EX-99.2 4 w02012exv99w2.txt UNAUDITED INTERIM FINANCIAL STATEMENTS FOR HUDSON RESPIRATORY CARE INC. EXHIBIT 99.2 HUDSON RESPIRATORY CARE INC. AND SUBSIDIARIES SIX MONTHS ENDED JUNE 30, 2004 TABLE OF CONTENTS
PAGE ---- FINANCIAL INFORMATION Unaudited Condensed Consolidated Financial Statements: Unaudited Condensed Consolidated Balance Sheets as of June 30, 2004 and December 31, 2003....................................... 1 Unaudited Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2004 and June 30, 2003........ 3 Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2004 and June 30, 2003 ..................... 4 Notes to Unaudited Condensed Consolidated Financial Statements............ 6
HUDSON RESPIRATORY CARE INC. AND SUBSIDIARIES (A MAJORITY-OWNED SUBSIDIARY OF RIVER HOLDING CORP.) UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS ASSETS (amounts in thousands)
JUNE 30, DECEMBER 31, 2004 2003 ---------- -------------- CURRENT ASSETS: Cash.............................................................................. $ 5,835 $ 6,682 Accounts receivable, less allowance for doubtful accounts of $1,117 and $1,156 at June 30, 2004 and December 31, 2003, respectively......................... 26,706 25,107 Inventories, net.................................................................. 27,695 23,829 Other current assets.............................................................. 2,205 2,505 ---------- ------------- Total current assets........................................................ 62,441 58,123 PROPERTY, PLANT AND EQUIPMENT, net................................................... 38,725 37,477 GOODWILL 39,912 41,410 DEFERRED FINANCING AND OTHER COSTS, net of accumulated amortization of $5,724 and $5,188 at June 30, 2004 and December 31, 2003, respectively ..................... 5,903 6,457 OTHER ASSETS 1,118 1,243 ---------- ------------- Total other assets.......................................................... 46,933 49,110 ---------- ------------- Total assets............................................................ $ 148,099 $ 144,710 ========== =============
See notes to condensed consolidated statements 1 HUDSON RESPIRATORY CARE INC. AND SUBSIDIARIES (A MAJORITY-OWNED SUBSIDIARY OF RIVER HOLDING CORP.) UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED) LIABILITIES AND STOCKHOLDERS' DEFICIT (amounts in thousands, except per share amounts)
JUNE 30, DECEMBER 31, 2004 2003 ------------ -------------- CURRENT LIABILITIES: Current portion of bank notes payable............................................ $ 8,979 $ 9,178 Accounts payable................................................................. 8,707 9,175 Accrued liabilities.............................................................. 18,435 16,973 ------------ ------------- Total current liabilities........................................................ 36,121 35,326 INTEREST PAYABLE TO AFFILIATES..................................................... 12,572 9,760 NOTES PAYABLE TO AFFILIATES........................................................ 39,317 39,317 BANK NOTES PAYABLE, net of current portion......................................... 56,849 54,377 SENIOR SUBORDINATED NOTES PAYABLE.................................................. 115,000 115,000 MANDATORILY REDEEMABLE PREFERRED STOCK, $0.01 par value; 2,990 shares authorized; 588 and 556 shares issued and outstanding at June 30, 2004 and December 31, 2003; liquidation preference, $60,224....................... 58,382 55,147 Accrued preferred stock dividend, payable in kind................................ 1,409 1,333 ------------ ------------- 59,791 56,480 OTHER NON-CURRENT LIABILITIES...................................................... 2,199 2,365 ------------ ------------- Total liabilities.............................................................. 321,849 312,625 COMMITMENTS AND CONTINGENCIES (Note 4) STOCKHOLDERS' DEFICIT: Junior preferred stock, $0.01 par value; 10 shares authorized; 3 shares outstanding at June 30, 2004 and December 31, 2003........................... 4,197 3,960 Common stock, $0.01 par value; 42,000 shares authorized; 10,654 issued and outstanding at June 30, 2004 and December 31, 2003........................... 98,258 98,258 Additional paid in capital....................................................... 881 881 Cumulative translation adjustment................................................ 5,845 6,848 Accumulated deficit.............................................................. (282,931) (277,862) ------------ ------------- Total stockholders' deficit.................................................... (173,750) (167,915) ------------ ------------- Total liabilities and stockholders' deficit........................... $ 148,099 $ 144,710 ============ =============
See notes to condensed consolidated statements 2 HUDSON RESPIRATORY CARE INC. AND SUBSIDIARIES (A MAJORITY-OWNED SUBSIDIARY OF RIVER HOLDING CORP.) UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (amounts in thousands)
