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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, 1996
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
SYBRON INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
Wisconsin 22-2849508
--------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
411 East Wisconsin Avenue, Milwaukee, Wisconsin 53202
- ----------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
(414) 274-6600
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(Registrant's telephone number, including area code)
-------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark 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 that 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 6, 1996 there were 46,865,568 shares of the Registrant's
Common Stock, par value $0.01 per share, outstanding.
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SYBRON INTERNATIONAL CORPORATION AND SUBSIDIARIES
Index Page
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets, June 30, 1996 (unaudited)
and September 30, 1995 2
Consolidated Statements of Operations, three months ended
June 30, 1996 (unaudited) and 1995 (unaudited) and the
nine months ended June 30, 1996 (unaudited) and 1995
(unaudited) 3
Consolidated Statements of Shareholders' Equity for the
nine months ended June 30, 1996 (unaudited) and the
year ended September 30, 1995 4
Consolidated Statements of Cash Flows, nine months ended
June 30, 1996 (unaudited) and 1995 (unaudited) 5
Notes to Unaudited Consolidated Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 8
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 18
ITEM 2. CHANGES IN SECURITIES 19
ITEM 5. OTHER INFORMATION 19
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 22
SIGNATURES 23
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SYBRON INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
ASSETS
June 30, September 30,
1996 1995
----------- -------------
(Unaudited)
Current assets:
Cash and cash equivalents ................................... $ 10,576 $ 9,243
Accounts receivable (less allowance for doubtful
receivables of $2,393 and $2,355) ........................... 118,463 109,572
Inventories (note 2) ........................................ 117,719 108,675
Deferred income taxes ....................................... 9,246 7,696
Prepaid expenses and other current assets ................... 16,720 13,229
-------- --------
Total current assets ..................................... 272,724 248,415
-------- --------
Property, plant and equipment net of depreciation of $123,062
and $103,497 ................................................ 151,875 148,110
Intangible assets ........................................... 452,165 437,865
Deferred income taxes ....................................... 14,435 11,672
Other non-current assets .................................... 7,020 6,021
-------- --------
Total assets ............................................. $898,219 $852,083
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable ............................................... $ 27,435 $ 27,165
Current portion of long-term debt .............................. 40,069 39,635
Income taxes payable ........................................... 2,690 17,772
Accrued payroll and employee benefits .......................... 28,022 26,890
Deferred income taxes .......................................... 1,769 1,234
Other current liabilities ...................................... 25,487 25,459
-------- --------
Total current liabilities .................................... 125,472 138,155
-------- --------
Long-term debt .................................................. 436,661 406,547
Deferred income taxes ........................................... 56,277 62,071
Other liabilities ............................................... 11,644 17,803
Minority interest in consolidated subsidiaries .................. 232 257
Commitments and contingent liabilities:
Shareholders' equity:
Common Stock, $.01 par value; authorized 110,000,000
shares, issued 46,866,914 and 46,529,992 shares, respectively .. 469 465
Preferred Stock, $.01 par value; authorized 20,000,000 shares .. - -
Equity Rights; 1,098 rights at $1.09 per right ................. 1 1
Additional paid-in capital ..................................... 179,119 172,774
Retained earnings .............................................. 93,628 54,261
Cumulative foreign currency translation adjustment ............. (4,813) 220
Treasury common stock, 2,402 shares at cost .................... (1) (1)
Minimum pension liability adjustment (470) (470)
-------- --------
Total shareholders' equity .............................. 267,933 227,250
-------- --------
Total liabilities and shareholders' equity .................... $898,219 $852,083
======== ========
See accompanying notes to unaudited consolidated financial statements
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SYBRON INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Three Months Ended Nine Months Ended
June 30, June 30,
1996 1995 1996 1995
-------- -------- -------- --------
Net sales ........................................ $171,096 $129,763 $488,809 $369,427
Cost of sales .................................... 85,618 64,541 246,101 184,012
-------- -------- -------- --------
Gross profit ..................................... 85,478 65,222 242,708 185,415
Selling, general and administrative expenses ..... 47,429 36,398 138,621 107,607
Restructuring expense ............................ - - 8,277 -
-------- -------- -------- --------
Operating income ................................. 38,049 28,824 95,810 77,808
-------- -------- -------- --------
Other income (expense):
Interest expense. ............................... (8,771) (5,855) (26,036) (15,626)
Amortization of deferred financing costs ........ (71) (234) (214) (700)
Minority interest in consolidated subsidiaries .. (19) (99) (127) (283)
Other, net ...................................... (83) 41 (59) 250
-------- -------- -------- --------
Income before income taxes ....................... 29,105 22,677 69,374 61,449
Income taxes ..................................... 12,000 8,878 30,007 24,198
-------- -------- -------- --------
Net income ....................................... $ 17,105 $ 13,799 $ 39,367 $ 37,251
======== ======== ======== ========
Earnings per common share ........................ $ .36 $ .29 $ .82 $ .79
======== ======== ======== ========
See accompanying notes to unaudited consolidated financial statements.
