-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MLYnnZhrluUfJApJFLSRsrZeLG2LzQ7UQP64pObwdj29YpKphPulqoBksTwtTBNR ZSWZ6nyDqCskpq5ExgO8mA== 0000898430-99-003809.txt : 19991018 0000898430-99-003809.hdr.sgml : 19991018 ACCESSION NUMBER: 0000898430-99-003809 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990722 ITEM INFORMATION: FILED AS OF DATE: 19991006 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HUDSON RESPIRATORY CARE INC CENTRAL INDEX KEY: 0001061893 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 951867330 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 333-56097 FILM NUMBER: 99723556 BUSINESS ADDRESS: STREET 1: 27711 DIAZ RD STREET 2: P O BOX 9020 CITY: TEMECULA STATE: CA ZIP: 92589 BUSINESS PHONE: 9096765611 MAIL ADDRESS: STREET 1: 27711 DIAZ RD STREET 2: P O BOX 9020 CITY: TEMECULA STATE: CA ZIP: 92589 8-K/A 1 FORM 8-K/A Washington, D.C. 20549 Form 8-K/A Current Report Pursuant to Section 13 or 15(d) of The Securities Act of 1934 Date of Report (Date of earliest event reported) July 22, 1999 ------------------------------ Hudson Respiratory Care Inc. - ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) California 333-56097 95-1867330 (State or other (Commission (I.R.S. Employer jurisdiction File Number) Identification No.) of incorporation)
27711 Diaz Road, P.O. Box 9020, Temecula, CA 92589 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (909) 676-5611 ---------------------------- Not applicable - -------------------------------------------------------------------------------- (Former name or former address, if changed since last report.) Item 7. Financial Statements and Exhibits. The following financial statements are being filed in connection with the acquisition by the Registrant, through its indirect, wholly-owned subsidiary Steamer Holding AB, a company organized under the laws of Sweden, of a majority of the outstanding capital stock of Louis Gibeck AB, a company organized under the laws of Sweden, which acquisition was originally reported on Form 8-K dated July 22, 1988 (date of earliest event reported). Page ---- (a) Financial statements of businesses acquired - Audited Report of Independent Public Accountants 3 Audited Louis Gibeck AB Balance Sheets - August 31, 1998 and 1997 4 Audited Louis Gibeck AB Statements of Income For the Years Ended August 31, 1998 and 1997 6 Audited Louis Gibeck AB Statements of Changes in Financial Position For the Years Ended August 31, 1998 and 1997 7 Louis Gibeck AB Notes to the Financial Statements 9 (b) Financial statements of businesses acquired - Unaudited Unaudited Louis Gibeck AB Balance Sheet February 28, 1999 15 Unaudited Louis Gibeck AB Statements of Income For the Six Months Ended February 28, 1999 and 1998 16 Unaudited Louis Gibeck AB Cash Flow Analysis For the Six Months Ended February 28, 1999 and 1998 17 Louis Gibeck AB Notes to the Unaudited Financial Statements 18 1 (c) Unaudited Pro Forma Consolidated Financial Statements Giving Effect to the Acquisition of Louis Gibeck AB by the Registrant Page ---- Hudson Respiratory Care Inc. and Louis Gibeck AB Unaudited Pro Forma Consolidated Financial Statements - Introduction 19 Hudson Respiratory Care Inc. and Louis Gibeck AB Unaudited Pro Forma Consolidated Balance Sheet - March 26, 1999 20 Notes to Unaudited Pro Forma Consolidated Balance Sheet - March 26, 1999 21 Hudson Respiratory Care Inc. and Louis Gibeck AB Unaudited Pro Forma Consolidated Statement of Operations For the Year Ended December 25, 1998 22 Notes to Unaudited Pro Forma Consolidated Statement of Operations For the Year Ended December 25, 1998 23 Hudson Respiratory Care Inc. and Louis Gibeck AB Unaudited Pro Forma Consolidated Statement of Operations For the Three Months Ended March 26, 1999 24 Notes to Unaudited Pro Forma Consolidated Statement of Operations For the Three Months Ended March 26, 1999 25 2 [LETTERHEAD OF DELOITTE & TOUCHE] To the Annual General Meeting of Louis Gibeck AB (publ) Organization number 556070-9668 We have examined the Annual Report and the financial statements, and the administration by the Board of Directors and the President of Louis Gibeck AB (publ) for the financial year ending August 31, 1998. These financial statements and the administration are the responsibility of the Board of Directors and the President. Our responsibility is to express an opinion in the Annual Report and the administration based on our audit. The audit was conducted in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Annual Report and the consolidated financial statements are free of material misstatements. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures contained in the financial statements. An audit also includes assessing the accounting principles and the Board of Directors' application thereof, as well as evaluating the overall financial statement presentation. We have examined significant decisions, measures and circumstances in the Company in order to evaluate whether or not any Director or the President is liable for damages to the Company, or in any other way has acted in breach of the Companies. Act, the Swedish Annual Accounts Act, or the Corporate By-Laws. We believe that our audit provides a reasonable basis for our opinion. The Annual Report has been prepared in accordance with the Annual Accounts Act and we therefore recommend that the Statement of Income and the Balance Sheet be adopted, and that the loss be allocated in accordance with the proposal contained in the Board of Director's Report. The Directors and the President have not taken any measure or committed any violation which in our opinion could entail liability for damages to the Company. We therefore recommend that the Board of Directors and the President be granted discharge from liability for the financial year. Stockholm December 3, 1998 (October 5, 1999 as to Note 26 and Note 27) Deloitte & Touche Stockholm AB /s/ Bo Magnusson Bo Magnusson Authorized Public Accountant BALANCE SHEETS
- ------------------------------------------------------------------------------------------------------------------------ GROUP PARENT COMPANY SEK thousand Note 1998-08-31 1997-08-31 1998-08-31 1997-08-31 - ------------------------------------------------------------------------------------------------------------------------ Assets Fixed assets Intangible fixed assets Patents and similar rights 12 827 4,965 827 1,324 Goodwill 13 96,293 102,773 0 0 - ------------------------------------------------------------------------------------------------------------------------ 97,120 107,738 827 1,324 Tangible fixed assets Buildings and land 14 5,495 5,710 0 0 Machinery and technical facilities 15 11,285 17,667 3,053 7,086 Equipment tools, and installations 16 1,812 7,602 1,371 4,372 Construction in progress 17 348 2,884 340 1,773 - ------------------------------------------------------------------------------------------------------------------------ 18,940 33,863 4,764 13,231 Financial fixed assets Shares in subsidiaries 18 0 0 126,122 126,122 Due from Group companies 0 0 4,700 0 Shares in associated companies 0 0 0 5,000 Deposits 0 307 25 25 Other long-term receivables 5,032 4,850 5,007 0 - ------------------------------------------------------------------------------------------------------------------------ 5,032 5,157 135,854 131,147 - ------------------------------------------------------------------------------------------------------------------------ Total fixed assets 121,092 146,758 141,445 145,702 - ------------------------------------------------------------------------------------------------------------------------ Current assets Inventories, etc. Raw materials and supplies 5,241 14,783 1,781 3,051 Work in progress 2,284 0 780 2,483 Finished products and goods for resale 21,711 13,721 9,422 3,994 - ------------------------------------------------------------------------------------------------------------------------ 29,236 28,504 11,983 9,528 Short-term receivables Accounts receivable 38,431 30,451 16,150 13,785 Due from group companies 0 0 46,612 18,371 Other receivables 7,010 793 5,083 302 Prepaid expenses and accrued income 19 20,335 1,721 1,638 1,034 - ------------------------------------------------------------------------------------------------------------------------ 65,776 32,965 69,483 33,492 Cash and bank deposits 19,179 15,678 6,168 7,340 - ------------------------------------------------------------------------------------------------------------------------ Total current assets 114,191 77,147 87,634 50,360 - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ TOTAL ASSETS 235,283 223,905 229,079 196,062 - ------------------------------------------------------------------------------------------------------------------------
