What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-07-30 compared with 2020-04-27 · 106 added, 87 removed, 200 unchanged (49% of the section changed)

49 unchanged sentences

We are one of the leading aftermarket suppliers of original equipment (“OE”) “dealer exclusive” parts.

OE “dealer exclusive” parts are those parts which were traditionally available to consumers only from original equipment manufacturers or salvage yards.

OE “dealer exclusive” parts are those parts which were traditionally available to consumers only from OE manufacturers or salvage yards.

These parts include, among other parts:

1 unchanged sentence

We generate virtually all our net sales from customers in the North American automotive aftermarket industry, primarily in the United States.

Our products are sold primarily through automotive aftermarket retailers, including through their online platforms;

national, regional and local warehouse distributors and specialty markets, and salvage yards.

Our products are sold primarily through automotive aftermarket retailers, including through their online platforms, national, regional and local warehouse distributors and specialty markets, and salvage yards.

We also distribute automotive aftermarket parts outside the United States, with sales primarily into Canada and Mexico, and to a lesser extent, Europe, the Middle East and Australia.

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

The introduction of new products and product lines to customers, as well as business acquisitions, may also cause significant fluctuations from quarter to quarter.

The introduction of new products and product lines to customers, as well as business acquisitions, also may cause significant fluctuations from quarter to quarter.

Early in 2019, we began the process of transferring operations of our existing distribution facility in Portland, Tennessee to a new, larger facility nearby.

Our new 800,000 square foot distribution center in Portland, Tennessee became fully operational in October 2019 and is in the process of being expanded to approximately 1 million square feet.

During the thirteen weeks ended March 28, 2020, we incurred $1.3 million of costs related to start up inefficiencies and duplication of facility overhead and operating costs primarily related to our Portland facility consolidation activities, of which $0.5 million was included in selling, general and administrative expenses and $0.8 million was included in gross profit.

These costs have decreased as compared to the thirteen weeks ended December 28, 2019 due to planned productivity initiatives that reduced costs by $3.9 million, $0.6 million of which related to gross profit and $3.3 million related to selling, general and administrative expenses.

We expect our distribution costs to be back to more typical levels as we move through 2020, subject to the impact of COVID-19.

The new 800,000 square foot facility became fully operational in October 2019.

In the second quarter of 2019, we began incurring additional costs related to start up inefficiencies and duplication of facility overhead and operating costs primarily related to those facility consolidation activities.

We began implementing productivity initiatives in the fourth quarter of 2019 to address those inefficiencies and costs while at the same time expanding the facility to cover an aggregate of approximately 1 million square feet, which expansion was completed in June 2020.

In the second quarter of 2020, the productivity levels at the new facility improved and costs began returning to typical levels, in-line with our expectations.

We expect our distribution costs to continue to moderate back to more typical levels as we move through the second half of 2020, subject to the impact of COVID-19.

We operate on a fifty-two or fifty-three week period ending on the last Saturday of the calendar year.

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Impacts of COVID-19

The COVID-19 pandemic has resulted and will continue to result in significant economic disruption, and it has and will adversely affect our business.

Although certain states have issued executive orders requiring all workers to remain at home, unless their work is critical, essential or life-sustaining, throughout the U.S., automotive repair and the related supply and distribution of parts have generally been classified as critical, essential or life-sustaining businesses exempted from these government shutdowns.

Therefore, the vast majority of our retail and wholesale customers currently are open for business.

The COVID-19 pandemic has resulted and is expected to continue to result in significant economic disruption, and it has and is expected to continue to adversely affect our business.

Since COVID-19 was declared a pandemic, state orders shutting down or restricting business operations to contain the spread of COVID-19 have generally exempted automotive repair and the related supply and distribution of parts as those businesses have generally been classified as critical, essential or life-sustaining.

Therefore, the vast majority of our retail and wholesale customers have been and currently remain open for business.

In turn, all of our U.S.

facilities are also open and operating at this time, with modified staffing in certain locations where appropriate.

We have taken actions to promote the welfare of our employees by enhancing safety protocols, including requiring administrative employees to work from home where applicable and implementing social distancing and robust sanitization practices at its facilities.

facilities have also remained, and currently remain, open and operating, with modified staffing in certain locations where appropriate.

We also have adopted a COVID-19 sick leave policy providing continued salary and benefits to eligible employees.

