What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-02-04 compared with 2021-08-09 · 84 added, 123 removed, 96 unchanged (68% of the section changed)

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This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) includes comments and analysis relating to the results of operations and financial condition of Johnson Outdoors Inc.

and its subsidiaries (collectively, the “Company”) as of and for the three and nine month periods ended July 2, 2021 and June 26, 2020.

and its subsidiaries (collectively, the “Company”) as of and for the three month periods ended December 31, 2021 and January 1, 2021.

All monetary amounts, other than share and per share amounts, are stated in thousands.

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Such forward-looking statements are subject to certain risks and uncertainties which could cause actual results or outcomes to differ materially from those currently anticipated.

Factors that could affect actual results or outcomes include the matters described under the caption “Risk Factors” in Item 1A of the Company’s Form 10-K which was filed with the Securities and Exchange Commission on December 11, 2020, the update to such "Risk Factors" section in Part II, Item 1A in this Form 10-Q and the following:

changes in economic conditions, consumer confidence levels and discretionary spending patterns in key markets;

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trade policies, tariffs, and the reaction of other countries to such changes;

the global outbreaks of disease, such as the COVID-19 pandemic which has affected, and may continue to affect, market and economic conditions, and the timing, pricing and continued availability of raw materials and components from our supply chain, along with wide-ranging impacts on employees, customers and various aspects of our operations;

the Company’s success in implementing its strategic plan, including its targeted sales growth platforms, innovation focus and its increasing digital presence;

JOHNSON OUTDOORS INC.

Company’s success in implementing its strategic plan, including its targeted sales growth platforms, innovation focus and its increasing digital presence;

litigation costs related to actions of and disputes with third parties, including competitors;

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movements in foreign currencies, interest rates or commodity costs;

fluctuations in the prices of raw materials or the availability of raw materials used by the Company;

any disruptions in the Company's supply chain as a result of material fluctuations in the Company's order volumes and requirements for (as well as limitations on the availability of) raw materials and other components necessary to manufacture and produce the Company's products;

fluctuations in the prices of raw materials or the availability of raw materials or components used by the Company;

any disruptions in the Company's supply chain as a result of material fluctuations in the Company's order volumes and requirements for raw materials and other components, or the demand for those same raw materials and components by third parties, that are necessary to manufacture and produce the Company's products;

the success of the Company’s suppliers and customers and the impact of any consolidation in the industries of the Company's suppliers and customers;

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Shareholders, potential investors and other readers are urged to consider these factors in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements.

The forward-looking statements included herein are only made

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as of the date of this filing.

The forward-looking statements included herein are only made as of the date of this filing.

The Company assumes no obligation, and disclaims any obligation, to update such forward-looking statements to reflect subsequent events or circumstances.

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Coronavirus (COVID-19)

In March 2020, the World Health Organization announced the COVID-19 outbreak had become a world-wide pandemic.

Various government mandates resulted in travel limitations and business and government shutdowns which had significant negative economic impacts around the world.

The Company temporarily halted certain production operations at the end of the second fiscal quarter and beginning of the third fiscal quarter of 2020, and saw a significant decline in demand and sales volumes during that time.

Although later during our 2020 third fiscal quarter, stay-at-home orders were lifted, government prescriptions for the general public to maintain social distancing and avoid activities involving large crowds or being in confined spaces with others to mitigate the spread of the virus continued and, as a result, the outdoor recreation industry has benefited from increased participation.

As consumers took advantage of being outdoors, the Company saw an increase in demand for many of its warm weather outdoor recreational products and each of our Fishing, Camping and Watercraft Recreation segments began to experience increased sales volumes toward the end of fiscal 2020.

As a result, our customers’ inventory levels were drawn down, and accordingly, we continued to experience strong orders from our customers during the first three quarters of fiscal 2021 to satisfy strong consumer demand for our products across these segments.

Nonetheless, COVID-19 has caused widely-documented supply chain and logistics disruptions across industries, including those in which we operate, which have been exacerbated due to the recent higher demand for our outdoor recreation products.

As a result of these disruptions, the Company is focused on managing its supply chain to meet the continued strong consumer demand;

however, such disruptions may affect our ability to fill such demand across our segments.

Net sales of $213,568 for the third quarter of fiscal 2021 increased $75,178, or 54%, from the same period in the prior year.

