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Item 2. Management’s Discussion and Analysis

2021-08-10 compared with 2021-05-11 · 111 added, 70 removed, 76 unchanged (70% of the section changed)

1 unchanged sentence

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.

Our discussions here focus on our results during the quarter and six months ended, or as of, July 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 three month period ended April 4, 2021 includes 13 weeks, and the three month period ended April 5, 2020 includes 14 weeks.

The six-month period ended July 4, 2021 includes 26 weeks, and the six-month period ended July 5, 2020 includes 27 weeks.

The three-month periods ended July 4, 2021 and July 5, 2020 both include 13 weeks.

Forward-Looking Statements

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Impact of the COVID-19 Pandemic

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.

In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic, and the virus continues to impact 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.

The duration of the pandemic will ultimately determine the extent to which our operations are impacted.

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 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 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.

During the second quarter of 2021, the COVID-19 pandemic had less of an impact on our overall global operations and financial results as COVID-19 vaccination rates increased, COVID-19 related restrictions loosened, and certain countries began to experience a rebound in economic activity.

Our global supply chain and manufacturing experienced increased impacts of COVID-19 in the quarter.

These impacts included raw material shortages, raw material cost increases, higher freight costs, shipping delays, and labor shortages - particularly in the United States.

These impacts to our supply chain and manufacturing increased our costs and adversely affected our gross margins.

During the second quarter of 2021, consolidated net sales increased 13.6% compared to the same period last year.

Higher sales are primarily in the corporate office and retail market segments.

During the second quarter of 2021, we began a phased re-opening of our corporate headquarters and global administrative offices and our salesforce and administrative staff are actively working in these locations in accordance with the Company’s ongoing safety measures, as well as any local government orders and directives which remain very fluid.

During the first six months of 2021, the COVID-19 pandemic continued to impact our global operations, as consolidated net sales increased 0.1% compared to the same period last year.

Net sales for the first six months of 2021 were impacted by lower sales in the corporate office market segment during the first quarter of 2021.

During the six months ended July 4, 2021, the Company recorded $0.9 million of net severance costs in connection with its programs to mitigate the impact of the COVID-19 pandemic as discussed above, which are included in selling, general and administrative expenses in the Consolidated Condensed Statements of Operations.

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”).

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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.

During the quarter ended July 4, 2021, consolidated net sales were $294.8 million compared with net sales of $259.5 million in the second quarter last year.

During the first six months of 2021, consolidated net sales were $548.0 million compared to $547.7 million in the first six months of last year.

Higher net sales during the second quarter of 2021, primarily in the corporate office market segment was due to higher corporate spending and reinvestment.

As discussed above, the COVID-19 pandemic continued to impact the first six months of 2021.

Fluctuations in currency exchange rates had a positive impact on net sales of approximately $13.1 million for the second quarter of 2021 and a positive impact of $25.0 million for the first six months of 2021 compared to the second quarter and first six months of last year, respectively, mostly driven by the strengthening of the Euro, British Pound sterling, Australian dollar and Chinese Renminbi against the U.S.

Goodwill, Intangible Asset and Fixed Asset Impairment

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

During the first six months 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.

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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 month periods ended April 4, 2021 and April 5, 2020:

Three Months Ended

April 4, 2021 April 5, 2020

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

Three Months Ended Six Months Ended

July 4, 2021 July 5, 2020 July 4, 2021 July 5, 2020

Net sales 100.0 % 100.0 % 100.0 % 100.0 %

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Net income (loss) 5.2 % 1.8 % 4.1 % (17.8) %

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:

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

Three Months Ended Percentage

April 4, 2021 April 5, 2020

(in thousands)

Change Six Months Ended Percentage

July 4, 2021 July 5, 2020 July 4, 2021 July 5, 2020

(in thousands) (in thousands)

Consolidated net sales $ 294,785 $ 259,504 13.6 % $ 548,045 $ 547,673 0.1 %

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 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.

For the quarter ended July 4, 2021, consolidated net sales increased $35.3 million (13.6%) versus the comparable period in 2020, including positive currency fluctuations of approximately $13.1 million (5.1%).

The sales increase was primarily due to higher net sales in the corporate, retail, healthcare, education and transportation market segments.

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

For the six months ended July 4, 2021, consolidated net sales increased $0.4 million (0.1%) versus the comparable period in 2020, including positive currency fluctuations of approximately $25.0 million (4.6%).

The sales increase was primarily due to higher sales in the retail and transportation market segments partially offset by decreases in the hospitality and corporate market segments.

Currency fluctuations had a positive impact on the first six months of 2021 sales compared to the same period last year mostly due to the strengthening of the Euro, British Pound sterling, Australian dollar and Chinese Renminbi against the U.S.

