EX-99.2 4 ex99-2.htm EXHIBIT 99.2 ex99-2.htm
EXHIBIT 99.2
 
NEEDLETECH PRODUCTS, INC. AND AFFILIATE
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
 
ASSETS
            
   
June 30,
2008
(Unaudited)
    
December 31,
2007
  
CURRENT ASSETS
            
Cash and cash equivalents
   $ 3,087     $ 2,910  
Marketable securities
     426       443  
Trade accounts receivable
     1,789       1,699  
Inventories
     2,664       2,530  
Deferred income tax asset
     225       81  
Prepaid expenses and other current assets
     215       128  
Total current assets
     8,406       7,791  
                 
PROPERTY AND EQUIPMENT, NET
     4,116       3,842  
                 
OTHER ASSETS
                
Marketable securities – long term
     1,591       1,585  
Other
     5       5  
      1,596       1,590  
                 
Total assets
   $ 14,118     $ 13,223  
 
The accompanying notes are an integral part of these consolidated statements.
 
NEEDLETECH PRODUCTS, INC.
 CONDENSED CONSOLIDATED BALANCE SHEETS - Continued
(Amounts in thousands)
 
LIABILITIES, REDEEMABLE COMMON STOCK AND SHAREHOLDERS’ EQUITY
            
   
June 30,
2008
(Unaudited)
    
December 31,
2007
  
CURRENT LIABILITIES
            
Accounts payable
   $ 378     $ 490  
Accrued salaries, wages and payroll taxes
     283       192  
Accrued 401(k) contribution
     96       166  
Income taxes payable
     438       431  
Customer deposits
     137       137  
Other current liabilities
     108       89  
Total current liabilities
     1,440       1,505  
                 
DEFERRED INCOME TAXES
     324       350  
                 
Total liabilities
     1,764       1,855  
                 
REDEEMABLE COMMON STOCK OWNED BY ESOP
     2,796       2,796  
                 
SHAREHOLDERS’ EQUITY
                
Common stock
     91       91  
Retained earnings
     9,348       8,320  
Accumulated other comprehensive income
     46       90  
Non-controlling interest of affiliate
     73       71  
Total shareholders’ equity
     9,558       8,572  
                 
Total liabilities, redeemable common stock and shareholders’ equity
   $ 14,118     $ 13,223  
 
 
The accompanying notes are an integral part of these consolidated statements.
 
NEEDLETECH PRODUCTS, INC. AND AFFILIATE
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
(Amounts in thousands, except per share data)
 
   
Three Months Ended
June 30,
    
Six Months Ended
June 30,
  
   
2008
    
2007
    
2008
    
2007
  
Revenue
                        
Product sales
   $ 4,404     $ 4,091     $ 8,774     $ 7,999  
Net fee income
     -       39       82       77  
      4,404       4,130       8,856       8,076  
                                 
Cost of sales
     2,883       2,410       5,763       4,871  
Gross profit
     1,521       1,720       3,093       3,205  
                                 
Operating expenses
                                
Selling, general and administrative
     420       298       860       612  
Research and development
     137       139       274       281  
Loss on sale of equipment
     -       2       -       2  
      557       439       1,134       895  
                                 
Earnings from operations
     964       1,281       1,959       2,310  
                                 
Other income
                                
Interest and investment income
     14       35       34       47  
Other
     -       2       2       2  
      14       37       36       49  
                                 
Earnings before income taxes
     978       1,318       1,995       2,359  
                                 
Income tax expense
     397       510       809       914  
                                 
Net earnings before income of
                                
non-controlling interest of affiliate
     581       808       1,186       1,445  
                                 
Less:  Net earnings of non-controlling interest of affiliate
     2       1       2       1  
                                 
NET EARNINGS
   $ 579     $ 807     $ 1,184     $ 1,444  
 
The accompanying notes are an integral part of these consolidated statements.
 
NEEDLETECH PRODUCTS, INC. AND AFFILIATE
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Amounts in thousands)
 
   
Six Months Ended
June 30,
  
   
2008
    
2007
  
Cash flows from operating activities
            
Net earnings
   $ 1,184     $ 1,445  
Adjustments to reconcile net earnings to net cash provided by operating activities
                
Net earnings of non-controlling affiliate
     2       1  
Depreciation and amortization
     258       235  
Deferred income taxes
     (114 )     29  
Loss on sale of equipment
     -       2  
Provision for allowances
     (31 )     (12 )
Realized gain on sale of marketable securities
     (7 )     (51 )
Changes in assets and liabilities:
                
Accounts receivable
     (87 )     (98 )
Inventories
     (106 )     (501 )
Prepaid expenses and other current assets
     (87 )     -  
Other assets
     -       2  
Trade accounts payable
     (112 )     413  
Accrued salaries, wages and payroll taxes
     91       57  
Accrued 401(k) contribution
     (70 )     (70 )
Income taxes payable
     7       211  
Customer deposits
     -       137  
Other current liabilities
     19       123  
Net cash provided by operating activities
     947       1,923  
Cash flows from investing activities
                
Purchases and construction of property and equipment
     (532 )     (422 )
Purchases of marketable securities
     (923 )     (1,122 )
Maturities of marketable securities
     75       160  
Proceeds from sales of marketable securities
     766       448  
Net cash used by investing activities
     (614 )     (936 )
CASH FLOWS FROM FINANCING ACTIVITIES
                
Cash dividends paid
     (156 )     (625 )
Net cash used by financing activities
     (156 )     (625 )
NET INCREASE IN CASH AND CASH EQUIVALENTS
   $ 177     $ 362  
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
     2,910       1,628  
CASH AND CASH EQUIVALENTS AT END OF PERIOD
   $ 3,087     $ 1,990  
 
The accompanying footnotes are an integral part of these consolidated statements.
 
