| SALTON INC ITEM 1A Risk Factors 9 ITEM 1A Risk Factors Prospective investors should carefully consider the following risk factors, together with the other information contained in this annual report on Form 10-K, in evaluating us and our business before purchasing our securities |
| In particular, prospective investors should note that this annual report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act and that actual results could differ materially from those contemplated by such statements |
| The factors listed below represent certain important factors which we believe could cause such results to differ |
| These factors are not intended to represent a complete list of the general or specific risks that may affect us |
| It should be recognized that other risks may be significant, presently or in the future, and the risks set forth below may affect us to a greater extent than indicated |
| OUR SUBSTANTIAL INDEBTEDNESS COULD ADVERSELY AFFECT OUR FINANCIAL HEALTH AND PREVENT US FROM FULFILLING OUR PAYMENT OBLIGATIONS We have a significant amount of indebtedness relative to our equity size |
| As of October 6, 2006, we had total consolidated indebtedness of approximately dlra338dtta1 million, including approximately dlra129dtta7 million under our senior secured credit facility, dlra103dtta3 million of Second Lien Notes, approximately dlra59dtta7 million of 2008 Notes, excluding dlra1dtta6 million related to the fair value of a monetized fixed to floating interest rate swap on the 2008 Notes, and dlra35dtta7 million under our European facility agreement |
| We may incur additional indebtedness in the future, including through additional borrowings under the second lien credit agreement (which permits the issuance of up to an additional dlra6dtta7 million principal amount of Second Lien Notes),our senior secured credit agreement, and our European facility agreement, subject to availability |
| Our ability to service our debt obligations and to fund planned working capital needs and capital expenditures will depend upon our future operating performance, which will be affected by prevailing economic conditions in the markets we serve and financial, business and other factors, certain of which are beyond our control |
| Based on our fiscal year 2007 operating plan, we believe existing sources of liquidity will be sufficient to meet cash needs during fiscal 2007 |
| Notwithstanding our beliefs, we can not assure you that our business will generate sufficient cash flow from operations or that future borrowings will be available under our senior secured credit facility or other sources of funds in an amount sufficient to enable us to service our indebtedness or to fund our other liquidity needs |
| If we are unable to satisfy such liquidity needs, we could be required to adopt one or more alternatives, such as reducing or delaying capital expenditures, borrowing additional funds, restructuring indebtedness, selling other assets or operations 9 and/or reducing expenditures for new product development, cutting other costs, and some of such actions would require the consent of our senior lenders, the holders of the Second Lien Notes, the holders of the 2008 Notes and/or the lenders under our European facility agreement |
| Notwithstanding our beliefs, we can not assure you that any of such actions could be effected, or if so, on terms favorable to us, that such actions would enable us to continue to satisfy our liquidity needs, that such actions would not dilute the ownership interest of stockholders and/or that such actions would be permitted under the terms of our senior secured credit facility, the second lien credit agreement, the indenture governing the 2008 Notes or the European facility agreement |
| Our high level of debt could have important consequences for you, such as: - - our debt level makes us more vulnerable to general adverse economic and industry conditions; - - our ability to obtain additional financing for acquisitions, or to fund future working capital, capital expenditures or other general corporate requirements may be limited; - - we will need to use a substantial portion of our cash flow from operations for the payment of the principal of, and interest on, our indebtedness (thereby reducing the amount of money available to fund working capital, capital expenditures or other general corporate purposes); - - our flexibility in planning for, or reacting to, changes in our business and the industry in which we compete may be limited; our debt level could impact our ability to maintain favorable credit terms with our suppliers; - - our debt level could limit our ability or increase the costs to refinance indebtedness; and - - our debt level may place us at a competitive disadvantage to our less leveraged competitors |
