What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-02-02 compared with 2021-11-03 · 96 added, 81 removed, 144 unchanged (55% of the section changed)

32 unchanged sentences

• our suppliers’ inability to perform and deliver on time as a result of their financial condition, component shortages, the effects of COVID-19 or other supply chain constraints;

• the effects of inflation and the timing and extent of changes in the prices and overall demand for and availability of our inputs;

• customer acceptance of new products;

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• the impact of tariffs, the adoption of trade restrictions affecting our products or suppliers, a United States withdrawal from or significant renegotiation of trade agreements, the occurrence of trade wars, the closing of border crossings, and other changes in trade regulations or relationships;

• our ability to meet financial covenant requirements which could impact, among other things, our liquidity;

• our ability to implement our stock repurchase program or the extent to which it enhances long-term stockholder value.

• our ability to implement our stock repurchase program or that it will enhance long-term stockholder value.

Other factors besides those listed here could also adversely affect us.

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We anticipate growth in revenue in fiscal 2022.

We continue to have a backlog entering the first quarter of fiscal 2022 and we anticipate continuing our strong momentum across all verticals.

We continue to have a backlog entering the remaining quarters of fiscal 2022 and we anticipate continuing our strong momentum across all verticals.

We have made inroads into the U.S.

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service provider customers.

We have also seen further growth for our international regions.

We have also seen continued growth in our international regions.

Our gross margin in the current quarter was negatively impacted by inflationary pressures incurred to overcome supply chain and logistical bottlenecks.

These were partially offset by price increases and surcharges.

We are monitoring, assessing and adapting to the situation and preparing for possible implications to our business, supply chain and customer demand.

We expect the potential for these challenges to continue until business and economic activities return to more normal levels.

In March 2020, the World Health Organization characterized the current respiratory illness caused by novel coronavirus disease, known as COVID-19, as a pandemic.

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The COVID-19 pandemic has had and is likely to continue to have an impact on our operations, supply chains and distribution systems.

The COVID-19 pandemic has led to an increase in our expenses, including as a result of impacts associated with preventive and precautionary measures that we, other businesses and governments are taking or requiring.

The extent to which the COVID-19 pandemic impacts our business, prospects and results of operations will depend on future developments, which are highly uncertain, including, but not limited

to, the duration and spread of the pandemic, its severity, the actions to contain the virus or treat its impact, including the ongoing vaccination efforts, any new variant strains of the underlying virus, and how quickly and to what extent normal economic and operating activities can resume.

The COVID-19 pandemic has led to an increase in

our expenses, including as a result of impacts associated with preventive and precautionary measures that we, other businesses and governments are taking or requiring.

The extent to which the COVID-19 pandemic impacts our business, prospects and results of operations will depend on future developments, which are highly uncertain and cannot be predicted with certainty, including, but not limited to, the duration and spread of the pandemic, its severity, the actions to contain the virus or treat its impact, including the ongoing vaccination efforts and how quickly and to what extent normal economic and operating activities can resume.

Management is actively monitoring the impact of the COVID-19 pandemic on our financial condition, liquidity, operations, suppliers, industry, and workforce.

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Our manufacturing sites remain operational, and we are maintaining social distancing and have enhanced cleaning protocols and usage of personal protective equipment, where appropriate.

Our gross margin in the current quarter was negatively impacted by inflationary pressures incurred to overcome supply chain and logistical bottlenecks.

These were partially offset by price increases and surcharges.

We are monitoring, assessing and adapting to the situation and preparing for possible implications to our business, supply chain and customer demand.

We expect the potential for these challenges to continue until business and economic activities return to more normal levels.

The financial results for the three months ended October 1, 2021 reflect some of the reduced activity experienced during the period in various locations around the world and are not necessarily indicative of the results for the full year.

Operations Review

The market for mobile backhaul continued to be our primary addressable market segment globally in the first three months of fiscal 2022.

The market for mobile backhaul continued to be our primary addressable market segment globally in the first six months of fiscal 2022.

In North America, we supported 5G and long-term evolution (“LTE”) deployments of our mobile operator customers, public safety network deployments for state and local governments, and private network implementations for utilities and other customers.

In international markets, our business continued to rely on a combination of customers increasing their capacity to handle subscriber growth, the ongoing build-out of some large 3G deployments, and LTE deployments.

Our position continues to be to support our customers for 5G and LTE readiness and ensure that our technology roadmap is well aligned with evolving market requirements.

