The following Management's Discussion and Analysis of Financial Condition and
Results of Operations should be read in conjunction with the consolidated
financial statements and the related notes thereto, which appear elsewhere
herein. Except for statements of historical facts, many of the matters discussed
in this Item 2 are considered "forward-looking" statements that reflect our
plans, estimates and beliefs. Actual results could differ materially from those
discussed in the forward-looking statements. Factors that could cause or
contribute to such differences include, but are not limited to, those discussed
in the section below entitled "Cautionary Statement Regarding Forward-Looking
Statements," in the section below entitled "Item 1A. Risk Factors," and in other
filings made with the Securities and Exchange Commission ("SEC"), including our
Annual Report on Form 10-K for the year ended June 30, 2019.
References herein to "CCUR Holdings," the "Company," "we," "us," or "our" refer
to CCUR Holdings, Inc. and its subsidiaries, unless the context specifically
indicates otherwise.
Overview
As of March 31, 2020, the Company operates with two business segments: (i)
merchant cash advance ("MCA"), conducted primarily through our subsidiary LM
Capital Solutions, LLC (d/b/a "LuxeMark Capital") ("LMCS"), and (ii) real
estate, conducted through our subsidiary Recur Holdings LLC ("Recur") and its
subsidiaries.
The Company holds an 80% interest in LMCS, with the remaining 20% held by
AZOKKB, LLC (formerly named LuxeMark Capital, LLC and herein referenced as "Old
LuxeMark"). Through LMCS, we manage a connected network of MCA originators and
syndicate participants who provide those originators with capital by purchasing
participation interests or co-funding MCA transactions. In addition, we provide
loans to MCA originators, the proceeds of which are used by the MCA originators
to fund MCAs themselves. LMCS' daily operations are led by the three principals
of Old LuxeMark. CCUR provides operational, accounting and legal support to
LMCS.
Recur provides commercial loans to local, regional, and national builders,
developers, and commercial landowners and also acquires, owns, and manages a
portfolio of real property for development. Recur does not provide consumer
mortgages.
In addition to our real estate and MCA operating segments, we actively evaluate
acquisitions of additional businesses or operating assets, either as part of an
expansion of our current operating segments or establishment of a new operating
segment, in an effort to reinvest the proceeds of our calendar year 2017
business dispositions and maximize use of other assets such as our net operating
loss ("NOL") carryforwards. We may also seek additional capital and financing to
support the purchase of additional businesses and/or to provide additional
working capital to further develop our operating segments. We believe that these
activities will enable us to identify, acquire, and grow businesses and assets
that will maximize value for all our stockholders.
Recent Events
On February 13, 2020, we announced that the Company's Board of Directors
declared a special one-time cash dividend of $0.50 per share of CCUR Holdings,
Inc. common stock to common stockholders of record on February 24, 2020. We paid
the dividend on March 9, 2020 in the amount of $4.4 million. In April 2020, the
Company's Board of Directors appointed existing director Steven G. Singer as
Chairman of the Board. Wayne Barr Jr. resigned as Executive Chairman of the
Board, but will continue to serve as Chief Executive Officer, as President, and
as a member of the Board of Directors.
During the fiscal quarter ended March 31, 2020, the novel coronavirus
("COVID-19") pandemic (the "pandemic") began to have an unprecedented economic
impact on the global economy, global financial markets, and transactional
activity (including merger and acquisition activity). The Company's business has
not been immune to these effects, and management is actively responding to these
developments by modifying business activity and workplace practices and
procedures in response to rapidly changing circumstances. Management and the
Board of Directors have taken steps during the quarter to reduce ongoing
operating costs and to reduce risk to the Company's long-term value for
stockholders.
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Our MCA segment experienced a decline in revenues during the latter half of our
fiscal quarter ending March 31, 2020 which management believes is predominantly
due to the economic uncertainties caused by the pandemic, and we anticipate our
MCA revenues will continue to be adversely affected while major parts of the
U.S. economy are restricted by mandatory business shut-downs and/or stay-at-home
orders, as well as other effects of the pandemic. We and our finance partners
have also decreased new funding arrangements while evaluating the effect of the
current economic uncertainties on the MCA business and its customers. We have
also experienced reduced ability to participate in MCA funding through
originators, which reduces our syndication fee income and revenue from direct
funding of MCAs. We anticipate continued lower funding of new MCAs and reduced
collection volume on outstanding MCAs until the economic situation caused by the
pandemic stabilizes and a greater level of economic activity returns.