4 BALANCE SHEETS
- -------------------------------------------------------------------------------------------------------------------------------- GROUP PARENT COMPANY SEK thousand Note 1998-08-31 1997-08-31 1998-08-31 1997-08-31 - -------------------------------------------------------------------------------------------------------------------------------- SHAREHOLDERS' EQUITY AND LIABILITIES Shareholders' equity 20 Restricted equity Share capital, 3,723,050 shares, each with nominal value of SEK 2 7,446 5,138 7,446 5,138 Additional paid-in-capital 69,086 0 69,086 0 Statutory reserve 11,482 16,242 6,426 6,426 Translation difference -1,384 0 0 0 - -------------------------------------------------------------------------------------------------------------------------------- Total restricted equity 86,630 21,380 82,958 11,564 Unrestricted equity Retained earnings 0 0 17,599 18,841 Unrestricted reserves 36,195 28,824 0 0 Net result for the year -7,010 5,491 15,021 942 - -------------------------------------------------------------------------------------------------------------------------------- Total unrestricted equity 29,185 34,315 32,620 19,783 - -------------------------------------------------------------------------------------------------------------------------------- Total shareholders' equity 115,815 55,695 115,578 31,347 - -------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------- Untaxed reserves 21 0 0 7,022 13,551 - -------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------- Provisions 22 8,078 8,619 255 0 - -------------------------------------------------------------------------------------------------------------------------------- Long-term liabilities Liabilities to credit institutions 23 42,884 74,173 38,000 59,690 - -------------------------------------------------------------------------------------------------------------------------------- Total long-term liabilities 42,884 74,173 38,000 59,690 - -------------------------------------------------------------------------------------------------------------------------------- Current liabilities Liabilities to credit institutions 28,000 0 28,000 0 Advance payments from customers 47 0 47 0 Accounts payable 14,136 12,953 7,531 8,008 Due to Group companies 0 0 14,511 20,472 Tax liabilities 0 605 0 1,483 Other liabilities 2,070 61,312 2,005 55,388 Accrued expenses and prepaid income 24 24,253 10,548 16,129 6,123 - -------------------------------------------------------------------------------------------------------------------------------- Total current liabilities 68,506 85,418 68,223 91,474 - -------------------------------------------------------------------------------------------------------------------------------- TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 235,283 223,905 229,078 196,062 - -------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------- GROUP PARENT COMPANY MEMORANDUM ITEMS Note 1998-08-31 1997-08-31 1998-08-31 1997-08-31 - -------------------------------------------------------------------------------------------------------------------------------- Pledged assets Net assets/Shares in subsidiaries 73,584 103,943 106,983 106,983 Corporate mortgages 53,100 31,200 22,000 25,700 Real estate mortgages 5,495 5,617 0 0 Escrow funds 0 25 0 25 - -------------------------------------------------------------------------------------------------------------------------------- 132,179 140,785 128,983 132,708 Contingent liabilities 25 Guaranty for subsidiary liabilities 0 0 0 5 Performance bond 333 756 333 0 - -------------------------------------------------------------------------------------------------------------------------------- 333 756 333 5 - --------------------------------------------------------------------------------------------------------------------------------
5 STATEMENTS OF INCOME
- ---------------------------------------------------------------------------------------------------------------------- GROUP PARENT COMPANY SEK thousands Note 1997/98 1996/97 1997/98 1996/97 - ---------------------------------------------------------------------------------------------------------------------- Operating revenue, etc. Net sales 2,3 240,348 222,686 125,636 118,935 Cost of goods sold -132,734 -122,929 -72,728 -71,245 - ---------------------------------------------------------------------------------------------------------------------- Gross result 107,614 99,757 52,908 47,690 Operating expense Selling expenses -58,340 -47,688 -25,457 -23,688 Administrative expenses -24,064 -22,270 -15,235 -11,126 Research and development expenses -12,172 -11,535 -6,876 -3,694 Items affecting comparability 4 -11,418 0 -18,185 0 - ---------------------------------------------------------------------------------------------------------------------- Operating result 5,6 1,620 18,264 -12,845 9,182 - ---------------------------------------------------------------------------------------------------------------------- Result of financial investments Results from participations in Group companies 7 0 0 13,358 0 Result from other securities and receivables accounted for as fixed assets 8 0 0 248 208 Other interest income and similar profit/loss items 9 494 430 499 325 Interest expense and similar profit/loss items -6,429 -8,665 -6,259 -7,904 - ---------------------------------------------------------------------------------------------------------------------- Result after financial items -4,315 10,029 -4,999 1,811 - ---------------------------------------------------------------------------------------------------------------------- Year-end appropriations 10 0 0 20,829 -418 Taxes on result for the year 11 -2,695 -4,538 -809 -451 - ---------------------------------------------------------------------------------------------------------------------- NET RESULT FOR THE YEAR -7,010 5,491 15,021 942 - ----------------------------------------------------------------------------------------------------------------------
6 STATEMENTS OF CHANGES IN FINANCIAL POSITION
- ------------------------------------------------------------------------------------------------------------------ GROUP PARENT COMPANY SEK thousand 1998-08-31 1997-08-31 1998-08-31 1997-08-31 - ------------------------------------------------------------------------------------------------------------------ Funds provided Funds generated internally by the year's operations 26,721 28,266 7,691 10,912 Sales of fixed assets 226 847 602 847 Decrease in long-term receivables 125 0 0 16 Equity offering 71,394 0 71,394 0 Increase in long-term liabilities 0 58,001 0 46,625 Group contribution received 14,247 262 - ------------------------------------------------------------------------------------------------------------------ Total funds provided 98,466 87,114 93,934 58,662 - ------------------------------------------------------------------------------------------------------------------ Funds applied Investments in fixed assets -8,643 -16,866 -4,829 -9,116 Equity investments 0 -5,000 0 -5,100 Increase in long-term receivables 0 -266 -4,707 0 Decrease in long-term liabilities -36,495 0 -21,690 0 Dividend to shareholders -2,184 -2,184 -2,184 -2,184 - ------------------------------------------------------------------------------------------------------------------ Total funds applied -47,322 -24,316 -33,410 -16,400 - ------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------ Change in working capital 51,144 62,798 60,524 42,262 - ------------------------------------------------------------------------------------------------------------------ Change in components of working capital Increase (+)/decrease (-) in inventories 879 5,308 2,455 3,212 Increase (+)/decrease (-) in short-term receivables 28,971 711 35,991 21,449 Increase (-)/decrease (+) in current liabilities 17,793 72,524 23,250 30,112 Increase (+)/decrease (-) in liquid funds 3,501 -15,745 -1,172 -12,511 - ------------------------------------------------------------------------------------------------------------------ Change in working capital 51,144 62,798 60,524 42,262 - ------------------------------------------------------------------------------------------------------------------ Funds generated internally Result before year-end appropriations and taxes -4,315 10,029 -4,999 1,811 Depreciation and amortization 24,570 14,654 10,632 3,405 Write-down/disposal of fixed assets 11,241 6,307 2,867 6,147 Translation differences -2,080 1,814 0 0 Taxes -2,695 -4,538 -809 -451 - ------------------------------------------------------------------------------------------------------------------ Total funds generated internally 26,721 28,266 7,691 10,912 - ------------------------------------------------------------------------------------------------------------------
