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EX-12.1 - EX-12.1 - Ames True Temper, Inc. | y02720exv12w1.htm |
EX-31.1 - EX-31.1 - Ames True Temper, Inc. | y02720exv31w1.htm |
EX-32.1 - EX-32.1 - Ames True Temper, Inc. | y02720exv32w1.htm |
EX-32.2 - EX-32.2 - Ames True Temper, Inc. | y02720exv32w2.htm |
EX-31.2 - EX-31.2 - Ames True Temper, Inc. | y02720exv31w2.htm |
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
For the fiscal year ended October 3, 2009 |
OR
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
For the transition period from to |
Commission file number 333-118086
AMES TRUE TEMPER, INC.
(Exact name of
registrant as specified in its charter)
DELAWARE | 22-2335400 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
|
465 Railroad Avenue, Camp Hill, Pennsylvania | 17011 | |
(Address of principal executive offices) | (Zip Code) |
Registrants telephone number, including area code: (717) 737-1500
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule
405 of the Securities Act.
Yes
o No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section
13 or Section 15(d) of the
Act. Yes
o No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes
þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of regulation S-T (232.405 of this chapter) during the preceding 12 months (or
for such shorter period that the registrant was required to submit and post such files).
Yes
o No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):
Large accelerated filer o | Accelerated filer o | Non-accelerated filer þ | Smaller reporting company o | |||
(Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act).
Yes
o No þ
As of December 14, 2009, the registrant had 1,000 shares of its common stock, $1.00 par value,
outstanding.
Documents Incorporated by Reference
None
None
AMES TRUE TEMPER, INC.
FORM 10-K
YEAR ENDED OCTOBER 3, 2009
TABLE OF CONTENTS
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TERMS USED IN THIS FORM 10-K
Unless otherwise noted, or indicated by the context, in this Form 10-K the terms the
Company, we, us, Ames True Temper and our refer to Ames True Temper, Inc. and
its subsidiaries; the term parent refers to ATT Holding Co., the owner of 100% of our capital
stock, which has no assets other than our capital stock. References to our fiscal years are to our
parents 52 or 53 week period that generally ends on the Saturday nearest to September 30 of such
year. The 2009 fiscal year is a 53 week period ended on October 3, 2009. The 2008 and 2007 fiscal
years ended on September 27, 2008 and September 29, 2007, respectively, were 52 week years.
TRADEMARKS AND SERVICE MARKS
We own or have the rights to various trademarks, copyrights and trade names used in our
business, including, but not limited to, the following: Ames®, Ames True Temper®, Dynamic Design,
Garant®, Jackson®, True Temper®, Razor-Back®, UnionTools® and Hound Dog®.
This Form 10-K includes trade names and trademarks of other companies. Our use or display of
other parties trade names, trademarks or products is not intended to and does not imply a
relationship with, or endorsement or sponsorship of, the trade name or trademark owners.
FORWARD-LOOKING STATEMENTS
This annual report on Form 10-K contains forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than
statements of historical fact are forward-looking statements for purposes of federal and state
securities laws. Forward-looking statements may include the words may, plans, will,
estimates, anticipates, believes, expects, intends and similar expressions.
Although we believe that such statements are based on reasonable assumptions, these forward-looking
statements are subject to numerous factors, risks and uncertainties that could cause actual
outcomes and results to be materially different from our historical experience and those projected
or assumed in our forward-looking statements. These factors, risks and uncertainties include, but
are not limited to, those described in Part I, Item 1A. Risk Factors and elsewhere in this
report.
Our actual results, performance or achievements could differ materially from those expressed
in, or implied by, the forward-looking statements. We can give no assurances that any of the events
anticipated by the forward-looking statements will occur or, if any of them do, what impact they
will have on our results of operations and financial condition. We do not intend, and we undertake
no obligation, to update any forward-looking statement.
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PART I
Item 1. BUSINESS
Our History
Ames True Temper was formed in 1999 when Ames and its then parent, U.S. Industries, Inc
(USI), acquired True Temper from the Huffy Corporation, combining two non-powered landscaping
products companies with market leadership positions in long handle tools and wheelbarrows. Ames,
founded in 1774, only manufactured shovels for much of its history. However, over the last three
decades, Ames acquired several companies to expand its product lines and geographical reach. For
example, in 1991, Ames acquired Garant, a Canadian lawn and garden tool manufacturer. In 1997, Ames
acquired Woodings-Verona and IXL in two separate transactions, adding striking tool and hickory
handle manufacturing capabilities, respectively.
Founded in 1809 in Vermont, True Temper started as a manufacturer of agricultural products,
particularly shovels and other digging tools. Like Ames, True Temper also expanded its product
lines through acquisitions. In 1981, True Temper acquired Jackson Manufacturing, a leading
manufacturer of wheelbarrows and carts. In addition, True Temper acquired Meaford Steel Products, a
leading Canadian wheelbarrow manufacturer, in 1996, and SuperLight, a leading aluminum rake
manufacturer, in 1997.
As part of a restructuring plan, USI decided to divest its non-powered landscaping product
business in 2001. Wind Point Partners, a private equity investment firm, in conjunction with
Richard Dell, our retired President and Chief Executive Officer, and Duane Greenly, our President
and Chief Executive Officer, purchased this business in January 2002. Over the next nineteen months
we completed three acquisitions to complement our product portfolio and enhance our sourcing
capabilities. In November 2002, we acquired Dynamic Design, a leading supplier of plastic and foam
flowerpots, outdoor planters, window boxes, indoor planters and hanging baskets. In May 2003, we
acquired Outdoor Inspirations, to enter the garden hose market. In August 2003, we acquired
Greenlife, a leading supplier of non-powered landscaping products manufactured in China.
In June 2004, affiliates of Castle Harlan, Inc., a New York-based private-equity investment
firm, together with certain of our employees, completed the acquisition of our Company. In order to
acquire our Company, CHATT Holdings, Inc., the
buyer, and CHATT Holdings LLC, the
buyer-parent, were formed. Upon completion of the acquisition, affiliates of Castle Harlan, Inc.
owned approximately 87% of the buyer-parent and management owned approximately 13%.
On April 7, 2006, we acquired Acorn Products, Inc. (Acorn), the parent company of
UnionTools, Inc., (Union), a business engaged in the manufacture and distribution of
non-powered landscaping products. On April 12, 2006, we acquired substantially all of the assets
and properties of Hound Dog Products Inc. (Hound Dog), a business that designs, markets and
distributes non-powered specialty tools. These businesses were acquired to expand the Companys
product lines.
General
We are a global provider of non-powered landscaping products that make work easier for
homeowners and professionals. We believe that our global manufacturing strategy, based primarily
upon a blend of domestic manufacturing and sourced product, makes us cost-competitive while
allowing us to provide a high level of customer service.
Our Company is organized and managed by three reporting segments: United States (U.S.),
Canada and Other. The U.S. segment includes sales within the U.S., Mexico and Australia. The
Canada segment consists of sales within Canada and the Other segment consists of sales within
Ireland and Europe. Additional information regarding segments is provided in Note 9 of the Notes
to Consolidated Financial Statements in this report.
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Brands
Our brands are among the most recognized across our primary product categories in the North
American non-powered landscaping products market. Our brand portfolio includes, but is not limited
to, Ames®, True Temper®, Ames True Temper®, Dynamic Design and Garant®, as well as
contractor-oriented brands including UnionTools®, Razor-Back® Professional Tools and Jackson®
Professional Tools. This strong portfolio of brands allows us to build and maintain long-standing
relationships with the leading companies that sell our product categories and to offer specific
branding strategies for key retail customers.
In addition to the brands listed above, we also sell unbranded products to capture the opening
price point at major retailers or to satisfy the entire product offering of a customer. While the
opening price point category historically has not generated significant revenues, it is an
important part of establishing our step-up strategy. As an example, we use opening price point
products for our long handle tools to strengthen the position of that categorys good,
better and best product lines. We also manufacture and distribute products under
proprietary customer brands as requested.
Products
Leveraging a strong portfolio of brand names, we manufacture and market one of the broadest
product portfolios in the non-powered landscaping product industry. This portfolio is anchored by
two core product categories: long handle tools and wheelbarrows. We believe that, as a result of
our brands strengths, high product quality, high level of customer service and strong customer
relationships, we have earned market-leading positions in the long handle tool and wheelbarrow
product lines.
The following is a brief description of our primary product lines:
| Long Handle Tools: A broad line of internally designed and developed long handle tools including shovels, spades, scoops, rakes, hoes, cultivators, weeders, post hole diggers, scrapers, edgers and forks are marketed under leading brand names including Ames, True Temper, Jackson Professional Tools, UnionTools, Razor-Back Professional Tools, Greenlife and Garant. We offer numerous types of heads, including poly, steel and aluminum, and various handles manufactured from wood, steel, aluminum, engineered polymers and fiberglass. The long handle tool line is designed to include a wide range of handle lengths, blade sizes and various features to meet the needs of our end-users. Long handle tools are both a manufactured and sourced product. |
| Wheelbarrows: We design, develop and manufacture a full line of wheelbarrows and lawn carts, primarily under the Ames, True Temper, Jackson Professional Tools, Razor-Back Professional Tools, UnionTools and Garant brand names. The wheelbarrows range in size (2 cubic feet to 10 cubic feet), material (poly and steel), tray form, tire type, handle length and color based on the needs of homeowners, landscapers and contractors. We also source a small portion of the wheelbarrow line from third party suppliers. |
| Planters and Lawn Accessories: We are a distributor of indoor and outdoor planters and accessories mostly sold under the Dynamic Design brand name. We, along with outside resources, design the products which are manufactured by third party suppliers. We offer a wide range of designs and planter sizes (from 6 to 24 inches) which are available in various colors and primarily made of resin and fiberglass. In fiscal 2009, we introduced the Ecogardener line of planters made of approximately 90% renewable resources that are biodegradable. |
| Snow Tools: A complete line of snow tools is marketed under the Ames True Temper, True Temper and Garant brand names. The snow tool line includes shovels, pushers, roof rakes, sled sleighs, scoops and ice scrapers for which we internally design, develop and manufacture. A wide range of handles and shapes made of wood, aluminum and steel are included in the line as well as a wide range of head sizes and shapes made of poly, steel and aluminum. |
| Striking Tools: Axes, picks, mattocks, mauls, wood splitters, sledgehammers and repair handles make up the striking tools product line. These products are marketed under the True Temper, |
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Jackson Professional Tools, UnionTools, Garant and Razor-Back Professional Tools brand names. We internally design these products which come in various sizes, forms and weighted heads that are made of steel with wood, fiberglass or composite handles. Striking tools are both a manufactured and sourced product. |
| Pruning: Our pruning line is made up of pruners, loppers, shears and other tools sold primarily under the Ames and True Temper brand names. We, along with outside resources, design the products which are manufactured by third party suppliers. The pruning tools are made of aluminum and steel blades with handles made from a variety of materials depending upon the tool. A variety of handle sizes, lengths, cutting blade styles and sizes and cutting capacities exist in the product line. |
| Garden Hoses and Hose Reels: We offer a wide range of both manufactured and sourced garden hoses and hose reels under the Ames and Jackson Professional Tools brand names. Our hoses are made of rubber and vinyl and come in a variety of lengths (6 to 100 feet), uses (both home and industrial applications) and styles (such as non-kinking and abrasion resistant material). Our hose reels are made of resin, metal and aluminum and have a hose capacity up to 300 feet. Both our garden hoses and hose reels are designed in house and through outside resources. |
We also provide offerings in other product lines including Hound Dog® specialty tools.
Customers
We sell our products primarily in the U.S. and Canada through (1) retail centers, including
home centers and mass merchandisers, such as The Home Depot, Lowes Companies, Wal-Mart, Target,
Tractor Supply Company, Canadian Tire and Rona, (2) wholesale chains, including hardware stores and
garden centers, such as Ace, Do-It-Best, Orgill and True Value and (3) industrial distributors,
such as Grainger and McMaster-Carr.
The following table includes the approximate percentage of net sales represented by The Home
Depot, Lowes Companies, Inc., and our ten largest customers:
October 3, | September 27, | September 29, | ||||||||||
2009 | 2008 | 2007 | ||||||||||
The Home Depot |
30 | % | 31 | % | 31 | % | ||||||
Lowes Companies, Inc. |
20 | 17 | 18 | |||||||||
Ten largest customers |
74 | 70 | 71 |
The following table presents net sales by geographic area (in thousands):
October 3, | September 27, | September 29, | ||||||||||
2009 | 2008 | 2007 | ||||||||||
United States |
$ | 361,728 | $ | 403,603 | $ | 421,810 | ||||||
Canada |
85,558 | 92,593 | 71,005 | |||||||||
Europe |
4,905 | 7,257 | 7,952 | |||||||||
Total |
$ | 452,191 | $ | 503,453 | $ | 500,767 | ||||||
Product Development
Our product development efforts focus on new products and product line extensions. We develop
products through our in-house industrial design and engineering staffs and through our
relationships with a number of outside product engineering and design firms to introduce new
products timely and cost effectively.
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Examples of recent new product initiatives include the True Temper Master Gardener series of
long handle tools designed for the gardening enthusiast, Titanium Xtra® shovels for maximum
toughness, PowerStep® shovels for safe and secure foot placement, Excavator® shovels allowing
digging to be made easy, an all-new True Temper branded pruning product line focused on ergonomics
and precision cutting, Total Control® sledges and axes for high performance and precision,
Tech-no-Kink® non-kinking hoses featuring SpringFlex, Duramax abrasion-proof hoses with Armor
Tech® technology, and Total Control watering cans with multi-grips and EZ-fill openings making
watering a breeze.
Sales and Marketing
Our sales organization is structured by distribution channel in the U.S. and by country
internationally. In the U.S., we have dedicated a team of sales professionals for each of our large
retail customers. We maintain offices adjacent to each of our three largest customers
headquarters, as well as dedicated in-house sales analysts at our corporate office. In addition, we
have assigned sales professionals to our domestic, wholesale and industrial distribution channels.
We also have sales teams located in Canada and Ireland to handle our Canadian and European sales
efforts, respectively. In fiscal 2008, we initiated marketing and distribution efforts in Mexico
and Australia.
To assist our clients in marketing our products and responding to new customer trends, we have
created teams headed by a product line marketing director focused on each product line. Each team
is responsible for implementing category-specific marketing strategies, including new product
development, Stock Keeping Unit rationalization and support for key accounts.
We offer internal graphics capabilities to design catalogs, labels, point of purchase and
other sales materials. In addition, we monitor point of sale and sell-through activity to identify
product opportunities and develop merchandising programs to help our customers achieve their sales
objectives. We also work closely with external research firms, design studios and product
engineering organizations to identify and capitalize on emerging consumer and professional end user
trends.
Raw Materials and Suppliers
The primary raw material inputs for our products include resin (primarily polypropylene and
high density polyethylene), wood (mainly ash, hickory and poplar logs) and steel (hot rolled and
cold rolled). In addition, we purchase some key materials and components, such as metal fork
components, wheelbarrow tires, shovel heads and fiberglass handles; however, we complete most of
the final assembly internally in order to ensure consistent quality for our customers. During
fiscal 2009, we purchased approximately 13% of our total raw materials from one supplier. No single
supplier provided more than 13%, 9% and 9% of our raw materials or components as of fiscal 2009,
fiscal 2008 and fiscal 2007, respectively.
Competition
The non-powered landscaping product industry is highly competitive and fragmented. Most of our
competitors consist of small, privately-held companies focusing on a single product category. Some
of our competitors include Fiskars and Truper in various tool categories, Suncast in hose reels and
accessories and Colorite/Swan in garden hoses. In addition, we face competition from imported or
sourced products from China, India and other low-cost producing countries, particularly in long
handled tools, wheelbarrows, planters, striking tools and pruning tools. We believe the principal
factors by which we compete are quality, performance, price, brand strength, reliability and
customer service, with the relative importance of each factor varying by product line.
Additionally, our three Asian joint ventures enable us to compete with products from low-cost
producing countries.
We believe that our size, product depth and category knowledge provide us with a competitive
advantage. In addition, we believe that some offshore manufacturers lack sufficient distribution
capabilities to service large retailers. We also believe that our extensive wood mill
infrastructure and expertise in curing wood handles, coupled with our proximity to American ash and
hickory sources, provide us with a competitive advantage over offshore manufacturers.
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Distribution
We have five distribution centers of which we operate four. The largest of these is a 1.2
million square foot facility in Carlisle, Pennsylvania. Our other U.S. facility is in Reno, Nevada.
Finished goods from our manufacturing sites are transported to these facilities by our internal
fleet, over the road trucking and rail. Additionally, light assembly is performed at our Carlisle,
Pennsylvania and Reno, Nevada locations. We maintain a distribution center in Canada and Ireland
and utilize a third party distribution center in Mexico City, Mexico. Effective October 3, 2009,
the Louisville, Kentucky distribution center was closed.
Our streamlined logistics and manufacturing capabilities allow us to deliver products cost
effectively with shorter lead times, providing our customers significant value for our products and
services.
Joint Ventures
We hold joint venture interests ranging from 25% to 35% in three separate joint ventures. We
do not share in the profits or losses of the joint ventures. Under the terms of the Chinese joint
venture agreements, we are entitled to minority representation on the board of directors of each
joint venture and do not receive financial information for the joint ventures.
Chengde Greenlife Houseware Co., Ltd. Joint Venture
This joint venture, owned by Pingquan County Stamping Factory (65%), us (30%) and Dick Liao
(5%), manufactures metal home and gardening products. We are responsible under the joint venture
agreement for handling the sale of products outside of China, while the joint venture is
responsible for the sale of products within China with the exception of global customers. The term
of the joint venture agreement is 15 years and was entered into during 2003. The joint venture may
be terminated by mutual agreement of the joint venture parties.
Fujian Greenlife Tools of Garden Co., Ltd. Joint Venture
This joint venture, owned by Fujian Huakun Implement Company Limited (Fujian) (35%), Fuzhou
Huatian Auto Accessories Company Limited (35%), us (25%) and Dick Liao (5%) manufactures poly
rakes, steel rakes, cutting tools and car components. Fujian is responsible for the development,
engineering and production of products, while we are responsible for exporting products of the
joint venture. The term of the joint venture agreement is 10 years and was entered into during
2003. The joint venture can be terminated by mutual agreement of the joint venture parties.
Dalian Greenlife Tools Co., Ltd. Joint Venture
This joint venture, owned by Shushi (Dalian) Steel Shovel Manufacturing Co. (57%), us (35%)
and Dick Liao (8%), manufactures assorted garden tools and metal products. We are responsible for
exporting the products of the joint venture. The term of the joint venture agreement is 20 years
and was entered into during 2003. The joint venture may be terminated by mutual agreement of the
joint venture parties.
Intellectual Property
We hold registered U.S. trademarks and issued U.S. patents, which are important to our
business. Additionally, we and our wholly-owned subsidiaries hold trademarks, patents and
copyrights in countries where we sell our products. We also hold an exclusive license in the U.S.
and Canada to manufacture Clog-Free rakes.
Employees
As of October 3, 2009, we had approximately 1,452 full-time employees worldwide. Most of these
employees work in manufacturing and distribution for the U.S. segment. At certain times of the
year, we augment our workforce with temporary workers to accommodate seasonal increases in business
activity. Approximately 145 of our U.S. employees are represented by the following:
1) | United Brotherhood of Carpenters and Joiners of America (UBCJ); contract expires September, 2012, |
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2) | United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union; contract expires October, 2013, |
3) | International Brotherhood of Teamsters (IBT); contract expires April, 2013. |
In addition, 201 employees in our Canadian segment are represented by the Trade Union Advisory
Committee. The collective bargaining agreement affecting these employees is in place until October,
2013. In Ireland, 15 of approximately 32 employees are covered by one labor agreement and
participate in a national wage plan. We believe that our relations with our employees are generally
good.
Environmental and Other Regulations
Our operations, both in the United States and abroad, are subject to federal, state, local and
foreign environmental laws, ordinances and regulations that limit discharges into the environment.
There are established standards for the handling, generation, emission, release, discharge,
treatment, storage and disposal of hazardous materials, substances and wastes. There are also
established standards that require cleanup of contaminated soil and groundwater. These laws,
ordinances and regulations are complex, change frequently and have tended to become more stringent
over time. Many of them provide for substantial fines and penalties, orders (including orders to
cease operations) and criminal sanctions for violations. They may also impose liability for
property damage and personal injury stemming from presence of, or exposure to hazardous substances.
In addition, certain of our operations require us to obtain, maintain compliance with, and
periodically renew permits.
Certain of these laws, including the U.S. Comprehensive Environmental Response, Compensation
and Liability Act, may require the investigation and cleanup of an entitys or its predecessors
current or former properties, even if the associated contamination was caused by the operations of
a third party. These laws also may require the investigation and cleanup of third-party sites at
which an entity or its predecessor sent hazardous wastes for disposal, notwithstanding that the
original disposal activity accorded with all applicable requirements. Liability under such laws may
be imposed jointly and severally, and regardless of fault.
Prior to entering into a Settlement and Release Agreement with Jacuzzi Brands, Inc. on May 15,
2006, we were entitled to indemnification by the former owners for 100% of costs for remediation
efforts arising out of certain environmental conditions that were known at the time of closing and
80% of costs for remediation efforts for certain other known items. We were also entitled to
indemnification for costs of remediation efforts arising out of certain environmental conditions
that were unknown at the time of closing, subject to a sliding scale cost allocation scheme. Upon
executing the Settlement and Release Agreement, the Company assumed all environmental liabilities
as a result of the release of the environmental indemnities. A portion of the settlement payment
offset the recording of additional environmental liabilities in fiscal 2006. This settlement
payment pertained to our Harrisburg, Pennsylvania facility, St. Francois, Quebec, Canada facility
and two Parkersburg, West Virginia facilities. During fiscal 2009, we completed active remediation
for our Harrisburg, Pennsylvania and St. Francois, Quebec, Canada sites. No further action at
these sites is required at this time. The Company continues to carry environmental insurance. While
we do not expect to incur significant costs associated with the remaining projects in West
Virginia, there can be no assurance that all such costs will be covered by insurance.
We are currently engaged in site investigation or active remediation at three sites, which is
the result of historical facility operations prior to our ownership. We are actively remediating
two locations in Parkersburg, West Virginia and a facility in Frankfort, New York. The active
remediation of the two Parkersburg locations is nearly complete, and we believe these sites will be
granted no further action status by the West Virginia Department of Environmental Protection in
2010. We are actively working with the New York State Department of Environmental Conservation and
the New York State Department of Health on the remediation of our Frankfort site. During our
initial remediation activities, an underground fuel oil tank with surrounding soil contamination
was discovered and is taking significant efforts to remediate. As a result, we recorded a charge
to cost of goods sold of approximately $2.6 million for the costs associated with the removal of
the fuel oil tank and soil contamination during the fourth quarter of fiscal 2009. The
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circumstance affecting our loss estimate includes the extent of the soil contamination. We
believe remediation will be completed by the end of fiscal 2010.
In May 2008, we experienced a fuel oil release at our Camp Hill, Pennsylvania facility.
Active remediation has been completed and we are in the monitoring stage awaiting direction from
the Pennsylvania Department of Environmental Protection. While the monitoring is still proceeding
and final resolution is pending, we are confident that all costs associated with this issue will be
covered by insurance, limiting our exposure to our deductible.
We could be subject to claims brought pursuant to applicable laws, ordinances and regulations
for property damage or personal injury resulting from the environmental impacts of our operations.
Increasingly stringent environmental requirements, more aggressive enforcement actions, the
discovery of unknown conditions or the bringing of future claims may cause our expenditures for
environmental, health and safety matters to increase, and we may incur material costs associated
with such matters.
We also are subject to the requirements of U.S. Department of Labor Occupational Safety and
Health Administration (OSHA). In order to maintain compliance with applicable OSHA
requirements, we have established uniform safety and compliance procedures for our operations and
implemented measures to prevent workplace injuries.
We have incurred and will continue to incur costs to comply with the requirements of
environmental, health and safety laws, ordinances and regulations. We anticipate that these
requirements will become more stringent in the future, and we cannot provide assurance that
compliance costs will not be material.
Segment Reporting
Duane R. Greenly is our President and Chief Executive Officer (CEO). In this position, Mr.
Greenly maintains functional responsibility for the U.S. segment along with corporate
responsibilities as CEO. Our chief operating decision maker, as the term is defined in related
accounting guidance, includes our CEO and geographic Presidents or Managing Directors.
During the fourth quarter of fiscal 2009, the Company consummated an internal reorganization
between the U.S. and Canada segments. Pursuant to this reorganization, a Canadian subsidiary of the
Company transferred all of the outstanding shares of a U.S. subsidiary of the Company to a separate
U.S. subsidiary. This transfer resulted in fiscal 2008 and fiscal 2007 trade name impairments
reported in our U.S. segment. See Note 9 in the notes to the consolidated financial statements for
further information.
General Information
The Company timely files all required reports with the Securities and Exchange Commission.
All of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K
and amendments to those filed reports are available at www.sec.gov.
Item 1A. RISK FACTORS
In addition to the other information set forth in this Form 10-K, you should carefully
consider the following factors which could materially affect our business, financial condition or
future results.
We depend on a small number of customers for a significant portion of our business.
Our two largest customers accounted for 50% (30% and 20%) of our net sales for fiscal 2009.
Our ten largest customers accounted for approximately 74% of our total net sales during fiscal
2009. The loss or reduction in orders from any of these customers could have a material adverse
effect on our business and our financial results, as could customer disputes regarding shipments,
fees, brand use and positioning, merchandise condition or related matters. Our business also may be
negatively affected by changes in the policies of our significant retail customers, such as return
policies or reductions in shelf space allocation to us.
We also extend credit to our customers, which exposes us to credit risk. Our two largest
customers and our ten largest customers accounted for approximately 48% and 60%, respectively, of
our net accounts
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receivable as of October 3, 2009. If one or more of these customers were to become insolvent
or were otherwise unable to pay us, our financial condition, results of operations and cash flows
would be adversely affected.
Our results of operations may be adversely impacted by macroeconomic events.
Beginning in 2008 continuing through 2009 and into fiscal 2010, global macroeconomic
conditions have experienced a significant downturn. Purchases of our products are discretionary
for consumers and consumers are generally more willing to purchase our products during periods in
which favorable macroeconomic conditions prevail. Therefore, our business has been adversely
affected. If the current macroeconomic environment persists or worsens, consumers may further
reduce or delay their purchases of our products. Any such reduction in purchases could have a
material adverse effect on our financial condition, results of operations and cash flows.
In addition, the demand for certain of our products has historically been partially correlated
to new home construction and sales of existing homes. The U.S. and Canadian housing markets are
undergoing a significant downturn, which has been exacerbated by recent macroeconomic conditions.
This downturn has been characterized by a lower rate of new home construction, decreased sales of
homes to first-time homebuyers and decreased movement to new homes by existing homeowners. This
downturn has negatively affected our sales. A continuation of this downturn or further
deterioration in housing market conditions could have a material adverse effect on our business,
financial condition, results of operations and cash flows.
Reliance on third party suppliers and manufacturers may impair our ability to meet customer
demands.
We rely on a limited number of domestic and foreign companies, including our joint venture
partners, to supply components and manufacture certain of our products. The percentage of our
products, based on net sales that we source was approximately 43% in fiscal 2009. We anticipate
that this percentage will remain at or near the fiscal 2009 level through fiscal 2010. Reliance on
third party suppliers and manufacturers may reduce our control over the timing of deliveries and
quality of products. Reduced product quality or failure to deliver products quickly may jeopardize
our relationships with certain of our key customers. In addition, reliance on third party suppliers
or manufacturers may result in failure to meet our customer demands. Continued turbulence in the
worldwide economy may affect the liquidity and financial condition of our suppliers. Should any of
these parties fail to manufacture sufficient supply, go out of business or discontinue a particular
component, we may not be able to find alternative suppliers in a timely manner, if at all. Such
events could impact our ability to fill orders, which would have a material adverse effect on our
customer relationships.
If we are unable to obtain raw materials for our products at favorable prices it could adversely
impact our operating performance.
Our suppliers primarily provide resin (primarily polypropylene and high density polyethylene),
wood (mainly ash, hickory and poplar logs) and steel (hot rolled and cold rolled). During fiscal
2009, we purchased approximately 13% of our total materials from one supplier. No other single
supplier provided more than 10% of our components in 2009. We cannot assure you that we may not
experience shortages of raw materials or components for our products or be forced to seek
alternative sources of supply. If temporary shortages due to disruptions in supply caused by
weather, transportation, production delays or other factors require us to secure our raw materials
from sources other than our current suppliers, we may not be able to do so on terms as favorable as
our current terms or at all. In addition, material increases in the cost of any of these items on
an industry-wide basis could have an adverse impact on our operating performance and cash flows if
we are unable to recoup these increased costs from our customers, which could have a material
adverse effect on our business and financial results. We currently do not engage in hedging or
other financial risk management strategies with respect to potential price fluctuations in the cost
of raw materials.
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We are subject to risks associated with our foreign operations.
We have operations in Canada, China and Ireland, either directly or through joint ventures.
We also have a third party distribution arrangement in Mexico. Our foreign operations are subject
to the risk of fluctuations in the relative value of the U.S. dollar and the local unit of
currency. The recent decline of the value of the U.S. dollar relative to local units of currency
lowered our foreign operating results in fiscal 2009. During fiscal 2009, we hedged some of our
fiscal 2010 forecasted Canadian operations purchases that are denominated in U.S. dollars. These
contracts do not qualify for hedge accounting treatment and the gains and losses are recorded in
earnings.
Foreign operations are subject to risks that can materially increase the cost of operating in
foreign countries and thereby may reduce our overall profitability. These risks include, but are
not limited to:
| currency exchange rate fluctuations; | ||
| increases in foreign tax rates and foreign earnings potentially being subject to withholding requirements or the imposition of tariffs, exchange controls or other restrictions; | ||
| general economic and political conditions in countries where we operate and/or sell our products, including inflation; | ||
| the difficulties associated with managing our organization spread throughout various countries; | ||
| required compliance with a variety of foreign laws and regulations; and | ||
| limited protection of intellectual property in certain foreign jurisdictions. |
We are subject to risks associated with our operations in China.
A substantial amount of our sourcing is done through our Chinese joint ventures. China does
not have a well-developed, consolidated body of laws governing foreign investment enterprises.
Enforcement of existing laws or contracts based on existing law may be uncertain and sporadic, and
it may be difficult to obtain swift and equitable enforcement or to obtain enforcement of a
judgment by a court of another jurisdiction. The relative inexperience of Chinas judiciary in many
cases creates additional uncertainty as to the outcome of any litigation. In addition,
interpretation of statutes and regulations may be subject to government policies reflecting
domestic political changes.
Furthermore, a substantial portion of our pruning tools, as well as all of our foam and
fiberglass planters, are manufactured in China and must be shipped into the U.S. When they enter
the U.S., these products may be subject to import quotas, import duties and other restrictions. Any
inability to import these products into the U.S. and any tariffs we may be required to pay with
respect to these products may have a material adverse result on our business and results of
operations, financial position and cash flows.
Unseasonable weather could have a negative impact on our business and financial results.
Demand for lawn and garden products is influenced by weather, particularly weekend weather
during the peak gardening season. Our sales volumes could be adversely affected by certain weather
patterns such as unseasonably cool or warm temperatures, hurricanes, water shortages or floods. In
addition, lack of snow or lower than average snowfall during the winter season may also result in
reduced sales of certain products, such as snow shovels and other snow tools. As a result, our
business, financial results, cash flow and our ability to service our debt could be adversely
affected.
Our lawn and garden sales are highly seasonal which could impact our cash flow and operating
results.
Because our lawn and garden products are used primarily in the spring and summer, our business
is highly seasonal. In fiscal 2009, 60% of our sales occurred during our second and third fiscal
quarters. A majority of our operating income and cash flow is generated in this period. Our working
capital needs and our borrowings generally peak near the end of our second fiscal quarter in
preparation for the spring selling season. If cash on hand and borrowings under our senior credit
facility are ever insufficient to meet our seasonal needs or if cash flow generated during the
spring and summer is insufficient to repay our
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borrowings on a timely basis, this seasonality could have a material adverse effect on our
business, results of operations, financial condition and cash flow.
Our industry is highly competitive and we may not be able to compete successfully.
All aspects of the lawn and garden industry, including attracting and retaining customers and
pricing, are competitive. To compete effectively, we must, among other things, maintain our
relationships with key retailers, continually develop innovative new products that appeal to
consumers and deliver products on a reliable basis at competitive prices. We cannot assure you that
we will be able to maintain existing competitive advantages we have in our market. We compete for
customers with various consumer product manufacturers and numerous other companies that produce
home and garden tools and accessories, including foreign manufacturers that export their products
to the United States.
Our current or potential competitors may offer products at a lower price or products and
services that are superior to ours. In addition, our competitors may be more effective and
efficient in integrating new technologies. Furthermore, as a result of business combinations or
acquisitions, some of our competitors could become more formidable and may have substantially more
resources at their disposal than us. Any of these factors may cause price reductions, reduced gross
margins, decreased sales and reduced ability to attract and retain customers.
Further consolidation in the retail industry may adversely affect our profitability.
Home centers and mass merchandisers have consolidated and increased in scale. If, as we
expect, this trend continues, our customers will likely seek more favorable terms, including
pricing, for their purchases of our products, which will limit our ability to raise prices,
including to recoup raw material and other cost increases. Sales on terms less favorable to us than
our current terms will have an adverse effect on our profitability.
A failure to successfully introduce new products could result in a reduction in sales and floor
space at retailers that carry our products.
We believe that our future success will depend, in part, upon our ability to develop, market
and produce new products, as well as to continue to improve existing products. We may not continue
to be successful in the timely introduction and marketing of new products or innovations to our
existing products. If we fail to successfully introduce, market and manufacture new products or
product innovations and differentiate our products from those of our competitors, our ability to
maintain or enhance our industry position could be adversely affected, which in turn could
materially adversely affect our business, financial condition or results of operations and cash
flows.
The products that we manufacture could expose us to product liability claims.
Our business exposes us to potential product liability risks, which are inherent in the
manufacture and distribution of certain of our products. From time to time, various suits and
claims have been brought against us asserting injury sustained while using our products. Although
we generally seek to insure against these risks, there can be no assurance that our coverage may be
adequate and we may not be able to maintain insurance on acceptable terms. A successful product
liability claim in excess of our insurance coverage could have a material adverse effect on us and
could prevent us from obtaining adequate product liability insurance in the future on commercially
reasonable terms or at all. Moreover, any adverse publicity arising from claims made against us
could adversely affect the reputation and sales of our products.
From approximately 1993 through 1999, we manufactured and sold 647,000 wheelbarrows with poly
wheel hubs. Various claims have been submitted, and lawsuits filed, to recover for injuries
sustained while inflating tires on these wheelbarrows. In 2002, we participated in a voluntary
fast track recall of these wheelbarrows with the Consumer Product Safety Commission. We again
voluntarily recalled these wheelbarrows in June 2004 in cooperation with the Consumer Product
Safety Commission. However, less than 1% of the total products sold were returned, leaving an
unknown number in service. To date, we have responded to 34 claims involving this product. All
known claims have been resolved. Although we believe
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that we have sufficient insurance coverage in place to cover these claims, a successful
claim may exceed the limits of our coverage.
Our ability to pay our debt or seek alternative financing may be adversely impacted.
We have a significant amount of debt that could adversely affect our financial health and
prevent us from fulfilling our obligations. Our substantial indebtedness could have important
consequences. For example, it could:
| make it more difficult for us to satisfy our obligations under outstanding indebtedness and otherwise; | ||
| increase our vulnerability to general adverse economic and industry conditions; | ||
| require us to dedicate a substantial portion of cash flows from operating activities to payments on our indebtedness, which would reduce the cash flows available to fund working capital, capital expenditures, research and development efforts and other general corporate requirements; | ||
| limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; | ||
| place us at a competitive disadvantage compared to our competitors that have less debt; | ||
| limit our ability to borrow additional funds; and | ||
| expose us to risks inherent in interest rate fluctuations because some of our borrowings are at variable rates of interest, which could result in higher interest expense in the event of increases in interest rates. |
Our ability to make payments on and to refinance our indebtedness and to fund planned capital
expenditures and acquisitions will depend on our ability to generate cash in the future. This, to
some extent, is subject to general economic, financial, competitive, legislative, regulatory and
other factors that are beyond our control.
