1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001
Or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period
from to .
---------------- ---------------
COMMISSION FILE NUMBER: 1-11091
APOGENT TECHNOLOGIES INC.
(Exact name of registrant as specified in its charter)
WISCONSIN 22-2849508
(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) Number)
48 CONGRESS STREET, PORTSMOUTH, NEW HAMPSHIRE 03801
(Address of principal executive offices) (Zip Code)
(603) 433-6131
(Registrant's telephone number, including area code)
(Former name, former address, former fiscal year, if changed since last report)
Indicate by checkmark, whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period the registrant was required
to file such reports, and (2) has been subject to such filing requirements for
the past 90 days. Yes X No .
At August 9, 2001, there were 105,690,103 shares of the Registrant's Common
Stock, par value $0.01 per share, outstanding.
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APOGENT TECHNOLOGIES INC. AND SUBSIDIARIES
Index Page
----- ----
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets as of June 30, 2001 and September 30, 2000 3
Consolidated Statements of Income for the three and nine months ended
June 30, 2001 and 2000 4
Consolidated Statement of Shareholders' Equity for the nine months
ended June 30, 2001 5
Consolidated Statements of Cash Flows for the nine months ended June
30, 2001 and 2000 6
Notes to unaudited consolidated financial statements 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION 23
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 40
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 41
Signatures 42
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
APOGENT TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
JUNE 30, SEPTEMBER 30,
2001 2000
------------- -------------
ASSETS (unaudited)
Current assets:
Cash and cash equivalents $ 26,820 $ 12,411
Accounts receivable (less allowance for doubtful accounts of
$3,793 and $4,041 at June 30,2001 and Sept. 30, 2000, respectively) 180,254 173,585
Inventories 162,911 141,779
Deferred income taxes 13,055 13,226
Net assets held for discontinued operations - 152,970
Prepaid expenses and other current assets 23,923 16,564
------------- -------------
Total current assets 406,963 510,535
Available for sale security 53,845 54,444
Property, plant and equipment, net 214,147 208,094
Intangible assets 1,110,189 1,008,153
Deferred income taxes 7,888 7,870
Other assets 10,719 3,268
------------- -------------
Total assets $ 1,803,751 $ 1,792,364
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 49,882 $ 51,899
Advances and loans from SDS - 77,762
Current portion of long-term debt 35,287 34,327
Income taxes payable 32,827 16,604
Accrued payroll and employee benefits 29,230 30,509
Restructuring reserve 2,966 5,609
Deferred income taxes 933 807
Other current liabilities 36,220 23,622
------------- -------------
Total current liabilities 187,345 241,139
Long-term debt 667,706 649,409
Securities lending agreement 53,845 54,444
Deferred income taxes 92,147 93,048
Other liabilities 8,868 4,808
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 105,690,166 and 105,191,692 shares respectively,
outstanding 105,689,946 and 105,191,472 respectively 1,057 1,052
Equity rights, 50 rights at $1.09 per right - -
Additional paid-in capital 251,299 271,739
Retained earnings 598,251 531,701
Accumulated other comprehensive income (56,767) (54,976)
Treasury common stock, 220 shares at cost - -
------------- -------------
Total shareholders' equity 793,840 749,516
============= =============
Total liabilities and shareholders' equity $ 1,803,751 $ 1,792,364
============= =============
See accompanying notes to unaudited consolidated financial statements.
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APOGENT TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
2001 2000 2001 2000
----------- ----------- ----------- -----------
Net sales $ 260,396 $ 212,029 $ 726,258 $ 634,986
Cost of sales:
Cost of products sold 134,715 106,492 373,843 321,925
Depreciation of purchase accounting adjustments 180 128 448 396
----------- ----------- ----------- -----------
Total cost of sales 134,895 106,620 374,291 322,321
----------- ----------- ----------- -----------
Gross profit 125,501 105,409 351,967 312,665
Selling, general and administrative expenses 64,817 52,183 162,749 143,218
Restructuring charge - - 583 -
Depreciation and amortization of purchase accounting
adjustments 2,003 2,046 23,284 19,215
----------- ----------- ----------- -----------
Total selling, general and administrative expenses 66,820 54,229 186,616 162,433
----------- ----------- ----------- -----------
Operating income 58,681 51,180 165,351 150,232
Other income(expense):
Interest expense (12,717) (12,256) (37,109) (36,151)
Amortization of deferred financing fees (133) (137) (382) (398)
Other, net 240 446 5,506 613
----------- ----------- ----------- -----------
Income from continuing operations before income
taxes and extraordinary items 46,071 39,233 133,366 114,296
Income taxes 17,968 15,290 52,886 44,552
----------- ----------- ----------- -----------
Income from continuing operations before extraordinary
items 28,103 23,943 80,480 69,744
Discontinued operations (net of income tax expense
of $0, $7,642 $435, and $23,635, respectively) - 11,275 (11,824) 34,873
----------- ----------- ----------- -----------
Income before extraordinary items 28,103 35,218 68,656 104,617
Extraordinary items (net of income tax benefit
of $863 and $1,359) (1,361) - (2,106) -
----------- ----------- ----------- -----------
Net income $ 26,742 $ 35,218 $ 66,550 $ 104,617
=========== =========== =========== ===========
Basic earnings per common share from continuing operations $ 0.27 $ 0.23 $ 0.76 $ 0.67
Discontinued operations - 0.11 (0.11) 0.33
Extraordinary item (0.01) - (0.02) -
----------- ----------- ----------- -----------
Basic earnings per common share $ 0.25 $ 0.34 $ 0.63 $ 1.00
=========== =========== =========== ===========
Diluted earning per common share from continuing operations $ 0.26 $ 0.22 $ 0.74 $ 0.65
Discontinued operations - 0.10 (0.11) 0.33
Extraordinary item (0.01) - (0.02) -
----------- ----------- ----------- -----------
Diluted earnings per common share $ 0.25 $ 0.33 $ 0.62 $ 0.98
=========== =========== =========== ===========
Weighted average basic shares outstanding 105,563 104,833 105,421 104,363
Weighted average diluted shares outstanding 108,333 107,889 108,193 106,952
See accompanying notes to unaudited consolidated financial statements.
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APOGENT TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED JUNE 30, 2001
(In thousands, except per share data)
(Unaudited)
ACCUMULATED
ADDITIONAL OTHER
COMMON EQUITY PAID - IN RETAINED COMPREHENSIVE
STOCK RIGHTS CAPITAL EARNINGS INCOME
--------- ------ ----------- ----------- -------------
Balance at September 30, 2000 $ 1,052 $ - $ 271,739 $ 531,701 $ (54,976)
Comprehensive income:
Cumulative effect of accounting change
for cash flow hedge, net of tax effect
of $1,687 - - - - 2,530
Net income - - - 66,550 -
Translation adjustment (14,951)
Adjustment to interest rate swap
agreement upon sale, net of tax
benefit of $984 - - - - (1,475)
Amortization of gain on sale of interest
rate swaps, net of tax benefit of $310 - - - - (465)
Unrealized loss on security available
for sale, net of tax benefit of $243 - - - - (356)
--------- ----- ----------- ----------- -----------
Total comprehensive income - - - 66,550 (14,717)
Shares issued in connection with
stock options 5 - 4,377 - -
Tax benefit related to stock options - - 2,210 - -
Distribution of the equity of Sybron Dental
Specialties, Inc. on December 11, 2000,
net of dividends of $142,880 - - (27,027) - 12,926
--------- ----- ----------- ----------- -----------
Balance at June 30, 2001 $ 1,057 $ - $ 251,299 $ 598,251 $ (56,767)
========= ===== =========== =========== ===========
TREASURY TOTAL
COMMON SHAREHOLDERS'
STOCK EQUITY
----------- -------------
Balance at September 30, 2000 $ - $ 749,516
Comprehensive income:
Cumulative effect of accounting change
for cash flow hedge, net of tax effect
of $1,687 - 2,530
Net income - 66,550
Translation adjustment - (14,951)
Adjustment to interest rate swap
agreement upon sale, net of tax
benefit of $984 - (1,475)
Amortization of gain on sale of interest
rate swaps, net of tax benefit of $310 - (465)
Unrealized loss on security available
for sale, net of tax benefit of $243 - (356)
----------- -----------
Total comprehensive income - 51,833
Shares issued in connection with stock options - 4,382
Tax benefit related to stock options - 2,210
Distribution of the equity of Sybron Dental
Specialties, Inc. on December 11, 2000,
net of dividends of $142,880 - (14,101)
----------- -----------
Balance at June 30, 2001 $ - $ 793,840
=========== ===========
See accompanying notes to unaudited consolidated financial statements.
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APOGENT TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
NINE MONTHS ENDED
JUNE 30,
2001 2000
----------- -----------
Cash flows from operating activities:
Net income $ 66,550 $ 104,617
Adjustments to reconcile net income to net cash provided by operating activities
Discontinued operations 11,824 (34,873)
Depreciation 25,182 21,287
Amortization 32,158 26,240
Gain on sale of property, plant and equipment (4,988) (40)
Provision for losses on doubtful accounts (188) 165
Inventory provisions 1,667 (904)
Deferred income taxes 632 11,721
Extraordinary items 2,106 -
Net changes in assets and liabilities, net of effects of spun-off business
and businesses acquired (23,085) (62,421)
----------- -----------
Net cash provided by operating activities 111,858 65,792
----------- -----------
Cash flows from investing activities:
Capital expenditures (35,502) (27,436)
Proceeds from sales of property, plant and equipment 11,446 384
Proceeds from sale of NPT - (2,600)
Dividends received from SDS 67,900 439
Capital contributions paid to SDS (4,623) (20,398)
Distribution of the net equity of SDS (14,101) -
Net change in advances and loans to SDS (2,782) 56,174
Net payment for businesses acquired (139,020) (123,399)
----------- -----------
Net cash used in investing activities (116,682) (116,836)
----------- -----------
Cash flows from financing activities
Proceeds from long-term debt 703,448 -
Principal payments on long-term debt (680,291) (4,691)
Proceeds from the exercise of stock options 4,382 12,496
Refinancing fees paid (6,721) (197)
Proceeds from revolving credit facility 407,060 250,554
Principal payments on revolving credit facility (410,960) (208,434)
Other financing activities 489 1,604
----------- -----------
Net cash provided by financing activities 17,407 51,332
----------- -----------
Effect of exchange rate changes on cash and cash equivalents 1,826 (460)
----------- -----------
Net increase (decrease) in cash and cash equivalents 14,409 (172)
Cash and cash equivalents at beginning of period 12,411 12,401
----------- -----------
Cash and cash equivalents at end of period $ 26,820 $ 12,229
=========== ===========
See accompanying notes to unaudited consolidated financial statements.
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APOGENT TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
(In thousands)
(Unaudited)
NINE MONTHS ENDED
JUNE 30,
2001 2000
------------ -------------
Net changes in assets and liabilities, net of effects of spun-off
business and businesses acquired:
Decrease (increase) in accounts receivable $ 778 $ (3,734)
Increase in inventories (21,987) (8,504)
Increase in prepaid expenses and other current assets (6,623) (8,013)
Decrease in accounts payable (5,466) (8,323)
Increase (decrease) in income taxes payable 14,453 (13,616)
Decrease in other current liabilities (3,171) (5,062)
Increase (decrease) in accrued payroll and employee benefits 3,032 (12,577)
Decrease in restructuring reserve (2,643) -
Net change in other assets and liabilities (1,458) (2,592)
----------- -----------
Net changes in asset and liabilities, net of effect of spun-off
business and businesses acquired $ (23,085) $ (62,421)
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 32,338 $ 35,054
=========== ===========
Income taxes $ 39,066 $ 33,797
=========== ===========
Capital lease obligations incurred $ - $ 56
=========== ===========
See accompanying notes to unaudited consolidated financial statements.
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APOGENT TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands except per share data)
1. BASIS OF PRESENTATION
In the opinion of management, all adjustments that are necessary for a fair
statement of the results for the interim periods presented have been
included. The results for the three and nine month periods ended June 30,
2001 are not necessarily indicative of the results to be expected for the
full year. The financial statements have been prepared in accordance with
the instructions to Form 10-Q and do not include all of the information and
note disclosures required by generally accepted accounting principles in
the United States. These statements should only be read in conjunction with
the Company's annual report on Form 10-K for the fiscal year ended
September 30, 2000. Certain prior period amounts have been reclassified to
conform to the current period presentation.
