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Item 2. Management’s Discussion and Analysis

2023-08-04 compared with 2023-05-04 · 131 added, 83 removed, 148 unchanged (59% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and with our audited condensed consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended December 30, 2022, as filed with the U.S.

Securities and Exchange Commission ("SEC") on February 23, 2023, and our other reports and registration statements that we file with the SEC from time to time.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and with our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended December 30, 2022, as filed with the SEC on February 23, 2023, and our other reports and registration statements that we file with the SEC from time to time.

In addition to historical condensed consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs.

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and global economy, which could in turn disrupt the business activities and operations of our customers, as well as our businesses and operations;

• changes in general economic conditions, including market and macro-economic disruptions resulting from escalating tensions between China and Taiwan, the Russian invasion of Ukraine or due to growing inflation or higher interest rates;

• changes in general economic conditions, including market and macro-economic disruptions resulting from escalating tensions between China and Taiwan, the on-going Russian war in Ukraine or due to growing inflation or higher interest rates;

• our dependency on a limited number of suppliers for materials, product parts, and vehicle chassis could lead to an increase in material costs, disruptions in our supply chain, or reputational costs;

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The table below summarizes our results of operations:

For the three months ended

(in thousands) March 31, 2023 April 1, 2022

Sales $ 399,851 $ 377,977

For the three months ended For the six months ended

(in thousands) June 30, 2023 July 1, 2022 June 30, 2023 July 1, 2022

Net sales $ 400,715 $ 406,705 $ 800,566 $ 784,682

Cost of sales 268,689 263,761 535,242 521,478

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Operating expenses:

General and administrative 30,221 28,444 63,982 54,011

Sales and marketing 26,556 24,175 50,225 46,764

Research and development 15,188 14,214 30,470 26,856

General and administrative 33,761 25,567

Amortization of purchased intangibles 7,277 5,636 13,173 10,943

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Income from operations 52,784 70,475 107,474 124,630

Interest and other expense, net:

Interest expense 4,418 1,697 7,939 3,674

Other expense, net 536 2,816 560 4,508

Interest and other expense, net 3,545 3,669

Income before income taxes 47,830 65,962 98,975 116,448

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Net income $ 39,735 $ 53,498 $ 81,502 $ 101,548

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

For the three months ended

March 31, 2023 April 1, 2022

Sales 100.0 % 100.0 %

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

For the three months ended For the six months ended

June 30, 2023 July 1, 2022 June 30, 2023 July 1, 2022

Net sales 100.0 % 100.0 % 100.0 % 100.0 %

Cost of sales 67.1 64.9 66.9 66.5

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Operating expenses:

General and administrative 7.5 7.0 8.0 6.9

Sales and marketing 6.6 5.9 6.3 6.0

Research and development 3.8 3.5 3.8 3.4

General and administrative 8.4 6.8

Amortization of purchased intangibles 1.8 1.4 1.6 1.4

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Income from operations 13.2 17.3 13.4 15.9

Interest and other expense, net:

Interest expense 1.1 0.4 1.0 0.5

Other expense, net 0.1 0.7 0.1 0.6

Interest and other expense, net 0.9 1.0

Income before income taxes 11.9 16.2 12.4 14.8

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*Percentages may not foot due to rounding.

Three months ended March 31, 2023 compared to three months ended April 1, 2022

Three months ended June 30, 2023 compared to three months ended July 1, 2022

For the three months ended

(in millions) March 31, 2023 April 1, 2022 Change ($) Change (%)

Powered Vehicle products $ 281.0 $ 208.1 $ 72.9 35.0 %

Specialty Sports products 118.9 169.9 (51.0) (30.0)

Total sales $ 399.9 $ 378.0 $ 21.9 5.8 %

Total sales for the three months ended March 31, 2023 increased approximately $21.9 million, or 5.8%, compared to the three months ended April 1, 2022.

Powered Vehicle product sales increased by $72.9 million, or 35.0%, due to increased demand in the OEM channel and strong performance in our upfitting product lines.

