What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-05-11 compared with 2020-11-10 · 97 added, 218 removed, 255 unchanged (55% of the section changed)

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and other statements that are not historical facts.

Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including, but not limited to, the following:

Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various important factors, including, but not limited to, the following:

economic and political conditions and the effects of these conditions on our customers’ businesses and level of business activities;

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our exposure to increased tariffs, trade restrictions or taxes on our products;

negative effects on global economic conditions, financial markets and our business as a result of the United Kingdom’s impending withdrawal from the European Union and the actions of the current U.S.

government, including its policies on trade tariffs and reactions from other countries to any new tariffs imposed by the U.S.;

negative effects on global economic conditions, financial markets and our business as a result of the United Kingdom’s withdrawal from the European Union;

violations of our intellectual property rights and our ability to protect our intellectual property against infringement by third parties;

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and our failure to maintain appropriate internal controls in the future.

Other important risk factors that could affect the outcome of the events set forth in these statements and that could affect the Company’s operating results and financial condition are discussed in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 under the heading “Risk Factors” as updated in Part 2, Item 1A of this Quarterly Report on Form 10-Q.

Other important risk factors that could affect the outcome of the events set forth in these statements and that could affect the Company’s operating results and financial condition are discussed in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 under the heading “Risk Factors” as updated in our other filings with the Securities and Exchange Commission.

In this Quarterly Report on Form 10-Q, the words “anticipates,” “believes,” “expects,” “intends,” “future,” “could,” “estimates,” “plans,” “would,” “should,” “potential,” “continues,” and similar words or expressions (as well as other words or expressions referencing future events, conditions or circumstances) identify forward-looking statements.

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Medical Market

For the three and nine months ended October 2, 2020, the medical market accounted for approximately 54% and 56%, respectively, of our revenue.

For the three months ended April 2, 2021, the medical market accounted for approximately 55% 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 three and nine months ended October 2, 2020, the advanced industrial market accounted for approximately 46% and 44%, respectively, 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, the f inancial condition of our customers, changes in regulatory requirements and laws, and general economic conditions.

For the three months ended April 2, 2021, the advanced industrial market accounted for approximately 45% of our revenue.

condition of our customers, changes in regulatory requirements and laws, and general economic conditions.

We believe that the Purchasing Managers Index (PMI) on manufacturing activities specific to different regions around the world may provide an indication of the impact of general economic conditions on our sales into the advanced industrial market .

Our strategy is to drive sustainable, profitable growth through short-term and long-term initiatives, including:

disciplined focus on our diversified business model of providing functionality to long life-cycle OEM customer platforms in attractive medical and advanced industrial niche markets;

disciplined focus on our diversified business model of providing components and sub-systems to long life-cycle OEM customer platforms in attractive medical and advanced industrial niche markets;

improving our business mix to increase medical sales as a percentage of total revenue by:

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Significant Events and Updates

Amendment to Third Amended and Restated Credit Agreement

On March 27, 2020, we entered into an amendment (the “First Amendment”) to the third amended and restated credit agreement, dated as of December 31, 2019 (the “Third Amended and Restated Credit Agreement”).

The First Amendment exercised a portion of the $200 million uncommitted accordion feature under the Third Amended and Restated Credit Agreement and increased the revolving credit facility commitment by $145 million, from $350 million to $495 million, and reset the uncommitted accordion feature to $200 million for potential future expansion.

Impact of COVID-19 on Our Business

Our Employees

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

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We established rigorous safety measures in all of our facilities, including implementing social distancing protocols, requiring working from home for those employees that do not need to be physically present on the manufacturing floor or in our facilities to perform their work, suspending travel, spreading production over more shifts, implementing temperature checks at the entrances to our facilities, frequently disinfecting our workspaces, and providing masks to those employees who must be physically present in our facilities.

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 investment in technologies and monitoring equipment.

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

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 for COVID-19 at certain locations.

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

We may take further actions as government authorities require or recommend or as we determine to be in the best interest of our employees.

We are committed to retaining and supporting our employees during this pandemic.

To retain our employees, we issued to substantially all of our employees a special one-time restricted stock unit grant in April 2020 at a total fair value of $14.4 million in the aggregate.

The restricted stock units are expected to vest in February 2021.

These actions were implemented to create an ownership mindset and focus among all employees for the duration of the crisis and through the expected recovery, while maintaining the Company’s talent and capabilities.

Executive Compensation

The Compensation Committee of our Board of Directors approved the 2020 compensation plans for our executive officers and a Section 16 officer (collectively, the “Officers”) in February 2020.

To support our business during the COVID-19 pandemic, the Officers agreed to waive their 2020 merit and promotional increases, eliminate their 2020 cash bonuses, and take two weeks of unpaid time-off.

Further, the Officers did not receive the one-time special restricted stock unit grant issued to the rest of the employees.

