Company Quick10K Filing
Shiloh Industries
Price3.98 EPS-1
Shares24 P/E-5
MCap95 P/FCF3
Net Debt234 EBIT-4
TTM 2019-10-31, in MM, except price, ratios
10-Q 2020-07-31 Filed 2020-09-09
10-Q 2020-04-30 Filed 2020-07-24
10-Q 2020-01-31 Filed 2020-03-04
10-K 2019-10-31 Filed 2019-12-20
10-Q 2019-07-31 Filed 2019-09-05
10-Q 2019-04-30 Filed 2019-06-10
10-Q 2019-01-31 Filed 2019-03-12
10-K 2018-10-31 Filed 2018-12-20
10-Q 2018-07-31 Filed 2018-09-07
10-Q 2018-04-30 Filed 2018-06-06
10-Q 2018-01-31 Filed 2018-03-08
10-K 2017-10-31 Filed 2018-01-05
10-Q 2017-07-31 Filed 2017-08-29
10-Q 2017-04-30 Filed 2017-06-01
10-Q 2017-01-31 Filed 2017-03-09
10-K 2016-10-31 Filed 2017-01-17
10-Q 2016-07-31 Filed 2016-09-07
10-Q 2016-04-30 Filed 2016-06-08
10-Q 2016-01-31 Filed 2016-03-03
10-K 2015-10-31 Filed 2016-01-14
10-Q 2015-07-31 Filed 2015-09-15
10-Q 2015-04-30 Filed 2015-06-05
10-Q 2015-01-31 Filed 2015-03-11
10-K 2014-10-31 Filed 2015-01-13
10-Q 2014-07-31 Filed 2014-09-05
10-Q 2014-04-30 Filed 2014-05-23
10-Q 2014-01-31 Filed 2014-02-26
10-K 2013-10-31 Filed 2013-12-23
10-Q 2013-04-30 Filed 2013-05-23
10-Q 2013-01-31 Filed 2013-03-01
10-K 2012-10-31 Filed 2012-12-21
10-Q 2012-07-31 Filed 2012-08-23
10-Q 2012-04-30 Filed 2012-05-23
10-Q 2012-01-31 Filed 2012-02-22
10-K 2011-10-31 Filed 2011-12-21
10-Q 2011-07-31 Filed 2011-08-26
10-Q 2011-04-30 Filed 2011-05-27
10-Q 2011-01-31 Filed 2011-02-22
10-K 2010-10-31 Filed 2010-12-17
10-Q 2010-07-31 Filed 2010-08-25
10-Q 2010-04-30 Filed 2010-05-25
10-Q 2010-01-31 Filed 2010-02-24
8-K 2020-09-01
8-K 2020-08-25
8-K 2020-07-23
8-K 2020-07-01
8-K 2020-06-16
8-K 2020-06-11
8-K 2020-06-08
8-K 2020-05-04
8-K 2020-04-13
8-K 2020-03-03
8-K 2020-02-26
8-K 2019-12-19
8-K 2019-09-05
8-K 2019-08-12
8-K 2019-06-21
8-K 2019-06-10
8-K 2019-03-12
8-K 2019-02-26
8-K 2019-01-04
8-K 2018-12-20
8-K 2018-12-17
8-K 2018-09-07
8-K 2018-09-04
8-K 2018-06-25
8-K 2018-06-06
8-K 2018-03-28
8-K 2018-03-14
8-K 2018-03-08
8-K 2018-03-01
8-K 2018-03-01
8-K 2018-02-07
8-K 2018-01-05

