What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-05-07 compared with 2023-10-31 · 101 added, 89 removed, 139 unchanged (58% of the section changed)

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Cautionary Statement Regarding Forward-Looking Statements

Certain statements in this document constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including statements related to the global coronavirus pandemic, net sales, diluted earnings per share, gross profit, gross margin, selling, general and administrative expenses, income tax expense, income before income taxes, net income, cash and cash equivalents, indebtedness, liquidity, the Company’s share repurchase program, the Company’s outlook, the Company’s growth opportunities and future business prospects, operational costs and productivity initiatives, inflation, customs duties and mitigation of tariffs, long-term value, acquisitions and acquisition opportunities, investments, cost offsets, quarterly fluctuations, new product development, customer concessions, and fluctuations in foreign currency.

Certain statements in this document constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including statements related to net sales, diluted earnings per share, gross profit, gross margin, selling, general and administrative expenses, income tax expense, income before income taxes, net income, cash and cash equivalents, indebtedness, liquidity, the Company’s share repurchase program, the Company’s outlook, the Company’s growth opportunities and future business prospects, operational costs and productivity initiatives, inflation, customs duties and mitigation of tariffs, long-term value, acquisitions and acquisition opportunities, investments, cost offsets, quarterly fluctuations, new product development, customer concessions, and fluctuations in foreign currency.

Words such as “may,” “believe,” “demonstrate,” “expect,” “estimate,” “forecast,” “project,” “plan,” “anticipate,” “intend,” “should,” “will” and “likely” and similar expressions identify forward-looking statements.

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Readers are cautioned not to place undue reliance on those forward-looking statements, which speak only as of the date the statements were made.

Such forward-looking statements are based on current expectations that involve a number of known and unknown risks, uncertainties and other factors (many of which are outside of our control) which may cause actual events to be materially different from those expressed or implied by such forward-looking statements.

Such forward-looking statements are based on current expectations that involve known and unknown risks, uncertainties and other factors (many of which are outside of our control) which may cause actual events to be materially different from those expressed or implied by such forward-looking statements.

Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected.

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and/or its affiliates.

This Quarterly Report on Form 10-Q also may contain additional trade names, trademarks or service marks belonging to other companies.

Quarterly Report on Form 10-Q also may contain additional trade names, trademarks or service marks belonging to other companies.

We do not intend our use or display of other parties’ trademarks, trade names or service marks to imply, and such use or display should not be construed to imply, a relationship with or endorsement or sponsorship of us by these parties.

We are one of the leading suppliers of replacement and upgrade parts in the motor vehicle aftermarket industry, serving passenger cars, light-, medium-, and heavy-duty trucks, as well as specialty vehicles, including utility terrain vehicles (UTVs) and all-terrain vehicles (ATVs).

As of December 31, 2022, we marketed approximately 129,000 distinct parts, many of which we designed and engineered.

We operate through three business segments:

Light Duty, Heavy Duty, and Specialty Vehicle, consistent with the sectors of the motor vehicle aftermarket industry in which we operate.

For more information on our segments, refer to Note 8, “Segment Information,” to the Consolidated Financial Statements, included under ITEM 8.

As of December 31, 2023, we marketed approximately 133,000 distinct parts compared to approximately 129,000 as of December 31, 2022, many of which we designed and engineered.

This number excludes private label stock keeping units and other variations in how we market, package and distribute our products, includes distinct parts of acquired companies and reflects distinct parts that have been discontinued at the end of their lifecycle.

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We generate most of our net sales from customers in North America, primarily in the United States.

Our products are sold primarily through:

aftermarket retailers, including through their online platforms;

Our products are sold primarily through aftermarket retailers;

through online platforms;

national, regional and local warehouse distributors and specialty markets;

and salvage yards.

In addition, we sell specialty vehicle products through dealers and our online platform.

We also distribute products outside the United States, with sales primarily into Canada and Mexico, and to a lesser extent, Europe, the Middle East and Australia.

We also distribute aftermarket parts outside the United States, with sales primarily into Canada and Mexico, and to a lesser extent, Europe, the Middle East and Australia.