THREE MONTHS ENDED SIX MONTHS ENDED ---------------------- ------------------------ JUNE 30, JUNE 30, JUNE 30, JUNE 30, 2004 2003 2004 2003 ---------- --------- ----------- ---------- NET SALES...................................................... $ 47,418 $ 45,268 $ 97,601 $ 91,147 COST OF SALES.................................................. 26,221 25,223 52,451 51,253 ---------- --------- ----------- ---------- Gross Profit............................................... 21,197 20,045 45,150 39,894 OPERATING EXPENSES: Distribution, selling, general & administrative............ 18,208 12,248 32,314 25,005 Research and development................................... 1,120 720 1,979 1,360 ---------- --------- ----------- ---------- 19,328 12,968 34,293 26,365 ---------- --------- ----------- ---------- Income from operations.................................. 1,869 7,077 10,857 13,529 INTEREST EXPENSE AND OTHER, net................................ 7,279 5,292 14,359 10,553 ---------- --------- ----------- ---------- Net (loss) income before provision for income taxes..... (5,410) 1,785 (3,502) 2,976 PROVISION FOR INCOME TAXES..................................... 658 647 1,332 1,328 ---------- --------- ----------- ---------- Net (loss) income....................................... $ (6,068) $ 1,138 $ (4,834) $ 1,648 ========== ========= =========== ========== OTHER COMPREHENSIVE INCOME (LOSS): Foreign currency translation (loss) gain................... 336 1,235 (1,003) 1,956 ---------- --------- ----------- ---------- Comprehensive (loss) income................................ $ (5,732) $ 2,373 $ (5,837) $ 3,604 ========== ========= =========== ==========
See notes to condensed consolidated statements 3 HUDSON RESPIRATORY CARE INC. AND SUBSIDIARIES (A MAJORITY-OWNED SUBSIDIARY OF RIVER HOLDING CORP.) UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (amounts in thousands)
SIX MONTHS ENDED ------------------------ JUNE 30, JUNE 30, 2004 2003 ---------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss) income................................................................ $ (4,834) $ 1,648 Adjustments to reconcile net (loss) income to net cash provided by operating activities- Depreciation and amortization.............................................. 5,020 4,902 Amortization of deferred financing costs................................... 536 931 Accrued mandatorily redeemable preferred stock dividends, payable in-kind.. 3,311 -- Interest payable to affiliates............................................. 2,813 2,651 Provision for bad debts.................................................... (19) 239 Loss (gain) on disposal of property, plant and equipment................... (11) 2 Changes in operating assets and liabilities: Accounts receivable........................................................ (1,857) 1,295 Inventories................................................................ (4,038) (1,051) Other current assets....................................................... 267 (226) Other assets............................................................... 34 (29) Accounts payable........................................................... (400) (947) Accrued liabilities........................................................ 1,601 (1,506) Other non-current liabilities.............................................. 30 29 ---------- ------------ Net cash provided by operating activities............................... 2,453 7,938 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant and equipment....................................... (6,333) (3,533) Proceeds from sales of property, plant and equipment............................. 2 18 ---------- ------------ Net cash used in investing activities................................... (6,331) (3,515) CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of bank notes payable.................................................. -- (14,771) Proceeds from bank borrowings.................................................... 2,743 7,486 Payment of capital lease obligations............................................. (28) (26) ---------- ------------ Net cash provided by (used in) financing activities..................... 2,715 (7,311) Effect of exchange rate changes on cash.............................................. 316 (933) ---------- ------------ NET DECREASE IN CASH................................................................. (847) (3,821) CASH, beginning of period............................................................ 6,682 6,425 ---------- ------------ CASH, end of period.................................................................. $ 5,835 $ 2,604 ========== ============
See notes to condensed consolidated statements 4