SHLO 10Q Quarterly Report

Part I - Financial Information
Item 1.Condensed Consolidated Financial Statements
Note 1 - Basis of Presentation, Impact of Covid - 19 and Going Concern
Note 2 - Recent Accounting Standards
Note 3 - Revenue
Note 4 - Accounts Receivable, Net
Note 5 - Related Party Receivables
Note 6 - Inventories, Net
Note 7 - Goodwill and Intangible Assets
Note 8 - Financing Arrangements
Note 9 - Leases
Note 10 - Pension and Other Post - Retirement Benefit Matters
Note 11 - Accumulated Other Comprehensive Loss
Note 12 - Derivatives and Financial Instruments
Note 13 - Stock Incentive Compensation
Note 14 - Fair Value of Financial Instruments
Note 15 - Restructuring Charges
Note 16 - Income Taxes
Note 17 - Earnings per Share
Note 18 - Business Segment Information
Note 19 - Commitments and Contingencies
Note 20 - Other Matters
Note 21 - Subsequent Events
Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Qualitative and Quantitative Disclosures About Market Risk
Item 4.Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 6.Exhibits
EX-31.1 exhibit311q3fy20peocer.htm
EX-31.2 exhibit312q3fy20pfocer.htm
EX-32.1 exhibit321q3fy20soxcer.htm

Shiloh Industries Earnings 2020-07-31

Balance SheetIncome StatementCash Flow
Assets, Equity
Rev, G Profit, Net Income
Ops, Inv, Fin

000090497910/31July 31, 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Washington, DC 20549
For the quarterly period ended July 31, 2020
For the transition period from              to             
Commission file number 0-21964
(Exact name of registrant as specified in its charter) 
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
880 Steel Drive, Valley City, OH 44280
(Address of principal executive offices—zip code)
(330) 558-2600
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par valueSHLO
The NASDAQ Global Select Market (1)

(1) On September 1, 2020, Shiloh Industries, Inc. (the “Company”) received notice from the Listing Qualifications Staff of the Nasdaq Stock Market LLC (“Nasdaq”) that it had determined to commence proceedings to delist the common stock of the Company at the opening of business on September 10, 2020, and a Form 25-NSE will be filed with the Securities and Exchange Commission on such date. The delisting will be effective 10 days after the Form 25 is filed. It is expected that the Company’s common stock will begin trading on the OTC Pink Market on September 10, 2020.
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 FilerNon-accelerated FilerSmaller Reporting CompanyEmerging 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  
Number of shares of Common Stock outstanding as of September 4, 2020 was 24,216,512.

Table of Contents
Item 1A. Risk Factors
Item 6. Exhibits


Table of Contents

Item 1.Condensed Consolidated Financial Statements


(Dollar amounts in thousands)
July 31,
October 31,
Cash and cash equivalents$30,262 $14,320 
Accounts receivable, net 142,899 172,468 
Related party accounts receivable605 1,477 
Prepaid income taxes2,569 1,853 
Inventories, net54,283 63,547 
Prepaid expenses5,943 8,980 
Other current assets21,718 13,354 
Total current assets258,279 275,999 
Property, plant and equipment, net203,047 328,026 
Goodwill 22,395 
Intangible assets, net6,876 13,025 
Deferred income taxes5,258 5,169 
Operating lease assets51,378  
Other assets5,232 7,077 
Total assets$530,070 $651,691 
Current debt$324,779 $1,975 
Accounts payable100,293 155,754 
Current portion of operating lease liabilities7,545  
Other accrued expenses49,947 50,093 
Accrued income taxes92 316 
Total current liabilities482,656 208,138 
Long-term debt 248,695 
Long-term benefit liabilities23,442 24,147 
Deferred income taxes841 798 
Noncurrent operating lease liabilities43,833  
Other liabilities1,178 2,399 
Total liabilities551,950 484,177 
Commitments and contingencies
Stockholders’ equity (deficit):
Preferred stock, $0.01 per share; 5,000,000 shares authorized; no shares issued and outstanding at July 31, 2020 and October 31, 2019, respectively  
Common stock, par value $0.01 per share; 75,000,000 shares authorized at July 31, 2020 and October 31, 2019; 24,308,119 and 23,790,258 shares issued and outstanding at July 31, 2020 and October 31, 2019, respectively243 238 
Paid-in capital117,815 116,436 
Retained earnings (deficit)(83,656)115,866 
Accumulated other comprehensive loss, net(56,282)(65,026)
Total stockholders’ equity (deficit)(21,880)167,514 
Total liabilities and stockholders’ equity (deficit)$530,070 $651,691 

