What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-08-09 compared with 2021-05-10 · 109 added, 98 removed, 145 unchanged (59% of the section changed)

31 unchanged sentences

The Company and the buyer are currently reviewing the calculations and underlying data and are engaged in negotiations.

The Company expects to record the additional gain for whatever amount is realized on the sale when that review is complete and agreement is reached.

The Company expects to record the additional gain for whatever amount is realized on the earnout when that review is complete and agreement is reached.

The timing and amount of any amount realized is uncertain and subject to risks and uncertainties as we continue the review and negotiation process.

CONSOLIDATED RESULTS OF OPERATIONS AND OUTLOOK

Three Months Ended

($ in thousands) April 3, 2021 March 28, 2020

Six Months Ended Three Months Ended

($ in thousands) July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020

Sales $ 217,015 $ 281,278 $ 111,158 $ 123,694

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Effective Tax Rate (0.2) % 3.4 % 0.8 % 3.6 %

Net (Loss) Income $ (11,909) $ (66,963)

Net Loss $ (20,008) $ (90,542) $ (8,099) $ (23,579)

A discussion by segment can be found at “Segment Results of Operations and Outlook” in this MD&A.

CONSOLIDATED FIRST QUARTER RESULTS

Consolidated sales were down $51.7 million compared with the first quarter of 2020.

Aerospace sales were down $59.7 million from the 2020 first quarter, which had been largely unaffected by the COVID pandemic.

Test System sales increased $7.9 million.

Consolidated cost of products sold in the first quarter of 2021 was $91.6 million, compared with $121.9 million in the prior-year period.

The decrease was primarily due to low volume related to the continued impacts of the COVID-19 pandemic on the global aerospace industry, coupled with the associated workforce and other cost reduction measures discussed further below.

CONSOLIDATED SECOND QUARTER RESULTS

Consolidated sales were down $12.5 million from the second quarter of 2020.

Aerospace sales were down $13.4 million, and Test System sales increased $0.8 million.

Consolidated cost of products sold in the second quarter of 2021 was $95.8 million, compared with $96.9 million in the prior-year period.

The decrease was primarily due to lower sales volume related to the continued impacts of the COVID-19 pandemic on the global aerospace industry.

Gross margin declined from 21.7% to 13.8% due to leverage lost on lower volumes.

Selling, general and administrative (“SG&A”) expenses were $23.8 million in the first quarter of 2021 compared with $28.9 million in the prior-year period.

Contributing to the decrease in SG&A in 2021 were workforce reduction activities and cost reduction measures which were not put into effect primarily until the second quarter of 2020.

Further, non-cash goodwill and other asset impairment charges of $74.4 million in the Aerospace segment were recognized in the first quarter of 2020 due to revised expectations regarding future operating results as the COVID-19 pandemic took hold.

Interest expense has increased due to the higher interest rate upon the amendment of the credit facility in May 2020.

The effective tax rate for the quarter was (0.9)%, compared with 3.3% in the first quarter of 2020.

The 2021 tax rate was impacted by changes in the valuation allowance recorded against federal deferred tax assets as well as State and Foreign income taxes.

The 2020 tax rate was impacted primarily by the initial recording of a valuation allowance against federal deferred tax assets.

Selling, general and administrative (“SG&A”) expenses were $21.3 million in the second quarter of 2021 compared with $32.9 million in the prior-year period.

The current year period benefited from a $2.2 million non-cash reduction of the fair value of a contingent consideration liability related to the 2019 acquisition of Diagnosys Test Systems.

The Company incurred $4.9 million in restructuring-related severance charges in the second quarter of 2020, primarily in the Aerospace segment.

Further, non-cash goodwill impairment charges of $12.6 million in the Aerospace segment were recognized in the second quarter of 2020 due to reduced expectations of future operating results due to further commercial aircraft order reductions, delays and cancellations at a major customer of our PECO reporting unit.

Other Expense, Net of Other Income in the prior year included a $3.5 million impairment of an equity investment.

The effective tax rate for the quarter was 0.8%, compared with 3.6% in the second quarter of 2020.

The 2021 tax rate was impacted by State and Foreign income taxes.

The 2020 tax rate was impacted by permanently non-deductible goodwill impairment of $12.6 million which no tax benefit has been recognized, and a Federal valuation allowance recorded of approximately $0.5 million.

Consolidated net loss was $8.1 million, or $0.26 per diluted share, compared with net loss of $23.6 million, or $0.77 per diluted share, in the prior year.

