Exhibit 99.1
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended November 30, | ||||||||
2008 | 2007 | |||||||
Net sales |
$ | 379,980 | $ | 415,143 | ||||
Cost of products sold |
248,088 | 274,309 | ||||||
Gross profit |
131,892 | 140,834 | ||||||
Selling, administrative and engineering expenses |
76,218 | 81,296 | ||||||
Restructuring charge |
| 5,521 | ||||||
Impairment charge |
26,553 | | ||||||
Amortization of intangible assets |
4,457 | 3,257 | ||||||
Operating profit |
24,664 | 50,760 | ||||||
Financing costs, net |
12,235 | 9,300 | ||||||
Other income, net |
(534 | ) | (1,110 | ) | ||||
Earnings before income tax expense and minority interest |
12,963 | 42,570 | ||||||
Income tax expense |
1,370 | 15,149 | ||||||
Minority interest, net of income taxes |
(5 | ) | (6 | ) | ||||
Net earnings |
$ | 11,598 | $ | 27,427 | ||||
Earnings per share: |
||||||||
Basic |
$ | 0.21 | $ | 0.49 | ||||
Diluted |
$ | 0.19 | $ | 0.43 | ||||
Weighted average common shares outstanding: |
||||||||
Basic |
56,022 | 55,609 | ||||||
Diluted |
64,395 | 64,654 |
See accompanying Notes to Condensed Consolidated Financial Statements
1
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
(unaudited)
November 30, 2008 |
August 31, 2008 |
|||||||
ASSETS | ||||||||
Current Assets |
||||||||
Cash and cash equivalents |
$ | 30,218 | $ | 122,549 | ||||
Accounts receivable, net |
211,576 | 226,564 | ||||||
Inventories, net |
223,450 | 215,391 | ||||||
Deferred income taxes |
11,729 | 11,870 | ||||||
Prepaid expenses and other current assets |
15,901 | 16,092 | ||||||
Total Current Assets |
492,874 | 592,466 | ||||||
Property, Plant and Equipment |
||||||||
Land, buildings, and improvements |
59,931 | 48,496 | ||||||
Machinery and equipment |
246,038 | 254,262 | ||||||
Gross property, plant and equipment |
305,969 | 302,758 | ||||||
Less: Accumulated depreciation |
(164,769 | ) | (168,208 | ) | ||||
Property, Plant and Equipment, net |
141,200 | 134,550 | ||||||
Goodwill |
698,446 | 639,862 | ||||||
Other Intangibles, net |
381,749 | 292,359 | ||||||
Other Long-term Assets |
13,512 | 9,145 | ||||||
Total Assets |
$ | 1,727,781 | $ | 1,668,382 | ||||
LIABILITIES AND SHAREHOLDERS EQUITY | ||||||||
Current Liabilities |
||||||||
Short-term borrowings |
$ | | $ | 339 | ||||
Trade accounts payable |
145,426 | 166,863 | ||||||
Accrued compensation and benefits |
33,189 | 59,023 | ||||||
Income taxes payable |
24,136 | 24,867 | ||||||
Current maturities of long-term debt |
4,336 | | ||||||
Other current liabilities |
66,829 | 60,033 | ||||||
Total Current Liabilities |
273,916 | 311,125 | ||||||
Long-term Debt, less Current Maturities |
696,049 | 573,818 | ||||||
Deferred Income Taxes |
125,152 | 99,634 | ||||||
Pension and Postretirement Benefit Liabilities |
25,902 | 27,641 | ||||||
Other Long-term Liabilities |
26,062 | 26,658 | ||||||
Shareholders Equity |
||||||||
Class A common stock, $0.20 par value per share, authorized 84,000,000 shares, issued and outstanding 56,382,000 and 56,002,228 shares, respectively |
11,276 | 11,200 | ||||||
Additional paid-in capital |
(318,627 | ) | (324,898 | ) | ||||
Retained earnings |
947,641 | 936,055 | ||||||
Accumulated other comprehensive (loss) income |
(59,590 | ) | 7,149 | |||||
Stock held in trust |
(2,336 | ) | (2,081 | ) | ||||
Deferred compensation liability |
2,336 | 2,081 | ||||||
Total Shareholders Equity |
580,700 | 629,506 | ||||||
Total Liabilities and Shareholders Equity |
$ | 1,727,781 | $ | 1,668,382 | ||||
See accompanying Notes to Condensed Consolidated Financial Statements
2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended November 30, |
||||||||
2008 | 2007 | |||||||
Operating Activities |
||||||||
Net earnings |
$ | 11,598 | $ | 27,427 | ||||
Adjustments to reconcile net earnings to cash provided by operating activities: |
||||||||
Depreciation and amortization |
12,747 | 10,464 | ||||||
Stock-based compensation expense |
1,537 | 1,603 | ||||||
Deferred income tax (benefit) provision |
(10,360 | ) | 6,220 | |||||
Impairment charge |
26,553 | | ||||||
Other |
63 | 192 | ||||||
Changes in components of working capital and other: |
||||||||
Accounts receivable |
4,974 | (22,767 | ) | |||||
Accounts receivable securitization |
483 | 4,924 | ||||||
Inventories |
(5,332 | ) | (7,024 | ) | ||||
Prepaid expenses and other assets |
(38 | ) | 948 | |||||
Trade accounts payable |
(19,683 | ) | 238 | |||||
Income taxes payable |
1,895 | 2,452 | ||||||
Accrued compensation and benefits |
(21,074 | ) | (8,298 | ) | ||||
Other accrued liabilities |
9,155 | 12,345 | ||||||
Net cash provided by operating activities |
12,518 | 28,724 | ||||||
Investing Activities |
||||||||
Proceeds from sale of property, plant and equipment |
94 | 8,321 | ||||||
Capital expenditures |
(7,634 | ) | (9,036 | ) | ||||
Cash paid for business acquisitions, net of cash acquired |
(231,768 | ) | (47,437 | ) | ||||
Net cash used in investing activities |
(239,308 | ) | (48,152 | ) | ||||
Financing Activities |
||||||||
Net borrowings on revolver and other debt |
187,995 | 134 | ||||||
Principal repayments on term loans |
(155,000 | ) | (994 | ) | ||||
Proceeds from issuance of term loans |
115,000 | | ||||||
Debt issuance costs |
(5,333 | ) | | |||||
Cash dividend |
(2,251 | ) | (2,221 | ) | ||||
Stock option exercises, related tax benefits, and other |
2,479 | 2,013 | ||||||
Net cash provided by (used in) financing activities |
142,890 | (1,068 | ) | |||||
Effect of exchange rate changes on cash |
(8,431 | ) | 2,557 | |||||
Net decrease in cash and cash equivalents |
(92,331 | ) | (17,939 | ) | ||||
Cash and cash equivalents beginning of period |
122,549 | 86,680 | ||||||
Cash and cash equivalents end of period |
$ | 30,218 | $ | 68,741 | ||||
See accompanying Notes to Condensed Consolidated Financial Statements
3
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
Note 1. Basis of Presentation
The accompanying unaudited Condensed Consolidated Financial Statements of Actuant Corporation (Actuant, or the Company) have been prepared in accordance with generally accepted accounting principles for interim financial reporting, and with the instructions of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The condensed consolidated balance sheet data as of August 31, 2008 was derived from the Companys audited financial statements, but does not include all disclosures required by generally accepted accounting principles. The Companys significant accounting policies are disclosed in its fiscal 2008 Annual Report on Form 10-K. For additional information, refer to the consolidated financial statements and related footnotes in the Companys fiscal 2008 Annual Report on Form 10-K.
