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Delaware | 3568 | 61-1478870 | ||
(State or Other Jurisdiction of Incorporation or Organization) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification Number) |
Craig W. Adas, Esq. Weil, Gotshal & Manges LLP 201 Redwood Shores Parkway Redwood Shores, California 94065 (650) 802-3000 | Valerie Ford Jacob, Esq. Stuart Gelfond, Esq. Fried, Frank, Harris, Shriver & Jacobson LLP One New York Plaza New York, New York 10004-1980 (212) 859-8000 |
Proposed Maximum | ||||||
Title of Each Class of | Aggregate | Amount of | ||||
Securities to be Registered | Offering Price(a) | Registration Fee(b) | ||||
Common stock, par value $0.001 per share | $172,500,000 | $18,458 | ||||
(a) | Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(o) promulgated under the Securities Act of 1933. |
(b) | Previously paid. |
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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 | $ | $ | ||||||
Proceeds, before expenses, to Altra Holdings, Inc. | $ | $ | ||||||
Proceeds, before expenses, to the selling stockholders | $ | $ |
Merrill Lynch & Co. | Wachovia Securities |
Jefferies & Company | Robert W. Baird & Co. |
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Ex-4.14 Amended and Restated Stockholders Agreement dated January 6, 2006 | ||||||||
Ex-4.15 First Amendment to the Amended and Restated Stockholders Agreement dated May 5, 2006 | ||||||||
Ex-23.1 Consent of Ernst & Young LLP | ||||||||
Ex-23.2 Consent of BDO Stoy Hayward LLP |
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• | Leverage Our Sales and Distribution Network. We intend to continue to leverage our relationships with our distributors to gain shelf space, further integrate our recently acquired brands with our core brands and sell new products. In addition, we intend to continue to actively pursue new OEM opportunities with innovative and cost-effective product designs and applications to help maintain and grow our aftermarket revenues. We seek to capitalize on customer brand preference for our products to generate pull-through aftermarket demand from our distribution channel. We believe this strategy also allows our distributors to achieve high profit margins, further enhancing our preferred position with them. | |
• | Focus our Strategic Marketing on New Growth Opportunities. We intend to expand our emphasis on strategic marketing to focus on new growth opportunities in key end user markets. Through a systematic process that leverages our core brands and products, we seek to identify attractive markets and product niches, collect customer and market data, identify market drivers, tailor product and service solutions to specific market and customer requirements and deploy resources to gain market share and drive future sales growth. |
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• | Accelerate New Product and Technology Development. We are highly focused on developing new products across our business in response to customer needs in various markets. Through our strategic marketing efforts, we continually gain market and customer intelligence, which feeds new product and technology development initiatives that are designed to address particular needs or problems customers identify. This focus has allowed us to respond quickly to new market opportunities. In total, we expect new products developed by us during the past three years to generate approximately $40 million in revenues in 2006. | |
• | Capitalize on Growth and Sourcing Opportunities in the Asia-Pacific Market. We intend to leverage our established sales offices in China, Taiwan and Singapore, as well as add representation in Japan and South Korea. We also intend to expand our manufacturing presence in Asia beyond our current plant in Shenzhen, China, to increase sales in the high-growth Asia-Pacific region. This region also offers opportunities for low-cost country sourcing of raw materials. During 2005, we sourced approximately 12% of our purchases from low-cost countries, resulting in average cost reductions of approximately 40% for these products. Within the next five years, we intend to utilize our sourcing office in Shanghai to significantly increase our current level of low-cost country sourced purchases. We may also consider opportunities to outsource some of our production from North American and Western European locations to Asia. | |
• | Continue to Improve Operational and Manufacturing Efficiencies through ABS. We believe we can continue to improve profitability through cost control, overhead rationalization, global process optimization, continued implementation of lean manufacturing techniques and strategic pricing initiatives. Our operating plan, based on manufacturing centers of excellence, provides additional opportunities to reduce costs by sharing best practices across geographies and business lines and by consolidating purchasing processes. We have implemented these principles with our recent acquisitions of Hay Hall Holdings Limited, or Hay Hall, and Bear Linear LLC, or Bear Linear, and intend to apply such principles to future acquisitions. | |
• | Pursue Strategic Acquisitions that Complement our Strong Platform. With our extensive MPT and motion control products, our strong customer and distributor relationships and our know-how in implementing lean enterprise initiatives through ABS, we have an ideal platform for acquiring and successfully integrating related businesses, as evidenced through our acquisition and integration of Hay Hall and Bear Linear. Management believes that there may be a number of attractive potential acquisition candidates in the future, in part due to the fragmented nature of the industry. We plan to continue our disciplined pursuit of strategic acquisitions to accelerate our growth, enhance our industry leadership and create value. |
• | if we are unable to address technological advances, or introduce new or improved products to meet customer needs, we may be unable to maintain or enhance our competitive positions with customers and distributors; | |
• | if we are unable to continue to effectively implement our ABS operating plan, outsource parts and manufacturing from low cost countries, or introduce new cost effective manufacturing techniques, we may not continue to achieve cost savings; | |
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• | our ability to improve or sustain operating margins as a result of cost-savings may be further impacted by cost increases in raw materials to the extent we are unable to offset any such cost increases with price increases on a timely basis; | |
• | in the past, we have grown through acquisitions and we may be unable to identify attractive acquisition candidates, successfully integrate acquired operations or realize the intended benefits of our acquisitions; and | |
• | as we expand our international operations we may be further subjected to risks not present in the U.S. markets such as foreign and U.S. government regulations and restrictions, tariffs and other trade barriers, foreign exchange risks and other risks related to political, economic and social instability. | |
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Common Stock offered by Altra Holdings, Inc | shares | |
Common Stock to be offered by the selling stockholders | shares | |
Shares outstanding after the offering | shares | |
Use of proceeds | We estimate our net proceeds from this offering without exercise of the over-allotment option will be approximately $ million. We may use these proceeds to repay a portion of our outstanding indebtedness, for general working capital or to make strategic acquisitions. We will not receive any of the proceeds from the sale of shares by the selling stockholders. | |
Risk factors | See “Risk Factors” and other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in shares of our common stock. | |
Dividend policy | We do not currently intend to pay cash dividends on shares of our common stock. | |
NASDAQ symbol | “AIMC” |
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Historical | Pro Forma(1) | Altra Holdings, Inc. | Predecessor | ||||||||||||||||||||||||||||||
Combined | |||||||||||||||||||||||||||||||||
Six | Twelve | Six | Twelve | Twelve | Period from | Eleven | Twelve | ||||||||||||||||||||||||||
Months | Months | Months | Months | Months | December 1, 2004 | Months | Months | ||||||||||||||||||||||||||
Ended | Ended | Ended | Ended | Ended | Through | Ended | Ended | ||||||||||||||||||||||||||
June 30, | December 31, | June 30, | December 31, | December 31, | December 31, | November 30, | December 31, | ||||||||||||||||||||||||||
2006 | 2005 | 2006 | 2005 | 2004(2) | 2004 | 2004 | 2003 | ||||||||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||||||||||||
Statement of Operations Data: | |||||||||||||||||||||||||||||||||
Net sales | $ | 234,558 | $ | 363,465 | $ | 241,504 | $ | 426,446 | $ | 303,662 | $ | 28,625 | $ | 275,037 | $ | 266,863 | |||||||||||||||||
Cost of sales | 170,431 | 271,952 | 173,243 | 307,106 | 233,100 | 23,847 | 209,253 | 207,941 | |||||||||||||||||||||||||
Gross profit | 64,127 | 91,513 | 68,261 | 119,340 | 70,562 | 4,778 | 65,784 | 58,922 | |||||||||||||||||||||||||
Selling, general and administrative expenses | 37,821 | 61,480 | 42,032 | 89,477 | 54,294 | 8,973 | 45,321 | 52,968 | |||||||||||||||||||||||||
Research and development expenses | 2,492 | 4,683 | — | — | 4,325 | 378 | 3,947 | ||||||||||||||||||||||||||
(Gain) on sale of assets | — | — | — | — | (1,300 | ) | — | (1,300 | ) | — | |||||||||||||||||||||||
Restructuring charge, asset impairment and transition expenses | — | — | — | — | 947 | — | 947 | 11,085 | |||||||||||||||||||||||||
Income (loss) from operations | 23,814 | 25,350 | 26,229 | 29,863 | 12,296 | (4,573 | ) | 16,869 | (5,131 | ) | |||||||||||||||||||||||
Net income (loss) | $ | 6,900 | $ | 2,504 | $ | 7,856 | $ | 1,042 | $ | 1,002 | $ | (5,893 | ) | $ | 6,895 | $ | (9,306 | ) | |||||||||||||||
Other Financial Data: | |||||||||||||||||||||||||||||||||
EBITDA(3)(4) | $ | 30,647 | $ | 36,900 | $ | 33,499 | $ | 44,470 | $ | 19,141 | $ | (3,654 | ) | $ | 22,795 | $ | 3,057 | ||||||||||||||||
Depreciation and amortization | 6,746 | 11,533 | 7,183 | 14,395 | 6,993 | 919 | 6,074 | 8,653 | |||||||||||||||||||||||||
Capital expenditures | 4,110 | 6,199 | 4,121 | 7,437 | 3,778 | 289 | 3,489 | 5,294 |
Altra Holdings, Inc. | ||||||||||||
December 31, | ||||||||||||
June 30, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(in thousands) | ||||||||||||
Balance Sheet Data (at end of period): | ||||||||||||
Cash and cash equivalents | $ | 5,573 | $ | 10,060 | $ | 4,729 | ||||||
Working capital(5) | 78,250 | 52,863 | 57,571 | |||||||||
Total assets | 372,277 | 297,691 | 299,387 | |||||||||
Total debt | 228,256 | 173,760 | 173,851 | |||||||||
Preferred stock and other long-term liabilities | 75,828 | 71,622 | 76,665 |
(1) | The term “Pro forma” refers to our operations after giving effect to the Other Transactions and the Hay Hall Acquisition after conversion into U.S. dollars at the assumed exchange rates described herein (each as described under “Our Formation, Recent Acquisitions and The Kilian Transactions”), as if they had occurred as of the applicable date for balance sheet purposes and the first day of the applicable period for results of operations purposes. |
(2) | The combined results were prepared by adding the results of Altra from December 1 to December 31, 2004 to those from our Predecessor for the 11 month period ending November 31, 2004. This presentation is not in accordance with GAAP. The primary differences between our Predecessor and the successor entity are the inclusion of Kilian in the successor and the successor’s book basis has been stepped up to fair value such that the successor has additional depreciation, amortization and financing costs. The results of Kilian are included in Altra for the period from December 1, 2004 through December 31, 2004. Management believes that this combined basis presentation provides useful information for our investors in the comparison to Predecessor trends and operating results. The combined results are not necessarily indicative of what our results of operations may have been if the |
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PTH Acquisition and Kilian Transactions had been consummated earlier, nor should they be construed as being a representation of our future results of operations. | |
(3) | EBITDA is defined as earnings before interest, income taxes, depreciation and amortization. EBITDA is used by us as a performance measure. Management believes that EBITDA provides relevant information for our investors because it is useful for trending, analyzing and benchmarking the performance and value of our business. Management also believes that EBITDA is useful in assessing current performance compared with the historical performance of our Predecessor because significant line items within our income statements such as depreciation, amortization and interest expense were significantly impacted by the PTH Acquisition. Internally, EBITDA is used as a financial measure to assess the operating performance and is an important measure in our incentive compensation plans. EBITDA has important limitations, and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. For example, EBITDA does not reflect: |
• | cash expenditures, or future requirements, for capital expenditures or contractual commitments; | |
• | changes in, or cash requirements for, working capital needs; | |
• | the significant interest expense, or the cash requirements necessary to service interest or principal payments, on debts; | |
• | tax distributions that would represent a reduction in cash available to us; and | |
• | any cash requirements for assets being depreciated and amortized that may have to be replaced in the future. |
Historical | Pro Forma | Altra Holdings, Inc. | Predecessor | |||||||||||||||||||||||||||||||
Combined | ||||||||||||||||||||||||||||||||||
Six | Twelve | Six | Twelve | Twelve | Period from | Eleven | Twelve | |||||||||||||||||||||||||||
Months | Months | Months | Months | Months | December 1, | Months | Months | |||||||||||||||||||||||||||
Ended | Ended | Ended | Ended | Ended | 2004 through | Ended | Ended | |||||||||||||||||||||||||||
June 30, | December 31, | June 30, | December 31, | December 31, | December 31, | November 30, | December 31, | |||||||||||||||||||||||||||
2006 | 2005 | 2006 | 2005 | 2004 | 2004 | 2004 | 2003 | |||||||||||||||||||||||||||
Net income (loss) | $ | 6,900 | $ | 2,504 | $ | 7,856 | $ | 1,042 | $ | 1,002 | $ | (5,893 | ) | $ | 6,895 | $ | (9,306 | ) | ||||||||||||||||
Adjustments: | ||||||||||||||||||||||||||||||||||
Provision (benefit) for income taxes | 4,186 | 3,349 | 4,824 | 2,497 | 5,240 | (292 | ) | 5,532 | (1,658 | ) | ||||||||||||||||||||||||
Interest expense | 12,815 | 19,514 | 13,636 | 26,536 | 5,906 | 1,612 | 4,294 | 5,368 | ||||||||||||||||||||||||||
Depreciation and amortization | 6,746 | 11,533 | 7,183 | 14,395 | 6,993 | 919 | 6,074 | 8,653 | ||||||||||||||||||||||||||
EBITDA | 30,647 | 36,900 | 33,499 | 44,470 | 19,141 | (3,654 | ) | 22,795 | 3,057 |
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(4) | Includes expenses relating to non-cash inventorystep-up costs, management fees and transaction expenses associated with acquisitions which, if subtracted out, would result in a higher EBITDA. Inventorystep-up costs accounted for $2.3 million, $1.7 million and $1.7 million, respectively, for the six months ended June 30, 2006, the twelve months ended December 31, 2005 and the Combined Twelve Months Ended December 31, 2004. Management fees consisted of $0.5 million, $1.0 million and $0.1 million, respectively, for the six months ended June 30, 2006, the twelve months ended December 31, 2005 and the Combined Twelve Months Ended December 31, 2004. Transaction fees and expenses associated with acquisitions accounted for $1.0 million and $4.4 million, respectively, for the six months ended June 30, 2006 and the Combined Twelve Months Ended December 31, 2004. |
(5) | Working capital consists of total current assets less total current liabilities. |
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We operate in the highly competitive mechanical power transmission industry and if we are not able to compete successfully our business may be significantly harmed. |
Changes in general economic conditions or the cyclical nature of our markets could harm our operations and financial performance. |
We rely on independent distributors and the loss of these distributors could adversely affect our business. |
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We must continue to invest in new technologies and manufacturing techniques; however, our ability to develop or adapt to changing technology and manufacturing techniques is uncertain and our failure to do so could place us at a competitive disadvantage. |
• | product quality and availability; | |
• | price competitiveness; | |
• | technical expertise and development capability; | |
• | reliability and timeliness of delivery; | |
• | product design capability; | |
• | manufacturing expertise; and | |
• | sales support and customer service. |
Our operations are subject to international risks that could affect our operating results. |
• | fluctuations in currency exchange rates; | |
• | exchange rate controls; | |
• | compliance with U.S. Department of Commerce export controls; |
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• | tariffs or other trade protection measures and import or export licensing requirements; | |
• | potentially negative consequences from changes in tax laws; | |
• | interest rates; | |
• | unexpected changes in regulatory requirements; | |
• | changes in foreign intellectual property law; | |
• | differing labor regulations; | |
• | requirements relating to withholding taxes on remittances and other payments by subsidiaries; | |
• | restrictions on our ability to own or operate subsidiaries, make investments or acquire new businesses in various jurisdictions; | |
• | potential political instability and the actions of foreign governments; | |
• | restrictions on our ability to repatriate dividends from our subsidiaries; and | |
• | exposure to liabilities under the Foreign Corrupt Practices Act. |
Our operations depend on production facilities throughout the world, many of which are located outside the United States and are subject to increased risks of disrupted production causing delays in shipments and loss of customers and revenue. |
Material weaknesses in our internal controls over financial reporting have been identified which could result in a decrease in the value of our common stock. |
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If we are unable to complete our assessment as to the adequacy of our internal controls over financial reporting as of December 31, 2007 as required by Section 404 of the Sarbanes-Oxley Act of 2002, or if material weaknesses are identified and reported, investors could lose confidence in the reliability of our financial statements, which could result in a decrease in the value of your investment. |
We rely on estimated forecasts of our OEM customers’ needs, and inaccuracies in such forecasts could materially adversely affect our business. |
The materials used to produce our products are subject to price fluctuations that could increase costs of production and adversely affect our profitability. |
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We face potential product liability claims relating to products we manufacture or distribute, which could result in our having to expend significant time and expense to defend these claims and to pay material claims or settlement amounts. |
We may be subject to work stoppages at our facilities, or our customers may be subjected to work stoppages, which could seriously impact our operations and the profitability of our business. |
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Changes in employment laws could increase our costs and may adversely affect our business. |
We depend on the services of key executives, the loss of whom could materially harm our business. |
If we lose certain of our key sales, marketing or engineering personnel, our business may be adversely affected. |
We are subject to environmental laws that could impose significant costs on us and the failure to comply with such laws could subject us to sanctions and material fines and expenses. |
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We face additional costs associated with our post-retirement and post-employment obligations to employees which could have an adverse effect on our financial condition. |
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Our future success depends on our ability to integrate acquired companies and manage our growth effectively. |
We may not be able to protect our intellectual property rights, brands or technology effectively, which could allow competitors to duplicate or replicate our technology and could adversely affect our ability to compete. |
Goodwill comprises a significant portion of our total assets, and if we determine that goodwill has become impaired in the future, net income in such years may be materially and adversely affected. |
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Unplanned repairs or equipment outages could interrupt production and reduce income or cash flow. |
Our operations are highly dependent on information technology infrastructure and failures could significantly affect our business. |
Our leverage could adversely affect our financial health and make us vulnerable to adverse economic and industry conditions. |
• | make it more challenging for us to obtain additional financing to fund our business strategy and acquisitions, debt service requirements, capital expenditures and working capital; | |
• | increase our vulnerability to interest rate changes and general adverse economic and industry conditions; | |
• | require us to dedicate a substantial portion of our cash flow from operations to service our indebtedness, thereby reducing the availability of our cash flow to finance acquisitions and to fund working capital, capital expenditures, research and development efforts and other general corporate activities; | |
• | make it difficult for us to fulfill our obligations under our credit and other debt agreements; | |
• | limit our flexibility in planning for, or reacting to, changes in our business and our markets; and | |
