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UNDER
THE SECURITIES ACT OF 1933
Delaware | 7363 | 57-6218917 | ||
(State or other jurisdiction of incorporation or organization) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification Number) |
Delaware | 7363 | 20-3812051 | ||
(State or other jurisdiction of incorporation or organization) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification Number) |
Stephen C. Mahon Fred A. Summer Squire, Sanders & Dempsey L.L.P. 312 Walnut Street Cincinnati, OH 45202 (513) 361-1200 (513) 361-1201 — Facsimile | Michael P. Reed Alston & Bird LLP The Atlantic Building 950 F Street N.W. Washington, D.C. 20004 (202) 756-3300 (202) 756-3333 — Facsimile |
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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. |
Per Share | Total | |||||||
Public offering price | $ | $ | ||||||
Underwriting discount and commissions | $ | $ | ||||||
Proceeds, before expenses, to us | $ | $ |
Citigroup | Ferris, Baker Watts | |
Incorporated |
A.G. Edwards |
BB&T Capital Markets a division of Scott & Stringfellow, Inc. |
Morgan Keegan & Company, Inc. |
SMH CAPITAL Inc. |
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F-1 | ||||||||
EX-1.1: FORM OF UNDERWRITING AGREEMENT | ||||||||
EX-10.3: REGISTRATION RIGHTS AGREEMENT | ||||||||
EX-10.16: FORM OF SHARE PURCHASE AGREEMENT | ||||||||
EX-23.1: CONSENT OF GRANT THORNTON LLP | ||||||||
EX-23.2: CONSENT OF GRANT THORNTON LLP | ||||||||
EX-23.3: CONSENT OF CLIFTON GUNDERSON LLP |
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• | produce stable cash flows; | |
• | have strong management teams largely in place; | |
• | maintain defensible positions in industries with forecasted long-term macroeconomic growth; and | |
• | face minimal threat of technological or competitive obsolescence. |
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Shares offered by us in this offering. | 8,000,000 shares |
Shares outstanding after this offering and the separate private placement transaction | 30,214,706 shares |
Use of proceeds | We estimate that our net proceeds from the sale of the shares in this offering will be approximately $129.2 million (or approximately $148.6 million if the underwriters’ overallotment option is exercised in full), but without giving effect to the payment of public offering costs of approximately $2.2 million. We intend to use the net proceeds from this offering and the $30 million of proceeds from the separate private placement transaction to repay borrowings under our revolving credit facility and any remaining amounts for general corporate purposes. See the section entitled “Use of Proceeds” for more information about the use of the proceeds of this offering. |
NASDAQ Global Select Market symbol | CODI | |
Dividend and distribution policy | We intend to declare and pay regular quarterly cash distributions on all outstanding shares, based on distributions received by the trust on the trust interests in the company. The declaration and amount of any distributions will be subject to the approval of the company’s board of directors, which will include a majority of independent directors, and will be based on the results of operations of our businesses and the desire to provide sustainable levels of distributions to our shareholders. Any cash distribution paid by the company to the trust will, in turn, be paid by the trust to its shareholders. | |
See the sections entitled “Dividend and Distribution Policy” for a discussion of our intended distribution rate and “Material U.S. Federal Income Tax Considerations” for more information about the tax treatment of distributions by the trust and the company. | ||
Shares of the trust | Each share of the trust represents an undivided beneficial interest in the trust property, and each share of the trust corresponds to one underlying trust interest of the company owned by the trust. Unless the trust is dissolved, it must remain the sole holder of 100% of the trust interests, and at all times the company will have outstanding the identical number of trust interests as the number of outstanding shares of the trust. If the trust is dissolved, each share of the trust will be exchanged for one trust interest in the company. Each outstanding share of the trust is entitled to one vote on any matter with respect to which the trust, as a holder of trust interests in the company, is entitled to vote. The company, as the sponsor of the trust, will provide to our shareholders proxy materials to enable our shareholders to exercise, in proportion to their percentage ownership of outstanding shares, the voting rights of the trust, and the trust will vote its trust interests in the same proportion as the vote of holders of shares. The allocation |
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interests do not grant to our manager voting rights with respect to the company except in certain limited circumstances. | ||
See the section entitled “Description of Shares” for information about the material terms of the shares, the trust interests and allocation interests. | ||
U.S. federal income tax considerations | Subject to the discussion in “Material U.S. Federal Income Tax Considerations,” neither the trust nor the company will incur U.S. federal income tax liability; rather, each holder of trust shares will be required to take into account his or her allocable share of company income, gain, loss, deduction, and other items. The trust is currently seeking approval from the shareholders of record as of April 10, 2007, to authorize the board to amend the trust agreement to provide that the trust be taxed as a partnership. Assuming that approval is granted, the trust will report tax information to the shareholders for the 2007 taxable year and all future taxable years thereafter onSchedule K-1. If that approval is not granted, the trustees intend to dissolve the trust and each shareholder would receive a direct interest in the company in exchange for their shares in the trust. If that occurs, the company will continue to treat the trust as a grantor trust for the initial portion of the 2007 tax year and the trust will report the same tax information as found on theSchedule K-1 to the shareholders on Form 1041. | |
See the section entitled “Material U.S. Federal Income Tax Considerations” for information about the potential U.S. federal income tax consequences of the purchase, ownership and disposition of shares and for a discussion of recent developments concerning treatment of the trust as a grantor trust for federal income tax purposes. | ||
Risk factors | Investing in our shares involves risks. See the section entitled “Risk Factors” and read this prospectus carefully before making an investment decision with the respect to the shares or the company. |
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Fiscal Year Ended December 31, | ||||||||
2006 | 2005 | |||||||
($ in thousands, except per share data) | ||||||||
Statements of Operations Data: | ||||||||
Net sales | $ | 410,873 | $ | — | ||||
Cost of sales | 311,641 | — | ||||||
Gross profit | 99,232 | — | ||||||
Operating expenses: | ||||||||
Staffing | 34,345 | — | ||||||
Selling, general and administrative | 36,732 | 1 | ||||||
Management fee | 4,376 | — | ||||||
Supplemental put expense | 22,456 | — | ||||||
Research and development expense | 1,806 | — | ||||||
Amortization expense | 6,774 | — | ||||||
Operating loss | $ | (7,257 | ) | $ | (1 | ) | ||
Loss from continuing operations | $ | (27,636 | ) | $ | (1 | ) | ||
Income from discontinued operations, net of income tax | $ | 8,387 | $ | |||||
Net loss | $ | (19,249 | ) | $ | (1 | ) | ||
Cash Flow Data: | ||||||||
Cash provided by operating activities | $ | 20,563 | $ | — | ||||
Cash (used in) investing activities | (362,286 | ) | — | |||||
Cash provided by financing activities | 351,073 | 100 | ||||||
Net increase in cash | $ | 9,350 | $ | 100 | ||||
Per Share Data: | ||||||||
Basic and fully diluted loss from continuing operations per share | $ | (2.18 | ) | $ | — | |||
Basic and fully diluted loss per share | $ | (1.52 | ) | $ | — | |||
At December 31, | ||||||||
2006 | 2005 | |||||||
($ in thousands) | ||||||||
Balance Sheet Data: | ||||||||
Total current assets | $ | 140,356 | $ | 3,408 | ||||
Total assets | 525,597 | 3,408 | ||||||
Current liabilities | 162,872 | 3,309 | ||||||
Long-term debt | — | — | ||||||
— | — | |||||||
Total liabilities | 242,755 | 3,309 | ||||||
Minority interests | 27,131 | 100 | ||||||
Shareholders’ equity (deficit) | 255,711 | (1 | ) |
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Year Ended | ||||
December 31, 2006 | ||||
($ in thousands) | ||||
Net loss | $ | (19,249 | ) | |
Adjustment to reconcile net loss to cash provided by operating activities | ||||
Depreciation and amortization | 10,290 | |||
Supplemental put expense | 22,456 | |||
Silvue’s in-process R&D expensed at acquisition date | 1,120 | |||
Advanced Circuit’s loan forgiveness accrual | 2,760 | |||
Minority interest | 2,950 | |||
Deferred taxes | (2,281 | ) | ||
Loss on Ableco debt retirement | 8,275 | |||
Other | (450 | ) | ||
Changes in operating assets and liabilities | (5,308 | ) | ||
Net cash provided by operating activities | 20,563 | |||
Plus: | ||||
Unused fee on delayed term loan(1) | 1,291 | |||
Changes in operating assets and liabilities | 5,308 | |||
Less: | ||||
Maintenance capital expenditures(2) | ||||
CBS Personnel | 209 | |||
Crosman(3) | 1,926 | |||
Advanced Circuits | 392 | |||
Silvue | 304 | |||
Anodyne | 636 | |||
Estimated cash flow available for distribution | $ | 23,695 | (a) | |
Distribution paid July 2006 | $ | (2,587 | ) | |
Distribution paid September 2006 | (5,368 | ) | ||
Distribution paid January 2007 | (6,135 | ) | ||
Total distributions | $ | (14,090 | )(b) | |
Distribution Coverage Ratio(a)¸(b) | 1.7 | x | ||
(1) | Represents the commitment fee on the unused portion of our third-party loans. | |
(2) | Represents maintenance capital expenditures that were funded from operating cash flow and excludes approximately $2.3 million of growth capital expenditures for the period ended December 31, 2006. | |
(3) | Crosman was sold on January 5, 2007 (see Note D to the consolidated financial statements). |
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• | restrictions on the company’s ability to enter into certain transactions with our major shareholders, with the exception of our manager, modeled on the limitation contained in Section 203 of the Delaware General Corporation Law, or DGCL; | |
• | allowing the chairman of the company’s board of directors to fill vacancies on the company’s board of directors until the 2008 annual meeting of shareholders; | |
• | allowing only the company’s board of directors to fill newly created directorships, for those directors who are elected by our shareholders, and allowing only our manager, as holder of the allocation interests, to fill vacancies with respect to the class of directors appointed by our manager; | |
• | requiring that directors elected by our shareholders be removed, with or without cause, by a vote of 85% of our shareholders; | |
• | requiring advance notice for nominations of candidates for election to the company’s board of directors or for proposing matters that can be acted upon by our shareholders at a shareholders’ meeting; | |
• | authorizing a substantial number of additional authorized but unissued shares that may be issued without shareholder action; |
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• | providing the company’s board of directors with certain authority to amend the LLC agreement, subject to certain voting and consent rights of the holders of trust interests and allocation interests, and the trust agreement, subject to certain voting and consent rights of the holders of the trust shares; | |
• | providing for a staggered board of directors of the company, the effect of which could be to deter a proxy contest for control of the company’s board of directors or a hostile takeover; and | |
• | limitations regarding shareholders calling special meetings and acting by written consent. |
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• | our ability to successfully operate our current businesses on a combined basis, and to effectively integrate and improve any future acquisitions; | |
• | our ability to remove our manager and our manager’s right to resign; | |
• | our trust and organizational structure, which may limit our ability to meet our dividend and distribution policy; | |
• | our ability to service and comply with the terms of our indebtedness; | |
• | our cash flow available for distribution after the closing of this offering and our ability to make distributions in the future to our shareholders; | |
• | our ability to pay the management fee, profit allocation and put price when due; | |
• | our ability to make and finance future acquisitions; | |
• | our ability to implement our acquisition and management strategies; | |
• | the regulatory environment in which our businesses operate; | |
• | trends in the industries in which our businesses operate; |
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• | changes in general economic or business conditions or economic or demographic trends in the United States and other countries in which we have a presence, including changes in interest rates and inflation; | |
• | environmental risks affecting the business or operations of our current businesses; | |
• | our and our manager’s ability to retain or replace qualified employees of our current businesses and our manager; | |
• | costs and effects of legal and administrative proceedings, settlements, investigations and claims; and | |
• | extraordinary or force majeure events affecting the business or operations of our current businesses. |
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High | Low | |||||||
2006: | ||||||||
Second Quarter (from May 16, 2006) | $ | 15.10 | $ | 14.27 | ||||
Third Quarter | 15.36 | 13.45 | ||||||
Fourth Quarter | 17.67 | 15.70 | ||||||
2007: | ||||||||
First Quarter | $ | 18.32 | $ | 16.77 | ||||
Second Quarter (through April 19, 2007) | $ | 17.27 | $ | 16.28 |
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• | the operating results of our businesses which are impacted by factors outside of our control including competition, inflation and general economic conditions; | |
• | the ability of our businesses to make distributions to us, which may be subject to limitations under laws of the jurisdictions in which they are incorporated or organized; | |
• | insufficient cash to pay distributions due to increases in our general and administrative expenses, including the quarterly management fee we pay our manager, principal and interest payments on our outstanding debt, tax expenses or working capital requirements; | |
• | the obligation to pay our manager a profit allocation upon the occurrence of a trigger event; | |
• | the obligation to pay our manager the put price pursuant to the supplemental put agreement; |
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• | the company’s board of directors’ election to keep a portion of the operating cash flow in the businesses or to use such funds for the acquisition of new businesses; | |
• | restrictions on distributions under our revolving credit facility which contains financial covenants that we will have to satisfy in order to make quarterly or annual distributions; | |
• | any dividends or distributions paid by our businesses pro rata to the minority shareholders of our businesses, which portion will not be available to us for any purpose, including for the purpose of making distributions to our shareholders; | |
• | possible future issuances of debt or debt-like financing arrangements that are secured by all or substantially all of our assets, or issuing debt or equity securities, which could include issuances of commercial paper, medium-term notes, senior notes, subordinated notes or preferred securities, which obligations will have priority over distributions on the shares; and | |
• | in the future, the company may issue preferred securities and holders of such preferred securities may have a preference with respect to distributions, which could limit our ability to make distributions to our shareholders. |
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As of December 31, 2006 | ||||||||
Actual | As Adjusted | |||||||
($ in thousands) | ||||||||
Cash and cash equivalents | $ | 7,006 | $ | 85,408 | ||||
Current maturities of long-term debt | $ | 87,604 | $ | 2,604 | ||||
Long-term debt, excluding current maturities | — | 502 | ||||||
Total debt | $ | 87,604 | $ | 3,106 | ||||
Stockholders’ equity | ||||||||
Trust shares, no par value; 500,000,000 authorized; 30,214,706 shares issued and outstanding as adjusted for the offering(1) | ||||||||
Total stockholder’s equity | $ | 255,711 | $ | 448,614 | ||||
Total capitalization | $ | 343,315 | $ | 451,720 | ||||
(1) | Each trust share representing one undivided beneficial interest in the trust property. |
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• | the offering and the application of proceeds from this offering and from the separate private placement transaction as further described in the section entitled “Use of Proceeds”; | |
• | the sale of Crosman on January 5, 2007 and the application of the proceeds from this sale to retire third party debt and to provide partial funding for the acquisition of Aeroglide and Halo; and | |
• | the acquisition of approximately 89.0% of Aeroglide and approximately 73.6% of Halo. |
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Pro Forma | ||||||||||||||||||||||||
Compass | Combined | |||||||||||||||||||||||
Diversified | Compass | |||||||||||||||||||||||
Trust | Aeroglide | Halo | Pro Forma | Diversified | ||||||||||||||||||||
(as reported) | Offering* | (as reported) | (as reported) | Adjustments | Trust | |||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||
Current assets: | ||||||||||||||||||||||||
Cash and cash equivalents | $ | 7,006 | $ | 157,000 | $ | 4,539 | $ | 339 | $ | (83,476 | )(1) | $ | 85,408 | |||||||||||
Accounts receivable, net | 74,899 | 11,340 | 22,769 | 109,008 | ||||||||||||||||||||
Inventories | 4,756 | 2,380 | 3,127 | 10,263 | ||||||||||||||||||||
Prepaid expenses and other current assets | 7,059 | 324 | 2,838 | 10,221 | ||||||||||||||||||||
Current assets of discontinued operations | 46,636 | — | — | (46,636 | )(2) | — | ||||||||||||||||||
Total current assets | 140,356 | 157,000 | 18,583 | 29,073 | (130,112 | ) | 214,900 | |||||||||||||||||
Property and equipment, net | 10,858 | 4,443 | 959 | 3,471 | (3) | 19,731 | ||||||||||||||||||
Goodwill | 159,151 | 7,812 | 7,388 | 44,137 | (4) | 218,488 | ||||||||||||||||||
Intangible assets, net | 128,890 | — | — | 57,720 | (5) | 186,610 | ||||||||||||||||||
Deferred debt issuance costs | 5,190 | — | — | 5,190 | ||||||||||||||||||||
Other non-current assets | 15,894 | 1,478 | 1,220 | (2,698 | )(6) | 15,894 | ||||||||||||||||||
Assets of discontinued operations | 65,258 | — | — | (65,258 | )(7) | — | ||||||||||||||||||
Total assets | $ | 525,597 | $ | 157,000 | $ | 32,316 | $ | 38,640 | $ | (92,740 | ) | $ | 660,813 | |||||||||||
Liabilities and stockholders’ equity | ||||||||||||||||||||||||
Current liabilities: | ||||||||||||||||||||||||
Accounts payable and accrued expenses | $ | 52,900 | $ | $ | 17,754 | $ | 18,204 | $ | $ | 88,858 | ||||||||||||||
Deferred income taxes | — | — | 516 | (516 | )(8) | — | ||||||||||||||||||
Due to related party | 469 | — | — | 469 | ||||||||||||||||||||
Current portion of debt | 87,604 | 1,324 | 1,096 | (87,420 | )(9) | 2,604 | ||||||||||||||||||
Current portion of supplemental put obligation | 7,880 | — | — | 7,880 | ||||||||||||||||||||
Current liabilities of discontinued operations | 14,019 | — | — | (14,019 | )(10) | — | ||||||||||||||||||
Total current liabilities | 162,872 | — | 19,078 | 19,816 | (101,955 | ) | 99,811 | |||||||||||||||||
Long-term debt | — | 4,058 | 8,205 | (11,761 | )(11) | 502 | ||||||||||||||||||
Supplemental put obligation | 14,576 | — | — | 14,576 | ||||||||||||||||||||
Long-term deferred income taxes | 41,337 | 71 | 170 | 13,586 | (12) | 55,164 | ||||||||||||||||||
Non-current liabilities of discontinued operations | 6,634 | — | — | (6,634 | )(13) | — | ||||||||||||||||||
Other non-current liabilities | 17,336 | 1,703 | — | (1,703 | )(14) | 17,336 | ||||||||||||||||||
Total liabilities | 242,755 | — | 24,910 | 28,191 | (108,467 | ) | 187,389 | |||||||||||||||||
Minority interest | 27,131 | — | — | (2,321 | )(15) | 24,810 | ||||||||||||||||||
Total stockholders’ equity | 255,711 | 157,000 | 7,406 | 10,449 | 18,048(16 | ) | 448,614 | |||||||||||||||||
Total liabilities and stockholders’ equity | $ | 525,597 | $ | 157,000 | $ | 32,316 | $ | 38,640 | $ | (92,740 | ) | $ | 660,813 | |||||||||||
* | Reflects the issuance of shares and the net proceeds from this offering (after deducting underwriting discounts and commissions of $6,800 and estimated offering expenses of $2,200) and the proceeds from the separate private placement transaction. |
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Pro Forma | ||||||||||||||||||||
Compass | Combined | |||||||||||||||||||
Diversified | Compass | |||||||||||||||||||
Trust | Aeroglide | Halo | Pro Forma | Diversified | ||||||||||||||||
(as reported) | (as reported) | (as reported) | Adjustments | Trust | ||||||||||||||||
(Unaudited) | ||||||||||||||||||||
(in thousands, except | ||||||||||||||||||||
per share data) | ||||||||||||||||||||
Net sales | $ | 410,873 | $ | 48,086 | $ | 115,646 | $ | $ | 574,605 | |||||||||||
Cost of sales | 311,641 | 27,699 | 71,210 | 370 | (2) | 410,920 | ||||||||||||||
Gross profit | 99,232 | 20,387 | 44,436 | (370 | ) | 163,685 | ||||||||||||||
Operating expenses: | ||||||||||||||||||||
Staffing expense | 34,345 | — | — | 34,345 | ||||||||||||||||
Selling, general and administrative expense | 36,732 | 17,334 | 38,321 | 174 | (2) | 92,561 | ||||||||||||||
Supplemental put expense | 22,456 | — | — | 22,456 | ||||||||||||||||
Fees to manager | 4,376 | — | — | 2,364 | (5) | 6,740 | ||||||||||||||
Research and development expense | 1,806 | — | — | 1,806 | ||||||||||||||||
Amortization expense | 6,774 | — | — | 7,129 | (1) | 13,903 | ||||||||||||||
Operating income (loss) | (7,257 | ) | 3,053 | 6,115 | (10,037 | ) | (8,126 | ) | ||||||||||||
Other income (expense): | ||||||||||||||||||||
Interest income | 807 | — | — | 807 | ||||||||||||||||
Interest expense | (6,130 | ) | (594 | ) | (797 | ) | 3,891 | (3) | (3,630 | ) | ||||||||||
Amortization of debt issuance costs | (779 | ) | — | — | (779 | ) | ||||||||||||||
Loss on debt extinguishment | (8,275 | ) | — | — | (8,275 | ) | ||||||||||||||
Other income (expense), net | 541 | 25 | — | 566 | ||||||||||||||||
Income (loss) from continuing operations before provision for income taxes and minority interest | (21,093 | ) | 2,484 | 5,318 | (6,146 | ) | (19,437 | ) | ||||||||||||
Provision for income taxes | 5,298 | 851 | 2,203 | (2,387 | )(4) | 5,965 | ||||||||||||||
