What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-11-03 compared with 2022-08-04 · 103 added, 103 removed, 187 unchanged (52% of the section changed)

62 unchanged sentences

The table below summarizes our results of operations:

For the three months ended For the six months ended

(in thousands) July 1, 2022 July 2, 2021 July 1, 2022 July 2, 2021

For the three months ended For the nine months ended

(in thousands) September 30, 2022 October 1, 2021 September 30, 2022 October 1, 2021

Sales $ 409,168 $ 347,435 $ 1,193,850 $ 956,735

10 unchanged sentences

Interest expense 2,667 1,849 6,341 6,351

Other expense, net 2,816 83 4,508 1,042

Other (income) expense, net (1,441) (187) 3,067 855

Interest and other expense, net 1,226 1,662 9,408 7,206

3 unchanged sentences

The following table sets forth selected statement of income data as a percentage of sales for the periods indicated:

For the three months ended For the six months ended

July 1, 2022 July 2, 2021 July 1, 2022 July 2, 2021

For the three months ended For the nine months ended

September 30, 2022 October 1, 2021 September 30, 2022 October 1, 2021

Sales 100.0 % 100.0 % 100.0 % 100.0 %

10 unchanged sentences

Interest expense 0.7 0.5 0.5 0.7

Other expense, net 0.7 — 0.6 0.2

Other (income) expense, net (0.4) (0.1) 0.3 0.1

Interest and other expense, net 0.3 0.5 0.8 0.8

3 unchanged sentences

*Percentages may not foot due to rounding.

Three months ended July 1, 2022 compared to three months ended July 2, 2021

Three months ended September 30, 2022 compared to three months ended October 1, 2021

For the three months ended

(in millions) July 1, 2022 July 2, 2021 Change ($) Change (%)

(in millions) September 30, 2022 October 1, 2021 Change ($) Change (%)

Powered Vehicle products $ 235.2 $ 188.0 $ 47.2 25.1 %

1 unchanged sentence

Total sales $ 409.2 $ 347.4 $ 61.8 17.8 %

Total sales for the three months ended July 1, 2022 increased approximately $78.5 million, or 23.9%, compared to the three months ended July 2, 2021.

Specialty Sports product sales increased by $39.0 million, or 28.1%, due to continued strong demand in the OEM channel.

Powered Vehicle product sales increased by $39.5 million, or 20.9%, due to strong performance in our upfitting product lines.

Total sales for the three months ended September 30, 2022 increased approximately $61.8 million, or 17.8%, compared to the three months ended October 1, 2021.

Powered Vehicle product sales increased by $47.2 million, or 25.1%, due to strong performance in our upfitting product lines and increased demand in the OEM channel.

Specialty Sports product sales increased by $14.6 million, or 9.1%, driven by continued strong demand in the OEM channel.

Cost of sales

For the three months ended

(in millions) July 1, 2022 July 2, 2021 Change ($) Change (%)

(in millions) September 30, 2022 October 1, 2021 Change ($) Change (%)

Cost of sales $ 271.9 $ 231.4 $ 40.5 17.5 %

Cost of sales for the three months ended July 1, 2022 increased approximately $46.7 million, or 21.5%, compared to the three months ended July 2, 2021.

Cost of sales for the three months ended September 30, 2022 increased approximately $40.5 million, or 17.5%, compared to the three months ended October 1, 2021.

The increase in cost of sales was primarily due to the 17.8% increase in sales in the same period, as well as certain business factors affecting gross margin, which are discussed below.

For the three months ended July 1, 2022, our gross margin increased 120 basis points to 35.1% compared to 33.9% for the three months ended July 2, 2021.

The increase in gross margin was primarily due to favorable product mix and improved factory efficiencies.

For the three months ended September 30, 2022, our gross margin increased 10 basis points to 33.5% compared to 33.4% for the three months ended October 1, 2021.

The increase in gross margin was primarily due to favorable product mix and improved factory efficiencies at our Gainesville, Georgia facility.

