What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-01-28 compared with 2020-10-21 · 95 added, 80 removed, 125 unchanged (58% of the section changed)

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

The following is a discussion and analysis of our financial condition and results of operations for the six months ended September 27, 2020 as compared to the similar period ended September 29, 2019.

The following is a discussion and analysis of our financial condition and results of operations for the nine months ended December 27, 2020 as compared to the similar period ended December 29, 2019.

This discussion should be read in conjunction with the condensed consolidated financial statements and notes to condensed consolidated financial statements included in this quarterly report on Form 10-Q and Item 8 of our Annual Report on Form 10-K for the fiscal year ended March 29, 2020 .

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Over the years, we have maintained the strong customer focus and have expanded our business by increasing our sales of value-added chemicals and specialty ingredients, including manufacturing, blending, and repackaging certain products.

Business Acquisition

Business and Property Acquisitions

On December 30, 2020, after the end of our third quarter, we acquired substantially all the assets of C & L Aqua Professionals, Inc.

and LC Blending, Inc.

(together, “C&L Aqua”) under the terms of an asset purchase agreement among us, C&L Aqua and its shareholders.

C&L Aqua is a water treatment chemical distribution company operating primarily in Louisiana.

The results of operations and the assets will be included as part of our Water Treatment segment from the date of acquisition forward.

In the third quarter of fiscal 2021, we acquired a manufacturing facility to allow further expansion and growth in both our Industrial and Water Treatment segments.

This site is adjacent to our facility in Rosemount, Minnesota, adding 40,000 square feet of manufacturing and warehouse space on 28 acres of land to bring us to a total of 105,000 square feet of space on 56 acres of land in the area, with rail access at both of the sites to allow for future growth and provide for supply chain flexibility on certain raw materials to better serve the customer.

On July 28, 2020, we acquired substantially all the assets of American Development Corporation of Tennessee, Inc.

(“ADC”) under the terms of an asset purchase agreement with ADC and its shareholders.

(“ADC”) under the terms of an asset purchase agreement among us, ADC and its shareholders.

ADC is a water treatment chemical distribution company operating primarily in Tennessee, Georgia and Kentucky.

The results of operations since the acquisition date are included in our Water Treatment segment.

The annual revenue from C&L Aqua and ADC in the twelve months prior to our acquisitions totaled approximately $25 million in the aggregate.

Statement on COVID-19

The pandemic caused by COVID-19 has resulted in federal, state and local governments around the world implementing stringent measures to help control the spread of the virus, including, from time to time, quarantines, “shelter in place” and “stay at home” orders, travel restrictions or bans, business curtailments, school closures, and other protective measures.

While some areas of the country have reopened and eased these restrictions, some still have certain restrictions in place or are implementing or contemplating new restrictions.

While some restrictions have eased since the stare of the COVID-19 pandemic, certain restrictions remain in place or new restrictions may be implemented in the future.

Restrictions will likely remain in place for some time.

Financial markets have been volatile in 2020, primarily due to uncertainty with respect to the severity and duration of the pandemic .

Financial markets have been volatile, primarily due to uncertainty with respect to the severity and duration of the pandemic .

All of our manufacturing facilities have qualified as essential operations (or the equivalent) under applicable federal and state orders.

As a result, all of our manufacturing sites and facilities have continued to operate, with no significant impact to output levels.

As a result, all of our manufacturing sites and facilities have continued to operate, with no significant impact to our output levels.

We are enforcing social distancing and enhanced health, safety and sanitization measures in accordance with guidelines from the Center for Disease Control.

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Our manufacturing sites have continued to operate during the COVID-19 pandemic, with no significant impact to manufacturing.

We ended the second quarter of fiscal 2021 with a leverage ratio of 1.0x, net debt of $72.8 million and $74 million available for borrowing under our Revolving Loan Facility.

The COVID-19 pandemic has created tremendous uncertainty in the economy.

The financial impact to our company has been mixed, as sales to certain end-markets such as food, bottled bleach and health and nutrition have benefited our reporting segments, while decreased sales to other end-markets such as ethanol, pools and resorts have negatively impacted them.

We ended the third quarter of fiscal 2021 with a leverage ratio of 1.2x, net debt of $88 million and $54 million available for borrowing under our Revolving Loan Facility.

