ALTEC LANSING TECHNOLOGIES, INC.
CONDENSED COMBINED FINANCIAL STATEMENTS
(Unaudited)
TABLE OF CONTENTS
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ALTEC LANSING TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
June 30, | ||||
(in thousands, except per share data) | 2005 | |||
ASSETS | ||||
Current assets: | ||||
Cash | $ | 4,537 | ||
Accounts receivable, net of allowances of $6,790 | 12,731 | |||
Inventories | 21,192 | |||
Deferred income taxes | 2,548 | |||
Prepaid expenses and other current assets | 2,245 | |||
Total current assets | 43,253 | |||
Property, plant, and equipment at cost, net | 6,756 | |||
Other assets | 176 | |||
Trademark | 12,502 | |||
Total assets | $ | 62,687 | ||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||
Current liabilities: | ||||
Trade accounts payable | $ | 17,195 | ||
Accrued expenses | 4,594 | |||
Current maturities of long-term debt | 177 | |||
Current maturities of capital lease liabilities | 274 | |||
Total current liabilities | 22,240 | |||
Long-term debt | 6,857 | |||
Notes payable to stockholders | 2,500 | |||
Capital lease liabilities | 67 | |||
Other long-term liabilities | 1,296 | |||
Minority interest | 170 | |||
Deferred tax liabilities | 4,580 | |||
Total liabilities | 37,710 | |||
Stockholders’ equity: | ||||
Capital stock: | ||||
Series A convertible preferred stock, par value $.01: authorized 7,500,000 shares; 5,766,000 shares issued and outstanding (aggregate liquidation preference of $7,000) | - | |||
Preferred stock, par value $.01: authorized 5,000,000 shares; none issued or outstanding | - | |||
Common stock, par value $.01: authorized 50,000,000 shares; 6,500,000 shares issued and outstanding | 65 | |||
Additional paid-in capital | 12,528 | |||
Unearned compensation | (329 | ) | ||
Retained earnings | 12,713 | |||
Total stockholders’ equity | 24,977 | |||
Total liabilities and stockholders’ equity | $ | 62,687 |
See accompanying notes.
ALTEC LANSING TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(in thousands) | Six months ended June 30 | ||||||
2005 | 2004 | ||||||
Net sales | $ | 68,282 | $ | 48,039 | |||
Cost of sales | 41,171 | 34,072 | |||||
Gross profit | 27,111 | 13,967 | |||||
Selling, general, and administrative expenses | 12,163 | 8,845 | |||||
Research and development | 3,218 | 2,403 | |||||
15,381 | 11,248 | ||||||
Operating income | 11,730 | 2,719 | |||||
Interest expense | 610 | 754 | |||||
Other | 535 | 182 | |||||
Income before income taxes | 10,585 | 1,783 | |||||
Income tax (expense) benefit | (4,002 | ) | 293 | ||||
Net income | $ | 6,583 | $ | 2,076 |
See accompanying notes.
ALTEC LANSING TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(in thousands) | Six months ended June 30 | ||||||
2005 | 2004 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES | |||||||
Net income | $ | 6,583 | $ | 2,076 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Provision for allowances on accounts receivable | (262 | ) | (304 | ) | |||
Provision for losses on inventory | 1,019 | 240 | |||||
Stock compensation | 1,390 | - | |||||
Depreciation and amortization | 1,065 | 1,427 | |||||
Deferred tax | - | (293 | ) | ||||
Changes in assets and liabilities: | |||||||
Accounts receivable | 10,195 | 3,205 | |||||
Inventories | (5,857 | ) | (3,828 | ) | |||
Prepaid expenses and other assets | (600 | ) | 134 | ||||
Accounts payable, accrued expenses, and other liabilities | (3,393 | ) | (2,205 | ) | |||
Net cash provided by operating activities | 10,140 | 452 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES | |||||||
Capital expenditures | (1,134 | ) | (644 | ) | |||
Net cash used in investing activities | (1,134 | ) | (644 | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||||
Net (payments) proceeds under line of credit | (8,110 | ) | 3,221 | ||||
Principal payments on long-term debt | (341 | ) | (348 | ) | |||
Payments on capital lease obligations | (135 | ) | (75 | ) | |||
Net cash (used in) provided by financing activities | (8,586 | ) | 2,798 | ||||
Net increase in cash | 420 | 2,606 | |||||
Cash at beginning of period | 4,117 | 1,739 | |||||
Cash at end of period | $ | 4,537 | $ | 4,345 | |||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | |||||||
Cash paid for interest expense | $ | 527 | $ | 433 | |||
Cash paid for income taxes | $ | 4,332 | $ | 14 | |||
Assets acquired under capital lease obligations | $ | 192 | $ | - |
See accompanying notes
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ALTEC LANSING TECHNOLOGIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
(Dollars in thousands)
1. | BASIS OF PRESENTATION |
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S.) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these condensed consolidated financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the U.S. These condensed consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments), which are in the opinion of management, necessary for a fair presentation of the results for the interim periods. Interim results are not necessarily indicative of results that may be expected for the full year.