Minority interest | 1,245 | — | — | 430 | (6) | 1,675 | ||||||||||||||
Income (loss) from continuing operations | $ | (27,636 | ) | $ | 1,633 | $ | 3,115 | $ | (4,189 | ) | $ | (27,077 | ) | |||||||
Loss from continuing operations per share | $ | (2.18 | ) | $ | (1.21 | ) | ||||||||||||||
Weighted average number of shares outstanding | 12,686 | 22,451 | ||||||||||||||||||
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(Unaudited)
Note 1. | Pro Forma Adjustments |
1. | Cash and cash equivalents | |||||||
Net proceeds from the sale of Crosman after partial application of proceeds to repay borrowings under the revolving credit facility | $ | 34,722 | (a) | |||||
Revolving credit borrowing to partially fund acquisition of Aeroglide and Halo | 94,500 | (b) | ||||||
Use of cash to fund acquisitions of Aeroglide and Halo | (118,198 | )(c) | ||||||
Partial use of the net proceeds from this offering and from the separate private placement transaction to repay outstanding borrowings under the revolving credit facility | (94,500 | )(d) | ||||||
$ | (83,476 | ) | ||||||
2. | Current assets of discontinued operations | |||||||
Sale of Crosman | $ | (46,636 | )(a) | |||||
3. | Property and equipment, net | |||||||
Aeroglide | $ | 2,553 | (e) | |||||
Halo | 918 | (f) | ||||||
$ | 3,471 | |||||||
4. | Goodwill | |||||||
Aeroglide | $ | 20,792 | (e) | |||||
Halo | 23,345 | (f) | ||||||
$ | 44,137 | |||||||
5. | Intangible assets, net | |||||||
Aeroglide | $ | 22,250 | (e) | |||||
Halo | 35,470 | (f) | ||||||
$ | 57,720 | |||||||
6. | Other non-current assets | |||||||
Aeroglide | $ | (1,478 | )(e) | |||||
Halo | (1,220 | )(f) | ||||||
$ | (2,698 | ) | ||||||
7. | Assets of discontinued operations | |||||||
Sale of Crosman | $ | (65,258 | )(a) | |||||
8. | Deferred income taxes | |||||||
Halo | $ | (516 | )(f) | |||||
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9. | Current portion of debt | |||||||
Sale of Crosman | $ | (85,000 | )(a) | |||||
Aeroglide | (1,324 | )(e) | ||||||
Halo | (1,096 | )(f) | ||||||
$ | (87,420 | ) | ||||||
10. | Current liabilities of discontinued operations | |||||||
Sale of Crosman | $ | (14,019 | )(a) | |||||
11. | Long-term debt | |||||||
Compass Diversified Trust | $ | 94,500 | (b) | |||||
Compass Diversified Trust | (94,500 | )(d) | ||||||
Aeroglide | (4,058 | )(e) | ||||||
Halo | (7,703 | )(f) | ||||||
$ | (11,761 | ) | ||||||
12. | Long-term deferred income taxes | |||||||
Aeroglide | (71 | )(e) | ||||||
Halo | 13,657 | (f) | ||||||
$ | 13,586 | |||||||
13. | Non-current liabilities of discontinued operations | |||||||
Crosman sale | $ | (6,634 | )(a) | |||||
14. | Other non-current liabilities | |||||||
Aeroglide | $ | (1,703 | )(e) | |||||
15. | Minority interest | |||||||
Sale of Crosman | $ | (7,422 | )(a) | |||||
Aeroglide | 2,350 | (e) | ||||||
Halo | 2,751 | (f) | ||||||
$ | (2,321 | ) | ||||||
16. | Total stockholders’ equity | |||||||
Sale of Crosman | $ | 35,903 | (a) | |||||
Aeroglide | (7,406 | )(e) | ||||||
Halo | (10,449 | )(f) | ||||||
$ | 18,048 | |||||||
Year Ended | ||||||||
December 31, | ||||||||
2006 | ||||||||
1. | Amortization expense | |||||||
Aeroglide | $ | 5,006 | (a)(1) | |||||
Halo | 2,123 | (b)(1) | ||||||
$ | 7,129 | |||||||
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Year Ended | ||||||||
December 31, | ||||||||
2006 | ||||||||
2. | Depreciation expense | |||||||
Aeroglide | $ | 370 | (a)(3) | |||||
Halo | 174 | (b)(3) | ||||||
$ | 544 | |||||||
3. | Interest expense | |||||||
Aeroglide | $ | 594 | (a)(2) | |||||
Halo | 797 | (b)(2) | ||||||
Compass Diversified Trust | 2,500 | (d) | ||||||
$ | 3,891 | |||||||
4. | Provision for income taxes | |||||||
Aeroglide | $ | (1,817 | )(a)(4) | |||||
Halo | (570 | )(b)(4) | ||||||
$ | (2,387 | ) | ||||||
5. | Fees to manager | |||||||
Compass Diversified Trust | $ | 2,364 | (c) | |||||
6. | Minority interest | |||||||
Compass Diversified Trust | $ | 430 | (e) | |||||
Note 2. | Pro Forma Adjustments by Business |
Cash | $ | 34,722 | ||
Current assets of discontinued operations | (46,636 | ) | ||
Assets of discontinued operations | (65,258 | ) | ||
Current portion of debt | 85,000 | |||
Current liabilities of discontinued operations | 14,019 | |||
Non-current liabilities of discontinued operations | 6,634 | |||
Minority interest | 7,422 | |||
Equity | (35,903 | ) | ||
$ | — | |||
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Cash | $ | 94,500 | ||
Long-term debt | (94,500 | ) | ||
$ | — | |||
Aeroglide — see note e | $ | (56,329 | ) | |
Halo — see note f | (61,869 | ) | ||
$ | (118,198 | ) | ||
Long-term debt | $ | 94,500 | ||
Cash | (94,500 | ) | ||
$ | — | |||
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Property and equipment | $ | 2,553 | ||
Goodwill | 20,792 | |||
Intangible assets | 22,250 | |||
Other assets | (1,478 | ) | ||
Current portion of long-term debt | 1,324 | |||
Long-term debt | 4,058 | |||
Deferred tax liability | 71 | |||
Other liabilities | 1,703 | |||
Establishment of minority interest | (2,350 | ) | ||
Elimination of historical shareholders’ equity | 7,406 | |||
Cash used to fund acquisition | $ | 56,329 | ||
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Property and equipment | $ | 918 | ||
Goodwill | 23,345 | |||
Intangible assets | 35,470 | |||
Other assets | (1,220 | ) | ||
Deferred income taxes | 516 | |||
Current portion of long-term debt | 1,096 | |||
Long-term debt | 7,703 | |||
Long-term deferred income taxes | (13,657 | ) | ||
Establishment of minority interest | (2,751 | ) | ||
Elimination of historical shareholders’ equity | 10,449 | |||
Cash used to fund acquisition | $ | 61,869 | ||
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Year Ended | ||||||||||||
December 31, 2006 | ||||||||||||
A. | The following entries represent the pro forma adjustments made by us in Note 1 to reflect the effect of our acquisition of Aeroglide upon the results of their operations for the year ended December 31, 2006 as if we had acquired Aeroglide at the beginning of the fiscal year presented: | |||||||||||
1. | Additional amortization expense of intangible assets resulting from the acquisition of Aeroglide: | |||||||||||
Customer relationship — capital equipment of $5,000 which will be amortized over 10 years | $ | 500 | ||||||||||
Customer relationship — after market of $8,000 which will be amortized over 11 years | 727 | |||||||||||
Order backlog of $3,400 which will be amortized over less than 1 year | 3,400 | |||||||||||
Process know-how of $2,000 which will be amortized over 13 years | 154 | |||||||||||
Non-compete covenants of $450 which will be amortized over 2 years | 225 | |||||||||||
Total | $ | 5,006 | ||||||||||
2. | Reduction of interest expense with respect to the $5,382 of debt redeemed in connection with the acquisition of Aeroglide | $ | (594 | ) | ||||||||
3. | Additional depreciation expense resulting from the acquisition of Aeroglide | $ | 370 | |||||||||
4. | Tax impact of adjustments 1 to 3 above | $ | (1,817 | ) | ||||||||
B. | The following entries represent the pro forma adjustments made by us in Note 1 to reflect the effect of our acquisition of Halo upon the results of their operations for the year ended December 31, 2006 as if we had acquired Halo at the beginning of the fiscal year presented: | |||||||||||
1. | Additional amortization expense of intangible assets resulting from the acquisition of Halo: | |||||||||||
Customer relationships and order processing network of $30,000 which will amortized over 15 years | $ | 2,000 | ||||||||||
Non-compete agreement of $370 which will be amortized over 3 years | 123 | |||||||||||
Total | $ | 2,123 | ||||||||||
2. | Reduction of interest expense with respect to $8,799 of debt redeemed in connection with acquisition of Halo | $ | (797 | ) | ||||||||
3. | Additional depreciation expense resulting from the acquisition of Halo | $ | 174 | |||||||||
4. | Tax impact of adjustments 1 to 3 above | $ | (570 | ) | ||||||||
C. | Adjustment to record the additional estimated management fee expense pursuant to the Management Services Agreement to be incurred in connection with the acquisition of Aeroglide and Halo. | |||||||||||
Net purchase price of Aeroglide | $ | 56,329 | ||||||||||
Net purchase price of Halo | 61,869 | |||||||||||
Additional net assets | 118,198 | |||||||||||
Management fee % | 2.0 | % | ||||||||||
$ | 2,364 | |||||||||||
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Year Ended | ||||||||||||
December 31, 2006 | ||||||||||||
D. | Adjustment to reduce interest expense with the assumption that the $50.0 million of unapplied proceeds from the offering that would have reduced outstanding third party debt borrowings. The amount was calculated as follows: | |||||||||||
Interest expense on $50.0 million at an average rate of 9.5% since May 16, 2006 | $ | (2,968 | ) | |||||||||
Additional unused fee on revolving loan commitment | 468 | |||||||||||
$ | (2,500 | ) | ||||||||||
E. | Adjustment to record the minority interest in net income. The adjustment for minority interest was calculated by applying the minority ownership percentage for Aeroglide and Halo to the net income applicable to the minority interest holders | $ | 430 | |||||||||
Note 3. | Pro Forma loss from continuing operations per share |
Net loss | $ | (27,077 | )(a) | |
Pro forma weighted average number of shares outstanding: | ||||
Actual weighted average outstanding for 2006 | 12,686 | |||
Shares from this offering and from the separate private placement(1) | 9,765 | |||
22,451 | (b) | |||
Pro forma net loss from continuing operations per share (a divided by b) | $ | (1.21 | ) | |
(1) | Pro forma weighted average number of shares outstanding was derived by dividing the estimated gross proceeds from the offering and the separate private placement transaction by the assumed price per share of $17.00. |
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Fiscal Year Ended December 31, | ||||||||
2006 | 2005 | |||||||
($ in thousands, | ||||||||
except per share data) | ||||||||
Statements of Operations Data: | ||||||||
Net sales | $ | 410,873 | $ | — | ||||
Cost of sales | 311,641 | — | ||||||
Gross profit | 99,232 | — | ||||||
Operating expenses: | ||||||||
Staffing | 34,345 | — | ||||||
Selling, general and administrative | 36,732 | 1 | ||||||
Management fee | 4,376 | — | ||||||
Supplemental put expense | 22,456 | — | ||||||
Research and development expense | 1,806 | — | ||||||
Amortization expense | 6,774 | — | ||||||
Operating loss | $ | (7,257 | ) | $ | (1 | ) | ||
Loss from continuing operations | $ | (27,636 | ) | $ | (1 | ) | ||
Income from discontinued operations, net of income tax | $ | 8,387 | $ | |||||
Net loss | $ | (19,249 | ) | $ | (1 | ) | ||
Cash Flow Data: | ||||||||
Cash provided by operating activities | $ | 20,563 | $ | — | ||||
Cash (used in) investing activities | (362,286 | ) | — | |||||
Cash provided by financing activities | 351,073 | 100 | ||||||
Net increase in cash | $ | 9,350 | $ | 100 | ||||
Per Share Data: | ||||||||
Basic and fully diluted loss from continuing operations per share | $ | (2.18 | ) | $ | — | |||
Basic and fully diluted loss per share | $ | (1.52 | ) | $ | — | |||
At December 31, | ||||||||
2006 | 2005 | |||||||
($ in thousands) | ||||||||
Balance Sheet Data: | ||||||||
Total current assets | $ | 140,356 | $ | 3,408 | ||||
Total assets | 525,597 | 3,408 | ||||||
Current liabilities | 162,872 | 3,309 | ||||||
Long-term debt | — | — | ||||||
Total liabilities | 242,755 | 3,309 | ||||||
Minority interests | 27,131 | 100 | ||||||
Shareholders’ equity (deficit) | 255,711 | (1 | ) |
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FINANCIAL CONDITION AND RESULTS OF OPERATIONS
• | produce stable cash flows; | |
• | have strong management teams largely in place; | |
• | maintain defensible positions in industries with forecasted long-term macroeconomic growth; and | |
• | face minimal threat of technological or competitive obsolescence. |
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• | utilizing structured incentive compensation programs tailored to each business to attract, recruit and retain talented managers to operate our businesses; | |
• | regularly monitoring financial and operational performance, instilling consistent financial discipline, and supporting management in the development and implementation of information systems to effectively achieve these goals; | |
• | assisting management in their analysis and pursuit of prudent organic cash flow growth strategies (both revenue and cost related); | |
• | identifying and working with management to execute attractive external growth and acquisition opportunities; and | |
• | forming strong subsidiary level boards of directors to supplement management in their development and implementation of strategic goals and objectives. |
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• | a loan was made to and a controlling interest in CBS Personnel was purchased totaling $127.8 million. Our controlling interest represented at the time of purchase approximately 97.6% of the outstanding stock of CBS Personnel on a primary basis and approximately 94.4% on a fully diluted basis, after giving effect to the exercise of vested and in-the-money options and vested non-contingent warrants; | |
• | a loan was made to and a controlling interest in Crosman was purchased totaling $72.6 million. Our controlling interest represented approximately 75.4% of the outstanding stock of Crosman on a primary basis and 73.8% on a fully diluted basis; | |
• | a loan was made to and a controlling interest in Advanced Circuits was purchased for approximately $81.0 million. Our controlling interest represented approximately 70.2% of the outstanding stock of Advanced Circuits on a primary and fully diluted basis; and | |
• | a loan was made to and a controlling interest in Silvue was purchased for approximately $37.5 million. Our controlling interest represented approximately 73.0% of the outstanding stock of Silvue on a primary and fully diluted basis. |
• | first, to meet capital expenditure requirements, management fees and corporate overhead expenses; | |
• | second, to fund distributions from the businesses to the company; and | |
• | third, to be distributed by the trust to shareholders. |
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($ in thousands) | ||||
Net sales | $ | 72,316 | ||
Costs and expenses | 59,039 | |||
Income from discontinued operations | 13,277 | |||
Other income, net | 182 | |||
Income from discontinued operations before taxes | 13,459 | |||
Provision for taxes | 3,367 | |||
Minority interests | 1,705 | |||
Net income from discontinued operations(1) | $ | 8,387 | ||
(1) | This amount does not include intercompany interest expense incurred totaling approximately $3.2 million. |
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Years Ended December 31, | ||||||||
2006 | 2005 | |||||||
($ in thousands) | ||||||||
Net sales | $ | 410,873 | $ | — | ||||
Cost of sales | 311,641 | — | ||||||
Gross profit | 99,232 | — | ||||||
Selling, general and administrative expense | 71,077 | 1 | ||||||
Fees to manager | 4,376 | — | ||||||
Supplemental put cost | 22,456 | — | ||||||
Amortization of intangibles | 6,774 | — | ||||||
Research and development expense | 1,806 | — | ||||||
Operating loss | $ | (7,257 | ) | $ | (1 | ) | ||
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Fiscal Year Ended | ||||||||
December 31, | ||||||||
2006 | 2005 | |||||||
($ in thousands) | ||||||||
Net sales | $ | 48,139 | $ | 41,969 | ||||
Cost of sales | 18,888 | 18,102 | ||||||
Gross profit | 29,251 | 23,867 | ||||||
Selling, general and administrative expenses | 14,934 | 8,283 | ||||||
Amortization of intangibles | 2,731 | 717 | ||||||
Income from operations | $ | 11,586 | $ | 14,867 | ||||
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Fiscal Year Ended December 31, | ||||||||
2006 | 2005 | |||||||
($ in thousands) | ||||||||
Revenues | $ | 551,080 | $ | 543,012 | ||||
Direct cost of revenues | 446,820 | 441,685 | ||||||
Gross profit | 104,260 | 101,327 | ||||||
Staffing expense | 54,847 | 54,249 | ||||||
Selling, general and administrative expenses | 25,666 | 26,723 | ||||||
Amortization expense | 2,687 | 1,902 | ||||||
Income from operations | $ | 21,060 | $ | 18,453 | ||||
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Fiscal Year Ended | ||||||||
December 31, | ||||||||
2006 | 2005 | |||||||
($ in thousands) | ||||||||
Net sales | $ | 24,068 | $ | 21,491 | ||||
Cost of sales | 7,098 | 7,497 | ||||||
Gross profit | 16,970 | 13,994 | ||||||
Selling, general and administrative expenses | 8,426 | 7,552 | ||||||
Research and development costs | 1,129 | 1,226 | ||||||
Amortization of intangibles | 745 | 709 | ||||||
Operating income | 6,670 | 4,507 | ||||||
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Fiscal | ||||
2006 | ||||
($ in thousands) | ||||
Net sales | $ | 23,367 | ||
Cost of sales | 17,505 | |||
Gross profit | 5,862 | |||
Selling, general and administrative expenses | 4,901 | |||
Amortization expense | 709 | |||
Income from operations | $ | 252 | ||
• | CBS Personnel — approximately $63.5 million; | |
• | Advanced Circuits — approximately $37.3 million; |
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• | Silvue — approximately $17.0 million; and | |
• | Anodyne — approximately $21.2 million. |
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Year Ended | ||||
December 31, 2006 | ||||
($ in thousands) | ||||
Net loss | $ | (19,249 | ) | |
Adjustment to reconcile net loss to cash provided by operating activities | ||||
Depreciation and amortization | 10,290 | |||
Supplemental put expense | 22,456 | |||
Silvue’s in-process R&D expensed at acquisition date | 1,120 | |||
Advanced Circuit’s loan forgiveness accrual | 2,760 | |||
Minority interest | 2,950 | |||
Deferred taxes | (2,281 | ) | ||
Loss on Ableco debt retirement | 8,275 | |||
Other | (450 | ) | ||
Changes in operating assets and liabilities | (5,308 | ) | ||
Net cash provided by operating activities | 20,563 | |||
Plus: | ||||
Unused fee on delayed term loan(1) | 1,291 | |||
Changes in operating assets and liabilities | 5,308 | |||
Less: | ||||
Maintenance capital expenditures(2) | ||||
CBS Personnel | 209 | |||
Crosman(3) | 1,926 | |||
Advanced Circuits | 392 | |||
Silvue | 304 | |||
Anodyne | 636 | |||
Estimated cash flow available for distribution | $ | 23,695 | (a) | |
Distribution paid July 2006 | $ | (2,587 | ) | |
Distribution paid September 2006 | (5,368 | ) | ||
Distribution paid January 2007 | (6,135 | ) | ||
Total distributions | $ | (14,090 | )(b) | |
Distribution Coverage Ratio(a)¸(b) | 1.7 | x | ||
(1) | Represents the commitment fee on the unused portion of our third-party loans. | |
(2) | Represents maintenance capital expenditures that were funded from operating cash flow and excludes approximately $2.3 million of growth capital expenditures for the period ended December 31, 2006. | |
(3) | Crosman was sold on January 5, 2007 (see Note D to the consolidated financial statements). |
• | management services agreement | |
• | LLC agreement | |
• | supplemental put agreement |
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Less Than | 1-3 | 3-5 | More Than | |||||||||||||||||
Total | 1 Year | Years | Years | 5 Years | ||||||||||||||||
($ in thousands) | ||||||||||||||||||||
Operating Lease Obligations(1) | $ | 28,012 | $ | 7,080 | $ | 11,002 | $ | 4,639 | $ | 5,291 | ||||||||||
Purchase Obligations(2) | 83,584 | 39,227 | 24,136 | 20,221 | — | |||||||||||||||
Supplemental Put Obligation(3) | 14,702 | — | — | — | — | |||||||||||||||
$ | 126,298 | $ | 46,307 | $ | 35,138 | $ | 24,860 | $ | 5,291 | |||||||||||
(1) | Reflects various operating leases for office space, manufacturing facilities and equipment from third parties with various lease terms running from one to fourteen years. | |
(2) | Reflects non-cancelable commitments as of December 31, 2006, including: (i) shareholder distributions of $24.5 million, (ii) management fees of $9.6 million per year over the next five years and; (iii) other obligations, including amounts due under employment agreements. | |
(3) | The supplemental put obligation represents the long-term portion of an estimated liability accrued as if our management services agreement with CGM had been terminated. This agreement has not been terminated and there is no basis upon which to determine a date in the future, if any, that this amount will be paid. |
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• | produce stable cash flows; | |
• | have strong management teams largely in place; | |
• | maintain defensible positions in industries with forecasted long-term macroeconomic growth; and | |
• | face minimal threat of technological or competitive obsolescence. |
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• | recruiting and retaining talented managers to operate our businesses by using structured incentive compensation and equity ownership programs tailored to each business; | |
• | regularly monitoring financial and operational performance, instilling consistent financial discipline, and supporting management in the development and implementation of information systems to effectively achieve these goals; | |
• | assisting management in their analysis and pursuit of prudent organic growth strategies, potentially involving capacity-related capital expenditures, introduction of new products or services, or expansion of sales or marketing programs; and | |
• | forming strong subsidiary level boards of directors to supplement management in their development and implementation of strategic goals and objectives. |
• | leverage manufacturing and distribution operations; | |
• | capitalize on existing branding and marketing programs, as well as customer relationships; | |
• | increase market share and penetrate new markets; | |
• | realize cost synergies, effectively reducing the multiple paid for the add-on acquisition target; and | |
• | add experienced management or management expertise; |
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• | Prototype PCBs — These PCBs are manufactured typically for customers in research and development departments of original equipment manufacturers, or OEMs, and academic institutions. Prototype PCBs are manufactured to the specifications of the customer, within certain manufacturing guidelines designed to increase speed and reduce production costs. Prototyping is a critical stage in the research and development of new products. These prototypes are used in the design and launch of new electronic equipment and are typically ordered in volumes of 1 to 50 PCBs. Because the prototype is used primarily in the research and development phase of a new electronic product, the life cycle is relatively short and requires accelerated delivery time frames of usually less than five days and very high, error-free quality. | |
