What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-11-02 compared with 2022-05-04 · 95 added, 106 removed, 134 unchanged (60% of the section changed)

27 unchanged sentences

• continued price and margin erosion as a result of increased competition in the microwave transmission industry;

• our ability to realize the anticipated benefits of any proposed or recent acquisitions within the anticipated timeframe or at all, including the risk that proposed or recent acquisitions will not be integrated successfully;

• the impact of the volume, timing, and customer, product, and geographic mix of our product orders;

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• 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;

• the ability of our subcontractors to timely perform;

• weakness in the global economy affecting customer spending;

• continued weakness in the global economy affecting customer spending;

• retention of our key personnel;

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See “Item 1A.

Risk Factors” in our fiscal 2021 Annual Report on Form 10-K filed with the SEC on August 25, 2021 for more information regarding factors that may cause our results to differ materially from those expressed or implied by the forward-looking statements contained in this Quarterly Report on Form 10-Q.

Risk Factors” in our fiscal 2022 Annual Report on Form 10-K filed with the SEC on September 14, 2022 for more information regarding factors that may cause our results to differ materially from those expressed or implied by the forward-looking statements contained in this Quarterly Report on Form 10-Q.

You should not place undue reliance on these forward-looking statements, which reflect our management’s opinions only as of the date of the filing of this Quarterly Report on Form 10-Q.

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MD&A is provided as a supplement to, and should be read in conjunction with, our unaudited condensed consolidated financial statements and the accompanying notes.

In the discussion herein, our fiscal year ending July 1, 2022 is referred to as “fiscal 2022” or “2022” and our fiscal year ended July 2, 2021 is referred to as “fiscal 2021” or “2021.”

On April 7, 2021, we effected a two-for-one split in the form of a stock dividend to shareholders of record as of April 1, 2021.

We anticipate growth in revenue in fiscal 2022.

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.

rural broadband and wireless internet service provider areas and there is now further evidence of investment to support 5G deployments with our U.S.

service provider customers.

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.

In the discussion herein, our fiscal year ending June 30, 2023 is referred to as “fiscal 2023” or “2023” and our fiscal year ended July 1, 2022 is referred to as “fiscal 2022” or “2022.”

Aviat sells radios, routers, software and services.

We have more than 3,000 customers and significant relationships with global service providers and private network operators.

Our manufacturing base in North America consists of a combination of contract manufacturing and assembly and test operated in Austin, Texas by Aviat.

Our technology is underpinned by more than 200 patents.

We compete on the basis of total cost of ownership, microwave radio expertise and solutions for mission critical communications.

We have a global presence.

The COVID-19 pandemic related disruptions to our business, operations, customers and suppliers lessened over the course of fiscal 2022.

While supply chain lead-times remain extended and difficult to manage, the impact on our ability to fulfill orders for the year ended July 1, 2022 was minimal.

Depending on the progression of pandemic-related factors such as supply constraints, potential for temporary manufacturing restrictions and our ability to perform field services during shelter in place orders, we could experience constraints and delays in fulfilling customer orders in future periods.

We are monitoring, assessing and adapting to the situation to mitigate impacts on 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.

The pandemic has resulted in government authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter-in-place or stay-at-home orders, and business shutdowns.

Our global operations expose us to risks associated with public health crises and epidemics/pandemics, such as the COVID-19 pandemic.

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 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.

Our first priority remains the health and safety of our employees and their families.

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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.

We continue to be impacted by inflationary pressures incurred to overcome supply chain and logistical bottlenecks.

We will monitor, assess and adapt to the situation and prepare for implications to our business, supply chain and customer demand.

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

Business Combination with Redline Communications

On April 13, 2022, Aviat and Redline Communications, Inc.

(“Redline”), a leading provider of mission-critical data infrastructure, signed a definitive agreement for Aviat to acquire all outstanding common stock of Redline.

The transaction closed on July 5, 2022.

Redline allows Aviat to expand its Private Networks Offering with Private LTE/5G, Unlicensed Wireless Access Solutions, by creating an integrated end-to-end offering for wireless access and transport in the Private Networks segment, leveraging Aviat's sales channel to address a large dollar Private LTE/5G addressable market and increasing Aviat’s reach in mission-critical industrial Private Networks.

