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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

or

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-39275

 

APi Group Corporation

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

 

98-1510303

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

1100 Old Highway 8 NW

New Brighton, Minnesota

 

55112

(Address of principal executive offices)

 

(Zip Code)

Registrant’s telephone number, including area code: (651) 636-4320

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.0001 per share

 

APG

 

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date: 233,906,920 shares of common stock as of October 27, 2022.

 

 

 


 

TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION

 

3

 

Item 1. Financial Statements

 

3

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

41

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

58

Item 4. Controls and Procedures

 

59

 

PART II. OTHER INFORMATION

 

61

 

Item 1A. Risk Factors

 

61

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

61

Item 4. Mine Safety Disclosures

 

61

Item 6. Exhibits

 

62

 

SIGNATURES

 

63

 

2

 


 

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

APi Group Corporation

Condensed Consolidated Balance Sheets (Unaudited)

(In millions, except share and per share data)

 

 

September 30,
2022

 

 

December 31,
2021

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

395

 

 

$

1,188

 

Restricted cash

 

 

3

 

 

 

302

 

Accounts receivable, net of allowances of $2 and $3 at September 30, 2022 and
    December 31, 2021, respectively

 

 

1,249

 

 

 

767

 

Inventories

 

 

150

 

 

 

69

 

Contract assets

 

 

511

 

 

 

217

 

Prepaid expenses and other current assets

 

 

164

 

 

 

83

 

Total current assets

 

 

2,472

 

 

 

2,626

 

Property and equipment, net

 

 

399

 

 

 

326

 

Operating lease right of use assets

 

 

209

 

 

 

101

 

Goodwill

 

 

2,327

 

 

 

1,106

 

Intangible assets, net

 

 

1,683

 

 

 

882

 

Deferred tax assets

 

 

61

 

 

 

73

 

Pension and post-retirement assets

 

 

576

 

 

 

 

Other assets

 

 

214

 

 

 

45

 

Total assets

 

$

7,941

 

 

$

5,159

 

 

 

 

 

 

 

 

Liabilities, Redeemable Convertible Preferred Stock, and Shareholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Short-term and current portion of long-term debt

 

$

6

 

 

$

1

 

Accounts payable

 

 

469

 

 

 

236

 

Contingent consideration and compensation liabilities

 

 

18

 

 

 

22

 

Accrued salaries and wages

 

 

294

 

 

 

209

 

Contract liabilities

 

 

428

 

 

 

243

 

Operating and finance leases

 

 

65

 

 

 

27

 

Other accrued liabilities

 

 

243

 

 

 

129

 

Total current liabilities

 

 

1,523

 

 

 

867

 

Long-term debt, less current portion

 

 

2,781

 

 

 

1,766

 

Pension and post-retirement obligations

 

 

65

 

 

 

 

Contingent consideration and compensation liabilities

 

 

14

 

 

 

10

 

Operating and finance leases

 

 

158

 

 

 

79

 

Deferred tax liabilities

 

 

342

 

 

 

43

 

Other noncurrent liabilities

 

 

111

 

 

 

71

 

Total liabilities

 

 

4,994

 

 

 

2,836

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 17)

 

 

 

 

 

 

 

 

 

 

 

 

 

5.5% Series B Redeemable Convertible Preferred Stock, $0.0001 par value, 800,000 authorized
    shares,
800,000 shares and 0 shares issued and outstanding at September 30, 2022 and December
    31, 2021, respectively; aggregate liquidation preference of $
840

 

 

797

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

Series A Preferred Stock, $0.0001 par value, 7,000,000 authorized shares, 4,000,000 shares
    issued and outstanding at September 30, 2022 and December 31, 2021

 

 

 

 

 

 

Common Stock, $0.0001 par value, 500,000,000 authorized shares, 233,786,135 shares and
    
224,625,193 shares issued at September 30, 2022 and December 31, 2021, respectively
   (excluding
7,539,697 shares declared for stock dividend at December 31, 2021)

 

 

 

 

 

 

Additional paid-in capital

 

 

2,565

 

 

 

2,560

 

Accumulated deficit

 

 

(186

)

 

 

(237

)

Accumulated other comprehensive loss

 

 

(229

)

 

 

 

Total shareholders’ equity

 

 

2,150

 

 

 

2,323

 

Total liabilities, redeemable convertible preferred stock, and shareholders’ equity

 

$

7,941

 

 

$

5,159

 

See notes to condensed consolidated financial statements.