In the opinion of management, all adjustments considered necessary for a fair presentation of financial results have been made. Such adjustments consist of only those of a normal recurring nature. Prior year amounts have been reclassified where appropriate to conform to current year presentations. During the second quarter of 2009, the Companys financial reporting segments were modified to reflect changes in the portfolio of businesses, due to acquisitions, as well as, changes in business reporting lines. All amounts and disclosures in these financial statements have been adjusted to reflect the current reportable segments: Industrial, Energy, Electrical and Engineered Solutions. Operating results for the three months ended November 30, 2008 are not necessarily indicative of the results that may be expected for the entire fiscal year ending August 31, 2009.
New Accounting Pronouncements
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. SFAS No. 157 provides a common definition of fair value and establishes a framework to make the measurement of fair value in generally accepted accounting principles more consistent and comparable. SFAS No. 157 also requires expanded disclosures to provide information about the extent to which fair value is used to measure assets and liabilities, the methods and assumptions used to measure fair value, and the effect of fair value measures on earnings. The Company adopted SFAS No. 157 on September 1, 2008; see Note 9, Fair Value Measurement for disclosures required under SFAS No. 157. The Company has not adopted SFAS No. 157 for non-financial assets and liabilities as permitted by FASB Staff Position No. FAS 157-2, which provides a deferral of such provisions until the Companys 2010 fiscal year.
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities Including an Amendment of FASB Statement No. 115. This standard permits an entity to choose to measure many financial instruments and certain other items at fair value. The fair value option permits a company to choose to measure eligible items at fair value at specified election dates. A company will report unrealized gains and losses on items for which the fair value option has been elected in earnings after adoption. The adoption of SFAS No. 159 on September 1, 2008 did not have any impact on the Companys consolidated results of operations, financial position or cash flows.
In December 2007, the FASB issued SFAS No. 141 (Revised 2007), Business Combinations. The objective of SFAS No. 141(R) is to improve the information provided in financial reports about a business combination and its effects. SFAS No. 141(R) requires an acquirer to recognize the assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree at the acquisition date, measured at their fair values as of that date. SFAS No. 141(R) also requires the acquirer to recognize and measure the goodwill acquired in a business combination or a gain from a bargain purchase and how to evaluate the nature and financial effects of the business combination. SFAS No. 141(R) is effective for the Companys 2010 fiscal year. This standard will change the Companys accounting treatment for business combinations on a prospective basis, when adopted.
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activitiesan amendment of FASB Statement No. 133. SFAS No. 161 is intended to improve financial reporting by requiring transparency about the nature, purpose, location and amounts of derivative instruments in an entitys financial statements; how derivative instruments and related hedged items are accounted for under SFAS No 133; and how derivative instruments and related hedged items affect its financial position, financial performance and cash flows. SFAS No. 161 will be effective for the Company beginning in the second quarter of fiscal 2009. The adoption of SFAS No. 161 is not expected to have a significant impact on the Companys consolidated financial statements.
Note 2. Acquisitions
The Company completed one business acquisition during the first quarter of fiscal 2009 and two during the fiscal year ended August 31, 2008, all of which resulted in the recognition of goodwill in the Companys Condensed Consolidated Financial Statements. The Company is continuing to evaluate the initial purchase price allocations for acquisitions completed within the past 12 months, and will adjust the allocations as additional information relative to the fair values of the assets and liabilities of the acquired businesses become known.
On September 26, 2008, the Company completed the acquisition of the stock of The Cortland Companies (Cortland) for approximately $231.0 million in cash, net of cash acquired. Headquartered in Cortland, New York, Cortland is a global designer, manufacturer and distributor of custom-engineered electro-mechanical cables and umbilicals, high performance synthetic ropes and value-added steel cable assemblies. The majority of the Cortland businesses are included in the Energy segment while the steel
4
cable assembly business (Sanlo) is included in the Other product line within the Engineered Solutions segment. The preliminary purchase price allocation resulted in $115.0 million assigned to goodwill (a portion of which is deductible for tax purposes), $19.7 million to tradenames, $2.3 million to non-compete agreements, $3.4 million to patents and $89.2 million to customer relationships. The amounts assigned to non-compete agreements, patents and customer relationships are being amortized over 4, 8 and 15 years, respectively.
On March 3, 2008, the Company acquired Superior Plant Services, LLC, (SPS) for approximately $57.7 million of cash. Headquartered in Terrytown, Louisiana, SPS is a specialized maintenance services company serving the North American oil & gas and nuclear power industries. Its services include field machining, flange weld testing, line isolation, bolting, heat treating and metal disintegration. SPS is included in the Energy segment. The purchase price allocation resulted in $22.9 million assigned to goodwill (which is deductible for tax purposes), $0.2 million to trademarks, $1.5 million to non-compete agreements and $25.3 million to customer relationships. The amounts assigned to trademarks, non-compete agreements and customer relationships are being amortized over 1, 5 and 15 years, respectively.
On September 13, 2007, the Company acquired Templeton, Kenly & Co, Inc. (TK) for approximately $47.3 million of cash. Headquartered in Broadview, Illinois, TK manufactures hydraulic pumps and tools, mechanical jacks, wrenches and actuators. TK is included in the Industrial segment. The purchase price allocation resulted in $14.4 million assigned to goodwill (which is deductible for tax purposes), $1.7 million to tradenames, $0.3 million to non-compete agreements, $0.3 to patents and $19.2 million to customer relationships. The amounts assigned to non-compete agreements, patents and customer relationships are being amortized over 3, 5 and 15 years, respectively.
The following unaudited pro forma results of operations of the Company for the three months ended November 30, 2008 and 2007, respectively, give effect to these three acquisitions as though the transactions and related financing activities had occurred on September 1, 2007 (in thousands, except per share amounts):
Three Months Ended | ||||||
November 30, 2008 |
November 30, 2007 | |||||
Net sales |
||||||
As reported |
$ | 379,980 | $ | 415,143 | ||
Pro forma |
384,079 | 443,723 | ||||
Net earnings |
||||||
As reported |
$ | 11,598 | $ | 27,427 | ||
Pro forma |
10,968 | 25,853 | ||||
Basic earnings per share |
||||||
As reported |
$ | 0.21 | $ | 0.49 | ||
Pro forma |
0.20 | 0.46 | ||||
Diluted earnings per share |
||||||
As reported |
$ | 0.19 | $ | 0.43 | ||
Pro forma |
0.18 | 0.41 |
Note 3. Restructuring
The Company initiated plans to restructure its European Electrical business (Electrical segment) during fiscal 2006. These plans were designed to reduce operating costs and improve profitability. The Company completed the restructuring activities in the second quarter of fiscal 2008, at a cumulative pre-tax cost of $20.8 million. A rollforward of the European Electrical restructuring reserve is as follows (in thousands):
Accrued restructuring costs as of August 31, 2008 |
$ | 5,063 | ||
Cash payments |
(212 | ) | ||
Impact of changes in foreign currency rates |
(662 | ) | ||
Accrued restructuring costs as of November 30, 2008 |
$ | 4,189 | ||
The remaining $4.2 million of accrued restructuring costs at November 30, 2008 primarily represent severance costs and a reserve for minimum lease payments related to exited facilities. All remaining severance costs will be paid during fiscal 2009 while the facility costs will be paid over the term of the lease.
