10-Q: Quarterly report pursuant to Section 13 or 15(d)
Published on May 3, 2023
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
For the quarterly period ended March 31, 2023
OR
For the transition period from __________ to __________
Commission File Number: 001-39352
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification Number)
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(Address of Principal Executive Office)
(770 ) 432-2744
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading symbol(s) |
Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
☒ | Accelerated Filer | ☐ | |||||||||
Non-accelerated Filer | ☐ | Smaller Reporting Company | |||||||||
Emerging Growth Company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act). o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒
As of April 28, 2023, there were 217,904,643 shares of Class A common stock, $0.0001 par value per share, and 7,847,333 shares of Class B common stock, $0.0001 par value per share, issued and outstanding.
INTRODUCTORY NOTE
On October 20, 2021 (the "Closing" or the “Closing Date”), Mirion Technologies, Inc. (formerly known as GS Acquisition Holdings Corp II or "GSAH") consummated its business combination with GSAH (the "Business Combination") pursuant to the Business Combination Agreement dated June 17, 2021 (as amended, the “Business Combination Agreement”). On the Closing Date, GSAH was renamed Mirion Technologies, Inc.
Unless the context otherwise requires, all references in this Quarterly Report on Form 10-Q to “Mirion,” the “Company,” “we,” “us” or “our” refer to Mirion Technologies, Inc. following the Business Combination, other than certain historical information which refers to the business of Mirion Technologies (TopCo), Ltd. (“Mirion TopCo”) prior to the consummation of the Business Combination.
As a result of the Business Combination, Mirion’s financial statement presentation distinguishes Mirion TopCo as the “Predecessor” for periods prior to the closing of the Business Combination and Mirion Technologies, Inc. as the “Successor” for periods after the closing of the Business Combination. As a result of the application of the acquisition method of accounting in the Successor Period, the financial statements for the Successor Period are presented on a full step-up basis as a result of the Business Combination, and are therefore not comparable to the financial statements of the Predecessor Period that are not presented on the same full step-up basis due to the Business Combination.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the "safe-harbor" provisions of the Private Securities Litigation Reform Act of 1995 that reflect future plans, estimates, beliefs, and expected performance. All statements contained in this Quarterly Report on Form 10-Q other than statements of historical fact, including statements regarding our future operating results and financial position, our business strategy and plans, our objectives for future operations, macroeconomic trends, and our competitive positioning are forward-looking statements. This includes, without limitation, statements under “Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding our expected or future capitalization and capital structure, indebtedness, market share and products sales, market opportunities, manufacturing capabilities and facilities, sales channels and strategies, goodwill impairment, backlog, our supply chain, the Russia-Ukraine conflict and relations between the United States and China, foreign exchange, interest rate and inflation, any mergers and acquisitions, including integration of previously completed mergers and acquisitions, and the future or expected impact on us of any epidemic, pandemic or other crises, including COVID-19. These statements constitute projections, forecasts and forward-looking statements, and are not guarantees of performance. When used in this Quarterly Report on Form 10-Q, words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “strive,” “seeks,” “plans,” “scheduled,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. When we discuss our strategies or plans we are making projections, forecasts or forward-looking statements. Such statements are based on the beliefs of, as well as assumptions made by and information currently available to, our management.
The forward-looking statements contained in this Quarterly Report on Form 10-Q are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, the following risks, uncertainties and other factors:
•changes in domestic and foreign business, market, economic, financial, political and legal conditions, including the Russia-Ukraine conflict and the relationship between the United States and China;
•risks related to the public's perception of nuclear radiation and nuclear technologies;
•risks related to the continued growth of our end markets;
•our ability to win new customers and retain existing customers;
•our ability to realize sales expected from our backlog of orders and contracts;
•risks related to governmental contracts;
•our ability to mitigate risks associated with long-term fixed price contracts, including risks related to inflation;
•risks related to information technology disruption or security;
•risks related to the implementation and enhancement of information systems;
•our ability to manage our supply chain or difficulties with third-party manufacturers;
•risks related to competition;
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•our ability to manage disruptions of, or changes in, our independent sales representatives, distributors and original equipment manufacturers;
•our ability to realize the expected benefit from any strategic transactions, such as acquisitions, divestitures and investments, including any synergies from internal restructuring and improvement efforts;
•our ability to issue debt, equity or equity-linked securities in the future;
•risks related to changes in tax law and ongoing tax audits;
•risks related to future legislation and regulation both in the United States and abroad;
•risks related to the costs or liabilities associated with product liability claims;
•our ability to attract, train and retain key members of our leadership team and other qualified personnel;
•risks related to the adequacy of our insurance coverage;
•risks related to the global scope of our operations, including operations in international and emerging markets;
•risks related to our exposure to fluctuations in foreign currency exchange rates, interest rates and inflation, including the impact on our debt service costs;
•our ability to comply with various laws and regulations and the costs associated with legal compliance;
•risks related to the outcome of any litigation, government and regulatory proceedings, investigations and inquiries;
•risks related to our ability to protect or enforce our proprietary rights on which our business depends or third-party intellectual property infringement claims;
•liabilities associated with environmental, health and safety matters;
•our ability to predict our future operational results;
•risks associated with our limited history of operating as an independent company;
•the effects of COVID-19 or other health epidemics, pandemics or similar outbreaks may have on our business, results of operations or financial condition; and
•other risks and uncertainties described in our Annual Report on Form 10-K for the year ended December 31, 2022 and this Quarterly Report on Form 10-Q, including those under the heading “Risk Factors,” and other documents filed or to be filed with the U. S Securities and Exchange Commission (the "SEC") by us.
