xx QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 20122013
| Maryland | 84-1507827 | |
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| 01887 | |
| (Address of registrant’s principal executive offices) | (Zip code) | |
| Large accelerated filer | ¨ | Accelerated filer | ¨ | |||
| Non-accelerated filer | x (Do not check if a smaller reporting company) | Smaller reporting company | ¨ | |||
Management’s Discussion and Analysis of Financial Condition and Results of Operations Assets Current assets: Cash Accounts receivable, net of allowances of $1,983 and $2,035 as of December 31, 2011 and June 30, 2012, respectively Inventory Prepaid expenses and other current assets Total current assets Property, plant and equipment, net Goodwill Other intangible assets, net Deferred financing costs and other assets, net Total assets Liabilities and Stockholder’s equity Current liabilities: Current portion of long-term debt Accounts payable Accrued payroll and benefits Accrued interest Accrued expenses and other current liabilities Total current liabilities Long-term debt Other liabilities Total liabilities Stockholder’s equity: Common stock, par value $0.01 per share, 50,000,000 shares authorized; 1,000 shares issued and outstanding at December 31, 2011 and June 30, 2012, respectively Additional paid-in capital Accumulated other comprehensive (loss) Accumulated deficit Total stockholder’s equity Total liabilities and stockholder’s equity 2013 Net sales Cost of sales (exclusive of amortization) Gross profit Operating expenses: Selling, general and administrative expenses Research and development expenses Restructuring expenses Loss (gain) on disposal of assets Amortization of intangible assets Total operating expenses Income from operations Other (expense) income, net: Interest expense, net Other income (expense), net Total other (expense) income, net Income (loss) before income taxes Provision for income taxes Net income (loss) Loss 2013 Net income (loss) Other comprehensive income (loss) Unrealized gain on available for sale security Cumulative translation adjustment Comprehensive income (loss) 2013 Cash flows from operating activities: Net loss Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Depreciation and amortization Amortization of debt discounts and non-cash interest accrued Restructuring charges, net of payments Loss (gain) on disposal of assets Deferred income tax expense Non-cash compensation expense Changes in operating assets and liabilities: Accounts receivable Inventory Prepaid expenses and other current assets Accounts payable, accrued expenses and other operating liabilities Net cash (used in) provided by operating activities Cash flows from investing activities: Capital expenditures Proceeds from sale of property and equipment Proceeds from business divestitures Net cash (used in) provided by investing activities Cash flows from financing activities: Repurchase of common stock Payment of deferred financing fees Repayments of long-term debt and capital lease obligations Proceeds from exercise of options in common stock Net cash used in financing activities Effect of exchange rate changes Net (decrease) increase in cash Cash, beginning of period Cash, end of period Supplemental disclosure of cash flow information: Cash paid for interest Cash paid for income taxes Supplemental disclosure of non-cash investing and financing activities: Property and equipment purchases included in accrued expenses Deferred financing fees unpaid and included in accounts payable and accrued expenses current year’s presentation. (See Customer A Customer B Customer C Inventories consisted of the following at December 31, Raw materials Work-in-process Finished goods Total Goodwill is the amount by which the cost of acquired net assets in a business combination exceeds the fair value of net identifiable assets acquired. Intangible assets include the value ascribed to trade names and trademarks, developed technology and know-how, as well as customer contracts and relationships obtained in connection with business combinations. During the first quarter of 2013, the Company reorganized its business into two segments: Advanced Surgical ("AS Segment") and Cardio & Vascular ("CV Segment"). Cost of sales Selling, general and administrative Total Developed technology and know how Customer contracts and relationships Trade names and trademarks Total intangible assets Developed technology and know how Customer contracts and relationships Trade names and trademarks Total intangible assets Finite lived intangible asset Developed technology and know how Customer contracts and relationships Total finite lived intangible asset Long-term debt consisted of the following at Senior secured notes maturing on February 1, 2017, interest at 8.375% Senior subordinated notes maturing on November 1, 2017, interest at 10.0% Capital lease obligations Total debt Less—unamortized discount Less—current portion Long term debt, excluding current portion During the 2013 2013 Balance, January 1, 2012 Restructuring expenses Payments Balance at June 30, 2012 Balance at January 1 Shares repurchased Shares exercised Options forfeited Change in fair value Balance at end of period Expected term to exercise Expected volatility Risk-free rate Dividend yield During the three months ended During the six months ended Cost of sales Selling, general and administrative Total Time-based vesting options Performance-based vesting options Restricted stock awards Roll-over options Total expense 2013 was credits or net operating losses. taxes refund. The Company maintains a management services agreement with its principal equity owner, Kohlberg, Kravis, Roberts & Co., (“KKR”) pursuant to which KKR had no outstanding payables as of June 30, 2013. Notes. 2013, respectively. At December 31, 2012 and Investment in Available for Sale Security Liability for Roll-Over options Investment in Available for Sale Security Liability for Roll-Over options 2013 Company’s earnings and the Company’s financial condition. There is no recall or litigation pending or, to the knowledge of the Company, threatened, that the Company expects to have a material effect on the Company’s consolidated financial position, results of operations or cash flow. The Pennsylvania Department of Environmental Protection (“DEP”) has filed a petition for review with the U.S. Court of Appeals for the District of Columbia Circuit challenging recent amendments to the U.S. Environmental Protection Agency (“EPA”) National Air Emissions Standards for hazardous air pollutants from halogenated solvent cleaning operations. These revised standards exempt three industry sectors (aerospace, narrow tube manufacturers and facilities that use continuous web-cleaning and halogenated solvent cleaning machines) from facility emission limits for Trichloroethylene (“TCE”) and other degreaser emissions. The EPA has agreed to reconsider the exemption. The Company’s Collegeville facility meets current EPA control standards for TCE emissions and is exempt from the new lower TCE emission limit since the Company manufactures narrow tubes. As part of efforts to lower TCE emissions, the Company has begun to implement a process that will reduce the Company’s TCE emissions generated by its Collegeville facility. However, this process will not reduce TCE emissions to the levels required should a new standard become law. Net sales Cost of sales (exclusive of amortization) Selling, general and administrative expenses Research and development expenses Amortization of intangible assets Loss on disposal of assets (Loss) income from operations Interest expense, net Other (expense) income, net Equity in earnings (losses) of affiliates Provision for income taxes Net income (loss) Net sales Cost of sales (exclusive of amortization) Selling, general and administrative expenses Research and development expenses Restructuring expenses Amortization of intangible assets (Gain) loss on disposal of assets (Loss) income from operations Interest (expense) income, net Other (expense) income, net Equity in earnings of affiliates Provision for income taxes Net (loss) income Net sales Cost of sales (exclusive of amortization) Selling, general and administrative expenses Research and development expenses Amortization of intangible assets Loss on disposal of assets (Loss) income from operations Interest (expense) income, net Other (expense) income, net Equity in earnings of affiliates Provision for income taxes Net (loss) income (in thousands): Net sales Cost of sales (exclusive of amortization) Selling, general and administrative expenses Research and development expenses Restructuring expenses Amortization of intangible assets (Gain) loss on disposal of assets (Loss) income from operations Interest (expense) income, net Other (expense) income, net Equity in earnings of affiliates Provision for income taxes Net (loss) income Cash Accounts receivable, net Inventories Prepaid expenses and other current assets Total current assets Property, plant and equipment, net Intercompany receivables, net Investment in subsidiaries Goodwill Other intangible assets, net Deferred financing costs and other assets, net Total assets Current portion of long-term debt Accounts payable Accrued expenses and other current liabilities Total current liabilities Long-term debt Other long-term liabilities Total liabilities Equity Total liabilities and equity Cash Accounts receivable, net Inventories Prepaid expenses and other current assets Total current assets Property, plant and equipment, net Intercompany receivables, net Investment in subsidiaries Goodwill Other intangible assets, net Deferred financing costs and other assets, net Total assets Current portion of long-term debt Accounts payable Accrued expenses and other current liabilities Total current liabilities Long-term debt Other long-term liabilities Total liabilities Equity Total liabilities and equity Net income (loss) Other comprehensive income (loss): Cumulative translation adjustment Comprehensive income (loss) Net income (loss) Other comprehensive income (loss): Unrealized gain on available for sale security Cumulative translation adjustment Comprehensive income (loss) Net income (loss) Other comprehensive income (loss): Cumulative translation adjustment Comprehensive income (loss) Cash Flows — Net income (loss) Other comprehensive income (loss): Unrealized gain on available for sale security Cumulative translation adjustment Comprehensive income (loss) Flows — Net cash (used in) provided by operating activities Cash flows from investing activities: Capital expenditures Proceeds from disposition of assets Net cash used in investing activities Cash flows from financing activities: Repayments of long-term debt and capital lease obligations Intercompany receipts (advances) Proceeds from exercise of options in parent company stock Payment of debt issuance costs Cash flows provided by (used in) financing activities Effect of exchange rate changes in cash Net increase (decrease) in cash Cash, beginning of period Cash, end of period Net cash (used in) provided by operating activities Cash flows from investing activities: Purchases of property and equipment Proceeds from the disposition of assets Net cash provided by (used in) investing activities Cash flows from financing activities: Principal payments on long-term debt Intercompany (advances) receipts Repurchase of parent company stock Cash flows provided by (used in) financing activities Effect of exchange rate changes Net increase (decrease) in cash Cash, beginning of period Cash, end of period The following table summarizes the changes in stockholders’ equity during the six months ended June 30, Balance, January 1, 2012 Comprehensive loss: Net loss Unrealized gain on available for sale security Cumulative translation adjustment Total comprehensive loss Stock-based compensation and other Balance at June 30, 2012 The Customer A Customer B Customer C June 30, 2013 Compared to Three Months Ended June 30, 2012 STATEMENT OF OPERATIONS DATA: Net sales Cost of sales Gross profit Selling, general and administrative expenses Research and development expenses Restructuring expenses Amortization of intangible assets Income from operations Net sales were also impacted by minimal fluctuations in foreign currency values. for the CV Segment for the three months ended $1.5 million, or 6.4%, primarily attributable to increased sales volume, offset in part by higher manufacturing costs. depreciation. 