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Delaware | 3511 | 20-1780492 | ||
(State or other jurisdiction of incorporation) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification Number) |
Proposed Maximum | Proposed Maximum | Amount of | ||||||
Title of Each Class of | Amount to be | Offering | Aggregate | Registration | ||||
Securities to be Registered | Registered(1) | Price Per Note | Offering Price(2) | Fee | ||||
73/8% Senior Subordinated Notes due 2014 | $370,000,000 | 100% | $370,000,000 | $39,590.00(4) | ||||
Guarantees of 73/8% Senior Subordinated Notes due 2014 | N/A(3) | (3) | (3) | (3) | ||||
(1) | In September 2005, Dresser-Rand Group Inc. redeemed $50,000,000 aggregate principal amount of the original $420,000,000 aggregate principal amount of the 73/8% Senior Subordinated Notes due 2014. |
(2) | Estimated solely for the purpose of calculating the registration fee under Rule 457(f) of the Securities Act of 1933, as amended the “Securities Act”). |
(3) | Pursuant to Rule 457(n) under the Securities Act, no separate filing fee is required for the guarantees. |
(4) | $49,434.00 was previously paid in connection with the Registrant’s Form S-4 (File No. 333-122757) initially filed with the Securities and Exchange Commission on February 11, 2005 and which was withdrawn on May 16, 2005. |
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Address, Including Zip Code | ||||||||||||
and Telephone Number, | ||||||||||||
Exact Name of | Including Area Code, | |||||||||||
Registrant Guarantor as | State or Other Jurisdiction of | I.R.S. Employer | of Registrant Guarantor’s | |||||||||
Specified in its Charter | Incorporation or Organization | Identification Number | Principal Executive Offices | |||||||||
Dresser-Rand LLC | Delaware | 20-2216392 | Paul Clark Drive, Olean, NY 14760 (716) 375-3000 | |||||||||
Dresser-Rand Power LLC | Delaware | 74-1716222 | Paul Clark Drive, Olean, NY 14760 (716) 375-3000 | |||||||||
Dresser-Rand Company | New York | 20-1897619 | Paul Clark Drive, Olean, NY 14760 (716) 375-3000 | |||||||||
D-R Steam LLC | Delaware | 20-3384295 | Paul Clark Drive, Olean, NY 14760 (716) 375-3000 | |||||||||
Dresser-Rand Global Services, L.L.C. | Delaware | 22-3845135 | Paul Clark Drive, Olean, NY 14760 (716) 375-3000 |
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The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. |
• | We will exchange all outstanding notes that are validly tendered and not validly withdrawn for an equal principal amount of exchange notes that are freely tradable. | |
• | You may withdraw tenders of outstanding notes at any time prior to the expiration date of the exchange offer. | |
• | The exchange offer expires at 4:00 p.m., New York City time, on , 2006, unless extended. We do not currently intend to extend the expiration date. | |
• | The exchange of outstanding notes for exchange notes in the exchange offer will not be a taxable event for United States federal income tax purposes. |
• | The exchange notes are being offered in order to satisfy certain of our obligations under the registration rights agreement entered into in connection with the private offering of the outstanding notes. | |
• | The terms of the exchange notes to be issued in the exchange offer are substantially identical to the outstanding notes, except that the exchange notes will be freely tradable. | |
• | The exchange notes will be guaranteed by our wholly-owned domestic subsidiaries that guarantee our obligations under the senior secured credit facility. |
• | The exchange notes may be sold in theover-the-counter market, in negotiated transactions or through a combination of such methods. We do not plan to list the notes on a national market. |
• | Each broker-dealer that receives exchange notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of such exchange notes. The letter of transmittal states that by so acknowledging and delivering a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act of 1933. | |
• | This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of exchange notes received in exchange for outstanding notes where such outstanding notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. | |
• | We have agreed that, for a period of 180 days after the consummation of the exchange offer, we will make this prospectus available to any broker-dealer for use in connection with any such resale. See “Plan of Distribution.” |
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The following summary is qualified in its entirety by the more detailed information, including the section entitled “Risk Factors” and the financial statements and related notes, included elsewhere in this prospectus. Because this is a summary, it may not contain all the information that may be important to you. You should read the entire prospectus, including the financial statements and related notes, before making your investment decision. |
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New Units |
Aftermarket Parts and Services |
Global Presence and Market Leadership. We operate globally and provide coverage in 105 countries worldwide. We believe we are a leading provider of rotating equipment solutions in most of the markets we serve. We believe that rotating equipment solutions providers with global scale are positioned to disproportionately share in future industry growth as customers shift their business to the handful of companies with the ability to fulfill the full range of their equipment and service needs worldwide. | |
Largest Installed Base in the Industry. As of December 31, 2004, we estimate that there were more than 77,000 of our units in operation. We believe this represents approximately 38% of all the units in our classes of products that are currently in operation and is the largest installed base of such equipment in the industry. This significant scale advantage offers a number of competitive benefits, including the opportunity to significantly grow our aftermarket parts and services business in light of an industry outsourcing trend, a substantial source of stable, recurring, high-margin aftermarket revenue, and the capacity to support both a high level of reinvestment in research and development and a global service center network that is difficult for competitors with a smaller installed base to match. |
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Largest Network of Service and Support Centers. We have 24 service and support centers employing approximately 1,000 service personnel in 14 countries, providing coverage in 105 countries and offering a broad range of support services for both our own and other OEM’s equipment. Our coverage area of service centers servicing both turbo and reciprocating compressors is approximately 50% larger than that of our next closest competitor. Because many aftermarket parts and services sales decisions are made by clients at the local plant level on the basis of supplier expertise, local presence and response time, we believe that our global network protects our existing aftermarket activity and positions us for future growth in this business. | |
Leading Technology Platform. Our research efforts center around leading technologies that maximize operating performance by increasing efficiency, durability, reliability and versatility. For example, we spent approximately five years and over $60 million to develop our DATUM turbo compressor platform. We believe this platform is more efficient than competing offerings, offers clients the lowest total cost of ownership, reduces emissions and noise levels and improves ease and speed of maintenance. | |
Fastest Cycle Time. We believe we generally have the fastest cycle time (time from order booking to unit delivery) in the industry among manufacturers in our product range. On a typical oil and gas project, our fast cycle time can reduce unit delivery time by as much as twelve weeks, thus reducing project costs and providing earlierstart-up of the production equipment. | |
Substantial Investment in Systems. We have invested substantial resources to develop a number of key proprietary systems. These systems enable us to reduce costs, shorten cycle times, monitor our own and some of our competitors’ installed bases, effectively monitor and manage our responsiveness to client requests and manage the entire sales cycle from lead generation to order booking on a global basis. | |
Strong and Experienced Management Team. Our management team has an average of 17 years experience with us, including our CEO who has been with us for 24 years, and has extensive industry experience and longstanding customer relationships. This management team has been responsible for the successful services revenue growth and cost reduction initiatives that have driven our increased profitability. | |
Attractive Business Model. Our business model has several attractive features, including: |
• | Strong, Stable Cash Flow with Low Growth Capital Requirements. As a result of the recurring revenue from our aftermarket parts and services business, progress payments from customers that limit our need for additional working capital as we grow, and the moderate capital expenditures needed to support our services-based growth model, our business generates strong, recurring cash flows. | |
• | Visibility. We have a high degree of visibility into our forecasted financial performance because a substantial portion of our new unit orders is booked six to nine months in advance of delivery. At September 30, 2005, our new units backlog was $687.3 million or 64.5% above the new units backlog at September 30, 2004. |
Increase Sales of Aftermarket Parts and Services to Existing Installed Base. We are implementing a proactive approach to aftermarket parts and services sales that capitalizes on our newly created proprietary database of the installed base of our own and our competitors’ equipment. | |
Expand Aftermarket Parts and Services Business to Non-Dresser-Rand OEM Equipment. We believe the aftermarket parts and services market for non-Dresser-Rand equipment represents a significant growth opportunity that we have only just begun to pursue on a systematic basis. We intend to |
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capitalize on our expertise, broad network of service centers, flexible technology and existing client relationships with most major industry participants to grow our aftermarket parts and services solutions for non-Dresser-Rand equipment. | |
Grow Alliances. In the past three years, we have seen a high level of interest among our clients in seeking alliances with us, and we have entered into agreements with more than 30 of our major clients. We plan to leverage our market leadership, global presence and comprehensive range of products and services to continue to take advantage of this trend by pursuing new client alliances as well as strengthening our existing alliances. | |
Expand our Performance-Based Long-Term Service Contracts. We are growing the outsourced services market with our performance-based operations and maintenance solutions (known as ourAvailability+program), which are designed to offer clients significant value (improved equipment performance, decreased life cycle cost and higher availability levels) versus the traditional services and products approach. | |
Introduce New and Innovative Products and Technologies. We believe we are an industry leader in introducing new, value-added technology. Product innovation has historically provided, and we believe will continue to provide, significant opportunities to increase revenues from both new product sales and upgrades to our, and other OEMs’, installed base of equipment. We plan to continue developing innovative products, including new compressor platforms for subsea and underground applications, which would further open up new markets to us. | |
Continue to Improve Profitability. Since the fourth quarter of 2002, we have implemented a number of productivity improvement programs across our entire company that have permitted us to streamline our operations. From September 30, 2002 through December 31, 2004, we consolidated eight facilities and reduced headcount from 5,942 to 4,631 employees, and have significantly increased our profitability. We are focused on continuing to improve our cost position in every area of our business, and we believe there is substantial opportunity to further increase our productivity in the future. | |
Selectively Pursue Acquisitions. We intend to continue our disciplined pursuit of acquisition opportunities that fit our business strategy. |
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General | In connection with the private offering, we entered into a registration rights agreement with the placement agents in which we agreed, among other things, to deliver this prospectus to you and to complete the exchange offer within 300 days after the date of first issuance of the outstanding notes. You are entitled to exchange in the exchange offer your outstanding notes for exchange notes which are identical in all material respects to the outstanding notes except: | |
• the exchange notes have been registered under the Securities Act; | ||
• the exchange notes are not entitled to any registration rights which are applicable to the outstanding notes under the registration rights agreement; and | ||
• the liquidated damages provisions of the registration rights agreement are not applicable to the exchange notes. | ||
The Exchange Offer | We are offering to exchange $370,000,000 principal amount of our 73/8% senior subordinated notes due 2014, which have been registered under the Securities Act, for any and all of our outstanding 73/8% senior subordinated notes due 2014. | |
You may only exchange outstanding notes in a principal amount of $1,000 or in integral multiples of $1,000 in excess thereof. | ||
Resale | Based on an interpretation by the staff of the Securities and Exchange Commission (the “SEC”) set forth in no-action letters issued to third parties, we believe that the exchange notes issued pursuant to the exchange offer in exchange for outstanding notes may be offered for resale, resold and otherwise transferred by you (unless you are our “affiliate” within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that: | |
• you are acquiring the exchange notes in the ordinary course of your business; and | ||
• you have not engaged in, do not intend to engage in, and have no arrangement or understanding with any person to participate in, a distribution of the exchange notes. | ||
If you are a broker-dealer and receive exchange notes for your own account in exchange for outstanding notes that you acquired as a result of market-making activities or other trading activities, you must acknowledge that you will deliver this prospectus in connec- |
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tion with any resale of the exchange notes. See “Plan of Distribution.” | ||
Any holder of outstanding notes who: | ||
• is our affiliate; | ||
• does not acquire exchange notes in the ordinary course of its business; or | ||
• tenders its outstanding notes in the exchange offer with the intention to participate, or for the purpose of participating, in a distribution of exchange notes | ||
cannot rely on the position of the staff of the SEC enunciated inMorgan Stanley & Co. Incorporated (available June 5, 1991) andExxon Capital Holdings Corporation (available May 13, 1988), as interpreted in the SEC’s letter toShearman & Sterling, dated available July 2, 1993, or similar no-action letters and, in the absence of an exemption therefrom, must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale of the exchange notes. | ||
Expiration Date | The exchange offer will expire at 4:00 p.m., New York City time, on , 2006, unless extended by us. We do not currently intend to extend the expiration date. | |
Withdrawal | You may withdraw the tender of your outstanding notes at any time prior to the expiration of the exchange offer. We will return to you any of your outstanding notes that are not accepted for any reason for exchange, without expense to you, promptly after the expiration or termination of the exchange offer. | |
Conditions to the Exchange Offer | The exchange offer is subject to customary conditions, which we may waive. See “The Exchange Offer — Conditions to the Exchange Offer.” | |
Procedures for Tendering Outstanding Notes | If you wish to participate in the exchange offer, you must complete, sign and date the applicable accompanying letter of transmittal, or a facsimile of such letter of transmittal, according to the instructions contained in this prospectus and the letter of transmittal. You must then mail or otherwise deliver the applicable letter of transmittal, or a facsimile of such letter of transmittal, together with the outstanding notes and any other required documents, to the exchange agent at the address set forth on the cover page of the letter of transmittal. | |
If you hold outstanding notes through The Depository Trust Company (“DTC”) and wish to participate in the exchange offer, you must comply with the Automated Tender Offer Program procedures of DTC by which you will agree to be bound by the letter of transmittal. By signing, or agreeing to be bound by, the letter of transmittal, you will represent to us that, among other things: | ||
• you are not our “affiliate” within the meaning of Rule 405 under the Securities Act; |
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• you do not have an arrangement or understanding with any person or entity to participate in the distribution of the exchange notes; | ||
• you are acquiring the exchange notes in the ordinary course of your business; and | ||
• if you are a broker-dealer that will receive exchange notes for your own account in exchange for outstanding notes that were acquired as a result of market-making activities, then you will deliver a prospectus, as required by law, in connection with any resale of such exchange notes. | ||
Special Procedures for Beneficial Owners | If you are a beneficial owner of outstanding notes that are registered in the name of a broker, dealer, commercial bank, trust company or other nominee, and you wish to tender those outstanding notes in the exchange offer, you should contact the registered holder promptly and instruct the registered holder to tender those outstanding notes on your behalf. If you wish to tender on your own behalf, you must, prior to completing and executing the applicable letter of transmittal and delivering your outstanding notes, either make appropriate arrangements to register ownership of the outstanding notes in your name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time and may not be able to be completed prior to the expiration date. | |
Guaranteed Delivery Procedures | If you wish to tender your outstanding notes and your outstanding notes are not immediately available or you cannot deliver your outstanding notes, the applicable letter of transmittal or any other required documents, or you cannot comply with the applicable procedures under DTC’s Automated Tender Offer Program for transfer of book-entry interests, prior to the expiration date, you must tender your outstanding notes according to the guaranteed delivery procedures set forth in this prospectus under “The Exchange Offer — Guaranteed Delivery Procedures.” | |
Effect on Holders of Outstanding Notes | As a result of the making of, and upon acceptance for exchange of all validly tendered outstanding notes pursuant to the terms of the exchange offer, we will have fulfilled a covenant under the applicable registration rights agreement. If you do not tender your outstanding notes in the exchange offer, you will continue to be entitled to all the rights and limitations applicable to the outstanding notes as set forth in the indenture, except we will not have any further obligation to you to provide for the exchange and registration of the outstanding notes under the registration rights agreement. To the extent that outstanding notes are tendered and accepted in the exchange offer, the trading market for remaining outstanding notes that are not so tendered and exchanged could be adversely affected. | |
Consequences of Failure to Exchange | All untendered outstanding notes will continue to be subject to the restrictions on transfer set forth in the outstanding notes and in the |
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indenture. In general, the outstanding notes may not be offered or sold unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. Other than in connection with the exchange offer, we do not currently anticipate that we will register the outstanding notes under the Securities Act. | ||
United States Federal Income Tax Consequences | The exchange of outstanding notes in the exchange offer will not be a taxable event for United States federal income tax purposes. See “United States Federal Income Tax Consequences of the Exchange Offer.” | |
Use of Proceeds | We will not receive any cash proceeds from the issuance of exchange notes in the exchange offer. See “Use of Proceeds.” | |
Exchange Agent | Citibank, N.A. is the exchange agent for the exchange offer. The address and telephone numbers of the exchange agent are set forth in the section captioned “The Exchange Offer — Exchange Agent” of this prospectus. |
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Issuer | Dresser-Rand Group Inc. | |
Notes Offered | $370,000,000 aggregate principal amount of 73/8% senior subordinated notes due 2014. | |
Maturity Date | November 1, 2014. | |
Interest | 73/8% per annum, payable semi-annually in arrears. | |
Interest Payment Dates | May 1 and November 1, beginning on May 1, 2005. | |
Optional Redemption | We may redeem any of the exchange notes beginning on November 1, 2009. The initial redemption price is 103.688% of their principal amount, plus accrued interest. The redemption price will decline each year after 2009 and will be 100% of their principal amount, plus accrued interest, beginning on November 1, 2012. | |
We may also redeem any of the exchange notes at any time prior to November 1, 2009, at a redemption price equal to 100% of the principal amount of notes to be redeemed, plus the Applicable Premium, defined under the section entitled “Description of the Notes,” as of, and accrued interest to, the redemption date. | ||
In addition, at any time prior to November 1, 2007, we may redeem up to 35% of the exchange notes at a redemption price of 107.375% of their principal amount plus accrued interest, using the proceeds from sales of certain kinds of capital stock. We may make such redemption only if, after such redemption, at least 65% of the aggregate principal amount of exchange notes originally issued under the indenture governing the exchange notes remains outstanding. In September 2005, we used a portion of the proceeds from the sale of our common stock to redeem $50,000,000 aggregate principal amount of the notes. | ||
Change of Control | Upon a change of control, as defined under the section entitled “Description of the Notes,” we will be required to make an offer to purchase the exchange notes then outstanding at a purchase price equal to 101% of their principal amount, plus accrued interest to the date of repurchase. We may not have sufficient funds available at the time of a change of control to repurchase the exchange notes. | |
Guarantees | The wholly-owned domestic subsidiaries of the issuer that guarantee the issuer’s obligations under the senior secured credit facility will guarantee the exchange notes. Each guarantor will provide a guarantee of the payment of the principal, premium and interest on the exchange notes on a senior subordinated, unsecured basis. | |
The guarantee by each guarantor will be subordinated to all existing and future senior indebtedness of such guarantor, including such guarantor’s guarantee of the issuer’s obligations under the senior secured credit facility. A substantial portion of our business is conducted through our foreign operating subsidiaries and non- |
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wholly-owned subsidiaries, none of which will be a guarantor of the exchange notes. See Note 21 to the combined financial statements included elsewhere in this prospectus. | ||
Ranking | The outstanding notes are the issuer’s only outstanding senior subordinated unsecured obligations, and the exchange notes will be the issuer’s senior subordinated, unsecured obligations. Accordingly, the exchange notes will rank: | |
• junior to any of the issuer’s existing and future senior indebtedness, including borrowings under the senior secured credit facility; | ||
• equally with any outstanding notes that are not exchanged in the exchange offer; | ||
• equally with any of the issuer’s future senior subordinated indebtedness; and | ||
• senior to any of the issuer’s future indebtedness that expressly provides for its subordination to the exchange notes. | ||
In the event that our secured creditors, including the lenders under our senior secured credit facility, exercise their rights with respect to our assets pledged to them, our secured creditors would be entitled to be repaid in full from the proceeds of those assets before those proceeds would be available for distribution to other creditors, including holders of the exchange notes. The assets of the issuer’s subsidiaries that are not guarantors of the exchange notes will be subject to the prior claims of all creditors, including trade creditors, of those non-guarantor subsidiaries. | ||
As of September 30, 2005: | ||
• We had $599.2 million principal amount of indebtedness, which includes the exchange notes and $229.0 million (excluding $171.3 million in letters of credit) of senior secured indebtedness under the senior secured credit facility; | ||
• An additional $178.7 million (giving effect to $171.3 million in letters of credit) was available for borrowing under the senior secured credit facility, which indebtedness would be senior secured indebtedness; and | ||
• Subsidiaries of the issuer that are not guarantors of the exchange notes had $358 million of indebtedness and other liabilities, including trade payables but excluding intercompany liabilities. | ||
Certain Covenants | The terms of the exchange notes will limit our ability and the ability of our subsidiaries to: | |
• incur additional indebtedness; | ||
• create liens; | ||
• pay dividends and make distributions in respect of capital stock; | ||
• redeem capital stock; | ||
• make investments or certain other restricted payments; |
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• sell assets; | ||
• issue or sell stock of restricted subsidiaries; | ||
• enter into transactions with affiliates; and | ||
• effect consolidations or mergers. | ||
These covenants are subject to a number of important qualifications and exceptions. See “Description of the Notes.” | ||
No Public Market | The exchange notes will be freely transferable but will be new securities for which there will not initially be a market. Accordingly, there is no assurance that a market for the exchange notes will develop or as to the liquidity of any market. The placement agents in the private offering of the outstanding notes have advised the issuer that they currently intend to make a market in the exchange notes. The placement agents are not obligated, however, to make a market in the exchange notes, and any such market-making may be discontinued by the placement agents in their discretion at any time without notice. |
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Predecessor | Successor | |||||||||||||||||||||||||||||||
Period | Period | Pro Forma | Pro Forma | |||||||||||||||||||||||||||||
Year Ended | January 1 | Nine Months | October 30 | Nine Months | Year | Nine Months | ||||||||||||||||||||||||||
December 31, | through | Ended | through | Ended | Ended | Ended | ||||||||||||||||||||||||||
October 29, | September 30, | December 31, | September 30, | December 31, | September 30, | |||||||||||||||||||||||||||
2002 | 2003 | 2004 | 2004 | 2004 | 2005 | 2004 | 2005 | |||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||
Statement of Operations Data: | ||||||||||||||||||||||||||||||||
Total revenues | $ | 1,031,353 | $ | 1,335,350 | $ | 715,495 | $ | 657,494 | $ | 199,907 | $ | 846,237 | $ | 915,402 | $ | 846,237 | ||||||||||||||||
Cost of goods sold | 865,858 | 1,132,047 | 538,042 | 499,208 | 149,564 | 657,845 | 704,497 | 652,751 | ||||||||||||||||||||||||
Gross profit | 165,495 | 203,303 | 177,453 | 158,286 | 50,343 | 188,392 | 210,905 | 193,486 | ||||||||||||||||||||||||
Selling and administrative expenses | 138,484 | 156,129 | 122,700 | 110,493 | 21,499 | 118,331 | 143,094 | 118,331 | ||||||||||||||||||||||||
Research and development expenses | 8,044 | 8,107 | 5,670 | 4,695 | 1,040 | 4,745 | 6,710 | 4,745 | ||||||||||||||||||||||||
Write-off of purchased in-process research and development assets | — | — | — | — | 1,800 | — | — | — | ||||||||||||||||||||||||
Restructuring charges(1) | 5,185 | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Operating income | 13,782 | 39,067 | 49,083 | 43,098 | 26,004 | 65,316 | 61,101 | 70,410 | ||||||||||||||||||||||||
Interest income (expense), net | (776 | ) | 1,938 | 3,156 | 2,306 | (9,654 | ) | (44,619 | ) | (50,103 | ) | (39,989 | ) | |||||||||||||||||||
Early redemption premium on debt | — | — | — | — | — | (3,688 | ) | — | — | |||||||||||||||||||||||
Other income (expense), net | 15,000 | (9,202 | ) | 1,882 | (2,754 | ) | (1,846 | ) | (1,558 | ) | 36 | (1,558 | ) | |||||||||||||||||||
Income (loss) before income taxes | 28,006 | 31,803 | 54,121 | 42,650 | 14,504 | 15,451 | 11,034 | 28,863 | ||||||||||||||||||||||||
(Benefit) provision for income taxes(2) | 11,910 | 11,438 | 11,970 | 4,918 | 7,275 | 10,560 | 15,997 | 9,845 | ||||||||||||||||||||||||
Net income (loss) | $ | 16,096 | $ | 20,365 | $ | 42,151 | $ | 37,732 | $ | 7,229 | $ | 4,891 | $ | (4,963 | ) | $ | 19,018 | |||||||||||||||
Predecessor | Successor | |||||||||||||||||||||||||||||||
Period | Period | Pro Forma | Pro Forma | |||||||||||||||||||||||||||||
Year Ended | January 1 | Nine Months | October 30 | Nine Months | Year | Nine Months | ||||||||||||||||||||||||||
December 31, | through | Ended | through | Ended | Ended | Ended | ||||||||||||||||||||||||||
October 29, | September 30, | December 31, | September 30, | December 31, | September 30, | |||||||||||||||||||||||||||
2002 | 2003 | 2004 | 2004 | 2004 | 2005 | 2004 | 2005 | |||||||||||||||||||||||||
(In thousands except ratios) | ||||||||||||||||||||||||||||||||
Cash flow data: | ||||||||||||||||||||||||||||||||
Cash flows provided by (used in) operating activities | $ | 42,029 | $ | 50,963 | $ | 57,729 | $ | 64,484 | $ | 17,948 | $ | 222,384 | ||||||||||||||||||||
Cash flows provided by (used in) investing activities | 3,813 | (7,089 | ) | (4,907 | ) | (1,772 | ) | (1,126,939 | ) | (57,721 | ) | |||||||||||||||||||||
Cash flows provided by (used in) financing activities | (18,759 | ) | (63,487 | ) | (52,030 | ) | (50,772 | ) | 1,217,099 | (161,141 | ) | |||||||||||||||||||||
Other financial data: | ||||||||||||||||||||||||||||||||
EBITDA(3)(4)(5) | $ | 62,604 | $ | 58,974 | $ | 73,680 | $ | 60,628 | $ | 40,427 | $ | 108,115 | $ | 127,413 | $ | 116,897 | ||||||||||||||||
Depreciation and amortization | 33,822 | 29,109 | 22,715 | 20,284 | 16,269 | 48,045 | 66,276 | 48,045 | ||||||||||||||||||||||||
Capital expenditures | 13,670 | 7,590 | 7,701 | 4,532 | 1,791 | 10,747 | ||||||||||||||||||||||||||
Ratio of Earnings to Fixed Charges(6) | 3.9 | x | 5.3 | x | 11.6 | x | 9.7 | x | 2.4 | x | 1.3 | x | 1.2 | x | 1.6 | x |
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Predecessor | Successor | ||||||||||||
As of | As of | As of | |||||||||||
December 31, | December 31, | September 30, | |||||||||||
2003 | 2004 | 2005 | |||||||||||
(In thousands) | |||||||||||||
Balance Sheet Data: | |||||||||||||
Cash and cash equivalents | $ | 41,537 | $ | 111,500 | $ | 109,504 | |||||||
Property, plant and equipment, net | 101,438 | 226,764 | 233,598 | ||||||||||
Total assets | 1,063,875 | 1,751,074 | 1,660,373 | ||||||||||
Goodwill | 10,214 | 423,330 | 399,286 | ||||||||||
Debt: | |||||||||||||
Short-term debt | 3,716 | 2,734 | 63 | ||||||||||
Long-term debt, including current maturities | 213 | 400,679 | 229,148 | ||||||||||
Senior subordinated notes | — | 420,000 | 370,000 | ||||||||||
Total debt | 3,929 | 823,413 | 599,211 | ||||||||||
Partnership interest | 565,035 | — | — | ||||||||||
Stockholders’ equity | — | 452,897 | 486,529 |
(1) | Includes severance expenses and facility exit costs associated with our corporate restructuring activities. |
(2) | On the closing date of the transactions we became a corporation subject to corporate income taxes in the United States. In the United States, we were a partnership during the Predecessor periods presented. The data presented does not give effect to income taxes we would have been required to recognize if we were organized as a corporation, except with regard to the pro forma period. |
(3) | EBITDA is defined as net income (loss) before interest, taxes, depreciation and amortization. EBITDA is not intended to represent cash flow from operations as defined by GAAP and should not be used as an alternative to net income as an indicator of operating performance or to cash flow as a measure of liquidity. While EBITDA is frequently used as a measure of operations and the ability to meet debt service requirements, it is not necessarily comparable to other similarly titled captions of other companies due to potential inconsistencies in the method of calculation. We present EBITDA because we consider it an important supplemental measure of our performance and believe it is frequently used by our investors and other interested parties, as well as by our management, in the evaluation of companies in our industry, many of which present EBITDA when reporting their results. In addition, EBITDA provides additional information used by our management and board of directors to facilitate internal comparisons to historical operating performance of prior periods. Further, management believes EBITDA facilitates their operating performance comparisons from period to period because it excludes potential differences caused by variations in capital structures (affecting interest expense), tax positions (such as impact of changes in effective tax rates or net operating losses) and the age and book depreciation of facilities and equipment (affecting relative depreciation expense). The following table reconciles EBITDA to net income (loss): |
Predecessor | Successor | ||||||||||||||||||||||||||||||||
Pro Forma | |||||||||||||||||||||||||||||||||
Period | Period | Pro Forma | Nine | ||||||||||||||||||||||||||||||
Year Ended | January 1 | Nine Months | October 30 | Nine Months | Year | Months | |||||||||||||||||||||||||||
December 31, | through | Ended | through | Ended | Ended | Ended | |||||||||||||||||||||||||||
October 29, | September 30, | December 31, | September 30, | December 31, | September 30, | ||||||||||||||||||||||||||||
2002 | 2003 | 2004 | 2004 | 2004 | 2005 | 2004 | 2005 | ||||||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||||||||
Net income (loss) | $ | 16,096 | $ | 20,365 | $ | 42,151 | $ | 37,732 | $ | 7,229 | $ | 4,891 | $ | (4,963 | ) | $ | 19,018 | ||||||||||||||||
Provision (benefit) for income taxes | 11,910 | 11,438 | 11,970 | 4,918 | 7,275 | 10,560 | 15,997 | 9,845 | |||||||||||||||||||||||||
Interest expense (income) net | 776 | (1,938 | ) | (3,156 | ) | (2,306 | ) | 9,654 | 44,619 | 50,103 | 39,989 | ||||||||||||||||||||||
Depreciation and amortization | 33,822 | 29,109 | 22,715 | 20,284 | 16,269 | 48,045 | 66,276 | 48,045 | |||||||||||||||||||||||||
EBITDA | $ | 62,604 | $ | 58,974 | $ | 73,680 | $ | 60,628 | $ | 40,427 | $ | 108,115 | $ | 127,413 | $ | 116,897 | |||||||||||||||||
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(4) | The following table provides supplemental information as to identified expenses that are reflected in EBITDA that are expected to be either reduced or increased, as applicable, due to the change in ownership of Dresser-Rand Group Inc. as a result of the acquisition: |
Predecessor | Successor | ||||||||||||||||||||||||||||||||
Pro Forma | |||||||||||||||||||||||||||||||||
Period | Pro Forma | Nine | |||||||||||||||||||||||||||||||
Year Ended | Period January 1 | Nine Months | October 30 | Nine Months | Year | Months | |||||||||||||||||||||||||||
December 31, | through | Ended | through | Ended | Ended | Ended | |||||||||||||||||||||||||||
October 29, | September 30, | December 31, | September 30, | December 31, | September 30, | ||||||||||||||||||||||||||||
2002 | 2003 | 2004 | 2004 | 2004 | 2005 | 2004 | 2005 | ||||||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||||||||
Net reduction in SFAS 106 expense(a) | $ | 8,512 | $ | 10,033 | $ | 9,322 | $ | 8,397 | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||
Excess (additional) corporate allocation(b) | (4,876 | ) | 3,816 | 2,122 | 1,913 | — | — | 2,122 | — | ||||||||||||||||||||||||
Removal of incremental corporate overhead(c) | — | 5,091 | 8,025 | 7,994 | — | — | 8,025 | — | |||||||||||||||||||||||||
Pension(d) | (2,317 | ) | 8,079 | 1,529 | 1,632 | — | — | 1,085 | — | ||||||||||||||||||||||||
Compensation adjustment(e) | (150 | ) | (150 | ) | (125 | ) | (112 | ) | — | — | — | — | |||||||||||||||||||||
Non-cash compensation(f) | — | — | — | — | 75 | 3,152 | 75 | 3,152 | |||||||||||||||||||||||||
$ | 1,169 | $ | 26,869 | $ | 20,873 | $ | 19,824 | $ | 75 | $ | 3,152 | $ | 11,307 | $ | 3,152 | ||||||||||||||||||
(a) | Reflects the adjustment to historical expense for the change in postretirement benefits other than pension expense due to Ingersoll-Rand’s retention of the obligations for all employees who are retired or eligible to retire as well as the results of actuarial valuations performed as of the transaction date for the portion retained by us. | |
(b) | Reflects the difference between the corporate overhead expenses allocated to us by Ingersoll-Rand and our estimated annual stand-alone expenses. | |
(c) | Reflects adjustment for removal of incremental corporate allocation initiated in 2003 by Ingersoll-Rand. | |
(d) | Reflects an adjustment for additional funding of certain pension plans and the elimination of actuarial losses through purchase accounting. | |
(e) | Reflects CEO compensation adjustment of $150,000 annually. |
(f) | Reflects employee non-cash equity compensation. |
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(5) | The following table provides supplemental information as to unusual and other items that are reflected in EBITDA: |
Predecessor | Successor | |||||||||||||||||||||||||||||||
Period | Period | Pro Forma | Pro Forma | |||||||||||||||||||||||||||||
Year Ended | January 1 | Nine Months | October 30 | Nine Months | Year | Nine Months | ||||||||||||||||||||||||||
December 31, | through | Ended | through | Ended | Ended | Ended | ||||||||||||||||||||||||||
October 29, | September 30, | December 31, | September 30, | December 31, | September 30, | |||||||||||||||||||||||||||
2002 | 2003 | 2004 | 2004 | 2004 | 2005 | 2004 | 2005 | |||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||
Restructuring costs | $ | 5,185 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||
Productivity measures(a) | — | 11,696 | 4,679 | 4,841 | (62 | ) | — | 4,617 | — | |||||||||||||||||||||||
Nigeria loss contract(b) | — | 4,843 | 6,437 | 5,935 | 206 | — | 6,643 | — | ||||||||||||||||||||||||
Nigeria casualty losses(c) | — | 2,750 | — | — | — | — | — | — | ||||||||||||||||||||||||
Provision for obsolete material(d) | — | 3,300 | 2,100 | 3,000 | — | — | 2,100 | — | ||||||||||||||||||||||||
New York State grant(e) | (8,000 | ) | 1,289 | — | — | — | — | — | — | |||||||||||||||||||||||
Equity (earnings) losses(f) | 479 | 133 | 1,013 | 1,010 | (194 | ) | 560 | 819 | 560 | |||||||||||||||||||||||
Insurance claim(g) | (10,145 | ) | — | — | — | — | — | — | — | |||||||||||||||||||||||
Settlement of product liability claim(h) | — | — | (4,500 | ) | (4,500 | ) | — | — | (4,500 | ) | — | |||||||||||||||||||||
China receivables(i) | — | — | 970 | 970 | — | — | 970 | — | ||||||||||||||||||||||||
Write-off of purchased in-process research and development assets | — | — | — | — | 1,800 | — | — | — | ||||||||||||||||||||||||
Inventory step-up write off(j) | — | — | — | — | 2,281 | 5,094 | — | 5,094 | ||||||||||||||||||||||||
Other expense (income)(k) | 1,535 | (2,976 | ) | (826 | ) | (192 | ) | 1,017 | (266 | ) | 191 | (266 | ) | |||||||||||||||||||
Note premium(l) | — | — | — | — | — | 3,688 | — | 3,688 | ||||||||||||||||||||||||
Hedge (gains) losses(m) | — | — | (1,095 | ) | (5 | ) | 18 | 1,957 | (1,077 | ) | 1,957 | |||||||||||||||||||||
Pension loss amortization(n) | — | — | — | — | — | 187 | — | 187 | ||||||||||||||||||||||||
Franchise taxes(o) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 707 | $ | — | $ | 707 | ||||||||||||||||
$ | (10,946 | ) | $ | 21,035 | $ | 8,778 | $ | 11,059 | $ | 5,066 | $ | 11,927 | $ | 9,763 | $ | 11,927 | ||||||||||||||||
(a) | Reflects severance expenses associated with our efficiency initiatives. These expenses were included in cost of goods sold and selling and administrative expenses. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” | |
(b) | Reflects losses under (i) a contract imposed on the business by Halliburton Industries terminated at the end of 2004, and (ii) a contract in Nigeria we were forced to exit because of force majeure. | |
(c) | Reflects losses of inventory stocks resulting from a fire in a warehouse in Nigeria. | |
(d) | Offsets impact of decision to increase obsolete and slow moving inventory reserve level. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” | |
(e) | Reflects one-time income from a New York State grant for the year ended December 31, 2002, and one-time charge related to refunding a portion of the grant in the year ended December 31, 2003. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” | |
(f) | Non-cash (gains) losses in joint ventures. | |
(g) | Reflects gains from the settlement of an insurance claim relating to a fire that occurred in 2000. | |
(h) | Reflects one-time gain from settlement of a legal claim. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” | |
(i) | Reflects write-off of receivables related to business closure. |
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(j) | As a result of the transactions, we wrote up inventory in the amount of $7.4 million. Of this amount, $2.3 million was expensed in the two-month period from October 30, 2004 through December 31, 2004 and $5.1 million was expensed in the nine months ended September 30, 2005. | |
(k) | Non-operating income and expense and other non-cash charges and credits. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” | |
(l) | Reflects premium paid on early redemption of $50 million aggregate principal amount of the notes. | |
(m) | Reflects (gains) losses due to hedging of foreign currencies. | |
(n) | Reflects pension loss amortization. | |
(o) | Reflects franchise taxes. |
(6) | The ratio of earnings to fixed charges is computed by dividing earnings by fixed charges. For this purpose, earnings include pre-tax income from continuing operations and fixed charges include interest, whether expensed or capitalized, and an estimate of interest within rental expense. |
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There may be adverse consequences if you do not exchange your outstanding notes. |
Our substantial indebtedness could adversely affect our financial condition and prevent the issuer and the guarantors from fulfilling their obligations under the exchange notes and the guarantees. |
• | making it more difficult for us to pay interest and satisfy our debt obligations, including our obligations with respect to the exchange notes; | |
• | making it more difficult to self-insure and obtain surety bonds or letters of credit; | |
• | increasing our vulnerability to general adverse economic and industry conditions; | |
• | limiting our ability to obtain additional financing to fund future working capital, capital expenditures, research and development or other general corporate or business requirements; | |
• | limiting our flexibility in planning for, or reacting to, changes in our business and in our industry; and | |
• | placing us at a competitive disadvantage. |
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We require a significant amount of cash to service our indebtedness. Our ability to generate cash depends on many factors beyond our control. |
The issuer and certain of the guarantors are holding companies, and their only source of cash to satisfy their payment obligations with respect to the exchange notes is distributions from their respective subsidiaries. |
Your right to receive payments on the exchange notes will be junior to the issuer’s existing and future senior indebtedness, and the guarantees of the exchange notes will be junior to all the guarantors’ existing and future senior indebtedness. |
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Our secured creditors will be entitled to be paid in full from the proceeds of our pledged assets before those proceeds will be available for payment on the exchange notes. |
Certain subsidiaries are not included as guarantors. |
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The covenants in the senior secured credit facility and the indenture governing the exchange notes impose restrictions that may limit our operating and financial flexibility and may limit our ability to make payments on the exchange notes. |
• | incur liens; | |
• | borrow money, guarantee debt and, in the case of restricted subsidiaries, sell preferred stock; | |
• | issue redeemable preferred stock; | |
• | pay dividends; | |
• | make redemptions and repurchases of certain capital stock; | |
