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-- 14,745 16,729 Extraordinary charge relating to early extinguishment of debt .............. 2,222 6,301 -- Changes in assets and liabilities, net of effect of acquisitions: Decrease (increase) in accounts receivable .................... 15,102 (1,011) (21,267) Decrease (increase) in inventories 20,348 10,852 (16,741) (Decrease) increase in trade accounts payable .............. (17,145) 43,108 4,478 Net working capital provided by AN Can from 8/1/95 to 12/31/95 .... -- 85,213 -- Other, net (decrease) increase ... (357) (6,745) 7,221 -------- --------- -------- Total adjustments ............ 96,784 231,435 60,364 -------- --------- -------- Net cash provided by operating activities .......................... 125,199 209,629 47,333 -------- --------- -------- Cash flows from investing activities: Acquisition of businesses ................. (43,043) (348,762) 519 Capital expenditures ...................... (56,851) (51,897) (29,184) Proceeds from sale of assets .............. 1,557 3,541 765 -------- --------- -------- Net cash used in investing activities . |
SILGAN HOLDINGS INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) For the years ended December 31, 1996, 1995 and 1994 (Dollars in thousands) 1996 1995 1994 ---- ---- ---- Cash flows from financing activities: Borrowings under working capital loans .. $952,050 $669,260 $393,250 Repayments under working capital loans .. (931,350) (674,760) (382,850) Proceeds from issuance of long-term debt 125,000 450,000 -- Repayments of long-term debt ............ (183,880) (234,506) (20,464) Proceeds from issuance of cumulative redeemable exchangeable preferred stock 50,000 -- -- Repurchase of common stock .............. (35,811) -- -- Debt financing costs .................... (3,956) (19,290) -- Payments to former shareholders of Silgan -- (3,795) (6,911) -------- -------- -------- Net cash (used by) provided for financing activities .............. (27,947) 186,909 (16,975) -------- -------- -------- Net (decrease) increase in cash and cash equivalents ........................ (1,085) (580) 2,458 Cash and cash equivalents at beginning of year ....................... 2,102 2,682 224 -------- -------- -------- Cash and cash equivalents at end of year ............................. $ 1,017 $ 2,102 $ 2,682 ======== ======== ======== Supplementary data: Interest paid $ 68,390 $ 45,293 $ 30,718 Income tax (refunds) payments, net.... (4,836) 8,967 2,588 Preferred stock dividend in lieu of cash dividend....................... 2,998 -- -- See accompanying notes. |
Long-term debt consists of the following: 1996 1995 ---- ---- (Dollars in thousands) Bank A Term Loans ........................ $194,554 $220,000 Bank B Term Loans ........................ 343,716 222,750 11 3/4% Senior Subordinated Notes due June 15, 2002 ......................... 135,000 135,000 13 1/4% Senior Subordinated Debentures due December 15, 2002 ..................... 58,940 201,263 -------- -------- 732,210 779,013 Less: Amounts due within one year ........ 38,427 28,140 -------- -------- $693,783 $750,873 ======== ======== The aggregate annual maturities of long-term debt at December 31, 1996 are as follows (in thousands): 1997.................. $ 38,427 1998.................. 53,393 1999.................. 53,393 2000.................. 126,112 2001.................. 155,880 2002 and thereafter... 305,005 -------- $732,210 ======== Refinancings Effective August 1, 1995, Silgan, Containers and Plastics entered into a $675.0 million credit agreement (the "Credit Agreement") with various banks to finance the acquisition by Containers of AN Can, to refinance and repay in full all amounts owing under the previous bank credit agreement and Silgan's Senior Secured Notes (the "Secured Notes"), and to repurchase up to $75.0 million of Discount Debentures. |
Retirement Plans (continued) The following table sets forth the funded status of the Company's retirement plans as of December 31, 1996 and 1995: Plans in which Plans in which Assets Exceed Accumulated Accumulated Benefits Benefits Exceed Assets ------------------ ------------------ 1996 1995 1996 1995 ---- ---- ---- ---- (Dollars in thousands) Actuarial present value of benefit obligations: Vested benefit obligations ....... $14,009 $12,135 $33,558 $31,465 Non-vested benefit obligations ... 383 547 4,718 3,158 ------- ------- ------- ------- Accumulated benefit obligations .... 14,392 12,682 38,276 34,623 Additional benefits due to future salary levels ............. 6,255 5,667 6,526 7,132 ------- ------- ------- ------- Projected benefit obligations ...... 20,647 18,349 44,802 41,755 Plan assets at fair value .......... 15,055 12,988 31,265 23,535 ------- ------- ------- ------- Projected benefit obligation in excess of plan assets ......... 5,592 5,361 13,537 18,220 Unrecognized actuarial gain (loss).. 110 (165) 3,476 1,237 Unrecognized prior service costs ... (565) (615) (2,052) (2,128) Additional minimum liability ....... -- -- 1,124 1,990 ------- ------- ------- ------- Accrued pension liability recognized in the balance sheet... $ 5,137 $ 4,581 $16,085 $19,319 ======= ======= ======= ======= For certain pension plans with accumulated benefits in excess of plan assets at December 31, 1996 and December 31, 1995, the balance sheet reflects an additional minimum pension liability and related intangible asset of $1.1 million and $2.0 million, respectively. |
Postretirement Benefits Other than Pensions (continued) The following table presents the funded status of the postretirement plans and amounts recognized in the Company's balance sheet as of December 31, 1996 and 1995: 1996 1995 ---- ---- (Dollars in thousands) Accumulated postretirement benefit obligation: Retirees ................................... $ 2,691 $ 1,587 Fully eligible active plan participants .... 5,576 11,647 Other active plan participants ............. 18,214 14,770 ------- ------- Total accumulated postretirement benefit obligation ......................... 26,481 28,004 Unrecognized net loss (gain) ................. 2,993 (2,929) Unrecognized prior service costs ............. (275) (298) ------- ------- Accrued postretirement benefit liability ..... $29,199 $24,777 ======= ======= Net periodic postretirement benefit cost include the following components: 1996 1995 1994 ---- ---- ---- (Dollars in thousands) Service cost ............................. $ 871 $ 372 $ 321 Interest cost ............................ 1,766 1,097 412 Net amortization and deferral ............ 25 42 (14) ------ ------ ----- Net periodic postretirement benefit cost $2,662 $1,511 $ 719 ====== ====== ===== The weighted average discount rate used to determine the accumulated postretirement benefit obligation as of December 31, 1996 and 1995 was 7.5%. |
Income Taxes The components of income tax expense are as follows: 1996 1995 1994 ---- ---- ---- (Dollars in thousands) Current Federal ..................... $ -- $ 500 $2,500 State ....................... 3,000 1,900 3,200 Foreign ..................... 300 100 (100) ------ ------ ------ 3,300 2,500 5,600 Deferred Federal ..................... -- -- -- State ....................... -- -- -- Foreign ..................... -- -- -- ------ ------ ------ -- -- -- ------ ------ ------ $3,300 $2,500 $5,600 ====== ====== ====== Income tax expense is included in the financial statements as follows: 1996 1995 1994 ---- ---- ---- (Dollars in thousands) Income before extraordinary charges ....... $3,300 $5,100 $5,600 Extraordinary charges ......... -- (2,600) -- ------ ------ ------ $3,300 $2,500 $5,600 ====== ====== ====== The income tax provision varied from that computed by using the U.S. statutory rate as a result of the following: 1996 1995 1994 ---- ---- ---- (Dollars in thousands) Income tax benefit at the U.S. federal income tax rate ..... $11,100 $(3,811) $(2,601) State and foreign tax expense, net of federal income benefit 2,145 1,820 2,015 Amortization of goodwill ...... 621 471 576 Change in valuation allowance . |
Significant components of the Company's deferred tax liabilities and assets at December 31, 1996 and 1995 are as follows: 1996 1995 ---- ---- (Dollars in thousands) Deferred tax liabilities: Tax over book depreciation ................ $65,000 $53,400 Book over tax basis of assets acquired .... 13,200 16,100 Other ..................................... 4,100 3,900 ------- ------- Total deferred tax liabilities .......... 82,300 73,400 Deferred tax assets: Book reserves not yet deductible for tax purposes ........................ 59,200 56,300 Deferred interest on high yield obligations 7,700 25,100 Net operating loss carryforwards .......... 57,200 35,600 Other ..................................... 500 1,200 ------- ------- Total deferred tax assets ............... 124,600 118,200 Valuation allowance for deferred tax assets 49,136 51,636 ------- ------- Net deferred tax assets ................. 75,464 66,564 ------- ------- Net deferred tax liabilities ................ $ 6,836 $ 6,836 ======= ======= The Company has a net deferred tax asset position primarily as a result of its net operating loss carryforwards and net temporary differences. |
----- ------ ------ ------ ------- 1996 (Dollars in millions) - ---- Metal container & specialty(1) ..... $1,189.3 $106.1 $750.7 $44.7 $39.1 Plastic container .... 216.4 18.4 158.5 14.6 17.6 ------- ------ ------ ----- ----- Total .............. $1,405.7 $124.5 $909.2 $59.3 $56.7 ======== ====== ====== ===== ===== - ---- Metal container & specialty(1) ..... $ 882.3 $ 58.2 (2) $736.7 $31.6 $32.5 Plastic container .... 219.6 13.2 159.4 13.8 19.4 -------- ------ ------- ----- ----- Total .............. $1,101.9 $ 71.4 $896.1 $45.4 $51.9 ======== ====== ====== ===== ===== - ---- Metal container & specialty(1) ..... $ 657.1 $ 59.8 (3) $335.3 $23.1 $16.9 Plastic container .... 204.3 (0.1)(3) 162.8 14.1 12.3 -------- ------ ------- ----- ----- Total .............. $ 861.4 $ 59.7 $498.1 $37.2 $29.2 ======== ====== ====== ===== ===== (1) Specialty packaging sales include closures, plastic bowls, and paper containers used by processors and packagers in the food industry and are not significant enough to be reported as a separate segment. |
SCHEDULE I CONDENSED FINANCIAL INFORMATION OF SILGAN HOLDINGS INC. CONDENSED BALANCE SHEETS December 31, 1996 and 1995 (Dollars in thousands) ASSETS 1996 1995 ---- ---- Current assets: Cash and cash equivalents .......................... $ 70 $ 10 Other current assets ............................... 74 70 -------- -------- Total current assets ............................. 144 80 Investment in and other amounts due from subsidiary .................................... -- 19,040 Notes receivable-subsidiary .......................... 1,489 1,489 Debt issuance costs and other assets ................. 3,533 3,418 -------- -------- $ 5,166 $ 24,027 ======== ======== LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY Current liabilities: Accrued expenses .................................. $ 1,339 $ 393 Amount payable to subsidiary ...................... 2,810 2,175 -------- -------- Total current liabilities ...................... 4,149 2,568 Excess of distributions over investment in subsidiary ..................................... 79,285 -- Long-term debt ....................................... 58,940 201,263 Cumulative exchangeable redeemable preferred stock .................................... 52,998 -- Deficiency in stockholders' equity: Common stock ....................................... 152 195 Additional paid-in capital ......................... 18,466 33,423 Accumulated deficit ................................ (208,824) (213,422) -------- -------- Total deficiency in stockholders' equity ......... (190,206) (179,804) -------- -------- $ 5,166 $ 24,027 ======== ======== See Notes to Consolidated Financial Statements for Silgan Holdings Inc. appearing elsewhere herein. |
SCHEDULE I CONDENSED FINANCIAL INFORMATION OF SILGAN HOLDINGS INC. CONDENSED STATEMENTS OF OPERATIONS For the years ended December 31, 1996, 1995 and 1994 (Dollars in thousands) 1996 1995 1994 ---- ---- ---- Net sales .................................... $ -- $ -- $ -- Cost of goods sold ........................... -- -- -- ------- -------- -------- Gross profit ............................ -- -- -- Selling, general and administrative expenses ................................... 713 1,113 837 ------- -------- -------- Loss from operations .................... (713) (1,113) (837) Equity in earnings of consolidated subsidiaries ............................... 31,611 6,806 12,053 Interest expense and other related financing costs ............................ 17,861 28,248 29,647 ------- -------- -------- Income (loss) before income taxes ....... 13,037 (22,555) (18,431) Income tax benefit ........................... 17,600 4,100 5,400 ------- -------- -------- Income (loss) before extraordinary charge 30,637 (18,455) (13,031) Extraordinary charges relating to early extinguishment of debt ............... (2,222) (3,351) -- ------- -------- -------- Net income (loss) before preferred stock dividend requirement ................ 28,415 (21,806) (13,031) Preferred stock dividend requirement ......... (3,006) -- -- ------- -------- -------- Net income (loss) available to common stockholders ................. $25,409 $(21,806) $(13,031) ======= ======== ======== See Notes to Consolidated Financial Statements for Silgan Holdings Inc. appearing elsewhere herein. |
Our international operations carry special financial, business and legal risks, including cultural and language differences; employment laws and related factors that could result in lower utilization, higher staffing costs, and cyclical fluctuations of utilization and revenues; currency fluctuations that adversely affect our financial position and operating results; burdensome regulatory requirements and other barriers to conducting business; tariffs and other trade barriers including the United Kingdom’s decision to leave the European Union; managing the risks associated with engagements with foreign officials and governmental agencies, including the risks arising from the United States Foreign Corrupt Practices Act and the United Kingdom Bribery Act of 2010; managing the risks associated with global privacy and data security laws and regulations including the General Data Protection Regulation in Europe; greater difficulties in managing and staffing foreign operations; successful entry and execution in new markets; restrictions on the repatriation of earnings; potentially adverse tax consequences; and other impending legislation that could add additional risks to the business. |
Our international operations carry special financial, business and legal risks, including cultural and language differences; employment laws and related factors that could result in lower utilization, higher staffing costs, and cyclical fluctuations of utilization and revenues; currency fluctuations that adversely affect our financial position and operating results; burdensome regulatory requirements and other barriers to conducting business; tariffs and other trade barriers including the United Kingdom’s decision to leave the European Union; managing the risks associated with engagements with foreign officials and governmental agencies, including the risks arising from the United States Foreign Corrupt Practices Act and the United Kingdom Bribery Act of 2010; managing the risks associated with global privacy and data security laws and regulations including the General Data Protection Regulation in Europe; greater difficulties in managing and staffing foreign operations; successful entry and execution in new markets; restrictions on the repatriation of earnings; potentially adverse tax consequences; and other impending legislation that could add additional risks to the business. |
The Company believes this methodology achieves a reliable measure of the revenue from the consulting services it provides to its customers under fixed-price contracts given the nature of the consulting services the Company provides and the following additional considerations: ·the Company considers labor hours at standard rates and expenses to be incurred when pricing its contracts; ·the Company generally does not incur set up costs on its contracts; ·the Company does not believe that there are reliable milestones to measure progress towards completion; ·the customer is required to pay the Company for time at standard rates plus materials incurred to date if the contract is terminated early; ·the Company’s contracts do not include award fees or bonuses; ·the Company does not include revenue for unpriced change orders until the customer agrees with the changes; ·historically the Company has not had significant accounts receivable write-offs or cost overruns; and ·the Company’s contracts are typically progress billed on a monthly basis. |
The Company believes this methodology achieves a reliable measure of the revenue from the consulting services it provides to its customers under fixed-price contracts given the nature of the consulting services the Company provides and the following additional considerations: ·the Company considers labor hours at standard rates and expenses to be incurred when pricing its contracts; ·the Company generally does not incur set up costs on its contracts; ·the Company does not believe that there are reliable milestones to measure progress toward completion; ·if the contract is terminated early, the customer is required to pay the Company for time at standard rates plus materials incurred to date; ·the Company does not recognize revenue for award fees or bonuses until specific contractual criteria are met; ·the Company does not include revenue for unpriced change orders until the customer agrees with the changes; ·historically the Company has not had significant accounts receivable write-offs or cost overruns; and ·its contracts are typically progress billed on a monthly basis. |
