What changed in this filing

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Item 1. Financial Statements

2021-10-25 compared with 2021-07-26 · 165 added, 88 removed, 232 unchanged (52% of the section changed)

4 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

(in thousands, except per share data)

June 26, 2021

June 27, 2020

June 26, 2021

June 27, 2020

September 25, 2021

September 26, 2020

September 25, 2021

September 26, 2020

Cost of goods sold

1 unchanged sentence

Income from operations

Other income (expense), net

Interest expense, net

Other income, net

Income before income taxes

7 unchanged sentences

(in thousands, except for share data)

June 26, 2021

September 25, 2021

December 26, 2020

6 unchanged sentences

Operating lease right-of-use assets

Intangible assets, net of accumulated amortization of $ 10,886 and $ 9,194 , respectively

Intangible assets, net

Deferred tax asset, net

4 unchanged sentences

Accrued customer rebates and returns

Revolving credit facility

Other accrued liabilities

17 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

Three Months Ended June 26, 2021

Three Months Ended September 25, 2021

(in thousands, except share data)

Balance at March 27, 2021

Additional Paid-In

Balance at June 26, 2021

Exercise of stock options

1 unchanged sentence

Purchase and cancellation of common stock

Issuance of non-vested stock, net of cancellations

Cancellation of non-vested stock, net of issuances

Other stock-related activity, net of tax

Balance at June 26, 2021

Three Months Ended June 27, 2020

Balance at September 25, 2021

Three Months Ended September 26, 2020

(in thousands, except share data)

Balance at March 28, 2020

Additional Paid-In

Balance at June 27, 2020

Exercise of stock options

1 unchanged sentence

Purchase and cancellation of common stock

Issuance of non-vested stock, net of cancellations

Cancellation of non-vested stock, net of issuances

Other stock-related activity, net of tax

Balance at June 27, 2020

Six Months Ended June 26, 2021

Balance at September 26, 2020

Nine Months Ended September 25, 2021

(in thousands, except share data)

Additional Paid-In

Balance at December 26, 2020

4 unchanged sentences

Other stock related activity, net of tax

Balance at June 26, 2021

Six Months Ended June 27, 2020

Balance at September 25, 2021

Nine Months Ended September 26, 2020

(in thousands, except share data)

Additional Paid-In

Balance at December 28, 2019

4 unchanged sentences

Other stock related activity, net of tax

Balance at June 27, 2020

Balance at September 26, 2020

See accompanying Notes to Condensed Consolidated Financial Statements

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended

Nine Months Ended

(in thousands)

June 26, 2021

June 27, 2020

September 25, 2021

September 26, 2020

Cash Flows from Operating Activities:

5 unchanged sentences

Provision for stock-based compensation

Payment of contingent consideration

Changes in assets and liabilities:

11 unchanged sentences

Proceeds of revolving credit line

Payments of revolving credit line

Payment of contingent consideration

Payment of debt issuance costs

Proceeds from exercise of stock options

1 unchanged sentence

Purchase and cancellation of common stock

Cash (used in) provided by financing activities

Cash provided by (used in) financing activities

Effect of exchange rate changes on Cash and Cash Equivalents

Net (Decrease) Increase in Cash and Cash Equivalents

8 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 26, 2021 AND JUNE 27, 2020

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 25, 2021 AND SEPTEMBER 26, 2020

Basis of Presentation

4 unchanged sentences

generally accepted accounting principles (“GAAP”) for interim financial information and under the rules and regulations of the U.S.

Securities and Exchange Commission (“SEC”).

Securities and Exchange Commission.

However, they do not include all the information and footnotes required by GAAP for complete financial statements.

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 three and six months ended June 26, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending December 25, 2021 or any future period.

Operating results for the three and nine months ended September 25, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending December 25, 2021 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.

3 unchanged sentences

DPL Holding Corporation (“Dayton Parts”)

On June 25, 2021, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) to acquire 100 % of the equity interests of Dayton Parts, a manufacturer of undercarriage and other parts designed to serve the heavy-duty vehicle sector of the aftermarket, for aggregate consideration of $ 338 million, subject to certain customary adjustments based on, among other things, the amount of cash, indebtedness and working capital in the business of Dayton Parts as of the closing date of the transaction.

