Steel Excel Inc. | ||
(Exact name of registrant as specified in its charter) | ||
Delaware | 0-15071 | 94-2748530 |
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
1133 Westchester Avenue, Suite N222, White Plains, New York | 10604 | |
(Address of Principal Executive Offices) | (Zip Code) |
n/a |
(Former Name or Former Address, If Changed Since Last Report) |
Item 2.01 | Completion of Acquisition or Disposition of Assets. |
Exhibit No. | Description |
23.1 | Consent of Independent Registered Public Accounting Firm |
99.1 | Audited financial statements of API as of November 30, 2013 and 2012, and for the years ended November 30, 2013 and 2012, the six months ended November 30, 2011, and the year ended May 31, 2011 |
99.2 | Unaudited financial statements of API as of May 31, 2014, and for the three months and six months ended May 31, 2014 and 2013, are attached as Exhibit 99.2 hereto and incorporated herein by reference. |
Steel Excel Inc. | |||
Dated: July 24, 2014 | By: | /s/ James F. McCabe, Jr. | |
Name: | James F. McCabe, Jr. | ||
Title: | Chief Financial Officer |
November 30, 2013 | November 30, 2012 | |||||||
Assets | ||||||||
Current | ||||||||
Cash and cash equivalents | $ | 6,351 | $ | 20,550 | ||||
Restricted cash (note 4c and 5b) | 1,500 | 700 | ||||||
Accounts receivable, less allowance for doubtful accounts of $697 and $609 at November 30, 2013 and 2012, respectively | 39,751 | 41,624 | ||||||
Inventories, less provision for obsolescence of $12,571 and $7,822 at November 30, 2013 and 2012, respectively (note 7) | 58,218 | 57,863 | ||||||
Deferred income taxes | 2,426 | 1,038 | ||||||
Prepaid expenses and other current assets | 2,445 | 2,560 | ||||||
Current assets of discontinued operations (note 5) | — | 13,836 | ||||||
110,691 | 138,171 | |||||||
Fixed assets, net (note 8) | 35,231 | 40,075 | ||||||
Fixed assets held for sale (note 2) | 150 | 900 | ||||||
Goodwill (note 9) | 116,770 | 116,770 | ||||||
Intangible assets, net | 38,780 | 47,934 | ||||||
Other non-current assets | 2,956 | 5,760 | ||||||
Long-lived assets of discontinued operations (note 5) | — | 43,105 | ||||||
Total assets | $ | 304,578 | $ | 392,715 | ||||
Liabilities, Redeemable Preferred Stock and Shareholders’ Equity | ||||||||
Current | ||||||||
Accounts payable and accrued expenses | $ | 32,217 | $ | 39,598 | ||||
Deferred revenue | 3,519 | 385 | ||||||
Current portion of long-term debt (note 12) | 8,155 | 2,328 | ||||||
Current liabilities of discontinued operations (note 5) | — | 1,888 | ||||||
43,891 | 44,199 | |||||||
Deferred income taxes | 5,517 | 3,411 | ||||||
Other long-term liabilities (note 13) | 1,135 | 1,048 | ||||||
Long-term debt, net of current portion and discount of $8,100 and $6,570 at November 30, 2013 and 2012, respectively (note 12) | 96,606 | 179,503 | ||||||
147,149 | 228,161 | |||||||
Commitments and contingencies (note 20) | ||||||||
Redeemable Preferred Stock | ||||||||
Preferred stock (Series A Mandatorily Redeemable Preferred Stock, $1,042 and $1,000 liquidation preference and 1,000,000 authorized shares, 26,000 and 26,000 shares issued and outstanding at November 30, 2013 and 2012, respectively) (note 14) | 26,326 | 25,581 | ||||||
Shareholders’ equity | ||||||||
Common shares ($0.001 par value, 250,000,000 and 100,000,000 authorized shares, 54,846,071 and 54,764,553 shares issued and outstanding at November 30, 2013 and 2012, respectively) | 55 | 55 | ||||||
Special voting stock ($0.01 par value, 1 share authorized, issued and outstanding at November 30, 2013 and 2012, respectively) | — | — | ||||||
Additional paid-in capital | 327,901 | 326,973 | ||||||
Common stock subscribed but not issued | 2,373 | 2,373 | ||||||
Accumulated deficit | (200,798 | ) | (192,513 | ) | ||||
Accumulated other comprehensive income | 1,572 | 2,085 | ||||||
131,103 | 138,973 | |||||||
Total Liabilities, Redeemable Preferred Stock and Shareholders’ Equity | $ | 304,578 | $ | 392,715 |
Year ended November 30, 2013 | Year ended November 30, 2012 | Six months ended November 30, 2011 | Year ended May 31, 2011 | |||||||||||||
Revenue, net | $ | 244,300 | $ | 242,381 | $ | 124,317 | $ | 96,045 | ||||||||
Cost of revenues | ||||||||||||||||
Cost of revenues | 192,279 | 186,209 | 94,702 | 77,538 | ||||||||||||
Restructuring charges (note 21) | 1,405 | 9,742 | 130 | 1,731 | ||||||||||||
Total cost of revenues | 193,684 | 195,951 | 94,832 | 79,269 | ||||||||||||
Gross profit | 50,616 | 46,430 | 29,485 | 16,776 | ||||||||||||
Operating expenses | ||||||||||||||||
General and administrative | 25,873 | 24,957 | 11,478 | 15,499 | ||||||||||||
Selling expenses | 15,015 | 14,440 | 7,169 | 5,569 | ||||||||||||
Research and development | 9,190 | 9,610 | 4,596 | 1,885 | ||||||||||||
Business acquisition and related charges | 849 | 4,027 | 638 | 12,798 | ||||||||||||
Restructuring charges (note 21) | 1,212 | 7,337 | 1,628 | 2,802 | ||||||||||||
Total operating expenses | 52,139 | 60,371 | 25,509 | 38,553 | ||||||||||||
Operating income (loss) | (1,523 | ) | (13,941 | ) | 3,976 | (21,777 | ) | |||||||||
Other expense (income), net | ||||||||||||||||
Goodwill impairment | — | 107,495 | — | — | ||||||||||||
Interest expense, net | 14,208 | 16,209 | 6,987 | 3,281 | ||||||||||||
Amortization of note discounts and deferred financing costs | 13,020 | 15,684 | 1,125 | 2,776 | ||||||||||||
Other expense (income), net | (14 | ) | 813 | 179 | (1,175 | ) | ||||||||||
27,214 | 140,201 | 8,291 | 4,882 | |||||||||||||
Loss from continuing operations before income taxes | (28,737 | ) | (154,142 | ) | (4,315 | ) | (26,659 | ) | ||||||||
Expense (benefit) for income taxes | (5,335 | ) | (5,307 | ) | (10,987 | ) | (2,680 | ) | ||||||||
Income (loss) from continuing operations | (23,402 | ) | (148,835 | ) | 6,672 | (23,979 | ) | |||||||||
Income (loss) from discontinued operations, net of tax | 16,174 | 132 | 1,212 | (2,238 | ) | |||||||||||
Net income (loss) | $ | (7,228 | ) | $ | (148,703 | ) | $ | 7,884 | $ | (26,217 | ) | |||||
Accretion on preferred stock | (1,057 | ) | — | — | — | |||||||||||
Net income (loss) attributable to common shareholders | $ | (8,285 | ) | $ | (148,703 | ) | $ | 7,884 | $ | (26,217 | ) | |||||
Income (loss) per share from continuing operations—Basic and diluted | $ | (0.44 | ) | $ | (2.69 | ) | $ | 0.13 | $ | (1.16 | ) | |||||
Income (loss) per share from discontinued operations—Basic and diluted | $ | 0.29 | $ | — | $ | 0.02 | $ | (0.11 | ) | |||||||
Net income (loss) per share—Basic and diluted | $ | (0.15 | ) | $ | (2.69 | ) | $ | 0.15 | $ | (1.27 | ) | |||||
Weighted average shares outstanding | ||||||||||||||||
Basic | 55,405,764 | 55,314,263 | 53,790,766 | 20,657,757 | ||||||||||||
Diluted | 55,405,764 | 55,314,263 | 53,802,763 | 20,657,757 | ||||||||||||
Comprehensive income (loss) Unrealized foreign currency translation adjustment | $ | (513 | ) | $ | 1,914 | $ | (115 | ) | $ | 107 | ||||||
Realized gain on marketable securities – net of taxes | — | — | — | (286 | ) | |||||||||||
Other comprehensive income (loss) | (513 | ) | 1,914 | (115 | ) | (179 | ) | |||||||||
Comprehensive income (loss) | $ | (7,741 | ) | $ | (146,789 | ) | $ | 7,769 | $ | (26,396 | ) |
Common stock-number of shares | Common shares amount | Additional paid-in capital | Common shares subscribed but not issued | Accumulated Deficit | Accumulated other comprehensive income (loss) | Total shareholders’ equity | |||||||||||||||||||||
Balance at May 31, 2010 | 8,211,319 | $ | 8 | $ | 41,569 | $ | 2,373 | $ | (25,477 | ) | $ | 465 | $ | 18,938 | |||||||||||||
Share-based compensation expense | — | — | 2,301 | — | — | — | 2,301 | ||||||||||||||||||||
Shares issued as compensation | 159,981 | — | 1,203 | — | — | — | 1,203 | ||||||||||||||||||||
Share repurchases | (35,544 | ) | — | (148 | ) | — | — | — | (148 | ) | |||||||||||||||||
Shares issued from conversion of Convertible debt | 1,216,667 | 1 | 3,649 | — | — | — | 3,650 | ||||||||||||||||||||
Shares issued to Parent as part of Merger | 22,000,000 | 22 | 133,078 | — | — | — | 133,100 | ||||||||||||||||||||
Fair value of options from Merger | — | — | 3,540 | — | — | — | 3,540 | ||||||||||||||||||||
Shares issued as part of Private Placement | 17,589,855 | 18 | 105,521 | — | — | — | 105,539 | ||||||||||||||||||||
Net loss for the period | — | — | — | — | (26,217 | ) | — | (26,217 | ) | ||||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | — | 107 | 107 | ||||||||||||||||||||
Realized gain on marketable securities—net of taxes | — | — | — | — | — | (286 | ) | (286 | ) | ||||||||||||||||||
Total comprehensive loss | (26,396 | ) | |||||||||||||||||||||||||
Balance at May 31, 2011 | 49,142,278 | $ | 49 | $ | 290,713 | $ | 2,373 | $ | (51,694 | ) | $ | 286 | $ | 241,727 |
Common stock-number of shares | Common shares amount | Additional paid-in capital | Common shares subscribed but not issued | Accumulated Deficit | Accumulated other comprehensive income (loss) | Total shareholders’ equity | |||||||||||||||||||||
Balance at May 31, 2011 | 49,142,278 | $ | 49 | $ | 290,713 | $ | 2,373 | $ | (51,694 | ) | $ | 286 | $ | 241,727 | |||||||||||||
Shares exchanged for subsidiary exchangeable shares and shares subject to issuance in connection with plan of arrangement (see Note 16) | 1,598 | — | — | — | — | — | — | ||||||||||||||||||||
Share-based compensation expense | — | — | 174 | — | — | — | 174 | ||||||||||||||||||||
Shares issued as part of Private Placement (Note 16) | 5,091,958 | 6 | 29,942 | — | — | — | 29,948 | ||||||||||||||||||||
Stock issued from stock option exercises (Note 17) | 332,550 | — | 1,846 | — | — | — | 1,846 | ||||||||||||||||||||
Net income for the period | — | — | — | — | 7,884 | — | 7,884 | ||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | — | (115 | ) | (115 | ) | ||||||||||||||||||
Total comprehensive income | 7,769 | ||||||||||||||||||||||||||
Balance at November 30, 2011 | 54,568,384 | $ | 55 | $ | 322,675 | $ | 2,373 | $ | (43,810 | ) | $ | 171 | $ | 281,464 |
Preferred Stock-number of shares | Preferred stock amount | Common stock-number of shares | Common stock amount | Additional paid-in capital | Common stock subscribed but not issued | Accumulated deficit | Accumulated other comprehensive income | Total shareholders’ equity | ||||||||||||||||||||||||||
Balance at November 30, 2011 | — | $ | — | 54,568,384 | $ | 55 | $ | 322,675 | $ | 2,373 | $ | (43,810 | ) | $ | 171 | $ | 281,464 | |||||||||||||||||
Series A Mandatorily Redeemable Preferred Stock (see Note 14) | 26,000 | 26,268 | — | — | — | — | — | — | — | |||||||||||||||||||||||||
Accrued dividend in kind (effective) on Series A Mandatorily Redeemable Preferred Stock (see Note 14) | — | (687 | ) | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Stock exchanged for subsidiary exchangeable shares and stock subject to issuance in connection with plan of arrangement (see Note 16) | — | — | 20,833 | — | — | — | — | — | — | |||||||||||||||||||||||||
Stock-based compensation expense | — | — | — | — | 1,550 | — | — | — | 1,550 | |||||||||||||||||||||||||
Stock issued as compensation | — | — | 227,477 | — | 674 | — | — | — | 674 | |||||||||||||||||||||||||
Stock withheld for taxes | — | — | (52,141 | ) | — | (198 | ) | — | — | — | (198 | ) | ||||||||||||||||||||||
Amounts related to beneficial conversion features and embedded derivatives on Convertible Notes and Preferred stock (note 14) | — | — | — | — | 2,272 | — | — | — | 2,272 | |||||||||||||||||||||||||
Net loss for the period | — | — | — | — | — | — | (148,703 | ) | — | (148,703 | ) | |||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | — | — | — | 1,914 | 1,914 | |||||||||||||||||||||||||
Total comprehensive loss | — | — | — | — | — | — | — | — | (146,789 | ) | ||||||||||||||||||||||||
Balance at November 30, 2012 | 26,000 | $ | 25,581 | 54,764,553 | $ | 55 | $ | 326,973 | $ | 2,373 | $ | (192,513 | ) | $ | 2,085 | $ | 138,973 |
Preferred Stock-number of shares | Preferred stock amount | Common stock-number of shares | Common stock amount | Additional paid-in capital | Common stock subscribed but not issued | Accumulated deficit | Accumulated other comprehensive income | Total shareholders’ equity | ||||||||||||||||||||||||||
Balance at November 30, 2012 | 26,000 | $ | 25,581 | 54,764,553 | $ | 55 | $ | 326,973 | $ | 2,373 | $ | (192,513 | ) | $ | 2,085 | $ | 138,973 | |||||||||||||||||
Accretion on Redeemable Preferred Stock (Dividends see Note 14) | — | (312 | ) | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Accrued dividend in kind (effective) on Series A Mandatorily Redeemable Preferred Stock (see Note 14) | — | 1,057 | — | — | — | — | (1,057 | ) | — | (1,057 | ) | |||||||||||||||||||||||