2013. June 30, 2013 and June 30, 2012, respectively. Included in other (expense) income, net are foreign currency gains and losses. During the three months ended June 30, 2012. In addition, we recorded an income of $0.2 million during the three months ended June 30, 2013 related to sales of available for sales securities. taxes refund. June 30, 2012 and June 30, 2013 (in thousands): The increase in cost of sales for the CV Segment was primarily attributable to overhead staffing increases of $1.0 million, $1.1 million of increased medical benefit expense, and $1.6 million due to lower utilization of our fixed cost infrastructure. These increases were offset by material decreases of $0.2 million which included $0.9 million of platinum cost pass through, $0.3 million related to decreased manufacturing staffing, and $1.2 million of lower depreciation. of sales growth, as described above, at a higher rate than revenue growth. depreciation. 2013. June 30, 2013 and June 30, 2012, respectively. Included in other (expense) income, net are foreign currency gains and losses. During the six months ended June 30, 2012. In addition, we recorded income of $0.9 million during the six months ended June 30, 2013 related to a distribution from the demutualization of an insurance company that carries our product liability insurance and sales of available for sale securities in 2013. taxes refund. 2012 flows from continuing operations. At June 30, they do not reflect our cash expenditures for capital expenditure or contractual commitments; they do not reflect changes in, or cash requirements for, our working capital requirements; they do not reflect interest expense, or the cash requirements necessary to service interest or principal payments on our indebtedness; although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect cash requirements for such replacements; Adjusted EBITDA does not reflect the impact of earnings or charges resulting from matters we consider not to be indicative of our ongoing operations, as discussed in our presentation of “Adjusted EBITDA” in this report; and other companies, including other companies in our industry, may calculate these measures differently than we do, limiting their usefulness as a comparative measure. RECONCILIATION OF NET INCOME (LOSS) TO EBITDA: Net income (loss) Interest expense, net Provision for income taxes Depreciation and amortization EBITDA indicated (in thousands): EBITDA Adjustments: Stock-based compensation – employees Stock-based compensation - non-employees Employee severance and relocation Restructuring expenses Executive recruiting costs Plant closure costs Currency loss (Gain) loss on disposal of assets Other taxes Management fees to stockholder Adjusted EBITDA indicated (in thousands): Adjusted EBITDA Net changes in operating assets and liabilities Interest expense, net Cash payment of restructuring charges Deferred tax provision Income tax (expense) Amortization of debt discount and non-cash interest Other items, net Net cash provided by (used in) operating activities Net cash (used in) provided by investing activities Net cash used in financing activities follows (in thousands): Contractual Obligations Senior Secured Notes (1) Senior Subordinated Notes (1) Capital leases (1) Operating leases Purchase obligations (2) Other obligations (3) Total Revenue recognition; Allowance for doubtful accounts; Valuation of goodwill, trade names and trademarks; Valuation of long-lived assets; Self Insurance reserves; Environmental reserves; Share Based Payments; and Income Taxes During the 3 ITEM 1.3 7 22 28 29 29 ITEM 1.29 ITEM 1A.29 29 30 30 ITEM 5.30 ITEM 6.30 31ITEM 1.FINANCIAL STATEMENTS20112012 and June 30, 20122013 December 31,
2011 June 30,
2012 $ 38,858 $ 46,970 54,763 54,722 65,962 68,174 4,481 5,447 164,064 175,313 126,992 118,122 629,854 629,854 149,687 142,217 16,825 15,189 $ 1,087,422 $ 1,080,695 $ 22 $ 19 22,580 25,766 8,221 10,781 19,519 19,897 18,747 15,874 69,089 72,337 712,967 713,129 38,466 40,363 820,522 825,829 — — 638,445 638,798 (1,266 ) (1,059 ) (370,279 ) (382,873 ) 266,900 254,866 $ 1,087,422 $ 1,080,695 December 31,
2012 June 30,
2013Assets Current assets: Cash $ 59,902 $ 60,486 Accounts receivable, net of allowances of $2,106 and $2,241 as of December 31, 2012 and June 30, 2013, respectively 49,403 56,505 Inventory 57,069 60,551 Prepaid expenses and other current assets 10,973 3,388 Total current assets 177,347 180,930 Property, plant and equipment, net 115,869 116,423 Goodwill 619,443 556,315 Other intangible assets, net 134,747 127,277 Deferred financing costs and other assets, net 13,766 12,385 Total assets $ 1,061,172 $ 993,330 Liabilities and Stockholders' equity Current liabilities: Current portion of long-term debt $ 11 $ 7 Accounts payable 20,044 23,766 Accrued payroll and benefits 6,829 9,803 Accrued interest 19,323 19,303 Accrued expenses and other current liabilities 17,359 16,378 Total current liabilities 63,566 69,257 Long-term debt 713,294 713,470 Other liabilities 39,905 40,678 Total liabilities 816,765 823,405 Commitments and contingencies (Note 12) Stockholders' equity: Common stock, par value $0.01 per share, 50,000,000 shares authorized; 1,000 shares issued and outstanding at December 31, 2012 and June 30, 2013, respectively — — Additional paid-in capital 639,610 640,010 Accumulated other comprehensive loss (2,554 ) (2,696 ) Accumulated deficit (392,649 ) (467,389 ) Total stockholders’ equity 244,407 169,925 Total liabilities and stockholders’ equity $ 1,061,172 $ 993,330 20112012 and 2012 Three Months Ended Six Months Ended June 30,
2011 June 30,
2012 June 30,
2011 June 30,
2012 $ 142,793 $ 130,231 $ 272,681 $ 261,809 104,301 96,881 202,618 197,849 38,492 33,350 70,063 63,960 14,549 13,974 28,661 29,024 733 472 1,479 945 — 1,486 — 1,838 47 (33 ) 47 (34 ) 3,735 3,735 7,470 7,470 19,064 19,634 37,657 39,243 19,428 13,716 32,406 24,717 (17,179 ) (17,259 ) (34,428 ) (34,501 ) (715 ) (864 ) (2,650 ) (687 ) (17,894 ) (18,123 ) (37,078 ) (35,188 ) 1,534 (4,407 ) (4,672 ) (10,471 ) 523 1,201 2,488 2,123 $ 1,011 $ (5,608 ) $ (7,160 ) $ (12,594 ) Three Months Ended Six Months Ended June 30,
2012 June 30,
2013 June 30,
2012 June 30,
2013Net sales $ 125,998 $ 130,733 $ 250,565 $ 251,531 Cost of sales (exclusive of amortization) 93,014 95,330 188,120 190,258 Gross profit 32,984 35,403 62,445 61,273 Operating expenses: Selling, general and administrative expenses 13,814 12,778 28,669 27,025 Research and development expenses 472 547 945 999 Impairment of goodwill — 12,128 — 63,128 Restructuring expenses 1,485 (170 ) 1,838 (181 ) (Gain) loss on disposal of assets (32 ) 736 (33 ) 692 Amortization of intangible assets 3,735 3,735 7,470 7,470 Total operating expenses 19,474 29,754 38,889 99,133 Income (loss) from continuing operations 13,510 5,649 23,556 (37,860 ) Other (expense) income, net: Interest expense, net (17,258 ) (17,271 ) (34,500 ) (34,577 ) Other expense, net (858 ) (31 ) (682 ) (180 ) Total other expense, net (18,116 ) (17,302 ) (35,182 ) (34,757 ) Loss from continuing operations before income taxes (4,606 ) (11,653 ) (11,626 ) (72,617 ) Provision for income taxes 1,131 1,018 1,718 2,123 Net loss from continuing operations (5,737 ) (12,671 ) (13,344 ) (74,740 ) Net income from discontinued operations, net of tax of $69 and $404 for the three and six months ended June 30, 2012, respectively, and net of tax of $0 for the three and six months ended June 30, 2013, respectively 129 — 750 — Net loss $ (5,608 ) $ (12,671 ) $ (12,594 ) $ (74,740 ) Income (Loss)20112012 and 2012 Three Months Ended Six Months Ended June 30,
2011 June 30,
2012 June 30,
2011 June 30,
2012 $ 1,011 $ (5,608 ) $ (7,160 ) $ (12,594 ) — 193 — 193 789 (541 ) 3,195 14 $ 1,800 $ (5,956 ) $ (3,965 ) $ (12,387 ) Three Months Ended Six Months Ended June 30,
2012 June 30,
2013 June 30,
2012 June 30,
2013Net loss $ (5,608 ) $ (12,671 ) $ (12,594 ) $ (74,740 ) Other comprehensive income (loss): Unrealized gain (loss) on available for sale security 193 (3 ) 193 32 Realized gain on available for sale security — (242 ) — (242 ) Cumulative translation adjustment (540 ) 325 14 68 Other comprehensive (loss) income (347 ) 80 207 (142 ) Comprehensive loss $ (5,955 ) $ (12,591 ) $ (12,387 ) $ (74,882 ) 20112012 and 2012 June 30,
2011 June 30,
2012 $ (7,160 ) $ (12,594 ) 19,047 20,130 1,449 1,533 — 1,031 47 (34 ) 2,979 1,479 535 227 (9,199 ) (59 ) (12,806 ) (5,371 ) (2,211 ) (609 ) 4,301 2,487 (3,018 ) 8,220 (16,773 ) (7,984 ) 163 25 — 8,034 (16,610 ) 75 — (43 ) (498 ) — (12 ) (11 ) 16 — (494 ) (54 ) 290 (129 ) (19,832 ) 8,112 40,787 38,858 $ 20,955 $ 46,970 $ 32,828 $ 32,574 $ 1,132 $ 1,414 $ 1,727 $ 1,853 $ 72 $ — Six Months Ended June 30,
2012 June 30,
2013Cash flows from operating activities: Net loss $ (12,594 ) $ (74,740 ) Less net income from discontinued operations, net of tax 750 — Net loss from continuing operations (13,344 ) (74,740 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 19,488 16,228 Amortization of debt discounts and non-cash interest accrued 1,533 1,619 Restructuring charges, net of payments 1,031 — Impairment of goodwill — 63,128 (Gain) Loss on disposal of assets (33 ) 692 Gain on sale of securities — (242 ) Deferred income tax expense 1,479 1,104 Non-cash compensation expense 227 460 Changes in operating assets and liabilities: Accounts receivable (2,119 ) (7,237 ) Inventory (4,427 ) (3,559 ) Prepaid expenses and other current assets (630 ) (684 ) Accounts payable, accrued expenses and other liabilities 2,998 6,002 Net cash provided by operating activities of continuing operations 6,203 2,771 Net cash provided by (used in) operating activities of discontinued operations 2,017 (108 ) Net cash provided by operating activities 8,220 2,663 Cash flows from investing activities: Capital expenditures (7,477 ) (10,264 ) Proceeds from sale of property and equipment 24 63 Proceeds from the sale of available for sale securities — 242 Net cash used in investing activities of continuing operations (7,453 ) (9,959 ) Net cash provided by investing activities of discontinued operations 7,528 7,987 Net cash provided by (used in) investing activities 75 (1,972 ) Cash flows from financing activities: Repayments of long-term debt and capital lease obligations (11 ) (7 ) Repurchase of common stock (43 ) — Net cash used in financing activities (54 ) (7 ) Effect of exchange rate changes (129 ) (100 ) Net increase in cash 8,112 584 Cash, beginning of period 38,858 59,902 Cash, end of period $ 46,970 $ 60,486 Supplemental disclosure of cash flow information: Cash paid for interest $ 32,574 $ 32,910 Cash paid for income taxes $ 1,414 $ 816 Supplemental disclosure of non-cash investing and financing activities: Property and equipment purchases included in accrued expenses $ 1,853 $ 1,615 201220131.Summary of significant accounting policiesWe haveWe haveThe Company has prepared the accompanying unaudited condensed consolidated financial statements on the same basis as the audited financial statements included in ourits Annual Report on Form 10-K for the fiscal year ended December 31, 2011,2012, and in the opinion of management, these financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results of the interim periods presented. The operating results for the interim periods presented are not necessarily indicative of the results expected for the full fiscal year. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in ourits Annual Report on Form 10-K for the fiscal year ended December 31, 2011.There2012no significant changes inreclassified to conform to the application of our significant accounting policies that were disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011, nor were there any significant changes resulting from the adoption of new accounting pronouncements.2011 and 2012 our , the Company's ten largest customers accounted for approximately 66% and 65% of ourits consolidated net sales, respectively.sales. During the three and six months ended June 30, 2011 and 2012, our 2013, the Company's ten largest customers accounted for approximately 66%68% and 65%67% of ourits consolidated net sales, respectively. more than 10% or more of our consolidated net sales was as follows for the periods presented: Three Months Ended June 30, Six Months Ended June 30, 2011 2012 2011 2012 17 % 16 % 16 % 16 % 16 % 14 % 17 % 14 % 10 % 11 % 11 % 10 % Three Months Ended Six Months Ended June 30,
2012 June 30,
2013 June 30,
2012 June 30,
