What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-02 compared with 2024-05-03 · 141 added, 65 removed, 180 unchanged (53% of the section changed)

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Forward-looking statements generally relate to future events or our future financial or operating performance that involve substantial risks and uncertainties.

In some cases, you can identify forward-looking statements because they contain words such as “may,” “might,” “will,” “would,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “likely,” “potential” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions.

In some cases, you can identify forward-looking statements because they contain words such as “may,” “might,” “will,” “would,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “likely,” “potential”, “remain” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions.

Forward-looking statements contained in this Quarterly Report on Form 10-Q are subject to numerous risks and uncertainties, including but not limited to risks related to:

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• our ability to successfully identify, evaluate and manage potential or completed acquisitions and to benefit from such acquisitions;

• the outcome of pending litigation;

• legal and regulatory developments, including the resolution of legal proceedings or regulatory or other governmental inquiries;

• future disruptions in the operations of our manufacturing facilities;

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You should not rely upon forward-looking statements as predictions of future events.

We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations, and prospects and the outcomes of any of the events described in any forward-looking statements are subject to risks, uncertainties, and other factors.

We based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations, and prospects and the outcomes of any of the events described in any forward-looking statements are subject to risks, uncertainties, and other factors.

In addition to the risks, uncertainties and other factors discussed above and elsewhere in this Quarterly Report on Form 10-Q, the risks, uncertainties and other factors expressed or implied in Part I, Item 1A.

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Critical Accounting Policies and Estimates

There have been no changes to the critical accounting policies and estimates described in our Annual Report on Form 10-K for the fiscal year ended December 29, 2023, as filed with the SEC on February 23, 2024, that have had a material impact on our condensed consolidated financial statements and related notes.

There have been no changes to the critical accounting policies and estimates described in our Annual Report on Form 10-K for the fiscal year ended December 29, 2023, as filed with the SEC on February 23, 2024, that had a material impact on our condensed consolidated financial statements and related notes.

Recent Accounting Pronouncements

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The table below summarizes our results of operations:

For the three months ended

(in millions) March 29, 2024 March 31, 2023

For the three months ended For the six months ended

(in millions) June 28, 2024 June 30, 2023 June 28, 2024 June 30, 2023

Net sales $ 348.5 $ 400.7 $ 682.0 $ 800.6

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Interest expense 13.9 4.4 27.2 7.9

Other expense, net 0.3 —

(Loss) Income before income taxes (4.8) 51.1

Other (income) expense, net (0.3) 0.5 — 0.6

Income before income taxes 5.0 47.8 0.3 99.0

(Benefit) provision for income taxes (0.4) 8.1 (1.6) 17.5

Net (loss) income $ (3.5) $ 41.8

Net income $ 5.4 $ 39.7 $ 1.9 $ 81.5

*Amounts may not foot due to rounding.

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

March 29, 2024 March 31, 2023

For the three months ended For the six months ended

June 28, 2024 June 30, 2023 June 28, 2024 June 30, 2023

Net sales 100.0 % 100.0 % 100.0 % 100.0 %

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Interest expense 4.0 1.1 4.0 1.0

Other expense, net 0.1 —

(Loss) Income before income taxes (1.4) 12.8

Other (income) expense, net (0.1) 0.1 — 0.1

Income before income taxes 1.4 11.9 — 12.4

(Benefit) provision for income taxes (0.1) 2.0 (0.2) 2.2

Net (loss) income (1.0) % 10.4 %

Net income 1.6 % 9.9 % 0.3 % 10.2 %

*Percentages may not foot due to rounding.

Three months ended March 29, 2024 compared to three months ended March 31, 2023

Three months ended June 28, 2024 compared to three months ended June 30, 2023

Consolidated net sales

For the three months ended

(in millions) March 29, 2024 March 31, 2023 Change ($) Change (%)

(in millions) June 28, 2024 June 30, 2023 Change ($) Change (%)

Net sales $ 348.5 $ 400.7 $ (52.2) (13.0) %

Total net sales for the three months ended March 29, 2024 decreased $66.3 million, or 16.6%, compared to the three months ended March 31, 2023.