• | make capital expenditures and specified types of investments; | |
• | prepay, redeem or repurchase subordinated debt; | |
• | sell assets or engage in acquisitions, mergers, consolidations and asset dispositions; | |
• | amend material agreements; | |
• | change the nature of our business; | |
• | engage in affiliate transactions; and | |
• | restrict dividends or other payments from restricted subsidiaries. |
The guarantees may not be enforceable because of fraudulent conveyance laws. |
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• | incurred this debt with the intent of hindering, delaying or defrauding current or future creditors; or | |
• | received less than reasonably equivalent value or fair consideration for incurring this debt and the guarantor: |
• | was insolvent or was rendered insolvent by reason of the related financing transactions; | |
• | was engaged, or about to engage, in a business or transaction for which its remaining assets constituted unreasonably small capital to carry on its business; or | |
• | intended to incur, or believed that it would incur, debts beyond its ability to pay these debts as they mature, as all the foregoing terms are defined in or interpreted under the relevant fraudulent transfer or conveyance statutes, |
• | it could not pay its debts or contingent liabilities as they become due; | |
• | the sum of its debts, including contingent liabilities, was greater than its assets, at fair valuation; or | |
• | the present fair saleable value of its assets was less than the amount required to pay the probable liability on its total existing debts and liabilities, including contingent liabilities, as they become absolute and mature. |
• | were not insolvent or rendered insolvent by the incurrence; and | |
• | had sufficient capital to run their businesses effectively. |
Your ability to transfer the exchange notes may be limited by the absence of an active trading market. |
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The issuer may be unable to purchase the exchange notes upon a change of control. |
Because the exchange notes are registered in the name of a single registered holder, beneficial owners of notes held in book-entry form may have difficulties exercising their rights as noteholders. |
We have identified material weaknesses in our internal controls, which could affect our ability to ensure timely and reliable financial reports and the ability of our auditors to attest to the effectiveness of our internal controls. |
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• | identification by our auditors of misstatements in internal drafts of our financial statements that were not initially identified by our internal control process, indicating a weakness with respect to our ability to properly monitor and account for non-routine transactions, and to apply GAAP in transactions subject to new or complex accounting pronouncements; | |
• | the need for a Chief Financial Officer with SEC reporting experience, a Director of Financial Reporting with strong accounting and SEC reporting experience and additional skilled accounting and SEC experienced personnel to enhance the accounting department to remedy insufficient experience in public company accounting and periodic reporting matters among our existing staff; | |
• | the need to develop a tax department; | |
• | the need to develop a risk management department; | |
• | the need to establish an internal audit department; and | |
• | the need to enhance our documentation of our systems and controls. |
• | hiring, in the third quarter of 2005, an Assistant Controller-Director Tax Worldwide; | |
• | hiring an experienced Chief Financial Officer with broad finance and SEC reporting experience, a Chief Accounting Officer with significant accounting and SEC reporting experience, a Director of Risk Management, a Director of Internal Audit and a General Counsel; | |
• | changing the organizational relationship of the worldwide accounting organization so that the Controllers of the operation units report directly to our Vice-President, Controller and Chief Accounting Officer; | |
• | engaging additional outside personnel to assist our internal personnel with audit work and SEC reporting; | |
• | outsourcing a substantial portion of our tax functions to a professional service firm; and | |
• | engaging external resources to supplement our Section 404 evaluation efforts. |
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• | During the third quarter of 2003, a management review identified an issue relating to work-in-process inventory at two of our manufacturing locations. It was determined that certain work-in-process inventory had not been properly relieved upon shipment during the time period from 1999 through 2003, resulting in an overstatement of inventory. Management immediately began an extensive, in-depth review of our accounts and records. As a consequence of these problems, we implemented an internal review of the functions and processes at the two plants that were involved, identified gaps in our internal controls and put in place remedial measures. At the end of this review and remediation process, our auditors determined that we had successfully eliminated the weakness in our inventory controls. | |
• | During June 2004, management uncovered an issue relating to payroll fraud at our U.S. Shared Services Unit in Olean, NY. It was determined that the payroll supervisor had misappropriated funds through the payroll system from February 1994 to June 2004. A thorough investigation was undertaken involving Dresser-Rand Company personnel, Ingersoll-Rand Internal Audit and the forensic investigations section of an independent accounting firm. The review of past payroll records from both Oracle (2/01 - 6/04) and GEAC (1/90 - 12/00) systems revealed that $1.042 million had been illegally processed through payroll and diverted to the payroll supervisor’s bank account. As part of the investigation, steps were taken to ensure that proper segregation of duties exist such that no one in the payroll, human resources or information technology areas has update capability for both the payroll and the human resources systems. |
We recently became subject to financial reporting and other requirements for which our accounting and other management systems and resources may not be adequately prepared. |
Our operating results could be harmed during economic or industry downturns. |
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We may not be successful in implementing our business strategy to increase our aftermarket parts and services revenue. |
We face intense competition that may cause us to lose market share and harm our financial performance. |
We may not be able to complete, or achieve the expected benefits from, any future acquisitions, which could adversely affect our growth. |
• | use of available cash, new borrowings or borrowings under our senior secured credit facility to consummate the acquisition; | |
• | demands on management related to the increase in our size after an acquisition; | |
• | diversion of management’s attention from existing operations to the integration of acquired companies; | |
• | integration into our existing systems; | |
• | difficulties in the assimilation and retention of employees; and | |
• | potential adverse effects on our operating results. |
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Economic, political and other risks associated with international sales and operations could adversely affect our business. |
• | changes in foreign currency exchange rates; | |
• | exchange controls; | |
• | changes in a specific country’s or region’s political or economic conditions, particularly in emerging markets; | |
• | civil unrest in any of the countries in which we operate; | |
• | tariffs, other trade protection measures and import or export licensing requirements; | |
• | potentially negative consequences from changes in tax laws; | |
• | difficulty in staffing and managing widespread operations; | |
• | differing labor regulations; | |
• | requirements relating to withholding taxes on remittances and other payments by subsidiaries; | |
• | different regimes controlling the protection of our intellectual property; | |
• | restrictions on our ability to own or operate subsidiaries, make investments or acquire new businesses in these jurisdictions; | |
• | restrictions on our ability to repatriate dividends from our subsidiaries; | |
• | difficulty in collecting international accounts receivable; | |
• | difficulty in enforcement of contractual obligations governed bynon-U.S. law; | |
• | unexpected transportation delays or interruptions; | |
• | unexpected changes in regulatory requirements; and | |
• | the burden of complying with multiple and potentially conflicting laws. |
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In the past, our Brazilian subsidiary has engaged in business transactions involving a Cuban entity that could subject us to potential sanctions. |
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If we lose our senior management, our business may be adversely affected. |
Environmental compliance costs and liabilities could affect our financial condition adversely. |
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Failure to maintain a safety performance that is acceptable to our clients could result in the loss of future business. |
Our business could suffer if we are unsuccessful in negotiating new collective bargaining agreements. |
We are controlled by First Reserve, whose interests may not be aligned with yours. |
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We are a “controlled company” within the meaning of the New York Stock Exchange rules and, as a result, will qualify for, and intend to rely on, exemptions from certain corporate governance requirements. |
Our historical financial information may not be comparable to future periods and some of it has not been audited or reviewed. |
We did not have a recent operating history as a stand-alone company prior to the acquisition. |
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We may be faced with unexpected product claims or regulations as a result of the hazardous applications in which our products are used. |
Third parties may infringe our intellectual property or we may infringe the intellectual property of third parties, and we may expend significant resources enforcing or defending our rights or suffer competitive injury. |
Our brand name may be subject to confusion. |
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Natural gas operations entail inherent risks that may result in substantial liability to us. |
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• | material weaknesses in our internal controls; | |
• | economic or industry downturns; | |
• | our inability to implement our business strategy to increase our aftermarket parts and services revenue; | |
• | competition in our markets; | |
• | failure to complete, or achieve the expected benefits from, any future acquisitions; | |
• | economic, political, currency and other risks associated with our international sales and operations; | |
• | loss of our senior management; | |
• | our brand name may be confused with others; | |
• | environmental compliance costs and liabilities; | |
• | failure to maintain safety performance acceptable to our clients; | |
• | failure to negotiate new collective bargaining agreements; | |
• | our ability to operate as a stand-alone company; | |
• | unexpected product claims or regulations; | |
• | infringement on our intellectual property or our infringement on others’ intellectual property; and | |
• | other factors described in this prospectus. |
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General |
• | the final net working capital amount and $149,677,999; | |
• | the final net cash amount and the estimated net cash amount; and | |
• | the final client prepayments amount and the estimated client prepayments amount. |
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The Equity Purchase Agreement |
• | any losses arising from the inaccuracy or breach of certain representations and warranties of the sellers contained in the equity purchase agreement; | |
• | any losses arising from breaches or defaults in the performance of any covenant, undertaking or other agreement or obligation of the sellers pursuant to the equity purchase agreement; | |
• | any claim related to the sale or use of products containing asbestos; | |
• | any claim for personal injury or property damage alleging defect in design, manufacture, materials or workmanship, or an alleged failure to exercise reasonable care in repair, service or maintenance, or failure to warn or provide adequate warning relating to the Dresser-Rand Entities’ products shipped prior to the closing; | |
• | specified pre-closing taxes; and | |
• | specified environmental liabilities. |
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Ancillary Agreements |
The Financing |
Sources | Uses | ||||||||||
(In millions) | |||||||||||
Senior secured credit facility:(1) | Purchase of equity interests of the | ||||||||||
Revolving credit facility(2) | $ | 5.0 | Dresser-Rand Entities(3) | $ | 1,125.1 | ||||||
Term Loan B | 395.0 | Cash | 91.4 | ||||||||
Senior subordinated notes | 420.0 | Existing indebtedness | 2.9 | ||||||||
Existing indebtedness | 2.9 | Financing fees and expenses | 33.5 | ||||||||
Equity invested by First Reserve | 430.0 | ||||||||||
Total Sources of Funds | $ | 1,252.9 | Total Uses of Funds | $ | 1,252.9 | ||||||
(1) | Of the $395 million Term Loan B facility,€78.5 million is denominated in Euros. |
(2) | As of September 30, 2005, we had approximately $178.7 million available for borrowing under the revolving portion of the senior secured credit facility, subject to certain conditions, after giving effect to approximately $171.3 million of outstanding letters of credit. |
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(3) | First Reserve and Ingersoll-Rand agreed to a gross cash purchase price of $1.2 billion for the acquisition, subject to working capital and other post-closing adjustments. |
(1) | D-R Interholding, LLC owns 63.5% of Dresser-Rand Group Inc.’s outstanding shares of capital stock. |
(2) | Guarantors of the notes consist of five domestic companies: (i) Dresser-Rand LLC, a Delaware limited liability company, (ii) Dresser-Rand Power LLC, a Delaware limited liability company, (iii) Dresser-Rand Company, a New York general partnership, (iv) D-R Steam LLC, a Delaware limited liability company, and (v) Dresser-Rand Global Services, L.L.C., a Delaware limited liability company. Each of such guarantors, other thanDresser-Rand LLC, is an operating subsidiary. |
(3) | Non guarantors of the notes consist of 44 foreign subsidiaries and 4 domestic subsidiaries. Of the 48 subsidiaries that are non guarantors, 39 are operating subsidiaries. |
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As of September 30, | ||||||
2005 | ||||||
(Unaudited) | ||||||
(In millions) | ||||||
Debt: | ||||||
Senior secured credit facility: | ||||||
Revolving credit facility(1) | $ | — | ||||
Term loan facility | 229.0 | |||||
Senior subordinated notes due 2014 | 370.0 | |||||
Other debt | .2 | |||||
Total debt(2) | 599.2 | |||||
Stockholders’ equity: | ||||||
Common stock, par value $0.01 per share, 250,000,000 shares authorized, 85,444,897 shares issued and outstanding | .9 | |||||
Additional paid-in capital | 492.2 | |||||
Retained earnings (accumulated deficit) | 12.1 | |||||
Accumulated other comprehensive loss | (18.7 | ) | ||||
Total stockholders’ equity | 486.5 | |||||
Total capitalization | $ | 1,085.7 | ||||
(1) | As of September 30, 2005, we had approximately $178.7 million available for borrowing under the revolving portion of the senior secured credit facility, subject to certain conditions, after giving effect to approximately $171.3 million of letters of credit outstanding thereunder. See “The Transactions” and “Description of Indebtedness.” |
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Predecessor | Successor | ||||||||||||||||||||
For the Period | For the Period | ||||||||||||||||||||
January 1 | October 30 | Pro Forma | |||||||||||||||||||
through | through | Offering and | Year Ended | ||||||||||||||||||
October 29, | December 31, | Pro Forma | Other | December 31, | |||||||||||||||||
2004(1) | 2004(2) | Adjustments(3) | Adjustments(3) | 2004 | |||||||||||||||||
(In thousands) | |||||||||||||||||||||
Total revenues | $ | 715,495 | $ | 199,907 | $ | — | $ | — | $ | 915,402 | |||||||||||
Cost of goods sold | 538,042 | 149,564 | (508 | )(a) | — | 704,497 | |||||||||||||||
(7,458 | )(b) | ||||||||||||||||||||
2,918 | (c) | ||||||||||||||||||||
24,220 | (d) | ||||||||||||||||||||
(2,281 | )(e) | ||||||||||||||||||||
Gross profit | 177,453 | 50,343 | (16,891 | ) | — | 210,905 | |||||||||||||||
Selling and administrative expenses | 122,700 | 21,499 | (127 | )(a) | — | 143,094 | |||||||||||||||
(1,864 | )(b) | ||||||||||||||||||||
154 | (c) | ||||||||||||||||||||
732 | (f) | ||||||||||||||||||||
Research and development expenses | 5,670 | 1,040 | — | — | 6,710 | ||||||||||||||||
Write-off of purchased in-process research and development assets | — | 1,800 | (1,800 | )(g) | — | — | |||||||||||||||
Operating income | 49,083 | 26,004 | (13,986 | ) | — | 61,101 | |||||||||||||||
Interest income (expense), net | 3,156 | (9,654 | ) | (47,506 | )(h) | 3,901 | (j) | (50,103 | ) | ||||||||||||
Other income (expense), net | 1,882 | (1,846 | ) | — | — | 36 | |||||||||||||||
Income (loss) before income taxes | 54,121 | 14,504 | (61,492 | ) | 3,901 | 11,034 | |||||||||||||||
(Benefit) provision for income taxes | 11,970 | 7,275 | (4,730 | )(i) | 1,482 | (i) | 15,997 | ||||||||||||||
Net income(loss) | $ | 42,151 | $ | 7,229 | $ | (56,762 | ) | $ | 2,419 | $ | (4,963 | ) | |||||||||
(1) | The amounts in this column represent the reported results of Dresser-Rand Company, our predecessor company, from January 1, 2004 through October 29, 2004. |
(2) | The amounts in this column represent the reported results of Dresser-Rand Group Inc., the successor, from October 30, 2004 through December 31, 2004. |
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(3) | The amounts in these columns represent the adjustments to reflect the pro forma impact of the transactions. |
(a) | Reflects the adjustment to historical expense for the change in pension expense due to Ingersoll-Rand’s retention of pension assets and obligations for one pension plan that was reflected in our historical combined statements as well as the results of actuarial valuations performed as of the transaction date for the portion retained by us. |
(b) | Reflects the adjustment to historical expense for the change in postretirement benefits other than pension expense due to Ingersoll-Rand’s retention of the obligations for all employees who are retired or eligible to retire as well as the results of actuarial valuations performed as of the transaction date for the portion retained by us. |
(c) | Reflects the adjustment to historical expense for the change in depreciation expense due to the revaluation of our property, plant and equipment in purchase accounting. Annual depreciation expense under the new basis of accounting is estimated to be $23,574, of which $3,929 was recognized during the period from October 30, 2004 through December 31, 2004. Depreciation expense under the old basis of accounting of $16,573 was recognized during the period from January 1, 2004 through October 29, 2004, resulting in a pro forma adjustment of $3,072. We estimate that 95% of our depreciation expense is recorded in cost of goods sold, and 5% of our depreciation expense is recorded in selling, general and administrative expenses. |
(d) | Reflects the adjustment to historical expense for the change in amortization expense due to the revaluation of our identifiable intangible assets in purchase accounting. Annual amortization expense under the new basis of accounting is estimated to be $42,702, of which $12,340 was recognized during the period from October 30, 2004 through December 31, 2004. Amortization expense under the old basis of accounting of $6,142 was recognized during the period from January 1, 2004 through October 29, 2004, resulting in a pro forma adjustment of $24,220 to cost of goods sold. |
(e) | Reflects a $2,281 reduction in cost of goods sold relating to the non-recurring amortization of the step-up in inventory basis to fair market value, for inventory that was sold during the period from October 30, 2004 through December 31, 2004. |
(f) | Reflects the adjustment to historical expense for new compensation contracts with management. In conjunction with the transactions, we entered into a new employment agreement with our President and Chief Executive Officer, and certain of our executives who acquired common units inDresser-Rand Holdings, LLC were issued profit units in Dresser-Rand Holdings, LLC, which permit them to indirectly share in appreciation in the value of our shares. The new employment agreement increases the annual compensation of our President and Chief Executive Officer by $150, $25 of which was reflected in the period from October 30, 2004 through December 31, 2004. The annual compensation expense associated with the profit units is $682, $75 of which was reflected in the period from October 30, 2004 through December 31, 2004. |
(g) | Reflects a $1,800 reduction in selling, general and administrative expenses relating to the non-recurring write-off of the value allocated to purchased in-process research and development, which was recognized during the period from October 30, 2004 through December 31, 2004. |
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(h) | The adjustment to interest expense reflects the following: |
Adjustment for Period | ||||||||
Annual | January 1, 2004 through | |||||||
Expense | October 29, 2004 | |||||||
Interest expense on letters of credit issued with our new revolving credit facility (at 2.5%) | $ | 3,584 | $ | 2,987 | ||||
Commitment fee on our revolving credit facility (at 0.5%) | 783 | 653 | ||||||
Interest expense on our Term Loan B (at 4.3%) | 17,201 | 14,365 | ||||||
Interest expense on the notes (at 7.375%) | 30,975 | 25,813 | ||||||
Amortization of debt issuance costs | 4,425 | 3,688 | ||||||
Total interest adjustment | $ | 56,968 | $ | 47,506 | ||||
Interest expense on average outstanding letters of credit of $133.4 million in 2004 was 2.5%. A change of1/8 percentage point in interest rates on the aggregate amount outstanding under our new revolving credit facility and term loan B would change annual interest expense by $497. |
(i) | Reflects the income tax effect of our pro forma adjustments to the income statement. We used a statutory tax rate of 38% for adjustments recorded at U.S. entities and the statutory tax rate of each foreign country for adjustments recorded at foreign entities. However, the pro forma income tax expense also reflects a full valuation allowance on the net income tax benefit generated in the United States. |
(j) | In connection with the initial public offering, we used approximately $55.0 million of the net proceeds to redeem $50.0 million of the $420 million aggregate principal amount of our notes due 2014, including the payment of the applicable redemption premium and accrued interest. The annualized interest savings resulting from the redemption will be $3.7 million, the annualized reduction in amortization of deferred financing fees will be $0.2 million, and we incurred a one-time charge of $1.9 million from the write-off of deferred financing fees and incurred prepayment penalties of $3.7 million. |
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Offering | ||||||||||||||||
Pro Forma | and Other | |||||||||||||||
Historical(1) | Adjustments(2) | Adjustments(2) | Pro Forma | |||||||||||||
(In thousands) | ||||||||||||||||
Total revenues | $ | 846,237 | $ | $ | $ | 846,237 | ||||||||||
Cost of goods sold | 657,845 | (5,094 | )(a) | 652,751 | ||||||||||||
Gross profit | 188,392 | 5,094 | 193,486 | |||||||||||||
Selling and administrative expenses | 118,331 | 118,331 | ||||||||||||||
Research and development expenses | 4,745 | 4,745 | ||||||||||||||
Operating income | 65,316 | 5,094 | 70,410 | |||||||||||||
Interest expense, net | (44,619 | ) | 4,630 | (c) | (39,989 | ) | ||||||||||
Early redemption premium on debt | (3,688 | ) | 3,688 | — | ||||||||||||
Other expense, net | (1,558 | ) | (1,558 | ) | ||||||||||||
Income before income taxes | 15,451 | 5,094 | 8,318 | 28,863 | ||||||||||||
Provision for income taxes | 10,560 | (272 | )(b) | (443 | )(b) | 9,845 | ||||||||||
Net income | $ | 4,891 | $ | 5,366 | $ | 8,761 | $ | 19,018 | ||||||||
(1) | The amounts in this column represent the reported results of Dresser-Rand Group Inc., the successor, from January 1, 2005 through September 30, 2005. |
(2) | The amounts in these columns represent the adjustments to reflect the pro forma impact of the transactions. |
(a) | Reflects a $5.1 million reduction in cost of goods sold relating to the non-recurring amortization of the step-up in inventory basis to fair market value, for inventory that was sold during the period from January 1, 2005 through September 30, 2005. | |
(b) | Reflects the income tax effect of our pro forma adjustments to the income statement. We used an effective tax rate based on the estimated effective consolidated income tax rate for the year ended December 31, 2005, after giving effect to the pro forma adjustments for the entire year 2005 which provides a benefit for U.S. tax loss carryforwards not previously recognized. | |
(c) | In connection with the initial public offering, we used approximately $55.0 million of the net proceeds to redeem $50.0 million of the $420 million aggregate principal amount of our 73/8% senior subordinated notes due 2014, including the payment of the applicable redemption premium and accrued interest. The annualized interest savings resulting from the redemption will be $3.7 million, the annualized reduction in amortization of deferred financing fee will be $0.2 million, and we incurred a one-time charge of $1.9 million from the write-off of deferred financing fees and incurred prepayment penalties of $3.7 million. |
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Predecessor | Successor | ||||||||||||||||||||||||||||||||||||||
Period | Period | ||||||||||||||||||||||||||||||||||||||
1 Month | 11 Months | January 1 | Nine Months | October 30 | Nine Months | ||||||||||||||||||||||||||||||||||
Ended | Ended | Year Ended December 31, | through | Ended | through | Ended | |||||||||||||||||||||||||||||||||
January 31, | December 31, | October 29, | September 30, | December 31, | September 30, | ||||||||||||||||||||||||||||||||||
2000 | 2000 | 2001 | 2002 | 2003 | 2004 | 2004 | 2004 | 2005 | |||||||||||||||||||||||||||||||
(In thousands, except ratios) | |||||||||||||||||||||||||||||||||||||||
Statement of Operations Data: | |||||||||||||||||||||||||||||||||||||||
Net sales, third parties | $ | $ | $ | 873,885 | $ | 1,026,753 | $ | 1,332,242 | $ | 712,483 | $ | 654,541 | $ | 199,907 | $ | 846,237 | |||||||||||||||||||||||
Net sales to affiliates | 2,837 | 1,841 | 1,439 | 1,845 | 1,639 | — | — | ||||||||||||||||||||||||||||||||
Other operating revenue | — | 2,759 | 1,669 | 1,167 | 1,314 | — | — | ||||||||||||||||||||||||||||||||
Total revenues | 42,690 | 777,754 | 876,722 | 1,031,353 | 1,335,350 | 715,495 | 657,494 | 199,907 | 846,237 | ||||||||||||||||||||||||||||||
Cost of goods sold | 714,093 | 865,858 | 1,132,047 | 538,042 | 499,208 | 149,564 | 657,845 | ||||||||||||||||||||||||||||||||
Gross profit | 162,629 | 165,495 | 203,303 | 177,453 | 158,286 | 50,343 | 188,392 | ||||||||||||||||||||||||||||||||
Selling and administrative expenses | 132,755 | 138,484 | 156,129 | 122,700 | 110,493 | 21,499 | 118,331 | ||||||||||||||||||||||||||||||||
Research and development expenses | 6,969 | 8,044 | 8,107 | 5,670 | 4,695 | 1,040 | 4,745 | ||||||||||||||||||||||||||||||||
Write-off of purchased in-process research and development assets | — | — | — | — | — | 1,800 | — | ||||||||||||||||||||||||||||||||
Restructuring charges(1) | 2,137 | 5,185 | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Operating income | 20,768 | 13,782 | 39,067 | 49,083 | 43,098 | 26,004 | 65,316 | ||||||||||||||||||||||||||||||||
Interest income (expense), net | (302 | ) | (776 | ) | 1,938 | 3,156 | 2,306 | (9,654 | ) | (44,619 | ) | ||||||||||||||||||||||||||||
Early redemption premium on debt | — | — | — | — | — | — | (3,688 | ) | |||||||||||||||||||||||||||||||
Other income (expense), net | 3,150 | 15,000 | (9,202 | ) | 1,882 | (2,754 | ) | (1,846 | ) | (1,558 | ) | ||||||||||||||||||||||||||||
Income (loss) from continuing operations before income taxes | 23,616 | 28,006 | 31,803 | 54,121 | 42,650 | 14,504 | 15,451 | ||||||||||||||||||||||||||||||||
Provision (benefit) for income taxes(2) | 14,781 | 11,910 | 11,438 | 11,970 | 4,918 | 7,275 | 10,560 | ||||||||||||||||||||||||||||||||
Income (loss) from continuing operations | (12,498 | ) | (20,331 | ) | 8,835 | 16,096 | 20,365 | 42,151 | 37,732 | 7,229 | 4,891 | ||||||||||||||||||||||||||||
Discontinued Operations: | |||||||||||||||||||||||||||||||||||||||
Earnings from discontinued operations, net | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Gain on disposal of discontinued operations, net | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Net income (loss) | $ | (11,577 | ) | $ | 33,939 | $ | 8,835 | $ | 16,096 | $ | 20,365 | $ | 42,151 | $ | 37,732 | $ | 7,229 | $ | 4,891 | ||||||||||||||||||||
Cash flow data: | |||||||||||||||||||||||||||||||||||||||
Cash flows provided by (used in) operating activities | $ | 57,837 | $ | 42,029 | $ | 50,963 | $ | 57,729 | $ | 64,484 | $ | 17,948 | $ | 222,384 | |||||||||||||||||||||||||
Cash flows provided by (used in) investing activities | (15,896 | ) | 3,813 | (7,089 | ) | (4,907 | ) | (1,772 | ) | (1,126,939 | ) | (57,721 | ) | ||||||||||||||||||||||||||
Cash flows provided by (used in) financing activities | (42,937 | ) | (18,759 | ) | (63,487 | ) | (52,030 | ) | (50,772 | ) | 1,217,099 | (161,141 | ) | ||||||||||||||||||||||||||
Other Data: | |||||||||||||||||||||||||||||||||||||||
Ratio of earnings to fixed charges(3) | — | — | 3.9 | x | 3.9 | x | 5.3 | x | 11.6 | x | 9.7 | x | 2.4 | x | 1.6 | x |
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Predecessor | Successor | |||||||||||||||||||||||||
As of December 31, | As of | As of | ||||||||||||||||||||||||
December 31, | September 30, | |||||||||||||||||||||||||
2000 | 2001 | 2002 | 2003 | 2004 | 2005 | |||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||
Balance Sheet Data: | ||||||||||||||||||||||||||
Cash and cash equivalents | $ | $ | 31,377 | $ | 59,619 | $ | 41,537 | $ | 111,500 | $ | 109,504 | |||||||||||||||
Total assets | 1,030,072 | 1,052,741 | 1,119,464 | 1,063,875 | 1,751,074 | 1,660,373 | ||||||||||||||||||||
Debt: | ||||||||||||||||||||||||||
Current portion of long-term debt | 52 | 2,631 | 3,716 | 6,749 | 63 | |||||||||||||||||||||
Long-term debt, net of current maturities | 260 | 1,254 | 213 | 396,664 | 229,148 | |||||||||||||||||||||
Senior subordinated notes | — | — | — | 420,000 | 370,000 | |||||||||||||||||||||
Total debt | 4,685 | 312 | 3,885 | 3,929 | 823,413 | 599,211 | ||||||||||||||||||||
Partnership interest | 588,450 | 526,710 | 565,035 | — | — | |||||||||||||||||||||
Stockholders’ equity | — | — | — | 452,897 | 486,529 |
(1) | Includes severance expenses and facility exit costs associated with our corporate restructuring activities. |
(2) | On the closing date of the transactions we became a corporation. Prior to that time, in the United States, we were a partnership. The information presented does not give effect to the income taxes we would have been required to recognize if we were organized as a corporation. Pro forma tax expense for the year ended December 31, 2004 was $15,997. Pro forma tax expense reflects income tax expense that we would have been required to pay if we were organized as a corporation during these periods and also includes other pro forma adjustments related to the acquisition of Dresser-Rand Company by First Reserve on October 29, 2004. |
(3) | The ratio of earnings to fixed charges is computed by dividing earnings by fixed charges. For this purpose, earnings include pre-tax income from continuing operations and fixed charges include interest, whether expensed or capitalized, and an estimate of interest within rental expense. Our earnings were inadequate to cover fixed charges for the one month ended January 31, 2000 by approximately $13.0 million and the eleven months ended December 31, 2000 by approximately $5.8 million. |
Predecessor | ||||||||||||||||||||||||||||||||
Period | ||||||||||||||||||||||||||||||||
Three Months Ended | October 1 | |||||||||||||||||||||||||||||||
through | ||||||||||||||||||||||||||||||||
March 31, | June 30, | September 30, | December 31, | March 31, | June 30, | September 30, | October 29, | |||||||||||||||||||||||||
2003 | 2003 | 2003 | 2003 | 2004 | 2004 | 2004 | 2004 | |||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||
Total revenues | $ | 278,106 | $ | 337,050 | $ | 379,758 | $ | 340,436 | $ | 170,348 | $ | 269,883 | $ | 217,263 | $ | 58,001 | ||||||||||||||||
Gross profit | 39,178 | 42,479 | 46,602 | 75,044 | 47,583 | 53,637 | 57,066 | 23,862 | ||||||||||||||||||||||||
Net income | (5,226 | ) | 2,158 | 1,884 | 21,549 | 3,310 | 13,370 | 21,052 | 4,419 |
Successor | ||||||||||||||||
Period | ||||||||||||||||
October 30 | Three Months Ended | |||||||||||||||
through | ||||||||||||||||
December 31, | March 31, | June 30, | September 30, | |||||||||||||
2004 | 2005 | 2005 | 2005 | |||||||||||||
(In thousands, except per share data) | ||||||||||||||||
Total revenues | $ | 199,907 | $ | 234,000 | $ | 302,478 | $ | 309,759 | ||||||||
Gross profit | 50,343 | 47,709 | 63,778 | 76,905 | ||||||||||||
Net income (loss) | 7,229 | (4,018 | ) | (1,525 | ) | 10,434 | ||||||||||
Earnings per share basic and diluted | 0.07 | (0.04 | ) | (0.03 | ) | 0.15 |
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New Units |
Aftermarket Parts and Services |
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Successor |
Predecessor |
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Total Company |
Nine Months Ended September 30, 2005 (Successor) Compared to the Nine Months Ended September 30, 2004 (Predecessor) |
Predecessor | Successor | |||||||||||||||||||||||
Period to Period | ||||||||||||||||||||||||
Nine Months | Nine Months | Change | ||||||||||||||||||||||
Ended | Ended | |||||||||||||||||||||||
September 30, | September 30, | 2004 to | ||||||||||||||||||||||
2004 | 2005 | 2005 | Change | |||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
Statement of Operations Data: | ||||||||||||||||||||||||
Total revenues | $ | 657.5 | 100.0 | % | $ | 846.2 | 100.0 | % | $ | 188.7 | 28.7 | % | ||||||||||||
Cost of goods sold | 499.2 | 75.9 | 657.8 | 77.7 | 158.6 | 31.8 | ||||||||||||||||||
Gross profit | 158.3 | 24.1 | 188.4 | 22.3 | 30.1 | 19.0 | ||||||||||||||||||
Selling and administrative expenses | 110.5 | 16.8 | 118.3 | 14.0 | 7.8 | 7.1 | ||||||||||||||||||
Research and development expenses | 4.7 | 0.7 | 4.7 | 0.6 | 0.0 | 1.1 | ||||||||||||||||||
Operating income | 43.1 | 6.6 | 65.3 | 7.7 | 22.2 | 51.6 | ||||||||||||||||||
Interest (expense) income, net | 2.4 | 0.3 | (44.6 | ) | (5.3 | ) | (47.0 | ) | N/M | |||||||||||||||
Early redemption premium on debt | — | — | (3.7 | ) | (0.4 | ) | (3.7 | ) | 100 | |||||||||||||||
Other income (expense), net | (2.8 | ) | (0.4 | ) | (1.5 | ) | (0.2 | ) | 1.3 | 46.4 | ||||||||||||||
Income (loss) before income taxes | 42.7 | 6.5 | 15.5 | 1.8 | (27.2 | ) | (63.8 | ) | ||||||||||||||||
(Benefit) provision for income taxes | 5.0 | 0.8 | 10.6 | 1.2 | 5.6 | 114.7 | ||||||||||||||||||
Net income (loss) | $ | 37.7 | 5.7 | % | $ | 4.9 | 0.6 | % | $ | (32.8 | ) | (87.0 | )% | |||||||||||
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Period from October 30, 2004 through December 31, 2004 (Successor) and for the Period from January 1, 2004 through October 29, 2004 (Predecessor) Compared to the Year Ended December 31, 2003 (Predecessor) |
Predecessor | Successor | ||||||||||||||||||||||||
For the Period | |||||||||||||||||||||||||
January 1 | For the Period | ||||||||||||||||||||||||
Year Ended | through | October 30 through | |||||||||||||||||||||||
December 31, 2003 | October 29, 2004 | December 31, 2004 | |||||||||||||||||||||||
(Dollars in millions) | |||||||||||||||||||||||||
Statement of Operations Data: | |||||||||||||||||||||||||
Total revenues | $ | 1,335.4 | 100.0 | % | $ | 715.5 | 100.0 | % | $ | 199.9 | 100.0 | % | |||||||||||||
Cost of goods sold | 1,132.1 | 84.8 | 538.0 | 75.2 | 149.6 | 74.8 | |||||||||||||||||||
Gross profit | 203.3 | 15.2 | 177.5 | 24.8 | 50.3 | 25.2 | |||||||||||||||||||
Selling and administrative expenses | 156.1 | 11.7 | 122.7 | 17.1 | 21.5 | 10.8 | |||||||||||||||||||
Research and development expenses | 8.1 | 0.6 | 5.7 | 0.8 | 1.0 | 0.5 | |||||||||||||||||||
Write-off of purchased in-process research and development | 0.0 | 0.0 | 0.0 | 0.0 | 1.8 | 0.9 | |||||||||||||||||||
Operating income | 39.1 | 2.9 | 49.1 | 6.9 | 26.0 | 13.0 | |||||||||||||||||||
Interest income (expense), net | 1.9 | 0.1 | 3.1 | 0.4 | (9.7 | ) | (4.8 | ) | |||||||||||||||||
Other income (expense), net | (9.2 | ) | (0.6 | ) | 1.9 | 0.3 | (1.8 | ) | (0.9 | ) | |||||||||||||||
Income before income taxes | 31.8 | 2.4 | 54.1 | 7.6 | 14.5 | 7.3 | |||||||||||||||||||
Provision for income taxes | 11.4 | 0.9 | 11.9 | 1.7 | 7.3 | 3.7 | |||||||||||||||||||
Net income | $ | 20.4 | 1.5 | % | $ | 42.2 | 5.9 | % | $ | 7.2 | 3.6 | % | |||||||||||||
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Predecessor | Successor | ||||||||||||
January 1, 2004 | October 30, 2004 | ||||||||||||
Year Ended | through | through | |||||||||||
December 31, 2003 | October 29, 2004 | December 31, 2004 | |||||||||||
(In millions) | |||||||||||||
Foreign currency gains (losses) | $ | (4.4 | ) | $ | 2.1 | $ | (1.0 | ) | |||||
Equity earnings | (0.1 | ) | (1.0 | ) | 0.2 | ||||||||
Casualty losses | (2.8 | ) | — | — | |||||||||
New York State grant | (1.3 | ) | — | — | |||||||||
All other | (0.6 | ) | 0.8 | (1.0 | ) | ||||||||
Total other income (expense), net | $ | (9.2 | ) | $ | 1.9 | $ | (1.8 | ) | |||||
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Year Ended December 31, 2003 Compared to the Year Ended December 31, 2002 |
Year-to-Year | ||||||||||||||||||||||||
Change | ||||||||||||||||||||||||
Year Ended | Year Ended | 2002 to | ||||||||||||||||||||||
December 31, 2002 | December 31, 2003 | 2003 | Change | |||||||||||||||||||||
(Dollars in Millions) | ||||||||||||||||||||||||
Statement of Operations Data: | ||||||||||||||||||||||||
Total revenues | $ | 1,031.4 | 100.0 | % | $ | 1,335.4 | 100.0 | % | $ | 304.0 | 29.5 | % | ||||||||||||
Cost of goods sold | 865.9 | 84.0 | 1,132.1 | 84.8 | 266.2 | 30.7 | ||||||||||||||||||
Gross profit | 165.5 | 16.0 | 203.3 | 15.2 | 37.8 | 22.8 | ||||||||||||||||||
Selling and administrative expenses | 138.5 | 13.4 | 156.1 | 11.7 | 17.6 | 12.7 | ||||||||||||||||||
Research and development expenses | 8.0 | 0.8 | 8.1 | 0.6 | 0.1 | 1.3 | ||||||||||||||||||
Restructuring charges | 5.2 | 0.5 | 0.0 | 0.0 | (5.2 | ) | (100.0 | ) | ||||||||||||||||
Operating income | 13.8 | 1.3 | 39.1 | 2.9 | 25.3 | 183.3 | ||||||||||||||||||
Interest income (expense), net | (0.8 | ) | (0.1 | ) | 1.9 | 0.2 | 2.7 | 337.5 | ||||||||||||||||
Other income (expense), net | 15.0 | 1.5 | (9.2 | ) | (0.7 | ) | (24.2 | ) | (161.3 | ) | ||||||||||||||
Income before income taxes | 28.0 | 2.7 | 31.8 | 2.4 | 3.8 | 13.6 | ||||||||||||||||||
Provision for income taxes | 11.9 | 1.1 | 11.4 | 0.9 | (0.5 | ) | (4.2 | ) | ||||||||||||||||
Net income | $ | 16.1 | 1.6 | % | $ | 20.4 | 1.5 | % | $ | 4.3 | 26.7 | % | ||||||||||||
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2002 | 2003 | Change | ||||||||||
(In millions) | ||||||||||||
Currency losses | $ | (1.1 | ) | $ | (4.4 | ) | $ | (3.3 | ) | |||
Equity losses | (0.5 | ) | (0.1 | ) | 0.4 | |||||||
Casualty losses | — | (2.8 | ) | (2.8 | ) | |||||||
New York State grant | 8.0 | (1.3 | ) | (9.3 | ) | |||||||
Insurance claims | 10.1 | — | (10.1 | ) | ||||||||
Other | (1.5 | ) | (0.6 | ) | 0.9 | |||||||
Total other income (expense), net | $ | 15.0 | $ | (9.2 | ) | $ | (24.2 | ) | ||||
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Segment Analysis |
Nine Months Ended September 30, 2005 (Successor) Compared to Nine Months Ended September 30, 2004 (Predecessor) |
Period to Period | ||||||||||||||||||||||||||
Predecessor | Successor | Change | ||||||||||||||||||||||||
Nine Months | Nine Months | |||||||||||||||||||||||||
Ended | Ended | |||||||||||||||||||||||||
September 30, | September 30, | 2004 to | ||||||||||||||||||||||||
2004 | 2005 | 2005 | Change | |||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||
Sales, net | ||||||||||||||||||||||||||
New units | $ | 256.6 | 39.0 | % | $ | 399.0 | 47.2 | % | $ | 142.4 | 55.5 | % | ||||||||||||||
Aftermarket parts and services | 400.9 | 61.0 | 447.2 | 52.8 | 46.3 | 11.5 | ||||||||||||||||||||
$ | 657.5 | 100.0 | % | $ | 846.2 | 100.0 | % | $ | 188.7 | 28.7 | % | |||||||||||||||
Gross Profit | ||||||||||||||||||||||||||
New units | $ | 31.7 | $ | 40.4 | $ | 8.7 | 27.4 | % | ||||||||||||||||||
Aftermarket parts and services | 126.6 | 148.0 | 21.4 | 16.9 | ||||||||||||||||||||||
Total gross profit | $ | 158.3 | $ | 188.4 | $ | 30.1 | 19.0 | % | ||||||||||||||||||
Operating Income (Loss) | ||||||||||||||||||||||||||
New units | $ | 2.0 | $ | 4.7 | $ | 2.7 | 134.8 | % | ||||||||||||||||||
Aftermarket parts and services | 72.9 | 93.2 | 20.3 | 27.9 | ||||||||||||||||||||||
Unallocated corporate expense | (31.8 | ) | (32.6 | ) | (0.8 | ) | 2.6 | |||||||||||||||||||
Total operating income | $ | 43.1 | $ | 65.3 | $ | 22.2 | 51.6 | % | ||||||||||||||||||
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Period from October 30, 2004 through December 31, 2004 (Successor) and for the Period from January 1, 2004 through October 29, 2004 (Predecessor) Compared to the Year Ended December 31, 2003 (Predecessor) |
Predecessor | Successor | ||||||||||||||||||||||||||
Period from | Period from | ||||||||||||||||||||||||||
Year Ended | January 1 through | October 30 through | |||||||||||||||||||||||||
December 31, 2003 | October 29, 2004 | December 31, 2004 | |||||||||||||||||||||||||
(Dollars in millions) | |||||||||||||||||||||||||||
Revenues | |||||||||||||||||||||||||||
New units | $ | 793.0 | 59.4 | % | $ | 267.7 | 37.4 | % | $ | 77.6 | 38.8 | % | |||||||||||||||
Aftermarket parts and services | 542.4 | 40.6 | 447.8 | 62.6 | 122.3 | 61.2 | |||||||||||||||||||||
Total revenues | $ | 1,335.4 | 100.0 | % | $ | 715.5 | 100.0 | % | $ | 199.9 | 100.0 | % | |||||||||||||||
Gross Profit | |||||||||||||||||||||||||||
New units | $ | 39.4 | $ | 32.3 | $ | 9.8 | |||||||||||||||||||||
Aftermarket parts and services | 163.9 | 145.2 | 40.5 | ||||||||||||||||||||||||
Total gross profit | $ | 203.3 | $ | 177.5 | $ | 50.3 | |||||||||||||||||||||
Operating Income (Loss) | |||||||||||||||||||||||||||
New units | $ | (11.4 | ) | $ | (0.5 | ) | $ | 3.6 | |||||||||||||||||||
Aftermarket parts and services | 98.1 | 85.1 | 30.5 | ||||||||||||||||||||||||
Unallocated corporate expense | (47.6 | ) | (35.5 | ) | (8.1 | ) | |||||||||||||||||||||
Total operating income | $ | 39.1 | $ | 49.1 | $ | 26.0 | |||||||||||||||||||||
New Units |
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Aftermarket Parts & Services |
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Year Ended December 31, 2003 Compared to the Year Ended December 31, 2002 |
Year-to-Year | ||||||||||||||||||||||||||
Change | ||||||||||||||||||||||||||
2002 to | ||||||||||||||||||||||||||
2002 | % | 2003 | % | 2003 | Change | |||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||||
New units | $ | 498.8 | 48.4 | % | $ | 793.0 | 59.4 | % | $ | 294.2 | 59.0 | % | ||||||||||||||
Aftermarket parts and services | 532.6 | 51.6 | 542.4 | 40.6 | 9.8 | 1.8 | ||||||||||||||||||||
Total revenues | $ | 1,031.4 | 100.0 | % | $ | 1,335.4 | 100.0 | % | $ | 304.0 | 29.5 | % | ||||||||||||||
Gross Profit | ||||||||||||||||||||||||||
New units | $ | 7.7 | $ | 39.4 | $ | 31.7 | 411.7 | % | ||||||||||||||||||
Aftermarket parts and services | 157.8 | 163.9 | 6.1 | 3.9 | ||||||||||||||||||||||
Total gross profit | $ | 165.5 | $ | 203.3 | $ | 37.8 | 22.8 | % | ||||||||||||||||||
Operating Income (loss) | ||||||||||||||||||||||||||
New units | $ | (32.8 | ) | $ | (11.4 | ) | $ | 21.4 | 65.2 | % | ||||||||||||||||
Aftermarket parts and services | 85.7 | 98.1 | 12.4 | 14.5 | ||||||||||||||||||||||
Unallocated corporate expense | (39.1 | ) | (47.6 | ) | (8.5 | ) | (21.7 | ) | ||||||||||||||||||
Total operating income (loss) | $ | 13.8 | $ | 39.1 | $ | 25.3 | 183.3 | % | ||||||||||||||||||
New Units. |
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Aftermarket Parts and Services |
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Accounts receivable | $ | 13,458 | ||
Inventory — net | 7,690 | |||
Prepaid expenses and other current assets | 208 | |||
Total current assets | 21,356 | |||
Property, plant and equipment, net | 20,319 | |||
Intangible assets and goodwill | 28,414 | |||
Total assets acquired | 70,089 | |||
Accounts payable and accruals | 10,570 | |||
Other liabilities | 2,501 | |||
Total liabilities assumed | 13,071 | |||
Cash paid — net | $ | 57,018 | ||
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Payments Due by Period | ||||||||||||||||||||
Less than | More than | |||||||||||||||||||
Total | 1 Year | 1-3 Years | 3-5 Years | 5 Years | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Long-term debt obligations(1) | $ | 820,679 | $ | 4,015 | $ | 8,235 | $ | 8,030 | $ | 800,399 | ||||||||||
