What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-11-10 compared with 2020-08-05 · 104 added, 98 removed, 208 unchanged (49% of the section changed)

57 unchanged sentences

Secondary Stock Offering

In June 2020, we closed a secondary offering selling 2.8 million shares of common stock at a price of $76.00 per share for gross proceeds of $209.8 million.

In June 2020, we completed a secondary offering selling 2.8 million shares of common stock at a price of $76.00 per share for gross proceeds of $209.8 million.

The net proceeds to us after underwriters' discounts and commissions of $11.0 million and $0.5 million of offering costs was $198.2 million.

1 unchanged sentence

This offering was made pursuant to our registration statement on Form S-3.

Purchase of Non-controlling Interest

On July 22, 2020, we, pursuant to a stock purchase agreement with Flagship, Inc., dated as of the same date, purchased the remaining 20% interest of FF US Holding Corp.

for $25.0 million payable in a combination of stock and cash.

Refer to Note 9 - Commitments and Contingencies for additional details of this agreement.

Critical Accounting Policies and Estimates

5 unchanged sentences

To the extent such a valuation allowance is established or reduced in a period, we reflect the change with a corresponding increase or decrease of our income tax provision in our consolidated statements of income.

There have been no material changes in the valuation allowance for foreign tax credits for the three and six month periods ended July 3, 2020 or June 28, 2019.

There have been no material changes in the valuation allowance for foreign tax credits for the three and nine month periods ended October 2, 2020 or September 27, 2019.

There have been no other changes to our significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended January 3, 2020, as filed with the SEC on March 3, 2020, that have had a material impact on our condensed consolidated financial statements and related notes.

3 unchanged sentences

The table below summarizes our results of operations:

For the three months ended For the six months ended

(in thousands) July 3, 2020 June 28, 2019 July 3, 2020 June 28, 2019

For the three months ended For the nine months ended

(in thousands) October 2, 2020 September 27, 2019 October 2, 2020 September 27, 2019

Sales $ 260,700 $ 211,317 $ 628,163 $ 565,139

10 unchanged sentences

Interest expense 2,291 748 7,030 2,582

Other expense 71 582 133 569

Other (income) expense (189) (37) (57) 532

Other expense, net 2,102 711 6,973 3,114

5 unchanged sentences

The following table sets forth selected statement of income data as a percentage of sales for the periods indicated:

For the three months ended For the six months ended

July 3, 2020 June 28, 2019 July 3, 2020 June 28, 2019

For the three months ended For the nine months ended

October 2, 2020 September 27, 2019 October 2, 2020 September 27, 2019

Sales 100.0 % 100.0 % 100.0 % 100.0 %

10 unchanged sentences

Interest expense 0.9 0.4 1.1 0.5

Other expense — 0.3 — 0.2

Other (income) expense (0.1) — — 0.1

Other expense, net 0.8 0.3 1.1 0.6

5 unchanged sentences

*Percentages may not foot due to rounding.

Three months ended July 3, 2020 compared to three months ended June 28, 2019

Three months ended October 2, 2020 compared to three months ended September 27, 2019

For the three months ended

(in millions) July 3, 2020 June 28, 2019 Change ($) Change (%)

(in millions) October 2, 2020 September 27, 2019 Change ($) Change (%)

Powered Vehicle products $ 153.0 $ 130.0 $ 23.0 17.7 %

1 unchanged sentence

Total sales $ 260.7 $ 211.3 $ 49.4 23.4 %

Total sales for the three months ended July 3, 2020 decreased approximately $9.0 million, or 4.7%, compared to the three months ended June 28, 2019.

Powered Vehicle product sales decreased by $16.7 million, or 14.5%, primarily due to impacts of the COVID-19 pandemic, including production shutdowns at our OEM customers, partially offset by the impact of our SCA subsidiary, which was acquired in March 2020, and growth in aftermarket products.

Total sales for the three months ended October 2, 2020 increased approximately $49.4 million, or 23.4%, compared to the three months ended September 27, 2019.

Powered Vehicle product sales increased by $23.0 million, or 17.7%, primarily due to the impact of our SCA subsidiary, which was acquired in March 2020.