| OUR DEBT INSTRUMENTS CONTAIN RESTRICTIVE COVENANTS THAT COULD ADVERSELY AFFECT OUR BUSINESS BY LIMITING OUR FLEXIBILITY Our senior secured credit agreement, the second lien credit agreement, the indenture governing the 2008 Notes and the European facility agreement impose restrictions that affect, among other things, our ability to incur debt, pay dividends, sell assets, create liens, make capital expenditures and investments, merge or consolidate, enter into transactions with affiliates, and otherwise enter into certain transactions outside the ordinary course of business |
| Our senior secured credit agreement, the second lien credit agreement and the European facility agreement also require us to maintain specified financial ratios |
| Our ability to comply with these covenants and restrictions may be affected by events beyond our control |
| If we are unable to comply with the terms of our senior secured credit agreement, the second lien credit agreement, indenture governing the 2008 Notes or the European facility agreement, or if we fail to generate sufficient cash flow from operations, or to refinance our debt as described below, we may be required to refinance all or a portion of our indebtedness or to obtain additional financing |
| If cash flow is insufficient and refinancing or additional financing is unavailable because of our high levels of debt and the debt incurrence restrictions under our debt instruments, we may default on our debt instruments |
| In the event of a default under the terms of any of our indebtedness, the debt holders may accelerate the maturity of our obligations, which could cause defaults under our other obligations |
| WE MUST EITHER REPAY OR REFINANCE OUR DEBT MATURING IN DECEMBER 2007 AND THEREAFTER We have significant maturities of debt in periods subsequent to the next twelve months |
| These maturities are December 31, 2007 under the senior secured credit agreement, March 31, 2008 under the second lien credit agreement, April 15, 2008 under the indenture governing the 2008 Notes and December 22, 2008 under the European facility agreement |
| In addition, on September 15, 2008 we are required to exchange all of the outstanding shares of Series A convertible preferred stock for an aggregate of dlra40dtta0 million in cash or shares of our common stock |
| We will not have sufficient cash flow from operations to repay all of our indebtedness at maturity, satisfy our redemption obligations under our preferred stock agreement and fund our other liquidity needs |
| We believe that these obligations can be satisfied through a 10 combination of repayment, refinancing and sales of assets, however, to accomplish potential sales of businesses or assets, we would need to extend or refinance all or a portion of our indebtedness on or before maturity |
| Notwithstanding our beliefs, we cannot assure you that we will be able to do so on attractive terms or at all |
| WE HAVE EXPERIENCED A DECLINE IN DOMESTIC MARKET SALES AND CONTINUE TO IMPLEMENT A DOMESTIC RESTRUCTURING PLAN Our domestic sales have decreased in fiscal 2006 as compared to fiscal 2005 |
| A portion of that decline is attributable to our sale of the tabletop business in September 2005, discontinued product lines and delays in production from suppliers |
| We continue to implement our domestic cost reduction plan, and we expect additional cost reductions in fiscal 2007 |
| The cost savings will principally come from a rationalization of operations, brands and SKUs and the costs related to them |
| Although the restructuring of our domestic operations through workforce layoffs, consolidation of facilities and reduction of certain marketing and advertising programs has reduced our operating expenses, such actions may have an adverse effect on our domestic sales |
| In addition, our current and prospective customers and suppliers may decide to delay or not purchase or supply our products due to the perceived uncertainty caused by our indebtedness and the domestic restructuring plan |
| We may be required to take charges in the future relating to our restructuring plan, which could have a material and adverse effect on our operating results |
| We cannot assure you that the domestic restructuring plan will allow us to better align our domestic cost structure with our current sales levels |
| OUR INTERNATIONAL OPERATIONS, AND EXPANSION OF THESE OPERATIONS, SUBJECTS US TO ADDITIONAL BUSINESS RISKS AND MAY CAUSE OUR PROFITABILITY TO DECLINE DUE TO INCREASED COSTS During fiscal 2006, 2005 and 2004, sales recorded outside of North America accounted for 42dtta1prca, 43dtta2prca and 37dtta1prca of total net sales, respectively |