The financial impact of the COVID-19 pandemic to our company has been mixed, as sales to certain end-markets such as food, bottled bleach and health and nutrition have benefited our reporting segments, while decreased sales to other end-markets such as ethanol, pools and resorts have negatively impacted them.

In addition, certain expenses, such as travel and entertainment and trade show expenses, have been lower than historical levels during fiscal 2021.

As uncertainty continues with this pandemic, we expect mixed results to continue for the foreseeable future.

We will continue to be cautious in our capital expenditures and investments, while still investing for the future by opening new Water Treatment branches, pursuing strategic acquisitions and making capital investments to drive higher margin business.

With our current debt levels and available borrowings, we believe we are well-positioned to weather a continued economic downturn.

Financial Results

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The following table sets forth the percentage relationship of certain items to sales for the period indicated:

Three Months Ended Six Months Ended

September 27, 2020 September 29, 2019 September 27, 2020 September 29, 2019

Three Months Ended Nine Months Ended

December 27, 2020 December 29, 2019 December 27, 2020 December 29, 2019

Sales 100.0 % 100.0 % 100.0 % 100.0 %

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Net income 5.5 % 3.7 % 7.3 % 5.8 %

Three Months Ended September 27, 2020 Compared to Three Months Ended September 29, 2019

Three Months Ended December 27, 2020 Compared to Three Months Ended December 29, 2019

Sales were $142.9 million for the current quarter, an increase of $22.5 million, or 19%, from sales of $120.4 million a year ago.

Industrial Segment.

Industrial segment sales decreased $6.9 million, or 10.2%, to $61.2 million for the current quarter, as compared to $68.1 million in the same period a year ago.

Industrial segment sales increased $1.4 million, or 2%, to $64.4 million for the current quarter, as compared to $63.0 million in the same period a year ago.

Sales of bulk commodity products in the Industrial segment were approximately 16% of sales dollars in the current quarter and 18% in the same period of the prior year.

The decrease in sales dollars as compared to the prior year was driven by lower overall volumes sold.

The increase in sales dollars from the prior year was driven largely by a product mix shift to more sales of certain of our higher-priced manufactured, blended and repackaged products.

Water Treatment Segment.

Water Treatment segment sales increased $4.4 million, or 13%, to $39.3 million for the current quarter, as compared to $34.9 million in the same period a year ago.

Sales of bulk commodity products in the Water Treatment segment were approximately 9% of sales dollars for the current quarter and 11% in the same period a year ago.

Sales of bulk commodity products in the Water Treatment segment were approximately 10% of sales dollars in the current quarter and 12% in the same period of the prior year.

The increase in sales dollars from the prior year was largely attributable to added sales from the acquisition of ADC.

Sales by our legacy business also increased due to increased sales of our manufactured, blended and repackaged products.

Sales by our legacy business also increased overall due to increased sales of our manufactured, blended and repackaged products.

Health & Nutrition Segment.

Sales for our Health and Nutrition segment increased $11.0 million, or 42.2%, to $37.1 million for the current quarter, as compared to $26.1 million in the same period a year ago.

Health and Nutrition segment sales increased $16.8 million, or 75%, to $39.3 million for the current quarter, as compared to $22.5 million in the same period a year ago.

The increase in sales was driven by increased sales of both our manufactured and specialty distributed products largely as a result of increased consumer demand for health and immunity products.

Gross profit increased $4.8 million to $32.8 million, or 22.2% of sales, for the current quarter, from $28.0 million, or 20.0% of sales, for the same period a year ago.

During the current quarter, the LIFO reserve decreased, and gross profits increased, by $0.2 million.

Gross profit increased $6.7 million, or 31%, to $28.2 million, or 20% of sales, for the current quarter, from $21.5 million, or 18% of sales, for the same period a year ago.

During the current quarter, the LIFO reserve increased, and gross profits decreased, by $0.1 million.

In the same quarter a year ago, the LIFO reserve decreased, and gross profits increased, by $0.3 million.

Industrial Segment.

Gross profit for the Industrial segment decreased $0.3 million to $10.4 million, or 17.0% of sales, for the current quarter, from $10.7 million, or 15.7% of sales, in the same period of the prior year.