5
Note 4. Accounts Receivable Securitization
The Company maintains an accounts receivable securitization program whereby it sells certain of its trade accounts receivable to a wholly owned, bankruptcy-remote special purpose subsidiary which, in turn, sells participating interests in its pool of receivables to a third-party financial institution (the Purchaser). The Purchaser receives an ownership and security interest in the pool of receivables. New receivables are purchased by the special purpose subsidiary and participation interests are resold to the Purchaser as collections reduce previously sold participation interests. The Company has retained collection and administrative responsibilities on the participation interests sold. The Purchaser has no recourse against the Company for uncollectible receivables; however, the Companys retained interest in the receivable pool is subordinate to the Purchaser and is recorded at fair value. Due to a short average collection cycle of approximately 60 days for such accounts receivable and the Companys collection history, the fair value of the Companys retained interest approximates book value. Book value of accounts receivable in the accompanying Condensed Consolidated Balance Sheet is comprised of the gross accounts receivable retained interest less a reserve for doubtful accounts, which is calculated based on a review of the specific receivable issues and supplemented by a general reserve based on past collection history. The retained interest recorded at November 30, 2008 and August 31, 2008 was $44.0 million and $47.7 million, respectively, and is included in accounts receivable, net in the accompanying Condensed Consolidated Balance Sheets. The securitization program, which has a final maturity date in September 2009, was amended in December 2008 to decrease available capacity from $65.0 million to $60.0 million. Trade accounts receivables sold and being serviced by the Company totaled $53.4 million and $52.9 million at November 30, 2008 and August 31, 2008, respectively.
Sales of trade receivables from the special purpose subsidiary totaled $111.2 million and $114.0 million for the three months ended November 30, 2008 and 2007, respectively. Cash collections of trade accounts receivable balances in the total receivable pool (including both sold and retained portions) totaled $187.1 million and $196.1 million for the three months ended November 30, 2008 and 2007, respectively.
The accounts receivables securitization program is accounted for as a sale in accordance with FASB Statement No. 140 Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities A Replacement of FASB Statement No. 125. Sales of trade receivables are reflected as a reduction of accounts receivable in the accompanying Condensed Consolidated Balance Sheets and the proceeds received are included in cash flows from operating activities in the accompanying Condensed Consolidated Statements of Cash Flows.
The following table provides additional information about delinquencies and net credit losses for trade accounts receivable subject to the accounts receivable securitization program (in thousands).
Balance Outstanding | Balance Outstanding 60 Days or More Past Due |
Net Credit Losses Three Months Ended | ||||||||||||||||
November 30, 2008 |
August 31, 2008 |
November 30, 2008 |
August 31, 2008 |
November 30, 2008 |
November 30, 2007 | |||||||||||||
Trade accounts receivable subject to securitization program |
$ | 97,429 | $ | 100,603 | $ | 6,514 | $ | 8,251 | $ | 565 | $ | 485 | ||||||
Trade accounts receivable balances sold |
53,426 | 52,943 | ||||||||||||||||
Retained interest |
$ | 44,003 | $ | 47,660 | ||||||||||||||
Accounts receivable financing costs of $0.4 million and $0.6 million for the three months ended November 30, 2008 and 2007, respectively, are included in financing costs in the accompanying Condensed Consolidated Statements of Earnings.
Note 5. Goodwill and Other Intangible Assets
The Companys goodwill is tested for impairment annually, or more frequently if events or changes in circumstances indicate that goodwill might be impaired. The Company performs impairment reviews for its reporting units using the discounted cash flow method based on managements judgments and assumptions. The estimated fair value of the reporting unit is compared to the carrying amount of the reporting unit, including goodwill. If the carrying value of the reporting unit exceeds its fair value, the goodwill of the reporting unit is potentially impaired and the Company then determines the implied fair value of goodwill, which is compared to the carrying value of goodwill to determine if impairment exists.
Indefinite lived intangible assets are also subject to an annual impairment test. On an annual basis, or more frequently if events or changes in circumstances indicate that the asset might be impaired, the fair value of the indefinite lived intangible assets are evaluated by the Company to determine if an impairment charge is required.
The Company also reviews long-lived assets for impairment when events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. If such indicators are present, the Company performs an undiscounted operating cash flow analyses to determine if an impairment exists. If an impairment is determined to exist, any related impairment loss is calculated based on the estimated fair value of the long-lived assets.
6
Significant adverse developments in the recreational vehicle (RV) market in the first quarter of fiscal 2009 have had a dramatic effect on the operations of the RV reporting unit (included in the Engineered Solutions segment). The financial results for the RV reporting unit have been negatively impacted by lower wholesale motorhome shipments by OEMs, decreased consumer confidence and the lack of financing as a result of the continued global credit crisis. These factors caused us to significantly reduce projected sales, operating profits and cash flows of the RV reporting unit, and resulted in a $26.6 million non-cash asset impairment charge during the three months ended November 30, 2008. The asset impairment charge includes a goodwill impairment charge of $22.2 million and, as a result, there is no remaining goodwill in the RV reporting unit at November 30, 2008. In addition, a $0.8 million impairment was recognized related to indefinite lived intangibles (tradenames) of the RV reporting unit. Due to the existing impairment indicators, management assessed the recoverability of the RV reporting units fixed assets and amortizable intangible assets (customer relationships, patents and trademarks). An impairment charge of $3.6 million was recognized for the difference between the fair value and carrying value of such assets during the three months ended November 30, 2008.
A considerable amount of management judgment and assumptions are required in performing the impairment tests and in measuring the fair value of goodwill, indefinite lived intangibles and long-lived assets. While the Company believes its judgments and assumptions are reasonable, different assumptions could change the estimated fair values or the amount of the recognized impairment losses.