| Our pursuit of international growth opportunities may require significant investments for an extended period before returns on these investments, if any, are realized |
| International operations are subject to a number of other risks and potential costs, including: - - the risk that because our brand names may not be locally recognized, we must spend significant amounts of time and money to build a brand identity without certainty that we will be successful; - - local and economic conditions; - - unexpected changes in regulatory requirements; - - inadequate protection of intellectual property in foreign countries; - - foreign currency fluctuations; - - transportation costs; - - adverse tax consequences; and - - political and economic instability, as a result of terrorist attacks, natural disasters or otherwise |
| For example, our foreign sales in fiscal 2006 were adversely impacted by weak consumer demand in the housewares sector in the United Kingdom and unfavorable foreign currency fluctuations |
| We cannot assure you that we will not incur significant costs in addressing these potential risks |
| OUR MARGINS HAVE BEEN ADVERSELY IMPACTED BY INCREASES IN RAW MATERIAL PRICES The cost of our products has been impacted by global increases in the price of petroleum based plastic materials, steel, copper and corrugated materials |
| Although we have increased the prices of certain of our goods to our customers, we cannot assure you that we will be able to pass all of these cost 11 increases on to our customers |
| As a result, our margins may continue to be adversely impacted by such cost increases |
| OUR ABILITY TO OBTAIN PRODUCTS MAY BE ADVERSELY IMPACTED BY WORLDWIDE DEMAND ON RAW MATERIAL Our products are predominately made from petroleum based plastic materials, steel and corrugated materials |
| Our suppliers contract separately for the purchase of them |
| We can provide no assurance that our sources of supply will not be interrupted should our suppliers not be able to obtain these materials due to worldwide demand or other events that interrupt material flow |
| IF WE WERE TO LOSE ONE OR MORE OF OUR MAJOR CUSTOMERS, OR SUFFER A MAJOR REDUCTION OF ORDERS FROM THEM, OUR FINANCIAL RESULTS WOULD SUFFER Our success depends on our sales to our significant customers |
| Our total net sales to our five largest customers during fiscal 2006 were 33dtta6prca of net sales with Target Corporation representing 9dtta8prca of our net sales and Wal-Mart representing 9dtta3prca of our net sales |
| Our total net sales to our five largest customers during fiscal 2005 were 37dtta3prca of net sales, with Target Corporation representing 12dtta6prca of our net sales and Wal-Mart representing 8dtta5prca of our net sales |
| Our total net sales to our five largest customers during fiscal 2004 were 41dtta0prca of net sales, with Target Corporation representing 11dtta6prca of our net sales and Wal-Mart representing 10dtta5prca of our net sales |
| We do not have long-term agreements with our major customers, and purchases are generally made through the use of individual purchase orders |
| A significant reduction in purchases by any of these major customers or a general economic downturn in retail sales could have a material adverse effect on our business, financial condition and results of operations |
| OUR DEPENDENCE ON FOREIGN SUPPLIERS SUBJECTS US TO THE RISKS OF DOING BUSINESS ABROAD We depend upon unaffiliated foreign companies for the manufacture of most of our products |
| Our arrangements with our suppliers are subject to the risks of doing business abroad, including: - - import duties; - - trade restrictions; - - production delays due to unavailability of parts or components; - - increase in transportation costs and transportation delays, including those resulting from terrorist activity; - - work stoppages; - - foreign currency fluctuations; and - - political and economic instability and civil unrest, which could lead to the business failure of major suppliers |
| Any reduction in trade credit from our suppliers could materially adversely affect our operations and financial condition |
| We depend on the continuing willingness of our suppliers to extend credit to us to finance our inventory purchases |
| If suppliers become concerned about our ability to generate liquidity and service our debt, they may delay shipments to us or require payment in advance |