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SYBRON INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED SEPTEMBER 30, 1995
AND FOR THE NINE MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS, EXCEPT SHARE DATA)
CUMULATIVE AMOUNT
FOREIGN RELATED TO
ADDITIONAL CURRENCY TREASURY RECORDING TOTAL
COMMON EQUITY PAID-IN RETAINED TRANSLATION COMMON MINIMUM SHAREHOLDERS'
STOCK RIGHTS CAPITAL EARNINGS ADJUSTMENT STOCK PENSION LIABILITY EQUITY
------ ------ ---------- -------- ----------- -------- ----------------- -------------
Balance at September 30, 1994 $464 $2 $170,927 $ 5,346 $ 38 $ (2) $ - $176,775
Shares issued in connection
with the exercise of 135,268
stock options ................. 1 - 1,550 - - - - 1,551
Conversion of 294 equity rights
to common stock ............... - (1) - - - 1 - -
Tax benefits related to stock
options ....................... - - 297 - - - - 297
Net income .................... - - - 48,915 - - - 48,915
Cumulative foreign currency
translation adjustment ........ - - - - 182 - - 182
Amount related to recording
minimum pension liability ..... - - - - - - (470) (470)
------ ------ ---------- -------- ----------- -------- ----------------- -------------
Balance at September 30, 1995 $465 $1 $172,774 $54,261 $ 220 $ (1) $(470) $227,250
====== ====== ========== ======== =========== ======== ================= =============
Shares issued in connection
with the exercise of 336,922
stock options ................. 4 - 4,935 - - - - 4,939
Tax benefits related to stock
options ....................... - - 1,410 - - - - 1,410
Net income (Unaudited) ........ - - - 39,367 - - - 39,367
Cumulative foreign currency
translation adjustment ........ - - - - (5,033) - - (5,033)
------ ------ ---------- -------- ----------- -------- ----------------- -------------
Balance at June 30, 1996
(Unaudited) ................... $469 $1 $179,119 $93,628 $ (4,813) $ (1) $(470) $267,933
====== ====== ========== ======== =========== ======== ================= =============
See accompanying notes to consolidated financial statements
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SYBRON INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
Nine Months Ended
June 30,
1996 1995
--------- ---------
Cash flows from operating activities:
Net income .......................................................... $39,367 $37,251
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation ....................................................... 18,889 14,397
Amortization ....................................................... 14,412 10,003
Provision for losses on doubtful accounts .......................... 361 431
Inventory provisions ............................................... 1,582 761
Deferred taxes ..................................................... (9,572) (4,262)
Changes in assets and liabilities:
Increase in accounts receivable .................................... (4,235) (5,200)
Increase in inventories ............................................ (8,107) (12,437)
Increase in prepaid expenses and other current assets .............. (2,753) (2,011)
Decrease in accounts payable ....................................... (1,058) (2,165)
Decrease in taxes payable .......................................... (15,975) (373)
Increase in accrued payroll and employee benefits .................. 566 2,277
Increase (decrease) in other current liabilities (2,954) 163
Net change in other assets and liabilities ......................... (452) (11,059)
--------- ---------
Total adjustments ................................................ (9,296) (9,475)
--------- ---------
Net cash provided by operating activities .......................... 30,071 27,776
Cash flows from investing activities:
Capital expenditures ................................................ (18,852) (13,025)
Proceeds from sales of property, plant, and equipment .............. 3,618 318
Payments for businesses acquired ................................... (43,369) (45,056)
--------- ---------
Net cash used in investing activities .............................. (58,603) (57,763)
Cash flows from financing activities:
Net change in the revolving credit facility ......................... 52,800 49,200
Principal payments long-term debt ................................... (26,624) (20,408)
Proceeds from the exercise of common stock options and warrants ..... 4,938 184
--------- ---------
Net cash provided by financing activities .......................... 31,114 28,976
Effect of exchange rate changes on cash ............................. (1,249) 186
Net increase (decrease) in cash ..................................... 1,333 (825)
Cash and cash equivalents at beginning of year ...................... 9,243 11,194
--------- ---------
Cash and cash equivalents at end of period .......................... $10,576 $10,369
========= =========
Supplemental disclosures of cash flow information:
Cash paid during the period for interest ............................ $33,007 $14,374
Cash paid during the period for income taxes ........................ 32,244 25,129
Capital lease obligations incurred .................................. 879 965
See accompanying notes to unaudited consolidated financial statements.
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SYBRON INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of management, all adjustments which are necessary for a
fair statement of the results for the interim periods have been included.
All such adjustments were of a normal recurring nature. The results for
the nine month period ended June 30, 1996 are not necessarily indicative
of the results to be expected for the full year. Certain amounts from the
nine month period ended June 30, 1995, as originally reported, have been
reclassified to conform with the nine month period ended June 30, 1996
presentation.
2. Inventories at June 30, 1996 consist of the following:
(In thousands)
Raw materials $36,289
Work-in-process 21,507
Finished goods 64,712
LIFO Reserve (4,789)
-------
$ 117,719
=======
3. Subsequent to June 30, 1996, the Company completed three acquisitions
through its subsidiaries identified below and amended its Revolving Credit
Facility.
On July 3, 1996, Richard-Allan Scientific Company, a subsidiary of Erie
Scientific Company, completed the acquisition of certain assets of Stephens
Scientific Company. Stephens Scientific manufactures solvents, imbedding
waxes, reagent grade alcohols, and tissue freezing aerosol, all products
used in histology laboratories. Stephens Scientific annual sales were
approximately $11 million.
On July 12, 1996, Nalge Nunc International Corporation completed the
purchase of the assets of Flexible Components, Inc., a company engaged in
the manufacture of flexible hoses, fittings and accessories used in fluid
and gas transport applications in the pharmaceutical, biotech, food and
beverage, air and gas industries. Annual sales were approximately $14.8
million.
On July 15, 1996, Metrex Research Corporation, a subsidiary of Kerr
Corporation which manufactures infection control products for the medical
and dental markets, acquired the assets of Micro-Aseptic Products, Inc.
Micro-Aseptic markets and sells infection control products, disinfectant
and decontaminant cleaners, deodorizers, antiseptic hand and skin cleaners
and related products to the medical and dental markets. Micro-Aseptic
annual sales were approximately $4.5 million.
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In fiscal year 1996 to date, the Company has completed eight acquisitions,
all of which are accounted for as purchases.
On July 9, 1996, the Company amended its existing bank facility. The
amendment increases the capacity of the Company's Revolving Credit Facility
from $250 million to $300 million, and provides a mechanism for the Company
to solicit competitive interest rate bids from banks who participate in the
facility.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis contains forward-looking statements.
When used herein, the words "anticipate", "believe", "estimate", "expect",
"objective" and similar expressions are intended to identify such statements.
Forward-looking statements are subject to certain risks, uncertainties and
assumptions that could cause actual results to differ materially from those
projected, including those that are described in Item 5, "Other Information -
Cautionary Factors", in Part II of this report.
