What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-04 compared with 2021-08-05 · 98 added, 96 removed, 192 unchanged (50% of the section changed)

14 unchanged sentences

and global economy, which could in turn disrupt the business activities and operations of our customers, as well as our businesses and operations;

• our ability to maintain our suppliers for materials, product parts and vehicle chassis without significant supply chain disruptions;

• our ability to develop new and innovative products in our current end-markets;

38 unchanged sentences

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 additional revenue is expected to generate foreign tax credits, that the Company believes will result in tax credits carried over from prior periods not to be realizable before their expiration.

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 was no change to the valuation allowance in the third quarter of 2021.

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 For the six months ended

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

For the three months ended For the nine months ended

(in thousands) October 1, 2021 October 2, 2020 October 1, 2021 October 2, 2020

Sales $ 347,435 $ 260,700 $ 956,735 $ 628,163

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Interest expense 1,849 2,291 6,351 7,030

Other expense 83 71 1,042 133

Other (income) expense (187) (189) 855 (57)

Interest and other expense, net 1,662 2,102 7,206 6,973

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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 For the six months ended

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

For the three months ended For the nine months ended

October 1, 2021 October 2, 2020 October 1, 2021 October 2, 2020

Sales 100.0 % 100.0 % 100.0 % 100.0 %

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Interest expense 0.5 0.9 0.7 1.1

Other expense — — 0.2 —

Other (income) expense (0.1) (0.1) 0.1 —

Interest and other expense, net 0.5 0.8 0.8 1.1

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*Percentages may not foot due to rounding.

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

Three months ended October 1, 2021 compared to three months ended October 2, 2020

For the three months ended

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

(in millions) October 1, 2021 October 2, 2020 Change ($) Change (%)

Powered Vehicle products $ 188.0 $ 153.0 $ 35.0 22.8 %

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Total sales $ 347.4 $ 260.7 $ 86.7 33.3 %

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.

Total sales for the three months ended October 1, 2021 increased approximately $86.7 million, or 33.3%, compared to the three months ended October 2, 2020.

Powered Vehicle product sales increased by $35.0 million, or 22.8%, due to strong performance in our upfitting product lines and increased demand in both the original equipment manufacturer ("OEM") and aftermarket channels.

Specialty Sports product sales increased by $51.7 million, or 48.1%, due to continued strong demand in the OEM channel.

Cost of sales

For the three months ended

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

(in millions) October 1, 2021 October 2, 2020 Change ($) Change (%)

Cost of sales $ 231.4 $ 171.2 $ 60.2 35.2 %

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.

Cost of sales for the three months ended October 1, 2021 increased approximately $60.2 million, or 35.2%, compared to the three months ended October 2, 2020.

The increase in cost of sales was primarily due to the 33.3% 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 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.

For the three months ended October 1, 2021, our gross margin decreased 90 basis points to 33.4% compared to 34.3% for the three months ended October 2, 2020.

The decrease in gross margin was primarily driven by supply chain related costs, including increased raw materials prices and higher freight costs.

Operating expenses

For the three months ended

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

(in millions) October 1, 2021 October 2, 2020 Change ($) Change (%)

Operating expenses:

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Total operating expenses $ 60.8 $ 43.9 $ 16.8 38.3 %

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.

Total operating expenses for the three months ended October 1, 2021 were $60.8 million compared to $43.9 million for the three months ended October 2, 2020.

When expressed as a percentage of total sales, total operating expenses increased to 17.5% of total sales for the three months ended October 1, 2021 compared to 16.8% of total sales in the three months ended October 2, 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.

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For the three months ended

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

(in millions) October 1, 2021 October 2, 2020 Change ($) Change (%)

Income from operations $ 55.2 $ 45.6 $ 9.6 21.1 %

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.

As a result of the factors discussed above, income from operations for the three months ended October 1, 2021 increased approximately $9.6 million, or 21.1%, compared to income from operations for the three months ended October 2, 2020.

Interest and other expense, net

For the three months ended

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

(in millions) October 1, 2021 October 2, 2020 Change ($) Change (%)

Interest and other expense, net:

Interest expense $ 1.8 $ 2.3 $ (0.5) (21.7) %

Other expense 0.1 0.1 — — %

Other (income) expense (0.2) (0.2) — — %

Interest and other expense, net $ 1.6 $ 2.1 $ (0.5) (23.8) %

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.

Interest and other expense, net for the three months ended October 1, 2021 decreased by $0.5 million to $1.6 million compared to $2.1 million for the three months ended October 2, 2020.