• | Quick-Turn Production PCBs — These PCBs are used for intermediate stages of testing for new products prior to full scale production. After a new product has successfully completed the prototype phase, customers undergo test marketing and other technical testing. This stage requires production of larger quantities of PCBs in a short period of time, generally 10 days or less, while it does not yet require high production volumes. This transition stage between low-volume prototype production and volume production is known as quick-turn production. Manufacturing specifications conform strictly to end product requirements and order quantities are typically in volumes of 10 to 500. Similar to prototype PCBs, response time remains crucial as the delivery of quick-turn PCBs can be a gating item in the development of electronic products. | |
• | Volume Production PCBs — These PCBs are used in the full scale production of electronic equipment and specifications conform strictly to end product requirements. Production PCBs are ordered in large quantities, usually over 100 units, and response time is less important, ranging between 15 days to 10 weeks or more. |
• | Increasing Customer Demand for Quick-Turn Production Services — Rapid advances in technology are significantly shortening product life-cycles and placing increased pressure on OEMs to develop new products in shorter periods of time. In response to these pressures, OEMs invest heavily on research and development, which results in a demand for PCB companies that can offer engineering support and quick-turn production services to minimize the product development process. | |
• | Increasing Complexity of Electronic Equipment — OEMs are continually designing more complex and higher performance electronic equipment, requiring sophisticated PCBs. To satisfy the demand for more advanced electronic products, PCBs are produced using exotic materials and increasingly have higher layer counts and greater component densities. Maintaining the production infrastructure necessary to manufacture PCBs of increasing complexity often requires significant capital expenditures and has acted to reduce the competitiveness of local and regional PCB manufacturers lacking the scale to make such investments. | |
• | Shifting of High Volume Production to Asia — Asian based manufacturers of PCBs are capitalizing on their lower labor costs and are increasing their market share of volume production of PCBs used, for example, in high-volume consumer electronics applications, such as personal computers and cell |
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phones. Asian based manufacturers have been generally unable to meet the lead time requirements for prototype or quick-turn PCB production or the volume production of the most complex PCBs. This “offshoring” of high-volume production orders has placed increased pricing pressure and margin compression on many small domestic manufacturers that are no longer operating at full capacity. Many of these small producers are choosing to cease operations, rather than operate at a loss, as their scale, plant design and customer relationships do not allow them to focus profitably on the prototype and quick-turn sectors of the market. |
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December 31, 2006 | December 31, 2005 | |||||||
Prototype Production | 33.4 | % | 34.0 | % | ||||
Quick-Turn Production | 32.1 | % | 32.0 | % | ||||
Volume Production | 20.4 | % | 20.1 | % | ||||
Third Party | 14.1 | % | 13.9 | % | ||||
Total | 100.0 | % | 100.0 | % | ||||
(1) | As a percentage of gross sales, exclusive of sale discounts. |
• | Numerous Unique Orders Per Day — For the year ended December 31, 2006, Advanced Circuits received an average of over 290 customer orders per day. Due to the large quantity of orders received, Advanced Circuits is able to combine multiple orders in a single panel design prior to production. Through this process, Advanced Circuits is able to significantly reduce the number of costly, labor intensive equipmentset-ups required to complete several manufacturing orders. As labor represents the single largest cost of production, management believes this capability gives Advanced Circuits a unique advantage over other industry participants. Advanced Circuits maintains proprietary software to maximize the number of units placed on any one panel design. A single panelset-up typically accommodates 1 to 12 orders. Further, as a “critical mass” of like orders are required to maximize the efficiency of this process, management believes Advanced Circuits is uniquely positioned as a low cost manufacturer of prototype and quick-turn PCBs. | |
• | Diverse Customer Base — Advanced Circuits possesses a customer base with little industry or customer concentration exposure. During fiscal year ended December 31, 2006, Advanced Circuits did business with over 8,000 customers and added approximately 225 new customers per month. Advanced Circuits’ website receives thousands of hits per day and, each month during 2005, it received approximately 600 requests to establish new web accounts. For the year ended December 31, 2006, no customer represented over 2% of net sales. | |
• | Highly Responsive Culture and Organization — A key strength of Advanced Circuits is its ability to quickly respond to customer orders and complete the production process. In contrast to many competitors that require a day or more to offer price quotes on prototype or quick-turn production, Advanced Circuits offers its customers quotes within seconds and the ability to place or track orders any time of day. In addition, Advanced Circuits’ production facility operates three shifts per day and is able to ship a customer’s product within 24 hours of receiving its order. | |
• | Proprietary FreeDFM.comTMSoftware — Advanced Circuits offers its customers unique design verification services through its online FreeDFM.comTM tool. This tool, which was launched in 2002, enables customers to receive a free manufacturability assessment report, within minutes, resolving design problems before customers place their orders. The service is relied upon by many of Advanced Circuits’ customers to reduce design errors and minimize production costs. Beyond improved customer service, FreeDFM.comTM has the added benefit of improving the efficiency of Advanced Circuits’ engineers, as many routine design problems, which typically require an engineer’s time and attention to identify, are identified and sent back to customers automatically. |
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• | Established Partner Network — Advanced Circuits has established third party production relationships with PCB manufacturers in North America and Asia. Through these relationships, Advanced Circuits is able to offer its customers a full suite of products including those outside of its core production capabilities. Additionally, these relationships allow Advanced Circuits to outsource orders for volume production and focus internal capacity on higher margin, short lead time, production and quick-turn manufacturing. |
• | Increase Portion of Revenue from Prototype and Quick-Turn Production — Advanced Circuits’ management believes it can grow revenues and cash flow by continuing to leverage its core prototype and quick-turn capabilities. Over its history, Advanced Circuits has developed a suite of capabilities that its management believes allow it to offer a combination of price and customer service unequaled in the market. Advanced Circuits intends to leverage this factor, as well as its core skill set, to increase net sales derived from higher margin prototype and quick-turn production PCBs. In this respect, marketing and advertising efforts focus on attracting and acquiring customers that are likely to require these premium services. And while production composition may shift, growth in these products and services is not expected to come at the cost of declining sales in volume production PCBs as Advanced Circuits intends to leverage its extensive network of third-party manufacturing partners to continue to meet customers’ demand for these services. |
• | Acquire Customers from Local and Regional Competitors — Advanced Circuits’ management believes the majority of its competition for prototype and quick-turn PCB orders comes from smaller scale local and regional PCB manufacturers. As an early mover in the prototype and quick-turn sector of the PCB market, management believes that Advanced Circuits has been able to grow faster and achieve greater production efficiencies than many industry participants. Management believes Advanced Circuits can continue to use these advantages to gain market share. Further, Advanced Circuits has begun to enter into prototype and quick-turn manufacturing relationships with several subscale local and regional PCB manufacturers. According to Fabfile online, in 2004 there were over 400 small PCB manufacturers with annual sales of under $10 million. Management believes that while many of these manufacturers maintain strong, longstanding customer relationships, they are unable to produce PCBs with short turn-around times at competitive prices. As a result, Advanced Circuits is beginning to seize upon a significant opportunity for growth by providing production support to these manufacturers or direct support to the customers of these manufacturers, whereby the manufacturers act more as a broker for the relationship. |
• | Remain Committed to Customers and Employees — Over its history, Advanced Circuits has remained focused on providing the highest quality product and service to its customers. Management believes this focus has allowed Advanced Circuits to achieve its outstanding delivery and quality record. Advanced Circuits’ management believes this reputation is a key competitive differentiator and is focused on maintaining and building upon it. Similarly, management believes its committed base of employees is a key differentiating factor. Advanced Circuits currently has a profit sharing program and tri-annual bonuses for all of its employees. Management also occasionally sets additional performance targets for individuals and departments and establishes rewards, such as lunch celebrations or paid vacations, if these goals are met. Management believes that Advanced Circuits’ emphasis on sharing rewards and creating a positive work environment has led to increased loyalty. As a result, Advanced Circuits plans on continuing to focus on similar programs to maintain this competitive advantage. |
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2006 Customer | ||||
Industry Sector | Distribution | |||
Electrical Equipment and Components | 40 | % | ||
Measuring Instruments | 15 | % | ||
Electronics Manufacturing Services | 11 | % | ||
Engineer Services | 5 | % | ||
Industrial and Commercial Machinery | 5 | % | ||
Business Services | 5 | % | ||
Wholesale Trade-Durable Goods | 3 | % | ||
Educational Institutions | 2 | % | ||
Transportation Equipment | 5 | % | ||
All Other Sectors Combined | 9 | % | ||
Total | 100 | % | ||
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• | Chemicals — The chemicals segment includes catalyst/clay products and pigment manufacturers. | |
• | Polymers — The polymers segment includes absorbent gels and synthetic rubber manufacturers. | |
• | Non-Wovens/Fibers — The non-wovens/fibers segment includes filter, non-woven, and synthetic fiber manufacturers. | |
• | Charcoal — The charcoal segment includes charcoal and coal processors and manufacturers. |
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• | Other Industrial — The other industrial segment includes minerals, metals, waste, recycling, pharmaceuticals, plastics, tobacco, and wood processors and manufacturers. |
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• | Reliability — Since many driers and coolers are operated continuously over a 10 year to 20 year period, customers are heavily focused on equipment reliability. Many processors are, therefore, willing to pay a premium for higher quality, more reliable equipment to mitigate the cost and inconvenience of unscheduled maintenance. | |
• | Process Knowledge — Design parameters for drying and cooling equipment include incoming and outgoing moisture levels, heat sensitivity, airflow requirements, and necessary retention times. As a result, manufacturers with significant thermal processing knowledge are usually differentiated in the marketplace. This is particularly important in the food and feed processing segments, where moisture uniformity failures can have a significant impact on a customer’s corporate image and profitability. | |
• | Time to Delivery — Typical times to delivery for Aeroglide’s products range from 18 weeks to 24 weeks from the order date. Given these lead times, customers typically seek suppliers who are most capable of delivering equipment on schedule. | |
• | Energy Efficiency — Depending on the application, drying and cooling equipment can consume a significant amount of energy. Accordingly, a more efficient machine can provide processors with enormouscost-of-ownership savings over the life of the equipment. | |
• | Sanitation — Many processors use a single conveyor or drier machine to produce multiple products. As a result, ease of maintenance and cleaning becomes a critical factor in the selection of an equipment manufacturer to minimize cross-contamination. Effective machinery design can minimize change-over times, thereby increasing overall equipment productivity and value to the customer. |
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• | Offer customers high quality, consistent product, on a national basis — Products produced by Anodyne and its competitors are typically bulky in nature and may not be conducive to shipping. Management believes that many of its competitors do not have the scale or resources required to produce support surfaces for national distributors and believes that customers value manufacturers with the scale and sophistication required to meet these needs. | |
• | Leverage scale to provide industry leading research and development — Medical support surfaces are becoming increasingly advanced in nature. Anodyne’s management believes that many smaller competitors to do not have the resources required to effectively meet the changing needs of their customers and believes that increased scale acquired though acquisitions will allow it to better serve its customers through industry leading research and development. | |
• | Pursue cost savings through scale purchasing and operational improvements — As many of the products used to manufacture medical support surfaces are standard in nature, management believes that increased scale achieved through acquisitions will allow it to benefit from lower costs of materials and therefore lower costs of sales. In addition, management believes that there are opportunities to improve the operations of smaller acquired entities and in turn benefit from production efficiencies. |
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• | providing excellent service to existing clients in a consistent and efficient manner; | |
• | attempting to sell additional service offerings to existing clients to increase revenue per client; | |
• | marketing services to prospective clients to expand the client base; and | |
• | providing incentives to employees through well-balanced incentive and bonus plans to encourage increased sales per client and the establishment of new client relationships. |
• | temporary staffing services in categories such as light industrial, clerical, healthcare, construction, transportation, professional and technical staffing; | |
• | employee leasing and related administrative services; and | |
• | temporary-to-permanent and permanent placement services. |
• | Light Industrial — A substantial portion of CBS Personnel’s temporary staffing revenues are derived from the placement of low-to mid-skilled temporary workers in the light industrial category, which comprises primarily the distribution(“pick-and-pack”) and light manufacturing (such as assembly-line work in factories) sectors of the economy. Approximately 50% of CBS Personnel’s temporary staffing revenues were derived from light industrial for the fiscal year ended December 31, 2006. | |
• | Clerical — CBS Personnel provides clerical workers that have been screened, reference-checked and tested for computer ability, typing speed, word processing and data entry capabilities. Clerical workers are often employed at client call centers and corporate offices. Approximately 37% of CBS Personnel’s temporary staffing revenues were derived from clerical for the fiscal year ended December 31, 2006. | |
• | Technical — CBS Personnel provides placement candidates in a variety of skilled technical capacities, including plant managers, engineering management, operations managers, designers, draftsmen, engineers, materials management, line supervisors, electronic assemblers, laboratory assistants and quality control personnel. Approximately 4% of CBS Personnel’s temporary staffing revenues were derived from technical for the fiscal year ended December 31, 2006. | |
• | Healthcare — Through its expert placement agents in its Columbia Healthcare division, CBS Personnel provides trained candidates in the following healthcare categories: medical office personnel, medical technicians, rehabilitation professionals, management and administrative personnel and radiology technicians, among others. Approximately 2% of CBS Personnel’s temporary staffing revenues were derived from healthcare for the fiscal year ended December 31, 2006. | |
• | Niche/Other — In addition to the light industrial, clerical, healthcare and technical categories, CBS Personnel also provides certain niche staffing services, placing candidates in the skilled industrial, construction and transportation sectors, among others. CBS Personnel’s wide array of niche service |
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offerings allows it to meet a broad range of client needs. Moreover, these niche services typically generate higher margins for CBS Personnel. Approximately 7% of CBS Personnel’s temporary staffing revenues were derived from niche/other for the fiscal year ended December 31, 2006. |
• | Large Employee Database/Customer List — Over the course of its history, CBS Personnel’s management believes CBS Personnel has built a significant presence in most of its markets in terms of both clients and employees. CBS Personnel is successful in recruiting additional employees because of its reputation as having numerous job openings with a wide variety of clients. CBS Personnel attracts clients through its reputation as having a large database of reliable employees with a wide ranging skill set. CBS Personnel’s employee database and client list have been built over a number of years in each of its markets and serve as a major competitive strength in most of its markets. | |
• | Higher Operating Margins — By establishing multiple offices in the majority of the markets in which it operates, CBS Personnel is able to better leverage its selling, general and administrative expenses at the regional and field level and create higher operating income margins than its less dense competitors. |
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• | Scalable Business Model — By having multiple office locations in each of its markets, CBS Personnel is able to quickly scale its business model in both good and bad economic environments. For example, in 2001 and 2002 during the economic downturn, CBS Personnel was able to close offices and reduce overhead expenses while shifting business to adjacent offices. For competitors with only one office per market, closing an office requires abandoning the clients and employees in that market. During 2001 and 2002, CBS Personnel was able to reduce its overhead costs by approximately 13% while maintaining its presence in each of its markets and retaining its clients and employees. | |
• | Marketing Synergies — By having a number of offices in the majority of its markets, CBS Personnel allocates additional resources to marketing and selling and amortizes those costs over a larger office network. For example, while many of its competitors use selling branch managers who split time between operations and sales, CBS Personnel uses outside sales reps that are exclusively focused on bringing in new sales. |
• | Invest in its Existing Markets — In many of its existing markets, CBS Personnel has multiple branch locations. CBS Personnel plans on continuing to invest in these existing markets through the opening of additional branch locations and the hiring of additional sales and operations employees. In addition, CBS personnel is offering complimentary human resource services to its existing clients such as full time recruiting, consulting, and administrative outsourcing. CBS Personnel has implemented an incentive plan that highly rewards its employees for selling services beyond its traditional temporary staffing services. | |
• | Build a Presence in Contiguous Markets — CBS Personnel plans on opening new branch locations in markets contiguous to those in which it operates. CBS Personnel believes that the cost and time required to establish profitable branch locations is minimized through expansion into contiguous markets as costs associated with advertising and administrative overhead are reduced due to proximity. | |
• | Pursue Selective Acquisitions — CBS Personnel views acquisitions, such as the SES acquisition in November 2006, as an attractive means to enter into a new geographical market. In some cases CBS Personnel will consider making acquisitions within its existing markets to increase its market share. |
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• | multiple offices in its core markets; | |
• | long-standing relationships with its clients; | |
• | a large database of qualified temporary workers which enables CBS Personnel to fill orders rapidly; | |
• | well-recognized brands and leadership positions in its core markets; and | |
• | a reputation for treating employees well and offering competitive benefits. |
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Number of | Employee Hours | |||||||
State | Branch Offices | Billed | ||||||
(in thousands) | ||||||||
Ohio | 26 | 10,053 | ||||||
California | 20 | 3,917 | ||||||
Kentucky | 14 | 4,352 | ||||||
Texas | 14 | 5,207 | ||||||
Illinois | 11 | 1,144 | ||||||
South Carolina | 10 | 2,166 | ||||||
North Carolina | 8 | 2,050 | ||||||
Indiana | 7 | 1,781 | ||||||
Maryland | 7 | 105 | ||||||
Pennsylvania | 7 | 926 | ||||||
Massachusetts | 5 | 328 | ||||||
Georgia | 4 | 383 | ||||||
Virginia | 3 | 1,307 | ||||||
Alabama | 2 | 541 | ||||||
New Jersey | 2 | 96 | ||||||
New York | 2 | 589 | ||||||
Tennessee | 1 | 18 | ||||||
Washington | 1 | 72 |
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Categories | Examples | |
Apparel | Jackets, sweaters, hats, golf shirts | |
Business Accessories | Calculators, briefcases, desk accessories | |
Calendars | Wall and desk calendars, appointment planners | |
Writing Instruments | Pens, pencils, markers, highlighters | |
