EXHIBIT 99.2
NEEDLETECH PRODUCTS, INC. AND AFFILIATE
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
| ASSETS | ||||||||
June 30, 2008 (Unaudited) | December 31, 2007 | |||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | 3,087 | $ | 2,910 | ||||
| Marketable securities | 426 | 443 | ||||||
| Trade accounts receivable | 1,789 | 1,699 | ||||||
| Inventories | 2,664 | 2,530 | ||||||
| Deferred income tax asset | 225 | 81 | ||||||
| Prepaid expenses and other current assets | 215 | 128 | ||||||
| Total current assets | 8,406 | 7,791 | ||||||
| PROPERTY AND EQUIPMENT, NET | 4,116 | 3,842 | ||||||
| OTHER ASSETS | ||||||||
| Marketable securities – long term | 1,591 | 1,585 | ||||||
| Other | 5 | 5 | ||||||
| 1,596 | 1,590 | |||||||
| Total assets | $ | 14,118 | $ | 13,223 | ||||
The accompanying notes are an integral part of these consolidated statements.
NEEDLETECH PRODUCTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS - Continued
(Amounts in thousands)
| LIABILITIES, REDEEMABLE COMMON STOCK AND SHAREHOLDERS’ EQUITY | ||||||||
June 30, 2008 (Unaudited) | December 31, 2007 | |||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable | $ | 378 | $ | 490 | ||||
| Accrued salaries, wages and payroll taxes | 283 | 192 | ||||||
| Accrued 401(k) contribution | 96 | 166 | ||||||
| Income taxes payable | 438 | 431 | ||||||
| Customer deposits | 137 | 137 | ||||||
| Other current liabilities | 108 | 89 | ||||||
| Total current liabilities | 1,440 | 1,505 | ||||||
| DEFERRED INCOME TAXES | 324 | 350 | ||||||
| Total liabilities | 1,764 | 1,855 | ||||||
| REDEEMABLE COMMON STOCK OWNED BY ESOP | 2,796 | 2,796 | ||||||
| SHAREHOLDERS’ EQUITY | ||||||||
| Common stock | 91 | 91 | ||||||
| Retained earnings | 9,348 | 8,320 | ||||||
| Accumulated other comprehensive income | 46 | 90 | ||||||
| Non-controlling interest of affiliate | 73 | 71 | ||||||
| Total shareholders’ equity | 9,558 | 8,572 | ||||||
| Total liabilities, redeemable common stock and shareholders’ equity | $ | 14,118 | $ | 13,223 | ||||
The accompanying notes are an integral part of these consolidated statements.
NEEDLETECH PRODUCTS, INC. AND AFFILIATE
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
(Amounts in thousands, except per share data)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2008 | 2007 | 2008 | 2007 | |||||||||||||
| Revenue | ||||||||||||||||
| Product sales | $ | 4,404 | $ | 4,091 | $ | 8,774 | $ | 7,999 | ||||||||
| Net fee income | - | 39 | 82 | 77 | ||||||||||||
| 4,404 | 4,130 | 8,856 | 8,076 | |||||||||||||
| Cost of sales | 2,883 | 2,410 | 5,763 | 4,871 | ||||||||||||
| Gross profit | 1,521 | 1,720 | 3,093 | 3,205 | ||||||||||||
| Operating expenses | ||||||||||||||||
| Selling, general and administrative | 420 | 298 | 860 | 612 | ||||||||||||
| Research and development | 137 | 139 | 274 | 281 | ||||||||||||
| Loss on sale of equipment | - | 2 | - | 2 | ||||||||||||
| 557 | 439 | 1,134 | 895 | |||||||||||||
| Earnings from operations | 964 | 1,281 | 1,959 | 2,310 | ||||||||||||
| Other income | ||||||||||||||||
| Interest and investment income | 14 | 35 | 34 | 47 | ||||||||||||
| Other | - | 2 | 2 | 2 | ||||||||||||
| 14 | 37 | 36 | 49 | |||||||||||||
| Earnings before income taxes | 978 | 1,318 | 1,995 | 2,359 | ||||||||||||
| Income tax expense | 397 | 510 | 809 | 914 | ||||||||||||
| Net earnings before income of | ||||||||||||||||
| non-controlling interest of affiliate | 581 | 808 | 1,186 | 1,445 | ||||||||||||
| Less: Net earnings of non-controlling interest of affiliate | 2 | 1 | 2 | 1 | ||||||||||||
| NET EARNINGS | $ | 579 | $ | 807 | $ | 1,184 | $ | 1,444 | ||||||||
The accompanying notes are an integral part of these consolidated statements.
