Exhibit 99.1
CHEROKEE INTERNATIONAL CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
On October 18, 2008, pursuant to an Agreement for the Sale and Purchase of All of the Issued and Outstanding Shares of Cherokee SPRL dated October 18, 2008 (the “Purchase Agreement”), Cherokee Netherlands II BV, a subsidiary of Cherokee International Corporation, a Delaware corporation (“Cherokee”), sold all of the issued and outstanding shares of Cherokee Europe SPRL, a private limited liability company incorporated under Belgian law, and all of the issued and outstanding shares of Cherokee Europe SCA, a partnership limited by shares incorporated under Belgian law (together with Cherokee Europe SPRL, the “Companies”), to Mr. Eric Brouwers, acting in his own name or in the name of a company in the process of incorporation under Belgian law. Mr. Brouwers was the general manager of Cherokee’s European operations prior to the sale. Mr. Brouwers paid nominal consideration for the shares of the Companies, in exchange for his agreement to purchase such shares without representations or warranties from, and without recourse to, the Seller. The terms of the transaction were determined in arm’s-length negotiations by the parties. The following unaudited pro forma consolidated financial statements give effect to this transaction.
The unaudited pro forma consolidated balance sheet of Cherokee gives effect to the transaction as if it had occurred on June 29, 2008. The unaudited pro forma consolidated statements of operations for the year ended December 30, 2007 and the six months ended June 29, 2008 give effect to the transaction as if it had occurred on January 1, 2007. The unaudited pro forma consolidated financial information is not intended to represent what Cherokee’s financial position was or results of operations would have been if the disposition had occurred on those dates or to project Cherokee’s financial position or results of operations for any future period.
The unaudited pro forma consolidated financial statements and the accompanying notes thereto should be read in conjunction with, and are qualified by, the historical financial statements and notes thereto of Cherokee. Cherokee’s historical financial statements are included in its Annual Report on Form 10-K for the year ended December 30, 2007 and its Quarterly Report on Form 10-Q for the six months ended June 29, 2008.
Cherokee International Corporation
Unaudited Pro Forma Consolidated Balance Sheet
As of June 29, 2008
(In thousands)
|
| Cherokee |
| Pro Forma |
| Pro Forma |
| |||
|
| International |
| Adjustments (A) |
| Consolidated |
| |||
ASSETS |
|
|
|
|
|
|
| |||
CURRENT ASSETS: |
|
|
|
|
|
|
| |||
Cash and cash equivalents |
| $ | 9,283 |
| $ | 722 |
| $ | 8,561 |
|
Accounts receivable, net |
|
| 33,804 |
|
| 12,089 |
|
| 21,715 |
|
Inventories, net |
|
| 30,973 |
|
| 10,891 |
|
| 20,082 |
|
Prepaid expenses and other current assets |
|
| 1,730 |
|
| 795 |
|
| 935 |
|
Deferred income taxes |
|
| — |
|
|
|
| — |
| |
Total current assets |
|
| 75,790 |
|
| 24,497 |
|
| 51,293 |
|
|
|
|
|
|
|
|
| |||
Property and equipment, net |
|
| 18,511 |
|
| 7,229 |
|
| 11,282 |
|
Deposits and other assets |
|
| 1,161 |
|
| — |
|
| 1,161 |
|
Deferred financing costs, net of amortization |
|
| 379 |
|
| — |
|
| 379 |
|
Deferred income taxes - long term |
|
| — |
|
| — |
|
| — |
|
Goodwill |
|
| — |
|
| — |
|
| — |
|
Total Assets |
| $ | 95,841 |
| $ | 31,726 |
| $ | 64,115 |
|
|
|
|
|
|
|
|
| |||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
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|
|
| |||
CURRENT LIABILITIES |
|
|
|
|
|
|
| |||
Accounts payable |
| $ | 16,244 |
| $ | 6,100 |
| $ | 10,144 |
|
Accrued liabilities |
|
| 4,253 |
|
| 1,694 |
|
| 2,559 |
|
Accrued compensation and benefits |
|
| 7,970 |
|
| 4,456 |
|
| 3,514 |
|
Accrued restructuring costs |
|
| 545 |
|
| 545 |
|
| — |
|
Other short term borrowings |
|
| 319 |
|
| 319 |
|
| — |
|
Borrowings under revolving line of credit |
|
| 3,502 |
|
| 3,076 |
|
| 426 |
|
|
|
|
|
|
|
|
| |||
Current debt |
|
| 24,485 |
|
| — |
|
| 24,485 |
|
Current debt payable to affiliates |
|
| 22,145 |
|
| — |
|
| 22,145 |
|
Total current liabilities |
|
| 79,463 |
|
| 16,190 |
|
| 63,273 |
|
|
|
|
|
|
|
|
| |||
Other long term liabilities |
|
| 4,511 |
|
| 4,314 |
|
| 197 |
|
Total Liabilities |
| $ | 83,974 |
| $ | 20,504 |
| $ | 63,470 |
|
|
|
|
|
|
|
|
| |||
STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
| |||
Common stock |
| $ | 19 |
| $ | — |
| $ | 19 |
|
Paid-in capital |
|
| 186,601 |
|
| 49,911 | (B) |
| 136,690 |
|
Accumulated deficit |
|
| (178,880 | ) |
| (42,816 | ) |
| (136,064 | ) |
Accumulated other comprehensive income |
|
| 4,127 |
|
| 4,127 |
|
| — |
|
Total stockholders’ equity |
|
| 11,867 |
|
| 11,222 |
|
| 645 |
|
Total Liabilities and Stockholders’ Equity |
| $ | 95,841 |
| $ | 31,726 |
| $ | 64,115 |
|
Cherokee International Corporation
Unaudited Pro Forma Consolidated Statement of Operations
For the Year Ended December 30, 2007
(In thousands, except per share amounts)
|
| Cherokee |
| Pro Forma |
| Pro Forma |
| |||
|
| International |
| Adjustments (C) |
| Consolidated |
| |||
|
|
|
|
|
|
|
| |||
Net sales |
| $ | 128,496 |
| $ | 42,812 |
| $ | 85,684 |
|
Cost of sales |
|
| 102,904 |
|
| 37,557 |
|
| 65,347 |
|
|
|
|
|
|
|
|
| |||
Gross profit |
|
| 25,592 |
|
| 5,255 |
|
| 20,337 |
|
Operating expenses: |
|
|
|
|
|
|
| |||
Engineering and development |
|
| 10,889 |
|
| 4,554 |
|
| 6,335 |
|
Selling and marketing |
|
| 7,172 |
|
| 3,080 |
|
| 4,092 |
|
General and administration |
|
| 12,177 |
|
| 4,087 |
|
| 8,090 |
|
Goodwill impairment |
|
| 5,197 |
|
| 5,197 |
|
| — |
|
Restructuring costs |
|
| 155 |
|
| — |
|
| 155 |
|
|
|
|
|
|
|
|
| |||
Total operating expenses |
|
| 35,590 |
|
| 16,918 |
|
| 18,672 |
|
|
|
|
|
|
|
|
| |||
Operating income (loss) |
|
| (9,998 | ) |
| (11,663 | ) |
| 1,665 |
|
Interest expense |
|
| (2,804 | ) |
| (53 | ) |
| (2,751 | ) |
Gain on sale of Mexico Facility building |
|
| 430 |
|
| — |
|
| 430 |
|
Gain on sale of Mexico corporation |
|
| 431 |
|