Operating expenses

For the three months ended

(in millions) July 1, 2022 July 2, 2021 Change ($) Change (%)

(in millions) September 30, 2022 October 1, 2021 Change ($) Change (%)

Operating expenses:

4 unchanged sentences

Total operating expenses $ 71.9 $ 60.8 $ 11.1 18.3 %

Total operating expenses for the three months ended July 1, 2022 were $72.5 million compared to $58.4 million for the three months ended July 2, 2021.

The increase in operating expenses is primarily due to higher employee related costs, higher insurance and facility-related expenses, and higher commission costs.

Within operating expenses, sales and marketing expenses increased approximately $6.4 million primarily due to higher commissions of $2.4 million and higher employee related costs of $1.7 million.

Total operating expenses for the three months ended September 30, 2022 were $71.9 million compared to $60.8 million for the three months ended October 1, 2021.

The increase in operating expenses is primarily due to higher employee related costs, insurance and facility-related expenses, commission costs and professional fees.

Within operating expenses, sales and marketing expenses increased approximately $6.0 million primarily due to higher commissions of $2.9 million and employee related costs of $1.6 million, as well as increases in various other costs.

Research and development costs increased approximately $1.7 million primarily due to personnel investments to support future growth and product innovation.

General and administrative expenses increased by approximately $4.1 million due to higher employee related costs of $2.9 million, as well as increases in insurance and other facilities-related expenses.

General and administrative expenses increased by approximately $3.4 million due to higher employee related costs of $1.7 million, professional fees of $1.0 million, as well as increases in insurance and facility-related expenses of $0.7 million.

Income from operations

For the three months ended

(in millions) July 1, 2022 July 2, 2021 Change ($) Change (%)

(in millions) September 30, 2022 October 1, 2021 Change ($) Change (%)

Income from operations $ 65.4 $ 55.2 $ 10.2 18.5 %

As a result of the factors discussed above, income from operations for the three months ended July 1, 2022 increased approximately $17.8 million, or 33.8%, compared to income from operations for the three months ended July 2, 2021.

Interest and other expense, net

As a result of the factors discussed above, income from operations for the three months ended September 30, 2022 increased approximately $10.2 million, or 18.5%, compared to income from operations for the three months ended October 1, 2021.

Interest and other (income) expense, net

For the three months ended

(in millions) July 1, 2022 July 2, 2021 Change ($) Change (%)

Interest and other expense, net:

(in millions) September 30, 2022 October 1, 2021 Change ($) Change (%)

Interest and other (income) expense, net:

Interest expense $ 2.7 $ 1.8 $ 0.9 50.0 %

Other expense, net 2.8 0.1 2.7 2,700.0 %

Interest and other expense, net $ 4.5 $ 1.7 $ 2.8 164.7 %

Interest and other expense, net for the three months ended July 1, 2022 increased by $2.8 million to $4.5 million compared to $1.7 million for the three months ended July 2, 2021.

The increase in other expense, net is primarily due to $1.9 million of unamortized loan fees that were written off in the second quarter of fiscal year 2022 upon the refinancing of our Prior Credit Facility, as well as losses on foreign currency translation.

Other (income) expense, net (1.4) (0.2) (1.2) 600.0 %

Interest and other (income) expense, net $ 1.3 $ 1.6 $ (0.3) (18.8) %

Interest and other (income) expense, net for the three months ended September 30, 2022 decreased by $0.3 million to $1.3 million compared to $1.6 million for the three months ended October 1, 2021.

Other (income) expense, net increased $1.2 million primarily due to a gain from the sale of a land asset in the third quarter of 2022, partially offset by increased losses on foreign currency transactions.

Interest expense increased by $0.9 million due to higher interest rates.