On January 30, 2001, the Company's shareholders voted to change the name of
the Company from Sybron International Corporation to Apogent Technologies
Inc. As used in these Notes to the Unaudited Consolidated Financial
Statements, the term "Company" means Sybron International Corporation for
the period prior to January 30, 2001 and Apogent Technologies Inc.
thereafter.
2. INVENTORIES
Inventories at June 30, 2001 and September 30, 2000 consist of the
following:
JUNE 30, SEPTEMBER 30,
2001 2000
------------ -------------
Raw materials and supplies $ 79,074 $ 59,178
Work in process 26,758 29,848
Finished goods 64,481 57,015
LIFO reserve (7,402) (4,262)
----------- ------------
$ 162,911 $ 141,779
=========== ============
3. ACQUISITIONS
During the nine-month period ended June 30, 2001, the Company completed
four acquisitions for cash. The aggregate purchase price (which was not
significant individually), net of cash acquired, was approximately $134
million. All of these acquisitions were accounted for as purchase
transactions. Accordingly, the results of the acquisitions were included as
of the date they were acquired. Total goodwill and intangibles for the
acquired companies was approximately $129 million, and will be amortized
over 3 to 40 years. Descriptions of the acquired companies are as follows:
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a) On November 9, 2000, the Company acquired Vacuum Process
Technology, Inc. ("VPT"), located in Plymouth, Massachusetts, a
leading manufacturer of state-of-the-art thin film deposition
equipment, which is sold to a wide variety of companies in the
internet infrastructure, optical and semiconductor industries.
VPT's sales revenue for the fiscal year is expected to be
approximately $18.4 million. VPT is included in the Clinical and
Industrial business segment.
b) On March 1, 2001, the Company acquired BioRobotics Group Limited
("BioRobotics") located in Haslingfield, England. BioRobotics is
a leading provider of automated instrumentation solutions used in
functional genomics. Sales revenues are expected to be
approximately $19 million for the twelve months ending February
28, 2002. BioRobotics is included in the Labware and Life
Sciences business segment.
c) On April 10, 2001, the Company acquired Advanced Biotechnologies
Limited ("ABgene"), located in Epsom, England. ABgene is a
leading manufacturer of a comprehensive range of molecular
biology reagents and special plastic consumables for the life
sciences market. ABgene's sales revenues for the year ended March
31, 2001 were approximately $21 million. ABgene is included in
the Labware and Life Sciences business segment.
d) On April 10, 2001, the Company acquired the disposable glass
culture tube business ("DCT Business") of Kimble Glass Inc.
located in Vineland, New Jersey. The DCT Business will be owned
by and consolidated into the Company's subsidiary, Chase
Scientific Glass, Inc., which currently manufactures disposable
glass culture tubes ("DCTs"). Sales revenue from this business is
expected to be approximately $5.8 million for the year ending
December 31, 2001. DCTs are used in a variety of general
laboratory applications, particularly in blood collection, blood
banking, urinalysis, and certain cell culture procedures. Chase
Scientific Glass, Inc. is included in the Clinical and Industrial
business segment.
4. RESTRUCTURING
In June 1998, the Company recorded a restructuring charge of approximately
$8,500 (approximately $5,400 after tax or $.05 per share on a diluted
basis) for the rationalization of certain acquired companies, combination
of certain duplicate production facilities, movement of certain customer
service and marketing functions, and the exiting of several product lines.
The restructuring charge was classified as components of cost of sales
(approximately $1,800 relating to the write-off of inventory discussed
below), and selling, general and administrative expenses (approximately
$6,700).
Restructuring activity since June 30, 1998 and its components are as
follows:
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LEASE INVENTORY FIXED
SEVERANCE PAYMENTS WRITE-OFF ASSETS GOODWILL
(a) (b) (c) (c) (d) TOTAL
--------- -------- --------- ------ -------- -------
1998 Restructuring Charge $3,400 $ 200 $ 1,800 $ 1,000 $ 2,100 $ 8,500
1998 Cash Payments....... 900 100 -- -- -- 1,000
1998 Non-Cash Charges.... -- -- 1,800 1,000 2,100 4,900
------ ----- ------- ------- ------- -------
September 30, 1998 balance $2,500 $ 100 $ -- $ -- $ -- $ 2,600
1999 Cash Payments....... 1,900 100 -- -- -- 2,000
Adjustments(a)........... 300 -- -- -- -- 300
------ ----- ------- ------- ------- -------
September 30, 1999 balance $ 900 $ -- $ -- $ -- $ -- $ 900
2000 Cash Payments....... 700 -- -- -- -- 700
------ ----- ------- ------- ------- -------
September 30, 2000 balance $ 200 $ -- $ -- $ -- $ -- $ 200
2001 Cash payments 100 -- -- -- -- 100
------ ----- ------- ------- ------- -------
June 30, 2001 balance.... $ 100 $ -- $ -- $ -- $ -- $ 100
====== ===== ======= ======= ======= =======
(a) Amount represents severance and termination costs for approximately 65
terminated employees (primarily sales and marketing personnel). As of June
30, 2001, all employees have been terminated as a result of the
restructuring plan. Payments will continue to certain employees previously
terminated under this restructuring plan. An adjustment of approximately
$300 was made in the third quarter of fiscal 1999 to adjust the accrual
primarily representing under accruals for anticipated costs associated with
outplacement services, accrued fringe benefits, and severance associated
with employees who were previously notified of termination. No additional
employees will be terminated under this restructuring plan.
(b) Amount represents lease payments on exited facilities.
(c) Amount represents write-offs of inventory and fixed assets associated with
discontinued product lines.
(d) Amount represents goodwill associated with exited product lines.
The Company expects to make future cash payments of approximately $100 during
the remainder of fiscal 2001.
In September 2000, the Company recorded a restructuring charge of approximately
$11,300 (approximately $7,500 after tax or $.07 per share on a diluted basis)
for the consolidation of certain businesses, product rationalizations, changes
in management structure and taxes associated with restructuring U.K. operations.
The restructuring charge was classified as components of cost of sales
(approximately $4,400 relating to the write-off of inventory, write-offs of
fixed assets, certain lease terminations and severance associated with employees
in production activities), selling, general and administrative expense of $5,800
and income tax expense of $1,000, related to the Company's restructuring of its
U.K. operations. Restructuring activity since its inception in September 2000
and its components are as follows:
FIXED LEASE SHUT-DOWN
SEVERANCE INVENTORY ASSETS COMMITMENTS COSTS TAX
(a) (b) (b) (c) (c) (d) OTHER TOTAL
--------- --------- ------- ------------- ---------- ------- -------- -----
2000 Restructuring charge $ 5,500 $ 2,100 $ 1,000 $ 500 $ 300 $ 1,000 $ 900 $ 11,300
2000 Cash payments....... 1,100 -- -- -- -- -- -- 1,100
2000 Non-cash charges.... -- 2,100 1,000 -- -- -- 800 3,900
------- ------- ------- ----- ----- ------- ------ --------
September 30, 2000 balance $ 4,400 $ -- $ -- $ 500 $ 300 $ 1,000 $ 100 $ 6,300
Adjustments (e) 600 600
2001 Cash payments....... 2,700 -- -- 200 100 -- -- 3,000
------- ------- ------- ----- ----- ------- ------ --------
June 30, 2001 balance $ 2,300 $ -- $ -- $ 300 $ 200 $ 1,000 $ 100 $ 3,900
======= ======= ======= ===== ===== ======= ====== ========
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(a) Amount represents severance and termination costs for 151 terminated
employees (primarily sales, marketing and corporate personnel). As of
June 30, 2001, 143 employees have been terminated as a result of the
restructuring plan.
(b) Amount represents write-offs of inventory and fixed assets associated
with discontinued product lines.
(c) Amount represents lease payments and shut down costs on exited
facilities.
(d) Amount represents income tax expense associated with the restructuring
of our U.K. facilities.
(e) Amount represents an increase in the severance costs for 16 employees
(primarily corporate personnel). These employees are included in the
total 151 terminated employees referenced above.
The Company expects to make future cash payments of approximately $2,000 in
the fourth quarter of fiscal 2001 and $1,900 in fiscal 2002 and beyond.
5. DISCONTINUED OPERATIONS
On November 8, 2000, the Company announced that it had declared a pro rata
distribution (or spin-off) to its shareholders of the common stock and
related preferred stock purchase rights of Sybron Dental Specialties, Inc.
(the "Distribution"). Shareholders of record as of November 30, 2000
received one share of Sybron Dental Specialties, Inc. ("SDS") common stock
for every three shares of Sybron International common stock they owned.
These consolidated financial statements have reclassified SDS and its
affiliates as discontinued operations. On December 11, 2000, the
Distribution was completed. The Company received no proceeds in connection
with the Distribution.
Immediately prior to the Distribution, Sybron Dental Management, Inc.
("SDM") then a subsidiary of Sybron, paid a dividend of $142,880 to Sybron,
of which $67,900 was paid in cash and $74,980 was a settlement of
intercompany loans and advances and to reflect an allocation of additional
bank debt to SDS. Immediately after payment of this dividend, SDM became a
subsidiary of SDS. The total allocation of bank debt to SDS was $375,000.
For the nine months ended June 30, 2001 and 2000, the Company has included
a net loss of $11,800 and net income of $34,900 from discontinued
operations, respectively. The net loss in 2001 included transaction
expenses of $12,500 relating to the spin-off of SDS. Revenues and net
income from SDS through the date of the Distribution (December 11, 2000)
were $67,400 and $638, respectively and offset the transaction expenses.
Revenues and net income from SDS for the nine months ended June 30, 2000
were $306,600 and $34,900, respectively.
As a result, these consolidated financial statements have reclassified SDS
and its affiliates as discontinued operations. SDS now owns and operates
what were formerly the Company's Professional Dental, Orthodontics, and
Infection Control Products business segments. The components of net assets
held for sale of discontinued operations included in the consolidated
balance sheet September 30, 2000 are as follows:
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SEPTEMBER 30,
2000
-------------
Cash.................................. $ 5,783
Net account receivables............... 85,767
Net inventories....................... 74,383
Other current assets.................. 6,497
Advances and loans to Sybron 77,762
International.........................
Property plant and equipment -- net... 55,326
Intangible assets..................... 220,705
Other assets.......................... 6,967
Current portion of long term debt..... (21,761)
Accounts payable...................... (11,351)
Income taxes payable.................. (5,680)
Accrued liabilities................... (27,859)
Deferred income taxes -- net.......... (6,252)
Long term debt........................ (298,482)
Other liabilities..................... (8,835)
---------
$ 152,970
=========
6. CREDIT AGREEMENTS
Until December 11, 2000, Sybron and its principal domestic subsidiaries
(including certain subsidiaries of SDS) were parties to a credit agreement
(as amended, the "Previous Credit Agreement") with The Chase Manhattan Bank
("Chase") and certain other lenders providing for a term A loan facility of
$300,000 (the "Tranche A Term Loan Facility"), a term B loan facility of
$300,000 (the "Tranche B Term Loan Facility"), and a revolving credit
facility of up to $600,000 (the "Previous Revolving Credit Facility").
In connection with the Distribution, on December 1, 2000, the Company
entered into a new credit agreement (the "Credit Agreement") with Chase and
certain other lenders providing for a term loan of $300,000.
On April 4, 2001 the Company issued $325,000 of unsecured senior notes in a
private placement with exchange and registration rights. The notes were
offered at a discount of approximately $1,469. They will mature on April 1,
2011. Interest is fixed at an annual rate of 8% and is payable on April 1
and October 1 of each year, beginning on October 1, 2001. Interest will
accrue from April 4, 2001. The notes are redeemable by the Company at any
time in whole, or from time to time in part, at a price equal to the
greater of (i) 100% of the principal amount of the notes to be redeemed or
(ii) the sum of the present values of the remaining scheduled payments of
principal and interest thereon (exclusive of interest accrued to the date
of redemption) discounted to the date of redemption on a semiannual basis
at the applicable Treasury Yield (as defined in the bond agreement) plus 35
basis points, plus accrued interest to the date of redemption. The Company
used the proceeds from the issuance to repay all of its Term Loan Facility
($300 million) and a portion of its Revolving Credit Facility. The notes
are guaranteed by the Company's material U.S. subsidiaries, which also
guarantee the Company's obligations under its bank credit facility.