Additionally, Specialty Sports product sales increased by $26.4 million, or 32.4%, primarily due to increased demand in both the OEM and aftermarket channels.

1 unchanged sentence

For the three months ended

(in millions) July 3, 2020 June 28, 2019 Change ($) Change (%)

(in millions) October 2, 2020 September 27, 2019 Change ($) Change (%)

Cost of sales $ 171.2 $ 141.5 $ 29.7 21.0 %

Cost of sales for the three months ended July 3, 2020 decreased approximately $6.8 million, or 5.2%, compared to the three months ended June 28, 2019.

The decrease in cost of sales was driven primarily by certain business factors affecting gross margin, which are discussed below.

For the three months ended July 3, 2020, our gross margin increased 40 basis points to 32.8% compared to 32.4% for the three months ended June 28, 2019.

The increase in gross margin was primarily due to the impact of the SCA acquisition, product and channel mix, and improvement in supply chain efficiencies, partially offset by higher factory related costs including incremental costs related to the COVID-19 pandemic.

Cost of sales for the three months ended October 2, 2020 increased approximately $29.7 million, or 21.0%, compared to the three months ended September 27, 2019.

The increase in cost of sales was primarily due to the 23.4% increase in sales in the same period, as well as certain business factors affecting gross margin which are discussed below.

For the three months ended October 2, 2020, our gross margin increased 130 basis points to 34.3% compared to 33.0% for the three months ended September 27, 2019.

The increase in gross margin was primarily due to favorable product and channel mix including the impact of the SCA acquisition.

Operating expenses

For the three months ended

(in millions) July 3, 2020 June 28, 2019 Change ($) Change (%)

(in millions) October 2, 2020 September 27, 2019 Change ($) Change (%)

Operating expenses:

4 unchanged sentences

Total operating expenses $ 43.9 $ 34.5 $ 9.4 27.2 %

Total operating expenses for the three months ended July 3, 2020 were $40.6 million compared to $32.7 million for the three months ended June 28, 2019.

When expressed as a percentage of total sales, total operating expenses increased to 22.2% of total sales for the three months ended July 3, 2020 compared to 17.0% of total sales in the three months ended June 28, 2019.

The increase in operating expenses is primarily due to SCA related costs, including acquisition costs, operating costs and amortization expense, partially offset by reductions in various other expenses.

Within operating expenses, our sales and marketing expenses increased approximately $1.4 million primarily due to $2.7 million of costs associated with our SCA subsidiary, partially offset by marketing and employee related expenses.

Research and development costs increased approximately $0.5 million primarily due to personnel investments to support future growth and product innovation.

General and administrative expenses increased by approximately $2.3 million resulting from various factors including SCA acquisition-related compensation costs of approximately $1.2 million and the inclusion of SCA operating costs of $1.8 million, partially offset by decreases in various other costs.

Amortization of purchased intangibles for the three months ended July 3, 2020 increased by approximately $3.7 million as compared to the three months ended June 28, 2019.

Total operating expenses for the three months ended October 2, 2020 were $43.9 million compared to $34.5 million for the three months ended September 27, 2019.

When expressed as a percentage of total sales, total operating expenses increased to 16.8% of total sales for the three months ended October 2, 2020 compared to 16.3% of total sales in the three months ended September 27, 2019.

The increase in operating expenses is primarily due to SCA related costs, including acquisition costs, operating costs and amortization expense.

Within operating expenses, our sales and marketing expenses increased approximately $2.0 million primarily due to $2.4 million of costs associated with our SCA subsidiary, partially offset by reduced spending on trade shows and race events.

Research and development costs increased approximately $0.1 million.

General and administrative expenses increased by approximately $3.7 million resulting from various factors including SCA acquisition-related compensation costs of approximately $1.3 million and the inclusion of SCA operating costs of $1.9 million as well as higher headcount costs as we expand our administrative support functions.

These increases were partially offset by decreases in various other costs.

Amortization of purchased intangibles for the three months ended October 2, 2020 increased by approximately $3.6 million as compared to the three months ended September 27, 2019.

The increase is primarily due to the amortization of intangible assets obtained through our acquisition of SCA.