For the three months ended

(in millions) July 1, 2022 July 2, 2021 Change ($) Change (%)

(in millions) September 30, 2022 October 1, 2021 Change ($) Change (%)

Provision for income taxes $ 13.4 $ 9.8 $ 3.6 36.7 %

The effective tax rates were 18.9% and 13.3% for the three month periods ended July 1, 2022 and July 2, 2021, respectively.

For the three months ended July 1, 2022, the difference between the Company's effective tax rate of 18.9% and the 21% federal statutory rate resulted primarily from a lower tax rate on foreign derived intangible income and excess benefits related to stock-based compensation.

The benefits were partially offset by withholding and state taxes.

For the three months ended July 2, 2021, the difference between our effective tax rate of 13.3% and the 21% federal statutory rate resulted primarily from excess benefits related to stock-based compensation and a lower tax rate on foreign derived intangible income.

The effective tax rates were 20.8% and 18.2% for the three month periods ended September 30, 2022 and October 1, 2021, respectively.

For the three months ended September 30, 2022, the difference between the Company's effective tax rate of 20.8% and the 21% federal statutory rate resulted primarily from a lower tax rate on foreign derived intangible income, partially offset by withholding and state taxes.

For the three months ended October 1, 2021, the difference between our effective tax rate of 18.2% and the 21% federal statutory rate resulted primarily from excess benefits related to stock-based compensation and a lower tax rate on foreign derived intangible income.

These benefits were partially offset by state taxes, an increase in the valuation allowance for foreign tax credits and non-deductible expenses.

For the three months ended

(in millions) July 1, 2022 July 2, 2021 Change ($) Change (%)

(in millions) September 30, 2022 October 1, 2021 Change ($) Change (%)

Net income $ 50.8 $ 43.8 $ 7.0 16.0 %

As a result of the factors described above, our net income increased $9.2 million, or 20.8%, to $53.5 million in the three months ended July 1, 2022 from $44.3 million for the three months ended July 2, 2021.

Six months ended July 1, 2022 compared to six months ended July 2, 2021

For the six months ended

(in millions) July 1, 2022 July 2, 2021 Change ($) Change (%)

As a result of the factors described above, our net income increased $7.0 million, or 16.0%, to $50.8 million in the three months ended September 30, 2022 from $43.8 million for the three months ended October 1, 2021.

Nine months ended September 30, 2022 compared to nine months ended October 1, 2021

For the nine months ended

(in millions) September 30, 2022 October 1, 2021 Change ($) Change (%)

Powered Vehicle products $ 672.3 $ 540.2 $ 132.1 24.5 %

1 unchanged sentence

Total sales $ 1,193.8 $ 956.8 $ 237.0 24.8 %

Total sales for the six months ended July 1, 2022 increased approximately $175.4 million, or 28.7%, compared to the six months ended July 2, 2021.

Total sales for the nine months ended September 30, 2022 increased approximately $237.0 million, or 24.8%, compared to the nine months ended October 1, 2021.

Specialty Sports product sales increased by $104.9 million, or 25.2%, due to continued strong demand in the OEM channel.

Powered Vehicle product sales increased by $84.9 million, or 24.1%, due to strong performance in our upfitting product lines.

Powered Vehicle product sales increased by $132.1 million, or 24.5%, due to strong performance in our upfitting product lines and increased demand in the OEM channel.

Cost of sales

For the six months ended

(in millions) July 1, 2022 July 2, 2021 Change ($) Change (%)

For the nine months ended

(in millions) September 30, 2022 October 1, 2021 Change ($) Change (%)

Cost of sales $ 793.4 $ 631.7 $ 161.7 25.6 %

Cost of sales for the six months ended July 1, 2022 increased approximately $121.2 million, or 30.3%, compared to the six months ended July 2, 2021.

Cost of sales for the nine months ended September 30, 2022 increased approximately $161.7 million, or 25.6%, compared to the nine months ended October 1, 2021.

The increase in cost of sales was primarily due to the 24.8% increase in sales in the same period, as well as certain business factors affecting gross margin, which are discussed below.

