NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of CIRCOR International, Inc. ("CIRCOR", the "Company", "us", "we" or "our") have been prepared according to the rules and regulations of the United States ("U.S.") Securities and Exchange Commission (“SEC”) for interim reporting, along with accounting principles generally accepted in the U.S ("GAAP"). In the opinion of management, the unaudited, condensed consolidated financial statements reflect all adjustments (consisting only of normal and recurring items) necessary for a fair statement of the Company’s results of operations, financial position and cash flows for the periods presented. We prepare our interim financial information using the same accounting principles we use for our annual audited consolidated financial statements. Certain information and note disclosures normally included in the annual audited consolidated financial statements have been condensed or omitted in accordance with SEC rules. We believe that the disclosures made in our condensed consolidated financial statements and the accompanying notes are adequate to make the information presented not misleading.
The condensed consolidated balance sheet as of December 31, 2019 was derived from our audited consolidated financial statements as of that date but does not contain all of the footnote disclosures from the annual financial statements. We recommend that the financial statements included in our Quarterly Report on Form 10-Q be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2019.
We operate and report financial information using a fiscal year ending December 31. The data periods contained within our Quarterly Reports on Form 10-Q reflect the results of operations for the 13-week, 26-week and 39-week periods which generally end on the Sunday nearest the calendar quarter-end date. Operating results for the three months ended March 29, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020 or any future quarter.
We have reclassified certain prior year amounts, including the results of discontinued operations and reportable segment information, to conform to the current year presentation. Unless otherwise indicated, all financial information and statistical data included in these notes to our condensed consolidated financial statements relate to our continuing operations, with dollar amounts expressed in thousands (except per-share data).
COVID-19
In March 2020, the World Health Organization declared the outbreak of COVID-19, which continues to spread throughout the
U.S. and the world, as a pandemic. The outbreak is having an impact on the global economy, resulting in rapidly changing
market and economic conditions. As of March 29, 2020 and through the date of this filing, the Company experienced a significant decline in its market capitalization below its consolidated book value. As a result, management concluded that there was a goodwill and an intangible asset impairment triggering event for the Company in the first quarter of 2020. Through its impairment analysis, the Company determined that goodwill in its Industrial segment was impaired and recognized a $116.2 million impairment. See Note 7, Goodwill and Intangible Assets, for additional information on the goodwill impairment.
The Company expects the effects of the COVID-19 pandemic to continue to negatively impact its results of operations, cash flows and financial position. The Company’s condensed consolidated financial statements presented herein reflect management's estimates and assumptions regarding the effects of COVID-19 as of the date of the condensed consolidated financial statements.
(2) Summary of Significant Accounting Policies
The significant accounting policies used in preparation of these condensed consolidated financial statements for the three months ended March 29, 2020 are consistent with those discussed in Note 2 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2019, except as updated below with respect to newly adopted accounting standards.
The preparation of these financial statements in conformity with GAAP requires management to make estimates and
assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying disclosures.
Some of the more significant estimates, which are impacted by management's estimates and assumptions regarding the effects of COVID-19, relate to recoverability of goodwill and indefinite-lived trade names, estimated total costs for ongoing long-term contracts accounted for as performance obligations where transfer of control occurs over time, inventory valuation, share-based compensation, amortization and impairment of long-lived assets, income taxes, penalty accruals for late shipments, other asset valuations, and product warranties. While management believes that the estimates and assumptions used in the preparation of the financial statements are appropriate, actual future results as estimated in the current period could differ materially from those estimates.
New Accounting Standards
In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-13, Financial Instruments - Credit Losses (ASC 326): Measurement of Credit Losses on Financial Instruments. The new guidance, referred to as the current expected credit loss (“CECL”) model, requires the measurement of expected credit losses for financial assets (e.g., accounts receivable) held at the reporting date based on historical experience, current economic conditions, and reasonable and supportable forecasts which generally result in the more timely recognition of losses. The adoption of this new guidance on January 1, 2020 did not have a material impact on our condensed consolidated financial statements.
(3) Discontinued Operations and Assets Held for Sale
Discontinued Operations
During the quarter ended September 29, 2019, the Company completed the disposition of its long-cycle upstream oil & gas Engineered Valves ("EV") business and received approval from its Board of Directors to dispose of the Company’s Distributed Valves ("DV") business in a transaction or transfer to a third-party purchaser or purchasers. The Company is actively marketing the DV business for sale and anticipates completing the disposition within the twelve month window from when the business was first classified as held for sale. The business continued to meet the criteria to be classified as held for sale as of March 29, 2020. These actions were consistent with the Company's strategic shift away from upstream oil and gas to focus on more attractive end markets. The EV and DV businesses meet the criteria of discontinued operations and are presented as such in the condensed consolidated financial statements for all periods presented.
The following table presents the summarized components of loss from discontinued operations for the DV business for the three months ended March 29, 2020 and March 31, 2019, and for the EV business for the three months ended March 31, 2019 (in thousands):
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
March 29, 2020
|
|
March 31, 2019
|
Net revenues
|
$
|
6,237
|
|
|
$
|
31,540
|
|
Cost of revenues
|
11,358
|
|
|
32,085
|
|
Gross loss
|
(5,121
|
)
|
|
(545
|
)
|
Selling, general and administrative expenses
|
3,139
|
|
|
5,466
|
|
Special and restructuring (recoveries) charges, net
|
(1,328
|
)
|
|
26
|
|
Operating loss
|
(6,932
|
)
|
|
(6,037
|
)
|
Other (income) expense:
|
|
|
|
Interest (income) expense, net
|
(7
|
)
|
|
86
|
|
Other expense, net
|
5,410
|
|
|
235
|
|
Total other expense, net
|
5,403
|
|
|
321
|
|
Loss from discontinued operations, pre tax
|
(12,335
|
)
|
|
(6,358
|
)
|
Benefit from income tax
|
(21,497
|
)
|
|
(630
|
)
|
Income (loss) from discontinued operations, net of tax
|
$
|
9,162
|
|
|
$
|
(5,728
|
)
|
Assets Held for Sale
During the quarter ended March 29, 2020, the Company completed the sale of its non-core Instrumentation and Sampling ("I&S") business. See Note 5, Special and Restructuring Recoveries, net for additional information on this divestiture. As of December 31, 2019, the I&S business is reported as "held for sale" within the current assets and current liabilities section of our condensed consolidated balance sheet.
