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Item 7. Management’s Discussion and Analysis

2024-02-29 compared with 2023-02-24 · 74 added, 87 removed, 185 unchanged (47% of the section changed)

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The RV industry is our primary market and comprised 43% of the Company’s consolidated net sales in 2023 .

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.

Net sales to the RV industry decreased 42% in 2023 compared to 2022.

Following a dealer inventory restocking in the first half of 2022, OEMs dramatically reduced production in the second half of 2022 and throughout 2023 as retail demand decreased and dealer inventory needs decreased, with the OEMs demonstrating operating discipline to maintain a balanced inventory channel for the long-term health and stability of the industry.

According to the RV Industry Association (“RVIA”), wholesale industry unit shipments totaled approximately 313,200 units in 2023, a decrease of 37% compared to approximately 493,300 units in 2022.

RV industry retail unit sales totaled approximately 377,500 units in 2023, a decrease of 15% compared to 2022 retail unit sales of approximately 446,300 units according to Statistical Surveys, Inc.

Marine Industry

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.

Net sales to the marine industry, which represented approximately 27% of the Company's consolidated net sales in 2023, decreased 11% in 2023 compared to 2022.

Our marine revenue is generally correlated to marine wholesale powerboat unit shipments, which decreased 2% to approximately 192,300 units in 2023 compared to approximately 196,500 units in 2022, according to Company estimates based on data published by the National Marine Manufacturers Association ("NMMA").

Estimated marine retail powerboat shipments totaled approximately 178,100 units in 2023 , a decrease of 5% compared to 2022 retail powerboat shipments of approximately 188,100 units, according to SSI as economic uncertainty and higher interest rates impacted demand.

Manufactured Housing ("MH") Industry

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.

Net sales to the MH industry, which represented 16% of the Company’s consolidated net sales in 2023 , decreased 19% in 2023 compared to 2022.

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

Based on industry data from the Manufactured Housing Institute, MH wholesale industry unit shipments totaled 112,900 units in 2022 , an increase of 7% compared to 2021 MH wholesale industry unit shipments of 105,800 units.

Based on industry data from the Manufactured Housing Institute, MH wholesale industry unit shipments totaled 89,200 units in 2023 , a decrease of 21% compared to 2022 MH wholesale industry unit shipments of 112,900 units.

Demand for MH units in 2023 was impacted by a decrease in housing affordability caused by elevated interest rates and higher raw material costs.

Industrial Market

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.

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

Net sales to this market represented 14% of our consolidated net sales in 2023 , decreasing 14% in 2023 compared to 2022.

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 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.

Combined new housing starts decreased 9% in 2023 compared to 2022, with single family housing starts decreasing 6% and multifamily residential starts decreasing 14% 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,

(thousands) 2022 2021 2020

($ in thousands) 2023 2022 2021

Net sales $ 3,468,045 100.0 % $ 4,881,872 100.0 % $ 4,078,092 100.0 %

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Year Ended December 31, 2023 Compared to 2022

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.

Net sales in 2023 decreased approximately $1.41 billion, or 29%, to $3.47 billion from $4.88 billion in 2022.

The decrease was attributable to a 42% decrease in net sales to our RV end market, a 11% decrease in net sales to our marine end market, a 19% decrease in net sales to our MH end market, and a 14% decrease in net sales to our industrial end market.

In 2023 and 2022 , net sales attributable to acquisitions completed in each of those years was $17.7 million and $121.8 million , respectively.

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

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

The Company’s RV content per wholesale unit for 2023 decreased 9% to $4,800 from $5,257 in 2022.

The Company's marine powerboat content per wholesale unit for 2023 decreased 5% to $4,803 from $5,032 in 2022.

The Company's MH content per wholesale unit for 2023 increased 2% to $6,372 in 2023 from $6,243 in 2022.

Cost of Goods Sold.

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

Cost of goods sold decreased $1.14 billion, or 30%, to $2.69 billion in 2023 from $3.82 billion in 2022.

