GLOBAL INDUSTRIAL COMPANY Forward-Looking Statements and Risk Factors.
This report contains forward-looking statements within the meaning of that term in the Private Securities Litigation Reform Act of 1995 (Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934). Additional written or oral forward-looking statements may be made by the Company from time to time in filings with theSecurities and Exchange Commission or otherwise. Any such statements that are not historical facts are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are based on management's estimates, assumptions and projections and are not guarantees of future performance. Forward-looking statements may include, but are not limited to statements regarding: i) projections or estimates of revenue, income or loss, exit costs, cash flow needs and capital expenditures; ii) fluctuations in general economic conditions, including effects of rising inflation; iii) future operations, such as risks regarding strategic business initiatives, plans relating to new distribution facilities, plans for utilizing alternative sources of supply in response to government tariff and trade actions and/or due to supply chain disruptions arising from the Coronavirus pandemic, war, geopolitical conflicts and plans for new products or services; iv) plans for acquisition or sale of businesses, including expansion or restructuring plans; v) financing needs, and compliance with financial covenants in loan agreements; vi) assessments of materiality; vii) predictions of future events and the effects of pending and possible litigation; and viii) assumptions relating to the foregoing. In addition, when used in this report, the words "anticipates," "believes," "estimates," "expects," "intends," and "plans" and variations thereof and similar expressions are intended to identify forward-looking statements. Forward-looking statements in this report are based on the Company's beliefs and expectations as of the date of this report and are subject to risks and uncertainties which may have a significant impact on the Company's business, operating results or financial condition. Investors are cautioned that these forward-looking statements are inherently uncertain and undue reliance should not be placed on them. We undertake no obligation to publicly release the result of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unexpected events. Other factors that may affect our future results of operations and financial condition include, but are not limited to, unanticipated developments in any one or more of the following areas, as well as other factors which may be detailed from time to time in ourSecurities and Exchange Commission filings: •general economic conditions, such as customer inventory levels, consumer prices and inflation, interest rates, borrowing ability and economic conditions in the manufacturing and/or distribution industries generally, as well as government spending levels will continue to impact our business; •delays in the timely availability of products from our suppliers has in the past and could in the future delay receipt of needed product, resulting in delayed or lost sales; •global supply chains and the timely availability of products, particularly products, or product components used in domestic manufacturing, imported fromChina and other Asian nations as well as from other countries, have been, and in the future could continue to be adversely affected by allocation restrictions of difficult to source products by our vendors; •quarantines, factory slowdowns or shutdowns, border closings and travel restrictions resulting from the Coronavirus pandemic have in the past and could in the future adversely affect the timely availability of products, resulting in delayed or lost sales; •the imposition of tariffs and other trade barriers, as well as retaliatory trade measures, have caused us to raise the prices on certain of our products and seek alternate sources of supply, which could negatively impact our sales or disrupt our operations if we are not able to mitigate these measures; •our use of alternate sources of supply, such as utilizing new vendors in additional countries, entails various risks, such as identifying, vetting and managing new business relationships, reliance on new vendors and maintaining quality control over their products, and protecting our intellectual property rights; •increases in freight and shipping costs, including fuel costs, could affect our margins to the extent the increases cannot be passed along to customers, as has occurred in the past; •extreme weather conditions have delayed or disrupted global product supply chains and have affected our ability to timely receive and ship products, which have and could adversely impact sales; •other critical factors affecting the shipping and distribution of products imported tothe United States by us or our domestic vendors, such as a global shortage in availability of shipping containers, shipping port congestion, and pandemic related labor shortages, have in the past and could in the future adversely affect the timely availability of products, resulting in delayed or lost sales, as well as adversely affecting our margins; 17 -------------------------------------------------------------------------------- Table of Contents •our reliance on common carrier delivery services for shipping inventoried merchandise to customers; •our reliance on drop ship deliveries directly to customers by our product vendors for products we do not hold in inventory; •our ability to maintain available capacity in our distribution operations for stocked inventory and to enable on time shipment and deliveries, such as by timely implementing additional temporary or permanent distribution resources, whether in the form of additional facilities we operate or by outsourcing certain functions to third-party distribution and logistics partners; •we compete with other companies for recruiting, training, integrating and