The transaction is subject to customary closing conditions, including the expiration or earlier termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

We expect the transaction to close in the second half of 2021.

In connection with entering into the Merger Agreement, we have entered into a commitment letter, dated as of June 25, 2021, with certain lenders as counterparties, whereby the lenders have committed to provide us with a new $ 600 million revolving credit facility (the “ New Facility ”) contingent on the satisfaction of customary conditions.

The New Facility would replace our existing $ 100 million revolving credit facility.

We may finance all or a portion of the merger transaction and related fees and expenses with borrowings under the New Facility.

On August 10, 2021, we acquired 100 % of the equity interests of Dayton Parts, a manufacturer of chassis and other parts designed to serve the heavy-duty vehicle sector of the aftermarket for a purchase price of $ 345.5 million in cash (net of $ 8.8 million of acquired cash), subject to certain customary post-acquisition purchase price adjustments.

The acquisition was funded by cash on hand as well as through the refinancing of our revolving credit facility discussed further in Note 6.

The transaction was accounted for as a business combination under the acquisition method of accounting.

We have preliminarily allocated the purchase price to tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values.

We are in the process of completing the valuation of identifiable intangible assets, current and deferred taxes, fixed assets, and pre-acquisition contingencies and, therefore, the fair values set forth below are subject to adjustment upon finalizing the valuations.

We expect to complete the purchase price allocation during the fourth quarter of fiscal 2021.

The table below details the estimated fair values of the assets acquired and the liabilities assumed at the acquisition date:

(in thousands)

Accounts receivable

Prepaids and other current assets

Property, plant and equipment

Identifiable intangible assets

Operating lease right-of-use assets

Accounts payable

Accrued compensation

Other current liabilities

Long-term operating lease liabilities

Deferred tax liabilities

Net cash consideration

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

(in thousands)

Amortization Period (in years)

Customer relationships

Product portfolio

The fair values assigned to intangible assets were estimated by discounting expected cash flows based on the relief from royalty and multiperiod excess earnings valuation methodologies.

These valuation methods rely on management judgment, including expected future cash flows resulting from existing customer relationships, customer attrition rates, contributory effects of other assets utilized in the business, royalty rates and other factors.

The goodwill recognized is attributable primarily to strategic and synergistic opportunities related to the Company’s and Dayton Parts’ existing automotive aftermarket businesses, the assembled workforce of Dayton Parts and other factors.

The goodwill is not expected to be deductible for tax purposes.

The financial results of the acquisition have been included in the unaudited condensed consolidated financial statements since the date of acquisition.

The net sales and net income of Dayton Parts included in the unaudited condensed consolidated financial statements for both the three and nine months ended September 25, 2021 were $ 27.4 million and $ 0.3 million, respectively.

The unaudited pro forma information for the periods set forth below gives effect to the Dayton Parts acquisition as if it had occurred as of December 29, 2019, the beginning of the earliest period presented in these financial statements.

The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved had the acquisition been consummated as of that time.

Three Months Ended

Nine Months Ended

(in thousands)

September 25, 2021

September 26, 2020

September 25, 2021

September 26, 2020

Diluted earnings per share

Power Train Industries, Inc.

6 unchanged sentences

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

Under these agreements, we sold $ 433.7 million and $ 496.4 million of accounts receivable during the six months ended June 26, 2021 and June 27, 2020, respectively.

Under these agreements, we sold $ 690.0 million and $ 568.3 million of accounts receivable during the nine months ended September 25, 2021 and September 26, 2020, respectively.

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

Selling, general and administrative expenses include financing costs associated with these accounts receivable sales programs of $ 2.9 million and $ 6.8 million during the three months ended June 26, 2021 and June 27, 2020, respectively, and $ 5.5 million and $ 9.6 million during the six months ended June 26, 2021 and June 27, 2020, respectively.

