UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 18, 2011
COMPASS DIVERSIFIED HOLDINGS
(Exact name of registrant as specified in its charter)
Delaware | 0-51937 | 57-6218917 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
COMPASS GROUP DIVERSIFIED
HOLDINGS LLC
(Exact name of registrant as specified in its charter)
Delaware | 0-51938 | 20-3812051 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
Sixty One Wilton Road
Second Floor
Westport, CT 06880
(Address of principal executive offices and zip code)
Registrants telephone number, including area code: (203) 221-1703
Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Section 8 | Other Events |
Item 8.01 | Other Events |
As previously disclosed by Compass Group Diversified Holdings LLC (the Company) and Compass Diversified Holdings (Holdings and, together with the Company, collectively CODI, us or we) in a Current Report on Form 8-K filed with the Securities and Exchange Commission on October 18, 2011, the Company entered into a Stock Purchase Agreement, dated as of October 17, 2011, with Recruit Co., LTD. and RGF Staffing USA, Inc. (collectively Recruit), pursuant to which the Company and all other shareholders of the Companys subsidiary business, Staffmark Holdings, Inc. (Staffmark), sold all of the issued and outstanding capital stock of Staffmark to Recruit (the Divestiture).
This Current Report on Form 8-K updates the pro forma financial statements of CODI to include the Unaudited Condensed Combined Pro Forma Balance Sheet of Compass Diversified Holdings at September 30, 2011 and notes thereto and the Unaudited Condensed Combined Pro Forma Statement of Operations for the nine months ended September 30, 2011 and notes thereto (collectively, the Pro Forma Financial Statements). The Unaudited Condensed Combined Pro Forma Statements of Operations for the years ended December 31, 2008, 2009 and 2010 previously disclosed in the Form 8-K filed with the Securities and Exchange Commission on October 18, 2011, are included in Exhibit 99.1 for ease of reference. The Pro Forma Financial Statements are filed as Exhibit 99.1 hereto and incorporated by reference herein.
Section 9 | Financial Statements and Exhibits |
Item 9.01 | Financial Statements and Exhibits |
(d) Exhibits.
99.1 | Unaudited Condensed Combined Pro Forma Balance Sheet of Compass Diversified Holdings at September 30, 2011 and notes thereto and Unaudited Condensed Combined Pro Forma Statements of Operations for the years ended December 31, 2008, 2009 and 2010 and the nine months ended September 30, 2011 and notes thereto |
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: November 18, 2011 | COMPASS DIVERSIFIED HOLDINGS | |||
By: | /s/ James J. Bottiglieri | |||
James J. Bottiglieri | ||||
Regular Trustee |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: November 18, 2011 | COMPASS GROUP DIVERSIFIED HOLDINGS LLC | |||
By: | /s/ James J. Bottiglieri | |||
James J. Bottiglieri | ||||
Chief Financial Officer |
3
Exhibit 99.1
Compass Diversified Holdings
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(Unaudited)
The following unaudited pro forma condensed combined financial statements are presented to show the effect on the historical condensed combined financial statements of Compass Diversified Holdings (the Company) of the sale (the Staffmark Disposition) of the Companys majority owned subsidiary, Staffmark Holdings, Inc. (Staffmark) for a total enterprise value of $295 million, and estimated net proceeds of approximately $220 million at closing, which does not include an additional approximately $9 million of customary working capital and other escrow proceeds that the Company expects to receive in the future. The Staffmark Disposition is further described in Item 2.01 of the Current Report on Form 8-K dated October 18, 2011, as filed with the Securities and Exchange Commission (the October 8-K).
The following unaudited condensed combined pro forma statements of operations for the years ended December 31, 2008, 2009 and 2010, and for the nine months ended September 30, 2011 are based on the assumption that the Staffmark Disposition was completed on January 1, 2008. The pro forma balance sheet as of September 30, 2011 is based on the assumption that the Staffmark Disposition was completed on September 30, 2011.
The as reported financial information for both Compass Diversified Holdings and Staffmark are derived from the audited financial statements of the Company for the years ended December 31, 2010 and 2009 as filed on Form 10-K dated March 11, 2011 and March 9, 2010, respectively, the audited financial statements of the Company for the year ended December 31, 2008 as filed on Form 10-K/A dated April 9, 2009, and the unaudited financial statements of the Company as of September 30, 2011 and for the nine months ended September 30, 2011, as filed on Form 10-Q dated November 8, 2011.
