This Quarterly Report on Form 10-Q contains certain statements that are
"forward-looking statements" as that term is defined under the Private
Securities Litigation Reform Act of 1995 (the "Act"). The words "may," "hope,"
"should," "expect," "plan," "anticipate," "intend," "believe," "estimate,"
"predict," "potential," "continue," and other expressions, which are predictions
of or indicate future events and trends and which do not relate to historical
matters, identify forward-looking statements, although not all forward-looking
statements are accompanied by such words. We believe that it is important to
communicate our future expectations to our stockholders, and we, therefore, make
forward-looking statements in reliance upon the safe harbor provisions of the
Act. However, there may be events in the future that we are not able to
accurately predict or control and our actual results may differ materially from
the expectations we describe in our forward-looking statements. Forward-looking
statements, including statements about the expected and potential direct or
indirect impacts of the COVID-19 pandemic on our business, the realization of
cost reductions from restructuring activities and expected synergies, the
expected impact of tariff increases and future cash flows from operating
activities, involve known and unknown risks, uncertainties and other factors,
which may cause our actual results, performance or achievements to differ
materially from anticipated future results, performance or achievements
expressed or implied by such forward-looking statements. Factors that could
cause or contribute to such differences include, but are not limited to: the
duration and severity of the COVID-19 pandemic and its impact on the global
economy; changes in the price of and demand for oil and gas in both domestic and
international markets; our ability to successfully integrate acquired businesses
and dispose of businesses that are held for sale as contemplated; any adverse
changes in governmental policies; variability of raw material and component
pricing; changes in our suppliers' performance; fluctuations in foreign currency
exchange rates; changes in tariffs or other taxes related to doing business
internationally; our ability to hire and retain key personnel; our ability to
operate our manufacturing facilities at efficient levels including our ability
to prevent cost overruns and reduce costs; our ability to generate increased
cash by reducing our working capital; our prevention of the accumulation of
excess inventory; our ability to successfully implement our divestiture;
restructuring or simplification strategies; fluctuations in interest rates; our
ability to successfully defend product liability actions, any actions of
stockholders or others in response to expiration of the recent unsolicited
tender offer and the cost and disruption of responding to those actions; as well
as the uncertainty associated with the current worldwide economic conditions and
the continuing impact on economic and financial conditions in
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Company Overview
Effective
COVID-19
InMarch 2020 , theWorld Health Organization declared the outbreak of COVID-19, which continues to spread throughout theU.S. and the world, as a pandemic. The outbreak is having an impact on the global economy, resulting in rapidly changing market and economic conditions.
In this time of unprecedented uncertainty resulting from the COVID-19 pandemic, the Company's top priority remains the health and safety of our employees, customers and suppliers. Because of the end markets we serve, the majority of our facilities are deemed 'essential operations' in the countries in which we operate, and as a result, 23 out of 25 production and service/assembly facilities are in operation. Over the last several weeks, we have implemented significant measures in an effort to ensure our factory employees around the world have the necessary protection and our business continues to operate with as little disruption as possible.
The Company has assembled a cross-functional Pandemic Response and Preparedness Team at the corporate level and has dedicated response teams across its business lines and sites that meet daily to address the challenges the virus poses to employee health and safety, as well as business continuity.
Due to the end markets it serves, the Company has been deemed an essential
business by the
• Additional cleaning and disinfecting procedures at all facilities;
• Daily temperature checks and masks for employees;
• Adherence to strict social distancing guidelines;
• Mandatory work from home policy where possible; and
• Cancellation of all non-essential travel.
Since the beginning of the COVID-19 crisis, the Company has taken prudent action to ensure it maintains its financial flexibility, including the cessation of all non-critical business expenses, employee furloughs, and pay cuts for senior leadership.
Additionally, the Company has been producing pump parts for the US Navy Hospital
Ships USNS Comfort and Mercy that had been dispatched to NYC and
The Company is also working with a large medical device customer to find ways for the Company's products to support the development of COVID-19 antibodies from recovered patients. And, a number of the Company's locations around the world have donated masks, sanitizer, and other safety equipment to local hospitals.
Basis of Presentation
All significant intercompany balances and transactions have been eliminated in consolidation.
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We operate and report financial information using a fiscal year ending
As of
The Company expects the effects of the COVID-19 pandemic to continue to negatively impact its results of operations, cash flows and financial position. The Company's condensed consolidated financial statements presented herein reflect management's estimates and assumptions regarding the effects of COVID-19 as of the date of the condensed consolidated financial statements.
Critical Accounting Policies
Critical accounting policies are those that are both important to the accurate portrayal of a company's financial condition and results and require subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. There have been no significant changes from the methodology applied by management for critical accounting estimates previously disclosed in our most recent Annual Report on Form 10-K, except as updated by Note 2 to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q with respect to newly adopted accounting standards. The expenses and accrued liabilities or allowances related to certain of our accounting policies are initially based on our best estimates at the time of original entry in our accounting records. Adjustments are recorded when our actual experience, or new information concerning our expected experience, differs from underlying initial estimates. These adjustments could be material if our actual or expected experience were to change significantly in a short period of time.
The preparation of these financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying disclosures. Some of the more significant estimates, which are impacted by management's estimates and assumptions regarding the effects of COVID-19, relate to estimated total costs for ongoing long-term contracts accounted for as performance obligations where transfer of control occurs over time, inventory valuation, share-based compensation, amortization and impairment of long-lived assets, income taxes, penalty accruals for late shipments, asset valuations, and product warranties. While management believes that the estimates and assumptions used in the preparation of the financial statements are appropriate, actual results could differ materially from those estimates.
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