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Item 2. Management’s Discussion and Analysis

2022-02-02 compared with 2021-10-27 · 94 added, 81 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 26, 2021 as compared to the similar period ended September 27, 2020.

The following is a discussion and analysis of our financial condition and results of operations for the nine months ended December 26, 2021 as compared to the similar period ended December 27, 2020.

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 28, 2021 .

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Business Acquisitions

On December 30, 2021, after the end of our third quarter, we acquired substantially all the assets of NAPCO Chemical Company, Inc.

and its affiliates ("NAPCO") under the terms of an asset purchase agreement among us, NAPCO and certain other parties thereto.

NAPCO manufactures and distributes water treatment chemicals from three locations in Texas.

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

On October 29, 2021, we acquired substantially all the assets of Water and Waste Specialties, LLC, under the terms of an asset purchase agreement with Water and Waste Specialties and its shareholders.

Water and Waste Specialties was a water treatment chemical distribution company operating primarily in Alabama.

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

On September 20, 2021, we acquired substantially all the assets of Southeast Water Systems LLC, under the terms of an asset purchase agreement with Southeast Water Systems and its shareholders.

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

The aggregate annual revenue from these three acquisitions in the twelve months prior to our acquisitions totaled approximately $26 million.

The aggregate annual revenue of the three businesses acquired in the current fiscal year totaled approximately $17 million, as determined using the applicable twelve-month period preceding each respective acquisition date.

In the fourth quarter of fiscal 2021, we effected a two-for-one split of our common stock, and adjusted the par value from $0.05 per share to $0.01 per share.

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During this public health crisis, we remained focused on the health and safety of our employees, customers and suppliers and maintaining safe and reliable operations of our manufacturing sites.

As our operations and products are essential to critical national infrastructure, it is imperative that we continue to supply materials including the products needed to maintain safe drinking water, ingredients essential for large-scale food, pharmaceutical and other health product manufacturing and nutrition products needed to support our critical infrastructure.

The financial impact of the COVID-19 pandemic to our company has been mixed, and we expect mixed results to continue until conditions normalize following the end of the pandemic.

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 26, 2021 September 27, 2020 September 26, 2021 September 27, 2020

Three Months Ended Nine Months Ended

December 26, 2021 December 27, 2020 December 26, 2021 December 27, 2020

Sales 100.0 % 100.0 % 100.0 % 100.0 %

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Net income 5.4 % 5.5 % 7.5 % 7.3 %

Three Months Ended September 26, 2021 Compared to Three Months Ended September 27, 2020

Sales were $183.3 million for the three months ended September 26, 2021, an increase of $35.5 million, or 24%, from sales of $147.8 million in the same period a year ago.

Three Months Ended December 26, 2021 Compared to Three Months Ended December 27, 2020

Sales were $187.1 million for the three months ended December 26, 2021, an increase of $44.2 million, or 31%, from sales of $142.9 million in the same period a year ago.

Industrial Segment.

Industrial segment sales increased $22.0 million, or 36%, to $83.2 million for the three months ended September 26, 2021, from sales of $61.2 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 three months ended September 26, 2021 and 15% in the same period of the prior year.

The increase in sales was driven by increased sales of both our bulk products as well as our manufactured, blended and repackaged products, in particular certain of our agricultural and food ingredient products.

Industrial segment sales increased $36.2 million, or 56%, to $100.6 million for the three months ended December 26, 2021, from sales of $64.4 million in the same period a year ago.

Sales of bulk commodity products in the Industrial segment were approximately 16% of sales dollars in both the three months ended December 26, 2021 and the same period of the prior year.

The increase in Industrial segment sales was driven primarily by increased sales volumes of both our bulk and our manufactured, blended and repackaged products.

The increase included sales of certain of our agricultural products lines due in large part due to both favorable crop prices and early purchases as customers anticipated additional price increases later in the season.

Sales also increased due to increased selling prices driven by higher costs on many of our raw materials.

Water Treatment Segment.

Water Treatment segment sales increased $12.6 million, or 25%, to $62.1 million for the three months ended September 26, 2021, from sales of $49.5 million in the same period a year ago.

