What changed in this filing

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Item 1. Financial Statements

2023-02-09 compared with 2022-11-09 · 94 added, 58 removed, 398 unchanged (28% of the section changed)

4 unchanged sentences

except share data)

October 1, 2022 July 2, 2022

December 31, 2022 July 2, 2022

Current assets:

40 unchanged sentences

CONSOLIDATED STATEMENTS OF INCOME

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

Three Months Ended

October 1, 2022 October 2, 2021

(Unaudited, in thousands, except per share amounts)

Three Months Ended Six Months Ended

December 31, 2022 January 1, 2022 December 31, 2022 January 1, 2022

Net sales $ 123,708 $ 134,456 $ 260,971 $ 267,218

8 unchanged sentences

Income before income taxes 1,101 556 2,575 1,658

Income tax provision 322 287

Income tax provision (benefit) 134 ( 31 ) 456 256

Net income $ 967 $ 587 $ 2,119 $ 1,402

7 unchanged sentences

(Unaudited, in thousands)

Three Months Ended

October 1, 2022 October 2, 2021

Three Months Ended Six Months Ended

December 31, 2022 January 1, 2022 December 31, 2022 January 1, 2022

Comprehensive income:

2 unchanged sentences

Unrealized gain (loss) on hedging instruments, net of tax 59 ( 1,084 ) 212 ( 2,615 )

Comprehensive income $ 1,305 $ ( 716 )

Other comprehensive income for the three months ended October 2, 2021, is reflected net of tax expense (benefit) of approximately $( 0.3 ) million.

Comprehensive income (loss) $ 1,026 $ ( 497 ) $ 2,331 $ ( 1,213 )

Other comprehensive income (loss) for the three months ended December 31, 2022 and January 1, 2022, is reflected net of tax expense (benefit) of approximately $ 0.0 million and $( 0.5 ) million, respectively.

Other comprehensive income (loss) for the six months ended December 31, 2022 and January 1, 2022, is reflected net of tax expense (benefit) of approximately $ 0.0 million and $( 0.8 ) million, respectively.

See accompanying notes to consolidated financial statements.

2 unchanged sentences

(Unaudited, in thousands)

Three Months Ended

October 1, 2022 October 2, 2021

Six Months Ended

December 31, 2022 January 1, 2022

Operating activities:

21 unchanged sentences

Purchase of property and equipment ( 3,859 ) ( 2,766 )

Proceeds from sale of fixed assets — 2

Proceeds from insurance 3,500 —

Cash used in investing activities ( 359 ) ( 2,764 )

6 unchanged sentences

Cash provided by financing activities 9,493 10,865

Net increase (decrease) in cash and cash equivalents 426 ( 1,929 )

Net decrease in cash and cash equivalents ( 897 ) ( 2,427 )

Cash and cash equivalents, beginning of period 1,707 3,473

10 unchanged sentences

except share data)

Three Months Ended

October 1, 2022 October 2, 2021

Three Months Ended Six Months Ended

December 31, 2022 January 1, 2022 December 31, 2022 January 1, 2022

Total shareholders’ equity, beginning balances $ 126,223 $ 123,705 $ 124,878 $ 123,705

29 unchanged sentences

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

The three month periods ended October 1, 2022 and October 2, 2021, were both 13 week periods.

The three month and six month periods ended December 31, 2022 and January 1, 2022, were both 13 week periods.

Fiscal year 2023 will end on July 1, 2023, which is a 52 week year.

57 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.

Inventories as of October 1, 2022 are $ 169.3 million compared to $ 155.7 million as of July 2, 2022.

Inventories as of December 31, 2022 are $ 171.7 million compared to $ 155.7 million as of July 2, 2022.

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 1, 2022, the Company had an outstanding balance under the asset-based revolving credit facility of $ 105.4 million, $ 0.3 million in outstanding letters of credit and $ 10.6 million available for future borrowings.

As of December 31, 2022, the Company had an outstanding balance under the asset-based revolving credit facility of $ 107.6 million, $ 0.3 million in outstanding letters of credit and $ 1.8 million available for future borrowings.

On August 26, 2022, the company entered into a third amendment to the loan agreement with Bank of America.

13 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 1, 2022, the Company had an outstanding balance of $ 3.1 million.

As of December 31, 2022, the Company had an outstanding balance of $ 2.8 million.

As of July 2, 2022, the Company had an outstanding balance of $ 3.3 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 1, 2022, the Company had an outstanding balance of $ 4.3 million.

As of December 31, 2022, the Company had an outstanding balance of $ 4.0 million.

As of July 2, 2022, the Company had an outstanding balance of $ 4.6 million.

The interest rates on outstanding debt as of October 1, 2022 range from 4.85 % - 6.15 % compared to 3.25 % - 5.52 % as of July 2, 2022.

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

The interest rates on outstanding debt as of December 31, 2022 range from 4.85 % - 7.44 % compared to 3.25 % - 5.52 % as of July 2, 2022.

Debt maturities as of December 31, 2022 for the next five years and thereafter are as follows (in thousands):

Fiscal Years Ending Amount

2 unchanged sentences

Long-term debt, net of debt issuance costs $ 116,522

(1) Represents scheduled payments for the remaining nine-month period ending July 1, 2023.