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents
(Amounts in thousands, except per share data)
Three Months Ended July 31,Nine Months Ended July 31,
Net revenues$155,367 $263,445 $556,781 $795,748 
Cost of sales148,335 239,857 530,986 729,790 
Gross profit7,032 23,588 25,795 65,958 
Selling, general & administrative expenses 25,165 18,105 58,059 51,069 
Amortization of intangible assets514 518 1,538 1,558 
Asset impairment, net109,633  134,104  
Restructuring2,196 3,905 13,397 11,371 
Operating income (loss)(130,476)1,060 (181,303)1,960 
Interest expense5,379 4,633 14,362 11,836 
Interest income(5)(4)(14)(10)
Other (income) expense, net 1,875 113 2,221 (959)
Loss before income taxes(137,725)(3,682)(197,872)(8,907)
Provision (benefit) for income taxes(591)(973)1,650 (2,612)
Net loss$(137,134)$(2,709)$(199,522)$(6,295)
Loss per share:
Basic loss per share$(5.76)$(0.11)$(8.40)$(0.27)
Basic weighted average number of common shares23,824 23,557 23,754 23,486 
Diluted loss per share$(5.76)$(0.11)$(8.40)$(0.27)
Diluted weighted average number of common shares23,824 23,557 23,754 23,486 

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents
(Dollar amounts in thousands)

Three Months Ended July 31,Nine Months Ended July 31,
Net loss$(137,134)$(2,709)$(199,522)$(6,295)
Other comprehensive income (loss)
Defined benefit pension plans & other post-retirement benefits
Amortization of net actuarial loss376 289 1,128 865 
Income tax (benefit)(86)(66)(258)(198)
Total defined benefit pension plans & other post-retirement benefits, net of tax290 223 870 667 
Marketable securities
Realized gain   18 
Total marketable securities, net of tax   18 
Derivatives and hedging
Unrealized loss on interest rate swap agreements(10)(301)(368)(1,030)
Income tax benefit (provision)(62)58 (60)195 
Reclassification adjustments for settlement of derivatives included in net income (loss)283 51 634 181 
Change in fair value of derivative instruments, net of tax211 (192)206 (654)
Foreign currency translation adjustments
Foreign currency translation gain (loss)13,671 (1,940)7,668 (3,713)
Unrealized gain (loss) on foreign currency translation13,671 (1,940)7,668 (3,713)
Comprehensive loss, net$(122,962)$(4,618)$(190,778)$(9,977)

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

(Dollar amounts in thousands)
Nine months ended July 31,
Net loss$(199,522)$(6,295)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization36,395 35,010 
Asset impairment134,104  
Restructuring 404 1,610 
Amortization of deferred financing costs1,572 1,033 
Deferred income taxes2,044 232 
Stock-based compensation expense1,386 1,576 
Loss (gain) on sale of assets986 (3,562)
Loss on marketable securities 29 
Changes in operating assets and liabilities:
Accounts receivable, net31,054 30,213 
Inventories, net9,488 3,900 
Prepaids and other assets(1,695)(1,564)
Payables and other liabilities(55,496)(30,965)
Prepaid and accrued income taxes(937)(6,863)
Net cash (used in) provided by operating activities(40,217)24,354 
Capital expenditures(23,501)(48,643)
Derivative settlements 5,869 
Proceeds from sale of assets3,274 12,339 
Net cash used in investing activities(20,227)(30,435)
Payment of capital leases(96)(495)
Proceeds from long-term borrowings152,900 223,400 
Repayments of long-term borrowings(78,700)(220,000)
Payment of deferred financing costs(98)(1,948)
Net cash provided by financing activities74,006 957 
Effect of foreign currency exchange rate fluctuations on cash2,380 217 
Net increase (decrease) in cash and cash equivalents15,942 (4,907)
Cash and cash equivalents at beginning of period14,320 16,843 
Cash and cash equivalents at end of period$30,262 $11,936 

