What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-11-03 compared with 2023-08-04 · 94 added, 91 removed, 188 unchanged (50% of the section changed)

55 unchanged sentences

See Note 1 - Description of the Business, Basis of Presentation, and Summary of Significant Accounting Policies to the accompanying notes to unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for further details regarding this topic.

United Auto Workers Strike

On September 15, 2023, the United Auto Workers (“UAW”) union began a strike at certain of our OEM customers’ U.S.

The strike had an undesirable impact on our sales for the three months ended September 29, 2023.

Although the union has reached tentative agreements with the automakers, we expect the impact to continue to affect our business in the future periods as our OEM customers recover from the strike.

Results of Operations

The table below summarizes our results of operations:

For the three months ended For the six months ended

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

For the three months ended For the nine months ended

(in thousands) September 29, 2023 September 30, 2022 September 29, 2023 September 30, 2022

Net sales $ 331,117 $ 409,168 $ 1,131,683 $ 1,193,850

9 unchanged sentences

Interest expense 3,466 2,667 11,405 6,341

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

Other (income) expense, net (878) (1,441) (318) 3,067

Income before income taxes 38,777 64,136 137,752 180,584

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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

For the three months ended For the nine months ended

September 29, 2023 September 30, 2022 September 29, 2023 September 30, 2022

Net sales 100.0 % 100.0 % 100.0 % 100.0 %

9 unchanged sentences

Interest expense 1.0 0.7 1.0 0.5

Other expense, net 0.1 0.7 0.1 0.6

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

Income before income taxes 11.7 15.7 12.2 15.1

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*Percentages may not foot due to rounding.

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

Three months ended September 29, 2023 compared to three months ended September 30, 2022

For the three months ended

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

(in millions) September 29, 2023 September 30, 2022 Change ($) Change (%)

Powered Vehicle Group $ 123.1 $ 109.5 $ 13.6 12.4 %

2 unchanged sentences

Total net sales $ 331.1 $ 409.2 $ (78.1) (19.1) %

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.

Total net sales for the three months ended September 29, 2023 decreased $78.1 million, or 19.1%, compared to the three months ended September 30, 2022.

Specialty Sports Group net sales decreased by $102.0 million, or 58.6%, 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.

Powered Vehicle Group net sales increased by $13.6 million, or 12.4%, due to increased demand in the OEM channel, partially offset by the impact of the UAW strike.

Aftermarket Applications Group net sales increased by $10.3 million, or 8.2%, due to the inclusion of revenue from our Custom Wheel House subsidiary, which was acquired in March 2023, partially offset by the impact of the UAW strike.

Cost of sales

For the three months ended

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

(in millions) September 29, 2023 September 30, 2022 Change ($) Change (%)

Cost of sales $ 223.9 $ 271.9 $ (48.0) (17.7) %

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.

Cost of sales for the three months ended September 29, 2023 decreased $48.0 million, or 17.7%, compared to the three months ended September 30, 2022.

The decrease in cost of sales was due to our decreased sales partially offset by certain business factors affecting gross margin, which are discussed below.

Our gross margin decreased 110 basis points to 32.4% for the three months ended September 29, 2023 as compared to the same prior fiscal year period primarily due to a shift in our product line mix and costs associated with keeping our skilled workforce as production slowed due to the UAW strike, offset by increased efficiencies at our North American facilities.

Operating expenses

For the three months ended

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

(in millions) September 29, 2023 September 30, 2022 Change ($) Change (%)

Operating expenses:

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Total operating expenses $ 65.9 $ 71.9 $ (6.0) (8.3) %

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.

Total operating expenses for the three months ended September 29, 2023 were $65.9 million compared to $71.9 million for the three months ended September 30, 2022.

General and administrative expenses decreased $3.4 million and sales and marketing expenses increased $1.0 million primarily due to strong cost controls offset by the inclusion of Custom Wheel House operating costs.

Amortization of purchased intangibles increased by $1.5 million mainly due to amortization of additional acquired intangibles.

Income from operations

For the three months ended

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

(in millions) September 29, 2023 September 30, 2022 Change ($) Change (%)

Income from operations $ 41.4 $ 65.4 $ (24.0) (36.7) %

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.

As a result of the factors discussed above, income from operations for the three months ended September 29, 2023 decreased $24.0 million, or 36.7%, compared to income from operations for the three months ended September 30, 2022.