• | place us at a competitive disadvantage relative to our competitors that have less debt. |
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We are subject to tax laws and regulations in many jurisdictions and the inability to successfully defend claims from taxing authorities related to our current or acquired businesses could adversely affect our operating results and financial position. |
Genstar Capital Partners III, L.P. and Stargen III, L.P. (together, the Genstar Funds) control us and may have conflicts of interest with our other stockholders in the future. |
The market price of our common stock may be volatile, which could cause the value of your investment to decline. |
We cannot assure you that an active trading market will develop for our stock. |
A substantial number of our shares of common stock may be sold in the public market by our principal stockholders, which could adversely affect the market price of our shares, which in turn could negatively impact your investment in us. |
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You will experience immediate and substantial dilution. |
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Because we have not paid dividends in the past and do not anticipate paying dividends on our common stock in the foreseeable future, you should not expect to receive dividends on shares of our common stock. |
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• | competitive factors in the industry in which we operate; | |
• | changes in general economic conditions and the cyclical nature of the markets in which we operate; | |
• | our dependence on our distribution network; | |
• | our ability to invest in, develop or adapt to changing technologies and manufacturing techniques; | |
• | international risks on our operations; | |
• | loss of our key management; | |
• | increase in litigation, including product liability claims; |
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• | our substantial indebtedness; and | |
• | other factors that are described under “Risk Factors.” |
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• | on an actual basis; and | |
• | on an as adjusted basis to give effect to the conversion of all shares of our preferred stock into shares of common stock, which will occur automatically upon the closing of this offering, and the sale by us of shares of common stock at the assumed initial public offering price of $ per share the midpoint of the range set forth on the cover page of this prospectus, in this offering and our receipt of the net offering proceeds therefrom, after deducting estimated underwriting discounts and commissions and offering expenses. |
As of June 30, 2006 | |||||||||
As | |||||||||
Actual | Adjusted | ||||||||
(Unaudited) | |||||||||
(In thousands) | |||||||||
Cash and cash equivalents | $ | 5,573 | $ | ||||||
Debt: | |||||||||
Senior revolving credit facility(1) | $ | — | |||||||
9% senior secured notes | 165,000 | ||||||||
111/4% senior notes | 59,938 | ||||||||
17% CDPQ note | 3,200 | ||||||||
5.75% mortgage | 2,448 | ||||||||
Capital leases and short-term bank borrowings | 2,787 | ||||||||
Total debt | $ | 233,373 | $ | ||||||
Preferred stock | 35,500 | ||||||||
Stockholders’ deficit | (2,027 | ) | |||||||
Total capitalization | $ | 266,846 | $ | ||||||
(1) | Our senior revolving credit facility has $30.0 million of borrowing capacity (including $10.0 million available for letters of credit), $27.6 million of which was available as of June 30, 2006. |
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Per Share | |||||
Assumed initial public offering price per share | $ | ||||
Net tangible book value before the offering | |||||
Increase in net tangible book value per share attributable to investors in this offering | |||||
Pro forma net tangible book value per share after this offering | |||||
Dilution per share to new investors | $ |
• | the total number of shares of common stock purchased from us; | |
• | the total consideration paid to us, assuming an initial public offering price of $ per share (before deducting the estimated underwriting discount and commissions and offering expenses payable by us in connection with this offering); and | |
• | the average price per share paid by existing stockholders and by new investors purchasing shares in this offering: |
Total | Average | ||||||||||||||||||||
Shares Purchased | Consideration | ||||||||||||||||||||
Per | |||||||||||||||||||||
Number | Percent | Amount | Percent | Share | |||||||||||||||||
Existing stockholders | $ | % | $ | % | $ | ||||||||||||||||
Investors in the offering | $ | % | $ | % | $ | ||||||||||||||||
Total | $ | 100 | % | $ | 100 | % | $ | ||||||||||||||
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Historical | |||||||||||||||||||||||||||||
Hay Hall | Hay Hall | ||||||||||||||||||||||||||||
Holding | Holdings | ||||||||||||||||||||||||||||
Altra Year | U.K. GAAP | U.K. GAAP | Hay Hall | ||||||||||||||||||||||||||
Ended | Year Ended | to U.S. | Hay Hall | Holdings | |||||||||||||||||||||||||
December 31, | December 31, | GAAP | Holdings | U.S. | Pro Forma | Pro Forma | |||||||||||||||||||||||
2005 | 2005 | Adjustments | U.S. GAAP | GAAP(a) | Adjustments | Combined | |||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||||
Net sales | $ | 363,465 | £ | 39,262 | £ | — | £ | 39,262 | $ | 71,496 | $ | (8,515 | )(1) | $ | 426,446 | ||||||||||||||
Cost of sales | 271,952 | 23,015 | (7 | ) | 23,008 | 41,898 | (6,744 | )(2) | 307,106 | ||||||||||||||||||||
Gross profit | 91,513 | 16,247 | 7 | 16,254 | 29,598 | (1,771 | ) | 119,340 | |||||||||||||||||||||
Selling, general, administrative and other operating expenses | 66,163 | 14,909 | 125 | 14,784 | 26,922 | (3,608 | )(3) | 89,477 | |||||||||||||||||||||
Operating profit | 25,350 | 1,338 | 132 | 1,470 | 2,676 | 1,837 | 29,863 | ||||||||||||||||||||||
Interest expense, net | 19,514 | 1,230 | — | 1,230 | 2,240 | 4,782 | (4) | 26,536 | |||||||||||||||||||||
Other income, net | (17 | ) | (107 | ) | — | (107 | ) | (195 | ) | — | (212 | ) | |||||||||||||||||
(Loss) income before income taxes | 5,853 | 215 | 132 | 347 | 631 | (2,945 | ) | 3,539 | |||||||||||||||||||||
Income tax (benefit) expense | 3,349 | 292 | — | 292 | 532 | (1,384 | )(5) | 2,497 | |||||||||||||||||||||
Net income (loss) | $ | 2,504 | £ | (77 | ) | £ | 132 | £ | 55 | $ | 99 | $ | (1,561 | ) | $ | 1,042 | |||||||||||||
Weighted average shares of common stock outstanding: | |||||||||||||||||||||||||||||
Basic | n/a | n/a | n/a | n/a | n/a | ||||||||||||||||||||||||
Diluted | n/a | n/a | n/a | n/a | n/a | ||||||||||||||||||||||||
Net income available to holders of shares of common stock per share: | |||||||||||||||||||||||||||||
Basic | $ | n/a | n/a | n/a | n/a | n/a | $ | ||||||||||||||||||||||
Diluted | $ | n/a | n/a | n/a | n/a | n/a | $ |
(a) | Reflects Hay Hall’s Combined Statement of Operations on a U.S. GAAP basis after translation to U.S. dollars at an exchange rate of 1.821 U.S. dollars per U.K. pound sterling (the average exchange rate for the 2005 fiscal year). |
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Hay Hall | |||||||||||||||||||||||||||||
Holdings | |||||||||||||||||||||||||||||
UK GAAP | |||||||||||||||||||||||||||||
Period from | |||||||||||||||||||||||||||||
Altra | January 1, | Hay Hall | |||||||||||||||||||||||||||
Six Months | 2006 | Holdings | Hay Hall | ||||||||||||||||||||||||||
Ended | through | UK GAAP | Hay Hall | Holdings | |||||||||||||||||||||||||
June 30, | February 10, | U.S. GAAP | Holdings | U.S. | Pro Forma | Pro Forma | |||||||||||||||||||||||
2006 | 2006 | Adjustments | U.S. GAAP | GAAP(a) | Adjustments | Combined | |||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||||
Net sales | $ | 234,558 | £ | 4,371 | £ | — | £ | 4,371 | $ | 7,662 | $ | (716 | )(1) | $ | 241,504 | ||||||||||||||
Cost of sales | 170,431 | 2,513 | (1 | ) | 2,512 | 4,404 | (1,592 | )(2) | 173,243 | ||||||||||||||||||||
Gross profit | 64,127 | 1,858 | 1 | 1,859 | 3,258 | 876 | 68,261 | ||||||||||||||||||||||
Selling, general, administrative and other expenses | 40,313 | 1,706 | (12 | ) | 1,694 | 2,970 | (1,251 | )(3) | 42,032 | ||||||||||||||||||||
Operating profit | 23,814 | 152 | 13 | 165 | 288 | 2,127 | 26,229 | ||||||||||||||||||||||
Interest expense, net | 12,815 | 111 | — | 111 | 195 | 626 | (4) | 13,636 | |||||||||||||||||||||
Other income, net | (87 | ) | — | — | — | — | — | (87 | ) | ||||||||||||||||||||
Income before income taxes | 11,086 | 41 | 13 | 54 | 93 | 1,501 | 12,680 | ||||||||||||||||||||||
Income tax (benefit) expense | 4,186 | 13 | — | 13 | 23 | 615 | (5) | 4,824 | |||||||||||||||||||||
Net Income | $ | 6,900 | £ | 28 | £ | 13 | £ | 41 | $ | 70 | $ | 886 | $ | 7,856 | |||||||||||||||
Weighted average shares of common stock outstanding: | |||||||||||||||||||||||||||||
Basic | n/a | n/a | n/a | n/a | n/a | ||||||||||||||||||||||||
Diluted | n/a | n/a | n/a | n/a | n/a | ||||||||||||||||||||||||
Net income available to holders of shares of common stock per share: | |||||||||||||||||||||||||||||
Basic | $ | n/a | n/a | n/a | n/a | n/a | $ | ||||||||||||||||||||||
Diluted | $ | n/a | n/a | n/a | n/a | n/a | $ |
(a) | Reflects Hay Hall’s Unaudited Interim Condensed Statement of Operations on a U.S. GAAP basis after translation to U.S. dollars at an exchange rate of 1.753 U.S. dollars per U.K. pound sterling (the average exchange rate for the six month period ended June 30, 2006). |
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Year | Six Months | ||||||||
Ended | Ended | ||||||||
December 31, | June 30, | ||||||||
2005 | 2006 | ||||||||
(In thousands) | |||||||||
(1) Adjustments to net sales as follows: | |||||||||
Elimination of net sales of Engineered Systems of Matrix business which is included in the Hay Hall financial statements but which were not acquired by Altra | $ | (6,805 | ) | $ | (291 | ) | |||
Elimination of intercompany sales from Hay Hall to Altra | (1,456 | ) | (378 | ) | |||||
Elimination of intercompany sales from Altra to Hay Hall | (254 | ) | (47 | ) | |||||
Total pro forma adjustment | $ | (8,515 | ) | $ | (716 | ) | |||
(2) Adjustments to cost of sales as follows: | |||||||||
Elimination of cost of sales of Engineered Systems of Matrix business which is included in the Hay Hall financial statements but which were not acquired by Altra | $ | (5,121 | ) | $ | (205 | ) | |||
Elimination of cost of sales on intercompany sales from Hay Hall to Altra | (1,456 | ) | (378 | ) | |||||
Elimination of cost of sales on intercompany sales from Altra to Hay Hall | (254 | ) | (47 | ) | |||||
Elimination of additional cost of goods sold as a result of the fair value adjustment to inventory recorded in connection with the Acquisition | — | (984 | ) | ||||||
To record additional depreciation expense resulting from the adjustment to the fair market value of property, plant and equipment in connection with the transaction | 87 | 22 | |||||||
Total pro forma adjustment | $ | (6,744 | ) | $ | (1,592 | ) | |||
(3) Adjustments to selling, general, administrative and other operating expenses as follows: | |||||||||
Elimination of selling, general, administrative and other operations expenses of Engineered Systems of Matrix business which is included in the Hay Hall financial statements but which were not acquired by Altra | $ | (1,724 | ) | $ | (156 | ) | |||
Elimination of the selling, general, administrative, and other operations expenses of Hay Hall’s corporate office business which is included in the Hay Hall financial statements but which were not acquired by Altra | (2,844 | ) | (330 | ) | |||||
Additional expense required to present amortization expense (based on lives ranging from eight to 12 years) associated with intangible assets recorded in connection with the Acquisition | 960 | 240 | |||||||
Elimination of additional expense related to Genstar Capital, L.P. transaction fee | — | (1,005 | ) | ||||||
Total pro forma adjustment | $ | (3,608 | ) | $ | (1,251 | ) | |||
(4) Adjustments to interest expense as follows: | |||||||||
Additional expense required associated with the notes issued to finance the Hay Hall Acquisition (consists of interest on £33.0 million of notes at 111/4%) | $ | 6,760 | $ | 756 | |||||
Elimination of interest expense recorded at Hay Hall | (2,240 | ) | (195 | ) | |||||
Additional expense required to present a full year of amortization expense (based on a seven year life) associated with debt issuance costs incurred in connection with the notes | 262 | 65 | |||||||
Total pro forma adjustment | $ | 4,782 | $ | 626 | |||||
(5) Adjustments to record additional tax (benefit) expense of 47% and 41%, calculated at an effective which reflects the federal, state and foreign statutory rate in effect at the beginning of 2005 and 2006, respectively, resulting from the other pro forma adjustments. Historical tax expense has not been adjusted | $ | (1,384 | ) | $ | 615 |
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Altra Holdings, Inc. | Predecessor | ||||||||||||||||||||||||||||||||
Six | Six | Twelve | Period from | ||||||||||||||||||||||||||||||
Months | Months | Months | Period from | January 1, 2004 | |||||||||||||||||||||||||||||
Ended | Ended | Ended | December 1, 2004 | through | Year Ended December 31, | ||||||||||||||||||||||||||||
June 30, | July 1, | December 31, | through | November 30, | |||||||||||||||||||||||||||||
2006 | 2005 | 2005 | December 31, 2004 | 2004 | 2003 | 2002 | 2001 | ||||||||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||||||||||||
Statement of Operations Data: | |||||||||||||||||||||||||||||||||
Net sales | $ | 234,558 | $ | 188,336 | $ | 363,465 | $ | 28,625 | $ | 275,037 | $ | 266,863 | $ | 253,217 | $ | 259,761 | |||||||||||||||||
Cost of sales | 170,431 | 143,122 | 271,952 | 23,847 | 209,253 | 207,941 | 190,465 | 193,577 | |||||||||||||||||||||||||
Gross profit | 64,127 | 45,214 | 91,513 | 4,778 | 65,784 | 58,922 | 62,752 | 66,184 | |||||||||||||||||||||||||
Selling, general and administrative expenses | 37,821 | 31,083 | 61,579 | 8,973 | 45,321 | 49,513 | 48,303 | 50,508 | |||||||||||||||||||||||||
Research and development expenses | 2,492 | 2,308 | 4,683 | 378 | 3,947 | 3,455 | 3,103 | 2,518 | |||||||||||||||||||||||||
Gain on sale of assets | — | — | (99 | ) | — | (1,300 | ) | — | — | — | |||||||||||||||||||||||
Restructuring charge, asset impairment and transition expenses | — | — | — | — | 947 | 11,085 | 27,825 | — | |||||||||||||||||||||||||
Income (loss) from operations | 23,814 | 11,823 | 25,350 | (4,573 | ) | 16,869 | (5,131 | ) | (16,479 | ) | 13,158 | ||||||||||||||||||||||
Interest expense | 12,815 | 9,771 | 19,514 | 1,612 | 4,294 | 5,368 | 5,489 | 6,655 | |||||||||||||||||||||||||
Other expense (income) | (87 | ) | 13 | (17 | ) | — | 148 | 465 | (312 | ) | 94 | ||||||||||||||||||||||
Income (loss) before income taxes, discontinued operations and cumulative effect of change in accounting principles | 11,086 | 2,039 | 5,853 | (6,185 | ) | 12,427 | (10,964 | ) | (21,656 | ) | 6,409 | ||||||||||||||||||||||
Provision (benefit) for income taxes | 4,186 | 1,034 | 3,349 | (292 | ) | 5,532 | (1,658 | ) | 2,455 | 4,794 | |||||||||||||||||||||||
Loss from disposal of discontinued, net of income taxes | — | — | — | — | — | — | (700 | ) | (1,867 | ) | |||||||||||||||||||||||
Income (loss) from operations and disposal of discontinued operations, net of income taxes | 6,900 | 1,005 | 2,504 | (5,893 | ) | 6,895 | (9,306 | ) | (24,811 | ) | (252 | ) | |||||||||||||||||||||
Cumulative effect of change in accounting principle — goodwill impairment | — | — | — | — | — | — | (83,412 | ) | — | ||||||||||||||||||||||||
Net income (loss) | $ | 6,900 | $ | 1,005 | $ | 2,504 | $ | (5,893 | ) | $ | 6,895 | $ | (9,306 | ) | $ | (108,223 | ) | $ | (252 | ) | |||||||||||||
Weighted average shares of common stock outstanding: | |||||||||||||||||||||||||||||||||
Basic | n/a | n/a | n/a | n/a | |||||||||||||||||||||||||||||
Diluted | n/a | n/a | n/a | n/a | |||||||||||||||||||||||||||||
Net income available to holders of shares of Class A common stock per share: | |||||||||||||||||||||||||||||||||
Basic | $ | $ | $ | $ | n/a | n/a | n/a | n/a | |||||||||||||||||||||||||
Diluted | $ | $ | $ | $ | n/a | n/a | n/a | n/a |
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Altra Holdings, Inc. | Predecessor | |||||||||||||||||||||||||||||||||
Six | Six | Twelve | Period from | Period from | ||||||||||||||||||||||||||||||
Months | Months | Months | December 1, 2004 | January 1, 2004 | ||||||||||||||||||||||||||||||
Ended | Ended | Ended | through | through | Year Ended December 31, | |||||||||||||||||||||||||||||
June 30, | July 1, | December 31, | December 31, | November 30, | ||||||||||||||||||||||||||||||
2006 | 2005 | 2005 | 2004 | 2004 | 2003 | 2002 | 2001 | |||||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||||||||
Other Financial Data: | ||||||||||||||||||||||||||||||||||
EBITDA(1)(2) | $ | 30,647 | $ | 17,211 | $ | 36,900 | $ | (3,654 | ) | $ | 22,795 | $ | 3,057 | $ | (90,732 | ) | $ | 23,404 | ||||||||||||||||
Depreciation and amortization | 6,746 | 5,401 | 11,533 | 919 | 6,074 | 8,653 | 9,547 | 12,207 | ||||||||||||||||||||||||||
Purchase of fixed assets | 4,110 | 1,960 | 6,199 | 289 | 3,489 | 5,294 | 5,911 | 4,374 | ||||||||||||||||||||||||||
Cash flow provided by (used in): | ||||||||||||||||||||||||||||||||||
Operating activities | 6,108 | 2,401 | 12,023 | 5,623 | 3,604 | (14,289 | ) | 21,934 | 27,658 | |||||||||||||||||||||||||
Investing activities | (58,196 | ) | (2,094 | ) | (5,197 | ) | (180,401 | ) | 953 | (1,573 | ) | (4,585 | ) | (3,645 | ) | |||||||||||||||||||
Financing activities | 47,346 | 3,776 | (971 | ) | 179,432 | (6,696 | ) | 12,746 | (13,037 | ) | (23,379 | ) |
Altra Holdings, Inc. | Predecessor | ||||||||||||||||||||||||||||
June 30, | July 1, | December 31, | December 31, | ||||||||||||||||||||||||||
2006 | 2005 | 2005 | 2004 | 2003 | 2002 | 2001 | |||||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||||||||
Balance Sheet Data (at end of period): | |||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 5,573 | $ | 8,466 | $ | 10,060 | $ | 4,729 | $ | 3,163 | $ | 5,214 | $ | 2,706 | |||||||||||||||
Working capital(3) | 78,250 | 56,699 | 52,863 | 57,571 | 51,375 | 10,200 | 35,906 | ||||||||||||||||||||||
Total assets | 372,277 | 299,779 | 297,691 | 299,387 | 174,324 | 173,034 | 281,567 | ||||||||||||||||||||||
Total debt | 228,256 | 178,101 | 173,760 | 173,851 | 1,025 | 46,183 | 61,338 | ||||||||||||||||||||||
Preferred stock and other long-term liabilities | 75,828 | 76,922 | 71,622 | 76,665 | 62,179 | 62,877 | 31,552 |
(1) | EBITDA is defined as earnings before interest, income taxes, depreciation and amortization. EBITDA is used by us as a performance measure. Management believes that EBITDA provides relevant information for our investors because it is useful for trending, analyzing and benchmarking the performance and value of our business. Management also believes that EBITDA is useful in assessing current performance compared with the historical performance of our Predecessor because significant line items within our income statements such as depreciation, amortization and interest expense were significantly impacted by the PTH Acquisition. Internally, EBITDA is used as a financial measure to assess the operating performance and is an important measure in our incentive compensation plans. EBITDA has important limitations, and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. For example, EBITDA does not reflect: |
• | cash expenditures, or future requirements, for capital expenditures or contractual commitments; | |
• | changes in, or cash requirements for, working capital needs; | |
• | the significant interest expense, or the cash requirements necessary to service interest or principal payments, on debts; | |
• | tax distributions that would represent a reduction in cash available to us; and | |
• | any cash requirements for assets being depreciated and amortized that may have to be replaced in the future. |
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Altra Holdings, Inc. | Predecessor | |||||||||||||||||||||||||||||||||
Six | Six | Twelve | Period from | Period from | ||||||||||||||||||||||||||||||
Months | Months | Months | December 1, | January 1, | ||||||||||||||||||||||||||||||
Ended | Ended | Ended | 2004 through | 2004 through | Year Ended December 31, | |||||||||||||||||||||||||||||
June 30, | July 1, | December 31, | December 31, | November 30, | ||||||||||||||||||||||||||||||
2006 | 2005 | 2005 | 2004 | 2004 | 2003 | 2002 | 2001 | |||||||||||||||||||||||||||
Net income (loss) | $ | 6,900 | $ | 1,005 | $ | 2,504 | $ | (5,893 | ) | $ | 6,895 | $ | (9,306 | ) | $ | (108,223 | ) | $ | (252 | ) | ||||||||||||||
Adjustments: | ||||||||||||||||||||||||||||||||||
Provision (benefit) for income taxes | 4,186 | 1,034 | 3,349 | (292 | ) | 5,532 | (1,658 | ) | 2,455 | 4,794 | ||||||||||||||||||||||||
Interest expense | 12,815 | 9,771 | 19,514 | 1,612 | 4,294 | 5,368 | 5,489 | 6,655 | ||||||||||||||||||||||||||
Depreciation and amortization | 6,746 | 5,401 | 11,533 | 919 | 6,074 | 8,653 | 9,547 | 12,207 | ||||||||||||||||||||||||||
EBITDA | 30,647 | 17,211 | 36,900 | (3,654 | ) | 22,795 | 3,057 | (90,732 | ) | 23,404 |
(3) | Working capital consists of total current assets less total current liabilities. |
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• | In 2003, our Predecessor incurred transition expenses, including relocation, training, recruiting and moving costs, directly related to implementing its restructuring activities amounting to $9.1 million. | |
• | In 2003, our Predecessor recorded a $2.0 million loss from the sale of certain real estate associated with facilities closed as a part of its restructuring activities. | |
• | In 2005, we re-negotiated two of our U.S. collective bargaining agreements which we estimate provide for savings of $0.8 million annually. | |
• | In 2006, we re-negotiated one of our U.S. collective bargaining agreements which we estimate provides for savings of $2.2 million annually. |
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Interim Results of Operations |
Six Months Ended | Six Months Ended | ||||||||
June 30, 2006 | July 1, 2005 | ||||||||
(Unaudited) | |||||||||
(In thousands, except percentage data) | |||||||||
Net sales | $ | 234,558 | $ | 188,336 | |||||
Cost of sales | 170,431 | 143,122 | |||||||
Gross profit | 64,127 | 45,214 | |||||||
Gross profit percentage | 27.3 | % | 24.0 | % | |||||
Selling, general and administrative expenses | 37,821 | 31,083 | |||||||
Research and development expenses | 2,492 | 2,308 | |||||||
