What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-05-11 compared with 2020-11-09 · 90 added, 119 removed, 56 unchanged (79% of the section changed)

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

Our discussions below in this Item 2 are based upon the more detailed discussions about our business, operations and financial condition included in our Annual Report on Form 10-K for the fiscal year ended December 29, 2019, under Part II, Item 7 of that Form 10-K.

Our discussions here focus on our results during the quarter ended, or as of, October 4, 2020, and the comparable periods of 2019 for comparison purposes, and, to the extent applicable, any material changes from the information discussed in that Form 10-K or other important intervening developments or information since that time.

Our discussions below in this Item 2 are based upon the more detailed discussions about our business, operations and financial condition included in our Annual Report on Form 10-K for the fiscal year ended January 3, 2021, under Part II, Item 7 of that Form 10-K.

Our discussions here focus on our results during the quarter ended, or as of, April 4, 2021, and the comparable periods of 2020 for comparison purposes, and, to the extent applicable, any material changes from the information discussed in that Form 10-K or other important intervening developments or information since that time.

These discussions should be read in conjunction with that Form 10-K for more detailed and background information.

The nine month period ended October 4, 2020 includes 40 weeks, and the nine month period ended September 29, 2019 includes 39 weeks.

The three month periods ended October 4, 2020 and September 29, 2019 both include 13 weeks.

The three month period ended April 4, 2021 includes 13 weeks, and the three month period ended April 5, 2020 includes 14 weeks.

Forward-Looking Statements

This report contains statements which may constitute “forward-looking statements” within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995.

Important factors currently known to management that could cause actual results to differ materially from those in forward-looking statements include risks and uncertainties associated with the ongoing COVID-19 pandemic and the economic conditions in the commercial interiors industry as well as the risks and uncertainties discussed under the heading “Risk Factors” included in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 29, 2019, as supplemented by the additional risk factors included in Part II, Item 1A of this Form 10-Q and the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended April 5, 2020.

The Company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time.

Impact of the COVID-19 Pandemic

The World Health Organization declared the COVID-19 outbreak a pandemic, and the virus continues to spread in areas where we operate and sell our products and services.

In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic, and the virus continues to spread in areas where we operate and sell our products and services.

The COVID-19 pandemic has had material adverse effects on our business, results of operations, and financial condition, and it is anticipated that this will continue for an indefinite period of time.

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We continue to monitor our operations and have implemented various programs to mitigate the effects on our business including reductions in employees, labor costs, marketing expenses, consulting expenses, travel costs, various other costs, and capital expenditures, as well as reducing the amount of the cash dividend that we pay on our common stock and suspending and reducing shifts in our production facilities, temporarily furloughing employees, and implementing other cost reduction or avoidance initiatives.

During the third quarter of 2020, the COVID-19 pandemic continued to impact our global operations, resulting in lower revenue across all geographic regions.

For the three months ended October 4, 2020, consolidated net sales declined 20.0% compared to the same period last year.

During the first quarter of 2021, the COVID-19 pandemic continued to impact our global operations, as consolidated net sales declined 12.1% compared to the same period last year.

Lower sales are primarily in the corporate office market segment as COVID-19 continues to impact corporate spending and reinvestment.

As discussed above, the Company implemented, and continues to implement, various cost cutting initiatives to mitigate the effects of COVID-19 on our operations.

During the three and nine months ended October 4, 2020, the Company recorded $7.7 million and $10.6 million, respectively, of voluntary and involuntary severance costs, which are included in selling, general and administrative expenses in the Consolidated Condensed Statements of Operations.

We anticipate future annualized savings of approximately $13 million as a result of these separation initiatives.

As a result of the COVID-19 pandemic, government grants and payroll protection programs are available in various countries globally to provide assistance to companies impacted by the pandemic.

The CARES Act enacted in the United States (see Note 13 entitled “Income Taxes” of Part I, Item 1 of this 10-Q for additional information) and a payroll protection program enacted in the Netherlands (the “NOW Program”), provide benefits related to payroll costs either as reimbursements, lower payroll tax rates or deferral of payroll tax payments.

The NOW Program provides eligible companies with reimbursement of labor costs as an incentive to retain employees and continue paying them in accordance with the Company’s customary compensation practices.