The following table presents the balance sheet information for assets and liabilities held for sale as of March 29, 2020 and December 31, 2019 by business (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 29, 2020
|
|
December 31, 2019
|
|
DV
|
|
DV
|
I&S
|
Total
|
Trade accounts receivable, net
|
$
|
1,434
|
|
|
$
|
467
|
|
$
|
9,935
|
|
$
|
10,402
|
|
Inventories
|
46,353
|
|
|
55,521
|
13,878
|
69,399
|
Prepaid expenses and other current assets
|
2,382
|
|
|
2,867
|
616
|
3,483
|
Property, plant, and equipment, net
|
5,824
|
|
|
6,742
|
6,409
|
13,151
|
Goodwill
|
—
|
|
|
—
|
|
91,492
|
91,492
|
Deferred tax asset
|
606
|
|
|
778
|
|
1,089
|
|
1,867
|
|
Other assets
|
6,980
|
|
|
4,793
|
6,363
|
11,156
|
Valuation adjustment on classification to assets held for sale
|
(36,962
|
)
|
|
(39,757
|
)
|
—
|
|
(39,757
|
)
|
Total assets held for sale
|
$
|
26,617
|
|
|
$
|
31,411
|
|
$
|
129,782
|
|
$
|
161,193
|
|
|
|
|
|
|
|
Accounts payable
|
$
|
8,314
|
|
|
$
|
8,708
|
|
$
|
5,997
|
|
$
|
14,705
|
|
Accrued and other current liabilities
|
5,095
|
|
|
5,834
|
|
2,192
|
|
8,026
|
|
Deferred income taxes
|
228
|
|
|
638
|
|
151
|
|
789
|
|
Other liabilities
|
12,980
|
|
|
13,931
|
|
5,838
|
|
19,769
|
|
Total liabilities held for sale
|
$
|
26,617
|
|
|
$
|
29,111
|
|
$
|
14,178
|
|
$
|
43,289
|
|
(4) Revenue Recognition
Our revenue is derived from a variety of contracts. A significant portion of our revenues are from contracts associated with the design, development, manufacture or modification of highly engineered, complex and severe environment products with customers who are either in or service the aerospace, defense and industrial markets. Our contracts within the defense markets are primarily with U.S. military customers. These contracts typically are subject to the Federal Acquisition Regulations (FAR). We account for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. Contracts may be modified to account for changes in contract specifications and requirements. Contract modifications exist when the modification either creates new, or changes the existing, enforceable rights and obligations. Contract modifications for goods or services that are not distinct from the existing contract are accounted for as if they were part of that existing contract.
Revenue is recognized from products and services transferred to customers over-time using an input measure (e.g., costs incurred to date relative to total estimated costs at completion, known as the “cost-to-cost” method) to measure progress. We generally use the cost-to-cost measure of progress for our contracts because it best depicts the transfer of control to the customer which occurs as we incur costs on our contracts. Under the cost-to-cost measure of progress, revenues are recorded proportionally as costs are incurred. Contract costs include labor, materials and subcontractors’ costs, other direct costs and an allocation of overhead, as appropriate.
As of March 29, 2020, we had $421.2 million of revenue related to remaining unfulfilled performance obligations. We expect to recognize approximately 74.0% of our remaining performance obligations as revenue during the remainder of 2020, 19.0% in 2021, and the remaining 7.0% thereafter.
In order to determine revenue recognized in the period from contract liabilities, we first allocate revenue to the individual contract liabilities balances outstanding at the beginning of the period until the revenue exceeds that balance. If additional advances are received on those contracts in subsequent periods, we assume all revenue recognized in the reporting period first applies to the beginning contract liabilities as opposed to a portion applying to the new advances for the period.
The impact of adjustments in contract estimates on our operating earnings can be reflected in either operating expenses or revenue. There have been no significant changes in estimates in the three months ended March 29, 2020.
Disaggregation of Revenue. The following tables present our revenue disaggregated by major product line and geographical market (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
March 29, 2020
|
|
March 31, 2019
|
Aerospace & Defense Segment
|
|
|
|
|
Commercial Aerospace & Other
|
$
|
26,320
|
|
|
$
|
28,706
|
|
|
Defense
|
39,173
|
|
|
32,534
|
|
|
Total
|
65,493
|
|
|
61,240
|
|
Industrial Segment
|
|
|
|
|
Valves
|
54,190
|
|
|
92,303
|
|
|
Pumps
|
72,530
|
|
|
85,312
|
|
|
Total
|
126,720
|
|
|
177,615
|
|
Net Revenue
|
$
|
192,213
|
|
|
$
|
238,855
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
March 29, 2020
|
|
March 31, 2019
|
Aerospace & Defense Segment
|
|
|
|
|
EMEA
|
$
|
14,806
|
|
|
$
|
17,732
|
|
|
North America
|
45,988
|
|
|
37,393
|
|
|
Other
|
4,699
|
|
|
6,115
|
|
|
Total
|
65,493
|
|
|
61,240
|
|
Industrial Segment
|
|
|
|
|
EMEA
|
57,006
|
|
|
75,743
|
|
|
North America
|
43,922
|
|
|
73,847
|
|
|
Other
|
25,792
|
|
|
28,025
|
|
|
Total
|
126,720
|
|
|
177,615
|
|
Net Revenue
|
$
|
192,213
|
|
|
$
|
238,855
|
|
Contract Balances. The following table presents contract assets and contract liabilities balances as of March 29, 2020 and December 31, 2019 as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 29, 2020
|
|
December 31, 2019
|
|
Increase/(Decrease)
|
Trade accounts receivables, net
|
$
|
116,514
|
|
|
$
|
125,422
|
|
|
$
|
(8,908
|
)
|
Contract assets (1)
|
63,826
|
|
|
52,781
|
|
|
11,045
|
|
Contract liabilities (2)
|
39,850
|
|
|
35,007
|
|
|
4,843
|
|
|
|
|
|
|
|
(1) Recorded within prepaid expenses and other current assets.
|
(2) Recorded within accrued expenses and other current liabilities.
|
Trade accounts receivable, net decreased by $8.9 million as of March 29, 2020, primarily due to the timing of cash collections during the three months ended March 29, 2020.
