What changed in this filing

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Item 1. Financial Statements

2020-07-30 compared with 2020-04-27 · 129 added, 134 removed, 342 unchanged (43% of the section changed)

3 unchanged sentences

CONSOLIDATED STATEMENTS OF OPERATIONS

Thirteen Weeks Ended

Twenty-Six Weeks Ended

(in thousands, except per share data)

March 28, 2020

March 30, 2019

June 27, 2020

June 29, 2019

Cost of goods sold

11 unchanged sentences

(in thousands, except for share data)

March 28, 2020

June 27, 2020

December 28, 2019

31 unchanged sentences

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

Thirteen Weeks Ended March 28, 2020

Thirteen Weeks Ended June 27, 2020

(in thousands, except share data)

Balance at December 28, 2019

Balance at March 28, 2020

Exercise of stock options

3 unchanged sentences

Other stock related activity, net of tax

Balance at June 27, 2020

Thirteen Weeks Ended June 29, 2019

(in thousands, except share data)

Balance at March 30, 2019

Thirteen Weeks Ended March 30, 2019

Exercise of stock options

Compensation expense under Incentive Stock Plan

Purchase and cancellation of common stock

Issuance of non-vested stock, net of cancellations

Other stock related activity, net of tax

Balance at June 29, 2019

Twenty-Six Weeks Ended June 27, 2020

(in thousands, except share data)

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Other stock related activity, net of tax

Balance at March 30, 2019

Balance at June 27, 2020

Twenty-Six Weeks Ended June 29, 2019

(in thousands, except share data)

Balance at December 29, 2018

Exercise of stock options

Compensation expense under Incentive Stock Plan

Purchase and cancellation of common stock

Issuance of non-vested stock, net of cancellations

Other stock related activity, net of tax

Balance at June 29, 2019

See accompanying Notes to Consolidated Financial Statements

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CONSOLIDATED STATEMENTS OF CASH FLOWS

Thirteen Weeks Ended

Twenty-Six Weeks Ended

(in thousands)

March 28, 2020

March 30, 2019

June 27, 2020

June 29, 2019

Cash Flows from Operating Activities:

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THIRTEEN WEEKS ENDED MARCH 28, 2020 AND MARCH 30, 2019

FOR THE THIRTEEN AND TWENTY-SIX WEEKS ENDED JUNE 27, 2020 AND JUNE 29, 2019

Basis of Presentation

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In the opinion of management, all adjustments (consisting of only normal recurring adjustments) considered necessary for a fair presentation have been included.

Operating results for the thirteen weeks ended March 28, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending 2020 or any future period.

Operating results for the thirteen and twenty-six weeks ended June 27, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending 2020 or any future period.

We may experience significant fluctuations from quarter to quarter in our results of operations due to the timing of orders placed by our customers.

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Certain prior year amounts have been reclassified to conform with current year presentation.

Revision of Prior Period Financial Statements

During the quarter ended June 29, 2019, we identified and corrected an immaterial error that affected previously issued consolidated financial statements.

This error related to the application of Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No.

2014-09, Revenue from Contracts with Customers, related to the balance sheet classification of accrued customer rebates and returns that are recognized in connection with sales of our products.

We adopted this ASU on December 31, 2017, the beginning of our 2018 fiscal year.

We previously recorded accrued customer rebates and returns that were expected to be issued as credits to our customers as a valuation account which offset accounts receivable.

Accrued customer rebates and returns are now recorded as a current liability.

Previously issued comparative financial statements, which were revised to correct the error noted above , are presented as “As Revised” in the tables presented in the following footnotes.

Thirteen Weeks Ended March 30, 2019

(in thousands)

As Previously Reported

Revised Consolidated Statement of Cash Flows from Operating Activities Amounts:

Accounts receivable

Accrued customer rebates and returns

Accrued compensation and other liabilities

Net cash provided by operating activities

Additionally, as a result of the adoption of ASU No.

2014-09, the Company should have disclosed the initial impact to the balance sheet reclassification for accrued customer rebates and returns from accounts receivable, net to accrued customer rebates and returns.

