Delaware | 20-5441563 | |
(State of Incorporation) | (I.R.S. Employer Identification Number) |
Large accelerated filer | x | Accelerated filer | o | |
Non-accelerated filer | o | (Do not check if a smaller reporting company) | ||
Smaller reporting company | o | |||
Emerging growth company | o |
Page | ||
June 30, 2017 | September 30, 2016 | ||||||
Assets | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | 57,056 | $ | 77,061 | |||
Accounts receivable, net of allowance for doubtful accounts of $3,240 and $3,846 at June 30, 2017 and September 30, 2016, respectively | 264,023 | 249,195 | |||||
Inventories | 802,709 | 713,470 | |||||
Prepaid expenses and other current assets | 12,865 | 10,203 | |||||
Income taxes receivable | 1,387 | 1,460 | |||||
Total current assets | 1,138,040 | 1,051,389 | |||||
Property and equipment, net | 51,172 | 50,525 | |||||
Deferred line-of-credit financing costs, net | 3,906 | 1,120 | |||||
Goodwill | 266,644 | 579,865 | |||||
Intangible assets, net | 182,045 | 194,114 | |||||
Deferred tax assets | 119,293 | 58,171 | |||||
Other assets | 12,566 | 13,394 | |||||
Total assets | $ | 1,773,666 | $ | 1,948,578 | |||
Liabilities and Stockholders’ Equity | |||||||
Current liabilities | |||||||
Accounts payable | $ | 175,834 | $ | 181,700 | |||
Accrued expenses and other current liabilities | 33,882 | 26,424 | |||||
Income taxes payable | — | 6,782 | |||||
Capital lease obligations-current portion | 2,922 | 1,471 | |||||
Short-term borrowings and current portion of long-term debt | 68,000 | — | |||||
Total current liabilities | 280,638 | 216,377 | |||||
Capital lease obligations, less current portion | 2,298 | 1,710 | |||||
Long-term debt, less current portion | 793,061 | 834,279 | |||||
Deferred tax liabilities | 4,092 | 4,092 | |||||
Other liabilities | 5,767 | 9,205 | |||||
Total liabilities | 1,085,856 | 1,065,663 | |||||
Commitments and contingencies | |||||||
Stockholders’ equity | |||||||
Preferred stock, $0.001 par value per share: 50,000,000 shares authorized; no shares issued and outstanding | — | — | |||||
Common stock, $0.001 par value, 950,000,000 shares authorized, 99,579,363 and 98,614,908 shares issued and outstanding at June 30, 2017 and September 30, 2016, respectively | 100 | 99 | |||||
Additional paid-in capital | 436,020 | 427,295 | |||||
Accumulated other comprehensive loss | (84,283 | ) | (79,561 | ) | |||
Retained earnings | 335,973 | 535,082 | |||||
Total stockholders’ equity | 687,810 | 882,915 | |||||
$ | 1,773,666 | $ | 1,948,578 |
Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net sales | $ | 363,907 | $ | 375,186 | $ | 1,067,877 | $ | 1,111,771 | |||||||
Cost of sales | 273,699 | 275,945 | 793,457 | 813,564 | |||||||||||
Gross profit | 90,208 | 99,241 | 274,420 | 298,207 | |||||||||||
Selling, general and administrative expenses | 66,313 | 59,197 | 192,071 | 179,708 | |||||||||||
Goodwill impairment | 311,114 | — | 311,114 | — | |||||||||||
(Loss) income from operations | (287,219 | ) | 40,044 | (228,765 | ) | 118,499 | |||||||||
Interest expense, net | (9,614 | ) | (9,325 | ) | (29,529 | ) | (27,436 | ) | |||||||
Other income, net | 256 | 2,657 | 289 | 3,960 | |||||||||||
(Loss) income before provision for income taxes | (296,577 | ) | 33,376 | (258,005 | ) | 95,023 | |||||||||
Benefit (provision) for income taxes | 66,969 | (9,360 | ) | 58,946 | (26,906 | ) | |||||||||
Net (loss) income | (229,608 | ) | 24,016 | (199,059 | ) | 68,117 | |||||||||
Other comprehensive income (loss), net | 960 | (21,936 | ) | (4,722 | ) | (36,128 | ) | ||||||||
Comprehensive (loss) income | $ | (228,648 | ) | $ | 2,080 | $ | (203,781 | ) | $ | 31,989 | |||||
Net (loss) income per share: | |||||||||||||||
Basic | $ | (2.32 | ) | $ | 0.25 | $ | (2.02 | ) | $ | 0.70 | |||||
Diluted | $ | (2.32 | ) | $ | 0.24 | $ | (2.02 | ) | $ | 0.69 | |||||
Weighted average shares outstanding: | |||||||||||||||
Basic | 98,869,675 | 97,929,438 | 98,558,330 | 97,511,590 | |||||||||||
Diluted | 98,869,675 | 98,599,215 | 98,558,330 | 98,108,904 |
Nine Months Ended June 30, | |||||||
2017 | 2016 | ||||||
Cash flows from operating activities | |||||||
Net (loss) income | $ | (199,059 | ) | $ | 68,117 | ||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 20,812 | 20,843 | |||||
Amortization of deferred financing costs | 5,136 | 3,144 | |||||
Bad debt and sales return reserve | (252 | ) | 41 | ||||
Goodwill impairment | 311,114 | — | |||||
Stock-based compensation expense | 5,958 | 6,406 | |||||
Excess tax benefit related to stock-based incentive plans | — | (796 | ) | ||||
Deferred income taxes | (62,231 | ) | 4,240 | ||||
Other non-cash items | 528 | (4,374 | ) | ||||
Changes in assets and liabilities: | |||||||
Accounts receivable | (15,972 | ) | (10,466 | ) | |||
Inventories | (91,599 | ) | (25,253 | ) | |||
Prepaid expenses and other assets | (1,854 | ) | (352 | ) | |||
Income taxes receivable | 86 | 5 | |||||
Accounts payable | (5,675 | ) | 21,466 | ||||
Accrued expenses and other liabilities | 6,905 | (6,098 | ) | ||||
Income taxes payable | (6,743 | ) | (10,330 | ) | |||
Net cash (used in) provided by operating activities | (32,846 | ) | 66,593 | ||||
Cash flows from investing activities | |||||||
Purchase of property and equipment | (6,831 | ) | (11,161 | ) | |||
Proceeds from sales of assets | — | 2,000 | |||||
Net cash used in investing activities | (6,831 | ) | (9,161 | ) | |||
Cash flows from financing activities | |||||||
Proceeds from short-term borrowings | 60,000 | — | |||||
Repayment of short-term borrowings | (12,000 | ) | — | ||||
Repayment of long-term debt | (16,344 | ) | (76,000 | ) | |||
Financing costs | (12,796 | ) | (2,126 | ) | |||
Repayment of capital lease obligations | (1,278 | ) | (1,037 | ) | |||
Excess tax benefit related to stock-based incentive plans | — | 796 | |||||
Proceeds from issuance of common stock | 2,965 | 6,126 | |||||
Settlement on restricted stock tax withholding | (264 | ) | — | ||||
Net cash provided by (used in) financing activities | 20,283 | (72,241 | ) | ||||
Effect of foreign currency exchange rate on cash and cash equivalents | (611 | ) | (2,572 | ) | |||
Net decrease in cash and cash equivalents | (20,005 | ) | (17,381 | ) | |||
Cash and cash equivalents, beginning of period | 77,061 | 82,866 | |||||
Cash and cash equivalents, end of period | $ | 57,056 | $ | 65,485 |
North America | Rest of World | Total | ||||||||||
Goodwill as of September 30, 2016, gross | $ | 779,647 | $ | 63,989 | $ | 843,636 | ||||||
Accumulated impairment | (263,771 | ) | — | (263,771 | ) | |||||||
Goodwill as of September 30, 2016, net | 515,876 | 63,989 | 579,865 | |||||||||
Changes during the period: | ||||||||||||
Foreign currency translation | — | (2,107 | ) | (2,107 | ) | |||||||
Goodwill impairment | (311,114 | ) | — | (311,114 | ) | |||||||
Goodwill as of June 30, 2017, gross | 779,647 | 61,882 | 841,529 | |||||||||
Accumulated impairment | (574,885 | ) | — | (574,885 | ) | |||||||
Goodwill as of June 30, 2017, net | $ | 204,762 | $ | 61,882 | $ | 266,644 |
Derivative Notional | |||||||||
June 30, 2017 | September 30, 2016 | ||||||||
Instruments designated as accounting hedges: | |||||||||
Interest rate contracts | $ | 387,500 | $ | 425,000 |
Fair Value | |||||||||||
Balance Sheet Locations | June 30, 2017 | September 30, 2016 | |||||||||
Instruments designated as accounting hedges: | |||||||||||
Interest rate contracts | Other current assets | $ | 83 | $ | — | ||||||
Interest rate contracts | Accrued expenses and other current liabilities | 2,069 | 1,057 | ||||||||
Interest rate contracts | Other liabilities | 1,482 | 5,615 |
Location in Consolidated Statement of Comprehensive Income | Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||||
Cash Flow Hedge | 2017 | 2016 | 2017 | 2016 | ||||||||||||||
Interest rate contracts | Interest expense, net | $ | 39 | $ | 330 | $ | 428 | $ | 1,020 | |||||||||
Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||
Cash Flow Hedge | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Interest rate contracts | $ | (474 | ) | $ | (873 | ) | $ | 1,976 | $ | (2,387 | ) |
AOCI - Unrealized Gain (Loss) on Hedging Instruments | Three Months Ended June 30, 2017 | Nine Months Ended June 30, 2017 | |||||||
Balance at beginning of period | $ | (1,756 | ) | $ | (4,206 | ) | |||
Change in fair value of hedging instruments | (513 | ) | 1,548 | ||||||
Amounts reclassified to earnings | 39 | 428 | |||||||
Net current period other comprehensive income | (474 | ) | 1,976 | ||||||
Balance at end of period | $ | (2,230 | ) | $ | (2,230 | ) |
Location in Consolidated Statement of Comprehensive Income | Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||||
Instruments Not Designated As Hedging Instruments | ||||||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||||
Foreign currency forward contracts | Other income (loss), net | $ | — | $ | (523 | ) | $ | (1,843 | ) | $ | (2,161 | ) | ||||||
June 30, 2017 | September 30, 2016 | ||||||||||||||
Principal Amount | Fair Value | Principal Amount | Fair Value | ||||||||||||
Term loan A facility | $ | 385,000 | $ | 381,728 | $ | 401,344 | $ | 401,344 | |||||||
Term loan B facility | 440,562 | 427,823 | 440,562 | 435,716 | |||||||||||
Total long-term debt | $ | 825,562 | $ | 809,551 | $ | 841,906 | $ | 837,060 |
Level 1: | Quoted prices in active markets for identical assets or liabilities. |
Level 2: | Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. |
Level 3: | Unobservable inputs for the asset or liability. |
June 30, 2017 | Balance Sheet Locations | Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Instruments designated as accounting hedges: | ||||||||||||||||||
Interest rate contracts | Other current assets | $ | 83 | $ | — | $ | 83 | $ | — | |||||||||
Interest rate contracts | Accrued expenses and other current liabilities | 2,069 | — | 2,069 | — | |||||||||||||
Interest rate contracts | Other liabilities | 1,482 | — | 1,482 | — |
September 30, 2016 | Balance Sheet Locations | Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Instruments designated as accounting hedges: | ||||||||||||||||||
Interest rate contracts | Accrued expenses and other current liabilities | $ | 1,057 | $ | — | $ | 1,057 | $ | — | |||||||||
Interest rate contracts | Other liabilities | 5,615 | — | 5,615 | — |
June 30, 2017 | September 30, 2016 | |||||||||||||||||||||||
Principal Amount | Deferred Financing Costs | Carrying Amount | Principal Amount | Deferred Financing Costs | Carrying Amount | |||||||||||||||||||
Term loan A facility | $ | 385,000 | $ | (8,035 | ) | $ | 376,965 | $ | 401,344 | $ | (2,247 | ) | $ | 399,097 | ||||||||||
Term loan B facility | 440,562 | (4,466 | ) | 436,096 | 440,562 | (5,380 | ) | 435,182 | ||||||||||||||||
Less: current portion | (20,000 | ) | — | (20,000 | ) | — | — | — | ||||||||||||||||
Non-current portion | $ | 805,562 | $ | (12,501 | ) | $ | 793,061 | $ | 841,906 | $ | (7,627 | ) | $ | 834,279 |
Term Loan A Facility | Term Loan B Facility | Revolving Facility | Total | |||||||||||||
Deferred financing costs as of September 30, 2016 | $ | 2,247 | $ | 5,378 | $ | 1,120 | $ | 8,745 | ||||||||
Write off for the Fourth Amendment | (1,769 | ) | — | (553 | ) | (2,322 | ) | |||||||||
Deferred financing costs for the Fourth Amendment | 7,215 | — | 3,247 | 10,462 | ||||||||||||