| 12 THE SMALL HOUSEHOLD APPLIANCE INDUSTRY IS HIGHLY COMPETITIVE AND WE MAY NOT BE ABLE TO COMPETE EFFECTIVELY We believe that competition is based upon several factors, including: - - price; - - access to retail shelf space; - - product features and enhancements; - - brand names; - - new product introductions; and - - marketing support and distribution approaches |
| We compete with established companies, some of which have substantially greater facilities, personnel, financial and other resources than we have |
| Significant new competitors or increased competition from existing competitors may adversely affect our business, financial condition and results of operations |
| IF THE HOUSEWARES SECTOR OF THE RETAIL INDUSTRY CONTINUES TO EXPERIENCE AN ECONOMIC SLOWDOWN, OUR FINANCIAL RESULTS WILL BE ADVERSELY AFFECTED We sell our products to consumers through major retail channels, primarily mass merchandisers, department stores, specialty stores and mail order catalogs |
| As a result, our business and financial results can fluctuate with the financial condition of our retail customers and the retail industry |
| The current general slowdown in the retail sector has adversely impacted our net sales of products, our operating margins and our net income |
| If such conditions continue or worsen, including any further weakness in consumer confidence as a result of terrorist activity, or otherwise, it could have a material adverse effect on our business, financial condition and results of operations |
| The current general slowdown in the retail sector has resulted in, and we expect it to continue to result in, additional pricing and marketing support pressures on us |
| Certain of our retail customers have filed for bankruptcy protection in recent years |
| We continually monitor and evaluate the credit status of our customers and attempt to adjust sales terms as appropriate |
| Despite these efforts, a bankruptcy filing by, or other adverse change in the financial condition of, a significant customer could adversely affect our financial results |
| LONG LEAD TIMES, POTENTIAL MATERIAL PRICE INCREASES AND CUSTOMER DEMANDS MAY CAUSE US TO PURCHASE MORE INVENTORY THAN NECESSARY Due to manufacturing lead times and a strong concentration of our sales occurring during the second fiscal quarter, as well as potential material price increases, we may purchase products and thereby increase inventories based on anticipated sales and forecasts provided by our customers and our sales personnel |
| In an extended general economic slowdown, we cannot assure you that our customers will order these inventories as anticipated |
| IF WE DO NOT ATTRACT AND RETAIN SKILLED PERSONNEL, OUR ABILITY TO GROW AND DEVELOP OUR BUSINESS WILL SUFFER Our continued success will depend significantly on the efforts and abilities of Leonhard Dreimann, Chief Executive Officer and William M Lutz, Chief Financial Officer |
| The loss of the services of one or both of these individuals could have a material adverse effect on our business |
| In addition, as our business develops and expands, we believe that our future success will depend greatly on our ability to attract and retain highly qualified and skilled personnel |
| We do not have, and do not intend to obtain, key-man life insurance on our executive officers |
| 13 OUR OUTSTANDING CONVERTIBLE PREFERRED STOCK CONTAINS REDEMPTION AND OTHER PROVISIONS WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON, AND SIGNIFICANTLY DILUTE, THE INTERESTS OF HOLDERS OF OUR COMMON STOCK On July 28, 1998, we issued 40cmam000 shares of convertible preferred stock in connection with a Stock Purchase Agreement dated July 15, 1998 |
| The convertible preferred stock is non-dividend bearing except if we breach, in any material respect, any of the material obligations in the preferred stock agreement or our restated certificate of incorporation relating to the convertible preferred stock, the holders of the convertible preferred stock are entitled to receive quarterly cash dividends on each share from the date of the breach until it is cured at a rate per annum equal to 12 1/2prca of the Liquidation Preference (defined below) |
| The preferred shares are convertible into 3cmam529cmam411 shares of our common stock (reflecting an dlra11dtta33 per share conversion price) |
| The holders of the convertible preferred stock are entitled to one vote for each share of our common stock that the holder would receive upon conversion of the convertible preferred stock |
| In the event of a change in control, each preferred shareholder has the right to require us to redeem the shares at a redemption price equal to the Liquidation Preference (defined below) plus interest accrued thereon at a rate of 7prca per annum compounded annually each anniversary date from July 28, 1998 through the earlier of the date of such redemption or July 28, 2003 |