Income from operations | 23,814 | 11,823 | |||||||
Interest expense | 12,815 | 9,771 | |||||||
Other non-operating (income) expense | (87 | ) | 13 | ||||||
Income before income taxes | 11,086 | 2,039 | |||||||
Provision for income taxes | 4,186 | 1,034 | |||||||
Net income | $ | 6,900 | $ | 1,005 | |||||
Six Months Ended June 30, 2006 Compared with Six Months Ended July 1, 2005 |
Net sales |
Gross profit |
Selling, general and administrative expenses |
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Research and development expenses |
Interest expense |
Provision for income taxes |
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Year End Results of Operations |
From | ||||||||||||||||||||||
Inception | Predecessor | |||||||||||||||||||||
Combined | (December 1, | |||||||||||||||||||||
12 Months | 2004) | 11 Months | ||||||||||||||||||||
Year Ended | Ended | through | Ended | Year Ended | ||||||||||||||||||
December 31, | December 31, | December 31, | November 30, | December 31, | ||||||||||||||||||
2005 | 2004 | 2004 | 2004 | 2003 | ||||||||||||||||||
(In thousands, except percentage data) | (In thousands, except | |||||||||||||||||||||
percentage data) | ||||||||||||||||||||||
Net sales | $ | 363,465 | $ | 303,662 | $ | 28,625 | $ | 275,037 | $ | 266,863 | ||||||||||||
Cost of sales | 271,952 | 233,100 | 23,847 | 209,253 | 207,941 | |||||||||||||||||
Gross profit | 91,513 | 70,562 | 4,778 | 65,784 | 58,922 | |||||||||||||||||
Gross profit percentage | 25.2 | % | 23.2 | % | 16.7 | % | 23.9 | % | 22.1 | % | ||||||||||||
Selling, general and administrative expenses | 61,579 | 54,294 | 8,973 | 45,321 | 49,513 | |||||||||||||||||
Research and development expenses | 4,683 | 4,325 | 378 | 3,947 | 3,455 | |||||||||||||||||
Gain on sale of assets | (99 | ) | (1,300 | ) | — | (1,300 | ) | — | ||||||||||||||
Restructuring charge, asset impairment and transition expenses | — | 947 | — | 947 | 11,085 | |||||||||||||||||
Income (loss) from operations | 25,350 | 12,296 | (4,573 | ) | 16,869 | (5,131 | ) | |||||||||||||||
Interest expense | 19,514 | 5,906 | 1,612 | 4,294 | 5,368 | |||||||||||||||||
Other non-operating (income) expense | (17 | ) | 148 | — | 148 | 465 | ||||||||||||||||
Income (loss) before income taxes | 5,853 | 6,242 | (6,185 | ) | 12,427 | (10,964 | ) | |||||||||||||||
Provision (benefit) for income taxes | 3,349 | 5,240 | (292 | ) | 5,532 | (1,658 | ) | |||||||||||||||
Net income (loss) | $ | 2,504 | $ | 1,002 | $ | (5,893 | ) | $ | 6,895 | $ | (9,306 | ) | ||||||||||
Year Ended December 31, 2005 Compared with Year Ended December 31, 2004 |
Net sales |
Gross profit |
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Selling, general and administrative expenses |
Research and development expenses |
Gain on sale of assets |
Restructuring charge, asset impairment and transition expenses |
Interest expense |
Provision for income taxes |
Year Ended December 31, 2004 Compared with Year Ended December 31, 2003 |
Net sales |
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Gross profit |
Selling, general and administrative expenses |
Research and development expenses |
Restructuring charge, asset impairment and transition expenses |
Interest expense |
Other non-operating (income) expense |
Provision for income taxes |
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Altra Holdings, Inc. | Predecessor | ||||||||||||||||||||||||||||||||||||
Period from | Period from | ||||||||||||||||||||||||||||||||||||
December 1, | October 2, | ||||||||||||||||||||||||||||||||||||
2004 to | 2004 to | ||||||||||||||||||||||||||||||||||||
June 30, | March 31, | Dec. 31, | Sept. 30, | July 1, | April 1, | December 31, | November 30, | October 1, | |||||||||||||||||||||||||||||
2006 | 2006 | 2005 | 2005 | 2005 | 2005 | 2004 | 2004 | 2004 | |||||||||||||||||||||||||||||
(In thousands, except per share data) | (In thousands, except per | ||||||||||||||||||||||||||||||||||||
share data) | |||||||||||||||||||||||||||||||||||||
Net sales | $ | 119,774 | $ | 114,784 | $ | 89,974 | $ | 85,155 | $ | 93,034 | $ | 95,302 | $ | 28,625 | $ | 46,338 | $ | 72,542 | |||||||||||||||||||
Cost of sales | 87,501 | 82,930 | 65,046 | 63,784 | 69,720 | 73,402 | 23,847 | 36,651 | 54,859 | ||||||||||||||||||||||||||||
Gross profit (loss) | 32,273 | 31,854 | 24,928 | 21,371 | 23,314 | 21,900 | 4,778 | 9,687 | 17,683 | ||||||||||||||||||||||||||||
Selling, general and administrative and research and development expenses | 20,382 | 19,931 | 16,678 | 16,094 | 16,456 | 16,935 | 9,351 | 8,996 | 13,082 | ||||||||||||||||||||||||||||
Operating profit (loss) | 11,891 | 11,923 | 8,250 | 5,277 | 6,858 | 4,965 | (4,573 | ) | 691 | 4,601 | |||||||||||||||||||||||||||
Interest expense (income), net | 6,374 | 6,441 | 4,867 | 4,876 | 4,902 | 4,869 | 1,612 | 702 | 1,123 | ||||||||||||||||||||||||||||
Other expense (income), net | 72 | (159 | ) | (20 | ) | (10 | ) | 13 | — | — | (28 | ) | 301 | ||||||||||||||||||||||||
Income (loss) before income taxes | 5,445 | 5,641 | 3,403 | 411 | 1,943 | 96 | (6,185 | ) | 17 | 3,177 | |||||||||||||||||||||||||||
Provision for income taxes (benefit) | 1,749 | 2,437 | 2,108 | 207 | 859 | 175 | (292 | ) | 270 | 4,258 | |||||||||||||||||||||||||||
Net income (loss) | $ | 3,696 | $ | 3,204 | $ | 1,295 | $ | 204 | $ | 1,084 | $ | (79 | ) | $ | (5,893 | ) | $ | (253 | ) | $ | (1,081 | ) | |||||||||||||||
Weighted average shares of common stock outstanding: | |||||||||||||||||||||||||||||||||||||
Basic | n/a | n/a | |||||||||||||||||||||||||||||||||||
Diluted | n/a | n/a | |||||||||||||||||||||||||||||||||||
Net income available to holders of shares of Class A common stock per share: | |||||||||||||||||||||||||||||||||||||
Basic | $ | $ | $ | $ | $ | $ | $ | n/a | n/a | ||||||||||||||||||||||||||||
Diluted | $ | $ | $ | $ | $ | $ | $ | n/a | n/a |
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Overview |
Borrowings |
44
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Capital Expenditures |
Pension Plans |
45
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Comparative Cash Flows |
46
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Debt Repayment |
Payments Due by Period | ||||||||||||||||||||||||
2006 | 2007 | 2008 | 2009 | 2010 | Thereafter | |||||||||||||||||||
9% senior secured notes(1) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 165.0 | ||||||||||||
111/4% senior notes(2) | — | — | — | — | — | 59.9 | ||||||||||||||||||
17% CDPQ note(3) | — | — | — | — | — | 3.2 | ||||||||||||||||||
Senior revolving credit facility(4) | — | — | — | — | — | — | ||||||||||||||||||
Capital leases | 0.4 | 0.6 | 0.3 | 0.2 | 0.1 | 0.2 | ||||||||||||||||||
Operating leases | 1.1 | 3.0 | 1.9 | 1.0 | 0.6 | 1.5 | ||||||||||||||||||
Mortgage | 0.1 | 0.2 | 0.2 | 0.2 | 0.2 | 2.9 | ||||||||||||||||||
Total contractual obligations | $ | 1.6 | $ | 3.8 | $ | 2.4 | $ | 1.4 | $ | 0.9 | $ | 232.7 |
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(1) | We have semi-annual cash interest requirements due on the 9% senior secured notes with $14.9 million payable in 2006, 2007, 2008, 2009, 2010 and thereafter. |
(2) | We have semi-annual cash interest requirements due on the 111/4% senior notes. Assuming an exchange rate of 1.8163 U.S. dollars per U.K. pound sterling as of June 30, 2006, we will have $3.4 million payable in 2006, $6.7 million payable in each of 2007, 2008, 2009 and 2010 and $16.9 million thereafter. The principal balance of £33.0 million is due in 2013. |
(3) | We have quarterly interest requirements due on the 17% CDPQ note. Interest is payable in cash or as paid-in-kind to be accrued against the outstanding principal balance at the discretion of the Company. |
(4) | We have up to $30.0 million of borrowing capacity, through November 2009, under our senior revolving credit facility (including $10.0 million available for use for letters of credit). At June 30, 2006, we had no outstanding borrowings and $2.4 million of outstanding letters of credit under our senior revolving credit facility. |
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Foreign Currency Exchange Rate Risk |
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Interest rate risk |
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• | Leverage Our Sales and Distribution Network. We intend to continue to leverage our relationships with our distributors to gain shelf space, further integrate our recently acquired brands with our core brands and sell new products. In addition, we intend to continue to actively pursue new OEM opportunities with innovative and cost-effective product designs and applications to help maintain and grow our aftermarket revenues. For example, in 2002 we launched a new product in the wrap spring category. Despite established competition within this particular category, we were able to quickly penetrate the market and we expect to exceed 15% in global market share in 2006 due to the strength of our Warner Electric brand. We seek to capitalize on customer brand preference for our products to generate pull-through aftermarket demand from our distribution channel. We believe this strategy also allows our distributors to achieve high profit margins, further enhancing our preferred position with them. | |
• | Focus our Strategic Marketing on New Growth Opportunities. We intend to expand our emphasis on strategic marketing to focus on new growth opportunities in key end user markets. Through a systematic process that leverages our core brands and products, we seek to identify attractive markets and product niches, collect customer and market data, identify market drivers, tailor product and service solutions to specific market and customer requirements and deploy resources to gain market share and drive future sales growth. | |
• | Accelerate New Product and Technology Development. We are highly focused on driving new product development across our business in response to customer needs in various markets. Through our strategic marketing efforts, we continually gain market and customer intelligence, which feeds new product and technology development initiatives that are designed to address particular needs or problems customers identify. This focus has allowed us to respond quickly to new market opportunities. |
Recent new product development examples include the Foot/ Deck Mount Kopper Kool Brake, a new clutch brake design which significantly extends product life and can dramatically reduce blade stop time on commercial and residential lawn tractors, a new magnetic particle clutch designed to solve a number of long-standing performance issues on soft-drink bottle capping applications, and the RA10 speed reducer, designed for use in the rapidly growing market for armor-fitted military vehicles used by the US military. In total, we expect new products developed by us during the past three years to generate approximately $40 million in revenues in 2006. |
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• | Capitalize on Growth and Sourcing Opportunities in the Asia-Pacific Market. We intend to leverage our established sales offices in China, Taiwan and Singapore, as well as add representation in Japan and South Korea. We also intend to expand our manufacturing presence in Asia beyond our current plant in Shenzhen, China, to increase sales in the high-growth Asia-Pacific region. This region also offers opportunities for low-cost country sourcing of raw materials. During 2005, we sourced approximately 12% of our purchases from low-cost countries, resulting in average cost reductions of approximately 40% for these products. Within the next five years, we intend to utilize our sourcing office in Shanghai to significantly increase our current level of low-cost country sourced purchases. We may also consider opportunities to outsource some of our production from North American and Western European locations to Asia. | |
• | Continue to Improve Operational and Manufacturing Efficiencies through ABS. We believe we can continue to improve profitability through cost control, overhead rationalization, global process optimization, continued implementation of lean manufacturing techniques and strategic pricing initiatives. Our operating plan, based on manufacturing centers of excellence, provides additional opportunities to reduce costs by sharing best practices across geographies and business lines and by consolidating purchasing processes. We have implemented these principles with our recent acquisitions of Hay Hall and Bear Linear and intend to apply such principles to future acquisitions. | |
• | Pursue Strategic Acquisitions that Complement our Strong Platform. With our extensive MPT and motion control products, our strong customer and distributor relationships and our know-how in implementing lean enterprise initiatives through ABS, we have an ideal platform for acquiring and successfully integrating related businesses, as evidenced through our acquisition and integration of Hay Hall and Bear Linear. Management believes that there may be a number of attractive potential acquisition candidates in the future, in part due to the fragmented nature of the industry. We plan to continue our disciplined pursuit of strategic acquisitions to accelerate our growth, enhance our industry leadership and create value. |
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Products | Principal Brands | Principal Markets | Sample Applications | |||
Clutches and Brakes | Warner Electric, Wichita Clutch, Formsprag Clutch, Stieber Clutch, Matrix International, Inertia Dynamics, Twiflex Limited, Industrial Clutch, Marland Clutch | Aerospace, energy, material handling, metals, turf and garden, mining | Elevators, forklifts, lawn mowers, oil well drawworks, punch presses, conveyors | |||
Gearing | Boston Gear, Nuttall Gear, Delroyd Worm Gear, | Food processing, material handling, metals, transportation | Conveyors, ethanol mixers, packaging machinery, rail car wheel drives | |||
Engineered Couplings | Ameridrives, Bibby Transmissions | Energy, metals, plastics | Extruders, turbines, steel strip mills | |||
Engineered Bearing Assemblies | Kilian Manufacturing | Aerospace, material handling, transportation | Cargo rollers, steering columns, conveyors | |||
Power Transmission Components | Warner Electric, Boston Gear, Huco Dynatork, Bear Linear, Matrix International, Safetek | Material handling, metals, turf and garden | Conveyors, lawn mowers, machine tools |
• | Electromagnetic Clutches and Brakes. Our industrial products include clutches and brakes with specially designed controls for material handling, forklift, elevator, medical mobility, mobile off-highway, baggage handling and plant productivity applications. We also offer a line of clutch and brake products for walk-behind mowers, residential lawn tractors and commercial mowers. While industrial applications are predominant, we also manufacture several vehicular niche applications including on-road refrigeration compressor clutches and agricultural equipment clutches. We market our electromagnetic products under the Warner Electric, IDI and Matrix brand names. | |
• | Overrunning Clutches. Specific product lines include the Formsprag and Stieber indexing and backstopping clutches. Primary industrial applications include conveyors, gear reducers, hoists and cranes, mining machinery, machine tools, paper machinery, packaging machinery, pumping equipment and other specialty machinery. We market and sell these products under the Formsprag, Marland and Stieber brand names. | |
• | Heavy Duty Clutches and Brakes. Our heavy duty clutch and brake product lines serve various markets including metal forming, off-shore and land-based oil and gas drilling platforms, mining material handling, marine applications and various off-highway and construction equipment segments. Our line of heavy duty pneumatic, hydraulic and caliper clutches and brakes are marketed under the Wichita Clutch and Twiflex brand names. |
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• | Bear Linear. Bear Linear is a designer and manufacturer of rugged service electromechanical linear actuators for off-highway vehicles, agriculture, turf care, special vehicles, medical equipment, industrial and marine applications. | |
• | Huco Dynatork. Huco Dynatork is a leading manufacturer and supplier of a complete range of precision couplings, universal joints, rod ends and linkages. | |
• | Safetek. Safetek manufactures a broad range of high quality non-asbestos friction materials for industrial, marine, construction, agricultural and vintage and classic cars and motorcycles. | |
• | Other Accessories. Our Boston Gear, Warner Electric and Matrix businesses make or market several other accessories such as sensors, sleeve bearings, AC/ DC motors, adjustable speed drives, shaft accessories, face tooth couplings and fluid power components that are used in numerous end markets. |
• | lowering the cost of manufacturing our existing products; | |
• | redesigning existing product lines to increase their efficiency or enhance their performance; and | |
• | developing new product applications. |
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Number of | Owned/ | Lease | ||||||||||||||||
Location | Brand | Major Products | Employees(1) | Sq Ft. | Leased | Expiration | ||||||||||||
United States | ||||||||||||||||||
South Beloit, Illinois(2) | Warner Electric | Electromagnetic Clutches & Brakes | 233 | 104,288 | Owned | N/A | ||||||||||||
Syracuse, New York | Kilian Manufacturing | Engineered Bearing Assemblies | 162 | 97,000 | Owned | N/A | ||||||||||||
Wichita Falls, Texas | Wichita Clutch | Heavy Duty Clutches and Brakes | 87 | 90,400 | Owned | N/A | ||||||||||||
Warren, Michigan | Formsprag | Overrunning Clutches | 91 | 79,000 | Owned | N/A | ||||||||||||
Erie, Pennsylvania | Ameridrives | Couplings | 138 | 76,200 | Owned | N/A | ||||||||||||
Columbia City, Indiana | Warner Electric | Electromagnetic Clutches & Brakes & Coils | 161 | 35,000 | Owned | N/A | ||||||||||||
Charlotte, North Carolina | Boston Gear | Gearing & Power Transmission Components | 207 | 193,000 | Leased | February 28, 2013 | ||||||||||||
Niagara Falls, New York | Nuttall Gear | Gearing | 119 | 155,509 | Leased | March 31, 2008 | ||||||||||||
Torrington, Connecticut | Inertia Dynamics | Electromagnetic Clutches & Brakes | 110 | 32,000 | Leased | May 31, 2007 | ||||||||||||
Belvidere, IL | Bear Linear | Linear Actuators | 14 | 21,000 | Leased | June 30, 2009 | ||||||||||||
Quincy, Massachusetts(2)(3) | Altra, Boston Gear | — | 70 | 30,350 | Leased | February 12, 2008 | ||||||||||||
International | ||||||||||||||||||
Heidelberg, Germany | Stieber | Overrunning Clutches | 68 | 57,609 | Owned | N/A | ||||||||||||
Saint Barthelemy, France | Warner Electric | Electromagnetic Clutches & Brakes | 135 | 50,129 | Owned | N/A | ||||||||||||
Bedford, England | Wichita Clutch | Heavy Duty Clutches and Brakes | 42 | 49,000 | Owned | N/A | ||||||||||||
Allones, France | Warner Electric | Electromagnetic Clutches & Brakes | 93 | 38,751 | Owned | N/A | ||||||||||||
Toronto, Canada | Kilian Manufacturing | Engineered Bearing Assemblies | 73 | 29,000 | Owned | N/A | ||||||||||||
Dewsbury, England | Bibby Transmissions | Couplings | 105 | 26,100 | Owned | N/A | ||||||||||||
Shenzhen, China | Warner Electric | Electromagnetic Clutches & Precision Components | 341 | 112,271 | Leased | December 15, 2008 | ||||||||||||
Brechin, Scotland | Matrix International | Clutch Brakes, Couplings | 122 | 52,500 | Leased | February 28, 2011 | ||||||||||||
Garching, Germany | Stieber | Overrunning Clutches | 54 | 32,292 | Leased | (4) | ||||||||||||
Toronto, Canada | Kilian Manufacturing | Engineered Bearing Assemblies | 47 | 30,120 | Leased | (5) | ||||||||||||
Twickenham, England | Twiflex | Heavy Duty Clutches and Brakes | 55 | 27,500 | Leased | September 30, 2009 | ||||||||||||
Hertford, England | Huco Dynatork | Couplings, Power Transmission Components | 59 | 13,565 | Leased | July 31, 2007 | ||||||||||||
Telford, England | Saftek | Friction Material | 16 | 4,400 | Leased | August 31, 2008 |
(1) | Includes full-time and part-time employees. |
(2) | Certain employees at these locations provide general and administrative services for our other locations. |
(3) | Corporate Headquarters and selective Boston Gear functions. |
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(4) | Must give the lessor twelve month notice for termination. |
(5) | Month to month lease. |
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Name | Age | Position | ||||
Michael L. Hurt | 61 | Chief Executive Officer and Director | ||||
Carl R. Christenson | 47 | President and Chief Operating Officer | ||||
David A. Wall | 48 | Chief Financial Officer | ||||
Gerald Ferris | 57 | Vice President of Global Sales, Altra Industrial | ||||
Timothy McGowan | 49 | Vice President of Human Resources, Altra Industrial | ||||
Edward L. Novotny | 54 | Vice President and General Manager, Boston Gear, Overrunning Clutch, Huco | ||||
Craig Schuele | 43 | Vice President of Marketing and Business Development, Altra Industrial | ||||
Jean-Pierre L. Conte | 43 | Director | ||||
Richard D. Paterson | 63 | Director | ||||
Darren J. Gold | 36 | Director | ||||
Frank E. Bauchiero | 71 | Director | ||||
Larry McPherson | 61 | Director |
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Audit Committee |
• | the integrity of our financial statements; | |
• | our compliance with legal and regulatory requirements; | |
• | our independent auditors’ qualifications and independence; | |
• | the performance of our independent auditors and our internal audit function; and | |
• | prepare the report required to be prepared by the committee pursuant to SEC rules. |
Nominating and Corporate Governance Committee |
• | identify and to recommend to the board individuals qualified to serve as directors of our company and on committees of the board; | |
• | advise the board with respect to the board composition, procedures and committees; | |
• | develop and recommend to the board a set of corporate governance principles and guidelines applicable to us; and | |
• | oversee the evaluation of the board and our management. |
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Compensation Committee |
Long-Term | |||||||||||||||||||||||||
Annual Compensation | Compensation | ||||||||||||||||||||||||
Other | Restricted | All Other | |||||||||||||||||||||||
Name and Principal Position | Year | Salary | Bonus | Annual | Stock Award(s) | Compensation | |||||||||||||||||||
Michael L. Hurt | 2005 | $ | 347,500 | $ | 446,375 | (1) | — | $ | 68,233 | (4) | $ | 12,600 | (9) | ||||||||||||