For the nine months ended June 30, 2001, the Company recorded an
extraordinary loss of $2,106 after taxes as a result of entering into the
Credit Agreement and the issuance of the senior notes. This loss related to
the write-off of deferred financing costs of approximately $1,200
associated with the Previous Credit Agreement paid-off in the December 2000
refinancing, and costs of approximately $2,200 associated with debt
paid-off from the proceeds of the senior note issuance in April 2001.
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7. DERIVATIVE INSTRUMENTS
On October 1, 2000, the Company adopted Financial Accounting Standard Board
(FASB) Opinion No. 133 ("SFAS 133") as modified by FASB Opinion No. 138.
These standards establish accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and hedging activities. They require the recognition of all
derivative instruments as assets or liabilities in the balance sheet at
fair value. The accounting treatment of changes in fair value is dependent
upon whether or not a derivative instrument is designated as a hedge and if
so, the type of hedge. For derivatives designated as a cash flow hedge,
changes in fair value are recognized in other comprehensive income until
the hedged item is recognized in earnings. At October 1, 2000 the Company
had no freestanding derivatives in place other than interest rate swaps
used to hedge variable rate long-term debt. The interest rate swaps meet
the criteria for cash flow hedge accounting. As a result, the swaps are
recorded on the balance sheet as an asset at fair value with the
corresponding gain or loss recorded in other comprehensive income beginning
October 1, 2000. The impact on other comprehensive income upon adoption of
the standard was an unrealized gain, net of tax, of approximately $2,530.
In the normal course of business, we manage risks associated with foreign
exchange and interest rates through a variety of strategies, including the
use of hedging transactions, executed in accordance with our policies. Our
hedging transactions include, but are not limited to, the use of various
derivative instruments. As a matter of policy, we do not use derivative
instruments unless there is an underlying exposure. Any change in the value
of our derivative instruments would be substantially offset by an opposite
change in the value of the underlying hedged items. We do not use
derivative instruments for trading or speculative purposes.
On December 11, 2000, the Company extinguished the variable rate long-term
debt to which the swaps were designated and as a result the interest rate
swaps ceased to be accounted for as hedges. On December 12, 2000, the
Company sold the interest rate swaps for an aggregate gain of $1,055, net
of tax. Upon sale of the interest rate swaps, the Company reduced the
unrealized gain recorded at October 1, 2000 in other comprehensive income
to reflect the fair market value net of tax on the date of sale. Because
these interest rate swaps were designated as a hedge against future
variable rate interest payments and the extinguished debt, the gain will
continue to be carried in other comprehensive income and recognized as an
adjustment of yield interest expense of the New Credit Facilities (see Note
6) over the remaining term of the interest rate contract. For the period
December 12, 2000 through June 30, 2001, the Company recognized a gain of
$465, net of tax.
In March 2001, we entered into two foreign currency options to hedge
against the effect of fluctuations in foreign exchange rates on two notes
issued in British Pounds. The options of $11,500 GPB and $11,750 GPB have
maturity dates approximating those of the notes, of July 31, 2002 and July
2003, respectively. Both options were priced at $0.69 GBP. These options
are accounted for as a cash flow hedge. All changes in the underlying
values are reflected in net income.
8. STOCK OPTIONS
On December 11, 2000, in connection with the spin-off of SDS, certain
employees of SDS exchanged 1,320,515 outstanding options to purchase Sybron
International Corporation common stock for 2,331,214 options to purchase
Sybron Dental Specialties, Inc. common
13
14
stock. All remaining stock options (owned by remaining employees and
directors of the Company) were adjusted by adjusting the exercise price and
the number of shares subject to each such option to reflect the change in
market value of the Company's common stock resulting from the spin-off, so
that the intrinsic value of the options (the spread between the market
value and the exercise price of the option shares) after the spin-off was
equal to their intrinsic value immediately prior to the spin-off. The
spread on options for fractional shares resulting from the exchange or
adjustment was paid in cash. As a result of these exchanges and
adjustments, the number of outstanding employee and director stock options
increased by 391,458 shares and the average exercise price decreased by
approximately $3.80.
14
15
9. SEGMENT INFORMATION
The Company's operating subsidiaries are engaged in the manufacture and
sale of laboratory products in the United States and other countries. The
Company's products are categorized in the business segments of a) Labware
and Life Sciences, b) Clinical and Industrial, c) Diagnostics and
Microbiology, and d) Laboratory Equipment.
Information on these business segments is summarized below:
Labware Clinical Diagnostics
and Life and and Laboratory Elimin-
Sciences Industrial Microbiology Equipment ations (a)
---------- ---------- ------------- ----------- ----------
THREE MONTHS ENDED JUNE 30, 2000
Revenues:
External customer $ 86,810 $ 50,270 $ 50,636 $ 24,313 $ -
Intersegment 203 1,735 138 228 (2,130)
Total revenues 87,013 52,005 50,774 24,541 (2,130)
Gross profit 45,919 22,124 27,200 10,166 -
Selling, general and administrative 25,096 8,800 13,736 4,806 -
Operating income 20,823 13,324 13,464 5,360 -
THREE MONTHS ENDED JUNE 30, 2001
Revenues:
External customer 108,763 65,927 60,503 25,203 -
Intersegment 345 2,132 145 87 (2,709)
Total revenues 109,108 68,059 60,648 25,290 (2,709)
Gross profit 55,147 26,735 32,678 10,941 -
Selling, general and administrative 31,520 12,229 16,083 5,828 -
Operating income 23,627 14,506 16,595 5,113 -
Total
Other (a) Company
--------- -------
THREE MONTHS ENDED JUNE 30, 2000
Revenues:
External customer $ - $ 212,029
Intersegment - 174
Total revenues - 212,203
Gross profit - 105,409
Selling, general and administrative 1,791 54,229
Operating income (1,791) 51,180
THREE MONTHS ENDED JUNE 30, 2001
Revenues:
External customer - 260,396
Intersegment - -
Total revenues - 260,396
Gross profit - 125,501
Selling, general and administrative 1,160 66,820
Operating income (1,160) 58,681
Labware Clinical Diagnostics
and Life and and Laboratory Elimin-
Sciences Industrial Microbiology Equipment ations (a)
----------- ----------- ------------ ------------ ----------
NINE MONTHS ENDED JUNE 30, 2000
Revenues:
External customer $ 252,292 $ 156,847 $ 154,431 $ 71,416 $ -
Intersegment 841 5,061 331 671 (6,445)
Total revenues 253,133 161,908 154,762 72,087 (6,445)
Gross profit 131,942 67,034 83,633 30,056 -
Selling, general and administrative 72,074 26,995 42,598 15,168 -
Operating income 59,868 40,039 41,035 14,888 -
NINE MONTHS ENDED JUNE 30, 2001
Revenues:
External customer 291,291 184,197 174,816 75,954 -
Intersegment 982 6,276 444 351 (7,985)
Total revenues 292,273 190,473 175,260 76,306 (7,985)
Gross profit 150,244 75,521 93,498 32,704 -
Selling, general and administrative 82,626 33,826 47,825 16,543 -
Operating income 67,617 41,695 45,673 16,162 -
Segment assets 712,458 333,903 526,986 120,817 -
Total
Other (a) Company
--------- -------
NINE MONTHS ENDED JUNE 30, 2000
Revenues:
External customer $ - $ 634,986
Intersegment - 459
Total revenues - 635,445
Gross profit - 312,665
Selling, general and administrative 5,598 162,433
Operating income (5,598) 150,232
NINE MONTHS ENDED JUNE 30, 2001
Revenues:
External customer - 726,258
Intersegment - 68
Total revenues - 726,327
Gross profit - 351,967
Selling, general and administrative 5,796 186,616
Operating income (5,796) 165,351
Segment assets 109,587 1,803,751
(a) Includes the elimination of intercompany and corporate office activity.
15
16
10. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
Below are the condensed consolidating balance sheets, statements of
operations and statements of cash flows for Apogent Technologies Inc., as
of June 30, 2001 and September 30, 2000 and for the nine months ended June
30, 2001 and fiscal year ended September 30, 2000.
Certain general corporate expenses have not been allocated to the
subsidiaries, and are all included under the Apogent Technologies Inc.
heading. As a matter of course, the Company retains certain assets and
liabilities at the corporate level that are not allocated to the
subsidiaries including, but not limited to, certain employee benefit,
insurance and tax liabilities. Income tax provisions for subsidiaries are
typically recorded using an estimate and finalized in total with an
adjustment recorded at the corporate level. Certain debt under which
Apogent Technologies Inc. is listed as the debtor has been allocated to the
guarantor subsidiaries. Intercompany balances include receivables/payables
incurred in the normal course of business in addition to investments and
loans transacted between subsidiaries of the Company or with Apogent
Technologies Inc.
16
17
CONDENSED CONSOLIDATING BALANCE SHEETS
As of June 30, 2001
--------------------------------------------------------------------------
Non
Apogent Guarantor Guarantor
(In thousands) Technologies Subsidiaries Subsidiaries Eliminations Consolidated
------------ ------------ ------------ ------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 14,198 $ - $ 16,154 $ (3,532) $ 26,820
Accounts receivable, net - 144,764 35,490 - 180,254
Inventories, net 1,263 136,864 30,731 (5,947) 162,911
Other current assets 17,651 15,275 5,818 (1,766) 36,978
---------- ---------- --------- ------------ -----------
Total current assets 33,112 296,903 88,193 (11,245) 406,963
Property, plant and equipment, net 8,893 165,147 40,107 - 214,147
Intangible asset 6,999 894,112 209,078 - 1,110,189
Deferred income taxes 7,888 - - - 7,888
Investment in subsidiaries 1,616,767 51,628 - (1,668,395) -
Other assets 57,113 6,061 1,390 - 64,564
---------- ---------- --------- ------------ -----------
Total assets $1,730,772 $1,413,851 $ 338,768 $ (1,679,640) $ 1,803,751
========== ========== ========= ============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 318 $ 42,895 $ 10,201 $ (3,532) $ 49,882
Current portion of long-term debt - 35,247 40 - 35,287
Income taxes payable - 31,810 4,104 (3,087) 32,827
Accrued expenses and other current liabilities 24,257 30,940 14,152 - 69,349
---------- ---------- --------- ------------ -----------
Total current liabilities 24,575 140,892 28,497 (6,619) 187,345
---------- ---------- --------- ------------ -----------
Long-term debt - 667,680 26 - 667,706
Securities lending agreement 53,845 - - - 53,845
Deferred income taxes 67,985 17,523 6,639 - 92,147
Other liabilities 6,422 955 1,491 - 8,868
Net intercompany payable/(receivable) 389,684 (577,080) 187,396 - -
Commitments and contingent liabilities
Shareholders' equity
Preferred stock - - - - -
Common stock 1,057 - - - 1,057
Equity rights - - - - -
Additional paid-in-capital 251,299 1,589,889 79,334 (1,669,223) 251,299
Retained earnings (deficit) 944,620 (397,817) 55,246 (3,798) 598,251
Accumulated other comprehensive income (8,715) (28,191) (19,861) - (56,767)
Treasury stock (at cost) - - - - -
---------- ---------- --------- ------------ -----------
Total shareholders' equity 1,188,261 1,163,881 114,719 (1,673,021) 793,840
---------- ---------- --------- ------------ -----------
Total liabilities and shareholders' equity $1,730,772 $1,413,851 $ 338,768 $ (1,679,640) $ 1,803,751
========== ========== ========= ============ ===========
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18
CONDENSED CONSOLIDATING BALANCE SHEETS - (CONTINUED)
As of September 30, 2000
------------------------------------------------------------------------
Non
Apogent Guarantor Guarantor
(In thousands) Technologies Subsidiaries Subsidiaries Eliminations Consolidated
------------ ------------ ------------ ------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 7,086 $ - $ 7,902 $ (2,577) $ 12,411
Accounts receivable, net - 146,564 27,021 - 173,585
Inventories, net 1,187 120,399 24,020 (3,827) 141,779
Net assets held for discontinued operations 152,970 - - - 152,970
Other current assets 16,467 28,387 4,112 (19,176) 29,790
----------- ----------- --------- ---------- -----------