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

(Dollar amounts in thousands)
Common Stock (.01 Par Value)Paid-in-CapitalRetained Earnings (Deficit)Accumulated Other Comprehensive LossTotal Stockholders' Equity (Deficit)
April 30, 2019$238 $115,391 $132,227 $(52,703)$195,153 
Net loss  (2,709) (2,709)
Other comprehensive income (loss), net of tax   (1,909)(1,909)
Stock-based compensation cost 586   586 
July 31, 2019$238 $115,977 $129,518 $(54,612)$191,121 
April 30, 2020$243 $117,551 $53,478 $(70,454)$100,818 
Net loss  (137,134) (137,134)
Other comprehensive income (loss), net of tax   14,172 14,172 
Stock-based compensation cost 264   264 
July 31, 2020$243 $117,815 $(83,656)$(56,282)$(21,880)

Common Stock (.01 Par Value)Paid-in-CapitalRetained Earnings (Deficit)Accumulated Other Comprehensive LossTotal Stockholders' Equity (Deficit)
October 31, 2018$234 $114,405 $135,813 $(50,930)$199,522 
Net loss  (6,295) (6,295)
Other comprehensive income (loss), net of tax   (3,682)(3,682)
Restricted stock and exercise of stock options4 (4)   
Stock-based compensation cost 1,576   1,576 
July 31, 2019$238 $115,977 $129,518 $(54,612)$191,121 
October 31, 2019$238 $116,436 $115,866 $(65,026)$167,514 
Net loss  (199,522) (199,522)
Other comprehensive income (loss), net of tax   8,744 8,744 
Restricted stock and exercise of stock options5 (7)  (2)
Stock-based compensation cost 1,386   1,386 
July 31, 2020$243 $117,815 $(83,656)$(56,282)$(21,880)

The accompanying notes are an integral part of these condensed consolidated financial statements.


(Dollar amounts and number of shares in thousands except per share data)

Note 1—Basis of Presentation, Impact of COVID-19 and Going Concern

The condensed consolidated financial statements have been prepared for Shiloh Industries, Inc. and its subsidiaries (collectively referred to as the "Company," "Shiloh Industries," "us," "our" or "we"), without audit, and pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). The information furnished in the condensed consolidated financial statements includes normal recurring adjustments and reflects all adjustments, which are, in the opinion of management, necessary for a fair presentation of such financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States ("GAAP") have been condensed or omitted pursuant to the rules and regulations of the SEC. Although we believe that the disclosures are adequate to make the information presented not misleading, these condensed consolidated financial statements should be read in conjunction with the audited financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended October 31, 2019. Revenues and operating results for the three and nine months ended July 31, 2020 are not necessarily indicative of the results to be expected for the full year.

Impact of Covid-19

In December 2019, a novel strain of coronavirus (“COVID-19”) was reported to have surfaced in Wuhan, China, which has spread throughout the world, including the United States. On January 30, 2020, the World Health Organization declared the outbreak of COVID-19 a “Public Health Emergency of International Concern,” and on March 11, 2020, it characterized the outbreak as a “pandemic.”  The Company’s manufacturing operations were initially impacted at the beginning of our second quarter by COVID-19 in Asia and the last half of the quarter in Europe and North America. The impact of COVID-19 developments and uncertainty with respect to the economic effects of the pandemic has introduced significant volatility in the financial markets and is having a widespread adverse effect on the automotive industry, including reductions in consumer demand and OEM automotive production. As a result, COVID-19 has impacted the Company's business globally. Many OEMs suspended manufacturing operations, particularly in North America, Europe and Asia, on a temporary basis due to market conditions and matters associated with COVID-19.

Our operations in China were closed for all of February and part of March 2020. In July 2020, we are operating at levels near full capacity in China. Our operations in North America and Europe, for the most part, closed down during March and April 2020. Beginning near the end of May and the beginning of June, our operations in Europe and North America, respectively, began fulfilling and shipping orders to our customers. Due to the safety protocols established, we have been able to restart production, although we have experienced normal start-up operational issues in some of our plants related to being shut down for an extended period of time.

Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which presumes that we will be able to realize our assets and discharge our liabilities in the normal course of business as they come due. As of July 31, 2020, the Company has significant indebtedness due within the next twelve months and cash flow from operations has not been sufficient to meet the Company’s liquidity demands. As a result, as described in Note 21, on August 30, 2020 (the “Petition Date”), the Company and its U.S. subsidiaries (collectively with the Company, the “Debtors”) each filed a voluntary petition for relief (the “Bankruptcy Petitions,” and the cases commenced thereby, the “Chapter 11 Cases”) under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”). These matters raise substantial doubt about the Company’s ability to continue as a going concern. Financial information in this Quarterly Report on Form 10-Q does not reflect the adjustments to the carrying values of assets and liabilities and the reported expenses and balance sheet classifications that would be necessary if we were unable to realize our assets and settle our liabilities as a going concern in the normal course of operations. Such adjustments could be material.

Our future plans, including those in connection with the Chapter 11 filings, are not yet finalized, fully executed or approved by the Bankruptcy Court, and therefore cannot be deemed probable of mitigating this substantial doubt within 12 months of the date of issuance of these financial statements.


Note 2—Recent Accounting Standards

Recently Issued Accounting Standards:

ASU 2020-04 Reference Rate Reform (Topic 848) - On March 12, 2020, the Financial Accounting Standards Board (FASB) issued this guidance that provides optional expedients and exceptions that are intended to ease the burden of updating contracts to contain a new reference rate due to the discontinuation of the London Inter-Bank Offered Rate (LIBOR). This guidance is available immediately and may be implemented in any period prior to the guidance expiration on December 31, 2022. We are currently assessing which of our various contracts will require an update for a new reference rate, and will determine the timing for our implementation of this guidance at the completion of that analysis.

ASU 2019-12 Income Taxes: Simplifying the Accounting for Income Taxes - This Accounting Standards Update removes specific exceptions to the general principles in Topic 740 in Generally Accepted Accounting Principles (GAAP). It eliminates the need for an organization to analyze whether the following apply in a given period: (1) Exception to the incremental approach for intraperiod tax allocation, (2) Exception accounting for basis differences when there are ownership changes in foreign investments, (3) Exception to the requirement to recognize a deferred tax liability for equity method investments when a foreign subsidiary becomes an equity method investment and (4) Exception in interim period income tax accounting for year-to-date losses that exceed anticipated losses. Also, this amendment updates the following: (1) Making minor Codification improvements for income taxes related to employee stock ownership plans and investments in qualified affordable housing projects accounted for using the equity method, (2) Requiring that an entity reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date and (3) Requiring that an entity evaluate when a step up in the tax basis of goodwill should be considered part of the business combination in which the book goodwill was originally recognized and when it should be considered a separate transaction. We expect to adopt this guidance on November 1, 2021 and we are currently assessing the impact that this standard will have on our consolidated financial statements.

ASU 2018-14 Compensation-Retirements Benefits-Defined Benefit Plans - This ASU amendment adds the following to disclosure requirements: (1) The weighted-average interest crediting rates used in the entity’s cash balance pension plans and other similar plans, (2) A narrative description of the reasons for significant gains and losses affecting the benefit obligation for the period, (3) An explanation of any other significant changes in the benefit obligation or plan assets that are not otherwise apparent in the other disclosures required by Accounting Standards Codification ("ASC") Topic 715, Compensation-Retirement Benefits. Also, this amendment clarifies the guidance in ASC 715-20-50-3 on defined benefit plans to require disclosure of (1) the projected benefit obligation (PBO) and fair value of plan assets for pension plans with PBOs in excess of plan assets (the same disclosure with reference to the accumulated postretirement benefit obligation rather than the PBO is required for other postretirement benefit plans) and (2) the accumulated benefit obligation (ABO) and fair value of plan assets for pension plans with ABOs in excess of plan assets. We expect to adopt this guidance on November 1, 2021 and we are currently assessing the impact that this standard will have on our consolidated financial statements.

