28,088.3		$	16,269.6		$	16,007.3		$	15,565.7		(4.4	)%	72.6	%

Total core deposits ⁽¹⁾	$	26,591.7		$	27,728.5		$	16,082.9		$	15,821.0		$	15,379.9		(4.1	)%	72.9	%

⁽¹⁾ Core deposits are defined as total deposits less time deposits, $250 and over, and brokered deposits.

FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Credit Quality
*(Unaudited)*

																% Change
*(In millions, except %)*	Jun 30, 2022			Mar 31, 2022			Dec 31, 2021			Sep 30, 2021			Jun 30, 2021			2Q22 vs 1Q22		2Q22 vs 2Q21

Allowance for Credit Losses:
Allowance for credit losses	$	220.4		$	247.2		$	122.3		$	135.1		$	135.5		(10.8	)%	62.7	%
As a percentage of loans held for investment		1.28	%		1.46	%		1.31	%		1.40	%		1.38	%
As a percentage of non-accrual loans		205.98			207.91			491.16			451.84			445.72

Net charge-offs during quarter	$	0.3		$	16.7		$	2.7		$	0.6		$	1.1		(98.2	)%	(72.7	)%
Annualized as a percentage of average loans		0.01	%		0.47	%		0.11	%		0.02	%		0.04	%

Non-Performing Assets:
Non-accrual loans	$	107.0		$	118.9		$	24.9		$	29.9		$	30.4		(10.0	)%	252.0	%
Accruing loans past due 90 days or more		2.9			2.7			2.8			5.2			5.2		7.4		(44.2	)
Total non-performing loans		109.9			121.6			27.7			35.1			35.6		(9.6	)	208.7
Other real estate owned		16.8			17.5			2.0			2.3			2.0		(4.0	)	740.0
Total non-performing assets	$	126.7		$	139.1		$	29.7		$	37.4		$	37.6		(8.9	)%	237.0	%

Non-performing assets as a percentage of:
Loans held for investment and OREO		0.74	%		0.82	%		0.32	%		0.39	%		0.38	%
Total assets		0.40			0.42			0.15			0.19			0.20

Non-accrual loans to loans held for investment		0.62			0.70			0.27			0.31			0.31

Accruing Loans 30-89 Days Past Due	$	56.4		$	54.4		$	26.7		$	27.3		$	22.1		3.7	%	155.2	%
Accruing troubled debt restructurings (TDRs)		20.5			14.7			2.3			2.1			2.2		39.5		831.8

Criticized Loans:
Special Mention	$	275.9		$	274.6		$	86.6		$	99.1		$	129.1		0.5	%	113.7	%
Substandard		461.4			553.9			130.1			149.7			141.2		(16.7	)	226.8
Doubtful		42.7			24.6			—			2.4			3.1		73.6		NM
Total	$	780.0		$	853.1		$	216.7		$	251.2		$	273.4		(8.6	)%	185.3	%

FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Selected Ratios – Annualized
*(Unaudited)*

	Jun 30, 2022				Mar 31, 2022			Dec 31, 2021			Sep 30, 2021			Jun 30, 2021
Annualized Financial Ratios (GAAP)
Return on average assets		0.79	%			(0.48	)%		1.03	%		0.98	%		0.91	%
Return on average common stockholders’ equity		7.52				(4.44	)		10.14			9.41			8.77
Yield on average earning assets		3.35				2.89			2.77			3.00			2.93
Cost of average interest-bearing liabilities		0.14				0.14			0.13			0.14			0.16
Interest rate spread		3.21				2.75			2.64			2.86			2.77
Net interest margin ratio		3.25				2.80			2.69			2.91			2.82
Efficiency ratio		71.37				89.61			62.63			62.12			62.62
Loans held for investment to deposit ratio		63.89				60.33			57.36			60.11			63.18

Annualized Financial Ratios – Operating (Non-GAAP)**
Tangible book value per common share	$	18.92			$	19.78		$	20.83		$	20.75		$	20.49
Tangible common stockholders’ equity to tangible assets		6.62	%			6.79	%		6.83	%		6.91	%		6.99	%
Return on average tangible common stockholders’ equity		11.78				(6.88	)		15.51			14.48			13.67