2013Customer A 13 % 17 % 13 % 16 % Customer B 16 % 14 % 17 % 14 % Customer C 11 % 11 % 11 % 11 % Customer D * 10 % * 10 % 2012,2013, Customer A comprisedand B accounted for approximately 13 %17% and 12%, respectively, and Customers C and D each accounted for approximately 10% of accounts receivable, net. At December 31, 2011,2012, Customers A and B each comprisedaccounted for approximately 13% and 12%, respectively, of Accountsaccounts receivable, net.2.New Accounting PronouncementsIn June 2011,2011-05, “Comprehensive Income (ASC Topic 220):Presentation2013-02, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income,” (“ASU 2011-05”) which amends current comprehensive income guidance.Income." This accounting update eliminates the option to present the componentsrequires additional disclosure requirements about reclassification adjustments out of accumulated other comprehensive income (loss) as part("AOCI"). These adjustments include (1) changes in AOCI balances by component and (2) significant items reclassified out of AOCI. The ASU does not change the statement of stockholders’ equity. Instead,current requirements for the Company must report comprehensive income (loss) in either a single continuous statementreporting of comprehensive income (loss) which contains two sections, net income (loss) and other comprehensive income (loss), or in two separate but consecutive statements.income. The Company adopted the provisions of this standardASU on January 1, 20122013 and elected to present comprehensive income (loss) in a separate statement. Thethe adoption of this standard did not have ana significant impact on the Company’s consolidated financial position, results of operations or cash flows.20112012 and June 30, 20122013 (in thousands): December 31,
2011 June 30,
2012 $ 16,056 $ 17,457 27,420 32,784 22,486 17,933 $ 65,962 $ 68,174 December 31,
2012 June 30,
2013Raw materials $ 12,100 $ 15,999 Work-in-process 27,779 28,850 Finished goods 17,190 15,702 Total $ 57,069 $ 60,551 4.Goodwill and intangible assetssix monthsyear ended June 30, 2011 and 2012.December 31, 2012.20112012 and 2012,2013, the Company recorded amortization expense related to intangible assets as follows (in thousands): Three Months Ended Six Months Ended June 30,
2011 June 30,
2012 June 30,
2011 June 30,
2012 $ 497 $ 497 $ 994 $ 994 3,238 3,238 6,476 6,476 $ 3,735 $ 3,735 $ 7,470 $ 7,470 Three Months Ended Six Months Ended June 30,
2012 June 30,
2013 June 30,
2012 June 30,
2013Cost of sales $ 497 $ 497 $ 994 $ 994 Selling, general and administrative 3,238 3,238 6,476 6,476 Total $ 3,735 $ 3,735 $ 7,470 $ 7,470 December 31, 2011June 30, 2013 (in thousands): Gross
Carrying
Amount Accumulated
Amortization Net
Carrying
Amount $ 16,991 $ (12,186 ) $ 4,805 197,575 (82,093 ) 115,482 29,400 — 29,400 $ 243,966 $ (94,279 ) $ 149,687 Developed technology and know how $ 16,991 $ (15,168 ) $ 1,823 Customer contracts and relationships 197,575 (101,521 ) 96,054 Trade names and trademarks 29,400 — 29,400 Total intangible assets $ 243,966 $ (116,689 ) $ 127,277 June 30,December 31, 2012 (in thousands): Gross
Carrying
Amount Accumulated
Amortization Net
Carrying
Amount $ 16,991 $ (13,180 ) $ 3,811 197,575 (88,569 ) 109,006 29,400 — 29,400 $ 243,966 $ (101,749 ) $ 142,217 Developed technology and know how $ 16,991 $ (14,174 ) $ 2,817 Customer contracts and relationships 197,575 (95,045 ) 102,530 Trade names and trademarks 29,400 — 29,400 Total intangible assets $ 243,966 $ (109,219 ) $ 134,747 20122013 is approximately $7.5 million.$7.5 million. The estimated annual intangible asset amortization expense approximates $14.9$13.8 million in 2013, $13.82014, $13.0 million in 2014 and $13.0 million in each of year in 2015, 2016, and 2016.2017, and $37.8 million thereafter.20112012 and June 30, 2012,2013, the remaining weighted-average amortization periods for the Company’s finite lived intangible assets were as follows: Remaining weighted -
average amortization period December 31,
2011 June 30,
2012 2.4 1.9 8.9 8.4 8.7 8.2 20112012 and June 30, 20122013 (in thousands): December 31,
2011 June 30,
2012 $ 400,000 $ 400,000 315,000 315,000 34 31 715,034 715,031 (2,045 ) (1,883 ) (22 ) (19 ) $ 712,967 $ 713,129 December 31,
2012 June 30,
2013Senior secured notes maturing on February 1, 2017, interest at 8.375% ("Senior Secured Notes") $ 400,000 $ 400,000 Senior subordinated notes maturing on November 1, 2017, interest at 10.0% ("Senior Subordinated Notes") 315,000 315,000 Capital lease obligations 20 13 Total debt 715,020 715,013 Less—unamortized discount (1,715 ) (1,536 ) Less—current portion (11 ) (7 ) Long term debt, excluding current portion $ 713,294 $ 713,470 $75.0$75.0 million of borrowing capacity, subject to borrowing base availability. At June 30, 2012,2013, there were no amounts outstanding under the ABL Revolver and the Company’s aggregate borrowing capacity was $27.1$33.2 million, after giving effect to outstanding letters of credit totaling $12.5$10.9 million and the amount of ineligible accounts receivable and inventories, as defined in the credit agreement governing the ABL Revolver.6.Restructuring2011,2013, the Company undertook no restructuring actions. Duringsix months ended June 30, 2012,Company's Board of Directors approved a plan of closure with respect to the Company completed the closure of itsCompany's manufacturing facility in Manchester, England. In April of 2012, the Manchester facility was closed, and substantially all employees were terminated. All affected employees were provided with stay-bonuses as well as one-time termination benefits that were received upon cessation of employment, provided they remained with the Company through the closing date. The total one-time termination benefits totaled approximately $0.6$0.6 million and were recorded over each employee’s remaining service period as they were required to stay through their termination date to receive the benefits. During the six months ended June 30, 2012, the Company recorded $1.3$1.3 million of restructuring costs including $0.9 million related to lease termination costs and $0.4 million related to one-time termination benefitsthe facility's closure that are recorded within “Restructuring expenses” in the accompanying unaudited condensed consolidated statement of operations foroperations. During the three and six months ended June 30, 2012.Colorado and theColorado. The Company expectscompleted the facility to be closed no later thanclosure in the first quarter of 2013 upon completion of the transfer of the facility’sfacility's business to other of the Company’sCompany's other facilities. In connection with the planned closure, the Company will provideprovided certain one-time termination benefits to affected employees. These one-time termination benefits are beingwere recorded over each employee’semployee's remaining service period as employees will bewere required to stay through their termination date to receive the benefits. During the six months ended June 30, 2012, theThe Company recorded $0.5$0.2 million of restructuring costs related to this facility during the facility’s planned closure, which consisted primarily of costs related to one-time termination benefits,three and are recorded within “Restructuring expenses” in the accompanying unaudited condensed consolidated statement of operations for the six months ended June 30, 2012.statementsbalance sheet as of operations for the six months ended June 30, 2012 (in thousands): Employee
costs Other exit
costs Total $ 340 — $ 340 874 964 1,838 (698 ) (108 ) (806 ) $ 516 $ 856 $ 1,372 7.Divestitures Total Balance, January 1, 2012 $ 340 $ — $ 340 Restructuring expenses 874 964 1,838 Payments (698 ) (108 ) (806 ) Balance, June 30, 2012 $ 516 $ 856 $ 1,372 In May 2012,The following table summarizes the amounts recorded related to restructuring activities, which are included in the accompanying unaudited condensed consolidated balance sheet as of June 30, 2013 (in thousands): Total Balance, January 1, 2013 $ 1,329 790 $ 2,119 Restructuring expenses (170 ) (11 ) (181 ) Payments (1,024 ) (121 ) (1,145 ) Balance, June 30, 2013 $ 135 $ 658 $ 793 completeddiscontinued certain businesses. The Company has accounted for these businesses as discontinued operations and, accordingly, has presented the sale of substantially all of the assets of its facility in Pittsburgh, Pennsylvania for a purchase price of approximately $8.0 million in cash which was received upon closing. The results of operations and related cash flows as discontinued operations for the Pittsburgh facility are not material to all periods presented. The Company recorded a pre-tax gain Three Months Ended Six Months Ended June 30,
2012 June 30,
2013 June 30,
2012 June 30,
2013Sales $ 4,233 $ — $ 11,244 $ — Costs and expenses 4,027 — 10,084 — Operating income from discontinued operations 206 — 1,160 — Other expenses, net (8 ) — (6 ) — Income from discontinued operations before income taxes 198 — 1,154 — Provision for income taxes 69 — 404 — Income from discontinued operations, net of tax $ 129 $ — $ 750 $ — five-yearfive-year period (“Performance-Based”). Targets underlying the vesting of Performance-Based shares are generally achieved upon the attainment of a specified level of Adjusted EBITDA, as defined in the indenture governing the Company’s senior secured notes, measured each calendar year. The vesting requirements for Performance-Based shares permit a catch-up of vesting should the target not be achieved in a calendar year but achieved in a subsequent calendar year, over the five year vesting period. In addition, in connection with the acquisition of the Company in 2005, the Company exchanged fully vested stock options to acquire common shares of its predecessor entities for 4,901,107 fully vested stock options, or “Roll-Over” options, of Accellent Holdings Corp. which are recorded as a liability until such options are exercised, forfeited, expired or settled. Three Months Ended June 30, 2012 June 30, 2013 Balance at January 1 $ 143 80,727 $ 141 80,727 Shares repurchased — — — — Options exercised — — — — Options forfeited — — — — Change in fair value (2 ) — — — Balance at end of period $ 141 80,727 $ 141 80,727 20112012 and 2012: Three months ended Six months ended June 30, 2011 June 30, 2012 June 30, 2011 June 30, 2012 Liability
(in thousands) Roll-Over
Shares
Outstanding Liability
(in thousands) Roll-Over
Shares
Outstanding Liability
(in thousands) Roll-Over
Shares
Outstanding Liability
(in thousands) Roll-Over
Shares
Outstanding $ 449 250,049 $ 143 80,727 $ 448 250,049 $ 355 201,817 — — — — — — (119 ) (67,607 ) (23 ) (12,995 ) — — (23 ) (12,995 ) (58 ) (33,301 ) (61 ) (35,237 ) — — (61 ) (35,237 ) (35 ) (20,182 ) (7 ) — (2 ) — (6 ) — (2 ) — $ 358 201,817 $ 141 80,727 $ 358 201,817 $ 141 80,727 Six Months Ended June 30, 2012 June 30, 2013 Balance at January 1 $ 355 201,817 $ 141 80,727 Shares repurchased (119 ) (67,607 ) — — Options exercised (58 ) (33,301 ) — — Options forfeited (35 ) (20,182 ) — — Change in fair value (2 ) — — — Balance at end of period $ 141 80,727 $ 141 80,727 20122013 to determine the fair value of the Roll-Over Options:options: June 30, 20122013 1.70.67 years26.725.84% 0.370.36% 0.0—% 20112012 and 2012,2013, the Company granted stock options to employees to purchase approximately 155,00010,000 and 10,00040,000 shares, respectively, of Accellent Holdings Corp.'s common stock. Of the total stock options granted during the three months ended June 30, 20112012 and 2012, 77,5002013, 5,000 and 5,000,20,000, respectively, were Performance-Based awards. Stock options granted during the three months ended June 30, 20112012 and 20122013 had a weighted average grant date fair value of $1.02$0.79 and $0.79$0.78 per share, respectively.20112012 and 2012,2013, the Company granted stock options to employees to purchase approximately 320,000425,000 and 425,000265,000 shares, respectively, of Accellent Holdings Corp.'s common stock. Of the total stock options granted during the six months ended June 30, 20112012 and 2012, 160,0002013, 212,500 and 212,500,132,500, respectively, were Performance-Based awards. Stock options granted during the six months ended June 30, 20112012 and 20122013 had a weighted average grant date fair value of $1.02$0.80 and $0.80$0.77 per share, respectively.summarizessummarize the classification of recorded stock-based compensation in the unaudited condensed consolidated statements of operations and the recorded stock-based compensation by type of award for the three and six months ended June 30, 20112012 and 2012:2013 (in thousands): Three Months Ended Six Months Ended June 30,
