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| TUX > SEC Filings for TUX > Form 10-Q on 4-Aug-2009 | All Recent SEC Filings |
4-Aug-2009
Quarterly Report
Overview
We are a blank check company formed on October 16, 2007 for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more domestic or international operating businesses or assets. We consummated our initial public offering on January 29, 2008. We are currently in the process of evaluating and identifying targets for a business combination. Our efforts in identifying prospective target businesses are not limited to a particular industry or group of industries.
We intend to effect our business combination using cash from the proceeds of our initial public offering, our capital stock, debt or a combination of cash, stock and debt.
The issuance of additional shares of our stock in a business combination:
· may significantly dilute the equity interest of our public stockholders;
· may subordinate the rights of holders of common stock if preferred stock is issued with rights senior to those afforded our common stock;
· may cause a change in control if a substantial number of our shares of common stock are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors and cause our public stockholders to become minority stockholders in the combined entity;
· may have the effect of delaying or preventing a change of control of us by diluting the stock ownership or voting rights of a person seeking to obtain control of our company; and
· may adversely affect prevailing market prices for our common stock and/or warrants.
Similarly, if we incur indebtedness, it could result in:
· default and foreclosure on our assets if our operating revenues after a business combination are insufficient to repay our debt obligations;
· acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant;
· our immediate payment of all principal and accrued interest, if any, if the debt obligation is payable on demand; and
· our inability to obtain necessary additional financing if the debt obligation contains covenants restricting our ability to obtain such financing while the debt obligation is outstanding.
If we are unable to consummate our business combination by January 23, 2010 (or up to July 23, 2010 if our stockholders approve an extension), our charter requires that we wind up our affairs and liquidate. Our plans to consummate our business combination may not be successful and, accordingly, we may be required to liquidate as soon as practicable after January 23, 2010 (or up to July 23, 2010 if our stockholders approve an extension).
Results of Operations and Known Trends or Future Events
We have neither engaged in any operations nor generated any revenues to date (other than interest income), other than in connection with our initial public offering. Our only activities since inception have been organizational activities, those necessary to consummate our initial public offering and those in connection with identifying and investigating targets for a business combination. We will not generate any operating revenues until after consummation of our business combination. We are generating non-operating income in the form of interest income on cash, cash equivalents and investments. We have incurred expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence activities. Our expenses may increase substantially.
Three Months Ended June 30, 2009 Compared with Three Months Ended June 30, 2008
Our interest income, which principally related to the investment of $905.6 million of the net proceeds from our initial public offering, decreased $2.5 million to $0.7 million in the 2009 second quarter from $3.2 million in the 2008 second quarter. This decrease was due to the significantly lower available yields on United States Treasury securities during the 2009 second quarter as compared with the 2008 second quarter. The average yield on our investments decreased from 1.4% for the 2008 second quarter to 0.3% for the 2009 second quarter.
Our professional fees and other expenses increased $0.2 million to $0.5 million in the 2009 second quarter from $0.3 million in the 2008 second quarter reflecting an increase in expenses related to investigating potential business combinations.
Our provision for income taxes decreased $1.4 million to $0.1 million in the 2009 second quarter from $1.5 million in the 2008 second quarter principally reflecting the lower income before income taxes in the 2009 second quarter.
Six Months Ended June 30, 2009 Compared with Six Months Ended June 30, 2008
Our interest income, which principally related to the investment of $905.6 million of the net proceeds from our initial public offering, decreased $4.8 million to $1.7 million for the six months ended June 30, 2009 from $6.5 million for the six months ended June 30, 2008. This decrease was due to the significantly lower available yields on United States Treasury securities for the six months ended June 30, 2009 as compared with the six months ended June 30, 2008, which impact more than offset the full period effect of the investment of the initial public offering proceeds for the six months ended June 30, 2009, which were invested in the 2008 first quarter beginning only on January 29, 2008. The average yield on our investments decreased from 1.4% for the six months ended June 30, 2008 to 0.4% for the six months ended June 30, 2009.
Our professional fees and other expenses increased $0.4 million to $1.0 million in the six months ended June 30, 2009 from $0.6 million for the six months ended June 30, 2008 reflecting an increase in expenses related to investigating potential business combinations as well as the full period effect of recurring expenses in the 2009 six-month period.
Our provision for income taxes decreased $2.3 million to $0.3 million for the six months ended June 30, 2009 from $2.6 million for the six months ended June 30, 2008 principally reflecting the lower income before income taxes for the 2009 six-month period.
Liquidity and Capital Resources
A total of $905.6 million of the net proceeds from our initial public offering, including $10.0 million from the sale of the sponsor warrants in a private placement and $29.8 million of deferred underwriting commissions, was placed in a trust account initially at Wilmington Trust Company, which we refer to as Wilmington, with Wilmington serving as trustee and custodian. Effective October 1, 2008, in accordance with the terms of the investment management trust agreement dated as of January 23, 2008 between us and Wilmington, which we refer to as the Original Trust Agreement, by mutual agreement of the parties, Wilmington resigned as trustee and custodian of the trust account and we appointed U.S. Trust Company of Delaware, which we refer to as U.S. Trust, as successor trustee and custodian. We and U.S. Trust have entered into an amended and restated investment management trust agreement dated as of October 1, 2008, the terms of which are substantially the same as the Original Trust Agreement.
