Delaware
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001-14608
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87-0563574
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(State or other jurisdiction of
incorporation or organization)
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(Commission File Number)
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(I.R.S. Employer
Identification Number)
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2002 South 5070 West
Salt Lake City, Utah
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84104-4726
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(Address of principal
executive offices)
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(Zip Code)
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¨
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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¨
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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¨
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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¨
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Item 9.01.
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Financial Statements and Exhibits.
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Exhibit No.
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Description
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99.1
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Unaudited pro forma financial information of the Company and Subsidiaries as of and for the nine months ended February 29, 2012 and for the year ended May 31, 2011.
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By:
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/s/ Joseph W. Baty
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Name: Joseph W. Baty
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Title: Executive Vice President and Chief Financial Officer
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Date: June 13, 2012
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Exhibit No.
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Description
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99.1
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Unaudited pro forma financial information of the Company and Subsidiaries as of and for the nine months ended February 29, 2012 and for the year ended May 31, 2011.
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·
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our acquisition of Airborne, together with the preliminary allocation of the purchase price of $150.0 million in cash;
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·
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our borrowing of $150.0 million in term loans under our credit agreement and the use of those proceeds to finance the Acquisition; and
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·
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our preliminary estimates of interest expense, including amortization of debt issuance costs, and amortization of intangible assets recognized in conjunction with the Acquisition.
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Schiff
Historical
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Airborne Historical
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Pro Forma Adjustments
|
Note References
|
Schiff Combined Pro Forma
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|||||||||||||
ASSETS
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|||||||||||||||||
Current assets:
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|||||||||||||||||
Cash and cash equivalents
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$ | 18,041 | $ | 32,823 | $ | (41,987 | ) |
(A), (B), (C)
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$ | 8,877 | |||||||
Available-for-sale securities
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7,649 | — | — | 7,649 | |||||||||||||
Receivables, net
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28,971 | 9,393 | — | 38,364 | |||||||||||||
Inventories
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34,657 | 7,567 | — | 42,224 | |||||||||||||
Prepaid expenses
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1,771 | 470 | — | 2,241 | |||||||||||||
Deferred taxes, net
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2,990 | 737 | — | 3,727 | |||||||||||||
Total current assets
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94,079 | 50,990 | (41,987 | ) | 103,082 | ||||||||||||
Property and equipment, net
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13,553 | 533 | — |
(G)
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14,086 | ||||||||||||
Other assets:
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|||||||||||||||||
Goodwill
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12,653 | 3,079 | 64,130 |
(B)
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79,862 | ||||||||||||
Other intangibles
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29,536 | 6,524 | 111,878 |
(B)
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147,938 | ||||||||||||
Available-for-sale securities
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671 | — | — | 671 | |||||||||||||
Other assets
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96 | — | 3,170 |
(C)
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3,266 | ||||||||||||
Total other assets
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42,956 | 9,603 | 179,178 | 231,737 | |||||||||||||
Total assets
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$ | 150,588 | $ | 61,126 | $ | 137,191 | $ | 348,905 | |||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
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|||||||||||||||||
Current liabilities:
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|||||||||||||||||
Accounts payable
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$ | 18,918 | $ | 5,063 | $ | 3,343 |
(I)
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$ | 27,324 | ||||||||
Accrued expenses
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16,457 | 2,958 | — | 19,415 | |||||||||||||
Dividends payable
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154 | — | — | 154 | |||||||||||||
Income taxes payable
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304 | 1,778 | (1,778 | ) |
(A)
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304 | |||||||||||
Total current liabilities
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35,833 | 9,799 | 1,565 | 47,197 | |||||||||||||
Long-term liabilities:
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|||||||||||||||||
Term loans
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— | — | 144,006 |
(C)
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144,006 | ||||||||||||
Dividends payable
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549 | — | — | 549 | |||||||||||||
Deferred taxes, net
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1,755 | 327 | 45,850 |
(B)
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47,932 | ||||||||||||
Other
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2,430 | 113 | — | 2,543 | |||||||||||||
Total long-term liabilities
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4,734 | 440 | 189,856 | 195,030 | |||||||||||||
Stockholders' equity:
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|||||||||||||||||
Preferred stock
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— | — | — | — | |||||||||||||
Common stock
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292 | 1 | (1 | ) |
(H)
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292 | |||||||||||
Additional paid-in capital
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90,139 | 33,781 | (33,781 | ) |
(H)
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90,139 | |||||||||||
Accumulated other comprehensive loss
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(77 | ) | — | — | (77 | ) | |||||||||||
Retained earnings
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19,667 | 17,105 | (20,448 | ) |
(H), (I)
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16,324 | |||||||||||
Total stockholders' equity
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110,021 | 50,887 | (54,230 | ) | 106,678 | ||||||||||||
Total liabilities and stockholders' equity
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$ | 150,588 | $ | 61,126 | $ | 137,191 | $ | 348,905 |
Schiff
Historical
|
Airborne Historical
|
Pro Forma Adjustments
|
Note References
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Schiff
Combined
Pro Forma
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|||||||||||||
Net sales
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$
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191,479
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$
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63,189
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$
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—
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$
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254,668
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|||||||||
Cost of goods sold
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105,523
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24,708
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—
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130,231
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|||||||||||||
Gross profit
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85,956
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38,481
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—
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124,437
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|||||||||||||
Operating expenses:
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|||||||||||||||||
Selling and marketing
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45,044
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21,512
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—
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66,556
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|||||||||||||
General and administrative
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17,191
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4,148
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(932
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)
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(J)
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20,407
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|||||||||||
Research and development
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3,702
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1,328
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—
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5,030
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|||||||||||||
Amortization of intangibles
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905
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303
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2,760
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(E)
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3,968
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||||||||||||
Total operating expenses
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66,842
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27,291
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1,828
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95,961
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|||||||||||||
Income from operations
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19,114
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11,190
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(1,828
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)
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28,476
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||||||||||||
Other income (expense):
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|||||||||||||||||
Interest income
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46
