UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________________________
FORM 11-K
ANNUAL REPORT
PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One):
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) of the SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2008
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) of the SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____to_____
Commission File Number: 000-30406
A. Full title of the plan and the address of the plan, if different from that of the issuer named below:
HEALTHTRONICS, INC. AND SUBSIDIARIES 401 (k) PLAN
B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:
HEALTHTRONICS, INC.
9825 Spectrum Drive, Building 3
AUSTIN, TEXAS 78717
TABLE OF CONTENTS |
Report of Independent Registered Public Accounting Firm Statements of Net Assets Available for Benefits, December 31, 2008 and 2007 Statements of Changes in Net Assets Available for Benefits, Years Ended December 31, 2008 and 2007 Notes to Financial Statements Supplemental Schedule- Assets Held for Investment Purposes at End of Year, December 31, 2008 Supplemental Schedule- Prohibited Transactions Signatures | Page 1 2 3 4 15 16 17 |
Report of Independent Registered Public Accounting Firm |
To the Board of Directors |
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HEALTHTRONICS, INC & SUBSIDIARIES 401(k) PLAN |
December 31, | ||||||||
---|---|---|---|---|---|---|---|---|
2008 | 2007 | |||||||
ASSETS | ||||||||
Cash | $ | 8,624 | $ | 8,729 | ||||
Investments | ||||||||
Collective trust funds, at fair value | 12,514,008 | 15,071,675 | ||||||
HealthTronics, Inc., at fair value | 352,388 | 791,891 | ||||||
Loans to participants | 219,503 | 200,776 | ||||||
Money market | 97,556 | 180,445 | ||||||
Total investments | 13,183,455 | 16,244,787 | ||||||
Receivables | ||||||||
Employer contributions | 89,986 | 104,079 | ||||||
Participants contributions | 3,186 | 91,755 | ||||||
Total receivables | 93,172 | 195,834 | ||||||
TOTAL ASSETS | 13,285,251 | 16,449,350 | ||||||
LIABILITIES | ||||||||
Benefits payable | 80,589 | 130,196 | ||||||
Operating expense payable | 16,967 | 36,535 | ||||||
Net assets available for benefits at fair value | 13,187,695 | 16,282,619 | ||||||
Adjustment from fair value to contract value for interest in | ||||||||
collective trust funds relating to fully benefit-responsive | ||||||||
investment contracts | (601,025 | ) | 54,075 | |||||
NET ASSETS AVAILABLE FOR BENEFITS | $ | 12,586,670 | $ | 16,336,694 |
See accompanying notes and independent auditors' report. |
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HEALTHTRONICS, INC & SUBSIDIARIES 401(k) PLAN |
Years Ended December 31, | ||||||||
---|---|---|---|---|---|---|---|---|
2008 | 2007 | |||||||
ADDITIONS: | ||||||||
Additions to net assets attributable to: | ||||||||
Investment income (loss) | ||||||||
Net (depreciation) appreciation in | ||||||||
fair value of investments | $ | (4,799,816 | ) | $ | 776,537 | |||
Interest and dividends | 34,419 | 20,734 | ||||||
Total investment income (loss) | (4,765,397 | ) | 797,271 | |||||
Contributions | ||||||||
Cash: | ||||||||
Employer | 566,375 | 106,653 | ||||||
Participants | 1,616,846 | 1,566,398 | ||||||
Rollover | 13,901 | 124,747 | ||||||
Total contributions | 2,197,122 | 1,797,798 | ||||||
TOTAL ADDITIONS, NET | (2,568,275 | ) | 2,595,069 | |||||
DEDUCTIONS: | ||||||||
Deductions from net assets attributable to: | ||||||||
Benefits paid to participants | 1,487,498 | 3,451,738 | ||||||
Administrative expenses | 175,641 | 226,651 | ||||||
Total deductions | 1,663,139 | 3,678,389 | ||||||
Net decrease in net assets | (4,231,414 | ) | (1,083,320 | ) | ||||
Transfer into Plan as a Result of Merger | 481,390 | -- | ||||||
Net Assets Available for Benefits: | ||||||||
BEGINNING OF YEAR | 16,336,694 | 17,420,014 | ||||||
END OF YEAR | $ | 12,586,670 | $ | 16,336,694 |
See accompanying notes and independent auditors' report. |