Interest and other expense, net

For the three months ended

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

(in millions) September 29, 2023 September 30, 2022 Change ($) Change (%)

Interest expense $ 3.5 $ 2.7 $ 0.8 29.6 %

Other expense, net 0.5 2.8 (2.3) (82.1)

Other (income) expense, net (0.9) (1.4) 0.5 (35.7)

Interest and other expense, net $ 2.6 $ 1.3 $ 1.3 100.0 %

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 and other expense, net for the three months ended September 29, 2023 increased by $1.3 million to $2.6 million compared to $1.3 million for the three months ended September 30, 2022.

Interest expense increased by $0.8 million due to higher interest rates.

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

For the three months ended

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

(in millions) September 29, 2023 September 30, 2022 Change ($) Change (%)

Provision for income taxes $ 3.5 $ 13.4 $ (9.9) (73.9) %

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 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 effective tax rates were 9.0% and 20.8% for the three month periods ended September 29, 2023 and September 30, 2022, respectively.

For the three months ended September 29, 2023, the difference between the Company’s effective tax rate of 9.0% and the 21% federal statutory rate was due to a benefit from the U.S.

research and development tax credit related to multiple periods and a lower tax rate on foreign derived intangible income.

These benefits were partially offset by other non-deductible expenses and state taxes.

For the three months ended September 30, 2022, the difference between our effective tax rate of 20.8% 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 (%)

(in millions) September 29, 2023 September 30, 2022 Change ($) Change (%)

Net income $ 35.3 $ 50.8 $ (15.5) (30.5) %

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 (%)

As a result of the factors described above, our net income decreased $15.5 million, or 30.5%, to $35.3 million in the three months ended September 29, 2023 from $50.8 million for the three months ended September 30, 2022.

Nine months ended September 29, 2023 compared to nine months ended September 30, 2022

For the nine months ended

(in millions) September 29, 2023 September 30, 2022 Change ($) Change (%)

Powered Vehicle Group $ 405.5 $ 299.8 $ 105.7 35.4 %

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Total net sales $ 1,131.7 $ 1,193.8 $ (62.1) (5.2) %

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.

Total net sales for the nine months ended September 29, 2023 decreased $62.1 million, or 5.2%, compared to the nine months ended September 30, 2022.

Specialty Sports Group product net sales decreased by $225.7 million, or 43.3%, due to the impacts of higher levels of inventory across various channels.

Powered Vehicle Group net sales increased by $105.7 million, or 35.4%, mainly due to increased demand in the OEM channel, partially offset by the impact of the UAW strike.

Aftermarket Applications Group net sales increased by $57.9 million, or 15.5%, 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.

Cost of sales

For the six months ended

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

For the nine months ended

(in millions) September 29, 2023 September 30, 2022 Change ($) Change (%)

Cost of sales $ 759.1 $ 793.4 $ (34.3) (4.3) %

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.

Cost of sales for the nine months ended September 29, 2023 decreased $34.3 million, or 4.3%, compared to the nine months ended September 30, 2022.

The decrease in cost of sales was due to our decreased sales partially offset by certain business factors affecting gross margin, which are discussed below.

Our gross margin decreased 60 basis points to 32.9% for the three months ended September 29, 2023 as compared to the same prior fiscal year period primarily due to a shift in our product line mix and amortization of acquired inventory valuation markups, 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 (%)

For the nine months ended

(in millions) September 29, 2023 September 30, 2022 Change ($) Change (%)

Operating expenses:

4 unchanged sentences

Total operating expenses $ 223.7 $ 210.5 $ 13.2 6.3 %

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.

Total operating expenses for the nine months ended September 29, 2023 were $223.7 million compared to $210.5 million for the nine months ended September 30, 2022.

General and administrative expenses increased by $6.5 million primarily due to operating expenses associated with facility expansion and the inclusion of Custom Wheel House operating expenses of $3.0 million partially offset by strong cost controls.

Sales and marketing expenses increased $4.4 million primarily due to the inclusion of $7.4 million Custom Wheel House operating expenses offset by strong cost controls.

Research and development costs decreased $1.4 million primarily due to additional benefit from a state research and development tax credit.

Amortization of purchased intangibles increased by $3.8 million mainly due to the amortization of additional acquired intangibles.

Income from operations

For the six months ended

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

For the nine months ended

(in millions) September 29, 2023 September 30, 2022 Change ($) Change (%)

Income from operations $ 148.8 $ 190.0 $ (41.2) (21.7) %

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.

As a result of the factors discussed above, income from operations for the nine months ended September 29, 2023 decreased $41.2 million, or 21.7% , compared to income from operations for the nine months ended September 30, 2022.

