What changed in this filing

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Item 1. Financial Statements

2022-02-10 compared with 2021-11-10 · 94 added, 62 removed, 413 unchanged (27% of the section changed)

4 unchanged sentences

except share data)

October 2, 2021 July 3, 2021

January 1, 2022 July 3, 2021

Current assets:

38 unchanged sentences

(Unaudited, in thousands, except share and per share amounts)

Three Months Ended

October 2, 2021 September 26, 2020

Three Months Ended Six Months Ended

January 1, 2022 December 26, 2020 January 1, 2022 December 26, 2020

Net sales $ 134,456 $ 128,262 $ 267,218 $ 251,469

7 unchanged sentences

Income before income taxes 556 1,872 1,658 3,987

Income tax provision 287 396

Income tax provision (benefit) ( 31 ) 292 256 688

Net income $ 587 $ 1,580 $ 1,402 $ 3,299

7 unchanged sentences

(Unaudited, in thousands)

Three Months Ended

October 2, 2021 September 26, 2020

Three Months Ended Six Months Ended

January 1, 2022 December 26, 2020 January 1, 2022 December 26, 2020

Comprehensive income (loss):

3 unchanged sentences

Comprehensive income (loss) $ ( 497 ) $ 4,506 $ ( 1,213 ) $ 7,493

Other comprehensive income (loss) for the three months ended October 2, 2021 and September 26, 2020, is reflected net of tax expense (benefit) of approximately $( 0.3 ) million and $ 1.5 million, respectively.

Other comprehensive income (loss) for the three months ended January 1, 2022 and December 26, 2020, is reflected net of tax expense (benefit) of approximately $( 0.5 ) million and $ 0.8 million, respectively.

Other comprehensive income (loss) for the six months ended January 1, 2022 and December 26, 2020, is reflected net of tax expense (benefit) of approximately $( 0.8 ) million and $ 1.5 million, respectively.

See accompanying notes to consolidated financial statements.

2 unchanged sentences

(Unaudited, in thousands)

Three Months Ended

October 2, 2021 September 26, 2020

Six Months Ended

January 1, 2022 December 26, 2020

Operating activities:

20 unchanged sentences

Purchase of property and equipment ( 2,766 ) ( 6,963 )

Proceeds from sale of fixed assets 2 —

Cash used in investing activities ( 2,764 ) ( 6,963 )

11 unchanged sentences

Cash and cash equivalents, end of period $ 1,046 $ 5,007

Non-cash investing activities:

Beneficial interest in transferred receivables — ( 9 )

Supplemental cash flow information:

8 unchanged sentences

except share data)

Three Months Ended

October 2, 2021 September 26, 2020

Three Months Ended Six Months Ended

January 1, 2022 December 26, 2020 January 1, 2022 December 26, 2020

Total shareholders’ equity, beginning balances $ 123,057 $ 118,607 $ 123,705 $ 115,557

28 unchanged sentences

The Company’s reporting period is a 52/53 week fiscal year ending on the Saturday closest to June 30.

The quarters ended October 2, 2021 and September 26, 2020 were 13 week periods, respectively.

The three and six month periods ended January 1, 2022 and December 26, 2020, were 13 and 26 week periods, respectively.

Fiscal year 2022 will end on July 2, 2022, which is a 52 week year.

5 unchanged sentences

Significant Accounting Policies

Reclassifications

Certain prior period reclassifications were made to conform with the current period presentation.

These reclassifications had no effect on reported income, comprehensive income, cash flows, total assets, or shareholders' equity as previously reported.

Earnings Per Common Share

4 unchanged sentences

Derivative Instruments and Hedging Activities

The Company has entered into foreign currency forward contracts that are accounted for as cash flow hedges in accordance with ASC 815, “ Derivatives and Hedging”.

The Company has entered into foreign currency forward contracts that are accounted for as cash flow hedges .

The effective portion of the gain or loss on the derivative is reported as a component of accumulated other comprehensive income (AOCI) and is reclassified into earnings in the same period in which the underlying hedged transaction affects earnings.

35 unchanged sentences

The Company is currently assessing the effects on its consolidated financial statements, and it intends to adopt the guidance as they become effective.

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (Topic 740), which modifies certain provisions of ASC 740, Income Taxes, in an effort to reduce the complexity of accounting for income taxes.