Stock exchanged for subsidiary exchangeable shares and stock subject to issuance in connection with plan of arrangement (see Note 16) | — | — | 22,916 | — | — | — | — | — | — | |||||||||||||||||||||||||
Stock-based compensation expense | — | — | — | — | 928 | — | — | — | 928 | |||||||||||||||||||||||||
Stock issued as compensation | — | — | 72,333 | — | — | — | — | — | — | |||||||||||||||||||||||||
Stock withheld for taxes | — | — | (13,731 | ) | — | — | — | — | — | — | ||||||||||||||||||||||||
Net loss for the period | — | — | — | — | — | — | (7,228 | ) | — | (7,228 | ) | |||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | — | — | — | (513 | ) | (513 | ) | |||||||||||||||||||||||
Total comprehensive loss | — | — | — | — | — | — | — | — | (7,741 | ) | ||||||||||||||||||||||||
Balance at November 30, 2013 | 26,000 | $ | 26,326 | 54,846,071 | $ | 55 | $ | 327,901 | $ | 2,373 | $ | (200,798 | ) | $ | 1,572 | $ | 131,103 |
Year Ended Nov. 30, 2013 | Year Ended Nov. 30, 2012 | Six Months Ended Nov. 30, 2011 | Year Ended May 31, 2011 | |||||||||||||
Cash flows from operating activities | ||||||||||||||||
Net income (loss) | $ | (7,228 | ) | $ | (148,703 | ) | $ | 7,884 | $ | (26,217 | ) | |||||
Less: (Gain) loss from discontinued operations | (16,174 | ) | (132 | ) | (1,212 | ) | 2,238 | |||||||||
Adjustments to reconcile net loss to net cash used by operating activities: | ||||||||||||||||
Depreciation and amortization | 17,130 | 16,945 | 7,817 | 2,369 | ||||||||||||
Amortization of note discounts and deferred financing costs | 2,743 | 3,040 | 1,125 | 511 | ||||||||||||
Amortization of note discounts due to debt extinguishment | 10,277 | 12,644 | — | 2,776 | ||||||||||||
Goodwill impairment | — | 107,495 | — | — | ||||||||||||
Write down of fixed assets | — | 2,821 | — | 461 | ||||||||||||
Stock based compensation, net | 928 | 2,224 | 173 | 3,504 | ||||||||||||
Accrued income tax- discontinued operations | (9,189 | ) | — | — | — | |||||||||||
Gain on sale of marketable securities | — | — | — | (322 | ) | |||||||||||
Gain on sale of fixed assets | — | (93 | ) | — | (916 | ) | ||||||||||
Deferred income taxes | 927 | (3,274 | ) | (10,896 | ) | (2,692 | ) | |||||||||
Changes in operating assets and liabilities, net of business acquisitions | ||||||||||||||||
Accounts receivable | 1,847 | 12,623 | (6,932 | ) | 3,422 | |||||||||||
Inventories | (457 | ) | 9,809 | (2,876 | ) | 15,955 | ||||||||||
Prepaid expenses and other current assets | 113 | (913 | ) | 1,269 | 617 | |||||||||||
Accounts payable and accrued expenses | (4,663 | ) | (9,805 | ) | 976 | (965 | ) | |||||||||
Deferred revenue | (1,196 | ) | (1,863 | ) | 101 | (8,263 | ) | |||||||||
Net cash provided (used) by continuing activities | (4,942 | ) | 2,818 | (2,571 | ) | (7,522 | ) | |||||||||
Net cash provided (used) by discontinued operations | 2,639 | 6,158 | 966 | (2,108 | ) | |||||||||||
Net cash provided (used) by operating activities | (2,303 | ) | 8,976 | (1,605 | ) | (9,630 | ) | |||||||||
Cash flows from investing activities | ||||||||||||||||
Purchase of fixed assets | (2,473 | ) | (1,139 | ) | (1,206 | ) | (1,855 | ) | ||||||||
Purchase of intangible assets | (732 | ) | (1,296 | ) | (564 | ) | — | |||||||||
Proceeds from disposal of fixed assets | 739 | 32 | — | 1,724 | ||||||||||||
Proceeds from sale of marketable securities | — | — | — | 324 | ||||||||||||
Net proceeds from sale of sensors & data bus | 80,497 | — | — | — | ||||||||||||
Business acquisitions net of cash acquired of $nil, $3,045, $7,141, and $32,353 (note 4) | (2,413 | ) | (29,052 | ) | (273,623 | ) | 32,354 | |||||||||
Restricted cash (note 4c and 5b) | (800 | ) | — | (700 | ) | — | ||||||||||
Discontinued operations (note 5) | (17 | ) | 358 | (118 | ) | 1,895 | ||||||||||
Net cash provided (used) by investing activities | 74,801 | (31,097 | ) | (276,211 | ) | 34,442 | ||||||||||
Cash flows from financing activities | ||||||||||||||||
Proceeds from issuance of common shares and share application | — | — | 31,795 | 105,539 | ||||||||||||
Repurchase and retirement of common shares | — | — | — | (148 | ) | |||||||||||
Short-term borrowings (repayment) | — | — | (4,372 | ) | 3,674 | |||||||||||
Repayment of long-term debt | (317,622 | ) | (2,192 | ) | (1,104 | ) | (30,171 | ) | ||||||||
Discontinued operations (note 5) | — | 4 | (4 | ) | (5 | ) | ||||||||||
Net proceeds—long-term debt (note 12) | 230,381 | 29,161 | 158,952 | — | ||||||||||||
Net cash provided by (used by) financing activities | (87,241 | ) | 26,973 | 185,267 | 78,889 | |||||||||||
Effect of exchange rate on cash and cash equivalents | 559 | (7 | ) | (178 | ) | 204 | ||||||||||
Net change in cash and cash equivalents | (14,184 | ) | 4,845 | (92,727 | ) | 103,905 | ||||||||||
Cash and cash equivalents, beginning of period—continuing operations | 20,550 | 15,628 | 108,238 | 4,496 | ||||||||||||
Cash and cash equivalents, beginning of period—discontinued operations | (15 | ) | 62 | 179 | 16 | |||||||||||
Cash and cash equivalents, beginning of period | 20,535 | 15,690 | 108,417 | 4,512 | ||||||||||||
Cash and cash equivalents, end of period | $ | 6,351 | $ | 20,535 | $ | 15,690 | $ | 108,417 | ||||||||
Less: cash and cash equivalents of discontinued operations, end of period | — | (15 | ) | 62 | 179 | |||||||||||
Cash and cash equivalents of continuing operations, end of period | $ | 6,351 | $ | 20,550 | $ | 15,628 | $ | 108,238 |
Buildings and leasehold improvements | 5-40 years | |
Computer equipment | 3-5 years | |
Furniture and fixtures | 5-8 years | |
Machinery and equipment | 5-10 years | |
Vehicles | 3 years |
Non-compete agreements | Straight line over 5 years | |
Computer software | Straight line over 3-5 years | |
Customer related intangibles | Straight line or the pattern in which the economic benefits are expected to be realized, over an estimated life of 4-15 years | |
Marketing related intangibles | The pattern in which the economic benefits are expected to be realized, over an estimated life of 3-10 years | |
Technology related intangibles | The pattern in which the economic benefits are expected to be realized, over an estimated life of 10 years |
(in thousands) | |||
Cash | $ | 3,045 | |
Accounts receivable and other current assets | 6,182 | ||
Inventory | 7,235 | ||
Fixed assets | 5,432 | ||
Customer, marketing and technology related intangible assets | 7,848 | ||
Goodwill | 11,364 | ||
Current liabilities | (4,614 | ) | |
Long-term liabilities | (3,265 | ) | |
Fair value of net assets acquired | $ | 33,227 | |
(in thousands) | |||
Land | $ | 155 | |
Buildings and leasehold improvements | 1,415 | ||
Computer equipment | 280 | ||
Furniture and fixtures | 70 | ||
Machinery and equipment | 3,504 | ||
Vehicles | 8 | ||
Total fixed assets acquired | $ | 5,432 | |
(in thousands) | |||
Inventory | $ | 275 | |
Fixed assets | 82 | ||
Goodwill | 2,177 | ||
Current liabilities | (225 | ) | |
Deferred revenue | (14 | ) | |
Fair value of net assets acquired | $ | 2,295 | |
Year ended November 30, | Six months ended November 30, | Year ended May 31, | ||||||||||
2012 | 2011 | 2011 | ||||||||||
Revenues | $ | 253,532 | $ | 148,385 | $ | 370,260 | ||||||
Net income (loss) from continuing operations | $ | (149,210 | ) | $ | 9,418 | $ | (2,419 | ) | ||||
Net income (loss) | $ | (149,210 | ) | $ | 9,418 | $ | (2,323 | ) | ||||
Net income (loss) from continuing operations per share—basic and diluted | $ | (2.70 | ) | $ | 0.18 | $ | (0.04 | ) | ||||
Net income (loss) per share—basic and diluted | $ | (2.70 | ) | $ | 0.18 | $ | (0.04 | ) |
(in thousands) | ||||||||||||||||
Year ended Nov. 30, 2013 | Year ended Nov. 30, 2012 | Six months ended Nov. 30, 2011 | Year ended May 31, 2011 | |||||||||||||
Revenue, net | $ | 7,571 | $ | 12,191 | $ | 5,814 | $ | 12,234 | ||||||||
Cost of revenues | 4,435 | 9,070 | 5,426 | 8,498 | ||||||||||||
Restructuring charges | — | 591 | 74 | 336 | ||||||||||||
Gross Profit | 3,136 | 2,530 | 314 | 3,400 | ||||||||||||
General and administrative | 484 | 1,064 | 765 | 3,461 | ||||||||||||
Selling expenses | 82 | 19 | 65 | 778 | ||||||||||||
Research and development | — | 41 | 143 | 504 | ||||||||||||
Restructuring charges | — | 24 | 497 | 1,161 | ||||||||||||
Provision for income taxes | 428 | 33 | (490 | ) | 2 | |||||||||||
Provision for income taxes—Gain on sale of Data Bus | 4,190 | — | — | — | ||||||||||||
Other expenses (income) | (10,002 | ) | — | (1 | ) | (173 | ) | |||||||||
Income (loss) from discontinued operations, net of tax | $ | 7,954 | $ | 1,349 | $ | (665 | ) | $ | (2,333 | ) |
2013 | 2012 | |||||||
Cash and cash equivalents | $ | — | $ | — | ||||
Inventories | — | 4,033 | ||||||
Current assets of discontinued operations | $ | — | $ | 4,033 | ||||
Fixed assets, net | $ | — | $ | 242 | ||||
Goodwill | — | 14,802 | ||||||
Long-lived assets of discontinued operations | $ | — | $ | 15,044 |
(in thousands) | ||||||||||||||||
Year ended Nov. 30, 2013 | Year ended Nov. 30, 2012 | Six months ended Nov. 30, 2011 | Year ended May 31, 2011 | |||||||||||||
Revenue, net | $ | 9,270 | $ | 26,247 | $ | 14,182 | $ | — | ||||||||
Cost of revenues | 7,155 | 19,181 | 9,606 | — | ||||||||||||
Restructuring charges | — | 3 | — | — | ||||||||||||
Gross Profit | 2,115 | 7,063 | 4,576 | — | ||||||||||||
General and administrative | 366 | 804 | 361 | — | ||||||||||||
Selling expenses | 497 | 1,294 | 721 | — | ||||||||||||
Research and development | 180 | 646 | 302 | — | ||||||||||||
Restructuring charges | — | 5 | — | — | ||||||||||||
Provision for income taxes | 258 | 1,642 | 1,317 | — | ||||||||||||
Provision for income taxes—Gain on sale of Sensors | 4,408 | — | — | — | ||||||||||||
Other expenses (income) | (11,814 | ) | 3,889 | (2 | ) | — | ||||||||||
Income (loss) from discontinued operations, net of tax | $ | 8,220 | $ | (1,217 | ) | $ | 1,877 | $ | — |
2013 | 2012 | |||||||
Cash and cash equivalents | $ | — | $ | (15 | ) | |||
Accounts Receivable | — | 3,605 | ||||||
Inventories | — | 6,067 | ||||||
Prepaid expenses and other current assets | — | 146 | ||||||
Current assets of discontinued operations | $ | — | $ | 9,803 | ||||
Fixed assets, net | $ | — | $ | 1,475 | ||||
Intangible assets, net | — | 2,156 | ||||||
Goodwill | — | 24,430 | ||||||
Long-lived assets of discontinued operations | $ | — | $ | 28,061 | ||||
Accounts payable and accrued expenses | $ | — | $ | 1,888 | ||||
Current liabilities of discontinued operations | $ | — | $ | 1,888 |
November 30, 2013 | November 30, 2012 | |||||||||||||||||||||||
2013 Total | Unobservable Measurement Criteria (Level 3) | Impairment | 2012 Total | Unobservable Measurement Criteria (Level 3) | Impairment | |||||||||||||||||||
Fixed assets held for sale | $ | 150 | $ | 150 | $ | — | $ | 900 | $ | 900 | $ | 1,781 | ||||||||||||
Derivative liabilities – Redeemable Preferred Stock (Note 14) | (179 | ) | (179 | ) | — | (267 | ) | (267 | ) | — | ||||||||||||||
Total | $ | (29 | ) | $ | (29 | ) | $ | — | $ | 633 | $ | 633 | $ | 1,781 |
Fixed Assets Held for Sale | Derivative Liabilities – Preferred Stock | |||||||
Balance as at November 30, 2011 | $ | 3,216 | $ | — | ||||
Less: Fixed assets sold | (535 | ) | — | |||||
Less: Impairment of fixed assets held for sale | (1,781 | ) | — | |||||
Add: Embedded features of convertible notes and preferred stock | — | (855 | ) | |||||
Less: Embedded features of convertible notes upon conversion to preferred stock | — | 588 | ||||||
Balance as at November 30, 2012 | $ | 900 | $ | (267 | ) | |||
Less: Fixed assets sold | (750 | ) | — | |||||
Less: Adjustment to fair value of derivative liabilities | — | 88 | ||||||
Balance as at November 30, 2013 | $ | 150 | $ | (179 | ) |
(in thousands) | ||||||||
2013 | 2012 | |||||||
Raw materials | $ | 26,015 | $ | 29,067 | ||||
Work in progress | 23,425 | 20,572 | ||||||
Finished goods | 8,778 | 8,224 | ||||||
Total | $ | 58,218 | $ | 57,863 |
As of November 30, 2013 (in thousands) | ||||||||||||
Cost | Accumulated Depreciation | Net Book Value | ||||||||||
Land | $ | 3,084 | $ | — | $ | 3,084 | ||||||
Buildings and leasehold improvements | 20,267 | (3,557 | ) | 16,710 | ||||||||
Computer equipment | 2,688 | (1,545 | ) | 1,143 | ||||||||
Furniture and fixtures | 1,482 | (948 | ) | 534 | ||||||||
Machinery and equipment | 28,551 | (14,826 | ) | 13,725 | ||||||||
Vehicles | 98 | (63 | ) | 35 | ||||||||
Fixed assets, net | $ | 56,170 | $ | (20,939 | ) | $ | 35,231 |
As of November 30, 2012 (in thousands) | ||||||||||||
Cost | Accumulated Depreciation | Net Book Value | ||||||||||
Land | $ | 3,297 | $ | — | $ | 3,297 | ||||||