Contract assets increased by $11.0 million, or 20.9%, to $63.8 million primarily driven by unbilled revenue recognized during the three months ended March 29, 2020 within our Defense business (+11%) and Refinery Valves business (+7%).
Contract liabilities increased by $4.8 million, or 13.8%, to $39.8 million as of March 29, 2020, primarily driven by timing of revenue recognized over time during the three months ended March 29, 2020. The increase was driven by our Defense business (+11%) and our EMEA Pumps business (+3%).
(5) Special and Restructuring Recoveries, net
Special and restructuring recoveries, net
Special and restructuring recoveries, net consist of restructuring costs (including costs to exit a product line or program) as well as certain special charges such as significant litigation settlements and other transactions (charges or recoveries) that are described below. All items described below are recorded in Special and restructuring recoveries, net on our condensed consolidated statements of (loss) income. Certain other special and restructuring charges such as inventory related items may be recorded in cost of revenues given the nature of the item.
The table below summarizes the amounts recorded within the special and restructuring recoveries, net line item on the condensed consolidated statements of (loss) income for the three months ended March 29, 2020 and March 31, 2019 (in thousands):
|
|
|
|
|
|
|
|
|
|
Special & restructuring (recoveries) charges, net
|
|
Three Months Ended
|
|
March 29, 2020
|
|
March 31, 2019
|
Special recoveries, net
|
$
|
(45,175
|
)
|
|
$
|
(8,200
|
)
|
Restructuring charges, net
|
2,883
|
|
|
358
|
|
Total special and restructuring recoveries, net
|
$
|
(42,292
|
)
|
|
$
|
(7,842
|
)
|
Special recoveries, net
The table below details the special recoveries, net recorded for the three months ended March 29, 2020 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Special & restructuring (recoveries) charges, net
|
|
Three Months Ended
|
|
Aerospace & Defense
|
|
Industrial
|
|
Corporate
|
|
Total
|
I&S divestiture
|
$
|
—
|
|
|
$
|
(53,202
|
)
|
|
$
|
—
|
|
|
$
|
(53,202
|
)
|
Professional fees to review and respond to an unsolicited tender offer to acquire the Company
|
—
|
|
|
—
|
|
|
2,355
|
|
|
2,355
|
|
Amortization of debt issuance fee
|
—
|
|
|
—
|
|
|
3,541
|
|
|
3,541
|
|
Other special charges
|
—
|
|
|
101
|
|
|
2,030
|
|
|
2,131
|
|
Total special (recoveries) charges, net
|
$
|
—
|
|
|
$
|
(53,101
|
)
|
|
$
|
7,926
|
|
|
$
|
(45,175
|
)
|
I&S divestiture: The Company recorded net special recoveries of $(53.2) million for the three months ended March 29, 2020, attributed to the sale of our I&S business in January 2020. During the quarter ended March 29, 2020, we received net cash proceeds of $169.8 million and recognized a gain on sale of $54.6 million. The Industrial segment incurred $1.4 million of operating expenses associated with the I&S business for the three months ended March 29, 2020, which are presented net within the I&S divestiture line.
Professional fees: The Company incurred special charges of $2.4 million for the three months ended March 29, 2020, associated with the review and response to an unsolicited tender offer to acquire the Company and related corporate governance actions.
Amortization of debt issuance fee: The Company incurred special charges of $3.5 million for the three months ended March 29, 2020 comprised of $3.2 million related to accelerated amortization of capitalized debt issuance costs, and $0.3 million related to the significant debt pay down from the sale of the I&S business. See Note 9, Financing Arrangements, for additional information on our debt repricing.
Other special charges: The Company incurred special charges of $2.1 million for the three months ended March 29, 2020, associated with professional fees for projects to streamline operations and reduce costs ($1.2 million), costs of a cyber incident ($0.7 million) and charges related to previous business sales ($0.2 million).
The table below details the special recoveries, net recorded for the three months ended March 31, 2019 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Special (recoveries) charges, net
|
|
For the three months ended March 29, 2019
|
|
|
Aerospace & Defense
|
|
Industrial
|
|
Corporate
|
|
Total
|
Reliability Services divestiture
|
|
$
|
—
|
|
|
$
|
(10,282
|
)
|
|
$
|
—
|
|
|
$
|
(10,282
|
)
|
Reliability Services 2019 operating expenses
|
|
—
|
|
|
1,450
|
|
|
—
|
|
|
1,450
|
|
Rosscor divestiture related charges
|
|
—
|
|
|
153
|
|
|
—
|
|
|
153
|
|
Trapped cost
|
|
—
|
|
|
—
|
|
|
479
|
|
|
479
|
|
Total special (recoveries) charges, net
|
|
$
|
—
|
|
|
$
|
(8,679
|
)
|
|
$
|
479
|
|
|
$
|
(8,200
|
)
|
Reliability Services divestiture: In January 2019, the Company sold its Reliability Services business. The Company recorded a 10.3 million gain during the first quarter of 2019 in connection with the divestiture.
Reliability Services 2019 operating expenses: The Company classified the 2019 operating expenses of the Reliability Services business as special given the business was held for sale as of 2018 and was sold in January 2019.
Rosscor divestiture: In November, 2018, the Company sold its Rosscor B.V. and SES International B.V. subsidiaries (the “Delden Business”) for a nominal amount. The Delden Business was the Company's Netherlands-based fluid handling skids and systems business, primarily for the oil and gas end market. During the first quarter of 2019, the Company recorded a $0.2 million charge related to the divestiture.
Trapped cost: With the separation of discontinued operations, there is an element of trapped cost from corporate allocations that have been reclassified to corporate.