ASU 2019-12 became effective for the Company during the first quarter of fiscal year 2022.

Implementation of this standard does not have a material impact on our consolidated financial position, results of operations, or cash flows.

In June 2016, the FASB issued ASU 2016-13 “Financial Instruments - Credit Losses (Topic 326):

3 unchanged sentences

The Company is currently assessing the impact on its consolidated financial statements, and it intends to adopt the guidance when it becomes effective in the first quarter of fiscal year 2024.

Total inventory as of October 2, 2021 is $ 143.1 million which is net of $ 23.9 million of reserves, customer payments, and customer deposits compared to $ 137.3 million which is net of $ 14.9 million in reserves, customer payments, and customer deposits as of July 3, 2021.

Total inventory as of January 1, 2022 is $ 157.8 million compared to $ 137.3 million as of July 3, 2021.

Substantially all of the Company’s inventory balances are raw materials.

2 unchanged sentences

The amendment increases the Company’s current credit facility of $ 93 million to $120 million, subject to the Company’s borrowing base, maturing on September 3, 2026.

As of October 2, 2021, the Company had an outstanding balance under the asset-based revolving credit facility of $ 101.3 million, $ 0.3 million in outstanding letters of credit and $ 12.0 million available for future borrowings.

As of January 1, 2022, the Company had an outstanding balance under the asset-based revolving credit facility of $ 97.0 million, $ 0.3 million in outstanding letters of credit and $ 17.3 million available for future borrowings.

As of July 3, 2021, the Company had an outstanding balance under the credit facility with Bank of America of $ 90.9 million, $ 0.3 million in outstanding letters of credit and $ 2.1 million available for future borrowings.

11 unchanged sentences

Under this loan agreement, equal monthly payments of approximately $ 94,000 commenced on September 14, 2020 and will continue through the maturity of the equipment financing facility on August 14, 2025.

As of October 2, 2021, the Company had an outstanding balance of $ 4.0 million.

As of January 1, 2022, the Company had an outstanding balance of $ 3.8 million.

As of July 3, 2021, the Company had an outstanding balance of $ 4.2 million under the Bank of America equipment term loan agreement.

1 unchanged sentence

Under this loan agreement, equal monthly payments of $ 100,000 commenced on May 24, 2021 and will continue through the maturity of the equipment financing facility on April 24, 2026.

As of October 2, 2021, the Company had an outstanding balance of $ 5.5 million.

As of January 1, 2022, the Company had an outstanding balance of $ 5.2 million.

As of July 3, 2021, the Company had an outstanding balance of $5.8 million.

The interest rates on outstanding debt as of October 2, 2021 range from 3.25 % - 5.52 % compared to 3.25 % - 5.52 % as of July 3, 2021.

Debt maturities as of October 2, 2021 for the next five years and thereafter are as follows (in thousands):

The interest rates on outstanding debt as of January 1, 2022 range from 3.25 % - 5.52 % compared to 3.25 % - 5.52 % as of July 3, 2021.

Debt maturities as of January 1, 2022 for the next five years and thereafter are as follows (in thousands):

Fiscal Years Ending Amount

3 unchanged sentences

Long-term debt, net of debt issuance costs $ 105,417

(1) Represents scheduled payments for the remaining nine-month period ending July 2, 2022.

(1) Represents scheduled payments for the remaining six-month period ending July 2, 2022.

The Company must comply with certain financial covenants, including a fixed charge coverage ratio and a cash flow leverage ratio.

1 unchanged sentence

limit or restrict the ability of the Company to incur additional liens, make acquisitions or investments, incur additional indebtedness, engage in mergers, consolidations, liquidations, dissolutions, or dispositions, pay dividends or other restricted payments, prepay certain indebtedness, engage in transactions with affiliates, and use proceeds.

The Company was in compliance with all financial covenants as of October 2, 2021.

The Company was in compliance with all financial covenants as of January 1, 2022.

The Company expects to repatriate a portion of its foreign earnings based on increased net sales growth driving additional capital requirements domestically, cash requirements for potential acquisitions and to implement certain tax strategies.

8 unchanged sentences

Withholding taxes would not apply to future repatriations from Mexico or Vietnam.

The Company has available approximately $ 6.4 million of gross federal research and development tax credits as of October 2, 2021.

