SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

6 Months Ended

12 Months Ended

Jul. 02, 2011

Dec. 31, 2010

SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

16.  SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

DJOFL and its direct wholly owned subsidiary, DJO Finco, issued $575.0 million and $100.0 million of 10.875% Notes in November 2007 and January 2010, respectively, $300.0 million of 9.75% Notes in October 2010 and $300.0 million of 7.75% Notes in April 2011.

DJO Finco was formed solely to act as a co-issuer of the notes, has only nominal assets and does not conduct any operations. The Indentures generally prohibit DJO Finco from holding any assets, becoming liable for any obligations or engaging in any business activity. The 10.875% Notes and 7.75% Notes are jointly and severally, fully and unconditionally guaranteed, on an unsecured senior basis by all of DJOFL’s domestic subsidiaries (other than the co-issuer) that are 100% owned, directly or indirectly, by DJOFL (the Guarantors). The 9.75% Notes are jointly and severally, fully and unconditionally guaranteed, on an unsecured senior subordinated basis by the Guarantors. Our foreign subsidiaries (the Non-Guarantors) do not guarantee the notes. The Guarantors also unconditionally guarantee the Senior Secured Credit Facility.

The following tables present the financial position, results of operations and cash flows of DJOFL, the Guarantors, the Non-Guarantors and certain eliminations for the periods presented.

DJO Finance LLC

Unaudited Condensed Consolidating Balance Sheets

As of July 2, 2011

(in thousands)

	DJOFL		Guarantors		Non - Guarantors		Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	13,385	$	2,932	$	24,654	$	—		$	40,971
Accounts receivable, net	—		128,949		40,570		—			169,519
Inventories, net	—		114,582		24,110		2,627			141,319
Deferred tax assets, net	—		43,554		440		—			43,994
Prepaid expenses and other current assets	73		18,961		3,448		2,622			25,104
Total current assets	13,458		308,978		93,222		5,249			420,907
Property and equipment, net	—		90,157		14,368		(5,338		)	99,187
Goodwill	—		1,274,193		119,193		(32,294		)	1,361,092
Intangible assets, net	—		1,163,347		36,984		—			1,200,331
Investment in subsidiaries	1,297,699		1,695,817		88,135		(3,081,651		)	—
Intercompany receivables	1,314,271		—		—		(1,314,271		)	—
Other non-current assets	37,818		3,245		1,738		—			42,801
Total assets	$	2,663,246	$	4,535,737	$	353,640	$	(4,428,305	)	$	3,124,318
Liabilities and Equity
Current liabilities:
Accounts payable	$	—	$	51,628	$	10,225	$	—		$	61,853
Current portion of debt and capital lease obligations	8,782		40		—		—			8,822
Other current liabilities	25,012		59,250		28,532		2,565			115,359
Total current liabilities	33,794		110,918		38,757		2,565			186,034
Long-term debt and capital lease obligations	2,158,182		20		—		—			2,158,202
Deferred tax liabilities, net	—		277,732		12,066		(335		)	289,463
Intercompany payables, net	—		1,091,963		136,547		(1,228,510		)	—
Other long-term liabilities	—		15,905		607		—			16,512
Total liabilities	2,191,976		1,496,538		187,977		(1,226,280		)	2,650,211
Noncontrolling interests	—		—		2,837		—			2,837
Total membership equity	471,270		3,039,199		162,826		(3,202,025		)	471,270
Total liabilities and equity	$	2,663,246	$	4,535,737	$	353,640	$	(4,428,305	)	$	3,124,318

DJO Finance LLC

Unaudited Condensed Consolidating Statements of Operations

For the Three Months Ended July 2, 2011

(in thousands)

	DJOFL			Guarantors			Non - Guarantors			Eliminations			Consolidated
Net sales	$	—		$	229,790		$	68,355		$	(20,359	)	$	277,786
Cost of sales (exclusive of amortization of intangible assets of $9,785)	—			97,948			44,824			(31,682		)	111,090
Gross profit	—			131,842			23,531			11,323			166,696
Operating expenses:
Selling, general and administrative	—			104,042			24,801			—			128,843
Research and development	—			5,050			1,051			—			6,101
Amortization of intangible assets	—			23,384			1,125			—			24,509
	—			132,476			26,977			—			159,453
Operating (loss) income	—			(634		)	(3,446		)	11,323			7,243
Other income (expense):
Interest expense	(42,386		)	(3		)	(40		)	—			(42,429		)
Interest income	3			17			33			—			53
Other income, net	—			874			807			—			1,681
Intercompany income (expense)	4,086			(3,033		)	(342		)	(711		)	—
Equity in income of subsidiaries, net	19,042			—			—			(19,042		)	—
	(19,255		)	(2,145		)	458			(19,753		)	(40,695		)
Loss before income taxes	(19,255		)	(2,779		)	(2,988		)	(8,430		)	(33,452		)
Income tax benefit (provision)	—			16,963			(2,952		)	481			14,492
Net (loss) income	(19,255		)	14,184			(5,940		)	(7,949		)	(18,960		)
Net income attributable to noncontrolling interests	—			—			(295		)	—			(295		)
Net (loss) income attributable to DJOFL	$	(19,255	)	$	14,184		$	(6,235	)	$	(7,949	)	$	(19,255	)