Operationally, our global network of parts suppliers is meeting our current demand levels, including our suppliers in China that experienced a slowdown in the first part of the first quarter of fiscal 2020 due to the pandemic.

In late March, we began experiencing softening customer demand as a result of government-imposed restrictions designed to slow the spread of COVID-19 and expect those trends to continue through the second quarter and potentially longer.

We expect demand to continue to be soft while government-imposed restrictions to curb the spread of COVID-19 remain in place.

However, it is difficult to determine the full impact that the pandemic will have on the overall demand environment and our operations.

We have taken and expect to continue to take proactive steps to manage our costs and bolster our balance sheet and cash position in light of the pandemic, including but not limited to, the following:

As more fully described under “Liquidity and Capital Resources,” at the end of March 2020, we drew down $99.0 million from our $100.0 million revolving credit facility.

We increased the level of receivables collected under our various accounts receivable purchase agreements.

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

We are managing inventory levels to meet reduced levels of customer demand and forecasts.

Toward the end of the first quarter of fiscal 2020, we began to reduce our inventory purchases in light of reduced demand levels.

We are adjusting operating costs to adjust to demand dynamics, by limiting non-essential operating expenses, reducing labor hours where possible, and deferring capital expenditures where we have deemed appropriate to do so.

We announced that we temporarily suspended our share repurchase program, noting that we may resume such repurchases at any time when we believe it is prudent to do so and without further notice.

As a result of these actions, we have increased our cash position and, as of April 24, 2020, we had approximately $300.0 million in cash and cash equivalents.

We have had to adjust our operations and inventory levels as demand has fluctuated due to government-imposed restrictions being imposed and then subsequently lifted or modified across the United States.

As previously disclosed, in late March, we began experiencing softening customer demand as a result of government-imposed restrictions designed to slow the spread of COVID-19.

While customer orders dropped significantly in April due to government-imposed restrictions, we saw a rapid recovery as the quarter progressed with May orders flat to prior year and June orders up significantly above prior year.

However, as government-imposed restrictions vary across the United States and continue to change , it remains difficult to determine the full impact that the pandemic will have on the overall demand environment.

Correspondingly, to the extent there may be fluctuations in demand as a result of the pandemic, it remains difficult to determine the full impact that the pandemic will have on various aspects of our operations, including, but not limited to, inventory levels, our ability to fulfill contractual requirements and staffing at our facilities.

We have taken and expect to continue to take proactive steps to manage our business in light of the pandemic, including but not limited to, the following:

We continued to adjust operating costs by limiting non-essential operating expenses, adjusting labor hours to align with demand levels where possible, and deferring capital expenditures where we have deemed appropriate to do so.

During the second quarter, we increased the typical level of receivables collected under our various accounts receivable purchase agreements by $163 million, incurring an additional $3.3 million in factoring costs above typical levels, to help bolster our liquidity.

In light of our enhanced liquidity position, in June 2020 we repaid the $99.0 million drawdown that we had made under our revolving credit facility at the end of March 2020.

We continued to suspend share repurchases under our share repurchase program;

however, we may resume such repurchases at any time when we believe it is prudent to do so and without further notice.

As a result of these actions, as of July 28, 2020, we had no amounts drawn under our revolving credit facility (excluding $0.8 million of issued but undrawn letters of credit) and approximately $230 million in cash and cash equivalents.

We believe that our asset-light model and level of liquidity position us well to navigate the current economic disruption associated with the ongoing COVID-19 pandemic.

Of course, at the time of this filing and as we look ahead, we are unable to determine or predict the overall impact the COVID-19 pandemic will have on our customers, vendors and suppliers or our business, results of operations, liquidity or capital resources.

During the second quarter, we estimate that we incurred $4.9 million of incremental out-of-pocket costs related to COVID-19, primarily from factoring, costs related to safety measures implemented at our sites, our COVID-19 sick leave policy, and interest on our revolving line of credit, with $0.5 million impacting gross profit, $4.2 million impacting selling, general and administrative expenses, and $0.2 million impacting interest expense.

At the time of this filing and as we look ahead, we are unable to determine or predict the overall impact the COVID-19 pandemic will have on our customers, vendors and suppliers or our business, results of operations, liquidity or capital resources.

Significant uncertainty still exists concerning the overall magnitude of the impact and the duration of the COVID-19 pandemic.