| The satisfaction of this redemption obligation would have to be satisfied before any proceeds from a change in control are available to holders of common stock |
| In the event of a liquidation, dissolution or winding up, whether voluntary or involuntary, holders of the convertible preferred stock are entitled to be paid out of the assets of the Company available for distribution to its stockholders an amount in cash equal to dlra1cmam000 per share, plus the amount of any accrued and unpaid dividends thereon (the "e Liquidation Preference "e ), before any distribution is made to the holders of any our common stock or any other of its capital stock ranking junior as to liquidation rights to the convertible preferred stock |
| We may optionally convert in whole or in part, the convertible preferred stock at any time on and after July 15, 2003 at a cash price per share of 100prca of the then effective Liquidation Preference per share, if the daily closing price per share of our common stock for a specified 20 consecutive trading day period is greater than or equal to 200prca of the then current conversion price |
| On September 15, 2008, we will be required to exchange all outstanding shares of convertible preferred stock at a price equal to the Liquidation Preference per share (or an aggregate of dlra40dtta0 million), payable at our option in cash or shares of our common stock |
| Our inability to satisfy this redemption obligation in cash could result in significant dilution of the ownership interest of holders of common stock |
| OUR CREDIT RATINGS HAVE BEEN DOWNGRADED AND COULD BE DOWNGRADED FURTHER Our credit ratings on our senior subordinated debt have been downgraded several times during the last two years |
| On July 14, 2005, Standard & Poorapstas withdrew its "e D "e corporate credit and "e D "e subordinated debt ratings |
| Such downgrades can have a negative impact on our liquidity by reducing attractive financing opportunities and could make our efforts to raise capital more difficult and have an adverse impact on our financial condition and results of operations |
| IF WE HAVE TO EXPEND SIGNIFICANT AMOUNTS TO REMEDIATE ENVIRONMENTAL LIABILITIES, OUR FINANCIAL RESULTS WILL SUFFER Prior to 2003, we manufactured certain of our products at our owned plants in the United States and Europe |
| Our previous manufacturing of products at these sites exposes us to potential liabilities for environmental damage that these facilities may have caused or may cause nearby landowners |
| During the ordinary course of our operations, we have received, and we expect that we may in the future receive, citations or notices from governmental authorities asserting that our facilities are not in compliance with, or 14 require investigation or remediation under, applicable environmental statutes and regulations |
| Any citations or notices could have a material adverse effect on our business, results of operations and financial condition |
| THE SEASONAL NATURE OF OUR BUSINESS COULD ADVERSELY IMPACT OUR OPERATIONS Our business is highly seasonal, with operating results varying from quarter to quarter |
| We have historically experienced higher sales during the second fiscal quarter primarily due to increased demand by customers for our products attributable to holiday sales |
| This seasonality has also resulted in additional interest expense for us during this period due to an increased need to borrow funds to maintain sufficient working capital to finance product purchases and customer receivables for the seasonal period |
| Lower sales than expected by us during this period, a lack of availability of product, a general economic downturn in retail sales or the inability to service additional interest expense due to increased borrowings could have a material adverse effect on our business, financial condition and results of operations |
| PRODUCT RECALLS OR LAWSUITS RELATING TO DEFECTIVE PRODUCTS COULD ADVERSELY IMPACT OUR FINANCIAL RESULTS We face exposure to product recalls and product liability claims in the event that our products are alleged to have manufacturing or safety defects or to have resulted in injury or other adverse effects |
| We cannot assure you that we will be able to maintain our product liability insurance on acceptable terms, if at all, or that product liability claims will not exceed the amount of our insurance coverage |
| As a result, we cannot assure you that product recalls and product liability claims will not adversely affect our business |