Recognition Awards | Trophies, plaques | |
Other Items | Crystal ware, key chains, watches, mugs, golf accessories |
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• | Industry Leading, Scalable Back Office Infrastructure — Halo’s management team believes that the key factor in attracting and retaining high quality account executives is providing an efficient and effective order processing and administrative system. Halo’s customer service organization provides critical support functions for its sales force including order entry, product sourcing, order tracking, vendor payment, customer billing and collections. Halo’s scale in the industry has allowed it to make information technology and personnel investments to create a sophisticated infrastructure that management believes differentiates it from many smaller industry participants. Additionally, management believes that its infrastructure allows it to acquire and integrate smaller distributors more effectively than other larger competitors. |
• | Diverse Customer Base Characterized by Long-Standing Relationships — Halo’s revenue base possesses little customer, end market or geographic concentration. It currently does business with over 30,000 customers in various end markets. For the fiscal year ended December 31, 2006, no customer represented more than 8.2% of its revenues and the top ten customers represented less than 18.5% of its revenues. In addition, Halo’s team of account executives are often deeply involved in their local communities and possess deep and long standing relationships with customers of all sizes. |
• | Extensive Relationships with a Broad Base of Suppliers — Halo’s management believes its relationships with over 3,000 suppliers of promotional products allows Halo to offer its end customers the most complete line of items in the industry. In addition, management believes that Halo’s scale provides it with greater purchasing power than many of its competitors. In many situations, Halo’s scale allows it to receive significant rebates from its suppliers. These rebates, typically shared with account executives, leads to both greater margins and higher levels of sales force retention than many of its competitors. |
• | Attract and Retain Account Executives — As Halo’s infrastructure is relatively fixed in nature, it can derive significant incremental contribution from the addition of account executives. Further, Halo’s management believes it has developed a combination of service and compensation that allows it to offer account executives a value proposition superior to those offered by its competitors. In addition to its executive team, Halo has a staff of four professionals focused both on ensuring that the company provides the highest possible level of service to its existing account executives and is able to attract additional promotional product sales professionals possessing existing customer relationships. | |
• | Continue to Increase the Productivity of Account Executives — The management team of Halo continuously strives to increase the productivity of its account executives. Halo routinely provides its account executives with marketing support tools and training. In addition, for larger accounts, Halo works with account executives to develop proprietary solutions, such as web-based portals, that allow customers to better measure and track their programs, thereby increasing their loyalty. | |
• | Selectively Acquire and Integrate Subscale Competitors — Halo’s management believes that Halo is well positioned to take advantage of the industry’s fragmentation and economies of scale. In the past, Halo has achieved significant synergies by acquiring and integrating subscale competitors. Following an acquisition, Halo’s advanced infrastructure allows the acquired entity both to process and administer orders more cost effectively and increase gross margin through volume discounts and rebates. Recognizing this opportunity, Halo’s management team is constantly evaluating potential acquisition opportunities. |
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State | Function | Number of Offices | ||||
California | Sales | 3 | ||||
Illinois | Administration | 2 | ||||
Information Technology | 1 | |||||
Warehousing | 1 | |||||
Louisiana | Sales | 1 | ||||
New York | Sales | 1 | ||||
Ohio | Administration | 1 | ||||
Tennessee | Sales | 2 | ||||
Texas | Sales | 1 |
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• | Silvue and CrystalCoat — these products are either non-tintable or tintable and impart index matching and anti-fogging properties; | |
• | Statux — this product imparts anti-static properties; and | |
• | Resinrelease — this product imparts “non-stick” or surface release properties. |
• | Automotive — CrystalCoat coatings are used on a variety of automotive and transit applications, including instrument panel windows, bus shelters, rail car windows, and bus windows. These coatings are used primarily to impart long-term durability, chemical resistance and scratch and abrasion resistance properties. | |
• | Electronics — CrystalCoat coatings are used for electronic application surfaces, from liquid crystal displays to cell phone windows. These coatings are used primarily to impart scratch and abrasion resistance properties. | |
• | Optical — CrystalCoat coatings are used for vision corrective lenses and other optical applications. These coatings are used primarily to impart high scratch and abrasion resistance properties and UV |
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protection while matching the optical properties of the underlying material to reduce interference. Silvue produces both tintable and non-tintable coatings. |
• | Safety — CrystalCoat coatings are used for safety applications. These coatings are used primarily to impart anti-fog characteristics. Silvue offers a high performance “water sheeting” anti-fog coating that is specifically designed to meet a customer’s specific standards and testing requirements. | |
• | Sunglasses and Sports Eyewear — CrystalCoat coatings are used for sunglasses and sports eyewear. These coatings are used primarily to impart scratch and abrasion resistance properties, UV protection and anti-fog characteristics. CrystalCoat coatings can be used on tinted or clear materials. |
• | improving existing products and processes to lower costs, improve product quality, and reduce potential environmental impact; | |
• | developing new product platforms and processes; and | |
• | developing new product lines and markets through applications research. |
• | application engineering and process support; | |
• | equipment and process design; | |
• | product and formulation development and customization; | |
• | test protocols and coating qualifications; | |
• | rapid response for customer technical support; | |
• | analytical testing and competitive product assessment; | |
• | quality assurance testing and reporting; and | |
• | manufacturing support. |
• | Extensive Patent Portfolio — Silvue owns nine patents relating to its coating systems, including six patents relating to its core Ultra-Coat platform systems. Beyond its existing patents, Silvue has three patents pending and two provisional patents. Products related to patents represent approximately 66% of Silvue’s net sales and are relied upon by eyewear manufacturers worldwide. Silvue aggressively |
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defends these patents and management believes they represent a significant barrier to entry for new products and that they reduce the threat of similar coating products gaining significant market share. |
• | Superior Technical Skills and Expertise — Silvue has invested in a team of experts who are ready to support its customers’ specific application needs from new product uses to the optimization of part design for coating application. | |
• | Reputation for Quality and Service — Silvue’s on-going commitment to producing quality coatings and its ability to meet the rigorous requirements of its most valued customers has earned it a reputation as one of the principal providers of coatings for premium eyewear. | |
• | Global Presence — Silvue works with its customers from three offices in North America, Asia and Europe. Many of Silvue’s customers have numerous manufacturing operations globally and management believes its ability to offer its coating systems and related customer service on a global basis is a competitive advantage. |
• | ISO 9001 Certified — Silvue’s Anaheim, California, and Chiba, Japan manufacturing facilities are ISO 9001 certified, which is a universally accepted quality assurance designation indicating the highest quality manufacturing standards. |
• | Experienced Management Team — Silvue’s senior management has extensive experience in all aspects of the coating industry. The senior management team, collectively, has approximately 80 years of experience in the global hardcoatings and closely related industries. |
• | Develop New Products and Expand into New Markets — Silvue’s management believes that Silvue is one of the principal developers of proprietary high performance coating systems for polycarbonate plastic, glass, acrylic, metals and other materials, and is focused on growth through continued product innovation to provide greater functionality or better value to its customers. Driven by input from customers and the demands of the marketplace, Silvue’s technology development programs are designed to provide an expanding choice of coating systems to protect and enhance existing materials and materials developed in the future. As an example of Silvue’s commitment to product innovation, in 2002, Silvue created a new group with primary focus on the discovery of new technologies and sciences, and the innovation of those findings into useful applications and beneficial results. This group, which is known as the “Discovery and Innovation Group,” is charged with exploring new coatings and coating applications while advancing thestate-of-the-art in functional surface coating technologies, nanotechnologies and materials science. | |
• | Pursue Opportunities for Business Development and Global Diversification — Silvue recently had in place and continues to pursue opportunities for joint ventures, equity investments and other alliances. These strategic initiatives are expected to diversify and strengthen Silvue’s business by providing access to new markets and high-growth areas as well as providing an efficient means of ensuring that Silvue is involved in technological innovation in or related to the coating systems industry. Silvue is committed to pursuing these initiatives in order to capitalize on new business development and global diversification opportunities. |
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2006 Customer | ||||
Industry | Distribution | |||
Performance eyewear and sunglasses | 88 | % | ||
Automotive | 11 | % | ||
Other | 1 | % | ||
Total | 100 | % | ||
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• | the management services agreements relating to the services our manager performs for us and the businesses we own; | |
• | the company’s LLC agreement relating to our manager’s rights with respect to the allocation interests it owns; and | |
• | the supplemental put agreement relating to our manager’s right to cause the company to purchase the allocation interests it owns. |
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(In thousands) | ||||
Total management fee: | ||||
1. Total assets | $ | 525,597 | ||
2. Accumulated amortization of intangibles | 7,032 | |||
3. Adjusted total liabilities | 132,473 | |||
4. Adjusted net assets (1 + 2 −3) | 400,156 | |||
5. Quarterly management fee (0.5% * 4) | 2,001 | |||
Offsetting management fees: | ||||
6. CBS Personnel | 278 | |||
7. Crosman | 145 | |||
8. Advanced Circuits | 125 | |||
9. Silvue | 88 | |||
10. Anodyne | 88 | |||
11. Total offsetting management fees (6 + 7 + 8 + 9 +10) | 724 | |||
12. Quarterly management fee paid by the company (5 −11) | $ | 1,277 | ||
• | “Adjusted net assets”equals, with respect to the company as of any calculation date, thesumof (i) consolidated total assets (as determined in accordance with GAAP) of the company as of such calculation date,plus(ii) the absolute amount of consolidated accumulated amortization of intangibles (as determined in accordance with GAAP) for the company as of such calculation date,minus(iii) the absolute amount of adjusted total liabilities of the company as of such calculation date, plus (iv) to the extent included in adjusted total liabilities of the company as of such calculation date, the absolute amount of the company’s liabilities (as determined in accordance with GAAP) in respect of its obligations under the supplemental put agreement. | |
• | “Adjusted total liabilities”equals, with respect to the company as of any calculation date, the company’s consolidated total liabilities (as determined in accordance with GAAP) as of such calculation date after excluding the effect of any outstanding third party indebtedness of the company. | |
• | “Management fee”equals, as of any calculation date, theproductof (i) 0.5%,multiplied by(ii) the company’s adjusted net assets as of such calculation date;provided, however,that, with respect to any fiscal quarter in which the management services agreement is terminated, the company will pay our manager a management fee with respect to such fiscal quarter equal to theproductof (i)(x) 0.5%,multiplied by(y) the company’s adjusted net assets as of such calculation date,multiplied by(ii) a fraction, the numerator of which is the number of days from and including the first day of such fiscal quarter to but excluding the date upon which the management services agreement is terminated and the denominator of which is the number of days in such fiscal quarter. | |
• | “Third party indebtedness”means any indebtedness of the company owed to third party lenders that are not affiliated with the company. |
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• | all costs and expenses of the company that are incurred by our manager or its affiliates on behalf of the company, including anyout-of-pocket costs and expenses incurred in connection with the performance of services under the management services agreement, and all costs and expenses the reimbursement of which are specifically approved by the company’s board of directors; and | |
• | the compensation and other costs and expenses of the chief financial officer and his staff as approved by the company’s compensation committee. |
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• | the sale of a material amount, as determined by our manager and reasonably consented to by a majority of the company’s board of directors, of the capital stock or assets of one of our businesses or a subsidiary of one of our businesses, which event we refer to as a sale event; or | |
• | at the option of our manager, during the30-day period following the fifth anniversary of the date upon which we acquired a controlling interest in a business, which event we refer to as a holding event. If our manager elects to forego declaring a holding event with respect to such business during such period, then our manager may only declare a holding event with respect to such business during the 30–day period following each anniversary of such fifth anniversary date with respect to such business. Once declared, our manager may only declare another holding event with respect to a business following the fifth anniversary of the calculation date with respect to a previously declared holding event. |
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• | the contribution-based profit of such business as of such calculation date, which is calculated upon the occurrence of any trigger event with respect to such business;plus | |
• | the cumulative gains and losses of the company as of such calculation date, which is only calculated upon the occurrence of a sale event with respect to such business. We generally expect this component to be the most significant component in calculating total profit allocation amount. |
• | manager’s profit allocationis notpaid with respect to a trigger event relating to any business if the total profit allocation amount, as of any calculation date, with respect to such business doesnotexceed such business’ level 1 hurdle amount (7% annualized), as of such calculation date; and | |
• | manager’s profit allocationispaid with respect to a trigger event relating to any business if the total profit allocation amount, as of any calculation date, with respect to such businessexceedssuch business’ level 1 hurdle amount (7% annualized), as of such calculation date. Manager’s profit allocation to be paid with respect to such calculation date is equal to thesumof the following: |
• | 100% of such business’ total profit allocation amount, as of such calculation date, with respect to that portion of the total profit allocation amount that exceeds such business’ level 1 hurdle amount (7% annualized) but is less than or equal to such business’ level 2 hurdle amount (8.75% annualized), in each case, as of such calculation date. We refer to this portion of the total profit allocation amount as the“catch-up.” The“catch-up” is intended to provide our manager with an overall profit allocation of 20% once the level 1 hurdle amount has been surpassed;plus | |
• | 20% of the total profit allocation amount, as of such calculation date, that exceeds such business’ level 2 hurdle amount (8.75% annualized) as of such calculation date;minus | |
• | the high water mark allocation, if any, as of such calculation date. The effect of deducting the high water mark allocation is to take into account allocations our manager has already received in respect of past gains and losses. |
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Year 6 | ||||||||||||||||
B, Due | ||||||||||||||||
Year 4 | to | Year 7 | Year 7 | |||||||||||||
A, Due | 5 | B, Due | C, Due | |||||||||||||
to | Year | to | to | |||||||||||||
With Respect to Relevant Business | Sale | Hold | Sale | Sale | ||||||||||||
Contribution-based profit since acquisition for respective subsidiary | $ | 8.5 | $ | 4.5 | $ | 1 | $ | 8 | ||||||||
Gain/Loss on sale of company | 20 | 0 | (5 | ) | 12 | |||||||||||
Cumulative gains and losses | 20 | 20 | 15 | 27 | ||||||||||||
High water mark prior to transaction | 0 | 20 | 20 | 20 | ||||||||||||
Total Profit Allocation Amount (1 + 3) | 28.5 | 24.5 | 16 | 35 | ||||||||||||
Business’ holding period in quarters since ownership or last measurement due to holding event | 12 | 20 | 4 | 16 | ||||||||||||
Business’ average allocated share of consolidated net equity | 40 | 30 | 30 | 35 | ||||||||||||
Business’ level 1 hurdle amount (1.75% * 6 * 7) | 8.4 | 10.5 | 2.1 | 9.8 | ||||||||||||
Business’ excess over level 1 hurdle amount (5 −8) | 20.1 | 14 | 13.9 | 25.2 | ||||||||||||
Business’ level 2 hurdle amount (125% * 8) | 10.5 | 13.125 | 2.625 | 12.25 | ||||||||||||
Allocated to manager as“catch-up” (10 −8) | 2.1 | 2.625 | 0.525 | 2.45 | ||||||||||||
Excess over level 2 hurdle amount (9 −11) | 18 | 11.375 | 13.375 | 22.75 | ||||||||||||
Allocated to manager from excess over level 2 hurdle amount (20% * 12) | 3.6 | 2.275 | 2.675 | 4.55 | ||||||||||||
Cumulative allocation to manager (11 +13) | 5.7 | 4.9 | 3.2 | 7 | ||||||||||||
High water mark allocation (20% * 4) | 0 | 4 | 4 | 4 | ||||||||||||
manager’s Profit Allocation for Current Period (14 −15, >0) | $ | 5.7 | $ | 0.9 | $ | 0 | $ | 3 | ||||||||
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1 | Contribution-based profit since acquisition (see below) | $ | 3,474 | |||||
2 | Gain on sale of company | 35,925 | ||||||
3 | Cumulative gains and losses | 35,925 | ||||||
4 | High water mark prior to transaction | — | ||||||
5 | Total Profit Allocation Amount (1 + 3) | 39,399 | ||||||
6 | Business’ holding period in quarters | 2.5 | ||||||
7 | Business’ average allocated share of consolidated net equity | 62,520 | ||||||
8 | Business’ level 1 hurdle amount (1.75% * 6 * 7) | 2,735 | ||||||
9 | Business’ excess over level 1 hurdle amount (5 −8) | 36,664 | ||||||
10 | Business’ level 2 hurdle amount (125% * 8) | 3,419 | ||||||
11 | Allocated to manager as“catch-up” (10 −8) | 684 | ||||||
12 | Excess over level 2 hurdle amount (9 −11) | 35,980 | ||||||
13 | Allocated to manager from excess over level 2 hurdle amount (20% * 12) | 7,196 | ||||||
14 | Cumulative allocation to manager (11 + 13) | 7,880 | ||||||
15 | High water mark allocation (20% * 4) | — | ||||||
16 | Manager’s Profit Allocation (14 −15, >0) | $ | 7,880 | |||||
Calculation of Contribution-Based Profits | ||||||||
Net income | $ | 6,924 | ||||||
Plus interest expense | 3,168 | |||||||
Minus minority interest | (1,705 | ) | ||||||
Minus allocated company overhead | (4,913 | ) | ||||||
Contribution-based profit | $ | 3,474 | ||||||
• | An entity’s“adjusted net assets”is equal to, as of any date, thesumof (i) such entity’s consolidated total assets (as determined in accordance with GAAP) as of such date,plus(ii) the absolute amount of such entity’s consolidated accumulated amortization of intangibles (as determined in accordance with GAAP) as of such date,minus(iii) the absolute amount of such entity’s adjusted total liabilities as of such date. | |
• | An entity’s“adjusted total liabilities”is equal to, as of any date, such entity’s consolidated total liabilities (as determined in accordance with GAAP) as of such date after excluding the effect of any outstanding indebtedness of such entity. | |
• | A business’“allocated share of the company’s overhead”is equal to, with respect to any measurement period as of any calculation date, the aggregate amount of such business’ quarterly share of the company’s overhead for each fiscal quarter ending during such measurement period. | |
• | A business’“average allocated share of our consolidated equity”is equal to, with respect to any measurement period as of any calculation date, the average (i.e.,arithmetic mean) of a business’ quarterly allocated share of our consolidated equity for each fiscal quarter ending during such measurement period. |
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• | “Capital gains”(i) means, with respect to any entity, capital gains (as determined in accordance with GAAP) that are calculated with respect to the sale of capital stock or assets of such entity and which sale gave rise to a sale event and the calculation of profit allocation and (ii) is equal to the amount, adjusted for minority interests, by which (x) the net sales price of such capital stock or assets, as the case may be,exceeded(y) the net book value (as determined in accordance with GAAP) of such capital stock or assets, as the case may be, at the time of such sale, as reflected on the company’s consolidated balance sheet prepared in accordance with GAAP;provided, that such amount shall not be less than zero. | |