Specialty Sports product sales decreased by $51.0 million, or 30.0%, driven by a return to seasonality and pre-pandemic market conditions.

(in millions) June 30, 2023 July 1, 2022 Change ($) Change (%)

Powered Vehicle Group $ 140.2 $ 105.7 $ 34.5 32.6 %

Aftermarket Applications Group 155.6 123.3 32.3 26.2

Specialty Sports Group 104.9 177.7 (72.8) (41.0)

Total net sales $ 400.7 $ 406.7 $ (6.0) (1.5) %

Total net sales for the three months ended June 30, 2023 decreased $6.0 million, or 1.5%, compared to the three months ended July 1, 2022.

Powered Vehicle Group net sales increased by $34.5 million, or 32.6%, due to increased demand in the OEM channel.

Aftermarket Applications Group net sales increased by $32.3 million, or 26.2%, due to the inclusion of revenue from our Custom Wheel House subsidiary, which was acquired in March 2023, and strong performance in our upfitting product lines.

Specialty Sports Group net sales decreased by $72.8 million, or 41.0%, due to the impacts of higher levels of inventory across various channels.

In the second quarter of fiscal year 2023, the Company realigned Powered Vehicles Group into Powered Vehicles Group and Aftermarket Applications Group to be more aligned with the Company’s end customers and drive additional focus on product development.

See Note 2 - Revenues to the accompanying notes to unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for further details.

Cost of sales

For the three months ended

(in millions) March 31, 2023 April 1, 2022 Change ($) Change (%)

(in millions) June 30, 2023 July 1, 2022 Change ($) Change (%)

Cost of sales $ 268.7 $ 263.8 $ 4.9 1.9 %

Cost of sales for the three months ended March 31, 2023 increased approximately $8.9 million, or 3.5%, compared to the three months ended April 1, 2022.

The increase in cost of sales was primarily due to the 5.8% 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 March 31, 2023, our gross margin increased 150 basis points to 33.3% compared to 31.8% for the three months ended April 1, 2022.

The increase in gross margin was primarily due to lower materials and other related costs, increased efficiencies at our North American facilities and strong performance in our upfitting product lines.

Cost of sales for the three months ended June 30, 2023 increased $4.9 million, or 1.9%, compared to the three months ended July 1, 2022.

The increase in cost of sales and resulting decrease in gross margin of 220 basis points to 32.9% for the three months ended June 30, 2023 as compared to the same prior fiscal year period was primarily due to amortization of an acquired inventory valuation markup and a shift in our product line mix, offset by increased efficiencies at our North American facilities.

Operating expenses

For the three months ended

(in millions) March 31, 2023 April 1, 2022 Change ($) Change (%)

(in millions) June 30, 2023 July 1, 2022 Change ($) Change (%)

Operating expenses:

General and administrative $ 30.2 $ 28.5 $ 1.7 6.0 %

Sales and marketing 26.5 24.2 2.3 9.5

Research and development 15.2 14.2 1.0 7.0

General and administrative 33.7 25.6 8.1 31.6

Amortization of purchased intangibles 7.3 5.6 1.7 30.4

Total operating expenses $ 79.2 $ 72.5 $ 6.7 9.2 %

Total operating expenses for the three months ended March 31, 2023 were $78.6 million compared to $66.1 million for the three months ended April 1, 2022.

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

Within operating expenses, sales and marketing expenses increased approximately $1.1 million primarily due to higher commission costs.

Research and development costs increased approximately $2.7 million primarily due to personnel investments to support future growth and product innovation.

General and administrative expenses increased by approximately $8.1 million due to higher employee headcount and benefits-related costs of $6.2 million, legal and professional fees of $2.5 million, insurance and facilities related expenses of $2.0 million, partially offset by lower acquisition-related compensation and other costs of $2.6 million.

Total operating expenses for the three months ended June 30, 2023 were $79.2 million compared to $72.5 million for the three months ended July 1, 2022.

Sales and marketing expenses and general and administrative expenses increased $2.3 million and $1.7 million, respectively, primarily due to the inclusion of Custom Wheel House operating costs.