The unaudited pro forma financial information is for informational purposes only and does not purport to present what the Companys results would actually have been had this transaction actually occurred on the dates presented or to project the results of operations or financial position for any future period. The pro forma adjustments are based upon available information and certain assumptions that we believe are reasonable. You should read these unaudited pro forma condensed combined financial statements in conjunction with the accompanying notes, the Stock Purchase Agreement related to the Staffmark Disposition filed as an exhibit to the October 8-K, and the consolidated financial statements for the Company, including the notes thereto as previously filed.
The unaudited pro forma financial information is prepared in accordance with Article 11 of Regulation S-X. The pro forma adjustments are described in the accompanying notes and are based upon information and assumptions available at the time of the filing of this Current Report on Form 8-K.
The pro forma adjustments to the statements of operations for all periods presented do not include the following:
| The non-recurring gain on the Staffmark Disposition and the related tax effect. The gain will be included in the Companys results for the three and twelve month periods ended December 31, 2011; |
| Certain non-recurring transaction costs and Staffmark stock option payments on closing of the sale estimated to be approximately $20.5 million; |
| The supplemental put expense (reversal) due to the inability to meaningfully or accurately reflect the impact on the supplemental put liability for the Staffmark Disposition using historical assumptions and estimates; and |
| Management fee adjustments due to the Companys adjusted net assets not materially impacted by the Staffmark Disposition as the proceeds from the sale approximate the adjusted net assets disposed of which were used in the calculation of the management fee. |
Compass Diversified Holdings
Condensed Combined Pro Forma Balance Sheet
at September 30, 2011
(unaudited)
(in thousands) | Staffmark Disposition | |||||||||||||||
Compass Diversified Holdings as Reported |
Less: Staffmark as Reported |
Staffmark Pro Forma Adjustments |
Pro Forma Combined Compass Diversified Holdings |
|||||||||||||
Assets |
||||||||||||||||
Current assets: |
||||||||||||||||
Cash and cash equivalents |
$ | 10,564 | $ | (15 | ) | $ | | $ | 10,549 | |||||||
Accounts receivable, net |
253,541 | (136,880 | ) | | 116,661 | |||||||||||
Inventories |
108,970 | | | 108,970 | ||||||||||||
Prepaid expenses and other current assets |
32,464 | (6,244 | ) | 6,474 | (a) | 32,694 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total current assets |
405,539 | (143,139 | ) | 6,474 | 268,874 | |||||||||||
Property, plant and equipment, net |
50,329 | (4,943 | ) | | 45,386 | |||||||||||
Goodwill |
325,312 | (88,637 | ) | | 236,675 | |||||||||||
Intangible assets, net |
437,015 | (66,838 | ) | | 370,177 | |||||||||||
Deferred debt issuance costs, net |
2,865 | | | 2,865 | ||||||||||||
Other non-current assets |
31,052 | (23,718 | ) | 3,007 | (b) | 10,341 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total assets |
$ | 1,252,112 | $ | (327,275 | ) | $ | 9,481 | $ | 934,318 | |||||||
|
|
|
|
|
|
|
|
|||||||||
Liabilities and stockholders equity |
||||||||||||||||
Current liabilities: |
||||||||||||||||
Accounts payable and accrued expenses |
$ | 160,820 | $ | (61,272 | ) | $ | | $ | 99,548 | |||||||
Due to related party |
4,839 | | | 4,839 | ||||||||||||
Current portion, long-term debt |
2,000 | | | 2,000 | ||||||||||||
Current portion of workers compensation liability |
18,775 | (18,775 | ) | | | |||||||||||
Other current liabilities |
977 | | | 977 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total current liabilities |
187,411 | (80,047 | ) | | 107,364 | |||||||||||
Supplemental put obligation |
43,801 | | | 43,801 | ||||||||||||
Deferred income taxes |
76,328 | (11,096 | ) | | 65,232 | |||||||||||
Long-term debt |
290,500 | | (219,519 | ) (c) | 70,981 | |||||||||||
Workers compensation liability |
42,126 | (42,126 | ) | | | |||||||||||
Other non-current liabilities |
1,162 | | | 1,162 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total liabilities |
641,328 | (133,269 | ) | (219,519 | ) | 288,540 | ||||||||||
Stockholders equity |
||||||||||||||||
Stockholders equity |
458,795 | | 89,606 | (d) | 548,401 | |||||||||||
Noncontrolling interest |
151,989 | (54,612 | ) | | 97,377 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total stockholders equity |