Total current assets 177,710 295,350 63,055 (25,580) 510,535
Property, plant and equipment, net 8,840 162,431 36,823 - 208,094
Intangible assets 2,922 895,583 109,648 - 1,008,153
Deferred income taxes 12,563 (4,693) - - 7,870
Investment in subsidiaries 813,152 51,069 - (864,221) -
Other assets 52,154 3,914 1,644 - 57,712
----------- ----------- --------- ---------- -----------
Total assets $ 1,067,341 $ 1,403,654 $ 211,170 $ (889,801) $ 1,792,364
=========== =========== ========= ========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 594 $ 37,361 $ 16,521 $ (2,577) $ 51,899
Advances and loans from SDS 77,762 - - - 77,762
Current portion of long-term debt - 34,252 75 - 34,327
Income taxes payable 34,117 - 2,523 (20,036) 16,604
Accrued expenses and other current liabilities 17,331 29,782 13,434 - 60,547
----------- ----------- --------- ---------- -----------
Total current liabilities 129,804 101,395 32,553 (22,613) 241,139
----------- ----------- --------- ---------- -----------
Long-term debt - 649,383 26 - 649,409
Securities lending agreement 54,444 - - - 54,444
Deferred income taxes 70,388 14,793 7,867 93,048
Other liabilities 1,164 3,772 1,060 (1,188) 4,808
Net intercompany payable/(receivable) (519,063) 463,622 55,232 209 -
Commitments and contingent liabilities
Shareholders' equity
Preferred stock - - - - -
Common stock 1,052 - - - 1,052
Equity rights - - - - -
Additional paid-in-capital 271,739 786,251 77,970 (864,221) 271,739
Retained earnings (deficit) 1,055,421 (615,562) 93,830 (1,988) 531,701
Accumulated other comprehensive income 2,392 - (57,368) - (54,976)
Treasury stock (at cost) - - - - -
----------- ----------- --------- ---------- -----------
Total shareholders' equity 1,330,604 170,689 114,432 (866,209) 749,516
----------- ----------- --------- ---------- -----------
Total liabilities and shareholders' equity $ 1,067,341 $ 1,403,654 $ 211,170 $ (889,801) $ 1,792,364
=========== =========== ========= ========== ===========
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19
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the Three Months Ended June 30, 2001
-----------------------------------------------------------------------------
Non
Apogent Guarantor Guarantor
(In thousands) Technologies Subsidiaries Subsidiaries Eliminations Consolidated
----------- ------------ ------------ ------------ ------------
Net sales $ - $ 226,546 $ 49,457 $ (15,607) $ 260,396
Cost of sales - 121,465 28,653 (15,223) 134,895
---------- ---------- ---------- ----------- -----------
Gross profit - 105,081 20,804 (384) 125,501
Selling, general and administrative expenses 7,154 47,807 11,859 66,820
---------- ---------- ---------- ----------- -----------
Operating income (7,154) 57,274 8,945 (384) 58,681
Other income (expense):
Interest income (expense) - (12,757) 40 - (12,717)
Other, net (163) 114 156 - 107
---------- ---------- ---------- ----------- -----------
Income before income taxes, discontinued operations
and extraordinary item (7,317) 44,631 9,141 (384) 46,071
Income taxes (3,541) 17,852 3,656 - 17,968
---------- ---------- ---------- ----------- -----------
Income from continuing operations before
extraordinary item (3,776) 26,779 5,485 (384) 28,103
Discontinued operations - - - - -
---------- ---------- ---------- ----------- -----------
Income before extraordinary item (3,776) 26,779 5,485 (384) 28,103
Extraordinary item - (1,361) - - (1,361)
---------- ---------- ---------- ----------- -----------
Net income $ (3,776) $ 25,418 $ 5,485 $ (384) $ 26,742
========== ========== ========== =========== ===========
For the Three Months Ended June 30, 2000
------------------------------------------------------------------------
Non
Apogent Guarantor Guarantor
(In thousands) Technologies Subsidiaries Subsidiaries Eliminations Consolidated
------------ ------------- ------------ ------------ ------------
Net sales $ - $ 187,927 $ 36,765 $ (12,663) $ 212,029
Cost of sales - 97,864 21,145 (12,389) 106,620
---------- ----------- ---------- ---------- -----------
Gross profit - 90,063 15,620 (274) 105,409
Selling, general and administrative expenses 1,579 43,482 9,168 - 54,229
---------- ----------- ---------- ---------- -----------
Operating income (1,579) 46,581 6,452 (274) 51,180
Other income (expense):
Interest income (expense) - (12,268) 12 - (12,256)
Other, net 399 493 (583) - 309
---------- ----------- ---------- ---------- -----------
Income before income taxes and discontinued operations (1,180) 34,806 5,881 (274) 39,233
Income taxes (985) 13,922 2,352 15,290
---------- ----------- ---------- ---------- -----------
Income from continuing operations (195) 20,884 3,529 (274) 23,943
Discontinued operations 11,275 - - - 11,275
---------- ----------- ---------- ---------- -----------
Net income $ 11,080 $ 20,884 $ 3,529 $ (274) $ 35,218
========== =========== ========== ========== ===========
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20
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS - (CONTINUED)
For the Nine Months Ended June 30, 2001
--------------------------------------------------------------------------
Non
Apogent Guarantor Guarantor
(In thousands) Technologies Subsidiaries Subsidiaries Eliminations Consolidated
------------ ------------ ------------ ------------ ------------
Net sales $ - $ 636,985 $ 128,974 $ (39,701) $ 726,258
Cost of sales - 337,474 75,257 (38,440) 374,291
----------- ----------- ----------- ----------- -----------
Gross profit - 299,511 53,717 (1,261) 351,967
Selling, general and administrative expenses 23,189 132,996 30,431 - 186,616
----------- ----------- ----------- ----------- -----------
Operating income (23,189) 166,515 23,286 (1,261) 165,351
Other income (expense): - - - -
Interest income (expense) - (37,134) 25 - (37,109)
Other, net 3,622 1,744 (242) - 5,124
----------- ----------- ----------- ----------- -----------
Income before income taxes, discontinued operations - - - -
And extraordinary item (19,567) 131,125 23,069 (1,261) 133,366
Income taxes (8,792) 52,450 9,228 - 52,886
----------- ----------- ----------- ----------- -----------
Income from continuing operations before - - - -
Extraordinary item (10,775) 78,675 13,841 (1,261) 80,480
Discontinued operations (11,824) - - - (11,824)
----------- ----------- ----------- ----------- -----------
Income before extraordinary items (22,599) 78,675 13,841 (1,261) 68,656
Extraordinary items - (2,106) - - (2,106)
----------- ----------- ----------- ----------- -----------
Net income $ (22,599) $ 76,569 $ 13,841 $ (1,261) $ 66,550
=========== =========== =========== =========== ===========
For the Nine Months Ended June 30, 2000
---------------------------------------------------------------------
Non
Apogent Guarantor Guarantor
(In thousands) Technologies Subsidiaries Subsidiaries Eliminations Consolidated
------------ ------------ ------------ ------------- ------------
Net sales $ - $ 559,583 $ 108,747 $ (33,344) $ 634,986
Cost of sales - 291,254 63,686 (32,619) 322,321
---------- ----------- ----------- ----------- -----------
Gross profit - 268,329 45,061 (725) 312,665
Selling, general and administrative expenses 5,469 131,214 25,750 - 162,433
---------- ----------- ----------- ----------- -----------
Operating income (5,469) 137,115 19,311 (725) 150,232
Other income (expense):
Interest expense - (36,103) (48) - (36,151)
Other, net 858 666 (1,309) - 215
---------- ----------- ----------- ----------- -----------
Income before income taxes and discontinued operations (4,611) 101,678 17,954 (725) 114,296
Income taxes (3,301) 40,671 7,182 - 44,552
---------- ----------- ----------- ----------- -----------
Income from continuing operations (1,310) 61,007 10,772 (725) 69,744
Discontinued operations 34,873 - - - 34,873
---------- ----------- ----------- ----------- -----------
Net income $ 33,563 $ 61,007 $ 10,772 $ (725) $ 104,617
========== =========== ========== ========== ===========
20
21
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the Nine Months Ended June 30, 2001
------------------------------------------------------------------
Non
Apogent Guarantor Guarantor Elimina-
(In thousands) Technologies Subsidiaries Subsidiaries tions Consolidated
------------ ------------- ------------ -------- ------------
Cash flows (used in) provided by operating activities: $ (47,066) $ 144,410 $ 14,514 $ - $ 111,858
---------- ---------- --------- -------- ------------
Cash flows from investing activities:
Capital expenditures (7,254) (22,360) (5,888) - (35,502)
Proceeds from sales of property, plant and equipment 10,167 1,136 143 - 11,446
Net cash inflow from SDS 46,394 - - - 46,394
Net payments for businesses acquired - (136,709) (2,311) - (139,020)
---------- ---------- --------- -------- ------------
Net cash provided by (used in) investing activities 49,307 (157,933) (8,056) - (116,682)
---------- ---------- --------- -------- ------------
Cash flows from financing activities:
Proceeds from long-term debt - 1,110,508 - - 1,110,508
Principal payments on long-term debt - (1,091,219) (32) - (1,091,251)
Proceeds from the exercise of stock options 4,384 - - - 4,384
Other 487 (6,721) - - (6,234)
---------- ---------- --------- -------- ------------
Net cash provided by (used in) financing activities 4,871 12,568 (32) - 17,407
Effect of exchange rate on cash and cash equivalents - - 1,826 - 1,826
---------- ---------- --------- -------- ------------
Net increase (decrease) in cash and cash equivalents 7,112 (955) 8,252 - 14,409
Cash and cash equivalents at beginning of year 7,086 (2,577) 7,902 - 12,411
---------- ---------- --------- -------- ------------
Cash and cash equivalents at end of period $ 14,198 $ (3,532) $ 16,154 $ - $ 26,820
========== ========== ========= ======== ============
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest $ - $ 31,996 $ 342 $ - $ 32,338
========== ========== ========= ======== ============
Income taxes $ 37,025 $ 131 $ 1,910 $ - $ 39,066
========== ========== ========= ======== ============
Capital lease obligations incurred $ - $ - $ - $ - $ -
========== ========== ========= ======== ============
21
22
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS - (CONTINUED)
For the Nine Months Ended June 30, 2000
----------------------------------------------------------------------
Non
Apogent Guarantor Guarantor Elimina- Consoli-
(In thousands) Technologies Subsidiaries Subsidiaries tions dated
------------ ------------ ------------ -------- -----------
Cash flows (used in) provided by operating activities: $ (51,685) $ 109,164 $ 8,313 $ - $ 65,792
---------- ----------- --------- -------- ----------
Cash flows from investing activities:
Capital expenditures (635) (23,173) (3,628) - (27,436)
Proceeds from sales of property, plant and equipment - 335 49 - 384
Proceeds from sale of NPT (2,600) - - - (2,600)
Net cash inflow from SDS 36,215 - - - 36,215
Net payments for businesses acquired - (123,399) - - (123,399)
---------- ----------- --------- -------- ----------
Net cash provided by (used in) investing activities 32,980 (146,237) (3,579) - (116,836)
---------- ----------- --------- -------- ----------
Cash flows from financing activities:
Proceeds from long-term debt - 250,554 - - 250,554
Principal payments on long-term debt - (213,081) (44) - (213,125)
Proceeds from the exercise of stock options 12,496 - - - 12,496
Other 5,376 (2,200) (1,769) - 1,407
---------- ----------- --------- -------- ----------
Net cash provided by (used in) financing activities 17,872 35,273 (1,813) - 51,332
Effect of exchange rate on cash and cash equivalents - - (460) - (460)
---------- ----------- --------- -------- ----------
Net (decrease) increase in cash and cash equivalents (833) (1,800) 2,461 - (172)
Cash and cash equivalents at beginning of year 6,708 (2,433) 8,126 - 12,401
---------- ----------- --------- -------- ----------
Cash and cash equivalents at end of period $ 5,875 $ (4,233) $ 10,587 $ - $ 12,229
========== =========== ========= ======== ==========
Supplemental disclosures of cash flow information
Cash paid during the year for:
Interest $ - $ 34,811 $ 243 $ - $ 35,054
========== =========== ========= ======== ==========
Income taxes $ 33,658 $ 85 $ 54 $ - $ 33,797
========== =========== ========= ======== ==========
Capital lease obligations incurred $ - $ 56 $ - $ - $ 56
========== =========== ========= ======== ==========
22
23
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The subsidiaries of Apogent are leading manufacturers of value-added products
for the labware and life sciences, clinical and industrial, diagnostics and
microbiology, and laboratory equipment markets in the United States and abroad.
