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Item 2. Management’s Discussion and Analysis

2021-08-05 compared with 2021-05-06 · 132 added, 68 removed, 156 unchanged (56% of the section changed)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and with our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended January 1, 2021, as filed with the SEC on February 25, 2021, and our other reports and registration statements that we file with the SEC from time to time.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and with our audited condensed consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended January 1, 2021, as filed with the SEC on February 25, 2021, and our other reports and registration statements that we file with the SEC from time to time.

In addition to historical condensed consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs.

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We reassess our projections and assumptions regarding the realization of our foreign tax credits periodically as changes in our business and tax regulations occur.

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 financial statements.

In the first quarter of 2021, the Company increased the forecast for additional revenue from Taiwan.

In the first and second quarters of 2021, the Company increased the forecast for additional revenue from Taiwan.

The additional revenue will generate foreign tax credits that the Company believes will render tax credits carried over from prior periods not be realizable before their expiration.

The Company has therefore added $3.0 million to the valuation allowance in the first quarter of 2021.

Therefore, the Company added $3.0 million and $0.6 million to the valuation allowance in the first and second quarters of 2021, respectively.

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 1, 2021, as filed with the SEC on February 25, 2021, that have had a material impact on our condensed consolidated financial statements and related notes.

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The table below summarizes our results of operations:

For the three months ended

(in thousands) April 2, 2021 April 3, 2020

For the three months ended For the six months ended

(in thousands) July 2, 2021 July 3, 2020 July 2, 2021 July 3, 2020

Sales $ 328,164 $ 183,102 $ 609,300 $ 367,463

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

For the three months ended

April 2, 2021 April 3, 2020

For the three months ended For the six months ended

July 2, 2021 July 3, 2020 July 2, 2021 July 3, 2020

Sales 100.0 % 100.0 % 100.0 % 100.0 %

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*Percentages may not foot due to rounding.

Three months ended April 2, 2021 compared to three months ended April 3, 2020

Three months ended July 2, 2021 compared to three months ended July 3, 2020

For the three months ended

(in millions) April 2, 2021 April 3, 2020 Change ($) Change (%)

(in millions) July 2, 2021 July 3, 2020 Change ($) Change (%)

Powered Vehicle products $ 189.5 $ 98.5 $ 91.0 92.4 %

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Total sales $ 328.2 $ 183.1 $ 145.1 79.2 %

Total sales for the three months ended April 2, 2021 increased approximately $96.8 million, or 52.5%, compared to the three months ended April 3, 2020.

Powered Vehicle product sales increased by $42.2 million, or 35.0%, primarily due to the impact of our SCA subsidiary, which was acquired in March 2020, and the continued success of our product lineup.

Additionally, Specialty Sports product sales increased by $54.6 million, or 85.5%, primarily due to increased demand in both the OEM and aftermarket channels.

Total sales for the three months ended July 2, 2021 increased approximately $145.1 million, or 79.2%, compared to the three months ended July 3, 2020.

Powered Vehicle product sales increased by $91.0 million, or 92.4%, due to an increase in demand in both the original equipment manufacturer ("OEM") and aftermarket channels, including strong performance from our upfitting product lines.

Additionally, our prior year results were impacted by production shutdowns at certain OEM customers.

Specialty Sports product sales increased by $54.1 million, or 63.9%, due to an increase in demand primarily in the OEM channel.

Cost of sales

For the three months ended

(in millions) April 2, 2021 April 3, 2020 Change ($) Change (%)

(in millions) July 2, 2021 July 3, 2020 Change ($) Change (%)

Cost of sales $ 217.1 $ 123.1 $ 94.0 76.4 %

Cost of sales for the three months ended April 2, 2021 increased approximately $55.5 million, or 43.5%, compared to the three months ended April 3, 2020.

Cost of sales for the three months ended July 2, 2021 increased approximately $94.0 million, or 76.4%, compared to the three months ended July 3, 2020.

The increase in cost of sales was primarily due to the 79.2% 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 April 2, 2021, our gross margin increased 410 basis points to 34.8% compared to 30.7% for the three months ended April 3, 2020.

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

Additionally, approximately $1.8 million of additional factory costs were incurred during the three months ended April 3, 2020 as compared to the three months ended April 2, 2021 due to mandated closures in response to COVID-19.

For the three months ended July 2, 2021, our gross margin increased 110 basis points to 33.9% compared to 32.8% for the three months ended July 3, 2020.