7 ACCOUNTING PRINCIPLES Accounting principles The accounting principles applied conform to the Swedish Annual Accounts Act and recommendations and opinions by the Accounting Standards Board of Sweden, The Swedish Financial Accounting Standards Council, and the Swedish Institute of Authorized Public Accountants (FAR). For the first time the Company is applying the new Annual Account Act with accompanying recommendations. Comparative data for prior years have been recalculated to reflect the new principles. The following valuation and translation principles have been applied to the Annual Report: Consolidated accounting The consolidated statements of income and balance sheets include all companies in which the Parent Company, directly or indirectly, owns more than half of the voting rights, and in companies in which the Group otherwise has a controlling influence and a substantial proportion of the profit of their business. Purchase method The consolidated financial statements have been prepared in accordance with recommendation RR 1:96 of the Financial Accounting Standards Council. All corporate acquisitions have been accounted for according to the purchase method of accounting. Untaxed reserves reported in individual Group companies are divided into on equity portion and one tax portion in the consolidated Balance Sheet. The equity portion is carried to statutory reserves. The tax portion is reported as a provision. Translation of foreign subsidiary income statements and balance sheets The so-called current rate method has been used for translating the income statements and balance sheets of foreign subsidiaries into Swedish kronor (SEK). All assets and liabilities in subsidiary balance sheets have been converted using the financial year-end rate of exchange, and all income statement items have been converted at the average rate of exchange for the year. Any translation differences thus arising have been carried directly to shareholders' equity. Exchange rate differences on loans in foreign currency in the Parent Company, attributable to the acquisition of shares in subsidiaries, have been reported net against dividends from subsidiary Gibeck, Inc. In the Group, these foreign exchange losses and gains are offset against shareholders' equity. Fixed Assets Fixed assets are carried at cost less depreciation according to plan based on the estimated economic life of the relative assets.
- -------------------------------------------------------------------------------------------- Schedule of depreciation and amortization according to plan 97/98 96/97 - -------------------------------------------------------------------------------------------- Computer equipment 3 years 4 years Production equipment 5 years 5 years Office machines 5 years 5 years Office equipment 5 years 8 years Production machines 5 years 8 years Patents, etc. 5 years 8 years Leasehold improvements -- Rental period Buildings 30 years 30 years Goodwill 10-20 years 30 years - --------------------------------------------------------------------------------------------
The difference between depreciation according to plan and depreciation for tax purposes is reported as a year-end appropriation in 1996/97. Inventories and work in progress Inventories are valued at the lower of cost and market. The FIFO method is used for determining cost. By market value is meant estimated selling value less estimated selling costs. Receivables Receivables are valued at the amount expected to be collected. Receivables and liabilities in foreign currency Receivables and liabilities in foreign currency have been converted to Swedish kronor at the rate of exchange prevailing at financial year-end. The difference between cost and value at financial year-end is carried to the income statement. Effects of forward contracts maturing after financial year-end and which do not correspond to receivables and liabilities as of financial year-end are not accounted for. Hedged receivables and liabilities are valued at the relevant forward rate of exchange. 8 NOTES TO THE FINANCIAL STATEMENTS
NOTE 2 Net sales by business segment and geographic market - -------------------------------------------------------------------------------- Net sales are attributable to business Group Parent Company segments as follows 1997/98 1996/97 1997/98 1996/97 - -------------------------------------------------------------------------------- Humidification/Filtration own brands 107.3 100.9 95.8 89.8 Humidification/Filtration private label 46.0 37.2 0.0 0.0 Circuit business 57.2 55.5 0.0 0.0 Agency business in Sweden 29.8 29.1 29.8 29.1 - -------------------------------------------------------------------------------- Total 240.3 222.7 125.6 118.9 - -------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Net sales are attributable to geographic markets Group Parent Company as follows 1997/98 1996/97 1997/98 1996/97 - ------------------------------------------------------------------------------- USA 103.9 91.3 19.7 19.9 Sweden 35.2 40.0 31.2 31.4 Germany 24.5 22.3 12.5 11.6 Japan 10.8 13.4 10.8 13.6 France 9.7 9.0 6.3 5.2 Other markets 56.2 46.7 45.1 37.2 - ------------------------------------------------------------------------------- Total 240.3 222.7 125.6 118.9 - ------------------------------------------------------------------------------- NOTE 3 Intra-Group transactions - ------------------------------------------------------------------------------- Parent Company Inkop pch forsaljning mellan Kconcernforetag 1998 1997 - ------------------------------------------------------------------------------- Purchases 16.6% 17.8% Sales 22.0% 19.3% - ------------------------------------------------------------------------------- NOTE 4 Items affecting comparability - ------------------------------------------------------------------------------- Group Parent Company 1997/98 1996/97 1997/98 1996/97 - ------------------------------------------------------------------------------- Restructuring in connection with move of production to Malaysia -20,058 0 -18,185 0 Net effect of sale of Gibeck, Inc.'s circuit business and other restructuring in the U.S. 3,503 0 0 0 Net effect of sale of business in LaryCare 5,137 0 0 0 - ------------------------------------------------------------------------------- Total -11,418 0 -18,185 0 - ------------------------------------------------------------------------------- Whereof disposals and write-down amounts to 13.161 in the Group and 11,621 in the Parent Company. NOTE 5 Average number of employees, wages, salaries, other compensation and social benefits - ------------------------------------------------------------------------------- 1997/98 1996/97 Average number Number of Of whom Number of Of whom employees employees men employees men - ------------------------------------------------------------------------------- Parent Company Sweden 87 37% 100 36% - ------------------------------------------------------------------------------- Parent Company total 87 37% 100 36% Subsidiaries Sweden 12 58% 14 71% USA 57 37% 74 38% Malaysia 120 20% 67 12% Subsidiary total 189 28% 155 30% - ------------------------------------------------------------------------------- Group total 276 30% 255 32% - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 1997/98 1996/97 Wages, salaries Wages, Social benefits Wages, Social benefits other compensation, salaries (of which salaries (of which etc. pensions) pensions) - ------------------------------------------------------------------------------- Parent Company 27,562 11,872 24,743 10,940 (2,005) (1,484) Subsidiaries 29,825 5,770 27,881 3,577 (1,481) (362) - ------------------------------------------------------------------------------- Group total 57,387 17,642 52,624 14,517 (3,486) (1,846) - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Wages, salaries, and other compensation 1997/98 1996/97 presidents allocated Directors Other Directors Other to directors, etc. and and president employees and presidents employees other employees (of which bonuses) (of which bonuses) - ------------------------------------------------------------------------------- Parent Company Sweden 2,350 25,207 1,583 23,160 (155) (75) - ------------------------------------------------------------------------------- Parent Company total 2,350 25,207 1,583 23,160 (155) (75) Subsidiaries in Sweden 815 3,523 1,450 3,891 (71) (0) Subsidiaries outside Sweden USA 973 20,009 1,626 18,689 (0) (0) Malaysia 615 3,276 494 1,731 (51) (0) - ------------------------------------------------------------------------------- Subsidiary total 2,403 26,808 3,570 24,311 - ------------------------------------------------------------------------------- (122) (0) Group total 4,753 52,015 5,153 47,471 (277) (75) - -------------------------------------------------------------------------------
