Year Ended December 31, 2008, compared with Year Ended December 31, 2007:
Operating Revenues—Total operating revenues for 2008 were $28,396,336, a decrease of 11% from $31,867,590 in 2007. The decrease resulted from a decrease in commission and fee income received by CFS.
Fee Income—Fee income for 2008 was $1,551,245, a 27% decrease from $2,127,388 in 2007. The decrease was due to a reduction in fee income received by CFS, as a result of lower values of client assets under management.
The Company earns investment advisory fees in connection with CFS' registered investment advisor. The Company pays the registered representatives a portion of this fee income as commission expense and retains the balance. These fees constituted 6% of the Company's consolidated revenues in 2008.
Commission Income—Commission income includes CFS commissions. The Company pays the registered representatives a percentage of this income as commission expense and retains the balance. Commission income for 2008 was $25,869,214, an 11% decrease from $29,198,732 in 2007. The decreases were due primarily to a decrease in commissions received by CFS due to market conditions, and reduced sales of alternative investment products. Future market conditions will continue to impact commission levels. Commission revenues constituted 91% of the Company's consolidated revenues in 2008.
Other Income—Other income for 2008 was $975,877, an 80% increase from $541,470 in 2007. Other income is comprised primarily of due diligence and marketing allowances received by CFS. Other income constituted 3% of the Company's consolidated revenues in 2008.
Operating Expenses—Total operating expenses for 2008 were $27,721,401, a 16% decrease from $33,064,838 in 2007. The decrease resulted primarily from decreased commission expense, which corresponds to decreases in fee and commission income.
Compensation and Benefits—Compensation and benefits expense for 2008 was $2,089,297, a 36% decrease from $3,261,695 in 2007. The decrease results primarily from decreased incentive overrides paid to certain employees for the recruitment of new registered representatives in CFS, and a decrease in the number of employees during the twelve month period.
On January 24, 2007, the Company announced the retirement of Robert E. Walstad, the Company's founder, chief executive officer and chairman of the board of directors, effective February 1, 2007. In connection with Mr. Walstad's retirement, the Company entered into a separation agreement with Mr. Walstad. Under the terms of the separation agreement, subject to Mr. Walstad meeting his obligations thereunder in all respects, Mr. Walstad is entitled to receive a cash payment in the amount of $274,500, options to purchase 60,000 common shares, and certain commission payments. The $274,500 separation payment was expensed in February of 2007.
Commission Expense—Commission expense for 2008 was $24,390,850, a 13% decrease from $28,190,323 in 2007. The decrease corresponds with the decreases in fee and commission income.
General and Administrative Expenses—Total general and administrative expenses for 2008 were $1,125,767, a decrease of 19% from $1,389,196 in 2007. The decrease is due primarily to a decrease in promotion expenses, license fees and dues paid out by the Company.
Depreciation and Amortization—Depreciation and amortization for 2008 was $115,487, a 48% decrease from $223,624 in 2007. The primary reason for the change was a decrease in amortization of computer software costs.
Year ended December 31, 2008 compared to the year ended December 31, 2007
Cash flows from operating activities. Net cash provided by operating activities was $27.3 million for fiscal 2008 as compared to $23.8 million for fiscal 2007. The primary reasons for the increase were cash provided by the operations of acquired businesses and a decrease in prepaid expenses and other current assets from existing operations, partially offset by a decrease in accounts payable and accrued expenses from existing operations.
Cash flows from investing activities. Net cash used in investing activities was $38.9 million for fiscal 2008 as compared to $39.7 million for fiscal 2007. The decrease in cash used in investing activities is due to a reduction in net cash used in business acquisitions. The net cash used decreased $2.3 million to $27.0 million for acquisitions in fiscal 2008 compared to $29.3 million for acquisitions in fiscal 2007. This decrease was partially offset by an increase in capital expenditures of $1.6 million to $12.7 million for fiscal 2008 compared to $11.1 million for fiscal 2007.