Additionally, while originators of MCAs are beginning to modify underwriting
criteria and focus new funding on businesses that are deemed "essential
services" during the pandemic, it remains to be seen whether essential
businesses will pursue MCAs at levels sufficient to offset the declines in MCA
collections for the foregoing reasons. We currently expect the pandemic to have
a short-term impact on our MCA revenue and profitability. We will continue to
monitor the pandemic's impact on the reporting unit to which our goodwill is
attributed, and should we determine in the future that its impact is more dire
and permanent than we currently anticipate, we will perform an interim period
goodwill impairment test.
Our real estate related revenues have continued to remain stable during the
quarter ended March 31, 2020 and we believe that our real estate borrowers will
continue to be able to service their real estate loans. We continue to develop
real estate for future sale. While we do not believe that any of these projects
warrant impairment charges or other reserves at this point, we do expect that
the economic impact of the pandemic will result in a delay in the eventual sale
of this real estate.
Through most of the quarter ended March 31, 2020, we have continued to actively
evaluate and engage with potential acquisition target candidates; however, the
pandemic has delayed our due diligence process by impeding our ability to
participate in in-person visits and physical tours and complicating our ability
to place valuations on targets given the uncertainty in the global markets. We
expect this uncertainty to continue over the next few months. Thus, while we
have not experienced a significant slowing of merger and acquisition activity,
any acquisitions that we decide to pursue may take longer to consummate.
Critical Accounting Policies and Estimates
The Securities and Exchange Commission (the "SEC") defines "critical accounting
estimates" as those that require application of management's most difficult,
subjective, or complex judgments, often as a result of the need to make
estimates about the effect of matters that are inherently uncertain and may
change in subsequent periods. Our critical accounting policies and estimates are
disclosed under the section "Application of Critical Accounting Policies" in our
Annual Report on Form 10-K for the fiscal year ended June 30, 2019.
Results of Operations
MCA revenue includes income from the discount at which we provide advances on
future merchant receivables, as well as fees earned for sourcing both
syndication capital and merchant leads for MCA originators. We generate revenue
from interest on loans by entering into commercial loan agreements to fund third
party originators in the MCA industry and real estate industry.
Selling, general, and administrative expenses consist primarily of salaries,
benefits, commissions, rent, travel, administrative personnel, information
systems, insurance, accounting, legal services, board of director fees and
expenses, and other professional services.
Other interest income is earned on cash overnight sweep accounts and money
market deposits as well as investments in debt securities. Interest income also
includes accretion of discounts related to transactions in which we purchased
debt securities on the secondary markets at a discount. Such discounts are
amortized over the terms of each debt security to the commitment values that
will be due on each maturity date, as well as early repayment. Additionally, we
earn payment-in-kind ("PIK") interest from one of our debt securities whereby
interest is paid in the form of an increase in the commitment value due from the
debt security issuer on the maturity date.
26
Three Months Ended March 31, 2020 in Comparison to the Three Months Ended March
31, 2019
Consolidated Revenues and Income. During the three months ended March 31, 2020,
we generated $1.5 million of total revenue, compared to $1.1 million in the
three months ended March 31, 2019, driven largely by our increasing
participation in the MCA industry. Our net income for the third quarter of
fiscal year 2020 was $0.7 million, compared to net income of $1.4 million in the
third quarter of fiscal year 2019. This decrease was attributable largely to
realized and unrealized losses from our investments in certain debt and equity
securities and increased state income taxes compared to the prior year,
partially offset by lower operating expenses.