Deferred financing costs for the Fifth Amendment | 1,617 | — | 719 | 2,336 | ||||||||||||
Amortization of deferred financing costs | (1,275 | ) | (912 | ) | (627 | ) | (2,814 | ) | ||||||||
Deferred financing costs as of June 30, 2017 | $ | 8,035 | $ | 4,466 | $ | 3,906 | $ | 16,407 |
Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net (loss) income | $ | (229,608 | ) | $ | 24,016 | $ | (199,059 | ) | $ | 68,117 | |||||
Foreign currency translation gain (loss) | 1,434 | (21,063 | ) | (6,698 | ) | (33,741 | ) | ||||||||
Unrealized (loss) gain on cash flow hedging instruments | (474 | ) | (873 | ) | 1,976 | (2,387 | ) | ||||||||
Total comprehensive (loss) income | $ | (228,648 | ) | $ | 2,080 | $ | (203,781 | ) | $ | 31,989 |
Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net (loss) income | $ | (229,608 | ) | $ | 24,016 | $ | (199,059 | ) | $ | 68,117 | |||||
Basic weighted average shares outstanding | 98,869,675 | 97,929,438 | 98,558,330 | 97,511,590 | |||||||||||
Dilutive effect of stock options and restricted stock awards/units | — | 669,777 | — | 597,314 | |||||||||||
Dilutive weighted average shares outstanding | 98,869,675 | 98,599,215 | 98,558,330 | 98,108,904 | |||||||||||
Basic net (loss) income per share | $ | (2.32 | ) | $ | 0.25 | $ | (2.02 | ) | $ | 0.70 | |||||
Diluted net (loss) income per share | $ | (2.32 | ) | $ | 0.24 | $ | (2.02 | ) | $ | 0.69 |
Three Months Ended June 30, 2017 | Three Months Ended June 30, 2016 | ||||||||||||||||||||||
North America | Rest of World | Consolidated | North America | Rest of World | Consolidated | ||||||||||||||||||
Net sales | $ | 292,993 | $ | 70,914 | $ | 363,907 | $ | 300,875 | $ | 74,311 | $ | 375,186 | |||||||||||
(Loss) income from operations | (293,489 | ) | 6,270 | (287,219 | ) | 29,267 | 10,777 | 40,044 | |||||||||||||||
Interest expense, net | (8,688 | ) | (926 | ) | (9,614 | ) | (8,233 | ) | (1,092 | ) | (9,325 | ) | |||||||||||
Benefit (provision) for income taxes | 68,525 | (1,556 | ) | 66,969 | (6,868 | ) | (2,492 | ) | (9,360 | ) | |||||||||||||
Capital expenditures | 1,064 | 1,558 | 2,622 | 3,878 | 50 | 3,928 | |||||||||||||||||
Depreciation and amortization | 6,451 | 889 | 7,340 | 5,769 | 1,021 | 6,790 | |||||||||||||||||
Nine Months Ended June 30, 2017 | Nine Months Ended June 30, 2016 | ||||||||||||||||||||||
North America | Rest of World | Consolidated | North America | Rest of World | Consolidated | ||||||||||||||||||
Net sales | $ | 858,568 | $ | 209,309 | $ | 1,067,877 | $ | 889,816 | $ | 221,955 | $ | 1,111,771 | |||||||||||
(Loss) income from operations | (253,211 | ) | 24,446 | (228,765 | ) | 86,380 | 32,119 | 118,499 | |||||||||||||||
Interest expense, net | (26,890 | ) | (2,639 | ) | (29,529 | ) | (24,073 | ) | (3,363 | ) | (27,436 | ) | |||||||||||
Benefit (provision) for income taxes | 64,361 | (5,415 | ) | 58,946 | (19,897 | ) | (7,009 | ) | (26,906 | ) | |||||||||||||
Capital expenditures | 4,475 | 2,356 | 6,831 | 10,616 | 545 | 11,161 | |||||||||||||||||
Depreciation and amortization | 18,332 | 2,480 | 20,812 | 17,771 | 3,072 | 20,843 |
As of June 30, 2017 | As of June 30, 2016 | ||||||||||||||||||||||
North America | Rest of World | Consolidated | North America | Rest of World | Consolidated | ||||||||||||||||||
Total assets | $ | 1,482,067 | $ | 291,599 | $ | 1,773,666 | $ | 1,700,979 | $ | 289,908 | $ | 1,990,887 | |||||||||||
Goodwill | 204,762 | 61,882 | 266,644 | 515,876 | 65,483 | 581,359 |
Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||
(dollars in thousands) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Benefit (provision) for income taxes | $ | 66,969 | $ | (9,360 | ) | $ | 58,946 | $ | (26,906 | ) | ||||||
Effective tax rate | 22.6 | % | 28.0 | % | 22.8 | % | 28.3 | % |
Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||
(In thousands) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Consolidated result of operations: | ||||||||||||||||
Net sales: | ||||||||||||||||
North America | $ | 292,993 | $ | 300,875 | $ | 858,568 | $ | 889,816 | ||||||||
Rest of World | 70,914 | 74,311 | 209,309 | 221,955 | ||||||||||||
Total net sales | $ | 363,907 | $ | 375,186 | $ | 1,067,877 | $ | 1,111,771 | ||||||||
(Loss) income from operations: | ||||||||||||||||
North America | $ | (293,489 | ) | $ | 29,267 | $ | (253,211 | ) | $ | 86,380 | ||||||
Rest of World | 6,270 | 10,777 | 24,446 | 32,119 | ||||||||||||
Total (loss) income from operations | (287,219 | ) | 40,044 | (228,765 | ) | 118,499 | ||||||||||
Interest expense, net | (9,614 | ) | (9,325 | ) | (29,529 | ) | (27,436 | ) | ||||||||
Other income, net | 256 | 2,657 | 289 | 3,960 | ||||||||||||
(Loss) income before provision for income taxes | (296,577 | ) | 33,376 | (258,005 | ) | 95,023 | ||||||||||
Benefit (provision) for income taxes | 66,969 | (9,360 | ) | 58,946 | (26,906 | ) | ||||||||||
Net (loss) income | $ | (229,608 | ) | $ | 24,016 | $ | (199,059 | ) | $ | 68,117 |
Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||
(As a % of total net sales; numbers have been rounded) | 2017 | 2016 | 2017 | 2016 | ||||||||
(Loss) income from operations by segment: | ||||||||||||
North America | (100.2 | )% | 9.7 | % | (29.5 | )% | 9.7 | % | ||||
Rest of World | 8.8 | % | 14.5 | % | 11.7 | % | 14.5 | % | ||||
Consolidated: | ||||||||||||
(Loss) income from operations | (78.9 | )% | 10.7 | % | (21.4 | )% | 10.7 | % | ||||
Interest expense, net | (2.6 | ) | (2.5 | ) | (2.8 | ) | (2.5 | ) | ||||
Other (expense) income, net | — | 0.7 | — | 0.3 | ||||||||
(Loss) income before provision for income taxes | (81.5 | ) | 8.9 | (24.2 | ) | 8.5 | ||||||
Benefit (provision) for income taxes | 18.4 | (2.5 | ) | 5.6 | (2.4 | ) | ||||||
Net (loss) income | (63.1 | )% | 6.4 | % | (18.6 | )% | 6.1 | % |
• | operating expenses; |
• | working capital requirements to fund the growth of our business; |
• | capital expenditures that primarily relate to IT equipment and our warehouse operations; |
• | debt service requirements for borrowings under the Credit Facilities (as defined below under “—Credit Facilities—Senior Secured Credit Facilities”); and |
• | strategic acquisitions. |
Nine Months Ended June 30, | ||||||||
Consolidated statements of cash flows data: | 2017 | 2016 | ||||||
Net cash (used in) provided by operating activities | $ | (32,846 | ) | $ | 66,593 | |||
Net cash used in investing activities | (6,831 | ) | (9,161 | ) | ||||
Net cash provided by (used in) financing activities | 20,283 | (72,241 | ) |
Exhibit Number | Description | ||
10.1 | Separation and Release Agreement, by and among Wesco Aircraft Holdings, Inc., Wesco Aircraft Hardware Corp. and David J. Castagnola, dated as of April 27, 2017 (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated April 28, 2017 (File No. 001-35253)) | ||
31.1 | Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) and pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith) | ||
31.2 | Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) and pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith) | ||
32.1 | Certification of Periodic Report by Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith) | ||
101.INS | XBRL Instance 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 |
Date: August 8, 2017 | WESCO AIRCRAFT HOLDINGS, INC. | |
By: | /s/ Todd S. Renehan | |
Name: Todd S. Renehan | ||
Title: Chief Executive Officer | ||
(Principal Executive Officer) | ||
Date: August 8, 2017 | By: | /s/ Richard J. Weller |
Name: Richard J. Weller | ||
Title: Executive Vice President and Chief Financial Officer | ||
(Principal Financial Officer) |
Dated: | August 8, 2017 |
/s/ Todd S. Renehan | |
Name: Todd S. Renehan | |
Title: Chief Executive Officer | |
(Principal Executive Officer) |
Dated: | August 8, 2017 |
/s/ Richard J. Weller | |
Name: Richard J. Weller | |
Title: Executive Vice President and Chief Financial Officer | |
(Principal Financial Officer) |
Dated: | August 8, 2017 |
/s/ Todd S. Renehan | |
Name: Todd S. Renehan | |
Title: Chief Executive Officer | |
(Principal Executive Officer) | |
Dated: | August 8, 2017 |
/s/ Richard J. Weller | |
Name: Richard J. Weller | |
Title: Executive Vice President and Chief Financial Officer | |
(Principal Financial Officer) |
Document and Entity Information - shares |
9 Months Ended | |
---|---|---|
Jun. 30, 2017 |
Aug. 01, 2017 |
|
Document and Entity Information | ||
Entity Registrant Name | Wesco Aircraft Holdings, Inc | |
Entity Central Index Key | 0001378718 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --09-30 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 99,579,363 | |
Document Fiscal Year Focus | 2017 | |
Document Fiscal Period Focus | Q3 |
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Jun. 30, 2017 |
Sep. 30, 2016 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Accounts receivable, allowance for doubtful accounts (in dollars) | $ 3,240 | $ 3,846 |
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized (in shares) | 50,000,000 | 50,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized (in shares) | 950,000,000 | 950,000,000 |
Common stock, shares issued (in shares) | 99,579,363 | 98,614,908 |
Common stock, shares outstanding (in shares) | 99,579,363 | 98,614,908 |
Consolidated Statements of Earnings and Comprehensive (Loss) Income - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
|
Income Statement [Abstract] | ||||
Net sales | $ 363,907 | $ 375,186 | $ 1,067,877 | $ 1,111,771 |
Cost of sales | 273,699 | 275,945 | 793,457 | 813,564 |
Gross profit | 90,208 | 99,241 | 274,420 | 298,207 |
Selling, general and administrative expenses | 66,313 | 59,197 | 192,071 | 179,708 |
Goodwill impairment | 311,114 | 0 | 311,114 | 0 |
(Loss) income from operations | (287,219) | 40,044 | (228,765) | 118,499 |
Interest expense, net | (9,614) | (9,325) | (29,529) | (27,436) |
Other income, net | 256 | 2,657 | 289 | 3,960 |
(Loss) income before provision for income taxes | (296,577) | 33,376 | (258,005) | 95,023 |
Benefit (provision) for income taxes | 66,969 | (9,360) | 58,946 | (26,906) |
Net (loss) income | (229,608) | 24,016 | (199,059) | 68,117 |
Other comprehensive income (loss), net | 960 | (21,936) | (4,722) | (36,128) |
Comprehensive (loss) income | $ (228,648) | $ 2,080 | $ (203,781) | $ 31,989 |
Net (loss) income per share: | ||||
Basic (in dollars per share) | $ (2.32) | $ 0.25 | $ (2.02) | $ 0.70 |
Diluted (in dollars per share) | $ (2.32) | $ 0.24 | $ (2.02) | $ 0.69 |
Weighted average shares outstanding: | ||||
Basic (in shares) | 98,869,675 | 97,929,438 | 98,558,330 | 97,511,590 |
Diluted (in shares) | 98,869,675 | 98,599,215 | 98,558,330 | 98,108,904 |
Basis of Presentation and Significant Accounting Policies |
9 Months Ended |