DJO Finance LLC

Unaudited Condensed Consolidating Statements of Operations

For the Six Months Ended July 2, 2011

(in thousands)

	DJOFL			Guarantors			Non - Guarantors			Eliminations			Consolidated
Net sales	$	—		$	432,879		$	134,183		$	(39,565	)	$	527,497
Cost of sales (exclusive of amortization of intangible assets of $19,143)	—			174,123			86,401			(56,278		)	204,246
Gross profit	—			258,756			47,782			16,713			323,251
Operating expenses:
Selling, general and administrative	—			198,262			47,645			—			245,907
Research and development	—			10,950			2,294			—			13,244
Amortization of intangible assets	—			42,801			2,137			—			44,938
	—			252,013			52,076			—			304,089
Operating income (loss)	—			6,743			(4,294		)	16,713			19,162
Other income (expense):
Interest expense	(83,417		)	(10		)	(129		)	—			(83,556		)
Interest income	7			94			62			—			163
Loss on modification of debt	(2,065		)	—			—			—			(2,065		)
Other income, net	—			2,216			2,237			—			4,453
Intercompany income (expense)	10,625			(8,798		)	(1,679		)	(148		)	—
Equity in income of subsidiaries, net	34,356			—			—			(34,356		)	—
	(40,494		)	(6,498		)	491			(34,504		)	(81,005		)
(Loss) income before income taxes	(40,494		)	245			(3,803		)	(17,791		)	(61,843		)
Income tax benefit (provision)	—			25,253			(3,775		)	481			21,959
Net (loss) income	(40,494		)	25,498			(7,578		)	(17,310		)	(39,884		)
Net income attributable to noncontrolling interests	—			—			(610		)	—			(610		)
Net (loss) income attributable to DJOFL	$	(40,494	)	$	25,498		$	(8,188	)	$	(17,310	)	$	(40,494	)

DJO Finance LLC

Unaudited Condensed Consolidating Statements of Cash Flows

For the Six Months Ended July 2, 2011

(in thousands)

	DJOFL			Guarantors			Non- Guarantors			Eliminations			Consolidated
Cash Flows From Operating Activities:
Net (loss) income	$	(40,494	)	$	25,498		$	(7,578	)	$	(17,310	)	$	(39,884	)
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Depreciation	—			11,204			2,682			(154		)	13,732
Amortization of intangible assets	—			42,801			2,137			—			44,938
Amortization of debt issuance costs and non-cash interest expense	4,086			—			—			—			4,086
Stock-based compensation expense	—			1,331			—			—			1,331
Loss on disposal of assets, net	—			153			225			—			378
Deferred income tax benefit	(1,235		)	(24,796		)	(394		)	(481		)	(26,906		)
Provision for doubtful accounts and sales returns	—			12,961			271			—			13,232
Inventory reserves	—			2,959			729			—			3,688
Equity in income of subsidiaries, net	(34,356		)	—			—			34,356			—
Changes in operating assets and liabilities:
Accounts receivable	—			(16,210		)	(4,642		)	—			(20,852		)
Inventories	—			(9,418		)	5,359			(6,316		)	(10,375		)
Prepaid expenses and other assets	88			2,616			(978		)	20			1,746
Accounts payable and other current liabilities	5,929			10,798			5,352			426			22,505
Net cash (used in) provided by operating activities	(65,982		)	59,897			3,163			10,541			7,619
Cash Flows From Investing Activities:
Cash paid in connection with acquisitions, net of cash acquired	—			(317,669		)	—			—			(317,669		)
Purchases of property and equipment	—			(17,546		)	(3,085		)	(61		)	(20,692		)
Other investing activities, net	—			211			4			—			215
Net cash used in investing activities	—			(335,004		)	(3,081		)	(61		)	(338,146		)
Cash Flows From Financing Activities:
Intercompany	(271,375		)	279,439			2,416			(10,480		)	—
Proceeds from issuance of debt	400,000			—			—			—			400,000
Repayments of debt and capital lease obligations	(58,391		)	(21		)	(1		)	—			(58,413		)
Payment of debt issuance costs	(7,468		)	—			—			—			(7,468		)
Repurchase of vested options	—			(2,000		)	—			—			(2,000		)
Dividend paid by subsidiary to owners of noncontrolling interests	—						(682		)	—			(682		)
Net cash provided by financing activities	62,766			277,418			1,733			(10,480		)	331,437
Effect of exchange rate changes on cash and cash equivalents	—			—			1,929			—			1,929
Net (decrease) increase in cash and cash equivalents	(3,216		)	2,311			3,744			—			2,839
Cash and cash equivalents at beginning of period	16,601			621			20,910			—			38,132
Cash and cash equivalents at end of period	$	13,385		$	2,932		$	24,654		$	—		$	40,971