Selling, general and administrative expenses include financing costs associated with these accounts receivable sales programs of $ 3.1 million and $ 1.3 million during the three months ended September 25, 2021 and September 26, 2020, respectively, and $ 8.6 million and $ 10.9 million during the nine months ended September 25, 2021 and September 26, 2020, respectively.

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.

1 unchanged sentence

(in thousands)

June 26, 2021

September 25, 2021

December 26, 2020

Raw materials

Finished product

Packaging materials

Goodwill and Intangible Assets

Goodwill included the following:

(in thousands)

September 25, 2021

December 26, 2020

Balance at beginning of period

Goodwill acquired

Balance at end of period

Intangible Assets

Intangible assets included the following:

September 25, 2021

December 26, 2020

Intangible assets subject to amortization

Gross Carrying Value

Accumulated Amortization

Net Carrying Value

Gross Carrying Value

Accumulated Amortization

Net Carrying Value

(in thousands)

Customer relationships

Product Portfolio

Amortization expense was $ 1.2 million and $ 0.8 million during the three months ended September 25, 2021 and September 26, 2020, respectively, and $ 2.9 million and $ 2.5 million during the nine months ended September 25, 2021 and September 26, 2020, respectively.

On August 10, 2021, in connection with the acquisition of Dayton Parts, we entered into a new credit agreement that provides for a $ 600 million revolving credit facility, including a letter of credit sub-facility of up to $ 60 million (the “New Facility”).

The New Facility replaced our previous $ 100 million revolving credit facility.

The New Facility matures on August 10, 2026 and is guaranteed by the Company’s material domestic subsidiaries (together with the Company, the “Credit Parties”) and is supported by a security interest in substantially all of the Credit Parties’ personal property and assets, subject to certain exceptions.

Borrowings under the New Facility bear interest at a rate per annum equal to, at the Company’s option, either a LIBOR rate (subject to a 0.00 % floor) or a base rate, in each case plus an applicable margin of, initially (i) in the case of LIBOR rate, 1.250 % or (ii) in the case of base rate loans, 0.250 %.

The applicable margin for (i) base rate loans ranges from 0.000 % to 1.000 % per annum and (ii) for LIBOR loans ranges from 1.000 % to 2.000 % per annum, in each case, based on the Total Net Leverage Ratio (as defined in the New Facility).

The commitment fee is initially equal to 0.150 % and thereafter ranges from 0.125 % to 0.250 % based on the Total Net Leverage Ratio.

As of September 25, 2021, the interest rate on the outstanding borrowings under the New Facility was 1.33 % and the commitment fee was 0.15 %.

The New Facility contains affirmative and negative covenants, including, but not limited to, covenants regarding capital expenditures, share repurchases, and financial covenants related to the ratio of consolidated interest expense to

consolidated EBITDA and the ratio of total net indebtedness to consolidated EBITDA, each as defined by the New Facility.

As of September 25, 2021, we were not in default with respect to the New Facility .

Commitments and Contingencies

We have contingent consideration related to certain of our prior acquisitions due to the uncertainty of the ultimate amount of payment which will become due as earnout payments if performance targets are achieved.

As of June 26, 2021 and December 26, 2020, we accrued $ 10.4 million and $ 8.0 million, respectively, representing the fair value of the estimated payments that we expected would become due in connection with prior acquisitions based upon performance targets.

For the three and six months ended June 26, 2021, we increased this accrual by $ 2.4 million, primarily due to the expected payout based on negotiations with the applicable counterparties.

The changes in the accrual balance were included in Selling, General and Administration expenses.

If the performance targets are fully achieved, the maximum contingent payments under these agreements would be $ 16.0 million using foreign currency exchange rates at June 26, 2021.

During the nine months ended September 25, 2021, we paid $ 10.4 million in contingent consideration in connection with prior acquisitions based upon performance targets.

If the performance targets associated with prior acquisitions are fully achieved, the maximum additional contingent payments to be made under the related acquisition agreements would be $ 3.6 million.

Other Contingencies

13 unchanged sentences

We have concluded that our estimates of variable consideration are not constrained.

