Dorman Products, Inc. 10-Q

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations “Management’s Discussion and Analysis of Financial Condition and Results of Operations” should be read in conjunction with the condensed consolidated financial statements and related notes thereto included in PART I, ITEM 1 of this Quarterly Report on Form 10-Q. As used herein, unless the context requires otherwise, “Dorman,” the “Company,” “we,” “us,” or “our” refers to Dorman Products, Inc. and its subsidiaries. Cautionary Statement Regarding Forward-Looking Statements This document contains certain statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including statements related to the COVID-19 pandemic, net sales, diluted earnings per share, gross profit, gross margin, selling, general and administrative expenses, income tax expense, income before income taxes, net income, cash and cash equivalents, indebtedness, liquidity, the Company’s share repurchase program, the Company’s outlook and distribution facility costs and productivity initiatives. Words such as “believe,” “demonstrate,” “expect,” “estimate,” “forecast,” “anticipate,” “should,” “will” and “likely” and similar expressions identify forward-looking statements. However, the absence of these words does not mean the statements are not forward-looking. In addition, statements that are not historical should also be considered forward-looking statements. Readers are cautioned not to place undue reliance on those forward-looking statements, which speak only as of the date the statement was made. Such forward-looking statements are based on current expectations that involve a number of known and unknown risks, uncertainties and other factors (many of which are outside of our control) which may cause actual events to be materially different from those expressed or implied by such forward-looking statements. These risks, uncertainties and other factors include, but are not limited to (i) the age, condition and number of vehicles that need servicing; (ii) competition in the automotive aftermarket industry; (iii) the loss or decrease in sales among one of our top customers; (iv) price competition; (v) limited customer shelf space; (vi) customer consolidation; (vii) widespread public health epidemics, including COVID-19; (viii) failure to maintain sufficient inventory or anticipate changes in customer demand; (ix) excess overstock inventory-related returns; (x) the inability to purchase raw materials, components and other items from our suppliers; (xi) the availability and cost of third-party transportation providers; (xii) reliance on new product development; (xiii) changes in, or restrictions on access to, automotive technology; (xiv) quality problems with our products; (xv) inability to protect our intellectual property; (xvi) claims of intellectual property infringement; (xvii) failure to maintain the value of our brands; (xviii) cyber-attacks; (xix) foreign currency fluctuations and dependence on foreign suppliers; (xx) exposure to risks related to accounts receivable; (xxi) changes in U.S. trade policy, including the imposition of tariffs; (xxii) the level of our indebtedness; (xxiii) risks related to accounts receivable sales agreements; (xxiv) the phaseout of LIBOR or the impact of the imposition of a new reference rate; (xxv) our executive chairman and his family owning a significant portion of the Company; (xxvi) unfavorable economic conditions; (xxvii) quarterly fluctuations and disruptions from events beyond our control; (xxviii) unfavorable results of legal proceedings; (xxix) volatility in the market price of our common stock and potential securities class action litigation; (xxx) losing the services of our executive officers or other highly qualified and experienced Contributors; (xxxi) the inability to identify suitable acquisition candidates, complete acquisitions or integrate acquisitions successfully; (xxxii) changes in tax laws; (xxxiii) global climate change and related regulations; (xxxiv) violations of anti-bribery laws; and (xxxv) import and export control and economic sanctions laws and regulations. Should one or more of any of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. See the “Statement Regarding Forward Looking Statements,” PART I, ITEM 1A, “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 26, 2020 and the Company’s other filings with the U.S. Securities and Exchange Commission (“SEC”) for additional information regarding forward-looking statements and the factors that could cause actual results to differ materially from those anticipated in the forward-looking statements. The Company is under no obligation to, and expressly disclaims any such obligation to, update any of the information in this document, including but not limited to any situation where any forward-looking statement later turns out to be inaccurate whether as a result of new information, future events or otherwise. Introduction The following discussion and analysis, as well as other sections in this Quarterly Report on Form 10-Q, should be read in conjunction with the unaudited condensed consolidated financial statements and footnotes thereto of Dorman Products, Inc. and its subsidiaries included in “ITEM 1. Financial Statements” of this Quarterly Report on Form 10-Q and with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the audited 14 consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 26, 2020 . This Quarterly Report on Form 10-Q contains the registered and unregistered trademarks or service marks of Dorman and are the property of Dorman Products, Inc. and/or its affiliates. This Quarterly Report