Delaware | 3841 | 52-2094496 | ||
(State of Incorporation) | (Primary S.I.C. Code Number) | (IRS Employer Identification No.) |
Edward R. Mandell Jenkens & Gilchrist Parker Chapin LLP 405 Lexington Avenue New York, NY 10174 Telephone No.: (212) 704-6000 Telecopier No.: (212) 704-6288 | Joseph J. Caffarelli Senior Vice President and Chief Financial Officer MedSource Technologies, Inc. 110 Cheshire Lane, Suite 100 Minneapolis, MN 55305 Telephone No.: (952) 807-1234 Telecopier No.: (952) 807-1235 | Patrick O’Brien Ropes & Gray One International Place Boston, MA 02110 Telephone No.: (617) 951-7000 Telecopier No.: (617) 951-7050 |
Price to Public | Underwriting Discounts and Commissions | Proceeds to Company | ||||
Per Share | $ | $ | $ | |||
Total | $ | $ | $ |
MORGAN STANLEY | BEAR, STEARNS & CO. INC. |
WACHOVIA SECURITIES | THOMAS WEISEL PARTNERS LLC |
The inside front cover includes 12 pictures of various MedSource manufactured products. The page also includes the following text: "MedSource Technologies, Inc. is a leading provider of engineering, product development and manufacturing services, and supply chain management solutions to the medical device industry."
Page | ||
Prospectus Summary | 3 | |
Risk Factors | 9 | |
Forward-Looking Statements | 19 | |
Use of Proceeds | 20 | |
Dividend Policy | 21 | |
Capitalization | 22 | |
Dilution | 24 | |
Selected Unaudited Pro Forma Condensed Combined Financial Information | 25 | |
Selected Consolidated Financial Data | 30 | |
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 32 | |
Selected Financial Data of Predecessor Companies | 41 | |
Management’s Discussion and Analysis of Financial Condition and Results of Operations of Predecessor Companies | 43 |
Page | ||
Business | 47 | |
Management | 58 | |
Related Party Transactions | 67 | |
Principal and Selling Stockholders | 72 | |
Description of Capital Stock | 75 | |
Shares Eligible for Future Sale | 79 | |
Underwriting | 81 | |
Legal Matters | 83 | |
Experts | 83 | |
Where You Can Find Additional Information | 84 | |
Index to Consolidated Financial Statements and Predecessor Company Financial Statements | F-1 |
· | the need for faster product innovation, which requires accelerating product development cycle times; |
· | cost containment pressures in healthcare, which necessitate a more efficient supply chain; and |
· | increased competition and industry consolidation. |
· | a single source solution; |
· | accelerated time to market; |
· | quality products and practices; |
· | reduced costs; and |
· | a financially stable product and service provider. |
· | focus on manufacturing excellence and leading process technologies; |
· | strengthen our customer relationships by collaborating in the design and engineering of new products; |
· | drive additional component manufacturing business by continuing to expand our device assembly services; |
· | pursue product line transfers and acquisitions of customers’ manufacturing assets; and, |
· | selectively acquire companies to complement our product and service offerings. |
Common stock to be offered by us | shares | |
Common stock to be outstanding after this offering | shares | |
Over-allotment option | shares of our common stock to be sold by us and an aggregate of 325,000 shares of our common stock to be sold by two selling stockholders. | |
Use of proceeds | For repayment of debt, redemption of our Series E and Series F preferred stock issued in connection with our acquisition of HV Technologies in January 2002, payment of accrued dividends on our Series B preferred stock, termination of certain management agreements and working capital and other general corporate purposes, including acquisitions, all as further described under the caption “Use of Proceeds.” | |
Dividend policy | We do not intend to pay dividends on our common stock. We plan to retain earnings for use in the operation of our business and to fund future growth. | |
Proposed Nasdaq National Market symbol | MEDT |
· | the conversion of all of our: |
· | Series A preferred stock into an aggregate of 1,918,500 shares of our common stock; |
· | Series B preferred stock into an aggregate of 3,327,280 shares of our common stock; |
· | Series C preferred stock into an aggregate of shares of our common stock (assuming that the initial public offering price is the midpoint of the price range on the cover of this prospectus), but if the initial public offering price is at the high end of the price range on the cover of this prospectus, the Series C preferred stock will convert into an aggregate of shares of our common stock and if the initial public offering price is at the low end of the range on the cover of this prospectus, the Series C preferred stock will convert into an aggregate of shares of our common stock, all as further described in the second paragraph under the caption “Description of Capital Stock — General”; |
· | Series D preferred stock into an aggregate of 1,766,620 shares of our common stock; and |
· | Series Z preferred stock into an aggregate of 650,000 shares of our common stock; and |
· | the exercise of a warrant to purchase 525 shares of our Series C preferred stock, and the conversion of that preferred stock into an aggregate of shares of our common stock (assuming that the initial public offering price is the midpoint of the price range on the cover of this prospectus), but if the initial public offering price is at the high end of the price range on the cover of this prospectus, the Series C preferred stock will convert into an aggregate of shares of our common stock and if the initial public offering price is at the low end of the range on the cover of this prospectus, the Series C preferred stock will convert into an aggregate of shares of our common stock, all as further described in the second paragraph under the caption “Description of Capital Stock — General.” |
· | 3,017,595 shares of our common stock issuable, at a weighted average exercise price of $15.60 per share, upon exercise of stock options outstanding as of December 30, 2001; |
· | 1,657,612 shares of our common stock available for future grant under our 1999 stock plan as of December 30, 2001; |
· | 500,000 shares of our common stock available for purchase under our employee stock purchase plan as of December 30, 2001; and |
· | 200,000 shares of our common stock issuable upon exercise of outstanding warrants as of December 30, 2001 at an exercise price of $0.01 per share. |
Fiscal Year Ended | Pro Forma Fiscal Year Ended June 30, 2001(b) | Six Months Ended December 30, | Pro Forma Six Months Ended December 30, 2001(b) | |||||||||||||||||||||
July 1, 2000(a) | June 30, 2001 | 2000 | 2001 | |||||||||||||||||||||
Statement of Operations Data: | (In thousands, except share and per share data) | |||||||||||||||||||||||
Revenues | $ | 89,352 | $ | 128,462 | $ | 149,769 | $ | 55,491 | $ | 72,155 | $ | 76,486 | ||||||||||||
Costs and expenses: | ||||||||||||||||||||||||
Cost of products sold | 59,811 | 94,386 | 108,126 | 41,514 | 54,616 | 56,565 | ||||||||||||||||||
Selling, general and administrative expense | 21,167 | 26,199 | 31,334 | 11,771 | 14,080 | 16,151 | ||||||||||||||||||
Amortization of goodwill and other intangibles(c) | 4,255 | 5,640 | 6,544 | 2,432 | 169 | 169 | ||||||||||||||||||
Restructuring charge(d) | — | 11,464 | 11,464 | — | — | — | ||||||||||||||||||
Total costs and expenses | 85,233 | 137,689 | 157,468 | 55,717 | 68,865 | 72,885 | ||||||||||||||||||
Operating income (loss) | 4,119 | (9,227 | ) | (7,699 | ) | (226 | ) | 3,290 | 3,601 | |||||||||||||||
Interest (expense), net | (10,682 | ) | (10,213 | ) | (10,155 | ) | (5,417 | ) | (4,886 | ) | (4,867 | ) | ||||||||||||
Other income (expense) | (7 | ) | 53 | 64 | (361 | ) | (27 | ) | (19 | ) | ||||||||||||||
Loss before income taxes | (6,570 | ) | (19,387 | ) | (17,790 | ) | (6,004 | ) | (1,623 | ) | (1,285 | ) | ||||||||||||
Income tax benefit (expense) | 535 | (70 | ) | (70 | ) | — | — | — | ||||||||||||||||
Net loss | (6,035 | ) | (19,457 | ) | (17,860 | ) | (6,004 | ) | (1,623 | ) | (1,285 | ) | ||||||||||||
Preferred stock dividends and accretion of discount on preferred stock | (8,345 | ) | (9,688 | ) | (12,514 | ) | (4,654 | ) | (5,322 | ) | (6,077 | ) | ||||||||||||
Net loss attributed to common stockholders | $ | (14,380 | ) | $ | (29,145 | ) | $ | (30,374 | ) | $ | (10,658 | ) | $ | (6,945 | ) | $ | (7,362 | ) | ||||||
Net loss per share attributed to common stockholders (basic and diluted) | $ | (3.10 | ) | $ | (5.55 | ) | $ | (5.00 | ) | $ | (2.03 | ) | $ | (1.32 | ) | $ | (1.21 | ) | ||||||
Weighted average number of shares of common stock outstanding (basic and diluted) | 4,633,571 | 5,252,749 | 6,076,974 | 5,251,833 | 5,256,058 | 6,080,280 | ||||||||||||||||||
Other Data: | ||||||||||||||||||||||||
Net cash provided by (used in) operating activities(e) | $ | 6,290 | $ | 1,253 | $ | 5,342 | $ | (4,024 | ) | |||||||||||||||
Net cash used in investing activities(e) | (22,244 | ) | (11,627 | ) | (5,963 | ) | (5,115 | ) | ||||||||||||||||
Net cash provided by (used in) financing activities(e) | 16,356 | 28,453 | 27,686 | 2,167 | ||||||||||||||||||||
EBITDA(f) | 12,867 | 3,021 | $ | 5,988 | 5,022 | 7,201 | $ | 7,664 | ||||||||||||||||
Adjusted EBITDA(f)(g) | 14,373 | 16,140 | 19,107 | 5,746 | 8,132 | 8,595 |
As of December 30, 2001 | ||||||||||
Actual | Pro Forma(b) | Pro Forma As Adjusted(b) | ||||||||
(In thousands) | ||||||||||
Balance Sheet Data: | ||||||||||
Cash and cash equivalents | $ | 13,317 | $ | 9,307 | $ | |||||
Working capital | 25,916 | 22,916 | ||||||||
Total assets | 201,334 | 220,498 | ||||||||
Total debt (h) | 86,356 | 86,356 | ||||||||
Mandatory redeemable convertible stock | 103,085 | 106,721 | ||||||||
Total stockholders’ equity (deficit) | (14,324 | ) | 188 |
(a) | Our fiscal years originally ended on the Saturday closest to June 30. Effective July 1, 2001, our fiscal year end was changed to June 30. |
(b) | In connection with our acquisition of HV Technologies in January 2002, we issued an aggregate of $6.0 million of our Series E preferred stock in December 2001 and January 2002, and we issued warrants to purchase an aggregate of 200,000 shares of our common stock at $0.01 per share. We recorded a discount of $2.3 million to the carrying value of the Series E preferred stock equal to the consideration allocated to the warrants. We will accrete this discount over the 12 month period ending December 31, 2002 because we plan to redeem our Series E preferred stock by that date. The effect of the accretion is excluded from the pro forma and pro forma as adjusted presentation. |
(c) | The Statement of Operations Data for the six months ended December 30, 2001 does not include a charge for the amortization of goodwill. Effective with our quarter ended September 30, 2001, we adopted the provisions of Statement of Financial Accounting Standards, or SFAS, No. 141,Business Combinations, and No. 142,Goodwill and Other Intangible Assets, and, accordingly, we reclassified certain identifiable intangibles to goodwill and will no longer amortize goodwill and intangible assets that are deemed to have indefinite lives under SFAS 142. Had we continued to amortize goodwill during the six months ended December 30, 2001, amortization expense in that period would have increased by approximately $2.8 million or $0.53 per common share. |
(d) | In June 2001, we completed a strategic review of our manufacturing operations and support functions. Based on this review and with board approval, we began actions to eliminate redundant facilities. These actions resulted in pre-tax charges of $11.5 million. The charges include employee termination benefits of $3.8 million, other exit costs of $2.2 million, impairment of goodwill and other intangibles of $3.6 million and impairment of property, plant, and equipment of $1.9 million. |
(e) | Because of the subjectivity inherent in the assumptions concerning the nature and timing of the uses of cash generated by the pro forma interest and other expenses, cash flows from operating, investing and financing activities are not presented for the pro forma periods. |
(f) | EBITDA represents earnings before interest expense, income taxes, depreciation and amortization. EBITDA should not be considered in isolation from, or as a substitute for, net income, cash flow from operations or other cash flow statement data prepared in accordance with generally accepted accounting principles or as a measure of our profitability or liquidity. Rather, EBITDA is presented because it is a widely accepted supplemental financial measure, and we believe that it provides relevant and useful information. A calculation of EBITDA may not be comparable to similarly titled measures reported by other companies, since all companies do not calculate this non-GAAP measure in the same manner. Our EBITDA calculation is not intended to represent cash provided by (used in) operating activities since it does not include interest and taxes and changes in operating assets and liabilities, nor is it intended to represent a net increase in cash since it does not include cash provided by (used in) investing and financing activities. |
(g) | Adjusted EBITDA excludes costs of management agreements that we have entered into with Kidd & Company and Whitney & Co. We incurred fees under these agreements of $0.4 million for the period from March 31, 1999 (inception) through July 3, 1999, $1.5 million for the year ended July 1, 2000, $1.7 million for the year ended June 30, 2001, $0.7 million for the six months ended December 30, 2000 and $0.9 million for the six months ended December 30, 2001. These agreements will terminate upon completion of this offering. Adjusted EBITDA also excludes restructuring charges of $11.5 million for year ended June 30, 2001. |
(h) | In connection with the repayment of our debt, as discussed under the caption “Use of Proceeds,” we will expense $3.0 million of unamortized deferred financing costs, $2.5 million of unamortized discount and a redemption premium of $1.6 million (assuming the redemption is prior to March 30, 2002). |
· | the timing of actual customer orders and the accuracy of our customers’ forecasts of future production requirements; |
· | the introduction and market acceptance of our customers’ new products and changes in demand for our customers’ existing products; |
· | changes in the relative portion of our revenue represented by our various products, services and customers, including the relative mix of our business across our target markets; |
· | changes in competitive or economic conditions generally or in our customers’ markets; |
· | changes in availability or costs of raw materials or supplies; and |
· | demand for our products and services, which, during our limited operating history, has been higher than average during the last quarter of our fiscal year and lower than average during the first quarter of our fiscal year. |
· | the diversion of management attention; |
· | difficulties in integrating the operations and products of an acquired business or in realizing projected operational results, synergies and cost savings; |
· | inaccurate assessments of undisclosed liabilities; and |
· | potential loss of key customers or employees of the acquired businesses. |
· | successfully accomplish those actions as rapidly as anticipated; |
· | achieve the cost savings and efficiencies that we expect from our acquisitions; |
· | successfully manage the integration of new locations or acquired operations; |
· | fully use new capacity; or |
· | enhance our business as a result of any past or future acquisition, including those mentioned above. |
· | pricing pressure experienced by our customers from managed care organizations and other third-party payors; |
· | increased market power of our customers as the medical device industry consolidates; and |
· | increased competition among medical engineering and manufacturing services providers. |
· | industry trends and the business success of our customers; |
· | loss of a key customer; |
· | fluctuations in our results of operations; |
· | our failure to meet the expectations of the investment community and changes in investment community recommendations or estimates of our future results of operations; |
· | strategic moves by our competitors, such as product announcements or acquisitions; |
· | regulatory developments; |
· | litigation; |
· | general market conditions; and |
· | other domestic and international macroeconomic factors unrelated to our performance. |
Number of Shares | Date Available for Resale | |
Immediately | ||
90 days after this offering ( , 2002) | ||
180 days after this offering , 2002) or earlier in the sole discretion of Morgan Stanley & Co. Incorporated | ||
Various dates beginning in , 2002. |
Approximate dollar amount | |||
(In millions) | |||
Refinancing of our senior credit facility(a) | $ | 30.4 | |
Repayment of our 12.5% senior subordinated notes(b) | 21.6 | ||
Redemption of our Series E preferred stock and our Series F preferred stock(c) | 10.4 | ||
Payment of accrued and unpaid dividends on our Series B preferred stock(d) | 4.3 | ||
Fees under agreements with Kidd & Company and Whitney Mezzanine Management Company(e) | 3.7 | ||
Working capital and other general corporate purposes, including potential acquisitions(f) | |||
Total | $ | ||
(a) | As of the date of this prospectus, we owed $68.3 million under our existing senior credit facility. We expect to repay this facility in full with $28.3 million of the proceeds of this offering and $40.0 million from our new senior credit facility while incurring $2.1 million in fees on our new facility, described below under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — New Senior Credit Facility.” The outstanding loans under our existing senior credit facility mature between March 2005 and March 2007 and presently bear interest at rates ranging from 5.4% to 6.9% per year. |
(b) | The senior subordinated notes mature in 2009, but we will prepay the notes in full, together with a redemption premium of $1.6 million, with the proceeds from this offering, as further discussed below under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Senior Subordinated Notes.” |
(c) | Our Series E preferred stock and Series F preferred stock were issued in connection with our acquisition of HV Technologies in January 2002. The Series E preferred stock was issued to investors for cash that was paid to shareholders of HV Technologies, and the Series F preferred stock was issued to one of the shareholders of HV Technologies. Our Series E preferred stock and our Series F preferred stock accrue dividends at the rate of 6% per year until December 31, 2002 and January 4, 2003, respectively, and accrue dividends at 16% per year on a retroactive basis thereafter. We expect to use a portion of the proceeds of this offering to redeem our Series E preferred stock before December 31, 2002, and we will use a portion of the proceeds of this offering to redeem our Series F preferred stock within 45 days after we complete this offering. |
(d) | This amount represents payment of accrued and unpaid dividends on our Series B preferred stock as of the date of this prospectus, which accrues dividends at the rate of 6% per year. As discussed above under the first paragraph after the table under the caption “Summary — The Offering” on page 5, the Series B preferred stock will convert into common stock upon completion of this offering. |
(e) | This amount represents amounts payable to terminate agreements with Kidd & Company and Whitney Mezzanine Management Company, together with accrued and unpaid fees thereunder, all described below under the caption “Related Party Transactions — Certain Services provided to us by Related Parties.” |
(f) | From time to time, in the ordinary course of business, we evaluate possible acquisitions of, or investments in, businesses, products and technologies that are complementary to our business. We currently have no arrangements, agreements or understandings for any such acquisitions or investments. |
· | on an actual basis; |
· | on a “pro forma” basis to reflect our acquisition of HV Technologies in January 2002 and the related issuance of our Series E preferred stock and warrants and Series F preferred stock as if they had all occurred on December 30, 2001; and |
· | on a “pro forma as adjusted” basis to reflect, in addition to the pro forma adjustments discussed above, (1) the sale of shares of common stock by us in this offering at an assumed initial public offering price of $ , after deducting the underwriting discount and estimated offering expenses payable by us; (2) the conversion of the preferred stock and the exercise of the warrant as described in the first and second paragraphs after the table under the caption “Summary — The Offering” on page 5; and (3) the application of the net proceeds of this offering, together with proceeds of approximately $40.0 million from the new senior credit facility described in footnote (a) below. |
As of December 30, 2001 | ||||||||||||
Actual | Pro Forma | Pro Forma As Adjusted | ||||||||||
(In thousands, except share data) | ||||||||||||
Cash and cash equivalents | $ | 13,317 | $ | 9,307 | $ | |||||||
Existing senior credit facility, including current portion | $ | 68,327 | $ | 68,327 | $ | — | ||||||
New senior credit facility, including current portion(a) | — | — | 40,000 | |||||||||
12.5% senior subordinated notes, including current portion and unamortized discount(b) | 20,000 | 20,000 | — | |||||||||
Other long-term debt including current portion | 511 | 511 | 511 | |||||||||
Mandatory redeemable stock: | ||||||||||||
Series B, Series C, Series D and Series F preferred stock, par value $.01 per share, 499,029 shares authorized in the aggregate actual, 499,029 shares authorized in the aggregate pro forma, none authorized pro forma as adjusted, 408,360 shares outstanding in the aggregate actual, 412,360 outstanding in the aggregate pro forma, and none outstanding pro forma as adjusted | 103,085 | 106,721 | — | |||||||||
Stockholders’ equity: | ||||||||||||
Preferred stock, par value $.01 per share, 1,000,000 shares authorized | — | — | — | |||||||||
Series A, Series E and Series Z preferred stock, par value $.01 per share, 171,000 shares authorized in the aggregate actual and aggregate pro forma, none authorized pro forma as adjusted, 108,870 shares outstanding in the aggregate actual, 109,370 shares outstanding in the aggregate pro forma, and none outstanding pro forma as adjusted | 1 | 1 | ||||||||||
Common stock, par value $.01 per share, 40,000,000 shares authorized, actual and pro forma, 70,000,000 shares authorized pro forma as adjusted, 5,256,158 shares outstanding actual, 6,080,380 shares outstanding pro forma and shares outstanding pro forma as adjusted | 53 | 61 | ||||||||||
Additional paid-in capital | 39,380 | 53,884 | ||||||||||
Accumulated other comprehensive loss | (2,407 | ) | (2,407 | ) | ||||||||
Accumulated deficit | (51,208 | ) | (51,208 | ) | (c | )(d) | ||||||
Unaccrued compensation | (143 | ) | (143 | ) | ||||||||
Total stockholders’ equity | (14,324 | ) | 188 | |||||||||
Total capitalization | $ | 177,599 | $ | 197,395 | $ | |||||||