As of June 30, 2009, the trust account was invested in U.S. Treasury bills with maturities ranging from 76 to 178 days when purchased and, to a lesser extent, a money market mutual fund that invests exclusively in U.S. Treasury securities. As of June 30, 2009, the balance in the trust account was $911.4 million, or approximately $9.91 per share held by our public stockholders. Up to $9.5 million of interest income earned on the cash equivalents and short-term investments in the trust account may be withdrawn to fund general and administrative expenses. Amounts necessary to pay (a) income taxes and (b) the trustee's investment management fees, which fees may not exceed $0.35 million per year, may also be withdrawn in addition to the $9.5 million of interest income. From the establishment of the trust account through June 30, 2009, $13.9 million of interest income was earned, $5.5 million was withdrawn to pay estimated income tax payments, $0.4 million was withdrawn to pay the trustee's investment management fees and $2.2 million was withdrawn to fund general and administrative expenses. As of June 30, 2009, the balance of our cash and cash equivalents held outside the trust account was $0.2 million.
Prior to the consummation of a business combination, we intend to use a substantial portion of the cash released to us from the trust account in connection with identifying and evaluating prospective target businesses, selecting one or more target businesses, and structuring and negotiating the business combination. We intend to effect a business combination using the proceeds from our initial public offering, our capital stock, debt or a combination of cash, stock and debt. The proceeds held in the trust account (less amounts paid to any public stockholders who exercise their conversion rights and deferred underwriting commissions paid to the underwriters) that are not utilized as part of the consideration for a business combination will be released to us and will be available to finance the operations of the target business or businesses. Such working capital funds could be used in a variety of ways including continuing or expanding the target business' operations, for strategic acquisitions or the payment of principal or interest due on indebtedness incurred in consummating a business combination or preexisting indebtedness of the target business. Such funds could also be used to repay any operating expenses or finder's fees that we had incurred prior to the consummation of our business combination if the funds available to us outside of the trust account were insufficient to cover such expenses.
The following amounts are or were available to us to fund our working capital requirements and certain other expenses, (1) $0.8 million of offering expense reimbursement obtained from the proceeds of our initial public offering, (2) $0.5 million of working capital held outside the trust account and also obtained from the proceeds of our initial public offering and (3) income of up to $9.5 million, net of income taxes, earned (or to be earned) on the balance of the trust account. Of these amounts, we have used an aggregate of $3.3 million through June 30, 2009 leaving us with a maximum additional availability of up to $7.5 million. However, based on currently available interest rates on U.S. Treasury securities, we would not earn sufficient interest income on the cash equivalents and short-term investments held in the trust account in order to generate the $9.5 million, net of income taxes, permitted to be withdrawn from the trust account. As of June 30, 2009, $5.9 million of interest earned on the trust account remains available for withdrawal. We believe the $5.9 million together with the remaining interest income that would be earned (and available for withdrawal) based on currently available interest rates will be sufficient to allow us to operate at least until January 23, 2010 (the date that is 24 months from the date of the prospectus relating to our initial public offering), or up to July 23, 2010 (30 months from the date of such prospectus) if extended pursuant to a stockholder vote, assuming our business combination is not consummated during that time. We estimate our primary liquidity requirements during that period to include legal, accounting and other expenses associated with structuring, negotiating and documenting a business combination, the trustee's investment management fees, payments for income taxes, payments to Trian Fund Management, L.P. of $10,000 per month for up to 24 months (or up to 30 months in the event our stockholders approve an extension) for office space, administrative services and support, legal and accounting fees related to regulatory reporting requirements, and general working capital that will be used for miscellaneous expenses and reserves, including director and officer liability insurance.
If our estimates of the costs of undertaking in-depth due diligence and negotiating a business combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our business combination. Moreover, we may need to obtain additional financing either to consummate our business combination or because we become obligated to convert into cash a significant number of shares of public stockholders voting against our business combination, in which case we may issue additional securities or incur debt in connection with such business combination. Following our business combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.
We have never entered into any off-balance sheet financing arrangements and have never established any special purposes entities. We have not guaranteed any debt or commitments of other entities or entered into any options on non-financial assets.
We do not have any long-term debt, capital lease obligations, operating lease obligations, purchase obligations or other long-term liabilities.
We are obligated to pay a $10,000 monthly fee to Trian Fund Management, L.P. for office space, administrative services and support for up to 24 months (or up to 30 months in the event our stockholders approve an extension) from the date of our initial public offering. As of June 30, 2009, the maximum amount of future payments under this obligation is $120,000 through July 23, 2010 (30 months from the date of the prospectus relating to our initial public offering). This obligation terminates upon the earlier of the consummation of our business combination and our liquidation.
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