Attached files
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8-K/A - FORM 8-K/A OCT 19 2011 - CREE, INC. | form8ka101911.htm |
EX-99.4 - EXHIBIT 99.4 - CREE, INC. | exhibit99_4.htm |
EX-23.1 - EXHIBIT 23.1 - CREE, INC. | exhibit23_1.htm |
EX-99.5 - EXHIBIT 99.5 - CREE, INC. | exhibit99_5.htm |
EX-99.3 - EXHIBIT 99.3 - CREE, INC. | exhibit99_3.htm |
EX-99.6 - EXHIBIT 99.6 - CREE, INC. | exhibit99_6.htm |
EX-23.2 - EXHIBIT 23.2 - CREE, INC. | exhibit23_2.htm |
Exhibit 99.2
RUUD LIGHTING, INC. AND ITS SUBSIDIARIES | |
Racine, Wisconsin
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CONSOLIDATED FINANCIAL STATEMENTS
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October 30, 2010
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TABLE OF CONTENTS
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PAGE
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INDEPENDENT AUDITORS' REPORT.....................................................................................................
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1
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FINANCIAL STATEMENTS
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Consolidated Balance Sheet...............................................................................................................
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2
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Consolidated Statement of Operations............................................................................................. |
4
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Consolidated Statement of Stockholders' Equity............................................................................ |
5
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Consolidated Statement of Cash Flows............................................................................................ |
6
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Notes to Consolidated Financial Statements................................................................................... | 7 |
Independent Auditor’s Report
Board of Directors and Shareholders
Ruud Lighting, Inc. and its subsidiaries
Racine, Wisconsin
We have audited the accompanying consolidated balance sheet of Ruud Lighting, Inc. and its subsidiaries as of October 30, 2010, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Ruud Lighting, Inc. and its subsidiaries as of October 30, 2010, and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
/s/ Clifton Gunderson LLP
Racine, Wisconsin
January 27, 2011, except for the last paragraph of Note 18,
as to which the date is August 17, 2011
- 1 -
RUUD LIGHTING, INC. AND ITS SUBSIDIARIES
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CONSOLIDATED BALANCE SHEET
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October 30, 2010
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ASSETS
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CURRENT ASSETS
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Cash and cash equivalents
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$ | 2,841,374 | ||
Accounts and notes receivable
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Trade, less allowance for doubtful accounts of $224,406
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23,824,682 | |||
Other
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1,026,373 | |||
Notes receivable from stockholders
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4,491,330 | |||
Refundable income taxes
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372,241 | |||
Inventories
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36,943,665 | |||
Prepaid expenses
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1,271,152 | |||
Total current assets
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70,770,817 | |||
INVESTMENTS
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Cash value of life insurance
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882,308 | |||
PROPERTY AND EQUIPMENT, NET
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29,537,950 | |||
OTHER ASSETS
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Patents, less accumulated amortization of $1,465,201
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2,815,279 | |||
Other
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39,349 | |||
Total other assets
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2,854,628 | |||
TOTAL ASSETS
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$ | 104,045,703 |
- 2 -
LIABILITIES AND STOCKHOLDERS' EQUITY
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CURRENT LIABILITIES
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Checks issued in excess of available bank balances
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$ | 2,071,216 | ||
Accounts payable
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14,456,999 | |||
Current maturities of long-term debt
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1,763,460 | |||
Note payable to bank
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23,964,000 | |||
Notes payable to stockholders
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2,200,000 | |||
Accrued income taxes
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703,333 | |||
Other current liabilities
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7,458,069 | |||
Total current liabilities
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52,617,077 | |||
LONG-TERM LIABILITIES
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Long-term debt, less current maturities above
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8,911,060 | |||
Total liabilities
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61,528,137 | |||
STOCKHOLDERS' EQUITY
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Common stock, par value $.01 per share;
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Class A Voting - 3,500 shares authorized;
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3,404 shares issued and outstanding
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34 | |||
Class B Nonvoting - 196,500 shares authorized;
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170,200 shares issued and outstanding
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1,702 | |||
Additional paid-in capital
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5,998,264 | |||
Cumulative translation adjustment
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1,153,900 | |||
Retained earnings
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35,363,666 | |||
Total stockholders' equity
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42,517,566 | |||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
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$ | 104,045,703 | ||
The accompanying notes are an integral part of the consolidated financial statements.
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- 3 -
RUUD LIGHTING, INC. AND ITS SUBSIDIARIES
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CONSOLIDATED STATEMENT OF OPERATIONS
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Year Ended October 30, 2010
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NET SALES
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$ | 148,917,925 | ||
COST OF SALES
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103,914,964 | |||
Gross profit
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45,002,961 | |||
SELLING AND ADMINISTRATIVE EXPENSES
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32,354,161 | |||
Income from operations
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12,648,800 | |||
OTHER INCOME (EXPENSE)
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Interest income
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157,077 | |||
Interest expense
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(1,705,239 | ) | ||
Gain on sale of component
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16,193,223 | |||
Miscellaneous expense
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(127,007 | ) | ||
Income before income taxes
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27,166,854 | |||
PROVISION FOR INCOME TAXES
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1,470,574 | |||
NET INCOME
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$ | 25,696,280 | ||
The accompanying notes are an integral part of the consolidated financial statements. |
- 4 -
RUUD LIGHTING, INC. AND ITS SUBSIDIARIES
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CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
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Year Ended October 30, 2010
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Cumulative
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Common Stock
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Additional
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Retained
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Translation
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Class A - Voting
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Class B - Nonvoting
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Paid-in
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Total
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Earnings
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Adjustment
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Shares
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Amount
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Shares
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Amount
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Capital
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BALANCE, October 31, 2009
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$ | 24,835,514 | $ | 17,470,969 | $ | 1,364,545 | 3,404 | $ | 34 | 170,200 | $ | 1,702 | $ | 5,998,264 | ||||||||||||||||||
Net income
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25,696,280 | 25,696,280 | - | - | - | - | - | - | ||||||||||||||||||||||||
Other comprehensive loss:
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Currency translation adjustment
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(210,645 | ) | - | (210,645 | ) | - | - | - | - | - | ||||||||||||||||||||||
Total comprehensive income
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25,485,635 | |||||||||||||||||||||||||||||||
Distributions to stockholders
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(7,803,583 | ) | (7,803,583 | ) | - | - | - | - | - | - | ||||||||||||||||||||||
BALANCE, October 30, 2010
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$ | 42,517,566 | $ | 35,363,666 | $ | 1,153,900 | 3,404 | $ | 34 | 170,200 | $ | 1,702 | $ | 5,998,264 |
The accompanying notes are an integral part of the consolidated financial statements.
- 5 -
RUUD LIGHTING, INC. AND ITS SUBSIDIARIES
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CONSOLIDATED STATEMENT OF CASH FLOWS
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Year Ended October 30, 2010
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CASH FLOWS FROM OPERATING ACTIVITIES
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Net income
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$ | 25,696,280 | ||
Adjustments to reconcile net income to net cash
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used in operating activities:
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Gain on sale of component
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(16,193,223 | ) | ||
Depreciation and amortization
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3,543,431 | |||
Increase in cash value of life insurance
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(63,335 | ) | ||
Effects of changes in operating assets and liabilities:
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Accounts receivable
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(759,904 | ) | ||
Refundable income taxes
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(303,711 | ) | ||
Inventories
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(10,851,085 | ) | ||
Prepaid expenses
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119,786 | |||
Accounts payable
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(5,642,101 | ) | ||
Other current liabilities
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1,305,663 | |||
Net cash used in operating activities
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(3,148,199 | ) | ||
CASH FLOWS FROM INVESTING ACTIVITIES
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Purchase of other assets
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(573,533 | ) | ||
Purchases of property and equipment
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(5,631,682 | ) | ||
Proceeds from sale of component
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20,054,344 | |||
Proceeds from sale of property and equipment
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6,501 | |||
Net cash provided by investing activities
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13,855,630 | |||
CASH FLOWS FROM FINANCING ACTIVITIES
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Net increase in checks issued in excess of available bank balances
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1,719,588 | |||
Net proceeds under line-of-credit agreement
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6,322,151 | |||
Proceeds from long-term debt
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1,686,775 | |||
Principal payments on long-term debt
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(12,991,574 | ) | ||
Proceeds from notes payable to stockholders
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3,175,000 | |||
Principal payments on notes payable to stockholders
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(1,425,000 | ) | ||
Distributions paid to stockholders
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(7,803,583 | ) | ||
Net cash used in financing activities
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(9,316,643 | ) | ||
EFFECT OF EXCHANGE RATE CHANGES ON CASH
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(64,140 | ) | ||
NET INCREASE IN CASH AND CASH EQUIVALENTS
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1,326,648 | |||
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
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1,514,726 | |||
CASH AND CASH EQUIVALENTS, END OF YEAR
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$ | 2,841,374 |
The accompanying notes are an integral part of the consolidated financial statements.