(a) | Concurrently with this offering, we intend to replace our existing senior credit facility with a new $85.0 million senior credit facility described under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — New Senior Credit Facility.” |
(b) | In connection with the repayment of our debt, as discussed under the caption “Use of Proceeds,” we will expense $3.0 million of unamortized deferred financing costs, $2.5 million of unamortized discount and a redemption premium of $1.6 million. |
(c) | As discussed in the second paragraph under the caption “Description of Capital Stock — General,” our Series C preferred stock converts into a number of shares of our common stock that depends upon the public offering price of our common stock. The pro forma as adjusted accumulated deficit therefore reflects a deemed preferred stock dividend of $ million as the value of the additional shares of our common stock issued to the holders of our Series C preferred stock upon conversion in this offering. We determined the value of the dividend in accordance with Emerging Issues Task Force, or EITF, 00-27 by multiplying the number of additional shares of our common stock that are issuable upon conversion of our Series C preferred stock, determined as set forth in the second paragraph under the caption “Description of Capital Stock — General,” by the value of our common stock on the date that investors first committed to purchase our Series C preferred stock. |
(d) | In connection with our acquisition of HV Technologies in January 2002, we issued an aggregate of $6.0 million of our Series E preferred stock in December 2001 and January 2002, and we issued warrants to purchase an aggregate of 200,000 shares of our common stock at $0.01 per share. We recorded a discount of $2.3 million to the carrying value of the Series E preferred stock equal to the consideration allocated to the warrants. We will accrete this discount over the 12 month period ending December 31, 2002 since we plan to redeem our Series E preferred stock by that date. |
Initial public offering price per share | $ | |||||
Pro forma net tangible book value per share as of December 30, 2001 | $ | |||||
Increase per share attributable to new investors | $ | |||||
Pro forma net tangible book value per share after this offering | $ | |||||
Dilution per share to new investors | $ | |||||
Shares Purchased | Total Consideration | Average Price Per Share | |||||||||||
Number | Percent | Amount | Percent | ||||||||||
Exiting stockholders | % | % | $ | ||||||||||
New investors | |||||||||||||
Total | 100.0 | % | 100.0 | % | |||||||||
Historical | Pro Forma | Historical | Pro Forma | |||||||||||||||||||||||||
MedSource | ACT Medical | Adjustments | Combined | HV Technologies | Adjustments | Combined | ||||||||||||||||||||||
(In thousands, except share and per share amounts) | ||||||||||||||||||||||||||||
Revenues | $ | 128,462 | $ | 12,786 | $ | — | $ | 141,248 | $ | 8,521 | $ | — | $ | 149,769 | ||||||||||||||
Costs and expenses: | ||||||||||||||||||||||||||||
Cost of products sold | 94,386 | 9,988 | — | 104,374 | 3,752 | — | 108,126 | |||||||||||||||||||||
Selling, general and administrative expenses | 26,199 | 3,257 | — | 29,456 | 1,878 | — | 31,334 | |||||||||||||||||||||
Amortization of goodwill and other intangibles | 5,640 | 58 | (58 | )(a) | 6,544 | — | — | 6,544 | ||||||||||||||||||||
904 | (b) | |||||||||||||||||||||||||||
Restructuring charge | 11,464 | — | — | 11,464 | — | — | 11,464 | |||||||||||||||||||||
Total costs and expenses | 137,689 | 13,303 | 846 | 151,838 | 5,630 | — | 157,468 | |||||||||||||||||||||
Operating (loss) income | (9,227 | ) | (517 | ) | (846 | ) | (10,590 | ) | 2,891 | — | (7,699 | ) | ||||||||||||||||
Interest (expense), net | (10,213 | ) | (560 | ) | 560 | (c) | (10,213 | ) | 7 | 51 | (c) | (10,155 | ) | |||||||||||||||
Other income (expense) | 53 | — | — | 53 | 285 | (274 | )(d) | 64 | ||||||||||||||||||||
(Loss) income before income taxes | (19,387 | ) | (1,077 | ) | (286 | ) | (20,750 | ) | 3,183 | (223 | ) | (17,790 | ) | |||||||||||||||
Income tax benefit (expense) | (70 | ) | — | — | (70 | ) | (181 | ) | 181 | (d) | (70 | ) | ||||||||||||||||
Net (loss) income | (19,457 | ) | (1,077 | ) | (286 | ) | (20,820 | ) | 3,002 | (42 | ) | (17,860 | ) | |||||||||||||||
Preferred stock dividends and accretion of discount on preferred stock | (9,688 | ) | (1,317 | )(e) | (11,005 | ) | — | (1,509 | )(f) | (12,514 | ) | |||||||||||||||||
Net (loss) income attributed to common stockholders | $ | (29,145 | ) | $ | (1,077 | ) | $ | (1,603 | ) | $ | (31,825 | ) | $ | 3,002 | $ | (1,551 | ) | $ | (30,374 | ) | ||||||||
Net loss per common share attributed to common stockholders — basic and diluted | $ | (5.55 | ) | $ | (6.06 | ) | $ | (5.00 | ) | |||||||||||||||||||
Weighted average common shares — basic and diluted | 5,252,749 | 5,252,749 | 824,222 | (g) | 6,076,971 | |||||||||||||||||||||||
Historical | Pro Forma | ||||||||||||||
MedSource | HV Technologies | Adjustments | Combined | ||||||||||||
(In thousands, except share and per share amounts) | |||||||||||||||
Assets | |||||||||||||||
Current assets: | |||||||||||||||
Cash and cash equivalents | $ | 13,317 | $ | 1,100 | $ | 500 | (h) | $ | 9,307 | ||||||
(5,610 | )(i) | ||||||||||||||
Accounts and notes receivable, net | 21,313 | 869 | — | 22,182 | |||||||||||
Inventories | 16,548 | 936 | — | 17,484 | |||||||||||
Prepaid expenses and other current assets | 3,515 | 71 | — | 3,586 | |||||||||||
Deferred income taxes | 1,335 | — | — | 1,335 | |||||||||||
Total current assets | 56,028 | 2,976 | (5,110 | ) | 53,894 | ||||||||||
Property, plant and equipment, net | 40,219 | 2,147 | — | 42,366 | |||||||||||
Goodwill, net | 96,813 | — | 19,151 | (j) | 115,964 | ||||||||||
Other identifiable intangible assets, net | 4,263 | — | — | 4,263 | |||||||||||
Deferred financing costs | 3,022 | — | — | 3,022 | |||||||||||
Interest escrow fund | 599 | — | — | 599 | |||||||||||
Other assets | 390 | — | — | 390 | |||||||||||
Total assets | $ | 201,334 | $ | 5,123 | $ | 14,041 | $ | 220,498 | |||||||
Liabilities, mandatory redeemable convertible stock and stockholders’ equity (deficit) | |||||||||||||||
Current liabilities | $ | 30,112 | $ | 866 | $ | — | $ | 30,978 | |||||||
Long term debt, less unamortized discount and current portion | 78,237 | 562 | (562 | )(k) | 78,237 | ||||||||||
Deferred income taxes | 1,335 | — | — | 1,335 | |||||||||||
Other long-term liabilities | 2,889 | 150 | — | 3,039 | |||||||||||
Mandatory redeemable stock | 103,085 | — | 3,636 | (l) | 106,721 | ||||||||||
Stockholders’ equity (deficit) | |||||||||||||||
Series A, Series E and Series Z preferred stock | 1 | — | — | 1 | |||||||||||
Common Stock | 53 | 50 | 8 | (l) | 61 | ||||||||||
(50 | )(m) | ||||||||||||||
Additional paid-in capital | 39,380 | — | 500 | (h) | 53,884 | ||||||||||
14,004 | (l) | ||||||||||||||
Accumulated other comprehensive loss | (2,407 | ) | — | — | (2,407 | ) | |||||||||
Retained earnings (accumulated deficit) | (51,208 | ) | 3,495 | (3,495 | )(m) | (51,208 | ) | ||||||||
Unearned compensation | (143 | ) | — | — | (143 | ) | |||||||||
Total stockholders’ equity (deficit) | (14,324 | ) | 3,545 | 10,967 | 188 | ||||||||||
Total liabilities, mandatory redeemable convertible stock and stockholders’ equity (deficit) | $ | 201,334 | $ | 5,123 | $ | 14,041 | $ | 220,498 | |||||||
Historical | Pro Forma | |||||||||||||||
MedSource | HV Technologies | Adjustments | Combined | |||||||||||||
(In thousands, except share and per share amounts) | ||||||||||||||||
Revenues | $ | 72,155 | $ | 4,331 | $ | — | $ | 76,486 | ||||||||
Costs and expenses: | ||||||||||||||||
Cost of products sold | 54,616 | 1,949 | — | 56,565 | ||||||||||||
Selling, general and administrative expense | 14,080 | 2,071 | — | 16,151 | ||||||||||||
Amortization of goodwill and other intangibles | 169 | — | — | 169 | ||||||||||||
Total costs and expenses | 68,865 | 4,020 | — | 72,885 | ||||||||||||
Operating income | 3,290 | 311 | — | 3,601 | ||||||||||||
Interest (expense), net | (4,886 | ) | (2 | ) | 21 | (n) | (4,867 | ) | ||||||||
Other income (expense) | (27 | ) | 117 | (109 | )(o) | (19 | ) | |||||||||
(Loss) income before income taxes | (1,623 | ) | 426 | (88 | ) | (1,285 | ) | |||||||||
Income tax benefit (expense) | — | (318 | ) | 318 | (o) | — | ||||||||||
Net (loss) income | (1,623 | ) | 108 | 230 | (1,285 | ) | ||||||||||
Preferred stock dividends and accretion of discount on preferred stock | (5,322 | ) | — | (755 | )(p) | (6,077 | ) | |||||||||
Net (loss) income attributable to common stockholders | $ | (6,945 | ) | $ | 108 | $ | (525 | ) | $ | (7,362 | ) | |||||
Net loss per common share attributed to common stockholders — basic and diluted | $ | (1.32 | ) | $ | (1.21 | ) | ||||||||||
Weighted average shares — basic and diluted | 5,256,058 | 824,222 | (q) | 6,080,280 | ||||||||||||
1. | Unaudited Pro Forma Statement of Operations Adjustments for the Year Ended June 30, 2001 |
(a) | Represents elimination of the amortization of goodwill that existed on ACT Medical’s balance sheet at the time of the acquisition. |
(b) | Represents the amortization of goodwill and other intangibles resulting from the acquisition of ACT Medical. |
(c) | Represents elimination of the interest income and interest expense incurred by ACT Medical or HV Technologies, as applicable, because the debt associated with the interest expense was paid off in connection with the acquisition. |
(d) | Represents elimination of HV Technologies licensing and royalty income related to licenses cancelled in connection with the acquisition and elimination of HV Technologies income tax expense. |
(e) | Represents recognition of the dividends and amortization of discount on the preferred stock issued in conjunction with the acquisition of ACT Medical. |
(f) | Represents recognition of the dividends and accretion of discount on the Series E and Series F preferred stock. |
(g) | Represents shares of common stock issued in connection with the acquisition of HV Technologies. |
2. | Unaudited Pro Forma Balance Sheet Adjustments as of December 30, 2001 |
(h) | Represents receipt of an additional $0.5 million of Series E preferred stock and related warrants to finance our acquisition of HV Technologies. The total Series E preferred stock and warrants are recorded at their respective allocated fair market values of $3.7 million and $2.3 million, respectively. We will accrete the discount allocated to the Series E preferred stock over the 12 month period ending December 31, 2002 because we plan to redeem the Series E preferred stock by that date. |
(i) | Represents cash paid to acquire HV Technologies. |
(j) | Represents excess of purchase price over book value of assets acquired in the acquisition of HV Technologies based on a preliminary purchase price allocation. As we finalize the purchase price allocation, we may reallocate a portion of the purchase price to identifiable intangibles, which we would amortize over the economic life of those intangibles. |
(k) | Represents repayment of debt of HV Technologies on the date of acquisition. |
(l) | Represents issuance of Series F preferred stock and common stock in consideration of the acquisition of HV Technologies. The Series F preferred stock is recorded at its fair market value of $3.6 million. We will record an expense of $0.4 million when we redeem the Series F preferred stock. |
(m) | Represents elimination of existing equity of HV Technologies as of December 30, 2001. |
3. | Unaudited Pro Forma Statement of Operations Adjustments for the Six Months Ended |
December | 30, 2001 |
(n) | Represents elimination of interest expense incurred by HV Technologies because the debt associated with the interest expense was paid off in connection with the acquisition. |
(o) | Represents elimination of HV Technologies licensing and royalty income related to licenses cancelled in connection with the acquisition and elimination of HV Technologies income tax expense. |
(p) | Represents recognition of the dividends and accretion of discount on the Series E and Series F preferred stock. |
(q) | Represents shares of common stock in connection with the acquisition of HV Technologies. |
Period from March 31, 1999 (inception) through July 3, 1999(a) | Fiscal Year Ended | Six Months Ended December 30, | ||||||||||||||||||
July 1, 2000(a) | June 30, 2001 | 2000 | 2001 | |||||||||||||||||
(In thousands, except share and per share data) | ||||||||||||||||||||
Statement of Operations Data: | ||||||||||||||||||||
Revenues | $ | 21,968 | $ | 89,352 | $ | 128,462 | $ | 55,491 | $ | 72,155 | ||||||||||
Costs and expenses: | ||||||||||||||||||||
Cost of products sold | 13,437 | 59,811 | 94,386 | 41,514 | 54,616 | |||||||||||||||
Selling, general and administrative expense | 4,458 | 21,167 | 26,199 | 11,771 | 14,080 | |||||||||||||||
Amortization of goodwill and other intangibles(b) | 4,135 | 4,255 | 5,640 | 2,432 | 169 | |||||||||||||||
Organization and start-up costs | 4,981 | — | — | — | — | |||||||||||||||
Restructuring charge(c) | — | — | 11,464 | — | — | |||||||||||||||
Total costs and expenses | 27,011 | 85,233 | 137,689 | 55,717 | 68,865 | |||||||||||||||
Operating (loss) income | (5,043 | ) | 4,119 | (9,227 | ) | (226 | ) | 3,290 | ||||||||||||
Interest expense, net | (2,658 | ) | (10,682 | ) | (10,213 | ) | (5,417 | ) | (4,886 | ) | ||||||||||
Other income (expense) | (289 | ) | (7 | ) | 53 | (361 | ) | (27 | ) | |||||||||||
Loss before income taxes | (7,990 | ) | (6,570 | ) | (19,387 | ) | (6,004 | ) | (1,623 | ) | ||||||||||
Income tax benefit (expense) | 2,975 | 535 | (70 | ) | — | — | ||||||||||||||
Net loss | (5,015 | ) | (6,035 | ) | (19,457 | ) | (6,004 | ) | (1,623 | ) | ||||||||||
Preferred stock dividends and accretion of discount on preferred stock | (2,078 | ) | (8,345 | ) | (9,688 | ) | (4,654 | ) | (5,322 | ) | ||||||||||
Net loss attributed to common stockholders | $ | (7,093 | ) | $ | (14,380 | ) | $ | (29,145 | ) | $ | (10,658 | ) | $ | (6,945 | ) | |||||
Net loss per share attributed to common stockholders (basic and diluted) | $ | (1.60 | ) | $ | (3.10 | ) | $ | (5.55 | ) | $ | (2.03 | ) | $ | (1.32 | ) | |||||
Weighted average number of shares of common stock outstanding (basic and diluted) | 4,448,000 | 4,633,571 | 5,252,749 | 5,251,833 | 5,256,058 | |||||||||||||||
Other Data: | ||||||||||||||||||||
Net cash (used in) provided by operating activities | $ | (244 | ) | $ | 6,290 | $ | 1,253 | $ | 5,342 | $ | (4,024 | ) | ||||||||
Net cash used in investing activities | (93,744 | ) | (22,244 | ) | (11,627 | ) | (5,963 | ) | (5,115 | ) | ||||||||||
Net cash provided by (used in) financing activities | 95,796 | 16,356 | 28,453 | 27,686 | 2,167 | |||||||||||||||
EBITDA(d) | (329 | ) | 12,867 | 3,021 | 5,022 | 7,201 | ||||||||||||||
Adjusted EBITDA(d)(e) | 5,007 | 14,373 | 16,140 | 5,746 | 8,132 |
Period from March 31, 1999 (inception) through July 3, 1999(a) | Fiscal Year Ended | |||||||||||||
July 1, 2000(a) | June 30, 2001 | Six Months Ended December 30, 2001 | ||||||||||||
Balance Sheet Data (at end of period): | (In thousands) | |||||||||||||
Cash and cash equivalents | $ | 1,808 | $ | 2,210 | $ | 20,289 | $ | 13,317 | ||||||
Current assets | 18,109 | 28,903 | 59,577 | 56,028 | ||||||||||
Property and equipment, net | 21,550 | 34,956 | 38,873 | 40,219 | ||||||||||
Total assets | 126,792 | 151,722 | 205,300 | 201,334 | ||||||||||
Total debt | 81,224 | 98,653 | 89,544 | 86,356 | ||||||||||
Mandatory redeemable convertible stock | 16,250 | 22,293 | 98,867 | 103,085 | ||||||||||
Total stockholders’ equity (deficit) | 21,248 | 15,072 | (13,261 | ) | (14,324 | ) |
(a) | Our fiscal years originally ended on the Saturday closest to June 30. Effective July 1, 2001, our fiscal year end was changed to June 30. |
(b) | The Statement of Operations Data for the six months ended December 30, 2001 is not comparable to prior periods because we have stopped amortizing goodwill. Effective with our quarter ended September 30, 2001, we adopted the provisions of SFAS No. 141,Business Combinations, and No. 142,Goodwill and Other Intangible Assets, and, accordingly, we reclassified certain identifiable intangibles to goodwill and will no longer amortize goodwill and intangible assets that are deemed to have indefinite lives under SFAS 142. Had we continued to amortize goodwill during the six months ended December 30, 2001, amortization expense in that period would have increased by approximately $2.8 million, or $0.53 per common share. |
(c) | In June 2001, we completed a strategic review of our manufacturing operations and support functions. Based on this review and with board approval, we began actions to eliminate redundant facilities. These actions resulted in pre-tax charges of $11.5 million. The charges include employee termination benefits of $3.8 million, other exit costs of $2.2 million, impairment of goodwill and other intangibles of $3.6 million and impairment of property, plant, and equipment of $1.9 million. |
(d) | EBITDA represents earnings before interest expense, income taxes, depreciation and amortization. EBITDA should not be considered in isolation from, or as a substitute for, net income, cash flow from operations or other cash flow statement data prepared in accordance with generally accepted accounting principles or as a measure of our profitability or liquidity. Rather, EBITDA is presented because it is a widely accepted supplemental financial measure, and we believe that it provides relevant and useful information. A calculation of EBITDA may not be comparable to similarly titled measures reported by other companies, since all companies do not calculate this non-GAAP measure in the same manner. Our EBITDA calculation is not intended to represent cash provided by (used in) operating activities since it does not include interest and taxes and changes in operating assets and liabilities, nor is it intended to represent a net increase in cash since it does not include cash provided by (used in) investing and financing activities. |
(e) | Adjusted EBITDA excludes costs of management agreements that we have entered into with Kidd & Company and Whitney & Co. We incurred fees under these agreements of $0.4 million for the period from March 31, 1999 (inception) through July 3, 1999, $1.5 million for the year ended July 1, 2000, $1.7 million for the year ended June 30, 2001, $0.7 million for the six months ended December 30, 2000, and $0.9 million for the six months ended December 30, 2001. These agreements will terminate upon completion of this offering. Adjusted EBITDA also excludes management fees for all periods presented, start-up costs of $5.0 million for the period ended July 3, 1999 and restructuring charges of $11.5 million for year ended June 30, 2001. |
· | surgical instrumentation devices and components; |
· | electro-medical devices and components; |
· | custom interventional devices and components; and |
· | custom orthopedic devices and instruments. |
· | the bank’s prime rate plus a margin, which depends upon our leverage ratio, ranging from zero to 125 basis points; or |
· | LIBOR plus a margin, which depends upon our leverage ratio, ranging from 175 to 300 basis points. |
Period | Redemption Price | ||
2002 | 108 | % | |
2003 | 107 | % | |
2004 | 106 | % | |
2005 and thereafter | 105 | % |
Quarter Ended | ||||||||||||||||||||||||||||||||||||||||
October 2, 1999 | January 1, 2000 | April 1, 2000 | July 1, 2000 | September 30, 2000 | December 30, 2000 | March 31, 2001 | June 30, 2001 | September 30, 2001 | December 30, 2001 | |||||||||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||||||||||
Statement of Operations Data: | ||||||||||||||||||||||||||||||||||||||||
Revenues | $ | 18.9 | $ | 19.4 | $ | 24.7 | $ | 26.4 | $ | 27.6 | $ | 27.9 | $ | 34.8 | $ | 38.2 | $ | 33.9 | $ | 38.3 | ||||||||||||||||||||
Costs and expenses: | ||||||||||||||||||||||||||||||||||||||||
Cost of products sold | 12.1 | 12.1 | 16.5 | 19.1 | 20.8 | 20.7 | 26.1 | 26.8 | 26.1 | 28.5 | ||||||||||||||||||||||||||||||
Selling, general and administrative expense | 3.9 | 4.0 | 5.2 | 8.1 | 5.6 | 6.1 | 7.3 | 7.2 | 6.4 | 7.7 | ||||||||||||||||||||||||||||||
Amortization of goodwill and other intangibles(a) | 1.0 | 1.1 | 1.1 | 1.1 | 1.2 | 1.2 | 1.7 | 1.5 | 0.1 | 0.1 | ||||||||||||||||||||||||||||||
Restructuring charge(b) | — | — | — | — | — | — | — | 11.5 | — | — | ||||||||||||||||||||||||||||||
Operating income (loss) | 1.9 | 2.2 | 1.9 | (1.9 | ) | — | (0.1 | ) | (0.3 | ) | (8.8 | ) | 1.3 | 2.0 | ||||||||||||||||||||||||||
Interest expense, net | (2.3 | ) | (2.2 | ) | (2.7 | ) | (3.5 | ) | (2.9 | ) | (2.5 | ) | (2.3 | ) | (2.5 | ) | (2.5 | ) | (2.4 | ) | ||||||||||||||||||||
Other expense | — | — | — | — | (0.2 | ) | (0.2 | ) | 0.3 | 0.1 | — | — | ||||||||||||||||||||||||||||
Income tax benefit (expense) | 0.3 | 0.1 | 0.3 | (0.1 | ) | — | — | — | (0.1 | ) | — | — | ||||||||||||||||||||||||||||
Net loss | $ | (0.1 | ) | $ | 0.1 | $ | (0.5 | ) | $ | (5.5 | ) | $ | (3.1 | ) | $ | (2.8 | ) | $ | (2.3 | ) | $ | (11.3 | ) | $ | (1.2 | ) | $ | (0.4 | ) | |||||||||||
Other Data: | ||||||||||||||||||||||||||||||||||||||||
EBITDA(c) | $ | 3.8 | $ | 4.2 | $ | 4.3 | $ | 0.6 | $ | 2.5 | $ | 2.4 | $ | 3.4 | $ | (5.3 | ) | $ | 3.2 | $ | 4.0 |
(a) | The information for the three months ended September 30, 2001 and December 30, 2001 does not include a charge for the amortization of goodwill. Effective with our quarter ended September 30, 2001, we adopted the provisions of SFAS No. 141,Business Combinations, and No. 142,Goodwill and Other Intangible Assets, and, accordingly, we reclassified certain identifiable intangibles to goodwill and will no longer amortize goodwill and intangible assets that are deemed to have indefinite lives under SFAS 142. Had we |
continued to amortize goodwill during the three months ended September 30, 2001 and December 30, 2001, amortization expense in each of these periods would have increased by approximately $1.4 million, or $0.27 per common share and $0.26 per common share, respectively. |
(b) | In June 2001, we completed a strategic review of our manufacturing operations and support functions. Based on this review and with board approval, we began actions to eliminate redundant facilities. These actions resulted in pre-tax charges of $11.5 million. The charges include employee termination benefits of $3.8 million, other exit costs of $2.2 million, impairment of goodwill and other intangibles of $3.6 million and impairment of property, plant, and equipment of $1.9 million. |
(c) | EBITDA represents earnings before interest expense, income taxes, depreciation and amortization. EBITDA should not be considered in isolation from, or as a substitute for, net income, cash flow from operations or other cash flow statement data prepared in accordance with generally accepted accounting principles or as a measure of our profitability or liquidity. Rather, EBITDA is presented because it is a widely accepted supplemental financial measure, and we believe that it provides relevant and useful information. A calculation of EBITDA may not be comparable to similarly titled measures reported by other companies, since all companies do not calculate this non-GAAP measure in the same manner. Our EBITDA calculation is not intended to represent cash provided by (used in) operating activities since it does not include interest and taxes and changes in operating assets and liabilities, nor is it intended to represent a net increase in cash since it does not include cash provided by (used in) investing and financing activities. |