Research and development costs increased $1.0 million primarily due to personnel investments to support future growth and product innovation.

Amortization of purchased intangibles increased by $1.7 million mainly due to the amortization of intangibles obtained in our acquisition of Custom Wheel House.

Income from operations

For the three months ended

(in millions) March 31, 2023 April 1, 2022 Change ($) Change (%)

(in millions) June 30, 2023 July 1, 2022 Change ($) Change (%)

Income from operations $ 52.8 $ 70.5 $ (17.7) (25.1) %

As a result of the factors discussed above, income from operations for the three months ended March 31, 2023 increased approximately $0.5 million, or 0.9%, compared to income from operations for the three months ended April 1, 2022.

Interest and other (income) expense, net

For the three months ended

(in millions) March 31, 2023 April 1, 2022 Change ($) Change (%)

As a result of the factors discussed above, income from operations for the three months ended June 30, 2023 decreased $17.7 million, or 25.1%, compared to income from operations for the three months ended July 1, 2022.

Interest and other expense, net

For the three months ended

(in millions) June 30, 2023 July 1, 2022 Change ($) Change (%)

Interest expense $ 4.4 $ 1.7 $ 2.7 158.8 %

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Interest and other expense, net $ 4.9 $ 4.5 $ 0.4 8.9 %

Interest and other expense, net for the three months ended March 31, 2023 decreased by $0.2 million to $3.5 million compared to $3.7 million for the three months ended April 1, 2022.

Interest and other expense, net for the three months ended June 30, 2023 increased by $0.4 million to $4.9 million compared to $4.5 million for the three months ended July 1, 2022.

Interest expense increased by $2.7 million due to higher interest rates.

Other expense, net decreased $2.3 million primarily due lower losses on foreign currency transactions.

Interest expense increased by $1.5 million due to higher outstanding borrowings on our line of credit used to finance our purchase of Custom Wheel House, which occurred in February 2023, as well as higher interest rates.

For the three months ended

(in millions) March 31, 2023 April 1, 2022 Change ($) Change (%)

(in millions) June 30, 2023 July 1, 2022 Change ($) Change (%)

Provision for income taxes $ 8.1 $ 12.5 $ (4.4) (35.2) %

The effective tax rates were 18.3% and 4.8% for the three month periods ended March 31, 2023 and April 1, 2022, respectively.

For the three months ended March 31, 2023, the difference between the Company's effective tax rate of 18.3% and the 21% federal statutory rate resulted primarily due to a lower tax rate on foreign derived intangible income.

The effective tax rates were 16.9% and 18.9% for the three month periods ended June 30, 2023 and July 1, 2022, respectively.

For the three months ended June 30, 2023, the difference between the Company’s effective tax rate of 16.9% and the 21% federal statutory rate resulted primarily from a lower tax rate on foreign derived intangible income and excess benefit related to stock-based compensation.

This benefit was partially offset by state and foreign withholding taxes.

For the three months ended April 1, 2022, the difference between our effective tax rate of 4.8% and the 21% federal statutory rate resulted primarily from the impact of U.S.

For the three months ended July 1, 2022, the difference between our 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

(in millions) June 30, 2023 July 1, 2022 Change ($) Change (%)

Net income $ 39.7 $ 53.5 $ (13.8) (25.8) %

As a result of the factors described above, our net income decreased $13.8 million, or 25.8%, to $39.7 million in the three months ended June 30, 2023 from $53.5 million for the three months ended July 1, 2022.

Six months ended June 30, 2023 compared to six months ended July 1, 2022

For the six months ended

(in millions) June 30, 2023 July 1, 2022 Change ($) Change (%)

Powered Vehicle Group $ 282.4 $ 190.4 $ 92.0 48.4 %

Aftermarket Applications Group 294.4 246.8 47.6 19.3

Specialty Sports Group 223.8 347.5 (123.7) (35.6)

Total net sales $ 800.6 $ 784.7 $ 15.9 2.0 %

Total net sales for the six months ended June 30, 2023 increased $15.9 million, or 2.0%, compared to the six months ended July 1, 2022.