The increase in gross margin was primarily driven by favorable product and channel mix led by higher volume sales in our Specialty Sports Group and the strong performance of our upfitting product lines.

Additionally, our prior fiscal year period results were negatively impacted by higher factory related costs including incremental costs related to the COVID-19 pandemic.

Operating expenses

For the three months ended

(in millions) April 2, 2021 April 3, 2020 Change ($) Change (%)

(in millions) July 2, 2021 July 3, 2020 Change ($) Change (%)

Operating expenses:

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Total operating expenses $ 58.4 $ 40.6 $ 17.8 43.8 %

Total operating expenses for the three months ended April 2, 2021 were $52.1 million compared to $45.0 million for the three months ended April 3, 2020.

When expressed as a percentage of total sales, total operating expenses decreased to 18.5% of total sales for the three months ended April 2, 2021 compared to 24.4% of total sales in the three months ended April 3, 2020.

The increase in operating expenses is primarily due to the inclusion of a full quarter of SCA related costs, including operating costs and amortization expense, as well as higher employee related expenses and various other costs, partially offset by lower acquisition related costs.

Within operating expenses, our sales and marketing expenses increased approximately $4.8 million primarily due to SCA costs of $3.3 million, employee related expenses of $1.0 million, and various others.

Research and development costs increased approximately $1.9 million primarily due to investments to support future growth and product innovation.

General and administrative expenses decreased by approximately $2.0 million due to various factors including a decrease in acquisition related costs of $9.9 million, partially offset by higher headcount and incentive compensation costs of $4.7 million as we continue to expand our administrative support functions, the inclusion of a full quarter of SCA operating costs of $1.4 million and various other costs.

Amortization of purchased intangibles for the three months ended April 2, 2021 increased by approximately $2.4 million as compared to the three months ended April 3, 2020.

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

Total operating expenses for the three months ended July 2, 2021 were $58.4 million compared to $40.6 million for the three months ended July 3, 2020.

When expressed as a percentage of total sales, total operating expenses decreased to 17.8% of total sales for the three months ended July 2, 2021 compared to 22.2% of total sales in the three months ended July 3, 2020.

The increase in operating expenses is primarily due to higher employee related costs, higher commission costs, and higher investments to right size our administrative support functions.

Within operating expenses, our sales and marketing expenses increased approximately $5.2 million primarily due to higher commissions of $3.6 million.

Research and development costs increased approximately $3.0 million primarily due to personnel investments to support future growth and product innovation.

General and administrative expenses increased by approximately $9.8 million due to higher employee related costs of $6.8 million, as well as increases in various other costs as we continue to expand our administrative support functions.

Income from operations

For the three months ended

(in millions) April 2, 2021 April 3, 2020 Change ($) Change (%)

(in millions) July 2, 2021 July 3, 2020 Change ($) Change (%)

Income from operations $ 52.7 $ 19.4 $ 33.3 171.6 %

As a result of the factors discussed above, income from operations for the three months ended April 2, 2021 increased approximately $34.3 million, or 295.7%, compared to income from operations for the three months ended April 3, 2020.

As a result of the factors discussed above, income from operations for the three months ended July 2, 2021 increased approximately $33.3 million, or 171.6%, compared to income from operations for the three months ended July 3, 2020.

Interest and other expense, net

For the three months ended

(in millions) April 2, 2021 April 3, 2020 Change ($) Change (%)

(in millions) July 2, 2021 July 3, 2020 Change ($) Change (%)

Interest and other expense, net:

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Interest and other expense, net $ 1.6 $ 3.0 $ (1.4) (46.7) %

Interest and other expense, net for the three months ended April 2, 2021 increased by $2.0 million to $3.9 million compared to $1.9 million for the three months ended April 3, 2020.

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

Interest and other expense, net for the three months ended July 2, 2021 decreased by $1.4 million to $1.6 million compared to $3.0 million for the three months ended July 3, 2020.

The decrease in interest and other expense, net is primarily due to the pay down of additional borrowings incurred in the prior year in connection with our March 2020 acquisition of SCA and lower interest rates.

For the three months ended

(in millions) April 2, 2021 April 3, 2020 Change ($) Change (%)

(in millions) July 2, 2021 July 3, 2020 Change ($) Change (%)

Provision for income taxes $ 6.8 $ 3.2 $ 3.6 112.5 %

The effective tax rate was 9.5% for the three month periods ended April 2, 2021 and April 3, 2020.

