What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-09 compared with 2021-08-10 · 162 added, 153 removed, 269 unchanged (54% of the section changed)

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our competitive positions;

changes in economic and political conditions;

changes in economic and political conditions, including supply chain constraints;

changes in accounting principles;

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thermal chart recorders;

spectrometry technologies, and embedded touch screen solutions.

spectrometry technologies;

and embedded touch screen solutions.

The vast majority of the segment’s product offerings are sold to OEM customers.

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Precision Motion

Our Precision Motion segment designs, manufactures and markets optical and inductive encoders, precision motor and motion control sub-assemblies, servo drives, air bearings, and air bearing spindles to customers worldwide.

Our Precision Motion segment designs, manufactures and markets optical and inductive encoders, precision motor and motion control sub-assemblies, servo drives, intelligent robotic end-of-arm technology solutions, air bearings, and air bearing spindles to customers worldwide.

The vast majority of the segment’s product offerings are sold to OEM customers.

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Medical Market

For the six months ended July 2, 2021, the medical market accounted for approximately 53% of our revenue.

For the nine months ended October 1, 2021, the medical market accounted for approximately 53% of our revenue.

Revenue from our products sold to the medical market is generally affected by hospital and other healthcare provider capital spending, growth rates of surgical procedures, changes in regulatory requirements and laws, aggregation of purchasing by healthcare networks, changes in technology requirements, timing of OEM customers’ product development and new product launches, changes in customer or patient preferences, and general demographic trends.

Advanced Industrial Market

For the six months ended July 2, 2021, the advanced industrial market accounted for approximately 47% of our revenue.

For the nine months ended October 1, 2021, the advanced industrial market accounted for approximately 47% of our revenue.

Revenue from our products sold to the advanced industrial market is affected by a number of factors, including changing technology requirements and preferences of our customers, productivity or quality investments in a manufacturing environment, financial

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Significant Events and Updates

Impact of COVID-19 on Our Business

Acquisition of ATI Industrial Automation, Inc.

On August 30, 2021, we acquired 100% of the outstanding shares of ATI Industrial Automation, Inc.

(“ATI”), an Apex, North Carolina-based leading supplier of intelligent end-of-arm technology solutions to OEMs for advanced industrial and surgical robots for an initial cash purchase price of $170.0 million, net of cash acquired, and $51.9 million estimated fair value of contingent consideration.

The contingent consideration will be payable in 2022 based on actual standalone ATI Adjusted EBITDA, as defined in the purchase and sale agreement, for the fiscal year ending December 31, 2021.

The initial cash purchase price was financed with borrowings under our revolving credit facility and cash available on hand.

We expect that the addition of ATI will complement and add intelligent technology solutions to further expand our position in mission critical robotic applications.

ATI will contribute to our operations and growth within the Precision Motion reportable segment.

Acquisition of Schneider Electric Motion USA, Inc.

On August 31, 2021, we acquired 100% of the outstanding shares of Schneider Electric Motion USA, Inc.

(“SEM”), a Marlborough, Connecticut-based manufacturer of integrated stepper motors and electronic controls for automation equipment for a total purchase price of $115.1 million, net of cash acquired, subject to customary working capital adjustment.

The acquisition was financed with borrowings under our revolving credit facility.

We expect that the addition of SEM will complement and expand our presence in life science applications and solutions for industrial automation applications within the Precision Motion reportable segment.

Impact of COVID-19 on O ur Business

In response to the COVID-19 pandemic, we have taken proactive, aggressive actions to protect the health and safety of our employees.

We established steering committees at both the corporate level and at each of our facilities to provide leadership for and manage our COVID-19 risk mitigation actions and countermeasures.

We established steering committees at both the corporate level and at each of our major facilities to provide leadership for and manage our COVID-19 risk mitigation actions and countermeasures.

We have provided frequent employee communications that include guidance and updates to our employees with regards to COVID-19 safety procedures and status.

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We expect to continue these measures until we determine that the COVID-19 pandemic is adequately contained for purposes of our business.

In connection with our COVID-19 remediation actions, we have incurred additional costs to protect the health of our employees, including investments in technologies and monitoring equipment and weekly testing of unvaccinated employees for COVID-19 at certain locations.

We expect such costs to continue to be significant to our cost of operations.

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The outbreak has significantly increased economic and demand uncertainty.

The spread of COVID-19 caused a global economic slowdown and a global recession.

Even as governmental restrictions are relaxed and economies gradually, partially or fully, reopen, the ongoing economic impacts and health concerns associated with COVID-19 may continue to affect customer demand and restrictions may resume.

Through July 2, 2021, w e experienced limited dis ruption s to our supply chain as a result of the COVID-19 pandemic.

W e regularly monitor the manufacturing output of companies in our supply chain .

Disruption s to our suppliers or sub-suppliers caused by the COVID-19 pandemic and the recent electronics and other material shortages could cause further challenges in our ability to obtain raw materials or components required to manufacture our products, adversely affecting our operations.

Through October 1, 2021, we experienced some disruptions to our supply chain as a result of the COVID-19 pandemic and the recent electronics and other material shortages.

We regularly monitor the manufacturing output of companies in our supply chain.

Disruptions to our suppliers or sub-suppliers caused by these events could cause further challenges in our ability to obtain raw materials or components required to manufacture our products, adversely affecting our operations.

To mitigate the risk of any potential supply interruptions from the COVID-19 pandemic and the electronics and other material shortages, we are identifying alternative suppliers and distributors, sourcing raw materials from different supplier and distributor locations, modifying our designs to allow for alternative components to be used without compromising quality, performance or other requirements and taking other actions to ensure our supply of raw materials.

Although we are working to mitigate potential supply interruptions from the COVID-19 pandemic and the electronics and other material shortages, if certain suppliers cannot produce a key part or component for us, or if the receipt of certain materials is otherwise delayed, we may miss our scheduled shipment deadlines and our relationship with customers may be harmed.

Additionally, restrictions on or disruptions of transportation, such as reduced availability of air transports, port closures and increased border controls or closures, have resulted in higher costs and delays, both for obtaining raw materials from suppliers and for shipping finished products to customers.

COVID-19 has caused inflationary pressures on the market prices for certain of our parts and primary raw materials as well as increases in the costs of freight, packaging, energy and other consumables that are used in our manufacturing processes.

Despite of our mitigation actions, if certain suppliers cannot produce a key part or component for us, or if the receipt of certain materials is otherwise delayed, we may miss our scheduled shipment deadlines and our relationship with customers may be harmed.

Additionally, restrictions on or disruptions of transportation, such as reduced availability of air transports, port closures and backlogs, and increased border controls or closures, have resulted in higher costs and delays, both for obtaining raw materials from suppliers and for shipping finished products to customers.