Sales of bulk commodity products in the Water Treatment segment were approximately 8% of sales dollars in the three months ended September 26, 2021 and 9% in the same period of the prior year.

Sales increased as a result of increased demand for many of our products, as well as $4.9 million in added sales from the acquisitions of ADC and C&L Aqua in fiscal 2021.

Water Treatment segment sales increased $10.5 million, or 27%, to $49.8 million for the three months ended December 26, 2021, from sales of $39.3 million in the same period a year ago.

Sales of bulk commodity products in the Water Treatment segment were approximately 9% of sales dollars in the three months ended December 26, 2021 and 10% in the same period of the prior year.

Sales increased as a result of increased demand for many of our products, as well as $3.1 million in added sales from acquired businesses.

Health & Nutrition Segment.

Health and Nutrition segment sales increased $0.9 million, or 2%, to $38.0 million for the three months ended September 26, 2021, from sales of $37.1 million in the same period a year ago.

The increase in sales was primarily driven by increased sales of our specialty distributed products largely as a result of continued increased demand for ingredients used in health and immunity products.

Gross profit increased $4.5 million, or 14%, to $37.3 million, or 20% of sales, for the three months ended September 26, 2021, from $32.8 million, or 22% of sales, for the same period a year ago.

During the three months ended September 26, 2021, the LIFO reserve increased, and gross profit decreased, by $3.0 million, primarily due to rising raw material prices.

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

Health and Nutrition segment sales decreased $2.6 million, or 7%, to $36.7 million for the three months ended December 26, 2021, from sales of $39.3 million in the same period a year ago.

The decrease in sales was primarily driven by decreased sales of our manufactured products when compared to strong demand for those products in the prior year, partially offset by an increase in sales of our specialty distributed products.

Gross profit increased $5.7 million, or 20%, to $33.9 million, or 18% of sales, for the three months ended December 26, 2021, from $28.2 million, or 20% of sales, for the same period a year ago.

During the three months ended December 26, 2021, the LIFO reserve increased, and gross profit decreased, by $2.9 million, primarily due to rising raw material prices.

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

Industrial Segment.

Gross profit for the Industrial segment increased $2.2 million, or 20%, to $12.6 million, or 15% of sales, for the three months ended September 26, 2021, from $10.4 million, or 17% of sales, in the same period a year ago.

During the three months ended September 26, 2021, the LIFO reserve increased, and gross profit decreased, by $2.3 million, primarily due to rising raw material prices.

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

Gross profit for the Industrial segment increased $6.1 million, or 66%, to $15.3 million, or 15% of sales, for the three months ended December 26, 2021, from $9.2 million, or 14% of sales, in the same period a year ago.

During the three months ended December 26, 2021, the LIFO reserve increased, and gross profit decreased, by $2.2 million, primarily due to rising raw material prices.

In the same quarter a year ago, the change in the LIFO reserve had a nominal impact on gross profit.

Gross profit increased as a result of the increase in sales, partially offset by the negative impact of the increase in the LIFO reserve.

Gross profit as a percentage of sales decreased due to the gross profit impact from the LIFO charge.

Water Treatment Segment.

Gross profit for the Water Treatment segment increased $3.0 million, or 21%, to $17.5 million, or 28% of sales, for the three months ended September 26, 2021, from $14.5 million, or 29% of sales, in the same period a year ago.

During the three months ended September 26, 2021, the LIFO reserve increased, and gross profit decreased, by $0.7 million.

Gross profit for the Water Treatment segment increased $1.1 million, or 11%, to $11.1 million, or 22% of sales, for the three months ended December 26, 2021, from $10.0 million, or 26% of sales, in the same period a year ago.

During the three months ended December 26, 2021, the LIFO reserve increased, and gross profit decreased, by $0.6 million.

In the same quarter a year ago, the change in the LIFO reserve had a nominal impact on gross profit.

Gross profit increased as a result of the increased sales, including the added sales in the acquired businesses of ADC and C&L Aqua.