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26
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—
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72
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|||||||||||||
Interest expense
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(809
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)
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(1
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)
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(8,052
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)
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(D)
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(8,862
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)
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||||||||
Other, net
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69
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(221
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)
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—
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(152
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)
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|||||||||||
Total other expense, net
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(694
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)
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(196
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)
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(8,052
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)
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(8,942
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)
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|||||||||
Income before income taxes
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18,420
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10,994
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(9,880
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)
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19,534
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||||||||||||
Income tax expense
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6,651
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3,908
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(3,853
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)
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(F)
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6,706
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|||||||||||
Net income
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$
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11,769
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$
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7,086
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$
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(6,027
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)
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$
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12,828
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||||||||
Weighted average shares outstanding:
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|||||||||||||||||
Basic
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29,284,109
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29,284,109
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|||||||||||||||
Diluted
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29,406,320
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29,406,320
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|||||||||||||||
Net income per share:
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|||||||||||||||||
Basic
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$
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0.40
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$
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0.44
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|||||||||||||
Diluted
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$
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0.40
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$
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0.44
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Schiff
Historical
|
Airborne Historical
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Pro Forma Adjustments
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Note References
|
Schiff
Combined
Pro Forma
|
|||||||||||||
Net sales
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$
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213,648
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$
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69,217
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$
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—
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$
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282,865
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|||||||||
Cost of goods sold
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132,472
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28,682
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—
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161,154
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|||||||||||||
Gross profit
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81,176
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40,535
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—
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121,711
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|||||||||||||
Operating expenses:
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|||||||||||||||||
Selling and marketing
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34,666
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22,293
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—
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56,959
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|||||||||||||
General and administrative
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22,300
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4,815
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—
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27,115
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|||||||||||||
Research and development
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4,017
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235
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—
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4,252
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|||||||||||||
Amortization of intangibles
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—
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330
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3,881
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(E)
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4,211
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||||||||||||
Total operating expenses
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60,983
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27,673
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3,881
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92,537
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|||||||||||||
Income from operations
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20,193
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12,862
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(3,881
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)
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29,174
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||||||||||||
Other income (expense):
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|||||||||||||||||
Interest income
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166
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27
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—
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193
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|||||||||||||
Interest expense
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(424
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)
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(1
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)
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(10,660
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)
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(D)
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(11,085
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)
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||||||||
Other, net
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(45
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)
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—
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—
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(45
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)
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|||||||||||
Total other income (expense), net
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(303
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)
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26
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(10,660
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)
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(10,937
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)
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||||||||||
Income before income taxes
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19,890
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12,888
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(14,541
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)
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18,237
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||||||||||||
Income tax expense
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7,248
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4,386
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(5,671
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)
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(F)
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5,963
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|||||||||||
Net income
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$
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12,642
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$
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8,502
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$
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(8,870
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)
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$
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12,274
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||||||||
Weighted average shares outstanding:
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|||||||||||||||||
Basic
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28,986,227
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28,986,227
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|||||||||||||||
Diluted
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29,252,030
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29,252,030
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|||||||||||||||
Net income per share:
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|||||||||||||||||
Basic
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$
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0.44
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$
|
0.42
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|||||||||||||
Diluted
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$
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0.43
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$
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0.42
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1.
