QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||
352 2668 62-1 | |||||
(Address of principal executive offices and zip code) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
OTC Markets Group Inc. |
x | Accelerated filer | o | ||||||||||||
Non-accelerated filer | o | Smaller reporting company | ||||||||||||
Emerging growth company |
Page | ||||||||
Item 1A. | Risk Factors | |||||||
June 30, 2023 | December 31, 2022 | ||||||||||
ASSETS | (Unaudited) | ||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Accounts receivable, net | |||||||||||
Inventories | |||||||||||
Income tax receivable | |||||||||||
Prepaid expenses and other current assets | |||||||||||
Total current assets | |||||||||||
Property, plant and equipment, net | |||||||||||
Operating lease right-of-use assets | |||||||||||
Finance lease right-of-use assets | |||||||||||
Goodwill | |||||||||||
Customer lists, net | |||||||||||
Technology and patents, net | |||||||||||
Tradenames, net | |||||||||||
Other assets, net | |||||||||||
Total assets | $ | $ | |||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | $ | $ | |||||||||
Accrued expenses and other current liabilities | |||||||||||
Founders advisory fees payable - related party | |||||||||||
Deferred revenue | |||||||||||
Total current liabilities | |||||||||||
Long-term debt | |||||||||||
Operating lease liabilities, net of current portion | |||||||||||
Finance lease liabilities, net of current portion | |||||||||||
Deferred income taxes | |||||||||||
Founders advisory fees payable - related party | |||||||||||
Redeemable preferred shares | |||||||||||
Redeemable preferred shares - related party | |||||||||||
Other non-current liabilities | |||||||||||
Total liabilities | |||||||||||
Commitments and contingencies (Note 9) | |||||||||||
Shareholders’ equity: | |||||||||||
Ordinary shares, $ | |||||||||||
Treasury shares, at cost; | ( | ( | |||||||||
Additional paid-in capital | |||||||||||
Accumulated other comprehensive loss | ( | ( | |||||||||
Accumulated deficit | ( | ( | |||||||||
Total shareholders’ equity | |||||||||||
Total liabilities and shareholders’ equity | $ | $ |
Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | ||||||||||||||||||||
Net sales | $ | $ | $ | $ | |||||||||||||||||||
Cost of goods sold | |||||||||||||||||||||||
Gross profit | |||||||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||
Selling, general and administrative expense | |||||||||||||||||||||||
Amortization expense | |||||||||||||||||||||||
Founders advisory fees - related party | ( | ( | ( | ( | |||||||||||||||||||
Other operating expense | |||||||||||||||||||||||
Total operating expenses | ( | ( | ( | ||||||||||||||||||||
Operating income | |||||||||||||||||||||||
Other expense (income): | |||||||||||||||||||||||
Interest expense, net | |||||||||||||||||||||||
Loss (gain) on contingent earn-out | ( | ( | |||||||||||||||||||||
Unrealized foreign currency loss (gain) | ( | ||||||||||||||||||||||
Other expense (income), net | ( | ( | |||||||||||||||||||||
Total other expense, net | |||||||||||||||||||||||
Income before income taxes | |||||||||||||||||||||||
Income tax (expense) benefit | ( | ( | |||||||||||||||||||||
Net income | |||||||||||||||||||||||
Other comprehensive income (loss), net of tax: | |||||||||||||||||||||||
Foreign currency translation adjustments | ( | ( | |||||||||||||||||||||
Total comprehensive income (loss) | $ | $ | ( | $ | $ | ||||||||||||||||||
Earnings per share: | |||||||||||||||||||||||
Basic | $ | $ | $ | $ | |||||||||||||||||||
Diluted | $ | $ | $ | $ | |||||||||||||||||||
Weighted average number of ordinary shares outstanding: | |||||||||||||||||||||||
Basic | |||||||||||||||||||||||
Diluted |
Ordinary Shares | Treasury Shares | Additional Paid-in Capital | Accumulated Other Comprehensive Loss | Accumulated Deficit | Total Shareholders' Equity | ||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||
Balance, December 31, 2021 | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||
Share-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
Ordinary share issued related to founders advisory fees - related party | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
Ordinary share issued related to warrants exercised | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
— | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
Balance, March 31, 2022 | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
Share-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
Ordinary shares repurchased | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
Balance, June 30, 2022 | $ | $ | ( | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||
Ordinary Shares | Treasury Shares | Additional Paid-in Capital | Accumulated Other Comprehensive Loss | Accumulated Deficit | Total Shareholders' Equity | ||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||
Balance, December 31, 2022 | $ | $ | ( | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||
Share-based compensation | — | — | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||
Ordinary shares issued related to founders advisory fees - related party | — | — | ( | — | — | ||||||||||||||||||||||||||||||||||||||||||
Ordinary shares repurchased | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
Balance, March 31, 2023 | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
Share-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
Ordinary shares repurchased | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
Balance, June 30, 2023 | $ | $ | ( | $ | $ | ( | $ | ( | $ |
Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | ||||||||||
Cash flows from operating activities: | |||||||||||
Net income | $ | $ | |||||||||
Adjustments to reconcile net income to net cash used in operating activities: | |||||||||||
Founders advisory fees - related party (change in accounting fair value) | ( | ( | |||||||||
Depreciation and amortization expense | |||||||||||
Interest and payment-in-kind on preferred shares | |||||||||||
Share-based compensation | ( | ||||||||||
Non-cash lease expense | |||||||||||
Deferred income taxes | ( | ( | |||||||||
Amortization of deferred financing costs | |||||||||||
Amortization of acquisition related inventory step-up | |||||||||||
Loss (gain) on contingent earn-out | ( | ||||||||||
Unrealized (gain) loss on foreign currency | ( | ||||||||||
Loss on disposal of assets | |||||||||||
Changes in operating assets and liabilities, net of acquisitions: | |||||||||||
Accounts receivable | ( | ( | |||||||||
Inventories | ( | ( | |||||||||
Prepaid expenses and current other assets | |||||||||||
Accounts payable | ( | ||||||||||
Deferred revenue | |||||||||||
Income taxes payable, net | ( | ( | |||||||||
Accrued expenses and other current liabilities | ( | ||||||||||
Founders advisory fees - related party (cash settled) | ( | ( | |||||||||
Operating lease liabilities | ( | ( | |||||||||
Finance lease liabilities | ( | ||||||||||
Other liabilities | ( | ||||||||||
Net cash used in operating activities | ( | ( | |||||||||
Cash flows from investing activities: | |||||||||||
Purchase of property and equipment | ( | ( | |||||||||
Purchase price adjustment under Business Combination Agreement | ( | ||||||||||
Net cash used in investing activities | ( | ( | |||||||||
Cash flows from financing activities: | |||||||||||
Ordinary shares repurchased | ( | ( | |||||||||
Proceeds from exercise of warrants | |||||||||||
Principal payments on finance lease obligations | ( | ||||||||||
Net cash used in financing activities | ( | ( | |||||||||
Effect of foreign currency on cash and cash equivalents | ( | ( | |||||||||
Net change in cash and cash equivalents | ( | ( | |||||||||
Cash and cash equivalents, beginning of period | |||||||||||
Cash and cash equivalents, end of period | $ | $ | |||||||||
Supplemental disclosures of cash flow information: | |||||||||||
Cash paid for interest | $ | $ | |||||||||
Cash paid for income taxes | $ | $ | |||||||||
Non-cash investing and financing activities: | |||||||||||
Liability portion of founders advisory fees - related party reclassified to additional paid in capital | $ | $ |
June 30, 2023 | December 31, 2022 | ||||||||||
Inventory: | |||||||||||
Raw materials and manufacturing supplies | $ | $ | |||||||||
Work in process | |||||||||||
Finished goods | |||||||||||
Total inventory | $ | $ | |||||||||
Prepaid Expenses and Other Current Assets: | |||||||||||
Advance to vendors | $ | $ | |||||||||
Prepaid insurance | |||||||||||
Prepaid value-added taxes | |||||||||||
Other | |||||||||||
Total prepaid expenses and other current assets | $ | $ | |||||||||
Property, Plant and Equipment: | |||||||||||
Buildings | $ | $ | |||||||||
Leasehold improvements | |||||||||||
Furniture and fixtures | |||||||||||
Machinery and equipment | |||||||||||
Vehicles | |||||||||||
Construction in progress | |||||||||||
Total property, plant and equipment, gross | |||||||||||
Less: Accumulated depreciation | ( | ( | |||||||||
Total property, plant and equipment, net | $ | $ | |||||||||
Accrued Expenses and Other Current Liabilities: | |||||||||||
Accrued bonus | $ | $ | |||||||||
Accrued salaries | |||||||||||
Accrued employee benefits | |||||||||||
Accrued interest | |||||||||||
Accrued purchases | |||||||||||
Accrued taxes | |||||||||||
Operating lease liabilities | |||||||||||
Finance lease liabilities | |||||||||||
Other | |||||||||||
Total accrued expenses and other current liabilities | $ | $ | |||||||||
Other Non-Current Liabilities: | |||||||||||
LaderaTech contingent earn-out | $ | $ | |||||||||
Other | |||||||||||
Total other non-current liabilities | $ | $ |
Fire Safety | Specialty Products | Total | |||||||||||||||
Balance, December 31, 2022 | $ | $ | $ | ||||||||||||||
Foreign currency translation | |||||||||||||||||
Balance, June 30, 2023 | $ | $ | $ |
June 30, 2023 | |||||||||||||||||||||||||||||
Estimated Useful Life (in years) | Gross Value | Foreign Currency Translation | Accumulated Amortization | Net Book Value | |||||||||||||||||||||||||
Definite Lived Intangible Assets: | |||||||||||||||||||||||||||||
Customer lists | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||
Technology and patents | ( | ( | |||||||||||||||||||||||||||
Tradenames | ( | ( | |||||||||||||||||||||||||||
Balance, June 30, 2023 | $ | $ | ( | $ | ( | $ |
December 31, 2022 | |||||||||||||||||||||||||||||
Estimated Useful Life (in years) | Gross Value | Foreign Currency Translation | Accumulated Amortization | Net Book Value | |||||||||||||||||||||||||
Definite Lived Intangible Assets: | |||||||||||||||||||||||||||||
Customer lists | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||
Technology and patents | ( | ( | |||||||||||||||||||||||||||
Tradenames | ( | ( | |||||||||||||||||||||||||||
Balance, December 31, 2022 | $ | $ | ( | $ | ( | $ |
2023 remaining | $ | |||||||
2024 | ||||||||
2025 | ||||||||
2026 | ||||||||
2027 | ||||||||
Thereafter | ||||||||
Total | $ |
Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | |||||||||||||||||||||||
Operating lease cost(1) | $ | $ | $ | $ | ||||||||||||||||||||||
Finance lease cost: | ||||||||||||||||||||||||||
Amortization of right-of-use assets | ||||||||||||||||||||||||||
Interest on lease liabilities | ||||||||||||||||||||||||||
Total lease cost | $ | $ | $ | $ | ||||||||||||||||||||||
Reported in: | ||||||||||||||||||||||||||
Cost of goods sold | $ | $ | $ | $ | ||||||||||||||||||||||
Selling, general and administrative | ||||||||||||||||||||||||||
Total lease cost | $ | $ | $ | $ |
Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | ||||||||||
Cash paid for amounts included in the measurement of lease liabilities: | |||||||||||
Operating cash flows for operating leases | $ | $ | |||||||||
Operating cash flows for finance leases | |||||||||||
Financing cash flows for finance leases | |||||||||||
Right-of-use assets obtained in exchange for new lease obligations: | |||||||||||
Operating leases | $ | $ | |||||||||
Finance leases | |||||||||||
Net change in operating lease right-of-use assets due to lease modifications resulting in reclassification of leases from operating to finance | $ | ( |
Operating Leases | Finance Leases | |||||||||||||
Remainder of 2023 | $ | $ | ||||||||||||
2024 | ||||||||||||||
2025 | ||||||||||||||
2026 | ||||||||||||||
2027 | ||||||||||||||
Thereafter | ||||||||||||||
Total Lease payments | ||||||||||||||
Less: imputed interest | ||||||||||||||
Present value of lease liabilities | $ | $ |
June 30, 2023 | December 31, 2022 | ||||||||||
Senior Notes | $ | $ | |||||||||
Less: unamortized debt issuance costs | ( | ( | |||||||||
Long-term debt | $ | $ |
Number of Options | Weighted-Average Exercise/Conversion Price | Weighted-Average Remaining Contractual Life (years) | Aggregate Intrinsic Value (in thousands) | ||||||||||||||||||||
Outstanding at December 31, 2022 | $ | ||||||||||||||||||||||
Granted | $ | ||||||||||||||||||||||
Exercised | $ | ||||||||||||||||||||||
Forfeited | ( | $ | |||||||||||||||||||||
Outstanding at June 30, 2023 | $ | $ | |||||||||||||||||||||
Options vested and exercisable | $ | $ |
Q1-2023 Option Grants | Prior Grants | ||||||||||
Dividend yield | % | % | |||||||||
Risk-free interest rate | |||||||||||
Expected volatility | % | ||||||||||
Expected term (years) | |||||||||||
Suboptimal exercise multiple | |||||||||||
Drift rate | % | ||||||||||