Total net sales for the three months ended June 28, 2024 decreased $52.2 million, or 13.0%, compared to the three months ended June 30, 2023.

The decrease in net sales is primarily due to product mix and higher interest rates impacting industry and consumer demands and the ongoing bike channel inventory recalibration, offset by the inclusion of $41.6 million in net sales from Marucci that was acquired in November 2023.

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For the three months ended

(in millions) March 29, 2024 March 31, 2023 Change ($) Change (%)

(in millions) June 28, 2024 June 30, 2023 Change ($) Change (%)

Cost of sales $ 237.5 $ 268.7 $ (31.2) (11.6) %

Cost of sales for the three months ended March 29, 2024 decreased $36.3 million, or 13.6%, compared to the three months ended March 31, 2023.

Cost of sales for the three months ended June 28, 2024 decreased $31.2 million, or 11.6%, compared to the three months ended June 30, 2023.

The decrease in cost of sales was primarily due to our decreased sales.

Our gross margin decreased 240 basis points to 30.9% for the three months ended March 29, 2024 as compared to the same prior fiscal year period primarily due to a shift in our product line mix and operating leverage on lower volume.

Our gross margin decreased 110 basis points to 31.8% for the three months ended June 28, 2024 as compared to the same prior fiscal year period primarily due to a shift in our product line mix and reduced operating leverage on lower volume, partially offset by increased efficiencies at our North American facilities.

Operating expenses

For the three months ended

(in millions) March 29, 2024 March 31, 2023 Change ($) Change (%)

(in millions) June 28, 2024 June 30, 2023 Change ($) Change (%)

Operating expenses:

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Total operating expenses $ 92.4 $ 79.2 $ 13.2 16.7 %

Total operating expenses for the three months ended March 29, 2024 were $94.3 million compared to $78.6 million for the three months ended March 31, 2023.

Sales and marketing expenses increased $7.5 million and general and administrative expenses increased $3.7 million primarily due to the inclusion of Marucci operating expenses and a full fiscal quarter of Custom Wheel House operating expenses.

Total operating expenses for the three months ended June 28, 2024 were $92.4 million, compared to $79.2 million for the three months ended June 30, 2023.

General and administrative expenses increased $6.8 million and sales and marketing expenses increased $3.0 million primarily due to the inclusion of Marucci operating expenses.

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

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For the three months ended

(in millions) March 29, 2024 March 31, 2023 Change ($) Change (%)

(in millions) June 28, 2024 June 30, 2023 Change ($) Change (%)

Income from operations $ 18.6 $ 52.8 $ (34.2) (64.8) %

As a result of the factors discussed above, income from operations for the three months ended March 29, 2024 decreased $45.8 million, or 83.7%, compared to income from operations for the three months ended March 31, 2023.

As a result of the factors discussed above, income from operations for the three months ended June 28, 2024 decreased $34.2 million, or 64.8%, compared to income from operations for the three months ended June 30, 2023.

Interest and other expense, net

For the three months ended

(in millions) March 29, 2024 March 31, 2023 Change ($) Change (%)

(in millions) June 28, 2024 June 30, 2023 Change ($) Change (%)

Interest expense $ 13.9 $ 4.4 $ 9.5 215.9 %

Other expense, net 0.3 — 0.3 NA

Other (income) expense, net (0.3) 0.5 (0.8) (160.0)

Interest and other expense, net $ 13.6 $ 4.9 $ 8.7 177.6 %

Interest and other expense, net for the three months ended March 29, 2024 increased by $10.1 million to $13.6 million compared to $3.5 million for the three months ended March 31, 2023.

Interest and other expense, net for the three months ended June 28, 2024 increased by $8.7 million to $13.6 million, compared to $4.9 million for the three months ended June 30, 2023.

Interest expense increased by $9.5 million due to additional debt and higher interest rates.