For the three months ended April 2, 2021, the difference between the Company's effective tax rate of 9.5% and the 21% federal statutory rate resulted primarily from windfall on stock based compensation, the recognition of uncertain tax positions due to the conclusion of an audit and a lower tax rate on foreign derived intangible income.

These benefits were partially offset by an increase in the valuation allowance for foreign tax credits, state taxes and non-deductible expenses.

For the three months ended April 3, 2020, the difference between our effective tax rate of 9.5% and the 21% federal statutory rate resulted primarily from a negotiated reduction of Switzerland withholding tax on prior year earnings.

These benefits were partially offset by state taxes, global low-tax intangible income, nondeductible expenses, and an excess benefit related to stock-based compensation

The effective tax rate was 13.3% and 19.5% for the three month periods ended July 2, 2021 and July 3, 2020, respectively.

For the three months ended July 2, 2021, the difference between the Company's effective tax rate of 13.3% and the 21% federal statutory rate resulted primarily from excess benefits related to stock-based compensation and a lower tax rate on foreign derived intangible income.

These benefits were partially offset by state taxes, an increase in the valuation allowance for foreign tax credits and non-deductible expenses.

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 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 three months ended

(in millions) April 2, 2021 April 3, 2020 Change ($) Change (%)

(in millions) July 2, 2021 July 3, 2020 Change ($) Change (%)

Net income $ 44.3 $ 13.2 $ 31.1 235.6 %

As a result of the factors described above, our net income increased $29.3 million, or 336.8%, to $38.0 million in the three months ended April 2, 2021 from $8.7 million for the three months ended April 3, 2020.

As a result of the factors described above, our net income increased $31.1 million, or 235.6%, to $44.3 million in the three months ended July 2, 2021 from $13.2 million for the three months ended July 3, 2020.

Six months ended July 2, 2021 compared to six months ended July 3, 2020

For the six months ended

(in millions) July 2, 2021 July 3, 2020 Change ($) Change (%)

Powered Vehicle products $ 352.2 $ 219.1 $ 133.1 60.7 %

Specialty Sports products 257.1 148.4 108.7 73.2

Total sales $ 609.3 $ 367.5 $ 241.8 65.8 %

Total sales for the six months ended July 2, 2021 increased approximately $241.8 million, or 65.8%, compared to the six months ended July 3, 2020.

Powered Vehicle product sales increased by $133.1 million, or 60.7%, primarily due increased demand in both the OEM and aftermarket channels, including strong performance from our upfitting product lines.

Additionally, our prior year results were impacted by production shutdowns at certain OEM customers.

Specialty Sports product sales increased by $108.7 million, or 73.2%, primarily due to increased demand in the OEM channel.

Cost of sales

For the six months ended

(in millions) July 2, 2021 July 3, 2020 Change ($) Change (%)

Cost of sales $ 400.3 $ 250.9 $ 149.4 59.5 %

Cost of sales for the six months ended July 2, 2021 increased approximately $149.4 million, or 59.5%, compared to the six months ended July 3, 2020.

The increase in cost of sales was primarily due to the 65.8% increase in sales in the same period, as well as certain business factors affecting gross margin, which are discussed below.

For the six months ended July 2, 2021, our gross margin increased 260 basis points to 34.3% compared to 31.7% for the six months ended July 3, 2020.

The increase in gross margin was primarily due to higher volume sales in our Specialty Sports Group and the strong performance of our upfitting product lines, as well as favorable product and channel mix.

Additionally, our gross margin for the first six months of the prior year was negatively impacted by incremental costs related to the COVID-19 pandemic.

Operating expenses

For the six months ended

(in millions) July 2, 2021 July 3, 2020 Change ($) Change (%)

Operating expenses:

Sales and marketing $ 34.7 $ 24.6 $ 10.1 41.1 %

Research and development 21.1 16.3 4.8 29.4

General and administrative 44.6 37.0 7.6 20.5

Amortization of purchased intangibles 10.0 7.8 2.2 28.2

Total operating expenses $ 110.4 $ 85.7 $ 24.7 28.8 %

Total operating expenses for the six months ended July 2, 2021 were $110.4 million compared to $85.7 million for the six months ended July 3, 2020.

When expressed as a percentage of total sales, total operating expenses decreased to 18.1% of total sales for the six months ended July 2, 2021 compared to 23.3% of total sales in the six months ended July 3, 2020.