As a percentage of net sales, cost of goods sold decreased 90 basis points during 2023 to 77.4% from 78.3% in 2022.

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.

Cost of goods sold as a percentage of net sales decreased for 2023 compared to 2022 primarily as a result of (i) continued cost reduction and automation initiatives we deployed throughout 2022 and 2023 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 2023 and 2022 and (iv) changes in certain commodity prices, partially offset by reduced sales volumes resulting in less favorable fixed cost absorption when compared to the prior year periods.

For 2023, these factors contributed to a 50-basis point decrease in labor as a percentage of net sales and a 330-basis point decrease in materials cost as a percentage of net sales, partially offset by a 300-basis point increase in overhead as a percentage of net sales due to lower sales volumes.

In general, the Company's cost of goods sold percentage can be impacted from period-to-period 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.

Gross profit increased $258.7 million or 32%, to $1,059.9 million in 2022 from $801.2 million in 2021.

Gross profit decreased $277.7 million or 26%, to $782.2 million in 2023 from $1,059.9 million in 2022.

As a percentage of net sales, gross profit increased to 22.6% in 2023 from 21.7% in 2022.

The increase in gross profit as a percentage of net sales in 2023 compared to 2022 reflects the impact of the factors discussed above under “Cost of Goods Sold”.

Economic or industry-wide factors affecting the profitability of our RV, marine, MH and industrial businesses include the costs of commodities and supply chain constraints and the labor used to manufacture our products, the competitive environment and the impact of different gross margin profiles of acquired companies, all of which can cause gross margins to fluctuate from quarter-to-quarter and year-to-year.

environment and the impact of different gross margin profiles of acquired companies, all of which can cause gross margins to fluctuate from quarter-to-quarter and year-to-year.

Warehouse and Delivery Expenses.

Warehouse and delivery expenses increased $23.4 million, or 17%, to $163.0 million in 2022 from $139.6 million in 2021.

Warehouse and delivery expenses decreased $19.1 million, or 12%, to $143.9 million in 2023 from $163.0 million in 2022.

As a percentage of net sales, warehouse and delivery expenses were 4.1% in 2023 and 3.3% in 2022.

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

The decrease in warehouse and delivery expenses is attributable to the decrease in sales, and the increase as a percentage of net sales is primarily attributed to the fixed nature of certain expenses such as personnel wages, building charges, fleet expense, insurance, and depreciation among others as well as a decrease in load efficiency.

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

SG&A expenses increased $74.0 million, or 29%, to $327.5 million in 2022 from $253.5 million in 2021.

SG&A expenses decreased $28.1 million, or 9%, to $299.4 million in 2023 from $327.5 million in 2022.

As a percentage of net sales, SG&A expenses were 8.6% in 2023 and 6.7% in 2022.

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.

The decrease in SG&A expenses in 2023 compared to 2022 is primarily due to lower variable expenses, such as commissions, associated with the decrease in net sales.

The increase in SG&A expenses as a percentage of net sales is primarily a result of the fixed nature of certain other expenses such as wages, payroll taxes, stock compensation, and insurance, as well as an increase in software and technology expenses.

Additionally, certain 2022 and 2023 acquisitions operate with comparatively higher SG&A as a percentage of sales when compared to the consolidated percentage.

Amortization of Intangible Assets.

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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 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.

The increase in operating income and operating margin is primarily attributable to the items discussed above as well as the operating margin profiles of businesses acquired in 2022 and 2021.

Operating income decreased $236.0 million, or 48%, to $260.2 million in 2023 from $496.2 million in 2022.

Operating income in 2023 and 2022 included $1.0 million and $19.4 million, respectively, from the businesses acquired in each respective year.

Operating income as a percentage of net sales decreased 270 basis points to 7.5% in 2023 from 10.2% in 2022.

The decrease in operating income and operating margin is primarily attributable to lower net sales and the items discussed above.

Interest Expense, Net.