Cash flows from financing activities. Net cash used in financing activities was $10.3 million for fiscal 2008 as compared to $36.4 million of cash provided by financing activities for fiscal 2007. The primary reason for this fluctuation was borrowings of $40.0 million on the acquisition facility during fiscal 2007 associated with the 2007 acquisitions of CMJs operations and McGurk and the acquisition of Tri-Ad in January 2008. As of December 31, 2007, the Company has borrowed all of the $40.0 million available under the acquisition facility. In addition, combined principal payments on the long-term obligations were $10.2 million during fiscal 2008 compared to $3.5 million during fiscal 2007.
Year Ended December 31, 2008 Compared to Year Ended December 31, 2007
Gross revenues decreased 3.8% for the Combined year ended December 31, 2008 from $484.6 million for the year ended December 31, 2007. The decrease in gross revenues for the period was due primarily to an overall decrease in gaming and hotel revenues across the majority of our properties as the result of the weakening Las Vegas and U.S. economies. Declining real estate values, volatile oil prices, increased unemployment, difficult consumer credit markets, and declining consumer confidence have all precipitated an economic slowdown which has negatively impacted our operations.
Income from operations declined 47.7% for the Combined year ended December 31, 2008 as compared to the year ended December 31, 2007. The decrease is due to declining revenue due to the weakening economic conditions as discussed above. In addition, during the Combined year ended December 31, 2008, we recognized non-cash charges of approximately $13.6 million for a loss on the early extinguishment of debt in the Predecessor period, $11.9 million for impairment of assets (see Impairment of Assets section), and $875,000 for a loss on the disposal of assets. We also expensed approximately $1.5 million for services related to the Acquisition and $2.6 million for management fees to Highgate. As a result, our consolidated net operating margin decreased to 8.9% for the Combined year ended December 31, 2008 compared to 16.3% for the year ended December 31, 2007 and EBITDA decreased 44.0% for the Combined year ended December 31, 2008 compared to the year ended December 31, 2007.
Fiscal 2008 Compared to Fiscal 2007
Fiscal 2008 Compared to Fiscal 2007
Net sales increased approximately $33.0 million, or 4.5%, to $761.1 million in fiscal 2008 from $728.1 million in fiscal 2007. The components of this $33.0 million increase in net sales are as follows:
In fiscal 2008, Hot Topic and Torrid each had annual average store volumes, excluding Internet sales, of $0.8 million, compared to $0.8 million and $0.9 million for Hot Topic and Torrid, respectively, in fiscal 2007. Hot Topic division sales of apparel category merchandise, as a percentage of total net sales, was 55% in fiscal 2008 compared to 57% in fiscal 2007. Torrid division sales of apparel category merchandise, as a percentage of total net sales, was 78% in fiscal 2008 compared to 79% in fiscal 2007.
Gross margin increased approximately $21.9 million to $273.3 million in fiscal 2008 from $251.4 million in fiscal 2007. As a percentage of net sales, gross margin increased to 35.9% in fiscal 2008 from 34.5% in fiscal 2007. The components of this 1.4 percentage point increase in gross margin as a percentage of net sales are as follows:
Selling, general and administrative expenses increased approximately $15.4 million to $242.5 million in fiscal 2008 from $227.1 million in fiscal 2007. As a percentage of net sales, selling, general and administrative expenses were 31.9% in fiscal 2008 compared to 31.2% in fiscal 2007. The total dollar increase in selling, general and administrative expenses was primarily attributable to an increase in the performance-based bonus for fiscal 2008, partially offset by a decrease in other store expenses. The components of this 0.7 percentage point increase in selling, general and administrative expenses as a percentage of net sales are as follows:
Income from operations increased to $30.8 million in fiscal 2008 from $24.3 million in fiscal 2007. As a percentage of net sales, income from operations was 4.0% in fiscal 2008 compared to 3.3% in fiscal 2007. Operating income on an average store basis was approximately $37,000 in fiscal 2008 compared to $29,000 in fiscal 2007. Net income included net losses from our ShockHound concept of $2.3 million in fiscal 2008. ShockHound did not impact our net income in fiscal 2007.
Interest income, net of interest expense, and other income as a percentage of sales remained the same at 0.3% in both fiscal 2008 and fiscal 2007.
