What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2023-12-08 compared with 2022-12-09 · 105 added, 108 removed, 171 unchanged (55% of the section changed)

2 unchanged sentences

Executive Overview

The Company designs, manufactures and markets high quality recreational products for the outdoor enthusiast.

The Company designs, manufactures and markets innovative, high quality recreational products for the outdoor enthusiast.

Through a combination of innovative products, strong marketing, a talented and passionate workforce and efficient distribution, the Company seeks to set itself apart from the competition in its markets.

Its subsidiaries operate as a network that promotes innovation and leverages best practices and synergies, following the strategic vision set by executive management and approved by the Company’s Board of Directors.

Coronavirus (COVID-19)

The COVID-19 pandemic drove consumer desire to engage in socially distant and safe activities outdoors.

As a result, increased participation in Fishing, Camping and Watercraft Recreation also increased demand for our products across Company segments beginning in fiscal 2020 and continuing throughout fiscal 2022.

As global travel restrictions also eased, we experienced increased participation and resulting increased product demand in the Diving segment beginning in fiscal 2021 and continuing through fiscal 2022.

In addition to this increase in demand for Company products, COVID-19 and the resulting macroeconomic dynamics have also caused widely-documented supply chain and logistics disruptions across industries.

Specifically, the adverse supply chain and logistics constraints and disruptions have impacted the timing, sourcing, availability and cost of raw materials and components that are necessary to manufacture our outdoor recreation products, especially in our Fishing segment due to the electronic components used in those products.

Because certain electronic components that are necessary for manufacturing our higher volume products in that segment have been most impacted by the supply chain and logistics disruptions, there has been limited availability of those materials and components, as well as increased pricing and inflationary pressures on such components when they have become available, all of which impacted our margins during fiscal 2022.

The Company has attempted to mitigate these disruptions by purchasing significantly higher levels of certain raw material and component inventory as they have been available, in many cases at higher price points than what was historically paid, to enable the Company to complete finished product orders as soon as the missing raw material and component inventory items become available.

Nonetheless, shortages throughout fiscal 2022 have impacted the Fishing segment's ability to complete products for shipping, which has ultimately resulted in decreased sales volumes in the Fishing segment over the prior year, despite continued demand for our Fishing products, as evidenced by outstanding orders.

Additionally, the Company's buying actions have subsequently resulted in decreased margins and the Company carrying significantly higher levels of inventory for a number of its materials, components and products at the end of fiscal 2022.

Though the Company continues to believe the inventory that it has built and which exists on its balance sheet is useable and salable in the ordinary course of business, it continues to monitor the current reserve balances for obsolete and excess inventory.

However, any changes in consumer demand for the Company's outdoor recreation products, changes in economic conditions, or changes in customer inventory levels or competitive conditions could have a favorable or unfavorable effect on required reserve balances in the future.

Because the Company expects that supply chain disruptions, as well as inflationary pricing conditions for raw materials and components necessary to manufacture product, will continue into fiscal 2023, the Company remains focused on evaluating and pursuing additional options (beyond building inventory) to meet the demand for its products.

During fiscal 2023 the Company expects to closely monitor customer demand and proactively manage its higher than normal inventory levels.

Nonetheless, these supply chain and logistics disruptions and inflationary pricing conditions remain fluid and will likely adversely impact the cost of goods sold for future sales of product.

The Company's fiscal 2022 and 2021 each comprised 52 weeks, whereas the fiscal year ended October 2, 2020 comprised 53 weeks.

The Company’s fiscal 2022 revenues decreased by 1% from the prior year.

While consumer and customer demand for the Company's products remained strong throughout fiscal 2022 as evidenced by outstanding order volumes, sales volumes were negatively impacted by product availability caused by the supply chain disruptions described above, particularly in Fishing, the Company's largest segment.

This sales volume decrease and lower gross margins resulting from higher costs of sales were the primary drivers of the $44,973 decrease in operating profit in fiscal 2022 over fiscal 2021.