Buildings and leasehold improvements | 20,820 | (2,425 | ) | 18,395 | ||||||||
Computer equipment | 2,722 | (988 | ) | 1,734 | ||||||||
Furniture and fixtures | 1,887 | (887 | ) | 1,000 | ||||||||
Machinery and equipment | 25,202 | (9,666 | ) | 15,536 | ||||||||
Vehicles | 122 | (9 | ) | 113 | ||||||||
Fixed assets, net | $ | 54,050 | $ | (13,975 | ) | $ | 40,075 |
(in thousands) | ||||||||
2,013 | 2,012 | |||||||
Goodwill not subject to amortization: | ||||||||
Beginning balance, net | $ | 116,770 | $ | 210,133 | ||||
Goodwill from C-MAC business acquisition (note 4a) | — | 11,364 | ||||||
Goodwill from RTIE business acquisition (note 4b) | — | 2,177 | ||||||
Goodwill from other business acquisition purchase price adjustments | — | 591 | ||||||
Goodwill impairment | — | (107,495 | ) | |||||
Ending balance, net | $ | 116,770 | $ | 116,770 |
November 30, 2013 (in thousands) | |||||||||||||||
Weighted Average Useful Life (years) | Cost | Accumulated Amortization | Net Book Value | ||||||||||||
Non-compete agreements | 2.0 | $ | 484 | $ | (403 | ) | $ | 81 | |||||||
Customer contracts | 8.1 | 33,485 | (10,798 | ) | 22,687 | ||||||||||
Technology | 7.5 | 18,965 | (6,636 | ) | 12,329 | ||||||||||
Tradenames | 3.3 | 7,376 | (5,623 | ) | 1,753 | ||||||||||
Computer software | 3.0 | 2,798 | (1,015 | ) | 1,783 | ||||||||||
Patents | 166 | (19 | ) | 147 | |||||||||||
Intangible assets, net | 7.1 | $ | 63,274 | $ | (24,494 | ) | $ | 38,780 |
November 30, 2012 (in thousands) | |||||||||||||||
Weighted Average Useful Life (years) | Cost | Accumulated Amortization | Net Book Value | ||||||||||||
Non-compete agreements | 2.0 | $ | 484 | $ | (12 | ) | $ | 472 | |||||||
Customer contracts | 8.1 | 33,485 | (9,671 | ) | 23,814 | ||||||||||
Technology | 7.5 | 18,965 | (2,124 | ) | 16,841 | ||||||||||
Tradenames | 3.3 | 7,376 | (2,199 | ) | 5,177 | ||||||||||
Computer software | 3.0 | 2,178 | (597 | ) | 1,581 | ||||||||||
Patents | 54 | (5 | ) | 49 | |||||||||||
Intangible assets, net | 7.1 | $ | 62,542 | $ | (14,608 | ) | $ | 47,934 |
(in thousands) | ||||||||
November 30, 2013 | November 30, 2012 | |||||||
Intangible assets: | ||||||||
Beginning balance, net | $ | 47,934 | $ | 47,453 | ||||
Intangible assets from business acquisition (note 4a) | — | 7,848 | ||||||
Intangible assets from business acquisition (note 4c) | — | 500 | ||||||
Intangible assets from business acquisition (note 4d) | — | — | ||||||
Patents and Computer software purchased | 732 | 1,296 | ||||||
Less: Amortization | (9,886 | ) | (9,163 | ) | ||||
Ending balance, net | $ | 38,780 | $ | 47,934 |
(in thousands) | ||||||||
2013 | 2012 | |||||||
Trade accounts payable | $ | 20,714 | $ | 24,575 | ||||
Accrued expenses | 6,586 | 10,045 | ||||||
Wage and vacation accrual | 4,917 | 4,978 | ||||||
Total | $ | 32,217 | $ | 39,598 |
(in thousands) | ||||||||
2013 | 2012 | |||||||
Term loans, due February 6, 2018, base rate plus 6.50% interest or LIBOR plus 7.50%, (a) | $ | 86,810 | $ | — | ||||
Asset based loans, due February 6, 2018, base rate plus a margin between 1.50% and 2.00%, or LIBOR plus a margin between 2.50% and 3.00%, (a) | 24,345 | — | ||||||
Term loans, repaid February 6, 2013, originally due June 1, 2016, base rate plus 6.25% interest or LIBOR plus 7.25%, (a) | — | 183,375 | ||||||
Mortgage loan, due 2027, 1.35% above Barclays fixed bank rate (b) | 1,318 | 1,424 | ||||||
Lockman loan repaid February 6, 2013, – C-MAC acquisition (c) | — | 2,724 | ||||||
Note payable – RTIE acquisition (d) | 139 | 540 | ||||||
Capital leases payable (e) | 249 | 338 | ||||||
$ | 112,861 | $ | 188,401 | |||||
Less: Current portion of long-term debt | (8,155 | ) | (2,328 | ) | ||||
Discount and deferred financing charges on term loans | (8,100 | ) | (6,570 | ) | ||||
Long-term portion | $ | 96,606 | $ | 179,503 |
a) | On February 6, 2013, the Company refinanced its credit facilities and entered into (i) a credit agreement with various lenders and Guggenheim Corporate Funding, LLC (the “Term Loan Agreement”) that provides for a $165,000 term loan facility and (ii) a credit agreement with various lenders and Wells Fargo Bank, National Association (the “Revolving Loan Agreement”) that provides for a $50,000 asset-based revolving borrowing base credit facility, with a $10,000 subfacility (or the Sterling equivalent) for certain of our United Kingdom subsidiaries, a $10,000 subfacility for letters of credit and a $5,000 subfacility for swingline loans. On February 6, 2013, in connection with entering into the Term Loan Agreement and the Revolving Loan Agreement, the Amended and Restated Credit Agreement, dated as of June 27, 2011 and amended on January 6, 2012 and March 22, 2012, by and among the lenders from time to time party thereto and Morgan Stanley Senior Funding, Inc., as administrative agent, lead arranger and sole book-runner, which had an outstanding balance of $183,400 was paid off and terminated, which resulted in the write-off of approximately $10,300 of deferred financing costs and note discounts. As of February 6, 2013, the Company borrowed $165,000 under the Term Loan Agreement and approximately $29,400 under the Revolving Loan Agreement. |
On July 5, 2013 and April 17, 2013, the Company sold Data Bus and Sensors (Note 5) and repaid approximately $28,780 and $44,919, respectively, of its term loans from the proceeds of these sales, in accordance with the Term Loan Agreement. In addition, the Company repaid a portion of its term loans using the net proceeds of $739 from the March 14, 2013, sale of certain land and a building in Palm Bay, Florida. As of November 30, 2013, $86,810 was outstanding under the Term Loan Agreement, $24,345 was outstanding under the Revolving Loan Agreement, and approximately $10,400 was available for future borrowings under the Revolving Loan Agreement. On May 22, 2013, the Company entered into a First Amendment to the Revolving Loan Agreement that amends certain cash management and reporting requirements. On October 10, 2013, the Company entered into an Amendment No. 1 to Credit Agreement (the “Amendment No. 1”). Amendment No. 1, among other things, amends the Term Loan Agreement to reduce the minimum interest coverage ratio, increase the maximum leverage ratio, reduce the interest rate on the term loans and modify the terms of the prepayment premium which the Company is required to pay upon voluntary prepayments or certain mandatory prepayments of the term loans. |
Term Loan Agreement The term loans incurred pursuant to the Term Loan Agreement, as amended, bear interest, at the Company’s option, at the base rate plus 6.50% or an adjusted LIBOR rate (based on one, two or three-month interest periods) plus 7.50% for the first year and at the base rate plus 7.50% or an adjusted LIBOR rate (based on one, two or three-month interest periods) plus 10.75% thereafter, with a LIBOR floor of 1.50%. For purposes of the Term Loan Agreement, the “base rate” means the highest of Wells Fargo Bank, National Association’s prime rate, the federal funds rate plus a margin equal to 0.50% and the adjusted LIBOR rate for a 3-month interest period plus a margin equal to 1.00%. Interest is due and payable in arrears monthly for term loans bearing interest at the base rate and at the end of an interest period (or at each three month interval in the case of term loans with interest periods greater than three months) in the case of term loans bearing interest at the adjusted LIBOR rate. Principal payments of the term loans are paid at the end of each of the Company’s fiscal quarters, commencing for the fiscal quarter ending May 31, 2013, with the balance of any outstanding term loans due and payable in full on February 6, 2018. The quarterly principal payments will amortize at 1.25% for the fiscal quarters through the end of the Company’s 2014 fiscal year, at 1.875% for the fiscal quarters through the end of the Company’s 2015 fiscal year and at 2.50% for each of the fiscal quarters thereafter. Under certain circumstances, we are required to prepay the term loans upon the receipt of cash proceeds of certain asset sales, cash proceeds of certain extraordinary receipts and cash proceeds of certain debt or equity financings, and based on a calculation of annual excess cash flow. Mandatory prepayments resulting from assets sales or certain debt financings may require the payment of certain prepayment premiums. The term loans are secured by a second priority security interest in accounts receivable, inventory, machinery, equipment and certain other personal property relating to the foregoing, and any proceeds from any of the foregoing, subject to certain exceptions and liens, and a first priority security position on substantially all other real and personal property, in each case that are owned by the Company and the subsidiary guarantors. |
The Term Loan Agreement contains customary affirmative and negative covenants, including covenants that limit or restrict the Company and its subsidiaries’ ability to, among other things, incur indebtedness, grant liens, dispose of assets and pay dividends or make distributions to stockholders, in each case subject to customary exceptions for a term loan of this size and type. Pursuant to the Term Loan Agreement, the Company is required to maintain compliance with an interest coverage ratio and a leverage ratio and to limit its annual capital expenditures to $4,000 per fiscal year (subject to carry-over rights). Revolving Loan Agreement The revolving loans incurred pursuant to the Revolving Loan Agreement bear interest, at the Company’s option, at the base rate plus a margin between 1.50% and 2.00% or an adjusted LIBOR rate (based on one, two, three or six-month interest periods) plus a margin between 2.50% and 3.00%, in each case with such margin being determined based on the Company’s average daily excess availability under the revolving credit facility for the preceding fiscal quarter. For purposes of the Revolving Loan Agreement, the “base rate” means the highest of Wells Fargo Bank, National Association’s prime rate, the federal funds rate plus a margin equal to 0.50% and the adjusted LIBOR rate for a 3-month interest period plus a margin equal to 1.00%. Interest is due and payable in arrears monthly for revolving loans bearing interest at the base rate and at the end of an interest period (or at each three month interval in the case of loans with interest periods greater than three months) in the case of revolving loans bearing interest at the adjusted LIBOR rate. Principal, together with all accrued and unpaid interest, is due and payable on February 6, 2018. The Company may prepay the revolving loans and terminate the commitments, in whole or in part, at any time without premium or penalty. Under certain circumstances, we are required to prepay the revolving loans upon the receipt of cash proceeds of certain asset sales. All borrowings under the Revolving Loan Agreement are limited by amounts available pursuant to a borrowing base calculation, which is based on percentages of eligible accounts receivable, inventory, machinery and equipment, in each case subject to reductions for applicable reserves. The Revolving Loan Agreement contains customary affirmative and negative covenants, including covenants that limit or restrict the Company and its subsidiaries’ ability to, among other things, incur indebtedness, grant liens, dispose of assets and pay dividends or make distributions to stockholders, in each case subject to customary exceptions for a credit facility of this size and type. Pursuant to the Revolving Loan Agreement, the Company is also required to maintain compliance with a fixed charge coverage ratio and to limit its annual capital expenditures to $4,000 per fiscal year (subject to carry-over rights) at such times that it fails to maintain excess availability under the revolving credit facility above a specified level. |
b) | A subsidiary of the Company in the United Kingdom entered into a 20 year term mortgage agreement in 2007, under which interest is charged at a margin of 1.35% over Barclays Fixed Base Rate of 0.5% at November 30, 2013. The mortgage is secured by the subsidiary’s assets. |
c) | A subsidiary of the Company in the United Kingdom entered into a 5 year term loan facility with Lockman Electronic Holdings Limited on December 16, 2011 (“Lockman Loan”), under which interest is charged at a |
margin of 5.5% over LIBOR. The margin was to increase by 0.5% each year on December 1 for the term of the agreement. The term loan was secured against a debenture over the subsidiary’s assets. This loan was repaid on February 6, 2013. |