The prior year third quarter was heavily impacted by COVID-19 related shutdowns, resulting in unusually low sales volumes for the quarter.

Due to this, as well as increased participation in outdoor recreation activities in the current fiscal year as a result of social distancing and other indoor activity restrictions related to the ongoing COVID-19 pandemic, there was a significant increase in third quarter sales volumes across all businesses over the prior year quarter.

This sales volume increase was the primary driver of the increase of $25,170 in operating profit over the prior year quarter.

Due to the timing of the COVID-19 outbreak, the Company's traditional seasonal pacing, where our heaviest sales volumes typically occurred during our second and third fiscal quarters, shifted during fiscal 2020 and fiscal 2021.

During those years, increased participation in fishing, camping and watercraft recreation and related demand for our products, largely driven by consumer desire to engage in socially distant and safe activities outdoors as a reaction to the COVID-19 pandemic led to increased sales volumes across all Company segments.

This demand continued into the first quarter of fiscal 2022.

In addition to this significant increase in demand for Company products during fiscal 2021 and into the first quarter of fiscal 2022, COVID-19 has also caused widely-documented supply chain and logistics disruptions across industries, including those in which we operate, which have been exacerbated during the latter half of fiscal 2021 and into fiscal 2022 due to the higher demand for our outdoor recreation products and associated inventory replenishment actions of our customers.

These adverse supply chain and logistics constraints and disruptions have impacted the timing, sourcing, availability and cost of raw materials and components that are necessary to manufacture our outdoor recreation products.

During the fourth quarter of fiscal 2021, certain of the Company's component suppliers and logistical service providers experienced disruptions, resulting in supply shortages across all of our segments for certain materials and components that are necessary to produce our products.

Moreover, during the first quarter of fiscal 2022, the Fishing segment was significantly impacted by these supply chain and logistical infrastructure disruptions, resulting in decreased sales volumes in that segment over the same quarter in the prior year.

As a result of these disruptions, the Company has taken certain preliminary actions to attempt to meet the continued strong consumer demand for its products to continue to fulfill product orders.

These actions include building and procuring numerous categories of inventory (in some cases at significantly higher price points than what was historically paid) to mitigate against potential shortages during fiscal 2022 in certain of its materials and components that are necessary to manufacture Company products.

These buying actions have subsequently resulted in decreased margins and in the Company carrying significantly higher levels of inventory for a number of its materials, components and products at the end of the first fiscal quarter of 2022.

Because the Company expects that these same supply chain and logistics disruptions will continue throughout fiscal 2022, the Company remains focused on evaluating and pursuing additional options (beyond building inventory) to meet the continued

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strong consumer demand for its products.

Nonetheless, these supply chain and logistics disruptions remain fluid and will likely impact the cost of goods sold for future sales of product or the Company’s ability to fill all customer demand for its products, especially given the volatility and changing circumstances brought on by the COVID-19 pandemic and its impact on the global supply chain and logistics infrastructure.

Net sales of $153,524 for the first quarter of fiscal 2022 decreased $12,143, or 7%, from the same period in the prior year.

While consumer demand remains strong, sales volumes have been negatively impacted by product availability and supply chain disruptions, particularly in Fishing, the Company's largest segment.

This sales volume decrease and lower gross margins resulting from higher costs of sales were the primary drivers of the $9,797 decrease in operating profit over the prior year quarter.

The Company’s business is seasonal in nature.

The third fiscal quarter traditionally falls within the Company’s primary selling season for its warm-weather outdoor recreation products.

The first fiscal quarter traditionally falls prior to the Company’s primary selling season for its warm-weather outdoor recreation products.

The table below sets forth a historical view of the Company’s seasonality during the last three fiscal years.

See “Coronavirus (COVID-19)” above for additional information of the impact of COVID-19 on changes to the Company’s seasonality for fiscal 2020 which changes have continued into fiscal 2021 and which changes are expected to continue to evolve over the remainder of fiscal 2021.

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See “Coronavirus (COVID-19)” above for additional information of the impact of COVID-19 on changes to the Company’s seasonality for fiscal 2020 and 2021 which changes are expected to continue to evolve over the remainder of fiscal 2022.