Its subsidiaries operate as a network that promotes innovation and leverages best practices and synergies in the design, production and marketing of their recreational products, following the strategic vision set by executive management and approved by the Company’s Board of Directors.

Fiscal 2023 saw a significant change in pacing of sales compared to fiscal 2022 and 2021 as seasonality fluctuations in the Company's business returned to more traditional pre-pandemic levels.

During the last quarter of fiscal 2022, as supply chain restrictions eased, the Company filled a significant number of backlogged customer orders.

As a result, the fiscal 2023 fourth quarter comparisons show a significant reduction in sales versus the prior year fourth quarter.

The Company’s fiscal 2023 full-year revenues decreased by 11% from the prior year as outdoor recreation markets continued to moderate after elevated pandemic-driven demand.

The decrease in sales volumes and a 13% increase in operating expenses between years resulted in a $54,570 decrease in operating profit in fiscal 2023 from fiscal 2022.

Results of Operations

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Interest income, net (4,391) (654) (221)

Other income, net 8,076 (1,418) (1,362)

Other (income) expense, net (9,693) 8,076 (1,418)

Income tax expense 6,290 14,397 29,541

21 unchanged sentences

Net sales for the Fishing business decreased by $33,655, or 6% during fiscal 2023 from fiscal 2022.

While customer and consumer demand was strong, the decrease over the prior year was driven by significant supply chain disruptions and the resulting unavailability of certain necessary components (especially as it related to electronic components) experienced in the current year, which impacted the ability to complete product build and fill customer orders.

Specifically, due to the technical and electronic nature of the product categories, the Fishing segment has been the most susceptible to the previously discussed supply chain issues, as discussed in "Coronavirus (COVID-19)" above.

Camping net sales increased $7,434, or 12%, in 2022 from 2021.

Increased sales of Eureka and Jetboil products as a result of continued participation in outdoor recreation activities were the primary driver of the increase year over year.

Net sales in the Watercraft Recreation business increased $1,337, or 2%.

Continued new product success drove the overall increase over the prior year.

The decrease from prior year is primarily due to the following key factors:

moderating demand during fiscal 2023 from record highs in the prior two fiscal years fueled by the impact of the pandemic;

and the effect of customers more tightly managing their inventory levels as the Company transitioned its bow-mount trolling motor product lines.

Camping net sales decreased $25,033, or 36%, in 2023 from 2022, as demand significantly declined from the increased levels seen during the pandemic.

Additionally, approximately $6,600 of the decrease in net sales from the prior year period was related to the sale of the Military and Commercial Tents product lines during the second fiscal quarter of 2023.

The Company sold these product lines to a third party in an asset sale for a purchase price of $14,990 which closed on March 17, 2023.

The net book value of the assets and liabilities sold was approximately $8,350, resulting in a gain on sale of approximately $6,640, which is recorded in Other (income) expense, net in the Company’s accompanying Condensed Consolidated Statements of Operations.

The purchase price and the net proceeds received by the Company related to this sale were subject to customary purchase price adjustment provisions and Company indemnity obligations set forth in the definitive purchase agreement.

Accordingly, during the third and fourth fiscal quarter, working capital true-up and purchase price adjustments reduced the purchase price and the final net gain to approximately $6,560.

Net sales in the Watercraft Recreation business decreased $27,172, or 40% as the overall market significantly declined from the elevated levels seen during the pandemic.

Diving net sales increased $6,195, or 8%, year over year.

Prior year sales were negatively impacted due to the negative effects of COVID-19 on demand due to restrictions in destination travel and tourism.

As several regions around the world have re-opened, sales volumes have increased along with the increase in tourism, partially offset by an unfavorable foreign currency translation impact on sales in these segment of approximately 4.5% in 2022 versus the prior year period.

The sales increase was due to increased demand for our products as the global tourism industry continued to recover from the pandemic, as well as the impact of price increases, which were partially offset by an unfavorable foreign currency translation impact on sales in this segment of approximately 1% in 2023 versus the prior year period.