The COVID-19 pandemic and the recent electronics and other material shortages have caused inflationary pressures on the market prices for certain of our parts and primary raw materials as well as increases in the costs of freight, packaging, energy and other consumables that are used in our manufacturing processes.

We have generally been able to offset increases in these costs through various productivity and cost reduction initiatives, as well as adjusting our selling prices to pass through some of these higher costs to our customers;

however, our ability to raise our selling prices depends on market conditions and competitive dynamics.

Given the timing of our actions compared to the timing of these inflationary pressures, there may be periods during which we are unable to fully recover increases in our costs.

Results of Operations for the Three and Six Months Ended July 2, 2021 Compared with the Three and Six Months Ended July 3, 2020

Given the timing of our actions compared to the timing of these inflationary pressures, there may be periods during which we are unable to fully recover the increases in our costs.

Results of Operations for the Three and Nine Months Ended October 1, 2021 Compared with the Three and Nine Months Ended October 2, 2020

The following table sets forth our unaudited results of operations as a percentage of revenue for the periods indicated:

Three Months Ended

Six Months Ended

Nine Months Ended

Cost of revenue

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Overview of Financial Results

Total revenue of $167.5 million for the three months ended July 2, 2021 increased $22.8 million, or 15.8%, from the prior year period primarily due to increased demand in the advanced industrial market related to microelectronics and as a result of increases in industrial manufacturing spending as compared to the 2020 period, which was impacted by COVID-19.

In addition, foreign currency exchange rates positively impacted our revenue by $6.2 million, or 4.4%, for the three months ended July 2, 2021.

Total revenue of $330.1 million for the six months ended July 2, 2021 increase d $29.9 million, or $10.0%, from the prior year period primarily due to increased demand in the advanced industrial market related to microelectronics and as a result of increase s in industrial manufacturing spending as compared to the 2020 period, which was impacted by COVID-19 .

In addition, foreign currency exchange rate s positively impacted our revenue by $ 11 .

6 million, or 3 .

9 %, for the six months ended July 2, 2021 .

Operating income of $16.0 million for the three months ended July 2, 2021 increased $2.3 million, or 16.7%, from the prior year period.

This increase was primarily attributable to an increase in gross profit of $13.7 million primarily attributable to higher revenue, partially offset by an increase in research and development and engineering (“R&D”) expenses of $2.5 million, selling, general and administrative (“SG&A”) expenses of $6.3 million and restructuring, acquisition, and related costs of $2.4 million.

Operating income of $27.1 million for the six months ended July 2, 2021 increased $0.1 million, or 0.5%, from the prior year period.

This increase was primarily attributable to an increase in gross profit of $18.0 million primarily attributable to higher revenue, partially offset by an increase in R&D expenses of $5.9 million, SG&A expenses of $7.2 million and restructuring, acquisition, and related cost of $4.5 million.

Basic earnings per common share (“Basic EPS”) of $0.33 for the three months ended July 2, 2021 remained consistent from the prior year period.

Diluted earnings per common share (“Diluted EPS”) of $0.33 for the three months ended July 2, 2021 remained consistent from the prior year period.

Basic EPS of $0.65 for the six months ended July 2, 2021 decreased $0.02 from the prior year period.

Diluted EPS of $0.64 for the six months ended July 2, 2021 decreased $0.02 from the prior year period.

The decreases were primarily attributable to an increase income tax provision.

Total revenue of $177.7 million for the three months ended October 1, 2021 increased $34.8 million, or 24.3%, from the prior year period primarily due to increased demand in the advanced industrial market related to microelectronics and as a result of increases in industrial manufacturing spending as compared to the 2020 period, which was impacted by COVID-19, as well as revenue from current year acquisitions.

The effect of our current year acquisitions resulted in an increase in revenue of $11.1 million, or 7.7%.

In addition, foreign currency exchange rates positively impacted our revenue by $2.2 million, or 1.5%, for the three months ended October 1, 2021.

Total revenue of $507.8 million for the nine months ended October 1, 2021 increased $64.7 million, or $14.6%, from the prior year period primarily due to increased demand in the advanced industrial market related to microelectronics and as a result of increases in industrial manufacturing spending as compared to the 2020 period, which was impacted by COVID-19.

The effect of our current year acquisitions also resulted in an increase in revenue of $11.1 million, or 2.5%.

In addition, foreign currency exchange rates positively impacted our revenue by $13.8 million, or 3.1%, for the nine months ended October 1, 2021.

Operating income of $15.3 million for the three months ended October 1, 2021 increased $3.4 million, or 28.7%, from the prior year period.

This increase was attributable to an increase in gross profit of $17.2 million primarily attributable to higher revenue, partially offset by an increase in research and development and engineering (“R&D”) expenses of $2.2 million, selling, general and administrative (“SG&A”) expenses of $4.5 million and restructuring, acquisition, and related charges of $6.4 million.

Operating income of $42.4 million for the nine months ended October 1, 2021 increased $3.5 million, or 9.1%, from the prior year period.

This increase was attributable to an increase in gross profit of $35.2 million primarily attributable to higher revenue, partially offset by an increase in R&D expenses of $8.1 million, SG&A expenses of $11.7 million and restructuring, acquisition, and related charges of $10.9 million.

Basic earnings per common share (“Basic EPS”) of $0.38 for the three months ended October 1, 2021 increased $0.15 from the prior year period.

Diluted earnings per common share (“Diluted EPS”) of $0.38 for the three months ended October 1, 2021 increased $0.15 from the prior year period.

The increases were primarily attributable to an increase in operating income and a decrease in income tax provision (benefit).

Basic EPS of $1.03 for the nine months ended October 1, 2021 increased $0.12 from the prior year period.

Diluted EPS of $1.02 for the nine months ended October 1, 2021 increased $0.13 from the prior year period.

The increases were primarily attributable to an increase in operating income and a decrease in income tax provision.

The following table sets forth external revenue by reportable segment for the periods noted (dollars in thousands):

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Precision Motion

Six Months Ended

Nine Months Ended

Precision Motion

Photonics segment revenue for the three months ended July 2, 2021 increased by $14.6 million, or 30.4%, versus the prior year period, primarily due to increased demand in the advanced industrial market as a result of increases in industrial manufacturing spending as compared to the 2020 period, which was impacted by COVID-19.

Photonics segment revenue for the six months ended July 2, 2021 increased by $17.9 million, or 17.4%, versus the prior year period, primarily due to increased demand in the advanced industrial market as a result of increases in industrial manufacturing spending as compared to the 2020 period, which was impacted by COVID-19.