Consolidated Capital Ratios:
Total risk-based capital to total risk-weighted assets		13.60	%	*		14.27	%		14.11	%		14.00	%		13.89	%
Tier 1 risk-based capital to total risk-weighted assets		11.46		*		11.91			12.49			12.30			12.17
Tier 1 common capital to total risk-weighted assets		11.46		*		11.91			11.77			11.59			11.45
Leverage Ratio		7.72		*		8.96			7.68			7.81			7.84

*Preliminary estimate – may be subject to change. The regulatory capital ratios presented above include the assumption of the transitional method relative to legislation by Congress to provide relief for the economy and financial institutions in the United States from the COVID‑19 pandemic. The referenced relief allows a total five-year phase-in of the CECL impact on capital and relief over the next two years for the impact on the allowance for credit losses resulting from COVID‑19.
**Non-GAAP financial measures – see Non-GAAP Financial Measures included herein for a reconciliation of book value per common share to tangible book value per common share, return on average common stockholders’ equity (GAAP) to return on average tangible common stockholders’ equity, and tangible common stockholders’ equity to tangible assets (non-GAAP).

FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Average Balance Sheets
*(Unaudited)*

	Three Months Ended
	June 30, 2022							March 31, 2022							June 30, 2021
*(In millions, except %)*	Average Balance		Interest			Average Rate		Average Balance		Interest			Average Rate		Average Balance		Interest			Average Rate
Interest earning assets:
Loans ^{(1) (2)}	$	17,220.4	$	193.5		4.51	%	$	14,460.6	$	153.0		4.29	%	$	9,969.2	$	105.6		4.25	%
Investment securities ⁽²⁾		10,378.0		50.5		1.95			8,279.3		30.9		1.51			5,105.2		17.4		1.37
Interest bearing deposits in banks		2,050.0		3.4		0.67			3,263.1		1.7		0.21			1,883.9		0.7		0.15
Federal funds sold		0.1		—		—			0.1		—		—			0.1		—		—
Total interest earning assets	$	29,648.5	$	247.4		3.35	%	$	26,003.1	$	185.6		2.89	%	$	16,958.4	$	123.7		2.93	%
Non-earning assets		2,962.8							2,492.0							1,706.8
Total assets	$	32,611.3						$	28,495.1						$	18,665.2
Interest-bearing liabilities:
Demand deposits	$	8,103.7	$	1.8		0.09	%	$	6,901.8	$	0.9		0.05	%	$	4,392.3	$	0.5		0.05	%
Savings deposits		9,461.7		1.6		0.07			8,332.7		1.1		0.05			4,752.7		0.4		0.03
Time deposits		1,555.4		0.9		0.23			1,397.2		1.0		0.29			1,025.2		1.3		0.51
Repurchase agreements		1,182.2		0.3		0.10			1,077.0		0.3		0.11			1,002.0		0.1		0.04
Long-term debt		120.4		1.4		4.66			127.5		1.7		5.41			112.4		1.5		5.35
Subordinated debentures held by subsidiary trusts		163.1		1.4		3.44			136.9		1.0		2.96			87.0		0.7		3.23
Total interest-bearing liabilities	$	20,586.5	$	7.4		0.14	%	$	17,973.1	$	6.0		0.14	%	$	11,371.6	$	4.5		0.16	%
Non-interest-bearing deposits		8,288.0							7,211.4							5,160.8
Other non-interest-bearing liabilities		319.4							260.5							188.5
Stockholders’ equity		3,417.4							3,050.1							1,944.3
Total liabilities and stockholders’ equity	$	32,611.3						$	28,495.1						$	18,665.2
Net FTE interest income			$	240.0						$	179.6						$	119.2
Less FTE adjustments ⁽²⁾				(2.1	)						(1.6	)						(0.4	)
Net interest income from consolidated statements of income			$	237.9						$	178.0						$	118.8
Interest rate spread						3.21	%						2.75	%						2.77	%
Net FTE interest margin ⁽³⁾						3.25	%						2.80	%						2.82	%
Cost of funds, including non-interest-bearing demand deposits ⁽⁴⁾						0.10	%						0.10	%						0.11	%

⁽¹⁾ Average loan balances include loans held for sale and non-accrual loans. Interest income on loans includes amortization of deferred loan fees net of deferred loan costs of $2.1 million, $3.5 million, and $6.4 million at June 30, 2022, March 31, 2022, and June 30, 2021, respectively.
⁽²⁾ Interest income and average rates for tax exempt loans and securities are presented on an FTE basis.
⁽³⁾ Net FTE interest margin during the period equals (i) the difference between annualized interest income on interest earning assets and the annualized interest expense on interest bearing liabilities, divided by (ii) average interest earning assets for the period.
⁽⁴⁾ Calculated by dividing total annualized interest on interest bearing liabilities by the sum of total interest-bearing liabilities plus non-interest-bearing deposits.

FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Non-GAAP Financial Measures
*(Unaudited)*

		As of or For the Quarter Ended
*(In millions, except % and per share data)*		Jun 30, 2022			Mar 31, 2022			Dec 31, 2021			Sep 30, 2021			Jun 30, 2021
Total common stockholders’ equity (GAAP)	(A)	$	3,271.9		$	3,441.1		$	1,986.6		$	1,984.8		$	1,970.9
Less goodwill and other intangible assets (excluding mortgage servicing rights)			1,232.9			1,275.2			690.9			693.3			695.7
Tangible common stockholders’ equity (Non-GAAP)	(B)	$	2,039.0		$	2,165.9		$	1,295.7		$	1,291.5		$	1,275.2

Total assets (GAAP)		$	32,038.7		$	33,162.2		$	19,671.9		$	19,372.2		$	18,940.5
Less goodwill and other intangible assets (excluding mortgage servicing rights)			1,232.9			1,275.2			690.9			693.3			695.7
Tangible assets (Non-GAAP)	(C)	$	30,805.8		$	31,887.0		$	18,981.0		$	18,678.9		$	18,244.8

Average Balances:
Total common stockholders’ equity (GAAP)	(D)	$	3,417.4		$	3,050.1		$	1,999.3		$	1,985.3		$	1,944.3
Less goodwill and other intangible assets (excluding mortgage servicing rights)			1,235.1			1,081.2			692.0			694.5			696.9
Average tangible common stockholders’ equity (Non-GAAP)	(E)	$	2,182.3		$	1,968.9		$	1,307.3		$	1,290.8		$	1,247.4

Net interest income		$	237.9		$	178.0		$	121.8		$	126.9		$	118.8
FTE interest income			2.1			1.6			0.5			0.6			0.4
Net FTE interest income	(F)		240.0			179.6			122.3			127.5			119.2
Less purchase accounting accretion			16.7			7.6			1.9			2.3			2.5
Less PPP income			1.1			2.8			9.7			14.2			7.8
Adjusted net FTE interest income	(G)	$	222.2		$	169.2		$	110.7		$	111.0		$	108.9

Average interest-earning assets	(H)	$	29,648.5		$	26,003.1		$	18,061.4		$	17,392.5		$	16,958.4
Less average PPP loans			30.8			91.6			200.1			462.1			750.4
Adjusted average earning assets	(I)	$	29,617.7		$	25,911.5		$	17,861.3		$	16,930.4		$	16,208.0

Total quarterly average assets	(J)	$	32,611.3		$	28,495.1		$	19,743.1		$	19,081.2		$	18,665.2
Annualized net income available to common shareholders	(K)		257.1			(135.5	)		202.7			186.9			170.5
Common shares outstanding	(L)		107,758			109,503			62,200			62,231			62,240
Return on average assets (GAAP)	(K)/(J)		0.79	%		(0.48	)%		1.03	%		0.98	%		0.91	%
Return on average common stockholders’ equity (GAAP)	(K)/(D)		7.52			(4.44	)		10.14			9.41			8.77
Average common stockholders’ equity to average assets (GAAP)	(D)/(J)		10.48			10.70			10.13			10.40			10.42
Book value per common share (GAAP)	(A)/(L)	$	30.36		$	31.42		$	31.94		$	31.89		$	31.67
Tangible book value per common share (Non-GAAP)	(B)/(L)		18.92			19.78			20.83			20.75			20.49
Tangible common stockholders’ equity to tangible assets (Non-GAAP)	(B)/(C)		6.62	%		6.79	%		6.83	%		6.91	%		6.99	%
Return on average tangible common stockholders’ equity (Non-GAAP)	(K)/(E)		11.78			(6.88	)		15.51			14.48			13.67
Net interest margin ratio (FTE)	(F) annualized/ (H)		3.25			2.80			2.69			2.91			2.82
Adjusted net interest margin ratio (FTE)	(G) annualized/ (I)		3.01			2.65			2.46			2.60			2.69
Total non-interest expense		$	210.3		$	207.2		$	102.2		$	105.9		$	99.0
Less: Acquisition-related expense			45.8			65.2			5.0			6.6			—
Less: Litigation accrual (recovery)			—			—			(0.2	)		1.2			—
Adjusted non-interest expense		$	164.5		$	142.0		$	97.4		$	98.1		$	99.0
Less: Intangible amortization			4.1			3.6			2.5			2.4			2.5
Less: Other real estate owned (income)			—			0.1			(0.1	)		—			—
Adjusted expense for efficiency ratio	(A)	$	160.4		$	138.3		$	95.0		$	95.7		$	96.5