610,784 | (54,612 | ) | 89,606 | 645,778 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total liabilities and stockholders equity |
$ | 1,252,112 | $ | (187,881 | ) | $ | (129,913 | ) | $ | 934,318 | ||||||
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|
|
|
|
|
|
|
Compass Diversified Holdings
Condensed Combined Pro Forma Statement of Operations
for the year ended December 31, 2008
(unaudited)
Staffmark Disposition | ||||||||||||||||
Compass Diversified Holdings as Reported |
Less: Staffmark as Reported |
Staffmark Pro Forma Adjustments |
Pro Forma Combined Compass Diversified Holdings |
|||||||||||||
(in thousands, except per share data) | ||||||||||||||||
Net sales |
$ | 532,127 | $ | | $ | | $ | 532,127 | ||||||||
Service revenues |
1,006,346 | (1,006,346 | ) | | | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total revenues |
1,538,473 | (1,006,346 | ) | | 532,127 | |||||||||||
Cost of sales |
363,675 | | | 363,675 | ||||||||||||
Cost of services |
832,531 | (832,531 | ) | | | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Gross profit |
342,267 | (173,815 | ) | | 168,452 | |||||||||||
Operating expenses: |
||||||||||||||||
Staffing expense |
102,438 | (102,438 | ) | | | |||||||||||
Selling, general and administrative expense |
165,768 | (48,067 | ) | | 117,701 | |||||||||||
Supplemental put expense |
6,382 | | | 6,382 | ||||||||||||
Management fees |
15,205 | | | 15,205 | ||||||||||||
Amortization expense |
24,605 | (9,476 | ) | | 15,129 | |||||||||||
Impairment expense |
| | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating income |
27,869 | (13,834 | ) | | 14,035 | |||||||||||
Other income (expense): |
||||||||||||||||
Interest income |
1,377 | | | 1,377 | ||||||||||||
Interest expense |
(17,828 | ) | 1,693 | 286 | (A) | (15,849 | ) | |||||||||
Amortization of debt issuance costs |
(1,969 | ) | | | (1,969 | ) | ||||||||||
Other income, net |
894 | (741 | ) | | 153 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income (loss) before income taxes |
10,343 | (12,882 | ) | 286 | (2,253 | ) | ||||||||||
Provision for income taxes |
6,526 | 542 | | 7,068 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income (loss) |
3,817 | (13,424 | ) | 286 | (9,321 | ) | ||||||||||
Net income attributable to noncontrolling interest |
3,493 | (1,774 | ) | | 1,719 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income (loss) attributable to Holdings |
$ | 324 | $ | (11,650 | ) | $ | 286 | $ | (11,040 | ) | ||||||
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|
|
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|
|
|
|
|||||||||
|
|
|
|
|||||||||||||
Basic and fully diluted income per share attributable to Holdings |
$ | 0.01 | $ | (0.35 | ) | |||||||||||
|
|
|
|
Compass Diversified Holdings
Condensed Combined Pro Forma Statement of Operations
for the year ended December 31, 2009
(unaudited)
Staffmark Disposition | ||||||||||||||||
Compass Diversified Holdings as Reported |
Less: Staffmark as Reported |
Staffmark Pro Forma Adjustments |
Pro Forma Combined Compass Diversified Holdings |
|||||||||||||
(in thousands, except per share data) | ||||||||||||||||
Net sales |
$ | 503,400 | $ | | $ | | $ | 503,400 | ||||||||
Service revenues |
745,340 | (745,340 | ) | | | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total revenues |
1,248,740 | (745,340 | ) | | 503,400 | |||||||||||
Cost of sales |
344,191 | | | 344,191 | ||||||||||||
Cost of services |
632,800 | (632,800 | ) | | | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Gross profit |
271,749 | (112,540 | ) | | 159,209 | |||||||||||
Operating expenses: |
||||||||||||||||
Staffing expense |
74,279 | (74,279 | ) | | | |||||||||||
Selling, general and administrative expense |
145,948 | (38,349 | ) | | 107,599 | |||||||||||
Supplemental put expense (reversal) |
(1,329 | ) | | | (1,329 | ) | ||||||||||
Management fees |
13,100 | | | 13,100 | ||||||||||||
Amortization expense |
24,609 | (9,822 | ) | | 14,787 | |||||||||||
Impairment expense |
59,800 | (59,800 | ) | | | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating income (loss) |
(44,658 | ) | 69,710 | | 25,052 | |||||||||||
Other income (expense): |
||||||||||||||||
Interest income |
1,178 | | | 1,178 | ||||||||||||
Interest expense |
(11,736 | ) | 1,846 | (776 | ) (A) | (10,666 | ) | |||||||||
Amortization of debt issuance costs |
(1,776 | ) | | | (1,776 | ) | ||||||||||
Loss on debt extinguishment |
(3,652 | ) | | | (3,652 | ) | ||||||||||
Other income (expense), net |