NEEDLETECH PRODUCTS, INC. AND AFFILIATE
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Amounts in thousands)
Six Months Ended June 30, | ||||||||
2008 | 2007 | |||||||
| Cash flows from operating activities | ||||||||
| Net earnings | $ | 1,184 | $ | 1,445 | ||||
| Adjustments to reconcile net earnings to net cash provided by operating activities | ||||||||
| Net earnings of non-controlling affiliate | 2 | 1 | ||||||
| Depreciation and amortization | 258 | 235 | ||||||
| Deferred income taxes | (114 | ) | 29 | |||||
| Loss on sale of equipment | - | 2 | ||||||
| Provision for allowances | (31 | ) | (12 | ) | ||||
| Realized gain on sale of marketable securities | (7 | ) | (51 | ) | ||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable | (87 | ) | (98 | ) | ||||
| Inventories | (106 | ) | (501 | ) | ||||
| Prepaid expenses and other current assets | (87 | ) | - | |||||
| Other assets | - | 2 | ||||||
| Trade accounts payable | (112 | ) | 413 | |||||
| Accrued salaries, wages and payroll taxes | 91 | 57 | ||||||
| Accrued 401(k) contribution | (70 | ) | (70 | ) | ||||
| Income taxes payable | 7 | 211 | ||||||
| Customer deposits | - | 137 | ||||||
| Other current liabilities | 19 | 123 | ||||||
| Net cash provided by operating activities | 947 | 1,923 | ||||||
| Cash flows from investing activities | ||||||||
| Purchases and construction of property and equipment | (532 | ) | (422 | ) | ||||
| Purchases of marketable securities | (923 | ) | (1,122 | ) | ||||
| Maturities of marketable securities | 75 | 160 | ||||||
| Proceeds from sales of marketable securities | 766 | 448 | ||||||
| Net cash used by investing activities | (614 | ) | (936 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Cash dividends paid | (156 | ) | (625 | ) | ||||
| Net cash used by financing activities | (156 | ) | (625 | ) | ||||
| NET INCREASE IN CASH AND CASH EQUIVALENTS | $ | 177 | $ | 362 | ||||
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 2,910 | 1,628 | ||||||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 3,087 | $ | 1,990 | ||||
The accompanying footnotes are an integral part of these consolidated statements.
NEEDLETECH PRODUCTS, INC. AND AFFILIATE
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
(UNAUDITED)
(Amounts in thousands)
Six Months Ended June 30, | ||||||||
| 2008 | 2007 | |||||||
| Supplementary cash flow disclosure: | ||||||||
| Taxes paid | $ | 886 | $ | 667 | ||||
The accompanying footnotes are an integral part of these consolidated statements.
NEEDLETECH PRODUCTS, INC. AND AFFILIATE
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008
(Unaudited)
NOTE A - BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS
The unaudited interim consolidated financial statements included herein reflect the operations of NeedleTech Products, Inc. and a Variable Interest Entity(“VIE”) for which NeedleTech Products, Inc. is the primary beneficiary. All significant accounts and transactions between NeedleTech Products, Inc. and the VIE have been eliminated. NeedleTech Products, Inc. and the VIE are together referred to as "NeedleTech" and the "Company" in these notes. These statements reflect all adjustments that are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows for the periods presented. All such adjustments are of a normal recurring nature. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These unaudited financial statements and notes should be read in conjunction with the audited consolidated financial statements and notes for the years ended December 31, 2007 and 2006, included in this Form 8-K/A. Comprehensive income is not presented for the interim periods included herein as the other comprehensive income items for the periods are not material. The results of operations for the six and three months ended June 30, 2008 and 2007 are not necessarily indicative of the results to be expected for a full year.