DJO Finance LLC

Unaudited Condensed Consolidating Statements of Operations

For the Three Months Ended July 3, 2010

(in thousands)

	DJOFL			Guarantors			Non- Guarantors			Eliminations			Consolidated
Net sales	$	—		$	205,053		$	32,765		$	4,709		$	242,527
Cost of sales (exclusive of amortization of intangible assets of $9,062 included below)	—			74,732			7,280			2,553			84,565
Gross profit	—			130,321			25,485			2,156			157,962
Operating expenses:
Selling, general and administrative	—			97,199			19,663			—			116,862
Research and development	—			4,542			918			—			5,460
Amortization of intangible assets	—			18,716			955			—			19,671
	—			120,457			21,536			—			141,993
Operating income	—			9,864			3,949			2,156			15,969
Other income (expense):
Interest expense	(37,124		)	(4		)	(60		)	—			(37,188		)
Interest income	1			53			6			—			60
Other income (expense), net	—			(998		)	(1,742		)	(97		)	(2,837		)
Intercompany income (expense), net	36,087			(2,862		)	(1,130		)	(32,095		)	—
Equity in income of subsidiaries, net	1,279			—			—			(1,279		)	—
	243			(3,811		)	(2,926		)	(33,471		)	(39,965		)
Income (loss) before income taxes	243			6,053			1,023			(31,315		)	(23,996		)
Income tax benefit (provision)	—			25,863			(1,303		)	—			24,560
Net income (loss)	243			31,916			(280		)	(31,315		)	564
Net income attributable to noncontrolling interests	—			—			(321		)	—			(321		)
Net income (loss) attributable to DJO Finance LLC	$	243		$	31,916		$	(601	)	$	(31,315	)	$	243

DJO Finance LLC

Unaudited Condensed Consolidating Statements of Operations

For the Six Months Ended July 3, 2010

(in thousands)

	DJOFL			Guarantors			Non- Guarantors			Eliminations			Consolidated
Net sales	$	—		$	415,864		$	103,114		$	(36,375	)	$	482,603
Cost of sales (exclusive of amortization of intangible assets of $17,981 included below)	—			158,296			50,968			(37,345		)	171,919
Gross profit	—			257,568			52,146			970			310,684
Operating expenses:
Selling, general and administrative	—			187,294			40,094			—			227,388
Research and development	—			9,274			1,757			—			11,031
Amortization of intangible assets	—			36,793			1,932			—			38,725
				233,361			43,783			—			277,144
Operating income	—			24,207			8,363			970			33,540
Other income (expense):
Interest expense	(77,466		)	(43		)	(118		)	—			(77,627		)
Interest income	3			100			37			—			140
Loss on modification of debt	(1,096		)	—			—			—			(1,096		)
Other income (expense), net	—			87			(2,473		)	(135		)	(2,521		)
Intercompany income (expense), net	61,793			(39,447		)	(1,886		)	(20,460		)	—
Equity in loss of subsidiaries, net	(16,649		)	—			—			16,649			—
	(33,415		)	(39,303		)	(4,440		)	(3,946		)	(81,104		)
(Loss) income before income taxes	(33,415		)	(15,096		)	3,923			(2,976		)	(47,564		)
Income tax provision (benefit)	—			(17,079		)	2,287			—			14,792
Net (loss) income	(33,415		)	1,983			1,636			(2,976		)	(32,772		)
Net income attributable to noncontrolling interests	—			—			(643		)	—			(643		)
Net (loss) income attributable to DJO Finance LLC	$	(33,415	)	$	1,983		$	993		$	(2,976	)	$	(33,415	)

DJO Finance LLC

Unaudited Condensed Consolidating Statements of Cash Flows

For the Six Months Ended July 3, 2010

(in thousands)

