| | | Standard Adopted | Description | Date of Adoption | Impact |
ASU 2019-12, Income Taxes (Topic 740) | The standard simplifies the accounting for income taxes by removing various exceptions. | January 1, 2021 | The adoption of this standard had an immaterial impact on the Company’s tax provision. |
ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40) | The standard simplifies the accounting for convertible instruments, as well as the diluted net income per share calculation. The standard also removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception. | January 1, 2021 | The Company early adopted this standard as of January 1, 2021 using the modified retrospective method of transition. The standard had a material impact on the Consolidated Financial Statements. See below for additional information. |
Upon adoption of ASU 2020-06 prospectively as of January 1, 2021, all outstanding Convertible Notes are now fully classified as a liability, there is no longer a separate equity component and the Convertible Notes will no longer have a debt discount that is amortized. This resulted in a decrease of $10.6 million to additional paid-in capital and an increase of $1.1 million and $5.3 million to current convertible notes, net and non-current convertible notes, net, respectively, on the Consolidated Balance Sheets as of January 1, 2021. Additionally, retained deficit was reduced by $4.2 million in the Consolidated Balance Sheets as of January 1, 2021 to remove amortization expense recognized in prior periods. The adoption of this standard did not have an effect on the Company’s cash flows, liquidity, and the methodology used for the earnings per share calculation. Refer to “Note 10 – Financing Arrangements” for additional information on the Company’s Convertible Notes.
There are no current ASUs issued, but not adopted, that will have an impact on the Company.
Legislation related to the COVID-19 Pandemic
Coronavirus Aid, Relief, and Economic Security ("CARES") Act
On March 27, 2020, the President of the United States signed the Coronavirus Aid, Relief, and Economic Security ("CARES") Act, an economic stimulus package intended to provide support, principally in the form of tax benefits, to companies and individuals negatively impacted by the COVID-19 pandemic. Although the majority of the provisions included in the CARES Act did not immediately benefit the Company from a cash tax perspective due to its significant net operating losses, the Company took advantage of the deferral of the employer share (6.2% of employee wages) of Social Security payroll taxes that would otherwise have been owed from the date of enactment of the legislation through December 31, 2020, as afforded by the CARES Act. At December 31, 2020, the Company had deferred $6.4 million in cash payments and recorded reserves for such deferred payroll taxes in salaries, wages and benefits on the Consolidated Balance Sheets. The deferred amount of payments is to be paid in two equal installments at December 31, 2021 and December 31, 2022.
The CARES Act also provided for an employee retention credit (“Employee Retention Credit”), which is a refundable tax credit against certain employment taxes of up to $5,000 per employee for eligible employers. The tax credit is equal to 50% of qualified wages paid to
employees during a quarter, capped at $10,000 of qualified wages per employee throughout the year. The Company qualified for the tax credit in the second and third quarters of 2020 and accrued a benefit of $2.3 million in the fourth quarter of 2020 related to the Employee Retention Credit in other (income) expense, net on the Company’s Consolidated Statements of Operations. The Company is currently in the process of filing for this credit.
Consolidated Appropriations Act, 2021 (“CAA”)
On December 27, 2020, the President of the United States signed the Consolidated Appropriation Act, 2021 (“CAA”). The CAA includes additional COVID-19 relief that expands upon the relief provided in the CARES Act, including, but not limited to, the extension of tax deductions, credits, and incentives. The Company has evaluated the CAA for any potential impact. While it was determined that the CAA revised and extended the Employee Retention Credit into 2021, the CAA is not expected to have an impact on the Company as furloughs related to the COVID-19 pandemic ceased in 2020. Furthermore, the Company does not expect any of the other provisions within the CAA to provide a benefit.
American Rescue Plan Act of 2021 (“ARPA”)
On March 11, 2021, the President of the United States signed the American Rescue Plan Act of 2021 (“ARPA”). APRA strengthens and extends certain programs enacted through the CARES Act and establishes new relief programs aimed at mitigating the financial impact of the COVID-19 pandemic. The Company is evaluating the provisions within the ARPA. At this time, two provisions are anticipated to impact the Company.
The first applicable provision imposes new requirements related to health coverage provided by the Consolidated Omnibus Budget Reconciliation Act (“COBRA”). Under the ARPA, employers are required to provide a 100% premium subsidy for COBRA health care continuation coverage for certain employees for the period of April 1, 2021 through September 30, 2021. The Company will be reimbursed for this additional coverage through fully refundable payroll tax credits.
The second applicable provision offers funding relief for single-employer defined benefit pension plans. Specifically, the ARPA provides enhanced interest rate stabilization, as well as extended amortization of funding shortfalls. The Company is currently evaluating the impact and timing of election options permitted by the ARPA on required contributions to our domestic defined benefit pension plans. At this time based on current assumptions and expected asset returns, pending further IRS guidance, we believe that the ARPA provisions are likely to result in a delay in the timing of required Company contributions until 2028. However, these estimates are subject to significant uncertainty.
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