retaining talented and experienced employees, particularly in markets where we and they have central distribution facilities; and this aspect of competition is aggravated by the current tight labor market in theU.S. for such jobs and at a time this market is undergoing competitive changes due to the Coronavirus pandemic; •we expect to pursue acquisitions and other strategic transactions that we believe will either expand or complement our business in new or existing markets or further enhance the value and offerings we are able to provide to our existing or future potential customers; •the maintenance, repair and operation ("MRO") and industrial equipment industry are consolidating as customers are increasingly aware of the total costs of fulfillment and the need to have consistent sources of supply at multiple locations. This consolidation has and will continue to cause the industry to become more competitive as greater economies of scale are achieved by competitors, or as competitors with new lower cost business models are able to operate with lower prices; •risks involved with e-commerce, including possible loss of business and customer dissatisfaction if outages or other computer-related problems should preclude customer access to our products and services; •our information systems and other technology platforms supporting our sales, procurement and other operations are critical to our operations and disruptions or delays have occurred and could occur in the future, and if not timely addressed could have a material adverse effect on us; •a data security breach due to our e-commerce, data storage or other information systems being hacked by those seeking to steal Company, vendor, employee or customer information, or due to employee error, resulting in disruption to our operations, litigation and/or loss of reputation or business; •managing various inventory risks, such as being unable to profitably resell excess or obsolete inventory and/or the loss of product return rights from our vendors; •meeting credit card industry compliance standards in order to maintain our ability to accept credit cards; •rising interest rates, increased borrowing costs or limited credit availability, could impact both our and our customers' ability to fund purchases and conduct operations in the ordinary course; •pending or threatened litigation and investigations, and other government actions, such as anti-dumping, unclaimed property, or trade and customs actions byU.S. or foreign governmental authorities, have occurred in the past and although had no material impact to our business, there can be no assurance that such events would not have such impact on our business and results of operation. Should one or more of the risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results or outcomes may vary materially from those described herein. Statements in this report, particularly in "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Notes to Condensed Consolidated Financial Statements, as well as information under the heading "Risk Factors" in our Annual Report on Form 10-K for fiscal year 2022, describe certain factors, among others, that could contribute to or cause such differences.
Overview
Global Industrial Company , through its subsidiaries, is a value-added industrial distributor of more than a million industrial and MRO products inNorth America going to market through a system of branded e-commerce websites and relationship marketers. Continuing Operations The Company sells a wide array of industrial and MRO products, including its own Global Industrial Exclusive BrandsTM, which are marketed inNorth America . These industrial and MRO products are manufactured by other companies. Some products are manufactured for us and sold as a white label product, and some are manufactured to our own design and marketed as private brand products under the trademarks: GlobalTM, GlobalIndustrial.comTM, NexelTM, ParamountTM and InterionTM..
See Note 2 to the condensed consolidated financial statements for additional financial information about our business' geographic operations.
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Operating Conditions
The North American industrial products market is highly fragmented and we
compete against multiple distribution channels. Industrial products
distribution is working capital intensive, requiring us to incur significant
costs associated with the warehousing of many products, including the costs of
maintaining inventory, leasing warehouse space, inventory management systems and
employing personnel to perform the associated tasks. We supplement our on-hand
product availability by maintaining relationships with major distributors and
manufacturers, utilizing a combination of stock and drop-shipment fulfillment.
The primary component of our operating expenses historically has been
employee-related costs, which includes items such as wages, commissions,
bonuses, employee benefits and equity-based compensation, as well as marketing
expenses, primarily comprised of digital marketing spend, and occupancy related
charges associated with our leased distribution and call center facilities. We
continually assess our operations to ensure that they are efficient, aligned
with market conditions and responsive to customer needs.
The discussion of our results of operations and financial condition that follows
will provide information that will assist in understanding our financial
statements, the factors that we believe may affect our future results and
financial condition as well as information about how certain accounting policies
and estimates affect the consolidated financial statements. This discussion
should be read in conjunction with the condensed consolidated financial
statements included herein and in conjunction with the audited financial
statements as of December 31, 2022 and the other information provided in our
Annual Report on Form 10-K for the fiscal year ended December 31, 2022 .