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(1) Africa and the Middle East, (2) Europe and Russia, and (3) Latin America and Asia Pacific.

Revenue by region for the three months ended October 1, 2021 and October 2, 2020 and the related changes were as follows:

Three Months Ended

(In thousands, except percentages) October 1, 2021 October 2, 2020 $ Change % Change

Revenue by region for the three and six months ended December 31, 2021 and January 1, 2021 and the related changes were as follows:

Three Months Ended Six Months Ended

(In thousands, except percentages) December 31, 2021 January 1, 2021 $ Change % Change December 31, 2021 January 1, 2021 $ Change % Change

North America $ 51,046 $ 49,158 $ 1,888 3.8 % $ 101,983 $ 94,657 $ 7,326 7.7 %

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$ 77,864 $ 70,531 $ 7,333 10.4 % $ 151,022 $ 136,821 $ 14,201 10.4 %

Our revenue in North America increased by $5.4 million, or 12.0%, during the first quarter of fiscal 2022 compared with the same period of fiscal 2021.

The increase in North America revenue during the first three months of fiscal 2022 was primarily due to an increase in revenue from private network projects and rural broadband sales.

Our revenue in Africa and the Middle East increased by $0.1 million or 1.2% during the first quarter of fiscal 2022 compared with the same period of fiscal 2021.

This increase in revenue during the first three months of fiscal 2022 was primarily due to increased sales to mobile operators in the region.

Revenue in Europe and Russia increased by $0.4 million, or 19.5%, for the first quarter of fiscal 2022 compared with the same period of fiscal 2021.

This increase during the first three months of fiscal 2022 was primarily due to increased sales to private networks in the region.

Revenue in Latin America and Asia Pacific increased by $0.9 million, or 10.8%, during the first quarter of fiscal 2022 compared with the same period of fiscal 2021.

The increase during the first three months of fiscal 2022 was primarily due to increased sales to mobile operators in the region.

Three Months Ended

(In thousands, except percentages) October 1, 2021 October 2, 2020 $ Change % Change

Our revenue in North America increased by $1.9 million, or 3.8%, during the second quarter of fiscal 2022 compared with the same period of fiscal 2021.

Revenue in North America increased by $7.3 million, or 7.7%, during the first six months of fiscal 2022 compared with the same period of fiscal 2021.

The increase in North America revenue during the three and six months of fiscal 2022 was primarily due to an increase in the number of private network projects.

Our revenue in Africa and the Middle East increased by $2.9 million or 26.9% during the second quarter of fiscal 2022 compared with the same period of fiscal 2021.

Revenue in Africa and the Middle East increased by $3.0 million, or 14.1%, during the first six months of fiscal 2022 compared with the same period of fiscal 2021.

This increase in revenue during the three and six months of fiscal 2022 was primarily due to increased sales to mobile operators in the region.

Revenue in Europe and Russia increased by $1.4 million, or 92.5%, for the second quarter of fiscal 2022 compared with the same period of fiscal 2021.

Revenue in Europe and Russia increased by $1.8 million, or 48.7%, during the first six months of fiscal 2022 compared with the same period of fiscal 2021.

This increase during the three and six months of fiscal 2021 was primarily due to increased sales to mobile operators in the region.

Revenue in Latin America and Asia Pacific increased by $1.2 million, or 12.8%, during the second quarter of fiscal 2022 compared with the same period of fiscal 2021.

Revenue in Latin America and Asia Pacific increased by $2.0 million, or 11.9%, during the first six months of fiscal 2022 compared with the same period of fiscal 2021.

The increase during the three and six months of fiscal 2022 was from increased sales to mobile operator customers.

Three Months Ended Six Months Ended

(In thousands, except percentages) December 31, 2021 January 1, 2021 $ Change % Change December 31, 2021 January 1, 2021 $ Change % Change

Product sales $ 53,467 $ 46,691 $ 6,776 14.5 % $ 104,314 $ 91,155 $ 13,159 14.4 %

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$ 77,864 $ 70,531 $ 7,333 10.4 % $ 151,022 $ 136,821 $ 14,201 10.4 %

Our revenue from product sales increased by $6.4 million, or 14.4%, for the first quarter of fiscal 2022 compared with the same quarter of fiscal 2021.

Our services revenue increased by $0.5 million, or 2.2%, during the first quarter of fiscal 2022 compared with the same quarter of fiscal 2021.

Three Months Ended

(In thousands, except percentages) October 1, 2021 October 2, 2020 $ Change % Change

Our revenue from product sales increased by $6.8 million, or 14.5%, for the second quarter of fiscal 2022 compared with the same quarter of fiscal 2021.