1 unchanged sentence

For the three months ended

(in millions) July 3, 2020 June 28, 2019 Change ($) Change (%)

(in millions) October 2, 2020 September 27, 2019 Change ($) Change (%)

Income from operations $ 45.6 $ 35.4 $ 10.2 28.8 %

As a result of the factors discussed above, income from operations for the three months ended July 3, 2020 decreased approximately $10.1 million, or 34.2%, compared to income from operations for the three months ended June 28, 2019.

As a result of the factors discussed above, income from operations for the three months ended October 2, 2020 increased approximately $10.2 million, or 28.8%, compared to income from operations for the three months ended September 27, 2019.

Other expense, net

For the three months ended

(in millions) July 3, 2020 June 28, 2019 Change ($) Change (%)

(in millions) October 2, 2020 September 27, 2019 Change ($) Change (%)

Other expense, net:

Interest expense $ 2.3 $ 0.7 $ 1.6 228.6 %

Other expense 0.1 0.6 (0.5) (83.3) %

Other (income) expense (0.2) — (0.2) NA

Other expense, net $ 2.1 $ 0.7 $ 1.4 200.0 %

Other expense, net for the three months ended July 3, 2020 increased by $1.4 million to $3.0 million compared to $1.6 million for the three months ended June 28, 2019.

Other expense, net for the three months ended October 2, 2020 increased by $1.4 million to $2.1 million compared to $0.7 million for the three months ended September 27, 2019.

The increase in other expense, net is primarily due to interest expense on additional borrowings in connection with our March 2020 acquisition of SCA.

For the three months ended

(in millions) July 3, 2020 June 28, 2019 Change ($) Change (%)

(in millions) October 2, 2020 September 27, 2019 Change ($) Change (%)

Provision for income taxes $ 5.4 $ 4.5 $ 0.9 20.0 %

The effective tax rates were 19.5% and 16.2% for the three months ended July 3, 2020 and June 28, 2019, respectively.

For the three months ended July 3, 2020, the difference between our effective tax rate of 19.5% and the 21% federal statutory rate resulted primarily from a lower tax rate on foreign derived intangible income, research and development credits, and $0.6 million of excess tax benefit related to stock based compensation.

These benefits were partially offset by state taxes, global low-tax intangible income and non-deductible expenses.

For the three months ended June 28, 2019, the difference between our effective tax rate of 16.2% and the 21% federal statutory rate resulted primarily from lower foreign tax rates, lower effective federal rates on foreign derived intangible income, research and development credits, and $1.8 million of excess tax benefits related to stock-based compensation.

The effective tax rates were 12.5% and 12.9% for the three months ended October 2, 2020 and September 27, 2019, respectively.

For the three months ended October 2, 2020, the difference between our effective tax rate of 12.5% and the 21% federal statutory rate resulted primarily from lower foreign tax rates, a lower tax rate on foreign derived intangible income, research and development credits, realization of foreign tax credits, and $3.1 million of excess tax benefit related to stock based compensation.

These benefits were partially offset by state taxes, global low-tax intangible income tax and non-deductible expenses.

For the three months ended September 27, 2019, the difference between our effective tax rate of 12.9% and the 21% federal statutory rate resulted primarily from lower foreign tax rates, lower effective federal rates on foreign derived intangible income, research and development credits, and $1.9 million of excess benefits related to stock-based compensation.

These benefits were partially offset by state taxes, foreign withholding taxes and the impact of non-deductible expenses.

The effective tax rate for the three months ended July 3, 2020 increased as compared to the same period in 2019 primarily as a result of the reduction in pre-tax income, and an increase in non-deductible transaction expenses and state taxes related to our SCA acquisition.

The effective tax rate for the three months ended October 2, 2020 decreased as compared to the same period in 2019 primarily as a result of excess stock based compensation deductions, an increase in foreign derived intangible income, and realization of foreign tax credit, partially offset by an increase in global low-tax intangible income tax and nondeductible expenses.