579 (617) of the Parent Company's pension costs referred to the group directors and presidents. 1,078 (979) of the Group's pension costs referred to the group direc- tors and presidents. The president has an agreement for severance pay of 18 monthly salaries. 9 NOTES TO THE FINANCIAL STATEMENTS NOTE 6 Depreciation, amortization, etc. according to plan of tangible and intangible fixed assets
- ----------------------------------------------------------------------------- Group Parent Company 1997/98 1996/97 1997/98 1996/97 - ----------------------------------------------------------------------------- Cost of goods sold 7,301 6,575 2,240 2,176 Selling expenses 4,250 3,861 215 49 Administrative expenses 1,687 1,631 1,008 939 Research and development expenses 2,748 2,587 207 241 Restructuring expenses 8,584 0 6,962 0 Other operating expenses 0 0 0 0 - ------------------------------------------------------------------------------ Total 24,570 14,654 10,632 3,405 - ------------------------------------------------------------------------------ NOTE 7 Result from shares in Group companies - ------------------------------------------------------------------------------- Group Parent Company 1997/98 1996/97 1997/98 1996/97 - ------------------------------------------------------------------------------- Anticipated dividend subsidiary, Gibeck, Inc. USA 0 0 16,180 0 Hedging loss 0 0 -2,822 0 - ------------------------------------------------------------------------------- Total 0 0 13,358 0 - ------------------------------------------------------------------------------- NOTE 8 Result from other securities and receivables in the form of fixed assets - -------------------------------------------------------------------------------- Parent Company 1997/98 1996/97 - -------------------------------------------------------------------------------- Interest (Group companies 248 208 - -------------------------------------------------------------------------------- Total 248 208 - -------------------------------------------------------------------------------- NOTE 9 Other interest income and similar profit/loss items - ------------------------------------------------------------------------------- Group Parent Company 1997/98 1996/97 1997/98 1996/97 - -------------------------------------------------------------------------------- Interest 494 430 364 325 Interest - Group companies 0 0 135 0 - -------------------------------------------------------------------------------- Total 494 430 499 325 - -------------------------------------------------------------------------------- NOTE 10 Year-end appropriations - ------------------------------------------------------------------------------- Parent Company 1997/98 1996/97 - ------------------------------------------------------------------------------- Change in timing difference reserve 2,649 -403 Reversal of tax equalization reserve 409 137 Accelerated depreciation and amortization 3,524 -414 Group contributions 14,247 262 - ------------------------------------------------------------------------------- Total year-end appropriations 20,829 -418 - ------------------------------------------------------------------------------- NOTE 11 Taxes on the year's result There are no taxes payable by the Parent Company for the 1997/98 financial year (451). The Parent Company reports U.S. withholding tax of 809 for anticipated dividend. The Group reports deferred taxes of -1,012 (-1,724) as a tax expense in the consolidated income statement and the total outstanding deferred tax liability as a provision in the consolidated balance sheet. Deferred taxes have declined by 2,191 (-264) due to reversal of untaxed reserves. NOTE 12 Patents and similar rights - -------------------------------------------------------------------------------- Group Parent Company 1998-08-31 1997-08-31 1998-08-31 1997-08-31 - -------------------------------------------------------------------------------- Opening cost 9,474 7,623 2,291 1,810 Purchases 819 1,644 803 481 Sales/disposals -7,789 0 -871 0 - -------------------------------------------------------------------------------- Closing accumulated cost 2,504 9,267 2,223 2,291 Opening amortization according to plan -4,417 -3,670 -967 -726 Sales/disposals 4,579 0 545 0 Year's amortization according to plan -1,839 -632 -974 -241 - -------------------------------------------------------------------------------- Closing accumulated amortization according to plan -1,677 -4,302 -1,396 -967 Closing residual value 827 4,965 827 1,324 - -------------------------------------------------------------------------------- Translation difference: The year's opening balances have been affected by 92. NOTE 13 Goodwill - -------------------------------------------------------------------------------- Group Parent Company 1998-08-31 1997-08-31 1998-08-31 1997-08-31 - -------------------------------------------------------------------------------- Opening cost 116,103 116,103 0 0 Purchases 0 0 0 0 - -------------------------------------------------------------------------------- Closing accumulated cost 116,103 116,103 0 0 Opening amortization according to plan -13,330 -7,067 0 0 Year's amortization according to plan -6,480 -6,263 0 0 - -------------------------------------------------------------------------------- Closing accumulated amortization according to plan -19,810 -13,330 0 0 - -------------------------------------------------------------------------------- Closing residual value according to plan 96,293 102,773 0 0 - --------------------------------------------------------------------------------
10 NOTES TO THE FINANCIAL STATEMENTS NOTE 14 Buildings and land
- -------------------------------------------------------------------------------- Group Parent Company 1998-08-31 1997-08-31 1998-08-31 1997-08-31 - -------------------------------------------------------------------------------- Opening cost 9,864 9,454 0 0 Purchases 0 80 0 0 - -------------------------------------------------------------------------------- Closing accumulated 9,864 9,534 0 0 cost Opening depreciation -3,957 -3,418 0 0 according to plan Year's depreciation -412 -406 0 0 according to plan - -------------------------------------------------------------------------------- Closing accumulated -4,369 -3,824 0 0 depreciation according to plan - -------------------------------------------------------------------------------- Closing residual value 5,495 5,710 0 0 according to plan - --------------------------------------------------------------------------------
Translation difference: The year's opening balances have been affected by 195. NOTE 15 Machinery and other technical facilities
- -------------------------------------------------------------------------------- Group Parent Company 1998-08-31 1997-08-31 1998-08-31 1997-08-31 - -------------------------------------------------------------------------------- Opening cost 48,639 44,764 15,442 14,629 Purchases 7,120 9,805 3,390 4,176 Sales/disposals -32,495 -5,816 -7,277 -3,363 Reclassification 2,134 0 1,578 0 - -------------------------------------------------------------------------------- Closing accumulated 25,398 48,753 13,133 15,442 cost Opening depreciation -31,309 -30,653 -8,356 -8,594 according to plan Sales/disposals 29,337 3,535 6,220 1,882 Reclassification 1,714 0 1,714 0 Year's depreciation according to plan -13,855 -3,968 -9,658 -1,644 - -------------------------------------------------------------------------------- Closing accumulated depreciation according to plan -14,113 -31,086 -10,080 -8,356 - -------------------------------------------------------------------------------- Closing residual value according to plan 11,285 17,667 3,053 7,086 - --------------------------------------------------------------------------------