Cost of Sales

Cost of sales was $419,757, or 63.2% of net sales, on a consolidated basis for fiscal 2023 compared to $472,023, or 63.5% of net sales, in the prior year.

Despite the decrease in sales over the prior fiscal year, the increase in cost of sales was primarily driven by significant increases in materials costs between years.

The Company continues to manage disruptions in its supply chain to ensure the availability of necessary components, parts and other raw materials, in some cases at significantly higher price points than what was historically paid, to try to meet sales demand for our products across segments.

The decrease in cost of sales was relatively consistent with the decrease in sales year over year and improved slightly as a percentage of net sales as supply chain conditions improved and costs of materials and freight both came down.

Gross profit of $244,087 was 36.8% of net sales on a consolidated basis for the year ended September 29, 2023 compared to $271,332, or 36.5% of net sales in the prior year.

Gross profit in the Fishing business decreased by $66,217 from the prior year due primarily to the 5% decrease in net sales year over year, as well as significant increases in materials costs, as discussed above.

Camping gross profit increased by $1,857 from 2021 due primarily to increased sales volumes, pricing actions and a favorable mix of products sold in the current year as compared to the prior year.

Gross profit in the Watercraft Recreation segment decreased by $2,525 from 2021, despite increased sales in 2022 versus the prior year, primarily due to increased materials and freight costs.

The $4,169 increase in gross profit in the Diving segment was due primarily to increased sales volumes and pricing actions during fiscal 2022 as compared to the prior year.

Gross profit in the Fishing business decreased by $7,685 from the prior year due primarily to the 6% decrease in net sales year over year.

Although we experienced improved freight and materials costs over the prior year, those cost savings were nearly offset by unfavorable overhead absorption on reduced sales volumes between periods.

Camping gross profit decreased by $12,120 from 2022, which was mainly attributable to decreased sales volumes as compared to the prior year.

Additionally, approximately $2,300 of increases in reserves for excess Eureka!

tent inventory further brought down gross profit.

Gross profit in the Watercraft Recreation segment decreased by $11,388 from 2022, due primarily to lower sales volumes than the prior year.

The $3,846 increase in gross profit in the Diving segment was due primarily to sales volume increases and pricing actions during fiscal 2023 as compared to the prior year.

Operating Expenses

Operating expenses decreased from the prior year by $17,820.

The decrease was primarily due to the impact of overall lower sales volume-driven expenses, as well as lower variable and deferred compensation expense incurred in fiscal 2022 as compared to the prior fiscal year.

Operating expenses for the Fishing segment decreased by $9,160 from fiscal 2021 levels.

The decrease was due primarily to lower sales volume related expenses between years.

Camping operating expenses increased by $2,467 from the prior year due primarily to increased sales volume related expenses and increased people costs.

In the Watercraft Recreation segment, operating expenses increased $475 from their levels in fiscal 2021 due primarily to increased sales volume related expenses in 2022.

Operating expenses for the Diving business increased by $993 year over year due primarily to increased sales volume related expenses between periods.

The Company's fiscal 2022 general corporate expenses of $23,722 decreased $12,595 from $36,317 in fiscal 2021.

The year over year decrease reflects lower people costs, including $11,200 of lower deferred compensation expenses, as well as lower incentive compensation and lower health insurance costs from the prior year.

Operating expenses increased from the prior year by $27,325 despite the decrease in sales volumes due to investments in marketing and research & development and higher headcount and deferred compensation costs.

Operating expenses for the Fishing segment increased by $16,423 from fiscal 2022 levels.

The increase was due primarily to higher warranty expense and marketing spend between years, as well as strategic investments in additional research and development headcount in fiscal 2023, offset in part by lower sales volume-driven expenses.

Camping operating expenses increased by $838 from the prior year where increased expenses related to the Eureka!

exit more than offset the decline in operating expenses resulting from decreased sales volume-driven expenses between years.