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Basis of Presentation, the Acquisition and Related Transactions
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·
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our acquisition of Airborne, together with the preliminary allocation of the purchase price of $150,000 in cash;
|
·
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our borrowing of $150,000 in term loans under our credit agreement and the use of those proceeds to finance the Acquisition; and
|
·
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our preliminary estimates of interest expense, including amortization of debt issuance costs, and amortization of intangible assets recognized in conjunction with the Acquisition.
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2.
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Pro Forma Adjustments and Assumptions
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(A)
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Airborne’s cash and cash equivalents, and income taxes payable were excluded from the acquired assets and assumed liabilities under the terms of the purchase agreement.
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(B)
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Reflects the preliminary allocation of the $150,000 purchase price. The Acquisition has been accounted for using the acquisition method of accounting and, accordingly, the total estimated purchase price consideration of the Acquisition was allocated to the tangible assets and identifiable intangible assets acquired and liabilities assumed based on their estimated respective fair values. The excess of the purchase price consideration over the net tangible and identifiable intangible assets acquired and liabilities assumed was recorded as goodwill. Determination of the purchase price and allocations of the purchase price used in the unaudited pro forma condensed consolidated financial statements are based
upon preliminary estimates and assumptions. These preliminary estimates and assumptions could change significantly during the measurement period as we finalize the valuations of the net tangible assets and intangible assets acquired and liabilities assumed. Any change could result in material variances between our future financial results and the amounts presented in these unaudited pro forma condensed consolidated financial statements, including variances in fair values recorded, as well as expenses associated with these items.
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Assets acquired:
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||||
Receivables, net
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$ | 9,393 | ||
Inventories
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7,567 | |||
Prepaid expenses and other assets
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1,207 | |||
Property and equipment, net
|
533 | |||
Intangible assets (customer relationships $53,419, trademarks $64,983)
|
118,402 | |||
Goodwill
|
67,209 | |||
Total assets acquired
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204,311 | |||
Liabilities assumed:
|
||||
Accounts payable
|
5,063 | |||
Accrued expenses
|
2,958 | |||
Deferred taxes, net
|
46,177 | |||
Other liabilities
|
113 | |||
Total liabilities assumed
|
54,311 | |||
Net assets acquired
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$ | 150,000 |
(C)
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Reflects the borrowing of $150,000 in term loans under our credit agreement to finance the Acquisition and/or use of cash on hand to pay $9,164 in debt issuance costs. Debt issuance costs include $5,994 paid directly to the creditor, reflected as a reduction to the outstanding term loans; and, $3,170 reflected in other assets.
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(D)
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Reflects interest expense incurred on the borrowing of $150,000 in term loans under our credit agreement in connection with the Acquisition, including associated credit facility fees and amortization of debt issuance costs. Interest expense is based on the minimum rate of three-month LIBOR of 1.25%, plus the applicable margin of 4.75% under our credit agreement for both the nine months ended February 29, 2012 and year ended May 31, 2011. A one percentage point increase or decrease in interest rates would result in an increase or decrease in interest expense related to this transaction of $1,125 and $1,500, respectively, for the nine months ended February 29, 2012 and year ended May 31, 2011.
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(E)
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Intangible assets include customer relationships and trademarks. Customer relationships are amortized over an estimated useful life of 20 years, recognizing amortization expense based on an accelerated method that reflects expected cash flow assumptions. Trademarks are not amortized because they represent indefinite–lived assets. Amortization expense for customer relationships for the next five years is as follows:
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Fiscal Year
|
Amortization
|
|
2012
|
$3,680
|
|
2013
|
$3,528
|
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2014
|
$3,398
|
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2015
|
$3,285
|
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2016
|
$3,148
|
(F)
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Reflects income tax effect of the “Pro Forma Adjustments” using our statutory tax rate of 39% for both the nine months ended February 29, 2012 and the year ended May 31, 2011.
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(G)
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Fair market value adjustments and changes to estimated useful lives for Airborne’s property and equipment are not expected to be significant; accordingly, no adjustments have been made to Airborne’s recorded amount of property and equipment or depreciation.
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(H)
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Reflects the elimination of Airborne’s stockholders’ equity.
|
(I)
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Reflects reduction in retained earnings for estimated non-recurring costs such as legal, accounting, valuation, and other professional services and expenses associated with the Acquisition, which Schiff incurred or expects to incur subsequent to February 29, 2012. While presented in the unaudited pro forma condensed consolidated balance sheet, these costs have been excluded from the unaudited pro forma condensed consolidated statements of income.
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(J)
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Reflects the elimination of transaction costs related to the Acquisition, which were incurred prior to the Acquisition date.
|