During the third quarter of 2020, the Company qualified for benefits under several payroll protection programs and recognized a reduction in payroll costs of approximately $2.8 million, which are recorded as a $2.5 million reduction of selling, general and administrative expenses and a $0.3 million reduction of cost of sales in the Consolidated Condensed Statements of Operations, as the Company believes it is probable that the benefits received will not be repaid.

During the first nine months of 2020, consolidated net sales declined 17.7% compared to the same period last year primarily due to COVID-19.

Due to reduced demand and to enhance employee safety measures, we temporarily suspended production in our U.S.

manufacturing facilities from March 18, 2020 to March 23, 2020, and then again from April 6, 2020 to April 13, 2020.

We also substantially reduced production in our Craigavon, UK facility beginning on April 20, 2020 through the end of the third quarter, and our Thailand, China, and Australia plants are operating in reduced shifts in light of reduced demand.

During the first quarter of 2020, our Asia-Pacific region was primarily impacted by COVID-19 due to government shutdowns in China and the temporary closure of our China plant in late January 2020 to February 9, 2020.

In addition, almost all of our salesforce and administrative employees globally continue to work remotely in accordance with the Company’s ongoing safety measures, as well as any local government orders and “shelter in place” directives in place from time to time.

During the nine months ended October 4, 2020, the Company recognized $6.6 million of lower payroll costs due to credits recognized from various wage support programs, which are recorded as a $6.0 million reduction of selling, general and administrative expenses and a $0.6 million reduction of cost of sales in the Consolidated Condensed Statements of Operations, as the Company believes it is probable that the benefits received will not be repaid.

During the quarter ended October 4, 2020, net sales were $278.6 million compared with net sales of $348.4 million in the third quarter last year.

During the first nine months ended October 4, 2020, net sales were $826.3 million, compared with net sales of $1,003.5 million in the first nine months of last year.

The third quarter and first nine months of 2020 were negatively impacted by the effects of the COVID-19 pandemic as discussed above.

Fluctuations in currency exchange rates had a positive impact on net sales of approximately $5.6 million for the third quarter of 2020 compared to the third quarter of last year, mostly driven by the strengthening of the Euro, British Pound sterling and Australian dollar against the U.S.

For the first nine months of 2020, fluctuations in currency exchange rates had a negative impact on net sales of approximately $1.9 million compared to 2019, mostly driven by the weakening of the Chinese Renminbi and Australian dollar against the U.S.

During the three months ended April 4, 2021, the Company recorded $1.4 million of involuntary severance costs, which are included in selling, general and administrative expenses in the Consolidated Condensed Statements of Operations.

In addition, many of our salesforce and administrative employees globally continue to work remotely in accordance with the Company’s ongoing safety measures, as well as any local government orders and “shelter in place” directives in place from time to time.

In the first quarter of 2021, the Company largely completed its integration of the nora acquisition, and integration of its European and Asia-Pacific commercial areas and determined that it has two operating and reportable segments - namely Americas (“AMS”) and Europe, Africa, Asia and Australia (collectively “EAAA”).

The AMS operating segment is unchanged from prior year and continues to include the United States, Canada and Latin America geographic areas.

See Part I, Item 1, Note 11 of this Quarterly Report on Form 10-Q entitled “Segment Information” for additional information.

The results of operations discussion below also includes segment information.

During the quarter ended April 4, 2021, consolidated net sales were $253.3 million compared with net sales of $288.2 million in the first quarter last year.

The first quarter of 2021 was negatively impacted by the continued effects of the COVID-19 pandemic as discussed above.

Fluctuations in currency exchange rates had a positive impact on net sales of approximately $11.8 million for the first quarter of 2021 compared to the first quarter of last year, mostly driven by the strengthening of the Euro, British Pound sterling and Australian dollar against the U.S.

Goodwill, Intangible Asset and Fixed Asset Impairment

During the first quarter of 2020, we recognized a charge of $121.3 million for the impairment of goodwill and certain intangible assets.

During the first quarter of 2021, there were no indicators of goodwill or intangible asset impairment.