Our services revenue increased by $0.6 million, or 2.3%, during the second quarter of fiscal 2022 compared with the same quarter of fiscal 2021.

Our revenue from product sales increased by $13.2 million, or 14.4%, for the first six months of fiscal 2022 compared with the same period of fiscal 2021.

Our services revenue increased by $1.0 million, or 2.3%, during the first six months of fiscal 2022 compared with the same period of fiscal 2021.

Three Months Ended Six Months Ended

(In thousands, except percentages) December 31, 2021 January 1, 2021 $ Change % Change December 31, 2021 January 1, 2021 $ Change % Change

Revenue $ 77,864 $ 70,531 $ 7,333 10.4 % $ 151,022 $ 136,821 $ 14,201 10.4 %

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35.7 % 32.2 % 34.0 % 33.7 %

Gross margin for the first quarter of fiscal 2022 increased by $1.8 million, or 7.6% compared with the same quarter of fiscal 2021.

Our gross margin in the current quarter was negatively impacted by inflationary pressures incurred to overcome supply chain and logistical bottlenecks.

These were partially offset by price increases and surcharges.

Product margin as a percentage of product revenue was flat compared to the same period in 2021.

While first quarter fiscal 2022 product sales volume increased in higher margin segments, increased supply chain costs offset those margin gains, holding margin rates even with the first quarter of fiscal 2021.

Service margin rates decreased in North America and in the international markets compared to the first quarter of fiscal 2021.

Gross margin for the second quarter of fiscal 2022 increased by $1.2 million, or 4.6% compared with the same quarter of fiscal 2021.

Gross margin for the first six months of fiscal 2022 increased by $3.1 million, or 6.0%.

For the three and six months of fiscal 2022, gross margin improved over the same period in fiscal 2021 primarily due to higher volume of Private Network business and increased sales through the Aviat Store which serves primarily the Rural Broadband space.

Gross margins continue to be pressured by expedite fees and inflation as we work to overcome supply chain issues.

However, our pricing actions to offset higher costs are gaining momentum.

Product margin as a percentage of product revenue decreased in the second quarter and in the first six months of fiscal 2022 compared with the same period of fiscal 2021 primarily due to increased supply chain costs.

Service margin as a percentage of service revenue increased in the second quarter and in the first six months of fiscal 2022 compared to the same periods in fiscal 2021 primarily due to stronger profitability in the North America region.

Research and Development Expenses

Three Months Ended

(In thousands, except percentages) October 1, 2021 October 2, 2020 $ Change % Change

Three Months Ended Six Months Ended

(In thousands, except percentages) December 31, 2021 January 1, 2021 $ Change % Change December 31, 2021 January 1, 2021 $ Change % Change

Research and development $ 6,169 $ 5,419 $ 750 13.8 % $ 12,079 $ 10,266 $ 1,813 17.7 %

Our research and development expenses increased by $1.1 million or 21.9% in the first three months of fiscal 2022 compared with the same periods of fiscal 2021 primarily due to increased product development activities.

7.9 % 7.7 % 8.0 % 7.5 %

Our research and development expenses increased by $0.8 million and $1.8 million, or 13.8% and 17.7%, in the three and six months, respectively of fiscal 2022 compared with the same periods of fiscal 2021 primarily due to the increased spending resulting from R&D efforts to design around problematic suppliers.

Selling and Administrative Expenses

Three Months Ended

(In thousands, except percentages) October 1, 2021 October 2, 2020 $ Change % Change

Three Months Ended Six Months Ended

(In thousands, except percentages) December 31, 2021 January 1, 2021 $ Change % Change December 31, 2021 January 1, 2021 $ Change % Change

Selling and administrative $ 13,739 $ 13,612 $ 127 0.9 % $ 26,437 $ 26,449 $ (12) — %

17.6 % 19.3 % 17.5 % 19.3 %

Our selling and administrative expenses decreased by $0.1 million, or 1.1%, in the first quarter of fiscal 2022 compared with the same period in fiscal 2021.

The decreases for the first three months of fiscal 2022 compared to comparable periods of fiscal 2021 were primarily due to restructuring savings.

Restructuring Charges

Three Months Ended

(In thousands, except percentages) October 1, 2021 October 2, 2020 $ Change % Change

Our selling and administrative expenses increased by $0.1 million, or 0.9%, in the second quarter of fiscal 2022 compared with the same period in fiscal 2021.