ASU 2016-13 Measurement of Credit Losses on Financial Instruments - The amendments change the impairment model for financial assets measured at amortized cost and available for sale equity securities. This new model will apply to instruments such as loans, held-to-maturity debt securities, loan commitments (including lines of credit), financial guarantees accounted for under ASC 460, net investments in leases, reinsurance and trade receivables. This model will result in an earlier recognition of allowances for losses through the establishment of an allowance account. The estimate of expected credit losses should consider historical and current information, and the reasonable and supportable forecasts of future events and circumstances, as well as estimates of prepayments. We expect to adopt this guidance on November 1, 2020 and we are currently assessing the impact that this standard will have on our consolidated financial statements and disclosures.

        ASU 2018-15 Internal-Use Software - The amendments apply to the accounting for implementation, setup and other upfront costs (collectively referred to as implementation costs) for entities that are a customer in a hosting arrangement and align the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The amendments also require customers to expense capitalized implementation costs over the term of the hosting arrangement and in the same line on the income statement as the fees associated with the hosting service and payments for the capitalized implementation costs in the statement of cash flows in the same manner as payments made for fees associated with the hosting service. We expect to adopt this guidance on November 1,

2020 and we are currently assessing the impact that this standard will have on our consolidated financial statements and disclosures.

Recently Adopted Accounting Standards:

        ASU 2016-02 Leases - This amendment requires lessees to recognize a lease liability and a right-of-use asset on the balance sheet and aligns many of the underlying principles of the new lessor model with those in ASC Topic 606, Revenue from Contracts with Customers. The standard requires a modified retrospective or current period transition approach for capital and operating leases existing at or entered into after the beginning of the earliest comparative period presented in the financial statements, but it does not require transition accounting for leases that expire prior to the date of initial adoption. In January 2018, the FASB issued an amendment to ASC Topic 842 which permits companies to elect an optional transition practical expedient to not evaluate existing land easements under the new standard if the land easements were not previously accounted for under existing lease guidance. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842 which clarifies certain areas within ASU 2016-02. ASU 2018-11 Targeted Improvements to Topic 842, Leases. This amendment provides entities with an additional (and optional) transition method to adopt the new leases standard. Under this new transition method, an entity initially applies the new leases standard at the adoption date. The Company adopted this guidance on November 1, 2019.  

        The Company has applied ASU 2016-02 and all related amendments ("ASC 842") using the current period adjustment method. The Company did not record any adjustments to the opening balance of retained earnings as of November 1, 2019. Therefore, the comparative information has not been adjusted and continues to be presented under prior lease guidance. In addition, the Company elected the following package of practical expedients on a consistent basis permitting entities not to reassess: (1) whether any expired or existing contract are/or contain a lease; (2) lease classification for any expired or existing leases; (3) whether initial direct costs for any expired or existing leases qualify for capitalization under the new amended guidance. As a result, as of November 1, 2019, we recorded right-of-use ("ROU") assets of $50,540 for operating leases and $2,000 for financing leases. This standard did not have a material impact on the Company's condensed consolidated statement of operations or statement of cash flows.

        The Company determines if an arrangement is a lease at inception. Operating leases are included in ROU assets and the Company's short-term and long-term operating lease liability on our Condensed Consolidated Balance Sheets. Finance leases are included in other assets, other current liabilities, and other non-current liabilities on our Condensed Consolidated Balance Sheets.
        ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the term of the lease. The Company includes options to extend or terminate the lease when it is reasonably certain that we will exercise that option. As most of the Company's leases do not provide an implicitly stated rate within the contract, we use our incremental borrowing rate based on third party information available at the commencement date in determining the present value of lease payments. Lease expenses for lease payments on operating leases are recognized on a straight-line basis over the lease term. Additionally, the Company does not record a ROU asset or lease liability for leases with an expected lease term of 12 months or less.

        The Company has lease arrangements with lease and non-lease components, which are accounted for separately across the Company's portfolio of leases. The non-lease components consist of maintenance, insurance, taxes and other expenses, and are immaterial.

