CW 2020 Annual Report

Liquidity and Capital Resources While uncertainty exists as to the full impact of the COVID-19 pandemic on our liquidity and capital resources, we believe that we have maintained sufficient liquidity to satisfy our working capital and other funding requirements with internally generated cash flow and, as necessary, cash on hand and borrowings under our revolving credit facility. We continually evaluate opportunities to obtain, retire, or restructure credit facilities or financing arrangements for strategic reasons or obtain additional financing to fund investments, operations and obligations, as we have done in the past, to further strengthen our financial position. We have historically relied on our internally generated cash flow to fund our working capital needs and ongoing capital expenditures on an annual basis. Our internally generated cash flow is seasonal and is typically lowest in the first quarter of the year, when revenue is lowest, and greatest in the fourth quarter of the year, when revenue is highest. The seasonal nature of our internally generated cash flow can result in a mismatch with funding needs for working capital and ongoing capital expenditures, which we manage using available cash on hand and, as necessary, borrowings under our revolving credit facility. In the absence of a large strategic acquisition or other extraordinary events, we believe our cash on hand, cash flow from operations and availability under our revolving credit facility will be sufficient to meet our anticipated cash requirements for the foreseeable future, and at a minimum for the next 12 months. We may seek to take advantage of opportunities to refinance existing debt instruments, as we have done in the past, with new debt instruments at interest rates, maturities and on terms we consider attractive. As of December 31, 2020, the Company had $2.1 billion of liquidity, consisting of cash on hand of $1.1 billion and our undrawn revolving credit facility of $1.0 billion. The Company's amounts outstanding under its 2018 First Lien Loan and its 2020 Notes were $2.6 billion and $639.4 million, respectively, as of December 31, 2020, which net of cash on hand of $1.1 billion, provided for a net debt position of approximately $2.2 billion. The increase in net debt of approximately $354.0 million from December 31, 2019 principally reflects normal annual bonus payments in March of 2020, acquisitions completed earlier this year and funding of the Company’s strategic realignment and operating efficiency initiatives. Our level of indebtedness increases the possibility that we may be unable to pay the principal amount of our indebtedness and other obligations when due. In addition, we may incur additional debt from time to time to finance strategic acquisitions, investments, joint ventures or for other purposes, subject to the restrictions contained in the documents governing our indebtedness. If we incur additional debt, the risks associated with our leverage, including our ability to service our debt, would increase. See "Risk Factors." Despite our current indebtedness levels, we and our subsidiaries may still be able to incur substantially more debt, which could further exacerbate the risks associated with our substantial leverage. Our material cash requirements require long-term liquidity to facilitate the payment of obligations related to acquisitions. For the year ended December 31, 2020, we paid $108.7 million in cash consideration for our various acquisitions, net of cash acquired. Acquisitions are often structured with deferred and/or contingent payments in future periods that are subject to the passage of time, achievement of certain performance metrics and/or other conditions. As of December 31, 2020 and 2019, we had accrued $63.7 million and $65.1 million, respectively, of deferred and earn-out consideration payable, which was included in Accounts payable and accrued expenses and in Other long-term liabilities in the accompanying audited Consolidated Balance Sheets. Of the total balance as of December 31, 2020 and 2019, we have accrued $21.0 million and $24.6 million for earn-out consideration, respectively. As of December 31, 2020, the maximum potential payment for these earn-outs was $26.5 million, subject to the achievement of certain performance conditions. As a professional services firm, funding our operating activities is not capital intensive. Total capital expenditures for the year ended December 31, 2020 were $41.0 million. In a situation in which the Company has a necessity regarding additional liquidity to meet cash requirements for capital expenditures as well as expenditures for human capital and contractual obligations, the Company is also party to an off-balance sheet A/R Securitization arrangement whereby it continuously sells trade receivables to an unaffiliated financial institution, which has an investment limit of $125.0 million. Receivables are derecognized from our balance sheet upon sale, for which we receive cash payment and record a deferred purchase price receivable. As of December 31, 2020, the Company had no outstanding balance drawn on the investment limit.

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