The cumulative effect of the changes to the consolidated balance sheet from the adoption was as follows:

(in thousands)

As of December 30, 2017

Effect of Adoption

As of December 31, 2017

Accounts receivable, net

Accrued customer rebates and returns

The correction of this error did not impact our Consolidated Statements of Operations or our Consolidated Statements of Shareholder’s Equity in any period presented.

Business Acquisitions and Investments

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(“PTI”), a privately-held supplier of parts to the automotive aftermarket, based in Reno, Nevada.

The total consideration paid for PTI was approximately $ 30.8 million, which included $ 18.0 million paid for the remaining 60% of the outstanding stock, $ 0.5 million deferred payment, subject to customary purchase price adjustments, and $ 12.3 million which represents the fair value of the previously held 40 % equity interest in PTI that was acquired by the Company in 2016.

As a result of the acquisition, we recorded a gain of approximately $ 2.5 million in Other Income in the thirteen weeks ended

March 28, 2020, as a result of the increase in fair value of the previou sly owned 40% interest in PTI.

The total consideration paid for PTI was approximately $ 30.7 million, which included $ 18.4 million paid for the remaining 60% of the outstanding stock, subject to customary purchase price adjustments, and $ 12.3 million which represents the fair value of the previously held 40 % equity interest in PTI that was acquired by the Company in 2016.

As a result of the acquisition, we recorded a gain of approximately $ 2.5 million in Other Income in the twenty-six weeks ended June 27, 2020 as a result of the increase in fair value of the previously owned 40% interest in PTI.

We previously accounted for our 40% interest as an equity-method investment.

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In connection with this acquisition, we recorded $ 16.7 million in goodwill, $ 7.3 million of identified intangibles, and $ 6.7 million of other assets, net, primarily $ 3.5 million of cash, $ 2.0 million of accounts receivable, $ 5.6 million of inventory, and ($ 4.4 million) of net other assets and liabilities.

The estimated fair value of the PTI assets acquired and liabilities assumed are provisional as of June 27, 2020 and are based on information that is currently available.

Additional information about conditions that existed as of the date of acquisition are being gathered to finalize these provisional measurements, particularly with respect to net working capital and income taxes payable.

Accordingly, the measurement of the PTI assets acquired and liabilities assumed may change upon completion of the purchase price allocation, both of which are expected to occur no later than one year from the acquisition date.

The valuation of the intangible assets acquired and related amortization periods are as follows:

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Transactions under these agreements were accounted for as sales of accounts receivable and the related accounts receivable were removed from our Consolidated Balance Sheet at the time of the sales transactions.

Pursuant to these agreements, we sold $ 151.3 million and $ 172.8 million of accounts receivable during the thirteen weeks ended March 28, 2020, and March 30, 2019 respectively.

All of our credit terms with our customers are less than one year .

If receivables had not been sold over the previous twelve months, $ 375.7 million and $ 437.9 million of additional accounts receivable would have been outstanding at March 28, 2020 and December 28, 2019, respectively, based on standard payment terms.

Selling, general and administrative expenses for the thirteen weeks ended March 28, 2020 and March 30, 2019 included $ 2.8 million and $ 4.6 million, respectively, in financing costs associated with these accounts receivable sales programs.

See Note 17 for information regarding our increasing the level of receivables collected under factoring programs in light of the COVID-19 pandemic.

Pursuant to these agreements, we sold $ 496.4 million and $ 355.1 million of accounts receivable during the twenty-six weeks ended June 27, 2020 and June 29, 2019, respectively.

All of our credit terms with our customers are 365 days or less.

If receivables had not been sold over the previous twelve months, $ 571.7 million and $ 437.9 million of additional accounts receivable would have been outstanding at June 27, 2020 and December 28, 2019, respectively, based on standard payment terms.

Financing costs associated with these accounts receivable sales programs were $ 6.8 million and $ 4.7 million in the thirteen weeks ended June 27, 2020 and June 29, 2019, respectively.

Financing costs associated with these accounts receivable sales programs were $ 9.6 million and $ 9.3 million in the twenty-six weeks ended June 27, 2020 and June 29, 2019, respectively.

The financing costs associated with our accounts receivable sales programs were classified as selling, general and administrative expense in the Consolidated Statements of Operations.