Operating lease obligations | 15,700 | 7,100 | 7,800 | 800 | — | |||||||||||||||
Loans payable | 2,734 | 2,734 | — | — | — | |||||||||||||||
License agreement | 4,000 | 444 | 889 | 889 | 1,778 | |||||||||||||||
Total | $ | 843,113 | $ | 14,293 | $ | 16,924 | $ | 9,719 | $ | 802,177 | ||||||||||
(1) | Principally includes amortization payments required to be made under our senior secured credit facility, as well as the notes. See “Description of Other Indebtedness.” |
September 30, 2005 | ||||||||
Covenant Level | Ratio | |||||||
Senior Secured Credit Facility(1) | ||||||||
Minimum Adjusted EBITDA to cash interest ratio | 1.87 | x | 3.7 | x | ||||
Maximum total debt to Adjusted EBITDA ratio | 6.50 | x | 2.7 | x | ||||
Indenture(2) | ||||||||
Minimum pro forma Adjusted EBITDA to pro forma fixed charge ratio required to incur additional debt pursuant to ratio provisions(3) | 2.0 | x | 3.8 | x |
(1) | Our senior secured credit facility requires us to maintain an Adjusted EBITDA to cash interest ratio starting at a minimum of 1.87x and a total debt to Adjusted EBITDA ratio starting at a maximum of 6.50x. Failure to satisfy these ratio requirements would constitute a default under the senior secured credit facility. If lenders under the senior secured credit facility failed to waive any such default, |
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repayment obligations under the senior secured credit facility could be accelerated, which would also constitute a default under the indenture. |
(2) | Our ability to incur additional debt and make certain restricted payments under our indenture, subject to specified exceptions, is tied to an Adjusted EBITDA to fixed charge ratio of at least 2.0 to 1. |
(3) | The ratio is calculated giving pro forma effect to the acquisition and the incurrences of debt under the indenture and the senior secured credit facility. |
Predecessor | Successor | ||||||||||||||||||||||||||||
Period | Period | Four | |||||||||||||||||||||||||||
Year Ended | January 1 | Nine Months | October 30 | Nine Months | Quarters | ||||||||||||||||||||||||
December 31, | through | Ended | through | Ended | Ended | ||||||||||||||||||||||||
October 29, | September 30, | December 31, | September 30, | September 30, | |||||||||||||||||||||||||
2002 | 2003 | 2004 | 2004 | 2004 | 2005 | 2005(a) | |||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||||
Net income (loss) | $ | 16,096 | $ | 20,365 | $ | 42,151 | $ | 37,732 | $ | 7,229 | $ | 4,891 | $ | 16,539 | |||||||||||||||
(Benefit) provision for income taxes | 11,910 | 11,438 | 11,970 | 4,918 | 7,275 | 10,560 | 24,887 | ||||||||||||||||||||||
Interest (income) expense, net | 776 | (1,938 | ) | (3,156 | ) | (2,306 | ) | 9,654 | 44,619 | 53,423 | |||||||||||||||||||
Depreciation and amortization | 33,822 | 29,109 | 22,715 | 20,284 | 16,269 | 48,045 | 66,745 | ||||||||||||||||||||||
EBITDA | 62,604 | 58,974 | 73,680 | 60,628 | 40,427 | 108,115 | 161,594 | ||||||||||||||||||||||
Net reduction in SFAS 106 expense(b) | 8,512 | 10,033 | 9,322 | 8,397 | — | — | 925 | ||||||||||||||||||||||
Excess (additional) corporate allocation(c) | (4,876 | ) | 3,816 | 2,122 | 1,913 | — | — | 209 | |||||||||||||||||||||
Removal of incremental corporate overhead(d) | — | 5,091 | 8,025 | 7,994 | — | — | 31 | ||||||||||||||||||||||
Restructuring severance(e) | 5,185 | — | — | — | — | — | — | ||||||||||||||||||||||
Productivity measures(f) | — | 11,696 | 4,679 | 4,841 | (62 | ) | — | (224 | ) | ||||||||||||||||||||
Pension(g) | (2,317 | ) | 8,079 | 1,529 | 1,632 | — | — | (103 | ) | ||||||||||||||||||||
Nigeria loss contract(h) | — | 4,843 | 6,437 | 5,935 | 206 | — | 708 | ||||||||||||||||||||||
Nigeria casualty losses(i) | — | 2,750 | — | — | — | — | — | ||||||||||||||||||||||
Provision for obsolete material(j) | — | 3,300 | 2,100 | 3,000 | — | — | (900 | ) | |||||||||||||||||||||
New York State grant(k) | (8,000 | ) | 1,289 | — | — | — | — | — | |||||||||||||||||||||
Equity (earnings) losses(l) | 479 | 133 | 1,013 | 1,010 | (194 | ) | 560 | 369 | |||||||||||||||||||||
Insurance claim(m) | (10,145 | ) | — | — | — | — | — | — | |||||||||||||||||||||
Settlement of product liability claim(n) | — | — | (4,500 | ) | (4,500 | ) | — | — | — | ||||||||||||||||||||
China receivables(o) | — | — | 970 | 970 | — | — | — |
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Predecessor | Successor | ||||||||||||||||||||||||||||
Period | Period | Four | |||||||||||||||||||||||||||
Year Ended | January 1 | Nine Months | October 30 | Nine Months | Quarters | ||||||||||||||||||||||||
December 31, | through | Ended | through | Ended | Ended | ||||||||||||||||||||||||
October 29, | September 30, | December 31, | September 30, | September 30, | |||||||||||||||||||||||||
2002 | 2003 | 2004 | 2004 | 2004 | 2005 | 2005(a) | |||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||||
Write-off of purchased in-process research and development assets | — | — | — | — | 1,800 | — | 1,800 | ||||||||||||||||||||||
Inventory step-up write-off(p) | — | — | — | — | 2,281 | 5,094 | 7,375 | ||||||||||||||||||||||
Other expense (income)(q) | 1,535 | (2,976 | ) | (826 | ) | (192 | ) | 1,017 | (266 | ) | 117 | ||||||||||||||||||
Compensation adjustment(r) | (150 | ) | (150 | ) | (125 | ) | (112 | ) | — | — | (13 | ) | |||||||||||||||||
Note premium(s) | — | — | — | — | — | 3,688 | 3,688 | ||||||||||||||||||||||
Non-cash compensation(t) | — | — | — | — | 75 | 3,152 | 3,227 | ||||||||||||||||||||||
Hedge (gains) losses(u) | — | — | (1,095 | ) | (5 | ) | 18 | 1,957 | 885 | ||||||||||||||||||||
Pension loss amortization(v) | — | — | — | — | — | 187 | 187 | ||||||||||||||||||||||
Franchise taxes(w) | — | — | — | — | — | 707 | 707 | ||||||||||||||||||||||
Adjusted EBITDA | $ | 52,827 | $ | 106,878 | $ | 103,331 | $ | 91,511 | $ | 45,568 | $ | 123,194 | $ | 180,582 | |||||||||||||||
(a) | Reflects the combination of financial information for the Predecessor and Successor periods as required by the covenants of our senior secured credit facility and the indenture governing the notes. | |
(b) | Reflects the adjustment to historical expense for the change in postretirement benefits other than pension expense due to Ingersoll-Rand’s retention of the obligations for all employees who are retired or eligible to retire as well as the results of actuarial valuations performed as of the transaction date for the portion retained by us. | |
(c) | Reflects the difference between the corporate overhead expenses allocated to us by Ingersoll-Rand and our estimated annual stand-alone expenses. | |
(d) | Reflects adjustment for removal of incremental corporate allocation initiated in 2003 by Ingersoll-Rand. | |
(e) | Reflects severance expenses associated with our efficiency initiatives. Subsequent to 2002, these expenses were included in cost of goods sold and selling and administrative expenses. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” | |
(f) | Reflects severance expenses associated with our efficiency initiatives. The expenses were included in the cost of goods sold and selling and administrative expenses. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” | |
(g) | Reflects an adjustment for additional funding of certain pension plans and the elimination of actuarial losses through purchase accounting. | |
(h) | Reflects losses under (i) a contract imposed on the business by Halliburton Industries terminated at the end of 2004 and (ii) a contract in Nigeria we were forced to exit because of force majeure. | |
(i) | Reflects losses of inventory stocks resulting from a fire in a warehouse in Nigeria. | |
(j) | Offsets impact of decision to increase obsolete and slow moving inventory reserve level. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” | |
(k) | Reflects one-time income from a New York State grant for the year ended December 31, 2002, and one-time charge related to refunding a portion of the grant in the year ended December 31, 2003. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” | |
(l) | Non-cash (gains) losses in joint ventures. |
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(m) | Reflects gains from the settlement of an insurance claim relating to a fire that occurred in 2000. | |
(n) | Reflects one-time gain from settlement of a legal claim. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” | |
(o) | Reflects write-off of receivables related to business closure. | |
(p) | As a result of the transactions, we wrote up inventory in the amount of $7.4 million. Of this amount, $2.3 million was expensed in the two-month period from October 30, 2004 through December 31, 2004, and $5.1 million was expensed in the nine months ended September 30, 2005. | |
(q) | Non-operating income and expense and other non-cash charges and credits. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” | |
(r) | Reflects increased compensation expense for our Chief Executive Officer. | |
(s) | Reflects premium paid on early redemption of $50 million aggregate principal amount of the notes. | |
(t) | Reflects employee non-cash equity compensation. | |
(u) | Reflects (gains) losses due to hedging of foreign currencies. | |
(v) | Reflects pension loss amortization. | |
(w) | Reflects franchise taxes. |
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Pensions |
Postretirement Benefits Other Than Pensions |
• | Revenue recognition — We use the completed contract method for recognizing revenue for our long-term contracts. This method recognizes revenue when the contract is substantially completed as opposed to thepercentage-of-completion method which recognizes revenue as the contract progresses. If we use thepercentage-of-completion method to recognize revenue, revenue would be recognized in periods prior to substantial completion of the contract. |
The completed contract method requires the use of estimates as to the future costs that will be incurred relating to any contract that might result in a loss. These costs include material, labor and overhead. Factors influencing these future costs include the availability of materials and skilled laborers. |
• | Inventories — We purchase materials for the manufacture of components for use in our contracts and for use by our aftermarket parts and services business. The decision to purchase a set quantity of a particular item is influenced by several factors including: current and projected cost; future estimated availability; existing and projected contracts to produce certain items; and the estimated needs for our aftermarkets parts and services business. We value our inventory at the lower of cost or market value. We estimate the net realizable value of our inventories and establish reserves to reduce the carrying amount of these inventories as necessary. | |
• | Employee benefit plans — We provide a range of benefits to employees and retired employees, including pensions, postretirement, postemployment and health care benefits. Determining the cost associated with such benefits is dependent on various actuarial assumptions, including discount rates, expected return on plan assets, compensation increases, employee mortality and turnover rates, and health care cost trend rates. Independent actuaries perform the required calculations to determine expense in accordance with U.S. generally accepted accounting principles. Actual results may differ from the actuarial assumptions and are generally accumulated and amortized over future periods. We review our actuarial assumptions at each measurement date and make modifications to the assumptions based on then current rates and trends if appropriate to do so. The discount rate, the rate of compensation increase and the expected long-term rates of return on plan assets are determined as |
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of the measurement date. The discount rate reflects a rate at which pension benefits could be effectively settled. The discount rate is established and based primarily on the yields of high quality fixed-income investments available and expected to be available during the period to maturity of the pension and postretirement benefits. We also review the yields reported by Moody’s on AA corporate bonds as of the measurement date. The rate of compensation increase is dependent on expected future compensation levels. The expected long-term rates of return are projected to be the rates of return to be earned over the period until the benefits are paid. Accordingly, the long-term rates of return should reflect the rates of return on present investments, expected contributions to be received during the current year and on reinvestments over the period. The rates of return utilized reflect the expected rates of return during the periods for which the payment of benefits is deferred. The expected long-term rate of return on plan assets used is based on what is realistically achievable based on the types of assets held by the plans and the plan’s investment policy. We review each plan and its returns and asset allocations to determine the appropriate expected long-term rate of return on plan assets to be used. At the end of 2002, we believed a revision to our long-term expectations for returns was necessary based upon the market performance experienced in 2001 and 2002. We believe that the assumptions utilized in recording our obligations under our plans are reasonable based on input from our actuaries, outside investment advisors, and information as to assumptions used by plan sponsors. |
A 1% change in the medical trend rate assumed for postretirement benefits would have the following effects for the period from October 30 through December 31, 2004 and at December 31, 2004, respectively: |
1% Increase | 1% Decrease | |||||||
(In thousands of dollars) | ||||||||
Effect on total service and interest cost components | $ | 166 | $ | (130 | ) | |||
Effect of postretirement benefit obligations | 10,144 | (8,014 | ) |
• | Commitments and contingencies — We are involved in various litigations, claims and administrative proceedings, including environmental matters, arising in the normal course of business. We have recorded reserves in the financial statements related to these matters which are developed based on consultation with legal counsel and internal and external consultants and engineers, depending on the nature of the reserve. We provide for environmental reserves when, in conjunction with our internal and external counsel, we determine that a liability is both probable and estimable. In many cases, the liability is not fixed or capped when we first record a liability for a particular site. Factors that affect the recorded amount of the liability in future years include: our participation percentage due to a settlement by or bankruptcy of other potentially responsible parties; a change in the environmental laws requiring more stringent requirements; a change in the estimate of future costs that will be incurred to remediate the site; and changes in technology related to environmental remediation. We have property and casualty insurance to cover such liabilities, but there is no guarantee that the coverage will be sufficient. | |
We have accrued liabilities for product liability claims, including workers’ compensation matters and product warranty issues. We have recorded reserves in the financial statements related to these matters, which are developed using input derived from actuarial estimates and historical and anticipated experience data depending on the nature of the reserve. We believe our estimated reserves are reasonable. If the level of claims changes or if the cost to provide the benefits related to these claims should change, our estimate of the underlying liability may change. | ||
• | Goodwill and other intangible assets — We have significant goodwill and other intangible assets on our balance sheet. The valuation and classification of these assets and the assignment of amortization lives involves significant judgments and the use of estimates. The testing of these intangible assets under established accounting guidelines for impairment also requires significant use of judgment and assumptions, particularly as it relates to the identification of reporting units and the determination of fair market value. These estimated fair market values are based on estimates of future cash flows of our businesses. Factors affecting these future cash flows include: the continued market acceptance of the products and services offered by our businesses; the development of new products and services by our businesses and the underlying cost of development; the future cost structure of our businesses; and |
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future technological changes. Our goodwill and other intangible assets are tested and reviewed for impairment on an annual basis or when there is a significant change in circumstances. We believe that our use of estimates and assumptions are reasonable and comply with generally accepted accounting principles. Changes in business conditions could potentially require future adjustments to these valuations. |
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• | “standard” equipment, based on a single, non-custom design, used for low-horsepower, lower-pressure and lower-volume applications in wellhead production from onshore or shallow-water offshore platform production; and | |
• | custom-engineered equipment, built to customer specifications, engineered for the specific operating environment and application in which it will be put to use. This equipment is generally used in high-pressure/volume applications, typically consists of large equipment packages, and is generally used in large scale production operations including mission-critical applications in deepwater offshore sites, major pipeline and storage systems and large processing and refining facilities and liquefying natural gas. |
• | Reciprocating Compressors. Reciprocating compressors use traditional piston and cylinder design to increase pressure within a chamber. Typically, reciprocating compressors are used in lower volume/higher compression ratio applications, including refinery processes, natural gas gathering and processing, extraction of natural gas liquids, chemical and refrigeration processes, and natural gas, ethylene, carbon dioxide and natural gas pipelines. | |
• | Centrifugal Compressors. Centrifugal compressors are a class of turbomachinery that uses a series of graduated impellers to increase pressure. Centrifugal compressors are typically used in a variety of higher-volume/lower compression ratio, and low and high pressure applications, including oil and gas production, liquid natural gas, gas to liquid, synfuels, and process applications similar to reciprocating compressors. | |
• | Turbines. Steam and gas turbines are typically used as prime movers for mechanical and electrical drive applications including compressors, pumps, fans, blowers, and electrical generators. |
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• | natural gas consumption worldwide is forecasted to increase at an annual average growth rate of 2.4% per year from 2001-2030 as a result of worldwide economic growth and the recognition of natural gas as a clean air fuel; | |
• | increased demand for forecasted natural gas is driving substantial growth in spending on liquefied natural gas infrastructure; forecast spending on LNG plant equipment for 2005-2008 is $13.4 billion, 155% more than was spent on such equipment from 1964-2004; | |
• | decline rates associated with maturing natural gas fields in the United States (as reflected in the graph below) and other countries have resulted in increased requirements for compression products and services to maintain commercially viable levels of production; |
• | the refining sector continues to experience demand pressures as current refinery capacity is reaching a peak; | |
• | environmental laws such as the Clean Air Act and the curtailing of the prior practice of flaring gas will increase the demand for compression products and services; | |
• | the production of natural gas and oil worldwide, as reflected in the graph below, will continue to grow as a result of increasing demand for fossil fuels; and |
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• | continued development of pipeline infrastructure, as reflected in the graph below, particularly in Asia and Latin America, and increased privatization of state-owned energy producers internationally, are leading to increased outsourcing of compression services. |
• | the demand for rotating equipment solutions is tied primarily to oil and natural gas consumption, which is generally less cyclical in nature than exploration activities; | |
• | rotating equipment is typically required for (i) oil and gas to be delivered from the wellhead to end-users, and (ii) end users to be able to process the oil and gas; | |
• | the customer base for rotating equipment solutions covers a wide range of end markets; and | |
• | demand for rotating equipment and services is geographically diversified. |
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• | lower clients’ total cost of ownership and improve equipment performance; | |
• | lower our and our clients’ transaction costs; | |
• | better forecast our future revenues; and | |
• | develop a broad, continuingbusiness-to-business relationship with our clients that often results in a substantial increase in the level of activity with those clients. |
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• | the trend to increased outsourcing of equipment maintenance and operation; | |
• | the maturation of producing fields worldwide, which requires increasing use of compression equipment to maintain production levels; | |
• | the substantial increase in demand for natural gas, which is driving growth in gas production, storage and transmission infrastructure; | |
• | regulatory and environmental initiatives, including clean fuel legislation and stricter emissions controls worldwide; | |
• | the aging installed base of equipment, which is increasing demand for aftermarket parts and services, revamps and upgrades; | |
• | increasing construction of natural gas production, storage and transportation infrastructure; and | |
• | the increased worldwide demand for fuel and feedstock resulting from economic growth. |
• | a significant opportunity to grow our aftermarket parts and services business as a result of the portion of our installed base currently serviced by clients in-house, combined with an industry trend toward outsourcing; | |
• | a substantial source of stable, recurring, defensible high-margin aftermarket revenue from the significant parts and services requirements of units over their long operational lives and clients’ general preference for OEM parts and services; and | |
• | the capacity to support both a high level of reinvestment in research and development and a global service center network that is difficult for competitors with a smaller installed base to match. |
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• | Configurator. Our proprietary system for automating the preliminary engineering phase of designing a product to client specifications and automatically generating design drawings and bills of materials, which enables us to reduce costs and reduce by more than two months the typical industry cycle time of 12-14 months. | |
• | D-R Avenue. Part of our Client Relationship Management (CRM) system, D-R Avenue is a recently deployed proprietary database with information on our installed base of equipment as well as the equipment of some of our competitors, including type, location, age, application, and maintenance history. This database positions us to better serve our clients and grow our aftermarket parts and services business by leveraging our knowledge and resources through a proactive sales approach. | |
• | Client Interface and Response System (CIRS). Part of our CRM system, this proprietary client relationship system allows clients to log any technical support or service requests they have into our system, automatically directs the request to both our field-based account manager and the most appropriate subject-matter expert in our company, and tracks our follow up on the client request. This provides the client with rapid access to the most knowledgeable personnel in our organization, and allows us to effectively monitor and manage our responsiveness to client requests. | |
• | Skills Registry. This database contains profiles of our service personnel, including education, training, experience, performance and safety records, and language skills. We frequently provide clients with profiles of our proposed service personnel, allowing them the opportunity to preapprove members of their service team. | |
• | TEST. We use a Siebel-based technology enabled selling tool (TEST), which allows us to systematically manage the entire sales cycle from lead generation to order booking on a global basis. This system provides productivity gains in our business processes associated with opportunity management, data collection and analysis, market intelligence, and communication associated with our clients and markets. |
• | Strong, Stable Cash Flow with Low Growth Capital Requirements. As a result of the recurring revenue from our aftermarket parts and services business, progress payments from customers that limit our need for additional working capital as we grow, and the moderate capital expenditures needed to support our services-based growth model, our business generates strong, recurring cash flows. Our cash |
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flow from operations was $222.4 million for the nine months ended September 30, 2005 compared to $64.5 million for the same period in 2004. Our cash flow from operations was $51.0 million, $57.7 million and $17.9 million, for the year ended December 31, 2003, the period from January 1, 2004 through October 29, 2004 and the period from October 30, 2004 through December 31, 2004, respectively. | ||
• | Visibility. We have a high degree of visibility into our forecasted financial performance. A substantial portion of our new unit orders is booked six to nine months in advance of delivery. As of September 30, 2005 and September 30, 2004, our new units backlog was $687.3 million and $417.8 million, respectively, representing a 64.5% increase. As of December 31, 2004 and December 31, 2003, our new units backlog was $489.3 million and $287.7 million, respectively, representing a 70.1% increase. Since December 2000, our new units backlog has consistently exceeded 80% of our next twelve month new units revenues. Customers may cancel an order at any time. Upon cancellation, customers are contractually obligated to pay us an amount sufficient to cover our costs and commitments incurred through the date of cancellation, plus a profit margin. Since 2003, only two orders have been cancelled for a net aggregate amount of approximately $733,000. |
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New Units |
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Revamp/Upgrade Opportunities |
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New Product Development |
Aftermarket Parts and Services |
• | Replacement Parts | |
• | Equipment Repair & Rerates | |
• | Field Service Turnaround | |
• | Equipment Installation | |
• | U.S. Navy Service & Repair | |
• | Applied Technology | |
• | Operation and Maintenance Contracts | |
• | Long-Term Service Agreements | |
• | Rotor Storage | |
• | Special Coatings/ Weldings |
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• | Condition Monitoring | |
• | Product Training | |
• | Controls Retrofit | |
• | Turnkey Installation/ Project Management | |
• | Equipment Technology Upgrades | |
• | Site/ Reliability Audits |
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Approx. | ||||||||||
Location | Status | Square Feet | Type | |||||||
Painted Post, New York | Owned/Leased | 840,000 | Manufacturing and services | |||||||
Olean, New York | Owned/Leased | 970,000 | Manufacturing and services | |||||||
Wellsville, New York | Owned/Leased | 380,000 | Manufacturing and services | |||||||
Burlington, Iowa | Owned | 185,000 | Manufacturing and services | |||||||
Millbury, Massachusetts | Owned | 104,000 | Manufacturing and services | |||||||
Campinas, Brazil | Owned | 36,870 | Manufacturing and services | |||||||
Kongsberg, Norway | Leased | 104,000 | Manufacturing and services | |||||||
Le Havre, France | Owned/Leased | 866,000 | Manufacturing and services | |||||||
Naroda, India | Leased | 102,000 | Manufacturing and services | |||||||
Oberhausen, Germany | Owned | 75,000 | Manufacturing and services | |||||||
Bielefeld, Germany | Owned | 31,000 | Manufacturing and services | |||||||
Houston, Texas | Owned | 115,800 | Services | |||||||
Houston, Texas | Owned | 45,900 | Controls | |||||||
Houston, Texas | Owned | 77,800 | Warehouse and offices |
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Name | Age | Position | ||||
Vincent R. Volpe Jr. | 48 | President, Chief Executive Officer and Director | ||||
Leonard M. Anthony | 51 | Executive Vice President and Chief Financial Officer | ||||
Stephen A. Riordan | 46 | Vice President Finance | ||||
Walter J. Nye | 50 | Executive Vice President, Worldwide Product Services | ||||
Bradford W. Dickson | 50 | Executive Vice President, New Equipment Worldwide | ||||
Christopher Rossi | 41 | Vice President and General Manager, North American Operations | ||||
Jean-Francois Chevrier | 59 | Vice President and General Manager, European Operations | ||||
Elizabeth C. Powers | 46 | Vice President and Chief Administrative Officer | ||||
Randy D. Rinicella | 48 | Vice President, General Counsel and Secretary | ||||
Lonnie A. Arnett | 59 | Vice President, Controller and Chief Accounting Officer | ||||
William E. Macaulay | 60 | Chairman of the Board of Directors | ||||
Thomas J. Sikorski | 44 | Director | ||||
Mark A. McComiskey | 33 | Director | ||||
Kenneth W. Moore | 36 | Director | ||||
Michael L. Underwood | 61 | Director | ||||
Louis A. Raspino | 53 | Director | ||||
Philip R. Roth | 54 | Director |
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Summary Compensation Table |
Long-Term Compensation | |||||||||||||||||||||||||||||||||
Payouts | |||||||||||||||||||||||||||||||||
Awards | |||||||||||||||||||||||||||||||||
Annual Compensation | Long-Term | ||||||||||||||||||||||||||||||||
Restricted | Number of Securities | Incentive | |||||||||||||||||||||||||||||||
Other Annual | Stock | Underlying | Plan | All Other | |||||||||||||||||||||||||||||
Name and Principal Position | Year | Salary ($) | Bonus ($)(1) | Compensation ($) | Award(s) ($) | Option/SARs (#)($) | Payouts | Compensation(4)($) | |||||||||||||||||||||||||
Vincent R. Volpe Jr. | 2004 | 375,000 | 865,593 | — | — | 20,430 | — | 1,330,000 | |||||||||||||||||||||||||
President and Chief | 2003 | 349,999 | 713,646 | — | — | 20,900 | — | — | |||||||||||||||||||||||||
Executive Officer | |||||||||||||||||||||||||||||||||
Walter J. Nye | 2004 | 224,561 | 129,000 | — | — | 9,970 | — | 334,476 | |||||||||||||||||||||||||
Executive Vice President, | 2003 | 211,866 | 98,500 | — | — | 9,720 | — | — | |||||||||||||||||||||||||
Worldwide Product Services | |||||||||||||||||||||||||||||||||
Stephen A. Riordan | 2004 | 193,722 | 124,800 | — | — | 5,280 | — | 283,932 | |||||||||||||||||||||||||
Vice President Finance(2) | 2003 | 173,016 | 100,000 | — | — | 5,000 | — | — | |||||||||||||||||||||||||
Bradford W. Dickson | 2004 | 193,923 | 122,100 | — | — | 7,130 | — | 284,400 | |||||||||||||||||||||||||
Executive Vice President, | 2003 | 181,290 | 86,967 | — | — | 6,820 | — | — | |||||||||||||||||||||||||
New Equipment Worldwide | |||||||||||||||||||||||||||||||||
Jean-Francois Chevrier | 2004 | 210,728 | 108,300 | — | — | 6,860 | — | 302,782 | |||||||||||||||||||||||||
Vice President, European | 2003 | 186,480 | 78,944 | — | — | 6,510 | — | — | |||||||||||||||||||||||||
Operations(3) |
(1) | This column reflects both amounts earned as annual bonuses and under the Performance Share Program. The Performance Share Program provides annual awards based on a combination of the achievement of strategic initiatives and annual financial performance. Payments are made in cash unless previously deferred |
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into the Executive Deferral Plan. The Performance Share Program was discontinued at December 31, 2004. The amounts earned as bonuses and under the Performance Share Program were as follows: |
Performance Share | ||||||||||||
Name | Year | Bonus ($) | Program ($) | |||||||||
Vincent R. Volpe Jr | 2004 | 440,100 | 425,493 | |||||||||
2003 | 282,400 | 431,246 |
(2) | Mr. Riordan was Vice President Finance from January 2003 through October 2004 and acted as the chief financial officer from October 2004 through April 2005. |
(3) | The average dollar to euro exchange rate for 2003 and 2004 was used to reflect earnings and bonus for Mr. Chevrier. |
(4) | To reward selected key employees in the event of a successful sale of Dresser-Rand Company, Ingersoll-Rand established a sales incentive program. Each of Messrs. Riordan, Nye, Dickson and Chevrier received, pursuant to the program, payments from Ingersoll-Rand equal to 100% of their total cash compensation (annual base salary plus annual target bonus amount) as of the date of the acquisition. In addition, all participants in the program had their unvested stock options, or stock equivalency rights for non-U.S. employees, in Ingersoll-Rand vest immediately as of October 29, 2004, the date of the acquisition. In addition, Mr. Volpe received payments from Ingersoll-Rand pursuant to the sales incentive program equal to two times his total cash compensation (annual base salary plus annual target bonus amount) as of the date of the acquisition and his unvested stock options vested as of October 29, 2004. |
Stock Options and Stock Appreciation Rights of Ingersoll-Rand |
Grant Date | ||||||||||||||||||||
Individual Grants | Value | |||||||||||||||||||
Number of | ||||||||||||||||||||
Securities | Percent of Total | |||||||||||||||||||
Underlying | Options/SARs | Grant Date | ||||||||||||||||||
Options/SARs | Granted to | Exercise or | Present | |||||||||||||||||
Granted | Employees in | Base | Value ($) | |||||||||||||||||
Name | (#)(a) | Fiscal Year | Price ($/SH) | Expiration Date (b) | (c) | |||||||||||||||
Vincent R. Volpe Jr. | 20,430 | 0.57 | % | $ | 64.37 | October 31, 2007 | $ | 22.74 | ||||||||||||
Walter J. Nye | 9,970 | 0.28 | 64.37 | October 31, 2007 | 22.74 | |||||||||||||||
Stephen A. Riordan | 5,280 | 0.15 | 64.37 | October 31, 2007 | 22.74 | |||||||||||||||
Bradford W. Dickson | 7,130 | 0.20 | 64.37 | October 31, 2007 | 22.74 | |||||||||||||||
Jean-Francois Chevrier | 6,860 | 0.19 | 64.37 | October 31, 2007 | 22.74 |
(a) | Options/ SARs issued by Ingersoll-Rand prior to the date of the acquisition. |
(b) | Options became exercisable as of October 31, 2004. Unexercised options/ SARs have no financial impact on us. |
(c) | Ingersoll-Rand estimated the average fair value of the options granted during the period from January 1, 2004 through October 29, 2004 at $22.74 on the date of grant, using the Black-Scholes option-pricing model, which included the following assumptions: |
Dividend yield | 1.19% | |
Volatility | 39.34% | |
Risk-free interest rate | 3.28% | |
Expected life | 5 years |
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Exercise of Options and Stock Appreciation Rights of Ingersoll-Rand |
Number of Securities | ||||||||||||||||||||||||
Underlying Unexercised | Value of Unexercised | |||||||||||||||||||||||
Options/SARs | In-the-Money | |||||||||||||||||||||||
at Fiscal Year-End | Options/SARs | |||||||||||||||||||||||
Shares | (#)(a) | at Fiscal Year-End ($) (b) | ||||||||||||||||||||||
Acquired on | Value | |||||||||||||||||||||||
Name | Exercise (#) | Realized ($) | Exercisable | Unexercisable | Exercisable | Unexercisable | ||||||||||||||||||
Vincent R. Volpe Jr. | 122,297 | $ | 2,813,262 | — | — | $ | — | $ | — | |||||||||||||||
Walter J. Nye | 13,115 | 417,301 | 34,333 | — | 1,006,191 | — | ||||||||||||||||||
Stephen A. Riordan | — | — | 10,280 | — | 290,387 | — | ||||||||||||||||||
Bradford W. Dickson | 18,600 | 442,458 | 13,033 | — | 439,311 | — | ||||||||||||||||||
Jean-Francois Chevrier | 9,649 | 335,708 | 14,135 | — | 351,196 | — |
(a) | Options/ SARs issued by Ingersoll-Rand prior to the date of the acquisition. |
(b) | Unexercised options/ SARs have no financial impact on us. |
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General |
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Amendment |
Units Held by Certain of our Managers |
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Terms of the Common Units, Service Units and the Exit Unit Tranches |
Certain Rights and Restrictions Applicable to the Units |
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Amount and | ||||||||
Nature of | ||||||||
Beneficial | ||||||||
Name of Beneficial Owner | Ownership | Percent | ||||||
Dresser-Rand Holdings, LLC(1) | 54,221,932 | 63.5 | % | |||||
Louis A. Raspino(2) | 78 | * | ||||||
Philip R. Roth(2) | 78 | * | ||||||
Michael L. Underwood(2) | 1,429 | * | ||||||
Directors and executive officers as a group (17 persons)(3) | 1,585 | * |
* | Less than 1% of outstanding common stock. |
(1) | 63.5% of our common stock is owned by D-R Interholding, LLC, which in turn is 100% owned by Dresser-Rand Holdings, LLC. Dresser-Rand Holdings, LLC is controlled by First Reserve Fund IX, L.P. (“Fund IX”) and First Reserve Fund X, L.P. (“Fund X”). First Reserve GP IX, L.P. (“GP IX”) is the general partner of Fund IX. First Reserve GP IX, Inc. (“GP IX Inc.”) is the general partner of GP IX. First Reserve GP X, L.P. (“GP X”) is the general partner of Fund X. First Reserve GP X, Inc. (“GP X, Inc.”) is the general partner of GP X. First Reserve Corporation is the adviser to Fund IX and Fund X. The officers for GP IX, GP IX Inc., GP X and GP X Inc. are William E. Macaulay, John A. Hill, Ben A. Guill, Thomas R. Denison, J.W.G. (Will) Honeybourne, Alex T. Krueger, Thomas J. Sikorski, Jennifer C. Zarrilli, Craig M. Jarchow, Kenneth W. Moore, Catia Cesari, Timothy H. Day, Joseph Robert Edwards, Mark A. McComiskey, J. Hardy Murchison, Glenn J. Payne, Kristin A. Custar, Brian K. Lee, Bingfeng Leng, Timothy K. O’Keeffe, Anne E. Gold, Valerie A. Thomason and Damien T. J. Harris, who are all employees of First Reserve. Decisions with respect to voting and investments are made by the Investment Committee of First Reserve, made up of a subset of these officers that includes the officers named above except for Ms. Thomason and Mr. Harris. With respect to investments held by these entities, decisions with respect to operations oversight are made by the subset of these officers that work most closely on a given investment, which includes Messrs. Macaulay, McComiskey, Moore and Sikorski in the case of Dresser-Rand Group Inc. The address of GP IX, Inc., GP IX, Fund IX, GP X, Inc., GP X, Fund X and First Reserve Corporation is c/o First Reserve Corporation, One Lafayette Place, Greenwich, CT 06830. |
(2) | The address of Messrs. Raspino, Roth and Underwood is c/o Dresser-Rand Group Inc., Paul Clark Drive, Olean, New York 14760. |
(3) | Because members of senior management hold their interests in units of Dresser-Rand Holdings, LLC, which is controlled by First Reserve, they are not deemed to beneficially own the common stock of Dresser-Rand Group Inc. in which they have an economic interest. |
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Amount and | ||||||||
Nature of | ||||||||
Economic | ||||||||
Name of Economic Interest Holder | Interest | Percent | ||||||
First Reserve Fund X, L.P. | 32,250,422 | 37.7% | ||||||
First Reserve Fund IX, L.P. | 21,086,814 | 24.7 | ||||||
Vincent R. Volpe Jr. | 248,179 | * | ||||||
Leonard M. Anthony | 118,906 | * | ||||||
Stephen A. Riordan | 62,044 | * | ||||||
Walter J. Nye | 31,022 | * | ||||||
Bradford W. Dickson | 62,019 | * | ||||||
Christopher Rossi | 62,328 | * | ||||||
Jean-Francois Chevrier | 32,238 | * | ||||||
Elizabeth C. Powers | 111,681 | * | ||||||
Randy D. Rinicella | 37,845 | * | ||||||
Lonnie A. Arnett | — | — | ||||||
William E. Macaulay(1) | — | — | ||||||
Thomas J. Sikorski(1) | — | — | ||||||
Mark A. McComiskey(1) | — | — | ||||||
Kenneth W. Moore(1) | — | — | ||||||
Directors and executive officers as a group (17 persons)(2) | 766,262 | * |
* | Less than 1% of outstanding common stock. |
(1) | Mr. Macaulay is the Chairman, Chief Executive Officer and a member of the board of directors of First Reserve Corporation, GP IX, Inc. and GP X, Inc. Mr. Sikorski is a Managing Director of First Reserve Corporation, GP IX, Inc. and GP X, Inc. Mr. Moore is a Director of First Reserve Corporation, GP IX, Inc. and GP X, Inc. Mr. McComiskey is a Vice President of First Reserve Corporation, GP IX, Inc. and GP X, Inc. Messrs. Macaulay, Sikorski, Moore and McComiskey all disclaim beneficial ownership of any common stock owned by such entities or their affiliates. The address of GP IX, Inc., GP X, Inc., GP IX, GP X, Fund IX, Fund X, William E. Macaulay, Thomas J. Sikorski, Mark A. McComiskey and Kenneth W. Moore is c/o First Reserve Corporation, One Lafayette Place, Greenwich, CT 06830. |
(2) | Excludes 1,585 shares of common stock directly held by Louis A. Raspino, Philip R. Roth and Michael L. Underwood as set forth in the previous table. |
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Overview |
• | a $395 million term loan facility (with a€78.5 million sub-facility); and | |
• | a $350 million revolving credit facility (with a sub-facility denominated in euros in an amount not to exceed the equivalent of $220 million and in sterling in an amount not to exceed the equivalent of $75 million). |
Interest Rate and Fees |
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Prepayments |
• | beginning in the year ending December 31, 2005, 75% (which percentage will be reduced to 50% if our leverage ratio is equal to or less than 5.00 to 1.00 and greater than 4.00 to 1.00, and to 25% if our leverage ratio is equal to or less than 4.00 to 1.00 and greater than 3.00 to 1.00, and to 0% if our leverage ratio is equal to or less than 3.00 to 1.00) of our annual excess cash flow; | |
• | 100% of the net cash proceeds in excess of an agreed upon amount from non-ordinary course asset sales and casualty and condemnation events, if we do not reinvest or contract to reinvest those proceeds within twelve months, subject to certain limitations; | |
• | 100% of the net cash proceeds of any incurrence of debt, other than certain debt permitted under the senior secured credit facility; and | |
• | 100% of amounts in excess of an aggregate amount of $5.0 million in respect of certain claims arising out of the Acquisition, subject to certain exceptions. |
Amortization |
Guarantee and Security |
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• | subject to certain exceptions, a pledge of 100% of our capital stock and the capital stock of each direct, material domestic subsidiary owned by us or a Domestic Guarantor (other than subsidiaries substantially all of whose assets consist of stock in controlled foreign corporations) and 65% of the capital stock of each direct, material foreign subsidiary owned by us or a Domestic Guarantor and of each direct, material domestic subsidiary owned by us or a Domestic Guarantor substantially all of whose assets consist of stock in controlled foreign corporations; and | |
• | subject to certain exceptions, a security interest in substantially all of the tangible and intangible assets owned by us and each Domestic Guarantor. |
• | subject to certain exceptions, a pledge of 100% of the capital stock of each direct, material subsidiary of such Euro Borrower and the applicable Foreign Guarantors (subject to exceptions with respect to any pledge that could create materially adverse tax or legal consequences); and | |
• | subject to certain exceptions and limitations under applicable law, a security interest in substantially all of the tangible and intangible assets of such Euro Borrower and the applicable Foreign Guarantors. |
Certain Covenants and Events of Default |
• | sell assets; | |
• | incur additional indebtedness; | |
• | prepay, redeem or repurchase other indebtedness; | |
• | pay dividends and distributions or repurchase capital stock; | |
• | create liens on assets; | |
• | make investments, loans or advances; | |
• | make capital expenditures; | |
• | make amendments to any corporate documents that would be materially adverse to the lenders; |
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• | make certain acquisitions; | |
• | engage in mergers or consolidations; | |
• | engage in certain transactions with affiliates; | |
• | amend certain material agreements governing indebtedness; | |
• | change the business conducted by D-R Interholding, LLC and its subsidiaries; | |
• | enter into agreements that restrict dividends from subsidiaries; | |
• | enter into sale and lease-back transactions; and | |
• | enter into swap agreements. |
• | a maximum consolidated net leverage ratio; and | |
• | a minimum interest coverage ratio. |
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• | you are not our affiliate or an affiliate of any guarantor within the meaning of Rule 405 of the Securities Act; | |
• | you have no arrangement or understanding with any person to participate in a distribution (within the meaning of the Securities Act) of the exchange notes in violation of the provisions of the Securities Act; | |
• | you are not engaged in, and do not intend to engage in, a distribution of the exchange notes; and | |
• | you are acquiring the exchange notes in the ordinary course of your business. |
• | you are not our affiliate or an affiliate of any guarantor within the meaning of Rule 405 under the Securities Act; | |
• | you do not have an arrangement or understanding with any person to participate in a distribution of the exchange notes; | |