GENERAL
Both sales and operating income for Sybron International Corporation
(together with its subsidiaries, the "Company") for the quarter and nine months
ended June 30, 1996 (the third quarter and year to date of fiscal 1996) grew
over the corresponding prior year periods despite an $8.3 million restructuring
charge, described below, in the second quarter of fiscal 1996. Net sales for
the quarter and year to date ended June 30, 1996 increased by 31.9% and 32.3%,
respectively, over the corresponding fiscal 1995 periods. Sales growth in the
third quarter of fiscal 1996 was strong both domestically and internationally
with increases of 29.3% and 36.6% in domestic and international sales,
respectively, over the corresponding 1995 period. Approximately 25.2 percentage
points of the 31.9% overall sales growth in the third quarter were attributable
to acquired businesses, with 6.7 percentage points coming from existing
businesses. International sales were adversely affected by the strengthened
U.S. dollar by approximately $1.5 million in the third quarter of fiscal 1996.
The Company's internal growth came from both the laboratory and dental
segments.
The results of operations of the Company reflect goodwill amortization,
other amortization, and depreciation. These non-cash charges totaled $11.0
million and $8.2 million for the quarters ended June 30, 1996 and 1995,
respectively, and $33.3 million and $24.4 million for the first nine months of
fiscal years 1996 and 1995, respectively. The Company's earnings before
interest, taxes, depreciation and amortization ("EBITDA") which, as discussed
below in "Liquidity and Capital Resources", the Company believes is the
appropriate measure of the Company's ability to internally fund its liquidity
requirements, amounted to $48.9 million and $36.7 million for the quarters
ended June 30 1996 and 1995, respectively, and $137.0 million and $101.5
million for the first nine months of fiscal years 1996 and 1995, respectively.
BITDA represents, for any relevant period, net income plus (i) interest
expense, (ii) provision for income taxes, (iii) depreciation, (iv) amortization
and (v) the restructuring charge described below, all determined on a
consolidated basis and in accordance with generally accepted accounting
principles.
Substantial portions of the Company's sales, income and cash flows are
derived from international operations. The financial position and the results
of operations from substantially all of the Company's international operations,
other than most U.S. export sales, are measured using the local currency of the
countries in which such operations are conducted and are
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translated into U.S. dollars. While the reported income of foreign subsidiaries
will be impacted by a weakening or strengthening of the U.S. dollar in relation
to a particular local currency, the effects of foreign currency fluctuations
are partially mitigated by the fact that manufacturing costs and other expenses
of foreign subsidiaries are generally incurred in the same currencies in which
sales are generated. Such effects of foreign currency fluctuations are also
mitigated by the fact that such subsidiaries' operations are conducted in
numerous foreign countries and, therefore, in numerous foreign currencies. In
addition, the Company's U.S. export sales may be impacted by foreign currency
fluctuations to the relative value of the U.S. dollar as foreign customers may
adjust their level of purchases upward or downward according to the weakness or
strength of the U.S. dollar. In order to hedge against future strengthening of
the U.S. dollar, in October 1994, the Company employed currency hedges through
the purchase of a series of options. The options purchased in October 1994 had
a U.S. dollar notional amount of approximately $21.2 million at a cost of
approximately $0.2 million. The October 1994 options employed by the Company
were designed to protect the Company from potential detrimental effects of
currency movements as compared to the prior year. Because of a steadily
declining dollar throughout fiscal 1994, the Company was able to take advantage
of the favorable currency rates to employ a series of "out of the money"
options to accomplish that purpose at a minimal cost. These contracts all
expired worthless in fiscal 1995. The Company has decided not to employ foreign
currency hedges at this time. From time to time, management may employ
currency hedges to mitigate the impact of foreign currency fluctuations.
In March of 1996, the Company recorded a restructuring charge of
$8,277,000 ($6,087,000 after tax or $.13 per share) for the rationalization of
certain acquired companies, combination of certain production facilities,
movement of certain customer service and marketing functions, and the exiting
of several product lines. The majority of expenditures related to the
restructuring plan are expected to be made during fiscal 1996, except for
expenditures related to leases and severance commitments which have terms
expiring later. As of June 30, 1996, approximately $3,342,000 of the
established liability remains to be expended. Principal items included in the
reserve are severance and termination costs for approximately 130 notified
employees (primarily production, sales and marketing personnel) (approximately
$2,300,000), remaining lease payments and shut down costs on exited facilities
(approximately $2,100,000), the non-cash write-off of certain fixed assets and
inventory associated with exited product lines, primarily at Sybron Dental
Specialties (approximately $2,500,000), and other related restructuring costs
(approximately $1,300,000). The Company estimates that savings from this
restructuring will approximate $3.8 million annually, before income taxes. It
is anticipated that the realization of most of the savings will begin in fiscal
1997.
As reported previously, on May 2, 1996, Combustion Engineering, Inc.
("CE") commenced legal proceedings in the New York Supreme Court, County of
Monroe (the "CE Litigation"), against the Company with respect to the former
Taylor Instruments ("Taylor") facility in Rochester, New York (the "Rochester
Site"), a discontinued operation. According to CE's complaint, its claims are
based on an asset purchase and sale agreement dated as of September 30, 1983,
pursuant to which Taylor was sold to CE (the "1983 Agreement"), and an
agreement between a subsidiary of the Company and CE dated August 14, 1987 (the
"1987
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Agreement"). The complaint alleges that under the 1983 Agreement the Company
retained certain liabilities for, and indemnified CE with respect to,
environmental contamination, hazards and other conditions that existed at the
time of the sale of Taylor to CE, and that under the 1987 Agreement, the
Company agreed to bear 70 percent of the costs thereafter incurred to clean up,
remediate and remove mercury from the land and buildings at the Rochester Site.
