| |
2. MoArk
LLC Consolidation and Planned Acquisition of Minority Interest
At December 31, 2002, the Company carried its 50% ownership interest
in MoArk under the equity method with an investment balance of $44.7
million. Osborne Investments, LLC (“Osborne”) owned
the remaining interest in MoArk. In 2003, the Company increased
its ownership from 50% to 57.5% with an additional investment of
$7.8 million. In addition, the Company has the right to acquire
(and Osborne has the right to require the Company to acquire) the
remaining 42.5% of MoArk owned by Osborne for a $42.2 million minimum
payment in 2007.
In accordance with the provisions of FIN 46, effective July 1, 2003,
the Company consolidated MoArk into its financial statements. Although
Osborne has a 42.5% ownership interest in MoArk, the Company continues
to be allocated 100% of the income or loss from the operations of
MoArk. In addition to consolidating MoArk for accounting purposes,
the Company has presumed that it will acquire the remaining 42.5%
in 2007. Effective July 1, 2003, the Company recorded this presumed
$42.2 million payment as a long-term liability in the consolidated
balance sheet as employee benefits and other liabilities at a present
value of $31.6 million using an effective interest rate of 7%. The
present value of this liability is $32.7 million at December 31,
2003. During 2003, MoArk changed its year end to the last Saturday
in December. In previous years, MoArk’s year end was the Saturday
closest to January 31.
The consolidation of MoArk impacted the comparability of several
categories in the consolidated balance sheets. Summarized, selected
balance sheet items for MoArk are as follows:
| |
At December 31, 2003 |
|
| Receivables, net |
$59,220 |
| Inventory |
39,286 |
| Property, plant and equipment, net |
82,680 |
| Property under capital lease, net |
12,245 |
| Goodwill |
63,985 |
| Notes and short-term obligations |
19,978 |
| Accounts payable and accrued expenses |
44,971 |
| Long-term debt (including current portion) |
75,785 |
| Obligations under capital lease (including current portion) |
10,797 |
|
|