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These investments historically have enabled us to provide an expanding array of new product offerings and grow revenues at levels that generally have exceeded market growth rates.

As a result of these investments, we introduced 640 new distinct SKU’s to our customers and end users in the thirteen weeks ended March 28, 2020, including 288 new-to-the-aftermarket SKU’s.

As a result of these investments, we introduced 1,291 new distinct SKU’s to our customers and end users in the twenty-six weeks ended June 27, 2020, including 494 new-to-the-aftermarket SKU’s.

We introduced 5,239 distinct SKU’s to our customers and end users in the fiscal year ended December 28, 2019, including 1,625 new-to-the-aftermarket SKU’s.

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Through Dorman HD Solutions™, we specialize in what formerly were “dealer exclusive” parts similar to how we have approached the passenger car and light duty truck sector.

During the thirteen weeks ended March 28, 2020, we introduced 54 SKU’s in this product line.

During the twenty-six weeks ended June 27, 2020, we introduced 161 SKU’s in this product line.

We expect to continue to invest aggressively in the medium and heavy duty product category.

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Generally, as vehicles are driven more miles, the more likely it is that parts will fail.

The recent executive orders issued by certain states in response to the COVID-19 pandemic requiring workers to remain at home, unless their work is critical, essential or life-sustaining, is having an adverse impact on work-related travel.

In addition, quarantine orders throughout the U.S.

are impacting personal travel.

In fact, according to a report cited by the Auto Care Association, data indicates that, relative to a typical daily travel day in February 2020, personal travel during the work week dropped by 38% to 48% nationally by the end of March 2020, with the largest decline in travel occurring during the last week of the quarter as more states entered into stay at home orders.

As a result, while, prior to COVID-19, we might have expected to see additional sales growth due to the VIO and mileage trends referenced above, the impact of COVID-19 related travel restrictions is expected to adversely affect our sales growth potential and our future results, at least until such restrictions are lifted.

The COVID-19 pandemic in general, as well as executive orders issued by certain states in response to the COVID-19 pandemic are having an adverse impact on work-related and personal travel.

In fact, according to a report cited by the Auto Care Association, data indicates that the number of miles driven daily was down 44% as of May 1, 2020 when compared to February 2, 2020.

However, the low point in the number of miles driven daily was down 57% as of mid-April when compared to February 2, 2020, and the number of miles driven daily has slowly increased since that low point.

As a result, while, prior to COVID-19, we might have expected to see additional sales growth due to the VIO and mileage trends referenced above, the impact of COVID-19 may adversely affect our sales growth potential and our future results.

Brand Protection

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We may offer cash discounts for paying invoices in accordance with the specified discount terms of the invoice.

In addition, we may offer pricing discounts based on volume purchased from us or other pricing discounts related to programs in accordance with a customer’s agreement.

In addition, we may offer pricing discounts based on volume purchased from us or

other pricing discounts related to programs in accordance with a customer’s agreement.

These discounts can be in the form of “off-invoice” discounts and are immediately deducted from sales at the time of sale.

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We attempt to avoid or minimize these concessions as much as possible, but we have granted pricing concessions, indemnification rights, extended customer payment terms and allowed a higher level of product returns in certain cases.

concessions impact net sales as well as our profit levels and may require additional capital to finance the business.

These concessions impact net sales as well as our profit levels and may require additional capital to finance the business.

We expect our customers to continue to exert pressure on our margins.

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Impact of Tariffs

Effective September 24, 2018, the Office of the United States Trade Representative (USTR) imposed an additional tariff on approximately $200 billion worth of Chinese imports.

The tariff was approximately 10% as of December 29, 2018.

Effective for shipments departing China on or after May 10, 2019, the USTR increased this tariff to 25%.

In addition, effective September 1, 2019, the USTR imposed a fourth tranche of tariffs on approximately $300 billion worth of Chinese imports with a tariff rate of 15%.

Effective the third quarter of 2018, the Office of the United States Trade Representative (USTR) imposed three additional tranches of tariffs on approximately $250 billion worth of Chinese imports.

Tariffs ranged from 10% to 25% depending on the commodity.

Effective for shipments departing China on or after May 10, 2019, the USTR modified the tranches to impose tariffs of 25% for all commodities.