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Jun. 30, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation and Significant Accounting Policies | Basis of Presentation and Significant Accounting Policies The accompanying unaudited consolidated financial statements include the accounts of Wesco Aircraft Holdings, Inc. and its wholly owned subsidiaries (referred to herein as “Wesco” or the “Company”) prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and with the instructions to Form 10-Q and Article 10 of Regulation S-X. The financial statements presented herein have not been audited by an independent registered public accounting firm, but include all material adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for fair statement of the financial position, results of operations and cash flows for the period. However, these results are not necessarily indicative of results for any other interim period or for the full fiscal year. The preparation of financial statements in conformity with GAAP requires us to make certain estimates and assumptions for the reporting periods covered by the financial statements. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent liabilities. Actual amounts could differ from these estimates. Certain information and footnote disclosures normally included in financial statements in accordance with GAAP have been omitted pursuant to the rules of the Securities and Exchange Commission (“SEC”). The accompanying consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K filed with the SEC on November 28, 2016, as amended by Amendment No. 1 to Annual Report on Form 10-K/A filed with the SEC on December 14, 2016 (collectively, the “2016 Form 10-K”). Certain reclassifications have been made to the amounts in prior periods in order to conform to the current period’s presentation. Deferred Financing Costs Debt issuance costs incurred in connection with the issuance of our long-term debt are capitalized and amortized to interest expense over the term of the debt using the straight-line method, which approximates the effective interest method. The unamortized amount is presented as a reduction of long-term debt on the balance sheet. Debt issuance costs incurred in connection with our revolving line-of-credit (LOC) agreement are capitalized and amortized to interest expense over the term of the LOC agreement using the straight-line method. The unamortized amount is presented as a non-current asset on the balance sheet. |
Recent Accounting Pronouncements |
9 Months Ended |
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Jun. 30, 2017 | |
Accounting Policies [Abstract] | |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Changes to GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of Accounting Standards Updates (“ASUs”) to the FASB’s Accounting Standards Codification (“ASC”). We consider the applicability and impact of all ASUs. ASUs not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on our consolidated financial position and results of operations. New Accounting Standards Issued In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other: Simplifying the Test for Goodwill Impairment, which simplifies the current requirements for testing goodwill for impairment by eliminating the second step of the two-step impairment test to measure the amount of an impairment loss. ASU 2017-04 is effective for the Company in fiscal year 2021, including interim reporting periods within that reporting period, and all annual and interim reporting periods thereafter. Early adoption is permitted. We are currently evaluating the impact of this guidance on our consolidated financial statements. In March 2016, the FASB issued ASU 2016-07, Investments - Equity Method and Joint Ventures (Topic 323), Simplifying the Transition to the Equity Method of Accounting. ASU 2016-07 eliminates the requirement that when an investment subsequently qualifies for use of the equity method as a result of an increase in level of ownership interest or degree of influence, an investor must adjust the investment, results of operations, and retained earnings retroactively on a step-by-step basis as if the equity method had been in effect during all previous periods that the investment had been held. ASU 2016-07 requires that the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investor’s previously held interest and to adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. In addition, ASU 2016-07 requires that an entity that has an available-for-sale equity security that becomes qualified for the equity method of accounting recognize through earnings the unrealized gain or loss in accumulated other comprehensive income at the date the investment becomes qualified for use of the equity method. ASU 2016-07 is effective for the Company in fiscal year 2018, with early adoption permitted. We are currently evaluating the impact of this guidance on our consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires lessees to recognize on the balance sheet a right-of-use asset, representing its right to use the underlying asset for the lease term, and a lease liability for all leases with terms greater than 12 months. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from current GAAP. ASU 2016-02 retains a distinction between finance leases (i.e. capital leases under current GAAP) and operating leases. The classification criteria for distinguishing between finance leases and operating leases will be substantially similar to the classification criteria for distinguishing between capital leases and operating leases under current GAAP. ASU 2016-02 also requires qualitative and quantitative disclosures designed to assess the amount, timing, and uncertainty of cash flows arising from leases. A modified retrospective transition approach shall be used when adopting ASU 2016-02, which includes a number of optional practical expedients that entities may elect to apply. ASU 2016-02 is effective for the Company in fiscal year 2020 and interim periods therein, with early application permitted. We are currently evaluating the impact of this guidance on our consolidated financial statements. As of September 30, 2016, total future minimum payments under our operating leases amounted to $57.8 million. In January 2016, the FASB issued ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which affects the accounting for equity investments, financial liabilities under the fair value option and the presentation and disclosure requirements of financial instruments. ASU 2016-01 is effective for the Company in fiscal year 2019, with early adoption permitted for certain provisions. We are currently evaluating the impact of ASU 2016-01 related to equity investments and the presentation and disclosure requirements of financial instruments on our consolidated financial statements. In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory, which requires an entity to measure inventory at the lower of cost and net realizable value, and eliminates current GAAP options for measuring market value. ASU 2015-11 defines realizable value as the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. ASU 2015-11 is effective for the Company in fiscal year 2018, and interim periods therein. Early adoption is permitted for financial statements that have not been previously issued. ASU 2015-11 can only be applied prospectively. We do not anticipate the adoption of ASU 2015-11 will have a significant impact on our consolidated financial statements. In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which amends ASC Subtopic 205-40 to provide guidance about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related disclosures. Specifically, ASU 2014-15 (1) provides a definition of the term “substantial doubt,” (2) requires an evaluation every reporting period, (3) provides principles for considering the mitigating effect of management’s plans, (4) requires certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) requires an express statement and other disclosures when substantial doubt is not alleviated, and (6) requires an assessment for a period of one year after the date that financial statements are issued. ASU 2014-15 is effective for the Company in fiscal year 2017, and for annual periods and interim periods thereafter. We do not anticipate the adoption of ASU 2014-15 will have a significant impact on our consolidated financial statements. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 is amended by ASU 2015-14, ASU 2016-08, ASU 2016-10, ASU 2016-11, ASU 2016-12, ASU 2016-20 and ASU 2017-10, which FASB issued in August 2015, March 2016, April 2016, May 2016, May 2016, December 2016 and May 2017, respectively (collectively the “amended ASU 2014-09”). The amended ASU 2014-09 provides a single comprehensive model for the recognition of revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. It requires an entity to recognize revenue when the entity transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amended ASU 2014-09 creates a five-step model that requires entities to exercise judgment when considering the terms of contract(s), which includes (1) identifying the contract(s) with the customer, (2) identifying the separate performance obligations in the contract, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. The amended ASU 2014-09 requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including qualitative and quantitative information about contracts with customers, significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The effective date for the amended ASU 2014-09 for the Company is fiscal year 2019, including interim reporting periods within that reporting period. Early adoption is permitted for fiscal year 2018, including interim reporting periods within that reporting period. The amended ASU 2014-09 may have an impact on the timing and amount of revenues and cost of sales in our industry due primarily to changes in whether certain performance obligations are accounted for on a gross or net basis, separating service revenue from the related product revenue, reporting costs currently included in operating expense as costs of services, and capitalizing certain up-front costs related to contracts and amortizing them over the service period. We have begun reviewing our largest contracts to determine the extent to which these and other issues may impact on our results after adoption. We plan to adopt the amended ASU 2014-09 in fiscal 2019 using the modified retrospective method. Adopted Accounting Standards Effective October 1, 2016, we elected to early adopt ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, which is intended to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The primary impacts of adoption are (1) the recognition of excess tax benefits in our benefit (provision) for income taxes instead of paid-in capital and (2) the presentation of excess tax benefits in the statement of cash flows as cash provided by operating activities instead of cash provided by financing activities. The first requirement is required to be applied prospectively. For the nine months ended June 30, 2017, we recorded $1.2 million of excess tax benefits as a reduction to our provision for income tax. For the second requirement, we elected to adopt this update prospectively. For the nine months ended June 30, 2017, we included the $1.2 million excess tax benefits in cash provided by operating activities on our consolidated statements of cash flows. ASU 2016-09 also addresses cash flow statement presentation. Since we have historically presented cash flows related to employee taxes paid for withheld shares as a financing activity, ASU 2016-09 had no impact on our consolidated statements of cash flows. As permitted by ASU 2019-09, we have elected to continue