CE's complaint seeks declaratory relief and claims damages of at least $10
million with respect to expenses CE has incurred and expects to incur to
remediate and remove mercury contamination from the land and buildings sold to
CE at the Rochester Site. The complaint also seeks declaratory relief and
claims damages in excess of $1 million with respect to expenses incurred and
expected to be incurred for remediating other alleged environmental hazards
associated with the Rochester Site. Some of CE's claims relate to the cost to
demolish and dispose of the buildings at the Rochester Site, which CE maintains
it had to do because the buildings were contaminated with mercury. CE
previously informed the Company that CE claims that the Company's share of such
demolition and disposal costs is approximately $4.2 million. The Company has
denied it has any liability for such costs. CE's remaining claims relate to
alleged soil and groundwater contamination, including mercury contamination,
for which the Company also denies liability. CE implemented a plan in early
1996 to assess the extent of potential soil and groundwater contamination at
the Rochester Site, the preliminary results of which have been provided by CE
to the Company. The preliminary results indicate there is mercury and
inorganic and volatile organic compound contamination in the soil and
groundwater at certain Rochester Site locations. CE is preparing a voluntary
clean-up proposal based on these results which it plans to present to the New
York Department of Environmental Conservation (the "NYDEC") for consideration.
The cost to remediate the Rochester Site will depend upon the remediation
standards incorporated into any voluntary agreement between CE and the NYDEC.
Because the clean-up standards which may be applied have not been determined,
the extent of remediation to be undertaken, and its cost, is unknown. As a
result, the Company cannot, at this time, estimate the cost of the soil and
groundwater remediation claims. The Company previously reported that prior to
beginning the Rochester Site assessment which generated the current test
results, CE had indicated to the Company that, based upon information available
to it and subject to a number of caveats, including the lack of assessment
information and the fact that clean-up standards which may be applied to the
Rochester Site have not been determined, the cost to remediate the soil and
groundwater would range from $3 million to $5 million. Because the bases for
this estimate were not disclosed by CE to the Company, the Company cannot make
a judgment about how the preliminary test results it has been provided would
affect this estimate. The Company intends to pursue insurance coverage for
CE's claims and has therefore provided notice of CE's claims to its third party
liability insurance carriers. To date the carriers have denied coverage.
RESULTS OF OPERATIONS
QUARTER ENDED JUNE 30, 1996 COMPARED TO THE QUARTER ENDED JUNE 30, 1995
NET SALES. Net sales for the three months ended June 30, 1996 were $171.1
million, an increase of $41.3 million (31.9%) from net sales of $129.8 million
for the corresponding three
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months ended June 30, 1995. Sales in the laboratory segment were $101.3
million for the three months ended June 30, 1996, an increase of 50.2% from the
corresponding 1995 fiscal period. Increased sales in the laboratory segment
resulted primarily from (i) sales of products of acquired companies
(approximately $28.8 million), (ii) increased volume from sales of existing
products at Nalge Nunc International Corporation ("Nalge Nunc International")
(approximately $1.4 million) and at Erie Scientific Company ("Erie")
(approximately $1.3 million), (iii) price increases at Erie (approximately $0.9
million), at Nalge Nunc International (approximately $0.7 million) and at
Barnstead/Thermolyne Corporation ("Barnstead/Thermolyne") (approximately $0.7
million) and (iv) increased volume from sales of new products at Nalge Nunc
International (approximately $0.6 million; primarily sales from the Micro
Packaging Vials product line). Increased sales in the laboratory segment were
partially offset by unfavorable foreign currency impacts at Erie (approximately
$0.7 million). In the dental segment, net sales were $69.8 million for the
three months ended June 30, 1996, an increase of 12.0% from the corresponding
fiscal 1995 period. Increased sales in the dental segment resulted primarily
from (i) increased volume from sales of new products (approximately $4.5
million; primarily sales from the ORTHOS(TM) and the Copper Ni-Ti(TM) product
lines manufactured by Ormco Corporation ("Ormco"), and Kerr Corporation's
("Kerr") TYTIN FC(TM) Alloy), (ii) sales of products of acquired companies
(approximately $3.3 million) and (iii) increased volume from sales of existing
products (approximately $0.4 million), partially offset by unfavorable foreign
currency impacts (approximately $0.8 million).
GROSS PROFIT. Gross profit for the third quarter of fiscal 1996 was $85.5
million, an increase of 31.1% from gross profit of $65.2 million for the
corresponding fiscal 1995 period. Gross profit in the laboratory segment was
$46.7 million (46.1% of net segment sales) in the third quarter of fiscal 1996,
an increase of 55.0% from gross profit of $30.1 million (44.6% of net segment
sales) during the corresponding fiscal 1995 period. Gross profit in the
laboratory segment increased primarily as a result of (i) the gross profits of
acquired businesses (approximately $13.0 million), (ii) increased volume at
Nalge Nunc International (approximately $1.4 million), at Barnstead/Thermolyne
(approximately $0.4 million) and at Erie (approximately $0.3 million), (iii) an
improved product mix at Nalge Nunc International (approximately $0.4 million),
at Barnstead/Thermolyne (approximately $0.4 million) and at Erie (approximately
$0.3 million), (iv) lower unit costs at Nalge Nunc International (approximately
$0.7 million), and (v) a reduction in material costs at Nalge Nunc
International (approximately $0.3 million). Increased gross profit was
partially offset by an inventory adjustment at Erie (approximately $0.5
million). In the dental segment, gross profit was $38.8 million (55.6% of net
segment sales) in the third quarter of fiscal 1996, an increase of 10.5% from
gross profit of $35.1 million (56.4% of net segment sales) during the
corresponding fiscal 1995 period. Increased gross profit in the dental segment
resulted primarily from (i) the gross profits of acquired businesses
(approximately $2.5 million), and (ii) increased volume (approximately $2.1
million) partially offset by unfavorable foreign currency impacts
(approximately $1.0 million).