• | you are not engaged in, and do not intend to engage in, a distribution of the exchange notes; and | |
• | you are acquiring the exchange notes in the ordinary course of your business. |
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• | You cannot rely on the position of the SEC set forth in Morgan Stanley & Co. Incorporated (available June 5, 1991) and Exxon Capital Holdings Corporation (available May 13, 1988), as interpreted in the SEC’s letter to Shearman & Sterling, dated July 2, 1993, or similar no-action letters; and | |
• | in the absence of an exception from the position stated immediately above, you must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale of the exchange notes. |
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• | to delay accepting for exchange any outstanding notes (if we amend or extend the exchange offer); | |
• | to extend the exchange offer or to terminate the exchange offer if any of the conditions set forth below under “— Conditions to the Exchange Offer” have not been satisfied, by giving oral or written notice of such delay, extension or termination to the exchange agent; and | |
• | subject to the terms of the registration rights agreement, to amend the terms of the exchange offer in any manner. |
• | the exchange offer or the making of any exchange by a holder violates any applicable law or interpretation of the SEC; or | |
• | any action or proceeding has been instituted or threatened in any court or by or before any governmental agency with respect to the exchange offer that, in their judgment, would reasonably be expected to impair their ability to proceed with the exchange offer. |
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• | the representations described under “— Purpose and Effect of the Exchange Offer,” “— Procedures for Tendering Outstanding Notes” and “Plan of Distribution;” or | |
• | any other representations as may be reasonably necessary under applicable SEC rules, regulations, or interpretations to make available to us an appropriate form for registration of the exchange notes under the Securities Act. |
• | complete, sign and date the letter of transmittal, or a facsimile of the letter of transmittal, have the signature(s) on the letter of transmittal guaranteed if required by the letter of transmittal and mail or deliver such letter of transmittal or facsimile thereof to the exchange agent at the address set forth below under “— Exchange Agent” prior to the expiration date; or | |
• | comply with DTC’s Automated Tender Offer Program procedures described below. |
• | the exchange agent must receive certificates for outstanding notes along with the accompanying letter of transmittal prior to the expiration date; | |
• | the exchange agent must receive a timely confirmation of book-entry transfer of outstanding notes into the exchange agent’s account at DTC according to the procedures for book-entry transfer described below or a properly transmitted agent’s message prior to the expiration date; or | |
• | you must comply with the guaranteed delivery procedures described below. |
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• | make appropriate arrangements to register ownership of the outstanding notes in your name; or | |
• | obtain a properly completed bond power from the registered holder of outstanding notes. |
• | by a registered holder of the outstanding notes who has not completed the box entitled “Special Registration Instructions” or “Special Delivery Instructions” on the accompanying letter of transmittal; or | |
• | for the account of an eligible guarantor institution. |
• | DTC has received an express acknowledgment from a participant in its Automated Tender Offer Program that is tendering outstanding notes that are the subject of the book-entry confirmation; |
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• | the participant has received and agrees to be bound by the terms of the accompanying letter of transmittal, or in the case of an agent’s message relating to guaranteed delivery, that such participant has received and agrees to be bound by the applicable notice of guaranteed delivery; and | |
• | we may enforce that agreement against such participant. |
• | outstanding notes or a timely book-entry confirmation of such outstanding notes into the exchange agent’s account at the applicable book-entry transfer facility; and | |
• | a properly completed and duly executed letter of transmittal and all other required documents or a properly transmitted agent’s message. |
• | you are not our affiliate or an affiliate of any guarantor within the meaning of Rule 405 under the Securities Act; | |
• | you do not have an arrangement or understanding with any person or entity to participate in a distribution of the exchange notes; and | |
• | you are acquiring the exchange notes in the ordinary course of your business. |
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• | the tender is made through an eligible guarantor institution; | |
• | prior to the expiration date, the exchange agent receives from such eligible guarantor institution either a properly completed and duly executed notice of guaranteed delivery, by facsimile transmission, mail, or hand delivery or a properly transmitted agent’s message and notice of guaranteed delivery, that (1) sets forth your name and address, the certificate number(s) of such outstanding notes and the principal amount of outstanding notes tendered; (2) states that the tender is being made thereby; and (3) guarantees that, within three New York Stock Exchange trading days after the expiration date, the letter of transmittal, or facsimile thereof, together with the outstanding notes or a book-entry confirmation, and any other documents required by the letter of transmittal, will be deposited by the eligible guarantor institution with the exchange agent; and | |
• | the exchange agent receives the properly completed and executed letter of transmittal or facsimile thereof, as well as certificate(s) representing all tendered outstanding notes in proper form for transfer or a book-entry confirmation of transfer of the outstanding notes into the exchange agent’s account at DTC and all other documents required by the letter of transmittal within three New York Stock Exchange trading days after the expiration date. |
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• | the exchange agent must receive a written notice, which may be by telegram, telex, facsimile or letter, of withdrawal at its address set forth below under “— Exchange Agent;” or | |
• | you must comply with the appropriate procedures of DTC’s Automated Tender Offer Program system. |
• | specify the name of the person who tendered the outstanding notes to be withdrawn; | |
• | identify the outstanding notes to be withdrawn, including the certificate numbers and principal amount of the outstanding notes; and | |
• | where certificates for outstanding notes have been transmitted, specify the name in which such outstanding notes were registered, if different from that of the withdrawing holder. |
• | the serial numbers of the particular certificates to be withdrawn; and | |
• | a signed notice of withdrawal with signatures guaranteed by an eligible institution unless your are an eligible guarantor institution. |
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By Registered or Certified Mail: | By Facsimile Transmission: | By Overnight Courier or Hand | ||
Delivery: | ||||
Citibank, N.A. 111 Wall Street, 15thFloor New York, NY 10005 Attn: Agency & Trust Services | Citibank, N.A Attn: Agency & Trust Services (212) 657-1020 Confirm Receipt of Facsimile by Telephone (800) 422-2066 | Citibank, N.A. 111 Wall Street, 15thFloor New York, NY 10005 Attn: Agency & Trust Services |
• | SEC registration fees; | |
• | fees and expenses of the exchange agent and trustee; | |
• | accounting and legal fees and printing costs; and | |
• | related fees and expenses. |
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• | certificates representing outstanding notes for principal amounts not tendered or accepted for exchange are to be delivered to, or are to be issued in the name of, any person other than the registered holder of outstanding notes tendered; | |
• | tendered outstanding notes are registered in the name of any person other than the person signing the letter of transmittal; or | |
• | a transfer tax is imposed for any reason other than the exchange of outstanding notes under the exchange offer. |
• | as set forth in the legend printed on the notes as a consequence of the issuances of the outstanding notes pursuant to the exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws; and | |
• | as otherwise set forth in the indenture governing the notes. |
(1) the issuer and the guarantors are not |
(a) required to file the exchange offer registration statement; or | |
(b) permitted to consummate the exchange offer because the exchange offer is not permitted by applicable law or SEC policy; or |
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(2) for any other reason the exchange offer is not consummated within 300 days following the closing date of the issuance of the outstanding notes; or | |
(3) any holder of Transfer Restricted Securities notifies the issuer prior to the effectiveness of the exchange offer registration statement that: |
(a) it is prohibited by law or SEC policy from participating in the exchange offer; | |
(b) it may not resell the exchange notes acquired by it in the exchange offer to the public without delivering a prospectus and the prospectus contained in the exchange offer registration statement is not appropriate or available for such resales; or | |
(c) it is a broker-dealer and owns notes acquired directly from the issuer or an affiliate of the issuer, |
(1) the date on which such note has been exchanged by a person other than a broker-dealer for an exchange note in the exchange offer; | |
(2) following the exchange by a broker-dealer in the exchange offer of a note for an exchange note, the date on which such exchange note is sold to a purchaser who receives from such broker-dealer on or prior to the date of such sale a copy of the prospectus contained in the exchange offer registration statement; | |
(3) the date on which such note has been effectively registered under the Securities Act and disposed of in accordance with the shelf registration statement; or | |
(4) the date on which such note is sold pursuant to Rule 144 under the Securities Act. |
(1) use commercially reasonable efforts to file the shelf registration statement with the SEC on or prior to 210 days after such filing obligation arises, unless such day is not a business day, then the next succeeding business day, and | |
(2) use commercially reasonable efforts to cause the shelf registration to be declared effective by the SEC on or prior to 270 days after such obligation arises, unless such day is not a business day, then the next succeeding business day. |
(1) the issuer and the guarantors fail to consummate the exchange offer within 300 days after the closing of this offering with respect to the exchange offer registration statement or fail to cause the shelf registration statement to be effective, if applicable, within 270 days after the date the filing obligation with respect thereto arises; or | |
(2) the shelf registration statement or the exchange offer registration statement is declared effective but thereafter ceases to be effective or usable in connection with resales of Transfer Restricted Securities during the periods specified in the registration rights agreement |
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The Notes |
• | general unsecured senior subordinated obligations of the Issuer; | |
• | subordinated in right of payment to all existing and future Senior Indebtedness of the Issuer, including borrowings under the Credit Agreement; | |
• | effectively subordinated in right of payment to any existing and future Indebtedness and other liabilities, including trade payables, of the Issuer’s Foreign Subsidiaries, certain Domestic Subsidiaries that are not Guarantors and any future Unrestricted Subsidiaries; | |
• | pari passu in right of payment with all future senior subordinated Indebtedness of the Issuer; | |
• | senior in right of payment to any future Indebtedness of the Issuer that expressly provides for its subordination to the notes; and | |
• | unconditionally guaranteed on a senior subordinated basis, jointly and severally, by the Guarantors. |
• | the Issuer and its Subsidiaries had $599.2 million principal amount of Indebtedness on a consolidated basis (including the notes), of which $229.0 million was secured Senior Indebtedness, comprised solely of borrowings under the Credit Agreement (excluding $171.3 million in letters of credit); |
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• | an additional $178.7 million was available for borrowing under the Credit Agreement, which Indebtedness when incurred would be Senior Indebtedness and would be secured; and | |
• | Subsidiaries of the Issuer that are not Guarantors had $358 million of Indebtedness and other liabilities, including trade payables but excluding intercompany liabilities. |
The Note Guarantees |
• | a general senior subordinated, unsecured obligation of that Guarantor; | |
• | subordinated in right of payment to all existing and future Senior Indebtedness of that Guarantor, including any borrowings and guarantees by that Guarantor of Indebtedness under the Credit Agreement; | |
• | pari passu in right of payment with all future senior subordinated Indebtedness of that Guarantor; and | |
• | senior in right of payment to any future Indebtedness of that Guarantor that expressly provides for its subordination to the Guarantor’s Note Guarantee. |
(1) immediately after giving effect to that transaction, no Default or Event of Default exists; and | |
(2) either: |
(a) the Person acquiring the property in any such sale or disposition or the Person formed by or surviving any such consolidation or merger assumes all the obligations of that Guarantor under the indenture and its Note Guarantee pursuant to a supplemental indenture in the form attached as an exhibit to the indenture; or | |
(b) in the case of any such sale or disposition (including by way of any such consolidation or merger), the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of the indenture. |
(1) in connection with any sale, disposition or transfer of all or substantially all of the assets of that Guarantor (including by way of merger or consolidation) to a Person that is not (either before or after |
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giving effect to such transaction) the Issuer or a Restricted Subsidiary of the Issuer, if the sale, disposition or transfer does not violate the first paragraph of the “Asset Sale” provisions of the indenture; | |
(2) in connection with any sale, disposition or transfer of all of the Capital Stock of that Guarantor to a Person that is not (either before or after giving effect to such transaction) the Issuer or a Restricted Subsidiary of the Issuer, if the sale, disposition or transfer does not violate the first paragraph of the “Asset Sale” provisions of the indenture; | |
(3) if the Issuer designates any Restricted Subsidiary that is a Guarantor to be an Unrestricted Subsidiary in accordance with the applicable provisions of the indenture; | |
(4) upon legal defeasance or satisfaction and discharge of the indenture as provided below under the captions “— Legal Defeasance and Covenant Defeasance” and “— Satisfaction and Discharge”; or | |
(5) upon the release of such Guarantor’s guarantee under the Credit Agreement or under such other Indebtedness requiring such Guarantor to provide a Note Guarantee as provided below under the caption “— Certain Covenants — Additional Note Guarantees.” |
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(1) in a liquidation or dissolution of the Issuer; | |
(2) in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Issuer or its property; | |
(3) in an assignment for the benefit of creditors; or | |
(4) in any marshaling of the Issuer’s assets and liabilities. |
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(1) a payment default on Designated Senior Indebtedness occurs and is continuing; or | |
(2) any other default occurs and is continuing on any series of Designated Senior Indebtedness that permits holders of that series of Designated Senior Indebtedness to accelerate its maturity and a responsible officer of the trustee receives actual notice of such default (a “Payment Blockage Notice”) from the trustee or other representative for the holders of any Designated Senior Indebtedness, or the holders of at least a majority of the outstanding principal amount of such Designated Senior Indebtedness. |
(1) in the case of a payment default in respect of Designated Senior Indebtedness, upon the date on which such default is cured or waived; and | |
(2) in the case of a nonpayment default in respect of Designated Senior Indebtedness, upon the earlier of the date on which such nonpayment default is cured or waived or 179 days after the date on which the applicable Payment Blockage Notice is received. |
(1) the payment is prohibited by these subordination provisions; and | |
(2) the trustee or such Holder has actual knowledge that the payment is prohibited, |
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(1) at least 65% of the aggregate principal amount of notes issued under the indenture (excluding notes held by the Issuer and its Subsidiaries) remains outstanding immediately after the occurrence of such redemption; and | |
(2) the redemption occurs within 180 days of the date of the closing of such Equity Offering. |
Year | Percentage | |||
2009 | 103.688 | % | ||
2010 | 102.458 | % | ||
2011 | 101.229 | % | ||
2012 and thereafter | 100.000 | % |
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Change of Control |
(1) accept for payment all notes or portions of notes properly tendered pursuant to the Change of Control Offer; | |
(2) deposit with the paying agent an amount equal to the Change of Control Payment in respect of all notes or portions of notes properly tendered; and | |
(3) deliver or cause to be delivered to the trustee the notes properly accepted together with an Officers’ Certificate stating the aggregate principal amount of notes or portions of notes being purchased by the Issuer. |
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Asset Sales |
(1) the Issuer (or the Restricted Subsidiary, as the case may be) receives consideration at the time of the Asset Sale at least equal to the Fair Market Value of the assets or Equity Interests issued or sold or otherwise disposed of; and | |
(2) at least 75% of the consideration received in the Asset Sale by the Issuer or such Restricted Subsidiary is in the form of cash, Cash Equivalents or Marketable Securities. For purposes of this provision, each of the following will be deemed to be cash: |
(a) any liabilities of the Issuer or any Restricted Subsidiary of the Issuer (other than contingent liabilities and liabilities that are by their terms subordinated to the notes or any Note Guarantee) that are assumed by the transferee of any such assets and as a result of which the Issuer and such Restricted Subsidiary of the Issuer are released from any further liability in connection therewith; | |
(b) any securities, notes, other obligations or assets received by the Issuer or any such Restricted Subsidiary from such transferee that are converted by the Issuer or such Restricted Subsidiary into cash or Cash Equivalents within 180 days of the receipt thereof, to the extent of the cash or Cash Equivalents received in that conversion; | |
(c) any Designated Non-cash Consideration received by the Issuer or any of its Restricted Subsidiaries in such Asset Sale; provided that the aggregate Fair Market Value of such Designated Non-cash Consideration, taken together with the Fair Market Value at the time of receipt of all other Designated Non-cash Consideration received pursuant to this clause (c), less the amount of Net Proceeds previously realized in cash from prior Designated Non-cash Consideration, is less than the greater of (x) 2.50% of Total Assets at the time of the receipt of such Designated Non-cash Consideration (with the Fair Market Value of each item of Designated Non-cash Consideration being measured at the time received and without giving effect to subsequent changes in value), and (y) $35.0 million; and | |
(d) any Capital Stock or assets of the kind referred to in clause (2) or (4) of the next paragraph of this covenant. |
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(a) apply such Net Proceeds, at its option: |
(1) to repay (w) Indebtedness and other Obligations constituting Senior Indebtedness, (x) any Indebtedness that was secured by the assets sold in such Asset Sale, (y) other pari passu Indebtedness (provided that the Issuer shall also equally and ratably reduce Indebtedness under the notes by making an offer (in accordance with the procedures set forth below for an Asset Sale) to all Holders to purchase at a purchase price equal to 100% of the principal amount thereof, plus accrued and unpaid interest and Additional Interest, if any, the pro rata principal amount of notes) or (z) Indebtedness of a Restricted Subsidiary that is not a Guarantor, in each case other than Indebtedness owed to any Parent, the Issuer or any of their respective Affiliates; | |
(2) to acquire all or substantially all of the assets of, or any Capital Stock of, another Permitted Business; provided, that in the case of any such acquisition of Capital Stock, the Permitted Business is or becomes a Restricted Subsidiary of the Issuer; | |
(3) to make a capital expenditure; or | |
(4) to acquire other assets that are not classified as current assets under GAAP and that are used or useful in a Permitted Business; or |
(b) enter into a binding commitment to apply the Net Proceeds pursuant to clause (a) (2), (3) or (4) above, provided that such binding commitment shall be treated as a permitted application of the Net Proceeds from the date of such commitment until the earlier of (x) the date on which such acquisition or expenditure is consummated, and (y) the 180th day following the expiration of the aforementioned 365 day period. |
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(1) if the notes are listed on any national securities exchange, in compliance with the requirements of the principal national securities exchange on which the notes are listed; or | |
(2) if the notes are not listed on any national securities exchange, on a pro rata basis. |
Changes in Covenants when Notes Rated Investment Grade |
(1) the notes are assigned an Investment Grade Rating from both of the Rating Agencies; and | |
(2) no Default or Event of Default shall have occurred and be continuing, |
(1) “— Repurchase at the Option of Holders — Asset Sales”; | |
(2) “— Restricted Payments”; | |
(3) “— Incurrence of Indebtedness and Issuance of Preferred Equity”; | |
(4) “— Dividend and Other Payment Restrictions Affecting Subsidiaries”; | |
(5) “— Designation of Restricted and Unrestricted Subsidiaries”; | |
(6) “— Transactions with Affiliates”; | |
(7) clause (4) of the covenant described below under the caption “— Merger, Consolidation or Sale of Assets”; and | |
(8) “— Business Activities.” |
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Restricted Payments |
(1) declare or pay any dividend or make any other payment or distribution on account of the Issuer’s or any of its Restricted Subsidiaries’ Equity Interests or to the direct or indirect holders of the Issuer’s or any of its Restricted Subsidiaries’ Equity Interests in their capacity as such (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Issuer and other than dividends or distributions payable to the Issuer or a Restricted Subsidiary of the Issuer); | |
(2) purchase, redeem or otherwise acquire or retire for value any Equity Interests of the Issuer, any Parent or any Restricted Subsidiary held by Persons other than the Issuer or any of its Restricted Subsidiaries; | |
(3) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value, any Indebtedness of any Parent, the Issuer or any Guarantor that is contractually subordinated to the notes or to any Note Guarantee (excluding (x) any intercompany Indebtedness between or among the Issuer and any of its Restricted Subsidiaries or (y) the purchase, repurchase or other acquisition of Indebtedness that is contractually subordinated to the notes or to any Note Guarantee, as the case may be, purchased in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of purchase, repurchase or acquisition), except a payment of interest or principal at the Stated Maturity thereof; or | |
(4) make any Restricted Investment; |
(1) no Default or Event of Default has occurred and is continuing or would occur as a consequence of such Restricted Payment; | |
(2) the Issuer would, after giving pro forma effect to such Restricted Payment as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described below under the caption “— Incurrence of Indebtedness and Issuance of Preferred Equity”; and | |
(3) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Issuer and its Restricted Subsidiaries since the date of the indenture (excluding Restricted Payments permitted by clauses (2), (3), (4), (5) (only to the extent of one-half of the amounts paid pursuant to such clause), (6), (8), (9), (10), (11), (12), (14), (15), (16) and (17) of the next succeeding paragraph), is less than the sum, without duplication, of: |
(a) 50% of the Consolidated Net Income of the Issuer for the period (taken as one accounting period) from the beginning of the first fiscal quarter commencing prior to the date of the indenture to the end of the Issuer’s most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100% of such deficit); plus | |
(b) 100% of the aggregate net proceeds, including cash and the Fair Market Value of property other than cash, received by the Issuer since the date of the indenture (x) as a contribution to its common equity capital or (y) from the issue or sale of Equity Interests of the Issuer or any Parent (other than Disqualified Stock, Designated Preferred Stock, Excluded Contributions or Cash Contributions) or from the issue or sale of convertible or exchangeable Disqualified Stock or convertible or exchangeable debt securities that have been converted into or exchanged for such Equity Interests (other than Equity Interests (or Disqualified Stock or debt securities) sold to a Subsidiary of the Issuer); plus |
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(c) to the extent that any Restricted Investment that was made after the date of the indenture is sold for cash or otherwise liquidated or repaid for cash, 100% of the aggregate amount received in cash and the Fair Market Value of property other than cash received; plus | |
(d) to the extent that any Unrestricted Subsidiary of the Issuer designated as such after the date of the indenture is redesignated as a Restricted Subsidiary after the date of the indenture or has been merged into, consolidated or amalgamated with or into, or transfers or conveys its assets to, the Issuer or a Restricted Subsidiary of the Issuer, 100% of the Fair Market Value of the Issuer’s Investment in such Subsidiary as of the date of such redesignation, combination or transfer (or of the assets transferred or conveyed, as applicable) after deducting any Indebtedness associated with the Unrestricted Subsidiary so designated or combined or any Indebtedness associated with the assets so transferred or conveyed; plus | |
(e) 100% of any dividends or distributions received by the Issuer or a Restricted Subsidiary of the Issuer after the date of the indenture from an Unrestricted Subsidiary of the Issuer, to the extent that such dividends or distributions were not otherwise included in the Consolidated Net Income of the Issuer for such period. |
(1) the payment of any dividend or distribution or the consummation of any redemption within 60 days after the date of declaration of the dividend or distribution or giving of the redemption notice, as the case may be, if, at the date of declaration or notice, the dividend, distribution or redemption payment would have complied with the provisions of the indenture; | |
(2) the making of any Restricted Payment in exchange for, or out of the net cash proceeds received by the Issuer of the substantially concurrent sale (other than to a Subsidiary of the Issuer) of, Equity Interests of the Issuer or any Parent (other than Disqualified Stock) or from the substantially concurrent contribution of such proceeds to the capital of the Issuer in any form other than Disqualified Stock or Indebtedness; provided that the amount of any such net cash proceeds that are utilized for any such Restricted Payment will be excluded from clause (3)(b) of the preceding paragraph; | |
(3) the repurchase, redemption, defeasance or other acquisition or retirement for value of Indebtedness of the Issuer or any Restricted Subsidiary of the Issuer that is contractually subordinated to the notes or to any Note Guarantee with the net cash proceeds from a substantially concurrent incurrence of Permitted Refinancing Indebtedness; | |
(4) the payment of any dividend (or, in the case of any partnership or limited liability company, any similar distribution) by a Restricted Subsidiary of the Issuer to the holders of its Equity Interests on a pro rata basis; | |
(5) the repurchase, redemption or other acquisition or retirement (or dividends or distributions to any Parent to finance any such repurchase, redemption or other acquisition or retirement) for value of any Equity Interests of the Issuer, any Parent or any Restricted Subsidiary of the Issuer held by any current or former officer, director, consultant or employee of the Issuer, any Parent or any Restricted Subsidiary of the Issuer pursuant to any equity subscription agreement, stock option agreement, shareholders’ or members’ agreement or similar agreement, plan or arrangement; provided that the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests may not exceed $4.0 million in any calendar year (with unused amounts in any calendar year being permitted to be carried over into succeeding calendar years); provided further, that the amount in any calendar year may be increased by an amount not to exceed: |
(a) the cash proceeds received by the Issuer or any of its Restricted Subsidiaries from the sale of Equity Interests (other than Disqualified Stock) of Issuer or any Parent (to the extent contributed to the capital of the Issuer or any Restricted Subsidiary in any form other than Disqualified Stock or Indebtedness) to members of management, directors or consultants of Issuer and its Restricted Subsidiaries or any Parent that occurs after the date of the indenture (provided |
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that the amount of such cash proceeds utilized for any such repurchase, retirement, other acquisition, or dividend or distribution will not increase the amount available for Restricted Payments under clause (3) of the immediately proceeding paragraph and to the extent such cash proceeds have not otherwise been applied to the payment of Restricted Payments); plus | |
(b) the cash proceeds of key man life insurance policies received by the Issuer or any Parent (to the extent such cash proceeds are contributed to the capital of the Issuer in any form other than Disqualified Stock or Indebtedness) and its Restricted Subsidiaries after the date of the indenture, less any amounts previously applied to the payment of Restricted Payments pursuant to this clause (5); |
(6) the repurchase of Equity Interests deemed to occur upon the exercise of stock options to the extent such Equity Interests represent a portion of the exercise price of those stock options; | |
(7) the declaration and payment of regularly scheduled or accrued dividends or distributions to holders of any class or series of Disqualified Stock of the Issuer or any Restricted Subsidiary of the Issuer issued on or after the date of the indenture in accordance with the Fixed Charge Coverage Ratio test described below under the caption “— Incurrence of Indebtedness and Issuance of Preferred Equity”; | |
(8) Permitted Payments to Parent; | |
(9) purchases of receivables pursuant to a Receivables Repurchase Obligation in connection with a Qualified Receivables Financing; | |
(10) the declaration and payment of dividends or distributions to holders of any class or series of Designated Preferred Stock (other than Disqualified Stock) issued after the date of the indenture and the declaration and payment of dividends to any Parent, the proceeds of which will be used to fund the payment of dividends or distributions to holders of any class or series of Designated Preferred Stock (other than Disqualified Stock) of any Parent issued after the date of the indenture; provided, however, that (A) for the most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date of issuance of such Designated Preferred Stock, after giving effect to such issuance (and the payment of dividends or distributions) on a pro forma basis, the Issuer could incur an additional $1.00 of Indebtedness pursuant to the Fixed Charge Coverage Ratio, and (B) the aggregate amount of dividends declared and paid pursuant to this clause (10) does not exceed the net cash proceeds actually received by the Issuer (including any such proceeds contributed to the capital of the Issuer in any form other than Disqualified Stock or Indebtedness by any Parent) from any such sale of Designated Preferred Stock (other than Disqualified Stock) issued after the date of the indenture; | |
(11) any payments made in connection with the consummation of the Transactions (as described in this prospectus); | |
(12) Investments that are made with Excluded Contributions; | |
(13) other Restricted Payments in an aggregate amount not to exceed $25.0 million since the date of the indenture; | |
(14) the satisfaction of change of control obligations once the Issuer has fulfilled its obligations under the indenture with respect to a Change of Control; | |
(15) the repayment of intercompany debt that was permitted to be incurred under the indenture; |
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(16) cash dividends or other distributions on the Issuer’s Capital Stock used to, or the making of loans to any Parent to, fund the payment of fees and expenses owed by the Issuer or its Restricted Subsidiaries to Affiliates, to the extent permitted by the covenant described under “— Transactions with Affiliates”; | |
(17) the payment of dividends or distributions on the Issuer’s common equity (or the payment of dividends or distributions to any Parent to fund the payment by such Parent of dividends or distributions on its common equity) of up to 5.0% per calendar year of the net cash proceeds received by the Issuer from any public Equity Offering or contributed to the capital of the Issuer in any form other than Disqualified Stock or Indebtedness by any Parent from any public Equity Offering; provided that the amount of any such net cash proceeds that are utilized for any such Restricted Payment will be excluded from clause (3)(b) of the preceding paragraph; | |
(18) any payments in connection with any merger or consolidation involving the Issuer or any of its Restricted Subsidiaries that does not violate the provisions of the indenture described below under the caption “— Merger, Consolidation or Sale of Assets”; | |
(19) payments of principal of, and interest on, any Management Notes; and | |
(20) the distribution, as a dividend or otherwise, of shares of Capital Stock of, or Indebtedness owed to, Dresser-Rand Holdings, LLC, Holdings, the Issuer or a Restricted Subsidiary of the Issuer by, Unrestricted Subsidiaries; |
Incurrence of Indebtedness and Issuance of Preferred Equity |
(1) the incurrence by the Issuer, the Guarantors or any of the Issuer’s Restricted Subsidiaries of additional Indebtedness and letters of credit and bankers’ acceptances thereunder under Credit Facilities in an aggregate principal amount at any one time outstanding under this clause (1) (with letters of credit being deemed to have a principal amount equal to the maximum potential liability of the Issuer and any Guarantors and any Restricted Subsidiaries thereunder) not to exceed $895 million; | |
(2) the incurrence by the Issuer and its Restricted Subsidiaries of Indebtedness to the extent outstanding on the date of the indenture; |
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(3) the incurrence by the Issuer and the Guarantors (including any future Guarantor) of Indebtedness represented by the notes and the related Note Guarantees to be issued on the date of the indenture and the exchange notes and the related Note Guarantees to be issued pursuant to the registration rights agreement; | |
(4) the incurrence by the Issuer or any of its Restricted Subsidiaries of Indebtedness represented by Capital Lease Obligations, mortgage financings, industrial revenue bonds, purchase money obligations or other Indebtedness or preferred stock, or synthetic lease obligations, in each case, incurred for the purpose of financing all or any part of the purchase price or cost of design, development, construction, installation or improvement of property (real or personal and including Capital Stock), plant or equipment used in the business of the Issuer or any of its Restricted Subsidiaries (in each case, whether through the direct purchase of such assets or the Equity Interests of any Person owning such assets), in an aggregate principal amount not to exceed, immediately after giving effect to any such incurrence, the greater of (x) $70.0 million or (y) 5% of Total Assets; | |
(5) the incurrence by the Issuer or any of its Restricted Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to renew, refund, refinance, replace, defease or discharge any Indebtedness (other than intercompany Indebtedness) that was permitted by the indenture to be incurred under the first paragraph of this covenant or clause (2), (3), (4), (5), (12), (15) or (16) of this paragraph; | |
(6) the incurrence by the Issuer or any of its Restricted Subsidiaries of intercompany Indebtedness between or among the Issuer and any of its Restricted Subsidiaries; provided, however, that: |
(a) if the Issuer or any Guarantor is the obligor on such Indebtedness and the payee is not the Issuer or a Guarantor, such Indebtedness must be expressly subordinated to the prior payment in full in cash of all Obligations then due with respect to the notes, in the case of the Issuer, or the Note Guarantee, in the case of a Guarantor; and | |
(b) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Issuer or a Restricted Subsidiary of the Issuer and (ii) any sale or other transfer of any such Indebtedness to a Person that is not either the Issuer or a Restricted Subsidiary of the Issuer, shall be deemed, in each case, to constitute an incurrence of such Indebtedness by the Issuer or such Restricted Subsidiary, as the case may be, that was not permitted by this clause (6); |
(7) the issuance by any of the Issuer’s Restricted Subsidiaries to the Issuer or to another Restricted Subsidiary of shares of preferred equity or Disqualified Stock; provided, however, that: |
(a) any subsequent issuance or transfer of Equity Interests that results in any such preferred equity or Disqualified Stock being held by a Person other than the Issuer or a Restricted Subsidiary of the Issuer, and | |
(b) any sale or other transfer of any such preferred equity or Disqualified Stock to a Person that is not either the Issuer or a Restricted Subsidiary of the Issuer, |
(8) the incurrence by the Issuer or any of its Restricted Subsidiaries of Hedging Obligations other than for speculative purposes; | |
(9) the guarantee by any Restricted Subsidiary of the Issuer of Indebtedness of the Issuer or a Restricted Subsidiary of the Issuer that was permitted to be incurred by another provision of this covenant (including the first paragraph hereof); provided that if the Indebtedness being guaranteed is subordinated to or pari passu with the notes, then the guarantee thereof shall be subordinated or pari passu, as applicable, to the same extent as the Indebtedness so guaranteed; |
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(10) the incurrence by the Issuer or any of its Restricted Subsidiaries of Indebtedness in respect of workers’ compensation claims, payment obligations in connection with health or other types of social security benefits, unemployment or other insurance or self-insurance obligations, reclamation, statutory obligations, bankers’ acceptances, performance, surety or similar bonds and letters of credit or completion or performance guarantees or equipment leases (including, without limitation, performance guarantees and reimbursement obligations arising under or in accordance with the terms of the Purchase Agreement), or other similar obligations in the ordinary course of business or consistent with past practice; | |
(11) the incurrence by the Issuer or any of its Restricted Subsidiaries of Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently drawn against insufficient funds; | |
(12) Indebtedness, Disqualified Stock or preferred equity of Persons that are acquired by the Issuer or any of its Restricted Subsidiaries or merged into a Restricted Subsidiary in accordance with the terms of the indenture; provided, however, that such Indebtedness, Disqualified Stock or preferred equity is not incurred or issued in contemplation of such acquisition or merger or to provide all or a portion of the funds or credit support required to consummate such acquisition or merger; provided further, however, that for any such Indebtedness, Disqualified Stock or preferred equity outstanding under this clause (12) in excess of $10.0 million on the date such Person is acquired by the Issuer or a Restricted Subsidiary, after giving effect to such acquisition and the incurrence or issuance of such Indebtedness, Disqualified Stock or preferred equity either: |
(a) the Issuer would be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first sentence of this covenant; or | |
(b) the Fixed Charge Coverage Ratio, on the date of and after giving pro forma effect to such acquisition and such incurrence or issuance, would not be reduced as a result of such acquisition; |
(13) Indebtedness incurred by a Receivables Subsidiary in a Qualified Receivables Financing that is Non-Recourse Debt to the Issuer or any Restricted Subsidiary of the Issuer other than such Receivables Subsidiary (except for Standard Securitization Undertakings); | |
(14) the incurrence of Indebtedness arising from agreements of the Issuer or a Restricted Subsidiary providing for indemnification, adjustment of purchase price, earn outs, or similar obligations, in each case, incurred or assumed in connection with the disposition or acquisition of any business, assets or a Subsidiary in accordance with the terms of the indenture, other than guarantees of Indebtedness incurred or assumed by any Person acquiring all or any portion of such business, assets or Subsidiary for the purpose of financing such acquisition; | |
(15) the incurrence by the Issuer or any of its Restricted Subsidiaries of additional Indebtedness or the issuance of Disqualified Stock or preferred equity in an aggregate principal amount (or accreted value, as applicable) or having an aggregate liquidation preference at any time outstanding not to exceed $85.0 million (it being understood that any Indebtedness, Disqualified Stock or preferred equity incurred pursuant to this clause (15) shall cease to be deemed incurred or outstanding for purposes of this covenant from and after the date on which the Issuer could have incurred such Indebtedness or Disqualified Stock or preferred equity under the first paragraph of this covenant without reliance upon this clause (15)); | |
(16) the incurrence by the Issuer or any of its Restricted Subsidiaries of additional Indebtedness arising out of advances on exports, advances on imports, advances on trade receivables, factoring of receivables, customer prepayments and similar transactions in the ordinary course of business and consistent with past practice; | |
(17) the incurrence of additional Indebtedness by a Foreign Subsidiary in an aggregate principal amount which does not exceed the greater of (a) $50 million or (b) 3.5% of the Total Assets at any one |
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time outstanding (which amount may, but need not, be incurred in whole or in part under a Credit Facility); | |
(18) Indebtedness of the Issuer or any of its Restricted Subsidiaries in respect of the Management Notes; and | |
(19) Contribution Indebtedness. |
(1) the accreted value of the Indebtedness, in the case of any Indebtedness issued with original issue discount; | |
(2) the principal amount of the Indebtedness, in the case of any other Indebtedness; and | |
(3) in respect of Indebtedness of another Person secured by a Lien on the assets of the specified Person, the lesser of: |
(a) the Fair Market Value of such assets at the date of determination; and | |
(b) the amount of the Indebtedness of the other Person. |
Limitation on Senior Subordinated Indebtedness |
Liens |
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Dividend and Other Payment Restrictions Affecting Subsidiaries |
(a) pay dividends or make any other distributions on its Capital Stock to the Issuer or any of its Restricted Subsidiaries, or with respect to any other interest or participation in, or measured by, its profits, or pay any Indebtedness owed to the Issuer or any of its Restricted Subsidiaries; | |
(b) make loans or advances to the Issuer or any of its Restricted Subsidiaries; or | |