d) | On March 19, 2012 the Company completed the acquisition of substantially all of the assets of RTIE (Note 4b) for a total purchase price of $2,295, with $1,500 payable in cash at closing and the remainder pursuant to a $795 Promissory Note payable in 24 equal monthly installments. The aggregate principal amount of the Promissory Note payable outstanding was $139 as of November 30, 2013. |
e) | The Company is the lessee of equipment under various capital leases with monthly payments of $9 and $10 for November 30, 2013 and 2012, respectively, including interest ranging from approximately 6 to 8%, secured by the leased assets that expire by May 2016. The assets and liabilities under the capital leases are recorded at the fair value of the asset. The assets are amortized over the lower of their related lease terms or its estimated productive life. At November 30, 2013 and 2012, $390 and $452 of assets from capital leases were included in fixed assets, net. |
(in thousands) | ||||||||||||
Year | Long-term debt | Capital leases | Total | |||||||||
2014 | $ | 4,964 | $ | 110 | $ | 5,074 | ||||||
2015 | 7,082 | 110 | 7,192 | |||||||||
2016 | 9,396 | 54 | 9,450 | |||||||||
2017 | 9,448 | — | 9,448 | |||||||||
2018 | 81,722 | — | 81,722 | |||||||||
$ | 112,612 | $ | 274 | $ | 112,886 | |||||||
Less: imputed interest | — | (25 | ) | (25 | ) | |||||||
$ | 112,612 | $ | 249 | $ | 112,861 |
Year ended November 30, 2013 | Year ended November 30, 2012 | Six months ended November 30, 2011 | Year ended May 31, 2011 | |||||||||||||
Income (loss) before income taxes: | ||||||||||||||||
United States | $ | (29,550 | ) | $ | (155,954 | ) | $ | (5,961 | ) | $ | (27,191 | ) | ||||
Non-United States | 813 | 1,812 | 1,646 | 532 | ||||||||||||
Total | $ | (28,737 | ) | $ | (154,142 | ) | $ | (4,315 | ) | $ | (26,659 | ) |
Year ended November 30, 2013 | Year ended November 30, 2012 | Six months ended November 30, 2011 | Year ended May 31, 2011 | |||||||||||||
Current: | ||||||||||||||||
United States | $ | (6,441 | ) | $ | (2,105 | ) | $ | (636 | ) | — | ||||||
Non-United States | 274 | 146 | 494 | — | ||||||||||||
(6,167 | ) | (1,959 | ) | (142 | ) | — | ||||||||||
Deferred: | ||||||||||||||||
United States | 617 | (3,445 | ) | (10,915 | ) | (2,680 | ) | |||||||||
Non-United States | 215 | 97 | 70 | — | ||||||||||||
832 | (3,348 | ) | (10,845 | ) | (2,680 | ) | ||||||||||
Income tax expense (benefit) | $ | (5,335 | ) | $ | (5,307 | ) | $ | (10,987 | ) | $ | (2,680 | ) |
Year ended Nov. 30, 2013 | Year ended Nov. 30, 2012 | Six months ended Nov. 30, 2011 | Year ended May 31, 2011 | |||||||||
U.S. federal statutory tax rate | 34.0 | % | 34.0 | % | 34.0 | % | 34.0 | % | ||||
Non-deductible expenses | (0.6 | ) | (3.5 | ) | (16.4 | ) | 1.1 | |||||
Effect of foreign tax rates | 0.2 | 0.1 | 4.9 | — | ||||||||
State income taxes, net of federal tax effect | 7.3 | 2.0 | (5.5 | ) | — | |||||||
Change in valuation allowance | (45.2 | ) | (9.0 | ) | 212.1 | (28.1 | ) | |||||
Change in tax rates | 0.4 | 0.6 | 14.3 | — | ||||||||
Impairment of goodwill | — | (22.5 | ) | — | — | |||||||
Tax credits | — | — | 6.4 | — | ||||||||
Utilization of continuing operations losses by discontinued operations | 22.2 | — | — | — | ||||||||
Other | 0.3 | 1.7 | 4.8 | 3.1 | ||||||||
Effective tax rate benefit/(expense) | 18.6 | % | 3.4 | % | 254.6 | % | 10.1 | % |
2013 | 2012 | |||||||
Future income tax assets | ||||||||
Loss carryforwards | $ | 16,728 | $ | 25,170 | ||||
Other | — | — | ||||||
Unrealized foreign exchange loss | — | — | ||||||
Marketable securities | — | — | ||||||
Share based compensation | 1,652 | 2,138 | ||||||
Inventory | 3,226 | 1,050 | ||||||
Capital assets | — | — | ||||||
Accruals | 453 | 1,037 | ||||||
Tax credits | 965 | 482 | ||||||
Valuation Allowance | (12,271 | ) | (16,051 | ) | ||||
10,753 | 13,826 | |||||||
Future income tax liabilities | ||||||||
Capital assets | (3,761 | ) | (4,333 | ) | ||||
Intangible assets | (6,816 | ) | (9,238 | ) | ||||
Deferred tax on export sales | (2,666 | ) | (2,468 | ) | ||||
Other | (587 | ) | — | |||||
(13,830 | ) | (16,039 | ) | |||||
$ | (3,077 | ) | $ | (2,213 | ) | |||
2013 | 2012 | |||||||
Balance sheet presentation | ||||||||
Deferred income tax assets—current | $ | 2,426 | $ | 1,038 | ||||
Deferred income tax assets—long-term (in Other non-current assets) | 14 | 160 | ||||||
Deferred income tax liability—current | — | — | ||||||
Deferred tax liabilities—long-term | (5,517 | ) | (3,411 | ) | ||||
Net deferred tax liabilities | $ | (3,077 | ) | $ | (2,213 | ) |
Balance at May 31, 2011 | — | ||
Increases related to the Spectrum acquisition | 248 | ||
Balance at November 30, 2011 | $ | 248 | |
Decreases related to IRS audit resolution | (215 | ) | |
Balance at November 30, 2012 | $ | 33 | |
Increases related to Canadian tax filing matters | 101 | ||
Balance at November 30, 2013 | $ | 134 | |
Year ended November 30, 2013 | Year ended November 30, 2012 | Six months ended November 30, 2011 | Year ended May 31, 2011 | |||||||||
Expected volatility | 81.9 | % | 89.5 | % | 93.4 | % | 97.4 | % | ||||
Expected dividends | — | % | — | % | — | % | — | % | ||||
Expected term | 6 years | 6 years | 6 years | 6 years | ||||||||
Risk-free rate | 0.85 | % | 0.91 | % | 1.83 | % | 1.93 | % |
Shares | Weighted Average Exercise Price | ||||||
Share Options outstanding—May 31, 2010 | 1,479,156 | $ | 5.71 | ||||
Less forfeited | (236,491 | ) | $ | 5.00 | |||
Exercised | — | $ | — | ||||
Issued | 1,043,334 | $ | 5.71 | ||||
Share Options outstanding—May 31, 2011 | 2,285,999 | $ | 5.74 | ||||
Less forfeited | (178,858 | ) | $ | 5.64 | |||
Exercised | (332,550 | ) | $ | 5.53 | |||
Issued | 145,000 | $ | 6.86 | ||||
Share Options outstanding—November 30, 2011 | 1,919,591 | $ | 5.72 | ||||
Less forfeited | (526,985 | ) | $ | 5.02 | |||
Exercised | — | $ | — | ||||
Issued | 1,025,000 | $ | 3.51 | ||||
Share Options outstanding— November 30, 2012 | 2,417,606 | $ | 5.06 | ||||
Less forfeited | (569,121 | ) | $ | 5.26 | |||
Exercised | — | $ | — | ||||
Issued | — | $ | — | ||||
Share Options outstanding—November 30, 2013 | 1,848,485 | $ | 4.98 | ||||
Share Options exercisable—November 30, 2013 | 1,242,313 | $ | 5.52 |
Units | Weighted Average Grant Date Fair Value | ||||||
RSUs outstanding—May 31, 2011 | — | $ | — | ||||
Issued | 51,000 | $ | 6.43 | ||||
RSUs outstanding—November 30, 2011 | 51,000 | $ | 6.43 | ||||
Issued (a) | 315,477 | $ | 3.61 | ||||
Exercised-Stock issued | (227,477 | ) | $ | 3.56 | |||
RSUs outstanding—November 30, 2012 | 139,000 | $ | 4.43 | ||||
Issued | 15,000 | $ | 2.56 | ||||
Exercised-Stock issued | (72,333 | ) | $ | 4.94 | |||
RSUs outstanding —November 30, 2013 | 81,667 | $ | 3.72 | ||||
RSUs exercisable —November 30, 2013 | — | $ | — |
(a) | 190,477 of the RSUs issued during the year ended November 30, 2012 were fully vested on the issuance date. |
RSUs and Options Outstanding | RSUs and Options Exercisable | ||||||||||||||||||||||||
Range of Exercise Price | Number of Outstanding at November 30, 2013 | Weighted Average Exercise Price | Weighted Average Remaining Life (Years) | Aggregate Intrinsic Value | Number Exercisable at November 30, 2013 | Weighted Average Exercise Price | Aggregate Intrinsic Value | ||||||||||||||||||
$0.00 – $ 3.55 | 854,998 | $ | 3.17 | 8.25 | $ | 539 | 263,319 | $ | 3.50 | $ | 79 | ||||||||||||||
$3.56 – $ 4.99 | 27,084 | $ | 3.56 | 6.90 | $ | 7 | 16,251 | $ | 3.56 | $ | 4 | ||||||||||||||
$5.00 – $ 6.99 | 1,030,984 | $ | 6.02 | 6.76 | $ | — | 945,651 | $ | 6.00 | $ | — | ||||||||||||||
$7.00 – $20.00 | 17,086 | $ | 11.85 | 3.98 | $ | — | 17,092 | $ | 11.85 | $ | — | ||||||||||||||
1,930,152 | 7.40 | $ | 546 | 1,242,313 | $ | 83 |
(in thousands) | ||||||||||||||||
Year ended Nov. 30, 2013 | Year ended Nov. 30, 2012 | Six months ended Nov. 30, 2011 | Year ended May 31, 2011 | |||||||||||||
(a) Supplemental Cash Flow Information | ||||||||||||||||
Cash paid for income taxes | $ | 2,802 | $ | 759 | $ | 227 | $ | 3 | ||||||||
Cash paid for interest | $ | 13,488 | $ | 16,001 | $ | 6,093 | $ | 2,793 | ||||||||
(b) Non cash transactions | ||||||||||||||||
Term loan issued in acquisition (note 4a) | $ | — | $ | 2,700 | $ | — | $ | — |
Year ended November 30, | Year ended November 30, | Six months ended November 30, | Year ended May 31, | |||||||||
2013 | 2012 | 2011 | 2011 | |||||||||
Weighted average shares-basic | 55,405,764 | 55,314,263 | 53,790,766 | 20,657,757 | ||||||||
Effect of dilutive securities | * | * | 11,997 | * | ||||||||
Weighted average shares—diluted | 55,405,764 | 55,314,263 | 53,802,763 | 20,657,757 |
* | Outstanding options and RSUs aggregating 1,970,591 incremental shares, and 955,362 warrants have been excluded from the November 30, 2011 computation of diluted EPS as they are anti-dilutive. All outstanding options aggregating 1,930,152 (2,556,606 - 2012) incremental shares, and 892,862 warrants have been excluded from the November 30, 2013 and 2012 computation of diluted EPS, respectively, and all outstanding options aggregating 2,285,999 incremental shares and 955,362 warrants have been excluded from the May 31, 2011 computation of diluted EPS, as they are anti-dilutive due to the losses generated in each respective year. |
(a) | Rent |
(in thousands) | |||
2014 | $ | 3,941 | |
2015 | 2,889 | ||
2016 | 2,493 | ||
2017 | 2,228 | ||
2018 | 1,637 | ||
Thereafter | 2,235 | ||
Total | $ | 15,423 | |
b) | On September 15, 2011, Currency, Inc., KII Inc., Kuchera Industries, LLC, William Kuchera and Ronald Kuchera (the “Plaintiffs”) filed a lawsuit against API and three API subsidiaries (the “API Pennsylvania Subsidiaries”) in the Court of Chancery of the State of Delaware in relation to the Asset Purchase Agreement by and among API, the API Pennsylvania Subsidiaries, the KGC Companies, William Kuchera, and Ronald Kuchera dated January 20, 2010. Plaintiffs’ complaint alleges claims for breach of contract and unjust enrichment based on their contention that API and the API Pennsylvania Subsidiaries violated the Agreement by failing to issue certain shares of stock to Plaintiffs and by failing to cooperate with Plaintiffs in the filing of a final general and administrative overhead rate with the Defense Contracting Audit Agency. API and the API Pennsylvania Subsidiaries filed an answer to the complaint denying all liability and a counterclaim for breach of contract against Plaintiffs. The final outcome and impact of this matter is subject to many variables, and cannot be predicted. Of the 550,000 shares that have not been delivered under the Asset Purchase Agreement, 126,250 were placed in escrow and the remaining 423,750 shares have been accounted for as common shares subscribed but not issued with a value of $2,373. |
c) | The Aster Group filed a lawsuit on November 24, 2010 against Spectrum, in Worcester Superior Court. The lawsuit arose out of a lease between Aster as landlord and Spectrum as tenant for a commercial property located at 165 Cedar Hill Street in Marlborough Massachusetts (the “Property”). This claim was settled on March 19, 2013. |
d) | The Company did not file its July 31, 2011 U.S. tax return timely and filed a Private Letter Ruling to request the IRS to grant relief to allow the Company to file a consolidated U.S. tax return for its tax year ended July 31, 2011. A favorable ruling from the IRS was received during the fiscal quarter ended May 31, 2013, which allows the Company to file consolidated U.S. tax returns. |
e) | The Company is also a party to lawsuits in the normal course of its business. Litigation can be unforeseeable, expensive, lengthy and disruptive to normal business operations. Moreover, the results of complex legal proceedings are difficult to predict. An unfavorable resolution of a particular lawsuit could have a material adverse effect on the Company’s business, operating results, or financial condition. |
EMS Restructuring (in thousands) | |||
Salary and related charges | $ | 591 | |
Inventory write-down | 7,401 | ||
Fixed asset impairment | 865 | ||
Lease impairment | 3,672 | ||
Accumulated restructuring charges at November 30, 2012 | 12,529 | ||
Cash payments | (591 | ) | |
Non-cash charges | (9,273 | ) | |
Balance-Lease impairment accrual, November 30, 2013 | $ | 2,665 | |
(in thousands) | ||||||||||||||||
Year ended Nov. 30, 2013 | Year ended Nov. 30, 2012 | Six months ended Nov. 30, 2011 | Year ended May 31, 2011 | |||||||||||||
Opening balance | $ | 210 | $ | 780 | $ | 460 | $ | 525 | ||||||||
Restructuring charges | 1,327 | 5,173 | 2,304 | 6,030 | ||||||||||||