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the third quarter of fiscal 1996 were $47.4 million
(27.7% of net sales) as compared to $36.4 million (28.0% of net sales) in the
corresponding fiscal 1995 period. General and administrative expenses at the
corporate level, including amortization of purchase accounting
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adjustments and goodwill associated with acquisitions, were $6.0 million in the
third quarter of fiscal 1996, representing an increase of 27.1% from $4.7
million in the corresponding fiscal 1995 period. Increases at the corporate
level were primarily due to increased amortization of the purchase accounting
valuation as a result of the acquisition of the Nunc group of companies
("Nunc") on July 31, 1995 (approximately $1.1 million). Selling, general and
administrative expenses at the subsidiary level, including amortization of
intangibles, were $41.4 million (24.2% of sales), representing an increase of
30.8% from $31.7 million (24.4% of sales) in the corresponding fiscal 1995
period. Increases at the subsidiary level were primarily due to (i) expenses
related to newly acquired businesses (approximately $6.9 million), (ii)
increased general and administrative expense (approximately $1.9 million),
(iii) increased marketing expense (approximately $0.6 million) and (iv)
increased amortization of intangible assets as a result of acquisitions
(approximately $0.4 million) partially offset by a reduction in research and
development expenses (approximately $0.4 million).
OPERATING INCOME. As a result of the foregoing, operating income was
$38.0 million (22.2% of net sales) in the third quarter of fiscal 1996 compared
to $28.8 million (22.2% of net sales) in the corresponding fiscal 1995 period.
Operating income in the laboratory segment was $23.1 million (22.8% of net
segment sales) in the third quarter of fiscal 1996 compared to $14.6 million
(21.7% of net segment sales) in the corresponding fiscal 1995 period.
Operating income in the dental segment was $14.9 million (21.4% of net segment
sales) in the third quarter of fiscal 1996 compared to $14.2 million (22.8% of
net segment sales) in the corresponding fiscal 1995 period.
INTEREST EXPENSE. Interest expense was $8.8 million in the third quarter
of fiscal 1996 compared to $5.9 million in the corresponding fiscal 1995
period. The increase resulted from a higher debt balance primarily from
increased acquisition activity. Interest expense during the quarters ended
June 30, 1996 and 1995 included additional non-cash interest expense of $0.3
million resulting from the adoption of SFAS No. 106.
INCOME TAXES. Taxes on income increased $3.1 million in the third quarter
of fiscal 1996 over the corresponding period in fiscal 1995, primarily as a
result of increased earnings from operations and an increase in nondeductible
amortization primarily related to the Nunc acquisition.
NET INCOME. As a result of the foregoing, the Company had net income of
$17.1 million in the third quarter of fiscal 1996 compared to $13.8 million in
the corresponding 1995 period.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense is
allocated among cost of sales, selling, general and administrative expenses and
other expense. Depreciation and amortization increased by $2.8 million (34.3%)
in the third quarter of fiscal 1996 when compared to the corresponding 1995
period. This increase is primarily due to increased amortization of intangible
assets and depreciation of property, plant and equipment related to acquired
companies.
NINE MONTHS ENDED JUNE 30, 1996 COMPARED TO THE NINE MONTHS ENDED JUNE 30, 1995
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NET SALES. Net sales for the nine months ended June 30, 1996 were $488.8
million, an increase of $119.4 million (32.3%) from net sales of $369.4 million
for the corresponding nine months ended June 30, 1995. Sales in the laboratory
segment were $284.7 million for the nine months ended June 30, 1996, an
increase of 52.2% from the corresponding 1995 fiscal period. Increased sales in
the laboratory segment resulted primarily from (i) sales of products of
acquired companies (approximately $90.5 million), (ii) increased prices at
Barnstead/Thermolyne (approximately $1.7 million), at Nalge Nunc International
(approximately $1.4 million) and at Erie (approximately $0.5 million), (iii)
increased volume from sales of existing products at Erie (approximately $1.9
million) and at Nalge Nunc International (approximately $0.5 million) and (iv)
increased volume from sales of new products at Nalge Nunc International
(approximately $1.1 million; primarily sales of Micro Packaging Vials and
silicone tubing products). In the dental segment, net sales were $204.1
million for the nine months ended June 30, 1996, an increase of 11.9% from the
corresponding fiscal 1995 period. Increased sales in the dental segment
resulted primarily from (i) sales of products of acquired companies
(approximately $12.6 million), (ii) increased volume from sales of new products
(approximately $10.8 million; primarily sales from the ORTHOS(TM) and the
Copper Ni-Ti(TM) product lines manufactured by Ormco, and Kerr's TYTIN FC(TM)
Alloy) and (iii) favorable foreign currency impacts (approximately $0.9
million), partially offset by a reduction in volume from sales of existing
products (approximately $2.7 million).
GROSS PROFIT. Gross profit for the nine months ended June 30, 1996 was
$242.7 million, an increase of 30.9% from gross profit of $185.4 million for
the corresponding fiscal 1995 period. Gross profit in the laboratory segment
was $130.2 million (45.7% of net segment sales) for the nine months ended June
30, 1996, an increase of 56.0% from gross profit of $83.4 million (44.6% of net
segment sales) during the corresponding fiscal 1995 period. Gross profit in
the laboratory segment increased primarily as a result of (i) the gross profits
of acquired businesses (approximately $40.7 million), (ii) increased sales
volume at Nalge Nunc International (approximately $1.6 million), at
Barnstead/Thermolyne (approximately $0.8 million) and at Erie (approximately
$0.2 million), (iii) an improved product mix at Nalge Nunc International
(approximately $0.9 million), at Barnstead/Thermolyne (approximately $0.7
million) and at Erie (approximately $0.3 million), (iv) lower unit costs at
Nalge Nunc International (approximately $1.4 million), (v) a reduction in
material costs at Nalge Nunc International (approximately $0.7 million), and
(vi) inventory adjustments at Barnstead/Thermolyne (approximately $0.2
million). Increased gross profit in the laboratory segment was partially offset
by inventory adjustments at Erie (approximately $0.5 million). In the dental
segment, gross profit was $112.6 million (55.1% of net segment sales) for the
nine months ended June 30, 1996, an increase of 10.4% from gross profit of
$102.0 million (55.9% of net segment sales) during the corresponding fiscal
1995 period. Increased gross profit in the dental segment resulted primarily
from (i) the gross profits of acquired businesses (approximately $8.3 million),
(ii) increased volume (approximately $3.2 million) and (iii) favorable foreign
currency impacts (approximately $0.4 million), partially offset by inventory
adjustments (approximately $1.7 million).