Weighted average exercise price of options granted | $ | $ | |||||||||
Weighted average fair value of options granted | $ | $ |
Fair Value Measurements Using: | |||||||||||||||||||||||
June 30, 2023 | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||
Liabilities: | |||||||||||||||||||||||
Founders advisory fees payable - related party | $ | $ | $ | $ | |||||||||||||||||||
LaderaTech contingent earn-out included in other liabilities, non-current | |||||||||||||||||||||||
Total liabilities | $ | $ | $ | $ | |||||||||||||||||||
December 31, 2022 | |||||||||||||||||||||||
Liabilities: | |||||||||||||||||||||||
Founders advisory fees payable - related party | $ | $ | $ | $ | |||||||||||||||||||
LaderaTech contingent earn-out included in other liabilities, non-current | |||||||||||||||||||||||
Total liabilities | $ | $ | $ | $ |
Three Months Ended June 30, 2023 | Six Months Ended June 30, 2023 | ||||||||||||||||||||||
Founders Advisory Fees Payable - Related Party | LaderaTech Contingent Earn-out | Founders Advisory Fees Payable - Related Party | LaderaTech Contingent Earn-out | ||||||||||||||||||||
Fair value, beginning of period | $ | $ | $ | $ | |||||||||||||||||||
Founders advisory fees - related party, change in fair value | ( | ( | |||||||||||||||||||||
Loss on contingent earn-out, change in fair value | |||||||||||||||||||||||
Fair value, end of period | $ | $ | $ | $ |
Three Months Ended June 30, 2022 | Six Months Ended June 30, 2022 | ||||||||||||||||||||||
Founders Advisory Fees Payable - Related Party | LaderaTech Contingent Earn-out | Founders Advisory Fees Payable - Related Party | LaderaTech Contingent Earn-out | ||||||||||||||||||||
Fair value, beginning of period | $ | $ | $ | $ | |||||||||||||||||||
Settlements | ( | ||||||||||||||||||||||
Reclassification from liability to equity | ( | ||||||||||||||||||||||
Founders advisory fees - related party, change in fair value | ( | ( | |||||||||||||||||||||
Gain on contingent earn-out, change in fair value | ( | ( | |||||||||||||||||||||
Fair value, end of period | $ | $ | $ | $ |
Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | ||||||||||||||||||||
Revenues from products | $ | $ | $ | $ | |||||||||||||||||||
Revenues from services | |||||||||||||||||||||||
Other revenues | |||||||||||||||||||||||
Total net sales | $ | $ | $ | $ |
Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | ||||||||||||||||||||
Net income | $ | $ | $ | $ | |||||||||||||||||||
Weighted-average shares outstanding: | |||||||||||||||||||||||
Weighted average shares used in computing earnings per share, basic | |||||||||||||||||||||||
Founders advisory fees | |||||||||||||||||||||||
Weighted average shares used in computing earnings per share, diluted | |||||||||||||||||||||||
Basic earnings per share | $ | $ | $ | $ | |||||||||||||||||||
Diluted earnings per share | $ | $ | $ | $ |
Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | ||||||||||||||||||||
Net sales: | |||||||||||||||||||||||
Fire safety | $ | $ | $ | $ | |||||||||||||||||||
Specialty products | |||||||||||||||||||||||
Total | $ | $ | $ | $ | |||||||||||||||||||
Adjusted EBITDA: | |||||||||||||||||||||||
Fire safety | $ | $ | $ | $ | |||||||||||||||||||
Specialty products | |||||||||||||||||||||||
Total segment Adjusted EBITDA | |||||||||||||||||||||||
Less: | |||||||||||||||||||||||
Depreciation and amortization | |||||||||||||||||||||||
Interest and financing expense | |||||||||||||||||||||||
Founders advisory fees - related party | ( | ( | ( | ( | |||||||||||||||||||
Non-recurring expenses | |||||||||||||||||||||||
Share-based compensation expense | ( | ||||||||||||||||||||||
Non-cash purchase accounting impact | |||||||||||||||||||||||
Loss (gain) on contingent earn-out | ( | ( | |||||||||||||||||||||
Unrealized foreign currency loss (gain) | ( | ||||||||||||||||||||||
Income before income taxes | $ | $ | $ | $ |
Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Change | |||||||||||||||||||||
$ | % | ||||||||||||||||||||||
Net sales | $ | 76,137 | $ | 100,965 | $ | (24,828) | (25 | %) | |||||||||||||||
Cost of goods sold | 44,140 | 72,050 | (27,910) | (39 | %) | ||||||||||||||||||
Gross profit | 31,997 | 28,915 | 3,082 | 11 | % | ||||||||||||||||||
Operating expenses | |||||||||||||||||||||||
Selling, general and administrative expense | 14,897 | 19,679 | (4,782) | (24 | %) | ||||||||||||||||||
Amortization expense | 13,771 | 13,802 | (31) | — | % | ||||||||||||||||||
Founders advisory fees - related party | (60,026) | (20,465) | (39,561) | 193 | % | ||||||||||||||||||
Other operating expense | 8 | 260 | (252) | (97 | %) | ||||||||||||||||||
Total operating expenses | (31,350) | 13,276 | (44,626) | (336 | %) | ||||||||||||||||||
Operating income | 63,347 | 15,639 | 47,708 | 305 | % | ||||||||||||||||||
Other expense (income): | |||||||||||||||||||||||
Interest expense, net | 10,344 | 12,142 | (1,798) | (15 | %) | ||||||||||||||||||
Loss (gain) on contingent earn-out | 146 | (9,398) | 9,544 | (102 | %) | ||||||||||||||||||
Unrealized foreign currency loss | 93 | 3,156 | (3,063) | (97 | %) | ||||||||||||||||||
Other expense (income), net | 17 | (200) | 217 | (109 | %) | ||||||||||||||||||
Total other expense, net | 10,600 | 5,700 | 4,900 | 86 | % | ||||||||||||||||||
Income before income taxes | 52,747 | 9,939 | 42,808 | 431 | % | ||||||||||||||||||
Income tax expense | (733) | (1,012) | 279 | (28 | %) | ||||||||||||||||||
Net income | $ | 52,014 | $ | 8,927 | $ | 43,087 | 483 | % |
Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | Change | |||||||||||||||||||||
$ | % | ||||||||||||||||||||||
Net sales | $ | 119,995 | $ | 158,723 | $ | (38,728) | (24 | %) | |||||||||||||||
Cost of goods sold | 75,152 | 113,393 | (38,241) | (34 | %) | ||||||||||||||||||
Gross profit | 44,843 | 45,330 | (487) | (1 | %) | ||||||||||||||||||
Operating expenses | |||||||||||||||||||||||
Selling, general and administrative expense | 25,362 | 38,833 | (13,471) | (35 | %) | ||||||||||||||||||
Amortization expense | 27,534 | 27,657 | (123) | — | % | ||||||||||||||||||
Founders advisory fees - related party | (84,262) | (80,313) | (3,949) | 5 | % | ||||||||||||||||||
Other operating expense | 10 | 456 | (446) | (98 | %) | ||||||||||||||||||
Total operating expenses | (31,356) | (13,367) | (17,989) | 135 | % | ||||||||||||||||||
Operating income | 76,199 | 58,697 | 17,502 | 30 | % | ||||||||||||||||||
Other expense (income): | |||||||||||||||||||||||
Interest expense, net | 20,490 | 22,638 | (2,148) | (9 | %) | ||||||||||||||||||
Loss (gain) on contingent earn-out | 392 | (9,398) | 9,790 | (104 | %) | ||||||||||||||||||
Unrealized foreign currency (gain) loss | (628) | 4,036 | (4,664) | (116 | %) | ||||||||||||||||||
Other expense (income), net | 89 | (35) | 124 | (354 | %) | ||||||||||||||||||
Total other expense, net | 20,343 | 17,241 | 3,102 | 18 | % | ||||||||||||||||||
Income before income taxes | 55,856 | 41,456 | 14,400 | 35 | % | ||||||||||||||||||
Income tax benefit | 5,589 | 4,434 | 1,155 | 26 | % | ||||||||||||||||||
Net income | $ | 61,445 | $ | 45,890 | $ | 15,555 | 34 | % |
Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | ||||||||||||||||||||||
Fire Safety | Specialty Products | Fire Safety | Specialty Products | ||||||||||||||||||||
Net sales | $ | 53,140 | $ | 22,997 | $ | 66,577 | $ | 34,388 | |||||||||||||||
Segment Adjusted EBITDA | $ | 16,532 | $ | 4,458 | $ | 24,219 | $ | 11,463 |
Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | ||||||||||||||||||||||
Fire Safety | Specialty Products | Fire Safety | Specialty Products | ||||||||||||||||||||
Net sales | $ | 71,884 | $ | 48,111 | $ | 85,047 | $ | 73,676 | |||||||||||||||
Segment Adjusted EBITDA | $ | 13,171 | $ | 10,935 | $ | 20,885 | $ | 26,774 |
Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | ||||||||||
Cash used in: | |||||||||||
Operating activities | $ | (72,936) | $ | (89,351) | |||||||
Investing activities | (4,375) | (5,644) | |||||||||
Financing activities | (27,315) | (4,479) | |||||||||
Effect of foreign currency on cash and cash equivalents | (6) | (578) | |||||||||
Net change in cash and cash equivalents | $ | (104,632) | $ | (100,052) |
Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plan or Program (1) | ||||||||||||||||||||
April 1, 2023 - April 30, 2023 | 1,183,226 | $ | 7.35 | 1,183,226 | 32,923,725 | ||||||||||||||||||
May 1, 2023 - May 31, 2023 | 1,291,385 | $ | 6.44 | 1,291,385 | 31,632,340 | ||||||||||||||||||
June 1, 2023 - June 30, 2023 | 1,518,445 | $ | 6.09 | 1,518,445 | 30,113,895 | ||||||||||||||||||
Total | 3,993,056 | $ | 6.58 | 3,993,056 |
Exhibit Number | Description | ||||
31.1* | |||||
31.2* | |||||
32.1** | |||||
101.INS* | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | ||||
101.SCH* | XBRL Taxonomy Extension Schema Document | ||||
101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document | ||||
101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document | ||||
101.LAB* | XBRL Taxonomy Extension Label Linkbase Document | ||||
101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document | ||||
104* | Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101). |
Perimeter Solutions, SA | ||||||||
Date: August 3, 2023 | By: | /s/ Haitham Khouri | ||||||
Haitham Khouri | ||||||||
Chief Executive Officer and Director | ||||||||
(Principal Executive Officer) | ||||||||
Date: August 3, 2023 | By: | /s/ Charles Kropp | ||||||
Charles Kropp | ||||||||
Chief Financial Officer | ||||||||
(Principal Financial Officer and Principal Accounting Officer) | ||||||||
Date: August 3, 2023 | By: | /s/ Haitham Khouri | ||||||
Haitham Khouri | ||||||||
Chief Executive Officer and Director | ||||||||
(Principal Executive Officer) |
Date: August 3, 2023 | By: | /s/ Charles Kropp | ||||||
Charles Kropp | ||||||||
Chief Financial Officer | ||||||||
(Principal Financial Officer and | ||||||||
Principal Accounting Officer) |
Perimeter Solutions, SA | ||||||||
Date: August 3, 2023 | By: | /s/ Haitham Khouri | ||||||
Haitham Khouri | ||||||||
Chief Executive Officer and Director | ||||||||
(Principal Executive Officer) | ||||||||
Date: August 3, 2023 | By: | /s/ Charles Kropp | ||||||
Charles Kropp | ||||||||
Chief Financial Officer | ||||||||
(Principal Financial Officer and Principal Accounting Officer) |
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares |
Jun. 30, 2023 |
Dec. 31, 2022 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Common stock, par value (in usd per share) | $ 1.00 | $ 1 |
Common stock, authorized (in shares) | 4,000,000,000 | 4,000,000,000 |
Common stock, issued (in shares) | 165,066,195 | 163,234,542 |
Common stock, outstanding (in shares) | 154,520,833 | 156,797,806 |
Treasury stock, shares (in shares) | 10,545,362 | 6,436,736 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
Income Statement [Abstract] | ||||
Net sales | $ 76,137 | $ 100,965 | $ 119,995 | $ 158,723 |
Cost of goods sold | 44,140 | 72,050 | 75,152 | 113,393 |
Gross profit | 31,997 | 28,915 | 44,843 | 45,330 |
Operating expenses: | ||||
Selling, general and administrative expense | 14,897 | 19,679 | 25,362 | 38,833 |
Amortization expense | 13,771 | 13,802 | 27,534 | 27,657 |
Founders advisory fees - related party | (60,026) | (20,465) | (84,262) | (80,313) |
Other operating expense | 8 | 260 | 10 | 456 |
Total operating expenses | (31,350) | 13,276 | (31,356) | (13,367) |
Operating income | 63,347 | 15,639 | 76,199 | 58,697 |
Other expense (income): | ||||
Interest expense, net | 10,344 | 12,142 | 20,490 | 22,638 |
Loss (gain) on contingent earn-out | 146 | (9,398) | 392 | (9,398) |
Unrealized foreign currency loss (gain) | 93 | 3,156 | (628) | 4,036 |
Other expense (income), net | 17 | (200) | 89 | (35) |
Total other expense, net | 10,600 | 5,700 | 20,343 | 17,241 |
Income before income taxes | 52,747 | 9,939 | 55,856 | 41,456 |
Income tax (expense) benefit | (733) | (1,012) | 5,589 | 4,434 |
Net income | 52,014 | 8,927 | 61,445 | 45,890 |
Other comprehensive income (loss), net of tax: | ||||
Foreign currency translation adjustments | 2,215 | (16,371) | 3,808 | (16,245) |
Total comprehensive income (loss) | $ 54,229 | $ (7,444) | $ 65,253 | $ 29,645 |
Earnings per share: | ||||
Basic (in usd per share) | $ 0.33 | $ 0.05 | $ 0.39 | $ 0.28 |
Diluted (in usd per share) | $ 0.31 | $ 0.05 | $ 0.36 | $ 0.26 |
Weighted average number of ordinary shares outstanding: | ||||
Basic (in shares) | 156,525,006 | 162,917,478 | 157,109,418 | 161,591,704 |
Diluted (in shares) | 168,310,311 | 177,059,844 | 168,894,723 | 175,734,070 |
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION |
6 Months Ended |
---|---|