There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements.
Forward-looking statements included in this Quarterly Report on Form 10-Q speak only as of the date of this Quarterly Report on Form 10-Q or any earlier date specified for such statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
We intend to announce material information to the public through the Mirion Investor Relations website, available at ir.mirion.com, SEC filings, press releases, public conference calls and public webcasts. We use these channels, as well as social media, to communicate with our investors, customers and the public about our company, our offerings and other issues. It is possible that the information we post on our website or social media could be deemed to be material information. As such, we encourage investors, the media, and others to follow the channels listed above, including the social media channels listed on our investor relations website, and to review the information disclosed through such channels. Any updates to the list of disclosure channels through which we will announce information will be posted on the investor relations website.
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TABLE OF CONTENTS
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
as of March 31, 2023 and December 31, 2022
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for the three months ended March 31, 2023 and March 31, 2022
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for the three months ended March 31, 2023 and March 31, 2022
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for the three months ended March 31, 2023 and March 31, 2022
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for the three months ended March 31, 2023 and March 31, 2022
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5
Mirion Technologies, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In millions, except share data)
March 31, 2023 | December 31, 2022 | ||||||||||
ASSETS | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Restricted cash | |||||||||||
Accounts receivable, net of allowance for doubtful accounts | |||||||||||
Costs in excess of billings on uncompleted contracts | |||||||||||
Inventories | |||||||||||
Prepaid expenses and other current assets | |||||||||||
Assets held for sale | |||||||||||
Total current assets | |||||||||||
Property, plant, and equipment, net | |||||||||||
Operating lease right-of-use assets | |||||||||||
Goodwill | |||||||||||
Intangible assets, net | |||||||||||
Restricted cash | |||||||||||
Other assets | |||||||||||
Total assets | $ | $ | |||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | $ | $ | |||||||||
Deferred contract revenue | |||||||||||
Notes payable to third-parties, current | |||||||||||
Operating lease liability, current | |||||||||||
Accrued expenses and other current liabilities | |||||||||||
Total current liabilities | |||||||||||
Notes payable to third-parties, non-current | |||||||||||
Warrant liabilities | |||||||||||
Operating lease liability, non-current | |||||||||||
Deferred income taxes, non-current | |||||||||||
Other liabilities | |||||||||||
Total liabilities | |||||||||||
Commitments and contingencies (Note 11) | |||||||||||
Stockholders’ equity (deficit): | |||||||||||
Class A common stock; $ |
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Class B common stock; $ |
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Additional paid-in capital | |||||||||||
Accumulated deficit | ( |
( |
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Accumulated other comprehensive loss | ( |
( |
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Mirion Technologies, Inc. stockholders’ equity | |||||||||||
Noncontrolling interests | |||||||||||
Total stockholders’ equity | |||||||||||
Total liabilities and stockholders’ equity | $ | $ |
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Mirion Technologies, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(In millions, except per share data)
Three Months Ended | |||||||||||
March 31, | |||||||||||
2023 | 2022 | ||||||||||
Revenues: | |||||||||||
Product | $ | $ | |||||||||
Service | |||||||||||
Total revenues | |||||||||||
Cost of revenues: | |||||||||||
Product | |||||||||||
Service | |||||||||||
Total cost of revenues | |||||||||||
Gross profit | |||||||||||
Operating expenses: | |||||||||||
Selling, general and administrative | |||||||||||
Research and development | |||||||||||
Total operating expenses | |||||||||||
Loss from operations | ( |
( |
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Other expense (income): | |||||||||||
Third party interest expense | |||||||||||
Loss on debt extinguishment | |||||||||||
Foreign currency (gain) loss, net | ( |
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Increase (decrease) in fair value of warrant liabilities | ( |
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Other income, net | ( |
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Loss before income taxes | ( |
( |
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Benefit from income taxes | ( |
( |
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Net loss | ( |
( |
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Loss attributable to noncontrolling interests | ( |
( |
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Net loss attributable to Mirion Technologies, Inc. | $ | ( |
$ | ( |
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Net loss per common share attributable to Mirion Technologies, Inc. stockholders — basic and diluted | $ | ( |
$ | ( |
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Weighted average common shares outstanding — basic and diluted |
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Mirion Technologies, Inc.