For the six months ended July 1, 2022, our gross margin decreased 80 basis points to 33.5% compared to 34.3% for the six months ended July 2, 2021.

The decrease in gross margin was primarily driven by continued increases in supply chain related costs, including increased prices for raw materials and freight.

For the nine months ended September 30, 2022, our gross margin decreased 50 basis points to 33.5% compared to 34.0% for the nine months ended October 1, 2021.

The decrease in gross margin was primarily driven by continued increases in supply chain related costs, including increased prices for raw materials.

Additionally, the completion of the planned shutdown of our Watsonville, California facility and transition of those production lines resulted in inefficiencies as we ramp up our Gainesville, Georgia facility.

Operating expenses

For the six months ended

(in millions) July 1, 2022 July 2, 2021 Change ($) Change (%)

For the nine months ended

(in millions) September 30, 2022 October 1, 2021 Change ($) Change (%)

Operating expenses:

4 unchanged sentences

Total operating expenses $ 210.5 $ 171.2 $ 39.3 23.0 %

Total operating expenses for the six months ended July 1, 2022 were $138.6 million compared to $110.4 million for the six months ended July 2, 2021.

The increase in operating expenses is primarily due to higher employee related costs and insurance and facility related expenses, partially offset by lower acquisition-related compensation.

Within operating expenses, sales and marketing expenses increased approximately $12.1 million primarily due to higher commissions of $5.0 million, employee related costs of $3.8 million, and marketing related expenses of $2.9 million.

Total operating expenses for the nine months ended September 30, 2022 were $210.5 million compared to $171.2 million for the nine months ended October 1, 2021.

The increase in operating expenses is primarily due to higher employee related costs, insurance and facility-related expenses and commissions costs, partially offset by lower acquisition related compensation.

Within operating expenses, sales and marketing expenses increased approximately $18.1 million primarily due to higher commissions of $7.9 million, employee related costs of $5.4 million, and marketing expenses of $4.2 million.

Research and development costs increased approximately $7.4 million primarily due to personnel investments to support future growth and product innovation.

General and administrative expenses increased by approximately $9.4 million due to higher employee related costs of $4.4 million and higher insurance and facility related costs of $6.2 million, which were partially offset by lower acquisition related compensation and other related costs.

General and administrative expenses increased by approximately $13.0 million due to higher employee related costs of $5.2 million, insurance and facility-related costs of $4.3 million, and professional fees of $4.0 million, which were partially offset by lower acquisition related compensation and other related costs.

Income from operations

For the six months ended

(in millions) July 1, 2022 July 2, 2021 Change ($) Change (%)

For the nine months ended

(in millions) September 30, 2022 October 1, 2021 Change ($) Change (%)

Income from operations $ 190.0 $ 153.8 $ 36.2 23.5 %

As a result of the factors discussed above, income from operations for the six months ended July 1, 2022 increased approximately $26.0 million, or 26.4%, compared to income from operations for the six months ended July 2, 2021.

Interest and other expense, net

For the six months ended

(in millions) July 1, 2022 July 2, 2021 Change ($) Change (%)

Interest and other expense, net:

As a result of the factors discussed above, income from operations for the nine months ended September 30, 2022 increased approximately $36.2 million, or 23.5%, compared to income from operations for the nine months ended October 1, 2021.

Interest and other (income) expense, net

For the nine months ended

(in millions) September 30, 2022 October 1, 2021 Change ($) Change (%)

Interest and other (income) expense, net:

Interest expense $ 6.3 $ 6.3 $ — — %

Other expense, net 4.5 1.0 3.5 350.0 %

Interest and other expense, net $ 8.2 $ 5.5 $ 2.7 49.1 %

Interest and other expense, net for the six months ended July 1, 2022 increased by $2.7 million to $8.2 million compared to $5.5 million for the six months ended July 2, 2021.