For the three months ended

(in millions) March 29, 2024 March 31, 2023 Change ($) Change (%)

(in millions) June 28, 2024 June 30, 2023 Change ($) Change (%)

(Benefit) provision for income taxes $ (0.4) $ 8.1 $ (8.5) (104.9) %

The effective tax rates were 26.6% and 18.3% for the three month periods ended March 29, 2024 and March 31, 2023, respectively.

For the three months ended March 29, 2024, the difference between the Company’s effective tax rate of 26.6% and the 21% federal statutory rate was due to the impact of discrete items and pre-tax loss.

For the three months ended March 31, 2023, the difference between our effective tax rate of 18.3% 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.

Net (loss) income

The effective tax rates were (7.4)% and 16.9% for the three month periods ended June 28, 2024 and June 30, 2023, respectively.

For the three months ended June 28, 2024, the difference between the Company’s effective tax rate of (7.4)% and the 21% federal statutory rate was primarily due to the favorable impact of discrete items in proportion to lower levels of pre-tax income.

For the three months ended June 30, 2023, the difference between our 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

(in millions) March 29, 2024 March 31, 2023 Change ($) Change (%)

Net (loss) income $ (3.5) $ 41.8 $ (45.3) (108.4) %

As a result of the factors described above, our net income decreased $45.3 million, or 108.4%, to $3.5 million in the three months ended March 29, 2024 from $41.8 million for the three months ended March 31, 2023.

(in millions) June 28, 2024 June 30, 2023 Change ($) Change (%)

Net income $ 5.4 $ 39.7 $ (34.3) (86.4) %

As a result of the factors described above, our net income decreased $34.3 million, or 86.4%, to $5.4 million in the three months ended June 28, 2024 from $39.7 million for the three months ended June 30, 2023.

Segment Review

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For the three months ended

(in millions) March 29, 2024 March 31, 2023 Change ($) Change (%)

(in millions) June 28, 2024 June 30, 2023 Change ($) Change (%)

Power Vehicles Group $ 117.8 $ 140.2 $ (22.4) (16.0) %

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Aftermarket Applications Group

Aftermarket Applications Group net sales decreased by $36.8 million, or 26.5%, driven by lower upfitting sales due to product mix and higher interest rates impacting industry dealers and consumers.

Aftermarket Applications Group adjusted EBITDA decreased by $21.4 million, or 59.0%, mainly due to lower gross profit driven by high interest rates, product mix shift, and reduced operating leverage on lower volume.

Aftermarket Applications Group net sales decreased by $48.5 million, or 31.2%, driven by lower upfitting sales due to product mix, chassis availability, and higher interest rates impacting industry dealers and consumers.

Aftermarket Applications Group adjusted EBITDA decreased by $23.6 million, or 62.4%, mainly due to lower gross profit and reduced operating leverage on lower volume.

Specialty Sports Group

Specialty Sports Group net sales decreased by $5.4 million, or 4.5%, primarily due to a reduction in Bike sales of $65.0 million because of the ongoing Bike channel inventory recalibration, offset by the inclusion of $59.6 million in net sales from Marucci which we acquired in November 2023.

Specialty Sports Group net sales increased by $18.7 million, or 17.8%, primarily due to the inclusion of $41.6 million in net sales from Marucci which we acquired in November 2023, partially offset by a reduction in bike sales of $22.9 million because of the ongoing bike channel inventory recalibration and to a lesser extent, lower end consumer demand.

Specialty Sports Group adjusted EBITDA decreased by $4.9 million, or 14.4%, primarily due to a decline in gross profit driven by the ongoing bike channel inventory recalibration, to a lesser extent, lower end consumer demand, and reduced operating leverage on lower volume, offset by the inclusion of Marucci which grew year over year.

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Unallocated corporate expenses decreased by $1.3 million, or 7.9%, driven by cost containment measures.

Six months ended June 28, 2024 compared to six months ended June 30, 2023

Consolidated net sales

For the six months ended

(in millions) June 28, 2024 June 30, 2023 Change ($) Change (%)

Net sales $ 682.0 $ 800.6 $ (118.6) (14.8) %

Total net sales for the six months ended June 28, 2024 decreased $118.6 million, or 14.8%, compared to the six months ended June 30, 2023.