to estimate forfeitures to determine the amount of compensation cost to be recognized in each period. Effective October 1, 2016, we adopted, on a prospective basis, ASU 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments, which requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. As of June 30, 2017, we did not have any provisional amounts outstanding from prior acquisitions. Therefore, the adoption of ASU 2015-16 did not have any impact on our consolidated financial statements. Effective October 1, 2016, we adopted ASU 2015-15, Interest - Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements. ASU 2015-15 states entities should present debt issuance costs as an asset, and subsequently amortize the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. As of June 30, 2017 and September 30, 2016, we had $3.9 million and $1.1 million, respectively, of deferred financing costs related to our revolving line-of-credit facility. Effective October 1, 2016, we adopted ASU 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Cost. ASU 2015-03 requires that we change the presentation of debt issuance costs on our consolidated balance sheets. Effective October 1, 2016, our unamortized debt financing costs are presented as a reduction of long-term debt instead of being presented as an asset on our consolidated balance sheet. As required by ASU 2015-03, we reclassified $7.6 million of deferred debt financing costs from non-current assets to reduce our $841.9 million long-term debt as of September 30, 2016. As of June 30, 2017, deferred debt financing costs of $12.5 million are presented as a reduction of our long-term debt. See Note 6 for further information. Effective October 1, 2016, we adopted, on a prospective basis, ASU 2014-12, Compensation-Stock Compensation (Topic 718): Accounting for Share-Based Payments when the Terms of an Award Provide that a Performance Target Could Be Achieved After the Requisite Service Period. ASU 2014-12 requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. The adoption of ASU 2014-12 did not have any impact on our consolidated financial statements. |
Inventory |
9 Months Ended |
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Jun. 30, 2017 | |
Inventory Disclosure [Abstract] | |
Inventory | Inventory Our inventory is comprised solely of finished goods. During the three months ended June 30, 2017 and 2016, we recorded a charge to cost of sales of $3.8 million and $3.2 million, respectively, to write down excess inventory to its net realizable value. During the nine months ended June 30, 2017 and 2016, we recorded a charge to cost of sales of $9.1 million and $9.6 million, respectively, to write down excess inventory to its net realizable value. |
Goodwill |
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Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill | Goodwill During the nine months ended June 30, 2017, goodwill declined $313.2 million, of which $311.1 million was an impairment charge and $2.1 million was a reduction as a result of the strengthening of the U.S. dollar compared to the British pound. Goodwill consists of the following (in thousands):
We test goodwill for impairment using a qualitative assessment process or a two-step quantitative assessment process. Step 1 of the quantitative process involves comparing the carrying value of net assets, including goodwill, to the fair value of the reporting unit. If the fair value exceeds its carrying amount, goodwill is not considered impaired and the second step of the process is unnecessary. If the carrying amount of a reporting unit’s goodwill exceeds its fair value, the second step measures the impairment loss, if any. We have four reporting units, which are North America Hardware, Rest of World Hardware, North America Chemical and Rest of World Chemical. The estimates of fair value of a reporting unit are determined based on a discounted cash flow analysis and market earnings multiples. A discounted cash flow analysis requires us to make various judgmental assumptions, including assumptions about future cash flows, growth rates and discount rates. The assumptions about future cash flows and growth rates are based on the forecast and long-term business plans of each reporting unit. Discount rate assumptions are based on an assessment of the risk inherent in the future cash flows of the respective reporting units. The preparation of our internal forecasts requires significant judgments, including the estimation of the long-term rate of growth for our business, estimation of the useful life over which cash flows will occur, cost expectations, changes in working capital, growth rates, discount rates, and other factors. Changes in these factors could significantly change our internal forecasts, which could significantly change the amount of impairment recorded, if any. We performed a Step 1 goodwill impairment test on July 1, 2016 on all four reporting units, which indicated no impairment. For the North America Hardware and North America Chemical reporting units, the fair value was in excess of carrying value by 29% and 15%, respectively. Since 2016, North America Hardware and North America Chemical reporting units have underperformed relative to the forecasts included in the Step 1 analysis; however, our qualitative impairment assessments performed on December 31, 2016 and March 31, 2017 did not indicate it was more likely than not that the carrying value exceeded the fair value of the two reporting units. During the third quarter of fiscal 2017, our stock price experienced a sustained decline in value. Additionally, during June 2017, we reassessed our five year outlook following the appointment of our new CEO in May 2017. The cash flows in this updated five year forecast indicated that it was more likely than not that the goodwill in the North America Hardware and North America Chemical reporting units was impaired. These events triggered our decision to perform a quantitative goodwill impairment test as of June 30, 2017. We performed our Step 1 goodwill impairment test on June 30, 2017 on all four reporting units. The results of these tests indicated that the North America Hardware and North America Chemical reporting units were impaired. Lower projected revenue growth and operating results reflected changes in assumptions related to organic growth rates, market trends, business mix, cost structure and other expectations about the anticipated short-term and long-term operating results of these two reporting units, resulting in lower estimated fair values. As a result, we proceeded to Step 2 of the goodwill impairment analysis using the most appropriate valuation methods and compared the implied value of goodwill with the carrying value of the goodwill for each of the impaired reporting units. Step 2 compares the implied fair value of goodwill with the carrying amount of that goodwill. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. The implied fair value of the reporting unit’s goodwill is calculated by creating a hypothetical balance sheet as if the reporting unit had just been acquired. This balance sheet contains all assets and liabilities recorded at fair value (including any intangible assets that may not have any corresponding carrying value in our balance sheet). The implied value of the reporting unit’s goodwill is calculated by subtracting the fair value of the net assets from the fair value of the reporting unit. If the carrying value of goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. In applying the Step 2 analysis to the North America Hardware and North America Chemical reporting units, we determined that the fair value of certain identifiable intangibles including trademarks, customer relationships, and technology exceeded their carrying values by a significant amount which further reduced the implied fair value of goodwill. We recorded a non-cash impairment charge of $240.6 million for North America Hardware and $70.5 million for North America Chemical, for a total impairment charge of $311.1 million in the three months ended June 30, 2017 to reduce each reporting unit’s carrying value goodwill to its implied fair value. The remaining goodwill for the North America Hardware and North America Chemical reporting units was $51.4 million and $153.4 million, respectively, as of June 30, 2017, and after recording the impairment charges, the fair values of these reporting units exceeded their carrying values by 8% and 9%, respectively. The Rest of World Hardware and Rest of World Chemical reporting units were not impaired with estimated fair values of these reporting units exceeding their carrying values by 105% and 22%, respectively. . |
Fair Value of Financial Instruments |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value of Financial Instruments | Fair Value of Financial Instruments Derivative Financial Instruments We use derivative instruments primarily to manage exposures to foreign currency exchange rates and interest rates. Our primary objective in holding derivatives is to reduce the volatility of earnings and cash flows associated with fluctuations in foreign exchange rates and changes in interest rates. Our derivatives expose us to credit risk to the extent that the counter-parties may be unable to meet the terms of the agreement. We, however, seek to mitigate such risks by limiting our counter-parties to major financial institutions. In addition, the potential risk of loss with any one counter-party resulting from this type of credit risk is monitored. Management does not expect material losses as a result of defaults by counter-parties. Cash Flow Hedges of Interest Rate Risk Our objectives in using interest rate derivatives are to add stability to interest expense and to manage our exposure to interest rate movements. To accomplish these objectives, we primarily use interest rate swaps as part of our interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for our making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. In July 2015, we entered into two interest rate swap agreements, which we designated as cash flow hedges, in order to reduce our exposure to variability in cash flows related to interest payments on a portion of our outstanding debt. The first interest rate swap agreement has an amortizing notional amount, which was $387.5 million as of June 30, 2017, and matures on September 30, 2017, giving us the contractual right to pay a fixed interest rate of 1.21% plus the applicable margin under the term loan B facility (as defined in Note 6 below; see Note 6 for the applicable margin). The second interest rate swap agreement also has an amortizing notional amount, initially $375.0 million, giving us the contractual right to pay a fixed interest rate of 2.2625% plus the applicable margin under the term loan B facility, which is effective on September 29, 2017 and matures on September 30, 2019. The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income (loss) (“AOCI”) and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During the nine months ended June 30, 2017, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt. The ineffective portion of the change in fair value of the derivatives is recognized immediately in