We cannot provide assurance that our business will generate sufficient cash flow from
operating activities or that future borrowings will be available to us under our credit facility in
amounts sufficient to enable us to pay our indebtedness or to fund our other liquidity needs. We
will need to refinance our Senior Subordinated Notes and our Senior Floating Rate Notes on or
before maturity in 2012, and we may need to refinance our revolving credit facility on or before
maturity in 2011. We cannot assure you that we will be able to refinance any of our indebtedness on
commercially reasonable terms or at all. Our credit facility contains restrictive covenants and
cross default provisions that require us to maintain specified financial covenants. Our ability to
satisfy those financial covenants can be affected by events beyond our control, and we cannot
provide assurance that we will satisfy those covenants. A breach of any of these financial
covenants or other covenants could result in a default. Upon the occurrence of an event of default,
the lenders could elect to declare the applicable outstanding indebtedness due immediately and
payable and terminate all commitments to extend further credit. We cannot be sure that our lenders
would waive a default or that we could pay the indebtedness in full if it were accelerated.
Environmental health and safety laws, ordinances and regulations impose risks and costs on us.
Our operations are subject to federal, state, local and foreign laws, ordinances and
regulations governing the protection of the environment and health and safety matters, including,
but not limited to, those regulating discharges into the air and water, the use, handling and
disposal of hazardous or toxic substances, the management of wastes, the cleanup of contamination
and the control of noise and odors. We have made, and will continue to make, expenditures to comply
with these requirements. While we believe, based upon current information, that we are in
substantial compliance with all applicable environmental laws, ordinances and regulations, we
cannot assure you of this, and we could be subject to potentially significant fines or penalties
for any failure to comply. Moreover, under certain environmental laws, a current or previous owner
or operator of real property, and parties that generate or transport hazardous
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substances that are disposed of at real property, may be held liable for the cost to
investigate or clean up such real property and for related damages to natural resources. We may be
subject to liability, including liability for investigation and cleanup costs, resulting from
historical or ongoing operations if contamination is discovered at one of our current or former
facilities, or at a landfill or other location where we have disposed of, or arranged for the
disposal of, wastes.
We depend on the service of key individuals, the loss of any of which could materially harm our
business.
Our success will depend, in part, on the efforts of our executive officers and other key
employees. The loss of the services of any of our key employees could have a material adverse
effect on us. We do not maintain key man life insurance on our executive officers.
Unionized employees could strike or participate in a work stoppage.
We employ approximately 1,452 people on a full-time basis, approximately 25% of whom are
covered by collective bargaining or similar labor agreements. We currently are a party to five such
agreements. If our unionized employees were to engage in a strike or other work stoppage, or if we
are unable to negotiate acceptable extensions of our agreements with labor unions resulting in a
strike or other work stoppage by the affected workers, we could experience a significant disruption
of operations and increased operating costs. In addition, any renegotiation or renewal of labor
agreements could result in higher wages or benefits paid to unionized employees, which could
increase our operating costs and could have a material adverse effect on our profitability.
We may be required to record impairment charges for goodwill and indefinite-lived intangible
assets.
We are required to assess goodwill and indefinite-lived intangible assets annually for
impairment or on an interim basis if changes in circumstances or the occurrence of events suggest
impairment exists. If impairment testing indicates that the carrying value of our reporting units
or indefinite-lived intangible assets exceeds the respective fair value, an impairment charge would
be recognized. For fiscal 2009, we have approximately $57.5 million of goodwill and $47.9 million
of indefinite-lived intangible assets. Indefinite-lived intangible asset impairment charges were
$0.8 million, $15.6 million and $4.4 million as of fiscal 2009, fiscal 2008 and fiscal 2007,
respectively. If our goodwill or indefinite-lived intangible assets were to become further
impaired, our results of operations could be materially and adversely affected.
We may not be able to acquire complementary lawn and garden product manufacturers or brands. In
addition, our acquisition strategy may negatively impact our operating results, divert managements
attention from operating our core business, and expose us to other risks.
Part of our growth strategy includes pursuing acquisitions. We may not be able to find
suitable acquisition targets, make suitable acquisitions on favorable terms or obtain financing for
such acquisitions. In addition, we may not be able to successfully integrate future acquisitions.
Future acquisitions may result in significant integration costs, and we may not realize the
anticipated strategic benefits of any future acquisitions. Acquisitions may involve a number of
special risks, including, but not limited to:
| adverse short-term effects on our profitability and cash flows as a result of integration costs; | ||
| diversion of managements attention from the operation of our core business; | ||
| difficulties assimilating and integrating the operations of the acquired company with our own; and | ||
| unanticipated liabilities or contingencies relating to the acquired company. |
Item 1B. | UNRESOLVED STAFF COMMENTS |
None
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Item 2. | PROPERTIES |
We currently operate 9 of our 11 manufacturing/distribution facilities and 8 of our 13 wood
processing facilities. At our manufacturing facilities, we perform various value added processes
for our products, including assembly, forging, forming, injection molding, painting, stamping,
treating, turning and welding. Through our Chinese joint venture partners, we have access to
multiple manufacturing facilities in China. Our executive headquarters are located in Camp Hill,
Pennsylvania.
In fiscal 2009, we paid an aggregate of approximately $9.4 million for rent on all our leased
properties and our projected rent for fiscal 2010 is substantially the same. Our leased facilities
vary in term, generally lasting up to 12 years. Several of the leases also contain renewal
provisions. We believe our current facilities are generally well maintained and provide adequate
production and distribution capacity for future operations. We may, during peak seasons, enter into
short-term leases to provide overflow storage facilities. Additionally, we have several small
satellite offices to support our sales force throughout the U.S.
The following table sets forth certain information concerning our current operating facilities
and those of our joint venture partners:
Approximate | Owned/ | |||||||||
Location | Country | Square Footage | Leased | Use | ||||||
Manufacturing/Distribution |
||||||||||
Bernie, MO |
United States | 170,000 | Owned | Manufacturing | ||||||
Camp Hill, PA |
United States | 380,000 | Leased | Manufacturing, Executive Offices | ||||||
Carlisle, PA |
United States | 1,217,000 | Leased | Manufacturing, Distribution | ||||||
Cork |
Ireland | 74,000 | Owned | Manufacturing, Distribution | ||||||
Falls City, NE |
United States | 82,000 | Owned | Manufacturing | ||||||
Frankfort, NY |
United States | 289,800 | Owned | Idle | ||||||
Harrisburg, PA |
United States | 264,000 | Owned | Manufacturing | ||||||
Lewistown, PA |
United States | 124,400 | Leased | Manufacturing | ||||||
Louisville, KY |
United States | 302,500 | Leased | Idle | ||||||
Reno, NV |
United States | 400,000 | Leased | Manufacturing, Distribution | ||||||
St. Francois, Quebec |
Canada | 353,000 | Owned | Manufacturing, Distribution | ||||||
Wood Mills |
||||||||||
Campaign, TN |
United States | 10,000 | Owned | Wood Processing | ||||||
Dexter City, OH |
United States | 12,600 | Owned | Wood Processing | ||||||
Frankfort, NY |
United States | 13,500 | Owned | Idle | ||||||
Lebanon, KY |
United States | 13,500 | Owned | Idle | ||||||
North Vernon, IN |
United States | 17,680 | Owned | Idle | ||||||
Palmyra, ME |
United States | 15,000 | Owned | Idle | ||||||
Pine Valley, NY |
United States | 15,750 | Owned | Wood Processing | ||||||
Portville, NY |
United States | 9,000 | Owned | Idle | ||||||
Princeton, KY |
United States | 10,000 | Owned | Wood Processing | ||||||
Unadilla, NY |
United States | 13,000 | Owned | Wood Processing | ||||||
Union City, PA |
United States | 70,000 | Owned | Wood Processing | ||||||
Wallingford, VT |
United States | 93,000 | Owned | Wood Processing | ||||||
Woodstock, New Brunswick |
Canada | 7,800 | Owned | Wood Processing | ||||||
Joint Ventures |
||||||||||
Hebei Province |
China | 600,000 | | Manufacturing, Distribution | ||||||
Fujian Province |
China | 180,000 | | Manufacturing, Distribution | ||||||
Liaoning Province |
China | 184,000 | | Manufacturing, Distribution |
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Item 3. | LEGAL PROCEEDINGS |
During December 2004, a customer of Union was named in litigation that involved the Companys
products. The complaint asserted causes of action against the defendant for improper advertisement
to the consumer. The allegation suggests that advertisements lead the consumer to believe that the
hand tools sold were manufactured within the boundaries of the United States. The allegation
asserts cause of action against the customer for common law fraud. In the event of a judgment
against our customer, there is a possibility that the customer would seek legal recourse for an
unspecified amount in contributory damages.
From approximately 1993 through 1999, we manufactured and sold approximately 647,000
wheelbarrows with poly wheel hubs. Various claims were submitted, and lawsuits filed, to recover
for injuries sustained while inflating tires on these wheelbarrows. In 2002, we participated in a
voluntary fast track recall of these wheelbarrows with the Consumer Product Safety Commission.
We again voluntarily recalled these wheelbarrows in June 2004 in cooperation with the Consumer
Product Safety Commission. However, less than 1% of the total products sold were returned, leaving
an unknown number in service. To date, we have responded to 34 claims involving this product. All
known claims have been resolved. Although we believe that we have sufficient insurance coverage in
place to cover these claims, a successful claim may exceed the limits of our coverage.
We are involved in various claims and legal actions that arise in the ordinary course of
business. We do not believe that the ultimate resolution of any of these actions will have a
material adverse effect on our consolidated financial position, results of operations, liquidity or
capital resources.
Item 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS |
None.
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PART II
Item 5. | MARKET FOR THE REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
There is no established public trading market for our common stock. All of our 1,000
outstanding shares of common stock are held by our parent. We have not declared a dividend on our
common stock. We are generally restricted from paying dividends by certain of our credit facility
covenants and the indentures pursuant to which the 10% Senior Subordinated Notes due 2012, which
are referred to in this Form 10-K as the Senior Subordinated Notes, and the Senior Floating
Rate Notes due 2012, referred to as Senior Floating Rate Notes, were issued. However, we may
pay dividends in the future if we are permitted to do so under our debt arrangements.
Item 6. | SELECTED FINANCIAL DATA |
The selected consolidated financial data below should be read in conjunction with Item 7,
Managements Discussion and Analysis of Financial Condition and Results of Operations and Item
8, Financial Statements and the related notes included in this Form 10-K.
The following table sets forth selected consolidated financial data of our parent. Separate
financial information for Ames True Temper, Inc. is not presented since our parent has no
operations or assets separate from its investment in Ames True Temper, Inc. and the Senior
Subordinated Notes and the Senior Floating Rate Notes are guaranteed by our parent. The selected
consolidated financial data presented below have been derived from our parents audited
consolidated financial statements. Our parents historical results included below and elsewhere in
this Form 10-K are not necessarily indicative of our parents future performance.
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(Dollars in Thousands) | ||||||||||||||||||||
(1) | (2) | (1) | ||||||||||||||||||
Fiscal | Fiscal | Fiscal | Fiscal | Fiscal | ||||||||||||||||
Year | Year | Year | Year | Year | ||||||||||||||||
Ended | Ended | Ended | Ended | Ended | ||||||||||||||||
October 1, | September 30, | September 29, | September 27, | October 3, | ||||||||||||||||
2005 | 2006 | 2007 | 2008 | 2009 | ||||||||||||||||
Income Statement Data: |
||||||||||||||||||||
Net sales |
$ | 450,604 | $ | 483,601 | $ | 500,767 | $ | 503,453 | $ | 452,191 | ||||||||||
Gross profit |
106,060 | 127,984 | 121,416 | 130,844 | 126,272 | |||||||||||||||
Selling, general and administrative expenses |
77,319 | 96,593 | 95,863 | 96,258 | 86,838 | |||||||||||||||
Impairment charges (3) |
122,678 | 6,377 | 4,465 | 15,783 | 1,727 | |||||||||||||||
Operating (loss) income |
(95,714 | ) | 23,548 | 18,293 | 16,611 | 35,104 | ||||||||||||||
Interest expense |
32,527 | 33,781 | 36,145 | 33,812 | 29,708 | |||||||||||||||
(Loss) income before income taxes |
(128,155 | ) | (4,577 | ) | (12,310 | ) | (20,276 | ) | 5,920 | |||||||||||
Net (loss) income |
(125,200 | ) | (4,577 | ) | (18,110 | ) | (16,422 | ) | 4,557 | |||||||||||
Other Data: |
||||||||||||||||||||
Depreciation and amortization |
12,031 | 13,979 | 17,625 | 17,131 | 17,647 | |||||||||||||||
Cash paid for property, plant and equipment |
11,600 | 15,797 | 10,861 | 8,100 | 6,749 | |||||||||||||||
Ratio of earnings to fixed charges (4) |
| | | | | |||||||||||||||
Balance Sheet Data (at end of period): |
||||||||||||||||||||
Working capital |
109,610 | 86,205 | 74,675 | 84,489 | 104,441 | |||||||||||||||
Total assets |
375,025 | 455,779 | 392,785 | 373,825 | 334,623 | |||||||||||||||
Total debt |
301,948 | 368,400 | 343,688 | 340,694 | 317,780 |
(1) | Fiscal years ended October 1, 2005 and October 3, 2009 are 53 week periods. | |
(2) | Data includes results of Acorn and Hound Dog from April 2006 acquisition date through end of fiscal year. | |
(3) | Impairment charges for the period ended October 1, 2005 include $119.8 million of goodwill impairment. | |
(4) | For purposes of computing the ratio of earnings to fixed charges, earnings consist of income (loss) before income taxes less preferred stock dividend requirements plus fixed charges. Fixed charges consist of interest (expensed and capitalized) on all indebtedness, plus preferred stock dividends and a proportion of rental expenses deemed to be representative of the interest factor. The earnings were deficient to meet fixed charges by $139.2 million, $20.3 million, $36.2 million, $53.3 million and $37.1 million for the periods ended October 1, 2005, September 30, 2006, September 29, 2007, September 27, 2008 and October 3, 2009. See Item 7 Management Discussion and Analysis of Financial Condition and Results of Operations and Exhibit 12.1 Computation of Ratio of Earnings to Fixed Charges for further information on the factors that caused a deficiency for the period ended October 3, 2009. |
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Item 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Overview
The following Managements Discussion and Analysis of Financial Condition and Results of
Operations (MD&A) is intended to help the reader understand our operations and our present
business environment. MD&A is provided as a supplement to, and should be read in conjunction with,
the consolidated financial statements and the accompanying notes thereto of our parent, ATT Holding
Co., contained in Item 8 of this report. A separate discussion for Ames True Temper, Inc. is not
presented since our parent has no operations or assets separate from its investment in Ames True
Temper, Inc. and the Senior Subordinated Notes and Senior Floating Rate Notes are guaranteed by our
parent. The following discussion includes forward-looking statements that involve certain risks and
uncertainties. See Forward-Looking Statements. This overview summarizes the MD&A, which
includes the following sections:
| Our Business a general description of our business and a statement of our business objective. | ||
| Critical Accounting Estimates a discussion of accounting policies that require critical judgments and estimates. | ||
| Operations Review an analysis of our consolidated results of operations for the three years presented in our consolidated financial statements. | ||
| Liquidity, Capital Resources and Financial Position an analysis of cash flows; debt and other obligations; off-balance sheet arrangements; aggregate contractual obligations and an overview of financial position. |
Our Business
General
Ames True Temper, Inc. is a global provider of non-powered landscaping products that make work
easier for homeowners and professionals.
We offer the following 8 distinct product lines: long handle tools, wheelbarrows, planters,
garden hoses and hose reels, snow tools, striking tools, pruning tools, and Hound Dog specialty
tools.
We sell our products primarily in the U.S. and Canada through (1) retail centers, including
home centers and mass merchandisers, (2) wholesale chains, including hardware stores and garden
centers, and (3) industrial distributors.
We have a large portfolio of recognized brands that enables us to offer specific branding
strategies for key retail customers. Our brands are recognized across our primary product
categories in the North American non-powered landscaping products market. Our brand portfolio
includes Ames, True Temper, Ames True Temper and Garant, as well as contractor-oriented brands
including UnionTools, Razor-Back Professional Tools and Jackson Professional Tools. This strong
portfolio of brands allows us to build and maintain long-standing relationships with the leading
companies that sell our product categories.
We believe that our global manufacturing strategy, based primarily upon a blend of domestic
manufacturing and sourced product, makes us cost-competitive while allowing us to provide a high
level of customer service.
Our Objective
Our objective is to use our extensive brand portfolio, strong customer relationships,
commitment to new product development and our global manufacturing strategy to achieve long-term
growth and increase shareholder value.
Critical Accounting Estimates
The preparation of our consolidated financial statements in conformity with generally accepted
accounting principles in the United States requires management to make estimates and assumptions
about
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future events that affect the amounts reported in the consolidated financial statements and
accompanying notes. Future events and their effects cannot be determined with absolute certainty.
Therefore, the determination of estimates requires the exercise of judgment. Actual results could
differ from those estimates, and such differences may be material to the consolidated financial
statements. The process of determining significant estimates is fact specific and takes into
account factors such as historical experience, current and expected economic conditions, product
mix and, in some cases, actuarial techniques. We evaluate these significant factors as facts and
circumstances dictate. Some events as described below have caused actual results to differ
significantly from those determined using estimates. We believe that our most critical accounting
estimates relate to the following:
| Inventories | ||
| Recoverability of Goodwill and Other Intangible Assets | ||
| Pension Liability | ||
| Income Taxes |
Management has discussed the development, selection and disclosure of critical accounting
estimates with the Audit Committee of the buyer-parents Board of Directors. While our estimates
and assumptions are based on our knowledge of current events and actions we may undertake in the
future, actual results may ultimately differ from these estimates and assumptions. For a discussion
of the Companys significant accounting policies, refer to Note 2 of Notes to Consolidated
Statements.
Inventories
Inventories are stated at the lower of cost or market, which are based on the first-in first-out
method of accounting. Valuation provisions are recorded for estimates of excess and obsolete
inventory based on a variety of factors, including future demand, product changes and improvements
and new product introductions. The adequacy of our valuation provisions could be materially
affected by changes in the demand for our products. We estimate that a 10% decrease in demand for
our products would increase our valuation provision by approximately $56,000 and a 10% increase in
demand for our products would reduce our valuation provision by approximately $29,000.
Recoverability of Goodwill and Other Intangible Assets
We evaluate goodwill and indefinite lived intangible assets for impairment annually or more
frequently if events or changes in circumstances indicate that the asset might be impaired. Such
events include, but are not limited to, strategic decisions made in response to economic and
competitive conditions, the impact of the economic environment on our customer base, a material
negative change in our relationships with significant customers and economic conditions that may
affect the assumptions.
Goodwill
In the fiscal year ended September 25, 2004, we were acquired by a private equity firm,
together with certain employees of the Company and its subsidiaries, and the resulting goodwill was
allocated to reporting units based upon the fair value of each reporting unit at the time of the
transaction. The fair value of each reporting unit was estimated using a market multiple approach.
In accordance with accounting guidance, goodwill arising from subsequent transactions was allocated
to reporting units that were assigned the assets and liabilities assumed. As a result, all goodwill
from our fiscal 2006 acquisitions was assigned to the U.S. reporting unit along with the assets and
liabilities assumed in the transactions.
In testing goodwill for impairment, we use a two-step impairment approach as required by
United States generally accepted accounting principles (U.S. GAAP). The first step compares the
fair value of a reporting unit to its carrying amount, including goodwill. If the fair value of the
reporting unit exceeds its carrying amount, no indication of goodwill impairment exists and the
second step is not necessary. If the carrying amount of a reporting unit exceeds its fair value,
the second step of the goodwill impairment test is performed to measure the amount of impairment
loss, if any. The second step requires the fair value of each reporting unit to be allocated to
assets (including intangible assets other than goodwill) and liabilities
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similar to a purchase price allocation in a business combination. Any fair value remaining
after allocation is considered implied goodwill. Implied goodwill is compared to the carrying
value of goodwill for each reporting unit. If the implied goodwill exceeds the carrying value of
goodwill, no impairment is recognized. If the carrying value of goodwill exceeds the implied
goodwill, an impairment is recognized for the difference.
We utilize multiple valuation methods to determine the fair value of our reporting units which
is consistent with marketplace participant assumptions since multiple methods are generally
accepted to value going concern entities. We utilized the following valuation methods as of
October 3, 2009 and September 27, 2008: (1) publicly traded methodology a market approach, (2)
transaction methodology a market approach, and (3) discounted cash flow methodology an income
approach with weightings of 40%, 20%, and 40%, respectively. Due to the fact that the transaction
methodology contained mostly historical transactions that may not reflect current market
conditions, it received the smallest weighting percentage.
The publicly traded methodology compares the subject company to publicly held companies whose
stock is publicly traded. A value indication is determined from the various multiples developed
from the guideline publicly traded companies. These multiples are normally based on earnings of
companies in similar lines of business and include consideration of other relevant factors, such as
capital structure, growth prospects and risk. The transaction methodology compares the subject
company to guideline companies involved in acquisitions. A value indication is determined from the
various multiples developed from the transaction values. These multiples are normally based on
earnings of companies in similar lines of business and include consideration of other relevant
factors, such as financial position, profitability, growth prospects and risk. The discounted cash
flow methodology is based on the future cash flow generating ability of the reporting unit,
discounted at the appropriate rate of return commensurate with the risk characteristics of the
reporting unit as well as current rates of return for equity and debt capital as of the valuation
date.
The material assumptions used to determine the fair value of reporting units include estimates
of revenues, costs, and discount rates. We utilized budgets and forecasts as prepared by management
that were available at the time of the impairment analysis for purposes of estimating revenues and
costs. Discount rates were based upon a market participants weighted average cost of capital using
market data available as of impairment testing dates. We believe the assumptions used are
consistent with market participant assumptions for purposes of valuing reporting units. There were
no material changes in assumptions on a year over year basis.
The fair value of each reporting unit exceeded their respective carrying values as of October
3, 2009 and September 27, 2008; therefore, the second step of the impairment test was not
necessary.
As of October 3, 2009, the fair values of the United States and Canada reporting units
exceeded their carrying amounts by 114.3% and 131.2%, respectively. In addition, there was no
indication of impairment under any of the individual methods-market approach-publicly traded
methodology; market approach-transaction methodology; or the income approach-discounted cash flow
methodology.
Other Indefinite Lived Intangibles
Our indefinite lived intangible assets consist solely of trade names. In testing our
indefinite lived intangibles for impairment, we compare the fair value to the carrying value. If
the fair value exceeds the carrying value, no impairment is recorded. If the carrying value exceeds
the fair value, an impairment is recorded for the difference. We estimate the fair value of trade
names utilizing the relief from royalty method (a discounted cash flow methodology). The relief
from royalty method represents the present value of savings resulting from owning the right to
manufacture or sell products under a trade name without having to pay a license fee for its use. It
requires us to estimate future revenues, royalty rates and a discount factor.
In fiscal 2009, 2008 and 2007 we recorded impairment charges of approximately $0.8 million,
$15.6 million and $4.4 million, respectively, related to certain trade names. The fiscal 2009
impairment was the
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result of the continued decline in industrial and commercial markets. In addition, the
discount factor declined to 17.0% from 18.5% in fiscal 2008 mainly due to a reduction in market
interest rates and credit spreads. The fiscal 2008 impairment was mainly due to market conditions
at that time which caused the discount factor to increase to 18.5% from 12.9% in fiscal 2007. The
economic downturn at the end of fiscal 2008 created an increased level of near-term uncertainty
relative to retailer and distributor reactions (i.e. reducing purchases from us and reducing
historical inventory levels) to consumer spending declines. The decline in consumer spending
continued into fiscal 2009 whereby retailers continued to reduce purchases and inventory levels as
a reaction to market conditions. Retailer and distributor reactions, as well as, overall changes in
consumer spending behavior impact our future estimates of revenues, costs and cash flow. We
included a risk premium of 3% in fiscal 2009 and 2008 in the discount factor to account for the
increased execution risk in our projections and the high amount of leverage in our capital
structure as compared to the industry benchmark.
The fiscal 2007 impairment was the result of our revised outlook of revenue directly
associated with the trade names which have been unfavorably impacted by changing brand strategies.
The shift in brand strategies by two of our significant customers whereby their product mix was
less heavily weighted with our trade name goods, reduced the amount of estimated branded revenues
from these two significant customers, leading to lower trade name fair values and, subsequently,
impairment charges. The shift in branding strategies was driven by changes in marketing strategies
by these two significant customers and not decisions of management.
While we are unable to predict the occurrence of certain future events, we estimate that a 10%
decrease in projected revenue related to each of the trade names would have resulted in an increase
in impairment of $0.8 million in fiscal 2009. In addition, a 1% increase in the discount rate
would have resulted in an increase in impairment of $0.6 million.
Pension Liability
We have defined benefit plans and postretirement plans, under which participants earn a
retirement benefit based upon a formula set forth in the plan. We record expense related to these
plans using actuarially determined amounts. Key assumptions used in the actuarial valuations
include the discount rate and the expected rate of return on plan assets. These rates are based on
historical experience, current market conditions and managements judgment.
The accumulated benefit obligation of the defined benefit plans is a discounted amount
calculated using market interest rates. An increase in market interest rates, assuming no other
changes in the estimates, reduces the amount of the accumulated benefit obligation and the related
expense. A decrease in market interest rates, assuming no other changes in the estimates, increases
the amount of the accumulated benefit obligation and the related expense. Changes to the expected
long-term rate of return on plan assets also impact pension expense. An increase in the expected
long-term rate of return on plan assets decreases pension expense. Conversely, a decrease in the
expected long-term rate of return on plan assets increases pension expense.
We use an 8% long term rate of return and estimate that a 1% change in the long term rate of
return on plan assets would have the following effect on fiscal 2009 results:
1% Increase | 1% Decrease | |||||||
(in millions) | ||||||||
Effect on net periodic benefit (credit) cost |
$ | (1.3 | ) | $ | 1.3 |
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We use a 6.10% discount rate for the defined benefit plans and a 6.30% discount rate for the
postretirement plans and estimate that a 1% change in the discount rates would have the following
effect on fiscal 2009 results:
1% Increase | 1% Decrease | |||||||
(in millions) | ||||||||
Effect on net periodic benefit (credit) cost |
$ | (0.1 | ) | $ | 1.0 |
Income Taxes
We record deferred tax assets and liabilities for the effect of temporary differences between
book and tax bases of recorded assets and liabilities and operating losses and tax credit
carryforwards using enacted tax rates. We are required to reduce deferred tax assets with a
valuation allowance, if it is more likely than not that some portion or all of the deferred tax
assets will not be recognized. In addition, we record liabilities for uncertain income tax
positions. A tax position is a position in a previously filed tax return or a position expected to
be taken in a future tax return that is reflected in the measurement of current and deferred income
taxes. Tax positions are recognized only when it is more likely than not (a likelihood of greater
than 50%), based on the technical merits, that the position will be sustained upon examination. A
probability approach is used in the measurement of the tax position which is the largest amount of
the tax benefit that is considered to have a greater than 50% likelihood of being realized upon
settlement.
We evaluate on a quarterly basis the realizability of our deferred tax assets by assessing our
valuation allowance and by adjusting the amount of such allowance, if necessary. The factors used
to assess the likelihood of realization of deferred tax assets include the reversal of deferred tax
liabilities, our forecast of future taxable income and available tax planning strategies that could
be implemented to realize the deferred tax assets.
Recent Accounting Standards and Pronouncements
Refer to Note 2 of Notes to Consolidated Statements for a discussion of recent accounting
standards and pronouncements.
Operations Review
Fiscal 2009 (53 Weeks) Compared to Fiscal 2008 (52 Weeks)
Company-Wide
The table below and the following narrative compares our statements of operations for the
fiscal year ended October 3, 2009 (fiscal 2009) to the fiscal year ended September 27, 2008
(fiscal 2008). The effect of the fifty-third week of fiscal 2009 as compared to the fifty-two
weeks of fiscal 2008 is not material.
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(Dollars in Millions) | ||||||||||||||||
Fiscal | Fiscal | Increase/(Decrease) | ||||||||||||||
2009 | 2008 | $ | % | |||||||||||||
Net sales |
$ | 452.2 | $ | 503.5 | $ | (51.3 | ) | (10.2 | )% | |||||||
Cost of goods sold |
325.9 | 372.6 | (46.7 | ) | (12.5 | ) | ||||||||||
Gross profit |
126.3 | 130.8 | (4.5 | ) | (3.4 | ) | ||||||||||
Gross profit percentage |
27.9 | % | 26.0 | % | ||||||||||||
Selling, general and
administrative expenses |
86.8 | 96.3 | (9.5 | ) | (9.9 | ) | ||||||||||
Loss on disposal of fixed assets |
1.4 | 0.8 | 0.6 | 75.0 | ||||||||||||
Amortization of intangible
assets |
1.2 | 1.4 | (0.2 | ) | (14.3 | ) | ||||||||||
Impairment charges |
1.7 | 15.8 | (14.1 | ) | (89.2 | ) | ||||||||||
Operating income |
35.1 | 16.6 | 18.5 | * | ||||||||||||
Operating income percentage |
7.8 | % | 3.3 | % | ||||||||||||
Interest expense |
29.7 | 33.8 | (4.1 | ) | (12.1 | ) | ||||||||||
Other (income) expense |
(0.5 | ) | 3.1 | 3.6 | * | |||||||||||
Income (loss) before income
taxes |
5.9 | (20.3 | ) | 26.2 | * | |||||||||||
Income tax expense (benefit) |
1.4 | (3.9 | ) | 5.3 | * | |||||||||||
Net income (loss) |
$ | 4.6 | $ | (16.4 | ) | $ | 21.0 | * | ||||||||
* | Greater than 100%. | |
Note:
Totals may not sum due to rounding.
Net Sales. Overall net sales decreased primarily due to volume declines of
approximately $85.0 million, excluding snow tools, unfavorable Canadian currency translation of
$14.9 million, less favorable weather conditions throughout much of the United States and the
recording of an additional $1.8 million of store servicing and advertising fees for certain
customers as a reduction in revenue as discussed below. The global economic slowdown has continued
to negatively impact retail, industrial and construction demand. Also, several customers decreased
their inventory levels in all four quarters of 2009 which adversely affected the volume of our net
sales. Declines were partially offset by general selling price increases of approximately $41.0
million and an increase in snow tool volume of $10.5 million. The general selling price increases
went into effect during Q1 2009.
During the quarter ended March 29, 2008 (Q2 2008), one customer changed the manner in which
store servicing was provided by eliminating third party contractors and utilizing the customers
own full-time employees. We could no longer identify the benefit received from store servicing
performed for our products sold by the customer. Therefore, beginning in Q2 2008, we recorded
store servicing allowances as a reduction to revenue.
Also during Q2 2008, agreements governing advertising allowances with two significant
customers were amended stipulating that no proof of performance was required and advertising
allowances were guaranteed. We could no longer identify the benefit received from advertising our
products by these customers. Therefore, beginning in Q2 2008, we recorded advertising allowances
as a reduction to revenue.
Gross Profit. Gross profit decreased primarily due to reduced sales volume and the recording
of $1.8 million of store servicing and advertising fees as a reduction to revenue as discussed
above partially offset by general selling price increases and improved manufacturing efficiencies
of $2.4 million. The gross profit percentage increased in fiscal 2009 from fiscal 2008 due to
general selling price increases.
Selling,
General and Administrative (SG&A) Expenses. SG&A expenses decreased primarily due
to a $1.9 million increase in recoveries under the U.S. Continued Dumping and Subsidy Offset Act of
2000,
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or Byrd Amendment, lower distribution and commission expenses of $2.0 million and $1.8
million, respectively, attributed to lower sales volume and the recording of $1.8 million of store
servicing and advertising fees as a reduction of revenue as discussed above. We recovered $3.0
million in Q1 2009 and $1.1 million in Q1 2008 under the Byrd Amendment. On December 2, 2009, we
received a distribution of tariffs collected under the Byrd Amendment in the amount of $3.3
million. Further recoveries under the Byrd Amendment are unknown and cannot be reasonably assured.
Loss on Disposal of Fixed Assets. Loss on disposal of fixed assets includes miscellaneous
disposals of machinery and equipment.
Amortization of Intangible Assets. Amortization expense is consistent with the prior period.
Impairment charges. Impairment charges in fiscal 2009 include the recording of $0.8 million
related to the annual trade name impairment testing mainly due to the decline in industrial and
commercial markets, $0.5 million related to an asset previously held for sale and $0.3 million
related to the impairment of equipment at our Other segment due to the discontinuance of
manufacturing certain products. In fiscal 2008, the Company recorded trade name impairments of
$15.6 million. See Critical Accounting Estimates-Recoverability of Goodwill and Other Intangible
Assets for further information regarding impairment charges.
Interest Expense. Interest expense decreased partially due to lower average borrowings under
our amended and restated revolving credit facility (the Revolving Loan). In addition, we entered
into an interest rate swap during Q2 2009 to replace expiring swaps with a notional amount of $100
million related to our Senior Floating Rate Notes. The new interest rate swap reduced the
effective interest rate on our Senior Floating Rate Notes to 6.9% from 8.2% in fiscal 2008. LIBOR
rates also declined on a year over year basis reducing interest expense associated with our
Revolving Loan.
Other (Income) Expense. Other income for fiscal 2009 includes $1.2 million of unrealized
foreign currency gains related to a U.S. dollar bank account held by a Canadian subsidiary and
realized gains related to foreign currency forward contracts of $1.5 million partially offset by
$2.4 million of an unrealized foreign currency loss on a U.S. dollar denominated intercompany note
issued by a Canadian subsidiary that is not of a long-term nature. Other expense for fiscal 2008
includes $3.0 million of unrealized foreign currency loss related to the intercompany note.
Income Tax Expense (Benefit). Fiscal 2009 income tax expense is mainly attributable to
deferred tax liabilities on indefinite-lived intangibles of $0.8 million, a net accrual for
unremitted foreign earnings of $0.6 million, an accrual of tax contingencies of $0.4 million and an
accrual of foreign income taxes of $0.4 million. Tax accruals were partially offset by the reversal
of foreign withholding taxes on intercompany interest payments of $1.0 million. We have accrued a
net $0.6 million of U.S. taxes as an estimate of the expected tax liability that would result from
the repatriation of our unremitted foreign earnings in a Canadian subsidiary. During the fourth
quarter of fiscal 2009, management determined we no longer qualified for the indefinite reversal
criteria with regards to our Canadian subsidiarys unremitted earnings. Addtionally, a deferred tax
asset and offsetting valuation allowance for foreign capital loss carryforwards were recognized. A
deferred tax asset valuation was necessary for substantially all of our U.S. domestic deferred tax
assets, net of certain deferred tax liabilities. We expect to maintain a valuation allowance on
these deferred tax assets until we can sustain a sufficient level of profits in the applicable
jurisdictions that will demonstrate the ability to realize these net deferred tax assets.
Our Segments
During the fourth quarter of fiscal 2009, the Company consummated an internal reorganization
between the U.S. and Canada segments. Pursuant to this reorganization, a Canadian subsidiary of the
Company transferred all of the outstanding shares of a U.S. subsidiary of the Company to a separate
U.S. subsidiary. This transfer resulted in fiscal 2008 and fiscal 2007 trade name impairments
reported in our U.S. segment.
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The following table presents our net sales and operating income after intercompany
eliminations by segment for fiscal 2009 and our net sales and operating income after intercompany
eliminations and the restructuring for the internal legal entity reorganization by segment for
fiscal 2008:
(Dollars in Millions) | ||||||||||||||||
Fiscal | Fiscal | Increase/(Decrease) | ||||||||||||||
2009 | 2008 | $ | % | |||||||||||||
Net sales: |
||||||||||||||||
United States |
$ | 361.7 | $ | 403.6 | $ | (41.9 | ) | (10.4 | )% | |||||||
Canada |
85.6 | 92.6 | (7.0 | ) | (7.6 | ) | ||||||||||
Other |
4.9 | 7.3 | (2.4 | ) | (32.9 | ) | ||||||||||
Net sales |
$ | 452.2 | $ | 503.5 | $ | (51.3 | ) | (10.2 | )% | |||||||
Operating income (loss): |
||||||||||||||||
United States |
$ | 25.2 | $ | 3.4 | $ | 21.8 | * | |||||||||
Canada |
11.9 | 13.4 | (1.5 | ) | (11.2 | )% | ||||||||||
Other |
(2.0 | ) | (0.1 | ) | (1.9 | ) | * | |||||||||
Operating income |
$ | 35.1 | $ | 16.6 | $ | 18.5 | * | |||||||||
* | Greater than 100%. | |
Note: Totals may not sum due to rounding.
United States
Net Sales. Net sales decreased primarily due to volume declines of approximately $75.0 million
and the recording of $1.8 million of store servicing and advertising fees for certain customers as
a reduction of revenue, partially offset by general selling price increases of approximately $35.0
million. Volume declines are mainly attributable to the continued economic slowdown, the overall
decrease in inventory by our customers in 2009, and less favorable weather conditions.