During the fourth quarter of 2023, the Company decided to fully exit the Eureka!

consumer product lines of the Camping business segment and focus solely on the Jetboil product line.

As part of this exit, the Company committed to donating approximately $2,000 in excess Eureka!

inventory to a non-profit organization and recognized the contribution expense in the fourth quarter of fiscal 2023.

Additionally, the Company incurred costs related to the wind down of this Eureka!

branded business which included accruing approximately $500 of exit costs.

Other costs will be expensed as incurred and are not expected to be material.

In the Watercraft Recreation segment, operating expenses decreased $3,438 from their levels in fiscal 2022 due primarily to decreased sales volume related expenses in 2023.

Operating expenses for the Diving business increased by $2,460 year over year due primarily to increased sales volume related expenses and increased headcount and personnel-related costs between periods.

The Company's fiscal 2023 general corporate expenses of $34,765 increased $11,043 from $23,722 in fiscal 2022.

More favorable market conditions on the Company's deferred compensation plan assets resulted in approximately $9,100 of higher deferred compensation expense during fiscal 2023 over the prior year.

The deferred compensation expenses are entirely offset by a gain in "Other (income) expense, net" related to marking the plan assets to market.

Additionally, professional services costs increased approximately $2,800 over the prior year.

Operating Results

The Company’s operating profit was $11,740 in fiscal 2023 compared to an operating profit of $66,310 in fiscal 2022.

Fishing operating profit decreased by $57,057 to $65,433 from $122,490 in the prior year due primarily to higher costs of goods and also lower sales volumes between years, stemming from supply chain disruptions, which were particularly acute in electronics.

The operating profit for Camping was $13,415 compared to $14,025 in 2021 which decrease was primarily a result of the higher operating expenses between periods.

The operating profit for the Watercraft Recreation business was $6,173 in fiscal 2022 compared to $9,173 in fiscal 2021 due to the factors noted above on changes in sales volumes and operating

Operating profit for the Diving business increased by $3,175 in fiscal 2022 from fiscal 2021, due primarily to increased sales volumes and pricing actions.

Fishing operating profit decreased by $24,108 to $41,325 from $65,433 in the prior year due primarily to lower sales volumes between years, as well as increased operating expenses, as discussed above.

The operating profit for Camping was $457 compared to $13,415 in 2022 which decrease was primarily a result of the lower sales volumes between periods.

The operating loss for the Watercraft Recreation business was $1,777 in fiscal 2023 compared to operating profit of $6,173 in fiscal 2022 due to the changes in sales volumes noted above.

Operating profit for the Diving business increased by $1,387 in fiscal 2023 from fiscal 2022, due primarily to increased sales volumes and improved margins.

Other Income and Expenses

Interest expense of $153 was relatively flat as compared to the prior year expense of $145.

Interest income of $807 increased from prior year interest income of $366 due to the increase in deposit interest rates year over year.

Net other expense of $8,076 in fiscal 2022 decreased from net other income of $1,418 in fiscal 2021.

The current year net other expense included currency losses of $1,741 and market losses net of dividend income of $5,878 on deferred compensation plan assets.

In the prior year, net other income included $5,329 of market gains and dividends on the deferred compensation plan assets, partially offset by $215 of currency losses and pension termination expense of $2,526.

The dividends and market gains and losses on deferred compensation plan assets recognized in the Consolidated Statement of Operations in “Other expense (income), net” are offset as compensation expense in “Operating expenses.”

Interest expense of $152 was flat as compared to the prior year expense of $153.

Interest income of $4,543 increased from prior year interest income of $807 due to the increase in deposit interest rates year over year, as well as increased cash and investment balances over the prior year.

Net other income of $9,693 in fiscal 2023 increased from net other expense of $8,076 in fiscal 2022.

The current year net other income included the gain on the sale of the Military and Commercial Tents product lines of approximately $6,560, and market earnings and dividend income of $3,200 on deferred compensation plan assets, partially offset by currency losses of $114.