MCA Segment Revenues. In December 2018, we began participating in the MCA
industry by purchasing participation interests in advances to merchants through
third-party originators. For the three months ended March 31, 2020, we
maintained a larger weighted-average outstanding balance of funded MCAs compared
to the prior year, and consequently earned higher MCA revenue during the current
period relative to the three months ended March 31, 2019. After closing the
acquisition of the assets of Old LuxeMark (the "LuxeMark Acquisition") in the
third quarter of our fiscal year 2019, we began generating additional revenue in
the MCA sector by earning fees on sourcing syndication capital for MCA
originators, earning interest on loans to MCA originators, and generating leads
for MCA originators in exchange for a fee. Additionally, as part of our MCA
business, we originated term loans to an MCA originator so that it may fund
additional MCAs. These loans generated $0.2 million of interest income during
the period. Our quarterly MCA operations revenues are as follows:
Three Months Ended
March 31,
2020 2019
(Amounts in thousands)
MCA revenue $ 899 $ 576
Syndication fee revenue 277 205
Fee income on leads generation - 72
MCA fees and other revenue 1,176 853
Interest on loans to MCA originators 234 -
Total MCA operations segment revenue $ 1,410 $ 853MCA revenue from interest on loans to MCA originators is categorized as MCA
revenue for purposes of segment reporting but reported within the line item
Interest on mortgage and commercial loans within our consolidated statements of
operations.
With the onset of the pandemic during the third quarter of our fiscal year 2020,
we experienced declines in MCA revenues during the latter half of the quarter,
partially offset by stable revenue from interest on loans to MCA originators.
This occurred as (i) fewer merchants are meeting MCA underwriting criteria,
which reduces our syndication fee income and ability to generate revenue by
directly funding MCAs (ii) underwriters are less interested in purchasing leads,
and (iii) a portion of our merchants, in coordination with the originators, have
reduced or paused payments to better weather the current economic downturn,
which reduces our MCA revenues. Furthermore, we reduced our volume of MCA
funding during the third quarter of our fiscal 2020, primarily as a result of
our efforts to better evaluate the impact of the pandemic on MCA assets before
funding additional assets. We anticipate continued lower funding and collection
volume over the next few months and are currently uncertain as to the long-term
impact of the pandemic. However, originators have already begun modifying
underwriting criteria and marketing efforts to focus on businesses that are
deemed "essential services" during the pandemic.
Real Estate Operations Segment Revenues. We generated $0.1 million of revenue
from interest on commercial mortgage loans during the three months ended March
31, 2020, compared to $0.2 million during the three months ended March 31, 2019.
The decrease in revenue resulted from borrower payoffs outpacing originations.
Selling, General, and Administrative Expenses. Selling, general, and
administrative expenses were $1.0 million for the three months ended March 31,
2020, a $0.1 million, or 6.5%, increase from the three months ended March 31,
2019. Collectively, slight increases in accounting fees and share-based
compensation expense compared to the prior period caused the period-over-period
increase.
27
Change in Fair Value of Contingent Consideration. During the three months ended
March 31, 2020, we recorded a $0.7 million reduction to the fair value of
contingent consideration due to Old LuxeMark. The decrease in estimated
contingent consideration payments associated with the LuxeMark acquisition
resulted from our projected impact of the pandemic's impact on LMCS's ability to
meet calendar year 2020 performance thresholds, due to a decline in the expected
levels of revenue and profitability over the next few months. Our expectation of
LMCS's ability to meet performance criteria in 2021 and 2022 currently remain
unchanged relative to prior projections.
Amortization of Purchased Intangibles. Our amortization of purchased intangibles
includes amortization over the respective useful lives of the trade name,
non-competition agreements, and investor/originator relationships attributable
to the LuxeMark Acquisition. Our intangible assets are evaluated for impairment
whenever events or changes in circumstances indicate that the carrying value of
the assets may not be fully recoverable. We acquired these intangibles as part
of the LuxeMark Acquisition on February 13, 2019 and no impairments or
circumstances requiring a testing of impairment of these intangible assets were
identified as of or during the three months ended March 31, 2020.
Provision for Credit Losses on Advances. During the three months ended March 31,
2020, we recorded a $0.2 million provision for credit losses on MCAs, a $0.1
million, or 28.9%, decrease from the provision expense for the three months
ended March 31, 2019. The period over period decrease in provision expense
resulted from decreases in the MCAs funded in the current period versus the
prior period. MCA funding activity decreased during the period primarily as a
result of our efforts to better evaluate the impact of the pandemic on MCA
assets before funding additional assets. Partially offsetting the period over
period decrease in provision for credit losses due to lower MCA funding
activity, we recorded an additional $0.1 million of provision expense for
existing MCAs during the current period due to our anticipated impact of the
pandemic on merchant repayment activity.