Chief Executive Officer and Director | |||||||||||||||||||||||||
Carl R. Christenson | 2005 | 240,994 | 290,141 | (2) | — | 78,000 | (5) | 174,134 | (10) | ||||||||||||||||
President and Chief Operating Officer | |||||||||||||||||||||||||
David A. Wall | 2005 | 208,523 | 149,925 | (3) | — | 39,000 | (6) | 51,145 | (11) | ||||||||||||||||
Chief Financial Officer | |||||||||||||||||||||||||
Edward L. Novotny | 2005 | 183,614 | 112,378 | — | 19,500 | (7) | 12,600 | (9) | |||||||||||||||||
Vice President and GM Boston Gear and Overrunning Clutch | |||||||||||||||||||||||||
Gerald Ferris | 2005 | 174,882 | 67,007 | — | 19,500 | (8) | 10,500 | (9) | |||||||||||||||||
Vice President of Global Sales — Altra Industrial |
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(1) | Mr. Hurt was paid a signing bonus of $146,000 during 2005. | |
(2) | Mr. Christenson was paid a signing bonus of $120,000 during 2005. | |
(3) | Mr. Wall was paid a signing bonus of $10,000 during 2005. | |
(4) | Value at time of grant. The aggregate restricted stock holdings of Mr. Hurt at the end of 2005 were 916,466 shares with a value of $97,500. Restricted stock grants vest in five equal annual installments and include the right to receive dividends on such stock when declared by the board. | |
(5) | Value at time of grant. The aggregate restricted stock holdings of Mr. Christenson at the end of 2005 were 780,000 shares with a value of $78,000. Restricted stock grants vest in five equal annual installments and include the right to receive dividends on such stock when declared by the board. | |
(6) | Value at time of grant. The aggregate restricted stock holdings of Mr. Wall at the end of 2005 were 390,000 shares with a value of $39,000. Restricted stock grants vest in five equal annual installments and include the right to receive dividends on such stock when declared by the board. | |
(7) | Value at time of grant. The aggregate restricted stock holdings of Mr. Novotny at the end of 2005 was 195,000 shares with a value of $19,500. Restricted stock grants vest in five equal annual installments and include the right to receive dividends on such stock when declared by the board. | |
(8) | Value at time of grant. The aggregate restricted stock holdings of Mr. Ferris at the end of 2005 was 195,000 shares with a value of $19,500. Restricted stock grants vest in five equal annual installments and include the right to receive dividends on such stock when declared by the board. | |
(9) | Represents our 401k contribution on the officer’s behalf. |
(10) | Mr. Christenson was reimbursed $161,534 in 2005 for costs related to his relocation and we made a $12,600 401k contribution on his behalf. |
(11) | Mr. Wall was reimbursed $38,545 in 2005 for costs related to his relocation and we made a $12,600 401k contribution on his behalf. |
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• | accruepayment-in-kind interest at an annual rate of 17%, provided that we may in our sole discretion pay such interest in whole or in part in cash to the extent allowed under the terms of the indenture governing the notes; | |
• | mature on November 30, 2019; | |
• | are redeemable at our option prior to maturity at specified prepayment premiums; and | |
• | are redeemable at the option of the holder at 101% of the principal amount with accrued interest in the event of a change of control of us or any of Altra Industrial. |
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• | each person that is a beneficial owner of more than 5% of our outstanding common stock; | |
• | each of our named executive officers; | |
• | each of our directors and director nominees; | |
• | all directors and executive officers as a group; and | |
• | each of the selling stockholders. |
Shares | ||||||||||||||||||||||||
Shares Owned Prior | Owned After the | |||||||||||||||||||||||
to the Offering(1) | Shares Offered | Offering | ||||||||||||||||||||||
Name and Address of Beneficial Owner | Number | % | Number | % | Number | % | ||||||||||||||||||
Directors, named executive officers and stockholders owning more than 5% | ||||||||||||||||||||||||
Genstar Capital Partners III, L.P.(2) | 25,080,999 | 63.5 | % | |||||||||||||||||||||
Stargen III, L.P.(3) | 904,001 | 2.3 | % | |||||||||||||||||||||
Caisse de dépôt et placement du Québec(4) | 7,000,000 | 17.7 | % | |||||||||||||||||||||
Michael L. Hurt | 1,882,798 | 4.8 | % | |||||||||||||||||||||
Carl Christenson | 1,262,713 | 3.2 | % | |||||||||||||||||||||
David Wall | 490,000 | 1.2 | % | |||||||||||||||||||||
Edward L. Novotny | 280,000 | * | ||||||||||||||||||||||
Gerald Ferris | 245,000 | * | ||||||||||||||||||||||
Jean-Pierre L. Conte(2) | 25,985,000 | 65.8 | % | �� | ||||||||||||||||||||
Richard D. Paterson(2) | 25,985,000 | 65.8 | % | |||||||||||||||||||||
Darren J. Gold(5) | — | — | ||||||||||||||||||||||
Frank Bauchiero(5)(6) | 818,250 | 2.1 | % | |||||||||||||||||||||
Larry McPherson | 318,250 | * | ||||||||||||||||||||||
All directors and executive officers as a group | 31,595,511 | 80.0 | % | |||||||||||||||||||||
Other Selling Stockholders |
* | Less than one percent (1%). |
(1) | Number of shares of common stock listed gives effect to the automatic conversion of shares of our preferred stock into shares of our common stock on a one-to-one basis. All shares of our issued and outstanding preferred stock were issued at a price of $1.00 per share. All shares of our common stock issued prior to this offering were restricted stock issued pursuant to our equity incentive plan. See “Management — Equity Incentive Plan” for a description of the issuance of the common shares and “Certain Relationships and Related Transactions” for a description of the issuance of the preferred shares. |
(2) | Genstar Capital Partners III, L.P., a Delaware limited partnership (“Genstar III”), owns 63.5% of the outstanding capital stock of Altra Holdings. Genstar Capital exercises investment discretion and |
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control over the shares held by Genstar III. Jean-Pierre L. Conte, the chairman and a managing director of Genstar Capital, and Richard D. Paterson, a managing director of Genstar Capital, may be deemed to share beneficial ownership of the shares shown as beneficially owned by Genstar III. Each of Mr. Conte and Mr. Paterson disclaims such beneficial ownership except to the extent of his pecuniary interest therein. The address of Genstar III is Four Embarcadero Center, Suite 1900, San Francisco, California 94111. | |
(3) | Stargen III, L.P., a Delaware limited partnership, owns 2.3% of the outstanding capital stock of Altra Holdings. Genstar Capital exercises investment discretion and control over the shares held by Stargen III, L.P. Jean-Pierre L. Conte, the chairman and a managing director of Genstar Capital, and Richard D. Paterson, a managing director of Genstar Capital, may be deemed to share beneficial ownership of the shares shown as beneficially owned by Stargen III, L.P. Each of Mr. Conte and Mr. Paterson disclaims such beneficial ownership except to the extent of his pecuniary interest therein. The address of Stargen III, L.P. is Four Embarcadero Center, Suite 1900, San Francisco, California 94111. |
(4) | CDPQ is a limited partner of Genstar III and its address is 1000 place Jean-Paul-Riopelle, Montreal, Québec. |
(5) | Mr. Bauchiero is a Strategic Advisor and Mr. Gold is a Principal of Genstar III. Mr. Bauchiero and Mr. Gold do not directly or indirectly have or share voting or investment power or the ability to influence voting or investment power over the shares shown as beneficially owned by Genstar III. |
(6) | Includes 750,000 shares of stock held by Frank Bauchiero MKC Worldwide. |
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• | the corporation has elected in its certificate of incorporation not to be governed by Section 203, which we have elected; | |
• | the business combination or the transaction which resulted in the stockholder becoming an interested stockholder was approved by the board of directors of the corporation before such stockholder became an interested stockholder; | |
• | upon consummation of the transaction that made such stockholder an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the commencement of the transaction excluding voting stock owned by directors who are also officers or held in employee benefit plans in which the employees do not have a confidential right to tender stock held by the plan in a tender or exchange offer; or | |
• | the business combination is approved by the board of directors of the corporation and authorized at a meeting by two-thirds of the voting stock which the interested stockholder did not own. |
• | any breach of their duty of loyalty to the corporation or its stockholders; | |
• | acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; | |
• | unlawful payments of dividends or unlawful stock repurchases or redemptions; or | |
• | any transaction from which the director derived an improper personal benefit. |
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• | the officer or director did not act in good faith and in a manner reasonably believed to be in, or not opposed to, our best interests; or | |
• | with respect to any criminal action or proceeding, the officer or director had reasonable cause to believe his conduct was unlawful. |
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• | incur additional indebtedness; | |
• | repay subordinated indebtedness prior to stated maturities; | |
• | pay dividends on or redeem or repurchase stock or make other distributions; | |
• | issue capital stock; | |
• | make investments or acquisitions; | |
• | sell certain assets or merge with or into other companies; | |
• | restrict dividends, distributions or other payments from our subsidiaries; | |
• | sell stock in our subsidiaries; | |
• | create liens; | |
• | enter into certain transactions with stockholders and affiliates; and | |
• | otherwise conduct necessary corporate activities. |
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• | incur additional indebtedness; | |
• | repay subordinated indebtedness prior to stated maturities; | |
• | pay dividends on or redeem or repurchase stock or make other distributions; | |
• | sell certain assets or merge with or into other companies; | |
• | restrict dividends, distributions or other payments from our subsidiaries; | |
• | create liens; | |
• | enter into certain transactions with stockholders and affiliates; and | |
• | otherwise conduct necessary corporate activities. |
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Number of Shares | Date | |
After days from the date of this prospectus (subject, in some cases, to volume limitations). | ||
At various times after days from the date of this prospectus as described below under “Lock-up Agreements.” |
• | 1% of the number of shares of our common stock then outstanding, which will equal approximately shares immediately after the offering; or | |
• | the average weekly trading volume of our common stock on the NASDAQ during the four calendar weeks preceding the filing of a notice on Form 144 with respect to that sale. |
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• | banks, insurance companies, regulated investment companies or other financial institutions; | |
• | persons subject to the alternative minimum tax; | |
• | tax-exempt organizations; | |
• | dealers in securities, commodities or currencies; | |
• | traders in securities that elect to use amark-to-market method of accounting for their securities holdings; | |
• | partnerships or other pass-through entities or investors in such entities; | |
• | “controlled foreign corporations,” “passive foreign corporations,” and corporations that accumulate earnings to avoid U.S. federal income tax; | |
• | U.S. expatriates or former long-term residents of the United States; | |
• | persons who hold our common stock as a position in a hedging transaction, “straddle,” “conversion transaction” or other risk reduction or integrated transaction; or | |
• | persons deemed to sell our common stock under the constructive sale provisions of the Code. |
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• | For purposes of this discussion, you are anon-U.S. holder if you are a beneficial owner of our common stock that, for U.S. federal income tax purposes, is not a U.S. person. For purposes of this discussion, a U.S. person is: | |
• | an individual who is a citizen or resident of the United States, including an alien individual who is a lawful permanent resident of the United States or who meets the “substantial presence” test under Section 7701(b) of the Code; | |
• | a corporation or other entity taxable as a corporation for U.S. federal tax purposes created or organized in the United States or under the laws of the United States or of any state therein or the District of Columbia; | |
• | an estate whose income is subject to U.S. federal income tax regardless of its source; or | |
• | a trust (1) whose administration is subject to the primary supervision of a U.S. court and of which one or more U.S. persons has the authority to control all substantial decisions of the trust or (2) that has made a valid election to be treated as a U.S. person. |
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• | the gain is effectively connected with your conduct of a U.S. trade or business (and, if required by an applicable tax treaty, is attributable to a U.S. permanent establishment maintained by you); | |
• | you are an individual who is present in the United States for a period (or periods) aggregating 183 days or more during the calendar year in which the sale or disposition occurs and certain other conditions are met; or | |
• | our common stock constitutes a U.S. real property interest by reason of our status as a “United States real property holding corporation” for U.S. federal income tax purposes (a USRPHC) at any time within the shorter of the five-year period preceding the disposition or your holding period for our common stock. |
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Number of | |||||
Underwriter | Shares | ||||
Merrill Lynch, Pierce, Fenner & Smith Incorporated | |||||
Wachovia Capital Markets, LLC. | |||||
Jefferies & Company, Inc. | |||||
Robert W. Baird & Co. Incorporated | |||||
Total | |||||
Per Share | Without Option | With Option | ||||||||||
Public offering price | $ | $ | $ | |||||||||
Underwriting discount | $ | $ | $ | |||||||||
Proceeds, before expenses, to Altra Holdings, Inc. | $ | $ | $ | |||||||||
Proceeds, before expenses, to the selling stockholders | $ | $ | $ |
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• | offer, pledge, sell or contract to sell any common stock, | |
• | sell any option or contract to purchase any common stock; | |
• | purchase any option or contract to sell any common stock; | |
• | grant any option, right or warrant for the sale of any common stock; | |
• | lend or otherwise dispose of or transfer any common stock; | |
• | request or demand that we file a registration statement related to the common stock; or | |
• | enter into any swap or other agreement that transfers; in whole or in part, the economic consequence of ownership of any common stock whether any such swap or transaction is to be settled by delivery of shares or other securities, in cash or otherwise. |
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• | the valuation multiples of publicly traded companies that the underwriters believe to be comparable to us; | |
• | our financial information; | |
• | the history of, and the prospects for, our company and the industry in which we compete; | |
• | an assessment of our management; its past and present operations, and the prospects for, and timing of, our future revenues; | |
• | the present state of our development; and | |
• | the above factors in relation to market values and various valuation measures of other companies engaged in activities similar to ours. |
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Page No. | |||||
Altra Holdings, Inc. (the “Company”) | |||||
Audited Financial Statements: | |||||
F-2 | |||||
F-3 | |||||
F-4 | |||||
F-5 | |||||
F-6 | |||||
F-7 | |||||
Unaudited Interim Financial Statements: | |||||
F-36 | |||||
F-37 | |||||
F-38 | |||||
F-39 | |||||
Hay Hall Holdings Limited | |||||
Audited Financial Statements: | |||||
F-52 | |||||
F-53 | |||||
F-54 | |||||
F-55 | |||||
F-56 | |||||
F-57 | |||||
F-58 |
F-1
Table of Contents
F-2
Table of Contents
Pro Forma | |||||||||||||
December 31, | December 31, | ||||||||||||
2005 | 2005 | 2004 | |||||||||||
�� | |||||||||||||
(unaudited) | |||||||||||||
ASSETS | |||||||||||||
Current assets: | |||||||||||||
Cash and cash equivalents | $ | 10,060 | $ | 10,060 | $ | 4,729 | |||||||
Trade receivables, less allowance for doubtful accounts of $1,797 and $1,424 | 46,441 | 46,441 | 45,969 | ||||||||||
Inventories, less allowance for obsolete materials of $6,843 and $6,361 | 54,654 | 54,654 | 56,732 | ||||||||||
Deferred income taxes | 2,779 | 2,779 | 1,145 | ||||||||||
Prepaid expenses and other | 1,973 | 1,973 | 4,792 | ||||||||||
Total current assets | 115,907 | 115,907 | 113,367 | ||||||||||
Property, plant and equipment, net | 66,393 | 66,393 | 68,006 | ||||||||||
Intangible assets, net | 44,751 | 44,751 | 48,758 | ||||||||||
Goodwill | 65,345 | 65,345 | 63,145 | ||||||||||
Other assets | 5,295 | 5,295 | 6,111 | ||||||||||
Total assets | $ | 297,691 | $ | 297,691 | $ | 299,387 | |||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||||
Current liabilities: | |||||||||||||
Accounts payable | $ | 30,724 | $ | 30,724 | $ | 28,787 | |||||||
Accrued payroll | 16,016 | 16,016 | 11,661 | ||||||||||
Accruals and other liabilities | 16,085 | 16,085 | 14,306 | ||||||||||
Deferred income taxes | 33 | 33 | 129 | ||||||||||
Current portion of long-term debt | 186 | 186 | 913 | ||||||||||
Total current liabilities | 63,044 | 63,044 | 55,796 | ||||||||||
Long-term debt, less current portion and net of unaccreted discount | 173,574 | 173,574 | 172,938 | ||||||||||
Deferred income taxes | 7,653 | 7,653 | 9,828 | ||||||||||
Pension liabilities | 14,368 | 14,368 | 19,534 | ||||||||||
Other post retirement benefits | 12,500 | 12,500 | 12,203 | ||||||||||
Other long term liabilities | 1,601 | 1,601 | — | ||||||||||
Commitments and Contingencies | — | — | — | ||||||||||
Convertible Preferred Series A stock ($0.001 par value, 40,000,000 shares authorized, 35,500,000 and 35,100,000 shares issued and outstanding, respectively) | — | 35,500 | 35,100 | ||||||||||
Stockholders’ equity: | |||||||||||||
Common stock ($0.001 par value, 50,000,000 shares authorized, 594,040 issued and outstanding at December 31, 2005) | 36 | 1 | — | ||||||||||
Additional paid-in capital | 35,577 | 112 | 54 | ||||||||||
Retained deficit | (3,389 | ) | (3,389 | ) | (5,893 | ) | |||||||
Cumulative foreign currency translation adjustment | (5,851 | ) | (5,851 | ) | 549 | ||||||||
Minimum pension liability | (1,422 | ) | (1,422 | ) | (722 | ) | |||||||
24,951 | 24,951 | 29,088 | |||||||||||
Total liabilities and stockholders’ equity | $ | 297,691 | $ | 297,691 | $ | 299,387 | |||||||
F-3
Table of Contents
Altra | ||||||||||||||||||
From | Predecessor (Note 1) | |||||||||||||||||
Inception | ||||||||||||||||||
(December 1, 2004 | 11 Months | |||||||||||||||||
Year Ended | Through | Ended | Year Ended | |||||||||||||||
December 31, | December 31, | November 30, | December 31, | |||||||||||||||
2005 | 2004) | 2004 | 2003 | |||||||||||||||
Net sales | $ | 363,465 | $ | 28,625 | $ | 275,037 | $ | 266,863 | ||||||||||
Cost of sales | 271,952 | 23,847 | 209,253 | 207,941 | ||||||||||||||
Gross profit | 91,513 | 4,778 | 65,784 | 58,922 | ||||||||||||||
Selling, general and administrative expenses | 61,579 | 8,973 | 45,321 | 49,513 | ||||||||||||||
Research and development expenses | 4,683 | 378 | 3,947 | 3,455 | ||||||||||||||
Restructuring charge, asset impairment and transition expenses | — | — | 947 | 11,085 | ||||||||||||||
Gain on sale of fixed assets | (99 | ) | — | (1,300 | ) | — | ||||||||||||
Income (loss) from operations | 25,350 | (4,573 | ) | 16,869 | (5,131 | ) | ||||||||||||
Interest expense, net | 19,514 | 1,612 | 4,294 | 5,368 | ||||||||||||||
Other non-operating (income) expense, net | (17 | ) | — | 148 | 465 | |||||||||||||
Income (loss) before income taxes | 5,853 | (6,185 | ) | 12,427 | (10,964 | ) | ||||||||||||
Provision (benefit) for income taxes | 3,349 | (292 | ) | 5,532 | (1,658 | ) | ||||||||||||
Net income (loss) | 2,504 | (5,893 | ) | 6,895 | (9,306 | ) | ||||||||||||
Other comprehensive (loss) income, net of income taxes: | ||||||||||||||||||
Minimum pension liability adjustment | (700 | ) | (722 | ) | (6,031 | ) | 5,418 | |||||||||||
Foreign currency translation adjustment | (6,400 | ) | 549 | 478 | 3,917 | |||||||||||||
Other comprehensive (loss) income | (7,100 | ) | (173 | ) | (5,553 | ) | 9,335 | |||||||||||
Comprehensive (loss) income | $ | (4,596 | ) | $ | (6,066 | ) | $ | 1,342 | $ | 29 | ||||||||
Net Income per share: | ||||||||||||||||||
Basic | $ | 139.11 | ||||||||||||||||
Diluted | $ | 0.07 | ||||||||||||||||
Weighted average common shares outstanding: | ||||||||||||||||||
Basic | 18 | |||||||||||||||||
Diluted | 37,937 |
Basic | $ | 0.07 | |||||||||||||||
Diluted | $ | 0.07 |
Basic | 35,518 | ||||||||||||||||
Diluted | 37,937 |
F-4
Table of Contents
Accumulated | ||||||||||||
Other | Net | |||||||||||
Invested | Comprehensive | Invested | ||||||||||
Capital | Loss | Capital | ||||||||||
For the Predecessor | ||||||||||||
Balance at December 31, 2002 | $ | 33,142 | $ | (42,560 | ) | $ | (9,418 | ) | ||||
Net loss | (9,306 | ) | — | (9,306 | ) | |||||||
Contribution from affiliates | 6,385 | — | 6,385 | |||||||||
Other comprehensive income, net of $4,251 tax benefit | — | 9,335 | 9,335 | |||||||||
Balance at December 31, 2003 | 30,221 | (33,225 | ) | (3,004 | ) | |||||||
Net income | 6,895 | — | 6,895 | |||||||||
Contribution from affiliates | 7,922 | — | 7,922 | |||||||||
Other comprehensive income, net of $3,697 tax benefit | — | (5,553 | ) | (5,553 | ) | |||||||
Balance at November 30, 2004 | $ | 45,038 | $ | (38,778 | ) | $ | 6,260 |
Accumulated | ||||||||||||||||||||||||||||||||
Convertible | Additional | Other | ||||||||||||||||||||||||||||||
Preferred | Common | Paid-In | Retained | Comprehensive | ||||||||||||||||||||||||||||
Stock | Shares | Stock | Shares | Capital | Deficit | Loss | Total | |||||||||||||||||||||||||
For the Company | ||||||||||||||||||||||||||||||||