2021 2020 2019

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The Company’s net sales and operating profit (loss) by business segment for the periods shown below were as follows:

Three Months Ended Nine Months Ended

July 2, 2021 June 26, 2020 July 2, 2021 June 26, 2020

Three Months Ended

December 31, 2021 January 1, 2021

Fishing $ 108,356 $ 126,999

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Total $ 13,760 $ 23,557

See “Note 16 – Segments of Business” of the notes to the accompanying Condensed Consolidated Financial Statements for the definition of segment net sales and operating profit.

Consolidated net sales for the three months ended July 2, 2021 were $213,568, an increase of $75,178, or 54%, compared to $138,390 for the three months ended June 26, 2020.

As described above, the prior year third quarter was impacted negatively by COVID-19 related shutdowns.

However, the current year quarter has seen strong sales volumes due to increased participation in outdoor recreation, as consumers continue to take advantage of being outdoors.

Foreign currency translation had a favorable impact of approximately 1% on current year third quarter net sales compared to the prior year's third quarter net sales.

Net sales for the three months ended July 2, 2021 for the Fishing business were $155,348, an increase of $52,607, or 51%, from $102,741 during the third fiscal quarter of the prior year.

The increase was driven by favorable comparison to the prior year quarter as explained above and due to COVID-19 related shutdowns in the prior year quarter, as well as increased participation in outdoor recreation, principally as a result of the effect of COVID-19 on consumer recreation and leisure choices which resulted in a significant increase in demand for our fishing products between quarters.

Net sales for the Camping business were $17,757 for the third quarter of the current fiscal year, an increase of $8,092, or 84%, from the prior year net sales during the same period of $9,665.

COVID-19 related shutdowns unfavorably impacted both production and demand in the prior year period for this segment.

In the current fiscal year third quarter, increased sales of

JOHNSON OUTDOORS INC.

Jetboil and Eureka!

consumer camping products as a result of increased participation in outdoor recreation activities described above were the primary drivers of the increase.

Net sales for the third quarter of fiscal 2021 for the Watercraft Recreation business were $19,873, an increase of $4,606, or 30%, compared to $15,267 in the prior year same period.

COVID-19 related shutdowns unfavorably impacted both production and demand in the prior year period for this segment.

During the current fiscal year third quarter, increased participation in outdoor recreation activities and successful offerings of new products further drove the significant increase over the prior year quarter.

Net sales for Diving, our most global business, for the third quarter of fiscal 2021were $20,680, an increase of $9,984 or 93% versus $10,696 for the three months ended June 26, 2020.

In the prior year third quarter, demand was severely deflated due to the effects of COVID-19 which caused the closure of destination travel locations and resulted in lower tourism activities.

As several regions around the world have started to re-open, sales volumes have begun increasing.

Additionally, there was a favorable foreign currency translation impact on sales in this segment of approximately 5% versus the prior year quarter.

For the nine months ended July 2, 2021, consolidated net sales of $585,391 increased $155,863 or 36% compared to $429,528 for the nine months ended June 26, 2020.

Foreign currency translation had a favorable impact of less than 1% on net sales of the current year to date period versus the prior year to date period.

Similar to the results for the fiscal third quarter as noted above, the prior year-to-date period experienced low sales volumes as a result of COVID-19 related shutdowns.

Due to increased participation in outdoor recreation, the current fiscal 2021 year-to-date period has resulted in significant increased demand and sales volumes.

Net sales for the nine months ended July 2, 2021 for the Fishing business were $442,363, an increase of $106,389, or 32% from $335,974 during the same period of the prior year.

The increase over the prior year to date period was driven by increased participation in outdoor recreation, principally as a result of the effect of COVID-19 on consumer recreation and leisure choices, resulting in higher demand across all product lines in this segment.

Net sales for the Camping business were $44,195 for the nine months ended July 2, 2021, an increase of $18,167, or 70%, from the prior year net sales during the same period of $26,028.

Increased sales of Jetboil and Eureka!

consumer camping products as a result of increased participation in outdoor recreation activities were the primary driver of the increase.

Net sales for the nine months ended July 2, 2021 for the Watercraft Recreation business were $50,094, an increase of $23,954, or 92%, compared to $26,140 in the prior year same period.

Increased demand as a result of increased participation in watercraft recreation during the COVID-19 pandemic drove the overall increase over the prior year to date period.