Gross profit increased as a result of the increase in sales, including the added sales from the acquired businesses, partially offset by the negative $0.6 million year-over-year impact of the increase in the LIFO reserve.

Gross profit as a percentage of sales declined in part due to rising raw material costs and our inability in some cases to pass cost increases on to customers with contracts in place.

Health and Nutrition Segment .

Gross profit for our Health and Nutrition segment decreased $0.6 million, or 8%, to $7.2 million, or 19% of sales, for the three months ended September 26, 2021, from $7.8 million, or 21% of sales, for the same period a year ago.

While sales were up slightly from a year ago, the decrease in gross profit was a result of product mix changes as well as inventory adjustments of $1.0 million due to increased reserves for excess product on hand, in accordance with our reserve policies.

Gross profit for our Health and Nutrition segment decreased $1.5 million, or 16%, to $7.5 million, or 21% of sales, for the three months ended December 26, 2021, from $9.0 million, or 23% of sales, for the same period a year ago.

The decrease in gross profit was a result of the year-over-year decline in sales.

Selling, General and Administrative Expenses

Selling, general and administrative (“SG&A”) expenses increased $1.5 million to $17.7 million, or 10% of sales, for the three months ended September 26, 2021, from $16.2 million, or 11% of sales, for the same period a year ago.

Expenses increased in part due to the added costs from the acquired businesses of ADC and C&L Aqua, including $0.3 million of expense for amortization of intangibles, as well as increased variable pay expense.

Selling, general and administrative (“SG&A”) expenses increased $1.9 million to $19.7 million, or 11% of sales, for the three months ended December 26, 2021, from $17.8 million, or 12% of sales, for the same period a year ago.

Expenses increased in part due to the added costs from the acquired businesses in our Water Treatment segment, including $0.1 million of expense for amortization of intangibles, as well as increased variable pay expense and increased travel expense.

Increased expenses were partially offset by a year-over-year decrease of $0.4 million due to lower compensation expense relating to the non-qualified deferred compensation plan liability which is offset in other income as described below.

Operating Income

Operating income increased $3.0 million, or 18%, to $19.6 million, or 11% of sales, for the three months ended September 26, 2021, from $16.6 million, or 11% of sales, for the same period a year ago due to the combined impact of the factors discussed above.

Operating income increased $3.8 million, or 36%, to $14.3 million, or 8% of sales, for the three months ended December 26, 2021, from $10.5 million, or 7% of sales, for the same period a year ago due to the combined impact of the factors discussed above.

Interest Expense, Net

Interest expense was $0.3 million for both the three months ended September 26, 2021 and the three months ended September 27, 2020.

Additional interest cost as a result of the increase in outstanding borrowings was offset by lower borrowing rates compared to the prior year.

Other income of $0.2 million for the current quarter was $0.1 million lower than other income of $0.3 million in the same period a year ago.

Interest expense was $0.3 million for the three months ended December 26, 2021 and $0.4 million the three months ended December 27, 2020.

Additional interest cost as a result of the increase in outstanding borrowings was more than offset by lower borrowing rates compared to the prior year.

Other income was $0.1 million for the three months ended December 26, 2021 and $0.5 million in the same period a year ago.

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

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Income Tax Provision

Our effective income tax rate was 27% for the three months ended September 26, 2021, compared to 26% in the same period a year ago.

Our effective income tax rate was 27% for the three months ended December 26, 2021, compared to 25% in the same period a year ago.

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

Our effective tax rate for the full year is currently expected to be approximately 26-27%.

Six Months Ended September 26, 2021 Compared to Six Months Ended September 27, 2020

Sales were $364.5 million for the six months ended September 26, 2021, an increase of $73.5 million, or 25%, from sales of $291.0 million in the same period a year ago.

Nine Months Ended December 26, 2021 Compared to Nine Months Ended December 27, 2020

Sales were $551.6 million for the nine months ended December 26, 2021, an increase of $117.7 million, or 27%, from sales of $433.9 million in the same period a year ago.

Industrial Segment.