• | “Capital losses”(i) means, with respect to any entity, capital losses (as determined in accordance with GAAP) that are calculated with respect to the sale of capital stock or assets of such entity and which sale gave rise to a sale event and the calculation of profit allocation and (ii) is equal to the amount, adjusted for minority interests, by which (x) the net book value (as determined in accordance with GAAP) of such capital stock or assets, as the case may be, at the time of such sale, as reflected on the company’s consolidated balance sheet prepared in accordance with GAAP,exceeded(y) the net sales price of such capital stock or assets, as the case may be;provided, that such absolute amount thereof shall not be less than zero. | |
• | The company’s“consolidated net equity”is equal to, as of any date, thesumof (i) the company’s consolidated total assets (as determined in accordance with GAAP) as of such date,plus(ii) the aggregate amount of asset impairments (as determined in accordance with GAAP) that were taken relating to any businesses owned by the company as of such date,plus(iii) the company’s consolidated accumulated amortization of intangibles (as determined in accordance with GAAP), as of such dateminus(iv) the company’s consolidated total liabilities (as determined in accordance with GAAP) as of such dateplus(v) to the extent included in the company’s consolidated total liabilities (as determined in accordance with GAAP) as of such date, the absolute amount of the company’s liabilities (as determined in accordance with GAAP) in respect of its obligations under the supplemental put agreement. | |
• | A business’“contribution-based profits”is equal to, for any measurement period as of any calculation date, thesumof (i) the aggregate amount of such business’ net income (loss) (as determined in accordance with GAAP and as adjusted for minority interests) with respect to such measurement period (without giving effect to (x) any capital gains or capital losses realized by such business that arise with respect to the sale of capital stock or assets held by such business and which sale gave rise to a sale event and the calculation of profit allocation or (y)��any expense attributable to the accrual or payment of any amount of profit allocation or any amount arising under the supplemental put agreement, in each case, to the extent included in the calculation of such business’ net income (loss)),plus(ii) the absolute aggregate amount of such business’ loan expense with respect to such measurement period,minus(iii) the absolute aggregate amount of such business’ allocated share of the company’s overhead with respect to such measurement period. | |
• | The company’s“cumulative capital gains”is equal to, as of any calculation date, the aggregate amount of capital gains realized by the company as of such calculation date, after giving effect to any capital gains realized by the company on such calculation date, since its inception. | |
• | The company’s“cumulative capital losses”is equal to, as of any calculation date, the aggregate amount of capital losses realized by the company as of such calculation date, after giving effect to any capital losses realized by the company on such calculation date, since its inception. | |
• | The company’s“cumulative gains and losses”is equal to, as of any calculation date, thesumof (i) the amount of cumulative capital gains as of such calculation date,minus(ii) the absolute amount of cumulative capital losses as of such calculation date. | |
• | The“high water mark”is equal to, as of any calculation date, the highest positive amount of the company’s cumulative capital gains and losses as of such calculation date that were calculated in connection with a qualifying trigger event that occurred prior to such calculation date. |
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• | The“high water mark allocation”is equal to, as of any calculation date, theproductof (i) the amount of the high water mark as of such calculation date,multiplied by(ii) 20%. | |
• | A business’“level 1 hurdle amount”is equal to, as of any calculation date, theproductof (i) (x) the quarterly hurdle rate of 1.75% (7% annualized),multiplied by(y) the number of fiscal quarters ending during such business’ measurement period as of such calculation date,multiplied by(ii) a business’ average allocated share of our consolidated equity for each fiscal quarter ending during such measurement period. | |
• | A business’“level 2 hurdle amount”is equal to, as of any calculation date, theproductof (i) (x) the quarterly hurdle rate of 2.1875% (8.75% annualized, which is 125% of the 7% annualized hurdle rate),multiplied by(y) the number of fiscal quarters ending during such business’ measurement period as of such calculation date,multiplied by (ii) a business’ average allocated share of our consolidated equity for each fiscal quarter ending during such measurement period. | |
• | A business’“loan expense”is equal to, with respect to any measurement period as of any calculation date, the aggregate amount of all interest or other expenses paid by such business with respect to indebtedness of such business to either the company or other company businesses with respect to such measurement period. | |
• | The“measurement period”means, with respect to any business as of any calculation date, the period from and including the later of (i) the date upon which the company acquired a controlling interest in such business and (ii) the immediately preceding calculation date as of which contribution-based profits were calculated with respect to such business and with respect to which profit allocation were paid (or, at the election of the allocation member, deferred) by the company up to and including such calculation date. | |
• | The company’s“overhead”is equal to, with respect to any fiscal quarter, thesumof (i) that portion of the company’s operating expenses (as determined in accordance with GAAP) (without giving effect to any expense attributable to the accrual or payment of any amount of profit allocation or any amount arising under the supplemental put agreement to the extent included in the calculation of the company’s operating expenses), including any management fees actually paid by the company to our manager, with respect to such fiscal quarter that are not attributable to any of the businesses owned by the company (i.e., operating expenses that do not correspond to operating expenses of such businesses with respect to such fiscal quarter),plus(ii) the company’s accrued interest expense (as determined in accordance with GAAP) on any outstanding third party indebtedness of the company with respect to such fiscal quarter,minus(iii) revenue, interest income and other income reflected in the company’s unconsolidated financial statements as prepared in accordance with GAAP. | |
• | A“qualifying trigger event”means, with respect to any business, a trigger event that gave rise to a calculation of total profit allocation with respect to such business as of any calculation date and (ii) where the amount of total profit allocation so calculated as of such calculation date exceeded such business’ level 2 hurdle amount as of such calculation date. | |
• | A business’“quarterly allocated share of our consolidated equity”is equal to, with respect to any fiscal quarter, theproductof (i) the company’s consolidated net equity as of the last day of such fiscal quarter,multiplied by(ii) a fraction, the numerator of which is such business’ adjusted net assets as of the last day of such fiscal quarter and the denominator of which is thesumof the adjusted net assets of all of the subsidiaries owned by us as of the last day of such fiscal quarter. | |
• | A business’“quarterly share of the company’s overhead”is equal to, with respect to any fiscal quarter, theproductof (i) the absolute amount of the company’s overhead with respect to such fiscal quarter,multiplied by(ii) a fraction, the numerator of which is such business’ adjusted net assets as of the last day of such fiscal quarter and the denominator of which is the sum of the adjusted net assets of all of the subsidiaries owned by us as of the last day of such fiscal quarter. |
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• | An entity’s“third party indebtedness”means any indebtedness of such entity owed to any third party lenders that are not affiliated with such entity. |
• | subject to the company’s right to issue a note in the circumstances described above, the company must use commercially reasonable efforts to raise sufficient debt or equity financing to permit the company to pay the put price or note when due and obtain approvals, waivers and consents or otherwise remove any restrictions imposed under contractual obligations or applicable law or regulations that have the effect of limiting or prohibiting the company from satisfying its obligations under the supplemental put agreement or note; | |
• | our manager will have the right to have a representative observe meetings of the company’s board of directors and have the right to receive copies of all documents and other information furnished to the board of directors; |
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• | the company and its businesses will be restricted in their ability to sell or otherwise dispose of their property or assets or any businesses they own and in their ability to incur indebtedness (other than in the ordinary course of business) without granting a lien on the proceeds therefrom to our manager, which lien will secure the company’s obligations under the supplemental put agreement or note; | |
• | the company will be restricted in its ability to (i) engage in certain mergers or consolidations, (ii) sell, transfer or otherwise dispose of all or a substantial part of its business, property or assets or all or a substantial portion of the stock or beneficial ownership of its businesses or a portion thereof, (iii) liquidate,wind-up or dissolve, (iv) acquire or purchase the property, assets, stock or beneficial ownership or another person, or (v) declare and pay distributions. |
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Serving as Officer | ||||||||||
Director | Age | or Director Since | Position | |||||||
C. Sean Day | 57 | 2006 | Chairman/Director | |||||||
Harold S. Edwards | 41 | 2006 | Director | |||||||
D. Eugene Ewing | 58 | 2006 | Director | |||||||
Mark H. Lazarus | 43 | 2006 | Director | |||||||
Ted Waitman | 57 | 2006 | Director | |||||||
I. Joseph Massoud | 38 | 2005 | Director, Chief Executive Officer | |||||||
James J. Bottiglieri | 51 | 2005 | Director, Chief Financial Officer |
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Change in | ||||||||||||||||||||||||||||||||||||
Pension Value | ||||||||||||||||||||||||||||||||||||
and Non- | ||||||||||||||||||||||||||||||||||||
Qualified | ||||||||||||||||||||||||||||||||||||
Non-Equity | Deferred | |||||||||||||||||||||||||||||||||||
Stock | Option | Incentive Plan | Compensation | All Other | ||||||||||||||||||||||||||||||||
Salary | Bonus | Awards | Awards | Compensation | Earnings | Compensation | Total | |||||||||||||||||||||||||||||
Name | Year | ($) | ($) | ($) | ($) | ($) | ($) | ($) | ($) | |||||||||||||||||||||||||||
James J. Bottiglieri | ||||||||||||||||||||||||||||||||||||
chief financial officer(1)(2) | 2006 | 218,750 | 75,000 | — | — | — | — | 41,004(3 | ) | 334,754 |
(1) | Mr. Bottiglieri began employment with our manager on May 16, 2006. Mr. Bottiglieri’s annual rate of salary for 2006 was $350,000. | |
(2) | Mr. Bottiglieri did not participate in any stock award, stock option, non equity incentive or non qualified deferred stock compensation plans. | |
(3) | Includes the following payments we paid on behalf of the executive: |
Healthcare | Insurance | 401-K | ||||||||||||||
Contributions | Premiums | Contributions | Total | |||||||||||||
Name | ($) | ($) | ($) | ($) | ||||||||||||
James J. Bottiglieri | $ | 9,711 | $ | 68 | $ | 30,625 | $ | 41,004 |
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• | for attending a committee meeting in person (if any): $2,000 for each meeting of the audit committee; $2,000 for each meeting of the nominating and corporate governance committee; and $2,000 for each meeting of the compensation committee; and | |
• | for attending a telephonic committee meeting (if any): $1,000 for each meeting of the audit committee; $1,000 for each meeting of the nominating and corporate governance committee; and $1,000 for each meeting of the compensation committee. |
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Change in | ||||||||||||||||||||||||||||||||
Pension Value | ||||||||||||||||||||||||||||||||
and Non- | ||||||||||||||||||||||||||||||||
Qualified | ||||||||||||||||||||||||||||||||
Fees Earned | Non-Equity | Deferred | ||||||||||||||||||||||||||||||
or Paid in | Stock | Option | Incentive Plan | Compensation | All other | |||||||||||||||||||||||||||
Cash | Awards | Awards | Compensation | Earnings | Compensation | |||||||||||||||||||||||||||
Name | ($) | ($) | ($) | ($) | ($) | ($) | Total | |||||||||||||||||||||||||
C. Sean Day | $ | 41,045 | $ | 30,000 | (1) | $ | — | $ | — | $ | — | $ | — | $ | 71,045 | |||||||||||||||||
Harold S. Edwards | 42,783 | 20,000 | (1) | — | — | — | — | 62,783 | ||||||||||||||||||||||||
D. Eugene Ewing | 45,204 | 20,000 | (1) | — | — | — | — | 65,204 | ||||||||||||||||||||||||
Mark H. Lazarus | 31,363 | 20,000 | (1) | — | — | — | — | 51,363 | ||||||||||||||||||||||||
Ted Waitman | 40,783 | 20,000 | (1) | — | — | — | — | 60,783 | ||||||||||||||||||||||||
Totals | $ | 201,178 | $ | 110,000 | $ | (2) | $ | (2) | $ | (2) | $ | — | $ | 311,178 | ||||||||||||||||||
(1) | Represents 1,683 fully vested shares for C. Sean Day and 1,122 fully vested shares for each other director issued pursuant to the annual award described above. These shares were received by the directors on January 3, 2007. | |
(2) | The company does not have any stock option, non-equity incentive or deferred compensation arrangements for any of its directors. |
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DIRECTORS AND EXECUTIVE OFFICERS
Shares of Trust Stock | ||||||||
Representing Sole | Percent of | |||||||
Voting and/or | Shares | |||||||
Name and Address of Beneficial Owner | Investment Power | Outstanding | ||||||
5% Beneficial Owners | ||||||||
CGI(1) | 7,350,000 | 35.9 | % | |||||
Prides Capital Partners, L.L.C.(2) | 1,308,653 | 6.4 | % | |||||
Chilton Investment Company, L.L.C.(3) | 1,105,045 | 5.4 | % | |||||
Directors and Executive Officers: | ||||||||
C. Sean Day(5) | 323,350 | 1.6 | % | |||||
I. Joseph Massoud(4)(5) | 266,667 | 1.3 | % | |||||
James J. Bottiglieri(5) | 6,667 | * | ||||||
Harold S. Edwards(5) | 3,830 | * | ||||||
D. Eugene Ewing | 9,455 | * | ||||||
Mark H. Lazarus | 1,122 | * | ||||||
Ted Waitman | 14,455 | * | ||||||
All Directors and Executive Officers as a Group | 625,546 | 3.1 | % |
* | Less than 1%. |
(1) | These shares are owned by CGI Diversified Holdings LP, a wholly owned subsidiary of CGI. Upon completion of this offering and the separate private placement transaction, CGI will own approximately 9,114,706 shares representing 30.2% of our shares. See the section entitled “Certain Relationships and Related Party Transactions” for more information about the relationship of CGI and its affiliates. |
(2) | Number of shares presented is based solely on the information provided in a filing by such person with the SEC on Schedule 13D. The address for Prides Capital Partners, L.L.C. is 200 High Street, Suite 700, Boston, Massachusetts 02110 |
(3) | Number of shares presented is based solely on the information provided in a filing by such person with the SEC on Schedule 13D. The address for Chilton Investment Company, L.L.C. is 300 Park Avenue, 19th floor, New York, N.Y. 10022. |
(4) | Our chief executive officer, Mr. Massoud, as managing member of Pharos, exercises sole voting and investment power with respect to the shares owned by Pharos. Amounts with respect to Mr. Massoud reflect his beneficial ownership of shares through his interest in and control of Pharos. |
(5) | The underwriters have allocated a total of 150,000 shares being offered hereby to directors, employees of our manager and others at the public offering price. Of the shares being allocated to these persons, |
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Mr. Day intends to purchase 60,000 shares, Mr. Massoud intends to purchase 25,000 shares, Mr. Bottiglieri intends to purchase 6,000 shares, and Mr. Edwards intends to purchase 1,500 shares. |
Number of | Percent of | |||||||
Interests(1) | Class | |||||||
Compass Group Management LLC | ||||||||
Allocation interests | 1,000 | 100 | % | |||||
Trust interests | — | — | ||||||
Compass Diversified Trust(2) | ||||||||
Allocation interests | — | — | ||||||
Trust interests | 20,450,000 | 100 | % |
(1) | Compass Group Diversified Holdings LLC has two classes of interests: allocation interests and trust interests. | |
(2) | Each beneficial interest in the trust corresponds to one underlying trust interest of the company. Unless the trust is dissolved, it must remain the sole holder of 100% of the trust interests and at all times the company will have outstanding the identical number of trust interests as the number of outstanding shares of the trust. As a result of corresponding interest between shares and trust interests, each holder of shares identified in the table above relating to the trust must be deemed to beneficially own a correspondingly proportionate interest in the company. |
Number of | Percent of | |||||||
Shares | Class | |||||||
C. Sean Day Advanced Circuits, Series B Common Stock(1) | 10,000 | 0.8% |
(1) | Mr. Day is the direct owner of 6,480 shares of Series B Common Stock and Mr. Day’s children are the owners in the aggregate of 3,520 shares of Series B Common Stock. |
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• | the management services agreement relating to the management services our manager performs for us and the businesses we own and the management and transaction fees to be paid to our manager in respect thereof; | |
• | the company’s LLC agreement setting forth our manager’s rights with respect to the allocation interests our manager owns, including the right to receive profit allocations from the company; and | |
• | the supplemental put agreement relating to our manager’s right to cause the company to purchase the allocation interests owned by our manager. |
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• | such business’ contribution-based profit, which generally will be equal to such business’ aggregate contribution to the company’s profit during the period such business is owned by the company; and | |
• | the company’s cumulative gains and losses to date. |
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• | our chief executive officer and chief financial officer; | |
• | our directors; and | |
• | other members of the management team involved in the oversight of theday-to-day operations of the company and its subsidiaries. |
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• | voting or consent rights in connection with certain anti-takeover provisions, as discussed below; | |
• | a consent right with respect to the amendment or modification of the provisions providing for distributions to the holders of allocation interests; | |
• | a consent right to any amendment to the provision entitling the holders of allocation interests to appoint directors who will serve on the board of directors of the company; |
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• | a consent right with respect to any amendment of the provision of the LLC agreement governing amendments thereof; and | |
• | a consent right with respect to any amendment that would adversely affect the holder of allocation interests. |
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• | the trust or the company, or both, is, or is reasonably likely to be, treated as a corporation for United States federal income tax purposes; | |
• | the trust is, or is reasonably likely to be, required to issue Schedules K-1 to holders of shares; or | |
• | the existence of the trust otherwise results, or is reasonably likely to result, in a material tax detriment to the trust, the holders of shares, the company or any of the members; and | |
• | the company’s board of directors obtains an opinion of counsel to such effect, the company, as sponsor of the trust, may cause the trust to exchange all shares then outstanding for an equal number of trust interests and dissolve the trust. We refer to such an exchange as a voluntary exchange. The company, as sponsor of the trust, will cause the transfer agent for the shares to mail a copy of notice of such exchange to the shareholders of the trust at least 30 days prior to the exchange of shares for trust interests. Upon the completion of a voluntary exchange, each holder of shares immediately prior to the completion of the voluntary exchange will be admitted to the company as a member in respect of an equal number of trust interests and the trust will cease to be a member of the company. |
• | the adoption of a resolution by a majority vote of the company’s board of directors approving the dissolution, winding up and liquidation of the company and such action has been approved by the affirmative vote of a majority of the outstanding trust interests entitled to vote thereon; | |
• | the unanimous vote of the outstanding trust interests to dissolve, wind up and liquidate the company; | |
• | a judicial determination that an event has occurred that makes it unlawful, impossible or impractical to carry on the business of the company as then currently operated as determined in accordance withSection 18-802 of the Delaware Limited Liability Company Act; or | |
• | the termination of the legal existence of the last remaining member or the occurrence of any other event that terminates the continued membership of the last remaining member, unless the company is continued without dissolution in a manner provided under the LLC agreement or the Delaware Limited Liability Company Act. |
• | an acquisition exchange or a voluntary exchange; |
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• | the filing of a certificate of cancellation of the company or its failure to revive its charter within 10 days following revocation of the company’s charter; | |
• | the entry of a decree of judicial dissolution by a court of competent jurisdiction over the company or the trust; or | |
• | the written election of the company. |
• | protect our manager and its economic interests in the company; | |
• | protect the position of our manager and its rights to manage the business and affairs of the company under the management services agreement; | |
• | enhance the likelihood of continuity and stability in the composition of the company’s board of directors and in the policies formulated by the board of directors; | |
• | discourage certain types of transactions which may involve an actual or threatened change in control of the trust and the company; | |