The increase in operating expenses is primarily due to higher employee related costs, increases in various other costs as we continue to expand our administrative support functions, and the impact of a full six months of SCA operating costs.

These increases were partially offset by lower acquisition related costs and lower patent litigation related expenses.

Within operating expenses, our sales and marketing expenses increased approximately $10.1 million primarily due to commissions of $5.8 million, employee related expenses of $1.3 million, and various other expenses.

Research and development costs increased approximately $4.8 million primarily due to personnel investments to support future growth and product innovation.

General and administrative expenses increased by approximately $7.6 million due to higher employee related costs of $12.4 million, as well as various other investments as we continue to right size our administrative support functions.

These increases were partially offset by lower acquisition-related costs of $9.2 million and lower litigation expenses of $0.7 million.

Amortization of purchased intangibles for the six months ended July 2, 2021 increased by approximately $2.2 million as compared to the six months ended July 3, 2020.

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 2, 2021 July 3, 2020 Change ($) Change (%)

Income from operations $ 98.6 $ 30.9 $ 67.7 219.1 %

As a result of the factors discussed above, income from operations for the six months ended July 2, 2021 increased approximately $67.7 million, or 219.1%, compared to income from operations for the six months ended July 3, 2020.

Interest and other expense, net

For the six months ended

(in millions) July 2, 2021 July 3, 2020 Change ($) Change (%)

Interest and other expense, net:

Interest expense $ 4.5 $ 4.7 $ (0.2) (4.3) %

Other expense 1.0 0.1 0.9 900.0 %

Interest and other expense, net $ 5.5 $ 4.8 $ 0.7 14.6 %

Interest and other expense, net for the six months ended July 2, 2021 increased by $0.7 million to $5.5 million compared to $4.8 million for the six months ended July 3, 2020.

The increase in interest and other expense, net is primarily due to higher foreign exchange losses, partially offset by a decrease in interest expense due to the pay down of additional borrowings incurred in the prior year in connection with our March 2020 acquisition of SCA and lower interest rates.

For the six months ended

(in millions) July 2, 2021 July 3, 2020 Change ($) Change (%)

Provision for income taxes $ 10.8 $ 4.1 $ 6.7 163.4 %

The effective tax rate was 11.6% and 15.8% for the six months periods ended July 2, 2021 and July 3, 2020.

For the six months ended July 2, 2021, the difference between the Company's effective tax rate of 11.6% and the 21% federal statutory rate resulted primarily from excess benefits related to stock-based compensation, a lower tax rate on foreign derived intangible income and a benefit resulting from the conclusion of an audit.

These benefits were partially offset by an increase in the valuation allowance for foreign tax credits, state taxes and non-deductible expenses.

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 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

(in millions) July 2, 2021 July 3, 2020 Change ($) Change (%)

Net income $ 82.3 $ 21.9 $ 60.4 275.8 %

As a result of the factors described above, our net income increased $60.4 million, or 275.8%, to $82.3 million for the six months ended July 2, 2021 from $21.9 million for the six months ended July 3, 2020.

Liquidity and Capital Resources

Our primary cash needs are to support working capital, capital expenditures, acquisitions, and debt repayments.

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

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

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 three months ended

(in thousands) April 2, 2021 April 3, 2020

Net cash provided by (used in) operating activities $ 66,028 $ (33,485)

For the six months ended

(in thousands) July 2, 2021 July 3, 2020

Net cash provided by operating activities $ 81,690 $ 5,689

Net cash used in investing activities (43,273) (361,992)

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Operating activities

Cash provided by or used in 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 three months ended April 2, 2021, net cash provided by operating activities was $66.1 million and consisted of net income of $38.0 million, plus non-cash items totaling $12.6 million and changes in operating assets and liabilities totaling $15.5 million.

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, amortization of loan fees and net cash invested in working capital.

In the six months ended July 2, 2021, net cash provided by operating activities was $81.7 million and consisted of net income of $82.3 million, plus non-cash items totaling $27.0 million, offset by changes in operating assets and liabilities totaling $27.6 million.

Non-cash items and other adjustments consisted of depreciation and amortization of $21.4 million, stock-based compensation of $5.9 million, and amortization of loan fees of $0.8 million, offset by a $1.1 million change in deferred taxes and uncertain tax positions.

Our investment in operating assets and liabilities is a result of increased inventory of $40.1 million, and accounts receivable of $16.6 million, offset by a decrease in prepaids and other current assets of $33.3 million, and increases in accounts payable of $33.7 million, accrued expenses of $2.9 million, and income taxes of $2.3 million.