on Form 10-Q also may contain additional trade names, trademarks or service marks belonging to other companies. We do not intend our use or display of other parties’ trademarks, trade names or service marks to imply, and such use or display should not be construed to imply, a relationship with or endorsement or sponsorship of us by these parties. Overview We are one of the leading suppliers of replacement parts and fasteners for passenger cars, light trucks, and heavy-duty trucks in the automotive aftermarket industry. As of December 26, 2020, we marketed approximately 81,000 distinct parts, many of which we designed and engineered. This number excludes private label stock keeping units and other variations in how we market, package and distribute our products, includes distinct parts of acquired companies and reflects distinct parts that have been discontinued at the end of their lifecycle. We are one of the leading aftermarket suppliers of original equipment (“OE”) “dealer exclusive” parts. Original equipment “dealer exclusive” parts are those which were traditionally available to consumers only from original equipment manufacturers or used parts from salvage yards and include, among other parts, intake manifolds, exhaust manifolds, window regulators, radiator fan assemblies, tire pressure monitor sensors, exhaust gas recirculation (EGR) coolers and complex electronics modules. Fasteners include such items as oil drain plugs, wheel bolts, and wheel lug nuts. For the year ended December 26, 2020, approximately 75% of our products were sold under brands that we own, and the remainder of our products were sold for resale under customers' private labels, other brands or in bulk. Our products are sold primarily in the United States through automotive aftermarket retailers (such as Advance Auto Parts, Inc., AutoZone, Inc., and O'Reilly Automotive, Inc.), including through their online platforms; national, regional and local warehouse distributors (such as Genuine Parts Co. – NAPA); and specialty markets, and salvage yards. We also distribute automotive aftermarket parts internationally, with sales primarily into Canada and Mexico, and to a lesser extent, Europe, the Middle East, and Australia. We operate on a fifty-two or fifty-three-week period ending on the last Saturday of the calendar year. Our 2021 fiscal year will be a fifty-two-week period that will end on December 25, 2021 (“fiscal 2021”). Our fiscal 2020 was a fifty-two-week period that ended on December 26, 2020 (“fiscal 2020”). Critical Accounting Policies There have been no material changes to the Company’s critical accounting policies as described in the Annual Report on Form 10-K for the year ended December 26, 2020. COVID-19 While COVID-19 did not have a material adverse effect on our business operations for the nine months ended September 25, 2021, during the period we did observe pandemic-related pressures on the global supply network that caused logistical issues, including higher freight costs and inflation with respect to materials costs, which impacted our results. We currently expect those pressures to continue to exist for the remainder of the fiscal year. As countries continue to combat COVID-19, and as government-imposed regulations regarding, among other things, COVID-19 testing, vaccine mandates and related workplace restrictions change around the world, there is still a risk that the pandemic may impact the overall demand environment as well as our ability to maintain staffing at our facilities, to source parts and other materials to meet demand levels, to maintain inventory levels and to fulfill contractual requirements. We will continue to closely monitor updates regarding the spread of COVID-19 and its variants, the distribution of vaccines developed to combat COVID-19, and applicable vaccine mandates, and we will adjust our operations according to guidelines from local, state and federal officials. In light of the foregoing, we may take actions that alter our business operations or that we determine are in the best interests of our employees, customers, suppliers and shareholders. New Product Development New product development is an important success factor for us and traditionally has been our primary vehicle for growth. We have made incremental investments to increase our new product development efforts to grow our business and strengthen our relationships with our customers. The investments primarily have been in the form of increased product development resources, increased customer and end-user awareness programs, and customer service improvements. 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. 15 In the nine months ended September 25, 2021 , excluding Dayton Parts, we introd uced 3,345 new distinct parts t o our customers and end- users , including 649 “New-to-the-A ftermarket ” parts . We introduced 3,479 distinct part s to our customers and end- users in the fiscal year ended December 26, 2020 , including 1,433 “N ew-to-th e- A ftermarket ” parts . One area of expanded development focus has been our complex electronics program, which we believe will help us capitalize on the increase of advanced computing and sensing components being utilized on today’s OE platforms. Current generation vehicles now contain an average of approximately 100 electronic modules, with some high-end luxury vehicles containing over 200 modules. Our complex electronics products are designed and developed in-house and tested using proprietary equipment that simulates the on-vehicle operating environment to verify performance. We continue to make investments in technology and people to enhance