SIX MONTHS ENDED ----------------------- JUNE 30, JUNE 30, 2004 2003 ---------- ---------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest...................................................................... $ 7,611 $ 7,387 ========== ========= Income taxes (primarily foreign).............................................. $ 1,090 $ 1,354 ========== ========= NON-CASH FINANCING ACTIVITIES: Preferred dividends accrued or paid-in-kind...................................... $ 237 $ 3,141 ========== =========
See notes to condensed consolidated statements 5 HUDSON RESPIRATORY CARE INC. AND SUBSIDIARIES (A MAJORITY-OWNED SUBSIDIARY OF RIVER HOLDING CORP.) NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. Financial Statements. The condensed consolidated 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 June 30, 2004, the results of operations for the three and six month periods ended June 30, 2004 and June 30, 2003 and statements of cash flows for the six month periods ended June 30, 2004 and June 30, 2003 pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). 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 have been condensed or omitted pursuant to such rules and regulations. Although the Company believes that the disclosures in such financial statements are adequate to make the information presented not misleading, the accompanying unaudited condensed, consolidated financial statements should be read in conjunction with the Company's 2003 audited financial statements and the notes thereto included in its Form 10-K filed with the SEC. The results of operations for the three and six month period ended June 30, 2004 are not necessarily indicative of the results to be achieved for a full year. Significant Accounting Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The significant estimates made in the preparation of the Company's consolidated financial statements relate to allowance for bad debts, rebate reserve, and inventory reserve. Stock Based Compensation The Company accounts for its stock-based compensation plans under the recognition and measurement principles of Accounting Principles Board Opinion ("APB") 25, "Accounting for Stock Issued to Employees," and related interpretations. The Company has adopted the disclosure provisions of Statement Financial Accounting Standards ("SFAS") 123, "Accounting for Stock-Based Compensation," as amended by SFAS 148, "Accounting for Stock-Based Compensation - Transition and Disclosure - an amendment of FASB Statement No. 123." No stock-based employee compensation expense is recognized in net income for any of the periods presented. Had compensation expense for the Company's stock-based compensation awards been recognized based on the fair value recognition provisions of SFAS 123, the Company's net income would have been adjusted to the pro forma amounts indicated below (amounts in thousands):
SIX MONTHS ENDED JUNE 30, -------------------------- 2004 2003 ---------- ---------- Net (loss) income, as reported..................... $ (4,834) $ 1,648 Deduct: Total stock-based employee compensation expense determined under the fair value based method for all awards.......................... 67 10 ---------- ---------- Pro forma net (loss) income........................ $ (4,901) $ 1,638 ========== ==========
6 Under the fair-value method, compensation expense is measured at the grant date based on the fair value of the award using an option-pricing model. Compensation expense is recognized on a straight-line basis over the vesting period. The fair value of employee stock options was estimated using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in 2003 and 2002: risk-free interest rates of 2.00% and 2.83%, respectively; dividend yield of 0% for all years; expected lives of three years and four years, respectively, and volatility of 50% for both years. Reclassifications Certain amounts from prior periods have been reclassified to conform to the current period presentation. 2. Inventories. Inventories consisted of the following (amounts in thousands):
JUNE 30, DECEMBER 31, 2004 2003 ------------- ------------ Raw materials................................................................... $ 5,062 $ 4,558 Work-in-process................................................................. 5,404 4,955 Finished goods.................................................................. 17,229 14,316 ------------- ----------- $ 27,695 $ 23,829 ------------- -----------
3. Geographic and Segment Information. The Company presents segment information externally based on how management uses financial data internally to make operating decisions and assess performance. The Company has two operating segments: guarantor, primarily the United States and non-guarantor, primarily international. The non-guarantor subsidiaries consist principally of Hudson AB and subsidiaries (whose operations are principally international). Under SFAS 131, "Disclosures about Segments of an Enterprise and Related Information," the Company's operating segments are the same as its reporting segments. The Company sells respiratory care and anesthesia products to distributors and medical facilities throughout the United States and internationally. Operating results of the Company's various product groups have been aggregated because of their common characteristics and their reliance on shared operating functions. The Company operates primarily in the United States and in Europe. The Company's sales and percentage of sales by geographic region for the three and six months ending June 30, 2004 and 2003 are as follows (amounts in thousands):