Powered Vehicle Group net sales increased by $92.0 million, or 48.4%, mainly due to increased demand in the OEM channel.

Aftermarket Applications Group net sales increased by $47.6 million, or 19.3%, primarily due to the inclusion of revenue from our Custom Wheel House subsidiary, which was acquired in March 2023, and strong performance in our upfitting product lines.

Specialty Sports Group product net sales decreased by $123.7 million, or 35.6%, due to the impacts of higher levels of inventory across various channels.

Cost of sales

For the six months ended

(in millions) June 30, 2023 July 1, 2022 Change ($) Change (%)

Cost of sales $ 535.2 $ 521.5 $ 13.7 2.6 %

Cost of sales for the six months ended June 30, 2023 increased $13.7 million, or 2.6%, compared to the six months ended July 1, 2022.

The increase in cost of sales and resulting decrease in gross margin of 40 basis points to 33.1% for the six months ended June 30, 2023 as compared to the same prior fiscal year period was primarily due to amortization of an acquired inventory valuation markup and a shift in our product line mix, offset by increased efficiencies at our North American facilities.

Operating expenses

For the six months ended

(in millions) June 30, 2023 July 1, 2022 Change ($) Change (%)

Operating expenses:

General and administrative $ 64.0 $ 54.0 $ 10.0 18.5 %

Sales and marketing 50.2 46.8 3.4 7.3

Research and development 30.5 26.9 3.6 13.4

Amortization of purchased intangibles 13.2 10.9 2.3 21.1

Total operating expenses $ 157.9 $ 138.6 $ 19.3 13.9 %

Total operating expenses for the six months ended June 30, 2023 were $157.9 million compared to $138.6 million for the six months ended July 1, 2022.

General and administrative expenses increased by $10.0 million primarily due to higher employee headcount and benefits-related costs of $4.0 million, new U.S.

facilities expansion costs of $1.9 million, and the inclusion of Custom Wheel House operating expenses of $1.8 million.

Sales and marketing expenses increased $3.4 million primarily due to the inclusion of Custom Wheel House operating expenses.

Research and development costs increased $3.6 million primarily due to personnel investments to support future growth and product innovation.

Amortization of purchased intangibles increased by $2.3 million mainly due to the amortization of intangibles obtained in our acquisition of Custom Wheel House.

Income from operations

For the six months ended

(in millions) June 30, 2023 July 1, 2022 Change ($) Change (%)

Income from operations $ 107.5 $ 124.6 $ (17.1) (13.7) %

As a result of the factors discussed above, income from operations for the six months ended June 30, 2023 decreased $17.1 million, or 13.7% , compared to income from operations for the six months ended July 1, 2022.

Interest and other expense, net

For the six months ended

(in millions) June 30, 2023 July 1, 2022 Change ($) Change (%)

Interest expense $ 7.9 $ 3.7 $ 4.2 113.5 %

Other expense, net 0.6 4.5 (3.9) (86.7)

Interest and other expense, net $ 8.5 $ 8.2 $ 0.3 3.7 %

Interest and other expense, net for the six months ended June 30, 2023 increased by $0.3 million to $8.5 million compared to $8.2 million for the six months ended July 1, 2022.

Other expense, net decreased $3.9 million primarily due lower losses on foreign currency transactions.

Interest expense increased by $4.2 million due to higher interest rates.

For the six months ended

(in millions) June 30, 2023 July 1, 2022 Change ($) Change (%)

Provision for income taxes $ 17.5 $ 14.9 $ 2.6 17.4 %

The effective tax rates were 17.7% and 12.8% for the six month periods ended June 30, 2023 and July 1, 2022, respectively.

For the six months ended June 30, 2023, the difference between the Company’s effective tax rate of 17.7% and the 21% federal statutory rate primarily due to a lower tax rate on foreign derived intangible income.

This benefit was partially offset by state and foreign withholding taxes.

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

tax regulations published by the U.S.

Treasury and Internal Revenue Service on January 4, 2022.