Kelco Industries, Inc. | W.N. Rushwood, Inc. d/b/a Hayden Precision Industries | ||||||||||||||||||||||||
Year Ended April 30, | Eleven Months Ended March 30, | Year Ended December 31, | Three Months Ended March 30, | ||||||||||||||||||||||
1997 | 1998 | 1999 | 1996 | 1997 | 1998 | 1999 | |||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||
Statement of Operations Data: | |||||||||||||||||||||||||
Net sales | $ | 19,518 | $ | 23,192 | $ | 22,877 | $ | 6,149 | $ | 6,003 | $ | 9,777 | $ | 2,227 | |||||||||||
Gross profit | 7,883 | 9,742 | 9,954 | 1,977 | 1,719 | 3,096 | 506 | ||||||||||||||||||
Operating expenses | 2,738 | 2,830 | 2,899 | 954 | 949 | 1,072 | 195 | ||||||||||||||||||
Operating income (loss) | 5,145 | 6,912 | 7,054 | 1,023 | 770 | 2,024 | 311 | ||||||||||||||||||
Other income (expense) | 56 | 99 | 189 | (142 | ) | (201 | ) | (241 | ) | (100 | ) | ||||||||||||||
Income before taxes | 5,201 | 7,011 | 7,243 | 881 | 569 | 1,783 | 211 | ||||||||||||||||||
Income taxes | — | — | — | — | — | — | — | ||||||||||||||||||
Net income (loss) | $ | 5,201 | $ | 7,011 | $ | 7,243 | $ | 881 | $ | 569 | $ | 1,783 | $ | 211 | |||||||||||
Balance Sheet Data (at end of period): | |||||||||||||||||||||||||
Total assets | $ | 9,803 | $ | 13,484 | $ | 18,962 | $ | 3,821 | $ | 3,712 | $ | 7,677 | $ | 7,875 | |||||||||||
Long-term debt | 5 | — | — | 2,193 | 1,804 | 3,174 | 3,744 | ||||||||||||||||||
Shareholders’ equity | 7,905 | 11,229 | 16,215 | 572 | 1,041 | 2,296 | 2,422 |
National Wire and Stamping, Inc. | The MicroSpring Company, Inc. | ||||||||||||||||||||||||||||
Year Ended December 31, | Three Months Ended March 30, | Year Ended December 31, | Three Months Ended March 30, | ||||||||||||||||||||||||||
1996 | 1997 | 1998 | 1999 | 1996 | 1997 | 1998 | 1999 | ||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||||
Statement of Operations Data: | |||||||||||||||||||||||||||||
Net sales | $ | 6,823 | $ | 9,513 | $ | 8,619 | $ | 1,636 | $ | 11,264 | $ | 11,782 | $ | 10,176 | $ | 1,792 | |||||||||||||
Gross profit | 2,921 | 3,730 | 3,618 | 669 | 5,520 | 3,321 | 2,896 | 394 | |||||||||||||||||||||
Operating expenses | 2,237 | 3,112 | 3,057 | 800 | 2,060 | 3,420 | 3,343 | 1,314 | |||||||||||||||||||||
Operating income (loss) | 684 | 618 | 561 | (131 | ) | 3,460 | (99 | ) | (447 | ) | (920 | ) | |||||||||||||||||
Other income (expense) | (47 | ) | 65 | 126 | 125 | 52 | 7 | (32 | ) | 1 | |||||||||||||||||||
Income before taxes | 637 | 683 | 687 | (6 | ) | 3,512 | (92 | ) | (479 | ) | (919 | ) | |||||||||||||||||
Income taxes | 257 | 275 | 264 | 45 | 83 | 31 | 7 | 3 | |||||||||||||||||||||
Net income (loss) | $ | 380 | $ | 408 | $ | 423 | $ | (51 | ) | $ | 3,429 | $ | (123 | ) | $ | (486 | ) | $ | (922 | ) | |||||||||
Balance Sheet Data (at end of period): | |||||||||||||||||||||||||||||
Total assets | $ | 3,038 | $ | 3,894 | $ | 4,373 | $ | 3,250 | $ | 4,983 | $ | 6,185 | $ | 3,984 | $ | 3,895 | |||||||||||||
Long-term debt | 112 | 117 | 107 | — | — | 250 | 250 | — | |||||||||||||||||||||
Shareholders’ equity | 2,036 | 2,290 | 2,757 | 2,664 | 3,916 | 3,377 | 2,990 | 3,076 |
Portlyn Corporation | Texcel, Inc. | |||||||||||||||||||||||||||||||
Year Ended December 31, | Three Months Ended March 30, | Year Ended December 31, | Three Months Ended March 30, | |||||||||||||||||||||||||||||
1996 | 1997 | 1998 | 1999 | 1996 | 1997 | 1998 | 1999 | |||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||
Statement of Operations Data: | ||||||||||||||||||||||||||||||||
Net sales | $ | 5,578 | $ | 6,955 | $ | 5,773 | $ | 1,180 | $ | 2,303 | $ | 4,310 | $ | 6,184 | $ | 2,045 | ||||||||||||||||
Gross profit | 2,835 | 3,391 | 2,573 | 473 | 708 | 1,677 | 2,295 | 941 | ||||||||||||||||||||||||
Operating expenses | 2,905 | 3,259 | 2,572 | 522 | 521 | 900 | 952 | 270 | ||||||||||||||||||||||||
Operating income (loss) | (70 | ) | 132 | 1 | (49 | ) | 187 | 777 | 1,343 | 671 | ||||||||||||||||||||||
Other income (expense) | 1 | (76 | ) | (74 | ) | (14 | ) | (94 | ) | (62 | ) | (68 | ) | (11 | ) | |||||||||||||||||
Income before taxes | (69 | ) | 56 | (73 | ) | (63 | ) | 93 | 715 | 1,275 | 660 | |||||||||||||||||||||
Income taxes | — | — | — | — | 42 | 307 | 15 | 14 | ||||||||||||||||||||||||
Net income (loss) | $ | (69 | ) | $ | 56 | $ | (73 | ) | $ | (63 | ) | $ | 51 | $ | 408 | $ | 1,260 | $ | 646 | |||||||||||||
Balance Sheet Data (at end of period): | ||||||||||||||||||||||||||||||||
Total assets | $ | 1,646 | $ | 2,710 | $ | 1,886 | $ | 1,818 | $ | 1,216 | $ | 2,324 | $ | 3,278 | $ | 3,363 | ||||||||||||||||
Long-term debt | 28 | 113 | 82 | 75 | 462 | 504 | 451 | 770 | ||||||||||||||||||||||||
Shareholders’ equity | 647 | 651 | 578 | 514 | 377 | 749 | 2,009 | 1,265 |
MEDICAL DEVICE MARKETS | EXAMPLES | MAJOR MEDICAL DEVICE COMPANIES | ||||||
MedSource Target Markets | ||||||||
Surgical Instrumentation | — Arthroscopic — Ophthalmology | — Endo-laparoscopic — Electro-surgical | — Boston Scientific — Johnson & Johnson | — Stryker — Tyco | ||||
Electro-Medical Implants | — Pacemakers — Defibrillators | — Hearing assist devices — Heart pumps | — Biotronik — Guidant | — Medtronic — St. Jude | ||||
Interventional | — Stents — Angioplasty | — Catheter ablation — Distal protection | — Boston Scientific — Guidant | — Johnson & Johnson — Medtronic | ||||
Orthopedics | — Spinal fixation — Hip implants | — Knee implants | — Biomet — Johnson & Johnson | — Stryker — Zimmer | ||||
Other Markets | ||||||||
Other Value-Added Products | — Respiratory — Renal / hemodialysis | — Urology — Dental | — Abbott — Baxter | — C.R. Bard — Fresenius | ||||
Commodity Products | — Needles / syringes — Gloves / gowns | — Wound care | — Allegiance — Becton Dickinson | — 3M — Tyco | ||||
Imaging Equipment | — MRI — Ultrasound | — X-ray | — General Electric — Philips | — Siemens — Toshiba |
· | the need for innovation and accelerated time-to-market, including design for manufacturability and rapid prototyping to support new product introductions; |
· | cost containment pressures from healthcare providers such as managed care organizations, which necessitate a more efficient supply chain; and |
· | increased competition and industry consolidation. |
· | Product design and development. Our product design, design for manufacturability and prototyping capabilities allow us to participate early in the product development process to help reduce our customers’ costs, accelerate product development times and secure ongoing manufacturing relationships. Equipping our facilities with rapid prototyping technologies and using these technologies across multiple disciplines (e.g., machining and plastic molding) is an important element of our product development services. In providing these services, our internal application engineering group and internal product design engineers provide our customers with expertise in desired disciplines (e.g., mechanical design, electrical design, electronics and software). |
· | Precision metal and plastic parts manufacturing. Precision metal manufacturing is a core element of our manufacturing capabilities. Our metal manufacturing capabilities include milling, lathe turning, drilling, grinding, polishing, lapping, laser cutting, sintering, wire forming, stamping and precision metal injection manufacturing with materials as diverse as stainless steel and titanium. Trends in the medical industry towards minimally-invasive surgical techniques have made our micro-machining capabilities increasingly important. These micro-machining capabilities include computer numerically controlled, or CNC, multi-axis and Swiss-machining, as well as electric discharge machining, or EDM. Our plastic part manufacturing capabilities include tubing (dip coating and extrusion), molding (injection, insert and thermoforming) and machining. |
· | Product assembly services and supply chain management. Our product assembly and supply chain management capabilities allow us to provide customers with completed medical devices and subassemblies. Our assembly capabilities include mechanical, electromechanical and instrumentation assembly, as well as functional testing, inspection, complex integration (with advanced materials), kitting and packaging. We use our supply chain management services to source components and services, either from internal operations or from third party suppliers, for the devices we assemble. Our assembly and supply chain management capabilities enable us to extend our vertically integrated manufacturing business and further distinguish us from suppliers with more limited capabilities. |
· | Surgical instrumentation devices and components, for both the minimally invasive and general surgery markets. Surgical instruments are typically produced from metal or plastic materials and, in the case of powered products, electronic components. We manufacture a variety of surgical products for |
our customers such as clip appliers, endoscopic instruments, forceps, electrocautery blades, staple cartridges and suturing devices. |
· | Electro-medical implant devices and components, for the cardiac rhythm management, or CRM, neurologic, and hearing assist markets, including pacemakers and defibrillators. These products are high precision and are typically produced from metal and plastic materials and electronic components. We provide our customers with laser welding services and manufacture guidewires, set screws and pins for pacemakers, ferrules, connector blocks and other components. |
· | Custom interventional devices and components, for the cardiology, radiology, neuroradiology, vascular access and electrophysiology markets. Interventional products are typically produced from a combination of metal and plastic materials. We manufacture a variety of interventional products for our customers, including precision catheters, PTCA guidewires, electrophysiology catheters and distal protection devices. |
· | Custom orthopedic devices and instruments, for the reconstructive, spinal implant and trauma markets. Orthopedic products are typically produced from metal, plastic and ceramic materials. We manufacture a variety of orthopedic implants for our customers, such as hips, knees, spinal cages, hooks and plates and instruments for the placement of these implants. |
· | Provide a single source solution. By providing a broad range of engineering, development, manufacturing, assembly and supply chain management capabilities, we offer our customers the ability to outsource all or part of the production of a device to a single provider. We have won several significant projects under which we design, manufacture and package finished devices for leading global medical device companies. In addition, we work closely with smaller, emerging medical device companies as their engineering and manufacturing partner. |
· | Accelerate product development cycle time. Our experience in design engineering and rapid prototyping positions us as a valuable resource early in the new product development process and enables critical processes to occur simultaneously, which reduces the overall time-to-market. We employ over 130 engineers of whom approximately 50 are devoted to new product introductions. Our engineers provide technical expertise to transform our customers’ concepts into finished devices that can be efficiently manufactured on a commercial scale. |
· | Provide quality products and practices. Quality is of the highest importance to our customers due to the serious and costly consequences of product failure. We operate our facilities under a single integrated quality system. Each of these facilities has been certified by independent certification bodies to comply with the ISO 9001 quality management standard and ISO 13485 medical device-specific standard. We believe that our quality system also complies with the FDA quality system regulation, which establishes good manufacturing practice requirements for product design, manufacture, management, packaging, labeling, distribution and installation. |
· | Reduce costs for customers. We reduce our customers’ total costs associated with manufacturing by: |
– | designing for manufacturability; |
– | providing purchasing power on raw materials and machinery; and |
– | delivering manufacturing processes that lower costs through increased efficiencies and continuous improvement efforts. |
· | Offer financial stability. We believe the medical engineering and manufacturing services industry includes over 3,000 companies, many of which have annual revenues of less than $5 million. We believe our customers prefer working with large and well capitalized medical engineering and manufacturing service providers such as MedSource, who can ensure a stable supply of products and services. Additionally, we have the financial capacity to allow us to respond rapidly to our customers’ requirements, such as higher production volumes. |
· | Focus on manufacturing excellence and leading process technologies. We are committed to maintaining and improving our manufacturing processes and services, which we believe has made us an efficient and high quality medical engineering and manufacturing services provider. Our manufacturing capabilities are supported by advanced manufacturing process technologies and a strong culture of continuous improvement. We are implementing a manufacturing strategy founded on the principles of employee excellence, technology deployment, quality-driven operations, an integrated low-cost manufacturing network, lean manufacturing and customer satisfaction. |
· | Strengthen our customer relationships by collaborating in the design and engineering of new products. Working closely with customers in the design and engineering of new products provides significant opportunity to anticipate customers’ needs and secure ongoing manufacturing relationships. Increasingly, our customers provide only functional or system performance specifications and request that we provide much of the design and engineering specifications associated with new products or product modifications. Our ability to provide product design and development services enables us to secure long term manufacturing relationships for finished devices, sub-assemblies and components. |
· | Drive additional component manufacturing business by continuing to expand our device assembly services. As we increase our assembly business, we have the opportunity to also increase our manufacturing of components because the assembler, or sub-assembler, of a device typically controls the source of the components used in that device. Our manufacturing capabilities position us well to produce many of the components for the products we assemble. |
· | Pursue product line transfers and acquisitions of customers’ manufacturing assets. We believe that the transfer of the manufacturing responsibility for product lines and our acquisition of customer manufacturing facilities will provide a vehicle for substantial growth, as well as a mechanism to develop closer relationships with leading medical device companies. These transactions allow our customers to reduce capital employed and focus resources on their core competencies, including research and sales and marketing. During October 2001, we acquired a manufacturing assembly facility for a product line from one of our major customers, a leading medical device company. As part of this transaction, we signed a multi-year supply agreement with this customer. We believe that product line transfers and asset acquisitions of this kind are becoming increasingly attractive to our customers. |
· | Selectively acquire new companies. We plan to make select acquisitions of complementary medical engineering and manufacturing services providers that bring desired capabilities, customers or geographic coverage and either strengthen our position in our target markets or provide us with a significant presence in a new market. We have an experienced business development team focusing on acquisitions and integrating these acquisitions into our operations. Since our formation through the acquisition of seven companies in March 1999, we have completed five additional acquisitions. We believe that our ability to identify, close and integrate acquisitions is a competitive advantage. |
Location | Approx. Square Feet | Leased/ Owned | ||
Brimfield, Massachusetts | 30,000 | Owned | ||
Brooklyn Park, Minnesota | 70,000 | Leased | ||
Corry, Pennsylvania | 40,000 | Leased | ||
Danbury, Connecticut(a) | 87,000 | Leased | ||
E. Longmeadow, Massachusetts(a) | 15,000 | Leased | ||
Englewood, Colorado | 35,000 | Leased | ||
Laconia, New Hampshire | 31,000 | Leased | ||
Minneapolis, Minnesota(b) | 7,000 | Leased | ||
Navojoa, Mexico | 38,000 | Leased | ||
Newton, Massachusetts | 69,000 | Leased | ||
Norwell, Massachusetts | 37,000 | Leased | ||
Orchard Park, New York | 41,000 | Leased | ||
Pittsfield, Massachusetts(a) | 26,000 | Owned | ||
Redwood City, California | 28,000 | Leased | ||
Santa Clara, California | 10,000 | Leased | ||
Trenton, Georgia | 42,000 | Leased | ||
Total | 606,000 | |||
(a) | One of these facilities will be closed or sold prior to July 1, 2002, and the other two plants will be closed or sold by February 2003. |
(b) | Corporate offices. |
Name | Age | Position | ||
Richard Effress | 31 | Chairman of the Board, Chief Executive Officer and Co-founder | ||
Joseph Caffarelli | 56 | Senior Vice President, Chief Financial Officer and Treasurer | ||
Dan Croteau | 36 | Vice President—Corporate Development | ||
Jim Drill | 37 | Vice President—Sales and Marketing | ||
Bill Ellerkamp | 42 | Vice President—Market Development | ||
Karl Hens | 41 | Vice President—Technology | ||
Rick McWhorter | 53 | Senior Vice President—Operations | ||
Ralph Polumbo | 50 | Vice President—Human Resources and Integration | ||
Rich Snider | 50 | Vice President—New Product Introduction | ||
Douglas Woodruff | 44 | Vice President—Regulatory Affairs and Quality Assurance | ||
Joseph Ciffolillo (a)(b) | 63 | Director | ||
John Galiardo (a) | 68 | Director | ||
Wayne Kelly | 39 | Director and Vice President | ||
William Kidd | 60 | Director and Co-founder | ||
T. Michael Long (a)(b) | 58 | Director | ||
Ross Manire (b) | 49 | Director | ||
Carl S. Sloane (a)(b) | 65 | Director |
(a) | Member of the Compensation and Benefits Committee. |
(b) | Member of the Audit Committee. |
· | that assets are safeguarded and that financial reports are properly prepared; |
· | consistent application of generally accepted accounting principles; and |
· | compliance with management’s policies and procedures. |
· | recommends an independent audit firm to audit financial statements and to perform services related to audits; |
· | approves the audit fees payable to the independent audit firm and reviews the scope and results of audits with the independent auditors; |
· | reviews with management and the independent auditors our annual operating results; |
· | considers the adequacy of our internal accounting control procedures; and |
· | considers our auditors’ independence. |
Long-Term Compensation Awards | ||||||||||
Annual Compensation | Number of Securities Underlying Options | All Other Compensation | ||||||||
Salary | Bonus | |||||||||
Richard Effress | $ | 250,000 | $ | 50,000 | 300,000 | $ — | ||||
Chairman and Chief Executive Officer | ||||||||||
Jim Drill | 208,333 | 41,466 | 10,000 | — | ||||||
Vice President—Sales and Marketing | ||||||||||
William Ellerkamp | 178,750 | 35,750 | 27,500 | — | ||||||
Vice President—Market Development | ||||||||||
Ralph Polumbo | 175,000 | 35,000 | — | — | ||||||
Vice President—Human Resources and Integration | ||||||||||
Rich Snider | 175,000 | 30,641 | 10,000 | — | ||||||
Vice President—New Product Introduction |
Name | Individual Grants | Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option | ||||||||||||
Number of Securities Underlying Options Granted | Percent of Total Options Granted to Employees in Fiscal Year (%) | Exercise Price per Share ($) | Expiration Date | |||||||||||
5% | 10% | |||||||||||||
Richard Effress | 300,000 | 19.3 | % | $ | 16.24 | 11/21/10 | ||||||||
Jim Drill | — | — | — | — | ||||||||||
William Ellerkamp | 27,500 | * | 16.24 | 11/21/10 | ||||||||||
Ralph Polumbo | — | — | — | — | ||||||||||
Rich Snider | 10,000 | * | 17.00 | 2/6/11 |
* | Less than one percent. |
Shares Acquired on Exercise | Value Realized | Number of Securities Underlying Unexercised Options as of June 30, 2001 | Value of Unexercised In-the-Money Options as of June 30, 2001 | ||||||||||
Name | Exercisable | Unexercisable | Exercisable | Unexercisable | |||||||||
Richard Effress | — | $ | — | 75,000 | 225,000 | ||||||||
Jim Drill | — | — | 67,500 | 82,500 | |||||||||
William Ellerkamp | 616 | 12,509 | 66,875 | ||||||||||
Ralph Polumbo | — | — | 32,500 | 37,500 | |||||||||
Rich Snider | 7,500 | 11,250 | 66,250 |
· | holding a direct or indirect financial interest, other than no more than 1% of the outstanding securities of a publicly traded company, in a firm that either provides services or supplies materials or equipment to us or with whom we compete, or to whom we provide services or products; |
· | speculating or dealing in equipment, supplies, materials, or property that we purchase or sell; |
· | accepting cash, commissions or other payments, or borrowing money, from suppliers, customers, individuals or firms with whom we do business or compete; |
· | accepting gifts, favors or entertainment or other personal items of more than nominal value from suppliers, customers, individuals or firms with whom we do business or compete; |
· | misusing for personal gain information to which they have access by reason of their position, or disclosing confidential or proprietary information to competitors, to any other person or to others at MedSource who have no business “need to know”; and |
· | appropriating for their personal benefit or diverting to others a business opportunity in which we might reasonably be expected to be interested, without first making the opportunity available to us. |
· | for any breach of the director’s duty of loyalty to us or our stockholders; |
· | for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law; |
· | under Delaware law regarding unlawful dividends and stock purchases; or |
· | for any transaction from which the director derived an improper personal benefit. |
Stockholder | Aggregate Investment | Securities Received | ||
· J.H. Whitney III, L.P. | · $21.5 million | · 292,941 shares of our Series B preferred stock(a) | ||
· Whitney Strategic Partners III, L.P. | · $0.5 million | · 7,058 shares of our Series B preferred stock(b) | ||
· J.H. Whitney Mezzanine Fund, L.P. | · $15.0 million | · $15.0 million senior subordinated note and 48,750 shares of our Series Z preferred stock(c) | ||
· Richard J. Effress | · $0.2 million | · 452,650 shares of our common stock | ||
· William J. Kidd, Carla G. Kidd, his wife, and various trusts for the benefit of their children | · $1.2 million | · 2,374,280 shares of our common stock |
(a) | Upon completion of this offering these shares will convert into an aggregate of 2,929,411 shares of our common stock, which means that the stockholder will have paid $7.33 per share. |
