UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):July 28, 2004
APOGENT TECHNOLOGIES INC.
(Exact name of registrant as specified in its charter)
| Wisconsin | 1-11091 | 22-2849508 | ||
| (State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
30 Penhallow Street Portsmouth, New Hampshire | 03801 | |
| (Address of principal executive offices) | (Zip Code) |
(603) 433-6131
Registrant’s telephone number, including area code
Item 5. Other Events
Apogent Technologies Inc. (NYSE: AOT), a leading manufacturer of clinical diagnostic and life science research products, on July 28, 2004 reported financial results for the third quarter and nine months ended June 30, 2004.
During the third quarter, Apogent completed certain restructuring activities at businesses within its Research Group, which resulted in special charges. Also in the third quarter, Apogent incurred transaction expenses associated with the pending merger with Fisher Scientific International Inc.
Including the impact of the special items, on a U.S. GAAP basis, income and diluted earnings per share from continuing operations for the third quarter of fiscal 2004 were $34.7 million and $0.36, respectively. These results compare with income and diluted earnings per share from continuing operations for the third quarter of fiscal 2003 of $35.7 million and $0.36, respectively.
Including the impact of the special items, on
a U.S. GAAP basis, income and diluted earnings per share from continuing operations for the nine months ended June 30, 2004 were $97.2 million and $1.05, respectively. These results compare with income and diluted earnings per share from continuing operations for the nine months ended June 30, 2003 of $95.4 million and $0.92, respectively.
Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||
| (In Thousands, Except Per Share Data) | ||||||||||||
| 2004 | 2003 | 2004 | 2003 | |||||||||
U.S GAAP | ||||||||||||
Income from continuing operations | $ | 34,694 | $ | 35,704 | $ | 97,216 | $ | 95,383 | ||||
Diluted earnings per common share from continuing operations | $ | 0.36 | $ | 0.36 | $ | 1.05 | $ | 0.92 | ||||
Weighted average diluted shares outstanding | 95,812 | 100,526 | 92,884 | 104,056 | ||||||||
Net sales for the third quarter were $307.7 million, compared with $278.5 million in the same period last year, an increase of 10.5%. Net sales for the nine months ended June 30, 2004 were $884.3 million, compared with $812.9 million in the same period last year, an increase of 8.8%.
Quarterly and year-to-date comparisons of net sales by business segment are as follows:
Three Months Ended | % Total Sales Increase | ||||||||
(in thousands) | 2004 | 2003 | |||||||
Business Segment | |||||||||
Clinical Group | $ | 141,298 | $ | 127,818 | 10.5 | % | |||
Research Group | 166,403 | 150,660 | 10.4 | % | |||||
Total | $ | 307,701 | $ | 278,478 | 10.5 | % | |||
| Nine Months Ended June 30, | % Total Sales Increase | ||||||||
(in thousands) | 2004 | 2003 | |||||||
Business Segment | |||||||||
Clinical Group | $ | 409,775 | $ | 379,747 | 7.9 | % | |||
Research Group | 474,515 | 433,167 | 9.5 | % | |||||
Total | $ | 884,290 | $ | 812,914 | 8.8 | % | |||
Apogent’s net sales by geographic area are as follows:
| Three Months Ended June 30, | ||||||
(in thousands) | 2004 | 2003 | ||||
Geographic Area | ||||||
North America | $ | 222,701 | $ | 203,894 | ||
Europe | 58,358 | 51,416 | ||||
Asia | 19,488 | 17,327 | ||||
Other | 7,154 | 5,841 | ||||
Total | $ | 307,701 | $ | 278,478 | ||
Nine Months Ended June 30, | ||||||
(in thousands) | 2004 | 2003 | ||||
Geographic Area | ||||||
North America | $ | 629,890 | $ | 594,604 | ||
Europe | 174,470 | 152,486 | ||||
Asia | 59,394 | 49,413 | ||||
Other | 20,536 | 16,411 | ||||
Total | $ | 884,290 | $ | 812,914 | ||
DETAILED FINANCIAL RESULTS
Please refer to the financial statements below when reviewing the following financial information.