The Company has available approximately $ 6.5 million of gross federal research and development tax credits as of January 1, 2022.

ASC 740 requires the Company to recognize in its financial statements uncertainties in tax positions taken that may not be sustained upon examination by the taxing authorities.

Accordingly, as of October 2, 2021, the Company has recorded $ 2.6 million of unrecognized tax benefits associated with these federal tax credits, resulting in a net deferred tax benefit of approximately $ 3.8 million.

Accordingly, as of January 1, 2022, the Company has recorded $ 2.7 million of unrecognized tax benefits associated with these federal tax credits, resulting in a net deferred tax benefit of approximately $ 3.8 million.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted in response to the COVID-19 pandemic.

15 unchanged sentences

(in thousands, except share and per share information)

October 2, 2021 September 26, 2020

January 1, 2022 December 26, 2020

Net income $ 587 $ 1,580

5 unchanged sentences

Antidilutive SARs not included in diluted earnings per share 619 —

Six Months Ended

(in thousands, except share and per share information)

January 1, 2022 December 26, 2020

Net income $ 1,402 $ 3,299

Weighted average shares outstanding—basic 10,762 10,760

Effect of dilutive common stock awards 293 280

Weighted average shares outstanding—diluted 11,055 11,040

Net income per share—basic $ 0.13 $ 0.31

Net income per share—diluted $ 0.13 $ 0.30

Antidilutive SARs not included in diluted earnings per share 619 324

Share-based Compensation

12 unchanged sentences

Fair Value $ 2.73 $ 2.32

Total share-based compensation expense recognized during the three months ended October 2, 2021 and September 26, 2020 was approximately $ 68,000 and $ 64,000 , respectively.

As of October 2, 2021, total unrecognized compensation expense related to unvested share-based compensation arrangements was approximately $ 0.6 million.

Total share-based compensation expense recognized during the three months ended January 1, 2022 and December 26, 2020 was approximately $ 75,000 and $ 51,000 , respectively.

Total share-based compensation expense recognized during the six months ended January 1, 2022 and December 26, 2020 was approximately $ 143,000 and $ 114,000 , respectively.

As of January 1, 2022, total unrecognized compensation expense related to unvested share-based compensation arrangements was approximately $ 0.6 million.

This expense is expected to be recognized over a weighted average period of 2.18 years.

No SARs were exercised during the three months ended October 2, 2021 or September 26, 2020.

No SARs were exercised during the three or six months ended January 1, 2022 or December 26, 2020.

Commitments and Contingencies

6 unchanged sentences

If actual return rates and/or repair and replacement costs differ significantly from management’s estimates, adjustments to recognize additional cost of sales may be required in future periods.

The Company’s warranty reserve was approximately $ 32,000 as of October 2, 2021 and $ 25,000 as of July 3, 2021, respectively.

The Company’s warranty reserve was approximately $ 25,000 as of January 1, 2022 and $ 25,000 as of July 3, 2021, respectively.

Derivative Financial Instruments

As of October 2, 2021, the Company had outstanding foreign currency forward contracts with a total notional amount of $ 19.1 million.

As of January 1, 2022, the Company had outstanding foreign currency forward contracts with a total notional amount of $ 13.9 million.

The maturity dates for these contracts extend through June 2022.

For the three months ended October 2, 2021, the Company entered into $ 13.9 million of foreign currency forward contracts and settled $ 5.5 million of contracts.

For the three months ended January 1, 2022, the Company did not enter into any foreign currency forward contracts and settled $ 5.1 million of contracts.

During the same period of the previous year, the Company did not enter into any foreign currency forward contracts and settled $ 6.3 million of contracts.

As of October 2, 2021, the aggregate notional amount of the Company’s outstanding foreign currency contracts along with their unrealized gains (losses) are expected to mature as summarized below (in thousands):

For the six months ended January 1, 2022, the Company entered into $13.9 million of foreign currency forward contracts and settled $ 10.6 million of such contracts.

During the same period of the previous year, the Company did not enter into any foreign currency forward contracts and settled $ 13.0 million of such contracts.