Restructuring charges, net
The tables below outline the charges associated with restructuring actions recorded for the three months ended March 29, 2020 and March 31, 2019 (in thousands). A description of the restructuring actions is provided in the section titled "Restructuring Programs Summary" below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring charges, net
|
|
As of and for the three months ended March 29, 2020
|
|
Aerospace & Defense
|
|
Industrial
|
|
Corporate
|
|
Total
|
Facility related expenses
|
$
|
10
|
|
|
$
|
1,632
|
|
|
$
|
—
|
|
|
$
|
1,642
|
|
Employee related expenses, net
|
—
|
|
|
1,058
|
|
|
183
|
|
|
1,241
|
|
Total restructuring charges, net
|
$
|
10
|
|
|
$
|
2,690
|
|
|
$
|
183
|
|
|
$
|
2,883
|
|
|
|
|
|
|
|
|
|
Accrued restructuring charges as of December 31, 2019
|
|
|
|
|
|
|
$
|
5,199
|
|
Total quarter to date charges, net (shown above)
|
|
|
|
|
|
|
2,883
|
|
Charges paid / settled, net
|
|
|
|
|
|
|
(4,154
|
)
|
Accrued restructuring charges as of March 29, 2020
|
|
|
|
|
|
|
$
|
3,928
|
|
We expect to make payment or settle the majority of the restructuring charges accrued as of March 29, 2020 during the second and third quarters of 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring charges, net
|
|
As of and for the three months ended March 31, 2019
|
|
Aerospace & Defense
|
|
Industrial
|
|
Corporate
|
|
Total
|
Facility related expenses
|
$
|
70
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
70
|
|
Employee related expenses
|
(2
|
)
|
|
290
|
|
|
—
|
|
|
288
|
|
Total restructuring charges, net
|
$
|
68
|
|
|
$
|
290
|
|
|
$
|
—
|
|
|
$
|
358
|
|
|
|
|
|
|
|
|
|
Accrued restructuring charges as of December 31, 2018
|
|
|
|
|
|
|
$
|
874
|
|
Total quarter to date charges, net (shown above)
|
|
|
|
|
|
|
358
|
|
Charges paid / settled, net
|
|
|
|
|
|
|
(571
|
)
|
Accrued restructuring charges as of March 31, 2019
|
|
|
|
|
|
|
$
|
661
|
|
Restructuring Programs Summary
During the quarter ended March 29, 2020, we recorded $2.8 million of restructuring charges, principally within our Industrial segment, to reduce expenses primarily through reductions in force and to close a sales location to consolidate operations.
During the quarter ended March 31, 2019, we recorded $0.4 million of restructuring charges related to the program we initiated during 2018.
(6) Inventories
Inventories consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
March 29, 2020
|
|
December 31, 2019
|
|
Raw materials
|
$
|
73,047
|
|
|
$
|
65,315
|
|
Work in process
|
51,548
|
|
|
53,891
|
|
Finished goods
|
22,580
|
|
|
18,103
|
|
Total inventories
|
$
|
147,175
|
|
|
$
|
137,309
|
|
(7) Goodwill and Intangibles, net
The following table shows goodwill by segment as of December 31, 2019 and March 29, 2020 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aerospace & Defense
|
|
Industrial
|
|
Total
|
Goodwill as of December 31, 2019
|
$
|
57,385
|
|
|
$
|
214,508
|
|
|
$
|
271,893
|
|
Impairment
|
—
|
|
|
(116,182
|
)
|
|
(116,182
|
)
|
Currency translation adjustments
|
(43
|
)
|
|
(4,740
|
)
|
|
(4,783
|
)
|
Goodwill as of March 29, 2020
|
$
|
57,342
|
|
|
$
|
93,586
|
|
|
$
|
150,928
|
|
We perform an impairment assessment for goodwill at the reporting unit level on an annual basis as of the end of our October month end or more frequently if circumstances warrant. At March 29, 2020, the Company reorganized its reporting units (see Note 8, Segment Information) and had its stock price drop below book value, which the Company determined were triggering events requiring an assessment of its goodwill and indefinite-lived trade names. Our asset groups did not experience a triggering event, and our long-lived assets did not suffer a decline in utility requiring a reassessment of their useful lives. Through its assessment, management determined that its long-lived assets other than goodwill were not impaired.
For the assessment of goodwill as of March 29, 2020, we estimated the fair value of our two reporting units, Industrial and Aerospace & Defense, using an income approach based on the present value of future cash flows. We also utilized the implied market value method under the market approach to validate the fair value amount we obtained using a discounted cash flow model income approach which indicated a control premium. Management believes this approach was the best approximation of fair value of its reporting units in the current economic environment considering the uncertainty caused by the COVID-19 pandemic. The key assumptions utilized in our discounted cash flow model include our estimates of the rate of revenue growth, including the rate of growth used in terminal year value, the assumption of a control premium, and the discount rate based on a weighted average cost of capital. The relevant inputs, estimates and assumptions used in the implied market value method include our market capitalization as of March 29, 2020, and selection of a control premium.
Based on our impairment assessment as of March 29, 2020, we have concluded that our goodwill in the Industrial reporting unit has been impaired and, accordingly, have recorded a goodwill impairment charge of $116.2 million.
The table below presents gross intangible assets and the related accumulated amortization as of March 29, 2020 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net Carrying Value
|
Patents
|
$
|
5,368
|
|
|
$
|
(5,368
|
)
|
|
$
|
—
|
|
Customer relationships
|
293,607
|
|
|
(87,017
|
)
|
|
206,590
|
|
Backlog
|
22,181
|
|
|
(20,497
|
)
|
|
1,684
|
|
Acquired technology
|
132,786
|
|
|
(46,717
|
)
|
|
86,069
|
|
Other
|
336
|
|
|
(336
|
)
|
|
—
|
|
Total Amortized Assets
|
$
|
454,278
|
|
|
$
|
(159,935
|
)
|
|
$
|
294,343
|
|
|
|
|
|
|
|
Non-amortized intangibles (primarily trademarks and trade names)
|
$
|
74,176
|
|
|
|
|
|
$
|
74,176
|
|
Total Non-Amortized Intangibles
|
$
|
74,176
|
|
|
|
|
|
$
|
74,176
|
|
Net carrying value of intangible assets
|
|
|
|
|
|
$
|
368,519
|
|
The table below presents estimated remaining amortization expense for intangible assets recorded as of March 29, 2020 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
|
After 2024
|
Estimated amortization expense
|
$
|
32,170
|
|
|
$
|
40,672
|
|
|
$
|
35,737
|
|
|
$
|
31,335
|
|
|
$
|
27,538
|
|
|
$
|
126,891
|
|
(8) Segment Information
Our Chief Operating Decision Maker evaluates segment operating performance using segment operating income. Segment operating income is defined as GAAP operating income excluding intangible amortization and amortization of fair value step-ups of inventory and fixed assets from acquisitions completed subsequent to December 31, 2011, the impact of restructuring related inventory write-offs, impairment charges and special charges or gains. The Company also refers to this measure as adjusted operating income. The Company uses this measure because it helps management understand and evaluate the segments’ core operating results and serves as the basis for determining incentive compensation achievement.