Inventories include the cost of material, freight, direct labor and overhead utilized in the processing of our products and are stated at the lower of cost or net realizable value.

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Right-of-use assets and lease liabilities are recognized at each lease’s commencement date based on the present values of its lease payments over its respective lease term.

When a borrowing rate is not explicitly available for a lease, our incremental borrowing rate is used based

on information available at the lease’s commencement date to determine the present value of its lease payments.

Operating lease payments are recognized on a straight-line basis over t he lease term.

We had no financing leases as of March 28, 2020 .

When a borrowing rate is not explicitly available for a lease, our incremental borrowing rate is used based on information available at the lease’s commencement date to determine the present value of its lease payments.

Operating lease payments are recognized on a straight-line basis over the lease term.

We had no financing leases as of June 27, 2020.

We have operating leases for distribution centers, sales offices and certain warehouse and office equipment.

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We consider these renewal options in determining the lease term used to establish our right-of-use assets and lease liabilities when it is determined that it is reasonably certain that the renewal option will be exercised.

As of March 28, 2020, there were no material variable lease costs or sublease income.

Cash paid for operating leases was $ 1.9 million and $ 1.2 million in the thirteen weeks ended March 28, 2020 and March 30, 2019, respectively, which is classified in operating activities.

The following table summarizes the lease expense for the thirteen weeks ended March 28, 2020 and March 30, 2019

As of June 27, 2020, there were no material variable lease costs or sublease income.

Cash paid for operating leases was $ 4.0 million and $ 2.5 million in the twenty-six weeks ended June 27, 2020 and June 29, 2019, respectively, which is classified in operating activities.

The following table summarizes the lease expense for the twenty-six weeks ended June 27, 2020 and June 29, 2019 :

Thirteen Weeks Ended

Twenty-Six Weeks Ended

(in thousands)

March 28, 2020

March 30, 2019

June 27, 2020

June 29, 2019

June 27, 2020

June 29, 2019

Operating lease expense

3 unchanged sentences

(in thousands)

March 28, 2020

June 27, 2020

Operating lease right-of-use assets

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Weighted average discount rate

The following table summarizes the maturities of our lease liabilities for all operating leases as of March 28, 2020:

During the twenty-six weeks ended June 27, 2020, we added $ 6.4 million of right of use asset and lease liability related to the expansion of our Portland, Tennessee distribution facility.

The following table summarizes the maturities of our lease liabilities for all operating leases as of June 27, 2020:

(in thousands)

March 28, 2020

June 27, 2020

2020 (Remainder of 2020)

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Intangible assets included the following:

March 28, 2020

June 27, 2020

December 28, 2019

9 unchanged sentences

Customer relationships

Amortization expense was $ 0.8 million and $ 0.7 million for the thirteen weeks ended March 28, 2020 and March 30, 2019, respectively .

Amortization expense was $ 0.9 million and $ 0.6 million for the thirteen weeks ended June 27, 2020 and June 29, 2019, respectively, and $ 1.7 million and $ 1.3 million for the twenty-six weeks ended June 27, 2020 and June 29, 2019, respectively .

In December 2017, we entered into a credit agreement which will expire in December 2022 .

This agreement provides for an initial revolving credit facility of $ 100.0 million and, subject to certain requirements, gives us the ability to request increases of up to an incremental $ 100.0 million.

The credit agreement replaced our previous $ 30.0 million facility.

This agreement provides for an initial revolving credit facility of $ 100.0 million and, subject to certain requirements, gives us the ability to request increases in revolving credit commitments of up to an additional $ 100.0 million.

Borrowings under the credit agreement are on an unsecured basis.

At the Company’s election, the interest rate applicable to borrowings under the credit agreement will be either (1) the Prime Rate as announced by Wells Fargo from time to time, (2) an Adjusted LIBOR Market Index Rate as measured by the LIBOR Market Index Rate plus the Applicable Margin which fluctuates between 65 basis points and 125 basis points based on the ratio of the Company’s Consolidated Funded Debt to Consolidated EBITDA, or (3) an Adjusted LIBOR Rate as measured by the LIBOR Rate plus the Applicable Margin which fluctuates between 65 basis points and 125 basis points based on the ratio of the Company’s Consolidated Funded Debt to Consolidated EBITDA.