- 6 -
RUUD LIGHTING, INC. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 30, 2010
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Ruud Lighting, Inc. (the Company) was incorporated on March 16, 1982 in the state of Wisconsin and is presently engaged in the manufacture and sale of lighting fixtures and other lighting-related products. The Company’s two foreign subsidiaries engage in the sales and distribution of lighting fixtures and other lighting related products within Canada and Europe. The Company grants credit on sales of its products to domestic and foreign customers. The Company’s fiscal year ends on the Saturday closest to October 31. Significant accounting policies followed by the Company are presented below.
Use of Estimates in Preparing Financial Statements
The preparation of consolidated financial statements in conformity with generally accepted accounting principles 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 the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries: Ruud Lighting Canada Corp., Ruud Lighting Exports, Inc., Ruud Lighting Europe S.r.l., and Light Air, LLC. Intercompany transactions and balances have been eliminated in consolidation.
Cash Equivalents
The Company considers all liquid investments with a maturity of three months or less when purchased to be cash equivalents.
Accounts Receivable
Accounts receivable are uncollateralized customer obligations that generally require payment within thirty days to sixty days from the invoice date. Payments of accounts receivable are applied to the specific invoices identified on the customer’s remittance advice or, if unspecified, to the earliest unpaid invoices.
The carrying amount of accounts receivable is reduced by an allowance for doubtful accounts that reflects management’s best estimate of amounts that will not be collected. The allowance for doubtful accounts is based on management’s assessment of the collectability of specific customer accounts and the aging of the accounts receivable. If there is a deterioration of a major customer’s credit worthiness or actual defaults are higher than the historical experience, management’s estimates of the recoverability of amounts due the Company could be adversely affected. All accounts or portions thereof deemed to be uncollectible or to require an excessive collection cost are written off to the allowance for doubtful accounts.
- 7 -
RUUD LIGHTING, INC. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 30, 2010
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Inventories
Inventories are valued at the lower of cost or market, cost being determined principally by the first-in, first-out method, and market on the basis of the lower of replacement cost or estimated net proceeds from sale.
Property and Equipment
Property and equipment are stated at cost and are depreciated over the estimated useful lives of the respective assets, using the straight-line method. Maintenance, repairs, and minor renewals are charged against earnings when incurred. Airplane engine maintenance, as required by the FAA, also is expensed as incurred. It is the Company’s policy to capitalize all items greater than $5,000 that have future benefits associated with them.
Impairment of Long-Lived Assets
The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.
Patents
The costs of patents acquired are amortized on a straight-line basis over 14-15 years, depending on the remaining legal or economic useful life of the respective patents.
Revenue Recognition
The Company recognizes revenue when all of these conditions are satisfied: (1) persuasive evidence of an arrangement exists, (2) delivery has occurred or the services have been rendered, (3) the price is fixed or determinable, and (4) collectability is reasonably assured.
Advertising
The Company capitalizes costs associated with producing its annual product catalog and amortizes these costs on a straight-line basis over the period of time that the catalog will be expected to be used, generally one year.
Shipping and Handling
The Company combines shipping costs incurred and shipping revenue received and presents them on the net basis, including both within net sales on the consolidated statement of operations.
- 8 -
RUUD LIGHTING, INC. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 30, 2010
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Taxes Collected and Remitted
The Company presents taxes collected from customers and remitted to governmental authorities on the net basis, excluding such amounts from revenue.
Self-Insurance
The Company maintains a self-insurance program for medical and dental insurance limited to payment of $85,000 per individual per plan year, through the use of a stop-loss policy. Losses and claims are charged against income as incurred and the Company records an estimated liability for claims incurred but not yet reported.
Product Warranties
The Company offers warranties on the products it manufactures and sells ranging from one to ten years. The Company determines its liability for product warranties by continually reviewing warranty claims paid by product type and calculating the expected claims to be paid over the remaining term of the warranty.
Income Taxes
Ruud Lighting, Inc., with consent of their stockholders, has elected S-corporation status under Section 1362 of the Internal Revenue Code effective December 13, 2001. Ruud Lighting Canada Corp. and Ruud Lighting Europe S.r.l., as foreign eligible entities with single owners, have elected to be disregarded as separate taxable entities. Light Air, LLC has been formed as a limited liability company, which is treated as a disregarded entity for tax purposes. Ruud Lighting Exports, Inc. was formed as a qualified IC-DISC.
As a result of these elections, no federal income taxes are paid by the Company in the United States. Instead, the stockholders separately pay tax on their pro rata share of the Company’s income. Ruud Lighting, Inc. is subject to tax in Canada and Italy based on the earnings of Ruud Lighting Canada Corp. and Ruud Lighting Europe S.r.l. Ruud Lighting Exports, Inc. is not subject to federal income taxes in the United States.
As an S-corporation with a taxable year other than a calendar year, Ruud Lighting, Inc. is required to make a payment under Section 7519 of the Internal Revenue Code for years in which the Company has taxable income. This amount is calculated by multiplying the Company’s net base year taxable income by the highest individual tax rate and is treated as a deposit by the Internal Revenue Service.
- 9 -
RUUD LIGHTING, INC. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 30, 2010
NOTE 2 - NOTES RECEIVABLE FROM STOCKHOLDERS
The notes receivable from stockholders are due in full on demand. The notes bear interest at prime (3.25% at October 30, 2010).
NOTE 3 - INVENTORIES
Raw materials | $ | 32,322,565 |
Work in process | 60,868 | |
Finished parts | 5,034,020 | |
Total at cost | 37,417,453 | |
Less allowance for obsolete inventories | (473,788) | |
Total inventories | $ | 36,943,665 |
NOTE 4 - SALE OF COMPONENT
During the year ended October 30, 2010, the Company sold one of its components to an unrelated third party, including the related finished parts inventory, the buildings and improvements and machinery and equipment. The sales agreement includes a shared services agreement and a supply agreement requiring the Company’s significant continuing involvement in the operations of the component. Accordingly, the results of operations for the component prior to the date of sale have not been reported as discontinued operations, but rather are included in income from operations. The gain on the sale of the component is included in other income for the year ended October 30, 2010.
NOTE 5 - PROPERTY AND EQUIPMENT
Furniture and fixtures | $ | 3,175,364 |
Land | 1,800,000 | |
Buildings and improvements | 14,891,061 | |
Machinery and equipment | 19,053,536 | |
Tooling and dies | 14,086,911 | |
Computer software | 2,546,405 | |
Total at cost | 55,553,277 | |
Less accumulated depreciation | (26,015,327) | |
Total property and equipment | $ | 29,537,950 |
Depreciation expense for the year ended October 30, 2010 was $3,233,434.
- 10 -
RUUD LIGHTING, INC. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 30, 2010
NOTE 6 - PATENTS
Intangible assets consist of patents. Aggregate amortization expense for intangible assets for the year ended October 30, 2010 was $309,997.
Future estimated amortization expenses for intangible assets for the years ending October are as follows:
2011 | $ | 282,608 |
2012 | 282,608 | |
2013 | 282,031 | |
2014 | 282,031 | |
2015 | 282,031 | |
Thereafter | 1,403,970 | |
Total | $ | 2,815,279 |
NOTE 7 - DEBT
Note Payable to Bank
The Company has available a maximum of $30,000,000 under a revolving line-of-credit, of which $23,964,000 was outstanding as of October 30, 2010. Amounts drawn against the line-of-credit are payable on June 30, 2011 and bear interest at the LIBOR rate plus a variable rate between 2.50% and 3.50% (4.75% at October 30, 2010), based on the Company’s funded debt to EBITDA ratio. The line-of-credit is collateralized by substantially all of the Company’s assets and contains restrictive covenants relating to the Company’s financial position and operations.
Notes Payable to Stockholders
The notes payable to stockholders are due in full on demand. The notes bear interest at rates varying between 4.49% and 7.25%.
Long-term Debt
Long-term debt consists of the following:
Note payable to bank, requiring monthly principal installments of $53,334 plus interest at LIBOR plus a variable rate between 2.00% and 2.375% (4.25% at October 30, 2010), based on the Company’s funded debt to EBITDA ratio with final payment due in June 2013. Secured by substantially all the Company’s assets. |
$
|
9,439,958
|
- 11 -
RUUD LIGHTING, INC. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 30, 2010
NOTE 7 - DEBT (CONTINUED)
Long-term Debt (continued)
Note payable to bank, requiring monthly principal installments of €22,000 ($30,565 at October 30, 2010) plus interest at Euribor plus 1.10% (2.62% at October 30, 2010), with final payment due March 2012. |
$
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525,419
|
Note payable to bank, requiring monthly principal installments of €30,000 ($41,679 at October 30, 2010) plus interest at Euribor plus 1.10% (2.62% at October 30, 2010), with final payment due April 2011. |
|
244,190
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Note payable to bank, requiring monthly principal installments of €28,000 ($38,900 at October 30, 2010) plus interest at Euribor plus 1.10% (2.62% at October 30, 2010), with final payment due October 2011. |
|
464,953
|
Total |
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10,674,520
|
Less current portion |
(1,763,460)
|
Long-term portion |
$
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8,911,060
|
In connection with these notes, the Company must meet various covenants. Under these covenants, the Company must achieve a specified tangible net worth and meet other selected financial ratios. The covenants also limit the amounts that can be spent on capital expenditures and distributions to stockholders.
Assuming no prepayments are required, future maturities of long-term debt for the years ending October are as follows:
2011 | $ | 1,763,460 |
2012 | 751,118 | |
2013 | 8,159,942 | |
Total | $ | 10,674,520 |
- 12 -
RUUD LIGHTING, INC. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 30, 2010
NOTE 8 - PROFIT SHARING AND SAVINGS PLAN
The Company maintains a profit sharing plan for employees who meet certain eligibility requirements. Contributions to the plan are made at the sole discretion of the Company.
The profit sharing plan includes a salary deferral “401(k)” program, which allows employees to defer up to the federal allowable limit. The Company has the option to match 50% of the first 8% of salary contributed by the employee. The Company suspended the match as of March 1, 2009 and subsequently reinstated the match as of November 1, 2010.
Total contributions made by the Company, were $0 for the year ended October 30, 2010.
NOTE 9 - ADVERTISING
Costs associated with the annual product catalog that are reported as an asset on the consolidated balance sheet are $55,165 at October 30, 2010. All other advertising costs are expensed as incurred. Advertising expense for the year ended October 30, 2010 was $5,812,566.
NOTE 10 - RESEARCH AND DEVELOPMENT
All costs for research and development are expensed as incurred. Research and development expense for the year ended October 30, 2010 was $6,047,972.
NOTE 11 - OPERATING LEASES
Ruud Lighting, Inc., Ruud Lighting Canada Corp., and Ruud Lighting Europe S.r.l. lease buildings and certain equipment under operating leases. Total rent paid under operating leases was $476,773 for the year ended October 30, 2010.
Future minimum lease payments required under all operating leases for the years ended October are as follows:
2011 | $ | 252,147 |
2012 | 79,752 | |
2013 | 79,560 | |
2014 | 82,212 | |
2015 | 41,769 | |
Total | $ | 535,440 |
- 13 -
RUUD LIGHTING, INC. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 30, 2010
NOTE 12 - PRODUCT WARRANTIES
The Company’s liability for product warranties at October 30, 2010 is calculated as follows:
Balance, beginning of period | 420,987 | |
Payments made for products warranties during the period | (288,637) | |
Accruals related to products warranties during the period | 117,650 | |
Balance, end of period | $ | 250,000 |
NOTE 13 - INCOME TAXES
The Company files income tax returns in the U.S. federal jurisdiction and ten states. The Company is a pass-through entity for federal income tax purposes whereby any income tax liabilities or benefits are attributable to the Company’s owners. Most states follow the federal income tax treatment. Any amounts paid by the Company for income taxes on behalf of the owners are accounted for as transactions with the Company’s owners.