THREE MONTHS ENDED ------------------------------------------ JUNE 30, 2004 JUNE 30, 2003 ------------------- ------------------- United States............................................ $ 31,140 65.8% $ 32,293 71.3% Europe................................................... 9,544 20.1 8,024 17.7 Pacific Rim (Japan, Southeast Asia, Australia/New Zealand).............................................. 3,864 8.1 3,096 6.8 Canada................................................... 678 738 1.6 1.4 Other international...................................... 2,192 4.6 1,117 2.5 --------- ----- --------- ----- $ 47,418 100.0% $ 45,268 100.0% ========= ===== ========= =====
SIX MONTHS ENDED -------------------------------------------- JUNE 30, 2004 JUNE 30, 2003 -------------------- ---------------------- United States............................................ $ 65,594 67.2% $ 65,867 72.3% Europe................................................... 19,368 19.8 15,067 16.5 Pacific Rim (Japan, Southeast Asia, Australia/New Zealand).............................................. 7,004 7.2 6,436 7.1 Canada................................................... 1,472 1.5 1,302 1.4 Other international...................................... 4,163 4.3 2,475 2.7 --------- ----- --------- ----- $ 97,601 100.0% $ 91,147 100.0% ========= ===== ========= =====
7 The Company's sales and percentage of sales by product group for the three and six months ending June 30, 2004, and 2003 are as follows (amounts in thousands):
THREE MONTHS ENDED ------------------------------------------ JUNE 30, 2004 JUNE 30, 2003 ------------------- ------------------- Oxygen Therapy.......................................... $ 13,571 28.7% $ 13,332 29.5% Airway Management....................................... 9,154 19.3 9,268 20.5 Humidification.......................................... 11,732 24.7 10,928 24.1 Aerosol Therapy......................................... 12,961 27.3 11,740 25.9 --------- ----- --------- ------ $ 47,418 100.0% $ 45,268 100.0% ========= ===== ========= =====
SIX MONTHS ENDED ------------------------------------------ JUNE 30, 2004 JUNE 30, 2003 ------------------- ------------------- Oxygen Therapy.......................................... $ 28,466 29.1% $ 26,595 29.2% Airway Management....................................... 21,140 21.7 19,405 21.3 Humidification.......................................... 23,197 23.8 21,605 23.7 Aerosol Therapy......................................... 24,798 25.4 23,542 25.8 --------- ----- --------- ----- $ 97,601 100.0% $ 91,147 100.0% ========= ===== ========= ======
The Company is the 100% owner of certain subsidiaries that do not guarantee the Company's senior subordinated notes and certain bank debt. The following tables disclose required consolidating financial information for guarantor and non-guarantor subsidiaries (amounts in thousands): 8 HUDSON RESPIRATORY CARE INC. AND SUBSIDIARIES GUARANTOR AND NON-GUARANTOR SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET
JUNE 30, 2004 ------------------------------------------------------------- NON- GUARANTOR GUARANTOR ELIMINATIONS TOTAL ------------- ---------- ------------ ------------- ASSETS CURRENT ASSETS: Cash.................................................. $ 3,798 $ 2,037 $ -- $ 5,835 Accounts receivable................................... 18,028 8,678 -- 26,706 Intercompany receivables, net......................... -- 425 (425) -- Inventories........................................... 23,808 4,939 (1,052) 27,695 Other current assets.................................. 1,322 883 -- 2,205 ------------- ---------- ----------- ------------- Total current assets............................... 46,956 16,962 (1,477) 62,441 PROPERTY, PLANT AND EQUIPMENT, NET.................................... 36,649 2,076 -- 38,725 GOODWILL.................................................. -- 39,912 -- 39,912 DEFERRED FINANCING COSTS, net............................. 5,903 -- -- 5,903 INVESTMENT IN NON-GUARANTOR SUBSIDIARIES, at cost......... 28,636 4,000 (32,636) -- OTHER ASSETS.............................................. 1,094 24 -- 1,118 ------------- ---------- ----------- ------------- Total other assets................................. 