The interest rate at March 28, 2020 was LIBOR plus 65 basis points ( 1.64 %).

At the Company’s election, the interest rate applicable to borrowings under the credit agreement will be either (1) the Prime Rate as announced by Wells Fargo from time to

time, (2) an Adjusted LIBOR Market Index Rate as measured by the LIBOR Market Index Rate plus the Applicable Margin which fluctuates between 65 basis points and 125 basis points based on the ratio of the Company’s Consolidated Funded Debt to Consolidated EBITDA, or (3) an Adjusted LIBOR Rate as measured by the LIBOR Rate plus the Applicable Margin which fluctuates between 65 basis points and 125 basis points based on the ratio of the Company’s Consolidated Funded Debt to Consolidated EBITDA.

The interest rate at June 27, 2020 was LIBOR plus 65 basis points ( 0.83 %).

During the occurrence and continuance of an event of default, all outstanding revolving credit loans will bear interest at a rate per annum equal to 2.00 % in excess of the greater of (1) the Prime Rate or (2) the Adjusted LIBOR Market Index Rate then applicable.

As of March 28, 2020, we were no t in default in respect to the credit agreement.

The credit agreement also contains covenants, including those related to the ratio of certain consolidated fixed charges to consolidated EBITDA, capital expenditures, and share repurchases, each as defined by the credit agreement.

The credit agreement also requires us to pay a fee of 0.10 % on the average daily unused portion of the facility, provided the fee will not be charged on the first $ 30 million of the revolving credit facility.

On March 23, 2020, Dorman took proactive steps to increase its cash position and preserve financial flexibility in light of uncertainties from the COVID-19 pandemic by drawing down $ 99.0 million from the revolving credit facility.

See Note 17 for additional information regarding our response to COVID-19.

As of March 28, 2020, we had $ 99.0 million in borrowings under the credit agreement, which amount does not include two outstanding letters of credit for approximately $ 0.8 million in the aggregate which were issued to secure ordinary course of business transactions.

Net of these borrowings and letters of credit, we had approximately $ 0.2 million available under the credit agreement at March 28, 2020.

In addition to the foregoing, and, subject to certain requirements, the credit agreement gives the Company the ability to request increases in revolving credit commitments of up to an additional $ 100.0 million.

As of March 28, 2020, we were no t in default in respect to the credit agreement.

In March 2020, Dorman took proactive steps to increase its cash position and preserve financial flexibility in light of uncertainties from the COVID-19 pandemic by drawing down $ 99.0 million from the revolving credit facility.

As of June 27, 2020, we had $ 99.0 million in borrowings under the credit agreement, which amount does not include two outstanding letters of credit for approximately $ 0.8 million in the aggregate which were issued to secure ordinary course of business transactions.

Net of these borrowings and letters of credit, we had approximately $ 0.2 million available under the credit agreement at June 27, 2020.

See Note 17 for additional information on the repayment of this loan.

As of June 27, 2020, we were no t in default in respect to the credit agreement and have paid $ 0.2 million in interest in both the thirteen and twenty-six weeks ended June 27, 2020.

Commitments and Contingencies

During 2019, we informed United States Customs & Border Protection (“CBP”) that we were commencing a voluntary disclosure process with CBP where we would voluntarily disclose to CBP certain product misclassifications and reimburse CBP for any resulting underpayment of duties that were identified as part of a voluntary internal review conducted by the Company.

As of the date of this filing, our internal review is substantially complete.

The Company recorded an estimated liability of $ 2.8 million in its Statement of Operations for the year ended December 28, 2019, which represents the Company’s estimated underpayment of duties, after deducting its estimated overpayment of duties, to CBP due to misclassifications over the prior five-year period, which is the applicable statute of limitations, plus applicable interest.

The estimated liability of $ 2.8 million is reported in Other Long-Term Liabilities on the Consolidated Balance Sheet at March 28, 2020.

The liability is reported in Other Long-Term liabilities since the ultimate resolution of the misclassifications with CBP is uncertain and is not expected to be resolved within the next twelve months.

We expect to complete our internal review and make our initial prior disclosure submission to CBP in the first six months of 2020.