The after tax impact of the prior year impairment was $68.8 million, or $2.23 per diluted share.

The after tax impact of the prior year impairment was $0.41 per diluted share.

Supply chain pressures became increasingly impactful as the quarter progressed, mostly affecting delivery schedules but with some pricing pressure also.

These pressures limited the Company’s ability to respond to accelerated or quick-turn delivery requests from customers.

The Company estimates that revenue would have been $5 million to $10 million higher in the second quarter if its supply chain was performing normally.

Bookings were $126.3 million, for a book-to-bill ratio of 1.14:1.

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Approximately $183.6 million, or 59%, of backlog is expected to ship in the remainder of 2021.

Impact of COVID-19 and Operational Adjustments

As previously discussed, we face risks related to outbreaks of infectious diseases, including the ongoing COVID-19 pandemic.

The challenges posed by the COVID-19 pandemic on the global economy, and more profoundly on the aerospace industry, increased significantly as 2020 progressed, and has continued into 2021.

CONSOLIDATED YEAR-TO-DATE RESULTS

Consolidated sales were down $64.3 million.

Aerospace sales were down $73.0 million from the first half of 2020.

Test System sales increased $8.7 million.

Consolidated cost of products sold in the first half of 2021 was $187.3 million, compared with $218.7 million in the prior-year period.

The decrease was primarily due to lower volume related to the continued impacts of the COVID-19 pandemic on the global aerospace industry.

SG&A expenses were $45.1 million in the first half of 2021 compared with $61.8 million the prior-year period.

The current year period benefited from a $2.2 million non-cash reduction of the fair value of a contingent consideration liability.

The Company incurred $5.4 million in restructuring-related severance charges in the first half of 2020, primarily in the Aerospace segment.

Non-cash goodwill and long-lived asset impairment charges of $87.0 million in the Aerospace segment were recognized in 2020 due to reduced expectations of future operating results caused by the COVID-19 pandemic.

Other Expense, Net of Other Income in the prior year included a $3.5 million impairment of an equity investment.

The effective tax rate for the first half of 2021 was (0.2)%, compared with 3.4% in the first half of 2020.

The tax rate in the 2021 period was impacted by State and Foreign income taxes as well as changes in the valuation allowance previously recorded against federal deferred tax assets.

The 2020 tax rate was impacted by permanently non-deductible goodwill impairments of $60.8 million and a Federal valuation allowance recorded of approximately $7.5 million.

Consolidated net loss was $20.0 million, or $0.65 per diluted share, compared with net loss of $90.5 million, or $2.94 per diluted share, in the prior year.

The after-tax impact of the prior year impairment was $2.64 per diluted share.

COVID-19 Impacts on Our Business

The spread of the COVID-19 outbreak has disrupted businesses on a global scale.

On March 11, 2020, the World Health Organization classified the outbreak as a pandemic.

COVID-19 has caused disruption and volatility in the global capital markets, and has authored an economic slowdown in the Aerospace industry in particular.

In response to COVID-19, national and local governments around the world have instituted certain measures, including travel bans, prohibitions on group events and gatherings, shutdowns of certain businesses, curfews, shelter-in-place orders and recommendations to practice social distancing.

While these actions and restrictions are easing in some geographies, there

remains continued impact.

Although our operations have been deemed essential and we follow the COVID-19 guidelines from the Centers for Disease Control (“CDC”) concerning the health and safety of our personnel, these measures have resulted in attenuating activity and, in some cases, required temporary closures of certain of our facilities, among other impacts.

The duration of these measures is unknown, may be extended and additional measures may be imposed.

In response to the global COVID-19 pandemic, we implemented actions to maintain the health of our employees as well as our financial health and liquidity.

These actions, which began in 2020, included:

• Implementing social distancing measures, the use of masks, restricting visitors and unnecessary travel, and working from home whenever possible;

• Workforce reduction activities to align capacity with expected demand, reducing headcount by approximately 20% to approximately 2,100 employees currently;

• Eliminated consultants and temporary labor where possible;

• Implemented significant cost conservation measures;

• Suspending cash bonus plans and certain benefit programs;

• Amended our revolving credit facility on May 4, 2020, as further described in the “Liquidity and Capital Resources” section below;

• Suspending share repurchases;

• Reducing capital spending where possible;

• Restrictions on marketing, trade shows, travel and discretionary spending.

Analysis of Impact on Demand and Market Trends

The Company evaluates three revenue streams to monitor demand and analyze the impact of the pandemic to its business.

