Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. Colfax CORP (1420800) 10-Q published on May 08, 2019 at 6:37 am
Reporting Period: Mar 28, 2019
Each TEU amortizing note has an initial principal amount of $15.6099, bears interest at a rate of 6.50% per annum and has a final installment payment date of January 15, 2022. On each January 15, April 15, July 15 and October 15, commencing on April 15, 2019, the Company pays equal quarterly cash installments of $1.4375 per TEU amortizing note (except for the April 15, 2019 installment payment, which was $1.5014 per TEU amortizing note), which will constitute a payment of interest and a partial repayment of principal, and which cash payment in the aggregate per year will be equivalent to 5.75% per year with respect to the $100 stated amount per unit. The TEU amortizing notes are the direct, unsecured and unsubordinated obligations of the Company and rank equally with all of the existing and future other unsecured and unsubordinated indebtedness of the Company.
The Company leases certain office spaces, warehouses, facilities, vehicles, and equipment. Leases with an initial term of twelve months or less are not recorded on the balance sheet. Most leases include renewal options, which can extend the lease term into the future. The Company determines the lease term by assuming options that are reasonably certain of being renewed will be exercised. Certain of the Company’s leases include rental payments adjusted for inflation. The right-of-use lease asset and lease liability are recorded on our Condensed Consolidated Balance Sheet, with the current lease liability being included in Accrued liabilities. Operating lease expense approximated cash paid for leases during the three months ended March 29, 2019.
Adjusted EBITA, a non-GAAP performance measure, is included in this report because it is a key metric used by management to assess our operating performance. Adjusted EBITA excludes Restructuring and other such charges, acquisition-related intangible asset amortization, and other non-cash acquisition-related charges and strategic transaction costs. Adjusted EBITA assists Colfax management in comparing its operating performance over time because certain items may obscure underlying business trends and make comparisons of long-term performance difficult, as they are of a nature and/or size that occur with inconsistent frequency or relate to discrete restructuring plans that are fundamentally different from the ongoing productivity improvements of the Company. Colfax management also believes that presenting these measures allows investors to view its performance using the same measures that the Company uses in evaluating its financial and business performance and trends.
Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information calculated in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures. The following tables set forth a reconciliation of Net (loss) income from continuing operations, the most directly comparable GAAP financial measure, to Adjusted EBITA.
We adopted ASU No. 2016-02, “Leases (Topic 842)”, as of January 1, 2019, using the modified retrospective approach. The modified retrospective approach provides a method for recording existing leases at adoption and in comparative periods that approximates the results of a full retrospective approach without restating prior periods. In addition, we elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed historical lease classification to be carried forward. Additionally, we elected the practical expedient to consolidate less significant non-lease components into the lease component for all asset classes. We made an accounting policy election, as permitted by Topic 842 to only record a right-of-use asset and related liability for leases with an initial term in excess of 12 months. We will recognize those lease payments in the Consolidated Statement of Operations on a straight-line basis over the lease term.
On May 7, 2019, the Company entered into an agreement amending the employment agreement of Ian Brander, Chief Executive Officer of Howden Group Limited (“Howden”) in contemplation of the potential sale of the Company’s air and gas handling business (the “proposed transaction”). Such amendment amends that certain Service Agreement, dated as of December 3, 2010, by and between Howden and Mr. Brander (the “Brander Amendment”). Under the Brander Amendment, Mr. Brander will be eligible to receive a $2,000,000 bonus upon closing of the potential transaction (“closing”), subject to his continued employment through closing (the “retention bonus”). Howden may, in its discretion, increase the retention bonus by up to $1,000,000 based on its assessment of the performance of Howden and Mr. Brander through closing. In the event the potential transaction does not close prior to March 31, 2020, Mr. Brander will not be eligible to receive the retention bonus, but will receive a $600,000 bonus, payable within 30 days following March 31, 2020, provided that he is employed through March 31, 2020 or terminated as a result of death or disability prior to such time. The Brander Amendment also provides that if Mr. Brander’s employment continues with the acquiring entity following closing, Mr. Brander’s annual bonus under the Management Incentive Plan (the “MIP bonus”) will be determined solely based on Howden performance. If Mr. Brander is terminated upon closing (other than for cause), he will receive his full MIP bonus with no pro-ration as soon as practicable following closing.