Exhibit 99.1
Company Investor/Media Contact: | |
dj Orthopedics, Inc. | |
Mark Francois, Director of Investor Relations | |
(760) 734-4766 | |
mark.francois@djortho.com | |
FOR IMMEDIATE RELEASE
DJ ORTHOPEDICS ANNOUNCES RECORD NET REVENUES AND EARNINGS
FOR FOURTH QUARTER AND FISCAL YEAR 2003
SAN DIEGO, CA January 28, 2004 – dj Orthopedics, Inc., (NYSE: DJO), a global medical device company specializing in rehabilitation and regeneration products for the non-operative orthopedic and spine markets, today announced record financial results for the fourth quarter and fiscal year ended December 31, 2003.
Net revenues for the fourth quarter of 2003 totaled $54.6 million and include one month of sales from the Company’s recently acquired RegentekTM bone growth stimulation device business, reflecting an increase of 17.0 percent, compared with net revenues of $46.7 million in the fourth quarter of 2002. The Regentek acquisition closed on November 26, 2003. Excluding Regentek sales, fourth quarter net revenues totaled $50.6 million, an increase of 8.5 percent, compared with net revenues in the fourth quarter of 2002. The fourth quarter of 2003 included 64 shipping days, while the comparable 2002 period included 63 days. Net income for the fourth quarter of 2003 was $4.1 million, or $0.21 per share, compared with a net loss of $6.0 million, or $(0.33) per share, for the fourth quarter of 2002. Net income for the fourth quarter of 2003 was reduced by $0.01 per share due to the impact of short-term Regentek purchase accounting adjustments, which increased costs of goods sold as a result of a step up in the value of acquired inventories, and operating expenses as a result of the amortization of a portion of the intangible value assigned to acquired customer order backlog. Net loss for the fourth quarter of 2002 included restructuring and other charges totaling $8.5 million ($5.5 million net of income taxes, or $0.31 per share) related to the Company’s performance improvement program in 2002.
For the full year 2003, net revenues totaled $197.9 million, reflecting an increase of 8.4 percent, compared with net revenues of $182.6 million for fiscal 2002. Excluding sales from Regentek, net sales for 2003 totaled $194.0 million, an increase of 6.2 percent, compared with net revenues for 2002. Net income for 2003 was $12.1 million, or $0.64 per share, compared with a net loss of $15.2 million, or $(0.85) per share for 2002.
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Net loss for fiscal year 2002 included restructuring and other charges aggregating $25.5 million ($16.3 million net of income taxes, or $0.91 per share) related to the Company’s performance improvement program.
On a pro forma basis, reflecting the Company’s Regentek acquisition as if it had occurred on January 1, 2003, fourth quarter and full year 2003 net revenues were $62.7 million and $240.4 million, respectively, and net income was $4.8 million, or $0.25 per share, and $15.4 million, or $0.82 per share, respectively.
Commenting on the Company’s results, Les Cross, dj Orthopedics’ President and Chief Executive Officer noted, “Our fourth quarter results reflect the dedication, focus and hard work of our employees and distribution partners throughout 2003. It is gratifying to report record results for our fourth quarter and full year 2003, and to report the Company’s first ever quarter with revenues exceeding $50 million. The year’s success is the culmination of our focused and carefully executed corporate performance improvement program, which began in 2002, coupled with our growth initiatives in 2003, that have enabled us to accelerate growth in each of our four historical business segments, as well as successfully expand into the bone growth stimulation market with the Regentek acquisition.”
“In looking at our fourth quarter results excluding Regentek sales, we recorded the highest average domestic sales per day in dj Orthopedics’ history. Our operating margins also remained strong, leading to record profitability for the fourth quarter and strong operating cash flow of $10.0 million. We exited 2003 a larger, stronger dj Orthopedics, and for 2004 we intend to continue to focus on strengthening our market position in the prevention, treatment and rehabilitation of acute and chronic orthopedic and spine conditions. With a solid foundation in place and a sound plan for 2004, we anticipate that our 2004 revenues will approach $260 million, resulting in earnings per share of approximately $1.00. The first quarter of 2004 is a short quarter for us with only 61 shipping days. Accordingly, we are targeting first quarter revenues of approximately $60 million.”