All our revenue was recognized under the point of time approach during the six months ended June 26, 2021 and June 27, 2020.

All our revenue was recognized under the point of time approach during the nine months ended September 25, 2021 and September 26, 2020.

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

3 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

(in thousands)

June 26, 2021

June 27, 2020

June 26, 2021

June 27, 2020

September 25, 2021

September 26, 2020

September 25, 2021

September 26, 2020

Automotive body

Three Months Ended

Six Months Ended

Nine Months Ended

(in thousands)

June 26, 2021

June 27, 2020

June 26, 2021

June 27, 2020

September 25, 2021

September 26, 2020

September 25, 2021

September 26, 2020

Net sales to U.S.

6 unchanged sentences

For performance-based RSA grants tied to growth in adjusted pre-tax income, compensation cost related to the award is recognized over the performance period and is calculated using the closing price per share of our common stock on the grant date and an estimate of the probable outcome of the performance conditions at each reporting date.

Since March 2020, we have granted performance-based RSU grants that vest based on our total shareholder return ranking relative to the total shareholder return of the companies comprising the S&P Mid-Cap 400 Growth Index over a three-year performance period.

For performance-based RSU grants 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.

For the six months ended June 26, 2021, we granted 17,714 performance-based RSUs with a grant date fair value of $ 131.02 per share.

Compensation cost related to RSA and RSU grants was $ 1.3 million and $ 1.1 million for the three months ended June 26, 2021 and June 27, 2020, respectively, and $ 3.1 million and $ 2.0 million for the six months ended June 26, 2021 and June 27, 2020, respectively, and were included in selling, general and administrative expense in the Condensed Consolidated Statements of Operations.

The following table summarizes our RSA and RSU activity for the six months ended June 26, 2021:

Since March 2020, we have made performance-based RSU grants that vest based on our total shareholder return ranking relative to the total shareholder return of the companies comprising the S&P Mid-Cap 400 Growth Index over a three-year performance period.

For these awards, 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.

For the nine months ended September 25, 2021, we granted 17,714 performance-based RSUs with a grant date fair value of $ 131.02 per share.

Compensation cost related to RSA and RSU grants was $ 1.4 million and $ 1.0 million for the three months ended September 25, 2021 and September 26, 2020, respectively, and $ 4.5 million and $ 3.0 million for the nine months ended September 25, 2021 and September 26, 2020, respectively, and were included in selling, general and administrative expense in the Condensed Consolidated Statements of Operations.

The following table summarizes our RSA and RSU activity for the nine months ended September 25, 2021:

Balance at December 26, 2020

Balance at June 26, 2021

As of June 26, 2021, there was $ 9.5 million of unrecognized compensation cost related to unvested RSA and RSU grants that is expected to be recognized over a weighted average period of 2.4 years.

Balance at September 25, 2021

As of September 25, 2021, there was $ 10.9 million of unrecognized compensation cost related to unvested RSA and RSU grants that is expected to be recognized over a weighted average period of 2.3 years.

Stock Options

We expense the grant-date fair value of stock options as compensation cost on a straight-line basis over the vesting period for which related services are performed.

The compensation cost charged against income was $ 0.3 million for each of the three months ended June 26, 2021 and June 27, 2020, and $ 0.6 million and $ 0.5 million for the six months ended June 26, 2021 and June 27, 2020, respectively.

The compensation cost charged against income was $ 0.3 million for each of the three months ended September 25, 2021 and September 26, 2020, and $ 0.9 million and $ 0.8 million for the nine months ended September 25, 2021 and September 26, 2020, respectively.

These costs are included as selling, general and administrative expense in the Condensed Consolidated Statements of Operations.

4 unchanged sentences

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

The following table summarizes our stock option activity for the six months ended June 26, 2021:

The following table summarizes our stock option activity for the nine months ended September 25, 2021 :

Balance at December 26, 2020

Balance at June 26, 2021

Options exercisable at June 26, 2021

As of June 26, 2021, there was $ 3.4 million of unrecognized compensation cost related to unvested stock options that is expected to be recognized over a weighted average period of 3.0 years.

