##### Table of Contents



FORM 10-K
 SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2005
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For
the transition period from

 to
 Commission
file number 0-27309
 AAVID THERMAL TECHNOLOGIES, INC.
  DELAWARE
(State or other jurisdiction of
incorporation or organization)
    
    02-0466826
(I.R.S. Employer
Identification No.)ONE EAGLE SQUARE, SUITE 509,
CONCORD, NEW HAMPSHIRE

(Address of principal executive offices)
    
    03301
(Zip Code)
    o þ
 o þ
  o þ
 þ
  o þ
  o o þ
 o þ
   
 (1)
    
    Although the Company has not been subject to such filing requirements for the past 90 days,
it has filed all reports required to be filed by Section 15(d) of the Securities Exchange Act
(the Act) of 1934 during the preceding twelve months. Pursuant to Section 15(d) of the Act,
the Companys duty to file reports is automatically suspended as a result of having fewer than
300 holders of record of each class of its debt securities outstanding, as of January 1, 2003,
but the Company agreed under the terms of certain long-term debt covenants to continue these
filings.




---



TABLE OF CONTENTS  PART IITEM 1. BUSINESSITEM 2. PROPERTIESITEM 3. LEGAL PROCEEDINGSITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSPART IIITEM 5. MARKET FOR THE REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERSITEM 6. SELECTED CONSOLIDATED FINANCIAL DATAITEM 7. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSUREITEM 9A. CONTROLS AND PROCEDURESITEM 9B. OTHER INFORMATIONPART IIIITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTITEM 11. EXECUTIVE COMPENSATIONITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONSITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICESPART IVITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 10-KSIGNATURESEX-31.1 Section 302 Certification of CEOEX-31.2 Section 302 Certification of CFOEX-32.1 Section 906 Certification of CEOEX-32.2 Section 906 Certification of CFO    Table of Contents  
 PART I
 
 ITEM 1. BUSINESS
 COMPANY INTRODUCTION
      2




---



##### Table of Contents



INDUSTRY OVERVIEW
 THERMAL MANAGEMENT
    -
    
    Inherent unit growth in end-user products, such as desktop computers, laptops and
telecommunications equipment. In particular, the volume of microprocessors and support chip
units is increasing on an absolute and on a per product basis.-
    
    The wider use of electronic controls in numerous areas due to the general increase
in automation.-
    
    The increasing use of microprocessors in industrial electronics applications,
fueling the need for thermal management products to manage the different operating
temperature characteristics of these devices.
 3




---



##### Table of Contents



-
    
    The increased need for reliable power supplies. The quality of power can be
adversely affected by thermal overload arising from ineffective thermal management. This is
becoming increasingly important within the industrial, computer and telecommunications
sectors where irregular power surges can damage equipment and cause productivity loss.-
    
    The complexity of thermal management problems, which has been intensified by the
increasing amount of heat to be dissipated, reductions in system size, shorter
time-to-market product cycles and more demanding temperature operating environments.
 COMPUTATIONAL FLUID DYNAMICS SOFTWARE
    -
    
    The ability of customers using CFD software to reduce their product development
costs, minimize time-to-market for their new products and improve product performance.-
    
    The ability to analyze fluid flows is becoming increasingly important across a wide
range of industries.-
    
    The development of more powerful and affordable computers that are capable of
running CFD software.-
    
    The growing trend among customers to improve the engineering efficiency of product
development and improvement through computer-aided analysis and design.-
    
    Expansion of the traditional user base for CFD software beyond Ph.D.-level engineers
in corporate research and development centers to the larger base of design engineers.
 COMPETITIVE STRENGTHS
  TOTAL INTEGRATED SOLUTIONS PROVIDER
  4




---



##### Table of Contents



VALUE-ADDED PARTNERING WITH OUR CUSTOMERS
  WORLDWIDE LOW-COST MANUFACTURER
  LEADERSHIP IN CFD SOFTWARE
  RECURRING REVENUES FROM SOFTWARE BUSINESS
  EXPERIENCED MANAGEMENT TEAM
  BUSINESS STRATEGY
  CAPITALIZE ON THERMAL MANAGEMENT INDUSTRY GROWTH
  5




---



##### Table of Contents



TAKE ADVANTAGE OF OUTSOURCING TREND
  EXPAND OUR ADDRESSED THERMAL MANAGEMENT MARKET
  ACCELERATE GROWTH IN COMPUTATIONAL FLUID DYNAMICS SOFTWARE MARKET
  PROVIDE TOTAL THERMAL MANAGEMENT SOLUTIONS ON A GLOBAL BASIS
  LEVERAGE OUR TECHNOLOGICAL LEADERSHIP
  MARKETS AND CUSTOMERS
    6




---



##### Table of Contents



THERMAL MANAGEMENT PRODUCTS AND SERVICES
    PRODUCT OR SERVICE
    
    DESCRIPTION
    
    APPLICATIONHeat Sinks, Fan Heat Sinks and Heat Spreaders
    
    These products are typically made from aluminum extrusions, stampings, castings or
multi-technology assemblies. These products have high surface area to volume ratios and
may rely on a fan mounted directly on the heat sink to increase the movement of air.
    
    -
    Removes potentially damaging heat from microprocessors and integrated circuits in
electronics applicationsInterface Materials and Attachment Accessories
    
    Attachment devices are the spring clips, tapes, adhesives, tabs and similar devices
which are used to attach the heat sink to the semiconductor or integrated circuit
device and/or to the customers printed circuit board or system chassis. Interface
materials include greases, silicon pads and other materials which have desirable
thermal and electrical properties. We purchase most of these materials on a private
label basis from a number of suppliers.
    
    ----
    Increases the effectiveness of heat sinks
Promotes a highly efficient thermal transfer between the microprocessor or integrated
circuit and heat sink
Reduces the cost of the customers installation and repairTransfers heat from the component being cooled to the heat sinkLiquid Cooling and Phase Change Devices
    
    These devices include cold plates, heat pipes and other liquid cooling designs that
dissipate heat by conducting or convecting the heat into a liquid, which then transfers
the heat away from the source to the ultimate heat sink.
    
    -
    Moves highly concentrated heat from microprocessors and integrated circuits to a
location where a traditional heat sink can dissipate heatApplied Thermal Technologies Design Centers
    
    Applied Thermal Technologies facilities are staffed by technicians with thermal
engineering and flow analysis expertise and utilize a variety of sophisticated design,
test and validation hardware and software.
    
    -
-
    Analyzes customers thermal problems at the device-, board-and system-level
Designs, simulates, prototypes, and tests thermal management solutions efficiently
 7




---



##### Table of Contents



COMPUTATIONAL FLUID DYNAMICS SOFTWARE PRODUCTS
      PRODUCT OR SERVICE
    
    DESCRIPTION
    
    FEATURESFluent
    
    Fluent is general purpose CFD software used across a wide range of industries and is ideally
suited for incompressible and mildly compressible (transonic) and highly compressible
(supersonic and hypersonic) flows. Fluent contains physical models for a wide range of
applications including turbulent flows, heat transfer, reacting flows, chemical mixing,
combustion and multi-phase flows.
    
    -
--
    Provides a choice of solver options for optimum convergence and accuracy for a wide
range of flow regimes
Structured and solution adaptive
unstructured mesh capabilityEnables easier problem setupFidap
    
    Fidap is general purpose CFD software for the simulation of incompressible or compressible
flows, including prediction of liquid-free surfaces, non-Newtonion rheology and advanced
radiation modeling.
    
    - -
    Offers complete mesh
flexibilityProvides a wide range of physical models, with particular strength for application
in the materials processing, biomedical, semiconductor, food paper and chemical
industries
 8




---



##### Table of Contents



PRODUCT OR SERVICE
    
    DESCRIPTION
    
    FEATURESIcepak
    
    Icepak is a fully-interactive, object-based CFD software tool specifically designed to
analyze air flow and thermal management in electronics design.
    
    --
    Used for component board- and
cabinet- level design 

Reduces design costs-
    Reduces the time-to-market of high-performance electronic systemsAirpak
    
    Airpak, like Icepak, is a fully interactive, object-based CFD software tool. Airpak is
specifically designed to analyze air flow, contamination and thermal comfort in room and
building designs.
    
    -
    Used to determine the layout of ventilation systems in rooms and buildings in order
to provide maximum comfort and air quality.-
    Assesses the risk of airborne contamination-
    Improves the energy performance of heating and cooling designs.GAMBIT
    
    GAMBIT supports a single user interface for geometry creation and meshing. Different CFD
problems require different mesh types, and GAMBIT brings together all of Fluents options in
one environment.
    
    --
    Reduces the time to create a CFD
modele
Allows users to import geometries created under other CAD/CAE packages into the
Fluent suite of software products.-
    Enables users to automatically create unstructured meshes for extremely complex
geometries-
    Provides a concise and powerful set of solid modeling-based geometry tools with both
geometry and clean-up functionsMixSim
    
    MixSim is a fully interactive, object-based CFD software tool specifically designed to
analyze the fluid flow and blending in stirred tank reactors. Based on, and fully compatible
with FLUENT and GAMBIT, it fully automates and thus simplifies their application to stirred
tank reactors for both CFD beginners and expert users.
    
    -
    Reduces the time to create a CFD model: The geometry is interactively assembled from
application-specific objects (impeller library); the mesh and FLUENT solver case
setup is created fully automatic by the software-
    Flexible interface for the addition of new objects (e.g. arbitrary new agitators) by
the user, including import of CAD files Application-specific results examination
and evaluationFloWizard
    
    FloWizard is a highly automated flow simulation tool that is specifically built for design
and process engineers. It allows engineers to rapidly turn their CAD (computer aided design)
models into fluid flow models without requiring extensive data input.
    
    --
    Basic, steady state fluid flow and
heat transfer analysis.

Accepts files from all major CAD software.-
    A Wizard driven interface that requires minimal user training.
 9




---



##### Table of Contents



SALES AND SUPPORT
  TECHNOLOGY
  I. THERMAL MANAGEMENT TECHNOLOGY
    II. COMPUTATIONAL FLUID DYNAMIC SOFTWARE TECHNOLOGY
  -
    
    automatic unstructured mesh generation, which allows the automatic creation of
meshes,-
    
    numerical algorithms for the accurate solution of fluid flow equations on structured
and unstructured meshes,-
    
    solution adaptive mesh which allows for interactive mesh refinement to provide
improved solution accuracy,-
    
    state-of-the-art physical models for important fluid flow phenomena such as
turbulence, turbulence-chemistry interactions, free surface flows and multiphase flows,-
    
    algorithms for efficient execution on multi-processor computers and distributed
computer networks,-
    
    interactive client/server architecture with a flexible and customizable user
interface, and-
    
    post-processing and data analysis tools.
 10




---



##### Table of Contents



PRODUCT DEVELOPMENT
   SUPPLIERS
   COMPETITION
   BACKLOG AND LICENSE RENEWAL
  11




---



##### Table of Contents



EMPLOYEES
  RISK FACTORS
   RISKS RELATING TO OUR BUSINESS
 WE MAY NOT BE ABLE TO EFFECTIVELY MANAGE OUR INTERNAL GROWTH.
  OUR OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY.
  -
    
    the volume and timing of orders received;-
    
    competitive pricing pressures;-
    
    the availability and cost of raw materials;
 12




---



##### Table of Contents



-
    
    changes in the mix of products and services sold;-
    
    potential cancellation or rescheduling of orders;-
    
    general economic conditions;-
    
    changes in the level of customer inventories of our products;-
    
    the timing of new product and manufacturing process technology introductions by us
or our competitors;-
    
    the availability of manufacturing capacity; and-
    
    market acceptance of new or enhanced products introduced by us.
  OUR BUSINESS IS DEPENDENT ON THE SEMICONDUCTOR MARKET.
   13




---



##### Table of Contents



CHANGES IN THE AVAILABILITY OR PRICE OF ALUMINUM AND COPPER CAN SIGNIFICANTLY AFFECT OUR
BUSINESS AND RESULTS OF OPERATIONS.
   WE SUPPLY PRODUCTS AND SERVICES TO INDUSTRIES THAT EXPERIENCE RAPID TECHNOLOGICAL CHANGE, WHICH
MAY MAKE OUR PRODUCTS OBSOLETE.
  14




---



##### Table of Contents



WE FACE INTENSE COMPETITION, WHICH COULD ADVERSELY AFFECT OUR ABILITY TO MAINTAIN OR INCREASE
SALES OF OUR PRODUCTS.
  OUR BUSINESS EXPERIENCES SEASONAL VARIATIONS.
  WE DEPEND ON KEY PERSONNEL AND SKILLED EMPLOYEES WHO MAY NOT REMAIN WITH US IN THE FUTURE.
  OUR INTERNATIONAL OPERATIONS EXPOSE US TO ADDITIONAL RISKS.
  -
    
    greater difficulties in controlling and administering business;-
    
    less familiarity with business customs and practices;-
    
    increased reliance on key local personnel;-
    
    the imposition of tariffs and import and export controls;-
    
    changes in governmental policies (including U.S. policy toward these countries);
 15




---



##### Table of Contents



-
    
    difficulties caused by language barriers;-
    
    increased difficulty in collecting receivables;-
    
    availability of, and time required for, the transportation of products to and from
foreign countries;-
    
    political instability;-
    
    foreign currency fluctuations; and-
    
    expropriation and nationalization.
    WE MAY BE UNABLE TO PROTECT OUR PROPRIETARY TECHNOLOGY.
  16




---



##### Table of Contents



WE ARE SUBJECT TO EXTENSIVE ENVIRONMENTAL AND OTHER REGULATIONS.
  RISKS RELATED TO OUR INDEBTEDNESS
 OUR SUBSTANTIAL DEBT COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION AND PREVENT US FROM
FULFILLING OUR OBLIGATIONS UNDER THE SENIOR SUBORDINATED NOTES.
  AS OF DECEMBER 31, 2005(DOLLARS IN THOUSANDS)Total debt (including current portion)
    