• | discourage certain tactics that may be used in proxy fights; | |
• | encourage persons seeking to acquire control of the trust and the company to consult first with the company’s board of directors to negotiate the terms of any proposed business combination or offer; and | |
• | reduce the vulnerability of the trust and the company to an unsolicited proposal for a takeover that does not contemplate the acquisition of all of the outstanding shares or that is otherwise unfair to shareholders of the trust. |
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• | the purpose or powers of the company; | |
• | the authorization of an increase in trust interests; | |
• | the distribution rights of the trust interests; | |
• | the voting rights of the trust interests; | |
• | the provisions regarding the right to acquire trust interests after an acquisition exchange described above; | |
• | the right of holders of shares to enforce the LLC agreement or to institute any legal proceeding for any remedy available to the trust; | |
• | the hiring of a replacement manager following the termination of the management services agreement; | |
• | the merger or consolidation of the company, the sale, lease or exchange of all or substantially all of the company’s assets and certain other business combinations or transactions; | |
• | the right of holders to vote on the dissolution, winding up and liquidation of the company; and | |
• | the provision of the LLC agreement governing amendments thereof. |
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• | cause the trust to fail or cease to qualify for the exemption from the status of an “investment company” under the Investment Company Act or be classified as anything other than a grantor trust for United States federal income tax purposes; | |
• | cause the trust to fail to qualify as a grantor trust for U.S. federal income tax purposes; | |
• | cause the trust to issue a class of equity securities other than the shares (as described above under “— Shares in the Trust”), or issue any debt securities or any derivative securities or amend the provision of the trust agreement prohibiting any such issuances; | |
• | affect the exclusive and absolute right of our shareholders to direct the voting of the trust, as a member of the company, with respect to all matters reserved for the vote of members of the company pursuant to the LLC agreement; | |
• | effect the merger or consolidation of the trust, effect the sale, lease or exchange of all or substantially all of the trust’s property or assets and certain other business combinations or transactions; | |
• | amend the distribution rights of the shares; | |
• | increase the number of authorized shares; or | |
• | amend the provision of the trust agreement governing the amendment thereof. |
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• | brokers and dealers in securities or currencies; | |
• | financial institutions; | |
• | regulated investment companies; | |
• | real estate investment trusts; | |
• | tax-exempt organizations; | |
• | insurance companies; | |
• | persons holding shares as a part of a hedging, integrated or conversion transaction or a straddle, or as part of any other risk reduction transaction; | |
• | traders in securities that elect to use amark-to-market method of accounting for their securities holdings; or | |
• | persons liable for alternative minimum tax. |
• | an individual citizen or resident of the United States; | |
• | a corporation (or other entity taxable as a corporation) created or organized in or under the laws of the United States or any state thereof or the District of Columbia; | |
• | a partnership (or other entity treated as a partnership for tax purposes) created or organized in or under the laws of the United States or any state thereof or the District of Columbia, the interests in which are owned only by U.S. persons; | |
• | an estate the income of which is subject to U.S. federal income taxation regardless of its source; or | |
• | a trust if it (1) is subject to the primary supervision of a federal, state or local court within the United States and one or more U.S. persons have the authority to control all substantial decisions of the trust or (2) has a valid election in effect under applicable Regulations to be treated as a U.S. person. |
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• | 3% of the individual’s adjusted gross income in excess of certain threshold amounts; or | |
• | 80% of the amount of certain itemized deductions otherwise allowable for the taxable year. |
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Number of | ||||
Offered | ||||
Underwriter | Shares | |||
Citigroup Global Markets Inc. | ||||
Ferris, Baker Watts, Incorporated | ||||
A.G. Edwards & Sons, Inc. | ||||
BB&T Capital Markets, a division of Scott & Stringfellow, Inc. | ||||
Morgan Keegan & Company, Inc. | ||||
Sanders Morris Harris Inc. | ||||
Total |
Per Share | No Exercise | Full Exercise | ||||||||||
Public offering price | $ | $ | $ | |||||||||
Underwriting discount and commissions payable by us | ||||||||||||
Proceeds before public offering costs |
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• | to any legal entity that is authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities or | |
• | to any legal entity that has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than €43,000,000 and (3) an annual net turnover of more than €50,000,000, as shown in its last annual or consolidated accounts or | |
• | in any other circumstances that do not require the publication of a prospectus pursuant to Article 3 of the Prospectus Directive. |
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• | released, issued, distributed or caused to be released, issued or distributed to the public in France or | |
• | used in connection with any offer for subscription or sale of the shares to the public in France. |
• | to qualified investors (investisseurs qualifiés)and/or to a restricted circle of investors (cercle restreint d’investisseurs), in each case investing for their own account, all as defined in, and in accordance with,Article L.411-2, D.411-1, D.411-2, D.734-1, D.744-1, D.754-1 and D.764-1 of the FrenchCode monétaire et financier or | |
• | to investment services providers authorized to engage in portfolio management on behalf of third parties or | |
• | in a transaction that, in accordance with article L.411-2-II-1º-or-2º-or 3º of the FrenchCode monétaire et financierandarticle 211-2 of the General Regulations (Règlement Général) of the Autorité des Marchés Financiers, does not constitute a public offer (appel public à l’épargne). |
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Page | ||||
Number(s) | ||||
Compass Diversified Trust | ||||
Report of Independent Registered Public Accounting Firm | F-2 | |||
Consolidated Balance Sheets as of December 31, 2005 and December 31, 2006 | F-3 | |||
Consolidated Statements of Operations for the Period November 18 2005 (date of inception) through December 31, 2005 and for the Year Ended December 31, 2006 | F-4 | |||
Condensed Consolidated Statement of Stockholder’s Equity for the Year Ended December 31, 2006 | F-5 | |||
Condensed Consolidated Statement of Cash Flows for the Period November 18, 2005 (date of inception) through December 31, 2005 and for the Year Ended December 31, 2006 | F-6 | |||
Notes to Consolidated Financial Statements | F-7 | |||
Aeroglide Corporation and Subsidiary | ||||
Report of Independent Certified Public Accounting Firm | F-30 | |||
Consolidated Balance Sheets as of December 31, 2006 and 2005 | F-31 | |||
Consolidated Statements of Operations and Comprehensive Income for the Years Ended December 31, 2006, 2005, and 2004 | F-32 | |||
Consolidated Statements of Shareholders’ Equity for the Years Ended December 31, 2006, 2005, and 2004 | F-33 | |||
Consolidated Statements of Cash Flows for the Years Ended December 31, 2006, 2005 and 2004 | F-34 | |||
Notes to Consolidated Financial Statements | F-35 | |||
Halo Branded Solutions, Inc. and Subsidiary | ||||
Independent Auditor’s Report | F-44 | |||
Consolidated Balance Sheets as of December 31, 2006 and 2005 | F-45 | |||
Consolidated Statements of Income for the Years Ended December 31, 2006, 2005 and 2004 | F-46 | |||
Consolidated Statement of Stockholders’ Equity for the Years Ended December 31, 2006, 2005 and 2004 | F-47 | |||
Consolidated Statements of Cash Flows for the Years Ended December 31, 2006, 2005 and 2004 | F-48 | |||
Notes to Consolidated Financial Statements | F-49 |
F-1
Table of Contents
Shareholders of Compass Diversified Trust
March 9, 2007
F-2
Table of Contents
December 31, | ||||||||
2006 | 2005 | |||||||
(In thousands) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 7,006 | $ | 100 | ||||
Accounts receivable, less allowances of $3,327 at December 31, 2006 | 74,899 | — | ||||||
Inventories | 4,756 | — | ||||||
Prepaid expenses and other current assets | 7,059 | 3,308 | ||||||
Current assets of discontinued operations | 46,636 | — | ||||||
Total current assets | 140,356 | 3,408 | ||||||
Property, plant and equipment, net | 10,858 | — | ||||||
Goodwill | 159,151 | — | ||||||
Intangible assets, net | 128,890 | — | ||||||
Deferred debt issuance costs, less accumulated amortization of $114 at December 31, 2006 | 5,190 | — | ||||||
Other non-current assets | 15,894 | — | ||||||
Assets of discontinued operations | 65,258 | — | ||||||
Total assets | $ | 525,597 | $ | 3,408 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 14,314 | $ | — | ||||
Accrued expenses | 38,586 | 1 | ||||||
Due to related party | 469 | 3,308 | ||||||
Revolving credit facility | 87,604 | — | ||||||
Current portion of supplemental put obligation | 7,880 | — | ||||||
Current liabilities of discontinued operations | 14,019 | — | ||||||
Total current liabilities | 162,872 | 3,309 | ||||||
Supplemental put obligation | 14,576 | — | ||||||
Deferred income taxes | 41,337 | — | ||||||
Other non-current liabilities | 17,336 | — | ||||||
Non-current liabilities of discontinued operations | 6,634 | — | ||||||
Total liabilities | 242,755 | 3,309 | ||||||
Minority interests | 27,131 | 100 | ||||||
Stockholders’ equity (deficit) | ||||||||
Trust shares, no par value, 500,000 authorized; 20,450 shares issued and outstanding | 274,961 | — | ||||||
Accumulated earnings (deficit) | (19,250 | ) | (1 | ) | ||||
Total stockholders’ equity (deficit) | 255,711 | (1 | ) | |||||
Total liabilities and stockholders’ equity (deficit) | $ | 525,597 | $ | 3,408 | ||||
F-3
Table of Contents
Year Ended December 31, | ||||||||
2006 | 2005 | |||||||
(In thousands, except per share data) | ||||||||
Net sales | $ | 410,873 | $ | — | ||||
Cost of sales | 311,641 | — | ||||||
Gross profit | 99,232 | — | ||||||
Operating expenses: | ||||||||
Staffing expense | 34,345 | — | ||||||
Selling, general and administrative expenses | 36,732 | 1 | ||||||
Supplemental put expense | 22,456 | — | ||||||
Fees to Manager | 4,376 | — | ||||||
Research and development expense | 1,806 | — | ||||||
Amortization expense | 6,774 | — | ||||||
Operating loss | (7,257 | ) | (1 | ) | ||||
Other income (expense): | ||||||||
Interest income | 807 | — | ||||||
Interest expense | (6,130 | ) | — | |||||
Amortization of debt issuance costs | (779 | ) | — | |||||
Loss on debt extinguishment | (8,275 | ) | — | |||||
Other income, net | 541 | — | ||||||
Loss from continuing operations before income taxes and minority interests | (21,093 | ) | (1 | ) | ||||
Provision for income taxes | 5,298 | — | ||||||
Minority interest | 1,245 | — | ||||||
Loss from continuing operations | (27,636 | ) | (1 | ) | ||||
Income from discontinued operations, net of income tax | 8,387 | — | ||||||
Net loss | $ | (19,249 | ) | $ | (1 | ) | ||
Basic and fully diluted net loss per share from continuing operations | $ | (2.18 | ) | $ | — | |||
Basic and fully diluted income per share from discontinued operations | 0.66 | — | ||||||
Basic and fully diluted net loss per share | $ | (1.52 | ) | $ | — | |||
Weighted average number of shares of Trust stock outstanding — basic and fully diluted | 12,686 | 1 | ||||||
Cash dividends paid per share | $ | 0.3952 | $ | — | ||||
F-4
Table of Contents
Total | ||||||||||||||||
Number of | Accumulated | Stockholders’ | ||||||||||||||
Shares | Amount | Deficit | Equity | |||||||||||||
(In thousands) | ||||||||||||||||
Balance — December 31, 2005 | — | $ | — | $ | (1 | ) | $ | (1 | ) | |||||||
Issuance of Trust shares, net of offering costs | 19,500 | 269,816 | — | 269,816 | ||||||||||||
Issuance of Trust shares — Anodyne acquisition | 950 | 13,100 | — | 13,100 | ||||||||||||
Dividends paid | — | (7,955 | ) | — | (7,955 | ) | ||||||||||
Net loss | — | — | (19,249 | ) | (19,249 | ) | ||||||||||
Balance — December 31, 2006 | 20,450 | $ | 274,961 | $ | (19,250 | ) | $ | 255,711 | ||||||||
F-5
Table of Contents
Year Ended December 31, | ||||||||
2006 | 2005 | |||||||
(In thousands) | ||||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (19,249 | ) | $ | (1 | ) | ||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
Depreciation of property and equipment | 2,494 | — | ||||||
Amortization expense | 7,796 | — | ||||||
Supplemental put expense | 22,456 | — | ||||||
Loss on debt extinguishment | 8,275 | — | ||||||
Minority interests | 2,950 | — | ||||||
Loan forgiveness accrual | 2,760 | — | ||||||
Deferred taxes | (2,281 | ) | — | |||||
In-process research and development expense | 1,120 | — | ||||||
Other | (450 | ) | — | |||||
Changes in operating assets and liabilities, net of acquisitions: | ||||||||
Increase in accounts receivable | (7,867 | ) | — | |||||
Increase in inventories | (6,314 | ) | — | |||||
Increase in prepaid expenses and other current assets | (72 | ) | — | |||||
Increase in accounts payable and accrued expenses | 8,555 | 1 | ||||||
Decrease in due to related party | (1,308 | ) | — | |||||
Increase in other liabilities | 2,251 | — | ||||||
Other | (553 | ) | — | |||||
Net cash provided by operating activities | 20,563 | — | ||||||
Cash flows from investing activities: | ||||||||
Acquisition of businesses, net of cash acquired | (356,464 | ) | — | |||||
Purchases of property and equipment | (5,822 | ) | — | |||||
Net cash used in investing activities | (362,286 | ) | — | |||||
Cash flows from financing activities: | ||||||||
Proceeds from the issuance of debt | 85,004 | — | ||||||
Proceeds from the issuance of Trust shares, net | 284,969 | 100 | ||||||
Debt issuance costs | (11,560 | ) | — | |||||
Distributions paid | (7,955 | ) | — | |||||
Other | 615 | — | ||||||
Net cash provided by financing activities | 351,073 | 100 | ||||||
Net increase in cash and cash equivalents | 9,350 | 100 | ||||||
Foreign currency adjustment | 260 | — | ||||||
Cash and cash equivalents —beginning of period | 100 | — | ||||||
Cash and cash equivalents —end of period | $ | 9,710 | $ | 100 | ||||
Cash reflected in discontinued operations at December 31, 2006 | $ | 2,704 | $ | — | ||||
F-6
Table of Contents
• | a controlling interest in CBS Personnel Holdings, Inc (“CBS Personnel”) was purchased for approximately $54.6 million, representing at the time of purchase approximately 97.6% of the outstanding stock of CBS Personnel on a primary basis and approximately 94.4% on a fully diluted basis, after giving effect to the exercise of vested and in the money options and vested non-contingent warrants; |
F-7
Table of Contents
• | a controlling interest in Crosman Acquisition Corporation (“Crosman”) was purchased for approximately $26.1 million representing approximately 75.4% of the outstanding stock of Crosman on a primary basis and 73.8% on a fully diluted basis (See Note O “Subsequent Events”); | |
• | a controlling interest in Compass AC Holdings, Inc.(“Advanced Circuits or ACI”) was purchased for approximately $35.4 million, representing approximately 70.2% of the outstanding stock of Advanced Circuits on a primary and fully diluted basis; and | |
• | a controlling interest in Silvue Technologies Group, Inc. (“Silvue”)was purchased for approximately $23.2 million, representing approximately 73.0% of the outstanding stock of Silvue on a primary and fully diluted basis. |
F-8
Table of Contents
F-9
Table of Contents
Machinery and Equipment | 3 to 5 years | |
Office Furniture and Equipment | 3 to 7 years | |
Buildings and Building Improvements | 2 to 15 years | |
Vehicles | 2 to 3 years | |
Leasehold Improvements | Shorter of useful life or lease term |
F-10
Table of Contents
F-11
Table of Contents
F-12
Table of Contents
F-13
Table of Contents
CBS Personnel | Crosman(2) | ACI | Silvue | Total | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Assets: | ||||||||||||||||||||
Current assets(1) | $ | 65,033 | $ | 34,793 | $ | 5,737 | $ | 6,597 | $ | 112,160 | ||||||||||
Property, plant and equipment | 2,617 | 9,983 | 3,158 | 2,137 | 17,895 | |||||||||||||||
Intangible assets | 71,200 | 19,150 | 20,700 | 26,920 | 137,970 | |||||||||||||||
Goodwill | 60,073 | 28,783 | 59,563 | 18,034 | 166,453 | |||||||||||||||
Other assets | 1,927 | 3,500 | 592 | 517 | 6,536 | |||||||||||||||
Total assets | 200,850 | 96,209 | 89,750 | 54,205 | 441,014 | |||||||||||||||
Liabilities: | ||||||||||||||||||||
Current liabilities | 34,741 | 15,442 | 5,669 | 6,668 | 62,520 | |||||||||||||||
Other liabilities | 108,149 | 48,944 | 46,396 | 21,891 | 225,380 | |||||||||||||||
Minority interests | 3,401 | 5,703 | 2,259 | 2,427 | 13,790 | |||||||||||||||
Total liabilities and minority interests | 146,291 | 70,089 | 54,324 | 30,986 | 301,690 | |||||||||||||||
Costs of net assets acquired | 54,559 | 26,120 | 35,426 | 23,219 | 139,324 | |||||||||||||||
Loans to businesses | 73,228 | 46,477 | 45,606 | 14,294 | 179,605 | |||||||||||||||
$ | 127,787 | $ | 72,597 | $ | 81,032 | $ | 37,513 | $ | 318,929 | |||||||||||
F-14
Table of Contents
(1) | Includes approximately $8.2 million in cash. | |
(2) | See Footnote D “Discontinued Operations”. |
Anodyne | ||||
(In thousands) | ||||
Assets: | ||||
Current assets | $ | 6,347 | ||
Property, plant and equipment | 1,909 | |||
Intangible assets | 10,890 | |||
Goodwill | 21,507 | |||
Other assets | 581 | |||
Total assets | 41,234 | |||
Liabilities: | ||||
Current liabilities | 2,991 | |||
Other liabilities | 12,636 | |||
Minority interests | 10,593 | |||
Total liabilities and minority interests | 26,220 | |||
Cost of net assets acquired | 15,014 | |||
Note purchase | 5,286 | |||
Loans to Anodyne | 10,750 | |||
$ | 31,050 | |||
F-15
Table of Contents
Total | ||||
(In thousands, except | ||||
per share data) | ||||
Net sales | $ | 602,074 | ||
Income from continuing operations before income taxes and minority interests | $ | 16,691 | ||
Net income | $ | 8,912 | ||
Basic and fully diluted income per share | $ | .44 |
Total | ||||
(In thousands, except | ||||
per share data) | ||||
Net sales | $ | 645,680 | ||
Loss from continuing operations before income taxes and minority interests | $ | (13,233 | ) | |
Net loss | $ | (16,639 | ) | |
Basic and fully diluted loss per share | $ | (0.81 | ) |
Net sales | $ | 72,316 | ||
Costs and expenses | 59,039 | |||
Income from discontinued operations | 13,277 | |||
Other income, net | 182 | |||
Income from discontinued operations before taxes | 13,459 | |||
Provision for taxes | 3,367 | |||
Minority interests | 1,705 | |||
Net income from discontinued operations(1) | $ | 8,387 | ||
(1) | This amount does not include intercompany interest expense incurred totaling approximately $3.2 million. |
F-16
Table of Contents
December 31, 2006 | ||||
(In thousands) | ||||
Assets: | ||||
Cash | $ | 2,706 | ||
Accounts receivable, net | 23,550 | |||
Inventory | 16,211 | |||
Other current assets | 4,169 | |||
Current assets of discontinued operations | 46,636 | |||
Property, plant and equipment, net | 12,567 | |||
Investment in joint venture | 3,526 | |||
Goodwill and other intangible assets, net | 49,165 | |||
Non-current assets of discontinued operations | 65,258 | |||
Total assets of discontinued operations | $ | 111,894 | ||
Liabilities: | ||||
Accounts payable | $ | 7,472 | ||
Other current liabilities | 6,547 | |||
Current liabilities of discontinued operations | $ | 14,019 | ||
Non-current liabilities of discontinued operations | $ | 6,634 | ||
• | CBS Personnel, a human resources outsourcing firm, is a provider of temporary staffing services in the United States. CBS Personnel serves over 4,000 corporate and small business clients. CBS Personnel also offers employee leasing services, permanent staffing andtemporary-to-permanent placement services. | |
• | ACI, an electronic components manufacturing company, is a provider of prototype and quick-turn printed circuit boards. ACI manufactures and delivers custom printed circuit boards to over 8,000 customers in the United States. | |
• | Silvue, a global hard-coatings company, is a developer and producer of proprietary, high performance liquid coating system used in the eye-ware, aerospace, automotive and industrial markets. Silvue has sales and distribution operations in the United States, Europe and Asia as well as manufacturing operations in the United States and Asia. |
F-17
Table of Contents
• | Anodyne, a medical support surfaces company, is a manufacturer of medical support services and patient positioning devices primarily used for the prevention and treatment of pressure wounds experienced by patients with limited or no mobility. Anodyne is headquartered in California and its product is sold primarily in North America. |
Year Ended | ||||
December 31, 2006 | ||||
CBS Personnel | $ | 352,421 | ||
ACI | 30,581 | |||
Silvue | 15,700 | |||
Anodyne | 12,171 | |||
Total | 410,873 | |||
Reconciliation of segment revenues to consolidated net sales: | ||||
Corporate and other | — | |||
Total consolidated net sales | $ | 410,873 | ||
F-18
Table of Contents
Year Ended | ||||
December 31, | ||||
2006 | ||||
CBS Personnel | $ | 17,079 | ||
ACI | 7,483 | |||
Silvue | 4,694 | |||
Anodyne | (557 | ) | ||
Total | 28,699 | |||
Reconciliation of segment profit to consolidated income from continuing operations before income taxes and minority interests: | ||||
Interest expense, net | (5,323 | ) | ||
Loss on debt extinguishment | (8,275 | ) | ||
Other income | 541 | |||
Corporate and other(2) | (36,735 | ) | ||
Total consolidated loss from continuing operations before income taxes and minority interests | $ | (21,093 | ) | |
(1) | Segment profit represents operating income | |
(2) | Corporate and other consists of charges at the corporate level and purchase accounting adjustments |
Accounts | ||||||||
Receivable | Allowances | |||||||
December 31, | December 31, | |||||||
2006 | 2006 | |||||||
CBS Personnel | $ | 68,133 | $ | (3,026 | ) | |||
ACI | 3,054 | (219 | ) | |||||
Silvue | 2,710 | (19 | ) | |||||
Anodyne | 4,329 | (63 | ) | |||||
Total | 78,226 | (3,327 | ) | |||||
Reconciliation of segments to consolidated amount: | ||||||||
Corporate and other | — | — | ||||||
Total | 78,226 | $ | (3,327 | ) | ||||
Allowance for doubtful accounts and other | (3,327 | ) | ||||||
Total consolidated net accounts receivable | $ | 74,899 | ||||||
F-19