Apogent provides products under four business segments -- Labware and Life
Sciences, Clinical and Industrial, Diagnostics and Microbiology, and Laboratory
Equipment. The primary subsidiaries in each of our business segments are as
follows:
LABWARE AND LIFE SCIENCES CLINICAL AND INDUSTRIAL
- ------------------------- ------------------------
Advance Biotechnologies Ltd. Chase Scientific Glass, Inc.
BioRobotics Group Limited Erie Electroverre S.A.
Genevac Limited Erie Scientific Company
Matrix Technologies Corporation Gerhard Menzel Glasbearbeitungswerk
Molecular BioProducts, Inc. GmbH & Co. K.G.
Nalge Nunc International Corporation Microm International GmbH
Nalge Nunc International K.K. The Naugatuck Glass Company
National Scientific Company Richard-Allan Scientific Company
Nunc A/S Samco Scientific Corporation
Robbins Scientific Corporation
DIAGNOSTICS AND MICROBIOLOGY LABORATORY EQUIPMENT
- ---------------------------- --------------------
Applied Biotech, Inc. Barnstead Thermolyne Corporation
Microgenics Corporation Electrothermal Engineering, Ltd.
Remel Inc. Lab-Line Instruments, Inc.
Over the past several years, Apogent has been pursuing a growth strategy
designed to increase sales and enhance operating margins. Elements of that
strategy include emphasis on acquisitions, product development, product line
extensions, new product introductions, internal growth, and rationalization of
existing businesses and product lines.
When we use the terms "we" or "our" in this report, we are referring to Apogent
Technologies Inc. and its subsidiaries. Our fiscal year ends on September 30,
and accordingly, all references to quarters refer to our fiscal quarters. The
quarters ended June 30, 2001 and 2000 are the Company's third quarters of fiscal
2001 and 2000, respectively.
As used in this report, the term "Company" means Sybron International
Corporation for the period prior to January 30, 2001 and Apogent Technologies
Inc. thereafter.
SPIN-OFF OF SYBRON DENTAL SPECIALTIES
On December 11, 2000, Apogent Technologies Inc. ("Apogent" or the "Company"),
then known as Sybron International Corporation ("Sybron"), completed the
spin-off of its dental business as a separate publicly traded company. The
spin-off was effected by way of a pro-rata distribution of all the outstanding
common stock and related preferred stock purchase rights of Sybron Dental
23
24
Specialties, Inc. ("SDS") to the Company's shareholders (the "Distribution" or
"Spin-Off"). SDS is now an independent public company operating what was
Sybron's dental business.
Immediately prior to the Distribution, Sybron Dental Management, Inc. ("SDM"),
then a subsidiary of Sybron, paid a dividend of $142,880 to Sybron, of which
$67,900 was paid in cash and $74,980 was a settlement of intercompany loans and
advances and to reflect an allocation of additional bank debt to SDS.
Immediately after payment of the dividend, SDM became a subsidiary of SDS. The
total allocation of bank debt to SDS was $375,000.
As a result of the Spin-Off, all historical financial data relating to the
operations of SDS and its affiliates has been reclassified to discontinued
operations.
RESULTS OF OPERATIONS
OVERVIEW
Both our sales and our operating income for the quarter and year to date period
ended June 30, 2001 grew over the corresponding prior year periods. Net sales
increased 22.8% during the quarter ended June 30, 2001 to $260.4 million from
$212.0 million in the quarter ended June 30, 2000. Operating income and income
from continuing operations before extraordinary item for the quarter ended June
30, 2001 was $58.7 million and $28.1 million, respectively, as compared to $51.2
million and $23.9 million for the quarter ended June 30, 2000, representing
increases of 14.7% and 17.4%, respectively.
Net sales increased 14.4% during the nine months ended June 30, 2001 to $726.3
million from $635.0 million in the nine months ended June 30, 2000. Operating
income was $165.4 million for the nine months ended June 30, 2001 as compared to
$150.2 million for the nine months ended June 30, 2000. Income from continuing
operations before extraordinary items increased 15.4% to $80.5 million for the
nine months ended June 30, 2001, from $69.7 million for the nine months ended
June 30, 2000. Income from continuing operations for the nine months ended June
30, 2001 included a $0.6 million charge relating to revisions in restructuring
reserves and a $4.1 million gain on the sale of an asset.
Sales growth in the quarter was strong both domestically and internationally.
Domestic and international net sales increased by 20.6% and 29.7%, respectively,
for the quarter ended June 30, 2001 as compared to the corresponding fiscal 2000
period. The strengthening of the U.S. dollar negatively impacted international
sales growth. Without the negative currency effects, international sales growth
would have been 34.2% over the corresponding fiscal 2000 quarter.
We continue to maintain an active program of developing and marketing new
products and product line extensions, as well as pursuing growth through
acquisitions. We completed four acquisitions during the first nine months of
fiscal 2001. (See Note 3 to the Unaudited Consolidated Financial Statements.)
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25
QUARTER ENDED JUNE 30, 2001 COMPARED TO THE QUARTER ENDED JUNE 30, 2000
NET SALES
FISCAL FISCAL DOLLAR PERCENT
2001 2000 CHANGE CHANGE
--------- --------- -------- -------
NET SALES (IN THOUSANDS)
Labware and Life Sciences $ 108,763 $ 86,810 $ 21,953 25.3%
Clinical and Industrial 65,927 50,270 15,657 31.1%
Diagnostics and Microbiology 60,503 50,636 9,867 19.5%
Laboratory Equipment 25,203 24,313 890 3.7%
--------- --------- --------
Total Net Sales $ 260,396 $ 212,029 $ 48,367 22.8%
========= ========= ========
Overall Company. Net sales for the third quarter ended June 30, 2001 increased
by $48.4 million or 22.8% from the corresponding fiscal 2000 quarter.
Labware and Life Sciences. Increased net sales in the Labware and Life Sciences
segment resulted primarily from: (a) net sales of products of acquired companies
(approximately $10.6 million), (b) increased net sales of existing products
(approximately $8.0 million), and (c) increased net sales of new products
(approximately $5.2 million). Net sales were partially reduced by: (a) foreign
currency fluctuations (approximately $1.7 million) and (b) price decreases
(approximately $0.1 million).
Clinical and Industrial. Increased net sales in the Clinical and Industrial
segment resulted primarily from: (a) net sales of products of acquired companies
(approximately $10.2 million), (b) increased sales of existing products
(approximately $4.8 million), (c) increased net sales of new products
(approximately $0.7 million), and (d) price increases (approximately $0.4
million). Net sales were partially reduced by foreign currency fluctuations
(approximately $0.5 million).
Diagnostics and Microbiology. Increased net sales in the Diagnostics and
Microbiology segment resulted primarily from: (a) increased net sales of
existing products (approximately $6.2 million), (b) net sales of products of
acquired companies (approximately $4.4 million), and (c) increased net sales of
new products (approximately $0.7 million). Net sales were partially reduced by
price decreases (approximately $1.4 million).
Laboratory Equipment. Increased net sales in the Laboratory Equipment segment
resulted primarily from: (a) increased net sales of new products (approximately
$1.1 million) and (b) price increases (approximately $0.7 million). Net sales
were partially reduced by: (a) decreased net sales of existing products
(approximately $0.8 million) and (b) foreign currency fluctuations
(approximately $0.1 million).
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GROSS PROFIT
FISCAL PERCENT FISCAL PERCENT DOLLAR PERCENT
2001 OF SALES 2000 OF SALES CHANGE CHANGE
--------- --------- -------- -------- --------- --------
GROSS PROFIT (IN THOUSANDS)
Labware and Life Sciences $ 55,147 21.2% $ 45,919 21.7% $ 9,228 20.1%
Clinical and Industrial 26,735 10.3% 22,124 10.4% 4,611 20.8%
Diagnostics and Microbiology 32,678 12.5% 27,200 12.8% 5,478 20.1%
Laboratory Equipment 10,941 4.2% 10,166 4.8% 775 7.6%
--------- -------- --------
Total Gross Profit $ 125,501 48.2% $105,409 49.7% $ 20,092 19.1%
========= ======== ========
Overall Company. Gross profit for the third quarter ended June 30, 2001
increased by $20.1 million or 19.1% from the corresponding fiscal 2000 period.
Labware and Life Sciences. Increased gross profit in the Labware and Life
Sciences segment resulted primarily from: (a) the effects of acquired companies
(approximately $3.8 million), (b) the effects of new products (approximately
$3.8 million), (c) product mix (approximately $2.7 million), and (d) increased
volume (approximately $1.4 million). Gross profit was partially reduced by: (a)
increased manufacturing overhead (approximately $1.3 million) and (b) foreign
currency fluctuations (approximately $1.2 million).
Clinical and Industrial. Increased gross profit in the Clinical and Industrial
segment resulted primarily from: (a) the effects of acquired companies
(approximately $2.5 million), (b) product mix (approximately $2.4 million), (c)
price increases (approximately $0.4 million), (d) the effects of new products
(approximately $0.5 million), and (e) increased volume (approximately $0.2
million). Gross profit was partially reduced by an increase in manufacturing
overhead (approximately $1.4 million).
Diagnostics and Microbiology. Increased gross profit in the Diagnostics and
Microbiology segment resulted primarily from: (a) product mix (approximately
$4.0 million), (b) the effects of acquired companies (approximately $3.7
million), (c) increased volume (approximately $2.9 million), and (d) the effects
of new products (approximately $0.4 million). Gross profit was partially reduced
by: (a) inventory adjustments (approximately $2.2 million), (b) increased
manufacturing overhead (approximately $2.1 million), and (c) price decreases
(approximately $1.2 million).
Laboratory Equipment. Increased gross profit in the Laboratory Equipment segment
resulted primarily from: (a) price increases (approximately $0.7 million), (b)
the effects of new products (approximately $0.6 million), and (c) inventory
adjustments (approximately $0.4 million). Gross profit was partially reduced by:
(a) increased manufacturing overhead (approximately $0.7 million) and (b)
decreased volume (approximately $0.2 million).
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SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
FISCAL FISCAL DOLLAR PERCENT
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 2001 2000 CHANGE CHANGE
-------- -------- -------- -------
(IN THOUSANDS)
Labware and Life Sciences $ 31,520 $ 25,096 $ 6,424 25.6%
Clinical and Industrial 12,229 8,800 3,429 39.0%
Diagnostics and Microbiology 16,083 13,736 2,347 17.1%
Laboratory Equipment 5,828 4,806 1,022 21.3%
--------- --------- --------
Subtotal 65,660 52,438 13,222 25.2%
Corporate Office 1,160 1,791 (631) -35.2%
--------- --------- --------
Total Selling, General and Administrative Expenses $ 66,820 $ 54,229 $ 12,591 23.2%
========= ========= ========
Overall Company. Selling, general and administrative expenses for the quarter
ended June 30, 2001 increased by $12.6 million or 23.2% from the corresponding
fiscal 2000 quarter.
Labware and Life Sciences. Increased selling, general and administrative
expenses in the Labware and Life Sciences segment resulted primarily from: (a)
acquired businesses (approximately $4.0 million), (b) general and administrative
expenses (approximately $2.5 million), (c) marketing expenses (approximately
$0.4 million), and (d) research and development expenses (approximately $0.1
million). Selling, general and administrative expenses were partially reduced by
foreign currency fluctuations (approximately $0.6 million).
Clinical and Industrial. Increased selling, general and administrative expenses
in the Clinical and Industrial segment resulted primarily from: (a) acquired
businesses (approximately $1.3 million), (b) general and administrative expenses
(approximately $1.0 million), (c) marketing expenses (approximately $1.0
million), and (d) increased amortization of intangibles primarily as a result of
acquisitions (approximately $0.1 million).
Diagnostics and Microbiology. Increased selling, general and administrative
expenses in the Diagnostic and Microbiology segment resulted primarily from: (a)
general and administrative expenses (approximately $1.0 million), (b) increased
amortization of intangibles primarily as a result of acquisitions (approximately
$0.7 million), (c) marketing expenses (approximately $0.3 million), (d) acquired
businesses (approximately $0.3 million), and (e) research and development
expenses (approximately $0.1 million). Selling, general and administrative
expenses were partially reduced by foreign currency fluctuations (approximately
$0.1 million).