Our selling and administrative expenses decreased by $12 thousand, or —%, for the six months of fiscal 2022 compared with the same period in fiscal 2021.

The increase for the three period compared to comparable period of fiscal 2021 was primarily due to higher travel expenses and variable compensation.

The movement in the six month comparable periods was not significant.

Restructuring Charges

In the first quarter of fiscal 2022, we recognized restructuring charges of $0.7 million primarily related to the restructuring plan (the “Fiscal 2021 Plan”) approved by our Board of Directors in the third and fourth quarters of fiscal 2021.

The Fiscal 2021 Plan is anticipated to entail a reduction in force of approximately 30 employees to be implemented through the second quarter of fiscal year 2022, with a certain number of positions being consolidated and/or relocated.

Interest Income and Interest Expense

Three Months Ended

(In thousands, except percentages) October 1, 2021 October 2, 2020 $ Change % Change

Interest income, net $ 28 $ 35 $ (7) (20.0) %

Interest income, net reflect interest earned on our cash equivalents, which were comprised of money market funds and bank certificates of deposit.

Three Months Ended

(In thousands, except percentages) October 1, 2021 October 2, 2020 $ Change % Change

Three Months Ended Six Months Ended

(In thousands, except percentages) December 31, 2021 January 1, 2021 $ Change % Change December 31, 2021 January 1, 2021 $ Change % Change

Restructuring (recovery) charges $ (960) $ — $ (960) N/A $ (301) $ — $ (301) N/A

In the second quarter of fiscal 2022, we recorded restructuring recoveries of $(1.0) million primarily related to the restructuring plan (the “Fiscal 2021 Plan”).

Included in our restructuring plans for which we were carrying a provision were positions identified for termination that have not been executed from a restructuring perspective.

Due to transition of leadership in the finance function it was concluded that we would not make several of the planned headcount reductions, and the likelihood of future restructuring for these positions is presently deemed remote.

Therefore, we decided it was prudent to reverse the associated provision.

Other Expense/Income, net

Three Months Ended Six Months Ended

(In thousands, except percentages) December 31, 2021 January 1, 2021 $ Change % Change December 31, 2021 January 1, 2021 $ Change % Change

Other expense (income), net $ 240 $ (38) $ 278 (731.6) % $ 212 $ (73) $ 285 (390.4) %

Our other expenses (income), net increased by $0.3 million, in the three and six months of fiscal 2022 compared with the same periods of fiscal 2021 primarily due to the movement in foreign exchange.

Three Months Ended Six Months Ended

(In thousands, except percentages) December 31, 2021 January 1, 2021 $ Change % Change December 31, 2021 January 1, 2021 $ Change % Change

Income before income taxes $ 8,968 $ 7,916 $ 1,052 13.3 % $ 15,810 $ 14,516 $ 1,294 8.9 %

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We estimate our annual effective tax rate at the end of each quarterly period, and we record the tax effect of certain discrete items in the interim period in which they occur, including changes in judgment about uncertain tax positions and deferred tax valuation allowances.

The tax benefit for the first quarter of fiscal 2022 was primarily due to the tax expense related to U.S.

profitable subsidiaries.

The tax expense for the first quarter of fiscal 2021 was primarily related to profitable subsidiaries.

The tax expense for the first six months of fiscal 2022 was primarily due to the tax expense related to U.S.

and profitable subsidiaries.

The tax expense for the first six months of fiscal 2021 was primarily due to tax expense related to profitable subsidiaries and $0.4 million of tax expense related to an audit settlement with the Financial Administration of the Republic of Slovenia.

Liquidity, Capital Resources, and Financial Strategies

Sources of Cash

As of October 1, 2021, our total cash and cash equivalents were $47.3 million.

As of December 31, 2021, our total cash and cash equivalents were $42.3 million.

Approximately $16.8 million, or 39.6%, was held in the United States.

The remaining balance of $25.6 million, or 60.4%, was held by entities outside the United States.

Of the amount of cash and cash equivalents held by our foreign subsidiaries on October 1, 2021, $20.9 million was held in jurisdictions where our undistributed earnings are indefinitely reinvested, and if repatriated, would be subject to foreign withholding taxes.

Of the amount of cash and cash equivalents held by our foreign subsidiaries on December 31, 2021, $23.4 million was held in jurisdictions where our undistributed earnings are indefinitely reinvested, and if repatriated, would be subject to foreign withholding taxes.