Net interest income		$	237.9		$	178.0		$	121.8		$	126.9		$	118.8
Add: Total non-interest income			51.0			49.2			37.4			39.7			35.3
Less: Net gain (loss) from investment securities			(0.1	)		(0.1	)		0.9			0.3			(0.1	)
Less: MSR recovery (impairment)			—			3.4			1.0			—			—
Less: Other income*			1.7			1.4			—			—			—
Adjusted revenue	(B)	$	287.3		$	222.5		$	157.3		$	166.3		$	154.2

Adjusted Efficiency Ratio	(A)/(B)		55.8	%		62.2	%		60.4	%		57.5	%		62.6	%

(All adjustments are after-tax)
Reported net (loss) income			64.1			(33.4	)		51.1			47.1			42.5
Plus: Non-PCD CECL Day 2 provision			—			55.2			—			—			—
Plus: Acquisition-related expenses			36.6			52.7			3.8			5.1			—
Plus: MSR fair value adjustments			—			(2.7	)		(0.8	)		—			—
Plus: Other income items			(1.4	)		(1.1	)		—			—			—
Plus: Investment securities (loss) gain			0.1			0.1			(0.7	)		(0.2	)		0.1
Plus: Other expense items			—			—			(0.2	)		0.9			—
Adjusted net income	(C)		99.4			70.8			53.2			52.9			42.6

Average stockholders’ equity	(D)		3,417.4			3,050.1			1,999.3			1,985.3			1,944.3
Return on average equity			7.52	%		(4.44	)%		10.14	%		9.41	%		8.77	%
Adjusted return on average equity	(C) annualized/ (D)		11.67	%		9.41	%		10.56	%		10.57	%		8.79	%

*Other income represents the recovery in the credit valuation discount on derivatives acquired in the GWB acquisition at June 30, 2022 and the gain on the disposition of subordinated debt at March 31, 2022.

(FIBK-ER)

View source version on businesswire.com: https://www.businesswire.com/news/home/20220726005911/en/

John R. Stewart, CFA

Deputy Chief Financial Officer

First Interstate BancSystem, Inc.

(406) 255-5311

[email protected]

KEYWORDS: Montana United States North America

INDUSTRY KEYWORDS: Banking Professional Services Finance

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July 26, 2022 4:21 pm

Ameriprise Financial Declares Regular Quarterly Dividend

Ameriprise Financial Declares Regular Quarterly Dividend

MINNEAPOLIS–(BUSINESS WIRE)–
The Board of Directors of Ameriprise Financial, Inc. (NYSE: AMP) has declared a quarterly cash dividend of $1.25 per common share payable on August 19, 2022 to shareholders of record at the close of business on August 8, 2022.

At Ameriprise Financial, we have been helping people feel confident about their financial future for more than 125 years. With a nationwide network of 10,000 financial advisors and extensive asset management, advisory and insurance capabilities, we have the strength and expertise to serve the full range of individual and institutional investors’ financial needs. For more information, visit ameriprise.com.

View source version on businesswire.com: https://www.businesswire.com/news/home/20220726005782/en/

Paul Johnson

Ameriprise Financial

612.671.0625

[email protected]

KEYWORDS: United States North America Minnesota

INDUSTRY KEYWORDS: Banking Professional Services Insurance Finance

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