Vision segment revenue for the three months ended July 2, 2021 decreased by $1.3 million, or 2.0%, versus the prior year period, primarily due to a decrease in revenue from our medical end market products as a result of lower healthcare spending.

Vision segment revenue for the six months ended July 2, 2021 decreased by $ 2 .

7 million, or 2.0%, versus the prior year period, primarily due to a decrease in revenue from our minimally invasive surgery (“MIS”) products as a result of continued deferrals of elective surgical procedures during the COVID-19 pandemic.

Photonics segment revenue for the three months ended October 1, 2021 increased by $8.9 million, or 19.1%, versus the prior year period, primarily due to increased demand in the advanced industrial market as a result of increases in industrial manufacturing spending as compared to the 2020 period, which was impacted by COVID-19.

Revenue was negatively impacted during the three months ended October 1, 2021 due to temporary production shutdowns in our factories in Taunton, U.K.

and Suzhou, China.

Photonics segment revenue for the nine months ended October 1, 2021 increased by $26.8 million, or 17.9%, versus the prior year period, primarily due to increased demand in the advanced industrial market as a result of increases in industrial manufacturing spending as compared to the 2020 period, which was impacted by COVID-19.

Vision segment revenue for the three months ended October 1, 2021 increased by $1.0 million, or 1.6%, versus the prior year period, primarily due to an increase in demand for our medical end market products.

Vision segment revenue for the nine months ended October 1, 2021 decreased by $1.6 million, or 0.8%, versus the prior year period, primarily due to a decrease in revenue from our minimally invasive surgery (“MIS”) products as a result of continued deferrals of elective surgical procedures during the COVID-19 pandemic.

Precision Motion

Precision Motion segment revenue for the three months ended July 2, 2021 increased by $9.5 million, or 29.6%, versus the prior year period, primarily due to increased demand in advanced industrial market as a result of an increase in industrial manufacturing spending.

Precision Motion segment revenue for the six months ended July 2, 2021 increased by $14.7 million, or 23.1%, versus the prior year period, primarily due to increased demand in advanced industrial market as a result of an increase in industrial manufacturing spending.

Precision Motion segment revenue for the three months ended October 1, 2021 increased by $24.9 million, or 77.2%, versus the prior year period, primarily due to increased demand in advanced industrial and medical markets and $11.1 million of revenue contributions from the ATI and SEM acquisitions.

Precision Motion segment revenue for the nine months ended October 1, 2021 increased by $39.6 million, or 41.3%, versus the prior year period, primarily due to increased demand in advanced industrial market as a result of an increase in industrial manufacturing spending and $11.1 million of revenue contributions from the ATI and SEM acquisitions.

Gross Profit and Gross Profit Margin

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Three Months Ended

Six Months Ended

Nine Months Ended

Gross profit:

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Gross profit and gross profit margin can be influenced by a number of factors, including product mix, pricing, volume, manufacturing efficiencies and utilization, costs for raw materials and outsourced manufacturing, trade tariffs, freight costs, headcount, inventory obsolescence and warranty expenses.

Photonics segment gross profit for the three months ended July 2, 2021 increased $8.7 million, or 41.6%, versus the prior year period, primarily due to an increase in both revenue and gross profit margin.

Photonics segment gross profit margin was 47.5% for the three months ended July 2, 2021, versus a gross profit margin of 43.7% for the prior year period.

The increase in gross profit margin was primarily attributable to higher factory utilization associated with higher production volumes.

Photonics segment gross profit for the six months ended July 2, 2021 increased $12.1 million, or 26.7%, versus the prior year period, primarily due to an increase in both revenue and gross profit margin.

Photonics segment gross profit margin was 47.7% for the six months ended July 2, 2021, versus a gross profit margin of 44.3% for the prior year period.

Photonics segment gross profit for the three months ended October 1, 2021 increased $5.1 million, or 25.5%, versus the prior year period, primarily due to an increase in both revenue and gross profit margin.

Photonics segment gross profit margin was 45.8% for the three months ended October 1, 2021, versus a gross profit margin of 43.5% for the prior year period.

The increase in gross profit margin was primarily attributable to higher production volumes.

Photonics segment gross profit for the nine months ended October 1, 2021 increased $17.3 million, or 26.3%, versus the prior year period, primarily due to an increase in both revenue and gross profit margin.

Photonics segment gross profit margin was 47.1% for the nine months ended October 1, 2021, versus a gross profit margin of 44.0% for the prior year period.

The increase in gross profit margin was primarily attributable to higher factory utilization associated with higher production volumes.

Vision segment gross profit for the three months ended July 2, 2021 decreased $0.1 million, or 0.3%, versus the prior year period.

Vision segment gross profit margin was 38.5% for the three months ended July 2, 2021, versus a gross profit margin of 37.9% for the prior year period.

Vision segment gross profit for the six months ended July 2, 2021 increased $0.3 million, or 0.5%, versus the prior year period.

Vision segment gross profit margin was 39.2% for the six months ended July 2, 2021, versus a gross profit margin of 38.2% for the

prior year period .

The increase in gross profit and gross profit margin w ere primarily attributable to improvements to factory productivity and product mix .

Vision segment gross profit for the three months ended October 1, 2021 increased $0.2 million, or 0.7%, versus the prior year period.

Vision segment gross profit margin was 37.9% for the three months ended October 1, 2021, versus a gross profit margin of 38.2% for the prior year period.

Vision segment gross profit for the nine months ended October 1, 2021 increased $0.5 million, or 0.6%, versus the prior year period.

Vision segment gross profit margin was 38.8% for the nine months ended October 1, 2021, versus a gross profit margin of 38.2% for the prior year period.

Precision Motion

Precision Motion segment gross profit for the three months ended July 2, 2021 increased $7.0 million, or 50.9%, versus the prior year period, primarily due to an increase in both revenue and gross profit margin.

Precision Motion segment gross profit margin was 50.0% for the three months ended July 2, 2021, versus a gross profit margin of 43.0% for the prior year period.

The increase in gross profit margin was primarily attributable to higher factory utilization associated with higher production volumes and favorable year over year comparison due to higher inventory obsolescence in the prior year period.

Precision Motion segment gross profit for the six months ended July 2, 2021 increased $9.2 million, or 33.2%, versus the prior year period, primarily due to an increase in both revenue and gross profit margin.

Precision Motion segment gross profit margin was 47.3% for the six months ended July 2, 2021, versus a gross profit margin of 43.7% for the prior year period.

Precision Motion segment gross profit for the three months ended October 1, 2021 increased $12.7 million, or 84.8%, versus the prior year period, primarily due to an increase in both revenue and gross profit margin.