2. | INVENTORIES |
Inventories consist of the following as of June 30, 2005:
Raw materials | $ | 1,850 | ||
Work-in-progress | 351 | |||
Finished goods | 18,991 |
3. | STOCK OPTIONS |
The Company applies Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation, together with Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, as permitted under SFAS No. 123, in accounting for its stock option plans. Accordingly, the Company uses the intrinsic value method to measure the costs associated with the granting of stock options to employees and this cost is accounted for as compensation expense in the consolidated statements of operations over the option vesting period or upon meeting certain performance criteria. In accordance with SFAS No. 123, the Company discloses the fair values of stock options issued to employees. Fair values of stock options are determined using the Black-Scholes option-pricing model. Pro forma disclosures as if compensation expense had been recognized for options granted in 2002 and 2001 in compliance with SFAS No. FAS 123 and SFAS No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure, are not presented, as such effects are not material to the results of operations in 2005.
4. | LONG-TERM DEBT |
The Company’s long-term debt is summarized as follows as of June 30, 2005:
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ALTEC LANSING TECHNOLOGIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
(Dollars in thousands)
Revolving credit line | $ | 5,006 | ||
Mortgage note, payable in monthly installments of $8 through September 2016, including interest at a variable rate (5.25% at June 30, 2005); secured by real property | 788 | |||
Mortgage note, payable in monthly installments of $19 through June 2020, including interest at a variable rate that is set every three years (7.5% at June 30, 2005); secured by real property | 1,189 | |||
Mortgage note, payable in monthly installments of $1 through July 2016, including interest at a variable rate (5.25% at June 30, 2005); secured by real property | 51 | |||
7,034 | ||||
Less current maturities | 177 | |||
$ | 6,857 |
5. | INCOME TAXES |
For the six months ended June 30, 2005 and 2004, we recorded income tax expense (benefit) of $4,002 and $(293) at effective rates of 37.81% and (16.43%), respectively. The Company’s effective tax rate for the six months ended June 30, 2004 is due to the Company’s release of certain valuation allowance against Federal and state net operating losses.
6. | GEOGRAPHIC INFORMATION |
Information about the Company’s operations in the United States and other countries is as follows as of June 30, 2005 and for the six months ended June 30, 2005 and 2004:
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ALTEC LANSING TECHNOLOGIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
(Dollars in thousands)
Six months ended June 30, | |||||||
Net sales | 2005 | 2004 | |||||
United States | $ | 55,807 | $ | 34,848 | |||
Asia | 12,475 | 13,191 | |||||
Consolidated | $ | 68,282 | $ | 48,039 | |||
June 30, | |||||||
Identifiable assets | 2005 | ||||||
United States | $ | 54,118 | |||||
Asia | 8,569 | ||||||
Consolidated | $ | 62,687 | |||||
Identifiable assets are those assets of the Company that are identified with the operations in each geographic area.
7. | STOCK INCENTIVE PLAN |
On November 8, 2001, the Company entered into a Stock Award Agreement with an executive. Per the Agreement, the Company issued 500,000 shares of Company common stock. The shares are subject to several vesting and forfeiture provisions, including time-based and performance conditions. The total compensation expense recorded for the six months ended June 30, 2005 and 2004 was $1,390 and $0, respectively and is included in Selling, general, and administrative expenses in the accompanying Consolidated Statement of Operations. As of June 30, 2005, 250,000 of these shares have vested, with the remaining 250,000 considered probable of vesting in 2005.
8. | SALE OF BUSINESS |
On July 11, 2005, the Company entered into a definitive Agreement and Plan of Merger with Plantronics, Inc. under which Plantronics will acquire all of the Company’s issued and outstanding stock for $166 million. The transaction is expected to close in August 2005.