Business Outlook
The Company's net sales declined in the first quarter by 5.1% to$273.8 million . First quarter performance reflects a continuation of the recent soft demand environment, with average daily sales declining 3.7%. Price was neutral in the period and volume remained muted, reflecting cautionary purchase behavior, specifically within our core small and medium business customer base. These trends have continued into the second quarter. We recorded strong growth from our largest accounts in the quarter and customer retention remained healthy overall, which we believe reflects the value of our one-to-one managed sales organization. Sales inthe United States were down 3.7% and sales inCanada , in local currency, were off by 17.3%. Excluding the benefit of a large one time deal last year,Canada sales declined 6.4% in local currency. Gross margin in the first quarter of 2023 was 35.9%, a slight decline from sequential quarter results, but as expected, off from record results in the first quarter of 2022. Product margin was solid and expanded each month as we moved through the quarter, reflecting a continuation of the benefit we are receiving from lower cost inventory flowing into our cost of sales. The Company expects to see continued margin variability due to the current economic environment, inflationary pressures and historical seasonality. Selling, distribution and administrative ("SD&A") primarily reflects the fixed cost nature of the business, including compensation expense which included the impact of our previously announced reduction in force, planned marketing investment and the expansion of our distribution network. We continue to maintain strong cost controls, and will evaluate additional steps to optimize our structure. 19 -------------------------------------------------------------------------------- Table of Contents Critical Accounting Policies and Estimates Our significant accounting policies are described in Note 1 to the Consolidated Financial Statements included in Item 15 of the Company's 2022 Annual Report on Form 10-K. Certain accounting policies require the application of significant judgment by management in selecting the appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty, and as a result, actual results could differ materially from those estimates. These judgments are based on historical experience, observation of trends in the industry, information provided by customers, forecasts of future economic conditions and information available from other outside sources, as appropriate. Management has identified revenue recognition and inventory valuation as policies that entail significant judgments or estimates. Management believes that full consideration has been given to all relevant circumstances that we may be subject to, and the consolidated financial statements of the Company accurately reflect management's best estimate of the consolidated results of operations, financial position and cash flows of the Company for the years presented.
There were no material changes in the Company's significant accounting policies
during the first quarter ended
Public companies inthe United States are subject to the accounting and reporting requirements of various authorities, including theFinancial Accounting Standards Board ("FASB") and theSecurities and Exchange Commission ("SEC"). These authorities issue numerous pronouncements, most of which are not applicable to the Company's current or reasonably foreseeable operating structure. See Note 1 of Notes to Condensed Consolidated Financial Statements, Recent Accounting Pronouncements. 20 -------------------------------------------------------------------------------- Table of Contents Highlights from Q1 2023 compared to Q1 2022 The discussion of our results of operations and financial conditions that follows will provide information that will assist in understanding our financial statements and information about how certain accounting principles and estimates affect the condensed consolidated financial statements included herein.
First Quarter 2023 Summary:
•Consolidated sales decreased 5.1% to$273.8 million compared to$288.6 million last year. Sales decreased 3.7% on an average daily sales basis. Average daily sales is calculated based upon the number of selling days in each period, with Canadian sales converted toU.S. dollars using the current year's average exchange rate. There were 64 selling days in theU.S. and 63 selling days inCanada compared to 65 selling days in theU.S. and 64 selling days inCanada in the first quarter of 2022. •Consolidated gross margin declined to 35.9% for the first quarter of 2023 compared to 37.4% last year. •Consolidated operating income from continuing operations decreased 39.7% to$17.8 million compared to$29.5 million last year. •Net income per diluted share from continuing operations decreased 38.6% to$0.35 compared to$0.57 last year. 21 -------------------------------------------------------------------------------- Table of Contents Results of Operations
Three Months Ended
Key Performance Indicators* (in millions except for percentages and per share
amounts):
Three Months Ended March 31,
%
2023 2022 Change
Net sales of continuing operations:
Consolidated net sales$273.8 $288.6 (5.1)% Consolidated gross profit$98.4 $107.8 (8.7)% Consolidated gross margin 35.9% 37.4% (1.5)% Consolidated SD&A costs$80.6 $78.3 2.9% Consolidated SD&A costs as a % of net sales 29.4% 27.1% 2.3%
Operating income from continuing operations:
Consolidated operating income$17.8 $29.5 (39.7)% Consolidated operating margin from continuing operations 6.5% 10.2% (3.7)% Effective income tax rate 24.4% 25.1% (0.7)% Net income from continuing operations$13.3 $21.8 (39.0)% Net income margin from continuing operations 4.9% 7.6% (2.7)% Net income per diluted share from continuing operations$0.35 $0.57 (38.6)%
*excludes discontinued operations
*
year that ends at midnight on the Saturday closest to
presentation, fiscal years and quarters are described as if they ended on the last day
of the respective calendar month. The actual fiscal quarters ended
13 weeks.