EXPONENT, INC. (Registrant) Date: February 23, 2018 /s/ Richard L. Schlenker, Jr. Richard L. Schlenker, Jr., Executive Vice President, Chief Financial Officer and Corporate Secretary Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated: Signature Title Date /s/ Paul R. Johnston Chief Executive Officer and Director February 23, 2018 Paul R. Johnston, Ph.D. (Principal Executive Officer) /s/ Richard L. Schlenker, Jr. Executive Vice President, Chief Financial Officer and February 23, 2018 Richard L. Schlenker, Jr. Corporate Secretary (Principal Financial and Accounting Officer) /s/ Michael R. Gaulke Chairman of the Board of Directors February 23, 2018 Michael R. Gaulke /s/ Carol Lindstrom Director February 23, 2018 Carol Lindstrom /s/ Karen A. Richardson Director February 23, 2018 Karen A. Richardson /s/ John B. Shoven Director February 23, 2018 John B. Shoven, Ph.D. /s/ Debra L. Zumwalt Director February 23, 2018 Debra L. Zumwalt EXHIBIT INDEX The following exhibits are filed as part of, or incorporated by reference into (as indicated parenthetically), the Annual Report on Form 10-K. |
The Company believes this methodology achieves a reliable measure of the revenue from the consulting services it provides to its customers under fixed-price contracts given the nature of the consulting services the Company provides and the following additional considerations: ·the Company considers labor hours at standard rates and expenses to be incurred when pricing its contracts; ·the Company generally does not incur set up costs on its contracts; ·the Company does not believe that there are reliable milestones to measure progress toward completion; ·if the contract is terminated early, the customer is required to pay the Company for time at standard rates plus materials incurred to date; ·the Company does not recognize revenue for award fees or bonuses until specific contractual criteria are met; ·the Company does not include revenue for unpriced change orders until the customer agrees with the changes; ·historically the Company has not had significant accounts receivable write-offs or cost overruns; and ·its contracts are typically progress billed on a monthly basis. |
EXPONENT, INC. (Registrant) Date: February 27, 2015 /s/ Richard L. Schlenker, Jr. Richard L. Schlenker, Jr., Executive Vice President, Chief Financial Officer and Corporate Secretary Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated: Signature Title Date /s/ Paul R. Johnston President, Chief Executive Officer and Director February 27, 2015 Paul R. Johnston, Ph.D. /s/ Richard L. Schlenker, Jr. Executive Vice President, Chief Financial Officer February 27, 2015 Richard L. Schlenker, Jr. and Corporate Secretary (Principal Financial and Accounting Officer) /s/ Michael R. Gaulke Chairman of the Board of Directors February 27, 2015 Michael R. Gaulke /s/ Karen A. Richardson Director February 27, 2015 Karen A. Richardson /s/ Stephen C. Riggins Director February 27, 2015 Stephen C. Riggins /s/ John B. Shoven Director February 27, 2015 John B. Shoven, Ph.D. /s/ Debra L. Zumwalt Director February 27, 2015 Debra L. Zumwalt EXHIBIT INDEX The following exhibits are filed as part of, or incorporated by reference into (as indicated parenthetically), the Annual Report on Form 10-K: 3.1(i ) Restated Certificate of Incorporation of the Company (incorporated by reference from the Company’s Registration Statement on Form S-1 as filed on June 25, 1990, registration number 33-35562). |
We currently operate 23 practices and centers in two operating segments, Engineering and Other Scientific and Environmental and Health: ENGINEERING AND OTHER SCIENTIFIC · Biomechanics · Biomedical Engineering · Buildings & Structures · Civil Engineering · Construction Consulting · Defense Technology Development · Electrical Engineering & Computer Science · Engineering Management Consulting · Human Factors · Industrial Structures · Materials & Corrosion Engineering · Mechanical Engineering · Polymer Science & Materials Chemistry · Statistical & Data Sciences · Thermal Sciences · Vehicle Analysis ENVIRONMENTAL AND HEALTH · Chemical Regulation & Food Safety · Ecological & Biological Sciences · Environmental & Earth Sciences · Epidemiology, Biostatistics & Computational Biology · Exposure Assessment & Dose Reconstruction · Occupational & Environmental Health · Toxicology & Mechanistic Biology ENGINEERING AND OTHER SCIENTIFIC Biomechanics Our biomechanics staff uses engineering and biomedical science to solve complex problems at the intersection of biology and engineering. |
The Company believes this methodology achieves a reliable measure of the revenue from the consulting services it provides to its customers under fixed-price contracts given the nature of the consulting services the Company provides and the following additional considerations: · the Company considers labor hours at standard rates and expenses to be incurred when pricing its contracts; · the Company generally does not incur set up costs on its contracts; · the Company does not believe that there are reliable milestones to measure progress toward completion; · if the contract is terminated early, the customer is required to pay the Company for time at standard rates plus materials incurred to date; · the Company does not recognize revenue for award fees or bonuses until specific contractual criteria are met; · the Company does not include revenue for unpriced change orders until the customer agrees with the changes; · historically the Company has not had significant accounts receivable write-offs or cost overruns; and · its contracts are typically progress billed on a monthly basis. |
EXPONENT, INC. (Registrant) Date: February 28, 2014 /s/ Richard L. Schlenker, Jr. Richard L. Schlenker, Jr., Executive Vice President, Chief Financial Officer and Corporate Secretary Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated: Signature Title Date /s/ Paul R. Johnston President, Chief Executive Officer and Director February 28, 2014 Paul R. Johnston, Ph.D. /s/ Richard L. Schlenker, Jr. Executive Vice President, Chief Financial Officer February 28, 2014 Richard L. Schlenker, Jr. and Corporate Secretary (Principal Financial and Accounting Officer) /s/ Michael R. Gaulke Chairman of the Board of Directors February 28, 2014 Michael R. Gaulke /s/ Samuel H. Armacost Director February 28, 2014 Samuel H. Armacost /s/ Mary B. Cranston Director February 28, 2014 Mary B. Cranston /s/ Karen A. Richardson Director February 28, 2014 Karen A. Richardson /s/ Stephen C. Riggins Director February 28, 2014 Stephen C. Riggins /s/ John B. Shoven Director February 28, 2014 John B. Shoven, Ph.D. EXHIBIT INDEX The following exhibits are filed as part of, or incorporated by reference into (as indicated parenthetically), the Annual Report on Form 10-K: 3.1(i) Restated Certificate of Incorporation of the Company (incorporated by reference from the Company’s Registration Statement on Form S-1 as filed on June 25, 1990, registration number 33-35562). |
We currently operate 23 practices and centers in two operating segments, Engineering and other scientific and Environmental and health: ENGINEERING AND OTHER SCIENTIFIC · Biomechanics · Biomedical Engineering · Buildings & Structures · Civil Engineering · Construction Consulting · Defense Technology Development · Electrical Engineering & Computer Science · Engineering Management Consulting · Human Factors · Industrial Structures · Materials & Corrosion Engineering · Mechanical Engineering · Polymer Science & Materials Chemistry · Statistical & Data Sciences · Thermal Sciences · Vehicle Analysis ENVIRONMENTAL AND HEALTH ·Chemical Regulation & Food Safety ·Ecological & Biological Sciences ·Environmental & Earth Sciences ·Epidemiology, Biostatistics & Computational Biology ·Exposure Assessment & Dose Reconstruction ·Occupational Medicine & Environmental Health ·Toxicology & Mechanistic Biology ENGINEERING AND OTHER SCIENTIFIC Biomechanics Our biomechanics staff uses engineering and biomedical science to solve complex problems at the intersection of biology and engineering. |
The Company believes this methodology achieves a reliable measure of the revenue from the consulting services it provides to its customers under fixed-price contracts given the nature of the consulting services the Company provides and the following additional considerations: ·the Company considers labor hours at standard rates and expenses to be incurred when pricing its contracts; ·the Company generally does not incur set up costs on its contracts; ·the Company does not believe that there are reliable milestones to measure progress toward completion; ·if the contract is terminated early, the customer is required to pay the Company for time at standard rates plus materials incurred to date; ·the Company does not recognize revenue for award fees or bonuses until specific contractual criteria are met; ·the Company does not include revenue for unpriced change orders until the customer agrees with the changes; ·historically the Company has not had significant accounts receivable write-offs or cost overruns; and ·its contracts are typically progress billed on a monthly basis. |
EXPONENT, INC. (Registrant) Date: February 27, 2013 /s/ Richard L. Schlenker, Jr. Richard L. Schlenker, Jr., Executive Vice President, Chief Financial Officer and Corporate Secretary Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated: Signature Title Date /s/ Paul R. Johnston President, Chief Executive Officer and Director February 27, 2013 Paul R. Johnston, Ph.D. /s/ Richard L. Schlenker, Jr. Executive Vice President, Chief Financial Officer and February 27, 2013 Richard L. Schlenker, Jr. Corporate Secretary (Principal Financial and Accounting Officer) /s/ Michael R. Gaulke Chairman of the Board of Directors February 27, 2013 Michael R. Gaulke /s/ Samuel H. Armacost Director February 27, 2013 Samuel H. Armacost /s/ Mary B. Cranston Director February 27, 2013 Mary B. Cranston /s/ Leslie G. Denend Director February 27, 2013 Leslie G. Denend, Ph.D. /s/ Stephen C. Riggins Director February 27, 2013 Stephen C. Riggins /s/ John B. Shoven Director February 27, 2013 John B. Shoven, Ph.D. EXHIBIT INDEX The following exhibits are filed as part of, or incorporated by reference into (as indicated parenthetically), the Annual Report on Form 10-K: 3.1(i)Restated Certificate of Incorporation of the Company (incorporated by reference from the Company’s Registration Statement on Form S-1 as filed on June 25, 1990, registration number 33-35562). |
The Company believes this methodology achieves a reliable measure of the revenue from the consulting services it provides to its customers under fixed-price contracts given the nature of the consulting services the Company provides and the following additional considerations: ·the Company considers labor hours at standard rates and expenses to be incurred when pricing its contracts; ·the Company generally does not incur set up costs on its contracts; ·the Company does not believe that there are reliable milestones to measure progress toward completion; ·if the contract is terminated early, the customer is required to pay the Company for time at standard rates plus materials incurred to date; ·the Company does not recognize revenue for award fees or bonuses until specific contractual criteria are met; ·the Company does not include revenue for unpriced change orders until the customer agrees with the changes; ·historically the Company has not had significant accounts receivable write-offs or cost overruns; and ·its contracts are typically progress billed on a monthly basis. |
EXPONENT, INC. (Registrant) Date: February 24, 2012 /s/ Richard L. Schlenker, Jr. Richard L. Schlenker, Jr., Executive Vice President, Chief Financial Officer and Corporate Secretary Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated: Signature Title Date /s/ Paul R. Johnston President, Chief Executive Officer and Director February 24, 2012 Paul R. Johnston, Ph.D. /s/ Richard L. Schlenker, Jr. Executive Vice President, Chief Financial Officer and February 24, 2012 Richard L. Schlenker, Jr. Corporate Secretary (Principal Financial and Accounting Officer) /s/ Michael R. Gaulke Chairman of the Board of Directors February 24, 2012 Michael R. Gaulke /s/ Samuel H. Armacost Director February 24, 2012 Samuel H. Armacost /s/ Mary B. Cranston Director February 24, 2012 Mary B. Cranston /s/ Leslie G. Denend Director February 24, 2012 Leslie G. Denend, Ph.D. /s/ Stephen C. Riggins Director February 24, 2012 Stephen C. Riggins /s/ John B. Shoven Director February 24, 2012 John B. Shoven, Ph.D. EXHIBIT INDEX The following exhibits are filed as part of, or incorporated by reference into (as indicated parenthetically), the Annual Report on Form 10-K: 3.1(i)Restated Certificate of Incorporation of the Company (incorporated by reference from the Company’s Registration Statement on Form S-1 as filed on June 25, 1990, registration number 33-35562). |
The Company believes this methodology achieves a reliable measure of the revenue from the consulting services it provides to its customers under fixed-price contracts given the nature of the consulting services the Company provides and the following additional considerations: • the Company considers labor hours at standard rates and expenses to be incurred when pricing its contracts; • the Company generally does not incur set up costs on its contracts; • the Company does not believe that there are reliable milestones to measure progress toward completion; • if the contract is terminated early, the customer is required to pay the Company for time at standard rates plus materials incurred to date; • the Company does not recognize revenue for award fees or bonuses until specific contractual criteria are met; • the Company does not include revenue for unpriced change orders until the customer agrees with the changes; • historically the Company has not had significant accounts receivable write-offs or cost overruns; and • its contracts are typically progress billed on a monthly basis. |
The Company believes this methodology achieves a reliable measure of the revenue from the consulting services it provides to its customers under fixed-price contracts given the nature of the consulting services the Company provides and the following additional considerations: • the Company considers labor hours at standard rates and expenses to be incurred when pricing its contracts; • the Company generally does not incur set up costs on its contracts; • the Company does not believe that there are reliable milestones to measure progress toward completion; • if the contract is terminated early, the customer is required to pay the Company for time at standard rates plus materials incurred to date; • the Company does not recognize revenue for award fees or bonuses until specific contractual criteria are met; • the Company does not include revenue for unpriced change orders until the customer agrees with the changes; • historically the Company has not had significant accounts receivable write-offs or cost overruns; and • its contracts are typically progress billed on a monthly basis. |
The Company believes this methodology achieves a reliable measure of the revenue from the consulting services it provides to its customers under fixed-price contracts given the nature of the consulting services the Company provides and the following additional considerations: • the Company considers labor hours at standard rates and expenses to be incurred when pricing its contracts; • the Company generally does not incur set up costs on its contracts; • the Company does not believe that there are reliable milestones to measure progress toward completion; • if the contract is terminated early, the customer is required to pay the Company for time at standard rates plus materials incurred to date; • the Company does not recognize revenue for award fees or bonuses until specific contractual criteria are met; • the Company does not include revenue for unpriced change orders until the customer agrees with the changes; • historically the Company has not had significant accounts receivable write-offs or cost overruns; and • its contracts are typically progress billed on a monthly basis. |
The Company believes this methodology achieves a reliable measure of the revenue from the consulting services it provides to its customers under fixed-price contracts given the nature of the consulting services the Company provides and the following additional considerations: • the Company considers labor hours at standard rates and expenses to be incurred when pricing its contracts; • the Company generally does not incur set up costs on its contracts; • the Company does not believe that there are reliable milestones to measure progress toward completion; • if either party terminates the contract early, the customer is required to pay the Company for time at standard rates plus materials incurred to date; • the Company does not recognize revenue for award fees or bonuses until specific contractual criteria are met; • the Company does not include revenue for unpriced change orders until the customer agrees with the changes; • historically the Company has not had significant accounts receivable write-offs or cost overruns; and • its contracts are typically progress billed on a monthly basis. |