Operations Review

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

The market for mobile backhaul continued to be our primary addressable market segment globally in the first three months of fiscal 2023.

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.

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We continue to find that our strength in turnkey and after-sale support services is a differentiating factor that wins business for us and enables us to expand our business with existing customers in all markets.

However, as disclosed above and in the “Risk Factors” section in Item 1A of our Annual Report on Form 10-K filed with the SEC on August 25, 2021, a number of factors could prevent us from achieving our objectives, including ongoing pricing pressures attributable to competition and macroeconomic conditions in the geographic markets that we serve.

However, as disclosed above and in the “Risk Factors” section in Item 1A of our Annual Report on Form 10-K filed with the SEC on September 14, 2022, a number of factors could prevent us from achieving our objectives, including ongoing pricing pressures attributable to competition and macroeconomic conditions in the geographic markets that we serve.

We manage our sales activities primarily on a geographic basis in North America and three international geographic regions:

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

Revenue by region for the three and nine months ended April 1, 2022 and April 2, 2021 and the related changes were as follows:

Three Months Ended Nine Months Ended

(In thousands, except percentages) April 1, 2022 April 2, 2021 $ Change % Change April 1, 2022 April 2, 2021 $ Change % Change

Revenue by region for the three months ended September 30, 2022 and October 1, 2021 and the related changes were as follows:

Three Months Ended

(In thousands, except percentages) September 30, 2022 October 1, 2021 $ Change % Change

North America $ 48,848 $ 50,937 $ (2,089) (4.1) %

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$ 81,251 $ 73,158 $ 8,093 11.1 %

Our revenue in North America increased by $7.0 million, or 16.7%, during the third quarter of fiscal 2022 compared with the same period of fiscal 2021.

Revenue in North America increased by $14.3 million, or 10.5%, during the first nine months of fiscal 2022 compared with the same period of fiscal 2021.

The increase in North America revenue during the three and nine 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 $3.2 million or 32.5% during the third quarter of fiscal 2022 compared with the same period of fiscal 2021.

Revenue in Africa and the Middle East increased by $6.2 million, or 20.0%, during the first nine months of fiscal 2022 compared with the same period of fiscal 2021.

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

Revenue in Europe decreased by $0.4 million, or 11.6%, for the third quarter of fiscal 2022 compared with the same period of fiscal 2021.

Revenue in Europe increased by $1.5 million, or 20.6%, during the first nine months of fiscal 2022 compared with the same period of fiscal 2021.

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

Revenue in Latin America and Asia Pacific decreased by $1.7 million, or 15.6%, during the third quarter of fiscal 2022 compared with the same period of fiscal 2021.

This decrease in revenue during the third quarter of fiscal 2022 was primarily due to timing of customer specific order in prior year.

Revenue in Latin America and Asia Pacific increased by $0.3 million, or 1.0%, during the first nine months of fiscal 2022 compared with the same period of fiscal 2021.

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

Three Months Ended Nine Months Ended

(In thousands, except percentages) April 1, 2022 April 2, 2021 $ Change % Change April 1, 2022 April 2, 2021 $ Change % Change

Our revenue in North America decreased by $2.1 million, or 4.1%, during the first quarter of fiscal 2023 compared with the same period of fiscal 2022.

The decrease in North America revenue during the three months of fiscal 2023 was primarily due to timing of private network projects.

Our revenue in Africa and the Middle East increased by $0.3 million or 2.6% during the first quarter of fiscal 2023 compared with the same period of fiscal 2022.

This increase in revenue during the three months of fiscal 2023 was primarily due to increased sales to mobile operators in the region.

Revenue in Europe increased by $1.8 million, or 66.5%, for the first quarter of fiscal 2023 compared with the same period of fiscal 2022.

This increase during the three months of fiscal 2023 was primarily due to increased sales to mobile operators in the region.

Revenue in Latin America and Asia Pacific increased by $8.1 million, or 91.9%, during the first quarter of fiscal 2023 compared with the same period of fiscal 2022.

The increase during the three months of fiscal 2023 was primarily due to increased sales to mobile operator customers.