Operating income. Operating income increased primarily due to lower trade name impairment
charges, general selling price increases and lower commission and distribution expenses of $1.6
million and $1.3 million, respectively, attributed to lower sales volume. The above items were
partially offset by volume declines. Operating income in fiscal 2008 includes $15.6 million in
impairment charges related to trade names.
Canada
Net Sales. Net sales decreased primarily due to unfavorable currency translation of $14.9
million partially offset by volume increases of approximately $3.0 million and selling price
increases of approximately $6.0 million. Volume increases are mainly attributable to increased snow
tool sales.
Operating income. Operating income decreased primarily due to unfavorable currency
translation partially offset by volume and selling price increases.
Other
Net Sales. Net sales decreased as a result of lowers sales volume of approximately $2.0
million due to slower retail demand partially offset by general selling price increases of
approximately $0.3 million.
Operating loss. Operating loss increased due to lower sales volume and the recording of $0.3
million in impairment of equipment and $0.8 million in severance costs partially offset by general
selling price increases.
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Fiscal 2008 (52 Weeks) Compared to Fiscal 2007 (52 Weeks)
Company-Wide
The table below and the following narrative compares our statements of operations for fiscal
2008 to the fiscal year ended September 29, 2007 (fiscal 2007):
(Dollars in Millions) | ||||||||||||||||
Fiscal | Fiscal | Increase/(Decrease) | ||||||||||||||
2008 | 2007 | $ | % | |||||||||||||
Net sales |
$ | 503.5 | $ | 500.8 | $ | 2.7 | 0.5 | % | ||||||||
Cost of goods sold |
372.6 | 379.4 | (6.8 | ) | (1.8 | ) | ||||||||||
Gross profit |
130.8 | 121.4 | 9.4 | 7.7 | ||||||||||||
Gross profit percentage |
26.0 | % | 24.2 | % | ||||||||||||
Selling, general and
administrative expenses |
96.3 | 95.9 | 0.4 | 0.4 | ||||||||||||
Loss on disposal of fixed assets |
0.8 | 1.3 | (0.5 | ) | (38.5 | ) | ||||||||||
Amortization of intangible
assets |
1.4 | 1.5 | (0.1 | ) | (6.7 | ) | ||||||||||
Impairment charges |
15.8 | 4.5 | 11.3 | * | ||||||||||||
Operating income |
16.6 | 18.3 | (1.7 | ) | (9.3 | ) | ||||||||||
Operating income percentage |
3.3 | % | 3.7 | % | ||||||||||||
Interest expense |
33.8 | 36.1 | (2.3 | ) | (6.4 | ) | ||||||||||
Other expense (income) |
3.1 | (5.5 | ) | (8.6 | ) | * | ||||||||||
Loss before income taxes |
(20.3 | ) | (12.3 | ) | (8.0 | ) | (65.0 | ) | ||||||||
Income tax (benefit) expense |
(3.9 | ) | 5.8 | 9.7 | * | |||||||||||
Net loss |
$ | (16.4 | ) | $ | (18.1 | ) | $ | (1.7 | ) | (9.4 | )% | |||||
Net Sales. Net sales increased primarily due to the increase in snow tool sales of approximately
$21.0 million due to the significant snowfall in Canada and certain parts of the United States,
favorable Canadian currency translation of approximately $9.0 million and price increases of
approximately $6.0 million on certain product lines in the United States. These increases were
partially offset by sales volume declines of approximately $27.0 million and the recording of
advertising and store servicing fees of $5.6 million and $2.6 million, respectively, as a reduction
in revenue for certain customers as discussed below.
Prior to Q2 2008, we recorded store servicing and cooperative advertising allowances as a
selling, general and administrative expense based upon the fair value of the identifiable benefit
received. Store service includes, but is not limited to, stocking items, maintaining displays,
monitoring inventory levels and conducting product knowledge training for customer employees
performed at our customers retail locations by third party service providers. Cooperative
advertising includes national and regional media-based advertising featuring our products in
cooperation with our customers retail outlets.
During Q2 2008, one customer changed the manner in which store servicing was provided by
eliminating third party contractors and utilizing the customers own full-time employees. We could
no longer identify the benefit received from store servicing performed for our products sold by the
customer. Therefore, beginning in Q2 2008, we recorded store servicing allowances as a reduction
to revenue.
Also during Q2 2008, agreements governing advertising allowances with two significant
customers were amended stipulating that no proof of performance was required and advertising
allowances were guaranteed. We could no longer identify the benefit received from advertising our
products by these customers. Therefore, beginning in Q2 2008, we recorded advertising allowances
as a reduction to revenue.
Gross Profit. The increase was primarily due to improved manufacturing efficiencies of $10.1
million in the United States and Canada. The effect of price increases was partially offset by
inflationary pressures on raw material costs especially polypropylene and polyethylene that
increased on average approximately 22% and 23%, respectively.
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SG&A. The increase relates to higher distribution and employee incentive costs of $3.0 million
and $3.1 million, respectively, compensation expense of $1.5 million associated with the retirement
of the Chief Executive Officer and pension costs of $1.1 million. These increases were partially
offset by decreases related to the recording of advertising and store servicing fees of $5.6
million and $2.6 million, respectively, as a reduction in revenue for certain customers as
discussed above.
Loss on Disposal of Fixed Assets. Loss on disposal of fixed assets includes miscellaneous
disposals of machinery and equipment.
Amortization of Intangible Assets. Amortization expense is consistent with the prior period.
Impairment charges. In fiscal 2008 the Company recorded an impairment of trade names in the
amount of $15.6 million and an impairment of certain fixed assets of $0.2 million. In fiscal 2007,
the Company recorded an impairment of trade names of $4.4 million and an impairment of certain
fixed assets of $0.1 million. See Critical Accounting Estimates Recoverability of Goodwill and
Other Intangible Assets for further information regarding the impairment charges.
Interest Expense. The decrease was due to lower prevailing interest rates coupled with a lower
average revolver balance than in fiscal 2007.
Other Expense (Income). Other expense for fiscal 2008 includes $3.0 million of an unrealized
foreign currency transaction loss on a U.S. dollar denominated note issued by a Canadian subsidiary
that is not of a long term nature. Other income for fiscal 2007 was primarily the result of an
unrealized foreign currency translation gain of $5.4 million related to the intercompany note.
Income Tax (Benefit)Expense. Income tax benefit is mainly attributable to a reduction in
deferred tax liabilities related to the impairment on indefinite-lived intangibles of $15.6 million
and lower taxable income in Canada. Income tax benefits were partially offset by foreign income
taxes attributable to intercompany interest payments. A deferred tax asset valuation was necessary
for substantially all of our U.S. domestic deferred tax assets, net of certain deferred tax
liabilities. We expect to maintain a valuation allowance on these deferred tax assets until we can
sustain a sufficient level of profits in the applicable jurisdictions that will demonstrate the
ability to realize these net deferred tax assets.
Our Segments
As a result of the internal legal entity restructuring during the fourth quarter of fiscal
2009 described above, we have recast our operating income below for fiscal 2008 and fiscal 2007 to
reflect the transferred U.S. subsidiarys trade name impairment charges to the U.S. segment.
The following table presents our net sales and operating income after intercompany
eliminations and the restructuring for the internal legal entity reorganization by segment for
fiscal 2008 and fiscal 2007:
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(Dollars in Millions) | ||||||||||||||||
Fiscal | Fiscal | Increase/(Decrease) | ||||||||||||||
2008 | 2007 | $ | % | |||||||||||||
Net sales: |
||||||||||||||||
United States |
$ | 403.6 | $ | 421.8 | $ | (18.2 | ) | (4.3 | )% | |||||||
Canada |
92.6 | 71.0 | 21.6 | 30.4 | ||||||||||||
Other |
7.3 | 8.0 | (0.7 | ) | (8.8 | ) | ||||||||||
Net sales |
$ | 503.5 | $ | 500.8 | $ | 2.7 | 0.5 | % | ||||||||
Operating income (loss): |
||||||||||||||||
United States |
$ | 3.4 | $ | 11.0 | $ | (7.6 | ) | (69.1 | )% | |||||||
Canada |
13.4 | 7.2 | 6.2 | 86.1 | ||||||||||||
Other |
(0.1 | ) | 0.1 | (0.2 | ) | * | ||||||||||
Operating income |
$ | 16.6 | $ | 18.3 | $ | (1.7 | ) | (9.3 | )% | |||||||
* | Greater than 100%. | |
Note: Totals may not sum due to rounding. |
United States
Net Sales. Overall net sales decreased primarily from the downturn in the housing market which
resulted in lower demand for certain products and the recording of advertising and store servicing
fees as a reduction in revenue as discussed above. The decrease was partially offset by a $6.9
million increase in snow tools sales due to significant snowfall in certain parts of the United
States and a price increase on certain product lines.
Operating income. Operating income decreased primarily due to recording of impairment on trade
names of $15.6 million and the decrease in net sales, partially offset by improved manufacturing
efficiencies and lower commission expenses.
Canada
Net Sales. Net sales increased primarily due to an increase of approximately $14.0 million in
snow tool sales as a result of significant snowfall in Canada, favorable currency exchange rate of
approximately $9.0 million as compared to the prior year and additional product line placements
with existing customers.
Operating income. This increase was primarily due to the increase in snow tool sales volume,
favorable currency exchange rates and additional product line placements.
Other
Changes in net sales and operating (loss) income for this segment were not significant for the
periods presented.
Liquidity, Capital Resources and Financial Position
Our principal liquidity requirements are to service our debt and meet our working capital and
capital expenditure needs. We expect to be able to meet our liquidity requirements for at least the
next twelve months through cash provided by operations and through borrowings available under our
Revolving Loan. We will need to refinance our Senior Subordinated Notes and Senior Floating Rate
Notes on or before maturity in 2012, and we may need to refinance our Revolving Loan on or before
maturity in 2011. We cannot assure you that we will be able to refinance any of our indebtedness on
commercially reasonable terms or at all.
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(Dollars in Millions) | ||||||||||||||||
Fiscal | Fiscal | Increase/(Decrease) | ||||||||||||||
2009 | 2008 | $ | % | |||||||||||||
Net cash provided by operating activities |
$ | 45.0 | $ | 22.8 | $ | 22.2 | 97.4 | % | ||||||||
Net cash used in investing activities |
(6.6 | ) | (7.2 | ) | 0.6 | 8.3 | ||||||||||
Net cash used in financing activities |
(23.0 | ) | (3.2 | ) | (19.8 | ) | * |
(Dollars in Millions) | |||||||||||||||||
Fiscal | Fiscal | Increase/(Decrease) | |||||||||||||||
2008 | 2007 | $ | % | ||||||||||||||
Net cash provided by operating activities |
$ | 22.8 | $ | 30.9 | $ | (8.1 | ) | (26.2 | )% | ||||||||
Net cash used in investing activities |
(7.2 | ) | (7.6 | ) | 0.4 | 5.3 | |||||||||||
Net cash used in financing activities |
(3.2 | ) | (24.8 | ) | 21.6 | 87.1 |
Cash Flows from Operating Activities
The increase in cash provided by operations from fiscal 2008 to fiscal 2009 is mainly due to
lower trade receivables and inventory balances partially offset by reduced trade accounts payable
balances. During fiscal 2009, the payment terms for one significant customer were shortened thus
reducing their average accounts receivable balance. Payment terms for fiscal 2010 related to this
customer are expected to return to fiscal 2008 terms. Both inventory and trade accounts payable
declined due to decreased sales and efforts to reduce inventory levels. The decrease in cash
provided by operations from fiscal 2007 to fiscal 2008 is primarily the result of fluctuations in
working capital.
Cash Flows from Investing Activities
Purchases of property, plant and equipment are generally the main investing activity of the
Company. We do not anticipate future purchases of property, plant and equipment for the fiscal year
ended October 2, 2010 (fiscal 2010) to deviate from historical purchase levels.
Cash Flows from Financing Activities
The use of cash in fiscal 2009, fiscal 2008 and fiscal 2007 is primarily related to net
repayments on our Revolving Loan.
Debt and Other Obligations
Total indebtedness is as follows:
October 3 | September 27, | |||||||
2009 | 2008 | |||||||
Revolving Loan |
$ | 17,500 | $ | 40,010 | ||||
Senior Floating Rate Notes, net of unamortized
discount of $241 and $349, respectively |
149,759 | 149,651 | ||||||
Senior Subordinated Notes |
150,000 | 150,000 | ||||||
Term Note |
479 | 1,033 | ||||||
Capital lease obligations |
42 | | ||||||
Total debt |
317,780 | 340,694 | ||||||
Less: |
||||||||
Short-term Revolving Loan |
(17,500 | ) | (40,010 | ) | ||||
Current portion of capital lease obligations |
(10 | ) | | |||||
Current portion of long-term debt |
(479 | ) | (554 | ) | ||||
Long-term debt |
$ | 299,791 | $ | 300,130 | ||||
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Letters of | (a) | (b) | ||||||||||||||||||||||
Borrowing | Credit | Availability | Interest | |||||||||||||||||||||
Maximum | Base as | Outstanding | as of | Rate as | ||||||||||||||||||||
Borrowing | of October 3, | as of October 3, | October 3, | of October | Expiration | |||||||||||||||||||
Amount | 2009 | 2009 | 2009 | 3, 2009 | Date | |||||||||||||||||||
Revolving Loan |
$ | 130,000 | $ | 69,330 | $ | 2,368 | $ | 49,462 | 2.0 | % | Apr 7, 2011 |
(d) | (e) | |||||||||||||||||||
Original | (c) | Interest | Maturity | Call Option | ||||||||||||||||
Principal | Interest Rate | Payments | Date | Date | ||||||||||||||||
Senior Floating Rate Notes |
$ | 150,000 | LIBOR + 4% | Jan 15, Apr 15, Jul 15, Oct 15 |
Jan 15, 2012 | Jan 15, 2007 | ||||||||||||||
Senior Subordinated Notes |
150,000 | 10 | % | Jan 15, Jul 15 | Jul 15, 2012 | Jul 15, 2008 | ||||||||||||||
Term Note |
2,700 | 2.5 | % | Monthly | Jul 19, 2010 | n/a |
(a) | Total amount available is limited by the amount of eligible accounts receivable, inventory, machinery and equipment, and real estate less letters of credit outstanding. | |
(b) | The interest rate applicable to the loans under the Revolving Loan is either 1) the Eurodollar Rate or London Interbank Offered Rate (LIBOR) plus a margin of 1.75% to 2.75%, or 2) the Base Rate plus a margin of 0.50% to 1.50%. The Base Rate is calculated at the higher of 1) the prevailing Federal Funds rate plus 50 basis points or 2) the administrative agents prime interest rate plus an applicable rate determined by the Companys consolidated leverage ratio as defined by the Amended and Restated Senior Secured Credit Agreement. | |
(c) | LIBOR represents the three month London Interbank Offered Rate which resets quarterly. LIBOR was 0.51% as of July 13, 2009. July 13, 2009 is the reset date for the October 15, 2009 interest payment. | |
(d) | Interest payments are in cash and paid in arrears. | |
(e) | The Senior Floating Rate Notes do not have a redemption premium. The Senior Subordinated Notes have a redemption price of 102.5% of principal on or after July 15, 2009, and 100% of principal on or after July 15, 2010. | |
(f) | As of October 3, 2009 the Company was in compliance with all financial covenants under its indebtedness agreements. |
Revolving Loan
On April 7, 2006, we entered into the Revolving Loan with Bank of America, N.A., as
administrative agent, swing line lender and letter of credit issuer. The Revolving Loan is a
five-year revolving credit facility of up to $130.0 million, including a sub-facility for letters
of credit in an amount not to exceed $15.0 million and a sub-facility for swing-line loans in an
amount not to exceed $15.0 million. Our obligations under the Revolving Loan are guaranteed by ATT
Holding Co. and collateralized by substantially all of the assets of Ames True Temper (ATT) and
Ames True Temper Properties, Inc. Future domestic subsidiaries will be required to guarantee the
obligations and grant a lien on substantially all of their assets.
The terms of the Revolving Loan include various covenants that restrict our ability to, among
other things, incur additional liens, incur additional indebtedness and make additional
investments. In addition, we are prohibited from incurring capital expenditures exceeding $15.0
million in any fiscal year (subject to the right to carry over the unused portion to the following
year). In addition, upon the occurrence of a Cash Dominion Trigger, we will be required to have
Consolidated EBITDA, as defined by the Revolving Loan, of at least $41.0 million cumulative over
four consecutive quarters. Under the Revolving Loan, a Cash Dominion Trigger shall have occurred
if (1) an event of default under the Revolving Loan shall have occurred or (2) availability under
the Revolving Loan falls below certain thresholds. The Revolving Loan also includes customary
events of default, including, without limitation, payment defaults, cross defaults to other
indebtedness and bankruptcy related defaults.
Senior Floating Rate Notes
The Senior Floating Rate Notes are fully and unconditionally guaranteed by our parent and all
domestic subsidiaries on a senior unsecured basis. The Senior Floating Rate Notes are unsecured,
unsubordinated obligations and are effectively subordinated to all of our existing and future
secured debt, to the extent of
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the assets securing such debt, including borrowings under the Revolving Loan, pari passu with
all future senior unsecured indebtedness, senior in right of payment to all existing and future
senior subordinated debt, including our Senior Subordinated Notes, and effectively behind all of
the existing and future liabilities of our subsidiaries, including trade payables.
The indenture governing the Senior Floating Rate Notes contains various affirmative and
negative covenants, subject to a number of important limitations and exceptions, including but not
limited to those limiting our ability and the ability of our restricted subsidiaries to borrow
money, guarantee debt or sell preferred stock, create liens, pay dividends on or redeem or
repurchase stock, make specified types of investments, sell stock in our restricted subsidiaries,
restrict dividends or other payments from restricted subsidiaries, enter into transactions with
affiliates and sell assets or merge with other companies. The indenture governing the Senior
Floating Rate Notes also contains various events of default, including but not limited to those
related to non-payment of principal, interest or fees; failure to perform or observe certain
covenants; inaccuracy of representations and warranties in any material respect; cross defaults
with certain other indebtedness; certain bankruptcy related events; monetary judgment defaults and
material non-monetary judgment defaults and ERISA (Employee Retirement Income Security Act)
defaults and change of control. In addition, we are required to redeem the Senior Floating Rate
Notes under certain circumstances involving changes of control.
Senior Subordinated Notes
The Senior Subordinated Notes are fully and unconditionally guaranteed by our parent, ATT
Holding Co. and all domestic subsidiaries, on a senior subordinated basis. The Senior Subordinated
Notes are unsecured senior subordinated obligations and rank behind all of our existing and future
senior debt, including borrowings under the Revolver Loan, equally with any of our future senior
subordinated debt, ahead of any of our future debt that expressly provides for subordination to the
Senior Subordinated Notes and effectively behind all of the existing and future liabilities of our
subsidiaries, including trade payables.
The indenture governing Senior Subordinated Notes contains various affirmative and negative
covenants, subject to a number of important limitations and exceptions, including but not limited
to those limiting our ability and the ability of our restricted subsidiaries to borrow money,
guarantee debt or sell preferred stock, create liens, pay dividends on or redeem or repurchase
stock, make certain investments, sell stock in our restricted subsidiaries, restrict dividends or
other payments from restricted subsidiaries, enter into transactions with affiliates and sell
assets or merge with other companies. The indenture governing the Senior Subordinated Notes also
contains various events of default, including but not limited to those related to non-payment of
principal, interest or fees; violations of certain covenants; certain bankruptcy-related events;
invalidity of liens; non-payment of certain legal judgments and cross defaults with certain other
indebtedness. We are required to redeem the Senior Subordinated Notes under certain circumstances
involving changes of control.
Other Debt
The Term Note contains customary events of default (subject to customary exceptions,
thresholds and grace periods), including, without limitation, nonpayment of principal, interest,
fees and failure to perform or observe certain covenants.
Interest Rate Swaps
The Senior Floating Rate Notes have an interest rate of 3-month LIBOR plus 4%. We have entered
into interest rate swaps that fix the variable rate portion of the interest rate as follows:
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(Dollars in Thousands) | ||||||||||||||||
(a) | ||||||||||||||||
Effective | ||||||||||||||||
Notional | Interest | |||||||||||||||
Receive | Pay | Amount | Rate | |||||||||||||
January 16, 2009 through January 15, 2010 |
3-month LIBOR | 4.31 | % | $ | 33,333 | 8.31 | % | |||||||||
January 16, 2009 through January 15, 2010 |
3-month LIBOR | 4.29 | % | 16,667 | 8.29 | % | ||||||||||
January 15, 2009 through January 15, 2010 |
3-month LIBOR | 1.40 | % | 100,000 | 5.40 | % | ||||||||||
January 15, 2010 through January 15, 2011 |
3-month LIBOR | 1.90 | % | 150,000 | 5.90 | % | ||||||||||
January 18, 2011 through January 15, 2012 |
3-month LIBOR | 2.50 | % | 150,000 | 6.50 | % |
(a) | Represents the effective interest rate on the respective portion of the Senior Floating Rate Notes including the contractual terms of the interest rate swap for the periods indicated. |
As of October 3, 2009, the interest rate swaps were recorded as a liability of $2.7
million. The change in fair value was recognized as an increase in accumulated other comprehensive
loss of $1.9 million net of taxes.
Off-Balance Sheet Arrangements
As of October 3, 2009 and September 27, 2008, we had no off-balance sheet arrangements.
Contractual Commitments
The following table represents our contractual commitments associated with our debt and other
obligations as of October 3, 2009.
October | October | October | October | October | ||||||||||||||||||||||||
2009 | 2010 | 2011 | 2012 | 2013 | ||||||||||||||||||||||||
to | to | to | to | to | ||||||||||||||||||||||||
September | September | September | September | September | ||||||||||||||||||||||||
Total | 2010 | 2011 | 2012 | 2013 | 2014 | Thereafter | ||||||||||||||||||||||
(Dollars in Thousands) | ||||||||||||||||||||||||||||
Contractual Obligations |
||||||||||||||||||||||||||||
Revolving credit facility |
$ | 17,500 | $ | 17,500 | $ | | $ | | $ | | $ | | $ | | ||||||||||||||
Senior Floating Rate Notes |
150,000 | | | 150,000 | | | | |||||||||||||||||||||
Senior Subordinated Notes |
150,000 | | | 150,000 | | | | |||||||||||||||||||||
Term Note |
479 | 479 | | | | | | |||||||||||||||||||||
Capital lease obligations |
42 | 10 | 10 | 10 | 10 | 2 | | |||||||||||||||||||||
Interest on Notes |
63,261 | 24,055 | 24,487 | 14,719 | | | | |||||||||||||||||||||
Operating leases |
77,982 | 9,639 | 9,550 | 8,959 | 8,164 | 7,187 | 34,483 | |||||||||||||||||||||
Pension and postretirement
payments |
54,236 | 2,916 | 6,277 | 10,029 | 9,775 | 9,476 | 15,763 | |||||||||||||||||||||
Medical self-insurance |
6,100 | 6,100 | | | | | | |||||||||||||||||||||
Open purchase orders |
27,263 | 27,263 | | | | | | |||||||||||||||||||||
Other purchase commitments |
3,656 | 3,163 | 470 | 12 | 11 | | | |||||||||||||||||||||
Forward purchase contracts |
14,776 | 14,776 | | | | | | |||||||||||||||||||||
Total contractual obligations |
$ | 565,295 | $ | 105,901 | $ | 40,794 | $ | 333,729 | $ | 17,960 | $ | 16,665 | $ | 50,246 | ||||||||||||||
Commitments |
||||||||||||||||||||||||||||
Outstanding letters of credit |
$ | 2,368 | $ | 2,368 | $ | | $ | | $ | | $ | | $ | | ||||||||||||||
Total commitments |
$ | 2,368 | $ | 2,368 | $ | | $ | | $ | | $ | | $ | | ||||||||||||||
As of October 3, 2009, the total amount of gross unrecognized tax benefits for
uncertain tax positions was $3.8 million. We do not expect a significant tax payment related to
these obligations within the next year. Due to the uncertainty of the timing of these tax positions
we have not included this liability in the above table.
Financial Position
Working capital as of October 3, 2009 and September 27, 2008 was as follows:
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(Dollars in Thousands) | ||||||||||||||||
October 3, | September 27, | Increase/(Decrease) | ||||||||||||||
2009 | 2008 | $ | % | |||||||||||||
Current assets: |
||||||||||||||||
Cash and cash equivalents |
$ | 33,609 | $ | 17,159 | $ | 16,450 | 95.9 | % | ||||||||
Trade receivables, net |
42,449 | 59,168 | (16,719 | ) | (28.3 | ) | ||||||||||
Inventories |
90,305 | 110,891 | (20,586 | ) | (18.6 | ) | ||||||||||
Assets held for sale |
| 1,025 | (1,025 | ) | (100.0 | ) | ||||||||||
Prepaid expenses and
other current assets |
6,315 | 6,156 | 159 | 2.6 | ||||||||||||
Total current assets |
172,678 | 194,399 | (21,721 | ) | (11.2 | ) | ||||||||||
Current liabilities: |
||||||||||||||||
Trade accounts payable |
18,214 | 35,691 | (17,477 | ) | (49.0 | ) | ||||||||||
Accrued interest payable |
5,392 | 6,021 | (629 | ) | (10.4 | ) | ||||||||||
Accrued expenses and
other current
liabilities |
26,642 | 27,634 | (992 | ) | (3.6 | ) | ||||||||||
Revolving loan |
17,500 | 40,010 | (22,510 | ) | (56.3 | ) | ||||||||||
Current portion of
long-term debt and
capital lease obligation |
489 | 554 | (65 | ) | (11.7 | ) | ||||||||||
Total current liabilities |
68,237 | 109,910 | (41,673 | ) | (37.9 | ) | ||||||||||
Working capital |
$ | 104,441 | $ | 84,489 | $ | 19,952 | 23.6 | % | ||||||||
Our working capital as of October 3, 2009 compared to our working capital as of September 27,
2008 reflects higher cash and cash equivalents and a lower Revolving Loan balance due to cash
generated from operations. The working capital increase was partially offset by a net lower
inventory and trade accounts payable due to our actions to reduce spending in light of reduced
sales. In addition, trade accounts receivable was reduced by changes in payment terms for one
significant customer as discussed above.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our cash flows, results of operations and financial position are subject to fluctuations
resulting from changes in interest rates, foreign currency exchange rates and raw material costs.
We manage our exposure to these market risks through internally established policies and procedures
and, when deemed appropriate, through the use of derivative financial instruments. Our policy does
not allow speculation in derivative instruments for profit or execution of derivative instrument
contracts for which there are no underlying exposures. We do not use financial instruments for
trading purposes and are not a party to any leveraged derivatives. We monitor our underlying
market risk exposures on an ongoing basis and believe that we can modify or adapt our hedging
strategies as needed.
Interest Rate Risk
Our primary market risk is interest rate exposure with respect to our floating rate debt,
which includes the Senior Floating Rate Notes and Revolving Loan. The interest rate on the Senior
Floating Rate Notes at October 3, 2009 was 4.5%. The interest rate on the Revolving Loan at October
3, 2009 was 2.0%. As of October 3, 2009, we had three outstanding interest rate swaps. These swaps
effectively fix the variable interest rate portion of the Senior
Floating Rate Notes. See Debt
and Other Obligations Senior Floating Rate Notes
and Interest Rate Swaps. We estimate a
1% change in Revolving Loan interest rates would impact us by approximately $0.6 million based on a
trailing twelve month analysis of actual Revolving Loan balances.
Foreign Operations; Currency Risk
We conduct foreign operations primarily in Canada and Ireland and utilize international
suppliers and manufacturers. For fiscal 2010, we have hedged $14.8 million (in Canadian dollars) of
our forecasted Canadian subsidiary operation purchases that are denominated in U.S. dollars.
Additionally, on September 1, 2007 a Canadian subsidiary issued a U.S. dollar denominated
intercompany note in the principal amount
34
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of $105 million to a U.S. subsidiary as part of an internal legal entity reorganization.
During the fourth quarter of fiscal 2009, the internal legal entity reorganization was reversed and
a portion of the balance outstanding under the intercompany note was repaid. As of October 3, 2009,
approximately $20.8 million remains outstanding. As a result, we are subject to risk from changes
in foreign exchange rates. These changes result in either cumulative translation adjustments, which
are included in accumulated other comprehensive income (loss), or realized and unrealized gains and
losses which are included in other expense. As of October 3, 2009, a hypothetical 10% change in
quoted foreign currency exchange rates would increase or decrease the income before income taxes by
$2.0 million.
Raw Material; Commodity Price Risk
We purchase certain raw materials such as resin, steel and wood that are subject to price
volatility caused by unpredictable factors. Where possible, we employ fixed rate raw material
purchase contracts and customer price adjustments to help us to manage this risk. We do not
currently manage our raw materials risk through the use of derivative instruments.
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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ATT Holding Co.
Consolidated Financial Statements
Contents
37 | ||||
38 | ||||
39 | ||||
40 | ||||
41 | ||||
42 |
36
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Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholder of
ATT Holding Co.
Camp Hill, Pennsylvania
ATT Holding Co.
Camp Hill, Pennsylvania
We have audited the accompanying consolidated balance sheets of ATT Holding Co. and subsidiaries
(the Company) as of October 3, 2009 and September 27, 2008 and the related consolidated
statements of operations, stockholders deficit, and cash flows for each of the three fiscal years
in the period ended October 3, 2009. Our audits also included the financial statement schedule
listed in the index at Item 15(a). These financial statements and financial statement schedule are
the responsibility of the Companys management. Our responsibility is to express an opinion on
these financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. The
Company is not required to have, nor were we engaged to perform, an audit of its internal control
over financial reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Companys internal control
over financial reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects,
the financial position of ATT Holding Co. and subsidiaries as of October 3, 2009 and September 27,
2008 and the results of their operations and their cash flows for each of the three fiscal years in
the period ended October 3, 2009 in conformity with accounting principles generally accepted in the
United States of America. Also, in our opinion, such financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents fairly, in all material
respects the information set forth therein.
/s/ Deloitte & Touche LLP
Philadelphia, Pennsylvania
December 14, 2009
December 14, 2009
37
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ATT
Holding Co.
Consolidated Balance Sheets
(In Thousands, Except Shares and Per Share Amounts)
(In Thousands, Except Shares and Per Share Amounts)
October 3, 2009 | September 27, 2008 | |||||||
Assets |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 33,609 | $ | 17,159 | ||||
Trade receivables, net |
42,449 | 59,168 | ||||||
Inventories |
90,305 | 110,891 | ||||||
Assets held for sale |
| 1,025 | ||||||
Prepaid expenses and other current assets |
6,315 | 6,156 | ||||||
Total current assets |
172,678 | 194,399 | ||||||
Property, plant and equipment, net |
44,239 | 55,237 | ||||||
Intangibles, net |
53,681 | 56,149 | ||||||
Goodwill |
57,494 | 58,242 | ||||||
Other noncurrent assets |
6,531 | 9,798 | ||||||
Total assets |
$ | 334,623 | $ | 373,825 | ||||
Liabilities and stockholders deficit |
||||||||
Current liabilities: |
||||||||
Trade accounts payable |
$ | 18,214 | $ | 35,691 | ||||
Accrued interest payable |
5,392 | 6,021 | ||||||
Accrued expenses and other current liabilities |
26,642 | 27,634 | ||||||
Revolving loan |
17,500 | 40,010 | ||||||
Current portion of long-term debt and capital lease obligations |
489 | 554 | ||||||
Total current liabilities |
68,237 | 109,910 | ||||||
Deferred income taxes |
13,672 | 11,348 | ||||||
Long-term debt |
299,791 | 300,130 | ||||||
Accrued retirement benefits |
51,836 | 26,108 | ||||||
Other liabilities |
12,661 | 10,534 | ||||||
Total liabilities |
446,197 | 458,030 | ||||||
Commitments and contingencies
|
||||||||
Stockholders deficit: |
||||||||
Preferred stockSeries A, $.0001 per share par value; 100,000
shares authorized; 62,495 shares issued and outstanding as of
October 3, 2009 and September 27, 2008 (Liquidation preference
of $62,495 at October 3, 2009) |
| | ||||||
Common stockClass A, $.0001 per share par value; 1,600,000
shares authorized; 726,556 shares issued and outstanding as of
October 3, 2009 and September 27, 2008 |
| | ||||||
Common stockClass B, $.0001 per share par value; 300,000
shares authorized; 267,448 shares issued and outstanding as of
October 3, 2009 and September 27, 2008 |
| | ||||||
Additional paid-in capital |
111,168 | 110,500 | ||||||
Predecessor basis adjustment |
(13,539 | ) | (13,539 | ) | ||||
Accumulated deficit |
(167,272 | ) | (172,129 | ) | ||||
Accumulated other comprehensive loss |
(41,931 | ) | (9,037 | ) | ||||
Total stockholders deficit |
(111,574 | ) | (84,205 | ) | ||||
Total liabilities and stockholders deficit |
$ | 334,623 | $ | 373,825 | ||||
See accompanying notes to consolidated financial statements
38
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ATT
Holding Co.
Consolidated Statements of Operations
(In thousands)
(In thousands)
Fiscal year | Fiscal year | Fiscal year | ||||||||||
ended | ended | ended | ||||||||||
October 3, | September 27, | September 29, | ||||||||||
2009 | 2008 | 2007 | ||||||||||
(53 weeks) | (52 weeks) | (52 weeks) | ||||||||||
Net sales |
$ | 452,191 | $ | 503,453 | $ | 500,767 | ||||||
Cost of goods sold |
325,919 | 372,609 | 379,351 | |||||||||
Gross profit |
126,272 | 130,844 | 121,416 | |||||||||
Selling, general and administrative expenses |
86,838 | 96,258 | 95,863 | |||||||||
Loss on disposal of fixed assets |
1,389 | 829 | 1,299 | |||||||||
Amortization of intangible assets |
1,214 | 1,363 | 1,496 | |||||||||
Impairment charges |
1,727 | 15,783 | 4,465 | |||||||||
Operating income |
35,104 | 16,611 | 18,293 | |||||||||
Interest expense |
29,708 | 33,812 | 36,145 | |||||||||
Other (income) expense |
(524 | ) | 3,075 | (5,542 | ) | |||||||
Income (loss) before income taxes |
5,920 | (20,276 | ) | (12,310 | ) | |||||||
Income tax expense (benefit) |
1,363 | (3,854 | ) | 5,800 | ||||||||
Net income (loss) |
$ | 4,557 | $ | (16,422 | ) | $ | (18,110 | ) | ||||
See accompanying notes to consolidated financial statements
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ATT
Holding Co.