The Company believes this methodology achieves a reliable measure of the revenue from the consulting services it provides to its customers under fixed-price contracts given the nature of the consulting services the Company provides and the following additional considerations: • the Company considers labor hours at standard rates and expenses to be incurred when pricing its contracts; • the Company generally does not incur set up costs on its contracts; • the Company does not believe that there are reliable milestones to measure progress toward completion; • if either party terminates the contract early, the customer is required to pay the Company for time at standard rates plus materials incurred to date; • the Company does not recognize revenue for award fees or bonuses until specific contractual criteria are met; • the Company does not include revenue for un-priced change orders until the customer agrees with the changes; • historically the Company has not had significant accounts receivable write-offs or cost overruns; and • its contracts are typically progress billed on a monthly basis. |
EXPONENT, INC. (Registrant) Date: April 3, 2003 /S/ RICHARD L. SCHLENKER, JR. Richard L. Schlenker, Jr., Chief Financial Officer and Corporate Secretary Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated: Signature Title Date /S/ MICHAEL R. GAULKE Michael R. Gaulke Chief Executive Officer, President and Director April 3, 2003 /S/ RICHARD L. SCHLENKER, JR. Richard L. Schlenker, Jr. Chief Financial Officer and Corporate Secretary (Principal Financial and Accounting Officer) April 3, 2003 /S/ ROGER L. MCCARTHY Roger L. McCarthy Chairman of the Board April 3, 2003 /S/ SUBBAIAH V. MALLADI Subbaiah V. Malladi Chief Technical Officer and Director April 3, 2003 /S/ EDWARD J. KEITH Edward J. Keith Vice Chairman of the Board April 3, 2003 /S/ SAMUEL H. ARMACOST Samuel H. Armacost Director April 3, 2003 /S/ BARBARA M. BARRETT Barbara M. Barrett Director April 3, 2003 /S/ LESLIE G. DENEND Leslie G. Denend Director April 3, 2003 /S/ JON R. KATZENBACH Jon R. Katzenbach Director April 3, 2003 /S/ STEPHEN C. RIGGINS Stephen C. Riggins Director April 3, 2003 CERTIFICATION PURSUANT TO RULE 15d-14 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Michael R. Gaulke, President and Chief Executive Officer of Exponent, Inc., certify that: 1. |
We believe our DPS Dynamic Pressure Sensing technology and CompuFlo Systems provides the following benefits: ● minimizes the pain associated with injections, resulting in a more comfortable injection experience for the patient; ● provides visual and audible in-tissue pressure feedback, identifying the desired target location to the healthcare provider, extending the benefit of painlessness from anesthetics with known viscosities to a wide range of liquid drugs and other medicaments with varying viscosities and flow rates; ● allows the healthcare provider to know when the target location is present and permits the healthcare provider to inject medicaments precisely at the desired location; ● provides a digital record of the time and volume of anesthetic or medicament injected; ● minimizes tissue damage do to the flow rate and pressure of the injection being controlled; ● provides an integrated injection database of algorithms that have been defined which allow for the measurement of the exit pressure, containing the critical components of specific drugs, parameters of needles, tubing and syringes and all other pertinent components for the safe and efficacious delivery of medications; ● the pencil grip used with the handpieces allows significant tactile sense and accurate control; ● new injections made possible with the technology eliminate collateral numbness; ● bi-directional rotation of the handpieces eliminates needle deflection resulting in greater success and more rapid onset of anesthesia in injections; and ● the use of a single patient use, disposable handpieces minimize the risk of cross contamination. |
● sales or potential sales of substantial amounts of our common stock; ● delay or failure in initiating our strategy to commercialize our CompuFlo Epidural System; ● the success of our strategy to commercialize our CompuFlo Epidural System; ● announcements about us or about our competitors, including clinical trial results, regulatory approvals or new product introductions that could adversely impact the market acceptance or competitive advantages of our CompuFlo Epidural System; ● developments concerning our licensors or product manufacturers; ● litigation and other developments relating to our patents or other proprietary rights or those of our competitors; ● our ability to successfully develop and commercialize products and services for the healthcare industry; ● conditions in the medical device industry; ● governmental regulation and legislation; ● variations in our anticipated or actual operating results; and ● change in securities analysts’ estimates of our performance, or our failure to meet analysts’ expectations. |
And Milestone (4) 10.3 2011 Equity Compensation Plan (7) 10.4 Master Supply and Distribution Agreement, dated July 3, 2013, between Milestone Scientific Inc and Tri-anim Health Services, Inc (9) 10.5 Agreement with Mark Hochman, dated July 2015 (13) 10.6 Investment Agreement, dated April 15, 2014, between Milestone Scientific Inc. and BP4 S.p.A. (12) 10.7 Exclusive Distribution and Supply Agreement, dated as of June 20, 2016, among Milestone Scientific Inc., Wand Dental, Inc. and Henry Schein, Inc. (14) 10.8 Amended and Restated Employment Agreement, dated December 1, 2016, between Wand Dental Inc. and Gian Domenico Trombetta (15) 10.9 Final Form of Asset Purchase Agreement, dated June 2, 2017, among APAD Octrooi B.V., APAD B.V., and Milestone Scientific Inc. (17) 10.10 Final form of the Memorandum of Agreement, dated June 6, 2017, between Solee Science & Technology U.S.A. Ltd. and Milestone Scientific Inc. (18) 10.11 Final form of the Promissory Note, dated June 6, 2017, in the principal amount of $1,275,000 made by Solee Science & Technology U.S.A. Ltd. to Milestone Scientific Ltd. (18) 10.12 Final form of the Stock Option Agreement, dated June 6, 2017, Solee Science & Technology U.S.A. Ltd. and Milestone Scientific Inc. (18) 10.13 New Employment Agreement between Milestone Scientific Inc. and Leonard Osser dated as of July 11, 2017. |
(20) 10.17 Underwriting Agreement, dated as of February 1, 2019 between Milestone Scientific Inc. and Maxim Group LLC, as underwriter (21) 10.18 Stock Purchase Agreement, dated as of February 8, 2019 between Milestone Scientific Inc. and BP4 S.p.A. (22) 10.19 Underwriting Agreement, dated as of April 9, 2020 between the Company and Maxim Group LLC (25) 10.20 Underwriting Agreement, dated as of June 25, 2020 between the Company and Maxim Group LLC (26) 21.1 List of Subsidiaries* 23.1 Consent of Friedman, LLP* 31.1 Rule 13a-14(a) Certification-Chief Executive Officer* 31.2 Rule 13a-14(a) Certification-Chief Financial Officer* 32.1 Section 1350 Certifications-Chief Executive Officer*** 32.2 Section 1350 Certifications-Chief Financial Officer*** 101.INS XBRL Instance Document* 101.SCH XBRL Taxonomy Extension Schema Document* 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document* 101.LAB XBRL Taxonomy Extension Label Linkbase Document* 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document* 101.DEF XBRL Taxonomy Extension Definition Linkbase Document* SIGNATURES In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. |
Signature Date Title /s/ Leonard Osser March 31, 2021 Interim Chief Executive Officer Leonard Osser (Principal Executive Officer) /s/ Joseph D'Agostino March 31, 2021 Chief Financial Officer and Chief Operating Officer Joseph D'Agostino (Principal Financial Officer) March 31, 2021 Chairman and Director /s/ Leslie Bernhard Leslie Bernhard March 31, 2021 Director /s/ Gian Domenico Trombetta Gian Domenico Trombetta /s/ Leonard Schiller March 31, 2021 Director Leonard Schiller /s/ Michael McGeehan March 31, 2021 Director Michael McGeehan /s/ Neal Goldman March 31, 2021 Director Neal Goldman REPORT INDEX TO CONSOLIDATED FINANCIAL STATEMENTS For the Years Ended December 31, 2020 and 2019 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Milestone Scientific, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Milestone Scientific, Inc., and subsidiaries (the “Company”) as of December 31, 2020, and 2019, and the related consolidated statements of operations, statements of changes in stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2020, and the related notes (collectively referred to as the consolidated financial statements). |
East Hanover, New Jersey March 31, 2021 MILESTONE SCIENTIFIC AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS See notes to Consolidated Financial Statements MILESTONE SCIENTIFIC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 2020 AND 2019 See notes to Consolidated Financial Statements MILESTONE SCIENTIFIC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 2020 AND 2019 See notes to Consolidated Financial Statements MILESTONE SCIENTIFIC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2020 AND 2019 See notes to Consolidated Financial Statements MILESTONE SCIENTIFIC INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A - ORGANIZATION AND BUSINESS All references in this report to “Milestone Scientific,” “us,” “our,” “we,” the “Company” or “Milestone” refer to Milestone Scientific Inc., and its consolidated subsidiaries, Wand Dental, Inc., Milestone Advanced Cosmetic Systems, Inc., Milestone Medical, Inc. and Milestone Education LLC (all described below), unless the context otherwise indicates. |
We believe our DPS Dynamic Pressure Sensing technology and CompuFlo Systems provides the following benefits: ● minimizes the pain associated with injections, resulting in a more comfortable injection experience for the patient; ● provides visual and audible in-tissue pressure feedback, identifying the desired target location to the healthcare provider, extending the benefit of painlessness from anesthetics with known viscosities to a wide range of liquid drugs and other medicaments with varying viscosities and flow rates; ● allows the healthcare provider to know when the target location is present and permits the healthcare provider to inject medicaments precisely at the desired location; ● provides a digital record of the time and volume of anesthetic or medicament injected; ● minimizes tissue damage because the flow rate and pressure of the injection are controlled; ● provides an integrated injection database of algorithms that have been defined which allow for the measurement of the exit pressure, containing the critical components of specific drugs, parameters of needles, tubing and syringes and all other pertinent components for the safe and efficacious delivery of medications; ● the pencil grip used with the handpieces allows significant tactile sense and accurate control; ● new injections made possible with the technology eliminate collateral numbness; ● bi-directional rotation of the handpieces eliminates needle deflection resulting in greater success and more rapid onset of anesthesia in injections; and ● the use of a single patient use, disposable handpieces minimize the risk of cross contamination. |
● sales or potential sales of substantial amounts of our common stock; ● delay or failure in initiating our strategy to commercialize our CompuFlo Epidural System; ● the success of our strategy to commercialize our CompuFlo Epidural System; ● announcements about us or about our competitors, including clinical trial results, regulatory approvals or new product introductions that could adversely impact the market acceptance or competitive advantages of our CompuFlo Epidural System; ● developments concerning our licensors or product manufacturers; ● litigation and other developments relating to our patents or other proprietary rights or those of our competitors; ● our ability to successfully develop and commercialize products and services for the healthcare industry; ● conditions in the medical device industry; ● governmental regulation and legislation; ● variations in our anticipated or actual operating results; and ● change in securities analysts’ estimates of our performance, or our failure to meet analysts’ expectations. |
And Milestone (4) 10.3 2011 Equity Compensation Plan (7) 10.4 Master Supply and Distribution Agreement, dated July 3, 2013, between Milestone Scientific Inc and Tri-anim Health Services, Inc (9) 10.5 Agreement with Mark Hochman, dated July 2015 (13) 10.6 Investment Agreement, dated April 15, 2014, between Milestone Scientific Inc. and BP4 S.p.A. (12) 10.7 Exclusive Distribution and Supply Agreement, dated as of June 20, 2016, among Milestone Scientific Inc., Wand Dental, Inc. and Henry Schein, Inc. (14) 10.8 Amended and Restated Employment Agreement, dated December 1, 2016, between Wand Dental Inc. and Gian Domenico Trombetta (15) 10.9 Final Form of Asset Purchase Agreement, dated June 2, 2017, among APAD Octrooi B.V., APAD B.V., and Milestone Scientific Inc. (17) 10.10 Final form of the Memorandum of Agreement, dated June 6, 2017, between Solee Science & Technology U.S.A. Ltd. and Milestone Scientific Inc. (18) 10.11 Final form of the Promissory Note, dated June 6, 2017, in the principal amount of $1,275,000 made by Solee Science & Technology U.S.A. Ltd. to Milestone Scientific Ltd. (18) 10.12 Final form of the Stock Option Agreement, dated June 6, 2017, Solee Science & Technology U.S.A. Ltd. and Milestone Scientific Inc. (18) 10.13 New Employment Agreement between Milestone Scientific Inc. and Leonard Osser dated as of July 11, 2017. |
(20) 10.17 Underwriting Agreement, dated as of February 1, 2019 between Milestone Scientific Inc. and Maxim Group LLC, as underwriter (21) 10.18 Stock Purchase Agreement, dated as of February 8, 2019 between Milestone Scientific Inc. and BP4 S.p.A. (22) 21.1 List of Subsidiaries* 23.1 Consent of Friedman, LLP* 31.1 Rule 13a-14(a) Certification-Chief Executive Officer* 31.2 Rule 13a-14(a) Certification-Chief Financial Officer* 32.1 Section 1350 Certifications-Chief Executive Officer*** 32.2 Section 1350 Certifications-Chief Financial Officer*** 101.INS XBRL Instance Document* 101.SCH XBRL Taxonomy Extension Schema Document* 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document* 101.LAB XBRL Taxonomy Extension Label Linkbase Document* 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document* 101.DEF XBRL Taxonomy Extension Definition Linkbase Document* SIGNATURES In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. |
Signature Date Title /s/ Leonard Osser March 30, 2020 Interim Chief Executive Officer Leonard Osser (Principal Executive Officer) /s/ Joseph D'Agostino March 30, 2020 Chief Financial Officer and Chief Operating Officer Joseph D'Agostino (Principal Financial Officer) March 30, 2020 Chairman and Director /s/ Leslie Bernhard Leslie Bernhard March 30, 2020 Director /s/ Gian Domenico Trombetta Gian Domenico Trombetta /s/ Leonard Schiller March 30, 2020 Director Leonard Schiller /s/ Michael McGeehan March 30, 2020 Director Michael McGeehan /s/ Neal Goldman March 30, 2020 Director Neal Goldman REPORT INDEX TO CONSOLIDATED FINANCIAL STATEMENTS For the Years Ended December 31, 2019 and 2018 Report of Independent Registered Public Accounting Firm Consolidated Financial Statements: Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statements of Changes in Stockholders’ Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements - REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Milestone Scientific, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Milestone Scientific, Inc. and subsidiaries (the “Company”) as of December 31, 2019 and 2018, and the related consolidated statements of operations, statements of changes in stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2019, and the related notes (collectively referred to as the consolidated financial statements). |
East Hanover, New Jersey March 30, 2020 MILESTONE SCIENTIFIC AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS See notes to Consolidated Financial Statements MILESTONE SCIENTIFIC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 2019 AND 2018 See notes to Consolidated Financial Statements MILESTONE SCIENTIFIC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 2019 AND 2018 See notes to Consolidated Financial Statements MILESTONE SCIENTIFIC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2019 AND 2018 See notes to Consolidated Financial Statements MILESTONE SCIENTIFIC INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A - ORGANIZATION AND BUSINESS All references in this report to “Milestone Scientific,” “us,” “our,” “we,” the “Company” or “Milestone” refer to Milestone Scientific Inc., and its consolidated subsidiaries, Wand Dental, Inc., Milestone Advanced Cosmetic Systems, Inc., Milestone Medical, Inc. and Milestone Education LLC (all described below), unless the context otherwise indicates. |
We believe our DPS Dynamic Pressure Sensing technology and CompuFlo Systems provides the following benefits: ● minimizes the pain associated with injections, resulting in a more comfortable injection experience for the patient; ● provides visual and audible in-tissue pressure feedback, identifying the desired target location to the healthcare provider, extending the benefit of painlessness from anesthetics with known viscosities to a wide range of liquid drugs and other medicaments with varying viscosities and flow rates; ● allows the healthcare provider to know when the target location is present and permits the healthcare provider to inject medicaments precisely at the desired location; ● provides a digital record of the time and volume of anesthetic or medicament injected; ● minimizes tissue damage because the flow rate and pressure of the injection are controlled; ● provides an integrated injection database of algorithms that have been defined which allow for the measurement of the exit pressure, containing the critical components of specific drugs, parameters of needles, tubing and syringes and all other pertinent components for the safe and efficacious delivery of medications; ● the pencil grip used with the handpieces allows significant tactile sense and accurate control; ● new injections made possible with the technology eliminate collateral numbness; ● bi-directional rotation of the handpieces eliminates needle deflection resulting in greater success and more rapid onset of anesthesia in injections; and ● the use of a single patient use, disposable handpieces minimize the risk of cross contamination. |