For the three months ended

(in millions) July 3, 2020 June 28, 2019 Change ($) Change (%)

(in millions) October 2, 2020 September 27, 2019 Change ($) Change (%)

Net income $ 38.0 $ 30.2 $ 7.8 25.8 %

As a result of the factors described above, our net income decreased $10.2 million, or 43.6%, to $13.2 million in the three months ended July 3, 2020 from $23.4 million for the three months ended June 28, 2019.

Six months ended July 3, 2020 compared to six months ended June 28, 2019

For the six months ended

(in millions) July 3, 2020 June 28, 2019 Change ($) Change (%)

As a result of the factors described above, our net income increased $7.8 million, or 25.8%, to $38.0 million in the three months ended October 2, 2020 from $30.2 million for the three months ended September 27, 2019.

Nine months ended October 2, 2020 compared to nine months ended September 27, 2019

For the nine months ended

(in millions) October 2, 2020 September 27, 2019 Change ($) Change (%)

Powered Vehicle products $ 372.1 $ 342.0 $ 30.1 8.8 %

1 unchanged sentence

Total sales $ 628.2 $ 565.1 $ 63.1 11.2 %

Total sales for the six months ended July 3, 2020 increased approximately $13.7 million, or 3.9%, compared to the six months ended June 28, 2019.

Powered Vehicle product sales increased by $7.1 million, or 3.3%, primarily due to the SCA acquisition and aftermarket products, partially offset by impacts of the COVID-19 pandemic.

Total sales for the nine months ended October 2, 2020 increased approximately $63.1 million, or 11.2%, compared to the nine months ended September 27, 2019.

Powered Vehicle product sales increased by $30.1 million, or 8.8%, primarily due to the SCA acquisition and strength in the aftermarket channel, partially offset by impacts of the COVID-19 pandemic on our OEM customers.

Additionally, Specialty Sports product sales increased by $33.0 million, or 14.8%, primarily due to increased demand in both the OEM and aftermarket channels.

Cost of sales

For the six months ended

(in millions) July 3, 2020 June 28, 2019 Change ($) Change (%)

For the nine months ended

(in millions) October 2, 2020 September 27, 2019 Change ($) Change (%)

Cost of sales $ 422.1 $ 382.0 $ 40.1 10.5 %

Cost of sales for the six months ended July 3, 2020 increased approximately $10.4 million, or 4.3%, compared to the six months ended June 28, 2019.

The increase in cost of sales was driven primarily by certain business factors affecting gross margin, which are discussed below.

For the six months ended July 3, 2020, our gross margin decreased 30 basis points to 31.7% compared to 32.0% for the six months ended June 28, 2019.

The decrease in gross margin was primarily due to factory costs incurred during the government mandated closures in response to the COVID-19 pandemic, partially offset by a change in product and channel mix and the impact of the SCA acquisition.

Cost of sales for the nine months ended October 2, 2020 increased approximately $40.1 million, or 10.5%, compared to the nine months ended September 27, 2019.

The increase in cost of sales was primarily due to the 11.2% increase in sales during the same period.

For the nine months ended October 2, 2020, our gross margin increased 40 basis points to 32.8% compared to 32.4% for the nine months ended September 27, 2019.

The increase in year-to-date gross margin was primarily due to the impact of the SCA acquisition and a change in product and channel mix partially offset by incremental cost due to government mandated closures in response to the COVID-19 pandemic.

Operating expenses

For the six months ended

(in millions) July 3, 2020 June 28, 2019 Change ($) Change (%)

For the nine months ended

(in millions) October 2, 2020 September 27, 2019 Change ($) Change (%)

Operating expenses:

4 unchanged sentences

Total operating expenses $ 129.6 $ 96.4 $ 33.2 34.4 %

Total operating expenses for the six months ended July 3, 2020 were $85.7 million compared to $62.0 million for the six months ended June 28, 2019.

When expressed as a percentage of total sales, total operating expenses increased to 23.3% of total sales for the six months ended July 3, 2020 compared to 17.5% of total sales in the six months ended June 28, 2019.

Total operating expenses for the nine months ended October 2, 2020 were $129.6 million compared to $96.4 million for the nine months ended September 27, 2019.

When expressed as a percentage of total sales, total operating expenses increased to 20.6% of total sales for the nine months ended October 2, 2020 compared to 17.1% of total sales in the nine months ended September 27, 2019.