(b) | Upon completion of this offering these shares will convert into an aggregate of 70,588 shares of our common stock, which means that the stockholder will have paid $7.33 per share. |
(c) | At the time of the investment, we allocated $12.3 million to the note and $2.7 million to the Series Z preferred stock. Upon completion of this offering these shares will convert into an aggregate of 487,500 shares of our common stock, which means that the stockholder will have paid $5.50 per share. |
· | sell all or substantially all of our assets; |
· | liquidate; |
· | undergo a change in control; or |
· | complete an initial public offering of common stock that provides us with net proceeds of at least $40.0 million; |
Stockholder | Aggregate Investment | Series C Preferred Stock Received | ||
· The 1818 Fund III, L.P. | · $35.0 million | · 35,000 shares of our Series C preferred stock | ||
· Limited partnership controlled by Ross Manire | · $0.5 million | · 500 shares of our Series C preferred stock | ||
· John Galiardo | · $0.2 million | · 200 shares of our Series C preferred stock | ||
· Richard J. Effress | · $0.5 million | · 537.5 shares of our Series C preferred stock | ||
· William J. Kidd, Carla G. Kidd, his wife, and various trusts for the benefit of their children | · $3.3 million | · 3,255 shares of our Series C preferred stock |
· | The 1818 Fund III will convert into an aggregate of �� shares of our common stock; |
· | the limited partnership controlled by Ross Manire will convert into an aggregate of shares of our common stock; |
· | John Galiardo will convert into an aggregate of shares of our common stock; |
· | Richard J. Effress will convert into an aggregate of shares of our common stock; and |
· | William J. Kidd, Carla G. Kidd and various trusts for the benefit of their children will convert into an aggregate of shares of our common stock. |
Stockholder | Aggregate Investment | Securities Received | ||
· Ross Manire | · $0.5 million | · 500 shares of our Series E preferred stock, together with warrants to purchase an aggregate of 16,667 shares of common stock at $0.01 per share | ||
· Carl Sloane | · $0.3 million | · 250 shares of our Series E preferred stock, together with warrants to purchase an aggregate of 8,333 shares of our common stock at $0.01 per share | ||
· William J. Kidd, Carla G. Kidd, his wife, and various trusts for the benefit of their children | · $1.2 million | · 1,185 shares of our Series E preferred stock, together with warrants to purchase an aggregate of 39,500 shares of our common stock at $0.01 per share |
Related Party | Amount of Payment | Purpose | ||
· J.H. Whitney III, L.P. and Whitney Strategic Partners III, L.P. | · $3.9 million | · Accrued and unpaid dividends on our Series B preferred stock | ||
· J.H. Whitney Mezzanine Fund, L.P. | · $16.2 million | · Redemption (with premium) on our $15.0 million senior subordinated promissory note | ||
· Whitney Mezzanine Management Company, LLC | · $1.2 million | · Accrued and unpaid fees due under, and termination of, management agreement | ||
· Ross Manire | · $0.5 million | · Redemption of our Series E preferred stock issued to finance our acquisition of HV Technologies, together with accrued and unpaid dividends thereon | ||
· Carl Sloane | · $0.3 million | · Redemption of our Series E preferred stock issued to finance our acquisition of HV Technologies, together with accrued and unpaid dividends thereon | ||
· Kidd & Company, LLC | · $2.5 million | · Accrued and unpaid fees due under, and termination of, management agreements | ||
· William J. Kidd, Carla G. Kidd, his wife, and various trusts for the benefit of their children | · $1.3 million | · Redemption of our Series E preferred stock issued to finance our acquisition of HV Technologies, together with accrued and unpaid dividends thereon |
· | our common stock by each person or group of affiliated persons that beneficially owns more than 5% of our outstanding common stock; |
· | our common stock and our Series E preferred stock by each of our directors; |
· | our common stock and our Series E preferred stock by each of our executive officers named in the Summary Compensation Table; and |
· | our common stock and our Series E preferred stock by all of our directors and executive officers as a group. |
Common Stock | Series E Preferred Stock | ||||||||||||||
Percentage of Shares Beneficially Owned | Percentage of Shares Beneficially Owned | ||||||||||||||
Beneficial Owner | Number of Shares Beneficially Owned | Before Offering | After Offering | Number of Shares Beneficially Owned | Before Offering | After Offering | |||||||||
Richard Effress(a)(b) | 637,907 | 3.8 | % | % | — | — | % | — | % | ||||||
Jim Drill(c) | 110,000 | * | — | — | — | ||||||||||
Bill Ellerkamp(d) | 20,000 | * | — | — | — | ||||||||||
Ralph Polumbo(e) | 55,000 | * | — | — | — | ||||||||||
Rich Snider(f) | 47,500 | * | — | — | — | ||||||||||
Joseph Ciffolillo(g) | 30,299 | * | — | — | — | ||||||||||
John Galiardo(b)(h) | 27,630 | * | — | — | — | ||||||||||
Wayne Kelly(i) | 60,932 | * | — | — | — | ||||||||||
William J. Kidd(b)(j) | 1,695,414 | 10.5 | 324 | 5.4 | 5.4 | ||||||||||
T. Michael Long(k) | 2,538,360 | 15.2 | — | — | — | ||||||||||
Ross Manire(b)(l) | 62,303 | * | 500 | 8.3 | 8.3 | ||||||||||
Carl S. Sloane(m) | 21,458 | * | 250 | * | * | ||||||||||
Funds affiliated with Whitney & Co.(n)(o) | 3,487,500 | 20.9 | — | ||||||||||||
The 1818 Fund III, L.P.(b)(p) | 2,538,360 | 15.2 | — |
Common Stock | Series E Preferred Stock | |||||||||||
Percentage of Shares Beneficially Owned | Percentage of Shares Beneficially Owned | |||||||||||
Beneficial Owner | Number of Shares Beneficially Owned | Before Offering | After Offering | Number of Shares Beneficially Owned | Before Offering | After Offering | ||||||
Carla G. Kidd(b)(q) | 1,695,414 | 10.5 | 324 | 5.4 | 5.4 | |||||||
Edward R. Mandell, as trustee(r) | 955,980 | 5.7 | 861 | 14.4 | 14.4 | |||||||
All directors and executive officers as a group (15 persons)(b)(s) | 5,445,702 | 34.5 | 787 | 13.1 | 13.1 | |||||||
Selling stockholders(t): | — | — | — | |||||||||
Whitney Mezzanine Fund, L.P.(p) | 487,500 | 2.9 | — | — | — | |||||||
German American Capital Corporation(u) | 162,500 | * | — | — | — |
* | Represents less than 1% of our outstanding common stock. |
(a) | Includes (1) 150,000 shares of our common stock issuable upon exercise of options that are exercisable on or within 60 days of February 19, 2002 and (2) 38,981 shares of our common stock issuable upon conversion of 537.5 shares of our Series C preferred stock. Does not include shares owned by a trust established for the benefit of Mr. Effress’s current and future children, as to which Mr. Effress disclaims beneficial ownership. |
(b) | The number of shares of our common stock issuable upon conversion of our Series C preferred stock is subject to adjustment depending on the initial public offering price of our common stock, as discussed in the second paragraph under the caption “Description of Capital Stock — General.” |
(c) | Includes 105,000 shares of our common stock issuable upon exercise of options that are exercisable on or within 60 days of February 19, 2002. |
(d) | Includes 19,384 shares of our common stock issuable upon exercise of options that are exercisable on or within 60 days of February 19, 2002. |
(e) | Includes 50,000 shares of our common stock issuable upon exercise of options that are exercisable on or within 60 days of February 19, 2002. |
(f) | Includes 40,000 shares of our common stock issuable upon exercise of options that are exercisable on or within 60 days of February 19, 2002. |
(g) | Includes (1) 9,375 shares of our common stock issuable upon exercise of options that are exercisable on or within 60 days of February 19, 2002 and (2) 20,924 shares of our common stock issuable upon conversion of 300 shares of our Series C preferred stock. |
(h) | Includes (1) 13,125 shares of our common stock issuable upon exercise of options that are exercisable on or within 60 days of February 19, 2002 and (2) 14,504 shares of our common stock issuable upon conversion of 200 shares of our Series C preferred stock. |
(i) | Includes 37,500 shares of our common stock issuable upon exercise of options that are exercisable on or within 60 days of February 19, 2002. |
(j) | Includes (1) 62,552 shares of our common stock issuable upon conversion of 862.5 shares of our Series C preferred stock that are owned directly by Mr. Kidd, (2) 62,552 shares of our common stock issuable upon conversion of 862.5 shares of our Series C preferred stock that are owned by Mr. Kidd’s wife, and (3) 287 shares of our Series E preferred stock owned by Mr. Kidd’s wife. Does not include 952,256 shares of our common stock or 861 shares of our Series E preferred stock owned by various trusts established for the benefit of Mr. Kidd’s children. Mr. Kidd disclaims beneficial ownership of the shares owned by these trusts. If Mr. Kidd were deemed to beneficially own the shares owned by these trusts, he would beneficially own 2,647,670 shares, or 15.8% or our common stock before this offering and % after this offering, and 1,185 shares, or 19.8%, of our Series E preferred stock before and after this offering. |
(k) | Mr. Long, a general partner of Brown Brothers Harriman & Co., which is the general partner of The 1818 Fund III, L.P., may be deemed to be the beneficial owner of shares held of record by The 1818 Fund III, L.P. due to his role as co-manager of The 1818 Fund III, L.P. Mr. Long disclaims beneficial ownership of the shares beneficially owned by The 1818 Fund III, L.P., except to the extent of his pecuniary interest therein. |
(l) | Includes (1) 9,375 shares of our common stock issuable upon exercise of options that are exercisable on or within 60 days of February 19, 2002; and (2) 36,262 shares of our common stock issuable upon conversion of 500 shares of our Series C preferred stock, which are beneficially owned by Manire Limited Partnership. Mr. Manire is a director and officer of Odyssey Corp., the general partner of Manire Limited Partnership. |
(m) | Includes (1) 13,125 shares of our common stock issuable upon exercise of options that are exercisable on or within 60 days of February 19, 2002 and (2) 8,333 shares of our common stock issuable upon exercise of warrants. |
(n) | Represents 2,929,412 shares of our common stock owned by J.H. Whitney III, L.P., 70,588 shares owned by Whitney Strategic Partners III, L.P. and 487,500 shares owned by J.H. Whitney Mezzanine Fund, L.P. J.H. Whitney Equity Partners III, LLC, of which Peter M. Castleman, Joseph D. Carrabino, Jr., James H. Fordyce, Jeffrey R. Jay, William Laverack, Jr., Daniel J. O’Brien and Michael R. Stone are the members, is the general partner of J.H. Whitney III and Whitney Strategic Partners III and has voting and investment power over their shares. Whitney GP, LLC, of which Peter M. Castleman, Joseph D. Carrabino, Jr., James H. Fordyce, Jeffrey R. Jay, William Laverack, Jr., Daniel J. O’Brien and Michael R. Stone are the members, is the general partner of Whitney Mezzanine Fund and has voting and investment power over its shares. Each of these funds is affiliated with Whitney & Co. |
(o) | If the underwriters exercise the over-allotment option in full, Whitney Mezzanine Fund will beneficially own 243,750 shares, or % of our common stock after this offering. The address of each beneficial owner is , Stamford, Connecticut 06901. |
(p) | Represents shares owned of record by The 1818 Fund III, L.P. Brown Brothers Harriman & Co. is the general partner of The 1818 Fund III. Includes 2,538,360 shares of common stock issuable upon conversion of 35,000 shares of our Series C preferred stock. Mr. Long and Michael C. Tucker are partners of Brown Brothers Harriman & Co. and have the power to vote and dispose of these shares, but each disclaims beneficial ownership except to the extent of his pecuniary interest. The address of each beneficial owner is 59 Wall Street, New York, New York 10005. |
(q) | Includes (1) 62,552 shares of our common stock issuable upon conversion of 862.5 shares of our Series C preferred stock, (2) 62,552 shares of our common stock issuable upon conversion of 862.5 shares of our Series C preferred stock that are owned by Mrs. Kidd’s husband and (3) 37 shares of our Series E preferred stock owned by Mrs. Kidd’s husband. Does not include 952,256 shares of our common stock or 861 shares of our Series E preferred stock owned by various trusts established for the benefit of Mrs. Kidd’s children. Mrs. Kidd disclaims beneficial ownership of the shares owned by these trusts. If Mrs. Kidd were deemed to beneficially own the shares owned by these trusts, she would beneficially own 2,647,670 shares, or 15.8% of our common stock before this offering and % after this offering, and 1,185 shares, or 19.8%, of our Series E preferred stock before and after this offering. The address of the listed beneficial owner is c/o Kidd & Company, LLC, Three Pickwick Plaza, Greenwich, Connecticut 06830. |
(r) | Represents shares owned by trusts established for the benefit of Mr. and Mrs. Kidd’s children, which includes 108,786 shares of our common stock issuable upon conversion of 1,500 shares of our Series C preferred stock. Also represents 3,724 shares owned by a trust established for the benefit of Mr. Effress’s current and future children. The address of Mr. Mandell is c/o Jenkens & Gilchrist Parker Chapin LLP, 405 Lexington Avenue, New York, New York 10174. |
(s) | Includes (1) 521,667 shares of our common stock issuable upon exercise of options that are exercisable on or within 60 days of February 19, 2002; and (2) 2,806,883 shares of common stock issuable upon conversion of 38,900 shares of our Series C preferred stock. |
(t) | As part of the underwriters’ over-allotment option, Whitney Mezzanine Fund and German American Capital have agreed to sell up to 243,750 and 81,250 shares of our common stock, respectively, to the underwriters for the purpose of covering over-allotments at the price offered to the public less underwriting discounts and commissions. |
(u) | If the underwriters exercise the over-allotment option in full, German American Capital will beneficially own 81,250 shares, or less than one percent, of our common stock after the completion of this offering. |
· | the holders of at least 50% of the shares from either of two groups that are party to a registration rights agreement that we entered into in March 1999 make the request to register at least 25% of those shares; or |
· | the holders of at least 25% of the shares that were party to a registration rights agreement that we entered into in October 2000 make the request. |
Date Available for Resale | Shares Eligible For Sale | Comment | ||
Immediately | Shares not subject to lock-up agreements | |||
90 days ( , 2002) | Shares not subject to lock-up and salable under Rule 701 | |||
180 days ( , 2002) | Lock-up released, shares salable under Rules 144 (subject, in some instances, to volume limitations) and 701 | |||
Various dates beginning in , 2002 | Shares saleable under Rule 144 (subject, in some instances, to volume limitations) |
· | 1% of the number of shares of our common stock then outstanding (which will equal approximately shares immediately after this offering); or |
· | the average weekly trading volume of our common stock as reported through Nasdaq’s automated quotation system during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale. |
Underwriter | Number of Shares | |
Morgan Stanley & Co. Incorporated | ||
Bear, Stearns & Co. Inc. | ||
First Union Securities, Inc. | ||
Thomas Weisel Partners LLC. | ||
Total |
· | offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of |
directly or indirectly, any shares of common stock or any securities convertible into or exercisable or exchangeable for common stock; or |
· | enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the common stock; |
· | the sale of shares to the underwriters; |
· | the issuance by MedSource of shares of common stock upon the exercise of an option or a warrant or the conversion of a security outstanding on the date of this prospectus of which the underwriters have been advised in writing; or |
· | transactions by any person other than MedSource relating to shares of common stock or other securities acquired in open market transactions after the completion of the offering of the shares. |
Consolidated Financial Statements of MedSource | ||
Report of Independent Auditors | F-3 | |
Consolidated Balance Sheets as of July 1, 2000 and June 30, 2001 and Unaudited Balance | ||
Sheet as of December 30, 2001 | F-4 | |
Consolidated Statements of Operations for the Period from March 30, 1999 (Inception) through | ||
July 3, 1999, the Year Ended July 1, 2000 and the Year Ended June 30, 2001 and Unaudited | ||
Consolidated Statements of Operations for the Six-Month Periods Ended December 30, | ||
2000 and 2001 | F-5 | |
Consolidated Statement of Changes in Mandatory Redeemable Convertible Stock and | ||
Stockholders’ Equity (Deficit) for the Period from March 30, 1999 (Inception) through July 3, | ||
1999, the Year Ended July 1, 2000 and the Year Ended June 30, 2001 and Unaudited | ||
Statement of Changes in Mandatory Redeemable Convertible Stock and | ||
Stockholders’ Equity (Deficit) for the Six-Month Period Ended December 30, 2001 | F-6 | |
Consolidated Statements of Cash Flows for the Period from March 30, 1999 (Inception) through | ||
July 3, 1999, the Year Ended July 1, 2000 and the Year Ended June 30, 2001 and Unaudited | ||
Statements of Cash Flows for the Six-Month Periods Ended December 30, 2000 and 2001 | F-8 | |
Notes to Consolidated Financial Statements | F-9 | |
ACT Medical, Inc. Financial Statements | ||
Report of Independent Certified Public Accountants | F-29 | |
Balance Sheet as of December 29, 2000 | F-30 | |
Statement of Operations for the Period from January 1, 2000 to December 29, 2000 | F-31 | |
Statement of Stockholders’ Equity for the Period from January 1, 2000 to December 29, 2000 | F-32 | |
Statement of Cash Flows for the Period from January 1, 2000 to December 29, 2000 | F-33 | |
Notes to Financial Statements | F-34 | |
Financial Statements of Predecessor Companies: | ||
Kelco Industries, Inc. Financial Statements | ||
Report of Independent Accountants | F-41 | |
Balance Sheet as of March 30, 1999 | F-42 | |
Statement of Income for the Period from May 1, 1998 through March 30, 1999 | F-43 | |
Statement of Changes in Stockholders’ Equity for the Period from May 1, 1998 through | ||
March 30, 1999 | F-44 | |
Statement of Cash Flows for the Period from May 1, 1998 through March 30, 1999 | F-45 | |
Notes to Financial Statements | F-46 | |
W.N. Rushwood, Inc. (d/b/a Hayden Precision Industries) Financial Statements | ||
Report of Independent Auditors | F-49 | |
Balance Sheets as of December 31, 1998 and March 30, 1999 | F-50 | |
Statements of Income and Retained Earnings for the Year Ended December 31, 1998 and | ||
the Three-Month Period Ended March 30, 1999 | F-51 | |
Statement of Cash Flows for the Year Ended December 31, 1998 and the Three-Month | ||
Period Ended March 30, 1999 | F-52 | |
Notes to Financial Statements | F-53 |
National Wire and Stamping, Inc. Financial Statements | ||
Report of Independent Auditors | F-56 | |
Balance Sheets as of December 31, 1998 and March 30, 1999 | F-57 | |
Statements of Operations for the Year Ended December 31, 1998 and | ||
the Three-Month Period Ended March 30, 1999 | F-58 | |
Statement of Changes in Stockholders’ Equity for the Year Ended December 31, 1998 and the Three-Month Period Ended March 30, 1999 | F-59 | |
Statements of Cash Flows for the Year Ended December 31, 1998 and | ||
the Three-Month Period Ended March 30, 1999 | F-60 | |
Notes to Financial Statements | F-61 | |
The MicroSpring Company, Inc. Financial Statements | ||
Report of Independent Auditors | F-66 | |
Report of Independent Accountants | F-67 | |
Balance Sheets as of December 31, 1998 and March 30, 1999 | F-68 | |
Statements of Operations for the Year Ended December 31, 1998 and | ||
the Three-Month Period Ended March 30, 1999 | F-69 | |
Statement of Changes in Stockholders’ Equity for the Year Ended December 31, 1998 and the Three-Month Period Ended March 30, 1999 | F-70 | |
Statements of Cash Flows for the Year Ended December 31, 1998 and | ||
the Three-Month Period Ended March 30, 1999 | F-71 | |
Notes to Financial Statements | F-72 | |
Portlyn Corporation Financial Statements | ||
Report of Independent Auditors | F-77 | |
Balance Sheets as of December 31, 1998 and March 30, 1999 | F-78 | |
Statements of Operations for the Year Ended December 31, 1998 and | ||
the Three-Month Period Ended March 30, 1999 | F-79 | |
Statements of Changes in Stockholders’ Equity for the Year Ended December 31, 1998 and the Three-Month Period Ended March 30, 1999 | F-80 | |
Statements of Cash Flows for the Year Ended December 31, 1998 and | ||
the Three-Month Period Ended March 30, 1999 | F-81 | |
Notes to Financial Statements | F-82 | |
Texcel, Inc. Financial Statements | ||
Report of Independent Auditors | F-85 | |
Balance Sheets as of December 31, 1998 and March 30, 1999 | F-86 | |
Statements of Operations for the Year Ended December 31, 1998 and the Three-Month Period Ended March 30, 1999 | F-87 | |
Statements of Changes in Stockholders’ Equity for the Year Ended December 31, 1998 and the Three-Month Period Ended March 30, 1999 | F-88 | |
Statements of Cash Flows for the Year Ended December 31, 1998 and for the Three-Month Period Ended March 30, 1999 | F-89 | |
Notes to Financial Statements | F-90 |
July 1, 2000 | June 30, 2001 | December 30, 2001 | ||||||||||
(Unaudited) | ||||||||||||
Assets | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $ | 2,210 | $ | 20,289 | $ | 13,317 | ||||||
Accounts and notes receivable (net of allowances of $427 at 2000, $596 at 2001 and $804 at December 30, 2001) | 14,227 | 21,504 | 21,313 | |||||||||
Inventories | 10,953 | 13,350 | 16,548 | |||||||||
Prepaid expenses and other current assets | 892 | 3,099 | 3,515 | |||||||||
Deferred income taxes | 621 | 1,335 | 1,335 | |||||||||
Total current assets | 28,903 | 59,577 | 56,028 | |||||||||
Property, plant, and equipment, net | 34,956 | 38,873 | 40,219 | |||||||||
Goodwill, net | 42,961 | 62,210 | 96,813 | |||||||||
Other identifiable intangible assets, net | 35,508 | 39,035 | 4,263 | |||||||||
Deferred financing costs | 4,028 | 3,386 | 3,022 | |||||||||
Interest escrow fund | 4,349 | 1,849 | 599 | |||||||||
Other assets | 1,017 | 370 | 390 | |||||||||
Total assets | $ | 151,722 | $ | 205,300 | $ | 201,334 | ||||||
Liabilities, mandatory redeemable convertible stock, and stockholders’ equity (deficit) | ||||||||||||
Current liabilities: | ||||||||||||
Accounts payable | $ | 3,665 | $ | 8,691 | $ | 7,019 | ||||||
Accrued compensation and benefits | 5,767 | 6,341 | 5,166 | |||||||||
Other accrued expenses | 5,199 | 5,784 | 3,999 | |||||||||
Reserve for restructuring | — | 5,928 | 5,809 | |||||||||
Current portion of long-term debt | 9,545 | 7,215 | 8,119 | |||||||||
Total current liabilities | 24,176 | 33,959 | 30,112 | |||||||||
Long-term debt, less unamortized discount and current portion | 89,108 | 82,329 | 78,237 | |||||||||
Deferred income taxes | 621 | 1,335 | 1,335 | |||||||||