Three Months Ended

(In thousands, except percentages) September 30, 2022 October 1, 2021 $ Change % Change

Product sales $ 55,101 $ 50,847 $ 4,254 8.4 %

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$ 81,251 $ 73,158 $ 8,093 11.1 %

Our revenue from product sales increased by $6.8 million, or 15.0%, for the third quarter of fiscal 2022 compared with the same quarter of fiscal 2021.

Our services revenue increased by $1.3 million, or 6.2%, during the third quarter of fiscal 2022 compared with the same quarter of fiscal 2021.

Our revenue from product sales increased by $20.0 million, or 14.6%, for the first nine months of fiscal 2022 compared with the same period of fiscal 2021.

Our services revenue increased by $2.4 million, or 3.5%, during the first nine months of fiscal 2022 compared with the same period of fiscal 2021.

Three Months Ended Nine Months Ended

(In thousands, except percentages) April 1, 2022 April 2, 2021 $ Change % Change April 1, 2022 April 2, 2021 $ Change % Change

Our revenue from product sales increased by $4.3 million, or 8.4%, for the first quarter of fiscal 2023 compared with the same quarter of fiscal 2022.

This is driven by strong growth in Asia Pacific and Latin America as well as the contribution from the Redline acquisition.

Our services revenue increased by $3.8 million, or 17.2%, during the first quarter of fiscal 2023 compared with the same quarter of fiscal 2022.

Three Months Ended

(In thousands, except percentages) September 30, 2022 October 1, 2021 $ Change % Change

Revenue $ 81,251 $ 73,158 $ 8,093 11.1 %

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36.7 % 32.1 %

Gross margin for the third quarter of fiscal 2022 increased by $2.0 million, or 7.7% compared with the same quarter of fiscal 2021.

Gross margin for the first nine months of fiscal 2022 increased by $5.0 million, or 6.6%.

For the three and nine 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 margin for the first quarter of fiscal 2023 increased by $3.4 million, or 12.9% compared with the same quarter of fiscal 2022.

For the first three months of fiscal 2023, gross margin improved over the same period in fiscal 2022 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 continue to gain momentum.

Product margin as a percentage of product revenue decreased in the third quarter and in the first nine 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 in the third quarter and in the first nine months of fiscal 2022 compared to the same periods in fiscal 2021 were relatively flat.

However, our pricing actions to offset higher costs continue to gain momentum, as well as the accretive contribution of the Redline business.

Product margin as a percentage of product revenue decreased in the first quarter of fiscal 2023 compared with the same period of fiscal 2022 primarily due to increased supply chain costs.

Service margin as a percentage of service revenue increased in the first quarter of fiscal 2023 compared to the same period in fiscal 2022.

Research and Development Expenses

Three Months Ended Nine Months Ended

(In thousands, except percentages) April 1, 2022 April 2, 2021 $ Change % Change April 1, 2022 April 2, 2021 $ Change % Change

Three Months Ended

(In thousands, except percentages) September 30, 2022 October 1, 2021 $ Change % Change

Research and development $ 6,087 $ 5,910 $ 177 3.0 %

7.1 % 7.9 % 7.7 % 7.6 %

Our research and development expenses increased by $1.8 million, or 11.6%, in the nine months of fiscal 2022 compared with the same periods of fiscal 2021 primarily due to the increased spend in prior six month period resulting from R&D efforts to design around problematic suppliers and deceleration of grant programs for nine month period to date compared to prior year.

Our research and development expenses increased by $0.2 million, or 3.0%, in the three months of fiscal 2023 compared with the same period of fiscal 2022 primarily due to the increased product development activities.

Selling and Administrative Expenses

Three Months Ended Nine Months Ended

(In thousands, except percentages) April 1, 2022 April 2, 2021 $ Change % Change April 1, 2022 April 2, 2021 $ Change % Change

Three Months Ended

(In thousands, except percentages) September 30, 2022 October 1, 2021 $ Change % Change

Selling and administrative $ 17,504 $ 12,698 $ 4,806 37.8 %

21.5 % 17.4 %

Our selling and administrative expenses decreased by $0.2 million, or 1.6%, in the third quarter of fiscal 2022 compared with the same period in fiscal 2021.

Our selling and administrative expenses decreased by $0.3 million, or 0.6%, for the nine months of fiscal 2022 compared with the same period in fiscal 2021.