Precision Motion segment gross profit margin was 48.6% for the three months ended October 1, 2021, versus a gross profit margin of 46.6% for the prior year period.

The increase in gross profit margin was primarily attributable to higher factory utilization associated with higher production volumes.

Precision Motion segment gross profit for the nine months ended October 1, 2021 increased $21.9 million, or 51.3%, versus the prior year period, primarily due to an increase in both revenue and gross profit margin.

Precision Motion segment gross profit margin was 47.8% for the nine months ended October 1, 2021, versus a gross profit margin of 44.7% for the prior year period.

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Unallocated corporate and shared services costs primarily represent costs of corporate and shared services functions that are not allocated to the operating segments.

These costs for the three months ended July 2, 2021 increased by $2.0 million versus the prior year period primarily due to COVID-19 testing costs for employees of $1.5 million.

Unallocated corporate and shared services costs for the six months ended July 2, 2021 increased by $3.6 million versus the prior year period primarily due to COVID-19 testing costs for employees of $2.9 million.

These costs for the three months ended October 1, 2021 increased by $0.9 million versus the prior year period primarily due to COVID-19 testing costs for employees of $0.4 million.

Unallocated corporate and shared services costs for the nine months ended October 1, 2021 increased by $4.5 million versus the prior year period primarily due to COVID-19 testing costs for employees of $3.3 million.

Operating Expenses

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Three Months Ended

Six Months Ended

Nine Months Ended

Research and development and engineering

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R&D expenses are primarily comprised of employee compensation related expenses and cost of materials for R&D projects.

R&D expenses were $17.0 million, or 10.1% of revenue, during the three months ended July 2, 2021, versus $14.4 million, or 10.0% of revenue, during the prior year period.

R&D expenses increased in terms of total dollars and as a percentage of revenue primarily due to higher compensation related expense.

R&D expenses were $35.6 million, or 10.8% of revenue, during the six months ended July 2, 2021, versus $29.8 million, or 9.9% of revenue, during the prior year period.

R&D expenses increased in terms of total dollars and as a percentage of revenue primarily due to higher compensation related expense.

R&D expenses were $17.5 million, or 9.8% of revenue, during the three months ended October 1, 2021, versus $15.2 million, or 10.7% of revenue, during the prior year period.

R&D expenses increased in terms of total dollars primarily due to higher compensation related expense and R&D expenses from current year acquisitions.

R&D expenses decreased as a percentage of revenue due to the timing of acquisitions.

R&D expenses were $53.1 million, or 10.5% of revenue, during the nine months ended October 1, 2021, versus $45.0 million, or 10.2% of revenue, during the prior year period.

R&D expenses increased in terms of total dollars and as a percentage of revenue primarily due to higher compensation related expenses.

Selling, General and Administrative Expenses

Selling, general and administrative (“SG&A”) expenses include costs for sales and marketing, sales administration, finance, human resources, legal, information systems, and executive management functions.

SG&A expenses were $31.2 million, or 18.6% of revenue, during the three months ended July 2, 2021, versus $24.9 million, or 17.2% of revenue, during the prior year period.

SG&A expenses increased in terms of total dollars and as a percentage of revenue primarily due to higher share-based compensation expense and higher variable compensation expense as a result of re-establishment of 2021 bonuses.

SG&A expenses were $ 62.9 million, or 19.1% of revenue, during the six months ended July 2, 2021 , versus $ 55.7 million, or 18.5 % of revenue, during the prior year period.

SG&A expenses were $31.3 million, or 17.6% of revenue, during the three months ended October 1, 2021, versus $26.8 million, or 18.7% of revenue, during the prior year period.

SG&A expenses increased in terms of total dollars primarily due to higher variable compensation expense as a result of the re-establishment of employee bonus plans in 2021 and SG&A expenses from current year acquisitions.

SG&A expenses decreased as a percentage of revenue due to the timing of acquisitions.

SG&A expenses were $94.2 million, or 18.5% of revenue, during the nine months ended October 1, 2021, versus $82.5 million, or 18.6% of revenue, during the prior year period.

SG&A expenses increased in terms of total dollars primarily due to higher share-based compensation expense and higher variable compensation expense as a result of the re-establishment of employee bonus plans in 2021.

Amortization of Purchased Intangible Assets

Amortization of purchased intangible assets, excluding amortization of developed technologies that is included in cost of revenue, was $3.6 million, or 2.1% of revenue, during the three months ended July 2, 2021, versus $3.4 million, or 2.4% of revenue, during the prior year period.

Amortization of purchased intangible assets, excluding amortization of developed technologies that is included in cost of revenue, was $7.2 million, or 2.2% of revenue, during the six months ended July 2, 2021, versus $6.9 million, or 2.3% of revenue, during the prior year period.

Amortization of purchased intangible assets, excluding amortization of developed technologies that is included in cost of revenue, was $4.1 million, or 2.3% of revenue, during the three months ended October 1, 2021, versus $3.5 million, or 2.5% of revenue, during the prior year period.

The increase, in terms of total dollars was the result of more acquired intangible assets from current year acquisitions.

Amortization of purchased intangible assets, excluding amortization of developed technologies that is included in cost of revenue, was $11.3 million, or 2.2% of revenue, during the nine months ended October 1, 2021, versus $10.4 million, or 2.3% of revenue, during the prior year period.

The increase, in terms of total dollars was the result of more acquired intangible assets from current year acquisitions.

Restructuring , Acquisition , and Related Costs

We recorded restructuring, acquisition, and related costs of $4.6 million during the three months ended July 2, 2021, versus $2.2 million during the prior year period.

The increase in restructuring, acquisition, and related costs versus the prior year period was primarily due to an increase in acquisition costs related to pending acquisitions, restructuring cost related to the 2020 restructuring plan, and legal fees related to a dispute involving a company we acquired in 2019.

We recorded restructuring, acquisition, and related costs of $8.4 million during the six months ended July 2, 2021, versus $3.9 million during the prior year period.

We recorded restructuring, acquisition, and related costs of $8.1 million during the three months ended October 1, 2021, versus $1.7 million during the prior year period.

The increase in restructuring, acquisition, and related costs versus the prior year period was primarily due to an increase in acquisition costs related to current year acquisitions and restructuring costs related to the 2020 restructuring plan.

We recorded restructuring, acquisition, and related costs of $16.5 million during the nine months ended October 1, 2021, versus $5.6 million during the prior year period.

The increase in restructuring, acquisition, and related costs versus the prior year period was primarily due to an increase in acquisition costs related to current year acquisitions, restructuring costs related to the 2020 restructuring plan, and legal fees related to a dispute involving a company we acquired in 2019.