During the first quarter of 2020, the Company recognized a charge of $121.3 million for the impairment of goodwill and certain intangible assets.

See Note 10 entitled “Goodwill and Intangible Assets” of Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.

No additional goodwill or intangible asset impairment charges were recorded during the second or third quarters of 2020.

During the second quarter of 2020, we recognized fixed asset impairment charges of $3.1 million related to certain FLOR design center closures and other projects that were abandoned or indefinitely delayed.

These charges are included in selling, general and administrative expenses in the Consolidated Condensed Statements of Operations.

No additional fixed asset impairment charges were recorded during the third quarter.

Results of Operations

The following table presents, as a percentage of net sales, certain items included in our consolidated condensed statements of operations for the three and nine month periods ended October 4, 2020 and September 29, 2019:

Three Months Ended Nine Months Ended

October 4, 2020 September 29, 2019 October 4, 2020 September 29, 2019

The following table presents, as a percentage of net sales, certain items included in our consolidated condensed statements of operations for the three month periods ended April 4, 2021 and April 5, 2020:

Three Months Ended

April 4, 2021 April 5, 2020

Net sales 100.0 % 100.0 %

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Net income (loss) 2.8 % (35.4) %

Below is information regarding our net sales, and analysis of those results, for the three and nine month periods ended October 4, 2020, and September 29, 2019:

Below is information regarding our consolidated net sales, and analysis of those results, for the three month periods ended April 4, 2021, and April 5, 2020:

Three Months Ended Percentage

October 4, 2020 September 29, 2019

(In thousands)

Americas $ 142,858 $ 195,900 (27.1) %

Europe 92,905 106,115 (12.4) %

Asia-Pacific 42,879 46,337 (7.5) %

Total Net Sales $ 278,642 $ 348,352 (20.0) %

Nine Months Ended Percentage

October 4, 2020 September 29, 2019

April 4, 2021 April 5, 2020

(in thousands)

Americas $ 452,171 $ 563,776 (19.8) %

Europe 259,469 294,830 (12.0) %

Asia-Pacific 114,675 144,941 (20.9) %

Total Net Sales $ 826,315 $ 1,003,547 (17.7) %

For the quarter ended October 4, 2020, net sales decreased $69.7 million (20.0%) versus the comparable period in 2019.

Consolidated net sales $ 253,260 $ 288,169 (12.1) %

For the quarter ended April 4, 2021, consolidated net sales decreased $34.9 million (12.1%) versus the comparable period in 2020, net of positive currency fluctuations of approximately $11.8 million (4.1%).

The sales decline was primarily due to the impact of the COVID-19 pandemic as discussed above.

Currency fluctuations had an approximately $5.6 million (1.6%) positive impact on third quarter 2020 sales compared to the third quarter of 2019.

This currency impact was mostly due to the strengthening of the Euro, British Pound sterling and Australian dollar against the U.S.

On a geographic basis, net sales in the Americas decreased 27.1%, Europe decreased 12.4% and Asia-Pacific decreased 7.5%.

The sales decreases across all geographic regions were, as discussed above, due to the impacts of COVID-19, resulting in lower sales globally.

The sales decrease in the Americas was most significant in the corporate, retail, healthcare, education, leisure, hospitality and transportation market segments, partially offset by increases in the residential/living market segment.

On a market segment basis, the sales decrease in Europe was most significant in the corporate, public buildings and hospitality market segments, partially offset by increases in the healthcare, transportation and leisure market segments.

The sales decrease in Europe was also partially offset by the strengthening of the Euro.

On a market segment basis, the sales decrease in Asia-Pacific was most significant in the corporate, retail, healthcare, and hospitality market segments partially offset by increases in the education, public buildings, transportation and residential/living market segments.

The sales decrease in Asia-Pacific was also partially offset by the strengthening of the Australian dollar.

For the nine months ended October 4, 2020, net sales decreased $177.2 million (17.7%) versus the comparable period in 2019.

The sales decline was primarily due to the impact of the COVID-19 pandemic, as discussed above, and was more pronounced in the second and third quarters as the effects of the pandemic did not begin to impact our business substantially until the end of the first quarter.

Currency fluctuations had an approximately $1.9 million (0.2%) negative impact on net sales for the first nine months of 2020 compared to the first nine months of 2019.