Table of Contents
Depreciation and | ||||||||||||
Amortization Expense | ||||||||||||
Goodwill | For the Year Ended | |||||||||||
December 31, | Identifiable Assets | December 31, | ||||||||||
2006 | December 31, 2006(3) | 2006 | ||||||||||
CBS Personnel | $ | 60,569 | $ | 23,395 | $ | 1,372 | ||||||
ACI | 50,659 | 24,438 | 2,040 | |||||||||
Silvue | 11,255 | 15,269 | 690 | |||||||||
Anodyne | 18,418 | 21,990 | 763 | |||||||||
Total | 140,901 | 85,092 | 4,865 | |||||||||
Reconciliation of segments to consolidated amount: | — | |||||||||||
Corporate and other identifiable assets | — | 206,455 | 4,379 | |||||||||
Goodwill carried at Corporate level | 18,250 | — | — | |||||||||
Total | $ | 159,151 | $ | 291,547 | $ | 9,244 | ||||||
(3) | Not including accounts receivable scheduled above |
December 31, 2006 | ||||
Raw materials and supplies | $ | 3,663 | ||
Finished goods | 1,135 | |||
Less: obsolescence reserve | (42 | ) | ||
$ | 4,756 | |||
December 31, 2006 | ||||
Machinery and equipment | $ | 4,489 | ||
Office furniture and equipment | 5,190 | |||
Buildings and building improvements | 886 | |||
Leasehold improvements | 1,873 | |||
12,438 | ||||
Less: Accumulated depreciation | (1,580 | ) | ||
$ | 10,858 | |||
F-20
Table of Contents
(In thousands) | ||||
2007 | $ | 7,080 | ||
2008 | 6,166 | |||
2009 | 4,837 | |||
2010 | 2,871 | |||
2011 | 1,769 | |||
Thereafter | 5,289 | |||
$ | 28,012 | |||
Balance at beginning of year | $ | — | ||
Acquisition of initial businesses and SES | 136,459 | |||
Anodyne and Anatomic Concepts, Inc. acquisition | 22,692 | |||
Balance at December 31, 2006 | $ | 159,151 | ||
F-21
Table of Contents
Weighted Average | ||||||||
Life | ||||||||
Customer and distributor relations | $ | 110,876 | 12 | |||||
Technology | 9,660 | 11 | ||||||
Licensing agreements and anti-piracy covenants | 1,157 | 5 | ||||||
121,693 | ||||||||
Accumulated amortization customer and distributor relations | (5,913 | ) | ||||||
Accumulated amortization technology | (694 | ) | ||||||
Accumulated amortization licensing and anti-piracy covenants | (166 | ) | ||||||
114,920 | ||||||||
Trade names, not subject to amortization | 13,970 | |||||||
Balance at December 31, 2006 | $ | 128,890 | ||||||
2007 | $ | 11,261 | ||
2008 | 11,261 | |||
2009 | 11,136 | |||
2010 | 10,655 | |||
2011 | 10,409 | |||
$ | 54,722 | |||
F-22
Table of Contents
• | to maintain a minimum fixed charge coverage ratio of at least 1.5 to 1.0; | |
• | to maintain a minimum interest coverage ratio of less than 3.0 to 1.0; and | |
• | to maintain a total debt to EBITDA ratio not to exceed 3.0: 1.0. |
F-23
Table of Contents
Year Ended | ||||
December 31, | ||||
2006 | ||||
(In thousands) | ||||
Current taxes: | ||||
Federal | $ | 5,752 | ||
State | 855 | |||
Foreign | 665 | |||
Total current taxes | 7,272 | |||
Deferred taxes: | ||||
Federal | (1,673 | ) | ||
State | (267 | ) | ||
Foreign | (34 | ) | ||
Total deferred taxes | (1,974 | ) | ||
Total tax expense | $ | 5,298 | ||
(In thousands) | ||||
Deferred tax assets: | ||||
Tax credits | $ | 1,728 | ||
Accounts receivable and allowances | 929 | |||
Workers’ compensation | 6,547 | |||
Accrued expenses | 2,134 | |||
Loan forgiveness | 993 | |||
Other | 1,116 | |||
Total deferred tax assets | 13,447 | |||
Less: | ||||
Valuation allowance | (1,728 | ) | ||
Net deferred tax asset | $ | 11,719 | ||
Deferred tax liabilities: | ||||
Intangible assets | $ | (41,328 | ) | |
Property and equipment | (346 | ) | ||
Prepaid and other expenses | (550 | ) | ||
Total deferred tax liabilities | $ | (42,224 | ) | |
Total net deferred tax liability | $ | (30,505 | ) | |
F-24
Table of Contents
2006 | ||||
(In thousands) | ||||
United States Federal Statutory Rate | (34.0 | )% | ||
Foreign and state income taxes (net of Federal benefits) | 4.7 | |||
Expenses of Compass Group Diversified Holdings, LLC representing a pass through to shareholders | 53.7 | |||
Loss on foreign debt refinancing not deductible | 1.5 | |||
Credits and other | (0.8 | ) | ||
Effective income tax rate | 25.1 | % | ||
F-25
Table of Contents
2006 Quarter Ended | ||||||||||||||||||||
Mar. 31 | Jun. 30 | Sep. 30 | Dec. 31 | Total | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Net sales | $ | — | $ | 80,194 | $ | 159,073 | $ | 171,606 | $ | 410,873 | ||||||||||
Gross profit | — | $ | 18,898 | $ | 38,158 | $ | 42,176 | $ | 99,232 | |||||||||||
Operating income (loss) | — | $ | 2,101 | $ | (954 | ) | $ | (8,404 | ) | $ | (7,257 | ) | ||||||||
Income (loss) from continuing operations | — | $ | 210 | $ | (7,288 | ) | $ | (20,558 | ) | $ | (27,636 | ) | ||||||||
Income from discontinued operations, net of taxes | $ | 1,902 | $ | 3,404 | $ | 3,081 | $ | 8,387 | ||||||||||||
Net income (loss) | — | $ | 2,112 | $ | (3,884 | ) | $ | (17,477 | ) | $ | (19,249 | ) | ||||||||
Basic and diluted net income (loss) per share from continuing operations | — | $ | 0.02 | $ | (0.36 | ) | $ | (1.00 | ) | $ | (2.18 | ) | ||||||||
Basic and diluted net income per share from discontinued operations | — | $ | 0.19 | $ | 0.17 | $ | 0.15 | $ | 0.66 | |||||||||||
Basic and diluted net income (loss) per share | — | $ | 0.21 | $ | (0.19 | ) | $ | (0.85 | ) | $ | (1.52 | ) |
Summary of accrued expenses: | December 31, 2006 | |||
Accrued payroll and fringes | $ | 21,419 | ||
Current portion of workers compensation liability | 7,664 | |||
Income taxes payable | 1,680 | |||
Accrued interest | 941 | |||
Other accrued expenses | 6,882 | |||
$ | 38,586 | |||
Summary of other non-current liabilities: | December 31, 2006 | |||
Workers compensation | $ | 13,198 | ||
Liabilities associated with stock purchase agreements at Advanced Circuits | 3,961 | |||
Other non-current liabilities | 177 | |||
$ | 17,336 | |||
Other cash flow data: | December 31, 2006 | |||
Interest paid | $ | 4,686 | ||
Taxes paid | 7,821 |
• | Management Services Agreement |
F-26
Table of Contents
• | LLC Agreement | |
• | Supplemental Put Agreement |
Year Ended | ||||
December 31, | ||||
2006 | ||||
(In thousands) | ||||
CBS Personnel | $ | 674 | ||
ACI | 315 | |||
Silvue | 218 | |||
Anodyne | 145 | |||
Corporate | 3,024 | |||
Total | $ | 4,376 | ||
F-27
Table of Contents
F-28
Table of Contents
F-29
Table of Contents
F-30
Table of Contents
December 31, 2006 and 2005
2006 | 2005 | |||||||
(Amounts in thousands) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 4,539 | $ | 122 | ||||
Accounts receivable, net | 8,184 | 7,722 | ||||||
Costs in excess of billings | 3,156 | 292 | ||||||
Inventories, net | 2,380 | 1,329 | ||||||
Prepaid expenses and other | 181 | 572 | ||||||
Deferred tax asset | 407 | 930 | ||||||
Total current assets | 18,847 | 10,967 | ||||||
Property, plant and equipment: | ||||||||
Land and land improvements | 283 | 283 | ||||||
Buildings | 2,533 | 2,686 | ||||||
Machinery and equipment | 7,717 | 7,361 | ||||||
10,533 | 10,330 | |||||||
Less — Accumulated depreciation | (6,090 | ) | (5,528 | ) | ||||
Total property, plant and equipment | 4,443 | 4,802 | ||||||
Other assets: | ||||||||
Investments | 1,163 | 1,059 | ||||||
Goodwill | 7,812 | 8,074 | ||||||
Other | 51 | 104 | ||||||
Total other assets | 9,026 | 9,237 | ||||||
$ | 32,316 | $ | 25,006 | |||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Line of credit | $ | 0 | $ | 1,429 | ||||
Current portion of long-term debt | 1,312 | 1,350 | ||||||
Notes payable | 12 | 12 | ||||||
Accounts payable | 3,980 | 3,347 | ||||||
Customer deposits | 6,477 | 2,481 | ||||||
Accrued liabilities | 7,297 | 3,603 | ||||||
Total current liabilities | 19,078 | 12,222 | ||||||
Noncurrent liabilities: | ||||||||
Long-term debt | 4,058 | 5,355 | ||||||
Accrued compensation | 1,520 | 876 | ||||||
Deferred tax liability | 71 | 71 | ||||||
Other noncurrent liabilities | 183 | 183 | ||||||
Total noncurrent liabilities | 5,832 | 6,485 | ||||||
Commitments and contingencies (Note J) | ||||||||
Shareholders’ equity: | ||||||||
Common stock, no par value; 100,000 shares authorized, 10,000 shares issued and outstanding | 0 | 0 | ||||||
Additional paid-in capital | 457 | 457 | ||||||
Accumulated other comprehensive income | 448 | 344 | ||||||
Retained earnings | 6,501 | 5,498 | ||||||
Total shareholders’ equity | 7,406 | 6,299 | ||||||
$ | 32,316 | $ | 25,006 | |||||
F-31
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For the Years Ended December 31, 2006, 2005 and 2004
2006 | 2005 | 2004 | ||||||||||
(Amounts in thousands) | ||||||||||||
Sales | $ | 48,086 | $ | 43,930 | $ | 33,242 | ||||||
Cost of sales | 27,699 | 28,905 | 22,459 | |||||||||
Gross profit | 20,387 | 15,025 | 10,783 | |||||||||
Selling, general and administrative expenses | 17,334 | 12,175 | 10,906 | |||||||||
Income (loss) from operations | 3,053 | 2,850 | (123 | ) | ||||||||
Other expense: | ||||||||||||
Interest expense | (594 | ) | (531 | ) | (349 | ) | ||||||
Other income (expense), net | 25 | (297 | ) | (33 | ) | |||||||
Income (loss) before income tax provision | 2,484 | 2,022 | (505 | ) | ||||||||
Income tax provision | (851 | ) | (154 | ) | 0 | |||||||
Net income (loss) | 1,633 | 1,868 | (505 | ) | ||||||||
Other comprehensive income — Unrealized gain (loss) on investments | 104 | 26 | (5 | ) | ||||||||
Comprehensive income (loss) | $ | 1,737 | $ | 1,894 | $ | (510 | ) | |||||
F-32
Table of Contents
For the Years Ended December 31, 2006, 2005 and 2004
Accumulated | ||||||||||||||||||||
Additional | Other | |||||||||||||||||||
Common | Paid-In | Comprehensive | Retained | |||||||||||||||||
Stock | Capital | (Loss) Income | Earnings | Total | ||||||||||||||||
(Amounts in thousands) | ||||||||||||||||||||
Balance, December 31, 2003 | $ | 0 | $ | 457 | $ | 323 | $ | 4,315 | $ | 5,095 | ||||||||||
Net loss | 0 | 0 | 0 | (505 | ) | (505 | ) | |||||||||||||
Other comprehensive loss — Unrealized loss on investments | 0 | 0 | (5 | ) | 0 | (5 | ) | |||||||||||||
Balance, December 31, 2004 | 0 | 457 | 318 | 3,810 | 4,585 | |||||||||||||||
Net income | 0 | 0 | 0 | 1,868 | 1,868 | |||||||||||||||
Dividends | 0 | 0 | �� | 0 | (180 | ) | (180 | ) | ||||||||||||
Other comprehensive income — Unrealized gain on investments | 0 | 0 | 26 | 0 | 26 | |||||||||||||||
Balance, December 31, 2005 | 0 | 457 | 344 | 5,498 | 6,299 | |||||||||||||||
Net income | 0 | 0 | 0 | 1,633 | 1,633 | |||||||||||||||
Dividends | 0 | 0 | 0 | (630 | ) | (630 | ) | |||||||||||||
Other comprehensive income — Unrealized gain on investments | 0 | 0 | 104 | 0 | 104 | |||||||||||||||
Balance, December 31, 2006 | $ | 0 | $ | 457 | $ | 448 | $ | 6,501 | $ | 7,406 | ||||||||||
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For the Years Ended December 31, 2006, 2005 and 2004
2006 | 2005 | 2004 | ||||||||||
(Amounts in thousands) | ||||||||||||
Cash flows from operating activities: | ||||||||||||
Net income (loss) | $ | 1,633 | $ | 1,868 | $ | (505 | ) | |||||
Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities: | ||||||||||||
Depreciation expense | 575 | 547 | 417 | |||||||||
Provision for accounts receivable and inventory reserves | 75 | 10 | 20 | |||||||||
Deferred income tax provision | 785 | 107 | 0 | |||||||||
Gain on sale of fixed assets | (22 | ) | (8 | ) | (5 | ) | ||||||
Deferred compensation expense | 644 | 220 | 0 | |||||||||
Change in current assets and liabilities: | ||||||||||||
(Increase) decrease in accounts receivable | (477 | ) | (2,743 | ) | 737 | |||||||
(Increase) decrease in costs in excess of billings | (2,864 | ) | 1,452 | (688 | ) | |||||||
Increase in inventories | (1,111 | ) | (65 | ) | (240 | ) | ||||||
(Increase) decrease in prepaid expenses | 391 | (153 | ) | (245 | ) | |||||||
Increase (decrease) in accounts payable and accrued liabilities | 8,323 | 1,361 | (584 | ) | ||||||||
Other, net | 53 | 0 | 28 | |||||||||
Cash provided by (used in) operating activities | 8,005 | 2,596 | (1,065 | ) | ||||||||
Cash flows from investing activities: | ||||||||||||
Cash paid for acquisition, net of $261 cash acquired | 0 | 0 | (5,295 | ) | ||||||||
Proceeds from sales of investments | 0 | 0 | 2,000 | |||||||||
Purchases of property and equipment | (355 | ) | (499 | ) | (822 | ) | ||||||
Proceeds from sale of property and equipment | 161 | 22 | 87 | |||||||||
Purchases of investments | 0 | 0 | (160 | ) | ||||||||
Cash used in investing activities | (194 | ) | (477 | ) | (4,190 | ) | ||||||
Cash flows from financing activities: | ||||||||||||
Proceeds from line of credit, net | 0 | 0 | 846 | |||||||||
Payments on line of credit, net | (1,429 | ) | (793 | ) | 0 | |||||||
Proceeds from issuance of long-term debt | 0 | 0 | 5,200 | |||||||||
Payment of dividends | (630 | ) | (180 | ) | 0 | |||||||
Principal payments on long-term debt | (1,335 | ) | (1,169 | ) | (788 | ) | ||||||
Cash (used in) provided by financing activities | (3,394 | ) | (2,142 | ) | 5,258 | |||||||
Net increase (decrease) in cash and cash equivalents | 4,417 | (23 | ) | 3 | ||||||||
Cash and cash equivalents, beginning of year | 122 | 145 | 142 | |||||||||
Cash and cash equivalents, end of year | $ | 4,539 | $ | 122 | $ | 145 | ||||||
Supplemental disclosures of cash flow information: | ||||||||||||
Cash paid during the year for interest | $ | 594 | $ | 531 | $ | 361 | ||||||
Cash paid during the year for income taxes | 76 | 0 | 0 | |||||||||
F-34
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December 31, 2006, 2005 and 2004
(Amounts in thousands)
F-35
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2006 | 2005 | |||||||
Raw materials | $ | 1,213 | $ | 1,197 | ||||
Work-in-process | 1,257 | 162 | ||||||
Inventory reserve | (90 | ) | (30 | ) | ||||
$ | 2,380 | $ | 1,329 | |||||
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F-37
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Current assets | $ | 2,824 | ||
Other assets | 321 | |||
Total assets acquired | 3,145 | |||
Current liabilities | 3,831 | |||
Noncurrent liabilities | 137 | |||
Total liabilities assumed | 3,968 | |||
Net liabilities assumed | (823 | ) | ||
Add — Goodwill | 7,130 | |||
Purchase price | $ | 6,307 | ||
F-38
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2006 | 2005 | |||||||||||||||||||||||
Fair | Fair | |||||||||||||||||||||||
Market | Unrealized | Market | Unrealized | |||||||||||||||||||||
Cost | Value | Gain | Cost | Value | Gain | |||||||||||||||||||
Government bonds | $ | 550 | $ | 558 | $ | 8 | $ | 550 | $ | 559 | $ | 9 | ||||||||||||
Common stock | 165 | 605 | 440 | 165 | 500 | 335 | ||||||||||||||||||
$ | 715 | $ | 1,163 | $ | 448 | $ | 715 | $ | 1,059 | $ | 344 | |||||||||||||
2006 | 2005 | |||||||
Bank loan, collateralized by the Company��s business assets, variable rate of prime (8.25% at December 31, 2006) less 1/8%, monthly interest and principal payments totaling $51 are due through July 2008, when the loan is scheduled to be paid in full | $ | 553 | $ | 1,094 | ||||
Industrial Development Revenue Bonds, collateralized by the Company’s land, building, machinery and equipment, principal and interest (variable rate of 4.26%at December 31, 2006), interest paid quarterly and annual principal payments of $75 are due through October 2017 | 825 | 900 | ||||||
Annuity payable to a former employee, annual payments of $7 for the remainder of the recipient’s life, discounted at 8.5% for estimated life expectancy of employee | 86 | 86 | ||||||
Term loan, collateralized by the Company’s business assets, used to acquire National, variable rate of prime (8.25%at December 31, 2006) plus 1/8%, monthly interest payments from May 2004 through April 2005, followed by monthly interest and principal payments of $85 through April 2011 | 3,787 | 4,468 | ||||||
Promissory note, collateralized by the Company’s business assets, variable rate of prime (8.25%at December 31, 2006) plus .25%, monthly interest and principal payments of $3 from December 2004 through November 2009 | 119 | 157 | ||||||
Total debt | 5,370 | 6,705 | ||||||
Less — Current portion | (1,312 | ) | (1,350 | ) | ||||
Long-term debt | $ | 4,058 | $ | 5,355 | ||||
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2007 | $ | 1,312 | ||
2008 | 1,005 | |||
2009 | 977 | |||
2010 | 1016 | |||
2011 | 524 | |||
Thereafter | 536 | |||
$ | 5,370 | |||
F-40
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2006 | 2005 | 2004 | ||||||||||
Current: | ||||||||||||
Federal | $ | 40 | $ | 25 | $ | 0 | ||||||
State | 26 | 22 | 0 | |||||||||
66 | 47 | 0 | ||||||||||
Deferred: | ||||||||||||
Federal | 743 | 72 | 0 | |||||||||
State | 42 | 35 | 0 | |||||||||
785 | 107 | 0 | ||||||||||
$ | 851 | $ | 154 | $ | 0 | |||||||
2006 | 2005 | |||||||
Deferred tax assets: | ||||||||
Compensation accruals | $ | 29 | $ | 29 | ||||
Other accruals and reserves | 55 | 86 | ||||||
Net operating loss carryforwards | 584 | 1,378 | ||||||
Other | 67 | 27 | ||||||
735 | 1,520 | |||||||
Valuation reserve | (328 | ) | (590 | ) | ||||
407 | 930 | |||||||
Deferred tax liabilities — Fixed assets | (71 | ) | (71 | ) | ||||
Net deferred tax asset | $ | 336 | $ | 859 | ||||
F-41
Table of Contents
Leases |
2007 | $ | 105 | ||
2008 | 84 | |||
2009 | 38 | |||
2010 | 8 | |||
Total minimum payments | $ | 235 | ||
Litigation |
F-42
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F-43
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HALO Branded Solutions, Inc. and Subsidiary
Sterling, Illinois
F-44
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2006 | 2005 | |||||||
(Dollars in thousands) | ||||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash | $ | 339 | $ | — | ||||
Accounts receivable, net of allowance of $401 for 2006 and $450 for 2005 | 22,769 | 18,582 | ||||||
Inventories | 3,127 | 1,929 | ||||||
Prepaid expenses | 537 | 654 | ||||||
Other current assets | 2,301 | 1,780 | ||||||
Total current assets | 29,073 | 22,945 | ||||||
Equipment, software, and leasehold improvements, net | 959 | 506 | ||||||
Deferred financing costs, net | — | 28 | ||||||
Deferred income taxes | — | 260 | ||||||
Goodwill | 7,388 | 4,765 | ||||||
Other assets | 11 | 18 | ||||||
Due from affiliate | 1,209 | 813 | ||||||
TOTAL ASSETS | $ | 38,640 | $ | 29,335 | ||||
LIABILITIES AND STOCKHOLDER’S EQUITY | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts payable | $ | 12,576 | $ | 9,570 | ||||
Accrued expenses | 4,506 | 3,807 | ||||||
Current installments of long-term debt | 1,049 | 4,789 | ||||||
Current installments of obligations under capital lease | 47 | — | ||||||
Income taxes payable | 1,122 | 925 | ||||||
Deferred income taxes | 516 | 361 | ||||||
Total current liabilities | 19,816 | 19,452 | ||||||
LONG-TERM LIABILITIES | ||||||||
Long-term debt, excluding current installments | 8,057 | 2,549 | ||||||
Obligations under capital lease, excluding current installments | 148 | — | ||||||
Deferred income taxes | 170 | — | ||||||
Total long-term liabilities | 8,375 | 2,549 | ||||||
Total liabilities | 28,191 | 22,001 | ||||||
STOCKHOLDER’S EQUITY | ||||||||
Common stock, $.01 par value, 2,000 shares authorized, issued and outstanding | 2 | 2 | ||||||
Additional paid-in capital | 2,008 | 2,008 | ||||||
Retained earnings | 8,439 | 5,324 | ||||||
Total stockholder’s equity | 10,449 | 7,334 | ||||||
TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY | $ | 38,640 | $ | 29,335 | ||||
the accompanying notes to consolidated financial statements.
F-45
Table of Contents
2006 | 2005 | 2004 | ||||||||||
(Dollars in thousands) | ||||||||||||
NET SALES | $ | 115,646 | $ | 105,926 | $ | 111,786 | ||||||
COST OF SALES | 71,210 | 67,457 | 73,388 | |||||||||
Gross profit | 44,436 | 38,469 | 38,398 | |||||||||
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES | 38,252 | 33,557 | 37,573 | |||||||||
PROVISION FOR DOUBTFUL ACCOUNTS | 69 | (45 | ) | 87 | ||||||||
Operating income | 6,115 | 4,957 | 738 | |||||||||
INTEREST EXPENSE | 797 | 644 | 495 | |||||||||
Income before income taxes | 5,318 | 4,313 | 243 | |||||||||
INCOME TAXES | ||||||||||||
Current | 1,618 | 925 | 103 | |||||||||
Deferred | 585 | 401 | (85 | ) | ||||||||
2,203 | 1,326 | 18 | ||||||||||
NET INCOME | $ | 3,115 | $ | 2,987 | $ | 225 | ||||||
the accompanying notes to consolidated financial statements.
F-46
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Additional | ||||||||||||||||
Common | Paid-in | Retained | ||||||||||||||
Stock | Capital | Earnings | Total | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
BALANCE AT DECEMBER 31, 2003 | $ | 2 | $ | 2,008 | $ | 2,112 | $ | 4,122 | ||||||||
Net income | — | — | 225 | 225 | ||||||||||||
BALANCE AT DECEMBER 31, 2004 | 2 | 2,008 | 2,337 | 4,347 | ||||||||||||
Net income | — | — | 2,987 | 2,987 | ||||||||||||
BALANCE AT DECEMBER 31, 2005 | 2 | 2,008 | 5,324 | 7,334 | ||||||||||||
Net income | — | — | 3,115 | 3,115 | ||||||||||||
BALANCE AT DECEMBER 31, 2006 | $ | 2 | $ | 2,008 | $ | 8,439 | $ | 10,449 | ||||||||
the accompanying notes to consolidated financial statements.
F-47
Table of Contents
2006 | 2005 | 2004 | ||||||||||
(Dollars in thousands) | ||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||||
Net income | $ | 3,115 | $ | 2,987 | $ | 225 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Provision for doubtful accounts | 69 | (45 | ) | 87 | ||||||||
Depreciation | 341 | 130 | 76 | |||||||||
Amortization of deferred financing costs | 28 | 62 | 64 | |||||||||
Deferred income taxes | 585 | 401 | (85 | ) | ||||||||
Loss on sale of equipment | — | — | 28 | |||||||||
Changes in operating assets and liabilities, net of acquisition of businesses: | ||||||||||||
Accounts receivable | (1,731 | ) | 3,804 | (8,702 | ) | |||||||
Inventories | (301 | ) | (181 | ) | 355 | |||||||
Prepaid expenses and other current assets | (377 | ) | 1,103 | (702 | ) | |||||||
Other assets | 7 | (12 | ) | (6 | ) | |||||||
Due from affiliate | (396 | ) | (175 | ) | (411 | ) | ||||||
Accounts payable and accrued expenses | 181 | (5,905 | ) | 10,037 | ||||||||
Income taxes payable | 197 | 841 | (178 | ) | ||||||||
Net cash provided by operating activities | 1,718 | 3,010 | 788 | |||||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||||||
Acquisition of businesses, net of cash acquired | (2,488 | ) | — | (7,259 | ) | |||||||
Purchases of equipment | (286 | ) | (356 | ) | (162 | ) | ||||||
Proceeds from sale of equipment | — | — | 2 | |||||||||
Net cash used in investing activities | (2,774 | ) | (356 | ) | (7,419 | ) | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||||
Proceeds from issuance of long-term debt | — | — | 3,500 | |||||||||
Principal payments on long-term debt | (1,055 | ) | (1,442 | ) | — | |||||||
Net borrowings under revolving credit facility | 2,488 | (1,212 | ) | 3,196 | ||||||||
Principal payments on obligations under capital lease | (38 | ) | — | — | ||||||||
Payments for deferred financing costs | — | — | (65 | ) | ||||||||
Net cash provided by (used in) financing activities | 1,395 | (2,654 | ) | 6,631 | ||||||||
INCREASE IN CASH | 339 | — | — | |||||||||
CASH, BEGINNING OF YEAR | — | — | — | |||||||||
CASH, END OF YEAR | $ | 339 | $ | — | $ | — | ||||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||||||||||||
Interest paid | $ | 799 | $ | 644 | $ | 496 | ||||||
Income taxes paid | $ | 1,421 | $ | 96 | $ | 281 | ||||||
the accompanying notes to consolidated financial statements.