These are (1) the commercial aircraft market, which includes OEM line fit and airline aftermarket business, (2) defense and other government markets, and (3) general aviation.

Commercial aerospace has been heavily impacted by the pandemic and contributed $38.2 million, or 36% of consolidated revenue in the quarter, compared to $102.8 million or 65% of consolidated revenue in the first quarter of 2020.

Airframe manufacturers adjusted to current market conditions by reducing planned production rates for new aircraft.

Driven by the production rate reductions, the Company also experienced a slow-down in orders related to destocking in the supply chain.

Narrow body aircraft build rates are expected to improve through 2021 from current levels as production of the 737 MAX picks up.

The aftermarket is expected to strengthen over the course of the year as aircraft utilization and load factors increase.

Defense and government markets have remained relatively strong through the pandemic.

Sales to these markets were $45.4 million, or 43% of first quarter consolidated revenue in 2021, up from $33.0 million, or 21% in the comparative period of 2020.

This includes our military aircraft programs and our Test business, excluding the divested semiconductor business.

General aviation, which consists of our business jet market, were $14.0 million, representing 13% of the first quarter revenue in 2021.

This compares with $15.0 million, or 10% of revenue in the comparator period.

Most of general aviation revenue is line fit production driven by the manufacture of new aircraft, although there is some amount of aftermarket business as well.

Demand for private aircraft has recovered quickly and is expected to in result in higher aircraft production rates in the near future.

Additionally, Astronics has pursued business opportunities from other markets, taking advantage of its technical design expertise and manufacturing capabilities, which are currently underutilized.

Other revenue was approximately 8% of revenue in the first quarter of 2021.

These opportunities can be meaningful, and some are directly related to the fight against COVID-19, such as the Xenex® program, whereby Astronics is providing manufacturing support to Xenex for the production of its unique LightStrike robots, which use patented pulsed xenon ultraviolet (“UV”) light disinfection technology to neutralize SARS-CoV-2, the virus that causes COVID-19.

We are pleased with the continued strong demand for our Test business, which had core sales up 64% over last year.

We also are encouraged by the consistent sequential ramping of Aerospace bookings since the second quarter of last year.

We are optimistic that demand will strengthen as 2021 progresses, but it is too early to forecast results confidently.

However, we expect our revenue in the second quarter to be about $115 million.

Our goals remain to generate cash and reduce debt.

Evidence suggests that our largest market, which is dependent upon the health of the commercial airline industry, will recover when and where the pandemic comes under control.

While we are making strides in the U.S., we look forward to progress in this regard worldwide through the remainder of this year.

As we entered this crisis, the Company established two clear priorities:

first and foremost the health and safety of our employees and their families, and second, continuing to meet the needs of our customers and secure the financial well-being of the Company.

Substantially all of our operations and production activities have, to-date, remained operational.

In response to the COVID-19 crisis, we implemented changes in our work practices to maintain a safe working environment for production employees at our facilities, while enabling other employees to productively work from home.

As we commence bringing employees back to the workplace and return to in-person meetings with customers and suppliers, we are adopting a flexible work approach.

This will allow for a smooth transition from COVID-19 conditions to a future that better meets the needs of the business and the interests of our employees.

In terms of maintaining our financial health and liquidity, in early 2020, we implemented workforce reduction activities to align capacity with expected demand.

We also implemented significant cost conservation measures, and we continue to closely monitor spending priorities.

As economic activity recovers, we continue to monitor the situation, to assess further possible implications on our operations, supply chain, liquidity, cash flow and customer orders, and to take actions in an effort to mitigate adverse consequences.

We believe that our existing financial arrangements are sufficient to meet our operating needs, and have adequate borrowings availability under our Credit Agreement that could provide additional relief if necessary.

See Part II, Item 1A, Risk Factors, for an additional discussion of risk related to supply chain disruptions.

Consolidated sales were $217 million in the first half of 2021 and we are expecting an uptick in the second half to about $240 million, weighted slightly to the fourth quarter.

We are assuming that the world will continue to make steady progress against the pandemic, and that supply chain stresses will not get worse.

We will be watching eagerly for demand signals which will determine our expectations for 2022.

Our expectation for capital expenditures for 2021 remains unchanged at $10 million to $11 million.

Consolidated backlog at April 3, 2021 was $297.5 million.

Consolidated backlog at July 3, 2021 was $312.7 million.

Approximately 59% of the backlog is expected to be recognized as revenue in 2021.