Jun. 30, 2023 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION | DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION Organization and General Perimeter Solutions, SA, (“PSSA”), a public company limited by shares (société anonyme) was incorporated on June 21, 2021 under the laws of the Grand Duchy of Luxembourg. PSSA is headquartered in the Grand Duchy of Luxembourg with global operations in North America, Europe, and Asia Pacific. PSSA's ordinary shares, nominal value, $1.00 per share (the “Ordinary Shares”), are listed on the New York Stock Exchange ("NYSE") and trade under the symbol "PRM." The condensed consolidated financial statements herein include the assets, liabilities, and results of operations of PSSA and its subsidiaries, all of which are wholly owned (collectively, the “Company”). Business Operations The Company is a global solutions provider for the fire safety and specialty chemical industries. Approximately 74% of the Company's 2022 annual revenues were derived in the United States, approximately 15% in Europe, approximately 5% in Canada and approximately 2% in Mexico, with the remaining approximately 4% spread across various other countries. The Company’s business is organized and managed in two reporting segments: Fire Safety and Specialty Products. The Fire Safety business is a formulator and manufacturer of fire management products that help the Company’s customers combat various types of fires, including wildland, structural, flammable liquids and other types of fires. The Company’s Fire Safety business also offers specialized equipment and services, typically in conjunction with its fire management products to support firefighting operations. The Company’s specialized equipment includes air base retardant storage, mixing, and delivery equipment; mobile retardant bases; retardant ground application units; mobile foam equipment; and equipment that it custom designs and manufactures to meet specific customer needs. Significant end markets include primarily government-related entities and are dependent on approvals, qualifications, and permits granted by the respective governments and commercial customers around the world. The Specialty Products segment produces and sells Phosphorus Pentasulfide ("P2S5") in several end markets and applications, including lubricant additives, various agricultural applications, various mining applications, and emerging electric battery technologies. Within the lubricant additives end market, currently the Company’s largest end market application, P2S5 is primarily used in the production of a family of compounds called Zinc Dialkyldithiophosphates (“ZDDP”), which is considered an essential component in the formulation of engine oils with its main function to provide anti-wear protection to engine components. P2S5 is also used in pesticide and mining chemicals applications. Global Economic Environment In recent years, the global economy and labor markets have experienced significant inflationary pressures attributable to ongoing economic recovery and supply chain issues, in part due to the impacts of the COVID-19 pandemic and the conflict in Ukraine. While the Company has limited exposure in Russia and Ukraine, it continues to monitor and take actions with its customers and suppliers to mitigate the impact of these inflationary pressures in the future. Actions to mitigate inflationary pressures with suppliers include aggregation of purchase requirements to achieve optimal volume benefits, negotiation of cost-reductions and identification of more cost competitive suppliers. While these actions are designed to offset the impact of inflationary pressures, the Company cannot provide assurance that they will be successful in fully offsetting increased costs resulting from inflationary pressure. In addition, interest payments for borrowings under the Company’s revolving credit facility are based on variable rates and any continued increase in interest rates may reduce the Company’s cash flow available for other corporate purposes.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS |
6 Months Ended |
---|---|
Jun. 30, 2023 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS Summary of Significant Accounting Policies Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments of a normal and recurring nature considered necessary for a fair presentation have been included in the accompanying condensed consolidated financial statements. The results of operations for the interim period are not necessarily indicative of the results that will be realized for the entire fiscal year. These condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements and accompanying notes thereto included in the Company’s 2022 Annual Report. The condensed consolidated financial statements for the prior periods include certain reclassifications that were made to conform to the current period presentation. Such reclassifications have no impact on previously reported condensed consolidated financial position, results of operations or cash flows. Principles of Consolidation The unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries after elimination of intercompany transactions and balances. Use of Estimates The preparation of financial statements in conformity with U.S. 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 revenue and expenses during the reporting period. Significant estimates made by management in connection with the preparation of the accompanying unaudited condensed consolidated financial statements include the useful lives of long-lived and intangible assets, the allowance for doubtful accounts, the fair value of financial assets and liabilities, stock options, founder advisory fees, contingent earn-out liability and realizability of deferred tax assets. Actual results could differ from those estimates. As of June 30, 2023, the Company’s significant accounting policies are consistent with those discussed in Note 2 - “Summary of Significant Accounting Policies and Recent Accounting Pronouncements” in its consolidated financial statements included in the Company’s 2022 Annual Report, except for performance-based non-qualified stock options ("PBNQSO") granted during the three months ended March 31, 2023 (“Q1-2023 Option Grants”) and modifications to PBNQSO’s as of May 8, 2023. For PBNQSO’s granted during the three months ended March 31, 2023, the Company recognized compensation costs related to PBNQSO’s granted to employees and non-employees based on the estimated fair value of the awards on the date of grant. The Company estimated the grant date fair value, and the resulting share-based compensation expense, using the Black-Scholes option-pricing model. The Company records forfeitures as they are incurred. The grant date fair value of the PBNQSO’s is expensed proportionately for each tranche over the applicable service period. The fair value of PBNQSO’s is recognized as compensation expense beginning at the time in which the performance conditions are deemed probable of achievement, over the remaining applicable service period. The assumptions used in the Black-Scholes option-pricing model are as follows: •Exercise price. The Company's Ordinary Share’s fair market value on the date of grant. •Fair Market Value of Ordinary Shares. The grant date fair market value is the quoted market price of the Company's Ordinary Shares. •Expected term. The expected term of stock options represents the period that the stock options are expected to remain outstanding and is based on vesting terms, exercise term and contractual lives of the options. The expected term is based on the simplified method and is estimated as the average of the weighted average vesting term and the time to expiration as of the grant date. The simplified method was used due to the lack of historical exercise information. •Expected volatility. As the Company does not have sufficient historical stock price information to meet the expected life of the stock option grants, it uses a blended volatility based on the Company’s short trading history and on the trading history from the common stock of a set of comparable publicly listed companies. •Risk-free interest rate. The risk-free interest rate is based on the U.S. Treasury yield with a maturity equal to the expected term of the stock options in effect at the time of grant. •Dividend yield. The expected dividend is assumed to be zero as the Company has never paid dividends and has no current plan to pay any dividends on its Ordinary Shares. As of May 8, 2023, to better account for seasonal fluctuations of the business, and to better align stock option performance with shareholder return, the Company modified certain terms in the PBNQSO agreements. One modification eliminated a term that provided discretion to the compensation committee to make certain adjustments on how the annual operational performance per diluted share (“AOP”) against the performance target will be measured. Such discretion prohibited the establishment of the grant date under Accounting Standards Codification (“ASC”) Topic 718, “Compensation—Stock Compensation” (“Topic 718”). As of May 8, 2023, it was determined that a mutual understanding of the key terms and conditions of the PBNQSO’s has been ascertained and the grant date was therefore established for PBNQSO’s granted through December 31, 2022 (“Prior Grants”). The modifications were determined to be a Type I (probable to probable) modification under Topic 718. As such, the Company performed a final fair value remeasurement under the original terms of Prior Grants using the Hull-White model and recognized the cumulative compensation cost to reflect the cumulative effect of re-measuring the compensation cost as of May 8, 2023. Subsequently, the Company calculated the modification date fair value for the PBNQSO’s based on the modified terms using (i) the Hull-White model that addresses the performance condition in the option agreements, and (ii) using the Monte Carlo simulation model that addresses the market condition in the option agreements. The modification did not result in any incremental share-based compensation expense for the Q1-2023 Option Grants. The Company currently expects that the performance condition for the modified awards is probable of being achieved, accordingly, the fair value of the PBNQSO’s on the modification date, calculated using the Hull-White model and Black Scholes option-pricing model, as applicable, is recognized as compensation expense on a proportionate basis, for each tranche, over the remaining applicable service period. The Hull-White model requires us to make assumptions and judgments about the variables used in the calculation, including the sub-optimal exercise factor, drift rate, the volatility of our Ordinary Shares, risk-free interest rate, and expected dividends. Changes in assumptions made on the risk-free interest rate and expected volatility can materially impact the estimate of fair value and ultimately how much share-based compensation expense is recognized. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of modification and corresponds to remaining contractual term of the PBNQSO’s. As the Company does not have sufficient historical stock price information to meet the expected life of the stock option grants, it uses a blended volatility based on the Company’s short trading history and on the trading history from the common stock of a set of comparable publicly listed companies. Recently Issued and Adopted Accounting Standards In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases, which required lessees to recognize a right of use asset and a lease liability on their balance sheet for all leases, including operating leases, with a term of greater than 12 months. In July 2018, the FASB issued ASU 2018-11, which added a transition option permitting entities to apply the provisions of the new standard at its adoption date instead of the earliest comparative period presented in the consolidated financial statements. The Company adopted Topic 842 as of January 1, 2022 at December 31, 2022, using the optional transition method provided by ASU 2018-11. Refer to Note 6, "Leases," for additional disclosures. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and issued subsequent amendments to the initial guidance within ASU 2019-04, ASU 2019-05 and ASU 2019-11. The amendments required an entity to replace the incurred loss impairment methodology in current U.S. GAAP with a new model that uses a forward-looking expected loss method, which generally results in earlier recognition of allowances for losses. The Company adopted the standard as of January 1, 2022 at December 31, 2022. The adoption of the standard did not have a material impact on the Company’s consolidated financial statements with the most significant impact being the increase in allowance for doubtful accounts related to its trade accounts receivable. The adoption adjustment was recorded to accumulated deficit in the accompanying condensed consolidated statements of shareholders’ equity. In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, and in January 2021 issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope. These ASUs provided temporary optional expedients and exceptions to existing guidance on contract modifications and hedge accounting to facilitate the market transition from existing reference rates, such as London Interbank Offered Rate (“LIBOR”) which is being phased out, to alternate reference rates, such as Secured Overnight Financing Rate (“SOFR”). These standards are elective and are effective upon issuance for all entities through December 31, 2022. In December 2022, the FASB issued ASU No. 2022-06, which deferred the sunset date of reference rate reform relief to December 31, 2024. The switch in the reference rates from LIBOR to SOFR, under the Company’s Revolving Credit Facility (defined below), occurred as of June 30, 2023. The Company did not have any outstanding borrowings under the Revolving Credit Facility, accordingly, the switch in the reference rates from LIBOR to SOFR did not have a material impact on the Company’s consolidated financial statements.