Industrial segment sales increased $36.3 million, or 27%, to $169.0 million for the six months ended September 26, 2021, from sales of $132.7 million in the same period a year ago.

Sales of bulk commodity products in the Industrial segment were approximately 15% of sales dollars in the six months ended September 26, 2021 and 14% in the same period of the prior year.

Industrial segment sales increased $72.6 million, or 37%, to $269.6 million for the nine months ended December 26, 2021, from sales of $197.0 million in the same period a year ago.

Sales of bulk commodity products in the Industrial segment were approximately 15% of sales dollars in the nine months ended December 26, 2021 and 14% in the same period of the prior year.

The increase in Industrial segment sales was driven primarily by increased sales volumes of both our bulk and our manufactured, blended and repackaged products.

Sales also increased due to increased selling prices driven by higher costs on many of our raw materials.

Water Treatment Segment.

Water Treatment segment sales increased $29.0 million, or 33%, to $118.3 million for the six months ended September 26, 2021, from sales of $89.3 million in the same period a year ago.

Sales of bulk commodity products in the Water Treatment segment were approximately 9% of sales dollars in both the six months ended September 26, 2021 and the six months ended September 27, 2020.

Sales increased as a result of increased demand for many of our products, as well as $11.7 million in added sales from the acquisitions of ADC and C&L Aqua in fiscal 2021.

Water Treatment segment sales increased $39.6 million, or 31%, to $168.1 million for the nine months ended December 26, 2021, from sales of $128.6 million in the same period a year ago.

Sales of bulk commodity products in the Water Treatment segment were approximately 9% of sales dollars in both the nine months ended December 26, 2021 and the same period in the prior year.

Sales increased as a result of increased demand for many of our products, as well as $14.7 million in added sales from acquired businesses.

Health & Nutrition Segment.

Health and Nutrition segment sales increased $8.2 million, or 12%, to $77.2 million for the six months ended September 26, 2021, from sales of $69.0 million in the same period a year ago.

Gross profit increased $12.5 million, or 20%, to $76.3 million, or 21% of sales, for the six months ended September 26, 2021, from $63.8 million, or 22% of sales, in the same period a year ago.

During the six months ended September 26, 2021, the LIFO reserve increased, and gross profit decreased, by $4.8 million, primarily due to rising raw material costs.

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

Industrial Segment.

Gross profit for the Industrial segment increased $3.9 million, or 17%, to $26.8 million, or 16% of sales, for the six months ended September 26, 2021, from $22.9 million, or 17% of sales, in the same period a year ago.

During the six months ended September 26, 2021, the LIFO reserve increased, and gross profit decreased, by $3.7 million, primarily due to rising raw material costs.

Health and Nutrition segment sales increased $5.6 million, or 5%, to $113.9 million for the nine months ended December 26, 2021, from sales of $108.3 million in the same period a year ago.

The increase in sales was driven by increased sales of our specialty distributed products partially offset by the decrease in sales of our manufactured products when compared to the strong demand for those products in the prior year.

Gross profit increased $18.2 million, or 20%, to $110.2 million, or 20% of sales, for the nine months ended December 26, 2021, from $92.0 million, or 20% of sales, in the same period a year ago.

During the nine months ended December 26, 2021, the LIFO reserve increased, and gross profit decreased, by $7.6 million, primarily due to rising raw material costs.

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

Gross profit increased as a result of the increase in sales, partially offset by the negative impact of the increase in the LIFO reserve.

Industrial Segment.

Gross profit for the Industrial segment increased $10.0 million, or 31%, to $42.1 million, or 16% of sales, for the nine months ended December 26, 2021, from $32.1 million, or 16% of sales, in the same period a year ago.

During the nine months ended December 26, 2021, the LIFO reserve increased, and gross profit decreased, by $5.9 million, primarily due to rising raw material costs.

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

Gross profit increased as a result of the increase in sales, partially offset by the negative impact resulting from the increase in the LIFO reserve.

Water Treatment Segment .

Gross profit for the Water Treatment segment increased $7.9 million, or 31%, to $33.8 million, or 29% of sales, for the six months ended September 26, 2021, from $25.9 million, or 29% of sales, in the same period a year ago.