In addition, effective September 1, 2019, the USTR imposed a fourth tranche of tariffs on approximately $300 billion worth of Chinese imports with a tariff rate of 15%, which was reduced to 7.5% in February 2020.

The tariffs enacted to date will increase the cost of many products that are manufactured for us in China.

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In addition, the USTR has granted tariff relief for certain categories of products being imported from China.

We expect that we will reverse tariff-related price increases previously passed along to our customers and cost concessions previously received from our suppliers as such tariffs are reduced or such other relief is granted.

We expect that we will reverse tariff-related price increases previously passed along to our customers and lose cost concessions previously received from our suppliers on future purchases as such tariffs are reduced or such other relief is granted.

Results of Operations

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Thirteen Weeks Ended*

Twenty-Six Weeks Ended*

(in millions)

March 28, 2020

March 30, 2019

June 27, 2020

June 29, 2019

June 27, 2020

June 29, 2019

Cost of goods sold

1 unchanged sentence

Income from operations

Other income, net

Other (expense) income, net

Income before income taxes

Provision for income taxes

* Percentage of sales information does not add due to rounding

Thirteen Weeks Ended March 28, 2020 Compared to Thirteen Weeks Ended March 30, 2019

Net sales increased 6% to $257.7 million for the thirteen weeks ended March 28, 2020 from $243.8 million for the thirteen weeks ended March 30, 2019.

The increase in net sales was primarily driven by increased volumes.

Customer demand began to decline late in March as the government imposed enhanced restrictions to prevent the further spread of COVID-19, with the corresponding negative impact on net sales estimated to be approximately 1.5% - 2.5%, or $4 million to $6 million, in the first quarter of 2020.

Gross profit margin was 32.9% of net sales for the thirteen weeks ended March 28, 2020 compared to 35.9% of net sales for the thirteen weeks ended March 30, 2019.

The gross margin was lower primarily due to higher first quarter 2020 customer provisions compared to first quarter 2019 (130 bps), and to a lesser extent, due to the pass-through of tariff costs to our customers (70 bps) and lower productivity levels as we continued to ramp up production at our new Portland, TN distribution facility (30 bps).

Selling, general and administrative expenses were $59.7 million, or 23.2% of net sales, for the thirteen weeks ended March 28, 2020 compared to $57.8 million, or 23.7% of net sales, for the thirteen weeks ended March 30, 2019.

The decrease in selling, general and administrative expense as a percentage of net sales during the thirteen weeks ended March 28, 2020 was primarily due to lower factoring costs (70 bps) due to decreased sales of accounts receivable, partially offset by lower productivity levels as we ramped up production at our new distribution center in Portland, TN (20 bps).

Other Income, net was $2.6 million for the thirteen weeks ended March 28, 2020 which includes a gain of $2.5 million recognized as the difference between the carrying value of our previously held equity method investment in PTI and the implied fair value when we acquired the remaining equity interest in PTI in January 2020 that we did not already own.

Our effective tax rate was 17.8% for the thirteen weeks ended March 28, 2020 compared to 21.4% for the thirteen weeks ended March 30, 2019.

The decrease in tax rate is primarily a result of discrete items in the quarter related to a foreign tax credit carryback claim and the write-off of the deferred tax liability associated with PTI, which was previously an investment and is now a consolidated U.S.

* Amounts and percentage of sales information does not add due to rounding

Thirteen Weeks Ended June 27, 2020 Compared to Thirteen Weeks Ended June 29, 2019

Net sales decreased 8.3% to $233.2 million for the thirteen weeks ended June 27, 2020 from $254.2 million for the thirteen weeks ended June 29, 2019.

The decrease in net sales was primarily driven by decreased volumes.

While customer orders dropped significantly in April 2020 due to government-imposed restrictions designed to slow the spread of COVID-19, the Company saw a rapid recovery as the quarter progressed with May orders flat to prior year and June orders up significantly above prior year.

The total estimated negative impact of COVID-19 on net sales was approximately 14% to 16% for the thirteen weeks ended June 27, 2020.

Gross profit margin was 33.9% of net sales for the thirteen weeks ended June 27, 2020 compared to 34.3% of net sales for the thirteen weeks ended June 29, 2019.

The gross profit margin was lower primarily due to $0.5 million of incremental costs associated with COVID-19, including costs related to safety measures implemented at our sites and our COVID-19 sick leave policy.

