Clarus Corp (CLAR) 2008 Q4 法說會逐字稿

Good afternoon, ladies and gentlemen. Thank you for waiting. Welcome to Clarus Corporation's Clarus update conference call. At this time, all lines are in listen-only mode.

At this time, I would like to turn the floor over to your host, Mr. Warren Kanders. Mr. Kanders, the floor is yours.

Thank you. Good afternoon, and welcome to the Clarus Corporation's March 3rd, 2009 investor conference call. This is Warren Kanders, Executive Chairman of Clarus, and I am joined by Gary Julien, our Vice President of Corporate Development, Phil Baratelli, our Chief Financial Officer, and Sue Luckfield.

As you may know, it is generally our policy not to provide quarterly updates on the progress or status of the search for an acquisition target. However, given the prevailing conditions in the economy and the financial markets, we wanted to speak to our shareholders regarding the M&A markets, and Clarus' asset redeployment strategy.

Please note that until a transaction is announced, we do not intend to change our policy regarding quarterly updates, and we do not intend to provide for a question-and-answer period on this call. In accordance with Regulation FD, or Fair Disclosure, a replay of this conference call will be made available on Clarus' website, www.Claruscorp.com. Any redistribution, retransmission or rebroadcast of this call in any way, without the expressed written content of Clarus Corporation is strictly prohibited.

Please note that on this call, certain information contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectation, and are subject to risks, uncertainties, and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, expected, estimated, or projected.

The following factors, among others, could cause actual results to differ materially from those described in the forward-looking statements, our ability to secure necessary financing, our ability to implement our redeployment strategy, and integrate and successfully manage any businesses that we acquire, our ability to use our net operating loss carry-forward, or NOL, and other risks and uncertainties that are set forth in the Company's 2008 Annual Report on Form 10-K, and most recent Forms 10-Q and 8-Ks, filed with the Securities and Exchange Commission.

The content of this conference call contains time sensitive information, that is accurate only as of this initial broadcast. The Company undertakes no obligation to make any revisions to the statements contained in our remarks, or to update them to reflect the events or the circumstances occurring after this call. We believe that these are highly unusual times with companies worldwide under varying levels of distress, caused by macro economic weakness, and broad reductions in personal and commercial consumption and investments.

In addition, declining asset values in the deleveraging of financial markets have contributed to anemic credit markets, which make access to debt for ongoing working capital or investment purposes or acquisitions challenging. Lastly, the equity capital markets are essentially not open, as there have been only two IPOs within approximately the past six months, and valuations across all indices have fallen substantially.

The question we would like to address today, is how these conditions affect the ability of Clarus to execute it's asset redeployment strategy. Given market instability, we believe business owners may be holding back from bringing companies to market through traditional auction, or organized sale processes, which is reflected in the dramatic reductions in midmarket M&A transaction volumes, which have declined in excess of 50% over the past year.

Having said that, we believe these difficult market conditions also have created an opportunity for Clarus, and they enhance the value of Clarus' assets. In an environment with little liquidity and few options for raising capital, we anticipate that our ability to provide fresh capital, and a structure that can maximize free cash flow through utilization of our NOL tax plus carry forwards, our net operating loss tax carry forwards, represents an attractive solution for companies and owners with short-term liquidity issues.

We believe the following factors make this an attractive time for Clarus to move ahead with our asset redeployment, specifically valuation expectations, while situation dependent, are largely being reset, as the public markets, being a significant proxy for value, are now off 50% from their highs. There is less competition for assets as many financial sponsors are focused inwardly on their portfolios, and do not have access to historical levels of leverage, and many corporate strategic buyers seeking to preserve cash, and focusing on their core operating businesses.

The deleveraging of the US markets has placed many otherwise healthy companies in financial distress, forcing the divestitures of operating businesses a means of generating liquidity, and we expect owners of operating businesses will seek alternative financing solutions, because of scarcity of capital.

Because of all of these factors, we have seen and expect to continue to see an increase in actionable opportunities, driven by a number of situations, including public companies looking to sell non-core operating divisions as a means to increase liquidity, or unlock the shareholder value, overlevered or liquidity-constrained publicly owned companies, private-equity owned, or entrepreneur-owned operating businesses, and public or private companies with near-term debt maturities that are unable to be refinanced at the same levels.

We are seeing and evaluating an increasing number of opportunities, and we continue to focus on investment criteria, that lend themselves to the creation of long-term shareholder value, such as a positive macroeconomic thesis, a minimum acquisition size objective of 25 million of EBITDA, opportunities for growth for selective strategic acquisitions, and an industry market leader with a substantial, predictable, and recurring revenue streams and cash flows. However, we may go below $25 million of EBITDA in the event we have a near term consolidation opportunity.

In summary, we believe we are well suited to capitalize on these challenging times, given the advantages we bring to a transaction, including our cash balances at approximately $86 million, our tax loss carry forwards of approximately $225 million, which will provide for significant tax savings when combined with an operating business. Our anticipated transaction execution speed, as no shareholder vote will be required to consummate a business combination. The potential for a flexible deal structure, offering cash and/or stock, provides ability for immediate liquidity, and the permanent capital Clarus provides through it's public company listing.

We believe the current market environment is an opportunity for Clarus to provide a solution to someone else's short-term liquidity issues, while also gaining an attractive entry point for Clarus' shareholders, in a business with solid, long-term prospects. We believe with the value of our assets, cash, and our NOLs are worth a premium, and we are guardedly optimistic that 2009 will be a successful year of capital redeployment for Clarus.

I will now turn the discussion over to Phil Baratelli, our Chief Financial Officer, to discuss our financial position.

Thank you, Warren. Good afternoon.

As of December 31, 2008, we had cash, cash equivalents and marketable securities of $86 million, or $4.94 per common share. The current earnings rate is 2.01% as of February 12, 2009, with a weighted average maturity of 37 days.

The portfolio currently consists of money market funds and United States Government agency securities, held in a custody account at JPMorgan. Investment yields have declined, and we expect to incur net losses for the foreseeable future. Our reinvestment rates are currently 97 basis points for money market funds, and 54 basis points for agency securities. And we do not expect interest rates to increase in 2009.

As of December 31, 2008, we had available net operating loss research and experimentation credit and alternative minimum tax credit carry forwards for US federal income tax purposes of approximately $225.4 million, $1.3 million, and $56,000 respectively, which expire in varying amounts beginning in the year 2009, after application of the limitation under Section 382 of the Internal Revenue code. Approximately 90% of our net operating losses expire beginning in 2020 or later. Thank you.

Thank you, Phil. In closing, I would again like to thank everyone for their participation in this afternoon's call, and we look forward to sharing with you our additional updates as they make sense. Thanks again.