AMERINAC HOLDING CORP. General
The following discussion and analysis should be read in conjunction with the consolidated financial statements, and the notes thereto included herein. The information contained below includes statements of the Company's or management's beliefs, expectations, goals and plans. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. For a discussion of forward-looking statements, see the information set forth in the Introductory Note to this Annual Report under the caption "Forward Looking Statements" which information is incorporated herein by reference.
A description of the Company's operations and marketplace is contained in Section 1 of this report.
Liquidity and Capital Resources
In 2019, the Company had
Management believes that the company has appropriate liquidity to continue operations for at least twelve months from the date of this report.
11
Table of Contents
PMAL Berkshire Loans
On
Borrowings under the PMAL Revolving Loan bear interest at a rate equal to the
The outstanding principal amount of any borrowings under the PMAL Revolving Loan
will be due and payable on
The PMAL Loan and Security Agreement contains usual and customary covenants for financings of this type, including, among other things: (i) requirements to deliver financial statements, other reports and notices; (ii) restrictions on indebtedness; (iii) restrictions on dividends, distributions and redemptions of equity and repayment of subordinated indebtedness; (iv) restrictions on liens; (v) restrictions on making certain payments; (vi) restrictions on investments; (vii) restrictions on asset dispositions and other fundamental changes; and (viii) restrictions on transactions with affiliates.
The PMAL Loan and Security Agreement contains certain financial covenants,
including a cash flow coverage ratio and a tangible net worth require covenant.
Under the cash flow coverage covenant, PMAL shall maintain a quarterly cash flow
coverage ratio of not less than 1.20 to 1.00. Under the tangible net worth
covenant, PMAL shall maintain a tangible net worth of no less than
The obligations of PMAL under the PMAL Loan and Security Agreement are secured
by liens and security interests on all assets of PMAL.
CAS Berkshire Loan
On
On
12
Table of Contents
Borrowings under the CAS Revolving Loan bear interest at a rate equal to the ICE
LIBOR rate plus 3.00%, which was 4.70% at
The outstanding principal amount of any borrowings under the CAS Revolving Loan
will be due and payable on
The CAS Loan and Security Agreement contains usual and customary covenants for financings of this type, including, among other things: (i) requirements to deliver financial statements, other reports and notices; (ii) restrictions on indebtedness; (iii) restrictions on dividends, distributions and redemptions of equity and repayment of subordinated indebtedness; (iv) restrictions on liens; (v) restrictions on making certain payments; (vi) restrictions on investments; (vii) restrictions on asset dispositions and other fundamental changes; and (viii) restrictions on transactions with affiliates.
The CAS Loan and Security Agreement contains certain financial covenants,
including a cash flow coverage ratio and a tangible net worth requirement
covenant. Under the cash flow coverage covenant, CAS shall maintain a quarterly
cash flow coverage ratio of not less than 1.20 to 1.00. Under the tangible net
worth covenant, CAS shall maintain a tangible net worth of no less than
The obligations of CAS under the CAS Loan and Security Agreement are secured by liens and security interests on all assets of CAS. The Company is a secured guarantor of the CAS Loan and Security Agreement, and has pledged its equity in CAS.
Results of Operations
The Company's aggregate sales increased by 3% in 2019 over 2018. During 2019, the CAS sales compared to 2018 sales were up approximately 37.2%. The main driver of sales has been related to the growth in our heavy truck market and the addition of new customers.
PMAL sales were
In 2019, the Company experienced normal lead times for product deliveries. While the Company believes that its supply chain will continue to operate without major interruption, the Company's management periodically assesses each supplier.
Gross profit margins, were 17.4% and 17.9% for 2019 and 2018, respectively.
Operating expenses in 2019 increased by 4.6% compared to 2018 due to normal
variation in cost. In 2019, PMAL operating expenses were
Interest cost was down 56% in 2019 compared to 2018 because the Company
refinanced Summit Term Loan A and Summit Term Loan B with lower interest
financing midway through 2018. Interest expense in 2019 and 2018 was
13
Table of Contents
Off-Balance Sheet Arrangements
None.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with accounting
principles generally accepted in
In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management's judgment in its application. There are also areas in which management's judgment in selecting among available alternatives would not produce a materially different result. Our senior management has reviewed these critical accounting policies and related disclosures. See notes to consolidated financial statements, which contain additional information regarding our accounting policies and other disclosures required by GAAP.