| THE INFRINGEMENT OR LOSS OF OUR PROPRIETARY RIGHTS COULD HAVE AN ADVERSE EFFECT ON OUR BUSINESS We regard our copyrights, trademarks, service marks and similar intellectual property as important to our success |
| We rely on copyright and trademark laws in the United States and other jurisdictions to protect our proprietary rights |
| We seek to register our trademarks in the United States and elsewhere |
| These registrations could be challenged by others or invalidated through administrative process or litigation |
| If any of these rights were infringed or invalidated, our business could be materially adversely affected |
| We license various trademarks and trade names from third parties for use on our products |
| These licenses generally place marketing obligations on us and require us to pay fees and royalties based on net sales or profits |
| Typically, each license may be terminated if we fail to satisfy minimum sales obligations or if we breach the license |
| The termination of these licensing arrangements could adversely affect our business, financial condition and results of operations |
| WE MAY BE SUBJECT TO LITIGATION AND INFRINGEMENT CLAIMS, WHICH COULD CAUSE US TO INCUR SIGNIFICANT EXPENSES OR PREVENT US FROM SELLING OUR PRODUCTS We cannot assure you that others will not claim that our proprietary or licensed products are infringing their intellectual property rights or that we do not in fact infringe those intellectual property rights |
| If someone claimed that our proprietary or licensed products infringed their intellectual property rights, any resulting litigation could be costly and time consuming and would divert the attention of management and key personnel from other business issues |
| We also may be subject to significant damages or an injunction against use of our proprietary or licensed products |
| COMPLIANCE WITH GOVERNMENTAL REGULATIONS COULD SIGNIFICANTLY INCREASE OUR OPERATING COSTS OR PREVENT US FROM SELLING OUR PRODUCTS Most federal, state and local authorities require certification by Underwriters Laboratory, Inc, an independent, not-for-profit corporation engaged in the testing of products for compliance with certain public safety standards, or other safety regulation certification prior to marketing electrical appliances |
| 15 Foreign jurisdictions also have regulatory authorities overseeing the safety of consumer products |
| Our products, or additional electrical appliances which may be developed by us, may not meet the specifications required by these authorities |
| A determination that we are not in compliance with these rules and regulations could result in the imposition of fines or an award of damages to private litigants |
| THE REQUIREMENTS OF COMPLYING WITH THE SARBANES-OXLEY ACT MAY STRAIN OUR RESOURCES, AND OUR INTERNAL CONTROL OVER FINANCIAL REPORTING MAY NOT BE SUFFICIENT TO ENSURE TIMELY AND RELIABLE EXTERNAL FINANCIAL REPORTS We are subject to various regulatory requirements, including the Sarbanes-Oxley Act of 2002 |
| We have incurred, and expect to continue to incur, substantial costs related to our compliance with the Sarbanes-Oxley Act |
| The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures, corporate governance standards and internal control over financial reporting and that our auditors provide an attestation relative to managementapstas assessment process and conclusions |
| Due to market capitalization levels, we are not currently required to comply with Section 404 |
| However, we must continue to maintain and assess our system of internal controls over financial reporting, and under current regulations, compliance with Section 404 will be required in fiscal 2008 |
| In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, significant resources and management oversight have been, and will continue to be, required |
| We have devoted additional financial resources, time and personnel to legal, financial and accounting activities to ensure our ongoing compliance with public company reporting requirements |
| In the future, if our management identifies one or more material weaknesses in our internal control over financial reporting, we may be unable to assert that our internal control over financial reporting is effective as of the end of the preceding year or our auditors may be unable to attest that our managementapstas report is fairly stated or to express an opinion on the effectiveness of our internal controls, even if our auditors issue an unqualified opinion on our financial statements for the preceding fiscal year |
| If the auditors are unable to provide an unqualified attestation of our assessment of our internal control over financial reporting, it could result in a loss of investor confidence in our financial reports, adversely affect our stock price and our ability to access the capital markets or borrow money, and may subject us to sanctions or investigation by regulatory authorities |