Condensed Consolidated Statements of Comprehensive Loss
(Unaudited)
(In millions)
Three Months Ended | |||||||||||
March 31, | |||||||||||
2023 | 2022 | ||||||||||
Net loss | $ | ( |
$ | ( |
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Other comprehensive income (loss), net of tax: | |||||||||||
Foreign currency translation, net of tax | ( |
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Unrealized losses on net investment hedges, net of tax | ( |
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Other comprehensive income (loss), net of tax | ( |
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Comprehensive loss | ( |
( |
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Less: Comprehensive loss attributable to noncontrolling interests | ( |
( |
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Comprehensive loss attributable to Mirion Technologies, Inc. | $ | ( |
$ | ( |
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Mirion Technologies, Inc.
Condensed Consolidated Statements of Stockholders’ Equity (Deficit)
(Unaudited)
(In millions, except share amounts)
Class A Common Stock | Class A Common Stock Amount | Class B Common Stock | Class B Common Stock Amount | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Noncontrolling Interests | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||||||||||
Balance December 31, 2021 |
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$ | — |
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$ | — | $ |
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$ | ( |
$ | ( |
$ |
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$ |
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Stock-based compensation expense | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Warrant exercises | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
Stock compensation to directors in lieu of cash compensation | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | ( |
— | ( |
( |
||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | — | ( |
( |
( |
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Balance March 31, 2022 |
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$ | — |
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$ | — | $ |
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$ | ( |
$ | ( |
$ |
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$ |
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Class A Common Stock | Class A Common Stock Amount | Class B Common Stock | Class B Common Stock Amount | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Noncontrolling Interests | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||||||||||
Balance December 31, 2022 |
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$ | — |
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$ |
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$ |
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$ | ( |
$ | ( |
$ |
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$ |
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Warrant redemptions | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
Stock issued for vested restricted stock units | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
Stock compensation to directors in lieu of cash compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
Conversion of shares of class B common stock to class A common stock | — | ( |
— | — | — | ( |
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Issuance of shares of class A common stock under a direct registered offering, net of offering costs | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation expense | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | ( |
— | ( |
( |
||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
Balance March 31, 2023 |
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$ | — |
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$ |
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$ |
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$ | ( |
$ | ( |
$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
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Mirion Technologies, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In millions)
Three Months Ended | |||||||||||
March 31, | |||||||||||
2023 | 2022 | ||||||||||
OPERATING ACTIVITIES: | |||||||||||
Net loss | $ | ( |
$ | ( |
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Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||||||
Depreciation and amortization expense | |||||||||||
Stock-based compensation expense | |||||||||||
Amortization of debt issuance costs | |||||||||||
Provision for doubtful accounts | ( |
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Inventory obsolescence write down | |||||||||||
Change in deferred income taxes | ( |
( |
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Loss (gain) on disposal of property, plant and equipment | ( |
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Loss (gain) on foreign currency transactions | ( |
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Increase (decrease) in fair values of warrant liabilities | ( |
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Other | |||||||||||
Changes in operating assets and liabilities: | |||||||||||
Accounts receivable | |||||||||||
Costs in excess of billings on uncompleted contracts | ( |
( |
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Inventories | ( |
( |
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Prepaid expenses and other current assets | ( |
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Accounts payable | ( |
( |
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Accrued expenses and other current liabilities | ( |
( |
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Deferred contract revenue | ( |
( |
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Other assets | |||||||||||
Other liabilities | ( |
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Net cash (used in) provided by operating activities | ( |
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INVESTING ACTIVITIES: | |||||||||||
Purchases of property, plant, and equipment and badges | ( |
( |
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Sales of property, plant, and equipment | |||||||||||
Net cash used in investing activities | ( |
( |
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FINANCING ACTIVITIES: | |||||||||||
Issuances of common stock | |||||||||||