The decrease for the three and nine months of fiscal 2022 compared to comparable period of fiscal 2021 was primarily due to variable compensation.

Three Months Ended Nine Months Ended

(In thousands, except percentages) April 1, 2022 April 2, 2021 $ Change % Change April 1, 2022 April 2, 2021 $ Change % Change

Restructuring (recovery) charges $ (72) $ 1,162 $ (1,234) (106.2) % $ (373) $ 1,162 $ (1,535) (132.1) %

In the third quarter of fiscal 2022, we recorded restructuring recoveries of $0.1 million primarily related to the restructuring plan (the “Fiscal 2021 Plan”).

As of April 1, 2022, the accrual balance of $1.0 million was in short-term restructuring liabilities on our unaudited condensed consolidated balance sheets.

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

Our selling and administrative expenses increased by $4.8 million, or 37.8%, in the first quarter of fiscal 2023 compared with the same period in fiscal 2022.

The increase for the three months of fiscal 2023 compared to comparable period of fiscal 2022 was primarily due to variable compensation and Redline related integration costs.

Restructuring charges

Three Months Ended

(In thousands, except percentages) September 30, 2022 October 1, 2021 $ Change % Change

Restructuring charges $ 1,950 $ 659 $ 1,291 195.9 %

In the first quarter of fiscal 2023, we recorded restructuring charges of $2.0 million primarily related to the restructuring plan (the “Fiscal 2023 Plan”).

As of September 30, 2022, the accrual balance of $1.5 million was in short-term restructuring liabilities on our unaudited condensed consolidated balance sheets.

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

Other Expense/Income, net

Three Months Ended Nine Months Ended

(In thousands, except percentages) April 1, 2022 April 2, 2021 $ Change % Change April 1, 2022 April 2, 2021 $ Change % Change

Three Months Ended

(In thousands, except percentages) September 30, 2022 October 1, 2021 $ Change % Change

Other expense (income), net $ 2,782 $ (28) $ 2,810 *

Our other expenses (income), net increased by $0.3 million and $0.6 million, in the three and nine months of fiscal 2022, respectively, compared with the same periods of fiscal 2021 primarily due to the movement in foreign exchange.

Three Months Ended Nine Months Ended

(In thousands, except percentages) April 1, 2022 April 2, 2021 $ Change % Change April 1, 2022 April 2, 2021 $ Change % Change

* percentage not meaningful

Our other expenses (income), net increased by $2.8 million in the three months of fiscal 2023, compared with the same period of fiscal 2022 primarily due to loss of value related to the marketable securities and the movement in foreign exchange .

Three Months Ended

(In thousands, except percentages) September 30, 2022 October 1, 2021 $ Change % Change

Income before income taxes $ 1,131 $ 6,842 $ (5,711) (83.5) %

Provision for (benefit from) income taxes $ 1,278 $ (90,568) $ 91,846 (101.4) % $ 6,490 $ (88,629) $ 95,119 (107.3) %

Provision for income taxes $ 3,877 $ 2,160 $ 1,717 79.5 %

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

and profitable foreign subsidiaries.

The tax benefit for the first nine months of fiscal 2021 was primarily due to the release of valuation allowance on our U.S.

federal and state deferred tax assets.

The tax expense for the first three months of fiscal 2023 was primarily due to the tax expense related to U.S.

and profitable foreign subsidiaries, including deferred tax expense associated with our acquisition of Redline in July 2022 and subsequent restructuring impact.

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

and profitable subsidiaries.

Liquidity, Capital Resources, and Financial Strategies

Sources of Cash

As of April 1, 2022, our total cash and cash equivalents were $31.3 million.

As of September 30, 2022, our total cash and cash equivalents were $21.6 million.

Approximately $8.2 million, or 38.0%, was held in the United States.

The remaining balance of $13.4 million, or 62.0%, was held by entities outside the United States.

Of the amount of cash and cash equivalents held by our foreign subsidiaries on April 1, 2022, $16.8 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 September 30, 2022, $12.1 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 used in operating activities was $10.8 million for the first nine months of fiscal 2022, compared to $14.2 million cash provided from operations for the first nine months of fiscal 2021;

Net cash used in operating activities was $6.3 million for the first three months of fiscal 2023, compared to $0.7 million cash provided from operations for the first three months of fiscal 2022;

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 $12.6 million for the first nine months of 2022.