During the current quarter, LIFO reserve decreased, and gross profits increased, by $0.2 million.

Gross profit for the Industrial segment increased $0.8 million, or 9%, to $9.2 million, or 14% of sales, for the current quarter, from $8.4 million, or 13% of sales, in the same period of the prior year.

During the current quarter, the change in the LIFO reserve had a nominal impact on gross profit.

In the same quarter a year ago, the LIFO reserve decreased, and gross profits increased, by $0.2 million.

Total gross profit decreased slightly due to the overall reduction in sales.

Total gross profit, and gross profit as a percentage of sales, decreased due to a product mix shift to more sales of certain higher-margin manufactured, blended and repackaged products.

Water Treatment Segment.

Gross profit for the Water Treatment segment increased $1.8 million to $14.5 million, or 29.3% of sales, for the current quarter, from $12.8 million, or 27.8% of sales, in the same period of the prior year.

Gross profit for the Water Treatment segment increased $1.6 million, or 20%, to $10.0 million, or 26% of sales, for the current quarter, from $8.4 million, or 24% of sales, in the same period of the prior year.

During the current and prior year quarters, the change in the LIFO reserve had a nominal impact on gross profit.

Gross profit increased as a result of the added gross profit from the acquisition of ADC, as well as the increased sales in our legacy business.

Gross profit increased as a result of the added gross profit from the sales in the acquired ADC business, as well as the increased sales of manufactured, blended and repackaged products in our legacy business.

Gross profit as a percentage of sales increased as a result of product mix changes.

Health and Nutrition Segment .

Gross profit for our Health and Nutrition segment increased $3.2 million to $7.8 million, or 21.1% of sales, for the current quarter, from $4.6 million, or 17.5% of sales, for the same period of the prior year.

The increase in gross profit was primarily a result of higher sales compared to the prior year.

Gross profit for our Health and Nutrition segment increased $4.3 million, or 92%, to $9.0 million, or 23% of sales, for the current quarter, from $4.7 million, or 21% of sales, for the same period of the prior year.

The increase in gross profit was a result of higher sales compared to the prior year.

Gross profit as a percentage of sales increased as a result of product mix changes.

Selling, General and Administrative Expenses

Selling, general and administrative (“SG&A”) expenses were $16.2 million, or 11.0% of sales, for the current quarter, compared to $14.8 million, or 10.6% of sales, for the same period of the prior year.

Expenses increased in part due to increased variable pay and the added costs due to the ADC acquisition, including $0.2 million expense for amortization of intangibles, as well as an unfavorable adjustment to compensation expense related to our non-qualified deferred compensation plan, which expense is offset in other income.

As a percentage of sales, SG&A was relatively flat year over year when adjusted for the expense related to the non-qualified deferred compensation plan and the amortization of the intangibles related to ADC.

Selling, general and administrative (“SG&A”) expenses increased $3.1 million to $17.8 million, or 12% of sales, for the current quarter, from $14.7 million, or 12% of sales, for the same period of the prior year.

Expenses increased primarily due to an increase in variable costs, primarily variable compensation, added costs from the acquired ADC business, including amortization of intangibles, and acquisition expenses.

In addition, we recorded a year-over-year expense increase of $0.3 million due to higher compensation expense relating to the non-qualified deferred compensation plan liability which is offset in other income as described below.

These increases were partially offset by a decrease in travel and trade show expenses due to restrictions imposed as a result of COVID-19.

Operating Income

Operating income increased $3.4 million to $16.6 million, or 11.2% of sales, for the current quarter, from $13.2 million, or 9.4% of sales, for the same period of the prior year due to the combined impact of the factors discussed above.

Operating income increased $3.7 million, or 55%, to $10.5 million, or 7% of sales, for the current quarter, from $6.8 million, or 6% of sales, for the same period of the prior year due to the combined impact of the factors discussed above.

Interest Expense, Net

Interest expense was $0.4 million for the current quarter, a decrease of $0.2 million from interest expense of $0.6 million for the same period a year ago.

Interest expense decreased due to lower outstanding borrowings and lower borrowing rates compared to the prior year.

Other income increased $0.3 million from the same period a year ago, with $0.3 million recorded in the current quarter, compared to a nominal amount in the same quarter a year ago.