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BUSINESS ACQUISITIONS |
6 Months Ended |
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Jun. 30, 2023 | |
Business Combination and Asset Acquisition [Abstract] | |
BUSINESS ACQUISITIONS | BUSINESS ACQUISITIONS Business Combination On November 9, 2021 (the “Closing Date”), PSSA consummated the transactions (the “Business Combination”) contemplated by the business combination agreement with EverArc Holdings Limited, the former parent company of PSSA ("EverArc"), SK Invictus Holdings, S.à r.l., ("SK Holdings"), SK Invictus Intermediate S.à r.l., ("SK Intermediate"), doing business under the name Perimeter Solutions and EverArc (BVI) Merger Sub Limited, incorporated in the British Virgin Islands and a wholly-owned subsidiary of PSSA (the “Business Combination Agreement”) dated June 15, 2021. Pursuant to the Business Combination Agreement, EverArc entered into an escrow agreement with SK Holdings and Wilmington Trust, N.A., a national banking association, as escrow agent, which provided that approximately $7.6 million of the cash consideration payable pursuant to the Business Combination Agreement be held in escrow pending a determination of the post-closing purchase price adjustments under the Business Combination Agreement. On March 3, 2022, the post-closing purchase price adjustments under the Business Combination Agreement were finalized. Approximately $7.6 million held in escrow was released and an additional $1.6 million related to the difference in estimated and actual working capital as of the Closing Date was also paid to SK Holdings.
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BALANCE SHEET COMPONENTS |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
BALANCE SHEET COMPONENTS | BALANCE SHEET COMPONENTS Details of certain balance sheet items are presented below (in thousands):
Depreciation expense related to property, plant and equipment was $2.4 million and $4.7 million for the three and six months ended June 30, 2023, respectively, and $2.9 million and $5.4 million for the three and six months ended June 30, 2022, respectively, substantially all of which was presented in cost of goods sold in the accompanying condensed consolidated statements of operations and comprehensive income (loss). The Company had an allowance for doubtful accounts, included in accounts receivable, net of $0.6 million and $0.9 million as of June 30, 2023 and December 31, 2022, respectively.
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GOODWILL AND OTHER INTANGIBLE ASSETS |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
GOODWILL AND OTHER INTANGIBLE ASSETS | GOODWILL AND OTHER INTANGIBLE ASSETS The changes in the carrying amount of goodwill by reportable segment are as follows (in thousands):
Intangible assets and related accumulated amortization as of June 30, 2023 and December 31, 2022 are as follows (in thousands):
Amortization expense for definite-lived intangible assets was $13.7 million and $27.5 million for the three and six months ended June 30, 2023, respectively, and $13.8 million and $27.7 million for the three and six months ended June 30, 2022, respectively. Estimated annual amortization expense of intangible assets for the next five years ending December 31 and thereafter is as follows (in thousands):
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LEASES |
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Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LEASES | LEASES Lease cost for the three and six months ended June 30, 2023 and 2022, respectively, are as follow (in thousands):
(1) Operating lease cost does not include short-term leases or variable costs, all of which are immaterial. As of June 30, 2023 the weighted-average remaining lease term of operating leases and finance leases were approximately 7.4 years and 9.2 years, respectively and the weighted-average discount rates applied were 5.8% and 7.9%, respectively. Supplemental cash flow information related to leases for the six months ended June 30, 2023 and June 30, 2022 are as follows (in thousands):
As of June 30, 2023, the estimated future minimum payment obligations for non-cancelable operating leases are as follows (in thousands):
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LEASES | LEASES Lease cost for the three and six months ended June 30, 2023 and 2022, respectively, are as follow (in thousands):
(1) Operating lease cost does not include short-term leases or variable costs, all of which are immaterial. As of June 30, 2023 the weighted-average remaining lease term of operating leases and finance leases were approximately 7.4 years and 9.2 years, respectively and the weighted-average discount rates applied were 5.8% and 7.9%, respectively. Supplemental cash flow information related to leases for the six months ended June 30, 2023 and June 30, 2022 are as follows (in thousands):
As of June 30, 2023, the estimated future minimum payment obligations for non-cancelable operating leases are as follows (in thousands):
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LONG-TERM DEBT AND REDEEMABLE PREFERRED SHARES |
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Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LONG-TERM DEBT AND REDEEMABLE PREFERRED SHARES | LONG-TERM DEBT AND REDEEMABLE PREFERRED SHARES Long-term debt consists of the following (in thousands):
Revolving Credit Facility On November 9, 2021, SK Invictus Intermediate II S.à r.l., a private limited liability company governed by the laws of the Grand Duchy of Luxembourg (“SK Intermediate II”), as borrower, entered into a five-year revolving credit facility (the “Revolving Credit Facility”), which provides for a senior secured Revolving Credit Facility in an aggregate principal amount of up to $100.0 million. The Revolving Credit Facility matures on November 9, 2026. The Revolving Credit Facility includes a $20.0 million swingline sub-facility and a $25.0 million letter of credit sub-facility. The Revolving Credit Facility allows SK Intermediate II to increase commitments under the Revolving Credit Facility up to an aggregate amount not to exceed the greater of (i) $143.0 million and (ii) 100.00% of consolidated earnings before interest, taxes, depreciation and amortization (“EBITDA”) for the most recent four-quarter period (minus the aggregate outstanding principal amount of certain ratio debt permitted to be incurred thereunder). All borrowings under the Revolving Credit Facility are subject to the satisfaction of customary conditions, including the absence of a default and the accuracy of representations and warranties, subject to customary exceptions. Solely to the extent that on the last day of the applicable fiscal quarter, the utilization of the Revolving Credit Facility (excluding cash collateralized letters of credit and up to $10.0 million of undrawn letters of credit) exceeds 40% of the aggregate commitments, the Revolving Credit Facility requires compliance on a quarterly basis with a maximum secured net leverage ratio of 7.50:1.00. The Revolving Credit Facility is fully and unconditionally guaranteed by the Company and each of SK Intermediate II’s existing and future wholly-owned material restricted subsidiaries, subject to customary exceptions, and is secured by a first priority lien, subject to certain permitted liens, on substantially all of SK Intermediate II’s and each of the guarantors’ existing and future property and assets, subject to customary exceptions. Deferred financing costs incurred in connection with securing the Revolving Credit Facility were $2.3 million, which is carried as a long-term asset in the accompanying condensed consolidated balance sheets and is amortized on a straight-line over the term of the Revolving Credit Facility and included in interest expense in the accompanying condensed consolidated statements of operations and comprehensive income (loss). As of June 30, 2023 and December 31, 2022, the Company did not have any outstanding borrowings under the Revolving Credit Facility and was in compliance with all covenants, including the financial covenants. Senior Notes On the Closing Date, SK Intermediate II assumed $675.0 million principal amount of 5.00% senior secured notes due October 30, 2029 (“Senior Notes”) issued by EverArc Escrow S.à r.l. (“Escrow Issuer”), a newly-formed limited liability company governed by the laws of the Grand Duchy of Luxembourg and a wholly owned subsidiary of EverArc under an indenture dated as of October 22, 2021 (“Indenture”). The Senior Notes bear interest at an annual rate of 5.00%. Interest on the Senior Notes is payable in cash semi-annually in arrears on April 30 and October 30 of each year. The Senior Notes are general, secured, senior obligations of SK Intermediate II; rank equally in right of payment with all existing and future senior indebtedness of SK Intermediate II (including, without limitation, the Revolving Credit Facility); and together with the Revolving Credit Facility, are effectively senior to all existing and future indebtedness of SK Intermediate II that is not secured by the collateral. The Senior Notes are fully and unconditionally guaranteed on a senior secured basis, jointly and severally, by all of SK Intermediate II’s existing or future restricted subsidiaries (other than certain excluded subsidiaries) that guarantee the Revolving Credit Facility. The Senior Notes contain certain covenants limiting SK Intermediate II’s ability and the ability of the restricted subsidiaries (as defined in the indenture governing the Senior Notes) to, under certain circumstances, prepay subordinated indebtedness, pay distributions, redeem stock or make certain restricted investments; incur indebtedness; create liens on the SK Intermediate II’s assets to secure debt; restrict dividends, distributions or other payments; enter into transactions with affiliates; designate subsidiaries as unrestricted subsidiaries; sell or otherwise transfer or dispose of assets, including equity interests of restricted subsidiaries; effect a consolidation or merger; and change the Company’s line of business. Deferred financing costs incurred in connection with securing the Senior Notes were $11.0 million, which were capitalized and will be amortized using the effective interest method over the term of the Senior Notes and included in interest expense in the accompanying condensed consolidated statements of operations and comprehensive income (loss). The unamortized portion of the deferred financing costs is included as a reduction to the carrying value of the Senior Notes which have been recorded as long-term debt, net in the accompanying condensed consolidated balance sheets. Redeemable Preferred Shares In connection with the Business Combination, the Company issued 10 million redeemable preferred shares of PSSA (“Redeemable Preferred Shares”), nominal value $10 per share, valued at $100.0 million. The Redeemable Preferred Shares are entitled to a preferred annual cumulative right to a dividend equal to 6.50% of its nominal value. The preferred dividend will generally be paid 40.00% in cash and 60.00% in kind each year within business days following the Company's annual general meeting. Holders of the Redeemable Preferred Shares generally have no voting rights. The Company, under its articles of association (the “Articles”) is mandatorily required to redeem the Redeemable Preferred Shares at any time prior to the earliest of (i) six months following the latest maturity date of the above-mentioned Senior Notes, (ii) nine years after the date of issuance of the Redeemable Preferred Shares or (iii) upon the occurrence of a change of control, as defined in the Company’s Articles. Due to the fact that the Redeemable Preferred Shares are mandatorily redeemable, the Redeemable Preferred Shares are classified as a liability in the accompanying unaudited condensed consolidated balance sheets, and $1.7 million, $3.4 million, $1.6 million and $3.3 million of dividends on these Redeemable Preferred Shares for the three and six months ended June 30, 2023 and June 30, 2022, respectively, is recorded as interest expense in the accompanying unaudited condensed consolidated statements of operations and comprehensive income (loss). At June 30, 2023 and December 31, 2022, $6.5 million and $4.5 million, respectively, of preferred dividends were in arrears. The Redeemable Preferred Shares have an aggregate liquidation preference of $100.0 million, plus any accrued and unpaid dividends thereon and is senior to the Ordinary Shares with respect to dividends and with respect to dissolution, liquidation or winding up of the Company. At June 30, 2023 and December 31, 2022, the redemption price was $106.5 million and $104.5 million, respectively.