The decrease in prepaids and other current assets is primarily due to timing of chassis deposits at our SCA and Tuscany subsidiaries.

The changes in inventory, accounts receivable, and accounts payable reflect business growth.

Our investment in operating assets and liabilities is a result of increased inventory of $79.2 million, accounts receivable of $28.3 million, and prepaids and other current assets of $0.5 million, partially offset by increases in accounts payable of $63.5 million, accrued expenses of $14.6 million, and income taxes of $2.3 million.

The change in inventory is primarily due to additional raw materials purchases to mitigate risks associated with supply chain uncertainty.

The changes in accounts receivable and accounts payable reflect normal business growth.

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 three months ended April 3, 2020, net cash used in operating activities was $33.5 million and consisted of net income of $8.7 million, plus non-cash items totaling $0.5 million and less changes in operating assets and liabilities totaling $41.7 million.

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.

Non-cash items and other adjustments consisted of depreciation and amortization of $15.0 million, stock-based compensation of $4.0 million, and amortization of loan fees of $0.7 million, offset by a $7.2 million change in deferred taxes and uncertain tax positions.

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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 March 2020 SCA subsidiary acquisition.

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.

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.

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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 three months ended April 2, 2021 and April 3, 2020, net cash used in investing activities was $16.9 million and $342.1 million, respectively.

Investing activities for the three months ended April 2, 2021 consisted of $16.9 million of property and equipment additions.

Our investing activities for the three months ended April 3, 2020 consisted of $329.2 million of cash consideration for our acquisition of SCA and $12.8 million of property and equipment additions.

In the six months ended July 2, 2021 and July 3, 2020, net cash used in investing activities was $43.3 million and $362.0 million, respectively.

Investing activities for the six months ended July 2, 2021 consisted of $27.6 million of property and equipment additions and $15.6 million of cash consideration for our purchases of Outside Van and Sola Sport Pty Ltd.

Our investing activities for the six months ended July 3, 2020 consisted of $329.2 million of cash consideration for our acquisition of SCA and $12.8 million of property and equipment additions.

Financing activities

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

In the three months ended April 2, 2021, net cash used in financing activities was $3.8 million, which consisted of payments on our term debt of $2.5 million and $1.9 million in installment payments related to the purchase of the Tuscany non-controlling interest.

These outflows were partially offset by $0.6 million in net proceeds received as part of our stock-based compensation program.

In the six months ended July 2, 2021, net cash used in financing activities was $9.6 million, which consisted of payments of $5.0 million to repurchase shares of our common stock, net of proceeds from the exercise of stock options, payments on our term debt of $5.0 million, and $2.8 million in installment payments related to the purchase of the Tuscany non-controlling interest.

These outflows were partially offset by net proceeds of $3.2 million from our line of credit.

Refer to Note 9 - Commitments and Contingencies for additional information on our purchase of the Tuscany non-controlling interest.

In the three months ended April 3, 2020, net cash provided by financing activities was $408.3 million, which consisted of $393.4 million in proceeds, net of issuance costs, from our credit facility entered into in June 2019 with Bank of America and other named lenders, which was amended and restated in connection with our acquisition of SCA, as well as net draws of $17.0 million from our line of credit.

In addition, we paid $2.1 million to repurchase shares of our common stock, as part of our stock-based compensation program.

First Amended and Restated Credit Facility

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 term loan of $400.0 million.

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 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.

Credit Facility

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 further amended on June 19, 2020 and June 11, 2021 (as amended to date, the "Credit Facility").

The 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 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 interest and other expense, net on the condensed consolidated statements of income for the three months ended April 3, 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%, with a floor rate of 0.50% or based on the base rate offered by Bank of America plus a margin ranging from 0.00% to 1.25%.

At April 2, 2021, the one-month LIBOR and prime rates were 0.11% and 3.25%, respectively.

At April 2, 2021, 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 April 2, 2021.

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

The remaining $0.2 million were allocated to the line of credit.

The 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%, with a floor rate of 0.00% or based on the base rate offered by Bank of America plus a margin ranging from 0.00% to 1.25%.

At July 2, 2021, the one-month LIBOR and prime rates were 0.10% and 3.25%, respectively.

At July 2, 2021, our weighted-average interest rate on outstanding borrowing was 1.32%.

The 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 2, 2021.

Off-Balance Sheet Arrangements

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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