Our stock price may experience substantial volatility because of many factors, including: ● sales or potential sales of substantial amounts of our common stock; ● delay or failure in initiating our strategy to commercialize our CompuFlo Epidural Computer Controlled Anesthesia System; ● the success of our strategy to commercialize our CompuFlo Epidural Computer Controlled Anesthesia System; ● announcements about us or about our competitors, including clinical trial results, regulatory approvals or new product introductions that could adversely impact the market acceptance or competitive advantages of our CompuFlo Epidural Computer Controlled Anesthesia System; ● developments concerning our licensors or product manufacturers; ● litigation and other developments relating to our patents or other proprietary rights or those of our competitors; ● our ability to successfully develop and commercialize to products and services for the healthcare industry; ● conditions in the medical device industries; ● governmental regulation and legislation; ● variations in our anticipated or actual operating results; and ● change in securities analysts’ estimates of our performance, or our failure to meet analysts’ expectations. |
/s/ Leonard Schiller April 1, 2019 Director Leonard Schiller /s/ Michael McGeehan April 1, 2019 Director Michael McGeehan REPORT INDEX TO CONSOLIDATED FINANCIAL STATEMENTS For the Years Ended December 31, 2018 and 2017 Report of Independent Registered Public Accounting Firm Consolidated Financial Statements: Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statements of Changes in Stockholders’ Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements - REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Milestone Scientific, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Milestone Scientific, Inc. and subsidiaries (the “Company”) as of December 31, 2018 and 2017, and the related consolidated statements of operations, statements of changes in stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2018, and the related notes (collectively referred to as the consolidated financial statements). |
East Hanover, New Jersey April 1, 2019 MILESTONE SCIENTIFIC AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS See notes to Consolidated Financial Statements MILESTONE SCIENTIFIC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 2018 AND 2017 See notes to Consolidated Financial Statements MILESTONE SCIENTIFIC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 2018 AND 2017 See notes to Consolidated Financial Statements MILESTONE SCIENTIFIC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2018 AND 2017 See notes to Consolidated Financial Statements MILESTONE SCIENTIFIC INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A - ORGANIZATION AND BUSINESS All references in this report to “Milestone Scientific,” “us,” “our,” “we,” the “Company” or “Milestone” refer to Milestone Scientific Inc., and its consolidated subsidiaries, Wand Dental, Inc., Milestone Advanced Cosmetic Systems, Inc., Milestone Medical, Inc. and Milestone Education LLC (all described below), unless the context otherwise indicates. |
We believe our DPS Dynamic Pressure Sensing technology and CompuFlo Systems provides the following benefits: ● minimizes the pain associated with injections, resulting in a more comfortable injection experience for the patient; ● provides visual and audible in-tissue pressure feedback, identifying the desired target location to the healthcare provider, extending the benefit of painlessness from anesthetics with known viscosities to a wide range of liquid drugs and other medicaments with varying viscosities and flow rates; ● allows the healthcare provider to know when the target location is present and permits the healthcare provider to inject medicaments precisely at the desired location; ● provides a digital record of the time and volume of anesthetic or medicament injected; ● minimizes tissue damage because the flow rate and pressure of the injection are controlled; ● provides an integrated injection database of algorithms that have been defined which allow for the measurement of the exit pressure, containing the critical components of specific drugs, parameters of needles, tubing and syringes and all other pertinent components for the safe and efficacious delivery of medications; ● the pencil grip used with the handpieces allows significant tactile sense and accurate control; ● new injections made possible with the technology eliminate collateral numbness; ● bi-directional rotation of the handpieces eliminates needle deflection resulting in greater success and more rapid onset of anesthesia in injections; ● the use of a single patient use, disposable handpieces minimize the risk of cross contamination; and Our first system utilizing a DPS Dynamic Pressure Sensing technology platform was our STA System and related handpiece for the dental market, currently marketed as the Wand STA System. |
Our stock price may experience substantial volatility because of many factors, including: ● sales or potential sales of substantial amounts of our common stock; ● delay or failure in initiating our strategy to commercialize our CompuFlo® Epidural Computer Controlled Anesthesia System; ● the success of our strategy to commercialize our CompuFlo® Epidural Computer Controlled Anesthesia System; ● announcements about us or about our competitors, including clinical trial results, regulatory approvals or new product introductions that could adversely impact the market acceptance or competitive advantages of our CompuFlo® Epidural Computer Controlled Anesthesia System; ● developments concerning our licensors or product manufacturers; ● litigation and other developments relating to our patents or other proprietary rights or those of our competitors; ● our ability to successfully develop and commercialize to products and services for the healthcare industry; ● conditions in the medical device industries; ● governmental regulation and legislation; ● variations in our anticipated or actual operating results; and ● change in securities analysts’ estimates of our performance, or our failure to meet analysts’ expectations. |
And Milestone (4) 10.4 Employment Agreement with Leonard Osser, dated September 1, 2009** (6) 10.5 2011 Equity Compensation Plan (7) 10.6 Amendment to the Employment Agreement with Leonard Osser, dated March 6, 2013** (11) 10.7 Master Supply and Distribution Agreement, dated July 3, 2013, between Milestone Scientific Inc and Tri-anim Health Services, Inc (9) 10.8 Amendment to the Employment Agreement with Leonard Osser, effective March 17, 2014** (10) 10.9 Agreement with Mark Hochman, dated July 2015 (13) 10.1 Investment Agreement, dated April 15, 2014, between Milestone Scientific Inc. and BP4 S.p.A. (12) 10.11 Exclusive Distribution and Supply Agreement, dated as of June 20, 2016, among Milestone Scientific Inc., Wand Dental, Inc. and Henry Schein, Inc. (14) 10.12 Amended and Restated Employment Agreement, dated December 1, 2016, between Wand Dental Inc. and Gian Domenico Trombetta (15) 10.13 Final Form of Asset Purchase Agreement, dated June 2, 2017, among APAD Octrooi B.V., APAD B.V., and Milestone Scientific Inc. (17) 10.14 Final form of the Memorandum of Agreement, dated June 6, 2017, between Solee Science & Technology U.S.A. Ltd. and Milestone Scientific Inc. (18) 10.15 Final form of the Promissory Note, dated June 6, 2017, in the principal amount of $1,275,000 made by Solee Science & Technology U.S.A. Ltd. to Milestone Scientific Ltd. (18) 10.16 Final form of the Stock Option Agreement, dated June 6, 2017, Solee Science & Technology U.S.A. Ltd. and Milestone Scientific Inc. (18) 10.17 New Employment Agreement between Milestone Scientific Inc. and Leonard Osser dated as of July 10, 2017. |
/s/ Leonard Schiller April 2, 2018 Director Leonard Schiller REPORT INDEX TO CONSOLIDATED FINANCIAL STATEMENTS For the Years ended December 31, 2017 and 2016 Reports of Independent Registered Public Accounting Firm Consolidated Financial Statements: Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statements of Changes in Stockholders’ Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements - REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Milestone Scientific, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Milestone Scientific, Inc. and subsidiaries (the “Company”) as of December 31, 2017 and 2016, and the related consolidated statements of operations, statement of changes in stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2017, and the related notes (collectively referred to as the consolidated financial statements). |
And Milestone (4) 10.4 Employment Agreement with Leonard Osser, dated September 1, 2009** (6) 10.5 2011 Equity Compensation Plan (7) 10.6 Amendment to the Employment Agreement with Leonard Osser, dated March 6, 2013** (11) 10.7 Master Supply and Distribution Agreement, dated July 3, 2013, between Milestone Scientific Inc and Tri-anim Health Services, Inc (9) 10.8 Amendment to the Employment Agreement with Leonard Osser, effective March 17, 2014** (10) 10.9 Agreement with Mark Hochman, dated July 2015 (13) 10.1 Investment Agreement, dated April 15, 2014, between Milestone Scientific Inc. and BP4 S.p.A. (12) 10.11 Exclusive Distribution and Supply Agreement, dated as of June 20, 2016, among Milestone Scientific Inc., Wand Dental, Inc. and Henry Schein, Inc. (14) 10.12 Amended and Restated Employment Agreement, dated December 1, 2016, between Wand Dental Inc. and Gian Domenico Trombetta (15) 21.1 List of Subsidiaries (12) 23.1 Consent of Friedman, LLP* 23.2 Consent of Baker Tilly Virchow Krause, LLP* 31.1 Rule 13a-14(a) Certification-Chief Executive Officer* 31.2 Rule 13a-14(a) Certification-Chief Financial Officer* 32.1 Section 1350 Certifications-Chief Executive Officer*** 32.2 Section 1350 Certifications-Chief Financial Officer*** 101.INS XBRL Instance Document* 101.SCH XBRL Taxonomy Extension Schema Document* 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document* 101.LAB XBRL Taxonomy Extension Label Linkbase Document* 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document* 101.DEF XBRL Taxonomy Extension Definition Linkbase Document* * Filed herewith. |
And Milestone (5) 10.4 Employment Agreement with Leonard Osser, dated September 1, 2009 (7) 10.5 Amendment to the loan agreement of $1.3 million from K. Tucker Andersen, dated April 18, 2008 (8) 10.6 2004 Stock Option Plan (9) 10.7 2011 Stock Option Plan (10) 10.8 Amendment to the Employment Agreement with Leonard Osser, dated March 6, 2013 (11) 10.9 Master Supply and Distribution Agreement, dated July 3, 2013, between Milestone Scientific Inc and Tri-anim Health Services, Inc (12) 10.10 Amendment to the Employment Agreement with Leonard Osser, effective March 17, 2014 (13) 10.11 Agreement with Mark Hochman, dated July 2015* 21.1 List of Subsidiaries* 23.1 Consent of Baker Tilly Virchow Krause, LLP* 31.1 Rule 13a-14(a) Certification-Chief Executive Officer* 31.2 Rule 13a-14(a) Certification-Chief Financial Officer* 32.1 Section 1350 Certifications-Chief Executive Officer*** 32.2 Section 1350 Certifications-Chief Financial Officer*** 101.INS XBRL Instance Document* 101.SCH XBRL Taxonomy Extension Schema Document* 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document* 101.LAB XBRL Taxonomy Extension Label Linkbase Document* 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document* 101.DEF XBRL Taxonomy Extension Definition Linkbase Document* * Filed herewith. |
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The following table, together with the accompanying footnotes, sets forth information, as of March 31, 2015, regarding stock ownership of all persons known by Milestone to own beneficially more than 5% of Milestone’s outstanding common stock, Named Executives, all directors, and all directors and officers of Milestone as a group: (1) The addresses of the persons named in this table are as follows: Leonard Osser, Joseph D’Agostino and Edward Zelnick are at 220 South Orange Avenue in, New Jersey 07039; Leonard M. Schiller, c/o Schiller, Klein & McElroy, P.C., 33 North Dearborn Street, Suite 1030, Chicago, Illinois 60602; Pablo Felipe Serna Cardenas, Via Camillo Golgi 2 Opera, Italy 20090; Leslie Bernhard, c/o AdStar, Inc., 4553 Glencoe Avenue, Suite 325, Marina del Rey, California 90292; K. Tucker Andersen, c/o Above All Advisors, 61 Above All Road, Warren, CT 06754, and Tom Cheng, c/o United Systems 18725 E. Gale Ave Suite 221, City of Industry, CA 91748. |
And Milestone (5) 10.5 Employment Agreement with Leonard Osser, dated September 1, 2009 (7) 10.6 Amendment to the loan agreement of $1.3 million from K. Tucker Andersen, dated April 18, 2008 (8) 10.7 2004 Stock Option Plan (9) 10.8 2011 Stock Option Plan (10) 10.9 Amendment to the Employment Agreement with Leonard Osser, dated March 6, 2013 (11) 10.10 Master Supply and Distribution Agreement, dated July 3, 2013, between Milestone Scientific Inc and Tri-anim Health Services, Inc (12) 10.11 Amendment to the Employment Agreement with Leonard Osser, effective March 17, 2014 (13) 21.1 List of Subsidiaries 23.1 Consent of Baker Tilly Virchow Krause, LLP* 31.1 Rule 13a-14(a) Certification-Chief Executive Officer* 31.2 Rule 13a-14(a) Certification-Chief Financial Officer* 32.1 Section 1350 Certifications-Chief Executive Officer*** 32.2 Section 1350 Certifications-Chief Financial Officer*** 101.INS XBRL Instance Document* 101.SCH XBRL Taxonomy Extension Schema Document* 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document* 101.LAB XBRL Taxonomy Extension Label Linkbase Document* 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document* 101.DEF XBRL Taxonomy Extension Definition Linkbase Document* * Filed herewith. |
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The following table, together with the accompanying footnotes, sets forth information, as of March 12, 2014, regarding stock ownership of all persons known by Milestone to own beneficially more than 5% of Milestone’s outstanding common stock, Named Executives, all directors, and all directors and officers of Milestone as a group: * Less than 1% (1) The addresses of the persons named in this table are as follows: Leonard Osser and Joseph D’Agostino are at 220 South Orange Avenue in, New Jersey 07039; Leonard M. Schiller, c/o Schiller, Klein & McElroy, P.C., 33 North Dearborn Street, Suite 1030, Chicago, Illinois 60602; Pablo Felipe Serna Cardenas, Via Camillo Golgi 2 Opera, Italy 20090; Leslie Bernhard, c/o AdStar, Inc., 4553 Glencoe Avenue, Suite 325, Marina del Rey, California 90292; K. Tucker Andersen, c/o Above All Advisors, 61 Above All Road, Warren, CT 06754; and Tom Cheng, c/o United Systems 18725 E. Gale Ave Suite 221, City of Industry, CA 91748. |
And Milestone (6) 10.10 Agreement with DaVinci regarding exclusive license over patented products, dated June 1, 2004 (8) 10.11** Employment Agreement with Leonard Osser, dated September 1, 2009 (9) 10.12 Loan agreement of $1 million from K. Tucker Andersen, dated June 29, 2007 (10) 10.13 Amendment to the loan agreement of $1.3 million from K. Tucker Andersen, dated April 18, 2008 (10) 10.14 Promissory note in the principal amount of $450,000 held by K. Tucker Andersen, dated December 24, 2008 (10) 10.15 Amendment to the $450,000 promissory note held by K. Tucker Andersen, dated June 30, 2011 (11) 10.16 2004 Stock Option Plan (12) 10.17 2011 Stock Option Plan (13) 10.18 Amendment to the $450,000 promissory note held by K. Tucker Andersen, effective May 10, 2012(15) 10.19** Amendment to the Employment Agreement with Leonard Osser, dated March 6, 2013 (15) 10.20 Master Supply and Distribution Agreement, dated July 3, 2013, between Milestone Scientific Inc and Tri-anim Health Services, Inc, (16) 10.21 Amendment to the $450,000 promissory note held by K. Tucker Andersen, effective March 29, 2013 (17) Code of Ethics (6) 23.1 Consent of Baker Tilly Virchow Krause, LLP* 31.1 Rule 13a-14(a) Certification-Chief Executive Officer* 31.2 Rule 13a-14(a) Certification-Chief Financial Officer* 32.1 Section 1350 Certifications-Chief Executive Officer* Exhibit NO. |
Our provision for income taxes is subject to volatility and could be adversely impacted by earnings being lower than anticipated in countries that have lower tax rates and higher than anticipated in countries that have higher tax rates; by changes in the valuation of our deferred tax assets and liabilities; by changes to domestic manufacturing deduction, foreign-derived intangible income deduction, global intangible low-tax income and base erosion and anti-abuse tax laws, regulations, or interpretations thereof; by expiration of or lapses in tax incentives; by transfer pricing adjustments, including the effect of acquisitions on our legal structure; by tax effects of nondeductible compensation; by tax costs related to intercompany realignments; by changes in accounting principles; or by changes in tax laws and regulations, treaties, or interpretations thereof, including changes to the taxation of earnings of our foreign subsidiaries, the deductibility of expenses attributable to foreign income, and the foreign tax credit rules. |