Operating Activities

Cash provided by or used in operating activities is presented as net income adjusted for non-cash items and changes in operating assets and liabilities.

Net cash provided by operating activities was $0.7 million for the first three months of fiscal 2022, compared to $4.2 million for the first three months of fiscal 2021;

Net cash used in operating activities was $2.2 million for the first six months of fiscal 2022, compared to $10.2 million cash provided from operations for the first six months of fiscal 2021;

this difference was primarily related to a net change in Accounts receivable and partially offset by the net change in Accounts payable.

Net cash provided by noncash items was $3.9 million for the first three months of 2022.

The net changes in operating assets and liabilities resulted in a net use of cash of $7.9 million for the first three months of fiscal 2022, compared to net use of cash $4.5 million for the same period in fiscal 2021.

Changes in operating assets and liabilities resulted in a net use of cash for the first three months of fiscal 2022 primarily related to the timing of payments of Accounts payable offset by the use of cash by Accounts receivable that fluctuate from period to period, depending on the amount, timing of sales and billing activities and cash collections.

Net cash provided by noncash items was $8.7 million for the first six months of 2022.

The net changes in operating assets and liabilities resulted in a net use of cash of $21.1 million for the first six months of fiscal 2022, compared to net use of cash of $8.0 million for the same period in fiscal 2021.

Changes in operating assets and liabilities resulted in a net use of cash for the first six months of fiscal 2022 primarily related to Accounts receivable that fluctuate from period to period, depending on the amount, timing of sales and billing activities and cash collections;

and an increase in certain levels of inventories primarily to mitigate supply chain constraints.

The use of cash from assets and liabilities was partially offset by the timing of payments from Accounts payable and by customer Advance payments and unearned revenue.

Investing Activities

Net cash used in investing activities was $0.3 million and $1.0 million for the first three months of fiscal 2022 and 2021, respectively, which consisted of capital expenditures.

During the remainder of fiscal year 2022, we expect to spend approximately $1 million to $2 million for capital expenditures, primarily on equipment for development and manufacturing of new products and IT infrastructure.

Net cash used in investing activities was $0.8 million and $1.4 million for the first six months of fiscal 2022 and 2021, respectively, which consisted of capital expenditures.

During the remainder of fiscal year 2022, we expect to spend approximately $4 million for capital expenditures, primarily on equipment for development and manufacturing of new products and IT infrastructure.

Financing Activities

Financing cash flows consist primarily of proceeds from and repayments of short-term debt, repurchase of stock and proceeds from the sale of shares of common stock through employee equity plans.

Net cash used in financing activities was $0.8 million for the first three months of fiscal 2022, primarily due to the purchase of treasury stock of $0.7 million.

As of October 1, 2021, our principal sources of liquidity consisted of $47.3 million in cash and cash equivalents and $22.5 million of available credit under our $25.0 million SVB Credit Facility, which matures on June 28, 2024, and future collections of receivables from customers.

Financing cash flows consist primarily from repayments of short-term debt, repurchase of stock and proceeds from the sale of shares of common stock through employee equity plans.

Net cash used in financing activities was $2.4 million for the first six months of fiscal 2022, primarily due to repurchase of $2.6 million of stock which was partially offset by cash proceeds from the issuance of common stock under employee stock plans of $0.6 million net of payments for taxes related to settlement of equity awards of $0.4 million.

Net cash used in financing activities was $7.7 million for the first six months of fiscal 2021, primarily due to $9.0 million repayment of short-term debt partially offset by cash proceeds from the issuance of common stock under employee stock plans of $1.5 net of the payments for taxes related to settlement of equity awards of $0.2 million.

As of December 31, 2021, our principal sources of liquidity consisted of $42.3 million in cash and cash equivalents;

$22.5 million of available credit under our $25.0 million SVB Credit Facility, which matures on June 28, 2024, and future collections of receivables from customers.

We regularly require letters of credit from certain customers, and, from time to time, these letters of credit are discounted without recourse shortly after shipment occurs in order to meet immediate liquidity requirements and to reduce our credit and sovereign risk.

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Additionally, we have an effective shelf registration statement on Form S-3 allowing us to offer and sell, either individually or in combination, in one or more offerings, up to a total dollar amount of $200 million of any combination of the securities described in the shelf registration statement or a related prospectus supplement.

We believe that our existing cash and cash equivalents, the available line of credit under the SVB Credit Facility, potential issuances of debt or equity securities and future cash collections from customers will be sufficient to provide for our anticipated requirements for working capital and capital expenditures for at least the next 12 months.