However, the process of finalizing our prior disclosure with CBP may be iterative.

We intend to work cooperatively with CBP in connection with the prior disclosure process and expect to complete the prior disclosure process with CBP and pay all required amounts within 18 months of our initial prior disclosure submission.

In June 2020, we completed our internal review and made our initial prior disclosure submission to CBP, including a payment to CBP of $ 2.8 million.

The process of finalizing our prior disclosure with CBP may be iterative, and we intend to work cooperatively with CBP in connection with finalizing the prior disclosure.

Other Contingencies

We are a party to or otherwise involved in legal proceedings that arise in the ordinary course of business, such as various claims and legal actions involving contracts, employment claims, competitive practices, intellectual property infringement, product liability claims and other

matters arising out of the conduct of our business.

In the opinion of management, none of the actions, individually or in the aggregate, taking into account relevant insurance coverage, would likely have a material financial impact on the Company, and we believe the range of reasonably possible losses from current matters, taking into account relevant insurance coverage, is immaterial.

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We estimate the transaction price at the inception of a contract or upon fulfilling a purchase order, including any variable consideration, and will update the estimate for changes in circumstances.

We utilize the most likely amount method consistently to estimate the effect of uncertainty on the amount of variable consideration to which we would be entitled.

The most likely amount method considers the single most likely amount from a range of possible consideration amounts.

This method is utilized for all of our variable consideration.

We record estimates for cash discounts, product returns, promotional rebates, core (i.e.

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The provision for customer rebates and returns is recorded as a reduction of gross sales.

Beginning with our Form 10-Q for the period ended June 29, 2019, our obligation associated with customer rebates and returns is classified as a current liability on our consolidated balance sheets (“accrued customer rebates and returns”).

We have revised prior period balances to conform with this presentation.

Please refer to Note 1.

Our obligation associated with customer rebates and returns is classified as a current liability on our consolidated balance sheets (“accrued customer rebates and returns”).

Actual customer rebates and returns have not differed materially from estimated amounts for each period presented.

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We have concluded that our estimates of variable consideration are not constrained according to the definition of the new standard.

All of our revenue was recognized under the point of time approach in accordance with the revenue standard during the thirteen weeks ended March 28, 2020 and March 30, 2019, respectively.

Also, we do not have significant financing arrangements with our customers, as our credit terms are all less than one year .

All of our revenue was recognized under the point of time approach in accordance with the revenue standard during the twenty-six weeks ended June 27, 2020 and June 29, 2019, respectively.

Also, we do not have significant financing arrangements with our customers, as our credit terms are all 365 days or less.

Lastly, we do not receive noncash consideration (such as materials or equipment) from our customers to facilitate the fulfillment of our contracts.

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- A contract asset is recorded when our right to consideration in exchange for goods or services that we have transferred to a customer is conditional on something other than the passage of time.

We did no t have any contract assets recorded as of March 28, 2020 or December 28, 2019.

We did no t have any contract assets recorded as of June 27, 2020 or December 28, 2019.

We recognize a contract liability when we receive consideration, or if we have the unconditional right to receive consideration, in advance of satisfying the performance obligation.

A contract liability is our obligation to transfer goods or services to a customer for which we have received consideration, or an amount of consideration is due from the customer.

We did no t have any contract liabilities recorded as of March 28, 2020 or December 28, 2019.

We did no t have any contract liabilities recorded as of June 27, 2020 or December 28, 2019.

Disaggregated Revenue

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Thirteen Weeks Ended

Twenty-Six Weeks Ended

(in thousands)

March 28, 2020

March 30, 2019

June 27, 2020

June 29, 2019

June 27, 2020

June 29, 2019

Automotive body

Thirteen Weeks Ended

Twenty-Six Weeks Ended

(in thousands)

March 28, 2020

March 30, 2019

June 27, 2020

June 29, 2019

June 27, 2020

June 29, 2019

Net sales to U.S.

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Restricted stock and restricted stock units vest in accordance with the terms set forth in each applicable award agreement.

At March 28, 2020, 885,847 shares were available for grant under the 2018 Plan.

At June 27, 2020, 856,921 shares were available for grant under the 2018 Plan.