These actions will result in an aggregate amount of $1.6 million (approximately 50%) reduction in the 2020 cash compensation, assuming bonuses were paid at target, for these Officers previously approved by the Compensation Committee.

In June 2020, our Board of Directors agreed to forgo the cash retainers payable to our non-employee directors for the third quarter of 2020.

This action resulted in an aggregate amount of $0.1 million (approximately 25%) reduction in the cash compensation of our Board of Directors for 2020.

Our Customers

The outbreak has significantly increased economic and demand uncertainty.

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

In the event of a prolonged economic recession, overall demand for our products could decline further and our business would be adversely affected to a greater extent.

Our Facilities

Because of the COVID-19 pandemic, governmental authorities worldwide implemented numerous evolving measures to try to contain the spread of the virus, such as travel bans and restrictions, limits on social gatherings, quarantines, shelter-in-place orders, business shutdowns and social distancing.

We have important manufacturing operations in the U.S., the U.K., Germany, and China, all of which have been affected by the COVID-19 pandemic.

As of October 2, 2020, our manufacturing facilities around the world were in operation.

While governmental measures may be modified or extended in the event of a resurgence of COVID-19 infections and in the absence of effective vaccines becoming available in the near term, we have taken measures to protect our employees and expect our manufacturing facilities to remain operational.

In connection with the COVID-19 pandemic, we have experienced limited absenteeism from those employees who are required to be on-site to perform their jobs.

Our Supply Chain

We have experienced limited disruption to our supply chain as a result of the COVID-19 pandemic to date.

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

Hardship on our suppliers or sub-suppliers caused by the COVID-19 pandemic could cause further disruption 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, we are identifying alternative suppliers, sourcing raw materials from different supplier locations, and taking other actions to ensure our supply of raw materials.

Although we are mitigating potential supply interruptions from the COVID-19 pandemic, if certain suppliers cannot produce a key 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.

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.

Through April 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 on 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.

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

Although we are mitigating potential supply interruptions from the COVID-19 pandemic and 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.

Our Liquidity

With respect to liquidity, we have taken actions to reduce costs and cash expenditures across the Company.

These actions included reducing hiring activities, restricting travel, adjusting employee compensation by eliminating fiscal year 2020 cash bonuses and base salary increases, implementing an unpaid time-off program for substantially all of our non-production workforce, limiting discretionary spending, reducing or deferring spending on capital investment projects, deferring lease payments on certain facilities, and deferring certain U.S.

payroll tax payments for the remainder of 2020 in accordance with relief provisions under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”).

As of October 2, 2020, we deferred $2.0 million in certain U.S.

payroll tax payments under the CARES Act.

Due to the uncertainty related to the future impact of the COVID-19 pandemic, we temporarily suspended repurchases under our share repurchase plans in April 2020.

In connection with our initiatives to preserve cash for a prolonged economic downturn caused by the COVID-19 pandemic, we reached an agreement with the former owner of ARGES GmbH (“ARGES”) in April 2020 to postpone a portion of the deferred cash consideration.

We paid the seller €5.0 million in cash in June 2020 and expect to pay €20.0 million in cash in December 2020.

As of October 2, 2020, we had cash and cash equivalents of $106.6 million and available borrowing capacity under our revolving credit facility of $398.8 million.

We have reviewed numerous potential scenarios in connection with the impact of COVID-19 on our business.

Based on our analysis, we believe our existing balances of cash and cash equivalents, anticipated cash flows from our operating activities, and available borrowing capacity under our revolving credit facility will be sufficient to meet our cash needs arising in the ordinary course of business for the next twelve months.

Additionally, we believe we will remain in compliance with our debt covenants for the next twelve months.

Results of Operations for the Three and Nine Months Ended October 2, 2020 Compared with the Three and Nine Months Ended September 27, 2019

COVID-19 has caused inflation pressures on the market prices for certain of our 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 Months Ended April 2, 2021 Compared with the Three Months Ended April 3, 2020

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

Three Months Ended

Nine Months Ended

September 27,

Cost of revenue

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Overview of Financial Results

Total revenue of $142.9 million for the three months ended October 2, 2020 decreased $11.1 million, or 7.2%, from the prior year period primarily due to the COVID-19 pandemic as we experienced decreased demand in the advanced industrial market related to reductions in industrial manufacturing spending and in the medical market as a result of deferrals of elective surgical procedures.

The effect of our prior year acquisitions resulted in an increase in revenue of $0.1 million, or 0.1%.

In addition, foreign currency exchange rates positively impacted our revenue by $2.6 million, or 1.7%, for the three months ended October 2, 2020.

Total revenue of $443.1 million for the nine months ended October 2, 2020 decreased $23.3 million, or 5.0%, from the prior year period primarily due to the COVID-19 pandemic as we experienced decreased demand in the advanced industrial market related to reductions in industrial manufacturing spending and in the medical market as a result of deferrals of elective surgical procedures.