Our provision for income taxes is subject to volatility and could be adversely impacted by earnings being lower than anticipated in countries that have lower tax rates and higher than anticipated in countries that have higher tax rates; by changes in the valuation of our deferred tax assets and liabilities; by changes to domestic manufacturing deduction, foreign-derived intangible income deduction, global intangible low-tax income, and base erosion and anti-abuse tax laws, regulations, or interpretations thereof; by expiration of or lapses in tax incentives; by transfer pricing adjustments, including the effect of acquisitions on our legal structure; by tax effects of nondeductible compensation; by tax costs related to intercompany realignments; by changes in accounting principles; or by changes in tax laws and regulations, treaties, or interpretations thereof, including changes to the taxation of earnings of our foreign subsidiaries, the deductibility of expenses attributable to foreign income, and the foreign tax credit rules. |
The terms are as follows: (i) Arista shall pay $400 million to Cisco; (ii) Cisco will not assert against Arista patents that were included in the litigation as long as Arista continues to implement workarounds it had put in place to certain of those patents; (iii) for three years (subject to earlier termination in some circumstances), any claim against the other party regarding patent infringement for its new products, or new features of existing products, will be resolved by an arbitration process; the process will not apply to claims of copyright infringement, trade secret misappropriation or certain other claims; (iv) for five years, neither party will bring an action against the other for patent or copyright (except for any claims of source code misappropriation) infringement regarding their respective products on the market before August 6, 2018; and (v) certain limited changes shall be implemented by Arista to its user interfaces for operation of its products, and the parties will continue to undertake the appeal of the ruling in U.S. District Court for the Northern District of California regarding copyright infringement, with further limited changes if the case is remanded or reversed. |
Product gross margin may be adversely affected in the future by changes in the mix of products sold, including periods of increased growth of some of our lower margin products; introduction of new products, including products with price-performance advantages and new business models for our offerings such as XaaS; our ability to reduce production costs; entry into new markets, including markets with different pricing structures and cost structures, as a result of internal development or through acquisitions; changes in distribution channels; price competition, including competitors from Asia, especially those from China; changes in geographic mix of our product revenue; the timing of revenue recognition and revenue deferrals; sales discounts; increases in material or labor costs, including share-based compensation expense; excess inventory and obsolescence charges; warranty costs; changes in shipment volume; loss of cost savings due to changes in component pricing; effects of value engineering; inventory holding charges; and the extent to which we successfully execute on our strategy and operating plans. |
Product gross margin may be adversely affected in the future by changes in the mix of products sold, including periods of increased growth of some of our lower margin products; introduction of new products, including products with price-performance advantages and new business models for our offerings such as XaaS; our ability to reduce production costs; entry into new markets, including markets with different pricing structures and cost structures, as a result of internal development or through acquisitions; changes in distribution channels; price competition, including competitors from Asia, especially those from China; changes in geographic mix of our product revenue; the timing of revenue recognition and revenue deferrals; sales discounts; increases in material or labor costs, including share-based compensation expense; excess inventory and obsolescence charges; warranty costs; changes in shipment volume; loss of cost savings due to changes in component pricing; effects of value engineering; inventory holding charges; and the extent to which we successfully execute on our strategy and operating plans. |
Product gross margin may be adversely affected in the future by changes in the mix of products sold, including periods of increased growth of some of our lower margin products; introduction of new products, including products with price-performance advantages, and new business models for our offerings such as XaaS; our ability to reduce production costs; entry into new markets, including markets with different pricing structures and cost structures, as a result of internal development or through acquisitions; changes in distribution channels; price competition, including competitors from Asia, especially those from China; changes in geographic mix of our product revenue; the timing of revenue recognition and revenue deferrals; sales discounts; increases in material or labor costs, including share-based compensation expense; excess inventory and obsolescence charges; warranty costs; changes in shipment volume; loss of cost savings due to changes in component pricing; effects of value engineering; inventory holding charges; and the extent to which we successfully execute on our strategy and operating plans. |
These factors include: • Fluctuations in demand for our products and services, especially with respect to telecommunications service providers and Internet businesses, in part due to changes in the global economic environment • Changes in sales and implementation cycles for our products and reduced visibility into our customers’ spending plans and associated revenue • Our ability to maintain appropriate inventory levels and purchase commitments • Price and product competition in the communications and networking industries, which can change rapidly due to technological innovation and different business models from various geographic regions • The overall movement toward industry consolidation among both our competitors and our customers • The introduction and market acceptance of new technologies and products and our success in new and evolving markets, including in our newer product categories such as data center and collaboration and in emerging technologies, as well as the adoption of new standards • Variations in sales channels, product costs, or mix of products sold • The timing, size, and mix of orders from customers • Manufacturing and customer lead times • Fluctuations in our gross margins, and the factors that contribute to such fluctuations, as described below • The ability of our customers, channel partners, contract manufacturers and suppliers to obtain financing or to fund capital expenditures, especially during a period of global credit market disruption or in the event of customer, channel partner, contract manufacturer or supplier financial problems • Share-based compensation expense • Actual events, circumstances, outcomes, and amounts differing from judgments, assumptions, and estimates used in determining the values of certain assets (including the amounts of related valuation allowances), liabilities, and other items reflected in our Consolidated Financial Statements • How well we execute on our strategy and operating plans and the impact of changes in our business model that could result in significant restructuring charges • Our ability to achieve targeted cost reductions • Benefits anticipated from our investments in engineering, sales and manufacturing activities • Changes in tax laws, tax regulations and / or accounting rules As a consequence, operating results for a particular future period are difficult to predict, and, therefore, prior results are not necessarily indicative of results to be expected in future periods. |
OUR OPERATING RESULTS MAY BE ADVERSELY AFFECTED BY UNFAVORABLE ECONOMIC AND MARKET CONDITIONS AND THE UNCERTAIN GEOPOLITICAL ENVIRONMENT Challenging economic conditions worldwide have from time to time contributed, and may continue to contribute, to slowdowns in the communications and networking industries at large, as well as in specific segments and markets in which we operate, resulting in: • Reduced demand for our products as a result of continued constraints on IT-related capital spending by our customers, particularly service providers, and other customer markets as well • Increased price competition for our products, not only from our competitors but also as a consequence of customers disposing of unutilized products • Risk of excess and obsolete inventories • Risk of supply constraints • Risk of excess facilities and manufacturing capacity • Higher overhead costs as a percentage of revenue and higher interest expense Instability in the global credit markets, including the continuing European economic and financial turmoil related to sovereign debt issues in certain countries, the instability in the geopolitical environment in many parts of the world and other disruptions, such as changes in energy costs, may continue to put pressure on global economic conditions. |
WE EXPECT GROSS MARGIN TO VARY OVER TIME, AND OUR LEVEL OF PRODUCT GROSS MARGIN MAY NOT BE SUSTAINABLE Our level of product gross margins declined in fiscal 2011 and to a lesser extent in fiscal 2012 and may continue to decline and be adversely affected by numerous factors, including: • Changes in customer, geographic, or product mix, including mix of configurations within each product group • Introduction of new products, including products with price-performance advantages • Our ability to reduce production costs • Entry into new markets or growth in lower margin markets, including markets with different pricing and cost structures, through acquisitions or internal development • Sales discounts • Increases in material, labor or other manufacturing-related costs, which could be significant especially during periods of supply constraints • Excess inventory and inventory holding charges • Obsolescence charges • Changes in shipment volume • The timing of revenue recognition and revenue deferrals • Increased cost, loss of cost savings or dilution of savings due to changes in component pricing or charges incurred due to inventory holding periods if parts ordering does not correctly anticipate product demand or if the financial health of either contract manufacturers or suppliers deteriorates • Lower than expected benefits from value engineering • Increased price competition, including competitors from Asia, especially from China • Changes in distribution channels • Increased warranty costs • How well we execute on our strategy and operating plans Changes in service gross margin may result from various factors such as changes in the mix between technical support services and advanced services, as well as the timing of technical support service contract initiations and renewals and the addition of personnel and other resources to support higher levels of service business in future periods. |
SUPPLY CHAIN ISSUES, INCLUDING FINANCIAL PROBLEMS OF CONTRACT MANUFACTURERS OR COMPONENT SUPPLIERS, OR A SHORTAGE OF ADEQUATE COMPONENT SUPPLY OR MANUFACTURING CAPACITY THAT INCREASED OUR COSTS OR CAUSED A DELAY IN OUR ABILITY TO FULFILL ORDERS, COULD HAVE AN ADVERSE IMPACT ON OUR BUSINESS AND OPERATING RESULTS, AND OUR FAILURE TO ESTIMATE CUSTOMER DEMAND PROPERLY MAY RESULT IN EXCESS OR OBSOLETE COMPONENT SUPPLY, WHICH COULD ADVERSELY AFFECT OUR GROSS MARGINS The fact that we do not own or operate the bulk of our manufacturing facilities and that we are reliant on our extended supply chain could have an adverse impact on the supply of our products and on our business and operating results: • Any financial problems of either contract manufacturers or component suppliers could either limit supply or increase costs • Reservation of manufacturing capacity at our contract manufacturers by other companies, inside or outside of our industry, could either limit supply or increase costs A reduction or interruption in supply; a significant increase in the price of one or more components; a failure to adequately authorize procurement of inventory by our contract manufacturers; a failure to appropriately cancel, reschedule, or adjust our requirements based on our business needs; or a decrease in demand for our products could materially adversely affect our business, operating results, and financial condition and could materially damage customer relationships. |
Acquisitions involve numerous risks, including the following: • Difficulties in integrating the operations, systems, technologies, products, and personnel of the acquired companies, particularly companies with large and widespread operations and/or complex products, such as Scientific-Atlanta, WebEx, Starent, Tandberg and NDS Group Limited • Diversion of management’s attention from normal daily operations of the business and the challenges of managing larger and more widespread operations resulting from acquisitions • Potential difficulties in completing projects associated with in-process research and development intangibles • Difficulties in entering markets in which we have no or limited direct prior experience and where competitors in such markets have stronger market positions • Initial dependence on unfamiliar supply chains or relatively small supply partners • Insufficient revenue to offset increased expenses associated with acquisitions • The potential loss of key employees, customers, distributors, vendors and other business partners of the companies we acquire following and continuing after announcement of acquisition plans Acquisitions may also cause us to: • Issue common stock that would dilute our current shareholders’ percentage ownership • Use a substantial portion of our cash resources, or incur debt, as we did in fiscal 2006 when we issued and sold $6.5 billion in senior unsecured notes to fund our acquisition of Scientific-Atlanta • Significantly increase our interest expense, leverage and debt service requirements if we incur additional debt to pay for an acquisition • Assume liabilities • Record goodwill and nonamortizable intangible assets that are subject to impairment testing on a regular basis and potential periodic impairment charges • Incur amortization expenses related to certain intangible assets • Incur tax expenses related to the effect of acquisitions on our intercompany research and development (“R&D”) cost sharing arrangement and legal structure • Incur large and immediate write-offs and restructuring and other related expenses • Become subject to intellectual property or other litigation Mergers and acquisitions of high-technology companies are inherently risky and subject to many factors outside of our control, and no assurance can be given that our previous or future acquisitions will be successful and will not materially adversely affect our business, operating results, or financial condition. |
Our future results could be materially adversely affected by a variety of political, economic or other factors relating to our operations outside the United States, including impacts from the global macroeconomic environment and continuing challenges in Europe, any or all of which could have a material adverse effect on our operating results and financial condition, including, among others, the following: • The worldwide impact of the recent global economic downturn and related market uncertainty, including the ongoing European economic and financial turmoil related to sovereign debt issues in certain countries • Foreign currency exchange rates • Political or social unrest • Economic instability or weakness or natural disasters in a specific country or region; environmental and trade protection measures and other legal and regulatory requirements, some of which may affect our ability to import our products, to export our products from, or sell our products in various countries • Political considerations that affect service provider and government spending patterns • Health or similar issues, such as a pandemic or epidemic • Difficulties in staffing and managing international operations • Adverse tax consequences, including imposition of withholding or other taxes on payments by subsidiaries WE ARE EXPOSED TO THE CREDIT RISK OF SOME OF OUR CUSTOMERS AND TO CREDIT EXPOSURES IN WEAKENED MARKETS, WHICH COULD RESULT IN MATERIAL LOSSES Most of our sales are on an open credit basis, with typical payment terms of 30 days in the United States and, because of local customs or conditions, longer in some markets outside the United States. |
Product gross margin may be adversely affected in the future by changes in the mix of products sold, including periods of increased growth of some of our lower margin products; introduction of new products, including products with price-performance advantages; our ability to reduce production costs; entry into new markets, including markets with different pricing structures and cost structures, as a result of internal development or through acquisitions; changes in distribution channels; price competition, including competitors from Asia, especially those from China; changes in geographic mix of our product sales; the timing of revenue recognition and revenue deferrals; sales discounts; increases in material or labor costs, including share-based compensation expense; excess inventory and obsolescence charges; warranty costs; changes in shipment volume; loss of cost savings due to changes in component pricing; effects of value engineering; inventory holding charges; and the extent to which we successfully execute on our strategy and operating plans. |