earnings. During the nine months ended June 30, 2017, we did not record any hedge ineffectiveness in earnings. No portion of our interest rate swap agreements is excluded from the assessment of hedge effectiveness. Amounts reported in AOCI related to derivatives and the related deferred tax are reclassified to interest expense as interest payments are made on our variable-rate debt. As of June 30, 2017, we expected to reclassify approximately $2.1 million from accumulated other comprehensive loss and the related deferred tax to earnings as an increase to interest expense over the next 12 months. Non-Designated Derivatives On October 3 and October 5, 2016, we entered into two foreign currency forward contracts to partially reduce our exposure to foreign currency fluctuations for a subsidiary's net monetary assets, which are denominated in a foreign currency. Both foreign currency forward contracts expired on December 28, 2016. On January 6, 2017, we entered into one foreign currency forward contract to partially reduce our exposure to foreign currency fluctuations for a subsidiary's net monetary assets, which are denominated in a foreign currency. The foreign currency forward contract expired on March 30, 2017. The derivatives were not designated as a hedging instrument. The change in their fair value is recognized as periodic gain or loss in the other income (loss), net line of our consolidated statement of earnings and comprehensive income. We did not have foreign currency forward contracts as of June 30, 2017 and September 30, 2016. The following table summarizes the notional principal amounts at June 30, 2017, and September 30, 2016 of our outstanding derivative instruments discussed above (in thousands).
The following table provides the location and fair value amounts of our financial instruments, which are reported in our consolidated balance sheets as of June 30, 2017 and September 30, 2016 (in thousands).
The following table provides the losses of our cash flow hedging instruments (net of income tax benefit), which were transferred from AOCI to interest expense on our consolidated statement of comprehensive income during the three and nine months ended June 30, 2017 and 2016 (in thousands).
The following table provides the effective portion of the amount of (loss) gain recognized in other comprehensive income (net of income taxes) for the three and nine months ended June 30, 2017 and 2016 (in thousands).
The following table provides a summary of changes to our AOCI related to our cash flow hedging instruments (net of income taxes) during the three and nine months ended June 30, 2017 (in thousands).
The following table provides the pretax effect of our derivative instruments not designated as hedging instruments on our consolidated statements of earnings and comprehensive income for the three and nine months ended June 30, 2017 and 2016 (in thousands).
Other Financial Instruments Our financial instruments consist of cash and cash equivalents, accounts receivable and payable, accrued expenses and other current liabilities, and a line of credit. The carrying amounts of these instruments approximate fair value because of their short-term duration. The fair value of the long-term debt instruments is determined using current applicable rates for similar instruments as of the balance sheet date, a Level 2 measurement (as defined below). The principal amounts and fair values of the debt instruments were as follows (in thousands):
Fair Value Measurement Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To determine fair value, we primarily utilize reported market transactions and discounted cash flow analysis. We use a three tier fair value hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs. The fair value hierarchy prioritizes the inputs to valuation techniques into three broad levels whereby the highest priority is given to Level 1 inputs and the lowest to Level 3 inputs. The three broad categories are:
The definition of fair value includes the consideration of nonperformance risk. Nonperformance risk refers to the risk that an obligation (either by a counter party or us) will not be fulfilled. For financial assets traded in an active market (Level 1), the nonperformance risk is included in the market price. For certain other financial assets and liabilities (Level 2 and 3), our fair value calculations have been adjusted accordingly. There were no transfers between the assets and liabilities under Level 1 and Level 2 during the nine months ended June 30, 2017. The following tables provide the valuation hierarchy classification of assets and liabilities that are carried at fair value and measured on a recurring basis in our consolidated balance sheets as of June 30, 2017 and September 30, 2016 (in thousands).
We use observable market-based inputs to calculate fair value of our interest rate swap agreements and outstanding debt instruments, in which case the measurements are classified within Level 2. If quoted or observable market prices are not available, fair value is based upon internally developed models that use, where possible, current market‑based parameters such as interest rates, yield curves and currency rates. These measurements are classified within Level 3. |
Long-Term Debt |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-Term Debt | Long-Term Debt The credit agreement, dated as of December 7, 2012 (as amended), by and among the Company, Wesco Aircraft Hardware (the “Borrower”) and the lenders and agents party thereto, which governs our senior secured credit facilities, provides for (1) a $400.0 million senior secured term loan A facility (the “term loan A facility”), (2) a $180.0 million revolving facility (the “revolving facility”), and (3) a $525.0 million senior secured term loan B facility (the “term loan B facility”). We refer to term loan A facility, the revolving facility and the term loan B facility, together, as the “Credit Facilities.” On March 28, 2017, we entered into the Fifth Amendment (the “Fifth Amendment”) to our credit agreement (as amended prior to the Fifth Amendment, the “Credit Agreement”; the Credit Agreement, as amended by the Fifth Amendment, the “Amended Credit Agreement”). The Fifth Amendment modified the Credit Agreement to reduce the maximum amount permitted to be incurred under a Capped Incremental Facility (as such term is defined in the Amended Credit Agreement) from $150.0 million to $75.0 million, unless the Consolidated Total Leverage Ratio (as such term is defined in the Amended Credit Agreement), after giving effect to the incurrence of any incremental loans or commitments and the use of proceeds thereof, on a pro forma basis, would be less than or equal to 3.50, in which case the Capped Incremental Facility will remain at $150.0 million. The Fifth Amendment also modified the Credit Agreement to (a) increase the highest possible interest rate margin applicable to loans under the term loan A facility and loans and commitments under the revolving facility from 2.75% to 3.00% for Eurocurrency loans and from 1.75% to 2.00% for Alternate Base Rate (“ABR”) loans and (b) increase the Consolidated Total Leverage Ratio levels in the financial covenant set forth in the Credit Agreement to a maximum of 4.50 for the quarters ending June 30, 2017 and September 30, 2017, with step-downs to 4.25 for the quarters ending December 31, 2017 and March 31, 2018; 4.00 for the quarters ending June 30, 2018 and September 30, 2018; 3.75 for the quarters ending December 31, 2018 and March 31, 2019; and 3.50 for the quarter ending June 30, 2019 and thereafter. Long-term debt consists of the following (in thousands):
During the nine months ended June 30, 2017, we made three required quarterly payments totaling $15.0 million and a voluntary prepayment of $1.3 million on our term loan A facility and two voluntary prepayments totaling $12.0 million on our borrowings under the revolving facility. As of June 30, 2017, $48.0 million of indebtedness was outstanding and $132.0 million was available for borrowing under the revolving facility, of which we could use up to $39.3 million to fund our operating and investing activities without breaching any covenants contained in the Amended Credit Agreement. The interest rate for the term loan A facility is based on our Consolidated Total Leverage Ratio as determined in the most recently delivered financial statements, with the respective margins ranging from 2.00% to 3.00% for Eurocurrency loans and 1.00% to 2.00% for ABR loans. The term loan A facility amortizes in equal quarterly installments of 1.25% of the original principal amount of $400.0 million with the balance due on the earlier of (i) 90 days before the maturity of the term loan B facility, and (ii) October 4, 2021. As of June 30, 2017, the interest rate for borrowings under the term loan A facility was 4.23%, which approximated the effective interest rate. The interest rate for the term loan B facility has a margin of 2.50% per annum for Eurocurrency loans (subject to a minimum Eurocurrency rate floor of 0.75% per annum) or 1.50% per annum for ABR loans (subject to a minimum ABR floor of 1.75% per annum). The term loan B facility amortizes in equal quarterly installments of 0.25% of the original principal amount of $525.0 million, with the balance due at maturity on February 28, 2021. As of June 30, 2017, the interest rate for borrowings under the term loan B facility was 3.8%, which approximated the effective interest rate. In July 2015, we entered into interest rate swap agreements relating to this indebtedness, which are described in greater detail in Note 5 above. The interest rate for the revolving facility is based on our Consolidated Total Leverage Ratio as determined in the most recently delivered financial statements, with the respective margins ranging from 2.00% to 3.00% for Eurocurrency loans and 1.00% to 2.00% for ABR loans. The revolving facility expires on the earlier of (i) 90 days before the maturity of the term loan B facility, and (ii) October 4, 2021. As of June 30, 2017, the weighted-average interest rate for borrowings under the revolving facility was 4.13%. As a result of the Fourth Amendment to our Credit Agreement on October 4, 2016, we incurred $10.5 million in fees that were capitalized, $7.2 million of which was related to the term loan A facility and $3.3 million of which was related to the revolving facility. Of the $3.4 million of the unamortized deferred financing costs related to the Credit Agreement prior to the Fourth Amendment, $2.3 million was written off as debt extinguishment loss in the nine months ended June 30, 2017, which was included in interest expense for the period. As a result of the Fifth Amendment to our Credit Agreement on March 28, 2017, we incurred $2.3 million in fees that were capitalized, $1.6 million of which was related to the term loan A facility and $0.7 million of which was related to the revolving facility. The deferred financing costs of term loan B were not impacted by the Fourth Amendment or Fifth Amendment. The following table summarizes the total deferred financing costs for the term loan A facility, the term loan B facility and the revolving facility, which will be amortized over their remaining terms.