Accumulated restructuring charges | 1,537 | 5,953 | 2,764 | 6,555 | ||||||||||||
Cash payments | (1,537 | ) | (5,743 | ) | (1,984 | ) | (5,681 | ) | ||||||||
Non-cash charges | — | — | — | (414 | ) | |||||||||||
Ending Balance | $ | — | $ | 210 | $ | 780 | $ | 460 |
Year ended November 30, 2013 (in thousands) | SSC | SSIA | EMS | Corporate | Inter Segment Eliminations | Total | ||||||||||||||||||
Sales to external customers | $ | 170,685 | $ | 18,300 | $ | 55,315 | $ | — | $ | — | $ | 244,300 | ||||||||||||
Total revenue | 170,685 | 18,300 | 55,315 | — | — | 244,300 | ||||||||||||||||||
Operating income before expenses below: | 23,429 | 4,065 | (346 | ) | — | — | 27,148 | |||||||||||||||||
Corporate—head office expenses | — | — | — | 8,075 | — | 8,075 | ||||||||||||||||||
Acquisition related charges | 196 | — | 39 | 614 | — | 849 | ||||||||||||||||||
Restructuring | 2,046 | 111 | 240 | 220 | — | 2,617 | ||||||||||||||||||
Depreciation and amortization | 11,278 | 412 | 5,114 | 326 | — | 17,130 | ||||||||||||||||||
Other expense (income) | 2,475 | 70 | 112 | 24,557 | — | 27,214 | ||||||||||||||||||
Income tax expense (benefit) | 1,929 | 581 | — | (7,845 | ) | — | (5,335 | ) | ||||||||||||||||
Income (loss) from continuing operations | $ | 5,505 | $ | 2,891 | $ | (5,851 | ) | $ | (25,947 | ) | $ | — | $ | (23,402 | ) | |||||||||
Income from discontinued operations, net of tax | 16,174 | — | — | — | — | 16,174 | ||||||||||||||||||
Net income (loss) | $ | 21,679 | $ | 2,891 | $ | (5,851 | ) | $ | (25,947 | ) | $ | — | $ | (7,228 | ) | |||||||||
Segment assets—as at November 30, 2013 | $ | 249,363 | $ | 15,068 | $ | 34,741 | $ | 5,406 | $ | — | $ | 304,578 | ||||||||||||
Goodwill included in assets—as at Nov. 30, 2013 | $ | 114,301 | $ | — | $ | 2,469 | $ | — | $ | — | $ | 116,770 | ||||||||||||
Purchase of fixed assets, to November 30, 2013 | $ | 2,042 | $ | 64 | $ | 363 | $ | 4 | $ | — | $ | 2,473 |
Year ended November 30, 2012 (in thousands) | SSC | SSIA | EMS | Corporate | Inter Segment Eliminations | Total | ||||||||||||||||||
Sales to external customers | $ | 160,579 | $ | 22,502 | $ | 59,300 | $ | — | $ | — | $ | 242,381 | ||||||||||||
Total revenue | 160,579 | 22,502 | 59,300 | — | — | 242,381 | ||||||||||||||||||
Operating income before expenses below: | 27,240 | 4,246 | 363 | — | — | 31,849 | ||||||||||||||||||
Corporate—head office expenses | — | — | — | 7,739 | — | 7,739 | ||||||||||||||||||
Acquisition related charges | 817 | — | — | 3,210 | — | 4,027 | ||||||||||||||||||
Restructuring | 2,776 | 946 | 13,120 | 237 | — | 17,079 | ||||||||||||||||||
Depreciation and amortization | 12,515 | 375 | 3,817 | 238 | — | 16,945 | ||||||||||||||||||
Goodwill impairment | 20,387 | — | 87,108 | — | — | 107,495 | ||||||||||||||||||
Other expense (income) | 3,641 | 19 | 117 | 28,929 | — | 32,706 | ||||||||||||||||||
Income tax expense (benefit) | (1,992 | ) | 556 | 10 | (3,881 | ) | — | (5,307 | ) | |||||||||||||||
Income (loss) from continuing operations | $ | (10,904 | ) | $ | 2,350 | $ | (103,809 | ) | $ | (36,472 | ) | $ | — | $ | (148,835 | ) | ||||||||
Income from discontinued operations, net of tax | 132 | — | — | — | — | 132 | ||||||||||||||||||
Net income (loss) | $ | (10,772 | ) | $ | 2,350 | $ | (103,809 | ) | $ | (36,472 | ) | $ | — | $ | (148,703 | ) | ||||||||
Segment assets—as at November 30, 2012 | $ | 317,791 | $ | 13,496 | $ | 52,589 | $ | 8,839 | $ | — | $ | 392,715 | ||||||||||||
Goodwill included in assets—as at Nov. 30, 2012 | $ | 114,301 | $ | — | $ | 2,469 | $ | — | $ | — | $ | 116,770 | ||||||||||||
Purchase of fixed assets, to November 30, 2012 | $ | 1,014 | $ | 19 | $ | 106 | $ | — | $ | — | $ | 1,139 |
Six months ended November 30, 2011 (in thousands) | SSC | SSIA | EMS | Corporate | Inter Segment Eliminations | Total | ||||||||||||||||||
Sales to external customers | $ | 71,504 | $ | 12,522 | $ | 40,291 | $ | — | $ | — | $ | 124,317 | ||||||||||||
Total revenue | 71,504 | 12,522 | 40,291 | — | — | 124,317 | ||||||||||||||||||
Operating income (loss) before expenses below: | 12,497 | 1,948 | 1,822 | — | — | 16,267 | ||||||||||||||||||
Corporate—head office expenses | — | — | — | 2,078 | — | 2,078 | ||||||||||||||||||
Corporate—acquisition related charges | — | — | — | 638 | — | 638 | ||||||||||||||||||
Restructuring costs | 365 | 458 | 631 | 304 | — | 1,758 | ||||||||||||||||||
Depreciation and amortization | 5,387 | 176 | 2,241 | 13 | — | 7,817 | ||||||||||||||||||
Other expense (income) | 700 | 43 | (378 | ) | 7,926 | — | 8,291 | |||||||||||||||||
Income tax expense (benefit) | (11,451 | ) | 400 | 3 | 61 | — | (10,987 | ) | ||||||||||||||||
Income (loss) from continuing operations | 17,496 | 871 | (675 | ) | (11,020 | ) | — | 6,672 | ||||||||||||||||
Income from discontinued operations, net of tax | 1,212 | — | — | — | — | 1,212 | ||||||||||||||||||
Net income (loss) | $ | 18,708 | $ | 871 | $ | (675 | ) | $ | (11,020 | ) | $ | — | $ | 7,884 | ||||||||||
Segment assets—as at November 30, 2011 | $ | 326,807 | $ | 15,604 | $ | 158,990 | $ | 5,046 | $ | — | $ | 506,447 | ||||||||||||
Goodwill included in assets—as at Nov. 30, 2011 | $ | 120,689 | $ | — | $ | 89,444 | $ | — | $ | — | $ | 210,133 | ||||||||||||
Purchase of fixed assets, to November 30, 2011 | $ | 756 | $ | 200 | $ | 250 | $ | — | $ | — | $ | 1,206 |
Year ended May 31, 2011 (in thousands) | SSC | SSIA | EMS | Corporate | Inter Segment Eliminations | Total | ||||||||||||||||||
Sales to external customers | $ | 14,624 | $ | 19,128 | $ | 62,293 | $ | — | $ | — | $ | 96,045 | ||||||||||||
Total revenue | 14,624 | 19,128 | 62,293 | — | — | 96,045 | ||||||||||||||||||
Operating income before expenses below: | (289 | ) | (667 | ) | 3,912 | — | — | 2,956 | ||||||||||||||||
Corporate—head office expenses | — | — | — | 5,033 | — | 5,033 | ||||||||||||||||||
Corporate—acquisition related charges | — | — | — | 12,798 | — | 12,798 | ||||||||||||||||||
Restructuring | 43 | 442 | 2,336 | 1,712 | — | 4,533 | ||||||||||||||||||
Depreciation and amortization | 393 | 418 | 1,453 | 105 | — | 2,369 | ||||||||||||||||||
Other expense (income) | (802 | ) | 62 | 466 | 5,156 | — | 4,882 | |||||||||||||||||
Income tax expense (benefit) | (2,691 | ) | — | 11 | — | — | (2,680 | ) | ||||||||||||||||
Income (loss) from continuing operations | $ | 2,768 | $ | (1,589 | ) | $ | (354 | ) | $ | (24,804 | ) | $ | — | $ | (23,979 | ) | ||||||||
Loss from discontinued operations, net of tax | (2,238 | ) | — | — | — | — | (2,238 | ) | ||||||||||||||||
Net income (loss) | $ | 530 | $ | (1,589 | ) | $ | (354 | ) | $ | (24,804 | ) | $ | — | $ | (26,217 | ) | ||||||||
Segment assets—as at May 31, 2011 | $ | 7,565 | $ | 11,083 | $ | 150,696 | $ | 103,828 | $ | — | $ | 273,172 | ||||||||||||
Goodwill included in assets—as at May 31, 2011 | $ | 1,141 | $ | — | $ | 89,160 | $ | — | $ | — | $ | 90,301 | ||||||||||||
Purchase of fixed assets, to May 31, 2011 | $ | 235 | $ | 647 | $ | 901 | $ | 72 | $ | — | $ | 1,855 |
(in thousands) | ||||||||||||||||
Year ended November 30, 2013 | Year ended November 30, 2012 | Six months ended November 30, 2011 | Year ended May 31, 2011 | |||||||||||||
Revenues | ||||||||||||||||
United States | $ | 177,057 | $ | 185,564 | $ | 101,499 | $ | 80,444 | ||||||||
United Kingdom | 23,503 | 22,832 | 6,047 | 6,267 | ||||||||||||
Canada | 9,188 | 9,286 | 3,195 | 7,334 | ||||||||||||
China | 3,834 | 7,257 | 1,897 | — | ||||||||||||
Germany | 5,002 | 4,067 | 1,606 | — | ||||||||||||
All other countries | 25,716 | 13,375 | 10,073 | 2,000 | ||||||||||||
Total | $ | 244,300 | $ | 242,381 | $ | 124,317 | $ | 96,045 |
(in thousands) | ||||||||
2013 | 2012 | |||||||
Long-lived assets (in thousands) | ||||||||
United States | $ | 25,369 | $ | 30,905 | ||||
United Kingdom | 9,121 | 8,878 | ||||||
Canada | 452 | 642 | ||||||
Mexico | 29 | 48 | ||||||
China | 398 | 485 | ||||||
Germany | 12 | 17 | ||||||
Total | $ | 35,381 | $ | 40,975 |
(in thousands) | ||||||||||||||||
For the Year Ended Nov. 30, 2012 | For the Year Ended Nov. 30, 2011 (Unaudited) | For the Six Months Ended Nov. 30, 2011 | For the Six Months Ended Nov. 30, 2010 (Unaudited) | |||||||||||||
Revenue, net | $ | 242,381 | $ | 172,499 | $ | 124,317 | $ | 47,862 | ||||||||
Cost of revenues | ||||||||||||||||
Cost of revenues | 186,209 | 135,455 | 94,702 | 36,785 | ||||||||||||
Restructuring charges (note 21) | 9,742 | 1,289 | 130 | 572 | ||||||||||||
Total cost of revenues | 195,951 | 136,744 | 94,832 | 37,357 | ||||||||||||
Gross profit | 46,430 | 35,755 | 29,485 | 10,505 | ||||||||||||
Operating expenses | ||||||||||||||||
General and administrative | 24,957 | 20,165 | 11,478 | 6,811 | ||||||||||||
Selling expenses | 14,440 | 10,734 | 7,169 | 2,003 | ||||||||||||
Research and development | 9,610 | 5,547 | 4,596 | 935 | ||||||||||||
Business acquisition and related charges | 4,027 | 13,436 | 638 | — | ||||||||||||
Restructuring charges (note 21) | 7,337 | 3,521 | 1,628 | 909 | ||||||||||||
60,371 | 53,403 | 25,509 | 10,658 | |||||||||||||
Operating income (loss) | (13,941 | ) | (17,648 | ) | 3,976 | (153 | ) | |||||||||
Other expense (income), net | ||||||||||||||||
Goodwill impairment | 107,495 | — | — | — | ||||||||||||
Interest expense, net | 16,209 | 7,736 | 6,987 | 2,021 | ||||||||||||
Amortization of note discounts and deferred financing costs | 15,684 | 3,957 | 1,125 | 510 | ||||||||||||
Other expense (income), net | 813 | (220 | ) | 179 | (833 | ) | ||||||||||
140,201 | 11,473 | 8,291 | 1,698 | |||||||||||||
Loss from continuing operations before income taxes | (154,142 | ) | (29,121 | ) | (4,315 | ) | (1,851 | ) | ||||||||
(Benefit) expense for income taxes | (5,307 | ) | (13,677 | ) | (10,987 | ) | 10 | |||||||||
Income (loss) from continuing operations | (148,835 | ) | (15,444 | ) | 6,672 | (1,861 | ) | |||||||||
Income (loss) from discontinued operations, net of income taxes | 132 | (1,884 | ) | 1,212 | 858 | |||||||||||
Net income (loss) | $ | (148,703 | ) | $ | (17,328 | ) | $ | 7,884 | $ | (1,003 | ) | |||||
Income (loss) per share from continuing operations—Basic and diluted | $ | (2.69 | ) | $ | (0.36 | ) | $ | 0.13 | $ | (0.21 | ) | |||||
Income per share from discontinued operations—Basic and diluted | $ | — | $ | (0.04 | ) | $ | 0.02 | $ | 0.10 | |||||||
Net income (loss) per share—Basic and diluted | $ | (2.69 | ) | $ | (0.40 | ) | $ | 0.15 | $ | (0.11 | ) | |||||
Weighted average shares outstanding | ||||||||||||||||
Basic | 55,314,263 | 43,177,538 | 53,790,766 | 8,874,263 | ||||||||||||
Diluted | 55,314,263 | 43,177,538 | 53,802,763 | 9,274,197 |
(in thousands) | ||||||||||||||||
For the Year Ended Nov. 30, 2012 | For the Year Ended Nov. 30, 2011 (Unaudited) | For the Six Months Ended Nov. 30, 2011 | For the Six Months Ended Nov. 30, 2010 (Unaudited) | |||||||||||||
Net Cash flows provided (used) by continuing activities | $ | 2,818 | $ | (7,644 | ) | $ | (2,571 | ) | $ | (3,606 | ) | |||||
Net Cash flows provided by discontinued operations | 6,158 | (5,475 | ) | 966 | 5,491 | |||||||||||
Cash flows provided (used) by investing activities | (31,097 | ) | (242,335 | ) | (276,211 | ) | 566 | |||||||||
Cash flows provided (used) by financing activities | 26,973 | 265,304 | 185,267 | (1,149 | ) | |||||||||||
Effect of exchange rate on cash and cash equivalents | (7 | ) | 331 | (178 | ) | (305 | ) | |||||||||
Net change in cash and cash equivalents | $ | 4,845 | $ | 10,181 | $ | (92,727 | ) | $ | 997 |
Three months ended | Year ended Nov. 30, 2013 | |||||||||||||||||||
Feb. 28, 2013 | May 31, 2013 | Aug. 31, 2013 | Nov. 30, 2013 | |||||||||||||||||
Revenues | $ | 58,304 | $ | 64,229 | $ | 62,630 | $ | 59,137 | $ | 244,300 | ||||||||||
Operating expenses | 13,334 | 13,520 | 12,659 | 12,626 | 52,139 | |||||||||||||||
Operating income (loss) | (1,281 | ) | 1,097 | 2,315 | (3,654 | ) | (1,523 | ) | ||||||||||||
Net income (loss) | $ | (14,426 | ) | $ | 7,473 | $ | 6,968 | $ | (7,243 | ) | $ | (7,228 | ) | |||||||
Basic earnings (loss) per share | $ | (0.26 | ) | $ | 0.13 | $ | 0.12 | $ | (0.14 | ) | $ | (0.15 | ) | |||||||
Diluted earnings (loss) per share | $ | (0.26 | ) | $ | 0.13 | $ | 0.12 | $ | (0.14 | ) | $ | (0.15 | ) |
Three months ended | Year ended Nov. 30, 2012 | |||||||||||||||||||
Feb. 28, 2012 | May 31, 2012 | Aug. 31, 2012 | Nov. 30, 2012 | |||||||||||||||||
Revenues | $ | 61,984 | $ | 68,270 | $ | 58,759 | $ | 53,368 | $ | 242,381 | ||||||||||
Operating expenses | 12,422 | 18,076 | 14,003 | 15,870 | 60,371 | |||||||||||||||
Operating income (loss) | 3,128 | (10,779 | ) | (1,152 | ) | (5,138 | ) | (13,941 | ) | |||||||||||