Restricted Stock and Restricted Stock Units (“RSUs”)

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For performance-based restricted stock and RSU awards tied to total shareholder return, compensation cost related to the award is recognized on a straight-line basis over the performance period and is calculated using the simulated fair value per share of our common stock based on the application of a Monte Carlo simulation model.

Compensation cost related to restricted stock and RSU awards was $ 1.0 million and $ 0.7 million for the thirteen weeks ended March 28, 2020 and March 30, 2019 respectively, and is classified as selling, general and administrative expense in the Consolidated Statements of Operations.

The following table summarizes our restricted stock and RSU award activity for the thirteen weeks ended March 28, 2020:

Compensation cost related to restricted stock and RSU awards was $ 1.1 million and $ 0.8 million for the thirteen weeks ended June 27, 2020 and June 29, 2019, respectively, and $ 2.0 million and $ 1.5 million for the twenty-six weeks ended June 27, 2020 and June 29, 2019, respectively.

The compensation costs were classified as selling, general and administrative expense in the Consolidated Statements of Operations.

The following table summarizes our restricted stock and RSU award activity for the twenty-six weeks ended June 27, 2020:

Balance at December 28, 2019

Balance at March 28, 2020

As of March 28, 2020, there was $ 10.3 million of unrecognized compensation cost related to unvested restricted stock and RSU awards that is expected to be recognized over a weighted-average period of approximately 2.8 years.

Balance at June 27, 2020

As of June 27, 2020, there was $ 9.6 million of unrecognized compensation cost related to unvested restricted stock and RSU awards that is expected to be recognized over a weighted-average period of approximately 2.7 years.

Cash flows resulting from tax deductions in excess of the tax effect of compensation cost recognized in the financial statements are classified as operating cash flows.

The excess tax benefit generated from restricted stock and RSU awards that vested was $ 0.1 million and $ 0.2 million in the thirteen weeks ended March 28, 2020 and March 30, 2019, respectively, and was credited to income tax expense.

The excess tax benefit generated from restricted stock and RSU awards that vested was less than $ 0.1 million and $ 0.2 million in the twenty-six weeks ended June 27, 2020 and June 29, 2019, respectively, and was credited to income tax expense.

Stock Options

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Compensation cost is recognized on a straight-line basis over the vesting period for which related services are performed.

The compensation cost charged against income was $ 0.2 million for each of the thirteen weeks ended March 28, 2020 and March 30, 2019.

The compensation cost charged against income was $ 0.3 million and $ 0.2 million for the thirteen weeks ended June 27, 2020 and June 29, 2019, respectively, and $ 0.5 million and $ 0.3 million for the twenty-six weeks ended June 27, 2020 and June 29, 2019, respectively.

The compensation costs were classified as selling, general and administrative expense in the Consolidated Statements of Operations.

No cost was capitalized during the thirteen weeks ended March 28, 2020.

No cost was capitalized during the twenty-six weeks ended June 27, 2020 or June 29, 2019.

We use the Black-Scholes option valuation model to estimate the fair value of stock options granted.

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Treasury security with terms equal to the expected time of exercise as of the grant date.

During the thirteen weeks ended March 28, 2020 and March 30, 2019, we granted 98,974 and 28,538 stock options, respectively.

The following table summarizes our stock option activity for the thirteen weeks ended March 28, 2020:

During the twenty-six weeks ended June 27, 2020 and June 29, 2019, we granted 102,584 and 36,235 stock options, respectively.

The following table summarizes our stock option activity for the twenty-six weeks ended June 27, 2020:

Balance at December 28, 2019

Balance at March 28, 2020

Options exercisable at March 28, 2020

There were options to purchase 419 shares of common stock exercised during the thirteen weeks ended March 28, 2020.

There were options to purchase 33,228 shares of common stock exercised during the thirteen weeks ended March 30, 2019.

As of March 28, 2020, there was $ 4.0 million of unrecognized compensation cost related to unvested stock options that is expected to be recognized over a weighted-average period of 3.3 years.

Cash generated from stock option exercises was-less than $ 0.1 million in each of the thirteen weeks ended March 28, 2020 and March 30, 2019.

There was no excess tax benefit generated from stock options exercised in the thirteen weeks ended March 28, 2020 or March 30, 2019.