This currency impact was mostly due to the weakening of the Australian dollar and Chinese Renminbi against the U.S.

On a geographic basis, net sales for the first nine months of 2020 in the Americas decreased 19.8%, Europe decreased 12.0% and Asia-Pacific decreased 20.9%.

The sales decreases across all geographic regions were, as discussed above, due to the impacts of COVID-19, resulting in lower sales globally.

The sales decrease in the Americas was seen in the corporate, retail, healthcare, transportation and leisure market segments, partially offset by increases in the education, public buildings and residential/living market segments.

On a market segment basis, the sales decrease in Europe was most significant in the corporate, retail, public buildings, residential/living and hospitality market segments, partially offset by increases in the healthcare, education, leisure and transportation market segments.

The sales decrease in the Asia-Pacific region was impacted by COVID-19 shutdowns and the weakening of the Chinese Renminbi and Australian dollar.

On a market segment basis, the sales decrease in Asia-Pacific was most significant in the corporate, retail, healthcare, public buildings, hospitality and transportation market segments partially offset by increases in the education, leisure, and residential/living market segment.

Currency fluctuations had a positive impact on first quarter 2021 sales compared to the first quarter of 2020 mostly due to the strengthening of the Euro, British Pound sterling and Australian dollar against the U.S.

Cost and Expenses

The following tables present our overall cost of sales and selling, general and administrative expenses for the three and nine month periods ended October 4, 2020, and September 29, 2019:

The following table presents our consolidated cost of sales and selling, general and administrative expenses for the three month periods ended April 4, 2021, and April 5, 2020:

Three Months Ended Percentage

October 4, 2020 September 29, 2019

(In thousands)

Cost of sales $ 176,480 $ 210,608 (16.2) %

Selling, general and administrative expenses 88,161 93,396 (5.6) %

Nine Months Ended Percentage

October 4, 2020 September 29, 2019

April 4, 2021 April 5, 2020

(in thousands)

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Selling, general and administrative expenses 79,302 87,683 (9.6) %

For the quarter ended October 4, 2020, cost of sales decreased $34.1 million (16.2%) compared to the third quarter of 2019, primarily due to lower net sales.

Currency translation had an approximately $3.3 million (1.6%) negative impact on the year-over-year comparison.

As a percentage of net sales, our cost of sales increased to 63.3% for the third quarter of 2020 versus 60.4% for the third quarter of 2019.

For the nine months ended October 4, 2020, cost of sales decreased $96.0 million (15.8%) compared to the first nine months of 2019, primarily due to lower net sales.

Currency translation had an approximately $2.0 million (0.3%) positive impact on the year-over-year comparison.

As a percentage of net sales, our cost of sales increased to 62.0% for the first nine months of 2020 versus 60.7% for the first nine months of 2019.

For the quarter ended October 4, 2020, selling, general and administrative (“SG&A”) expenses decreased $5.2 million (5.6%) versus the comparable period in 2019.

For the quarter ended April 4, 2021, consolidated cost of sales decreased $16.6 million (9.6%) compared to the first quarter of 2020, primarily due to lower net sales and the negative impact of currency fluctuations of approximately $7.6 million (4.3%) on the year-over-year comparison.

As a percentage of net sales, our cost of sales increased to 62.1% for the first quarter of 2021 versus 60.3% for the first quarter of 2020, primarily due to changes in fixed cost absorption driven by lower production volumes due to the impact of COVID-19.

For the quarter ended April 4, 2021, consolidated selling, general and administrative (“SG&A”) expenses decreased $8.4 million (9.6%) versus the comparable period in 2020.

Currency translation had a $2.8 million (3.2%) negative impact on the year-over-year comparison.

SG&A expenses were lower for the third quarter of 2020 primarily due to (1) lower selling expenses of $12.8 million due to lower net sales, (2) $2.5 million of wage support program credits, (3) lower overall payroll costs due to lower performance-based incentive compensation as well as the impact of voluntary and involuntary employee separations and furloughs, which were partially offset by $7.7 million of severance expenses recorded during the quarter, and (4) a $5.0 million fine to settle the SEC matter as referenced in Part II, Item 1, “Legal Proceedings,” of this Quarterly Report on Form 10-Q.