Other Interest Income. Other interest income includes interest earned on
investments in debt securities and cash and money market balances. The
components of our interest income for the three months ended March 31, 2020 and
2019 are as follows:
Three Months Ended
March 31,
2020 2019
(Amounts in thousands)
Interest from cash deposits and debt securities $ 397 $ 545
Accretion of discounts on purchased debt securities
750 287
Payment-in-kind interest 244 221
Other interest income $ 1,391 $ 1,053Other interest income for the three months ended March 31, 2020 increased by
$0.3 million, or 32.1%, compared to the three months ended March 31, 2019, due
to higher yields on incremental investments in debt securities since March 31,
2019 and accretion of the discounts on these securities.
Realized (Loss) Gain on Investments, Net. During the three months ended March
31, 2020, we sold investments in certain debt and equity securities for which we
recognized $0.1 million of net realized losses, as compared to $0.5 million of
realized gains on the sale of certain equity and debt securities during the same
period in the prior year.
Unrealized Loss on Equity Securities, Net. During the three months ended March
31, 2020, we reported unrealized loss on equity securities, net, of $0.6
million, compared to unrealized loss of $0.2 million during the three months
ended March 31, 2019. Our unrealized losses on equity securities each period are
a function of changes in the fair value of the equity securities that we hold as
of the current reporting period balance sheet date relative to the preceding
balance sheet date. Our unrealized losses during the current period were
attributable to a decline in the fair value of equity securities during the
period.
28
Other (Expense) Income, Net. Other expense during the three months ended March
31, 2020 is primarily attributable to a $0.3 million unrealized foreign exchange
loss on cash and MCAs held in Australian dollars, whereas the prior year other
income was primarily attributable to dividend income from equity securities that
we no longer own.
Income Tax (Benefit) Provision. We reported $0.3 million of income tax provision
for the three months ended March 31, 2020, due to updated estimates of our
estimated state income taxes during the period. Our available federal net
operating loss ("NOL") carryforwards offset any federal taxable income for our
fiscal year 2019.
Nine Months Ended March 31, 2020 in Comparison to the Nine Months Ended March
31, 2019
Consolidated Revenues and Income. During the nine months ended March 31, 2020,
we generated $5.0 million of total revenue, compared to $1.6 million during the
nine months ended March 31, 2019, driven largely by our growing participation in
the MCA industry. Our net income for the first nine months of fiscal year 2020
increased to $6.9 million, compared to a loss of $0.1 million during the first
nine months of fiscal year 2019. This increase was attributable largely to an
increase in our income before income tax driven by our MCA operations and our
investments in certain debt and equity securities.
MCA Operations Segment Revenues. We generated $4.7 million of revenue from MCA
operations during the nine months ended March 31, 2020, compared to $1.0 million
during the nine months ended March 31, 2019. For the nine months ended March 31,
2020, we maintained a larger weighted-average outstanding balance of funded MCAs
compared to the prior year, and consequently earned higher MCA revenue during
the current period relative to the nine months ended March 31, 2019. Our
syndication fee revenue during the nine months ended March 31, 2019 benefited
from a full nine months of syndication activity, while in the prior year period,
we only began generating syndication revenue after the LuxeMark Acquisition in
mid-February 2019. Additionally, as part of our MCA business, we originated term
loans to an MCA originator so that it may fund additional MCAs. These loans
generated $0.7 million of interest income during the period. Our MCA operations
revenues for the nine months are as follows:
Nine Months Ended
March 31,
2020 2019
(Amounts in thousands)
MCA revenue $ 2,694 $ 796
Syndication fee revenue 1,215 205
Fee income on MCA leads generation 155 72
MCA fees and other revenue 4,064 1,073
Interest on loans to MCA originators 673 -
Total MCA operations segment revenue $ 4,737 $ 1,073MCA revenue from interest on loans to MCA originators is categorized as MCA
operations revenue for purposes of segment reporting but reported within the
line item Interest on mortgage and commercial loans within our consolidated
statements of operations.