The changes in the carrying amount of goodwill for the three months ended November 30, 2008 are as follows (in thousands):
Industrial | Energy | Electrical | Engineered Solutions |
Total | ||||||||||||||||
Balance as of August 31, 2008 |
$ | 65,337 | $ | 133,157 | $ | 214,407 | $ | 226,961 | $ | 639,862 | ||||||||||
Business acquired |
| 90,978 | | 24,045 | 115,023 | |||||||||||||||
Purchase accounting adjustments |
| 260 | | 750 | 1,010 | |||||||||||||||
Impairment charges |
| | | (22,205 | ) | (22,205 | ) | |||||||||||||
Impact of changes in foreign currency rates |
(2,387 | ) | (23,350 | ) | (4,835 | ) | (4,672 | ) | (35,244 | ) | ||||||||||
Balance as of November 30, 2008 |
$ | 62,950 | $ | 201,045 | $ | 209,572 | $ | 224,879 | $ | 698,446 | ||||||||||
The gross carrying amount and accumulated amortization of the Companys intangible assets that have defined useful lives and are subject to amortization are as follows (in thousands):
November 30, 2008 | August 31, 2008 | |||||||||||||||||
Gross Carrying Amount |
Accumulated Amortization |
Net Book Value |
Gross Carrying Amount |
Accumulated Amortization |
Net Book Value | |||||||||||||
Customer relationships |
$ | 240,910 | $ | 26,972 | $ | 213,938 | $ | 163,956 | $ | 24,529 | $ | 139,427 | ||||||
Patents |
46,701 | 23,371 | 23,330 | 44,200 | 21,289 | 22,911 | ||||||||||||
Trademarks |
6,409 | 4,794 | 1,615 | 6,556 | 3,640 | 2,916 | ||||||||||||
Non-compete agreements |
5,837 | 1,857 | 3,980 | 3,914 | 1,784 | 2,130 | ||||||||||||
Other |
611 | 338 | 273 | 656 | 318 | 338 | ||||||||||||
$ | 300,468 | $ | 57,332 | $ | 243,136 | $ | 219,282 | $ | 51,560 | $ | 167,722 | |||||||
The gross carrying amount of the Companys intangible assets that have indefinite lives and are not subject to amortization as of November 30, 2008 and August 31, 2008 are $138.6 million and $124.7 million, respectively. These assets are comprised of acquired tradenames.
Amortization expense recorded on the intangible assets listed above was $4.5 million and $3.3 million for the three months ended November 30, 2008 and 2007, respectively. The Company estimates that amortization expense will approximate $15.4 million for the remainder of the fiscal year ending August 31, 2009. Amortization expense for future years is estimated to be as follows: $20.3 million in fiscal 2010, $19.9 million in fiscal 2011, $19.6 million in 2012, $18.4 million in fiscal 2013 and $149.6 million thereafter. These future amortization expense amounts represent estimates, which may change based on future acquisitions or changes in foreign currency exchange rates.
7
Note 6. Product Warranty Costs
The Company recognizes the cost associated with its product warranties at the time of sale. The amount recognized is based on historical claims rates and current claim cost experience. The following is a reconciliation of the changes in accrued product warranty (in thousands):
Three Months Ended November 30, |
||||||||
2008 | 2007 | |||||||
Beginning balance |
$ | 9,309 | $ | 10,070 | ||||
Warranty reserves of acquired business |
278 | 72 | ||||||
Provision for warranties |
2,652 | 3,420 | ||||||
Warranty payments and costs incurred |
(2,180 | ) | (2,450 | ) | ||||
Impact of changes in foreign currency rates |
(527 | ) | 308 | |||||
Ending balance |
$ | 9,532 | $ | 11,420 | ||||
Note 7. Debt
The following is a summary of the Companys long-term indebtedness (in thousands):
November 30, 2008 |
August 31, 2008 | ||||||
Senior Credit Facility: |
|||||||
Commercial paper borrowings |
$ | 33,215 | $ | | |||
Revolver |
153,008 | | |||||
Term loan |
115,000 | 155,000 | |||||
6.875% Senior notes |
249,162 | 249,137 | |||||
Fair value of cross currency interest rate swap |
| 19,681 | |||||
Sub-totalSenior indebtedness |
550,385 | 423,818 | |||||
Convertible subordinated debentures (2% Convertible Notes) |
150,000 | 150,000 | |||||
Total debt, excluding short-term borrowings |
700,385 | 573,818 | |||||
Less: current maturities of long-term debt |
(4,336 | ) | | ||||
Total long-term debt, less current maturities |
$ | 696,049 | $ | 573,818 | |||
On November 10, 2008, the Company amended and extended its existing Senior Credit Facility, extending the maturity to November 10, 2011 and increasing total capacity by $110 million. The amended Senior Credit Facility provides for a $400 million revolving credit facility, a $115 million term loan, and an optional $300 million expansion feature. The term loan initially bears interest at LIBOR plus 2.5% (4.313% at November 30, 2008), while borrowings under the revolver bear interest at either LIBOR plus a borrowing spread of 2.5% (aggregating 4.313% at November 30, 2008) or a base borrowing rate of prime plus 1.25% (aggregating 5.250% at November 30, 2008). The term loan will be repaid in eight quarterly installments of $1.4 million beginning March 31, 2009 through December 31, 2010, and four quarterly payments of $25.9 million beginning March 31, 2011. All amended Senior Credit Facility borrowings are subject to a pricing grid, which can result in increases or decreases to the borrowing spread on a quarterly basis, depending on the Companys debt to EBIDTA leverage ratios. In addition, a non-use fee is payable quarterly on the average unused credit line under the revolver. At November 30, 2008, the non-use fee was 0.40%. The amended Senior Credit Facility contains customary limits and restrictions concerning investments, sales of assets, liens on assets, fixed charge coverage ratios, maximum leverage, dividends and other restricted payments. As of November 30, 2008, the Company was in compliance with all debt covenants.
There were $33.2 million of commercial paper borrowings outstanding at November 30, 2008. Total commercial paper outstanding cannot exceed $100.0 million under the terms of the amended Senior Credit Facility. Since the revolver provides the liquidity backstop for outstanding commercial paper, the combined outstanding balance of the revolver and any outstanding commercial paper cannot exceed $400.0 million. The unused and available credit line under the revolver at November 30, 2008 was approximately $213.8 million.
On June 12, 2007, the Company issued $250.0 million of 6.875% Senior Notes (the Senior Notes) at an approximate $1.0 million discount, generating net proceeds of $249.0 million. The Senior Notes were issued at a price of 99.607% to yield 6.93%, and require no principal installments prior to their June 15, 2017 maturity. The approximate $1.0 million initial issuance discount is being amortized through interest expense over the 10 year life of the Senior Notes.
8
In November 2003, the Company issued $150.0 million of Senior Subordinated Convertible Debentures due November 15, 2023 (the 2% Convertible Notes). The 2% Convertible Notes bear interest at a rate of 2.0% annually which is payable on November 15 and May 15 of each year. Beginning with the six-month interest period commencing November 15, 2010, holders will receive contingent interest if the trading price of the 2% Convertible Notes equals or exceeds 120% of their underlying principal amount over a specified trading period. If payable, the contingent interest shall equal 0.25% of the average trading price of the 2% Convertible Notes during the five days immediately preceding the applicable six-month interest periods. The Company has the right to force conversion of all or part of the 2% Convertible Notes on or after November 20, 2010. The 2% Convertible Notes are convertible into shares of the Companys Class A common stock at a conversion rate of 50.1126 shares per $1,000 of principal amount, which equals a conversion price of approximately $19.96 per share (subject to adjustment).