Initial capital contribution | $ | 26,334 | 26,334 | $ | — | $ | — | $ | — | $ | — | $ | 26,334 | |||||||||||||||||||
Equity issued related to acquisition | 8,766 | 8,766 | — | — | 54 | — | — | 8,820 | ||||||||||||||||||||||||
Net loss | — | — | — | — | — | (5,893 | ) | — | (5,893 | ) | ||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | — | (173 | ) | (173 | ) | ||||||||||||||||||||||
Balance at December 31, 2004 | 35,100 | 35,100 | — | — | 54 | (5,893 | ) | (173 | ) | 29,088 | ||||||||||||||||||||||
Issuance of preferred stock | 400 | 400 | — | — | — | — | — | 400 | ||||||||||||||||||||||||
Amortization of restricted stock grants | — | — | 1 | 594 | 58 | — | — | 59 | ||||||||||||||||||||||||
Net income | — | — | — | — | — | 2,504 | — | 2,504 | ||||||||||||||||||||||||
Other comprehensive loss, net of $1,938 tax benefit | — | — | — | — | — | — | (7,100 | ) | (7,100 | ) | ||||||||||||||||||||||
Balance at December 31, 2005 | $ | 35,500 | 35,500 | $ | 1 | 594 | $ | 112 | $ | (3,389 | ) | $ | (7,273 | ) | $ | 24,951 | ||||||||||||||||
F-5
Table of Contents
Altra | Predecessor (Note 1) | |||||||||||||||||||
From Inception | ||||||||||||||||||||
(December 1, 2004 | 11 Months | |||||||||||||||||||
Year Ended | Through | Ended | Year Ended | |||||||||||||||||
December 31, | December 31, | November 30, | December 31, | |||||||||||||||||
2005 | 2004) | 2004 | 2003 | |||||||||||||||||
Cash flows from operating activities: | ||||||||||||||||||||
Net income (loss) | $ | 2,504 | $ | (5,893 | ) | $ | 6,895 | $ | (9,306 | ) | ||||||||||
Adjustments to reconcile net income to cash provided by operating activities: | ||||||||||||||||||||
Depreciation | 8,574 | 673 | 6,074 | 8,653 | ||||||||||||||||
Amortization of intangible assets | 2,959 | 246 | — | — | ||||||||||||||||
Amortization of deferred loan costs | 669 | 53 | — | 587 | ||||||||||||||||
Accretion of debt discount | 942 | 79 | — | — | ||||||||||||||||
Paid-in-kind interest | — | 198 | — | — | ||||||||||||||||
Amortization of inventory fair value adjustment | 1,699 | 1,699 | — | — | ||||||||||||||||
Amortization of deferred compensation | 59 | — | — | — | ||||||||||||||||
(Gains) impairments on sale of fixed assets | (99 | ) | — | (1,300 | ) | 2,126 | ||||||||||||||
Provision (benefit) for deferred taxes | 225 | (1,031 | ) | 117 | (2,679 | ) | ||||||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||||||
Trade receivables | (2,654 | ) | (324 | ) | (4,197 | ) | (578 | ) | ||||||||||||
Inventories | (1,353 | ) | (412 | ) | (6,418 | ) | (2,232 | ) | ||||||||||||
Accounts payable and accrued liabilities | (1,788 | ) | 9,402 | 3,734 | (13,842 | ) | ||||||||||||||
Other current assets and liabilities | 2,226 | (2,126 | ) | 1,477 | (445 | ) | ||||||||||||||
Other operating assets and liabilities | (1,940 | ) | 3,059 | (2,778 | ) | 3,427 | ||||||||||||||
Net cash provided by (used in) operating activities | 12,023 | 5,623 | 3,604 | (14,289 | ) | |||||||||||||||
Cash flows from investing activities: | ||||||||||||||||||||
Purchases of fixed assets | (6,199 | ) | (289 | ) | (3,489 | ) | (5,294 | ) | ||||||||||||
Acquisitions, net of $2,367 of cash acquired in 2004 | 1,607 | (180,112 | ) | — | — | |||||||||||||||
Payment of additional Kilian purchase price | (730 | ) | — | — | — | |||||||||||||||
Proceeds from sale of fixed assets | 125 | — | 4,442 | 3,721 | ||||||||||||||||
Net cash (used in) provided by investing activities | (5,197 | ) | (180,401 | ) | 953 | (1,573 | ) | |||||||||||||
Cash flows from financing activities: | ||||||||||||||||||||
Initial contributed capital | — | 26,334 | — | 5,000 | ||||||||||||||||
Proceeds from issuance of senior subordinated notes | — | 158,400 | — | — | ||||||||||||||||
Proceeds from sale of convertible preferred stock | 400 | — | — | — | ||||||||||||||||
Payments of debt acquired in acquisitions | — | (12,178 | ) | — | (64,242 | ) | ||||||||||||||
Payment of paid-in-kind interest | (198 | ) | — | — | — | |||||||||||||||
Proceeds from issuance of subordinated notes | — | 14,000 | — | — | ||||||||||||||||
Payment of debt issuance costs | (338 | ) | (7,087 | ) | — | — | ||||||||||||||
Borrowings under revolving credit agreement | 4,408 | 4,988 | — | — | ||||||||||||||||
Payments on revolving credit agreement | (4,408 | ) | (4,988 | ) | — | — | ||||||||||||||
Payment of capital leases | (835 | ) | (37 | ) | — | — | ||||||||||||||
Contribution from affiliates | — | — | 7,922 | 1,385 | ||||||||||||||||
Change in affiliate debt | — | — | (14,618 | ) | 70,603 | |||||||||||||||
Net cash (used in) provided by financing activities | (971 | ) | 179,432 | (6,696 | ) | 12,746 | ||||||||||||||
Effect of exchange rates on cash | (524 | ) | 75 | 159 | 1,065 | |||||||||||||||
Increase (Decrease) in cash and cash equivalents | 5,331 | 4,729 | (1,980 | ) | (2,051 | ) | ||||||||||||||
Cash and cash equivalents, beginning of period | 4,729 | — | 3,163 | 5,214 | ||||||||||||||||
Cash and cash equivalents, end of period | $ | 10,060 | $ | 4,729 | $ | 1,183 | 3,163 | |||||||||||||
Cash paid during the period for: | ||||||||||||||||||||
Interest | $ | 17,458 | $ | — | $ | 2,796 | $ | 4,061 | ||||||||||||
Income Taxes | $ | 1,761 | $ | — | $ | 446 | $ | 1,249 |
F-6
Table of Contents
1. | Description of Business and Summary of Significant Accounting Policies |
Basis of Preparation and Description of Business |
Principles of Consolidation |
Pro Forma (unaudited) |
Net Income Per Share |
F-7
Table of Contents
Year Ended | ||||
December 31, | ||||
2005 | ||||
Net Income | $ | 2,504 | ||
Shares used in net income per common share — basic | 18 | |||
Effect of dilutive securities: | ||||
Incremental shares of unvested restricted common stock | 2,419 | |||
Conversion of preferred stock | 35,500 | |||
Shares used in net income per common share — diluted | 37,937 | |||
Net income per common share — basic | $ | 139.11 | ||
Net income per common share — diluted | $ | 0.07 | ||
Fair Value of Financial Instruments |
Use of Estimates |
Foreign currency translation |
F-8
Table of Contents
Cash and Cash Equivalents |
Trade Receivables |
Inventories |
Property, Plant and Equipment |
Buildings and improvements | 15 to 45 years | |
Machinery and equipment | 2 to 15 years |
Intangible Assets |
Goodwill |
F-9
Table of Contents
Impairment of Goodwill and Indefinite-Lived Intangible Assets |
Impairment of Long-Lived Assets Other Than Goodwill and Indefinite-Lived Intangible Assets |
Debt Issuance Costs |
Revenue Recognition |
F-10
Table of Contents
Shipping and Handling Costs |
Warranty Costs |
Self-Insurance |
Research and Development |
Advertising |
Stock-Based Compensation |
Income Taxes |
F-11
Table of Contents
2. | Recent Accounting Pronouncements |
F-12
Table of Contents
3. | Acquisitions |
Predecessor | Kilian | Total | |||||||||||
Total purchase price, including closing costs of approximately $2.6 million | $ | 181,019 | $ | 9,594 | $ | 190,613 | |||||||
Cash and cash equivalents | 1,183 | 1,184 | 2,367 | ||||||||||
Trade receivables | 39,233 | 6,096 | 45,329 | ||||||||||
Inventories | 52,761 | 5,108 | 57,869 | ||||||||||
Prepaid expenses and other | 4,770 | 207 | 4,977 | ||||||||||
Property, plant and equipment | 59,320 | 9,111 | 68,431 | ||||||||||
Intangible assets | 49,004 | — | 49,004 | ||||||||||
Deferred income taxes — long term | — | 104 | 104 | ||||||||||
Other assets | 150 | — | 150 | ||||||||||
Total assets acquired | 206,421 | 21,810 | 228,231 | ||||||||||
Accounts payable, accrued payroll, and accruals and other current liabilities | 46,422 | 3,125 | 49,547 | ||||||||||
Bank debt | — | 12,178 | 12,178 | ||||||||||
Deferred income taxes | 8,127 | — | 8,127 | ||||||||||
Pensions, other post retirement benefits and other liabilities | 34,166 | — | 34,166 | ||||||||||
Total liabilities assumed | 88,715 | 15,303 | 104,018 | ||||||||||
Net assets acquired | 117,706 | 6,507 | 124,213 | ||||||||||
Excess purchase price over the fair value of net assets acquired | $ | 63,313 | $ | 3,087 | $ | 66,400 | |||||||
F-13
Table of Contents
Predecessor | Kilian | Total | |||||||||||
Customer relationships | $ | 27,802 | $ | — | $ | 27,802 | |||||||
Product technology and patents | 5,122 | — | 5,122 | ||||||||||
Total intangible assets subject to amortization | 32,924 | — | 32,924 | ||||||||||
Trade names and trademarks, not subject to amortization | 16,080 | — | 16,080 | ||||||||||
Total intangible assets | $ | 49,004 | $ | — | $ | 49,004 | |||||||
(Pro forma, unaudited, in thousands) | 2004 | 2003 | ||||||
Total Revenues | $ | 343,308 | $ | 305,513 | ||||
Net loss | (672 | ) | (19,769 | ) |
4. | Inventories |
2005 | 2004 | |||||||
Raw materials | $ | 22,512 | $ | 29,219 | ||||
Work in process | 13,876 | 12,636 | ||||||
Finished goods | 25,109 | 21,238 | ||||||
61,497 | 63,093 | |||||||
Less — Allowance for excess, slow-moving and obsolete inventory | (6,843 | ) | (6,361 | ) | ||||
$ | 54,654 | $ | 56,732 | |||||
F-14
Table of Contents
5. | Property, Plant and Equipment |
2005 | 2004 | |||||||
Land | $ | 7,892 | $ | 5,848 | ||||
Buildings and improvements | 16,500 | 14,597 | ||||||
Machinery and equipment | 50,402 | 48,234 | ||||||
74,794 | 68,679 | |||||||
Less — Accumulated depreciation | (8,401 | ) | (673 | ) | ||||
$ | 66,393 | $ | 68,006 | |||||
6. | Goodwill and Intangible Assets |
Goodwill | |||||
Balance December 31, 2004 | $ | 63,145 | |||
Adjustments, net | 3,255 | ||||
Impact of changes in foreign currency | (1,055 | ) | |||
Balance December 31, 2005 | $ | 65,345 | |||
December 31, 2005 | December 31, 2004 | ||||||||||||||||
Accumulated | Accumulated | ||||||||||||||||
Other Intangibles | Cost | Amortization | Cost | Amortization | |||||||||||||
Intangible assets not subject to amortization | |||||||||||||||||
Tradenames and trademarks | $ | 16,080 | $ | — | $ | 16,080 | $ | — | |||||||||
Intangible assets subject to amortization: | |||||||||||||||||
Customer relationships | 27,802 | 2,515 | 27,802 | 193 | |||||||||||||
Product technology and patents | 5,122 | 690 | 5,122 | 53 | |||||||||||||
Impact of changes in foreign currency | (1,048 | ) | — | — | — | ||||||||||||
Total intangible assets | $ | 47,956 | $ | 3,205 | $ | 49,004 | $ | 246 | |||||||||
F-15
Table of Contents
7. | Warranty Costs |
December 1, 2004 | Predecessor | ||||||||||||
Year Ended | Through | 11 Months Ended | |||||||||||
December 31, | December 31, | November 30, | |||||||||||
2005 | 2004 | 2004 | |||||||||||
Balance at beginning of period | $ | 1,528 | $ | 1,524 | $ | 1,300 | |||||||
Accrued warranty costs | 1,265 | 94 | 1,093 | ||||||||||
Payments and adjustments | (917 | ) | (90 | ) | (869 | ) | |||||||
Balance at end of period | $ | 1,876 | $ | 1,528 | $ | 1,524 | |||||||
8. | Income Taxes |
Predecessor (Note 1) | |||||||||||||||||
December 1, | |||||||||||||||||
2004 | 11 Months | ||||||||||||||||
Through | Ended | Year Ended | |||||||||||||||
December 31, | December 31, | November 30, | December 31, | ||||||||||||||
2005 | 2004 | 2004 | 2003 | ||||||||||||||
Domestic | $ | 2,127 | $ | (6,539 | ) | $ | 9,125 | $ | (9,189 | ) | |||||||
Foreign | 3,726 | 354 | 3,302 | (1,775 | ) | ||||||||||||
$ | 5,853 | $ | (6,185 | ) | $ | 12,427 | $ | (10,964 | ) | ||||||||
Predecessor (Note 1) | ||||||||||||||||||
December 1, | ||||||||||||||||||
2004 | 11 Months | |||||||||||||||||
Through | Ended | Year Ended | ||||||||||||||||
December 31, | December 31, | November 30, | December 31, | |||||||||||||||
2005 | 2004 | 2004 | 2003 | |||||||||||||||
Current: | ||||||||||||||||||
Federal | $ | 1,086 | $ | (71 | ) | $ | 3,851 | $ | 434 | |||||||||
Foreign and State | 2,038 | 810 | 1,564 | 587 | ||||||||||||||
3,124 | 739 | 5,415 | 1,021 | |||||||||||||||
Deferred: | ||||||||||||||||||
Federal | 509 | (564 | ) | 98 | (1,707 | ) | ||||||||||||
Foreign and state | (284 | ) | (467 | ) | 19 | (972 | ) | |||||||||||
225 | (1,031 | ) | 117 | (2,679 | ) | |||||||||||||
Provision (benefit) for income taxes | $ | 3,349 | $ | (292 | ) | $ | 5,532 | $ | (1,658 | ) | ||||||||
F-16
Table of Contents
Predecessor (Note 1) | |||||||||||||||||
December 1, | |||||||||||||||||
2004 | 11 Months | ||||||||||||||||
Through | Ended | Year Ended | |||||||||||||||
December 31, | December 31, | November 30, | December 31, | ||||||||||||||
2005 | 2004 | 2004 | 2003 | ||||||||||||||
Tax at U.S. federal income tax rate | $ | 2,049 | $ | (2,165 | ) | $ | 4,371 | $ | (3,749 | ) | |||||||
State taxes, net of federal income tax effect | 373 | (67 | ) | 366 | (209 | ) | |||||||||||
Effect of losses of domestic S corporation and partnership entities | — | — | — | (5,927 | ) | ||||||||||||
Valuation allowance | — | 2,011 | 895 | 7,153 | |||||||||||||
Disallowed interest expense | 313 | 26 | — | — | |||||||||||||
Foreign and other | 614 | (97 | ) | (100 | ) | 1,074 | |||||||||||
Provision (benefit) for income taxes | $ | 3,349 | $ | (292 | ) | $ | 5,532 | $ | (1,658 | ) | |||||||
2005 | 2004 | ||||||||
Deferred tax assets: | |||||||||
Post-retirement obligations | 12,050 | $ | 10,580 | ||||||
Expenses not currently deductible | 8,657 | 8,575 | |||||||
Net operating loss carryover | 1,740 | 1,997 | |||||||
Other | 883 | 842 | |||||||
Total deferred tax assets | 23,330 | 21,994 | |||||||
Valuation allowance for deferred tax assets | (16,389 | ) | (18,374 | ) | |||||
Net deferred tax assets | 6,941 | 3,620 | |||||||
Deferred tax liabilities: | |||||||||
Property, plant and equipment | 6,264 | 4,010 | |||||||
Intangible assets | 5,278 | 7,638 | |||||||
Other | 306 | 784 | |||||||
Total deferred tax liabilities | 11,848 | 12,432 | |||||||
Net deferred tax liabilities | $ | (4,907 | ) | $ | (8,812 | ) | |||
F-17
Table of Contents
9. | Pension and Other Employee Benefits |
Defined Benefit (Pension) and Postretirement Benefit Plans |
F-18
Table of Contents
Pension Benefits | Postretirement Benefits | ||||||||||||||||||||||||||
From | Predecessor | From | Predecessor | ||||||||||||||||||||||||
Inception | (Note 1) 11 | Inception | (Note 1) 11 | ||||||||||||||||||||||||
(December 1, | Months | (December 1, | Months | ||||||||||||||||||||||||
Year Ended | 2004) Through | Ended | Year Ended | 2004) Through | Ended | ||||||||||||||||||||||
December 31, | December 31, | November 30, | December 31, | December 31, | November 30, | ||||||||||||||||||||||
2005 | 2004 | 2004 | 2005 | 2004 | 2004 | ||||||||||||||||||||||
Change in benefit obligation: | |||||||||||||||||||||||||||
Obligation at beginning of period | $ | 24,706 | $ | — | $ | 149,338 | $ | 12,570 | $ | — | $ | 30,903 | |||||||||||||||
Benefit obligation assumed from Predecessor | — | 23,750 | — | — | 12,040 | — | |||||||||||||||||||||
Service cost | 591 | 35 | 530 | 295 | 30 | 269 | |||||||||||||||||||||
Interest cost | 1,362 | 112 | 8,352 | 549 | 59 | 1,654 | |||||||||||||||||||||
Amendments | 55 | — | 440 | (2,088 | ) | — | — | ||||||||||||||||||||
Actuarial loss (gain) | 1,610 | 687 | 6,757 | (218 | ) | 441 | (2,199 | ) | |||||||||||||||||||
Foreign exchange effect | (424 | ) | 144 | 125 | — | — | — | ||||||||||||||||||||
Benefits paid | (203 | ) | (22 | ) | (10,541 | ) | (125 | ) | — | (1,651 | ) | ||||||||||||||||
Obligation at end of period | $ | 27,697 | $ | 24,706 | $ | 155,001 | $ | 10,983 | $ | 12,570 | $ | 28,976 | |||||||||||||||
Change in plan assets: | |||||||||||||||||||||||||||
Fair value of plan assets, beginning of period | $ | 4,647 | $ | — | $ | 111,287 | $ | — | $ | — | $ | — | |||||||||||||||
Plan assets transferred from Predecessor | — | 4,647 | — | — | — | — | |||||||||||||||||||||
Actual return on plan assets | 309 | — | 3,979 | — | — | — | |||||||||||||||||||||
Employer contribution | 961 | 22 | 5,055 | — | — | 1,651 | |||||||||||||||||||||
Benefits paid | (85 | ) | (22 | ) | (10,541 | ) | — | — | (1,651 | ) | |||||||||||||||||
Fair value of plan assets, end of period | $ | 5,832 | $ | 4,647 | $ | 109,780 | $ | — | $ | — | $ | — | |||||||||||||||
Funded status: | |||||||||||||||||||||||||||
Plan assets less than benefit obligation | $ | (21,865 | ) | $ | (20,059 | ) | $ | (45,221 | ) | $ | (10,983 | ) | $ | (12,570 | ) | $ | (28,976 | ) | |||||||||
Unrecognized actuarial loss | 2,390 | 722 | 58,494 | 162 | 367 | 1,666 | |||||||||||||||||||||
Unrecognized prior service cost | 49 | — | 223 | (1,679 | ) | — | (28 | ) | |||||||||||||||||||
(Accrued) prepaid cost | $ | (19,426 | ) | $ | (19,337 | ) | $ | 13,496 | $ | (12,500 | ) | $ | (12,203 | ) | $ | (27,338 | ) | ||||||||||
Amounts recognized in the balance sheets consist of: | |||||||||||||||||||||||||||
Accrued benefit cost | $ | (21,865 | ) | $ | (20,059 | ) | $ | (45,343 | ) | $ | (12,500 | ) | $ | (12,203 | ) | $ | (27,338 | ) | |||||||||
Intangible asset | 49 | — | 223 | — | — | — | |||||||||||||||||||||
Accumulated other comprehensive income | 2,390 | 722 | 58,616 | — | — | — | |||||||||||||||||||||
Net amount recognized | $ | (19,426 | ) | $ | (19,337 | ) | $ | 13,496 | $ | (12,500 | ) | $ | (12,203 | ) | $ | (27,338 | ) | ||||||||||
F-19
Table of Contents
Pension | Postretirement | |||||||||||||||
Benefits | Benefits | |||||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
Weighted-average discount rate | 5.5 | % | 5.8 | % | 5.5 | % | 5.8 | % | ||||||||
Weighted-average rate of compensation increase | N/A | N/A | N/A | N/A |
Pension Benefits | Postretirement Benefits | |||||||||||||||||||||||||||||||||
Predecessor (Note 1) | Predecessor (Note 1) | |||||||||||||||||||||||||||||||||
From | From | |||||||||||||||||||||||||||||||||
Inception | Inception | |||||||||||||||||||||||||||||||||
(December 1, | (December 1, | |||||||||||||||||||||||||||||||||
2004) | 11 Months | 2004) | 11 Months | |||||||||||||||||||||||||||||||
Year Ended | Through | Ended | Year Ended | Year Ended | Through | Ended | Year Ended | |||||||||||||||||||||||||||
December 31, | December 31, | November 30, | December 31, | December 31, | December 31, | November 30, | December 31, | |||||||||||||||||||||||||||
2005 | 2004 | 2004 | 2003 | 2005 | 2004 | 2004 | 2003 | |||||||||||||||||||||||||||
Service cost | $ | 591 | $ | 35 | $ | 530 | $ | 650 | $ | 295 | $ | 30 | $ | 269 | $ | 390 | ||||||||||||||||||
Interest cost | 1,362 | 112 | 8,352 | 9,211 | 549 | 59 | 1,654 | 1,876 | ||||||||||||||||||||||||||
Recognized net actuarial loss | — | — | 2,783 | 23 | — | — | 183 | — | ||||||||||||||||||||||||||
Expected return on plan assets | (431 | ) | (31 | ) | (9,747 | ) | (10,971 | ) | — | — | — | — | ||||||||||||||||||||||
Amortization | 72 | — | 14 | 1,266 | (423 | ) | — | (19 | ) | 232 | ||||||||||||||||||||||||
Net periodic benefit cost | $ | 1,594 | $ | 116 | $ | 1,932 | $ | 179 | $ | 421 | $ | 89 | $ | 2,087 | $ | 2,498 | ||||||||||||||||||
Pension Benefits | Postretirement Benefits | |||||||||||||||||||||||||||||||||
Predecessor (Note 1) | Predecessor (Note 1) | |||||||||||||||||||||||||||||||||
From | From | |||||||||||||||||||||||||||||||||
Inception | Inception | |||||||||||||||||||||||||||||||||
(December 1, | (December 1, | |||||||||||||||||||||||||||||||||
2004) | 11 Months | 2004) | 11 Months | |||||||||||||||||||||||||||||||
Year Ended | Through | Ended | Year Ended | Year Ended | Through | Ended | Year Ended | |||||||||||||||||||||||||||
December 31, | December 31, | November 30, | December 31, | December 31, | December 31, | November 30, | December 31, | |||||||||||||||||||||||||||
2005 | 2004 | 2004 | 2003 | 2005 | 2004 | 2004 | 2003 | |||||||||||||||||||||||||||
Discount rate | 5.5 | % | 6.0 | % | 6.2 | % | 7.2 | % | 5.5 | % | 6.0 | % | 6.3 | % | 6.8 | % | ||||||||||||||||||
Expected return on plan assets | 8.5 | % | 8.5 | % | 8.5 | % | 9.0 | % | N/A | N/A | N/A | N/A | ||||||||||||||||||||||
Compensation rate increase | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A |
F-20
Table of Contents
1 Percentage- | 1 Percentage- | |||||||
Point | Point | |||||||
Increase | Decrease | |||||||
Effect on service and interest cost components for the period January 1, 2005 through December 31, 2005 | $ | 122 | $ | (101 | ) | |||
Effect on the December 31, 2005 post-retirement benefit obligation | 1,453 | (1,378 | ) |
Allocation Percentage of | ||||||||||||
Plan Assets at Year End | ||||||||||||
2005 | 2005 | 2004 | ||||||||||
Asset Category | Actual | Target | Actual | |||||||||
Equity securities | 67 | % | 65 | % | (i | ) | ||||||
Fixed income securities | 33 | % | 35 | % | (i | ) |
(i) | The assets for Altra Industrial’s funded retirement plan at the end of 2004 were held by the Predecessor, awaiting transfer. Once received, they were invested in a manner consistent with the 2005 target allocation. |
Expected cash flows |
Pension | Postretirement | |||||||||||
Benefits | Benefits | |||||||||||
Expected benefit payments (from plan assets) | 2006 | 446 | 208 | |||||||||
2007 | 633 | 296 | ||||||||||
2008 | 818 | 394 | ||||||||||
2009 | 1,035 | 499 | ||||||||||
2010 | 1,212 | 618 | ||||||||||
2011-2015 | 8,577 | 4,203 |
F-21
Table of Contents
Defined Contribution Plans |
10. | Long-Term Debt |
Revolving Credit Agreement |
F-22
Table of Contents
9% Senior Secured Notes |
Subordinated Notes |
F-23
Table of Contents
Predecessor Debt |
Capital Leases (see also Note 16) |
11. | Convertible Preferred Stock |
Dividends |
Liquidation |
F-24
Table of Contents
Redemption |
Conversion |
Voting |
Protective Provision |
12. | Stockholders’ Equity |
Amended and Restated Certificate of Incorporation |
Registration Rights Agreement |
F-25
Table of Contents
Restricted Common Stock |
• | Historical and expected future earnings performance | |
• | The liquidation preferences and dividend rights of the preferred stock | |
• | Milestones achieved by the company | |
• | Marketplace and major competition | |
• | Market barriers to entry | |
• | The Company’s workforce and related skills | |
• | Customer and vendor characteristics | |
• | Strategic relationships with suppliers | |
• | Risk factors and uncertainties facing the Company | |
F-26
Table of Contents
Predecessor |
13. | Related-Party Transactions |
Kilian Acquisition |
Management Agreement |
Subordinated Notes |
Transition Services Agreement |
F-27
Table of Contents
Predecessor Related Party Transactions |
14. | Concentrations of Credit, Business Risks and Workforce |
F-28
Table of Contents
Net Sales | ||||||||||||||||||||||||||
Predecessor (Note 1) | ||||||||||||||||||||||||||
December 1, | ||||||||||||||||||||||||||
2004 | 11 Months | Property, Plant and Equipment | ||||||||||||||||||||||||
Year Ended | Through | Ended | Year Ended | |||||||||||||||||||||||
December 31, | December 31, | November 30, | December 31, | December 31, | December 31, | |||||||||||||||||||||
2005 | 2004 | 2004 | 2003 | 2005 | 2004 | |||||||||||||||||||||
North America (primarily U.S.) | $ | 288,883 | $ | 23,071 | $ | 207,731 | $ | 198,244 | $ | 47,587 | $ | 47,284 | ||||||||||||||