    
    $ 135,391Stockholders deficit
    
    
    (61,285
    )Debt to stockholders equity
    
    
    N/A
  -
    
    make it difficult for us to satisfy our obligations with respect to the senior
subordinated notes and our obligations under our current senior credit facility (the Loan
and Security Agreement);-
    
    require us to dedicate a substantial portion of our cash flow from operations to
payments on our debt, which will reduce amounts available for working capital, capital
expenditures, research and development and other general corporate purposes;-
    
    limit our flexibility in planning for, or reacting to, changes in our business and
the industry in which we operate;-
    
    increase our vulnerability to general adverse economic and industry conditions;-
    
    place us at a competitive disadvantage compared to our competitors with less debt;
and-
    
    limit our ability to borrow additional funds.
 17




---



##### Table of Contents



TO SERVICE OUR DEBT, WE WILL REQUIRE A SIGNIFICANT AMOUNT OF CASH, WHICH DEPENDS ON MANY FACTORS
BEYOND OUR CONTROL.
   OUR LOAN AND SECURITY AGREEMENT AND THE INDENTURE IMPOSE OPERATIONAL AND FINANCIAL RESTRICTIONS
ON US.
  -
    
    incur more debt;-
    
    pay dividends and make distributions;-
    
    issue stock of subsidiaries;-
    
    make certain investments;-
    
    repurchase stock;-
    
    create liens;-
    
    enter into transactions with affiliates;-
    
    enter into sale-leaseback transactions;-
    
    merge or consolidate; and-
    
    transfer and sell assets.
 18




---



##### Table of Contents



RISKS RELATED TO THE SENIOR SUBORDINATED NOTES
 OUR CONTROLLING STOCKHOLDER, WILLIS STEIN, MAY HAVE INTERESTS THAT CONFLICT WITH HOLDERS OF THE
SENIOR SUBORDINATED NOTES.
  THE SENIOR SUBORDINATED NOTES ARE CONTRACTUALLY SUBORDINATED IN RIGHT OF PAYMENT TO OUR SENIOR
DEBT.
     19




---



##### Table of Contents



WE ARE A HOLDING COMPANY AND OUR ONLY SOURCE OF CASH TO PAY INTEREST ON AND THE PRINCIPAL OF THE
SENIOR SUBORDINATED NOTES IS DISTRIBUTIONS FROM OUR SUBSIDIARIES.
  WE MAY NOT HAVE THE ABILITY TO RAISE THE FUNDS NECESSARY TO FINANCE THE CHANGE OF CONTROL OFFER
REQUIRED BY THE INDENTURE.
  THE SENIOR SUBORDINATED NOTES AND THE GUARANTEES COULD BE VOIDED OR SUBORDINATED TO OUR OTHER
DEBT IF THE ISSUANCE OF THE SENIOR SUBORDINATED NOTES OR THE GUARANTEES CONSTITUTED A FRAUDULENT
CONVEYANCE.
  -
    
    received less than reasonably equivalent value or fair consideration for the
incurrence of such debt; and-
    
    were insolvent or rendered insolvent by reason of such incurrence; or-
    
    were engaged in a business or transaction for which the remaining assets constituted
unreasonably small capital; or-
    
    intended to incur, or believed that we or a subsidiary executing a guarantee thereof
would incur, debts beyond the ability to pay such debts as they matured; or-
    
    intended to hinder, delay or defraud creditors.
 20




---



##### Table of Contents



-
    
    the sum of its debts, including contingent liabilities, were greater than the fair
saleable value of all of its assets; or-
    
    the present fair saleable value of its assets was less than the amount that would be
required to pay its probable liability on its existing debts, including contingent
liabilities, as they become absolute and mature; or-
    
    it could not pay its debts as they become due.
 EFFECT OF ORIGINAL ISSUE DISCOUNT ON HOLDERS OF THE SENIOR SUBORDINATED NOTES.
  
 ITEM 2. PROPERTIES
   21




---



##### Table of Contents



U.S. LOCATIONS
    
    PRINCIPAL ACTIVITYConcord, NH
    
    Corporate Offices, Aavid Thermalloy Corporate OfficesChicago, IL
    
    Fluent-Software Development, Sales and MarketingAustin, TX
    
    Fluent-Software Sales and MarketingDallas, TX
    
    Aavid Thermalloy -Sales and MarketingLaconia, NH
    
    Aavid Thermalloy-ManufacturingLebanon, NH
    
    Fluent-Software Development, Sales
and Marketing
Fluent  Software Sales and Marketing; Applied ThermalSanta Clara, CA
    
    Technologies-Research and Development and ConsultingMorgantown, WV
    
    Fluent-Research and Development and ConsultingAnn Arbor, MI
    
    Fluent-Software Sales and Marketing
 INTERNATIONAL LOCATIONS
    
    PRINCIPAL ACTIVITYToronto, Canada
    
    Aavid Thermalloy-ManufacturingMonterrey, Mexico
    
    Aavid Thermalloy-ManufacturingDarmstadt, Germany
    
    Fluent-Software Sales and MarketingSwindon, U.K
    
    Aavid Thermalloy-ManufacturingSheffield, U.K
    
    Fluent-Software Development, Sales and MarketingBologna, Italy
    
    Aavid Thermalloy-ManufacturingLe Bretonneaux, France
    
    Fluent-Software Sales and MarketingGuang Dong Prov., PRC
    
    Aavid Thermalloy-ManufacturingSingapore
    
    Aavid Thermalloy-Sales and MarketingTaipei, Taiwan
    
    Aavid Thermalloy-Sales and MarketingPune, India
    
    Fluent-Software Development, Sales and Marketing;Applied Thermal Technologies-Research and Development and ConsultingTokyo, Japan
    
    Fluent-Software Development, Sales and MarketingMilan, Italy
    
    Fluent-Software Sales and MarketingGoteborg, Sweden
    
    Fluent-Software Sales and MarketingBrussels, Belgium
    
    Fluent-Software Development, Sales and MarketingShanghai, China
    
    Fluent-Software Development, Sales and Marketing
 
 ITEM 3. LEGAL PROCEEDINGS
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  22




---



##### Table of Contents



PART II
 
 ITEM 5. MARKET FOR THE REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
 MARKET PRICES OF AAVID COMMON STOCK
   23




---



##### Table of Contents



ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
  YEAR ENDED
    
    
    YEAR ENDED
    
    
    YEAR ENDED
    
    
    YEAR ENDED
    
    
    YEAR ENDEDDECEMBER 31,
    
    
    DECEMBER 31,
    
    
    DECEMBER 31,
    
    
    DECEMBER 31,
    
    
    DECEMBER 31,2001
    
    
    2002
    
    
    2003
    
    
    2004
    
    
    2005STATEMENT OF OPERATIONS DATA:
(AMOUNTS IN THOUSANDS)Net sales
    
    $
    170,892
    
    
    $
    161,942
    
    
    $
    188,167
    
    
    $
    227,131
    
    
    $
    256,488Cost of goods sold
    
    
    124,000
    
    
    
    88,532
    
    
    
    97,061
    
    
    
    112,232
    
    
    
    127,331Gross profit
    
    
    46,892
    
    
    
    73,410
    
    
    
    91,106
    
    
    
    114,899
    
    
    
    129,157Selling, general and administrative expenses
    
    
    92,742
    
    
    
    58,835
    
    
    
    62,565
    
    
    
    68,924
    
    
    
    73,974Research and development
    
    
    10,775
    
    
    
    12,492
    
    
    
    15,004
    
    
    
    16,658
    
    
    
    18,603Intangible asset impairment charge(1)
    
    
    115,210
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,861Restructuring charge (credit)(2)
    
    
    16,885
    
    
    
    858
    
    
    
    (90
    )
    
    
    (6
    )
    
    
    Loss on sale of division(3)
    
    
    4,322
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Income (loss) from continuing operations
    
    
    (193,042
    )
    
    
    1,225
    
    
    
    13,627
    
    
    
    29,323
    
    
    
    34,719Interest expense, net
    
    
    (22,217
    )
    
    
    (20,141
    )
    
    
    (18,137
    )
    
    
    (17,940
    )
    
    
    (18,261
    )Other income (expense), net
    
    
    1,098
    
    
    
    453
    
    
    
    2,483
    
    
    
    1,077
    
    
    
    (322
    )Income (loss) from continuing operations
before income taxes and minority interest
    
    
    (214,161
    )
    
    
    (18,463
    )
    
    
    (2,027
    )
    
    
    12,460
    
    
    
    16,136Benefit (provision) for income taxes
    
    
    10,959
    
    
    
    (817
    )
    
    
    (1,627
    )
    
    
    (4,807
    )
    
    
    (8,272
    )Income (loss) from continuing operations
before minority interest
    
    
    (203,202
    )
    
    
    (19,280
    )
    
    
    (3,654
    )
    
    
    7,653
    
    
    
    7,864Minority interest
    
    
    3,294
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Income (loss) from continuing operations
    
    
    (199,908
    )
    
    
    (19,280
    )
    
    
    (3,654
    )
    
    
    7,653
    
    
    
    7,864Income (loss) from discontinued operations,
net (including gain on disposal of $7,082 in
2002)(4)
    
    
    1,445
    
    
    
    6,725
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss)(5)
    
    $
    (198,463
    )
    
    $
    (12,555
    )
    
    $
    (3,654
    )
    
    $
    7,653
    
    
    $
    7,864BALANCE SHEET DATA AT YEAR END:Working capital
    
    $
    (152,980
    )
    
    $
    (19,359
    )
    
    $
    (18,276
    )
    
    $
    (12,751
    )
    
    $
    (5,251
    )Total assets
    
    
    175,294
    
    
    
    139,052
    
    
    
    145,693
    
    
    
    171,690
    
    
    
    184,452Total long term debt, including current portion
    
    
    175,832
    
    
    
    139,450
    
    
    
    138,810
    
    
    
    138,467
    
    
    
    135,391Stockholders deficit
    
    
    (70,888
    )
    
    
    (70,416
    )
    
    
    (75,331
    )
    
    
    (67,639
    )
    
    
    (61,285
    )
 24




---



##### Table of Contents



NOTES TO SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA (AMOUNTS IN THOUSANDS)
 (1)
    
    In the fourth quarter of 2001 and in accordance with SFAS 121, we recorded an impairment
charge related to goodwill and intangible assets acquired in connection with the Merger. In
the fourth quarter of 2005 and in accordance with SFAS 142 and SFAS 144, we recorded an
impairment charge related to goodwill, fixed assets and intangible assets acquired in
connection with the acquisition of a small Taiwanese manufacturing company that occurred in
2004.
 (2)
    
    Restructuring charges of $16,885 in 2001 were recorded in connection with the cessation of
manufacturing activities at the Dallas, Texas, Terrell, Texas and Loudwater, United Kingdom
facilities, reduction of the New Hampshire workforce and reduction of China workforce
including closure of the fan factory and write-off of associated fixed assets. Restructuring
charges of $858 in 2002 were recorded in the fourth quarter of 2002 in connection with the
reduction in workforce and cessation of manufacturing activities in Singapore and Malaysia.
Restructuring credit of $90 in 2003 and $6 in 2004 consists of excess accruals originally
recorded in Singapore that were reversed once actual restructuring activities were concluded
in 2003 and 2004.
 (3)
    
    Represents loss realized on sale of Franklin, New Hampshire extrusion plant that occurred in
the fourth quarter of 2001.
 (4)
    
    On July 17, 2002, the Company sold all of the outstanding shares of Aavid Thermalloy
Holdings, GmbH, which in turn owned approximately 89.5% of the outstanding shares of curamik
electronics GmbH, pursuant to a Share Sale and Purchase Agreement between the Company and
Electrovac Fabrikation Electrotechnischer Spezialartikel GesmbH dated July 10, 2002 (the Sale
Agreement). The sale of Curamik and its related operating results have been excluded from
income (losses) from continuing operations and is classified as a discontinued operation for
all periods presented, in accordance with the requirements of SFAS No. 144 Accounting for
Impairment or Disposal of Long-Lived Assets.
 (5)
    
    Because the Companys common stock is not publicly traded, earnings per share information is
not presented.
 25




---



##### Table of Contents



ITEM 7. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  OVERVIEW AND EXECUTIVE SUMMARY
     26




---



##### Table of Contents



27




---



##### Table of Contents



RESULTS OF OPERATIONS
  YEAR ENDED DECEMBER 31,2003
    
    
    2004
    
    
    2005Net sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of goods sold
    
    
    51.6
    
    
    
    49.4
    
    
    
    49.6Gross profit
    
    
    48.4
    
    
    
    50.6
    
    
    
    50.4Selling, general and administrative expenses
    
    
    33.2
    
    
    
    30.4
    
    
    
    28.9Research and development
    
    
    8.0
    
    
    
    7.3
    
    
    
    7.3Asset impairment charges
    
    
    
    
    
    
    
    
    
    
    0.7Income from operations
    
    
    7.2
    
    
    
    12.9
    
    
    
    13.5Interest expense, net
    
    
    (9.6
    )
    
    
    (7.9
    )
    
    
    (7.1
    )Other income(expense), net
    
    
    1.3
    
    
    
    0.5
    
    
    
    (0.1
    )Income (loss) before income taxes
    
    
    (1.1
    )
    
    
    5.5
    
    
    
    6.3Provision for income taxes
    
    
    (0.8
    )
    
    
    (2.1
    )
    
    
    (3.2
    )Net income (loss)
    
    
    (1.9
    )%
    
    
    3.4
    %
    
    
    3.1
    %
 2005 COMPARED WITH 2004
 YEAR ENDEDDECEMBER 31,NET SALES (DOLLARS IN MILLIONS)
    
    2004
    
    
    2005
    
    
    CHANGEComputer, Networking and Industrial Electronics
    
    $
    121.6
    
    
    $
    133.1
    
    
    
    9.5
    %Consulting and Design (Applied)
    
    
    1.1
    
    
    
    1.6
    
    
    
    36.9
    %Total Aavid Thermalloy
    
    
    122.7
    
    
    
    134.7
    
    
    
    9.8
    %Total Fluent
    
    
    104.3
    
    
    
    121.7
    
    
    
    16.8
    %Total Enductive Solutions
    
    
    0.1
    
    
    
    0.1
    
    
    
    Total Aavid Thermal Technologies
    
    $
    227.1
    
    
    $
    256.5
    
    
    
    12.9
    %
     28




---



##### Table of Contents



(DOLLARS IN MILLIONS)
    
    2005Goodwill
    
    $
    0.6Developed technology
    
    
    1.1Non-compete agreements
    
    
    0.1Fixed assets
    
    
    0.1Total
    
    $
    1.9
     29




---



##### Table of Contents



FOR THE YEAR ENDEDDECEMBER 31,
    
    
    DECEMBER 31,(DOLLARS IN MILLIONS)
    
    2005
    
    
    2004Net income (loss)
    
    $
    7.9
    
    
    $
    7.7Cash interest expense
    
    
    16.7
    
    
    
    16.5Bond discount amortization
    
    
    0.9
    
    
    
    0.8Deferred financing fee amortization
    
    
    1.1
    
    
    
    1.0Provision for income taxes
    
    
    8.3
    
    
    
    4.8Depreciation
    
    
    6.8
    
    
    
    7.3Intangible asset amortization
    
    
    0.9
    
    
    
    0.8Deferred revenue change during period (1)
    
    
    1.7
    
    
    
    5.5Loss on disposal of fixed assets
    
    
    0.2
    
    
    
    0.0Asset impairment charge
    
    
    1.9
    
    
    