Translation difference: The year's opening balances have been affected by -188. NOTE 16 Equipment and tools
- -------------------------------------------------------------------------------- Group Parent Company 1998-08-31 1997-08-31 1998-08-31 1997-08-31 - -------------------------------------------------------------------------------- Opening cost 18,576 17,028 8,122 7,536 Purchases 997 3,360 636 2,318 Sales/disposals -9,096 -1,994 -149 -1,732 Reclassification -1,578 0 -1,578 0 - -------------------------------------------------------------------------------- Closing accumulated 8,899 18,394 7,031 8,122 cost Opening depreciation -10,963 -9,719 -3,750 -4,427 according to plan Accumulated depreciation 0 0 -295 0 on Group purchases Sales/disposals 7,979 1,675 99 1,524 Reclassification -1,714 0 -1,714 0 Year's depreciation -2,389 -2,748 0 -847 according to plan - -------------------------------------------------------------------------------- Closing accumulated -7,087 -10,792 -5,660 -3,750 depreciation according to plan - -------------------------------------------------------------------------------- Closing residual value 1,812 7,602 1,371 4,372 according to plan - --------------------------------------------------------------------------------
Translation difference: The year's opening balances have been affected by 11. NOTE 17 Construction in progress
- -------------------------------------------------------------------------------- Group Parent Company 1998-08-31 1997-08-31 1998-08-31 1997-08-31 - -------------------------------------------------------------------------------- Opening cost 2,743 6,721 1,772 5,610 Purchases 8 2,141 0 2,141 Sales/disposals -2,403 -5,978 -1,432 -5,978 Reclassification 0 0 0 0 - -------------------------------------------------------------------------------- Closing accumulated 348 2,884 340 1,773 cost Opening depreciation 0 0 0 0 according to plan Sales/disposals 0 0 0 0 Year's depreciation 0 0 0 0 according to plan Closing accumulated 0 0 0 0 depreciation according to plan - -------------------------------------------------------------------------------- Closing residual value 348 2,884 340 1,773 according to plan - --------------------------------------------------------------------------------
Translation difference: The year's opening balances have been affected by -141. NOTE 18 Shares in subsidiaries (Group and Parent Company)
- -------------------------------------------------------------------------------- Company name Org.no Domicile Equity Result - -------------------------------------------------------------------------------- ICOR Holding AB 556316-4309 Taby 859 0 ICOR AB 556261-2621 Upplands Vasby 28,762 -83 Kiewclass SDN.BDH Kuala Lumpur, Malaysia 5,242 -642 Gibeck Inc. Indianapolis, USA 33,252 3,990 Other Upplands Vasby 6,374 -23 - --------------------------------------------------------------------------------
11 Note 18 continued Shares in subsidiaries
- ------------------------------------------------------------------------------------------------------------------ Size of Value of holding holding Number of Percentage Book Company name Shares of capital Value - ------------------------------------------------------------------------------------------------------------------ ICOR Holding AB 5,000 100.0% 106,983 ICOR AB 0 100.0% 0 Kiewclass SDN.BHD. 0 100.0% 0 Gibeck, Inc. 1,000 100.0% 15,999 Other 100.0% 3,140 - ------------------------------------------------------------------------------------------------------------------ 126,122 - ------------------------------------------------------------------------------------------------------------------ NOTE 19 Prepaid expenses and accrued income - ------------------------------------------------------------------------------------------------------------------ Group Parent Company 1998-08-31 1997-08-31 1998-08-31 1997-08-31 - ------------------------------------------------------------------------------------------------------------------ Prepaid rent 495 301 439 252 Accrued rental income 263 108 168 42 Other items 19,577 1,312 1,031 740 - ------------------------------------------------------------------------------------------------------------------ Total 20,335 1,721 1,638 1,034 - ------------------------------------------------------------------------------------------------------------------ Of which 17,454 in the Group refers to sale of assets in the U.S. operations. NOTE 20 Change in equity - ------------------------------------------------------------------------------------------------------------------ Share Statutory Unrestricted Net result Group Capital reserves reserves for the year - ------------------------------------------------------------------------------------------------------------------ Opening balance 5,138 16,242 28,824 5,491 Equity offering 2,308 69,086 Transfer between restricted and unrestricted equity -4,760 4,760 Translation difference -1,384 -696 Profit allocation pursuant to Annual General Meeting resolution 0 5,491 -5,491 Dividend 0 -2,184 Net result for the year -7,010 - ------------------------------------------------------------------------------------------------------------------ Closing balance 7,446 79,184 36,195 -7,010 - ------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------ Share Statutory Unrestricted Net result Parent Company Capital reserves reserves for the year - ------------------------------------------------------------------------------------------------------------------ Opening balance 5,138 6,426 18,841 942 Equity offering 2,308 69,086 Profit allocation pursuant to Annual General Meeting resolution 0 942 -942 Dividend 0 -2,184 Net result for the year 15,021 - ------------------------------------------------------------------------------------------------------------------ Closing balance 7,446 75,512 17,599 15,021 - ------------------------------------------------------------------------------------------------------------------ NOTE 21 Untaxed reserves - ------------------------------------------------------------------------------------------------------------------ Parent Company 1998-08-31 1997-08-31 - ------------------------------------------------------------------------------------------------------------------ Timing difference reserve 1994 0 2,143 Timing difference reserve 1995 3,351 3,857 Timing difference reserve 1996 3,268 3,268 Timing difference reserve 1997 403 403 Tax equalization reserve 0 409 Accelerated depreciation and amortization 0 3,471 - ------------------------------------------------------------------------------------------------------------------ Total 7,022 13,551 - ------------------------------------------------------------------------------------------------------------------ NOTE 22 Provisions - ------------------------------------------------------------------------------------------------------------------ Group Parent Company 1998-08-31 1997-08-31 1998-08-31 1997-08-31 - ------------------------------------------------------------------------------------------------------------------ Provisions for pensions and similar undertakings 306 0 255 0 Deferred taxes 6,225 0 0 0 Ovriga avsattningar 1,547 8,619 0 0 - ------------------------------------------------------------------------------------------------------------------ Total 8,078 8,619 255 0 - ------------------------------------------------------------------------------------------------------------------ NOTE 23 Skuld till kreditinstitut - ------------------------------------------------------------------------------------------------------------------ Liabilities to credit institutions Long-term liabilities due for repayment more than one year after financial year-end Group Parent Company 1998-08-31 1997-08-31 1998-08-31 1997-08-31 - ------------------------------------------------------------------------------------------------------------------ Liabilities to credit institutions 42,884 74,173 38,000 59,690 - ------------------------------------------------------------------------------------------------------------------ Total 42,884 74,173 38,000 59,690 - ------------------------------------------------------------------------------------------------------------------ NOTE 24 Accrued expenses and prepaid income - ------------------------------------------------------------------------------------------------------------------ Group Parent Company 1998-08-31 1997-08-31 1998-08-31 1997-08-31 - ------------------------------------------------------------------------------------------------------------------ Accrued vacation pay 2,841 3,253 2,693 2,731 Accrued social benefits 3,492 1,072 3,333 854 Other items 17,920 6,223 10,103 2,538 - ------------------------------------------------------------------------------------------------------------------ 24,253 10,548 16,129 6,123 - ------------------------------------------------------------------------------------------------------------------