The ultimate impact of COVID-19 on our business results of operations, financial condition and cash flows is dependent on future developments, including the duration of the pandemic, vaccination rates and efficacy and the related length of impact on the global economy and specifically on the markets we are active in, which is uncertain and cannot be predicted at this time.

Our expectation for capital expenditures for 2021 remains unchanged at $10 million to $11 million.

While core aerospace markets have strengthened as vaccination rates rise and passenger traffic accelerated, the ultimate impact of COVID-19 on our business, results of operations, financial condition and cash flows is dependent on future developments, including the duration of the pandemic, virus variants, vaccination rates and efficacy and the related length of impact on the global economy and specifically on the markets we are active in, which is uncertain and cannot be predicted at this time.

SEGMENT RESULTS OF OPERATIONS AND OUTLOOK

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AEROSPACE SEGMENT

Three Months Ended

(In thousands) April 3, 2021 March 28, 2020

Six Months Ended Three Months Ended

(In thousands) July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020

Sales $ 170,650 $ 243,734 $ 89,220 $ 102,597

Less Inter-segment Sales

(14) (91) — (24)

Total Aerospace Sales

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$ 170,636 $ 243,643 $ 89,220 $ 102,573

(In thousands) April 3, 2021 December 31, 2020

(In thousands) July 3, 2021 December 31, 2020

$ 474,682 $ 484,885

$ 239,088 $ 191,081

AEROSPACE FIRST QUARTER RESULTS

AEROSPACE SECOND QUARTER RESULTS

Aerospace segment sales decreased $13.4 million, or 13.0%, to $89.2 million.

Sales continued to be negatively affected by low commercial aircraft build rates and a weak commercial aircraft aftermarket as airlines have reduced spending and grounded aircraft due to the global COVID-19 pandemic.

Electrical Power and Motion sales were down $40.1 million compared with the prior-year period.

Lighting & Safety sales decreased $10.8 million.

Additionally, Avionics sales were down $7.3 million compared with the prior-year period.

Commercial aerospace continues to see depressed sales relative to pre-pandemic levels.

Sales to this market were $47.8 million, or 43.0% of consolidated revenue in the quarter, compared with $67.5 million, or 54.6% of consolidated revenue in the second quarter of 2020.

Demand related to new build and retrofit narrow body aircraft is improving and expected to continue to build through 2021 and into the future.

The improvement has been driven by growing domestic travel supporting increased production rates of the 737 MAX and narrow body aircraft being placed back in service.

The production and utilization rates of widebody aircraft have remained very low as international travel has been slow to recover.

Military Aircraft sales increased $2.7 million, or 19.6%, to $16.8 million.

Improvement year-over-year includes incremental non-recurring engineering revenue associated with new programs under development.

Business Jet sales were down $0.5 million, or 3.5%, to $15.0 million.

Other revenue increased $4.2 million to $9.6 driven by increased contract manufacturing programs.

Aerospace segment operating loss was $2.7 million compared with operating loss of $17.1 million for the same period last year.

Leverage lost on reduced sales significantly impacted operating results.

Aerospace operating profit in the prior-year period was impacted by goodwill and other asset impairment charges of $74.4 million, as previously discussed.

Aerospace operating profit in the prior-year period was

impacted by goodwill impairment charges of $12.6 million and restructuring-related severance charges of $4.6 million, as previously discussed.

AEROSPACE YEAR-TO-DATE RESULTS

Aerospace segment sales decreased $73.0 million, or 30.0%, to $170.6 million.

Sales continued to be negatively affected by reasons stated during the quarter.

Aerospace segment operating loss was $8.3 million compared with operating loss of $80.2 million for the same period last year.

Leverage lost on reduced sales significantly impacted operating results.

Aerospace operating profit in the prior-year period was impacted by impairment charges of $87.0 million, of which $86.3 million was related to goodwill, and restructuring-related severance charges of $5.1 million.

AEROSPACE OUTLOOK

Aerospace bookings in the first quarter of 2021 were $100.5 million, for a book-to-bill ratio of 1.23:1.

The Aerospace segment’s backlog at the end of the first quarter of 2021 was $210.2 million with approximately $178.0 million expected to be recognized as revenue over the remaining part of 2021 and $185.3 million scheduled over the next 12 months.

Aerospace bookings in the second quarter of 2021 were $118.2 million, for a book-to-bill ratio of 1.32:1.

The Aerospace segment’s backlog at the end of the second quarter of 2021 was $239.1 million with approximately $155.7 million expected to be recognized as revenue over the remaining part of 2021 and $196.7 million scheduled over the next 12 months.