We may experience significant fluctuations from quarter to quarter in our results of operations due to the timing of orders placed by our customers as well as our ability, and the ability of our suppliers, to deliver products ordered by our customers.

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New Product Development

New product development is an important success factor for us and has been a source of growth for us.

New product development is an important success factor for us and has been a source of our growth.

We have made incremental investments to increase our new product development efforts to grow our business and strengthen our relationships with our customers.

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These investments historically have enabled us to provide an expanding array of new product offerings and grow revenues at levels that generally have exceeded market growth rates.

In the nine months ended September 30, 2023, we introduced 2,820 new distinct parts to our customers and end-users, including 1,063 “New-to-the-Aftermarket” parts.

We introduced 4,443 new

distinct parts to our customers and end-users in the fiscal year ended December 31, 2022, including 1,565 “New-to-the-Aftermarket” parts.

One area of focus has been our complex electronics program, which capitalizes on the growing number of electronic components being utilized on today’s OE platforms.

New vehicles contain an average of approximately 50 electronic modules, with some high-end luxury vehicles containing over 100 modules.

In the three months ended March 30, 2024, we introduced 1,440 new distinct parts to our customers and end-users, including 522 “New-to-the-Aftermarket” parts.

We introduced 6,106 new distinct parts to our customers and end-users in the fiscal year ended December 31, 2023, including 1,791 “New-to-the-Aftermarket” parts.

One area of focus for the light-duty sector has been our complex electronics program, which capitalizes on the growing number of electronic components being utilized on today’s OE platforms.

New vehicles contain an average of approximately 100 electronic modules, with some high-end luxury vehicles exceeding that.

Our complex electronics products are designed and developed in-house and tested to help ensure consistent performance, and our product portfolio is focused on further developing our leadership position in the category.

Another area of focus has been on products we market for the medium- and heavy-duty truck sector of the motor vehicle aftermarket industry.

We believe that this sector provides many of the same growth opportunities that the passenger car and light-duty truck sector of the motor vehicle aftermarket industry has provided us.

We specialize in offering parts to this sector that were traditionally only available from OE manufacturers or salvage yards, similar to how we approach the passenger car and light-duty truck sector.

A key component of our strategy is growth through acquisitions.

On October 4, 2022, we acquired Super ATV, LLC ("SuperATV"), a leading independent supplier to the powersports aftermarket with a family of highly respected brands spanning functional accessories and upgrades, as well as replacement parts for specialty vehicles.

See Note 2, Acquisitions under Notes to Condensed Consolidated Financial Statements for additional information.

Another area of focus has been on products we market for the heavy-duty sector.

We believe that this sector provides many of the same growth opportunities that the light-duty sector has provided us.

We specialize in offering parts to this sector that were traditionally only available from OE manufacturers or salvage yards, similar to how we approach the light-duty sector.

Within the specialty vehicle sector, we focus on providing performance parts and accessories, and nondiscretionary repair parts for UTVs and ATVs.

We develop products designed to be compatible across a wide variety of makes and models to enhance both the performance and appearance of customers’ vehicles.

A key component of our strategy is growth through acquisitions, including the October 2022 acquisition of Super ATV, a leading independent supplier to the powersports aftermarket with a family of highly respected brands spanning functional accessories and upgrades, as well as replacement parts for specialty vehicles, and the August 2021 acquisition of Dayton Parts, a manufacturer of chassis and other parts designed to serve the heavy-duty vehicle sector of the aftermarket.

We may acquire businesses in the future to supplement our financial growth, increase our customer base, add to our distribution capabilities or enhance our product development resources, among other reasons.

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consumers began to increase their purchases of new vehicles which over time caused the US SAAR to recover and return to more historical levels.

Consequently, we expect the VIO for vehicles aged 8 to 13 years old to continue to recover.

The 8-to-13-year-old vehicle car parc has continued to grow over the past several years, which we expect will expand demand for aftermarket replacement parts as more vehicles remain in operation.

In addition, we believe that vehicle owners generally are operating their current vehicles longer than they did several years ago, performing necessary repairs and maintenance to keep those vehicles well maintained.

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According to the U.S.