With the onset of the pandemic during the third quarter of our fiscal year 2020,
we experienced declines of MCA revenues during the latter half of the quarter
ending March 31, 2020, partially offset by stable revenue from interest on loans
to MCA originators. This occurred as (i) fewer merchants are meeting MCA
underwriting criteria, which reduces our syndication fee income and ability to
generate revenue by directly funding MCAs, (ii) underwriters are less interested
in purchasing leads, and (iii) a portion of our merchants, in coordination with
the originators, have reduced or paused payments to better weather the current
economic downturn, which reduces our MCA revenues. Furthermore, we reduced our
volume of MCA funding during the third quarter of our fiscal 2020, primarily as
a result of our efforts to better evaluate the impact of the pandemic on MCA
assets before funding additional assets. We anticipate continued lower funding
and collection volume over the next few months and are uncertain as to the
long-term impact of the pandemic at this point. However, originators have
already begun modifying underwriting criteria and marketing efforts to focus on
businesses that are deemed "essential services" during the pandemic.
29
Real Estate Operations Segment Revenues. We generated $0.2 million of revenue
from real estate operations for the nine months ended March 31, 2020, as
compared to $0.5 million for the nine months ended March 31, 2019. The decrease
in revenue resulted from the decrease in interest on commercial mortgage loans
due to borrower payoffs outpacing originations.
Selling, General, and Administrative Expenses. Selling, general, and
administrative expenses were $3.6 million for the nine months ended March 31,
2020, a $1.1 million, or 42.3%, increase from the nine months ended March 31,
2019. Legal, accounting, compensation, and other administrative expenses
attributable to our MCA operations accounted for $0.8 million of the increase.
The remaining $0.3 million increase was due to corporate salaries from
additional headcount and financial performance bonuses earned during the nine
months ended March 31, 2020.
Change in Fair Value of Contingent Consideration. During the nine months ended
March 31, 2020, we recorded a $1.1 million reduction in the fair value of
contingent consideration due to Old LuxeMark. The decrease in estimated
contingent consideration payments associated with the LuxeMark Acquisition
resulted from (i) LMCS' not meeting the minimum performance levels to earn
calendar year 2019 contingent consideration, and (ii) our projected impact of
the pandemic on LMCS's ability to meet calendar year 2020 performance
thresholds.
Amortization of Purchased Intangibles. Our amortization of purchased intangibles
includes amortization over the respective useful lives of the trade name,
non-competition agreements, and investor/originator relationships attributable
to the LuxeMark Acquisition. Our intangible assets are evaluated for impairment
whenever events or changes in circumstances indicate that the carrying value of
the assets may not be fully recoverable. We acquired these intangibles as part
of the LuxeMark Acquisition on February 13, 2019.
Provision for Credit Losses on Advances. During the nine months ended March 31,
2020, we recorded a $0.6 million provision for credit losses on MCAs, a $0.2
million, or 23.6%, decrease from the nine months ended March 31, 2019. The
period-over-period decrease in provision expense resulted from decreases in the
MCAs funded in the current period versus the prior period, and our shift away
from originators with higher default rates to those with lower default rates.
Recent MCA funding activity decreased primarily as a result of our efforts to
better evaluate the impact of the pandemic on MCA assets before funding
additional assets. Partially offsetting the period-over-period decrease in
provision for credit losses due to lower MCA funding activity, we recorded an
additional $0.1 million of provision expense for existing MCAs during the
current period due to our anticipated impact of the pandemic on merchant
repayment activity.
Other Interest Income. Other interest income includes interest earned on
investments in debt securities and cash and money market balances. The
components of our interest income for the nine months ended March 31, 2020 and
2019 are as follows:
Nine Months Ended
March 31,
2020 2019
(Amounts in thousands)
Interest from cash deposits and debt securities $ 1,830 $ 1,351
Accretion of discounts on purchased debt securities
3,116 804
Payment-in-kind interest 727 633
Other interest income $ 5,673 $ 2,788Other interest income for the nine months ended March 31, 2020 increased by $2.9
million, or 103.5%, compared to the nine months ended March 31, 2019, due to
higher yields on incremental investments in debt securities and accretion of the
discounts on these securities.
Realized Gain on Investments, Net. During the nine months ended March 31, 2020,
we sold investments in certain equity and debt securities for which we
recognized $1.8 million of net realized gains, as compared to $0.7 million of
realized gains on the sale of certain equity and debt securities during the same
period in the prior year.
30
Unrealized Loss on Equity Securities, Net. During the nine months ended March
31, 2020, we reported unrealized losses on equity securities, net, of $0.8
million, compared to an unrealized loss of $2.2 million during the nine months
ended March 31, 2019. Our unrealized gains and losses on equity securities each
period are a function of changes in the fair value of the equity securities that
we hold as of the current reporting period balance sheet date relative to the
preceding balance sheet date. Additionally, our unrealized losses during the
current period were primarily attributable to sale of equity securities during
the period for which we had previously recognized unrealized gains, and upon
sale in the current period, resulted in a transfer of the gain from unrealized
to realized, while the unrealized loss in the comparative prior period is
primarily attributable to declines in the market values of securities.
