EX-99.2 4 exh99_2.htm UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF ALTEC LANSING FOR THE SIX MONTHS ENDED JUNE 30, 2005 Unaudited Condensed Consolidated Financial Statements of Altec Lansing for the six months ended June 30, 2005

ALTEC LANSING TECHNOLOGIES, INC.
CONDENSED COMBINED FINANCIAL STATEMENTS
(Unaudited)

TABLE OF CONTENTS



ALTEC LANSING TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)

   
June 30,
  
(in thousands, except per share data)
  
2005
  
       
ASSETS
      
Current assets:
      
Cash
  
$
4,537
  
Accounts receivable, net of allowances of $6,790
    
12,731
 
Inventories
    
21,192
 
Deferred income taxes
    
2,548
 
Prepaid expenses and other current assets
    
2,245
 
Total current assets
    
43,253
 
         
Property, plant, and equipment at cost, net
    
6,756
 
Other assets
    
176
 
Trademark
    
12,502
 
Total assets
  
$
62,687
  
         
LIABILITIES AND STOCKHOLDERS' EQUITY
        
Current liabilities:
        
Trade accounts payable
  
$
17,195
  
Accrued expenses
    
4,594
 
Current maturities of long-term debt
    
177
 
Current maturities of capital lease liabilities
    
274
 
Total current liabilities
    
22,240
 
 
        
Long-term debt
    
6,857
 
Notes payable to stockholders
    
2,500
 
Capital lease liabilities
    
67
 
Other long-term liabilities
    
1,296
 
Minority interest
    
170
 
Deferred tax liabilities
    
4,580
 
Total liabilities
    
37,710
 
 
        
Stockholders’ equity:
        
Capital stock:
        
Series A convertible preferred stock, par value $.01: authorized 7,500,000 shares; 5,766,000 shares issued and outstanding (aggregate liquidation preference of $7,000)
    
-
 
Preferred stock, par value $.01: authorized 5,000,000 shares; none issued or outstanding
    
-
 
Common stock, par value $.01: authorized 50,000,000 shares; 6,500,000 shares issued and outstanding
    
65
 
Additional paid-in capital
    
12,528
 
Unearned compensation
    
(329
)
Retained earnings
    
12,713
 
Total stockholders’ equity
    
24,977
 
Total liabilities and stockholders’ equity
  
$
62,687
  
 
See accompanying notes.


ALTEC LANSING TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)


(in thousands)
 
Six months ended June 30
 
   
2005
  
2004
  
           
Net sales
 
$
68,282
  
$
48,039
  
Cost of sales
   
41,171
   
34,072
 
Gross profit
   
27,111
   
13,967
 
               
Selling, general, and administrative expenses
   
12,163 
    
8,845
 
Research and development
   
3,218
   
2,403
 
     
15,381
   
11,248
 
Operating income
   
11,730
   
2,719
 
               
Interest expense
   
610
   
754
 
Other
   
535
   
182
 
Income before income taxes
   
10,585
   
1,783
 
               
Income tax (expense) benefit
   
(4,002
)
  
293
 
Net income
 
$
6,583
  
$
2,076
  

 

See accompanying notes.
 

ALTEC LANSING TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)

(in thousands)
  
Six months ended June 30
  
   
2005
  
2004
  
CASH FLOWS FROM OPERATING ACTIVITIES
          
Net income
  
$
6,583
  
$
2,076
  
Adjustments to reconcile net income to net cash provided by operating activities:
              
Provision for allowances on accounts receivable
    
(262
)
  
(304
)
Provision for losses on inventory
    
1,019
   
240
 
Stock compensation
    
1,390
   
-
 
Depreciation and amortization
    
1,065
   
1,427
 
Deferred tax
    
-
   
(293
)
Changes in assets and liabilities:
              
Accounts receivable
    
10,195
   
3,205
 
Inventories
    
(5,857
)
  
(3,828
)
Prepaid expenses and other assets
    
(600
)
  
134
 
Accounts payable, accrued expenses, and other liabilities
    
(3,393
)
  
(2,205
)
Net cash provided by operating activities
    
10,140
   
452
 
               
CASH FLOWS FROM INVESTING ACTIVITIES
              
Capital expenditures
    
(1,134
)
  
(644
)
Net cash used in investing activities
    
(1,134
)
  
(644
)
               
CASH FLOWS FROM FINANCING ACTIVITIES
              
Net (payments) proceeds under line of credit
    
(8,110
)
  
3,221
 
Principal payments on long-term debt
    
(341
)
  
(348
)
Payments on capital lease obligations
    
(135
)
  
