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Subsequent Events
12 Months Ended
May 31, 2020
Subsequent Events [Abstract]  
Subsequent Events Subsequent Events
Debt Covenant Amendment
As disclosed in Note 7 - Debt, on July 15, 2020, the Company entered into the Eighth Amendment, which among other things, (i) in relation to the covenant calculations modified the definition of EBITDA to increase the limit on permitted exclusions for certain unusual, extraordinary or one-time cash items for each fiscal quarter ending on or after February 28, 2021, to a maximum of 20% of EBITDA, and (ii) restricted the Company from making Capital Expenditures over certain thresholds. Interest continues to be based on the Company’s Total Leverage Ratio, now at a revised per annum Applicable Rate of either (i) the prime rate plus a spread of between 0.75% and 3.50% or (ii) the Eurodollar rate plus a spread of between 1.75% and 4.50%, plus, in each case, a commitment fee, as applicable, of between 0.15% and 0.55%, as further described in the Eighth Amendment. In connection with the execution of the Eighth Amendment, the Company paid $0.3 million in fees to the Lenders.
Ontario, California Salad Dressing Plant
On August 7, 2020 the Company assigned the lease and sold the corresponding assets related to its salad dressing plant in Ontario, California. The net carrying amount of these assets of $2.6 million are classified as assets held for sale and are included in Property and equipment, net within the Consolidated Balance Sheets as of May 31, 2020. The Company received net cash proceeds of $4.6 million in connection with the sale. The Company estimates that it will record a $2.6 million gain on disposal subsequent to fiscal year end 2020 in connection with this transaction.
Hanover, Pennsylvania Manufacturing Facility
In connection with the Company’s strategic initiative, Project SWIFT, on June 25, 2020 the Board of Directors approved a plan to close Curation Foods’ underutilized manufacturing operations in Hanover, Pennsylvania (“Hanover”), sell the building and assets related thereto, and consolidate its operations into its manufacturing facilities in Guadalupe, California and Bowling Green, Ohio. The $17.2 million carrying value of these assets are included in Property and equipment, net on the consolidated Balance Sheets as of May 31, 2020 and were not classified as assets held for sale as the plans to sell were not finalized until subsequent to fiscal year end 2020.
The Company is in the process of marketing Hanover for sale and assessing the Hanover assets’ fair value in relation to their carrying value and anticipates recording an impairment based on the current strategic plans for the assets. The Company expects to complete its analysis by the end of its first quarter of fiscal year 2021. The Company expects to complete the sale of its Hanover assets during its second quarter of fiscal year 2021.
COVID-19 Pandemic
There are many uncertainties regarding the current novel coronavirus (“COVID-19”) pandemic, including the scope of scientific and health issues, the anticipated duration of the pandemic, and the extent of local and worldwide social, political, and economic disruption it may cause. The COVID-19 pandemic has had and we believe will continue to have significant adverse impacts on many aspects of the Company’s operations, directly and indirectly, including with respect to sales, customer behaviors, business and manufacturing operations, inventory, the Company’s employees, and the market generally, and the scope and nature of these impacts continue to evolve each day. The Company expects to continue to assess the evolving impact of the COVID-19 pandemic, and intends to continue to make adjustments to its responses accordingly.