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the nine months ended June 30, 1996 were $138.6
million (28.4% of net sales) as
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compared to $107.6 million (29.1% of net sales) in the corresponding fiscal
1995 period. General and administrative expenses at the corporate level,
including amortization of purchase accounting adjustments and goodwill
associated with acquisitions, were $18.1 million for the nine months ended June
30, 1996, representing an increase of 19.5% from $15.1 million in the
corresponding fiscal 1995 period. Increases at the corporate level were
primarily due to increased amortization of purchase accounting adjustments as a
result of the acquisition of Nunc (approximately $3.5 million), partially
offset by a reduction in employee benefit costs (approximately $0.5 million).
Selling, general and administrative expenses at the subsidiary level, including
amortization of intangibles, were $120.5 million (24.7% of sales), representing
an increase of 30.3% from $92.5 million (25.0% of sales) in the corresponding
fiscal 1995 period. Increases at the subsidiary level were primarily due to
(i) expenses related to newly acquired businesses (approximately $22.3
million), (ii) increased general and administrative expense (approximately $2.0
million), (iii) increased amortization of intangible assets as a result of
acquisitions (approximately $1.4 million), (iv) increased marketing expense
(approximately $1.0 million), (v) increased research and development expenses
(approximately $0.8 million) and (vi) unfavorable foreign currency impacts
(approximately $0.6 million).
RESTRUCTURING CHARGE. In March of 1996, the Company recorded a
restructuring charge of $8,277,000 ($6,087,000 after tax or $.13 per share) for
the rationalization of certain acquired companies, combination of certain
production facilities, movement of certain customer service and marketing
functions, and the exiting of several product lines. The majority of
expenditures related to the restructuring plan are expected to be made during
fiscal 1996, except for expenditures related to leases and severance
commitments which have terms expiring later. As of June 30, 1996,
approximately $3.3 million of the established liability remains to be expended
and is recorded in other current liabilities. Principal items included in the
reserve are severance and termination costs for approximately 130 notified
employees (primarily production, sales and marketing personnel) (approximately
$2,300,000), remaining lease payments and shut down costs on exited facilities
(approximately $2,100,000), the non-cash write-off of certain fixed assets and
inventory associated with exited product lines, primarily at Sybron Dental
Specialties (approximately $2,500,000), and other related restructuring costs
(approximately $1,300,000).
OPERATING INCOME. As a result of the foregoing, operating income was
$95.8 million (19.6% of net sales) for the nine months ended June 30, 1996
compared to $77.8 million (21.1% of net sales) in the corresponding fiscal 1995
period. Operating income in fiscal 1996 prior to the restructuring charge was
$104.1 million (21.3% of net sales). Operating income in the laboratory
segment, prior to the restructuring charge described above, was $62.6 million
(22.0% of net segment sales) for the nine months ended June 30, 1996 compared
to $38.4 million (20.5% of net segment sales) in the corresponding fiscal 1995
period. Operating income in the dental segment, prior to the restructuring
charge described above, was $41.5 million (20.3% of net segment sales) for the
nine months ended June 30, 1996 compared to $39.4 million (21.6% of net segment
sales) in the corresponding fiscal 1995 period.
INTEREST EXPENSE. Interest expense was $26.0 million for the nine months
ended June 30, 1996 compared to $15.6 million in the corresponding fiscal 1995
period. The increase resulted
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from a higher debt balance primarily from increased acquisition activity.
Interest expense during the nine months ended June 30, 1996 and 1995 included
additional non-cash interest expense of $0.9 million resulting from the
adoption of SFAS No. 106.
INCOME TAXES. Taxes on income increased $5.8 million in the nine months
ended June 30, 1996, primarily as a result of increased earnings from
operations and an increase in nondeductible amortization primarily related to
the Nunc acquisition.
NET INCOME. As a result of the foregoing, the Company had net income of
$39.4 million for the nine months ended June 30, 1996 compared to $37.3 million
in the corresponding 1995 period. Without the restructuring charge, net income
would have been $45.5 million.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense is
allocated among cost of sales, selling, general and administrative expenses and
other expense. Depreciation and amortization increased $8.9 million (36.5%) in
the nine months ended June 30, 1996 when compared to the corresponding 1995
period. This increase is primarily due to increased amortization of intangible
assets and depreciation of property, plant and equipment related to acquired
companies.
INFLATION. The Company does not believe that inflation has had a material
impact on net sales or income during any of the periods presented above. There
can be no assurance, however, that the Company's business will not be affected
by inflation in the future.
LIQUIDITY AND CAPITAL RESOURCES
As a result of the leveraged buyout in 1987 of a company known at the time
as Sybron Corporation (the "Acquisition"), subsequent adoption of SFAS 109 and
the acquisitions completed since 1987, the Company increased the carrying value
of certain tangible and intangible assets consistent with generally accepted
accounting principles. Also, as a result of the permanent financing effected
in August 1988 for the Acquisition, the Company incurred approximately $372
million of debt. Accordingly, the Company's 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 increased by $31.4 million in the nine months ended June
30, 1996 as a result of acquisitions. The Company believes, therefore, that
EBITDA represents the more appropriate measure of the Company's ability to
internally fund its capital requirements.
The Company's capital requirements arise principally from indebtedness
incurred in connection with the permanent financing for the Acquisition and its
subsequent refinancings, the Company's working capital needs, primarily related
to inventory and accounts receivable, the Company's capital expenditures,
primarily related to purchases of machinery and molds, the purchase of various
businesses and product lines in execution of the Company's acquisition
strategy, the periodic expansion of physical facilities and, in the short term,
payments related to the restructuring charge (as described above). In
addition, in the event the Company should be
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held liable for CE's claims in the CE Litigation (described above), liability
for which the Company denies, the Company could require capital to satisfy such
liabilities, depending upon their magnitude. With respect to the restructuring
charge, as of June 30, 1996, the Company has paid approximately $2.4 million
and charged an additional $2.5 million to inventory and fixed assets. The
Company intends to expend an additional $2.2 million by the end of fiscal 1996
and $1.1 million over the remaining terms of exited facilities leases and
severance agreements. With respect to acquisitions, it is currently the
Company's intent to continue to pursue its acquisition strategy. If
acquisitions are to continue at the Company's historical pace, the Company
believes it will require financing beyond the capacity of its existing Credit
Facilities (as defined below). In addition, certain acquisitions previously
completed contain "earnout provisions" requiring further payments in the future
if certain financial results are achieved by the acquired companies.