NEEDLETECH PRODUCTS, INC. AND AFFILIATE
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
(UNAUDITED)
(Amounts in thousands)
 
   
Six Months Ended
June 30,
  
   
2008
    
2007
  
Supplementary cash flow disclosure:
            
Taxes paid
   $ 886     $ 667  
 
The accompanying footnotes are an integral part of these consolidated statements.
 
NEEDLETECH PRODUCTS, INC. AND AFFILIATE
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008
(Unaudited)
 
NOTE A - BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS
 
The unaudited interim consolidated financial statements included herein reflect the operations of NeedleTech Products, Inc. and a Variable Interest Entity(“VIE”) for which NeedleTech Products, Inc. is the primary beneficiary.  All significant accounts and transactions between NeedleTech Products, Inc. and the VIE have been eliminated.  NeedleTech Products, Inc. and the VIE are together referred to as "NeedleTech" and the "Company" in these notes.  These statements reflect all adjustments that are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows for the periods presented. All such adjustments are of a normal recurring nature. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These unaudited financial statements and notes should be read in conjunction with the audited consolidated financial statements and notes for the years ended December 31, 2007 and 2006, included in this Form 8-K/A. Comprehensive income is not presented for the interim periods included herein as the other comprehensive income items for the periods are not material.  The results of operations for the six and three months ended June 30, 2008 and 2007 are not necessarily indicative of the results to be expected for a full year.

NeedleTech is a manufacturer of specialty needles and related medical devices.  The Company’s current products include coaxial needles, biopsy needles, access trocars, brachytherapy needles, guidewire introducer needles, spinal needles, disposable veress needles, and other needle-based products.  End markets served include the cardiology, orthopedic, pain management, endoscopy, spine, urology, and veterinary markets.  The Company sells its products primarily to original equipment manufacturers.  The non-controlling interest of affiliate owns real estate, which is utilized in the Company’s operations.
 
NOTE B – RECENTLY ISSUED ACCOUNTING STANDARDS
 
In June 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes, (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements in accordance with SFAS Statement No. 109, Accounting for Income Taxes. FIN 48 requires a company to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements. FASB Staff Position No. FIN 48-2 (as amended), delayed the effective date of FIN 48 for nonpublic enterprises to the annual financial statements for fiscal years beginning after December 15, 2007.  Accordingly, FIN 48 would be effective in the Company’s year ended December 31, 2008 financial statements. The Company does not currently believe the adoption of FIN 48 will have a material impact on its financial statements.
 
In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 157, Fair Value Measurements (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 was effective for the Company on January 1, 2008.  However, in February 2008 the FASB released FASB Staff Position No. FAS 157-2, Effective Date of FASB Statement No. 157, which delayed the effective date of SFAS 157 for all non-financial assets and non-financial liabilities, except those that are recognized or disclosed in the financial statements at fair value at least annually.  Accordingly, the Company has adopted the provisions of SFAS 157 only with respect to its financial assets and liabilities as of January 1, 2008. The adoption of SFAS 157 for the Company’s financial assets and liabilities did not have a material impact on its consolidated financial statements.
 
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of FASB Statement No. 115 (“SFAS 159”).  SFAS 159 permits entities to choose to measure eligible items at fair value at specified election dates and report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date.  SFAS No. 159, which the Company adopted on January 1, 2008, did not have a material impact on its consolidated financial statements. As permitted under SFAS 159, the Company has currently chosen not to elect the fair value option for any items that are not already required to be measured at fair value in accordance with accounting principles generally accepted in the United States.
 
 
NOTE C - INVENTORIES
 
Inventories are stated at the lower of cost or market. Cost is determined based on weighted average cost, which approximates the first-in, first-out (FIFO) method. Market is replacement cost or net realizable value. The Company estimates reserves for inventory obsolescence based upon management’s judgment of future realization. Inventories were comprised of the following (in thousands):
 
   
June 30,
2008
    
December 31,
2007
  
Raw materials
   $ 929     $ 756  
Work in process
     1,088       1,175  
Finished goods
     729       709  
      2,746       2,640  
Allowance for obsolete inventory
     (82 )     (110 )
Total
   $ 2,664     $ 2,530  
 
NOTE D – FAIR VALUE
 
Effective January 1, 2008, the Company adopted SFAS No. 157, which defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. SFAS No. 157 establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:
 
• Level 1 — Quoted prices in active markets for identical assets or liabilities.
• Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
• Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.
 
 
 
The Company’s assets measured at fair value on a recurring basis subject to the disclosure requirements of SFAS 157 at June 30, 2008 were as follows (in thousands):

   
Quoted Prices
in Active Markets
(Level 1)
    
Significant
Other
Observable Inputs
(Level 2)
    
Significant Unobservable Inputs
(Level 3)
    
 
 
 
Total
  
                         
Marketable securities
   $ 2,017     $ -     $ -     $ 2,017  
                                 
 
 
NOTE E – SUBSEQUENT EVENT

On July 28, 2008, Theragenics Corporation purchased all of the outstanding common stock of NeedleTech for $47.8 million in cash.