During the quarter ended March 29, 2020, we divested our I&S business, which was previously part of the Energy segment. See Note 5, Special and Restructuring Recoveries, net for additional information on this divestiture. In light of this divestiture, effective March 29, 2020, we realigned our segments by eliminating the Energy segment and moving the remaining businesses into the Industrial segment. The new reporting segments are Industrial and Aerospace & Defense. The current and prior periods are reported under this new segment structure.
The following table presents certain reportable segment information (in thousands):
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
March 29, 2020
|
|
March 31, 2019
|
Net revenues
|
|
|
|
Aerospace & Defense
|
$
|
65,493
|
|
|
$
|
61,240
|
|
Industrial
|
126,720
|
|
|
177,615
|
|
Consolidated net revenues
|
$
|
192,213
|
|
|
$
|
238,855
|
|
Results from continuing operations before income taxes
|
|
|
|
Aerospace & Defense - Segment Operating Income
|
$
|
12,494
|
|
|
$
|
9,374
|
|
Industrial - Segment Operating Income
|
5,169
|
|
|
22,581
|
|
Corporate expenses
|
(6,588
|
)
|
|
(8,522
|
)
|
Segment Operating Income
|
11,075
|
|
|
23,433
|
|
Impairment charge
|
116,182
|
|
|
—
|
|
Restructuring charges, net
|
2,883
|
|
|
358
|
|
Special recoveries, net
|
(45,175
|
)
|
|
(8,200
|
)
|
Special and restructuring recoveries, net
|
(42,292
|
)
|
|
(7,842
|
)
|
Restructuring related inventory charges
|
(602
|
)
|
|
325
|
|
Acquisition amortization
|
10,218
|
|
|
12,077
|
|
Acquisition depreciation
|
974
|
|
|
1,123
|
|
Acquisition amortization and other costs, net
|
10,590
|
|
|
13,525
|
|
Consolidated operating (loss) income
|
(73,405
|
)
|
|
17,750
|
|
Interest expense, net
|
9,011
|
|
|
13,094
|
|
Other income, net
|
(2,680
|
)
|
|
(2,148
|
)
|
(Loss) income from continuing operations before income taxes
|
$
|
(79,736
|
)
|
|
$
|
6,804
|
|
|
|
|
|
|
Three Months Ended
|
|
March 29, 2020
|
|
March 31, 2019
|
Capital expenditures
|
|
|
|
Aerospace & Defense
|
$
|
640
|
|
|
$
|
788
|
|
Industrial
|
2,225
|
|
|
1,676
|
|
Corporate
|
198
|
|
|
387
|
|
Consolidated capital expenditures
|
$
|
3,063
|
|
|
$
|
2,851
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
Aerospace & Defense
|
$
|
3,093
|
|
|
$
|
2,673
|
|
Industrial
|
12,419
|
|
|
15,199
|
|
Corporate
|
125
|
|
|
164
|
|
Consolidated depreciation and amortization
|
$
|
15,637
|
|
|
$
|
18,036
|
|
|
|
|
|
Identifiable assets
|
March 29, 2020
|
|
March 31, 2019
|
Aerospace & Defense
|
$
|
463,744
|
|
|
$
|
406,064
|
|
Industrial
|
1,650,963
|
|
|
2,288,645
|
|
Corporate
|
(805,630
|
)
|
|
(975,375
|
)
|
Consolidated identifiable assets
|
$
|
1,309,077
|
|
|
$
|
1,719,334
|
|
The total assets for each reportable segment have been reported as the Identifiable Assets for that segment, including inter-segment intercompany receivables, payables and investments in other CIRCOR companies. Identifiable assets reported in Corporate include both corporate assets, such as cash, deferred taxes, prepaid and other assets, fixed assets, as well as the elimination of all inter-segment intercompany assets. The elimination of intercompany assets results in negative amounts
reported in Corporate for Identifiable Assets. Corporate Identifiable Assets excluding intercompany assets were $87.7 million and $27.8 million as of March 29, 2020 and March 31, 2019, respectively.
(9) Financing Arrangements
Fair Value
The company utilizes fair value measurement guidance prescribed by accounting standards to value its financial instruments. The guidance establishes a fair value hierarchy based on the inputs used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows:
|
|
•
|
Level One: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets.
|
|
|
•
|
Level Two: Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
|
|
|
•
|
Level Three: Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
|
A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
The aggregate fair value of the Company's interest rate swap and cross-currency swap as of March 29, 2020 are summarized in the table below (in thousands):
|
|
|
|
|
|
Significant Other Observable Inputs
|
|
Level 2
|
Derivative asset
|
$
|
3,768
|
|
Derivative liabilities
|
$
|
12,310
|
|
The carrying amounts of cash and cash equivalents, trade receivables and trade payables approximate fair value because of the short maturity of these financial instruments. Cash equivalents are carried at cost which approximates fair value at the balance sheet date and is a Level 1 financial instrument. As of March 29, 2020, the fair value of our gross debt (before netting debt issuance costs) was $496.1 million, or $131.8 million below our carrying cost of $602.3 million, and is a Level 2 financial instrument.
Financial Instruments
As of March 29, 2020 and December 31, 2019, the Company had restricted cash balances of $1.1 million and $1.2 million, respectively. These balances are recorded within prepaid and other current assets on the condensed consolidated balance sheets, and are included within cash, cash equivalents and restricted cash in the condensed consolidated statements of cash flows.
The Company has a receivables purchasing agreement with a bank whereby the Company can sell selected account receivables and receive between 90% and 100% of the purchase price upfront, net of applicable discount fee, and the residual amount as the receivables are collected. During the quarter, the Company sold a total of $14.5 million in receivables under the program, receiving $13.6 million in cash. The outstanding purchase price component of $0.8 million was recorded in prepaid expenses and other current assets on the condensed consolidated balance sheet at March 29, 2020.