Interest expense decreased due to lower outstanding borrowings compared to the prior year.

Other income increased $0.4 million from the same period a year ago, with $0.5 million recorded in the current quarter, from $0.1 million in the same period of the prior year.

This amount represents gains recorded on investments held for our non-qualified deferred compensation plan.

The amount recorded as a gain is offset by a similar amount recorded as an increase to compensation expense within SG&A expenses.

The amount recorded as a gain was offset by a similar amount recorded as an increase to compensation expense within SG&A expenses.

Income Tax Provision

Our effective income tax rate was 25.2% for the current quarter, compared to 28.1% in the same period of the prior year.

The effective tax rate decreased from the prior year due to favorable tax provision adjustments recorded in the third quarter of fiscal 2021.

The effective tax rate is impacted by projected levels of annual taxable income, permanent items, and state taxes.

Six Months Ended September 27, 2020 Compared to Six Months Ended September 29, 2019

Sales were $291.0 million for the six months ended September 27, 2020, an increase of $3.6 million, or 1.3%, from sales of $287.4 million for the same period a year ago.

Nine Months Ended December 27, 2020 Compared to Nine Months Ended December 29, 2019

Sales were $433.9 million for the nine months ended December 27, 2020, an increase of $26.1 million, or 6%, from sales of $407.8 million for the same period a year ago.

Industrial Segment.

Industrial segment sales decreased $10.7 million, or 7.5%, to $132.7 million for the six months ended September 27, 2020, as compared to $143.4 million for the same period a year ago.

Industrial segment sales decreased $9.4 million, or 5%, to $197.0 million for the nine months ended December 27, 2020, as compared to $206.4 million for the same period a year ago.

Sales of bulk commodity products in the Industrial segment were approximately 14% of sales dollars in the current year and 18% in the same period of the prior year.

The decrease in sales dollars from the prior year was driven largely by weakened economic conditions in the ethanol industry, which decreased sales of products into that industry.

In addition, the decrease in sales dollars from the prior year was partially attributable to a temporary increase in sales in the prior year attributable to heavy rains and flooding along the Mississippi River, which increased demand from certain customers.

These year-over-year sales decreases were partially offset by increased sales of certain of our manufacturing, blended and repackaged products, largely our bleach products as a result of increased demand due to COVID-19.

The decrease in sales dollars from the prior year was driven largely by weakened economic conditions in the ethanol industry, which decreased sales of products into that industry in the first half of the year.

In addition, the decrease in sales dollars when compared to the prior year was partially attributable to temporarily higher sales in the first quarter of the prior year attributable to heavy rains and flooding along the Mississippi River, which increased demand from certain customers.

These year-over-year sales decreases were partially offset by increased sales of certain of our manufacturing, blended and repackaged products, largely our food ingredient, pharmaceutical, and bleach products as a result of increased demand.

Water Treatment Segment.

Water Treatment segment sales increased $0.2 million, or 0.2%, to $89.3 million for the six months ended September 27, 2020, as compared to $89.1 million for the same period a year ago.

Water Treatment segment sales increased $4.5 million, or 4%, to $128.6 million for the nine months ended December 27, 2020, as compared to $124.0 million for the same period a year ago.

Sales of bulk commodity products in the Water Treatment segment were approximately 9% of sales dollars in the current year and 11% a year ago.

The increase in sales dollars resulted from the added sales from the acquisition of ADC and was largely offset by a first quarter sales decline due to reduced sales to certain end markets, primarily pools, as a result of COVID-19.

The increase in sales dollars resulted primarily from the added sales from the acquisition of ADC and was largely offset by a first quarter sales decline due to reduced sales to certain end markets, primarily public pools, as a result of shutdowns due to the COVID-19 pandemic.

Health & Nutrition Segment.

Sales for our Health and Nutrition segment increased $14.2 million, or 25.9%, to $69.0 million for the six months ended September 27, 2020, as compared to $54.8 million for the same period a year ago.

Health and Nutrition segment sales increased $31.0 million, or 40%, to $108.3 million for the nine months ended December 27, 2020, as compared to $77.3 million for the same period a year ago.

The increase in sales was driven by increased sales of both our manufactured and specialty distributed products largely as a result of increased consumer demand for health and immunity products.