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HEALTHTRONICS, INC. & SUBSIDIARIES 401 (K) PLAN |
NOTE A—DESCRIPTION OF PLAN
The following description of the HealthTronics, Inc. & Subsidiaries (“Company”) 401(k) Plan (“the Plan”) provides only general information. Participants should refer to the Plan agreement for a more complete description of the Plan’s provisions. |
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HEALTHTRONICS, INC. & SUBSIDIARIES 401 (K) PLAN |
NOTE A—DESCRIPTION OF PLAN (Continued)
Vesting |
Number of Completed Years of Service | Vesting Percentage | |
---|---|---|
Less than 1 year 1 years, less than 2 years 2 years, less than 3 years 3 years, less than 4 years 4 years | 0% 25% 50% 75% 100% |
Payment of Benefits |
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HEALTHTRONICS, INC. & SUBSIDIARIES 401 (K) PLAN |
NOTE A—DESCRIPTION OF PLAN (Continued)
Forfeited Accounts |
• • • • | Medical expenses, Purchase of a principal residence, Post secondary education for participant or their dependents, To prevent eviction from or foreclosure on the participant’s principal residence. |
Plan Expenses |
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HEALTHTRONICS, INC. & SUBSIDIARIES 401 (K) PLAN |
NOTE B—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting and Use of Estimates |
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HEALTHTRONICS, INC. & SUBSIDIARIES 401 (K) PLAN |
NOTE B—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Payment of Benefits |
NOTE C—NONPARTICIPANT-DIRECTED INVESTMENTS
At December 31, 2008 and 2007, the Plan had a receivable from the Company in the amount of $89,986 and $104,079, respectively. In 2006 the Company’s matching contributions were made in Company common stock (which is publicly traded under the symbol HTRN on the NASDAQ market). In 2007, the Company changed the matching contribution from matching in Company common stock to a cash matching program. The matching contributions are made semi-monthly. The receivables at December 31, 2008 and 2007 were paid on January 6, 2009 and January 8, 2008, respectively. |
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HEALTHTRONICS, INC. & SUBSIDIARIES 401 (K) PLAN |
NOTE D—INVESTMENTS
The following presents investments that are 5% or more of the Plan’s net assets at December 31, 2008 and 2007: |
December 31, | |||||||||
---|---|---|---|---|---|---|---|---|---|
2008 | 2007 | ||||||||
Collective Trust Funds, at Fair Value | |||||||||
S&P 500 Index Portfolio | $ | 791,456 | $ | 1,338,152 | |||||
GIC Portfolio | $ | 2,798,443 | * | $ | 3,218,758 | * | |||
Balanced Portfolio | $ | 747,380 | $ | 918,882 | |||||
International Growth Portfolio | $ | 963,526 | $ | 1,696,752 | |||||
Large Company Value Portfolio | $ | 1,389,498 | $ | 1,899,091 | |||||
Intermediate Fixed Income Portfolio | $ | 1,744,658 | $ | 1,306,911 | |||||
Large Company Domestic Growth Portfolio | $ | 1,228,154 | $ | 1,853,906 | |||||
Small Company Value Portfolio | N/A | $ | 820,370 | ||||||
Employer Stock | |||||||||
HealthTronics, Inc. common stock (HTRN) | N/A | $ | 791,891 | ||||||
* This amount represents contract value for this investment. |
During 2008 and 2007, the Plan’s investments (including gains and losses on investments bought and sold, as well as held during the year) appreciated (depreciated) in value by ($4,799,816) and $776,537 and respectively, as follows: |
2008 | 2007 | |||||||
---|---|---|---|---|---|---|---|---|
Investment Type | ||||||||
Collective trust and mutual funds | (4,414,821 | ) | (1,220,845 | ) | ||||
HTRN common stock | (384,995 | ) | (444,308 | ) | ||||
Total | (4,799,816 | ) | (776,537 | ) | ||||