In the prior year, net other expense included $5,878 of market losses net of dividends on the deferred compensation plan assets, as well as $1,741 of currency losses.

The dividends and market gains and

losses on deferred compensation plan assets recognized in the Consolidated Statement of Operations in “Other (income) expense, net” are offset as compensation expense in “Operating expenses.”

Pretax Income and Income Taxes

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Fiscal 2022 vs.

Net sales in 2021 increased by 26% to $751,651 compared to $594,209 in 2020.

Foreign currency exchange had a favorable impact of less than 1%, on the fiscal 2021 sales versus the prior year.

Net sales for the Fishing business increased by $103,122, or 23% during 2021 from 2020.

The increase over fiscal 2020 was driven by continued new product success and increased participation in fishing, principally as a result of the effect of COVID-19 on consumer recreation and leisure choices, resulting in higher demand across all product lines in this segment.

Net sales in fiscal 2022 decreased by 1% to $743,355 compared to $751,651 in fiscal 2021.

Foreign currency exchange had an unfavorable impact of less than 1% on fiscal 2022 sales versus the prior year.

Net sales for the Fishing business decreased by $26,418, or 5% during fiscal 2022 from fiscal 2021.

While customer and consumer demand was strong, the decrease over fiscal 2021 was driven by significant supply chain disruptions and the resulting unavailability of certain necessary components (especially as it related to electronic components) experienced in fiscal 2022, which impacted the ability to complete product build and fill customer orders.

Specifically, due to the technical and electronic nature of the product categories, the Fishing segment was most susceptible to the supply chain disruption issues, (including with respect to cost and availability of necessary materials and components) caused by the Coronavirus (COVID-19) pandemic.

Camping net sales increased $7,434, or 12%, in 2022 from 2021.

Increased sales of consumer tents and Jetboil products as a result of increased participation in outdoor recreation activities were the primary driver of the increase year over year.

Net sales in the Watercraft Recreation business increased $24,746, or 59% from 2020 to 2021.

Increased demand as a result of increased participation in watercraft recreation activities during the COVID-19 pandemic, combined with new product success, drove the overall increase between years.

Increased sales of Eureka!

and Jetboil products as a result of continued participation in outdoor recreation activities were the primary driver of the increase year over year.

Net sales in the Watercraft Recreation business increased $1,337, or 2%.

Continued new product success drove the overall increase over fiscal 2021.

Diving net sales increased $9,427, or 14%, year over year.

Fiscal 2020 sales were negatively impacted due to the effects of COVID-19 on demand globally due to restrictions in destination travel and tourism.

As travel restrictions started to lift throughout fiscal 2021, tourism began to recover, resulting in increased demand and sales in this segment between years.

In addition, foreign currency translation favorably impacted sales by approximately 3.3% in 2021 versus 2020.

Fiscal 2021 sales were negatively impacted due to the negative effects of COVID-19 on demand due to restrictions in destination travel and tourism.

As several regions around the world re-opened, sales volumes increased during fiscal 2022 along with the increase in tourism, partially offset by an unfavorable foreign currency translation impact on sales in these segment of approximately 4.5% in 2022 versus the fiscal 2021 period.

Cost of Sales

Cost of sales was $472,023, or 63.5% of net sales, on a consolidated basis for fiscal 2022 compared to $417,526, or 55.5% of net sales, in fiscal 2021.

Higher sales volumes between years were the primary driver of the increase in the cost of sales between periods.

Favorable product mix and pricing between fiscal years offset the impact of approximately $7,200 of additional tariffs on Chinese goods and components during fiscal 2021, as well as increased freight costs over fiscal 2020.

Gross profit of $334,125 was 44.5% of net sales on a consolidated basis for the year ended October 1, 2021 compared to $264,993, or 44.6% of net sales in fiscal 2020.

Gross profit in the Fishing business in fiscal 2021 increased by $39,676 from fiscal 2020 due primarily to the 23% increase in net sales year over year.