(282 | ) | 405 | | 123 | |||||||||||
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|
|
|
|
|
|
|
|||||||||
Income (loss) before income taxes |
(60,926 | ) | 71,961 | (776 | ) | 10,259 | ||||||||||
Provision (benefit) for income taxes |
(21,281 | ) | 31,057 | | 9,776 | |||||||||||
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|
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|
|
|
|
|
|||||||||
Net income (loss) |
(39,645 | ) | 40,904 | (776 | ) | 483 | ||||||||||
Net income (loss) attributable to noncontrolling interest |
(13,375 | ) | 15,701 | | 2,326 | |||||||||||
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|
|
|
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|
|
|||||||||
Net loss attributable to Holdings |
$ | (26,270 | ) | $ | 25,203 | $ | (776 | ) | $ | (1,843 | ) | |||||
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|||||||||
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|||||||||||||
Basic and fully diluted loss per share attributable to Holdings |
$ | (0.76 | ) | $ | (0.05 | ) | ||||||||||
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|
Compass Diversified Holdings
Condensed Combined Pro Forma Statement of Operations
for the year ended December 31, 2010
(unaudited)
Staffmark Disposition | ||||||||||||||||
Compass Diversified Holdings as Reported |
Less: Staffmark as Reported |
Staffmark Pro Forma Adjustments |
Pro Forma Combined Compass Diversified Holdings |
|||||||||||||
(in thousands, except per share data) | ||||||||||||||||
Net sales |
$ | 655,098 | $ | | $ | | $ | 655,098 | ||||||||
Service revenues |
1,002,511 | (1,002,511 | ) | | | |||||||||||
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|
|
|
|
|
|
|
|||||||||
Total revenues |
1,657,609 | (1,002,511 | ) | | 655,098 | |||||||||||
Cost of sales |
447,504 | | | 447,504 | ||||||||||||
Cost of services |
854,698 | (854,698 | ) | | | |||||||||||
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|
|
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|
|||||||||
Gross profit |
355,407 | (147,813 | ) | | 207,594 | |||||||||||
Operating expenses: |
||||||||||||||||
Staffing expense |
81,250 | (81,250 | ) | | | |||||||||||
Selling, general and administrative expense |
179,154 | (36,128 | ) | | 143,026 | |||||||||||
Supplemental put expense |
32,516 | | | 32,516 | ||||||||||||
Management fees |
15,380 | | | 15,380 | ||||||||||||
Amortization expense |
29,312 | (9,870 | ) | | 19,442 | |||||||||||
Impairment expense |
38,835 | | | 38,835 | ||||||||||||
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|
|
|
|
|
|
|||||||||
Operating loss |
(21,040 | ) | (20,565 | ) | | (41,605 | ) | |||||||||
Other income (expense): |
||||||||||||||||
Interest income |
20 | | | 20 | ||||||||||||
Interest expense |
(11,544 | ) | 1,849 | 109 | (A) | (9,586 | ) | |||||||||
Amortization of debt issuance costs |
(1,789 | ) | | | (1,789 | ) | ||||||||||
Other income (expense), net |
718 | (904 | ) | | (186 | ) | ||||||||||
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|
|
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|
|||||||||
Income (loss) before income taxes |
(33,635 | ) | (19,620 | ) | 109 | (53,146 | ) | |||||||||
Provision for income taxes |
11,135 | (1,736 | ) | | 9,399 | |||||||||||
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|
|
|
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|
|||||||||
Net loss |
(44,770 | ) | (17,884 | ) | 109 | (62,545 | ) | |||||||||
Net income attributable to noncontrolling interest |
3,987 | (2,939 | ) | | 1,048 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income (loss) attributable to Holdings |
$ | (48,757 | ) | $ | (14,945 | ) | $ | 109 | $ | (63,593 | ) | |||||
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|||||||||
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|
|||||||||||||
Basic and fully diluted loss per share attributable to Holdings |
$ | (1.19 | ) | $ | (1.55 | ) | ||||||||||
|
|
|
|
Compass Diversified Holdings
Condensed Combined Pro Forma Statement of Operations
for the nine months ended September 30, 2011
(unaudited)
Staffmark Disposition | ||||||||||||||||
Compass Diversified Holdings as Reported |
Less: Staffmark as Reported |
Staffmark Pro Forma Adjustments |
Pro Forma Combined Compass Diversified Holdings |
|||||||||||||
(in thousands, except per share data) | ||||||||||||||||
Net sales |
$ | 562,084 | $ | | $ | | $ | 562,084 | ||||||||
Service revenues |
780,080 | (780,080 | ) | | | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total revenues |
1,342,164 | (780,080 | ) | | 562,084 | |||||||||||