Diving net sales were $48,981 for the nine months ended July 2, 2021 versus $41,416 for the nine months ended June 26, 2020, an increase of $7,565, or 18%.

As explained earlier, this segment was heavily impacted by COVID-19 shutdowns and restrictions in the prior year-to-date period, due to disruptions to the global tourism industry.

As the industry slowly begins to recover, increased demand in the current fiscal year-to-date period drove the increase in sales over the prior year period.

There was a favorable effect of foreign currency translation of approximately 5% versus the prior year to date period.

See “Note 16 – Segments of Business” of the notes to the accompanying Condensed Consolidated Financial Statements for the definition of segment net sales and operating profit.

Consolidated net sales for the three months ended December 31, 2021 were $153,524, a decrease of $12,143, or 7%, compared to $165,667 for the three months ended January 1, 2021.

Foreign currency translation had virtually no impact on current year first quarter net sales compared to the prior year's first quarter net sales.

Net sales for the three months ended December 31, 2021 for the Fishing business were $108,356, a decrease of $18,643, or 15%, from $126,999 during the first fiscal quarter of the prior year.

While demand remains strong, the decrease was driven by significant supply chain disruptions and the resulting unavailability of components experienced in the first fiscal quarter of 2022, which limited the Company's ability to fill all product orders.

Net sales for the Camping business were $14,134 for the first quarter of the current fiscal year, an increase of $1,940, or 16%, from the prior year net sales during the same period of $12,194 due to increased sales of military tents as well as for Jetboil and Eureka!

consumer camping products evidencing the continued strong participation in outdoor recreation activities by the public.

Net sales for the first quarter of fiscal 2022 for the Watercraft Recreation business were $14,600, an increase of $2,157, or 17%, compared to $12,443 in the prior year same period.

Continued strong demand for the segment's Sportsman line and successful pedal and motorized product offerings drove the increase over the prior year quarter.

Net sales for Diving, our most global business, for the first quarter of fiscal 2022 were $16,491, an increase of $2,398 or 17% versus $14,093 for the three months ended January 1, 2021.

In the prior year first quarter, demand was severely deflated due to the effects of COVID-19 which caused the closure of destination travel locations and resulted in lower tourism activities.

Sales volumes have increased in this segment as markets in several regions around the world have begun to recover.

The increase in sales volumes was partially offset by an unfavorable foreign currency translation impact on sales in this segment of approximately 2% versus the prior year quarter.

Cost of Sales

Cost of sales for the three months ended July 2, 2021 was $116,057 compared to $75,828 for the three months ended June 26, 2020.

The increase year over year was driven primarily by increases in variable costs due to the higher sales volume in the current year quarter over the prior year quarter.

Furthermore, the Company incurred $2,600 of additional tariff costs versus the prior year quarter and experienced increased inbound air freight costs as the Company continues to manage disruptions in its supply chain to ensure the availability of necessary components, parts and other raw materials across our segments to meet sales demand for our products.

For the nine months ended July 2, 2021, cost of sales was $319,596 compared to $238,222 in the same period of the prior year.

The increase year over year was primarily driven by increased sales volumes in the current year versus the prior year as described above.

The Company also incurred $4,600 of additional tariff costs and experienced increased inbound air freight costs versus the prior year quarter all as described above.

Cost of sales for the three months ended December 31, 2021 was $92,893 compared to $90,637 for the three months ended January 1, 2021.

The increase year over year was driven primarily by increases in costs, specifically increased materials costs and increased inbound freight costs, as the Company continues to manage disruptions in its supply chain to ensure the availability of necessary components, parts and other raw materials across our segments to try to meet sales demand for our products.

Gross Profit Margin

For the three months ended July 2, 2021, gross profit as a percentage of net sales was 45.7% compared to 45.2% in the three month period ended June 26, 2020.

The gross profit impact of cost increases noted above was more than offset by increased sales volume-related efficiencies.

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For the nine months ended July 2, 2021, gross profit as a percentage of net sales was 45.4% compared to 44.5% in the prior nine month period, mainly due to increased sales volume efficiencies and favorable product mix, which more than offset the increase in tariffs and inbound air freight costs over the prior year to date period noted above.