Our effective tax rate was 39.2% and 39.0% in fiscal 2008 and 2007, respectively. The increase was primarily due to a decrease in non-taxable income arising from lower interest rate yields, an increase in non-deductible expense arising from deferred compensation investment losses and an increase in the liability associated with unrecognized tax benefits. The increase was partially offset by the benefit obtained from federal and state tax research and development credits.
2008 (52 weeks) Compared with 2007 (52 weeks)
Net revenue for 2008 increased 14.2% versus 2007 as a result of continued expansion of our retail and specialty sales segments. Sales of whole bean and related products increased 12.7% to $151.1 million. Sales from beverages and pastries increased 16.0% to $133.8 million.
In the retail segment, net revenue increased 11.5% compared to 2007 as a result of increased sales from new stores and the sales they generated in their first 12 months. Stores operating for at least one year contributed only
a nominal amount of sales growth for the Company. We opened 23 new stores in 2008 and 30 new stores in 2007. Sales of whole bean coffee and related products in the retail segment increased by 3.8% to $55.1 million, while sales of beverages and pastries increased by 15.0% to $132.6 million. The increase in beverage and pastry sales was primarily related to sales at the stores we opened in 2007 and 2008 and increased traffic in our existing stores. The slower growth in whole bean and related products was primarily due to continuing cannibalization of bean sales in retail stores as we increased the availability of Peets coffee in grocery stores and our own new retail stores.
In the specialty sales segment, net revenue increased 19.9% compared to 2007 as summarized by business channel below. The growth in net revenue in grocery was due to the 2,400 new stores we added during 2008, as well as growth in our existing accounts in the western United States. Foodservice and office net revenue increased 34.7% over the prior year primarily due to 38 new licensed partner locations opened during 2008 and 150 additional We Proudly Brew accounts that serve Peets coffee in their own branded locations. Net revenue in the home delivery channel declined primarily due to cannibalization from our grocery business expanding in the eastern U.S. and lower gift sales during the 2008 holiday season.
Cost of sales and related occupancy expenses
Cost of sales and related occupancy expenses consist of product costs, including manufacturing costs, rent and other occupancy costs. As a percent of net revenue, cost of sales decreased from 47.5% in 2007 to 46.9% in 2008. The decrease from 2007 was primarily due to procurement savings (-0.7%), leverage of costs related to the roasting facility that opened in 2007 (-0.4%), and increased prices in retail and grocery (-0.3%), partially offset by higher green coffee costs (0.8%).
Operating expenses consist of both retail store and specialty operating costs, such as employee labor and benefits, repairs and maintenance, supplies, training, travel and banking and card processing fees. Operating expenses as a percent of net revenue for 2008 increased 0.3% to 34.7%. The increase was primarily due to higher costs associated with expanding the grocery business (0.7%), opening 53 new retail stores in 2008 and 2007 (0.2%), partially offset by favorable workers compensation insurance expense (-0.3%) and other cost savings. The favorable workers compensation expense resulted primarily from a decrease in our self-insurance reserve for prior policy years due to favorable claims experience and settlement history.
General and administrative expenses
General and administrative expenses in 2008 were $22.5 million, or 7.9% of net revenue, compared to $22.7 million, or 9.1% in 2007. The decrease in expenses as a percent of net revenue is primarily due to higher net revenue (1.1%) and lower professional fees associated with our stock option review and related litigation (0.5%), partially offset by increases in headcount (0.2%) and various professional services. Professional fees associated with our stock option review and related litigation were $1.4 million in 2007 and $16,000 in 2008. The related lawsuits were dismissed in March 2008.
Depreciation and amortization expenses
Depreciation and amortization expenses increased in 2008 primarily due to the 53 stores we opened during 2008 and 2007.
Interest income, net
We invest in U.S. government, agency, municipal and guaranteed student loan obligations. Interest income, net includes interest income and gains or losses from the sale of these instruments. We earned $726,000 in interest income in 2008, compared to $1.4 million in 2007, due to our lower average cash and investment balances and lower interest rates.
Income tax provision
The effective income tax rate for 2008 was 37.0% compared to 35.8% in 2007. Our effective rate increased 1.2% primarily due to a lower impact from the domestic production deduction and decreased tax-exempt interest income.