The Company has a cross-currency swap agreement to hedge its net investment in non-U.S. subsidiaries against future volatility in exchange rates between the U.S. dollar and the Euro. The cross-currency swap agreement is pursuant to an International Swaps and Derivatives Association ("ISDA") Master Agreement with Deutsche Bank AG. The three-year cross-currency swap has a fixed notional value of $100.0 million at an annual rate of 2.4% and a maturity date of July 12, 2022. At inception, the cross-currency swap was designated as a net investment hedge. This hedging agreement mitigates foreign currency exchange rate exposure and is not for speculative trading purposes. The net investment hedge was deemed effective as of quarter-end.
The Company has an interest rate swap pursuant to an ISDA Master Agreement with Citizens Bank, National Association. The four-year interest rate swap has a fixed notional value of $400.0 million with a 1% LIBOR floor and a maturity date of April 12, 2022. The fixed rate of interest paid by the Company is comprised of our current credit spread of 350 basis points plus 2.6475% for a total interest rate of 6.1475%. The ISDA Master Agreement, together with its related schedules, contains customary representations, warranties and covenants.
The Company has designated the interest rate swap as a qualifying hedging instrument and is treating it as a cash flow hedge for accounting purposes pursuant to ASC 815, Derivatives and Hedging. The aggregate net fair value of the interest rate swap and cross-currency swap was $(8.5) million. These balances are recorded in other long-term liabilities of $6.0 million, accrued expenses and other current liabilities of $6.3 million, and other current assets of $3.8 million on our condensed consolidated balance sheet as of March 29, 2020. In addition, the Company recorded a long-term deferred tax asset of $2.8 million as of the same date.
The amount of gain (loss) recognized in other comprehensive (loss) income ("OCI") and reclassified from accumulated other comprehensive (loss) income ("AOCI") to income are summarized below:
|
|
|
|
|
|
Three Months Ended
|
|
March 29, 2020
|
Amount of loss recognized in OCI
|
$
|
(4,105
|
)
|
|
|
Amount of loss reclassified from AOCI into income
|
$
|
(1,093
|
)
|
The realized loss of $1.1 million was reclassified from other comprehensive loss to interest expense and was accrued on the swap during the three months ended March 29, 2020. Amounts expected to be reclassified from other comprehensive income into interest expense in the following 12 months is a loss of $6.2 million. Interest expense (including the effects of the cash flow hedges) related to the portion of the Company's term loan subject to the aforementioned interest-rate swap agreement was $6.0 million for the three months ended March 29, 2020.
Debt
As of March 29, 2020, total debt was $589.0 million compared to $636.3 million as of December 31, 2019. Total debt is net of unamortized term loan debt issuance costs of $13.3 million and $17.6 million at March 29, 2020 and December 31, 2019, respectively. The Company made interest payments of $8.8 million and $12.4 million during the three months ended March 29, 2020, and March 31, 2019, respectively.
During the three months ended March 29, 2020, the Company paid down $161.8 million on its term loan from proceeds received through the sale of the I&S business. On March 20, 2020, the Company drew down $80.0 million on its line of credit due to concerns about possible disruptions to global capital markets stemming from COVID-19.
During the three months ended March 29, 2020 the Company amended its term loan to lower the interest rate associated with the applicable margin calculation. The new terms lower the interest rate on the Company's term loan from LIBOR plus an applicable margin of 3.5% to LIBOR plus an applicable margin of 3.25%, based on its existing corporate family rating from Moody's. The applicable margin reduces to LIBOR plus an applicable margin of 3.00%, with a corporate family rating from Moody's of B1 or better.
As part of the debt repricing, the Company's outstanding loan balance was reallocated amongst the lender group. The Company evaluated the changes in outstanding loan balance for each individual lender to determine the amount of capitalized debt issuance costs that required adjustment. Through this exercise, the Company amortized $3.2 million of debt issuance costs, which were recorded as special charges.
(10) Guarantees and Indemnification Obligations
As permitted under Delaware law, we have agreements whereby we indemnify certain of our officers and directors for certain events or occurrences while the officer or director is, or was, serving at our request in such capacity. The term of the indemnification period is for the officer’s or director’s lifetime. The maximum potential amount of future payments we could be required to make under these indemnification agreements is unlimited. However, we have directors’ and officers’ liability
insurance policies that insure us with respect to certain events covered under the policies and should enable us to recover a portion of any future amounts paid under the indemnification agreements. We have no liabilities recorded from those agreements as of March 29, 2020.
We record provisions for the estimated cost of product warranties, primarily from historical information, at the time product revenue is recognized. We also record provisions with respect to any significant individual warranty issues as they arise. While we engage in extensive product quality programs and processes, our warranty obligation is affected by product failure rates, utilization levels, material usage, service delivery costs incurred in correcting a product failure, and supplier warranties on parts delivered to us. Should actual product failure rates, utilization levels, material usage, service delivery costs or supplier warranties on parts differ from our estimates, revisions to the estimated warranty liability would be required.
The following table sets forth information related to our product warranty reserves for the three months ended March 29, 2020 (in thousands):
|
|
|
|
|
Balance beginning December 31, 2019
|
$
|
1,642
|
|
Provisions
|
368
|
|
Claims settled
|
(682
|
)
|
Currency translation adjustment
|
(29
|
)
|
Balance ending March 29, 2020
|
$
|
1,299
|
|
Warranty obligations were $1.6 million as of December 31, 2019 and $1.3 million as of March 29, 2020, reflecting a decrease in the reserve for the three months ended March 29, 2020, as new provisions were more than offset by net claims settled.
(11) Commitments and Contingencies
We are subject to various legal proceedings and claims pertaining to matters such as product liability or contract disputes, including issues arising under certain customer contracts with aerospace and defense customers. We are also subject to other proceedings and governmental inquiries, inspections, audits or investigations pertaining to issues such as tax matters, patents and trademarks, pricing, business practices, governmental regulations, employment and other matters. Although the results of litigation and claims cannot be predicted with certainty, we expect that the ultimate disposition of these matters, to the extent not previously provided for, will not have a material adverse effect, individually or in the aggregate, on our business, financial condition, results of operations or liquidity.