Fourth Quarter Business Highlights:
• The Company completed the acquisition of the bone growth stimulation device business from OrthoLogic Corp. in November 2003. The acquired business now operates as the Company’s Regentek division. Regentek products include the OL1000TM for the noninvasive treatment of nonunion fractures, and SpinaLogic®, a state-of-the-art device used as an adjunct therapy after spinal fusion surgery.
• The Company launched five new products during the quarter in shoulder and foot and ankle and also launched its first professional-retail line of soft goods for the European market.
• The Company was awarded a new three-year supply contract from Premier, Inc. that commenced December 1, 2003.
• The Company initiated operations of a new wholly-owned subsidiary in France for the direct distribution of the Company’s products.
• The Company entered into a build-to-suit lease for a new 200,000 square foot facility in Tijuana, Mexico to increase production capacity and consolidate its Mexico manufacturing operations under a single roof. The Company expects to move into this new facility prior to year-end 2004.
• In January 2004, the Company reached a tentative settlement of its outstanding class action lawsuit. The amount of the tentative settlement is within the limits of the Company’s directors’ and officers’ liability insurance policies and, subject to court approval, should become final within the next several months.
Revenue Segment Information
Net revenues for the fourth quarter of 2003 for the Company’s historical business segments, which are its primary sales channels, DonJoy®, ProCare®, OfficeCare®, and International were $25.1 million, $12.6 million, $7.2 million and $5.8 million respectively, compared to prior year amounts of $23.3 million, $11.7 million, $5.9 million and $5.7 million, respectively. The Company’s new RegentekTM division is also reported as a new business segment. Net revenues for the fourth quarter in the Company’s DonJoy, ProCare, OfficeCare and International segments increased 7.4 percent, 7.0 percent, 22.5 percent and 1.8 percent, respectively, over the comparable prior year amounts. International net revenues in the fourth quarter of 2003 were reduced by approximately $0.8 million compared to the prior year period because of the Company’s fourth quarter 2002 discontinuation of its majority owned Australian subsidiary. In addition, International revenues in the fourth quarter of 2003 included a $0.6 million benefit from favorable changes in exchange rates compared to the rates in effect in the fourth quarter of 2002. Excluding Australia, and the foreign exchange impact, local currency international revenues increased 6.4 percent in the fourth quarter of 2003 compared to the similar period a year ago.
Net revenues for the full year 2003 for the Company’s business segments DonJoy, ProCare, OfficeCare, and International were $95.4 million, $47.9 million, $25.6 million and $25.1 million, respectively, compared to prior year amounts of $90.8 million, $46.4 million, $23.0 million and $22.4 million, respectively.
Gross Profit Margin
For the fourth quarter of 2003, the Company reported gross profit of $31.9 million, or 58.3 percent of net revenues. Excluding Regentek operations, gross profit for the quarter was $28.7 million, or 56.7 percent of net revenues, compared to $21.3 million, or 45.7 percent of net revenues for the fourth quarter of 2002. Gross profit in the fourth quarter of 2002 was reduced by $1.0 million in charges for reserves for excess inventories related to discontinued products. For the full year 2003, the Company reported gross profit of $112.0 million, or 56.6 percent of net revenues. Excluding Regentek operations, gross profit for the year was $108.9 million, or 56.1 percent of net revenues, compared to $86.8 million, or 47.5 percent of net revenues for fiscal 2002. Gross profit for 2002 reflects $5.1 million of aggregate charges for incremental inventory reserves taken in 2002.
Conference Call Information
dj Orthopedics has scheduled an investor conference call to discuss this announcement beginning at 5:00 PM, Eastern Time today, January 28, 2004. Individuals interested in listening to the conference call may do so by dialing (706) 634-0177, using the reservation code 5034054. A telephone replay will be available for 48 hours following the conclusion of the call by dialing (706) 645-9291 and using the above reservation code. The live conference call also will be available via the Internet at www.djortho.com, and a recording of the call will be available on the Company’s website.
About dj Orthopedics, Inc.
dj Orthopedics is a global medical device company specializing in rehabilitation and regeneration products for the non-operative orthopedic and spine markets. The Company’s broad range of over 600 rehabilitation products, including rigid knee braces, soft goods and pain management products, are used in the prevention of injury, in the treatment of chronic conditions and for recovery after surgery or injury. The Company’s regeneration products consist of bone growth stimulation devices that are used to treat nonunion fractures and as an adjunct therapy after spinal fusion surgery.