(75
)
Net cash (used in) provided by financing activities
    
(8,586
)
  
2,798
 
Net increase in cash
    
420
   
2,606
 
               
Cash at beginning of period
    
4,117
   
1,739
 
Cash at end of period
  
$
4,537
  
$
4,345
  
               
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
              
Cash paid for interest expense
  
$
527
  
$
433
  
Cash paid for income taxes
  
$
4,332
  
$
14
  
Assets acquired under capital lease obligations
  
$
192
  
$
-
  
 
See accompanying notes

 
-4-
ALTEC LANSING TECHNOLOGIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
(Dollars in thousands)
 

1.
BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S.) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these condensed consolidated financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the U.S. These condensed consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments), which are in the opinion of management, necessary for a fair presentation of the results for the interim periods. Interim results are not necessarily indicative of results that may be expected for the full year.

2.
INVENTORIES

Inventories consist of the following as of June 30, 2005:

Raw materials
  
$
1,850
  
Work-in-progress
    
351
 
Finished goods
    
18,991
 

3.
STOCK OPTIONS

The Company applies Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation, together with Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, as permitted under SFAS No. 123, in accounting for its stock option plans. Accordingly, the Company uses the intrinsic value method to measure the costs associated with the granting of stock options to employees and this cost is accounted for as compensation expense in the consolidated statements of operations over the option vesting period or upon meeting certain performance criteria. In accordance with SFAS No. 123, the Company discloses the fair values of stock options issued to employees. Fair values of stock options are determined using the Black-Scholes option-pricing model. Pro forma disclosures as if compensation expense had been recognized for options granted in 2002 and 2001 in compliance with SFAS No. FAS 123 and SFAS No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure, are not presented, as such effects are not material to the results of operations in 2005.

4.
LONG-TERM DEBT

The Company’s long-term debt is summarized as follows as of June 30, 2005:


 
-5-
ALTEC LANSING TECHNOLOGIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
(Dollars in thousands)
 
 
Revolving credit line
  
$
5,006
  
         
Mortgage note, payable in monthly installments of $8 through September 2016, including interest at a variable rate (5.25% at June 30, 2005); secured by real property
   
788
  
         
Mortgage note, payable in monthly installments of $19 through June 2020, including interest at a variable rate that is set every three years (7.5% at June 30, 2005); secured by real property
   
1,189
  
         
Mortgage note, payable in monthly installments of $1 through July 2016, including interest at a variable rate (5.25% at June 30, 2005); secured by real property
    
51
  
     
7,034
  
Less current maturities
    
177
  
   
$
6,857
  

5.
INCOME TAXES

For the six months ended June 30, 2005 and 2004, we recorded income tax expense (benefit) of $4,002 and $(293) at effective rates of 37.81% and (16.43%), respectively. The Company’s effective tax rate for the six months ended June 30, 2004 is due to the Company’s release of certain valuation allowance against Federal and state net operating losses.

6.
GEOGRAPHIC INFORMATION

Information about the Company’s operations in the United States and other countries is as follows as of June 30, 2005 and for the six months ended June 30, 2005 and 2004:

 
-6-
ALTEC LANSING TECHNOLOGIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
(Dollars in thousands)
 
 
   
Six months ended June 30,
  
Net sales
  
2005
  
2004
  
           
United States
  
$
55,807
  
$
34,848
  
Asia
    
12,475
   
13,191
 
Consolidated
  
$
68,282
  
$
48,039
  
               
 
    
June 30,  
        
Identifiable assets
    
2005
 
               
United States
  
$
54,118
        
Asia
    
8,569
       
Consolidated
  
$
62,687
        
               
 
Identifiable assets are those assets of the Company that are identified with the operations in each geographic area.

7.
STOCK INCENTIVE PLAN

On November 8, 2001, the Company entered into a Stock Award Agreement with an executive. Per the Agreement, the Company issued 500,000 shares of Company common stock. The shares are subject to several vesting and forfeiture provisions, including time-based and performance conditions. The total compensation expense recorded for the six months ended June 30, 2005 and 2004 was $1,390 and $0, respectively and is included in Selling, general, and administrative expenses in the accompanying Consolidated Statement of Operations. As of June 30, 2005, 250,000 of these shares have vested, with the remaining 250,000 considered probable of vesting in 2005.

8.
SALE OF BUSINESS

On July 11, 2005, the Company entered into a definitive Agreement and Plan of Merger with Plantronics, Inc. under which Plantronics will acquire all of the Company’s issued and outstanding stock for $166 million. The transaction is expected to close in August 2005.