For the next twelve months, we expect capital expenditures to remain relatively consistent, the majority of which
relate to new or expanded business or continuous improvement programs. We believe that funds generated from continuing operations and borrowings from the credit facilities will be sufficient to finance capital expenditures and working capital needs
through this period. The absence of cash flows from discontinued operations is not expected to significantly affect our ability to finance capital expenditures or working capital needs. We base these assertions on current availability for borrowing
of up to $89.7 million, existing cash of $347.4 million and forecasted positive cash flow from continuing operations for the next twelve months.
Seasonality and Fluctuation in Quarterly Results
economic conditions impact our business and financial results, and certain businesses experience seasonal and other trends related to the industries and end markets that they serve. For example, European sales are often weaker in the summer months
as customers slow production, medical device sales are often stronger in the fourth calendar quarter, and sales to original equipment manufacturers are often stronger immediately preceding and following the launch of new products. However, as a
whole, we are not subject to material seasonality.
Off-Balance Sheet Arrangements
We are not a party to any off-balance sheet arrangements that have, or are reasonably likely to have, a material
current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Critical Accounting Policies
Our critical accounting
policies, including the assumptions and judgments underlying them, are disclosed in the 2016 Annual Report, including those policies as discussed in Note 1 to the Notes to Consolidated Financial Statements included in the 2016 Annual Report. There
have been no changes to these policies during the nine months ended September 30, 2017, except as discussed in Note 1 to the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.
Recent Accounting Pronouncements
See Note 1 in the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to changes in financial market conditions in the normal course of business due to use of certain financial instruments as well as transacting
business in various foreign currencies. To mitigate the exposure to these market risks, we have established policies, procedures and internal processes governing the management of financial market risks. We are exposed to changes in interest rates
primarily as a result of borrowing activities.
At September 30, 2017, we had $539.3 million of principal outstanding under the variable rate
Senior Secured Term Loan, without regard to debt issuance costs. At September 30, 2017, a one-percent increase in the interest rate charged on outstanding variable rate borrowings under the Senior Secured
Term Loan would result in interest expense increasing annually by approximately $5.4 million.
At September 30, 2017, we had $294.0 million
of principal outstanding under the Incremental Term Loan, without regard to debt issuance costs. At September 30, 2017, a one-percent increase in the interest rate charged on outstanding variable rate
borrowings under the Incremental Term Loan would result in interest expense increasing annually by approximately $2.9 million.
At September 30,
2017, we did not have any debt outstanding under the Senior Secured Revolver.
Our policy is to manage interest expense using a mix of fixed and variable
rate debt. To manage this mix effectively, we may enter into interest rate swaps to exchange the difference between fixed and variable interest amounts. The nature and amount of borrowings may vary as a result of future business requirements, market
conditions and other factors.
Translation of our operating cash flows denominated in foreign currencies is impacted by changes in foreign exchange rates.
We participate in various third party and intercompany loans, payables and receivables denominated in currencies other than the U.S. dollar. To help reduce exposure to foreign currency fluctuation, we have incurred debt in euros in the past. From
time to time, we may use foreign currency hedges to hedge currency exposures when these exposures meet certain discretionary levels. We did not hold a position in any foreign currency hedging instruments as of September 30, 2017.