These factors include: • Fluctuations in demand for our products and services, especially with respect to telecommunications service providers and Internet businesses, in part due to changes in the global economic environment • Changes in sales and implementation cycles for our products and reduced visibility into our customers’ spending plans and associated revenue • Our ability to maintain appropriate inventory levels and purchase commitments • Price and product competition in the communications and networking industries, which can change rapidly due to technological innovation and different business models from various geographic regions • The overall movement toward industry consolidation among both our competitors and our customers • The introduction and market acceptance of new technologies and products and our success in new and evolving markets, including in our New Products category and emerging technologies, as well as the adoption of new standards • Variations in sales channels, product costs, or mix of products sold • The timing, size, and mix of orders from customers • Manufacturing and customer lead times • Fluctuations in our gross margins, and the factors that contribute to such fluctuations, as described below • The ability of our customers, channel partners, contract manufacturers and suppliers to obtain financing or to fund capital expenditures, especially during a period of global credit market disruption or in the event of customer, channel partner, contract manufacturer or supplier financial problems • Share-based compensation expense • Actual events, circumstances, outcomes, and amounts differing from judgments, assumptions, and estimates used in determining the values of certain assets (including the amounts of related valuation allowances), liabilities, and other items reflected in our Consolidated Financial Statements • How well we execute on our strategy and operating plans and the impact of changes in our business model that could result in significant restructuring charges • Our ability to achieve targeted cost reductions • Benefits anticipated from our investments in engineering, sales and manufacturing activities • Changes in tax laws or regulations or accounting rules As a consequence, operating results for a particular future period are difficult to predict, and, therefore, prior results are not necessarily indicative of results to be expected in future periods. |
OUR OPERATING RESULTS MAY BE ADVERSELY AFFECTED BY UNFAVORABLE ECONOMIC AND MARKET CONDITIONS AND THE UNCERTAIN GEOPOLITICAL ENVIRONMENT Challenging economic conditions worldwide have from time to time contributed, and may continue to contribute, to slowdowns in the communications and networking industries at large, as well as in specific segments and markets in which we operate, resulting in: • Reduced demand for our products as a result of continued constraints on IT-related capital spending by our customers, particularly service providers, and other customer markets as well • Increased price competition for our products, not only from our competitors but also as a consequence of customers disposing of unutilized products • Risk of excess and obsolete inventories • Risk of supply constraints • Risk of excess facilities and manufacturing capacity • Higher overhead costs as a percentage of revenue and higher interest expense Instability in the global credit markets, including the recent European economic and financial turmoil related to sovereign debt issues in certain countries, the instability in the geopolitical environment in many parts of the world and other disruptions, such as changes in energy costs, may continue to put pressure on global economic conditions. |
WE EXPECT GROSS MARGIN TO VARY OVER TIME, AND OUR LEVEL OF PRODUCT GROSS MARGIN MAY NOT BE SUSTAINABLE Our level of product gross margins declined in fiscal 2011 and may continue to decline and be adversely affected by numerous factors, including: • Changes in customer, geographic, or product mix, including mix of configurations within each product group • Introduction of new products, including products with price-performance advantages • Our ability to reduce production costs • Entry into new markets or growth in lower margin markets, including markets with different pricing and cost structures, through acquisitions or internal development • Sales discounts • Increases in material, labor or other manufacturing-related costs, which could be significant especially during periods of supply constraints • Excess inventory and inventory holding charges • Obsolescence charges • Changes in shipment volume • The timing of revenue recognition and revenue deferrals • Increased cost, loss of cost savings or dilution of savings due to changes in component pricing or charges incurred due to inventory holding periods if parts ordering does not correctly anticipate product demand or if the financial health of either contract manufacturers or suppliers deteriorates • Lower than expected benefits from value engineering • Increased price competition, including competitors from Asia, especially from China • Changes in distribution channels • Increased warranty costs • How well we execute on our strategy and operating plans Changes in service gross margin may result from various factors such as changes in the mix between technical support services and advanced services, as well as the timing of technical support service contract initiations and renewals and the addition of personnel and other resources to support higher levels of service business in future periods. |
SUPPLY CHAIN ISSUES, INCLUDING FINANCIAL PROBLEMS OF CONTRACT MANUFACTURERS OR COMPONENT SUPPLIERS, OR A SHORTAGE OF ADEQUATE COMPONENT SUPPLY OR MANUFACTURING CAPACITY THAT INCREASED OUR COSTS OR CAUSED A DELAY IN OUR ABILITY TO FULFILL ORDERS, COULD HAVE AN ADVERSE IMPACT ON OUR BUSINESS AND OPERATING RESULTS, AND OUR FAILURE TO ESTIMATE CUSTOMER DEMAND PROPERLY MAY RESULT IN EXCESS OR OBSOLETE COMPONENT SUPPLY, WHICH COULD ADVERSELY AFFECT OUR GROSS MARGINS The fact that we do not own or operate the bulk of our manufacturing facilities and that we are reliant on our extended supply chain could have an adverse impact on the supply of our products and on our business and operating results: • Any financial problems of either contract manufacturers or component suppliers could either limit supply or increase costs • Reservation of manufacturing capacity at our contract manufacturers by other companies, inside or outside of our industry, could either limit supply or increase costs A reduction or interruption in supply; a significant increase in the price of one or more components; a failure to adequately authorize procurement of inventory by our contract manufacturers; a failure to appropriately cancel, reschedule, or adjust our requirements based on our business needs; or a decrease in demand for our products could materially adversely affect our business, operating results, and financial condition and could materially damage customer relationships. |
Acquisitions involve numerous risks, including the following: • Difficulties in integrating the operations, systems, technologies, products, and personnel of the acquired companies, particularly companies with large and widespread operations and/or complex products, such as Scientific-Atlanta, WebEx and Tandberg • Diversion of management’s attention from normal daily operations of the business and the challenges of managing larger and more widespread operations resulting from acquisitions • Potential difficulties in completing projects associated with in-process research and development intangibles • Difficulties in entering markets in which we have no or limited direct prior experience and where competitors in such markets have stronger market positions • Initial dependence on unfamiliar supply chains or relatively small supply partners • Insufficient revenue to offset increased expenses associated with acquisitions • The potential loss of key employees, customers, distributors, vendors and other business partners of the companies we acquire following and continuing after announcement of acquisition plans Acquisitions may also cause us to: • Issue common stock that would dilute our current shareholders’ percentage ownership • Use a substantial portion of our cash resources, or incur debt, as we did in fiscal 2006 when we issued and sold $6.5 billion in senior unsecured notes to fund our acquisition of Scientific-Atlanta • Significantly increase our interest expense, leverage and debt service requirements if we incur additional debt to pay for an acquisition • Assume liabilities • Record goodwill and nonamortizable intangible assets that are subject to impairment testing on a regular basis and potential periodic impairment charges • Incur amortization expenses related to certain intangible assets • Incur tax expenses related to the effect of acquisitions on our intercompany research and development (R&D) cost sharing arrangement and legal structure • Incur large and immediate write-offs and restructuring and other related expenses • Become subject to intellectual property or other litigation Mergers and acquisitions of high-technology companies are inherently risky and subject to many factors outside of our control, and no assurance can be given that our previous or future acquisitions will be successful and will not materially adversely affect our business, operating results, or financial condition. |
Our future results could be materially adversely affected by a variety of political, economic or other factors relating to our operations outside the United States, any or all of which could have a material adverse effect on our operating results and financial condition, including, among others, the following: • The worldwide impact of the recent global economic downturn and related market uncertainty, including the recent European economic and financial turmoil related to sovereign debt issues in certain countries • Foreign currency exchange rates • Political or social unrest • Economic instability or weakness or natural disasters in a specific country or region; environmental and trade protection measures and other legal and regulatory requirements, some of which may affect our ability to import our products, to export our products from, or sell our products in various countries • Political considerations that affect service provider and government spending patterns • Health or similar issues, such as a pandemic or epidemic • Difficulties in staffing and managing international operations • Adverse tax consequences, including imposition of withholding or other taxes on payments by subsidiaries WE ARE EXPOSED TO THE CREDIT RISK OF SOME OF OUR CUSTOMERS AND TO CREDIT EXPOSURES IN WEAKENED MARKETS, WHICH COULD RESULT IN MATERIAL LOSSES Most of our sales are on an open credit basis, with typical payment terms of 30 days in the United States and, because of local customs or conditions, longer in some markets outside the United States. |
Product gross margin may be adversely affected in the future by changes in the mix of products sold, including periods of increased growth of some of our lower margin products; introduction of new products, including products with price-performance advantages; our ability to reduce production costs; entry into new markets, including markets with different pricing structures and cost structures, as a result of internal development or through acquisitions; changes in distribution channels; price competition, including competitors from Asia, especially those from China; changes in geographic mix of our product sales; the timing of revenue recognition and revenue deferrals; sales discounts; increases in material or labor costs, including share-based compensation expense; excess inventory and obsolescence charges; warranty costs; changes in shipment volume; loss of cost savings due to changes in component pricing; effects of value engineering; inventory holding charges; and the extent to which we successfully execute on our strategy and operating plans. |
Depreciation and amortization are computed using the straight-line method, generally over the following periods: Period Buildings 25 years Building improvements 10 years Furniture and fixtures 5 years Leasehold improvements Shorter of remaining lease term or 5 years Computer equipment and related software 30 to 36 months Production, engineering, and other equipment Up to 5 years Operating lease assets Based on lease term-generally up to 3 years (h) Business Combinations Upon adoption of revised accounting guidance for business combinations beginning with business combinations completed in the first quarter of fiscal 2010, the Company (i) applies the expanded definition of “business” and “business combination” as prescribed by the revised guidance ii) recognizes assets acquired, liabilities assumed and noncontrolling interests (including goodwill) measured at fair value at the acquisition date with subsequent changes to the fair value of such assets acquired and liabilities assumed recognized in earnings after the expiration of the measurement period, a period not to exceed 12 months from the acquisition date; (iii) recognizes acquisition-related expenses and acquisition-related restructuring costs in earnings; and (iv) capitalizes in-process research and development (IPR&D) at fair value as an indefinite-lived intangible asset that will be assessed for impairment thereafter. |
These factors include: • Fluctuations in demand for our products and services, especially with respect to telecommunications service providers and Internet businesses, in part due to changes in the global economic environment • Changes in sales and implementation cycles for our products and reduced visibility into our customers’ spending plans and associated revenue • Our ability to maintain appropriate inventory levels and purchase commitments • Price and product competition in the communications and networking industries, which can change rapidly due to technological innovation and different business models from various geographic regions • The overall movement toward industry consolidation among both our competitors and our customers • The introduction and market acceptance of new technologies and products and our success in new and evolving markets, including emerging and advanced technologies, as well as the adoption of new standards • Variations in sales channels, product costs, or mix of products sold • The timing, size, and mix of orders from customers • Manufacturing and customer lead times • Fluctuations in our gross margins, and the factors that contribute to such fluctuations, as described below • The ability of our customers, channel partners, contract manufacturers and suppliers to obtain financing or to fund capital expenditures, especially during a period of global credit market disruption or in the event of customer, channel partner, contract manufacturer or supplier financial problems • Share-based compensation expense • Actual events, circumstances, outcomes, and amounts differing from judgments, assumptions, and estimates used in determining the values of certain assets (including the amounts of related valuation allowances), liabilities, and other items reflected in our Consolidated Financial Statements • How well we execute on our strategy and operating plans • Benefits anticipated from our investments in engineering, sales and manufacturing activities • Changes in tax laws or regulations or accounting rules As a consequence, operating results for a particular future period are difficult to predict, and, therefore, prior results are not necessarily indicative of results to be expected in future periods. |
OUR OPERATING RESULTS MAY BE ADVERSELY AFFECTED BY UNFAVORABLE ECONOMIC AND MARKET CONDITIONS AND THE UNCERTAIN GEOPOLITICAL ENVIRONMENT Challenging economic conditions worldwide have from time to time contributed, and may continue to contribute, to slowdowns in the communications and networking industries at large, as well as to specific segments and markets in which we operate, resulting in: • Reduced demand for our products as a result of continued constraints on IT-related capital spending by our customers, particularly service providers, and other customer markets as well • Increased price competition for our products, not only from our competitors but also as a consequence of customers disposing of unutilized products • Risk of excess and obsolete inventories • Risk of supply constraints • Risk of excess facilities and manufacturing capacity • Higher overhead costs as a percentage of revenue and higher interest expense Instability in the global credit markets, including the recent European economic and financial turmoil related to sovereign debt issues in certain countries, the instability in the geopolitical environment in many parts of the world and other disruptions, such as changes in energy costs, may continue to put pressure on global economic conditions. |
WE EXPECT GROSS MARGIN TO VARY OVER TIME, AND OUR LEVEL OF PRODUCT GROSS MARGIN MAY NOT BE SUSTAINABLE Our level of product gross margins may not be sustainable and may continue to be adversely affected by numerous factors, including: • Changes in customer, geographic, or product mix, including mix of configurations within each product group • Introduction of new products, including products with price-performance advantages • Our ability to reduce production costs • Entry into new markets or growth in lower margin markets, including markets with different pricing and cost structures, through acquisitions or internal development • Sales discounts • Increases in material, labor or other manufacturing-related costs, which could be significant especially during periods of supply constraints • Excess inventory and inventory holding charges • Obsolescence charges • Changes in shipment volume • The timing of revenue recognition and revenue deferrals • Increased cost, loss of cost savings or dilution of savings due to changes in component pricing or charges incurred due to inventory holding periods if parts ordering does not correctly anticipate product demand or if the financial health of either contract manufacturers or suppliers deteriorates • Lower than expected benefits from value engineering • Increased price competition, including competitors from Asia, especially from China • Changes in distribution channels • Increased warranty costs • How well we execute on our strategy and operating plans Changes in service gross margin may result from various factors such as changes in the mix between technical support services and advanced services, as well as the timing of technical support service contract initiations and renewals and the addition of personnel and other resources to support higher levels of service business in future periods. |