Average daily sales is calculated based upon the number of selling days in each period,
with Canadian sales converted to US dollars using the current year's average exchange
rate. In the first quarter of 2023, there were 64 selling days in the
selling days in
Canada in the first quarter of 2022. 22
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Table of Contents Management's discussion and analysis that follows includes current operations.
The Company's net sales decreased 5.1% during the quarter endedMarch 31, 2023 as compared to the same period in 2022. The Company's sales reflect a continuation of a soft demand environment experienced in the second half of 2022. Price was neutral in the period and volume remained muted, reflecting cautionary purchasing behavior, specifically within our core small and medium business customer base. Demand softened as we moved through the quarter and we have seen a continuation of this trend into the second quarter of 2023.U.S. sales decreased 3.7% for the quarter compared to the same periods in 2022.Canada sales, in local currency, were down 17.3%. Excluding the benefit of a large one time deal in 2022,Canada sales were down 6.4%, in local currency, compared to the first quarter of 2022. Consolidated average daily sales decreased 3.7% during the quarter.
There were 64 selling days in the
GROSS MARGIN
Gross margin is dependent on variables such as product mix including sourcing and category, competition, pricing strategy, vendor volume rebates, freight pricing decisions including the use of free or other promotional freight plans, freight cost inflation including both domestic outbound freight as well as international inbound ocean freight, inventory valuation and obsolescence and other variables, any or all of which may result in fluctuations in gross margin. The Company expects to see continued margin variability due to the current economic environment, inflationary pressures and historical seasonality. Gross margin declined by 150 basis points in the first quarter of 2023 compared to the first quarter of 2022. The first quarter of 2022 benefited from strong price realization and lower inventory cost flow through, both of which have now waned. Product margin trends improved as we moved through the quarter, as we benefited from lower total landing cost of imported inventory products, primarily the result of lower ocean freight costs.
SELLING, DISTRIBUTION AND ADMINISTRATIVE EXPENSES ("SD&A")
For the three month period endedMarch 31, 2023 , SD&A costs as a percentage of sales increased 230 basis points compared to the same period in 2022. This increase reflects the impact of the previously announced reduction in force of approximately$1.1 million , e-commerce and other technological enhancements and increased marketing efforts. In the first quarter of 2023, the cost increases include increased salary and related costs of approximately$0.7 million , including the previously announced reduction in force, offset by savings in temporary help spend of approximately$0.7 million . Other cost increases include approximately$1.2 million related to our increased marketing efforts and approximately$1.1 million of increased costs related to our Canadian distribution center offset by cost savings in contract services, consulting, professional fees of approximately$0.5 million .
OPERATING MARGIN
Operating margin for the three month periods endedMarch 31, 2023 declined 370 basis points compared to the same period in 2022. As discussed above, the decline was driven by the sales decrease in the quarter, lower gross margin as compared to the record gross margin in the first quarter of 2022, the fixed cost nature of our SD&A and approximately$1.1 million in costs related to our previously announced reduction in force.
INTEREST AND OTHER EXPENSE, NET
Interest and other expense, net from continuing operations was$0.2 million in the first quarter of 2023 compared to$0.4 million in the first quarter of 2022 primarily related to higher borrowings in the first quarter of 2022.