our electronics design capabilities, expand our complex electronics product portfolio and further develop our leadership position in the category. Another area of focus has been on products we market for the medium- and heavy-duty truck sector of the automotive aftermarket industry. Our recent acquisition of Dayton Parts, a manufacturer of chassis and other parts for medium- and heavy-duty vehicles, is one of the ways in which we have sought to further our strategy of expansion in this sector. We believe that this sector provides many of the same opportunities for growth that the passenger car and light truck sector of the automotive aftermarket industry has provided us. For example, 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 nine months ended September 25, 2021, excluding Dayton Parts, we introduced 74 distinct parts in this product line. Acquisitions Our growth is also impacted by acquisitions. For example, on August 10, 2021, we acquired Dayton Parts. See Note 2, Business Acquisitions and Investments under Notes to Condensed Consolidated Financial Statements for additional information. We may acquire businesses in the future to supplement our financial growth, increase our customer base, add to our distribution capabilities or enhance our product development resources, among other reasons. Economic Factors The Company’s financial results are also impacted by various economic and industry factors, including, but not limited to the labor market and inflationary costs, the number, age and condition of vehicles in operation at any one time, and miles driven by those vehicles. Impact of Labor Market and Inflationary Costs We have experienced broad-based inflationary impacts during the nine months ended September 25, 2021, due primarily to: global transportation and logistics constraints, which have resulted in significantly higher transportation costs; tariffs; and wage inflation from an increasingly competitive labor market. We expect increased freight, higher labor costs and material inflation costs to continue to negatively impact our results for the remainder of the fiscal year. We attempt to offset inflationary pressures with price increases to customers and the use of alternative suppliers. However, there can be no assurance that we will be successful in these efforts. Vehicles in Operation The Company’s products are primarily purchased and installed on a subsegment of the passenger and light-duty vehicles in operation in the United States (“VIO”), specifically weighted towards vehicles aged 8 to 13 years old. Each year, the United States seasonally adjusted annual rate (“US SAAR”) of new vehicles purchased adds a new year to the VIO. According to data from the Auto Care Association (“Auto Care”), the US SAAR experienced a decline from 2008 to 2011 as consumers purchased fewer new vehicles as a result of the Great Recession of 2008. We believe that the declining US SAAR during that period resulted in a follow-on decline in our primary VIO subsegment (8 to 13-year-old vehicles) commencing in 2016. However, following 2011 and the impact of the Great Recession of 2008, U.S. consumers began to increase their purchases of new vehicles which over time caused the US SAAR to recover and return to more historical levels. Consequently, subject to any potential impacts from COVID-19, we expect the VIO for vehicles aged 8 to 13 years old to continue to recover over the next several years. In addition, we believe that vehicle owners generally are operating their current vehicles longer than they did several years ago, performing necessary repairs and maintenance to keep those vehicles well maintained. We believe this trend has resulted in an increase in VIO. According to data published by Polk, a division of IHS Automotive, the average age of VIO increased to 12.0 years as of October 2020 from 11.9 years as of October 2019 despite increasing new car sales. 16 Additionally, while the number of VIO in the United States decreased 4% in 2020 to 279.8 million from 290.0 million in 2019, the number of VIO that are 11 years old or older increased from 57% in 2019 to 60% in 2020. Vehicle scrappage rates have also decreased over the last several years. Miles Driven The COVID-19 pandemic in general, as well as restrictions imposed by certain states in response to the COVID-19 pandemic, adversely impacted work-related and personal travel throughout 2020 and into early 2021. However, as a result of easing restrictions, the number of miles driven has shown a recent increase compared to prior year levels. In fact, according the U.S. Department of Transportation, the number of miles driven through July 2021 has increased 12.8% year over year. We believe that demand for our products generally correlates to miles driven, as the more miles a vehicle is driven, the more likely it is that parts will fail. The combination of the factors above has accounted for a portion of our sales growth and is expected to impact our future results. Discounts, Allowances and Incentives We offer a variety of customer discounts, rebates, defective and slowing moving product returns and other incentives. 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 under 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. For those customers that choose to receive a payment on a quarterly or annual basis instead of “off-invoice,” we accrue for such payments as the related sales are made and reduce sales accordingly. Finally, rebates and discounts are provided to customers to support promotional activities such as advertising and sales force allowances. Our customers, particularly our larger retail customers, regularly seek more favorable pricing and product return provisions and extended payment terms when negotiating with us. 