The decrease in net sales is primarily due to product mix and higher interest rates impacting industry and consumer demands and the ongoing bike channel inventory recalibration, offset by the inclusion of $101.2 million in net sales from Marucci that was acquired in November 2023.

Cost of sales

For the six months ended

(in millions) June 28, 2024 June 30, 2023 Change ($) Change (%)

Cost of sales $ 467.8 $ 535.2 $ (67.4) (12.6) %

Cost of sales for the six months ended June 28, 2024 decreased $67.4 million, or 12.6%, compared to the three months ended June 30, 2023.

The decrease in cost of sales was primarily due to our decreased sales.

Our gross margin decreased by 170 basis points to 31.4% for the six months ended June 28, 2024 as compared to the same prior fiscal year period primarily due to a shift in our product line mix and operating leverage on lower volume.

Operating expenses

For the six months ended

(in millions) June 28, 2024 June 30, 2023 Change ($) Change (%)

Operating expenses:

General and administrative $ 74.4 $ 64.0 $ 10.4 16.3 %

Sales and marketing 60.7 50.2 10.5 20.9

Research and development 29.3 30.5 (1.2) (3.9)

Amortization of purchased intangibles 22.3 13.2 9.1 68.9

Total operating expenses $ 186.7 $ 157.9 $ 28.8 18.2 %

Total operating expenses for the six months ended June 28, 2024 were $186.7 million, compared to $157.9 million for the six months ended June 30, 2023.

Sales and marketing expenses increased $10.5 million and general and administrative expenses increased $10.4 million primarily due to the inclusion of Marucci operating expenses and a full six months of Custom Wheel House operating expenses.

Amortization of purchased intangibles increased by $9.1 million mainly due to amortization of additional acquired intangibles.

Income from operations

For the six months ended

(in millions) June 28, 2024 June 30, 2023 Change ($) Change (%)

Income from operations $ 27.5 $ 107.5 $ (80.0) (74.4) %

As a result of the factors discussed above, income from operations for the six months ended June 28, 2024 decreased $80.0 million or 74.4%, compared to income from operations for the six months ended June 30, 2023.

Interest and other expense, net

For the six months ended

(in millions) June 28, 2024 June 30, 2023 Change ($) Change (%)

Interest expense $ 27.2 $ 7.9 $ 19.3 244.3 %

Other expense, net — 0.6 (0.6) (100.0)

Interest and other expense, net $ 27.2 $ 8.5 $ 18.7 220.0 %

Interest and other expense, net for the six months ended June 28, 2024 increased by $18.7 million to $27.2 million, compared to $8.5 million for the six months ended June 30, 2023.

Interest expense increased by $19.3 million to $27.2 million due to additional debt and higher interest rates.

For the six months ended

(in millions) June 28, 2024 June 30, 2023 Change ($) Change (%)

(Benefit) provision for income taxes $ (1.6) $ 17.5 $ (19.1) (109.1) %

The effective tax rates were (620.1)% and 17.7% for the six month periods ended June 28, 2024 and June 30, 2023, respectively.

For the six months ended June 28, 2024, the difference between the Company’s effective tax rate of (620.1)% and the 21% federal statutory rate was due to the favorable impact of discrete items in proportion to lower levels of pre-tax income.

For the six months ended June 30, 2023, the difference between our effective tax rate of 17.7% and the 21% federal statutory rate resulted 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

(in millions) June 28, 2024 June 30, 2023 Change ($) Change (%)

Net income $ 1.9 $ 81.5 $ (79.6) (97.7) %

As a result of the factors described above, our net income decreased $79.6 million, or 97.7% to $1.9 million in the six months ended June 28, 2024 from $81.5 million for the six months ended June 30, 2023.

Segment Review

For additional financial information related to our operating segments including the reconciliation of net income attributable to our common shareholder to adjusted EBITDA, see Note 16 – Segment Information .