The increase in operating expenses is primarily due to SCA related costs, including acquisition-related costs, operating costs and amortization expense, partially offset by reductions in various other expenses.

Within operating expenses, our sales and marketing expenses increased approximately $4.1 million primarily due to costs related to SCA of $3.4 million, higher payroll-related costs, increases in various other administrative expenses, partially offset by lower travel related costs.

Research and development costs increased approximately $1.2 million primarily due to personnel investments to support future growth and product innovation.

General and administrative expenses increased by approximately $13.7 million resulting from various factors including acquisition-related costs of approximately $11.6 million and the inclusion of SCA operating costs of $2.1 million.

Amortization of purchased intangibles for the six months ended July 3, 2020 increased by approximately $4.7 million as compared to the six months ended June 28, 2019.

Within operating expenses, our sales and marketing expenses increased approximately $6.1 million primarily due to costs related to SCA of $5.8 million and higher personnel and commission expenses of $2.5 million, which were partially offset by reduced spending on trade shows and race events.

Research and development costs increased approximately $1.4 million primarily due to personnel investments and facility-related expense related to the Company's expanding Technology Center in Georgia, partially offset by reductions in other various expenses.

General and administrative expenses increased by approximately $17.3 million resulting from various factors including acquisition-related costs of approximately $12.9 million and the inclusion of SCA operating costs of $4.0 million, as well as increases in various other costs as the Company expands its administrative support functions.

Amortization of purchased intangibles for the nine months ended October 2, 2020 increased by approximately $8.4 million as compared to the nine months ended September 27, 2019.

The increase is primarily due to the amortization of intangible assets obtained through our acquisition of SCA.

Income from operations

For the six months ended

(in millions) July 3, 2020 June 28, 2019 Change ($) Change (%)

For the nine months ended

(in millions) October 2, 2020 September 27, 2019 Change ($) Change (%)

Income from operations $ 76.5 $ 86.7 $ (10.2) (11.8) %

As a result of the factors discussed above, income from operations for the six months ended July 3, 2020 decreased approximately $20.4 million, or 39.8%, compared to income from operations for the six months ended June 28, 2019.

As a result of the factors discussed above, income from operations for the nine months ended October 2, 2020 decreased approximately $10.2 million, or 11.8%, compared to income from operations for the nine months ended September 27, 2019.

Other expense, net

For the six months ended

(in millions) July 3, 2020 June 28, 2019 Change ($) Change (%)

For the nine months ended

(in millions) October 2, 2020 September 27, 2019 Change ($) Change (%)

Other expense, net:

Interest expense $ 7.0 $ 2.6 $ 4.4 169.2 %

Other expense 0.1 0.6 (0.5) (83.3)

Other (income) expense (0.1) 0.5 (0.6) (120.0)

Other expense, net $ 6.9 $ 3.1 $ 3.8 122.6 %

Other expense, net for the six months ended July 3, 2020 increased by $2.4 million to $4.8 million compared to $2.4 million for the six months ended June 28, 2019.

The increase in other expense, net is primarily due to additional interest expense incurred as a result of additional debt taken on in connection with the Company's acquisition of SCA during the six months ended July 3, 2020.

For the six months ended

(in millions) July 3, 2020 June 28, 2019 Change ($) Change (%)

Other expense, net for the nine months ended October 2, 2020 increased by $3.8 million to $6.9 million compared to $3.1 million for the nine months ended September 27, 2019.

The increase in other expense, net is primarily due to additional interest expense incurred on additional borrowings in connection with the Company's acquisition of SCA in March 2020.

For the nine months ended

(in millions) October 2, 2020 September 27, 2019 Change ($) Change (%)

Provision for income taxes $ 9.6 $ 11.6 $ (2.0) (17.2) %

The effective tax rates were 15.8% and 14.6% for the six months ended July 3, 2020 and June 28, 2019, respectively.

For the six months ended July 3, 2020, the difference between our effective tax rate of 15.8% and the 21% federal statutory rate resulted primarily from a lower tax rate on foreign derived intangible income, research and development credits, a negotiated reduction of Switzerland withholding tax on prior year earnings, and $0.7 million from excess tax benefits related to stock-based compensation.