| OUR STOCK PRICE MAY CONTINUE TO BE VOLATILE The trading price of our common stock is subject to significant fluctuations in response to variations in quarterly operating results; changes in earnings estimates by analysts; announcements of new products by us or our competitors; changes in the domestic and international economic, political and business conditions; general conditions in the housewares industry; the recent lack of confidence in corporate governance and accounting practices; the open short interest in our Common Stock; our ability to continue the listing of our common stock on New York Stock Exchange; and other events or factors |
| In addition, the stock market in general has experienced extreme price and volume fluctuations that have affected the market prices for many companies that have been unrelated to the operating performance of these companies |
| These market fluctuations have adversely affected and may continue to adversely affect the market price of our common stock |
| OUR COMMON STOCK COULD BE DELISTED BY THE NEW YORK STOCK EXCHANGE IF WE DO NOT COMPLY WITH ITS CONTINUED LISTING STANDARDS Our common stock is listed on the New York Stock Exchange, or NYSE The NYSE continued listing standards require that all listed companies maintain an average global capitalization of at least dlra25 million over a consecutive 30 trading-day period or undergo prompt suspension and delisting procedures |
| In May 2006 we received notice from the NYSE that we are not in compliance with this requirement |
| In order to maintain the continued listing of our common stock on the NYSE, we are following the NYSEapstas rules and procedures applicable to listed companies which fail to meet the continued listing standards |
| We are currently subject to quarterly monitoring by the NYSE for compliance with its continued listing standards |
| 16 We cannot assure you that the NYSE will maintain our listing in the future |
| In the event that our common stock is delisted by the NYSE, or if it becomes apparent to us that we will be unable to meet the NYSEapstas continued listing criteria in the foreseeable future, we will seek to have our stock listed or quoted on another national securities exchange or quotation system |
| However, we cannot assure you that, if our common stock is listed or quoted on such other exchange or system, the market for our common stock will be as liquid as it has been on the NYSE As a result, if we are delisted by the NYSE or transfer our listing to another exchange or quotation system, the market price for our common stock may become more volatile than it has been historically |
| Delisting of our common stock would likely cause a reduction in the liquidity of an investment in our common stock |
| Delisting also could reduce the ability of holders of our common stock to purchase or sell our securities as quickly and inexpensively as they would have been able to do had our common stock remained listed |
| This lack of liquidity also could make it more difficult for us to raise capital in the future |
| TAKEOVER DEFENSE PROVISIONS WHICH WE HAVE IMPLEMENTED MAY ADVERSELY AFFECT THE MARKET PRICE OF OUR COMMON STOCK Our stockholder rights plan and various provisions of Delaware corporation law and of our corporate governance documents may inhibit changes in control not approved by our board of directors and may have the effect of depriving stockholders of an opportunity to receive a premium over the prevailing market price of our common stock in the event of an attempted hostile takeover or may deter takeover attempts by third parties |
| In addition, the existence of these provisions may adversely affect the market price of our common stock |
| These provisions include: - - a classified board of directors; - - a prohibition on stockholder action through written consent; - - a requirement that special meetings of stockholders be called only by the board of directors; - - availability of "e blank check "e preferred stock |
| WE DO NOT ANTICIPATE PAYING DIVIDENDS We have not paid dividends on our common stock and we do not anticipate paying dividends in the foreseeable future |
| We intend to retain future earnings, if any, to finance the expansion of our operations and for general corporate purposes, including future acquisitions |
| In addition, our senior secured credit facility, the second lien credit agreement and the Europe credit facility contain restrictions on our ability to pay dividends on our capital stock |