At current expected rates, the Company anticipates an aggregate negative impact of Section 301 tariffs on China sourced goods, net of mitigation actions, on the Company's full fiscal 2021 gross profit of approximately $9 million, compared to approximately $3.5 million during the full previous fiscal year.

The expiration of tariff exclusions that the Company secured in prior periods, combined with the application of tariffs on a broader assortment of goods, as well as additional purchase volume are driving the expected year over year increase in tariff costs.

For the three months ended December 31, 2021, gross profit as a percentage of net sales was 39.5% compared to 45.3% in the three month period ended January 1, 2021.

While the Company has taken price increases across its operating segments, they were not enough to offset the negative gross profit impact associated with the cost increases noted above.

Operating Expenses

Operating expenses were $59,412 for the three months ended July 2, 2021, compared to $49,633 for the three months ended June 26, 2020.

The increase of $9,779 was primarily due to the impact of higher sales volume-driven expenses and approximately $2,000 of higher health insurance claims expense in the current year quarter.

Operating expenses were $168,103 for the nine months ended July 2, 2021, compared to $139,782 for the nine months ended June 26, 2020.

The increase of $28,321 was primarily due to the impact of higher sales volume-driven expenses, as well as higher variable and deferred compensation expense and higher health benefit costs between periods.

Furthermore, favorable market conditions on the Company's deferred compensation plan assets resulted in approximately $4,900 of higher deferred compensation expense in the current year to date period as compared to the prior year to date period, which was entirely offset by a gain in Other (Income) Expense, net related to marking these deferred compensation plan assets to market.

Operating expenses were $46,871 for the three months ended December 31, 2021, compared to $51,473 for the three months ended January 1, 2021.

The decrease of $4,602 was primarily due to the impact of lower sales volume-driven expenses as total expenses remained consistent as a percent of net sales year over year.

Operating Profit

Operating profit on a consolidated basis for the three month period ended July 2, 2021 was $38,099, compared to an operating profit of $12,929 in the third quarter of the prior fiscal year.

Higher sales volumes and the other factors discussed above were the primary drivers of the increase in operating profit between quarters.

Operating profit on a consolidated basis for the nine months ended July 2, 2021 was $97,692, compared to an operating profit of $51,524 in the prior year to date period.

The improvement year over year was driven primarily by increased sales volumes as well as the other factors discussed above.

Interest expense remained flat at $35 for each of the three months ended July 2, 2021 and June 26, 2020.

Interest expense was $102 for the nine months ended July 2, 2021 compared to $105 for the nine months ended June 26, 2020.

Interest income for the three month periods ended July 2, 2021 and June 26, 2020 was $76 and $170, respectively.

For the nine months ended July 2, 2021, interest income was $238, compared to $1,309 for the nine months ended June 26, 2020.

The decrease in interest income year over year was mainly driven by the decrease in interest rates in fiscal 2021 versus the corresponding period of fiscal 2020.

Operating profit on a consolidated basis for the three month period ended December 31, 2021 was $13,760, compared to an operating profit of $23,557 in the first quarter of the prior fiscal year.

Lower sales volumes and the other factors discussed above were the primary drivers of the decrease in operating profit between quarters.

Interest expense was $38 and $32 for the three months ended December 31, 2021 and January 1, 2021, respectively.

Interest income for the three month periods ended December 31, 2021 and January 1, 2021 was $93 and $82, respectively.

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Other Income, net

Other income was $934 for the three months ended July 2, 2021 compared to $2,493 in the prior year period.

Investment gains and earnings on the assets related to the Company’s non-qualified deferred compensation plan were $1,550 in the three month period ended July 2, 2021 compared to $2,791 in the three month period ended June 26, 2020.

Other income was $774 for the three months ended December 31, 2021 compared to $2,404 in the prior year period.

Investment gains and earnings on the assets related to the Company’s non-qualified deferred compensation plan were $1,344 in the three month period ended December 31, 2021 compared to $2,737 in the three month period ended January 1, 2021.

The change year over year in the investment value of these assets was offset by the deferred compensation expense included in the Company's Operating expenses during the same periods.

For the three months ended July 2, 2021, foreign currency exchange losses were $220 compared to gains of $74 for the three months ended June 26, 2020.

For the nine months ended July 2, 2021, other income was $4,567 compared to expense of $205 in the nine months ended June 26, 2020.