Department of Transportation, the number of miles driven through October 2022 increased 1.5% year over year.

We expect this increase in miles driven may continue, given that certain employers have begun to lift work-from-home policies implemented during the pandemic and, consequently, consumers may return to commuting to work on a more regular basis.

However, global gasoline prices have remained high, which may negatively impact miles driven as consumers reduce travel or seek alternative methods of transportation.

Department of Transportation, the number of miles driven through October 2023 increased 2.1% year over year in the light-duty sector.

However, global gasoline prices remained high during fiscal 2023 and, if they continue, they may negatively impact miles driven as consumers reduce travel or seek alternative methods of transportation.

Brand Protection

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In addition, we may offer pricing discounts based on volume purchased from us or other pricing discounts related to programs under a customer’s agreement.

These incentives can be in the form of “off-invoice” discounts and are immediately deducted from sales at the time of sale.

For those customers that choose to receive their incentives on a quarterly or annual basis instead of “off-invoice,” we provide rebates and accrue for such payments as the related sales are made and reduce sales accordingly.

These incentives can be in the form of “off-invoice” discounts that are immediately deducted from sales at the time of sale.

For those customers that choose to receive their incentives on a quarterly or annual basis instead of “off-invoice,” we provide rebates and accrue for such incentives as the related sales are made and reduce sales accordingly.

Finally, rebates and discounts are provided to customers to support promotional activities such as advertising and sales force allowances.

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Change-over costs include the costs related to removing the new customer’s inventory and replacing it with our inventory, which is commonly referred to as a stock lift.

New customer acquisition costs are recorded as a reduction to revenue when incurred.

Customer acquisition costs are recorded as a reduction to revenue when incurred.

Product Warranty and Overstock Returns

Many of our products carry a lifetime limited warranty, which generally covers defects in materials or workmanship and failure to meet specifications.

In addition to warranty returns, we also

may permit our customers to return new, undamaged products to us within customer-specific limits if they have overstocked their inventories.

We warrant our products against certain defects in material and workmanship when used as designed on the vehicle on which it was originally installed.

We offer a limited lifetime warranty on most of our products in the light-duty parts categories, with more limited warranties for our heavy-duty and specialty vehicle products.

In addition to warranty returns, we may permit our customers to return new, undamaged products to us within customer-specific limits if they have overstocked their inventories.

At the time products are sold, we accrue a liability for product warranties and overstock returns as a percentage of sales based upon estimates established using historical information on the nature, frequency and average cost of the claim and the probability of the customer return.

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Foreign Currency

Many of our products and related raw materials and components are purchased from suppliers in the United States and a variety of non-U.S.

Many of our products and related raw materials and components are purchased from suppliers in a variety of non-U.S.

The products generally are purchased through purchase orders with the purchase price specified in U.S.

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dollar may result in a change in the cost of goods that we purchase from China.

However, the cost of the goods we procure is also affected by other factors including raw material availability, labor cost, and transportation costs.

We have subsidiaries located outside the United States with various functional currencies.

However, the cost of the goods we procure is also affected by other factors, including raw material availability, labor cost, tariffs and transportation costs.

We have operations located outside the United States with various functional currencies.

Because our consolidated financial statements are denominated in U.S.

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Impact of Labor Market and Inflationary Costs

We have experienced broad-based inflationary impacts during the nine months ended September 30, 2023 as well as during the year ended December 31, 2022, due primarily to global transportation and logistics constraints, which have resulted in significantly higher transportation costs;

We experienced broad-based inflationary impacts during the year ended December 31, 2023, notably in the first six months of the year, due primarily to global transportation and logistics constraints, which resulted in significantly higher transportation costs;

material costs;

and wage inflation from an increasingly competitive labor market.

Higher labor costs and material inflation costs may continue to negatively impact our results throughout the remainder of fiscal 2023, despite signs of global supply chain constraints easing.

Despite signs of global supply chain constraints easing, higher labor costs and material inflation costs may continue to negatively impact our results in the future.

We attempt to offset inflationary pressures with cost-saving initiatives, price increases to customers and the use of alternative suppliers.