TEST SYSTEMS SEGMENT

Three Months Ended

(In thousands) April 3, 2021 March 28, 2020

Six Months Ended Three Months Ended

(In thousands) July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020

Sales $ 46,683 $ 37,985 $ 21,938 $ 21,432

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Total Test Systems Sales $ 46,379 $ 37,635 $ 21,938 $ 21,121

Operating profit $ 1,189 $ 722

Operating profit (loss) $ 243 $ 3,334 $ (946) $ 2,612

Operating Margin 0.5 % 8.9 % (4.3) % 12.4 %

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(In thousands)

April 3, 2021 December 31, 2020

July 3, 2021 December 31, 2020

$ 99,205 $ 105,079

Backlog $ 73,621 $ 92,337

TEST SYSTEMS FIRST QUARTER RESULTS

TEST SYSTEMS SECOND QUARTER RESULTS

Test Systems segment sales were $21.9 million, up $0.8 million compared to the prior-year period.

Volumes have increased, as defense and government markets have been largely unaffected by the pandemic.

Test Systems operating profit was $1.2 million, or 4.9% of sales, compared with $0.7 million, or 4.4% of sales, in the first quarter of 2020.

Operating profit in the first quarter of 2021 was negatively affected by $0.9 million in legal fees related to infringement claims.

Test Systems operating loss was $0.9 million, or 4.3% of sales, compared with operating profit of $2.6 million, or 12.4% of sales, in the second quarter of 2020.

Operating profit in the second quarter of 2021 was negatively affected by $1.0 million in legal fees related to infringement claims.

Operating results in 2020 benefited from $1.2 million in semiconductor warranty revenue.

TEST SYSTEMS YEAR-TO-DATE RESULTS

Test Systems segment sales were $46.4 million, up $8.7 million compared with the prior-year period.

Test Systems operating profit was $0.2 million, or 0.5% of sales, compared with $3.3 million, or 8.9% of sales, in the second quarter of 2020.

Operating profit in the first half of 2021 was negatively affected by $1.9 million in legal fees related to infringement claims.

Operating results in 2020 benefited from $2.8 million in semiconductor warranty revenue.

TEST SYSTEMS OUTLOOK

Bookings for the Test Systems segment in the quarter were $8.2 million, for a book-to-bill ratio of 0.37:1 for the quarter.

The Test Systems segment’s backlog at the end of the first quarter of 2021 was $87.4 million, with approximately $39.2 million expected to be recognized as revenue over the remaining part 2021 and approximately $46.8 million scheduled over the next 12 months.

The Test Systems segment’s backlog at the end of the second quarter of 2021 was $73.6 million, with approximately $27.9 million expected to be recognized as revenue over the remaining part 2021 and approximately $41.4 million scheduled over the next 12 months.

LIQUIDITY AND CAPITAL RESOURCES

Operating Activities:

Cash used for operating activities totaled $6.9 million for the first three months of 2021, as compared with $23.3 million cash provided by operating activities during the same period in 2020.

Cash used for operating activities totaled $2.3 million for the first six months of 2021, as compared with $41.5 million cash provided by operating activities during the same period in 2020.

Cash flow from operating activities decreased compared with the same period of 2020 primarily due to lower net income adjusted for non-cash expenses and income in 2021 compared with 2020 due to the impacts of the COVID-19 pandemic on our business, coupled with changes in net operating assets.

Investing Activities:

Cash used for investing activities was $1.9 million for the first three months of 2021 compared with $2.8 million in cash used for investing activities in the same period of 2020 due to a decrease in capital expenditures.

Cash used for investing activities was $3.6 million for the first six months of 2021 compared with $2.3 million in cash used for investing activities in the same period of 2020 due to a decrease in capital expenditures coupled with proceeds from the sale of assets in the prior year.

The Company expects capital spending in 2021 to be in the range of $10 million and $11 million.

Financing Activities:

Cash used for financing activities totaled $0.6 million for the first three months of 2021, as compared with $136.8 million cash provided by financing activities during the same period in 2020.

Cash flow from financing activities decreased compared with the same period of 2020 due to net proceeds on our senior credit facility of $145.0 million in the first three months of 2020, partially offset by $7.7 million of share repurchases before the 10b-5 plan associated with the share repurchase program was terminated.

Cash used for financing activities totaled $0.9 million for the first six months of 2021, as compared with $24.0 million cash used for financing activities during the same period in 2020.