These benefits were partially offset by state taxes, global low-tax intangible income and non-deductible expenses.

For the six months ended June 28, 2019, the difference between our effective tax rate of 14.6% and the 21% federal statutory rate resulted primarily from lower foreign tax rates, lower effective federal rates on foreign derived intangible income, research and development credits, and $3.6 million from excess tax benefits related to stock-based compensation.

The effective tax rates were 13.7% and 13.9% for the nine months ended October 2, 2020 and September 27, 2019, respectively.

For the nine months ended October 2, 2020, the difference between our effective tax rate of 13.7% and the 21% federal statutory rate resulted primarily from lower foreign tax rates, a lower tax rate on foreign derived intangible income, research and development credits, a negotiated reduction of Switzerland withholding tax on prior year earnings, realization of foreign tax credits, and $3.8 million from excess tax benefits related to stock-based compensation.

These benefits were partially offset by state taxes, global low-tax intangible income tax and non-deductible expenses.

For the nine months ended September 27, 2019, the difference between our effective tax rate of 13.9% and the 21% federal statutory rate resulted primarily from lower foreign tax rates, lower effective federal rates on foreign derived intangible income, research and development credits, and $5.5 million of excess benefits related to stock-based compensation.

These benefits were partially offset by state taxes, foreign withholding taxes and the impact of non-deductible expenses.

The effective tax rate for the six months ended July 3, 2020 increased as compared to the same period in 2019 primarily as a result of the reduction in pre-tax income, stock-based compensation deductions, an increase in non-deductible transaction expenses and state taxes related to our SCA acquisition, partially offset by foreign derived intangible income benefits and the reduction in Switzerland withholding taxes.

For the six months ended

(in millions) July 3, 2020 June 28, 2019 Change ($) Change (%)

The effective tax rate for the nine months ended October 2, 2020 decreased as compared to the same period in 2019 primarily as a result of an increase in foreign derived intangible income, realization of foreign tax credits, and a negotiated reduction of Switzerland withholding tax on prior year earnings partially offset by a decrease in excess stock based compensation deductions and increase in nondeductible expenses.

For the nine months ended

(in millions) October 2, 2020 September 27, 2019 Change ($) Change (%)

Net income $ 60.0 $ 71.9 $ (11.9) (16.6) %

As a result of the factors described above, our net income decreased $19.9 million, or 47.6%, to $21.9 million in the six months ended July 3, 2020 from $41.8 million for the six months ended June 28, 2019.

As a result of the factors described above, our net income decreased $11.9 million, or 16.6%, to $60.0 million in the nine months ended October 2, 2020 from $71.9 million for the nine months ended September 27, 2019.

Liquidity and Capital Resources

1 unchanged sentence

Historically, we have generally financed our liquidity needs with operating cash flows, borrowings under our credit facilities and the issuance of common stock.

These sources of liquidity may be impacted by various factors, including demand for our products, impacts of mandated closures in response to the COVID-19 pandemic, investments made by us in acquired businesses, our plant and equipment and other capital expenditures, and expenditures on general infrastructure and information technology.

These sources of liquidity may be impacted by various factors, including demand for our products, impacts of the COVID-19 pandemic, investments made by us in acquired businesses, our plant and equipment and other capital expenditures, and expenditures on general infrastructure and information technology.

A summary of our operating, investing and financing activities are shown in the following table:

For the six months ended

(in thousands) July 3, 2020 June 28, 2019

For the nine months ended

(in thousands) October 2, 2020 September 27, 2019

Net cash provided by operating activities $ 99,801 $ 30,924

5 unchanged sentences

Cash provided by operating activities consists of net income, adjusted for certain non-cash items, primarily depreciation and amortization, stock-based compensation, changes in deferred income taxes and uncertain tax positions, and net cash invested in working capital.

In the six months ended July 3, 2020, net cash provided by operating activities was $5.7 million and consisted of net income of $21.9 million, plus non-cash items totaling $12.5 million and less changes in operating assets and liabilities totaling $28.7 million.