Interest expense, net, increased $8.2 million, or 13%, to $68.9 million in 2023 from $60.8 million in 2022.

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.

The increase in interest expense is primarily attributable to the increase in interest rates on our debt subject to variable interest rates and the repayment of our 1.00% Convertible Senior Notes due 2023 (the “1.00% Convertible Notes”) in February 2023, with borrowings under our revolving credit facility (the "Revolver due 2027") which has a comparatively higher interest rate, partially offset by lower average debt levels compared to 2022.

Income Taxes.

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.

Income tax expense decreased $58.9 million, or 55%, to $48.4 million in 2023 from $107.2 million in 2022 as a result of the decrease in pre-tax income and an increase in the effective tax rate.

For 2023, the effective tax rate was 25.3% compared to 24.6% in 2022.

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

The increase in the effective tax rate in 2023 was mostly attributable to an increased impact from stock compensation Section 162(m) permanent addback.

See our Form 10-K for the year ended December 31, 2022 for a discussion of our consolidated operating results for the year ended December 31, 2022 compared to 2021.

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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.

These metrics should not be considered alternatives to accounting principles generally accepted in the United States of America ("U.S.

Our computations of content per unit may differ from similarly titled measures used by others.

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The table below presents information about the net sales, gross profit, and operating income of the Company’s segments.

Reconciliations of the amounts below to consolidated totals are presented in Note 17 of the Notes to Consolidated Financial Statements included elsewhere in this Form 10-K.

Reconciliations of the amounts below to consolidated totals are presented in Note 16 "Segment Information" of the Notes to Consolidated Financial Statements included elsewhere in this Form 10-K.

Year Ended December 31,

(thousands) 2022 2021 2020

($ in thousands) 2023 2022 2021

Manufacturing $ 2,653,257 $ 3,681,412 $ 3,002,107

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Manufacturing

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

Sales decreased $1.03 billion, or 28%, to $2.65 billion in 2023 from $3.68 billion in 2022.

This segment accounted for approximately 75% of the Company’s consolidated net sales in 2023 compared to approximately 74% of the Company's consolidated net sales in 2022.

The sales increase reflected increased net sales across all of our end markets.

The sales decrease reflects decreased net sales across all of our end markets.

In 2023 and 2022, net sales attributable to acquisitions completed in each of those periods was approximately $3.6 million and $121.3 million, respectively.

Gross Profit.

Gross profit increased $220.1 million, or 37%, to $819.0 million in 2022 from $598.9 million in 2021.

Gross profit decreased $241.7 million, or 30%, to $577.3 million in 2023 from $819.0 million in 2022.

As a percentage of net sales, gross profit was 21.8% in 2023 compared to 22.2% in 2022.

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.

Gross profit margin decreased in 2023 compared to 2022 due to increases in labor and manufacturing overhead expense as a percentage of net sales primarily due to reduced sales volumes, partially offset by an improvement in material costs as a percentage of net sales.

Operating Income.

Operating income increased $151.6 million, or 40%, to $531.5 million in 2022 from $379.9 million in 2021.

Operating income decreased $210.4 million, or 40%, to $321.1 million in 2023 from $531.5 million in 2022.

Operating income for the manufacturing segment attributable to acquisitions completed in 2023 and 2022 was approximately $(0.6) million and $19.4 million, respectively.

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

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

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

Sales decreased $398.2 million, or 31%, to $889.4 million in 2023 from $1,287.6 million in 2022.

This segment accounted for approximately 25% of the Company’s consolidated net sales for 2023 compared to 26% of the Company's consolidated net sales in 2022.

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.

The decrease in sales in 2023 is attributed to decreased net sales across all of our end markets.

In 2023 and 2022, net sales attributable to acquisitions completed in each of those periods was approximately $14.1 million and $0.5 million, respectively.

Gross Profit.

Gross profit increased $43.7 million, or 21%, to $254.9 million in 2022 from $211.2 million in 2021.

Gross profit decreased $59.4 million, or 23%, to $195.5 million in 2023 from $254.9 million in 2022.