Common stock issuance costs | ( |
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Term loan principal repayments | ( |
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Principal repayments | ( |
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Other financing | ( |
( |
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Net cash provided by (used in) financing activities |
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( |
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Effect of exchange rate changes on cash, cash equivalents, and restricted cash |
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( |
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Net increase in cash, cash equivalents, and restricted cash |
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Cash, cash equivalents, and restricted cash at beginning of period | |||||||||||
Cash, cash equivalents, and restricted cash at end of period | $ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
10
Mirion Technologies, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Nature of Business and Summary of Significant Accounting Policies
Nature of Business
Mirion Technologies, Inc. (“Mirion,” the “Company,” "Successor," "we," "our," or "us" and formerly GS Acquisition Holdings Corp II ("GSAH")) is a global provider of radiation detection, measurement, analysis, and monitoring products and services to the medical, nuclear, and defense end markets. We provide products and services through our two operating and reportable segments; (i) Medical and (ii) Industrial. The Medical segment provides radiation oncology quality assurance, delivering patient safety solutions for diagnostic imaging and radiation therapy centers around the world, dosimetry solutions for monitoring the total amount of radiation medical staff members are exposed to over time, radiation therapy quality assurance solutions for calibrating and verifying imaging and treatment accuracy, and radionuclide therapy products for nuclear medicine applications such as shielding, product handling, medical imaging furniture, and rehabilitation products. The Industrial segment provides robust, field ready personal radiation detection and identification equipment for defense applications and radiation detection and analysis tools for power plants, labs, and research applications. Nuclear power plant product offerings are used for the full nuclear power plant lifecycle including core detectors and essential measurement devices for new build, maintenance, decontamination and decommission equipment for monitoring and control during fuel dismantling and remote environmental monitoring.
The Company is headquartered in Atlanta, Georgia and has operations in the United States, Canada, the United Kingdom, France, Germany, Finland, China, Belgium, the Netherlands, Estonia, and Japan.
Basis of Presentation and Principles of Consolidation
The accompanying unaudited Condensed Consolidated Financial Statements and Notes to Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for financial statements and pursuant to the accounting and disclosure rules and regulations of the U.S. Securities and Exchange Commission (the "SEC") for interim financial information. The interim Condensed Consolidated Financial Statements reflect all adjustments that are of a normal recurring nature and that are considered necessary for a fair representation of the results for the periods presented and should be read in conjunction with the audited Consolidated Financial Statements and notes thereto for the period ended December 31, 2022, which include a complete set of footnote disclosures, including our significant accounting policies included in our Annual Report on Form 10-K. The results for interim periods are not necessarily indicative of the results that may be expected for a full fiscal year or for any other future period. The Condensed Consolidated Financial Statements include the accounts of the Company and its wholly owned and majority-owned or controlled subsidiaries. For consolidated subsidiaries where our ownership is less than 100%, the portion of the net income or loss allocated to noncontrolling interests is reported as “Income (Loss) attributable to noncontrolling interests” in the Condensed Consolidated Statements of Operations. All intercompany accounts and transactions have been eliminated in consolidation.
Segments
The Company manages its operations through two operating and reportable segments: Medical and Industrial. These segments align the Company’s products and service offerings with customer use in medical and industrial markets and are consistent with how the Company’s Chief Executive Officer, its Chief Operating Decision Maker (“CODM”), reviews and evaluates the Company’s operations. The CODM allocates resources and evaluates the financial performance of each operating segment. The Company’s segments are strategic businesses that are managed separately because each one
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Significant Accounting Policies
There have been no material changes in our significant accounting policies during the three months ended March 31, 2023, as compared to the significant accounting policies described in Note 1 to the audited Consolidated Financial Statements on Form 10-K for the period ended December 31, 2022.
The components of prepaid expenses and other current assets consist of the following (in millions):
March 31, 2023 | December 31, 2022 | ||||||||||
Prepaid insurance | $ | $ | |||||||||
Short-term marketable securities | |||||||||||
Income tax receivable and prepaid income taxes | |||||||||||
Other tax receivables | |||||||||||
Other current assets | |||||||||||
$ | $ |
Revenue Recognition
The Company recognizes revenue from arrangements that include performance obligations to design, engineer, manufacture, deliver, and install products. If a performance obligation does not qualify for over-time revenue recognition, revenue is then recognized at the point-in-time in which control of the distinct good or service is transferred to the customer, typically based upon the terms of delivery.
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Revenue derived from passive dosimetry and analytical services is of a subscription nature and is provided to customers on an agreed-upon recurring monthly, quarterly or annual basis. Revenue is recognized ratably over the service period as the service is continuous, and no other discernible pattern of recognition is evident.