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. 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. New Customer Acquisition Costs New customer acquisition costs refer to arrangements under which we incur change-over costs to induce a customer to switch from a competitor’s brand. Change-over costs include the costs related to removing the new customer’s existing inventory (purchased from their previous supplier) and replacing it with Dorman inventory, which is commonly referred to as a stock-lift. New customer acquisition costs are recorded as a reduction to revenue when incurred. Product Warranty and Overstock Returns Many of our products carry a lifetime limited warranty, which generally covers defects in materials or workmanship and failure to meet specifications. In addition to warranty returns, we also may permit our customers to return new, undamaged products to us within customer-specific limits if they have overstocked their inventories. At the time products are sold, we accrue a liability for product warranties and overstock returns as a percentage of sales based upon estimates established using historical information on the nature, frequency and average cost of the claim and the probability of the customer return. Significant judgments and estimates must be made and used in connection with establishing the sales returns and other allowances in any accounting period. Revision to these estimates is made when necessary, based upon changes in these factors. We regularly study trends of such claims. Foreign Currency Our products are purchased from suppliers in the United States and a variety of non-U.S. countries. The products generally are purchased through purchase orders with the purchase price specified in U.S. dollars. Accordingly, we generally do not have exposure to fluctuations in the relationship between the U.S. dollar and various foreign currencies between the time of execution of the purchase order and payment for the product. To the extent that the U.S. dollar changes in value relative to those foreign currencies in the future, the prices charged by our suppliers for products under new purchase orders may change in equivalent U.S. dollars. The largest portion of our overseas purchases comes from China. The Chinese yuan to U.S. dollar exchange rate has fluctuated over the past 17 several years. Any future changes in the value of the Chinese yuan relative to the U.S. dollar may result in a change in the cost of products that we purchase from China in the future. However, the cost of the products we procure is also affected by other factors including raw material availability, labor cost, and transportation costs. Since our consolidated financial statements are denominated in U.S. dollars, the assets, liabilities, net sales, and expenses which are denominated in currencies other than the U.S. dollar must be converted into U.S. dollars using exchange rates for the current period. As a result, fluctuations in foreign currency exchange rates may impact our financial results. Impact of Tariffs In the third quarter of 2018, the Office of the United States Trade Representative (USTR) began imposing additional tariffs on products imported from China, including many of our products, ranging from 7.5% to 25%. The tariffs enacted to date increase the cost of many of the products that are manufactured for us in China. We have taken several actions to mitigate the impact of the tariffs including, but not limited to, price increases to our customers and cost concessions from our suppliers. We expect to continue mitigating the impact of tariffs in fiscal 2021 primarily through selling price increases to offset the higher tariffs incurred. Tariffs are not expected to have a material impact on our net income but are expected to increase net sales and lower our gross and operating profit margins to the extent that these additional costs are passed through to customers. In January 2020, the USTR granted temporary tariff relief for certain categories of products being imported from China. The tariff relief granted by the USTR expired on most categories of products being imported from China at the end of 2020. However, the USTR has stated it is considering reinstating temporary tariff relief on certain categories of products imported after October 12, 2021 following its review of comments submitted to the USTR prior to December 1, 2021. 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 tariffs are reduced or tariff relief is granted. Results of Operations The following table sets forth, for the periods indicated, the percentage of net sales represented by certain items in our Condensed Consolidated Statements of Operations: Three Months Ended* Nine Months Ended* (in millions) September 25, 2021 September 26, 2020 September 25, 2021 September 26, 2020 Net sales $ 348,426 100.0 % $ 300,620 100.0 % $ 947,073 100.0 % $ 791,532 100.0 % Cost of goods sold 231,572 66.5 % 192,819 64.1 % 615,574 65.0 % 519,786 65.7 % Gross profit 116,854 33.5 % 107,801 35.9 % 331,499 35.0 % 271,746 34.3 % Selling, general and administrative expenses 72,663 20.9 % 63,028 21.0 % 205,049 21.7 % 184,288 23.3 % Income from operations 44,191 12.7 % 44,773 14.9 % 126,450 13.4 % 87,458 11.0 % Interest expense, net 733 0.2 % 63 0.0 % 918 0.1 % 545 0.1 % Other income, net (95 ) -0.0 % (46 ) -0.0 % (334 ) -0.0 % (2,862 ) -0.4 % Income before income taxes 43,553 12.5 % 44,756 14.9 % 125,866 13.3 % 89,775 11.3 % Provision for income taxes 10,449 3.0 % 10,497 3.5 % 28,414 3.0 % 18,856 2.4 % Net income $ 33,104 9.5 % $ 34,259 11.4 % $ 97,452 10.3 % $ 70,919 9.0 % * Percentage of sales information may not add due to rounding Three Months Ended September 25, 2021 Compared to Three Months Ended September 26, 2020 Net sales increased 16% to $348.4 million for the three months ended September 25, 2021 from $300.6 million for the three months ended September 26, 2020. The increase in net sales reflected the addition of Dayton Parts as well as robust customer demand across all our product channels. Year-over-year net sales growth for the three months ended September 25, 2021 excluding Dayton Parts was 7%. Gross profit margin was 33.5% of net sales for the three months ended September 25, 2021 compared to 35.9% of net sales for the three months ended September 26, 2020. Dayton Parts had a 150 basis points dilutive impact on gross margin in the three months ended September 25, 2021, primarily due to higher costs in the three months ended September 25, 2021 from fair value adjustments to inventory recorded in connection with the Dayton Parts acquisition. We also experienced broad-based inflationary impacts due to global transportation and logistics constraints. Although pass-through price increases we have implemented are expected to largely offset these inflationary impacts on a go-forward basis, we did not experience a full quarter of these price increases for the three months ended September 25, 2021. Pricing 18 increases implemented to pass through the increased costs had no added profit and consequently resulted in a lower gross margin. Selling, general and administrative expenses (“SG&A”) were $72.7 million, or 20.9% of net sales, for the three months ended September 25, 2021 compared to $63.0 million, or 21.0% of net sales, for the three months ended September 26, 2020. The decrease in SG&A expenses as a percentage of net sales was primarily due to leverage from the increase in net sales, partially offset by wage and benefits inflation and costs related to the completion of the Dayton Parts acquisition and subsequent integration activities in the three months ended September 25, 2021. Our effective tax rate was 24.0% for the three months ended September 25, 2021 compared to 23.5% for the three months ended September 26, 2020. The lower effective tax rate for the three months ended September 26, 2020 was the result of lower state tax expense and a nontaxable book gain associated with the PTI acquisition. Nondeductible transaction costs related to the Dayton Parts acquisition also contributed to the higher effective tax rate for the three months ended September 25, 2021. Nine Months Ended September 25, 2021 Compared to Nine Months Ended September 26, 2020 Net sales increased 20% to $947.1 million for the nine months ended September 25, 2021 from $791.5 million for the nine months ended September 26, 2020. The increase in net sales reflected the addition of Dayton Parts as well as robust customer demand across all our product channels. Year-over-year net sales growth excluding Dayton Parts for the nine months ended September 25, 2021 was 16%. The absence of the government imposed shut-downs that negatively impacted the nine months ended September 26, 2020 was also a significant contributor to the year-over-year growth. Gross profit margin was 35.0% of net sales for the nine months ended September 25, 2021 compared to 34.3% of net sales for the nine months ended September 26, 2020. Gross margin expansion was driven by fixed cost leverage from higher sales volume and improved efficiencies as we continued to drive productivity savings in our end-to-end supply chain processes. Additionally, we benefitted from the absence of out-of-pocket costs incurred due to the COVID-19 pandemic in the nine months ended September 26, 2020. These benefits were partially offset by broad-based inflationary impacts due to global transportation and logistics constraints and higher costs from fair value adjustments to inventory recorded in connection with the Dayton Parts acquisition in the nine months ended September 25, 2021. Selling, general and administrative expenses were $205.0 million, or 21.7% of net sales, for the nine months ended September 25, 2021 compared to $184.3 million, or 23.3% of net sales, for the nine months ended September 26, 2020. The decrease in SG&A as a percentage of net sales was due to the operating leverage from the $155.6 million increase in net sales for the nine months ended September 25, 2021 as compared to the nine months ended September 26, 2020. Additionally, we saw benefits in SG&A as a percentage of net sales from the absence of out-of-pocket costs related to the COVID-19 pandemic incurred in the nine months ended September 26, 2020. These benefits were partially offset by wage and benefits inflation and costs related to the completion of the Dayton Parts acquisition and subsequent integration activities in the nine months ended September 25, 2021. Our effective tax rate was 22.6% for the nine months ended September 25, 2021 compared to 21.0% for the nine months ended September 26, 2020. The lower effective tax rate for the nine months ended September 26, 2020 was the result of lower state tax expense, a tax benefit related to a nontaxable book gain and the write-off of a deferred tax liability associated with PTI upon our acquisition of the controlling interest in January 2020, and a foreign tax credit carry-back claim. Nondeductible transaction costs related to the Dayton Parts acquisition also contributed to the higher effective tax rate for the nine months ended September 25, 2021. 