        The Company has exercised the land easement expedient and will continue to treat land leases under legacy GAAP provisions of ASC 840, Leases. If a modification or extension happens to a land lease, the Company will then treat the lease under the ASC 842 requirements. Current land leases are being recorded in other assets on the Company's Condensed Consolidated Balance Sheets.

Note 3Revenue

        The Company manufactures and sells products, primarily to original equipment manufacturers ("OEMs") and to OEMs through Tier 1 suppliers. We enter into contracts with customers that create enforceable rights and obligations for the sale of

those products. While certain production is provided under awarded multi-year programs, these programs do not contain any commitment to volume by the customer. Individual customer volume releases, blanket purchase orders, supply agreements, terms and conditions represent the contract with the customer. Volume releases are limited to near-term customer requirements generally with delivery periods within a few weeks. We do not have contract assets or liabilities as defined under ASC 606, "Revenue from Contracts with Customers".

        The Company participates in certain customers’ materials repurchase programs, under which we purchase materials directly from a customer’s designated supplier, for use in manufacturing products for that customer. We take delivery and title to such materials and bear the risk of loss and obsolescence. We invoice customers based upon negotiated selling prices, which inherently include a component for materials under such repurchase programs. We have risks and rewards of a principal, and as such, for transactions in which we participate in customers' materials resale programs, revenue is recognized on a gross basis for the entire amount, including the component for purchases under that customers' material resale programs.
        We provide customers with standard warranties customary in the industry that products will operate as intended or designed, which are not separate performance obligations under ASC 606. We do not provide customers with the right to a refund but provide for product replacement. Returns or refunds for nonconforming products are not separate performance obligations applicable to the Company's contract arrangements with customers.

        We continue to include shipping and handling fees billed to customers in revenue, while including costs of shipping and handling in costs of sales as a fulfillment cost. Taxes collected from customers are excluded from revenues and credited directly to obligations to the appropriate government agencies. Payment terms with customers are established based on industry and regional practices and do not exceed 180 days.

Disaggregation of Net Revenues

        The following table summarizes revenue for the three and nine months ended July 31, 2020 and 2019:
Net Revenues
Three Months Ended July 31,Nine Months Ended July 31,
North America$114,133 $203,920 $412,336 $606,872 
Europe34,696 61,685 131,672 194,883 
Asia13,188 3,529 30,595 10,877 
Total Company$155,367 $263,445 $556,781 $795,748 

Note 4—Accounts Receivable, Net
Accounts receivable, net is expected to be collected within one year and is net of an allowance for doubtful accounts in the amount of $1,147 and $884 at July 31, 2020 and October 31, 2019, respectively. We recognized bad debt expense of $1,993 and $2,535 for the three and nine months ended July 31, 2020 and recognized bad debt expense of $3 and $329 during the three and nine months ended July 31, 2019, in the condensed consolidated statement of operations.
We continually monitor our exposure with our customers and additional consideration is given to individual accounts considering the COVID-19 market conditions in the automotive and commercial vehicle markets.

As a part of our working capital management, the Company has entered into factoring agreements with third party financial institutions ("institutions") for the sale of certain accounts receivable, with and without recourse. The sale of the receivables is accounted for in accordance with ASC 860, Transfers and Servicing. Under that guidance, receivables are considered sold when they are transferred beyond the reach of the Company and its creditors, the purchaser has the right to pledge or exchange the receivables, and the Company has surrendered control over the transferred receivables. In addition, certain agreements address events and conditions which may obligate the Company to immediately repay to the institutions the outstanding purchase price of the receivables sold.


The total amount of trade accounts receivable factored was $5,966 and $8,779 as of July 31, 2020 and October 31, 2019, respectively. As these sales of trade accounts receivable are with recourse, $4,578 and $9,188 were recorded in accounts payable as of July 31, 2020 and October 31, 2019, respectively. The cost of selling these receivables is dependent upon the number of days between the sale date of the receivables, the date the customer’s invoice is due and the interest rate. The expense associated with the sale of these receivables is recorded as a component of selling, general and administrative expense in the accompanying condensed consolidated statements of operations.

