What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-02-24 compared with 2022-02-25 · 60 added, 69 removed, 212 unchanged (38% of the section changed)

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The RV industry is our primary market and comprised 53% of the Company’s consolidated net sales in 2022 .

Sales to the RV industry increased 73% in 2021 compared to 2020.

An approximate 6-week operations shutdown occurred in the late first quarter and early second quarter of 2020 in certain of our RV facilities in alignment with production shutdowns by certain OEM customers in response to the COVID-19 pandemic.

In the second half of 2020, OEM production improved sharply in response to a strong increase in retail and wholesale demand for RVs, and our sales to RV OEMs also improved for 2020, with demand continuing through 2021.

According to the Recreation Vehicle Industry Association (“RVIA”), wholesale industry shipments totaled approximately 600,200 units in 2021, an increase of 39% compared to 430,400 units in 2020.

RV industry retail unit sales totaled approximately 564,400 units in 2021, an increase of 8% compared to 2020 retail unit sales of 520,500 units according to Statistical Surveys, Inc ("SSI").

Net sales to the RV industry increased 8% in 2022 compared to 2021.

Following a strong post-COVID increase in retail demand through 2021 and dealer inventory restocking occurring through the first half of 2022, OEMs dramatically reduced production in the second half of 2022 as retail demand decreased and the OEMs focused on maintaining a balanced dealer inventory channel for the long-term health and stability of the industry.

According to the Recreation Vehicle Industry Association (“RVIA”), wholesale industry unit shipments totaled approximately 493,300 units in 2022, a decrease of 18% compared to approximately 600,200 units in 2021.

RV industry retail unit sales totaled approximately 446,300 units in 2022 , a decrease of 22% compared to 2021 retail unit sales of approximately 568,900 units according to Statistical Surveys, Inc.

Marine Industry

Sales to the marine industry, which represented approximately 16% of the Company's consolidated net sales in 2021, increased 96% in 2021 compared to 2020.

Our marine revenue is generally correlated to marine wholesale powerboat unit shipments, which increased 11% to approximately 138,400 units in 2021 compared to approximately 124,200 units in 2020, according to the National Marine Manufacturers Association.

Estimated marine retail powerboat shipments totaled approximately 214,200 units in 2021, a decrease of 9% compared to 2020 retail powerboat shipments of approximately 234,800 units.

Net sales to the marine industry, which represented approximately 21% of the Company's consolidated net sales in 2022 , increased 56% in 2022 compared to 2021.

Our marine revenue is generally correlated to marine wholesale powerboat unit shipments, which increased 7% to approximately 196,500 units in 2022 compared to approximately 183,200 units in 2021, according to Company estimates based on data published by the National Marine Manufacturers Association ("NMMA").

Approximately 65% of our marine net sales increase was attributable to acquisitions made in 2022 and 2021, with the remaining growth attributable to pricing, industry product mix and market share gains.

Estimated marine retail powerboat shipments totaled approximately 188,100 units in 2022 , a decrease of 15% compared to 2021 retail powerboat shipments of approximately 220,200 units, according to SSI.

Marine wholesale unit shipments were limited in part by supply chain constraints, particularly for engines and related components.

Manufactured Housing ("MH") Industry

Sales to the MH industry, which represented 14% of the Company’s consolidated net sales in 2021, increased 26% in 2021 compared to 2020.

Net sales to the MH industry, which represented 15% of the Company’s consolidated net sales in 2022 , increased 29% in 2022 compared to 2021.

MH sales are generally correlated to MH industry wholesale unit shipments.

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The industrial market is comprised primarily of the solid surface countertop industry, kitchen cabinet industry, high-rise, hospitality, retail and commercial fixtures market, office and household furniture market and regional distributors.

Sales to this market represented 11% of our consolidated net sales in 2021, increasing 43% in 2021 compared to 2020.

Net sales to this market represented 11% of our consolidated net sales in 2022 , increasing 18% in 2022 compared to 2021.

Overall, our revenues in these markets are focused on the residential housing, hospitality, high-rise housing and office, commercial construction and institutional furniture markets.

We estimate that a pproximately 70% of our industrial business is directly tied to the residential housing market, with the remaining 30% directly tied to the non-residential and commercial markets.

Combined new housing starts increased 16% in 2021 compared to 2020, with single family housing starts increasing 13% and multifamily residential starts increasing 23% for the same period.

We estimate that approximately 70% to 80% of our industrial business is directly tied to the residential housing market, with the remaining industrial sales directly tied to the non-residential and commercial markets.