Gross profit and margin were $145.3 and 47.2% for the quarter, compared with gross profit and margin of $133.7 and 48.0% for the third quarter of fiscal 2003. Gross profit and margin were $418.1 and 47.3% for the nine months ended June 30, 2004, compared with gross profit and margin of $389.8 million and 48.0% for the nine months ended June 30, 2003.
Selling, general and administrative expenses were $81.7 million for the third quarter of fiscal 2004, compared with $70.4 million for the third quarter of fiscal 2003. Selling, general and administrative expenses were $237.5 million for the nine months ended June 30, 2004, compared with $210.7 million for the nine months ended June 30, 2003.
Operating income and margin were $63.6 million and 20.7% of net sales for the third quarter of fiscal 2004, compared with $63.3 million and 22.7% of net sales for the second quarter of fiscal 2003. Operating income and margin were $180.6 million and 20.4% of net sales for the nine months ended June 30, 2004, compared with $179.1 and 22.0% of net sales for the nine months ended June 30, 2003.
Net income and margin for the three months ended June 30, 2004 were $34.3 million and 11.1% of net sales, compared to $35.5 million and 12.8% of net sales for the same period in 2003. Net income and margin for the nine months ended June 30, 2004 were $96.9 million and 11.0% of net sales, compared to $7.9 million and 1.0% of net sales for the same period in 2003.
Fully diluted weighted average shares outstanding were 95.8 million for the quarterly period ended June 30, 2004, compared with fully diluted weighted average shares outstanding of 100.5 million for the same period in fiscal 2003. Fully diluted weighted average shares outstanding were 92.9 million for the nine months ended June 30, 2004, compared with fully diluted weighted shares outstanding of 104.1 million for the same period in fiscal 2003. The period-over-period decreases in fully diluted weighted average shares outstanding resulted from repurchases of Company stock between October 2002 and December 2003. Included in the fully diluted shares outstanding for the three months and nine months ended June 30, 2004 are 3.3 million shares and 1.1 million shares arising from our convertible debt, which became convertible on June 16, 2004 due to the pending merger with Fisher Scientific and will remain convertible until 15
days after the closing of the transaction. No convertible debt was converted as of June 30, 2004.
The net cash provided by operating activities for the third quarter of fiscal 2004 was $63.5 million, compared to $58.5 million for the same period last year. The net cash provided by operating activities for the nine months ended June 30, 2004 was $176.8 million, compared to $115.4 million for the same period last year. The period-over-period increases in free cash flow resulted from the timing of tax payments and reduced capital expenditures.
Inventory was $222.3 million at the end of the third quarter. Inventory turns for the quarter were 2.7, compared with 2.6 for the second quarter of fiscal 2004. Accounts receivable at the end of the quarter were $191.1 million. Days sales outstanding in the third quarter were 54.5 days, compared with 52.0 days for the second quarter of fiscal 2004.
SPECIAL ITEMS
Restructuring expenses during the three and nine months ended June 30, 2004 were $1.8 million and $7.0 million, respectively. These charges were primarily related to costs associated with the consolidation of facilities and discontinuance of certain product lines.
Additionally, during the three and nine months ended June 30, 2004, the Company incurred transaction expenses of approximately $2.0 million and $4.2 million, respectively, associated with the pending merger with Fisher Scientific International Inc.