    EBITDA
    
    $
    46.4
    
    
    $
    44.4
 
 (1)
    
    Change in deferred revenue as defined in the Loan and Security Agreement represents the net
change in deferred revenue found on the Companys balance sheet from the beginning of the
applicable reporting period to the end of the applicable reporting period. An increase in
deferred revenue during the period will increase EBITDA. A decrease in deferred revenue during
the period will decrease EBITDA, as defined.  30




---



##### Table of Contents



2004 COMPARED WITH 2003
 YEAR ENDEDDECEMBER 31,NET SALES (DOLLARS IN MILLIONS)
    
    2003
    
    
    2004
    
    
    CHANGEComputer, Networking and Industrial Electronics
    
    $
    100.5
    
    
    $
    121.6
    
    
    
    21.0
    %Consulting and Design (Applied)
    
    
    1.1
    
    
    
    1.1
    
    
    
    Total Aavid Thermalloy
    
    
    101.6
    
    
    
    122.7
    
    
    
    20.8
    %Total Fluent
    
    
    86.5
    
    
    
    104.3
    
    
    
    20.6
    %Total Enductive Solutions
    
    
    0.1
    
    
    
    0.1
    
    
    
    Total Aavid Thermal Technologies
    
    $
    188.2
    
    
    $
    227.1
    
    
    
    20.7
    %
        31




---



##### Table of Contents



32




---



##### Table of Contents



FOR THE YEAR ENDEDDECEMBER 31,
    
    
    DECEMBER 31,(DOLLARS IN MILLIONS)
    
    2004
    
    
    2003Net income (loss)
    
    $
    7.7
    
    
    $
    (3.7
    )Cash interest expense
    
    
    16.5
    
    
    
    16.7Bond discount amortization
    
    
    0.8
    
    
    
    0.7Deferred financing fee amortization
    
    
    1.0
    
    
    
    1.0Provision for income taxes
    
    
    4.8
    
    
    
    1.6Depreciation
    
    
    7.3
    
    
    
    8.0Intangible asset amortization
    
    
    0.8
    
    
    
    3.5Deferred revenue change during period (1)
    
    
    5.5
    
    
    
    7.8Loss on disposal of fixed assets
    
    
    0.0
    
    
    
    0.2Restructuring charges(credits)
    
    
    
    
    
    
    (0.1
    )EBITDA
    
    $
    44.4
    
    
    $
    35.7
 
 (1)
    
    Change in deferred revenue as defined in the Loan and Security Agreement represents the
net change in deferred revenue found on the Companys balance sheet from the beginning of
the applicable reporting period to the end of the applicable reporting period. An increase
in deferred revenue during the period will increase EBITDA. A decrease in deferred revenue
during the period will decrease EBITDA, as defined.  NEW ACCOUNTING PRONOUNCEMENTS
  33




---



##### Table of Contents



CRITICAL ACCOUNTING POLICIES
  REVENUE RECOGNITION AND SALES RETURNS AND ALLOWANCES
 Thermal Products
  Software
      34




---



##### Table of Contents



ACCOUNTS RECEIVABLE
  INVENTORIES
  VALUATION OF GOODWILL AND OTHER INTANGIBLE ASSETS
  35




---



##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES
     36




---



##### Table of Contents



PAYMENTS DUE BY PERIOD ($ IN THOUSANDS)LESS THANCONTRACTUAL OBLIGATIONS
    
    TOTAL
    
    
    1 YEAR
    
    
    1-3 YRS
    
    
    4-5 YRS
    
    
    5+ YRSLong-term debt and capital leases
    
    $
    135,391
    
    
    $
    11,480
    
    
    $
    123,437
    
    
    $
    132
    
    
    $
    342Operating leases
    
    
    16,802
    
    
    
    6,284
    
    
    
    5,782
    
    
    
    2,600
    
    
    
    2,136Total contractual obligations
    
    $
    152,193
    
    
    $
    17,764
    
    
    $
    129,219
    
    
    $
    2,732
    
    
    $
    2,478
   37




---



##### Table of Contents



ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
   
 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  
 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A. CONTROLS AND PROCEDURES
 (1)
    
    Evaluation of disclosure controls and procedures. Based on their evaluation of our
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934) as of December 31, 2005, our chief executive officer and
chief financial officer have concluded that our disclosure controls and procedures were
effective in ensuring that information required to be disclosed by us in this report is
made known to the chief executive officer and chief financial officer by others within
Aavid during the period in which the report was being prepared.(2)
    
    Changes in internal controls. There were no significant changes in our internal
controls or in other factors that could significantly affect these controls subsequent to
the date of their most recent evaluation.
 
 ITEM 9B. OTHER INFORMATION
  38




---



##### Table of Contents



PART III
 
 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
 DIRECTORS
  YEARFIRSTBECAME
    
    PRINCIPAL OCCUPATIONNAME
    
    AGE
    
    DIRECTOR
    
    DURING THE PAST FIVE YEARSBharatan R. Patel
    
    
    57
    
    
    
    1996
    
    
    Mr. Patel has been the Chief
Executive Officer of the
Company since January 1,
2000. He served as President
and Chief Operating Officer
of the Company from October
1997 to December 1999 and
the President until 1998 and
Chief Executive Officer of
Fluent, Inc., a subsidiary
of the Company (Fluent),
since 1988, when Fluent was
formed as a subsidiary of
Creare Inc. (Creare), an
engineering consulting firm;
various capacities at Creare
since 1976, including
principal engineer and vice
president, and established
the Fluent division upon its
formation in 1983; senior
engineer from 1971 to 1976
in the Power Systems Group
of Westinghouse Electric
Corporation.Daniel H. Blumenthal
    
    
    42
    
    
    
    2000
    
    
    Mr. Blumenthal became a
director upon consummation
of the Merger on February 2,
2000. Mr. Blumenthal has
been a managing director of
Willis Stein & Partners
since its inception in 1994.
Prior to that time, he
served as vice president of
Continental Illinois Venture
Corporation, or CIVC, a
private equity investment
firm, from 1993 to 1994.
From 1988 to 1993 he was a
corporate tax attorney with
Latham & Watkins, a national
law firm. Mr. Blumenthal
currently serves as a
director of several
companies, including Ziff
Davis Holdings, Inc. and
other Willis Stein portfolio
companies.John R. Willis
    
    
    56
    
    
    
    2001
    
    
    Mr. Willis became a director
in October, 2001. Mr. Willis
has been a managing director
of Willis Stein & Partners
since its inception in 1994.
Prior to that time, he
served as the president and
a director of CIVC, a
private equity investment
firm from 1989 to 1994. In
1988, he founded Continental
Mezzanine Investment Group,
and was its Manager through
1990. From 1974 until 1988,
Mr. Willis held various
management positions at
Continental Bank. He
currently serves as a
director of several
companies, including
Roundys Inc., Ziff Davis
Holdings, Inc. and other
Willis Stein portfolio
companies.Christopher G. Boehm
    
    
    33
    
    
    
    2003
    
    
    Mr. Boehm became a director
in October, 2003 and also
serves as a director of
several other Willis Stein
portfolio companies. Prior
to joining Willis Stein &
Partners in 1996, Mr. Boehm
was in the investment
banking division at Salomon
Brothers Inc, where he was
involved with a variety of
mergers and acquisitions and
corporate finance
transactions. Mr. Boehm
received an M.B.A. from
Harvard Universitys
Graduate School of Business
Administration and holds a
B.S. in Finance and
Accountancy from Miami
University.
 39




---



##### Table of Contents



YEARFIRSTBECAME
    
    PRINCIPAL OCCUPATIONNAME
    
    AGE
    
    DIRECTOR
    
    DURING THE PAST FIVE YEARSCharles A. Dickinson
    
    
    82
    
    
    
    1997
    
    
    Mr. Dickinson has twice
served as chairman of the
board of Solectron
Corporation, from 1986 to
1990 and from 1993 to 1996,
where he has been a director
since 1984; from 1991 until
February 1996, he was
responsible for establishing
Solectron Europe. Mr.
Dickinson has held various
management positions in
manufacturing and technology
companies. From 1986 until
1990 he served as chief
executive officer and
chairman of Vermont
Microsystems; prior thereto
he was chief executive
officer and president of
Data Products Corporation,
having been promoted from
vice president of
operations, a position he
had held since 1978.David R. A. Steadman
    
    
    67
    
    
    
    1994
    
    
    Mr. Steadman served as
Chairman of the Board from
February 1995 until October
1996; Director of Tech/Ops
Sevcon, Inc., a
manufacturing company;
Chairman of Visibility,
Inc., a software company,
from November 1996 until
July, 2000; Chairman of
Brookwood Companies
Incorporated, a textile
converter, dyer and
finisher, since March 1989;
chairman of Technology
Service Group, Inc., a
manufacturer of
coin-operated telephones,
from November 1994 to
December 1997; president of
Atlantic Management
Associates, Inc., a
management services and
investment group, since
November 1988; chairman and
chief executive officer of
Integra-A Hotel and
Restaurant Company from July
1990 to March 1994; chairman
and chief executive officer
of GCA Corporation from 1987
to July 1990; various
positions within the
Raytheon Company from 1975
to 1978 and 1980 to 1987;
and Mr. Steadman served as
chairman of a group of
subsidiaries of EMI Ltd. in
the United Kingdom,
Australia and the United
States from 1978 to 1980.
 MEETINGS OF THE BOARD OF DIRECTORS
   BOARD COMMITTEES
  40




---



##### Table of Contents



EXECUTIVE OFFICERS
  NAME
    
    AGE
    
    POSITIONBharatan R. Patel
    
    
    57
    
    
    Chairman of the Board, President and Chief
Executive Officer, Aavid Thermal Technologies, Inc.
and Aavid Thermalloy; Chief Executive Officer,
Fluent; DirectorBrian A. Byrne
    
    
    58
    
    
    Vice President and Chief Financial OfficerJohn W. Mitchell
    
    
    57
    
    
    Vice President and General Counsel, AavidH. Ferit Boysan
    
    
    58
    
    
    President and Chief Operating Officer, FluentPeter L. Christie
    
    
    60
    
    
    Vice President and Chief Financial Officer of Fluent
 BHARATAN R. PATEL, PH.D.
 BRIAN A. BYRNE
 JOHN W. MITCHELL
 H. FERIT BOYSAN, PH.D.
 PETER L. CHRISTIE
 CODE OF ETHICS
  41




---



##### Table of Contents



ITEM 11. EXECUTIVE COMPENSATION
 COMPENSATION OF EXECUTIVE OFFICERS
  SUMMARY COMPENSATION TABLE
 COMPENSATIONANNUALNAME AND PRINCIPAL POSITION
    
    FISCAL YEAR
    
    SALARY
    
    BONUSBharatan R. Patel
    
    
    2005
    
    
    $
    446,250
    
    
    $
    199,251Chief Executive Officer
    
    
    2004
    
    
    $
    438,584
    
    
    $
    312,0922003
    
    
    $
    425,000
    
    
    $
    239,700Brian A. Byrne
    
    
    2005
    
    
    $
    262,500
    
    
    $
    70,324Vice President and Chief Financial Officer
    
    
    2004
    
    
    $
    256,747
    
    
    $
    110,3152003
    
    
    $
    250,000
    
    
    $
    84,000H. Ferit Boysan
    
    
    2005
    
    
    $
    215,000
    
    
    $
    168,122President and Chief Operating Officer of Fluent
    
    
    2004
    
    
    $
    215,000
    
    
    $
    170,1252003
    
    
    $
    214,600
    
    
    $
    158,309John W. Mitchell
    
    
    2005
    
    
    $
    262,500
    
    
    $
    78,060Vice President, General Counsel and Secretary
    
    
    2004
    
    
    $
    259,900
    
    
    $
    122,2662003
    
    
    $
    250,000
    
    
    $
    93,060Peter L. Christie
    
    
    2005
    
    
    $
    161,893
    
    
    $
    126,176Chief Financial Officer of Fluent
    
    
    2004
    
    
    $
    156,805
    
    
    $
    126,9212003
    
    
    $
    152,000
    
    
    $
    117,781
 EMPLOYMENT AGREEMENTS
   42




---



##### Table of Contents



COMPENSATION OF DIRECTORS
  
 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 BENEFICIAL OWNERSHIP OF COMMON STOCK
  43




---



##### Table of Contents



BENEFICIAL OWNERSHIP(1)
 SERIES ACLASS A
    
    
    
    
    
    
    PREFERREDCOMMON AND
    
    
    
    
    
    
    ANDCLASS B
    
    
    
    
    
    
    SERIES BNAME OF SECURITY HOLDER
    
    COMMON STOCK
    
    
    PERCENT
    
    
    PREFERRED
    
    
    PERCENTWillis Stein & Partners Management II, L.L.C.(3)
    
    
    4,358,846.57
    
    
    
    66.73
    %
    
    
    0.00
    
    
    
    0.00
    %Willis Stein & Partners Management III, L.L.C. (4)
    
    
    0.00
    
    
    
    0.00
    %
    
    
    1,039,748.31
    
    
    
    73.01
    %The Chase Manhattan Bank, as Trustee For First Plaza
Group Trust (5)
    
    
    1,068,344.75
    
    
    
    16.35
    %
    
    
    232,909.15
    
    
    
    16.35
    %Abbott Capital (6)
    
    
    427,337.90
    
    
    
    6.54
    %
    
    
    93,163.66
    
    
    
    6.54
    %Nassau Capital (7)
    
    
    427,337.90
    
    
    
    6.54
    %
    
    
    50,266.51
    
    
    
    3.53
    %BancBoston Investments, Inc. (8)
    
    
    213,668.95
    
    
    
    3.27
    %
    
    
    0.00
    
    
    
    0.00
    %Bharatan R. Patel
    
    
    21,366.89
    
    
    
    0.33
    %
    
    
    4,658.18
    
    
    
    0.33
    %H. Ferit Boysan
    
    
    6,410.07
    
    
    
    0.10
    %
    
    
    1,397.45
    
    
    
    0.10
    %John W. Mitchell
    
    
    6,410.07
    
    
    
    0.10
    %
    
    
    1,397.45
    
    
    
    0.10
    %Michael Engelman
    
    
    1,282.01
    
    
    
    0.02
    %
    
    
    279.49
    
    
    
    0.02
    %Peter L. Christie
    
    
    1,068.34
    
    
    
    0.02
    %
    
    
    232.91
    
    
    
    0.02
    %Swaminathan Subbiah
    
    
    427.34
    
    
    
    0.01
    %
    
    
    93.16
    
    
    
    0.01
    %Total
    
    
    6,532,500.79
    
    
    
    100.00
    %
    
    
    1,424,146.27
    
    
    
    100.00
    %
 SERIES C
    
    
    
    
    
    
    FULLYPREFERRED
    
    
    