Asbestos-related product liability claims continue to be filed against two of our subsidiaries: Spence Engineering Company, Inc. (“Spence”), the stock of which we acquired in 1984; and CIRCOR Instrumentation Technologies, Inc. (f/k/a Hoke, Inc.) (“Hoke”), the stock of which we acquired in 1998. The Hoke subsidiary was divested in January 2020 through our sale of I&S. However, the Company has indemnified the buyer for asbestos-related claims that are made against Hoke. Due to the nature of the products supplied by these entities, the markets they serve and our historical experience in resolving these claims, we do not expect that these asbestos-related claims will have a material adverse effect on the financial condition, results of operations or liquidity of the Company.
Standby Letters of Credit
We execute standby letters of credit, which include bid bonds and performance bonds, in the normal course of business to ensure our performance or payments to third parties. The aggregate notional value of these instruments was $35.5 million at March 29, 2020. We believe that the likelihood of demand for a significant payment relating to the outstanding instruments is remote. These instruments generally have expiration dates ranging from less than 1 month to 5 years from March 29, 2020.
The following table contains information related to standby letters of credit instruments outstanding as of March 29, 2020 (in thousands):
|
|
|
|
|
Term Remaining
|
Maximum Potential
Future Payments
|
0–12 months
|
$
|
20,747
|
|
Greater than 12 months
|
14,707
|
|
Total
|
$
|
35,454
|
|
(12) Retirement Plans
The following table sets forth the components of total net periodic benefit cost (income) of the Company’s defined benefit pension plans and other post-retirement employee benefit plans (in thousands):
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
March 29, 2020
|
|
March 31, 2019
|
Pension Benefits - U.S. Plans
|
|
|
|
Interest cost
|
$
|
1,398
|
|
|
$
|
1,967
|
|
Expected return on plan assets
|
(2,747
|
)
|
|
(2,742
|
)
|
Amortization
|
43
|
|
|
129
|
|
Net periodic benefit income
|
$
|
(1,306
|
)
|
|
$
|
(646
|
)
|
|
|
|
|
Pension Benefits - Non-U.S. Plans
|
|
|
|
Service cost
|
$
|
692
|
|
|
$
|
695
|
|
Interest cost
|
339
|
|
|
555
|
|
Expected return on plan assets
|
(194
|
)
|
|
(247
|
)
|
Amortization
|
31
|
|
|
5
|
|
Net periodic benefit cost
|
$
|
868
|
|
|
$
|
1,008
|
|
|
|
|
|
Other Post-Retirement Benefits
|
|
|
|
Interest cost
|
$
|
66
|
|
|
$
|
93
|
|
Net periodic benefit cost
|
$
|
66
|
|
|
$
|
93
|
|
The periodic benefit service costs are included in the selling, general, and administrative costs, while the remaining net periodic benefit costs are included in other expense (income), net in our condensed consolidated statements of (loss) income for the three months ended March 29, 2020 and March 31, 2019, respectively.
There were no employer contributions to the Company's U.S. and non-U.S. based pension plans during the three months ended March 29, 2020.
(13) Income Taxes
As of March 29, 2020 and December 31, 2019, we had $0.9 million and $0.6 million, respectively, of unrecognized tax benefits, of which $0.8 million and $0.6 million, respectively, would affect our effective tax rate if recognized in any future period.
The Company files income tax returns in U.S. federal, state and local jurisdictions and in foreign jurisdictions. The Company is no longer subject to examination by the Internal Revenue Service (the "IRS") for years prior to 2016 and is no longer subject to examination by the tax authorities in foreign and state jurisdictions prior to 2012, except for Germany which is under examination from 2006 to 2015. The Company is currently under examination for income tax filings in various foreign jurisdictions.
The Company has a net U.S. deferred tax asset and a net foreign deferred tax liability. Due to uncertainties related to our ability to utilize certain U.S. and foreign deferred income tax assets, we maintained a valuation allowance of $14.3 million at March 29, 2020 and $14.3 million at December 31, 2019. The valuation allowance is based on estimates of income in each of the jurisdictions in which we operate and the period over which our deferred tax assets will be recoverable. If future results of operations exceed our current expectations, our existing tax valuation allowances may be adjusted, resulting in future tax benefits. Alternatively, if future results of operations are less than expected, future assessments may result in a determination that some or all of the deferred tax assets are not realizable. Consequently, we may need to establish additional tax valuation allowances for all or a portion of the deferred tax assets, which may have a material adverse effect on our business, results of operations and financial condition.
On March 27, 2020, the United States enacted the Coronavirus Aid, Relief, and Economic Security (CARES) Act as a result of the Coronavirus pandemic, which contains among other things, numerous income tax provisions. Some of these tax provisions are expected to be effective retroactively for years ending before the date of enactment. The company has evaluated the current legislation and at this time, does not anticipate the CARES Act to have a material impact on its financial statements.
During the three months ended March 29, 2020 and March 31, 2019, the Company paid income taxes of $1.5 million and $2.1 million, respectively.
(14) Share-Based Compensation
As of March 29, 2020, the Company had 689,418 stock options and 826,349 Restricted Stock Unit Awards ("RSU Awards") and Restricted Stock Unit Management Stock Plan Awards ("RSU MSPs") outstanding. On May 9, 2019, our shareholders approved the 2019 Stock Option and Incentive Plan (the "2019 Plan") at the Company's annual meeting which was adopted, subject to shareholder approval, by the Company's board of directors on February 20, 2019. The 2019 Plan authorizes issuance of up to 1,000,000 shares of common stock (subject to adjustment for stock splits and similar events). Under the 2019 Plan, there were 413,507 shares available for grant as of March 29, 2020.
During the three months ended March 29, 2020, there were no stock options granted compared with 153,726 stock options granted during the three months ended March 31, 2019.
The average fair value of stock options granted during the first three months of 2019 was $11.84 per share, estimated using the following weighted-average assumptions:
|
|
|
|
|
March 31, 2019
|
Risk-free interest rate
|
2.6
|
%
|
Expected life (years)
|
4.4
|
|
Expected stock volatility
|
38.1
|
%
|
Expected dividend yield
|
—
|
%
|
For additional information regarding the historical issuance of stock options, refer to Note 12 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019.
During the three months ended March 29, 2020 and March 31, 2019, we granted 552,010 and 154,903 RSU Awards with approximate fair values of $12.70 and $33.07 per RSU Award, respectively. During the first three months of 2020 and 2019, we granted performance-based RSU Awards as part of the overall mix of RSU Awards. Of the 552,010 RSU Awards granted during the three months ended March 29, 2020, 109,278 are performance-based RSU Awards. This compares to 26,475 performance-based RSU Awards granted during the three months ended March 31, 2019. In 2020, these performance-based RSU Awards include metrics for achieving Adjusted Operating Margin and Adjusted Measurement Cash Flow with target payouts ranging from 0% to 200%. In 2019, the performance-based RSU Awards include metrics for achieving Adjusted Operating Margin and Adjusted Free Cash Flow with the same target payout ranges. Of the different performance-based RSU tranches, the Company anticipates approximately 95% overall achievement and probability to vest.
There were no RSU MSPs granted during the three months ended March 29, 2020. RSU MSPs totaling 56,379 with per unit discount amounts representing a fair value of $11.10 per share were granted during the three months ended March 31, 2019.
Compensation expense related to our share-based plans for the three months ended March 29, 2020 and March 31, 2019 was $0.7 million and $1.4 million, respectively. The decrease in costs in the current period is primarily related to a delay in our annual grant as well as reduced achievement on certain performance-based awards. Compensation expense for the three months ended March 29, 2020 was recorded as follows: $0.6 million in selling, general and administrative expenses and $0.1 million in special charges related to the sale of our Instrumentation and Sampling business. The special charge amount related to the accelerated vesting of awards as a result of the transaction. Compensation expense for the three months ended March 31, 2019 was recorded in selling, general and administrative expenses. As of March 29, 2020, there were $13.0 million of total unrecognized compensation costs related to our outstanding share-based compensation arrangements. That cost is expected to be recognized over a weighted average period of 2.0 years.
The weighted average contractual term for stock options outstanding and options exercisable as of March 29, 2020 was 3.9 years and 3.5 years, respectively. The aggregate intrinsic values of stock options exercised, outstanding, and exercisable during the three months ended March 29, 2020 were insignificant.
The aggregate intrinsic value of RSU Awards settled during the three months ended March 29, 2020 was $1.1 million and the aggregate intrinsic value of RSU Awards outstanding and RSU Awards vested and deferred as of March 29, 2020 was $9.0 million and $0.0 million, respectively.
The aggregate intrinsic value of RSU MSPs settled during the three months ended March 29, 2020 was insignificant. The aggregate intrinsic value of RSU MSPs outstanding and RSU MSPs vested and deferred as of March 29, 2020 was insignificant.
International participants are issued Cash Settled Stock Unit Awards. As of March 29, 2020, there were 53,513 Cash Settled Stock Unit Awards outstanding compared to 45,681 as of December 31, 2019. During the three months ended March 29, 2020, the aggregate cash used to settle Cash Settled Stock Unit Awards was $0.7 million. As of March 29, 2020, we had $0.1 million of accrued expenses in other non-current liabilities associated with these Cash Settled Stock Unit Awards compared with $0.9 million as of December 31, 2019. Cash Settled Stock Unit Award related compensation costs for the three months ended March 29, 2020 and March 31, 2019 were $(0.1) million and $0.4 million, respectively. The decrease in cost is due primarily to the much lower stock price as of March 29, 2020. For the three months ended March 29, 2020, $(0.2) million was recorded as selling, general, and administrative expenses and $0.1 million was recorded as special charges related to the sale of our Instrumentation and Sampling business. The special charge amount related to the accelerated vesting of awards as a result of the transaction. For the three months ended March 31, 2019, compensation costs for Cash Settled Stock Unit Awards were recorded entirely in selling, general, and administrative expense.
(15) Accumulated Other Comprehensive Loss
The following table summarizes the changes in accumulated other comprehensive loss, net of tax, which is reported as a component of shareholders' equity, for the three months ended March 29, 2020 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Currency Translation Adjustments
|
|
Pension, net
|
|
Derivative
|
|
Total
|
Balance as of December 31, 2019
|
$
|
(53,848
|
)
|
|
$
|
(19,513
|
)
|
|
$
|
(6,906
|
)
|
|
$
|
(80,267
|
)
|
Other comprehensive loss
|
(20,325
|
)
|
|
39
|
|
|
(2,320
|
)
|
|
(22,606
|
)
|
Balance as of March 29, 2020
|
$
|
(74,173
|
)
|
|
$
|
(19,474
|
)
|
|
$
|
(9,226
|
)
|
|
$
|
(102,873
|
)
|
(16) Loss Per Common Share ("EPS")
Stock options, RSU Awards, and RSU MSPs covering 417,932 and 901,098 shares of common stock for the three months ended March 29, 2020 and March 31, 2019, respectively, were not included in the computation of diluted EPS because their effect would be anti-dilutive.
(17) Subsequent Events
On May 18, 2020, the Company entered into Amendment No. 4 to the Credit Agreement (the “Fourth Amendment”), which amends the Credit Agreement, dated as of December 11, 2017, among the Company, certain domestic subsidiaries of the Company, as guarantors, the lenders from time to time party thereto, Deutsche Bank AG New York Branch, as term loan administrative agent and collateral agent, and Truist Bank (formerly known as SunTrust Bank), as revolver administrative agent, swing line lender and a letter of credit issuer (as amended by Amendment No. 1 to the Credit Agreement dated as of January 23, 2018, by Amendment No. 2 to the Credit Agreement dated as of February 19, 2020, and by Amendment No. 3 to the Credit Agreement dated as of February 26, 2020, the “Original Credit Agreement” and as amended by the Fourth Amendment, the “Credit Agreement”).
The Fourth Amendment makes certain changes to the Original Credit Agreement, including, among other things, (i) changing the frequency of the immaterial subsidiary testing date from annually to quarterly and (ii) extending the deadline by which the financial statements must be reported (A) with respect to annual reporting, from 90 days after the close of each fiscal year to 100 days after the close of each fiscal year and (B) with respect to quarterly reporting, from 50 days after the close of each fiscal quarter to 60 days after the close of each fiscal quarter, in each case subject to extension to the date that is 2 business days after the last day of any extension or deferral period permitted by the SEC with respect to any such report. In connection with
the execution of the Fourth Amendment, the Company paid customary arranger and lender consent fees and fees and expenses of Deutsche Bank AG New York Branch, in its capacity as term loan administrative agent, and Truist Bank (formerly known as SunTrust Bank), in its capacity as revolver administrative agent.