UPCOMING COMPANY TRADE SHOW EXHIBITS
Show | Details | |
American Association of Clinical Chemistry | July 25 – 29, 2004 Los Angeles, CA www.aacc.org | |
Drug Discovery Technology | August 8-13, 2004 Boston, MA www.drugdisc.com | |
Chips to Hits | September 20-22, 2004 Boston, MA www.chipstohits.com | |
APOGENT TECHNOLOGIES INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands except share and per share data)
(unaudited)
| June 30, 2004 | September 30, 2003 | |||||||
| Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 92,872 | $ | 18,505 | ||||
Marketable securites - available for sale | 15,166 | 17,625 | ||||||
Accounts receivable (less allowance for doubtful accounts of $5,369 and $4,286 respectively) | 191,055 | 179,523 | ||||||
Inventories | 222,315 | 206,549 | ||||||
Deferred income taxes | 15,308 | 15,308 | ||||||
Prepaid expenses and other current assets | 19,699 | 16,518 | ||||||
Total current assets | 556,415 | 454,028 | ||||||
Property, plant and equipment, net | 269,555 | 282,752 | ||||||
Intangible assets, net | 199,833 | 179,492 | ||||||
Goodwill | 1,023,564 | 999,243 | ||||||
Other assets | 39,061 | 34,476 | ||||||
Total assets | $ | 2,088,428 | $ | 1,949,991 | ||||
Liabilities and Shareholders’ Equity | ||||||||
Current liabilities: | ||||||||
Short-term debt and overdrafts | $ | 10,889 | $ | 12,801 | ||||
Current portion of long-term debt | 2,190 | 2,281 | ||||||
Accounts payable | 47,339 | 50,220 | ||||||
Income taxes payable | 41,584 | 20,053 | ||||||
Accrued payroll and employee benefits | 39,389 | 34,484 | ||||||
Accrued interest expense | 3,780 | 8,844 | ||||||
Restructuring reserve | 3,048 | 1,758 | ||||||
Other current liabilities | 48,851 | 38,883 | ||||||
Total current liabilities | 197,070 | 169,324 | ||||||
Long-term debt, less current portion | 912,333 | 891,989 | ||||||
Deferred income taxes | 154,827 | 137,683 | ||||||
Other liabilities | 29,350 | 26,948 | ||||||
Commitments and contingent liabilities | ||||||||
Shareholders’ equity: | ||||||||
Preferred stock, $0.01 par value; authorized 20,000,000 shares | — | — | ||||||
Common stock, $0.01 par value; authorized 250,000,000 shares; issued 107,120,682 and 107,057,865 shares; outstanding 89,988,443 and 92,013,345 shares, respectively | 1,071 | 1,071 | ||||||
Additional paid-in capital | 287,400 | 270,119 | ||||||
Retained earnings | 833,993 | 737,045 | ||||||
Accumulated other comprehensive income (loss) | 18,085 | (3,127 | ) | |||||
Deferred compensation | (4,955 | ) | — | |||||
Treasury common stock, 17,132,239 and 15,044,520 shares at cost | (340,746 | ) | (281,061 | ) | ||||
Total shareholders’ equity | 794,848 | 724,047 | ||||||
Total liabilities and shareholders’ equity | $ | 2,088,428 | $ | 1,949,991 | ||||
APOGENT TECHNOLOGIES INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except per share data)
(unaudited)
| Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||
| 2004 | 2003 | 2004 | 2003 | |||||||||||||
Net sales | $ | 307,701 | $ | 278,478 | $ | 884,290 | $ | 812,914 | ||||||||
Cost of sales: | ||||||||||||||||
Cost of products sold | 161,008 | 143,839 | 464,529 | 422,205 | ||||||||||||
Restructuring charges | 1,365 | 955 | 1,652 | 955 | ||||||||||||
Total cost of sales | 162,373 | 144,794 | 466,181 | 423,160 | ||||||||||||
Gross profit | 145,328 | 133,684 | 418,109 | 389,754 | ||||||||||||
Selling, general and administrative expenses | 79,330 | 69,923 | 227,940 | 209,863 | ||||||||||||
Merger expenses | 1,953 | — | 4,239 | — | ||||||||||||
Restructuring charges and asset impairments | 399 | 475 | 5,370 | 807 | ||||||||||||
Total selling, general and administrative expenses | 81,682 | 70,398 | 237,549 | 210,670 | ||||||||||||
Operating income | 63,646 | 63,286 | 180,560 | 179,084 | ||||||||||||
Other income (expense): | ||||||||||||||||