As a percentage of sales, SG&A expenses increased to 31.6% for the third quarter of 2020 versus 26.8% for the third quarter of 2019.

For the nine months ended October 4, 2020, SG&A expenses decreased $35.5 million (12.2%) versus the comparable period in 2019.

Currency translation did not have a significant impact on the year-over-year comparison.

SG&A expenses were lower for the first nine months of 2020 primarily due to (1) lower selling expenses of $38.2 million due to lower net sales, (2) lower stock compensation expense of $7.9 million, (3) $6.0 million of wage support program credits, and (4) lower overall payroll costs due to furloughs and separations offset by $10.6 million of severance expenses recorded year to date, and (5) the SEC settlement expense discussed above.

As a percentage of sales, SG&A expenses increased to 31.0% for the first nine months of 2020 versus 29.0% for the first nine months of 2019.

Other Expense

For the quarter ended October 4, 2020, other expenses increased $1.9 million compared to 2019 primarily due to foreign currency transaction losses recognized during the quarter.

During the nine months ended October 4, 2020, other expenses increased $7.2 million compared to 2019 primarily due to a $4.2 million write-down of damaged raw material inventory as a result of a fire at a storage facility in the second quarter of 2020.

SG&A expenses were lower for the first quarter of 2021 primarily due to (1) lower selling expenses of $8.9 million due to lower net sales, and (2) lower marketing expenses of $1.3 million due to fewer marketing initiatives.

These decreases were partially offset by higher performance-based compensation of $2.4 million as these costs were lower in the prior year due to the impacts of COVID-19.

As a percentage of sales, SG&A expenses increased to 31.3% for the first quarter of 2021 versus 30.4% for the first quarter of 2020.

Interest Expense

For the quarter ended October 4, 2020, interest expense decreased $1.2 million, from $6.6 million in the comparable period last year to $5.4 million, primarily due to lower interest rates and lower debt balances.

For the nine months ended October 4, 2020, interest expense decreased $4.2 million, from $20.2 million in the comparable period last year to $16.0 million, primarily due to lower interest rates.

For the quarter ended April 4, 2021, interest expense increased $1.7 million, from $5.6 million in the comparable period last year to $7.3 million, primarily due to deferred losses on terminated interest rate swaps that were reclassified from accumulated other comprehensive loss into interest expense during the quarter.

Segment Operating Results

As discussed above, in the first quarter of 2021, the Company has two operating and reportable segments – AMS and EAAA.

Segment information presented below for fiscal year 2020 has been restated to conform to the new reportable segment structure.

AMS Segment - Net Sales and Adjusted Operating Income (“AOI”)

The following table presents AMS segment net sales and AOI for the three month periods ended April 4, 2021, and April 5, 2020:

Three Months Ended Percentage Change

April 4, 2021 April 5, 2020

(in thousands)

AMS segment net sales $ 126,967 $ 158,091 (19.7) %

AMS segment AOI (1)

11,913 23,552 (49.4) %

(1) Includes allocation of corporate SG&A expenses

During the first quarter of 2021, net sales in AMS decreased 19.7% versus the comparable period in 2020 primarily due to the continued impacts of COVID-19.

On a market segment basis, the AMS sales decrease was most significant in the corporate, hospitality, public buildings and education market segments, partially offset by increases in the healthcare and consumer residential market segments.

AOI in AMS decreased 49.4% during the first quarter of 2021 primarily due to lower net sales as discussed above.

Lower profit margins due to lower fixed cost leverage in the plant, higher raw material costs and higher freight costs also contributed to the decrease in AOI compared to the prior year period, partially offset by lower selling expenses due to reduced sales.

EAAA Segment - Net Sales and AOI

The following table presents EAAA segment net sales and AOI for the three month periods ended April 4, 2021, and April 5, 2020:

Three Months Ended Percentage Change

April 4, 2021 April 5, 2020

(in thousands)

EAAA segment net sales $ 126,293 $ 130,078 (2.9) %

EAAA segment AOI (1)

8,011 5,798 38.2 %

(1) Includes allocation of corporate SG&A expenses

During the first quarter of 2021, net sales in EAAA decreased 2.9% versus the comparable period in 2020 primarily due to the continued impacts of COVID-19.