Laboratory Equipment. Increased selling, general and administrative expenses in
the Laboratory Equipment segment resulted primarily from: (a) general and
administrative expenses (approximately $0.6 million), (b) marketing expenses
(approximately $0.2 million), and (c) research and development expenses
(approximately $0.2 million).
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OPERATING INCOME
FISCAL FISCAL DOLLAR PERCENT
2001 2000 CHANGE CHANGE
-------- --------- --------- --------
OPERATING INCOME (IN THOUSANDS)
Labware and Life Sciences $ 23,627 $ 20,823 $ 2,804 13.5%
Clinical and Industrial 14,506 13,324 1,182 8.9%
Diagnostics and Microbiology 16,595 13,464 3,131 23.3%
Laboratory Equipment 5,113 5,360 (247) -4.6%
-------- -------- --------
Subtotal 59,841 52,971 6,870 13.0%
Corporate Office (1,160) (1,791) 631 -35.2%
-------- -------- --------
Total Operating Income $ 58,681 $ 51,180 $ 7,501 14.7%
======== ======== ========
As a result of the foregoing, operating income in the third quarter ended June
30, 2001 increased by 14.7% or $7.5 million over operating income in the
corresponding quarter of fiscal 2000.
INTEREST EXPENSE
Interest expense for the third quarter ended June 30, 2001 increased by $0.5
million to $12.7 million from the corresponding quarter of fiscal 2000. The
increase in interest expense is primarily a result of higher debt levels,
resulting from funding acquisitions.
INCOME TAXES
Taxes on income from continuing operations for the third quarter ended June 30,
2001 were $18.0 million, an increase of $2.7 million from the corresponding 2000
quarter. The increase resulted primarily from increased taxable earnings.
INCOME FROM CONTINUING OPERATIONS BEFORE EXTRAORDINARY ITEM
As a result of the foregoing, the Company had net income from continuing
operations before an extraordinary item of $28.1 million for third quarter ended
June 30, 2001, as compared to $23.9 million in the corresponding 2000 period,
representing an increase of 17.4%.
DISCONTINUED OPERATIONS
Losses from discontinued operations were $11.3 million (net of income taxes of
$7.6 million) in the third quarter ended June 30, 2000. The 2000 income related
to the operating results of SDS. On December 11, 2000 we completed the spin-off
of SDS. There were no related operations for the comparable quarter in fiscal
2001.
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EXTRAORDINARY ITEM
As a result of the April 4, 2001 senior note offering, Apogent wrote off
deferred financing costs of approximately $2.2 million that related to the term
loan that was paid off with proceeds. This was recorded as an extraordinary item
of $1.4 million, net of income taxes.
NET INCOME
As a result of the foregoing, we had net income of $26.7 million in the third
quarter ended June 30, 2001, as compared to net income of $35.2 million in the
corresponding 2000 period.
DEPRECIATION AND AMORTIZATION EXPENSE
Depreciation and amortization expense is allocated among cost of sales, selling,
general and administrative expenses and other expense. Depreciation expense and
amortization expense increased $3.4 million in the third quarter ended June 30,
2001 due to additional depreciation and amortization from goodwill and
intangibles recorded from the various acquisitions as well as routine operating
capital expenditures.
NINE MONTHS ENDED JUNE 30, 2001 COMPARED TO NINE MONTHS ENDED JUNE 30, 2000
FISCAL FISCAL DOLLAR PERCENT
2001 2000 CHANGE CHANGE
--------- --------- -------- -------
NET SALES (IN THOUSANDS)
Labware and Life Sciences $ 291,291 $ 252,292 $ 38,999 15.5%
Clinical and Industrial 184,197 156,847 27,350 17.4%
Diagnostics and Microbiology 174,816 154,431 20,385 13.2%
Laboratory Equipment 75,954 71,416 4,538 6.4%
--------- --------- --------
Total Net Sales $ 726,258 $ 634,986 $ 91,272 14.4%
========= ========= ========
NET SALES
Overall Company. Net sales for the nine months ended June 30, 2001 increased by
$91.3 million or 14.4% over the corresponding period in fiscal 2000.
Labware and Life Sciences. Increased net sales in the Labware and Life Sciences
segment resulted primarily from: (a) net sales of products of acquired companies
(approximately $18.4 million), (b) increased net sales of new products
(approximately $13.3 million), (c) increased net sales of existing products
(approximately $8.6 million), and (d) price increases (approximately $4.1
million). Net sales were partially reduced by foreign currency fluctuations
(approximately $5.5 million).
Clinical and Industrial. Increased net sales in the Clinical and Industrial
segment resulted primarily from: (a) net sales of products of acquired companies
(approximately $23.4 million), (b) increases sales of existing products
(approximately $3.5 million), (c) increased net sales of new products
(approximately $1.8 million), and (d) price increases (approximately $1.1
million). Net sales were partially reduced by foreign currency fluctuations
(approximately $2.4 million).
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30
Diagnostics and Microbiology. Increased net sales in the Diagnostics and
Microbiology segment resulted primarily from: (a) net sales of products of
acquired companies (approximately $15.5 million), (b) increased net sales of
existing products (approximately $3.9 million), and (c) increased net sales of
new products (approximately $2.1 million). Net sales were partially reduced by:
(a) price decreases (approximately $0.6 million), and (b) foreign currency
fluctuations (approximately $0.5 million).
Laboratory Equipment. Increased net sales in the Laboratory Equipment segment
resulted primarily from: (a) increase in net sales of new products
(approximately $3.5 million), and (b) price increases (approximately $1.9
million). Net sales were partially reduced by: (a) foreign currency fluctuations
(approximately $0.5 million), and (b) decreased net sales of existing products
(approximately $0.4 million).
GROSS PROFIT
FISCAL PERCENT FISCAL PERCENT DOLLAR PERCENT
2001 OF SALES 2000 OF SALES CHANGE CHANGE
--------- -------- --------- -------- --------- ---------
GROSS PROFIT (IN THOUSANDS)
Labware and Life Sciences $ 150,244 20.7% $ 131,942 20.8% $ 18,302 13.9%
Clinical and Industrial 75,521 10.4% 67,034 10.6% 8,487 12.7%
Diagnostics and Microbiology 93,498 12.9% 83,633 13.2% 9,865 11.8%
Laboratory Equipment 32,704 4.5% 30,056 4.7% 2,648 8.8%
-------- -------- --------
Total Gross Profit $ 351,967 48.5% $ 312,665 49.2% $ 39,302 12.6%
======== ======== ========
Overall Company. Gross profit for the nine months ended June 30, 2001 increased
by $39.3 million or 12.6% over the corresponding fiscal 2000 period.
Labware and Life Sciences. Increased gross profit in the Labware and Life
Sciences segment resulted primarily from: (a) the effects of acquired companies
(approximately $9.1 million), (b) the effects of new products (approximately
$7.6 million), (c) price increases (approximately $4.3 million), and (d)
increased volume (approximately $3.6 million). Gross profit was partially
reduced by: (a) unfavorable foreign currency fluctuations (approximately $2.9
million), (b) increased manufacturing overhead (approximately $1.9 million), (c)
product mix (approximately $1.4 million), and (d) inventory adjustments
(approximately $0.1 million).
Clinical and Industrial. Increased gross profit in the Clinical and Industrial
segment resulted primarily from: (a) the effects of acquired companies
(approximately $6.4 million), (b) product mix (approximately $2.4 million), (c)
price increases (approximately $1.1 million), (d) the effects of new products
(approximately $0.9 million), and (e) inventory adjustments ($0.1 million).
Gross profit was partially reduced by: (a) reduced volume (approximately $1.6
million) and (b) unfavorable foreign currency fluctuations (approximately $0.9
million).
Diagnostics and Microbiology. Increased gross profit in the Diagnostics and
Microbiology segment resulted primarily from: (a) the effects of acquired
companies (approximately $11.6 million), (b) product mix (approximately $7.2
million), (c) increased volume (approximately $1.9 million), and (d) the effects
of new products (approximately $0.8 million). Gross profit was partially reduced
by: (a) increased manufacturing overhead (approximately $6.4 million), (b)
inventory adjustments (approximately $4.8 million), (c) price decreases
(approximately $0.4 million), and (d) foreign currency fluctuations
(approximately $0.1 million).
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31
Laboratory Equipment. Increased gross profit in the Laboratory Equipment segment
resulted primarily from: (a) price increases (approximately $1.9 million), (b)
the effects of new products (approximately $1.6 million), and (c) inventory
adjustments (approximately $0.3 million). Gross profit was partially reduced by:
(a) increased manufacturing overhead (approximately $0.9 million), and (b)
foreign currency fluctuations (approximately $0.3 million).
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
FISCAL FISCAL DOLLAR PERCENT
2001 2000 CHANGE CHANGE
--------- ---------- ---------- -------
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
(IN THOUSANDS)
Labware and Life Sciences $ 82,626 $ 72,074 $ 10,552 14.6%
Clinical and Industrial 33,826 26,995 6,831 25.3%
Diagnostics and Microbiology 47,825 42,598 5,227 12.3%
Laboratory Equipment 16,543 15,168 1,375 9.1%
--------- ---------- --------
Subtotal 180,820 156,835 23,985 15.3%
Corporate Office 5,796 5,598 198 3.5%
--------- ---------- --------
Total Selling, General and Administrative Expenses $ 186,616 $ 162,433 $ 24,183 14.9%
========= ========== ========
Overall Company. Selling, general and administrative expenses for the nine
months ended June 30, 2001 increased by $24.1 million or 14.9% from the
corresponding fiscal 2000 period.
Labware and Life Sciences. Increased selling, general and administrative
expenses in the Labware and Life Sciences segment resulted primarily from: (a)
acquired businesses (approximately $7.3 million), (b) general and administrative
expenses (approximately $2.6 million), (c) increased amortization of intangibles
primarily as a result of acquisitions (approximately $0.9 million), (d)
marketing expenses (approximately $0.3 million), and (e) research and
development expense (approximately $0.3 million). Selling, general and
administrative expenses were partially reduced by foreign currency fluctuations
(approximately $0.9 million).
Clinical and Industrial. Increased selling, general and administrative expenses
in the Clinical and Industrial segment resulted primarily from: (a) acquired
businesses (approximately $3.0 million), (b) marketing expenses (approximately
$2.2 million), (c) general and administrative expenses (approximately $1.1
million), (d) increased amortization of intangibles primarily as a result of
acquisitions (approximately $0.7 million), and (e) research and development
expenses (approximately $0.1 million). Selling, general and administrative
expenses were partially reduced by foreign currency fluctuations (approximately
$0.3 million).
Diagnostics and Microbiology. Increased selling, general and administrative
expenses in the Diagnostic and Microbiology segment resulted primarily from: (a)
increased amortization of intangibles primarily as a result of acquisitions
(approximately $2.8 million), (b) marketing expenses (approximately $1.4
million), (c) general and administrative expenses (approximately $1.5 million),
and (d) acquired businesses (approximately $0.4 million). Selling, general and
administrative expenses were partially reduced by: (a) research and development
expense (approximately $0.6 million) and (b) foreign currency fluctuations
(approximately $0.3 million).
Laboratory Equipment. Increased selling, general and administrative expenses in
the Laboratory Equipment segment resulted primarily from: (a) general and
administrative expenses (approximately $0.7 million), (b) research and
development expenses (approximately $0.6
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32
million), and (c) marketing expenses (approximately $0.2 million). Selling,
general and administrative expenses were partially reduced by foreign currency
fluctuations (approximately $0.1 million).
SPECIAL CHARGES
Results for the nine-months ended June 30, 2001 include a charge of
approximately $0.6 million ($0.4 million after tax) relating to adjustments made
to the 2000 restructuring reserve, consisting of additional severance. This
charge is included in the corporate office selling, general and administrative
expenses.
OPERATING INCOME
FISCAL FISCAL DOLLAR PERCENT
2001 2000 CHANGE CHANGE
--------- --------- -------- -------
OPERATING INCOME (IN THOUSANDS)
Labware and Life Sciences $ 67,617 $ 59,868 $ 7,749 12.9%
Clinical and Industrial 41,695 40,039 1,656 4.1%
Diagnostics and Microbiology 45,673 41,035 4,638 11.3%
Laboratory Equipment 16,162 14,888 1,274 8.6%
--------- --------- --------
Subtotal 171,147 155,830 15,317 9.8%
Corporate Office (5,796) (5,598) (198) 3.5%
--------- --------- --------
Total Operating Income $ 165,351 $ 150,232 $ 15,119 10.1%
========= ========= ========
As a result of the foregoing, operating income for the nine months ended June
30, 2001 increased by $15.1 million or 10.1% over the corresponding period in
fiscal 2000.