The Company sells its products in the United States and in more than 30 other countries through networks of agents, distributors and its direct sales force that market its products to orthopedic and podiatric surgeons, spine surgeons, orthopedic and prosthetic centers, third-party distributors, hospitals, surgery centers, physical therapists, athletic trainers and other healthcare professionals. For additional information on the Company, please visit www.djortho.com
Safe Harbor Statement
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such statements relate to, among other
things, the Company’s future growth and profitability, growth strategy, the Company’s plans with respect to the recently acquired bone growth stimulation device business, the Company’s anticipated financial results for 2004, the settlement of the Company’s outstanding class action lawsuit and trends in the markets in which the Company operates. The words “believe,” “should,” “expect,” “intend,” “estimate” and “anticipate,” variations of such words and similar expressions identify forward-looking statements, but their absence does not mean that a statement is not a forward-looking statement. These forward-looking statements are based on the Company’s current expectations and are subject to a number of risks, uncertainties and assumptions. The Company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. Among the important factors that could cause actual results to differ significantly from those expressed or implied by such forward-looking statements are risks relating to: implementing our business strategy relative to the acquisition of the bone growth stimulation device business; the continued growth of the bone growth stimulation market; outsourcing certain administrative functions relating to our OfficeCare sales channel; our ability to successfully develop, license or acquire, and timely introduce and market new products or product enhancements; our dependence on orthopedic professionals, agents and distributors for marketing our products; our transition to direct distribution of our products in select foreign countries; our international operations; our quarterly operating results are subject to substantial fluctuations; our high level of indebtedness; the restrictions imposed by the terms of our indebtedness; our ability to generate cash to service our indebtedness; government regulations; developing and protecting our intellectual property; and the effects of healthcare reform, managed care and buying groups on prices of our products. Other risk factors are detailed in our Annual Report on Form 10-K for the 2002 calendar year, filed on March 28, 2003 with the Securities and Exchange Commission.
Tables to follow
dj Orthopedics, Inc.
Unaudited Condensed Consolidated Statements of Operations
(In thousands, except per share data)
| | Three Months Ended | | Twelve Months Ended | |
| | December 31, 2003 | | December 31, 2002 | | December 31, 2003 | | December 31, 2002 | |
Net revenues | | $ | 54,615 | | $ | 46,660 | | $ | 197,939 | | $ | 182,636 | |
Costs of goods sold | | 22,764 | | 25,350 | | 85,927 | | 95,878 | |
Gross Profit | | 31,851 | | 21,310 | | 112,012 | | 86,758 | |
Operating expenses: | | | | | | | | | |
Sales and marketing | | 14,959 | | 14,746 | | 54,067 | | 56,216 | |
General and administrative | | 5,496 | | 7,763 | | 21,767 | | 26,414 | |
Research and development | | 1,309 | | 755 | | 4,442 | | 2,922 | |
Amortization of acquired intangibles | | 464 | | — | | 464 | | — | |
Impairment of long-lived assets | | — | | 1,261 | | — | | 3,666 | |
Performance improvement, restructuring and other | | — | | 3,882 | | (497 | ) | 10,008 | |
Total operating expense | | 22,228 | | 28,407 | | 80,243 | | 99,226 | |
Income (loss) from operations | | 9,623 | | (7,097 | ) | 31,769 | | (12,468 | ) |
Interest expense and other, net | | (2,894 | ) | (3,048 | ) | (11,718 | ) | (12,088 | ) |
Income (loss) before income taxes | | 6,729 | | (10,145 | ) | 20,051 | | (24,556 | ) |
(Provision) benefit for income taxes | | (2,648 | ) | 4,173 | | (7,980 | ) | 9,361 | |
Net income (loss) | | $ | 4,081 | | $ | (5,972 | ) | $ | 12,071 | | $ | (15,195 | ) |
| | | | | | | | | |
Net income (loss) per share: | | | | | | | | | |
Basic | | $ | 0.23 | | $ | (0.33 | ) | $ | 0.67 | | $ | (0.85 | ) |
Diluted | | $ | 0.21 | | $ | (0.33 | ) | $ | 0.64 | | $ | (0.85 | ) |
Weighted average shares outstanding used to calculate per share information: | | | | | | | | | |
Basic | | 18,097 | | 17,873 | | 17,963 | | 17,873 | |