Net income (loss) | $ | 773 | $ | (109,507 | ) | $ | (27,666 | ) | $ | (12,303 | ) | $ | (148,703 | ) | ||||||
Basic earnings (loss) per share | $ | 0.01 | $ | (1.98 | ) | $ | (0.50 | ) | $ | (0.22 | ) | $ | (2.69 | ) | ||||||
Diluted earnings (loss) per share | $ | 0.01 | $ | (1.98 | ) | $ | (0.50 | ) | $ | (0.22 | ) | $ | (2.69 | ) |
Three months ended | Six months ended Nov. 30, 2011 | |||||||||||
Aug. 31, 2011 | Nov. 30, 2011 | |||||||||||
Revenues | $ | 58,425 | $ | 65,892 | $ | 124,317 | ||||||
Operating expenses | 13,598 | 11,911 | 25,509 | |||||||||
Operating income (loss) | 13 | 3,963 | 3,976 | |||||||||
Net income (loss) | $ | 10,372 | $ | (2,488 | ) | $ | 7,884 | |||||
Basic earnings (loss) per share | $ | 0.20 | $ | (0.05 | ) | $ | 0.15 | |||||
Diluted earnings (loss) per share | $ | 0.20 | $ | (0.05 | ) | $ | 0.15 |
Three months ended | ||||||||||||||||||||
Aug. 31, 2010 | Nov. 30, 2010 | Feb. 28, 2011 | May 31, 2011 | Year ended May 31, 2011 | ||||||||||||||||
Revenues | $ | 25,197 | $ | 22,665 | $ | 23,139 | $ | 25,044 | $ | 96,045 | ||||||||||
Operating expenses | 4,562 | 6,096 | 11,062 | 16,833 | 38,553 | |||||||||||||||
Operating income (loss) | 605 | (758 | ) | (6,441 | ) | (15,183 | ) | (21,777 | ) | |||||||||||
Net income (loss) | $ | 757 | $ | (1,761 | ) | $ | (10,547 | ) | $ | (14,666 | ) | $ | (26,217 | ) | ||||||
Basic earnings (loss) per share | $ | 0.08 | $ | (0.20 | ) | $ | (0.83 | ) | $ | (0.32 | ) | $ | (1.27 | ) | ||||||
Diluted earnings (loss) per share | $ | 0.08 | $ | (0.20 | ) | $ | (0.83 | ) | $ | (0.32 | ) | $ | (1.27 | ) |
Year ended Nov. 30, 2013 | Year ended Nov. 30, 2012 | Six months ended Nov. 30, 2011 | Year ended May 31, 2011 | |||||||||||||
Allowance for doubtful accounts | ||||||||||||||||
Balance beginning of period | $ | 609 | $ | 474 | $ | 173 | $ | 102 | ||||||||
Charged to costs and expenses | 302 | (145 | ) | (116 | ) | 180 | ||||||||||
Charged to other accounts (1) | — | 280 | 417 | 50 | ||||||||||||
Deductions (2) | (214 | ) | — | — | (159 | ) | ||||||||||
Balance at end of period | $ | 697 | $ | 609 | $ | 474 | $ | 173 | ||||||||
Inventory obsolescence reserve | ||||||||||||||||
Balance beginning of period | $ | 7,822 | $ | 9,731 | $ | 3,148 | $ | 3,295 | ||||||||
Charged to costs and expenses | 4,970 | 9,281 | 105 | 1,561 | ||||||||||||
Charged to other accounts (1) | — | 4,667 | 6,478 | 843 | ||||||||||||
Deductions (3) | (221 | ) | (15,857 | ) | — | (2,551 | ) | |||||||||
Balance at end of period | $ | 12,571 | $ | 7,822 | $ | 9,731 | $ | 3,148 |
(1) | Provision primarily as a result of business acquisitions. |
(2) | Uncollectible accounts written off, net of recoveries. |
(3) | Obsolete inventory written off, net of recoveries. |
May 31, 2014 | November 30, 2013 | |||||||
Assets | ||||||||
Current | ||||||||
Cash and cash equivalents | $ | 10,632 | $ | 6,351 | ||||
Restricted cash (note 4b) | — | 1,500 | ||||||
Accounts receivable, less allowance for doubtful accounts of $828 and $697 at May 31, 2014 and November 30, 2013, respectively | 36,779 | 39,751 | ||||||
Inventories, less provision for obsolescence of $11,198 and $12,571 at May 31, 2014 and November 30, 2013, respectively (note 6) | 52,726 | 58,218 | ||||||
Deferred income taxes | 2,303 | 2,426 | ||||||
Prepaid expenses and other current assets | 1,426 | 2,445 | ||||||
103,866 | 110,691 | |||||||
Fixed assets, net | 31,689 | 35,231 | ||||||
Fixed assets held for sale (note 2) | 150 | 150 | ||||||
Goodwill | 116,770 | 116,770 | ||||||
Intangible assets, net | 34,169 | 38,780 | ||||||
Other non-current assets | 1,714 | 2,956 | ||||||
Total assets | $ | 288,358 | $ | 304,578 | ||||
Liabilities, Redeemable Preferred Stock and Shareholders’ Equity | ||||||||
Current | ||||||||
Accounts payable and accrued expenses | $ | 23,806 | $ | 32,217 | ||||
Deferred revenue | 3,723 | 3,519 | ||||||
Current portion of long-term debt (note 9) | 8,451 | 8,155 | ||||||
35,980 | 43,891 | |||||||
Deferred income taxes | 5,945 | 5,517 | ||||||
Other long-term liabilities | 1,133 | 1,135 | ||||||
Long-term debt, net of current portion, and discount of $0 and $8,100 at May 31, 2014 and November 30, 2013, respectively (note 9) | 123,298 | 96,606 | ||||||
Deferred gain (note 9d) | 8,085 | — | ||||||
174,441 | 147,149 | |||||||
Commitments and contingencies (note 15) | ||||||||
Redeemable Preferred Stock | ||||||||
Preferred stock (Series A Mandatorily Redeemable Preferred Stock, $0 and $1,042 liquidation preference and 1,000,000 authorized shares, 0 and 26,000 shares issued and outstanding at May 31, 2014 and November 30, 2013, respectively) (note 10) | — | 26,326 | ||||||
Shareholders’ Equity | ||||||||
Common shares ($0.001 par value, 250,000,000 and 100,000,000 authorized shares, 55,397,320 and 54,846,071 shares issued and outstanding at May 31, 2014 and November 30, 2013, respectively) | 55 | 55 | ||||||
Special voting stock ($0.01 par value, 1 share authorized, issued and outstanding at May 31, 2014 and November 30, 2013, respectively) | — | — | ||||||
Additional paid-in capital | 327,794 | 327,901 | ||||||
Common stock subscribed but not issued | 2,373 | 2,373 | ||||||
Accumulated deficit | (218,299 | ) | (200,798 | ) | ||||
Accumulated other comprehensive income | 1,994 | 1,572 | ||||||
113,917 | 131,103 | |||||||
Total Liabilities, Redeemable Preferred Stock and Shareholders’ Equity | $ | 288,358 | $ | 304,578 |
For the Three Months Ended May 31, 2014 | For the Three Months Ended May 31, 2013 | For the Six Months Ended May 31, 2014 | For the Six Months Ended May 31, 2013 | |||||||||||||
Revenue, net | $ | 53,169 | $ | 64,229 | $ | 112,086 | $ | 122,533 | ||||||||
Cost of revenues | ||||||||||||||||
Cost of revenues | 42,478 | 49,549 | 87,751 | 95,697 | ||||||||||||
Restructuring charges | 281 | 63 | 580 | 166 | ||||||||||||
Total cost of revenues | 42,759 | 49,612 | 88,331 | 95,863 | ||||||||||||
Gross profit | 10,410 | 14,617 | 23,755 | 26,670 | ||||||||||||
Operating expenses | ||||||||||||||||
General and administrative | 5,820 | 6,168 | 11,539 | 12,804 | ||||||||||||
Selling expenses | 3,536 | 4,074 | 7,294 | 7,758 | ||||||||||||
Research and development | 2,161 | 2,337 | 4,234 | 4,641 | ||||||||||||
Business acquisition and related charges | 75 | 620 | 185 | 1,088 | ||||||||||||
Restructuring charges | 748 | 322 | 866 | 563 | ||||||||||||
Total operating expenses | 12,340 | 13,521 | 24,118 | 26,854 | ||||||||||||
Operating income (loss) | (1,930 | ) | 1,096 | (363 | ) | (184 | ) | |||||||||
Other expenses (income), net | ||||||||||||||||
Interest expense, net | 2,887 | 4,478 | 5,297 | 8,822 | ||||||||||||
Amortization of note discounts and deferred financing costs | 10,228 | 521 | 10,893 | 11,275 | ||||||||||||
Other expenses (income), net | (223 | ) | 421 | (113 | ) | (376 | ) | |||||||||
Total other expenses (income), net | 12,892 | 5,420 | 16,077 | 19,721 | ||||||||||||
Loss from continuing operations before income taxes & discontinued operations | (14,822 | ) | (4,324 | ) | (16,440 | ) | (19,905 | ) | ||||||||
Expense (benefit) for income taxes | 162 | (350 | ) | 668 | (172 | ) | ||||||||||
Loss from continuing operations | (14,984 | ) | (3,974 | ) | (17,108 | ) | (19,733 | ) | ||||||||
Income from discontinued operations, net of income taxes | — | 11,446 | — | 12,779 | ||||||||||||
Net income (loss) | $ | (14,984 | ) | $ | 7,472 | $ | (17,108 | ) | $ | (6,954 | ) | |||||
Accretion on preferred stock | — | (290 | ) | (393 | ) | (290 | ) | |||||||||
Net income (loss) attributable to common shareholders | $ | (14,984 | ) | $ | 7,182 | $ | (17,501 | ) | $ | (7,244 | ) | |||||
Loss per share from continuing operations—Basic and diluted | $ | (0.27 | ) | $ | (0.07 | ) | $ | (0.32 | ) | $ | (0.36 | ) | ||||
Income per share from discontinued operations—Basic and diluted | $ | — | $ | 0.20 | $ | — | $ | 0.23 | ||||||||
Net income (loss) per share—Basic and diluted | $ | (0.27 | ) | $ | 0.13 | $ | (0.32 | ) | $ | (0.13 | ) | |||||
Weighted average shares outstanding | ||||||||||||||||
Basic | 55,446,463 | 55,402,595 | 55,436,440 | 55,386,031 | ||||||||||||
Diluted | 55,446,463 | 55,402,595 | 55,436,440 | 55,386,031 | ||||||||||||
Comprehensive income (loss) | ||||||||||||||||
Unrealized foreign currency translation adjustment | 281 | 128 | 422 | (1,290 | ) | |||||||||||
Other comprehensive income (loss) | 281 | 128 | 422 | (1,290 | ) | |||||||||||
Comprehensive income (loss) | (14,703 | ) | 7,600 | (16,686 | ) | (8,244 | ) |
Preferred Stock- number of shares | Preferred stock amount | Common stock- number of shares | Common stock amount | Additional paid- in capital | Common stock subscribed but not issued | Accumulated deficit | Accumulated other comprehensive income | Total shareholders’ equity | ||||||||||||||||||||||||||
Balance at November 30, 2013 | 26,000 | $ | 26,326 | 54,846,071 | $ | 55 | $ | 327,901 | $ | 2,373 | $ | (200,798 | ) | $ | 1,572 | $ | 131,103 | |||||||||||||||||
Stock issued as compensation | — | — | 48,333 | — | — | — | — | — | — | |||||||||||||||||||||||||
Stock withheld for taxes | — | — | (13,751 | ) | — | — | — | — | — | — | ||||||||||||||||||||||||
Accretion on Redeemable Preferred Stock (Dividends see Note 10) | — | 393 | — | — | — | — | (393 | ) | — | (393 | ) | |||||||||||||||||||||||
Accrued dividend in kind (effective) on Series A Mandatorily Redeemable Preferred Stock (see Note 10) | — | 42 | — | — | — | — | — | — | — | |||||||||||||||||||||||||
Redemption of Preferred Stock (see Note 10) | (26,000 | ) | (26,761 | ) | — | — | — | — | — | — | — | |||||||||||||||||||||||
Stock-based compensation expense | — | — | — | — | (107 | ) | — | — | — | (107 | ) | |||||||||||||||||||||||
Stock exchanged for subsidiary exchangeable shares and stock subject to issuance in connection with plan of arrangement (Note 11) | — | — | 516,667 | — | — | — | — | — | — | |||||||||||||||||||||||||
Net loss for the period | — | — | — | — | — | — | (17,108 | ) | — | (17,108 | ) | |||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | — | — | 422 | 422 | |||||||||||||||||||||||||
Balance at May 31, 2014 | — | $ | — | 55,397,320 | $ | 55 | $ | 327,794 | $ | 2,373 | $ | (218,299 | ) | $ | 1,994 | $ | 113,917 |
Six Months Ended May 31, | ||||||||
2014 | 2013 | |||||||
Cash flows from operating activities | ||||||||
Net loss | $ | (17,108 | ) | $ | (6,954 | ) | ||
Less: Income from discontinued operations | — | (12,779 | ) | |||||
Adjustments to reconcile net income (loss) to net cash used by operating activities: | ||||||||
Depreciation and amortization | 8,242 | 8,620 | ||||||
Amortization of note discounts and deferred financing costs | 681 | 998 | ||||||
Amortization of note discounts and deferred financing costs due to debt extinguishment | 10,212 | 10,277 | ||||||
Stock based compensation | (69 | ) | 600 | |||||
Gain on sale of fixed assets | (248 | ) | — | |||||
Accrued income tax – discontinued operations | — | (2,456 | ) | |||||
Deferred income taxes | 551 | 825 | ||||||
Changes in operating asset and liabilities, net of business acquisitions | ||||||||
Accounts receivable | 1,451 | (898 | ) | |||||
Inventories | 5,447 | (1,822 | ) | |||||
Prepaid expenses and other current assets | 1,018 | (172 | ) | |||||
Accounts payable and accrued expenses | (7,478 | ) | (3,989 | ) | ||||
Deferred revenue | (209 | ) | (218 | ) | ||||
Net cash provided (used) by continuing activities | 2,490 | (7,968 | ) | |||||
Net cash provided by discontinued operations | — | 1,971 | ||||||
Net cash provided (used) by operating activities | 2,490 | (5,997 | ) | |||||
Cash flows from investing activities | ||||||||
Purchase of fixed assets | (847 | ) | (1,126 | ) | ||||
Purchase of intangible assets | (141 | ) | (220 | ) | ||||
Net proceeds from disposal of discontinued operations (note 4b) | — | 49,219 | ||||||
Net proceeds from disposal of fixed assets (note 9d) | 15,108 | 739 | ||||||
Restricted cash | 1,500 | (800 | ) | |||||
Business acquisitions (note 13) | 1,414 | (600 | ) | |||||
Discontinued operations | — | (17 | ) | |||||
Net cash provided by investing activities | 17,034 | 47,195 | ||||||
Cash flows from financing activities | ||||||||
Redemption of preferred shares (note 10) | (27,600 | ) | — | |||||
Repayments of long-term debt (note 9) | (52,329 | ) | (253,543 | ) | ||||
Net proceeds from long-term debt (note 9) | 64,782 | 200,832 | ||||||
Net cash used by financing activities | (15,147 | ) | (52,711 | ) | ||||
Effect of exchange rate on cash and cash equivalents | (96 | ) | (293 | ) | ||||
Net change in cash and cash equivalents | 4,281 | (11,806 | ) | |||||
Cash and cash equivalents, beginning of period—continuing operations | 6,351 | 20,550 | ||||||