Operating Income (Loss) by Segment

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Three Months Ended

Six Months Ended

Nine Months Ended

Operating Income (Loss)

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Unallocated Corporate and Shared Services

Photonics segment operating income was $14.2 million, or 22.8% of revenue, during the three months ended July 2, 2021, versus $6.9 million, or 14.5% of revenue, during the prior year period.

The increase in operating income was primarily due to an increase in gross profit of $8.7 million, partially offset by an increase in R&D spending of $0.4 million and SG&A spending of $0.7 million.

Photonics segment operating income was $26.6 million, or 22.0% of revenue, during the six months ended July 2, 2021, versus $15.9 million, or 15.4% of revenue, during the prior year period.

The increase in operating income was primarily due to an increase in gross profit of $12.1 million, partially offset by an increase in R&D spending of $1.2 million.

Vision segment operating income was $3.2 million, or 5.1% of revenue, during the three months ended July 2, 2021, versus $4.7 million, or 7.2% of revenue, during the prior year period.

The decrease in operating income was primarily due to an increase in R&D spending of $1.4 million.

Vision segment operating income was $ 6.6 million, or 5.0% of revenue, during the six months ended July 2, 2021 , versus $ 10.3 million , or 7.7% o f revenue , during the prior year period.

The de crease in operating income was primarily due to an increase in R&D spending of $3.4 million.

Photonics segment operating income was $9.3 million, or 16.8% of revenue, during the three months ended October 1, 2021, versus $7.0 million, or 15.1% of revenue, during the prior year period.

The increase in operating income was primarily due to an increase in gross profit of $5.1 million, partially offset by an increase in restructuring charges of $2.3 million.

Photonics segment operating income was $35.9 million, or 20.4% of revenue, during the nine months ended October 1, 2021, versus $22.9 million, or 15.3% of revenue, during the prior year period.

The increase in operating income was primarily due to an increase in gross profit of $17.3 million, partially offset by an increase in R&D spending of $1.5 million and restructuring, acquisition, and related charges of $3.1 million.

Vision segment operating income was $5.6 million, or 8.6% of revenue, during the three months ended October 1, 2021, versus $3.8 million, or 5.9% of revenue, during the prior year period.

The increase in operating income was primarily due to a decrease in SG&A expenses of $0.5 million and restructuring, acquisitions, and related charges of $1.2 million.

Vision segment operating income was $12.2 million, or 6.2% of revenue, during the nine months ended October 1, 2021, versus $14.1 million, or 7.1% of revenue, during the prior year period.

The decrease in operating income was primarily due to an increase in R&D spending of $3.6 million, partially offset by an increase in gross profit of $0.5 million and a decrease in SG&A expenses of $1.0 million.

Precision Motion

Precision Motion segment operating income was $12.3 million, or 29.4% of revenue, during the three months ended July 2, 2021, versus $6.5 million, or 20.2% of revenue, during the prior year period.

The increase in operating income was primarily due to an increase in gross profit of $7.0 million, partially offset by an increase in restructuring, acquisition, and related charges of $0.8 million, and R&D spending of $0.7 million.

Precision Motion segment operating income was $19.7 million, or 25.2% of revenue, during the six months ended July 2, 2021, versus $13.1 million, or 20.6% of revenue, during the prior year period.

The increase in operating income was primarily due to an increase in gross profit of $9.2 million, partially offset by an increase in restructuring, acquisition, and related charges of $1.5 million, and R&D spending of $1.3 million.

Precision Motion segment operating income was $15.0 million, or 26.2% of revenue, during the three months ended October 1, 2021, versus $7.7 million, or 23.8% of revenue, during the prior year period.

The increase in operating income was primarily due to an increase in gross profit of $12.7 million, partially offset by an increase in R&D spending of $1.7 million, SG&A expenses of $1.3 million and restructuring, acquisition, and related charges of $1.9 million.

Precision Motion segment operating income was $34.7 million, or 25.6% of revenue, during the nine months ended October 1, 2021, versus $20.7 million, or 21.7% of revenue, during the prior year period.

The increase in operating income was primarily due to

an increase in gross profit of $ 21 .

9 million, partially offset by an increase in restructuring, acquisition, and related charges of $ 3 .

4 million, R&D spending of $ 3.0 million and SG&A expenses of $1.0 million.

Unallocated Corporate and Shared Services

Unallocated corporate and shared services costs primarily represent costs of corporate and shared services functions that are not allocated to the operating segments, including certain restructuring and most acquisition costs.

These costs for the three months ended July 2, 2021 increased by $9.3 million versus the prior year period primarily due to costs related to COVID-19 testing for employees of $1.5 million included in costs of revenue, an increase in SG&A spending of $5.7 million primarily related to share-based compensation and the re-establishment of 2021 bonuses, and an increase in restructuring, acquisition, and related charges of $1.6 million.

Unallocated corporate and shared services costs for the six months ended July 2, 2021 increased by $13.5 million versus the prior year period primarily due to costs related to COVID-19 testing for employees of $2.9 million included in costs of revenue, an increase in SG&A spending of $8.1 million primarily related to share-based compensation and the re-establishment of 2021 bonuses, and an increase in restructuring, acquisition, and related charges of $1.8 million.

These costs for the three months ended October 1, 2021 increased by $7.9 million versus the prior year period primarily due to costs related to COVID-19 testing for employees of $0.4 million included in cost of revenue, an increase in SG&A spending of $4.3 million primarily related to the re-establishment of employee bonus plans in 2021, and an increase in restructuring, acquisition, and related charges of $2.9 million.

Unallocated corporate and shared services costs for the nine months ended October 1, 2021 increased by $21.5 million versus the prior year period primarily due to costs related to COVID-19 testing for employees of $3.3 million included in cost of revenue, an increase in SG&A spending of $12.4 million primarily related to share-based compensation, the re-establishment of employee bonus plans in 2021, and an increase in restructuring, acquisition, and related charges of $4.6 million.

Other Income and Expense Items

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Three Months Ended

Six Months Ended

Nine Months Ended

Interest income (expense), net

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Interest Income (Expense), Net

Net interest expense was $1.4 million for the three months ended July 2, 2021, versus $1.7 million in the prior year period.

The decrease in net interest expense was primarily due to a decrease in average debt levels and a decrease in the weighted average interest rate on our senior credit facilities.

The weighted average interest rate on our senior credit facilities was 2.04% during the three months ended July 2, 2021, versus 2.40% during the three months ended July 3, 2020.

Net interest expense was $2.8 million for the six months ended July 2, 2021, versus $3.4 million in the prior year period.

Net interest expense was $1.7 million for both the three months ended October 1, 2021 and the prior year period.