Currency fluctuations had an approximately $11.2 million (8.6%) positive impact on EAAA’s first quarter 2021 sales compared to 2020 due to the strengthening of the Euro, British Pound sterling and the Australian dollar against the U.S.

On a market segment basis, the EAAA sales decrease was most significant in the corporate, transportation and hospitality market segments, partially offset by increases in the public building, retail, and education market segments.

AOI in EAAA increased 38.2% during the first quarter of 2021 versus the comparable period in 2020.

Currency fluctuations had an approximately $1.5 million (13.2%) positive impact on AOI for the quarter.

The impact of lower net sales was offset by higher gross profit margins and lower SG&A expenses, comprised of lower selling expenses and lower labor costs due to employee position eliminations.

Liquidity and Capital Resources

At October 4, 2020, we had $103.7 million in cash.

At that date, we had $562.3 million in term loan borrowing, $23.7 million of revolving loan borrowings, and $1.6 million in letters of credit outstanding under our Syndicated Credit Facility.

As of October 4, 2020, we had additional borrowing capacity of $274.7 million under the Syndicated Credit Facility and $9.6 million of borrowing capacity under other credit facilities in place at other non-U.S.

At April 4, 2021, we had $106.9 million in cash.

At that date, we had $270.9 million in term loan borrowing, no revolving loan borrowings, and $1.6 million in letters of credit outstanding under our Syndicated Credit Facility, and we had $300.0 million of Senior Notes outstanding.

As of April 4, 2021, we had additional borrowing capacity of $298.4 million under the Syndicated Credit Facility and $6.0 million of borrowing capacity under other credit facilities in place at other non-U.S.

subsidiaries.

We anticipate that our liquidity is sufficient to meet our obligations for the next 12 months.

Amendment of Credit Facility Due to COVID-19 Impact

On July 15, 2020, we entered into a second amendment to our Syndicated Credit Facility.

See Note 5 entitled “Long-Term Debt” within Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.

The Senior Notes are unsecured and are guaranteed, jointly and severally, by each of the Company’s material domestic subsidiaries, all of which also guarantee the obligations of the Company under its existing Facility.

The Company’s foreign subsidiaries and certain non-material domestic subsidiaries are considered non-guarantors.

Net sales for the non-guarantor subsidiaries were approximately $136 million for the three month period ended April 4, 2021.

Total indebtedness of the non-guarantor subsidiaries was approximately $79 million as of April 4, 2021.

Analysis of Cash Flows

The following table presents a summary of cash flows for the nine month periods ended October 4, 2020 and September 29, 2019, respectively:

Nine Months Ended

October 4, 2020 September 29, 2019

The following table presents a summary of cash flows for the three month periods ended April 4, 2021 and April 5, 2020, respectively:

Three Months Ended

April 4, 2021 April 5, 2020

(in thousands)

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Cash and cash equivalents at end of period $ 106,923 $ 72,651

Cash provided by operating activities was $97.3 million for the nine months ended October 4, 2020, which represents an increase of $7.4 million from the prior year comparable period.

The increase was primarily due to working capital changes, specifically an increase in accounts receivable collections and lower inventories, offset by the change to accounts payable and accrued expenses.

Cash used in investing activities was $47.1 million for the nine months ended October 4, 2020, which represents a decrease of $6.7 million from the prior year comparable period.

The decrease was primarily due to a decrease in capital expenditures from the prior year comparable period.

Cash used in financing activities was $30.2 million for the nine months ended October 4, 2020, which is consistent with the prior year comparable period.

Financing activities for 2020 include higher repayments of revolving loan borrowings offset by lower dividends paid and no repurchases of common stock compared to the prior year comparable period.

Purchase Obligations

We have outstanding purchase obligations of $6.8 million related to expanding our manufacturing capabilities, which we expect to fund during the remainder of 2020.

Cash provided by operating activities was $24.9 million for the three months ended April 4, 2021, which represents an increase of $40.6 million compared with cash used in operating activities in the prior year comparable period.

