EX-99 3 a4534552ex99.txt EXHIBIT 99.1 Exhibit 99.1
Durel Corporation Balance Sheets (dollars in thousands) As of As of September 28, 2003 December 29, 2002 (unaudited) (unaudited) ------------------------------------------------ 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 ------------------------------------------------ Total inventories 4,632 6,383 Prepaid expenses and other 298 13 ------------------------------------------------ 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 ------------------------------------------------ Total assets $43,388 $45,209 ================================================ 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 ------------------------------------------------ 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 ------------------------------------------------ Total shareholders' equity 33,567 30,208 ------------------------------------------------ Total liabilities and shareholders' equity $43,388 $45,209 ================================================ 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 ------------------------------------------------ Gross Profit 22,088 24,763 Costs and expenses: Selling and administrative 6,377 6,508 Research and development 2,410 2,509 ------------------------------------------------ Income from operations 13,301 15,746 Other (expense) income: Interest income 77 50 Interest expense - (512) Other (154) (186) ------------------------------------------------ Income before income taxes 13,224 15,098 Provision for income taxes (3,968) (4,531) ------------------------------------------------ Net income $9,256 $10,567 ================================================ 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 ------------------------------------------------ Net cash provided by operating activities 11,714 13,327 Investing Activities Purchase of property, plant and equipment (328) (257) ------------------------------------------------ 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) - ------------------------------------------------ Net cash used in financing activities (6,656) (7,549) ------------------------------------------------ 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 ------------------------------------------------ Cash and cash equivalents and the end of the period $8,344 $6,693 ================================================ 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.