The effect of our prior year acquisitions resulted in an increase in revenue of $8.4 million, or 1.8%.

In addition, foreign currency exchange rates adversely impacted our revenue by $0.2 million, or 0.1%, for the nine months ended October 2, 2020.

Operating income of $11.9 million for the three months ended October 2, 2020 decreased $0.9 million, or 7.3%, from the prior year period.

This decrease was primarily attributable to a decrease in gross profit of $4.9 million as a result of lower revenue, partially offset by a decrease in restructuring, acquisition, and related costs of $3.9 million.

Operating income of $38.8 million for the nine months ended October 2, 2020 decreased $3.5 million, or 8.2%, from the prior year period.

This decrease was primarily attributable to a decrease in gross profit of $13.9 million as a result of lower revenue and an increase in R&D spending of $3.8 million, offset by decreases in SG&A expenses of $6.5 million and restructuring, acquisition, and related costs of $6.3 million.

Basic earnings per common share (“Basic EPS”) of $0.23 for the three months ended October 2, 2020 decreased $0.02 from the prior year period.

Diluted earnings per common share (“Diluted EPS”) of $0.23 for the three months ended October 2, 2020 decreased $0.02 from the prior year period.

The decrease was primarily attributable to a decrease in operating income.

Basic EPS of $0.91 for the nine months ended October 2, 2020 increased $0.01 from the prior year period.

The increase was primarily attributable to decreases in income tax provision and net interest expense, partially offset by a decrease in operating income.

Diluted EPS of $0.89 for the nine months ended October 2, 2020 remained flat from the prior year period.

Total revenue of $162.6 million for the three months ended April 2, 2021 increased $7.1 million, or 4.6%, 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, partially offset by a decrease in demand in the medical market as a result of deferrals of elective surgical procedures during COVID-19 pandemic.

In addition, foreign currency exchange rates positively impacted our revenue by $5.4 million, or 3.5%, for the three months ended April 2, 2021.

Operating income of $11.1 million for the three months ended April 2, 2021 decreased $2.2 million, or 16.2%, from the prior year period.

This decrease was primarily attributable to an increase in Research and Development and Engineering (“R&D”) expense of $3.3 million and restructuring, acquisition, and related cost of $2.1 million, partially offset by an increase in gross profit of $4.3 million primarily attributable to higher revenue.

Basic earnings per common share (“Basic EPS”) of $0.32 for the three months ended April 2, 2021 decreased $0.02 from the prior year period.

Diluted earnings per common share (“Diluted EPS”) of $0.32 for the three months ended April 2, 2021 decreased $0.02 from the prior year period.

The decreases were primarily attributable to a decrease in operating income, offset by a decrease in income tax expense.

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

Three Months Ended

September 27,

Precision Motion

Nine Months Ended

September 27,

Precision Motion

Photonics segment revenue for the three months ended October 2, 2020 decreased by $8.2 million, or 15.0%, versus the prior year period, primarily due to decreased demand in the advanced industrial market related to reductions in industrial manufacturing spending and in the medical market as a result of deferrals of elective surgical procedures and a reduction in certain medical diagnostic testing during the COVID-19 pandemic.

Photonics segment revenue for the nine months ended October 2, 2020 decreased by $ 22.7 million, or 13.2% , versus the prior year period, primarily due to decreased demand in the advanced industrial market related to reductions in industrial manufacturing spending and in the medical market as a result of deferrals of elective surgical procedures and a reduction in certain medical diagnostic testing during the COVID-19 pandemic , partially offset by a $3.3 million increase in revenue from the ARGES acquisition consummated in July 2019 .

Vision segment revenue for the three months ended October 2, 2020 decreased by $5.6 million, or 8.0%, versus the prior year period, primarily due to a decrease in revenue from our minimally invasive surgery (“MIS”) products as a result of deferrals of elective surgical procedures during the COVID-19 pandemic.

Vision segment revenue for the nine months ended October 2, 2020 decreased by $3.7 million, or 1.8%, versus the prior year period, primarily due to a decrease in revenue from our MIS products as a result of deferrals of elective surgical procedures during the COVID-19 pandemic, partially offset by a $3.0 million increase in revenue from the Med X Change acquisition consummated in June 2019 and an increase in revenue from our optical data collection products.

Photonics segment revenue for the three months ended April 2, 2021 increased by $3.4 million, or 6.1%, versus the prior year period, primarily due to increased demand in the advanced industrial market as a result of increases in industrial manufacturing spending.

Vision segment revenue for the three months ended April 2, 2021 decreased by $1.4 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 deferrals of elective surgical procedures during the COVID-19 pandemic.

Precision Motion

Precision Motion segment revenue for the three months ended October 2, 2020 increased by $2.7 million, or 9.0%, versus the prior year period, primarily due to an increase in revenue related to microelectronics demand, partially offset by decreased demand in the medical market as a result of deferrals of elective surgical procedures during the COVID-19 pandemic.