INTEREST EXPENSE
Interest expense was $37.1 million for the nine months ended June 30, 2001, an
increase of $1.0 million from the corresponding fiscal 2000 period. The increase
in interest expense is primarily a result of higher debt levels, resulting from
funding acquisitions.
OTHER INCOME
Other income for the nine months ended June 30, 2001 was $5.5 million, an
increase of $4.9 million over the corresponding 2000 period. The increase
resulted primarily from the gain on the sale of asset of $4.1 million during the
second quarter of fiscal 2001.
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INCOME TAXES
Taxes on income from continuing operations for the nine months ended June 30,
2001 were $52.9 million, an increase of $8.3 million from the corresponding
fiscal 2000 period. The increase resulted primarily from increased taxable
earnings.
INCOME FROM CONTINUING OPERATIONS BEFORE EXTRAORDINARY ITEMS
As a result of the foregoing, for the nine months ended June 30, 2001, income
from continuing operations was $80.5 million as compared to $69.7 million in the
corresponding fiscal 2000 period.
DISCONTINUED OPERATIONS
Losses from discontinued operations were $11.8 million (net of income taxes of
$0.4 million) for the nine months ended June 30, 2001, as compared to income of
$34.9 million (net of income tax of $23.6 million) in the corresponding period
of fiscal 2000. The 2001 loss from discontinued operations resulted from
transaction expenses relating to the spin-off of approximately $12.4 million
offset by the operating results of SDS (through December 11, 2000) of $0.6
million. On December 11, 2000 we completed the spin-off of SDS.
EXTRAORDINARY ITEMS
As a result of the December 2000 debt refinancing and the April 2001 bond
issuance, the Company wrote off deferred financing costs of approximately $3.5
million that related to prior debt agreements. This was recorded as an
extraordinary item of $2.1 million, net of income taxes.
NET INCOME
As a result of the foregoing, the Company had net income of $66.6 million for
the nine months ended June 30, 2001, as compared to net income of $104.6 for the
corresponding fiscal 2000 period.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization expense is allocated among cost of sales, selling,
general and administrative expenses and other expense. Depreciation expense and
amortization expense increased $9.8 million for the nine months ended June 30,
2001 due to additional depreciation and amortization from goodwill and
intangibles recorded from the various acquisitions as well as routine operating
capital expenditures.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In July 2001, the FASB issued Statement No. 141, "Business Combinations", and
Statement No. 142, "Goodwill and Other Intangible Assets". Statement 141
requires that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001 as well as all purchase method
business combinations completed after June 30, 2001. Statement 141 also
specifies criteria that intangible assets acquired in a purchase method business
combination must meet to be recognized and reported apart from goodwill noting
that any purchase price allocable to an assembled workforce may not be accounted
for separately. Statement 142 will require that
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34
goodwill and intangible assets with indefinite useful lives no longer be
amortized, but instead tested for impairment at least annually in accordance
with the provisions of Statement 142. Statement 142 will also require that
intangible assets with definite useful lives be amortized over their respective
estimated useful lives to the estimated residual values, and reviewed for
impairment in accordance with SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.
The Company is required to adopt the provisions of Statement 141 immediately,
and expects to adopt Statement 142 effective October 1, 2001. Furthermore, any
goodwill and any intangible asset determined to have an indefinite useful life
that are acquired in a purchase business combination completed after June 30,
2001 will not be amortized, but will continue to be evaluated for impairment in
accordance with the appropriate pre-Statement 142 accounting literature.
Goodwill and intangible assets acquired in a business combination completed
before July 1, 2001 will continue to be amortized prior to the adoption of
Statement 142.
Statement 141 will require upon adoption of Statement 142, that the Company
evaluate its existing intangible assets and goodwill that were acquired in a
prior business combination, and to make any necessary reclassification in order
to conform with the new criteria in Statement 141 for recognition apart from
goodwill. Upon adoption of Statement 142, the Company will be required to
reassess the useful lives and residual values of all intangible assets acquired
in purchase business combinations, and make any necessary amortization period
adjustments by the end of the first interim period after adoption. In addition,
to the extent an intangible asset is identified as having an indefinite useful
life, the Company will be required to test the intangible asset for impairment
in accordance with the provisions of Statement 142 within the first interim
period. Any impairment loss will be measured as of the date of adoption and
recognized as the cumulative effect of a change in accounting principle in the
first interim period.
In connection with the transition goodwill impairment evaluation, Statement 142
will require the Company to perform an assessment of whether there is an
indication that goodwill (and equity -method goodwill) is impaired as of the
date of adoption. To accomplish this the Company must identify its reporting
units and determine the carrying value of each reporting unit by assigning the
assets and liabilities, including the existing goodwill and intangible assets,
to those reporting units as of the date of adoption. The Company will then have
up to six months from the date of adoption to determine the fair value of each
reporting unit and compare it to the reporting unit's carrying amount. To the
extent a reporting unit's carrying amount exceeds its fair value, an indication
exists that the reporting unit's goodwill may be impaired and the Company must
perform the second step of the transitional impairment test. In the second step,
the Company must compare the implied fair value of the reporting unit's
goodwill, determined by allocating the reporting unit's fair value to all of its
assets (recognized and unrecognized) and liabilities in a manner similar to a
purchase price allocation in accordance with Statement 141, to its carrying
amount, both of which would be measured as of the date of adoption. This second
step is required to be completed as soon as possible, but no later than the end
of the year of adoption. Any transitional impairment loss will be recognized as
the cumulative effect of a change in accounting principle in the Company's
statement of earnings.
At June 30, 2001, the Company had unamortized goodwill and unamortized
identifiable intangible assets in the amount of $887.4 million and $222.8
million, respectively, all of which will be subject to the transition provisions
of Statements 141 and 142. Amortization expense relating to goodwill was $20.5
million for the fiscal year ended September 30, 2000 and $19.1 million for the
nine months ended June 30, 2001. At this time it is not practical to estimate
the impact of the adoption of both statements on the Company.
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LIQUIDITY AND CAPITAL RESOURCES
As a result of the acquisition of the Company's predecessor in 1987 and the
acquisitions we completed since 1987, we have increased the carrying value of
certain tangible and intangible assets consistent with accounting principles
generally accepted in the United States. Accordingly, our results of operations
include a significant level of non-cash expenses related to the depreciation of
fixed assets and the amortization of intangible assets, including goodwill.
Goodwill and intangible assets, net of amortization, increased by approximately
$102 million in the nine months ended June 30, 2001, primarily as a result of
continued acquisition activity.
Our capital requirements arise principally from indebtedness incurred in
connection with the permanent financing for the 1987 acquisition and our
subsequent refinancings, our obligation to pay rent under the Sale/ Leaseback
facility (as defined herein), our working capital needs, primarily related to
inventory and accounts receivable, our capital expenditures, primarily related
to purchases of machinery and molds, the purchase of various businesses and
product lines in execution of our acquisition strategy, payments to be made in
connection with our restructuring in 2000, and the periodic expansion of
physical facilities. It is currently our intent to continue to pursue our
current acquisition strategy. If acquisitions continue at our historical pace,
of which there can be no assurance, we may require financing beyond the capacity
of our Credit Facilities (as defined below).
The statement contained in the immediately preceding paragraph concerning our
intent to continue to pursue our acquisition strategy is a forward-looking
statement. Our ability to continue our acquisition strategy is subject to a
number of uncertainties, including, but not limited to, our ability to raise
capital beyond the capacity of our Credit Facilities and the availability of
suitable acquisition candidates at reasonable prices. See "Cautionary Factors"
below.
Approximately $111.9 million of cash was generated from operating activities in
the nine months ended June 30, 2001, an increase of $46.2 million or 70.3% from
the corresponding period in fiscal 2000. Non-cash depreciation and amortization
charged against net income increased approximately $9.8 million for the nine
months ended June 30, 2001 as compared to the corresponding period in fiscal
2000. The cash outflow resulting from the net change in working capital, net of
the effects of acquisitions and divestitures, was $23.1 million for the nine
months ended June 30, 2001, or an increase in cash flow of $39.3 million, as
compared to $62.4 million in cash outflow for the corresponding period in fiscal
2000. This resulted in an increase in cash flow of $39.3 million for the nine
months ended June 30, 2001 as compared to the corresponding period in fiscal
2000. These changes are set forth in detail in the Consolidated Statement of
Cash Flows. The increase in working capital accounts over the nine months ended
June 30, 2001 is attributable to the higher level of business activity as
reflected in our increased sales.
Investing activities in the nine months ended June 30, 2001 used approximately
$116.7 million of cash. Increased cash outflow from investing activities as
compared to fiscal 2000 resulted primarily from an increase in net payments for
businesses acquired of approximately $15.6 million, an increase in capital
expenditures of $8.1 million, and an increase in net payments to SDS of $9.9
million, offset in part by an increase in the proceeds from sales of property,
plant and equipment of $11.0 million.
Financing activities provided approximately $17.4 million of cash. Proceeds from
long-term debt relating to acquisitions of $79.9 million were offset in part by
the payments made on the revolving Credit Facilities in excess of proceeds of
$3.9 million and payments made on prior
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acquisition debt of $6 million. In addition, the Company paid down a further
$51.0 million on the Term Loan Facilities above the results of the December 2000
refinancing and April 2001 bond issuance (discussed below). Financing fees of
$6.7 million were paid in connection with the December 2000 refinancing and
April 2001 bond issuance.
Prior to the Spin-Off, the Company was party to a credit agreement (the "Old
Credit Agreement") with The Chase Manhattan Bank ("Chase") and certain other
lenders providing for a tranche A term loan facility of $300 million (the "Old
Tranche A Term Loan Facility"), a tranche B term loan facility of $300 million
(the "Old Tranche B Term Loan Facility") and a revolving credit facility of up
to $600 million (the "Old Revolving Credit Facility"), and together with the Old
Tranche A Term Loan Facility and the Old Tranche B Term Loan Facility, the "Old
Credit Facilities"). Both the Company and SDM were obligors under the Old Credit
Facilities and as such, certain outstanding amounts under the Old Credit
Facilities were historically recorded on the books of SDM. Outstanding amounts
under the Old Tranche A Term Loan Facility, the Old Tranche B Term Loan Facility
and the Old Revolving Credit Facility at September 30, 2000 (including amounts
recorded on the books of SDM) were $270.8 million, $299.3 million, and $379.0
million, respectively. Outstanding amounts under the Old Tranche A Term Loan
Facility, the Old Tranche B Term Loan Facility, and the Old Revolving Credit
Facility at September 30, 2000 recorded on the books of the Company were $201.0
million, $179.9 million, and $256.4 million, respectively.
On December 1, 2000, the Company entered into a new credit agreement (the
"Credit Agreement") with Chase and certain other lenders providing for a term
loan facility of $300 million (the "Term Loan Facility") due in a single payment
on December 1, 2005, and a revolving credit facility of up to $500 million for a
period of up to five years (the "Revolving Credit Facility") and together with
the Term Loan Facility, the "Credit Facilities"). On December 11, 2000, the
Company borrowed approximately $563.0 million under the Credit Facilities and
together with funds aggregating $375.0 million ($307.1 million, the amount equal
to the outstanding amounts under the Old Credit Facilities attributable to SDS
on December 11, 2000 including accrued interest plus a cash dividend of $67.9
million from SDM to the Company), used such funds to repay all of the
outstanding amounts under the Old Credit Facilities, aggregating $938.0 million
(including accrued interest).
On April 4, 2001, the Company issued $325 million of unsecured senior notes in a
private placement with exchange and registration rights. The Company used the
proceeds from the issuance to repay all of its Term Loan Facility ($300 million)
and a portion of its Revolving Credit Facility. The notes were offered at a
discount of approximately $1,469. They will mature on April 1, 2011. Interest is
fixed at an annual rate of 8% and is payable on April 1 and October 1 of each
year, beginning on October 1, 2001. Interest will accrue from April 4, 2001. The
notes are redeemable by the Company at any time in whole, or from time to time
in part, at a price equal to the greater of (i) 100% of the principal amount of
the notes to be redeemed or (ii) the sum of the present values of the remaining
scheduled payments of principal and interest thereon (exclusive of interest
accrued to the date of redemption) discounted to the date of redemption on a
semiannual basis at the applicable Treasury Yield (as defined in the bond
agreement) plus 35 basis points, plus accrued interest to the date of
redemption. These notes are guaranteed by the Company's material U.S.
subsidiaries, which also guarantee the Company's obligations under its bank
credit facility.