    
    
    
    DILUTED, ASAND
    
    
    
    
    
    
    CONVERTEDSERIES D
    
    
    
    
    
    
    (EACH COMMONNAME OF SECURITY HOLDER
    
    PREFERRED
    
    
    PERCENT
    
    
    CLASS)(2)
    
    
    PERCENTWillis Stein & Partners Management II, L.L.C.(3)
    
    
    0.00
    
    
    
    0.00
    %
    
    
    4,358,846.57
    
    
    
    46.83
    %Willis Stein & Partners Management III, L.L.C. (4)
    
    
    476,357.44
    
    
    
    92.89
    %
    
    
    2,313,579.30
    
    
    
    24.86
    %The Chase Manhattan Bank, as Trustee For First Plaza
Group Trust (5)
    
    
    0.00
    
    
    
    0.00
    %
    
    
    1,286,016.85
    
    
    
    13.82
    %Abbott Capital (6)
    
    
    33,546.29
    
    
    
    6.54
    %
    
    
    608,903.35
    
    
    
    6.54
    %Nassau Capital (7)
    
    
    0.00
    
    
    
    0.00
    %
    
    
    474,315.95
    
    
    
    5.10
    %BancBoston Investments, Inc. (8)
    
    
    0.00
    
    
    
    0.00
    %
    
    
    213,668.95
    
    
    
    2.30
    %Bharatan R. Patel
    
    
    1,677.31
    
    
    
    0.33
    %
    
    
    30,445.17
    
    
    
    0.33
    %H. Ferit Boysan
    
    
    503.19
    
    
    
    0.10
    %
    
    
    9,133.55
    
    
    
    0.10
    %John W. Mitchell
    
    
    503.19
    
    
    
    0.10
    %
    
    
    9,133.55
    
    
    
    0.10
    %Michael Engelman
    
    
    100.64
    
    
    
    0.02
    %
    
    
    1,826.71
    
    
    
    0.02
    %Peter L. Christie
    
    
    83.87
    
    
    
    0.02
    %
    
    
    1,522.26
    
    
    
    0.02
    %Swaminathan Subbiah
    
    
    33.55
    
    
    
    0.01
    %
    
    
    608.90
    
    
    
    0.01
    %Total
    
    
    512,805.48
    
    
    
    100.00
    %
    
    
    9,308,001.11
    
    
    
    100.00
    %
 
 (1)
    
    Beneficial ownership means any person who, directly or indirectly, has or shares voting or
investment power with respect to a security or has the right to acquire such power within 60
days. Unless otherwise indicated, we believe that each holder has sole voting and investment
power with regard to the equity interests listed as beneficially owned.(2)
    
    Each share of Series A preferred stock is convertible into approximately .9346 shares of
Class A common stock and each share of Series B preferred stock is convertible into
approximately .9346 shares of Class B common stock. Each share of Series C preferred stock is
convertible into approximately 2.817 shares of Class A common stock, and each share of Series
D preferred stock is convertible into approximately 2.817 shares of Class B common stock. 44




---



##### Table of Contents



(3)
    
    Consists of 4,096,770.66 shares of each of Class A common stock and Class B common stock
directly beneficially held by Willis Stein & Partners II, L.P. and 262,075.91 shares of each
of Class A common stock and Class B common stock directly beneficially held by Willis Stein &
Partners Dutch, L.P. Willis Stein & Partners Management II, L.L.C. is the general partner of
the general partner of both partnerships and may be deemed to beneficially own such shares.
John R. Willis and Daniel H. Blumenthal are managing directors and Christopher G. Boehm is a
principal of Willis Stein & Partners Management II, L.L.C. As a result of such relationships,
Messrs. Willis, Blumenthal and Boehm may be deemed to beneficially own the shares of stock
beneficially owned by the partnerships and their general partners, but each of Messrs. Willis,
Blumenthal and Boehm disclaim beneficial ownership of any of such shares. The address of
Willis Stein & Partners Management II, L.L.C. and each partnership is One North Wacker Drive,
Suite 4800, Chicago, IL 60606.(4)
    
    Consists of (a) 972,735.80 shares of each of Series A preferred stock and Series B preferred
stock and 445,655.86 shares of each of Series C preferred stock and Series D preferred stock
directly beneficially held by Willis Stein & Partners III, L.P., (b) 29,288.68 shares of each
of Series A preferred stock and Series B preferred stock and 13,418.52 shares of each of
Series C preferred stock and Series D preferred stock directly beneficially held by Willis
Stein & Partners Dutch III-A, L.P., (c) 29,288.68 shares of each of Series A preferred stock
and Series B preferred stock and 13,418.52 shares of each of Series C preferred stock and
Series D preferred stock directly beneficially held by Willis Stein & Partners Dutch III-B,
L.P. and (d) 8,435.15 shares of each of Series A preferred stock and Series B preferred stock
and 3,864.54 shares of each of Series C preferred stock and Series D preferred stock directly
beneficially held by Willis Stein & Partners III-C, L.P. Willis Stein & Partners Management
III, L.L.C. is the general partner of the general partner of each partnership and may be
deemed to beneficially own such shares. John R. Willis and Daniel H. Blumenthal are managing
directors and Christopher G. Boehm is a principal of Willis Stein & Partners Management III,
L.L.C. As a result of such relationships, Messrs. Willis, Blumenthal and Boehm may be deemed
to beneficially own the shares of stock beneficially owned by the partnerships and their
general partners, but each of Messrs. Willis, Blumenthal and Boehm disclaim beneficial
ownership of any of such shares. The address of Willis Stein & Partners Management III, L.L.C.
and each partnership is One North Wacker Drive, Suite 4800, Chicago, IL 60606.(5)
    
    The Chase Manhattan Bank acts as the trustee for the First Plaza Group Trust, a trust under
and for the benefit of certain employee benefit plans of General Motors Corporation (GM),
its subsidiaries and unrelated employers. These shares may be deemed to be owned beneficially
by General Motors Investment Management Corporation (GMIMCo), a wholly-owned subsidiary of
GM. GMIMCos principal business is providing investment advice and investment management
services with respect to the assets of certain employee benefit plans of GM, its subsidiaries
and unrelated employers, and with respect to the assets of certain direct and indirect
subsidiaries of GM and associated entities. GMIMCo is serving as the trusts investment
manager with respect to these shares and in that capacity it has the sole power to direct the
trustee as to the voting and disposition of these shares. Because of the trustees limited
role, beneficial ownership of the shares by the trustee is disclaimed. First Plaza Group
Trusts address is c/o GMIMCo, 767 Fifth Ave., 16th Floor, New York, NY 10153.(6)
    
    Consists of (a) 333,857.73 shares of each of Class A common stock and Class B common stock
directly beneficially held by Abbott Capital 1330 Investors II, L.P., (b) 66,771.55 shares of
each of Class A common stock and Class B common stock, 93,163.66 shares of each of Series A
preferred stock and Series B preferred stock, and 31,804.53 shares of each of Series C
preferred stock and Series D preferred stock directly beneficially held by Abbott Capital
Private Equity Fund III, L.P. and (c) 26,708.62 shares of each of Class A common stock and
Class B common stock and 1,741.76 shares of each of Series C preferred stock and Series D
preferred stock directly beneficially held by BNY Partners Fund, L.L.C. The address of such
funds is c/o Abbott Capital Management, LLC, 1211 Avenue of the Americas, Suite 4300, New
York, New York 10036. 45




---



##### Table of Contents



(7)
    
    Consists of (a) 424,061.76 shares of each of Class A common stock and Class B common stock,
and 49,881.15 shares of each of Series A preferred stock and Series B preferred stock directly
beneficially held by Nassau Capital Partners III, L.P., and (b) 3,276.14 shares of each of
Class A common stock and Class B common stock and 385.36 shares of each of Series A preferred
stock and Series B preferred stock directly beneficially held by NAS Partners I L.L.C. Such
funds address is 22 Chambers Street, Princeton, New Jersey 08542.(8)
    
    BancBostons address is 175 Federal Street, 10th Floor, Boston, Massachusetts 02110.   
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
  
 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
 INDEPENDENT AUDITOR FEE INFORMATION
  2005
    
    
    2004Audit fees
    
    $
    0.7
    
    
    $
    0.7Tax fees
    
    
    0.7
    
    
    
    0.3Total fees
    
    $
    1.4
    
    
    $
    1.0
   46




---



##### Table of Contents



PART IV
 
 ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 10-K
  (1) and (2)
    
    See Index to Consolidated Financial Statements beginning on page 50. Schedule
II  Valuation and Qualifying Accounts and the Financial Data Schedule are filed herewith.
All other schedules for which provision is made in the applicable accounting regulations of
the Securities and Exchange Commission are not required under the related instructions or
are inapplicable and, therefore, have been omitted.(3)
    
    The following exhibits are filed or incorporated by reference as part of this Annual
Report. Exhibits pertaining to management contracts, compensatory plans or arrangements are
as follows: Exhibits 5.15, 5.25, 5.35 and 5.45.
 NO.
    
    DESCRIPTION2.1
    
    Agreement and Plan of Merger, dated as of February 15, 2006, by
and among ANSYS, Inc., ANSYS XL, LLC, BEN I, Inc., HINES II,
Inc., Heat Holdings Corp., Aavid Thermal Technologies, Inc., TROY
III, Inc., Fluent, Inc., Principal Stockholders and Stockholders
Representative. (1)3.1
    
    Certificate of Incorporation (2)3.2
    
    By-laws(2)4.1
    
    Indenture dated as of February 2, 2000, among Aavid Thermal
Technologies, Inc., the subsidiary guarantors and Bankers Trust
Company, as trustee.(3)4.2
    
    Warrant Agreement, dated as of February 2, 2000, by and between
Aavid Thermal Technologies, Inc. and Bankers Trust Company, as
Warrant Agent.(3)4.3
    
    Third Supplemental Indenture, dated as of March 21, 2006, among
Aavid Thermal Technologies, Inc., the Guarantors and Deutsche
Bank Trust Company Americas. (7)5.15
    
    Executive Employment Agreement dated as of February 16, 2006 by
and between Aavid Thermalloy, LLC and Bharatan R. Patel.(1)5.25
    
    Amendment to Executive Employment Agreement dated as of February
16, 2006 among Aavid Thermal Technologies, Inc. and John W.
 Mitchell.(1)5.35
    
    Amendment to Executive Employment Agreement dated as of February
16, 2006 among Aavid Thermal Technologies, Inc. and Brian A.
Byrne.(1)5.45
    
    Executive Employment Agreement dated August 31, 2005 between
Aavid Thermalloy, LLC and Michael P. Flanders. (6)
 47




---



##### Table of Contents



NO.
    
    DESCRIPTION10.5
    
    Form of indemnification agreement for the Companys officers and directors(4)10.10
    
    Registration Rights Agreement dated as of February 2, 2000, among Aavid
Thermal Technologies, Inc., the subsidiary guarantors, CIBC World Markets
Corp. and Fleet Boston Robertson Stephens Inc., as initial purchasers.(3)10.26
    
    Common Stock Registration Rights Agreement dated as of February 2, 2000,
among Aavid Thermal Technologies, Inc., Heat Holdings Corp. and CIBC World
Markets Corp. and Fleet Boston Robertson Stephens Inc., as initial
purchasers.(3)10.27
    
    Loan and Security Agreement dated as of July 31, 2002(5)21.0
    
    Subsidiaries of Registrant(2)31.1
    
    CEO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    CFO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    CEO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    CFO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 (1)
    
    Incorporated by reference to Exhibits to the Companys Current Report on Form 8-K dated
February 22, 2006.
 (2)
    
    Incorporated by reference to Exhibits to the Companys Registration Statement on Form S-4
(No. 333-33126).
 (3)
    
    Incorporated by reference to Exhibits to the Companys Current Report on Form 8-K dated
February 2, 2000.
 (4)
    
    Incorporated by reference to Exhibits to the Companys Registration Statement on Form S-1
(No. 33-99232).
 (5)
    
    Incorporated by reference to Exhibits to the Companys Quarterly Report on Form 10-Q for the
Quarter ended June 29, 2002.
 (6)
    
    Incorporated by reference to Exhibits to the Companys Current Report on Form 8-K dated
August 31, 2005.
 (7)
    
    Incorporated by reference to Exhibits to the Companys Current Report on form 8-K dated March
21, 2006.
 48




---



##### Table of Contents



SIGNATURES
  AAVID THERMAL TECHNOLOGIES, INC.By:
    /s/ Bharatan R. PatelBharatan R. Patel, President andChief Executive OfficerApril 14, 2006  SIGNATURE
    
    TITLE
    
    DATE/s/ Bharatan R. Patel

Bharatan R. Patel
    
    Director, President and CEO
 
(Principal Executive Officer)
    
    April 14, 2006/s/ Brian A. Byrne

Brian A. Byrne
    
    Chief Financial Officer
 
(Principal Financial and
Accounting Officer)
    
    April 14, 2006/s/ John R. Willis

John R. Willis
    
    Director
    
    April 14, 2006/s/ Daniel H. Blumenthal

Daniel H. Blumenthal
    
    Director
    
    April 14, 2006/s/ Christopher G. Boehm

Christopher G. Boehm
    
    Director
    
    April 14, 2006
 49




---



##### Table of Contents



INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 AAVID THERMAL TECHNOLOGIES, INC.
 PAGEReport of Independent Registered Public Accounting Firm
    
    
    51Consolidated Balance Sheets as of December 31, 2005 and 2004
    
    
    52Consolidated Statements of Operations for the years ended December 31, 2005, 2004 and 2003
    
    
    53Consolidated Statements of Changes in Stockholders Deficit for the years ended December
31, 2005, 2004 and 2003
    
    
    54Consolidated Statements of Cash Flows for the years ended December 31, 2005, 2004 and 2003
    
    
    57Notes to Consolidated Financial Statements
    
    
    58Schedule II  Valuation and Qualifying Accounts
    
    
    85
 50




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
     
 51




---



##### Table of Contents



AAVID THERMAL TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
 December 31,
    
    
    December 31,2005
    
    
    2004AssetsCash and cash equivalents
    
    $
    40,968
    
    
    $
    28,312Accounts receivable-trade, less allowance for doubtful accounts
    
    
    53,972
    
    
    
    48,234Inventories
    
    
    13,132
    
    
    
    12,745Refundable taxes
    
    
    937
    
    
    
    380Deferred income taxes
    
    
    1,013
    
    
    
    1,062Prepaid and other current assets
    
    
    5,781
    
    
    
    5,375Total current assets
    
    
    115,803
    
    
    
    96,108Property, plant and equipment, net
    
    
    25,669
    
    
    
    28,296Goodwill
    
    
    39,433
    
    
    
    40,026Developed technology
    
    
    451
    
    
    