During the six months ended September 26, 2021, the LIFO reserve increased, and gross profit decreased, by $1.1 million.

Gross profit for the Water Treatment segment increased $9.0 million, or 25%, to $44.9 million, or 27% of sales, for the nine months ended December 26, 2021, from $35.9 million, or 28% of sales, in the same period a year ago.

During the nine months ended December 26, 2021, the LIFO reserve increased, and gross profit decreased, by $1.7 million.

In the same period a year ago, the change in the LIFO reserve had a nominal impact on gross profit.

Gross profit increased as a result of the increased sales, including the added sales in the acquired businesses of ADC and C&L Aqua.

Gross profit increased as a result of the increase in sales, including the added sales from the acquired businesses.

Health and Nutrition Segment .

Gross profit for our Health and Nutrition segment increased $0.7 million, or 4%, to $15.7 million, or 20% of sales, for the six months ended September 26, 2021, from $15.0 million, or 22% of sales, in the same period a year ago.

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

Gross profit for our Health and Nutrition segment decreased $0.8 million, or 3%, to $23.2 million, or 20% of sales, for the nine months ended December 26, 2021, from $24.0 million, or 22% of sales, in the same period a year ago.

The decrease in gross profit was a result of product mix changes as well as inventory adjustments of approximately $1.0 million due to increased reserves for excess product on hand, in accordance with our reserve policies.

Selling, General and Administrative Expenses

SG&A expenses increased $3.2 million to $34.5 million, or 9% of sales, for the six months ended September 26, 2021, from $31.3 million, or 11% of sales, in the same period a year ago.

Expenses increased primarily due to the added costs from the acquired businesses of ADC and C&L Aqua, including $0.7 million of expense for amortization of intangibles, as well as increased variable pay expense.

SG&A expenses increased $5.2 million to $54.2 million, or 10% of sales, for the nine months ended December 26, 2021, from $49.0 million, or 11% of sales, in the same period a year ago.

Expenses increased in part due to the added costs from the acquired businesses in our Water Treatment segment, including $0.7 million of expense for amortization of intangibles, as well as increased variable pay expense and increased travel expense.

Increased expenses were partially offset by a year-over-year decrease of $0.8 million due to lower compensation expense relating to the non-qualified deferred compensation plan liability which is offset in other income as described below.

Operating Income

Operating income increased $9.2 million, or 28%, to $41.7 million, or 11% of sales, for the six months ended September 26, 2021, from $32.5 million, or 11% of sales, in the same period a year ago due to the combined impact of the factors discussed above.

Operating income increased $13.0 million, or 30%, to $56.0 million, or 10% of sales, for the nine months ended December 26, 2021, from $43.0 million, or 10% of sales, in the same period a year ago due to the combined impact of the factors discussed above.

Interest Expense, Net

Interest expense was $0.7 million for both the six months ended September 26, 2021 and the six months ended September 27, 2020.

Additional interest cost as a result of the increase in outstanding borrowings was offset by lower borrowing rates compared to the prior year.

Other income of $0.4 million for the six months ended September 26, 2021 was $0.4million lower than other income of $0.8 million in the same period a year ago.

Interest expense was $1.0 million for the nine months ended December 26, 2021 and $1.1 million the nine months ended December 27, 2020.

Additional interest cost as a result of the increase in outstanding borrowings was more than offset by lower borrowing rates compared to the prior year.

Other income was $0.5 million for the nine months ended December 26, 2021 and $1.3 million in the same period a year ago.

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

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Income Tax Provision

Our effective income tax rate was 26% for the six months ended September 26, 2021 and in the same period a year ago.

Our effective income tax rate was 26% for both the nine months ended December 26, 2021 and in the same period a year ago.

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

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Liquidity and Capital Resources

Cash was $6.8 million at September 26, 2021, an increase of $3.8 million as compared with the $3.0 million available as of March 28, 2021.

Cash provided by operating activities was $40.1 million for the six months ended September 26, 2021, compared to cash provided by operating activities of $20.1 million in the same period a year ago.

