Risks and Uncertainties

12 Months Ended

Oct. 03, 2020

Risks and Uncertainties [Abstract]

Risks and Uncertainties

RISKS AND UNCERTAINTIES

Coronavirus 2019 (COVID-19) Pandemic

The global spread of COVID-19 has created significant volatility, uncertainty and economic disruption. As an essential critical infrastructure business, we have continued to operate in the U.S. and other parts of the world as permitted. Our production capacity continues to recover as jurisdictions have eased work restrictions throughout the world; however, restrictions on our employees' ability to access our customers, temporary closures of customer facilities and delays in customer spending negatively impacted our sales and operating results in fiscal year 2020.

Impairment charges on our goodwill, indefinite-lived intangible asset and long-lived assets were recorded in the fourth quarter of fiscal year 2020 driven by a decline in market conditions as a result of COVID-19, including a sustained decrease in our stock price and significant declines in the flight simulation and entertainment markets. We continue to monitor the impacts of COVID-19 on the fair value of our assets. While we do not currently anticipate any additional material impairments on assets as a result of COVID-19, future changes in sales, earnings and cash flows related to goodwill, indefinite-lived intangible asset and long-lived assets could cause these assets to become impaired. We anticipate the challenges posed by COVID-19 to continue to negatively impact our fiscal year 2021 revenue and operating results; however, the future impact COVID-19 will have on our business, operations and financial results remains unknown at this time, and we remain unable to accurately quantify the impact due to the significant global economic uncertainty.

The extent to which COVID-19 impacts our business, operations and financial results will depend on numerous evolving factors that we may or may not be able to accurately predict, including: the duration and scope of the pandemic; governmental, business and individual actions that have been and continue to be taken in response to the pandemic; the impact of the pandemic on economic activity and actions taken in response; the effect on our customers' demand for our goods and services; our vendors' ability to supply us with raw materials; our ability to sell and provide our goods and services amidst travel restrictions; the ability of our customers to pay for our goods and services; and any future closures of our facilities or the facilities of our customers. Customers have and may continue to slow down decision-making, delay planned work or seek to terminate existing agreements. Any of these events could materially adversely affect our business, financial condition, results of operations and/or stock price.

In response to COVID-19 and the economic uncertainty, we have continued to right-size our operations and manage short-term business risk to allow for bottom-line improvement through the execution of cost savings initiatives. We have taken actions to manage and reduce operating costs and further enhance our financial flexibility, including the temporary reduction by senior executives of their salaries by 10% to at least 15% in fiscal year 2020; the temporary reduction by non-employee directors of their cash compensation by 20% in fiscal year 2020; a reduction in workforce in connection with global restructuring efforts in Test & Simulation being executed in specifically targeted areas, including the reorganization of our European operations and product rationalizations in China; other reductions in salaries or work schedules and temporary furloughs for employees, targeted toward specific, short-term impacted areas within each business; and the reduction in discretionary spending, capital expenditures and a strong focus on working capital management in fiscal year 2020. To the extent we are eligible based on actions taken, we have participated in government aid programs in the United States, Europe and Asia, including the employer payroll tax (FICA) deferrals extensions offered under the CARES Act. We also continued the suspension of our quarterly dividend of $0.30 per share, equating to approximately $23 million in annualized cash payments, which will enable us to maximize our liquidity for the foreseeable future as we face uncertain economic times. Lastly, in the fourth quarter of fiscal year 2020, we entered into a fifth amendment to the Credit Agreement to maximize flexibility and available liquidity under our current capital structure in the event we would need to access additional funds.

Although we believe our financial position is strong, given the level of economic uncertainty, these cost reduction actions have provided and will provide an increased level of flexibility during these challenging times. Certain temporary, incremental cost reduction measures taken will remain in place until we begin to see marked improvement in the markets we serve. While we expect that these actions will be sufficient to provide the needed flexibility, we continue to evaluate the ongoing impact of COVID-19 and may need to take further cost reduction or other actions in the future.