Diluted | | 19,619 | | 17,873 | | 18,791 | | 17,873 | |
| | | | | | | | | |
Adjusted EBITDA (1) | | $ | 12,506 | | $ | 2,309 | | $ | 40,640 | | $ | 19,745 | |
(1) The Company defines EBITDA as net income (loss) before net interest expense, (provision) benefit for income taxes and depreciation and amortization. Adjusted EBITDA represents EBITDA, as defined, adjusted to eliminate amounts related to (i) costs and expenses that management does not consider reflective of the Company’s ongoing core operating results and (ii) other adjustments, such as adjustments to add back certain restructuring and other charges, aggregating $25.1 million recorded in 2002 in connection with the Company’s performance improvement program, because the Company was permitted to adjust for these amounts in measuring its performance under its prior bank credit facility. The following table reconciles net income (loss), which management believes is the most directly comparable GAAP measure, to EBITDA and Adjusted EBITDA:
| | Three Months Ended | | Twelve Months Ended | |
| | December 31,
2003 | | December 31,
2002 | | December 31,
2003 | | December 31,
2002 | |
Net income (loss) | | $ | 4,081 | | $ | (5,972 | ) | $ | 12,071 | | $ | (15,195 | ) |
Interest expense, net of interest income | | 3,055 | | 3,048 | | 12,184 | | 11,887 | |
Income taxes | | 2,648 | | (4,173 | ) | 7,980 | | (9,361 | ) |
Depreciation and amortization | | 2,503 | | 1,821 | | 8,186 | | 7,283 | |
EBITDA | | 12,287 | | (5,276 | ) | 40,421 | | (5,386 | ) |
Net adjustments | | 219 | | 7,585 | | 219 | | 25,131 | |
Adjusted EBITDA | | $ | 12,506 | | $ | 2,309 | | $ | 40,640 | | $ | 19,745 | |
EBITDA and Adjusted EBITDA are supplemental measures of the Company’s performance that are not required by, or presented in accordance with, generally accepted accounting principles. EBITDA and Adjusted EBITDA are not measurements of the Company’s financial performance under GAAP and should not be considered as alternatives to net income, operating income or any other performance measures derived in accordance with GAAP. The Company presents Adjusted EBITDA because management considers it an important supplemental measure of our performance and believes it is frequently used by securities analysts, investors and other interested parties to evaluate the performance of companies like the Company. Management also uses financial measures similar to Adjusted EBITDA, though subject to certain different adjustments, to measure the Company’s performance under its new credit agreement entered into in November 2003. Management also believes EBITDA and Adjusted EBITDA facilitate comparisons from period to period and company to company by backing out potential differences caused by items such as variations in capital structure, affecting relative interest expense.
EBITDA and Adjusted EBITDA have limitations as analytical tools and you should not consider them in isolation, or as a substitute for analysis of the Company’s results reported under GAAP. Among these limitations are that EBITDA and Adjusted EBITDA do not reflect the Company’s significant interest expense, or the cash requirements necessary to service interest or principal payments on the Company’s indebtedness, do not reflect the Company’s cash expenditures for capital expenditures, and do not reflect changes in, or cash requirements for, working capital.
dj Orthopedics, Inc.
Unaudited Condensed Consolidated Balance Sheets
(In thousands)
| | December 31, | |
| | 2003 | | 2002 | |
Assets | | | | | |
Current assets: | | | | | |
Cash and cash equivalents | | $ | 19,146 | | $ | 32,085 | |
Accounts receivable, net | | 43,876 | | 33,705 | |
Inventories, net | | 15,534 | | 14,583 | |
Deferred tax asset, current portion | | 11,283 | | 10,247 | |
Other current assets | | 6,342 | | 4,970 | |
Total current assets | | 96,181 | | 95,590 | |
Property, plant and equipment, net | | 15,556 | | 14,082 | |
Goodwill, intangible assets and other assets | | 161,258 | | 72,568 | |
Deferred tax asset | | 47,509 | | 55,484 | |
Total assets | | $ | 320,504 | | $ | 237,724 | |
| | | | | |
Liabilities and stockholders’ equity | | | | | |
Current liabilities: | | | | | |
Accounts payable and other accrued liabilities | | $ | 29,015 | | $ | 26,995 | |
Long-term debt, current portion | | 5,000 | | 1,274 | |
Total current liabilities | | 34,015 | | 28,269 | |
Long-term debt, less current portion | | 169,156 | | 108,542 | |
Total stockholders’ equity | | 117,333 | | 100,913 | |
Total liabilities and stockholders’ equity | | $ | 320,504 | | $ | 237,724 | |
dj Orthopedics, Inc.