Contract Balances
The timing of the Company's revenue recognition, invoicing, and cash collections results in accounts receivable, costs and estimated earnings in excess of billings on uncompleted contracts, and deferred contract revenue. Refer to Note 4, Contracts in Progress for further details.
Remaining Performance Obligations
Disaggregation of Revenues
A disaggregation of the Company’s revenues by segment, geographic region, timing of revenue recognition and product category is provided in Note 16, Segment Information.
Concentrations of Risk
Financial instruments that are potentially subject to concentration of credit risk consist primarily of cash and cash equivalents and accounts receivable. The Company maintains cash in bank deposit accounts that, at times, may exceed the insured limits of the local country. The Company has not experienced any losses in such accounts.
Recent Accounting Pronouncements
Accounting Guidance Issued But Not Yet Adopted
In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-04 “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting”. ASU 2020-04 provides temporary optional expedients and exceptions for applying GAAP guidance on
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2. Business Combinations and Acquisitions
The Company continually evaluates potential acquisitions that strategically fit with the Company’s existing portfolio. As a result, on August 1, 2022, the Company acquired the Critical Infrastructure ("CI") business of Collins Aerospace (renamed as Secure Integrated Solutions "SIS") via an Asset Purchase Agreement. The Company paid cash of $6.6 million, but due to net working capital (NWC) settlements to be settled in the future, the GAAP consideration was $5.9 million. The SIS business joined our Industrial segment and specializes in delivering physical and cyber security systems to critical infrastructure based on a command-and-control platform that includes video surveillance, access control, intrusion detection, credential/training management, biometrics, and video analytics. The Company used carrying values as of the closing date of the CI Acquisition to value certain current and non-current assets and liabilities, as we determined that they represented the fair value of those items at such date.
All identifiable intangible assets acquired in the CI Acquisition were assigned to developed technology for accounting purposes.
Transaction costs related to the CI Acquisition were not material for the three months ended March 31, 2023.
Measurement period adjustments to the previously disclosed preliminary fair value of net assets related to the CI Acquisition were recorded in 2023, resulting in a $0.9 million net increase in goodwill and corresponding $0.9 million net increase in Other Accrued Liabilities for the three months ended March 31, 2023.
All acquisitions are accounted for under the acquisition method of accounting, and the related assets acquired and liabilities assumed are recorded at fair value. The Company makes an initial allocation of the purchase price at the date of acquisition based upon its understanding of the fair value of the acquired assets and assumed liabilities. The Company obtains the information used for the purchase price allocation during due diligence and through other sources. In the months after closing, as the Company obtains additional information about the acquired assets and liabilities, including through tangible and intangible asset appraisals, and learns more about the newly acquired business, it is able to refine the estimates of fair value and more accurately allocate the purchase price. The fair values of acquired intangibles are determined based on estimates and assumptions that are deemed reasonable by the Company. Significant assumptions include the discount rates and certain assumptions that form the basis of the forecasted results of the acquired business including revenue, earnings before interest, taxes, depreciation and amortization (“EBITDA”), and growth rates. These assumptions are forward looking and could be affected by future economic and market conditions. Only facts and circumstances that existed as of the acquisition date are considered for subsequent adjustment. The Company will make appropriate adjustments to the purchase price allocation prior to completion of the measurement period, as required.
Purchases of acquired businesses resulted in the recognition of goodwill in the Company’s Consolidated Financial Statements, which is calculated as the excess of the consideration transferred over the net assets recognized and represents the future economic benefits arising from the other assets acquired that could not be individually identified and separately recognized. The goodwill is not amortized but some portion may be deductible for income tax purposes. This goodwill recorded includes the following:
• The expected synergies and other benefits that we believe will result from combining the operations of the acquired business with the operations of Mirion;
• Any intangible assets that did not qualify for separate recognition, as well as future, yet unidentified projects and products;
• The value of the existing business as an assembled collection of net assets versus if the Company had acquired all of the net assets separately.
3. Assets and Liabilities Held for Sale
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March 31, 2023 | December 31, 2022 | ||||||||||
Inventories | $ | $ | |||||||||
Prepaid expenses and other current assets | |||||||||||
Property, plant and equipment — net | |||||||||||
Goodwill | |||||||||||
Assets held for sale | $ | $ | |||||||||
Accrued liabilities | |||||||||||
Other non-current liabilities | |||||||||||
Liabilities held for sale (1)
|
$ | $ |
(1)Included in accrued expenses and other liabilities within the consolidated balance sheets.