For the six months ended

(in millions) July 1, 2022 July 2, 2021 Change ($) Change (%)

Other (income) expense, net 3.1 0.9 2.2 244.4 %

Interest and other (income) expense, net $ 9.4 $ 7.2 $ 2.2 30.6 %

Interest and other expense, net for the nine months ended September 30, 2022 increased by $2.2 million to $9.4 million compared to $7.2 million for the nine months ended October 1, 2021.

The increase in other expense, net is primarily due to $1.9 million of unamortized loan fees that were written off in the second quarter of fiscal year 2022, as well as losses on foreign currency transactions, partially offset by the sale of a land asset in the third quarter of 2022.

For the nine months ended

(in millions) September 30, 2022 October 1, 2021 Change ($) Change (%)

Provision for income taxes $ 28.3 $ 20.5 $ 7.8 38.0 %

The effective tax rates were 12.8% and 11.6% for the six month periods ended July 1, 2022 and July 2, 2021, respectively.

For the six months ended July 1, 2022, the difference between the Company's effective tax rate of 12.8% and the 21% federal statutory rate resulted primarily from the impact of the recently finalized U.S.

The effective tax rates were 15.7% and 14.0% for the nine month periods ended September 30, 2022 and October 1, 2021, respectively.

For the nine months ended September 30, 2022, the difference between the Company's effective tax rate of 15.7% and the 21% federal statutory rate resulted primarily from a lower tax rate on foreign derived intangible income, and the impact of the recently finalized U.S.

tax regulations published by the U.S.

Treasury and Internal Revenue Service on January 4, 2022 and from a lower tax rate on foreign derived intangible income.

Treasury and Internal Revenue Service on January 4, 2022.

These regulations limit the amount of newly generated foreign taxes that are creditable against U.S.

1 unchanged sentence

These benefits were partially offset by withholding and state taxes.

For the six months ended July 2, 2021, the difference between our effective tax rate of 11.6% and the 21% federal statutory rate resulted primarily from excess benefits related to stock-based compensation, a lower tax rate on foreign derived intangible income and a benefit resulting from the conclusion of an audit.

For the nine months ended October 1, 2021, the difference between our effective tax rate of 14.0% and the 21% federal statutory rate resulted primarily from excess benefits related to stock-based compensation, a lower tax rate on foreign derived intangible income and a benefit resulting from the conclusion of an audit.

These benefits were partially offset by an increase in the valuation allowance for foreign tax credits, state taxes and non-deductible expenses.

For the six months ended

(in millions) July 1, 2022 July 2, 2021 Change ($) Change (%)

For the nine months ended

(in millions) September 30, 2022 October 1, 2021 Change ($) Change (%)

Net income $ 152.3 $ 126.1 $ 26.2 20.8 %

As a result of the factors described above, our net income increased $19.2 million, or 23.3%, to $101.5 million in the six months ended July 1, 2022 from $82.3 million for the six months ended July 2, 2021.

As a result of the factors described above, our net income increased $26.2 million, or 20.8%, to $152.3 million in the nine months ended September 30, 2022 from $126.1 million for the nine months ended October 1, 2021.

Liquidity and Capital Resources

2 unchanged sentences

These sources of liquidity may be impacted by various factors, including demand for our products, impacts of the COVID-19 pandemic, investments made by us in acquired businesses, our plant and equipment and other capital expenditures, and expenditures on general infrastructure and information technology.

As of July 1, 2022, we held $31.8 million of our $108.6 million of cash and cash equivalents in accounts of our subsidiaries outside of the U.S., which we may repatriate.

As of September 30, 2022, we held $55.6 million of our $153.1 million of cash and cash equivalents in accounts of our subsidiaries outside of the U.S., which we may repatriate.

We manage our foreign cash, intercompany payables and intercompany debt to provide a foreign currency hedge against U.S.