In November 2008, the Company terminated its then existing cross-currency interest rate swap agreement (the swap agreement). At August 31, 2008 the fair value of the swap agreement was a $19.7 million liability, which was included in long-term debt in the accompanying Consolidated Balance Sheets. As a result of the strengthening of the U.S. dollar since August 31, 2008, the Company received $2.1 million of cash from the counterparties upon termination of the swap agreement.
Note 8. Employee Benefit Plans
The Company provides pension benefits to certain employees of acquired domestic businesses, that were entitled to those benefits prior to acquisition, or existing and former employees of foreign businesses. Most of the U.S. defined benefit pension plans are frozen, and as a result, the majority of the plan participants no longer earn additional benefits, while most non-U.S. defined benefit plans continue to earn benefits. The following table provides detail on the Companys net periodic benefit costs for the three months ended November 30 (in thousands):
Non-U.S Pension Plans | U.S Pension Plans | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
Service cost |
$ | 128 | $ | 122 | $ | | $ | 21 | ||||||||
Interest cost |
389 | 355 | 601 | 563 | ||||||||||||
Expected return on assets |
(143 | ) | (80 | ) | (716 | ) | (702 | ) | ||||||||
Amortization of actuarial loss |
1 | 1 | 19 | 2 | ||||||||||||
Net periodic benefit cost (credit) |
$ | 375 | $ | 398 | $ | (96 | ) | $ | (116 | ) | ||||||
The Company anticipates contributing $0.2 million to U.S. pension plans and $1.3 million to non-U.S. pension plans in fiscal 2009.
Note 9. Fair Value Measurement
The Company adopted SFAS No. 157 on September 1, 2008, which requires expanded disclosure for financial assets and liabilities measured at fair value. The Company assesses the inputs used to measure fair value using a three-tier hierarchy. Level 1 inputs include quoted prices for identical instruments and are the most observable. Level 2 inputs include quoted prices for similar assets and observable inputs such as interest rates, foreign currency exchange rates, commodity rates and yield curves. Level 3 inputs are not observable in the market and include managements own judgments about the assumptions market participants would use in pricing the asset or liability. At November 30, 2008, the financial assets and liabilities included in the Condensed Consolidated Balance Sheet that are measured at fair value, on a recurring basis, include cash equivalents of $0.4 million (Level 1), investments of $1.1 million (Level 1) and a liability for the fair value of derivative instruments of $1.8 million (Level 2). The Company has no financial assets or liabilities that are recorded at fair value using significant unobservable inputs (Level 3).
9
Note 10. Earnings Per Share
The reconciliations between basic and diluted earnings per share are as follows (in thousands, except per share amounts):
Three Months Ended November 30, | ||||||
2008 | 2007 | |||||
Numerator: |
||||||
Net earnings |
$ | 11,598 | $ | 27,427 | ||
Plus: 2% Convertible Notes financings costs, net of taxes |
611 | 611 | ||||
Net earnings for diluted earnings per share |
$ | 12,209 | $ | 28,038 | ||
Denominator (in thousands): |
||||||
Weighted average common shares outstanding for basic earnings per share |
56,022 | 55,609 | ||||
Net effect of dilutive securities-employee stock compensation plans |
856 | 1,528 | ||||
Net effect of 2% Convertible Notes based on the if-converted method |
7,517 | 7,517 | ||||
Weighted average common and equivalent shares outstanding for diluted earnings per share |
64,395 | 64,654 | ||||
Basic Earnings Per Share: |
$ | 0.21 | $ | 0.49 | ||
Diluted Earnings Per Share: |
$ | 0.19 | $ | 0.43 |
Note 11. Income Taxes
The Companys income tax expense is impacted by a number of factors, including the amount of taxable earnings derived in foreign jurisdictions with tax rates that are higher or lower than the U.S. federal statutory rate, permanent items, state tax rates and our ability to utilize various tax credits and net operating loss carryforwards. The effective income tax rate for the three months ended November 30, 2008 was 10.6%. The decrease in the effective tax rate in the most recent period, relative to the prior year, reflects the tax benefit on the impairment charge (Note 5, Goodwill and Other Intangible Assets) being recognized at a 38.0% rate, consistent with the underlying combined U.S. federal and state income tax rate. This rate is much higher than the Companys consolidated global effective tax rate. Excluding the impairment charge, the effective income tax rate for the three months ended November 30, 2008 would have been 29.0%. The effective income tax rate of 35.6% for the three months ended November 30, 2007 was relatively higher, primarily the result of restructuring charges for which no tax benefits were recorded.
As a result of a review of current tax positions, the liability for unrecognized tax benefits increased from $29.9 million at August 31, 2008 to $30.4 million at November 30, 2008. Substantially all of these unrecognized tax benefits, if recognized, would impact the effective income tax rate. Within the next twelve months, the Company expects the settlement of a foreign tax item, which will reduce the liability for unrecognized tax benefits by approximately $1.0 million. In addition, as of November 30, 2008 and August 31, 2008, the Company has accrued $3.6 million and $3.2 million, respectively, for the payment of interest and penalties related to its unrecognized tax benefits.
Note 12. Other Comprehensive Income (Loss)
The Companys comprehensive income (loss) during the three months ended November 30, 2008 was significantly impacted by the strengthening of the US dollar versus other global currencies, most notably the Euro and British Pound. The following table sets forth the reconciliation of net income to comprehensive income (loss) (in thousands):
Three Months Ended November 30, | ||||||||
2008 | 2007 | |||||||
Net income |
$ | 11,598 | $ | 27,427 | ||||
Foreign currency translation adjustment |
(64,940 | ) | 7,606 | |||||
Changes in net unrealized gains/(losses), net of tax |
(1,799 | ) | (714 | ) | ||||
Comprehensive (loss) income |
$ | (55,141 | ) | $ | 34,319 | |||
10
Note 13. Segment Information
During the second quarter of fiscal 2009, the Companys financial reporting segments were modified to reflect changes in the portfolio of businesses, due to acquisitions, as well as changes in business reporting lines. The Company considered these changes as part of its ongoing assessment of segment reporting, and changed its operating and reportable segments to reflect four reportable segments: Industrial, Energy, Electrical and Engineered Solutions. All prior period amounts and disclosures have been adjusted to reflect the current reportable segments. The Industrial segment is primarily involved in the design, manufacture and distribution of branded hydraulic and mechanical tools to the maintenance, industrial, infrastructure and production automation markets. The Energy segment provides joint integrity products and services, as well as umbilical, rope and cable solutions to the global oil & gas, power generation and energy markets. The Electrical segment is primarily involved in the design, manufacture and distribution of a broad range of electrical products to the retail DIY, wholesale, OEM, utility and marine markets. The Engineered Solutions segment provides highly engineered position and motion control systems to OEMs in various vehicle and other industrial markets, as well as other engineered industrial products. The Company has not aggregated individual operating segments within these reportable segments. The Company evaluates segment performance based primarily on net sales and operating profit.