Our borrowings under the Credit Facilities are guaranteed by us and all of our direct and indirect, wholly-owned, domestic restricted subsidiaries (subject to certain exceptions) and secured by a first lien on substantially all of our assets and the assets of our guarantor subsidiaries, including capital stock of the subsidiaries (in each case, subject to certain exceptions). Our borrowings under the Credit Facilities are subject to a financial covenant based upon our Consolidated Total Leverage Ratio with the maximum ratio set at 4.50 for the three months ended June 30, 2017. The Amended Credit Agreement also contains customary negative covenants, including restrictions on our and our restricted subsidiaries’ ability to merge and consolidate with other companies, incur indebtedness, grant liens or security interests on assets, make acquisitions, loans, advances or investments, pay dividends, sell or otherwise transfer assets, optionally prepay or modify terms of any junior indebtedness or enter into transactions with affiliates. We were in compliance with all of the foregoing covenants, and our Consolidated Total Leverage Ratio was 4.29 as of June 30, 2017. As of June 30, 2017, our subsidiary, Wesco Aircraft Europe, Ltd, has available a £7.0 million ($9.1 million based on the June 30, 2017 exchange rate) line of credit that automatically renews annually on October 1 (the “UK line of credit”). The UK line of credit bears interest based on the base rate plus an applicable margin of 1.65%. As of June 30, 2017, the full £7.0 million was available for borrowing under the UK line of credit without breaching any covenants contained in the agreements governing our indebtedness, provided such borrowing, combined with borrowings under the Credit Facilities, does not cause us to exceed the maximum Consolidated Total Leverage Ratio. |
Comprehensive (Loss) Income |
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Comprehensive (Loss) Income | Comprehensive (Loss) Income Comprehensive (loss) income, which is net of income taxes, consists of the following (in thousands):
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Net Income Per Share |
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Net Income Per Share | Net (Loss) Income Per Share Basic net (loss) income per share is computed by dividing net (loss) income available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted net (loss) income per share includes the dilutive effect of both outstanding stock options and restricted shares, calculated using the treasury stock method. Assumed proceeds from in-the-money awards are calculated under the “as-if” method as prescribed by ASC 718, Compensation—Stock Compensation. The following table provides our basic and diluted net (loss) income per share for the three and nine months ended June 30, 2017 and 2016 (dollars in thousands except share data):
For the three months ended June 30, 2017 and 2016, respectively, 3,150,564 and 1,595,791 shares of common stock equivalents were not included in the diluted calculation due to their anti-dilutive effect. For the nine months ended June 30, 2017 and 2016, respectively, 2,715,563 and 2,386,294 shares of common stock equivalents were not included in the diluted calculation due to their anti-dilutive effect. |
Segment Reporting |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting | Segment Reporting We are organized based on geographical location. We conduct our business through two reportable segments: North America and Rest of World. We evaluate segment performance based primarily on segment income from operations. Each segment reports its results of operations and makes requests for capital expenditures and acquisition funding to our chief operating decision-maker (“CODM”). Our Chief Executive Officer serves as our CODM. The following tables present operating and financial information by business segment (in thousands):
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Income Taxes |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | Income Taxes
For the three months ended June 30, 2017, our effective tax rate decreased 5.4 percentage points compared to the same period in the prior year. The effective tax rate of 22.6% resulted primarily from (i) a decrease in the proportion of U.S. pre-tax income with a higher tax rate than pre-tax income from foreign jurisdictions, which was caused by the $311.1 million goodwill impairment charge, a portion of which is permanently not deductible for tax purposes and (ii) the establishment of a $10.6 million valuation allowance with respect to deferred tax assets for foreign tax credits. Excluding the impact of the goodwill impairment charge and valuation allowance, the effective tax rate would have been 27.3% for the three months ended June 30, 2017. For the nine months ended June 30, 2017, our effective tax rate decreased 5.5 percentage points compared to the same period in the prior year. The effective tax rate of 22.8% resulted primarily from (i) a decrease in the proportion of U.S. pre-tax income with a higher tax rate than pre-tax income from foreign jurisdictions, which was caused by the $311.1 million goodwill impairment charge taken during the nine months ended June 30, 2017, a portion of which is permanently not deductible for tax purposes and (ii) the establishment of a $10.6 million valuation allowance with respect to deferred tax assets for foreign tax credits. Excluding the impact of the goodwill impairment charge and valuation allowance, the effective tax rate would have been 22.6% for the nine months ended June 30, 2017. The difference between the adjusted effective tax rate of 22.6% and the effective tax rate of 28.3% for the nine months ended June 30, 2017 and June 30, 2016, respectively, is primarily due to (i) the impact of the adoption of ASU 2016-09 as discussed in Note 2 and (ii) the release of a valuation allowance on a net operating loss carryforward of a foreign subsidiary. |
Commitments and Contingencies |
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Jun. 30, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies We are involved in various legal matters that arise in the ordinary course of business. Our management, after consulting with outside legal counsel, believes that the ultimate outcome of such matters will not have a material adverse effect on our business, financial position, results of operations or cash flows. There can be no assurance, however, that such actions will not be material or adversely affect our business, financial position, results of operations or cash flows. |
Basis of Presentation and Significant Accounting Policies (Policies) |
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Jun. 30, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of accounting | The accompanying unaudited consolidated financial statements include the accounts of Wesco Aircraft Holdings, Inc. and its wholly owned subsidiaries (referred to herein as “Wesco” or the “Company”) prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and with the instructions to Form 10-Q and Article 10 of Regulation S-X. |
Deferred Financing Costs | Debt issuance costs incurred in connection with the issuance of our long-term debt are capitalized and amortized to interest expense over the term of the debt using the straight-line method, which approximates the effective interest method. The unamortized amount is presented as a reduction of long-term debt on the balance sheet. Debt issuance costs incurred in connection with our revolving line-of-credit (LOC) agreement are capitalized and amortized to interest expense over the term of the LOC agreement using the straight-line method. The unamortized amount is presented as a non-current asset on the balance sheet. |
New Accounting Standards Issued | In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other: Simplifying the Test for Goodwill Impairment, which simplifies the current requirements for testing goodwill for impairment by eliminating the second step of the two-step impairment test to measure the amount of an impairment loss. ASU 2017-04 is effective for the Company in fiscal year 2021, including interim reporting periods within that reporting period, and all annual and interim reporting periods thereafter. Early adoption is permitted. We are currently evaluating the impact of this guidance on our consolidated financial statements. In March 2016, the FASB issued ASU 2016-07, Investments - Equity Method and Joint Ventures (Topic 323), Simplifying the Transition to the Equity Method of Accounting. ASU 2016-07 eliminates the requirement that when an investment subsequently qualifies for use of the equity method as a result of an increase in level of ownership interest or degree of influence, an investor must adjust the investment, results of operations, and retained earnings retroactively on a step-by-step basis as if the equity method had been in effect during all previous periods that the investment had been held. ASU 2016-07 requires that the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investor’s previously held interest and to adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. In addition, ASU 2016-07 requires that an entity that has an available-for-sale equity security that becomes qualified for the equity method of accounting recognize through earnings the unrealized gain or loss in accumulated other comprehensive income at the date the investment becomes qualified for use of the equity method. ASU 2016-07 is effective for the Company in fiscal year 2018, with early adoption permitted. We are currently evaluating the impact of this guidance on our consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires lessees to recognize on the balance sheet a right-of-use asset, representing its right to use the underlying asset for the lease term, and a lease liability for all leases with terms greater than 12 months. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from current GAAP. ASU 2016-02 retains a distinction between finance leases (i.e. capital leases under current GAAP) and operating leases. The classification criteria for distinguishing between finance leases and operating leases will be substantially similar to the classification criteria for distinguishing between capital leases and operating leases under current GAAP. ASU 2016-02 also requires qualitative and quantitative disclosures designed to assess the amount, timing, and uncertainty of cash flows arising from leases. A modified retrospective transition approach shall be used when adopting ASU 2016-02, which includes a number of optional practical expedients that entities may elect to apply. ASU 2016-02 is effective for the Company in fiscal year 2020 and interim periods therein, with early application permitted. We are currently evaluating the impact of this guidance on our consolidated financial statements. As of September 30, 2016, total future minimum payments under our operating leases amounted to $57.8 million. In January 2016, the FASB issued ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which affects the accounting for equity investments, financial liabilities under the fair value option and the presentation and disclosure requirements of financial instruments. ASU 2016-01 is effective for the Company in fiscal year 2019, with early adoption permitted for certain provisions. We are currently evaluating the impact of ASU 2016-01 related to equity investments and the presentation and disclosure requirements of financial instruments on our consolidated financial statements. In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory, which requires an entity to measure inventory at the lower of cost and net realizable value, and eliminates current GAAP options for measuring market value. ASU 2015-11 defines realizable value as the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. ASU 2015-11 is effective for the Company in fiscal year 2018, and interim periods therein. Early adoption is permitted for financial statements that have not been previously issued. ASU 2015-11 can only be applied prospectively. We do not anticipate the adoption of ASU 2015-11 will have a significant impact on our consolidated financial statements. In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which amends ASC Subtopic 205-40 to provide guidance about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related disclosures. Specifically, ASU 2014-15 (1) provides a definition of the term “substantial doubt,” (2) requires an evaluation every reporting period, (3) provides principles for considering the mitigating effect of management’s plans, (4) requires certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) requires an express statement and other disclosures when substantial doubt is not alleviated, and (6) requires an assessment for a period of one year after the date that financial statements are issued. ASU 2014-15 is effective for the Company in fiscal year 2017, and for annual periods and interim periods thereafter. We do not anticipate the adoption of ASU 2014-15 will have a significant impact on our consolidated financial statements. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 is amended by ASU 2015-14, ASU 2016-08, ASU 2016-10, ASU 2016-11, ASU 2016-12, ASU 2016-20 and ASU 2017-10, which FASB issued in August 2015, March 2016, April 2016, May 2016, May 2016, December 2016 and May 2017, respectively (collectively the “amended ASU 2014-09”). The amended ASU 2014-09 provides a single comprehensive model for the recognition of revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. It requires an entity to recognize revenue when the entity transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amended ASU 2014-09 creates a five-step model that requires entities to exercise judgment when considering the terms of contract(s), which includes (1) identifying the contract(s) with the customer, (2) identifying the separate performance obligations in the contract, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. The amended ASU 2014-09 requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including qualitative and quantitative information about contracts with customers, significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The effective date for the amended ASU 2014-09 for the Company is fiscal year 2019, including interim reporting periods within that reporting period. Early adoption is permitted for fiscal year 2018, including interim reporting periods within that reporting period. The amended ASU 2014-09 may have an impact on the timing and amount of revenues and cost of sales in our industry due primarily to changes in whether certain performance obligations are accounted for on a gross or net basis, separating service revenue from the related product revenue, reporting costs currently included in operating expense as costs of services, and capitalizing certain up-front costs related to contracts and amortizing them over the service period. We have begun reviewing our largest contracts to determine the extent to which these and other issues may impact on our results after adoption. We plan to adopt the amended ASU 2014-09 in fiscal 2019 using the modified retrospective method. Adopted Accounting Standards Effective October 1, 2016, we elected to early adopt ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, which is intended to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The primary impacts of adoption are (1) the recognition of excess tax benefits in our benefit (provision) for income taxes instead of paid-in capital and (2) the presentation of excess tax benefits in the statement of cash flows as cash provided by operating activities instead of cash provided by financing activities. The first requirement is required to be applied prospectively. For the nine months ended June 30, 2017, we recorded $1.2 million of excess tax benefits as a reduction to our provision for income tax. For the second requirement, we elected to adopt this update prospectively. For the nine months ended June 30, 2017, we included the $1.2 million excess tax benefits in cash provided by operating activities on our consolidated statements of cash flows. ASU 2016-09 also addresses cash flow statement presentation. Since we have historically presented cash flows related to employee taxes paid for withheld shares as a financing activity, ASU 2016-09 had no impact on our consolidated statements of cash flows. As permitted by ASU 2019-09, we have elected to continue to estimate forfeitures to determine the amount of compensation cost to be recognized in each period. Effective October 1, 2016, we adopted, on a prospective basis, ASU 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments, which requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. As of June 30, 2017, we did not have any provisional amounts outstanding from prior acquisitions. Therefore, the adoption of ASU 2015-16 did not have any impact on our consolidated financial statements. Effective October 1, 2016, we adopted ASU 2015-15, Interest - Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements. ASU 2015-15 states entities should present debt issuance costs as an asset, and subsequently amortize the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. As of June 30, 2017 and September 30, 2016, we had $3.9 million and $1.1 million, respectively, of deferred financing costs related to our revolving line-of-credit facility. Effective October 1, 2016, we adopted ASU 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Cost. ASU 2015-03 requires that we change the presentation of debt issuance costs on our consolidated balance sheets. Effective October 1, 2016, our unamortized debt financing costs are presented as a reduction of long-term debt instead of being presented as an asset on our consolidated balance sheet. As required by ASU 2015-03, we reclassified $7.6 million of deferred debt financing costs from non-current assets to reduce our $841.9 million long-term debt as of September 30, 2016. As of June 30, 2017, deferred debt financing costs of $12.5 million are presented as a reduction of our long-term debt. See Note 6 for further information. Effective October 1, 2016, we adopted, on a prospective basis, ASU 2014-12, Compensation-Stock Compensation (Topic 718): Accounting for Share-Based Payments when the Terms of an Award Provide that a Performance Target Could Be Achieved After the Requisite Service Period. ASU 2014-12 requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. The adoption of ASU 2014-12 did not have any impact on our consolidated financial statements. |
Goodwill (Tables) |
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Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of goodwill | Goodwill consists of the following (in thousands):
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Fair Value of Financial Instruments (Tables) |
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Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of derivative instruments | The following table summarizes the notional principal amounts at June 30, 2017, and September 30, 2016 of our outstanding derivative instruments discussed above (in thousands).
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Schedule of derivative instruments in statement of financial position, fair value | The following table provides the location and fair value amounts of our financial instruments, which are reported in our consolidated balance sheets as of June 30, 2017 and September 30, 2016 (in thousands).
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Derivative instruments, gain (loss) | The following table provides the losses of our cash flow hedging instruments (net of income tax benefit), which were transferred from AOCI to interest expense on our consolidated statement of comprehensive income during the three and nine months ended June 30, 2017 and 2016 (in thousands).
The following table provides the effective portion of the amount of (loss) gain recognized in other comprehensive income (net of income taxes) for the three and nine months ended June 30, 2017 and 2016 (in thousands).
The following table provides the pretax effect of our derivative instruments not designated as hedging instruments on our consolidated statements of earnings and comprehensive income for the three and nine months ended June 30, 2017 and 2016 (in thousands).
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Schedule of accumulated other comprehensive income (loss) | The following table provides a summary of changes to our AOCI related to our cash flow hedging instruments (net of income taxes) during the three and nine months ended June 30, 2017 (in thousands).
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Schedule of carrying values and estimated fair values of debt instruments | The principal amounts and fair values of the debt instruments were as follows (in thousands):
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Schedule of fair value, assets and liabilities measured on recurring basis | The following tables provide the valuation hierarchy classification of assets and liabilities that are carried at fair value and measured on a recurring basis in our consolidated balance sheets as of June 30, 2017 and September 30, 2016 (in thousands).
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Long-Term Debt (Tables) |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of debt | Long-term debt consists of the following (in thousands):
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Total deferred financing costs | The following table summarizes the total deferred financing costs for the term loan A facility, the term loan B facility and the revolving facility, which will be amortized over their remaining terms.
