12.
COMMITMENTS AND CONTINGENCIES
The Company currently has
12
operating leases for various buildings, equipment and vehicles. These leases are under non-cancelable operating lease agreements with expiration dates between
and
The Company has the option to extend certain leases to
five
or
ten
-year term(s) and has the right of
first
refusal on any sale.
C: The Company records lease liabilities within current liabilities or long-term liabilities based upon the length of time associated with the lease payments.
The Company records its long-term operating leases as right-of-use assets. Upon initial adoption, using the modified retrospective transition approach,
no
leases with terms less than
12
-months have been capitalized to the consolidated balance sheet consistent with ASC
842.
Instead, these leases are recognized in the consolidated statement of operations on a straight-line expense throughout the lives of the leases.
None
of
the Company’s leases contain common area maintenance or security agreements.
The Company has made certain assumptions and judgments when applying ASC
842,
the most significant of which is that
the Company elected the package of practical expedients available for transition that allow
the Company to
not
reassess whether expired or existing
contracts contain leases under the new definition of a lease, lease classification for expired or existing leases and whether previously capitalized initial direct costs would qualify for capitalization under ASC
842.
Additionally,
the Company did
not
elect to use hindsight when considering judgments and estimates such as assessments of lessee options to extend or terminate a lease or purchase the underlying asset.
The Company has
no
contingent rent agreements.
Present Value of Long-term Leases
| (in thousands): | | May 31, 2020 |
| Right-of-use assets, net | | $ | 451,188 | |
| | | | | |
| Current portion of lease liability | | | 136,714 | |
| Lease liability, less current portion | | | 314,474 | |
| Total lease liability | | $ | 451,188 | |
As of
the weighted-average remaining lease term was
1.9
years.
The Company’s lease agreements do
not
provide a readily determinable implicit rate nor is it available to
the Company from its lessors. Instead, as of
the Company estimates the weighted-average discount rate for its operating leases to be
4.32%
to present value based on the incremental borrowing rate.
Future minimum payments for the next
five
fiscal years and thereafter as of
under these long-term operating leases are as follows (in thousands):
| Fiscal 2020 | | $ | 68,746 | |
| Fiscal 2021 | | | 263,392 | |
| Fiscal 2022 | | | 125,648 | |
| Fiscal 2023 | | | 10,222 | |
| Fiscal 2024 | | | 2,570 | |
| Total future minimum lease payments | | | 470,578 | |
| Less amount representing interest | | | (19,390 | ) |
| Present value of obligations under operating leases | | | 451,188 | |
| Less current portion | | | (136,714 | ) |
| Long-term operating lease obligations | | $ | 314,474 | |
On
the Compensation Committee of the Board of Directors of
the Company approved the material terms of an annual bonus plan for
the Company’s executive officers as well as certain officers and employees for the fiscal year ending
For fiscal
2020
as in past years, the total amount available under the bonus plan for all plan participants, including executive officers, is dependent upon
the Company’s earnings before interest, taxes and other income (EBITOI), as adjusted to take into account amounts to be paid under the bonus plan and certain other adjustments (Adjusted EBITOI). Each plan participant’s percentage of the overall bonus pool is based upon the number of plan participants, the individual’s annual base salary and the individual’s position and level of responsibility within
the Company. In the case of each of
the Company’s executive officer participants,
75%
of the amount of their individual bonus payout will be determined based upon
the Company’s actual EBITOI for fiscal
2020
compared to a pre-established target EBITOI for fiscal
2020,
and
25%
of the payout will be determined based upon such executive officer’s achievement of certain pre-established individual performance objectives. The payment of bonuses under the plan is discretionary, and bonuses
may
be paid to executive officer participants in both cash and shares of NTIC common stock, with the exact amount and percentages determined by
the Company’s Board of Directors, upon recommendation of the Compensation Committee, after the completion of
the Company’s consolidated financial statements for fiscal
2020.
There was
$1,200,000
recognized for management bonuses for the
nine
months ended
compared to
$1,450,000
recognized for management bonuses for the
nine
months ended
C: Two joint ventures (consisting of
the Company’s joint ventures in South Korea and Thailand) accounted for
56.2%
of
the Company’s trade joint venture receivables at
and
five
joint ventures (consisting of
the Company’s joint ventures in South Korea, Thailand, France, Germany and India) accounted for
69.6%
of
the Company’s trade joint venture receivables as of
From time to time,
the Company is subject to various other claims and legal actions in the ordinary course of its business.
The Company records a liability in its consolidated financial statements for costs related to claims, including future legal costs, settlements, and judgments, where
the Company has assessed that a loss is probable, and an amount could be reasonably estimated. If the reasonable estimate of a probable loss is a range,
the Company records the most probable estimate of the loss or the minimum amount when
no
amount within the range is a better estimate than any other amount.
The Company discloses a contingent liability even if the liability is
not
probable or the amount is
not
estimable, or both, if there is a reasonable possibility that material loss
may
have been incurred. In the opinion of management, as of
the amount of liability, if any, with respect to these matters, individually or in the aggregate, will
not
materially affect
the Company’s consolidated results of operations, financial position, or cash flows.