EUROPEAN ECONOMIC MONETARY UNIT
On January 1, 1999, eleven of the European Union countries (including one
country in which we have operations) adopted the Euro as their single currency.
At that time, a fixed exchange rate was established between the Euro and the
individual countries' existing currencies (the "legacy
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currencies"). The Euro trades on currency exchanges and is available for
non-cash transactions. Following the introduction of the Euro, the legacy
currencies will remain legal tender in the participating countries during a
transition period from January 1, 1999 through January 1, 2002. Beginning on
January 1, 2002, the European Central Bank will issue Euro-denominated bills and
coins for use in cash transactions.
Our German operating units affected by the Euro conversion intend to keep their
books in their respective legacy currencies through a portion of the transition
period. At this time, we do not expect Euro conversions to have a material
adverse effect on our business operations or financial condition.
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CAUTIONARY FACTORS
This report contains various forward-looking statements concerning our prospects
that are based on the current expectations and beliefs of management. We may
also make forward-looking statements from time to time in other reports and
documents as well as oral presentations. When used in written documents or oral
statements, the words "anticipate", "believe", "continue", "estimate", "expect",
"goal", "objective", "outlook", and similar expressions are intended to identify
forward-looking statements. The statements contained herein and such future
statements involve or may involve certain assumptions, risks and uncertainties,
many of which are beyond our control, that could cause our actual results and
performance to differ materially from what is expected. In addition to the
assumptions and other factors referenced specifically in connection with such
statements, the following factors could impact our business and financial
prospects:
o We have operations outside the United States. We are therefore subject to
factors affecting our international operations, including relevant foreign
currency exchange rates, which can affect the cost to produce our products
or the ability to sell our products in foreign markets, and the value in
U.S. dollars of sales made in foreign currencies. Other factors include our
ability to obtain effective hedges against fluctuations in currency
exchange rates; foreign trade, monetary and fiscal policies; laws,
regulations and other activities of foreign governments, agencies and
similar organizations; risks associated with having major manufacturing
facilities located in countries, such as Mexico and Hungary, which have
historically been less stable than the United States in several respects,
including fiscal and political stability; and risks associated with
economic downturn in other countries.
o A significant portion of our growth over the past several years has been
achieved through our acquisition program, which has generated approximately
70 acquisitions since 1993. Our rate of continued growth is therefore
subject to factors affecting our ability to continue pursuing our current
acquisition strategy and to be successful with that strategy. These factors
include our ability to raise capital beyond the capacity of our existing
credit facilities or to use our stock for acquisitions, the cost of the
capital required to effect our acquisition strategy, the availability of
suitable acquisition candidates at reasonable prices, competition for
appropriate candidates, our ability to realize the synergies expected to
result from acquisitions, and the ability of our existing personnel to
efficiently handle increased transitional responsibilities resulting from
acquisitions.
o We are organized as a holding company. As a result, all of our revenues are
generated through our subsidiaries, including foreign subsidiaries.
Consequently, our operating cash flow and ability to service indebtedness
and other obligations depend upon the operating cash flow of our U.S. and
foreign subsidiaries and the payment of funds by them to us in the form of
loans, dividends or otherwise. Their ability to pay dividends and make
loans, advances and other payments to us depends upon statutory
restrictions (including insolvency and fraudulent conveyance laws) and
contractual restrictions (which may include requirements to maintain
minimum levels of working capital and other assets).
o Our reliance on major independent distributors for a substantial portion of
our sales subjects our sales performance to volatility in demand from
distributors. We can experience volatility when distributors merge or
consolidate, when inventories are not managed to end-user demand, or when
distributors experience softness in their sales. This volatility in demand
can also arise with large OEM customers to whom we sell direct. Sales to
our distributors and
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OEM customers are sometimes unpredictable and wide variances sometimes
occur quarter to quarter.
o Our ability to increase revenues and to profitably distribute and sell our
products is subject to a number of risks, such as any changes in our
business relationships with our principal distributors or OEM customers,
competitive factors such as the entrance of additional competitors into our
markets, pricing and technological competition, risks associated with the
development and marketing of new products in order to remain competitive by
keeping pace with advancing laboratory and life science technologies,
particularly in the genomics and other rapidly developing technologies,
factors affecting certain high growth industries we serve, such as
consolidation in the drug discovery and diagnostics industries, and risks
of unanticipated technological developments that result in competitive
disadvantages and create the potential for impairment of our existing
assets.
o Our business is subject to quarterly variations in operating results caused
by a number of factors, including business and industry conditions, timing
of acquisitions, distribution and OEM customer issues, and other factors
listed here. All these factors make it difficult to predict operating
results for any particular period.
o With respect to the Clinical and Industrial segment, factors affecting our
Erie Electroverre S.A. subsidiary's ability to manufacture the glass used
by the Clinical and Industrial segment's worldwide manufacturing
operations, including delays encountered in connection with the periodic
rebuild of the sheet glass furnace and furnace malfunctions at a time when
inventory levels are not sufficient to sustain this segment's flat glass
operations.
o Factors affecting our ability to obtain raw materials at reasonable prices,
especially white glass, which comes from a single source, our Electroverre,
S.A. facility in Switzerland.
o Our ability to hire and retain competent employees is subject to a number
of risks, including unionization of our non-union employees and changes in
relationships with our unionized employees. There is a risk of strikes or
other labor disputes at those locations that are unionized which could
affect our operations.
o Our business currently has a significant amount of floating rate debt and
can be adversely affected by a rise in interest rates.
o Our ability to continue manufacturing and selling those of our products
that are subject to regulation by the FDA or other domestic or foreign
governments or agencies is subject to a number of risks, including the
promulgation of stricter laws or regulations, reclassification of our
products into categories subject to more stringent requirements, or the
withdrawal of the approval needed to sell one or more of our products.
o The impact of changing public and private health care budgets, including
reimbursement by private or governmental insurance programs, may affect
demand for or pricing of our products.
o Our business is subject to the risks of claims involving our products and
other legal and administrative proceedings, including the expense of
investigating, litigating and settling any claims.
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o SDS has agreed to indemnify Apogent from and after the spin-off with
respect to certain liabilities and obligations. Our ability to collect on
such indemnities, if applicable, from SDS will depend upon SDS's financial
strength at the time of any such indemnity claim.
o Our financial performance or condition may be affected by changes in tax
legislation, applicable accounting principles, or environmental laws and
regulations.
o We may be subject to risks arising from other business and investment
considerations that may be disclosed from time to time in our Securities
and Exchange Commission filings or in other publicly available written
documents.
WE UNDERTAKE NO OBLIGATION TO PUBLICLY UPDATE OR REVISE ANY FORWARD-LOOKING
STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
RISK MANAGEMENT
We are exposed to market risk from changes in foreign currency exchange rates
and interest rates. To achieve our objectives, we identify these risks and
manage them through our regular operations and financing activities and when
deemed appropriate, we occasionally enter into various hedging transactions. We
do not anticipate material changes to our primary market risks other than
fluctuations in magnitude from increased or decreased foreign currency
denominated business activity or floating rate debt levels. We do not use
financial instruments for trading purposes and are not a party to any leveraged
derivatives.
Foreign Exchange
We have, from time to time, used foreign currency options to hedge our exposure
from adverse changes in foreign currency rates. Hedging is accomplished by the
use of foreign currency options, and the gain or loss on these options is used
to offset gains or losses in the foreign currencies to which they pertain.
Hedges of anticipated transactions are accomplished with options that expire on
or near the maturity date of the anticipated transaction.
In March 2001, we entered into two foreign currency options to hedge against the
effect of fluctuations in foreign exchange rates on two notes issued in British
Pounds. The options of $11,500 GPB and $11,750 GPB have maturity dates
approximating those of the notes, of July 31, 2002 and July 2003, respectively.
Both options were priced at $0.69 GBP.
In part due to the aforementioned options, the Company's exposure to market risk
from changes in interest rates and foreign currency exchange rates has not
changed materially from its exposure as of the most recent year ended September
30, 2000.
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A) EXHIBITS:
See Exhibit Index following the Signature page in this report, which is
incorporated herein by reference.
B) REPORTS ON FORM 8-K:
A Form 8-K was filed on April 9, 2001 to report under items 5 and 7 the
announcement of a private placement of senior notes pursuant to the Company's
press release of April 4, 2001.
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SIGNATURES
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 thereto duly authorized.
APOGENT TECHNOLOGIES INC.
------------------------------------------
(Registrant)
Date: August 13, 2001 /S/ JEFFREY C. LEATHE
- ------------------------ ------------------------------------------
Jeffrey C. Leathe
Executive Vice President - Finance,
Chief Financial Officer and Treasurer*
* Executing as both the financial officer
and the duly authorized officer of the
Company
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APOGENT TECHNOLOGIES INC.
(THE "REGISTRANT")
(COMMISSION FILE NO. 1-11091)
EXHIBIT INDEX
TO
QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2001
EXHIBIT FILED
NUMBER DESCRIPTION INCORPORATED HEREIN BY REFERENCE TO HEREWITH
- ------- ----------- ----------------------------------- --------
2.1 Contribution Agreement, Plan and Exhibit 2.1 to the Registrant's Form 10-K
Agreement of Reorganization and for the fiscal year ended September 30,
Distribution, dated as of November 2000 (the "2000 10-K)
28, 2000, between the Registrant and
Sybron Dental Specialties, Inc.
("SDS") and Sybron Dental Management,
Inc. (excluding the forms of the
ancillary agreements attached
thereto as exhibits, definitive copies
of which are filed as Exhibits 2.2
through 2.8 below)
2.2 General Assignment, Assumption and Exhibit 2.2 to the 2000 10-K
Agreement Regarding Litigation,
Claims and Other Liabilities, dated
as of December 11, 2000, between
the Registrant and SDS
2.3 Trade Name Assignment and Exhibit 2.3 to the 2000 10-K
Transitional Trade Name Use and
License Agreement, dated as of
December 11, 2000, between the
Registrant and SDS
2.4 Insurance Matters Agreement, dated Exhibit 2.4 to the 2000 10-K
as of December 11, 2000, between the
Registrant and SDS
2.5 Employee Benefits Agreement, dated Exhibit 2.5 to the 2000 10-K
as of December 11, 2000, between the
Registrant and SDS
2.6 Tax Sharing and Indemnification Exhibit 2.6 to the 2000 10-K
Agreement, dated as of December 11,
2000, between the Registrant and SDS
2.7 Interim Administrative Services Exhibit 2.7 to the 2000 10-K
Agreement, dated as of December 11,
2000, between the Registrant and SDS
2.8 Confidentiality and Nondisclosure Exhibit 2.8 to the 2000 10-K
Agreement, dated as of December 11,
2000, between the Registrant and SDS
3.1 (a) Composite Restated Articles of Exhibit 3.1(a) to the Registrant's
Incorporation of the Registrant, Form 10-Q for the quarter ended
as amended through February 5, December 31, 2000 (the "12/31/00 10-Q")
2001 to change the name of the
Registrant to Apogent Technologies
Inc. and increase the size of the
Board of Directors from between
six and nine to between six and
twelve directors
3.2 (b) Articles of Amendment Exhibit 3.1(b) to the 2000 10-K
containing Certificate of
Designation, Preferences and
Rights of Series A Preferred Stock
3.2 Bylaws of the Registrant, as Exhibit 3.2 to the 12/31/00 10-Q
amended as of January 30, 2001 to
amend Section 3.01 to reflect the
increase in the maximum number of
directors to twelve
4.1 Indenture, dated April 4, 2001 Exhibit 4.1 to the Registrant's
among the Registrant, Subsidiary Form 10-Q for the quarter ended
Guarantor parties thereto, and The March 31, 2001 (the "3/31/01 10-Q")
Bank of New York, as Trustee
4.2 Exchange and Registration Rights
Agreement, dated April 4, 2001, Exhibit 4.2 to the 3/31/01 10-Q
among the Registrant, Subsidiary
Guarantors and Chase Securities
Inc., Bank of America Securities
LLC, Banc One Capital Markets
Inc., Credit Suisse First Boston
Corporation and First Union
Securities Inc. (collectively, as
Initial Purchasers)
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