    2,242Deferred financing fees
    
    
    1,308
    
    
    
    2,451Deferred income taxes
    
    
    
    
    
    
    434Other assets, net
    
    
    1,788
    
    
    
    2,133Total assets
    
    $
    184,452
    
    
    $
    171,690Liabilities, Minority Interest And Stockholders DeficitAccounts payable-trade
    
    $
    26,292
    
    
    $
    19,657Current portion of long term debt obligations
    
    
    11,480
    
    
    
    8,948Income taxes payable
    
    
    8,345
    
    
    
    6,411Restructuring charges
    
    
    121
    
    
    
    163Deferred revenue
    
    
    44,858
    
    
    
    43,136Accrued expenses and other current liabilities
    
    
    29,958
    
    
    
    30,544Total current liabilities
    
    
    121,054
    
    
    
    108,859Long-term debt obligations, net of current portion
    
    
    123,911
    
    
    
    129,519Deferred income taxes
    
    
    187
    
    
    
    366Total liabilities
    
    
    245,152
    
    
    
    238,744Commitments
and contingencies (Note J)Minority interest in consolidated subsidiaries
    
    
    585
    
    
    
    585Stockholders deficitSeries A Preferred Stock, $.0001 par value; authorized 100
shares; 67.71 shares issued and outstanding (Liquidation value of
$7,997 at December 31, 2005)
    
    
    
    
    
    
    Series B Preferred Stock, $.0001 par value; authorized 100
shares; 67.71 shares issued and outstanding (Liquidation value of
$7,997 at December 31, 2005)
    
    
    
    
    
    
    Class A Common Stock, $.0001 par value; authorized 1,400 shares;
1,018.87 shares issued and outstanding
    
    
    
    
    
    
    Class B Common Stock, $.0001 par value; authorized 1,400 shares;
1,078.87 shares issued and outstanding
    
    
    
    
    
    
    Class H Common Stock, $.0001 par value; authorized 200 shares; 40
shares issued and outstanding
    
    
    
    
    
    
    Warrants to purchase 49.52 shares of Class A common stock and
49.52 shares of Class H common stock
    
    
    3,764
    
    
    
    3,764Additional paid-in capital
    
    
    188,007
    
    
    
    188,007Cumulative translation adjustment
    
    
    (2,576
    )
    
    
    (1,066
    )Accumulated deficit
    
    
    (250,480
    )
    
    
    (258,344
    )Total stockholders deficit
    
    
    (61,285
    )
    
    
    (67,639
    )Total liabilities, minority interest and stockholders deficit
    
    $
    184,452
    
    
    $
    171,690
 The accompanying notes are an integral part of these
consolidated financial statements.
 52




---



##### Table of Contents



AAVID THERMAL TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
 Year Ended
    
    
    Year Ended
    
    
    Year EndedDecember 31, 2005
    
    
    December 31, 2004
    
    
    December 31, 2003Net sales
    
    $
    256,488
    
    
    $
    227,131
    
    
    $
    188,167Cost of goods sold
    
    
    127,331
    
    
    
    112,232
    
    
    
    97,061Gross profit
    
    
    129,157
    
    
    
    114,899
    
    
    
    91,106Selling, general and administrative expenses
    
    
    73,095
    
    
    
    68,074
    
    
    
    59,096Amortization of intangible assets
    
    
    879
    
    
    
    850
    
    
    
    3,469Research and development
    
    
    18,603
    
    
    
    16,658
    
    
    
    15,004Asset impairment charge
    
    
    1,861
    
    
    
    
    
    
    
    Restructuring credits
    
    
    
    
    
    
    (6
    )
    
    
    (90
    )Income from operations
    
    
    34,719
    
    
    
    29,323
    
    
    
    13,627Interest expense, net
    
    
    (18,261
    )
    
    
    (17,940
    )
    
    
    (18,137
    )Foreign currency exchange gain (loss), net
    
    
    (445
    )
    
    
    902
    
    
    
    2,460Other income, net
    
    
    123
    
    
    
    175
    
    
    
    23Income (loss) before income taxes
    
    
    16,136
    
    
    
    12,460
    
    
    
    (2,027
    )Provision for income taxes
    
    
    (8,272
    )
    
    
    (4,807
    )
    
    
    (1,627
    )Net income (loss)
    
    $
    7,864
    
    
    $
    7,653
    
    
    $
    (3,654
    )
 The accompanying notes are an integral part of these
consolidated financial statements.
 53




---



##### Table of Contents



AAVID THERMAL TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS DEFICIT
(IN THOUSANDS, EXCEPT SHARE DATA)
 Series A
    
    
    Series B
    
    
    Class APreferred Stock
    
    
    Preferred Stock
    
    
    Common StockShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    AmountBalance, December 31, 2002
    
    
    68
    
    
    $
    
    
    
    
    68
    
    
    $
    
    
    
    
    1,019
    
    
    $
    Comprehensive loss:Net loss
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    Cumulative translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance, December 31, 2003
    
    
    68
    
    
    $
    
    
    
    
    68
    
    
    $
    
    
    
    
    1,019
    
    
    $
    Comprehensive income:Net income
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    Cumulative translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance, December 31, 2004
    
    
    68
    
    
    $
    
    
    
    
    68
    
    
    $
    
    
    
    
    1,019
    
    
    $
    Comprehensive income:Net income
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    Cumulative translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance, December 31, 2005
    
    
    68
    
    
    $
    
    
    
    
    68
    
    
    $
    
    
    
    
    1,019
    
    
    $
    
 The accompanying notes are an integral part of these
consolidated financial statements.
 54




---



##### Table of Contents



AAVID THERMAL TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS DEFICIT
(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
 Class B
    
    
    Class H
    
    
    
    
    
    
    AdditionalCommon Stock
    
    
    Common Stock
    
    
    
    
    
    
    Paid-InShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Warrants
    
    
    CapitalBalance, December 31, 2002
    
    
    1,079
    
    
    $
    
    
    
    
    40
    
    
    $
    
    
    
    $
    3,764
    
    
    $
    188,007Comprehensive loss:Net loss
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Cumulative translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance, December 31, 2003
    
    
    1,079
    
    
    $
    
    
    
    
    40
    
    
    $
    
    
    
    $
    3,764
    
    
    $
    188,007Comprehensive income:Net income
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Cumulative translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance, December 31, 2004
    
    
    1,079
    
    
    $
    
    
    
    
    40
    
    
    $
    
    
    
    $
    3,764
    
    
    $
    188,007Comprehensive income:Net income
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Cumulative translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance, December 31, 2005
    
    
    1,079
    
    
    $
    
    
    
    
    40
    
    
    $
    
    
    
    $
    3,764
    
    
    $
    188,007
 The accompanying notes are an integral part of these
consolidated financial statements.
 55




---



##### Table of Contents



AAVID THERMAL TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS DEFICIT
(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
 CumulativeComprehensive
    
    
    Translation
    
    
    AccumulatedIncome (Loss)
    
    
    Adjustment
    
    
    Deficit
    
    
    TotalBalance, December 31, 2002
    
    
    
    
    
    $
    156
    
    
    $
    (262,343
    )
    
    $
    (70,416
    )Comprehensive loss:Net loss
    
    $
    (3,654
    )
    
    $
    
    
    
    $
    (3,654
    )
    
    $
    (3,654
    )Cumulative translation adjustment
    
    
    (1,261
    )
    
    
    (1,261
    )
    
    
    
    
    
    
    (1,261
    )Comprehensive loss
    
    $
    (4,915
    )
    
    
    
    
    
    
    
    
    
    
    Balance, December 31, 2003
    
    
    
    
    
    $
    (1,105
    )
    
    $
    (265,997
    )
    
    $
    (75,331
    )Comprehensive income:Net income
    
    $
    7,653
    
    
    $
    
    
    
    $
    7,653
    
    
    $
    7,653Cumulative translation adjustment
    
    
    39
    
    
    
    39
    
    
    
    
    
    
    
    39Comprehensive income
    
    $
    7,692
    
    
    
    
    
    
    
    
    
    
    
    Balance, December 31, 2004
    
    
    
    
    
    $
    (1,066
    )
    
    $
    (258,344
    )
    
    $
    (67,639
    )Comprehensive income:Net income
    
    $
    7,864
    
    
    $
    
    
    
    $
    7,864
    
    
    $
    7,864Cumulative translation adjustment
    
    
    (1,510
    )
    
    
    (1,510
    )
    
    
    
    
    
    
    (1,510
    )Comprehensive income
    
    $
    6,354
    
    
    
    
    
    
    
    
    
    
    
    Balance, December 31, 2005
    
    
    
    
    
    $
    (2,576
    )
    
    $
    (250,480
    )
    
    $
    (61,285
    )
 The accompanying notes are an integral part of these
consolidated financial statements.
 56




---



##### Table of Contents



AAVID THERMAL TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
 Year Ended
    
    
    Year Ended
    
    
    Year EndedDecember 31,
    
    
    December 31,
    
    
    December 31,2005
    
    
    2004
    
    
    2003Cash flows provided by operating activities:Net income (loss)
    
    $
    7,864
    
    
    $
    7,653
    
    
    $
    (3,654
    )Adjustments to reconcile net income (loss) to net cash provided
by operating activities:Depreciation
    
    
    6,812
    
    
    
    7,256
    
    
    
    7,996Amortization and accretion
    
    
    2,932
    
    
    
    2,680
    
    
    
    5,103Bad debt provision
    
    
    (87
    )
    
    
    1,008
    
    
    
    289Loss on sale of property, plant and equipment
    
    
    191
    
    
    
    5
    
    
    
    225Deferred income tax provision (benefit)
    
    
    304
    
    
    
    237
    
    
    
    (114
    )Asset impairment charge
    
    
    1,861
    
    
    
    
    
    
    
    Restructuring credits
    
    
    
    
    
    
    (6
    )
    
    
    (90
    )Changes in assets and liabilities:Accounts receivable-trade
    
    
    (8,578
    )
    
    
    (7,523
    )
    
    
    (4,701
    )Inventories
    
    
    (865
    )
    
    
    (2,743
    )
    
    
    (2,283
    )Refundable taxes
    
    
    (556
    )
    
    
    (220
    )
    
    
    33Prepaid and other current assets
    
    
    (1,071
    )
    
    
    1,076
    
    
    
    (491
    )Notes receivable
    
    
    
    
    
    
    
    
    
    
    82Other long-term assets
    
    
    (24
    )
    
    
    (324
    )
    
    
    16Accounts payable-trade
    
    
    6,896
    
    
    
    6,270
    
    
    
    1,002Income taxes payable
    
    
    2,427
    
    
    
    2,457
    
    
    
    (99
    )Deferred revenue
    
    
    4,925
    
    
    
    4,210
    
    
    
    5,327Accrued expenses and other current liabilities
    
    
    410
    
    
    
    2,892
    
    
    
    2,406Total adjustments
    
    
    15,577
    
    
    
    17,275
    
    
    
    14,701Net cash provided by operating activities
    
    
    23,441
    
    
    
    24,928
    
    
    
    11,047Cash flows used in investing activities:Proceeds from sale of property, plant and equipment
    
    
    40
    
    
    
    48
    
    
    
    188Purchases of property, plant and equipment
    
    
    (4,443
    )
    
    
    (5,440
    )
    
    
    (4,009
    )Payment for acquisition, net of cash acquired
    
    
    
    
    
    
    (3,041
    )
    
    
    Net cash used in investing activities
    
    
    (4,403
    )
    
    
    (8,433
    )
    
    
    (3,821
    )Cash flows used in financing activities:Advances (repayments) of line of credit, net
    
    
    1,221
    
    
    
    (538
    )
    
    
    (157
    )Advances under debt obligations
    
    
    547
    
    
    
    
    
    
    
    178Principal payments under debt obligations
    
    
    (6,569
    )
    
    
    (2,396
    )
    
    
    (2,141
    )Net cash used in financing activities
    
    
    (4,801
    )
    
    
    (2,934
    )
    
    
    (2,120
    )Foreign exchange effect on cash and cash equivalents
    
    
    (1,581
    )
    
    
    (480
    )
    
    
    (2,172
    )Net increase in cash and cash equivalents
    
    
    12,656
    
    
    
    13,081
    
    
    
    2,934Cash and cash equivalents, beginning of year
    
    
    28,312
    
    
    
    15,231
    
    
    
    12,297Cash and cash equivalents, end of year
    
    $
    40,968
    
    
    $
    28,312
    
    
    $
    15,231Supplemental disclosure of cash flow information:Interest paid
    
    $
    16,686
    
    
    $
    16,537
    
    
    $
    16,656Income taxes paid
    
    $
    6,579
    
    
    $
    1,517
    
    
    $
    1,850Supplemental disclosure of non-cash investing activities:Reconciliation of assets acquired and liabilities assumed in
acquisition:Fair value of assets acquired
    
    $
    
    
    
    $
    3,130
    
    
    $
    Cash paid for assets
    
    
    
    
    
    
    (3,088
    )
    
    
    Liabilities assumed
    
    $
    
    
    
    $
    42
    
    
    $
    Capital lease obligations incurred for purchases of new equipment
    
    $
    945
    
    
    $
    1,730
    
    
    $
    558
 The accompanying notes are an integral part of these
consolidated financial statements.
 57




---



##### Table of Contents



AAVID THERMAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
 A. Background
    B. Summary Of Significant Accounting Policies
 Principles Of Consolidation
  Concentration Of Credit Risk
  58




---



##### Table of Contents



Income Taxes
  Research And Development
  Advertising
  Cash And Cash Equivalents And Financial Instruments
   59




---



##### Table of Contents



Inventories
  Shipping And Handling Costs
  Property, Plant And Equipment
   60




---



##### Table of Contents



Intangible Assets
   Intangible Assets
    
    YearsDeveloped technology
    
    
    4 to 7Non-compete agreements
    
    
    2Deferred financing fees
    
    
    4 to 7
  2005
    
    
    2004Gross
    
    
    
    
    
    
    GrossCarrying
    
    
    Accumulated
    
    
    Carrying
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    Amount
    
    
    AmortizationAmortized intangible assets:Developed technology
    
    $
    8,056
    
    
    $
    (7,605
    )
    
    $
    9,556
    
    
    $
    (7,314
    )Non-compete agreements
    
    
    
    
    
    
    
    
    
    
    252
    
    
    
    (53
    )Deferred financing fees
    
    
    7,463
    
    
    
    (6,155
    )
    
    
    7,463
    
    
    
    (5,012
    )Total amortized intangible assets
    
    $
    15,519
    
    
    $
    (13,760
    )
    
    $
    17,271
    
    
    $
    (12,379
    )Unamortized intangible assets:Goodwill
    
    $
    39,433
    
    
    
    
    