The weighted average interest rate on our senior credit facilities was 2.28% during the three months ended October 1, 2021, versus 2.31% during the prior year period.

Net interest expense was $4.5 million for the nine months ended October 1, 2021, versus $5.1 million in the prior year period.

The decrease in net interest expense was primarily due to a decrease in average debt levels and a decrease in the weighted average interest rate on our senior credit facilities.

The weighted average interest rate on our senior credit facilities was 2.03% during the six months ended July 2, 2021, versus 2.40% during the six months ended July 3, 2020.

The weighted average interest rate on our senior credit facilities was 2.12% during the nine months ended October 1, 2021, versus 2.37% during the prior year period.

Foreign Exchange Transaction Gains (Losses), Net

Foreign exchange transaction gains (losses) were $(0.1) million net losses for the three months ended July 2, 2021, versus $(0.3) million net losses in the prior year period.

Foreign exchange transaction gains (losses) were $ (0.

3 ) million net losses for the six months ended July 2, 2021 , versus less than $(0.1) million net losses in the prior year period .

The increase in net losses was primarily due to changes in the value of the U.S.

Dollar against the British Pound and the Euro and lower net realized gains from foreign currency contracts.

Foreign exchange transaction gains (losses) were less than $0.1 million net gain for the three months ended October 1, 2021, versus $(0.1) million net losses in the prior year period.

Foreign exchange transaction gains (losses) were $(0.3) million net losses for the nine months ended October 1, 2021, versus $(0.2) million net losses in the prior year period.

Other Income (Expense), Net

Net other expense was nominal for both the three and six months ended July 2, 2021 and the three and six months ended July 3, 2020.

Income Tax Provision

Our effective tax rate for the three months ended July 2, 2021 was 19.2%, versus 0.3% for the prior year period.

Our effective tax rate of 19.2% for the three months ended July 2, 2021 differs from the Canadian statutory tax rate of 29.0% primarily due to the mix of income earned in jurisdictions with varying tax rates, estimated deductions for Foreign Derived Intangible Income, U.K.

patent box deductions, other tax credits, and a release of uncertain tax position reserves, offset by the revaluation of long term deferred tax balances resulting from the UK corporate tax rate change.

Our effective tax rate of 0.3% for the three months ended July 3, 2020 differs from the Canadian statutory tax rate of 29.0% primarily due to the mix of income earned in jurisdictions with varying tax rates, estimated deductions for Foreign Derived Intangible Income, U.K.

patent box deductions and other tax credits, and a release of a portion of the valuation allowance on our deferred tax assets in Canada.

For the three months ended July 3, 2020, the release of the valuation allowance had a benefit of 11.4% on our effective tax rate.

Our effective tax rate for the six months ended July 2, 2021 was 3.5%, versus (0%) for the prior year period.

Our effective tax rate of 3.5% for the six months ended July 2, 2021 differs from the Canadian statutory tax rate of 29.0% primarily due to the mix of income earned in jurisdictions with varying tax rates, estimated deductions for Foreign Derived Intangible Income, U.K.

patent box deductions, other tax credits, a release of uncertain tax positions reserves, and windfall tax benefits upon vesting of certain share-based compensation awards, partially offset by the revaluation of long term deferred tax balances resulting from the UK corporate tax rate change during the period.

For the six months ended July 2, 2021, the windfall tax benefits upon vesting of certain share-based compensation awards had a benefit of 14.7% on our effective tax rate.

Our effective tax rate of (0%) for the six months ended July 3, 2020 differs from the Canadian statutory tax rate of 29.0% primarily due to the mix of income earned in jurisdictions with varying tax rates, estimated deductions for Foreign Derived Intangible Income, U.K.

patent box deductions and other tax credits, windfall tax benefits upon vesting of certain share-based compensation awards during the period, and a release of a portion of the valuation allowance.

For the six months ended July 3, 2020, the windfall tax benefits upon vesting of certain share-based compensation awards and the release of the valuation allowance had a benefit of 11.2% and 5.7%, respectively, on our effective tax rate.

Net other expense was nominal for both the three and nine months ended October 1, 2021 and the three and nine months ended October 2, 2020.

Income Tax Provision (Benefit)

Our effective tax rate for the three months ended October 1, 2021 was (0.6%), versus 17.6% for the prior year period.

Our effective tax rate of (0.6%) for the three months ended October 1, 2021 differs from the Canadian statutory tax rate of 29.0% primarily due to the mix of income earned in jurisdictions with varying tax rates, estimated deductions for Foreign Derived Intangible Income, U.K.

patent box deductions, other tax credits, windfall tax benefits upon vesting of certain share-based compensation awards and a release of uncertain tax position reserves due to expiration of statutes of limitation, partially offset by an increase in our valuation allowance.

Our effective tax rate of 17.6 % for the three months ended October 2 , 202 0 differs from the Canadian statutory tax rate of 29.0% primarily due to the mix of income earned in jurisdictions with varying tax rates, estimated deductions for Foreign Derived Intangible Income, U.K.

patent box deductions and other tax credits.

Our effective tax rate for the nine months ended October 1, 2021 was 2.0%, versus 5.2% for the prior year period.

Our effective tax rate of 2.0% for the nine months ended October 1, 2021 differs from the Canadian statutory tax rate of 29.0% primarily due to the mix of income earned in jurisdictions with varying tax rates, estimated deductions for Foreign Derived Intangible Income, U.K.

corporate tax rate change during the period and an increase in our valuation allowances.

For the nine months ended October 1, 2021, the windfall tax benefits upon vesting of certain share-based compensation awards had a benefit of 14.5% on our effective tax rate.

Our effective tax rate of 5.2% for the nine months ended October 2, 2020 differs from the Canadian statutory tax rate of 29.0% primarily due to the mix of income earned in jurisdictions with varying tax rates, estimated deductions for Foreign Derived Intangible Income, U.K.

patent box deductions, other tax credits, windfall tax benefits upon vesting of certain share-based compensation awards during the period, and a release of a portion of the valuation allowance on our deferred tax assets in Canada.

For the nine months ended October 2, 2020, the windfall tax benefits upon vesting of certain share-based compensation awards and the release of the valuation allowance had a benefit of 7.9% and 3.3%, respectively, on our effective tax rate.

Liquidity and Capital Resources

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We believe our future operating cash flows will be sufficient to meet our future operating and capital expenditure cash needs for the foreseeable future, including at least the next 12 months.

The availability of borrowing capacity under our revolving credit facility provides a sufficient source of liquidity to pay the purchase prices for our pending acquisitions of ATI Industrial Automation, Inc.

and Schneider Electric Motion USA, Inc.

as well as a potential source of liquidity for any future capital expenditures and other liquidity needs.