Net investment gains and earnings on the assets related to the Company’s non-qualified deferred compensation plan in the nine months ended July 2, 2021 were $5,554, compared to $648 in the nine months ended June 26, 2020.

Foreign currency exchange losses were $99 for the nine months ended July 2, 2021, compared to losses of $224 for the nine months ended June 26, 2020.

For the three months ended December 31, 2021, foreign currency exchange losses were $366 compared to $96 for the three months ended January 1, 2021.

Income Tax Expense

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The Company’s provision for income taxes is based upon estimated annual effective tax rates in the tax jurisdictions in which the Company operates.

The effective tax rate for the three and nine month periods ended July 2, 2021 were 26.4% and 25.3%, respectively, compared to 17.3% and 24.4% in the corresponding periods of the prior year.

The key factor impacting the effective tax rate for the three and nine months ended July 2, 2021 was the favorable impact from a decrease in reserves for unrecognized tax benefits reported in the prior year periods.

Net income for the three months ended July 2, 2021 was $28,774, or $2.83 per diluted common class A and B share, compared to net income of $12,869, or $1.27 per diluted common class A and B share, for the third quarter of the prior fiscal year.

Net income for the nine months ended July 2, 2021 was $76,455, or $7.53 per diluted common class A and B share, compared to net income of $39,686, or $3.93 per diluted common class A and B share, for the nine months ended June 26, 2020.

The effective tax rate for the three month period ended December 31, 2021 was 25.6% compared to 23.7% in the corresponding period of the prior year.

The key factor impacting the effective tax rate was the favorable impact from an intra-entity transfer of assets other than inventory reported in the prior year period.

Net income for the three months ended December 31, 2021 was $10,856, or $1.07 per diluted common class A and B share, compared to net income of $19,847, or $1.96 per diluted common class A and B share, for the first quarter of the prior fiscal year.

Liquidity and Financial Condition

Cash and cash equivalents totaled $249,016 as of July 2, 2021, compared to cash and cash equivalents of $181,445 as of June 26, 2020.

The increase in cash year over year was due primarily to increased operating profits earned over the prior year period.

The Company’s debt to total capitalization ratio was 0% as of July 2, 2021 and June 26, 2020.

The Company’s total debt balance was $0 as of each of July 2, 2021 and June 26, 2020.

Cash and cash equivalents totaled $167,473 as of December 31, 2021, compared to cash and cash equivalents of $195,923 as of January 1, 2021.

The decrease in cash year over year was due primarily to the Company's action to build and procure numerous categories of inventory (in some cases at significantly higher prices than was historically paid) in an attempt to mitigate against potential supply chain shortages during this fiscal year.

The Company’s debt to total capitalization ratio was 0% as of December 31, 2021 and January 1, 2021.

The Company’s total debt balance was $0 as of each of December 31, 2021 and January 1, 2021.

See “Note 11 – Indebtedness” in the notes to the Company’s accompanying condensed consolidated financial statements for further discussion.

Accounts receivable, net of allowance for doubtful accounts, were $94,750 as of July 2, 2021, an increase of $12,173 compared to $82,577 as of June 26, 2020.

The increase is consistent with increased sales volumes year over year.

Inventories were $130,742 as of July 2, 2021, an increase of $36,524, compared to $94,218 as of June 26, 2020.

The increase in our inventory balances over the prior year period is due to increased raw material and other component purchases in an effort to meet increased demand for products in the current year period.

Accounts payable were $54,991 at July 2, 2021 compared to $31,026 as of June 26, 2020, which increase corresponded with the increase in inventory balances between periods.

Accounts receivable, net of allowance for doubtful accounts, were $86,689 as of December 31, 2021, a decrease of $10,697 compared to $97,386 as of January 1, 2021.

The decrease is consistent with decreased sales volumes year over year.

Inventories were $217,431 as of December 31, 2021, an increase of $102,582, compared to $114,849 as of January 1, 2021.

As noted above, the increase in our inventory balances over the prior year period is due to increased raw material and other component purchases in an effort to meet increased demand for products in the current year period in the event that the current supply chain and logistics infrastructure disruptions continue as expected during fiscal 2022.

Accounts payable were $59,241 at December 31, 2021 compared to $44,908 as of January 1, 2021, which increase corresponded with the increase in inventory balances between periods.