Cash and cash equivalents, beginning of period—discontinued operations | — | (15 | ) | |||||
Cash and cash equivalents, beginning of period | 6,351 | 20,535 | ||||||
Cash and cash equivalents, end of period | $ | 10,632 | $ | 8,729 | ||||
Cash and cash equivalents, end of period—discontinued operations | — | — | ||||||
Cash and cash equivalents, end of period—continuing operations | $ | 10,632 | $ | 8,729 |
Straight line basis | ||||
Buildings and leasehold improvements | 5-40 years | |||
Computer equipment | 3-5 years | |||
Furniture and fixtures | 5-8 years | |||
Machinery and equipment | 5-10 years | |||
Vehicles | 3 years |
Non-compete agreements | Straight line over 5 years | |
Computer software | Straight line over 3-5 years | |
Customer related intangibles | Straight line or the pattern in which the economic benefits are expected to be realized, over an estimated life of 4-15 years | |
Marketing related intangibles | The pattern in which the economic benefits are expected to be realized, over an estimated life of 3-10 years | |
Technology related intangibles | The pattern in which the economic benefits are expected to be realized, over an estimated life of 10 years |
(in thousands) | ||||||||
Three months ended May 31, 2013 | Six months ended May 31, 2013 | |||||||
Revenue, net | $ | 3,872 | $ | 6,580 | ||||
Cost of revenues | 2,653 | 3,888 | ||||||
Gross Profit | 1,219 | 2,692 | ||||||
General and administrative | 244 | 428 | ||||||
Selling expenses | 46 | 79 | ||||||
Research and development | — | — | ||||||
Restructuring | — | — | ||||||
Provision for income taxes | 257 | 720 | ||||||
Provision for income taxes — Gain on sale of Data Bus | — | — | ||||||
Other expenses (income) | — | — | ||||||
Income from discontinued operations, net of tax | $ | 672 | $ | 1,465 |
(in thousands) | ||||||||
Three months ended May 31, 2013 | Six months ended May 31, 2013 | |||||||
Revenue, net | $ | 3,124 | $ | 9,270 | ||||
Cost of revenues | 2,507 | 7,155 | ||||||
Gross Profit | 617 | 2,115 | ||||||
General and administrative | 166 | 368 | ||||||
Selling expenses | 195 | 497 | ||||||
Research and development | 56 | 179 | ||||||
Provision for income taxes | (266 | ) | 66 | |||||
Provision for income taxes — Gain on sale of Sensors | 1,671 | 1,671 | ||||||
Other expenses (income) | (11,979 | ) | (11,980 | ) | ||||
Income (loss) from discontinued operations, net of tax | $ | 10,774 | $ | 11,314 |
(in thousands) | ||||||||||||||||||||||||
May 31, 2014 | November 30, 2013 | |||||||||||||||||||||||
2014 Total | Unobservable Measurement Criteria (Level 3) | Impairment | 2013 Total | Unobservable Measurement Criteria (Level 3) | Impairment | |||||||||||||||||||
Fixed assets held for sale | $ | 150 | $ | 150 | $ | — | $ | 150 | $ | 150 | $ | — | ||||||||||||
Derivative liabilities – Redeemable Preferred Stock (Note 10) | — | — | — | (179 | ) | (179 | ) | — | ||||||||||||||||
Total | $ | 150 | $ | 150 | $ | — | $ | (29 | ) | $ | (29 | ) | $ | — |
(in thousands) | ||||||||
Fixed Assets Held for Sale | Derivative Liabilities – Preferred Stock | |||||||
Balance, November 30, 2012 | $ | 900 | $ | (267 | ) | |||
Less: Fixed assets sold | (750 | ) | — | |||||
Less: Adjustment to fair value of derivative liabilities | — | 88 | ||||||
Balance, November 30, 2013 | $ | 150 | $ | (179 | ) | |||
Less: Redemption of Preferred Stock | — | 179 | ||||||
Balance, May 31, 2014 | $ | 150 | $ | — |
(in thousands) | ||||||||
May 31, 2014 | November 30, 2013 | |||||||
Raw materials | $ | 24,504 | $ | 26,015 | ||||
Work in progress | 19,280 | 23,425 | ||||||
Finished goods | 8,942 | 8,778 | ||||||
Total | $ | 52,726 | $ | 58,218 |
(in thousands) | ||||||||
May 31, 2014 | November 30, 2013 | |||||||
Trade accounts payable | $ | 13,197 | $ | 20,714 | ||||
Accrued expenses | 6,593 | 6,586 | ||||||
Wage and vacation accrual | 4,016 | 4,917 | ||||||
Total | $ | 23,806 | $ | 32,217 |
(in thousands) | ||||||||
May 31, 2014 | November 30, 2013 | |||||||
Term loans, due February 6, 2018, base rate plus 6.50% interest or LIBOR plus 7.50%, (a) | $ | 125,014 | $ | 86,810 | ||||
Asset based loans, due February 6, 2018, base rate plus a margin between 1.50% and 2.00%, or LIBOR plus a margin between 2.50% and 3.00%, (a) | — | 24,345 | ||||||
Mortgage loan, due 2027, 1.35% above Barclays fixed bank rate (b) | 1,279 | 1,318 | ||||||
Note payable – RTIE acquisition (c) | — | 139 | ||||||
Capital leases payable (d) | 5,456 | 249 | ||||||
$ | 131,749 | $ | 112,861 | |||||
Less: Current portion of long-term debt | (8,451 | ) | (8,155 | ) | ||||
Discount and deferred financing charges on term loans | — | (8,100 | ) | |||||
Long-term portion | $ | 123,298 | $ | 96,606 |
a) | On February 6, 2013, the Company refinanced its credit facilities and entered into (i) a credit agreement (the “Term Loan Agreement”) with various lenders and Guggenheim Corporate Funding, LLC, as agent (the “Agent”) that provides for a $165,000 term loan facility and (ii) a credit agreement with various lenders and Wells Fargo Bank, National Association (the “Revolving Loan Agreement”) that provides for a $50,000 asset-based revolving borrowing base credit facility, with a $10,000 subfacility (or the Sterling equivalent) for certain of our United Kingdom subsidiaries, a $10,000 subfacility for letters of credit and a $5,000 subfacility for swingline loans. |
On February 6, 2013, in connection with entering into the Term Loan Agreement and the Revolving Loan Agreement, the Amended and Restated Credit Agreement, dated as of June 27, 2011 and amended on January 6, 2012 and March 22, 2012, by and among the lenders from time to time party thereto and Morgan Stanley Senior Funding, Inc., as administrative agent, lead arranger and sole book-runner, which had an outstanding balance of $183,400 was paid off and terminated, which resulted in the write-off of approximately $10,300 of deferred financing costs and note discounts. |
On December 31, 2013, the Company repaid $14,200 of its term loans from the proceeds of the Sale/Leaseback, (see d) below) of the Company’s facility located in State College, Pennsylvania. On July 5, 2013 and April 17, 2013, the Company sold Data Bus and Sensors (Note 4) and repaid approximately $28,780 and $44,919, respectively, of its term loans from the proceeds of these sales, in accordance with the Term Loan Agreement. In addition, the Company repaid a portion of its term loans using the net proceeds of $739 from the March 14, 2013, sale of certain land and a building in Palm Bay, Florida. |
On May 22, 2013, the Company entered into a First Amendment to the Revolving Loan Agreement that amends certain cash management and reporting requirements. |
On October 10, 2013, the Company entered into an Amendment No. 1 to Credit Agreement (the “Amendment No. 1”). Amendment No. 1, among other things, amends the Term Loan Agreement to reduce the minimum interest coverage ratio, increase the maximum leverage ratio, reduce the interest rate on the term loans and modify the terms of the prepayment premium, which the Company is required to pay upon voluntary prepayments or certain mandatory prepayments of the term loans. On March 21, 2014, the Company entered into Amendment No. 2 to Credit Agreement (the “Amendment No. 2”), by and among the Company, as borrower, the lenders party thereto and the Agent. Amendment No. 2 amends the Term Loan Agreement to provide for an incremental term loan facility in an aggregate principal amount equal to $55,000 (the “Incremental Term Loan Facility”), which Incremental Term Loan Facility is subject to substantially the same terms and conditions, including the applicable interest rate and the maturity date of February 6, 2018, as the $165,000 term loan facility provided upon the initial closing of the Term Loan Agreement. In addition, Amendment No. 2 amends the Term Loan Agreement to reduce the minimum interest coverage ratio and increase the maximum leverage ratio, among other things. The proceeds of the Incremental Term Loan Facility were used (i) to pay in full and terminate the Company’s Revolving Loan Agreement; (ii) to redeem all 26,000 shares of the Company’s Series A Preferred Stock that were |
outstanding (as defined and described in Note 10); (iii) to pay fees, costs and expenses associated with the Incremental Term Loan Facility and related transactions; and (iv) for general corporate purposes. This resulted in the write-off of approximately $10,212 of deferred financing costs and note discounts in the quarter ended May 31, 2014. As of May 31, 2014, $125,014 was outstanding under the Term Loan Agreement. |
Term Loan Agreement The term loans incurred pursuant to the Term Loan Agreement, as amended, bear interest, at the Company’s option, at the base rate plus 6.50% or an adjusted LIBOR rate (based on one, two or three-month interest periods) plus 7.50% for the first year and at the base rate plus 7.50% or an adjusted LIBOR rate (based on one, two or three-month interest periods) plus 10.75% thereafter, with a LIBOR floor of 1.50%. For purposes of the Term Loan Agreement, the “base rate” means the highest of Wells Fargo Bank, National Association’s prime rate, the federal funds rate plus a margin equal to 0.50% and the adjusted LIBOR rate for a 3-month interest period plus a margin equal to 1.00%. Interest is due and payable in arrears monthly for term loans bearing interest at the base rate and at the end of an interest period (or at each three month interval in the case of term loans with interest periods greater than three months) in the case of term loans bearing interest at the adjusted LIBOR rate. Principal payments of the term loans are paid at the end of each of the Company’s fiscal quarters, commencing for the fiscal quarter ending May 31, 2013, with the balance of any outstanding term loans due and payable in full on February 6, 2018. The quarterly principal payments will amortize at 1.25% for the fiscal quarters through the end of the Company’s 2014 fiscal year, at 1.875% for the fiscal quarters through the end of the Company’s 2015 fiscal year and at 2.50% for each of the fiscal quarters thereafter. Under certain circumstances, we are required to prepay the term loans upon the receipt of cash proceeds of certain asset sales, cash proceeds of certain extraordinary receipts and cash proceeds of certain debt or equity financings, and based on a calculation of annual excess cash flow. Mandatory prepayments resulting from assets sales or certain debt financings may require the payment of certain prepayment premiums. The term loans are secured by a first priority security interest in accounts receivable, inventory, machinery, equipment and certain other personal property relating to the foregoing, and any proceeds from any of the foregoing, subject to certain exceptions and liens, and a first priority security position on substantially all other real and personal property, in each case that are owned by the Company and the subsidiary guarantors. |
Revolving Loan Agreement The revolving loans incurred pursuant to the Revolving Loan Agreement bore interest, at the Company’s option, at the base rate plus a margin between 1.50% and 2.00% or an adjusted LIBOR rate (based on one, two, three or six-month interest periods) plus a margin between 2.50% and 3.00%, in each case with such margin being determined based on the Company’s average daily excess availability under the revolving credit facility for the preceding fiscal quarter. For purposes of the Revolving Loan Agreement, the “base rate” means the highest of Wells Fargo Bank, National Association’s prime rate, the federal funds rate plus a margin equal to 0.50% and the adjusted LIBOR rate for a 3-month interest period plus a margin equal to 1.00%. Interest was due and payable in arrears monthly for revolving loans bearing interest at the base rate and at the end of an interest period (or at each three month interval in the case of loans with interest periods greater than three months) in the case of revolving loans bearing interest at the adjusted LIBOR rate. Principal, together with all accrued and unpaid interest, was due and payable on February 6, 2018. The Company was permitted to prepay the revolving loans and terminate the commitments, in whole or in part, at any time without premium or penalty. Under certain circumstances, the Company was required to prepay the revolving loans upon the receipt of cash proceeds of certain asset sales. All borrowings under the Revolving Loan Agreement were limited by amounts available pursuant to a borrowing base calculation, which was based on percentages of eligible accounts receivable, inventory, machinery and equipment, in each case subject to reductions for applicable reserves. The Revolving Loan Agreement contained customary affirmative and negative covenants, including covenants that limited or restricted the Company and its subsidiaries’ ability to, among other things, incur indebtedness, grant liens, dispose of assets and pay dividends or make distributions to stockholders, in each case subject to customary exceptions for a credit facility of this size and type. Pursuant to the Revolving Loan Agreement, the Company was also required to maintain compliance with a fixed charge coverage ratio and to limit its annual capital expenditures to $4,000 per fiscal year (subject to carry-over rights) at such times that it failed to maintain excess availability under the revolving credit facility above a specified level. |