(1) Represents scheduled payments for the remaining six-month period ending July 1, 2023.

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

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

The Company was in compliance with all financial covenants as of December 31, 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 $ 10.6 million of gross federal research and development tax credits as of October 1, 2022.

The Company has available approximately $ 10.8 million of gross federal research and development tax credits as of December 31, 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 1, 2022, the Company has recorded $ 3.1 million of unrecognized tax benefits associated with these federal tax credits, resulting in a net deferred tax benefit of approximately $ 7.5 million.

Accordingly, as of December 31, 2022, the Company has recorded $ 3.1 million of unrecognized tax benefits associated with these federal tax credits, resulting in a net deferred tax benefit of approximately $ 7.7 million.

The Company evaluated tax law changes and regulatory guidance issued through the prior fiscal year.

13 unchanged sentences

(in thousands, except share and per share information)

October 1, 2022 October 2, 2021

December 31, 2022 January 1, 2022

Net income $ 967 $ 587

5 unchanged sentences

Antidilutive SARs not included in diluted earnings per share 904 629

Six Months Ended

(in thousands, except per share information)

December 31, 2022 January 1, 2022

Net income $ 2,119 $ 1,402

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

Effect of dilutive common stock awards 70 293

Weighted average shares outstanding—diluted 10,832 11,055

Net income per share—basic $ 0.20 $ 0.13

Net income per share—diluted $ 0.20 $ 0.13

Antidilutive SARs not included in diluted earnings per share 904 619

Share-based Compensation

12 unchanged sentences

Fair Value $ 2.09 $ 2.73

Total share-based compensation expense recognized during the three months ended October 1, 2022 and October 2, 2021 was approximately $ 40,000 and $ 68,000 , respectively.

As of October 1, 2022, 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 December 31, 2022 and January 1, 2022 was approximately $ 62,000 and $ 75,000 , respectively.

Total share-based compensation expense recognized during the six months ended December 31, 2022 and January 1, 2022 was approximately $ 102,000 and $ 143,000 , respectively.

As of December 31, 2022, total unrecognized compensation expense related to unvested share-based compensation arrangements was approximately $ 0.5 million.

This expense is expected to be recognized over a weighted average period of 1.96 years.

No SARs were exercised during the three months ended October 1, 2022 or October 2, 2021.

No SARs were exercised during the three or six months ended December 31, 2022 or January 1, 2022.

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 $ 30,000 as of October 1, 2022 and $ 31,000 as of July 2, 2022, respectively.

The Company’s warranty reserve was approximately $ 83,000 as of December 31, 2022 and $ 31,000 as of July 2, 2022, respectively.

Gain from Insurance Recoveries, Net of Losses

Gain from insurance recoveries, net of losses, relate to losses incurred from storm damage to the Company’s Arkansas facility on July 29, 2022, as the result of a lightning strike.

During the three months ended October 1, 2022, the Company recorded a gain from insurance recoveries, net of losses, of $ 0.9 million due to the storm event.

The gain is net of a $ 0.4 million loss on the disposal of fixed assets, which were damaged in the event.

Subsequent to the end of the first quarter of fiscal year 2023, the Company received initial insurance proceeds of $ 1 million to repair the plant and replace equipment, which should be completed by the second half of fiscal year 2023.

During the three and six months ended December 31, 2022, the Company recorded a gain from insurance recoveries, net of losses, of $ 2.7 million and $ 3.6 million, respectively due to the storm event.The gains are net of a $ 0.4 million loss on the disposal of fixed assets, which were damaged in the event.

During the second quarter of fiscal year 2023, the Company received additional insurance proceeds of $ 3.5 million to repair the plant and replace equipment, which should be completed by the second half of fiscal year 2023.

These initial coverage amounts, net of equipment book value loss, are included in reported gain on insurance claims during the quarter.

Derivative Financial Instruments

As of October 1, 2022, the Company did not have any outstanding foreign currency forward contracts.

For the three months ended October 1, 2022, the Company did not enter into or settle any foreign currency forward contracts.

During the same period of the previous year, the Company entered into $ 13.9 million foreign currency forward contracts and settled $ 5.5 million of contracts.

As of December 31, 2022, the Company did not have any outstanding foreign currency forward contracts.

For the three months ended December 31, 2022, the Company did not enter into or settle any foreign currency forward contracts.

During the same period of the previous year, the Company did not enter into any foreign currency forward contracts and settled $ 5.1 million of contracts.

For the six months ended December 31, 2022, the Company did not enter into or settle any foreign currency contracts.

During the same period of the previous year, the Company entered into $ 13.9 million foreign currency contracts and settled $ 10.6 million of such contracts.

On November 6, 2019, the Company entered into an interest rate swap contract with an effective date of November 6, 2019 and a termination date of September 30, 2022, related to the borrowings outstanding under the term loan with Wells Fargo Bank.

This interest rate swap contract was terminated on August 14, 2020 when the Company entered into a loan and security agreement with Bank of America.