The following are the Company's critical accounting policies:
• Inventory - For the Company's distribution subsidiary (Creative Assembly ),
inventories are carried at the lower of cost on an average cost basis, or
net realizable value. When necessary, management records an inventory
reserve for estimated obsolescence or unmarketable inventory based upon
the age of the respective part and the knowledge of future demand of
inventory on hand as well as other market conditions and events. For the
Company's manufacturing subsidiary (PMAL) inventories are carried at the
lower of cost on an average cost basis, or net realizable value. When
necessary, management records an inventory reserve for estimated
obsolescence or unmarketable inventory based upon knowledge of future
demand of inventory on hand as well as other market conditions and events.
• Accounts Receivable Allowance - Accounts receivable are recorded net of
provisions for doubtful accounts. The Company records an allowance for
doubtful accounts to allow for any amounts that may not be recoverable.
The amount of the allowance is based on an analysis of the Company's prior
collection experience, customer credit worthiness, and current economic
trends. The Company determines receivables to be past due based on the
payment terms of original invoices. Interest is not typically charged on
past due receivables. Accounts are written off against the allowance when
deemed uncollectable.
• Unbilled Services - The Company recognizes revenue on its tolling services
as those services are performed. Unbilled services represent the revenue
recognized but not yet invoiced.
• Revenue Recognition - Revenue is recognized when control transfers to our
customers via shipment of products or delivery of services. Shipping and
handling costs are considered fulfillment activities and as such are not
accounted for as separate performance obligations. We measure revenue as
the amount of consideration we expect to be entitled to receive in
exchange for those goods or services, net of any variable considerations
(e.g., rights to return product, sales incentives, others) and any taxes
collected from customers and subsequently remitted to governmental
authorities. The Company applied the practical expedient available under
ASC 606 to disregard determining significant financing components if the
good or serve is transferred and payment is received within one year. We
estimate product returns based on historical experience and record them on
a gross basis. Substantially all of Creative Assembly customer returns
relate to products that are returned under warranty obligations
underwritten by manufacturers. Substantially all of PMAL customer returns
relate to products which do not meet customer requirements and are
replaced by the Company. We occasionally receive advance payments to
secure product to be delivered in future periods. These advance payments
are recorded as deferred revenue, and revenue is recognized as our
performance obligations are satisfied throughout the term of the
applicable contract. We may also purchase metal on our customer's behalf,
sell the unprocessed metal to our customer, and then process and ship the
material, charging a processing fee at the time of shipment. For these
specific non-tolling arrangements in which we purchase metal for a
customer, a single performance obligation exists, and as a result, amounts
invoiced to our customers for the metal purchased on their behalf is
recorded as deferred revenue until the metal is processed and shipped.
• Income Taxes - In the preparation of consolidated financial statements,
the Company estimates anticipated income taxes. Deferred income tax assets
and liabilities represent tax benefits or obligations that arise from
temporary differences due to differing treatment of certain items for
accounting and income tax purposes. The Company evaluates deferred tax
assets each period to ensure that estimated future taxable income will be
sufficient in character, amount and timing to result in their recovery. A
valuation allowance is established when management determines that it is
more likely than not that a deferred tax asset will not be realized to
reduce the assets to their realizable value. Considerable judgments are
required in establishing deferred tax valuation allowances and in
assessing probable exposures related to tax matters. The Company's tax
returns are subject to audit by Federal, state and local taxing
authorities that could challenge the company's tax positions. The Company
believes it records and/or discloses such potential tax liabilities as
appropriate and has reasonably estimated its income tax liabilities and
recoverable tax assets.
• Goodwill and Intangible Assets - We make estimates, assumptions, and
judgments when valuing goodwill and other intangible assets such as
customer lists in connection with the initial purchase price allocation of
any acquired operations, as well as when evaluating the recoverability of
our goodwill and other intangible assets on an ongoing basis. These
estimates are based upon a number of factors, including historical
experience, market conditions, and information obtained from the
management of any acquired operations. Critical estimates in valuing
certain intangible assets include, but are not limited to, historical and
projected attrition rates, discount rates, anticipated growth in revenue
from the acquired customers and acquired technology, and the expected use
of the acquired assets. These factors are also considered in determining
the useful life of acquired intangible assets. The amounts and useful
lives assigned to identified intangible assets impact the amount and
timing of future amortization expense.
14
Table of Contents© Edgar Online, source