Cost of sales |
376,696 | | | 376,696 | ||||||||||||
Cost of services |
670,415 | (670,415 | ) | | | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Gross profit |
295,053 | (109,665 | ) | | 185,388 | |||||||||||
Operating expenses: |
||||||||||||||||
Staffing expense |
65,379 | (65,379 | ) | | | |||||||||||
Selling, general and administrative expense |
145,840 | (25,491 | ) | | 120,349 | |||||||||||
Supplemental put expense |
6,095 | | | 6,095 | ||||||||||||
Management fees |
13,033 | | | 13,033 | ||||||||||||
Amortization expense |
23,863 | (7,109 | ) | | 16,754 | |||||||||||
Impairment expense |
7,700 | | | 7,700 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating income |
33,143 | (11,686 | ) | | 21,457 | |||||||||||
Other income (expense): |
||||||||||||||||
Interest income |
4 | | | 4 | ||||||||||||
Interest expense |
(7,510 | ) | 1,405 | (214 | ) (A) | (6,319 | ) | |||||||||
Amortization of debt issuance costs |
(1,543 | ) | | (1,543 | ) | |||||||||||
Other income (expense), net |
813 | (835 | ) | | (22 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income before income taxes |
24,907 | (11,116 | ) | (214 | ) | 13,577 | ||||||||||
Provision for income taxes |
10,738 | (390 | ) | | 10,348 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income |
14,169 | (10,726 | ) | (214 | ) | 3,229 | ||||||||||
Net income attributable to noncontrolling interest |
6,669 | (1,774 | ) | | 4,895 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income (loss) attributable to Holdings |
$ | 7,500 | $ | (8,952 | ) | $ | (214 | ) | $ | (1,666 | ) | |||||
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|
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|
|||||||||
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|||||||||||||
Basic and fully diluted income (loss) per share attributable to Holdings |
$ | 0.16 | $ | (0.04 | ) | |||||||||||
|
|
|
|
Notes to Pro Forma Condensed Combined Financial Statements
(Unaudited)
Pro forma information is intended to reflect the impact of the Staffmark Disposition on the Companys historical financial position and results of operations through adjustments that are directly attributable to the transactions, that are factually supportable and, with respect to the pro forma statements of operations that are expected to have a continuing impact. In order to accomplish this, the Company eliminated the historical results of Staffmark from the Companys historical financial position and results of operations. Staffmarks historical operations, for current and prior periods, including the gain on the sale, will be presented as discontinued operations for financial reporting purposes beginning with the Companys Annual Report on Form 10-K for the year ended December 31, 2011.
This information in Note 1 provides a description of the pro forma adjustments from each line item in the pro forma condensed combined financial statements together with information explaining how the adjustments were derived or calculated for each period presented.
Note 1. Pro Forma Adjustments
Balance Sheet
The following adjustments correspond to those included in the unaudited condensed combined pro forma balance sheet as of September 30, 2011:
(a) | This adjustment reflects short term receivables related to certain customary escrow receipts that we expect to receive. |
(b) | This adjustment reflects long term receivables related to certain customary escrow receipts that we expect to receive. |
(c) | This adjustment reflects paying down $219.5 million of revolver debt. The Company did not reflect the payoff of term debt. The effect of this revolver debt payoff on the next five years of debt maturity payments is to reduce the fiscal year 2012 debt maturity payment by $219.5 million. |
(d) | This adjustment reflects the gain on the Staffmark Disposition as if the sale had occurred on September 30, 2011. This gain may not be representative of what will actually be recorded during the three and twelve month periods ended December 31, 2011. |
Statements of Operations
The following adjustments correspond to those included in the unaudited condensed combined pro forma statements of operations for all periods presented:
(A) | These adjustments reflect the effect of paying down $219.5 million of revolver debt outstanding during the respective periods with proceeds from the sale. The effect of paying off this revolver debt was to reduce interest expense on the revolver debt for all periods presented and increase commitment (unused) fees associated with the revolver debt for all periods presented. |