35,633 43,936 (32,636) 46,933 ------------- ---------- ----------- ------------- $ 119,238 $ 62,974 $ (34,113) $ 148,099 ============= ========== =========== ============= LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES: Current portion of bank notes payable................. $ 3,680 $ 5,299 $ -- $ 8,979 Accounts payable...................................... 7,188 1,519 -- 8,707 Intercompany payables, net............................ 425 -- (425) -- Accrued liabilities................................... 14,704 3,731 -- 18,435 ------------- ---------- ----------- ------------- Total current liabilities.......................... 25,997 10,549 (425) 36,121 INTEREST PAYABLE TO AFFILIATES............................ 8,547 4,025 -- 12,572 NOTES PAYABLE TO AFFILIATES............................... 26,951 12,366 -- 39,317 BANK NOTES PAYABLE, net of current portion................ 52,257 4,592 -- 56,849 SENIOR SUBORDINATED NOTES PAYABLE......................... 115,000 -- -- 115,000 MANDATORILY REDEEMABLE PREFERRED STOCK 59,791 -- -- 59,791 OTHER NON-CURRENT LIABILITIES............................. 111 2,088 -- 2,199 ------------- ---------- ----------- ------------- Total liabilities.................................. 288,654 33,620 (425) 321,849 STOCKHOLDERS' EQUITY (DEFICIT)............................ (169,416) 29,354 (33,688) (173,750) ------------- ---------- ----------- ------------- $ 119,238 $ 62,974 $ (34,113) $ 148,099 ============= ========== =========== =============
9 HUDSON RESPIRATORY CARE INC. AND SUBSIDIARIES GUARANTOR AND NON-GUARANTOR SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2003 ------------------------------------------------------------- NON- GUARANTOR GUARANTOR ELIMINATIONS TOTAL ------------- ---------- ------------ ------------- ASSETS CURRENT ASSETS: Cash..................................................... $ 3,690 $ 2,992 $ -- $ 6,682 Accounts receivable...................................... 17,938 7,169 -- 25,107 Intercompany receivables, net............................ -- 1,694 (1,694) -- Inventories.............................................. 20,419 4,605 (1,195) 23,829 Other current assets..................................... 1,587 918 -- 2,505 ------------- ---------- ----------- ------------- Total current assets.................................. 43,634 17,378 (2,889) 58,123 PROPERTY, PLANT AND EQUIPMENT, NET....................................... 35,480 1,997 -- 37,477 GOODWILL..................................................... -- 41,410 -- 41,410 DEFERRED FINANCING COSTS, net................................ 6,457 -- -- 6,457 INVESTMENT IN NON-GUARANTOR SUBSIDIARIES, at cost............ 28,636 4,000 (32,636) -- OTHER ASSETS................................................. 1,216 27 -- 1,243 ------------- ---------- ----------- ------------- Total other assets.................................... 36,309 45,437 (32,636) 49,110 ------------- ---------- ----------- ------------- $ 115,423 $ 64,812 $ (35,525) $ 144,710 ============= ========== =========== ============= LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES: Current portion of bank notes payable.................... $ 3,680 $ 5,498 $ -- $ 9,178 Accounts payable......................................... 7,170 2,005 -- 9,175 Intercompany payables, net............................... 1,694 -- (1,694) -- Accrued liabilities...................................... 13,459 3,514 -- 16,973 ------------- ---------- ----------- ------------- Total current liabilities............................. 26,003 11,017 (1,694) 35,326 INTEREST PAYABLE TO AFFILIATES............................... 6,720 3,040 -- 9,760 NOTES PAYABLE TO AFFILIATES.................................. 26,951 12,366 -- 39,317 BANK NOTES PAYABLE, net of current portion................... 46,552 7,825 -- 54,377 SENIOR SUBORDINATED NOTES PAYABLE............................ 115,000 -- -- 115,000 MANDATORILY REDEEMABLE PREFERRED STOCK....................... 56,480 -- -- 56,480 OTHER NON-CURRENT LIABILITIES................................ 229 2,136 -- 2,365 ------------- ---------- ----------- ------------- Total liabilities..................................... 277,935 36,384 (1,694) 312,625 STOCKHOLDERS' EQUITY (DEFICIT)............................... (162,512) 28,428 (33,831) (167,915) ------------- ---------- ----------- ------------- $ 115,423 $ 64,812 $ (35,525) $ 144,710 ============= ========== =========== =============