SUPPLY CHAIN ISSUES, INCLUDING FINANCIAL PROBLEMS OF CONTRACT MANUFACTURERS OR COMPONENT SUPPLIERS, OR A SHORTAGE OF ADEQUATE COMPONENT SUPPLY OR MANUFACTURING CAPACITY THAT INCREASED OUR COSTS OR CAUSED A DELAY IN OUR ABILITY TO FULFILL ORDERS, COULD HAVE AN ADVERSE IMPACT ON OUR BUSINESS AND OPERATING RESULTS, AND OUR FAILURE TO ESTIMATE CUSTOMER DEMAND PROPERLY MAY RESULT IN EXCESS OR OBSOLETE COMPONENT SUPPLY, WHICH COULD ADVERSELY AFFECT OUR GROSS MARGINS The fact that we do not own or operate the bulk of our manufacturing facilities and that we are reliant on our extended supply chain could have an adverse impact on the supply of our products and on our business and operating results: • Any financial problems of either contract manufacturers or component suppliers could either limit supply or increase costs • Reservation of manufacturing capacity at our contract manufacturers by other companies, inside or outside of our industry, could either limit supply or increase costs A reduction or interruption in supply; a significant increase in the price of one or more components; a failure to adequately authorize procurement of inventory by our contract manufacturers; a failure to appropriately cancel, reschedule, or adjust our requirements based on our business needs; or a decrease in demand for our products could materially adversely affect our business, operating results, and financial condition and could materially damage customer relationships. |
Acquisitions involve numerous risks, including the following: • Difficulties in integrating the operations, systems, technologies, products, and personnel of the acquired companies, particularly companies with large and widespread operations and/or complex products, such as Scientific-Atlanta, WebEx and Tandberg • Diversion of management’s attention from normal daily operations of the business and the challenges of managing larger and more widespread operations resulting from acquisitions • Potential difficulties in completing projects associated with in-process research and development intangibles • Difficulties in entering markets in which we have no or limited direct prior experience and where competitors in such markets have stronger market positions • Initial dependence on unfamiliar supply chains or relatively small supply partners • Insufficient revenue to offset increased expenses associated with acquisitions • The potential loss of key employees, customers, distributors, vendors and other business partners of the companies we acquire following and continuing after announcement of acquisition plans Acquisitions may also cause us to: • Issue common stock that would dilute our current shareholders’ percentage ownership • Use a substantial portion of our cash resources, or incur debt, as we did in fiscal 2006 when we issued and sold $6.5 billion in senior unsecured notes to fund our acquisition of Scientific-Atlanta • Significantly increase our interest expense, leverage and debt service requirements if we incur additional debt to pay for an acquisition • Assume liabilities • Record goodwill and nonamortizable intangible assets that are subject to impairment testing on a regular basis and potential periodic impairment charges • Incur amortization expenses related to certain intangible assets • Incur tax expenses related to the effect of acquisitions on our intercompany research and development (R&D) cost sharing arrangement and legal structure • Incur large and immediate write-offs and restructuring and other related expenses • Become subject to intellectual property or other litigation Mergers and acquisitions of high-technology companies are inherently risky and subject to many factors outside of our control, and no assurance can be given that our previous or future acquisitions will be successful and will not materially adversely affect our business, operating results, or financial condition. |
Our future results could be materially adversely affected by a variety of factors relating to our operations outside the United States, any or all of which could have a material adverse effect on our operating results and financial condition, including, among others, the following: • The worldwide impact of the recent global economic downturn and related market uncertainty, including the recent European economic and financial turmoil related to sovereign debt issues in certain countries • Foreign currency exchange rates • Political or social unrest • Economic instability or weakness or natural disasters in a specific country or region; environmental and trade protection measures and other legal and regulatory requirements, some of which may affect our ability to import our products, to export our products from, or sell our products in various countries • Political considerations that affect service provider and government spending patterns • Health or similar issues, such as a pandemic or epidemic • Difficulties in staffing and managing international operations • Adverse tax consequences, including imposition of withholding or other taxes on payments by subsidiaries WE ARE EXPOSED TO THE CREDIT RISK OF SOME OF OUR CUSTOMERS AND TO CREDIT EXPOSURES IN WEAKENED MARKETS, WHICH COULD RESULT IN MATERIAL LOSSES Most of our sales are on an open credit basis, with typical payment terms of 30 days in the United States and, because of local customs or conditions, longer in some markets outside the United States. |
These factors include: • Fluctuations in demand for our products and services, especially with respect to telecommunications service providers and Internet businesses, in part due to changes in the global economic environment • Changes in sales and implementation cycles for our products and reduced visibility into our customers’ spending plans and associated revenue • Our ability to maintain appropriate inventory levels and purchase commitments • Price and product competition in the communications and networking industries, which can change rapidly due to technological innovation and different business models from various geographic regions • The overall movement toward industry consolidation among both our competitors and our customers • The introduction and market acceptance of new technologies and products and our success in new and evolving markets, including emerging and advanced technologies, as well as the adoption of new standards • Variations in sales channels, product costs, or mix of products sold • The timing, size, and mix of orders from customers • Manufacturing and customer lead times • Fluctuations in our gross margins, and the factors that contribute to such fluctuations, as described below • Our ability to achieve targeted cost reductions, such as the resource realignment and expense reduction that is described in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section in our 2009 Annual Report to Shareholders, which section is incorporated into this report by reference • The ability of our customers, channel partners, contract manufacturers and suppliers to obtain financing or to fund capital expenditures, especially during a period of global credit market disruption or in the event of customer, channel partner, contract manufacturer or supplier financial problems • Share-based compensation expense • Actual events, circumstances, outcomes, and amounts differing from judgments, assumptions, and estimates used in determining the values of certain assets (including the amounts of related valuation allowances), liabilities, and other items reflected in our Consolidated Financial Statements • How well we execute on our strategy and operating plans • Benefits anticipated from our investments in engineering, sales and manufacturing activities • Changes in tax laws or regulations or accounting rules, such as increased use of fair value measures and the potential requirement that U.S. registrants prepare financial statements in accordance with International Financial Reporting Standards (IFRS) As a consequence, operating results for a particular future period are difficult to predict, and, therefore, prior results are not necessarily indicative of results to be expected in future periods. |
OUR OPERATING RESULTS MAY BE ADVERSELY AFFECTED BY UNFAVORABLE ECONOMIC AND MARKET CONDITIONS AND THE UNCERTAIN GEOPOLITICAL ENVIRONMENT Challenging economic conditions worldwide have from time to time contributed, and may continue to contribute, to slowdowns in the communications and networking industries at large, as well as to specific segments and markets in which we operate, resulting in: • Reduced demand for our products as a result of continued constraints on IT-related capital spending by our customers, particularly service providers, and other customer markets as well • Increased price competition for our products, not only from our competitors but also as a consequence of customers disposing of unutilized products • Risk of excess and obsolete inventories • Risk of excess facilities and manufacturing capacity • Higher overhead costs as a percentage of revenue and higher interest expense The turmoil in the global credit markets, the instability in the geopolitical environment in many parts of the world and other disruptions, such as changes in energy costs, may continue to put pressure on global economic conditions. |
WE EXPECT GROSS MARGIN TO VARY OVER TIME, AND OUR LEVEL OF PRODUCT GROSS MARGIN MAY NOT BE SUSTAINABLE Our level of product gross margins may not be sustainable and may continue to be adversely affected by numerous factors, including: • Changes in customer, geographic, or product mix, including mix of configurations within each product group • Introduction of new products, including products with price-performance advantages • Our ability to reduce production costs • Entry into new markets, including markets with different pricing and cost structures, through acquisitions or internal development • Sales discounts • Increases in material or labor costs • Excess inventory and inventory holding charges • Obsolescence charges • Changes in shipment volume • The timing of revenue recognition and revenue deferrals • Increased cost, loss of cost savings or dilution of savings due to changes in component pricing or charges incurred due to inventory holding periods if parts ordering does not correctly anticipate product demand or if the financial health of either contract manufacturers or suppliers deteriorates • Lower than expected benefits from value engineering • Increased price competition, including competitors from Asia, especially from China • Changes in distribution channels • Increased warranty costs • How well we execute on our strategy and operating plans Changes in service gross margin may result from various factors such as changes in the mix between technical support services and advanced services, as well as the timing of technical support service contract initiations and renewals and the addition of personnel and other resources to support higher levels of service business in future periods. |
SUPPLY CHAIN ISSUES, INCLUDING FINANCIAL PROBLEMS OF CONTRACT MANUFACTURERS OR COMPONENT SUPPLIERS, OR A SHORTAGE OF ADEQUATE COMPONENT SUPPLY OR MANUFACTURING CAPACITY THAT INCREASED OUR COSTS OR CAUSED A DELAY IN OUR ABILITY TO FULFILL ORDERS, COULD HAVE AN ADVERSE IMPACT ON OUR BUSINESS AND OPERATING RESULTS, AND OUR FAILURE TO ESTIMATE CUSTOMER DEMAND PROPERLY MAY RESULT IN EXCESS OR OBSOLETE COMPONENT SUPPLY, WHICH COULD ADVERSELY AFFECT OUR GROSS MARGINS The fact that we do not own or operate the bulk of our manufacturing facilities and that we are reliant on our extended supply chain could have an adverse impact on the supply of our products and on our business and operating results: • Any financial problems of either contract manufacturers or component suppliers could either limit supply or increase costs • Reservation of manufacturing capacity at our contract manufacturers by other companies, inside or outside of our industry, could either limit supply or increase costs A reduction or interruption in supply; a significant increase in the price of one or more components; a failure to adequately authorize procurement of inventory by our contract manufacturers; a failure to appropriately cancel, reschedule, or adjust our requirements based on our business needs; or a decrease in demand for our products could materially adversely affect our business, operating results, and financial condition and could materially damage customer relationships. |
Acquisitions involve numerous risks, including the following: • Difficulties in integrating the operations, systems, technologies, products, and personnel of the acquired companies, particularly companies with large and widespread operations and/or complex products, such as Scientific-Atlanta and WebEx • Diversion of management’s attention from normal daily operations of the business and the challenges of managing larger and more widespread operations resulting from acquisitions • Potential difficulties in completing projects associated with in-process research and development • Difficulties in entering markets in which we have no or limited direct prior experience and where competitors in such markets have stronger market positions • Initial dependence on unfamiliar supply chains or relatively small supply partners • Insufficient revenue to offset increased expenses associated with acquisitions • The potential loss of key employees, customers, distributors, vendors and other business partners of the companies we acquire following and continuing after announcement of acquisition plans Acquisitions may also cause us to: • Issue common stock that would dilute our current shareholders’ percentage ownership • Use a substantial portion of our cash resources, as we did in connection with our fiscal 2007 acquisition of WebEx, or incur debt, as we did in fiscal 2006 when we issued and sold $6.5 billion in senior unsecured notes to fund our acquisition of Scientific-Atlanta • Significantly increase our interest expense, leverage and debt service requirements if we incur additional debt to pay for an acquisition • Assume liabilities • Record goodwill and nonamortizable intangible assets that are subject to impairment testing on a regular basis and potential periodic impairment charges • Incur amortization expenses related to certain intangible assets • Incur tax expenses related to the effect of acquisitions on our intercompany research and development (R&D) cost sharing arrangement and legal structure • Incur large and immediate write-offs and restructuring and other related expenses • Become subject to intellectual property or other litigation Mergers and acquisitions of high-technology companies are inherently risky and subject to many factors outside of our control, and no assurance can be given that our previous or future acquisitions will be successful and will not materially adversely affect our business, operating results, or financial condition. |
Our future results could be materially adversely affected by a variety of factors relating to our operations outside the United States, any or all of which could have a material adverse effect on our operating results and financial condition, including, among others, the following: • The worldwide impact of the global economic downturn and related market uncertainty • Foreign currency exchange rates • Political or social unrest • Economic instability or weakness or natural disasters in a specific country or region; environmental and trade protection measures and other legal and regulatory requirements, some of which may affect our ability to import our products to export our products from, or sell our products in various countries • Political considerations that affect service provider and government spending patterns • Health or similar issues, such as a pandemic or epidemic (including the H1N1 virus outbreak) • Difficulties in staffing and managing international operations • Adverse tax consequences, including imposition of withholding or other taxes on payments by subsidiaries WE ARE EXPOSED TO THE CREDIT RISK OF SOME OF OUR CUSTOMERS AND TO CREDIT EXPOSURES IN WEAKENED MARKETS, WHICH COULD RESULT IN MATERIAL LOSSES Most of our sales are on an open credit basis, with typical payment terms of 30 days in the United States and, because of local customs or conditions, longer in some markets outside the United States. |