(c) sell, lease or transfer any of its properties or assets to the Issuer or any of its Restricted Subsidiaries. |
(1) agreements governing Indebtedness outstanding on the Issue Date, the Credit Agreement and Credit Facilities as in effect on the date of the indenture and any amendments, restatements, modifications, renewals, supplements, refundings, replacements or refinancings of those agreements; provided that such amendments, restatements, modifications, renewals, supplements, refundings, replacements or refinancings are not, in the good faith judgment of the Issuer’s Board of Directors, materially more restrictive, taken as a whole, with respect to such dividend and other payment restrictions than those contained in those agreements on the date of the indenture; | |
(2) the indenture, the notes and the Note Guarantees; | |
(3) applicable law, rule, regulation, order, approval, license, permit or similar restriction; | |
(4) any instrument governing Indebtedness or Capital Stock of a Person acquired by the Issuer or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness or Capital Stock was incurred or issued in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired; provided that, in the case of Indebtedness, such Indebtedness was permitted by the terms of the indenture to be incurred; | |
(5) non-assignment provisions or subletting restrictions in contracts, leases and licenses entered into in the ordinary course of business; | |
(6) purchase money obligations for property (including Capital Stock) acquired in the ordinary course of business and Capital Lease Obligations that impose restrictions on the property purchased or leased of the nature described in clause (c) of the preceding paragraph; | |
(7) any agreement for the sale or other disposition of the Capital Stock or assets of a Restricted Subsidiary that restricts distributions by that Restricted Subsidiary pending closing of the sale or other disposition; | |
(8) Permitted Refinancing Indebtedness; provided that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are not, in the good faith judgment of the Issuer’s Board of Directors, materially more restrictive, taken as a whole, than those contained in the agreements governing the Indebtedness being refinanced; | |
(9) Liens permitted to be incurred under the provisions of the covenant described above under the caption “— Liens” that limits the right of the debtor to dispose of the assets securing such Indebtedness; |
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(10) provisions limiting the disposition or distribution of assets or property or transfer of Capital Stock in joint venture agreements, asset sale agreements, sale-leaseback agreements, stock sale agreements, limited liability company organizational documents, and other similar agreements entered into (a) in the ordinary course of business, consistent with past practice or (b) with the approval of the Issuer’s Board of Directors, which limitation is applicable only to the assets, property or Capital Stock that are the subject of such agreements; | |
(11) any encumbrance or restriction of a Receivables Subsidiary effected in connection with a Qualified Receivables Financing; provided, however, that such restrictions apply only to such Receivables Subsidiary; | |
(12) restrictions on cash, Cash Equivalents, Marketable Securities or other deposits or net worth imposed by customers or lessors under contracts or leases entered into in the ordinary course of business; | |
(13) other Indebtedness of Restricted Subsidiaries (i) that are Guarantors that is incurred subsequent to the date of the indenture pursuant to the covenant described under “— Incurrence of Indebtedness and Issuance of Preferred Equity” or (ii) that is incurred subsequent to the date of the indenture pursuant to clauses (4) and (15) of the second paragraph of the covenant described under “— Incurrence of Indebtedness and Issuance of Preferred Equity”; | |
(14) encumbrances on property that exist at the time the property was acquired by the Issuer or a Restricted Subsidiary; | |
(15) contractual encumbrances or restrictions in effect on the Issue Date, and any amendments, restatements, modifications, renewals, supplements, refundings, replacements or refinancings of those agreements; provided that the amendments, restatements, modifications, renewals, supplements, refundings, replacements or refinancings are not, in the good faith judgment of the Issuer’s Board of Directors, materially more restrictive, taken as a whole, with respect to such dividend and other payment restrictions than those contained in those agreements on the date of the indenture; or | |
(16) any encumbrances or restrictions imposed by any amendments or refinancings of the contracts, instruments or obligations referred to above in clauses (1) through (15); provided that such amendments or refinancings are not, in the good faith judgment of the Issuer’s Board of Directors, materially more restrictive, taken as a whole, than such encumbrances and restrictions prior to such amendment or refinancing. |
Merger, Consolidation or Sale of Assets |
(1) either (a) the Issuer is the surviving entity; or (b) the Person formed by or surviving any such consolidation or merger (if other than the Issuer) or to which such sale, assignment, transfer, conveyance or other disposition has been made is a corporation, partnership or limited liability company organized or existing under the laws of the United States, any state of the United States or the District of Columbia; | |
(2) the Person formed by or surviving any such consolidation or merger (if other than the Issuer) or the Person to which such sale, assignment, transfer, conveyance or other disposition has been made assumes all the obligations of the Issuer under the notes, the indenture and the registration rights agreement, in each case pursuant to agreements reasonably satisfactory to the trustee; | |
(3) immediately after such transaction, no Default or Event of Default exists; and | |
(4) (a) the Issuer or the Person formed by or surviving any such consolidation or merger (if other than the Issuer), or to which such sale, assignment, transfer, conveyance or other disposition has been made would, on the date of such transaction after giving pro forma effect thereto and to any related |
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financing transactions as if the same had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described above under the caption “— Incurrence of Indebtedness and Issuance of Preferred Equity” or (b) the Fixed Charge Coverage Ratio for the successor entity and its Restricted Subsidiaries, on the date of and after giving pro forma effect to such acquisition and such incurrence or issuance, would not be less than such ratio for the Issuer and its Restricted Subsidiaries immediately prior to such transaction. |
(1) a merger of the Issuer with an Affiliate solely for the purpose of reincorporating the Issuer in another jurisdiction; or | |
(2) any consolidation or merger, or any sale, assignment, transfer, conveyance, lease or other disposition of assets between or among the Issuer and any of its Restricted Subsidiaries. |
Transactions with Affiliates |
(1) the Affiliate Transaction is on terms that are not materially less favorable to the Issuer or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Issuer or such Restricted Subsidiary with an unrelated Person; and | |
(2) the Issuer delivers to the trustee: |
(a) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $5.0 million, a resolution of the Board of Directors of the Issuer certifying that such Affiliate Transaction complies with this covenant and that such Affiliate Transaction has been approved by a majority of the disinterested members, if any, of the Board of Directors of the Issuer; and | |
(b) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $25.0 million, an opinion as to the fairness to the Issuer or such Restricted Subsidiary of such Affiliate Transaction from a financial point of view issued by an accounting, appraisal or investment banking firm of national standing. |
(1) any employment agreement, employee benefit plan, officer or director indemnification agreement or any similar arrangement entered into by the Issuer or any of its Restricted Subsidiaries in the ordinary course of business or consistent with past practice and payments pursuant thereto; | |
(2) transactions (including a merger) between or among the Issuer and/or any of its Restricted Subsidiaries; | |
(3) transactions with a Person (other than an Unrestricted Subsidiary of the Issuer) that is an Affiliate of the Issuer solely because the Issuer owns, directly or through a Restricted Subsidiary, an Equity Interest in, or controls, such Person; |
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(4) payment of reasonable fees to, and indemnity provided on behalf of, officers, directors, employees or consultants of the Issuer or any of its Restricted Subsidiaries or any Parent; | |
(5) any issuance of Equity Interests (other than Disqualified Stock) of the Issuer to Affiliates of the Issuer or to any director, officer, employee or consultant of the Issuer or any Parent, and the granting and performance of registration rights; | |
(6) Restricted Payments and Investments that do not violate the provisions of the indenture described above under the caption “— Restricted Payments”; | |
(7) the entering into any agreement to pay, and the payment of, customary annual management, consulting, monitoring and advisory fees to the Equity Investors in an amount not to exceed in any four quarter period the greater of (x) $5.0 million and (y) 2% of Consolidated Cash Flow of the Issuer and its Restricted Subsidiaries for such period; | |
(8) loans or advances to employees or consultants in the ordinary course of business or consistent with past practice not to exceed $2.5 million in the aggregate at any one time outstanding; | |
(9) any transaction effected as part of a Qualified Receivables Financing; | |
(10) any transaction in which the Issuer or any of its Restricted Subsidiaries, as the case may be, delivers to the trustee a letter from an accounting, appraisal or investment banking firm of national standing stating that such transaction is fair to the Issuer or such Restricted Subsidiary from a financial point of view or that such transaction meets the requirements of clause (1) of the preceding paragraph; | |
(11) the existence of, or the performance by the Issuer or any of its Restricted Subsidiaries of its obligations under the terms of, any acquisition agreements or members’ or stockholders agreement or related documents to which it is a party as of the date of the indenture and any amendment thereto or similar agreements which it may enter into thereafter; provided, however, that the existence of, or the performance by the Issuer or any of its Restricted Subsidiaries of its obligations under, any future amendment to any such existing agreement or under any similar agreement entered into after the date of the indenture shall only be permitted by this clause (11) to the extent that the terms of any such existing agreement, together with all amendments thereto, taken as a whole, or such new agreement are not, in the good faith judgment of the Issuer’s Board of Directors, otherwise more disadvantageous to the Holders taken as a whole than the original agreement as in effect on the date of the indenture; | |
(12) transactions with Unrestricted Subsidiaries, customers, clients, suppliers, joint venture partners or purchasers or sellers of goods or services, or lessors or lessees of property, in each case in the ordinary course of business and otherwise in compliance with the terms of the indenture which are, in the aggregate (taking into account all the costs and benefits associated with such transactions), materially no less favorable to the Issuer or its Restricted Subsidiaries than those that would have been obtained in a comparable transaction by the Issuer or such Restricted Subsidiary with an unrelated Person, in the good faith judgment of the Issuer’s Board of Directors or senior management thereof, or are on terms at least as favorable as might reasonably have been obtained at such time from an unaffiliated party; | |
(13) (x) guarantees of performance by the Issuer and its Restricted Subsidiaries of Unrestricted Subsidiaries of the Issuer in the ordinary course of business, except for guarantees of Indebtedness in respect of borrowed money, and (y) pledges of Equity Interests of Unrestricted Subsidiaries of the Issuer for the benefit of lenders of Unrestricted Subsidiaries of the Issuer; | |
(14) if such Affiliate Transaction is with a Person in its capacity as a holder of Indebtedness or Capital Stock of the Issuer or any Restricted Subsidiary where such Person is treated no more favorably than the holders of Indebtedness or Capital Stock of the Issuer or any Restricted Subsidiary; | |
(15) transactions effected pursuant to agreements in effect on the Issue Date and any amendment, modification or replacement of such agreement (so long as such amendment or replacement is not in the good faith judgment of the Issuer’s Board of Directors materially more disadvantageous to the Holders of the notes, taken as a whole than the original agreement as in effect on the Issue Date); |
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(16) payments to the Equity Investors made for any financial advisory, financing or other investment banking activities, including without limitation, in connection with acquisitions or divestitures, which payments are approved by a majority of the Issuer’s Board of Directors; | |
(17) any restructuring or similar transactions contemplated to be effected pursuant to the terms of the Holdings LLC Agreement or the Dresser-Rand Holdings, LLC Agreement; and | |
(18) the issuance of Management Notes. |
Business Activities |
Additional Note Guarantees |
Designation of Restricted and Unrestricted Subsidiaries |
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Payments for Consent |
Reports |
(1) default for 30 days in the payment when due of interest on, or Additional Interest, if any, with respect to, the notes, whether or not such payment is prohibited by the provisions described above under “— Ranking”; | |
(2) default in the payment when due (at maturity, upon redemption or otherwise) of the principal of, or premium, if any, on, the notes, whether or not such payment is prohibited by the provisions described above under “— Ranking”; | |
(3) failure by the Issuer or any of its Restricted Subsidiaries to comply with the provisions described under the captions “— Repurchase at the Option of Holders — Change of Control” or “— Certain Covenants — Merger, Consolidation or Sale of Assets”; | |
(4) failure by the Issuer or any of its Restricted Subsidiaries for 60 days after notice to the Issuer by the trustee or the Holders of at least 25% in aggregate principal amount of the notes then outstanding voting as a single class to comply with any of the other agreements in the indenture; |
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(5) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Issuer or any of its Significant Subsidiaries or group of Restricted Subsidiaries that taken as a whole would constitute a Significant Subsidiary (or the payment of which is guaranteed by the Issuer or any of its Restricted Subsidiaries), whether such Indebtedness or guarantee now exists, or is created after the date of the indenture (but excluding Indebtedness owing to the Issuer or a Restricted Subsidiary), if that default: |
(a) is caused by a failure to pay principal on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness upon the Stated Maturity of such Indebtedness (a “Payment Default”); or | |
(b) results in the acceleration of such Indebtedness prior to its Stated Maturity, |
(6) failure by the Issuer or any of its Significant Subsidiaries, or group of Restricted Subsidiaries that taken as a whole would constitute a Significant Subsidiary, to pay final and nonappealable judgments entered by a court or courts of competent jurisdiction aggregating in excess of $25.0 million (net of any amounts which are covered by insurance or bonded), which judgments are not paid, waived, satisfied, discharged or stayed for a period of 60 days; | |
(7) except as permitted by the indenture, any Note Guarantee of any Significant Subsidiary or group of Restricted Subsidiaries that taken as a whole would constitute a Significant Subsidiary is held in any judicial proceeding to be unenforceable or invalid or ceases for any reason to be in full force and effect (other than in accordance with the terms of such Note Guarantee and the indenture), or any Guarantor, or any Person acting on behalf of any Guarantor, denies or disaffirms its obligations under its Note Guarantee and such Default continues for 10 days; and | |
(8) certain events of bankruptcy or insolvency described in the indenture with respect to the Issuer or any of its Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary. |
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(1) such Holder has previously given the trustee notice that an Event of Default is continuing; | |
(2) Holders of at least 25% in aggregate principal amount of the then outstanding notes have requested the trustee to pursue the remedy; | |
(3) such Holders have offered the trustee security or indemnity satisfactory to the trustee against any loss, liability or expense; | |
(4) the trustee has not complied with such request within 60 days after the receipt of the request and the offer of security or indemnity; and | |
(5) Holders of a majority in aggregate principal amount of the then outstanding notes have not given the trustee a direction inconsistent with such request within such60-day period. |
(1) the rights of Holders of outstanding notes to receive payments in respect of the principal of, or interest or premium and Additional Interest, if any, on, such notes when such payments are due from the trust referred to below; |
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(2) the Issuer’s obligations with respect to the notes concerning issuing temporary notes, registration of notes, mutilated, destroyed, lost or stolen notes and the maintenance of an office or agency for payment and money for security payments held in trust; | |
(3) the rights, powers, trusts, duties and immunities of the trustee, and the Issuer’s and the Guarantors’ obligations in connection therewith; and | |
(4) the Legal Defeasance provisions of the indenture. |
(1) the Issuer must irrevocably deposit with the trustee, in trust, for the benefit of the Holders, cash in U.S. dollars, non-callable Government Securities, or a combination of cash in U.S. dollars and non-callable Government Securities, in amounts as will be sufficient, in the opinion of a nationally recognized investment bank, appraisal firm or firm of independent public accountants, to pay the principal of, or interest and premium and Additional Interest, if any, on, the outstanding notes on the stated date for payment thereof or on the applicable redemption date, as the case may be, and the Issuer must specify whether the notes are being defeased to such stated date for payment or to a particular redemption date; | |
(2) in the case of Legal Defeasance, the Issuer must deliver to the trustee an opinion of counsel reasonably acceptable to the trustee (subject to customary exceptions and exclusions) confirming that (a) the Issuer has received from, or there has been published by, the Internal Revenue Service a ruling or (b) since the date of the indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such opinion of counsel shall confirm that, the Holders of the outstanding notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; | |
(3) in the case of Covenant Defeasance, the Issuer must deliver to the trustee an opinion of counsel reasonably acceptable to the trustee (subject to customary exceptions and exclusions) confirming that the Holders of the outstanding notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; | |
(4) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from, or arising in connection with, the borrowing of funds to be applied to such deposit and the grant of any Lien securing such borrowing); | |
(5) such Legal Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than the indenture) to which the Issuer or any of its Subsidiaries is a party or by which the Issuer or any of its Subsidiaries is bound, including the Credit Agreement; | |
(6) the Issuer is not prohibited from making payments in respect of the notes by the provisions described under “— Ranking”; |
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(7) the Issuer must deliver to the trustee an Officers’ Certificate stating that the deposit was not made by the Issuer with the intent of preferring the Holders over the other creditors of the Issuer with the intent of defeating, hindering, delaying or defrauding any creditors of the Issuer or others; and | |
(8) the Issuer must deliver to the trustee an Officers’ Certificate and an opinion of counsel, each stating that all conditions precedent relating to the Legal Defeasance or the Covenant Defeasance have been complied with. |
(1) reduce the principal amount of notes whose Holders must consent to an amendment, supplement or waiver; | |
(2) reduce the principal of or change the fixed maturity of any note or alter the provisions with respect to the redemption of the notes (other than payment provisions relating to the covenants described above under the caption “— Repurchase at the Option of Holders”); | |
(3) reduce the rate of or change the time for payment of interest, including default interest, on any note; | |
(4) waive a Default or Event of Default in the payment of principal of, or interest or premium, or Additional Interest, if any, on, the notes (except a rescission of acceleration of the notes by the Holders of at least a majority in aggregate principal amount of the then outstanding notes and a waiver of the payment default that resulted from such acceleration); | |
(5) make any note payable in money other than that stated in the notes; | |
(6) make any change in the provisions of the indenture relating to waivers of past Defaults or impair the rights of Holders to receive payments of principal of, or interest or premium or Additional Interest, if any, on, the notes; | |
(7) waive a redemption payment with respect to any note (other than a payment required by one of the covenants described above under the caption “— Repurchase at the Option of Holders”); | |
(8) release any Guarantor that is a Significant Subsidiary from any of its obligations under its Note Guarantee or the indenture, except in accordance with the terms of the indenture; | |
(9) impair the right to institute suit for the enforcement of any payment on or with respect to the notes or any Note Guarantees; | |
(10) modify the subordination provisions of the indenture in any manner adverse to the Holders; or | |
(11) make any change in the preceding amendment and waiver provisions. |
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(1) to cure any ambiguity, defect or inconsistency; | |
(2) to provide for uncertificated notes in addition to or in place of certificated notes; | |
(3) to provide for the assumption of the Issuer’s or a Guarantor’s obligations to Holders of notes and Note Guarantees in the case of a merger or consolidation or sale of all or substantially all of the Issuer’s or such Guarantor’s assets, as applicable; | |
(4) to make any change that would provide any additional rights or benefits to the Holders or that does not adversely affect the legal rights under the indenture of any such Holder; | |
(5) to comply with requirements of the SEC in order to effect or maintain the qualification of the indenture under the Trust Indenture Act; | |
(6) to conform the text of the indenture, the Note Guarantees or the notes to any provision of this Description of the Notes to the extent that such provision in this Description of the Notes was intended to be a verbatim recitation of a provision of the indenture, the Note Guarantees or the notes; | |
(7) to provide for the issuance of additional notes in accordance with the limitations set forth in the indenture; or | |
(8) to allow any Guarantor to execute a supplemental indenture and/or a Note Guarantee with respect to the notes and to release Guarantors from the Note Guarantee in accordance with the terms of the indenture as of the date of the indenture; | |
(9) to comply with the rules of any applicable securities depositary; or | |
(10) to provide for a successor trustee in accordance with the terms of the indenture or to otherwise comply with any requirement of the indenture. |
(1) either: |
(a) all notes that have been authenticated and, except lost, stolen or destroyed notes that have been replaced or paid and notes for whose payment money has been deposited in trust or segregated and held in trust by the Issuer and thereafter repaid to the Issuer, have been delivered to the trustee for cancellation; or | |
(b) all notes that have not been delivered to the trustee for cancellation have become due and payable by reason of the mailing of a notice of redemption or otherwise or will become due and payable within one year and the Issuer or any Guarantor has irrevocably deposited or caused to be deposited with the trustee as trust funds in trust solely for the benefit of the Holders, cash in U.S. dollars, non-callable Government Securities, or a combination of cash in U.S. dollars and non- callable Government Securities, in amounts as will be sufficient, without consideration of any reinvestment of interest, to pay and discharge the entire Indebtedness (including all principal, interest, and Additional Interest) on the notes not delivered to the trustee for cancellation; |
(2) no Default or Event of Default shall have occurred and be continuing on the date of such deposit or shall occur as a result of such deposit and such deposit will not result in a breach or violation of, |
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or constitute a default under, any other instrument to which the Issuer or any Guarantor is a party or by which the Issuer or any Guarantor is bound; | |
(3) the Issuer or any Guarantor has paid or caused to be paid all other sums payable by it under the indenture; and | |
(4) the Issuer has delivered irrevocable instructions to the trustee under the indenture to apply the deposited money toward the payment of the notes at maturity or on the redemption date, as the case may be. |
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(1) upon deposit of the Global Notes, DTC will credit the accounts of Participants pursuant to the corresponding letters of transmittal with portions of the principal amount of the Global Notes; and | |
(2) ownership of these interests in the Global Notes will be shown on, and the transfer of ownership thereof will be effected only through, records maintained by DTC (with respect to the Participants) or by the Participants and the Indirect Participants (with respect to other owners of beneficial interests in the Global Notes). |
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(1) any aspect of DTC’s records or any Participant’s or Indirect Participant’s records relating to or payments made on account of beneficial ownership interest in the Global Notes or for maintaining, supervising or reviewing any of DTC’s records or any Participant’s or Indirect Participant’s records relating to the beneficial ownership interests in the Global Notes: or | |
(2) any other matter relating to the actions and practices of DTC or any of its Participants or Indirect Participants. |
(1) DTC (a) notifies the Issuer that it is unwilling or unable to continue as depositary for the Global Notes or (b) has ceased to be a clearing agency registered under the Exchange Act, and in each case the Issuer fails to appoint a successor depositary; |
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(2) the Issuer, at its option, notifies the trustee in writing that it elects to cause the issuance of the Certificated Notes; or | |
(3) there shall have occurred and be continuing a Default or Event of Default with respect to the notes. |
(1) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Restricted Subsidiary of such specified Person, whether or not such Indebtedness is incurred in connection with, or in contemplation of, such other Person merging with or into, or becoming a Restricted Subsidiary of, such specified Person; and | |
(2) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person. |
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(1) 1.0% of the principal amount of the note; or | |
(2) the excess of: |
(a) the present value at such redemption date of (i) the redemption price of the note at November 1, 2009 (such redemption price being set forth in the table appearing above under the caption “— Optional Redemption”), plus (ii) all required interest payments due on the note through November 1, 2009 (excluding accrued but unpaid interest to the redemption date), computed using a discount rate equal to the Treasury Rate as of such redemption date plus 50 basis points; over | |
(b) the principal amount of the note. |
(1) an Investment by the Issuer or any Restricted Subsidiary of the Issuer in any other Person pursuant to which such Person shall become a Restricted Subsidiary of the Issuer or any Restricted Subsidiary of the Issuer, or shall be merged with or into or consolidated with the Issuer or any Restricted Subsidiary of the Issuer; or | |
(2) the acquisition by the Issuer or any Restricted Subsidiary of the Issuer of the assets of any Person (other than a Restricted Subsidiary of the Issuer) which constitute all or substantially all of the assets of such Person or comprise any division or line of business of such Person or any other properties or assets of such Person other than in the ordinary course of business. |
(1) the sale, lease, conveyance or other disposition of any assets or rights; provided that the sale, lease, conveyance or other disposition of all or substantially all of the assets of the Issuer and its Restricted Subsidiaries taken as a whole will be governed by the provisions of the indenture described above under the caption “— Repurchase at the Option of Holders — Change of Control” and/or the provisions described above under the caption “— Certain Covenants — Merger, Consolidation or Sale of Assets” and not by the provisions described above under the caption “— Repurchase at the Option of Holders — Asset Sales”; and | |
(2) the issuance or sale of Equity Interests in any of the Issuer’s Restricted Subsidiaries. |
(1) any single transaction or series of related transactions that involves assets or Equity Interests of any Restricted Subsidiary having a Fair Market Value of less than $5.0 million; | |
(2) a transfer of assets between or among the Issuer and any of its Restricted Subsidiaries; | |
(3) an issuance or sale of Equity Interests by a Restricted Subsidiary of the Issuer to the Issuer or to another Restricted Subsidiary of the Issuer; | |
(4) the sale or lease of inventory, products or services or the lease, assignment or sub-lease of any real or personal property in the ordinary course of business; |
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(5) the sale or discounting of accounts receivable in the ordinary course of business; | |
(6) any sale or other disposition of damaged, worn-out, obsolete or no longer useful assets or properties in the ordinary course of business; | |
(7) any sale of assets received by the Issuer or any of its Restricted Subsidiaries upon the foreclosure on a Lien; | |
(8) the sale or other disposition of cash, Cash Equivalents or Marketable Securities; | |
(9) a sale of accounts receivable and related assets of the type specified in the definition of “Receivables Financing” to a Receivables Subsidiary in a Qualified Receivables Financing; | |
(10) a transfer of accounts receivable and related assets of the type specified in the definition of “Receivables Financing” (or a fractional undivided interest therein) by a Receivables Subsidiary in a Qualified Receivables Financing; | |
(11) a Restricted Payment that does not violate the covenant described above under the caption “— Certain Covenants — Restricted Payments” or any Permitted Investment; | |
(12) any sale of Equity Interests in, or Indebtedness or other securities of, an Unrestricted Subsidiary; | |
(13) the granting of Liens not otherwise prohibited by the indenture; | |
(14) the surrender, or waiver of contract rights or settlement, release or surrender of contract, tort or other claims; and | |
(15) any exchange of assets related to a Permitted Business of comparable market value, as determined in good faith by the Issuer. |
(1) with respect to a corporation, the board of directors of the corporation or any committee thereof duly authorized to act on behalf of such board; | |
(2) with respect to a partnership, the Board of Directors or other governing body of the general partner of the partnership; | |
(3) with respect to a limited liability company, the Board of Directors or other governing body, and in the absence of same, the manager or board of managers or the managing member or members or any controlling committee thereof; and | |
(4) with respect to any other Person, the board or committee of such Person serving a similar function. |
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(1) in the case of a corporation, corporate stock; | |
(2) in the case of an association or business entity that is not a corporation, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock; | |
(3) in the case of a partnership or limited liability company, partnership interests (whether general or limited) or membership interests; and | |
(4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person, but excluding from all of the foregoing any debt securities convertible into Capital Stock, whether or not such debt securities include any right of participation with Capital Stock. |
(1) United States dollars or, in the case of any Foreign Subsidiary, such local currencies held by it from time to time in the ordinary course of business; | |
(2) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality of the United States government (provided that the full faith and credit of the United States is pledged in support of those securities) having maturities of not more than one year from the date of acquisition; | |
(3) certificates of deposit, time deposits and eurodollar time deposits with maturities of one year or less from the date of acquisition, bankers’ acceptances with maturities not exceeding one year and overnight bank deposits, in each case, with any lender party to the Credit Agreement or with any domestic commercial bank having capital and surplus in excess of $500.0 million and a rating at the time of acquisition thereof of P-1 or better from Moody’s or A-1 or better from S&P; | |
(4) repurchase obligations for underlying securities of the types described in clauses (2) and (3) above entered into with any financial institution meeting the qualifications specified in clause (3) above; | |
(5) commercial paper having one of the two highest ratings obtainable from Moody’s or S&P and, in each case, maturing within one year after the date of acquisition; | |
(6) securities issued or fully guaranteed by any state or commonwealth of the United States, or by any political subdivision or taxing authority thereof having one of the two highest ratings obtainable from Moody’s or S&P, and, in each case, maturing within one year after the date of acquisition; | |
(7) money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (1) through (5) of this definition; | |
(8) Indebtedness or Preferred Stock issued by Persons with a rating of “A” or higher from S&P or “A-2” from Moody’s; and | |
(9) in the case of any Foreign Subsidiary, investments denominated in the currency of the jurisdiction in which that Foreign Subsidiary is organized or has its principal place of business, which are similar to and have similar ratings from similar rating agencies to the items specified in clauses (2), (3), (4), (6), (7) and (8). |
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(1) the direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of the Issuer and its Restricted Subsidiaries, in each case, taken as a whole, to any “person” (as that term is used in Section 13(d)(3) of the Exchange Act) other than the Permitted Holders; | |
(2) the adoption of a plan relating to the liquidation or dissolution of the Issuer; | |
(3) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than the Permitted Holders, becomes the Beneficial Owner, directly or indirectly, of more than 50% of the voting power of the Voting Stock of the Issuer; or | |
(4) the first day on which a majority of the members of the Board of Directors of Holdings or the Issuer are not Continuing Directors. |
(1) provision for taxes based on income profits or capital of such Person and its Restricted Subsidiaries for such period, to the extent that such provision for taxes was deducted in computing such Consolidated Net Income; plus | |
(2) the Fixed Charges of such Person and its Restricted Subsidiaries for such period, to the extent that such Fixed Charges were deducted in computing such Consolidated Net Income; plus | |
(3) depreciation, amortization (including amortization of intangibles, deferred financing fees and any amortization expense included in pension, OPEB or other employee benefit expense) and other non-cash expenses (including without limitation write-downs and impairment of property, plant, equipment and intangibles and other long-lived assets and the impact of purchase accounting on such Person and its Restricted Subsidiaries for such period) to the extent that such depreciation, amortization and other non-cash expenses were deducted in computing such Consolidated Net Income; plus | |
(4) the amount of any restructuring charges (which, for the avoidance of doubt, shall include retention, severance, systems establishment cost or excess pension, other post employment benefits, curtailment or other excess charges); plus | |
(5) the minority interest expense consisting of subsidiary income attributable to minority equity interests of third parties in any non-wholly-owned subsidiary in such period or any prior period, except to the extent of dividends declared or paid on Equity Interests held by third parties; plus | |
(6) the amount of management, consulting, monitoring and advisory fees and related expenses paid to the Permitted Holders (or any accruals related to such fees and related expenses) during such period; provided that such amount shall not exceed in any four quarter period the greater of (x) $5.0 million and (y) 2% of Consolidated Cash Flow of the Issuer and its Restricted Subsidiaries for each period; plus | |
(7) equity earnings losses in affiliates; plus | |
(8) other non-operating expenses; plus |
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(9) accretion of asset retirement obligations in accordance with SFAS No. 143, Accounting for Asset Retirement Obligations, and any similar accounting in prior periods; minus |
(1) any net after-tax extraordinary, unusual or nonrecurring gains or losses (less all fees and expenses relating thereto) or income or expense or charge (including, with limitation, income and expenses from the New York state grant, SFAS 106 expense, pension expense, excess corporate and tax department allocations from Ingersoll-Rand, casualty losses, severance expenses, relocation expenses, other restructuring expenses, special provisions to increase the OSMI reserve, and losses on contracts in Nigeria), including, without limitation, any severance expense, and fees, expenses or charges related to any offering of Equity Interests of such Person, any Investment, acquisition or Indebtedness permitted to be incurred hereunder (in each case, whether or not successful), including all fees, expenses, charges and change in control payments related to the Transactions, in each case shall be excluded; | |
(2) any net after-tax income or loss from discontinued operations and any net after-tax gain or loss on disposal of discontinued operations shall be excluded; | |
(3) any net after-tax gains or losses (less all fees and expenses or charges relating thereto) attributable to business dispositions or asset dispositions other than in the ordinary course of business (as determined in good faith by the Board of Directors of the Issuer) shall be excluded; | |
(4) any net after-tax income or loss (less all fees and expenses or charges relating thereto) attributable to the early extinguishment of indebtedness and Hedging Obligations shall be excluded; | |
(5) (A) the Net Income for such period of any Person that is not a Restricted Subsidiary, or that is accounted for by the equity method of accounting, shall be included only to the extent of the amount of dividends or distributions or other payments in respect of equity that are actually paid in cash (or to the extent converted into cash) by the referent Person to the Issuer or a Restricted Subsidiary thereof in respect of such period and (B) the Net Income for such period shall include any dividend, distribution or other payments in respect of equity paid in cash by such Person to the Issuer or a Restricted Subsidiary thereof in excess of the amount included in clause (A); | |
(6) any non-cash charges from the application of the purchase method of accounting in connection with the Transactions or any future acquisition, to the extent that any such charges are deducted in computing such Consolidated Net Income, shall be excluded; | |
(7) accruals and reserves that are established within twelve months after the acquisition’s Closing Date (as defined in Purchase Agreement) and that are so required to be established in accordance with GAAP shall be excluded; | |
(8) any non-cash impairment charges resulting from the application of Statements of Financial Accounting Standards No. 142 and No. 144 and the amortization of intangibles pursuant to Statement of Financial Accounting Standards No. 141 shall be excluded; | |
(9) any long-term incentive plan accruals and any non-cash compensation expense realized from grants of stock appreciation or similar rights, stock options or other rights to officers, directors and employees of such Person or any of its Restricted Subsidiaries shall be excluded; |
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(10) solely for the purpose of determining the amount available for Restricted Payments under clause (3)(a) of the first paragraph of “— Certain Covenants — Restricted Payments,” the Net Income of any Restricted Subsidiary that is not a Guarantor will be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders or members, unless such restriction with respect to the payment of dividends or similar distributions has been legally waived; provided that Consolidated Net Income of such Person shall be increased by the amount of dividends or distributions or other payments that are actually paid in cash (or to the extent converted into cash) by such Person to the Issuer or another Restricted Subsidiary thereof in respect of such period, to the extent not already included therein; and | |
(11) the cumulative effect of a change in accounting principles will be excluded. |
(1) to purchase any such primary obligation or any property constituting direct or indirect security thereof; | |
(2) to advance or supply funds (A) for the purchase or payment of any such primary obligation or (B) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor; or | |
(3) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such obligation against loss in respect thereof. |
(1) was a member of such Board of Directors on the date of the indenture, or | |
(2) was nominated for election or elected to such Board of Directors by one or more of the Equity Investors or with the approval of a majority of the Continuing Directors who were members of such Board at the time of such nomination or election. |
(1) if the aggregate principal amount of such Contribution Indebtedness is greater than one times such cash contributions to the equity capital of the Issuer or such Guarantor, as applicable, the amount in excess shall be Indebtedness (other than secured Indebtedness) with a Stated Maturity later than the Stated Maturity of the notes, and | |
(2) such Contribution Indebtedness (x) is incurred within 180 days after the making of such cash contributions and (y) is designated as Contribution Indebtedness pursuant to an Officer’s Certificate on the incurrence date thereof. |
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(1) contributions to its common equity capital, and | |
(2) the sale (other than to a Subsidiary of the Issuer) of Capital Stock (other than Disqualified Stock and Designated Preferred Stock) of the Issuer, |
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(1) the consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued, excluding amortization of debt issuance costs and the expensing of any bridge or other financing fees, but including original issue discount, non-cash interest payments, the interest component of any deferred payment obligations (classified as Indebtedness under the indenture), the interest component of all payments associated with Capital Lease Obligations and net of the effect of all payments made or received pursuant to Hedging Obligations in respect of interest rates; plus | |
(2) the consolidated interest expense of such Person and its Restricted Subsidiaries that was capitalized during such period; plus | |
(3) all cash dividend payments or other cash distributions on any series of preferred equity of such Person and all other dividend payments or other distributions on the Disqualified Stock of such Person; less | |