Combined new housing starts decreased 3% in 2022 compared to 2021, with single family housing starts decreasing 11% and multifamily residential starts increasing 15% for the same period.

Our industrial products are generally among the last components installed in new unit construction and as such our related sales typically trail new housing starts by four to six months.

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Year Ended December 31, 2022 Compared to 2021

Net sales in 2021 increased approximately $1.59 billion, or 64%, to $4.08 billion from $2.49 billion in 2020.

The increase was attributable to a 73% increase in sales to our RV end market, a 96% increase in sales to our marine end market, a 26% increase in sales to our MH end market, and a 43% increase in sales to our industrial end market.

Net sales in 2022 increased approximately $803.8 million, or 20%, to $4.88 billion from $4.08 billion in 2021.

The increase was attributable to an 8% increase in net sales to our RV end market, a 56% increase in net sales to our marine end market, a 29% increase in net sales to our MH end market, and a 18% increase in net sales to our industrial end market.

In 2022 and 2021 , net sales attributable to acquisitions completed in each of those years was $121.8 million and $259.9 million , respectively.

Net sales in 2020 were adversely impacted by the COVID-19 pandemic and the related approximate 6-week operations shutdown that occurred in the late first quarter and early second quarter of 2020 in certain of our facilities in alignment with production shutdowns by certain OEM customers in response to the COVID-19 pandemic.

The Company’s RV content per wholesale unit for 2022 increased 31% to $5,257 from $4,006 in 2021.

Marine powerboat content per wholesale unit for 2021 increased 76% to $3,632 from $2,069 in 2020.

The Company's marine powerboat content per wholesale unit for 2022 increased 45% to $5,281 from $3,632 in 2021.

The Company's MH content per wholesale unit for 2022 increased 21% to $6,243 in 2022 from $5,153 in 2021.

Cost of Goods Sold.

Cost of goods sold increased $1.25 billion, or 62%, to $3.28 billion in 2021 from $2.03 billion in 2020.

Cost of goods sold increased $545.0 million, or 17%, to $3.82 billion in 2022 from $3.28 billion in 2021.

As a percentage of net sales, cost of goods sold decreased 210 basis points during 2022 to 78.3% from 80.4% in 2021.

Cost of goods sold as a percentage of net sales decreased for 2021 compared to 2020 primarily as a result of (i) continued cost reduction and automation initiatives we deployed throughout 2020 and 2021, (ii) volume-driven efficiencies as a result of leveraging fixed overhead, (iii) a recovery from the production inefficiencies experienced while operating in a COVID-19 environment, and (iv) synergies and different cost profiles from our 2021 and 2020 acquisitions, partially offset by an increase in labor costs and certain labor inefficiencies, the impact of supply-chain constraints, and an increase in certain commodity cost inputs.

In general, the Company's cost of goods sold percentage can be impacted by demand changes in certain market sectors that can result in fluctuating costs of certain raw materials and commodity-based components that are utilized in the production of our products.

Cost of goods sold as a percentage of net sales decreased for 2022 compared to 2021 primarily as a result of (i) continued cost reduction and automation initiatives we deployed throughout 2021 and 2022 that positively impacted overall costs, (ii) improved labor efficiencies as a result of investment in human capital and improved retention rates, (iii) synergies and different cost profiles from acquisitions completed in 2022 and 2021, and (iv) volume-driven efficiencies as a result of leveraging fixed overhead.

For 2022, these four factors contributed to a 210-basis point decrease in labor as a percentage of net sales and a 10-basis point decrease in overhead as a percentage of net sales, partially offset by a 10-basis point increase in material costs as a percentage of net sales in part due to supply chain constraints and elevated raw material costs in the first half of 2022.

In general, the Company's cost of goods sold percentage can be impacted from quarter-to-quarter by demand changes in certain market sectors that can result in fluctuating costs of certain raw materials and commodity-based components that are utilized in production.

Gross Profit.

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As a percentage of net sales, warehouse and delivery expenses were 3.3% in 2022 and 3.4% in 2021.

The increase in warehouse and delivery expenses is attributable to the significant increase in sales.

The decrease of warehouse and delivery expenses as a percentage of net sales in 2021 compared to 2020 was primarily attributable to the lower proportion of MH industry net sales in 2021 compared to 2020, which have higher warehousing and delivery costs as a percentage of net sales.

In addition, the percentage of warehousing and delivery expenses as a percentage of sales decreased as we leveraged certain fixed warehousing costs in proportion to our overall sales growth.