2011 June 30,
2012 June 30,
2011 June 30,
2012 $ 26 $ 30 $ 54 $ 38 216 112 436 144 $ 242 $ 142 $ 490 $ 182 Three Months Ended Six Months Ended June 30,
2012 June 30,
2013 June 30,
2012 June 30,
2013Cost of sales $ 30 $ 49 $ 38 $ 111 Selling, general and administrative 112 136 144 289 Total $ 142 $ 185 $ 182 $ 400 Three Months Ended Six Months Ended June 30,
2011 June 30,
2012 June 30,
2011 June 30,
2012 $ 227 $ 144 $ 452 $ 184 — — — — 22 — 44 — (7 ) (2 ) (6 ) (2 ) $ 242 $ 142 $ 490 $ 182 Three Months Ended Six Months Ended June 30,
2012 June 30,
2013 June 30,
2012 June 30,
2013Time-based vesting options $ 144 $ 79 $ 184 $ 192 Performance-based vesting options — — — — Restricted stock awards — 106 — 208 Roll-over options (2 ) — (2 ) — Total expense $ 142 $ 185 $ 182 $ 400 2012,2013, the Company determined that attainment of certain of the targets through 20122013 necessary for Performance-Based options to vest is not probable. Accordingly, the Company has not recorded stock-based compensation expense for Performance-Based Stock Awardsstock awards during the three and six months ended June 30, 2012.3,570,2713,808,901 and 3,808,9014,750,105, and $4.2$4.3 million and $4.3$4.9 million, at June 30, 20112012 and 2012,2013, respectively. The total unvested Time-Based shares and their aggregate fair values were 2,629,0002,314,550 and 2,314,5502,566,250, and $2.9$2.4 million and $2.4$2.4 million, at June 30, 20112012 and 2012,2013, respectively.total unvested restricted stock awards and theirvest annually each year over a five year period beginning on the grant date. The aggregate grant date fair value were 58,677 and $0.2 million at June 30, 2011. No Restricted Stock awards were outstanding at June 30, 2012.Non-employee$125,000, or $2.50 per share. The Company did not record any stock-based compensationDuring each of expense during the three and six months ended June 30, 20112012 related to restricted stock. The Company recorded approximately $0.1 million and $0.2 million of stock-based compensation expense during the three and six months ended June 30, 2013 related to restricted stock.$22,500$22,500 and $45,000$30,000, respectively, of non-employee stock-based compensation related to fees paid to members of the Company’s Board of Directors. These fees are recorded as a liability and recorded in “Other liabilities” in the unaudited condensed consolidated balance sheets.9.Income taxeswe arethe Company is required to pay income taxes. The Company records valuation allowances to reduce deferred tax assets to the amount that is more likely than not to be realized. The Company has not provided for U.S. income taxes on the undistributed earnings of non-U.S. subsidiaries, as these earnings have been permanently reinvested or would be offset by foreign tax credits.20112012 was $0.5$1.1 million and $2.5$1.7 million, respectively, and included $0.8$0.7 million and $1.5$1.5 million, respectively, of deferred income tax expense for differences in the book and tax treatment of goodwill offset in part by $0.4 millionand $(0.3)$0.2 million and $1.0 million, respectively, in state and foreign income taxes.20122013 was $1.2$1.0 million and $2.1$2.1 million, respectively, and included $0.7$0.7 million and $1.5$1.1 million, respectively, of deferred income tax expense for differences inwhich included $0.7 million and $1.3 million, respectively, related to the book and tax treatment of goodwill offset in part by other taxes of approximately $0.3 millionand $0.5$0.8 million. The income tax expense also included $0.3 million and $0.6$0.6 million in state, foreign and foreignother income taxes.has $29.4had $29.9 million and $30.3$31.2 million of net deferred tax liabilities included in “Other liabilities” in the accompanying unaudited condensed consolidated balance sheets as of December 31, 20112012 and June 30, 2012,2013, respectively, relating to goodwill basis differences.not currently under any examination by U.S. Federal, state and local, or non-U.S.the State of New York for income tax authorities.years ended December 31, 2008 through 2010. There are no other current income tax audits. The tax years ended December 31, 2005 through 2011 remain subject to examination by major tax jurisdictions. However, since the Company has net operating loss carryforwards, which may be utilized in future years to offset taxable income, those years may also be subject to review by relevant taxing authorities if utilized, notwithstanding that the statute for assessment may have closed.10.Related party transactionswill provideprovides certain structuring, consulting and management advisory services. During the three and six months ended June 30, 2011,2012 and 2013, the Company incurred management fees and related expenses pursuant to this agreement of $0.3$0.3 million and $0.6$0.7 million respectively. During the three and six months ended June 30, 2012, the Company incurred management fees and related expenses pursuant to this agreement of $0.3 million and $0.7 million,, respectively. As of December 31, 20112012 and June 30, 2012,2013, the Company owed KKR $0.3$0.4 million and $0.3 million, for each period respectively for unpaid management fees which are included in “Accrued expenses and other current liabilities” in the accompanying unaudited condensed consolidated balance sheets. The Company has also historically utilized the services of Capstone Consulting LLC (“Capstone”), an entity affiliated with KKR. During the three and six months ended June 30, 2011, the Company incurred consulting fees and related expenses of $0.1 million and $0.2 million, respectively. No fees or expenses related to Capstone were incurred during the three and six months ended June 30, 2012. At December 31, 2011 and June 30, 2012 and June 30, 2013. At December 31, 2012 the Company owed Capstone $0.3$0.3 million, and $0.3 million, respectively.$31.7$14.0 million principal amount of the Company’s Senior Secured Notes and approximately $35.5$23.4 million principal amount of the Company’s 2017Senior Subordinated Notes at June 30, 2012. Entities2013. At December 31, 2012, entities affiliated with KKR-AM an affiliate of KKR, owned approximately $31.3$14.7 million principal amount of the Company’s Senior Secured Notes and approximately $27.9$23.4 million principal amount of the Company’s 2017Senior Subordinated Notes at December 31, 2011.in September 2007 becameis privately owned by a consortium of private equity sponsors, including KKR. Net sales resulting from product shipments to Biomet, Inc. during the three and six months ended June 30, 20112012 totaled $0.1$0.1 million and $0.2$0.3 million, respectively. Net sales resulting from product shipments to Biomet, Inc. during the three and six months ended June 30, 2012 totaled $0.12013 were approximately $0.1 million and $0.3 million,, respectively. At December 31, 2011 and June 30, 2012, accounts receivable from Biomet, Inc. aggregated $0.1$0.1 million and $36 thousand, respectively.. At June 30, 2013, accounts receivable from Biomet were negligible.$0.1$0.2 million and $0.2$0.4 million in fees in connection with this agreement for the three and six month periods ended June 30, 2011. The Company incurred approximately $0.2 million2012 and $0.4 million in fees in connection with this agreement for the three and six month periods ended June 30, 2012.11.Fair value measurements20112012 and June 30, 2012: Fair Value Measurements at
December 31, 2011 determined using Total Carrying
Value at
December 31,
2011 Quoted Prices in
Active Markets
for Identical
Assets (Level 1) Significant Other
Observable
Inputs (Level 2) Significant
Unobservable
Inputs
(Level 3) $ 1,155 $ 1,155 $ — $ — $ 355 $ — $ — $ 355 Fair Value Measurements at
June 30, 2012 determined using Total Carrying
Value at
June 30,
2012 Quoted Prices in
Active Markets
for Identical
Assets (Level 1) Significant Other
Observable
Inputs (Level 2) Significant
Unobservable
Inputs
(Level 3) $ 1,348 $ 1,348 $ — $ — $ 141 $ — $ — $ 141 Investment in Available for Sale Security $ 210 $ 210 $ — $ — Liability for Roll-Over options $ 141 $ — $ — $ 141 Liability for Roll-Over options $ 141 $ — $ — $ 141 •Accounts receivable and accounts payable: The carrying amounts of these items are a reasonable estimate of their fair values at December 31, 2011 and June 30, 2012 based on the short-term nature of these items.•Borrowings under the Senior Secured Notes due 2017—Borrowings under the Senior Secured Notes due 2017 have a fixed rate. The Company intends to carry the Senior Secured Notes until their maturity. At June 30, 2012, the fair value of the Senior Secured Notes due 2017, which is Level 2 in the fair value hierarchy, was approximately 104% or $416 million compared to their carrying value of $400 million.•Borrowings under the Senior Subordinated Notes due 2017—Borrowings under the Senior Subordinated Notes due 2017 have a fixed rate. The Company intends to carry the Senior Subordinated Notes until their maturity. At June 30, 2012 the fair value of the Senior Subordinated Notes due 2017, which is Level 2 in the fair value hierarchy, was approximately 84% or $264.6 million compared to their carrying value of $315 million.12.Contingencies13.Environmental matters20112012 and June 30, 2012,2013, the Company maintained a reserve for environmental liabilities of approximately $1.8$1.6 million and $1.7$1.4 million respectively.. The Company expects to pay $0.1$0.1 million during 2012.14.Supplemental guarantor condensed consolidating financial statementsIn connection with the Company’s borrowing arrangements (collectivelybalance of “Notes”), all of itsCompany's domestic subsidiaries (the “Subsidiary Guarantors”) that are 100% owned guaranteedby the Company, directly or indirectly, guarantee on a joint and several, full and unconditional basis, the repayment byobligations of Accellent Inc. of such Notes.under the Senior Secured Notes and the Senior Subordinated Notes (collectively, the "Notes"). Foreign subsidiaries of Accellent Inc. (the “Non-Guarantor Subsidiaries”) have not guaranteed the Notes. (loss) for the three and six months ended June 30, 20112012 and 20122013 the unaudited condensed consolidating balance sheets as of December 31, 20112012 and June 30, 2012,2013, and the unaudited condensed consolidating statements of cash flows for the six months ended June 30, 20112012 and 2012,2013, of Accellent Inc. (the “Parent”), the Subsidiary Guarantors and the Non-Guarantor Subsidiaries.20112012 (in thousands): Parent Subsidiary
Guarantors Non-
Guarantor
Subsidiaries Eliminations Consolidated $ — $ 133,572 $ 9,724 $ (503 ) $ 142,793 — 98,394 6,448 (541 ) 104,301 23 13,601 925 — 14,549 — 456 277 — 733 3,735 — — — 3,735 — 47 — — 47 (3,758 ) 21,074 2,074 38 19,428 (17,159 ) (22 ) 2 — (17,179 ) — (167 ) (510 ) (38 ) (715 ) 21,928 1,163 — (23,091 ) — — (120 ) (403 ) — (523 ) $ 1,011 $ 21,928 $ 1,163 $ (23,091 ) $ 1,011 Parent Eliminations Consolidated Net sales $ — $ 116,546 $ 10,208 $ (756 ) $ 125,998 Cost of sales (exclusive of amortization) — 86,723 7,047 (756 ) 93,014 Selling, general and administrative expenses 23 12,877 914 — 13,814 Research and development expenses — 243 229 — 472 Restructuring expenses — 1,485 — — 1,485 Amortization of intangible assets 3,735 — — — 3,735 (Gain) loss on disposal of assets — (40 ) 8 — (32 ) (Loss) income from continuing operations (3,758 ) 15,258 2,010 — 13,510 Interest (expense) income, net (17,232 ) 663 (689 ) — (17,258 ) Other (expense) income, net — (2,116 ) 1,258 — (858 ) Equity in earnings (losses) of affiliates 15,382 1,795 — (17,177 ) — (Loss) income from continuing operations before income taxes (5,608 ) 15,600 2,579 (17,177 ) (4,606 ) Provision for income taxes — 347 784 — 1,131 Net (loss) income from continuing operations (5,608 ) 15,253 1,795 (17,177 ) (5,737 ) Net income from discontinued operations, net of tax — 129 — — 129 Net (loss) income $ (5,608 ) $ 15,382 $ 1,795 $ (17,177 ) $ (5,608 ) 20122013 (in thousands): Parent Subsidiary
Guarantors Non-
Guarantor