Cost and Expenses

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:

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

Three Months Ended Percentage

April 4, 2021 April 5, 2020

(in thousands)

Change Six Months Ended Percentage

July 4, 2021 July 5, 2020 July 4, 2021 July 5, 2020

(in thousands) (in thousands)

Cost of sales $ 185,793 $ 162,210 14.5 % $ 343,015 $ 336,068 2.1 %

Selling, general and administrative expenses 79,830 80,058 (0.3) % 159,132 167,741 (5.1) %

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.

For the quarter ended July 4, 2021, consolidated cost of sales increased $23.6 million (14.5%) compared to the second quarter of 2020, primarily due to higher net sales and the negative impact of currency fluctuations of approximately $8.8 million (5.4%) on the year-over-year comparison.

As a percentage of net sales, our cost of sales increased to 63.0% for the second quarter of 2021 versus 62.5% for the second quarter of 2020, primarily due to price increases for certain raw materials.

For the six months ended July 4, 2021, consolidated cost of sales increased $6.9 million (2.1%) versus the comparable period in 2020, primarily due to higher net sales and the negative impact of currency fluctuations of approximately $16.4 million (4.9%) on the year-over-year comparison.

As a percentage of net sales, our cost of sales increased to 62.6% for the first six months of 2021 versus 61.4% for the first six months of 2020, primarily due to price increases for certain raw materials.

For the quarter ended July 4, 2021, consolidated selling, general and administrative (“SG&A”) expenses decreased $0.2 million (0.3%) versus the comparable period in 2020.

Currency translation had a $2.9 million (3.6%) negative impact on the year-over-year comparison.

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.

SG&A expenses were lower for the second quarter of 2021 primarily due to (1) lower asset impairment and exit activity costs of $5.0 million compared to the prior year period as fiscal 2020 included one-time costs to exit certain FLOR design center locations and (2) lower severance costs of $3.5 million due to employee separations in the prior year period to mitigate the impacts of COVID-19.

These decreases were partially offset by higher labor costs in the second quarter of 2021 as performance-based compensation costs were lower in the prior year period due to the impacts of COVID-19.

As a percentage of sales, SG&A expenses decreased to 27.1% for the second quarter of 2021 versus 30.9% for the second quarter of 2020.

For the six months ended July 4, 2021, consolidated SG&A expenses decreased $8.6 million (5.1%) versus the comparable period in 2020.

Currency translation had a $5.7 million (3.4%) negative impact on the year-over-year comparison.

SG&A expenses were lower for the first six months of 2021 primarily due to (1) lower asset impairment and exit activity costs of $4.7 million compared to the prior year period as fiscal 2020 included one-time costs to exit certain FLOR design center locations, (2) lower severance costs of $2.0 million due to the prior year period impacts of COVID-19 as discussed above, and (3) lower professional fees of $4.2 million and lower marketing and other one-time costs of $2.7 million.

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

As a percentage of sales, SG&A expenses decreased to 29.0% for the first six months of 2021 versus 30.6% for the first six months of 2020.

Interest Expense

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.

For the quarter ended July 4, 2021, interest expense increased $2.3 million, from $5.0 million in the comparable period last year to $7.3 million.

For the six months ended July 4, 2021, interest expense increased $3.9 million, from $10.6 million in the comparable period last year to $14.5 million.

The increase in both the three and six months ended July 4, 2021 was primarily due to higher fixed-rate interest expense on the senior notes debt, which replaced variable-rate debt under the credit facility, and deferred losses on terminated interest rate swaps that were reclassified from accumulated other comprehensive loss into interest expense during the respective periods.

Other Expense

Other expenses decreased $4.5 million and $5.3 million during the three and six months ended July 4, 2021, respectively, compared to 2020 primarily due to a $4.2 million write-down of damaged raw material inventory in 2020, which resulted from a fire at a leased storage facility.

Segment Operating Results

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

As discussed above, 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)

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

Three Months Ended Percentage Change Six Months Ended Percentage Change

July 4, 2021 July 5, 2020 July 4, 2021 July 5, 2020

(in thousands) (in thousands)

AMS segment net sales $ 156,665 $ 151,222 3.6 % $ 283,632 $ 309,313 (8.3) %

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(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.

Excludes non-recurring items related to goodwill and intangible asset impairment charges, purchase accounting amortization, restructuring, asset impairment, severance and other costs.

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

During the second quarter of 2021, net sales in AMS increased 3.6% versus the comparable period in 2020 primarily due to higher sales in the retail, healthcare and transportation market segments, partially offset by decreases in the hospitality and public buildings market segments.

During the first six months of 2021, net sales in AMS decreased 8.3% 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, public buildings and hospitality market segments, partially offset by increases in the retail, transportation and consumer residential market segments.

AOI in AMS decreased 11.9% during the second quarter of 2021 primarily due to higher raw material costs, higher freight costs and higher overtime costs compared to prior year.