(4) interest income, in each case, on a consolidated basis and in accordance with GAAP. |
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(1) the subsidiaries of the Issuer that execute the indenture on the Issue Date; and | |
(2) any other Subsidiary of the Issuer that becomes a Guarantor in accordance with the provisions of the indenture, and their respective successors and assigns, in each case, until the Note Guarantee of such Person has been released in accordance with the provisions of the indenture. |
(1) interest rate swap agreements (whether from fixed to floating or from floating to fixed), interest rate cap agreements and interest rate collar agreements; | |
(2) other agreements or arrangements designed to manage interest rates or interest rate risk; and | |
(3) other agreements or arrangements designed to protect such Person against fluctuations in currency exchange rates or commodity prices. |
(1) in respect of borrowed money; | |
(2) evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof); | |
(3) in respect of banker’s acceptances; | |
(4) representing Capital Lease Obligations; | |
(5) representing the balance deferred and unpaid of the purchase price of any property or services due more than six months after such property is acquired or such services are completed; | |
(6) representing any Hedging Obligations; or | |
(7) to the extent not otherwise included, with respect to the Issuer and its Restricted Subsidiaries, the amount then outstanding (i.e., advanced, and received by, and available for use by, the Issuer or any of its Restricted Subsidiaries) under any Receivables Financing (as set forth in the books and records of |
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the Issuer or any Restricted Subsidiary and confirmed by the agent, trustee or other representative of the institution or group providing such Receivables Financing), |
(1) securities issued or directly and fully guaranteed or insured by the U.S. government or any agency or instrumentality thereof (other than Cash Equivalents) and in each case with maturities not exceeding two years from the date of acquisition; | |
(2) investments in any fund that invests exclusively in investments of the type described in clause (1) which fund may also hold immaterial amounts of cash pending investment and/or distribution; and | |
(3) corresponding instruments in countries other than the United States customarily utilized for high quality investments and in each case with maturities not exceeding two years from the date of acquisition. |
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(1) as to which neither the Issuer nor any of its Restricted Subsidiaries (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness) other than a pledge of the Equity Interest of any Unrestricted Subsidiaries, (b) is directly or indirectly liable (as a guarantor or otherwise) other than by virtue of a pledge of the Equity Interests of any Unrestricted Subsidiaries, or (c) constitutes the lender; and | |
(2) no default with respect to which (including any rights that the holders of the Indebtedness may have to take enforcement action against an Unrestricted Subsidiary) would permit, upon notice, lapse of time or both, any holder of any other Indebtedness (other than the notes offered hereby) of the Issuer or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment of the Indebtedness to be accelerated or payable prior to its Stated Maturity. |
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(1) any Investment in the Issuer or in a Restricted Subsidiary of the Issuer; | |
(2) any Investment in, cash, Cash Equivalents, Marketable Securities or Investment Grade Securities; | |
(3) any Investment by the Issuer or any Restricted Subsidiary of the Issuer in a Person, if as a result of such Investment: |
(a) such Person becomes a Restricted Subsidiary of the Issuer; or | |
(b) such Person, in one transaction or a series of related transactions, is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Issuer or a Restricted Subsidiary of the Issuer; |
(4) any Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with the covenant described above under the caption “— Repurchase at the Option of Holders — Asset Sales”; | |
(5) any Investment the payment for which consists of Equity Interests (other than Disqualified Stock) of the Issuer or any Parent (which Investment, in the case of any Parent, is contributed to the common equity capital of the Issuer; provided that any such contribution shall be excluded from clause 3(b) of the first paragraph of the covenant described under the caption “— Certain Covenants — Restricted Payments”); | |
(6) any Investments received (i) in compromise or resolution of (A) obligations of trade creditors or customers that were incurred in the ordinary course of business of the Issuer or any of its Restricted Subsidiaries, including pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of any trade creditor or customer; or (B) litigation, arbitration or other disputes; or (ii) as a result of a foreclosure by the Issuer or any of its Restricted Subsidiaries with respect to any secured Investment or other transfer of title with respect to any secured Investment in default; | |
(7) Investments represented by Hedging Obligations; |
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(8) loans or advances to officers, directors and employees made in the ordinary course of business of the Issuer or any Restricted Subsidiary of the Issuer in an aggregate principal amount not to exceed $2.5 million at any one time outstanding; | |
(9) repurchases of the notes; | |
(10) Investments in Permitted Businesses, joint ventures or Unrestricted Subsidiaries having an aggregate Fair Market Value, taken together with all other Investments made pursuant to this clause (10) that are at that time outstanding, not to exceed the greater of (x) $70.0 million and (y) 5% of Total Assets at the time of such Investment (with the Fair Market Value of each Investment being measured at the time made and without giving effect to subsequent changes in value); | |
(11) any Investment in a Receivables Subsidiary or any Investment by a Receivables Subsidiary in any other Person in connection with a Qualified Receivables Financing, including Investments of funds held in accounts permitted or required by the arrangements governing such Qualified Receivables Financing or any related Indebtedness; provided, however, that any Investment in a Receivables Subsidiary is in the form of a Purchase Money Note, contribution of additional receivables or an equity interest; | |
(12) any transaction to the extent it constitutes an Investment that is permitted by and made in accordance with the provisions of the second paragraph of the covenant described under “— Certain Covenants — Transaction with Affiliates” (except for transactions described in clauses (6), (8), (10) and (12) of such paragraph); | |
(13) guarantees issued in accordance with the covenants described under “— Certain Covenants — Incurrence of Indebtedness and Issuance of Preferred Equity” and “— Certain Covenants — Additional Note Guarantees”; | |
(14) any Investment existing on the date of the indenture and any Investment that replaces, refinances or refunds an existing Investment; provided, that the new Investment is in an amount that does not exceed the amount replaced, refinanced or refunded, and is made in the same Person as the Investment replaced, refinanced or refunded; | |
(15) Investments consisting of purchases and acquisitions of inventory, supplies, materials and equipment or purchases of contract rights or licenses or leases of intellectual property, in each case in the ordinary course of business; and | |
(16) additional Investments by the Issuer or any Restricted Subsidiary having an aggregate Fair Market Value (measured on the date each such Investment was made and without giving effect to subsequent changes in value), taken together with all other Investments made pursuant to this clause (16) that are at the time outstanding not to exceed 2% of Total Assets; provided, however, that if any Investment pursuant to this clause (16) is made in a Person that is not a Restricted Subsidiary of the Issuer at the date of the making of such Investment and such Person becomes a Restricted Subsidiary of the Issuer after such date, such Investment shall thereafter be deemed to have been made pursuant to clause (1) above and shall cease to have been made pursuant to this clause (16) for so long as such Person continues to be a Restricted Subsidiary; |
(1) Equity Interests in the Issuer; or | |
(2) debt securities that are subordinated to all Senior Indebtedness and any debt securities issued in exchange for Senior Indebtedness to substantially the same extent as, or to a greater extent than, the Notes are subordinated to Senior Indebtedness under the indenture. |
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(1) Liens securing Indebtedness and other Obligations under Credit Facilities incurred pursuant to the covenant “Incurrence of Indebtedness and Issuance of Preferred Equity” and/or securing Hedging Obligations related thereto; | |
(2) Liens in favor of the Issuer or any of its Restricted Subsidiaries; | |
(3) Liens on property of a Person existing at the time such Person is merged with or into or consolidated with the Issuer or any Restricted Subsidiary of the Issuer; provided that such Liens were in existence prior to the contemplation of such merger or consolidation and do not extend to any assets other than those of the Person merged into or consolidated with the Issuer or the Restricted Subsidiary; | |
(4) Liens on property (including Capital Stock) existing at the time of acquisition of the property by the Issuer or any Subsidiary of the Issuer; provided that such Liens were in existence prior to, such acquisition, and not incurred in contemplation of, such acquisition and do not extend to any property other than the property so acquired by the Issuer or such Restricted Subsidiary; | |
(5) Liens or deposits to secure the performance of statutory or regulatory obligations, or surety, appeal, indemnity or performance bonds, warranty and contractual requirements or other obligations of a like nature incurred in the ordinary course of business; | |
(6) Liens securing reimbursement obligations with respect to commercial letters of credit which encumber documents and other assets relating to such letters of credit and products and proceeds thereof; | |
(7) Liens to secure Indebtedness (including Capital Lease Obligations) permitted to be incurred pursuant to clause (4) of the definition of Permitted Debt covering only the assets acquired with or financed by such Indebtedness; | |
(8) Liens securing Indebtedness permitted to be incurred pursuant to clause (15) of the definition of Permitted Debt; | |
(9) Liens existing on the date of the indenture; | |
(10) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded; provided that any reserve or other appropriate provision as is required in conformity with GAAP has been made therefor; | |
(11) Liens created for the benefit of (or to secure) the notes (or the Note Guarantees); | |
(12) Liens securing Indebtedness or other obligations incurred in the ordinary course of business of the Issuer or any Subsidiary of the Issuer with respect to obligations that do not exceed 5% of Total Assets at any one time outstanding; | |
(13) Liens on accounts receivable and related assets of the type specified in the definition of “Receivables Financing” incurred in connection with a Qualified Receivables Financing; | |
(14) licenses of intellectual property in the ordinary course of business; | |
(15) Liens to secure a defeasance trust; | |
(16) Liens on equipment of the Issuer or any Restricted Subsidiary granted in the ordinary course of business to clients of which such equipment is located; | |
(17) Liens imposed by law (including, without limitation, Liens in favor of customers for equipment under order or in respect of advances paid in connection therewith), such as carriers’, warehousemen’s, landlord’s, lessor’s, suppliers, banks, repairmen’s and mechanics’ Liens, and Liens of landlords securing obligations to pay lease payments that are not yet due and payable or in default, in each case, incurred in the ordinary course of business; |
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(18) Liens securing the aggregate amount of Indebtedness (including Acquired Debt) incurred in connection with (or at any time following the consummation of) an Asset Acquisition made in accordance with the indenture equal to, at the time of incurrence, the net increase in inventory, accounts receivable and net property, reserves, plant and equipment attributable to such Asset Acquisition from the amounts reflected on the Issuer’s historical consolidated balance sheet as of the end of the full fiscal quarter ending on or prior to the date of such Asset Acquisition, calculated after giving effect on a pro forma basis to such Asset Acquisition (which amount may, but need not, be incurred in whole or in part under the Credit Agreement) less the amount of Indebtedness incurred in connection with such Asset Acquisition secured by Liens pursuant to clause (4) or (7) above; | |
(19) Liens incurred or deposits made in the ordinary course of business to secure payment of workers’ compensation or to participate in any fund in connection with workmen’s compensation, unemployment insurance, old-age pensions or other social security programs; | |
(20) easements, rights of way zoning and similar restrictions, reservations (including severances, leases or reservations of oil, gas, coal, minerals or water rights), restriction or encumbrances in respect of real property or title defects that were not incurred in connection with Indebtedness and that do not in the aggregate materially adversely affect the value of said properties (as such properties are used by the Issuer or its Subsidiaries) or materially impair their use in the operation of the business of the Issuer and its Subsidiaries; | |
(21) Liens to secure any Permitted Refinancing Indebtedness permitted to be incurred under the indenture; provided, however, that: |
(a) the new Lien shall be limited to all or part of the same property and assets that secured or, under the written agreements pursuant to which the original Lien arose, could secure the original Lien (plus improvements and accessions to such property or proceeds or distributions thereof); and | |
(b) the Indebtedness secured by the new Lien is not increased to any amount greater than the sum of (x) the outstanding principal amount, or, if greater, committed amount, of the Permitted Refinancing Indebtedness and (y) an amount necessary to pay any fees and expenses, including premiums, related to such renewal, refunding, refinancing, replacement, defeasance or discharge; |
(22) Liens arising from precautionary Uniform Commercial Code financing statement filings regarding operating leases entered into by the Issuer or any of its Restricted Subsidiaries in the ordinary course of business; | |
(23) judgment Liens not giving rise to an Event of Default so long as any appropriate legal proceedings that may have been duly initiated for the review of such judgment shall not have been finally terminated or the period within which such legal proceedings may be initiated shall not have expired; | |
(24) Liens on Capital Stock of an Unrestricted Subsidiary that secure Indebtedness or other obligations of such Unrestricted Subsidiary; | |
(25) leases and subleases of real property which do not materially interfere with the ordinary conduct of the business of the Issuer and its Restricted Subsidiaries; and | |
(26) Liens securing insurance premium financing arrangements, provided that such Lien is limited to the applicable insurance contracts. |
(1) payments to any Parent in amounts equal to the amounts required for any direct payment of the Issuer to pay fees and expenses (including franchise or similar taxes) required to maintain its corporate existence, customary salary, bonus and other benefits payable to officers and employees of any direct parent of the Issuer and general corporate overhead expenses of any direct parent of the Issuer to the extent such fees and expenses are attributable to the ownership or operation of the Issuer and its Subsidiaries; |
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(2) for so long as the Issuer is a member of a group filing a consolidated or combined tax return with any Parent, payments to any Parent in respect of an allocable portion of the tax liabilities of such group that is attributable to the Issuer and its Subsidiaries (“Tax Payments”). The Tax Payments shall not exceed the lesser of (i) the amount of the relevant tax (including any penalties and interest) that the Issuer would owe if the Issuer were filing a separate tax return (or a separate consolidated or combined return with its Subsidiaries that are members of the consolidated or combined group), taking into account any carryovers and carrybacks of tax attributes (such as net operating losses) of the Issuer and such Subsidiaries from other taxable years and (ii) the net amount of the relevant tax that such Parent actually owes to the appropriate taxing authority. Any Tax Payments received from the Issuer shall be paid over to the appropriate taxing authority within 30 days of any Parent’s receipt of such Tax Payments or refunded to the Issuer; and | |
(3) dividends or distributions paid to any Parent, if applicable, in amounts equal to amounts required for any Parent, if applicable, to pay interest and/or principal on Indebtedness the proceeds of which have been contributed to the Issuer or any of its Restricted Subsidiaries and that has been guaranteed by, or is otherwise considered Indebtedness of, the Issuer incurred in accordance with the covenant described under “— Certain Covenants — Incurrence of Indebtedness and Issuance of Preferred Equity.” |
(1) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness extended, renewed, refunded, refinanced, replaced, defeased or discharged (plus any premium required to be paid on the Indebtedness being so renewed, refunded, replaced, defeased or discharged, plus the amount of all fees and expenses incurred in connection therewith); | |
(2) such Permitted Refinancing Indebtedness has a final maturity date equal to or later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the remaining Weighted Average Life to Maturity of, the Indebtedness being extended, renewed, refunded, refinanced, replaced, defeased or discharged, provided that this clause (2) shall not apply to debt under Credit Facilities; | |
(3) if the Indebtedness being extended, renewed, refunded, refinanced, replaced, defeased or discharged is subordinated in right of payment to the Notes or the Note Guarantees, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to, the Notes on terms at least as favorable to the holders of Notes as those contained in the documentation governing the Indebtedness being extended, renewed, refunded, refinanced, replaced, defeased or discharged; | |
(4) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is pari passu in right of payment with the notes or any Note Guarantees, such Permitted Refinancing Indebtedness is pari passu in right of payment with, or subordinated in right of payment to, the notes or such Note Guarantees; and | |
(5) such Permitted Refinancing Indebtedness shall not include Indebtedness of the Issuer or a Restricted Subsidiary that refinance Indebtedness of an Unrestricted Subsidiary. |
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(1) the Board of Directors of the Issuer will have determined in good faith that such Qualified Receivables Financing (including financing terms, covenants, termination events and other provisions) is in the aggregate economically fair and reasonable to the Issuer and the Receivables Subsidiary, | |
(2) all sales of accounts receivable and related assets to the Receivables Subsidiary are made at Fair Market Value (as determined in good faith by the Issuer), and | |
(3) the financing terms, covenants, termination events and other provisions thereof will be market terms (as determined in good faith by the Issuer) and may include Standard Securitization Undertakings. |
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(1) no portion of the Indebtedness or any other obligations (contingent or otherwise) of which (i) is guaranteed by the Issuer or any other Subsidiary of the Issuer (excluding guarantees of obligations (other than the principal of, and interest on, Indebtedness) pursuant to Standard Securitization Undertakings), (ii) is recourse to or obligates the Issuer or any other Subsidiary of the Issuer in any way other than pursuant to Standard Securitization Undertakings, or (iii) subjects any property or asset of the Issuer or any other Subsidiary of the Issuer, directly or indirectly, contingently or otherwise, to the satisfaction thereof, other than pursuant to Standard Securitization Undertakings, | |
(2) with which neither the Issuer nor any other Subsidiary of the Issuer has any material contract, agreement, arrangement or understanding other than on terms which the Issuer reasonably believes to be no less favorable to the Issuer or such Subsidiary than those that might be obtained at the time from Persons that are not Affiliates of the Issuer, and | |
(3) to which neither the Issuer nor any other Subsidiary of the Issuer has any obligation to maintain or preserve such entity’s financial condition or cause such entity to achieve certain levels of operating results. Any such designation by the Board of Directors of the Issuer shall be evidenced to the trustee by filing with the trustee a certified copy of the resolution of the Board of Directors of the Issuer giving effect to such designation and an Officers’ Certificate certifying that such designation complied with the foregoing conditions. |
(1) any controlling stockholder, partner, member, 50% (or more) owned Subsidiary, or immediate family member (in the case of an individual) of any Equity Investor; | |
(2) any trust, corporation, partnership or other entity, the beneficiaries, stockholders, partners, owners or Persons beneficially holding an 50% or more controlling interest of which consist of any one or more Equity Investors and/or such other Persons referred to in the immediately preceding clause; or | |
(3) any Person with whom an Equity Investor or a Related Party (under clauses (1) or (2) of the definition of Related Party) may be deemed as part of a “group” within the meaning of Section 13(d)(3) of the Exchange Act. |
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(1) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency and after giving effect to any voting agreement or stockholders’ agreement that effectively transfers voting power) to vote in the election of directors, managers or trustees of the corporation, association or other business entity is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and | |
(2) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are that Person or one or more Subsidiaries of that Person (or any combination thereof). |
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(1) any Subsidiary of the Issuer that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors of the Issuer in the manner provided below; and | |
(2) any Subsidiary of an Unrestricted Subsidiary. |
(a) the Subsidiary to be so designated has total consolidated assets of $1,000 or less; or | |
(b) if such Subsidiary has consolidated assets greater than $1,000, then such designation would be permitted under the covenant entitled “— Certain Covenants — Restricted Payments.” |
(x) (1) the Issuer could incur $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test described under “— Certain Covenants — Incurrence of Indebtedness and Issuance of Preferred Equity,” or (2) the Fixed Charge Coverage Ratio for the Issuer and its Restricted Subsidiaries would be greater than such ratio for the Issuer and its Restricted Subsidiaries immediately prior to such designation, in each case on a pro forma basis taking into account such designation, and | |
(y) no Event of Default shall have occurred and be continuing. |
(1) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect of the Indebtedness, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment; by | |
(2) the then outstanding principal amount of such Indebtedness. |
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Page | ||||
Report of Independent Registered Public Accounting Firm | F-2 | |||
Report of Independent Registered Public Accounting Firm | F-3 | |||
Consolidated Financial Statements and Predecessor Combined Financial Statements at December 31, 2004 and 2003 and for the period from October 30, 2004 through December 31, 2004, for the period from January 1, 2004 through October 29, 2004, and for the years ended December 31, 2003 and 2002 | ||||
Consolidated Statement of Operations (Successor) for the period from October 30, 2004 through December 31, 2004 and Combined Statements of Operations (Predecessor) for the period from January 1, 2004 through October 29, 2004 and for the years ended December 31, 2003 and 2002 | F-4 | |||
Consolidated Balance Sheet (Successor) at December 31, 2004 and Combined Balance Sheet (Predecessor) at December 31, 2003 | F-5 | |||
Consolidated Statement of Cash Flows (Successor) for the period from October 30, 2004 through December 31, 2004 and Combined Statements of Cash Flows (Predecessor) for the period from January 1, 2004 through October 29, 2004 and for the years ended December 31, 2003 and 2002 | F-6 | |||
Consolidated Statement of Changes in Stockholders’ Equity (Successor) for the period from October 30, 2004 through December 31, 2004 and Combined Statements of Changes in Ingersoll-Rand Company Limited Partnership Interest (Predecessor) for the period from January 1, 2004 through October 29, 2004 and for the years ended December 31, 2003 and 2002 | F-7 | |||
Notes to Consolidated and Combined Financial Statements | F-9 | |||
Consolidated Financial Statements and Predecessor Combined Financial Statements at September 30, 2005 and December 31, 2004 and for the nine months ended September 30, 2005 and 2004 (unaudited) | ||||
Consolidated Statement of Operations (Successor) for the nine months ended September 30, 2005 and Combined Statement of Operations (Predecessor) for the nine months ended September 30, 2004 | F-56 | |||
Consolidated Balance Sheet (Successor) at September 30, 2005 and December 31, 2004 | F-57 | |||
Consolidated Statement of Cash Flows (Successor) for the nine months ended September 30, 2005 and Combined Statement of Cash Flows (Predecessor) for the nine months ended September 30, 2004 | F-58 | |||
Notes to Consolidated and Combined Financial Statements | F-59 |
F-1
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F-2
Table of Contents
F-3
Table of Contents
Successor | Predecessor | |||||||||||||||||
Year Ended | ||||||||||||||||||
Period from | Period from | December 31, | ||||||||||||||||
October 30 through | January 1 through | |||||||||||||||||
December 31, 2004 | October 29, 2004 | 2003 | 2002 | |||||||||||||||
(In thousands of dollars, except per share information) | ||||||||||||||||||
Net sales of products to third parties | $ | 155,993 | $ | 544,794 | $ | 1,124,267 | $ | 837,417 | ||||||||||
Net sales of services to third parties | 43,914 | 167,689 | 207,975 | 189,336 | ||||||||||||||
Net sales to affiliates | — | 1,845 | 1,439 | 1,841 | ||||||||||||||
Other operating revenue | — | 1,167 | 1,669 | 2,759 | ||||||||||||||
Total revenues | 199,907 | 715,495 | 1,335,350 | 1,031,353 | ||||||||||||||
Cost of products sold | 117,991 | 411,665 | 971,893 | 722,308 | ||||||||||||||
Cost of services sold | 31,573 | 125,088 | 159,236 | 142,313 | ||||||||||||||
Cost of products sold, affiliates | — | 1,289 | 918 | 1,237 | ||||||||||||||
Total cost of products and services sold | 149,564 | 538,042 | 1,132,047 | 865,858 | ||||||||||||||
Gross Profit | 50,343 | 177,453 | 203,303 | 165,495 | ||||||||||||||
Selling and administrative expenses | 21,499 | 122,700 | 156,129 | 138,484 | ||||||||||||||
Research and development expenses | 1,040 | 5,670 | 8,107 | 8,044 | ||||||||||||||
Write-off of purchased in-process research and development assets | 1,800 | — | — | — | ||||||||||||||
Restructuring charges | — | — | — | 5,185 | ||||||||||||||
Income from operations | 26,004 | 49,083 | 39,067 | 13,782 | ||||||||||||||
Interest income (expense), net | (9,654 | ) | 3,156 | 1,938 | (776 | ) | ||||||||||||
Other income (expense), net | (1,846 | ) | 1,882 | (9,202 | ) | 15,000 | ||||||||||||
Income before income taxes | 14,504 | 54,121 | 31,803 | 28,006 | ||||||||||||||
Provision for income taxes | 7,275 | 11,970 | 11,438 | 11,910 | ||||||||||||||
Net income | $ | 7,229 | $ | 42,151 | $ | 20,365 | $ | 16,096 | ||||||||||
Weighted average common shares outstanding — basic and diluted | 53,793,188 | |||||||||||||||||
Net income per common share | $ | 0.13 | ||||||||||||||||
F-4
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Successor | Predecessor | |||||||||
December 31, | December 31, | |||||||||
2004 | 2003 | |||||||||
(In thousands of dollars | ||||||||||
except for shares) | ||||||||||
ASSETS | ||||||||||
Current assets | ||||||||||
Cash and cash equivalents | $ | 111,500 | $ | 41,537 | ||||||
Marketable securities at market | — | 1,037 | ||||||||
Accounts receivable, less allowance for doubtful accounts of $15,110 and $12,427 at 2004 and 2003 | 264,938 | 242,021 | ||||||||
Inventories, net | 175,873 | 133,425 | ||||||||
Prepaid expenses | 14,256 | 15,665 | ||||||||
Due from affiliates | — | 105,346 | ||||||||
Loans due from affiliates | — | 122,841 | ||||||||
Deferred income taxes | 7,445 | 10,498 | ||||||||
Total current assets | 574,012 | 672,370 | ||||||||
Investments in and advances to partially owned equity companies | 12,989 | 9,059 | ||||||||
Property, plant and equipment, net | 226,764 | 101,438 | ||||||||
Goodwill | 423,330 | 10,214 | ||||||||
Intangible assets, net | 479,587 | 254,412 | ||||||||
Deferred income taxes | — | 14,565 | ||||||||
Other assets | 34,392 | 1,817 | ||||||||
Total assets | $ | 1,751,074 | $ | 1,063,875 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY/PARTNERSHIP INTEREST | ||||||||||
Current liabilities | ||||||||||
Accounts payable and accruals | $ | 271,275 | $ | 291,830 | ||||||
Customer advance payments | 38,661 | 18,700 | ||||||||
Income taxes payable | 12,977 | 7,081 | ||||||||
Loans due to affiliates | — | 14,811 | ||||||||
Loans payable | 2,734 | 3,716 | ||||||||
Current maturities of long-term debt | 4,015 | — | ||||||||
Total current liabilities | 329,662 | 336,138 | ||||||||
Deferred income taxes | 27,287 | — | ||||||||
Postemployment and other employee benefit liabilities | 111,640 | 147,852 | ||||||||
Long-term debt | 396,664 | 213 | ||||||||
Senior subordinated notes | 420,000 | — | ||||||||
Other noncurrent liabilities | 12,924 | 14,637 | ||||||||
Total liabilities | 1,298,177 | 498,840 | ||||||||
Commitments and contingencies (Notes 12, 13, 14, 15, 17 and 21) | ||||||||||
Stockholders’ Equity/ Partnership Interest | ||||||||||
Partnership interest | — | 631,640 | ||||||||
Common stock, $0.01 par value, 53,838,816 shares authorized, 54,219,297 shares issued and outstanding, respectively | 542 | — | ||||||||
Additional paid-in capital | 436,642 | — | ||||||||
Retained earnings | 7,229 | — | ||||||||
Accumulated other comprehensive income (loss) | 8,484 | (66,605 | ) | |||||||
Total stockholders’ equity/partnership interest | 452,897 | 565,035 | ||||||||
Total liabilities and stockholders’ equity/partnership interest | $ | 1,751,074 | $ | 1,063,875 | ||||||
F-5
Table of Contents
Predecessor | ||||||||||||||||||||
Successor | ||||||||||||||||||||
Year Ended | ||||||||||||||||||||
Period from | Period from | December 31, | ||||||||||||||||||
October 30 through | January 1 through | |||||||||||||||||||
December 31, 2004 | October 29, 2004 | 2003 | 2002 | |||||||||||||||||
(In thousands of dollars) | ||||||||||||||||||||
Cash flows from operating activities | ||||||||||||||||||||
Net income | $ | 7,229 | $ | 42,151 | $ | 20,365 | $ | 16,096 | ||||||||||||
Adjustments to arrive at net cash provided by operating activities: | ||||||||||||||||||||
Restructuring charges | — | — | — | 3,704 | ||||||||||||||||
Depreciation and amortization | 16,269 | 22,715 | 29,109 | 33,822 | ||||||||||||||||
(Gain)/loss on sale of property, plant and equipment | — | (1,031 | ) | (31 | ) | (642 | ) | |||||||||||||
Gain on insurance recoveries | — | — | — | (10,145 | ) | |||||||||||||||
Provision for losses on accounts receivable | 327 | 3,139 | 3,001 | 2,473 | ||||||||||||||||
Provision (net adjustment) for losses on inventory | 1,780 | 6,953 | 5,581 | 5,708 | ||||||||||||||||
Write off of purchased in-process research and development assets | 1,800 | — | — | — | ||||||||||||||||
Minority interest, net of dividends | 51 | (1,247 | ) | (110 | ) | (555 | ) | |||||||||||||
Equity (earnings)/losses, net | (194 | ) | 1,013 | (1,150 | ) | (1,235 | ) | |||||||||||||
Deferred income taxes | (974 | ) | 633 | (4,901 | ) | 945 | ||||||||||||||
Other | 452 | — | — | — | ||||||||||||||||
(Increase) decrease in: | ||||||||||||||||||||
Accounts receivable | (30,377 | ) | 51,074 | (15,324 | ) | (5,173 | ) | |||||||||||||
Inventories | 600 | (37,818 | ) | 127,410 | (35,647 | ) | ||||||||||||||
Other current and noncurrent assets | 1,248 | (4,469 | ) | 1,288 | (10,287 | ) | ||||||||||||||
Increase (decrease) in: | ||||||||||||||||||||
Accounts payable | 4,664 | (12,976 | ) | (36,835 | ) | 27,487 | ||||||||||||||
Other current and noncurrent liabilities | 15,073 | (12,408 | ) | (77,440 | ) | 15,478 | ||||||||||||||
Net cash provided by operating activities | 17,948 | 57,729 | 50,963 | 42,029 | ||||||||||||||||
Cash flows from investing activities | ||||||||||||||||||||
Capital expenditures | (1,791 | ) | (7,701 | ) | (7,590 | ) | (13,670 | ) | ||||||||||||
Acquisition | (1,125,148 | ) | — | — | — | |||||||||||||||
Proceeds from insurance recoveries | — | — | — | 10,145 | ||||||||||||||||
Proceeds from sales of property, plant and equipment | — | 1,757 | 560 | 4,487 | ||||||||||||||||
(Increase) decrease in marketable securities | — | 1,037 | (59 | ) | 2,851 | |||||||||||||||
Net cash provided by (used in) investing activities | (1,126,939 | ) | (4,907 | ) | (7,089 | ) | 3,813 | |||||||||||||
Cash flows from financing activities | ||||||||||||||||||||
Proceeds from short-term borrowings | — | — | 462 | 3,073 | ||||||||||||||||
Payments of short-term borrowings | — | (993 | ) | — | — | |||||||||||||||
Proceeds from issuance of 73/8% Senior Notes | 420,000 | — | — | — | ||||||||||||||||
Proceeds from long-term debt | 395,033 | 43 | — | 463 | ||||||||||||||||
Cash paid for debt issuance costs | (33,498 | ) | — | — | — | |||||||||||||||
Proceeds from revolver | 5,000 | — | — | — | ||||||||||||||||
Payments of revolver | (5,000 | ) | — | — | — | |||||||||||||||
Payments of long-term debt | (1,013 | ) | (65 | ) | (520 | ) | — | |||||||||||||
Issuance of common stock | 437,109 | — | — | — | ||||||||||||||||
Change in due to (from) unconsolidated affiliates | (532 | ) | (45,918 | ) | (63,429 | ) | (14,120 | ) | ||||||||||||
Dividends paid | — | (5,097 | ) | — | (8,175 | ) | ||||||||||||||
Net cash provided by (used in) financing activities | 1,217,099 | (52,030 | ) | (63,487 | ) | (18,759 | ) | |||||||||||||
Effect of exchange rate changes on cash and cash equivalents | 3,392 | 1,930 | 1,531 | 1,159 | ||||||||||||||||
Net increase (decrease) in cash and cash equivalents | 111,500 | 2,722 | (18,082 | ) | 28,242 | |||||||||||||||
Cash and cash equivalents, beginning of the period | — | 41,537 | 59,619 | 31,377 | ||||||||||||||||
Cash and cash equivalents, end of period | $ | 111,500 | $ | 44,259 | $ | 41,537 | $ | 59,619 | ||||||||||||
F-6
Table of Contents
Accumulated | |||||||||||||||||||||||||
Other | Total | ||||||||||||||||||||||||
Common | Additional | Retained | Comprehensive | Comprehensive | |||||||||||||||||||||
Stock | Paid-in Capital | Earnings | Income (Loss) | Income (Loss) | Total | ||||||||||||||||||||
(In thousands of dollars) | |||||||||||||||||||||||||
Successor | |||||||||||||||||||||||||
At October 30, 2004 | $ | — | $ | — | $ | — | $ | — | — | $ | — | ||||||||||||||
Issuance of 100,609,287 shares of common stock to D-R Interholding, LLC (adjusted to reflect the 1,006,092.87-for-one stock split effected February 11, 2005) | 1,006 | 434,806 | — | — | — | 435,812 | |||||||||||||||||||
Issuance of 298,829 shares of common stock to employees (adjusted to reflect the 1,006,092.87-for-one stock split effected February 11, 2005) | 3 | 1,294 | — | — | — | 1,297 | |||||||||||||||||||
Stock based employee compensation | — | 75 | — | — | — | 75 | |||||||||||||||||||
Net income | — | — | 7,229 | — | $ | 7,229 | — | ||||||||||||||||||
Other comprehensive income (loss) | |||||||||||||||||||||||||
Minimum pension liability, net of tax of $590 | — | — | — | (922 | ) | (922 | ) | — | |||||||||||||||||
Currency translation | — | — | — | 9,406 | 9,406 | — | |||||||||||||||||||
Effect of the 0.53731353527-for-one reverse stock split effected August 4, 2005 | (467 | ) | 467 | — | — | — | — | ||||||||||||||||||
Total comprehensive income | — | — | — | — | $ | 15,713 | 15,713 | ||||||||||||||||||
At December 31, 2004 | $ | 542 | $ | 436,642 | $ | 7,229 | $ | 8,484 | $ | 452,897 | |||||||||||||||
F-7
Table of Contents
Accumulated | |||||||||||||||||
Other | Total | ||||||||||||||||
Partnership | Comprehensive | Comprehensive | |||||||||||||||
Interest | Income (Loss) | Income (Loss) | Total | ||||||||||||||
(In thousands of dollars) | |||||||||||||||||
Predecessor | |||||||||||||||||
At January 1, 2002 | $ | 603,354 | $ | (14,904 | ) | — | $ | 588,450 | |||||||||
Dividends | (8,175 | ) | — | — | (8,175 | ) | |||||||||||
Net income | 16,096 | — | $ | 16,096 | — | ||||||||||||
Other comprehensive income (loss) | |||||||||||||||||
Minimum pension liability, net of tax of $4,217 | — | (77,692 | ) | (77,692 | ) | — | |||||||||||
Currency translation | — | 7,284 | 7,284 | — | |||||||||||||
Derivatives qualifying as cash flow hedges, net of tax of $387 | — | 747 | 747 | — | |||||||||||||
Total comprehensive loss | — | — | $ | (53,565 | ) | (53,565 | ) | ||||||||||
At December 31, 2002 | 611,275 | (84,565 | ) | — | 526,710 | ||||||||||||
Net income | 20,365 | — | $ | 20,365 | — | ||||||||||||
Other comprehensive income (loss) | |||||||||||||||||
Minimum pension liability, net of tax of $1,199 | — | 939 | 939 | — | |||||||||||||
Currency translation | — | 17,074 | 17,074 | — | |||||||||||||
Derivatives qualifying as cash flow hedges, net of tax of $16 | — | (53 | ) | (53 | ) | — | |||||||||||
Total comprehensive income | — | — | $ | 38,325 | 38,325 | ||||||||||||
At December 31, 2003 | 631,640 | (66,605 | ) | — | 565,035 | ||||||||||||
Dividends | (5,097 | ) | — | — | (5,097 | ) | |||||||||||
Net income | 42,151 | — | $ | 42,151 | — | ||||||||||||
Other comprehensive income (loss) | |||||||||||||||||
Minimum pension liability, net of tax of $577 | — | (4,973 | ) | (4,973 | ) | — | |||||||||||
Currency translation | — | 11,582 | 11,582 | — | |||||||||||||
Derivatives qualifying as cash flow hedges, net of tax of $230 | — | (694 | ) | (694 | ) | — | |||||||||||
Total comprehensive income | — | — | $ | 48,066 | 48,066 | ||||||||||||
At October 29, 2004 | $ | 668,694 | $ | (60,690 | ) | $ | 608,004 | ||||||||||
F-8
Table of Contents
1. | Business Activities and Basis of Presentation |
Successor |
Predecessor |
The Acquisition |
F-9
Table of Contents
(In thousands of dollars) | |||||
Assets acquired: | |||||
Accounts receivable, net | $ | 193,944 | |||
Accounts receivable, other | 32,863 | ||||
Inventories | 173,313 | ||||
Prepaid expenses and other current assets | 14,387 | ||||
Property, plant and equipment | 225,654 | ||||
Goodwill | 408,424 | ||||
Intangible assets | 490,519 | ||||
Other assets | 14,156 | ||||
Total assets acquired | 1,553,260 | ||||
Liabilities assumed: | |||||
Accounts payable | 94,898 | ||||
Other current liabilities | 159,984 | ||||
Short term loans | 2,731 | ||||
Tax liabilities | 44,920 | ||||
Other non-current liabilities | 125,579 | ||||
Total liabilities assumed | 428,112 | ||||
Cash paid for Acquisition | $ | 1,125,148 | |||
F-10
Table of Contents
IR Transition Services Agreement |
Supply Agreement |
License Agreement |
Basis of Presentation |
F-11
Table of Contents
Legal Entities | Country | |
D-R Central Service GmbH & Co. KG | Germany | |
D-R Holdings (France) S.A.S. | France | |
D-R Holdings (Germany) GmbH | Germany | |
D-R Holdings (Netherlands) B.V. | Netherlands | |
D-R Holdings (U.K.) Ltd. | UK | |
D-R Holdings Norway AS | Norway | |
D-R Management GmbH | Germany | |
Dresser-Rand & Enserv Services Sdn. Bhd. | Malaysia | |
Dresser-Rand (Nigeria) Ltd. | Nigeria | |
Dresser-Rand (SEA) Pte. Ltd. | Singapore | |
Dresser-Rand (SEA) Pte. Ltd. | Australia | |
Dresser-Rand (U.K.) Ltd. | UK | |
Dresser-Rand AS | Norway | |
Dresser-Rand Asia Pacific Sdn. Bhd. | Malaysia | |
Dresser-Rand Asia Pacific Sdn. Bhd. | Singapore | |
Dresser-Rand B.V. | Netherlands | |
Dresser-Rand Canada, Inc. | Canada | |
Dresser-Rand CIS | Moscow | |
Dresser-Rand Comercio e Industria Ltda. | Brazil | |
Dresser-Rand Company | United States of America | |
Dresser-Rand Company Ltd. | UK | |
Dresser-Rand Compressor (Suzhou) Ltd. | PRC | |
Dresser-Rand Compressor Co., Ltd. Shanghai (60% owned) | PRC | |
Dresser-Rand de Mexico S.A. de C.V. | Mexico | |
Dresser-Rand de Venezuela, S.A. | Venezuela | |
Dresser-Rand do Brasil, Ltda. (75% owned) | Brazil | |
Dresser-Rand Global Services, LLC | United States of America | |
Dresser-Rand GmbH | Germany | |
Dresser-Rand Holdings (Delaware) LLC | United States of America | |
Dresser-Rand Holding Company | Venezuela | |
Dresser-Rand India Private Limited | India | |
Dresser-Rand International B.V. | Netherlands | |
Dresser-Rand Italia S.r.1 | Italy | |
Dresser-Rand Japan Ltd. | Japan | |
Dresser-Rand LLC | United States of America | |
Dresser-Rand Machinery Repair Belgie N.V. | Belgium | |
Dresser-Rand Overseas Sales Company Ltd. | United States of America | |
Dresser-Rand Power LLC | United States of America | |
Dresser-Rand S.A. | France | |
Dresser-Rand S.A. Representative Office (Moscow) | Moscow |
F-12
Table of Contents
Legal Entities | Country | |
Dresser-Rand S.A. Representative Office (Uzbekistan) | Uzbekistan | |
Dresser-Rand s.r.o | Czech Republic | |
Dresser-Rand Sales Company S.A. | Switzerland | |
Dresser-Rand Services B.V. | Netherlands | |
Dresser-Rand Services, S. de R.L. de C.V. | Mexico | |
Dresser-Rand Services, S.a.r.1 | Switzerland | |
Multiphase Power and Processing Technologies, LLC | United States of America | |
Paragon Engineers Services, Inc. | United States of America | |
PT Dresser-Rand Services Indonesia | Indonesia | |
Turbodyne Electric Power Corporation | United States of America | |
UZ-DR Service Center (51% owned) | Uzbekistan |
Predecessor |
Legal Entities | Country | |
Dresser-Rand Company | United States of America | |
Dresser-Rand Canada, Inc. | Canada | |
Dresser-Rand Compressor Co., Ltd. Shanghai (60% owned) | China | |
Dresser-Rand de Mexico, S.A. | Mexico | |
Dresser-Rand Global Services, LLC | United States of America | |
Dresser-Rand Holding Company | United States of America | |
Dresser-Rand Asia Pacific Sdn. Bhd. | Malaysia | |
Dresser-Rand B.V. | Netherlands | |
Dresser-Rand Compressor (Suzhou) Ltd. | China | |
Dresser-Rand de Venezuela, S.A. | Venezuela | |
Dresser-Rand Japan, Ltd. | Japan | |
Dresser-Rand Overseas Sales Company | United States of America | |
Dresser-Rand Company Ltd.-UK | United Kingdom | |
Dresser-Rand (UK) Ltd. | United Kingdom | |
Dresser-Rand Sales Company S.A. | Switzerland | |
Dresser-Rand Services, S.a.r.l | Switzerland | |
Turbodyne Electric Power Corporation | United States of America | |
Dresser-Rand India Private Limited | India | |
Dresser-Rand International B.V. | Netherlands |
F-13
Table of Contents
Legal Entities | Country | |
Dresser-Rand Italia S.r.l | Italy | |
Dresser-Rand Machinery Repair Belgie N.V. | Belgium | |
Dresser-Rand Power, Inc. | United States of America | |
Dresser-Rand A/ S | Norway | |
Dresser-Rand Comercio e Industria Ltda. | Brazil | |
Dresser-Rand (SEA) Pte. Ltd. | Singapore | |
Dresser-Rand S.A. — France | France | |
Dresser-Rand Services B.V. | Netherlands | |
Dresser-Rand s.r.o. | Czech Republic | |
PT Dresser-Rand Services Indonesia | Indonesia | |
Dresser-Rand Services S.de R.L. | Mexico | |
Dresser-Rand do Brasil, Ltda. (75% owned) | Brazil | |
Dresser-Rand Ltd. | Nigeria | |
UZ-DR Service Center Uzneftegazmash (51% owned) | Uzbekistan | |
Dresser-Rand GmbH | Germany |
2. | Summary of Significant Accounting Policies |
Principles of Consolidation |
Principles of Combination |
F-14
Table of Contents
Use of Estimates |
Cash and Cash Equivalents |
Marketable Securities |
Allowance for Doubtful Accounts |
Inventories |
Property, Plant and Equipment |
F-15
Table of Contents
Impairment of Long-Lived Assets |
Intangible Assets |
Income Taxes |
Successor: |
F-16
Table of Contents
Predecessor: |
Product Warranty |
Environmental Costs |
Revenue Recognition |
F-17
Table of Contents
Research and Development Costs |
Distribution and Shipping Costs |
Comprehensive Income (Loss) |
Foreign Currency |
Stock-based Compensation |
F-18
Table of Contents
Predecessor | ||||||||||||
Period from | ||||||||||||
January 1 | Year Ended | |||||||||||
through | December 31, | |||||||||||
October 29, | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
(In thousands of dollars) | ||||||||||||
Net income, as reported | $ | 42,151 | $ | 20,365 | $ | 16,096 | ||||||
Add: Stock-based employee compensation expense included in reported net income, net of tax | 446 | 1,502 | 143 | |||||||||