The increase was primarily due to variable compensation payouts in 2021 related to 2020 performance that were greatly reduced versus the payouts that occurred in 2020 related to 2019 performance.

Working capital changes also contributed positively, specifically increases in accounts payable and accrued expenses, offset by higher inventories and higher prepaid expenses due primarily to a build-up of inventory due to higher expected demand.

Accounts receivable collections also contributed to the increase in working capital during 2021 despite lower net sales due to the impacts of COVID-19.

Cash used in investing activities was $5.2 million for the three months ended April 4, 2021, which represents a decrease of $17.1 million from the prior year comparable period.

The decrease was primarily due to a decrease in capital expenditures from the prior year comparable period due to reduced capital investment as a result of the impacts of COVID-19.

Cash used in financing activities was $13.0 million for the three months ended April 4, 2021, which represents a decrease of $45.5 million compared with cash provided by financing activities in the prior year comparable period.

Financing activities for 2021 include lower revolving loan borrowings offset by higher repayments of term loan and revolving loan debt.

Forward-Looking Statement on Impact of COVID-19

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We believe the most significant elements of uncertainty are (1) the intensity and duration of the impact on construction, renovation, and remodeling;

(2) corporate, government, and consumer spending levels and sentiment;

(2) corporate, government, and consumer spending levels and sentiment including but not limited to when and how employees will be required to work from their office versus working from home;

and (3) the ability of our sales channels, supply chain, manufacturing, and distribution partners to continue operating through disruptions.

Any or all of these factors could negatively impact our financial position, results of operations, cash flows, and outlook.

As the impact of the COVID-19 pandemic continues to affect companies with global operations, we anticipate that our business and results in the fourth quarter of 2020 will continue to be adversely affected, and the timeline and pace of recovery is uncertain.

While we are unable to predict with certainty, we anticipate continued year-over-year declines in revenue and operating income in the fourth quarter of fiscal year 2020, and perhaps during quarterly periods thereafter.

As the impact of the COVID-19 pandemic continues to affect companies with global operations, we anticipate that our business and results in the second quarter of 2021 will continue to be adversely affected, and the timeline and pace of recovery is uncertain.

While we are unable to predict with certainty, we anticipate revenue and operating income growth in the second quarter of fiscal year 2021 compared with the second quarter of 2020.

The Company has implemented several cost reduction and avoidance initiatives to align with anticipated customer demand, including a voluntary employee separation program, temporary employee furloughs and other time-and-pay reduction programs, involuntary employee separations where necessary to streamline roles and responsibilities, and various other cost reducing initiatives.

The Company has also suspended merit-based salary increases, as well as its 401(k) and Non-Qualified Savings Plan (NSP) matching contributions, and will benefit from lower than originally anticipated performance-based compensation and variable compensation for 2020.

In addition, the Company has reduced its capital spending plans.

Starting in January 2021 the Company may resume its 401(k) and NSP matching contributions on a prospective basis, as well as customary merit-based salary increases for fiscal year 2021.

The Company will also need to establish new performance-based compensation and variable compensation targets for fiscal year 2021.

All of these items will increase costs compared to fiscal year 2020.

Cash flows from operations, cash and cash equivalents, and other sources of liquidity are expected to be available and sufficient to meet foreseeable cash requirements.

However, the Company’s cash flows from operations can be affected by numerous factors including the uncertainty of COVID-19 and its impact on global operations, raw material availability and cost, demand for our products, and other factors described in “Risk Factors” included in Part II, Item 1A of this Quarterly Report on Form 10-Q.

As of October 25, 2020, the consolidated backlog of orders was approximately $189.4 million.

As disclosed in our Annual Report on Form 10-K for the fiscal year ended December 29, 2019, backlog was approximately $177.8 million as of February 9, 2020.

As of April 25, 2021, the consolidated backlog of orders was approximately $202.9 million.

As disclosed in our Annual Report on Form 10-K for the fiscal year ended January 3, 2021, backlog was approximately $177.7 million as of February 7, 2021.

Disruptions in supply and distribution chains, global travel restrictions and government shelter in place orders due to the impact of COVID-19 have resulted in delays of construction projects and flooring installations in many regions worldwide.

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