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 sponsored by our customers. Additionally, we have utilized borrowings under revolving lines of credit, as needed, to fund Company objectives. Cash and cash equivalents were $57.3 million at September 25, 2021 compared to $155.6 million at December 26, 2020. During the nine months ended September 25, 2021, strong cash provided from operating activities was more than offset by cash used to fund the Dayton Parts acquisition, share repurchases under our publicly announced repurchase program and capital expenditures. Working capital was $390.4 million at September 25, 2021 compared to $600.3 million at December 26, 2020. 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. However, our liquidity could be 19 negatively affected by extending payment terms to customers, a decrease in demand for our products, the outcome of contingencies or other factors, including the impact of the COVID-19 pandemic. Payment Terms and Accounts Receivable Sales Programs Over the past several years we have continued to extend payment terms to certain customers as a result of customer requests and market demands. These extended terms have resulted in increased accounts receivable levels and significant uses of cash flows. We participate in accounts receivable sales programs with several customers that allow us to sell our accounts receivable to financial institutions to offset the negative cash flow impact of these payment terms extensions. However, any sales of accounts receivable through these programs ultimately result in us receiving a lesser amount of cash upfront than if we collected those accounts receivable ourselves in due course. Moreover, to the extent that any of these accounts receivable sales programs bear interest rates tied to the London Inter-Bank Offered Rate (“LIBOR”) or other reference rates, increases in these applicable rates increase our cost to sell our receivable. See ITEM 3. Quantitative and Qualitative Disclosures about Market Risk for more information. Further extensions of customer payment terms would result in additional uses of cash flow or increased costs associated with the sales of accounts receivable. During the nine months ended September 25, 2021 and September 26, 2020, we sold $690.0 million and $568.3 million of accounts receivable, respectively, under these programs. If receivables had not been sold over the previous twelve months, approximately $381 million and $505 million of additional accounts receivable would have been outstanding at September 25, 2021 and December 26, 2020, respectively, based on our standard payment terms. We can sell increased levels of accounts receivable under our available programs if liquidity needs arise, whether due to the continued impacts of COVID-19 or other factors. Credit Agreement 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 interest rate at September 25, 2021 was LIBOR plus 125 basis points (1.33%). 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. 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 credit agreement. As of September 25, 2021, there was $249.4 million in outstanding borrowings under the New Facility and two outstanding letters of credit for $0.8 million in the aggregate which were issued to secure ordinary course of business transactions. Net of outstanding borrowings and letters of credit, we had $349.8 million available under the New Facility at September 25, 2021. Cash Flows The following summarizes the activities included in the Condensed Consolidated Statements of Cash Flows: Nine Months Ended (in thousands) September 25, 2021 September 26, 2020 Cash provided by operating activities $ 77,601 $ 145,719 Cash used in investing activities (360,757 ) (26,369 ) Cash provided by (used in) financing activities 184,855 (17,201 ) Net (decrease) increase in cash and cash equivalents $ (98,301 ) $ 102,149 20 During the nine months ended September 25, 2021, cash provided by operating activities was $77.6 million compared to $145.7 million during the nine months ended September 26, 2020. The $68.1 million decrease was driven by higher inventory purchases to maintain customer fill rates, as compared to the prior year, partially offset by higher proceeds from accounts receivable due to higher sales of accounts receivable in the nine months ended September 25, 2021. Investing activities used cash of $360.8 million and $26.4 million during the nine months ended September 25, 2021 and September 26, 2020, respectively. During the nine months ended September 25, 2021, we used $345.5 million to acquire Dayton Parts, net of cash acquired and during the nine months ended September 26, 2020 we used $14.3 million to acquire the remaining 60% of the outstanding equity of PTI, net of cash acquired. Financing activities used $184.9 million of cash during the nine months ended September 25, 2021, compared to $17.2 million of cash provided during the nine months ended September 26, 2020. During the nine months ended September 25, 2021, we borrowed $252.4 million under the New Facility to help fund the acquisition of Dayton Parts in August 2021, and subsequently repaid $3.0 million of that borrowing during the nine months ended September 25, 2021. Additionally, during the nine months ended September 25, 2021, we paid $54.2 million to repurchase 534,507 common shares under our share repurchase plan. During the nine months ended September 26, 2020, we paid $16.2 million to repurchase 218,836 common shares under the share repurchase plan. The remaining uses of cash from financing activities in each period result primarily from the repurchase of our common stock from our 401(k) Plan.