Unaudited Segment Information
(In thousands)
| | Three Months Ended | | Twelve Months Ended | |
| | December 31, 2003 | | December 31,
2002 | | December 31,
2003 | | December 31,
2002 | |
| | | | | | | | | |
Net revenues: | | | | | | | | | |
DonJoy | | $ | 25,067 | | $ | 23,341 | | $ | 95,353 | | $ | 90,796 | |
ProCare | | 12,550 | | 11,730 | | 47,858 | | 46,444 | |
Regentek | | 3,989 | | — | | 3,989 | | — | |
OfficeCare | | 7,167 | | 5,850 | | 25,631 | | 22,966 | |
International | | 5,842 | | 5,739 | | 25,108 | | 22,430 | |
Consolidated net revenues | | 54,615 | | 46,660 | | 197,939 | | 182,636 | |
| | | | | | | | | |
Gross profit: | | | | | | | | | |
DonJoy | | 14,334 | | 13,530 | | 53,824 | | 53,377 | |
ProCare | | 5,038 | | 2,417 | | 19,805 | | 11,323 | |
Regentek | | 3,145 | | — | | 3,145 | | — | |
OfficeCare | | 5,840 | | 4,364 | | 20,162 | | 16,829 | |
International | | 3,494 | | 2,017 | | 15,076 | | 10,325 | |
Gross profit from reportable segments | | 31,851 | | 22,328 | | 112,012 | | 91,854 | |
Expenses not allocated to segments | | — | | (1,018 | ) | — | | (5,096 | ) |
Consolidated gross profit | | 31,851 | | 21,310 | | 112,012 | | 86,758 | |
| | | | | | | | | |
Income (loss) from operations: | | | | | | | | | |
DonJoy | | 6,236 | | 5,930 | | 22,437 | | 23,040 | |
ProCare | | 2,572 | | 186 | | 10,224 | | 2,382 | |
Regentek | | 537 | | — | | 537 | | — | |
OfficeCare | | 1,905 | | (1,744 | ) | 2,801 | | (4,591 | ) |
International | | 1,001 | | (599 | ) | 6,255 | | 824 | |
Income from reportable segments | | 12,251 | | 3,773 | | 42,254 | | 21,655 | |
Expenses not allocated to segments | | (2,628 | ) | (10,870 | ) | (10,485 | ) | (34,123 | ) |
Consolidated income (loss) from operations | | $ | 9,623 | | $ | (7,097 | ) | $ | 31,769 | | $ | (12,468 | ) |
dj Orthopedics, Inc.
Unaudited Pro Forma Combined Segment and Statement of Operations Information (1)
(In thousands, except per share data)
| | | | Three Months Ended | | | |
| | Year ended
December 31,
2002 | | March 29,
2003 | | June 28,
2003 | | September
27, 2003 | | December 31,
2003 | | Year ended
December 31,
2003 | |
| | | | | | | | | | | | | |
Net revenues: | | | | | | | | | | | | | |
DonJoy | | $ | 90,796 | | $ | 22,854 | | $ | 23,192 | | $ | 24,240 | | $ | 25,067 | | $ | 95,353 | |
ProCare | | 46,444 | | 11,267 | | 11,659 | | 12,382 | | 12,550 | | 47,858 | |
Regentek | | 38,964 | | 10,416 | | 11,522 | | 12,453 | | 12,037 | | 46,428 | |
OfficeCare | | 22,966 | | 5,822 | | 6,005 | | 6,637 | | 7,167 | | 25,631 | |
International | | 22,430 | | 7,111 | | 6,564 | | 5,591 | | 5,842 | | 25,108 | |
Consolidated net revenues | | 221,600 | | 57,470 | | 58,942 | | 61,303 | | 62,663 | | 240,378 | |
| | | | | | | | | | | | | |
Gross profit: | | | | | | | | | | | | | |
DonJoy | | 53,377 | | 12,579 | | 13,047 | | 13,864 | | 14,334 | | 53,824 | |
ProCare | | 11,323 | | 4,460 | | 4,879 | | 5,428 | | 5,038 | | 19,805 | |
Regentek | | 32,115 | | 8,386 | | 9,895 | | 10,375 | | 10,293 | | 38,949 | |
OfficeCare | | 16,829 | | 4,410 | | 4,567 | | 5,345 | | 5,840 | | 20,162 | |
International | | 10,325 | | 4,344 | | 3,673 | | 3,565 | | 3,494 | | 15,076 | |