Selling, general and administrative expenses were $61.5 million, or 26.4% of net sales, for the thirteen weeks ended June 27, 2020 compared to $59.9 million, or 23.6% of net sales, for the thirteen weeks ended June 29, 2019.

Approximately 220 bps of the increase in selling, general and administrative expenses as a percentage of net sales was due to decreased leverage resulting from the $20.9 million decline in net sales compared to the second quarter of 2019.

Selling, general and administrative expenses as a percentage of net sales for the thirteen weeks ended March 27, 2020 also increased 180 bps due to $4.2 million of incremental out-of-pocket costs directly related to COVID-19, primarily from factoring costs, costs related to safety measures at our sites, and our COVID-19 sick leave policy.

These increases in selling, general and administrative expenses as a percentage of net sales were offset by cost savings primarily from productivity improvements in our Portland, TN distribution facility, as well as reduced travel expenses.

Our effective tax rate was 19.9% for the thirteen weeks ended June 27, 2020 compared to 21.1% for the thirteen weeks ended June 29, 2019.

The decrease in the effective tax rate is primarily related to an equity method investment converted to a consolidated subsidiary, which occurred during the thirteen weeks ended March 28, 2020.

Twenty-Six Weeks Ended June 27, 2020 Compared to Twenty-Six Weeks Ended June 29, 2019

Net sales decreased 1.4% to $490.9 million for the twenty-six weeks ended June 27, 2020 from $498.0 million for the twenty-six weeks ended June 29, 2019.

The decrease in net sales was primarily driven by decreased volumes due to the impacts of government-imposed restrictions designed to slow the spread of COVID-19.

Gross profit margin was 33.4% of net sales for the twenty-six weeks ended June 27, 2020 compared to 35.1% of net sales for the twenty-six weeks ended June 29, 2019.

The gross profit margin was lower primarily due to incremental costs associated with COVID-19, including costs related to safety measures implemented at our sites and our COVID-19 sick leave policy, and higher customer provisions in the first quarter of 2020 compared to 2019.

Selling, general and administrative expenses were $121.3 million, or 24.7% of net sales, for the twenty-six weeks ended June 27, 2020 compared to $117.7 million, or 23.6% of net sales, for the twenty-six weeks ended June 29, 2019.

The increase in selling, general and administrative expense as a percentage of net sales during the period was primarily due to the impact of COVID-19, including incremental out-of-pocket costs directly related to COVID-19, primarily factoring costs, costs related to safety measures at our sites, and our COVID-19 sick leave policy (90 bps).

Partially offsetting these costs were cost savings primarily from productivity improvements in our Portland distribution facility, as well as reduced travel expenses.

Other Income, net was $2.3 million for the twenty-six weeks ended June 27, 2020 which includes a gain of $2.5 million recognized as the difference between the carrying value of our previously held equity method investment in PTI and the implied fair value when we acquired the remaining equity interest in PTI in January 2020 that we did not already own.

Our effective tax rate was 18.6% for the twenty-six weeks ended June 27, 2020 compared to 21.2% for the twenty-six weeks ended June 29, 2019.

The decrease in the effective tax rate is primarily a result of a non-taxable gain and discrete items related to the write-off of a deferred tax liability, both of which were associated with an equity method investment converted to a consolidated subsidiary upon acquisition of the controlling interest, and a foreign tax credit carry back claim from a prior period.

Liquidity and Capital Resources

Historically, our primary sources of liquidity have been our invested cash and the cash flow we generate from our operations, including accounts receivable sales programs provided by our customers.

Cash and cash equivalents at March 28, 2020 increased to $161.8 million from $68.4 million at December 28, 2019.

Working capital was $539.7 million at March 28, 2020 compared to $534.1 million at December 28, 2019.

Shareholders’ equity was $791.4 million at March 28, 2020 compared to $773.6 million at December 28, 2019.

Cash and cash equivalents at June 27, 2020 increased to $359.6 million from $68.4 million at December 28, 2019.

The increase primarily related to our efforts to enhance our liquidity in light of COVID-19, which efforts included our March 2020 drawdown on our revolving credit facility and additional sales of accounts receivable.

Working capital was $561.1 million at June 27, 2020 compared to $534.1 million at December 28, 2019.

Shareholders’ equity was $807.1 million at June 27, 2020 compared to $773.6 million at December 28, 2019.