Interest and other expense, net

For the six months ended

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

For the nine months ended

(in millions) September 29, 2023 September 30, 2022 Change ($) Change (%)

Interest expense $ 11.4 $ 6.3 $ 5.1 81.0 %

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

Other (income) expense, net (0.3) 3.1 (3.4) (109.7)

Interest and other expense, net $ 11.1 $ 9.4 $ 1.7 18.1 %

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 and other expense, net for the nine months ended September 29, 2023 increased by $1.7 million to $11.1 million compared to $9.4 million for the nine months ended September 30, 2022.

Interest expense increased by $5.1 million due to higher interest rates.

For the six months ended

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

Other income, net increased $3.4 million primarily due lower losses on foreign currency transactions.

For the nine months ended

(in millions) September 29, 2023 September 30, 2022 Change ($) Change (%)

Provision for income taxes $ 21.0 $ 28.3 $ (7.3) (25.8) %

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.

The effective tax rates were 15.2% and 15.7% for the nine month periods ended September 29, 2023 and September 30, 2022, respectively.

For the nine months ended September 29, 2023, the difference between the Company’s effective tax rate of 15.2% and the 21% federal statutory rate resulted primarily from a lower tax rate on foreign derived intangible income and benefit from the U.S.

research and development tax credit related to multiple periods.

These benefits were partially offset by other non-deductible expenses and state taxes.

For the nine months ended September 30, 2022, the difference between our effective tax rate of 15.7% and the 21% federal statutory rate resulted primarily from the impact of the recently finalized U.S.

tax regulations published by the U.S.

3 unchanged sentences

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 (%)

For the nine months ended

(in millions) September 29, 2023 September 30, 2022 Change ($) Change (%)

Net income $ 116.8 $ 152.3 $ (35.5) (23.3) %

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.

As a result of the factors described above, our net income decreased $35.5 million, or 23.3%, to $116.8 million in the nine months ended September 29, 2023 from $152.3 million for the nine months ended September 30, 2022.

Liquidity and Capital Resources

1 unchanged sentence

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 events described in Cautionary Note Regarding For ward-Looking S tatements and Item 1A.

These sources of liquidity may be impacted by events described in Cautionary Note Regarding Forward-Looking Statements 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.

As of September 29, 2023, we held $37.0 million of our $90.6 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 six months ended

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

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

For the nine months ended

(in millions) September 29, 2023 September 30, 2022

Net cash provided by operating activities $ 126.7 $ 57.0

Net cash used in investing activities (165.4) (32.4)

Net cash provided by financing activities 119.8 32.2

Net cash used in financing activities (16.2) (54.0)

Effect of exchange rate changes on cash and cash equivalents 0.3 2.8

Change in cash and cash equivalents $ (54.6) $ (26.5)

*Amounts may not foot due to rounding.

We expect that cash on hand, cash flow from operations and availability under our 2022 Credit Facility will be sufficient to fund our operations during the next 12 months from the date of this Form 10-Q and beyond.

Operating activities

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

In the nine months ended September 29, 2023, net cash provided by operating activities was $126.7 million.

Our investment in operating assets and liabilities is a result of increases in prepaids and other assets of $53.1 million primarily due to carrying more chassis to meet current year production needs for the upfitting product lines, and decreases in accounts payable of $51.4 million, income taxes payable of $20.4 million and accrued expenses and other liabilities of $7.2 million, partially offset by decreases in accounts receivable of $53.3 million and inventory of $24.3 million.

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

The change in our accounts receivable reflects a shift in our product line mix and the timing of customer collections.

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

1 unchanged sentence

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.

In the nine months ended September 30, 2022, net cash provided by operating activities was $57.0 million.

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.

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 tax payables, as well as normal business growth and the timing of such payments.

Investing activities

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.

In the nine months ended September 29, 2023 and September 30, 2022, net cash used in investing activities consisted of $165.4 million and $32.4 million, respectively.

Investing activities for the nine months ended September 29, 2023 consisted of $130.9 million of cash consideration for our purchase of Custom Wheel House, $32.0 million of property and equipment additions and $2.4 million in cash consideration for our purchase of other assets.

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.

Financing activities

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.

In the nine months ended September 29, 2023, net cash provided by financing activities was $16.2 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, offset by payments of $220.0 million to reduce the revolver borrowings and payments of $6.2 million to repurchase shares of our common stock to cover withholding taxes from our stock-based compensation program.

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.

Prior Credit Facility

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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 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%.

At September 29, 2023, the one-month SOFR and three-month SOFR rates were 5.32% and 5.27%, respectively.

At September 29, 2023, our weighted-average interest rate on outstanding borrowing was 5.31%.

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 June 30, 2023.

The Company was in compliance with the covenants as of September 29, 2023.

Material Cash Requirements

5 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