Balance at June 27, 2020

Options exercisable at June 27, 2020

There were options to purchase 419 and 34,301 shares of common stock exercised during the twenty-six weeks ended June 27, 2020 and June 29, 2019, respectively.

As of June 27, 2020, there was $ 3.6 million of unrecognized compensation cost related to unvested stock options that is expected to be recognized over a weighted-average period of 3.1 years.

There was no cash received from stock option exercises in the twenty-six weeks ended June 27, 2020.

Cash received from stock option exercises was less than $ 0.1 million in the twenty-six weeks ended June 29, 2019.

There was no excess tax benefit generated from stock options exercised in the twenty-six weeks ended June 27, 2020 or June 29, 2019.

Employee Stock Purchase Plan

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These contributions are used to purchase shares of the Company’s common stock at a 15 % discount from the lower of the market price at the beginning or end of the purchase window.

There were no shares purchased under the ESPP plan in the thirteen weeks ended March 28, 2020 or March 30, 2019 as a result of the timing of the end of the purchase windows.

During both the thirteen weeks ended March 28, 2020 and March 30, 2019, compensation cost under the ESPP was $ 0.1 million.

There were 10,735 shares purchased under the ESPP plan in both the thirteen and twenty-six weeks ended June 27, 2020, and 13,669 shares purchased in both the thirteen and twenty-six weeks ended June 29, 2019.

During both the thirteen weeks ended June 27, 2020 and June 29, 2019, compensation cost under the ESPP was $ 0.1 million.

During both the twenty-six weeks ended June 27, 2020 and June 29, 2019, compensation cost under the ESPP was $ 0.2 million.

Earnings Per Share

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Common share equivalents are calculated using the treasury stock method and are computed based on outstanding stock-based awards.

Stock-based awards of 91,273 shares and 114,000 shares were excluded from the calculation of diluted earnings per share as of March 28, 2020 and March 30, 2019, respectively, as their effect would have been anti-dilutive.

Stock-based awards of 123,000 shares and 54,000 shares were excluded from the calculation of diluted earnings per share as of June 27, 2020 and June 29, 2019, respectively, as their effect would have been anti-dilutive.

The following table sets forth the computation of basic earnings per share and diluted earnings per share:

Thirteen Weeks Ended

Twenty-Six Weeks Ended

(in thousands, except per share data)

March 28, 2020

March 30, 2019

June 27, 2020

June 29, 2019

June 27, 2020

June 29, 2019

Weighted average basic shares outstanding

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Shares are generally purchased from the 401(k) Plan when participants sell units as permitted by the 401(k) Plan or elect to leave the 401(k) Plan upon retirement, termination or other reasons.

For the thirteen weeks ended March 28, 2020, we repurchased and cancelled 4,730 shares of common stock held in the 401(k) Plan for $ 0.3 million at an average price of $ 66.66 per share.

For the twenty-six weeks ended June 27, 2020, we repurchased and cancelled 6,350 shares of common stock held in the 401(k) Plan for $ 0.4 million at an average price of $ 63.00 per share.

During the fifty-two weeks ended December 28, 2019, we repurchased and cancelled 22,380 shares of common stock held in the 401(k) Plan for $ 1.9 million at an average price of $ 87.26 per share.

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The share repurchase program does not obligate us to acquire any specific number of shares.

For the thirteen weeks ended March 28, 2020, we repurchased and cancelled 91,979 shares of common stock for $ 5.5 million at an average price of $ 59.41 per share under this program.

For the twenty-six weeks ended June 27, 2020, we repurchased and cancelled 91,979 shares of common stock for $ 5.5 million at an average price of $ 59.41 per share under this program.

However, in light of COVID-19, during March 2020, we temporarily suspended repurchases under the share repurchase program and disclosed that we may resume the repurchase program at any time when we believe it is prudent to do so and without further notice.

At June 27, 2020 $ 138.5 million was available for repurchase under this share repurchase program.

For the fifty-two weeks ended December 28, 2019, we repurchased and cancelled 499,564 shares of common stock for $ 39.4 million at an average price of $ 78.84 per share under this program.

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This lease will expire on December 31, 2022 .