The following tables summarize financial information by reportable segment and product line (in thousands):
Three Months Ended | ||||||||
November 30, 2008 |
November 30, 2007 |
|||||||
Net Sales by Segment: |
||||||||
Industrial |
$ | 90,523 | $ | 87,412 | ||||
Energy |
73,782 | 49,677 | ||||||
Electrical |
108,058 | 140,293 | ||||||
Engineered Solutions |
107,417 | 137,761 | ||||||
$ | 379,980 | $ | 415,143 | |||||
Net Sales by Reportable Product Line: |
||||||||
Industrial |
$ | 90,524 | $ | 87,412 | ||||
Energy |
73,982 | 49,677 | ||||||
Electrical Tools & Supplies |
63,195 | 79,326 | ||||||
Harsh Environment Electrical |
18,336 | 29,604 | ||||||
Power Transformation |
26,526 | 31,363 | ||||||
Vehicle Systems |
72,749 | 103,419 | ||||||
Other |
34,668 | 34,342 | ||||||
$ | 379,980 | $ | 415,143 | |||||
Operating Profit: |
||||||||
Industrial |
$ | 26,007 | $ | 25,662 | ||||
Energy |
15,537 | 12,314 | ||||||
Electrical |
4,648 | 6,093 | ||||||
Engineered Solutions |
(18,329 | ) | 13,106 | |||||
General Corporate |
(3,197 | ) | (6,415 | ) | ||||
$ | 24,664 | $ | 50,760 | |||||
November 30, 2008 |
August 31, 2008 |
|||||||
Assets: |
||||||||
Industrial |
$ | 223,312 | $ | 251,384 | ||||
Energy |
473,115 | 306,833 | ||||||
Electrical |
441,449 | 464,105 | ||||||
Engineered Solutions |
496,132 | 520,579 | ||||||
General Corporate |
93,773 | 125,481 | ||||||
$ | 1,727,781 | $ | 1,668,382 | |||||
In addition to the impact of changes in foreign currency exchange rates, the comparability of the segment and product line data is impacted by the acquisitions discussed in Note 2, Acquisitions and the asset impairment charge of $26.6 million included in the Engineered Solutions segment for the three months ended November 30, 2008, as discussed in Note 5, Goodwill and Other Intangibles.
11
Corporate assets, which are not allocated, principally represent cash and cash equivalents, capitalized debt issuance costs, deferred income taxes, the fair value of derivative instruments and the retained interest in trade accounts receivable (subject to the accounts receivable program discussed in Note 4, Accounts Receivable Securitization.)
Note 14. Contingencies and Litigation
The Company had outstanding letters of credit of $7.2 million and $6.4 million at November 30, 2008 and August 31, 2008, respectively, which secure self-insured workers compensation liabilities.
The Company is a party to various legal proceedings that have arisen in the normal course of its business. These legal proceedings typically include product liability, environmental, labor, patent claims and other disputes. The Company has recorded reserves for loss contingencies based on the specific circumstances of each case. Such reserves are recorded when it is probable that a loss has been incurred as of the balance sheet date and such loss can be reasonably estimated. In the opinion of management, the resolution of these contingencies will not have a material adverse effect on the Companys financial condition, results of operations or cash flows.
The Company, in the normal course of business, enters into certain real estate and equipment leases or guarantees such leases on behalf of its subsidiaries. In conjunction with the spin-off of a former subsidiary in fiscal 2000, the Company assigned its rights in the leases used by the former subsidiary, but was not released as a responsible party from all such leases by the lessors. All of these businesses were subsequently sold. The Company remains contingently liable for those leases if any of these businesses are unable to fulfill their obligations thereunder. The discounted present value of future minimum lease payments for such leases totals, assuming no offset for sub-leasing, approximately $5.1 million at November 30, 2008. The future undiscounted minimum lease payments for these leases are as follows: $0.3 million in the balance of calendar 2008; $1.1 million in calendar 2009; $1.1 million in calendar 2010; $1.2 million in calendar 2011; $1.2 million in calendar 2012 and $3.7 million thereafter.
The Company has facilities in numerous geographic locations that are subject to a range of environmental laws and regulations. Environmental costs that have no future economic value are expensed. Liabilities are recorded when environmental remediation is probable and the costs are reasonably estimable. Environmental expenditures over the last two years have not been material. Management believes that such costs will not have a material adverse effect on the Companys financial position, results of operations or cash flows.
Note 15. Guarantor Subsidiaries
On June 12, 2007, Actuant Corporation (the Parent) issued $250.0 million of 6.875% Senior Notes. All of our material domestic 100% owned subsidiaries (the Guarantors) fully and unconditionally guarantee the 6.875% Senior Notes on a joint and several basis. There are no significant restrictions on the ability of the Guarantors to make distributions to the Parent. The following tables present the condensed results of operations, financial position and cash flows of Actuant Corporation and its subsidiaries, the Guarantor and non-Guarantor entities, and the eliminations necessary to arrive at the information for the Company on a consolidated basis.
General corporate expenses have not been allocated to subsidiaries, and are all included under the Parent heading. As a matter of course, the Company retains certain assets and liabilities at the corporate level (Parent column in the following tables) which are not allocated to subsidiaries including, but not limited to, certain employee benefits, insurance, financing, and tax liabilities. Income tax provisions for domestic subsidiaries are typically recorded using an estimate and finalized in total with an adjustment recorded at the Parent level. Net sales reported for each of the headings only includes sales to third parties; sales between entities are not significant. Additionally, substantially all of the indebtedness of the Company is carried at the corporate level and is therefore included in the Parent column in the following tables. Substantially all accounts receivable of the Parent and Guarantors are sold into the accounts receivable program described in Note 4, Accounts Receivable Securitization. Allowances for doubtful accounts remains recorded at the Parent and Guarantors. Intercompany balances include receivables/payables incurred in the normal course of business in addition to investments and loans transacted between subsidiaries of the Company or with Actuant.