Precision Motion segment revenue for the nine months ended October 2, 2020 increased by $3.2 million, or 3.4%, versus the prior year period, primarily due to an increase in revenue related to microelectronics demand, partially offset by decreased demand in the medical market as a result of deferrals of elective surgical procedures during the COVID-19 pandemic.

Precision Motion segment revenue for the three months ended April 2, 2021 increased by $5.1 million, or 16.4%, versus the prior year period, primarily due to increased demand in advanced industrial market as a result of an increase in industrial manufacturing spending.

Gross Profit and Gross Profit Margin

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Three Months Ended

Nine Months Ended

September 27,

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 October 2, 2020 decreased $5.1 million, or 20.3%, versus the prior year period, primarily due to a decrease in revenue.

Photonics segment gross profit margin was 43.5% for the three months ended October 2, 2020, versus a gross profit margin of 46.3% for the prior year period.

The decrease in gross profit margin was primarily attributable to lower factory utilization associated with lower production volumes and higher period costs as a result of the COVID-19 pandemic.

Photonics segment gross profit for the nine months ended October 2, 2020 decreased $ 14.2 million, or 17.8% , versus the prior year period, primarily due to a decrease in revenue.

Photonics segment gross profit margin was 44.

0 % for the nine months ended October 2, 2020 , versus a gross profit margin of 46.

4 % for the prior year period.

The decrease in gross profit margin was primarily attributable to lower factory utilization associated with lower production volumes and higher period costs as a result of the COVID-19 pandemic .

Vision segment gross profit for the three months ended October 2, 2020 decreased $2.3 million, or 8.7%, versus the prior year period, primarily due to a decrease in revenue.

Vision segment gross profit margin was 38.2% for the three months ended October 2, 2020, versus a gross profit margin of 38.5% for the prior year period.

The decrease in gross profit margin was primarily attributable to unfavorable product mix changes as a result of the COVID-19 pandemic.

Vision segment gross profit for the nine months ended October 2, 2020 decreased $2.4 million, or 3.1%, versus the prior year period, primarily due to a decrease in revenue.

Vision segment gross profit margin was 38.2% for the nine months ended October 2, 2020, versus a gross profit margin of 38.7% for the prior year period.

The decrease in gross profit margin was primarily attributable to unfavorable product mix changes as a result of the COVID-19 pandemic.

Photonics segment gross profit for the three months ended April 2, 2021 increased $3.4 million, or 14.0%, versus the prior year period, primarily due to an increase in both revenue and gross profit margin.

Photonics segment gross profit margin was 48.1% for the three months ended April 2, 2021, versus a gross profit margin of 44.7% 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 April 2, 2021 increased $0.4 million, or 1.3%, versus the prior year period.

Vision segment gross profit margin was 39.8% for the three months ended April 2, 2021, versus a gross profit margin of 38.5% for the prior year period.

The increase in gross profit and gross profit margin were primarily attributable to improvements to factory productivity and lower cost of poor quality.

Precision Motion

Precision Motion segment gross profit for the three months ended October 2, 2020 increased $2.5 million, or 20.0%, versus the prior year period, primarily due to an increase in revenue and an increase in gross profit margin.

Precision Motion segment gross profit margin was 46.6% for the three months ended October 2, 2020, versus a gross profit margin of 42.3% for the prior year period.

The increase in gross profit margin was primarily attributable to favorable product and customer mix changes.

Precision Motion segment gross profit for the nine months ended October 2, 2020 increased $3.0 million, or 7.5%, versus the prior year period, primarily due to an increase in revenue and an increase in gross profit margin.

Precision Motion segment gross profit margin was 44.7% for the nine months ended October 2, 2020, versus a gross profit margin of 43.0% for the prior year period.

The increase in gross profit margin was primarily attributable to favorable product and customer mix changes.

Precision Motion segment gross profit for the three months ended April 2, 2021 increased $2.2 million, or 16.0%, versus the prior year period, primarily due to an increase in revenue.

Precision Motion segment gross profit margin was 44.1% for the three months ended April 2, 2021, versus a gross profit margin of 44.4% for the prior year period.

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.

These costs for the three months ended April 2, 2021 increased by $1.7 million versus the prior year period primarily due to COVID-19 testing costs for employees of $1.4 million.

Operating Expenses

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Three Months Ended

Nine Months Ended

September 27,

Research and development and engineering

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Research and Development and Engineering Expenses

Research and Development and Engineering (“R&D”) expenses are primarily comprised of employee compensation related expenses and cost of materials for R&D projects.

R&D expenses were $15.2 million, or 10.7% of revenue, during the three months ended October 2, 2020, versus $13.8 million, or 9.0% 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 R&D project spending and higher share-based compensation expense.