The Company adopted the Financial Accounting Standards Board’s requirements for accounting for uncertain tax positions on November 1, 2009. The Company determined that it was not required to record a liability related to uncertain tax positions as a result of implementing the new requirements.
The federal and state income tax returns of the Company for the 2008, 2009, and 2010 taxable years are subject to examination by the IRS and state taxing authorities, generally for three or four years after they were filed.
Refundable income taxes consist of the following:
Required payment under IRC Section 7519 | 66,426 | |
Prepaid income taxes of subsidiaries | 305,815 | |
$ | 372,241 |
NOTE 14 - CASH FLOW DISCLOSURES
Cash paid for interest and income taxes was as follows:
Interest | $ | 1,682,366 |
Income taxes | 1,864,929 |
- 14 -
RUUD LIGHTING, INC. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 30, 2010
NOTE 15 - SIGNIFICANT ESTIMATES
Generally accepted accounting principles require disclosure of information about certain significant estimates and current vulnerabilities due to certain concentrations. These matters include the following significant estimates.
Reserve for Self-insurance
Under its self-insurance plan, the Company accrues the estimated expense of hospitalization and medical coverage claims costs based on claims filed subsequent to year-end and an additional amount for incurred but not yet reported claims based on prior experience.
Accruals for such costs of $290,000 are included in accrued liabilities at October 30, 2010. Claims payments based on actual claims ultimately filed could differ materially from the estimate.
NOTE 16 - EXCHANGE RATES
The exchange rate used to convert Ruud Lighting Canada Corp.’s balance sheet at October 30, 2010 from its functional currency, the Canadian Dollar, to the United States Dollar was 0.97990. Revenue and expense transactions were converted at 0.96340, which was the average exchange rate for year ended October 30, 2010.
The exchange rate used to convert Ruud Lighting Europe S.r.l.’s balance sheet at October 30, 2010 from its functional currency, the Euro, to the United States Dollar was 1.38930. Revenue and expense transactions were converted at 1.34942 which was the average exchange rate for the year ended October 30, 2010.
NOTE 17 - CONTINGENCY
The Company is a party to several lawsuits related to intellectual property matters dealing with the LED fixtures it manufactures, both as a plaintiff and as a defendant. A seriously negative outcome in these cases would have significant financial implications, as a variety of successful products are at issue in this litigation. Management believes that any claims against it are without merit and is vigorously defending itself. The cases have not progressed far enough for the amount of liability, if any, from the outcome of these lawsuits to be reasonably estimated. However, management believes the ultimate impact on the Company’s financial position will not be material. Nevertheless, due to uncertainties in the settlement process, it is at least reasonably possible that management’s view of the outcome could change.
- 15 -
RUUD LIGHTING, INC. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 30, 2010
NOTE 18 - SUBSEQUENT EVENTS
Management evaluated subsequent events through January 27, 2011, the date the financial statements were available to be issued. Events or transactions occurring after October 30, 2010, but prior to January 27, 2011 that provided additional evidence about conditions that existed at October 30, 2010, have been recognized in the financial statements for the period ended October 30, 2010. Events or transactions that provided evidence about conditions that did not exist at October 30, 2010 but arose before the financial statements were available to be issued have not been recognized in the financial statements for the period ended October 30, 2010.
On August 17, 2011, the shareholders of the Company executed an agreement to sell the stock of the Company for cash and stock of the acquirer. As part of this agreement, the Company re-acquired the component it sold during the fiscal year ended October 30, 2010, as described in Note 4. In addition, all notes receivable from stockholders and payable to stockholders were paid and collected.
This information is an integral part of the accompanying consolidated financial statements.
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