The net changes in operating assets and liabilities resulted in a net use of cash of $40.0 million for the first nine months of fiscal 2022, compared to net use of cash of $12.5 million for the same period in fiscal 2021.

Changes in operating assets and liabilities resulted in a net use of cash for the first nine 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;

Net cash provided by noncash items was $9.2 million for the first three months of 2023.

The net changes in operating assets and liabilities resulted in a net use of cash of $12.7 million for the first three months of fiscal 2023, compared to net use of cash of $7.9 million for the same period in fiscal 2022.

Changes in operating assets and liabilities resulted in a net use of cash for the first three months of fiscal 2023 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.

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Investing Activities

Net cash used in investing activities was $1.2 million and $2.4 million for the first nine months of fiscal 2022 and 2021, respectively, which consisted of purchases of marketable securities and acquisition of capital expenditures offset by proceeds from asset held for sale.

During the remainder of fiscal year 2022, we expect to spend approximately $2.0 million for capital expenditures, primarily on equipment for development and manufacturing of new products and IT infrastructure.

Net cash used in investing activities was $8.3 million for the first three months of fiscal 2023, consisting of payment for acquisition net of cash and cash equivalent, and investment in property, plant, and equipment, less consideration received from sale of marketable securities.

Net cash used in investing activities was $0.5 million for the first three months of fiscal 2022, driven by investments in property, plant, and equipment.

Financing Activities

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 $4.0 million for the first nine months of fiscal 2022, primarily due to repurchase of $4.6 million of stock which was partially offset by cash proceeds from the issuance of common stock under employee stock plans of $0.9 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 nine 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 $1.9 net of the payments for taxes related to settlement of equity awards of $0.2 million.

As of April 1, 2022, our principal sources of liquidity consisted of $31.3 million in cash and cash equivalents;

Net cash used in financing activities was $0.3 million for the first three months of fiscal 2023, due to payments for taxes related to settlement of equity awards of $0.7 million partially offset by the issuance of common stock under employee stock plans of $0.4 million.

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 September 30, 2022, our principal sources of liquidity consisted of $21.6 million in cash and cash equivalents;

$22.0 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.

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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.

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

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

and Singapore entities.

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The borrowing base is subject to certain eligibility criteria.

Availability under the accounts receivable formula-based revolving credit facility can also be utilized to issue letters of credit with a $12.0 million sub-limit.

As of April 1, 2022, available credit under the SVB Credit Facility was $21.7 million, reflecting the lower available limit of $25.0 million less outstanding letters of credit of $3.3 million.

As of July 3, 2020, our outstanding debt balance under the SVB Credit Facility, classified as a current liability, was $9.0 million, and the interest rate was 3.75%.

We repaid the outstanding debt balance in July 2020.

We have not borrowed against the SVB Credit Facility during the nine months ended April 1, 2022 and there were no borrowing outstanding as of April 1, 2022 or July 2, 2021.

As of April 1, 2022, 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 April 1, 2022 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 April 1, 2022 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.

Availability under the

accounts receivable formula-based revolving credit facility can also be utilized to issue letters of credit with a $12.0 million sub-limit.

As of September 30, 2022, available credit under the SVB Credit Facility was $22.0 million, reflecting the lower available limit of $25.0 million less outstanding letters of credit of $3.0 million.

We borrowed and repaid $15.0 million against the SVB Credit Facility during the fiscal quarter and the interest rate was 5.83%..

As of September 30, 2022 there was no borrowing outstanding.

As of September 30, 2022, 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.

Restructuring Payments

We had liabilities for restructuring activities totaling $1.0 million as of April 1, 2022, 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 $1.5 million as of September 30, 2022, 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.

Contractual Obligations

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 nine 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.

The amounts disclosed in our fiscal 2022 Annual Report on Form 10-K filed with the SEC on September 14, 2022 include our commercial commitments and contractual obligations.

During the first three months of fiscal 2023, 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 2022 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 April 1, 2022, 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 September 30, 2022, 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 April 1, 2022, we had commercial commitments of $65.1 million.

As of September 30, 2022, we had commercial commitments of $64.3 million.

Please refer to “Note 13 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