1 unchanged sentence

A summary of our operating, investing and financing activities is shown in the following table:

For the six months ended

(in thousands) July 1, 2022 July 2, 2021

Net cash (used in) provided by operating activities $ (85,400) $ 81,366

For the nine months ended

(in thousands) September 30, 2022 October 1, 2021

Net cash provided by operating activities $ 57,035 $ 148,983

Net cash used in investing activities (32,379) (55,559)

Net cash provided by (used in) financing activities 32,220 (9,292)

Net cash used in financing activities (54,004) (19,967)

Effect of exchange rate changes on cash and cash equivalents 2,799 121

2 unchanged sentences

Operating activities

Cash used in or provided by operating activities consists of net income, adjusted for certain non-cash items, primarily depreciation and amortization, stock-based compensation, the write off of unamortized loan origination fees, amortization of loan fees, amortization of swap settlements, changes in the fair value of interest rate swaps, changes in deferred income taxes and uncertain tax positions and net cash invested in working capital.

In the six months ended July 1, 2022, net cash used in operating activities was $85.4 million and consisted of net income of $101.5 million, plus non-cash items totaling $21.8 million, offset by changes in operating assets and liabilities totaling $208.7 million.

Non-cash items and other adjustments consisted of depreciation and amortization of $24.5 million, stock-based compensation of $7.1 million, the write off of unamortized loan origination fees of $1.9 million, the amortization of loan fees of $0.6 million, partially offset by a $9.3 million change in deferred taxes, changes in interest rate swap fair value of $1.9 million, and the amortization of swap settlements of $1.1 million.

Our investment in operating assets and liabilities is a result of increases in prepaids and other assets of $146.2 million, inventory of $74.8 million, accounts receivable of $57.4 million, and decreases in income taxes of $5.1 million, partially offset by an increase in accounts payable of $68.7 million and accrued expenses of $6.1 million.

The change in prepaids and other assets is due to increased chassis deposits to secure supply for our upfitting business for the remainder of the year.

Cash provided by operating activities consists of net income, adjusted for certain non-cash items, primarily depreciation and amortization, stock-based compensation, the write off of unamortized loan origination fees, amortization of loan fees, amortization of deferred gains on swap agreements, gains received from disposals of property, plant and equipment, changes in deferred income taxes and uncertain tax positions, and net cash invested in working capital.

In the nine months ended September 30, 2022, net cash provided by operating activities was $57.0 million and consisted of net income of $152.3 million, plus non-cash items totaling $34.5 million, offset by changes in operating assets and liabilities totaling $129.8 million.

Non-cash items and other adjustments consisted of depreciation and amortization of $36.8 million, stock-based compensation of $11.4 million, the write off of unamortized loan origination fees of $1.9 million, the amortization of loan fees of $0.9 million, partially offset by a $12.5 million change in deferred taxes, the amortization of deferred gains on swap agreements of $2.1 million and gains of $1.8 million received from the disposals of property, plant and equipment.

Our investment in operating assets and liabilities is a result of increases in inventory of $84.8 million, accounts receivable of $60.0 million, and prepaids and other assets of $55.0 million, partially offset by an increase in accounts payable of $43.4 million, accrued expenses and other liabilities of $22.4 million and income taxes payable of $4.2 million.

The change in inventory is due to several factors, including receipt of long lead time items that had been delayed, higher levels of safety stock to mitigate uncertainty and the result of normal growth to meet anticipated demand.

The changes in accounts receivable and accounts payable reflect business growth and the timing of vendor payments.

The change in income taxes and accrued expenses is due to normal business growth and the timing of vendor and tax payments.

In the six months ended July 2, 2021, net cash provided by operating activities was $81.4 million and consisted of net income of $82.3 million, plus non-cash items totaling $27.0 million, offset by changes in operating assets and liabilities totaling $27.9 million.

Non-cash items and other adjustments consisted of depreciation and amortization of $21.4 million, stock-based compensation of $5.9 million, and amortization of loan fees of $0.8 million, offset by a $0.6 million change in deferred taxes and uncertain tax positions and changes in interest rate swap fair value of $0.5 million.