The decrease in interest and other expense, net is primarily due to lower interest rates.

For the three months ended

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

(in millions) October 1, 2021 October 2, 2020 Change ($) Change (%)

Provision for income taxes $ 9.8 $ 5.4 $ 4.4 81.5 %

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.

The effective tax rate was 18.2% and 12.5% for the three month periods ended October 1, 2021 and October 2, 2020, respectively.

For the three months ended October 1, 2021, the difference between the Company's effective tax rate of 18.2% and the 21% federal statutory rate resulted primarily from a lower tax rate on foreign-derived intangible income and a windfall from stock-based compensation.

These benefits were partially offset by other non-deductible expenses and state taxes.

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

(in millions) October 1, 2021 October 2, 2020 Change ($) Change (%)

Net income $ 43.8 $ 38.0 $ 5.8 15.3 %

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 (%)

As a result of the factors described above, our net income increased $5.8 million, or 15.3%, to $43.8 million in the three months ended October 1, 2021 from $38.0 million for the three months ended October 2, 2020.

Nine months ended October 1, 2021 compared to nine months ended October 2, 2020

For the nine months ended

(in millions) October 1, 2021 October 2, 2020 Change ($) Change (%)

Powered Vehicle products $ 540.2 $ 372.1 $ 168.1 45.2 %

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Total sales $ 956.8 $ 628.2 $ 328.6 52.3 %

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.

Total sales for the nine months ended October 1, 2021 increased approximately $328.6 million, or 52.3%, compared to the nine months ended October 2, 2020.

Powered Vehicle product sales increased by $168.1 million, or 45.2%, due to increased demand primarily in the aftermarket channel, including strong performance from our upfitting product lines, and the inclusion of a full nine months of revenues from our SCA subsidiary.

Additionally, our prior year results were impacted by production shutdowns at a majority of our OEM partners due to the COVID-19 pandemic.

Specialty Sports product sales increased by $160.5 million, or 62.7%, drive by increased demand primarily in the OEM channel.

Cost of sales

For the six months ended

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

For the nine months ended

(in millions) October 1, 2021 October 2, 2020 Change ($) Change (%)

Cost of sales $ 631.7 $ 422.1 $ 209.6 49.7 %

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.

Cost of sales for the nine months ended October 1, 2021 increased approximately $209.6 million, or 49.7%, compared to the nine months ended October 2, 2020.

The increase in cost of sales was primarily due to the 52.3% 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.

For the nine months ended October 1, 2021, our gross margin increased 120 basis points to 34.0% compared to 32.8% for the nine months ended October 2, 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.

Additionally, our gross margin for the first nine months of the prior fiscal year period 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 (%)

For the nine months ended

(in millions) October 1, 2021 October 2, 2020 Change ($) Change (%)

Operating expenses:

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Total operating expenses $ 171.2 $ 129.6 $ 41.6 32.1 %

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.

Total operating expenses for the nine months ended October 1, 2021 were $171.2 million compared to $129.6 million for the nine months ended October 2, 2020.

When expressed as a percentage of total sales, total operating expenses decreased to 17.9% of total sales for the nine months ended October 1, 2021 compared to 20.6% of total sales in the nine months ended October 2, 2020.

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

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Research and development costs increased approximately $8.6 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.

General and administrative expenses increased by approximately $16.8 million due to higher employee related costs of $15.5 million, as well as various other investments of $9.8 million as we continue to right-size our administrative support functions.

These increases were partially offset by lower acquisition-related costs of $9.4 million and lower litigation expenses of $0.9 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.

Amortization of purchased intangibles for the nine months ended October 1, 2021 increased by approximately $2.3 million as compared to the nine months ended October 2, 2020.

The increase is primarily due to the amortization of intangible assets obtained through our acquisitions of SCA and Outside Van.

Income from operations

For the six months ended

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

For the nine months ended

(in millions) October 1, 2021 October 2, 2020 Change ($) Change (%)

Income from operations $ 153.8 $ 76.5 $ 77.3 101.0 %

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.

As a result of the factors discussed above, income from operations for the nine months ended October 1, 2021 increased approximately $77.3 million, or 101.0%, compared to income from operations for the nine months ended October 2, 2020.

Interest and other expense, net

For the six months ended

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

For the nine months ended

(in millions) October 1, 2021 October 2, 2020 Change ($) Change (%)

Interest and other expense, net:

Interest expense $ 6.3 $ 7.0 $ (0.7) (10.0) %

Other expense 1.0 0.1 0.9 900.0 %

Other expense (income) 0.9 (0.1) 1.0 (1,000.0) %

Interest and other expense, net $ 7.2 $ 6.9 $ 0.3 4.3 %

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.