Subsidiaries Eliminations Consolidated $ — $ 120,779 $ 10,208 $ (756 ) $ 130,231 — 90,590 7,047 (756 ) 96,881 23 13,037 914 — 13,974 — 243 229 — 472 — 1,486 — — 1,486 3,735 — — — 3,735 — (41 ) 8 — (33 ) (3,758 ) 15,464 2,010 — 13,716 (17,232 ) 662 (689 ) — (17,259 ) — (2,122 ) 1,258 — (864 ) 15,382 1,795 — (17,177 ) — — (417 ) (784 ) — (1,201 ) $ (5,608 ) $ 15,382 $ 1,795 $ (17,177 ) $ (5,608 ) Parent Eliminations Consolidated Net sales $ — $ 120,112 $ 10,898 $ (277 ) $ 130,733 Cost of sales (exclusive of amortization) — 87,727 7,880 (277 ) 95,330 Selling, general and administrative expenses 30 11,908 840 — 12,778 Research and development expenses — 327 220 — 547 Impairment of goodwill 12,128 — — — 12,128 Restructuring expenses — (170 ) — — (170 ) Amortization of intangible assets 3,735 — — — 3,735 Loss on disposal of assets — 708 28 — 736 (Loss) income from continuing operations (15,893 ) 19,612 1,930 — 5,649 Interest (expense) income, net (17,277 ) 714 (708 ) — (17,271 ) Other income (expense), net 242 256 (529 ) — (31 ) Equity in earnings of affiliates 20,257 415 — (20,672 ) — (Loss) income from continuing operations before income taxes (12,671 ) 20,997 693 (20,672 ) (11,653 ) Provision for income taxes — 740 278 — 1,018 Net (loss) income from continuing operations (12,671 ) 20,257 415 (20,672 ) (12,671 ) Net income from discontinued operations, net of tax — — — — — Net (loss) income $ (12,671 ) $ 20,257 $ 415 $ (20,672 ) $ (12,671 ) 20112012 (in thousands): Parent Subsidiary
Guarantors Non-
Guarantor
Subsidiaries Eliminations Consolidated $ — $ 254,717 $ 18,908 $ (944 ) $ 272,681 — 191,520 12,080 (982 ) 202,618 45 26,900 1,716 — 28,661 — 946 533 — 1,479 7,470 — — — 7,470 — 47 — — 47 (7,515 ) 35,304 4,579 38 32,406 (34,381 ) (49 ) 2 — (34,428 ) — (330 ) (2,282 ) (38 ) (2,650 ) 34,736 1,563 — (36,299 ) — — (1,752 ) (736 ) — (2,488 ) $ (7,160 ) $ 34,736 $ 1,563 $ (36,299 ) $ (7,160 ) Parent Eliminations Consolidated Net sales $ — $ 231,254 $ 20,458 $ (1,147 ) $ 250,565 Cost of sales (exclusive of amortization) — 175,089 14,178 (1,147 ) 188,120 Selling, general and administrative expenses 48 26,782 1,839 — 28,669 Research and development expenses — 497 448 — 945 Restructuring expenses — 1,838 — — 1,838 Amortization of intangible assets 7,470 — — — 7,470 (Gain) loss on disposal of assets — (41 ) 8 — (33 ) (Loss) income from continuing operations (7,518 ) 27,089 3,985 — 23,556 Interest (expense) income, net (34,448 ) 1,340 (1,392 ) — (34,500 ) Other (expense) income, net — (1,321 ) 639 — (682 ) Equity in earnings (losses) of affiliates 29,372 1,961 — (31,333 ) — (Loss) income from continuing operations before income taxes (12,594 ) 29,069 3,232 (31,333 ) (11,626 ) Provision for income taxes — 447 1,271 — 1,718 Net (loss) income from continuing operations (12,594 ) 28,622 1,961 (31,333 ) (13,344 ) Net income from discontinued operations, net of tax — 750 — — 750 Net (loss) income $ (12,594 ) $ 29,372 $ 1,961 $ (31,333 ) $ (12,594 ) Parent Eliminations Consolidated Net sales $ — $ 231,211 $ 20,963 $ (643 ) $ 251,531 Cost of sales (exclusive of amortization) — 175,937 14,964 (643 ) 190,258 Selling, general and administrative expenses 62 25,152 1,811 — 27,025 Research and development expenses — 625 374 — 999 Impairment of goodwill 63,128 — — — 63,128 Restructuring expenses — (181 ) — — (181 ) Amortization of intangible assets 7,470 — — — 7,470 Loss on disposal of assets — 666 26 — 692 (Loss) income from continuing operations (70,660 ) 29,012 3,788 — (37,860 ) Interest (expense) income, net (34,580 ) 1,408 (1,405 ) — (34,577 ) Other income (expense), net 923 (854 ) (249 ) — (180 ) Equity in earnings of affiliates 29,577 1,447 — (31,024 ) — (Loss) income from continuing operations before income taxes (74,740 ) 31,013 2,134 (31,024 ) (72,617 ) Provision for income taxes — 1,436 687 — 2,123 Net (loss) income from continuing operations (74,740 ) 29,577 1,447 (31,024 ) (74,740 ) Net income from discontinued operations, net of tax — — — — — Net (loss) income $ (74,740 ) $ 29,577 $ 1,447 $ (31,024 ) $ (74,740 ) Parent Eliminations Consolidated Cash $ — $ 53,812 $ 6,090 $ — $ 59,902 Accounts receivable, net — 46,992 2,929 (518 ) 49,403 Inventories — 52,807 4,262 — 57,069 Prepaid expenses and other current assets 215 10,399 359 — 10,973 Total current assets 215 164,010 13,640 (518 ) 177,347 Property, plant and equipment, net — 90,473 25,396 — 115,869 Intercompany receivables, net — 365,713 — (365,713 ) — Investment in subsidiaries 554,794 9,143 — (563,937 ) — Goodwill 619,443 — — — 619,443 Other intangible assets, net 134,747 — — — 134,747 Deferred financing costs and other assets, net 13,269 (8 ) 505 — 13,766 Total assets $ 1,322,468 $ 629,331 $ 39,541 $ (930,168 ) $ 1,061,172 Current portion of long-term debt $ — $ 11 $ — $ — $ 11 Accounts payable 1 18,613 1,948 (518 ) 20,044 Accrued expenses and other current liabilities 19,317 20,267 3,927 — 43,511 Total current liabilities 19,318 38,891 5,875 (518 ) 63,566 Long-term debt 1,057,832 — 21,175 (365,713 ) 713,294 Other long-term liabilities 911 35,646 3,348 — 39,905 Total liabilities 1,078,061 74,537 30,398 (366,231 ) 816,765 Equity 244,407 554,794 9,143 (563,937 ) 244,407 Total liabilities and equity $ 1,322,468 $ 629,331 $ 39,541 $ (930,168 ) $ 1,061,172 Parent Eliminations Consolidated Cash $ — $ 52,397 $ 8,089 $ — $ 60,486 Accounts receivable, net — 52,688 4,089 (272 ) 56,505 Inventories — 55,641 4,910 — 60,551 Prepaid expenses and other current assets 44 3,078 266 — 3,388 Total current assets 44 163,804 17,354 (272 ) 180,930 Property, plant and equipment, net — 89,488 26,935 — 116,423 Intercompany receivables, net — 398,943 — (398,943 ) — Investment in subsidiaries 584,438 10,934 — (595,372 ) — Goodwill 556,315 — — — 556,315 Other intangible assets, net 127,277 — — — 127,277 Deferred financing costs and other assets, net 11,828 70 487 — 12,385 Total assets $ 1,279,902 $ 663,239 $ 44,776 $ (994,587 ) $ 993,330 Current portion of long-term debt $ — $ 7 $ — $ — $ 7 Accounts payable — 21,011 3,027 (272 ) 23,766 Accrued expenses and other current liabilities 19,303 21,447 4,734 — 45,484 Total current liabilities 19,303 42,465 7,761 (272 ) 69,257 Long-term debt 1,089,703 — 22,710 (398,943 ) 713,470 Other long-term liabilities 971 36,336 3,371 — 40,678 Total liabilities 1,109,977 78,801 33,842 (399,215 ) 823,405 Equity 169,925 584,438 10,934 (595,372 ) 169,925 Total liabilities and equity $ 1,279,902 $ 663,239 $ 44,776 $ (994,587 ) $ 993,330 Parent Eliminations Consolidated Net (loss) income $ (5,608 ) $ 15,382 $ 1,795 $ (17,177 ) $ (5,608 ) Other comprehensive income (loss): Unrealized gain on available for sale security 193 — — — 193 Cumulative translation adjustment (540 ) (139 ) (401 ) 540 (540 ) Comprehensive (loss) income $ (5,955 ) $ 15,243 $ 1,394 $ (16,637 ) $ (5,955 ) Parent Eliminations Consolidated Net (loss) income $ (12,671 ) $ 20,257 $ 415 $ (20,672 ) $ (12,671 ) Other comprehensive income (loss): Unrealized loss on available for sale security (3 ) — — — (3 ) Realized gain on available for sale security (242 ) — — — (242 ) Cumulative translation adjustment 325 2 323 (325 ) 325 Comprehensive (loss) income $ (12,591 ) $ 20,259 $ 738 $ (20,997 ) $ (12,591 ) Parent Subsidiary
Guarantors Non-
Guarantor
Subsidiaries Eliminations Consolidated $ — $ 242,499 $ 20,458 $ (1,148 ) $ 261,809 — 184,665 14,332 (1,148 ) 197,849 47 27,138 1,839 — 29,024 — 497 448 — 945 — 1,838 — — 1,838 7,470 — — — 7,470 — (42 ) 8 — (34 ) (7,517 ) 28,403 3,831 — 24,717 (34,449 ) 1,341 (1,393 ) — (34,501 ) — (1,480 ) 793 — (687 ) 29,372 1,960 — (31,332 ) — — (852 ) (1,271 ) — (2,123 ) $ (12,594 ) $ 29,372 $ 1,960 $ (31,332 ) $ (12,594 ) Unaudited Condensed Consolidating Balance SheetsJune 30, 2012 (in thousands): Parent Subsidiary
Guarantors Non-
Guarantor
Subsidiaries Eliminations Consolidated $ — $ 41,447 $ 5,523 $ — $ 46,970 — 51,445 4,115 (838 ) 54,722 — 63,587 4,587 — 68,174 1,343 3,883 221 — 5,447 1,343 160,362 14,446 (838 ) 175,313 — 95,836 22,286 — 118,122 — 340,890 — (340,890 ) — 523,471 7,343 — (530,814 ) — 629,854 — — — 629,854 142,217 — — — 142,217 14,662 162 365 — 15,189 $ 1,311,547 $ 604,593 $ 37,097 $ (872,542 ) $ 1,080,695 $ — $ 19 $ — $ — $ 19 — 23,831 2,773 (838 ) 25,766 19,901 20,461 6,190 — 46,552 19,901 44,311 8,963 (838 ) 72,337 1,035,628 — 18,391 (340,890 ) 713,129 1,152 36,811 2,400 — 40,363 1,056,681 81,122 29,754 (341,728 ) 825,829 254,866 523,471 7,343 (530,814 ) 254,866 $ 1,311,547 $ 604,593 $ 37,097 $ (872,542 ) $ 1,080,695 Unaudited Condensed Consolidating Balance SheetsDecember 31, 2011 (in thousands): Parent Subsidiary
Guarantors Non-
Guarantor
Subsidiaries Eliminations Consolidated $ — $ 32,627 $ 6,231 $ — $ 38,858 — 52,073 3,014 (324 ) 54,763 — 62,528 3,434 — 65,962 879 3,385 217 — 4,481 879 150,613 12,896 (324 ) 164,064 — 110,251 16,741 — 126,992 — 300,148 21,728 (321,876 ) — 493,405 42,612 — (536,017 ) — 629,854 — — — 629,854 149,687 — — — 149,687 16,310 155 352 8 16,825 $ 1,290,135 $ 603,779 $ 51,717 $ (858,209 ) $ 1,087,422 $ — $ 22 $ — $ — $ 22 15 21,236 1,764 (435 ) 22,580 19,517 21,919 4,932 119 46,487 19,532 43,177 6,696 (316 ) 69,089 1,003,063 31,780 — (321,876 ) 712,967 1,321 34,736 2,409 — 38,466 1,023,916 109,693 9,105 (322,192 ) 820,522 266,219 494,086 42,612 (536,017 ) 266,900 $ 1,290,135 $ 603,779 $ 51,717 $ (858,209 ) $ 1,087,422 Parent Eliminations Consolidated Net (loss) income $ (12,594 ) $ 29,372 $ 1,961 $ (31,333 ) $ (12,594 ) Other comprehensive income (loss): Unrealized gain on available for sale security 193 — — — 193 Cumulative translation adjustment 14 55 (41 ) (14 ) 14 Comprehensive (loss) income $ (12,387 ) $ 29,427 $ 1,920 $ (31,347 ) $ (12,387 ) (Loss)Three months ended June 30, 2011 (in thousands): Parent Subsidiary
Guarantors Non-
guarantor
subsidiaries Eliminations Consolidated $ 1,011 $ 21,928 $ 1,163 $ (23,091 ) $ 1,011 �� 789 789 789 (1,578 ) 789 $ 1,800 $ 22,717 $ 1,952 $ (24,669 ) $ 1,800 Unaudited Condensed Consolidating Statements of Comprehensive Income (Loss)Three months ended June 30, 2012 (in thousands): Parent Subsidiary
Guarantors Non-
guarantor
subsidiaries Eliminations Consolidated $ (5,608 ) $ 15,382 $ 1,795 $ (17,177 ) $ (5,608 ) 193 — — — 193 (541 ) (541 ) (541 ) 1,082 (541 ) $ (5,956 ) $ 14,841 $ 1,254 $ (16,095 ) $ (5,956 ) Unaudited Condensed Consolidating Statements of Comprehensive Income (Loss)20112013 (in thousands): Parent Subsidiary
Guarantors Non-
guarantor
subsidiaries Eliminations Consolidated $ (7,160 ) $ 34,736 $ 1,563 $ (36,299 ) $ (7,160 ) 3,195 3,195 3,195 (6,390 ) 3,195 $ (3,965 ) $ 37,931 $ 4,758 $ (42,689 ) $ (3,965 ) Parent Eliminations Consolidated Net (loss) income $ (74,740 ) $ 29,577 $ 1,447 $ (31,024 ) $ (74,740 ) Other comprehensive income (loss): Unrealized gain on available for sale security 32 — — — 32 Realized gain on available for sale security (242 ) — — — (242 ) Cumulative translation adjustment 68 (277 ) 345 (68 ) 68 Comprehensive (loss) income $ (74,882 ) $ 29,300 $ 1,792 $ (31,092 ) $ (74,882 ) Comprehensive Income (Loss) Parent Subsidiary
Guarantors Non-guarantor
subsidiaries Eliminations Consolidated $ (12,594 ) $ 29,372 $ 1,960 $ (31,332 ) $ (12,594 ) 193 — — — 193 14 14 14 (28 ) 14 $ (12,387 ) $ 29,386 $ 1,974 $ (31,360 ) $ (12,387 ) Parent Eliminations Consolidated Net cash (used in) provided by operating activities of continuing operations $ (32,360 ) $ 34,588 $ 3,975 $ — $ 6,203 Net cash provided by operating activities of discontinued operations — 2,017 — — 2,017 Net cash (used in) provided by operating activities (32,360 ) 36,605 3,975 — 8,220 Cash flows from investing activities: Capital expenditures — (257 ) (7,220 ) — (7,477 ) Proceeds from disposition of assets — 24 — — 24 Net cash used in investing activities of continuing operations — (233 ) (7,220 ) — (7,453 ) Net cash provided by investing activities of discontinued operations — 7,528 — — 7,528 Net cash provided by (used in) investing activities — 7,295 (7,220 ) — 75 Cash flows from financing activities: Repayments of long-term debt and capital lease obligations — (11 ) — — (11 ) Intercompany receipts (advances) 32,403 (35,097 ) 2,694 — — Repurchase of parent company stock (43 ) — — — (43 ) Cash flows provided by (used in) financing activities 32,360 (35,108 ) 2,694 — (54 ) Effect of exchange rate changes in cash — 28 (157 ) — (129 ) Net increase (decrease) in cash — 8,820 (708 ) — 8,112 Cash, beginning of period — 32,627 6,231 — 38,858 Cash, end of period $ — $ 41,447 $ 5,523 $ — $ 46,970 Flows—20112013 (in thousands): Parent Subsidiary
Guarantors Non-
Guarantor