12 NOTES TO THE FINANCIAL STATEMENTS NOTE 25 Foreign exchange forward contracts outstanding
- -------------------------------------------------------------------------------- Amount in local Amount Average Spot Currency ('000,000) MSEK forward rate rate - -------------------------------------------------------------------------------- August 31, 1998 USD 2,6 20,3 7,84 8,06 DEM 2,6 11,5 4,41 4,44 JPY 125,8 7,8 0,062 0,0579 MYR 10,9 19,9 1,83 1,96 - -------------------------------------------------------------------------------- 59,5 - -------------------------------------------------------------------------------- Amount in local Amount Average Spot Currency ('000,000) MSEK forward rate rate - -------------------------------------------------------------------------------- August 31, 1997 USD 2,3 17,8 7,65 7,73 DEM 2,6 11,7 4,68 4,48 JPY 183,3 12,0 0,0636 0,0618 MYR 6,5 18,6 2,86 2,9 - -------------------------------------------------------------------------------- 60,1 - -------------------------------------------------------------------------------- Amount in local Amount Average Spot Currency ('000,000) MSEK forward rate rate - -------------------------------------------------------------------------------- August 31, 1996 USD 2,6 17,6 6,84 6,63 DEM 1,9 9,0 4,69 4,49 JPY 115,5 7,8 0,0677 0,06072 - -------------------------------------------------------------------------------- 34,4
13 Note 26 Reconciliation of Swedish GAAP to US GAAP
FISCAL YEAR ENDED ---------------------------- Note 8/31/98 8/31/97 ----- ---------- ---------- Reported net (loss) earnings (7,010) 5,491 - ---------------------------- Disposal of Gibeck Inc. A (4,096) 0 Valuation of forward exchange contracts to spot rate B 388 (491) Fair value write up of ICOR inventory acquired C 0 (5,197) Goodwill Amortization C,D 605 605 Restructuring Reserve FY 96 D (1,242) (4,662) ---------------------------- Total change in accordance with US GAAP (4,345) (9,745) ---------------------------- Estimated net earnings in accordance ---------------------------- With US GAAP (11,355) (4,254) ---------------------------- Earnings per share (3.05) (1.66) ---------------------------- Number of shares (Basic and diluted) 3,723,050 2,569,250 AS OF ---------------------------- 8/31/98 8/31/97 ---------- ---------- Reported Stockholders' equity 115,815 55,695 - ----------------------------- Disposal of Gibeck Inc. A (4,096) 0 Valuation of forward exchange contracts to spot rate B 983 595 Fair value write up of ICOR inventory acquired C (5,197) (5,197) Goodwill Amortization C,D 1,210 605 Restructuring Reserve D (5,904) (4,662) ---------------------------- Total change in accordance with US GAAP (13,004) (8,659) Estimated stockholders' equity in accordance ---------------------------- With US GAAP 102,811 47,036 ----------------------------
A. For Swedish GAAP purposes the company recognized the sale of its US operations, Gibeck Inc., in the fiscal year ended August 31, 1998. For US GAAP purposes the transaction would be recognized in the fiscal year ended August 31, 1999 because certain significant provisions of the related asset sales agreement were not executed before fiscal year end 1998. B. Changes in the market value of forward contracts are not recognized under Swedish GAAP. Under US GAAP unrecognized gains and losses are reflected in earnings for the year in which they arise. C. The Company acquired ICOR Holding AB in 1996. For US GAAP purposes the inventory acquired is adjusted to fair value at the acquisition date. The inventory adjustment was then charged against earnings in the subsequent accounting period. Under Swedish GAAP no fair value adjustment is recorded. D. Certain costs to restructure a subsidiary of the Company were recorded as adjustments to goodwill under Swedish GAAP. For US GAAP purposes these costs are charged against income in the year that they are recorded. Note 27 Subsequent events In July 1999, all outstanding shares of the Company were purchased by Hudson RCI. The Company is from that date a wholly owned subsidiary of Hudson RCI and no longer subject to the reporting requirements of the Stockholm Stock Exchange. Management, after analyzing sales forecasts, determined that certain intangible assets associated with the colibri product line had no future value and took a charge against earnings in the residual value of 31.7 MSEK in fiscal year 1998/99. Based on information received in August 1999 management determined that certain receivables accounted for in the financial statements as at August 31, 1998 has no future value and took a charge against earnings of 5,0 MSEK in fiscal year 98/99. 14 Louis Gibeck AB Balance Sheet (Unaudited) February 28, 1999 (in millions SEK)
- ------------------------------------------------------- ASSETS - ------------------------------------------------------- Fixed Assets - ------------------------------------------------------- Goodwill 93.1 Other intangible Fixed assets 1.0 Tangible fixed assets 14.3 Financial fixed assets 5.0 - ------------------------------------------------------- Total fixed assets 113.4 - ------------------------------------------------------- Current assets Inventories 14.7 Short-term receivables 37.4 Liquid funds 46.8 - ------------------------------------------------------- Total current assets 98.9 - ------------------------------------------------------- TOTAL ASSETS 212.3 - ------------------------------------------------------- - ------------------------------------------------------- SHAREHOLDERS' EQUITY AND LIABILITIES - ------------------------------------------------------- Equity 133.1 Provisions 7.8 Long-term liabilities (2) 32.0 Current liabilities (2) 39.4 - ------------------------------------------------------- TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 212.3 - -------------------------------------------------------
15 Louis Gibeck AB Statements of Income (Unaudited) For the Six Months Ended February 28, 1999 and 1998 (in millions SEK)
1999 1998 - ----------------------------------------------------------- Net Sales 94.2 111.6 Cost of goods sold -39.5 -60.2 - ----------------------------------------------- -------- Gross Profit 54.7 51.4 Research and Development expenses -6.3 -5.2 Other operating expenses -27.8 -40.4 - ----------------------------------------------- -------- Operating Profit 1) 20.6 5.8 - ----------------------------------------------- -------- Financial Income 0.3 0.3 Financial Expense -1.2 -4.0 - ----------------------------------------------- -------- Profit after financial items 19.7 2.1 Taxes on profit for the year -6.3 -1.5 - ----------------------------------------------- -------- NET PROFIT FOR THE PERIOD 13.4 0.6 - ----------------------------------------------- -------- 1) Whereof amortization of goodwill -2.7 -3.1