Based on our current operating plan, we believe that our sources of available capital are adequate to meet our ongoing cash needs for at least the next twelve months.

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Further extensions of customer payment terms will result in additional uses of cash flow or increased costs associated with the sales of accounts receivable.

During the thirteen weeks ended March 28, 2020 and March 30, 2019, we sold approximately $151.3 million and $172.8 million of accounts receivable, respectively, under these programs.

We have the ability to sell significantly more accounts receivable under these programs if the needs of the business warrant, and, in fact, following the end of the first fiscal quarter of 2020, in light of COVID-19 we began increasing the amount of accounts receivable sold under these programs in an effort to enhance our liquidity.

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

During the twenty-six weeks ended June 27, 2020 and June 29, 2019, we sold approximately $496.4 million and $355.1 million of accounts receivable, respectively, under these programs.

The increase in sales of accounts receivable was primarily in connection with our efforts to enhance our liquidity in light of COVID-19.

We have the ability to sell significantly more accounts receivable under these programs if the needs of the business warrant, although, as we continue to monitor the impacts of COVID-19 on our business, we may choose to return to more historical levels of factoring if we believe we have sufficient liquidity to do so.

Credit Agreement

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The credit agreement provides for an initial revolving credit facility of $100.0 million.

The credit agreement replaced our previous $30.0 million facility.

Borrowings under the credit agreement are on an unsecured basis.

At the Company’s election, the interest rate applicable to revolving credit loans 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%).

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 not in default in respect to the credit agreement.

As of June 27, 2020, we were not 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 an unused fee of 0.10% on the average daily unused portion of the facility, provided the unused fee will not be charged on the first $30 million of the revolving credit facility.

In late March, in an effort to enhance our liquidity in light of COVID-19, we drew down on the revolving credit facility in the amount of $99.0 million.

As of March 28, 2020, approximately $99.8 million was outstanding under that facility, inclusive of issued but undrawn letters of credit in the amount of $0.8 million that were issued to secure ordinary course of business transactions.

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

In March 2020, in an effort to enhance our liquidity in light of COVID-19, we drew down on the revolving credit facility in the amount of $99.0 million.

As of June 27, 2020, approximately $99.8 million was outstanding under that facility, inclusive of issued but undrawn letters of credit in the amount of $0.8 million that were issued to secure ordinary course of business transactions.

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

On June 29, 2020, we repaid $99.0 million of outstanding borrowings under the 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.

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

1 unchanged sentence

The following summarizes the activities included in the 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 provided by operating activities

Cash used in investing activities

Cash used in financing activities

Cash provided by (used in) financing activities

Net increase (decrease) in cash and cash equivalents

During the thirteen weeks ended March 28, 2020 , cash provided by operating activities was $ 18.6 million primarily as a result of $ 22.8 million in net income, non-cash adjustments to net income of $ 5.3 million and a net increase in operating assets and liabilities of $ 9.5 million.

Compared to the Consolidated Balance Sheet at December 28, 2019 , accounts receivable inc reased $ 29.5 million due to higher sales .

Inventory de creased $ 28.0 million due to the impacts of COVID-19 slowing the receipts of inventory and increased sales.

During the twenty-six weeks ended June 27, 2020, cash provided by operating activities was $219.4 million primarily as a result of $36.7 million in net income, non-cash adjustments to net income of $14.3 million and a net decrease in operating assets and liabilities of $168.5 million.

Compared to the Consolidated Balance Sheet at December 28, 2019, accounts receivable decreased $151.8 million mostly attributable to higher factoring, which provided $486.8 million in cash, net of factoring costs of $9.6 million.

Inventory decreased $11.6 million due to the timing of inventory orders and receipts, and increased sales late in the second quarter.

Prepaids and other current assets decreased $2.5 million primarily due to the timing of payments.

Accrued compensation and other liabilities increased $6.8 million primarily due to the timing of payments associated with income taxes and employee compensation programs.

Other assets increased $4.8 million primarily due to an increase in our long-term core inventory.

Accounts payable decreased $8.7 million primarily due to the timing of vendor payments.

During the thirteen weeks ended March 30, 2019, cash provided by operating activities was $16.4 million primarily as a result of $23.4 million in net income, non-cash adjustments to net income of $8.2 million and a net increase in operating assets and liabilities of $15.2 million.