Subsidiaries Eliminations Consolidated $ (32,295 ) $ 24,650 $ 4,627 $ — $ (3,018 ) — (13,118 ) (3,655 ) — (16,773 ) — 163 — — 163 — (12,955 ) (3,655 ) — (16,610 ) — (12 ) — — (12 ) 32,792 (32,597 ) (195 ) — — — 16 — — 16 (498 ) — — — (498 ) 32,294 (32,593 ) (195 ) — (494 ) — 47 243 — 290 — (20,851 ) 1,020 — (19,832 ) — 38,392 2,395 — 40,787 $ — $ 17,541 $ 3,415 $ — $ 20,955 Unaudited Condensed Consolidating Statements Parent Eliminations Consolidated Net cash (used in) provided by operating activities of continuing operations $ (32,424 ) $ 30,583 $ 4,612 $ — $ 2,771 Net cash used in operating activities of discontinued operations — (108 ) — — (108 ) Net cash (used in) provided by operating activities (32,424 ) 30,475 4,612 — 2,663 Cash flows from investing activities: Capital expenditures — (6,265 ) (3,999 ) — (10,264 ) Proceeds from sale of equipment — 56 7 — 63 Proceeds from the sale of available for sale securities 242 — — — 242 Net cash provided by (used in) investing activities of continuing operations 242 (6,209 ) (3,992 ) — (9,959 ) Net cash provided by investing activities of discontinued operations — 7,987 — — 7,987 Net cash provided by (used in) investing activities 242 1,778 (3,992 ) — (1,972 ) Cash flows from financing activities: Repayments of long-term debt and capital lease obligations — (7 ) — — (7 ) Intercompany receipts (advances) 32,182 (33,633 ) 1,451 — — Cash flows provided by (used in) financing activities 32,182 (33,640 ) 1,451 — (7 ) Effect of exchange rate changes in cash — (28 ) (72 ) — (100 ) Net (decrease) increase in cash — (1,415 ) 1,999 — 584 Cash, beginning of period — 53,812 6,090 — 59,902 Cash, end of period $ — $ 52,397 $ 8,089 $ — $ 60,486 Six months ended June 30, 2012 (in thousands): Parent Subsidiary
Guarantors Non-
Guarantor
Subsidiaries Eliminations Consolidated $ (32,360 ) $ 36,605 $ 3,975 $ — $ 8,220 — (764 ) (7,220 ) — (7,984 ) — 8,059 — — 8,059 — 7,295 (7,220 ) — 75 — (11 ) — — (11 ) 32,403 (35,097 ) 2,694 — — (43 ) — — — (43 ) 32,360 (35,108 ) 2,694 — (54 ) — 28 (157 ) — (129 ) — 8,820 (708 ) — 8,112 — 32,627 6,231 — 38,858 $ — $ 41,447 $ 5,523 $ — $ 46,970 15.Changes in Stockholder’s Equity2012: Common Stock Accumulated Additional
Paid-In
Capital other
comprehensive
income (loss) Accumulated
(deficit) Total
Equity Shares Amount 1,000 $ — $ 638,445 $ (1,266 ) $ (370,279 ) $ 266,900 — — — (12,594 ) (12,594 ) — — 193 — 193 — — 14 — 14 (12,387 ) — 353 — — 353 1,000 $ — $ 638,798 $ (1,059 ) $ (382,873 ) $ 254,866 2013: Common Stock Shares Amount Balance, January 1, 2013 1,000 $ — $ 639,610 $ (2,554 ) $ (392,649 ) $ 244,407 Comprehensive loss: Net loss — — — (74,740 ) (74,740 ) Unrealized gain on available for sale security — — 32 — 32 Realized gain on available for sale security — — — (242 ) — (242 ) Cumulative translation adjustment — — 68 — 68 Total comprehensive loss (74,882 ) Stock-based compensation and other — 400 — — 400 Balance, June 30, 2013 1,000 $ — $ 640,010 $ (2,696 ) $ (467,389 ) $ 169,925 16.Subsequent EventsCompany has evaluatedfollowing table summarizes the period from changes in accumulated other comprehensive loss for the three months ended June 30, 2012 (in thousands): Defined Benefit Pension Items Unrealized Gains and Losses on Available-for-Sale Securities Foreign Currency Items Total Balance at April 1, 2012 $ (317 ) $ 1,155 $ (1,550 ) $ (712 ) Other comprehensive income before reclassifications — 193 (540 ) (347 ) Amounts reclassified from accumulated other comprehensive income — — — — Net current-period other comprehensive income — 193 (540 ) (347 ) Balance at June 30, 2012 $ (317 ) $ 1,348 $ (2,090 ) $ (1,059 ) datechanges in accumulated other comprehensive income (loss) for the three months ended June 30, 2013 (in thousands): Defined Benefit Pension Items Unrealized Gains and Losses on Available-for-Sale Securities Foreign Currency Items Total Balance at April 1, 2013 $ (1,159 ) $ 245 $ (1,862 ) $ (2,776 ) Other comprehensive (loss) income before reclassifications — (245 ) 325 80 Amounts reclassified from accumulated other comprehensive income — — — — Net current-period other comprehensive income — (245 ) 325 80 Balance at June 30, 2013 $ (1,159 ) $ — $ (1,537 ) $ (2,696 ) Defined Benefit Pension Items Unrealized Gains and Losses on Available-for-Sale Securities Foreign Currency Items Total Balance at January 1, 2012 $ (317 ) $ 1,155 $ (2,104 ) $ (1,266 ) Other comprehensive income before reclassifications — 193 14 207 Amounts reclassified from accumulated other comprehensive income — — — — Net current-period other comprehensive income — 193 14 207 Balance at June 30, 2012 $ (317 ) $ 1,348 $ (2,090 ) $ (1,059 ) Defined Benefit Pension Items Unrealized Gains and Losses on Available-for-Sale Securities Foreign Currency Items Total Balance at January 1, 2013 $ (1,159 ) $ 210 $ (1,605 ) $ (2,554 ) Other comprehensive (loss) income before reclassifications — (210 ) 68 (142 ) Amounts reclassified from accumulated other comprehensive income — — — — Net current-period other comprehensive income — (210 ) 68 (142 ) Balance at June 30, 2013 $ (1,159 ) $ — $ (1,537 ) $ (2,696 ) Three Months Ended Six Months Ended June 30,
2012 June 30,
2013 June 30,
2012 June 30,
2013Net sales: Cardio & Vascular $ 79,497 $ 81,193 $ 156,685 $ 157,168 Advanced Surgical 49,057 50,467 98,174 95,658 Intersegment (2,556 ) (927 ) (4,294 ) (1,295 ) Total net sales $ 125,998 $ 130,733 $ 250,565 $ 251,531 Adjusted EBITDA: Cardio & Vascular $ 23,515 $ 23,833 $ 47,451 $ 45,716 Advanced Surgical 8,016 8,422 14,116 13,145 Corporate Services (5,364 ) (4,716 ) (13,775 ) (12,808 ) Total Adjusted EBITDA $ 26,167 $ 27,539 $ 47,792 $ 46,053 Reconciliation of Adjusted EBITDA to income from continuing operations before provision for income taxes Impairment of goodwill $ — $ (12,128 ) $ — $ (63,128 ) Interest expense, net (17,258 ) (17,271 ) (34,500 ) (34,577 ) Depreciation and amortization (9,838 ) (8,102 ) (19,488 ) (16,228 ) Stock-based compensation - employees (142 ) (185 ) (182 ) (400 ) Stock-based compensation - non-employees (22 ) (30 ) (45 ) (60 ) Employee severance and relocation (556 ) (417 ) (1,370 ) (819 ) Restructuring expenses (1,485 ) 170 (1,838 ) 181 Plant closure costs (154 ) (47 ) (323 ) (1,217 ) Currency (loss) (905 ) (272 ) (720 ) (1,120 ) Gain (loss) on disposal of property and equipment 32 (736 ) 33 (692 ) Other taxes (110 ) (64 ) (315 ) (148 ) Management fees to stockholder (335 ) (352 ) (670 ) (704 ) Gain from the sale of available for sale securities — 242 — 242 Total adjustments $ (30,773 ) $ (39,192 ) $ (59,418 ) $ (118,670 ) Loss from continuing operations before provision for income taxes $ (4,606 ) $ (11,653 ) $ (11,626 ) $ (72,617 ) Six Months Ended June 30,
2012 June 30,
2013Capital expenditures: Cardio & Vascular $ 3,787 $ 5,590 Advanced Surgical 2,467 4,659 Corporate 1,223 15 Total capital expenditures $ 7,477 $ 10,264 December 31,
2012 June 30,
2013Assets: Cardio & Vascular $ 606,304 $ 620,850 Advanced Surgical 245,619 177,671 Corporate Services 209,249 194,809 Total assets $ 1,061,172 $ 993,330 consolidated financial statements, through the dateCardio & Vascular Group.ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS “continue”“continues” or the negative of those words and other comparable words. These forward-looking statements involve risks and uncertainties. Our actual results could differ materially from those indicated in these statements as a result of certain factors as more fully discussed under the heading “Risk Factors” contained in our annual reportAnnual Report on Form 10-K filed on March 29, 2012April 1, 2013 with the Securities and Exchange Commission (File No. 333-130470) for the Company’s fiscal year ended December 31, 2011.2012. The following discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included herein.withinof the medical device industry. We offer our customers design and engineering, precision component manufacturing, device assembly and supply chain management services. We have extensive resources focused on providing our customers with reliable, high quality, cost-efficient, integrated outsourced solutions. Based on discussions with our customers, we believe we often become the sole supplier of manufacturing and engineering services for the products we provide to our customers.Stryker and Zimmer.Stryker. While sales are aggregated by us to the ultimate parent of a customer, we typically generate diversified revenue streams within these large customers across separate customer divisions and multiple products.2011 and 2012, our 10ten largest customers accounted for approximately 66% and 65% of our consolidated net sales, respectively.sales. During the three and six months ended June 30, 2011 and 2012,2013, our 10ten largest customers accounted for approximately 66%68% and 65%67% of our consolidated net sales, respectively. Three customers each accounted for 10% or more of our consolidated net sales during the three and six months ended June 30, 2012 and four customers each accounted for 10% or more of our consolidated net sales during the three and six months ended June 30, 2011 and 2012.2013. We expect net sales from our largest customers to continue to constitute a significant portion of our net sales in the future.the Company’sour consolidated net sales were as follows for the periods presented: Three Months Ended June 30, Six Months Ended June 30, 2011 2012 2011 2012 17 % 16 % 16 % 16 % 16 % 14 % 17 % 14 % 10 % 11 % 11 % 10 % Three Months Ended Six Months Ended June 30,
2012 June 30,
2013 June 30,
2012 June 30,
2013Customer A 13 % 17 % 13 % 16 % Customer B 16 % 14 % 17 % 14 % Customer C 11 % 11 % 11 % 11 % Customer D * 10 % * 10 % Three Months Ended Six Months Ended June 30,
2012 June 30,
2013 June 30,
2012 June 30,
2013Loss on disposition of discontinued operations $ — $ — $ — $ — Income from discontinued operations 129 — 750 — Net income from discontinued operations, net of tax $ 129 $ — $ 750 $ — percentagesour operating data derived from the unaudited condensed consolidated statements of continuing operations for the three and six months ended June 30, 20112012 and 2012,2013, presented as a percentage of net sales. Three Months Ended Six Months Ended June 30,
2011 June 30,
2012 June 30,
2011 June 30,
2012 100.0 % 100.0 % 100.0 % 100.0 % 73.0 74.4 74.3 75.6 27.0 25.6 25.7 24.4 10.2 10.7 10.5 11.1 0.5 0.4 0.5 0.4 — 1.1 — 0.7 2.7 2.9 2.8 2.8 13.6 % 10.5 % 11.9 % 9.4 % Three Months Ended June 30,
2012 June 30,
2013STATEMENT OF OPERATIONS DATA: Net sales 100.0 % 100.0 % Cost of sales 73.8 72.9 Gross profit 26.2 27.1 Selling, general and administrative expenses 11.0 9.8 Research and development expenses 0.4 0.4 Impairment of goodwill — 9.3 Restructuring expenses and other 1.1 0.4 Amortization of intangible assets 3.0 2.9 Income from continuing operations 10.7 % 4.3 % Three Months Ended The following table shows the net sales by segment for the three months ended June 30, 2012 Compared to Three Months Ended and June 30, 20112013Net Sales (in thousands): Three Months Ended June 30,
2012 June 30,
2013 Increase(Decrease) % Change Net Sales: Cardio & Vascular segment $ 79,010 $ 80,726 $ 1,716 2.2 % Advanced Surgical segment 46,988 50,007 3,019 6.4 % Total Net Sales $ 125,998 $ 130,733 $ 4,735 3.8 % 20122013 were $130.2$130.7 million, a decreasean increase of $12.6$4.7 million, or 8.8%3.8%, compared to net sales of $142.8$126.0 million for the three months ended June 30, 2011.2012. Net sales were impacted by lower salespositive volume totaling $8.6 million, exclusiveincreases in both segments of approximately $7.1 million. Increases in volume were offset by price decreases of $1.3$2.1 million, $1.2 million related to lower foreign currency values and $1.5$0.3 million related to decreased sales of platinum, resulting primarily from passing through to our customers, changes in precious metal prices which do not benefit gross profit.CostNet sales for the three months ended June 30, 2013 for the CV Segment were $80.7 million, an increase of goods sold and gross profitCost$1.7 million, or 2.2%, compared to net sales of goods sold was $96.9$79.0 million for the three months ended June 30, 2012. The increase in net sales for the CV Segment is primarily attributed to increased volume of approximately $3.4 million, offset by price decreases of $1.4 million and $0.3 million related to decreased sales of platinum. Net sales were also impacted by minimal fluctuations in foreign currency values.$104.3net sales of $47.0 million for the three months ended June 30, 2011, a decrease2012. The increase in net sales for the AS Segment is primarily related to increases in volume of $7.4$3.7 million, offset by decreases in price of $0.7 million. Three Months Ended June 30,
2012 June 30,