3

 


 

APi Group Corporation

Condensed Consolidated Statements of Operations (Unaudited)

(In millions, except per share amounts)

 

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net revenues

 

$

1,735

 

 

$

1,047

 

 

$

4,855

 

 

$

2,828

 

Cost of revenues

 

 

1,295

 

 

 

795

 

 

 

3,604

 

 

 

2,163

 

Gross profit

 

 

440

 

 

 

252

 

 

 

1,251

 

 

 

665

 

Selling, general, and administrative expenses

 

 

379

 

 

 

211

 

 

 

1,138

 

 

 

579

 

Operating income

 

 

61

 

 

 

41

 

 

 

113

 

 

 

86

 

Interest expense, net

 

 

33

 

 

 

14

 

 

 

88

 

 

 

43

 

(Gain) loss on extinguishment of debt, net

 

 

(5

)

 

 

 

 

 

(5

)

 

 

9

 

Non-service pension benefit

 

 

(10

)

 

 

 

 

 

(32

)

 

 

 

Investment income and other, net

 

 

(3

)

 

 

(3

)

 

 

(5

)

 

 

(12

)

Other expense, net

 

 

15

 

 

 

11

 

 

 

46

 

 

 

40

 

Income before income taxes

 

 

46

 

 

 

30

 

 

 

67

 

 

 

46

 

Income tax provision

 

 

18

 

 

 

11

 

 

 

16

 

 

 

14

 

Net income

 

$

28

 

 

$

19

 

 

$

51

 

 

$

32

 

Net income attributable to common shareholders:

 

 

 

 

 

 

 

 

 

 

 

 

Stock dividend on Series B Preferred Stock

 

 

(11

)

 

 

 

 

 

(33

)

 

 

 

Net income attributable to common shareholders

 

$

17

 

 

$

19

 

 

$

18

 

 

$

32

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per common share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.06

 

 

$

0.08

 

 

$

0.06

 

 

$

0.14

 

Diluted

 

 

0.06

 

 

 

0.08

 

 

 

0.06

 

 

 

0.14

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

234

 

 

 

205

 

 

 

233

 

 

 

199

 

Diluted

 

 

266

 

 

 

209

 

 

 

266

 

 

 

205

 

 

See notes to condensed consolidated financial statements.

4

 


 

APi Group Corporation

Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

(In millions)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net income

 

$

28

 

 

$

19

 

 

$

51

 

 

$

32

 

Other comprehensive (loss) income:

 

 

 

 

 

 

 

 

 

 

 

 

Fair value change - derivatives, net of tax benefit (expense)
    of ($
16), ($1), ($27), and ($4), respectively

 

 

51

 

 

 

5

 

 

 

82

 

 

 

13

 

Foreign currency translation adjustment

 

 

(86

)

 

 

(9

)

 

 

(311

)

 

 

(9

)

Comprehensive (loss) income

 

$

(7

)

 

$

15

 

 

$

(178

)

 

$

36

 

 

See notes to condensed consolidated financial statements.

5

 


 

APi Group Corporation

Condensed Consolidated Statements of Shareholders’ Equity (Unaudited)

(In millions, except share amounts)

 

 

Preferred Stock Issued
and Outstanding

 

 

Common Stock Issued
and Outstanding

 

 

Additional
Paid-In

 

 

Accumulated

 

 

Accumulated
Other
Comprehensive

 

 

Total
Shareholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Income (Loss)

 

 

Equity

 

Balance, December 31, 2021

 

 

4,000,000

 

 

$

 

 

 

224,625,193

 

 

$

 

 

$

2,560

 

 

$

(237

)

 

$

 

 

$

2,323

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7

)

 

 

 

 

 

(7

)

Fair value change - derivatives

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9

 

 

 

9

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(59

)

 

 

(59

)

Series A Preferred Stock dividend

 

 

 

 

 

 

 

 

7,539,697

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series B Preferred Stock dividend

 

 

 

 

 

 

 

 

519,469

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share repurchases

 

 

 

 

 

 

 

 

(531,431

)

 

 

 

 

 

(11

)

 

 

 

 

 

 

 

 

(11

)

Profit sharing plan contributions

 

 

 

 

 

 

 

 

622,655

 

 

 

 

 

 

15

 

 

 

 

 

 

 

 

 

15

 

Share-based compensation and other, net

 

 

 

 

 

 

 

 

413,029

 

 

 

 

 

 

8

 

 

 

 

 

 

 

 

 

8

 

Balance, March 31, 2022

 

 

4,000,000

 

 

$

 

 

 

233,188,612

 

 

$

 

 

$

2,572

 

 

$

(244

)

 

$

(50

)

 

$

2,278

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30

 

 

 

 

 

 

30

 

Fair value change - derivatives

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

22

 

 

 

22

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(166

)

 

 

(