NOTE E—INVESTMENT CONTRACT WITH INSURANCE COMPANY OR STABLE VALUE FUND OR GUARANTEED INVESTMENT ACCOUNTThe Plan offers as an investment option a benefit-responsive investment contract with Wilmington Trust Company. Wilmington Trust Company maintains the contributions in a general account. The account is credited with earnings on the underlying investments and charged for participant withdrawals and administrative expenses. The guaranteed investment contract issuer is contractually obligated to repay the principal and a specified interest rate that is guaranteed to the Plan. |
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HEALTHTRONICS, INC. & SUBSIDIARIES 401 (K) PLAN |
NOTE E—INVESTMENT CONTRACT WITH INSURANCE COMPANY OR STABLE VALUE FUND OR GUARANTEED INVESTMENT ACCOUNT (Continued)As described in note B, because the guaranteed investment contract is fully benefit-responsive, contract value is the relevant measurement attribute for that portion of the net assets available for benefits attributable to the guaranteed investment contract. Contract value, as reported to the Plan by Wilmington Trust Company, represents contributions made under the contract, plus earnings, less participant withdrawals and administrative expenses. Participants may ordinarily direct the withdrawal or transfer of all or a portion of their investment at contract value.There are no reserves against contract value for credit risk of the contract issuer or otherwise. The crediting interest rate is based on a formula agreed upon with the issuer, but it may not be less than 4%. Such interest rates are reviewed on a quarterly basis for resetting. Certain events limit the ability of the Plan to transact at contract value with the issuer. Such events include the following: (1) amendments to the Plan documents (including complete or partial Plan termination or merger with another plan); (2) changes to the Plan’s prohibition on competing investment options or deletion of equity wash provisions; (3) bankruptcy of the Plan sponsor or other Plan sponsor events (for example, divestitures or spin-offs of a subsidiary) that cause a significant withdrawal from the Plan; or (4) the failure of the trust to qualify for exemption from federal income taxes or any required prohibited transaction exemption under ERISA. The Plan administrator does not believe the occurrence of any such value event, which would limit the Plan’s ability to transact at contract value with participants, is probable. The guaranteed investment contract does not permit the insurance company to terminate the agreement prior to the scheduled maturity date. NOTE F—FAIR VALUE MEASUREMENTSEffective January 1, 2008, the Plan adopted Statement of Financial Accounting Standards (“SFAS”) No. 157, Fair Value Measurements (“SFAS No. 157”), for financial assets and financial liabilities. In accordance with Financial Accounting Standards Board Staff Position No. 157-2, Effective Date of FASB Statement No. 157, the Plan will delay application of SFAS No. 157 for nonfinancial assets and nonfinancial liabilities until January 1, 2009, except for those that are recognized or disclosed at fair value on a recurring basis. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America, and expands disclosures about fair value measurements. SFAS No. 157 applies to all financial instruments that are being measured and reported on a fair value basis. SFAS No. 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. SFAS No. 157 also establishes a fair value hierarchy that prioritizes the inputs used in valuation methodologies into the following three levels: |
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HEALTHTRONICS, INC. & SUBSIDIARIES 401 (K) PLAN |
NOTE F—FAIR VALUE MEASUREMENTS (Continued)
• • • | Level 1 Inputs – Unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 Inputs – Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, or other inputs that can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 Inputs – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or other valuation techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. |
A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. |
