EX-99.4 4 b51314gsexv99w4.txt UNAUDITED CONDENSED FINANCIAL STATEMENTS OF MICROE SYSTEMS . . . EXHIBIT 99.4 MICROE SYSTEMS UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS APRIL 4, 2004 AND SEPTEMBER 28, 2003 (Stated in thousands of U.S. dollars)
April 4, September 28, 2004 2003 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 3,481 $ 9,634 Accounts receivable, net 4,119 4,691 Inventories 1,656 1,183 Deferred taxes 639 639 Prepaid expenses and other current assets 132 174 -------- -------- Total current assets 10,027 16,321 PROPERTY AND EQUIPMENT--Net 390 456 DEFERRED TAXES 46 46 OTHER ASSETS--Net 130 54 -------- -------- TOTAL ASSETS $ 10,593 $ 16,877 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 811 $ 572 Accrued income taxes 888 487 Accrued expenses 948 1,355 -------- -------- Total current liabilities 2,647 2,414 DEFERRED RENT 30 34 -------- -------- Total liabilities 2,677 2,448 -------- -------- COMMITMENTS AND CONTINGENCIES (Note 4) REDEEMABLE PREFERRED STOCK: Class A Redeemable Preferred Stock, at liquidation value; $0.01 par value 0 2,638 Class B Redeemable Preferred Stock, at liquidation value; $0.01 par value 0 5,142 STOCKHOLDERS' EQUITY: Common stock, $0.01 par value 9 9 Treasury stock, at cost (1,157) (1,101) Additional paid-in capital 794 701 Accumulated other comprehensive gain (loss) 20 (23) Retained earnings 8,250 7,063 -------- -------- Total stockholders' equity 7,916 6,649 -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 10,593 $ 16,877 ======== ========
-1- MICROE SYSTEMS UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE SIX MONTHS ENDED APRIL 4, 2004 AND MARCH 30, 2003 (Stated in thousands of U.S. dollars)
2004 2003 REVENUE $ 12,895 $ 11,522 COST OF REVENUE 5,207 4,691 -------- -------- GROSS MARGIN 7,688 6,831 -------- -------- OPERATING EXPENSES: Research and development 2,378 2,323 Selling and marketing 2,342 2,079 General and administrative 1,027 900 -------- -------- Total operating expenses 5,747 5,302 -------- -------- INCOME FROM OPERATIONS 1,941 1,529 OTHER INCOME/(EXPENSE)--Net (346) 57 -------- -------- INCOME BEFORE INCOME TAX PROVISION 1,595 1,586 INCOME TAX PROVISION 402 461 -------- -------- NET INCOME $ 1,193 $ 1,125 -------- -------- PREFERRED STOCK DIVIDENDS AND ACCRETION 234 -------- -------- NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS $ 1,193 $ 891 ======== ========
-2- MICROE SYSTEMS UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED APRIL 4, 2004 AND MARCH 30, 2003 (Stated in thousands of U.S. dollars)
2004 2003 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 1,193 $ 1,125 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 127 148 Changes in operating assets and liabilities: Accounts receivable 572 745 Inventories (473) (63) Prepaid expenses and other assets 43 101 Accounts payable 238 (186) Accrued income taxes 402 243 Accrued expenses and other (413) (260) -------- -------- Net cash provided by operating activities 1,689 1,853 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (60) (157) Decrease (increase) in other assets (76) 7 -------- -------- Net cash used in investing activities (136) (150) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Redemption of preferred stock (7,785) Proceeds from the exercise of common stock options 93 21 Purchase & settlement of treasury stock transactions (56) (31) -------- -------- Net cash used in financing activities (7,748) (10) -------- -------- Effects of exchange rates on cash & cash equivalents 42 (10) -------- -------- NET INCREASE IN CASH AND CASH EQUIVALENTS (6,153) 1,683 CASH AND CASH EQUIVALENTS--Beginning of period 9,634 9,010 -------- -------- CASH AND CASH EQUIVALENTS--End of period $ 3,481 $ 10,693 ======== ======== SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES--Accretion of dividends on redeemable preferred stock $ 0 $ 234 ======== ========
-3- MICROE SYSTEMS NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Amounts in $000s) 1. NATURE OF OPERATIONS MicroE Systems (the "Company" or "MicroE") develops, manufactures and markets high-performance, position-sensing systems called encoders for motion-controlled applications. The Company's patented technology enables the development of encoders that are smaller and more robust while delivering high resolution and accuracy. The Company targets specific motion control applications in a variety of high-tech and industrial markets. These markets include data storage, semiconductor processing and packaging, electronics assembly and other high-precision industries. The Company sells to customers located throughout the world. 2. BASIS OF PRESENTATION INTERIM FINANCIALS -- These unaudited interim condensed consolidated financial statements have been prepared by the Company in United States (U.S.) dollars and in accordance with accounting principles generally accepted in the U.S. for interim financial statements. The condensed consolidated financial statements reflect all adjustments and accruals, consisting only of adjustments and accruals of a normal recurring nature, which management considers necessary for a fair presentation of financial position and results of operations for the periods presented. The condensed consolidated interim financial statements should be read in conjunction with the consolidated financial statements and notes for the year ended September 28, 2003 included in Exhibit 99.3 of this Current Report on 8-K/A. The results for interim periods are not necessarily indicative of results to be expected for the year or for any future periods. PRINCIPLES OF CONSOLIDATION -- The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, MicroE International, which operates branches in Japan, Singapore and Switzerland. All intercompany accounts and transactions have been eliminated in consolidation. USE OF ESTIMATES -- The Company's financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. Such principles require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. INVENTORIES -- Inventories are valued at the lower of cost (first-in, first-out) or market. Inventories at April 4, 2004 and September 28, 2003 consist of the following: -4-