On March 21, 2014, approximately $25,136 of the proceeds of the Incremental Term Loan Facility were used to pay in full and terminate the Company’s Revolving Loan Agreement. |
b) | A subsidiary of the Company in the United Kingdom entered into a 20 year term mortgage agreement in 2007, under which interest is charged at a margin of 1.35% over Barclays Fixed Base Rate of 0.5% at February 28, 2013. The mortgage is secured by the subsidiary’s assets. |
c) | On March 19, 2012 the Company completed the acquisition of substantially all of the assets of RTIE Electronics for a total purchase price of $2,295, with $1,500 payable in cash at closing and the remainder pursuant to a $795 Promissory Note payable in 24 equal monthly installments. This Promissory Note payable was fully repaid as of May 31, 2014. |
d) | On December 31, 2013, the Company completed the Sale/Leaseback. The Company sold the facility to an unaffiliated third party for a gross purchase price of approximately $15,500 and will lease the property from the buyer for 15 years for approximately $1,279 per year, subject to annual adjustments. As a result of this transaction the Company initially recorded a capital lease obligation of $5,225. The gain on the sale has been deferred and is being recognized over the 15 year lease term. |
May 31, 2014 | May 31, 2013 | |||||
Expected volatility | 64.8 | % | 81.9 | % | ||
Expected dividends | — | % | — | % | ||
Expected term | 6 years | 6 years | ||||
Risk-free rate | 1.26 | % | 0.85 | % |
Options | Weighted Average Exercise Price | ||||||
Stock Options outstanding— November 30, 2012 | 2,417,606 | $ | 5.06 | ||||
Less forfeited | (569,121 | ) | $ | 5.26 | |||
Exercised | — | $ | — | ||||
Issued | — | $ | — | ||||
Stock Options outstanding—November 30, 2013 | 1,848,485 | $ | 4.98 | ||||
Less forfeited | (303,550 | ) | $ | 5.49 | |||
Exercised | — | $ | — | ||||
Issued | 45,000 | $ | 2.40 | ||||
Stock Options outstanding— May 31, 2014 | 1,589,935 | $ | 4.81 | ||||
Stock Options exercisable— May 31, 2014 | 1,297,517 | $ | 5.09 |
Units | Weighted Average Grant Date Fair Value | ||||||
RSUs outstanding— November 30, 2012 | 139,000 | $ | 4.43 | ||||
Issued | 15,000 | $ | 2.56 | ||||
Exercised—Stock issued | (72,333 | ) | $ | 4.94 | |||
RSUs outstanding—November 30, 2013 | 81,667 | $ | 3.72 | ||||
Issued | 15,000 | $ | 2.37 | ||||
Exercised—Stock issued | (48,333 | ) | $ | 3.72 | |||
RSUs outstanding— May 31, 2014 | 48,334 | $ | 3.30 | ||||
RSUs exercisable— May 31, 2014 | — | $ | — |
RSUs and Options Outstanding | RSUs and Options Exercisable | ||||||||||||||||||||||||
Range of Exercise Price | Number of Outstanding at May 31, 2014 | Weighted Average Exercise Price | Weighted Average Remaining Life (Years) | Aggregate Intrinsic Value (in thousands) | Number Exercisable at May 31, 2014 | Weighted Average Exercise Price | Aggregate Intrinsic Value (in thousands) | ||||||||||||||||||
$0.00 – $ 3.55 | 764,998 | $ | 3.21 | 7.73 | $ | 153 | 466,656 | $ | 3.50 | $ | — | ||||||||||||||
$3.56 – $ 4.99 | 27,084 | $ | 3.56 | 6.40 | $ | — | 16,251 | $ | 3.56 | $ | — | ||||||||||||||
$5.00 – $ 6.99 | 837,434 | $ | 5.93 | 6.16 | $ | — | 805,857 | $ | 5.93 | $ | — | ||||||||||||||
$7.00 – $ 20.00 | 8,753 | $ | 14.76 | 2.97 | $ | — | 8,753 | $ | 14.76 | $ | — | ||||||||||||||
1,638,269 | 6.88 | $ | 153 | 1,297,517 | $ | — |
(in thousands) Six months ended | ||||||||
May 31, 2014 | May 31, 2013 | |||||||
Supplemental Cash Flow Information | ||||||||
Cash paid for income taxes | $ | 558 | $ | 210 | ||||
Cash paid for interest | $ | 3,349 | $ | 3,806 | ||||
Capital lease obligation | $ | 5,225 | $ | — |
Three months ended | Six months ended | |||||||||||
May 31, 2014 | May 31, 2013 | May 31, 2014 | May 31, 2013 | |||||||||
Weighted average shares-basic | 55,446,463 | 55,402,595 | 55,436,440 | 55,386,031 | ||||||||
Effect of dilutive securities | * | * | * | * | ||||||||
Weighted average shares—diluted | 55,446,463 | 55,402,595 | 55,436,440 | 55,386,031 |
* | Outstanding options and RSUs aggregating 1,638,269 (2,008,238 – May 31, 2013) incremental shares, and 892,862 warrants have been excluded from the three and six months ended May 31, 2014 and the six months ended May 31, 2013 computation of diluted EPS as they are anti-dilutive due to the losses generated in each respective period. Outstanding options and RSUs aggregating 2,008,238 incremental shares, and 892,862 warrants have been excluded from the three months ended May 31, 2013 computation of diluted EPS as none are exercisable and in-the-money. |
a) | On September 15, 2011, Currency, Inc., KII Inc., Kuchera Industries, LLC, William Kuchera and Ronald Kuchera (the “Plaintiffs”) filed a lawsuit against API and three API subsidiaries (the “API Pennsylvania Subsidiaries”) in the Court of Chancery of the State of Delaware in relation to the Asset Purchase Agreement by and among API, the API Pennsylvania Subsidiaries, the KGC Companies, William Kuchera, and Ronald Kuchera dated January 20, 2010. Plaintiffs’ complaint alleges claims for breach of contract and unjust enrichment based on their contention that API and the API Pennsylvania Subsidiaries violated the Agreement by failing to issue certain shares of stock to Plaintiffs and by failing to cooperate with Plaintiffs in the filing of a final general and administrative overhead rate with the Defense Contracting Audit Agency. API and the API Pennsylvania Subsidiaries filed an answer to the complaint denying all liability and a counterclaim for breach of contract against Plaintiffs. The final outcome and impact of this matter is subject to many variables, and cannot be predicted. Of the 550,000 shares that have not been delivered under the Asset Purchase Agreement, 126,250 were placed in escrow and the remaining 423,750 shares have been accounted for as common shares subscribed but not issued with a value of $2,373. |
b) | The Company is also a party to lawsuits in the normal course of its business. Litigation can be unforeseeable, expensive, lengthy and disruptive to normal business operations. Moreover, the results of complex legal proceedings are difficult to predict. An unfavorable resolution of a particular lawsuit could have a material adverse effect on the Company’s business, operating results, or financial condition. |
EMS Restructuring (in thousands) | |||
Salary and related charges | $ | 591 | |
Inventory write-down | 7,401 | ||
Fixed asset impairment | 865 | ||
Lease impairment | 3,672 | ||
Accumulated restructuring charges at November 30, 2012 | 12,529 | ||
Cash payments | (591 | ) | |
Non-cash charges | (9,610 | ) | |
Balance – Lease impairment accrual, May 31, 2014 | $ | 2,328 | |
Three months ended May 31, 2014 (in thousands) | SSC | SSIA | EMS | Corporate | Inter Segment Eliminations | Total | ||||||||||||||||||
Revenue from external customers | $ | 39,272 | $ | 5,062 | $ | 8,835 | $ | — | $ | — | $ | 53,169 | ||||||||||||
Adjusted EBITDA: | 4,534 | 540 | (791 | ) | — | — | 4,283 | |||||||||||||||||
Acquisition related charges | 75 | |||||||||||||||||||||||
Restructuring | 1,029 | |||||||||||||||||||||||
Depreciation and amortization | 4,111 | |||||||||||||||||||||||
Interest expense, net | 2,887 | |||||||||||||||||||||||
Amortization of note discounts and deferred financing costs | 10,228 | |||||||||||||||||||||||
Other adjustments * | 775 | |||||||||||||||||||||||
Loss from continuing operations before income taxes | $ | (14,822 | ) | |||||||||||||||||||||
Segment assets—as at May 31, 2014 | $ | 242,011 | $ | 13,108 | $ | 24,573 | $ | 8,666 | $ | — | $ | 288,358 | ||||||||||||
Goodwill included in assets—as at May 31, 2014 | $ | 114,301 | $ | — | $ | 2,469 | $ | — | $ | — | $ | 116,770 | ||||||||||||
Purchase of fixed assets, to May 31, 2014 | $ | 624 | $ | 7 | $ | 111 | $ | — | $ | — | $ | 742 |
Three months ended May 31, 2013 (in thousands) | SSC | SSIA | EMS | Corporate | Inter Segment Eliminations | Total | ||||||||||||||||||
Revenue from external customers | $ | 42,865 | $ | 5,135 | $ | 16,229 | $ | — | $ | — | $ | 64,229 | ||||||||||||
Adjusted EBITDA: | 5,626 | 1,048 | 637 | — | — | 7,311 | ||||||||||||||||||
Acquisition related charges | 620 | |||||||||||||||||||||||
Restructuring charges | 385 | |||||||||||||||||||||||
Depreciation and amortization | 4,312 | |||||||||||||||||||||||
Interest expense, net | 4,478 | |||||||||||||||||||||||
Amortization of note discounts and deferred financing costs | 521 | |||||||||||||||||||||||
Other adjustments * | 1,319 | |||||||||||||||||||||||
Loss from continuing operations before income taxes | $ | (4,324 | ) | |||||||||||||||||||||
Segment assets—as at November 30, 2013 | $ | 249,363 | $ | 15,068 | $ | 34,741 | $ | 5,406 | $ | — | $ | 304,578 | ||||||||||||
Goodwill included in assets—as at November 30, 2013 | $ | 114,301 | $ | — | $ | 2,469 | $ | — | $ | — | $ | 116,770 | ||||||||||||
Purchase of fixed assets, to May 31, 2013 | $ | 639 | $ | 9 | $ | 294 | $ | — | $ | — | $ | 942 |
* | Other adjustments primarily include inventory provisions ($824—2014; $514—2013), stock based compensation ($(21)—2014; $210—2013), corporate franchise taxes ($44—2014; $151—2013), financing related costs ($(26)—2014; $328—2013), foreign exchange losses ($94—2014; $116—2013), and in fiscal 2014 also include lease payments for the State College, Pennsylvania facility ($(322)—2014) and $182 related to change in employee vacation policy. |
Six months ended May 31, 2014 (in thousands) | SSC | SSIA | EMS | Corporate | Inter Segment Eliminations | Total | ||||||||||||||||||
Revenue from external customers | $ | 78,932 | $ | 10,461 | $ | 22,693 | $ | — | $ | — | $ | 112,086 | ||||||||||||
Adjusted EBITDA: | 8,945 | 1,608 | 224 | — | — | 10,777 | ||||||||||||||||||
Acquisition related charges | 185 | |||||||||||||||||||||||
Restructuring | 1,446 | |||||||||||||||||||||||
Depreciation and amortization | 8,242 | |||||||||||||||||||||||
Interest expense, net | 5,297 | |||||||||||||||||||||||
Amortization of note discounts and deferred financing costs | 10,893 | |||||||||||||||||||||||
Other adjustments * | 1,154 | |||||||||||||||||||||||
Loss from continuing operations before income taxes | $ | (16,440 | ) | |||||||||||||||||||||
Purchase of fixed assets, to May 31, 2014 | $ | 688 | $ | 22 | $ | 137 | $ | — | $ | — | $ | 847 |
Six months ended May 31, 2013 (in thousands) | SSC | SSIA | EMS | Corporate | Inter Segment Eliminations | Total | ||||||||||||||||||
Revenue from external customers | $ | 82,459 | $ | 8,977 | $ | 31,097 | $ | — | $ | — | $ | 122,533 | ||||||||||||
Adjusted EBITDA: | 9,809 | 1,853 | 808 | — | — | 12,470 | ||||||||||||||||||
Acquisition related charges | 1,088 | |||||||||||||||||||||||
Restructuring charges | 729 | |||||||||||||||||||||||
Depreciation and amortization | 8,620 | |||||||||||||||||||||||
Interest expense, net | 8,822 | |||||||||||||||||||||||
Amortization of note discounts and deferred financing costs | 11,275 | |||||||||||||||||||||||
Other adjustments * | 1,841 | |||||||||||||||||||||||
Loss from continuing operations before income taxes | $ | (19,905 | ) | |||||||||||||||||||||
Purchase of fixed assets, to May 31, 2013 | $ | 809 | $ | 23 | $ | 294 | $ | — | $ | — | $ | 1,126 |
* | Other adjustments primarily include inventory provisions ($1,168—2014; $1,158—2013), stock based compensation ($(69)—2014; $600—2013), corporate franchise taxes ($85—2014; $178—2013), financing related costs ($101—2014; $328—2013), foreign exchange losses ($226—2014; $116—2013), reversal of contingency accrual ($nil—2014; $(539)—2013) and in fiscal 2014 also include lease payments for the State College, Pennsylvania facility ($(539)—2014) and $182 related to change in employee vacation policy. |