As of July 31, 2020 and October 31, 2019, $3,235 and $2,538 of trade accounts receivable were subject to factoring without recourse, respectively. The amounts subject to factoring without recourse for the year 2020 have been included in the proceeds for net cash provided by operating activities in the consolidated statements of cash flows. The expense associated with the sale of the receivables is recorded as a component of selling, general and administrative expense in the accompanying condensed consolidated statements of operations.

Note 5—Related Party Receivables

        MTD Products Inc. and MTD Holdings LLC are affiliates of Oak Tree Holdings LLC, which is a greater than 5% beneficial owner of the Company's shares of Common Stock.
        Sales to MTD Products Inc. and its affiliates were $1,309 and $4,225 for the three and nine months ended July 31, 2020, respectively, and $1,322 and $5,521 for the three and nine months ended July 31, 2019, respectively. At July 31, 2020 and October 31, 2019, we had related party receivable balances of $605 and $1,477, respectively, due from MTD Products Inc. and its affiliates.

Note 6—Inventories, Net
Inventories, net consists of the following:
July 31, 2020October 31, 2019
Raw materials$22,512 $26,653 
Work in process20,558 21,369 
Finished goods18,860 19,470 
Total inventories, net$54,283 $63,547 

Note 7 —Goodwill and Intangible Assets


        In accordance with FASB ASC Topic 350, "Intangibles – Goodwill and Other", goodwill must be reviewed for impairment annually, or more frequently if events and circumstances arise that suggest the asset may be impaired. We conduct our review for goodwill impairment on September 30 of each year. Goodwill impairment testing is performed at the reporting unit level. The fair value is compared to the carrying value including goodwill. If the carrying value exceeds the fair value, then goodwill impairment exists. The impact of COVID-19 developments and uncertainty with respect to the economic effects of the pandemic has introduced significant volatility in the financial markets and is having a widespread adverse effect on the automotive industry, including reductions in consumer demand and OEM automotive production. In response to the COVID-19 pandemic, our key customers temporarily closed nearly all their production facilities in North America, Europe and Asia (our primary markets) over the course of the quarter ended April 30, 2020. As a result, we concluded that an interim test of our goodwill was required. More specifically, the Company concluded that the following events and circumstances, in the aggregate, indicated that it was more likely than not that the carrying value of our North American reporting unit exceeded its fair value: (1) lower forecasted 2020 industry production volumes for North America, including those for our primary North American customers, due to OEM shutdowns to mitigate the spread of COVID-19 and subsequent reduced production levels over the remainder of the year, as compared to our prior production forecasts (including estimates used in our 2019 assessment) and (2) the volatility in financial markets that has lowered median North American automotive market multiples. Based on the

results of our quantitative analysis, we recognized a non-cash goodwill impairment charge equal to the remaining goodwill balance of $21,971 since the carrying value exceeded the fair value of the North American reporting unit by more than the amount of the goodwill balance at April 30, 2020.
        We utilized both an income and a market approach, to determine the fair value of the North American reporting unit as part of our goodwill impairment assessment. The income approach is based on projected debt-free cash flow, which is discounted to the present value using discount factors that consider the timing and risk of cash flows. The discount rate used is the weighted average of an estimated cost of equity and of debt (“weighted average cost of capital”). The weighted average cost of capital is adjusted as necessary to reflect risk associated with the business of the North American reporting unit. Financial projections are based on estimated production volumes, product prices and expenses, including raw material cost, wages, energy and other expenses. Other significant assumptions include terminal value cash flow and growth rates, future capital expenditures and changes in future working capital requirements. The market approach is based on the observed share prices of comparable, publicly traded companies. The market approach fair value was determined by multiplying outstanding share capital by the associated market value of the Company’s stock at April 30, 2020. A considerable amount of management judgment and assumptions were required in performing the quantitative impairment test, principally related to determining the fair value of the reporting unit.