Exhibit 99.1
Durel Corporation
Balance Sheets
(dollars in thousands)
As of As of
September 28, 2003 December 29, 2002
(unaudited) (unaudited)
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Assets
Current assets:
Cash and cash equivalents $8,344 $3,614
Accounts receivable, net 8,333 11,545
Inventories, net:
Raw materials 631 943
In-process and finished goods 4,001 5,440
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Total inventories 4,632 6,383
Prepaid expenses and other 298 13
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Total current assets 21,607 21,555
Non-current pension asset 563 563
Deferred tax assets 1,863 1,863
Property, plant and equipment, net of accumulated
depreciation of $18,002 and $14,908) 19,355 21,228
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Total assets $43,388 $45,209
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Liabilities and shareholders' equity
Current liabilities
Accounts payable $3,668 $6,225
Accrued payroll and related expenses 2,376 3,609
Accrued liabilities 1,196 1,199
Payable to shareholders 360 966
Income taxes payable 782 1,631
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Total current liabilities 8,382 13,630
Deferred tax liability 1,439 1,371
Contingencies
- -
Shareholders' equity:
Common shares, par value $.01 per share Authorized shares - 150,000 Issued
and outstanding shares - 2,000 - -
Additional paid-in capital 7,040 7,040
Retained earnings 26,527 23,168
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Total shareholders' equity 33,567 30,208
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Total liabilities and shareholders' equity $43,388 $45,209
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The accompanying notes are an integral part of these financial statements.
Exhibit 99.1
Durel Corporation
Statements of Income
(dollars in thousands)
For the Nine-Months For the Nine-Months
Ended Ended
September 28, 2003 September 29, 2002
(unaudited) (unaudited)
Net sales $51,331 $59,076
Cost of goods sold 29,243 34,313
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Gross Profit 22,088 24,763
Costs and expenses:
Selling and administrative 6,377 6,508
Research and development 2,410 2,509
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Income from operations 13,301 15,746
Other (expense) income:
Interest income 77 50
Interest expense - (512)
Other (154) (186)
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Income before income taxes 13,224 15,098
Provision for income taxes (3,968) (4,531)
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Net income $9,256 $10,567
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The accompanying notes are an integral part of these financial statements.
Exhibit 99.1
Durel Corporation
Statements of Cash Flows
(dollars in thousands)
For the Nine-Months For the Nine-Months
Ended Ended
September 28, 2003 September 29, 2002
(unaudited) (unaudited)
Operating Activities
Net income $9,256 $10,567
Adjustments to reconcile net income to net cash provided by
operating
activities:
Depreciation 2,201 2,376
Changes in operating assets and liabilities:
Accounts receivable 3,212 (2,677)
Inventories 1,751 1,561
Prepaid expenses and other (285) (36)
Accounts payable and accrued liabilities (4,421) 1,536
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Net cash provided by operating activities 11,714 13,327
Investing Activities
Purchase of property, plant and equipment (328) (257)
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Net cash used in investing activities (328) (257)
Financing Activities
Repayments of long term debt - (4,000)
Proceeds from long term debt - 1,451
Repayments of borrowings from shareholders (656) (5,000)
Dividends to shareholders (6,000) -
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Net cash used in financing activities (6,656) (7,549)
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Net increase in cash and cash equivalents 4,730 5,521
Cash and cash equivalents at the beginning of the period 3,614 1,172
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Cash and cash equivalents and the end of the period $8,344 $6,693
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The accompanying notes are an integral part of these financial statements.
DUREL CORPORATION
SUPPLEMENTARY NOTES
A. The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. For further
information regarding Durel's accounting policies, refer to the audited
financial statements and footnotes of Durel for the fiscal year ended
December 29, 2002, which have been filed with the Rogers Corporation's
Annual Report on Form 10-K for fiscal year ended December 29, 2002 and are
incorporated by reference herein.
B. Durel Corporation was incorporated on June 1, 1988, in the state of
Delaware. Durel operates in one operating segment and engages primarily in
the research, development, manufacture, and sales of electroluminescent
products. Until September 30, 2003, Durel was a joint venture of Rogers
Corporation and Minnesota Mining and Manufacturing Company (the
"shareholders").
C. Durel's effective tax rate was 30% for the first nine months of 2003 and
2002, respectively. The effective tax rate is lower than the statutory rate
due to various tax benefits, including nontaxable foreign sales income and
research and development credits. Income taxes paid were $5,600,000 and
$4,815,000 in the first nine months of 2003 and 2002, respectively.
D. In connection with the sale of Durel's products, Durel reimburses one of
the shareholders for the selling costs and pays no commission. Selling
costs reimbursed to this shareholder were approximately $235,000 and
$120,000 for the nine months ended September 28, 2003 and September 29,
2002, respectively. The other shareholder bears a large portion of the
selling costs and receives a commission ranging from 2.5 to 5 percent of
sales. Commissions earned by this shareholder were approximately $2,149,000
and $2,465,000 for the nine months ended September 28, 2003 and September
29, 2002, respectively.
E. Durel's payable to shareholders in 2003 and 2002 represents amounts due to
the Shareholders for various costs paid on behalf of Durel, including items
such as research and development, general corporate overhead, and various
marketing charges. Amounts paid to the shareholders for these respective
costs were $352,000 and $703,000 for the nine months ended September 28,
2003 and September 29, 2002, respectively.
On September 24, 1999, Durel executed a promissory note with one
of its shareholders under which the Shareholder would make funds
available to Durel from time to time. The promissory note was
amended in September 2001 to increase the available borrowing
amount to $8 million and to extend the maturity date through
September 2002. The note accrued interest at prime. Durel had $5
million outstanding under this note on December 30, 2001 but
repaid the note prior to the maturity in 2002. The borrowing
facility was terminated when it was paid off. Interest paid on
this note in 2003 and 2002 was $0 and $51,000, respectively.
F. On January 4, 1999, Durel converted a $10 million unsecured revolving line
of credit agreement with a bank into a term loan. The loan was guaranteed
by one of the Shareholders, bearing interest at a fixed rate of LIBOR plus
1.05 percent. On January 2, 2002, Durel amended this term loan and merged
the outstanding balance of the term loan in the amounts of $7.8 million and
$2.2 million outstanding under Durel's unsecured revolving line of credit
into a new loan in the amount of $10 million. On January 3, 2002, Durel
also entered into an interest rate swap agreement to fix the effective
interest rate on the term loan at 5.44 percent. On December 11, 2002, Durel
paid off the term loan. In addition, Durel paid approximately $390,000 to
settle the interest rate swap agreement with the bank. Durel's line of
credit was terminated in connection with paying off the loan. Interest paid
during the nine months ended September 28, 2003 and September 29, 2002 was
$0 and $485,000, respectively.
Exhibit 99.1
G. The nature and scope of Durel's business bring it in regular contact with
the general public and a variety of businesses and government agencies.
Such activities inherently subject Durel to the possibility of litigation,
including environmental and product liability matters that are defended and
handled in the ordinary course of business. Durel has established accruals
for matters for which management considers a loss to be probable and
reasonably estimable. It is the opinion of management that facts known at
the present time do not indicate that any such matters, after taking into
account insurance coverage and the aforementioned accruals, would have a
material adverse effect on the financial position of Durel.