    
    $
    40,026
  2006
    
    $
    1,6342007
    
    
    125
  61




---



##### Table of Contents



Long-Lived Assets
  Revenue Recognition
 Thermal Products
  Software
  -
    
    Persuasive evidence of an arrangement exists, which is typically when a non-cancelable
sales and software license agreement has been signed;-
    
    Delivery, which is typically FOB shipping point, is complete for the software (either
physically or electronically) and related ancillary products;-
    
    The customers fee is deemed to be fixed or determinable and free of contingencies or
significant uncertainties;
 62




---



##### Table of Contents



-
    
    Collectibility is probable, and;-
    
    Vendor-specific objective evidence (VSOE) of fair value exists for all undelivered
elements, typically PCS and professional services.
     Comprehensive Income
  Use Of Accounting Estimates
  New accounting pronouncements
  63




---



##### Table of Contents



Translation Of Foreign Currency
   C. Accounts Receivable
  December 31,2005
    
    
    2004Accounts receivable
    
    $
    56,726
    
    
    $
    50,621Allowance for doubtful accounts
    
    
    (2,754
    )
    
    
    (2,387
    )$
    53,972
    
    
    $
    48,234
 D. Inventories
  December 31,2005
    
    
    2004Raw materials
    
    $
    4,441
    
    
    $
    4,233Work-in-process
    
    
    3,197
    
    
    
    4,896Finished goods
    
    
    5,494
    
    
    
    3,616$
    13,132
    
    
    $
    12,745
 64




---



##### Table of Contents



E. Property, Plant, And Equipment
  December 31,2005
    
    
    2004Land
    
    $
    1,632
    
    
    $
    1,665Building and improvements
    
    
    15,874
    
    
    
    15,962Machinery and equipment
    
    
    28,512
    
    
    
    27,932Computer equipment
    
    
    21,508
    
    
    
    19,526Furniture and fixtures
    
    
    4,525
    
    
    
    4,888Vehicles
    
    
    596
    
    
    
    452Machinery-in-progress
    
    
    472
    
    
    
    22873,119
    
    
    
    70,653Less accumulated depreciation
    
    
    47,450
    
    
    
    42,357$
    25,669
    
    
    $
    28,296
  F. Accrued Expenses And Other Current Liabilities
  December 31,2005
    
    
    2004Employee related
    
    $
    17,034
    
    
    $
    17,298Accrued interest
    
    
    6,609
    
    
    
    6,620Accrued sales and property taxes
    
    
    1,418
    
    
    
    1,632Other accrued expenses
    
    
    4,897
    
    
    
    4,994$
    29,958
    
    
    $
    30,544
 65




---



##### Table of Contents



G. Debt Obligations
  December 31,2005
    
    
    2004Term Loans under a Loan and Security Agreement payable in 40
consecutive quarterly installments ranging from $215 to $359 commencing
November 1, 2002. At December 31, 2005 the interest rates on the Term
Loans ranged from 7.24% to 7.75%
    
    $
    2,898
    
    
    $
    8,249Revolving Loans under a Loan and Security Agreement which matures on
July 31, 2006. At December 31, 2005 the interest rate on the Revolving
Loans ranged from 6.89% to 7.75%
    
    
    7,658
    
    
    
    6,47212 3/4% Senior Subordinated Notes due February 1, 2007
    
    
    122,687
    
    
    
    121,777Term loans payable through 2014 with monthly payments of approximately $6
through 2007 and annual payments of approximately $67 through 2015. At
December 31, 2005 the interest rates on the term loans ranged from
1.01% to 3.33%
    
    
    767
    
    
    
    389Capitalized lease obligations
    
    
    1,381
    
    
    
    1,580135,391
    
    
    
    138,467Less current portion
    
    
    11,480
    
    
    
    8,948Debt Obligations, net of current portion
    
    $
    123,911
    
    
    $
    129,519
  66




---



##### Table of Contents



2006
    
    $
    11,4802007
    
    
    123,2122008
    
    
    2252009
    
    
    662010
    
    
    66Thereafter
    
    
    342Total
    
    $
    135,391
 H. Equity
 Common And Preferred Stock
  67




---



##### Table of Contents



Common Stock
      68




---



##### Table of Contents



Preferred Stock
    69




---



##### Table of Contents



Warrants And Additional Equity Contributions
   70




---



##### Table of Contents



Management Incentive Purchase Program
   Aavid Thermalloy Shares
    
    
    Fluent Shares
    
    
    Enductive Solutions SharesWeighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    Average
    
    
    
    
    
    AverageRestricted
    
    Number Of
    
    
    Exercise
    
    
    Number Of
    
    
    Exercise
    
    
    Number Of
    
    
    ExerciseStock AwardS
    
    Shares
    
    
    Price
    
    
    Shares
    
    
    Price
    
    
    Shares
    
    
    PriceBalance at December
31, 2003
    
    
    32,089
    
    
    $
    10.00
    
    
    
    26,347
    
    
    $
    10.00
    
    
    
    250
    
    
    $
    10.00Issued during 2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Canceled during 2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance at December 31,
2004
    
    
    32,089
    
    
    $
    10.00
    
    
    
    26,347
    
    
    $
    10.00
    
    
    
    250
    
    
    $
    10.00Issued during 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Canceled during 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance at December 31,
2005
    
    
    32,089
    
    
    $
    10.00
    
    
    
    26,347
    
    
    $
    10.00
    
    
    
    250
    
    
    $
    10.00Vested at December 31, 2005
    
    
    31,526
    
    
    $
    10.00
    
    
    
    26,347
    
    
    $
    10.00
    
    
    
    200
    
    
    $
    10.00
  71




---



##### Table of Contents



I. Income Taxes
  Year Ended December 31,2005
    
    
    2004
    
    
    2003Domestic
    
    $
    808
    
    
    $
    (4,702
    )
    
    $
    (6,885
    )Foreign
    
    
    15,328
    
    
    
    17,162
    
    
    
    4,858$
    16,136
    
    
    $
    12,460
    
    
    $
    (2,027
    )
  Year Ended December 31,2005
    
    
    2004
    
    
    2003Federal provision:Current
    
    $
    167
    
    
    $
    
    
    
    $
    Deferred
    
    
    
    
    
    
    
    
    
    
    167
    
    
    
    
    
    
    
    State provision:Current
    
    
    433
    
    
    
    615
    
    
    
    504Deferred
    
    
    
    
    
    
    
    
    
    
    433
    
    
    
    615
    
    
    
    504Foreign provision (benefit):Current
    
    
    7,368
    
    
    
    3,955
    
    
    
    1,237Deferred
    
    
    304
    
    
    
    237
    
    
    
    (114
    )7,672
    
    
    
    4,192
    
    
    
    1,123Total provision
    
    $
    8,272
    
    
    $
    4,807
    
    
    $
    1,627
  Year Ended December 31,2005
    
    
    2004
    
    
    2003Expected federal tax
    
    $
    5,486
    
    
    $
    4,236
    
    
    $
    (689
    )State income taxes, net of federal benefit
    
    
    286
    
    
    
    406
    
    
    
    333Foreign related
    
    
    4,782
    
    
    
    3,386
    
    
    
    1,180(Decrease) increase in valuation allowance
    
    
    (2,870
    )
    
    
    (3,389
    )
    
    
    743Other
    
    
    588
    
    
    
    168
    
    
    
    60Total provision for income taxes
    
    $
    8,272
    
    
    $
    4,807
    
    
    $
    1,627
  72




---



##### Table of Contents



December 31,2005
    
    
    2004Tax credits
    
    $
    2,835
    
    
    $
    1,373Inventory reserves and capitalization
    
    
    202
    
    
    
    638Accounts receivable reserves
    
    
    896
    
    
    
    643Vacation and benefit reserves
    
    
    644
    
    
    
    651Unremitted foreign earnings
    
    
    (14,903
    )
    
    
    (12,199
    )Restructuring reserves
    
    
    533
    
    
    
    118Other liabilities and reserves
    
    
    6,372
    
    
    
    6,001Depreciation
    
    
    (618
    )
    
    
    (761
    )Net operating loss carryforwards
    
    
    25,107
    
    
    
    27,778Acquired intangibles
    
    
    (9,673
    )
    
    
    (9,673
    )Valuation allowance
    
    
    (10,569
    )
    
    
    (13,439
    )Net deferred tax assets
    
    $
    826
    
    
    $
    1,130
  J. Commitments And Contingencies
 Leases
  Operating
    
    
    CapitalYears Ending December 31,
    
    Leases
    
    
    Leases2006
    
    $
    6,284
    
    
    $
    8392007
    
    
    3,950
    
    
    
    4672008
    
    
    1,832
    
    
    
    1742009
    
    
    1,601
    
    
    
    2010
    
    
    999
    
    
    
    Thereafter
    
    
    2,136
    
    
    
    Total minimum lease payments
    
    $
    16,802
    
    
    
    1,480Less amount representing interest
    
    
    
    
    
    
    99Present value of total minimum lease payments
    
    
    
    
    
    
    1,381Less current portion
    
    
    
    
    
    
    791Long-term capital lease obligations
    
    
    
    
    
    $
    590
 73




---



##### Table of Contents



Litigation
  Purchase Commitment
  Mexico Labor Agreement
  K. 401(K) Profit Sharing Plan
  L. Segment Reporting
    74




---



##### Table of Contents



Revenues From
    
    
    
    
    
    
    Depreciation
    
    
    RestructuringExternal
    
    
    Interest
    
    
    And
    
    
    Charges
    
    
    ImpairmentCustomers
    
    
    Expense, Net
    
    
    Amortization (1)
    
    
    (Credits)
    
    
    Charge2005Thermal Products
    
    $
    134,650
    
    
    $
    15,495
    
    
    $
    4,712
    
    
    $
    
    
    
    $
    1,861CFD Software
    
    
    121,838
    
    
    
    2,059
    
    
    
    2,976
    
    
    
    
    
    
    
    Corporate Office
    
    
    
    
    
    
    707
    
    
    
    3
    
    
    
    
    
    
    
    Total
    
    $
    256,488
    
    
    $
    18,261
    
    
    $
    7,691
    
    
    $
    
    
    
    $
    1,8612004Thermal Products
    
    $
    122,726
    
    
    $
    13,938
    
    
    $
    5,121
    
    
    $
    (6
    )
    
    $
    CFD Software
    
    
    104,405
    
    
    
    3,978
    
    
    
    2,982
    
    
    
    
    
    
    
    Corporate Office
    
    
    
    
    
    
    24
    
    
    
    3
    
    
    
    
    
    
    
    Total
    
    $
    227,131
    
    
    $
    17,940
    
    
    $
    8,106
    
    
    $
    (6
    )
    
    $
    2003Thermal Products
    
    $
    101,583
    
    
    $
    13,274
    
    
    $
    6,252
    
    
    $
    (90
    )
    
    $
    CFD Software
    
    
    86,584
    
    
    
    5,824
    
    
    
    5,204
    
    
    
    
    
    
    
    Corporate Office
    
    
    
    
    
    
    (961
    )
    
    
    10
    
    
    
    
    
    
    
    Total
    
    $
    188,167
    
    
    $
    18,137
    
    
    $
    11,466
    
    
    $
    (90
    )
    
    $
    
 
 (1)
    
    Does not include amortization associated with deferred financing fees and accretion of
bond discount as these amounts are included in Interest Expense, net.
 Income Tax
    
    
    Income
    
    
    Assets (Net OfProvision
    
    
    (Loss) Before
    
    
    Intercompany
    
    
    Capital(Benefit)
    
    
    Income Taxes
    
    
    Balances)
    
    
    Expenditures2005Thermal Products
    
    $
    1,400
    
    
    $
    (13,155
    )
    
    $
    67,776
    
    
    $
    2,268CFD Software
    
    
    10,895
    
    
    
    29,810
    
    
    
    120,917
    
    
    
    2,175Corporate Office
    
    
    (4,023
    )
    
    
    (519
    )
    
    
    (4,241
    )
    
    
    Total
    
    $
    8,272
    
    
    $
    16,136
    
    
    $
    184,452
    
    
    $
    4,4432004Thermal Products
    
    $
    1,548
    
    
    $
    (7,852
    )
    
    $
    66,831
    
    
    $
    2,010CFD Software
    
    
    5,856
    
    
    
    20,493
    
    
    
    119,457
    
    
    
    3,427Corporate Office
    
    
    (2,597
    )
    
    
    (181
    )
    
    
    (14,598
    )
    
    
    3Total
    
    $
    4,807
    
    
    $
    12,460
    
    
    $
    171,690
    
    
    $
    5,4402003Thermal Products
    
    $
    861
    
    
    $
    (12,253
    )
    
    $
    54,374
    
    
    $
    929CFD Software
    
    
    2,886
    
    
    
    9,181
    
    
    
    103,271
    
    
    
    3,078Corporate Office
    
    
    (2,120
    )
    
    
    1,045
    
    
    
    (11,952
    )
    
    
    2Total
    
    $
    1,627
    
    
    $
    (2,027
    )
    
    $
    145,693
    
    
    $
    4,009
  75




---



##### Table of Contents



Year Ended December 31,2005
    
    
    2004
    
    
    2003Long-Lived
    
    
    
    
    
    
    Long-Lived
    
    
    
    
    
    
    Long-LivedAssets
    
    
    Net Sales
    
    
    Assets
    
    
    Net Sales
    
    
    Assets
    
    
    Net SalesUnited States
    
    $
    57,653
    
    
    $
    122,687
    
    
    $
    60,664
    
    
    $
    114,629
    
    
    $
    61,815
    
    
    $
    104,735Taiwan
    
    
    1,328
    
    
    
    22,035
    
    
    
    3,460
    
    
    
    19,814
    
    
    
    618
    
    
    
    12,428China
    
    
    962
    
    
    
    43,384
    
    
    
    980
    
    
    
    28,480
    
    
    
    848
    
    
    
    25,750United Kingdom
    
    
    1,406
    
    
    
    30,305
    
    
    
    2,411
    
    
    
    24,273
    
    
    
    2,434
    
    
    
    22,153Italy
    
    
    1,848
    
    
    
    20,117
    
    
    
    2,241
    
    
    
    22,572
    
    
    
    2,609
    
    
    
    15,428Japan
    
    
    1,638
    
    
    
    23,699
    
    
    
    1,686
    
    
    
    17,606
    
    
    
    1,455
    
    
    
    12,955Singapore
    
    
    159
    
    
    
    17,879
    
    
    
    125
    
    
    
    9,360
    
    
    
    78
    
    
    
    7,527Mexico
    
    
    183
    
    
    
    7,823
    
    
    
    322
    
    
    
    9,120
    
    
    
    548
    
    
    
    8,772Other International
    
    
    3,830
    
    
    
    46,929
    
    
    