We believe that our existing cash and cash equivalents, the available line of credit under the SVB Credit Facility and future cash collections from customers will be sufficient to provide for our anticipated requirements for working capital and capital expenditures for at least the next 12 months.

On May 17, 2021, we entered into Amendment No.

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The SVB Credit Facility provides for a $25.0 million accounts receivable formula-based revolving credit facility that can be borrowed by the U.S.

company, with a $25.0 million sub-limit that can be borrowed by our U.S.

with a $25.0 million sub-limit that can be borrowed by our U.S.

and Singapore entities.

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We may prepay loans under the SVB Credit Facility in whole or in part at any time without premium or penalty.

As of October 1, 2021, available credit under the SVB Credit Facility was $22.5 million reflecting the calculated borrowing base of $25.0 million less outstanding letters of credit of $2.5 million.

did not borrow against the SVB Credit Facility during the first quarter of fiscal 2022 and there was no borrowing outstanding as of October 1, 2021 or July 2, 2021.

As of October 1, 2021, we were in compliance with the quarterly financial covenants, as amended, contained in the SVB Credit Facility and there was no amount outstanding under the SVB Credit Facility.

As of December 31, 2021, available credit under the SVB Credit Facility was $22.5 million reflecting the calculated borrowing base of $25.0 million less outstanding letters of credit of $2.5 million.

We did not borrow against the SVB Credit Facility during the six months ended December 31, 2021 and there was no borrowing outstanding as of December 31, 2021 or July 2, 2021

As of December 31, 2021, we were in compliance with the quarterly financial covenants, as amended, contained in the SVB Credit Facility and there was no amount outstanding under the SVB Credit Facility.

In addition, we have an uncommitted short-term line of credit of $0.4 million from a bank in New Zealand to support the operations of our subsidiary located there.

This line of credit provides for $0.3 million in short-term advances at various interest rates, all of which was available as of October 1, 2021 and July 2, 2021.

The line of credit also provides for the issuance of standby letters of credit and company credit cards, of which $0.1 million was outstanding as of October 1, 2021 and July 2, 2021.

This line of credit provides for $0.4 million in short-term advances at various interest rates, all of which was available as of December 31, 2021 and July 2, 2021.

The line of credit also provides for the issuance of standby letters of credit and company credit cards, of which none was outstanding as of December 31, 2021 and July 2, 2021.

This facility may be terminated upon notice, is reviewed annually for renewal or modification, and is supported by a corporate guarantee.

Restructuring Payments

We had liabilities for restructuring activities totaling $3.0 million as of October 1, 2021, which were classified as current liabilities and expected to be paid out in cash over the next 12 months.

We had liabilities for restructuring activities totaling $1.8 million as of December 31, 2021, which were classified as current liabilities and expected to be paid out in cash over the next 12 months.

We expect to fund these future payments with available cash and cash provided by operations.

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The amounts disclosed in our fiscal 2021 Annual Report on Form 10-K filed with the SEC on August 25, 2021 include our commercial commitments and contractual obligations.

During the first three months of fiscal 2022, no material changes occurred in our contractual obligations to purchase goods and services or to make payments under operating leases or our contingent liabilities on outstanding letters of credit, guarantees, and other arrangements as disclosed in our fiscal 2021 Annual Report on Form 10-K.

During the first six months of fiscal 2022, no material changes occurred in our contractual obligations to purchase goods and services or to make payments under operating leases or our contingent liabilities on outstanding letters of credit, guarantees, and other arrangements as disclosed in our fiscal 2021 Annual Report on Form 10-K.

Off-Balance Sheet Arrangements

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Currently we are not participating in transactions that generate relationships with unconsolidated entities or financial partnerships, including variable interest entities, and we do not have any material retained or contingent interest in assets as defined above.

As of October 1, 2021, we did not have material financial guarantees or other contractual commitments that are reasonably likely to adversely affect our current or future financial condition.

As of December 31, 2021, we did not have material financial guarantees or other contractual commitments that are reasonably likely to adversely affect our current or future financial condition.

In addition, we are not currently a party to any related party transactions that materially affect our results of operations, cash flows or financial condition.

As of October 1, 2021, we had commercial commitments of $64.0 million.

As of December 31, 2021, we had commercial commitments of $64.2 million.

Please refer to “Note 12 Commitments and Contingencies” of the Notes to unaudited condensed consolidated financial statements in this Quarterly Report on Form 10-Q for Contractual Obligations and Off-Balance Sheet Arrangements.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis