Attached files
file | filename |
---|---|
8-K - FORM 8-K - Swisher Hygiene Inc. | g27950e8vk.htm |
EX-10.7 - EX-10.7 - Swisher Hygiene Inc. | g27950exv10w7.htm |
EX-99.3 - EX-99.3 - Swisher Hygiene Inc. | g27950exv99w3.htm |
EX-23.1 - EX-23.1 - Swisher Hygiene Inc. | g27950exv23w1.htm |
EX-10.3 - EX-10.3 - Swisher Hygiene Inc. | g27950exv10w3.htm |
EX-99.4 - EX-99.4 - Swisher Hygiene Inc. | g27950exv99w4.htm |
EX-99.6 - EX-99.6 - Swisher Hygiene Inc. | g27950exv99w6.htm |
EX-99.1 - EX-99.1 - Swisher Hygiene Inc. | g27950exv99w1.htm |
EX-10.1 - EX-10.1 - Swisher Hygiene Inc. | g27950exv10w1.htm |
EX-23.3 - EX-23.3 - Swisher Hygiene Inc. | g27950exv23w3.htm |
EX-10.4 - EX-10.4 - Swisher Hygiene Inc. | g27950exv10w4.htm |
EX-10.2 - EX-10.2 - Swisher Hygiene Inc. | g27950exv10w2.htm |
EX-10.6 - EX-10.6 - Swisher Hygiene Inc. | g27950exv10w6.htm |
EX-99.5 - EX-99.5 - Swisher Hygiene Inc. | g27950exv99w5.htm |
EX-23.2 - EX-23.2 - Swisher Hygiene Inc. | g27950exv23w2.htm |
EX-10.5 - EX-10.5 - Swisher Hygiene Inc. | g27950exv10w5.htm |
Exhibit 99.2
Consolidated Financial Statements As of December 31, 2010 | ||||
F-1 | ||||
FINANCIAL STATEMENTS
|
||||
F-2 | ||||
F-3 | ||||
F-4 | ||||
F-5 | ||||
F-6 | ||||
Board of Directors
Mt. Hood Solutions Company
Portland, OR
INDEPENDENT
AUDITORS REPORT
We have audited the accompanying consolidated balance sheet of
Mt. Hood Solutions Company as of December 31, 2010, and the
related consolidated statements of operations and comprehensive
income, stockholders equity and comprehensive loss and
cash flows for the year then ended. These financial statements
are the responsibility of the Companys management. Our
responsibility is to express an opinion on these 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 financial statements referred to above
present fairly, in all material respects, the financial position
of Mt. Hood Solutions Company as of December 31, 2010, and
the results of their operations and cash flows for the year then
ended, in conformity with accounting principles generally
accepted in the United States of America.
/s/ Scharf Pera & Co., PLLC
Charlotte, North Carolina
July 12, 2011
F-1
MT. HOOD
SOLUTIONS COMPANY
DECEMBER
31, 2010
ASSETS
|
||||
Current assets
|
||||
Cash and cash equivalents
|
$ | 243,032 | ||
Marketable securities Note 3
|
28,884 | |||
Accounts receivable, net of allowance Note 2
|
2,223,540 | |||
Employee receivables
|
27,353 | |||
Due from related party
|
10,000 | |||
Inventory Note 4
|
1,710,449 | |||
Prepaid expenses and other current assets
|
213,318 | |||
Total current assets
|
$ | 4,456,576 | ||
Property and equipment, net Note 5
|
4,474,925 | |||
Other assets
|
||||
Intangible assets, net Note 6
|
25,072 | |||
$ | 8,956,573 | |||
LIABILITIES AND STOCKHOLDERS EQUITY | ||||
Current liabilities
|
||||
Line of credit Note 7
|
$ | 738,210 | ||
Accounts payable
|
1,126,875 | |||
Deferred compensation Note 11
|
783,896 | |||
Accrued expenses and other current liabilities
Note 11
|
1,001,537 | |||
Income taxes payable
|
14,640 | |||
Total current liabilities
|
$ | 3,665,158 | ||
Commitments and contingencies Note 8
|
| |||
Stockholders equity
|
||||
Common stock, no par value, authorized 1,000 shares,
37 shares issued and outstanding at December 31, 2010
|
95,738 | |||
Retained earnings
|
5,175,378 | |||
Accumulated other comprehensive loss
|
(1,726 | ) | ||
Total Mt Hood Solutions Company stockholders equity
|
5,269,390 | |||
Non-controlling interest
|
22,025 | |||
$ | 8,956,573 | |||
See Notes to Consolidated Financial Statements
F-2
MT. HOOD
SOLUTIONS COMPANY
YEAR
ENDED DECEMBER 31, 2010
Revenue
|
||||
Products and services
|
$ | 23,650,280 | ||
Costs and Expenses
|
||||
Cost of sales
|
$ | 10,549,561 | ||
Selling, general and administrative
|
11,291,306 | |||
Depreciation and amortization
|
747,048 | |||
Total costs and expenses
|
22,587,915 | |||
Income from Operations
|
1,062,365 | |||
Other Income (Expense)
|
||||
Interest expense
|
(7,375 | ) | ||
Rental income
|
85,227 | |||
Gain on sale of property and equipment
|
57,513 | |||
Loss on marketable securities
|
(16,213 | ) | ||
Other
|
19,239 | |||
Total other income (expense)
|
138,391 | |||
Net Income Before Income Taxes
|
1,200,756 | |||
Income Taxes
|
(12,951 | ) | ||
Net Income
|
1,187,805 | |||
Net Income Attributable to Non-Controlling Equity Interest
|
(5,372 | ) | ||
Net Income Attributable to Mt Hood Solutions Company
|
1,182,433 | |||
Other Comprehensive Income
|
||||
Unrealized gain on marketable securities
|
9,341 | |||
Comprehensive Income
|
$ | 1,191,774 | ||
See Notes to Consolidated Financial Statements
F-3
MT. HOOD
SOLUTIONS COMPANY
YEAR
ENDED DECEMBER 31, 2010
Accumulated |
||||||||||||||||||||||||
Other |
Non- |
|||||||||||||||||||||||
Common Stock |
Comprehensive |
Retained |
controlling |
|||||||||||||||||||||
Shares | Amount | Loss | Earnings | Interest | Total | |||||||||||||||||||
Balance as of December 31, 2009
|
37 | $ | 95,738 | $ | (11,067 | ) | $ | 5,016,732 | $ | 36,027 | $ | 5,137,430 | ||||||||||||
Distributions
|
(1,023,787 | ) | (19,374 | ) | (1,043,161 | ) | ||||||||||||||||||
Net income
|
1,182,433 | 5,372 | 1,187,805 | |||||||||||||||||||||
Unrealized gain on marketable securities
|
9,341 | 9,341 | ||||||||||||||||||||||
Balance as of December 31, 2010
|
37 | $ | 95,738 | $ | (1,726 | ) | $ | 5,175,378 | $ | 22,025 | $ | 5,291,415 | ||||||||||||
See Notes to Consolidated Financial Statements
F-4
MT. HOOD
SOLUTIONS COMPANY
YEAR
ENDED DECEMBER 31, 2010
Cash provided by operating activities
|
||||
Net income
|
$ | 1,187,805 | ||
Adjustments to reconcile net income to net cash provided by
operating activities:
|
||||
Depreciation and amortization
|
747,048 | |||
Provision for doubtful accounts
|
138,904 | |||
Realized loss on marketable securities
|
16,213 | |||
Gain on sale of property and equipment
|
(57,513 | ) | ||
Changes in working capital components:
|
||||
Accounts receivable
|
(246,403 | ) | ||
Employee receivable
|
(12,497 | ) | ||
Due from related party
|
10,000 | |||
Investment
|
(9,336 | ) | ||
Inventory
|
(59,448 | ) | ||
Prepaid expenses and other assets
|
(22,826 | ) | ||
Accounts payable and accrued expenses
|
(118,815 | ) | ||
Deferred compensation
|
31,356 | |||
Accrued income taxes
|
(10,586 | ) | ||
Cash provided by operating activities
|
$ | 1,593,902 | ||
Cash used in investing activities
|
||||
Purchases of property and equipment
|
(556,639 | ) | ||
Proceeds from sale of property and equipment
|
85,848 | |||
Proceeds from sale of marketable securities
|
827 | |||
Cash used in investing activities
|
(469,964 | ) | ||
Cash used in financing activities
|
||||
Distributions to stockholder
|
(1,609,269 | ) | ||
Distributions to non-controlling equity interest
|
(19,374 | ) | ||
Net advances from line of credit
|
690,335 | |||
Cash used in financing activities
|
(938,308 | ) | ||
Net change in cash and cash equivalents
|
185,630 | |||
Cash and cash equivalents at beginning of year
|
57,402 | |||
Cash and cash equivalents at end of year
|
$ | 243,032 | ||
See Notes to Consolidated Financial Statements
F-5
MT. HOOD
SOLUTIONS COMPANY
NOTE 1 | BUSINESS DESCRIPTION |
Mt. Hood Solutions Company (MHS), is a manufacturer
and distributor of over 300 industrial detergents and other
cleaning compounds headquartered in Portland, Oregon. Its
customers primarily consist of institutional and commercial
enterprises in Oregon, Washington, Utah, Colorado, California
and Idaho.
AML2, LLC (AML2) was founded in 2008, to manufacture
a cleaning compound for use in institutional and commercial
enterprises. AML2 is headquartered in Portland, Oregon.
Principles
of Combination and Consolidation
MHS and AML2 (collectively the Company) have common
ownership and management. The financial statements of these two
companies have been consolidated in accordance with Financial
Accounting Standards Board (FASB) Accounting
Standards Codification (ASC) Topic 810
Consolidation.
The non-controlling equity interest amounts shown represent the
third-party ownership interest in AML2. All inter-company
transactions are eliminated in these consolidated financial
statements.
NOTE 2 | SUMMARY OF 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, liabilities, revenue
and expenses and disclosure of contingent assets and liabilities
at the date of the financial statements. Actual results could
differ from those estimates and such differences could affect
the results of operations reported in future periods.
Cash and
Cash Equivalents
The Company considers all cash accounts and all highly liquid
short-term investments purchased with an original maturity of
three months or less to be cash or cash equivalents. As a result
of the Companys cash management system, checks issued but
not presented to the banks for payment may create negative book
cash balances. Such negative balances are included in trade
accounts payable and totaled $44,063 at December 31, 2010.
Marketable
Securities
At December 31, 2010, the Company held equity securities
classified as available for sale. Available for sale securities
are carried at fair market value with the unrealized holding
gains and losses reported in other comprehensive income. For
determining gross realized gains and losses, the cost of
securities sold is based upon specific identification. Quoted
market prices are used in determining the fair market value of
the Companys investments.
Accounts
Receivable
Accounts receivable consist of amounts due from customers for
product sales and services. Accounts receivable are reported net
of an allowance for doubtful accounts. The allowance is
managements best estimate of uncollectible amounts and is
based on a number of factors, including overall credit quality,
age of outstanding balances, historical write-off experience and
specific account analysis that projects the ultimate
collectability of the outstanding balances. As of
December 31, 2010, the allowance was $206,460.
F-6
MT. HOOD
SOLUTIONS COMPANY
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Inventory
Inventory is stated at the lower of cost or market determined
using the last in-first out (LIFO) cost method.
Property
and Equipment
Property and equipment is stated at cost, less accumulated
depreciation and amortization. Depreciation and amortization is
provided using the straight-line method over the estimated
useful lives of individual assets or classes of assets as
follows:
Building Improvements
|
15 years | |||
Dish Machines
|
5 years | |||
Office Equipment and Furniture
|
5 years | |||
Machinery and Equipment
|
5 years | |||
Vehicles
|
5 years |
When an asset is sold or otherwise disposed, the related cost
and accumulated depreciation or amortization are removed from
the respective accounts and the gain or loss is recognized.
Maintenance and repairs are charged to expense when incurred.
Intangible
Assets
Intangible assets include customer relationships and formulas
purchased during acquisitions. Customer relationships are
amortized on a straight-line basis over the expected average
life of the acquired accounts, which is five years.
Long-lived
Assets
In accordance with FASB ASC
360-10-35
Impairment of Disposal of Long-lived Assets, losses
related to the impairment of long-lived assets are recognized
when the carrying amount is not recoverable and exceeds its fair
value. When facts and circumstances indicate that the carrying
values of long-lived assets may be impaired, management of the
Company evaluates recoverability by comparing the carrying value
of the assets to projected future cash flows, in addition to
other qualitative and quantitative analyses.
Compensated
Absences
Employees of the Company are entitled to paid vacation, sick
days and personal days, depending on job classification, length
of service, and other factors. It is impractical to estimate the
amount of compensation for future absences and accordingly no
liability has been recorded in the accompanying financial
statements. The companys policy is to recognize the costs
of compensated absences when actually paid to employees.
Revenue
Recognition
Revenue from product sales and services is recognized when the
services are performed or the products are delivered to the
customer, provided that persuasive evidence of a sales
arrangement exists, both title and risk of loss have passed to
the customer, and collection is reasonably assured.
Advertising
The Company expenses non-direct advertising costs when incurred.
Advertising expense was $74,136 for the year ended
December 31, 2010.
F-7
MT. HOOD
SOLUTIONS COMPANY
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Income
Taxes
Effective July 1, 2003, the Companys stockholder
elected that the corporation be taxed under the provisions of
Subchapter S of the Internal Revenue Code. Under this provision,
the stockholder is taxed on their proportionate share of the
Companys taxable income. As a Subchapter
S corporation, the Company bears no liability or expense
for federal income taxes. The Company is required to file income
tax returns in several states. Various states do not recognize
Subchapter S of the Internal Revenue Code and as such the
Company may incur income tax expense.
FASB ASC
740-10,
Income Taxes, clarifies the accounting for income
taxes, by prescribing a minimum recognition threshold a tax
position is required to meet before being recognized in the
balance sheet. It also provides guidance on derecognition,
measurement and classification of amounts related to uncertain
tax positions, accounting for and disclosure of interest and
penalties, accounting in interim period disclosures and
transition relating to the adoption of new accounting standards.
Under FASB ASC
740-10, the
recognition for uncertain tax positions should be based on a
more likely than not threshold that the tax position will be
sustained upon audit. The tax position is measured as the
largest amount of benefit that has a greater than fifty percent
probability of being realized upon settlement. Management has
determined that adoption of this topic has had no effect on the
Companys balance sheet.
Fair
Value of Financial Instruments
The Companys financial instruments include cash,
marketable securities, receivables and accrued liabilities. The
Company adopted the provisions of FASB ASC Topic 820 Fair
Value Measurements and Disclosures, effective
January 1, 2008. Under FASB ASC
820-10-30-2,
fair value is defined as the price that would be received to
sell an asset or paid to transfer a liability in an orderly
transaction between market participants.
FASB ASC
820-10-30-2
establishes a fair value hierarchy for inputs used in measuring
fair value that maximizes the use of observable inputs and
minimizes the use of unobservable inputs by requiring the most
observable inputs be used when available. Observable inputs are
from sources independent of the Company, whereas unobservable
inputs reflect the Companys assumptions about the inputs
market participants would use in pricing the asset or liability
developed on the best information available in the
circumstances. The fair value hierarchy is categorized into
three levels based on the inputs as follows:
Level 1 inputs are valuations based on unadjusted quoted
prices in active markets for identical assets or liabilities
that the Company has the ability to access. Since valuations are
based on quoted prices that are readily and regularly available
in an active market, valuation of these securities does not
entail a significant degree of judgment.