Balance at September 25, 2021

Options exercisable at September 25, 2021

As of September 25, 2021, there was $ 3.0 million of unrecognized compensation cost related to unvested stock options that is expected to be recognized over a weighted average period of 2.8 years.

Employee Stock Purchase Plan

Under the Company’s employee stock purchase program, employees purchased 31,462 shares of the Company’s common stock during the three and six months ended June 26, 2021, and 10,735 shares during the three and six months ended June 27, 2020.

The Company recognized compensation cost of $ 0.7 million for the three and six months ended June 26, 2021, and $ 0.1 million and $ 0.2 million for the three and six months ended June 27, 2020, respectively.

There were 31,462 shares and 10,735 shares purchased during the nine months ended September 25, 2021 and September 26, 2020, respectively.

During the nine months ended September 25, 2021 and September 26, 2020, compensation costs were $ 0.7 million and $ 0.3 million, respectively.

Earnings Per Share

2 unchanged sentences

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

Stock-based awards that were excluded from the calculation of diluted earnings per share as their effect would have been anti-dilutive were 19,000 shares and 123,000 shares for the three months ended June 26, 2021 and June 27, 2020, respectively, and 14,000 shares and 107,000 shares for the six months ended June 26, 2021 and June 27, 2020, respectively.

Stock-based awards that were excluded from the calculation of diluted earnings per share as their effect would have been anti-dilutive were 19,000 shares and 34,000 shares for the three months ended September 25, 2021 and September 26, 2020, respectively, and 16,000 shares and 141,000 shares for the nine months ended September 25, 2021 and September 26, 2020, respectively.

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

Three Months Ended

Six Months Ended

Nine Months Ended

(in thousands, except per share data)

June 26, 2021

June 27, 2020

June 26, 2021

June 27, 2020

September 25, 2021

September 26, 2020

September 25, 2021

September 26, 2020

Weighted average basic shares outstanding

8 unchanged sentences

The following table summarizes the repurchase and cancellation of common stock in the 401(k) Plan:

For the Three Months Ended

For the Six Months Ended

June 26, 2021

June 27, 2020

June 26, 2021

June 27, 2020

Three Months Ended

Nine Months Ended

September 25, 2021

September 26, 2020

September 25, 2021

September 26, 2020

Shares repurchased and canceled

1 unchanged sentence

Average price per share

Our Board of Directors has authorized the repurchase of up to $ 500 million through December 31, 2022 under a previously announced share repurchase program.

Our Board of Directors has authorized the repurchase of up to $ 500 million of our common stock through December 31, 2022 under a previously announced share repurchase program.

Under this program, share repurchases may be made from time to time depending on market conditions, share price, share availability and other factors at our discretion.

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

At June 26, 2021, $ 176.2 million was available for repurchase under this share repurchase program.

At September 25, 2021, $ 153.0 million was available for repurchase under this share repurchase program.

The following table summarizes the repurchase and cancellation of common stock under the share repurchase program:

For the Three Months Ended

For the Six Months Ended

June 26, 2021

June 27, 2020

June 26, 2021

June 27, 2020

Three Months Ended

Nine Months Ended

September 25, 2021

September 26, 2020

September 25, 2021

September 26, 2020

Shares repurchased and canceled

1 unchanged sentence

Average price per share

At June 26, 2021, we had $ 1.2 million of net unrecognized tax benefits, all of which would lower our effective tax rate if recognized.

At September 25, 2021, we had $ 1.2 million of net unrecognized tax benefits, all 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 June 26, 2021, accrued interest and penalties related to uncertain tax positions were not material.

As of September 25, 2021, accrued interest and penalties related to uncertain tax positions were not material.

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

17 unchanged sentences

Fair Value Disclosures

The carrying value of financial instruments such as cash, accounts receivable, accounts payable, and other current assets and liabilities approximate their fair value based on the short-term nature of these instruments.

The carrying value of financial instruments such as cash, accounts receivable, accounts payable, debt under our revolving credit facility, and other current assets and liabilities approximate their fair value based on the short-term nature of these instruments.

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