As of January 1, 2022, the aggregate notional amount of the Company’s outstanding foreign currency contracts along with their unrealized gains (losses) are expected to mature as summarized below (in thousands):

Quarter Ending Notional Contracts in MXN Notional Contracts in USD Estimated Fair Value

January 1, 2022 $ 137,973 $ 5,129 $ 1,586

April 2, 2022 $ 149,893 $ 7,224 $ 35

6 unchanged sentences

On the date of termination this interest rate swap was in a liability position of $ 776,500 , which will be amortized to interest expense over the original term of the swap.

The following table summarizes the fair value of derivative instruments in the Consolidated Balance Sheet as of October 2, 2021 and July 3, 2021 (in thousands):

October 2, 2021 July 3, 2021

The following table summarizes the fair value of derivative instruments in the Consolidated Balance Sheet as of January 1, 2022 and July 3, 2021 (in thousands):

January 1, 2022 July 3, 2021

Derivatives Designated as Hedging Instruments Balance Sheet Location Fair Value Fair Value

1 unchanged sentence

Foreign currency forward contracts Other current liabilities $ ( 1 ) $ —

The following tables summarize the gain (loss) on derivative instruments, net of tax, on the Consolidated Statements of Income for the three months ended October 2, 2021 and September 26, 2020, respectively (in thousands):

The following tables summarize the gain (loss) on derivative instruments, net of tax, on the Consolidated Statements of Income for the three months ended January 1, 2022 and December 26, 2020, respectively (in thousands):

Derivatives Designated as Hedging Instruments Classification of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) AOCI Balance

October 2, 2021 Effective

AOCI Effective Portion

Reclassified From

Income AOCI Balance

January 1, 2022

Forward contracts Cost of sales $ 1,115 $ 338 $ ( 1,498 ) $ ( 45 )

Interest rate swap Interest expense ( 574 ) — 76 ( 498 )

Total $ 541 $ 338 $ ( 1,422 ) $ ( 543 )

Derivatives Designated as Hedging Instruments Classification of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) AOCI Balance

September 26, 2020 Effective

AOCI Effective Portion

Reclassified From

Income AOCI Balance

December 26, 2020

Forward contracts Cost of sales $ 643 $ 2,958 $ ( 108 ) $ 3,493

Interest rate swap Interest expense ( 875 ) — 76 ( 799 )

Total $ ( 232 ) $ 2,958 $ ( 32 ) $ 2,694

The following tables summarize the gain (loss) on derivative instruments, net of tax, on the Consolidated Statements of Income for the six months ended January 1, 2022 and December 26, 2020, respectively (in thousands):

Derivatives Designated as Hedging Instruments Classification of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) AOCI Balance

July 3, 2021 Effective

2 unchanged sentences

Income AOCI Balance

October 2, 2021

January 1, 2022

Forward contracts Cost of sales $ 2,721 $ 562 $ ( 3,328 ) $ ( 45 )

6 unchanged sentences

Income AOCI Balance

September 26, 2020

December 26, 2020

Forward contracts Cost of sales $ ( 759 ) $ 4,001 $ 251 $ 3,493

1 unchanged sentence

Total $ ( 1,500 ) $ 3,778 $ 416 $ 2,694

As of October 2, 2021, the net amount of unrealized gain expected to be reclassified into earnings within the next 12 months is approximately $ 1.2 million.

As of October 2, 2021, the Company does not have any foreign exchange contracts with credit-risk-related contingent features.

As of January 1, 2022, the net amount of unrealized gain expected to be reclassified into earnings within the next 12 months is approximately $ 33,000 .

As of January 1, 2022, the Company does not have any foreign exchange contracts with credit-risk-related contingent features.

Fair Value Measurements

6 unchanged sentences

These contracts are marked to market using level 2 input criteria every quarter with the unrealized gain or loss, net of tax, reported as a component of shareholders’ equity in accumulated other comprehensive gain (loss), as they qualify for hedge accounting.

The following table summarizes the fair value of assets (liabilities) of the Company’s derivatives that are required to be measured on a recurring basis as of October 2, 2021 and July 3, 2021 (in thousands):

October 2, 2021

The following table summarizes the fair value of assets (liabilities) of the Company’s derivatives that are required to be measured on a recurring basis as of January 1, 2022 and July 3, 2021 (in thousands):

January 1, 2022

Level 1 Level 2 Level 3 Total

6 unchanged sentences

Foreign currency forward contracts $ — $ 3,614 $ — $ 3,614

The carrying values of cash and cash equivalents, accounts receivable and current liabilities reflected on the balance sheets at October 2, 2021 and July 3, 2021, reasonably approximate their fair value.