On the date of termination this interest rate swap was in a liability position of $ 148,400 , which will be amortized to interest expense over the original term of the swap.

On the date of termination this interest rate swap was in a liability position of $ 148,400 , which has been amortized to interest expense over the original term of the swap.

On November 6, 2019, the Company entered into an interest rate swap contract with an effective date of November 6, 2019 and a termination date of November 1, 2023, related to the borrowings outstanding under the line of credit with Wells Fargo Bank.

1 unchanged sentence

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 tables summarize the gain (loss) on derivative instruments, net of tax, on the Consolidated Statements of Income for the three months ended October 1, 2022 and October 2, 2021, 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 December 31, 2022 and January 1, 2022, respectively (in thousands):

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

October 1, 2022 Effective

AOCI Effective Portion

Reclassified From

Income AOCI Balance

December 31, 2022

Forward contracts Cost of sales $ — $ — $ — $ —

Interest rate swap Interest expense ( 272 ) — 59 ( 213 )

Total $ ( 272 ) $ — $ 59 $ ( 213 )

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 )

The following tables summarize the gain (loss) on derivative instruments, net of tax, on the Consolidated Statements of Income for the six months ended December 31, 2022 and January 1, 2022, respectively (in thousands):

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

July 2, 2022 Effective

2 unchanged sentences

Income AOCI Balance

October 1, 2022

December 31, 2022

Forward contracts Cost of sales $ ( 79 ) $ — $ 79 $ —

6 unchanged sentences

Income AOCI Balance

October 2, 2021

January 1, 2022

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

1 unchanged sentence

Total $ 2,072 $ 562 $ ( 3,177 ) $ ( 543 )

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

As of December 31, 2022, the Company does not have any foreign exchange contracts with credit-risk-related contingent features.

The Company is subject to the risk of fluctuating interest rates from our line of credit and foreign currency risk resulting from our China operations.

9 unchanged sentences

In these instances, as well as when we have an MSA in place, we receive customer purchase orders for specific quantities and timing of products.

As a result, the

Company considers its contract with a customer to be the combination of the MSA and the purchase order.

As a result, the Company considers its contract with a customer to be the combination of the MSA and the purchase order.

The transaction price is fixed and set forth in each purchase order.

13 unchanged sentences

therefore, the primary performance obligation in the majority of our contracts is the delivery of a specific good through the purchase order submitted by our customer.

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.

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

The Company has elected to expense costs to obtain contracts as incurred as these costs are immaterial to the financial statements.

During the first three months of fiscal year 2023, no revenues were recognized from performance obligations satisfied or partially satisfied in previous periods.

During the first six months of fiscal year 2023, 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 1, 2022 (in thousands):

The following table summarizes the activity in the Company’s contract assets during the six months ended December 31, 2022 (in thousands):

Contract Assets

2 unchanged sentences

Amounts collected or invoiced ( 247,852 )

Ending balance, October 1, 2022

Ending balance, December 31, 2022

Disaggregation of Revenue

The following table presents the Company’s revenue disaggregated for the three months ended October 1, 2022 and October 2, 2021 (in thousands):

Recognition Three Months Ended

October 1, 2022 October 2, 2021

The following table presents the Company’s revenue disaggregated for the three and six months ended December 31, 2022 and January 1, 2022 (in thousands):

Recognition Three Months Ended Six Months Ended

December 31, 2022 January 1, 2022 December 31, 2022 January 1, 2022

Over-Time $ 119,649 $ 128,126 $ 254,207 $ 257,607

6 unchanged sentences

The weighted average discount rate is disclosed in the tables below.

The components of lease cost for the three months ended October 1, 2022 and October 2, 2021 were (in thousands):

Lease cost Classification October 1, 2022 October 2, 2021

The components of lease cost for the three months and six months ended December 31, 2022 and were (in thousands):

Three Months Ended Six Months Ended

December 31, 2022 January 1, 2022 December 31, 2022 January 1, 2022

Lease cost Classification

Operating lease cost Cost of sales $ 2,441 $ 1,598 $ 3,775 $ 3,031

6 unchanged sentences

Total lease cost $ 4,744 $ 2,482 $ 7,200 $ 4,667

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

October 1, 2022

Amounts reported in the Consolidated Balance Sheet as of December 31, 2022 were (in thousands, except weighted average lease term and discount rate):

December 31, 2022 July 2, 2022

Operating Leases:

1 unchanged sentence

Operating lease liabilities (1)

$ 18,652 $ 16,731

Weighted-average remaining lease term (in years)

13 unchanged sentences

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

Three Months Ended

October 1, 2022 October 2, 2021

Six Months Ended

December 31, 2022 January 1, 2022

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

1 unchanged sentence

Financing cash flows used in financing leases $ 1,970 $ 1,077

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

Future lease payments under non-cancellable leases as of December 31, 2022 are as follows (in thousands):

Fiscal Years Ending Operating Leases Finance Leases

8 unchanged sentences

Total lease liabilities $ 18,652 $ 9,006

(1) Represents estimated lease payments for the remaining nine-month period ending July 1, 2023.

(1) Represents estimated lease payments for the remaining six-month period ending July 1, 2023.

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