Favorable product mix and improved absorption of overhead costs during fiscal 2021 partially offset approximately $5,900 of additional tariff costs on Chinese sourced goods and components and higher freight costs incurred during fiscal 2021 versus fiscal 2020.

Despite the decrease in sales over fiscal 2021, the increase in cost of sales was primarily driven by significant increases in materials costs between years.

During fiscal 2022, the Company devoted significant effort to managing disruptions in its supply chain to ensure the availability of necessary components, parts and other raw materials, in some cases at significantly higher price points than what was historically paid, to try to meet sales demand for our products across segments.

Gross profit of $271,332 was 36.5% of net sales on a consolidated basis for the year ended September 30, 2022 compared to $334,125, or 44.5% of net sales in fiscal 2021.

Gross profit in the Fishing business decreased by $66,217 from fiscal 2021 due primarily to the 5% decrease in net sales year over year, as well as significant increases in materials costs, as discussed above.

Camping gross profit increased by $1,857 from 2021 due primarily to increased sales volumes, pricing actions and a favorable mix of products sold in fiscal 2022 as compared to fiscal 2021.

Gross profit in the Watercraft Recreation segment increased by $12,289 from fiscal 2020 due primarily to increased sales volumes in fiscal 2021 versus the prior year and the resulting improvement in absorption of overhead costs.

The $5,463 increase in gross profit in the Diving segment was due primarily to increased sales volumes, pricing actions and favorable product mix during fiscal 2021 as compared to fiscal 2020.

Gross profit in the Watercraft Recreation segment decreased by $2,525 from 2021, despite increased sales in 2022 versus fiscal 2021, primarily due to increased materials and freight costs.

The $4,169 increase in gross profit in the Diving segment was due primarily to increased sales volumes and pricing actions during fiscal 2022 as compared to fiscal 2021.

Operating Expenses

Operating expenses increased in fiscal 2021 from fiscal 2020 by $28,919.

The increase was driven primarily by higher sales volume related costs incurred in fiscal 2021 as compared to the prior fiscal year.

Additionally, increased headcount and compensation costs further increased expenses year over year.

Operating expenses for the Fishing segment increased by $13,069 from fiscal 2020 levels.

The increase was due primarily to higher sales volume related expenses, as well as increased people costs between years.

Camping operating expenses increased by $1,879 in fiscal 2021 from the prior year due primarily to increased sales volume related expenses.

In the Watercraft Recreation segment, operating expenses increased $2,787 in fiscal 2021 from their levels in fiscal 2020 due primarily to increased sales volume related expenses in 2021, partially offset by decreased spending rate on advertising and promotions.

Operating expenses for the Diving business increased by $1,357 year over year due primarily to increased sales volume related expenses, as well as increased people costs between periods.

The Company's 2021 general corporate expenses of $36,317 increased $9,827 from $26,490 in 2020.

The year over year increase reflects higher people costs including $2,900 of higher deferred compensation expenses and higher health insurance costs over the prior year as well as higher professional services expense.

Operating expenses decreased from fiscal 2021 by $17,820.

Operating expenses for the Fishing segment decreased by $9,160 from fiscal 2021 levels.

The decrease was due primarily to lower sales volume related expenses between years.

Camping operating expenses increased by $2,467 from fiscal 2021 due primarily to increased sales volume related expenses and increased people costs.

In the Watercraft Recreation segment, operating expenses increased $475 from their levels in fiscal 2021 due primarily to increased sales volume related expenses in 2022.

Operating expenses for the Diving business increased by $993 year over year due primarily to increased sales volume related expenses between periods.

The Company's fiscal 2022 general corporate expenses of $23,722 decreased $12,595 from $36,317 in fiscal 2021.

The year over year decrease reflected lower people costs, including $11,200 of lower deferred compensation expenses, as well as lower incentive compensation and lower health insurance costs from fiscal 2021.

Operating Results

The Company’s operating profit was $66,310 in fiscal 2022 compared to an operating profit of $111,283 in fiscal 2021.