Interest expense, net | (6,891 | ) | (11,635 | ) | (22,707 | ) | (32,427 | ) | ||||||||
Amortization of deferred financing fees | (1,681 | ) | (1,006 | ) | (4,693 | ) | (2,809 | ) | ||||||||
Loss on extinguishment of debt | — | — | (171 | ) | — | |||||||||||
Other, net | 313 | 163 | 741 | 943 | ||||||||||||
Income from continuing operations before income taxes | 55,387 | 50,808 | 153,730 | 144,791 | ||||||||||||
Income taxes | 20,693 | 15,104 | 56,514 | 49,408 | ||||||||||||
Income from continuing operations | 34,694 | 35,704 | 97,216 | 95,383 | ||||||||||||
Discontinued operations, net of income tax benefit | (413 | ) | (188 | ) | (267 | ) | (87,516 | ) | ||||||||
Net income | $ | 34,281 | $ | 35,516 | $ | 96,949 | $ | 7,867 | ||||||||
Basic earnings per common share from continuing operations | $ | 0.39 | $ | 0.36 | $ | 1.08 | $ | 0.93 | ||||||||
Discontinued operations | (0.00 | ) | (0.00 | ) | (0.00 | ) | (0.85 | ) | ||||||||
Basic earnings per common share | $ | 0.38 | $ | 0.36 | $ | 1.08 | $ | 0.08 | ||||||||
Diluted earnings per common share from continuing operations | $ | 0.36 | $ | 0.36 | $ | 1.05 | $ | 0.92 | ||||||||
Discontinued operations | $ | (0.00 | ) | (0.00 | ) | $ | (0.00 | ) | (0.84 | ) | ||||||
Diluted earnings per common share | $ | 0.36 | $ | 0.35 | $ | 1.05 | $ | 0.08 | ||||||||
Weighted average basic shares outstanding | 89,654 | 99,486 | 89,601 | 103,053 | ||||||||||||
Weighted average diluted shares outstanding | 95,812 | 100,526 | 92,884 | 104,056 | ||||||||||||
APOGENT TECHNOLOGIES INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Nine Months Ended June 30, | ||||||||
| 2004 | 2003 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 96,949 | $ | 7,867 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Discontinued operations | 267 | 87,516 | ||||||
Depreciation | 34,464 | 31,819 | ||||||
Amortization of intangible assets and deferred financing fees | 16,754 | 14,377 | ||||||
Amortization of deferred compensation | 991 | — | ||||||
Gain on sale of property plant and equipment | 196 | 244 | ||||||
Asset impairments | 2,693 | — | ||||||
Loss on extinguishment of debt and settlement of securities lending | 171 | — | ||||||
Deferred income taxes | 15,370 | 10,252 | ||||||
Changes in assets and liabilities, net of effects of businesses acquired: | ||||||||
(Increase) decrease in accounts receivable | (4,518 | ) | 2,504 | |||||
Increase in inventories | (8,327 | ) | (11,110 | ) | ||||
Increase in prepaid expenses and other current assets | (3,111 | ) | (3,376 | ) | ||||
Decrease in accounts payable | (4,892 | ) | (6,956 | ) | ||||
Increase (decrease) in income taxes payable | 20,735 | (6,604 | ) | |||||
Increase (decrease) in accrued payroll and employee benefits | 3,933 | (1,372 | ) | |||||
Decrease in accrued interest expense | (5,064 | ) | (7,290 | ) | ||||
Increase (decrease) in restructuring reserve | 1,290 | (298 | ) | |||||
Increase in other current liabilities | 6,336 | 2,842 | ||||||
Net change in other assets and liabilities | 2,532 | (4,970 | ) | |||||
Net cash provided by operating activities | 176,769 | 115,445 | ||||||
Cash flows from investing activities: | ||||||||
Capital expenditures | (18,466 | ) | (37,684 | ) | ||||
Proceeds from sales of property, plant and equipment | 2,639 | 1,221 | ||||||
Net payments for businesses acquired | (41,983 | ) | (21,654 | ) | ||||
Other investing activities | 696 | 1,546 | ||||||
Net cash used in investing activities | (57,114 | ) | (56,571 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from revolving credit facility | 161,300 | 469,400 | ||||||
Principal payments on revolving credit facility | (484,406 | ) | (469,400 | ) | ||||
Proceeds from long-term debt | 345,000 | 250,000 | ||||||
Principal payments on long-term debt | — | (23,408 | ) | |||||