| — |
|
| 431 |
|
Other income, net |
|
| 516 |
|
| (45 | ) |
| 561 |
|
|
|
|
|
|
|
|
| |||
Income (loss) before income taxes |
|
| (11,425 | ) |
| (11,761 | ) |
| 336 |
|
Income tax provision (benefit) |
|
| (2,452 | ) |
| (2,576 | ) |
| 124 |
|
Net income (loss) |
| $ | (8,973 | ) | $ | (9,185 | ) | $ | 212 |
|
|
|
|
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| |||
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|
| |||
Net Income (loss) per share: |
|
|
|
|
|
|
| |||
Basic |
| $ | (0.46 | ) | $ | (0.47 | ) | $ | 0.01 |
|
Diluted |
| $ | (0.46 | ) | $ | (0.47 | ) | $ | 0.01 |
|
|
|
|
|
|
|
|
| |||
Weighted average shares outstanding: |
|
|
|
|
|
|
| |||
Basic |
| 19,387 |
|
|
| 19,387 |
| |||
Diluted |
| 19,387 |
|
|
| 19,387 |
|
Cherokee International Corporation
Unaudited Pro Forma Consolidated Statement of Operations
For the Six Months Ended June 29, 2008
(In thousands, except per share amounts)
|
| Cherokee |
| Pro Forma |
| Pro Forma |
| |||
|
| International |
| Adjustments (C) |
| Consolidated |
| |||
|
|
|
|
|
|
|
| |||
Net sales |
| $ | 75,287 |
| $ | 25,253 |
| $ | 50,034 |
|
Cost of sales |
|
| 55,311 |
|
| 21,524 |
|
| 33,787 |
|
|
|
|
|
|
|
|
| |||
Gross profit |
|
| 19,976 |
|
| 3,729 |
|
| 16,247 |
|
Operating expenses: |
|
|
|
|
|
|
| |||
Engineering and development |
|
| 5,681 |
|
| 2,352 |
|
| 3,329 |
|
Selling and marketing |
|
| 3,835 |
|
| 1,546 |
|
| 2,289 |
|
General and administration |
|
| 6,989 |
|
| 2,232 |
|
| 4,757 |
|
Goodwill impairment |
|
| 1,120 |
|
| 1,120 |
|
| — |
|
Restructuring costs |
|
| — |
|
| — |
|
| — |
|
|
|
|
|
|
|
|
| |||
Total operating expenses |
|
| 17,625 |
|
| 7,250 |
|
| 10,375 |
|
|
|
|
|
|
|
|
| |||
Operating income (loss) |
|
| 2,351 |
|
| (3,521 | ) |
| 5,872 |
|
Interest expense |
|
| (1,459 | ) |
| (80 | ) |
| (1,379 | ) |
Gain on sale of Mexico Facility building |
|
| — |
|
| — |
|
| — |
|
Gain on sale of Mexico corporation |
|
| — |
|
| — |
|
| — |
|
Other income, net |
|
| 239 |
|
| 54 |
|
| 185 |
|
|
|
|
|
|
|
|
| |||
Income (loss) before income taxes |
|
| 1,131 |
|
| (3,547 | ) |
| 4,678 |
|
Income tax provision (benefit) |
|
| 1,688 |
|
| 1,656 |
|
| 32 |
|
Net income (loss) |
| $ | (557 | ) | $ | (5,203 | ) | $ | 4,646 |
|
|
|
|
|
|
|
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| |||
|
|
|
|
|
|
|
| |||
Net Income (loss) per share: |
|
|
|
|
|
|
| |||
Basic |
| $ | (0.03 | ) | $ | (0.27 | ) | $ | 0.24 |
|
Diluted |
| $ | (0.03 | ) | $ | (0.27 | ) | $ | 0.24 |
|
|
|
|
|
|
|
|
| |||
Weighted average shares outstanding: |
|
|
|
|
|
|
| |||
Basic |
| 19,459 |
|
|
| 19,459 |
| |||
Diluted |
| 19,459 |
|
|
| 19,459 |
|
Cherokee International Corporation
Notes to Unaudited Pro Forma Consolidated Financial Statements
(In thousands)
(A) Reflects the removal of the assets, liabilities and equity of the Companies as of June 29, 2008.
(B) Includes $6,761 of intercompany financing.
(C) Reflects the removal of the results of operations of the Companies for the year ended December 30, 2007 and for the six months ended June 29, 2008.