Our investment in operating assets and liabilities is a result of increased inventory of $79.2 million, accounts receivable of $28.3 million, and prepaids and other current assets of $0.8 million, partially offset by increases in accounts payable of $63.5 million, accrued expenses of $14.6 million, and income taxes of $2.3 million.

The change in inventory is primarily due to additional raw materials purchases to mitigate risks associated with supply chain uncertainty.

The changes in accounts receivable and accounts payable reflect normal business growth.

The changes in accrued expenses and income taxes are primarily attributable to the timing of rebate payments and the timing of tax payments, respectively.

The change in prepaids and other assets is due to increased chassis deposits to secure supply for our upfitting business for the remainder of the year.

The change in accrued expenses and other liabilities and income taxes is due to increases in sales rebates, compensation related accruals and income taxes payables, as well as normal business growth and the timing of such payments.

In the nine months ended October 1, 2021, net cash provided by operating activities was $149.0 million and consisted of net income of $126.1 million, plus non-cash items totaling $42.1 million, offset by changes in operating assets and liabilities totaling $19.2 million.

Non-cash items and other adjustments consisted of depreciation and amortization of $31.9 million, stock-based compensation of $9.9 million, amortization of loan fees of $1.2 million, and gains of $0.4 million received from the disposals of property, plant and equipment, partially offset by a $1.2 million change in deferred taxes and uncertain tax positions, and amortization of deferred gains on swap agreements of $0.1 million.

Our investment in operating assets and liabilities is a result of increased inventory of $116.8 million, and accounts receivable of $37.9 million, partially offset by increases in accounts payable of $66.1 million, accrued expenses and other liabilities of $25.9 million, and income taxes of $8.3 million and a decrease in prepaids and other assets of $35.2 million.

The changes in inventory and accounts payable are primarily due to additional raw materials purchased to mitigate risks associated with supply chain uncertainty.

The change in accounts receivable reflects business growth.

The changes in accrued expenses and other liabilities and income taxes reflect higher compensation related accruals, warranty reserves, sales rebates and income taxes payable due to both business growth, as well as the timing of such payments.

The change in prepaids and other assets are primarily due to a decrease in deposits on chassis.

Investing activities

Cash used in investing activities primarily relates to investments in our manufacturing and general infrastructure through the procurement of property and equipment.

In the six months ended July 1, 2022 and July 2, 2021, net cash used in investing activities consisted of $19.9 million and $43.3 million, respectively.

Investing activities for the six months ended July 1, 2022 consisted of $19.9 million of property and equipment additions.

Investing activities for the six months ended July 2, 2021 consisted of of $27.6 million of property and equipment additions and $15.6 million of cash consideration for our purchases of Outside Van and Sola Sport Pty Ltd.

Cash used in investing activities primarily relates to investments in our manufacturing and general infrastructure through the procurement of property and equipment and strategic acquisitions of businesses and other assets.

In the nine months ended September 30, 2022 and October 1, 2021, net cash used in investing activities consisted of $32.4 million and $55.6 million, respectively.

Investing activities for the nine months ended September 30, 2022 consisted of $35.6 million of property and equipment additions, partially offset by proceeds from the sale of property and equipment of $3.2 million.

Investing activities for the nine months ended October 1, 2021 consisted of $40.0 million of property and equipment additions and $15.7 million of cash consideration for our purchases of Outside Van and Sola Sport Pty Ltd, partially offset by $0.1 million in proceeds from the sale of property and equipment.

Financing activities

Cash provided by or used in financing activities primarily relate to various forms of debt and equity instruments used to finance our business.

In the six months ended July 1, 2022, net cash provided by financing activities was $32.3 million, and consisted of net proceeds from our 2022 Credit Facility of $582.4 million, which was used to refinance our Prior Credit Facility, and proceeds from the termination of our 2021 Swap Agreement of $12.3 million.