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INCOME TAXES |
6 Months Ended |
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Jun. 30, 2023 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXESThe Company is subject to U.S. federal income tax, U.S. state and local tax and tax in foreign jurisdictions. The Company estimates its annual effective tax rate in recording its quarterly provision for income taxes in the various jurisdictions in which it operates. The Company’s effective tax rate was 1.39% and (10.01)% for the three and six months ended June 30, 2023, respectively, and 10.18% and (10.70)% for the three and six months ended June 30, 2022, respectively. The primary differences between the effective tax rate and the amount computed by applying the Luxembourg statutory rate of 24.94% are related to losses not expected to be benefited in certain jurisdictions that have a valuation allowance, permanently non-deductible compensation, withholding taxes accrued on unremitted earnings and the impact of foreign tax rate differences. In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. The Company considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), projected future taxable income, and tax-planning strategies in making this assessment. While the Company expects to realize the remaining net deferred tax assets, changes in future taxable income or in tax laws may alter this expectation and result in future increases to the valuation allowance. The valuation allowance for deferred tax assets as of June 30, 2023 and 2022 primarily relates to net operating loss and interest deduction limitation carryforwards that, in the judgment of the Company, are not more likely than not to be realized. The Company evaluates its tax positions and recognizes only tax benefits that, more likely than not, will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax position is measured at the largest amount of benefit that has a greater than 50.0% likelihood of being realized upon settlement. During the three and six months ended June 30, 2023, there was a decrease in unrecognized tax benefits of $34.0 million due to an amended tax filing. As of June 30, 2023, it is not expected that the Company’s remaining unrecognized tax benefits of $2.3 million will decrease within twelve months.
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COMMITMENTS AND CONTINGENCIES |
6 Months Ended |
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Jun. 30, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES Legal Proceedings The Company is involved in various claims, actions, and legal proceedings arising in the ordinary course of business, including a number of matters related to the aqueous film forming foam litigation consolidated in the District of South Carolina multi-district litigation and other similar matters pending in other jurisdictions in the United States. The Company’s exposure to losses, if any, is not considered probable or reasonably estimable at this time. Commitments The Company has a supply agreement to purchase elemental phosphorus (“P4”) from a supplier through 2023. The contract price is tied to the contract year cost times a multiplier, subject to a market-driven benchmark price adjustment, which is generally settled once per year. The Company did not purchase the anticipated minimum pounds of P4 for the three and six months ended June 30, 2023 and 2022. However, the Company has no obligation to record a liability, as there is no financial penalty owed to the vendor. Purchases under this supply agreement were $7.9 million and $17.9 million for the three and six months ended June 30, 2023, respectively, and $10.3 million and $24.3 million for the three and six months ended June 30, 2022, respectively. The Company also has an agreement to purchase various types of capital equipment up to $5.0 million through October 2027. As of June 30, 2023, the Company paid $2.6 million to the supplier and the remaining $2.4 million will be paid through October 2027.
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EQUITY |
6 Months Ended |
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Jun. 30, 2023 | |
Equity [Abstract] | |
EQUITY | EQUITY The Company’s authorized share capital is $4,100.0 million, consisting of 4,000.0 million Ordinary Shares with a nominal value of $1.00 per share and 10.0 million Redeemable Preferred Shares with a nominal value of $10.00 per share. Each Ordinary Share entitles the holder thereof to one vote. On July 21, 2022, subject to certain limits, the shareholders of the Company approved a proposal authorizing the Company’s Board of Directors (the “Board”) to repurchase up to 25% of the Company’s Ordinary Shares outstanding as of the date of shareholders approval, being 40,659,257 Ordinary Shares, at any time during the next five years (the “Share Repurchase Plan”). On November 3, 2022 the Board re-established the limit for Ordinary Share repurchases at $100.00 million, which is within the repurchase limit approved by the Company’s shareholders on July 21, 2022. During the three and six months ended June 30, 2023, the Company repurchased 3,993,056 and 4,108,626 Ordinary Shares, respectively, under its Share Repurchase Plan. The repurchased Ordinary Shares are recorded at cost and are being held in treasury. As of June 30, 2023, there were 154,520,833 Ordinary Shares, 33,843,440 warrants and 10,000,000 Redeemable Preferred Shares outstanding.
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SHARE-BASED COMPENSATION AND EMPLOYEE BENEFIT PLANS |
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Share-Based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SHARE-BASED COMPENSATION AND EMPLOYEE BENEFIT PLANS | HARE-BASED COMPENSATION AND EMPLOYEE BENEFIT PLANS 2021 Equity Plan In connection with the Business Combination, the Company’s Board adopted, and its shareholders approved, the 2021 Equity Incentive Plan (the “2021 Equity Plan”). A total of 31,900,000 Ordinary Shares are authorized and reserved for issuance under the 2021 Equity Plan which provides for the grant of stock options (either incentive or non-qualified), stock appreciation rights (“SARs”), restricted stock, restricted stock units (“RSUs”), performance shares, performance share units and other share-based awards with respect to the Ordinary Shares. Shares associated with underlying awards that are expired, forfeited, or otherwise terminated without the delivery of shares, or are settled in cash, and any shares tendered to or withheld by the Company for the payment of an exercise price or for tax withholding will again be available for issuance under the 2021 Equity Plan. During the three months ended March 31, 2023, the Company granted 2,175,000 PBNQSO’s that vest based on the achievement of certain performance goals for fiscal years 2023-2027 (the “5-Year Option”) to its chief executive officer and independent directors. The Company recognized compensation costs related to the 5-Year Option granted in 2023 based on the estimated fair value of the awards on the date of grant. The Company estimates the grant date fair value, and the resulting share-based compensation expense, using the Black-Scholes option-pricing model. The Company records forfeitures as they are incurred. The grant date fair value of the PBNQSO is expensed proportionately for each tranche over the applicable service period. The fair value of performance-based stock options is recognized as compensation expense beginning at the time in which the performance conditions are deemed probable of achievement, over the remaining applicable service period. On March 8, 2023, in connection changes in the Company’s leadership structure, it amended the performance terms and conditions of the outstanding 5-Year Options previously granted to its former chief executive officer (the “Executive”) where by 50% of such outstanding options eligible to vest in each of fiscal years from 2023 through 2026 will remain subject to the existing performance terms and conditions. The remaining 50% of such outstanding options will be eligible to vest in such fiscal years subject to the performance terms and conditions related to the Executive’s position and duties as Vice Chairman. For the remaining 50% of outstanding options, the Company’s compensation committee will establish performance goals and communicate them to the Executive and assess achievement annually. For accounting purposes, the Company will recognize compensation expense related to the remaining 50% of outstanding options when the specified performance goal for future periods have been established and communicated to the Executive. In March 2023, based on the Company’s performance for 2022, its compensation committee verified and determined the Annual Operational Performance per Diluted Share (“AOP”) for the 2022 tranche of the 5-Year Option to be $8.39. As a result, it was determined that a mutual understanding of the key terms and conditions for the 2022 tranche had been ascertained and the grant date was therefore established. The cumulative compensation expense for the 2022 tranche was adjusted based on the fair value calculated using the Black-Scholes option-pricing model at the grant date. As the AOP for the 2022 tranche was below the minimum vesting AOP target of $11.35 employees separated from the Company through the date of determination of the 2022 AOP relinquished 240,000 options retained by them relating the 2022 tranche and such options were cancelled by the Company. As of May 8, 2023, the Company modified certain terms in the PBNQSO agreements as noted below: •eliminated a term that provided discretion to the compensation committee to make certain adjustments on how AOP against the performance target will be measured with respect to the Prior Grants; •eliminated the two-year look-back and two-year look-forward for excess AOP; •adjusted the minimum and maximum AOP growth targets from 13.5% and 23.5% to 10% and 20%, respectively; •added of cumulative vesting term, under which if the maximum AOP target was achieved in an option performance year, (including in any one of the two years immediately following the fifth and final year of the option term), any number of unvested options that were eligible to vest in all prior performance years, will be eligible to vest based on AOP calculated in such option performance year; •added an alternative vesting provision if the market price of the Company's Ordinary Shares is more than twice the exercise price for a sustained period of time commencing in the third fiscal year after option grant; and •made certain clarifying and other changes. The above modifications affected all of the outstanding Prior Grants and Q1-2023 Option Grants and there was no incremental share-based compensation expense as a result of modifications. The table below summarizes the PBNQSO activity for the six months ended June 30, 2023:
The weighted-average assumptions used to fair value the PBNQSO on the grant date using the Black-Scholes option-pricing model and on the modification date using the Hull-White model were as follows:
Non-cash share-based compensation expense recognized by the Company for the three and six months ended June 30, 2023 was $1.2 million and $(1.9) million, respectively. Compensation expense is recognized based upon probability assessments of PBNQSOs that are expected to vest in future periods. Such probability assessments are subject to revision and, therefore, unrecognized compensation expense is subject to future changes in estimate. As of June 30, 2023, there was approximately $19.3 million of total unrecognized compensation expense related to non-vested PBNQSOs expected to vest, which is expected to be recognized over a weighted-average period of 1.7 years. Founder Advisory Amounts Upon consummation of the Business Combination, the Company assumed the advisory agreement entered into on December 12, 2019 by EverArc ("Founder Advisory Agreement") with EverArc Founders, LLC, a Delaware limited liability company ("EverArc Founder Entity"), pursuant to which the EverArc Founder Entity, for the services provided to the Company, including strategic and capital allocation advice, is entitled to receive both a fixed amount (the “Fixed Annual Advisory Amount”) and a variable amount (the “Variable Annual Advisory Amount,” each an “Advisory Amount” and collectively, the “Advisory Amounts”) until the years ending December 31, 2027 and 2031, respectively. Under the Founder Advisory Agreement, at the election of the EverArc Founder Entity, at least 50% of the Advisory Amounts will be paid in Ordinary Shares and the remainder in cash. The Fixed Annual Advisory Amount will be equal to 2,357,061 Ordinary Shares (1.5% of 157,137,410 Ordinary Shares outstanding) for each year through December 31, 2027 and is valued using the period end volume weighted average closing share price of our Ordinary Shares for ten consecutive trading days. The Variable Annual Advisory Amount for each year through December 31, 2031 is based on the appreciation of the market price of Ordinary Shares if such market price exceeds certain trading price minimums at the end of each reporting period and is valued using a Monte Carlo simulation model. Because up to 50% of the Advisory Amounts could be settled through a cash payment, 50% are classified as a liability and the remaining 50% is classified within equity. For Advisory Amounts classified within equity, the Company does not subsequently remeasure the fair value. For the Advisory Amounts classified as a liability, the Company remeasures the fair value at each reporting date, accordingly, the compensation expense recorded by the Company in the future will depend upon changes in the fair value of the liability-classified Advisory Amounts. As of June 30, 2023 and December 31, 2022, the fair value of the Fixed Annual Advisory Amount was calculated to be $69.4 million and $104.5 million, respectively, based on the period end volume weighted average closing share price for consecutive trading days of Ordinary Shares of $5.89 and $8.86, respectively. As of June 30, 2023 and December 31, 2022, the fair value of the Variable Annual Advisory Amount, determined using a Monte Carlo simulation model, was $103.5 million and $237.0 million, respectively. For the three and six months ended June 30, 2023, the Company recognized a reduction in the compensation expense related to the founders advisory fees-related party due to a decrease in fair value for liability-classified Advisory Amounts of $60.0 million and $84.3 million, respectively. For the three and six months ended June 30, 2022, the Company recognized a reduction in the compensation expense related to the founders advisory fees-related party due to a decrease in fair value for liability-classified Advisory Amounts of $20.5 million and $80.3 million, respectively.