The increase in warehouse and delivery expenses is attributable to the increase in sales.

Selling, General and Administrative ("SG&A") Expenses.

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As a percentage of net sales, SG&A expenses were 6.7% in 2022 and 6.2% in 2021.

The increase in SG&A expenses in 2021 is primarily due to (i) the increase in net sales;

(ii) increases in the breadth and depth of corporate resources, specifically our investments in human capital and other technological initiatives to support the size and growth of the Company, (iii) the comparison to the prior year, which includes SG&A cost reduction measures implemented in the second quarter of 2020 that continued into the third quarter of 2020, and (iv) increased incentive compensation.

As a percentage of sales, SG&A expenses increased 30 basis points for 2021 compared 2020.

This increase is primarily a result of the aforementioned investment in human capital and incentive compensation.

The increase in SG&A expenses in 2022 compared to 2021 is primarily due to (i) higher variable expenses associated with the increase in net sales, and (ii) increases in the breadth and depth of corporate resources, specifically our investments in human capital, technology and other initiatives to support the size and growth of the Company.

The increase in SG&A expenses as a percentage of net sales is primarily a result of the aforementioned investment in human capital and incentive compensation.

Amortization of Intangible Assets.

Amortization of intangible assets increased $16.9 million, or 30%, in 2022 compared to 2021.

The increase in 2021 compared to 2020 primarily reflects the impact of intangible assets of businesses acquired in 2021 and 2020.

The increase in 2022 compared to 2021 reflects the impact of intangible assets of businesses acquired in 2022 and 2021.

Operating Income.

Operating income increased $144.5 million, or 41%, to $496.2 million in 2022 from $351.7 million in 2021.

Operating income in 2021 and 2020 included $25.0 million and $10.7 million, respectively, from the businesses acquired in each respective year.

Operating income in 2022 and 2021 included $19.4 million and $25.0 million, respectively, from the businesses

acquired in each respective year.

Operating income as a percentage of net sales increased 160 basis points to 10.2% in 2022 from 8.6% in 2021.

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Interest expense, net, increased $2.9 million, or 5%, to $60.8 million in 2022 from $57.9 million in 2021.

The increase in interest expense reflects (i) increased borrowings related to 2021 and 2020 acquisitions and (ii) the Company's issuance of its 4.75% Senior Notes (as defined herein) in April 2021 and 1.75% Convertible Notes (as defined herein) in December 2021.

The increase in interest expense is primarily attributable to the issuance of our 1.75% Convertible Senior Notes due 2028 (the "1.75% Convertible Notes") issued in December 2021, partially offset by a decrease in total borrowings.

Income Taxes.

Income tax expense increased $35.6 million, or 107%, to $68.9 million in 2021 from $33.3 million in 2020, attributed to an increase in pre-tax income.

Income tax expense increased $38.3 million, or 56%, to $107.2 million in 2022 from $68.9 million in 2021 as a result of the increase in pre-tax income and an increase in the effective tax rate.

For 2022, the effective tax rate was 24.6% compared to 23.5% in 2021.

The decrease in the effective tax rate in 2021 was mostly attributable to increased benefits from stock-based compensation as well as a decrease in certain state tax rates.

The increase in the effective tax rate in 2022 was mostly attributable to decreased benefits from stock-based compensation.

See our Form 10-K for the year ended December 31, 2021 for a discussion of our consolidated operating results for the year ended December 31, 2021 compared to 2020.

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Our MD&A includes financial metrics, such as RV, marine and MH content per unit, which we believe are important measures of the Company's business performance.

Content per unit metrics are generally calculated using our market sales divided by third-party industry volume metrics.

Content per unit metrics are generally calculated using our market sales divided by Company estimates of industry unit volume, which are derived from third-party industry data.

These metrics should not be considered alternatives to U.S.

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These metrics should not be considered in isolation or as substitutes for an analysis of our results as reported under U.S.

Beginning in the third quarter of 2020, we calculate marine content per unit based on estimated wholesale powerboat unit shipments, which we believe better represents the relationship between our sales and marine OEM production, rather than based on estimated retail powerboat unit sales.

BUSINESS SEGMENTS

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adhesives and sealants;

boat covers, towers, tops, trailers and frames;

boat towers, tops, trailers and frames;

marine hardware and accessories;

protective covers for boats, RVs, aircraft, and military and industrial equipment;

aluminum and plastic fuel tanks;

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Manufacturing

Sales increased $1.23 billion, or 70%, to $3.00 billion in 2021 from $1.77 billion in 2020.