2013 Increase (Decrease) % Change Cost of Sales: Cardio & Vascular segment $ 55,043 $ 55,223 $ 180 0.3 % Advanced Surgical segment 37,971 40,107 2,136 5.6 % Total cost of sales $ 93,014 $ 95,330 $ 2,316 2.5 % 7.1%2.5%. Cost of goods soldsales reflects our variable manufacturing and fixed overhead costs necessary to produce productproducts for our customers. The decreaseincrease in cost of goods soldsales is primarily attributable to lowerhigher costs from increased volume comprised of the following: material costs resulting from the sales decrease related toincreases of $2.1 million, which included $0.3 million of platinum totaling approximately $1.5 million, decreases in material costs totaling approximately $3.3cost pass through, $0.8 million related to lower raw material procurement costs primarily associated with lower sales volume,increased manufacturing staffing, and $3.1$1.0 million resulting from lower variable manufacturing costs attributable primarily to lower sales volume but including approximately $0.5 million related to cost reduction and productivity improvement activities, all of which were offset by increased fixed manufacturing costs due to lower utilization of our fixed cost infrastructure withinfrastructure. These increases were offset by $1.6 million of lower depreciation.totaling approximately $0.5 million. Three Months Ended June 30,
2012 June 30,
2013 Increase (Decrease) % Change Gross Profit: Cardio & Vascular segment $ 23,967 $ 25,503 $ 1,536 6.4 % Advanced Surgical segment 9,017 9,900 883 9.8 % Total gross profit $ 32,984 $ 35,403 $ 2,419 7.3 % $33.4$35.4 million, or 25.6%27.1%, of net sales, for the three months ended June 30, 20122013 compared to $38.5$33.0 million, or 27.0%26.2%, of net sales for the three months ended June 30, 2011.2012. As a percentpercentage of sales, gross profit declined 1.4%increased 0.9% during the three months ended June 30, 20122013 compared to the three months ended June 30, 20112012 primarily due to lower leverageincreased sales volume.our fixed cost infrastructure resulting from lower sales.$14.0$12.8 million for the three months ended June 30, 20122013 compared to $14.5$13.8 million for the three months ended June 30, 2011.2012. The $0.5$1.0 million decrease in SG&A expenses waswere primarily attributable to lower compensation and benefits of $1.1 million, inclusive of $0.7 million related to management incentive plans, lower travel and related costs, of $0.3 million, offset by higher costs related to professional fees and outside services of $0.6 million, increased depreciation costs of $0.2 million and higher utility costs of $0.1 million during the three months ended June 30, 2012 compared to the three months ended June 30, 2011.million, $0.2 million lower than the $0.7 million in the three months ended June 30, 2011.million. R&D expenses represent costs related to the development of new or improved manufacturing technologiestechnologies.declinecurrent structure and operations. During the first quarter of $0.2fiscal 2013, goodwill was reassigned to the new reporting units based on the relative fair values of the reporting units. This resulted in goodwill of $134.0 million is attributable primarilybeing assigned to lower headcount duringits AS reporting unit, and $485.4 million being assigned to its CV reporting unit.three months endedgoodwill, the carrying amount of the AS reporting unit exceeds its fair value by approximately $16 million, which required us to perform an interim goodwill impairment test for the AS reporting unit. Pursuant to the next step of impairment testing, we calculated an implied fair value of goodwill based on a hypothetical purchase price allocation. During the first quarter of 2013, the Company had not finalized this step of its impairment testing due to the complexities involved in estimating fair value. In accordance with accounting guidance, the Company recognized an estimated impairment charge and recorded a pre-tax goodwill impairment charge of $51.0 million in the first quarter of 2013. The Company finalized the second step of the analysis in the second quarter of 2013 and recorded an additional pre-tax goodwill impairment charge of $12.1 million for a total pre-tax goodwill impairment charge of $63.1 million as of June 30, 2012 compared to the three months ended June 30, 2011. $17.2 million and $17.3 million for each of the three month periods ended June 30, 2013 and June 30, 2012 and June 30, 2011, respectively..2012,2013, we recorded a currency loss of approximately $0.9$0.3 million compared to a loss of approximately $0.7$0.9 million during the three months ended June 30, 2011.2012. The increasechange is due to changesfluctuation in foreign currency exchange rates during the three months ended June 30, 20122013 compared to the three months ended June 30, 2011.$1.2$1.1 million and included approximately $0.7 million of deferred income tax expense for differences in the book and tax treatment of goodwill and $0.5offset in part by $0.4 million in state and foreign income taxes. Income tax expense for the three months ended June 30, 2011 was $0.5 million and included approximately $0.8 million of deferred income tax expense for differences in the book and tax treatment of goodwill and an income tax benefit of approximately $0.3 million in state and foreign income taxes. The change in income tax expense during the three months ended June 30, 2012 compared to the three months ended June 30, 2011 is attributable to higher profitability in the Company’s foreign operations during the three months ended June 30, 2012.20122013 Compared to Six Months Ended June 30, 20112012 Six Months Ended June 30,
2012 June 30,
2013STATEMENT OF OPERATIONS DATA: Net sales 100.0 % 100.0 % Cost of sales 75.1 75.6 Gross profit 24.9 24.4 Selling, general and administrative expenses 11.4 10.7 Research and development expenses 0.4 0.4 Impairment of goodwill — 25.1 Restructuring expenses and other 0.7 0.2 Amortization of intangible assets 3.0 3.0 Income from continuing operations 9.4 % (15.0 )% Six Months Ended June 30,
2012 June 30,
2013 Increase(Decrease) % Change Net Sales: Cardio & Vascular segment $ 155,911 $ 156,579 $ 668 0.4 % Advanced Surgical segment 94,654 94,952 298 0.3 % Total Net Sales $ 250,565 $ 251,531 $ 966 0.4 % 20122013 were $261.8$251.5 million, a decreasean increase of $10.9approximately $1.0 million, or 4.0%0.4%, compared to net sales of $272.7$250.6 million for the six months ended June 30, 2011.2012. Net sales were impacted by lower salespositive volume totaling $6.4 million, exclusiveincreases in both segments of approximately $5.9 million. Increases in volume were offset by price decreases of $2.4$4.0 million $1.2 million related to lower foreign currency values and $0.9 million related to decreased sales of platinum, resulting primarily from passing through to our customers, changes in precious metal prices which do not benefit gross profit.Cost Net sales were also impacted by minimal fluctuations in foreign currency values.CostJune 30, 2013 for the CV Segment were $156.6 million, an increase of goods sold was $197.8$0.7 million, or 0.4%, compared to net sales of $155.9 million for the six months ended June 30, 2012. The increase in net sales for the CV Segment is primarily attributed to increased volume of $4.4 million offset by price decreases of $2.8 million and $0.9 million related to decreased sales of platinum.$202.6net sales of $94.7 million for the six months ended June 30, 2011, a decrease2012. The increase in net sales for the AS Segment is primarily related to increases in volume of $4.8$1.5 million offset by decreases in price of $1.2 million. Six Months Ended June 30,
2012 June 30,
2013 Increase (Decrease) % Change Cost of Sales: Cardio & Vascular segment $ 108,433 $ 110,436 $ 2,003 1.8 % Advanced Surgical segment 79,687 79,822 135 0.2 % Total cost of sales $ 188,120 $ 190,258 $ 2,138 1.1 % 2.4%1.1%. Cost of goods soldsales reflects our variable manufacturing and fixed overhead costs necessary to produce productproducts for our customers. The decreaseincrease in cost of goods soldsales is primarily attributable to decreasedhigher costs from increased volume comprised of the following: material costs resulting from lower salesincreases of $0.3 million which included $0.9 million of platinum totaling approximatelycost pass through, $0.9 million decreases in material costs totalingrelated to increased manufacturing staffing, approximately $1.3$1.9 million resulting from lower sales volume , lower variable manufacturing costs totaling approximately $3.9of increased medical benefit expense, and $2.0 million primarily attributabledue to lower sales volume, all of which were offset by higher fixed costs resulting from lower utilization of our fixed cost infrastructure totaling approximately $1.3infrastructure. These increases were offset by $3.0 million of lower depreciation. Six Months Ended June 30,
2012 June 30,
2013 Increase (Decrease) % Change Gross Profit: Cardio & Vascular segment $ 47,478 $ 46,143 $ (1,335 ) (2.8 )% Advanced Surgical segment 14,967 15,130 163 1.1 % Total gross profit $ 62,445 $ 61,273 $ (1,172 ) (1.9 )% $64.0$61.3 million, or 24.4%, of net sales, for the six months ended June 30, 20122013 compared to $70.1$62.4 million, or 25.7%24.9%, of net sales for the six months ended June 30, 2011.2012. As a percentpercentage of sales, gross profit declined 1.3%decreased 0.5% during the six months ended June 30, 20122013 compared to the six months ended June 30, 20112012 driven primarily dueby the CV Segment.lower leverage$47.5 million for the six months ended June 30, 2012, a decrease of our fixedapproximately $1.3 million, or 2.8%. The decrease in gross profit for the CV Segment was primarily a result of cost infrastructure.$29.0$27.0 million for the six months ended June 30, 20122013 compared to $28.7 million for the six months ended June 30, 2011.2012. The $0.3$1.7 million increasedecrease in SG&A expenses was primarily attributable to one time contractually obligated severance charges recorded during the six months ended June 30, 2012 totaling approximately $0.4 million, lower costs of $0.8 million related to management incentive plans and stock compensation costs, lower travel and related costs of $0.2 million, lower costs related to recruiting and relocation totaling $0.3 million, offset by higher costs related toutility expenses, professional fees and outside services of $0.7 million, increased depreciation costs of $0.3 million and higher utility costs of $0.2 million during the six months ended June 30, 2012 compared to the six months ended June 30, 2011.20122013 were $0.9approximately $1.0 million $0.6 million lower than the $1.5 million infor each of the six months ended June 30, 2011.2013 and June 30, 2012. R&D expenses represent costs related to the development of new or improved manufacturing technologiestechnologies.declinecurrent structure and operations. During the first quarter of $0.6fiscal 2013, goodwill was reassigned to the new reporting units based on the relative fair values of the reporting units. This resulted in goodwill of $134.0 million is attributable primarilybeing assigned to lower headcountits AS reporting unit, and $485.4 million being assigned to its CV reporting unit.six months endedfirst quarter of 2013. The Company finalized the second step of the analysis in the second quarter of 2013 and recorded an additional pre-tax goodwill impairment charge of $12.1 million for a total pre-tax goodwill impairment charge of $63.1 million as of June 30, 2012 compared to the six months ended June 30, 2011.$34.4$34.6 million and $34.5 million for each of the six month periods ended June 30, 2013 and June 30, 2012 and June 30, 2011,, respectively.2012,2013, we recorded a currency loss of approximately $0.7$1.1 million compared to a loss of approximately $3.1$0.7 million during the six months ended June 30, 2011. This difference2012. The change is due to smaller changesfluctuation in foreign currency exchange rates during the six months ended June 30, 20122013 compared to the six months ended June 30, 2011.20122013 was $2.1$2.1 million and included $1.5$1.3 million of deferred income tax expense for differences in the book and tax treatment of goodwill and $0.6$0.6 million in state and foreign income taxes. Income tax expense for the six months ended June 30, 20112012 was $2.5$1.7 million and included approximately $1.5$1.5 million of deferred income tax expense for differences in the book and tax treatment of goodwill and approximately $1.0offset in part by $0.2 million in state and foreign income taxes. The change in income tax expense during the six months ended June 30, 2012 compared to the six months ended June 30, 2011 is attributable to higher profitability in the Company’s foreign operations offset by the effect of changes in the Company’s entity structure that became effective in January of 2012.2012,2013, we had $12.5$10.9 million of letters of credit outstanding and no outstanding loans under the ABL Revolver. As of June 30, 2012,2013, our total indebtedness amounted to $715.0 million.