Interest and other expense, net for the nine months ended October 1, 2021 increased by $0.3 million to $7.2 million compared to $6.9 million for the nine months ended October 2, 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 (%)

For the nine months ended

(in millions) October 1, 2021 October 2, 2020 Change ($) Change (%)

Provision for income taxes $ 20.5 $ 9.6 $ 10.9 113.5 %

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.

The effective tax rate was 14.0% and 13.7% for the nine months periods ended October 1, 2021 and October 2, 2020, respectively.

For the nine months ended October 1, 2021, the difference between the Company's effective tax rate of 14.0% and the 21% federal statutory rate resulted primarily from a windfall on stock-based compensation 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 and state taxes.

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 a lower tax rate on foreign-derived intangible income, research and development credits, a negotiated reduction of Switzerland's 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 (%)

For the nine months ended

(in millions) October 1, 2021 October 2, 2020 Change ($) Change (%)

Net income $ 126.1 $ 60.0 $ 66.1 110.2 %

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.

As a result of the factors described above, our net income increased $66.1 million, or 110.2%, to $126.1 million for the nine months ended October 1, 2021 from $60.0 million for the nine months ended October 2, 2020.

Liquidity and Capital Resources

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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 2, 2021 July 3, 2020

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

For the nine months ended

(in thousands) October 1, 2021 October 2, 2020

Net cash provided by operating activities $ 149,309 $ 99,801

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, 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.

In the nine months ended October 1, 2021, net cash provided by operating activities was $149.3 million and consisted of net income of $126.1 million, plus non-cash items totaling $42.2 million, offset by changes in operating assets and liabilities totaling $19.0 million.

Non-cash items and other adjustments consisted of depreciation and amortization of $32.3 million, stock-based compensation of $9.9 million, and amortization of loan fees of $1.2 million, offset by a $1.2 million change in deferred taxes and uncertain tax positions.

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 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.

Our investment in operating assets and liabilities is a result of increased inventory of $116.8 million, and accounts receivable of $37.9 million, partially offset by increases in accounts payable of $66.1 million, accrued expenses of $25.9 million, and income taxes of $8.3 million and a decrease in prepaids and other assets of $35.4 million.

The changes in inventory and accounts payable are primarily due to additional raw materials purchases to mitigate risks associated with supply chain uncertainty.

The change in accounts receivable reflects business growth.

The changes in accrued expenses and income taxes reflect higher compensation related accruals, warranty reserves, sales rebates and income taxes payable due to both business growth, as well as the timing of such payments.

The change in prepaids and other assets are primarily due to a decrease in deposits on chassis.

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.

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, and normal seasonality.

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

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, 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 SCA subsidiary acquisition in March 2020.

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.

Investing activities

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 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.

In the nine months ended October 1, 2021 and October 2, 2020, net cash used in investing activities was $55.6 million and $375.4 million, respectively.

Investing activities for the nine months ended October 1, 2021 consisted of $40.0 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 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.

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 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.

In the nine months ended October 1, 2021, net cash used in financing activities was $20.3 million, which consisted of payments of $6.6 million to repurchase shares of our common stock, net of proceeds from the exercise of stock options, payments on our term debt of $10.0 million, and $3.7 million in installment payments related to the purchase of the Tuscany non-controlling interest.

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

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.

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 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.

Credit Facility

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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 six months ended July 3, 2020.

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 Credit Facility.

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 provides for interest at a rate either based on the London Interbank Offered Rate ("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 October 1, 2021, the one-month LIBOR and prime rates were 0.08% and 3.25%, respectively.

At October 1, 2021, our weighted-average interest rate on outstanding borrowing was 1.30%.

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.

The Company was in compliance with the covenants as of October 1, 2021.

Off-Balance Sheet Arrangements

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Historically, inflation has not had a material effect on our results of operations.

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.

However, we have recently experienced a rise in raw material costs, supply constraints, labor availability issues and logistical cost increases and our expectation is that these impacts will continue into the fourth quarter of 2021.

While we are currently taking actions to mitigate these impacts, should these actions be unsuccessful or should such costs exceed what we can effectively mitigate, our business, financial condition and results of operations could be adversely impacted.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

1 unchanged sentence

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What changed 10-Q

Item 2. Management’s Discussion and Analysis