4. Contracts in Progress
Costs and billings on uncompleted construction-type contracts consist of the following (in millions):
March 31, 2023 | December 31, 2022 | ||||||||||
Costs incurred on contracts (from inception to completion) | $ | $ | |||||||||
Estimated earnings | |||||||||||
Contracts in progress | |||||||||||
Less: billings to date | ( |
( |
|||||||||
$ | $ |
The carrying amounts related to uncompleted construction-type contracts are included in the accompanying Condensed Consolidated Balance Sheets under the following captions (in millions):
March 31, 2023 | December 31, 2022 | ||||||||||
Costs and estimated earnings in excess of billings on uncompleted contracts – current | $ | $ | |||||||||
Costs and estimated earnings in excess of billings on uncompleted contracts – non-current (1)
|
|||||||||||
Billings in excess of costs and estimated earnings on uncompleted contracts – current (2)
|
( |
( |
|||||||||
Billings in excess of costs and estimated earnings on uncompleted contracts – non-current (3)
|
( |
( |
|||||||||
$ | $ |
(1)Included in other assets within the Condensed Consolidated Balance Sheets.
(2)Included in deferred contract revenue – current within the Condensed Consolidated Balance Sheets.
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5. Inventories
The components of inventories consist of the following (in millions):
March 31, 2023 | December 31, 2022 | ||||||||||
Raw materials | $ | $ | |||||||||
Work in progress | |||||||||||
Finished goods | |||||||||||
$ | $ |
6. Property, Plant and Equipment, Net
Property, plant and equipment, net consist of the following (in millions):
Depreciable Lives |
March 31, 2023 | December 31, 2022 | |||||||||||||||
Land, buildings, and leasehold improvements | $ | $ | |||||||||||||||
Machinery and equipment | |||||||||||||||||
Badges | |||||||||||||||||
Furniture, fixtures, computer equipment and other | |||||||||||||||||
Construction in progress | — | ||||||||||||||||
Less: accumulated depreciation and amortization | ( |
( |
|||||||||||||||
$ | $ |
Total depreciation expense included in costs of revenues and operating expenses was as follows (in millions):
Three Months Ended | |||||||||||
March 31, | |||||||||||
2023 | 2022 | ||||||||||
Depreciation expense in: | |||||||||||
Cost of revenues | $ | $ | |||||||||
Operating expenses | $ | $ |
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7. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consist of the following (in millions):
March 31, 2023 | December 31, 2022 | ||||||||||
Compensation and related benefit costs | $ | $ | |||||||||
Customer deposits | |||||||||||
Accrued commissions | |||||||||||
Accrued warranty costs | |||||||||||
Non-income taxes payable | |||||||||||
Pension and other post-retirement obligations | |||||||||||
Income taxes payable | |||||||||||
Restructuring | |||||||||||
Liabilities held for sale | |||||||||||
Other accrued expenses | |||||||||||
Total | $ | $ |
8. Goodwill and Intangible Assets
Goodwill
Goodwill is calculated as the excess of consideration transferred over the net assets recognized for acquired businesses and represents future economic benefits arising from the other assets acquired that could not be individually identified and separately recognized. Goodwill is assigned to reporting units at the date the goodwill is initially recorded and is reallocated as necessary based on the composition of reporting units over time.
The Company assesses goodwill for impairment at the reporting unit level annually on the first day of the fourth quarter and upon the occurrence of a triggering event or change in circumstance that would more likely than not reduce the fair value of a reporting unit below its carrying amount.
Medical | Industrial | Consolidated | |||||||||||||||
Balance—December 31, 2022 | $ | $ | $ | ||||||||||||||
Business Combination and other acquisitions - measurement period adjustments | |||||||||||||||||
Translation adjustment | |||||||||||||||||
Balance—March 31, 2023 | $ | $ | $ |
A portion of goodwill is deductible for income tax purposes.
Gross carrying amounts and cumulative goodwill impairment losses are as follows (in millions):
March 31, 2023 | December 31, 2022 | ||||||||||||||||||||||
Gross Carrying Amount | Cumulative Impairment | Gross Carrying Amount | Cumulative Impairment | ||||||||||||||||||||
Goodwill | $ | $ | ( |
$ | $ | ( |
Intangible Assets
Intangible assets consist of our developed technology, customer relationships, backlog, trade names, and non-compete agreements at the time of acquisition through business combinations. The customer relationships definite lived intangible assets are amortized using the double declining balance method while all other definite lived intangible assets are amortized on a straight-line basis over their estimated useful lives.