Gross profit increased $7.0 million to $63.8 million, or 21.9% of sales, for the six months ended September 27, 2020, from $56.8 million, or 19.8% of sales, for the same period a year ago.

Gross profit increased $13.7 million, or 18%, to $92.0 million, or 21% of sales, for the nine months ended December 27, 2020, from $78.3 million, or 19% of sales, for the same period a year ago.

During the current year, the LIFO reserve decreased, and gross profits increased, by $0.1 million.

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Industrial Segment.

Gross profit for the Industrial segment increased $1.3 million to $22.9 million, or 17.3% of sales, for the six months ended September 27, 2020, from $21.6 million, or 15.1% of sales, for the same period a year ago.

During the current year, LIFO reserve decreased, and gross profits increased, by $0.1 million.

Gross profit for the Industrial segment increased $2.1 million, or 7%, to $32.1 million, or 16% of sales, for the nine months ended December 27, 2020, from $30.0 million, or 15% of sales, for the same period a year ago.

During the current year, the LIFO reserve decreased, and gross profits increased, by $0.1 million.

In the same period a year ago, the LIFO reserve decreased, and gross profits increased, by $0.5 million.

Gross profit increased due to strong first quarter sales of certain manufactured, blended and re-packaged products, largely our bleach products as a result of increased demand due to COVID-19.

Total gross profit, and gross profit as a percentage of sales, increased due to a product mix shift to more sales of higher-margin manufactured, blended and re-packaged products.

Water Treatment Segment.

Gross profit for the Water Treatment segment increased $1.1 million to $25.9 million, or 29.0% of sales, for the six months ended September 27, 2020, from $24.8 million, or 27.8% of sales, for the same period a year ago.

During the current and prior year periods, the LIFO reserve had a nominal impact on gross profit.

Gross profit increased primarily as a result of added sales from the acquisition of ADC.

Gross profit for the Water Treatment segment increased $2.7 million, or 8%, to $35.9 million, or 28% of sales, for the nine months ended December 27, 2020, from $33.2 million, or 27% of sales, for the same period a year ago.

During the current year, changes in the LIFO reserve had a nominal impact on gross profits.

In the same period a year ago, the LIFO reserve decreased, and gross profits increased by $0.1 million.

Gross profit increased as a result of the added gross profit from the sales in the acquired ADC business, as well as a product mix shift in our legacy business to more sales of manufactured, blended and repackaged products.

Gross profit as a percentage of sales increased as a result of product mix changes.

Health and Nutrition Segment .

Gross profit for our Health and Nutrition segment increased $4.6 million to $15.0 million, or 21.8% of sales, for the six months ended September 27, 2020, from $10.4 million, or 18.9% of sales, for the same prior year period.

The increase in gross profit was primarily a result of higher sales compared to the prior year.

Gross profit for our Health and Nutrition segment increased $8.9 million, or 60%, to $24.0 million, or 22% of sales, for the nine months ended December 27, 2020, from $15.1 million, or 20% of sales, for the same period a year ago.

The increase in gross profit was a result of higher sales compared to the prior year.

Gross profit as a percentage of sales increased as a result of product mix changes.

Selling, General and Administrative Expenses

SG&A expenses were $31.3 million, or 10.7% of sales, for the six months ended September 27, 2020, compared to $29.7 million, or 10.3% of sales, for the same prior year period.

Expenses increased in part due to increased variable pay, the added costs due to the ADC acquisition, including $0.2 million expense for amortization of intangibles, as well as an unfavorable adjustment to compensation expense related to our non-qualified deferred compensation plan, which expense is offset in other income.

SG&A expenses increased $4.6 million, or 11% to $49.0 million, or 11% of sales, for the nine months ended December 27, 2020, compared to $44.4 million, or 11% of sales, for the same prior year period.

In addition, we recorded a year-over-year expense increase of $1.0 million due to higher compensation expense relating to the non-qualified deferred compensation plan liability which is offset in other income as described below.

These increases were partially offset by a decrease in travel and trade show expenses due to restrictions imposed as a result of COVID-19.

Operating Income

Operating income increased $5.4 million to $32.5 million, or 11.2% of sales, for the six months ended September 27, 2020, from $27.1 million, or 9.5% of sales, for the same prior year period due to the combined impact of the factors discussed above.