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HEALTHTRONICS, INC. & SUBSIDIARIES 401 (K) PLAN |
NOTE F—FAIR VALUE MEASUREMENTS (Continued)
The Plan’s investments measured at fair value by the three levels described above are as follows: |
December 31, 2008 | Level 1 | Level 2 | Level 3 | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Assets: | |||||||||||||||||
Common stock | $ | 352,388 | $ | 352,388 | -- | -- | |||||||||||
Common collective trust funds | $ | 12,514,008 | -- | $ | 12,514,008 | -- | |||||||||||
Participant loans | $ | 219,503 | -- | -- | $ | 219,503 |
The following table presents a summary of changes in the fair value of the plans Level 3 investment assets for the year ended December 31, 2008 |
Beginning Fair Value | Items Included in Net Income | Gains/Losses in Other Comprehensive Income | Sales, Issuances, Maturities, Settlements, Calls - Net | Transfers In or Out of Level 3 | Ending Fair Value | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Participant loans | $ | 200,776 | $ | -- | $ | 18,727 | -- | -- | $ | 219,503 |
NOTE G—RELATED PARTY TRANSACTIONS
The Plan invests in shares of collective trust funds managed by UBS Fiduciary Trust Company. (“UBS”), formerly known as PW Trust. UBS acts as Trustee for only those investments defined by the Plan. UBS is an affiliate of UBS/Paine Webber. Transactions in such investments qualify as party-in-interest transactions, and are exempt from the prohibited transaction rules. |
NOTE H—RECONCILIATION OF FINANCIAL STATEMENTS TO SCHEDULE H OF FORM 5500
The following is a reconciliation of net assets available for benefits per the financial statements at December 31, 2008 and 2007 to form 5500: |
2008 | 2007 | |||||||
---|---|---|---|---|---|---|---|---|
Net assets available for benefits per the financial | ||||||||
statements | $ | 12,586,670 | $ | 16,336,694 | ||||
Less: Adjustment from fair value to contract value | ||||||||
for fully benefit-responsive investment contacts | 601,025 | (54,075 | ) | |||||
Net assets available for benefits per the Form 5500 | $ | 13,187,695 | $ | 16,282,619 |
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HEALTHTRONICS, INC. & SUBSIDIARIES 401 (K) PLAN |
NOTE H—RECONCILIATION OF FINANCIAL STATEMENTS TO SCHEDULE H OF FORM 5500 (Continued)
The following is a reconciliation of investment income per the financial statements to the Form 5500: |
December 31, | ||||||||
---|---|---|---|---|---|---|---|---|
2008 | 2007 | |||||||
Total investment income (loss) per the financial statements | $ | (4,765,397 | ) | $ | 797,271 | |||
Less: Adjustment from fair value to contract value for | ||||||||
fully benefit-responsive investment contracts | 601,025 | (52,868 | ) | |||||
Total investment income (loss) per the Form 5500 | $ | (4,164,372 | ) | $ | 744,403 |
NOTE I—PLAN TERMINATION
Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, participants become 100% vested in their accounts. |
NOTE J—TAX STATUS
The Plan obtained its latest determination letter, in which the Internal Revenue Service stated that the Plan, as then designed, was in compliance with the applicable requirements of the Internal Revenue Code. The Plan has been amended since receiving the determination letter. However, the Plan administrator and the Plan’s third party administrator believe that the Plan is currently designed and being operated in compliance with the applicable requirements of the Internal Revenue Code. Therefore, no provision for income taxes has been included in the Plan’s financial statements. |
NOTE K—RISKS AND UNCERTAINTIES
The Plan invests in various investment securities. Investment securities are exposed to various risks, such as interest rate, market, and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participants’ account balances and the amounts reported in the statements of net assets available for benefits. |
NOTE L—FIDELITY BOND