    4,051
    
    
    
    42,054
    
    
    
    3,459
    
    
    
    35,514Intercompany eliminations
    
    
    (358
    )
    
    
    (78,370
    )
    
    
    (358
    )
    
    
    (60,777
    )
    
    
    (358
    )
    
    
    (57,095
    )Consolidated
    
    $
    68,649
    
    
    $
    256,488
    
    
    $
    75,582
    
    
    $
    227,131
    
    
    $
    73,506
    
    
    $
    188,167
  M. Restructuring Charges And Reserves
  Cash Charges AgainstReserves For The
    
    
    RestructuringRestructuring
    
    
    Year Ended
    
    
    Reserves BalanceReserves Balance At
    
    
    December 31,
    
    
    At December 31,January 1, 2005
    
    
    2005
    
    
    2005Employee separation
    
    $
    160
    
    
    $
    (40
    )
    
    $
    120Total
    
    $
    160
    
    
    $
    (40
    )
    
    $
    120
 76




---



##### Table of Contents



Cash Charges AgainstReserves For The
    
    
    RestructuringRestructuring
    
    
    Year Ended
    
    
    Reserves BalanceReserves Balance At
    
    
    December 31,
    
    
    At December 31,January 1, 2004
    
    
    2004
    
    
    2004Lease
terminations and
leasehold
improvements
reserve
    
    $
    2
    
    
    $
    (2
    )
    
    $
    Employee separation
    
    
    200
    
    
    
    (40
    )
    
    
    160Total
    
    $
    202
    
    
    $
    (42
    )
    
    $
    160
  Restructuring
    
    
    Cash Charges Against
    
    
    RestructuringCredits For
    
    

Reserves
For The Year
    
    
    ReservesRestructuring
    
    
    The Year Ended
    
    
    Ended
    
    
    Balance AtReserves Balance
    
    
    December 31,
    
    
    December 31,
    
    
    December 31,At January 1, 2005
    
    
    2005
    
    
    2005
    
    
    2005Facility costs
and lease
terminations
    
    $
    3
    
    
    $
    
    
    
    $
    (2
    )
    
    $
    1Total
    
    $
    3
    
    
    $
    
    
    
    $
    (2
    )
    
    $
    1
 Restructuring
    
    
    Cash Charges Against
    
    
    RestructuringCredits For
    
    

Reserves
For The Year
    
    
    ReservesRestructuring
    
    
    The Year Ended
    
    
    Ended
    
    
    Balance AtReserves Balance
    
    
    December 31,
    
    
    December 31,
    
    
    December 31,At January 1, 2004
    
    
    2004
    
    
    2004
    
    
    2004Fixed asset reserves
    
    $
    6
    
    
    $
    (6
    )
    
    $
    
    
    
    $
    Facility costs and lease
terminations
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    3Total
    
    $
    9
    
    
    $
    (6
    )
    
    $
    
    
    
    $
    3
 77




---



##### Table of Contents



N. Acquisition
  Cash
    
    $
    47Accounts receivable
    
    
    38Inventories
    
    
    46Prepaids and other current assets
    
    
    2Property, plant and equipment, net
    
    
    650Goodwill
    
    
    593Developed technology
    
    
    1,500Other long-term assets
    
    
    254Accounts payable
    
    
    (14
    )Accrued expenses and other current liabilities
    
    
    (28
    )Total
    
    $
    3,088
  Goodwill
    
    $
    593Developed technology
    
    
    1,075Non-compete agreements
    
    
    74Fixed assets
    
    
    119Total
    
    $
    1,861
 O. Subsequent events
     78




---



##### Table of Contents



P. quarterly data (unaudited)
  FISCAL QUARTERFIRST
    
    
    SECOND
    
    
    THIRD
    
    
    FOURTH
    
    
    TOTAL2005Net sales
    
    $
    60,578
    
    
    $
    64,192
    
    
    $
    63,590
    
    
    $
    68,128
    
    
    $
    256,488Gross profit
    
    
    31,404
    
    
    
    32,263
    
    
    
    31,225
    
    
    
    34,265
    
    
    
    129,157Net income
    
    
    1,742
    
    
    
    456
    
    
    
    2,734
    
    
    
    2,932
    
    
    
    7,8642004Net sales
    
    $
    55,617
    
    
    $
    56,538
    
    
    $
    55,711
    
    
    $
    59,265
    
    
    $
    227,131Gross profit
    
    
    27,829
    
    
    
    27,916
    
    
    
    28,209
    
    
    
    30,945
    
    
    
    114,899Net income
    
    
    1,733
    
    
    
    1,712
    
    
    
    1,368
    
    
    
    2,840
    
    
    
    7,653
 q. selected consolidating financial statements of parent, guarantors and non-guarantors
  79




---



##### Table of Contents



CONDENSED CONSOLIDATING BALANCE SHEET AS OF DECEMBER 31, 2005U.S. GUARANTOR
    
    
    NON-GUARANTORPARENT
    
    
    SUBSIDIARIES
    
    
    SUBSIDIARIES
    
    
    ELIMINATIONS
    
    
    CONSOLIDATEDASSETSCash and cash equivalents
    
    $
    5,957
    
    
    $
    5,544
    
    
    $
    29,467
    
    
    $
    
    
    
    $
    40,968Accounts receivable-trade,
net
    
    
    
    
    
    
    17,637
    
    
    
    36,326
    
    
    
    9
    
    
    
    53,972Inventories
    
    
    
    
    
    
    4,760
    
    
    
    8,547
    
    
    
    (175
    )
    
    
    13,132Due (to) from affiliate, net
    
    
    102,958
    
    
    
    (129,664
    )
    
    
    38,505
    
    
    
    (11,799
    )
    
    
    Refundable taxes
    
    
    (348
    )
    
    
    
    
    
    
    1,105
    
    
    
    180
    
    
    
    937Deferred income taxes
    
    
    (2,826
    )
    
    
    11,782
    
    
    
    1,013
    
    
    
    (8,956
    )
    
    
    1,013Prepaid and other current
assets
    
    
    66
    
    
    
    1,296
    
    
    
    4,419
    
    
    
    
    
    
    
    5,781Total current assets
    
    
    105,807
    
    
    
    (88,645
    )
    
    
    119,382
    
    
    
    (20,741
    )
    
    
    115,803Property, plant and
equipment, net
    
    
    4
    
    
    
    15,041
    
    
    
    10,520
    
    
    
    104
    
    
    
    25,669Investment in subsidiaries
    
    
    (37,196
    )
    
    
    8,768
    
    
    
    
    
    
    
    28,428
    
    
    
    Deferred taxes
    
    
    282
    
    
    
    
    
    
    
    
    
    
    
    (282
    )
    
    
    Other assets, net
    
    
    1,747
    
    
    
    40,382
    
    
    
    835
    
    
    
    16
    
    
    
    42,980Total assets
    
    $
    70,644
    
    
    $
    (24,454
    )
    
    $
    130,737
    
    
    $
    7,525
    
    
    $
    184,452LIABILITIES, MINORITY
INTERESTS AND STOCKHOLDERS
DEFICITAccounts payable-trade
    
    $
    
    
    
    $
    2,620
    
    
    $
    23,702
    
    
    $
    (30
    )
    
    $
    26,292Current portion of debt
obligations
    
    
    
    
    
    
    8,315
    
    
    
    3,165
    
    
    
    
    
    
    
    11,480Income taxes payable
    
    
    2,853
    
    
    
    (556
    )
    
    
    5,385
    
    
    
    663
    
    
    
    8,345Deferred revenue
    
    
    
    
    
    
    21,299
    
    
    
    23,559
    
    
    
    
    
    
    
    44,858Accrued expenses and other
current liabilities
    
    
    7,359
    
    
    
    10,232
    
    
    
    12,750
    
    
    
    (262
    )
    
    
    30,079Total current liabilities
    
    
    10,212
    
    
    
    41,910
    
    
    
    68,561
    
    
    
    371
    
    
    
    121,054Debt obligations, net of
current portion
    
    
    122,687
    
    
    
    554
    
    
    
    670
    
    
    
    
    
    
    
    123,911Deferred income taxes
    
    
    (1,557
    )
    
    
    6,193
    
    
    
    187
    
    
    
    (4,636
    )
    
    
    187Total liabilities
    
    
    131,342
    
    
    
    48,657
    
    
    
    69,418
    
    
    
    (4,265
    )
    
    
    245,152Commitments and contingenciesMinority interests
    
    
    587
    
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    585Stockholders deficitCommon stock
    
    
    
    
    
    
    3
    
    
    
    6,396
    
    
    
    (6,399
    )
    
    
    Preferred stock
    
    
    
    
    
    
    97,288
    
    
    
    8,837
    
    
    
    (106,125
    )
    
    
    Warrants
    
    
    3,764
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,764Additional paid-in capital
    
    
    188,007
    
    
    
    134,479
    
    
    
    10,556
    
    
    
    (145,035
    )
    
    
    188,007Cumulative translation
adjustment
    
    
    (2,576
    )
    
    
    996
    
    
    
    2,499
    
    
    
    (3,495
    )
    
    
    (2,576
    )Accumulated deficit
    
    
    (250,480
    )
    
    
    (305,877
    )
    
    
    33,031
    
    
    
    272,846
    
    
    
    (250,480
    )Total stockholders equity
(deficit)
    
    
    (61,285
    )
    
    
    (73,111
    )
    
    
    61,319
    
    
    
    11,792
    
    
    
    (61,285
    )Total liabilities, minority
interests and stockholders (deficit) equity
    
    $
    70,644
    
    
    $
    (24,454
    )
    
    $
    130,737
    
    
    $
    7,525
    
    
    $
    184,452
 80




---



##### Table of Contents



CONDENSED CONSOLIDATING BALANCE SHEET AS OF DECEMBER 31, 2004U.S. GUARANTOR
    
    
    NON-GUARANTORPARENT
    
    
    SUBSIDIARIES
    
    
    SUBSIDIARIES
    
    
    ELIMINATIONS
    
    
    CONSOLIDATEDASSETSCash and cash equivalents
    
    $
    601
    
    
    $
    3,910
    
    
    $
    23,801
    
    
    $
    
    
    
    $
    28,312Accounts receivable-trade,
net
    
    
    
    
    
    
    18,383
    
    
    
    29,860
    
    
    
    (9
    )
    
    
    48,234Inventories
    
    
    
    
    
    
    5,666
    
    
    
    7,338
    
    
    
    (259
    )
    
    
    12,745Due (to) from affiliate, net
    
    
    103,066
    
    
    
    (95,776
    )
    
    
    29,627
    
    
    
    (36,917
    )
    
    
    Refundable taxes
    
    
    (348
    )
    
    
    
    
    
    
    548
    
    
    
    180
    
    
    
    380Deferred income taxes
    
    
    (4,168
    )
    
    
    13,124
    
    
    
    1,062
    
    
    
    (8,956
    )
    
    
    1,062Prepaid and other current
assets
    
    
    75
    
    
    
    1,253
    
    
    
    4,047
    
    
    
    
    
    
    
    5,375Total current assets
    
    
    99,226
    
    
    
    (53,440
    )
    
    
    96,283
    
    
    
    (45,961
    )
    
    
    96,108Property, plant and
equipment, net
    
    
    7
    
    
    
    16,559
    
    
    
    11,626
    
    
    
    104
    
    
    
    28,296Investment in subsidiaries
    
    
    (38,833
    )
    
    
    6,925
    
    
    
    
    
    
    
    31,908
    
    
    
    Deferred taxes
    
    
    282
    
    
    
    
    
    
    
    434
    
    
    
    (282
    )
    
    
    434Other assets, net
    
    
    2,689
    
    
    
    40,930
    
    
    
    3,217
    
    
    
    16
    
    
    
    46,852Total assets
    
    $
    63,371
    
    
    $
    10,974
    
    
    $
    111,560
    
    
    $
    (14,215
    )
    
    $
    171,690LIABILITIES, MINORITY
INTERESTS AND STOCKHOLDERS
DEFICITAccounts payable-trade
    
    $
    203
    
    
    $
    2,666
    
    
    $
    16,788
    
    
    $
    
    
    
    $
    19,657Current portion of debt
obligations
    
    
    
    
    
    
    7,036
    
    
    
    1,912
    
    
    
    
    
    
    
    8,948Income taxes payable
    
    
    3,172
    
    
    
    (210
    )
    
    
    4,567
    
    
    
    (1,118
    )
    
    
    6,411Deferred revenue
    
    
    
    
    
    
    21,247
    
    
    
    21,889
    
    
    
    
    
    
    
    43,136Accrued expenses and other
current liabilities
    
    
    7,565
    
    
    
    11,260
    
    
    
    12,086
    
    
    
    (204
    )
    
    
    30,707Total current liabilities
    
    
    10,940
    
    
    
    41,999
    
    
    
    57,242
    
    
    
    (1,322
    )
    
    
    108,859Debt obligations, net of
current portion
    
    
    121,777
    
    
    
    7,400
    
    
    
    342
    
    
    
    
    
    
    
    129,519Deferred income taxes
    
    
    (2,294
    )
    
    
    6,930
    
    
    
    366
    
    
    
    (4,636
    )
    
    
    366Total liabilities
    
    
    130,423
    
    
    
    56,329
    
    
    
    57,950
    
    
    
    (5,958
    )
    
    
    238,744Commitments and contingenciesMinority interests
    
    
    587
    
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    585Stockholders deficitCommon stock
    
    
    
    
    
    
    3
    
    
    
    6,267
    
    
    
    (6,270
    )
    
    
    Preferred stock
    
    
    
    
    
    
    86,222
    
    
    
    8,837
    
    
    
    (95,059
    )
    
    
    Warrants
    
    
    3,764
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,764Additional paid-in capital
    
    
    188,007
    
    
    
    126,192
    
    
    
    8,715
    
    
    
    (134,907
    )
    
    
    188,007Cumulative translation
adjustment
    
    
    (1,066
    )
    
    
    548
    
    
    
    8,574
    
    
    
    (9,122
    )
    
    
    (1,066
    )Accumulated deficit
    
    
    (258,344
    )
    
    
    (258,320
    )
    
    
    21,217
    
    
    
    237,103
    
    
    
    (258,344
    )Total stockholders equity
(deficit)
    
    
    (67,639
    )
    
    
    (45,355
    )
    
    
    53,610
    
    
    
    (8,255
    )
    
    
    (67,639
    )Total liabilities, minority
interests and stockholders
(deficit) equity
    
    $
    63,371
    
    
    $
    10,974
    
    
    $
    111,560
    
    
    $
    (14,215
    )
    