Level 2 inputs are valuations based on quoted prices in
markets that are not active or for which all significant inputs
are observable, either directly or indirectly.
Level 3 inputs are valuations that are unobservable and
significant to the overall fair value measurement.
The Company did not have any outstanding financial derivative
instruments.
Segment
Information
FASB ASC 280, Segment Reporting, establishes
standards for reporting information regarding operating segments
in annual financial statements. Operating segments are
identified as components of an enterprise for which separate
discrete financial information is available for evaluation by
the chief operating decision-maker, or decision-making group in
making decisions on how to allocate resources and assess
performance.
F-8
MT. HOOD
SOLUTIONS COMPANY
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Company manages, allocates resources and reports in one
business segment. The Companys chief operating
decision-maker, as defined under FASB ASC 280, is the
Companys chief executive officer. Based on the information
reviewed by its chief executive officer, the Company operates in
one business segment.
NOTE 3 | FAIR VALUE MEASUREMENTS |
The Companys assets and liabilities recorded at fair value
have been categorized based upon a fair value hierarchy in
accordance with FASB ASC
820-10-30-2,
as described in Note 2. The following table presents
information about the Companys marketable securities
measured at fair value as of December 31, 2010.
Quoted Price in |
||||||||||||||||
Active Markets for |
Significant Other |
Significant |
Balance as of |
|||||||||||||
Identical Assets |
Observable Inputs |
Unobservable Inputs |
December 31, |
|||||||||||||
(Level 1) | (Level 2) | (Level 3) | 2010 | |||||||||||||
Marketable securities actively traded
|
$ | 28,884 | $ | | $ | | $ | 28,884 | ||||||||
$ | 28,884 | $ | | $ | | $ | 28,884 | |||||||||
NOTE 4 | INVENTORY |
Inventory as of December 31, 2010 consists of the following
components:
Raw materials
|
$ | 923,211 | ||
Finished goods
|
880,565 | |||
Purchased goods
|
192,617 | |||
Supplies
|
65,224 | |||
LIFO reserve
|
(351,168 | ) | ||
$ | 1,710,449 | |||
NOTE 5 | PROPERTY AND EQUIPMENT |
Property and equipment as of December 31, 2010 consists of
the following:
Building improvements
|
$ | 3,615,615 | ||
Dish machines
|
2,233,047 | |||
Office equipment and furniture
|
87,955 | |||
Machinery and equipment
|
812,966 | |||
Vehicles
|
1,180,747 | |||
7,930,330 | ||||
Less: accumulated depreciation
|
(3,455,405 | ) | ||
$ | 4,474,925 | |||
Depreciation expense for the year ended December 31, 2010
is $736,303.
F-9
MT. HOOD
SOLUTIONS COMPANY
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
NOTE 6 | INTANGIBLE ASSETS |
Intangible assets as of December 31, 2010 consists of the
following:
Customer list
|
$ | 53,726 | ||
Less: accumulated amortization
|
(28,654 | ) | ||
$ | 25,072 | |||
Amortization expense for the year ended December 31, 2010
is $10,745.
As of December 31, 2010, future amortization of customer
relationships for the next three years is as follows:
2011
|
$ | 10,745 | ||
2012
|
10,745 | |||
2013
|
3,582 | |||
$ | 25,072 | |||
NOTE 7 | LINE OF CREDIT |
In July 2010, the Company amended its revolving line of credit
with a financial institution having a maximum borrowing of up to
$3,000,000. The line of credit matures on July 31, 2011.
Borrowings under these lines are used for general working
capital purposes and capital expenditures. The line of credit is
collateralized by accounts receivable and substantially all
assets not otherwise encumbered. Interest is payable monthly at
the banks announced prime rate less 0.50%, which at
December 31, 2010 was 3.25%. The line of credit contains
financial covenants which the Company met at December 31,
2010. At December 31, 2010, the Company had borrowings
totaling $738,210 against the line of credit.
NOTE 8 | COMMITMENTS AND CONTINGENCIES |
The Company leases its headquarters and other facilities,
equipment and vehicles under operating leases that expire at
varying times through 2023. Future minimum lease payments for
operating leases that had initial or remaining non-cancelable
lease terms in excess of one year as of December 31, 2010
are as follows:
Twelve months ended
|
||||
December 31, 2011
|
$ | 675,984 | ||
December 31, 2012
|
675,984 | |||
December 31, 2013
|
675,984 | |||
December 31, 2014
|
675,984 | |||
December 31, 2015
|
672,588 | |||
Thereafter
|
4,747,200 | |||
$ | 8,123,724 | |||
The Company leases its headquarters from a limited liability
company related through common ownership. The lease expires
March 2023 and has two five-year renewal options. Under terms of
the lease, the Company is responsible for utilities,
maintenance, taxes and insurance. Future payments under this
lease totaling $8,059,200 are included in the above figures.
During the year ended December 31, 2010, the Company paid
this related party $662,400 as rent for use in the facility.
F-10
MT. HOOD
SOLUTIONS COMPANY
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Total rent expense for operating leases, including those with
terms of less than one year was approximately $737,000 for the
year ended December 31, 2010.
The Company has determined that, as a potentially responsible
party, it is likely that it has incurred a liability for
environmental remediation costs resulting from leasing certain
real property in past years. The Company has accrued
approximately $150,000 of estimated environmental remediation
costs in accrued liabilities as of December 31, 2010.
NOTE 9 | RELATED-PARTY TRANSACTIONS |
As of December 31, 2010, the Company had guaranteed the
debt of its related party lessor totaling approximately
$4,721,000, which is fully collateralized by property and
facilities. The Company is required to perform under the
guaranty in the event the related party fails to make
contractual payments. The term of the loan covered by this
guaranty is through March 2018. There is no recognition of any
potential future payment obligation as the Company believes the
potential for making this payment is remote.
NOTE 10 | EMPLOYEE BENEFIT PLAN |
The Company has a 401(k) profit sharing plan which covers all
eligible employees. Plan participants can make voluntary
contributions of up to $16,500 of compensation, subject to
certain limitations. Under this plan, the Company may contribute
to participants accounts at managements discretion.
Total Company contributions to the plan for the year ended
December 31, 2010 was $230,000. Accrued contributions of
$230,000 are included in accrued liabilities at
December 31, 2010.
NOTE 11 | SUPPLEMENTAL FINANCIAL INFORMATION |
Accrued
Expenses and Other Current Liabilities
Accrued expenses and other current liabilities as of
December 31, 2010 consists of the following:
Sales tax payable
|
$ | 85,806 | ||
Accrued commissions
|
136,620 | |||
Accrued payroll and payroll taxes
|
39,412 | |||
Profit sharing
|
230,000 | |||
Other accrued expenses
|
509,699 | |||
$ | 1,001,537 | |||
The Company entered into a deferred compensation agreement with
an employee in December 1993. The agreement provides that the
Company pay the employee an incentive bonus based upon the
number of full employment years and average monthly pay of the
employee at termination. The amount is fully vested. The
Companys liability is approximately $783,896 at
December 31, 2010.
Supplemental
Disclosure of Cash Flow Information
Supplemental cash flow information with respect to the year
ended December 31, 2010 is as follows:
Cash paid for:
|
||||
Interest
|
$ | 7,375 | ||
Income taxes
|
$ | 25,741 | ||
Shareholder loan converted to equity
|
$ | 585,481 | ||
F-11
MT. HOOD
SOLUTIONS COMPANY
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
NOTE 12 | SUBSEQUENT EVENTS |
The Company evaluated all events and transactions through
July 12, 2011, the date these financial statements were
issued. During this period, there were no material recognizable
or non-recognizable subsequent events except for the following:
On May 4, 2011, the Company entered into an agreement under
which it sold certain assets and liabilities of the Company to
Swisher Hygiene Inc. Assets sold included substantially all
inventory and supplies, accounts receivable, property and
equipment, customer lists, and other assets.
F-12