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Comprehensive (Loss) Income (Tables) |
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Comprehensive Income (Loss), Net of Tax, Attributable to Parent [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of comprehensive income | Comprehensive (loss) income, which is net of income taxes, consists of the following (in thousands):
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Net Income Per Share (Tables) |
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Schedule of net income per share | The following table provides our basic and diluted net (loss) income per share for the three and nine months ended June 30, 2017 and 2016 (dollars in thousands except share data):
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Segment Reporting (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of net sales and other financial information by business segment | The following tables present operating and financial information by business segment (in thousands):
|
Income Taxes (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of components of income tax expense (benefit) |
|
Inventory (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
|
Inventory Disclosure [Abstract] | ||||
Inventory write-down | $ 3.8 | $ 3.2 | $ 9.1 | $ 9.6 |
Fair Value of Financial Instruments - Cash Flow Hedges of Interest Rate Risk (Details) - Cash flow hedging |
9 Months Ended | |||
---|---|---|---|---|
Jun. 30, 2017
USD ($)
|
Jun. 30, 2016
USD ($)
|
Mar. 31, 2016 |
Jul. 31, 2015
interest_rate_swap_agreement
|
|
Interest rate swap | ||||
Derivative [Line Items] | ||||
Derivative instrument, gain (loss) reclassification from AOCI to income | $ 2,100,000 | |||
Interest rate swap one | ||||
Derivative [Line Items] | ||||
Derivative, fixed interest rate (as a percent) | 1.21% | |||
Interest rate swap two | ||||
Derivative [Line Items] | ||||
Derivative, fixed interest rate (as a percent) | 2.2625% | |||
Designated as hedging instrument | Interest rate swap | ||||
Derivative [Line Items] | ||||
Number of interest rate derivatives held | interest_rate_swap_agreement | 2 | |||
Designated as hedging instrument | Interest rate swap one | ||||
Derivative [Line Items] | ||||
Derivative, notional amount | $ 387,500,000 | |||
Designated as hedging instrument | Interest rate swap two | ||||
Derivative [Line Items] | ||||
Derivative, notional amount | $ 375,000,000 |
Fair Value of Financial Instruments - Non-Designated Derivatives (Details) |
Jun. 30, 2017
USD ($)
|
Jan. 06, 2017
foreign_currency_forward_contract
|
Oct. 05, 2016
foreign_currency_forward_contract
|
Sep. 30, 2016
USD ($)
|
---|---|---|---|---|
Designated as hedging instrument | Interest rate contract | ||||
Derivative [Line Items] | ||||
Derivative, notional amount | $ | $ 387,500,000 | $ 425,000,000 | ||
Other income | Not designated as hedging instrument | Foreign exchange contract | ||||
Derivative [Line Items] | ||||
Number of foreign currency forward contracts | foreign_currency_forward_contract | 1 | 2 |
Fair Value of Financial Instruments - Location and Fair Value Amounts of Financial Instruments (Details) - Designated as hedging instrument - Interest rate contract - Cash flow hedging - USD ($) $ in Thousands |
Jun. 30, 2017 |
Sep. 30, 2016 |
---|---|---|
Other current assets | ||
Derivative [Line Items] | ||
Derivative asset, fair value, gross asset | $ 83 | $ 0 |
Accrued expenses and other current liabilities | ||
Derivative [Line Items] | ||
Derivative liability, fair value, gross liability | 2,069 | 1,057 |
Other liabilities | ||
Derivative [Line Items] | ||
Derivative liability, fair value, gross liability | $ 1,482 | $ 5,615 |
Fair Value of Financial Instruments - Losses of Cash Flow Hedge Instruments (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
|
Interest expense, net | Interest rate contract | Cash flow hedging | ||||
Derivative [Line Items] | ||||
Interest rate contracts loss reclassified from accumulated OCI into income | $ 39 | $ 330 | $ 428 | $ 1,020 |
Fair Value of Financial Instruments - Effective Portion of Gain Recognized In OCI (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
|
Interest rate contract | Cash flow hedging | ||||
Derivative [Line Items] | ||||
Gain (loss) on interest rate contacts | $ (474) | $ (873) | $ 1,976 | $ (2,387) |
Fair Value of Financial Instruments - Changes in AOCI (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended |
---|---|---|
Jun. 30, 2017 |
Jun. 30, 2017 |
|
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||
Balance at beginning of period | $ 882,915 | |
Balance at end of period | $ 687,810 | 687,810 |
Accumulated net gain (loss) from cash flow hedges attributable to parent [Member] | ||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||
Balance at beginning of period | (1,756) | (4,206) |
Change in fair value of hedging instruments | (513) | 1,548 |
Amounts reclassified to earnings | 39 | 428 |
Net current period other comprehensive income | (474) | 1,976 |
Balance at end of period | $ (2,230) | $ (2,230) |
Fair Value of Financial Instruments - Pretax Effect of Derivative Instruments (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
|
Not designated as hedging instrument | Foreign exchange contract | Other income | ||||
Fair value of financial instruments | ||||
Gain (loss) on foreign exchange contract, net, pretax | $ 0 | $ (523) | $ (1,843) | $ (2,161) |
Fair Value of Financial Instruments - Other Financial Instruments (Details) - Level 2 - USD ($) $ in Thousands |
Jun. 30, 2017 |
Sep. 30, 2016 |
---|---|---|
Carrying reported amount fair value disclosure | ||
Fair value of financial instruments | ||
Principal Amount | $ 825,562 | $ 841,906 |
Estimate of fair value measurement | ||
Fair value of financial instruments | ||
Fair Value | 809,551 | 837,060 |
Term loan due December 2017 | Carrying reported amount fair value disclosure | ||
Fair value of financial instruments | ||
Principal Amount | 385,000 | 401,344 |
Term loan due December 2017 | Estimate of fair value measurement | ||
Fair value of financial instruments | ||
Fair Value | 381,728 | 401,344 |
Term loan due February 2021 | Carrying reported amount fair value disclosure | ||
Fair value of financial instruments | ||
Principal Amount | 440,562 | 440,562 |
Term loan due February 2021 | Estimate of fair value measurement | ||
Fair value of financial instruments | ||
Fair Value | $ 427,823 | $ 435,716 |
Long-Term Debt - Schedule of Long-term Debt (Details) - USD ($) $ in Thousands |
Jun. 30, 2017 |
Sep. 30, 2016 |
---|---|---|
Debt Instrument [Line Items] | ||
Deferred Financing Costs | $ (12,501) | $ (7,627) |
Carrying Amount | 841,900 | |
Less: current portion | (20,000) | 0 |
Long-term debt, less current portion, gross | 805,562 | 841,906 |
Long-term debt, less current portion, net | 793,061 | 834,279 |
Term loan due December 2017 | Term loan | ||
Debt Instrument [Line Items] | ||
Principal Amount | 385,000 | 401,344 |
Deferred Financing Costs | (8,035) | (2,247) |
Carrying Amount | 376,965 | 399,097 |
Term loan due February 2021 | Term loan | ||
Debt Instrument [Line Items] | ||
Principal Amount | 440,562 | 440,562 |
Deferred Financing Costs | (4,466) | (5,380) |
Carrying Amount | $ 436,096 | $ 435,182 |
Comprehensive (Loss) Income (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
|
Comprehensive Income (Loss), Net of Tax, Attributable to Parent [Abstract] | ||||
Net (loss) income | $ (229,608) | $ 24,016 | $ (199,059) | $ 68,117 |
Foreign currency translation gain (loss) | 1,434 | (21,063) | (6,698) | (33,741) |
Unrealized (loss) gain on cash flow hedging instruments | (474) | (873) | 1,976 | (2,387) |
Comprehensive (loss) income | $ (228,648) | $ 2,080 | $ (203,781) | $ 31,989 |
Net Income Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
|
Earnings Per Share [Abstract] | ||||
Net (loss) income | $ (229,608) | $ 24,016 | $ (199,059) | $ 68,117 |
Basic weighted average shares outstanding (in shares) | 98,869,675 | 97,929,438 | 98,558,330 | 97,511,590 |
Dilutive effect of stock options and restricted stock awards/units (in shares) | 0 | 669,777 | 0 | 597,314 |
Dilutive weighted average shares outstanding (in shares) | 98,869,675 | 98,599,215 | 98,558,330 | 98,108,904 |
Basic net income per share (in dollars per share) | $ (2.32) | $ 0.25 | $ (2.02) | $ 0.70 |
Diluted net income per share (in dollars per share) | $ (2.32) | $ 0.24 | $ (2.02) | $ 0.69 |
Common stock equivalents not included in diluted calculation due to anti-dilutive effect (in shares) | 3,150,564 | 1,595,791 | 2,715,563 | 2,386,294 |
Segment Reporting (Details) $ in Thousands |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2017
USD ($)
|
Jun. 30, 2016
USD ($)
|
Jun. 30, 2017
USD ($)
reportable_segment
|
Jun. 30, 2016
USD ($)
|
Sep. 30, 2016
USD ($)
|
|
Segment Reporting [Line Items] | |||||
Number of reportable segments | reportable_segment | 2 | ||||
Net sales | $ 363,907 | $ 375,186 | $ 1,067,877 | $ 1,111,771 | |
(Loss) income from operations | (287,219) | 40,044 | (228,765) | 118,499 | |
Interest expense, net | (9,614) | (9,325) | (29,529) | (27,436) | |
Benefit (provision) for income taxes | 66,969 | (9,360) | 58,946 | (26,906) | |
Capital expenditures | 2,622 | 3,928 | 6,831 | 11,161 | |
Depreciation and amortization | 7,340 | 6,790 | 20,812 | 20,843 | |
Total assets | 1,773,666 | 1,990,887 | 1,773,666 | 1,990,887 | $ 1,948,578 |
Goodwill | 266,644 | 581,359 | 266,644 | 581,359 | $ 579,865 |
North America | |||||
Segment Reporting [Line Items] | |||||
Net sales | 292,993 | 300,875 | 858,568 | 889,816 | |
(Loss) income from operations | (293,489) | 29,267 | (253,211) | 86,380 | |
Interest expense, net | (8,688) | (8,233) | (26,890) | (24,073) | |
Benefit (provision) for income taxes | 68,525 | (6,868) | 64,361 | (19,897) | |
Capital expenditures | 1,064 | 3,878 | 4,475 | 10,616 | |
Depreciation and amortization | 6,451 | 5,769 | 18,332 | 17,771 | |
Total assets | 1,482,067 | 1,700,979 | 1,482,067 | 1,700,979 | |
Goodwill | 204,762 | 515,876 | 204,762 | 515,876 | |
Rest of World | |||||
Segment Reporting [Line Items] | |||||
Net sales | 70,914 | 74,311 | 209,309 | 221,955 | |
(Loss) income from operations | 6,270 | 10,777 | 24,446 | 32,119 | |
Interest expense, net | (926) | (1,092) | (2,639) | (3,363) | |
Benefit (provision) for income taxes | (1,556) | (2,492) | (5,415) | (7,009) | |
Capital expenditures | 1,558 | 50 | 2,356 | 545 | |
Depreciation and amortization | 889 | 1,021 | 2,480 | 3,072 | |
Total assets | 291,599 | 289,908 | 291,599 | 289,908 | |
Goodwill | $ 61,882 | $ 65,483 | $ 61,882 | $ 65,483 |
Income Taxes (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
|
Benefit (provision) for income taxes | $ 66,969 | $ (9,360) | $ 58,946 | $ (26,906) |
Effective tax rate | 22.60% | 28.00% | 22.80% | 28.30% |
Effective income tax rate reconciliation, share-based compensation, excess tax benefit, percent | (10.00%) | 5.50% | ||
Goodwill impairment | $ 311,114 | $ 0 | $ 311,114 | $ 0 |
Pro Forma | ||||
Effective tax rate | 27.30% | 22.60% | ||
Foreign tax credit | ||||
Deferred tax asset, valuation allowance | $ 10,600 | $ 10,600 |
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