10 HUDSON RESPIRATORY CARE INC. AND SUBSIDIARIES GUARANTOR AND NON-GUARANTOR SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2004 ------------------------------------------------------------- NON- GUARANTOR GUARANTOR ELIMINATIONS TOTAL ------------- ---------- ------------ ------------- NET SALES.................................................... $ 39,754 $ 12,420 $ (4,756) $ 47,418 COST OF SALES................................................ 25,453 5,776 (5,008) 26,221 ------------- ---------- ----------- ------------- Gross Profit............................................. 14,301 6,644 252 21,197 OPERATING EXPENSES: Distribution, selling, general and administrative........ 14,225 3,983 -- 18,208 Research and development................................. 756 364 -- 1,120 ------------- ---------- ----------- ------------- 14,981 4,347 -- 19,328 ------------- ---------- ----------- ------------- (Loss) income from operations............................ (680) 2,297 252 1,869 INTEREST EXPENSE AND OTHER, net: 6,411 868 7,279 ------------- ---------- ----------- ------------- (Loss) income before provision for income taxes.......... (7,091) 1,429 252 (5,410) PROVISION FOR INCOME TAXES................................... 21 637 -- 658 ------------- ---------- ----------- ------------- Net (loss) income............................................ $ (7,112) $ 792 $ 252 $ (6,068) ============= ========== =========== =============
THREE MONTHS ENDED JUNE 30, 2003 ------------------------------------------------------------- NON- GUARANTOR GUARANTOR ELIMINATIONS TOTAL ------------- ---------- ------------ ------------- NET SALES.................................................... $ 39,751 $ 11,411 $ (5,894) $ 45,268 COST OF SALES................................................ 25,191 5,484 (5,452) 25,223 ------------- ---------- ----------- ------------- Gross Profit............................................. 14,560 5,927 (442) 20,045 OPERATING EXPENSES: Distribution, selling, general and administrative........ 8,743 3,505 -- 12,248 Research and development................................. 389 331 -- 720 ------------- ---------- ----------- ------------- 9,132 3,836 -- 12,968 ------------- ---------- ----------- ------------- Income from operations................................... 5,428 2,091 (442) 7,077 INTEREST EXPENSE AND OTHER, net: 4,685 607 5,292 ------------- ---------- ----------- ------------- Income (loss) before provision for income taxes.......... 743 1,484 (442) 1,785 PROVISION FOR INCOME TAXES................................... 62 585 -- 647 ------------- ---------- ----------- ------------- Net income (loss)............................................ $ 681 $ 899 $ (442) $ 1,138 ============= ========== =========== =============
11 HUDSON RESPIRATORY CARE INC. AND SUBSIDIARIES GUARANTOR AND NON-GUARANTOR SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2004 ------------------------------------------------------------- NON- GUARANTOR GUARANTOR ELIMINATIONS TOTAL ------------- ---------- ------------ ------------- NET SALES.................................................... $ 82,268 $ 24,819 $ (9,486) $ 97,601 COST OF SALES................................................ 50,742 11,338 (9,629) 52,451 ------------- ---------- ----------- ------------- Gross Profit............................................. 31,526 13,481 143 45,150 OPERATING EXPENSES: Distribution, selling, general and administrative........ 24,384 7,930 -- 32,314 Research and development................................. 1,292 687 -- 1,979 ------------- ---------- ----------- ------------- 25,676 8,617 -- 34,293 ------------- ---------- ----------- ------------- Income from operations................................... 5,850 4,864 143 10,857 INTEREST EXPENSE AND OTHER, net: 12,706 1,653 14,359 ------------- ---------- ----------- ------------- Income before provision for income taxes................. (6,856) 3,211 143 (3,502) PROVISION FOR INCOME TAXES................................... (11) 1,343 -- 1,332 ------------- ---------- ----------- ------------- Net (loss) income............................................ $ (6,845) $ 1,868 $ 143 $ (4,834) ============= ========== =========== =============
SIX MONTHS ENDED JUNE 30, 2003 ------------------------------------------------------------- NON- GUARANTOR GUARANTOR ELIMINATIONS TOTAL ------------- ---------- ------------ ------------- NET SALES.................................................... $ 80,071 $ 21,420 $ (10,344) $ 91,147 COST OF SALES................................................ 50,731 10,376 (9,854) 51,253 ------------- ---------- ----------- ------------- Gross Profit............................................. 29,340 11,044 (490) 39,894 OPERATING EXPENSES: Distribution, selling, general and administrative........ 18,487 6,518 -- 25,005 Research and development................................. 747 613 -- 1,360 ------------- ---------- ----------- ------------- 19,234 7,131 -- 26,365 ------------- ---------- ----------- ------------- Income from operations................................... 10,106 3,913 (490) 13,529 INTEREST EXPENSE AND OTHER, net: 9,290 1,263 10,553 ------------- ---------- ----------- ------------- Income (loss) before provision for income taxes.......... 816 2,650 (490) 2,976 PROVISION FOR INCOME TAXES................................... 227 1,101 -- 1,328 ------------- ---------- ----------- ------------- Net income(loss)............................................. $ 589 $ 1,549 $ (490) $ 1,648 ============= ========== =========== =============