Deduct: Total stock-based employee compensation expense determined under fair value method for all awards, net of tax | (4,640 | ) | (4,885 | ) | (2,990 | ) | ||||||
Pro forma net income | $ | 37,957 | $ | 16,982 | $ | 13,249 | ||||||
Credit Facilities |
Deferred Financing Costs |
New Accounting Standards |
F-19
Table of Contents
3. | Related Party Transactions |
Successor |
Dresser Name |
Predecessor |
Intercompany Activities |
F-20
Table of Contents
Employee Benefit Administration |
Other Related Party Transactions |
4. | Earnings per share |
Successor |
Predecessor |
F-21
Table of Contents
5. | Inventories |
December 31, | ||||||||||
2004 | 2003 | |||||||||
(Successor) | (Predecessor) | |||||||||
(In thousands of dollars) | ||||||||||
Raw materials and supplies | $ | 60,728 | $ | 62,207 | ||||||
Work-in-process and finished goods | 209,247 | 142,050 | ||||||||
269,975 | 204,257 | |||||||||
Less: | ||||||||||
Progress payments | (94,102 | ) | (70,832 | ) | ||||||
Total | $ | 175,873 | $ | 133,425 | ||||||
6. | Investments In Partially Owned Equity Companies |
Successor | Predecessor | ||||||||||||||||
Period from | Period from | ||||||||||||||||
October 30 | January 1 | Year Ended | |||||||||||||||
through | through | December 31, | |||||||||||||||
December 31, | October 29, | ||||||||||||||||
2004 | 2004 | 2003 | 2002 | ||||||||||||||
(In thousands of dollars) | |||||||||||||||||
Net sales | $ | 13,460 | $ | 56,271 | $ | 53,337 | $ | 56,953 | |||||||||
Gross profit | 3,725 | 17,857 | 18,890 | 18,596 | |||||||||||||
Net income/(loss) | 596 | (1,849 | ) | 310 | (518 | ) |
F-22
Table of Contents
December 31, | |||||||||
2004 | 2003 | ||||||||
(Successor) | (Predecessor) | ||||||||
(In thousands of dollars) | |||||||||
Current assets | $ | 24,819 | $ | 18,855 | |||||
Property, plant and equipment, net | 2,303 | 2,748 | |||||||
Other assets | 5,353 | 5,925 | |||||||
Total assets | $ | 32,475 | $ | 27,528 | |||||
Current liabilities | $ | 8,298 | $ | 3,813 | |||||
Other liabilities | 10,594 | 8,878 | |||||||
Total owners’ equity | 13,583 | 14,837 | |||||||
Total liabilities and owners’ equity | $ | 32,475 | $ | 27,528 | |||||
7. | Property, Plant and Equipment |
December 31, | ||||||||
2004 | 2003 | |||||||
(Successor) | (Predecessor) | |||||||
(In thousands of dollars) | ||||||||
Land | $ | 8,156 | $ | 5,213 | ||||
Buildings and improvements | 64,599 | $ | 46,719 | |||||
Machinery and equipment | 157,969 | 128,363 | ||||||
230,724 | 180,295 | |||||||
Less: Accumulated depreciation | (3,960 | ) | (78,857 | ) | ||||
Property plant and equipment, net | $ | 226,764 | $ | 101,438 | ||||
F-23
Table of Contents
8. | Intangible Assets and Goodwill |
Successor | Predecessor | |||||||||||||||||||||||
December 31, 2004 | December 31, 2003 | |||||||||||||||||||||||
Weighted | Weighted | |||||||||||||||||||||||
Average | Gross | Accumulated | Average | Gross | Accumulated | |||||||||||||||||||
Useful Lives | Amount | Amortization | Useful Lives | Amount | Amortization | |||||||||||||||||||
(In thousands of dollars) | ||||||||||||||||||||||||
Trade names | 40 years | $ | 82,700 | $ | 344 | Indefinite | $ | 34,935 | $ | — | ||||||||||||||
Customer Relationships | 40 years | 227,746 | 936 | 40 years | 235,824 | 22,657 | ||||||||||||||||||
Software | 10 years | 30,553 | 510 | 8 years | 11,014 | 4,704 | ||||||||||||||||||
Existing technology | 25 years | 119,100 | 794 | — | — | |||||||||||||||||||
Order backlog | 15 months | 25,095 | 8,824 | — | — | |||||||||||||||||||
Non-compete agreement | 2 years | 4,413 | 366 | — | — | |||||||||||||||||||
Royalty agreement | 14 months | 2,320 | 566 | — | — | |||||||||||||||||||
Total | $ | 491,927 | $ | 12,340 | $ | 281,773 | $ | 27,361 | ||||||||||||||||
Successor | Predecessor | ||||||||||||
Period from | Period from | ||||||||||||
October 30 | January 1 | ||||||||||||
through | through | Year Ended | |||||||||||
December 31, | October 29, | December 31, | |||||||||||
2004 | 2004 | 2003 | |||||||||||
(In thousands of dollars) | |||||||||||||
Beginning balance | $ | 408,424 | $ | 10,214 | $ | 10,214 | |||||||
Dispositions | (377 | ) | — | — | |||||||||
Translation adjustments | 15,283 | — | — | ||||||||||
Ending balance | $ | 423,330 | $ | 10,214 | $ | 10,214 | |||||||
F-24
Table of Contents
9. | Accounts Payable and Accruals |
December 31, | |||||||||
2004 | 2003 | ||||||||
(Successor) | (Predecessor) | ||||||||
(In thousands of dollars) | |||||||||
Accounts payable | $ | 103,822 | $ | 104,835 | |||||
Accruals: | |||||||||
Payroll and benefits | 31,289 | 25,061 | |||||||
Pension and Postretirement benefits | 9,706 | 49,849 | |||||||
Contract reserves | 30,702 | 25,359 | |||||||
Warranties | 21,078 | 23,699 | |||||||
Taxes other than income | 25,749 | 19,763 | |||||||
Legal, audit and consulting | 3,718 | 10,344 | |||||||
Interest | 6,216 | 554 | |||||||
Third-party commissions | 7,961 | 9,362 | |||||||
Insurance and claims | 7,679 | 4,095 | |||||||
Other | 23,355 | 18,909 | |||||||
Total accounts payable and accruals | $ | 271,275 | $ | 291,830 | |||||
10. | Income Taxes |
Predecessor | ||||||||||||||||||
Successor | ||||||||||||||||||
Period | ||||||||||||||||||
Period from | from | |||||||||||||||||
October 30 | January 1 | Year Ended | ||||||||||||||||
through | through | December 31, | ||||||||||||||||
December 31, | October 29, | |||||||||||||||||
2004 | 2004 | 2003 | 2002 | |||||||||||||||
(In thousands of dollars) | ||||||||||||||||||
United States | $ | (3,562 | ) | $ | 34,058 | $ | (7,619 | ) | $ | (2,198 | ) | |||||||
Non-U.S. | 18,066 | 20,063 | 39,422 | 30,204 | ||||||||||||||
Total | $ | 14,504 | $ | 54,121 | $ | 31,803 | $ | 28,006 | ||||||||||
F-25
Table of Contents
Successor | Predecessor | ||||||||||||||||||
Period from | Period from | ||||||||||||||||||
October 30 | January 1 | Year Ended | |||||||||||||||||
through | through | December 31, | |||||||||||||||||
December 31, | October 29, | ||||||||||||||||||
2004 | 2004 | 2003 | 2002 | ||||||||||||||||
(In thousands of dollars) | |||||||||||||||||||
Current tax expense | |||||||||||||||||||
United States | $ | 883 | $ | (933 | ) | $ | 1,314 | $ | 2,367 | ||||||||||
Non-U.S. | 7,366 | 12,270 | 15,025 | 8,598 | |||||||||||||||
Total current | 8,249 | 11,337 | 16,339 | 10,965 | |||||||||||||||
Deferred tax expense | |||||||||||||||||||
United States | — | (2,707 | ) | (404 | ) | 2 | |||||||||||||
Non-U.S. | (974 | ) | 3,340 | (4,497 | ) | 943 | |||||||||||||
Total deferred | (974 | ) | 633 | (4,901 | ) | 945 | |||||||||||||
Total provision for income taxes | $ | 7,275 | $ | 11,970 | $ | 11,438 | $ | 11,910 | |||||||||||
Successor | Predecessor | |||||||||||||||||
Period from | Period from | |||||||||||||||||
October 30 | January 1 | Year Ended | ||||||||||||||||
through | through | December 31, | ||||||||||||||||
December 31, | October 29, | |||||||||||||||||
2004 | 2004 | 2003 | 2002 | |||||||||||||||
Statutory U.S. rate | 35.0 | % | 35.0 | % | 35.0 | % | 35.0 | % | ||||||||||
Increase (decrease) in rates resulting from: | ||||||||||||||||||
Non-U.S. operations | (4.3 | )% | 9.9 | % | 5.5 | % | (7.5 | )% | ||||||||||
State and local income taxes, net of U.S. tax | 4.0 | % | (0.2 | )% | 1.1 | % | 0.4 | % | ||||||||||
Valuation allowances | 11.0 | % | 7.2 | % | (10.7 | )% | 6.5 | % | ||||||||||
Nontaxable partnership income | — | (18.7 | )% | 9.6 | % | 6.6 | % | |||||||||||
Other | 4.5 | % | (11.1 | )% | (4.5 | )% | 1.5 | % | ||||||||||
Effective tax rate | 50.2 | % | 22.1 | % | 36.0 | % | 42.5 | % | ||||||||||
F-26
Table of Contents
December 31, | ||||||||||
2004 | 2003 | |||||||||
(Successor) | (Predecessor) | |||||||||
(In thousands of dollars) | ||||||||||
Current deferred assets and (liabilities) | ||||||||||
Differences between book and tax bases of inventories and receivables | $ | 3,199 | $ | 1,826 | ||||||
Differences between book and tax expense for other employee related benefits and allowances | — | 403 | ||||||||
Other reserves and valuation allowances versus tax deductions | 3,769 | 3,808 | ||||||||
Other differences between tax and financial statement values | 477 | 4,461 | ||||||||
Gross current deferred tax assets | 7,445 | 10,498 | ||||||||
Noncurrent deferred tax assets and (liabilities) | ||||||||||
Tax net operating loss carryforwards | 9,216 | 7,476 | ||||||||
Pension contributions in excess of book expense | 12,833 | 10,986 | ||||||||
Book depreciation/amortization versus tax depreciation/amortization | (37,343 | ) | 2,194 | |||||||
Gross noncurrent deferred tax assets (liabilities) | (15,294 | ) | 20,656 | |||||||
Less: valuation allowances | (11,993 | ) | (6,091 | ) | ||||||
Total net deferred tax assets (liabilities) | $ | (19,842 | ) | $ | 25,063 | |||||
F-27
Table of Contents
11. | Long–Term Debt |
Senior Secured Credit Facility |
F-28
Table of Contents
Senior Subordinated Notes |
F-29
Table of Contents
December 31, | ||||||||
2004 | 2003 | |||||||
(Successor) | (Predecessor) | |||||||
(In thousands of dollars) | ||||||||
Senior Subordinated Notes | $ | 420,000 | $ | — | ||||
Senior Secured Credit Facility | 400,474 | — | ||||||
Other debt | 205 | 213 | ||||||
Total long term debt | 820,679 | 213 | ||||||
Less: current maturities | (4,015 | ) | — | |||||
Total non current long term debt | $ | 816,664 | $ | 213 | ||||
Senior | Senior | |||||||||||||||
Subordinated | Secured Credit | Other | ||||||||||||||
Notes | Facility* | Debt | Total | |||||||||||||
(In thousands of dollars) | ||||||||||||||||
2005 | $ | — | $ | 4,015 | $ | — | $ | 4,015 | ||||||||
2006 | — | 4,015 | 162 | 4,177 | ||||||||||||
2007 | — | 4,015 | 43 | 4,058 | ||||||||||||
2008 | — | 4,015 | — | 4,015 | ||||||||||||
2009 | — | 4,015 | — | 4,015 | ||||||||||||
2010 and after | 420,000 | 380,399 | — | 800,399 | ||||||||||||
$ | 420,000 | $ | 400,474 | $ | 205 | $ | 820,679 | |||||||||
* | Through May 11, 2005 the Company has made payments of $111.7 million on the Senior Secured Credit Facility, as a result of which no further principal amortization payments are required prior to maturity of the facility on October 29, 2011. |
12. | Pension Plans |
F-30
Table of Contents
December 31, | ||||||||||
2004 | 2003 | |||||||||
(Successor) | (Predecessor) | |||||||||
(In thousands of dollars) | ||||||||||
Change in benefit obligations | ||||||||||
Benefit obligation at beginning of the period | $ | 308,712 | $ | 310,172 | ||||||
Service cost | 870 | 4,643 | ||||||||
Interest cost | 2,884 | 19,704 | ||||||||
Employee contributions | 62 | 291 | ||||||||
Expenses paid | — | (207 | ) | |||||||
Actuarial losses | 3,035 | 19,328 | ||||||||
Benefits paid | (2,464 | ) | (17,176 | ) | ||||||
Foreign exchange impact | 4,399 | 7,995 | ||||||||
Benefit obligation at end of the period | $ | 317,498 | $ | 344,750 | ||||||
Change in plan assets | ||||||||||
Fair value at beginning of the period | $ | 240,025 | $ | 237,201 | ||||||
Actual return on assets | 2,460 | 32,813 | ||||||||
Company contributions | 495 | 14,383 | ||||||||
Employee contributions | 62 | 291 | ||||||||
Expenses paid | — | (207 | ) | |||||||
Benefits paid | (2,464 | ) | (16,533 | ) | ||||||
Foreign exchange impact | 2,554 | 4,726 | ||||||||
Fair value of assets at end of the period | $ | 243,132 | $ | 272,674 | ||||||
December 31, | ||||||||||
2004 | 2003 | |||||||||
(Successor) | (Predecessor) | |||||||||
(In thousands of dollars) | ||||||||||
Funded status | ||||||||||
Plan assets less than benefit obligations | $ | (74,366 | ) | $ | (72,076 | ) | ||||
Unrecognized | ||||||||||
Net transition obligation | — | 3 | ||||||||
Prior service costs | — | 4 | ||||||||
Plan net losses (gains) | 3,816 | 90,567 | ||||||||
Net amount recognized | $ | (70,550 | ) | $ | 18,498 | |||||
Costs included in the balance sheet | ||||||||||
Prepaid benefit cost | $ | — | $ | 360 | ||||||
Accrued benefit liability | (72,061 | ) | (64,311 | ) | ||||||
Accumulated other comprehensive income | 1,511 | 82,449 | ||||||||
Net amount recognized | $ | (70,550 | ) | $ | 18,498 | |||||
F-31
Table of Contents
December 31, | ||||||||||
2004 | 2003 | |||||||||
(Successor) | (Predecessor) | |||||||||
Weighted-average assumptions used, benefit obligations | ||||||||||
Discount rate | ||||||||||
U.S. plans | 5.750% | 6.00% | ||||||||
Non-U.S. plans | 5.308% | 5.75% | ||||||||
Rate of compensation increase | ||||||||||
U.S. plans | N/A | 4.00% | ||||||||
Non-U.S. plans | 3.75% | 3.75% |
Successor | Predecessor | |||||||||||||||||
Period from | Period from | |||||||||||||||||
October 30 | January 1 | Year Ended | ||||||||||||||||
through | through | December 31, | ||||||||||||||||
December 31, | October 29, | |||||||||||||||||
2004 | 2004 | 2003 | 2002 | |||||||||||||||
(In thousands of dollars) | ||||||||||||||||||
Service cost | $ | 870 | $ | 3,801 | $ | 4,643 | $ | 3,871 | ||||||||||
Interest cost | 2,884 | 16,903 | 19,704 | 19,067 | ||||||||||||||
Expected return on plan assets | (3,207 | ) | (21,173 | ) | (19,329 | ) | (23,462 | ) | ||||||||||
Net amortization of unrecognized | ||||||||||||||||||
Transition amount | — | 1 | — | — | ||||||||||||||
Prior Service Cost | — | 453 | 1 | 1 | ||||||||||||||
Plan net losses | — | 3,375 | 5,257 | 403 | ||||||||||||||
Net pension expense (income) | $ | 547 | $ | 3,360 | $ | 10,276 | $ | (120 | ) | |||||||||
Successor | Predecessor | |||||||||||||||||
Period from | Period from | |||||||||||||||||
October 30 | January 1 | Year Ended | ||||||||||||||||
through | through | December 31, | ||||||||||||||||
December 31, | October 29, | |||||||||||||||||
2004 | 2004 | 2003 | 2002 | |||||||||||||||
Weighted-average assumptions used, net periodic pension cost | ||||||||||||||||||
Discount rate | ||||||||||||||||||
U.S. plans | 5.750 | % | 6.00 | % | 6.75 | % | 7.25 | % | ||||||||||
Non-U.S. plans | 5.308 | % | 5.75 | % | 5.75 | % | 6.00 | % | ||||||||||
Rate of compensation increase | ||||||||||||||||||
U.S. plans | N/A | N/A | 4.00 | % | 5.00 | % | ||||||||||||
Non-U.S. plans | 3.750 | % | 3.75 | % | 3.00 | % | 3.00 | % | ||||||||||
Expected return on plan assets | ||||||||||||||||||
U.S. plans | 8.500 | % | 8.75 | % | 8.75 | % | 9.00 | % | ||||||||||
Non-U.S. plans | 7.094 | % | 7.50 | % | 7.50 | % | 7.50 | % |
F-32
Table of Contents
December 31, | ||||||||||
2004 | 2003 | |||||||||
(Successor) | (Predecessor) | |||||||||
Asset category* | ||||||||||
Equity securities | 58.1 | % | 59.7 | % | ||||||
Debt securities | 35.0 | % | 27.1 | % | ||||||
Other (including cash) | 6.9 | % | 13.2 | % | ||||||
Total | 100.0 | % | 100.0 | % | ||||||
* | Reflects weighted average percentage allocations of U.S. andnon-U.S. plans. |
F-33
Table of Contents
Defined Contribution Plans |
13. | Postretirement Benefits other than Pensions |
December 31, | ||||||||||
2004 | 2003 | |||||||||
(Successor) | (Predecessor) | |||||||||
(In thousands of dollars) | ||||||||||
Change in benefit obligations | ||||||||||
Benefit obligation at beginning of the period | $ | 46,818 | $ | 189,183 | ||||||
Service cost | 301 | 1,935 | ||||||||
Interest cost | 449 | 11,907 | ||||||||
Amendments | — | (9,300 | ) | |||||||
Actuarial losses (gains) | — | 18,196 | ||||||||
Benefits paid | — | (11,544 | ) | |||||||
Benefit obligation at end of the period | $ | 47,568 | $ | 200,377 | ||||||
Funded status | ||||||||||
Plan assets less than benefit obligations | $ | (47,568 | ) | $ | (200,377 | ) | ||||
Unrecognized | ||||||||||
Prior service gains | — | (9,042 | ) | |||||||
Plan net losses* | — | 83,157 | ||||||||
Accrued costs in the balance sheet | $ | (47,568 | ) | $ | (126,262 | ) | ||||
* | Plan net losses in 2003 arose primarily from changes in discount rate and medical cost trend assumptions. |
F-34
Table of Contents
Successor | Predecessor | ||||||||||||||||
Period from | Period from | ||||||||||||||||
October 30 | January 1 | Year Ended | |||||||||||||||
through | through | December 31, | |||||||||||||||
December 31, | October 29, | ||||||||||||||||
2004 | 2004 | 2003 | 2002 | ||||||||||||||
(In thousands of dollars) | |||||||||||||||||
Service cost | $ | 301 | $ | 1,599 | $ | 1,935 | $ | 1,172 | |||||||||
Interest cost | 449 | 9,323 | 11,907 | 11,108 | |||||||||||||
Net amortization of unrecognized prior service gains | — | (861 | ) | (258 | ) | — | |||||||||||
Net amortization of loss | — | 3,011 | 949 | 732 | |||||||||||||
Net periodic postretirement benefits cost | $ | 750 | $ | 13,072 | $ | 14,533 | $ | 13,012 | |||||||||
Successor | Predecessor | |||||||||||||||||
Period from | Period from | |||||||||||||||||
October 30 | January 1 | Year Ended | ||||||||||||||||
through | through | December 31, | ||||||||||||||||
December 31, | October 29, | |||||||||||||||||
2004 | 2004 | 2003 | 2002 | |||||||||||||||
Weighted-average discount rate assumption used to determine | ||||||||||||||||||
Benefit obligations at end of period | 5.75 | % | 6.00 | % | 6.00 | % | 6.75 | % | ||||||||||
Net periodic benefit cost for the periods ended February 15, 2003 and October 2002 | N/A | N/A | 6.75 | % | 7.25 | % | ||||||||||||
Net periodic benefit cost for the remaining period | 5.75 | % | 6.00 | % | 6.50 | % | 6.75 | % | ||||||||||
Assumed health care cost trend rates | ||||||||||||||||||
Current year medical inflation | 11.00 | % | 11.00 | % | 11.00 | % | 11.00 | % | ||||||||||
Ultimate inflation rate | 5.00 | % | 5.25 | % | 5.25 | % | 5.25 | % | ||||||||||
Year that the rate reaches the ultimate trend rate | 2010 | 2010 | 2010 | 2009 |
F-35
Table of Contents
1% Increase | 1% Decrease | |||||||
(In thousands of dollars) | ||||||||
Effect on total service and interest cost components | $ | 166 | $ | (130 | ) | |||
Effect of postretirement benefit obligations | 10,144 | (8,014 | ) |
14. | Financial Instruments |
15. | Commitments and Contingencies |
F-36
Table of Contents
F-37
Table of Contents
Successor | Predecessor | |||||||||||
Period from | Period from | |||||||||||
October 30 | January 1 | |||||||||||
through | through | Year Ended | ||||||||||
December 31, | October 29, | December 31, | ||||||||||
2004 | 2004 | 2003 | ||||||||||
(In thousands of dollars) | ||||||||||||
Beginning balance | $ | 20,319 | $ | 23,699 | $ | 21,424 | ||||||
Reductions for payments | (2,224 | ) | (12,487 | ) | (17,050 | ) | ||||||
Translation | 1,400 | 483 | 1,896 | |||||||||
Changes in accrual during current period | 1,583 | 8,624 | 17,429 | |||||||||
Ending balance | $ | 21,078 | $ | 20,319 | $ | 23,699 | ||||||
16. | Incentive Plans |
Successor Incentive Plan |
F-38
Table of Contents
Expected volatility | 36.20 | % | ||
Expected dividend yield | 0 | % | ||
Expected term (in years) | 4.9 | |||
Risk-free interest rate | 3.18 | % |
Predecessor Stock Incentive Plan |
Predecessor | ||||||||||||
Period from | ||||||||||||
January 1 | Year Ended | |||||||||||
through | December 31, | |||||||||||
October 29, | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
Dividend yield | 1.19 | % | 1.75 | % | 1.61 | % | ||||||
Volatility | 39.34 | % | 39.83 | % | 38.85 | % | ||||||
Risk-free interest rate | 3.28 | % | 3.12 | % | 4.69 | % | ||||||
Expected life | 5 years | 5 years | 5 years |
F-39
Table of Contents
Shares Subject | Option Price | Weighted Average | ||||||||||
to Option | Range per Share | Exercise Price | ||||||||||
Predecessor | ||||||||||||
December 31, 2001 | 465,476 | $ | 40.75-53.03 | $ | 45.94 | |||||||
Granted | 128,465 | 41.81-41.81 | 41.81 | |||||||||
Exercised | (1,233 | ) | 40.25-40.75 | 40.75 | ||||||||
Cancelled | (650 | ) | 53.03-53.03 | 33.03 | ||||||||
December 31, 2002 | 592,058 | 33.67-53.03 | 45.04 | |||||||||
Granted | 162,220 | 39.05 | 39.05 | |||||||||
Exercised | (117,634 | ) | 33.67-53.03 | 45.35 | ||||||||
Cancelled | (23,222 | ) | 39.05-53.05 | 42.91 | ||||||||
December 31, 2003 | 613,422 | 39.05-53.03 | 44.25 | |||||||||
Granted | 136,610 | 64.37 | 46.96 | |||||||||
Exercised | (82,299 | ) | 39.05-53.03 | 46.14 | ||||||||
Cancelled | (107,272 | ) | 39.05-64.37 | 47.84 | ||||||||
October 29, 2004 | 560,461 | $ | 39.05-64.37 | $ | 47.77 | |||||||
17. | Significant Customers and Concentration of Credit Risk |
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Table of Contents
18. | Other Income (Expense) |
Successor | Predecessor | ||||||||||||||||
Period from | Period from | ||||||||||||||||
October 30 | January 1 | Year Ended | |||||||||||||||
through | through | December 31, | |||||||||||||||
December 31, | October 29, | ||||||||||||||||
2004 | 2004 | 2003 | 2002 | ||||||||||||||
(In thousands of dollars) | |||||||||||||||||
New York State Grant | $ | — | $ | — | $ | (1,289 | ) | $ | 8,000 | ||||||||
Equity earnings (losses) in partially owned affiliates | 194 | (1,013 | ) | (133 | ) | (479 | ) | ||||||||||
Foreign currency gains (losses) | (1,023 | ) | 2,069 | (4,406 | ) | (1,131 | ) | ||||||||||
Insurance claims | — | — | — | 10,145 | |||||||||||||
Casualty losses | — | — | (2,750 | ) | — | ||||||||||||
Other | (1,017 | ) | 826 | (624 | ) | (1,535 | ) | ||||||||||
Total other income/(expense), net | $ | (1,846 | ) | $ | 1,882 | $ | (9,202 | ) | $ | 15,000 | |||||||
19. | Restructuring |
F-41
Table of Contents
Employee | Facility | |||||||||||
Termination | Exit | |||||||||||
Costs | Costs | Total | ||||||||||
(In thousands of dollars) | ||||||||||||
Predecessor | ||||||||||||
Balance at January 1, 2002 | $ | — | $ | — | $ | — | ||||||
Provision | 4,689 | 500 | 5,189 | |||||||||
Cash payments | (1,485 | ) | — | (1,485 | ) | |||||||
Balance at December 31, 2002 | 3,204 | 500 | 3,704 | |||||||||
Cash payments | (3,104 | ) | (341 | ) | (3,445 | ) | ||||||
Balance at December 31, 2003 | 100 | 159 | 259 | |||||||||
Cash payments | (100 | ) | (159 | ) | (259 | ) | ||||||
Balance at October 29, 2004 | $ | — | $ | — | $ | — | ||||||
20. | Supplemental Cash Flow Information |
Successor | Predecessor | |||||||||||||||
Period from | Period from | |||||||||||||||
October 30 | January 1 | Year Ended | ||||||||||||||
through | through | December 31, | ||||||||||||||
December 31, | October 29, | |||||||||||||||
2004 | 2004 | 2003 | 2002 | |||||||||||||
(In thousands of dollars) | ||||||||||||||||
Cash paid during the period for interest | $ | 2,930 | $ | 888 | $ | 2,195 | $ | 4,244 | ||||||||
Income taxes paid, net of refunds | 3,337 | 7,566 | 8,554 | 16,603 |
21. | Royalty Agreement |
F-42
Table of Contents
22. | Segment Information: |
�� 1) New Units — are highly engineered solutions to new customer requests. The segment includes engineering, manufacturing, sales and administrative support. | |
2) Aftermarket Parts and Services — consist of aftermarket support solutions for the existing population of installed equipment. The segment includes engineering, manufacturing, sales and administrative support. |
Successor | Predecessor | |||||||||||||||
Period from | Period from | |||||||||||||||
October 30 | January 1 | |||||||||||||||
through | through | Year Ended December 31, | ||||||||||||||
December 31, | October 29, | |||||||||||||||
2004 | 2004 | 2003 | 2002 | |||||||||||||
(In thousands of dollars) | ||||||||||||||||
Revenues | ||||||||||||||||
New units | $ | 77,607 | $ | 267,691 | $ | 792,974 | $ | 498,791 | ||||||||
Aftermarket parts and services | 122,300 | 447,804 | 542,376 | 532,562 | ||||||||||||
Total Revenues | $ | 199,907 | $ | 715,495 | $ | 1,335,350 | $ | 1,031,353 | ||||||||
Operating Income (Loss) | ||||||||||||||||
New units | $ | 3,567 | $ | (464 | ) | $ | (11,445 | ) | $ | (32,850 | ) | |||||
Aftermarket parts and services | 30,571 | 85,039 | 98,159 | 85,696 | ||||||||||||
Unallocable | (8,134 | ) | (35,492 | ) | (47,647 | ) | (39,064 | ) | ||||||||
Total Operating Income | $ | 26,004 | $ | 49,083 | $ | 39,067 | $ | 13,782 | ||||||||
Depreciation and Amortization | ||||||||||||||||
New units | $ | 5,775 | $ | 9,201 | $ | 16,678 | $ | 15,758 | ||||||||
Aftermarket parts and services | 10,494 | 13,514 | 12,431 | 18,064 | ||||||||||||
Total Depreciation and Amortization | $ | 16,269 | $ | 22,715 | $ | 29,109 | $ | 33,822 | ||||||||
F-43
Table of Contents
Successor | Predecessor | |||||||||||||||
Period from | Period from | |||||||||||||||
October 30 | January 1 | |||||||||||||||
through | through | Year Ended December 31, | ||||||||||||||
December 31, | October 29, | |||||||||||||||
2004 | 2004 | 2003 | 2002 | |||||||||||||
(In thousands of dollars) | ||||||||||||||||
Goodwill | ||||||||||||||||
New units | $ | 123,831 | $ | 506 | ||||||||||||
Aftermarket parts and services | 299,499 | 9,708 | ||||||||||||||
Total Goodwill | $ | 423,330 | $ | 10,214 | ||||||||||||
Total Assets (including Goodwill) | ||||||||||||||||
New units | $ | 270,563 | $ | 144,292 | ||||||||||||
Aftermarket parts and services | 564,253 | 246,166 | ||||||||||||||
Unallocable | 916,258 | 673,417 | ||||||||||||||
Total Assets | $ | 1,751,074 | $ | 1,063,875 | ||||||||||||
Revenues by Destination(a) | ||||||||||||||||
North America | $ | 77,700 | $ | 275,941 | $ | 547,777 | $ | 437,199 | ||||||||
Latin America | 30,660 | 139,898 | 106,635 | 121,527 | ||||||||||||
Europe | 26,591 | 113,461 | 331,366 | 207,769 | ||||||||||||
Asia-Pacific | 21,482 | 94,291 | 128,945 | 159,964 | ||||||||||||
Middle East, Africa | 43,474 | 91,904 | 220,627 | 104,894 | ||||||||||||
Total Revenues | $ | 199,907 | $ | 715,495 | $ | 1,335,350 | $ | 1,031,353 | ||||||||
Long-Lived Assets by Geographic Area | ||||||||||||||||
North America | $ | 159,060 | $ | 75,783 | ||||||||||||
Latin America | 2,531 | 1,617 | ||||||||||||||
Europe | 58,860 | 18,006 | ||||||||||||||
Asia-Pacific | 6,313 | 6,028 | ||||||||||||||
Middle East, Africa | — | 4 | ||||||||||||||
Total Long-Lived Assets | $ | 226,764 | $ | 101,438 | ||||||||||||
(a) | In the period from October 30, 2004 through December 31, 2004, the sales to customers in Canada, Venezuela and Russia comprised 6.0%, 8.5% and 5.5%, respectively, of total revenues. In the period from January 1, 2004 through October 29, 2004, sales to customers in Brazil and Venezuela comprised 6.7% and 6.8%, respectively, of total revenues. In 2003, sales to customers in Norway and Libya comprised 9.6% and 5.3%, respectively, of total revenues and in 2002 sales to customers in France generated 6.1% of total revenues. No other sales within individual countries exceeded 5% of the total revenues in any year presented. |
F-44
Table of Contents
23. | Subsequent events |
24. | Supplemental Guarantor Financial Information |
F-45
Table of Contents
Subsidiary | Subsidiary | Consolidating | |||||||||||||||||||
Issuer | Guarantors | Non-Guarantors | Adjustments | Total | |||||||||||||||||
(In thousands of dollars) | |||||||||||||||||||||
Net sales | $ | — | $ | 123,431 | $ | 88,181 | $ | (11,705 | ) | $ | 199,907 | ||||||||||
Cost of goods sold | 56 | 98,234 | 65,819 | (11,705 | ) | 152,404 | |||||||||||||||
Gross Profit | (56 | ) | 25,197 | 22,362 | — | 47,503 | |||||||||||||||
Selling and administrative expenses | 19 | 13,170 | 8,310 | — | 21,499 | ||||||||||||||||
Restructuring charges | — | — | — | — | — | ||||||||||||||||
Income from operations | (75 | ) | 12,027 | 14,052 | — | 26,004 | |||||||||||||||
Equity earnings in affiliates (net of tax) | 15,817 | 1,517 | — | (17,334 | ) | — | |||||||||||||||
Interest (expense) income, net | (8,649 | ) | (199 | ) | (806 | ) | — | (9,654 | ) | ||||||||||||
Intercompany interest and fees | 1,019 | (2,984 | ) | 1,965 | — | — | |||||||||||||||
Other income (expense), net | — | 32 | (1,878 | ) | — | (1,846 | ) | ||||||||||||||
Income (loss) before income taxes | 8,112 | 10,393 | 13,333 | (17,334 | ) | 14,504 | |||||||||||||||
Provision for income taxes | 883 | — | 6,392 | — | 7,275 | ||||||||||||||||
Net (loss) income | $ | 7,229 | $ | 10,393 | $ | 6,941 | $ | (17,334 | ) | $ | 7,229 | ||||||||||
F-46
Table of Contents
Subsidiary | Subsidiary | Combining | |||||||||||||||||||
Issuer | Guarantors | Non-Guarantors | Adjustments | Total | |||||||||||||||||
(In thousands of dollars) | |||||||||||||||||||||
Net sales | $ | — | $ | 429,542 | $ | 285,953 | $ | — | $ | 715,495 | |||||||||||
Cost of goods sold | — | 332,931 | 210,781 | — | 543,712 | ||||||||||||||||
Gross Profit | — | 96,611 | 75,172 | — | 171,783 | ||||||||||||||||
Selling and administrative expenses | — | 61,864 | 60,836 | — | 122,700 | ||||||||||||||||
Income from operations | — | 34,747 | 14,336 | — | 49,083 | ||||||||||||||||
Equity earnings (losses) in affiliates (net of tax) | 42,151 | (8,691 | ) | — | (33,460 | ) | — | ||||||||||||||
Interest (expense) income, net | — | 1,419 | 1,737 | — | 3,156 | ||||||||||||||||
Other income (expense), net | — | 14,096 | (12,214 | ) | — | 1,882 | |||||||||||||||
Income (loss) before income taxes | 42,151 | 41,571 | 3,859 | (33,460 | ) | 54,121 | |||||||||||||||
Provision for income taxes | — | 3,721 | 8,249 | — | 11,970 | ||||||||||||||||
Net (loss) income | $ | 42,151 | $ | 37,850 | $ | (4,390 | ) | $ | (33,460 | ) | $ | 42,151 | |||||||||
F-47
Table of Contents
Subsidiary | Subsidiary | Combining | |||||||||||||||||||
Issuer | Guarantors | Non-Guarantors | Adjustments | Total | |||||||||||||||||
(In thousands of dollars) | |||||||||||||||||||||
Net sales | $ | — | $ | 648,904 | $ | 686,446 | $ | — | $ | 1,335,350 | |||||||||||
Cost of goods sold | — | 565,595 | 574,559 | — | 1,140,154 | ||||||||||||||||
Gross Profit | — | 83,309 | 111,887 | — | 195,196 | ||||||||||||||||
Selling and administrative expenses | — | 92,783 | 63,346 | — | 156,129 | ||||||||||||||||
Income from operations | — | (9,474 | ) | 48,541 | — | 39,067 | |||||||||||||||
Equity earnings (losses) in affiliates (net of tax) | 20,365 | (28,959 | ) | — | 8,594 | — | |||||||||||||||
Interest (expense) income, net | — | 219 | 1,719 | — | 1,938 | ||||||||||||||||
Other income (expense), net | — | 20,969 | (30,171 | ) | — | (9,202 | ) | ||||||||||||||
Income (loss) before income taxes | 20,365 | (17,245 | ) | 20,089 | 8,594 | 31,803 | |||||||||||||||
Provision for income taxes | — | 2,197 | 9,241 | — | 11,438 | ||||||||||||||||
Net (loss) income | $ | 20,365 | $ | (19,442 | ) | $ | 10,848 | $ | 8,594 | $ | 20,365 | ||||||||||
F-48
Table of Contents
Subsidiary | Subsidiary | Combining | |||||||||||||||||||
Issuer | Guarantors | Non-Guarantors | Adjustments | Total | |||||||||||||||||
(In thousands of dollars) | |||||||||||||||||||||
Net sales | $ | — | $ | 592,215 | $ | 439,138 | $ | — | $ | 1,031,353 | |||||||||||
Cost of goods sold | — | 505,643 | 368,259 | — | 873,902 | ||||||||||||||||
Gross Profit | — | 86,572 | 70,879 | — | 157,451 | ||||||||||||||||
Selling and administrative expenses | — | 86,732 | 51,752 | — | 138,484 | ||||||||||||||||
Restructuring charges | — | 3,985 | 1,200 | — | 5,185 | ||||||||||||||||
Income from operations | — | (4,145 | ) | 17,927 | — | 13,782 | |||||||||||||||
Equity earnings (losses) in affiliates (net of tax) | 16,096 | (9,990 | ) | — | (6,106 | ) | — | ||||||||||||||
Interest (expense) income, net | — | (1,413 | ) | 637 | — | (776 | ) | ||||||||||||||
Other income (expense), net | — | 17,390 | (2,390 | ) | — | 15,000 | |||||||||||||||
Income (loss) before income taxes | 16,096 | 1,842 | 16,174 | (6,106 | ) | 28,006 | |||||||||||||||
Provision for income taxes | — | 1,286 | 10,624 | — | 11,910 | ||||||||||||||||
Net (loss) income | $ | 16,096 | $ | 556 | $ | 5,550 | $ | (6,106 | ) | $ | 16,096 | ||||||||||
F-49
Table of Contents
Subsidiary | Subsidiary | Consolidating | |||||||||||||||||||
Issuer | Guarantors | Non-Guarantors | Adjustments | Total | |||||||||||||||||
(In thousands of dollars) | |||||||||||||||||||||
ASSETS | |||||||||||||||||||||
Cash and cash equivalents | $ | — | $ | 63,341 | $ | 48,159 | $ | — | $ | 111,500 | |||||||||||
Accounts and notes receivables net | 32,863 | 99,831 | 132,785 | — | 265,479 | ||||||||||||||||
Inventories, net (excluding advance payments) | — | 112,984 | 62,889 | — | 175,873 | ||||||||||||||||
Prepaid expenses and deferred income taxes | — | 4,222 | 17,479 | — | 21,701 | ||||||||||||||||
Total Current Assets | 32,863 | 280,378 | 261,312 | — | 574,553 | ||||||||||||||||
Investment in affiliates | 919,711 | 43,720 | — | (963,431 | ) | — | |||||||||||||||
Property, plant and equipment, net | — | 158,342 | 68,422 | — | 226,764 | ||||||||||||||||
Intangible assets, net | — | 532,843 | 370,074 | — | 902,917 | ||||||||||||||||
Other Assets | 23,560 | 19,676 | 3,604 | — | 46,840 | ||||||||||||||||
Total Assets | $ | 976,134 | $ | 1,034,959 | $ | 703,412 | $ | (963,431 | ) | $ | 1,751,074 | ||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||||||||||||
Accounts payable and accruals | $ | 7,015 | $ | 105,437 | $ | 210,461 | $ | — | $ | 322,913 | |||||||||||
Loans payable | 2,800 | — | 3,949 | — | 6,749 | ||||||||||||||||
Total current liabilities | 9,815 | 105,437 | 214,410 | — | 329,662 | ||||||||||||||||
Long-term debt | 696,500 | — | 120,164 | — | 816,664 | ||||||||||||||||
Intercompany accounts | (183,078 | ) | 45,090 | 137,988 | — | — | |||||||||||||||
Other noncurrent liabilities | — | 95,229 | 56,622 | — | 151,851 | ||||||||||||||||
Total liabilities | 523,237 | 245,756 | 529,184 | — | 1,298,177 | ||||||||||||||||
Common Stock | 542 | — | — | — | 542 | ||||||||||||||||
Other stockholders’ equity | 452,355 | 789,203 | 174,228 | (963,431 | ) | 452,355 | |||||||||||||||
Total stockholders’ equity | 452,897 | 789,203 | 174,228 | (963,431 | ) | 452,897 | |||||||||||||||
Total liabilities and stockholders’ equity | $ | 976,134 | $ | 1,034,959 | $ | 703,412 | $ | (963,431 | ) | $ | 1,751,074 | ||||||||||
F-50
Table of Contents
Subsidiary | Subsidiary | Combining | |||||||||||||||||||
Issuer | Guarantors | Non-Guarantors | Adjustments | Total | |||||||||||||||||
(In thousands of dollars) | |||||||||||||||||||||
ASSETS | |||||||||||||||||||||
Cash and cash equivalents | $ | — | $ | (156 | ) | $ | 41,693 | $ | — | $ | 41,537 | ||||||||||
Marketable securities | — | 1,037 | — | — | 1,037 | ||||||||||||||||
Accounts and notes receivables net | — | 95,834 | 146,187 | — | 242,021 | ||||||||||||||||
Inventories, net (excluding advance payments) | — | 93,811 | 39,614 | — | 133,425 | ||||||||||||||||
Prepaids expenses and deferred income taxes | — | 3,348 | 22,815 | — | 26,163 | ||||||||||||||||
Accounts and notes receivable affiliates | — | 203,415 | 225,415 | (200,643 | ) | 228,187 | |||||||||||||||
Total Current Assets | — | 397,289 | 475,724 | (200,643 | ) | 672,370 | |||||||||||||||
Investment in affiliates | 565,035 | (39,104 | ) | — | (525,931 | ) | — | ||||||||||||||
Property, plant and equipment, net | — | 75,627 | 25,811 | — | 101,438 | ||||||||||||||||
Intangible assets, net | — | 267,724 | (3,098 | ) | — | 264,626 | |||||||||||||||
Other Assets | — | 9,307 | 16,134 | — | 25,441 | ||||||||||||||||
Total Assets | $ | 565,035 | $ | 710,843 | $ | 514,571 | $ | (726,574 | ) | $ | 1,063,875 | ||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||||||||||||
Accounts payable and accruals | $ | — | $ | 128,012 | $ | 189,599 | $ | — | $ | 317,611 | |||||||||||
Loans payable | — | — | 3,716 | — | 3,716 | ||||||||||||||||
Accounts and notes payable affiliates | — | 73,387 | 142,067 | (200,643 | ) | 14,811 | |||||||||||||||
Total current liabilities | — | 201,399 | 335,382 | (200,643 | ) | 336,138 | |||||||||||||||
Long-term debt | — | — | 213 | — | 213 | ||||||||||||||||
Other noncurrent liabilities | — | 133,554 | 28,935 | — | 162,489 | ||||||||||||||||
Total liabilities | — | 334,953 | 364,530 | (200,643 | ) | 498,840 | |||||||||||||||
Total stockholders’ equity | 565,035 | 375,890 | 150,041 | (525,931 | ) | 565,035 | |||||||||||||||
Total liabilities and stockholders’ equity | $ | 565,035 | $ | 710,843 | $ | 514,571 | $ | (726,574 | ) | $ | 1,063,875 | ||||||||||
F-51
Table of Contents
Subsidiary | Subsidiary | |||||||||||||||||||||
Guarantors | Non-Guarantors | Consolidating | ||||||||||||||||||||
Issuer | Entities | Entities | Adjustments | Total | ||||||||||||||||||
(In thousands of dollars) | ||||||||||||||||||||||
Cash flows from operating activities: | ||||||||||||||||||||||
Net cash provided by (used in) operating activities | $ | (4,422 | ) | $ | 1,639 | $ | 13,202 | $ | 7,529 | $ | 17,948 | |||||||||||
Cash flows from investing activities: | ||||||||||||||||||||||
Capital expenditures | — | (929 | ) | (862 | ) | — | (1,791 | ) | ||||||||||||||
Acquisitions, net of cash | (1,125,148 | ) | — | — | — | (1,125,148 | ) | |||||||||||||||
Net cash provided by (used in) investing activities | (1,125,148 | ) | (929 | ) | (862 | ) | — | (1,126,939 | ) | |||||||||||||
Cash flows From financing activities: | ||||||||||||||||||||||
Net change in debt | 699,300 | — | 114,720 | — | 814,020 | |||||||||||||||||
Change in intercompany accounts | 17,168 | 69,668 | (79,307 | ) | (7,529 | ) | — | |||||||||||||||
Cash paid for debt issuance costs | (24,007 | ) | (6,837 | ) | (2,654 | ) | — | (33,498 | ) | |||||||||||||
Issuance of common units | 437,109 | — | — | — | 437,109 | |||||||||||||||||
Change in due to (from) unconsolidated affiliates | — | (200 | ) | (332 | ) | — | (532 | ) | ||||||||||||||
Net cash provided by (used in) financing activities | 1,129,570 | 62,631 | 32,427 | (7,529 | ) | 1,217,099 | ||||||||||||||||
Effect of exchange rate changes | — | — | 3,392 | — | 3,392 | |||||||||||||||||
Net increase in cash & cash equivalents | — | 63,341 | 48,159 | — | 111,500 | |||||||||||||||||
Cash and cash equivalents, beginning of period | — | — | — | — | — | |||||||||||||||||
Cash and cash equivalents, end of period | $ | — | $ | 63,341 | $ | 48,159 | $ | — | $ | 111,500 | ||||||||||||
F-52
Table of Contents
Subsidiary | Subsidiary | |||||||||||||||||||||
Guarantors | Non-Guarantors | Combining | ||||||||||||||||||||
Issuer | Entities | Entities | Adjustments | Total | ||||||||||||||||||
(In thousands of dollars) | ||||||||||||||||||||||
Cash flows from operating activities: | ||||||||||||||||||||||
Net cash provided by (used in) operating activities | $ | — | $ | 155,340 | $ | (97,611 | ) | $ | — | $ | 57,729 | |||||||||||
Cash flows from investing activities: | ||||||||||||||||||||||
Capital expenditures | — | (4,607 | ) | (3,094 | ) | — | (7,701 | ) | ||||||||||||||
Proceeds from sale of property, plant and equipment | — | 1,764 | (7 | ) | — | 1,757 | ||||||||||||||||
Proceeds from sale of marketable securities | — | 1,037 | — | — | 1,037 | |||||||||||||||||
Net cash provided by (used in) investing activities | — | (1,806 | ) | (3,101 | ) | — | (4,907 | ) | ||||||||||||||
Cash flows from financing activities: | ||||||||||||||||||||||
Net change in debt | — | — | (1,015 | ) | — | (1,015 | ) | |||||||||||||||
Change in due to (from) unconsolidated affiliates | — | (161,320 | ) | 115,402 | — | (45,918 | ) | |||||||||||||||
Dividends paid | — | 10,610 | (15,707 | ) | — | (5,097 | ) | |||||||||||||||
Net cash provided by (used in) financing activities | — | (150,710 | ) | 98,680 | — | (52,030 | ) | |||||||||||||||
Effect of exchange rate changes | — | — | 1,930 | — | 1,930 | |||||||||||||||||
Net increase (decrease) in cash & cash equivalents | — | 2,824 | (102 | ) | — | 2,722 | ||||||||||||||||
Cash and cash equivalents, beginning of period | — | (156 | ) | 41,693 | — | 41,537 | ||||||||||||||||
Cash and cash equivalents, end of period | $ | $ | 2,668 | $ | 41,591 | $ | — | $ | 44,259 | |||||||||||||
F-53
Table of Contents
Subsidiary | Subsidiary | |||||||||||||||||||||
Guarantors | Non-Guarantors | Combining | ||||||||||||||||||||
Issuer | Entities | Entities | Adjustments | Total | ||||||||||||||||||
(In thousands of dollars) | ||||||||||||||||||||||
Cash flows from operating activities: | ||||||||||||||||||||||
Net cash provided by (used in) operating activities | $ | — | $ | 26,630 | $ | 24,333 | $ | — | $ | 50,963 | ||||||||||||
Cash flows from investing activities: | ||||||||||||||||||||||
Capital expenditures | — | (3,216 | ) | (4,374 | ) | — | (7,590 | ) | ||||||||||||||
Proceeds from sale of property, plant and equipment | — | 149 | 411 | — | 560 | |||||||||||||||||
Proceeds from sale of marketable securities | — | (227 | ) | 168 | — | (59 | ) | |||||||||||||||
Net cash provided by (used in) investing activities | — | (3,294 | ) | (3,795 | ) | — | (7,089 | ) | ||||||||||||||
Cash flows from financing activities: | ||||||||||||||||||||||
Net change in debt | — | — | (58 | ) | — | (58 | ) | |||||||||||||||
Change in due to (from) unconsolidated affiliates | — | (28,362 | ) | (35,067 | ) | — | (63,429 | ) | ||||||||||||||
Net cash provided by (used in) financing activities | — | (28,362 | ) | (35,125 | ) | — | (63,487 | ) | ||||||||||||||
Effect of exchange rate changes | — | — | 1,531 | — | 1,531 | |||||||||||||||||
Net increase (decrease) in cash & cash equivalents | — | (5,026 | ) | (13,056 | ) | — | (18,082 | ) | ||||||||||||||
Cash and cash equivalents, beginning of period | — | 4,870 | 54,749 | — | 59,619 | |||||||||||||||||
Cash and cash equivalents, end of period | $ | — | $ | (156 | ) | $ | 41,693 | $ | — | $ | 41,537 | |||||||||||
F-54
Table of Contents
Subsidiary | Subsidiary | |||||||||||||||||||||
Guarantors | Non-Guarantors | Combining | ||||||||||||||||||||
Issuer | Entities | Entities | Adjustments | Total | ||||||||||||||||||
(In thousands of dollars) | ||||||||||||||||||||||
Cash flows from operating activities: | ||||||||||||||||||||||
Net cash provided by (used in) operating activities | $ | — | $ | 11,967 | $ | 30,062 | $ | — | $ | 42,029 | ||||||||||||
Cash flows from investing activities: | ||||||||||||||||||||||
Capital expenditures | — | (9,224 | ) | (4,446 | ) | — | (13,670 | ) | ||||||||||||||
Proceeds from insurance recoveries | — | 10,145 | — | — | 10,145 | |||||||||||||||||
Proceeds from sale of property, plant and equipment | — | 671 | 3,816 | — | 4,487 | |||||||||||||||||
Proceeds from sale of marketable securities | — | 363 | 2,488 | — | 2,851 | |||||||||||||||||
Net cash provided by (used in) investing activities | — | 1,955 | 1,858 | — | 3,813 | |||||||||||||||||
Cash flows from financing activities: | ||||||||||||||||||||||
Net change in debt | — | — | 3,536 | — | 3,536 | |||||||||||||||||
Change in due to (from) unconsolidated affiliates | — | (11,959 | ) | (2,161 | ) | — | (14,120 | ) | ||||||||||||||
Dividends paid | — | — | (8,175 | ) | — | (8,175 | ) | |||||||||||||||
Net cash provided by (used in) financing activities | — | (11,959 | ) | (6,800 | ) | — | (18,759 | ) | ||||||||||||||
Effect of exchange rate changes | — | — | 1,159 | — | 1,159 | |||||||||||||||||
Net increase (decrease) in cash & cash equivalents | — | 1,963 | 26,279 | — | 28,242 | |||||||||||||||||
Cash and cash equivalents, beginning of period | — | 2,907 | 28,470 | — | 31,377 | |||||||||||||||||
Cash and cash equivalents, end of period | $ | — | $ | 4,870 | $ | 54,749 | $ | — | $ | 59,619 | ||||||||||||
F-55
Table of Contents
Successor | Predecessor | |||||||||
Nine Months | Nine Months | |||||||||
Ended | Ended | |||||||||
September 30, | September 30, | |||||||||
2005 | 2004 | |||||||||
(unaudited) | (unaudited) | |||||||||
(In thousands of dollars, except | ||||||||||
per share information) | ||||||||||
Net sales of products to third parties | $ | 683,656 | $ | 506,187 | ||||||
Net sales of services to third parties | 162,581 | 148,354 | ||||||||
Net sales to affiliates | — | 1,639 | ||||||||
Other operating revenue | — | 1,314 | ||||||||
Total | 846,237 | 657,494 | ||||||||
Cost of products sold | 533,685 | 386,024 | ||||||||
Cost of services sold | 124,160 | 112,216 | ||||||||
Cost of products sold to affiliates | — | 968 | ||||||||
Total cost of products and services sold | 657,845 | 499,208 | ||||||||
Gross profit | 188,392 | 158,286 | ||||||||
Selling and administrative expenses | 118,331 | 110,493 | ||||||||
Research and development expenses | 4,745 | 4,695 | ||||||||
Income from operations | 65,316 | 43,098 | ||||||||
Interest (expense) income, net | (44,619 | ) | 2,306 | |||||||
Early redemption premium on debt | (3,688 | ) | — | |||||||
Other expense, net | (1,558 | ) | (2,754 | ) | ||||||
Income before income taxes | 15,451 | 42,650 | ||||||||
Provision for income taxes | 10,560 | 4,918 | ||||||||
Net income | $ | 4,891 | $ | 37,732 | ||||||
Net income per share: | ||||||||||
Basic and diluted | $ | 0.08 | ||||||||
Shares used in computing net income per share: | ||||||||||
Basic and diluted | 60,178,986 | |||||||||
F-56
Table of Contents
September 30, 2005 | December 31, 2004 | |||||||||
(unaudited) | ||||||||||
(In thousands of dollars except per share | ||||||||||
information) | ||||||||||
ASSETS | ||||||||||
Current assets | ||||||||||
Cash and cash equivalents | $ | 109,504 | $ | 111,500 | ||||||
Accounts receivable, less allowance for doubtful accounts of $8,757 in 2005 and $14,569 in 2004 | 225,117 | 265,479 | ||||||||
Inventories, net | 163,371 | 175,873 | ||||||||
Prepaid expenses | 18,842 | 14,256 | ||||||||
Deferred income taxes | 11,817 | 7,445 | ||||||||
Total current assets | 528,651 | 574,553 | ||||||||
Investments in and advances to partially owned companies — at equity | — | 12,448 | ||||||||
Property, plant and equipment, less accumulated depreciation of $21,137 in 2005 and $3,949 in 2004 | 233,598 | 226,764 | ||||||||
Goodwill | 399,286 | 423,330 | ||||||||
Intangible assets, net | 472,279 | 479,587 | ||||||||
Other assets | 26,559 | 34,392 | ||||||||
Total assets | $ | 1,660,373 | $ | 1,751,074 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||
Current liabilities | ||||||||||
Accounts payable and accruals | $ | 297,450 | $ | 271,275 | ||||||
Customer advance payments | 113,988 | 38,661 | ||||||||
Income taxes payable | 5,000 | 12,977 | ||||||||
Loans payable | 63 | 2,734 | ||||||||
Current maturities of long-term debt | — | 4,015 | ||||||||
Total current liabilities | 416,501 | 329,662 | ||||||||
Deferred income taxes | 29,743 | 27,287 | ||||||||
Postemployment and other employee benefit liabilities | 112,537 | 111,640 | ||||||||
Long-term debt | 599,148 | 816,664 | ||||||||
Other noncurrent liabilities | 15,915 | 12,924 | ||||||||
Total liabilities | 1,173,844 | �� | 1,298,177 | |||||||
Commitments and contingencies | ||||||||||
(Notes 7 through 10) | ||||||||||
Shareholders’ Equity | ||||||||||
Common stock, $0.01 par value, 250,000,000 shares authorized in 2005 and 101,200,000 shares in 2004; 85,444,897 shares issued and outstanding | 854 | 542 | ||||||||
Additional paid in capital | 492,226 | 436,642 | ||||||||
Retained earnings | 12,120 | 7,229 | ||||||||
Accumulated other comprehensive (loss) income | (18,671 | ) | 8,484 | |||||||