These changes were partially offset by the repayment of our term debt upon the refinancing of our Prior Credit Facility of $382.5 million, payments made on our line of credit of $174.3 million, payments of $3.8 million to repurchase shares of our common stock, net of proceeds from our stock-based compensation program, and $1.8 million in installment payments related to the purchase of the Tuscany non-controlling interest.

In the six months ended July 2, 2021, net cash used in financing activities was $9.3 million, which consisted of payments of $5.0 million to repurchase shares of our common stock, net of proceeds from the exercise of stock options, payments on our term debt of $5.0 million, and $2.8 million in installment payments related to the purchase of the Tuscany non-controlling interest.

These outflows were partially offset by net proceeds of $3.2 million from our line of credit and $0.3 million in proceeds received from the termination of our 2020 Swap Agreement.

Cash used in financing activities primarily relate to various forms of debt and equity instruments used to finance our business.

In the nine months ended September 30, 2022, net cash used in financing activities was $54.0 million, and consisted of the repayment of our term debt upon the refinancing of our Prior Credit Facility of $382.5 million, payments made on our line of credit of $259.3 million, payments of $4.1 million to repurchase shares of our common stock, net of proceeds from our stock-based compensation program, and $2.7 million in installment payments related to the purchase of the Tuscany non-controlling interest.

These changes were partially offset by net proceeds from our 2022 Credit Facility of $582.4 million, which was used to refinance our Prior Credit Facility, and proceeds from the termination of our 2021 Swap Agreement of $12.3 million.

In the nine months ended October 1, 2021, net cash used in financing activities was $20.0 million, which consisted of payments on our term debt of $10.0 million, payments of $6.6 million to repurchase shares of our common stock, net of proceeds from the exercise of stock options, $3.7 million in installment payments related to the purchase of the Tuscany non-controlling interest, partially offset by $0.3 million in proceeds received from the termination of our 2020 Swap Agreement.

Prior Credit Facility

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The credit facility was amended and restated on March 11, 2020, and further amended on June 19, 2020, and June 11, 2021 (as amended, the "Prior Credit Facility").

The Prior Credit Facility (which was terminated on April 5, 2022 and replaced with the 2022 Credit Facility (as discussed below)), would have matured on March 11, 2025, and provided a senior secured revolving line of credit with a borrowing capacity of $250,000 and a term loan of $400,000.

The term loan was subject to quarterly amortization payments.

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Base rate revolving loans bear interest on the outstanding principal amount thereof at a rate per annum equal to the highest of (i) Federal Funds Rate plus 0.50%, (ii) the rate of interest in effect for such day as publicly announced from time to time by the lender as its “prime rate”, and (iii) Adjusted Term SOFR rate for a one-month tenor plus 1.00%, subject to the interest rate floors set forth therein, plus a margin ranging from 0.00% to 1.00%.

At July 1, 2022, the one-month SOFR and three-month SOFR rates were 1.11% and 0.71%, respectively.

At July 1, 2022, our weighted-average interest rate on outstanding borrowing was 2.54%.

At September 30, 2022, the one-month SOFR and three-month SOFR rates were 2.47% and 2.13%, respectively.

At September 30, 2022, our weighted-average interest rate on outstanding borrowing was 3.72%.

The 2022 Credit Facility is secured by substantially all of the Company’s assets, restricts the Company's ability to make certain payments and engage in certain transactions, and requires that the Company satisfy customary financial ratios.

The Company was in compliance with the covenants as of July 1, 2022.

The Company was in compliance with the covenants as of September 30, 2022.

Material Cash Requirements

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Historically, inflation has not had a material effect on our results of operations.

However, we have recently experienced a rise in raw material costs, supply constraints, labor availability issues and logistical cost increases and our expectation is that these impacts will continue throughout 2022.

While we are currently taking actions to mitigate these impacts, should these actions be unsuccessful or should such costs exceed what we can effectively mitigate, our business, financial condition and results of operations could be adversely impacted.

2 unchanged sentences

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