Sales increased $679.3 million, or 23%, to $3.68 billion in 2022 from $3.00 billion in 2021.

This segment accounted for approximately 74% of the Company’s consolidated net sales in 2022 compared to approximately 72% of the Company's consolidated net sales in 2021.

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As a percentage of net sales, gross profit was 22.2% in 2022 compared to 20.0% in 2021.

Gross profit margin increased in 2021 compared to 2020 primarily due to (i) an improvement in manufacturing overhead expense as a percentage of net sales, and (ii) an improvement in direct labor as a percentage of net sales, partially offset by an increase in material costs as a percentage of net sales.

Gross profit margin increased in 2022 compared to 2021 due to (i) an improvement in direct labor, material costs, and manufacturing overhead expense as a percentage of net sales primarily as a result of automation and efficiency initiatives implemented during 2022 and 2021 and (ii) synergies and different cost profiles from acquisitions completed in 2022 and 2021.

Operating Income.

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The increase in operating income primarily reflects the increase in gross profit mentioned above.

Sales increased $392.2 million, or 51%, to $1,154.7 million in 2021 from $762.5 million in 2020.

This segment accounted for approximately 28% of the Company’s consolidated net sales for 2021 compared to 30% of the Company's

consolidated net sales in 2020.

The increase in net sales in 2021 is attributed to an increase in sales across all end markets.

Sales increased $132.9 million, or 12%, to $1.29 billion in 2022 from $1.15 billion in 2021.

This segment accounted for approximately 26% of the Company’s consolidated net sales for 2022 compared to 28% of the Company's consolidated net sales in 2021.

The increase in sales in 2022 is attributed to an increase in net sales in our RV, marine and MH markets, partially offset by a decrease in net sales in our industrial market.

In 2022 and 2021, net sales attributable to acquisitions completed in each of those periods was approximately $0.5 million and $57.7 million, respectively.

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As a percentage of net sales, gross profit was 19.8% in 2022 compared to 18.3% in 2021.

The increase in gross profit as a percentage of net sales for 2021 is primarily attributed to the higher margin profiles of certain 2021 and 2020 acquisitions as well as the benefit of leveraging certain fixed costs on increased net sales.

The increase in gross profit as a percentage of net sales for 2022 is primarily attributed to the higher margin profiles of certain 2021 acquisitions as well as the benefit of leveraging certain fixed costs on increased net sales.

Operating Income.

Operating income in 2022 increased $30.7 million, or 29%, to $136.9 million from $106.2 million in 2021.

Operating income for the Distribution segment attributable to acquisitions completed in 2021 and 2020 was approximately $10.4 million and $3.7 million, respectively.

Operating income for the Distribution segment attributable to acquisitions completed in 2022 was immaterial.

Operating income for the Distribution segment in 2021 attributable to acquisitions completed in 2021 was approximately $10.4 million.

The overall improvement in operating income in 2022 primarily reflects the items discussed above.

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LIQUIDITY AND CAPITAL RESOURCES

The Company's primary sources of liquidity are cash flow from operations, which includes selling its products and collecting receivables, available cash reserves and borrowing capacity available under the 2021 Credit Facility (as defined below).

The Company's primary sources of liquidity are cash flows from operations, which includes selling its products and collecting receivables, available cash reserves and borrowing capacity available under the 2021 Credit Facility (as defined below).

Principal uses of cash are to support working capital demands, meet debt service requirements and support the Company's capital allocation strategy, which includes acquisitions, capital expenditures, dividends and repurchases of the Company’s common stock, among others.

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(i) an increase in net income of $103.3 million;

(ii) an increase in cash from accounts payable, accrued liabilities and other of $129.1 million;

and (iii) an increase in depreciation and amortization of $31.5 million.

Partially offsetting these sources of cash was an increase in cash used for the purchase of inventory of $197.9 million as we strategically secured inventory to support a strong increase in end market demand for our products.

(ii) a decrease in cash used for inventory procurement of $220.6 million;

(iii) a source of cash from trade and other receivables of $26.1 million compared to a use of cash of $14.4 million in 2021;

and (iv) an increase in depreciation and amortization of $26.0 million.

Partially offsetting these sources of cash was a use of cash for accounts payable, accrued liabilities and other of $95.0 million compared to a source of cash of $149.9 million in the prior year period.