NeedleTech is a manufacturer of specialty needles and related medical devices. The Company’s current products include coaxial needles, biopsy needles, access trocars, brachytherapy needles, guidewire introducer needles, spinal needles, disposable veress needles, and other needle-based products. End markets served include the cardiology, orthopedic, pain management, endoscopy, spine, urology, and veterinary markets. The Company sells its products primarily to original equipment manufacturers. The non-controlling interest of affiliate owns real estate, which is utilized in the Company’s operations.
NOTE B – RECENTLY ISSUED ACCOUNTING STANDARDS
In June 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes, (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements in accordance with SFAS Statement No. 109, Accounting for Income Taxes. FIN 48 requires a company to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements. FASB Staff Position No. FIN 48-2 (as amended), delayed the effective date of FIN 48 for nonpublic enterprises to the annual financial statements for fiscal years beginning after December 15, 2007. Accordingly, FIN 48 would be effective in the Company’s year ended December 31, 2008 financial statements. The Company does not currently believe the adoption of FIN 48 will have a material impact on its financial statements.
In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 157, Fair Value Measurements (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 was effective for the Company on January 1, 2008. However, in February 2008 the FASB released FASB Staff Position No. FAS 157-2, Effective Date of FASB Statement No. 157, which delayed the effective date of SFAS 157 for all non-financial assets and non-financial liabilities, except those that are recognized or disclosed in the financial statements at fair value at least annually. Accordingly, the Company has adopted the provisions of SFAS 157 only with respect to its financial assets and liabilities as of January 1, 2008. The adoption of SFAS 157 for the Company’s financial assets and liabilities did not have a material impact on its consolidated financial statements.
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of FASB Statement No. 115 (“SFAS 159”). SFAS 159 permits entities to choose to measure eligible items at fair value at specified election dates and report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. SFAS No. 159, which the Company adopted on January 1, 2008, did not have a material impact on its consolidated financial statements. As permitted under SFAS 159, the Company has currently chosen not to elect the fair value option for any items that are not already required to be measured at fair value in accordance with accounting principles generally accepted in the United States.
NOTE C - INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined based on weighted average cost, which approximates the first-in, first-out (FIFO) method. Market is replacement cost or net realizable value. The Company estimates reserves for inventory obsolescence based upon management’s judgment of future realization. Inventories were comprised of the following (in thousands):
June 30, 2008 | December 31, 2007 | |||||||
| Raw materials | $ | 929 | $ | 756 | ||||
| Work in process | 1,088 | 1,175 | ||||||
| Finished goods | 729 | 709 | ||||||
| 2,746 | 2,640 | |||||||
| Allowance for obsolete inventory | (82 | ) | (110 | ) | ||||
| Total | $ | 2,664 | $ | 2,530 | ||||
NOTE D – FAIR VALUE
Effective January 1, 2008, the Company adopted SFAS No. 157, which defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. SFAS No. 157 establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:
• Level 1 — Quoted prices in active markets for identical assets or liabilities.
• Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
• Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.
The Company's adoption of SFAS No. 157 for its financial assets and liabilities did not have a material impact on its consolidated financial statements. The Company has segregated all financial assets and liabilities that are measured at fair value on a recurring basis (at least annually) into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date in the table below. FSP FAS 157-2 delayed the effective date for all nonfinancial assets and liabilities until January 1, 2009, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis.
The Company’s assets measured at fair value on a recurring basis subject to the disclosure requirements of SFAS 157 at June 30, 2008 were as follows (in thousands):
Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | |||||||||||||
| Marketable securities | $ | 2,017 | $ | - | $ | - | $ | 2,017 | ||||||||
NOTE E – SUBSEQUENT EVENT
On July 28, 2008, Theragenics Corporation purchased all of the outstanding common stock of NeedleTech for $47.8 million in cash.