Operating income increased $9.1 million, or 27%, to $43.0 million, or 10% of sales, for the nine months ended December 27, 2020, from $33.9 million, or 8% of sales, for the same prior year period due to the combined impact of the factors discussed above.

Interest Expense, Net

Interest expense was $0.7 million for the six months ended September 27, 2020 , a decrease of $0.7 million from interest expense of $1.4 million for the same period a year ago.

Interest expense decreased due to lower outstanding borrowings and lower borrowing rates compared to the prior year.

Other income increased $0.7 million from the same period a year ago, with $0.8 million of expense recorded in the six months ended September 27, 2020, compared to $0.1 million in the same period a year ago.

Interest expense decreased $0.9 million, to $1.1 million for the nine months ended December 27, 2020, from $2.0 million for the same period a year ago.

Interest expense decreased due to lower borrowing rates compared to the prior year.

Other income increased $1.0 million, to $1.3 million for the nine months ended December 27, 2020, from $0.3 million in the same period a year ago.

This represents gains recorded on investments held for our non-qualified deferred compensation plan.

The amount recorded as a gain is offset by a similar amount recorded as an increase to compensation expense within SG&A expenses.

The amount recorded as a gain was offset by a similar amount recorded as an increase to compensation expense within SG&A expenses.

Income Tax Provision

Our effective income tax rate for the six months ended September 27, 2020 was 26.4%, compared to 26.3% in the same period of the prior year.

Our effective income tax rate for the nine months ended December 27, 2020 was 26.1%, compared to 26.6% in the same period of the prior year.

The effective tax rate is impacted by projected levels of annual taxable income, permanent items, and state taxes.

Liquidity and Capital Resources

Cash was $3.2 million at September 27, 2020, a decrease of $1.1 million as compared with the $4.3 million available as of March 29, 2020.

Cash provided by operating activities was $20.1 million for the six months ended September 27, 2020, compared to cash provided by operating activities of $27.1 million for the same period of the prior year.

The year-over-year decrease in cash provided by operating activities was primarily driven by an increase in inventory and customer receivables, offset by an increase in net income for the first six months of fiscal 2021 compared to the same period a year ago.

Increased customer demand in our Health and Nutrition segment resulted in a significant increase in on-hand inventory due to required stocking levels and longer lead times for many products.

Cash was $8.0 million at December 27, 2020, an increase of $3.7 million as compared with the $4.3 million available as of March 29, 2020.

Cash provided by operating activities was $26.6 million for the nine months ended December 27, 2020, compared to cash provided by operating activities of $45.0 million for the same period of the prior year.

The year-over-year decrease in cash provided by operating activities was primarily driven by increases in inventory and customer receivables, offset by an increase in net income for the first nine months of fiscal 2021 compared to the same period a year ago.

Increased customer demand in our Health and Nutrition segment resulted in a significant increase in on-hand inventory due to increased stocking levels to fill the increased demand and to offset longer lead times from our suppliers for many products.

Due to the nature of our operations, which includes purchases of large quantities of bulk chemicals, timing of purchases can result in significant changes in working capital investment and the resulting operating cash flow.

Typically, our cash requirements increase during the period from April through November as caustic soda inventory levels increase because we receive the majority of barges during this period.

Cash used in investing activities was $33.0 million for the six months ended September 27, 2020, compared to $13.9 million for the same period of the prior year.

In the six months ended September 27, 2020, we acquired ADC for $25 million.

Capital expenditures were $8.1 million for the six months ended September 27, 2020, compared to $14.1 million in the same period of the prior year.

In the first six months of the prior year, we purchased our previously leased corporate headquarters facility for $6.4 million.

Cash provided by financing activities was $11.8 million for the six months ended September 27, 2020, compared to $18.4 million of cash used in financing activities in the same period of the prior year.

Included in financing activities in the first six months of the current year were net debt proceeds of $16.0 million used in part for the acquisition of ADC, compared to net debt repayments of $10 million in the first six months of the prior year.

In addition, we repurchased no shares of our common stock in the first six months of the current fiscal year, compared to $3.8 million in the same period in the prior year.