Investing Activities

N et cash used in i nvesting activities increased $236.8 million, or 70%, to $574.7 million in 2021 from $337.9 million in 2020 primarily due to a n increase in cash used in business acquisitions of $202.1 million and an increase in capital expenditures of $32.7 million .

N et cash used in i nvesting activities de creased $253.2 million, or 44%, to $321.5 million in 2022 from $574.7 million in 2021 primarily due to a decrease in cash used in business acquisitions of $259.2 million, partially offset by an increase in cash used for capital expenditures of $15.1 million .

Financing Activities

Net cash flows provided by financing activities increased $317.6 million, or 382%, to $400.7 million in 2021 from $83.1 million in 2020 primarily due to:

(i) proceeds of $350.0 million from the Company's issuance of its 4.75% Senior Notes;

(ii) proceeds of $258.8 million from the Company's issuance of 1.75% Convertible Notes;

and (iii) an additional $51.9 million in term loan borrowings, net of repayments.

These sources of cash were partially offset by (i) $140.0 million of net revolver repayments in 2021 versus $140.0 million of net revolver borrowings in 2020, and (ii) a $29.2 million increase in stock repurchases and dividends to shareholders.

Net cash flows used in financing activities was $190.3 million in 2022 compared to net cash provided by financing activities of $400.7 million in 2021.

The change in cash flows from financing activities was primarily due to:

(i) a $34.1 million increase in stock repurchases and cash dividends paid to shareholders in 2022 and (ii) $62.2 million in net revolver and term loan repayments in 2022 compared with $520.6 million of net borrowings in 2021 consisting of $350.0 million of borrowings from the Company's issuance of its 4.75% Senior Notes and $258.8 million of borrowings from the Company's issuance of its 1.75% Convertible Notes, less $88.1 million of net revolver and term loan repayments .

See our Form 10-K for the year ended December 31, 2021 for a discussion of cash flows for the year ended December 31, 2021 compared to 2020.

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At December 31, 2022, the Company's existing cash and cash equivalents, cash generated from operations, and available borrowings under its 2021 Credit Facility are expected to be sufficient to meet anticipated cash needs for working capital and capital expenditures for at least the next 12 months, exclusive of any acquisitions, based on its current cash flow budgets and forecast of short-term and long-term liquidity needs.

Following the issuance of the 4.75% Senior Notes, the Company amended and restated its credit agreement to establish a new $700 million senior secured credit facility consisting of a $550 million revolving credit facility and a $150 million term loan facility (the "2021 Credit Facility").

The maturity date for borrowings under the 2021 Credit Facility is April 2026.

The ability to access unused borrowing capacity under the 2021 Credit Facility as a source of liquidity is dependent on maintaining compliance with the financial covenants as specified under the terms of the credit agreement that established the 2021 Credit Facility (the "2021 Credit Agreement").

On August 11, 2022, the Company entered into the first amendment of its Fourth Amended and Restated Credit Agreement dated April 20, 2021 (as amended, the “2021 Credit Agreement”), under which the senior secured credit facility was increased to $925 million from $700 million and the maturity date was extended to August 11, 2027 from April 20, 2026.

The senior credit facility under the 2021 Credit Agreement is comprised of a $775 million revolving credit facility (the "Revolver due 2027") and the remaining balance of the $150 million term loan (the "Term Loan due 2027", and together with the Revolver due 2027, the "2021 Credit Facility").

The quarterly repayment schedule for the Term Loan due 2027 was revised, with quarterly installments in the following amounts:

(i) beginning June 30, 2021, through and including June 30, 2025, in the amount of $1,875,000, and (ii) beginning September 30, 2025, and each quarter thereafter, in the amount of $3,750,000, with the remaining balance due at maturity.

The Company recorded a $0.3 million write-off of deferred financing costs as a result of the amendment, which is included in "Selling, general and administrative" in the Company's consolidated statements of income for the year ended December 31, 2022.

Pursuant to the amendment, interest rates for borrowings under the 2021 Credit Agreement transitioned to a SOFR-based option from a LIBOR-based option.

The ability to access unused borrowing capacity under the 2021 Credit Agreement as a source of liquidity is dependent on maintaining compliance with the financial covenants as specified under the terms of the 2021 Credit Agreement.

See Note 8 of the Notes to Consolidated Financial Statements included elsewhere in this Form 10-K for aggregate maturities of total long-term debt for the next five fiscal years and thereafter.

In February 2023, the Company utilized available borrowing capacity under the Revolver due 2027 and cash on hand to satisfy its repayment obligation at maturity for the 1.00% Convertible Notes due 2023.