In the nine months ended October 2, 2020, net cash provided by operating activities was $99.8 million and consisted of net income of $60.0 million, plus non-cash items totaling $20.4 million and less changes in operating assets and liabilities totaling $19.5 million.

Non-cash items and other adjustments consisted of depreciation and amortization of $24.8 million, stock-based compensation of $6.4 million, and amortization of loan fees of $1.1 million, offset by a $11.9 million change in deferred taxes and uncertain tax positions.

Our investment in operating assets and liabilities is a result of increased prepaids and other current assets of $30.7 million, inventory of $13.6 million, and decreases in accrued expenses of $2.6 million, offset by decreases in accounts receivable of $13.1 million, increases in accounts payable of $2.7 million and income taxes of $2.4 million.

Our investment in operating assets and liabilities is a result of increased prepaids and other current assets of $14.7 million, accounts receivable of $12.6 million, and inventory of $0.6 million, offset by increases in accounts payable of $36.7 million, increases in accrued expenses of $7.5 million, and income taxes of $3.2 million.

The change in prepaids and other current assets is primarily due to deposits on chassis and acquisition-related compensation payments held in escrow, both related to our recently acquired SCA subsidiary.

The changes in inventory, accounts receivable, and accounts payable reflect the impact of mandated shutdowns in response to COVID-19 on our shipment, collection and payment cycles, and normal seasonality.

The changes in accrued expenses and income taxes are primarily attributable to seasonality and the timing of tax payments.

In the six months ended June 28, 2019, net cash provided by operating activities was $20.4 million and consisted of net income of $41.8 million, plus non-cash items totaling $11.4 million and less changes in operating assets and liabilities totaling $32.8 million.

The changes in inventory, accounts receivable, and accounts payable reflect seasonality as well as timing of vendor payments.

The changes in accrued expenses and income taxes are primarily attributable to the timing of rebate payments and the timing of tax payments, respectively.

In the nine months ended September 27, 2019, net cash provided by operating activities was $30.9 million and consisted of net income of $71.9 million, plus non-cash items totaling $13.0 million and less changes in operating assets and liabilities totaling $54.0 million.

Non-cash items and other adjustments consisted of depreciation and amortization of $13.0 million, stock-based compensation of $5.0 million, and loss on the extinguishment of debt of $0.5 million, offset by a $5.5 million change in deferred taxes and uncertain tax positions.

4 unchanged sentences

Cash used in investing activities primarily relates to strategic acquisitions of businesses and other assets and investments in our manufacturing and general infrastructure through the procurement of property and equipment.

In the six months ended July 3, 2020 and June 28, 2019, net cash used in investing activities was $362.0 million and $23.2 million, respectively.

Investing activities for the six months ended July 3, 2020 consisted of $329.2 million of cash consideration for our acquisition of SCA and $32.8 million of property and equipment additions.

Our investing activities for the six months ended June 28, 2019 consisted of $16.4 million of property and equipment additions and $6.8 million of cash consideration for our acquisition of Ridetech.

In the nine months ended October 2, 2020 and September 27, 2019, net cash used in investing activities was $375.4 million and $32.7 million, respectively.

Investing activities for the nine months ended October 2, 2020 consisted of $329.2 million of cash consideration for our acquisition of SCA, $46.0 million of property and equipment additions and $0.3 million of acquisition of other assets.

Our investing activities for the nine months ended September 27, 2019 consisted of $25.9 million of property and equipment additions and $6.8 million of cash consideration for our acquisition of Ridetech.

Financing activities

Cash provided by financing activities primarily relates to various forms of debt and equity instruments used to finance our business.

In the six months ended July 3, 2020, net cash provided by financing activities was $530.8 million, which consisted of $392.4 million in proceeds, net of issuance costs, from our First Amended and Restated Credit Facility, which was amended and restated in connection with our acquisition of SCA, partially offset by net payments of $53.0 million on our line of credit and payments on our term debt of $2.5 million.

In addition, we received $198.2 million from our June 2020 issuance of common stock and paid $4.3 million to repurchase shares of our common stock, as part of our stock-based compensation program.

In the six months ended June 28, 2019, net cash provided by financing activities was $13.7 million, which consisted of $45.0 million in proceeds from our line of credit, partially offset by $25.0 million paid on our line of credit and $2.8 million paid on our term debt.