52 Weeks Ended December 27, 2008 (Fiscal 2008) Compared to 52 Weeks Ended December 29, 2007 (Fiscal 2007)
Net sales. Net sales decreased to $265.7 million from $274.5 million, a decrease of $8.7 million, or 3.2%, below the prior fiscal year. This reflected $10.5 million of decreased net sales, as a result of a 4.1% decrease in comparable store sales, an increase of $2.2 million of net sales from our wholesale division, and a decrease of $398,000 from our non-comparable store sales. During the first half of fiscal 2008, comparable store sales increased due to a strong customer response to our sportswear assortment and the Company's aggressive pricing strategy. This increase during the first half of fiscal 2008 was offset by a decrease during the second half of fiscal 2008, primarily due to the economic crisis, which resulted in a dramatic reduction in mall traffic where Cache stores are located coupled with a shift in consumer spending pattern that favored lower priced or discounted merchandise. The decrease in net sales during fiscal 2008 reflected a 2.4% increase in the number of sales transactions, which was offset by a 6.3% decrease in average dollars per transactions, we believe primarily due to the economic crisis.
Gross profit. Gross profit decreased to $109.7 million from $127.0 million, a decrease of $17.3 million, or 13.6%, below the prior fiscal year. This decrease was the combined result of lower net sales, as described above, and decreased gross profit margins. As a percentage of net sales, gross profit decreased to 41.3% from 46.3%. This decrease as a percentage of net sales was primarily due to an increase in markdowns combined with the Company's implementation of a new pricing strategy, as compared to the prior fiscal year, and partially due to an increase in operational costs related to our subsidiary AVD, which was acquired during the third quarter of fiscal 2007. The increase in markdowns was due to the significant deterioration in the United States economic environment during the fourth quarter of fiscal 2008. These increased costs were partially offset by savings from increased direct sourcing of merchandise through AVD and a decrease in buying expenses, as compared to the prior fiscal year.
Store operating expenses. Store operating expenses decreased to $95.3 million from $97.0 million, a decrease of $1.7 million, or 1.7%, below the prior fiscal year. As a percentage of net sales, store operating expenses increased to 35.9% from 35.4%. Store operating expenses decreased principally due
to lower marketing ($1.9 million) and payroll ($1.1 million) expenses. A reduction in marketing expense was primarily caused by the Company eliminating all branding (TV and Print) efforts in fiscal 2008, along with a reduction in direct mail advertisements mailed to customers. Payroll expenses were reduced due to a cut back in the number of hours allotted to store employees coupled with a reduction in bonus and commission expense, as a result of decreased sales. The decrease in marketing and payroll expenses were primarily offset by an increase in self insured medical expense ($926,000), due to an increase in claim payments made to the insurance company and depreciation expense ($168,000), due to full twelve months of depreciation and amortization on assets purchased towards the latter part of fiscal 2007, assets purchased to enhance our customer service department and installation of second registers at a majority of our stores.
General and administrative expenses. General and administrative expenses decreased to $21.3 million from $22.7 million, a decrease of $1.4 million or 6.3%, below the prior fiscal year. As a percentage of net sales, general and administrative expenses decreased to 8.0% from 8.3%. General and administrative expenses decreased, primarily due to lower professional fees ($1.5 million) and payroll expenses ($851,000). Professional fees were reduced during fiscal 2008 primarily due to lower audit fees during the current fiscal year and the inclusion of nonrecurring legal settlement costs ($924,000) in the same period last year. Payroll expenses were reduced during fiscal 2008 due to the resignation of the Company's previous Chairman and CEO, as well as the termination of certain employees from the corporate office due to a decline in the business, which resulted from the slowdown in the economy. These decreases were primarily offset by increases in shipping expense ($363,000), due to shipment of our wholesale products, sales commissions ($341,000), paid to an agent for the sale of our wholesale products and depreciation expense ($389,000).