Fishing operating profit increased by $26,606 to $122,490 from $95,884 in the prior year due primarily to higher sales volumes between years.

The operating profit for Camping was $14,025 compared to $4,406 in 2020 which increase was also primarily a result of higher sales volumes between periods.

The operating profit for the Watercraft Recreation business was $9,173 in fiscal 2021 compared to a loss of $329 in fiscal 2020 due to the factors noted above on changes in sales volumes and operating expenses.

Operating profit for the Diving business increased by $4,106 in fiscal 2021 from fiscal 2020, due to recovery from the impact of COVID-19 and demand for our Diving products and the other factors discussed above.

Fishing operating profit decreased by $57,057 to $65,433 from $122,490 in fiscal 2021 due primarily to higher costs of goods and also lower sales volumes between years, stemming from supply chain disruptions, which were particularly acute in electronics.

The operating profit for Camping was $13,415 compared to $14,025 in 2021 which decrease was primarily a result of the higher operating expenses between periods.

The operating profit for the Watercraft Recreation business was $6,173 in fiscal 2022 compared to $9,173 in fiscal 2021 due to the factors noted above on changes in sales volumes and operating expenses.

Operating profit for the Diving business increased by $3,175 in fiscal 2022 from fiscal 2021, due primarily to increased sales volumes and pricing actions.

Other Income and Expenses

Interest expense in fiscal 2021 of $145 was relatively flat as compared to the prior year expense of $143.

Interest income of $366 decreased from fiscal 2020 year interest income of $1,413 due to the decrease in deposit interest rates year over year.

Net other income of $1,418 in fiscal 2021 increased slightly from net other income of $1,362 in fiscal 2020.

Fiscal 2021 net other income included currency losses of $215 and market gains and dividends of $5,329 on deferred compensation plan assets, partially offset by pension termination expense of $2,526.

In fiscal 2020, net other income included $269 of currency losses and $2,454 of market gains and dividends on the deferred compensation plan assets.

The dividends and market gains and losses on deferred compensation plan assets recognized in the Consolidated Statement of Operations in “Other income, net” are offset as compensation expense in “Operating expenses.”

Interest expense of $153 was relatively flat as compared to fiscal 2021 expense of $145.

Interest income of $807 increased from fiscal 2021 interest income of $366 due to the increase in deposit interest rates year over year.

Net other expense of $8,076 in fiscal 2022 decreased from net other income of $1,418 in fiscal 2021.

The fiscal 2022 net other expense included currency losses of $1,741 and market losses net of dividend income of $5,878 on deferred compensation plan assets.

In fiscal 2021, net other income included $5,329 of market gains and dividends on the deferred compensation plan assets, partially offset by $215 of currency losses and pension termination expense of $2,526.

Pretax Income and Income Taxes

The Company realized pretax income of $58,888 in fiscal 2022 compared to $112,922 in fiscal 2021.

The Company recorded income tax expense of $29,541 in fiscal 2021, which equated to an effective tax rate of 26.2%, compared to $18,469 in fiscal 2020, which equated to an effective tax rate of 25.1%.

The Company recorded income tax expense of $14,397 in 2022, which equated to an effective tax rate of 24.4%, compared to $29,541 in 2021, which equated to an effective tax rate of 26.2%.

The Company recognized net income of $44,491, or $4.37 per diluted common share, in fiscal 2022 compared to $83,381, or $8.21 per diluted common share, in fiscal 2021 based on the factors discussed above.

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The Company considers all short-term investments in interest-bearing bank accounts, and all securities and other instruments with an original maturity of three months or less, to be equivalent to cash.

Short-term investments in prior years consisted of certificates of deposit, with original maturities greater than three months but less than one year, with the primary objective of minimizing the potential risk of principal loss.

Short-term investments consist of marketable securities, with original maturities greater than three months but less than one year, and long-term investments consist of marketable securities with original maturities greater than one year, with the primary objective of minimizing the potential risk of principal loss.

The Company’s investment policy generally requires securities to be investment grade.