Other long-term liabilities | 452 | 2,071 | 2,889 | |||||||||
Mandatory redeemable convertible stock: | ||||||||||||
6% Series B preferred stock, par value $0.01 per share: Authorized shares—400,000 Issued and outstanding shares—332,728 at 2000, 2001 and December 30, 2001 | 22,293 | 26,289 | 27,252 | |||||||||
6% Series C preferred stock, par value $0.01 per share: Authorized shares—52,029 Issued and outstanding shares— -0- at 2000 and 40,300 at 2001 and December 30, 2001 | — | 39,190 | 40,949 | |||||||||
6% Series D preferred stock, par value $0.01 per share: Authorized shares—43,000 Issued and outstanding shares— -0- shares at 2000, 35,165 at 2001 and 35,391 at December 30, 2001 | — | 33,388 | 34,884 | |||||||||
Stockholders’ equity (deficit): | ||||||||||||
Preferred stock, par value $.01 per share: Authorized shares—1,000,000 | — | — | — | |||||||||
Series A convertible preferred stock, par value $0.01 per share: Authorized shares—100,000 Issued and outstanding shares—38,370 at 2000, 2001 and December 30, 2001 | — | — | — | |||||||||
Series E preferred stock, par value $0.01 per share: Authorized shares—6,000 Issued and outstanding shares— -0- shares at 2000, 2001 and 5,500 at December 30, 2001 | — | — | — | |||||||||
Series Z convertible preferred stock, par value $0.01 per share: Authorized shares—65,000 Issued and outstanding shares—65,000 at 2000, 2001 and December 30, 2001 | 1 | 1 | 1 | |||||||||
Common stock, par value $0.01 per share: Authorized shares—40,000,000 Issued and outstanding shares—5,235,450 at 2000, 5,255,758 at 2001 and 5,256,158 at December 30, 2001 | 52 | 52 | 53 | |||||||||
Additional paid-in capital | 33,591 | 33,875 | 39,380 | |||||||||
Accumulated other comprehensive loss | — | (1,560 | ) | (2,407 | ) | |||||||
Accumulated deficit | (18,572 | ) | (45,415 | ) | (51,208 | ) | ||||||
Unearned compensation | — | (214 | ) | (143 | ) | |||||||
Total stockholders’ equity (deficit) | 15,072 | (13,261 | ) | (14,324 | ) | |||||||
Total liabilities, mandatory redeemable convertible stock, and stockholders’ equity (deficit) | $ | 151,722 | $ | 205,300 | $ | 201,334 | ||||||
Period From March 30, 1999 (Inception) Through July 3, 1999 | Year Ended | Six Months Ended December 30, | ||||||||||||||||||
July 1, 2000 | June 30, 2001 | 2000 | 2001 | |||||||||||||||||
(Unaudited) | ||||||||||||||||||||
Revenues | $ | 21,968 | $ | 89,352 | $ | 128,462 | $ | 55,491 | $ | 72,155 | ||||||||||
Cost and expenses: | ||||||||||||||||||||
Cost of products sold | 13,437 | 59,811 | 94,386 | 41,514 | 54,616 | |||||||||||||||
Selling, general, and administrative expense | 4,458 | 21,167 | 26,199 | 11,771 | 14,080 | |||||||||||||||
Amortization of goodwill and other intangibles | 4,135 | 4,255 | 5,640 | 2,432 | 169 | |||||||||||||||
Organization and start-up costs | 4,981 | — | — | — | — | |||||||||||||||
Restructuring charge | — | — | 11,464 | — | — | |||||||||||||||
27,011 | 85,233 | 137,689 | 55,717 | 68,865 | ||||||||||||||||
Operating (loss) income | (5,043 | ) | 4,119 | (9,227 | ) | (226 | ) | 3,290 | ||||||||||||
Interest expense, net | (2,658 | ) | (10,682 | ) | (10,213 | ) | (5,417 | ) | (4,886 | ) | ||||||||||
Other income (expense) | (289 | ) | (7 | ) | 53 | (361 | ) | (27 | ) | |||||||||||
Loss before income taxes | (7,990 | ) | (6,570 | ) | (19,387 | ) | (6,004 | ) | (1,623 | ) | ||||||||||
Income tax benefit (expense) | 2,975 | 535 | (70 | ) | — | — | ||||||||||||||
Net loss | (5,015 | ) | (6,035 | ) | (19,457 | ) | (6,004 | ) | (1,623 | ) | ||||||||||
Preferred stock dividends and accretion of discount on preferred stock | (2,078 | ) | (8,345 | ) | (9,688 | ) | (4,654 | ) | (5,322 | ) | ||||||||||
Net loss attributed to common stockholders | $ | (7,093 | ) | $ | (14,380 | ) | $ | (29,145 | ) | $ | (10,658 | ) | $ | (6,945 | ) | |||||
Net loss per share attributed to common stockholders—basic and diluted | $ | (1.60 | ) | $ | (3.10 | ) | $ | (5.55 | ) | $ | (2.03 | ) | $ | (1.32 | ) | |||||
Weighted average common shares outstanding—basic and diluted | 4,448,000 | 4,633,571 | 5,252,749 | 5,251,833 | 5,256,058 | |||||||||||||||
Mandatory Redeemable Convertible Stock | |||||||||
Series B Preferred Stock | Series C Preferred Stock | Series D Preferred Stock | |||||||
Sale of Series B preferred stock, net of costs of $2,128 and discount of $7,500 | $ | 14,771 | $ | — | $ | — | |||
Sale of Series Z preferred stock, net of costs of $312 | — | — | — | ||||||
Stock issued for acquired businesses | — | — | — | ||||||
Sale and issuance of Series A preferred stock | — | — | — | ||||||
Sale of common stock | — | — | — | ||||||
Accretion of discounts on mandatory redeemable convertible preferred stock | 1,130 | — | — | ||||||
Accrued dividends on mandatory redeemable convertible preferred stock | 349 | — | — | ||||||
Net loss and comprehensive net loss for the period from March 30, 1999 (inception) through July 3, 1999 | — | — | — | ||||||
Balance at July 3, 1999 | 16,250 | — | — | ||||||
Stock issued for acquired businesses | — | — | — | ||||||
Accretion of discounts on mandatory redeemable convertible preferred stock | 4,522 | — | — | ||||||
Accrued dividends on mandatory redeemable convertible preferred stock | 1,521 | — | — | ||||||
Net loss and comprehensive net loss for the year | — | — | — | ||||||
Balance at July 1, 2000 | 22,293 | — | — | ||||||
Cumulative effect change due to implementation of SFAS No. 133 | — | — | — | ||||||
Change in fair value of interest rate swaps | — | — | — | ||||||
Net loss for the year | — | — | — | ||||||
Comprehensive loss for the year | |||||||||
Sale and issuance of Series C preferred stock, net of costs of $3,061 | — | 37,239 | — | ||||||
Issuance of Series D preferred stock and options for acquired business | — | — | 31,575 | ||||||
Issuance of stock pursuant to option exercises | — | — | 374 | ||||||
Accretion of discounts on mandatory redeemable convertible preferred stock | 2,379 | 275 | 391 | ||||||
Accrued dividends on mandatory redeemable convertible preferred stock | 1,617 | 1,676 | 1,048 | ||||||
Amortization of unearned compensation | — | — | — | ||||||
Balance at July 1, 2001 | 26,289 | 39,190 | 33,388 | ||||||
Change in fair value of interest rate swaps | — | — | — | ||||||
Net loss for the period | — | — | — | ||||||
Comprehensive loss for the period | — | — | — | ||||||
Issuance of stock pursuant to option exercises | — | — | 48 | ||||||
Sale of Series E preferred stock and common stock purchase warrants | — | — | — | ||||||
Accretion of discounts on mandatory redeemable convertible preferred stock | 118 | 206 | 399 | ||||||
Accrued dividends on mandatory redeemable convertible preferred stock | 845 | 1,553 | 1,049 | ||||||
Amortization of unearned compensation | — | — | — | ||||||
Balance at December 30, 2001 (Unaudited) | $ | 27,252 | $ | 40,949 | $ | 34,884 | |||
Stockholders’ Equity (Deficit) | |||||||||||||||||||||||||||||||
Series A Convertible Preferred Stock | Series Z Convertible Preferred Stock | Series E Preferred Stock | Common Shares | Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Loss | Accumulated Deficit | Unearned Compensation | Total Stockholders’ Equity (Deficit) | ||||||||||||||||||||||
$ | — | $ | — | $ | — | — | $ | — | $ | 7,500 | $ | — | $ | — | $ | — | $ | 7,500 | |||||||||||||
— | 1 | — | — | — | 3,262 | — | — | — | 3,263 | ||||||||||||||||||||||
— | — | — | 425 | — | 14,667 | — | — | — | 14,667 | ||||||||||||||||||||||
— | — | — | — | — | 312 | — | — | — | 312 | ||||||||||||||||||||||
— | — | — | 4,023 | 44 | 1,956 | — | — | — | 2,000 | ||||||||||||||||||||||
— | — | — | — | — | — | — | (1,130 | ) | — | (1,130 | ) | ||||||||||||||||||||
— | — | — | — | — | — | — | (349 | ) | — | (349 | ) | ||||||||||||||||||||
— | — | — | — | — | — | — | (5,015 | ) | — | (5,015 | ) | ||||||||||||||||||||
— | 1 | — | 4,448 | 44 | 27,697 | — | (6,494 | ) | — | 21,248 | |||||||||||||||||||||
— | — | — | 787 | 8 | 5,894 | — | — | — | 5,902 | ||||||||||||||||||||||
— | — | — | — | — | — | — | (4,522 | ) | — | (4,522 | ) | ||||||||||||||||||||
— | — | — | — | — | — | — | (1,521 | ) | — | (1,521 | ) | ||||||||||||||||||||
— | — | — | — | — | — | — | (6,035 | ) | — | (6,035 | ) | ||||||||||||||||||||
— | 1 | — | 5,235 | 52 | 33,591 | — | (18,572 | ) | — | 15,072 | |||||||||||||||||||||
— | — | — | — | — | — | 1,097 | — | — | 1,097 | ||||||||||||||||||||||
— | — | — | — | — | — | (2,657 | ) | — | — | (2,657 | ) | ||||||||||||||||||||
— | — | — | — | — | — | — | (19,457 | ) | — | (19,457 | ) | ||||||||||||||||||||
(22,114 | ) | ||||||||||||||||||||||||||||||
— | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||
— | — | — | — | — | — | — | — | (286 | ) | (286 | ) | ||||||||||||||||||||
— | — | — | 21 | — | 284 | — | — | — | 284 | ||||||||||||||||||||||
— | — | — | — | — | — | — | (3,045 | ) | — | (3,045 | ) | ||||||||||||||||||||
— | — | — | — | — | — | — | (4,341 | ) | — | (4,341 | ) | ||||||||||||||||||||
— | — | — | — | — | — | — | — | 72 | 72 | ||||||||||||||||||||||
— | 1 | — | 5,256 | 52 | 33,875 | (1,560 | ) | (45,415 | ) | (214 | ) | (13,261 | ) | ||||||||||||||||||
— | — | — | — | — | — | (847 | ) | — | — | (847 | ) | ||||||||||||||||||||
— | — | — | — | — | — | — | (1,623 | ) | — | (1,623 | ) | ||||||||||||||||||||
— | — | — | — | — | — | — | — | — | (2,470 | ) | |||||||||||||||||||||
— | — | — | — | 1 | 5 | — | — | — | 6 | ||||||||||||||||||||||
— | — | — | — | — | 5,500 | — | — | — | 5,500 | ||||||||||||||||||||||
— | — | — | — | — | — | — | (723 | ) | — | (723 | ) | ||||||||||||||||||||
— | — | — | — | — | — | — | (3,447 | ) | — | (3,447 | ) | ||||||||||||||||||||
— | — | — | — | — | — | — | — | 71 | 71 | ||||||||||||||||||||||
$ | — | $ | 1 | $ | — | 5,256 | $ | 53 | $ | 39,380 | $ | (2,407 | ) | $ | (51,208 | ) | $ | (143 | ) | $ | (14,324 | ) | |||||||||
Period From March 30, 1999 (Inception) Through July 3, 1999 | Year Ended | Six Months Ended December 30, | ||||||||||||||||||
July 1, 2000 | June 30, 2001 | 2000 | 2001 | |||||||||||||||||
(Unaudited) | ||||||||||||||||||||
Operating activities | ||||||||||||||||||||
Net loss | $ | (5,015 | ) | $ | (6,035 | ) | $ | (19,457 | ) | $ | (6,004 | ) | $ | (1,623 | ) | |||||
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | ||||||||||||||||||||
Depreciation | 868 | 4,500 | 6,555 | 3,177 | 3,769 | |||||||||||||||
Amortization of goodwill and other intangibles | 4,135 | 4,255 | 5,640 | 2,432 | 169 | |||||||||||||||
Amortization of deferred financing costs and discount on long-term debt | 365 | 1,295 | 1,122 | 482 | 563 | |||||||||||||||
Amortization of unearned compensation | — | — | 72 | — | 71 | |||||||||||||||
Restructuring charges | — | — | 11,464 | — | — | |||||||||||||||
Deferred taxes | (2,975 | ) | (685 | ) | — | — | — | |||||||||||||
Gain on sale of equipment | — | — | (29 | ) | (18 | ) | — | |||||||||||||
Changes in operating assets and liabilities, net of effect of businesses acquired: | ||||||||||||||||||||
Accounts and notes receivable | (776 | ) | (3,168 | ) | (4,296 | ) | 1,927 | 191 | ||||||||||||
Inventories | 2,186 | (1,915 | ) | (1,775 | ) | 153 | (3,198 | ) | ||||||||||||
Prepaid expenses and other current assets | (305 | ) | 65 | (836 | ) | (291 | ) | (416 | ) | |||||||||||
Interest escrow fund | 651 | 2,500 | 2,500 | 1,250 | 1,250 | |||||||||||||||
Accounts payable, accrued compensatoin and benefits, accrued expenses, and other | 490 | 5,493 | 476 | 2,244 | (4,751 | ) | ||||||||||||||
Other | 132 | (15 | ) | (183 | ) | (10 | ) | (49 | ) | |||||||||||
Net cash (used in) provided by operating activities | (244 | ) | 6,290 | 1,253 | 5,342 | (4,024 | ) | |||||||||||||
Investing activities | ||||||||||||||||||||
Acquisition of businesses, net of cash acquired | (91,560 | ) | (15,458 | ) | (378 | ) | (975 | ) | — | |||||||||||
Other additions to plant and equipment, net | (2,184 | ) | (6,786 | ) | (11,491 | ) | (5,134 | ) | (5,115 | ) | ||||||||||
Proceeds from sale of equipment | — | — | 242 | 146 | — | |||||||||||||||
Net cash used in investing activities | (93,744 | ) | (22,244 | ) | (11,627 | ) | (5,963 | ) | (5,115 | ) | ||||||||||
Financing activities | ||||||||||||||||||||
Proceeds from issuance of long-term debt, net of financing costs, and interest escrow fund | 68,646 | 19,506 | 105 | — | — | |||||||||||||||
Payments of long-term debt | (696 | ) | (3,150 | ) | (5,549 | ) | (5,452 | ) | (3,387 | ) | ||||||||||
Proceeds from sale of Series C and D preferred stock, net of costs | — | — | 37,897 | 37,138 | 48 | |||||||||||||||
Proceeds from sale of Series A, B, E, and Z preferred stock, common stock and common stock purchase warrants, net of costs | 27,846 | — | — | — | 5,506 | |||||||||||||||
Net payments on lines of credit | — | — | (4,000 | ) | (4,000 | ) | — | |||||||||||||
Net cash provided by financing activities | 95,796 | 16,356 | 28,453 | 27,686 | 2,167 | |||||||||||||||
Increase (decrease) in cash and cash equivalents | 1,808 | 402 | 18,079 | 27,065 | (6,972 | ) | ||||||||||||||
Cash and cash equivalents at beginning of period | — | 1,808 | 2,210 | 2,210 | 20,289 | |||||||||||||||
Cash and cash equivalents at end of period | $ | 1,808 | $ | 2,210 | $ | 20,289 | $ | 29,275 | $ | 13,317 | ||||||||||
Supplemental disclosure of cash flow information | ||||||||||||||||||||
Cash paid for interest | $ | 2,089 | $ | 9,616 | $ | 9,319 | $ | 5,428 | $ | 4,759 | ||||||||||
Cash paid for income taxes | $ | — | $ | 179 | $ | 150 | $ | 106 | $ | — | ||||||||||
Preferred and common stock issued for acquisitions | $ | 14,667 | $ | 5,902 | $ | 31,289 | $ | 31,289 | $ | — | ||||||||||
Period From March 30, 1999 (Inception) Through July 3, 1999 | Year Ended | |||||||||||
July 1, 2000 | June 30, 2001 | Six Months Ended December 30, 2001 | ||||||||||
(unaudited) | ||||||||||||
Customer A | — | 14 | % | 18 | % | 24 | % | |||||
Customer B | 28 | % | 16 | 12 | 12 |
Purchase Price | Location of Operations | ||||||||||
Company | Cash | Shares of Series A Preferred (p) or Common (c) Stock | Fair Value of Shares | ||||||||
(In Thousands) | (In Thousands) | ||||||||||
Kelco Industries, Inc. | $ | 49,595 | 12,000 | (p) | $ | 4,020 | Minnesota | ||||
W.N. Rushwood, Inc., d/b/a Hayden Precision Industries | 11,644 | 7,270 | (p) | 2,435 | New York | ||||||
National Wire and Stamping, Inc. | 5,600 | 9,170 | (p) | 3,072 | Colorado | ||||||
The Microspring Company, Inc. | 5,050 | 425,000 | (c) | 2,125 | Massachusetts | ||||||
Portlyn Corporation | 5,354 | 3,000 | (p) | 1,005 | New Hampshire | ||||||
Texcel, Inc. | 5,286 | 6,000 | (p) | 2,010 | Massachusetts | ||||||
Brimfield Precision, Inc. | 6,157 | — | — | Massachusetts | |||||||
$ | 88,686 | $ | 14,667 | ||||||||
Fair value of tangible assets acquired, net of liabilities assumed and deferred taxes | $ | 31,289 | |
Identified intangible assets, net of deferred taxes | 37,120 | ||
Goodwill | 38,896 | ||
$ | 107,305 | ||
Company | Cash | Shares of Common Stock | Fair Value of Shares | Location of Operations | ||||||
(In Thousands) | (In Thousands) | |||||||||
Tenax | $ | 7,700 | 50,000 | $ | 375 | Connecticut | ||||
Apex Engineering, Inc. | 1,954 | 236,950 | 1,777 | Massachusetts | ||||||
Thermat Precision Technology, Inc. | 4,045 | 500,000 | 3,750 | Pennsylvania | ||||||
$ | 13,699 | 5,902 | ||||||||
Fair value of tangible assets acquired, net of liabilities assumed and deferred taxes | $ | 13,724 | |
Identified intangible assets, net of deferred taxes | 1,222 | ||
Goodwill | 6,484 | ||
$ | 21,430 | ||
Fair value of tangible assets acquired, net of liabilities assumed, and deferred taxes | $ | 2,014 | |
Identifiable intangible assets, net of deferred taxes | 3,648 | ||
Goodwill | 28,075 | ||
$ | 33,737 | ||
Year Ended | ||||||||
July 1, 2000 | June 30, 2001 | |||||||
Net revenues | $ | 116,298 | $ | 141,248 | ||||
Loss before taxes | (5,395 | ) | (20,750 | ) | ||||
Net loss | (5,408 | ) | (20,820 | ) | ||||
Net loss attributed to common stockholders | (16,385 | ) | (31,825 | ) | ||||
Net loss per share attributed to common stockholders | $ | (3.54 | ) | $ | (6.06 | ) | ||
July 1, 2000 | June 30, 2001 | December 30, 2001 | |||||||
(Unaudited) | |||||||||
Raw materials | $ | 4,207 | $ | 6,287 | $ | 8,135 | |||
Work in progress | 3,936 | 5,051 | 5,850 | ||||||
Finished goods | 2,810 | 2,012 | 2,563 | ||||||
Total | $ | 10,953 | $ | 13,350 | $ | 16,548 | |||
Estimated Useful Lives (Years) | July 1, 2000 | June 30, 2001 | December 30, 2001 | |||||||||||
(Unaudited) | ||||||||||||||
Land | $ | 198 | $ | 198 | $ | 198 | ||||||||
Buildings and improvements | 1 to 20 | 1,987 | 1,987 | 1,987 | ||||||||||
Leasehold improvements | 2 to 20 | 2,654 | 3,173 | 3,344 | ||||||||||
Machinery and equipment | 3 to 15 | 30,870 | 35,530 | 38,151 | ||||||||||
Furniture and fixtures | 1 to 7 | 3,211 | 4,613 | 4,852 | ||||||||||
Automobiles | 2 to 3 | 107 | 86 | 101 | ||||||||||
Construction in progress | 1,276 | 5,176 | 7,247 | |||||||||||
Total | 40,303 | 50,763 | 55,880 | |||||||||||
Less accumulated depreciation and amortization | (5,347 | ) | (11,890 | ) | (15,661 | ) | ||||||||
Net property, plant, and equipment | $ | 34,956 | $ | 38,873 | $ | 40,219 | ||||||||
July 1, 2000 | June 30, 2001 | December 30, 2001 | ||||||||||
(Unaudited) | ||||||||||||
Goodwill | $ | 45,462 | $ | 67,268 | $ | 109,860 | ||||||
Less accumulated amortization | (2,501 | ) | (5,058 | ) | (13,047 | ) | ||||||
$ | 42,961 | $ | 62,210 | $ | 96,813 | |||||||
Other identifiable intangibles: | ||||||||||||
Customer base | $ | 37,553 | $ | 39,155 | $ | — | ||||||
Acquired workforce | 2,747 | 3,437 | — | |||||||||
Patents and intellectual properties | 622 | 4,383 | 4,383 | |||||||||
Covenants not to compete | 476 | 476 | 476 | |||||||||
41,398 | 47,451 | 4,859 | ||||||||||
Less accumulated amortization | (5,890 | ) | (8,416 | ) | (596 | ) | ||||||
$ | 35,508 | $ | 39,035 | $ | 4,263 | |||||||
Period From March 30, 1999 (Inception) Through July 3, 1999 | Fiscal Year Ended | Six Months Ended December 30, | ||||||||||||||||||
July 1, 2000 | June 30, 2001 | 2000 | 2001 | |||||||||||||||||
(Unaudited) | ||||||||||||||||||||
Net loss attributed to common stockholders, as reported | $ | (7,093 | ) | $ | (14,380 | ) | $ | (29,145 | ) | $ | (10,658 | ) | $ | (6,945 | ) | |||||
Add back goodwill, workforce, and customer base amortization (net of tax) | 4,125 | 4,211 | 5,268 | 2,118 | — | |||||||||||||||
Adjusted net loss attributed to common stockholders | $ | (2,968 | ) | $ | (10,169 | ) | $ | (23,877 | ) | $ | (8,540 | ) | $ | (6,945 | ) | |||||
Basic and diluted net loss per share: | ||||||||||||||||||||
Net loss attributed to common stockholders, as reported | $ | (1.60 | ) | $ | (3.10 | ) | $ | (5.55 | ) | $ | (2.03 | ) | $ | (1.32 | ) | |||||
Goodwill, workforce, and customer base amortization (net of tax) | .93 | .91 | 1.00 | .40 | — | |||||||||||||||
Adjusted net loss attributed to common stockholders | $ | (0.67 | ) | $ | (2.19 | ) | $ | (4.55 | ) | $ | (1.63 | ) | $ | (1.32 | ) | |||||
July 1, 2000 | June 30, 2001 | December 30, 2001 | ||||||||||
(Unaudited) | ||||||||||||
A Term Loan | $ | 22,250 | $ | 19,000 | $ | 17,000 | ||||||
B Term Loan | 39,600 | 39,200 | 39,000 | |||||||||
Senior Subordinated Notes | 20,000 | 20,000 | 20,000 | |||||||||
Acquisition Loans | 15,118 | 13,413 | 12,327 | |||||||||
Revolving Loans | 4,000 | — | — | |||||||||
Other | 701 | 612 | 511 | |||||||||
101,669 | 92,225 | 88,838 | ||||||||||
Less: | ||||||||||||
Unamortized discount on Senior Subordinated Notes | (3,016 | ) | (2,681 | ) | (2,482 | ) | ||||||
Current portion | (9,545 | ) | (7,215 | ) | (8,119 | ) | ||||||
$ | 89,108 | $ | 82,329 | $ | 78,237 | |||||||
2002 | $ | 7,215 | |
2003 | 8,763 | ||
2004 | 9,961 | ||
2005 | 8,663 | ||
2006 | 423 | ||
Thereafter | 57,200 | ||
$ | 92,225 | ||
Period From March 30, 1999 (Inception) Through July 3, 1999 | Year Ended | ||||||||||
July 1, 2000 | June 30, 2001 | ||||||||||
Current: | |||||||||||
Federal | $ | — | $ | — | $ | — | |||||
State | — | (150 | ) | (70 | ) | ||||||
— | (150 | ) | (70 | ) | |||||||
Deferred: | |||||||||||
Federal | 2,603 | 599 | — | ||||||||
State | 372 | 86 | — | ||||||||
2,975 | 685 | — | |||||||||
$ | 2,975 | $ | 535 | $ | (70 | ) | |||||
July 1, 2000 | June 30, 2001 | |||||||
Deferred tax assets: | ||||||||
Organization costs | $ | 2,337 | $ | 1,798 | ||||
Nondeductible reserves and current liabilities | 621 | 1,335 | ||||||
Restructuring reserve | — | 3,704 | ||||||
Net operating loss carryforwards | 4,145 | 8,708 | ||||||
Valuation reserve | (1,853 | ) | (6,147 | ) | ||||
Total deferred tax assets | 5,250 | 9,398 | ||||||
Deferred tax liabilities: | ||||||||
Identified intangible assets | (3,275 | ) | (6,187 | ) | ||||
Property, plant, and equipment | (433 | ) | (1,530 | ) | ||||
Goodwill | (1,542 | ) | (1,662 | ) | ||||
Other | — | (19 | ) | |||||
Total deferred tax liabilities | (5,250 | ) | (9,398 | ) | ||||
Net deferred tax liabilities | $ | — | $ | — | ||||
July 1, 2000 | June 30, 2001 | |||||||
Net current deferred assets | $ | 621 | $ | 1,335 | ||||
Net noncurrent deferred liabilities | (621 | ) | (1,335 | ) | ||||
Net deferred tax assets/liabilities | $ | — | $ | — | ||||
Period From March 30, 1999 (Inception) Through July 3, 1999 | Year Ended | |||||||||||
July 1, 2000 | June 30, 2001 | |||||||||||
Income tax benefit computed at the federal statutory rate | $ | 2,796 | $ | 2,300 | $ | 6,785 | ||||||
State income taxes, net of federal benefit | 399 | 178 | 899 | |||||||||
Restructuring reserve, portion not deductible for tax purposes | — | — | (882 | ) | ||||||||
Amortization of goodwill, not deductible for tax purposes | (32 | ) | (153 | ) | (401 | ) | ||||||
Valuation reserve | — | (1,853 | ) | (6,462 | ) | |||||||
Other | (188 | ) | 63 | (9 | ) | |||||||
Income tax benefit (expense) | $ | 2,975 | $ | 535 | $ | (70 | ) | |||||
Options Outstanding | Shares Reserved | Weighted Average Initial Exercise Price | |||||||
At inception of Plan | — | 1,750,000 | |||||||
Granted | 945,720 | (945,720 | ) | $ | 12.00 | ||||
Balance at July 3, 1999 | 945,720 | 804,280 | |||||||
Granted | 840,459 | (840,459 | ) | 14.57 | |||||
Canceled | (345,109 | ) | 345,109 | 12.07 | |||||
Balance at July 1, 2000 | 1,441,070 | 308,930 | |||||||
Reserved | — | 1,680,000 | |||||||
Granted | 1,555,660 | (1,555,660 | ) | 17.13 | |||||
Exercised | (20,308 | ) | — | 13.99 | |||||
Canceled | (401,038 | ) | 401,038 | 14.40 | |||||
Balance at June 30, 2001 | 2,575,384 | 834,308 | 15.54 | ||||||
Reserved | — | 1,000,000 | |||||||
Granted | 363,211 | (363,211 | ) | 17.38 | |||||
Exercised | (400 | ) | — | 12.00 | |||||
Canceled | (188,761 | ) | 188,761 | 16.17 | |||||
Balance at December 30, 2001 (Unaudited) | 2,749,434 | 1,659,858 | $ | 15.74 | |||||
2000 | 2001 | |||||||
Pro forma net loss attributed to common stockholders | $ | (14,384 | ) | $ | (29,627 | ) | ||
Pro forma net loss per share attributed to common stockholders | $ | (3.10 | ) | $ | (5.64 | ) |
Conversion of Series A preferred | 1,918,500 | |
Conversion of Series B preferred | 3,327,280 | |
Conversion of Series C preferred (including options and warrants) | 2,617,000 | |
Conversion of Series D preferred (including options) | 2,017,142 | |
Conversion of Series Z preferred | 650,000 | |
1999 Stock Plan | 3,409,692 | |
Total | 13,939,614 | |
2002 | $ | 3,682 | |
2003 | 3,455 | ||
2004 | 2,372 | ||
2005 | 1,468 | ||
2006 | 1,321 | ||
Thereafter | 3,754 | ||
$ | 16,052 | ||
Initial Accrual | Incurred through December 30, 2001 | Balance at December 30, 2001 | |||||||