	DJOFL			Guarantors			Non- Guarantors			Eliminations			Consolidated
OPERATING ACTIVITIES:
Net (loss) income	$	(33,415	)	$	1,983		$	1,636		$	(2,976	)	$	(32,772	)
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Depreciation	—			10,811			2,358			(64		)	13,105
Amortization of intangible assets	—			36,793			1,932			—			38,725
Amortization of debt issuance costs and non-cash interest expense	7,193			—			—			—			7,193
Stock-based compensation expense	—			865			—			—			865
Loss on disposal of assets, net	—			1,856			129			(178		)	1,807
Deferred income tax benefit	—			(17,409		)	(138		)	—			(17,547		)
Equity in loss of subsidiaries, net	16,649			—			—			(16,649		)	—
Provision for doubtful accounts and sales returns	—			17,054			334			—			17,388
Inventory reserves	—			2,472			368			—			2,840
Changes in operating assets and liabilities:
Accounts receivable	—			(18,733		)	(608		)	—			(19,341		)
Inventories	—			(3,993		)	(2,392		)	(2,234		)	(8,619		)
Prepaid expenses and other assets	92			11,954			(23,987		)	—			(11,941		)
Accounts payable and other current liabilities	1,632			18,345			(1,527		)	—			18,450
Net cash provided by (used in) operating activities	(7,849		)	61,998			(21,895		)	(22,101		)	10,153
INVESTING ACTIVITIES:
Cash paid in connection with acquisitions, net of cash acquired	—			(810		)	—			—			(810		)
Purchases of property and equipment	—			(12,904		)	(3,096		)	1,505			(14,495		)
Other investing activities, net	—			69			(567		)	—			(498		)
Net cash used in investing activities	—			(13,645		)	(3,663		)	1,505			(15,803		)
FINANCING ACTIVITIES:
Intercompany	11,468			(53,136		)	21,072			20,596			—
Proceeds from issuance of debt	118,000			—			130			—			118,130
Repayments of debt and capital lease obligations	(121,298		)	(525		)	(12		)	—			(121,835		)
Payment of debt issuance costs	(3,348		)	—			—			—			(3,348		)
Investment by parent	—			988			—			—			988
Dividend paid by subsidiary to noncontrolling interests	—			—			(529		)	—			(529		)
Net cash provided by (used in) financing activities	4,822			(52,673		)	20,661			20,596			(6,594		)
Effect of exchange rate changes on cash and cash equivalents	—			—			1,717			—			1,717
Net decrease in cash and cash equivalents	(3,027		)	(4,320		)	(3,180		)	—			(10,527		)
Cash and cash equivalents at beginning of period	6,999			17,389			20,223			—			44,611
Cash and cash equivalents at end of period	$	3,972		$	13,069		$	17,043		$	—		$	34,084

DJO Finance LLC

Condensed Consolidating Balance Sheets

As of December 31, 2010

(in thousands)

	DJOFL		Guarantors		Non- Guarantors		Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	16,601	$	621	$	20,910	$	—		$	38,132
Accounts receivable, net	—		112,250		33,273		—			145,523
Inventories, net	—		84,569		29,611		(11,080		)	103,100
Deferred tax assets, net	—		47,805		402		(146		)	48,061
Prepaid expenses and other current assets	162		18,199		2,418		2,640			23,419
Total current assets	16,763		263,444		86,614		(8,586		)	358,235
Property and equipment, net	—		77,216		13,357		(5,553		)	85,020
Goodwill	—		1,108,703		109,693		(29,509		)	1,188,887
Intangible assets, net	—		1,074,388		36,453		—			1,110,841
Investment in subsidiaries	1,296,776		1,663,969		127,148		(3,087,893		)	—
Intercompany receivables	1,003,751		—		—		(1,003,751		)	—
Other assets	34,115		1,177		1,479		36			36,807
Total assets	$	2,351,405	$	4,188,897	$	374,744	$	(4,135,256	)	$	2,779,790
Liabilities and Equity
Current liabilities:
Accounts payable	$	—	$	40,893	$	8,054	$	—		$	48,947
Current portion of debt and capital lease obligations	8,782		39		—		—			8,821
Other current liabilities	22,234		52,150		20,263		2,640			97,287
Total current liabilities	31,016		93,082		28,317		2,640			155,055
Long-term debt and capital leases obligations	1,816,250		41		—		—			1,816,291
Deferred tax liabilities, net	—		277,135		11,657		1,121			289,913
Intercompany payables, net	—		825,647		178,104		(1,003,751		)	—
Other long-term liabilities	—		10,160		1,552		—			11,712
Total liabilities	1,847,266		1,206,065		219,630		(999,990		)	2,272,971
Noncontrolling interests	—		—		2,680		—			2,680
Total membership equity	504,139		2,982,832		152,434		(3,135,266		)	504,139
Total liabilities and equity	$	2,351,405	$	4,188,897	$	374,744	$	(4,135,256	)	$	2,779,790

23.          SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

DJOFL and its direct wholly owned subsidiary, DJO Finco, issued the 10.875% Notes with an aggregate principal amount of $575.0 million and $100.0 million on November 20, 2007 and January 20, 2010, respectively. On October, 2010, DJOFL and DJO Finco issued $300.0 million aggregate principal amount of 9.75% Notes, and used a portion of the proceeds to repurchase $200.0 million aggregate principal amount of 11.75% Notes, which were issued on November 3, 2006. DJO Finco was formed solely to act as a co-issuer of the notes, has only nominal assets and does not conduct any operations. The Indentures generally prohibit DJO Finco from holding any assets, becoming liable for any obligations, or engaging in any business activity. The 10.875% Notes are jointly and severally, fully and unconditionally guaranteed, on an unsecured senior basis by all of DJOFL’s domestic subsidiaries (other than the co-issuer) that are 100% owned, directly or indirectly, by DJOFL (the Guarantors). The 9.75% Notes are jointly and severally, fully and unconditionally guaranteed, on an unsecured senior subordinated basis by the Guarantors. Our foreign subsidiaries (the Non-Guarantors) do not guarantee our notes. The Guarantors also unconditionally guarantee the Senior Secured Credit Facility.