Cash used in investing activities was $48.1 million for the nine months ended December 27, 2020, compared to $19.1 million for the same period of the prior year.

In the nine months ended December 27, 2020, we acquired ADC for $25 million.

Capital expenditures were $13.2 million for the nine months ended December 27, 2020, compared to $19.4 million in the same period of the prior year.

In the first nine months of the current year, we purchased a manufacturing facility on 28 acres to allow further expansion and growth in both our Industrial and Water Treatment segments for $10 million, compared to the purchases of our previously leased corporate headquarters facility for $6.4 million and a Water Treatment facility for $0.8 million in the first nine months of the prior year.

Cash provided by financing activities was $25.1 million for the nine months ended December 27, 2020, compared to $27.8 million of cash used in financing activities in the same period of the prior year.

Included in financing activities in the first nine months of the current year were net debt proceeds of $36.0 million used in part for the acquisition of ADC, compared to net debt repayments of $17 million in the first nine months of the prior year.

In addition, we repurchased $4.1 million of shares of our common stock in the first nine months of the current fiscal year, compared to $3.8 million in the same period in the prior year.

We expect our cash balances and funds available under our credit facility, discussed below, along with cash flows generated from operations, will be sufficient to fund the cash requirements of our ongoing operations for the foreseeable future.

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The primary objective of the share repurchase program is to offset the impact of dilution from issuances relating to employee and director equity grants and our employee stock purchase program.

During the first six months of fiscal 2021, we did not repurchase any shares of common stock.

In the first six months of the prior fiscal year, we repurchased 91,395 shares of common stock with an aggregate purchase price of $3.8 million.

As of September 27, 2020, 358,797 shares remained available for purchase under the program

During the first nine months of fiscal 2021, we repurchased 83,044 shares of common stock with an aggregate purchase price of $4.1 million.

In the first nine months of the

prior fiscal year, we repurchased 91,395 shares of common stock with an aggregate purchase price of $3.8 million.

As of December 27, 2020, 275,753 shares remained available for purchase under the program

We are party to an amended and restated credit agreement (the “Credit Agreement”) with U.S.

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Borrowings under the Revolving Loan Facility bear interest at a rate per annum equal to one of the following, plus, in both cases, an applicable margin based upon our leverage ratio:

(a) LIBOR for an interest period of one, two, three or six months as selected by us, reset at the end of the selected interest period, or (b) a base rate determined by reference to the highest of (1) U.

(a) LIBOR for an interest period of one, two, three or nine months as selected by us, reset at the end of the selected interest period, or (b) a base rate determined by reference to the highest of (1) U.

Bank’s prime rate, (2) the Federal Funds Effective Rate plus 0.5%, or (3) one-month LIBOR for U.S.

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Bank, the Revolving Credit Loan Facility would be amended to use such successor rate without any further action or consent of any other lender, so long as the administrative agent does not receive any objection from any other lender.

At September 27, 2020, the effective interest rate on our borrowings was 1.3% .

At December 27, 2020, the effective interest rate on our borrowings was 1.4% .

In addition to paying interest on the outstanding principal under the Revolving Loan Facility, we are required to pay a commitment fee on the unutilized commitments thereunder.

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Debt issuance costs paid to the Lenders are being amortized as interest expense over the term of the Credit Agreement.

As of September 27, 2020, the unamortized balance of these costs was $0.3 million, and is reflected as a reduction of debt on our balance sheet.

As of December 27, 2020, the unamortized balance of these costs was $0.3 million, and is reflected as a reduction of debt on our balance sheet.

The Credit Agreement requires us to maintain (a) a minimum fixed charge coverage ratio of 1.15 to 1.00 and (b) a maximum total cash flow leverage ratio of 3.0 to 1.0.

1 unchanged sentence

We are permitted to make distributions, pay dividends and repurchase shares so long as no default or event of default exists or would exist as a result thereof.

We were in compliance with all covenants of the Credit Agreement as of September 27, 2020.

We were in compliance with all covenants of the Credit Agreement as of December 27, 2020.

The Credit Agreement contains customary events of default, including failure to comply with covenants in the Credit Agreement and other loan documents, cross default to other material indebtedness, failure by us to pay or discharge material judgments, bankruptcy, and change of control.

15 unchanged sentences

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