The following table summarizes consolidated net sales and adjusted EBITDA by segment:

For the six months ended

(in millions) June 28, 2024 June 30, 2023 Change ($) Change (%)

Power Vehicles Group $ 235.9 $ 282.4 $ (46.5) (16.5) %

Aftermarket Applications Group 209.0 294.4 (85.4) (29.0)

Specialty Sports Group 237.1 223.8 13.3 5.9

Net sales $ 682.0 $ 800.6 $ (118.6) (14.8) %

Adjusted EBITDA

Power Vehicles Group $ 31.8 $ 41.6 $ (9.8) (23.6) %

Aftermarket Applications Group 29.0 74.1 (45.1) (60.9)

Specialty Sports Group 53.3 75.9 (22.6) (29.8)

Unallocated corporate expenses (29.5) (33.0) 3.5 (10.6)

Adjusted EBITDA $ 84.6 $ 158.6 $ (74.0) (46.7) %

Powered Vehicles Group

Powered Vehicles Group net sales decreased by $46.5 million, or 16.5%, due to lower industry demand in Power Sports because of higher interest rates.

Powered Vehicles Group adjusted EBITDA decreased by $9.8 million, or 23.6%, driven by a decrease in gross profit, partially offset by reductions across operating expenses from our cost control efforts.

Aftermarket Applications Group

Aftermarket Applications Group net sales decreased by $85.4 million, or 29.0%, driven by lower upfitting sales due to product mix, chassis availability, and higher interest rates impacting industry dealers and consumers.

Aftermarket Applications Group adjusted EBITDA decreased by $45.1 million, or 60.9%, mainly due to lower gross profit and reduced operating leverage on lower volume.

Specialty Sports Group

Specialty Sports Group net sales increased by $13.3 million, or 5.9%, primarily due to the inclusion of $101.2 million in net sales from Marucci, partially offset by a reduction in bike sales of $87.9 million because of the ongoing bike channel inventory recalibration and, to a lesser extent, lower end consumer demand.

Specialty Sports Group adjusted EBITDA decreased by $22.6 million, or 29.8%, primarily due to a decline in gross profit driven by the ongoing bike channel inventory recalibration, to a lesser extent, lower end consumer demand, and reduced operating leverage on lower volume, offset by the inclusion of Marucci which grew year over year.

Unallocated corporate expenses

Unallocated corporate expenses decreased by $3.5 million, or 10.6%, driven by cost containment measures.

Liquidity and Capital Resources

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Historically, we 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 Forward-Looking Statements and Item 1A.

These sources of liquidity may be impacted by events described in Cautionary Note Regarding Forward-Looking Statements and Part II, Item 1A.

Risk Factors .

As of March 29, 2024, we held $16.8 million of our $69.6 million of cash and cash equivalents in accounts of our subsidiaries outside of the U.S., which we may repatriate.

As of June 28, 2024, we held $17.8 million of our $82.2 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 millions) March 29, 2024 March 31, 2023

For the six months ended

(in millions) June 28, 2024 June 30, 2023

Net cash provided by (used in) operating activities $ 36.0 $ (3.3)

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Operating activities

In the three months ended March 29, 2024, net cash provided by operating activities was $9.4 million.

Our investment in operating assets and liabilities is a result of an increase in prepaids and other assets of $36.5 million and decreases in accounts payable of $2.4 million, accrued expenses and other liabilities of $1.2 million, and income taxes payable of $0.8 million, partially offset by decreases in inventory of $20.0 million and accounts receivable of $5.3 million.

In the six months ended June 28, 2024, net cash provided by operating activities was $36.0 million.

Our investment in operating assets and liabilities is a result of an increase in prepaids and other assets of $35.7 million, a decrease in income taxes payable of $23.2 million, and an increase in inventory of $7.8 million, partially offset by an increase in accounts payable of $34.6 million, a decrease in accounts receivable of $12.0 million, and an increase in accrued expenses and other liabilities of $2.9 million.

The increase in prepaids and other assets is primarily due to carrying new model year chassis to meet current year production needs for the upfitting product lines and, to a lesser degree, slowing sales of older model years.