Store exit costs. During fiscal 2008, the Company recorded a pre-tax charge of $2.8 million ($1.7 million after tax or $0.13 per diluted share) for 16 underperforming stores. Of the 16 underperforming stores, the Company closed six during fiscal 2008 and closed an additional eight stores in fiscal 2009. Included in the store exit costs is a write down of equipment and leasehold improvements and furniture and fixtures in the amount of $2.3 million, severance accrual of $198,000 and lease termination costs of $990,000. These costs were offset by the reversal of $750,000 of deferred rent accruals. In fiscal 2007, the Company reversed $78,000 of store closing costs previously reserved in fiscal 2006.
Impairment charges. During fiscal 2008, the Company recorded a pre-tax impairment charge of $1.1 million ($715,000 after tax or $0.05 per diluted share) for 12 underperforming stores. During fiscal 2007, the Company recorded an impairment charge of $73,000 for one store, which was closed in January 2008.
In addition, Cache also recorded an impairment charge of approximately $1.0 million ($624,000 after tax or $0.05 per diluted share) against the carrying value of its goodwill.
Other income/expense. Other income (expense) decreased to $463,000 from $2.6 million, a decrease of $2.1 million, or 82.2%, as compared to the prior fiscal year. This decrease was due to a reduction in interest income of $1.7 million, caused by lower interest rates as well as lower average cash and marketable securities balances, coupled with charges related to interest expense for the note payable recorded in connection with the acquisition of AVD. The reduction in average cash balances was primarily due to the repurchase of the Company's common stock.
Income taxes. During fiscal 2008, an income tax benefit of $4.3 million was recorded as compared to an income tax provision of $3.4 million in the same period last year. The income tax benefit was attributable to the operating loss incurred by the Company during fiscal 2008, as discussed above. The effective rate increased to 37.4% in fiscal 2008 from 34.2% in fiscal 2007.
Net income (loss). As a result of the factors discussed above, net loss of $7.1 million was recorded during fiscal 2008 and net income of $6.5 million was recorded during fiscal 2007, a decrease of $13.6 million, as compared to the prior fiscal year.
This excerpt taken from the VLKAY 8-K filed Feb 11, 2010.
December 31, 2008 compared to the year ended December 31, 2007
Revenues for the year ended December 31, 2008 were $17,405,486 compared to $12,101,497 for the year ended December 31, 2007. In 2008, the Company received several large contracts for the production of Fortrex products resulting in revenue during the year of $6.4 million compared to no Fortrex sales in 2007. Despite overall contraction in building construction in 2008, Paperstone revenue grew to $4.4 million in 2008 from over $2.8 million in 2007 due to market development and expansion. As the construction industry contracted in 2008 due to the recession, revenue from the Overlays unit declined from $6.1 million to $3.6 million.
Gross profit grew to $3,992,602 for the year ended December 31, 2008 from $2,153,819 for the year ended December 31, 2007. Gross profit percentage grew to 22.9% in 2008 from 17.8% in 2007. The percentage improvement was due to the increase in Fortrex contracts in 2008 for which the gross margin percentage was 41%. Raw material costs for PaperStone rose in 2008 as the Company sought higher grade pigments for its various colors. The Company was also affected by higher commodity prices in 2008 which lowered the gross margin percentage for both PaperStone and Overlays.
Operating expenses grew to $2,049,992 in 2008 from $1,822,446 in 2007 due to the hiring of a Controller mid-year in 2008 and the hiring of a Brand Manager, a Senior VP of Product Development, and a Sales and Operations Planning Manager in the fourth quarter of 2008. The Controller was hired in response to increases in the Company’s revenue and associated increases in accounting workload. The Brand Manager position was added to develop and improve the recognition, presence and value of the Company’s brands. The Senior VP of Product Development and the Sales and Operations Planning Manager were hired to develop the Company’s Fortrex capabilities and products.
As of December 31, 2007, Paneltech LLC’s line of credit maximum limit Shorebank Facility was $1,700,000 and further limited to the eligible accounts receivable and inventory. The amount available to Paneltech LLC, over the amount borrowed, was $386,863.
The accounts receivable balance was $1,542,634 on December 31, 2008 and $506,497 on December 31, 2007.
During the year ended December 31, 2008, Paneltech LLC had sales to one customer in the amount of $6,433,320 at 36.4% of total sales. As of December 31, 2008, accounts receivable from the customer was $920,807. This concentration was due to several large Fortrex contracts with one customer.