17
Many of our intangible assets are not deductible for income tax purposes. A summary of intangible assets useful lives, gross carrying value and related accumulated amortization is below (in millions):
March 31, 2023 | |||||||||||||||||||||||
Original Average Life in Years |
Gross Carrying Amount |
Accumulated Amortization |
Net Book Value |
||||||||||||||||||||
Customer relationships | $ | $ | ( |
$ | |||||||||||||||||||
Distributor relationships | ( |
||||||||||||||||||||||
Developed technology | ( |
||||||||||||||||||||||
Trade names | ( |
||||||||||||||||||||||
Backlog and other | ( |
||||||||||||||||||||||
Total | $ | $ | ( |
$ | |||||||||||||||||||
December 31, 2022 | |||||||||||||||||||||||
Original Average Life in Years |
Gross Carrying Amount |
Accumulated Amortization |
Net Book Value |
||||||||||||||||||||
Customer relationships | $ | $ | ( |
$ | |||||||||||||||||||
Distributor relationships | ( |
||||||||||||||||||||||
Developed technology | ( |
||||||||||||||||||||||
Trade names | ( |
||||||||||||||||||||||
Backlog and other | ( |
||||||||||||||||||||||
Total | $ | $ | ( |
$ |
Aggregate amortization expense for intangible assets included in cost of revenues and operating expenses was as follows (in millions):
Three Months Ended | |||||||||||
March 31, | |||||||||||
2023 | 2022 | ||||||||||
Amortization expense for intangible assets in: | |||||||||||
Cost of revenues | $ | $ | |||||||||
Operating expenses | $ | $ |
9. Borrowings
Third-party notes payable consist of the following (in millions):
March 31, 2023 | December 31, 2022 | ||||||||||
2021 Credit Agreement | $ | $ | |||||||||
Canadian Financial Institution | |||||||||||
Other | |||||||||||
Draw on revolving line of credit | |||||||||||
Total third-party borrowings | |||||||||||
Less: notes payable to third-parties, current | ( |
( |
|||||||||
Less: deferred financing costs | ( |
( |
|||||||||
Notes payable to third-parties, non-current | $ | $ |
As of March 31, 2023 and December 31, 2022, the fair market value of the Company's 2021 Credit Agreement (as defined below) was $682.8 million and $803.2 million, respectively. The fair market value for the 2021 Credit Agreement was estimated using primarily level 2 inputs, including borrowing rates available to the Company at the respective period ends. The fair market value for the Company’s remaining third-party debt approximates the respective carrying amounts as of March 31, 2023 and December 31, 2022.
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2021 Credit Agreement
In connection with the Business Combination, in October 2021, certain subsidiaries of the Company entered into- a credit agreement (the "2021 Credit Agreement") among Mirion Technologies (HoldingSub2), Ltd., a limited liability company incorporated in England and Wales, as Holdings, Mirion Technologies (US Holdings), Inc., as the Parent Borrower, Mirion Technologies (US), Inc., as the Subsidiary Borrower, the lending institutions party thereto, Citibank, N.A., as the Administrative Agent and Collateral Agent and Goldman Sachs Lending Partners, Citigroup Global Markets Inc., Jefferies Finance LLC and JPMorgan Chase Bank, N.A., as the Joint Lead Arrangers and Bookrunners.
The 2021 Credit Agreement refinanced and replaced the credit agreement from March 2019, by and between, among others, Mirion Technologies (HoldingRep), Ltd. ("Mirion HoldingRep"), its subsidiaries and Morgan Stanley Senior Funding Inc., as administrative agent, certain other revolving lenders and a syndicate of institutional lenders (the “2019 Credit Facility”) which is described in more detail below.
The 2021 Credit Agreement provides for an $830.0 million senior secured first lien term loan facility and a $90.0 million senior secured revolving facility (collectively, the “Credit Facilities”). Funds from the Credit Facilities are permitted to be used in connection with the Business Combination and related transactions to refinance the 2019 Credit Facility referred to below and for general corporate purposes. The term loan facility is scheduled to mature on October 20, 2028 and the revolving facility is scheduled to expire and mature on October 20, 2026. The agreement requires the payment of a commitment fee of 0.50 % per annum for unused revolving commitments, subject to stepdowns to 0.375 % per annum and 0.25 % per annum upon the achievement of specified leverage ratios. Any outstanding letters of credit issued under the 2021 Credit Agreement reduce the availability under the revolving line of credit.