The statement contained in the immediately preceding paragraph concerning
the Company's intent to continue to pursue its acquisition strategy is a
forward-looking statement. The Company's ability to continue its acquisition
strategy is subject to a number of uncertainties, including, but not limited
to, its ability to raise capital beyond the capacity of its existing Credit
Facilities, and the availability of suitable acquisition candidates at
reasonable prices. See Item 5, "Other Information - Cautionary Factors", in
Part II of this report.
On July 31, 1995, the Company and its domestic subsidiaries entered into a
new credit agreement (as amended, the "Credit Agreement") with Chemical Bank
and certain other lenders providing for a term loan facility of $300 million
(the "Term Loan Facility"), and a revolving credit facility of $250 million
(the "Revolving Credit Facility") (collectively the "Credit Facilities"). On
the same day, the Company and its subsidiaries borrowed a total of
approximately $422.5 million under the Credit Facilities. The Company borrowed
$300 million under the Term Loan Facility and approximately $122.5 million was
borrowed under the Revolving Credit Facility. Approximately $167.6 million of
the borrowed funds were used to finance the acquisition of the Nunc group of
companies. The remaining borrowed funds of approximately $254.9 million were
used to repay outstanding amounts, including accrued interest, under the
Company's previous senior bank credit facilities (the "Previous Credit
Facilities") and to pay certain fees in connection with such refinancing. On
July 9, 1996, the Credit Agreement was amended to increase the capacity of the
Revolving Credit Facility to $300 million and to establish a competitive bid
process as an additional option to the Company in setting interest rates.
Payment of principal and interest with respect to the Credit Facilities
and the Sale/Leaseback (as defined later herein) are anticipated to be the
Company's largest use of funds in the future. As with the Company's Previous
Credit Facilities, the Credit Facilities provide for an annual interest rate,
at the option of the Company, equal to (a) the higher of (i) the rate from time
to time publicly announced by Chemical Bank in New York City as its prime rate,
(ii) the federal funds rate plus 1/2 of 1%, and (iii) the base CD rate plus
1%, (b) the London interbank offered rate ("LIBOR") plus 1/2% to 1% depending
upon the level of certain financial ratios, or (c) with respect to the
Revolving Credit Facility, the rate set by the competitive bid process among
the parties to the Revolving Credit Facility established in the July 9, 1996
amendment. Under the Previous Credit Facilities, the LIBOR margin was at 3/4%
through February 3, 1995. Upon
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application of the financial ratios for the period ending December 31, 1994,
the Company received a reduction in the LIBOR margin from 3/4% to 5/8%, which
took effect on February 4, 1995. On May 15, 1995, the LIBOR margin was
increased back to 3/4% and remained at that level through the first six months
of fiscal 1996. The primary reason for the rate increase was increased
borrowings under the Previous Credit Facilities and the Credit Facilities to
fund acquisitions completed in the second and third fiscal quarters of 1995 and
the first and second quarters of fiscal 1996. Upon application of the
financial ratios to the second quarter results of fiscal 1996, the Company
experienced an increase in the LIBOR margin from 3/4% to 1% effective May 15,
1996. The primary reason for this rate increase was the negative earnings
impact of the restructuring charge included in the second quarter. The LIBOR
margin decreased back to 3/4% on August 9, 1996 after application of the
financial ratios to the third quarter results.
As a result of the terms of the Credit Agreement and the agreement
governing the Previous Credit Facilities, the Company is sensitive to a rise in
interest rates. In order to reduce its sensitivity to such interest rate
increases, on July 2, 1993, the Company entered into two interest rate swaps,
aggregating $100 million, to hedge against a rise in interest rates. The first
swap was effective July 7, 1993, and fixed the interest rate on $50 million of
the Company's borrowings under the Credit Facilities and the Previous Credit
Facilities for a period of five years. A second swap was effective August 13,
1993, and fixed the interest rate on an additional $50 million of the Company's
borrowings for a period of six years. These rates, prior to the August 9, 1996
adjustment, were 6.17% and 6.44%, respectively, and decreased to 5.92% and
6.19%, respectively on August 9, 1996 as a result of the decrease in the LIBOR
margin discussed above.
The Company executed three additional interest rate swaps effective
December 8, 1995 with notional amounts of $50 million each. The three swaps,
prior to the August 9, 1996 adjustment, were at interest rates of 6.348%, 6.56%
and 6.624%, when the LIBOR margin was 1%, and adjusted to 6.098%, 6.31% and
6.374%, respectively, on August 9, 1996. These swap arrangements expire on
December 9, 1996, September 8, 2000 and September 10, 2001, respectively.
Also as part of the permanent financing for the Acquisition, on December
22, 1988, the Company entered into the sale and leaseback of its principal
domestic facilities (the "Sale/Leaseback"). In January 1994, the annual
obligation under the Sale/Leaseback increased from $2.9 million to $3.3
million, payable monthly. On the fifth anniversary of the leases and every
five years thereafter (including renewal terms), the rent will be increased by
the percentage equal to 75% of the percentage increase in the Consumer Price
Index over the preceding five years. The percentage increase to the rent in
any five-year period is capped at 15%. The next adjustment will not occur
until January 1, 1999.
The Company intends to fund its cash needs for acquisitions, working
capital requirements, capital expenditure requirements, principal and interest
payments, obligations under the Sale/Leaseback, restructuring expenditures,
other liabilities and periodic expansion of facilities, to the extent
available, with funds provided by operations and short-term borrowings under
the
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Revolving Credit Facility. To the extent that funds are not available,
particularly with respect to acquisitions proposed to be made with cash, the
Company will have to raise additional capital.