The following tables present the financial position, results of operations and cash flows of DJOFL, the Guarantors, the Non-Guarantors and certain eliminations as of December 31, 2010 and 2009 and for the years ended December 31, 2010, 2009 and 2008.

DJO Finance LLC

Condensed Consolidating Balance Sheets

As of December 31, 2010

(in thousands)

	DJOFL		Guarantors		Non- Guarantors		Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	16,601	$	621	$	20,910	$	—		$	38,132
Accounts receivable, net	—		112,250		33,273		—			145,523
Inventories, net	—		84,569		29,611		(11,080		)	103,100
Deferred tax assets, net	—		47,805		402		(146		)	48,061
Prepaid expenses and other current assets	162		18,199		2,418		2,640			23,419
Total current assets	16,763		263,444		86,614		(8,586		)	358,235
Property and equipment, net	—		77,216		13,357		(5,553		)	85,020
Goodwill	—		1,108,703		109,693		(29,509		)	1,188,887
Intangible assets, net	—		1,074,388		36,453		—			1,110,841
Investment in subsidiaries	1,296,776		1,663,969		127,148		(3,087,893		)	—
Intercompany receivables	1,003,751		—		—		(1,003,751		)	—
Other assets	34,115		1,177		1,479		36			36,807
Total assets	$	2,351,405	$	4,188,897	$	374,744	$	(4,135,256	)	$	2,779,790
Liabilities and Equity
Current liabilities:
Accounts payable	$	—	$	40,893	$	8,054	$	—		$	48,947
Current portion of debt and capital lease obligations	8,782		39		—		—			8,821
Other current liabilities	22,234		52,150		20,263		2,640			97,287
Total current liabilities	31,016		93,082		28,317		2,640			155,055
Long-term debt and capital leases obligations	1,816,250		41		—		—			1,816,291
Deferred tax liabilities, net	—		277,135		11,657		1,121			289,913
Intercompany payables, net	—		825,647		178,104		(1,003,751		)	—
Other long-term liabilities	—		10,160		1,552		—			11,712
Total liabilities	1,847,266		1,206,065		219,630		(999,990		)	2,272,971
Noncontrolling interests	—		—		2,680		—			2,680
Total membership equity	504,139		2,982,832		152,434		(3,135,266		)	504,139
Total liabilities and equity	$	2,351,405	$	4,188,897	$	374,744	$	(4,135,256	)	$	2,779,790

DJO Finance LLC

Condensed Consolidating Statements of Operations

For the Year Ended December 31, 2010

(in thousands)

	DJOFL			Guarantors			Non- Guarantors			Eliminations			Consolidated
Net sales	$	—		$	830,186		$	276,295		$	(140,508	)	$	965,973
Cost of sales (exclusive of amortization of intangible assets of $36,343)	—			304,206			177,592			(136,528		)	345,270
Gross profit	—			525,980			98,703			(3,980		)	620,703
Operating expenses:
Selling, general and administrative	—			352,707			79,554			—			432,261
Research and development	—			18,062			3,830			—			21,892
Amortization intangible assets	—			73,560			3,963			—			77,523
Impairment of assets held for sale	—			1,147			—			—			1,147
	—			445,476			87,347			—			532,823
Operating income	—			80,504			11,356			(3,980		)	87,880
Other income (expense):
Interest expense	(154,823		)	(42,113		)	(3,795		)	45,550			(155,181		)
Interest income	33,264			11,871			725			(45,550		)	310
Loss on modification and extinguishment of debt	(19,798		)	—			—			—			(19,798		)
Other income (expense), net	88,825			(2,031		)	3,467			(89,402		)	859
	(52,532		)	(32,273		)	397			(89,402		)	(173,810		)
Income (loss) before income taxes	(52,532		)	48,231			11,753			(93,382		)	(85,930		)
Income tax benefit (expense)	—			39,791			(5,536		)	—			34,255
Net income (loss)	(52,532		)	88,022			6,217			(93,382		)	(51,675		)
Net income attributable to noncontrolling interests	—			—			(857		)	—			(857		)
Net income (loss) attributable to DJOFL	$	(52,532	)	$	88,022		$	5,360		$	(93,382	)	$	(52,532	)

DJO Finance LLC

Condensed Consolidating Statements of Cash Flows

For the Year Ended December 31, 2010

(in thousands)