The availability of borrowing capacity under our revolving credit facility provides a potential source of liquidity for any future capital expenditures and other liquidity needs.

In addition, we have the ability to expand our borrowing capacity by up to $200.0 million by exercising the accordion feature under our revolving credit agreement.

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Significant factors affecting the management of our ongoing cash requirements are the adequacy of available bank lines of credit and our ability to attract long term capital with satisfactory terms.

The sources of our liquidity are subject to all of the risks of our business and could be adversely affected by, among other factors, risks associated with events outside our control, such as the economic consequences of the COVID-19 pandemic, a decrease in demand for our products, our ability to integrate current and future acquisitions, deterioration in certain financial ratios, availability of borrowings under our revolving credit facility, and market changes

The sources of our liquidity are subject to all of the risks of our business and could be adversely affected by, among other factors, risks associated with events outside our control, such as the economic consequences of the COVID-19 pandemic, worsening supply chain disruptions and electronics and material shortages, a decrease in demand for our products, our ability to integrate current and future acquisitions, deterioration in certain financial ratios, availability of borrowings under our revolving credit facility, and market changes in general.

See “Risks Relating to Our Common Shares and Our Capital Structure” included in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

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There is no assurance that the applicable laws and regulations and/or the terms of our indebtedness will permit our subsidiaries to provide us with sufficient dividends, distributions or loans when necessary.

As of July 2, 2021, $87.8 million of our $133.9 million cash and cash equivalents was held by subsidiaries outside of Canada and the United States.

As of October 1, 2021, $69.0 million of our $102.4 million cash and cash equivalents was held by subsidiaries outside of Canada and the United States.

Generally, our intent is to use cash held in these foreign subsidiaries to fund our local operations or acquisitions by those local subsidiaries and to pay down borrowings under our Senior Credit Facilities (as defined below).

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payroll tax payments in 2020 in accordance with relief provisions under the CARES Act.

As of July 2, 2021, we had $2.8 million in such deferred U.S.

As of October 1, 2021, we had $2.8 million in such deferred U.S.

payroll tax payments under the CARES Act.

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The Company’s Board of Directors may designate and issue one or more series of preferred shares in order to raise additional capital .

As of July 2, 2021, no preferred shares have been issued and outstanding.

As of October 1 , 2021, no preferred shares ha d been issued and outstanding.

Senior Credit Facilities

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The First Amendment increased the revolving credit facility commitment under the Third Amended and Restated Credit Agreement by $145.0 million, from $350.0 million to $495.0 million, and reset the uncommitted accordion feature to $200.0 million for potential future expansion.

As of July 2, 2021, we had $98.9 million term loan and $97.1 million revolver borrowings outstanding under our Senior Credit Facilities.

As of October 1, 2021, we had $95.3 million term loan and $355.3 million revolver borrowings outstanding under our Senior Credit Facilities.

The borrowings outstanding under the Senior Credit Facilities bear interest at rates based on (a) the Base Rate, as defined in the Third Amended and Restated Credit Agreement, plus a margin ranging between 0.25% and 1.25% per annum, determined by reference to our consolidated leverage ratio, or (b) the Eurocurrency Rate, as defined in the Third Amended and Restated Credit Agreement, plus a margin ranging between 1.25% and 2.25% per annum, determined by reference to our consolidated leverage ratio.

In addition, we are obligated to pay a commitment fee on the unused portion of the revolving credit facility, ranging between 0.20% and 0.40% per annum, determined by reference to our consolidated leverage ratio.

As of July 2, 2021, we had outstanding borrowings under the Third Amended and Restated Credit Agreement denominated in Euro and U.S.

As of October 1, 2021, we had outstanding borrowings under the Third Amended and Restated Credit Agreement denominated in Euro and U.S.

Dollars of $171.6 million and $279.0 million, respectively.

On October 5, 2021, the Company entered into an amendment (the “Fourth Amendment”) to the Third Amended and Restated Credit Agreement to exercise the accordion feature.

The Fourth Amendment increased the revolving credit facility commitment under the Third Amended and Restated Credit Agreement by $200.0 million, from $495.0 million to $695.0 million, and reset the uncommitted accordion feature to $200.0 million for potential future expansion.

The Third Amended and Restated Credit Agreement contains various covenants that we believe are usual and customary for this type of agreement, including a maximum consolidated leverage ratio and a minimum consolidated fixed charge coverage ratio (as defined in the Third Amended and Restated Credit Agreement).

The following table summarizes these financial covenants and our compliance therewith as of July 2, 2021:

The following table summarizes these financial covenants and our compliance therewith as of October 1, 2021:

Maximum consolidated leverage ratio

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In October 2018, our Board of Directors approved a share repurchase plan (the “2018 Repurchase Plan”) authorizing the repurchase of $25.0 million worth of common shares.

Share repurchases have been made under the 2018 Repurchase Plan pursuant to Rule 10b-18 under the Securities Exchange Act of 1934.

We had $9.5 million available for share repurchases under the 2018 Repurchase Plan as of July 2, 2021.

Share repurchases have been made under the 2018 Repurchase Plan pursuant to

Rule 10b-18 under the Securities Exchange Act of 1934 .

We had $9.5 million available for share repurchases under the 2018 Repurchase Plan as of October 1 , 202 1 .

In February 2020, our Board of Directors approved a new share repurchase plan (the “2020 Repurchase Plan”) authorizing the repurchase of an additional $50.0 million worth of common shares.

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No shares have been repurchased under the 2020 Repurchase Plan to date.

Pending Acquisitions

On July 9, 2021, we signed a purchase and sale agreement to acquire Schneider Electric Motion USA, Inc.

(“SEM”), a Marlborough, Connecticut-based manufacturer of integrated stepper motors and electronic controls for automation equipment for a total purchase price of $115 million in cash, subject to customary closing and net working capital adjustments.

The transaction is subject to customary regulatory approvals and closing conditions and is anticipated to close in the third quarter of fiscal year 2021.

SEM will be included in our Precision Motion reportable segment.

On July 18, 2021, we signed a purchase and sale agreement to acquire ATI Industrial Automation Inc.

(“ATI”), an Apex, North Carolina-based developer and manufacturer of robotic end-of-arm tooling for an initial purchase price of $172 million upfront in cash and additional contingent cash payments associated with 2021 financial performance.

The transaction is subject to customary regulatory approvals and closing conditions and is anticipated to close in the third quarter of fiscal year 2021.

ATI will be included in our Precision Motion reportable segment.

We expect to fund the SEM and ATI acquisitions using cash on hand and funds from drawdowns under our Senior Credit Facilities.