Consolidated Statements of Changes in Stockholders Deficit
(In Thousands, Except Shares)
(In Thousands, Except Shares)
Accumulated | ||||||||||||||||||||||||||||||||||||||||||||
Additional | Predecessor | Other | Total | |||||||||||||||||||||||||||||||||||||||||
Series A | Class A | Class B | Paid-in | Basis | Accumulated | Comprehensive | Stockholders | |||||||||||||||||||||||||||||||||||||
Preferred Stock | Common Stock | Common Stock | Capital | Adjustment | Deficit | Income (Loss) | Deficit | |||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||||||||
Balance at September 30, 2006 |
62,495 | $ | | 726,556 | $ | | 267,448 | $ | | $ | 110,500 | $ | (13,539 | ) | $ | (137,597 | ) | $ | 9,909 | $ | (30,727 | ) | ||||||||||||||||||||||
Net loss |
| | | | | | | (18,110 | ) | | (18,110 | ) | ||||||||||||||||||||||||||||||||
Other comprehensive income (loss): |
||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation
adjustment |
| | | | | | | | | 451 | 451 | |||||||||||||||||||||||||||||||||
Minimum pension liability, net of tax |
| | | | | | | | | 577 | 577 | |||||||||||||||||||||||||||||||||
Change in fair value of interest
rate swaps, net of tax |
| | | | | | | | | (1,248 | ) | (1,248 | ) | |||||||||||||||||||||||||||||||
Comprehensive loss |
| | | | | | | | | | (18,330 | ) | ||||||||||||||||||||||||||||||||
Adjustment to adopt pension recognition
provision, net of tax (see Note 2) |
| | | | | | | | | (4,931 | ) | (4,931 | ) | |||||||||||||||||||||||||||||||
Balance at September 29, 2007 |
62,495 | $ | | 726,556 | $ | | 267,448 | $ | | $ | 110,500 | $ | (13,539 | ) | $ | (155,707 | ) | $ | 4,758 | $ | (53,988 | ) | ||||||||||||||||||||||
Net loss |
| | | | | | | | (16,422 | ) | | (16,422 | ) | |||||||||||||||||||||||||||||||
Other comprehensive income (loss): |
||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation
adjustment |
| | | | | | | | | 1,236 | 1,236 | |||||||||||||||||||||||||||||||||
Change in accrued benefit liability,
net of tax |
| | | | | | | | | (13,822 | ) | (13,822 | ) | |||||||||||||||||||||||||||||||
Change in fair value of interest
rate swaps, net of tax |
| | | | | | | | | (1,209 | ) | (1,209 | ) | |||||||||||||||||||||||||||||||
Comprehensive loss |
| | | | | | | | | | (30,217 | ) | ||||||||||||||||||||||||||||||||
Balance at September 27, 2008 |
62,495 | $ | | 726,556 | $ | | 267,448 | $ | | $ | 110,500 | $ | (13,539 | ) | $ | (172,129 | ) | $ | (9,037 | ) | $ | (84,205 | ) | |||||||||||||||||||||
Net income |
| | | | | | | | 4,557 | | 4,557 | |||||||||||||||||||||||||||||||||
Other comprehensive income (loss): |
||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation
adjustment |
| | | | | | | | | 464 | 464 | |||||||||||||||||||||||||||||||||
Minimum pension liability, net of tax |
| | | | | | | | | (31,465 | ) | (31,465 | ) | |||||||||||||||||||||||||||||||
Change in fair value of interest
rate swaps, net of tax |
| | | | | | | | | (1,893 | ) | (1,893 | ) | |||||||||||||||||||||||||||||||
Comprehensive loss |
| | | | | | | | | (28,337 | ) | |||||||||||||||||||||||||||||||||
Other |
| | | | | | 668 | | | | 668 | |||||||||||||||||||||||||||||||||
Adjustment to adopt pension measurement
date provision, net of tax (see Notes 2
and 7) |
| | | | | | | | 300 | | 300 | |||||||||||||||||||||||||||||||||
Balance at October 3, 2009 |
62,495 | $ | | 726,556 | $ | | 267,448 | $ | | $ | 111,168 | $ | (13,539 | ) | $ | (167,272 | ) | $ | (41,931 | ) | $ | (111,574 | ) | |||||||||||||||||||||
See
accompanying notes to consolidated financial statements.
40
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ATT
Holding Co.
Consolidated Statements of Cash Flows
(In Thousands)
(In Thousands)
Fiscal year | Fiscal year | Fiscal year | ||||||||||
ended | ended | ended | ||||||||||
October 3, | September 27, | September 29, | ||||||||||
2009 | 2008 | 2007 | ||||||||||
Operating activities |
||||||||||||
Net income (loss) |
$ | 4,557 | $ | (16,422 | ) | $ | (18,110 | ) | ||||
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities: |
||||||||||||
Depreciation expense |
16,433 | 15,768 | 16,129 | |||||||||
Amortization of intangible assets |
1,214 | 1,363 | 1,496 | |||||||||
Amortization of loan fees |
2,220 | 2,220 | 2,421 | |||||||||
Provision for (recovery from) bad debts |
48 | 173 | (213 | ) | ||||||||
Provision for (benefit from) deferred taxes |
1,260 | (3,965 | ) | 2,076 | ||||||||
Noncash interest expense |
| 70 | 136 | |||||||||
Loss on disposal of property, plant and equipment |
1,389 | 829 | 1,299 | |||||||||
Amortization of bond discount |
108 | 107 | 108 | |||||||||
Unrealized foreign currency loss (gain) |
982 | 3,106 | (5,926 | ) | ||||||||
Impairment charges |
1,727 | 15,783 | 4,465 | |||||||||
Changes in assets and liabilities: |
||||||||||||
Accounts receivable |
16,014 | (3,271 | ) | 11,436 | ||||||||
Inventories |
19,738 | 3,714 | 28,080 | |||||||||
Prepaid expenses and other assets |
1,145 | (2,087 | ) | 1,590 | ||||||||
Accounts payable |
(17,037 | ) | 522 | (5,037 | ) | |||||||
Accrued expenses and other liabilities |
(4,825 | ) | 4,874 | (9,054 | ) | |||||||
Net cash provided by operating activities |
44,973 | 22,784 | 30,896 | |||||||||
Investing activities |
||||||||||||
Restricted cash in escrow |
| | 2,081 | |||||||||
Cash paid for property, plant and equipment |
(6,749 | ) | (8,100 | ) | (10,861 | ) | ||||||
Proceeds from sale of property, plant and equipment |
136 | 600 | 1,507 | |||||||||
Proceeds from state government grant |
| 300 | | |||||||||
Investment in joint ventures |
| | (300 | ) | ||||||||
Net cash used in investing activities |
(6,613 | ) | (7,200 | ) | (7,573 | ) | ||||||
Financing activities |
||||||||||||
Repayments of long-term debt |
(554 | ) | (684 | ) | (710 | ) | ||||||
Borrowings on revolver |
146,171 | 162,618 | 143,138 | |||||||||
Repayments of revolver |
(168,681 | ) | (165,106 | ) | (167,248 | ) | ||||||
Principal payments under capital lease obligations |
(8 | ) | | | ||||||||
Net cash used in financing activities |
(23,072 | ) | (3,172 | ) | (24,820 | ) | ||||||
Effect of exchange rate changes on cash |
1,162 | (435 | ) | 1,041 | ||||||||
Increase (decrease) in cash and cash equivalents |
16,450 | 11,977 | (456 | ) | ||||||||
Cash and cash equivalents at beginning of period |
17,159 | 5,182 | 5,638 | |||||||||
Cash and cash equivalents at end of period |
$ | 33,609 | $ | 17,159 | $ | 5,182 | ||||||
Supplemental Cash Flow Information |
||||||||||||
Cash paid for interest |
$ | 28,270 | $ | 28,552 | $ | 34,906 | ||||||
Cash paid for income taxes |
$ | 292 | $ | 230 | $ | 2,830 | ||||||
Property, plant and equipment in trade accounts payable at end of period |
$ | 96 | $ | 330 | $ | 208 | ||||||
See
accompanying notes to consolidated financial statements.
41
Table of Contents
ATT Holding Co.
Notes to Consolidated Statements (Continued)
(Dollars in Thousands, Except Share Data)
1. Formation and Description of Business
ATT
Holding Co. and its subsidiaries (the Company) is a global provider of non-powered
landscaping products that make work easier for homeowners and professionals. The Company refers to
operations subsequent to June 27, 2004. Operations from September 28, 2003 to June 27, 2004 are
referred to as Predecessor Company.
ATT Holding Co. (as Predecessor Company) was incorporated on December 20, 2001. On January 14,
2002, Predecessor Company acquired, from U.S. Industries, Inc. (USI), certain assets and
liabilities of Ames True Temper Group, including Ames True Temper,
Inc. (ATT); True Temper
Ltd.; IXL Manufacturing, Inc. and Garant Division of USI Canada, Inc., a division of USI. In May
2002, IXL Manufacturing was merged into ATT.
On June 28, 2004, the Company completed the sale of all outstanding common and preferred stock and
warrants of Predecessor Company to affiliates of Castle Harlan, a New York private-equity
investment firm. CHATT Holdings Inc., the buyer,
and CHATT Holdings LLC, the buyer-parent,
were created to make the acquisition of the Company. Approximately 87% of the equity interests of
the buyer parent are owned by affiliates of Castle Harlan, and the remainder was issued to members
of our management who held capital stock in the Predecessor Company, in lieu of cash consideration
that they otherwise would have been entitled to receive in the acquisition. In addition, certain
members of management that did not hold equity in Predecessor Company purchased an equity interest
in the buyer parent for cash.
ATT Holding Co. is a holding company which has no interest, operations or activities other than
through its ownership of 100% of Ames True Temper Inc. and ATTs wholly-owned subsidiaries.
The Companys fiscal year ends on the Saturday nearest to September 30. The 2009 fiscal year is a
53 week period ended on October 3, 2009 while fiscal 2008 and fiscal 2007 were 52 week periods
ended on September 27, 2008 and September 29, 2007, respectively.
2. Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the consolidated financial statements and reported amounts of revenue and expenses
during the reporting period. Although these estimates are based on managements best knowledge of
current events and actions the Company may undertake in the future, actual results could differ
from the estimates.
42
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ATT Holding Co.
Notes to Consolidated Statements (Continued)
Principles of Consolidation
The accompanying consolidated financial statements for the fiscal years ended October 3, 2009,
September 27, 2008 and September 29, 2007, include the accounts of ATT Holding Co. and its
subsidiaries. All intercompany transactions have been eliminated in consolidation.
Cash and Cash Equivalents
Cash equivalents represent short-term, highly liquid investments, which have maturities of 90 days
or less when purchased. The carrying amount of cash and cash equivalents approximates fair value.
Accounts Receivable
Accounts receivable are reported net of an allowance for doubtful accounts, customer program
reserves and cash discounts. The allowance for doubtful accounts is based on managements estimate
of the amount of receivables that will actually be collected including consideration of historical
levels of write-off. Accounts are considered past due based on how payments are received compared
to the customers credit terms. Accounts are written off when management determines the account is
uncollectible. Finance charges are generally not assessed on past due accounts. Customer program
reserves are managements estimates of amounts due for volume discounts and co-op advertising
programs to certain of its customers. Cash discounts are managements estimate of the customers
ability to pay within the billing terms in order to receive the discount. The Company performs
periodic credit evaluations of its customers financial condition and generally does not require
collateral. Historically, credit losses have been within managements estimates.
Trade receivables are as follows:
October 3, | September 27, | |||||||
2009 | 2008 | |||||||
Trade receivables |
$ | 60,731 | $ | 77,646 | ||||
Allowance for doubtful accounts |
(512 | ) | (626 | ) | ||||
Customer programs and contractual allowances |
(17,770 | ) | (17,852 | ) | ||||
$ | 42,449 | $ | 59,168 | |||||
The Companys two largest customers represented approximately 30% and 20% of the net sales for the
fiscal year ended October 3, 2009. These customers represented 31% and 17% of net sales for the
fiscal year ended September 27, 2008 and 31% and 18% for the fiscal year ended September 29, 2007.
These customers represent 26% and 22% of trade receivables at October 3, 2009 and 35% and 12% of
trade receivables at September 27, 2008. The top ten largest customers represented approximately
74%, 70% and 71% of net sales for the fiscal years ended October 3, 2009, September 27, 2008 and
September 29, 2007, respectively.
Inventories
Inventories are stated at the lower of cost, which is determined by the first-in, first-out method,
or market. Inventories include the cost of raw materials, labor and manufacturing overhead. The
Company makes provisions for obsolete or slow-moving inventories as necessary to properly reflect
inventory at the lower of cost or market.
Inventories are as follows:
October 3, | September 27, | |||||||
2009 | 2008 | |||||||
Finished goods |
$ | 51,161 | $ | 69,681 | ||||
Work in process |
14,595 | 13,564 | ||||||
Raw materials |
24,549 | 27,646 | ||||||
$ | 90,305 | $ | 110,891 | |||||
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ATT Holding Co.
Notes to Consolidated Statements (Continued)
Investments in Joint Ventures
The Company accounts for its joint venture investments in accordance with the cost method. Joint
venture investments are included in other noncurrent assets. The Company has investments in three
cooperative joint ventures in China with certain exclusive marketing rights to sell, outside China,
products manufactured by the three separate joint ventures. The Companys interests in the joint
ventures range between 25% and 35%. The Company does not share in either the profit or loss and has
minority representation on the board of directors of each joint venture and does not receive
financial information for the joint ventures. The Company purchased finished goods and raw material
components from the joint ventures in the amounts of $28,581, $26,777 and $26,321 for the fiscal
years ended October 3, 2009, September 27, 2008 and September 29, 2007, respectively.
Property, Plant and Equipment
Property, plant and equipment are stated on the basis of cost less accumulated depreciation
provided under the straight-line method. Buildings and building improvements are depreciated based
on lives of 25 and 10 years, respectively. Land improvements and leasehold improvements are
depreciated based on lives of 15 and 20 years (or less, depending on the life of the lease),
respectively. Machinery and equipment is depreciated based on lives ranging from 3 to 7 years and
furniture and fixtures based on lives ranging from 5 to 7 years. Expenditures for major additions
and improvements are capitalized, while minor replacements, maintenance and repairs are charged to
expense as incurred. When property is retired or otherwise disposed of, the costs and accumulated
depreciation are removed from the accounts. Any resulting gain or loss is recognized currently.
Construction in progress is comprised of ongoing development costs associated with upgrades and
additions.
A summary of property, plant and equipment is as follows:
October 3, | September 27, | |||||||
2009 | 2008 | |||||||
Land and improvements |
$ | 1,849 | $ | 1,565 | ||||
Buildings and improvements |
19,327 | 18,431 | ||||||
Machinery and equipment (a) |
68,549 | 68,625 | ||||||
Furniture and fixtures (a) |
6,519 | 7,019 | ||||||
Computer hardware |
3,720 | 3,160 | ||||||
Computer software |
8,938 | 8,508 | ||||||
Construction in progress |
1,636 | 2,372 | ||||||
110,538 | 109,680 | |||||||
Less accumulated depreciation |
(66,299 | ) | (54,443 | ) | ||||
Net property, plant and equipment |
$ | 44,239 | $ | 55,237 | ||||
(a) | The amounts as of September 27, 2008 reflect a $5,745 reclassification of warehouse racking from machinery and equipment to furniture and fixtures for comparability purposes to the fiscal year ended October 3, 2009 presentation. |
Long-Lived Assets
The Company reviews long-lived assets for impairment, other than goodwill and indefinite-lived
intangible assets which are separately tested for impairment, whenever circumstances change such
that the indicated recorded value of an asset may not be recoverable. If such indicators are
present, the Company determines whether the sum of the estimated undiscounted future cash flows
attributable to such assets is less than their carrying amount. An impairment loss based on the
excess of the carrying amount of the assets over their fair value is recorded if the calculated
future cash flows is less than the carrying amount of the assets. For the fiscal years ended
October 3, 2009, September 27, 2008 and September 29, 2007 the Company recorded impairment charges
of $818, $200 and $39, respectively, related to certain fixed assets.
44
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ATT Holding Co.
Notes to Consolidated Statements (Continued)
Assets Held For Sale
Long-lived assets to be disposed of by sale are classified as held for sale in the period in which
management, with the proper authority, commits to a plan to sell the asset, the asset is available
for immediate sale in its present condition, an active program to locate a buyer has been
initiated, the asset is marketed at a price that is reasonable in relation to its current fair
value and the sale is probable within one year. Depreciation ceases when an asset is classified as
held for sale. Assets held for sale are carried at the lower of depreciated cost or fair value
less cost to sell.
Goodwill and Other Intangible Assets
Goodwill and intangible assets with indefinite useful lives are not subject to amortization and are
tested for impairment annually or more frequently if events or changes in circumstances indicate
that the asset might be impaired. The Company performs its annual impairment tests for goodwill and
trade names as of the fiscal year-end balance sheet date. Goodwill is tested on a geographic
reporting unit basis.
The Company uses a two-step impairment approach in testing for goodwill impairment. The first step
of testing includes three valuation techniques, publicly traded methodology, transaction
methodology and discounted cash flow methodology with weightings of 40%, 20% and 40%, respectively.
The fair value of each reporting unit exceeded their respective carrying amount as of October 3,
2009, September 27, 2008 and September 29, 2007; therefore, the Company did not complete the second
step of the two-step impairment test.
The Companys indefinite lived intangible assets consist solely of trade names. The relief from
royalty method is used to estimate the fair value of the trade names. If the fair value exceeds the
carrying value, no impairment is recorded. If the carrying value exceeds the fair value, an
impairment charge is recorded for the difference.
Debt Issuance Costs
The Company records deferred financing costs incurred in conjunction with its debt obligations
within other noncurrent assets in the accompanying balance sheets. These costs are capitalized then
amortized using the effective interest method over the lives of the associated debt to interest
expense. Total deferred financing costs, net of accumulated amortization at October 3, 2009 and
September 27, 2008 were $5,002 and $7,222, respectively.
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities include the following amounts:
October 3, | September 27, | |||||||
2009 | 2008 | |||||||
Accrued compensation and benefits |
$ | 10,810 | $ | 11,332 | ||||
Deferred tax liability |
3,656 | 3,607 | ||||||
Other |
12,176 | 12,695 | ||||||
$ | 26,642 | $ | 27,634 | |||||
Income Tax
Income taxes are accounted for under the asset and liability method. Deferred tax assets and
liabilities are recognized for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date. In assessing the realizability
of deferred tax assets, the Company considers whether it is more likely than not that some portion
or all of the deferred tax assets will not be realized. The ultimate realization of deferred taxes
is dependent upon the generation of future taxable
45
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ATT Holding Co.
Notes to Consolidated Statements (Continued)
income during the periods in which those temporary differences and net operating loss carryforwards
become deductible. The Company considers the scheduled reversal of deferred tax liabilities,
projected future taxable income and tax planning strategies in making this assessment.
The Company recognizes the impact of a tax position in the consolidated financial statements if the
position is more likely than not of being sustained under audit based on the technical merits of
the position. The Company records interest and penalties on unrecognized tax benefits as income tax
expense.
Revenue and Cost Recognition
Revenue is recognized upon shipment of products or delivery of products to the customer depending
on the terms of the sale and whether persuasive evidence of an arrangement exists, the selling
price is fixed and determinable and collectability is reasonably assured. The Company offers volume
discounts and co-op advertising programs and store service support to certain of its customers.
Discounts, co-op advertising program expense and store service fees are estimated and accrued for
at the time of sale to the customer based on expected annual rates at established volume
thresholds. The adequacy of accruals is re-assessed quarterly, monitoring the customers progress
toward earning any applicable volume rebate. Discounts provided to customers and expenses
associated with co-op advertising are recorded as a reduction of sales. Provisions are made for
estimated sales returns and allowances, including product warranty costs, at the time of sale. Such
amounts, which are included in net sales, totaled $8,800, $7,950 and $9,126 for the fiscal years
ended October 3, 2009, September 27, 2008 and September 29, 2007, respectively.
Shipping and Handling Costs
All shipping and handling costs are expensed as incurred. Costs incurred to ship product from the
manufacturing facility and distribution centers to customers are included in costs of goods sold
and totaled $14,810, $19,837 and $18,207 for the fiscal years ended October 3, 2009, September 27,
2008 and September 29, 2007, respectively. Costs to ship the product from manufacturing facilities
to the main distribution center are included in selling, general and administrative expense and
totaled $3,347, $8,115 and $5,481 for the fiscal years ended October 3, 2009, September 27, 2008
and September 29, 2007, respectively.
Advertising Costs
Advertising costs are expensed as incurred. Such amounts totaled $3,050, $5,073 and $11,483 for the
fiscal years ended October 3, 2009, September 27, 2008 and September 29, 2007, respectively, and
are included in selling, general and administrative expenses in the accompanying consolidated
statements of operations.
Research and Development Costs
Research and development costs are expensed as incurred. Such amounts totaled $1,379, $1,589 and
$3,187 for the fiscal years ended October 3, 2009, September 27, 2008 and September 29, 2007,
respectively, and are included in selling, general and administrative expenses in the accompanying
consolidated statements of operations.
Foreign Currency Translation
The financial statements of the Companys foreign operations are measured using the local currency
as the functional currency. Assets and liabilities of foreign subsidiaries are translated at the
exchange rates as of the balance sheet date. Resulting translation adjustments are recorded in the
currency translation adjustment account, a separate component of accumulated other comprehensive
(loss) income. Income and expense items are translated at average monthly exchange rates. Gains and
losses from foreign currency transactions are included in other expense/(income).
Accumulated Other Comprehensive Income (Loss)
Comprehensive income (loss) is defined as net income (loss) and other changes in stockholders
deficit from transactions and other events from sources other than stockholders. The components of
and changes in other comprehensive income (loss) are as follows:
46
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ATT Holding Co.
Notes to Consolidated Statements (Continued)
Beginning | Before-Tax | Tax Benefit | Net-of-Tax | Ending | ||||||||||||||||
Balance | Amount | (Expense) | Amount | Balance | ||||||||||||||||
October 3, 2009 |
||||||||||||||||||||
Currency translation adjustment |
$ | 10,548 | $ | 464 | $ | | $ | 464 | $ | 11,012 | ||||||||||
Change in accrued benefit liability |
(18,753 | ) | (31,465 | ) | | (31,465 | ) | (50,218 | ) | |||||||||||
Interest rate swaps |
(832 | ) | (1,893 | ) | | (1,893 | ) | (2,725 | ) | |||||||||||
$ | (9,037 | ) | $ | (32,894 | ) | $ | | $ | (32,894 | ) | $ | (41,931 | ) | |||||||
September 27, 2008 |
||||||||||||||||||||
Currency translation adjustment |
$ | 9,312 | $ | 1,236 | $ | | $ | 1,236 | $ | 10,548 | ||||||||||
Change in accrued benefit liability |
(4,931 | ) | (14,282 | ) | 460 | (13,822 | ) | (18,753 | ) | |||||||||||
Interest rate swaps |
377 | (1,440 | ) | 231 | (1,209 | ) | (832 | ) | ||||||||||||
$ | 4,758 | $ | (14,486 | ) | $ | 691 | $ | (13,795 | ) | $ | (9,037 | ) | ||||||||
September 29, 2007 |
||||||||||||||||||||
Currency translation adjustment |
$ | 8,861 | $ | 451 | $ | | $ | 451 | $ | 9,312 | ||||||||||
Minimum pension liability
adjustment |
(577 | ) | 856 | (279 | ) | 577 | | |||||||||||||
Adoption of pension recognition
provision |
| (4,608 | ) | (323 | ) | (4,931 | ) | (4,931 | ) | |||||||||||
Interest rate swaps |
1,625 | (2,013 | ) | 765 | (1,248 | ) | 377 | |||||||||||||
$ | 9,909 | $ | (5,314 | ) | $ | 163 | $ | (5,151 | ) | $ | 4,758 | |||||||||
Material Suppliers
During fiscal 2009, 2008 and 2007, one supplier accounted for approximately 13%, 9% and 9%,
respectively, of the Companys total raw material purchases.
Pension and Other Postretirement Benefits
The Company uses certain assumptions in the calculation of the actuarial valuation of defined
benefit plans. These assumptions include the weighted average discount rate, rates of increase in
compensation levels and expected long-term rates of return on assets. If actual results are less
favorable than those projected by the Company, additional expense may be required.
The Company recognizes in its statement of financial position an asset for a defined benefit
postretirement plans overfunded status or a liability for a plans underfunded status, measures a
defined benefit postretirement plans assets and obligations that determine its funded status as of
the end of the Companys fiscal year and recognizes changes in the funded status of a defined
benefit postretirement plan in comprehensive income in the year in which the change occurs.
Fair Value of Financial Instruments
The Companys financial instruments include cash and cash equivalents, trade receivables, trade
accounts payable, derivatives and debt. Because of short term maturities, the carrying amounts of
cash and cash equivalents, trade receivables, trade accounts payable, the Revolving Loan and Term
Note approximate fair value. See Note 5 for further information related to the fair value of the
Companys remaining long-term debt.
The Companys assets and liabilities that are measured at fair value, defined as the exit price or
the price that would be received to sell the asset or paid to transfer the liability at the
measurement date, on a recurring basis relate to the Companys derivative contracts which are
mainly comprised of interest rate swaps and foreign currency forward contracts. The Company
utilizes a present value technique to fair value
47
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ATT Holding Co.
Notes to Consolidated Statements (Continued)
each derivative contract. The Company calculates
the present value of future expected cash flows using a discount rate commensurate with the
underlying risk of the debtor. If the derivative represents a liability to the Company, the
Companys incremental borrowing rate was utilized as the discount rate in the present value
calculation. If the derivative represents an asset to the Company, the recorded value includes an
estimate of a credit risk adjustment for the counterparty. No changes to valuation techniques were
made during the periods.
A fair value hierarchy exists that prioritizes the inputs to valuation techniques used to measure
fair value into the following three categories (from highest to lowest priority):
| Level 1 Inputs that represent quoted prices for identical instruments in active markets. | ||
| Level 2 Inputs that represent quoted prices for similar instruments in active markets, or quoted prices for identical instruments in non-active markets. Also includes valuation techniques whose inputs are derived principally from observable market data other than quoted prices, such as interest rates or other market-corroborated means. | ||
| Level 3 Inputs that are largely unobservable, as little or no market data exists for the instrument being valued. |
The Company is required to categorize all financial assets and liabilities required to be measured
at fair value on a recurring basis into the above three levels. See Note 14 for further
information.
Derivative Instruments and Hedging Activities
The Companys cash flows and earnings are subject to fluctuations resulting from changes in
interest rates and foreign currency exchange rates. The Company manages the exposure to these
market risks through internally established policies and procedures and, when deemed appropriate,
through the use of derivative financial instruments. The Companys policy does not allow
speculation in derivative instruments for profit or execution of derivative instrument contracts
for which there are no underlying exposures. Interest rate swaps are entered into to manage
interest rate risk associated with the Companys variable-rate borrowings. Foreign currency
forward contracts are entered into to manage exchange rate risk for portions of the Companys
forecasted U.S. dollar purchases by the Canada segment. Accounting guidance requires companies to
recognize all derivative instruments as either assets or liabilities at fair value in the balance
sheet.
Interest rate swaps were entered into to fix the variable interest rate portion of the Senior
Floating Rate Notes. The Company swaps 3-month LIBOR rates for fixed interest rates to limit the
exposure of changes in interest payments. The Company has structured all existing interest rate
swap agreements to be perfectly effective. The Company designates the interest rate swaps as cash
flow hedges. The change in fair values of the interest rate swaps are recorded within accumulated
other comprehensive income (loss), net of deferred taxes. The remaining gain or loss, if any, is
recognized currently in earnings. Gains and losses on the interest rate swaps are reclassified from
accumulated other comprehensive income into earnings as interest expense on the Senior Floating
Rate Notes is accrued. See Note 5 for further information regarding the notional amounts and
duration of the interest rate swaps. See Notes 14 and 15 for further information regarding the fair
value of the interest rate swaps.
Foreign currency forward contracts do not qualify for hedge accounting treatment. Therefore, in
accordance with United States generally accepted accounting principles (U.S. GAAP), the change in
fair value is
recognized as an unrealized gain or loss in earnings in the period of change. See Notes 14 and 15
for further information regarding the fair value of the foreign currency forward contracts.
Other than standard cross default provisions if a default occurs across the organization, no
credit-risk related-contingent features exist for the Companys derivatives.
Accruals for Self-Insured Losses
The Company maintains insurance for certain risks, including workers compensation, general
liability and vehicle liability and is self insured for employee related health care benefits. The
Company accrues for the
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ATT Holding Co.
Notes to Consolidated Statements (Continued)
expected costs associated with these risks by considering historical claims
experience, demographic factors, severity factors and other relevant information. Costs are
recognized in the period the claim is incurred, and the accruals include an actuarially determined
estimate of claims incurred but not yet reported.
Recent Accounting Pronouncements
Adopted
In September 2006, the Financial Accounting Standards Board (FASB) issued new accounting
guidance that defines fair value, establishes a framework for measuring fair value in U.S. GAAP and
expands disclosures about fair value measurements. The guidance is effective for financial assets
and financial liabilities in fiscal years beginning after November 15, 2007 and for nonfinancial
assets and nonfinancial liabilities in fiscal years beginning after November 15, 2008. Effective
September 28, 2008, the Company adopted the provisions that relate to financial assets and
financial liabilities. The adoption had no material effect on the Companys condensed consolidated
financial statements. See Note 14 for further information.
In September 2006, the FASB issued an amendment to existing accounting guidance that requires an
entity to recognize in its statement of financial position an asset for a defined benefit
postretirement plans overfunded status or a liability for a plans underfunded status, measure a
defined benefit postretirement plans funded status as of the end of the employers fiscal year and
recognize changes in the funded status of a defined benefit postretirement plan in comprehensive
income in the year in which the change occurs. The Company adopted the requirement to recognize the
funded status of a defined benefit postretirement plan as of September 29, 2007. The Company
adopted the provision to measure plan assets and benefit obligations as of the Companys fiscal
year end during the thirteen week period ended December 27, 2008. Two of the Companys plans
previously used a June 30 measurement date. All plans are now measured at October 3, 2009,
consistent with the Companys fiscal year end. The non-cash effect of the adoption of the
measurement date provision resulted in a credit to opening accumulated deficit of $300, a pension
liability decrease of $395, and a credit to accumulated other comprehensive loss of $95. See Note 7
for further information.
In February 2007, the FASB issued new accounting guidance that permits entities to choose to
measure many financial instruments and certain other items at fair value that are not currently
required to be measured at fair value. Unrealized gains and losses on items for which the fair
value option has been elected are reported in earnings. The new guidance does not affect any
existing accounting literature that requires certain assets and liabilities to be carried at fair
value. The Company has elected not to adopt the fair value option.
In March 2008, the FASB issued new accounting guidance that requires qualitative disclosures
about objectives and strategies for using derivatives, quantitative disclosures about fair value
amounts of gains and losses on derivative instruments, and disclosures about credit-risk-related
contingent features in derivative agreements. The Company adopted the new guidance in the thirteen
week period ended March 28, 2009. See Note 15 for further information.
In April 2009, the FASB issued an amendment to existing accounting guidance that requires
disclosures about the fair value of financial instruments for interim periods, as well as annual
periods. The Company adopted the amendment in the thirteen week period ended June 27, 2009. See
Note 5 for further information.
In May 2009, the FASB issued new accounting guidance that establishes general standards of
accounting for and disclosure of events that occur after the balance sheet date but before
financial statements are issued or are available to be issued. The Company adopted the new
guidance in the thirteen week period ended June 27, 2009. See Note 18 for further information.
In June 2009, the FASB issued new accounting guidance that establishes the Accounting
Standards Codification as the source of authoritative accounting principles recognized by the FASB
to be applied by
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ATT Holding Co.
Notes to Consolidated Statements (Continued)
nongovernmental entities in preparation of financial statements in conformity with
GAAP. The Company adopted the new guidance in the fourteen week period ended October 3, 2009.
To Be Adopted
In February 2008, the FASB issued new accounting guidance that defers the effective date of
applying fair value guidance for one year for certain nonfinancial assets and nonfinancial
liabilities. The new guidance is effective for fiscal years beginning after November 15, 2008. The
Company is required to adopt the new guidance in the first quarter of fiscal 2010. The Company has
not yet assessed the impact of adoption, if any, on its consolidated financial statements.
In December 2007, the FASB issued new accounting guidance that establishes principles and
requirements for how an acquirer in a business combination:
| Recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree; | ||
| Recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and | ||
| Determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. |
The related guidance and interpretations is effective for business combinations for which the
acquisition date is on or after the beginning of the first annual reporting period beginning on or
after December 15, 2008 and early adoption is not permitted. The Company is required to adopt the
related guidance and interpretations in the first quarter of fiscal 2010. The Company has not yet
assessed the impact of adoption, if any, on its consolidated financial statements.
In December 2007, the FASB issued an amendment to existing accounting guidance to establish
accounting and reporting standards for the noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary. It also amends certain consolidation procedures for consistency
with the requirements of the new accounting guidance. The amendment is effective for fiscal years,
and interim periods within those fiscal years, beginning on or after December 15, 2008. The Company
is required to adopt the amendment in the first quarter of fiscal 2010. The Company has not yet
assessed the impact of adoption, if any, on its consolidated financial statements.
In June 2009, the FASB issued an amendment to existing accounting guidance to require entities
to perform an analysis to determine whether its variable interests give it controlling interest in
the variable interest entity. Also, enhanced disclosures are required for any enterprise that holds
a variable interest in a
variable interest entity. The Company is required to adopt the amendment in the first quarter
of fiscal 2011. The Company has not yet assessed the impact of adoption, if any, on its
consolidated financial statements.
3. Goodwill and Other Intangibles
As of October 3, 2009, September 27, 2008 and September 29, 2007 the Company performed the annual
impairment test of goodwill and trade names which resulted in trade name impairments of $800,
$15,583 and $4,426, respectively, which are included in impairment charges in the consolidated
statements of operations within the U.S. segment. Fiscal 2009 trade name impairment is a result of
the continued decline in the industrial and commercial markets. Trade name impairment in fiscal
2008 was mainly due to current market conditions related to the economic downturn and fiscal 2007
trade name impairment was primarily the result of a shift in branding strategies by certain
customers.
The changes in carrying amount of goodwill are as follows:
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ATT Holding Co.
Notes to Consolidated Statements (Continued)
United States | Canada | Total | ||||||||||
Goodwill at September 29, 2007 |
$ | 44,156 | $ | 15,164 | $ | 59,320 | ||||||
Currency translation adjustments |
(130 | ) | (527 | ) | (657 | ) | ||||||
Revision of purchase price allocations |
(421 | ) | | (421 | ) | |||||||
Goodwill at September 27, 2008 |
$ | 43,605 | $ | 14,637 | $ | 58,242 | ||||||
Currency translation adjustments |
| (748 | ) | (748 | ) | |||||||
Goodwill at October 3, 2009 |
$ | 43,605 | $ | 13,889 | $ | 57,494 | ||||||
The following table reflects the components of intangible assets other than goodwill at October 3,
2009 and September 27, 2008:
October 3, 2009 | September 27, 2008 | |||||||||||||||
Gross | Gross | |||||||||||||||
Carrying | Accumulated | Carrying | Accumulated | |||||||||||||
Amount | Amortization | Amount | Amortization | |||||||||||||
Indefinite lived intangible assets: |
||||||||||||||||
Trade names |
$ | 47,879 | $ | | $ | 48,967 | $ | | ||||||||
Finite lived intangible assets: |
||||||||||||||||
Technology (patents) |
1,356 | 1,142 | 1,356 | 1,095 | ||||||||||||
Non-compete agreements |
976 | 965 | 976 | 944 | ||||||||||||
Customer relationships |
11,617 | 6,040 | 11,775 | 4,886 | ||||||||||||
13,949 | 8,147 | 14,107 | 6,925 | |||||||||||||
$ | 61,828 | $ | 8,147 | $ | 63,074 | $ | 6,925 | |||||||||
The cost of other acquired intangible assets, including primarily customer relationships, patents
and covenants not to compete is amortized on a straight-line basis over the estimated lives of 3 to
19 years. Amortization of other intangibles amounted to $1,214, $1,363 and $1,496 for the fiscal
years ended October 3, 2009, September 27, 2008 and September 29, 2007, respectively. The estimated
aggregate amortization expense for each of the succeeding fiscal years is as follows:
Fiscal 2010 |
$ | 1,211 | ||
Fiscal 2011 |
1,200 | |||
Fiscal 2012 |
1,180 | |||
Fiscal 2013 |
1,166 | |||
Fiscal 2014 |
845 | |||
Thereafter |
200 | |||
$ | 5,802 | |||
4. Income Taxes
Income (loss) before income taxes and the related provision for income taxes consist of the
following:
Fiscal year | Fiscal year | Fiscal year | ||||||||||
ended | ended | ended | ||||||||||
October 3, | September 27, | September 29, | ||||||||||
2009 | 2008 | 2007 | ||||||||||
Income (loss) before provision for income taxes: |
||||||||||||
Domestic |
$ | (4,724 | ) | $ | (31,791 | ) | $ | (23,370 | ) | |||
Foreign |
10,644 | 11,515 | 11,060 | |||||||||
$ | 5,920 | $ | (20,276 | ) | $ | (12,310 | ) | |||||
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Notes to Consolidated Statements (Continued)
Fiscal year | Fiscal year | Fiscal year | ||||||||||
ended | ended | ended | ||||||||||
October 3, | September 27, | September 29, | ||||||||||
2009 | 2008 | 2007 | ||||||||||
Income tax expense (benefit): |
||||||||||||
Current: |
||||||||||||
Federal |
$ | 113 | $ | | $ | | ||||||
State |
544 | (608 | ) | 1,115 | ||||||||
Foreign |
(554 | ) | 719 | 2,609 | ||||||||
103 | 111 | 3,724 | ||||||||||
Deferred: |
||||||||||||
Federal |
1,232 | (3,484 | ) | 1,416 | ||||||||
State |
216 | (410 | ) | 167 | ||||||||
Foreign |
(188 | ) | (71 | ) | 493 | |||||||
1,260 | (3,965 | ) | 2,076 | |||||||||
$ | 1,363 | $ | (3,854 | ) | $ | 5,800 | ||||||
The reported income tax provisions differ from the amount based on United States federal income tax
rates as follows:
Fiscal year | Fiscal year | Fiscal year | ||||||||||
ended | ended | ended | ||||||||||
October 3, | September 27, | September 29, | ||||||||||
2009 | 2008 | 2007 | ||||||||||
Statutory federal income tax expense (benefit) |
$ | 2,013 | $ | (6,894 | ) | $ | (4,185 | ) | ||||
Non-deductible goodwill impairment loss |
| | 58 | |||||||||
State income tax expense (net of federal benefit) |
298 | (1,084 | ) | 846 | ||||||||
Tax contingencies |
387 | (738 | ) | | ||||||||
Nondeductible other |
48 | 102 | 52 | |||||||||
Foreign income inclusions (exclusions) |
889 | (4,281 | ) | | ||||||||
Foreign income tax differential |
(167 | ) | (234 | ) | (199 | ) | ||||||
Unremitted earnings |
9,132 | | | |||||||||
Change in valuation allowance |
(9,526 | ) | 7,973 | 9,955 | ||||||||
Foreign withholding tax |
(990 | ) | 1,133 | | ||||||||
Other, net |
(721 | ) | 169 | (727 | ) | |||||||
$ | 1,363 | $ | (3,854 | ) | $ | 5,800 | ||||||
The following table sets forth the tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and liabilities:
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Notes to Consolidated Statements (Continued)
October 3, | September 27, | |||||||
2009 | 2008 | |||||||
Deferred tax assets: |
||||||||
Accounts receivable |
$ | 940 | $ | 926 | ||||
Inventories |
3,031 | 1,912 | ||||||
Accrued liabilities and other expenses |
2,940 | 3,587 | ||||||
Pension |
18,183 | 8,360 | ||||||
Derivative financial instruments |
1,027 | | ||||||
Other non-current items |
5,740 | 5,951 | ||||||
Foreign tax credits |
6,514 | | ||||||
Foreign capital loss carryover |
3,588 | | ||||||
Net operating loss carryforwards |
14,781 | 23,344 | ||||||
Total deferred tax assets |
56,744 | 44,080 | ||||||
Deferred tax liabilities: |
||||||||
Other current items |
4,357 | 5,084 | ||||||
Plant and equipment, principally due to differences in depreciation |
3,226 | 5,829 | ||||||
Intangible assets |
13,294 | 13,099 | ||||||
Derivative financial instruments |
| 101 | ||||||
Unremitted foreign earnings |
13,568 | | ||||||
Total deferred tax liabilities |
34,445 | 24,113 | ||||||
Valuation allowance |
38,083 | 34,924 | ||||||
Net deferred tax liabilities |
$ | (15,784 | ) | $ | (14,957 | ) | ||
As of October 3, 2009 and September 27, 2008, a net current deferred tax liability of $3,656 and
$3,607, respectively, is included in accrued expenses and other current liabilities in the
accompanying consolidated balance sheets. As of October 3, 2009, a net current deferred tax asset
of $1,544 is included in prepaid expenses and other current assets in the accompanying consolidated
balance sheet.