	DJOFL			Guarantors			Non- Guarantors			Eliminations			Consolidated
Cash Flows From Operating Activities:
Net income (loss)	$	(52,532	)	$	88,022		$	6,217		$	(93,382	)	$	(51,675	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation	—			21,403			4,713			(120		)	25,996
Amortization of intangible assets	—			73,560			3,963			—			77,523
Amortization of debt issuance costs and non-cash interest expense	13,272			—			—			—			13,272
Stock-based compensation expense	—			1,888			—			—			1,888
Loss on disposal of assets, net	—			771			551			(402		)	920
Deferred income tax (benefit) expense	—			(85,634		)	45,947			—			(39,687		)
Non-cash (income) loss from subsidiaries	(84,964		)	499,074			390			(414,500		)	—
Provision for doubtful accounts and sales returns	—			31,918			1,159			—			33,077
Inventory reserves	—			5,890			706			—			6,596
Impairment of assets held for sale	—			1,147			—			—			1,147
Loss on modification and extinguishment of debt	19,798			—			—			—			19,798
Changes in operating assets and liabilities, net of acquired assets and liabilities:
Accounts receivable	—			(31,619		)	(1,486		)	—			(33,105		)
Inventories	—			(4,081		)	(7,449		)	(2,378		)	(13,908		)
Prepaid expenses and other assets	—			25,457			(30,294		)	—			(4,837		)
Accounts payable and other current liabilities	(12,653		)	101			1,141			—			(11,411		)
Net cash provided by (used in) operating activities	(117,079		)	627,897			25,558			(510,782		)	25,594
Cash Flows From Investing Activities:
Purchases of property and equipment	—			(26,111		)	(4,233		)	3,097			(27,247		)
Cash paid in connection with acquisitions, net of cash acquired	—			(2,045		)	—			—			(2,045		)
Other investing activities, net	—			1,180			(2,083		)	—			(903		)
Net cash used in investing activities	—			(26,976		)	(6,316		)	3,097			(30,195		)
Cash Flows From Financing Activities:
Intercompany	123,854			(601,900		)	(29,639		)	507,685			—
Proceeds from issuance of debt	447,000			—			130			—			447,130
Repayments of debt and capital lease obligations	(433,891		)	(17,278		)	13,802			—			(437,367		)
Payment of debt issuance costs	(10,282		)	—			—			—			(10,282		)
Investment by parent	—			1,489			—			—			1,489
Dividend paid by subsidiary to owners of noncontrolling interests	—			—			(557		)	—			(557		)
Net cash provided by (used in) financing activities	126,681			(617,689		)	(16,264		)	507,685			413
Effect of exchange rate changes on cash and cash equivalents	—			—			(2,291		)	—			(2,291		)
Net increase (decrease) in cash and cash equivalents	9,602			(16,768		)	687			—			(6,479		)
Cash and cash equivalents, beginning of year	6,999			17,389			20,223			—			44,611
Cash and cash equivalents, end of year	$	16,601		$	621		$	20,910		$	—		$	38,132

DJO Finance LLC

Condensed Consolidating Balance Sheets

As of December 31, 2009

(in thousands)

	DJOFL		Guarantors			Non- Guarantors		Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	6,999	$	17,389		$	20,223	$	—		$	44,611
Accounts receivable, net	—		113,258			32,954		—			146,212
Inventories, net	—		80,491			23,705		(8,316		)	95,880
Deferred tax assets, net	—		40,474			993		(1,019		)	40,448
Prepaid expenses and other current assets	162		11,368			3,195		—			14,725
Total current assets	7,161		262,980			81,070		(9,335		)	341,876
Property and equipment, net	—		76,883			12,811		(2,980		)	86,714
Goodwill	—		1,108,703			82,794		—			1,191,497
Intangible assets, net	—		1,147,504			40,173		—			1,187,677
Investment in subsidiaries	1,275,652		2,362,165			71,566		(3,709,383		)	—
Intercompany receivables	1,065,693		—			—		(1,065,693		)	—
Other assets	38,946		(1,913		)	5,382		—			42,415
Total assets	$	2,387,452	$	4,956,322		$	293,796	$	(4,787,391	)	$	2,850,179
Liabilities and Equity
Current liabilities:
Accounts payable	$	—	$	34,750		$	7,393	$	1		$	42,144
Current portion of debt and capital lease obligations	12,568		140			3,218		—			15,926
Other current liabilities	22,165		60,992			18,419		—			101,576
Total current liabilities	34,733		95,882			29,030		1			159,646
Long-term debt and capital lease obligations	1,796,859		83			2		—			1,796,944
Deferred tax liabilities, net	—		302,870			15,272		2,989			321,131
Intercompany payables, net	—		960,790			104,903		(1,065,693		)	—
Other long-term liabilities	—		11,162			2,927		—			14,089
Total liabilities	1,831,592		1,370,787			152,134		(1,062,703		)	2,291,810
Noncontrolling interests	—		—			2,509		—			2,509
Total membership equity	555,860		3,585,535			139,153		(3,724,688		)	555,860
Total liabilities and equity	$	2,387,452	$	4,956,322		$	293,796	$	(4,787,391	)	$	2,850,179