Europe | 59,176 | 4,632 | 54,141 | 54,672 | 16,968 | 18,760 | ||||||||||||||||||||
Asia and other | 15,406 | 922 | 13,165 | 13,947 | 1,838 | 1,962 | ||||||||||||||||||||
Total | $ | 363,465 | $ | 28,625 | $ | 275,037 | $ | 266,863 | $ | 66,393 | $ | 68,006 | ||||||||||||||
15. | Predecessor Restructuring, Asset Impairment and Transition Expenses |
F-29
Table of Contents
11 Months Ended | Year Ended | |||||||
November 30, | December 31, | |||||||
2004 | 2003 | |||||||
Accrued restructuring charge | $ | — | $ | — | ||||
Impairment or loss on sale of fixed assets | 306 | 2,011 | ||||||
Period cost transition expenses | 641 | 9,074 | ||||||
$ | 947 | $ | 11,085 | |||||
United States Programs |
European and Asian Programs |
F-30
Table of Contents
11 Months | ||||||||
Ended | ||||||||
November 30, | December 31, | |||||||
2004 | 2003 | |||||||
United States programs: | ||||||||
Speed reducer product line consolidation | $ | — | $ | 2,011 | ||||
Electronic clutch brake consolidation | 306 | — | ||||||
Total United States programs | $ | 306 | $ | 2,011 | ||||
Total non-cash asset impairment and loss on sale of assets | $ | 306 | $ | 2,011 | ||||
11 Months | ||||||||
Ended | ||||||||
November 30, | December 31, | |||||||
2004 | 2003 | |||||||
United States programs: | ||||||||
Speed reducer product line consolidation | $ | — | $ | 3,516 | ||||
Electronic clutch brake consolidation | 641 | 2,203 | ||||||
Sprag clutch consolidation | — | 24 | ||||||
Heavy duty clutch consolidation | — | 516 | ||||||
Administrative streamlining | — | 592 | ||||||
Total United States programs | $ | 641 | $ | 6,851 | ||||
Europe and Asia electronic clutch brake consolidation | — | 2,223 | ||||||
Total transition expense | $ | 641 | $ | 9,074 | ||||
11 Months | ||||||||
Ended | ||||||||
November 30, | December 31, | |||||||
2004 | 2003 | |||||||
Training | $ | — | $ | 914 | ||||
Relocation | — | 959 | ||||||
Moving costs | — | 3,485 | ||||||
Severance | — | 767 | ||||||
Duplicate employees | — | 1,689 | ||||||
ERP system integration | — | 477 | ||||||
Other | 641 | 783 | ||||||
Total transition expense | $ | 641 | $ | 9,074 | ||||
F-31
Table of Contents
Combined, | ||||||||||||
Period from | ||||||||||||
11 Months | January 1, 2003 | |||||||||||
Ended | Year Ended | Through | ||||||||||
November 30, | December 31, | November 30, | ||||||||||
2004 | 2003 | 2004 | ||||||||||
United States programs: | ||||||||||||
Speed reducer product line consolidation | $ | 331 | $ | 583 | $ | 914 | ||||||
Electronic clutch brake consolidation | 711 | 908 | 1,619 | |||||||||
Sprag clutch consolidation | 89 | 103 | 192 | |||||||||
Heavy duty clutch consolidation | 158 | 416 | 574 | |||||||||
Administrative streamlining | 8 | 284 | 292 | |||||||||
Total United States programs | $ | 1,297 | $ | 2,294 | $ | 3,591 | ||||||
Europe and Asia electronic clutch brake consolidation | 288 | 2,553 | 2,841 | |||||||||
Cash charged against the restructuring reserve | $ | 1,585 | $ | 4,847 | $ | 6,432 | ||||||
Transition expense | 641 | 9,074 | 9,715 | |||||||||
Total cash utilized | $ | 2,226 | $ | 13,921 | $ | 16,147 | ||||||
11 Months Ended | ||||
November 30, | ||||
2004 | ||||
Balance at beginning of period | $ | 1,606 | ||
Cash payments | (1,585 | ) | ||
Balance at end of period | $ | 21 | ||
F-32
Table of Contents
16. | Commitments and Contingencies |
Minimum Lease Obligations |
Operating | Capital | ||||||||
Year Ending December 31: | Leases | Leases | |||||||
2006 | $ | 2,709 | $ | 211 | |||||
2007 | 2,269 | 166 | |||||||
2008 | 1,396 | 6 | |||||||
2009 | 680 | — | |||||||
2010 | 513 | — | |||||||
Thereafter | 1,464 | — | |||||||
Total lease obligations | $ | 9,031 | 383 | ||||||
Less amounts representing interest | (44 | ) | |||||||
Present value of minimum capital lease obligations | $ | 339 | |||||||
General Litigation |
F-33
Table of Contents
17. | Unaudited Quarterly Results of Operations (in thousands): |
Year Ending December 31, 2005 | Fourth | Third | Second | First | ||||||||||||
Net Sales | $ | 89,974 | $ | 85,155 | $ | 93,034 | $ | 95,302 | ||||||||
Gross Profit | 24,928 | 21,371 | 23,314 | 21,900 | ||||||||||||
Net income (loss) | 1,295 | 204 | 1,084 | (79 | ) | |||||||||||
Basic earnings per share | $ | 18.50 | $ | — | $ | — | N/A | |||||||||
Diluted earnings per share | $ | 0.03 | $ | 0.01 | $ | 0.03 | N/A |
Predecessor (Note 1) | ||||||||||||||||||||
Period from | ||||||||||||||||||||
Inception | Period from | |||||||||||||||||||
(December 1) | October 1, 2004 | |||||||||||||||||||
to | to | |||||||||||||||||||
December 31, | November 30, | |||||||||||||||||||
Year Ending December 31, 2004 | 2004 | 2004 | Third | Second | First | |||||||||||||||
Net Sales | $ | 28,625 | $ | 46,338 | $ | 72,542 | $ | 78,151 | $ | 78,006 | ||||||||||
Gross Profit | 4,778 | 9,687 | 17,683 | 18,296 | 20,118 | |||||||||||||||
Net income (loss) | (5,893 | ) | (253 | ) | (1,081 | ) | 2,668 | 5,561 | ||||||||||||
Basic earnings per share | $ | — | N/A | N/A | N/A | N/A | ||||||||||||||
Diluted earnings per share | $ | — | N/A | N/A | N/A | N/A |
18. | Subsequent Event (Unaudited) |
F-34
Table of Contents
Total purchase price, including closing costs of approximately $1.7 million | $ | 50,981 | |||
Cash and cash equivalents | 441 | ||||
Trade receivables | 11,668 | ||||
Inventories | 16,989 | ||||
Prepaid expenses and other | 1,442 | ||||
Property, plant and equipment | 10,509 | ||||
Intangible assets | 15,900 | ||||
Total assets acquired | 56,949 | ||||
Accounts payable, accrued payroll, and accruals and other current liabilities | 11,862 | ||||
Other liabilities | 5,647 | ||||
Total liabilities assumed | 17,509 | ||||
Net assets acquired | 39,440 | ||||
Excess purchase price over the fair value of net assets acquired | $ | 11,541 | |||
Customer relationships | $ | 9,064 | |||
Product technology and patents | 1,589 | ||||
Total intangible assets subject to amortization | 10,653 | ||||
Trade names and trademarks, not subject to amortization | 5,247 | ||||
Total intangible assets | $ | 15,900 | |||
F-35
Table of Contents
Pro forma | |||||||||||||
June 30, | June 30, | December 31, | |||||||||||
2006 | 2006 | 2005 | |||||||||||
(Unaudited) | (Unaudited) | ||||||||||||
ASSETS | |||||||||||||
Current assets: | |||||||||||||
Cash and cash equivalents | $ | 5,573 | $ | 5,573 | $ | 10,060 | |||||||
Trade receivables, less allowance for doubtful accounts of $2,129 and $1,797 | 64,653 | 64,653 | 46,441 | ||||||||||
Inventories, less allowance for obsolete materials of $9,970 and $6,843 | 73,191 | 73,191 | 54,654 | ||||||||||
Deferred income taxes | 2,194 | 2,194 | 2,779 | ||||||||||
Prepaid expenses and other current assets | 4,527 | 4,527 | 1,973 | ||||||||||
Total current assets | 150,138 | 150,138 | 115,907 | ||||||||||
Property, plant and equipment, net | 80,978 | 80,978 | 66,393 | ||||||||||
Intangible assets, net | 57,823 | 57,823 | 44,751 | ||||||||||
Goodwill | 77,432 | 77,432 | 65,345 | ||||||||||
Other assets, net | 5,906 | 5,906 | 5,295 | ||||||||||
Total assets | $ | 372,277 | $ | 372,277 | $ | 297,691 | |||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||||
Current liabilities: | |||||||||||||
Accounts payable | 36,094 | $ | 36,094 | $ | 30,724 | ||||||||
Accrued payroll | 15,426 | 15,426 | 16,016 | ||||||||||
Accruals and other liabilities | 18,512 | 18,512 | 16,085 | ||||||||||
Deferred income taxes | 188 | 188 | 33 | ||||||||||
Current portion of capital leases and short term bank borrowings | 1,668 | 1,668 | 186 | ||||||||||
Total current liabilities | 71,888 | 71,888 | 63,044 | ||||||||||
Long-term debt, less current portion and net of unaccreted discount | 226,588 | 226,588 | 173,574 | ||||||||||
Deferred income taxes | 10,043 | 10,043 | 7,653 | ||||||||||
Pension liabilities | 15,053 | 15,053 | 14,368 | ||||||||||
Other post retirement benefits | 12,801 | 12,801 | 12,500 | ||||||||||
Other long term liabilities | 2,431 | 2,431 | 1,601 | ||||||||||
Commitments and Contingencies | — | — | — | ||||||||||
Convertible Preferred Series A stock ($0.001 par value, 40,000,000 shares authorized, 35,500,000 shares issued and outstanding) | — | 35,500 | 35,500 | ||||||||||
Stockholders’ equity: | |||||||||||||
Common stock (50,000,000 shares authorized, 915,040 and 594,040 issued & outstanding, respectively, $0.001 par value) | 36 | 1 | 1 | ||||||||||
Additional paid-in capital | 35,642 | 177 | 112 | ||||||||||
Retained earnings (deficit) | 3,511 | 3,511 | (3,389 | ) | |||||||||
Cumulative foreign currency translation adjustment | (4,294 | ) | (4,294 | ) | (5,851 | ) | |||||||
Minimum pension liability | (1,422 | ) | (1,422 | ) | (1,422 | ) | |||||||
33,473 | 33,473 | 24,951 | |||||||||||
Total liabilities and stockholders’ deficit | $ | 372,277 | $ | 372,277 | $ | 297,691 | |||||||
F-36
Table of Contents
Six Months Ended | |||||||||
June 30, | July 1, | ||||||||
2006 | 2005 | ||||||||
(Unaudited) | (Unaudited) | ||||||||
Net sales | $ | 234,558 | $ | 188,336 | |||||
Cost of sales | 170,431 | 143,122 | |||||||
Gross profit | 64,127 | 45,214 | |||||||
Selling, general and administrative expenses | 37,821 | 31,083 | |||||||
Research and development expenses | 2,492 | 2,308 | |||||||
Income from operations | 23,814 | 11,823 | |||||||
Interest expense, net | 12,815 | 9,771 | |||||||
Other non-operating income, net | (87 | ) | 13 | ||||||
Income before income taxes | 11,086 | 2,039 | |||||||
Provision for income taxes | 4,186 | 1,034 | |||||||
Net income | 6,900 | 1,005 | |||||||
Other comprehensive income (loss), net of income taxes: | |||||||||
Foreign currency translation adjustment | 1,557 | (1,918 | ) | ||||||
Other comprehensive income (loss) | 1,557 | (1,918 | ) | ||||||
Comprehensive income (loss) | $ | 8,457 | (913 | ) | |||||
Net Income per share: | |||||||||
Basic | $ | 12.11 | $ | — | |||||
Diluted | $ | 0.18 | $ | 0.03 | |||||
Weighted average common shares outstanding: | |||||||||
Basic | 570 | — | |||||||
Diluted | 38,699 | 37,083 | |||||||
Pro forma effect of conversion of Series A preferred stock to common stock on net income per share: | |||||||||
Basic | $ | 0.19 | |||||||
Diluted | $ | 0.18 | |||||||
Pro forma weighted average common shares outstanding: | |||||||||
Basic | 36,070 | ||||||||
Diluted | 38,699 |
F-37
Table of Contents
Six Months Ended | |||||||||||
June 30, | July 1, | ||||||||||
2006 | 2005 | ||||||||||
(Unaudited) | (Unaudited) | ||||||||||
Cash flows from operating activities: | |||||||||||
Net income | $ | 6,900 | $ | 1,005 | |||||||
Adjustments to reconcile net income to cash provided by operating activities: | |||||||||||
Depreciation | 4,950 | 3,924 | |||||||||
Amortization of intangible assets | 1,796 | 1,477 | |||||||||
Amortization of deferred loan costs | 654 | 405 | |||||||||
Accretion of debt discount | 472 | 474 | |||||||||
Amortization of inventory fair value adjustment | 2,278 | 1,699 | |||||||||
Amortization of deferred compensation | 65 | 28 | |||||||||
Gains on sale of fixed assets | (7 | ) | (51 | ) | |||||||
Provision for deferred taxes | 2,184 | 409 | |||||||||
Changes in operating assets and liabilities: | |||||||||||
Trade receivables | (3,667 | ) | (753 | ) | |||||||
Inventories | (3,181 | ) | (714 | ) | |||||||
Accounts payable and accrued liabilities | (6,153 | ) | (2,237 | ) | |||||||
Other current assets and liabilities | (446 | ) | (2,641 | ) | |||||||
Other operating assets and liabilities | 263 | (624 | ) | ||||||||
Net cash provided by operating activities | 6,108 | 2,401 | |||||||||
Cash flows from investing activities: | |||||||||||
Purchases of fixed assets | (4,110 | ) | (1,960 | ) | |||||||
Sales of fixed assets | — | 596 | |||||||||
Payment of additional Kilian purchase price | — | (730 | ) | ||||||||
Acquisitions, net of $441 of cash acquired | (54,086 | ) | — | ||||||||
Net cash used in investing activities | (58,196 | ) | (2,094 | ) | |||||||
Cash flows from financing activities: | |||||||||||
Proceeds from issuance of senior notes | 57,625 | — | |||||||||
Payment of debt issuance costs | (1,928 | ) | — | ||||||||
Payment of paid-in-kind interest | — | (198 | ) | ||||||||
Payment of Long term debt | (10,800 | ) | — | ||||||||
Borrowings under revolving credit agreement | 5,057 | 4,408 | |||||||||
Payments on revolving credit agreement | (5,057 | ) | — | ||||||||
Proceeds from mortgages | 2,510 | — | |||||||||
Payment of capital leases | (61 | ) | (434 | ) | |||||||
Net cash provided by financing activities | 47,346 | 3,776 | |||||||||
Effect of exchange rates on cash | 255 | (346 | ) | ||||||||
Increase (Decrease) in cash and cash equivalents | (4,487 | ) | 3,737 | ||||||||
Cash and cash equivalents, beginning of period | 10,060 | 4,729 | |||||||||
Cash and cash equivalents, end of period | $ | 5,573 | $ | 8,466 | |||||||
Cash paid during the period for: | |||||||||||
Interest | $ | 10,584 | $ | 9,349 | |||||||
Income Taxes | $ | 2,020 | $ | 1,074 |
F-38
Table of Contents
1. | Organization and Nature of Operations |
2. | Basis of Presentation |
3. | Recent Accounting Pronouncements |
4. | Net Income Per Share |
F-39
Table of Contents
Year-to-Date | Year-to Date | |||||||
Ended June 30, | Ended July 1, | |||||||
2006 | 2005 | |||||||
Net Income | $ | 6,900 | $ | 1,005 | ||||
Shares used in net income per common share — basic | 570 | — | ||||||
Effect of dilutive securities: | ||||||||
Incremental shares of unvested restricted common stock | 2,629 | 1,983 | ||||||
Conversion of preferred stock | 35,500 | 35,100 | ||||||
Shares used in net income per common share — diluted | 38,699 | 37,083 | ||||||
Net income per common share — basic | $ | 12.11 | $ | — | ||||
Net income per common share — diluted | $ | 0.18 | $ | 0.03 | ||||
5. | Acquisitions |
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Total purchase price, including closing costs of approximately $1.7 million | $ | 50,981 | |||
Cash and cash equivalents | 441 | ||||
Trade receivables | 12,959 | ||||
Inventories | 16,388 | ||||
Prepaid expenses and other | 1,099 | ||||
Property, plant and equipment | 13,996 | ||||
Intangible assets | 13,881 | ||||
Total assets acquired | 58,764 | ||||
Accounts payable, accrued payroll, and accruals and other current liabilities | 11,282 | ||||
Other liabilities | 3,493 | ||||
Total liabilities assumed | 14,775 | ||||
Net assets acquired | 43,989 | ||||
Excess purchase price over the fair value of net assets acquired | 6,992 | ||||
Customer relationships, subject to amortization | $ | 6,931 | ||
Trade names and trademarks, not subject to amortization | 6,950 | |||
Total intangible assets | $ | 13,881 | ||
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Year-to-date | Year-to-date | |||||||
Ended | Ended | |||||||
(Pro Forma, Unaudited, in Thousands) | June 30, 2006 | July 1, 2005 | ||||||
Total Revenues | $ | 243,891 | $ | 225,750 | ||||
Net income | $ | 8,527 | $ | 1,325 |
6. | Cash and Cash Equivalents |
7. | Inventories |
June 30, | December 31, | |||||||
2006 | 2005 | |||||||
Raw materials | $ | 28,443 | $ | 22,512 | ||||
Work in process | 16,928 | 13,876 | ||||||
Finished goods | 37,790 | 25,109 | ||||||
83,161 | 61,497 | |||||||
Less — Allowance for excess, slow-moving and obsolete inventory | (9,970 | ) | (6,843 | ) | ||||
$ | 73,191 | $ | 54,654 | |||||
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8. | Goodwill and Intangible Assets |
Goodwill | Cost | |||
Balance December 31, 2005 | $ | 65,345 | ||
Additions related to Hay Hall acquisition | 6,971 | |||
Additions related to Bear Linear acquisition | 4,211 | |||
Impact of changes in foreign currency | 905 | |||
Balance June 30, 2006 | $ | 77,432 | ||
June 30, 2006 | December 31, 2005 | ||||||||||||||||
Accumulated | Accumulated | ||||||||||||||||
Cost | Amortization | Cost | Amortization | ||||||||||||||
Intangible assets not subject to amortization: | |||||||||||||||||
Tradenames and trademarks | $ | 23,030 | $ | — | $ | 16,080 | $ | — | |||||||||
Intangible assets subject to amortization: | |||||||||||||||||
Customer relationships | 34,733 | 3,922 | 27,802 | 2,515 | |||||||||||||
Product technology and patents | 5,122 | 1,074 | 5,122 | 690 | |||||||||||||
Impact of changes in foreign currency | (66 | ) | — | (1,048 | ) | — | |||||||||||
Total intangible assets | $ | 62,819 | $ | 4,996 | $ | 47,956 | $ | 3,205 | |||||||||
9. | Warranty Costs |
June 30, 2006 | July 1, 2005 | |||||||
Balance at beginning of period | $ | 1,876 | $ | 1,528 | ||||
Accrued warranty costs | 825 | 689 | ||||||
Payments and adjustments | (747 | ) | (747 | ) | ||||
Balance at end of period | $ | 1,954 | $ | 1,470 | ||||
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10. | Income Taxes |
11. | Pension and Other Employee Benefits |
Defined Benefit (Pension) and Postretirement Benefit Plans |
Quarter Ended | ||||||||||||||||
Pension Benefits | Other Benefits | |||||||||||||||
June 30, 2006 | July 1, 2005 | June 30, 2006 | July 1, 2005 | |||||||||||||
Service cost | $ | 151 | $ | 138 | $ | 84 | $ | 94 | ||||||||
Interest cost | 334 | 305 | 150 | 180 | ||||||||||||
Expected return on plan assets | (207 | ) | (111 | ) | — | — | ||||||||||
Amortization of prior service cost | 2 | 3 | (101 | ) | — | |||||||||||
Amortization of net (gain) loss | — | — | 17 | — | ||||||||||||
Curtailment charge | — | — | — | — | ||||||||||||
Special termination benefits | — | — | — | — | ||||||||||||
Net periodic benefit cost | $ | 280 | $ | 335 | $ | 150 | $ | 274 | ||||||||
Year-to-Date Ended | ||||||||||||||||
Pension Benefits | Other Benefits | |||||||||||||||
June 30, 2006 | July 1, 2005 | June 30, 2006 | July 1, 2005 | |||||||||||||
Service cost | $ | 303 | $ | 265 | $ | 168 | $ | 187 | ||||||||
Interest cost | 669 | 614 | 299 | 361 | ||||||||||||
Expected return on plan assets | (415 | ) | (216 | ) | — | — | ||||||||||
Amortization of prior service cost | 3 | 3 | (201 | ) | — | |||||||||||
Amortization of net (gain) loss | — | — | 35 | — | ||||||||||||
Curtailment charge | — | — | — | — | ||||||||||||
Special termination benefits | — | — | — | — | ||||||||||||
Net periodic benefit cost | $ | 560 | $ | 666 | $ | 301 | $ | 548 | ||||||||
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11. | Financing Arrangements |
Revolving Credit Agreement |
9% Senior Secured Notes |
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Table of Contents
11.25% Senior Notes |
Mortgage |
Capital Leases |
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12. | Convertible Preferred Stock |
Dividends |
Liquidation |
Redemption |
Conversion |
Voting |
Protective Provision |
F-47
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13. | Stockholders’ Equity |
Amended and Restated Certificate of Incorporation |
Registration Rights Agreement |
Restricted Common Stock |
F-48
Table of Contents
• | Historical and expected future earnings performance | |
• | The liquidation preferences and dividend rights of the preferred stock | |
• | Milestones achieved by the company | |
• | Marketplace and major competition | |
• | Market barriers to entry | |
• | The Company’s workforce and related skills | |
• | Customer and vendor characteristics | |
• | Strategic relationships with suppliers | |
• | Risk factors and uncertainties facing the Company | |
14. | Related-Party Transactions |
Kilian Acquisition |
Management Agreement |
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Subordinated Notes |
15. | Concentrations of Credit, Business Risks and Workforce |
16. | Geographic Information |
Net Sales | Property, Plant | ||||||||||||||||
and Equipment | |||||||||||||||||
Year-to- | |||||||||||||||||
Year-to-Date | Date | ||||||||||||||||
Ended | Ended | June 30, | December 31, | ||||||||||||||
June 30, 2006 | July 1, 2005 | 2006 | 2005 | ||||||||||||||
North America (primarily U.S.) | $ | 163,994 | $ | 142,773 | $ | 47,590 | $ | 47,587 | |||||||||
Europe | 62,624 | 37,909 | 31,577 | 16,968 | |||||||||||||
Asia and other | 7,940 | 7,654 | 1,811 | 1,838 | |||||||||||||
Total | $ | 234,558 | $ | 188,336 | $ | 80,978 | $ | 66,393 | |||||||||
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17. | Commitments and Contingencies |
General Litigation |
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Year Ended | ||||||||
31 December | ||||||||
Notes | 2005 | |||||||
£’000 | ||||||||
Turnover | 2 | 39,262 | ||||||
Operating costs less other income | 3 | (37,924 | ) | |||||
Operating profit | 4 | 1,338 | ||||||
Interest receivable | 56 | |||||||
Interest payable | 5 | (1,286 | ) | |||||
Other financial income | 107 | |||||||
Profit on ordinary activities before taxation | 215 | |||||||
Tax on profit on ordinary activities | 8 | (292 | ) | |||||
(77 | ) | |||||||
Minority interests | — | |||||||
(Loss) profit for the financial period | (77 | ) | ||||||
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Year Ended | ||||
31 December | ||||
2005 | ||||
£’000 | ||||
(Loss) profit for the financial period | (77 | ) | ||
Profit (loss) on foreign currency translation | 118 | |||
Actuarial (losses) gains on retirement benefit scheme | (2,148 | ) | ||
Total recognised gains and losses relating to the period | (2,107 | ) | ||
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Notes | 2005 | |||||||
£’000 | ||||||||
Fixed assets | ||||||||
Goodwill | 9 | 2,593 | ||||||
Tangible assets | 10 | 6,131 | ||||||
Investments | 11 | 19 | ||||||
8,743 | ||||||||
Current assets | ||||||||
Stocks | 12 | 8,659 | ||||||
Debtors | 13 | 7,537 | ||||||
Cash at bank and in hand | 2,207 | |||||||
18,403 | ||||||||
Creditors:Amounts falling due within one year | 14 | (13,673 | ) | |||||
Net current assets | 4,730 | |||||||
Total assets less current liabilities | 13,473 | |||||||
Financed by: | ||||||||
Creditors:Amounts falling due after more than one year Obligations under finance leases and hire purchase contracts | 15 | 513 | ||||||
Borrowings | 16 | 9,185 | ||||||
Pension obligations | 25 | 3,573 | ||||||
13,271 | ||||||||
Capital and reserves | ||||||||
Called-up share capital | 18 | 2,130 | ||||||
Profit and loss account | 19 | (1,928 | ) | |||||
Shareholders’ funds | 20 | 202 | ||||||
Minority interests | 21 | — | ||||||
13,473 | ||||||||
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Notes | 2005 | |||||||
£’000 | ||||||||
Fixed assets | ||||||||
Investments | 11 | 2,280 | ||||||
Creditors:Amounts falling due after more than one year | 14 | (150 | ) | |||||
Total assets less current liabilities | 2,130 | |||||||
Financed by: | ||||||||
Capital and reserves | ||||||||
Called-up share capital | 18 | 2,130 | ||||||
Profit and loss account | 19 | — | ||||||
Shareholders’ funds | 20 | 2,130 | ||||||
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Year Ended | ||||||||
31 December | ||||||||
Notes | 2005 | |||||||