12
CONDENSED CONSOLIDATING STATEMENTS OF EARNINGS
(In thousands)
Three Months Ended November 30, 2008 | ||||||||||||||||||||
Parent | Guarantors | Non-Guarantors | Eliminations | Consolidated | ||||||||||||||||
Net sales |
$ | 43,562 | $ | 140,926 | $ | 195,492 | $ | | $ | 379,980 | ||||||||||
Cost of sales |
14,835 | 100,029 | 133,224 | | 248,088 | |||||||||||||||
Gross profit |
28,727 | 40,897 | 62,268 | | 131,892 | |||||||||||||||
Selling, administrative and engineering expenses |
11,879 | 26,932 | 37,407 | | 76,218 | |||||||||||||||
Impairment charge |
| 23,774 | 2,779 | | 26,553 | |||||||||||||||
Amortization of intangible assets |
| 3,471 | 986 | | 4,457 | |||||||||||||||
Operating profit |
16,848 | (13,280 | ) | 21,096 | | 24,664 | ||||||||||||||
Financing costs, net |
12,021 | (2 | ) | 216 | | 12,235 | ||||||||||||||
Intercompany expense (income), net |
(5,817 | ) | 2,294 | 3,523 | | | ||||||||||||||
Other expense (income), net |
186 | (502 | ) | (218 | ) | | (534 | ) | ||||||||||||
Earnings (loss) before income tax expense and minority interest |
10,458 | (15,070 | ) | 17,575 | | 12,963 | ||||||||||||||
Income tax expense (benefit) |
3,033 | (6,510 | ) | 4,847 | | 1,370 | ||||||||||||||
Minority interest, net of income taxes |
| | (5 | ) | | (5 | ) | |||||||||||||
Net earnings (loss) before equity in earnings of subsidiaries |
7,425 | (8,560 | ) | 12,733 | | 11,598 | ||||||||||||||
Equity in earnings of subsidiaries |
4,173 | 6,672 | (2,946 | ) | (7,899 | ) | | |||||||||||||
Net earnings |
$ | 11,598 | $ | (1,888 | ) | $ | 9,787 | $ | (7,899 | ) | $ | 11,598 | ||||||||
Three Months Ended November 30, 2007 | ||||||||||||||||||||
Parent | Guarantors | Non-Guarantors | Eliminations | Consolidated | ||||||||||||||||
Net sales |
$ | 40,910 | $ | 150,983 | $ | 223,250 | $ | | $ | 415,143 | ||||||||||
Cost of sales |
15,890 | 109,805 | 148,614 | | 274,309 | |||||||||||||||
Gross profit |
25,020 | 41,178 | 74,636 | | 140,834 | |||||||||||||||
Selling, administrative and engineering expenses |
16,716 | 27,159 | 37,421 | | 81,296 | |||||||||||||||
Restructuring charges |
| | 5,521 | | 5,521 | |||||||||||||||
Amortization of intangible assets |
| 2,272 | 985 | | 3,257 | |||||||||||||||
Operating profit |
8,304 | 11,747 | 30,709 | | 50,760 | |||||||||||||||
Financing costs, net |
8,573 | (3 | ) | 730 | | 9,300 | ||||||||||||||
Intercompany expense (income), net |
(5,619 | ) | 4,981 | 638 | | | ||||||||||||||
Other expense (income), net |
403 | 1 | (1,514 | ) | | (1,110 | ) | |||||||||||||
Earnings before income tax expense and minority interest |
4,947 | 6,768 | 30,855 | | 42,570 | |||||||||||||||
Income tax expense |
1,761 | 2,408 | 10,980 | | 15,149 | |||||||||||||||
Minority interest, net of income taxes |
| | (6 | ) | | (6 | ) | |||||||||||||
Net earnings before equity in earnings of subsidiaries |
3,186 | 4,360 | 19,881 | | 27,427 | |||||||||||||||
Equity in earnings of subsidiaries |
24,241 | 14,938 | (168 | ) | (39,011 | ) | | |||||||||||||
Net earnings |
$ | 27,427 | $ | 19,298 | $ | 19,713 | $ | (39,011 | ) | $ | 27,427 | |||||||||
13
CONDENSED CONSOLIDATING BALANCE SHEETS
(In thousands)
November 30, 2008 | ||||||||||||||||||
Parent | Guarantors | Non-Guarantors | Eliminations | Consolidated | ||||||||||||||
ASSETS |
||||||||||||||||||
Current Assets |
||||||||||||||||||
Cash and cash equivalents |
$ | 927 | $ | | $ | 29,291 | $ | | $ | 30,218 | ||||||||
Accounts receivable |
1,462 | 12,923 | 197,191 | | 211,576 | |||||||||||||
Inventories |
26,517 | 100,492 | 96,441 | | 223,450 | |||||||||||||
Deferred income taxes |
12,899 | 37 | (1,207 | ) | | 11,729 | ||||||||||||
Prepaid expenses |
4,902 | 2,649 | 8,350 | | 15,901 | |||||||||||||
Total Current Assets |
46,707 | 116,101 | 330,066 | | 492,874 | |||||||||||||
Property, Plant & Equipment, net |
9,769 | 57,493 | 73,938 | | 141,200 | |||||||||||||
Goodwill |
68,968 | 410,242 | 219,236 | | 698,446 | |||||||||||||
Other Intangibles, net |
| 279,902 | 101,847 | | 381,749 | |||||||||||||
Investment in Subsidiaries |
1,524,560 | 262,901 | 153,836 | (1,941,297 | ) | | ||||||||||||
Other Long-term Assets |
12,665 | 218 | 629 | | 13,512 | |||||||||||||
Total Assets |
$ | 1,662,669 | $ | 1,126,857 | $ | 879,552 | $ | (1,941,297 | ) | $ | 1,727,781 | |||||||
LIABILITIES & SHAREHOLDERS EQUITY |
||||||||||||||||||
Current Liabilities |
||||||||||||||||||
Short-term borrowings |
$ | | $ | | $ | | $ | | $ | | ||||||||
Trade accounts payable |
19,424 | 43,800 | 82,202 | | 145,426 | |||||||||||||
Accrued compensation and benefits |
7,073 | 5,677 | 20,439 | | 33,189 | |||||||||||||
Income taxes payable (receivable) |
1,147 | (6,345 | ) | 29,334 | | 24,136 | ||||||||||||
Current maturities of long-term debt |
4,313 | 3 | 20 | | 4,336 | |||||||||||||
Other current liabilities |
20,991 | 17,466 | 28,372 | | 66,829 | |||||||||||||
Total Current Liabilities |
52,948 | 60,601 | 160,367 | | 273,916 | |||||||||||||
Long-term Debt, less Current Maturities |
696,049 | | | | 696,049 | |||||||||||||
Deferred Income Taxes |
106,601 | (413 | ) | 18,964 | | 125,152 | ||||||||||||
Pension and Post-retirement Benefit Liabilities |
9,163 | 381 | 16,358 | | 25,902 | |||||||||||||
Other Long-term Liabilities |
18,086 | 2,412 | 5,564 | | 26,062 | |||||||||||||
Intercompany Payable (Receivable) |
199,122 | (193,313 | ) | (5,809 | ) | | | |||||||||||
Shareholders Equity |
580,700 | 1,257,189 | 684,108 | (1,941,297 | ) | 580,700 | ||||||||||||
Total Liabilities and Shareholders Equity |
$ | 1,662,669 | $ | 1,126,857 | $ | 879,552 | $ | (1,941,297 | ) | $ | 1,727,781 | |||||||
14
CONDENSED CONSOLIDATING BALANCE SHEETS
(In thousands)
August 31, 2008 | |||||||||||||||||||
Parent | Guarantors | Non-Guarantors | Eliminations | Consolidated | |||||||||||||||
ASSETS |
|||||||||||||||||||
Current Assets |
|||||||||||||||||||
Cash and cash equivalents |
$ | 43,132 | $ | 213 | $ | 79,204 | $ | | $ | 122,549 | |||||||||