The year-over-year increase in cash provided by operating activities was primarily driven by year-over-year changes in uses of working capital, including less cash expended in the first six months of the current year for inventory and accounts payable and improved collections of customer receivables, combined with an increase in net income for the six months ended September 26, 2021 compared to the same period a year ago.

Cash was $23.4 million at December 26, 2021, an increase of $20.4 million as compared with the $3.0 million available as of March 28, 2021.

Generally we expect cash to be lower at the end of a quarter as debt is paid down, but due to the NAPCO acquisition closing occurring within a few days after quarter end the funds were borrowed within the quarter.

Cash provided by operating activities was $38.7 million for the nine months ended December 26, 2021, compared to cash provided by operating activities of $26.6 million in the same period a year ago.

The year-over-year increase in cash provided by operating activities was primarily driven by an increase in net income combined with year-over-year changes in uses of working capital, including less cash expended in the first nine months of the current year for accounts payable, partially offset by an increase in inventory and customer receivables for the nine months ended December 26, 2021 compared to the same period a year ago.

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 $7.9 million for the six months ended September 26, 2021, compared to $33.0 million in the same period a year ago.

Capital expenditures were $6.9 million for the six months ended September 26, 2021, compared to $8.1 million in the same period a year ago.

In the first six months of the prior year, we had larger investments in facility improvements and new and replacement equipment compared to the first six months of the current year due to the timing of capital projects.

Also in the first six months of the prior year, we closed on the acquisition of ADC for $25 million in cash.

Cash used in financing activities was $28.4 million for the six months ended September 26, 2021, compared to $11.8 million of cash provided by financing activities in the same period a year ago.

Included in financing activities in the first six months of the current year were net debt repayments of $15.0 million, compared to net debt borrowings of $16.0 million in the first six months of the prior year.

In addition, we repurchased $7.4 million of shares of our common stock in the first six months of the current fiscal year, compared to no shares repurchased in the same period a year ago.

Cash used in investing activities was $18.0 million for the nine months ended December 26, 2021, compared to $48.1 million in the same period a year ago.

Capital expenditures were $15.7 million for the nine months ended December 26, 2021,

compared to $13.2 million in the same period a year ago.

In the first nine months of the current year, we had larger investments in containers and replacement equipment compared to the first nine months of the prior year.

Acquisition spending was $2.6 million in the current year compared to $35.0 million in the same period of the prior year.

Cash used in financing activities was $0.2 million for the nine months ended December 26, 2021, compared to $25.1 million of cash provided by financing activities in the same period a year ago.

Included in financing activities in the first nine months of the current year were net debt proceeds of $17.0 million, compared to net debt proceeds of $36.0 million in the first nine months of the prior year.

In addition, we repurchased $8.5 million of shares of our common stock in the first nine months of the current fiscal year, compared to $4.1 million shares repurchased in the same period a year ago.

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 six months ended September 26, 2021, we repurchased 209,963 shares of common stock with an aggregate purchase price of $7.4 million.

During the six months ended September 27, 2020, no shares were repurchased.

As of September 26, 2021, 341,543 shares remained available to be repurchased under the share repurchase program.

During the nine months ended December 26, 2021, we repurchased 240,501 shares of common stock with an aggregate purchase price of $8.5 million.

During the nine months ended December 27, 2020, 166,088 shares were repurchased with an aggregate purchase price of $4.1 million.

As of December 26, 2021, 311,005 shares remained available to be repurchased under the share repurchase program.

We are party to an amended and restated credit agreement (the “Credit Agreement”) with 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 26, 2021, the effective interest rate on our borrowings was 1.1% .

At December 26, 2021, the effective interest rate on our borrowings was 0.9% .

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 26, 2021, the unamortized balance of these costs was $0.2 million, and is reflected as a reduction of debt on our balance sheet.

As of December 26, 2021, the unamortized balance of these costs was $0.2 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.

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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 26, 2021.

We were in compliance with all covenants of the Credit Agreement as of December 26, 2021.

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.

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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