See Note 8 of the Notes to Consolidated Financial Statements included elsewhere in this Form 10-K for further discussion of the 1.00% Convertible Notes due 2023.

As of and for the reporting period ended December 31, 2022, the Company was in compliance with its financial covenants as required under the terms of its 2021 Credit Agreement.

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While this ratio was a covenant under the Company’s previous credit agreement and is not a covenant under the 2021 Credit Agreement, it is used in the determination of the applicable borrowing margin under the 2021 Credit Agreement.

Working capital requirements vary from period to period depending on manufacturing volumes primarily related to the RV, MH, marine and industrial markets we serve, the timing of deliveries, and the payment cycles of customers.

Working capital requirements vary from period to period depending on manufacturing volumes primarily related to the RV, marine, MH and industrial markets we serve, the timing of deliveries, and the payment cycles of customers.

In the event that operating cash flow is inadequate and one or more of the Company's capital resources were to become unavailable, the Company would seek to revise its operating strategies accordingly.

The Company will continue to assess its liquidity position and potential sources of supplemental liquidity in view of operating performance, current economic and capital market conditions, and other relevant circumstances.

In April 2021, we issued $350.0 million aggregate principal amount of 4.75% Senior Notes due 2029 (the "4.75% Senior Notes"), which accrue interest at a rate of 4.75% per annum and mature on May 1, 2029.

The Company may redeem the 4.75% Senior Notes, in whole or in part, at any time (a) prior to May 1, 2024, at a price equal to 100% of the principal amount thereof, plus the applicable premium described in the associated indenture and accrued and unpaid interest and (b) on or after May 1, 2024 at specified redemption prices set forth in the indenture, plus accrued and unpaid interest.

In addition, prior to May 1, 2024, the Company may redeem, in one or more transactions, up to an aggregate of 40% of the original principal amount of the 4.75% Senior Notes at a redemption price equal to 104.75% of the principal amount thereof, plus accrued and unpaid interest, with the net cash proceeds of one or more equity offerings.

In December 2021, we completed the issuance of $258.8 million aggregate principal amount of 1.75% Convertible Senior Notes due 2028 (the “1.75% Convertible Notes”).

The net proceeds from the issuance of the 1.75% Convertible Notes were approximately $249.7 million, after deducting the initial purchasers’ discounts and commissions and offering expenses payable by the Company, but before deducting the net cost of the 1.75% Convertible Note Hedge Transactions and the Warrant Transactions (each as defined herein) of $13.8 million described in Note 9 of the Notes to Consolidated Financial Statements included elsewhere in this Form 10-K.

The 1.75% Convertible Notes are senior unsecured obligations of the Company, accrue interest at 1.75% per annum and mature on December 1, 2028.

The 1.75% Convertible Notes are convertible, in certain circumstances and subject to certain

conditions, into cash, or a combination of cash and common stock, at the Company’s election.

The initial conversion rate for the 1.75% Convertible Notes is 9.9887 shares of the Company’s common stock per $1,000 principal amount of 1.75% Convertible Notes (equal to an initial conversion price of $100.11 per share).

Prior to June 1, 2028, the 1.75% Convertible Notes may be converted at the option of the holders only upon the occurrence of specified events and during certain periods, and thereafter until the close of business on the second scheduled trading day immediately preceding the maturity date, the Notes may be converted at any time.

The Company will satisfy any conversion by paying cash up to the aggregate principal amount of the 1.75% Convertible Notes to be converted and by paying or delivering, as the case may be, cash, shares of the Company’s common stock, or a combination of cash and shares of the Company’s common stock, at its election, in respect of the remainder, if any, of its conversion obligation in excess of the aggregate principal amount of the 1.75% Convertible Notes being converted.

The Company may redeem for cash all or any portion of the 1.75% Convertible Notes, at its option, on or after December 5, 2025 if the closing sale price per share of the Company’s common stock exceeds 130% of the conversion price of the 1.75% Convertible Notes for a specified period of time.

Off-Balance Sheet Arrangements

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Impairment reviews of indefinite-lived intangible assets (trademarks) consist of a comparison of the fair value of the trademark to its carrying value.

Fair value is measured using a relief-from-royalty approach, a form of discounted cash flow

Fair value is measured using a relief-from-royalty approach, a form of discounted cash flow method.

Estimated royalty rates applied to projected revenues are based on comparable industry studies and consideration of operating margins.

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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