The change in our accounts receivable reflects the timing of customer collections.

The decrease in income taxes payable is mainly due to our income tax payments.

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 settlements of sales rebate accruals.

The change in our accounts receivable reflects a decrease in our sales and the timing of customer collections.

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 three months ended March 31, 2023, net cash used in operating activities was $66.8 million.

Our investment in operating assets and liabilities is a result of increases in prepaids and other assets of $112.2 million, inventory of $11.5 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 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.

Investing activities

In the three months ended March 29, 2024 and March 31, 2023, net cash used in investing activities consisted of $15.3 million and $144.3 million, respectively.

Investing activities for the three months ended March 29, 2024 consisted of $9.9 million of property and equipment additions, $5.0 million of cash consideration for our acquisitions and $0.4 million of cash consideration for our acquisition of other assets.

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.

In the six months ended June 28, 2024 and June 30, 2023, net cash used in investing activities consisted of $26.6 million and $156.5 million, respectively.

Investing activities for the six months ended June 28, 2024 consisted of $21.2 million of property and equipment additions, $5.0 million of cash consideration for our acquisitions and $0.4 million of cash consideration for our acquisition of other assets.

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.

Financing activities

In the three months ended March 29, 2024, net cash used in financing activities was $7.9 million, and consisted of the proceeds from our 2022 Credit Facility of $70.0 million that were used to support our working capital, offset by payments of $48.0 million to reduce the revolver borrowings, $3.6 million quarterly repayment on our Term A Loan, $25.0 million to repurchase shares of our common stock for retirement, and payments of $1.3 million to repurchase shares of our common stock to cover withholding taxes from our stock-based compensation program.

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 six months ended June 28, 2024, net cash used in financing activities was $10.7 million, and consisted of the proceeds from our 2022 Credit Facility revolver of $119.0 million and draw from the Delayed Draw Term Loan of $200.0 million that were used to support our working capital, offset by payments of $295.0 million to reduce the revolver borrowings, $7.1 million repayments on our Term A Loan, $25.0 million to repurchase shares of our common stock for retirement, and payments of $2.5 million to repurchase shares of our common stock to cover withholding taxes 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.

2022 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 March 29, 2024, the one-month SOFR and three-month SOFR rates were 5.32% and 5.35%, respectively.

At March 29, 2024, our weighted-average interest rate on outstanding borrowing was 6.93%.

At June 28, 2024, the one-month SOFR and three-month SOFR rates were 5.34% and 5.35%, respectively.

At June 28, 2024, our weighted-average interest rate on outstanding borrowing was 7.07%.

On November 14, 2023, in connection and concurrently with the closing of the Marucci acquisition, the Company entered into the First Incremental Facility Amendment (the “Amendment:) amending the 2022 Credit Facility.

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The Incremental Term A Loan was fully funded on November 14, 2023 and used to fund a portion of the consideration owed under the Marucci acquisition.

The Delayed Draw Term Loan is available to the Company for up to six months commencing on December 6, 2023, until the earlier of (a) May 14, 2024 and (b) the date on which the Delayed Draw Term commitments have been terminated.

The Delayed Draw Term Loan was available to the Company for up to six months commencing on December 6, 2023, until the earlier of (a) May 14, 2024 and (b) the date on which the Delayed Draw Term commitments have been terminated.

Each Incremental Term Loan is subject to quarterly amortization payments of principal at a rate of 5.00% per annum.

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Loan fees allocated to the Delayed Draw Term Loan were deferred as an asset until the debt is drawn.

Upon the drawing of the Delayed Draw Term Loan, the fees will be reclassified to a contra-liability account and amortized over the term of the drawn debt using the interest method.

On May 13, 2024, the Company borrowed the full amount of $200,000 of the Delayed Draw Term Loan.

The fees were reclassified to a contra-liability account and amortized over the term of the drawn debt using the interest method.

The Company recently secured an improved covenant profile on its capital structure to provide more flexibility given the uncertain macro environment.

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 29, 2024.

The Company was in compliance with the covenants as of June 28, 2024.

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