Cash flow used for financing activities decreased compared with the same period of 2020 due to net payments on our senior credit facility of $15.0 million in the first six months of 2020, coupled with $7.7 million of share repurchases before the 10b-5 plan associated with the share repurchase program was terminated.

The Company's Fifth Amended and Restated Credit Agreement (the “Agreement”) provided for a $500 million revolving credit line with the option to increase the line by up to $150 million.

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In May 2020, the Company executed an amendment to the Agreement (the “Amended Facility”), which reduced the revolving credit line from $500 million to $375 million.

The Amended Facility suspends the application of the leverage ratio up through and including the second quarter of 2021 (the “suspension period”).

The Amended Facility suspended the application of the leverage ratio up through and including the second quarter of 2021 (the “suspension period”).

The maximum net leverage ratio will be 6.00 to 1 for the third quarter of 2021, 5.50 to 1 for the fourth quarter of 2021, 4.50 to 1 for the first quarter of 2022, and return to 3.75 to 1 for each quarter thereafter.

At April 3, 2021, there was $173.0 million outstanding on the revolving credit facility and there remained $200.9 million available subject to the minimum liquidity covenant discussed below, net of outstanding letters of credit.

At July 3, 2021, there was $173.0 million outstanding on the revolving credit facility and there remained $200.9 million available subject to the minimum liquidity covenant discussed below, net of outstanding letters of credit.

The credit facility allocates up to $20 million of the $375 million revolving credit line for the issuance of letters of credit, including certain existing letters of credit.

At April 3, 2021, outstanding letters of credit totaled $1.1 million.

At July 3, 2021, outstanding letters of credit totaled $1.1 million.

Through the third quarter of 2021, the Amended Facility requires the Company to maintain minimum liquidity, defined as unrestricted cash plus the unused revolving credit commitments, of $180 million at all times.

Through the second quarter of 2021, the Company is required to maintain a minimum interest coverage ratio of 1.75x on a quarterly basis, except for the first quarter of 2021, which was set at 1.50x.

The Company was in compliance with its financial covenants at April 3, 2021.

During the suspension period, the Company will pay interest on the unpaid principal amount of the Amended Facility at a rate equal to one-, three- or six-month LIBOR (which shall be at least 1.00%) plus 2.25%.

The Company will also pay a commitment fee to the lenders in an amount equal to 0.35% on the undrawn portion of the Amended Facility.

Through the second quarter of 2021, the Company was required to maintain a minimum interest coverage ratio of 1.75x on a quarterly basis, except for the first quarter of 2021, which was set at 1.50x.

The Company was in compliance with its financial covenants at July 3, 2021.

During the suspension period, the Company paid interest on the unpaid principal amount of the Amended Facility at a rate equal to one-, three- or six-month LIBOR (which shall be at least 1.00%) plus 2.25%.

The Company paid a commitment fee to the lenders in an amount equal to 0.35% on the undrawn portion of the Amended Facility.

After the suspension period, the Company will pay interest on the unpaid principal amount of the Amended Facility at a rate equal to one-, three- or six-month LIBOR (which shall be at least 1.00%) plus between 1.00% to 2.25% based upon the Company’s leverage ratio.

The Company will also pay a commitment fee to the lenders in an amount equal to 0.10% to 0.35% on the undrawn portion of the Amended Facility, based upon the Company’s leverage ratio.

The Amended Facility provided for the payment of a consent fee of 15 basis points of the commitment for each consenting lender.

The Amended Facility also temporarily restricts certain activities, including acquisitions and share repurchases, and requires mandatory prepayments during the suspension period when the Company’s cash balance exceeds $100 million.

The Company has not made any prepayments during the three months ended April 3, 2021.

The Amended Facility provided for the payment of a consent fee of 15 basis

points of the commitment for each consenting lender.

The Amended Facility also temporarily restricts certain activities, including acquisitions and share repurchases, through the second quarter of 2022.

The Company’s obligations under the Amended Facility are jointly and severally guaranteed by each domestic subsidiary of the Company other than non-material subsidiaries.

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We do not have any material off balance sheet arrangements that have or are reasonably likely to have a material future effect on our results of operations or financial condition.

The Company’s backlog at April 3, 2021 was $297.5 million compared with $283.4 million at December 31, 2020 and $369.4 million at March 28, 2020.

The Company’s backlog at July 3, 2021 was $312.7 million compared with $283.4 million at December 31, 2020 and $307.2 million at June 27, 2020.

CONTRACTUAL OBLIGATIONS AND COMMITMENTS

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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-Q

Item 2. Management’s Discussion and Analysis