R&D expenses were $45.0 million, or 10.2% of revenue, during the nine months ended October 2, 2020, versus $41.2 million, or 8.8% 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 R&D expenses from 2019 acquisitions, higher R&D project spending and higher share-based compensation expense.

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

R&D expenses were $18.7 million, or 11.5% of revenue, during the three months ended April 2, 2021, versus $15.3 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 as a result of higher headcount and higher R&D project spending.

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 $26.8 million, or 18.7% of

revenue, during the three months ended October 2, 2020 , versus $ 27.9 million, or 18.

1 % of revenue, during the prior year period .

SG&A expenses de creased in terms of total dollars primarily due to lower salaries as a result of unpaid-time off, and lower travel costs and other discretionary spending , partially offset by higher s hare -based compensation expense.

SG&A expenses were $82.5 million, or 18.6% of revenue, during the nine months ended October 2, 2020, versus $89.0 million, or 19.1% of revenue, during the prior year period.

SG&A expenses decreased in terms of total dollars and as a percentage of revenue primarily due to lower variable compensation as we eliminated 2020 annual bonuses, lower salaries due to unpaid-time off, and lower travel costs and other discretionary spending, partially offset by higher share-based compensation expense.

SG&A expenses were $31.7 million, or 19.5% of revenue, during the three months ended April 2, 2021, versus $30.8 million, or 19.8% 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 re-establishment of 2021 cash bonuses, partially offset by lower travel costs and other discretionary spending.

Amortization of Purchased Intangible Assets

Amortization of purchased intangible assets, excluding the amortization of developed technologies included in cost of revenue, was $3.5 million, or 2.5% of revenue, during the three months ended October 2, 2020, versus $4.0 million, or 2.6% of revenue, during the prior year period.

Amortization of purchased intangible assets, excluding the amortization of developed technologies included in cost of revenue, was $10.4 million, or 2.3% of revenue, during the nine months ended October 2, 2020, versus $11.7 million, or 2.5% of revenue, during the prior year period.

Amortization of purchased intangible assets, excluding the amortization of developed technologies that is included in cost of revenue, was $3.6 million, or 2.2% of revenue, during the three months ended April 2, 2021, versus $3.4 million, or 2.2% of revenue, during the prior year period.

Restructuring, Acquisition, and Related Costs

We recorded restructuring, acquisition, and related costs of $1.7 million during the three months ended October 2, 2020, versus $5.5 million during the prior year period.

The decrease in restructuring, acquisition, and related costs versus the prior year period was primarily due to a decrease in acquisition and related charges attributable to higher professional services fees for acquisitions in the prior year.

We recorded restructuring, acquisition, and related costs of $5.6 million during the nine months ended October 2, 2020, versus $11.9 million during the prior year period.

The decrease in restructuring, acquisition, and related costs versus the prior year period was primarily due to a decrease in restructuring charges of $2.4 million and a decrease in acquisition and related costs of $3.9 million.

The decrease in acquisition and related costs was primarily attributable to higher professional services fees for acquisitions in the prior year and a decrease in costs recognized under earn-out agreements in the current year period, offset by legal fees during the nine months ended October 2, 2020 related to a dispute involving a company we acquired in 2019.

We recorded restructuring, acquisition, and related costs of $3.7 million during the three months ended April 2, 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 restructuring cost 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

Nine Months Ended

September 27,

Operating Income (Loss)

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Unallocated Corporate and Shared Services

Photonics segment operating income was $7.0 million, or 15.1% of revenue, during the three months ended October 2, 2020, versus $10.7 million, or 19.5% of revenue, during the prior year period.

The decrease in operating income was primarily due to a decrease in gross profit of $5.1 million and an increase in R&D spending of $0.5 million, offset by a decrease in restructuring, acquisition, and related charges of $1.2 million and a decrease in amortization of purchased intangible assets of $0.6 million.

Photonics segment operating income was $22.9 million, or 15.3% of revenue, during the nine months ended October 2, 2020, versus $34.6 million, or 20.1% of revenue, during the prior year period.

The decrease in operating income was primarily due to a decrease in gross profit of $14.2 million and an increase in R&D spending of $2.7 million, partially offset by a decrease in SG&A expenses of $1.2 million, a decrease in restructuring, acquisition, and related charges of $2.4 million, and a decrease in amortization of purchased intangible assets of $1.5 million.

Vision segment operating income was $3.8 million, or 5.9% of revenue, during the three months ended October 2, 2020, versus $5.8 million, or 8.3% of revenue, during the prior year period.

The decrease in operating income was primarily due to a decrease in gross profit of $2.3 million, an increase in R&D spending of $0.6 million, and an increase in restructuring, acquisition, and related charges of $0.6 million, partially offset by a decrease in SG&A expenses of $1.6 million.

Vision segment operating income was $14.1 million, or 7.1% of revenue, during the nine months ended October 2, 2020, versus $14.6 million, or 7.2% of revenue, during the prior year period.