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FAIR VALUE MEASUREMENTS |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FAIR VALUE MEASUREMENTS | FAIR VALUE MEASUREMENTS Fair Value Measurement The carrying value of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and other current liabilities approximates fair value due to the short-term nature of their maturities. Borrowings under the Company’s Revolving Credit Facility accrues interest at a floating rate tied to a standard short-term borrowing index, selected at the Company’s option, plus an applicable margin. The carrying amount of this floating rate debt approximates fair value based upon the respective interest rates adjusting with market rate adjustments. The carrying amount of the Company's Redeemable Preferred Shares equals the redemption price, which approximates fair value. At June 30, 2023 and December 31, 2022, the estimated fair value of the Company’s Senior Notes, calculated using Level 2 inputs, based on bid prices obtained from a broker was approximately $534.9 million and $556.9 million, respectively. The Company uses valuation approaches that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or a liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels: •Level 1 inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date. •Level 2 inputs: Other than quoted prices in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability. •Level 3 inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date. Liabilities by Hierarchy Level The following tables set forth the Company’s liabilities that were measured at fair value on a recurring basis, by level, within the fair value hierarchy as of June 30, 2023 and December 31, 2022 (in thousands):
The fair value of the founders advisory fees payable is based on the appreciation of the market price of Ordinary Shares if such market price exceeds certain trading price minimums at the end of each reporting period and is valued using a Monte Carlo simulation model, which requires the input of highly subjective assumptions, including the fair value of the underlying Ordinary Shares, the risk-free interest rate, the expected equity volatility, and the expected term of the Founder Advisory Agreement. See Note 11, “Share-Based Compensation” for discussion of the fair value estimation on the founders advisory fees payable. The fair value of the contingent earn-out related to the May 2020 purchase of LaderaTech, Inc. (“LaderaTech”) is measured on a recurring basis using Level 3 fair value inputs. The earn-out is based on 20% of gross profits upon achieving a revenue threshold exceeding $5.0 million through December 31, 2026 and is valued using a Monte Carlo simulation model. Significant changes in the projected revenue, projected gross margin, or discount rate would have a material impact on the fair value of the contingent consideration. Changes in Level 3 Liabilities The reconciliations for all liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) are as follows (in thousands):
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RELATED PARTIES |
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Jun. 30, 2023 | |
Related Party Transactions [Abstract] | |
RELATED PARTIES | RELATED PARTIES On November 9, 2021, in connection with the consummation of the Business Combination, the Company, EverArc and the EverArc Founder Entity entered into an Assignment and Assumption Agreement (the “Founder Assignment Agreement”) pursuant to which the Company assumed, and agreed to pay, perform, satisfy and discharge in full, all of EverArc’s liabilities and obligations under the Founder Advisory Agreement. In exchange for the services provided to the Company, including strategic and capital allocation advice, the EverArc Founder Entity is entitled to receive both the Fixed Annual Advisory Amount and the Variable Annual Advisory Amount from the Company. The Fixed Annual Advisory Amount will be equal to 2,357,061 Ordinary Shares (1.5% of 157,137,410 Ordinary Shares outstanding) for each year through December 31, 2027 and valued using the period end volume weighted average closing share price for ten consecutive trading days of Ordinary Shares. The Variable Annual Advisory Amount for each year through December 31, 2031 is based on the appreciation of the market price of Ordinary Shares if such market price exceeds certain trading price minimums at the end of each reporting period and is valued using a Monte Carlo simulation model. For 2022, the average price was $8.86 per Ordinary Share. The EverArc Founder Entity was entitled to receive the Fixed Annual Advisory Amount of 2,357,061 Ordinary Shares or a value of $20.9 million, based on average price of $8.86 per Ordinary Share (the “2022 Fixed Amount”). The EverArc Founder Entity did not qualify to receive the Variable Annual Advisory Amount as the average price of $8.86 per Ordinary Share for 2022 was lower than the average price of $13.63 per Ordinary Share established in 2021. Per the Founder Advisory Agreement, the EverArc Founder Entity elected to receive approximately 77.7% of the 2022 Fixed Amount in Ordinary Shares (1,831,653 Ordinary Shares) and approximately 22.3% of the 2022 Fixed Amount in cash ($4.7 million). On February 15, 2023, the Company issued 1,831,653 Ordinary Shares and paid $4.7 million in cash in satisfaction of the 2022 Fixed Amount. As of June 30, 2023, the Company calculated the fair value of the Fixed Annual Advisory Amounts using the period end volume weighted average closing share price of Ordinary Shares for ten consecutive trading days of $5.89 and used a Monte Carlo simulation model to calculate the fair value of the Variable Annual Advisory Amount. These approaches resulted in fair values of $103.5 million for the Variable Annual Advisory Amount and $69.4 million for the Fixed Annual Advisory Amount, of which 50% may be paid in cash and recorded as a liability and the remaining 50% would be settled in Ordinary Shares. While the entire instrument is subject to the fair value calculation described above, the amount classified and recorded as equity remains consistent while the amount classified and recorded as a liability is updated each period. For the three and six months ended June 30, 2023, the Company recognized a reduction in share-based compensation expense related to a decrease in fair value for liability-classified Advisory Amounts of $60.0 million and $84.3 million, respectively, primarily due to the decrease in stock price. The Company leases real property from the sellers of First Response Fire Rescue, LLC, River City Fabrication, LLC, and H&S Transport, LLC (collectively, “Ironman”). Shannon Horn, who serves as our Business Director, North America Retardant and Services, was one of the sellers of Ironman. The Company paid $0.1 million, $0.1 million, $0.2 million and $0.2 million to lease real property from Ironman during the three and six months ended June 30, 2023 and 2022, respectively.
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REVENUE RECOGNITION |
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REVENUE RECOGNITION | REVENUE RECOGNITION Disaggregation of revenues Amounts recognized at a point in time primarily relate to products sold whereas amounts recognized over time primarily relate to services associated with the full-service retardant contracts. Revenues for the three and six months ended June 30, 2023 and 2022 are as follows (in thousands):
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EARNINGS PER SHARE |
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EARNINGS PER SHARE | EARNINGS PER SHARE Basic earnings per share represents income available to ordinary shareholders divided by the weighted average number of Ordinary Shares outstanding during the reported period. Diluted earnings per share is based upon the weighted-average number of Ordinary Shares outstanding during the period plus additional weighted-average potentially dilutive Ordinary Share equivalents during the period when the effect is dilutive. Basic and diluted weighted average shares outstanding and earnings per share were as follows (in thousands, except share and per share data):
As of June 30, 2023, 11.2 million PBNQSO and 17.6 million Ordinary Shares issuable under the Founder Advisory Agreement were excluded from the diluted earnings per share calculation as the contingencies related to such instruments had not been met. In addition, 8.5 million Ordinary Shares equivalent warrants were excluded from the diluted earnings per share calculation as their effect would have been anti-dilutive. As of June 30, 2022, 10.2 million PBNQSOs and 23.9 million Ordinary Shares issuable under the Founder Advisory Agreement were excluded from the diluted earnings per share calculation as the contingencies related to such instruments had not been met. In addition, 8.5 million Ordinary Shares equivalent warrants were excluded from the diluted earnings per share calculation as their effect would have been anti-dilutive.