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

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

income taxes, which resulted in a release of the Company’s valuation allowance against foreign tax credits due to the Company’s ability to use foreign tax credit carryforwards that had previously been reserved against.

This benefit was partially offset by state taxes and other nondeductible expenses.

For the three months ended

(in millions) March 31, 2023 April 1, 2022 Change ($) Change (%)

These benefits were partially offset by withholding and state taxes.

For the six months ended

(in millions) June 30, 2023 July 1, 2022 Change ($) Change (%)

Net income $ 81.5 $ 101.5 $ (20.0) (19.7) %

As a result of the factors described above, our net income decreased $6.3 million, or 13.1%, to $41.8 million in the three months ended March 31, 2023 from $48.1 million for the three months ended April 1, 2022.

As a result of the factors described above, our net income decreased $20.0 million, or 19.7%, to $81.5 million in the six months ended June 30, 2023 from $101.5 million for the six months ended July 1, 2022.

Liquidity and Capital Resources

Our primary cash needs are to support working capital, capital expenditures, acquisitions, and debt repayments.

Our primary cash needs are to support working capital, interest on debt, employee compensation, capital expenditures, acquisitions, debt repayments, and other general corporate purposes.

Historically, we have generally financed our liquidity needs with operating cash flows, borrowings under our Prior Credit Facility and our 2022 Credit Facility, and the issuance of common stock.

These sources of liquidity may be impacted by various factors, including demand for our products, 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 March 31, 2023, we held $45.7 million of our $91.9 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.

dollar-denominated trade receivable balances held by our Taiwan location.

These sources of liquidity may be impacted by events described in Cautionary Note Regarding For ward-Looking S tatements and Item 1A.

Risk Factors .

As of June 30, 2023, we held $44.9 million of our $105.4 million of cash and cash equivalents in accounts of our subsidiaries outside of the U.S., which we may repatriate.

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

For the three months ended

(in thousands) March 31, 2023 April 1, 2022

For the six months ended

(in millions) June 30, 2023 July 1, 2022

Net cash used in operating activities $ (3.3) $ (85.4)

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Operating activities

Cash used in 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, amortization of inventory fair value step-up, 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 three months ended March 31, 2023, net cash used in operating activities was $66.8 million and consisted of net income of $41.8 million, plus non-cash items totaling $21.3 million, offset by changes in operating assets and liabilities totaling $129.9 million.

Non-cash items and other adjustments consisted of depreciation and amortization of $13.3 million, stock-based compensation of $5.7 million, the amortization of inventory fair value step-up of $3.1 million, the amortization of loan fees of $0.2 million, and a $0.1 million change in deferred taxes, partially offset by the amortization of deferred gains on swap agreements of $1.1 million.

Our investment in operating assets and liabilities is a result of increases in prepaids and other assets of $112.2 million, inventory of $8.6 million, and decreases in accrued expenses and other liabilities of $7.8 million, accounts payable of $6.7 million and income taxes payable of $4.0 million, partially offset by a decrease in accounts receivable of $9.4 million.

The change in prepaids and other assets is primarily due to a higher supply of chassis as we ramp up to meet current year production needs for our upfitting product line.

The increase in inventory is primarily due to our recent acquisition of Custom Wheel House in February 2023.

The change in accrued expenses and other liabilities is primarily due to payments made for compensation and tax related accruals in the first quarter.

The changes in accounts payable and account receivable reflect the timing of customer collections and vendor payments.

In the three months ended April 1, 2022, net cash used in operating activities was $143.1 million and consisted of net income of $48.1 million, plus non-cash items totaling $5.1 million, offset by changes in operating assets and liabilities totaling $196.3 million.

Non-cash items and other adjustments consisted of depreciation and amortization of $11.9 million, stock-based compensation of $3.0 million, and amortization of loan fees of $0.4 million, offset by a $10.1 million change in deferred taxes and the amortization of deferred gains on swap agreements of $0.1 million.

Our investment in operating assets and liabilities is a result of increases in prepaids and other assets of $171.3 million, accounts receivable of $37.6 million, inventory of $37.5 million, and decreases in income taxes of $5.0 million and accrued expenses of $3.5 million, partially offset by an increase in accounts payable of $58.6 million.