F-48
Table of Contents
F-49
Table of Contents
F-50
Table of Contents
Furniture, fixtures, and office equipment | 3 to 7 years | |||
Computer equipment | 5 to 7 years | |||
Leasehold improvements | Life of lease | |||
Software development | 3 years |
F-51
Table of Contents
F-52
Table of Contents
Purchase price | $ | 2,288 | ||
Net assets recorded: | ||||
Cash | 112 | |||
Accounts receivable | 1,192 | |||
Inventories | 310 | |||
Other current assets | 27 | |||
Office and computer equipment | 68 | |||
Total assets | 1,709 | |||
Accounts payable and accrued liabilities | (1,713 | ) | ||
Net accounts payable and accrued liabilities | (4 | ) | ||
Excess of purchase price over net assets recorded | $ | 2,292 | ||
Purchase price | $ | 488 | ||
Net assets recorded: | ||||
Accounts receivable | 1,215 | |||
Inventories | 584 | |||
Office and computer equipment | 184 | |||
Total assets | 1,983 | |||
Accounts payable and accrued liabilities | (1,749 | ) | ||
Net assets recorded | 234 | |||
Excess of purchase price over net assets recorded | $ | 254 | ||
F-53
Table of Contents
Purchase price | $ | 159 | ||
Net assets recorded: | ||||
Accounts receivable | 118 | |||
Inventories | 3 | |||
Office and computer equipment | 23 | |||
Total assets | 144 | |||
Accounts payable and accrued liabilities | (62 | ) | ||
Net assets recorded | 82 | |||
Excess of purchase price over net assets recorded | $ | 77 | ||
Purchase price | $ | 7,259 | ||
Net assets recorded: | ||||
Accounts receivable | 3,592 | |||
Inventories | 571 | |||
Other current assets | 783 | |||
Office and computer equipment | 156 | |||
Total assets | 5,102 | |||
Accounts payable and accrued liabilities | (2,608 | ) | ||
Net assets recorded | 2,494 | |||
Excess of purchase price over net assets recorded | $ | 4,765 | ||
F-54
Table of Contents
2006 | 2005 | |||||||
Inventory at vendor locations (drop-ship merchandise) | $ | 1,485 | $ | 1,078 | ||||
Warehouse inventory (fulfillment merchandise) | 1,642 | 851 | ||||||
Total inventories | $ | 3,127 | $ | 1,929 | ||||
2006 | 2005 | |||||||
Prepaid rent | $ | 110 | $ | 93 | ||||
Prepaid insurance | 30 | 23 | ||||||
Prepaid catalogs | 40 | 40 | ||||||
Other prepaid expenses | 357 | 498 | ||||||
Total prepaid expenses | $ | 537 | $ | 654 | ||||
2006 | 2005 | |||||||
Advanced commissions | $ | 1,503 | $ | 1,096 | ||||
Vendor deposits | 718 | 633 | ||||||
Other deposits | 80 | 51 | ||||||
Total other current assets | $ | 2,301 | $ | 1,780 | ||||
F-55
Table of Contents
2006 | 2005 | |||||||
Salesperson commissions | $ | 613 | $ | 447 | ||||
Salesperson bonus | 1,377 | 1,159 | ||||||
Compensation and fringe benefits | 1,037 | 915 | ||||||
Customer deposits | 542 | 438 | ||||||
Professional fees | 49 | 27 | ||||||
Sales and other taxes | 581 | 480 | ||||||
Other | 307 | 341 | ||||||
Total accrued expenses | $ | 4,506 | $ | 3,807 | ||||
2006 | 2005 | |||||||
Revolving Credit Facility | ||||||||
Note payable; revolving credit facility (“Revolver”) for eligible borrowings of up to $15,000. Eligible borrowings under the Revolver are determined based on the lesser of the Company’s borrowing base or $15,000. The borrowing base is determined based on eligible accounts receivable and inventories as defined in the agreement. The credit agreement matured on May 14, 2006, and bore interest at a rate equal to the prime rate (7.25 percent at December 31, 2005) plus 0.5 percent or LIBOR plus 3 percent. The loan agreement also provided for the issuance of letters of credit of up to $2,000. At December 31, 2005, there were no outstanding letters of credit and available borrowings under the Revolver were $7,810. Borrowings under the Revolver are secured by a first priority lien on substantially all of the Company’s assets as well as a guarantee by the Parent Company. In connection with obtaining the loan, the Company incurred $113 in financing costs. Additionally, the Company is required to pay $2 per month in fees as well as a fee of 0.25 percent of the unused portion of the revolver. The loan agreement contains certain financial covenants, including the maintenance of minimum fixed charge ratio as defined in the agreement | $ | — | $ | 3,980 | ||||
In May, 2006, the Company refinanced the revolving credit facility for eligible borrowings of up to $15,000. Eligible borrowings under the Revolver are determined based on the lesser of the Company’s borrowing base or $15,000. The borrowing base is determined based on eligible accounts receivable and inventories as defined in the agreement. The Credit agreement matures on May, 14, 2009 and bears interest at a rate equal to the greater of the prime rate (8.25 percent at December 31, 2006) or LIBOR plus 2 percent. Additionally, the Company is required to pay $1 per month in fees as well as a fee of 0.25 percent of the unused portion of the revolver. The loan agreement contains certain financial covenants, including the maintenance of minimum fixed charge ratio as defined in the agreement | ||||||||
In November, 2006, the Company amended the revolving credit facility for eligible borrowings of up to $17,000. All other terms of the revolver remained unchanged | $ | 6,468 | $ | — |
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Table of Contents
2006 | 2005 | |||||||
Term Loan | ||||||||
Term note payable to lender, requiring monthly installments of $58 plus interest at the greater of lender’s prime rate (8.25 percent at December 31, 2006 and 7.25 percent at December 31, 2005) plus .50 percent, or LIBOR plus 3 percent, with final payment due in January 2010, secured by H.I.G. Capital, LLC guaranty | 2,158 | 2,858 | ||||||
Note payable to JII Promotions, Inc., requiring yearly installments starting on April 11, 2005 of $800, $300, and $200. The note is unsecured and bears no interest, with final payment due March 15, 2007 | 200 | 500 | ||||||
Notes payable to former owners of Stotts & Company, Inc., requiring monthly installments of $8, with final payment due May 1, 2009 | 220 | — | ||||||
Holdback payable to Francis & Lusky LLC requiring final payment upon the finalization of the capital adjustment for the November 2006 acquisition. | 60 | — | ||||||
Total long-term debt | 9,106 | 7,338 | ||||||
Less current installments of long-term debt | 1,049 | 4,789 | ||||||
Long-term debt, excluding current installments | $ | 8,057 | $ | 2,549 | ||||
2007 | $ | 1,049 | ||
2008 | 795 | |||
2009 | 7,204 | |||
2010 | 58 | |||
Total | $ | 9,106 | ||
2007 | $ | 56 | ||
2008 | 56 | |||
2009 | 56 | |||
2010 | 56 | |||
2011 | 14 | |||
Total future minimum lease payments | 238 | |||
Less amount representing interest | 43 | |||
Present value of future minimum lease payments | $ | 195 | ||
F-57
Table of Contents
2007 | $ | 1,161 | ||
2008 | 903 | |||
2009 | 827 | |||
2010 | 756 | |||
2011 | 688 | |||
Thereafter | 4,072 | |||
Total operating leases | $ | 8,407 | ||
2006 | 2005 | 2004 | ||||||||||
Current: | ||||||||||||
Federal | $ | 1,294 | $ | 751 | $ | — | ||||||
State | 324 | 174 | 103 | |||||||||
Total current income tax expense | 1,618 | 925 | 103 | |||||||||
Deferred: | ||||||||||||
Federal | 468 | 326 | (72 | ) | ||||||||
State | 117 | 75 | (13 | ) | ||||||||
Total deferred income tax expense (benefit) | 585 | 401 | (85 | ) | ||||||||
Total income tax expense | $ | 2,203 | $ | 1,326 | $ | 18 | ||||||
2006 | 2005 | 2004 | ||||||||||
Computed “expected” tax expense | $ | 1,808 | $ | 1,466 | $ | 83 | ||||||
State income taxes, net of federal tax effect | 242 | 164 | 59 | |||||||||
Under (over) accrual of prior year provision | 143 | (196 | ) | 204 | ||||||||
Decrease inbeginning-of-the-year balance of the valuation allowance for deferred tax assets | — | (116 | ) | (337 | ) | |||||||
Other | 10 | 8 | 9 | |||||||||
$ | 2,203 | $ | 1,326 | $ | 18 | |||||||
F-58
Table of Contents
2006 | 2005 | |||||||
Deferred income tax assets: | ||||||||
Accounts receivable | $ | 161 | $ | 180 | ||||
Inventory | 74 | 67 | ||||||
Depreciation and other amortization | 133 | 191 | ||||||
Other long term assets | 69 | 69 | ||||||
Accrued expenses | 70 | 70 | ||||||
Total deferred income tax assets | 507 | 577 | ||||||
Deferred income tax liabilities: | ||||||||
Prepaid expenses | (240 | ) | (240 | ) | ||||
Advance commissions | (581 | ) | (438 | ) | ||||
Goodwill | (372 | ) | — | |||||
Total deferred income tax liabilities | (1,193 | ) | (678 | ) | ||||
Net deferred liability | $ | (686 | ) | $ | (101 | ) | ||
2006 | 2005 | |||||||
Current deferred tax liability | $ | (516 | ) | $ | (361 | ) | ||
Noncurrent deferred tax liability | 170 | 260 | ||||||
$ | (686 | ) | $ | (101 | ) | |||
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Item 13. | Other Expenses of Issuance and Distribution. |
SEC Registration Fee | $ | 4,802 | ||
NASD Filing Fee | $ | 18,486 | ||
Accounting Fees and Expenses | $ | 450,000 | ||
Printing and Engraving Expenses | $ | 650,000 | ||
Legal Fees and Expenses | $ | 1,000,000 | ||
Blue Sky Services and Expenses | $ | 3,500 | ||
Miscellaneous(1) | $ | 73,212 | ||
Total | $ | 2,200,000 |
(1) | This amount represents additional expenses that may be incurred by the company or underwriters in connection with the offering over and above those specifically listed above, including distribution and mailing costs. |
Item 14. | Indemnification of Directors and Officers. |
• | for any breach of the director’s duty of loyalty to the company or its members; | |
• | for acts or omissions not in good faith or a knowing violation of law; | |
• | Regarding unlawful dividends and stock purchases analogous to Section 174 of the Delaware General Corporation Law; or | |
• | for any transaction from which the director derived an improper benefit. |
• | we must indemnify our directors and officers to the equivalent extent permitted by Delaware General Corporation Law; | |
• | we may indemnify our other employees and agents to the same extent that we indemnified our officers and directors, unless otherwise determined by the company’s board of directors; and |
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• | we must advance expenses, as incurred, to our directors and executive officers in connection with a legal proceeding to the extent permitted by Delaware law and may advance expenses as incurred to our other employees and agents, unless otherwise determined by the company’s board of directors. |
Item 15. | Recent Sales of Unregistered Securities. |
Item 16. | Exhibits and Financial Statement Schedules. |
Exhibit | ||||
Number | Description | |||
1 | .1 | Form of Underwriting Agreement* | ||
3 | .1 | Certificate of Trust of Compass Diversified Trust(1) | ||
3 | .2 | Certificate of Formation of Compass Group Diversified Holdings LLC(1) | ||
3 | .3 | Amended and Restated Trust Agreement of Compass Diversified Trust(3) | ||
3 | .4 | Second Amended and Restated Operating Agreement of Compass Group Diversified Holdings, LLC dated January 9, 2007(7) | ||
4 | .1 | Specimen Certificate evidencing a share of trust of Compass Diversified Trust (included in Exhibit 3.3)(2) |
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Exhibit | ||||
Number | Description | |||
4 | .2 | Specimen Certificate evidencing an interest of Compass Group Diversified Holdings LLC (included in Exhibit 3.4)(3) | ||
5 | .1 | Form of Opinion of Richards, Layton & Finger, P.A.** | ||
5 | .2 | Form of Opinion of Richards, Layton & Finger, P.A.** | ||
8 | .1 | Form of Tax Opinion of Squire, Sanders & Dempsey L.L.P.** | ||
10 | .1 | Form of Registration Rights Agreement(3) | ||
10 | .2 | Form of Registration Rights Agreement(4) | ||
10 | .3 | Registration Rights Agreement dated as of April 3, 2007, by and between Compass Group Diversified Holdings LLC, Compass Diversified Trust and CGI Diversified Holdings, LP* | ||
10 | .4 | Form of Supplemental Put Agreement by and between Compass Group Management LLC and Compass Group Diversified Holdings LLC(3) | ||
10 | .5 | Employment Agreement by and between Compass Group Management LLC and James Bottiglieri dated as of September 28, 2005(2) | ||
10 | .6 | Form of Share Purchase Agreement by and between Compass Group Diversified Holdings LLC, Compass Diversified Trust and CGI Diversified Holdings, LP(4) | ||
10 | .7 | Form of Share Purchase Agreement by and between Compass Group Diversified Holdings LLC, Compass Diversified Trust and Pharos I LLC(4) | ||
10 | .8 | Form of Credit Agreement by and between Compass Group Diversified Holdings LLC and each of the initial businesses(3) | ||
10 | .9 | Shareholders’ Agreement for holders of CBS Personnel Holdings, Inc. Class C common stock(2) | ||
10 | .10 | Stockholder’s Agreement for holders of Crosman Acquisition Corp. common stock(2) | ||
10 | .11 | Stockholder’s Agreement for holders of Compass AC Holdings, Inc. common stock(2) | ||
10 | .12 | Stockholder’s Agreement for holders of Silvue Technologies Group, Inc. common stock(2) | ||
10 | .13 | Amended and Restated Management Services Agreement with CGM effective as of May 16, 2006 and dated April 2, 2007** | ||
10 | .14 | Form of Supplemental Put Agreement by and between Compass Group Management LLC and Compass Group Diversified Holdings LLC(3) | ||
10 | .15 | Credit Agreement among Compass Group Diversified Holdings LLC, the financial institutions party thereto and Madison Capital Funding LLC, dated as of November 21, 2006(6) | ||
10 | .16 | Share Purchase Agreement dated as of April 3, 2007, by and between Compass Group Diversified Holdings LLC, Compass Diversified Trust and CGI Diversified Holdings, LP* | ||
21 | .1 | List of Subsidiaries(9) | ||
23 | .1 | Consent of Grant Thornton LLP* | ||
23 | .2 | Consent of Grant Thorton LLP* | ||
23 | .3 | Consent of Clifton Gunderson LLP* | ||
23 | .4 | Consent of Richards, Layton & Finger, P.A. (included in Exhibits 5.1 and 5.2) | ||
23 | .5 | Consent of Squire, Sanders & Dempsey L.L.P. (included in Exhibit 8.1) | ||
24 | Powers of Attorney (included on Signature Page) | |||
99 | .1 | Stock and Note Purchase Agreement dated as of July 31, 2006, among Compass Group Diversified Holdings LLC, Compass Group Investments, Inc. and Compass Medical Mattress Partners, LP(5) | ||
99 | .2 | Stock Purchase Agreement, dated as of February 28, 2007, among Aeroglide Corporation, the shareholders of Aeroglide Corporation and Aeroglide Holdings, Inc.(8) | ||
99 | .3 | Stock Purchase Agreement dated as of February 28, 2007, by and between HA-LO Holdings, LLC and Halo Holding Corporation(8) |
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* | Filed herewith |
** | Previously filed |
(1) | Previously filed in connection with Compass Diversified Trust’s and Compass Diversified Holdings LLC registration statement onForm S-1 (File No.333-130326,333-130326-01) filed on December 14, 2005. | |
(2) | Previously filed in connection with Amendment No. 3 to Compass Diversified Trust’s and Compass Diversified Holdings LLC’s registration statement onForm S-1 (FileNo. 333-130326,333-130326-01) filed on April 13, 2006. | |
(3) | Previously filed in connection with Amendment No. 4 to Compass Diversified Trust’s and Compass Group Diversified Holdings LLC’s registration statement onForm S-1 (FileNo. 333-130326-01) filed on April 26, 2006. | |
(4) | Previously filed in connection with Amendment No. 6 to Compass Diversified Trust’s and Compass Group Diversified Holdings LLC’s registration statement onForm S-1 (FileNo. 333-130326-01) filed on May 5, 2006. | |
(5) | Filed with Registrants’8-K on August 1, 2006. | |
(6) | Filed with Registrants’10-Q for the quarter ended September 30, 2006. | |
(7) | Filed with Registrants’8-K on January 10, 2007. | |
(8) | Filed with Registrants’8-K on March 1, 2007. | |
(9) | Filed with Registrants’10-K for the quarter ended December 31, 2006. |
Item 17. | Undertakings. |
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By: COMPASS GROUP DIVERSIFIED |
HOLDINGS LLC, as Sponsor |
By: | /s/ James J. Bottiglieri |
By: | /s/ James J. Bottiglieri |
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Signature | Title | Date | ||||
* I. Joseph Massoud | (Principal Executive Officer) | April 20, 2007 | ||||
/s/ James J. Bottiglieri James J. Bottiglieri | (Principal Financial Officer and Principal Accounting Officer) | April 20, 2007 | ||||
* C. Sean Day | Director | April 20, 2007 | ||||
* D. Eugene Ewing | Director | April 20, 2007 | ||||
* Ted Waitman | Director | April 20, 2007 | ||||
* Harold S. Edwards | Director | April 20, 2007 | ||||
* Mark H. Lazarus | Director | April 20, 2007 | ||||
*By | /s/ James J. Bottiglieri James J. Bottiglieri Attorney-in-fact |
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Exhibit | ||||
Number | Description | |||
1 | .1 | Form of Underwriting Agreement* | ||
3 | .1 | Certificate of Trust of Compass Diversified Trust(1) | ||
3 | .2 | Certificate of Formation of Compass Group Diversified Holdings LLC(1) | ||
3 | .3 | Amended and Restated Trust Agreement of Compass Diversified Trust(3) | ||
3 | .4 | Second Amended and Restated Operating Agreement of Compass Group Diversified Holdings, LLC dated January 9, 2007(7) | ||
4 | .1 | Specimen Certificate evidencing a share of trust of Compass Diversified Trust (included in Exhibit 3.3)(2) | ||
4 | .2 | Specimen Certificate evidencing an interest of Compass Group Diversified Holdings LLC (included in Exhibit 3.4)(3) | ||
5 | .1 | Form of Opinion of Richards, Layton & Finger, P.A.** | ||
5 | .2 | Form of Opinion of Richards, Layton & Finger, P.A.** | ||
8 | .1 | Form of Tax Opinion of Squire, Sanders & Dempsey L.L.P.** | ||
10 | .1 | Form of Registration Rights Agreement(3) | ||
10 | .2 | Form of Registration Rights Agreement(4) | ||
10 | .3 | Registration Rights Agreement dated as of April 3, 2007, by and between Compass Group Diversified Holdings LLC, Compass Diversified Trust and CGI Diversified Holdings, LP* | ||
10 | .4 | Form of Supplemental Put Agreement by and between Compass Group Management LLC and Compass Group Diversified Holdings LLC(3) | ||
10 | .5 | Employment Agreement by and between Compass Group Management LLC and James Bottiglieri dated as of September 28, 2005(2) | ||
10 | .6 | Share Purchase Agreement dated as of April 3, 2007, by and between Compass Group Diversified Holdings LLC, Compass Diversified Trust and CGI Diversified Holdings, LP(4) | ||
10 | .7 | Form of Share Purchase Agreement by and between Compass Group Diversified Holdings LLC, Compass Diversified Trust and Pharos I LLC(4) | ||
10 | .8 | Form of Credit Agreement by and between Compass Group Diversified Holdings LLC and each of the initial businesses(3) | ||
10 | .9 | Shareholders’ Agreement for holders of CBS Personnel Holdings, Inc. Class C common stock(2) | ||
10 | .10 | Stockholder’s Agreement for holders of Crosman Acquisition Corp. common stock(2) | ||
10 | .11 | Stockholder’s Agreement for holders of Compass AC Holdings, Inc. common stock(2) | ||
10 | .12 | Stockholder’s Agreement for holders of Silvue Technologies Group, Inc. common stock(2) | ||
10 | .13 | Amended and Restated Management Services Agreement with CGM effective as of May 16, 2006 and dated April 2, 2007** | ||
10 | .14 | Form of Supplemental Put Agreement by and between Compass Group Management LLC and Compass Group Diversified Holdings LLC(3) | ||
10 | .15 | Credit Agreement among Compass Group Diversified Holdings LLC, the financial institutions party thereto and Madison Capital Funding LLC, dated as of November 21, 2006(6) | ||
10 | .16 | Form of Share Purchase Agreement by and between Compass Group Diversified Holdings LLC Compass Diversified Trust and CGI Diversified Holdings, LP* | ||
21 | .1 | List of Subsidiaries(9) | ||
23 | .1 | Consent of Grant Thornton LLP* | ||
23 | .2 | Consent of Grant Thornton LLP* | ||
23 | .3 | Consent of Clifton Gunderson LLP* | ||
23 | .4 | Consent of Richards, Layton & Finger, P.A. (included in Exhibits 5.1 and 5.2) | ||
23 | .5 | Consent of Squire, Sanders & Dempsey L.L.P. (included in Exhibit 8.1) | ||
24 | Powers of Attorney (included on Signature Page) | |||
99 | .1 | Stock and Note Purchase Agreement dated as of July 31, 2006, among Compass Group Diversified Holdings LLC, Compass Group Investments, Inc. and Compass Medical Mattress Partners, LP(5) | ||
99 | .2 | Stock Purchase Agreement, dated as of February 28, 2007, among Aeroglide Corporation, the shareholders of Aeroglide Corporation and Aeroglide Holdings, Inc.(8) | ||
99 | .3 | Stock Purchase Agreement dated as of February 28, 2007, by and between HA-LO Holdings, LLC and Halo Holding Corporation(8) |
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* | Filed herewith |
** | Previously filed |
(1) | Previously filed in connection with Compass Diversified Trust’s and Compass Diversified Holdings LLC registration statement onForm S-1 (FileNo. 333-130326,333-130326-01) filed on December 14, 2005. | |
(2) | Previously filed in connection with Amendment No. 3 to Compass Diversified Trust’s and Compass Diversified Holdings LLC’s registration statement onForm S-1 (FileNo. 333-130326,333-130326-01) filed on April 13, 2006. | |
(3) | Previously filed in connection with Amendment No. 4 to Compass Diversified Trust’s and Compass Group Diversified Holdings LLC’s registration statement onForm S-1 (FileNo. 333-130326-01) filed on April 26, 2006. | |
(4) | Previously filed in connection with Amendment No. 6 to Compass Diversified Trust’s and Compass Group Diversified Holdings LLC’s registration statement onForm S-1 (FileNo. 333-130326-01) filed on May 5, 2006. | |
(5) | Filed with Registrants’8-K on August 1, 2006. | |
(6) | Filed with Registrants’10-Q for the quarter ended September 30, 2006. | |
(7) | Filed with Registrants’8-K on January 10, 2007. | |
(8) | Filed with Registrants’8-K on March 1, 2007. | |
(9) | Filed with Registrants’10-K for the year ended December 31, 2006. |