Proceeds from the exercise of stock options | 50,770 | 2,543 | ||||||
Proceeds from employee stock purchase program | 1,586 | 927 | ||||||
Purchase of treasury stock | (109,437 | ) | (226,348 | ) | ||||
Financing fees paid | (9,320 | ) | (9,168 | ) | ||||
Premium paid on extinguishment of debt and settlement of securities lending | (171 | ) | — | |||||
Other financing activities | — | 2,510 | ||||||
Net cash used in financing activities | (44,678 | ) | (2,944 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | (610 | ) | 13,893 | |||||
Net increase in cash and cash equivalents | 74,367 | 69,823 | ||||||
Cash and cash equivalents at beginning of period | 18,505 | 16,327 | ||||||
Cash and cash equivalents at end of period | $ | 92,872 | $ | 86,150 | ||||
Item 9. Regulation FD Disclosure
Attached hereto as Exhibit 99.1, but only furnished pursuant to Item 12 of this Report, is the registrant’s press release dated July 28, 2004 announcing the Company’s earnings for the quarter and nine months ended June 30, 2004.
Item 12. Results of Operations and Financial Condition
Attached hereto as Exhibit 99.1 is the registrant’s press release dated July 28, 2004 announcing the Company’s earnings for the three months ended June 30, 2004. Within the press release, the Company has presented certain financial information that has not been prepared in accordance with accounting principles generally accepted in the United States of America (“Non-GAAP Measures”). The Company has presented Non-GAAP Measures for, among others: (i) adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”); and (ii) free cash flow. With respect to all such Non-GAAP Measures, the Company has included (a) a presentation of the most directly comparable financial measure calculated and presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”); and (b) a quantitative reconciliation of the differences between the Non-GAAP Measures and the most directly comparable measure calculated and presented in accordance with GAAP.
The Company has included information concerning Adjusted EBITDA and free cash flow because the Company’s management believes that some investors use Adjusted EBITDA and free cash flow as measures of a company’s historical ability to service its debt. Adjusted EBITDA and free cash flow should not be considered as alternatives to, or more meaningful than, net income as an indicator of the Company’s operating performance, or cash flows from operating activities as a measure of liquidity. As indicated on the attached, Adjusted EBITDA and free cash flow have not been prepared in accordance with generally accepted accounting principles (GAAP). Adjusted EBITDA and free cash flow, as presented by Apogent, may not be comparable to similarly titled measures reported by other companies.Certain other non-GAAP financial measures (i.e., adjusted gross profit, adjusted gross margin, and adjusted operating income) have been provided in order to provide consistency with the format of presentation previously made to the investing public.
Investors should recognize these Non-GAAP Measures may not be comparable to similarly titled measures of other companies and that the measures presented are not a substitute or alternatives for measures of financial performance determined in accordance with GAAP, such as net income as a measure of operating results or cash flows as a measure of liquidity.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
APOGENT TECHNOLOGIES INC. (Registrant) | ||||||
| Date: July 29, 2004 | By: | /s/ Michael K. Bresson | ||||
Michael K. Bresson Executive Vice President – Administration, General Counsel and Secretary | ||||||
EXHIBIT INDEX
| Exhibit No. | Description | |
| 99.1 | Press release dated July 28, 2004, reporting Apogent’s quarterly and year-to-date results as of June 30, 2004. | |