The Plan was covered by a $2,000,000 fidelity bond during 2008 and 2007. |
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HEALTHTRONICS, INC. & SUBSIDIARIES 401 (K) PLAN |
NOTE M—PLAN MERGERS
In 2008, the Plan merged in three of the Company’s subsidiaries plans. As a result, all investments and participant loans were transferred from the three individual plans into the Plan. |
NOTE N-PROHIBITED TRANSACTIONS
During 2008, the Company failed to remit participant contributions in a timely manner. The company identified four instances for a total of $232,103 where participant contributions were remitted to the Plan in violation of Department of Labor (DOL) regulations. The Company intends to enter into the DOL Voluntary Correction Program. The Company estimated the amount of corrective payments due to the Plan and determined that the amount is immaterial. |
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HEALTHTRONICS, INC. & SUBSIDIARIES 401 (K) PLAN |
(a) | (b) Identity of issuer, borrower, lessor, or similar party | (c) Description of investment including maturity date, rate of interest, collateral, par, or maturity value | (d) Cost | (e) Current Value |
Collective Trust Funds | |||||||||||||||||
UBS Fiduciary Trust Portfolio | |||||||||||||||||
* | Small Company Growth | Common or Collective Trust; | 5,470.968 Units | $ | 451,936 | $ | 326,759 | ||||||||||
* | UBS GIC | Common or Collective Trust; | 99,236.030 Units | 2,959,610 | 3,399,468 | ||||||||||||
* | UBS Large Co Value | Common or Collective Trust; | 22,659.431 Units | 1,477,901 | 1,389,498 | ||||||||||||
* | UBS Intermediate Fixed Income | Common or Collective Trust; | 48,152.426 Units | 1,573,016 | 1,744,658 | ||||||||||||
* | UBS Balanced | Common or Collective Trust; | 17,713.386 Units | 779,281 | 747,380 | ||||||||||||
* | UBS International Growth | Common or Collective Trust; | 77,057.479 Units | 1,250,156 | 963,526 | ||||||||||||
* | UBS S&P 500 | Common or Collective Trust; | 65,377.243 Units | 922,617 | 791,456 | ||||||||||||
* | UBS Small Co Value | Common or Collective Trust; | 21,295.618 Units | 595,655 | 562,502 | ||||||||||||
* | UBS Fixed Income Index | Common or Collective Trust; | 16,814.868 Units | 264,633 | 294,596 | ||||||||||||
* | UBS Mid Cap Growth | Common or Collective Trust; | 60,391.451 Units | 572,064 | 482,467 | ||||||||||||
* | UBS Lg Co Domestic Growth | Common or Collective Trust; | 330,415.651 Units | 1,707,285 | 1,228,154 | ||||||||||||
* | UBS International Value | Common or Collective Trust; | 11,276.831 Units | 262,075 | 199,137 | ||||||||||||
* | UBS Mid Fundamental Value | Common or Collective Trust; | 51,996.075 Units | 578,877 | 384,407 | ||||||||||||
* | Money Market | Money Market Portfolio | 97,556 | 97,556 | |||||||||||||
Employer Stock | |||||||||||||||||
* | HealthTronics, Inc. common stock | Employer Securities | 156,617 shares | 1,382,928 | 352,388 | ||||||||||||
(NASDAQ-HTRN) | |||||||||||||||||
* | Participant Loans | 219,503 | |||||||||||||||
$ | 14,875,590 | $ | 13,183,455 | ||||||||||||||
(a) | Party in interest, if any identify by *. |
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HEALTHTRONICS, INC. & SUBSIDIARIES 401 (K) PLAN |
Total that Constitute Nonexempt Prohibited Transactions | ||||
---|---|---|---|---|
Participant Contribution Transferred Late to Plan | Contributions Not Corrected | Contribution Corrected Outside of VFCP | Contributions Pending Correction in VFCP | Total Fully Corrected Under VFCP and PTE 2002-51 |
$232,103 | 0 | 0 | $232,103 | 0 |
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SIGNATURES |
Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the Plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized. |
HEALTHTRONICS, INC. AND SUBSIDIARIES 401 (K) PLAN
By: Plan Administrator of the HealthTronics, Inc. and Subsidiaries 401(K) Plan
Date: September 24, 2009 | By: /s/ Jeffrey J. Quade Jeffrey J. Quade Plan Administrator |