During the year ended December 31, 2007, Paneltech LLC had sales to two customers in the amount of $1,444,789 and $1,307,812 at 12.3% and 10.7%, respectively. As of December 31, 2007, accounts receivable from these customers were $0 and $68,000, respectively.
The inventory balance was $2,277,592 on December 31, 2008 and $1,786,068 on December 31, 2009.
This excerpt taken from the VLKAY 8-K filed Dec 15, 2009.
Year Ended December 31, 2008 Compared to Year Ended December 31, 2007
The following table sets forth key components of our results of operations for the periods indicated, both in dollars and as a percentage of our net sales. As the reverse acquisition of MenQ was entered into after December 31, 2008 and during the periods indicated Wisegate, MenQ China and MenQ HK were the only entities in our combined business that had operations, the results of operations below refer only to that of Wisegate, MenQ China and MenQ HK.
Net Sales. Our sales grew substantially from $5,614,547 in 2007 to $14,844,024 in 2008, primarily due to the expansion of our business line to develop educational computer programming beginning in 2008, at which time we began to generate revenues from development fees. This expansion of our business enlarged our sales in 2008. We generated 74.1% of our revenues from development fees during fiscal year 2008 and compared to 38.7% in 2007.
Cost of Sales. Our cost of sales increased from $3,652,587 in 2007 to $6,153,524 in 2008, due to the expansion of our business in 2008 to develop educational computer programming and the resulting development fees.
Gross Profit and Gross Margin. Our gross profit increased from $1,961,960 in 2007 to $8,690,500 in 2008, due to the expansion of our business to develop educational computer programming and the resulting development fees, which have a high gross profit margin. Our gross profit margin was improved from 35% in 2007 to 59% in 2008 accordingly.
Selling, General and Administrative Expenses. In 2008, our selling, general and administration expenses rose significantly to $745,562, from $242,871 in 2007, as a result of the expansion our business in the 2008 period. This increase was mainly due to an increase in research and development expenses and marketing expenses.
Other Income. Other income increased to $35,146 in 2008, from $2,708 in 2007 due to exchange gain experienced by the Company for its overseas sales.
Income Before Income Taxes. Our income before income taxes increased to $7,980,084 in 2008 from $1,721,797 in 2007. Such increase was mainly due to significant increases in sales and sales margin as a result of the expansion of our business.
Income Taxes. Income tax increased $921,618 to $1,162,393 in 2008 from $240,775 in 2007. The increase was mainly due to the income contributed by development fees, which is subject to Chinas 10% withholding tax that applies to China-sourced income derived by non-resident enterprises.
Net Income. In 2008, we generated a net income of $6,817,691, an increase of $5,336,669 from $1,481,022 in 2007. Such increase was mainly due to the expansion of our business in 2008 to develop educational computer programming and the resulting development fees.
This excerpt taken from the VLKAY 8-K filed Dec 14, 2009.
Year Ended October 31, 2008 Compared to Year Ended October 31, 2007
Total revenues for the year ended October 31, 2008 were $12,128,852 compared to $12,625,896 for the year ended October 31, 2007, a decrease of $497,044. Gross profit for the year ended October 31, 2008 amounted to $2,397,358 or 19.8% of total revenues compared to $2,650,179 or 20.9% of total revenues for the year ended October 31, 2007.
Total operating expenses amounted to $3,507,003 for the year ended October 31, 2008 compared to $2,315,029 for the year ended October 31, 2007. This $1,192,004 increase relates to re-organizational, transformation and start up costs associated with establishing the router software and firmware division to compliment the distribution business including increased selling, general and administration expenses, expanded facilities, legal, consulting fees, new accounting system, generating marketing materials and collaterals, hiring experienced staff and incurring legal fees associated with negotiating a supply contract with our offshore router manufacturer. These development, transformation and start up costs were funded from proceeds of $1,000,000 raised through a private equity transaction.
The loss from operations amounted to $1,109,845 for the year compared to income from operations of $335,150 for the year ended October 31, 2007. The net loss after interest, stock-based compensation and income taxes amounted to $1,030,994 for the year ended October 31, 2008 as compared to net income of $340,446 for the year ended October 31, 2007.