INCOME TAXES
For the three month periods ended
In the three month period ended
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Financial Condition, Liquidity and Capital Resources
The following tables present selected liquidity data and historical cash flows
(in millions):
Selected liquidity data
March 31, December 31,
2023 2022 $ Change
Cash and cash equivalents $ 48.2 $ 28.5 $ 19.7
Accounts receivable, net $ 113.7 $ 108.0 $ 5.7
Inventories $ 166.1 $ 179.4 $ (13.3)
Prepaid expenses and other current assets $ 7.4 $ 9.8 $ (2.4)
Accounts payable $ 103.6 $
96.9
Accrued expenses and other current liabilities$ 40.0 $ 43.2 $ (3.2) Short-term debt$ 0.0 $ 0.6$ (0.6) Operating lease liabilities$ 12.2 $ 12.4 $ (0.2) Working capital$ 179.6 $ 172.6 $ 7.0 Historical Cash Flows Three Months Ended March 31, 2023 2022
Net cash provided by (used in) operating activities from continuing operations
$ 28.5 $ (14.0)
Net cash used in operating activities from discontinued operations $
(0.2) $ (0.1) Net cash used in investing activities from continuing operations $
(0.7) $ (1.1) Net cash (used in) provided by financing activities from continuing operations
$ (7.9) $ 14.4 Effects of exchange rates on cash$ 0.0 $ 0.0 Net increase (decrease) in cash and cash equivalents$ 19.7 $ (0.8) Our primary liquidity needs are to support working capital requirements in our business, including inflationary cost pressure within inventory, funding recently declared and any future dividends, funding capital expenditures and inventory purchases related to our new distribution center inCanada , continuing investment in upgrading and expanding our technological capabilities specifically related to additional functionality and enhanced navigation of our new web platform, continuing investment in upgrading our distribution facilities and funding acquisitions. We rely principally upon operating cash flow to meet these needs. We currently believe that current cash on hand, cash flow from operations and our availability under our credit facility will be sufficient to fund our working capital and other cash requirements for at least the next twelve months. We believe our current capital structure and cash resources are adequate for our internal growth initiatives. To the extent our growth initiatives expand, including major acquisitions, we would seek to raise additional capital. We believe that, if needed, we can access public or private funding alternatives to raise additional capital. Our working capital increased$7.0 million primarily related to increased cash and cash equivalent and accounts receivable balances, decreased accrued expenses and other current liabilities balances offset by decreased inventory, prepaid expenses and other current asset balances and increased accounts payable balances. Accounts receivable days outstanding were 38.3 in 2023 compared to 37.8 in 2022, inventory turns were 4.0 in 2023 compared to 4.3 in 2022 and accounts payable days outstanding were 54.6 in 2023 compared to 65.9 in 2022. We expect that future accounts receivable, inventory and accounts payable balances will fluctuate with net sales and the product mix of our net sales. 24 -------------------------------------------------------------------------------- Table of Contents Operating Activities Net cash provided by operating activities from continuing operations was$28.5 million compared to$14.0 million used in 2022, attributable to changes in our working capital accounts which provided$12.9 million in cash compared to$38.2 million used in 2022, primarily the result of the changes in inventory, accounts payable, accrued expenses, other current liabilities and other liabilities and accounts receivable. Cash generated from net income adjusted by other non-cash items, provided$15.6 million in 2023 compared to$24.2 million provided by these items in 2022 primarily due to higher net income generated in the first three months endedMarch 31, 2022 compared to 2023. Net cash used in operating activities from discontinued operations was$0.2 million and$0.1 million for the three months endedMarch 31, 2023 andMarch 31, 2022 , respectively.