£’000 | ||||||||
Net cash inflow from operating activities | 22 | 2,789 | ||||||
Returns on investments and servicing of finance | ||||||||
Interest received | 56 | |||||||
Interest paid — HP and finance lease | (26 | ) | ||||||
Interest paid — other interest | (1,129 | ) | ||||||
Net cash outflow for returns on investments and servicing of finance | (1,099 | ) | ||||||
Taxation | ||||||||
Tax paid | (186 | ) | ||||||
Net cash outflow for taxation | (186 | ) | ||||||
Capital expenditure | ||||||||
Purchase of tangible fixed assets | (680 | ) | ||||||
Sale of tangible fixed assets | 8 | |||||||
Net cash outflow for capital expenditure | (672 | ) | ||||||
Acquisition and disposals | ||||||||
Purchase of subsidiary undertaking | (288 | ) | ||||||
Net cash acquired with subsidiary undertakings | 42 | |||||||
Purchase of investments | (5 | ) | ||||||
Net cash outflow for acquisition and disposals | (251 | ) | ||||||
Cash outflow before financing | 581 | |||||||
Financing | ||||||||
Capital element of finance lease rental payments | (178 | ) | ||||||
New loans | 238 | |||||||
Repayment of loans | (1,007 | ) | ||||||
Net cash (outflow) inflow from financing | (947 | ) | ||||||
Decrease in cash in the period | 23 | (366 | ) | |||||
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1 | Accounting policies |
a) Basis of accounting |
b) Accounting period |
c) Basis of consolidation |
d) Goodwill |
e) Tangible fixed assets |
Freehold buildings | 2% to 31/3% per annum | |
Improvements to short leasehold premises | Over term of lease | |
Plant and machinery and equipment | 4% to 331/3% per annum |
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f) Investments |
g) Stocks |
h) Taxation |
i) Foreign currency |
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j) Leases |
k) Turnover |
l) Pension costs |
m) Finance costs |
n) Debt |
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2 | Turnover |
2005 | ||||
£’000 | ||||
UK | 12,348 | |||
Rest of Europe | 8,471 | |||
Americas | 14,086 | |||
Rest of the World | 4,357 | |||
39,262 | ||||
2005 | ||||
£’000 | ||||
UK | 30,050 | |||
Rest of Europe | 700 | |||
USA | 7,192 | |||
Africa | 1,320 | |||
39,262 | ||||
3 | Operating costs less other income |
2005 | ||||
Continuing | ||||
Operations | ||||
£’000 | ||||
Change in stocks of finished goods and work in progress | 607 | |||
Other operating income | 54 | |||
Raw materials and consumables | (14,438 | ) | ||
Other external charges | (7,317 | ) | ||
Staff costs | (15,631 | ) | ||
Depreciation and Amortisation | (1,200 | ) | ||
(37,924 | ) | |||
4 | Operating profit |
2005 | |||||
£’000 | |||||
Depreciation of tangible fixed assets | 1,075 | ||||
Amortisation of goodwill | 125 | ||||
Auditors’ remuneration for audit services | 71 | ||||
Operating lease rentals — plant and machinery | 113 | ||||
— other | 473 | ||||
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5 | Interest payable and similar charges |
2005 | ||||
£’000 | ||||
Bank loans and overdrafts | 1,079 | |||
Finance leases and hire purchase contracts | 26 | |||
Amortisation of loan issue costs | 181 | |||
1,286 | ||||
6 | Staff costs |
2005 | ||||
Number | ||||
Works employees | 349 | |||
Staff | 199 | |||
548 | ||||
2005 | ||||
£’000 | ||||
Wages and salaries | 13,969 | |||
Redundancy costs | 55 | |||
Social security costs | 1,328 | |||
Other pension costs | 279 | |||
15,631 | ||||
7 | Directors’ remuneration |
8 | Tax on profit on ordinary activities |
2005 | ||||
£’000 | ||||
Current tax | ||||
UK corporation tax at 30% | 5 | |||
Overseas tax | 215 | |||
220 | ||||
Deferred tax (see note 17) | ||||
Origination and reversal of timing differences | 72 | |||
Total tax on profit on ordinary activities | 292 | |||
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2005 | ||||
£’000 | ||||
Profit on ordinary activities before tax | 215 | |||
Tax on profit on ordinary activities at standard UK corporation tax rate of 30% | 65 | |||
Effects of: | ||||
Expenses not deductible for tax purposes | 6 | |||
Depreciation in excess of capital allowances | 125 | |||
Other timing differences | 24 | |||
Current tax charges for period | 220 | |||
9 | Goodwill |
Group | £’000 | |||
Cost | ||||
Beginning of year (as previously reported) | 745 | |||
Prior year adjustment | 1,604 | |||
Beginning of year (as restated) | 2,349 | |||
Goodwill on acquisition in the year (note 11) | 399 | |||
End of year | 2,748 | |||
Amortisation | ||||
Beginning of year (as previously reported) | (10 | ) | ||
Prior year adjustment | (20 | ) | ||
Beginning of year (as restated) | (30 | ) | ||
Charge for the year | (125 | ) | ||
End of year | (155 | ) | ||
Net book value | ||||
End of year | 2,593 | |||
Beginning of year (as restated) | 2,319 | |||
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10 | Tangible fixed assets |
Freehold | Short | Plant, | ||||||||||||||
Land and | Leasehold | Machinery & | ||||||||||||||
Group | Buildings | Buildings | Equipment | Total | ||||||||||||
£’000 | £’000 | £’000 | £’000 | |||||||||||||
Cost or valuation | ||||||||||||||||
Beginning of year | 1,579 | 218 | 10,331 | 12,128 | ||||||||||||
Acquisitions | — | — | 13 | 13 | ||||||||||||
Additions | — | — | 672 | 672 | ||||||||||||
Disposal | — | (132 | ) | (395 | ) | (527 | ) | |||||||||
Exchange adjustment | — | 2 | 173 | 175 | ||||||||||||
End of year | 1,579 | 88 | 10,794 | 12,461 | ||||||||||||
Depreciation | ||||||||||||||||
Beginning of year | 212 | 114 | 5,405 | 5,731 | ||||||||||||
Acquisitions | 4 | 4 | ||||||||||||||
Charge for the year | 30 | 34 | 1,003 | 1,067 | ||||||||||||
Disposal | (132 | ) | (391 | ) | (523 | ) | ||||||||||
Exchange adjustment | 51 | 51 | ||||||||||||||
End of year | 242 | 16 | 6,072 | 6,330 | ||||||||||||
Net book value | ||||||||||||||||
Beginning of year | 1,367 | 104 | 4,926 | 6,397 | ||||||||||||
End of year | 1,337 | 72 | 4,722 | 6,131 | ||||||||||||
Company |
11 | Fixed asset investments |
2005 | ||||||||
Group | Company | |||||||
2005 | 2005 | |||||||
£’000 | £’000 | |||||||
Subsidiary undertaking | — | 2,280 | ||||||
Investments | 19 | — | ||||||
19 | 2,280 | |||||||
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Investment in subsidiary undertaking |
Country of | ||||||||||||
Registration | Holding | % | ||||||||||
The Hay Hall Group Limited | England | Ordinary | 85 | |||||||||
Preference | 82 | |||||||||||
B Preference | 84 | |||||||||||
C Preference | 100 | |||||||||||
The subsidiary undertaking has investments in the following companies: | ||||||||||||
Trading companies | ||||||||||||
Matrix International Limited | England | Ordinary | 100 | |||||||||
Inertia Dynamics Inc | USA | Ordinary | 100 | |||||||||
Matrix International GmbH | Germany | Ordinary | 100 | |||||||||
Bibby Transmissions Limited | England | Ordinary | 100 | |||||||||
Huco Engineering Industries Limited | England | Ordinary | 100 | |||||||||
Twiflex Limited | England | Ordinary | 100 | |||||||||
Bibby Turboflex (SA) (Pty) Limited | South Africa | Ordinary | 100 | |||||||||
Scandicom AB | Sweden | Ordinary | 100 | |||||||||
Saftek Limited | England | Ordinary | 100 | |||||||||
Holding companies | ||||||||||||
Bibby Group Limited | England | Ordinary | 100 | |||||||||
Huco Power Transmissions Limited | England | Ordinary | 100 | |||||||||
MEL Holding Inc | USA | Ordinary | 100 | |||||||||
Non trading companies | ||||||||||||
Turboflex Limited | England | Ordinary | 100 | |||||||||
Matrix Engineering Limited | England | Ordinary | 100 | |||||||||
Hay Hall Leicester Limited | England | Ordinary | 100 | |||||||||
Stainless Steel Tubes Limited | England | Ordinary | 100 | |||||||||
Hay Hall Tyseley Limited | England | Ordinary | 100 | |||||||||
T&A Nash (Penn) Limited | England | Ordinary | 100 | |||||||||
Motion Developments Limited | England | Ordinary | 100 | |||||||||
Hay Hall Trustees Limited | England | Ordinary | 100 | |||||||||
Turboflex (South Africa) (Pty) Limited | South Africa | Ordinary | 100 | |||||||||
Torsiflex Limited | England | Ordinary | 100 | |||||||||
Dynatork Air Motors Limited | England | Ordinary | 100 | |||||||||
Dynatork Limited | England | Ordinary | 100 |
Country of | ||||||||||||
Registration | Holding | % | ||||||||||
Rathi Turboflex Pty Limited | India | Ordinary | 50 |
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Acquisition of subsidiary undertaking |
Book and Fair | ||||
Value | ||||
£’000 | ||||
Tangible fixed assets | 13 | |||
Stocks | 25 | |||
Debtors | 56 | |||
Creditors | (6 | ) | ||
Taxation | (41 | ) | ||
Cash acquired | 42 | |||
89 | ||||
Goodwill (note 9) | 399 | |||
488 | ||||
Satisfied by: | ||||
Cash | 288 | |||
Deferred consideration | 200 | |||
488 | ||||
Profit and Loss Account | ||||
£’000 | ||||
Turnover | 144 | |||
Cost of sales | (43 | ) | ||
Operating profit | 101 | |||
Finance charges (net) | — | |||
Profit on ordinary activities before taxation | 101 | |||
tax on profit on ordinary activities | (20 | ) | ||
Profit for the financial period | 81 | |||
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Book and | ||||||||
Fair Value | ||||||||
£’000 | ||||||||
(As restated) | ||||||||
Investments | 10 | |||||||
Tangible fixed assets | 6,563 | |||||||
Stocks | 7,309 | |||||||
Debtors | 8,728 | |||||||
Creditors | (7,074 | ) | ||||||
Overdrafts acquired | (5,206 | ) | ||||||
Loans | (8,280 | ) | ||||||
Obligations under finance leases and hire purchase contracts | (515 | ) | ||||||
Pension obligations | (1,604 | ) | ||||||
(69 | ) | |||||||
Goodwill (note 9) (as previously reported) | 745 | |||||||
Prior year adjustment | 1,604 | 2,349 | ||||||
2,280 | ||||||||
Satisfied by: | ||||||||
Cash | 150 | |||||||
Issue of shares | 2,130 | |||||||
2,280 | ||||||||
12 | Stocks |
2005 | ||||
£’000 | ||||
Group | ||||
Raw materials and consumables | 1,668 | |||
Work in progress | 1,848 | |||
Finished goods and goods for resale | 5,143 | |||
8,659 | ||||
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Company |
13 | Debtors |
2005 | ||||||||
Group | Company | |||||||
£’000 | £’000 | |||||||
Amounts falling due within one year: | ||||||||
Trade debtors | 6,792 | — | ||||||
VAT | 262 | — | ||||||
Taxation recoverable | 11 | — | ||||||
Deferred tax debtor | 83 | — | ||||||
Prepayments and accrued income | 389 | — | ||||||
7,537 | — | |||||||
14 | Creditors: Amounts falling due within one year |
2005 | ||||||||
Group | Company | |||||||
£’000 | £’000 | |||||||
Bank loans and overdrafts (secured) | 5,668 | — | ||||||
Trade creditors | 4,531 | — | ||||||
Amounts due to group undertakings | 150 | |||||||
Corporate tax payable | 353 | — | ||||||
Other taxation and social security | 437 | — | ||||||
Obligations under finance leases and hire purchase contracts | 233 | — | ||||||
Accruals | 2,451 | — | ||||||
13,673 | 150 | |||||||
15 | Creditors: Amounts falling due after more than one year |
2005 | ||||||||
Group | Company | |||||||
£’000 | £’000 | |||||||
Obligations under finance leases and hire purchase contracts | 331 | — | ||||||
Deferred consideration | 182 | — | ||||||
Amounts due to subsidiary undertaking | — | 150 | ||||||
513 | 150 | |||||||
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Finance leases |
2005 | ||||
£’000 | ||||
Amounts payable: | ||||
— Within one year | 233 | |||
— between one and two years | 163 | |||
— between two and five years | 168 | |||
564 | ||||
Deferred consideration |
16 | Creditors: Amounts falling due after more than one year |
2005 | ||||||||
Group | Company | |||||||
£’000 | £’000 | |||||||
Senior loans | 9,185 | — | ||||||
Analysis of borrowings |
2005 | ||||
Group | ||||
£’000 | ||||
Amounts payable: | ||||
— within one year | 1,200 | |||
— between one and two years | 1,200 | |||
— between two and five years | 7,985 | |||
10,385 | ||||
Loan issue costs not amortised | — | |||
10,385 | ||||
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17 | Provisions for liabilities and charges |
2005 | ||||||||
Group | Company | |||||||
£’000 | £’000 | |||||||
Deferred tax | ||||||||
At beginning of period | 131 | — | ||||||
On acquisitions | — | |||||||
Charged to the profit and loss account | (72 | ) | — | |||||
Differences on exchange | (12 | ) | — | |||||
Offset against pension obligations | 32 | |||||||
Transferred to debtors | (83 | ) | — | |||||
At end of period | — | — | ||||||
The deferred tax provision comprises: | ||||||||
Accelerated capital allowances | (8 | ) | — | |||||
Other timing differences | 91 | — | ||||||
83 | — | |||||||
18 | Called-up share capital |
2005 | ||||
£’000 | ||||
Authorised | ||||
2,600,000 ordinary shares of £1 each | 2,600 | |||
Allotted, called-up and fully-paid | ||||
2,130,370 ordinary shares of £1 each | 2,130 | |||
19 | Reserves |
Profit and | ||||
Loss Account | ||||
£’000 | ||||
Group | ||||
Beginning of year (as restated) | 179 | |||
Retained loss for the period | (77 | ) | ||
Profit on foreign currency translation | 118 | |||
Actuarial losses on pension scheme | (2,148 | ) | ||
End of year | (1,928 | ) | ||
Company | ||||
Beginning and end of period | — | |||
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20 | Reconciliation of movements in shareholders’ funds |
2005 | ||||||||
Group | Company | |||||||
£’000 | £’000 | |||||||
(Loss) Profit for the financial period | (77 | ) | — | |||||
Issue of share capital | — | — | ||||||
Profit (Loss) on foreign currency translation | 118 | — | ||||||
Actuarial losses on pension scheme | (2,148 | ) | — | |||||
Net (reduction in) addition to shareholders’ funds | (2,107 | ) | — | |||||
Opening shareholders’ funds | 2,309 | 2,130 | ||||||
Closing shareholders’ funds | 202 | 2,130 | ||||||
21 | Minority interests |
2005 | ||||
£’000 | ||||
At 1 January 2005 (as restated) | — | |||
Profit on ordinary activities after taxation for the year | — | |||
At 31 December 2005 | — | |||
22 | Reconciliation of operating profit to operating cash flows |
2005 | ||||
£’000 | ||||
Operating profit | 1,338 | |||
Depreciation and amortisation charges | 1,200 | |||
(Increase) in stocks | (841 | ) | ||
Decrease in debtors | 392 | |||
Decrease in creditors | 700 | |||
Net cash inflow from operating activities | 2,789 | |||
23 | Analysis and reconciliation of net debt |
At Start | Exchange | At End | ||||||||||||||||||
of Year | Cash Flow | Acquisition | Adjustment | of Year | ||||||||||||||||
£’000 | £’000 | £’000 | £’000 | £’000 | ||||||||||||||||
Cash in hand, at bank | 1,958 | 207 | 42 | — | 2,207 | |||||||||||||||
Overdrafts | (3,853 | ) | (615 | ) | — | — | (4,468 | ) | ||||||||||||
(1,895 | ) | (408 | ) | 42 | (2,261 | ) | ||||||||||||||
Debt due after one year | (9,583 | ) | 645 | — | (247 | ) | (9,185 | ) | ||||||||||||
Debt due within one year | (1,200 | ) | — | — | — | (1,200 | ) | |||||||||||||
Net debt | (12,678 | ) | 237 | 42 | (247 | ) | (12,646 | ) | ||||||||||||
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2005 | ||||
£’000 | ||||
Decrease in cash in the year | (366 | ) | ||
Cash inflow (outflow) from (decrease) increase in debt | 398 | |||
Change in net debt resulting from cash flows in the year | 32 | |||
Net debt at start of year | (12,678 | ) | ||
Net debt at end of year | (12,646 | ) | ||
24 | Guarantees and other financial commitments |
a) Capital commitments |
2005 | ||||
£’000 | ||||
Group | ||||
Contracted but not provided for | — | |||
b) Operating lease commitments |
Land and | Plant and | |||||||
Buildings | Machinery | |||||||
2005 | 2005 | |||||||
£’000 | £’000 | |||||||
Group | ||||||||
Expiry date | ||||||||
— within one year | 5 | 51 | ||||||
— between one and two years | 168 | 65 | ||||||
— between two and five years | 281 | 52 | ||||||
454 | 168 | |||||||
c) Other commitments |
2005 | ||||
£’000 | ||||
Group | ||||
Trade guarantees | 79 | |||
HM Customs and Excise | 36 |
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25 | Pension arrangements |
Composition of the Scheme |
At 31 December 2005 | ||||
Rate of increase in pensions in payment (where increases are not fixed) | 2.65% | |||
Discount rate | 5.00% | |||
Inflation assumption | 2.75% |
Long Term Rate | ||||||||
of Return | ||||||||
Expected at | Market Value at | |||||||
31 December | 31 December | |||||||
2005 | 2005 | |||||||
£000 | ||||||||
Equities | 8.00 | % | 11,366 | |||||
Bonds | 4.70 | % | 15,656 | |||||
Cash | 4.10 | % | 155 | |||||
Total market value of assets | 27,177 | |||||||
Present value of scheme liabilities | 32,281 | |||||||
(Deficit) surplus in the Scheme | (5,104 | ) | ||||||
Related deferred tax asset (liability) | 1,531 | |||||||
Net pension liability | (3,573 | ) | ||||||
31 December 2005 | ||||
£000 | ||||
Analysis of the amount charged in operating profit | ||||
Current service cost | — | |||
Past service cost | — | |||
Curtailment (gain)/loss | — | |||
Total Operating Charge | — | |||
Analysis of the amount credited to other finance income | ||||
Expected return on pension scheme assets | 1,571 | |||
Interest on pensions scheme liabilities | (1,464 | ) | ||
Net return | 107 | |||
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31 December 2005 | ||||
£000 | ||||
Analysis of amount recognised in statement of total recognised gains and losses (STRGL) | ||||
Actual return less expected return on scheme assets | 1,777 | |||
Experience gains and losses arising on the scheme liabilities | (334 | ) | ||
Changes in assumptions underlying the present value of the scheme liabilities | (4,511 | ) | ||
Actuarial (loss) gain recognised in STRGL | (3,068 | ) | ||
Movement in (deficit) during the period | ||||
Deficit in scheme at beginning of the period | (2,143 | ) | ||
Movement in the period: | ||||
Current service cost | — | |||
Contributions | — | |||
Past service cost | — | |||
Curtailments gain/(loss) | — | |||
Other finance income | 107 | |||
Actuarial loss | (3,068 | ) | ||
(5,104 | ) | |||
History of experience gains and losses | ||||
Actuarial less expected return | 1,777 | |||
7 | % | |||
Experience gain on the liabilities | (334 | ) | ||
(1 | )% | |||
Total amount recognised in the STRGL | (3,068 | ) | ||
(10 | )% |
26 | Subsequent Events |
27 | Related Party Disclosures |
28 | Summary of differences between accounting principles in the United Kingdom and the United State of America |
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Notes | 2005 | |||||||
£’000 | ||||||||
Net (loss) income in accordance with UK GAAP | (77 | ) | ||||||
Goodwill | a | 125 | ||||||
Tangible assets | b | 7 | ||||||
Net (loss) income in accordance with US GAAP | 55 | |||||||
Shareholders’ funds in accordance with UK GAAP | 202 | |||||||
Goodwill | a | 155 | ||||||
Tangible assets | b | (268 | ) | |||||
Shareholders’ funds in accordance with US GAAP | 89 | |||||||
(a) | Goodwill Amortization |
(b) | Tangible Assets |
1. | Balance sheet and profit and loss account presentation |
General |
2. | Consolidated statement of cashflow |
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2005 | ||||
£’000 | ||||
Net cash provided by operating activities | 1,504 | |||
Net cash used by investing activities | (923 | ) | ||
Net cash provided by financing activities | (947 | ) | ||
Net decrease in cash and cash equivalents | (366 | ) | ||
Cash and cash equivalents under US GAAP at beginning of the period | (1,895 | ) | ||
Cash and cash equivalents under US GAAP at end of the period | (2,261 | ) | ||
Cash and cash equivalents under UK GAAP at end of the period | (2,261 | ) | ||
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Table of Contents
Item 13. | Other Expenses of Issuance and Distribution |
SEC registration fee | $ | 18,458 | |||
NASD filing fee | |||||
NASDAQ listing fee | |||||
Printing and engraving expenses | * | ||||
Legal fees and expenses | * | ||||
Accounting fees and expenses | * | ||||
Transfer agent and registrar fees | * | ||||
Miscellaneous | * | ||||
Total | $ | ||||
* | To be completed by amendment. |
Item 14. | Indemnification of Directors and Officers |
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Item 15. | Recent Sales of Unregistered Securities |
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Item 16. | Exhibits and Financial Statement Schedules. |
Number | Description | |||
1 | .1+ | Form of Underwriting Agreement | ||
2 | .1(1) | LLC Purchase Agreement, dated as of October 25, 2004, among Warner Electric Holding, Inc., Colfax Corporation and Registrant | ||
2 | .2(1) | Assignment and Assumption Agreement, dated as of November 21, 2004, between Registrant and Altra Industrial Motion, Inc. | ||
2 | .3(2) | Share Purchase Agreement, dated as of November 7, 2005, among Altra Industrial Motion, Inc. and the stockholders of Hay Hall Holdings Limited listed therein | ||
2 | .4* | Asset Purchase Agreement, dated May 18, 2006, among Warner Electric LLC, Bear Linear LLC and the other guarantors listed therein | ||
3 | .1+ | Amended and Restated Certificate of Incorporation of the Registrant, to be in effect upon the consummation of the offering | ||
3 | .2+ | Amended and Restated Bylaws of the Registrant, to be in effect upon the consummation of the offering | ||
4 | .1* | Amended and Restated Registration Rights Agreement, dated January 6, 2005, among Registrant, Genstar Capital Partners II, L.P., Stargen III, L.P. and Caisse de dépôt et Placement du Québec | ||
4 | .2(1) | Indenture, dated as of November 30, 2004, among Altra Industrial Motion, Inc., the Guarantors party thereto and The Bank of New York Trust Company, N.A. as trustee | ||
4 | .3(3) | First Supplemental Indenture, dated as of February 7, 2006, among Altra Industrial Inc., the guarantors party thereto, and The Bank of New York Trust Company, N.A. as trustee | ||
4 | .4(2) | Second Supplemental Indenture, dated as of February 8, 2006, among Altra Industrial Inc., the guarantors party thereto, and The Bank of New York Trust Company, N.A. as trustee | ||
4 | .5(3) | Third Supplemental Indenture, dated as of April 24, 2006, among Altra Industrial Inc., the guarantors party thereto, and The Bank of New York Trust Company, N.A. as trustee | ||
4 | .6(1) | Form of 9% Senior Secured Notes due 2011 (included in Exhibit 4.1) | ||
4 | .7(1) | Registration Rights Agreement, dated as of November 30, 2004, among Altra Industrial Motion, Inc., Jefferies & Company, Inc., and the Subsidiary Guarantors party thereto | ||
4 | .8(2) | Indenture, dated as of February 8, 2006, among Altra Industrial Motion Inc. the guarantors party thereto, the Bank of New York, as trustee and paying agent and the Bank of New York (Luxembourg) SA, as Luxembourg paying agent |
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Number | Description | |||
4 | .9(3) | First Supplemental Indenture, dated as of April 24, 2006, among Altra Industrial Inc., the guarantors party thereto, and The Bank of New York as trustee | ||