These factors include: • Fluctuations in demand for our products and services, especially with respect to telecommunications service providers and Internet businesses, in part due to changes in the global economic environment • Changes in sales and implementation cycles for our products and reduced visibility into our customers’ spending plans and associated revenue • Our ability to maintain appropriate inventory levels and purchase commitments • Price and product competition in the communications and networking industries, which can change rapidly due to technological innovation and different business models from various geographic regions • The overall movement toward industry consolidation among both our competitors and our customers • The introduction and market acceptance of new technologies and products and our success in new markets, including emerging and advanced technologies, as well as the adoption of new standards • Variations in sales channels, product costs, or mix of products sold • The timing, size, and mix of orders from customers • Manufacturing and customer lead times • Fluctuations in our gross margins, and the factors, that contribute to such fluctuations as described below • Our ability to achieve targeted cost reductions • The ability of our customers, channel partners, and suppliers to obtain financing or to fund capital expenditures • Share-based compensation expense and the timing and amount of employer payroll tax to be paid on our employees’ gains on stock options exercised • Actual events, circumstances, outcomes, and amounts differing from judgments, assumptions, and estimates used in determining the values of certain assets (including the amounts of related valuation allowances), liabilities, and other items reflected in our Consolidated Financial Statements • How well we execute on our strategy and operating plans • Benefits anticipated from our investments in engineering, sales and manufacturing activities • Changes in accounting rules, such as increased use of fair value measures and the potential requirement that U.S. registrants prepare financial statements in accordance with International Financial Reporting Standards (IFRS) As a consequence, operating results for a particular future period are difficult to predict, and, therefore, prior results are not necessarily indicative of results to be expected in future periods. |
WE EXPECT GROSS MARGIN TO VARY OVER TIME, AND OUR LEVEL OF PRODUCT GROSS MARGIN MAY NOT BE SUSTAINABLE Our level of product gross margins may not be sustainable and may continue to be adversely affected by numerous factors, including: • Changes in customer, geographic, or product mix, including mix of configurations within each product group • Introduction of new products, including products with price-performance advantages • Our ability to reduce production costs • Entry into new markets, including markets with different pricing and cost structures, through acquisitions or internal development • Sales discounts • Increases in material or labor costs • Excess inventory and inventory holding charges • Obsolescence charges • Changes in shipment volume • The timing of revenue recognition and revenue deferrals • Loss of cost savings due to changes in component pricing or charges incurred due to inventory holding periods if parts ordering does not correctly anticipate product demand • Lower than expected benefits from value engineering • Increased price competition, including competitors from Asia, especially from China • Changes in distribution channels • Increased warranty costs • How well we execute on our strategy and operating plans Changes in service gross margin may result from various factors such as changes in the mix between technical support services and advanced services, as well as the timing of technical support service contract initiations and renewals and the addition of personnel and other resources to support higher levels of service business in future periods. |
Acquisitions involve numerous risks, including the following: • Difficulties in integrating the operations, systems, technologies, products, and personnel of the acquired companies, particularly companies with large and widespread operations and/or complex products, such as Scientific-Atlanta and WebEx • Diversion of management’s attention from normal daily operations of the business and the challenges of managing larger and more widespread operations resulting from acquisitions • Potential difficulties in completing projects associated with in-process research and development • Difficulties in entering markets in which we have no or limited direct prior experience and where competitors in such markets have stronger market positions • Initial dependence on unfamiliar supply chains or relatively small supply partners • Insufficient revenue to offset increased expenses associated with acquisitions • The potential loss of key employees, customers, distributors, vendors and other business partners of the companies we acquire following and continuing after announcement of acquisition plans Acquisitions may also cause us to: • Issue common stock that would dilute our current shareholders’ percentage ownership • Use a substantial portion of our cash resources, as we did in connection with our June 2007 acquisition of WebEx, or incur debt, as we did in February 2006 when we issued and sold $6.5 billion in senior unsecured notes to fund our acquisition of Scientific-Atlanta • Significantly increase our interest expense, leverage and debt service requirements if we incur additional debt to pay for an acquisition • Assume liabilities • Record goodwill and nonamortizable intangible assets that are subject to impairment testing on a regular basis and potential periodic impairment charges • Incur amortization expenses related to certain intangible assets • Incur tax expenses related to the post-acquisition integration of purchased intangible assets into our intercompany R&D cost sharing arrangement • Incur large and immediate write-offs and restructuring and other related expenses • Become subject to intellectual property or other litigation Mergers and acquisitions of high-technology companies are inherently risky and subject to many factors outside of our control, and no assurance can be given that our previous or future acquisitions will be successful and will not materially adversely affect our business, operating results, or financial condition. |
These factors include: • Fluctuations in demand for our products and services, especially with respect to Internet businesses and telecommunications service providers, in part due to changes in the global economic environment • Changes in sales and implementation cycles for our products and reduced visibility into our customers’ spending plans and associated revenue • Our ability to maintain appropriate inventory levels and purchase commitments • Price and product competition in the communications and networking industries, which can change rapidly due to technological innovation and different business models from various geographic regions • The overall movement toward industry consolidation among both our competitors and our customers • The introduction and market acceptance of new technologies and products and our success in new markets, including emerging and advanced technologies, as well as the adoption of new networking standards • Variations in sales channels, product costs, or mix of products sold • The timing, size, and mix of orders from customers • Manufacturing and customer lead times • Fluctuations in our gross margins, and the factors that contribute to this as described below • Our ability to achieve targeted cost reductions • The ability of our customers, channel partners, and suppliers to obtain financing or to fund capital expenditures • The timing and amount of employer payroll tax to be paid on our employees’ gains on stock options exercised • Actual events, circumstances, outcomes, and amounts differing from judgments, assumptions, and estimates used in determining the values of certain assets (including the amounts of related valuation allowances), liabilities, and other items reflected in our Consolidated Financial Statements • How well we execute on our strategy and operating plans • Benefits anticipated from our investments in engineering, sales and manufacturing activities • Changes in accounting rules, such as recording expenses for employee stock option grants and tax accounting, including accounting for uncertain tax positions As a consequence, operating results for a particular future period are difficult to predict, and, therefore, prior results are not necessarily indicative of results to be expected in future periods. |
OUR OPERATING RESULTS MAY BE ADVERSELY AFFECTED BY UNFAVORABLE ECONOMIC AND MARKET CONDITIONS AND THE UNCERTAIN GEOPOLITICAL ENVIRONMENT Economic conditions worldwide have from time to time contributed to slowdowns in the communications and networking industries at large, as well as to specific segments and markets in which we operate, resulting in: • Reduced demand for our products as a result of continued constraints on information technology-related capital spending by our customers, particularly service providers, and other customer markets as well • Increased price competition for our products, not only from our competitors but also as a consequence of customers disposing of unutilized products • Risk of excess and obsolete inventories • Excess facilities and manufacturing capacity • Higher overhead costs as a percentage of revenue and higher interest expense Recent turmoil in the geopolitical environment in many parts of the world, including terrorist activities and military actions, particularly the continuing tension in and surrounding Iraq, and changes in energy costs may continue to put pressure on global economic conditions. |
WE EXPECT GROSS MARGIN TO VARY OVER TIME, AND OUR LEVEL OF PRODUCT GROSS MARGIN MAY NOT BE SUSTAINABLE Our level of product gross margins may not be sustainable and may continue to be adversely affected by numerous factors, including: • Changes in customer, geographic, or product mix, including mix of configurations within each product group • Introduction of new products, including products with price-performance advantages • Our ability to reduce production costs • Entry into new markets, including markets with different pricing and cost structures, through acquisitions, such as our acquisition of Scientific-Atlanta, or internal development • Sales discounts • Increases in material or labor costs • Excess inventory and inventory holding charges • Obsolescence charges • Changes in shipment volume • Loss of cost savings due to changes in component pricing or charges incurred due to inventory holding periods if parts ordering does not correctly anticipate product demand • Lower than expected benefits from value engineering • Increased price competition, including competitors from Asia, especially China • Changes in distribution channels • Increased warranty costs • How well we execute on our strategy and operating plans Changes in service gross margin may result from various factors such as changes in the mix between technical support services and advanced services, as well as the timing of technical support service contract initiations and renewals and the addition of personnel and other resources to support higher levels of service business in future periods. |
Acquisitions involve numerous risks, including the following: • Difficulties in integrating the operations, systems, technologies, products, and personnel of the acquired companies, particularly companies with large and widespread operations and/or complex products, such as Scientific-Atlanta and WebEx • Diversion of management’s attention from normal daily operations of the business and the challenges of managing larger and more widespread operations resulting from acquisitions • Potential difficulties in completing projects associated with in-process research and development • Difficulties in entering markets in which we have no or limited direct prior experience and where competitors in such markets have stronger market positions • Initial dependence on unfamiliar supply chains or relatively small supply partners • Insufficient revenue to offset increased expenses associated with acquisitions • The potential loss of key employees, customers, distributors, vendors and other business partners of the companies we acquire following and continuing after announcement of acquisition plans Acquisitions may also cause us to: • Issue common stock that would dilute our current shareholders’ percentage ownership • Use a substantial portion of our cash resources, as we did in connection with our acquisitions of WebEx and IronPort, or incur debt as we did in February 2006 when we issued and sold $6.5 billion in senior unsecured notes to fund our acquisition of Scientific-Atlanta • Significantly increase our interest expense, leverage and debt service requirements if we incur additional debt to pay for an acquisition • Assume liabilities • Record goodwill and nonamortizable intangible assets that are subject to impairment testing on a regular basis and potential periodic impairment charges • Incur amortization expenses related to certain intangible assets • Incur tax expenses related to the post-acquisition integration of purchased intangible assets into our intercompany R&D cost sharing arrangement • Incur large and immediate write-offs and restructuring and other related expenses • Become subject to intellectual property or other litigation Mergers and acquisitions of high-technology companies are inherently risky and subject to many factors outside of our control, and no assurance can be given that our previous or future acquisitions will be successful and will not materially adversely affect our business, operating results, or financial condition. |
These factors include: • Fluctuations in demand for our products and services, especially with respect to Internet businesses and telecommunications service providers, in part due to the changing global economic environment • Changes in sales and implementation cycles for our products and reduced visibility into our customers’ spending plans and associated revenue • Our ability to maintain appropriate inventory levels and purchase commitments • Price and product competition in the communications and networking industries, which can change rapidly due to technological innovation • The overall movement toward industry consolidation among both our competitors and our customers • The introduction and market acceptance of new technologies and products and our success in new markets, including emerging and advanced technologies, as well as the adoption of new networking standards • Variations in sales channels, product costs, or mix of products sold • The timing, size, and mix of orders from customers • Manufacturing and customer lead times • Fluctuations in our gross margins, and the factors that contribute to this as described below • Our ability to achieve targeted cost reductions • The ability of our customers, channel partners, and suppliers to obtain financing or to fund capital expenditures • The timing and amount of employer payroll tax to be paid on our employees’ gains on stock options exercised • Actual events, circumstances, outcomes, and amounts differing from judgments, assumptions, and estimates used in determining the values of certain assets (including the amounts of related valuation allowances), liabilities, and other items reflected in our Consolidated Financial Statements • How well we execute on our strategy and operating plans • Benefits anticipated from our investments in engineering, sales and manufacturing activities • Changes in accounting rules, such as recording expenses for employee stock option grants and changes in tax accounting principles As a consequence, operating results for a particular future period are difficult to predict, and, therefore, prior results are not necessarily indicative of results to be expected in future periods. |
OUR OPERATING RESULTS MAY BE ADVERSELY AFFECTED BY UNFAVORABLE ECONOMIC AND MARKET CONDITIONS AND THE UNCERTAIN GEOPOLITICAL ENVIRONMENT Economic conditions worldwide have contributed to slowdowns in the communications and networking industries and may impact our business, resulting in: • Reduced demand for our products as a result of continued constraints on information technology-related capital spending by our customers, particularly service providers • Increased price competition for our products, not only from our competitors but also as a consequence of customers disposing of unutilized products • Risk of excess and obsolete inventories • Excess facilities and manufacturing capacity • Higher overhead costs as a percentage of revenue and higher interest expense Recent turmoil in the geopolitical environment in many parts of the world, including terrorist activities and military actions, particularly the continuing tension in and surrounding Iraq, and changes in energy costs may continue to put pressure on global economic conditions. |
WE EXPECT GROSS MARGIN TO VARY OVER TIME, AND OUR LEVEL OF PRODUCT GROSS MARGIN MAY NOT BE SUSTAINABLE Our level of product gross margins may not be sustainable and may continue to be adversely affected by numerous factors, including: • Changes in customer, geographic, or product mix, including mix of configurations within each product group • Introduction of new products, including products with price-performance advantages • Our ability to reduce production costs • Entry into new markets, including markets with different pricing and cost structures, through acquisitions, such as our acquisition of Scientific-Atlanta, or internal development • Sales discounts • Increases in material or labor costs • Excess inventory and inventory holding charges • Obsolescence charges • Changes in shipment volume • Loss of cost savings due to changes in component pricing or charges incurred due to inventory holding periods if parts ordering does not correctly anticipate product demand • Lower than expected benefits from value engineering • Increased price competition, including competitors from Asia, especially China • Changes in distribution channels • Increased warranty costs • How well we execute on our strategy and operating plans Changes in service gross margin may result from various factors such as changes in the mix between technical support services and advanced services, as well as the timing of technical support service contract initiations and renewals and the addition of personnel and other resources to support higher levels of service business in future periods. |
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