The Company believes it is more likely than not that the benefits of these deductible differences
and net operating loss carryforwards, net of existing valuation allowances will be realized at
October 3, 2009. As a result of this assessment, the Company increased the valuation allowance by
$3,159. As of October 3, 2009 and September 27, 2008, $19,732 and $6,908, respectively, of the
valuation allowance relates to accumulated other comprehensive loss in the accompanying
consolidated balance sheets.
The Company has federal net operating loss carryforwards of approximately $33,697, state net
operating loss carryforwards of approximately $40,227, and foreign net operating loss carryforwards
of approximately $2,050 the majority of which will expire in 2025 through 2028. The Company also
has a foreign capital loss carryforward of $13,000 which does not expire. All loss carryforward
deferred tax assets are fully offset by valuation allowances.
During the thirteen week period ended June 27, 2009, the Company determined that it no longer
qualified for the indefinite reversal criteria with regards to its Canadian subsidiarys unremitted
earnings. As a result, the Company accrued $13,568 of a deferred tax liability, $4,239 of foreign
tax credits and $197 of alternative minimum tax credits as deferred tax assets and reduced the
valuation allowance by $8,494 resulting in a net tax expense of $638 on the foreign unremitted
earnings of this subsidiary.
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ATT Holding Co.
Notes to Consolidated Statements (Continued)
Unrecognized | ||||
Tax Benefit | ||||
Balance at September 29, 2007 |
$ | 1,413 | ||
Increases related to prior year tax positions |
| |||
Decrease related to prior year tax positions |
| |||
Increases related to current year tax positions |
2,417 | |||
Lapse of a statute of limitations |
(875 | ) | ||
Balance at September 27, 2008 |
$ | 2,955 | ||
Increases related to prior year tax positions |
138 | |||
Decrease related to prior year tax positions |
| |||
Increases related to current year tax positions |
657 | |||
Lapse of statute of limitations |
| |||
Balance at October 3, 2009 |
$ | 3,750 | ||
During the fiscal years ended October 3, 2009 and September 27, 2008, the Company recorded $156 and
$151, respectively, of income tax expense to reflect additional interest and penalties on
unrecognized tax benefits. At October 3, 2009 and September 27, 2008, the Company accrued $450 and
$294, respectively, for interest and penalties on unrecognized tax benefits.
Of the total unrecognized tax benefit amount shown above, $1,058 will impact the effective rate.
During the fiscal year beginning on October 4, 2010, the Company expects to settle approximately
$138 of the unrecognized tax benefit shown above. No other changes significant changes to the
above items are expected.
The Companys U.S. federal, Canada, and Ontario tax returns for the years ended September 30, 2006
through the present are open to examination, as are the Companys various state tax returns for the
tax years ended October 1, 2005 through the present.
5. Debt Arrangements
October 3, | September 27, | |||||||
2009 | 2008 | |||||||
Revolving Loan |
$ | 17,500 | $ | 40,010 | ||||
Senior Floating Rate Notes, net of unamortized discount of $241 and
$349, respectively |
149,759 | 149,651 | ||||||
Senior Subordinated Notes |
150,000 | 150,000 | ||||||
Term Note |
479 | 1,033 | ||||||
Capital lease obligations |
42 | | ||||||
Total debt |
317,780 | 340,694 | ||||||
Less: |
||||||||
Short-term Revolving Loan |
(17,500 | ) | (40,010 | ) | ||||
Current portion of capital lease obligations |
(10 | ) | | |||||
Current portion of long-term debt |
(479 | ) | (554 | ) | ||||
Long-term debt |
$ | 299,791 | $ | 300,130 | ||||
Letters of | (a) | (b) | ||||||||||||||||||||||
Borrowing | Credit | Availability | Interest Rate | |||||||||||||||||||||
Maximum | Base as | Outstanding | as of | as of | ||||||||||||||||||||
Borrowing | of October | as of October | October | October | Expiration | |||||||||||||||||||
Amount | 3, 2009 | 3, 2009 | 3, 2009 | 3, 2009 | Date | |||||||||||||||||||
Revolving Loan |
$ | 130,000 | $ | 69,330 | $ | 2,368 | $ | 49,462 | 2.0 | % | Apr 7, 2011 |
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ATT Holding Co.
Notes to Consolidated Statements (Continued)
(d) | (e) | |||||||||||||||||||
Original | (c) | Interest | Maturity | Call Option | ||||||||||||||||
Principal | Interest Rate | Payments | Date | Date | ||||||||||||||||
Senior Floating Rate Notes |
$ | 150,000 | LIBOR + 4% | Jan 15, Apr 15, Jul 15, Oct 15 | Jan 15, 2012 | Jan 15, 2007 | ||||||||||||||
Senior Subordinated Notes |
150,000 | 10 | % | Jan 15, Jul 15 | Jul 15, 2012 | Jul 15, 2008 | ||||||||||||||
Term Note |
2,700 | 2.5 | % | Monthly | Jul 19, 2010 | n/a |
(a) | Total amount available is limited by the amount of eligible accounts receivable, inventory, machinery and equipment, and real estate less letters of credit outstanding. | |
(b) | The interest rate applicable to the loans under the Revolving Loan is either 1) the Eurodollar Rate or London Interbank Offered Rate (LIBOR) plus a margin of 1.75% to 2.75%, or 2) the Base Rate plus a margin of 0.50% to 1.50%. The Base Rate is calculated at the higher of 1) the prevailing Federal Funds rate plus 50 basis points or 2) the administrative agents prime interest rate plus an applicable rate determined by the Companys consolidated leverage ratio as defined by the Amended and Restated Senior Secured Credit Agreement. | |
(c) | LIBOR represents the three month London Interbank Offered Rate which resets quarterly. LIBOR was 0.51% as of July 13, 2009. July 13, 2009 is the reset date for the October 15, 2009 interest payment. | |
(d) | Interest payments are in cash and paid in arrears. | |
(e) | The Senior Floating Rate Notes do not have a redemption premium. The Senior Subordinated Notes have a redemption price of 102.5% of principal on or after July 15, 2009 and 100% of principal on or after July 15, 2010. |
Revolving Loan
On April 7, 2006, we entered into the Revolving Loan with Bank of America, N.A., as
administrative agent, swing line lender and letter of credit issuer. The Revolving Loan is a
five-year revolving facility of up to $130.0 million, including a sub-facility for letters of
credit in an amount not to exceed $15.0 million and a sub-facility for swing-line loans in an
amount not to exceed $15.0 million. Our obligations under the Revolving Loan are guaranteed by ATT
Holding Co. and collateralized by substantially all of the assets of Ames True Temper (ATT) and
Ames True Temper Properties, Inc. Future domestic subsidiaries will be required to guarantee the
obligations and grant a lien on substantially all of their assets.
The terms of the Revolving Loan include various covenants that restrict our ability to, among
other things, incur additional liens, incur additional indebtedness and make additional
investments. In addition, we are prohibited from incurring capital expenditures exceeding $15.0
million in any fiscal year (subject to the right to carry over the unused portion to the following
year). In addition, upon the occurrence of a Cash Dominion Trigger, we will be required to have
Consolidated EBITDA, as defined by the Revolving Loan, of at least $41.0 million cumulative over
four consecutive quarters. Under the Revolving Loan, a Cash Dominion Trigger shall have occurred
if (1) an event of default under the Revolving Loan shall have occurred or (2) availability under
the Revolving Loan falls below certain thresholds. The Revolving Loan also includes customary
events of default, including, without limitation, payment defaults, cross defaults to other
indebtedness and bankruptcy related defaults.
Senior Floating Rate Notes
The Senior Floating Rate Notes are fully and unconditionally guaranteed by our parent and all
domestic subsidiaries on a senior unsecured basis. The Senior Floating Rate Notes are unsecured,
unsubordinated obligations and are effectively subordinated to all of our existing and future
secured debt, to the extent of the assets securing such debt, including borrowings under the
Revolving Loan, pari passu with all future senior unsecured indebtedness, senior in right of
payment to all existing and future senior subordinated debt, including our Senior Subordinated
Notes, and effectively behind all of the existing and future liabilities of our subsidiaries,
including trade payables.
The indenture governing the Senior Floating Rate Notes contains various affirmative and negative
covenants, subject to a number of important limitations and exceptions, including but not limited
to those limiting the Companys ability and the ability of its restricted subsidiaries to borrow
money, guarantee debt
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Notes to Consolidated Statements (Continued)
or sell preferred stock, create liens, pay dividends on or redeem or repurchase stock, make
specified types of investments, sell stock in its restricted subsidiaries, restrict dividends or
other payments from restricted subsidiaries, enter into transactions with affiliates and sell
assets or merge with other companies. The indenture governing the Senior Floating Rate Notes also
contains various events of default, including but not limited to those related to non-payment of
principal, interest or fees; failure to perform or observe certain covenants; inaccuracy of
representations and warranties in any material respect; cross defaults with certain other
indebtedness; certain bankruptcy related events; monetary judgment defaults and material
non-monetary judgment defaults and ERISA (Employee Retirement Income Security Act) defaults and
change of control. In addition, the Company is required to redeem the Senior Floating Rate Notes
under certain circumstances involving changes of control.
Senior Subordinated Notes
The Senior Subordinated Notes are fully and unconditionally guaranteed by our parent, ATT Holding
Co. and all domestic subsidiaries, on a senior subordinated basis. The Senior Subordinated Notes
are unsecured senior subordinated obligations and rank behind all of our existing and future senior
debt, including borrowings under the Revolver Loan and the Senior Floating Rate Notes, equally with
any of our future senior subordinated debt, ahead of any of our future debt that expressly provides
for subordination to the Senior Subordinated Notes and effectively behind all of the existing and
future liabilities of our subsidiaries, including trade payables.
The indenture governing Senior Subordinated Notes contains various affirmative and negative
covenants, subject to a number of important limitations and exceptions, including but not limited
to those limiting the Companys ability and the ability of its restricted subsidiaries to borrow
money, guarantee debt or sell preferred stock, create liens, pay dividends on or redeem or
repurchase stock, make certain investments, sell stock in its restricted subsidiaries, restrict
dividends or other payments from restricted subsidiaries, enter into transactions with affiliates
and sell assets or merge with other companies. The indenture governing the Senior Subordinated
Notes also contains various events of default, including but not limited to those related to
non-payment of principal, interest or fees; violations of certain covenants; certain
bankruptcy-related events; invalidity of liens; non-payment of certain legal judgments and cross
defaults with certain other indebtedness. The Company is required to redeem the Senior Subordinated
Notes under certain circumstances involving changes of control.
Other Debt
The Term Note contains customary events of default (subject to customary exceptions,
thresholds and grace periods), including, without limitation, nonpayment of principal, interest,
fees and failure to perform or observe certain covenants.
Interest Rate Swaps
The Companys Senior Floating Rate Notes have an interest rate of 3-month LIBOR plus 4%. The
Company has entered into interest rate swaps that fix the variable rate portion of the interest
rate as follows:
(a) | ||||||||||||||||
Effective | ||||||||||||||||
Notional | Interest | |||||||||||||||
Receive | Pay | Amount | Rate | |||||||||||||
January 16, 2009 through January 15, 2010 |
3-month LIBOR | 4.31 | % | $ | 33,333 | 8.31 | % | |||||||||
January 16, 2009 through January 15, 2010 |
3-month LIBOR | 4.29 | % | 16,667 | 8.29 | % | ||||||||||
January 15, 2009 through January 15, 2010 |
3-month LIBOR | 1.40 | % | 100,000 | 5.40 | % | ||||||||||
January 15, 2010 through January 15, 2011 |
3-month LIBOR | 1.90 | % | 150,000 | 5.90 | % | ||||||||||
January 18, 2011 through January 15, 2012 |
3-month LIBOR | 2.50 | % | 150,000 | 6.50 | % |
(a) | Represents the effective interest rate on the respective portion of the Senior Floating Rate Notes including the contractual terms of the interest rate swap for the periods indicated. |
56
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ATT Holding Co.
Notes to Consolidated Statements (Continued)
Principal maturities of debt for the next five fiscal years are as follows:
2010 |
$ | 17,989 | ||
2011 |
10 | |||
2012 |
300,010 | |||
2013 |
10 | |||
2014 |
2 | |||
Thereafter |
| |||
$ | 318,021 | |||
The fair value of the Companys long-term debt is as follows:
October 3, 2009 | September 27, 2008 | |||||||||||||||||||
Balance Sheet | Carrying | Fair | Carrying | Fair | ||||||||||||||||
Classification | Value | Value | Value | Value | ||||||||||||||||
Senior Floating Rate Notes |
Liability | $ | 149,759 | $ | 131,070 | $ | 149,651 | $ | 127,688 | |||||||||||
Senior Subordinated Notes |
Liability | 150,000 | 127,425 | 150,000 | 75,000 |
6. Lease Arrangements
The Company leases certain distribution and production facilities, machinery, office equipment and
vehicles under lease arrangements of varying terms. The most significant lease commitments involve
distribution and production facilities with lease terms of up to 12 years.
October 3, | September 27, | September 29, | ||||||||||
2009 | 2008 | 2007 | ||||||||||
Rental expense for operating leases |
$ | 9,419 | $ | 9,328 | $ | 9,691 |
Future minimum rental commitments under noncancelable operating leases as of October 3, 2009 are as
follows:
2010 |
$ | 9,639 | ||
2011 |
9,550 | |||
2012 |
8,959 | |||
2013 |
8,164 | |||
2014 |
7,187 | |||
Thereafter |
34,483 | |||
Total minimum lease payments |
$ | 77,982 | ||
7. Pension and Other Postretirement Benefits
The Company has one noncontributory defined benefit plan (Pension Plan) covering substantially
all of its United States employees. Also, the Companys subsidiary in Ireland administers a
defined benefit pension plan. The benefits under these plans are based primarily on years of
credited service and compensation as defined under the respective plan provisions. The Company also
sponsors three Supplemental Executive Retirement Plans (SERP), which are nonqualified, unfunded
plans designed to provide certain senior executives defined pension benefits in excess of the
limits defined under Sections 415 and 401(a)(17) of the Internal Revenue Code. The Company also
provides healthcare and life insurance benefits for certain groups of retirees through several
plans. The benefits are at fixed amounts per retiree and are partially contributory by the retiree.
57
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ATT Holding Co.
Notes to Consolidated Statements (Continued)
The assets of the Ames True Temper, Inc. Pension Plan are invested and managed by a third party
investment advisor, which acts as both trustee and administrator. The Ames True Temper Benefits
Committee meets quarterly to review current investment policy and to monitor the third party
investment advisors performance. The Companys funding policy is to contribute amounts to the
plans sufficient to meet the minimum funding requirements set forth in the Employee Retirement
Income Security Act of 1974, plus such amounts as the Company may determine to be appropriate from
time to time. Also, the assets of the plan are invested in a manner consistent with the Fiduciary
Standards of the Employee Retirement Income Security Act of 1974. Investment strategy is based on
a rolling time horizon of three to five years. The investment objective is to achieve the highest
possible return commensurate with the assumed level of risk. Based on key characteristics such as
work force growth, plan maturity and assets vs. liabilities, a slightly conservative to normal risk
portfolio asset mix structure has been adopted.
The Companys target asset allocation and actual weighted average asset allocations by asset
category are as follows:
Target Allocations | Actual Allocations | Actual Allocations | ||||||||||
October 3, | October 3, | September 27, | ||||||||||
2009 | 2009 | 2008 | ||||||||||
Domestic equity securities |
48 | % | 49 | % | 58 | % | ||||||
Fixed income securities |
32 | % | 36 | % | 30 | % | ||||||
International equity securities |
15 | % | 15 | % | 12 | % | ||||||
Real estate |
5 | % | | |
On April 11, 2008, the Company notified salaried and certain hourly associates that the Company was
freezing benefit accruals under its Pension Plan and the SERP effective with the close of business
on May 31, 2008. Participants under the Pension Plan accrued benefits through May 31, 2008 based on
applicable years of benefit service and eligible compensation through that date. Service after May
31, 2008 count for vesting purposes and toward meeting the eligibility requirements for commencing
a pension benefit under the Pension Plan, but do not count toward the calculation of the pension
benefit amount. Compensation earned after May 31, 2008 similarly does not count toward the
determination of the pension benefit amounts under the Pension Plan. In conjunction with the
freezing of benefit accruals under the Pension Plan, the Company froze benefit accruals under the
SERP effective with the close of business on May 31, 2008. On June 1, 2008, the Company provided
certain participants in the Pension Plan and SERP with enhanced matching contributions under an
existing 401(k) defined contribution pension plan (the 401(k) Plan). The eligibility for and
amount of enhanced matching contributions under the 401(k) Plan depend on an employees combined
years of benefit accrual service and age under the Pension Plan projected through December 31,
2008. The change in the Pension Plan and SERP were accounted for as a curtailment and resulted in
no curtailment gain or loss.
On November 10, 2009 the Company notified hourly associates at the Harrisburg, Pennsylvania
facility that the Company was freezing benefit accruals associated with the locations benefits
(Harrisburgs benefits) effective with the close of business on December 31, 2009. The change in
Harrisburgs benefits was accounted for as a curtailment and resulted in a curtailment loss of
$261.
The Companys 401(k) Plan covers substantially all of its eligible U.S. employees. The purpose of
the plan is generally to provide additional financial security to employees during retirement.
Participants in the 401(k) Plan may elect to contribute, on a pre-tax basis, a certain percent of
their annual earnings with the Company matching a portion of these contributions. Expenses under
the plan related to the Companys matching contribution were $1,394, $811 and $535 for the fiscal
years ended October 3, 2009, September 27, 2008 and September 29, 2007, respectively.
The Companys Canadian subsidiary, Garant Inc., operates a group-registered retirement savings
plan. The Company matches 50% of nonunion employee contributions, up to 3% of an employees base
salary. The
58
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ATT Holding Co.
Notes to Consolidated Statements (Continued)
expenses related to the plan for the Company for the fiscal years ended October 3, 2009, September
27, 2008 and September 29, 2007 were $93, $95 and $82, respectively.
The following table contains the accumulated benefit obligation, a reconciliation of changes in the
projected benefit obligation, fair value of plan assets and the funded status of the Companys U.S.
qualified defined benefit pension and non-qualified defined benefit pension plans (valuation dates
October 3, 2009 and June 30, 2008 for the years ended October 3, 2009 and September 27, 2008,
respectively) and postretirement benefit plan with the amounts recognized in the Companys
consolidated balance sheets at October 3, 2009 and September 27, 2008 as well as the accumulated
benefit obligation and a reconciliation of changes in the projected benefit obligation, fair value
of plan assets and the funded status of the Irish subsidiarys defined benefit pension plan
(valuation dates of October 3, 2009 and September 30, 2008 for the years ended October 3, 2009 and
September 27, 2008, respectively):
Postretirement | ||||||||||||||||||||||||
Pension Benefits | Benefits | |||||||||||||||||||||||
U.S. Plan | Ireland Plan | |||||||||||||||||||||||
October | September | October | September | October | September | |||||||||||||||||||
3, 2009 | 27, 2008 | 3, 2009 | 27, 2008 | 3, 2009 | 27, 2008 | |||||||||||||||||||
Accumulated benefit obligation |
$ | 148,679 | $ | 139,619 | $ | 7,204 | $ | 6,697 | 1,578 | 1,479 | ||||||||||||||
Change in projected benefit obligation
|
||||||||||||||||||||||||
Projected benefit obligation at beginning of period |
$ | 139,619 | $ | 145,663 | $ | 7,712 | $ | 7,824 | $ | 1,479 | $ | 1,566 | ||||||||||||
Service cost |
241 | 2,460 | 279 | 287 | 2 | 1 | ||||||||||||||||||
Interest cost |
10,288 | 8,570 | 419 | 428 | 89 | 92 | ||||||||||||||||||
Curtailment |
| (6,732 | ) | (258 | ) | | | | ||||||||||||||||
Participants contributions |
| | 22 | 29 | | | ||||||||||||||||||
Assumption changes |
| | | | | (117 | ) | |||||||||||||||||
Actuarial gain |
9,287 | (1,774 | ) | (42 | ) | (631 | ) | 64 | | |||||||||||||||
Benefits paid |
(10,756 | ) | (8,568 | ) | (416 | ) | (503 | ) | (56 | ) | (63 | ) | ||||||||||||
Effect of foreign currency |
| | (60 | ) | 278 | | | |||||||||||||||||
Projected benefit obligation at end of period |
$ | 148,679 | $ | 139,619 | $ | 7,656 | $ | 7,712 | $ | 1,578 | $ | 1,479 | ||||||||||||
Change in fair value of plan assets
|
||||||||||||||||||||||||
Fair value of plan assets at beginning of period |
$ | 116,459 | $ | 135,664 | $ | 6,112 | $ | 8,315 | $ | | $ | | ||||||||||||
Actual (loss) return on plan assets |
(10,164 | ) | (10,648 | ) | (38 | ) | (2,349 | ) | | | ||||||||||||||
Employer contributions |
3,683 | 11 | 1,037 | 272 | 56 | | ||||||||||||||||||
Participants contributions |
| | 22 | 29 | | |||||||||||||||||||
Benefits paid |
(10,756 | ) | (8,568 | ) | (251 | ) | (287 | ) | (56 | ) | | |||||||||||||
Plan expenses |
| | (165 | ) | (216 | ) | | | ||||||||||||||||
Effect of foreign currency |
| | (4 | ) | 348 | | | |||||||||||||||||
Fair value of plan assets at end of period |
$ | 99,222 | $ | 116,459 | $ | 6,713 | $ | 6,112 | $ | | $ | | ||||||||||||
Unfunded status |
$ | (49,457 | ) | $ | (23,160 | ) | $ | (943 | ) | $ | (1,600 | ) | $ | (1,578 | ) | $ | (1,479 | ) | ||||||
Unfunded status at fiscal year end
|
||||||||||||||||||||||||
Unfunded status |
$ | (49,457 | ) | $ | (23,160 | ) | $ | (943 | ) | $ | (1,600 | ) | $ | (1,578 | ) | $ | (1,479 | ) | ||||||
Amount contributed after measurement date |
| 3 | | | | | ||||||||||||||||||
Unfunded status at fiscal year end |
$ | (49,457 | ) | $ | (23,157 | ) | $ | (943 | ) | $ | (1,600 | ) | $ | (1,578 | ) | $ | (1,479 | ) | ||||||
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ATT Holding Co.
Notes to Consolidated Statements (Continued)
Postretirement | ||||||||||||||||||||||||
Pension Benefits | Benefits | |||||||||||||||||||||||
U.S. Plan | Ireland Plan | |||||||||||||||||||||||
October | September | October | September | October | September 27, | |||||||||||||||||||
3, 2009 | 27, 2008 | 3, 2009 | 27, 2008 | 3, 2009 | 2008 | |||||||||||||||||||
Net amount recognized on consolidated balance sheet at fiscal year end | ||||||||||||||||||||||||
Current benefit
liability (included
in accrued expenses
and other current
liabilities) |
$ | (34 | ) | $ | (15 | ) | $ | 605 | $ | (131 | ) | $ | (107 | ) | $ | (113 | ) | |||||||
Noncurrent benefit
liability (included
in accrued
retirement
benefits) |
(49,423 | ) | (23,142 | ) | (1,548 | ) | (1,469 | ) | (1,471 | ) | (1,366 | ) | ||||||||||||
Net amount
recognized at
fiscal year end |
$ | (49,457 | ) | $ | (23,157 | ) | $ | (943 | ) | $ | (1,600 | ) | $ | (1,578 | ) | $ | (1,479 | ) | ||||||
Amounts recognized
in accumulated
other comprehensive
loss (income)
(pre-tax) at fiscal
year end |
||||||||||||||||||||||||
Net loss (gain) |
$ | 50,360 | $ | 18,852 | $ | 1,548 | $ | 1,469 | $ | (1,507 | ) | $ | (1,689 | ) | ||||||||||
Prior service cost |
| 290 | | | | | ||||||||||||||||||
Net amount
recognized at
fiscal year end |
$ | 50,360 | $ | 19,142 | $ | 1,548 | $ | 1,469 | $ | (1,507 | ) | $ | (1,689 | ) | ||||||||||
Weighted average assumptions |
||||||||||||||||||||||||
Discount rate |
5.50 | % | 6.10 | % | 5.50 | % | 6.00 | %(a) | 5.50 | % | 6.30 | % | ||||||||||||
Rate of compensation increase |
| | 3.75 | % | 3.75 | % | | |
(a) | The Company corrected the discount rate disclosed in the prior year for the Irish plan. Because the correct discount rate was used in the original actuarial calculation, the reported amounts of pension liabilities and expense were not impacted. |
Pension Benefits | Other Benefits | |||||||||||||||||||||||
U.S. Plan | Ireland Plan | |||||||||||||||||||||||
October | September | October | September | October | September | |||||||||||||||||||
3, 2009 | 27, 2008 | 3, 2009 | 27, 2008 | 3, 2009 | 27, 2008 | |||||||||||||||||||
Other comprehensive loss (income) |
||||||||||||||||||||||||
Net loss (gain) |
$ | 31,507 | $ | 11,999 | $ | 134 | $ | 2,234 | $ | 182 | $ | (1 | ) | |||||||||||
Net prior service (credit) cost |
(261 | ) | | | | | | |||||||||||||||||
Amortization loss |
| | (42 | ) | | | | |||||||||||||||||
Amortization of prior service cost |
(28 | ) | (22 | ) | | | | | ||||||||||||||||
Total |
$ | 31,218 | $ | 11,977 | $ | 92 | $ | 2,234 | $ | 182 | $ | (1 | ) | |||||||||||
The amounts in accumulated other comprehensive income expected to be recognized as components of
net periodic benefit cost over the next fiscal year are shown below:
U.S. | Ireland | |||||||||||
Pension | Other | Pension | ||||||||||
Benefits | Benefits | Benefits | ||||||||||
Amortization of net loss (gain)
|
$ | 2,853 | $ | (115 | ) | $ | 42 |
Amounts recognized in the statements of operations related to the U.S. plan consist of:
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Notes to Consolidated Statements (Continued)
Pension Benefits | Other Benefits | |||||||||||||||||||||||
October | September | September | October | September | September | |||||||||||||||||||
3, 2009 | 27, 2008 | 29, 2007 | 3, 2009 | 27, 2008 | 29, 2007 | |||||||||||||||||||
Service cost |
$ | 192 | $ | 2,460 | $ | 2,841 | $ | 1 | $ | 1 | $ | 2 | ||||||||||||
Interest cost |
8,230 | 8,570 | 8,133 | 89 | 92 | 105 | ||||||||||||||||||
Amortization of net loss (gain) |
360 | (18 | ) | | (118 | ) | (118 | ) | | |||||||||||||||
Amortization of prior service cost |
22 | 22 | | | | | ||||||||||||||||||
Expected return on plan assets |
(10,004 | ) | (9,977 | ) | (11,097 | ) | | | | |||||||||||||||
Asset loss deferred |
| | (50 | ) | | | (112 | ) | ||||||||||||||||
Net periodic benefit (credit) cost |
$ | (1,200 | ) | $ | 1,057 | $ | (173 | ) | $ | (28 | ) | $ | (25 | ) | $ | (5 | ) | |||||||
Weighted average assumptions: |
||||||||||||||||||||||||
Discount rate |
6.10 | % | 6.10 | % | 6.15 | % | 6.30 | % | 6.10 | % | $ | 6.15 | % | |||||||||||
Rate of compensation increase |
| 3.50 | % | 3.50 | % | | | | ||||||||||||||||
Expected return on plan assets |
8.00 | % | 8.00 | % | 9.00 | % | | | |
Amounts recognized in the statements of operations related to the Irish plan consist of:
October | September | September | ||||||||||
3, 2009 | 27, 2008 | 29, 2007 | ||||||||||
Service cost |
$ | 279 | $ | 287 | $ | 281 | ||||||
Interest cost |
419 | 428 | 348 | |||||||||
Expected return on plan assets |
(386 | ) | (572 | ) | (453 | ) | ||||||
Amortization of net loss |
39 | | | |||||||||
Net periodic benefit cost |
$ | 351 | $ | 143 | $ | 176 | ||||||
Weighted average assumptions: |
||||||||||||
Discount rate |
6.00 | % | 5.25 | %(a) | 4.50 | %(a) | ||||||
Rate of compensation increase |
3.75 | % | 3.75 | %(a) | | (a) | ||||||
Expected return on plan assets |
6.90 | % | 6.50 | %(a) | 6.25 | %(a) |
(a) | The Company corrected respective rates disclosed in both prior years for the Irish plan. Because the correct rates were used in the original actuarial calculations, the reported amounts of pension liabilities and expense were not impacted. |
The tables above set forth the historical components of net periodic pension cost and a
reconciliation of the funded status of the pension and other postretirement benefit plans for the
employees associated with the Company and are not necessarily indicative of the amounts to be
recognized by the Company on a prospective basis.
The expected return on assets represents the Companys estimate of the long-term future return on
plan assets based upon the mix of plan investments and historical return experience.
The Company anticipates making contributions of $2,269 to the U.S. defined benefit pension plans,
$107 to its postretirement plan and $540 to the Irish pension plan during the fiscal year beginning
on October 4, 2009.
The following benefit payments, which reflect expected future service, as appropriate, are expected
to be paid to participants in the U.S. pension and retiree plans and the Irish pension plan:
61
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ATT Holding Co.
Notes to Consolidated Statements (Continued)
U.S. | Ireland | |||||||||||
Pension Benefits | Other Benefits | Pension Benefits | ||||||||||
2010 |
$ | 8,777 | $ | 107 | $ | 269 | ||||||
2011 |
8,837 | 105 | 340 | |||||||||
2012 |
8,919 | 105 | 406 | |||||||||
2013 |
9,096 | 105 | 442 | |||||||||
2014 |
9,217 | 105 | 487 | |||||||||
Five year period beginning thereafter |
48,711 | 527 | 2,620 |
8. Stockholders Equity
CHATT Holdings Inc. owns 726,556 shares of Class A Common Stock, 124,859 warrants to purchase
shares of Class A Common Stock, 267,448 shares of Class B Common Stock and 62,495 shares of Series
A Preferred Stock, which constituted all of the outstanding securities of ATT Holding Co. There
were no changes to the legal composition of these equity securities.
Series A Preferred Stock
The Company is authorized to issue 100,000 shares of Series A Preferred Stock at a par value of
$0.0001. There were 62,495 shares issued and outstanding as of October 3, 2009 and September 27,
2008. Dividends on each share of the Series A Preferred Stock were accrued on a daily basis at the
rate of 10% per annum of the Liquidation Value thereof plus all accumulated and unpaid dividends
thereon from and including the date of issuance of such share to and including the first to occur
of (i) the date on which the Liquidation Value of such share (plus all accrued and unpaid dividends
thereon) is paid to the holder thereof in connection with the liquidation of the Company or the
redemption of such share by the Company or (ii) the date on which such share is otherwise acquired
by the Company. The Company had $42,991 and $32,980 accumulated, unrecorded and unpaid dividends as
of October 3, 2009 and September 27, 2008, respectively.
Upon any liquidation, dissolution or winding up of the Company, each holder of Series A Preferred
Stock shall be entitled to be paid, before any distribution or payment is made upon any junior
securities, an amount in cash equal to the aggregate Liquidation Value of all shares held by such
holder plus all accrued and unpaid dividends thereon, and the holders of Series A Preferred Stock
shall not be entitled to any further payment. The aggregate Liquidation Preference was $62,495 as
of October 3, 2009 and September 27, 2008, which excludes any accumulated dividends. The Series A
Preferred Stock has no voting rights.
Class A and B Common Stock
The Company is authorized to issue 1,600,000 shares of Class A Common Stock at a par value of
$0.0001. There were 726,556 shares issued and outstanding as of October 3, 2009 and September 27,
2008. The Company is authorized to issue 300,000 shares of Class B Common Stock at a par value of
$0.0001.
Class A Common Stock and Class B Common Stock shall be entitled to one vote for each share. With
respect to the election of the Board of Directors, the holders of shares of Class B Common Stock
shall have that number of votes equal to the lesser of (i) the number of shares outstanding or (ii)
29.99% of the voting power of the Company. With respect to the election of the Board of Directors,
the holders of shares of Common Stock excluding Class B Common Stock shall have the number of votes
equal to the greater of (i) the number of shares outstanding or (ii) 70.01% of the voting power of
the Company.
Warrants
In conjunction with the issuance of $47,000 Senior Subordinated Notes on January 14, 2002,
Predecessor Company issued warrants to purchase 124,859 shares of Class A Common Stock at a price
equal to $.01 per share. The warrants were exercisable at any time prior to January 13, 2010. In
connection with the sale of
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ATT Holding Co.
Notes to Consolidated Statements (Continued)
the Predecessor Company, CHATT Holdings Inc. purchased the warrants to purchase Class A Common
Stock on June 28, 2004. These warrants were outstanding at October 3, 2009 and September 27, 2008.
9. Segment Information
The Company has three operating segments, comprised of the United States, Canada and Other. All of
the Companys revenues represent sales of similar products. All intercompany amounts are eliminated
in the eliminations column. During the fourth quarter of the period ended October 3, 2009, the
Company consummated an internal reorganization. Pursuant to this reorganization, a Canadian
subsidiary of the Company transferred all of the outstanding shares of a U.S. subsidiary of the
Company to a separate U.S. subsidiary. This transfer resulted in trade name impairments for the
fiscal years ended September 27, 2008 and September 29, 2007 reported within the U.S. segment.
Segment information for the fiscal years ended October 3, 2009, September 27, 2008 and September
29, 2007, representing the reportable segments currently utilized by the chief operating decision
makers was as follows:
Fiscal Year Ended | ||||||||||||||||||||
October 3, 2009 | ||||||||||||||||||||
United States | Canada | Other | Eliminations | Consolidated | ||||||||||||||||
Net sales |
$ | 361,728 | $ | 85,558 | $ | 4,905 | $ | | $ | 452,191 | ||||||||||
Intersegment sales |
12,454 | 4,724 | 2,056 | (19,234 | ) | | ||||||||||||||
Operating income (loss) |
25,159 | 11,926 | (1,981 | ) | 35,104 | |||||||||||||||
Interest expense |
29,708 | |||||||||||||||||||
Other income |
(524 | ) | ||||||||||||||||||
Income before income taxes |
$ | 5,920 | ||||||||||||||||||
Depreciation and amortization |
15,331 | 1,932 | 384 | 17,647 | ||||||||||||||||
Intangible impairment charges |
800 | 800 | ||||||||||||||||||
Cash paid for property,
plant and equipment |
5,733 | 970 | 46 | 6,749 |
Fiscal Year Ended | ||||||||||||||||||||
September 27, 2008 | ||||||||||||||||||||
United States | Canada | Other | Eliminations | Consolidated | ||||||||||||||||
Net sales |
$ | 403,603 | $ | 92,593 | $ | 7,257 | $ | | $ | 503,453 | ||||||||||
Intersegment sales |
13,492 | 2,880 | 2,597 | (18,969 | ) | | ||||||||||||||
Operating income (loss) |
3,362 | 13,367 | (118 | ) | 16,611 | |||||||||||||||
Interest expense |
33,812 | |||||||||||||||||||
Other expense |
3,075 | |||||||||||||||||||
Loss before income taxes |
$ | (20,276 | ) | |||||||||||||||||
Depreciation and amortization |
14,292 | 2,550 | 289 | 17,131 | ||||||||||||||||
Intangible impairment charges |
15,583 | 15,583 | ||||||||||||||||||
Cash paid for property, plant and equipment |
6,585 | 1,374 | 141 | 8,100 |
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ATT Holding Co.
Notes to Consolidated Statements (Continued)
Fiscal Year Ended | ||||||||||||||||||||
September 29, 2007 | ||||||||||||||||||||
United States | Canada | Other | Eliminations | Consolidated | ||||||||||||||||
Net sales |
$ | 421,810 | $ | 71,005 | $ | 7,952 | $ | | $ | 500,767 | ||||||||||
Intersegment sales |
7,914 | 628 | 2,752 | (11,294 | ) | | ||||||||||||||
Operating income |
10,978 | 7,199 | 116 | 18,293 | ||||||||||||||||
Interest expense |
36,145 | |||||||||||||||||||
Other income |
(5,542 | ) | ||||||||||||||||||
Loss before income taxes |
$ | (12,310 | ) | |||||||||||||||||
Depreciation and amortization |
15,090 | 2,261 | 274 | 17,625 | ||||||||||||||||
Intangible impairment charges |
4,426 | 4,426 | ||||||||||||||||||
Cash paid for property,
plant and equipment |
6,689 | 4,047 | 125 | 10,861 |
Segment assets as of October 3, 2009 and September 27, 2008 are as follows:
October 3, | September 27, | |||||||
2009 | 2008 | |||||||
United States |
$ | 242,774 | $ | 290,069 | ||||
Canada |
84,987 | 75,848 | ||||||
Other |
6,862 | 7,908 | ||||||
Total |
$ | 334,623 | $ | 373,825 | ||||
The following table presents long-lived assets by geographic area:
October 3, | September 27, | |||||||
2009 | 2008 | |||||||
United States |
$ | 33,245 | $ | 42,201 | ||||
Canada |
8,943 | 10,311 | ||||||
Europe |
2,051 | 2,725 | ||||||
Total |
$ | 44,239 | $ | 55,237 | ||||
10. Other (Income) Expense
Other (income) expense consists of the following:
Fiscal year | Fiscal year | Fiscal year | ||||||||||
ended | ended | ended | ||||||||||
October 3, | September 27, | September 29, | ||||||||||
2009 | 2008 | 2007 | ||||||||||
Unrealized loss (gain) |
$ | 982 | $ | 3,106 | $ | (5,926 | ) | |||||
Realized (gain) loss |
(1,506 | ) | (31 | ) | 384 | |||||||
Total |
$ | (524 | ) | $ | 3,075 | $ | (5,542 | ) | ||||
On September 1, 2007, the Company entered into an intercompany financing arrangement whereby one of
the Companys Canadian subsidiaries issued a U. S. dollar denominated intercompany note as part of
an internal legal entity restructuring. During the fourth quarter of the fiscal year ended October 3,
2009, the internal legal entity restructuring was reversed and a portion of the balance outstanding
under the intercompany note was repaid. The intercompany note is not long-term in nature. As a
result, the impact of
64
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ATT Holding Co.
Notes to Consolidated Statements (Continued)
exchange rate changes on the principal and interest of the note was recorded as an unrealized
(gain) loss in the consolidated statements of operations. For the fiscal years ended October 3,
2009, September 27, 2008 and September 29, 2007 the Company recorded unrealized losses of $2,402
and $3,001 and an unrealized gain of $5,445, respectively related to the intercompany note. In
addition, for the fiscal year ended October 3, 2009 the Company recorded unrealized foreign
currency gains of $1,209 related to a U.S. dollar bank account held by a Canadian subsidiary and
$112 related to foreign currency forward contracts. The Company also recorded a realized gain
related to foreign currency contracts of $1,523 for the fiscal year ended October 3, 2009.
11. Condensed Guarantor Data
On December 17, 2007, as a result of certain corporate restructuring activities, ATT entered into
supplemental indenture agreements with respect to ATTs $150,000 Senior Subordinated Notes and
$150,000 Senior Floating Rate Notes (collectively, the
Notes) to include certain domestic
subsidiaries as guarantors. The Notes are fully and unconditionally and jointly and severally
guaranteed by ATT Holding Co. and certain of its directly or indirectly 100% owned subsidiaries,
namely, Ames True Temper Properties, Inc., Ames Holdings, Inc. and Ames U.S. Holding Corp.,
(collectively the Subsidiary Guarantors). ATT Holding Co. is a holding company which has no
interest, operations or activities other than through its ownership of 100% of ATT and ATTs
wholly-owned subsidiaries. The Notes are not guaranteed by any of ATT Holding Co.s other directly
and indirectly wholly-owned subsidiaries.
The following condensed consolidating information presents, in separate columns, the consolidating
balance sheets as of October 3, 2009 and September 27, 2008, the related consolidating statements
of operations for the fiscal years ended October 3, 2009, September 27, 2008 and September 29, 2007
and the condensed consolidating statements of cash flows for the fiscal years ended October 3,
2009, September 27, 2008 and September 29, 2007 for ATT Holding Co. on a parent-only basis, with
its investment in subsidiary recorded under the equity method, the issuer (Ames True Temper Inc.)
as a wholly-owned subsidiary, on a parent-only basis, with its investments in subsidiaries recorded
under the equity method, the Subsidiary Guarantors on a combined basis, the subsidiary
non-guarantors on a combined basis and the Company on a consolidated basis.
During the fourth quarter of the period ended October 3, 2009, the Company consummated an internal
reorganization between the U.S. and Canada segments. Pursuant to this reorganization, a Canadian
subsidiary of the Company transferred all of the outstanding shares of a U.S. subsidiary of the
Company to a separate U.S. subsidiary. This transfer resulted in trade name impairments for the
fiscal years ended October 3, 2009 and September 27, 2008 reported within the U.S. segment. The
Company has recast its consolidating balance sheet for the fiscal year ended September 27, 2008,
consolidating statements of operations and condensed consolidating statements of cash flows for the
fiscal years ended September 27, 2008 and September 29, 2007 as a result of this reorganization.
65
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ATT Holding Co.
Notes to Consolidated Statements (Continued)
ATT Holding Co.
Consolidating Balance Sheet
As of October 3, 2009
Consolidating Balance Sheet
As of October 3, 2009
Ames | ||||||||||||||||||||||||
ATT | True | Subsidiary | ||||||||||||||||||||||
Holding | Temper, | Subsidiary | Non- | |||||||||||||||||||||
Co. | Inc. | Guarantors | Guarantors | Eliminations | Consolidated | |||||||||||||||||||
Assets |
||||||||||||||||||||||||
Current assets: |
||||||||||||||||||||||||
Cash and cash equivalents |
$ | | $ | 454 | $ | 9 | $ | 33,146 | $ | | $ | 33,609 | ||||||||||||
Trade receivables, net |
| 34,431 | | 8,018 | | 42,449 | ||||||||||||||||||
Inventories |
| 71,933 | | 18,372 | | 90,305 | ||||||||||||||||||
Assets held for sale |
| | | | | | ||||||||||||||||||
Prepaid expenses and other
current assets |
| 4,450 | | 1,865 | | 6,315 | ||||||||||||||||||
Total current assets |
| 111,268 | 9 | 61,401 | | 172,678 | ||||||||||||||||||
Property, plant and equipment, net |
| 33,246 | | 10,993 | | 44,239 | ||||||||||||||||||
Intangibles, net |
| 5,098 | 41,900 | 6,683 | | 53,681 | ||||||||||||||||||
Goodwill |
| 43,605 | | 13,889 | | 57,494 | ||||||||||||||||||
Intercompany receivable |
| 29,980 | 168,715 | 2,941 | (201,636 | ) | | |||||||||||||||||
Investment in subsidiaries |
| 248,762 | 163,010 | | (411,772 | ) | | |||||||||||||||||
Other noncurrent assets |
| 6,531 | | | | 6,531 | ||||||||||||||||||
Total assets |
$ | | $ | 478,490 | $ | 373,634 | $ | 95,907 | $ | (613,408 | ) | $ | 334,623 | |||||||||||
Liabilities and stockholders
(deficit) equity |
||||||||||||||||||||||||
Current liabilities: |
||||||||||||||||||||||||
Trade accounts payable |
$ | | $ | 12,485 | $ | 31 | $ | 5,698 | $ | | $ | 18,214 | ||||||||||||
Accrued interest payable |
| 5,392 | | | | 5,392 | ||||||||||||||||||
Accrued expenses and other
current liabilities |
| 19,189 | 113 | 7,340 | | 26,642 | ||||||||||||||||||
Revolving loan |
| 17,500 | | | | 17,500 | ||||||||||||||||||
Current portion of long-term
debt and capital lease
obligations |
| 479 | | 10 | | 489 | ||||||||||||||||||
Total current liabilities |
| 55,045 | 144 | 13,048 | | 68,237 | ||||||||||||||||||
Deferred income taxes |
| 1,544 | 11,115 | 1,013 | | 13,672 | ||||||||||||||||||
Long-term debt |
| 299,759 | | 32 | | 299,791 | ||||||||||||||||||
Accrued retirement benefits |
| 50,893 | | 943 | | 51,836 | ||||||||||||||||||
Other liabilities |
| 11,370 | 1,184 | 107 | | 12,661 | ||||||||||||||||||
Intercompany payable |
| 171,453 | | 30,183 | (201,636 | ) | | |||||||||||||||||
Cumulative losses in subsidiaries |
111,574 | | | | (111,574 | ) | | |||||||||||||||||
Total liabilities |
111,574 | 590,064 | 12,443 | 45,326 | (313,210 | ) | 446,197 | |||||||||||||||||
Commitments and contingencies |
||||||||||||||||||||||||
Stockholders (deficit) equity: |
||||||||||||||||||||||||
Preferred stock Series A |
| | 118,249 | 49,622 | (167,871 | ) | | |||||||||||||||||
Common stock Class A |
| | | | | | ||||||||||||||||||
Common stock Class B |
| | | | | | ||||||||||||||||||
Additional paid-in capital |
111,168 | 111,168 | 154,502 | | (265,670 | ) | 111,168 | |||||||||||||||||
Predecessor basis adjustment |
(13,539 | ) | (13,539 | ) | | | 13,539 | (13,539 | ) | |||||||||||||||
(Accumulated deficit) retained
earnings |
(167,272 | ) | (167,272 | ) | 77,681 | (8,711 | ) | 98,302 | (167,272 | ) | ||||||||||||||
Accumulated other comprehensive
(loss) income |
(41,931 | ) | (41,931 | ) | 10,759 | 9,670 | 21,502 | (41,931 | ) | |||||||||||||||
Total stockholders (deficit) equity |
(111,574 | ) | (111,574 | ) | 361,191 | 50,581 | (300,198 | ) | (111,574 | ) | ||||||||||||||
Total liabilities and stockholders
(deficit) equity |
$ | | $ | 478,490 | $ | 373,634 | $ | 95,907 | $ | (613,408 | ) | $ | 334,623 | |||||||||||
66
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ATT Holding Co.
Notes to Consolidated Statements (Continued)
ATT Holding Co.
Consolidating Balance Sheet
As of September 27, 2008
Consolidating Balance Sheet
As of September 27, 2008
Ames | ||||||||||||||||||||||||
ATT | True | Subsidiary | ||||||||||||||||||||||
Holding | Temper, | Subsidiary | Non- | |||||||||||||||||||||
Co. | Inc. | Guarantors | Guarantors | Eliminations | Consolidated | |||||||||||||||||||
Assets |
||||||||||||||||||||||||
Current assets: |
||||||||||||||||||||||||
Cash and cash equivalents |
$ | | $ | 285 | $ | 5 | $ | 16,869 | $ | | $ | 17,159 | ||||||||||||
Trade receivables, net |
| 48,413 | | 10,755 | | 59,168 | ||||||||||||||||||
Inventories |
| 91,411 | | 19,480 | | 110,891 | ||||||||||||||||||
Assets held for sale |
| 1,025 | | | | 1,025 | ||||||||||||||||||
Prepaid expenses and other
current assets |
| 4,313 | | 1,843 | | 6,156 | ||||||||||||||||||
Total current assets |
| 145,447 | 5 | 48,947 | | 194,399 | ||||||||||||||||||
Property, plant and equipment, net |
| 42,202 | | 13,035 | | 55,237 | ||||||||||||||||||
Intangibles, net |
| 6,162 | 42,701 | 7,286 | | 56,149 | ||||||||||||||||||
Goodwill |
| 43,605 | | 14,637 | | 58,242 | ||||||||||||||||||
Intercompany receivable |
| 27,079 | 136,937 | 2,308 | (166,324 | ) | | |||||||||||||||||
Investment in subsidiaries |
| 223,202 | 163,342 | | (386,544 | ) | | |||||||||||||||||
Other noncurrent assets |
| 9,798 | | | | 9,798 | ||||||||||||||||||
Total assets |
$ | | $ | 497,495 | $ | 342,985 | $ | 86,213 | $ | (552,868 | ) | $ | 373,825 | |||||||||||
Liabilities and stockholders
(deficit) equity |
||||||||||||||||||||||||
Current liabilities: |
||||||||||||||||||||||||
Trade accounts payable |
$ | | $ | 28,172 | $ | 48 | $ | 7,471 | $ | | $ | 35,691 | ||||||||||||
Accrued interest payable |
| 6,021 | | | | 6,021 | ||||||||||||||||||
Accrued expenses and other
current liabilities |
| 20,174 | | 7,460 | | 27,634 | ||||||||||||||||||
Revolving loan |
| 40,010 | | | | 40,010 | ||||||||||||||||||
Current portion of long-term
debt and capital lease
obligations |
| 554 | | | | 554 | ||||||||||||||||||
Total current liabilities |
| 94,931 | 48 | 14,931 | | 109,910 | ||||||||||||||||||
Deferred income taxes |
| 112 | 9,566 | 1,670 | | 11,348 | ||||||||||||||||||
Long-term debt |
| 300,130 | | | | 300,130 | ||||||||||||||||||
Accrued retirement benefits |
| 24,508 | | 1,600 | | 26,108 | ||||||||||||||||||
Other liabilities |
| 10,487 | | 47 | | 10,534 | ||||||||||||||||||
Intercompany payable |
| 151,532 | | 14,792 | (166,324 | ) | | |||||||||||||||||
Cumulative losses in subsidiaries |
84,205 | | | | (84,205 | ) | | |||||||||||||||||
Total liabilities |
84,205 | 581,700 | 9,614 | 33,040 | (250,529 | ) | 458,030 | |||||||||||||||||
Commitments and contingencies |
||||||||||||||||||||||||
Stockholders (deficit) equity: |
||||||||||||||||||||||||
Preferred stock Series A |
| | 118,249 | 49,622 | (167,871 | ) | | |||||||||||||||||
Common stock Class A |
| | | | | | ||||||||||||||||||
Common stock Class B |
| | | | | | ||||||||||||||||||
Additional paid-in capital |
110,500 | 110,500 | 154,502 | | (265,002 | ) | 110,500 | |||||||||||||||||
Predecessor basis adjustment |
(13,539 | ) | (13,539 | ) | | | 13,539 | (13,539 | ) | |||||||||||||||
(Accumulated deficit) retained
earnings |
(172,129 | ) | (172,129 | ) | 50,548 | (6,020 | ) | 127,601 | (172,129 | ) | ||||||||||||||
Accumulated other comprehensive
(loss) income |
(9,037 | ) | (9,037 | ) | 10,072 | 9,571 | (10,606 | ) | (9,037 | ) | ||||||||||||||
Total stockholders (deficit) equity |
(84,205 | ) | (84,205 | ) | 333,371 | 53,173 | (302,339 | ) | (84,205 | ) | ||||||||||||||
Total liabilities and stockholders
(deficit) equity |
$ | | $ | 497,495 | $ | 342,985 | $ | 86,213 | $ | (552,868 | ) | $ | 373,825 | |||||||||||
67
Table of Contents
ATT Holding Co.
Notes to Consolidated Statements (Continued)
ATT Holding Co.
Consolidating Statement of Operations
Fiscal Year Ended October 3, 2009
Consolidating Statement of Operations
Fiscal Year Ended October 3, 2009
Ames | ||||||||||||||||||||||||
ATT | True | Subsidiary | ||||||||||||||||||||||
Holding | Temper, | Subsidiary | Non- | |||||||||||||||||||||
Co. | Inc. | Guarantors | Guarantors | Eliminations | Consolidated | |||||||||||||||||||
Net sales |
$ | | $ | 372,055 | $ | | $ | 97,103 | $ | (16,967 | ) | $ | 452,191 | |||||||||||
Cost of goods sold |
| 273,286 | | 69,600 | (16,967 | ) | 325,919 | |||||||||||||||||
Gross profit |
| 98,769 | | 27,503 | | 126,272 | ||||||||||||||||||
Selling, general and administrative
expenses |
| 69,719 | 207 | 16,912 | | 86,838 | ||||||||||||||||||
Loss on disposal of fixed assets |
| 1,389 | | | | 1,389 | ||||||||||||||||||
Amortization of intangible assets |
| 1,066 | | 148 | | 1,214 | ||||||||||||||||||
Impairment charges |
| 476 | 800 | 451 | | 1,727 | ||||||||||||||||||
Operating income (loss) |
| 26,119 | (1,007 | ) | 9,992 | | 35,104 | |||||||||||||||||
Interest expense (income) |
| 39,546 | (20,419 | ) | 10,581 | | 29,708 | |||||||||||||||||
Other expense (income) |
| 6,690 | (8,934 | ) | 1,720 | | (524 | ) | ||||||||||||||||
(Loss) income before income taxes |
| (20,117 | ) | 28,346 | (2,309 | ) | | 5,920 | ||||||||||||||||
Income tax expense |
| 466 | 514 | 383 | | 1,363 | ||||||||||||||||||
Equity in earnings (losses) of subsidiaries |
4,557 | 25,140 | (700 | ) | | (28,997 | ) | | ||||||||||||||||
Net income (loss) |
$ | 4,557 | $ | 4,557 | $ | 27,132 | $ | (2,692 | ) | $ | (28,997 | ) | $ | 4,557 | ||||||||||
ATT Holding Co.
Consolidating Statement of Operations
Fiscal Year Ended September 27, 2008
Consolidating Statement of Operations
Fiscal Year Ended September 27, 2008
Ames | ||||||||||||||||||||||||
ATT | True | Subsidiary | ||||||||||||||||||||||
Holding | Temper, | Subsidiary | Non- | |||||||||||||||||||||
Co. | Inc. | Guarantors | Guarantors | Eliminations | Consolidated | |||||||||||||||||||
Net sales |
$ | | $ | 415,853 | $ | | $ | 103,773 | $ | (16,173 | ) | $ | 503,453 | |||||||||||
Cost of goods sold |
| 316,787 | | 71,995 | (16,173 | ) | 372,609 | |||||||||||||||||
Gross profit |
| 99,066 | | 31,778 | | 130,844 | ||||||||||||||||||
Selling, general and
administrative expenses |
| 77,607 | 223 | 18,428 | | 96,258 | ||||||||||||||||||
Loss (gain) on disposal of fixed
assets |
| 832 | | (3 | ) | | 829 | |||||||||||||||||
Amortization of intangible assets |
| 1,181 | | 182 | | 1,363 | ||||||||||||||||||
Impairment charges |
| 200 | 15,583 | | | 15,783 | ||||||||||||||||||
Operating income (loss) |
| 19,246 | (15,806 | ) | 13,171 | | 16,611 | |||||||||||||||||
Interest expense (income) |
| 42,497 | (17,909 | ) | 9,224 | | 33,812 | |||||||||||||||||
Other expense (income) |
| 8,241 | (9,896 | ) | 4,730 | | 3,075 | |||||||||||||||||
(Loss) income before income taxes |
| (31,492 | ) | 11,999 | (783 | ) | | (20,276 | ) | |||||||||||||||
Income tax benefit |
| (817 | ) | (2,600 | ) | (437 | ) | | (3,854 | ) | ||||||||||||||
(Loss) equity in earnings of
subsidiaries |
(16,422 | ) | 14,253 | (142 | ) | | 2,311 | | ||||||||||||||||
Net (loss) income |
$ | (16,422 | ) | $ | (16,422 | ) | $ | 14,457 | $ | (346 | ) | $ | 2,311 | $ | (16,422 | ) | ||||||||
68
Table of Contents
ATT Holding Co.
Notes to Consolidated Statements (Continued)
ATT Holding Co.
Consolidating Statement of Operations
Fiscal Year Ended September 29, 2007
Consolidating Statement of Operations
Fiscal Year Ended September 29, 2007
Ames | ||||||||||||||||||||||||
ATT | True | Subsidiary | ||||||||||||||||||||||
Holding | Temper, | Subsidiary | Non- | |||||||||||||||||||||
Co. | Inc. | Guarantors | Guarantors | Eliminations | Consolidated | |||||||||||||||||||
Net sales |
$ | | $ | 430,356 | $ | | $ | 79,286 | $ | (8,875 | ) | $ | 500,767 | |||||||||||
Cost of goods sold |
| 332,792 | | 55,434 | (8,875 | ) | 379,351 | |||||||||||||||||
Gross profit |
| 97,564 | | 23,852 | | 121,416 | ||||||||||||||||||
Selling, general and
administrative expenses |
| 79,469 | | 16,394 | | 95,863 | ||||||||||||||||||
Loss (gain) on disposal of fixed
assets |
| 1,316 | | (17 | ) | | 1,299 | |||||||||||||||||
Amortization of intangible assets |
| 1,332 | 164 | | 1,496 | |||||||||||||||||||
Impairment charges |
| 42 | 4,427 | (4 | ) | | 4,465 | |||||||||||||||||
Operating income (loss) |
| 15,405 | (4,427 | ) | 7,315 | | 18,293 | |||||||||||||||||
Interest expense (income) |
| 43,454 | (8,202 | ) | 893 | | 36,145 | |||||||||||||||||
Other expense (income) |
| 6,014 | (6,914 | ) | (4,642 | ) | | (5,542 | ) | |||||||||||||||
(Loss) income before income taxes |
| (34,063 | ) | 10,689 | 11,064 | | (12,310 | ) | ||||||||||||||||
Income tax expense (benefit) |
| 6,283 | (3,585 | ) | 3,102 | | 5,800 | |||||||||||||||||
(Loss) equity in earnings of
subsidiaries |
(18,110 | ) | 22,236 | 7,923 | | (12,049 | ) | | ||||||||||||||||
Net (loss) income |
$ | (18,110 | ) | $ | (18,110 | ) | $ | 22,197 | $ | 7,962 | $ | (12,049 | ) | $ | (18,110 | ) | ||||||||
69
Table of Contents
ATT Holding Co.
Notes to Consolidated Statements (Continued)
ATT Holding Co.
Condensed Consolidating Statement of Cash Flows
Fiscal Year Ended October 3, 2009
Condensed Consolidating Statement of Cash Flows
Fiscal Year Ended October 3, 2009
Ames | ||||||||||||||||||||||||
ATT | True | Subsidiary | ||||||||||||||||||||||
Holding | Temper, | Subsidiary | Non- | |||||||||||||||||||||
Co. | Inc. | Guarantors | Guarantors | Eliminations | Consolidated | |||||||||||||||||||
Operating activities |
||||||||||||||||||||||||
Net income (loss) |
$ | 4,557 | $ | 4,557 | $ | 27,132 | $ | (2,692 | ) | $ | (28,997 | ) | $ | 4,557 | ||||||||||
Adjustments to reconcile net income (loss) to net
cash provided by operating activities: |
||||||||||||||||||||||||
Depreciation expense |
| 14,266 | | 2,167 | | 16,433 | ||||||||||||||||||
Equity in (earnings) loss of subsidiaries |
(4,557 | ) | (25,140 | ) | 700 | | 28,997 | | ||||||||||||||||
Provision for (benefit from) deferred taxes |
| | 1,294 | (34 | ) | | 1,260 | |||||||||||||||||
Impairment charges |
| 476 | 800 | 451 | | 1,727 | ||||||||||||||||||
Other, net |
| 4,765 | | 214 | | 4,979 | ||||||||||||||||||
Unrealized foreign currency loss |
| | | 982 | | 982 | ||||||||||||||||||
Related party non-cash transactions |
| (2,526 | ) | 1,523 | 1,003 | | | |||||||||||||||||
Changes in assets and liabilities: |
||||||||||||||||||||||||
Accounts receivable |
| 13,999 | | 2,015 | | 16,014 | ||||||||||||||||||
Inventories |
| 19,478 | | 260 | | 19,738 | ||||||||||||||||||
Prepaid expenses and other current assets |
| 1,532 | | (387 | ) | | 1,145 | |||||||||||||||||
Accounts payable |
| (15,687 | ) | (15 | ) | (1,335 | ) | | (17,037 | ) | ||||||||||||||
Intercompany accounts |
| 19,334 | (32,726 | ) | 13,392 | | | |||||||||||||||||
Accrued expenses and other liabilities |
| (6,224 | ) | 1,296 | 103 | | (4,825 | ) | ||||||||||||||||
Net cash provided by operating activities |
| 28,830 | 4 | 16,139 | | 44,973 | ||||||||||||||||||
Investing activities |
||||||||||||||||||||||||
Cash paid for property, plant and equipment |
| (5,733 | ) | | (1,016 | ) | | (6,749 | ) | |||||||||||||||
Proceeds from sale of property, plant and equipment |
| 136 | | | | 136 | ||||||||||||||||||
Net cash used in investing activities |
| (5,597 | ) | | (1,016 | ) | | (6,613 | ) | |||||||||||||||
Financing activities |
||||||||||||||||||||||||
Repayments of long-term debt |
| (554 | ) | | | | (554 | ) | ||||||||||||||||
Borrowings on revolver |
| 146,171 | | | | 146,171 | ||||||||||||||||||
Repayments on revolver |
| (168,681 | ) | | | | (168,681 | ) | ||||||||||||||||
Principal payments under capital lease obligations |
| | | (8 | ) | | (8 | ) | ||||||||||||||||
Net cash used in financing activities |
| (23,064 | ) | | (8 | ) | | (23,072 | ) | |||||||||||||||
Effect of exchange rate changes on cash |
| | | 1,162 | | 1,162 | ||||||||||||||||||
Increase in cash and cash equivalents |
| 169 | 4 | 16,277 | | 16,450 | ||||||||||||||||||
Cash and cash equivalents at beginning of period |
| 285 | 5 | 16,869 | | 17,159 | ||||||||||||||||||
Cash and cash equivalents at end of period |
$ | | $ | 454 | $ | 9 | $ | 33,146 | $ | | $ | 33,609 | ||||||||||||
70
Table of Contents
ATT Holding Co.
Notes to Consolidated Statements (Continued)
ATT Holding Co.
Condensed Consolidating Statement of Cash Flows
Fiscal Period Ended September 27, 2008
Condensed Consolidating Statement of Cash Flows
Fiscal Period Ended September 27, 2008
Ames | ||||||||||||||||||||||||
ATT | True | Subsidiary | ||||||||||||||||||||||
Holding | Temper, | Subsidiary | Non- | |||||||||||||||||||||
Co. | Inc. | Guarantors | Guarantors | Eliminations | Consolidated | |||||||||||||||||||
Operating activities |
||||||||||||||||||||||||
Net (loss) income |
$ | (16,422 | ) | $ | (16,422 | ) | $ | 14,457 | $ | (346 | ) | $ | 2,311 | $ | (16,422 | ) | ||||||||
Adjustments to reconcile net (loss) income to net
cash provided by operating activities: |
||||||||||||||||||||||||
Depreciation expense |
| 13,111 | | 2,657 | | 15,768 | ||||||||||||||||||
Equity in loss (earnings) of subsidiaries |
16,422 | (14,253 | ) | 142 | | (2,311 | ) | | ||||||||||||||||
Benefit from deferred taxes |
| | (3,894 | ) | (71 | ) | | (3,965 | ) | |||||||||||||||
Other, net |
| 4,527 | | 235 | | 4,762 | ||||||||||||||||||
Unrealized foreign currency loss |
| | | 3,106 | | 3,106 | ||||||||||||||||||
Impairment charges |
| 200 | 15,583 | | | 15,783 | ||||||||||||||||||
Non cash provision for taxes |
| 11,867 | 1,048 | (12,915 | ) | | | |||||||||||||||||
Changes in assets and liabilities: |
||||||||||||||||||||||||
Accounts receivable |
| (3,014 | ) | | (257 | ) | | (3,271 | ) | |||||||||||||||
Inventories |
| 5,169 | | (1,455 | ) | | 3,714 | |||||||||||||||||
Prepaid expenses and other current assets |
| (2,750 | ) | | 663 | | (2,087 | ) | ||||||||||||||||
Accounts payable |
| (1,295 | ) | (111 | ) | 1,928 | | 522 | ||||||||||||||||
Intercompany accounts |
| 18,871 | (27,225 | ) | 8,354 | | | |||||||||||||||||
Accrued expenses and other liabilities |
| (7,133 | ) | | 12,007 | | 4,874 | |||||||||||||||||
Net cash provided by operating activities |
| 8,878 | | 13,906 | | 22,784 | ||||||||||||||||||
Investing activities |
||||||||||||||||||||||||
Cash paid for property, plant and equipment |
| (6,585 | ) | | (1,515 | ) | | (8,100 | ) | |||||||||||||||
Proceeds from sale of property, plant and equipment |
| 588 | | 12 | | 600 | ||||||||||||||||||
Proceeds from state government grant |
| 300 | | | | 300 | ||||||||||||||||||
Net cash used in investing activities |
| (5,697 | ) | | (1,503 | ) | | (7,200 | ) | |||||||||||||||
Financing activities |
||||||||||||||||||||||||
Repayments of long-term debt |
| (684 | ) | | | | (684 | ) | ||||||||||||||||
Borrowings on revolver |
| 162,618 | | | | 162,618 | ||||||||||||||||||
Repayments on revolver |
| (165,106 | ) | | | | (165,106 | ) | ||||||||||||||||
Net cash used in financing activities |
| (3,172 | ) | | | | (3,172 | ) | ||||||||||||||||
Effect of exchange rate changes on cash |
| | | (435 | ) | | (435 | ) | ||||||||||||||||
Increase in cash and cash equivalents |
| 9 | | 11,968 | | 11,977 | ||||||||||||||||||
Cash and cash equivalents at beginning of period |
| 276 | 5 | 4,901 | | 5,182 | ||||||||||||||||||
Cash and cash equivalents at end of period |
$ | | $ | 285 | $ | 5 | $ | 16,869 | $ | | $ | 17,159 | ||||||||||||
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ATT Holding Co.
Notes to Consolidated Statements (Continued)
ATT Holding Co.
Condensed Consolidating Statement of Cash Flows
Fiscal Year Ended September 29, 2007
Condensed Consolidating Statement of Cash Flows
Fiscal Year Ended September 29, 2007
Ames | ||||||||||||||||||||||||
ATT | True | Subsidiary | ||||||||||||||||||||||
Holding | Temper, | Subsidiary | Non- | |||||||||||||||||||||
Co. | Inc. | Guarantors | Guarantors | Eliminations | Consolidated | |||||||||||||||||||
Operating activities |
||||||||||||||||||||||||
Net (loss) income |
$ | (18,110 | ) | $ | (18,110 | ) | $ | 22,197 | $ | 7,962 | $ | (12,049 | ) | $ | (18,110 | ) | ||||||||
Adjustments to reconcile net (loss) income to net
cash provided by (used in) operating activities: |
||||||||||||||||||||||||
Depreciation expense |
| 13,759 | | 2,370 | | 16,129 | ||||||||||||||||||
Equity in loss (earnings) of subsidiaries |
18,110 | (22,236 | ) | (7,923 | ) | | 12,049 | | ||||||||||||||||
Provision for (benefit from) deferred taxes |
| 5,270 | (3,687 | ) | 493 | | 2,076 | |||||||||||||||||
Other, net |
| 5,205 | | 42 | | 5,247 | ||||||||||||||||||
Unrealized foreign currency gain |
| | | (5,926 | ) | | (5,926 | ) | ||||||||||||||||
Impairment charges |
| 213 | 4,426 | (174 | ) | 4,465 | ||||||||||||||||||
Non cash provision for taxes |
| 2,199 | 103 | (2,302 | ) | | | |||||||||||||||||
Changes in assets and liabilities: |
||||||||||||||||||||||||
Accounts receivable |
| 11,573 | | (137 | ) | | 11,436 | |||||||||||||||||
Inventories |
| 28,867 | | (787 | ) | | 28,080 | |||||||||||||||||
Prepaid expenses and other current assets |
| 1,820 | | (230 | ) | | 1,590 | |||||||||||||||||
Accounts payable |
| (4,319 | ) | 95 | (813 | ) | | (5,037 | ) | |||||||||||||||
Intercompany accounts |
| 14,258 | (15,212 | ) | 954 | | | |||||||||||||||||
Accrued expenses and other liabilities |
| (11,099 | ) | | 2,045 | | (9,054 | ) | ||||||||||||||||
Net cash provided by (used in) operating activities |
| 27,400 | (1 | ) | 3,497 | | 30,896 | |||||||||||||||||
Investing activities |
||||||||||||||||||||||||
Cash paid for property, plant and equipment |
| (6,609 | ) | | (4,252 | ) | | (10,861 | ) | |||||||||||||||
Proceeds from sale of property, plant and equipment |
| 1,507 | | | | 1,507 | ||||||||||||||||||
Restricted cash released from escrow |
| 2,081 | | | | 2,081 | ||||||||||||||||||
Investment in joint venture |
| (300 | ) | | | | (300 | ) | ||||||||||||||||
Net cash used in investing activities |
| (3,321 | ) | | (4,252 | ) | | (7,573 | ) | |||||||||||||||
Financing activities |
||||||||||||||||||||||||
Repayments of long-term debt |
| (710 | ) | | | | (710 | ) | ||||||||||||||||
Borrowings on revolver |
| 143,138 | | | | 143,138 | ||||||||||||||||||
Repayments on revolver |
| (167,248 | ) | | | | (167,248 | ) | ||||||||||||||||
Net cash used in financing activities |
| (24,820 | ) | | | | (24,820 | ) | ||||||||||||||||
Effect of exchange rate changes on cash |
| | | 1,042 | (1 | ) | 1,041 | |||||||||||||||||
(Decrease) increase in cash and cash equivalents |
| (741 | ) | (1 | ) | 287 | (1 | ) | (456 | ) | ||||||||||||||
Cash and cash equivalents at beginning of period |
| 1,017 | 6 | 4,614 | 1 | 5,638 | ||||||||||||||||||
Cash and cash equivalents at end of period |
$ | | $ | 276 | $ | 5 | $ | 4,901 | $ | | $ | 5,182 | ||||||||||||
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ATT
Holding Co.
Notes to Consolidated Statements (Continued)
12. Related Party Transactions
The Company is party to a management agreement with Castle Harlan, Inc., an affiliate of the
shareholder, under which Castle Harlan, Inc. provides business and organizational strategy,
financial and investment management, advisory, merchant and investment banking services to the
Company. During the fiscal years ended October 3, 2009, September 27, 2008 and September 29, 2007
the Company recorded $3,431, $3,067 and $3,006, respectively, for the annual management fee plus
expenses, which are included in selling, general and administrative expenses on the accompanying
consolidated statements of operations. Management fees are payable quarterly in advance in
accordance with the management agreement. The Company had no outstanding amounts payable to Castle
Harlan, Inc. at October 3, 2009 or September 27, 2008.