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(thousands) September 29

2022 October 1

2023 September 30

2022 October 1

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(thousands, except share data) September 29

2022 October 1

2023 September 30

Current assets $ 458,656 $ 480,316

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Current ratio 4.4:1 4.2:1

Cash flows used for operations in fiscal 2022 totaled $62,144, and cash provided by operations totaled $58,318 and $61,493 in fiscal 2021 and 2020, respectively.

The change in operating cash flow from the prior year is due primarily to a decrease in net income, as well as increases in inventory levels and other working capital changes.

Cash flows provided by operations in fiscal 2023 totaled $41,713, cash flows used for operations totaled $62,144 in fiscal 2022, respectively, and cash provided by operations totaled $58,318 in fiscal 2021.

During fiscal 2022, the Company was able to fill backlogged customer orders, which generated customer payments during fiscal 2023 that substantially improved cash flows from operating activities during the year.

Notwithstanding such improvement in operating cash flows, the Company continues to focus on managing inventory levels.

Depreciation and amortization charges were $16,295, $14,234 and $13,401 in fiscal 2023, 2022 and 2021, respectively.

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Cash flows used for investing activities were $48,374, $31,678, and $21,381 in fiscal 2023, 2022, and 2021, respectively.

There were no sales or purchases of short-term investments in fiscal 2022, 2021 or 2020.

During fiscal 2023, the Company purchased investments of $40,700.

There were no sales or purchases of investments in fiscal 2022 or 2021.

In fiscal 2023, there was $14,990 of proceeds from selling the Military and Commercial Tent product lines.

Expenditures for property, plant and equipment were $22,668, $31,690 and $21,409 in fiscal 2023, 2022 and 2021, respectively.

The increase from the prior year is due primarily to additional capacity investments made in the current year.

The decrease in these expenditures from the prior year was due primarily to additional capacity investments made in the prior year that did not recur in fiscal 2023.

In general, the Company’s ongoing capital expenditures are primarily related to tooling for new products, facilities investments and information systems improvements.

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The Company utilizes letters of credit primarily as security for the payment of future claims under its workers’ compensation insurance.

Letters of credit outstanding at September 30, 2022 and October 1, 2021 were $173 and $181, respectively, and were included in the Company’s total loan availability.

The Company had no unsecured revolving credit facilities at its foreign subsidiaries as of September 30, 2022 or October 1, 2021.

Letters of credit outstanding at September 29, 2023 and September 30, 2022 were $67 and $173, respectively, and were included in the Company’s total loan availability.

The Company had no unsecured revolving credit facilities at its foreign subsidiaries as of September 29, 2023 or September 30, 2022.

The Company has no other off-balance sheet arrangements.

Market Risk Management

Coronavirus outbreak

As disclosed in our prior filings with the Securities and Exchange Commission and elsewhere herein, in December 2019, a new strain of coronavirus ("COVID-19"), began to spread globally, leaving no region or part of the world unaffected by the pandemic it has created.

Governments and health authorities took measures to prevent the spread of this virus (including in certain cases requiring or recommending a vaccine or imposing testing requirements), all of which impacted the Company's business and operations.

To the extent that COVID-19 continues to persist or recur, among other things, the ability of the Company’s suppliers to manufacture and deliver the products that it sells to the Company, the ability of the Company to manufacture and deliver its products to its customers, the Company's ability to display its products at trade shows and similar events, the Company's ability to conduct meetings with its customers and prospective customers, and, if a significant number of its employees at a particular facility or location were to contract coronavirus, the Company’s ability to conduct its day-to-day operations could be adversely impacted.

The financial impact of the coronavirus pandemic on the Company will depend on future developments, including related to any supply chain disruptions, that the Company cannot reasonably predict or estimate at this time, but any of which could materially and adversely affect its results for an unknown but possibly extended period.

See the section "Risk Factors" identified in Part I, Item 1A in this Form 10-K for more information.

Foreign Exchange Risk

75 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-K

Item 7. Management’s Discussion and Analysis