16 Louis Gibeck AB Cash Flow Analysis For the Six Months Ended February 28, 1999 and 1998 (in thousands SEK) 1999 1,998 ---------- ---------- Result after financials 19,700 2,056 Items not included in the cash flow 6,900 6,106 ---------- ---------- 26,600 8,162 Paid tax (400) (1,124) Cash flow from ongoing business before changes from operation 26,200 7,038 Cashflow from changes in operation Decrese (Increase) in inventory 14,500 (1,890) Decrease (Increase) in current receivables 31,200 (5,336) (Decrease) Increase in Accounts payable (10,500) 2,040 Decrease of other current liabilities (5,000) (1,630) Cashflow from ongoing business 56,400 222 INVESTMENTS Investments, net (1,900) (4,535) ---------- ---------- Cashflow from investments (1,900) (4,535) Financial operations New share issue - 71,400 Amortization of debt - (59,459) Dividend - (2,184) Repayment of Loans (26,900) - ---------- ---------- Cashflow from financial operations (26,900) 9,757 This year cashflow 27,600 5,444 Cash at year opening 19,200 15,678 Cash at year end 46,800 21,122 17 Louis Gibeck AB Notes to Unaudited Financial Statements Note 1 Financial Statements. The financial statements included herein have been prepared by the Company, without audit, and include all adjustments which are, in the opinion of management, necessary for a fair presentation of the financial position at February 28, 1999 and the results of operations and statements of financial position for the six month periods ended February 28, 1999 and 1998. All such adjustments are of a normal recurring nature. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in Sweden have been condensed or omitted. Although the Company believes that the disclosures in such financial statements are adequate to make the information presented not misleading, the accompanying unaudited financial statements should be read in conjunction with the Company's 1998 audited financial statements and the notes thereto included in its Annual Report. The results of operations for the six month periods ended February 28, 1999 and February 28, 1998 are not necessarily indicative of the results to be achieved for a full year. Note 2 Unaudited Reconciliation of Swedish GAAP to US GAAP
SIX MONTHS ENDED ---------------------------- 2/28/99 2/28/98 ---------------------------- Reported net earnings 13,475 600 Disposal of Gibeck Inc. A 4,096 0 Valuation of forward exchange contracts to spot rate B 0 194 Goodwill Amortization C 302 302 Restructuring Reserve E (996) (621) ---------------------------- Total change in accordance with U.S. GAAP 3,402 (125) ---------------------------- Estimated net earnings in accordance ---------------------------- with U.S.GAAP 16,877 475 ---------------------------- Earnings per share 4.53 0.18 ---------------------------- Number of shares (Basic and diluted) 3,723,050 2,569,250 AS OF Financial year 2/28/99 ----------- Reported Stockholders'equity 133,100 Valuation of forward exchange contracts to spot rate B 983 Fair value write up of ICOR net assets acquired C (5,197) Goodwill Amortization D 1,512 Restructuring Reserve E (6,900) ----------- Total change in accordance with US GAAP (9,602) Estimated stockholders'equity in accordance ----------- with US GAAP 123,498 -----------
A. To reflect the gain on sale of certain assets to Hudson Respiratory Care, Inc. in the appropriate period in accordance with US GAAP B. To reflect the change in value of forward currency contracts in excess of local currency accounts receivable (SFAS 52) C. To reflect the sale of purchased inventory, net of selling costs, which would have been recorded in accordance with APB 16 D. To reflect reduced goodwill amortization as a result of C and E E. To reflect restructuring charges not capitalizable in accordance with US GAAP. 18 HUDSON RESPIRATORY CARE INC. AND LOUIS GIBECK AB UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS The accompanying pro forma consolidated financial statements have been prepared to show the effects of the July 22, 1999 acquisition of the majority of the outstanding capital stock of Louis Gibeck AB ("LGAB"), a company organized under the laws of Sweden by Hudson Respiratory Care, Inc. ("the Company") through its indirect, wholly-owned subsidiary, Steamer Holding. This acquisition is accounted for as a purchase business combination. The following unaudited pro forma balance sheet presents the pro forma consolidated financial position of the Company at March 26, 1999 as if the acquisition occurred on such date. Included are adjustments to record the value of consideration paid by the Company and the assets and liabilities acquired by the Company. The purchase price was approximately $53.7 million including approximately $3 million of transaction expenses, resulting in goodwill of approximately $37.5 million, which is expected to be amortized over an estimated useful life of 20 years. The unaudited consolidated statement of financial position has been converted to US GAAP and from Swedish Krona to US Dollars using the average interbank rate as of the statement date (.1224 SEK to US $). The financial statements of Louis Gibeck AB have been derived from its historical financial statements to (i) reflect US generally accepted accounting principles and (ii) present the results of Louis Gibeck on reporting periods more comparable to those of the Company. Accordingly, the balance sheet of Louis Gibeck is as of February 28, 1999 and the results are for the year and quarter then ended. The unaudited pro forma statements of operations for the year ended December 25, 1998 and the quarter ended March 26, 1999 reflect the combined results of the Company and Louis Gibeck AB as if the acquisition had occurred on December 26, 1997. Unaudited pro forma statements of operations for the year ended December 25, 1998 and the quarter ended March 26, 1999 have been converted to US GAAP and from Swedish Krona to US Dollars using the average interbank rate for the period presented (.12614 and .12566 SEK to US $, respectively). The unaudited pro forma consolidated statements of operations do not necessarily represent actual results that would have been achieved had the companies been together as of December 26, 1997, nor may they be indicative of future operations. These unaudited pro forma consolidated financial statements should be read in conjunction with the historical financial statements and notes thereto of the Company and Louis Gibeck AB. 19 Hudson Respiratory Care Inc. and Louis Gibeck AB Unaudited Pro Forma Consolidated Balance Sheet March 26, 1999 (in thousands)
Hudson Respiratory Care Inc. Louis Gibeck Pro 26-Mar-99 28-Feb-99 Adjustments Forma ------------ ------------- --------------- ------------ Assets: Current Assets: Cash and short term investments $ 710 $ 5,728 $ 2,828 (a) $ 9,266 Accounts receivable, net 23,153 4,578 27,731 Inventories 19,091 1,799 1,800 (b) 22,690 Other current assets 769 - 769 ---------- ----------- ------------ ---------- Total current assets 43,723 12,105 4,628 60,456 ---------- ----------- ------------ ---------- Property, plant & equipment, net 32,996 1,750 34,746 Intangibles and other assets 4,568 10,100 37,001 (c) 51,669 Deferred tax asset 70,217 - (720) (c) 69,497 Deferred financing costs 11,672 - 11,672 Other assets 445 856 - 1,301 ---------- ----------- ------------ ---------- Total assets $163,621 $ 24,811 $40,909 $229,341 ========= =========== ============ ========= Liabilities and Shareholder's Equity: Current Liabilities: Notes payable to bank $ 4,000 $ - $ 4,000 Accounts payable 2,343 - 2,343 Accrued liabilities 9,620 4,823 14,443 ---------- ----------- ------------ ---------- Total current liabilities 15,963 4,823 - 20,786 ---------- ----------- ------------ ---------- Non-current Liabilities: - Senior subordinated notes payable 115,000 - 115,000 Notes payable to banks, net of current portion 39,000 3,917 5,917 (a) 48,834 Affiliate note payable - 22,000 (a) 22,000 Other 955 955 ---------- ----------- ------------ ---------- Total liabilities 169,963 9,695 27,917 207,575 ---------- ----------- ------------ ---------- Mandatorily redeemable preferred stock 30,802 - 30,802 Accrued Preferred Stock Dividend, PIK 1,636 - 1,636 ---------- ----------- ------------ ---------- 32,438 - - 32,438 Shareholder's equity (deficit) (38,780) 15,116 12,992 (d) (10,672) ------------ ----------- ------------ ---------- Total liabilities and shareholder's equity (deficit) $163,621 $ 24,811 $40,909 $229,341 ========= =========== ============ =========
20 Hudson Respiratory Care Inc. and Louis Gibeck AB Notes to Unaudited Pro Forma Consolidated Balance Sheet March 26, 1999 The following unaudited pro-forma adjustments are included in the accompanying pro forma balance sheet at March 26, 1999 (in thousands): (a) Sources and uses of cash for the purchase of Louis Gibeck AB are as follows:
Sources: Proceeds from affiliate note payable $22,000 Proceeds from sale of common stock to majority stockholder 22,000 Proceeds from bank loan 5,917 ------- 49,917 ------- Uses: Purchase of shares of Louis Gibeck AB 44,089 Payment of transaction expenses 3,000 ------- 47,089 ------- Net Change in Cash $ 2,828 =======
(b) Represents the estimated portion of the purchase price to be allocated to purchased inventory at fair value, less costs to sell. (c) The purchase price has been allocated on a preliminary basis based on available information. Management expects that the purchase price allocation will be revised when additional information becomes available.