The 2021 Credit Agreement is secured by a first priority lien on the equity interests of the Parent Borrower owned by Holdings and substantially all of the assets (subject to customary exceptions) of the borrowers and the other guarantors thereunder. Interest with respect to the facilities is based on, at the option of the borrowers, (i) a customary base rate formula for borrowings in U.S. dollars or (ii) a floating rate formula based on LIBOR (with customary fallback provisions) for borrowings in U.S. dollars, a floating rate formula based on Euro Interbank Offered Rate ("EURIBOR") for borrowings in Euro or a floating rate formula based on SONIA for borrowings in Pounds Sterling, each as described in the 2021 Credit Agreement with respect to the applicable type of borrowing. The 2021 Credit Agreement includes fallback language that seeks to either facilitate an agreement with the Company's lenders on a replacement rate for LIBOR in the event of its discontinuance or that automatically replaces LIBOR with benchmark rates based upon the Secured Overnight Financing Rate ("SOFR") or other benchmark replacement rates upon certain triggering events.
The 2021 Credit Agreement contains customary representations and warranties as well as customary affirmative and negative covenants and events of default. The negative covenants include, among others and in each case subject to certain thresholds and exceptions, limitations on incurrence of liens, limitations on incurrence of indebtedness, limitations on making dividends and other distributions, limitations on engaging in asset sales, limitations on making investments, and a financial covenant that the “First Lien Net Leverage Ratio” (as defined in the 2021 Credit Agreement) as of the end of any fiscal quarter is not greater than 7.00 to 1.00 if on the last day of such fiscal quarter certain borrowings outstanding under the revolving credit facility exceed 40 % of the total revolving credit commitments at such time. The covenants also contain limitations on the activities of Mirion Technologies (HoldingSub2), Ltd. as the “passive” holding company. If any of the events of default occur and are not cured or waived, any unpaid amounts under the 2021 Credit Agreement may be declared immediately due and payable, the revolving credit commitments may be terminated and remedies against the collateral may be exercised. Mirion Technologies (HoldingSub2), Ltd. and subsidiaries were in compliance with all debt covenants on March 31, 2023 and December 31, 2022.
Term Loan - The term loan has a seven-year term (expiring October 2028), bears interest at the greater of Adjusted London Interbank Offered Rate ("LIBOR") or 0.50 %, plus 2.75 % and has quarterly principal repayments of 0.25 % of the original principal balance. The interest rate was 7.48 % and 7.48 % as of March 31, 2023 and December 31, 2022, respectively. The Company repaid $125.0 million and $6.6 million for the three month period ended March 31, 2023 and for the fiscal year ended December 31, 2022, respectively, yielding an outstanding balance of approximately $696.7 million and $821.7 million as of March 31, 2023 and December 31, 2022, respectively.
During the three months ended March 31, 2023, the Company used $125.0 million of proceeds received from a direct registered equity offering to pay down early outstanding amounts on the term loan.
Revolving Line of Credit - The revolving line of credit arrangement has a five year term and bears interest at the greater of LIBOR or 0%, plus 2.75 %. The agreement requires the payment of a commitment fee of 0.50 % per annum for unused commitments. The revolving line of credit matures in October 2026, at which time all outstanding revolving facility loans and accrued and unpaid interest are due. Any outstanding letters of credit reduce the availability of the revolving line of credit. There was no outstanding balance under the arrangement as of March 31, 2023 and December 31, 2022.
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Additionally, the Company has standby letters of credit issued under its 2021 Credit Agreement that reduce the availability under the revolver of $10.8 million and $9.4 million as of March 31, 2023 and December 31, 2021, respectively. The amount available on the revolver as of March 31, 2023 and December 31, 2022 was approximately $79.2 million and $80.6 million, respectively.
Deferred Financing Costs
In connection with the issuance of the 2021 Credit Agreement term loan, we incurred debt issuance costs of $21.7 million on date of issuance. In accordance with accounting for debt issuance costs, we recognize and present deferred finance costs associated with non-revolving debt and financing obligations as a reduction from the face amount of related indebtedness in our Condensed Consolidated Balance Sheets.
In connection with the issuance of the 2021 Credit Agreement revolving line of credit, we incurred debt issuance costs of $1.8 million. We recognize and present debt issuance costs associated with revolving debt arrangements as an asset and include the deferred finance costs within other assets on our Condensed Consolidated Balance Sheets. We amortize all debt issuance costs over the life of the related indebtedness.
For the three month periods ended March 31, 2023 and March 31, 2022, we incurred approximately $3.5 million (including a $2.6 million loss on debt extinguishment for the $125.0 million early debt repayment) and $1.0 million, respectively, of amortization expense of the deferred financing costs.
Canadian Financial Institution - In May 2019, the Company entered into a credit agreement for C$