The decrease in operating income was primarily due to a decrease in gross profit of $2.4 million, an increase in R&D spending of $0.9 million, and an increase in restructuring, acquisition, and related charges of $1.1 million, partially offset by a decrease in SG&A expenses of $4.2 million.

Photonics segment operating income was $12.4 million, or 21.2% of revenue, during the three months ended April 2, 2021, versus $8.9 million, or 16.2% of revenue, during the prior year period.

The increase in operating income was primarily due to an increase in gross profit of $3.4 million and a decrease in SG&A spending of $0.9 million, offset by an increase in R&D spending of $0.7 million.

Vision segment operating income was $3.4 million, or 5.0% of revenue, during the three months ended April 2, 2021, versus $5.6 million, or 8.2% of revenue, during the prior year period.

The decrease in operating income was primarily due to an increase in R&D spending of $2.0 million, and an increase in restructuring, acquisition, and related charges of $1.1 million, partially offset by a decrease in SG&A spending of $0.6 million.

Precision Motion

Precision Motion segment operating income was $7.7 million, or 23.8% of revenue, during the three months ended October 2, 2020, versus $5.2 million, or 17.7% of revenue, during the prior year period.

The increase in operating income was primarily due to an increase in gross profit of $2.5 million.

Precision Motion segment operating income was $20.7 million, or 21.7% of revenue, during the nine months ended October 2, 2020, versus $16.8 million, or 18.2% of revenue, during the prior year period.

The increase in operating income was primarily due to an increase in gross profit of $3.0 million and a decrease in SG&A expenses of $0.8 million.

Precision Motion segment operating income was $7.4 million, or 20.4% of revenue, during the three months ended April 2, 2021, versus $6.5 million, or 20.9% of revenue, during the prior year period.

The increase in operating income was primarily due to an increase in gross profit of $2.2 million, partially offset by an increase in restructuring, acquisition, and related charges of $0.7 million, and R&D spending of $0.6 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 October 2, 2020 decreased by $2.3 million versus the prior year period primarily due to a decrease in restructuring, acquisition, and related costs of $3.0 million, partially offset by higher shared-based compensation expense.

Unallocated corporate and shared services costs for the nine months ended October 2, 2020 decreased by $4.9 million versus the prior year period primarily due to a decrease in restructuring, acquisition, and related costs of $4.8 million.

These costs for the three months ended April 2, 2021 increased by $4.3 million versus the prior year period primarily due to costs related to COVID-19 testing for employees of $1.4 million included in costs of goods sold, and an increase in SG&A spending of $2.4 million related to stock-based compensation and the re-establishment of 2021 cash bonuses.

Other Income and Expense Items

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Three Months Ended

Nine Months Ended

September 27,

Interest income (expense), net

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Interest Income (Expense), Net

Net interest expense was $1.7 million for the three months ended October 2, 2020, versus $2.2 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 2.31% during the three months ended October 2, 2020, versus 3.13% during the three months ended September 27, 2019.

Net interest expense was $5.1 million for the nine months ended October 2, 2020, versus $6.4 million in the prior year period.

Net interest expense was $1.4 million for the three months ended April 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 2.37% during the nine months ended October 2, 2020, versus 3.46% during the nine months ended September 27, 2019.

The weighted average interest rate on our senior credit facilities was 2.02% during the three months ended April 2, 2021, versus 2.39% during the three months ended April 3, 2020.

Foreign Exchange Transaction Gains (Losses), Net

Foreign exchange transaction gains (losses) were $0.1 million net losses for the three months ended October 2, 2020, versus $0.4 million net gains in the prior year period.

The decrease in net gains 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 $0.2 million net losses for the nine months ended October 2, 2020, versus $0.5 million net gains in the prior year period.

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

The decrease in net gains was primarily due to changes in the value of the U.S.

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Other Income (Expense), Net

Net other expense was nominal for both the three and nine months ended October 2, 2020 and the three and nine months ended September 27, 2019.

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

Income Tax Provision

Our effective tax rate for the three months ended October 2, 2020 was 17.6%, versus 18.8% for the prior year period.

Our effective tax rate of 17.6% for the three 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 and other tax credits.

Our effective tax rate of 18.8% for the three months ended September 27, 2019 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 2, 2020 was 5.2%, versus 12.9% for the prior year period.

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.

Our effective tax rate of 12.9% for the nine months ended September 27, 2019 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 windfall tax benefits upon vesting of certain share-based compensation awards during the period.

For the nine months ended September 27, 2019, the windfall tax benefits upon vesting of certain share-based compensation awards had a benefit of 7.4% on our effective tax rate.

On March 27, 2020, the U.S.

federal government enacted the CARES Act in response to the COVID-19 pandemic.

The CARES Act is an emergency economic stimulus package which, among other things, contains numerous provisions concerning income taxes.