Impairment of goodwill and other intangibles | $ | 3.6 | $ | 3.6 | $ | — | |||
Impairment of property, plant and equipment | 1.9 | 1.9 | — | ||||||
Employee termination benefits | 3.8 | 0.2 | 3.6 | ||||||
Other direct costs | 2.2 | — | 2.2 | ||||||
$ | 11.5 | $ | 5.7 | $ | 5.8 | ||||
Quarters Ending | ||||||||||||||||||
March 31, 2002 | June 31, 2002 | September 29, 2002 | December 29, 2002 | March 30, 2003 | Total | |||||||||||||
(In Millions) | ||||||||||||||||||
Employee termination benefits | $ | 0.5 | $ | 0.8 | $ | 1.0 | $ | 0.6 | $ | 0.7 | $ | 3.6 | ||||||
Other direct cost | 0.2 | 0.6 | 0.5 | 0.6 | 0.3 | 2.2 | ||||||||||||
Total | $ | 0.7 | $ | 1.4 | $ | 1.5 | $ | 1.2 | $ | 1.0 | $ | 5.8 | ||||||
· | Commence transfer of processes and equipment (start mid-March 2002); and |
· | Commence product and process validations (start mid-March 2002). |
/s/ Grant Thornton LLP |
Assets | |||
Current assets: | |||
Cash and cash equivalents | $ | 1,305,841 | |
Accounts receivable, net of allowance for doubtful accounts of $294,774 | 3,009,324 | ||
Inventory | 622,497 | ||
Prepaid expenses | 200,063 | ||
Prepaid taxes | 320,500 | ||
Deferred tax asset | 345,904 | ||
Total current assets | 5,804,129 | ||
Fixed assets, at cost: | |||
Machinery and equipment | 1,776,040 | ||
Office equipment | 837,999 | ||
2,614,039 | |||
Less accumulated depreciation | 1,530,956 | ||
Net fixed assets | 1,083,083 | ||
Other assets: | |||
Goodwill, net of accumulated amortization of $192,733 | 1,541,868 | ||
Investment | 129,430 | ||
Total other assets | 1,671,298 | ||
Total assets | $ | 8,558,510 | |
Liabilities and stockholders’ equity | |||
Current liabilities: | |||
Redeemable common stock, no par value; 300,000 shares issued and outstanding | $ | 2,160,000 | |
Accounts payable | 664,833 | ||
Accrued payroll and related expenses | 1,173,410 | ||
Accrued profit sharing | 204,924 | ||
Accrued expenses | 126,027 | ||
Deferred income | 1,661,300 | ||
Other current liabilities | 25,886 | ||
Total current liabilities | 6,016,380 | ||
Long-term liabilities | 97,073 | ||
Stockholders’ equity: | |||
Common stock, no par value; 6,000,000 shares authorized; 3,404,000 shares issued | 746,178 | ||
Retained earnings | 1,702,985 | ||
2,449,163 | |||
Less cost of treasury stock, 15,625 shares | 4,106 | ||
Total stockholders’ equity | 2,445,057 | ||
Total liabilities and stockholders’ equity | $ | 8,558,510 | |
Net sales | $ | 24,944,933 | ||
Cost of goods sold | 19,272,720 | |||
Gross profit | 5,672,213 | |||
Operating expenses: | ||||
Research and development | 463,218 | |||
Selling, general, and administrative | 5,501,789 | |||
5,965,007 | ||||
Gain on sale of development stage product | 500,000 | |||
Income from operations | 207,206 | |||
Other income (expense): | ||||
Interest income | 127,051 | |||
Interest expense | (1,252,920 | ) | ||
(1,125,869 | ) | |||
Loss before income taxes | (918,663 | ) | ||
Income taxes | 91,200 | |||
Net loss | $ | (1,009,863 | ) | |
Common Stock | Retained Earnings | Treasury Stock | Total | ||||||||||||||
Shares | Amount | ||||||||||||||||
Balance at December 31, 1999 | 3,368,750 | $ | 667,578 | $ | 2,712,848 | $ | (4,106 | ) | $ | 3,376,320 | |||||||
Exercise of stock options | 35,250 | 78,600 | — | — | 78,600 | ||||||||||||
Net loss | — | — | (1,009,863 | ) | — | (1,009,863 | ) | ||||||||||
Balance at December 29, 2000 | 3,404,000 | $ | 746,178 | $ | 1,702,985 | $ | (4,106 | ) | $ | 2,445,057 | |||||||
Cash flows from operating activities | ||||
Net loss | $ | (1,009,863 | ) | |
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||
Depreciation | 359,613 | |||
Amortization | 115,640 | |||
Non-cash interest cost associated with accretion of redeemable common stock | 1,092,400 | |||
Deferred taxes | (168,904 | ) | ||
Gain on sale of development stage product | (500,000 | ) | ||
Changes in assets and liabilities, excluding effects of acquisition: | ||||
(Increase) decrease in assets: | ||||
Accounts receivable | (563,355 | ) | ||
Inventory | 487,009 | |||
Prepaid expenses | (51,723 | ) | ||
Prepaid taxes | (320,500 | ) | ||
Other | (6,471 | ) | ||
Increase (decrease) in liabilities: | ||||
Accounts payable | (358,909 | ) | ||
Accrued payroll and related expenses | 280,796 | |||
Accrued profit sharing | (67,117 | ) | ||
Accrued expenses | (271,725 | ) | ||
Accrued taxes | (11,500 | ) | ||
Deferred income | 1,033,644 | |||
Net cash provided by operating activities | 39,035 | |||
Cash flows from investing activities | ||||
Purchase of fixed assets | (646,144 | ) | ||
Proceeds from sale of development stage product | 500,000 | |||
Net cash used in investing activities | (146,144 | ) | ||
Cash flows from financing activities | ||||
Exercise of stock options | 78,600 | |||
Payments on long-term debt | (714,200 | ) | ||
Payments on demand notes due to stockholders | (1,529,000 | ) | ||
Net cash used in financing activities | (2,164,600 | ) | ||
Net decrease in cash and cash equivalents | (2,271,709 | ) | ||
Cash and cash equivalents at beginning of year | 3,577,550 | |||
Cash and cash equivalents at end of year | $ | 1,305,841 | ||
Supplemental Information | ||||
Cash paid for interest | $ | 181,693 | ||
Cash paid for income taxes | $ | 569,079 | ||
Balance at beginning of year | $ | 229,252 | ||
Provision | 300,000 | |||
Charge-offs | (234,478 | ) | ||
Balance at end of year | $ | 294,774 | ||
Raw materials | $ | 476,751 | |
Work-in-process | 103,900 | ||
Finished goods | 41,846 | ||
$ | 622,497 | ||
Current: | ||||
Federal | $ | 237,446 | ||
State | 22,658 | |||
Total current expense | 260,104 | |||
Deferred: | ||||
Federal | (133,074 | ) | ||
State | (35,830 | ) | ||
Total deferred expense (benefit) | (168,904 | ) | ||
Total income tax expense | $ | 91,200 | ||
Deferred tax assets: | |||
Inventory | $ | 76,730 | |
Allowance for doubtful accounts | 118,064 | ||
Recall adjustments | 200,500 | ||
Total deferred tax asset | 395,294 | ||
Deferred tax liabilities: | |||
Fixed assets | 49,390 | ||
Total deferred tax liability | 49,390 | ||
Net deferred tax asset | $ | 345,904 | |
Tax at federal statutory rate | $ | (312,345 | ) | |
State taxes | (9,816 | ) | ||
Interest cost associated with accretion of redeemable common stock | 371,416 | |||
Non-deductible goodwill amortization | 37,367 | |||
Non-deductible meals and entertainment | 4,578 | |||
Tax at effective rate | $ | 91,200 | ||
Year Ending | |||
2001 | $ | 925,500 | |
2002 | 938,000 | ||
2003 | 952,000 | ||
2004 | 968,000 | ||
2005 | 129,000 | ||
$ | 3,912,500 | ||
Net reduction in sales | $ | 500,000 | |
Inventory write-off | 225,000 | ||
Reduction in income (loss) from operations | $ | 725,000 | |
2000 | ||||
Net loss: | ||||
As reported | $ | (1,009,863 | ) | |
Pro forma | (1,101,131 | ) | ||
Weighted-average fair value of options granted during the year | $ | 1.52 |
Shares Under Option | Exercise Price | |||||
Outstanding at December 31, 1999 | 637,000 | $1.60-$20.00 | ||||
Granted in 2000 | 335,625 | $ | 2.40-$ 3.20 | |||
Forfeited in 2000 | (46,875 | ) | $ | 1.60-$ 2.40 | ||
Exercised in 2000 | (35,250 | ) | $ | 1.60-$ 2.40 | ||
Outstanding at December 29, 2000 | 890,500 | $1.60-$20.00 | ||||
Exercise Price | Number of Shares Exercisable at December 29, 2000 | Number of Shares Outstanding at December 29, 2000 | Weighted Average Remaining Contractual Life | |||
$1.60 | 84,000 | 231,875 | 8.1 | |||
$2.40 | 74,800 | 330,750 | 9.3 | |||
$3.20 | 3,075 | 15,375 | 9.7 | |||
$4.00 | 25,000 | 62,500 | 7.7 | |||
$8.00 | 25,000 | 62,500 | 7.7 | |||
$12.00 | 25,000 | 62,500 | 7.7 | |||
$16.00 | 25,000 | 62,500 | 7.7 | |||
$20.00 | 25,000 | 62,500 | 7.7 | |||
286,875 | 890,500 | |||||
/s/ Bertram, Vallez, Kaplan & Talbot, Ltd. |
Assets | |||
Current assets: | |||
Cash (Note 1) | $ | 3,918,464 | |
Marketable securities(Notes 1 and 3) | 2,865,000 | ||
Accounts receivable (less allowance for doubtful accounts of $61,172)(Notes 1 and 3) | 1,709,298 | ||
Sales tax refund receivable | 266,129 | ||
Inventory(Notes 1, 3, and 8) | |||
Raw materials | 1,615,690 | ||
Work-in-process | 1,313,935 | ||
Finished goods | 240,000 | ||
Prepaid expenses | 27,983 | ||
Other current assets | 12,826 | ||
Total current assets | 11,969,325 | ||
Property and equipment(Notes 1 and 3) | 13,006,783 | ||
Less accumulated depreciation | 7,880,288 | ||
5,126,495 | |||
Other assets: | |||
Tax deposit(Note 1) | 1,416,210 | ||
Split dollar life insurance receivable | 450,181 | ||
1,866,391 | |||
Total assets | $ | 18,962,211 | |
Liabilities and Stockholders’ equity | |||
Current liabilities: | |||
Accounts payable | $ | 622,020 | |
Accrued liabilities: | |||
Profit sharing contribution(Note 4) | 1,140,267 | ||
Real estate taxes | 24,018 | ||
Wages and vacation | 437,067 | ||
Bonus | 514,503 | ||
Commissions | 7,516 | ||
Other current liabilities | 1,764 | ||
Total current liabilities | 2,747,155 | ||
Stockholders’ equity: | |||
Class A—voting common stock, $.01 par value: | |||
Authorized—100,000 shares; Issued and outstanding—4,476 shares | 45 | ||
Class B—nonvoting common stock, $.01 par value: | |||
Authorized—900,000 shares; Issued and outstanding—101,994 shares | 1,020 | ||
Capital paid in excess of par value | 399,895 | ||
Retained earnings | 15,814,096 | ||
16,215,056 | |||
Total liabilities and stockholders’ equity | $ | 18,962,211 | |
Sales (Note 6) | $ | 22,877,031 | ||
Cost of sales | 12,923,250 | |||
Gross margin | 9,953,781 | |||
Selling, general, and administrative expenses | 2,899,461 | |||
Income from operations | 7,054,320 | |||
Other income (expense): | ||||
Interest income | 183,697 | |||
Interest expense | (165 | ) | ||
Rent income | 5,557 | |||
189,089 | ||||
Net income before cumulative effect of accounting change | 7,243,409 | |||
Cumulative effect of accounting change in inventories(Note 8) | 431,078 | |||
Net income | $ | 7,674,487 | ||
Class A Common Stock | Class B Common Stock | Additional Paid-In Capital | Retained Earnings | Total Stockholders’ Equity | |||||||||||||||||
Shares Issued and Outstanding | Amount | Shares Issued and Outstanding | Amount | ||||||||||||||||||
Balance at April 30, 1998 | 4,476 | $ | 45 | 101,994 | $ | 1,020 | $ | 399,895 | $ | 10,827,882 | $ | 11,228,842 | |||||||||
Distributions | — | — | — | — | — | (2,688,273 | ) | (2,688,273 | ) | ||||||||||||
Net income for the period from May 1, 1998 through March 30, 1999 | — | — | — | — | — | 7,674,487 | 7,674,487 | ||||||||||||||
Balance at March 30, 1999 | 4,476 | $ | 45 | 101,994 | $ | 1,020 | $ | 399,895 | $ | 15,814,096 | $ | 16,215,056 | |||||||||
Operating activities | ||||
Net income | $ | 7,674,487 | ||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||
Depreciation | 1,149,050 | |||
Loss on sale of property and equipment | 7,995 | |||
Changes in operating assets and liabilities that increase or (decrease) cash: | ||||
Accounts receivable | 84,677 | |||
Sales tax refund receivable | (116,511 | ) | ||
Inventory | (837,306 | ) | ||
Prepaid expenses | 77,757 | |||
Other current assets | (4,364 | ) | ||
Accounts payable | 183,777 | |||
Accrued liabilities | 307,779 | |||
Net cash provided by operating activities | 8,527,341 | |||
Investing activities | ||||
Fiscal year required payment | (73,185 | ) | ||
Purchase of marketable securities | (550,000 | ) | ||
Payments for split dollar life insurance | (87,292 | ) | ||
Proceeds from sale of equipment | 7,400 | |||
Purchase of property and equipment | (2,350,140 | ) | ||
Net cash used in investing activities | (3,053,217 | ) | ||
Financing activities | ||||
Distributions paid | (2,688,273 | ) | ||
Net cash used in financing activities | (2,688,273 | ) | ||
Net increase in cash | 2,785,851 | |||
Cash at beginning of period | 1,132,613 | |||
Cash at end of period | $ | 3,918,464 | ||
Cost | Accumulated Depreciation | Book Value | |||||||
Machinery and equipment | $ | 11,009,391 | $ | 7,336,335 | $ | 3,673,056 | |||
Vehicles | 209,690 | 68,585 | 141,105 | ||||||
Furniture and fixtures | 514,152 | 348,734 | 165,418 | ||||||
Leasehold improvements | 1,212,389 | 107,764 | 1,104,625 | ||||||
Land improvements | 61,161 | 18,870 | 42,291 | ||||||
$ | 13,006,783 | $ | 7,880,288 | $ | 5,126,495 | ||||
Years 1–3 | $ | 32,589 | |
Years 4–6 | $ | 36,200 | |
Years 7–10 | $ | 40,244 |
2000 | $ | 69,378 | |
2001 | 47,799 | ||
2002 | 12,229 | ||
$ | 129,406 | ||
/s/ James F. Yochum |
December 31, 1998 | March 30 , 1999 | |||||
Assets | ||||||
Current assets: | ||||||
Cash | $ | 86,061 | $ | 165,219 | ||
Accounts receivable | 857,372 | 776,432 | ||||
Inventory | 1,926,050 | 1,854,929 | ||||
Total current assets | 2,869,483 | 2,796,580 | ||||
Property and equipment, less accumulated depreciation | 4,522,287 | 5,071,119 | ||||
Other assets—deposits and prepayments | 285,414 | 6,978 | ||||
$ | 7,677,184 | $ | 7,874,677 | |||
Liabilities | ||||||
Current liabilities: | ||||||
Trade accounts payable | $ | 368,663 | $ | 450,657 | ||
Due on equipment purchases | 149,520 | — | ||||
Accrued payroll, bonuses, and taxes | 248,260 | 257,197 | ||||
Accrued shareholder distribution—taxes | 300,000 | — | ||||
Accrued franchise tax payable | 11,062 | — | ||||
Short-term debt—fleet line of credit | 500,000 | 1,000,000 | ||||
Current maturities of long-term debt | 629,297 | — | ||||
Total current liabilities | 2,206,802 | 1,707,854 | ||||
Long-term debt, less current maturities: | ||||||
Bank | 2,174,220 | 2,744,476 | ||||
Shareholder | 1,000,000 | 1,000,000 | ||||
Total long-term debt | 3,174,220 | 3,744,476 | ||||
Total liabilities | 5,381,022 | 5,452,330 | ||||
Stockholders’ equity: | ||||||
Capital stock, no par—shares authorized 200; issued and outstanding 100 in 1998 and 1999 | 50,000 | 50,000 | ||||
Retained earnings | 2,246,162 | 2,372,347 | ||||
Total stockholder’s equity | 2,296,162 | 2,422,347 | ||||
$ | 7,677,184 | $ | 7,874,677 | |||
Year Ended December 31, 1998 | Three-Month Period Ended March 30, 1999 | |||||||
Sales | $ | 9,777,414 | $ | 2,226,920 | ||||
Cost of sales | 6,681,514 | 1,721,383 | ||||||
Gross profit | 3,095,900 | 505,537 | ||||||
General and administrative expenses | 1,072,023 | 194,599 | ||||||
Income from operations | 2,023,877 | 310,938 | ||||||
Other income (expenses)—net, including interest expense of $106,497 | (241,018 | ) | (99,753 | ) | ||||
Net income | 1,782,859 | 211,185 | ||||||
Distribution of Sub-S earnings | (528,000 | ) | (85,000 | ) | ||||
Retained earnings—beginning | 991,303 | 2,246,162 | ||||||
Retained earnings—ending | $ | 2,246,162 | $ | 2,372,347 | ||||
Year Ended December 31, 1998 | Three-Month Period Ended March 30, 1999 | |||||||
Operating activities | ||||||||
Net income | $ | 1,782,859 | $ | 211,185 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation | 794,491 | 213,684 | ||||||
Changes in assets and liabilities: | ||||||||
Accounts receivable | (156,162 | ) | 80,940 | |||||
Inventory | (1,233,265 | ) | 71,121 | |||||
Prepaid expenses | — | (6,978 | ) | |||||
Trade accounts payable | 174,972 | 81,994 | ||||||
Accrued expenses | 115,095 | (2,125 | ) | |||||
Net cash provided by operating activities | 1,477,990 | 649,821 | ||||||
Investing activities | ||||||||
Deposits and prepayments | (285,414 | ) | — | |||||
Capital expenditures | (3,168,314 | ) | (626,622 | ) | ||||
Net cash used in investing activities | (3,453,728 | ) | (626,622 | ) | ||||
Financing activities | ||||||||
Net borrowings—short term (equip and LOC) | 509,520 | 500,000 | ||||||
Net borrowings—long term | 1,610,854 | (59,041 | ) | |||||
Distribution of Sub-S earnings | (228,000 | ) | (385,000 | ) | ||||
Net cash provided by financing activities | 1,892,374 | 55,959 | ||||||
(Decrease) increase in cash | (83,364 | ) | 79,158 | |||||
Cash—beginning of year | 169,425 | 86,061 | ||||||
Cash—end of year | $ | 86,061 | $ | 165,219 | ||||
December 31, 1998 | March 30, 1999 | |||||
Raw materials | $ | 934,050 | $ | 666,313 | ||
Work in progress | 688,568 | 604,885 | ||||
Finished goods | 303,432 | 583,731 | ||||
$ | 1,926,050 | $ | 1,854,929 | |||
December 31, 1998 | March 30, 1999 | |||||||
Machinery, equipment, and tools | $ | 7,790,993 | $ | 8,509,961 | ||||
Computer system | 478,523 | 514,160 | ||||||
Furniture and fixtures | 23,177 | 31,191 | ||||||
Leasehold improvements | 28,200 | 28,200 | ||||||
8,320,893 | 9,083,512 | |||||||
Less accumulated depreciation | (3,798,606 | ) | (4,012,393 | ) | ||||
Net property and equipment | $ | 4,522,287 | $ | 5,071,119 | ||||
December 31, 1998 | March 30, 1999 | ||||||
Fleet Bank | |||||||
Term loan payable—bank maturing $7,691.67 monthly through May 1, 2000 plus interest at 9.42% | $ | 130,767 | $ | 107,692 | |||
Term loan payable—bank maturing $11,416.67 monthly through May 1, 2001 plus interest at .75% above prime or LIBOR + 2.75% | 331,083 | 296,833 | |||||
Term loan payable—bank maturing $8,333.33 monthly through May 1, 2002 plus interest at .75% above prime or LIBOR + 2.75% | 341,667 | 316,667 | |||||
Equipment line of credit. This loan will be converted to a term loan on 4/1/99 | 2,000,000 | 2,000,000 | |||||
Shareholder Loans | |||||||
Note dated December 15, 1996 payable to Nancy Heywood. Monthly interest is payable at 7% until August 2000. Principal and interest (7%) payments of $6,233.20 begin September 15, 2000 with the note maturing in August 2010 | 536,842 | 536,842 | |||||
Note dated December 15, 1996 payable to William H. Heywood. Monthly interest is payable at 7% until August 2000. Principal and interest (7%) payments of $5,377.66 begin September 15, 2000 with the note maturing in August 2010 | 463,158 | 463,158 | |||||
Accrued interest on above | — | 23,284 | |||||
3,803,517 | 3,744,476 | ||||||
Less current maturities | (629,297 | ) | — | ||||
Total long-term debt | $ | 3,174,220 | $ | 3,744,476 | |||
/s/ Ernst & Young LLP |
December 31, 1998 | March 30, 1999 | |||||
Assets | ||||||
Current assets: | ||||||
Cash | $ | 319,662 | $ | 236,575 | ||
Marketable securities | 599,964 | — | ||||
Accounts receivable | 966,776 | 620,244 | ||||
Due from stockholder | 2,194 | 165,463 | ||||
Inventories | 555,585 | 697,699 | ||||
Prepaid expenses and other current assets | 31,748 | 25,857 | ||||
Income taxes recoverable | 115,452 | 349,722 | ||||
Current deferred tax assets | 57,057 | 60,235 | ||||
Total current assets | 2,648,438 | 2,155,795 | ||||
Property and equipment, net | 998,818 | 818,092 | ||||
Other assets: | ||||||
Cash surrender value—life insurance | 446,886 | 268,617 | ||||
Deferred tax assets | 253,193 | — | ||||
Miscellaneous | 25,375 | 7,918 | ||||
Total other assets | 725,454 | 276,535 | ||||
Total assets | $ | 4,372,710 | $ | 3,250,422 | ||
Liabilities and stockholders’ equity | ||||||
Current liabilities: | ||||||
Trade accounts payable | $ | 371,242 | $ | 330,728 | ||
Current maturities of long-term debt | 10,377 | — | ||||
Accrued compensation | 167,878 | 220,667 | ||||
Other accrued expenses | 68,549 | 35,460 | ||||
Total current liabilities | 618,046 | 586,855 | ||||
Long-term debt, less current maturities | 106,844 | — | ||||
Deferred compensation | 890,709 | — | ||||
Total liabilities | 1,615,599 | 586,855 | ||||
Stockholders’ equity: | ||||||
Common stock, $0.86 par value: | ||||||
Authorized shares—200,000; Issued and outstanding shares—64,250 | 55,480 | 55,480 | ||||
Paid-in capital | 8,770 | 8,770 | ||||
Retained earnings | 2,650,622 | 2,599,317 | ||||
Accumulated other comprehensive income | 42,239 | — | ||||
Total stockholders’ equity | 2,757,111 | 2,663,567 | ||||
Total liabilities and stockholders’ equity | $ | 4,372,710 | $ | 3,250,422 | ||
Year Ended December 31, 1998 | Three Months Ended March 30, 1999 | |||||||
Net sales | $ | 8,618,755 | $ | 1,636,420 | ||||
Cost of sales | 5,000,713 | 967,648 | ||||||
Gross profit | 3,618,042 | 668,772 | ||||||
Operating expenses: | ||||||||
Selling, general and administrative | 2,917,944 | 770,214 | ||||||
Research and development | 139,105 | 30,179 | ||||||
3,057,049 | 800,393 | |||||||
Other operating income | 105,566 | 47,258 | ||||||
Operating income (loss) | 666,559 | (84,363 | ) | |||||
Other income (expense): | ||||||||
Investment income | 37,472 | 81,713 | ||||||
Interest expense | (17,165 | ) | (3,562 | ) | ||||
Income (loss) before taxes | 686,866 | (6,212 | ) | |||||
Income taxes | 264,325 | 45,093 | ||||||
Net income (loss) | $ | 422,541 | $ | (51,305 | ) | |||
Common Stock | Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Totals | ||||||||||||||||
Shares | Amount | |||||||||||||||||||
Balance at December 27, 1997 | 64,250 | $ | 55,480 | $ | 8,770 | $ | 2,228,081 | $ | (1,974 | ) | $ | 2,290,357 | ||||||||
Unrealized gain on marketable securities available for sale, net of tax | — | — | — | — | 44,213 | 44,213 | ||||||||||||||
Net income for year | — | — | — | 422,541 | — | 422,541 | ||||||||||||||
Balance at December 31, 1998 | 64,250 | 55,480 | 8,770 | 2,650,622 | 42,239 | 2,757,111 | ||||||||||||||
Unrealized loss on marketable securities available for sale, net of tax | — | — | — | — | (42,239 | ) | (42,239 | ) | ||||||||||||
Net loss for period | — | — | — | (51,305 | ) | — | (51,305 | ) | ||||||||||||
Balance at March 30, 1999 | 64,250 | $ | 55,480 | $ | 8,770 | $ | 2,599,317 | $ | — | $ | 2,663,567 | |||||||||
Year Ended December 31, 1998 | Three Months Ended March 30, 1999 | |||||||
Operating activities | ||||||||
Net income (loss) | $ | 422,541 | $ | (51,305 | ) | |||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||
Depreciation | 260,334 | 65,493 | ||||||
Gain on sale of property and equipment | (94,807 | ) | (46,038 | ) | ||||
Deferred income taxes | (24,573 | ) | 277,021 | |||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | 153,103 | 346,532 | ||||||
Due from stockholder | — | (163,269 | ) | |||||
Inventories | 118,792 | (142,114 | ) | |||||
Prepaid expenses and other current assets | (19,698 | ) | 5,891 | |||||
Other assets | 20,989 | (7,543 | ) | |||||
Accounts payable | 173,553 | (40,514 | ) | |||||
Accrued income taxes | (193,517 | ) | (234,270 | ) | ||||
Accrued compensation | (154,229 | ) | 52,789 | |||||
Other accrued expenses | (28,754 | ) | (33,089 | ) | ||||
Deferred compensation | 108,868 | (890,709 | ) | |||||
Net cash provided by (used in) operating activities | 742,602 | (861,125 | ) | |||||
Investing activities | ||||||||
(Increase) decrease in marketable securities, net | (150,487 | ) | 530,719 | |||||
Purchases of property and equipment | (421,977 | ) | (91,160 | ) | ||||
(Increase) decrease in cash surrender value—life insurance | (85,907 | ) | 178,269 | |||||
Proceeds from sale of property and equipment | 177,150 | 277,431 | ||||||
Net cash (used in) provided by investing activities | (481,221 | ) | 895,259 | |||||
Financing activities | ||||||||
Principal payments on long-term debt | (9,505 | ) | (117,221 | ) | ||||
Net cash used in financing activities | (9,505 | ) | (117,221 | ) | ||||
Net increase (decrease) in cash | 251,876 | (83,087 | ) | |||||
Cash at beginning of period | 67,786 | 319,662 | ||||||
Cash at end of period | $ | 319,662 | $ | 236,575 | ||||
Supplemental disclosures: | ||||||||
Interest paid | $ | 28,688 | $ | 3,562 | ||||
Income taxes paid | $ | 482,415 | $ | — |
Building | 31.5 years | |
Leasehold improvements | 5 to 31.5 years | |
Machinery and equipment | 7 years | |
Motor vehicles | 5 years | |
Furniture and fixtures | 5 to 7 years |
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||
December 31, 1998 | |||||||||||||