APRIL 4, SEPTEMBER 28, 2004 2003 Raw materials $ 998 $ 745 Work-in-process 567 353 Finished goods 91 85 ------ ------ $1,656 $1,183 ====== ======
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS -- In May 2003, FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity," which establishes standards for how an issuer of financial instruments classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances) if, at inception, the monetary value of the obligation is based solely or predominantly on a fixed monetary amount known at inception, or something other than the fair value of the issuer's equity shares, or on variation inversely related to changes in the fair value of the issuer's equity shares. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003 and is otherwise effective at the beginning of the first interim period beginning after June 15, 2003, except for mandatorily redeemable financial instruments of nonpublic companies, for which it is applicable for the first fiscal period beginning after December 15, 2004. The Company's outstanding preferred stock was redeemed and the Company paid the holders of the preferred stock during the six months ended April 4, 2004. The Company had no other securities outstanding impacted by SFAS 150. 3. INCOME TAXES Income taxes have been provided in accordance with SFAS No. 109, "Accounting for Income Taxes," under which deferred tax assets and liabilities at the end of each period are determined based on the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases using enacted tax rates when such differences are expected to reverse. The Company establishes reserves for potential adjustments to its filed tax returns. 4. COMMITMENTS AND CONTINGENCIES The Company is subject to asserted and unasserted claims that may arise in the ordinary course of business. In the opinion of management, it is remote that the ultimate resolution of any known matters will have a material adverse effect on the Company's financial condition, results of operations or cash flows. 5. REDEEMABLE PREFERRED STOCK Redemption of Preferred Stock -- On September 30, 2003, holders of greater than 2/3 of Class A and Class B shares elected to require the Company to redeem all outstanding shares and cumulative unpaid dividends totaling $7,780. The Board of Directors voted to pay all cumulative dividends on the Class A and Class B accrued as of September 28, 2003. Such amounts totaled $2,642 and were paid by the Company in November 2003. The Company initially settled the obligation for the remaining balance due on the preferred stock by issuing notes. In addition, the Company paid additional 16% annual rate on the balance outstanding on the redeemed preferred shares until all amounts were settled. All amounts due were paid in full on March 26, 2004 and no remaining obligations related to the redemption remained at April 4, 2004. -5-
CLASS A REDEEMABLE CLASS B REDEEMABLE CLASS A CLASS B TOTAL ---------------------- -------------------- ------- NUMBER CARRYING NUMBER CARRYING OF SHARES VALUE OF SHARES VALUE BALANCE--September 29, 2002 44,154 2,519 36,000 4,854 7,373 Accretion of dividends on Class A and B Redeemable Preferred Stock 119 288 407 ------- ------- ------- ------- ------- BALANCE--September 28, 2003 44,154 2,638 36,000 5,142 7,780 Redemption of Preferred Stock (44,154) (2,638) (36,000) (5,142) (7,780) ------- ------- ------- ------- ------- BALANCE--April 4, 2004 - $ - - $ - $ - ======= ======= ======= ======= =======
6. OTHER ACCRUED EXPENSES -- Accrued expenses consist of the following as of April 4, 2004 and September 28, 2003:
APRIL 4, SEPTEMBER 28, 2004 2003 Salaries and wages $ 301 $ 687 Vacation pay and employee benefits 293 175 Other 354 493 ------ ------ $ 948 $1,355 ====== ======
WARRANTY -- The following table sets forth the activity in the Company's warranty accrual, included in accrued expenses:
SIX MONTHS BALANCE AT BALANCE AT ENDED BEGINNING CHARGES TO COSTS ACCRUAL END OF OF PERIOD AND EXPENSES REDUCTIONS PERIOD April 4, 2004 $ 414 $ (53) $ (62) $ 299 March 30, 2003 367 (59) 104 412
REVENUE -- Revenue consists of the following for the six months ended April 4, 2004 and March 30, 2003: -6-
APRIL 4, MARCH 30, 2004 2003 Products $12,769 $11,077 Services 58 414 Other 68 31 ------- ------- $12,895 $11,522 ======= =======
7. SUBSEQUENT EVENT On April 12, 2004, the Company entered into an Agreement and Plan of Merger to be acquired by GSI Lumonics Inc. ("GSI"). The acquisition was completed on May 14, 2004 with GSI by means of a merger with the Company becoming an indirect wholly owned subsidiary of GSI. Pursuant to the terms of the Merger Agreement, GSI paid the MicroE security holders $57,300 in cash in exchange for all of the Company's outstanding capital stock. The $57,300 was net of the Company's transaction costs that were unpaid at the time of the closing of the merger. The Company incurred approximately $1,200 of transaction costs relating primarily to professional services. ****** -7-