On June 28, 2004, affiliates of Castle Harlan, Inc., a New York-based private-equity investment
firm, together with certain employees of the Company or its subsidiaries, completed the acquisition
of the Company (the Acquisition). In connection with the Acquisition, CHATT LLC was formed.
CHATT LLC owns 100% of CHATT Holdings Inc. (CHATT Inc.); which owns 100% of ATT Holding Co.;
which owns 100% of the Company. CHATT LLC and CHATT Inc. are not included in the consolidated
financial statements of ATT Holding Co. Upon completion of the Acquisition, affiliates of Castle
Harlan, Inc. owned approximately 87% of the equity interests of CHATT LLC and certain employees of
the Company or its subsidiaries owned approximately 13% of the equity interests of CHATT LLC. The
equity interests of CHATT LLC as of the completion of the Acquisition consisted of Class A Units
and Class B Units, the terms of which are described below. The Class A Units and Class B Units
were issued as strips of equal numbers of Class A Units and Class B Units (Strips). In addition,
certain employees of the Company or its subsidiaries were issued Class B Units (sometimes referred
to as Class B Incentive Units) that are subject to certain vesting requirements which are discussed
below.
From time to time since June 28, 2004, CHATT LLC has issued additional Strips and additional Class
B Units to employees of the Company or its subsidiaries that are subject to vesting requirements.
All of the Class B Units that are subject to vesting requirements were issued pursuant to employee
subscription agreements entered into separately between CHATT LLC and each employee that received
such Class B Units (Employee Subscription Agreements). Pursuant to the Employee Subscription
Agreements, these Class B Units vest based on three criteria: (i) time vesting based on a five-year
term, (ii) performance vesting based on the operating results of CHATT LLC and (iii) vesting based
upon the achievement of a targeted rate of return upon a change of control of CHATT LLC. In
addition, the vesting of these Class B Units is subject to acceleration in the event of a change of
control of CHATT LLC. As of October 3, 2009 and September 27, 2008, there were 138,567 and 135,769
units, respectively, issued to management and members of the CHATT Holdings LLC Board of Directors
who are not employees of ATT or Castle Harlan, Inc. These units may not be sold, pledged, or
otherwise transferred except in compliance with applicable securities laws. None of the Class A
Units or Class B Units that were issued as Strips are subject to any vesting requirements.
Each Class A Unit and Class B Unit, whether issued as part of a Strip or pursuant to an Employee
Subscription Agreement, is governed by and subject to the terms of an operating agreement among
CHATT LLC and each of its equity holders (the Operating Agreement). Pursuant to the Operating
Agreement: to the extent any distribution of assets is made by CHATT LLC, the holders of Class A
Units are entitled to a preferred return prior to any distribution to holders of Class B Units;
after the preferred return has been paid to the holders of Class A Units, the holders of Class B
Units are entitled to receive any remaining amounts of any distribution on a pro rata basis;
holders of Class A Units do not have any voting rights; and each holder of any Class B Units is
entitled to one vote per Class B Unit on all matters to be voted on by the members of CHATT LLC.
73
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ATT
Holding Co.
Notes to Consolidated Statements (Continued)
The above-referenced rights of the Class B Units are applicable only to those Class B Units that
(i) were issued as part of a Strip and therefore are not subject to vesting requirements or (ii)
were issued pursuant to an Employee Subscription Agreement and have become vested. Unvested Class
B Units do not have any voting rights or rights to receive distributions.
Each Class A Unit and Class B Unit held by employees of the Company or its subsidiaries is subject
to repurchase by CHATT LLC or an affiliate of Castle Harlan, Inc. upon the termination of such
employees employment.
At certain times following the Acquisition, CHATT LLC issued strips of Class A-1 Units and Class B
Units to certain employees of the Company or its subsidiaries. Pursuant to the Operating
Agreement, the holders of Class A-1 Units were entitled to a preferred return prior to any
distribution of assets to holders of Class A Units or Class B Units. The terms of the Class A-1
Units were otherwise identical to the Class A Units. In January 2007, all of the Class A-1 Units
were converted into Class A Units pursuant to the terms of the Operating Agreement.
Following the conversion of the Class A-1 Units into Class A Units, CHATT LLC issued strips of
Class A-2 Units and Class B Units to certain employees of the Company or its subsidiaries.
Pursuant to the Operating Agreement, the holders of Class A-2 Units were entitled to a preferred
return prior to any distribution of assets to holders of Class A Units or Class B Units. The terms
of the Class A-2 Units were otherwise identical to the Class A Units. In January 2009, all of the
Class A-2 Units were converted into Class A Units pursuant to the terms of the Operating Agreement.
Following the conversion of the Class A-2 Units into Class A Units, CHATT LLC issued strips of
Class A-3 Units and Class B Units to certain employees of the Company or its subsidiaries.
Pursuant to the Operating Agreement, the holders of Class A-3 Units are entitled to a preferred
return prior to any distribution of assets to holders of Class A Units or Class B Units. The terms
of the Class A-3 Units are otherwise identical to the Class A Units.
Accordingly, the Class A Units and Class B Units described above are the only equity interests of
CHATT LLC outstanding as of the date hereof.
Strip Subscription Agreements
An aggregate of 147,815 Class A Units and 147,815 Class B Units have been sold pursuant to strip
subscription agreements since June 28, 2004 to certain of the Companys executives and directors at
$100.00 per unit and $0.01 per unit, respectively. Of the 147,815 Class A Units, an aggregate of
2,590 Class A Units were originally sold as Class A-1 Units and 600 Class A Units were originally
sold as Class A-2 Units. An aggregate of 110 Class A-3 Units have been sold pursuant to strip
agreements since June 28, 2004 to certain of the Companys executives at $100.00 per unit. All
Class A-1 and Class A-2 Units have been converted into Class A Units pursuant to the terms of the
CHATT LLC operating agreement.
Employee Subscription Agreements
An aggregate of 233,232 Class B Incentive Units have been sold pursuant to employee subscription
agreements since June 28, 2004 at a cost of $0.01 per unit to certain employees. The Company has
determined the estimated fair value of these Class B Incentive Units at each grant date using the
probability-weighted expected return method.
Compensation expense is recognized based on service and performance over the respective vesting
periods as the difference between the fair value at the date of grant and the purchase price paid
for the Class B Incentive Units. Compensation expense was not material.
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ATT Holding Co.
Notes to Consolidated Statements (Continued)
Notes to Consolidated Statements (Continued)
Activity related to the Class B Incentive Units was as follows:
Unvested | Vested | |||||||
Class B Incentive Units as of September 27, 2008 |
82,642 | 51,627 | ||||||
Granted |
3,700 | | ||||||
Purchased |
| (574 | ) | |||||
Vested |
(22,438 | ) | 22,438 | |||||
Forfeited |
(828 | ) | | |||||
Class B Incentive Units as of October 3, 2009 |
63,076 | 73,491 | ||||||
Activity related to the Class A, Class A-3 and Class B Units was as follows:
Class A and A-3 | Class B | |||||||
Units outstanding as of September 27, 2008 |
124,237 | 124,237 | ||||||
Granted |
210 | 210 | ||||||
Purchased |
(70 | ) | (70 | ) | ||||
Units outstanding as of October 3, 2009 |
124,377 | 124,377 | ||||||
13. Assets Held for Sale
During the fiscal year ended September 27, 2008, assets held for sale of $1,025, were comprised of
$755 of buildings and $270 of land. The assets held for sale consisted of two woodmills located in
Portville, NY and Palmyra, ME and a manufacturing facility in Frankfort, NY. The carrying amount
of these assets was determined to be more than their approximate fair value less cost to sell,
therefore, the Company recorded an impairment loss on these assets of $166.
During the fiscal year ended October 3, 2009, the Company determined all three assets held for sale
as of September 27, 2008 would not be sold due to current economic conditions. As a result, the
assets were reclassified as an asset held for use and the total combined carrying value of all
three assets was decreased by $12, the depreciation that would have been expensed had the assets
been continuously classified as held for use. Therefore, as of October 3, 2009, no assets
currently qualify as held for sale.
14. Fair Value of Financial Instruments
The Companys financial assets and liabilities required to be measured at fair value on a recurring
basis are as follows:
Quoted Prices | ||||||||||||||||
in Active Markets | ||||||||||||||||
for Identical | Significant Other | Significant Other | ||||||||||||||
Assets | Observable Inputs | Unobservable Inputs | Total as of | |||||||||||||
(Level 1) | (Level 2) | (Level 3) | October 3, 2009 | |||||||||||||
Foreign currency forward contracts |
$ | | $ | 113 | $ | | $ | 113 | ||||||||
Total assets |
$ | | $ | 113 | $ | | $ | 113 | ||||||||
Foreign currency forward contracts |
$ | | $ | 171 | $ | | $ | 171 | ||||||||
Interest rate swaps |
| 2,725 | | 2,725 | ||||||||||||
Total liabilities |
$ | | $ | 2,896 | $ | | $ | 2,896 | ||||||||
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ATT
Holding Co.
Notes to Consolidated Statements (Continued)
15. Derivative Instruments and Hedging Activities
Fair values of derivative instruments are as follows:
Asset Derivatives | Liability Derivatives | |||||||||||||||||||||||||||
Description of | Qualifies for Hedge | Balance Sheet | Pretax Loss | Balance Sheet | Pretax Loss | |||||||||||||||||||||||
Derivative | Designation | Fair Value | Location | Recognized in AOCI | Fair Value | Location | Recognized in AOCI | |||||||||||||||||||||
Foreign
currency forward
contracts |
No | $ | 113 | (a | ) | $ | | $ | 171 | (b | ) | $ | | |||||||||||||||
Interest rate swaps |
Yes | | | | 2,725 | (c | ) | 2,725 |
(a) | The balance sheet location for the foreign currency forward contracts is Prepaid expenses and other current assets. | |
(b) | The balance sheet location for the foreign currency forward contracts is Accrued expenses and other current liabilities. | |
(c) | The balance sheet location for the interest rate swaps is Other liabilities. |
The effect of derivative instruments on the accompanying consolidated statement of
operations for the fiscal year ended October 3, 2009 is as follows:
Location of pretax | Amount of pretax | Amount of pretax | ||||||||||||||||||
gain or (loss) | gain or (loss) | Location of pretax gain or | gain or (loss) | |||||||||||||||||
Description | Qualifies for Hedge | reclassed from AOCI | reclassed from AOCI | (loss) recognized in | recognized in | |||||||||||||||
of Derivative | Designation | into earnings | into earnings | earnings | earnings | |||||||||||||||
Foreign
currency forward
contracts |
No | | $ | | Other expense | $ | 1,635 | |||||||||||||
Other |
No | | | SG&A | (88 | ) | ||||||||||||||
Interest rate swaps |
Yes | Interest expense | $ | (1,490 | ) | | |
The Company expects $2,454 of net pretax losses recognized in accumulated other comprehensive
income as of October 3, 2009, to be reclassified into earnings within the next twelve months.
As of October 3, 2009, seventeen foreign currency forward contracts remain outstanding with a total
notional amount of $14,776 (in Canadian dollars).
16. Commitments and Contingencies
During December 2004, a customer of the Company was named in litigation that involved UnionTools
products. The complaint asserted causes of action against the defendant for improper advertisement
to the end consumer. The allegation suggests that advertisements led the consumer to believe that
the hand tools sold were manufactured within boundaries of the United States. The allegation
asserts cause of action against the customer for common law fraud. In the event that an adverse
judgment is rendered against the customer, there is a possibility that the customer would seek
legal recourse against the Company for an unspecified amount in contributory damages. Presently,
the Company cannot estimate the amount of loss, if any, if the customer were to seek legal recourse
against the Company.
From approximately 1993 through 1999, the Company manufactured and sold 647,000 wheelbarrows with
poly wheel hubs. Various claims were submitted, and lawsuits filed, to recover for injuries
sustained while inflating tires on these wheelbarrows. In 2002, the Company participated in a
voluntary fast track recall of these wheelbarrows with the Consumer Product Safety Commission
(CPSC). The Company again voluntarily recalled these wheelbarrows in June 2004 in cooperation
with the CPSC. However, less than 1% of the total products sold were returned, leaving an unknown
number in service. To date, the Company has
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ATT
Holding Co.
Notes to Consolidated Statements (Continued)
responded to 34 claims involving this product. All known claims have been resolved. Although the
Company believes it has sufficient insurance coverage in place to cover these claims, a successful
claim may exceed the limits of the Companys coverage.
During fiscal 2009, an underground fuel tank with surrounding soil contamination was discovered at
the Frankfort, NY site which is the result of historical facility operations prior to the Companys
ownership. The Company is actively working with the New York Department of Environmental
Conservation and the New York State Department of Health to comply with remediation efforts. The
remediation process is taking significant efforts to complete and, as a result, the Company
recorded a charge to cost of goods sold in the accompanying statements of operations of
approximately $2,567 for the costs associated with the removal of the fuel oil tank and soil
contamination during the fourth quarter of the period ended October 3, 2009. The circumstance
affecting the loss estimates includes the extent of the soil contamination. The Company believes
remediation will be completed by the end of the fiscal year beginning on October 4, 2009
The Company is involved in lawsuits and claims, including certain environmental matters, arising
out of the normal course of its business. In the opinion of management, the ultimate amount of
liability, if any, under pending litigation will not have a material adverse effect on the
Companys financial position, results of operations or cash flows.
17. Other
The Company applied for relief under the U. S. Continued Dumping and Subsidy Offset Act of 2000, or
Byrd Amendment, as a result of foreign manufacturers selling certain tools at unfair prices
within the U.S. market. During December 2008 and December 2007, the Company received a
distribution of tariffs collected in the amount of $2,983 and $1,110, respectively. These amounts
were recorded within selling, general and administrative expenses in the accompanying consolidated
statements of operations.
18. Subsequent Events
The Company has evaluated subsequent events through December 14, 2009, which is the date the
consolidated financial statements were issued, and have determined that except as set forth below,
there are no subsequent events that require disclosure. On December 2, 2009, the Company received a
distribution of tariffs collected under the Byrd Amendment in the amount of $3,259.
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ATT
Holding Co.
Notes to Consolidated Statements (Continued)
Item 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
None
Item 9A(T). | CONTROLS AND PROCEDURES |
Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial
Officer, has evaluated the effectiveness of disclosure controls and procedures as defined in Rules
13a-15(e) of the Securities Exchange Act of 1934, as amended (the
Exchange Act) as of the end
of the period covered by this report. Based on that evaluation, our Chief Executive Officer and
Chief Financial Officer concluded that, as of October 3, 2009, our disclosure controls and
procedures were effective.
Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over
financial reporting, as defined in Rules 13a-15(f) under the Exchange Act. Under the supervision
and with the participation of our management, including our Chief Executive Officer and Chief
Financial Officer, we have conducted an evaluation of the effectiveness of our internal control
over financial reporting based on the framework in Internal Controls-Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation,
our management has concluded that as of October 3, 2009, our internal control over financial
reporting was effective.
This annual report does not include an attestation report of the Companys registered public
accounting firm regarding internal control over financial reporting. Managements report was not
subject to attestation by the Companys registered public accounting firm pursuant to temporary
rules of the Securities and Exchange Commission that permit the Company to provide only
managements report in this annual report.
Changes in Internal Control Over Financial Reporting
There have not been any changes in our internal control over financial reporting as defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act during our fourth quarter ended October 3,
2009 that have materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
Item 9B. | OTHER INFORMATION |
None
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PART III
Item 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
The following table sets forth certain information regarding our board of directors, the board
of directors of our parent, the board of directors of the buyer and the board of directors of the
buyer parent. In addition, the table sets forth information regarding our executive officers and
certain of our other senior officers. Duane Greenly is the sole member of our, our parents and the
buyers board of directors.
Name | Age | Position | ||||
Duane Greenly
|
59 | President and Chief Executive Officer. Member of our Board of Directors, the Board of Directors of our parent, the Board of Directors of the buyer and the Board of Directors of the buyer parent | ||||
David Nuti
|
50 | Chief Financial Officer | ||||
Jean Gaudreault
|
53 | President and General Manager, Garant (Canada) | ||||
Thomas OConnor
|
63 | Managing Director, True Temper Ltd. (Ireland) | ||||
Lawrence Baab
|
47 | Vice President, Marketing and Product Development | ||||
Daniel Yurovich
|
46 | Senior Vice President of Operations | ||||
John Castle
|
69 | Member of the Board of Directors of the buyer parent | ||||
Justin Wender
|
40 | Member of the Board of Directors of the buyer parent | ||||
William Pruellage
|
36 | Member of the Board of Directors of the buyer parent | ||||
Richard Moore
|
49 | Member of the Board of Directors of the buyer parent | ||||
Richard Dell
|
63 | Member of the Board of Directors of the buyer parent | ||||
Robert Elman
|
71 | Member of the Board of Directors of the buyer parent | ||||
Edward LeBlanc
|
63 | Member of the Board of Directors of the buyer parent | ||||
Kenneth Roman
|
78 | Member of the Board of Directors of the buyer parent |
Duane Greenly has been our President and Chief Executive Officer since September 27, 2008, at
which time he was also elected to the board of directors. Mr. Greenly was the President of Ames
True Temper-U.S. since October 2007. Previously, he was our Chief Operating Officer since acquiring
us, in partnership with Richard Dell and Wind Point Partners, in January 2002. From 1998 through
2001, Mr. Greenly was President and CEO of Barry Controls, which served the retail, industrial and
OEM markets. From 1996 through 1998, he was President of Morgan Manufacturing. Mr. Greenly held
numerous senior positions with Newell Rubbermaid. Mr. Greenly also held engineering, product
development and operational roles with BF Goodrich and Milliken Textiles.
David Nuti joined Ames True Temper in 2006 as the Chief Financial Officer. Previously he was
employed as CFO and Senior Vice President for Rubicon Technology, CFO for Third Wave Technologies,
Inc., and Vice President and Corporate Controller at Fiskars. Mr. Nuti was with Rubbermaid for
over eight years in various senior financial and operational roles and began his career with
Container Corporation of America and Newell. Mr. Nuti holds a bachelors degree from Northern
Illinois University and an MBA from Lewis University.
Jean Gaudreault has been the President and General Manager of Garant Canada since 1996. From
1991 to 1996, Mr. Gaudreault was part owner of Venmar Ventilation where he held the position of
Vice President, Sales & Marketing until the company was sold. From 1980 to 1991, Mr. Gaudreault
served in various positions with Denco Canada, including the last two years with Denco SA in
France, where he held the position of General Manger, responsible for the restructuring of
operations in France.
Thomas OConnor has been the Managing Director of True Temper Ltd., Ireland since July 2005.
Mr. OConnor joined True Temper Ltd. in 1985 and served in various sales and marketing functions
most recently as Sales and Marketing Director. Prior to joining True Temper Ltd., Mr. OConnor
served 10 years
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with I. S. Varian & Co. Ltd. Dublin, Ireland in Sales and 6 years with Polycell Products Ltd.
United Kingdom.
Lawrence Baab joined Ames True Temper in April 2008 with responsibility for Sales and
Marketing and, since July 2009, Marketing and Product Development. Mr. Baab was previously employed
by Igloo Products Corporation where he served as Vice President of National Sales & Licensing from
2006 to 2008 and Vice President of Marketing & New Product Development from 2002 through 2005.
Before joining Igloo, Mr. Baab was employed with Black & Decker from 1993 through 2002 in senior
sales, marketing, product development, and engineering roles. He also served in progressively
responsible sales and training roles at Johnson & Johnson. Mr. Baab holds a bachelors degree from
Azusa Pacific University and an MBA from the University of New Haven.
Daniel Yurovich has been Senior Vice President of Operations since July 2008. He has been with
Ames True Temper since April 2006 in key operational roles. Mr. Yurovich was previously employed by
Barry Controls where he served as President and CEO from 2001 to 2006 and Vice President of
Operations from 1998 through 2001. From 1996 through 1998 Mr. Yurovich was part of the Morgan
Products LTD turn-around team as the Director of Support Services. He started his business career
with the Newell Companies after nearly 11 years of duty in the Marine Corps where he attained the
rank of Major. Mr. Yurovich holds a bachelors degree in Aerospace Engineering from the United
States Naval Academy and an MBA from Regis University.
John K. Castle is a member of the board of the directors of the buyer parent. Mr. Castle is
Chairman and Chief Executive Officer of Castle Harlan. Prior to forming Castle Harlan in 1987, Mr.
Castle was President and Chief Executive Officer of Donaldson, Lufkin & Jenrette, Inc., one of the
nations leading investment banking firms. At that time, he also served as a director of the
Equitable Life Assurance Society of the U.S. Mr. Castle is a board member of Perkins & Marie
Callenders Inc., Mortons Restaurant Group, Inc. and various private equity companies. Mr. Castle
has also been elected to serve as a Life Member of the Massachusetts Institute of Technology. He
has served for twenty-two years as a trustee of New York Medical College, including eleven of those
years as Chairman of the Board. He was formerly a member of the Board of the Whitehead Institute
for Biomedical Research, and was Founding Chairman of the Whitehead Board of Associates. He is also
a member of The New York Presbyterian Hospital Board of Trustees and Former Chairman of the
Columbia-Presbyterian Health Sciences Advisory Council. Mr. Castle received his bachelors degree
from the Massachusetts Institute of Technology, his MBA as a Baker Scholar with High Distinction
from Harvard and two Honorary Doctorate degrees of Humane Letters.
Justin Wender is a member of the board of directors of the buyer parent. Mr. Wender is the
President of Castle Harlan, Inc. Prior to joining Castle Harlan in 1993, Mr. Wender worked in the
Corporate Finance Group of Merrill Lynch & Co., where he assisted clients with a variety of
corporate finance matters. He is a board member of Mortons Restaurant Group, Caribbean
Restaurants, and Baker & Taylor. In addition, he is a Trustee of The Weitz Funds, the Chair of the
International Center for the Disabled, a Trustee of Carleton College and a Board Member of the Pew
Center on Global Climate Change. Mr. Wender is a Cum Laude graduate of Carleton College with a
B.A. in Political Science and has his M.B.A. from the Wharton School of the University of
Pennsylvania.
William M. Pruellage is a member of the board of directors of the buyer parent and is a senior
managing director of Castle Harlan, Inc. Prior to joining Castle Harlan in 1997, Mr. Pruellage
worked in the mergers and acquisitions department of Merrill Lynch & Co., where he assisted clients
in strategic planning and corporate mergers. He is currently a board member of Anchor Drilling
Fluids and Perkins & Marie Callenders Inc. He is a former director of RathGibson, Universal
Compression, American Achievement Corp., and Verdugt Holdings, LLC. Mr. Pruellage graduated Summa
Cum Laude from Georgetown University with a double major in Finance and International Business. He
is member of Beta Gamma Sigma Honor Society. Mr. Pruellage is a member of the board of the
Catholic Charities of the Archdiocese of New York.
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Richard Moore is a member of the board of directors of the buyer parent and is
currently serving his fourth term as Director of New York Stock Exchange Regulation. Mr. Moore is
a former State Treasurer of North Carolina where he held office for eight years. He is a former
corporate attorney, federal prosecutor, state legislator and head of North Carolinas Department of
Crime Control and Public Safety. Mr. Moore is an honors graduate of Wake Forest University and the
School of Law with a graduate degree in Accounting and Finance from the London School of Economics.
Richard Dell retired from our company on September 27, 2008. Mr. Dell remains a member of the
board of directors of the buyer parent. He had been our President and Chief Executive Officer and
a member of our board of directors since participating in our acquisition in partnership with Duane
Greenly and Wind Point Partners in January 2002 through the date of retirement. Mr. Dell also has
been a member of the board of directors of the buyer parent since June 1, 2004 and continues to
serve in that position. He has been a partner in Focus Associates, LLC, a business consulting
group, since November 2008. Prior to his employment by our Company, he served 27 years with Newell
Rubbermaid, where he began in Sales and Marketing and became President of two different divisions.
Prior to leaving Newell Rubbermaid, Mr. Dell was Group President. Mr. Dell serves on the Board of
Directors of Gander Mountain Company.
Robert Elman is a member of the board of directors of the buyer parent. Mr. Elman served as
Chairman and Chief Executive Officer of DESA International from its formation in 1985 until his
retirement in 1999. Mr. Elman, in a leveraged buyout, co-founded DESA Industries in 1969. In 1975,
AMCA International acquired DESA Industries and he became a Senior Group Vice President responsible
for the Consumer, Automotive products, Aerospace and Food Packaging Divisions. Prior to joining
DESA, Mr. Elman worked with ITT corp. and Singer Company in various management positions in the
United States and Europe. He received his Bachelors Degree in Mechanical Engineering from
Rensselaer Polytechnic Institute and his M.B.A. from Harvard Business School.
Edward LeBlanc is a member of the board of directors of the buyer parent. He served as interim
Chairman and Chief Executive Officer of Generac Power Systems from 2007 to 2008. Mr. LeBlanc
served as President, Residential and Commercial Division of Kidde, Inc. from September 2000 until
December 2005. Mr. LeBlanc served as President and CEO of Regent Lighting Corporation from 1997
until 2000. Prior to joining Regent, Mr. LeBlanc held a number of positions with Macklanburg-Duncan
over a 19-year period including President and Chief Operating Officer. Mr. LeBlanc also serves on
the Boards of IPS Inc., Pro Build Holdings, Inc. and Generac Power Systems Corporation.
Kenneth Roman is a member of the board of directors of the buyer parent. Mr. Roman was
Executive Vice President of American Express from 1989 to 1991. Mr. Roman spent 26 years with
Ogilvy & Mather Worldwide (and its parent, The Ogilvy Group). Mr. Roman was Chairman and Chief
Executive Officer of The Ogilvy Group from 1988 to 1989 and Chairman of Ogilvy & Mather Worldwide
from 1985 to 1989. Mr. Roman has served on a dozen corporate boardsincluding Compaq Computer,
Brunswick Corp. and Gartner Inc.
Audit Committee Financial Expert
The audit committee of CHATT Holding LLC, the buyer parent of ATT Holding Co., which we refer
to as the Audit Committee, effectively functions as our audit committee. The Audit Committee
consists of Edward LeBlanc (Chairman), Robert Elman, and William Pruellage. The Audit Committee of
CHATT Holding LLC has determined that Mr. LeBlanc is considered an audit committee financial
expert, as defined in Section 401 (h) of Regulation S-K. The Audit Committee has not determined
that Mr. LeBlanc qualifies as independent as defined in the listing standards of the New York
Stock Exchange.
Code of Ethics
The Audit Committee of CHATT Holdings LLC, the buyer parent of ATT Holding Co. has adopted a
code of ethics applicable to Ames True Temper, Inc. and its affiliates. The Audit Committee has
established a hotline where, on a confidential basis, anyone with concerns involving
internal controls, accounting or auditing matters, can contact a third-party law firm without
screening or review by
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management. A copy of the code of ethics is available on the Companys website at
www.amestruetemper.com.
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Item 11. | EXECUTIVE COMPENSATION |
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Compensation Discussion and Analysis
Overview of Compensation Program
Ames
True Temper, Inc.s (ATT) executive compensation program is carried out through
several compensation methods. The primary compensation components we use include the following:
| annual salary; | ||
| annual cash bonus incentive; and | ||
| various health, disability, retirement and other benefits, including post-termination arrangements. |
This Compensation Discussion and Analysis describes the total compensation for the following
Named Executive Officers (NEOs):
| Duane Greenly, President & Chief Executive Officer | ||
| David Nuti, Chief Financial Officer | ||
| Jean Gaudreault, President & General Manager, Garant | ||
| Lawrence Baab, Vice President of Marketing and Product Development | ||
| Daniel Yurovich, Senior Vice President of Operations |
General Compensation Philosophy and Objectives
In administering our executive compensation program, we look to accomplish the following
goals:
| correlate executive compensation with annual performance objectives (both financial and personal) to the achievement of short-term objectives and long-term growth for ATT and its stockholder; | ||
| promote individual initiative and achievement; | ||
| provide total compensation packages that are fair, reasonable and competitive with comparable industrial companies; and | ||
| attract and retain qualified executives who are critical to our long-term success. |
In establishing the weight of the various compensation components, our management believes
employees in higher ranks should have a higher proportion of their total compensation delivered
through pay-for-performance cash incentives.
Compensation Committee
Our
Compensation Committee (the Committee) has the authority to engage the services of
outside advisors, experts and others to assist the Committee with compensation matters. The
Committee is responsible for the following:
| Determining financial bonus targets for ATT for the upcoming fiscal year and the upper and lower thresholds of potential bonus that may be earned. | ||
| Setting personal objectives for the Chief Executive Officer. | ||
| Determining compensation for ATTs NEOs, including the Chief Executive Officer for the following year based on the current years audited financial results. | ||
| Approving bonus payouts consistent with the current year bonus policy and attainment of predetermined financial targets. |
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We believe the established goals require our executives and ATT to perform at a high level in
order to achieve targeted payouts. The targets are reset each year to facilitate the increase in
stockholder value.
In establishing total compensation, the Committee reviews each aspect of direct compensation
(i.e., salary and annual bonus) on both an individual component and a combined basis. Many other
benefits we offer, such as health benefits, disability benefits and retirement benefits, are
offered on the same basis to all employees. Specific consideration of the level of these benefits
is not generally included in the review. Benefits specific to an individual executive are reviewed
on a regular basis, but not necessarily as part of the annual compensation review.
Compensation Components
Annual Salary
The goal is to provide a salary level that fairly compensates individuals for the services
they perform and is competitive with current market rates. In general, we strive to maintain salary
levels ranging from moderately below to moderately above industry medians. Through the Committee,
we review and approve the base salaries of each NEO annually, taking into consideration the
following factors:
| the available salary budget, which is established based on recent salary data for manufacturing companies based on geographic area and the size of the Company determined by number of employees (taken from various survey sources); | ||
| the NEOs current and historical performance and contribution to our business, including achieved results of operations for which he is responsible and other key strategic accomplishments on pre-established goals within his area of responsibility; | ||
| the NEOs level and amount of responsibility within our business, focusing particularly on the individuals ability to impact bottom-line results, either directly or through the groups of people he manages and considering any change in the NEOs level of responsibility; | ||
| comparison to other internal salaries, with the goal of internal equity that reward positions with similar levels of responsibility; and | ||
| our salary range structure for various grade levels. |
The Committee completed its annual review of NEO salaries for calendar year 2009 in December
2008. Mr. Greenlys annual increase and promotional increase was retroactively approved back to
September 28, 2008. Increases in annual salary levels of NEOs ranged from 2.3% to 14.29% over the
prior years salary. Annual salary generally comprises 50.0% to 66.7% of the total compensation of
NEOs at target bonus levels.
Annual Cash Bonus Incentive
The
annual cash bonus incentive (2009 Bonus Plan) applies to all ATT salaried employees.
The financial target portion of the program is consistent across all participants, although payouts
differ based on the target bonus percentage applicable to the employees level within ATT. Further,
the NEOs and certain management level personnel have specific personal objectives in addition to
ATTs financial targets.
The Committee approves annual target EBITDA (Earnings Before Interest, Income Taxes,
Depreciation and Amortization) which is a non-GAAP measurement and working capital targets at the
conclusion of our annual financial planning process, based upon the Boards approval of our
financial plan and budget for the fiscal year. At such time, we assess the future internal and
external operating environment and develop projections of anticipated results. Each year the
Committee approves target EBITDA and working capital goals that are considered to be challenging
for us to achieve and generally reflect performance above the prior year.
Payments to NEOs under the 2009 Bonus Plan for fiscal year 2009 were dependent upon
achievement of specific financial targets related to EBITDA and working capital, as well as
personal objectives
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established for each NEO. These payments are a function of the NEOs annual salary multiplied
by the applicable target bonus percentage, which in turn is multiplied by a performance percentage.
The applicable target bonus percentage is determined for each NEO by the Committee and is a
function of the individuals level of responsibility and his ability to impact the overall results
of ATT. The applicable target bonus percentage is comprised of financial targets (67.0%, of which
45.0% relates to EBITDA targets and 22.0% relates to working capital targets) and personal
objectives (33.0%) for all NEOs with the exception of Mr. Gaudreault. In the case of Mr.
Gaudreault, 53.4% of his financial target is tied specifically to his operating units results,
33.3% is tied to personal objectives and 13.3% is tied to the overall consolidated financial
targets.
The performance percentage can range from 0.0% to 220.0% of the EBITDA target, 0.0% to 150.0%
of the working capital target and 0.0% to 125.0% of personal objectives. Achieving the financial
targets and personal objectives results in a performance percentage of 100.0%. A maximum of 173.25%
of the applicable target bonus percentage can be achieved by attaining the upper limit on all
components. Performance below the minimum performance level results in a zero performance
percentage and no incentive payments. The performance percentage increases above zero once the
minimum performance level is attained and increases as results increase above the minimum level. If
the maximum performance level is attained or surpassed, the performance percentage is capped to
generate a maximum payout of 173.25% of fiscal year salary for Mr. Greenly and 86.63% to 104.0% of
fiscal year salary for the other NEOs.
For fiscal 2009, ATT achieved a performance percentage for the EBITDA target of 145.03% and
for the working capital target the performance percentage was 150.0%. The NEOs achieved between
52.5% and 116.75% of their personal objectives.
The target bonus percentage for Mr. Greenly in 2009 was 100.0% of fiscal year salary and the
target bonus percentages for the other NEOs ranged from 50.0% to 60.0% of fiscal year salary. Based
on each NEOs achievements against the established target bonus percentage, Mr. Greenly attained a
bonus of 131.68% of fiscal year salary. The other four NEOs attained a range of 57.8% to 94.6% of
their fiscal year salaries for 2009. The amounts of the awards under the Plan are summarized in the
Summary Compensation Table.
Other Components of the Executive Compensation Program
ATT has in place the following broad-based employee benefit plans, in which the U.S. NEOs
participate on the same terms as U.S. non-executive employees:
| health insurance; | ||
| disability insurance; | ||
| term life insurance benefit equal to two times the individuals salary up to a maximum benefit of $300,000; | ||
| defined benefit pension plan (plan was frozen May 31, 2008); | ||
| 401(k) Savings Plan; and | ||
| non qualified 401(k) Savings Plan. |
Since various laws and regulations set limits on amounts allocable to a participant under the
defined benefit pension plan, ATT had established the Ames True Temper, Inc. Supplemental Executive
Retirement Plan (SERP) to provide supplemental retirement benefits on an unfunded basis to Mr.
Greenly (whose benefits under the defined benefit pension plan are restricted by IRS limits on
covered compensation for qualified defined benefit programs) upon retirement from ATT of an amount
equal to the difference between the annual retirement benefits permitted under the defined benefit
pension plan and the amount that would have been paid if the limitations imposed were at a level
stated in the SERP rather than the laws and regulation. The limits in the SERP are different for
each participant. Benefits under the SERP became
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vested upon the change of control to Castle Harlan in June 2004. Payments under the SERP are
subject to the same provisions as the regular pension plan.
On May 31, 2008, ATT froze benefit accruals for all salaried and certain hourly associates
under its domestic defined benefit plan (Pension Plan) and the SERP. Participants under the
Pension Plan accrued benefits through May 31, 2008 based on applicable years of benefit service and
eligible compensation through that date. Service after May 31, 2008 will count for vesting
purposes and toward meeting the eligibility requirements for commencing a pension benefit under the
Pension Plan, but will not count toward the calculation of the pension benefit amount.
Compensation earned after May 31, 2008 will similarly not count toward the determination of the
pension benefit amounts under the Pension Plan. In conjunction with the freezing of benefit
accruals under the Pension Plan, ATT froze benefit accruals under the SERP effective with the close
of business on May 31, 2008. On June 1, 2008, ATT provided certain participants in the Pension
Plan and SERP with enhanced matching contributions under an existing 401(k) defined contribution
pension plan (the 401(k) Plan). The eligibility for and amount of enhanced matching contributions
under the 401(k) Plan will depend on an employees combined years of benefit accrual service and
age under the Pension Plan projected through December 31, 2008. If the years of projected benefit
accrual service under the pension plan as of December 31, 2008 plus the participants age equal less
than 55, the matching contribution remained at 100% of the first 3% and 50% of the next 2% of the
employees deferrals. Detailed below as follows:
Age and Years of Service | Matching contributions | |
Less than 55
|
100% of the 1st 3% and 50% of the next 2% deferred | |
55, less than 60
|
100% of the 1st 5% deferred | |
60, less than 65
|
100% of the 1st 6% deferred | |
65, less than 70
|
116.66% of the 1st 6% deferred | |
70, less than 75
|
133.33% of the 1st 6% deferred | |
Greater than 75
|
150% of the 1st 6% deferred |
On June 1, 2008, ATT established a non qualified 401(k) for highly compensated individuals
to provide a vehicle for them to receive additional matching funds in excess of the 4% that they
were unable to receive in the 401(k) plan. Highly compensated employees who participate in the
401(k) plan are by various regulations capped at the amount of a maximum company contribution of
4%. Those highly compensated employees who otherwise meet the service and age requirements
specified above will receive a discretionary contribution to the non-qualified plan equal to the
difference between the maximum amount they could have received under the 401(k) plan and the amount
they would have been entitled to receive per the schedule listed above.