Available for sale: | |||||||||||||
Common stocks | $ | 250,301 | $ | 74,189 | $ | — | $ | 324,490 | |||||
Mutual fund | 29,990 | — | (11,946 | ) | 18,044 | ||||||||
Colorado Municipal Bonds | 250,428 | 7,002 | — | 257,430 | |||||||||
Total | $ | 530,719 | $ | 81,191 | $ | (11,946 | ) | $ | 599,964 | ||||
December 31, 1998 | March 30, 1999 | |||||
Raw materials | $ | 127,856 | $ | 115,171 | ||
Work in process | 123,558 | 193,652 | ||||
Finished goods | 304,171 | 388,876 | ||||
$ | 555,585 | $ | 697,699 | |||
December 31, 1998 | March 30, 1999 | |||||||
Land | $ | 12,275 | $ | — | ||||
Building | 265,440 | — | ||||||
Machinery and equipment | 2,473,829 | 2,495,743 | ||||||
Office furniture | 317,386 | 318,955 | ||||||
Autos | 64,685 | 47,628 | ||||||
Leasehold improvements | 206,090 | 258,938 | ||||||
3,339,705 | 3,121,264 | |||||||
Accumulated depreciation | (2,340,887 | ) | (2,303,172 | ) | ||||
$ | 998,818 | $ | 818,092 | |||||
December 31, 1998 | March 30, 1999 | ||||||
Note payable to bank collateralized by a vehicle. Monthly payments of $778, including interest at 8% | $ | 21,101 | $ | — | |||
11.5% mortgage note payable in monthly installments of $1,113.75 including principal and interest, collateralized by land and building | 96,120 | — | |||||
117,221 | — | ||||||
Less current maturities | (10,377 | ) | — | ||||
$ | 106,844 | $ | — | ||||
Operating Leases | |||
1999-2013 | $ | 180,000 per year |
Year Ended December 31, 1998 | Three Months Ended March 30, 1999 | |||||||
Current: | ||||||||
Federal income tax (benefit) | $ | 263,918 | $ | (228,945 | ) | |||
State income tax (benefit) | 24,980 | (2,983 | ) | |||||
288,898 | (231,928 | ) | ||||||
Deferred expense (benefit) | (24,573 | ) | 277,021 | |||||
$ | 264,325 | $ | 45,093 | |||||
December 31, 1998 | March 30, 1999 | |||||||
Future taxable income (deductions): | ||||||||
Increase in marketable securities | $ | 27,006 | $ | — | ||||
Depreciation | 3,274 | 3,414 | ||||||
Accrued vacation pay | (57,057 | ) | (56,691 | ) | ||||
Deferred compensation payable | (278,927 | ) | — | |||||
Capital losses on sale of investments | (4,546 | ) | — | |||||
Other | — | (6,958 | ) | |||||
Net deferred tax asset | $ | (310,250 | ) | $ | (60,235 | ) | ||
/s/ Ernst & Young LLP |
/s/ PricewaterhouseCoopers LLP |
December 31, 1998 | March 30, 1999 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 137,533 | $ | 298,680 | ||||
Accounts receivable, trade (net of allowance for bad debts of $20,400 in 1998 and 1999) | 494,082 | 404,116 | ||||||
Inventories | 898,038 | 1,024,339 | ||||||
Receivable from stockholders | 126,785 | 201,850 | ||||||
Current portion of notes receivable from stockholders | 2,814 | — | ||||||
Prepaid expenses and other current assets | 51,735 | 55,870 | ||||||
Total current assets | 1,710,987 | 1,984,855 | ||||||
Property and equipment, net | 1,985,022 | 1,909,935 | ||||||
Notes receivable from stockholders, long-term | 288,331 | — | ||||||
Total assets | $ | 3,984,340 | $ | 3,894,790 | ||||
Liabilities and stockholders’ equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 180,686 | $ | 305,758 | ||||
Accrued compensation | 148,159 | 211,928 | ||||||
Accrued liabilities | 141,669 | 77,449 | ||||||
Accrued state taxes payable | 99,893 | 63,000 | ||||||
Deferred revenue | 112,500 | 160,606 | ||||||
Total current liabilities | 682,907 | 818,741 | ||||||
Deferred revenue | 61,651 | — | ||||||
Convertible notes payable to stockholders | 250,000 | — | ||||||
Stockholders’ equity: | ||||||||
Common stock, par value $.01 per share, 9,000,000 shares authorized, 6,677,661 issued and 6,656,221 outstanding at December 31, 1998, 8,341,342 issued and 8,319,902 outstanding at March 30, 1999 | 66,777 | 83,413 | ||||||
Paid-in capital | 904,048 | 1,750,734 | ||||||
Retained earnings | 2,164,309 | 1,242,116 | ||||||
Treasury stock, at par, 21,440 shares | (214 | ) | (214 | ) | ||||
Unearned compensation | (145,138 | ) | — | |||||
Total stockholders’ equity | 2,989,782 | 3,076,049 | ||||||
Total liabilities and stockholders’ equity | $ | 3,984,340 | $ | 3,894,790 | ||||
Year Ended December 31, 1998 | Three Months Ended March 30, 1999 | |||||||
Net sales | $ | 10,176,175 | $ | 1,791,597 | ||||
Cost of sales | 7,280,290 | 1,397,990 | ||||||
Gross profit | 2,895,885 | 393,607 | ||||||
Operating expenses: | ||||||||
Sales and marketing | 422,591 | 115,180 | ||||||
Research and development | 1,841,172 | 464,121 | ||||||
General and administrative | 1,078,889 | 734,151 | ||||||
Total operating expenses | 3,342,652 | 1,313,452 | ||||||
Operating loss | (446,767 | ) | (919,845 | ) | ||||
Interest income | 22,460 | 5,490 | ||||||
Interest expense | (54,433 | ) | (4,838 | ) | ||||
Loss before state taxes | (478,740 | ) | (919,193 | ) | ||||
State taxes | 7,500 | 3,000 | ||||||
Net loss | $ | (486,240 | ) | $ | (922,193 | ) | ||
Common Stock | Paid-in Capital | Retained Earnings | Treasury Stock | Unearned Compensation | Total Stockholders’ Equity | ||||||||||||||||||||
Shares | Amount | ||||||||||||||||||||||||
Balance at December 31, 1997 | 6,466,650 | $ | 64,881 | $ | 761,536 | $ | 2,692,171 | $ | (214 | ) | $ | (141,355 | ) | $ | 3,377,019 | ||||||||||
Stock options exercised | 40,000 | 400 | — | — | — | — | 400 | ||||||||||||||||||
Issuance of stock | 122,445 | 1,224 | 59,998 | — | — | — | 61,222 | ||||||||||||||||||
Common stock issued in lieu of cash payment of interest on convertible notes | 27,126 | 272 | 22,679 | — | — | — | 22,951 | ||||||||||||||||||
Stock options granted | — | — | 59,835 | — | — | (59,835 | ) | — | |||||||||||||||||
Amortization of unearned compensation | — | — | — | — | — | 56,052 | 56,052 | ||||||||||||||||||
Dividend distributions | — | — | — | (41,622 | ) | — | — | (41,622 | ) | ||||||||||||||||
Net loss | — | — | — | (486,240 | ) | — | — | (486,240 | ) | ||||||||||||||||
Balance at December 31, 1998 | 6,656,221 | 66,777 | 904,048 | 2,164,309 | (214 | ) | (145,138 | ) | 2,989,782 | ||||||||||||||||
Stock options granted | — | — | 696,102 | — | — | (696,102 | ) | — | |||||||||||||||||
Stock options exercised | 1,239,229 | 12,392 | — | — | — | — | 12,392 | ||||||||||||||||||
Stock options forfeited | — | — | (99,843 | ) | — | — | 99,843 | — | |||||||||||||||||
Common stock issued upon conversion of convertible notes | 416,666 | 4,166 | 245,834 | — | — | — | 250,000 | ||||||||||||||||||
Common stock issued in lieu of cash payment of interest on convertible notes | 7,786 | 78 | 4,593 | — | — | — | 4,671 | ||||||||||||||||||
Amortization of unearned compensation | — | — | — | — | — | 741,397 | 741,397 | ||||||||||||||||||
Net loss | — | — | — | (922,193 | ) | — | — | (922,193 | ) | ||||||||||||||||
Balance at March 30, 1999 | 8,319,902 | $ | 83,413 | $ | 1,750,734 | $ | 1,242,116 | $ | (214 | ) | $ | — | $ | 3,076,049 | |||||||||||
Year Ended December 31, 1998 | Three Months Ended March 30, 1999 | |||||||
Operating activities | ||||||||
Net loss | $ | (486,240 | ) | $ | (922,193 | ) | ||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
Depreciation | 512,309 | 112,079 | ||||||
Interest expense | 20,884 | 4,671 | ||||||
Amortization of unearned compensation | 56,052 | 741,397 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable, trade | 523,102 | 89,966 | ||||||
Inventories | 175,306 | (126,301 | ) | |||||
Notes and other receivables from stockholders | 1,088,098 | 216,080 | ||||||
Prepaid expenses and other current assets | 26,159 | (4,135 | ) | |||||
Accounts payable | (884,804 | ) | 125,072 | |||||
Accrued compensation | 25,327 | 63,769 | ||||||
Accrued liabilities | 35,067 | (64,220 | ) | |||||
Accrued state taxes payable | 73,854 | (36,893 | ) | |||||
Deferred revenue | (6,849 | ) | (13,545 | ) | ||||
Net cash provided by operating activities | 1,158,265 | 185,747 | ||||||
Investing activities | ||||||||
Acquisition of property and equipment | (192,907 | ) | (36,992 | ) | ||||
Net cash used in investing activities | (192,907 | ) | (36,992 | ) | ||||
Financing activities | ||||||||
Advances under credit agreement | 5,179,882 | 200,000 | ||||||
Repayments under credit agreement | (6,172,579 | ) | (200,000 | ) | ||||
Issuance of stock | 400 | 12,392 | ||||||
Net cash (used in) provided by financing activities | (992,297 | ) | 12,392 | |||||
Net (decrease) increase in cash | (26,939 | ) | 161,147 | |||||
Cash at beginning of period | 164,472 | 137,533 | ||||||
Cash at end of period | $ | 137,533 | $ | 298,680 | ||||
Supplemental disclosures: | ||||||||
Interest paid | $ | 31,906 | $ | 167 | ||||
Taxes paid | $ | 5,843 | $ | — |
Machinery and equipment | 5 to 10 years | |
Furniture and fixtures | 5 years | |
Computer equipment | 3 years | |
Leasehold improvements | Remaining life of lease |
December 31, 1998 | March 30, 1999 | |||||
Raw materials | $ | 215,609 | $ | 162,523 | ||
Work in progress | 362,351 | 469,173 | ||||
Finished goods | 320,078 | 392,643 | ||||
$ | 898,038 | $ | 1,024,339 | |||
December 31, 1998 | March 30, 1999 | |||||||
Machinery and equipment | $ | 2,178,057 | $ | 2,194,331 | ||||
Furniture and fixtures | 214,442 | 214,442 | ||||||
Computer equipment and software | 278,414 | 290,047 | ||||||
Leasehold improvements | 617,141 | 619,982 | ||||||
Construction in progress | 97,822 | 104,066 | ||||||
3,385,876 | 3,422,868 | |||||||
Less accumulated depreciation and amortization | (1,400,854 | ) | (1,512,933 | ) | ||||
Net property and equipment | $ | 1,985,022 | $ | 1,909,935 | ||||
Year ending March 30: | |||
2000 | $ | 282,000 | |
2001 | 268,000 | ||
2002 | 90,000 | ||
Total minimum future rental payments | $ | 640,000 | |
Option Summary | Number of Shares | Option Price Per Share | ||||
Options outstanding at December 31, 1997 | 492,916 | $ | 0.01 | |||
Granted | 101,416 | 0.01 | ||||
Exercised | (40,000 | ) | 0.01 | |||
Forfeited | (6,250 | ) | 0.01 | |||
Options outstanding at December 31, 1998 | 548,082 | 0.01 | ||||
Granted | 869,211 | 0.01 | ||||
Exercised | (1,239,229 | ) | 0.01 | |||
Forfeited | (178,064 | ) | 0.01 | |||
Options outstanding at March 30, 1999 | — | $ | — | |||
Year Ended December 31, 1998 | Three Months Ended March 30, 1999 | |||||
Noncash transactions: | ||||||
Conversion of interest expense and accrued interest to common stock | $ | 22,951 | $ | 4,671 | ||
Dividend distributions | 41,622 | — | ||||
Satisfaction of short-term liability by issuing common stock | 61,222 | — | ||||
Conversion of notes payable to common stock | — | 250,000 |
/s/ Ernst & Young LLP |
December 31, 1998 | March 30, 1999 | |||||
Assets | ||||||
Current assets: | ||||||
Cash | $ | 132,168 | $ | 187,731 | ||
Accounts receivable | 608,513 | 433,242 | ||||
Inventories | 631,697 | 734,959 | ||||
Prepaid expenses | 38,742 | 26,426 | ||||
Total current assets | 1,411,120 | 1,382,358 | ||||
Property and equipment, net | 448,402 | 408,715 | ||||
Other assets | 26,082 | 26,676 | ||||
Total assets | $ | 1,885,604 | $ | 1,817,749 | ||
Liabilities and stockholders’ equity | ||||||
Current liabilities: | ||||||
Line of credit | $ | 350,000 | $ | 285,000 | ||
Notes payable to officer | 576,275 | 576,275 | ||||
Obligations under capital leases | 30,229 | 30,926 | ||||
Accounts payable | 112,696 | 177,831 | ||||
Accrued compensation | 108,107 | 129,429 | ||||
Accrued liabilities | 48,180 | 29,053 | ||||
Total current liabilities | 1,225,487 | 1,228,514 | ||||
Obligations under capital leases, less current portion | 82,386 | 74,783 | ||||
Total liabilities | 1,307,873 | 1,303,297 | ||||
Stockholders’ equity: | ||||||
Common stock, no par value: | ||||||
Authorized shares—300; Issued and outstanding shares—262 | 16,910 | 16,910 | ||||
Retained earnings | 560,821 | 497,542 | ||||
Total stockholders’ equity | 577,731 | 514,452 | ||||
Total liabilities and stockholders’ equity | $ | 1,885,604 | $ | 1,817,749 | ||
Year Ended December 31, 1998 | Three Months Ended March 30, 1999 | |||||||
Net sales | $ | 5,772,765 | $ | 1,179,926 | ||||
Cost of sales | 3,200,066 | 706,797 | ||||||
Gross profit | 2,572,699 | 473,129 | ||||||
Operating expenses | 2,571,587 | 522,410 | ||||||
Operating income (loss) | 1,112 | (49,281 | ) | |||||
Other income (expense): | ||||||||
Interest income | 9,284 | 1,686 | ||||||
Interest expense | (75,226 | ) | (15,684 | ) | ||||
Other | (8,443 | ) | — | |||||
Net (loss) | $ | (73,273 | ) | $ | (63,279 | ) | ||
Common Stock | Retained Earnings | Total | |||||||||||
Shares | Amount | ||||||||||||
Balance at December 31, 1997 | 262 | $ | 16,910 | $ | 634,094 | $ | 651,004 | ||||||
Net loss | — | — | (73,273 | ) | (73,273 | ) | |||||||
Balance at December 31, 1998 | 262 | 16,910 | 560,821 | 577,731 | |||||||||
Net loss | — | — | (63,279 | ) | (63,279 | ) | |||||||
Balance at March 30, 1999 | 262 | $ | 16,910 | $ | 497,542 | $ | 514,452 | ||||||
Year Ended December 31, 1998 | Three Months Ended March 30, 1999 | |||||||
Operating activities | ||||||||
Net loss | $ | (73,273 | ) | $ | (63,279 | ) | ||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
Depreciation | 105,813 | 40,937 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | 577,995 | 175,271 | ||||||
Inventories | 259,985 | (103,262 | ) | |||||
Prepaid expenses | (9,079 | ) | 12,316 | |||||
Other assets | (20,557 | ) | (594 | ) | ||||
Accounts payable | (3,177 | ) | 65,135 | |||||
Accrued compensation | 46,504 | 21,322 | ||||||
Accrued liabilities | 705 | (19,127 | ) | |||||
Net cash provided by operating activities | 884,916 | 128,719 | ||||||
Investing activities | ||||||||
Purchases of property and equipment | (50,378 | ) | (1,250 | ) | ||||
Net cash used in investing activities | (50,378 | ) | (1,250 | ) | ||||
Financing activities | ||||||||
Line of credit (net) | 50,000 | (65,000 | ) | |||||
Note payable—officers (net) | (818,658 | ) | — | |||||
Payments on obligations under capital leases | (26,581 | ) | (6,906 | ) | ||||
Net cash used in financing activities | (795,239 | ) | (71,906 | ) | ||||
Net increase in cash | 39,299 | 55,563 | ||||||
Cash at beginning of period | 92,869 | 132,168 | ||||||
Cash at end of period | $ | 132,168 | $ | 187,731 | ||||
Transportation and equipment | 5 years | |
Machinery and equipment | 5-7 years | |
Office equipment | 5-7 years | |
Improvements | 15-39 years |
December 31, 1998 | March 30, 1999 | |||||||
Land | $ | 28,800 | $ | 28,800 | ||||
Building and improvements | 438,291 | 438,291 | ||||||
Machinery and equipment | 771,394 | 771,394 | ||||||
Office equipment | 262,194 | 263,444 | ||||||
Transportation equipment | 17,629 | 17,629 | ||||||
Leasehold improvements | 65,000 | 65,000 | ||||||
1,583,308 | 1,584,558 | |||||||
Accumulated depreciation | (1,134,906 | ) | (1,175,843 | ) | ||||
$ | 448,402 | $ | 408,715 | |||||
Period ending December 31: | ||||
1999 | $ | 32,289 | ||
2000 | 42,194 | |||
2001 | 35,788 | |||
2002 | 18,900 | |||
Total future minimum lease payments | 129,171 | |||
Less amount representing interest | (23,462 | ) | ||
Present value of future minimum lease payments | 105,709 | |||
Less current portion | (30,926 | ) | ||
$ | 74,783 | |||
Period ending December 31: | |||
1999 | $ | 21,664 | |
2000 | 181,503 | ||
2001 | 396,006 | ||
2002 | 396,006 | ||
2003 | 396,006 | ||
Thereafter | 5,035,357 |
/s/ Ernst & Young LLP |
December 31, 1998 | March 30, 1999 | |||||
Assets | ||||||
Current assets: | ||||||
Cash | $ | 1,247 | $ | 189,943 | ||
Accounts receivable, net | 1,325,135 | 1,211,068 | ||||
Loan receivable from related party | 48,941 | — | ||||
Inventories | 233,529 | 149,233 | ||||
Recoverable income taxes | 3,923 | 6,384 | ||||
Prepaid expenses | 27,106 | 21,723 | ||||
Total current assets | 1,639,881 | 1,578,351 | ||||
Property and equipment, net | 1,572,239 | 1,715,304 | ||||
Deposits | 66,156 | 69,653 | ||||
Total assets | $ | 3,278,276 | $ | 3,363,308 | ||
Liabilities and stockholders’ equity | ||||||
Current liabilities: | ||||||
Line of credit | $ | 128,695 | $ | 440,000 | ||
Note payable—officer | 103,789 | — | ||||
Notes payable, current portion | 70,356 | 127,499 | ||||
Obligations under capital leases, current portion | 23,989 | 24,778 | ||||
Accounts payable | 457,691 | 487,284 | ||||
Accrued compensation | 27,588 | 45,020 | ||||
Dividends payable | — | 189,942 | ||||
Accrued liabilities | 6,141 | 14,181 | ||||
Total current liabilities | 818,249 | 1,328,704 | ||||
Notes payable, less current portion | 386,391 | 711,660 | ||||
Obligations under capital leases, less current portion | 64,515 | 58,017 | ||||
Total liabilities | 1,269,155 | 2,098,381 | ||||
Stockholders’ equity: | ||||||
Common stock, Class A | 7,500 | 7,500 | ||||
Common stock, Class B | 67,500 | 67,500 | ||||
Retained earnings | 1,934,121 | 1,189,927 | ||||
Total stockholders’ equity | 2,009,121 | 1,264,927 | ||||
Total liabilities and stockholders’ equity | $ | 3,278,276 | $ | 3,363,308 | ||
Year Ended December 31, 1998 | Three Months Ended March 30, 1999 | |||||||
Net sales | $ | 6,184,002 | $ | 2,044,662 | ||||
Cost of sales | 3,888,727 | 1,103,881 | ||||||
Gross profit | 2,295,275 | 940,781 | ||||||
Operating expenses: | ||||||||
Selling | 208,836 | 61,114 | ||||||
Research and development | 27,544 | 55,378 | ||||||
General and administrative | 715,699 | 153,777 | ||||||
952,079 | 270,269 | |||||||
Operating income | 1,343,196 | 670,512 | ||||||
Other income (expense): | ||||||||
Interest expense | (75,138 | ) | (14,751 | ) | ||||
Interest income | 8,219 | 4,029 | ||||||
Other | (833 | ) | — | |||||
Income before taxes | 1,275,444 | 659,790 | ||||||
Taxes | 15,774 | 14,042 | ||||||
Net income | $ | 1,259,670 | $ | 645,748 | ||||
Class A Common Stock | Class B Common Stock | Retained Earnings | Total Stockholders’ Equity | ||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||||
Balance at December 31, 1997 | 1,000 | $ | 75,000 | — | $ | — | $ | 674,451 | $ | 749,451 | |||||||||
Issuance of Class B common stock | — | (67,500 | ) | 9,000 | 67,500 | — | — | ||||||||||||
Net income | — | — | — | — | 1,259,670 | 1,259,670 | |||||||||||||
Balance at December 31, 1998 | 1,000 | 7,500 | 9,000 | 67,500 | 1,934,121 | 2,009,121 | |||||||||||||
Dividends | — | — | — | — | (1,389,942 | ) | (1,389,942 | ) | |||||||||||
Net income | — | — | — | — | 645,748 | 645,748 | |||||||||||||
Balance at March 30, 1999 | 1,000 | $ | 7,500 | 9,000 | $ | 67,500 | $ | 1,189,927 | $ | 1,264,927 | |||||||||
Year Ended December 31, 1998 | Three Months Ended March 30, 1999 | |||||||
Operating activities | ||||||||
Net income | $ | 1,259,670 | $ | 645,748 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation | 213,601 | 69,803 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (420,424 | ) | 114,067 | |||||
Loan receivable | 16,585 | — | ||||||
Inventories | (67,238 | ) | 84,296 | |||||
Recoverable income taxes | (3,923 | ) | (2,461 | ) | ||||
Prepaid expenses | (7,021 | ) | 5,383 | |||||
Accounts payable | 32,716 | 29,593 | ||||||
Accrued compensation | 10,483 | 17,432 | ||||||
Accrued liabilities | (216,392 | ) | 8,040 | |||||
Net cash provided by operating activities | 818,057 | 971,901 | ||||||
Investing activities | ||||||||
Acquisition of property and equipment | (695,299 | ) | (212,868 | ) | ||||
Deposits | (50,237 | ) | (3,497 | ) | ||||
Net cash used in investing activities | (745,536 | ) | (216,365 | ) | ||||
Financing activities | ||||||||
Line of credit (net) | 88,695 | 311,305 | ||||||
Note payable to officer (net) | (164,379 | ) | (54,848 | ) | ||||
Proceeds from notes payable | — | 400,000 | ||||||
Payments on notes payable | (70,355 | ) | (17,588 | ) | ||||
Payments on obligations under capital leases | (30,096 | ) | (5,709 | ) | ||||
Payment of dividends | — | (1,200,000) | ||||||
Net cash used in financing activities | (176,135 | ) | (566,840 | ) | ||||
Net (decrease) increase in cash | (103,614 | ) | 188,696 | |||||
Cash at beginning of period | 104,861 | 1,247 | ||||||
Cash at end of period | $ | 1,247 | $ | 189,943 | ||||
Machinery and equipment | 4 to 7 years | |
Tools and fixtures | 5 to 7 years | |
Furniture and equipment | 5 to 7 years | |
Automotive equipment | 5 years | |
Leasehold improvements | Remaining life of lease |
December 31, 1998 | March 30, 1999 | |||||||
Machinery and equipment | $ | 1,906,934 | $ | 2,019,522 | ||||
Tools and fixtures | 87,044 | 90,075 | ||||||
Furniture and equipment | 300,735 | 333,183 | ||||||
Automotive equipment | 22,085 | 22,085 | ||||||
Leasehold improvements | 58,164 | 110,739 | ||||||
2,374,962 | 2,575,604 | |||||||
Less accumulated depreciation and amortization | (925,325 | ) | (991,643 | ) | ||||
1,449,637 | 1,583,961 | |||||||
Construction in process | 122,602 | 131,343 | ||||||
$ | 1,572,239 | $ | 1,715,304 | |||||
December 31, 1998 | March 30, 1999 | |||||||
Note payable to Springfield Institute for Savings (SIS) dated March 12, 1999 in the original amount of $400,000 with a fixed interest rate of 8.20% due in 84 equal monthly principal payments plus interest. Due March 12, 2006, secured by substantially all assets of the Company | $ | — | $ | 400,000 | ||||
Note payable to SIS dated June 26, 1996 in the original amount of $500,000 with a fixed interest rate at 9.00%. Note bears interest only until December 26, 1996; thereafter, 114 equal monthly principal installments plus interest. Due July 26, 2006, secured by substantially all assets of the Company | 394,737 | 381,580 | ||||||
Note payable to SIS dated June 6, 1996 in the original amount of $88,596 with a fixed interest rate at 9.10% due June 6, 2002, secured by laser marking equipment | 62,010 | 57,579 | ||||||
456,747 | 839,159 | |||||||
Less current maturities | (70,356 | ) | (127,499 | ) | ||||
$ | 386,391 | $ | 711,660 | |||||
Year ending March 30: | ||||
2000 | $ | 33,794 | ||
2001 | 32,494 | |||
2002 | 20,078 | |||
2003 | 11,873 | |||
2004 | 4,947 | |||
103,186 | ||||
Less amount representing interest | (20,391 | ) | ||
82,795 | ||||
Less current portion | (24,778 | ) | ||
Long-term capital lease obligations | $ | 58,017 | ||
Year Ended December 31, 1998 | Three Months Ended March 30, 1999 | |||||
Current taxes | $ | 15,774 | $ | 14,042 |
December 31, 1998 | March 30, 1999 | |||||
Loan receivable—BMD Real Estate, LLC | $ | 48,941 | $ | — | ||
Note payable to officer | 103,789 | — |
The inside back cover page includes the following text: "MedSource Technologies provides components, subassemblies and finished medical devices for the following markets:". The inside back cover page also includes four pictures representing products we manufacture for each of our four target markets and the following lists of sample products in each of these markets: Surgical Instrumentation: Electrosurgical Instruments, Bi-Polar and Monopolar Devices, Ultrasonic Surgical Instruments, Rigid/Flexible Forceps, Closure Devices, Endoscopic Instruments, and Laparoscopic Instruments; Electro-Medical Implants: Pacemakers/Defibrillators, Neurostimulators, Ventricular Assist Devices, Total Artificial Heart (TAH), Drug Delivery Systems, and Hearing Assist Devices; Orthopedics: Reconstructive Implants (Hip and Knee), Procedure Specific Instrumentation, Spinal Fixation Devices, Arthroscopy Instruments, Maxillofacial Implants, and Dental Implants; and Interventional Devices: Cardiology Catheters and Guidewires, Radiology Catheters and Guidewires, Neuroradiology Catheters and Guidewires, Balloon Forming, and PICC.
The page also includes the following text; "MedSource Technologies provides components, subassemblies and finished medical devices for the following markets:".