DJO Finance LLC

Condensed Consolidating Statements of Operations

For the Year Ended December 31, 2009

(in thousands)

	DJOFL			Guarantors			Non- Guarantors			Eliminations			Consolidated
Net sales	$	—		$	804,912		$	268,644		$	(127,430	)	$	946,126
Cost of sales (exclusive of amortization of intangible assets of $37,884)	—			290,097			175,464			(126,842		)	338,719
Gross profit	—			514,815			93,180			(588		)	607,407
Operating expenses:
Selling, general and administrative	—			343,574			76,201			983			420,758
Research and development	—			20,712			2,828			—			23,540
Amortization and impairment of intangible assets	—			81,431			2,821			—			84,252
	—			445,717			81,850			983			528,550
Operating income	—			69,098			11,330			(1,571		)	78,857
Other income (expense):
Interest expense	(156,228		)	(50,522		)	(3,492		)	53,210			(157,032		)
Interest income	50,355			3,002			886			(53,210		)	1,033
Other income, net	55,440			90,714			1,264			(141,345		)	6,073
	(50,433		)	43,194			(1,342		)	(141,345		)	(149,926		)
Income (loss) from continuing operations before income taxes	(50,433		)	112,292			9,988			(142,916		)	(71,069		)
Income tax benefit	—			23,555			1,876			(3,753		)	21,678
Income (loss) from continuing operations	(50,433		)	135,847			11,864			(146,669		)	(49,391		)
Loss from discontinued operations, net	—			(319		)	—			—			(319		)
Net income (loss)	(50,433		)	135,528			11,864			(146,669		)	(49,710		)
Net income attributable to noncontrolling interests	—			—			(723		)	—			(723		)
Net income (loss) attributable to DJOFL	$	(50,433	)	$	135,528		$	11,141		$	(146,669	)	$	(50,433	)

DJO Finance LLC

Condensed Consolidating Statements of Cash Flows

For the Year Ended December 31, 2009

(in thousands)

	DJOFL			Guarantors			Non- Guarantors			Eliminations			Consolidated
Cash Flows From Operating Activities:
Net income (loss)	$	(50,433	)	$	135,528		$	11,864		$	(146,669	)	$	(49,710	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation	—			23,400			4,992			(496		)	27,896
Amortization and impairment of intangible assets	—			81,431			2,821			—			84,252
Amortization of debt issuance costs and non-cash interest expense	12,679			—			—			—			12,679
Stock-based compensation expense	—			3,382			—			—			3,382
Loss on disposal of assets, net	—			455			651			(142		)	964
Deferred income tax benefit	—			(26,474		)	(3,228		)	6,012			(23,690		)
Non-cash loss from subsidiaries	(65,501		)	(18,643		)	(32,671		)	116,815			—
Provision for doubtful accounts and sales returns	—			34,175			729			—			34,904
Inventory reserves	—			6,894			568			—			7,462
Gain on sales of product lines	—			(3,058		)	—			—			(3,058		)
Gain on disposal of discontinued operations	—			(496		)	—			103			(393		)
Changes in operating assets and liabilities, net of acquired assets and liabilities:
Accounts receivable	—			(17,962		)	2,806			—			(15,156		)
Inventories	—			(3,958		)	(705		)	2,795			(1,868		)
Prepaid expenses and other assets	141			17,353			(13,718		)	(338		)	3,438
Accounts payable and other current liabilities	(2,962		)	(6,143		)	(4,456		)	253			(13,308		)
Net cash provided by (used in) operating activities	(106,076		)	225,884			(30,347		)	(21,667		)	67,794
Cash Flows From Investing Activities:
Purchases of property and equipment	—			(24,601		)	(5,961		)	1,690			(28,872		)
Cash paid in connection with acquisitions, net of cash acquired	—			(2,580		)	(10,506		)	—			(13,086		)
Proceeds received upon disposition of discontinued operations, net	—			21,846			—			—			21,846
Other investing activities, net	—			4,112			—			—			4,112
Net cash used in investing activities	—			(1,223		)	(16,467		)	1,690			(16,000		)
Cash Flows From Financing Activities:
Intercompany	147,725			(221,581		)	53,879			19,977			—
Proceeds from issuance of debt	68,000			12			248			—			68,260
Repayments of debt and capital lease obligations	(102,650		)	(76		)	(795		)	—			(103,521		)
Net cash provided by (used in) financing activities	113,075			(221,645		)	53,332			19,977			(35,261		)
Effect of exchange rate changes on cash and cash equivalents	—			—			(2,405		)	—			(2,405		)
Net increase in cash and cash equivalents	6,999			3,016			4,113			—			14,128
Cash and cash equivalents, beginning of year	—			14,373			16,110			—			30,483
Cash and cash equivalents, end of year	$	6,999		$	17,389		$	20,223		$	—		$	44,611