The benefits offered under the health, disability and life insurance programs are offered to
U.S. based NEOs on the same basis as they are offered to U.S. based non-executive employees. ATT
also provides to its NEOs monthly car allowances and car related expenses and a severance policy as
described below.
ATTs philosophy is to position the aggregate of these other elements of compensation at a
level that is competitive with our size and performance relative to other companies, as well as a
larger group of general industrial companies. ATT further believes these other aspects of the
executive compensation program are reasonable, competitive and consistent with the overall
executive compensation program in that they help us attract and retain the best leaders.
Employment/Severance Agreements
All NEOs have employment agreements that are for initial three-year periods and are
automatically renewable for twelve month increments thereafter, unless notice to terminate the
contract is provided. In the event of termination without cause of any NEO, severance payments from
seven months to 25 months of
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annual salary are triggered, in addition to payment of medical benefits at the active employee
rates during the severance period.
Mr. Greenly and Mr. Gaudreault completed their initial three-year terms and are in their third
renewal period. Mr. Nuti and Mr. Yurovich completed their initial three-year terms and are in
their first renewal period. Mr. Baab is in the initial three-year period of his agreement which
expires on April 21, 2011.
Executive Compensation Tables
Summary Compensation Table
Change | ||||||||||||||||||||||||||||
in Value | ||||||||||||||||||||||||||||
Annual | of | Change | ||||||||||||||||||||||||||
Fiscal | Cash | Regular | in Value | |||||||||||||||||||||||||
Year | Bonus | Pension | of SERP | All Other | ||||||||||||||||||||||||
Salary | Incentive | Benefit | Benefit | Compensation | ||||||||||||||||||||||||
NEO | Year | (a) | (b) | (c) | (d) | (e) | Total | |||||||||||||||||||||
D. Greenly |
2009 | $ | 407,692 | $ | 536,833 | $ | 29,668 | $ | 4,827 | $ | 33,610 | $ | 1,012,630 | |||||||||||||||
2008 | 329,808 | 247,668 | 29,701 | 6,067 | 24,335 | 637,579 | ||||||||||||||||||||||
2007 | 269,804 | 59,806 | 39,208 | 5,046 | 19,782 | 393,646 | ||||||||||||||||||||||
D. Nuti |
2009 | 264,424 | 214,799 | 4,254 | | 22,055 | 505,532 | |||||||||||||||||||||
2008 | 246,785 | 161,169 | 14,536 | | 16,651 | 439,141 | ||||||||||||||||||||||
2007 | 235,890 | 44,229 | 18,465 | | 17,007 | 315,591 | ||||||||||||||||||||||
J. Gaudreault |
2009 | 267,584 | 253,176 | | | 14,397 | 535,157 | |||||||||||||||||||||
2008 | 258,718 | 282,656 | | | 15,205 | 556,579 | ||||||||||||||||||||||
2007 | 257,448 | 39,010 | | | 14,286 | 310,744 | ||||||||||||||||||||||
L. Baab(f) |
2009 | 259,231 | 149,820 | | | 91,384 | 500,435 | |||||||||||||||||||||
D. Yurovich(f) |
2009 | 210,769 | 142,679 | 3,936 | | 20,840 | 378,224 |
(a) | Amounts shown in this column represent the fiscal year salary for each year. Fiscal 2009 was a 53 week year. Mr. Gaudreaults salary was converted to U.S. dollars using the exchange rate in effect on the last day of the fiscal year: Fiscal 2009: Canadian $1:00 = USD $0.92, Fiscal 2008: Canadian $1.00 = USD $0.97, Fiscal 2007: Canadian $1.00 = USD $1.00. | |
(b) | Amounts shown in this column represent the annual cash bonus incentive paid to each NEO based on achievement of financial targets and personal objectives for the fiscal year. | |
(c) | Amounts shown in this column represent the change in value of the regular pension benefit from July 1, 2008 to October 3, 2009 for Fiscal 2009, July 1, 2007 to June 30, 2008 for Fiscal 2008, July 1, 2006 to June 30, 2007 for Fiscal 2007. Mr. Gaudreault is not in the pension plan but is in the Registered Retirement Savings Plan (RRSP) in Canada. | |
(d) | Amounts shown in this column represent the change in value of the SERP benefit from July 1, 2008 to October 3, 2009, for Mr. Greenly. | |
(e) | Amounts shown in this column consist of items detailed in the All Other Compensation Table, automobile allowance and expense, matching contributions to the 401 (k) or RRSP plan and other expenses paid as noted in the table. | |
(f) | Fiscal 2009 is the first year that Mr. Baab and Mr. Yurovich are named executive officers. |
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All Other Compensation Table
Matching | ||||||||||||||||||||||||
Automobile | Contributions to | Non-Qualified | ||||||||||||||||||||||
Allowance | 401(k) or | 401(k) | Other | |||||||||||||||||||||
NEO | Year | and Expenses | RRSP | Contributions | (d) | Total | ||||||||||||||||||
D. Greenly |
2009 | $ | 11,100 | $ | 9,800 | $ | 12,710 | $ | | $ | 33,610 | |||||||||||||
2008 | 9,900 | 5,394 | 9,041 | | 24,335 | |||||||||||||||||||
2007 | 12,573 | 7,209 | | | 19,782 | |||||||||||||||||||
D. Nuti |
2009 | 11,100 | 9,615 | 1,340 | | 22,055 | ||||||||||||||||||
2008 | 9,900 | 6,252 | 499 | | 16,651 | |||||||||||||||||||
2007 | 12,887 | 4,120 | | | 17,007 | |||||||||||||||||||
J. Gaudreault (a)(b) |
2009 | 8,516 | 5,881 | | | 14,397 | ||||||||||||||||||
2008 | 8,884 | 6,321 | | | 15,205 | |||||||||||||||||||
2007 | 6,666 | 7,620 | | | 14,286 | |||||||||||||||||||
L. Baab (c) |
2009 | 11,100 | 7,476 | | 72,808 | 91,384 | ||||||||||||||||||
D. Yurovich (c) |
2009 | 9,900 | 10,033 | 907 | | 20,840 |
(a) | The conversion rate used for amounts included in this table for Mr. Gaudreault was the exchange rate in effect on the last day of the fiscal year: Fiscal 2009: Canadian $1.00= USD $0.92, Fiscal 2008: Canadian $1.00= USD $0.97, Fiscal 2007: Canadian $1.00 = USD $1.00. | |
(b) | Mr. Gaudreault does not participate in ATTs 401(k) plan; however, we do contribute to his RRSP. The RRSP functions much like a 401(k) plan in the form of matching contributions to the plan. | |
(c) | Fiscal 2009 is the first year that Mr. Baab and Mr. Yurovich are named executive officers. | |
(d) | The amount shown in this column relates to relocation reimbursements. |
Pension Benefits Table
Present | Payments | |||||||||||||||
Number of Years | Value of | During | ||||||||||||||
of Credited | Accumulated | Fiscal | ||||||||||||||
NEO | Plan Name | Service (b) | Benefits (b) | Year 2009 | ||||||||||||
D. Greenly |
Pension | 6.4 years | $ | 185,511 | $ | | ||||||||||
SERP | 6.4 years | 36,303 | | |||||||||||||
D. Nuti |
Pension | 2.3 years | 37,255 | | ||||||||||||
J. Gaudreault (a) |
RRSP | | | | ||||||||||||
L. Baab (a) |
Pension | | | | ||||||||||||
D. Yurovich |
Pension | 2.1 years | 27,985 | |
(a) | Mr. Gaudreault is not in the pension plan but is in the RRSP in Canada. Mr. Baab is not eligible for the pension plan based on his hire date. | |
(b) | The amounts shown for pension and SERP for number of years of credited service at the plan freeze date of May 31, 2008 and present value of accumulated benefits are at the pension and SERP valuation date of October 3, 2009, and reflect a discount rate of 5.50%. |
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Potential Payments Upon Termination Table
NEO | Severance (a) | Benefits (a) | ||||||
D. Greenly Termination without cause |
833,333 | | ||||||
D. Nuti Termination without cause |
284,375 | | ||||||
J. Gaudreault (b) Termination without cause |
155,970 | 2,006 | ||||||
L. Baab Termination without cause |
277,063 | | ||||||
D. Yurovich Termination without cause |
121,917 | |
(a) | Mr. Greenlys severance period is 25 months. Mr. Nuti and Mr. Baabs severance periods are 13 months. Mr. Gaudreault and Mr. Yurovichs severance periods are 7 months. | |
(b) | The conversion rate used for amounts included in this table for Mr. Gaudreault was the exchange rate in effect on the last day of the fiscal year: Fiscal 2009: Canadian $1.00 = USD $0.92, Fiscal 2008: Canadian $1.00 = USD $0.97, Fiscal 2007: Canadian $1.00 = USD $1.00. |
Interaction of Elements of Compensation
Many of the benefits ATT offers are either directly or indirectly impacted by the NEOs level
of salary. The annual bonus incentive program is directly tied to the level of the individuals
salary because the payment is based on a percentage of salary. The relative amount of life
insurance and disability insurance is a function of the individuals salary, as is the amount
contributed to the individuals 401(k) account, although that is also a function of the percentage
of salary the individual chooses to contribute to the plan and IRS maximum contribution
limitations.
Director Compensation
Of the current Board of Directors (Board), only Mr. Greenly is a salaried employee of ATT.
Mr. Greenly was appointed to the Board on September 27, 2008. For fiscal year 2009, all Board
members receive annual compensation of $35,000 and reimbursement of Board-related travel and
incidental expenses except for employee Board members and Castle Harlan employees.
Conclusion
In addition to being consistent and linked to ATTs performance, our compensation plans are
competitive in the marketplace and allow us to attract and retain the best and brightest employees.
We also believe the design of our compensation plans and their relative mix successfully motivates
our NEOs.
All aspects of compensation are performance driven and align both the short and long-term
interests of employees and stockholders. We will continue to focus on these factors and on
maintaining a compensation system that will encourage maximization of long-term value of ATT.
Compensation Committee Report
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis
with management. Based on this review and discussion, the Committee recommended to the Board of
Directors that the Compensation Discussion and Analysis be included in ATTs Annual Report on Form
10-K for the fiscal year ended October 3, 2009.
SUBMITTED BY THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS OF CHATT HOLDINGS LLC:
John Castle
Justin Wender
William Pruellage
Ken Roman
Justin Wender
William Pruellage
Ken Roman
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Compensation Committee Interlocks and Insider Participation
Other than Messrs. Castle, Wender and Pruellage, there are no compensation committee
interlocks (i.e., no executive officer of either the issuer or our parent serves as a member of the
board or the compensation committee of another entity which has an executive officer serving on the
board of either the issuer or our parent or on the compensation committee thereof).
Employment Agreements
We have employment agreements with Duane Greenly, David Nuti, Jean Gaudreault, Lawrence Baab
and Daniel Yurovich. The term of each executives agreement is three years and will be
automatically renewed for consecutive one-year periods, unless within 60 days prior to the
expiration of the employment term, either party to the agreement provides notice of its election to
terminate the agreement. Currently salaries are as follows; Mr. Greenlys is $400,000, Mr. Nutis
is $262,500, Mr. Gaudreaults is $290,628 (CAD) Mr. Baabs is $255,750 and Mr. Yurovichs is
$209,000. Their agreements provide that their annual salary is subject to increase from time to
time, solely at our discretion. During the employment period, each executive is eligible to receive
a cash bonus based on the achievement of budgeted performance goals, as well as additional bonuses
based on the achievement of performance goals and objectives approved by the buyer parents board
of directors. Each executive is eligible to receive employee benefits comparable to the benefits
provided to our other senior executive officers and to the benefits provided to him or her
immediately prior to the date of his or her agreement and will be reimbursed by us for any business
expenses reasonably incurred.
With respect to each of the executives, in the event of a termination of employment by reason
of death or permanent disability, as defined in the
agreements, by us for due cause, as
defined in the agreements, or by the executive voluntarily, we will have no further obligation to
the executive (or the executives estate) except for salary and benefits accrued through the
termination date. In the case of a termination based on permanent disability, the executive will
also be entitled to any benefits provided under our disability insurance policy. If the executive
is terminated by us without due cause or if he or she terminates
employment for good reason, as
defined in the agreements for the period specified in the applicable executives employment
agreement, then the executive will be entitled to receive severance pay and benefits as specified
in the applicable executives employment agreement, payable at our regular payroll intervals. For
two years after the termination of employment, each executive will be subject to a non-competition
and non-solicitation restriction.
Employment Plans
Retirement Plans
Effective January 14, 2002, we established the Ames True Temper, Inc. Pension Plan and Trust
which we refer to as the pension plan. Assets necessary to fund the pension plan were transferred
from the Lawn and Garden Pension Plan, formerly known as the USI Group Pension Plan, which we refer
to as the lawn and garden plan. Accumulated years of benefit service under the lawn and garden plan
are included in the benefit formula of the pension plan, which generally covers employees who have
completed either one year of service or one hour of service, depending upon his or her location of
employment.
Subject to certain exceptions, most hourly employees will receive a pension at normal retirement
age (which is generally the later of age 65 and the completion of five years of service) equal to
the product of his or her years of benefit service and the applicable multiplier, subject to offset
in certain instances for payments that are required by law (other than social security payments).
The applicable multiplier is generally between $11.00 and $37.50, but will vary depending upon,
among other things, the employees work location, years of benefit service and the date the
employee last worked for ATT. Eligible salaried employees and certain other hourly employees are
entitled to a pension at the normal retirement age of 65 equal to 1.20% of average monthly
compensation, as defined below, up to the social security integration level times years of benefit
service, plus 1.85% of average monthly compensation, in excess of the social security integration
level times years of benefit service, up to a total of 30 years of benefit service. Average
monthly compensation is the highest average monthly salary received in any 60 consecutive
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months in
the last 120 months. Compensation includes all wages paid by us, including bonuses,
before-tax contributions made to the Ames True Temper, Inc. Retirement Savings and Investment Plan
and salary reduction contributions to any Section 125 Plan, but excludes income realized under any
incentive plan or stock option plan, severance pay in excess of six months, welfare benefits,
accrued vacation for periods in excess of one year, moving expenses, taxable fringe benefits,
reimbursements and other expense allowances and deferred compensation. This compensation is
comparable to the Annual Compensation shown in the Summary Compensation Table. After completing
five years of service, an employee whose employment with the participating company has terminated
is entitled to a benefit, as of the employees normal retirement date, equal to the benefit earned
to the date of termination of employment, or an actuarially reduced benefit commencing at any time
after age 55 or 60, depending upon the employees work location, if the participant is eligible for
early retirement under the pension plan. Certain death benefits are available to eligible surviving
spouses of participants.
Since various laws and regulations set limits on the amounts allocable to a participant under
the pension plan, we had established the Ames True Temper, Inc. Supplemental Executive Retirement
Plan, or SERP. The SERP provides retirement benefits on an unfunded basis to Mr. Greenly and five
former executives (whose benefits under the pension plan would be restricted by the limits) upon
retirement from our company of an amount equal to the difference between the annual retirement
benefits permitted under the pension plan and the amount that would have been paid if the
limitations imposed were at a level stated in the SERP rather than the laws and regulations. The
limits in the SERP are different for each participant. Benefits under the SERP generally become
100% vested after five years of service, at early retirement, at normal retirement, upon death,
upon disability or upon a change in control, as defined in the SERP.
Item 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
All of our issued and outstanding capital stock is held by our parent. Our parents
capitalization consists of 1,600,000 shares of Class A Common Stock, $.0001 par value per share,
300,000 shares of Class B Common Stock, $.0001 par value per share and 100,000 shares of Series A
Preferred Stock, $.0001 par value per share. Our parent is a direct wholly owned subsidiary of
buyer, and buyer is a direct wholly owned subsidiary of buyer parent and approximately 87% and 13%,
respectively, of the equity interests of buyer parent are owned by CHAMES Holdings I LLC and its
affiliates (an affiliate of Castle Harlan), and certain members of management.
The following table sets forth information with respect to the beneficial ownership of buyer
parents equity interests by:
| each person who is known by us to beneficially own 5% or more of buyer parents outstanding equity; | ||
| each member of buyer parents board of directors; | ||
| each of our executive officers named in the table under Item 11Executive Compensation; and | ||
| all members of buyer parents board of directors and our executive officers as a group. |
Beneficial ownership is determined in accordance with the rules of the SEC. Accordingly, the
following table does not reflect certain Class B management incentive units of buyer parent that
are subject to vesting or units that have been repurchased from certain departed members of
management. To our knowledge, each of the holders of units of ownership interests listed below has
sole voting and investment power as to the units owned unless otherwise noted. The holders of Class
A units will not ordinarily have the right to vote on matters to be voted on by unitholders.
Holders of Class A and Class B units will also have different rights with respect to distributions.
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Number of | Percentage of | Number of | Percentage of | |||||||||||||
Class | Total Class | Class | Total Class | |||||||||||||
Name and Address of Beneficial Owner | A Units | A Units (%) | B Units | B Units (%) | ||||||||||||
CHAMES Holdings I LLC(1)(2) |
961,564 | 87.03 | % | 961,564 | 87.03 | % | ||||||||||
John K. Castle(1)(3) |
961,564 | 87.03 | % | 961,564 | 87.03 | % | ||||||||||
Richard Dell(1) |
60,398 | 5.47 | % | 60,398 | 5.47 | % | ||||||||||
Duane Greenly(1) |
22,706 | 2.06 | % | 22,706 | 2.06 | % | ||||||||||
David Nuti(1) |
1,000 | * | 1,000 | * | ||||||||||||
Jean Gaudreault(1) |
4,723 | * | 4,723 | * | ||||||||||||
Lawrence Baab(1) |
150 | * | 150 | * | ||||||||||||
Daniel Yurovich(1) |
700 | * | 700 | * | ||||||||||||
Justin B. Wender(1) |
0 | * | 0 | * | ||||||||||||
William M. Pruellage(1) |
0 | * | 0 | * | ||||||||||||
Richard Moore(1) |
0 | * | 0 | * | ||||||||||||
Robert Elman(1) |
1,000 | * | 1,000 | * | ||||||||||||
Edward LeBlanc(1) |
500 | * | 500 | * | ||||||||||||
Kenneth Roman(1) |
2,000 | * | 2,000 | * | ||||||||||||
All directors and executive officers as a
group (including those listed above) |
1,078,100 | 97.58 | % | 1,078,100 | 97.58 | % |
* | Denotes beneficial ownership of less than 1% of the class of units. | |
(1) | The address for CHP IV and Messrs. Castle, Pruellage and Wender is c/o Castle Harlan, Inc., 150 East 58th Street, New York, New York 10155. The address for Mr. Greenly, our other executive officers named in the table and Messrs. Dell, Elman, LeBlanc, Roman and Moore is 465 Railroad Avenue, Camp Hill, Pennsylvania 17011. | |
(2) | CHP IV is the direct parent of CHAMES Holdings I LLC and includes units of ownership interests held by related entities and persons, all of which may be deemed to be beneficially owned by CHP IV. CHP IV disclaims beneficial ownership of these units. | |
(3) | John K. Castle, a member of buyer parents board of directors, is the controlling stockholder of Castle Harlan Partners IV, G.P., Inc., the general partner of the general partner of CHP IV, the indirect parent of the buyer parent and as such may be deemed a beneficial owner of the units of the buyer parent owned by CHP IV and its affiliates. Mr. Castle disclaims beneficial ownership of all units in excess of his proportionate partnership share of CHP IV. |
Item 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS |
Management Agreement
On June 28, 2004, at the closing of the acquisition, we entered into a management agreement
with Castle Harlan, Inc., as manager, under which Castle Harlan provides business and
organizational strategy, financial and investment management, advisory, merchant and investment
banking services to the buyer parent, the buyer, our parent and us. As compensation for those
services, we will pay to Castle Harlan (1) for services rendered during the first year of the term
of the agreement, a management fee equal to 1.5% of the aggregate equity contributions made upon
closing of the acquisition by CHP IV and its affiliates (including their limited partners), payable
on June 28, 2005, (2) for services rendered during the second year of the term of the agreement, a
management fee equal to 1.5% of the aggregate equity contributions made on June 28, 2004 by CHP IV
and its affiliates (including their limited partners), payable quarterly in advance and (3) for
services rendered after the second full year of the agreement, an annual management fee equal to
3.0% of the aggregate equity contributions made on June 28, 2004 by CHP IV and its affiliates
(including their limited partners), payable quarterly in advance. Under the management agreement,
we will also pay Castle Harlan, for services rendered in connection with the transactions, a
one-time transaction fee, payable on June 28, 2004, equal to 3% of the aggregate equity
contributions made on June 28, 2004 by CHP IV and its affiliates (including their limited
partners). In addition, if at any time after the closing of the acquisition, CHP IV or its
affiliates (including their limited partners) make any additional equity
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contributions to any of us, our parent, the buyer or the buyer parent, we will pay Castle
Harlan an annual management fee equal to 3% of each such equity contribution. We will also pay or
reimburse Castle Harlan for all out-of-pocket fees and expenses incurred by Castle Harlan and any
advisors, consultants, legal counsel and other professionals engaged by Castle Harlan to assist in
the provision of services under the management agreement. During fiscal 2009, we recorded fees and
expenses of $3,431 related to Castle Harlans management agreement.
The management agreement is for an initial term expiring December 31, 2011 and is subject to
renewal for consecutive one-year terms unless terminated by Castle Harlan or us upon 90 days notice
prior to the expiration of the initial term or any annual renewal. We also indemnify the manager,
its officers, directors and affiliates from any losses or claims suffered by them as a result of
services they provide us. Payment of management fees will be subject to restrictions contained in
our Revolving Loan.
Management Equity
In connection with the acquisition, certain members of management, including our executive
officers, made an equity investment in the aggregate amount of approximately $14.0 million in buyer
parent, through the exchange of shares of our parents capital stock held by management and, in a
few cases, certain members of management that did not hold equity in our parent purchased an equity
interest in buyer parent for cash. During fiscal 2009, new or promoted members of Ames True Temper
management purchased equity units of CHATT Holdings LLC.
Independent Directors
In accordance with the definition of independent directors under Rule 4200 of the NASDAQ
Stock Market, the following directors have no direct or indirect material relationship with us:
Robert Elman, Edward LeBlanc and Kenneth Roman.
Review, Approval or Ratification of Transactions with Related Persons
Our management determines which transactions or relationships should be referred to the Audit
Committee for consideration. The Audit Committee then determines whether to approve, ratify,
revise or terminate a related person transaction on a case by case basis. We have not adopted a
written policy for the review of transactions with related persons.
Item 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
The Audit Committee of the Board of Directors on April 12, 2007, appointed as the Companys
principal accounting firm, the independent registered accounting firm of Deloitte & Touche LLP, the
member firms of Deloitte Touche Tohmatsu, and their respective
affiliates (collectively, Deloitte
& Touche). Deloitte & Touche has served as the Companys principal accounting firm for the fiscal
years ended October 3, 2009 and September 27, 2008.
The Audit Committee approves all services rendered to us by Deloitte & Touche and all fees
paid to Deloitte & Touche. The Audit Committee requires that management obtain the prior approval
of the Audit Committee for all audit and permissible non-audit services to be provided by Deloitte
& Touche. The Audit Committee considers and approves anticipated audit and permissible non-audit
services to be provided by Deloitte & Touche and during the year and estimated fees. The Audit
Committee will not approve non-audit engagements that would violate rules of the Securities and
Exchange Commission or impair the independence of Deloitte & Touche.
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For the fiscal years ended October 3, 2009 and September 27, 2008, aggregate fees,
including expenses billed to us by Deloitte & Touche were as follows:
Fiscal | Fiscal | |||||||
2009 | 2008 | |||||||
Audit Fees(1) |
$ | 1,041,002 | $ | 1,245,140 | ||||
Tax Fees(2) |
27,036 | 21,000 | ||||||
Audit-Related Fees(3) |
82,160 | 39,498 |
(1) | Includes aggregate fees and expenses for professional services performed in conjunction with: fiscal 2009, the audit of our financial statements for the fiscal year ended October 3, 2009 and reviews of interim financial statements for the quarterly periods ended December 27, 2008, March 28, 2009 and June 27, 2009; fiscal 2008, the audit of our financial statements for fiscal year ended September 27, 2008 and reviews of interim financial statements for the quarterly periods ended December 29, 2007, March 29, 2008 and June 28, 2008. | |
(2) | For fiscal 2009 and 2008, tax fees consist principally of fees related to tax compliance. | |
(3) | For 2009, audit-related fees include fees and expenses for professional services performed in conjunction with the review of the responses to an SEC comment letter received in June 2009 as well as fees related to a statutory audit performed at a subsidiary in the Other segment. For fiscal 2008, audit-related fees consist primarily of fees related to a statutory audit performed at a subsidiary in the Other segment. |
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PART IV
Item 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES |
(a) The following documents are filed as part of this Form 10-K:
1. Financial Statements:
A list of the Consolidated Financial Statements, related notes and Report of Independent
Registered Public Accounting Firm is set forth in Item 8 of this report on Form 10-K.
2. Financial Statement Schedules:
Schedule II Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable accounting regulations of
the Securities and Exchange Commission are not required under the related instructions, are
inapplicable, are not material, or the information called for thereby is otherwise included in the
financial statements and, therefore, have been omitted.
3. Index to Exhibits:
Each management contract or compensatory plan or arrangement filed as an exhibit to this
report is identified in this index to exhibits with a + sign following the exhibit number.
Exhibit | ||||
Number | Description | |||
2.1 | Agreement and Plan of Merger, dated as of April 7, 2006, by and among Acorn Products, Inc., Ames True Temper, Inc. and ATTUT Holdings, Inc. |
G | ||
3.1 | Certificate of Incorporation of Ames True Temper, Inc. |
A | ||
3.2 | By-laws of Ames True Temper, Inc. |
A | ||
3.3 | Certificate of Incorporation of ATT Holding Co. |
A | ||
3.4 | By-laws of ATT Holding Co. |
A | ||
4.1 | Indenture dated as of June 28, 2004 among Ames True Temper, Inc., as Issuer, ATT Holding Co., as Guarantor and The Bank of New York, as
Trustee |
A | ||
4.2 | Form of 10%
Senior Subordinated Notes due 2012 (included in Exhibit 4.1) |
A | ||
4.3 | Registration Rights Agreement, dated June 28, 2004, among Ames True Temper, Inc., ATT Holding Co. and the Initial Purchasers |
A | ||
4.4 | Indenture, dated as of January 14, 2005, among Ames True Temper, Inc., as Issuer, ATT Holding Co., as Guarantor and The Bank of New
York, as Trustee |
C | ||
4.5 | Form of Senior Floating Rate Notes due 2012 (included in Exhibit 4.4) |
C | ||
4.6 | Registration Rights Agreement, dated January 14, 2005, among Ames True Temper, Inc., ATT Holding Co. and the Initial Purchasers |
C | ||
10.1 | Stock Purchase Agreement, dated as of June 21, 2004, by and among ATT Holding Co., the Warrantholders of ATT Holding Co., Windpoint
Investors V, L.P., as Sellers Representative, CHATT Holdings LLC,
as Buyer Parent, and CHATT Holdings Inc., as Buyer. |
B | ||
10.2 | Credit Agreement, dated as of June 28, 2004, by and among Ames True Temper, Inc., ATT Holding Co., the lenders from time to time party
thereto (each a Lender and collectively, the Lenders), Bank
of America, N.A., in its capacity as Administrative Agent, Swing
Line Lender and L/C Issuer, General Electric Capital Corporation, as
Documentation Agent, Wachovia Bank, National Association, as
Syndication Agent and Banc of America Securities LLC, as Sole Lead
Arranger and Sole Book Manager |
B |
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Exhibit | ||||
Number | Description | |||
10.2.1 | Amendment No. 1 to Credit Agreement, dated January 14, 2005, by and among Ames True Temper, Inc., ATT Holding Co., as a guarantor, the banks, financial institutions and other institutional lenders parties to the Credit Agreement dated as of June 28, 2004, and Bank of America, N.A., as administrative agent. | C | ||
10.2.2 | Amendment No. 2 to Credit Agreement, dated December 1, 2005, by and among Ames True Temper, Inc., ATT Holding Co., as a guarantor, the banks, financial institutions and other institutional lenders parties to the Credit Agreement dated as of June 28, 2004, and Bank of America, N.A., as administrative agent. | D | ||
10.2.3 | Amended and Restated Credit Agreement, dated as of April 7, 2006, among Ames True Temper, Inc., Acorn Products, Inc., UnionTools, Inc., and Ames True Temper Properties, Inc., as borrowers, ATT Holding Co., as a guarantor, Bank of America, N.A., as administrative agent, swing line lender and l/c issuer, and the other lenders party thereto. | H | ||
10.3 | Security Agreement, dated as of June 28, 2004, made by Ames True Temper, Inc., the other persons listed on the signature pages thereof to Bank of America, N.A., as Collateral Agent | B | ||
10.4 | Intellectual Property Security Agreement, dated June 28, 2004, made by the persons listed on the signature pages thereof in favor of Bank of America, N.A., as Collateral Agent | B | ||
10.5 | Subsidiary Guaranty, dated as of June 28, 2004, made by the persons listed on the signature pages thereof under the caption Subsidiary Guarantor in favor of the Secured Parties | B | ||
10.6 | Charge of Shares in respect of the shares of True Temper Limited made on June 28, 2004 between Ames True Temper, Inc. and Bank of America, N.A., as security trustee. | B | ||
10.9+ | Amended and Restated Employment Agreement, dated June 28, 2004, between Ames True Temper, Inc. and Duane R. Greenly | B | ||
10.9.1+ | Amendment to Employment Agreement, dated as of February 4, 2009, between Ames True Temper, Inc. and Duane R. Greenly | J | ||
10.12+ | Management Agreement, dated June 28, 2004, by and among Castle Harlan, Inc., ATT Holding Co., Ames True Temper, Inc. and CHATT Holdings Inc. | B | ||
10.13+ | Amended and Restated Employment Agreement, dated June 28, 2004, between Ames True Temper, Inc. and Jean Gaudreault | F | ||
10.17+ | Amended and Restated Employment Agreement, dated May 5, 2006, between Ames True Temper, Inc. and David M. Nuti | I | ||
10.18 | Supplemental Indenture, to the Indenture, dated June 28, 2004, by and among Ames True Temper, Inc., ATT Holding Co. and The Bank of New York, as trustee, such Supplemental Indenture dated as of December 17, 2007, and among Ames U.S. Holding Corp, Ames Holdings, Inc., Ames True Temper Properties, Inc., Ames True Temper, Inc., ATT Holding Co. and The Bank of New York, as trustee | K | ||
10.19 | Supplemental Indenture to the Indenture, dated January 14, 2005, by and among the Company, ATT Holding Co. and The Bank of New York, as trustee, such Supplemental Indenture dated as of December 17, 2007 and among Ames U.S. Holding Corp., Ames Holdings, Inc., Ames True Temper Properties, Inc. Ames True Temper, Inc., ATT Holding Co. and The Bank of New York, as trustee | K | ||
10.20+ | Employment Agreement, dated April 21, 2008, between Ames True Temper, Inc. and Lawrence D. Baab | M |
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Exhibit | ||||
Number | Description | |||
10.21+ | Separation Agreement and General Release, dated September 18, 2008, between Ames True Temper, Inc. and Richard C. Dell | L | ||
12.1* | Statement Regarding Computation of Ratios | |||
14.1 | Code of Ethics | K | ||
21.1 | List of subsidiaries of the Company | K | ||
31.1* | Certification of Chief Executive Officer pursuant to Section 302 and 404 of the Sarbanes-Oxley Act of 2002 | |||
31.2* | Certification of Chief Financial Officer pursuant to Section 302 and 404 of the Sarbanes-Oxley Act of 2002 | |||
32.1* | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act 2002 | |||
32.2* | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act 2002 | |||
* | Filed herewith | |||
(A) | Previously filed as an exhibit to the Registrants Registration Statement on Form S-4 (Reg. No. 333-118086) filed with the SEC on August 10, 2004. | |||
(B) | Previously filed as an exhibit to Amendment No. 1 to the Registrants Registration Statement on Form S-4 (Reg. No. 333-118086) filed with the SEC on October 7, 2004 | |||
(C) | Previously filed as an exhibit to the Registrants Current Report on Form 8-K filed with the SEC on January 18, 2005 | |||
(D) | Previously filed as an exhibit to the Registrants Current Report on Form 8-K filed with the SEC on December 7, 2005 | |||
(E) | Previously filed as an exhibit to the Registrants Current Report on Form 8-K filed with the SEC on March 28, 2005 | |||
(F) | Previously filed as an exhibit to the Registrants Annual Report on Form 10-K for the fiscal year ended October 1, 2005, filed with the SEC on December 22, 2005 | |||
(G) | Previously filed as an exhibit to the Registrants Current Report on Form 8-K filed with the SEC on April 7, 2006 | |||
(H) | Previously filed as an exhibit to the Registrants Current Report on Form 8-K filed with the SEC on April 14, 2006 | |||
(I) | Previously filed as an exhibit to the Registrants Annual Report on Form 10-K for the fiscal year ended September 30, 2006, filed with the SEC on December 22, 2006 | |||
(J) | Previously filed as an exhibit to the Registrants Quarterly Report on Form 10-Q for the fiscal quarter ended December 27, 2008, filed with the SEC on February 6, 2009 | |||
(K) | Previously filed as an exhibit to the Registrants Annual Report on Form 10-K for the fiscal year ended September 29, 2007, filed with the SEC on December 28, 2007 | |||
(L) | Previously filed as an exhibit to the Registrants Annual Report on Form 10-K for the fiscal year ended September 27, 2008, filed with the SEC on December 22, 2008 | |||
(M) | Previously filed as an exhibit to the Registrants Quarterly Report on Form 10-Q for the fiscal quarter ended March 29, 2008, filed with the SEC on May 13, 2008 |
(b) | Reference is made to Item 15(a)(3) above. | |
(c) | Reference is made to Item 15(a)(2) above. |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto
duly authorized.
Ames True Temper, Inc. |
||||
Date: December 14, 2009 | By: | /s/ Duane R. Greenly | ||
Duane R. Greenly | ||||
President and Chief Executive Officer (Authorized Signatory) |
||||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below, by the following persons on behalf of the registrant and in the capacities and on the
dates indicated.
Signature | Title | |||
/s/ Duane R. Greenly
|
President and Chief Executive Officer | |||
(Principal Executive Officer) | ||||
Dated: December 14, 2009 |
||||
/s/ David M. Nuti
|
Chief Financial Officer | |||
(Principal Financial Officer) | ||||
Dated: December 14, 2009 |
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SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
For the Fiscal years Ended October 3, 2009, September 27, 2008 and September 29, 2007.
(Dollar amounts in thousands)
(Dollar amounts in thousands)
Balance at | Additions charged | |||||||||||||||||||
beginning of | to costs and | Balance at | ||||||||||||||||||
Account receivable allowances | period | expenses | Deductions | Other (1) | end of period | |||||||||||||||
Fiscal year ended October 3, 2009 |
$ | 18,478 | 32,341 | (32,571 | ) | 34 | $ | 18,282 | ||||||||||||
Fiscal year ended September 27, 2008 |
$ | 20,617 | 43,693 | (45,739 | ) | (93 | ) | $ | 18,478 | |||||||||||
Fiscal year ended September 29, 2007 |
$ | 17,491 | 40,626 | (37,844 | ) | 344 | $ | 20,617 |
Balance at | ||||||||||||||||||||
beginning of | Balance at | |||||||||||||||||||
Valuation allowance of deferred tax asset | period | Additions | Deductions | Other | end of period | |||||||||||||||
Fiscal year ended October 3, 2009 |
$ | 34,924 | 18,764 | (15,605 | ) | | $ | 38,083 | ||||||||||||
Fiscal year ended September 27, 2008 |
$ | 19,530 | 15,394 | | | $ | 34,924 | |||||||||||||
Fiscal year ended September 29, 2007 |
$ | 7,548 | 11,982 | | | $ | 19,530 |
(1) | Primarily the impact of currency change for each fiscal year. |
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