Income Tax Provision (Benefit). We reported $0.4 million of income tax expense
for the nine months ended March 31, 2020, primarily due to taxes on income
earned in states where we do not have NOLs available to offset such taxable
income.
Liquidity and Capital Resources
We do not currently expect the pandemic to significantly affect our liquidity
and currently have access to sufficient liquidity and capital resources to
continue funding our operations and sustain currently expected levels of capital
expenditures over the next twelve months. While we maintain significant amounts
of cash and cash equivalents and marketable securities which we may use to fund
our operations and make investments, the pandemic has had a significant impact
on credit markets, which may adversely affect our ability to access third-party
financing. Our future liquidity will be affected by, among other things:
· our future access to capital;
· our exploration and evaluation of strategic alternatives and
development of new operating assets;
· our ability to collect on our commercial loans and advances receivable;
· the liquidity and fair value of our debt and equity securities;
· our ongoing operating expenses; and
· potential liquidation of the Company pursuant to an organized plan
of liquidation.
Uses and Sources of Cash
Cash Flows from Operating Activities
We generated $3.6 million and $0.5 million of cash from operating activities
during the nine months ended March 31, 2020 and 2019, respectively. Operating
cash generated during the nine months ended March 31, 2020 was primarily
attributable to income from operations, adjusted for non-cash items, partially
offset by realized gains on investments and by the timing of collection of
interest income. Operating cash generated during the nine months ended March 31,
2019 was primarily attributable to cash income generated by our operations and
investments exceeding our operating costs.
Cash Flows from Investing Activities
During the nine months ended March 31, 2020 we generated $11.4 million of cash,
net, from investing activities. Our net cash inflows were primarily driven by
liquidations of $11.2 million more in debt and equity securities than
investments during the nine months ended March 31, 2020. As of December 31,
2019, we held bonds with a fair market value of $12.1 million in an issuer that
were acquired through our Asset Manager as part of an acquisition strategy.
After determining that an acquisition would not be pursued, we sold the bonds to
the issuer in February 2020, resulting in a $0.1 million realized loss during
the third quarter of fiscal year 2020. As of December 31, 2019, we held bonds
with a fair value of $12.1 million that were acquired through our Asset Manager
as part of an acquisition strategy. After determining that an acquisition would
not be pursued, we sold the bonds to the issuer in February 2020, resulting in a
$0.1 million realized gain during the third quarter of fiscal year 2020.
During the nine months ended March 31, 2019 we used $17.5 million of cash, net,
in investing activities. During the prior year period, we originated $7.5
million of short-term mortgage loans and collected $4.4 million in repayments of
loans through Recur. Additionally, we provided $17.7 million in MCA funding
through our MCA originators, and received $6.5 million in repayments through
LMCS. We also used $1.2 million of cash to fund the LuxeMark Acquisition. Our
remaining investing activities consisted of $13.0 million in purchases and $9.5
million in maturities or sales of debt and equity securities.
31
Cash Flows from Financing Activities
During the nine months ended March 31, 2020 we used $6.3 million of cash for
financing activities. During the period we fully repaid the outstanding balance
of a $1.6 million term loan collateralized by land purchased for development and
resale. We repaid the balance with existing cash to reduce associated interest
cost.
During the third quarter of our fiscal year 2020, the Company declared and paid
a one-time dividend of $0.50 per share, which resulted in $4.4 million of cash
dividends paid during the quarter. Another $0.1 million of dividends declared
during the quarter relate to restricted stock and will remain as dividends
payable until the restricted stock vests.
During the third quarter of our fiscal year 2020, the Company distributed $0.2
million of cash to the non-controlling member of LMCS, representing the
non-controlling member's 20% interest in LMCS's distributable net income.