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Impact of Interest Rates

Our business is subject to interest rate risk under the terms of our customer accounts receivable sales programs, as a change in the T erm Secured Overnight Financing Rate (“Term SOFR”) or alternative discount rate affects the cost incurred to factor eligible accounts receivable.

Our business is subject to interest rate risk under the terms of our customer accounts receivable sales programs, as a change in the Term Secured Overnight Financing Rate (“Term SOFR”) or alternative discount rate affects the cost incurred to factor eligible accounts receivable.

Additionally, our outstanding borrowings under our credit facility bear interest at variable rates tied to Term SOFR or the applicable base rate.

Under the terms of the credit facility, a change in interest rates affects the rate at which we can borrow funds thereunder and also impacts the interest cost on existing borrowings.

During the nine months ended September 30, 2023 and the year ended December 31, 2022, we saw significant increases in Term SOFR and other reference rates, which impacted our

results as discussed in Results of Operations that follows.

Interest rates may increase in the future or may be held steady for prolonged periods, resulting in increased costs associated with our accounts receivable sales programs and outstanding borrowings.

Under the terms of the credit facility, a change in interest rates affects the

rate at which we can borrow funds thereunder and also impacts the interest cost on existing borrowings.

Interest rates may hold steady at their current rates for prolonged periods or may increase in the future, resulting in increased costs associated with our accounts receivable sales programs and outstanding borrowings.

During the year ended December 31, 2023, we saw significant increases in Term SOFR and other reference rates and interest rates have remained elevated throughout the three months ended March 30, 2024, which impacted our results as discussed in Results of Operations that follows.

Impact of Tariffs

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We have taken several actions to mitigate the impact of the tariffs including, but not limited to, price increases to our customers and cost concessions from our suppliers.

We expect to continue mitigating the impact of tariffs primarily through selling price increases to offset the higher tariffs incurred.

We expect to continue mitigating the impact of tariffs primarily through, among other things, diversification of suppliers across geographies and selling price increases to offset the higher tariffs incurred.

Tariffs are not expected to have a material impact on our net income but are expected to increase net sales and lower our gross and operating profit margins.

In January 2020, the USTR granted temporary tariff relief for certain categories of products being imported from China.

The tariff relief granted by the USTR expired on most categories of products being imported from China at the end of 2020.

However, in March 2022, the USTR reinstated tariff relief for certain categories of products imported from China.

The reinstated tariff relief applies retroactively to October 12, 2021 and is scheduled to expire on December 31, 2023.

In March 2022, the USTR reinstated tariff relief for certain categories of products imported from China that had expired.

Absent further action by the USTR, the reinstated tariff relief will expire on May 31, 2024.

The reinstated tariff relief applies to a limited number of our products and is not expected to materially impact our operating results.

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The following table sets forth, for the periods indicated, the percentage of net sales represented by certain items in our Condensed Consolidated Statements of Operations:

Three Months Ended* Nine Months Ended*

(in thousands, except percentage data) September 30, 2023 September 24, 2022 September 30, 2023 September 24, 2022

Three Months Ended*

(in thousands, except percentage data) March 30, 2024 April 1, 2023

Net sales $ 468,701 100.0 % $ 466,738 100.0 %

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Interest expense, net 10,605 2.3 % 11,953 2.6 %

Other (income) expense, net (605) -0.1 % 65 0.0 % (1,358) -0.1 % (130) -0.0 %

Other expense (income), net 40 0.0 % (357) (0.1) %

Income before income taxes 43,793 9.3 % 6,518 1.4 %

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* Percentage of sales information may not add due to rounding

Three Months Ended September 30, 2023 Compared to Three Months Ended September 24, 2022

Net sales increased 18% to $488.2 million for the three months ended September 30, 2023 from $413.5 million for the three months ended September 24, 2022.

Net sales growth was primarily driven by the addition of SuperATV, price increases to offset inflation and the introduction of new products to the market.

Net sales growth for the three months ended September 30, 2023 excluding SuperATV was 6%.

Gross profit margin was 37.5% of net sales for the three months ended September 30, 2023 compared to 31.9% of net sales for the three months ended September 24, 2022.