The carrying values of cash and cash equivalents, accounts receivable and current liabilities reflected on the balance sheets at January 1, 2022 and July 3, 2021, reasonably approximate their fair value.

The Company’s long-term debt, which is measured at amortized cost, primarily consists of an asset-based revolving credit facility, lease liability, and an equipment loan.

2 unchanged sentences

As a result of the determinable market rates for our asset-based revolving credit facility and equipment loan, they are classified within Level 2 of the fair value hierarchy.

Further, the carrying value of each of these instruments reasonably approximates their fair value as of October 2, 2021 and July 3, 2021.

Further, the carrying value of each of these instruments reasonably approximates their fair value as of January 1, 2022 and July 3, 2021.

Revenue Recognition

22 unchanged sentences

The Company elected to not disclose information about remaining performance obligations as they are part of contracts that that have expected durations of one year or less.

During the first three months of fiscal year 2022, no revenues were recognized from performance obligations satisfied or partially satisfied in previous periods.

During the first six months of fiscal year 2022, no revenues were recognized from performance obligations satisfied or partially satisfied in previous periods.

Contract Balances

1 unchanged sentence

Contract assets are classified separately on the condensed consolidated balance sheet and transferred to receivables when the right to payment becomes unconditional.

The following table summarizes the activity in the Company’s contract assets during the three months ended October 2, 2021 (in thousands):

The following table summarizes the activity in the Company’s contract assets during the six months ended January 1, 2022 (in thousands):

Contract Assets

2 unchanged sentences

Amounts collected or invoiced ( 256,420 )

Ending balance, October 2, 2021

Ending balance, January 1, 2022

Disaggregation of Revenue

The following table presents the Company’s revenue disaggregated for the three months ended October 2, 2021 and September 26, 2020 (in thousands):

Recognition Three Months Ended

October 2, 2021 September 26, 2020

The following table presents the Company’s revenue disaggregated for the three and six months ended January 1, 2022 and December 26, 2020 (in thousands):

Recognition Three Months Ended Six Months Ended

January 1, 2022 December 26, 2020 January 1, 2022 December 26, 2020

Over-Time $ 128,126 $ 125,534 $ 257,607 $ 246,370

2 unchanged sentences

The Company has several commitments under operating and financing leases for warehouses, manufacturing facilities, office buildings, and equipment with initial terms that expire at various dates during the next 1 year to 10 years.

The components of lease cost for the three months ended October 2, 2021 were (in thousands):

Lease cost Classification Three Months Ended

The components of lease cost for the three and six months ended January 1, 2022 were (in thousands):

Lease cost Classification Three Months Ended Six Months Ended

Operating lease cost Cost of sales $ 1,598 $ 3,031

6 unchanged sentences

Total lease cost $ 2,482 $ 4,667

Amounts reported in the Consolidated Balance Sheet as of October 2, 2021 were (in thousands, except weighted average lease term and discount rate):

October 2, 2021

Amounts reported in the Consolidated Balance Sheet as of January 1, 2022 were (in thousands, except weighted average lease term and discount rate):

January 1, 2022

Operating Leases:

16 unchanged sentences

Other information related to leases was as follows (in thousands):

Three Months Ended

October 2, 2021

Three Months Ended Six Months Ended

January 1, 2022

Cash paid for amounts included in the measurement of lease liabilities:

1 unchanged sentence

Financing cash flows used in financing leases $ 676 $ 1,077

Future lease payments under non-cancellable leases as of October 2, 2021 are as follows (in thousands):

Future lease payments under non-cancellable leases as of January 1, 2022 are as follows (in thousands):

Fiscal Years Ending Operating Leases Finance Leases

2 unchanged sentences

2024 3,811 2,496

2025 3,462 92

Thereafter 4,521 —

2 unchanged sentences

Total lease liabilities $ 19,027 $ 5,973

(1) Represents estimated lease payments for the remaining nine-month period ending July 2, 2022.

(1) Represents estimated lease payments for the remaining six-month period ending July 2, 2022.

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 1. Financial Statements