    $
    171,690
 81




---



##### Table of Contents



CONDENSED CONSOLIDATING STATEMENT OF OPERATIONSFOR THE YEAR ENDED DECEMBER 31, 2005U.S. GUARANTOR
    
    
    NON-GUARANTORPARENT
    
    
    SUBSIDIARIES
    
    
    SUBSIDIARIES
    
    
    ELIMINATIONS
    
    
    CONSOLIDATEDNet sales
    
    $
    
    
    
    $
    123,819
    
    
    $
    212,171
    
    
    $
    (79,502
    )
    
    $
    256,488Cost of goods sold
    
    
    
    
    
    
    54,107
    
    
    
    123,033
    
    
    
    (49,809
    )
    
    
    127,331Gross profit
    
    
    
    
    
    
    69,712
    
    
    
    89,138
    
    
    
    (29,693
    )
    
    
    129,157Selling, general and
administrative expenses
    
    
    (185
    )
    
    
    38,575
    
    
    
    45,470
    
    
    
    (9,886
    )
    
    
    73,974Research and development
    
    
    
    
    
    
    17,741
    
    
    
    20,760
    
    
    
    (19,898
    )
    
    
    18,603Asset impairment charge
    
    
    
    
    
    
    
    
    
    
    1,861
    
    
    
    
    
    
    
    1,861Income from operations
    
    
    185
    
    
    
    13,396
    
    
    
    21,047
    
    
    
    91
    
    
    
    34,719Interest expense, net
    
    
    (711
    )
    
    
    (17,265
    )
    
    
    (278
    )
    
    
    (7
    )
    
    
    (18,261
    )Other income (expense), net
    
    
    3
    
    
    
    3,201
    
    
    
    1,644
    
    
    
    (5,170
    )
    
    
    (322
    )Equity in income of subsidiaries
    
    
    4,364
    
    
    
    
    
    
    
    
    
    
    
    (4,364
    )
    
    
    Income (loss) before income taxes
    
    
    3,841
    
    
    
    (668
    )
    
    
    22,413
    
    
    
    (9,450
    )
    
    
    16,136Income tax benefit (expense)
    
    
    4,023
    
    
    
    (4,287
    )
    
    
    (6,449
    )
    
    
    (1,559
    )
    
    
    (8,272
    )Net income (loss)
    
    $
    7,864
    
    
    $
    (4,955
    )
    
    $
    15,964
    
    
    $
    (11,009
    )
    
    $
    7,864
 CONDENSED CONSOLIDATING STATEMENT OF OPERATIONSFOR THE YEAR ENDED DECEMBER 31, 2004U.S. GUARANTOR
    
    
    NON-GUARANTORPARENT
    
    
    SUBSIDIARIES
    
    
    SUBSIDIARIES
    
    
    ELIMINATIONS
    
    
    CONSOLIDATEDNet sales
    
    $
    
    
    
    $
    115,984
    
    
    $
    173,280
    
    
    $
    (62,133
    )
    
    $
    227,131Cost of goods sold
    
    
    
    
    
    
    53,209
    
    
    
    95,385
    
    
    
    (36,362
    )
    
    
    112,232Gross profit
    
    
    
    
    
    
    62,775
    
    
    
    77,895
    
    
    
    (25,771
    )
    
    
    114,899Selling, general and
administrative expenses
    
    
    182
    
    
    
    37,627
    
    
    
    39,934
    
    
    
    (8,819
    )
    
    
    68,924Restructuring charges
    
    
    
    
    
    
    
    
    
    
    (6
    )
    
    
    
    
    
    
    (6
    )Research and development
    
    
    
    
    
    
    16,214
    
    
    
    17,311
    
    
    
    (16,867
    )
    
    
    16,658Income (loss) from operations
    
    
    (182
    )
    
    
    8,934
    
    
    
    20,656
    
    
    
    (85
    )
    
    
    29,323Interest income (expense) net
    
    
    (27
    )
    
    
    (17,283
    )
    
    
    (676
    )
    
    
    46
    
    
    
    (17,940
    )Other income (expense), net
    
    
    25
    
    
    
    1,915
    
    
    
    (76
    )
    
    
    (787
    )
    
    
    1,077Equity in income of subsidiaries
    
    
    5,240
    
    
    
    
    
    
    
    
    
    
    
    (5,240
    )
    
    
    Income (loss) before income taxes
    
    
    5,056
    
    
    
    (6,434
    )
    
    
    19,904
    
    
    
    (6,066
    )
    
    
    12,460Income tax benefit (expense)
    
    
    2,597
    
    
    
    (3,211
    )
    
    
    (4,224
    )
    
    
    31
    
    
    
    (4,807
    )Net income (loss)
    
    $
    7,653
    
    
    $
    (9,645
    )
    
    $
    15,680
    
    
    $
    (6,035
    )
    
    $
    7,653
 CONDENSED CONSOLIDATING STATEMENT OF OPERATIONSFOR THE YEAR ENDED DECEMBER 31, 2003U.S. GUARANTOR
    
    
    NON-GUARANTORPARENT
    
    
    SUBSIDIARIES
    
    
    SUBSIDIARIES
    
    
    ELIMINATIONS
    
    
    CONSOLIDATEDNet sales
    
    $
    
    
    
    $
    106,207
    
    
    $
    140,528
    
    
    $
    (58,568
    )
    
    $
    188,167Cost of goods sold
    
    
    
    
    
    
    47,036
    
    
    
    82,197
    
    
    
    (32,172
    )
    
    
    97,061Gross profit
    
    
    
    
    
    
    59,171
    
    
    
    58,331
    
    
    
    (26,396
    )
    
    
    91,106Selling, general and
administrative expenses
    
    
    (42
    )
    
    
    37,988
    
    
    
    33,724
    
    
    
    (9,105
    )
    
    
    62,565Restructuring charges
    
    
    
    
    
    
    (375
    )
    
    
    285
    
    
    
    
    
    
    
    (90
    )Intangible asset impairment charge
    
    
    
    
    
    
    (854
    )
    
    
    854
    
    
    
    
    
    
    
    Research and development
    
    
    
    
    
    
    15,182
    
    
    
    17,314
    
    
    
    (17,492
    )
    
    
    15,004Income from operations
    
    
    42
    
    
    
    7,230
    
    
    
    6,154
    
    
    
    201
    
    
    
    13,627Interest income (expense) net
    
    
    961
    
    
    
    (18,744
    )
    
    
    (336
    )
    
    
    (18
    )
    
    
    (18,137
    )Other income (expense), net
    
    
    41
    
    
    
    2,202
    
    
    
    1,565
    
    
    
    (1,325
    )
    
    
    2,483Equity in income of subsidiaries
    
    
    (6,819
    )
    
    
    
    
    
    
    
    
    
    
    6,819
    
    
    
    Income (loss) before income taxes
    
    
    (5,775
    )
    
    
    (9,312
    )
    
    
    7,383
    
    
    
    5,677
    
    
    
    (2,027
    )Income tax benefit (expense)
    
    
    2,121
    
    
    
    (2,115
    )
    
    
    (1,633
    )
    
    
    
    
    
    
    (1,627
    )Net income (loss)
    
    $
    (3,654
    )
    
    $
    (11,427
    )
    
    $
    5,750
    
    
    $
    5,677
    
    
    $
    (3,654
    )
 82




---



##### Table of Contents



CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWSFOR THE YEAR ENDED DECEMBER 31, 2005U.S. GUARANTOR
    
    
    NON-GUARANTORPARENT
    
    
    SUBSIDIARIES
    
    
    SUBSIDIARIES
    
    
    ELIMINATIONS
    
    
    CONSOLIDATEDNet cash provided by operating
activities
    
    $
    6,866
    
    
    $
    8,765
    
    
    $
    13,437
    
    
    $
    (5,627
    )
    
    $
    23,441Cash flows used in investing
activities:Proceeds from sale of fixed assets
    
    
    
    
    
    
    5
    
    
    
    35
    
    
    
    
    
    
    
    40Purchases of property, plant and
equipment
    
    
    
    
    
    
    (1,077
    )
    
    
    (3,366
    )
    
    
    
    
    
    
    (4,443
    )Net cash used in investing activities
    
    
    
    
    
    
    (1,072
    )
    
    
    (3,331
    )
    
    
    
    
    
    
    (4,403
    )Cash flows provided by (used in)
financing activities:(Repayments of) advances on line of
credit, net
    
    
    
    
    
    
    (26
    )
    
    
    1,247
    
    
    
    
    
    
    
    1,221Advances under debt obligations
    
    
    
    
    
    
    
    
    
    
    547
    
    
    
    
    
    
    
    547Principal payments under debt
obligations
    
    
    
    
    
    
    (6,482
    )
    
    
    (87
    )
    
    
    
    
    
    
    (6,569
    )Net cash (used in) provided by
financing activities
    
    
    
    
    
    
    (6,508
    )
    
    
    1,707
    
    
    
    
    
    
    
    (4,801
    )Foreign exchange effect on cash and
cash equivalents
    
    
    (1,510
    )
    
    
    448
    
    
    
    (6,146
    )
    
    
    5,627
    
    
    
    (1,581
    )Net increase in cash and cash
equivalents
    
    
    5,356
    
    
    
    1,633
    
    
    
    5,667
    
    
    
    
    
    
    
    12,656Cash and cash equivalents, beginning
of year
    
    
    601
    
    
    
    3,910
    
    
    
    23,801
    
    
    
    
    
    
    
    28,312Cash and cash equivalents, end of
year
    
    $
    5,957
    
    
    $
    5,543
    
    
    $
    29,468
    
    
    $
    
    
    
    $
    40,968
 CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWSFOR THE YEAR ENDED DECEMBER 31, 2004U.S. GUARANTOR
    
    
    NON-GUARANTORPARENT
    
    
    SUBSIDIARIES
    
    
    SUBSIDIARIES
    
    
    ELIMINATIONS
    
    
    CONSOLIDATEDNet cash provided by operating
activities
    
    $
    468
    
    
    $
    6,828
    
    
    $
    14,390
    
    
    $
    3,242
    
    
    $
    24,928Cash flows used in investing
activities:Proceeds from sale of fixed assets
    
    
    
    
    
    
    19
    
    
    
    29
    
    
    
    
    
    
    
    48Purchases of property, plant and
equipment
    
    
    (3
    )
    
    
    (2,476
    )
    
    
    (2,961
    )
    
    
    
    
    
    
    (5,440
    )Payment for acquisition, net of cash
acquired
    
    
    
    
    
    
    (3,088
    )
    
    
    47
    
    
    
    
    
    
    
    (3,041
    )Net cash used in investing activities
    
    
    (3
    )
    
    
    (5,545
    )
    
    
    (2,885
    )
    
    
    
    
    
    
    (8,433
    )Cash flows provided by (used in)
financing activities:(Repayments of) advances on line of
credit, net
    
    
    
    
    
    
    (487
    )
    
    
    (51
    )
    
    
    
    
    
    
    (538
    )Principal payments under other debt
obligations
    
    
    
    
    
    
    (2,182
    )
    
    
    (214
    )
    
    
    
    
    
    
    (2,396
    )Net cash used in financing activities
    
    
    
    
    
    
    (2,669
    )
    
    
    (265
    )
    
    
    
    
    
    
    (2,934
    )Foreign exchange effect on cash and
cash equivalents
    
    
    39
    
    
    
    215
    
    
    
    2,508
    
    
    
    (3,242
    )
    
    
    (480
    )Net increase (decrease) in cash and
cash equivalents
    
    
    504
    
    
    
    (1,171
    )
    
    
    13,748
    
    
    
    
    
    
    
    13,081Cash and cash equivalents, beginning
of year
    
    
    97
    
    
    
    5,081
    
    
    
    10,053
    
    
    
    
    
    
    
    15,231Cash and cash equivalents, end of
year
    
    $
    601
    
    
    $
    3,910
    
    
    $
    23,801
    
    
    $
    
    
    
    $
    28,312
 83




---



##### Table of Contents



CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWSFOR THE YEAR ENDED DECEMBER 31, 2003U.S. GUARANTOR
    
    
    NON-GUARANTORPARENT
    
    
    SUBSIDIARIES
    
    
    SUBSIDIARIES
    
    
    ELIMINATIONS
    
    
    CONSOLIDATEDNet cash provided by (used in)
operating activities
    
    $
    (61
    )
    
    $
    7,394
    
    
    $
    667
    
    
    $
    3,047
    
    
    $
    11,047Cash flows used in investing
activities:Proceeds from sale of fixed assets
    
    
    
    
    
    
    
    
    
    
    188
    
    
    
    
    
    
    
    188Purchases of property, plant and
equipment
    
    
    (2
    )
    
    
    (828
    )
    
    
    (3,179
    )
    
    
    
    
    
    
    (4,009
    )Net cash used in investing activities
    
    
    (2
    )
    
    
    (828
    )
    
    
    (2,991
    )
    
    
    
    
    
    
    (3,821
    )Cash flows provided by (used in)
financing activities:Advances under other debt obligations
    
    
    
    
    
    
    
    
    
    
    178
    
    
    
    
    
    
    
    178Principal payments on other debt
obligations
    
    
    
    
    
    
    (1,900
    )
    
    
    (241
    )
    
    
    
    
    
    
    (2,141
    )(Repayments of) advances on line of
credit, net
    
    
    
    
    
    
    (484
    )
    
    
    327
    
    
    
    
    
    
    
    (157
    )Net cash provided by (used in)
financing activities
    
    
    
    
    
    
    (2,384
    )
    
    
    264
    
    
    
    
    
    
    
    (2,120
    )Foreign exchange effect on cash and
cash equivalents
    
    
    (1,262
    )
    
    
    (1,541
    )
    
    
    3,678
    
    
    
    (3,047
    )
    
    
    (2,172
    )Net increase (decrease) in cash and
cash equivalents
    
    
    (1,325
    )
    
    
    2,641
    
    
    
    1,618
    
    
    
    
    
    
    
    2,934Cash and cash equivalents, beginning
of year
    
    
    1,422
    
    
    
    2,440
    
    
    
    8,435
    
    
    
    
    
    
    
    12,297Cash and cash equivalents, end of
year
    
    $
    97
    
    
    $
    5,081
    
    
    $
    10,053
    
    
    $
    
    
    
    $
    15,231
 84




---



##### Table of Contents



SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
 ALLOWANCE FOR DOUBTFUL ACCOUNTS:
 BALANCE AT
    
    PROVISIONS/
    
    WRITE-OFF/
    
    BALANCE ATBEGINNING OF YEAR
    
    (CREDITS)
    
    (RECOVERIES)
    
    END OF YEAR2005
    
    $
    2,387
    
    
    $
    (87
    )
    
    $
    (454
    )
    
    $
    2,7542004
    
    $
    2,201
    
    
    $
    1,008
    
    
    $
    822
    
    
    $
    2,3872003
    
    $
    3,194
    
    
    $
    289
    
    
    $
    1,282
    
    
    $
    2,201
 85