The increase in gross margin as a percentage of net sales was primarily due to sales of lower-cost inventory, price increases and the addition of SuperATV, which has a higher gross margin percentage than the Company average.

Selling, general and administrative expenses (“SG&A”) were $119.0 million, or 24.4% of net sales, for the three months ended September 30, 2023 compared to $89.8 million, or 21.7% of net sales, for the three months ended September 24, 2022.

The increase in SG&A as a percentage of net sales was primarily due to the addition of SuperATV, which has higher SG&A expenses as a percentage of net sales than the Company average, an increase in variable compensation expense and the impact of higher interest rates on our customer accounts receivable factoring programs .

Our effective tax rate was 23.0% for the three months ended September 30, 2023 compared to 22.9% for the three months ended September 24, 2022.

The effective tax rate was flat, with an increase from state tax expense and the effect of foreign operations offset by discrete benefits.

Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 24, 2022

Net sales increased 16% to $1,435.5 million for the nine months ended September 30, 2023 from $1,232.5 million for the nine months ended September 24, 2022.

The increase in net sales reflected the addition of SuperATV in October 2022, the introduction of new products to the market, and price increases to offset inflation.

Net sales growth for the nine months ended September 30, 2023 excluding SuperATV was 4%.

Gross profit margin was 34.2% of net sales for the nine months ended September 30, 2023 compared to 33.0% of net sales for the nine months ended September 24, 2022.

The increase in gross margin as a percentage of net sales was primarily due to the addition of SuperATV, which has a higher gross margin percentage than the Company average, partially offset by the sell-through of high-cost inventory purchased in 2022 that was impacted by inflationary costs.

SG&A expenses were $353.7 million, or 24.6% of net sales, for the nine months ended September 30, 2023 compared to $268.4 million, or 21.8% of net sales, for the nine months ended September 24, 2022.

The increase in SG&A as a percentage of net sales was primarily due to the impact of higher interest rates on our customer accounts receivable factoring programs and the addition of SuperATV, which has higher SG&A expenses as a percentage of net sales than the Company average.

The increase was also impacted by higher amortization of intangible assets, and a charge recorded related to a customer bankruptcy filing, partially offset by a decrease in the nine months ended September 30, 2023 in the fair value estimate of a contingent consideration obligation for a potential earnout payment on a previous acquisition.

Our effective tax rate was 22.7% for the nine months ended September 30, 2023 compared to 22.2% for the nine months ended September 24, 2022.

The increase in the effective tax rate was primarily due to an increase in state tax expense and the effect of foreign operations.

Three Months Ended March 30, 2024 Compared to Three Months Ended April 1, 2023

Net sales increased slightly for the three months ended March 30, 2024 compared to the prior year period, driven primarily by new product introductions and pricing actions to offset inflation.

Gross profit as a percentage of net sales increased 770 basis points compared to the prior year period primarily due to sales of lower-cost inventory, cost-saving initiatives, and pricing actions to offset inflation.

Selling, general and administrative expenses (“SG&A”) increased $0.6 million, and were flat as a percentage of net sales, for the three months ended March 30, 2024, compared to the prior year period.

SG&A for the three months ended March 30, 2024 included costs incurred in connection with a reduction in workforce action that was enacted in February 2024, net of realized savings as a result of that action, while SG&A for the three months ended April 1, 2023 included a charge recorded related to a customer bankruptcy filing.

Our effective tax rate increased to 25.0% for the three months ended March 30, 2024 from 12.8% for the three months ended April 1, 2023 primarily due to favorable discrete items applied to a lower income before income taxes in the three months ended April 1, 2023.

Segment Operating Results

Segment operating results were as follows:

For the Three Months Ended

(in thousands) March 30, 2024 April 1, 2023

Light Duty $ 359,293 $ 348,083

Heavy Duty 57,809 67,647

Specialty Vehicle 51,599 51,008

Total $ 468,701 $ 466,738

Segment profit:

Light Duty $ 57,795 $ 21,447

Heavy Duty 9 5,348

Specialty Vehicle 7,169 7,080

Total $ 64,973 $ 33,875

Light Duty net sales increased $11.2 million, or 3%, for the three months ended March 30, 2024 compared to the prior year period, primarily due to new product introductions and pricing actions to offset inflation.