Purchase price: Contribution of Louis Gibeck AB shares by Hudson RCI stockholder $ 6,623 Cash paid for shares 44,089 Expenses of the transaction 3,000 ------- $53,712 ======= Preliminary allocation of purchase price (e): Goodwill $37,516 Inventory step-up to fair value, net of deferred tax liability of $720 1,080 Historical cost basis of net assets 15,116 ------- Total purchase price $53,712 =======
The net change in goodwill in the pro forma balance sheet includes goodwill related to the acquisition of Louis Gibeck AB and the elimination of $515 of goodwill recorded by the Company in connection with a 1998 acquisition of certain assets of Louis Gibeck AB. This amount relates to Louis Gibeck AB's gain on the sale of those assets. (d) The change in equity reflects the $22 million net cash proceeds and $6.6 million in Louis Gibeck AB stock received from Hudson RCI's majority stockholder for approximately 2.2 million shares of common stock, offset by the elimination of Louis Gibeck AB's historical equity and the elimination of $515 of gain described at (c) above. (e) The Company is evaluating the status of certain in process research and development projects that were acquired with the purchase of Louis Gibeck AB. Accordingly, a portion of the purchase price may be allocated to purchased in process research and development when the Company has completed its analysis. 21 Hudson Respiratory Care Inc. and Louis Gibeck AB Unaudited Pro Forma Consolidated Statement of Operations Year Ended December 25, 1998 (in thousands)
Hudson RCI Louis Gibeck Year ended Year ended Pro 25-Dec-98 28-Feb-99 Adjustments Forma ============ ========================================== Net Sales $100,498 $ 28,115 $ (5,794) (a) $122,819 Cost of Sales 53,520 14,128 (5,794) (a) 61,854 -------- -------- -------- -------- Gross Profit 46,978 13,987 0 60,965 Selling 10,350 7,357 17,707 Distribution 5,714 0 5,714 General & Administrative 10,284 2,989 1,850 (b) 15,123 Research & Development 1,880 1,674 3,554 -------- -------- -------- -------- Total SG&A 28,228 12,020 1,850 42,098 Provision for EPP (63,939) 0 (63,939) Provision for Retention Bonuses (4,754) 0 (4,754) -------- -------- -------- -------- Income (Loss) from Operations (49,943) 1,967 (1,850) (49,826) Interest Expense (10,692) (395) (2,936) (c) (14,023) Other, Net (1,041) 0 (1,041) -------- -------- -------- -------- Total Other (11,733) (395) (2,936) (15,064) -------- -------- -------- -------- Income (Loss) Before Taxes (61,676) 1,572 (4,786) (64,890) Provision (Benefit) for Income Taxes 1,390 945 (881) (d) 1,454 -------- -------- -------- -------- Income (Loss) Before Extraordinary Item (63,066) 627 (3,905) (66,344) Extraordinary Item/Loss on Extinguishment 104 0 0 104 Net Income (Loss) (63,170) 627 (3,905) (66,448) -------- -------- -------- -------- Preferred Stock Dividends 2,512 0 0 2,512 -------- -------- -------- -------- Net Income (Loss) Available to Shareholder $(65,682) $ 627 $(3,905) $(68,960) ======== ======== ======== ========
22 Hudson Respiratory Care Inc. and Louis Gibeck AB Notes to Unaudited Pro Forma Consolidated Statement of Operations Year Ended December 25, 1998 The following unaudited pro forma adjustments are included in the accompanying unaudited pro forma consolidated statement of operations for the year ended December 25, 1998 (in thousands): (a) Reflects the the elimination of intercompany sales. Gross profit in ending inventory is not material to the proforma consolidated statement of operations. (b) This amount represents amortization of goodwill arising from the transaction, net of goodwill eliminated, over an estimated useful life of 20 years. (c) Reflects interest on additional bank borrowings and borrowings from an affiliate at 5 percent and 12 percent annual interest rates, respectively. (d) Reflects the tax benefit associated with additional interest expense on new borrowings in Sweden. The effective tax rate is estimated at 30 percent. 23 Hudson Respiratory Care Inc. and Louis Gibeck AB Unaudited Pro Forma Consolidated Statement of Operations Quarter Ended March 26, 1999 (in thousands)
Hudson RCI Louis Gibeck Quarter Endd Quarter Ended Pro 26-Mar-99 28-Feb-99 Adjustments Forma ============================================================== Net Sales $ 27,169 5,617 $ (1,449) (a) $ 31,337 Cost of Sales 14,875 2,344 (1,449) (a) 15,770 ------------ -------------- ------------- ------------ Gross Profit 12,294 3,273 0 15,567 Selling 2,436 829 3,265 Distribution 1,709 0 1,709 General & Administrative 3,328 266 463 (b) 4,057 Research & Development 510 534 1,044 ------------ -------------- ------------- ------------ Total SG&A 7,983 1,629 463 10,075 ------------ -------------- ------------- ------------ Income (Loss) from Operations 4,311 1,644 (463) 5,492 Interest Expense (3,873) (45) (734)(c) (4,652) Other, Net 30 0 0 30 ------------ -------------- ------------- ------------ (3,843) (45) (734) (4,622) ------------ -------------- ------------- ------------ Income (Loss) Before Taxes 468 1,599 (1,197) 870 Provision for Income Taxes 187 474 (220)(d) 441 ------------ -------------- ------------- ------------ Net Income 281 1,125 (977) 429 ------------ -------------- ------------- ------------ Preferred Stock Dividends 925 0 0 925 Net Income (Loss) Available to Shareholders $ (644) 1,125 $ (977) $ (496) =========== ============= ============= ===========
24 Hudson Respiratory Care Inc. and Louis Gibeck AB Notes to Unaudited Pro Forma Consolidated Statement of Operations Quarter Ended March 26, 1999 The following unaudited pro forma adjustments are included in the accompanying unaudited pro forma consolidated statement of operations for the year ended December 25, 1998 (in thousands): (a) Reflects the elimination of intercompany sales. Gross profit in ending inventory is not material to the pro forma consolidated statement of operations. (b) This amount represents amortization of goodwill arising from the transaction, net of goodwill eliminated, over an estimated useful life of 20 years. (c) Reflects interest on additional bank borrowings and borrowings from an affiliate at 5 percent and 12 percent annual interest rates, respectively. (d) Reflects the tax benefit associated with additional interest expense on new borrowings in Sweden. The effective tax rate is estimated at 30 percent. 25 Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Date: October 5, 1999 HUDSON RESPIRATORY CARE INC. By: /s/ Jay R. Ogram ------------------------------- Jay R. Ogram Chief Financial Officer 26 -----END PRIVACY-ENHANCED MESSAGE-----