Securities and Exchange Commission registration fee | $ | 32,982 | |
NASD filing fee | 14,300 | ||
Nasdaq listing fees | 95,000 | ||
Legal fees and expenses | * | ||
Accounting fees and expenses | * | ||
Transfer agent fees | * | ||
Printing and engraving expenses | * | ||
Miscellaneous | * | ||
Total | $ | ||
* | To be supplied by amendment. |
(a) | In connection with the formation of the registrant in March 1999, the registrant issued for cash an aggregate of 4,023,000 shares of common stock to 12 accredited investors, resulting in aggregate gross proceeds to the registrant of $2.0 million. The registrant issued these securities in reliance on the exemption provided by Section 4(2) of the Securities Act of 1933 as transactions not involving a public offering and Rule 506 thereunder. |
(b) | On March 30, 1999, the registrant paid cash and issued an aggregate of 425,000 shares of common stock to one accredited investor and an aggregate of 37,440 shares of Series A preferred stock to 12 accredited investors in connection with the acquisition by the registrant of the businesses of Hayden Precision Industries, Inc., Kelco Industries, Inc., The MicroSpring Company, Inc., National Wire & Stamping, Inc., Portlyn Corp. and Texcel, Inc. The registrant received assets valued at approximately $107.3 million in the aggregate in connection with the acquisition of these businesses. Each share of Series A preferred stock is presently convertible into 50 shares of the registrant’s common stock. The registrant issued these securities in reliance on the exemption provided by Section 4(2) of the Securities Act of 1933 as transactions not involving a public offering and Rule 506 thereunder. |
(c) | On March 30, 1999, the registrant issued for cash an aggregate of 300,000 shares of Series B preferred stock to two accredited investors, resulting in aggregate gross proceeds to the registrant $22.0 million. Each share of Series B preferred stock is presently convertible into 10 shares of its common stock. The registrant issued these securities in reliance on the exemption provided by Section 4(2) of the Securities Act of 1933 as transactions not involving a public offering and Rule 506 thereunder. |
(d) | On March 30, 1999, MedSource Technologies, LLC, a wholly-owned subsidiary of the registrant, issued for cash an aggregate of $20.0 million of its senior subordinated notes and the registrant issued for cash an aggregate of 65,000 shares of its Series Z preferred stock to two accredited investors, resulting in aggregate gross proceeds to the registrant and its subsidiary of $20.0 million. Each share of Series Z preferred stock is convertible into 10 shares of its common stock. The registrant and its subsidiary issued these securities in reliance on the exemption provided by Section 4(2) of the Securities Act of 1933 as transactions not involving a public offering and Rule 506 thereunder. |
(e) | On March 30, 1999, the registrant issued for cash an aggregate of 930 shares of Series A preferred stock to four of its employees, resulting in aggregate gross proceeds to the registrant $0.9 million. The registrant issued these securities in reliance on the exemption provided by Section 4(2) of the Securities Act of 1933 as transactions not involving a public offering and Rule 506 thereunder. |
(f) | On May 14, 1999, the registrant issued for cash an aggregate of 32,728 shares of Series B preferred stock to one accredited investor, resulting in aggregate gross proceeds to the registrant $2.4 million. The registrant issued these securities in reliance on the exemption provided by Section 4(2) of the Securities Act of 1933 as transactions not involving a public offering and Rule 506 thereunder. |
(g) | On January 11, 2000, the registrant paid cash and issued an aggregate of 50,000 shares of common stock to one accredited investor in connection with the acquisition by the registrant of the business of Tenax Corporation. The registrant received assets valued at approximately $8.8 million in connection with the acquisition of this business. The registrant issued these securities in reliance on the exemption provided by Section 4(2) of the Securities Act of 1933 as transactions not involving a public offering and Rule 506 thereunder. |
(h) | On February 1, 2000, the registrant paid cash and issued an aggregate of 236,950 shares of common stock to two accredited investors in connection with the acquisition by the registrant of the business of Apex Engineering, Inc. The registrant received assets valued at approximately $4.1 million in connection with the acquisition of this business. The registrant issued these securities in reliance on the exemption provided by Section 4(2) of the Securities Act of 1933 as transactions not involving a public offering and Rule 506 thereunder. |
(i) | On May 1, 2000, the registrant paid cash and issued an aggregate of 500,000 shares of common stock to two accredited investors in connection with the acquisition by the registrant of the business of Thermat Precision Technology, Inc. The registrant received assets valued at approximately $8.5 million in connection with the acquisition of this business. The registrant issued these securities in reliance on the exemption provided by Section 4(2) of the Securities Act of 1933 as transactions not involving a public offering and Rule 506 thereunder. |
(j) | On June 20, 2000, the registrant issued an aggregate of 500 shares of common stock to a consultant in exchange for services previously rendered. The registrant issued these securities in reliance on the exemption from registration provided by Rule 701 as transactions pursuant to compensatory benefit plans or contracts relating to compensation. |
(k) | On October 25, 2000, the registrant issued an aggregate of 40,000 shares of Series C preferred stock to eight accredited investors, resulting in aggregate gross proceeds to the registrant $40.0 million. In the transaction, the registrant paid to a placement agent a cash fee of $2.1 million and issued the placement agent the warrant referred to in item (o) below. Each share of Series C preferred stock converts in the manner described in the second paragraph after the table under the caption “Summary—The Offering” on page of the prospectus included as part of this registration statement. The registrant issued these securities in reliance on the exemption provided by Section 4(2) of the Securities Act of 1933 as transactions not involving a public offering and Rule 506 thereunder. |
(l) | On December 29, 2000, in connection with the acquisition by the registrant of the business of ACT Medical, Inc., the registrant paid cash and issued an aggregate of 33,423 shares of Series D preferred stock to 25 persons to whom the registrant provided the information called for by Rule 502(b) under the Securities Act of 1933. The registrant received assets valued at approximately $33.7 million in connection with the acquisition of this business. Each share of Series D preferred stock is presently convertible into 50 shares of the registrant’s common stock. The registrant issued these securities in reliance on the exemption provided by Section 4(2) of the Securities Act of 1933 as transactions not involving a public offering and Rule 506 thereunder. |
(m) | On December 29, 2000, the registrant granted rollover options to purchase an aggregate of 6,920 shares of its Series D preferred stock to certain individuals who became employees of the registrant following its acquisition of ACT Medical at exercise prices ranging from $169.70 to $1,000.00 per share. The registrant granted each of these options pursuant to the ACT Medical stock plan, which was assumed by the registrant in connection with the acquisition of Act Medical. The registrant received no proceeds from these issuances. The registrant issued these securities in reliance on the exemption from registration provided by Rule 701 as transactions pursuant to compensatory benefit plans or contracts relating to compensation. |
(n) | On February 27, 2001, the registrant issued a warrant to purchase an aggregate of 525 shares of Series C preferred stock to one accredited investor for services previously rendered as a placement agent (referred to in item (k) above). The registrant issued these securities in reliance on the exemption provided by Section 4(2) of the Securities Act of 1933 as transactions not involving a public offering and Rule 506 thereunder. |
(o) | On June 22, 2001, the registrant issued an aggregate of 300 shares of Series C preferred stock to one accredited investor, resulting in aggregate gross proceeds to the registrant $0.3 million. The registrant issued these securities in reliance on the exemption provided by Section 4(2) of the Securities Act of 1933 as transactions not involving a public offering and Rule 506 thereunder. |
(p) | On December 31, 2001, the registrant issued for cash an aggregate of 6,000 Series E preferred stock and warrants to purchase an aggregate of 200,000 shares of common stock to 29 accredited investors, resulting in aggregate gross proceeds to the registrant of $6.0 million. The registrant used the proceeds of the issuance to finance the acquisition of HV Technologies. The registrant issued these securities in reliance on the exemption provided by Section 4(2) of the Securities Act of 1933 as transactions not involving a public offering and Rule 506 thereunder. |
(q) | On January 4, 2002, the registrant paid cash and issued an aggregate of 824,222 shares of common stock and 4,000 shares of Series F preferred stock to 18 persons to whom the registrant provided the information called for by Rule 502(b) under the Securities Act of 1933 in connection with the acquisition by the registrant of the business of HV Technologies, Inc. The registrant received assets valued at approximately $24.3 million in connection with the acquisition of this business. The registrant issued these securities in reliance on the exemption provided by Section 4(2) of the Securities Act of 1933 as transactions not involving a public offering and Rule 506 thereunder. |
(r) | Since March 30, 1999, the registrant has granted options to purchase an aggregate of 3,705,050 shares of its common stock to its employees and directors at exercise prices ranging from $12 to $20 per share. The registrant granted each of these options pursuant to its 1999 stock plan. The registrant received no proceeds from these issuances. The registrant issued these securities in reliance on the exemption from registration provided by Rule 701 as transactions pursuant to compensatory benefit plans or contracts relating to compensation. |
(s) | Since August 21, 2000, the registrant has issued 20,708 shares of common stock upon exercise of options granted under its 1999 stock plan for total proceeds of approximately $288,992. The registrant issued these securities in reliance on the exemption from registration provided by Rule 701 as transactions pursuant to compensatory benefit plans or contracts relating to compensation. |
(a) | Exhibits |
Exhibit Number | Description | |||
* | 1.1 | Form of Underwriting Agreement | ||
2.1 | Agreement and Plan of Merger dated as of December 8, 2000 among the registrant, ACT Acquisition Corp., ACT Medical, Inc., The Tolkoff Family Limited Partnership and M. Joshua Tolkoff | |||
* | 3.1 | Form of registrant’s restated certificate of incorporation | ||
* | 3.2 | Form of registrant’s amended and restated bylaws | ||
* | 4.1 | Credit Agreement among the registrant, MedSource Technologies, LLC, the domestic subsidiaries of the registrant from time to time party thereto, the lenders party thereto, First Union National Bank, as administrative agent, and First Union Securities, Inc., as lead arranger. | ||
* | 5.1 | Opinion of Jenkens & Gilchrist Parker Chapin LLP as to the legality of the securities being offered | ||
+ | 10.1 | Registration Rights Agreement dated as of March 30, 1999 among the registrant, William J. Kidd, Carla G. Kidd, Edward R. Mandell, as Trustee under the Catherine M. Kidd Trust, Edward R. Mandell, as Trustee under the Cara E. Kidd Trust, Edward R. Mandell, as Trustee under the Thomas C. Kidd Trust, Clarice E. Webb, John P. Neafsey, Richard J. Effress, Andrew D. Lipman, Adam D. Lehrhoff, John C. Hertig, William Altieri, Portlyn Corporation, Kelco Industries, Inc., The MicroSpring Company, Inc., Laurence S. Derose Trust, BMD Irrevocable Trust of 1998, Jeffrey L. Derose Irrevocable Trust, Kevin L. Derose Irrevocable Trust, W.N. Rushwood, Inc. d/b/a Hayden Precision Industries, Peter J. Neidecker, Peter J. Neidecker Limited Partnership, Peter C. Neidecker Irrevocable Trust, Sally N. Morris and Sylvia N. Coors |
Exhibit Number | Description | |||
+ | 10.2 | Registration Rights Agreement dated as of March 30, 1999 among the registrant, William J. Kidd, Carla G. Kidd, Edward R. Mandell, as Trustee under the Catherine M. Kidd Trust, Edward R. Mandell, as Trustee under the Cara E. Kidd Trust, Edward R. Mandell, as Trustee under the Thomas C. Kidd Trust, Clarice E. Webb, John P. Neafsey, Richard J. Effress, Andrew D. Lipman, Adam D. Lehrhoff, John C. Hertig, William Altieri, J.H. Whitney Mezzanine Fund, L.P., Whitney Strategic Partners, III, L.P., J.H. Whitney III, L.P. and German American Capital Corporation | ||
+ | 10.3 | Registration Rights Agreement dated as of May 14, 1999 between the registrant and IndoSuez MST Partners | ||
+ | 10.2 | Registration Rights Agreement dated as of March 30, 1999 among the registrant, William J. Kidd, Carla G. Kidd, Edward R. Mandell, as Trustee under the Catherine M. Kidd Trust, Edward R. Mandell, as Trustee under the Cara E. Kidd Trust, Edward R. Mandell, as Trustee under the Thomas C. Kidd Trust, Clarice E. Webb, John P. Neafsey, Richard J. Effress, Andrew D. Lipman, Adam D. Lehrhoff, John C. Hertig, William Altieri, J.H. Whitney Mezzanine Fund, L.P., Whitney Strategic Partners, III, L.P., J.H. Whitney III, L.P. and German American Capital Corporation | ||
+ | 10.4 | Registration Rights Agreement dated as of May 15, 2000 among the registrant, Karl F. Hens and Thomas J. Roche | ||
+ | 10.5 | Registration Rights Agreement dated as of January 31, 2000 among the registrant, Donald R. Rochelo and Donna L. Rochelo | ||
+ | 10.6 | Registration Rights Agreement dated as of October 25, 2000 among the registrant, The 1818 Fund III, L.P., William J. Kidd, Carla G. Kidd, Edward R. Mandell, as trustee under the William J. Kidd Grantor Trust, Richard J. Effress, Andrew D. Lipman, John W. Galiardo and Manire Limited Partnership | ||
+ | 10.7 | Registration Rights Agreement dated as of December 29, 2000 among the registrant and each of the former stockholders of ACT Medical, Inc. | ||
+ | 10.8 | Registration Rights Agreement dated as of February 27, 2001 between the registrant and Thomas Weisel Partners LLC | ||
+ | 10.9 | Registration Rights Agreement dated as of December 31, 2001 among the registrant and each of the investors in its Series E Preferred Stock | ||
+ | 10.10 | Registration Rights Agreement dated as of January 4, 2002 among the registrant and each of the former stockholders of HV Technologies, Inc. | ||
10.11 | Form of 1999 Stock Plan of the registrant (as amended and restated through December 14, 2001) | |||
* | 10.12 | Form of option contract between the registrant and its officers | ||
+ | 10.13 | Form of option contract between the registrant and its directors | ||
+ | 10.14 | Omnibus Stock Plan of ACT Medical, Inc. (as amended and restated through April 4, 2000) | ||
+ | 10.15 | 2001 Employee Stock Purchase Plan of the registrant | ||
10.16 | Employment agreement dated as of August 8, 2000 between the registrant and Richard J. Effress. | |||
10.17 | Employment agreement dated as of April 1, 1999 between the registrant and James Drill | |||
10.18 | Employment agreement between the registrant and William Ellerkamp. | |||
10.19 | Employment agreement dated as of April 1, 1999 between the registrant and Ralph Polumbo | |||
10.20 | Employment agreement between the registrant and Joseph J. Caffarelli | |||
10.21 | Employment agreement between the registrant and Rick McWhorter | |||
* | 10.22 | Severance Agreement dated as of February , 2002 between the registrant and Richard J. Effress | ||
* | 10.23 | Severance Agreement dated as of February , 2002 between the registrant and Joseph J. Caffarelli | ||
* | 10.24 | Severance Agreement dated as of February , 2002 between the registrant and Dan Croteau | ||
* | 10.25 | Severance Agreement dated as of February , 2002 between the registrant and Jim Drill | ||
* | 10.26 | Severance Agreement dated as of February , 2002 between the registrant and William Ellerkamp | ||
* | 10.27 | Severance Agreement dated as of February , 2002 between the registrant and Rick McWhorter | ||
* | 10.28 | Severance Agreement dated as of February , 2002 between the registrant and Karl Hens | ||
* | 10.29 | Severance Agreement dated as of February , 2002 between the registrant and Ralph Polumbo | ||
* | 10.30 | Severance Agreement dated as of February , 2002 between the registrant and Rich Snider | ||
10.31 | Business Conduct Policy and form of acknowledgement for the registrant’s employees | |||
10.32 | Form of Confidentiality Agreement for the registrant’s employees |
Exhibit Number | Description | |||
10.33 | Form of Disclosure Policy and acknowledgement for the registrant’s employees | |||
* | 10.34 | Office/Tech Lease dated March 30, 1999 between Paul D. Kelly and Kelco Acquisition LLC in respect of the premises located at 6400-6420 Zane Avenue North, Brooklyn Park, Minnesota | ||
* | 10.35 | Office/Tech Lease dated March 30, 1999 between Paul D. Kelly and Kelco Acquisition LLC in respect of the premises located at 6320 Zane Avenue North, Brooklyn Park, Minnesota | ||
21.1 | List of Subsidiaries | |||
23.1 | Consent of Ernst & Young LLP | |||
23.2 | Consent of Bertram, Vallez, Kaplan & Talbot, Ltd. | |||
23.3 | Consent of James F. Yochum, CPA | |||
23.4 | Consent of PricewaterhouseCoopers LLP | |||
23.5 | Consent of Grant Thornton, LLP | |||
* | 23.6 | Consent of Jenkens & Gilchrist Parker Chapin LLP (included in their opinion filed as Exhibit 5.1) | ||
+ | 24.1 | Power of Attorney |
* | To be filed by amendment. |
+ | Previously filed. |
(1) | For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. |
(2) | For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
MEDSOURCE TECHNOLOGIES, INC. |
By: /s/ Richard J. Effress |
Richard J. Effress |
Chairman |
Signatures | Title | Date | ||
/s/ Richard J. Effress Richard J. Effress | Chairman of the Board of Directors and Chief Executive Officer (Principal Executive Officer) | February 20, 2002 | ||
/s/ Joseph J. Caffarelli Joseph J. Caffarelli | �� | Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) | February 20, 2002 | |
* Joseph Ciffolillo | Director | February 20, 2002 | ||
* John Galiardo | Director | February 20, 2002 | ||
* Wayne Kelly | Director | February 20, 2002 | ||
* William J. Kidd | Director | February 20, 2002 | ||
* T. Michael Long | Director | February 20, 2002 | ||
* Ross Manire | Director | February 20, 2002 | ||
Carl Sloane | Director |
COL. A | COL. B | COL. C | COL. D | COL. E | ||||||||||||
Additions | ||||||||||||||||
Description | Balance at Beginning of Period | Charged to Costs and Expenses | Charged to Other Accounts—Describe | Deductions—Describe | Balance at End of Period | |||||||||||
Allowance for doubtful accounts: | ||||||||||||||||
Three-months ended July 3, 1999 | $ | 0 | $ | 58 | $ | 191 | $ | 249 | ||||||||
Year ended July 1, 2000 | 249 | 75 | 116 | $ | (13 | ) | 427 | |||||||||
Year ended June 30, 2001 | 427 | 101 | 295 | (227 | ) | 596 | ||||||||||
COL. A | COL. B | COL. C | COL. D | COL. E | |||||||||||
Additions | |||||||||||||||
Description | Balance at Beginning of Period | Charged to Costs and Expenses | Charged to Other Accounts—Describe | Deductions—Describe | Balance at End of Period | ||||||||||
Allowance for doubtful accounts: | |||||||||||||||
Period ended March 30, 1999 | $ | 0 | $ | 63 | $ | (2 | ) | $ | 61 | ||||||
/s/ PricewaterhouseCoopers LLP |
COL. A | COL. B | COL. C | COL. D | COL. E | |||||||||||
Additions | |||||||||||||||
Description | Balance at Beginning of Period | Charged to Costs and Expenses | Charged to Other Accounts—Describe | Deductions—Describe | Balance at End of Period | ||||||||||
Allowance for doubtful accounts: | |||||||||||||||
Year ended December 31, 1998 | $ | 27 | $ | (7 | ) | $ | 20 | ||||||||
Three-months ended March 30, 1999 | 20 | 20 | |||||||||||||
Allowance for sales returns: | |||||||||||||||
Year ended December 31, 1998 | 136 | $ | 164 | 300 | |||||||||||
Three-months ended March 30, 1999 | $ | 300 | $ | (250 | ) | $ | 50 | ||||||||
COL. A | COL. B | COL. C | COL. D | COL. E | |||||||||||
Additions | |||||||||||||||
Description | Balance at Beginning of Period | Charged to Costs and Expenses | Charged to Other Accounts—Describe | Deductions—Describe | Balance at End of Period | ||||||||||
Allowance for doubtful accounts: | |||||||||||||||
Year ended December 31, 1998 | $ | 41 | $ | 43 | $ | (24 | ) | $ | 60 | ||||||
Three-months ended March 30, 1999 | $ | 60 | $ | 60 | |||||||||||
Exhibit Number | Description | |||
* | 1.1 | Form of Underwriting Agreement | ||
2.1 | Agreement and Plan of Merger dated as of December 8, 2000 among the registrant, ACT Acquisition Corp., ACT Medical, Inc., The Tolkoff Family Limited Partnership and M. Joshua Tolkoff | |||
* | 3.1 | Form of registrant’s restated certificate of incorporation | ||
* | 3.2 | Form of registrant’s amended and restated bylaws | ||
* | 4.1 | Credit Agreement among the registrant, MedSource Technologies, LLC, the domestic subsidiaries of the registrant from time to time party thereto, the lenders party thereto, First Union National Bank, as administrative agent, and First Union Securities, Inc., as lead arranger. | ||
* | 5.1 | Opinion of Jenkens & Gilchrist Parker Chapin LLP as to the legality of the securities being offered | ||
+ | 10.1 | Registration Rights Agreement dated as of March 30, 1999 among the registrant, William J. Kidd, Carla G. Kidd, Edward R. Mandell, as Trustee under the Catherine M. Kidd Trust, Edward R. Mandell, as Trustee under the Cara E. Kidd Trust, Edward R. Mandell, as Trustee under the Thomas C. Kidd Trust, Clarice E. Webb, John P. Neafsey, Richard J. Effress, Andrew D. Lipman, Adam D. Lehrhoff, John C. Hertig, William Altieri, Portlyn Corporation, Kelco Industries, Inc., The MicroSpring Company, Inc., Laurence S. Derose Trust, BMD Irrevocable Trust of 1998, Jeffrey L. Derose Irrevocable Trust, Kevin L. Derose Irrevocable Trust, W.N. Rushwood, Inc. d/b/a Hayden Precision Industries, Peter J. Neidecker, Peter J. Neidecker Limited Partnership, Peter C. Neidecker Irrevocable Trust, Sally N. Morris and Sylvia N. Coors | ||
+ | 10.2 | Registration Rights Agreement dated as of March 30, 1999 among the registrant, William J. Kidd, Carla G. Kidd, Edward R. Mandell, as Trustee under the Catherine M. Kidd Trust, Edward R. Mandell, as Trustee under the Cara E. Kidd Trust, Edward R. Mandell, as Trustee under the Thomas C. Kidd Trust, Clarice E. Webb, John P. Neafsey, Richard J. Effress, Andrew D. Lipman, Adam D. Lehrhoff, John C. Hertig, William Altieri, J.H. Whitney Mezzanine Fund, L.P., Whitney Strategic Partners, III, L.P., J.H. Whitney III, L.P. and German American Capital Corporation | ||
+ | 10.3 | Registration Rights Agreement dated as of May 14, 1999 between the registrant and IndoSuez MST Partners | ||
+ | 10.2 | Registration Rights Agreement dated as of March 30, 1999 among the registrant, William J. Kidd, Carla G. Kidd, Edward R. Mandell, as Trustee under the Catherine M. Kidd Trust, Edward R. Mandell, as Trustee under the Cara E. Kidd Trust, Edward R. Mandell, as Trustee under the Thomas C. Kidd Trust, Clarice E. Webb, John P. Neafsey, Richard J. Effress, Andrew D. Lipman, Adam D. Lehrhoff, John C. Hertig, William Altieri, J.H. Whitney Mezzanine Fund, L.P., Whitney Strategic Partners, III, L.P., J.H. Whitney III, L.P. and German American Capital Corporation | ||
+ | 10.4 | Registration Rights Agreement dated as of May 15, 2000 among the registrant, Karl F. Hens and Thomas J. Roche | ||
+ | 10.5 | Registration Rights Agreement dated as of January 31, 2000 among the registrant, Donald R. Rochelo and Donna L. Rochelo | ||
+ | 10.6 | Registration Rights Agreement dated as of October 25, 2000 among the registrant, The 1818 Fund III, L.P., William J. Kidd, Carla G. Kidd, Edward R. Mandell, as trustee under the William J. Kidd Grantor Trust, Richard J. Effress, Andrew D. Lipman, John W. Galiardo and Manire Limited Partnership | ||
+ | 10.7 | Registration Rights Agreement dated as of December 29, 2000 among the registrant and each of the former stockholders of ACT Medical, Inc. | ||
+ | 10.8 | Registration Rights Agreement dated as of February 27, 2001 between the registrant and Thomas Weisel Partners LLC | ||
+ | 10.9 | Registration Rights Agreement dated as of December 31, 2001 among the registrant and each of the investors in its Series E Preferred Stock | ||
+ | 10.10 | Registration Rights Agreement dated as of January 4, 2002 among the registrant and each of the former stockholders of HV Technologies, Inc. | ||
10.11 | Form of 1999 Stock Plan of the registrant (as amended and restated through December 14, 2001) | |||
10.12 | Form of option contract between the registrant and its officers | |||
+ | 10.13 | Form of option contract between the registrant and its directors | ||
+ | 10.14 | Omnibus Stock Plan of ACT Medical, Inc. (as amended and restated through April 4, 2000) |
Exhibit Number | Description | |||
+ | 10.15 | 2001 Employee Stock Purchase Plan of the registrant | ||
10.16 | Employment agreement dated as of August 8, 2000 between the registrant and Richard J. Effress. | |||
10.17 | Employment agreement dated as of April 1, 1999 between the registrant and James Drill | |||
10.18 | Employment agreement between the registrant and William Ellerkamp. |
10.19 | Employment agreement dated as of April 1, 1999 between the registrant and Ralph Polumbo | |||
10.20 | Employment agreement between the registrant and Joseph J. Caffarelli | |||
10.21 | Employment agreement between the registrant and Rick McWhorter | |||
* | 10.22 | Severance Agreement dated as of February , 2002 between the registrant and Richard J. Effress | ||
* | 10.23 | Severance Agreement dated as of February , 2002 between the registrant and Joseph J. Caffarelli | ||
* | 10.24 | Severance Agreement dated as of February , 2002 between the registrant and Dan Croteau | ||
* | 10.25 | Severance Agreement dated as of February , 2002 between the registrant and Jim Drill | ||
* | 10.26 | Severance Agreement dated as of February , 2002 between the registrant and William Ellerkamp | ||
* | 10.27 | Severance Agreement dated as of February , 2002 between the registrant and Rick McWhorter | ||
* | 10.28 | Severance Agreement dated as of February , 2002 between the registrant and Karl Hens | ||
* | 10.29 | Severance Agreement dated as of February , 2002 between the registrant and Ralph Polumbo | ||
* | 10.30 | Severance Agreement dated as of February , 2002 between the registrant and Rich Snider | ||
10.31 | Business Conduct Policy and form of acknowledgement for the registrant’s employees | |||
10.32 | Form of Confidentiality Agreement for the registrant’s employees | |||
10.33 | Form of Disclosure Policy and acknowledgement for the registrant’s employees | |||
* | 10.34 | Office/Tech Lease dated March 30, 1999 between Paul D. Kelly and Kelco Acquisition LLC in respect of the premises located at 6400-6420 Zane Avenue North, Brooklyn Park, Minnesota | ||
* | 10.35 | Office/Tech Lease dated March 30, 1999 between Paul D. Kelly and Kelco Acquisition LLC in respect of the premises located at 6320 Zane Avenue North, Brooklyn Park, Minnesota | ||
21.1 | List of Subsidiaries | |||
23.1 | Consent of Ernst & Young LLP | |||
23.2 | Consent of Bertram, Vallez, Kaplan & Talbot, Ltd. | |||
23.3 | Consent of James F. Yochum, CPA | |||
23.4 | Consent of PricewaterhouseCoopers LLP | |||
23.5 | Consent of Grant Thornton, LLP | |||
* | 23.6 | Consent of Jenkens & Gilchrist Parker Chapin LLP (included in their opinion filed as Exhibit 5.1) | ||
+ | 24.1 | Power of Attorney |
* | To be filed by amendment. |
+ | Previously filed. |