$8.2$2.8 million during the six months ended June 30, 2013 compared to cash provided by continuing operations of $6.2 million during the six months ended June 30, 2012, an increase of $3.4 million used by operating activities of continuing operations.2012 compared to $(3.0) million used in operations during the six months ended June 30, 2011, an improvement of $11.2 million. 2013.increase in cash used in operations is primarily a result of working capital improvements offset by a higher net loss. Our net cash invested in working capital was $16.3 million lower while our net loss was ($5.4) million higher during the six months ended June 30, 2012 compared to the six months ended June 30, 2011. In addition, aggregate adjustments for non-cash items positively impacted operating cash flows by $0.3 million primarily due to an increase in depreciation costs and restructuring charges offset by lower deferred income tax expense and stock compensation.Cash used in investing activities was $0.1 million during the six months ended June 30, 2012 compared to $(16.6) million during the six months ended June 30, 2011. The decrease in cash used for investing activities of $16.7 million is attributable to lower capital asset acquisitions of $8.8 million during the six months ended June 30, 2012 compared to the six months ended June 30, 2011 as we completed the build-out of our facility in Penang, Malaysia during 2011. Additionally, the sale of certain assets of our former site in Pittsburgh, PA plant generated $8.0 million of cash.During the six months ended June 30, 2012,Company's cash used in financing activities was approximately $(0.1) million compared to $(0.5) million duringfor the six months ended 2011. During the six months ended 2013 and June 30, 2011 we paid approximately $0.5 million of deferred financing costs related to our 2010 refinancing transactions.20122013 include investments related to new business opportunities, upgrades of our existing equipment infrastructure and information technology enhancements. We expect that these investments will be financed from operating cash flow.2012,2013, we have a liability of $1.7$1.4 million, of which the Company expects to pay $0.1 million during 2012,2013, for environmental clean-up matters. The United States Environmental Protection Agency, or EPA, issued an Administrative Consent Order in July 1988 requiring UTI, our subsidiary, to study and, if necessary, remediate the groundwater and soil beneath and around its plant in Collegeville, Pennsylvania. Since that time, UTI has implemented and is operating successfully a TCE contamination well pumping treatment system approved by the EPA. We expect to pay approximately $0.1 million of ongoing annual operating costs during each of the next five years relating to this remediation effort. Our environmental accrual at June 30, 20122013 includes $1.5$1.4 million related to our Collegeville location. The remaining environmental accrual, related to our other locations, was $0.2 million at June 30, 2012.Indebtedness2012,2013, our aggregate debt was approximately $715.0 million, substantially all of which is due in 2017. Our debt at June 30, 2012 consisted of our senior secured notes bearing interest at 8.375% (the “Senior Secured Notes”) and our senior subordinated notes that bear interest at 10% (the “Senior Subordinated Notes”). In addition, we have a $75 million asset based revolving credit facility. Our revolving credit facility afforded us borrowing capacity of $27.1$33.2 million at June 30, 2012.2013, after collaterlizing approximately $10.9 million of letters of credit. No amounts have been drawn under the facility since it was put in place in January 2010. As of June 30, 2012,2013, we were in compliance with the covenants of our debt agreements. income before net interest expense, income tax expense, depreciation and amortization. Adjusted EBITDA is defined as EBITDA further adjusted to give effect to unusual items, non-cash items and other adjustments, all of which are defined in the indentures governing the Senior Subordinated Notes and the Senior Secured Notes and the credit agreement governing the ABL Revolver. We believe that the inclusion of EBITDA and Adjusted EBITDA in this Quarterly Report on Form 10-Q is appropriate to provide additional information to investors regarding certain thresholds based on Adjusted EBITDA that we may be required to meet in certain cases that are included in the indentures governing the Senior Subordinated Notes and the Senior Secured Notes and the credit agreement governing the ABL Revolver. There are no material differences in the manner in which EBITDA and Adjusted EBITDA were determined in the past under our credit agreement, as amended.income (loss)loss to EBITDA for the periods indicated: Three Months Ended Six Months Ended June 30,
2011 June 30,
2012 June 30,
2011 June 30,
2012 $ 1,011 $ (5,608 ) $ (7,160 ) $ (12,594 ) 17,179 17,259 34,428 34,501 523 1,201 2,488 2,123 9,606 10,047 19,047 20,130 $ 28,319 $ 22,899 $ 48,803 $ 44,160 Three Months Ended Six Months Ended June 30,
2012 June 30,
2013 June 30,
2012 June 30,
2013RECONCILIATION OF NET LOSS TO EBITDA: Net loss $ (5,608 ) $ (12,671 ) $ (12,594 ) $ (74,740 ) Interest expense, net 17,258 17,271 34,500 34,577 Provision for income taxes 1,131 1,018 1,718 2,123 Depreciation and amortization 9,838 8,102 19,488 16,228 EBITDA $ 22,619 $ 13,720 $ 43,112 $ (21,812 ) indicated: Three Months Ended Six Months Ended June 30,
2011 June 30,
2012 June 30,
2011 June 30,
2012 $ 28,319 $ 22,899 $ 48,803 $ 44,160 242 142 490 182 22 22 45 45 479 555 814 1,370 — 1,486 — 1,838 43 — 264 — — 154 — 323 687 906 2,707 721 47 (33 ) 47 (34 ) 56 109 246 315 319 335 638 670 $ 30,214 $ 26,575 $ 54,054 $ 49,590 Three Months Ended Six Months Ended June 30,
2012 June 30,
2013 June 30,
2012 June 30,
2013EBITDA $ 22,619 $ 13,720 $ 43,112 $ (21,812 ) Adjustments: Impairment of goodwill — 12,128 — 63,128 Stock-based compensation – employees 142 185 182 400 Stock-based compensation - non-employees 22 30 45 60 Employee severance and relocation 556 417 1,370 819 Income from discontinued operations, net (129 ) — (750 ) — Restructuring expenses 1,485 (170 ) 1,838 (181 ) Plant closure costs 154 47 323 1,217 Currency loss 905 272 720 1,120 (Gain) loss on disposal of assets (32 ) 736 (33 ) 692 Other taxes 110 64 315 148 Management fees to stockholder 335 352 670 704 Gain from the sale of available for sale securities — (242 ) — (242 ) Adjusted EBITDA $ 26,167 $ 27,539 $ 47,792 $ 46,053 follows: Three Months Ended Six Months Ended June 30,
2011 June 30,
2012 June 30,
2011 June 30,
2012 $ 30,214 $ 26,575 $ 54,054 $ 49,590 (11,913 ) 2,054 (19,915 ) (3,552 ) (17,179 ) (17,259 ) (34,428 ) (34,501 ) — (363 ) — (806 ) 739 741 2,979 1,479 (523 ) (1,201 ) (2,488 ) (2,123 ) 729 767 1,449 1,533 (83 ) (2,051 ) (4,669 ) (3,400 ) $ 1,984 $ 9,263 $ (3,018 ) $ 8,220 $ (11,025 ) $ 2,949 $ (16,610 ) $ 75 $ (119 ) $ (6 ) $ (494 ) $ (54 ) Three Months Ended Six Months Ended June 30,
2012 June 30,
2013 June 30,
2012 June 30,
2013Adjusted EBITDA $ 26,167 $ 27,539 $ 47,792 $ 46,053 Net changes in operating assets and liabilities 1,411 884 (4,178 ) (5,478 ) Interest expense, net (17,258 ) (17,271 ) (34,500 ) (34,577 ) Deferred tax provision 741 682 1,479 1,104 Income tax (expense) (1,131 ) (1,018 ) (1,718 ) (2,123 ) Amortization of debt discount and non-cash interest 777 819 1,533 1,619 Other items, net (1,444 ) (1,031 ) (2,188 ) (3,935 ) Net cash provided by operating activities $ 9,263 $ 10,604 $ 8,220 $ 2,663 Net cash provided by (used in) investing activities $ 2,949 $ (4,839 ) $ 75 $ (1,972 ) Net cash used in financing activities $ (6 ) $ (2 ) $ (54 ) $ (7 ) 20122013 (in thousands): Payment due by Period Total Less than
1 year 1-3 years 3-5 years More than
5 years $ 567,500 $ 33,500 $ 67,000 $ 467,000 $ — 488,250 31,500 63,000 63,000 330,750 31 19 12 — — 21,218 6,065 9,210 4,645 1,298 51,226 51,226 — — — 40,003 315 953 877 37,858 $ 1,168,228 $ 122,625 $ 140,175 $ 535,522 $ 369,906 Payment due by Period Contractual Obligations Total 1-3 years 3-5 years Senior Secured Notes (1) $ 534,000 $ 33,500 $ 67,000 $ 433,500 $ — Senior Subordinated Notes (1) 456,750 31,500 63,000 362,250 — Capital leases (1) 13 7 6 — — Operating leases 19,179 5,852 8,502 4,461 364 Purchase obligations (2) 64,159 56,975 7,184 — — Other obligations (3) 41,265 693 1,041 989 38,542 Total $ 1,115,366 $ 128,527 $ 146,733 $ 801,200 $ 38,906 (1) Includes interest and principal payments. Interest is determined using the instrument’s fixed rate of interest. (2) Purchase obligations consist of commitments for materials, supplies, machinery and equipment. (3) Other obligations include share based payment obligations of $0.1 million payable to employees and $1.1$0.9 million payable to non-employees, environmental remediation obligations of $1.7$1.4 million, accrued compensation and pension benefits of $4.0$5.0 million, deferred income taxes of $32.4$32.5 million, accrued restructuring fees of $0.8 million and other obligations of $0.7$0.6 million.2012, there were no significant changes2013, and in connection with our reorganization into operating our critical accounting policies or estimates.business into two segments, we applied the relative fair value method to assigning goodwill to our reporting units.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK2012,2013, there were no significant changes to our quantitative and qualitative disclosures about market risk. Please refer to Part II, Item 7A. Quantitative and Qualitative Disclosures about Market Risk included in our Annual Report on Form 10-K for the year ended December 31, 20112012 filed with the Securities and Exchange Commission on March 29, 2012April 1, 2013 for a more complete discussion of the market risks we encounter.
For a discussion of our potential risks or uncertainties, please see Part I, Item 1A, of Accellent Inc.’s 2012.2013. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of June 30, 2012,2013, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.20122013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.ITEM 1.Legal Proceedings.RISK FACTORS2011March 29, 2012.April 1, 2013. There have been no material changes to the risk factors disclosed in Part I, Item 1A, of Accellent Inc.’s 20112012 Annual Report on Form 10-K.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
No unregistered equity securities of the registrant were sold and no repurchases of equity securities were made during the six months ended June 30, 2012.
2013.
| Description of Exhibits | |
| 31.1* | Rule 13a-14(a) Certification of Principal Executive Officer | |
| 31.2* | Rule 13a-14(a) Certification of Principal Financial Officer | |
| 32.1* | Section 1350 Certification of Principal Executive Officer | |
| 32.2* | Section 1350 Certification of Principal Financial Officer | |
| Exhibit 101.INS | XBRL Instance Document. | |
| Exhibit 101.SCH | XBRL Taxonomy Extension Schema Document. | |
| Exhibit 101.CAL | XBRL Taxonomy Calculation Linkbase Document. | |
| Exhibit 101.LAB | XBRL Taxonomy Label Linkbase Document. | |
| Exhibit 101.PRE | XBRL Taxonomy Presentation Linkbase Document | |
| Exhibit 101.DEF | Taxonomy Definition Linkbase Document | |
| Accellent Inc. | ||||||
| August 14, | 2013 | By: | /s/ Donald J. Spence | |||
| Donald J. Spence | ||||||
| ||||||
| Accellent Inc. | ||||||
| August 14, | 2013 | By: | /s/ Jeremy A. Friedman | |||
| Jeremy A. Friedman | ||||||
| ||||||
| Description of Exhibits | |
| 31.1* | Rule 13a-14(a) Certification of Principal Executive Officer | |
| 31.2* | Rule 13a-14(a) Certification of Principal Financial Officer | |
| 32.1* | Section 1350 Certification of Principal Executive Officer | |
| 32.2* | Section 1350 Certification of Principal Financial Officer | |
| Exhibit 101.INS | XBRL Instance Document. | |
| Exhibit 101.SCH | XBRL Taxonomy Extension Schema Document. | |
| Exhibit 101.CAL | XBRL Taxonomy Calculation Linkbase Document. | |
| Exhibit 101.LAB | XBRL Taxonomy Label Linkbase Document. | |
| Exhibit 101.PRE | XBRL Taxonomy Presentation Linkbase Document | |
| Exhibit 101.DEF | Taxonomy Definition Linkbase Document | |
32