The Company’s cash flows from operating, investing and financing activities, as presented in the Company’s accompanying Condensed Consolidated Statements of Cash Flows, are summarized in the following table:

Nine months ended

(thousands) July 2,

2021 June 26,

Three months ended

(thousands) December 31,

2021 January 1,

Cash provided by (used for):

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Effect of foreign currency rate changes on cash (492) 1,701

Increase in cash and cash equivalents $ 36,579 $ 9,063

Decrease in cash and cash equivalents $ (72,975) $ (16,514)

Operating Activities

Cash provided by operations totaled $57,611 for the nine months ended July 2, 2021 compared to $25,560 during the corresponding period of the prior fiscal year.

The increase in cash provided by operations over the prior year nine month period was due primarily to increased net income between periods, offset in part by changes in working capital balances between periods.

Depreciation and amortization charges were $10,015 for the nine month period ended July 2, 2021 compared to $11,489 for the corresponding period of the prior year.

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Cash used for operations totaled $62,773 for the three months ended December 31, 2021 compared to $11,238 during the corresponding period of the prior fiscal year.

The increase in cash used for operations over the prior year three month period was due primarily to the Company's decision to build and procure inventory in its attempt to mitigate against shortages, all as described in greater detail above.

Depreciation and amortization charges were $3,492 for the three month period ended December 31, 2021 compared to $3,493 for the corresponding period of the prior year.

Investing Activities

Cash used for investing activities totaled $15,468 for the nine months ended July 2, 2021 compared to cash used for investing activities of $11,340 for the corresponding period of the prior fiscal year.

Cash usage for capital expenditures totaled $15,481 for the current year nine month period and $11,350 for the prior year period.

Cash used for investing activities totaled $6,244 for the three months ended December 31, 2021 compared to $4,388 for the corresponding period of the prior fiscal year.

Cash usage for capital expenditures totaled $6,244 for the current year three month period and $4,390 for the prior year period.

Any additional capital expenditures in fiscal 2022 are expected to be funded by working capital.

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Financing Activities

Cash used for financing activities totaled $6,792 for the nine months ended July 2, 2021 compared to $5,412 for the nine month period ended June 26, 2020 and represents the payment of dividends and purchase of treasury stock.

The Company had no debt during either quarter ended July 2, 2021 and June 26, 2020.

Cash used for financing activities totaled $3,466 for the three months ended December 31, 2021 compared to $2,589 for the three month period ended January 1, 2021 and represents the payment of dividends and purchase of treasury stock.

The Company had no debt during either quarter ended December 31, 2021 and January 1, 2021.

See Note 11 "Indebtedness" to the accompanying Condensed Consolidated Financial Statements for additional information on our credit facilities.

As of July 2, 2021 the Company held approximately $54,656 of cash and cash equivalents in bank accounts in foreign taxing jurisdictions.

As of December 31, 2021 the Company held approximately $55,434 of cash and cash equivalents in bank accounts in foreign taxing jurisdictions.

Contractual Obligations and Off Balance Sheet Arrangements

The Company has contractual obligations and commitments to make future payments including under operating leases and open purchase orders.

There have been no changes outside of the ordinary course of business in the specified contractual obligations during the quarter ended July 2, 2021.

There have been no changes outside of the ordinary course of business in the specified contractual obligations during the quarter ended December 31, 2021.

The Company utilizes letters of credit primarily as security for the payment of future claims under its workers compensation insurance.

Letters of credit outstanding were approximately $181 and $181 as of July 2, 2021 and June 26, 2020, respectively.

Letters of credit outstanding were approximately $181 and $181 as of December 31, 2021 and January 1, 2021, respectively.

The Company anticipates making contributions of $71 to its defined benefit pension plans during the remainder of fiscal 2022.

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The Company’s critical accounting policies and estimates are identified in the Company’s Annual Report on Form 10-K for the fiscal year ending October 1, 2021 in Management’s Discussion and Analysis of Financial Condition and Results of Operations under the heading “Critical Accounting Estimates”, which was filed with the Securities and Exchange Commission on December 10, 2021.

There were no significant changes to the Company’s critical accounting policies and estimates during the nine months ended July 2, 2021.

There were no significant changes to the Company’s critical accounting policies and estimates during the three months ended December 31, 2021.

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