In the six months ended June 30, 2023, net cash used in operating activities was $3.3 million.

Our investment in operating assets and liabilities is a result of increases in prepaids and other assets of $112.2 million primarily due to carrying more chassis to meet current year production needs for the upfitting product lines, and decreases in accounts payable of $41.6 million, income taxes payable of $16.4 million and accrued expenses and other liabilities of $6.5 million, partially offset by decreases in accounts receivable of $32.7 million and inventory of $13.1 million.

The change in our accounts receivable reflects a shift in our product line mix.

The change in our accounts payable is driven by timing of inventory purchases and vendor payments.

The change in accrued expenses and other liabilities is primarily due to payments made for compensation and tax related accruals.

The decrease in inventory reflects our continued efforts to optimize inventory levels.

In the six months ended July 1, 2022, net cash used in operating activities was $85.4 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.

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

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 changes in accrued expenses and income taxes reflect lower compensation related accruals and income taxes payable due to business growth and the timing of such payments.

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

Investing activities

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 three months ended March 31, 2023 and April 1, 2022, net cash used in investing activities consisted of $144.3 million and $8.2 million, respectively.

Investing activities for the three months ended March 31, 2023 consisted of $130.9 million of cash consideration for our purchase of Custom Wheel House, $11.1 million of property and equipment additions and $2.3 million in cash consideration for our purchase of other assets.

Investing activities for the three months ended April 1, 2022 consisted of $8.2 million of property and equipment additions.

In the six months ended June 30, 2023 and July 1, 2022, net cash used in investing activities consisted of $156.5 million and $19.9 million, respectively.

Investing activities for the six months ended June 30, 2023 consisted of $130.9 million of cash consideration for our purchase of Custom Wheel House, $23.2 million of property and equipment additions and $2.4 million in cash consideration for our purchase of other assets.

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

Financing activities

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

In the three months ended March 31, 2023, net cash provided by financing activities was $157.8 million, and consisted of the net proceeds from our 2022 Credit Facility of $160.0 million that were used to finance our purchase of Custom Wheel House, partially offset by payments of $2.2 million to repurchase shares of our common stock from our stock-based compensation program.

In the three months ended April 1, 2022, net cash provided by financing activities was $38.6 million, which consisted of net proceeds from our Prior Credit Facility of $42.9 million, which were partially offset by payments on our term debt of $2.5 million, $0.9 million in installment payments related to the purchase of the Tuscany non-controlling interest and payments of $0.8 million to repurchase shares of our common stock, net of proceeds from our stock-based compensation program.

In the six months ended June 30, 2023, net cash provided by financing activities was $119.8 million, and consisted of the proceeds from our 2022 Credit Facility of $210.0 million that were used to support our working capital and the purchase of Custom Wheel House, partially offset by payments of $85.0 million to reduce the revolver borrowings and payments of $5.2 million to repurchase shares of our common stock to cover withholding taxes from our stock-based compensation program.

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.

Refer to Note 8 - Commitments and Contingencies for additional information on our purchase of the Tuscany non-controlling interest.

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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 March 31, 2023, the one-month SOFR and three-month SOFR rates were 4.63% and 4.51%, respectively.

At March 31, 2023, our weighted-average interest rate on outstanding borrowing was 5.38%.

At June 30, 2023, the one-month SOFR and three-month SOFR rates were 5.07% and 4.99%, respectively.

At June 30, 2023, our weighted-average interest rate on outstanding borrowing was 5.56%.

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 March 31, 2023.

The Company was in compliance with the covenants as of June 30, 2023.

Material Cash Requirements

1 unchanged sentence

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

However, significant increases in inflation, particularly those related to wages and increases in the cost of raw materials could have an adverse impact on our business, financial condition and results of operations.

However, significant increases in inflation, particularly those related to wages and increases in the cost of raw materials have and could continue to have an adverse impact on our business, financial condition and results of operations.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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Item 2. Management’s Discussion and Analysis