Gross profit from reportable segments | | 123,969 | | 34,179 | | 36,061 | | 38,577 | | 38,999 | | 147,816 | |
Expenses not allocated to segments | | (5,096 | ) | — | | — | | — | | — | | — | |
Consolidated gross profit | | 118,873 | | 34,179 | | 36,061 | | 38,577 | | 38,999 | | 147,816 | |
| | | | | | | | | | | | | |
Income (loss) from operations: | | | | | | | | | | | | | |
DonJoy | | 23,040 | | 5,008 | | 5,325 | | 5,868 | | 6,236 | | 22,437 | |
ProCare | | 2,382 | | 2,253 | | 2,526 | | 2,873 | | 2,572 | | 10,224 | |
Regentek | | 4,859 | | 707 | | 2,361 | | 2,876 | | 2,324 | | 8,268 | |
OfficeCare | | (4,591 | ) | 132 | | 258 | | 506 | | 1,905 | | 2,801 | |
International | | 824 | | 2,092 | | 1,623 | | 1,539 | | 1,001 | | 6,255 | |
Income from reportable segments | | 26,514 | | 10,192 | | 12,093 | | 13,662 | | 14,038 | | 49,985 | |
Expenses not allocated to segments | | (34,123 | ) | (3,711 | ) | (2,645 | ) | (1,501 | ) | (2,628 | ) | (10,485 | ) |
Consolidated income (loss) from operations | | (7,609 | ) | 6,481 | | 9,448 | | 12,161 | | 11,410 | | 39,500 | |
| | | | | | | | | | | | | |
Interest expense, net of interest income | | (14,365 | ) | (3,571 | ) | (3,616 | ) | (3,632 | ) | (3,615 | ) | (14,434 | ) |
Other income (expense) | | (200 | ) | 149 | | 398 | | (242 | ) | 161 | | 466 | |
Income (loss) before income taxes | | (22,174 | ) | 3,059 | | 6,230 | | 8,287 | | 7,956 | | 25,532 | |
Benefit (provision) for income taxes | | 8,453 | | (1,224 | ) | (2,492 | ) | (3,315 | ) | (3,131 | ) | (10,162 | ) |
Net income (loss) | | $ | (13,721 | ) | $ | 1,835 | | $ | 3,738 | | $ | 4,972 | | $ | 4,825 | | $ | 15,370 | |
| | | | | | | | | | | | | |
Net income (loss) per share: | | | | | | | | | | | | | |
Basic | | $ | (0.77 | ) | $ | 0.10 | | $ | 0.21 | | $ | 0.28 | | $ | 0.27 | | $ | 0.86 | |
Diluted | | $ | (0.77 | ) | $ | 0.10 | | $ | 0.20 | | $ | 0.26 | | $ | 0.25 | | $ | 0.82 | |
| | | | | | | | | | | | | |
Weighted average shares outstanding used to calculate per share information: | | | | | | | | | | | | | |
Basic | | 17,873 | | 17,902 | | 17,902 | | 17,945 | | 18,097 | | 17,963 | |
Diluted | | 17,873 | | 17,941 | | 18,336 | | 18,898 | | 19,619 | | 18,791 | |
| | | | | | | | | | | | | |
Shipping days per period | | 253 | | 62 | | 64 | | 63 | | 64 | | 253 | |
(1) The Company’s Regentek acquisition closed effective November 26, 2003. The pro forma information presented, and the underlying pro forma adjustments, have been prepared based on the actual balances of tangible and intangible assets acquired as of the closing date, and accordingly, differ from pro forma amounts previously reported by the Company, which were based upon Regentek financial information as of September 30, 2003. These differences primarily include the pro forma adjustment to increase costs of goods sold related to the step up in the value of acquired inventories, which decreased by approximately $0.2 million to approximately $0.7 million, and the pro forma adjustment to add amortization expense related to the value assigned to acquired customer order backlog, which decreased by approximately $0.4 million to approximately $0.2 million.
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