As a percentage of net sales, gross profit was 22.0% in 2023 compared to 19.8% in 2022.

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.

The increase in gross profit as a percentage of net sales for 2023 is primarily attributed to decreases in labor as a percentage of net sales partly offset by increases in material costs as a percentage of 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 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.

Operating income in 2023 decreased $46.8 million, or 34%, to $90.1 million from $136.9 million in 2022.

Operating income for the Distribution segment attributable to acquisitions completed in 2023 and 2022 was immaterial.

The decrease in operating income in 2023 primarily reflects the items discussed above.

Unallocated Corporate Expenses

As presented in Note 17 of the Notes to Consolidated Financial Statements included elsewhere in this Form 10-K, unallocated corporate expenses in 2022 increased $20.9 million, or 27%, to $99.0 million from $78.1 million in 2021.

The increase in 2022 was mostly attributed to an increase in professional fees, administrative wages, and incentive compensation.

As presented in Note 16 "Segment Information" of the Notes to Consolidated Financial Statements included elsewhere in this Form 10-K, unallocated corporate expenses in 2023 decreased $26.7 million, or 27%, to $72.3 million from $99.0 million in 2022.

The decrease in 2023 was mostly attributed to decreases in incentive compensation, wages, professional fees and amortization of inventory step-up adjustments.

LIQUIDITY AND CAPITAL RESOURCES

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).

Our liquidity as of December 31, 2023 consisted of cash and cash equivalents of $11.4 million and $768.1 million of availability under our credit facility.

As of December 31, 2023, 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.

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.

Year Ended December 31, 2022 Compared to 2021

Operating Activities

Cash flows from operating activities are one of the Company's primary sources of liquidity, representing the net income the Company earned in the reported periods, adjusted for non-cash items and changes in operating assets and liabilities.

Net cash provided by operating activities increased $159.6 million, or 63%, to $411.7 million in 2022 from $252.1 million in 2021 primarily due to:

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

(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 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 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.

Summary of Liquidity and Capital Resources

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.

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.

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 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.

See Note 7 "Debt" of the Notes to Consolidated Financial Statements included elsewhere in this Form 10-K for further discussion of the 1.00% Convertible Notes.

Throughout the course of the year, the Company made payments on the Revolver due 2027, with the balance repaid in full as of December 2023.

In January 2024, the Company utilized available borrowing capacity under the Revolver due 2027 and cash on hand to fund its acquisition of Sportech, as discussed in Note 17 "Subsequent Events" of the Notes to Consolidated Financial Statements.

As of and for the reporting period ended December 31, 2023, 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.

Year Ended December 31, 2023 Compared to 2022

Operating Activities

Net cash provided by operating activities decreased $3.0 million, or 1%, to $408.7 million in 2023 from $411.7 million in 2022 primarily due to a decrease in net income of $185.3 million, substantially offset by an increase in depreciation and amortization of $13.7 million and a $98.9 million source of cash from operating assets and liabilities compared to a $60.7 million use of cash from operating assets and liabilities in the prior period.

Investing Activities

Net cash used in investing activities decreased $235.0 million, or 73%, to $86.5 million in 2023 from $321.5 million in 2022 primarily due to a decrease in cash used in business acquisitions of $223.0 million and a decrease in cash used for capital expenditures of $20.9 million, partly offset by a $6.2 million decrease in cash received on disposals of property, plant, and equipment.

Financing Activities

Net cash flows used in financing activities increased $143.3 million to $333.6 million in 2023 compared to $190.3 million in 2022.

The increase in cash flows used in financing activities was primarily due to the $172.5 million repayment of the 1.00% Convertible Notes and $25.6 million in net repayments on the Revolver due 2027, partially offset by a $58.3 million reduction in stock repurchases in 2023 compared to 2022.

See our Form 10-K for the year ended December 31, 2022 for a discussion of cash flows for the year ended December 31, 2022 compared to 2021.

Off-Balance Sheet Arrangements

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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