Light Duty segment profit as a percentage of net sales increased to 16.1% for the three months ended March 30, 2024, from 6.2% for the three months ended April 1, 2023.

This increase was primarily driven by the sell-through of lower-cost inventory and cost-saving initiatives compared to the three months ended April 1, 2023 that included a charge recorded related to a customer bankruptcy filing.

Heavy Duty net sales decreased $9.8 million, or 15%, for the three months ended March 30, 2024 compared to the prior year period.

The decrease in net sales primarily reflects lower freight industry shipping volumes in the three months ended March 30, 2024, as well as strong sales performance in the three months ended April 1, 2023 driven by customers’ inventory restocking at the end of the global pandemic.

Heavy Duty segment profit as a percentage of net sales decreased by 790 basis points for the three months ended March 30, 2024, compared to the prior year period.

This decrease was primarily driven by the sell-through of high-cost inventory, deleverage of fixed costs on lower net sales

volumes, and the impact of investments we made as part of initiatives to grow sales and improve margins on a long-term basis.

Specialty Vehicle

Specialty Vehicle net sales increased $0.6 million, or 1%, for the three months ended March 30, 2024, compared to the prior year period, due to initiatives to expand our dealer footprint and drive sales to new dealers.

Specialty Vehicle segment profit as a percentage of net sales remained unchanged at 13.9% for both the three months ended March 30, 2024 and April 1, 2023.

Liquidity and Capital Resources

Historically, our primary sources of liquidity have been our invested cash and the cash flow we generate from our operations, including accounts receivable sales programs provided by certain customers.

Cash and cash equivalents were $32.0 million at September 30, 2023 and $46.0 million at December 31, 2022.

Working capital was $662.3 million at September 30, 2023 compared to $590.8 million at December 31, 2022.

Shareholders’ equity was $1,128.1 million at September 30, 2023 and $1,042.6 million at December 31, 2022.

Key components of our liquidity and capital resources were as follows:

(in thousands) March 30, 2024 April 1, 2023

Cash and cash equivalents $ 34,433 $ 36,814

Working Capital $ 697,199 $ 686,558

Shareholders' equity $ 1,174,495 $ 1,168,203

Based on our current operating plan, we believe that our sources of available capital are adequate to meet our ongoing cash needs for at least the next twelve months.

However, our liquidity could be negatively affected by extending payment terms to customers, a decrease in demand for our products, increases in interest rates, the outcome of contingencies or other factors.

However, our liquidity could be negatively affected by extending payment terms to customers, a decrease in demand for our products, higher interest rates, the outcome of contingencies or other factors.

See Note 7, “Commitments and Contingencies”, in the accompanying condensed consolidated financial statements for additional information regarding commitments and contingencies that may affect our liquidity.

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However, any sales of accounts receivable through these programs ultimately result in us receiving a lesser amount of cash upfront than if we collected those accounts receivable ourselves in due course, resulting in accounts receivable factoring costs.

Moreover, to the extent that any of these accounts receivable sales programs bear interest at rates tied to the Term SOFR or other reference rates, increases in these applicable rates increase our cost to sell our receivables and reduce the amount of cash we receive.

Moreover, since these accounts receivable sales programs bear interest at rates tied to the Term SOFR or other reference rates, increases in these applicable rates increase our cost to sell our receivables and reduce the amount of cash we receive.

Quantitative and Qualitative Disclosures about Market Risk for more information.

Further extensions of customer payment terms would result in additional uses of cash or increased costs associated with the sales of accounts receivable.

During the nine months ended September 30, 2023 and September 24, 2022, we sold $713.2 million and $778.1 million of accounts receivable, respectively, under these programs.

If receivables had not been sold over the previous twelve months, approximately $866.5 million and $722.3 million of additional accounts receivable would have been outstanding at September 30, 2023 and December 31, 2022, respectively, based on our standard payment terms.