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SEGMENT INFORMATION |
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Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SEGMENT INFORMATION | SEGMENT INFORMATION The Company’s products and operations are managed and reported in two operating segments: Fire Safety and Specialty Products. The Fire Safety segment manufactures and sells fire retardant and firefighting foam products, as well as specialized equipment and services typically offered in conjunction with these retardant and foam products. The Specialty Products segment produces and sells P2S5 used in several end markets and applications, including lubricant additives, various agricultural applications, various mining applications, and emerging electric battery technologies. Within the lubricant additives end market, currently the Company’s largest end market application, P2S5 is primarily used in the production of a family of compounds called ZDDP, which is considered an essential component in the formulation of engine oils with its main function to provide anti-wear protection to engine components. P2S5 is also used in pesticide and mining chemicals applications. Interest income, interest expense, other income (expense) and certain corporate operating expenses are neither allocated to the segments nor included in the measures of segment performance by the chief operating decision-maker (“CODM”). The corporate category is not considered to be a segment. The CODM is the Company's CEO. The Company’s CODM uses the segment net sales and Adjusted EBITDA to assess the ongoing performance of the Company’s business segments and to allocate resources. The Company defines Adjusted EBITDA as earnings before interest, taxes, depreciation and amortization, as adjusted on a consistent basis for certain non-recurring or unusual items in a balanced manner and on a segment basis. These non-recurring or unusual items may include acquisition and integration related costs, management fees and other non-recurring items. Information related to net sales and Adjusted EBITDA for the Company’s operations are summarized below (in thousands):
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Pay vs Performance Disclosure - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||||
---|---|---|---|---|---|---|
Jun. 30, 2023 |
Mar. 31, 2023 |
Jun. 30, 2022 |
Mar. 31, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
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Pay vs Performance Disclosure | ||||||
Net income | $ 52,014 | $ 9,431 | $ 8,927 | $ 36,963 | $ 61,445 | $ 45,890 |
Insider Trading Arrangements |
3 Months Ended | 6 Months Ended |
---|---|---|
Jun. 30, 2023
shares
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Jun. 30, 2023
shares
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Trading Arrangements, by Individual | ||
Non-Rule 10b5-1 Arrangement Adopted | false | |
Rule 10b5-1 Arrangement Terminated | false | |
Non-Rule 10b5-1 Arrangement Terminated | false | |
Haitham Khouri [Member] | ||
Trading Arrangements, by Individual | ||
Material Terms of Trading Arrangement | On June 9, 2023, Haitham Khouri, Chief Executive Officer and Director of the Company, entered into a 10b5-1 sales plan (the “Khouri 10b-5-1 Sales Plan”) intended to satisfy the affirmative defense of Rule 10b5-1(c) under the Exchange Act. The Khouri 10b5-1 Sales Plan provides for the sale of up to 600,000 Ordinary Shares and will remain in effect until the earlier of (1) March 24, 2024 and (2) the date on which an aggregate 600,000 Ordinary Shares have been sold under the Khouri 10b5-1 Sales Plan. | |
Name | Haitham Khouri | |
Title | Chief Executive Officer and Director of the Company | |
Rule 10b5-1 Arrangement Adopted | true | |
Adoption Date | June 9, 2023 | |
Arrangement Duration | 289 days | |
Aggregate Available | 600,000 | 600,000 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS (Policies) |
6 Months Ended |
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Jun. 30, 2023 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments of a normal and recurring nature considered necessary for a fair presentation have been included in the accompanying condensed consolidated financial statements. The results of operations for the interim period are not necessarily indicative of the results that will be realized for the entire fiscal year. These condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements and accompanying notes thereto included in the Company’s 2022 Annual Report. The condensed consolidated financial statements for the prior periods include certain reclassifications that were made to conform to the current period presentation. Such reclassifications have no impact on previously reported condensed consolidated financial position, results of operations or cash flows.
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Principles of Consolidation | Principles of ConsolidationThe unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries after elimination of intercompany transactions and balances. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with U.S. 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 revenue and expenses during the reporting period. Significant estimates made by management in connection with the preparation of the accompanying unaudited condensed consolidated financial statements include the useful lives of long-lived and intangible assets, the allowance for doubtful accounts, the fair value of financial assets and liabilities, stock options, founder advisory fees, contingent earn-out liability and realizability of deferred tax assets. Actual results could differ from those estimates. As of June 30, 2023, the Company’s significant accounting policies are consistent with those discussed in Note 2 - “Summary of Significant Accounting Policies and Recent Accounting Pronouncements” in its consolidated financial statements included in the Company’s 2022 Annual Report, except for performance-based non-qualified stock options ("PBNQSO") granted during the three months ended March 31, 2023 (“Q1-2023 Option Grants”) and modifications to PBNQSO’s as of May 8, 2023. For PBNQSO’s granted during the three months ended March 31, 2023, the Company recognized compensation costs related to PBNQSO’s granted to employees and non-employees based on the estimated fair value of the awards on the date of grant. The Company estimated the grant date fair value, and the resulting share-based compensation expense, using the Black-Scholes option-pricing model. The Company records forfeitures as they are incurred. The grant date fair value of the PBNQSO’s is expensed proportionately for each tranche over the applicable service period. The fair value of PBNQSO’s is recognized as compensation expense beginning at the time in which the performance conditions are deemed probable of achievement, over the remaining applicable service period. The assumptions used in the Black-Scholes option-pricing model are as follows: •Exercise price. The Company's Ordinary Share’s fair market value on the date of grant. •Fair Market Value of Ordinary Shares. The grant date fair market value is the quoted market price of the Company's Ordinary Shares. •Expected term. The expected term of stock options represents the period that the stock options are expected to remain outstanding and is based on vesting terms, exercise term and contractual lives of the options. The expected term is based on the simplified method and is estimated as the average of the weighted average vesting term and the time to expiration as of the grant date. The simplified method was used due to the lack of historical exercise information. •Expected volatility. As the Company does not have sufficient historical stock price information to meet the expected life of the stock option grants, it uses a blended volatility based on the Company’s short trading history and on the trading history from the common stock of a set of comparable publicly listed companies. •Risk-free interest rate. The risk-free interest rate is based on the U.S. Treasury yield with a maturity equal to the expected term of the stock options in effect at the time of grant. •Dividend yield. The expected dividend is assumed to be zero as the Company has never paid dividends and has no current plan to pay any dividends on its Ordinary Shares. As of May 8, 2023, to better account for seasonal fluctuations of the business, and to better align stock option performance with shareholder return, the Company modified certain terms in the PBNQSO agreements. One modification eliminated a term that provided discretion to the compensation committee to make certain adjustments on how the annual operational performance per diluted share (“AOP”) against the performance target will be measured. Such discretion prohibited the establishment of the grant date under Accounting Standards Codification (“ASC”) Topic 718, “Compensation—Stock Compensation” (“Topic 718”). As of May 8, 2023, it was determined that a mutual understanding of the key terms and conditions of the PBNQSO’s has been ascertained and the grant date was therefore established for PBNQSO’s granted through December 31, 2022 (“Prior Grants”). The modifications were determined to be a Type I (probable to probable) modification under Topic 718. As such, the Company performed a final fair value remeasurement under the original terms of Prior Grants using the Hull-White model and recognized the cumulative compensation cost to reflect the cumulative effect of re-measuring the compensation cost as of May 8, 2023. Subsequently, the Company calculated the modification date fair value for the PBNQSO’s based on the modified terms using (i) the Hull-White model that addresses the performance condition in the option agreements, and (ii) using the Monte Carlo simulation model that addresses the market condition in the option agreements. The modification did not result in any incremental share-based compensation expense for the Q1-2023 Option Grants. The Company currently expects that the performance condition for the modified awards is probable of being achieved, accordingly, the fair value of the PBNQSO’s on the modification date, calculated using the Hull-White model and Black Scholes option-pricing model, as applicable, is recognized as compensation expense on a proportionate basis, for each tranche, over the remaining applicable service period. The Hull-White model requires us to make assumptions and judgments about the variables used in the calculation, including the sub-optimal exercise factor, drift rate, the volatility of our Ordinary Shares, risk-free interest rate, and expected dividends. Changes in assumptions made on the risk-free interest rate and expected volatility can materially impact the estimate of fair value and ultimately how much share-based compensation expense is recognized. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of modification and corresponds to remaining contractual term of the PBNQSO’s. As the Company does not have sufficient historical stock price information to meet the expected life of the stock option grants, it uses a blended volatility based on the Company’s short trading history and on the trading history from the common stock of a set of comparable publicly listed companies.
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Recently Issued and Adopted Accounting Standards | Recently Issued and Adopted Accounting Standards In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases, which required lessees to recognize a right of use asset and a lease liability on their balance sheet for all leases, including operating leases, with a term of greater than 12 months. In July 2018, the FASB issued ASU 2018-11, which added a transition option permitting entities to apply the provisions of the new standard at its adoption date instead of the earliest comparative period presented in the consolidated financial statements. The Company adopted Topic 842 as of January 1, 2022 at December 31, 2022, using the optional transition method provided by ASU 2018-11. Refer to Note 6, "Leases," for additional disclosures. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and issued subsequent amendments to the initial guidance within ASU 2019-04, ASU 2019-05 and ASU 2019-11. The amendments required an entity to replace the incurred loss impairment methodology in current U.S. GAAP with a new model that uses a forward-looking expected loss method, which generally results in earlier recognition of allowances for losses. The Company adopted the standard as of January 1, 2022 at December 31, 2022. The adoption of the standard did not have a material impact on the Company’s consolidated financial statements with the most significant impact being the increase in allowance for doubtful accounts related to its trade accounts receivable. The adoption adjustment was recorded to accumulated deficit in the accompanying condensed consolidated statements of shareholders’ equity. In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, and in January 2021 issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope. These ASUs provided temporary optional expedients and exceptions to existing guidance on contract modifications and hedge accounting to facilitate the market transition from existing reference rates, such as London Interbank Offered Rate (“LIBOR”) which is being phased out, to alternate reference rates, such as Secured Overnight Financing Rate (“SOFR”). These standards are elective and are effective upon issuance for all entities through December 31, 2022. In December 2022, the FASB issued ASU No. 2022-06, which deferred the sunset date of reference rate reform relief to December 31, 2024. The switch in the reference rates from LIBOR to SOFR, under the Company’s Revolving Credit Facility (defined below), occurred as of June 30, 2023. The Company did not have any outstanding borrowings under the Revolving Credit Facility, accordingly, the switch in the reference rates from LIBOR to SOFR did not have a material impact on the Company’s consolidated financial statements.