Accrued customer rebates and returns increased $7.6 million due to the timing of rebate payments.

Accrued compensation and other liabilities increased $8.5 million primarily due to the timing of payments associated with income taxes and employee compensation programs.

During the twenty-six weeks ended June 29, 2019, cash provided by operating activities was $36.5 million primarily as a result of $44.9 million in net income, non-cash adjustments to net income of $16.1 million and a net increase in operating assets and liabilities of $24.5 million.

Compared to the Consolidated Balance Sheet at December 29, 2018, accounts receivable decreased $21.5 million due to higher sales of accounts receivable.

Inventory increased $18.2 million due to inventory purchases to support new product launches and to maintain customer fill rates as we consolidated facilities.

Inventory increased $21.2 million due to inventory purchases to support new product launches, the maintenance of customer fill rates as we consolidated facilities, and due to increased costs from higher tariffs.

Accounts payable decreased $6.9 million due to the timing of payments to our vendors.

The change in prepaids, other assets, accrued customer rebates and returns, accrued compensation and other liabilities was not material.

Investing activities used $18.0 million of cash in the thirteen weeks ended March 28, 2020 and $8.8 million in the thirteen weeks ended March 30, 2019, as summarized below:

Capital spending in the thirteen weeks ended March 28, 2020 was primarily related to $1.7 million in tooling associated with new products, and $1.5 million in enhancements and upgrades to our information systems.

Capital spending in the thirteen weeks ended March 30, 2019 was primarily related to $1.5 million in tooling associated with new products and $2.6 million in enhancements and upgrades to our information systems.

Additionally, during the thirteen weeks ended March 28, 2020 we used $18.1 million to acquire the remaining 60% of the outstanding equity of Power Train Industries, Inc., net of $3.5 million of cash acquired.

Investing activities used $21.5 million of cash in the twenty-six weeks ended June 27, 2020 and $17.3 million in the twenty-six weeks ended June 29, 2019, as summarized below:

Capital spending in the twenty-six weeks ended June 27, 2020 was primarily related to $1.1 million in tooling associated with new products, and $1.3 million in enhancements and upgrades to our information systems.

Capital spending in the twenty-six weeks ended June 29, 2019 was primarily related to $3.9 million in tooling associated with new products and $7.5 million in enhancements and upgrades to our information systems.

Additionally, during the twenty-six weeks ended June 27, 2020 we used $18.4 million to acquire the remaining 60% of the outstanding equity of Power Train Industries, Inc., net of $3.5 million of cash acquired.

The remaining capital spending in both periods resulted from scheduled equipment replacements, certain facility improvements and other capital projects.

Financing activities provided $92.8 million of cash in the thirteen weeks ended March 28, 2020 and used $10.3 million in the thirteen weeks ended March 30, 2019 as summarized below:

In the thirteen weeks ended March 28, 2020, we drew down on the revolving credit facility in the amount of $99.0 million.

In the thirteen weeks ended March 28, 2020, we paid $5.5 million to repurchase 91,979 common shares.

In the thirteen weeks ended March 30, 2019, we paid $8.4 million to repurchase 101,000 common shares.

Financing activities provided $93.3 million of cash in the twenty-six weeks ended June 27, 2020 and used $24.2 million in the twenty-six weeks ended June 29, 2019 as summarized below:

In the twenty-six weeks ended June 27, 2020, we drew down on the revolving credit facility in the amount of $99.0 million.

In the twenty-six weeks ended June 27, 2020, we paid $5.5 million to repurchase 91,979 common shares.

In the twenty-six weeks ended June 29, 2019, we paid $22.8 million to repurchase 272,564 common shares.

The remaining uses of cash from financing activities in each period result from stock compensation plan activity and the repurchase of our common stock from our 401(k) Plan.

1 unchanged sentence

The Company may resume its repurchase program at any time when we believe it is prudent to do so and without further notice.

During the thirteen weeks ended March 28, 2020, we experienced no material changes to our contractual obligations as disclosed in our Annual Report on Form 10-K for the year ended December 28, 2019.

During the twenty-six weeks ended June 27, 2020, we experienced no material changes to our contractual obligations as disclosed in our Annual Report on Form 10-K for the year ended December 28, 2019.

New and Recently Adopted Accounting Pronouncements

1 unchanged sentence

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