Sales of accounts receivable under these programs, and related factoring costs were as follows:

Three Months Ended

(in thousands) March 30, 2024 April 1, 2023

Sales of accounts receivable $ 285,218 $ 237,739

Factoring costs 13,610 13,524

If receivables had not been sold over the previous twelve months, approximately $630.8 million and $526.4 million of additional accounts receivable would have been outstanding at March 30, 2024

and December 31, 2023, respectively, based on our standard payment terms.

We had capacity to sell more accounts receivable under these programs if the needs of the business warranted.

During the nine months ended September 30, 2023 and September 24, 2022, factoring costs associated with these accounts receivable sales programs were $37.7 million and $23.0 million, respectively.

The increase in factoring costs year over year was driven by higher Term SOFR and other reference rates.

Credit Agreement

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The credit agreement matures on October 4, 2027.

As of September 30, 2023, there was $119.7 million in outstanding borrowings under the revolving credit facility, and $487.5 million in outstanding borrowings under the term loan.

Also on that date, we had three outstanding letters of credit for $1.3 million in aggregate.

Net of outstanding borrowings and letters of credit, we had $479.0 million available under the credit facility at September 30, 2023.

As of March 30, 2024, there was $81.2 million in outstanding borrowings under the revolving credit facility and $481.3 million in outstanding borrowings under the term loan.

Also on that date, we had outstanding letters of credit for $1.3 million in aggregate.

Net of outstanding borrowings and letters of credit, we had $517.5 million available under the credit facility at March 30, 2024.

Our credit agreement contains affirmative and negative covenants.

As of September 30, 2023, we were not in default with respect to our credit agreement.

As of March 30, 2024, we were not in default with respect to our credit agreement.

Refer to Note 7, “Long-Term Debt” to the Notes to Consolidated Financial Statements contained in PART II, ITEM 8 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, for additional information.

The following summarizes the activities included in the Condensed Consolidated Statements of Cash Flows:

Nine Months Ended

(in thousands) September 30, 2023 September 24, 2022

Three Months Ended

(in thousands) March 30, 2024 April 1, 2023

Cash provided by operating activities $ 51,980 $ 26,210

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Net decrease in cash and cash equivalents $ (2,381) $ (12,727)

For the nine months ended September 30, 2023, cash provided by operating activities increased $119.8 million over the prior year period, driven by cash inflows for working capital versus cash outflows from working capital in the prior year period, primarily from inventory, as well as higher income.

Investing activities used cash of $32.9 million and $23.2 million during the nine months ended September 30, 2023 and September 24, 2022, respectively.

The increase in cash used in investing activities during the nine months ended September 30, 2023 over the prior year period is primarily due to higher additions for property, plant and equipment from the inclusion of SuperATV in the current year period following its acquisition in October 2022.

Financing activities during the nine months ended September 30, 2023 included the repayment of $119.7 million of outstanding borrowings under our revolving credit facility, and $9.4 million of our term loan balance under our credit agreement.

During the nine months ended September 24, 2022, we repaid $10.0 million of outstanding borrowing under our revolving credit facility and paid $16.1 million to repurchase 166,050 shares of common stock under our share repurchase plan.

For the three months ended March 30, 2024, cash provided by operating activities increased $25.8 million over the prior year period, primarily driven by higher net income.

Investing activities used cash of $10.8 million and $10.3 million during the three months ended March 30, 2024 and April 1, 2023, respectively.

The increase in cash used in investing activities during the three months ended March 30, 2024 over the prior year period is primarily due to higher additions for property, plant and equipment.

Financing activities during the three months ended March 30, 2024 included $26.9 million paid to repurchase 316,285 shares of common stock under our share repurchase plan, and the repayment of $11.6 million of outstanding borrowings under our revolving credit facility and $3.1 million of our term loan balance under our credit agreement.

During the three months ended April 1, 2023, we repaid $23.9 million of outstanding borrowings under our revolving credit facility and $3.1 million of our term loan balance under our credit agreement.

The remaining uses of cash from financing activities in each period resulted primarily from the repurchase of our common stock from our 401(k) Plan and income tax withholding in connection with the vesting of restricted stock awards (“RSAs”) and restricted stock units (“RSUs”).

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