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BALANCE SHEET COMPONENTS (Tables) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Balance Sheet Components | Details of certain balance sheet items are presented below (in thousands):
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GOODWILL AND OTHER INTANGIBLE ASSETS (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Changes in Goodwill | The changes in the carrying amount of goodwill by reportable segment are as follows (in thousands):
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Schedule of Definite Lived Intangible Assets | Intangible assets and related accumulated amortization as of June 30, 2023 and December 31, 2022 are as follows (in thousands):
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Schedule of Intangible Asset Future Amortization Expense | Estimated annual amortization expense of intangible assets for the next five years ending December 31 and thereafter is as follows (in thousands):
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LEASES (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Lease Cost | Lease cost for the three and six months ended June 30, 2023 and 2022, respectively, are as follow (in thousands):
(1) Operating lease cost does not include short-term leases or variable costs, all of which are immaterial. Supplemental cash flow information related to leases for the six months ended June 30, 2023 and June 30, 2022 are as follows (in thousands):
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Schedule of Future Minimum Payment Obligations for Non-Cancelable Operating Leases | As of June 30, 2023, the estimated future minimum payment obligations for non-cancelable operating leases are as follows (in thousands):
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Schedule of Future Minimum Payment Obligations for Non-Cancelable Finance Leases | As of June 30, 2023, the estimated future minimum payment obligations for non-cancelable operating leases are as follows (in thousands):
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LONG-TERM DEBT AND REDEEMABLE PREFERRED SHARES (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Long-term Debt | Long-term debt consists of the following (in thousands):
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SHARE-BASED COMPENSATION AND EMPLOYEE BENEFIT PLANS (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-Based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Performance-based Non-qualified Stock Options Activity | The table below summarizes the PBNQSO activity for the six months ended June 30, 2023:
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Schedule of Performance-based Non-qualified Stock Options Valuation Assumptions | The weighted-average assumptions used to fair value the PBNQSO on the grant date using the Black-Scholes option-pricing model and on the modification date using the Hull-White model were as follows:
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FAIR VALUE MEASUREMENTS (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Liabilities Measured on a Recurring Basis | The following tables set forth the Company’s liabilities that were measured at fair value on a recurring basis, by level, within the fair value hierarchy as of June 30, 2023 and December 31, 2022 (in thousands):
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Schedule of Reconciliation of Level 3 Liabilities Measured on a Recurring Basis | The reconciliations for all liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) are as follows (in thousands):
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REVENUE RECOGNITION (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Revenue | Revenues for the three and six months ended June 30, 2023 and 2022 are as follows (in thousands):
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EARNINGS PER SHARE (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Basic and Diluted Weighted Average Shares Outstanding and Earning (Loss) Per Share | Basic and diluted weighted average shares outstanding and earnings per share were as follows (in thousands, except share and per share data):
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SEGMENT INFORMATION (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Segment Information | Information related to net sales and Adjusted EBITDA for the Company’s operations are summarized below (in thousands):
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS (Details) - USD ($) |
6 Months Ended | |
---|---|---|
Jun. 30, 2023 |
Dec. 31, 2022 |
|
Revolving Credit Facility | The Revolving Credit Facility | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Long-term line of credit | $ 0 | $ 0 |
Stock Option | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Expected dividend rate | 0.00% |
BUSINESS ACQUISITIONS - Narrative (Details) - USD ($) $ in Thousands |
6 Months Ended | |||
---|---|---|---|---|
Mar. 03, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
Nov. 09, 2021 |
|
Business Acquisition [Line Items] | ||||
Purchase price adjustment | $ 0 | $ 1,638 | ||
SK Intermediate | ||||
Business Acquisition [Line Items] | ||||
Escrow deposit | $ 7,600 | |||
Purchase price adjustment | $ 1,600 | |||
SK Intermediate | Escrow Deposit | ||||
Business Acquisition [Line Items] | ||||
Escrow deposit released | $ 7,600 |
BALANCE SHEET COMPONENTS - Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
Dec. 31, 2022 |
|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||
Depreciation | $ 2.4 | $ 2.9 | $ 4.7 | $ 5.4 | |
Allowance for doubtful accounts | $ 0.6 | $ 0.6 | $ 0.9 |
GOODWILL AND OTHER INTANGIBLE ASSETS - Schedule of Changes in Goodwill (Details) $ in Thousands |
6 Months Ended |
---|---|
Jun. 30, 2023
USD ($)
| |
Goodwill [Roll Forward] | |
Beginning goodwill | $ 1,031,460 |
Foreign currency translation | 2,182 |
Ending goodwill | 1,033,642 |
Fire Safety | |
Goodwill [Roll Forward] | |
Beginning goodwill | 860,319 |
Foreign currency translation | 1,689 |
Ending goodwill | 862,008 |
Specialty Products | |
Goodwill [Roll Forward] | |
Beginning goodwill | 171,141 |
Foreign currency translation | 493 |
Ending goodwill | $ 171,634 |
GOODWILL AND OTHER INTANGIBLE ASSETS - Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
Goodwill and Intangible Assets Disclosure [Abstract] | ||||
Amortization of intangible assets | $ 13.7 | $ 13.8 | $ 27.5 | $ 27.7 |
GOODWILL AND OTHER INTANGIBLE ASSETS - Future Amortization Expense (Details) - USD ($) $ in Thousands |
Jun. 30, 2023 |
Dec. 31, 2022 |
---|---|---|
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract] | ||
2023 remaining | $ 27,800 | |
2024 | 55,600 | |
2025 | 55,600 | |
2026 | 55,600 | |
2027 | 55,600 | |
Thereafter | 761,920 | |
Net Book Value | $ 1,012,120 | $ 1,037,440 |
LEASES - Schedule of Lease Costs (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
Lessee, Lease, Description [Line Items] | ||||
Operating lease cost | $ 1,117 | $ 1,333 | $ 2,271 | $ 2,642 |
Finance lease cost: | ||||
Amortization of right-of-use assets | 118 | 0 | 118 | 0 |
Interest on lease liabilities | 75 | 0 | 75 | 0 |
Total lease cost | 1,310 | 1,333 | 2,464 | 2,642 |
Cost of goods sold | ||||
Finance lease cost: | ||||
Total lease cost | 1,171 | 1,228 | 2,264 | 2,432 |
Selling, general and administrative | ||||
Finance lease cost: | ||||
Total lease cost | $ 139 | $ 105 | $ 200 | $ 210 |
LEASES - Narrative (Details) |
Jun. 30, 2023 |
---|---|
Leases [Abstract] | |
Weighted average remaining lease term of operating leases | 7 years 4 months 24 days |
Weighted average remaining lease term of finance leases | 9 years 2 months 12 days |
Weighted average discount rate of operating leases | 5.80% |
Weighted average discount rate of finance leases | 7.90% |
LEASES - Schedule of Supplemental Cash Flow Lease (Details) - USD ($) $ in Thousands |
6 Months Ended | |
---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
|
Cash paid for amounts included in the measurement of lease liabilities: | ||
Operating cash flows for operating leases | $ 2,263 | $ 2,511 |
Operating cash flows for finance leases | 67 | 0 |
Financing cash flows for finance leases | 103 | 0 |
Right-of-use assets obtained in exchange for new lease obligations: | ||
Operating leases | 0 | 912 |
Finance leases | 4,688 | 0 |
Net change in operating lease right-of-use assets due to lease modifications resulting in reclassification of leases from operating to finance | $ (1,514) | $ 0 |
LEASES - Schedule of Future Minimum Payment Obligations for Non-Cancelable Operating Leases & Finance Leases (Details) $ in Thousands |
Jun. 30, 2023
USD ($)
|
---|---|
Operating Leases | |
Remainder of 2023 | $ 1,983 |
2024 | 3,100 |
2025 | 2,948 |
2026 | 2,585 |
2027 | 1,955 |
Thereafter | 6,742 |
Total Lease payments | 19,313 |
Less: imputed interest | 3,859 |
Present value of lease liabilities | 15,454 |
Finance Leases | |
Remainder of 2023 | 383 |
2024 | 723 |
2025 | 703 |
2026 | 617 |
2027 | 580 |
Thereafter | 4,231 |
Total Lease payments | 7,237 |
Less: imputed interest | 2,500 |
Present value of lease liabilities | $ 4,737 |
LONG-TERM DEBT AND REDEEMABLE PREFERRED SHARES - Schedule of Long-term Debt (Details) - USD ($) $ in Thousands |
Jun. 30, 2023 |
Dec. 31, 2022 |
---|---|---|
Debt Instrument [Line Items] | ||
Less: unamortized debt issuance costs | $ (9,121) | $ (9,720) |
Long-term debt | 665,879 | 665,280 |
Senior Notes | ||
Debt Instrument [Line Items] | ||
Senior Notes | $ 675,000 | $ 675,000 |
LONG-TERM DEBT AND REDEEMABLE PREFERRED SHARES - Revolving Credit Facility (Details) - The Revolving Credit Facility - USD ($) |
Nov. 09, 2021 |
Jun. 30, 2023 |
Dec. 31, 2022 |
---|---|---|---|
Revolving Credit Facility | |||
Debt Instrument [Line Items] | |||
Debt term | 5 years | ||
Line of credit, maximum borrowing capacity | $ 100,000,000 | ||
Line of credit accordion feature | $ 143,000,000 | ||
Line of credit, increase percentage factor | 100.00% | ||
Utilization threshold | 40.00% | ||
Leverage ratio | 750.00% | ||
Debt issuance costs, gross | $ 2,300,000 | ||
Long-term line of credit | $ 0 | $ 0 | |
Bridge Loan | |||
Debt Instrument [Line Items] | |||
Line of credit, maximum borrowing capacity | 20,000,000 | ||
Letter of Credit | |||
Debt Instrument [Line Items] | |||
Line of credit, maximum borrowing capacity | 25,000,000 | ||
Amount of undrawn letters of credit (up to) | $ 10,000,000 |
LONG-TERM DEBT AND REDEEMABLE PREFERRED SHARES - Senior Notes (Details) - Senior Notes Due 2029 - Senior Notes $ in Millions |
Nov. 09, 2021
USD ($)
|
---|---|
Debt Instrument [Line Items] | |
Debt face amount | $ 675.0 |
Debt interest rate | 5.00% |
Deferred financing costs incurred | $ 11.0 |
INCOME TAXES (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
Income Tax Disclosure [Abstract] | ||||
Effective tax rate | 1.39% | 10.18% | (10.01%) | (10.70%) |
Luxembourg statutory rate | 24.94% | |||
Decrease in unrecognized tax benefits | $ 34.0 | $ 34.0 | ||
Unrecognized tax benefits | $ 2.3 | $ 2.3 |
COMMITMENTS AND CONTINGENCIES - Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
Commitments and Contingencies Disclosure [Abstract] | ||||
Purchase obligation expense | $ 7.9 | $ 10.3 | $ 17.9 | $ 24.3 |
Purchase agreement | 5.0 | 5.0 | ||
Obligation paid to date | 2.6 | |||
Obligation outstanding | $ 2.4 | $ 2.4 |
FAIR VALUE MEASUREMENTS - Narrative (Details) $ in Millions |
6 Months Ended | |
---|---|---|
Jun. 30, 2023
USD ($)
|
Dec. 31, 2022
USD ($)
|
|
LaderaTech, Inc | ||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||
Revenue threshold | $ 5.0 | |
LaderaTech, Inc | Measurement Input, Gross Profit | ||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||
Contingent consideration liability, measurement input | 0.20 | |
Level 2 | Senior Notes | ||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||
Long-term debt, fair value | $ 534.9 | $ 556.9 |
REVENUE RECOGNITION - Schedule of Revenue (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
Disaggregation of Revenue [Line Items] | ||||
Net sales | $ 76,137 | $ 100,965 | $ 119,995 | $ 158,723 |
Revenues from products | ||||
Disaggregation of Revenue [Line Items] | ||||
Net sales | 72,720 | 97,069 | 115,860 | 152,663 |
Revenues from services | ||||
Disaggregation of Revenue [Line Items] | ||||
Net sales | 2,929 | 3,418 | 3,638 | 3,990 |
Other revenues | ||||
Disaggregation of Revenue [Line Items] | ||||
Net sales | $ 488 | $ 478 | $ 497 | $ 2,070 |
SEGMENT INFORMATION - Narrative (Details) |
6 Months Ended |
---|---|
Jun. 30, 2023
segment
| |
Segment Reporting [Abstract] | |
Number of operating segments | 2 |
SEGMENT INFORMATION - Schedule of Segment Information (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
Segment Reporting Information [Line Items] | ||||
Net sales: | $ 76,137 | $ 100,965 | $ 119,995 | $ 158,723 |
Adjusted EBITDA: | 20,990 | 35,682 | 24,106 | 47,659 |
Depreciation and amortization | 16,130 | 16,715 | 32,217 | 33,086 |
Interest and financing expense | 10,344 | 12,142 | 20,490 | 22,638 |
Founders advisory fees - related party | (60,026) | (20,465) | (84,262) | (80,313) |
Non-recurring expenses | 361 | 2,144 | 1,920 | 3,620 |
Share-based compensation expense | 1,195 | 3,433 | (1,879) | 8,396 |
Non-cash purchase accounting impact | 0 | 18,016 | 0 | 24,138 |
Loss (gain) on contingent earn-out | 146 | (9,398) | 392 | (9,398) |
Unrealized foreign currency loss (gain) | 93 | 3,156 | (628) | 4,036 |
Income before income taxes | 52,747 | 9,939 | 55,856 | 41,456 |
Fire Safety | ||||
Segment Reporting Information [Line Items] | ||||
Net sales: | 53,140 | 66,577 | 71,884 | 85,047 |
Adjusted EBITDA: | 16,532 | 24,219 | 13,171 | 20,885 |
Specialty Products | ||||
Segment Reporting Information [Line Items] | ||||
Net sales: | 22,997 | 34,388 | 48,111 | 73,676 |
Adjusted EBITDA: | $ 4,458 | $ 11,463 | $ 10,935 | $ 26,774 |
Label | Element | Value |
---|---|---|
Accounting Standards Update [Extensible Enumeration] | us-gaap_AccountingStandardsUpdateExtensibleList | Accounting Standards Update 2016-13 [Member] |
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