The CARES Act will not have a material impact on our income taxes or related disclosures.

Our effective tax rate for the three months ended April 2, 2021 was (20.8)%, versus (0.3)% for the prior year period.

Our effective tax rate of (20.8)% for the three months ended April 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 windfall tax benefits upon vesting of certain stock-based compensation awards during the period.

For the three months ended April 2, 2021, the windfall tax benefits upon vesting of certain stock-based compensation awards had a benefit of 35.9% on our effective tax rate.

Our effective tax rate of (0.3)% for the three months ended April 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, other tax credits, and windfall tax benefits upon vesting of certain stock-based compensation awards during the period.

For the three months ended April 3, 2020, the windfall tax benefits upon vesting of certain stock-based compensation awards had a benefit of 19.8% on our effective tax rate.

Liquidity and Capital Resources

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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.

acquisitions, deterioration in certain financial ratios, availability of borrowings under our revolving credit facility, and market changes in general.

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 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 October 2, 2020, $69.6 million of our $106.6 million cash and cash equivalents was held by subsidiaries outside of Canada and the United States.

As of April 2, 2021, $87.0 million of our $113.6 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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Additionally, we may use intercompany loans to address short-term cash flow needs for various subsidiaries.

In connection with our initiatives to preserve cash for a prolonged economic downturn caused by the COVID-19 pandemic, we reached an agreement with the former owner of ARGES in April 2020 to settle net working capital adjustments and to postpone a portion of the deferred cash consideration.

We paid the seller €5.0 million in cash in June 2020 and expect to pay €20.0 million in cash in December 2020.

We also are deferring certain U.S.

We deferred certain U.S.

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

As of October 2, 2020, we deferred $2.0 million in certain U.S.

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

payroll tax payments under the CARES Act.

As permitted under the CARES Act, we expect to pay half of the deferred U.S.

payroll tax by December 31, 2021 and the remaining half by December 31, 2022.

In addition, with respect to the COVID-19 pandemic impact on liquidity, we have taken actions to reduce costs and cash expenditures across the Company.

These included reducing hiring activities, restricting travel, adjusting employee compensation by eliminating fiscal year 2020 cash bonuses and base salary increases, implementing an unpaid time-off program for substantially all of our non-production workforce, limiting discretionary spending, reducing or deferring spending on capital investment projects, and deferring lease payments on certain facilities.

payroll tax payments by December 31, 2021 and the remaining half by December 31, 2022.

Senior Credit Facilities

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We may pay down outstanding borrowings under our revolving credit facility with cash on hand and cash generated from future operations at any time.

On March 27, 2020, we entered into an amendment (the “First Amendment”) to the Third Amended and Restated Credit Agreement and exercised a portion of the uncommitted accordion feature.

In March 2020, we entered into an amendment (the “First Amendment”) to the Third Amended and Restated Credit Agreement and exercised a portion of the uncommitted accordion feature.

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 October 2, 2020, we had $101.8 million term loan and $96.2 million revolver borrowings outstanding under our Senior Credit Facilities.

As of April 2, 2021, we had $99.2 million term loan and $96.3 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 October 2, 2020, we had outstanding borrowings under the Third Amended and Restated Credit Agreement denominated in Euro and U.S.

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

Dollars of $176.5 million and $19.0 million, respectively.

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 covenant s and our compliance therewith as of October 2, 2020 :

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

Maximum consolidated leverage ratio

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

During the nine months ended October 2, 2020, we repurchased 65 thousand shares for an aggregate purchase price of $5.5 million at an average price of $84.55 per share under the 2018 Repurchase Plan.

We had $9.5 million available for share repurchases under the 2018 Repurchase Plan as of October 2, 2020.

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

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.

We expect that share repurchases will be made under the 2020 Repurchase Plan pursuant to Rule 10b-18 under the Securities Exchange Act of 1934 after the 2018 Repurchase Plan is completed.

We expect that share repurchases will be made under the 2020 Repurchase Plan after the 2018 Repurchase Plan is completed.

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

In an effort to preserve cash in light of the economic slowdown caused by the COVID-19 pandemic, we have temporarily suspended repurchases under our share repurchase plans since April 2020.

Cash Flows for the Nine Months Ended October 2, 2020 and September 27, 2019

Cash Flows for the T hree M onths Ended April 2, 202 1 and April 3, 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):

Nine Months Ended

September 27,

Three Months Ended

Net cash provided by operating activities

Net cash used in investing activities

Net cash provided by (used in) financing activities

Net cash used in financing activities

Cash and cash equivalents

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Operating Cash Flows

Cash provided by operating activities was $93.7 million for the nine months ended October 2, 2020, versus $27.8 million for the prior year period.

Cash provided by operating activities for the nine months ended October 2, 2020 increased from the prior year period primarily due to working capital improvements resulting in an increase in cash flows from accounts receivable and inventory, and a decrease in income tax payments.