Accounts receivable |
325 | 9,039 | 217,200 | | 226,564 | ||||||||||||||
Inventories |
26,273 | 87,835 | 101,283 | | 215,391 | ||||||||||||||
Deferred income taxes |
12,835 | 36 | (1,001 | ) | | 11,870 | |||||||||||||
Prepaid expenses |
4,651 | 2,541 | 8,900 | | 16,092 | ||||||||||||||
Total Current Assets |
87,216 | 99,664 | 405,586 | | 592,466 | ||||||||||||||
Property, Plant & Equipment, net |
9,463 | 46,209 | 78,878 | | 134,550 | ||||||||||||||
Goodwill |
65,062 | 390,306 | 184,494 | | 639,862 | ||||||||||||||
Other Intangibles, net |
| 228,099 | 64,260 | | 292,359 | ||||||||||||||
Investment in Subsidiaries |
1,345,395 | 250,953 | 42,212 | (1,638,560 | ) | | |||||||||||||
Other Long-term Assets |
8,185 | 220 | 740 | | 9,145 | ||||||||||||||
Total Assets |
$ | 1,515,321 | $ | 1,015,451 | $ | 776,170 | $ | (1,638,560 | ) | $ | 1,668,382 | ||||||||
LIABILITIES & SHAREHOLDERS EQUITY |
|||||||||||||||||||
Current Liabilities |
|||||||||||||||||||
Short-term borrowings |
$ | | $ | 4 | $ | 335 | $ | | $ | 339 | |||||||||
Trade accounts payable |
23,394 | 45,408 | 98,061 | | 166,863 | ||||||||||||||
Accrued compensation and benefits |
19,431 | 10,664 | 28,928 | | 59,023 | ||||||||||||||
Income taxes payable (receivable) |
(6,702 | ) | 278 | 31,291 | | 24,867 | |||||||||||||
Other current liabilities |
16,461 | 17,829 | 25,743 | | 60,033 | ||||||||||||||
Total Current Liabilities |
52,584 | 74,183 | 184,358 | | 311,125 | ||||||||||||||
Long-term Debt, less Current Maturities |
573,815 | 1 | 2 | | 573,818 | ||||||||||||||
Deferred Income Taxes |
80,744 | (286 | ) | 19,176 | | 99,634 | |||||||||||||
Pension and Post-retirement Benefit Liabilities |
9,628 | | 18,013 | | 27,641 | ||||||||||||||
Other Long-term Liabilities |
19,012 | 1,218 | 6,428 | | 26,658 | ||||||||||||||
Intercompany Payable (Receivable) |
150,032 | (229,662 | ) | 79,630 | | | |||||||||||||
Shareholders Equity |
629,506 | 1,169,997 | 468,563 | (1,638,560 | ) | 629,506 | |||||||||||||
Total Liabilities and Shareholders Equity |
$ | 1,515,321 | $ | 1,015,451 | $ | 776,170 | $ | (1,638,560 | ) | $ | 1,668,382 | ||||||||
15
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(In thousands)
Three Months Ended November 30, 2008 | ||||||||||||||||||||
Parent | Guarantors | Non-Guarantors | Eliminations | Consolidated | ||||||||||||||||
Operating Activities |
||||||||||||||||||||
Net cash provided by (used in) operating activities |
$ | (7,570 | ) | $ | 7,716 | $ | 18,849 | $ | (6,477 | ) | $ | 12,518 | ||||||||
Investing Activities |
||||||||||||||||||||
Proceeds from sale of property, plant & equipment |
| 17 | 77 | | 94 | |||||||||||||||
Capital expenditures |
(159 | ) | (1,445 | ) | (6,030 | ) | | (7,634 | ) | |||||||||||
Changes in intercompany receivables (payable) |
56,925 | (663 | ) | (56,262 | ) | | | |||||||||||||
Business acquisitions, net of cash acquired |
(234,600 | ) | 639 | 2,193 | | (231,768 | ) | |||||||||||||
Cash used in investing activities |
(177,834 | ) | (1,452 | ) | (60,022 | ) | | (239,308 | ) | |||||||||||
Financing Activities |
||||||||||||||||||||
Net borrowings (repayments) on revolver and other debt |
188,304 | | (309 | ) | | 187,995 | ||||||||||||||
Proceeds from term loan |
115,000 | | | | 115,000 | |||||||||||||||
Principal repayments on term loans |
(155,000 | ) | | | | (155,000 | ) | |||||||||||||
Debt issuance and amendment costs |
(5,333 | ) | | | | (5,333 | ) | |||||||||||||
Intercompany dividends paid |
(2,251 | ) | (6,477 | ) | | 6,477 | (2,251 | ) | ||||||||||||
All other |
2,479 | | | | 2,479 | |||||||||||||||
Cash provided by (used in) financing activities |
143,199 | (6,477 | ) | (309 | ) | 6,477 | 142,890 | |||||||||||||
Effect of exchange rate changes on cash |
| | (8,431 | ) | | (8,431 | ) | |||||||||||||
Net decrease in cash and cash equivalents |
(42,205 | ) | (213 | ) | (49,913 | ) | | (92,331 | ) | |||||||||||
Cash and cash equivalents - beginning of period |
43,132 | 213 | 79,204 | | 122,549 | |||||||||||||||
Cash and cash equivalents - end of period |
$ | 927 | $ | | $ | 29,291 | $ | | $ | 30,218 | ||||||||||
16
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(In thousands)
Three Months Ended November 30, 2007 | ||||||||||||||||||||
Parent | Guarantors | Non-Guarantors | Eliminations | Consolidated | ||||||||||||||||
Operating Activities |
||||||||||||||||||||
Net cash provided by operating activities |
$ | 14,481 | $ | 1,633 | $ | 19,087 | $ | (6,477 | ) | $ | 28,724 | |||||||||
Investing Activities |
||||||||||||||||||||
Proceeds from sale of property, plant & equipment |
704 | 5,473 | 2,144 | | 8,321 | |||||||||||||||
Capital expenditures |
(601 | ) | (1,950 | ) | (6,485 | ) | | (9,036 | ) | |||||||||||
Changes in intercompany receivables (payable) |
17,915 | 1,628 | (19,543 | ) | | | ||||||||||||||
Business acquisitions, net of cash acquired |
(47,464 | ) | 27 | | | (47,437 | ) | |||||||||||||
Cash provided by (used in) investing activities |
(29,446 | ) | 5,178 | (23,884 | ) | | (48,152 | ) | ||||||||||||
Financing Activities |
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Net borrowings on revolver and other debt |
| | 134 | | 134 | |||||||||||||||
Principal repayments on term loans |
| | (994 | ) | | (994 | ) | |||||||||||||
Intercompany dividends paid |
(2,221 | ) | (6,477 | ) | | 6,477 | (2,221 | ) | ||||||||||||
All other |
2,013 | | | | 2,013 | |||||||||||||||
Cash used in financing activities |
(208 | ) | (6,477 | ) | (860 | ) | 6,477 | (1,068 | ) | |||||||||||
Effect of exchange rate changes on cash |
| | 2,557 | | 2,557 | |||||||||||||||
Net increase (decrease) in cash and cash equivalents |
(15,173 | ) | 334 | (3,100 | ) | | (17,939 | ) | ||||||||||||
Cash and cash equivalents - beginning of period |
25,601 | | 61,079 | | 86,680 | |||||||||||||||
Cash and cash equivalents - end of period |
$ | 10,428 | $ | 334 | $ | 57,979 | $ | | $ | 68,741 | ||||||||||
17