Cash Flows for the Six Months Ended July 2, 2021 and July 3, 2020

Cash Flows for the Nine Months Ended October 1, 2021 and October 2, 2020

The following table summarizes our cash flows, cash and cash equivalents, and unused and available funds under our revolving credit facility for the periods indicated (in thousands):

Six Months Ended

Nine Months Ended

Net cash provided by operating activities

Net cash used in investing activities

Net cash used in financing activities

Net cash provided by (used in) financing activities

Cash and cash equivalents

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Operating Cash Flows

Cash provided by operating activities was $52.0 million for the six months ended July 2, 2021, versus $51.6 million for the prior year period.

Cash provided by operating activities for the six months ended July 2, 2021 increased from the prior year period primarily

due to an increase in our days payables outstanding which increased from 45 days at December 31, 2020 to 52 days at July 2, 2021 and substantially no bonus payout in 2021 as a result of the elimination of our 2020 annual bonus plan, offset by an increase in accounts receivable and inventory due to increases in revenue and demand .

Cash provided by operating activities for the six months ended July 3, 2020 was positively impacted by an increase in our inventory turnover ratio from 3.1 at December 31, 2019 to 3.2 at July 3, 2020 and a decrease in accounts receivable, offset by a decrease in our days payables outstanding which decreased from 53 days at December 31, 2019 to 49 days at July 3, 2020.

During the six months ended July 3, 2020, we paid the 2019 annual employee bonuses which had been accrued for as of December 31, 2019.

Cash provided by operating activities was $65.9 million for the nine months ended October 1, 2021, versus $93.7 million for the prior year period.

Cash provided by operating activities for the nine months ended October 1, 2021 decreased from the prior year period primarily due to an increase in accounts receivable and inventories due to increases in revenue and demand, and the $8.3 million payout of an acquisition earnout recorded as compensation, partially offset by an increase in days payables outstanding and substantially no bonus payout in 2021 as a result of the elimination of our 2020 annual bonus plan.

Cash provided by operating activities for the nine months ended October 2, 2020 was positively impacted by an increase in our inventory turnover ratio from 3.1 at December 31, 2019 to 3.3 at October 2, 2020 and a decrease in accounts receivable, offset by a decrease in our days payables outstanding which decreased from 53 days at December 31, 2019 to 44 days at October 2, 2020.

During the nine months ended October 2, 2020, we paid the 2019 annual employee bonuses which had been accrued for as of December 31, 2019.

Investing Cash Flows

Cash used in investing activities was $10.8 million for the six months ended July 2, 2021, primarily driven by capital expenditures of $8.6 million and a contingent consideration payment of $2.2 million related to our 2016 asset acquisition of video signal processing and management technologies.

Cash used in investing activities was $7.3 million for the six months ended July 3, 2020, primarily related to capital expenditures of $4.6 million and a contingent consideration payment of $2.6 million related to our 2016 asset acquisition of video signal processing and management technologies.

Cash used in investing activities was $302.1 million for the nine months ended October 1, 2021, primarily driven by the ATI and SEM acquisitions.

In connection with these acquisitions, we paid cash consideration of $285.2 million (net of cash acquired of $14.6 million) during the nine months ended October 1, 2021.

We also paid capital expenditures of $14.8 million and a contingent consideration payment of $2.2 million related to our 2016 asset acquisition of video signal processing and management technologies during the nine months ended October 1, 2021.

Cash used in investing activities was $9.8 million for the nine months ended October 2, 2020, primarily related to capital expenditures of $7.2 million and a contingent consideration payment of $2.6 million related to our 2016 asset acquisition of video signal processing and management technologies.

We expect to use an aggregate of approximately $20 million to $22 million in fiscal 2021 for capital expenditures related to investments in new property, plant and equipment for our existing businesses.

Financing Cash Flows

Cash used in financing activities was $32.0 million for the six months ended July 2, 2021, primarily due to $18.4 million of payroll tax payments upon vesting of share-based compensation awards, a $8.7 million payment for the purchase of a building under a finance lease agreement, $2.7 million of term loan repayments, and $1.8 million of contingent consideration payments related to acquisitions.

Cash used in financing activities was $25.0 million for the six months ended July 3, 2020, primarily due to $7.9 million of payroll tax payments on share-based compensation awards, $5.6 million of ARGES deferred purchase price payment, $5.5 million of repurchases of common shares, $2.5 million repayment of our term loan, and $1.6 million of fees paid in connection with the First Amendment to our Third Amended and Restated Credit Agreement.

Cash provided by financing activities was $214.3 million for the nine months ended October 1, 2021, primarily due to $280.0 million of borrowings under our revolving credit facility used to fund the cash considerations paid for the ATI and SEM acquisitions, partially offset by $30.7 million of payroll tax payments upon vesting of share-based compensation awards, $24.0 million of term loan

and revolver credit facility repayments, a $8.

7 million payment for the purchase of a building under a finance lease agreement , and $1.8 million of contingent consideration payments related to acquisition s .

Cash used in financing activities was $57.2 million for the nine months ended October 2, 2020, primarily due to $34.0 million in repayments of borrowings under our Senior Credit Facilities, $8.3 million of payroll tax payments upon vesting of share-based compensation awards, $5.8 million payments of deferred and escrowed purchase price related to prior year acquisitions, $5.5 million of repurchases of common shares, and $1.6 million of fees paid in connection with the First Amendment to our Third Amended and Restated Credit Agreement.

Off-Balance Sheet Arrangements, Contractual Obligations

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Such contractual obligations are described in our Management’s Discussion and Analysis of Financial Condition and Results of Operations and in the Notes to Consolidated Financial Statements, each included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

As of July 2, 2021, we have not entered into any other material new or modified contractual obligations since December 31, 2020 .

Excluding the estimated contingent considerations payments and non-cancellable inventory purchase commitments from current year acquisitions, through October 1, 2021, we have not entered into any other material new or modified contractual obligations since December 31, 2020 .

Off-Balance Sheet Arrangements

Through July 2, 2021, we have not entered into any other off-balance sheet arrangements or material transactions with any unconsolidated entities or other persons.

Through October 1, 2021, we have not entered into any other off-balance sheet arrangements or material transactions with any unconsolidated entities or other persons.

Critical Accounting Policies and Estimates

The critical accounting policies that we believe impact significant judgments and estimates used in the preparation of our consolidated financial statements presented in this periodic report on Form 10-Q are described in our Management’s Discussion and Analysis of Financial Condition and Results of Operations and in the Notes to Consolidated Financial Statements, each included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

There have been no material changes to our critical accounting policies and estimates through July 2, 2021 from those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

There have been no material changes to our critical accounting policies and estimates through October 1, 2021 from those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

Recent Accounting Pronouncements

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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