In the nine months ended October 2, 2020, net cash provided by financing activities was $510.0 million, which consisted of $392.4 million in proceeds, net of issuance costs, from our First Amended and Restated Credit Facility, which was amended and restated in connection with our acquisition of SCA, partially offset by net payments of $68.0 million on our line of credit and payments on our term debt of $5.0 million.

In addition, we received $198.2 million from our June 2020 issuance of common stock.

These inflows were partially offset by $4.6 million to repurchase shares of our common stock as part of our stock-based compensation program and $3.0 million in installment payments related to the purchase of the Tuscany non-controlling interest.

Refer to Note 9 - Commitments and Contingencies for additional details.

In the nine months ended September 27, 2019, net cash provided by financing activities was $5.8 million, which consisted of $67.5 million in proceeds from our line of credit, partially offset by $52.1 million paid on our line of credit and $2.8 million paid on our term debt.

In addition, we paid $6.8 million to repurchase shares of our common stock, net of proceeds from the exercise of stock options, as part of our stock-based compensation program.

6 unchanged sentences

In June 2019, the Company entered into a credit facility with Bank of America and other named lenders, which was amended and restated on March 11, 2020 and June 19, 2020 (as most recently amended and restated as the "First Amended and Restated Credit Facility").

The First Amended and Restated Credit Facility, which matures on March 11, 2025, provides a senior secured revolving line of credit with a borrowing capacity of $250.0 million and a maturing secured term loan of $400.0 million.

The term loan is subject to quarterly amortization payments.

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Additionally, the Company had $0.4 million of remaining unamortized debt issuance costs.

The Company expensed $0.3 million of the remaining unamortized debt issuance costs, which are included in other expense, net on the Condensed Consolidated Statements of Income for the six months ended July 3, 2020 and the remaining $0.2 million were allocated to the line of credit.

The Company expensed $0.3 million of the remaining unamortized debt issuance costs, which are included in other expense, net on the condensed consolidated statements of income for the six months ended October 2, 2020 and the remaining $0.2 million were allocated to the line of credit.

All loan fees allocated to the term debt will be amortized using the interest method and all loan fees allocated to the line of credit will be amortized on a straight-line basis over the term of the First Amended and Restated Credit Facility.

The First Amended and Restated Credit Facility provides for interest at a rate either based on the London Interbank Offered Rate, or LIBOR, plus a margin ranging from 1.00% to 2.25%, or based on the base rate offered by Bank of America plus a margin ranging from 0.00% to 1.25%.

At July 3, 2020, the one-month LIBOR and prime rates were 0.17% and 3.25%, respectively.

At July 3, 2020, our weighted-average interest rate on outstanding borrowing was 2.05%.

At October 2, 2020, the one-month LIBOR and prime rates were 0.14% and 3.25%, respectively.

At October 2, 2020, our weighted-average interest rate on outstanding borrowing was 1.87%.

The First Amended and Restated Credit Facility is secured by substantially all of the Company’s assets, restricts the Company's ability to make certain payments and engage in certain transactions, and requires that the Company satisfy customary financial ratios.

The Company was in compliance with the covenants as of July 3, 2020.

The Company was in compliance with the covenants as of October 2, 2020.

Hall County, Georgia Project - Phase 1

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The Company plans to invest approximately $55.9 million in capital expenditures and employ up to 800 personnel over the next five years, dependent on market and general economic conditions in Georgia.

The Company currently estimates that the first phase of the project will be completed in August 2020.

The first phase of the project was completed in August 2020 at a cost of approximately $47.3 million.

The Company currently estimates that the second phase of the project will be completed in late 2021.

The amount of any such capital expenditures is subject to change depending on the circumstances and the scope of the project.

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However, significant increases in inflation, particularly those related to wages and increases in the cost of raw materials, could have an adverse impact on our business, financial condition and results of operations.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes to the disclosures discussed in the section “Quantitative and Qualitative Disclosures About Market Risk” in Part II, Item 7A of our Annual Report on Form 10-K for the fiscal year ended January 3, 2020, as filed with the SEC on March 3, 2020.

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