The right-of-use asset and total lease liabilities related to this lease were both $ 4.4 million as of March 28, 2020.

In the opinion of our Audit Committee, the terms and rates of this lease are no less favorable than those which could have been obtained from an unaffiliated party when the lease was renewed during November 2016.

The right-of-use asset and total lease liabilities related to this lease were both $ 3.8 million as of June 27, 2020.

We also have non-cancelable operating leases with a limited liability company in which certain of the former owners of PTI are members.

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Each of these investments is accounted for according to the equity method.

At March 28, 2020, we had $ 2.3 million of net unrecognized tax benefits, $ 2.0 million of which would lower our effective tax rate if recognized.

At June 27, 2020, we had $ 1.1 million of net unrecognized tax benefits, $ 1.0 million of which would lower our effective tax rate if recognized.

We recognize interest and penalties related to uncertain tax positions in income tax expense.

As of March 28, 2020 we had approximately $ 0.4 million of accrued interest and penalties related to uncertain tax positions.

As of June 27, 2020, we had approximately $ 0.1 million of accrued interest and penalties related to uncertain tax positions.

We file income tax returns in the United States, Canada, China, India, and Mexico.

19 unchanged sentences

Simplifying the Accounting for Income Taxes .

This ASU removes certain exceptions for recognizing deferred taxes for investments, performing intraperiod allocation and calculating income taxes in

interim periods.

This ASU removes certain exceptions for recognizing deferred taxes for investments, performing intraperiod allocation and calculating income taxes in interim periods.

The ASU also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group.

4 unchanged sentences

Clarifying the Interactions between Topic 321, Topic 323 and Topic 815 , which clarifies the interactions between ASC 321, ASC 323 and ASC 815.

The new guidance addresses accounting for the transition into and out of the equity method and also provides guidance on whether equity method accounting would be applied to certain purchased options and forward contracts upon settlement.

contracts upon settlement.

ASU 2020-01 is effective for annual and interim periods in fiscal years beginning after December 15, 2020.

1 unchanged sentence

However, at this time we do not believe this new guidance will have a material impact on our consolidated financial statements and related disclosures.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional guidance for a limited time to ease the potential accounting burden associated with transitioning away from reference rates such as LIBOR.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional guidance for a limited time to ease the potential accounting burden associated with transitioning away from reference rates such as LIBOR.

The expedients and exceptions provided by ASU 2020-04 will not be available until after December 31, 2022, other than for certain hedging relationships entered into before December 31, 2022.

3 unchanged sentences

Subsequent Events

The recent outbreak of the novel coronavirus COVID-19, which was declared a pandemic by the World Health Organization on March 11, 2020, has led to adverse impacts on the U.S.

and global economies and created uncertainty regarding potential impacts to the Company’s employees, supply chain, operations, and customer demand.

The COVID-19 pandemic has impacted and could further impact the Company’s operations and the operations of the Company’s customers, suppliers and vendors as a result of quarantines, facility closures, and travel and logistics restrictions.

The extent to which the COVID-19 pandemic impacts the Company’s business, results of operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to the duration, spread, severity, and impact of the COVID-19 pandemic, the effects of the COVID-19 pandemic on the Company’s customers, suppliers, and vendors and the remedial actions and stimulus measures adopted by local, state and federal governments, and to what extent normal economic and operating conditions can resume.

Even after the COVID-19 pandemic has subsided, the Company may continue to experience adverse impacts to its business as a result of any economic recession or depression that has occurred or may occur in the future.

Therefore, the Company cannot reasonably estimate the impact at this time.

In light of the COVID-19 pandemic, the Company has taken proactive steps to manage its costs and bolster its liquidity, including increasing the level of receivables collected under various factoring programs.

Since the end of the first quarter of 2020 through April 24, 2020, the Company factored $ 192.0 million of receivables under these programs, with $ 3.7 million in financing costs associated with these accounts receivable sales.

On June 29, 2020 the Company repaid the $ 99.0 million of outstanding borrowings under its revolving credit facility.

Following such repayment, as of June 29, 2020, we had $ 99.2 million of availability under our revolving credit facility, after taking into account issued but undrawn letters of credit in the amount of $ 0.8 million.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements