Company Quick10K Filing
Ceco Environmental
Price7.19 EPS0
Shares36 P/E28
MCap256 P/FCF-405
Net Debt37 EBIT19
TEV293 TEV/EBIT16
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-06
10-K 2019-12-31 Filed 2020-03-04
10-Q 2019-09-30 Filed 2019-11-06
10-Q 2019-06-30 Filed 2019-08-06
10-Q 2019-03-31 Filed 2019-05-08
10-K 2018-12-31 Filed 2019-03-07
10-Q 2018-09-30 Filed 2018-11-07
10-Q 2018-06-30 Filed 2018-08-08
10-Q 2018-03-31 Filed 2018-05-10
10-K 2017-12-31 Filed 2018-03-09
10-Q 2017-09-30 Filed 2017-11-08
10-Q 2017-06-30 Filed 2017-08-09
10-Q 2017-03-31 Filed 2017-05-10
10-K 2016-12-31 Filed 2017-03-14
10-Q 2016-09-30 Filed 2016-11-08
10-Q 2016-06-30 Filed 2016-08-09
10-Q 2016-03-31 Filed 2016-05-10
10-K 2015-12-31 Filed 2016-03-23
10-Q 2015-09-30 Filed 2015-11-09
10-Q 2015-06-30 Filed 2015-08-07
10-Q 2015-03-31 Filed 2015-05-07
10-K 2014-12-31 Filed 2015-03-18
10-Q 2014-09-30 Filed 2014-11-06
10-Q 2014-06-30 Filed 2014-08-07
10-Q 2014-03-31 Filed 2014-05-08
10-K 2013-12-31 Filed 2014-03-14
10-Q 2013-09-30 Filed 2013-11-08
10-Q 2013-06-30 Filed 2013-08-09
10-Q 2013-03-31 Filed 2013-05-10
10-K 2012-12-31 Filed 2013-03-15
10-Q 2012-09-30 Filed 2012-11-08
10-Q 2012-06-30 Filed 2012-08-10
10-Q 2012-03-31 Filed 2012-05-11
10-K 2011-12-31 Filed 2012-03-16
10-Q 2011-09-30 Filed 2011-11-10
10-Q 2011-06-30 Filed 2011-08-12
10-Q 2011-03-31 Filed 2011-05-11
10-K 2010-12-31 Filed 2011-03-15
10-Q 2010-09-30 Filed 2010-11-15
10-Q 2010-06-30 Filed 2010-08-13
10-Q 2010-03-31 Filed 2010-05-14
10-K 2009-12-31 Filed 2010-03-29
8-K 2020-06-11
8-K 2020-05-06
8-K 2020-04-07
8-K 2020-03-04
8-K 2019-11-06
8-K 2019-08-06
8-K 2019-06-11
8-K 2019-06-05
8-K 2019-05-08
8-K 2019-03-07
8-K 2018-11-07
8-K 2018-10-24
8-K 2018-08-08
8-K 2018-06-12
8-K 2018-05-10
8-K 2018-03-30
8-K 2018-03-08

CECE 10Q Quarterly Report

Part I - Financial Information
Item 1.Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 cece-ex311_8.htm
EX-31.2 cece-ex312_9.htm
EX-32.1 cece-ex321_6.htm
EX-32.2 cece-ex322_7.htm

Ceco Environmental Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
65052039026013002012201420172020
Assets, Equity
115814713-21-552012201420172020
Rev, G Profit, Net Income
905520-15-50-852012201420172020
Ops, Inv, Fin

10-Q 1 cece-10q_20200331.htm 10-Q cece-10q_20200331.htm

same

 

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 March 31, 2020

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 No. 0-07099

 

CECO ENVIRONMENTAL CORP.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

13-2566064

(State or other jurisdiction of

Incorporation or organization)

 

(IRS Employer

Identification No.)

 

14651 North Dallas Parkway

Suite 500

Dallas, Texas

 

 

 

75254

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: (214) 357-6181

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

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, par value $0.01 per share

CECE

The NASDAQ Stock Market LLC

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 files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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  

The number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practical date: 35,394,045 shares of common stock, par value $0.01 per share, as of April 30, 2020.

 

 


 

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

QUARTERLY REPORT ON FORM 10-Q

For the quarter ended March 31, 2020

Table of Contents

 

Part I –

 

Financial Information

 

2

 

 

 

 

 

 

 

Item 1. Financial Statements

 

2

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019

 

2

 

 

 

 

 

 

 

Condensed Consolidated Statements of Income for the three-month periods ended March 31, 2020 and 2019

 

3

 

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income for the three-month periods ended March 31, 2020 and 2019

 

4

 

 

 

 

 

 

 

Condensed Consolidated Statements of Shareholders’ Equity for the three-month periods ended March 31, 2020 and 2019

 

5

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the three-month periods ended March 31, 2020 and 2019

 

6

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

 

7

 

 

 

 

 

 

 

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

 

16

 

 

 

 

 

 

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

22

 

 

 

 

 

 

 

Item 4. Controls and Procedures

 

22

 

 

 

 

 

Part II –

 

Other Information

 

24

 

 

 

 

 

 

 

Item 1. Legal Proceedings

 

24

 

 

 

 

 

 

 

Item 1A. Risk Factors

 

24

 

 

 

 

 

 

 

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

 

28

 

 

 

 

 

 

 

Item 3. Defaults Upon Senior Securities

 

28

 

 

 

 

 

 

 

Item 4. Mine Safety Disclosures

 

28

 

 

 

 

 

 

 

Item 5. Other Information

 

28

 

 

 

 

 

 

 

Item 6. Exhibits

 

29

 

 

 

 

 

Signatures

 

30

 

 

 

1


CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

PART I – FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS

 

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

 

 

 

 

 

 

 

(dollars in thousands, except per share data)

 

(unaudited)

March 31, 2020

 

 

DECEMBER 31, 2019

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

82,528

 

 

$

35,602

 

Restricted cash

 

 

1,578

 

 

 

1,356

 

Accounts receivable, net

 

 

55,638

 

 

 

68,434

 

Costs and estimated earnings in excess of billings on uncompleted contracts

 

 

39,160

 

 

 

34,805

 

Inventories, net

 

 

18,608

 

 

 

20,578

 

Prepaid expenses and other current assets

 

 

12,681

 

 

 

9,899

 

Prepaid income taxes

 

 

7,547

 

 

 

8,231

 

Assets held for sale

 

 

578

 

 

 

593

 

Total current assets

 

 

218,318

 

 

 

179,498

 

Property, plant and equipment, net

 

 

15,703

 

 

 

15,274

 

Right-of-use assets from operating leases

 

 

13,408

 

 

 

13,607

 

Goodwill

 

 

151,676

 

 

 

152,020

 

Intangible assets – finite life, net

 

 

29,460

 

 

 

31,283

 

Intangible assets – indefinite life

 

 

14,242

 

 

 

14,291

 

Deferred charges and other assets

 

 

2,450

 

 

 

2,664

 

Total assets

 

$

445,257

 

 

$

408,637

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Current portion of debt

 

$

2,500

 

 

$

2,500

 

Accounts payable and accrued expenses

 

 

71,988

 

 

 

78,319

 

Billings in excess of costs and estimated earnings on uncompleted contracts

 

 

33,925

 

 

 

34,369

 

Total current liabilities

 

 

108,413

 

 

 

115,188

 

Other liabilities

 

 

19,918

 

 

 

20,372

 

Debt, less current portion

 

 

105,481

 

 

 

63,001

 

Deferred income tax liability, net

 

 

5,902

 

 

 

5,943

 

Operating lease liabilities

 

 

10,937

 

 

 

11,116

 

Total liabilities

 

 

250,651

 

 

 

215,620

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $.01 par value; 10,000 shares authorized, none issued

 

 

 

 

 

 

Common stock, $.01 par value; 100,000,000 shares authorized, 35,337,859 and

35,275,465 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively

 

 

354

 

 

 

353

 

Capital in excess of par value

 

 

254,313

 

 

 

253,869

 

Accumulated loss

 

 

(42,932

)

 

 

(46,344

)

Accumulated other comprehensive loss

 

 

(16,773

)

 

 

(14,505

)

 

 

 

194,962

 

 

 

193,373

 

Less treasury stock, at cost, 137,920 shares at March 31, 2020 and December 31, 2019

 

 

(356

)

 

 

(356

)

Total shareholders’ equity

 

 

194,606

 

 

 

193,017

 

Total liabilities and shareholders' equity

 

$

445,257

 

 

$

408,637

 

 

 

The notes to the condensed consolidated financial statements are an integral part of the above statements.

2


CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

 

 

 

 

Three months ended March 31,

 

(dollars in thousands, except per share data)

 

2020

 

 

2019

 

Net sales

 

$

80,486

 

 

$

86,011

 

Cost of sales

 

 

52,207

 

 

 

57,579

 

Gross profit

 

 

28,279

 

 

 

28,432

 

Selling and administrative expenses

 

 

21,953

 

 

 

21,312

 

Amortization expenses

 

 

1,713

 

 

 

2,160

 

Restructuring expenses

 

 

374

 

 

 

 

Loss on divestitures, net of selling costs

 

 

 

 

 

70

 

Income from operations

 

 

4,239

 

 

 

4,890

 

Other income (expense), net

 

 

975

 

 

 

(640

)

Interest expense

 

 

(1,023

)

 

 

(1,544

)

Income before income taxes

 

 

4,191

 

 

 

2,706

 

Income tax expense

 

 

779

 

 

 

842

 

Net income

 

$

3,412

 

 

$

1,864

 

Earnings per share:

 

 

 

 

 

 

 

 

Basic

 

$

0.10

 

 

$

0.05

 

Diluted

 

$

0.10

 

 

$

0.05

 

Weighted average number of common shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

35,155,377

 

 

 

34,835,550

 

Diluted

 

 

35,394,865

 

 

 

35,360,042

 

 

 

The notes to the condensed consolidated financial statements are an integral part of the above statements.

 


3


CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

 

 

 

Three months ended March 31,

 

(dollars in thousands)

2020

 

 

2019

 

Net income

$

3,412

 

 

$

1,864

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

Interest rate swap loss

 

 

 

 

(213

)

Foreign currency translation (loss) gain

 

(2,268

)

 

 

979

 

Comprehensive income

$

1,144

 

 

$

2,630

 

 

 

The notes to the condensed consolidated financial statements are an integral part of the above statements.

 


4


CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(unaudited)

 

 

 

 

Common Stock

 

 

Capital in

excess of

 

 

Accumulated

 

 

Accumulated

Other

Comprehensive

 

 

Treasury Stock

 

 

Total

Shareholders'

 

 

 

Shares

 

 

Amount

 

 

par value

 

 

Loss

 

 

Loss

 

 

Shares

 

 

Amount

 

 

Equity

 

Balance December 31, 2018

 

 

34,954

 

 

$

349

 

 

$

251,409

 

 

$

(59,427

)

 

$

(13,415

)

 

 

(138

)

 

$

(356

)

 

$

178,560

 

Net income for the three-months ended March 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,864

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,864

 

Cumulative effect adjustment upon adoption of new accounting standards (ASU 2017-12) and (ASU 2016-02)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,602

)

 

 

12

 

 

 

 

 

 

 

 

 

 

 

(4,590

)

Restricted stock units issued

 

 

12

 

 

 

 

 

 

(8

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8

)

Share based compensation earned

 

 

14

 

 

 

 

 

 

798

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

798

 

Adjustment for interest rate swap

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(213

)

 

 

 

 

 

 

 

 

 

 

(213

)

Translation gain

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

979

 

 

 

 

 

 

 

 

 

 

 

979

 

Balance March 31, 2019

 

 

34,980

 

 

$

349

 

 

$

252,199

 

 

$

(62,165

)

 

$

(12,637

)

 

 

(138

)

 

$

(356

)

 

$

177,390

 

 

 

 

 

Common Stock

 

 

Capital in

excess of

 

 

Accumulated

 

 

Accumulated

Other

Comprehensive

 

 

Treasury Stock

 

 

Total

Shareholders'

 

 

 

Shares

 

 

Amount

 

 

par value

 

 

Loss

 

 

Loss

 

 

Shares

 

 

Amount

 

 

Equity

 

Balance December 31, 2019

 

 

35,275

 

 

$

353

 

 

$

253,869

 

 

$

(46,344

)

 

$

(14,505

)

 

 

(138

)

 

$

(356

)

 

$

193,017

 

Net income for the three-months ended March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,412

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,412

 

Restricted stock units issued

 

 

63

 

 

 

1

 

 

 

(153

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(152

)

Share based compensation earned

 

 

 

 

 

 

 

 

597

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

597

 

Translation loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,268

)

 

 

 

 

 

 

 

 

 

 

(2,268

)

Balance March 31, 2020

 

 

35,338

 

 

$

354

 

 

$

254,313

 

 

$

(42,932

)

 

$

(16,773

)

 

 

(138

)

 

$

(356

)

 

$

194,606

 

 

The notes to the condensed consolidated financial statements are an integral part of the above statements.

 

 

5


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

 

 

 

Three months ended March 31,

 

(dollars in thousands)

 

2020

 

 

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

3,412

 

 

$

1,864

 

Adjustment to reconcile net income to net cash provided by (used in) operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

2,196

 

 

 

2,771

 

Unrealized foreign currency loss

 

 

505

 

 

 

561

 

Net gain on interest rate swaps

 

 

 

 

 

(44

)

Loss on divestitures

 

 

 

 

 

70

 

Debt discount amortization

 

 

104

 

 

 

269

 

Share-based compensation expense

 

 

597

 

 

 

798

 

Bad debt expense

 

 

46

 

 

 

137

 

Inventory reserve expense

 

 

69

 

 

 

217

 

Changes in operating assets and liabilities, net of divestitures:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

12,190

 

 

 

(19,627

)

Costs and estimated earnings in excess of billings on uncompleted contracts

 

 

(5,927

)

 

 

(1,607

)

Inventories

 

 

1,765

 

 

 

821

 

Prepaid expense and other current assets

 

 

(3,022

)

 

 

1,187

 

Deferred charges and other assets

 

 

491

 

 

 

41

 

Accounts payable and accrued expenses

 

 

(4,611

)

 

 

(3,938

)

Billings in excess of costs and estimated earnings on uncompleted contracts

 

 

(375

)

 

 

3,443

 

Income taxes payable

 

 

(6

)

 

 

(719

)

Other liabilities

 

 

(433

)

 

 

15

 

Net cash provided by (used in) operating activities

 

 

7,001

 

 

 

(13,741

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Acquisitions of property and equipment

 

 

(976

)

 

 

(423

)

Net cash used in by investing activities

 

 

(976

)

 

 

(423

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Borrowings on revolving credit lines

 

 

49,500

 

 

 

 

Repayments on revolving credit lines

 

 

(6,500

)

 

 

 

Repayments of long-term debt

 

 

(625

)

 

 

(1,700

)

Payments on finance leases and financing liability

 

 

(125

)

 

 

(116

)

Net cash provided by (used in) financing activities

 

 

42,250

 

 

 

(1,816

)

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

 

(1,127

)

 

 

447

 

Net increase (decrease) in cash, cash equivalents and restricted cash

 

 

47,148

 

 

 

(15,533

)

Cash, cash equivalents and restricted cash at beginning of period

 

 

36,958

 

 

 

44,438

 

Cash, cash equivalents and restricted cash at end of period

 

$

84,106

 

 

$

28,905

 

Cash paid during the period for:

 

 

 

 

 

 

 

 

Interest

 

$

1,056

 

 

$

1,514

 

Income taxes

 

$

133

 

 

$

237

 

 

 

 

 

 

 

 

 

 

 

 

The notes to the condensed consolidated financial statements are an integral part of the above statements.

 

 

6


CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

 

1.

Basis of Reporting for Consolidated Financial Statements

 

The accompanying unaudited condensed consolidated financial statements of CECO Environmental Corp. and its subsidiaries (the “Company”, “we”, “us”, or “our”) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in annual financial statements have been condensed or omitted pursuant to those rules and regulations. In the opinion of management, the accompanying unaudited condensed consolidated financial statements of the Company contain all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the financial position as of March 31, 2020 and the results of operations, cash flows and shareholders’ equity for the three-month periods ended March 31, 2020 and 2019. The results of operations for the three-month period ended March 31, 2020 are not necessarily indicative of the results to be expected for the full year. The balance sheet as of December 31, 2019 has been derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 as filed with the SEC.

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

These financial statements and accompanying notes should be read in conjunction with the audited financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC.

 

Unless otherwise indicated, all balances within tables are in thousands, except per share amounts.

 

COVID-19

 

On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus (“COVID-19”) originating in Wuhan, China and the risks to the international community as the virus spreads globally beyond its point of origin. On March 11, 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally. The pandemic has had a significant impact on macroeconomic conditions and the end markets of our business.  The Company has instituted some and may take additional temporary precautionary measures to comply with government directives and guidelines and minimize business disruption.  The Company considered the impact of COVID-19 on the assumptions and estimates used and determined that there were no material adverse impacts on the Company’s results of operations and financial position at March 31, 2020.

On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”).  The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property.  It is currently unclear if and how the Company will benefit from the CARES Act in the future, but we continue to examine the impacts the CARES Act may have on our business, results of operations, financial condition or liquidity.

 

The full impact of the COVID-19 outbreak continues to evolve as of the date of this filing. As such, it is uncertain as to the full magnitude that the pandemic will have on the Company’s financial condition, liquidity, and future results of operations. Management is actively monitoring the impact of the global situation on its financial condition, liquidity, operations, suppliers, industry, and workforce. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, the Company is not able to estimate the effects of the COVID-19 outbreak on its results of operations, financial condition, or liquidity for fiscal year 2020.


7


 

2.

New Financial Accounting Pronouncements

 

Accounting Standards adopted in Fiscal 2020

None.

 

Accounting Standards Yet to be Adopted

In August 2018, the FASB issued ASU 2018-14, “Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans,” that makes minor changes to the disclosure requirements for employers that sponsor defined benefit pension and/or other postretirement benefit plans. The new guidance eliminates requirements for certain disclosures that are no longer considered cost beneficial and requires new ones that the FASB considers pertinent. ASU 2018-14 is effective for the Company January 1, 2021. The Company is evaluating the impact of the adoption of ASU 2018-14 on its consolidated financial statements.

 

 

3.     Accounts Receivable

 

(table only in thousands)

 

March 31, 2020

 

 

December 31, 2019

 

Contract receivables

 

$

47,128

 

 

$

58,881

 

Trade receivables

 

 

11,073

 

 

 

12,135

 

Allowance for doubtful accounts

 

 

(2,563

)

 

 

(2,582

)

Total accounts receivable

 

$

55,638

 

 

$

68,434

 

 

Balances billed but not paid by customers under retainage provisions in contracts within the Condensed Consolidated Balance Sheets amounted to approximately $1.1 million and $0.9 million at March 31, 2020 and December 31, 2019, respectively. Retainage receivables on contracts in progress are generally collected within a year after contract completion.

 

Bad debt expense was approximately $46,000 and $0.1 million for the three-month periods ended March 31, 2020 and 2019, respectively.

 

4.

Inventories

 

 

(table only in thousands)

 

March 31, 2020

 

 

December 31, 2019

 

Raw materials

 

$

14,865

 

 

$

15,218

 

Work in process

 

 

6,083

 

 

 

7,328

 

Finished goods

 

 

499

 

 

 

654

 

Obsolescence allowance

 

 

(2,839

)

 

 

(2,622

)

Total inventories

 

$

18,608

 

 

$

20,578

 

 

Amounts credited to the allowance for obsolete inventory and charged to cost of sales amounted to $0.1 million and $0.2 million for the three-month periods ended March 31, 2020 and 2019, respectively.

 

5.

Goodwill and Intangible Assets

 

(table only in thousands)

 

Three months ended March 31, 2020

 

 

Year ended December 31, 2019

 

Goodwill / Tradename

 

Goodwill

 

 

Tradename

 

 

Goodwill

 

 

Tradename

 

Beginning balance

 

$

152,020

 

 

$

14,291

 

 

$

152,156

 

 

$

18,258

 

Transfers to finite life classification

 

 

 

 

 

 

 

 

 

 

 

(3,904

)

Foreign currency translation

 

 

(344

)

 

 

(49

)

 

 

(136

)

 

 

(63

)

 

 

$

151,676

 

 

$

14,242

 

 

$

152,020

 

 

$

14,291

 

8


 

 

(table only in thousands)

 

As of March 31, 2020

 

 

As of December 31, 2019

 

Intangible assets – finite life

 

Cost

 

 

Accum. Amort.

 

 

Cost

 

 

Accum. Amort.

 

Technology

 

$

14,457

 

 

$

11,267

 

 

$

14,457

 

 

$

10,686

 

Customer lists

 

 

68,943

 

 

 

45,484

 

 

 

68,943

 

 

 

44,484

 

Tradename

 

 

5,294

 

 

 

1,286

 

 

 

5,294

 

 

 

1,154

 

Foreign currency adjustments

 

 

(1,691

)

 

 

(494

)

 

 

(1,869

)

 

 

(782

)

 

 

$

87,003

 

 

$

57,543

 

 

$

86,825

 

 

$

55,542

 

 

Activity for the three-months ended March 31, 2020 and 2019 is as follows:

 

(table only in thousands)

 

2020

 

 

2019

 

Intangible assets – finite life, net at beginning of period

 

$

31,283

 

 

$

35,959

 

Amortization expense

 

 

(1,713

)

 

 

(2,160

)

Transfers from indefinite life classification

 

 

 

 

 

3,904

 

Foreign currency adjustments

 

 

(110

)

 

 

(70

)

Intangible assets – finite life, net at end of period

 

$

29,460

 

 

$

37,633

 

 

Amortization expense of finite life intangible assets was $1.7 million and $2.2 million for the three-month periods ended March 31, 2020 and 2019, respectively. Amortization over the next five years for finite life intangibles is expected to be $5.1 million for the remainder of 2020, $5.7 million in 2021, $4.8 million in 2022, $4.0 million in 2023, and $3.4 million in 2024.

During the three-month period ended March 31, 2019, the Company reassessed the useful lives of certain tradenames and determined that $3.9 million of their tradenames would have useful lives of 10 years now versus indefinite.

The Company completes an annual (or more often if circumstances require) goodwill and indefinite life intangible asset impairment assessment on October 1.  As a part of its impairment assessment, the Company first qualitatively assesses whether current events or changes in circumstances lead to a determination that it is more likely than not (defined as a likelihood of more than 50 percent) that the fair value of a reporting unit or indefinite life intangible asset is less than its carrying amount. If there is a qualitative determination that the fair value is more likely than not greater than carrying value, the Company does not need to quantitatively test for impairment. If this qualitative assessment indicates a more likely than not potential that the asset may be impaired, the estimated fair value is calculated. If the estimated fair value is less than carrying value, an impairment charge is recorded.

 

In 2019, we performed a quantitative assessment and concluded each of our reporting units and indefinite life intangible assets had excess fair value over their carrying value. However, as of March 31, 2020, we observed negative macroeconomic indicators resulting from the COVID-19 pandemic, which could have a direct impact on our business. We determined this constituted a triggering event that required an assessment to determine if an impairment loss may have occurred. Therefore, we qualitatively assessed whether it was more likely than not that goodwill and indefinite life intangible assets were impaired as of March 31, 2020. We reviewed our previous forecasts and assumptions based on our current projections, which are subject to various risks and uncertainties, including projected revenue, projected operational profit, terminal growth rates, and the cost of capital. Based on our interim impairment assessment as of March 31, 2020, we have determined that our goodwill and indefinite life intangible assets are not impaired. The Company’s assumptions about future conditions important to its assessment of potential impairment of its goodwill and indefinite life intangible assets, including the impacts of the COVID-19 pandemic, are subject to uncertainty, and the Company will continue to monitor these conditions in future periods as new information becomes available, and will update its analyses accordingly.

6.

Accounts Payable and Accrued Expenses

 

(table only in thousands)

 

March 31, 2020

 

 

December 31, 2019

 

Trade accounts payable, including amounts due to subcontractors

 

$

47,424

 

 

$

48,762

 

Compensation and related benefits

 

 

5,639

 

 

 

5,712

 

Accrued warranty

 

 

3,789

 

 

 

4,664

 

Contract liabilities

 

 

3,411

 

 

 

5,666

 

Short-term lease liability

 

 

2,613

 

 

 

2,610

 

Other

 

 

9,112

 

 

 

10,905

 

Total accounts payable and accrued expenses

 

$

71,988

 

 

$

78,319

 

9


 

7.

Senior Debt

Debt consisted of the following:

 

(table only in thousands)

 

March 31, 2020

 

 

December 31, 2019

 

Outstanding borrowings under the Credit Facility (defined below).

Payable in quarterly principal installments of $0.6 million

through June 2021, $0.9 million through June 2023, and $1.3

million thereafter with balance due upon maturity in June 2024.

 

 

 

 

 

 

 

 

- Term loan

 

$

48,125

 

 

$

48,750

 

- Revolving Credit Loan

 

 

61,500

 

 

 

18,500

 

- Unamortized debt discount