Total shareholders’ equity | 486,529 | 452,897 | ||||||||
Total liabilities and shareholders’ equity | $ | 1,660,373 | $ | 1,751,074 | ||||||
F-57
Table of Contents
Successor | Predecessor | |||||||||||
Nine Months | Nine Months | |||||||||||
Ended | Ended | |||||||||||
September 30, | September 30, | |||||||||||
2005 | 2004 | |||||||||||
(unaudited) | (unaudited) | |||||||||||
(In thousands of dollars) | ||||||||||||
Cash flows from operating activities | ||||||||||||
Net income | $ | 4,891 | $ | 37,732 | ||||||||
Adjustments to arrive at net cash provided by (used in) operating activities: | ||||||||||||
Depreciation and amortization | 48,045 | 20,284 | ||||||||||
Amortization of deferred financing costs | 8,627 | — | ||||||||||
Adjustment to allowance for doubtful accounts | (1,373 | ) | 3,181 | |||||||||
Provision for estimated losses on inventory | 2,743 | 5,209 | ||||||||||
Deferred income taxes | (2,459 | ) | 5,404 | |||||||||
Employee equity compensation | 3,237 | — | ||||||||||
Other | (3,323 | ) | 1,098 | |||||||||
(Increase) decrease in: | ||||||||||||
Accounts receivable | 48,362 | 48,624 | ||||||||||
Inventories | 13,003 | (23,209 | ) | |||||||||
Other current and noncurrent assets | (9,965 | ) | (14,046 | ) | ||||||||
Increase (decrease) in: | ||||||||||||
Accounts payable and accruals | 8,372 | (19,545 | ) | |||||||||
Customer advance payments | 75,838 | 18,604 | ||||||||||
Other current and noncurrent liabilities | 26,386 | (18,852 | ) | |||||||||
Net cash provided by operating activities | 222,384 | 64,484 | ||||||||||
Cash flows from investing activities | ||||||||||||
Capital expenditures | (10,747 | ) | (4,532 | ) | ||||||||
Acquisitions | (57,218 | ) | — | |||||||||
Proceeds from sale of equity investment | 10,000 | — | ||||||||||
Proceeds from sales of property, plant and equipment | 244 | 1,723 | ||||||||||
Proceeds from sale of marketable securities | — | 1,037 | ||||||||||
Net cash provided by (used in) investing activities | (57,721 | ) | (1,772 | ) | ||||||||
Cash flows from financing activities | ||||||||||||
Payments of short-term borrowings | (2,638 | ) | (991 | ) | ||||||||
Payments of long term debt | (211,162 | ) | (21 | ) | ||||||||
Proceeds from initial public offering — net | 608,925 | — | ||||||||||
Cash dividend paid | (557,686 | ) | — | |||||||||
Proceeds from sale of stock to employees | 1,420 | — | ||||||||||
Changes in receivable from IR | — | (49,760 | ) | |||||||||
Net cash used in financing activities | (161,141 | ) | (50,772 | ) | ||||||||
Effect of exchange rate changes on cash | (5,518 | ) | (203 | ) | ||||||||
Net increase (decrease) in cash and cash equivalents | (1,996 | ) | 11,737 | |||||||||
Cash and cash equivalents, beginning of the period | 111,500 | 41,537 | ||||||||||
Cash and cash equivalents, end of period | $ | 109,504 | $ | 53,274 | ||||||||
F-58
Table of Contents
1. | Basis of Presentation |
2. | Recently Issued Accounting Standards |
F-59
Table of Contents
3. | Inventories |
September 30, | December 31, | |||||||||
2005 | 2004 | |||||||||
(unaudited) | (audited) | |||||||||
(In thousands) | ||||||||||
Raw materials and supplies | $ | 80,970 | $ | 60,728 | ||||||
Work-in-process and finished goods | 289,669 | 209,247 | ||||||||
370,639 | 269,975 | |||||||||
Less: | ||||||||||
Progress payments | (207,268 | ) | (94,102 | ) | ||||||
Inventories | $ | 163,371 | $ | 175,873 | ||||||
4. | Sale of common stock |
5. | Acquisitions |
F-60
Table of Contents
Accounts receivable | $ | 13,458 | ||
Inventory — net | 7,690 | |||
Prepaid expenses and other current assets | 208 | |||
Total current assets | 21,356 | |||
Property, plant and equipment, net | 20,319 | |||
Intangible assets and goodwill | 28,414 | |||
Total assets acquired | 70,089 | |||
Accounts payable and accruals | 10,570 | |||
Other liabilities | 2,501 | |||
Total liabilities assumed | 13,071 | |||
Cash paid — net | $ | 57,018 | ||
6. | Intangible assets and goodwill |
September 30, 2005 | December 31, 2004 | |||||||||||||||
Accumulated | Accumulated | |||||||||||||||
Cost | Amortization | Cost | Amortization | |||||||||||||
(unaudited) | ||||||||||||||||
(In thousands) | ||||||||||||||||
Trade names | $ | 89,692 | $ | 1,903 | $ | 82,700 | $ | 344 | ||||||||
Customer relationships | 232,648 | 5,216 | 227,746 | 936 | ||||||||||||
Software and technology | 158,765 | 7,281 | 149,653 | 1,304 | ||||||||||||
Other amortizable intangible assets | 33,640 | 28,066 | 31,828 | 9,756 | ||||||||||||
Total | $ | 514,745 | $ | 42,466 | $ | 491,927 | $ | 12,340 | ||||||||
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Table of Contents
Balance at December 31, 2004 | $ | 423,330 | ||
TES acquisition | 5,120 | |||
Translation adjustments | (29,164 | ) | ||
Balance at September 30, 2005 | $ | 399,286 | ||
7. | Income taxes |
F-62
Table of Contents
8. | Pension plans |
Successor | Predecessor | ||||||||
Nine Months Ended | Nine Months Ended | ||||||||
September 30, 2005 | September 30, 2004 | ||||||||
(In thousands) | |||||||||
Service cost | $ | 3,862 | $ | 3,757 | |||||
Interest cost | 12,891 | 15,250 | |||||||
Expected return on plan assets | (14,575 | ) | (19,126 | ) | |||||
Net amortization of unrecognized: | |||||||||
Prior service cost | — | 408 | |||||||
Plan net losses | — | 2,991 | |||||||
Net periodic pension cost | $ | 2,178 | $ | 3,280 | |||||
9. | Postretirement benefits other than pensions |
Successor | Predecessor | ||||||||
Nine Months Ended | Nine Months Ended | ||||||||
September 30, 2005 | September 30, 2004 | ||||||||
(In thousands) | |||||||||
Service cost | $ | 1,498 | $ | 1,444 | |||||
Interest cost | 2,052 | 8,411 | |||||||
Net amortization of unrecognized: | |||||||||
Prior service cost | — | (775 | ) | ||||||
Plan net losses | — | 2,692 | |||||||
Net periodic postretirement benefits cost | $ | 3,550 | $ | 11,772 | |||||
10. | Commitments and contingencies |
F-63
Table of Contents
11. | Warranty accruals |
F-64
Table of Contents
Nine Months Ended | |||||||||
Successor | Predecessor | ||||||||
(In thousands) | September 30, | September 30, | |||||||
2005 | 2004 | ||||||||
Balance, beginning of period | $ | 21,078 | $ | 23,699 | |||||
Provisions for warranties issued during the period | 9,350 | 6,599 | |||||||
Adjustments to warranties issued in prior periods | 1,436 | (426 | ) | ||||||
Payments during the period | (9,379 | ) | (10,850 | ) | |||||
Translation adjustments | (1,266 | ) | 960 | ||||||
Balance, end of period | $ | 21,219 | $ | 19,982 | |||||
12. | Other comprehensive (loss) income |
Nine Months | Nine Months | ||||||||
Ended | Ended | ||||||||
September 30, 2005 | September 30, 2004 | ||||||||
(In thousands) | |||||||||
Net (loss) income | $ | 4,891 | $ | 37,732 | |||||
Other comprehensive (loss) income: | |||||||||
Change in value of cash flow hedge | — | 171 | |||||||
Foreign currency translation adjustment | (27,155 | ) | 4,394 | ||||||
Comprehensive (loss) income | $ | (22,264 | ) | $ | 42,297 | ||||
September 30, | December 31, | |||||||
2005 | 2004 | |||||||
(unaudited) | ||||||||
(In thousands) | ||||||||
Minimum pension liability | $ | (922 | ) | $ | (922 | ) | ||
Foreign currency translation adjustment | (17,749 | ) | 9,406 | |||||
Accumulated other comprehensive (loss) income | $ | (18,671 | ) | $ | 8,484 | |||
13. | Segment information: |
1) | New Units are highly engineered solutions to new customer requests. The segment includes engineering, manufacturing, sales and administrative support. | |
2) | Aftermarket Parts and Services consist of aftermarket support solutions for the existing population of installed equipment. The segment includes engineering, manufacturing, sales and administrative support. |
F-65
Table of Contents
Successor | Predecessor | |||||||||
Nine Months | Nine Months | |||||||||
Ended | Ended | |||||||||
September 30, 2005 | September 30, 2004 | |||||||||
(In thousands) | ||||||||||
Sales | ||||||||||
New units | $ | 399,044 | $ | 256,590 | ||||||
Aftermarket parts and services | 447,193 | 400,904 | ||||||||
Total | $ | 846,237 | $ | 657,494 | ||||||
Operating Income | ||||||||||
New units | $ | 4,713 | $ | 2,007 | ||||||
Aftermarket parts and services | 93,197 | 72,858 | ||||||||
Unallocable | (32,594 | ) | (31,767 | ) | ||||||
Total | $ | 65,316 | $ | 43,098 | ||||||
Depreciation and Amortization | ||||||||||
New units | $ | 22,499 | $ | 8,438 | ||||||
Aftermarket parts and services | 25,546 | 11,846 | ||||||||
Total | $ | 48,045 | $ | 20,284 | ||||||
Total Assets | ||||||||||
New units | $ | 249,075 | ||||||||
Aftermarket parts and services | 529,025 | |||||||||
Unallocable | 882,273 | |||||||||
Total | $ | 1,660,373 | ||||||||
14. | Stockholders’ equity: |
Accumulated | ||||||||||||||||||||
Additional | Other | |||||||||||||||||||
Common | Paid-In | Retained | Comprehensive | |||||||||||||||||
(In thousands) | Stock | Capital | Earnings | (Loss) | Total | |||||||||||||||
Balances at December 31, 2004 | $ | 542 | $ | 436,642 | $ | 7,229 | $ | 8,484 | $ | 452,897 | ||||||||||
Net income | — | — | 4,891 | — | 4,891 | |||||||||||||||
Stock-based employee compensation | 2 | 4,655 | — | — | 4,657 | |||||||||||||||
Currency translation | — | — | — | (27,155 | ) | (27,155 | ) | |||||||||||||
IPO net proceeds | 310 | 608,615 | — | — | 608,925 | |||||||||||||||
Cash dividends | — | (557,686 | ) | — | — | (557,686 | ) | |||||||||||||
Balances at September 30, 2005 | $ | 854 | $ | 492,226 | $ | 12,120 | $ | (18,671 | ) | $ | 486,529 | |||||||||
F-66
Table of Contents
15. | Changes in existing financing arrangements: |
16. | Supplemental guarantor financial information: |
F-67
Table of Contents
Subsidiary | Subsidiary | Consolidating | |||||||||||||||||||
Issuer | Guarantors | Non-Guarantors | Adjustments | Total | |||||||||||||||||
(In thousands of dollars) | |||||||||||||||||||||
ASSETS | |||||||||||||||||||||
Cash and cash equivalents | $ | $ | 42,577 | $ | 66,927 | $ | — | $ | 109,504 | ||||||||||||
Accounts and notes receivables net | 2,405 | 100,437 | 122,275 | — | 225,117 | ||||||||||||||||
Inventories, net (excluding advance payments) | 114,794 | 48,577 | — | 163,371 | |||||||||||||||||
Prepaid expenses and deferred income taxes | 14 | 4,421 | 26,224 | — | 30,659 | ||||||||||||||||
Total Current Assets | 2,419 | 262,229 | 264,003 | 528,651 | |||||||||||||||||
Investment in affiliates | 1,010,710 | 48,456 | — | (1,059,166 | ) | — | |||||||||||||||
Property, plant and equipment, net | 170,915 | 62,683 | — | 233,598 | |||||||||||||||||
Intangible assets, net | 530,872 | 340,693 | — | 871,565 | |||||||||||||||||
Other Assets | 17,599 | 5,835 | 3,125 | — | 26,559 | ||||||||||||||||
Total Assets | $ | 1,030,728 | $ | 1,018,307 | $ | 670,504 | $ | (1,059,166 | ) | $ | 1,660,373 | ||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||||||||||||
Accounts payable and accruals | $ | 14,807 | $ | 161,159 | $ | 240,472 | $ | — | $ | 416,438 | |||||||||||
Loans payable | — | — | 63 | — | 63 | ||||||||||||||||
Total current liabilities | 14,807 | 161,159 | 240,535 | — | 416,501 | ||||||||||||||||
Long-term debt | 532,158 | 1 | 66,989 | — | 599,148 | ||||||||||||||||
Intercompany accounts | (2,766 | ) | (128,568 | ) | 131,334 | — | — | ||||||||||||||
Other noncurrent liabilities | — | 107,378 | 50,817 | — | 158,195 | ||||||||||||||||
Total liabilities | 544,199 | 139,970 | 489,675 | — | 1,173,844 | ||||||||||||||||
Common Stock | 854 | — | — | — | 854 | ||||||||||||||||
Other stockholders’ equity | 485,675 | 878,337 | 180,829 | (1,059,166 | ) | 485,675 | |||||||||||||||
Total stockholders’ equity | 486,529 | 878,337 | 180,829 | (1,059,166 | ) | 486,529 | |||||||||||||||
Total liabilities and stockholders’ equity | $ | 1,030,728 | $ | 1,018,307 | $ | 670,504 | $ | (1,059,166 | ) | $ | 1,660,373 | ||||||||||
F-68
Table of Contents
Subsidiary | Subsidiary | Consolidating | |||||||||||||||||||
Issuer | Guarantors | Non-Guarantors | Adjustments | Total | |||||||||||||||||
(In thousands of dollars) | |||||||||||||||||||||
ASSETS | |||||||||||||||||||||
Cash and cash equivalents | $ | — | $ | 63,341 | $ | 48,159 | $ | — | $ | 111,500 | |||||||||||
Accounts and notes receivables net | 32,863 | 99,831 | 132,785 | — | 265,479 | ||||||||||||||||
Inventories, net (excluding advance payments) | — | 112,984 | 62,889 | — | 175,873 | ||||||||||||||||
Prepaid expenses and deferred income taxes | — | 4,222 | 17,479 | — | 21,701 | ||||||||||||||||
Total Current Assets | 32,863 | 280,378 | 261,312 | — | 574,553 | ||||||||||||||||
Investment in affiliates | 919,711 | 43,720 | — | (963,431 | ) | — | |||||||||||||||
Property, plant and equipment, net | — | 158,342 | 68,422 | — | 226,764 | ||||||||||||||||
Intangible assets, net | — | 532,843 | 370,074 | — | 902,917 | ||||||||||||||||
Other Assets | 23,560 | 19,676 | 3,604 | — | 46,840 | ||||||||||||||||
Total Assets | $ | 976,134 | $ | 1,034,959 | $ | 703,412 | $ | (963,431 | ) | $ | 1,751,074 | ||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||||||||||||
Accounts payable and accruals | $ | 7,015 | $ | 105,437 | $ | 210,461 | $ | — | $ | 322,913 | |||||||||||
Loans payable | 2,800 | — | 3,949 | — | 6,749 | ||||||||||||||||
Total current liabilities | 9,815 | 105,437 | 214,410 | — | 329,662 | ||||||||||||||||
Long-term debt | 696,500 | — | 120,164 | — | 816,664 | ||||||||||||||||
Intercompany accounts | (183,078 | ) | 45,090 | 137,988 | — | — | |||||||||||||||
Other noncurrent liabilities | — | 95,229 | 56,622 | — | 151,851 | ||||||||||||||||
Total liabilities | 523,237 | 245,756 | 529,184 | — | 1,298,177 | ||||||||||||||||
Common Stock | 542 | — | — | — | 542 | ||||||||||||||||
Other stockholders’ equity | 452,355 | 789,203 | 174,228 | (963,431 | ) | 452,355 | |||||||||||||||
Total stockholders’ equity | 452,897 | 789,203 | 174,228 | (963,431 | ) | 452,897 | |||||||||||||||
Total liabilities and stockholders’ equity | $ | 976,134 | $ | 1,034,959 | $ | 703,412 | $ | (963,431 | ) | $ | 1,751,074 | ||||||||||
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Subsidiary | Subsidiary | Consolidating | |||||||||||||||||||
Issuer | Guarantors | Non-Guarantors | Adjustments | Total | |||||||||||||||||
(In thousands of dollars) | |||||||||||||||||||||
Net sales | $ | $ | 561,105 | $ | 359,288 | $ | (74,156 | ) | $ | 846,237 | |||||||||||
Cost of goods sold | 2,285 | 456,965 | 277,496 | (74,156 | ) | 662,590 | |||||||||||||||
Gross Profit | (2,285 | ) | 104,140 | 81,792 | — | 183,647 | |||||||||||||||
Selling and administrative expenses | 1,035 | 74,887 | 42,409 | — | 118,331 | ||||||||||||||||
Income from operations | (3,320 | ) | 29,253 | 39,383 | — | 65,316 | |||||||||||||||
Equity earnings in affiliates (net of tax) | 47,068 | 5,645 | — | (52,713 | ) | — | |||||||||||||||
Interest(expense) income, net | (40,884 | ) | 376 | (4,111 | ) | — | (44,619 | ) | |||||||||||||
Intercompany interest and fees | 4,365 | (7,364 | ) | 2,999 | — | — | |||||||||||||||
Other income (expense), net | (2,338 | ) | 786 | (3,694 | ) | — | (5,246 | ) | |||||||||||||
Income (loss) before income taxes | 4,891 | 28,696 | 34,577 | (52,713 | ) | 15,451 | |||||||||||||||
Provision for income taxes | — | — | 10,560 | — | 10,560 | ||||||||||||||||
Net (loss) income | $ | 4,891 | $ | 28,696 | $ | 24,017 | $ | (52,713 | ) | $ | 4,891 | ||||||||||
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Subsidiary | Subsidiary | Combining | |||||||||||||||||||
Issuer | Guarantors | Non-Guarantors | Adjustments | Total | |||||||||||||||||
(In thousands of dollars) | |||||||||||||||||||||
Net sales | $ | — | $ | 416,204 | $ | 241,290 | $ | — | $ | 657,494 | |||||||||||
Cost of goods sold | — | 330,352 | 173,551 | — | 503,903 | ||||||||||||||||
Gross Profit | — | 85,852 | 67,739 | — | 153,591 | ||||||||||||||||
Selling and administrative expenses | — | 53,620 | 56,873 | — | 110,493 | ||||||||||||||||
Income from operations | — | 32,232 | 10,866 | — | 43,098 | ||||||||||||||||
Equity earnings in affiliates (net of tax) | 37,732 | (5,124 | ) | — | (32,608 | ) | — | ||||||||||||||
Interest(expense) income, net | 1,107 | 1,199 | 2,306 | ||||||||||||||||||
Other income (expense), net | — | 896 | (3,650 | ) | — | (2,754 | ) | ||||||||||||||
Income (loss) before income taxes | 37,732 | 29,111 | 8,415 | (32,608 | ) | 42,650 | |||||||||||||||
Provision for income taxes | — | 1,096 | 3,822 | — | 4,918 | ||||||||||||||||
Net (loss) income | $ | 37,732 | $ | 28,015 | $ | 4,593 | $ | (32,608 | ) | $ | 37,732 | ||||||||||
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Subsidiary | Subsidiary | |||||||||||||||||||||
Guarantors | Non-Guarantors | Consolidating | ||||||||||||||||||||
Issuer | Entities | Entities | Adjustments | Total | ||||||||||||||||||
(In thousands of dollars) | ||||||||||||||||||||||
Cash flows from operating activities: | ||||||||||||||||||||||
Net cash provided by (used in) operating activities | $ | (4,771 | ) | $ | 142,991 | $ | 86,809 | $ | (2,645 | ) | $ | 222,384 | ||||||||||
Cash flows from investing activities: | ||||||||||||||||||||||
Capital expenditures | — | (7,938 | ) | (2,809 | ) | — | (10,747 | ) | ||||||||||||||
Proceeds from sale of property, plant and equipment | — | 66 | 178 | — | 244 | |||||||||||||||||
Proceeds from sale of equity investment | — | 10,000 | — | — | 10,000 | |||||||||||||||||
Acquisitions, net of cash | (57,018 | ) | (200 | ) | — | — | (57,218 | ) | ||||||||||||||
Net cash provided by (used in) investing activities | (57,018 | ) | 1,928 | (2,631 | ) | — | (57,721 | ) | ||||||||||||||
Cash flows from financing activities: | ||||||||||||||||||||||
Net change in debt | (167,141 | ) | — | (46,659 | ) | — | (213,800 | ) | ||||||||||||||
Change in intercompany accounts | 176,271 | (165,683 | ) | (13,233 | ) | 2,645 | — | |||||||||||||||
Issuance of common units | 1,420 | — | — | — | 1,420 | |||||||||||||||||
Proceeds from initial public offering | 608,925 | — | — | — | 608,925 | |||||||||||||||||
Dividends paid | (557,686 | ) | — | — | — | (557,686 | ) | |||||||||||||||
Net cash provided by (used in) financing activities | 61,789 | (165,683 | ) | (59,892 | ) | 2,645 | (161,141 | ) | ||||||||||||||
Effect of exchange rate changes | — | — | (5,518 | ) | — | (5,518 | ) | |||||||||||||||
Net increase (decrease) in cash & cash equivalents | — | (20,764 | ) | 18,768 | — | (1,996 | ) | |||||||||||||||
Cash and cash equivalents, beginning of period | — | 63,341 | 48,159 | — | 111,500 | |||||||||||||||||
Cash and cash equivalents, end of period | $ | — | $ | 42,577 | $ | 66,927 | $ | — | $ | 109,504 | ||||||||||||
F-72
Table of Contents
Subsidiary | Subsidiary | |||||||||||||||||||||
Guarantors | Non-Guarantors | Combining | ||||||||||||||||||||
Issuer | Entities | Entities | Adjustments | Total | ||||||||||||||||||
(In thousands of dollars) | ||||||||||||||||||||||
Cash flows from operating activities: | ||||||||||||||||||||||
Net cash provided by (used in) operating activities | $ | — | $ | 68,924 | $ | (4,440 | ) | $ | — | $ | 64,484 | |||||||||||
Cash flows from investing activities: | ||||||||||||||||||||||
Capital expenditures | — | (2,053 | ) | (2,479 | ) | — | (4,532 | ) | ||||||||||||||
Proceeds from sale of property, plant and equipment | — | 1,732 | (9 | ) | — | 1,723 | ||||||||||||||||
Proceeds from sale of marketable securities | — | 1,037 | — | — | 1,037 | |||||||||||||||||
Net cash provided by (used in) investing activities | — | 716 | (2,488 | ) | — | (1,772 | ) | |||||||||||||||
Cash flows from financing activities: | ||||||||||||||||||||||
Net change in debt | — | — | (1,012 | ) | — | (1,012 | ) | |||||||||||||||
Change in due to (from) unconsolidated affiliates | — | (66,516 | ) | 16,756 | — | (49,760 | ) | |||||||||||||||
Net cash provided by (used in) financing activities | — | (66,516 | ) | 15,744 | — | (50,772 | ) | |||||||||||||||
Effect of exchange rate changes | — | — | (203 | ) | — | (203 | ) | |||||||||||||||
Net increase (decrease) in cash & cash equivalents | — | 3,124 | 8,613 | — | 11,737 | |||||||||||||||||
Cash and cash equivalents, beginning of period | — | (156 | ) | 41,693 | — | 41,537 | ||||||||||||||||
Cash and cash equivalents, end of period | $ | — | $ | 2,968 | $ | 50,306 | $ | — | $ | 53,274 | ||||||||||||
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Table of Contents
Item 20. | Indemnification of Directors and Officers. |
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Item 21. | Exhibits and Financial Statement Schedules. |
3 | .1* | Amended and Restated Certificate of Incorporation of Dresser-Rand Group Inc. | ||
3 | .2* | Amended and Restated By-Laws of Dresser-Rand Group Inc. | ||
3 | .3 | Certificate of Formation of Dresser-Rand LLC | ||
3 | .4 | Amended and Restated Operating Agreement of Dresser-Rand LLC | ||
3 | .5 | Certificate of Formation of Dresser-Rand Power LLC | ||
3 | .6 | Amended and Restated Operating Agreement of Dresser-Rand Power LLC | ||
3 | .7 | Business Certificate for Partners of Dresser-Rand Company | ||
3 | .8 | Second Amended and Restated Partnership Agreement of Dresser-Rand Company | ||
3 | .9 | Amended and Restated Certificate of Formation of Dresser-Rand Global Services, L.L.C. | ||
3 | .10 | Amended and Restated Operating Agreement of Dresser-Rand Global Services, L.L.C. | ||
3 | .11 | Certificate of Formation of D-R Steam LLC | ||
3 | .12 | Limited Liability Company Agreement of D-R Steam LLC | ||
4 | .1* | Indenture dated as of October 29, 2004 among Dresser-Rand Group Inc., the guarantors party thereto and Citibank, N.A., as trustee | ||
4 | .2 | First Supplemental Indenture, dated as of December 22, 2005 among Dresser-Rand Group Inc., the guarantors party thereto and Citibank, N.A., as trustee | ||
4 | .3* | Registration Rights Agreement, dated as of October 29, 2004, among Dresser-Rand Group Inc., Dresser-Rand LLC, Dresser-Rand Company, Dresser-Rand Power LLC, Dresser-Rand Global Services, LLC and Morgan Stanley & Co. Incorporated, Citigroup Global Markets Inc., UBS Securities LLC, Bear, Stearns & Co. Inc., Natexis Bleichroeder Inc., Sovereign Securities Corporation, LLC and Daiwa Securities America Inc. as representatives of the placement agents | ||
5 | .1 | Opinion of Simpson Thacher & Bartlett LLP | ||
10 | .1* | Equity Purchase Agreement, dated as of August 25, 2004, by and among FRC Acquisition LLC and Ingersoll-Rand Company Limited | ||
10 | .2* | Credit Agreement dated as of October 29, 2004, among D-R Interholding, LLC, Dresser-Rand Group Inc., D-R Holdings (UK) LTD, D-R Holdings S.A.S., the lenders party thereto, Citicorp North America, Inc. as administrative agent and collateral agent, Morgan Stanley Senior Funding, Inc. and UBS Securities LLC, each as co-syndication agent, Citigroup Global Markets Inc., Morgan Stanley Senior Fundings, Inc. and UBS Securities LLC, as joint lead arrangers and joint book managers and Bear Stearns Corporate Lending Inc. and Natexis Banques Populaires as co-documentation agents | ||
10 | .3* | Amendment No. 1 and Consent to the Credit Agreement, dated as of January 4, 2005, among D-R Interholding, LLC, Dresser-Rand Group Inc., D-R Holdings (UK) Limited, D-R Holdings (France) S.A.S. and the lenders party thereto | ||
10 | .4* | Form of Amendment No. 2 and Consent to the Credit Agreement and Amendment No. 1 to the Domestic Guarantee and Collateral Agreement among D-R Interholding, LLC, Dresser Rand Group Inc., D-R Holdings (UK) Limited, D-R Holdings (France) S.A.S. and the lenders party thereto | ||
10 | .5** | Commitment Increase Supplement dated as of August 26, 2005, to the Credit Agreement dated as of October 29, 2004, among Dresser-Rand Group Inc., the Foreign Borrowers party thereto from time to time, the lenders party thereto, Citicorp North America, Inc. as administrative agent and collateral agent, Morgan Stanley Senior Funding, Inc. and UBS Securities LLC, each as co-syndication agent, Citigroup Global Markets Inc., Morgan Stanley Senior Fundings, Inc. and UBS Securities LLC, as joint lead arrangers and joint book managers, and Natexis Banques Populaires and Bear Stearns Corporate Lending Inc., as co-documentation agents. | ||
10 | .6* | Domestic Guarantee and Collateral Agreement, dated and effective as of October 29, 2004, among D-R Interholding, LLC, Dresser-Rand Group Inc., the domestic subsidiary loan parties named therein and Citicorp North America, Inc. as collateral agent | ||
10 | .7 | Supplement No. 1 dated as of December 22, 2005, to the Domestic Guarantee and Collateral Agreement dated and effective as of October 29, 2004, among D-R Interholding, LLC, Dresser-Rand Group Inc., the domestic subsidiary loan parties named therein and Citicorp North America, Inc. as collateral agent | ||
10 | .8* | Transition Services Agreement, dated as of October 29, 2004 by and between Ingersoll-Rand Company Limited and Dresser-Rand Group Inc. |
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10 | .9* | Supply Agreement, dated October 31, 2004, by and between Dresser-Rand Company and Ingersoll-Rand Company | ||
10 | .10* | License Agreement, dated as of October 26, 2004, by and between Dresser, Inc. and Dresser-Rand Group Inc. | ||
10 | .11* | License Agreement, dated as of October 29, 2004, by and between Dresser-Rand Company, Dresser-Rand A.S., Ingersoll-Rand Energy Systems Corporation and the Energy Systems Division of Ingersoll-Rand Company | ||
10 | .12* | Amended and Restated Limited Liability Company Agreement of Dresser-Rand Holdings, LLC, effective as of October 29, 2004 | ||
10 | .13* | Amendment to the Amended and Restated Limited Liability Company Agreement of Dresser-Rand Holdings, LLC, effective as of June 24, 2005 | ||
10 | .14* | Employment Agreement, dated October 27, 2004, by and among Vincent R. Volpe, Dresser-Rand Holdings, LLC and Dresser-Rand Group Inc. | ||
10 | .15* | Employment Agreement, dated July 25, 1990, by and between Jean-Francois Chevrier and Dresser-Rand S.A. | ||
10 | .16* | Amended and Restated Stockholder Agreement, effective as of July 15, 2005, by and among Dresser-Rand Group Inc., D-R Interholding, LLC, Dresser-Rand Holdings, LLC and certain management employees, together with any other stockholder who may be made party to this agreement | ||
10 | .17* | Dresser-Rand Group Inc. Stock Incentive Plan | ||
10 | .18* | Dresser-Rand Group Inc. 2005 Stock Incentive Plan | ||
10 | .19* | Dresser-Rand Group Inc. 2005 Directors Stock Incentive Plan | ||
10 | .20* | Form of Subscription Agreement | ||
10 | .21* | Form of Management Stock Subscription Agreement | ||
10 | .22* | Annual Incentive Plan | ||
12 | .1 | Computation of Ratio of Earnings to Fixed Charges | ||
21 | .1 | List of Subsidiaries | ||
23 | .1 | Consent of Simpson Thacher & Bartlett LLP (included as part of its opinion filed as Exhibit 5.1 hereto) | ||
23 | .2 | Consent of PricewaterhouseCoopers LLP | ||
24 | Powers of Attorney (included in signature pages of this Registration Statement) | |||
25 | .1 | Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of Citibank, N.A. Trustee | ||
99 | .1 | Form of Letter of Transmittal | ||
99 | .2 | Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees | ||
99 | .3 | Form of Letter to Clients | ||
99 | .4 | Form of Notice of Guaranteed Delivery |
* | Incorporated by reference to the Registration Statement onForm S-1 of Dresser-Rand Group Inc. (FileNo. 333-124963) |
** | Incorporated by reference to the Quarterly Report onForm 10-Q ofDresser-Rand Group Inc. filed with the SEC on November 14, 2005 |
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Table of Contents
Additions | ||||||||||||||||||||
Beginning | Charges to | Charges to | Ending | |||||||||||||||||
Balance at | Costs and | Other | Balance at | |||||||||||||||||
Description | 10/30/2004 | Expenses | Accounts | Deductions | 12/31/2004 | |||||||||||||||
Reserve for Doubtful Accounts | $ | 14,483 | $ | 327 | $ | — | $ | (300 | )(a) | $ | 15,110 |
(a) — | Impact of translation of (420) and write-off of Bad Debts of 120. |
Additions | ||||||||||||||||||||
Beginning | Charges to | Charges to | Ending | |||||||||||||||||
Balance at | Costs and | Other | Balance at | |||||||||||||||||
Description | 01/01/2004 | Expenses | Accounts | Deductions | 10/29/2004 | |||||||||||||||
Reserve for Doubtful Accounts | $ | 12,427 | $ | 3,139 | $ | — | $ | 1,083 | (a) | $ | 14,483 |
(a) — | Impact of translation of (175) and write-off of Bad Debts of 1,258. |
Additions | ||||||||||||||||||||
Beginning | Charges to | Charges to | Ending | |||||||||||||||||
Balance at | Costs and | Other | Balance at | |||||||||||||||||
Description | 01/01/2003 | Expenses | Accounts | Deductions | 12/31/2003 | |||||||||||||||
Reserve for Doubtful Accounts | $ | 9,790 | $ | 3,001 | $ | — | $ | 364 | (a) | $ | 12,427 |
(a) — | Impact of translation of (787) and write-off of Bad Debts of 1,151. |
Additions | ||||||||||||||||||||
Beginning | Charges to | Charges to | Ending | |||||||||||||||||
Balance at | Costs and | Other | Balance at | |||||||||||||||||
Description | 01/01/2002 | Expenses | Accounts | Deductions | 12/31/2002 | |||||||||||||||
Reserve for Doubtful Accounts | $ | 7,865 | $ | 2,473 | $ | — | $ | 548 | (a) | $ | 9,790 |
(a) — | Impact of translation of (300) and write-off of Bad Debts of 848. |
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Table of Contents
Item 22. | Undertakings. |
(1) to file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: |
(i) to include any prospectus required by Section 10(a)(3) of the Securities Act; | |
(ii) to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amend) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more that a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and | |
(iii) to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; |
(2) that, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; and | |
(3) to remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. |
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Table of Contents
Dresser-Rand Group Inc. |
By: | /s/Vincent R. Volpe Jr. |
Name: Vincent R. Volpe Jr. |
Title: | President, Chief Executive Officer and Director |
Signature | Title | Date | ||||
/s/Vincent R. Volpe Jr. Vincent R. Volpe Jr. | President, Chief Executive Officer and Director | January 23, 2006 | ||||
/s/Leonard M. Anthony Leonard M. Anthony | Executive Vice President and Chief Financial Officer | January 23, 2006 | ||||
/s/Lonnie A. Arnett Lonnie A. Arnett | Vice President, Controller and Chief Accounting Officer | January 23, 2006 | ||||
/s/William E. Macaulay William E. Macaulay | Chairman of the Board of Directors | January 23, 2006 | ||||
/s/Thomas J. Sikorski Thomas J. Sikorski | Director | January 23, 2006 | ||||
/s/Mark A. McComiskey Mark A. McComiskey | Director | January 23, 2006 | ||||
/s/Kenneth W. Moore Kenneth W. Moore | Director | January 23, 2006 |
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Table of Contents
Signature | Title | Date | ||||
/s/Michael L. Underwood Michael L. Underwood | Director | January 23, 2006 | ||||
/s/Louis A. Raspino Louis A. Raspino | Director | January 23, 2006 | ||||
/s/Philip R. Roth Philip R. Roth | Director | January 23, 2006 |
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Table of Contents
Dresser-Rand LLC | |
By: Dresser-Rand Group Inc., its sole member |
By: | /s/Vincent R. Volpe Jr. |
Name: Vincent R. Volpe Jr. |
Title: | President, Chief Executive Officer and Director |
Signature | Title | Date | ||||
/s/Vincent R. Volpe Jr. Vincent R. Volpe Jr. | President (Principal Executive Officer) of Dresser-Rand LLC and President, Chief Executive Officer and Director of the sole member | January 23, 2006 | ||||
/s/Stephen A. Riordan Stephen A. Riordan | Treasurer (Principal Financial Officer and Principal Accounting Officer) | January 23, 2006 | ||||
/s/Elizabeth C. Powers Elizabeth C. Powers | Secretary | January 23, 2006 |
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Table of Contents
Signature | Title | Date | ||||
/s/William E. Macaulay William E. Macaulay | Chairman of the Board of Directors of the sole member | January 23, 2006 | ||||
/s/Thomas J. Sikorski Thomas J. Sikorski | Director of the sole member | January 23, 2006 | ||||
/s/Mark A. McComiskey Mark A. McComiskey | Director of the sole member | January 23, 2006 | ||||
/s/Kenneth W. Moore Kenneth W. Moore | Director of the sole member | January 23, 2006 | ||||
/s/Michael L. Underwood Michael L. Underwood | Director of the sole member | January 23, 2006 | ||||
/s/Louis A. Raspino Louis A. Raspino | Director of the sole member | January 23, 2006 | ||||
/s/Philip R. Roth Philip R. Roth | Director of the sole member | January 23, 2006 |
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Table of Contents
Dresser-Rand Company | |
By: Dresser-Rand Group Inc., its partner |
By: | /s/Vincent R. Volpe Jr. |
Name: Vincent R. Volpe Jr. |
Title: | President, Chief Executive Officer and Director |
By: | Dresser-Rand LLC, its partner |
By: Dresser-Rand Group Inc., its sole member |
By: | /s/Vincent R. Volpe Jr. |
Name: Vincent R. Volpe Jr. |
Title: | President, Chief Executive Officer and Director |
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Table of Contents
Signature | Title | Date | ||||
/s/Vincent R. Volpe Jr. Vincent R. Volpe Jr. | President (Principal Executive Officer) of Dresser-Rand Company and President, Chief Executive Officer and Director of Dresser-Rand Group Inc. | January 23, 2006 | ||||
/s/Stephen A. Riordan Stephen A. Riordan | Treasurer (Principal Financial Officer and Principal Accounting Officer) | January 23, 2006 | ||||
/s/Elizabeth C. Powers Elizabeth C. Powers | Secretary | January 23, 2006 | ||||
/s/William E. Macaulay William E. Macaulay | Chairman of the Board of Directors of Dresser-Rand Group Inc. | January 23, 2006 | ||||
/s/Thomas J. Sikorski Thomas J. Sikorski | Director of Dresser-Rand Group Inc. | January 23, 2006 | ||||
/s/Mark A. McComiskey Mark A. McComiskey | Director of Dresser-Rand Group Inc. | January 23, 2006 | ||||
/s/Kenneth W. Moore Kenneth W. Moore | Director of Dresser-Rand Group Inc. | January 23, 2006 | ||||
/s/Michael L. Underwood Michael L. Underwood | Director of Dresser-Rand Group Inc. | January 23, 2006 | ||||
/s/Louis A. Raspino Louis A. Raspino | Director of Dresser-Rand Group Inc. | January 23, 2006 | ||||
/s/Philip R. Roth Philip R. Roth | Director of Dresser-Rand Group Inc. | January 23, 2006 |
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Table of Contents
Dresser-Rand Power LLC | |
By: Dresser-Rand Group Inc., its sole member |
By: | /s/Vincent R. Volpe Jr. |
Name: Vincent R. Volpe Jr. | |
Title: President, Chief Executive Officer and Director |
Signature | Title | Date | ||||
/s/Bradford W. Dickson Bradford W. Dickson | President (Principal Executive Officer) | January 23, 2006 | ||||
/s/Talbot A. Lancaster Talbot A. Lancaster | Vice President, Treasurer (Principal Financial Officer and Principal Accounting Officer) | January 23, 2006 | ||||
/s/Stephen A. Riordan Stephen A. Riordan | Secretary | January 23, 2006 | ||||
/s/Vincent R. Volpe Jr. Vincent R. Volpe Jr. | President, Chief Executive Officer and Director of the sole member | January 23, 2006 |
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Signature | Title | Date | ||||
/s/William E. Macaulay William E. Macaulay | Chairman of the Board of Directors of the sole member | January 23, 2006 | ||||
/s/Thomas J. Sikorski Thomas J. Sikorski | Director of the sole member | January 23, 2006 | ||||
/s/Mark A. McComiskey Mark A. McComiskey | Director of the sole member | January 23, 2006 | ||||
/s/Kenneth W. Moore Kenneth W. Moore | Director of the sole member | January 23, 2006 | ||||
/s/Michael L. Underwood Michael L. Underwood | Director of the sole member | January 23, 2006 | ||||
/s/Louis A. Raspino Louis A. Raspino | Director of the sole member | January 23, 2006 | ||||
/s/Philip R. Roth Philip R. Roth | Director of the sole member | January 23, 2006 |
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Dresser-Rand Global Services, L.L.C. |
By: | Dresser-Rand Company, its sole member | |
By: | Dresser-Rand Group Inc., its partner | |
By: | /s/Vincent R. Volpe Jr. |
Name: Vincent R. Volpe Jr. | |
Title: President, Chief Executive Officer and Director |
By: | Dresser-Rand LLC, its partner | |
By: | Dresser-Rand Group Inc., its sole member | |
By: | /s/Vincent R. Volpe Jr. |
Name: Vincent R. Volpe Jr. | |
Title: President, Chief Executive Officer and Director |
II-14
Table of Contents
Signature | Title | Date | ||||
/s/Walter J. Nye Walter J. Nye | President (Principal Executive Officer) | January 23, 2006 | ||||
/s/Talbot A. Lancaster Talbot A. Lancaster | Treasurer (Principal Financial Officer and Principal Accounting Officer) | January 23, 2006 | ||||
/s/Stephen A. Riordan Stephen A. Riordan | Secretary | January 23, 2006 | ||||
/s/Vincent R. Volpe Jr. Vincent R. Volpe Jr. | President, Chief Executive Officer and Director of Dresser-Rand Group Inc. | January 23, 2006 | ||||
/s/William E. Macaulay William E. Macaulay | Chairman of the Board of Directors of Dresser-Rand Group Inc. | January 23, 2006 | ||||
/s/Thomas J. Sikorski Thomas J. Sikorski | Director of Dresser-Rand Group Inc. | January 23, 2006 | ||||
/s/Mark A. McComiskey Mark A. McComiskey | Director of Dresser-Rand Group Inc. | January 23, 2006 | ||||
/s/Kenneth W. Moore Kenneth W. Moore | Director of Dresser-Rand Group Inc. | January 23, 2006 | ||||
/s/Michael L. Underwood Michael L. Underwood | Director of Dresser-Rand Group Inc. | January 23, 2006 | ||||
/s/Louis A. Raspino Louis A. Raspino | Director of Dresser-Rand Group Inc. | January 23, 2006 | ||||
/s/Philip R. Roth Philip R. Roth | Director of Dresser-Rand Group Inc. | January 23, 2006 |
II-15
Table of Contents
D-R Steam LLC | |
By: Dresser-Rand Group Inc., its sole member |
By: | /s/Randy D. Rinicella |
Name: Randy D. Rinicella | |
Title: Vice President, General Counsel | |
and Secretary |
Signature | Title | Date | ||||||
/s/Christopher Rossi Christopher Rossi | President (Principal Executive Officer) | January 23, 2006 | ||||||
/s/Elizabeth C. Powers Elizabeth C. Powers | Vice President, Treasurer (Principal Financial Officer and Principal Accounting Officer) | January 23, 2006 | ||||||
/s/Randy D. Rinicella Randy D. Rinicella | Secretary | January 23, 2006 | ||||||
/s/Vincent R. Volpe Jr. Vincent R. Volpe Jr. | President, Chief Executive Officer and Director of the sole member | January 23, 2006 |
II-16
Table of Contents
Signature | Title | Date | ||||||
/s/William E. Macaulay William E. Macaulay | Chairman of the Board of Directors of the sole member | January 23, 2006 | ||||||
/s/Thomas J. Sikorski Thomas J. Sikorski | Director of the sole member | January 23, 2006 | ||||||
/s/Mark A. McComiskey Mark A. McComiskey | Director of the sole member | January 23, 2006 | ||||||
/s/Kenneth W. Moore Kenneth W. Moore | Director of the sole member | January 23, 2006 | ||||||
/s/Michael L. Underwood Michael L. Underwood | Director of the sole member | January 23, 2006 | ||||||
/s/Louis A. Raspino Louis A. Raspino | Director of the sole member | January 23, 2006 | ||||||
/s/Philip R. Roth Philip R. Roth | Director of the sole member | January 23, 2006 |
II-17
Table of Contents
Exhibit No. | Description of Exhibit | |||
3 | .1* | Amended and Restated Certificate of Incorporation of Dresser-Rand Group Inc. | ||
3 | .2* | Amended and Restated By-Laws of Dresser-Rand Group Inc. | ||
3 | .3 | Certificate of Formation of Dresser-Rand LLC | ||
3 | .4 | Amended and Restated Operating Agreement of Dresser-Rand LLC | ||
3 | .5 | Certificate of Formation of Dresser-Rand Power LLC | ||
3 | .6 | Amended and Restated Operating Agreement of Dresser-Rand Power LLC | ||
3 | .7 | Business Certificate for Partners of Dresser-Rand Company | ||
3 | .8 | Second Amended and Restated Partnership Agreement of Dresser-Rand Company | ||
3 | .9 | Amended and Restated Certificate of Formation of Dresser-Rand Global Services, L.L.C. | ||
3 | .10 | Amended and Restated Operating Agreement of Dresser-Rand Global Services, L.L.C. | ||
3 | .11 | Certificate of Formation of D-R Steam LLC | ||
3 | .12 | Limited Liability Company Agreement of D-R Steam LLC | ||
4 | .1* | Indenture dated as of October 29, 2004 among Dresser-Rand Group Inc., the guarantors party thereto and Citibank, N.A., as trustee | ||
4 | .2 | First Supplemental Indenture, dated as of December 22, 2005 among Dresser-Rand Group Inc., the guarantors party thereto and Citibank, N.A., as trustee | ||
4 | .3* | Registration Rights Agreement, dated as of October 29, 2004, among Dresser-Rand Group Inc., Dresser-Rand LLC, Dresser-Rand Company, Dresser-Rand Power LLC, Dresser-Rand Global Services, LLC and Morgan Stanley & Co. Incorporated, Citigroup Global Markets Inc., UBS Securities LLC, Bear, Stearns & Co. Inc., Natexis Bleichroeder Inc., Sovereign Securities Corporation, LLC and Daiwa Securities America Inc. as representatives of the placement agents | ||
5 | .1 | Opinion of Simpson Thacher & Bartlett LLP | ||
10 | .1* | Equity Purchase Agreement, dated as of August 25, 2004, by and among FRC Acquisition LLC and Ingersoll-Rand Company Limited | ||
10 | .2* | Credit Agreement dated as of October 29, 2004, among D-R Interholding, LLC, Dresser-Rand Group Inc., D-R Holdings (UK) LTD, D-R Holdings S.A.S., the lenders party thereto, Citicorp North America, Inc. as administrative agent and collateral agent, Morgan Stanley Senior Funding, Inc. and UBS Securities LLC, each as co-syndication agent, Citigroup Global Markets Inc., Morgan Stanley Senior Fundings, Inc. and UBS Securities LLC, as joint lead arrangers and joint book managers and Bear Stearns Corporate Lending Inc. and Natexis Banques Populaires as co-documentation agents | ||
10 | .3* | Amendment No. 1 and Consent to the Credit Agreement, dated as of January 4, 2005, among D-R Interholding, LLC, Dresser-Rand Group Inc., D-R Holdings (UK) Limited, D-R Holdings (France) S.A.S. and the lenders party thereto | ||
10 | .4* | Form of Amendment No. 2 and Consent to the Credit Agreement and Amendment No. 1 to the Domestic Guarantee and Collateral Agreement among D-R Interholding, LLC, Dresser Rand Group Inc., D-R Holdings (UK) Limited, D-R Holdings (France) S.A.S. and the lenders party thereto | ||
10 | .5** | Commitment Increase Supplement dated as of August 26, 2005, to the Credit Agreement dated as of October 29, 2004, among Dresser-Rand Group Inc., the Foreign Borrowers party thereto from time to time, the lenders party thereto, Citicorp North America, Inc. as administrative agent and collateral agent, Morgan Stanley Senior Funding, Inc. and UBS Securities LLC, each as co-syndication agent, Citigroup Global Markets Inc., Morgan Stanley Senior Fundings, Inc. and UBS Securities LLC, as joint lead arrangers and joint book managers, and Natexis Banques Populaires and Bear Stearns Corporate Lending Inc., as co-documentation agents. | ||
10 | .6* | Domestic Guarantee and Collateral Agreement, dated and effective as of October 29, 2004, among D-R Interholding, LLC, Dresser-Rand Group Inc., the domestic subsidiary loan parties named therein and Citicorp North America, Inc. as collateral agent |
Table of Contents
Exhibit No. | Description of Exhibit | |||
10 | .7 | Supplement No. 1 dated as of December 22, 2005, to the Domestic Guarantee and Collateral Agreement, dated and effective as of October 29, 2004, among D-R Interholding, LLC, Dresser-Rand Group Inc., the domestic subsidiary loan parties named therein and Citicorp North America, Inc. as collateral agent | ||
10 | .8* | Transition Services Agreement, dated as of October 29, 2004 by and between Ingersoll-Rand Company Limited and Dresser-Rand Group Inc. | ||
10 | .9* | Supply Agreement, dated October 31, 2004, by and between Dresser-Rand Company and Ingersoll-Rand Company | ||
10 | .10* | License Agreement, dated as of October 26, 2004, by and between Dresser, Inc. and Dresser-Rand Group Inc. | ||
10 | .11* | License Agreement, dated as of October 29, 2004, by and between Dresser-Rand Company, Dresser-Rand A.S., Ingersoll-Rand Energy Systems Corporation and the Energy Systems Division of Ingersoll-Rand Company | ||
10 | .12* | Amended and Restated Limited Liability Company Agreement of Dresser-Rand Holdings, LLC, effective as of October 29, 2004 | ||
10 | .13* | Amendment to the Amended and Restated Limited Liability Company Agreement of Dresser-Rand Holdings, LLC, effective as of June 24, 2005 | ||
10 | .14* | Employment Agreement, dated October 27, 2004, by and among Vincent R. Volpe, Dresser-Rand Holdings, LLC and Dresser-Rand Group Inc. | ||
10 | .15* | Employment Agreement, dated July 25, 1990, by and between Jean-Francois Chevrier and Dresser-Rand S.A. | ||
10 | .16* | Amended and Restated Stockholder Agreement, effective as of July 15, 2005, by and among Dresser-Rand Group Inc., D-R Interholding, LLC, Dresser-Rand Holdings, LLC and certain management employees, together with any other stockholder who may be made party to this agreement | ||
10 | .17* | Dresser-Rand Group Inc. Stock Incentive Plan | ||
10 | .18* | Dresser-Rand Group Inc. 2005 Stock Incentive Plan | ||
10 | .19* | Dresser-Rand Group Inc. 2005 Directors Stock Incentive Plan | ||
10 | .20* | Form of Subscription Agreement | ||
10 | .21* | Form of Management Stock Subscription Agreement | ||
10 | .22* | Annual Incentive Plan | ||
12 | .1 | Computation of Ratio of Earnings to Fixed Charges | ||
21 | .1 | List of Subsidiaries | ||
23 | .1 | Consent of Simpson Thacher & Bartlett LLP (included as part of its opinion filed as Exhibit 5.1 hereto) | ||
23 | .2 | Consent of PricewaterhouseCoopers LLP | ||
24 | Powers of Attorney (included in signature pages of this Registration Statement) | |||
25 | .1 | Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of Citibank, N.A. Trustee | ||
99 | .1 | Form of Letter of Transmittal | ||
99 | .2 | Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees | ||
99 | .3 | Form of Letter to Clients | ||
99 | .4 | Form of Notice of Guaranteed Delivery |
* | Incorporated by reference to the Registration Statement onForm S-1 of Dresser-Rand Group Inc. (FileNo. 333-124963) |
** | Incorporated by reference to the Quarterly Report onForm 10-Q ofDresser-Rand Group Inc. filed with the SEC on November 14, 2005 |