12 HUDSON RESPIRATORY CARE INC. AND SUBSIDIARIES GUARANTOR AND NON-GUARANTOR SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2004 ------------------------------------------ NON- GUARANTOR GUARANTOR TOTAL ------------- ---------- ------------ Net cash provided by operating activities................... $ 221 $ 2,232 $ 2,453 Net cash used in investing activities....................... (5,749) (582) (6,331) Net cash used provided by (used in) financing activities.... 5,695 (2,980) 2,715 Effect of exchange rate changes on cash..................... (59) 375 316 ------------- ---------- ------------ NET INCREASE (DECREASE) IN CASH............................. 108 (955) (847) CASH, beginning of period................................... 3,690 2,992 6,682 ------------- ---------- ------------ CASH, end of period......................................... $ 3,798 $ 2,037 $ 5,835 ============= ========== ============
SIX MONTHS ENDED JUNE 30, 2003 ------------------------------------------ NON- GUARANTOR GUARANTOR TOTAL ------------- ---------- ------------ Net cash provided by operating activities................... $ 5,448 $ 2,490 $ 7,938 Net cash used in investing activities....................... (2,602) (913) (3,515) Net cash used in financing activities....................... (5,576) (1,735) (7,311) Effect of exchange rate changes on cash..................... (51) (882) (933) ------------- ---------- ------------ NET DECREASE IN CASH........................................ (2,781) (1,040) (3,821) CASH, beginning of period................................... 3,568 2,857 6,425 ------------- ---------- ------------ CASH, end of period......................................... $ 787 $ 1,817 $ 2,604 ============= ========== ============
4. Commitments and Contingencies. The Company is not a party to any material lawsuits or other proceedings. While the result of the Company's other existing lawsuits and proceedings cannot be predicted with certainty, management does not expect that the ultimate resolution of these matters will have a material adverse effect on the financial position or results of operations of the Company. Self Insurance. The Company self-insures the majority of its medical benefit programs and workers' compensation whereby the Company directly assumes the liability for employee medical and dental claims presented, subject to per-claim and aggregate maximums. Reserves for medical claim losses (including retiree benefits) totaling approximately $0.8 million and $1.1 million at June 30, 2004 and December 31, 2003, respectively, were established based upon estimated obligations and are included in accrued liabilities in the accompanying unaudited condensed consolidated balance sheets. The Company maintains excess coverage on an aggregate claim basis. Additionally, the Company is self-insured for workers' compensation. Reserves for workers' compensation claim losses totaling approximately $2.3 million and $0.8 million at June 30, 2004 and December 31, 2003, respectively, were established based upon estimated obligations and are included in accrued liabilities in the accompanying unaudited condensed consolidated balance sheets. The Company maintains excess coverage on an individual and aggregate claim basis. A third-party administrator processes all employee medical claims and requires the Company to collateralize a portion of its potential payment liability through the use of standby letters of credit. The standby letters of credit are issued for one-year periods with automatic annual extensions until such time the third-party administrator determines all outstanding claims for the policy period have been paid. As of June 30, 2004, the Company had issued three such standby letters of credit totaling approximately $1.6 million. 5. Bank Notes Payable. Total borrowings as of June 30, 2004 were $65.8 million, which consisted of $25.9 million under the Revolving A Facility, $30.0 million under the Term B Facility and $9.9 million under the HRCI AB Facility. As of June 30, 2004, $3.5 million was available for borrowing. As of June 30, 2004, the fair value of the bank notes payable approximated the face value. At June 30, 2004, the Company was in compliance with all provisions of its debt securities. 13 6. Mandatorily Redeemable Preferred Stock. At June 30, 2004, the redemption amount was $60.2 million, of which $58.4 million relates to issued shares and $1.8 million to accrued but not issued shares. The maximum amount the Company will pay on April 15, 2010, the mandatory redemption date, will be $115.0 million and will be accreted at a rate per annum of 11-1/2% with dividends being paid in kind and not in cash. 7. Subsequent event. On July 6, 2004 Teleflex Incorporated completed the acquisition of all of the issued and outstanding capital stock of Hudson Respiratory Care Inc. As a result of this transaction, the Company incurred $23.8 million of costs for bonus and option obligations, broker fees and insurance costs at closing. 14