Cash provided by op erating activities for the nine months ended October 2, 2020 was pos itively 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 5 3 days at December 31, 2019 to 4 4 days at October 2, 2020 .

During the nine months ended October 2, 2020 , we paid the 201 9 annual employee bonuses which had been accrued for as of December 31, 2019 .

Cash provided by operating activities for the nine months ended September 27, 2019 was negatively impacted by an increase in our days sales outstanding which increased from 51 days at December 31, 2018 to 59 days at September 27, 2019 primarily due to poor sales linearity, a decrease in our days payables outstanding which decreased from 52 days at December 31, 2018 to 48 days at September 27, 2019 and an increase in inventories.

Our inventory turnover ratio decreased from 3.4 at December 31, 2018 to 3.2 at September 27, 2019.

During the nine months ended September 27, 2019, we paid the first milestone payment under the earn-out agreement for our acquisition of Zettlex Holdings Limited amounting to $3.9 million and paid the 2018 annual employee bonuses, both of which had been accrued for as of December 31, 2018.

Cash provided by operating activities was $23.3 million for the three months ended April 2, 2021, versus $17.8 million for the prior year period.

Cash provided by operating activities for the three months ended April 2, 2022 increased from the prior year period primarily due to working capital improvements resulting in an increase in cash flows from inventory 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 due to increases in revenue.

Cash provided by operating activities for the three months ended April 2, 2021 was positively impacted by an increase in our inventory turnover ratio from 3.7 at December 31, 2020 to 4.1 at April 2, 2021 and an increase in our days payables outstanding which increased from 45 days at December 31, 2020 to 51 days at April 2, 2021, offset by an increase in accounts receivable as a result of increased revenue.

Cash provided by operating activities for the three months ended April 3, 2020 was positively impacted by an increase in our inventory turnover ratio from 3.1 at December 31, 2019 to 3.2 at April 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 50 days at April 3, 2020.

During the three months ended April 3, 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 $9.8 million for the nine months ended October 2, 2020, primarily driven by capital expenditures of $7.2 million and a payment for intangible assets of $2.6 million related to our 2016 asset acquisition of video signal processing and management technologies.

Cash used in investing activities was $61.1 million for the nine months ended September 27, 2019, primarily driven by the Arges GmbH, Med X Change Inc., and Ingenia CAT, S.L.

acquisitions.

In connection with these acquisitions, we paid $53.1 million cash considerations, net of cash acquired, during the nine months ended September 27, 2019.

We also paid $8.0 million for capital expenditures during the nine months ended September 27, 2019.

We have no material commitments to purchase property, plant, and equipment as of October 2, 2020.

We expect to use an aggregate of approximately $8 million to $9 million in fiscal 2020 for capital expenditures related to investments in new property, plant and equipment.

Cash used in investing activities was $5.5 million for the three months ended April 2, 2021, primarily driven by capital expenditures of $3.3 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 $5.1 million for the three months ended April 3, 2020, primarily related to capital expenditures of $2.3 million and a contingent consideration payment of $2.6 million related to our 2016 asset acquisition of video signal processing and management technologies.

We have no material commitments to purchase property, plant, and equipment as of April 2, 2021.

We expect to use an aggregate of approximately $21 million to $23 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 $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.

We expect to pay the final ARGES deferred purchase price of €20.0 million in cash in December 2020.

Cash provided by financing activities was $12.4 million for the nine months ended September 27, 2019, primarily due to $66.8 million of borrowings under our revolving credit facility used to fund the Arges GmbH, Med X Change Inc., and Ingenia CAT, S.L.

acquisitions, partially offset by $40.8 million repayments of borrowings under our Senior Credit Facilities, $6.8 million of payroll tax payments upon vesting of share-based compensation awards, and $6.7 million of repurchases of common shares.

Cash used in financing activities was $28.9 million for the three months ended April 2, 2021, primarily due to $18.3 million of payroll tax payments upon vesting of share-based compensation awards, $8.7 million of payment made for the purchase of a building under a finance lease, and $1.3 million of term loan repayments.

Cash used in financing activities was $16.0 million for the three months ended April 3, 2020, primarily due to $1.3 million of term loan repayments, $1.3 million of fees paid in connection with the First Amendment to our Third Amended and Restated Credit Agreement, $7.8 million of payroll tax payments upon vesting of share-based compensation awards, and $5.5 million of repurchases of common shares.

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 October 2, 2020, other than the First Amendment to the Third Amended and Restated Credit Agreement, we have not entered into any other material new or modified contractual obligations since December 31, 2019 .

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

Off-Balance Sheet Arrangements

Through October 2, 2020, we have not entered into any other off-balance sheet arrangements or material transactions with any unconsolidated entities or other persons.

Through April 2, 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 October 2, 2020 from those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

There have been no material changes to our critical accounting policies and estimates through April 2, 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