4 | .10(2) | Form of 111/4% Senior Notes due 2013 | ||
4 | .11(2) | Registrants Rights Agreement, dated as of February 8, 2006, among Altra Industrial Inc., the guarantors party thereto, and Jefferies International Limited, as initial purchasers | ||
4 | .12* | Note Purchase Agreement, dated November 30, 2004, between Registrant and Caisse de dépôt et Placement du Québec | ||
4 | .13* | Form of Caisse de dépôt et Placement du Québec Note, due November 30, 2019 | ||
4 | .14 | Stockholders Agreement, dated January 6, 2005, among the Registrant and the stockholders listed therein | ||
4 | .15 | First Amendment to the Amended and Restated Stockholders Agreement, dated May 1, 2005, among the Registrant and the stockholders listed therein. | ||
5 | .1+ | Opinion of Weil, Gotshal Manges LLP | ||
10 | .1(1) | Credit Agreement, dated as of November 30, 2004, among Altra Industrial Motion, Inc. and certain subsidiaries of the Company, as Guarantors, the financial institutions listed therein, as Lenders, and Wells Fargo Bank, as Lead Arranger | ||
10 | .2(1) | Security Agreement, dated as of November 30, 2004, among Altra Industrial Motion, Inc., the other Grantors listed therein and The Bank of New York Trust Company, N.A. | ||
10 | .3(1) | Patent Security Agreement, dated as of November 30, 2004, among Kilian Manufacturing Corporation, Warner Electric Technology LLC, Formsprag LLC, Boston Gear LLC, Ameridrives International, L.P. and The Bank of New York Trust Company, N.A. | ||
10 | .4(1) | Trademark Security Agreement, dated as of November 30, 2004, among Warner Electric Technology LLC, Boston Gear LLC and The Bank of New York Trust Company, N.A. | ||
10 | .5(1) | Intercreditor and Lien Subordination Agreement, dated as of November 30, 2004, among Wells Fargo Foothill, Inc., The Bank of New York Trust Company, N.A. and Altra Industrial Motion, Inc. | ||
10 | .6(1) | Agreement, dated as of October 24, 2004, between Ameridrives International, L.P. and United Steel Workers of America Local 3199-10 | ||
10 | .7(1) | Labor Agreement, dated as of August 9, 2004, between Warner Electric LLC (formerly Warner Electric Inc.) and International Association of Machinists and Aerospace Works, AFL-CIO, and Aeronautical Industrial District Lode 776, Local Lodge 2771 | ||
10 | .8* | Labor Agreement, dated May 17, 2006, between Warner Electric LLC and United Steelworkers and Local Union No. 3245 | ||
10 | .9* | Labor Agreement, dated June 6, 2005, between Formsprag LLC and UAW Local 155 | ||
10 | .10(1) | Employment Agreement, dated as of January 6, 2005, between Altra Industrial Motion, Inc. and Michael L. Hurt | ||
10 | .11(1) | Employment Agreement, dated as of January 6, 2005, between Altra Industrial Motion, Inc. and Carl Christenson | ||
10 | .12(1) | Employment Agreement, dated as of January 12, 2005, between Altra Industrial Motion, Inc. and David Wall | ||
10 | .13(1) | Registrant’s 2004 Equity Incentive Plan | ||
10 | .14* | Amendment to Registrant’s 2004 Equity Incentive Plan | ||
10 | .15(1) | Form of Registrant’s Restricted Stock Award Agreement | ||
10 | .16* | Subscription Agreement, dated November 30, 2004, among Registrant, the preferred purchasers and the common purchasers as listed therein | ||
10 | .17(1) | Advisory Services Agreement, dated as of November 30, 2004, among Registrant, Altra Industrial Motion, Inc. and Genstar Capital, L.P. | ||
10 | .18(1) | Transition Services Agreement, dated as of November 30, 2004, among Warner Electric Holding, Inc., Colfax Corporation and Altra Industrial Motion, Inc. |
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Number | Description | |||
10 | .19(1) | Trademarks and Technology License Agreement, dated November 30, 2004, among Registrant, Colfax Corporation and Altra Industrial Motion, Inc. | ||
11 | .1 | Statement of Computation of Earnings Per Share (required information contained within this Form S-1) | ||
21 | .1* | Subsidiaries of Registrant | ||
23 | .1 | Consent of Ernst & Young LLP, independent registered public accounting firm | ||
23 | .2 | Consent of BDO Stoy Hayward LLP, independent chartered accountants | ||
23 | .3+ | Consent of Weil, Gotshal & Manges LLP (included in Exhibit 5.1) | ||
24 | .1* | Power of Attorney |
(1) | Incorporated by reference to Altra Industrial Motion, Inc.’s Registration Statement on Form S-4 (File No. 333-124944) filed with the Securities and Exchange Commission on May 16, 2005. |
(2) | Incorporated by reference to Altra Industrial Motion, Inc.’s Current Report on Form 8-K (File No. 333-124944) filed with the Securities and Exchange Commission on February 14, 2006. |
(3) | Incorporated by reference to Altra Industrial Motion, Inc.’s Annual Report on Form 10-K (File No. 333-124944) filed with the Securities and Exchange Commission on May 15, 2006. |
+ | To be filed by amendment |
* | Filed previously |
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December 31, | |||||||||
2005 | 2004 | ||||||||
Assets | |||||||||
Current assets | $ | — | $ | — | |||||
Other assets | 287 | 336 | |||||||
Investments in subsidiaries | 38,613 | 42,879 | |||||||
$ | 38,900 | $ | 43,215 | ||||||
Liabilities and stockholders’ deficit | |||||||||
Current liabilities: | |||||||||
Accruals and other current liabilities | $ | (154 | ) | $ | (71 | ) | |||
Subordinated Notes | 14,000 | 14,198 | |||||||
Deferred income taxes | 103 | — | |||||||
Total liabilities | 13,949 | 14,127 | |||||||
Convertible Preferred Series A stock ($0.001 par value, 40,000,000 shares authorized, 35,500,000 and 35,100,000 shares issued and outstanding, respectively) | 35,500 | 35,100 | |||||||
Stockholders’ deficit | (10,549 | ) | (6,012 | ) | |||||
$ | 38,900 | $ | 43,215 | ||||||
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For the Periods | ||||||||
January 1, | December 1, | |||||||
2005 to | 2004 to | |||||||
December 31, | December 31, | |||||||
2005 | 2004 | |||||||
Net sales | $ | — | $ | — | ||||
Cost of sales | — | — | ||||||
Gross profit | — | — | ||||||
Selling, general and administrative expenses | 59 | — | ||||||
Research and development expenses | — | — | ||||||
Loss from operations | (59 | ) | — | |||||
Interest expense | 2,449 | 202 | ||||||
Equity in earnings of subsidiaries | 4,444 | (5,762 | ) | |||||
Income before income taxes | 1,936 | (5,964 | ) | |||||
Benefit for income taxes | (568 | ) | (71 | ) | ||||
Net income (loss) | $ | 2,504 | $ | (5,893 | ) | |||
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For the Periods | |||||||||||
January 1, | December 1, | ||||||||||
2005 to | 2004 to | ||||||||||
December 31, | December 31, | ||||||||||
2005 | 2004 | ||||||||||
Cash flows from operating activities: | |||||||||||
Net income (loss) | $ | 2,504 | $ | (5,893 | ) | ||||||
Undistributed equity in earnings of subsidiaries | (4,444 | ) | 5,762 | ||||||||
Adjustments to reconcile net loss to cash used in operating activities: | |||||||||||
Amortization and write-off of deferred loan costs | 48 | 4 | |||||||||
Paid-in-kind interest | — | 198 | |||||||||
Amortization of deferred compensation | 59 | — | |||||||||
Provision for deferred taxes | (23 | ) | — | ||||||||
Changes in operating assets and liabilities: | |||||||||||
Accrued expenses and other liabilities | 44 | (71 | ) | ||||||||
Net cash used in continuing operating activities | (1,812 | ) | — | ||||||||
Cash flows from investing activities: | — | — | |||||||||
Cash flows from financing activities: | |||||||||||
Initial contributed capital | — | 26,334 | |||||||||
Proceeds from issuance of subordinated notes | — | 14,000 | |||||||||
Payment of paid-in-kind interest | (198 | ) | — | ||||||||
Proceeds from sale of preferred stock | 400 | — | |||||||||
Payment of debt issuance costs | — | (340 | ) | ||||||||
Change in affiliated debt | 1,610 | (39,994 | ) | ||||||||
Net cash provided by financing activities | 1,812 | — | |||||||||
Increase (decrease) in cash and cash equivalents | — | — | |||||||||
Cash and cash equivalents, beginning of the period | — | — | |||||||||
Cash and cash equivalents, end of period | $ | — | $ | — | |||||||
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II-9
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June 30, | December 31, | ||||||||
2006 | 2005 | ||||||||
Assets | |||||||||
Current assets | $ | — | $ | — | |||||
Other assets | 58 | 287 | |||||||
Investments in subsidiaries | 35,617 | 38,613 | |||||||
$ | 35,675 | $ | 38,900 | ||||||
Liabilities and stockholders’ deficit | |||||||||
Current liabilities: | |||||||||
Accruals and other current liabilities | $ | (1,100 | ) | $ | (154 | ) | |||
Subordinated Notes | 3,200 | 14,000 | |||||||
Deferred income taxes | 102 | 103 | |||||||
Total liabilities | 2,202 | 13,949 | |||||||
Convertible Preferred Series A stock ($0.001 par value, 40,000,000 shares authorized, 35,500,000 shares issued and outstanding) | 35,500 | 35,500 | |||||||
Stockholders’ deficit | (2,027 | ) | (10,549 | ) | |||||
$ | 35,675 | $ | 38,900 | ||||||
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For the Six Months Ended | ||||||||
June 30, 2006 | July 1, 2005 | |||||||
Net sales | $ | — | $ | — | ||||
Cost of sales | — | — | ||||||
Gross profit | — | — | ||||||
Selling, general and administrative expenses | — | 28 | ||||||
Research and development expenses | — | — | ||||||
Loss from operations | — | (28 | ) | |||||
Interest expense | 1,589 | 1,214 | ||||||
Equity in earnings of subsidiaries | 8,001 | 1,968 | ||||||
Income before income taxes | 6,412 | 726 | ||||||
Benefit for income taxes | (488 | ) | (279 | ) | ||||
Net income | $ | 6,900 | $ | 1,005 | ||||
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For the Six Months Ended | |||||||||||
June 30, 2006 | July 1, 2005 | ||||||||||
Cash flows from operating activities: | |||||||||||
Net income | $ | 6,900 | $ | 1,005 | |||||||
Undistributed equity in earnings of subsidiaries | (8,001 | ) | (1,968 | ) | |||||||
Adjustments to reconcile net income to cash used in operating activities: | |||||||||||
Amortization of deferred loan costs | 229 | 24 | |||||||||
Amortization of deferred compensation | — | 28 | |||||||||
Provision for deferred taxes | (25 | ) | (11 | ) | |||||||
Changes in operating assets and liabilities: | |||||||||||
Accrued expenses and other liabilities | (857 | ) | 164 | ||||||||
Net cash used in continuing operating activities | (1,754 | ) | (758 | ) | |||||||
Cash flows from investing activities: | — | — | |||||||||
Cash flows from financing activities: | |||||||||||
Payment of subordinated notes | (10,800 | ) | — | ||||||||
Payment of paid-in-kind interest | — | (198 | ) | ||||||||
Change in affiliate debt | 12,554 | 956 | |||||||||
Net cash provided by financing activities | 1,754 | 758 | |||||||||
Increase (decrease) in cash and cash equivalents | — | — | |||||||||
Cash and cash equivalents, beginning of the period | — | — | |||||||||
Cash and cash equivalents, end of period | $ | — | $ | — | |||||||
II-12
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II-13
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Balance at | ||||||||||||||||
Beginning | Balance at | |||||||||||||||
Reserve for inventory obsolescence: | of Period | Additions | Deductions | End of Period | ||||||||||||
Predecessor-For the year ended December 31, 2003 | $ | 5,089 | $ | 3,033 | $ | (1,309 | ) | $ | 6,813 | |||||||
Predecessor-For the period ended November 30, 2004 | 6,813 | 1,459 | (2,084 | ) | 6,188 | |||||||||||
From Inception (December 1) through December 31, 2004 | 6,188 | 545 | (372 | ) | 6,361 | |||||||||||
For the year ended December 31, 2005 | $ | 6,361 | $ | 2,385 | $ | (1,903 | ) | $ | 6,843 |
Balance at | ||||||||||||||||
Beginning | Balance at | |||||||||||||||
Reserve for uncollectible accounts: | of Period | Additions | Deductions | End of Period | ||||||||||||
Predecessor-For the year ended December 31, 2003 | $ | 2,939 | $ | 730 | $ | (2,053 | ) | $ | 1,616 | |||||||
Predecessor-For the period ended November 30, 2004 | 1,616 | 589 | (772 | ) | 1,433 | |||||||||||
From Inception (December 1) through December 31, 2004 | 1,433 | 135 | (144 | ) | 1,424 | |||||||||||
For the year ended December 31, 2005 | $ | 1,424 | $ | 687 | $ | (314 | ) | $ | 1,797 |
Balance at | ||||||||||||||||
Beginning | Balance at | |||||||||||||||
Income tax assets valuation allowance: | of Period | Additions | Deductions | End of Period | ||||||||||||
Predecessor-For the year ended December 31, 2003 | $ | 10,261 | $ | 7,573 | $ | — | $ | 17,834 | ||||||||
Predecessor-For the period ended November 30, 2004 | 17,834 | 895 | — | 18,729 | ||||||||||||
From Inception (December 1) through December 31, 2004(1) | 18,462 | — | (88 | ) | 18,374 | |||||||||||
For the year ended December 31, 2005 | $ | 18,374 | — | $ | (1,985 | ) | $ | 16,389 |
(1) | The difference between the balance at the end of the period ending November 30, 2004 and the balance at December 1, 2004 is the result of purchase accounting for the Acquisition. |
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Item 17. | Undertakings |
(1) That for purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. | |
(2) That for the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. | |
(3) To provide to the underwriters at the closing specified in the Underwriting Agreement, certificates in such denomination and registered in such names as required by the underwriters to permit prompt delivery to each purchaser. | |
(4) That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, if the Registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness; provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use. | |
(5) That, for the purpose of determining liability of the Registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities, in a primary offering of securities of the undersigned Registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned Registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser: | |
i. Any preliminary prospectus or prospectus of the undersigned Registrant relating to the offering required to be filed pursuant to Rule 424; |
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ii. Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned Registrant or used or referred to by the undersigned Registrant; | |
iii. The portion of any other free writing prospectus relating to the offering containing material information about the undersigned Registrant or its securities provided by or on behalf of the undersigned Registrant; and | |
iv. Any other communication that is an offer in the offering made by the undersigned Registrant to the purchaser. | |
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ALTRA HOLDINGS, INC. |
By: | /s/David Wall |
Name: David Wall | |
Title: Chief Financial Officer |
Signature | Title | |||
/s/Michael L. Hurt | Chief Executive Officer and Director (principal executive officer) | |||
/s/David Wall | Chief Financial Officer (principal financial officer and principal accounting officer) | |||
/s/Frank E. Bauchiero* | Director | |||
/s/Jean-Pierre L. Conte* | Director | |||
/s/Darren J. Gold* | Director | |||
/s/Larry McPherson* | Director | |||
/s/Richard D. Paterson* | Director | |||
* /s/David Wall as attorney-in-fact |
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Number | Description | |||
1 | .1+ | Form of Underwriting Agreement | ||
2 | .1(1) | LLC Purchase Agreement, dated as of October 25, 2004, among Warner Electric Holding, Inc., Colfax Corporation and Registrant | ||
2 | .2(1) | Assignment and Assumption Agreement, dated as of November 21, 2004, between Registrant and Altra Industrial Motion, Inc. | ||
2 | .3(2) | Share Purchase Agreement, dated as of November 7, 2005, among Altra Industrial Motion, Inc. and the stockholders of Hay Hall Holdings Limited listed therein | ||
2 | .4* | Asset Purchase Agreement, dated May 18, 2006, among Warner Electric LLC, Bear Linear LLC and the other guarantors listed therein | ||
3 | .1+ | Amended and Restated Certificate of Incorporation of the Registrant, to be in effect upon the consummation of the offering | ||
3 | .2+ | Amended and Restated Bylaws of the Registrant, to be in effect upon the consummation of the offering | ||
4 | .1* | Amended and Restated Registration Rights Agreement, dated January 6, 2005, among Registrant, Genstar Capital Partners II, L.P., Stargen III, L.P. and Caisse de dépôt et Placement du Québec | ||
4 | .2(1) | Indenture, dated as of November 30, 2004, among Altra Industrial Motion, Inc., the Guarantors party thereto and The Bank of New York Trust Company, N.A. as trustee | ||
4 | .3(3) | First Supplemental Indenture, dated as of February 7, 2006, among Altra Industrial Inc., the guarantors party thereto, and The Bank of New York Trust Company, N.A. as trustee | ||
4 | .4(2) | Second Supplemental Indenture, dated as of February 8, 2006, among Altra Industrial Inc., the guarantors party thereto, and The Bank of New York Trust Company, N.A. as trustee | ||
4 | .5(3) | Third Supplemental Indenture, dated as of April 24, 2006, among Altra Industrial Inc., the guarantors party thereto, and The Bank of New York Trust Company, N.A. as trustee | ||
4 | .6(1) | Form of 9% Senior Secured Notes due 2011 (included in Exhibit 4.1) | ||
4 | .7(1) | Registration Rights Agreement, dated as of November 30, 2004, among Altra Industrial Motion, Inc., Jefferies & Company, Inc., and the Subsidiary Guarantors party thereto | ||
4 | .8(2) | Indenture, dated as of February 8, 2006, among Altra Industrial Motion Inc. the guarantors party thereto, the Bank of New York, as trustee and paying agent and the Bank of New York (Luxembourg) SA, as Luxembourg paying agent | ||
4 | .9(3) | First Supplemental Indenture, dated as of April 24, 2006, among Altra Industrial Inc., the guarantors party thereto, and The Bank of New York as trustee | ||
4 | .10(2) | Form of 111/4% Senior Notes due 2013 | ||
4 | .11(2) | Registrants Rights Agreement, dated as of February 8, 2006, among Altra Industrial Inc., the guarantors party thereto, and Jefferies International Limited, as initial purchasers | ||
4 | .12* | Note Purchase Agreement, dated November 30, 2004, between Registrant and Caisse de dépôt et Placement du Québec | ||
4 | .13* | Form of Caisse de dépôt et Placement du Québec Note, due November 30, 2019 | ||
4 | .14 | Stockholders Agreement, dated January 6, 2005, among the Registrant and the stockholders listed therein | ||
4 | .15 | First Amendment to the Amended and Restated Stockholders Agreement, dated May 1, 2005, among the Registrant and the stockholders listed therein. | ||
5 | .1+ | Opinion of Weil, Gotshal Manges LLP | ||
10 | .1(1) | Credit Agreement, dated as of November 30, 2004, among Altra Industrial Motion, Inc. and certain subsidiaries of the Company, as Guarantors, the financial institutions listed therein, as Lenders, and Wells Fargo Bank, as Lead Arranger | ||
10 | .2(1) | Security Agreement, dated as of November 30, 2004, among Altra Industrial Motion, Inc., the other Grantors listed therein and The Bank of New York Trust Company, N.A. |
Table of Contents
Number | Description | |||
10 | .3(1) | Patent Security Agreement, dated as of November 30, 2004, among Kilian Manufacturing Corporation, Warner Electric Technology LLC, Formsprag LLC, Boston Gear LLC, Ameridrives International, L.P. and The Bank of New York Trust Company, N.A. | ||
10 | .4(1) | Trademark Security Agreement, dated as of November 30, 2004, among Warner Electric Technology LLC, Boston Gear LLC and The Bank of New York Trust Company, N.A. | ||
10 | .5(1) | Intercreditor and Lien Subordination Agreement, dated as of November 30, 2004, among Wells Fargo Foothill, Inc., The Bank of New York Trust Company, N.A. and Altra Industrial Motion, Inc. | ||
10 | .6(1) | Agreement, dated as of October 24, 2004, between Ameridrives International, L.P. and United Steel Workers of America Local 3199-10 | ||
10 | .7(1) | Labor Agreement, dated as of August 9, 2004, between Warner Electric LLC (formerly Warner Electric Inc.) and International Association of Machinists and Aerospace Works, AFL-CIO, and Aeronautical Industrial District Lode 776, Local Lodge 2771 | ||
10 | .8* | Labor Agreement, dated May 17, 2006, between Warner Electric LLC and United Steelworkers and Local Union No. 3245 | ||
10 | .9* | Labor Agreement, dated June 6, 2005, between Formsprag LLC and UAW Local 155 | ||
10 | .10(1) | Employment Agreement, dated as of January 6, 2005, between Altra Industrial Motion, Inc. and Michael L. Hurt | ||
10 | .11(1) | Employment Agreement, dated as of January 6, 2005, between Altra Industrial Motion, Inc. and Carl Christenson | ||
10 | .12(1) | Employment Agreement, dated as of January 12, 2005, between Altra Industrial Motion, Inc. and David Wall | ||
10 | .13(1) | Registrant’s 2004 Equity Incentive Plan | ||
10 | .14* | Amendment to Registrant’s 2004 Equity Incentive Plan | ||
10 | .15(1) | Form of Registrant’s Restricted Stock Award Agreement | ||
10 | .16* | Subscription Agreement, dated November 30, 2004, among Registrant, the preferred purchasers and the common purchasers as listed therein | ||
10 | .17(1) | Advisory Services Agreement, dated as of November 30, 2004, among Registrant, Altra Industrial Motion, Inc. and Genstar Capital, L.P. | ||
10 | .18(1) | Transition Services Agreement, dated as of November 30, 2004, among Warner Electric Holding, Inc., Colfax Corporation and Altra Industrial Motion, Inc. | ||
10 | .19(1) | Trademarks and Technology License Agreement, dated November 30, 2004, among Registrant, Colfax Corporation and Altra Industrial Motion, Inc. | ||
11 | .1 | Statement of Computation of Earnings Per Share (required information contained within this Form S-1) | ||
21 | .1* | Subsidiaries of Registrant | ||
23 | .1 | Consent of Ernst & Young LLP, independent registered public accounting firm | ||
23 | .2 | Consent of BDO Stoy Hayward LLP, independent chartered accountants | ||
23 | .3+ | Consent of Weil, Gotshal & Manges LLP (included in Exhibit 5.1) | ||
24 | .1* | Power of Attorney |
(1) | Incorporated by reference to Altra Industrial Motion, Inc.’s Registration Statement on Form S-4 (File No. 333-124944) filed with the Securities and Exchange Commission on May 16, 2005. |
(2) | Incorporated by reference to Altra Industrial Motion, Inc.’s Current Report on Form 8-K (File No. 333-124944) filed with the Securities and Exchange Commission on February 14, 2006. |
(3) | Incorporated by reference to Altra Industrial Motion, Inc.’s Annual Report on Form 10-K (File No. 333-124944) filed with the Securities and Exchange Commission on May 15, 2006. |
+ | To be filed by amendment |
* | Filed previously |