Higher SG&A costs due to higher performance-based compensation also contributed to the decrease in AOI.

AOI in AMS decreased 30.5% during the first six months 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, higher freight costs and higher overtime costs as well as higher performance-based compensation also contributed to the decrease in AOI compared to the prior year period.

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)

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

Three Months Ended Percentage Change Six Months Ended Percentage Change

July 4, 2021 July 5, 2020 July 4, 2021 July 5, 2020

(in thousands) (in thousands)

EAAA segment net sales $ 138,120 $ 108,282 27.6 % $ 264,413 $ 238,360 10.9 %

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(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.

Excludes non-recurring items related to goodwill and intangible asset impairment charges, purchase accounting amortization, restructuring, asset impairment, severance and other costs.

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

During the second quarter of 2021, net sales in EAAA increased 27.6% versus the comparable period in 2020.

Currency fluctuations had an approximately $12.2 million (11.3%) positive impact on EAAA’s second quarter 2021 sales compared to 2020 due to the strengthening of the Euro, British Pound sterling, Australian dollar and the Chinese Renminbi against the U.S.

On a market segment basis, the EAAA sales increase was most significant in the corporate, retail, education and public buildings market segments.

During the first six months of 2021, net sales in EAAA increased 10.9% versus the comparable period in 2020.

Currency fluctuations had an approximately $23.6 million (9.9%) positive impact on EAAA’s first six months of 2021 sales compared to 2020 due to the strengthening of the Euro, British Pound sterling, Australian dollar and the Chinese Renminbi against the U.S.

On a market segment basis, the EAAA sales increase was most significant in the public buildings, retail and education market segments.

AOI in EAAA increased 182.2% during the second quarter of 2021 versus the comparable period in 2020.

Currency fluctuations had an approximately $1.4 million (12.2%) 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.

The impact of higher net sales and higher gross profit margins contributed to the increase in AOI.

AOI in EAAA increased 92.6% during the first six months of 2021 versus the comparable period in 2020.

Currency fluctuations had an approximately $3.0 million (12.8%) positive impact on AOI for the six-month period of 2021.

The impact of higher net sales and higher gross profit margins partially offset by higher SG&A expenses, comprised of higher performance-based compensation and lower government wage support programs, contributed to the increase in AOI.

Liquidity and Capital Resources

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

At July 4, 2021, we had $102.4 million in cash.

At that date, we had $264.6 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.

As of July 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.

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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.

Net sales for the non-guarantor subsidiaries were approximately $148 million and $284 million for the three and six-month periods ended July 4, 2021, respectively.

Total indebtedness of the non-guarantor subsidiaries was approximately $65 million and $88 million as of July 4, 2021 and January 3, 2021, respectively.

Analysis of Cash Flows

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

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

Six Months Ended

July 4, 2021 July 5, 2020

(in thousands)

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Cash and cash equivalents at end of period $ 102,372 $ 91,844

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.

Cash provided by operating activities was $35.1 million for the six months ended July 4, 2021, which represents an increase of $2.7 million from 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.

The lower variable compensation payouts in 2021 were offset by a greater use of cash from working capital.

Specifically, increases in accounts payable and accrued expenses that contributed positively to the change in working capital were offset by higher inventories and higher prepaid expenses attributable primarily to a build-up of inventory due to increased customer demand.

Increases in accounts receivable as a result of higher net sales also contributed to the change in working capital during the year.

Cash used in investing activities was $12.1 million for the six months ended July 4, 2021, which represents a decrease of $23.6 million from the prior year comparable period.

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

Cash used in financing activities was $21.3 million for the six months ended July 4, 2021, which represents a decrease of $36.9 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.

Lower dividend payments in 2021 compared with the prior year comparable period also contributed to the change.

Forward-Looking Statement on Impact of COVID-19

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(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.

(3) new and renewed government mandated lockdowns, quarantine and other procedures in response to resurgences of COVID-19 cases and variants of the virus;

and (4) the ability of our sales channels, supply chain, manufacturing, suppliers, freight providers 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 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.

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

We anticipate revenue growth in the third quarter of fiscal year 2021 compared with the third quarter of 2020.

We are also anticipating continued impacts to our global supply chain and manufacturing operations.

These impacts are anticipated to include significant cost increases in our raw materials globally and continued labor shortages – particularly in the United States.

The impacts may also potentially include raw material shortages, higher freight costs, shipping delays, and other disruption.

These impacts to our supply chain and manufacturing will increase our costs and adversely affect our gross margins, they may inhibit our ability to manufacture and ship product timely, and at times they may inhibit our ability to meet customer demands and expectations.

We also plan to continue evaluating our cost structure and global manufacturing footprint to identify and activate opportunities to decrease costs and optimize our global cost structure.

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, and demand for our products.

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

As of July 25, 2021, the consolidated backlog of orders was approximately $231.8 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.

1 unchanged sentence

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