Investing Activities
Net cash used in investing activities totaled$0.7 million and was used for warehouse machinery and equipment, primarily related to our new Canadian distribution center, leasehold improvements, computer equipment and molds. Net cash used in investing activities in 2022 totaled$1.1 million primarily for warehouse machinery and equipment, leasehold improvements, computer equipment and software. Financing Activities Net cash used in financing activities totaled$7.9 million in 2023 primarily related to the regular quarterly dividend of$0.20 per common share which totaled approximately$7.7 million and repayments of short-term debt of approximately$0.6 million . Proceeds from the issuance of common stock from the employee stock purchase plan totaled$0.7 million and proceeds from stock option exercises totaled$0.1 million , offset by payments for payroll taxes through shares withheld, which totaled$0.4 million . Net cash provided by financing activities in 2022 totaled$14.4 million primarily related to the net proceeds from short-term borrowings of$20.5 million . Proceeds from the issuance of common stock from our employee stock purchase plan totaled$0.6 million and proceeds from the issuance of common stock from stock option exercises, net of payments for payroll taxes through shares withheld totaled$0.3 million . Dividends paid primarily related to the regular quarterly dividend of$0.18 per common share declared inFebruary 2022 which totaled approximately$7.0 million . The Company maintains a$125.0 million secured revolving credit facility with one financial institution, which has a five year term, maturing onOctober 19, 2026 and provides for borrowings inthe United States . The credit agreement contains certain operating, financial and other covenants, including limits on annual levels of capital expenditures, availability tests related to payments of dividends and stock repurchases and fixed charge coverage tests related to acquisitions. The revolving credit agreement requires that a minimum level of availability be maintained. If such availability is not maintained, the Company will be required to maintain a fixed charge coverage ratio (as defined). The borrowings under the agreement are subject to borrowing base limitations of up to 85% of eligible accounts receivable and the inventory advance rate computed as the lesser of 65% or 85% of the net orderly liquidation value ("NOLV"). Borrowings are secured by substantially all of the Borrower's assets, as defined, including all accounts, accounts receivable, inventory and certain other assets, subject to limited exceptions, including the exclusion of certain foreign assets from the collateral. The interest rate under the amended and restated facility is computed at applicable market rates based on the Secured Overnight Financing Rate ("SOFR"), theFederal Reserve Bank of New York ("NYFRB") or the Prime Rate, plus an applicable margin. The applicable margin varies based on borrowing base availability. As ofMarch 31, 2023 , eligible collateral under the credit agreement was$120.6 million , total availability was$118.0 million , total outstanding letters of credit was$1.4 million , total excess availability was$116.6 million and no outstanding borrowings. The Company was in compliance with all of the covenants of the credit agreement as ofMarch 31, 2023 . Levels of earnings and cash flows are dependent on factors such as consolidated gross margin and selling, distribution and administrative costs, product mix and relative levels of domestic and foreign sales. Unusual gains or expense items, such as special (gains) charges and settlements, may impact earnings and are separately disclosed. We expect that past performance may not be indicative of future performance due to the competitive nature of our business where the need to adjust prices to gain or hold market share is prevalent. Macroeconomic conditions, such as business and consumer sentiment, may affect our revenues, cash flows or financial condition. However, we do not believe that there is a direct correlation between any specific macroeconomic indicator and our revenues, cash flows or financial condition.
The expenses and capital expenditures described above will require significant levels of liquidity, which we believe can be adequately funded from our currently available cash resources, cash flow from operations and borrowing under our current
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credit facility. In 2023 we anticipate capital expenditures in the range of
$6.0 to $8.0 million , though at this time we are not contractually committed to
incur these expenditures.
In the past we have engaged in opportunistic acquisitions, choosing to pay the
purchase price in cash, and may do so in the future as favorable situations
arise. However, a deep and prolonged period of reduced business spending could
adversely impact our cash resources and force us to either forego future
acquisition opportunities or to pay the purchase price using stock, debt or a
combination of consideration which could have an adverse effect on our earnings.
We believe that our cash balances and future cash flows from operations and
availability under our credit facility will be sufficient to fund our working
capital and other cash requirements for at least the next twelve months.
We maintain our cash and cash equivalents in money market funds or their
equivalents that have maturities of less than three months and in non-interest
bearing accounts that partially offset banking fees. As of March 31, 2023 , we
had no investments with maturities of greater than three months. Accordingly, we
do not believe that our cash balances have significant exposure to interest rate
risk. At March 31, 2023 cash balances held in foreign subsidiaries totaled
approximately $4.4 million . These balances are held in local country banks and
are held primarily to support local working capital needs. The Company had over
$160 million of liquidity (cash and undrawn line of credit) in the U.S. as of
March 31, 2023 .
Material Cash Requirements
We are obligated under non-cancelable operating leases for the rental of our
facilities and certain of our equipment which expires at various dates through
2032. As of March 31, 2023 we were obligated for approximately $98.4 million
under these non-cancelable leases. In 2023 we anticipate remaining cash
expenditures of approximately $13.1 million for these operating leases. We have
sublease agreements for unused space, as well as excess space in facilities we
are currently occupying in the United States and Canada . In the event the sub
lessee is unable to fulfill its obligations, we would be responsible for
remaining rents due under the leases.
Our purchase and other obligations consist primarily of purchase commitments for
certain employment, consulting and service agreements. In addition to the
previously mentioned commitments, at
We are party to certain litigation, the outcome of which we believe, based on discussions with legal counsel, will not have a material adverse effect on our condensed consolidated financial statements.
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