This excerpt taken from the VLKAY 20-F filed Dec 9, 2009.
Year ended December 31, 2008 Compared to Year ended December 31, 2007
For the year ended December 31, 2008 Global Ship Leases operating activities were comprised almost entirely of the chartering out its vessels under time charters. The combined financial statements comprise two distinct reporting periods, the Predecessor period before the Merger, which completed on August 14, 2008, and the Successor period from that date.
Net cash provided by operating activities was $20.7 million in the period from January 1 to August 14, 2008 reflecting net income of $7.4 million, depreciation and amortization expense of $12.6 million, $5.1 million improvement in net working capital less $3.0 million change in fair value of interest rate derivatives net of settlement of hedges which do not qualify for hedge accounting and $1.5 million payment of drydock costs.
The cash settlement of interest rate derivatives was $4.9 million. The two newly built vessels were purchased in January for $188.7 million, financed by $188.0 borrowings under the credit facility which had been made in December 2007 with the proceeds being placed on deposit.
The net change in cash for the period January 1 to August 14, 2008 was an increase of $14.4 million leaving cash at the end of the period of $16.3 million.
Net cash provided by operating activities for the period from August 15 to December 31, 2008 was $14.0 million reflecting the net loss of $44.0 million, depreciation and amortization expense of $8.9 million, $55.5 million non cash change in fair value of interest rate derivatives net of settlement of hedges which do not qualify for hedge accounting, $1.1 million non cash charge for stock based compensation less $7.5 million settlement of accounts payable and other liabilities mainly associated with the Merger.
The cash settlement of interest rate derivatives was $0.6 million. Net current liabilities of $6.5 million (net of cash of $16.3 million) were acquired in the Merger and $317.4 million was released from the trust account. $147.1 million was used to retire stock in connection with the Merger and $115.0 million of long term debt was repaid. Amendment and other fees relating to the credit facility totaling $3.9 million were paid in connection with the Merger.
Warrant proceeds of $3.0 million were received and placed on restricted deposit. Four vessels were purchased in December 2008 for $257.4 million cash (in addition to the $99 million that had been prepaid through the issuance of 12,375,000 common shares to CMA CGM pursuant to the Merger). The cash payment was mainly financed by additional drawings under the credit facility of $256 million. A deposit of $15.5 million was paid for the two vessels anticipated to be purchased in fourth quarter 2010 and $15.6 million of dividends were paid.
The net change in cash for the period August 15, 2008 to December 31, 2008 was an increase of $25.8 million leaving cash at the end of the period of $26.4 million.
For the year ended December 31, 2007, Global Ship Leases operating activities, largely those of the Predecessor Group until Global Ship Leases acquisition of the 10 secondhand vessels in December 2007, generated $56.6 million. This amount reflects net income of $16.8 million, depreciation and amortization expenses of $18.3 million, $9.1 million change in the fair value of financial derivative instruments less payment of drydock costs of $4.7 million. Improvements in working capital contributed $17.0 million.
For the year ended December 31, 2007, net cash used in Global Ship Leases and the Predecessor Groups investing activities amounted to $183.8 million, almost entirely being the acquisition of the two newly built vessels for $183.7 million.
For the year ended December 31, 2007, net cash received from Global Ship Leases and the Predecessor Groups financing activities was $129.1 million. Drawings under Global Ship Leases credit facility were $401.1 million of which $188.0 million was placed on deposit pending the acquisition of the two newly built vessels in January 2008. A shareholder loan totaling $176.9 million was received from CMA CGM. Out of these inflows, costs of $5.9 million for the credit facility were paid and $146.2 million debt relating to certain vessels when owned by the Predecessor Group was repaid. The remaining cash outflow of $108.8 million is comprised (i) a reduction of $11.9 million in the amount due to CMA CGM within stockholders equity and (ii) a deemed distribution of $96.9 million relating to the difference between the purchase price of the initial fleet paid by Global Ship Lease and the value at which the initial fleet was recorded in the Predecessor Groups financial statements at the dates of sale.
Overall, the net increase in cash and cash equivalents in 2007 was $1.9 million.
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