DJO Finance LLC

Condensed Consolidating Statement of Operations

For the Year Ended December 31, 2008

(in thousands)

	DJOFL			Guarantors			Non- Guarantors			Eliminations			Consolidated
Net sales	$	—		$	789,960		$	255,414		$	(96,905	)	$	948,469
Cost of sales (exclusive of amortization of intangible assets of $38,017)	—			298,766			151,650			(100,239		)	350,177
Gross profit	—			491,194			103,764			3,334			598,292
Operating expenses:
Selling, general and administrative	—			353,464			85,601			(6		)	439,059
Research and development	—			23,965			2,973			—			26,938
Amortization and impairment of intangible assets	—			96,894			2,060			—			98,954
	—			474,323			90,634			(6		)	564,951
Operating income	—			16,871			13,130			3,340			33,341
Other income (expense):
Interest expense	(172,286		)	(45,193		)	(4,091		)	48,408			(173,162		)
Interest income	45,032			4,230			808			(48,408		)	1,662
Other income (expense), net	29,468			(6,395		)	(2,810		)	(29,468		)	(9,205		)
	(97,786		)	(47,358		)	(6,093		)	(29,468		)	(180,705		)
Income (loss) from continuing operations before income taxes	(97,786		)	(30,487		)	7,037			(26,128		)	(147,364		)
Income tax benefit (expense)	—			52,143			(2,462		)	—			49,681
Income (loss) from continuing operations	(97,786		)	21,656			4,575			(26,128		)	(97,683		)
Income from discontinued operations, net of tax	—			946			—			—			946
Net income (loss)	(97,786		)	22,602			4,575			(26,128		)	(96,737		)
Net income attributable to noncontrolling interests	—			—			(1,049		)	—			(1,049		)
Net income (loss) attributable to DJOFL	$	(97,786	)	$	22,602		$	3,526		$	(26,128	)	$	(97,786	)

DJO Finance LLC

Condensed Consolidating Statements of Cash Flows

For the Year Ended December 31, 2008

(in thousands)

	DJOFL			Guarantors			Non- Guarantors			Eliminations			Consolidated
Cash Flows From Operating Activities:
Net income (loss)	$	(97,786	)	$	22,602		$	4,575		$	(26,128	)	$	(96,737	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation	—			20,113			4,189			(705		)	23,597
Amortization and impairment of intangible assets	—			96,894			2,060			—			98,954
Amortization of debt issuance costs and non-cash interest expense	13,177			—			—			—			13,177
Stock-based compensation expense	—			1,381			—			—			1,381
Loss on disposal of assets, net	—			2,610			602			(143		)	3,069
Deferred income tax benefit	—			(41,927		)	(230		)	—			(42,157		)
Non-cash income (loss) from subsidiaries	(29,468		)	11,980			—			17,488			—
Provision for doubtful accounts and sales returns	—			25,421			856			—			26,277
Inventory reserves	—			7,922			715			—			8,637
Changes in operating assets and liabilities, net of acquired assets and liabilities:
Accounts receivable	—			(34,543		)	(2,521		)	—			(37,064		)
Inventories	—			1,788			136			(3,533		)	(1,609		)
Prepaid expenses and other assets	(293		)	(2,760		)	3,125			(4		)	68
Accounts payable and other current liabilities	770			(9,188		)	(1,325		)	89			(9,654		)
Net cash provided by (used in) operating activities	(113,600		)	102,293			12,182			(12,936		)	(12,061		)
Cash Flows From Investing Activities:
Purchases of property and equipment	—			(22,412		)	(4,502		)	1,009			(25,905		)
Cash paid in connection with acquisitions, net of cash acquired	—			(3,234		)	(1,861		)	—			(5,095		)
Other investing activities, net	—			1,698			(294		)	—			1,404
Net cash used in investing activities	—			(23,948		)	(6,657		)	1,009			(29,596		)
Cash Flows From Financing Activities:
Intercompany	99,731			(107,914		)	(3,744		)	11,927			—
Proceeds from issuance of debt and revolving line of credit	43,000			—			3,540			—			46,540
Repayments on debt and capital lease obligations	(29,650		)	(752		)	(6,892		)	—			(37,294		)
Dividend paid by subsidiary to owners of noncontrolling interests	—			—			(381		)	—			(381		)
Net cash provided by (used in) financing activities	113,081			(108,666		)	(7,477		)	11,927			8,865
Effect of exchange rate changes on cash and cash equivalents	—			—			(196		)	—			(196		)
Net decrease in cash and cash equivalents	(519		)	(30,321		)	(2,148		)	—			(32,988		)
Cash and cash equivalents at beginning of year	519			44,694			18,258			—			63,471
Cash and cash equivalents at end of year	$	—		$	14,373		$	16,110		$	—		$	30,483