On March 5, 2018, we announced that our Board of Directors authorized the
repurchase of up to one million shares of the Company's common stock. In January
2019, we completed the purchase of the authorized one million shares, and the
Board of Directors authorized the repurchase of an additional 500,000 shares of
the Company's common stock under a new repurchase program that replaces and
supersedes the prior repurchase program. Purchases are made through private
transactions or open market purchases, which may be made pursuant to trading
plans subject to the restrictions and protections of Rule 10b5-1 and/or Rule
10b-18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
We repurchased 16,821 shares of the Company's common stock totaling $0.1 million
during the nine months ended March 31, 2020, as compared to 344,933 shares of
the Company's common stock totaling $1.3 million during the nine months ended
March 31, 2019. All repurchased stock was retired. We may purchase up to 364,298
additional shares pursuant to our previously announced repurchase plan.
Liquidity
We had working capital (current assets less current liabilities) of $46.5
million at March 31, 2020, compared to working capital of $48.8 million at June
30, 2019. At March 31, 2020, we had no material commitments for capital
expenditures.
As of March 31, 2020, less than 0.1% of our cash was in foreign accounts, and
there is no expectation that any foreign cash would need to be transferred from
these foreign accounts to cover U.S. operations in the next 12 months. Based
upon our existing cash balances, equity securities, and available-for-sale
investments, historical cash usage, and anticipated operating cash flow in the
current fiscal year, we believe that existing U.S. cash balances will be
sufficient to meet our anticipated working capital requirements for at least the
next 12 months from the issuance date of this report.
Off-Balance Sheet Arrangements
We had no material off-balance sheet arrangements as of March 31, 2020.
Recent Accounting Guidance
See "Note 2. Recent Accounting Guidance," to the accompanying consolidated
financial statements for a full description of recent accounting standards,
including the respective expected dates of adoption and the expected effects on
our consolidated results of operations and financial condition.
32
Cautionary Statement Regarding Forward-Looking Statements
Certain statements made or incorporated by reference in this Quarterly Report on
Form 10-Q may constitute "forward-looking statements" within the meaning of the
federal securities laws. When used or incorporated by reference in this report,
the words "believes," "expects," "estimates," "anticipates," and similar
expressions, are intended to identify forward-looking statements. Statements
regarding future events and developments, our future performance, payment of
dividends, ability to utilize our net deferred tax assets and availability of
earnings and profits with respect to dividend income, as well as our
expectations, beliefs, plans, estimates, or projections relating to the future
and current assessments of business opportunities, are forward-looking
statements within the meaning of these laws. Examples of our forward-looking
statements in this report include, but are not limited to, the duration and
impact of the pandemic on the Company's business plans and expected operating
results, the ability of the Board of Directors and Asset Management Committee to
identify suitable business opportunities and acquisition targets and the
Company's ability to consummate transactions with such acquisition targets; our
ability to successfully develop our real estate and MCA operations; the impact
of any strategic initiatives we may undertake; the impact of the current
reestablishment of and potential for future release of our tax valuation
allowances on future income tax provisions and income taxes paid; expected level
of capital additions; our expected cash position; the impact of interest rate
changes and fluctuation in currency exchange rates; our sufficiency of cash; the
impact of litigation; and the payment of any declared dividends. These
statements are based on beliefs and assumptions of our management, which are
based on currently available information. All forward-looking statements are
subject to certain risks and uncertainties that could cause actual events to
differ materially from those projected. The risks and uncertainties which could
affect our financial condition or results of operations include, without
limitation: the process of evaluating strategic alternatives; the Company's
ability to compete with experienced investors in the acquisition of one or more
additional businesses; our ability to utilize our net operating losses to offset
cash taxes, in general, and in the event of an ownership change as defined by
the Internal Revenue Service; changes in and related uncertainties caused by
changes in applicable tax laws; the current macroeconomic environment generally
and with respect to acquisitions and the financing thereof; continuing
unevenness of the global economic recovery; the availability of debt or equity
financing to support any liquidity needs; global terrorism; and earthquakes,
tsunamis, floods, and other natural disasters.
Our forward-looking statements are based on current expectations and speak only
as of the date of such statements. We undertake no obligation to publicly update
or revise any forward-looking statement, whether as a result of future events,
new information, or otherwise, except as may be required by federal securities
law.
Other important risk factors that could cause actual results to differ from any
forward-looking statements made in this report are discussed in "Item 1A. Risk
Factors" in our Annual Report on Form 10-K for the fiscal year ended June 30,
2019 and in "Item 1A. Risk Factors" in this report or elsewhere herein.
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