As set forth above, until July 9, 1996 the Revolving Credit Facility
provided up to $250 million in credit, and on July 9, 1996, the Facility was
expanded to $300 million. As of June 30, 1996, prior to expansion of the
Facility and prior to the acquisitions of Stephens Scientific, Flexible
Components, Inc. And Micro-Aseptic Products, Inc., there was $78.2 million of
unused available credit under the Revolving Credit Facility. Under the Term
Loan Facility, on October 31, 1995 the Company began to repay principal in 28
consecutive quarterly installments. As of August 1, 1996, the Company paid all
of the $35 million obligation due in fiscal 1996. Future annual payments are
due as follows: $35 million, $40 million, $40 million, $50 million, $50
million, and $50 million in fiscal years 1997 through 2002, respectively.
The Credit Agreement contains numerous financial and operating covenants,
including, among other things, restrictions on investments; requirements that
the Company maintain certain financial ratios; restrictions on the ability of
the Company and its subsidiaries to incur indebtedness or to create or permit
liens, to make capital expenditures, or to pay cash dividends in excess of
$50.0 million plus 50% of the defined consolidated net income of the Company
for each fiscal quarter ending after September 30, 1995, less any dividends
paid after June 22, 1994; restrictions on annual capital expenditures to
amounts ranging from $36.0 million to $40.0 million during the remaining term
of the Credit Agreement; and limitations on incurrence of additional
indebtedness. The Credit Agreement permits the Company to make acquisitions
provided the Company continues to satisfy all financial covenants upon any such
acquisition. The ability of the Company to meet its debt service requirements
and to comply with such covenants is dependent upon the Company's future
performance, which is subject to financial, economic, competitive and other
factors affecting the Company, many of which are beyond its control.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The following information should be read in conjunction with Item 3,
"Legal Proceedings", in Part I of the Company's Annual Report on Form 10-K for
the fiscal year ended September 30, 1995 and with Item 1, "Legal Proceedings",
in Part II of the Company's Quarterly Reports on Form 10-Q for the quarterly
periods ended December 31, 1995 and March 31, 1996.
On May 2, 1996, Combustion Engineering, Inc. ("CE"), a subsidiary of ABB
Asea Brown Boveri Ltd. ("ABB"), commenced legal proceedings (the "CE
Litigation") against the Company with respect to the former Taylor Instruments
facility in Rochester, New York (the "Rochester Site"), a discontinued
operation. The CE Litigation, brought in the New York
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Supreme Court, Monroe County, New York, relates to the previously reported
claims ABB has made for reimbursement to it of expenses associated with the
remediation of alleged environmental contamination at the Rochester Site. The
Rochester Site was sold to CE in 1983 by the predecessor of a subsidiary of the
Company.
See Part I, Item 2, "Management's Discussion and Analysis of Financial
Condition and Results of Operations - General" for additional information
regarding the CE litigation.
ITEM 2. CHANGES IN SECURITIES
Information concerning the Company's Amended and Restated Credit
Agreement, dated as of July 31, 1995, with Chemical Bank and other lenders, as
amended by the First Amendment thereto, dated as of July 9, 1996, including the
financial and operating covenants contained therein (which, among other things,
place limitations upon the payment of dividends), is incorporated in response
to this item by reference to "Management's Discussion and Analysis of Financial
Condition and Results of Operations --Liquidity and Capital Resources" in Item
2 of Part I hereof.
ITEM 5. OTHER INFORMATION
CAUTIONARY FACTORS
This report contains various forward-looking statements concerning the
Company's prospects that are based on the current expectations and beliefs of
management. Forward-looking statements may also be made by the Company from
time to time in other reports and documents as well as oral presentations.
When used in written documents or oral presentations, the words "anticipate",
"believe", "estimate", "expect", "objective" 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 that could cause the Company's actual results and
performance to differ materially from what is projected. In addition to the
assumptions and other factors referenced specifically in connection with such
statements, the following factors could impact the business and financial
prospects of the Company:
- Factors affecting the Company's international operations, including
relevant foreign currency exchange rates, which can affect the cost to
produce the Company's products or the ability to sell the Company's
products in foreign markets, and the value in U.S. dollars of sales made
in foreign currencies. Other factors include the Company's 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;
and risks associated with having major manufacturing facilities located
in countries, such as Mexico, Hungary and Italy, which have historically
been less stable than the United States in several respects, including
fiscal and political stability.
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- Factors affecting the Company's ability to continue pursuing its
current acquisition strategy, including the Company's ability to raise
capital beyond the capacity of its existing Credit Facilities or to use
the Company's stock for acquisitions, the cost of the capital required to
effect the Company's acquisition strategy, the availability of suitable
acquisition candidates at reasonable prices, the ability of the Company
to realize the synergies expected to result from acquisitions, and the
ability of existing Company personnel to efficiently handle increased
transitional responsibilities resulting from acquisitions.
- Factors affecting the Company's ability to profitably distribute and
sell its products, including any changes in the Company's business
relationships with its principal distributors, primarily in the
laboratory segment, competitive factors such as the entrance of
additional competitors into the Company's markets, pricing and
technological competition, and risks associated with the development and
marketing of new products in order to remain competitive by keeping pace
with advancing dental, orthodontic and laboratory technologies.
- With respect to Erie, factors affecting its Erie Electroverre S.A.
subsidiary's ability to manufacture the glass used by Erie'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 Erie's
operations.
- Factors affecting the Company's ability to hire and retain competent
employees, including unionization of the Company's non-union employees
and changes in relationships with the Company's unionized employees.
- The risk of strikes or other labor disputes at those locations which
are unionized which could affect the Company's operations.
- Factors affecting the Company's ability to continue manufacturing
and selling those of its products that are subject to regulation by the
United States Food and Drug Administration or other domestic or foreign
governments or agencies, including the promulgation of stricter laws or
regulations, reclassification of the Company's products into categories
subject to more stringent requirements or the withdrawal of the approval
needed to sell one or more of the Company's products.
- Factors affecting the economy generally, including the financial and
business conditions of the Company's customers and the demand for
customers' products and services that utilize Company products.
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- Factors relating to the impact of changing public and private
healthcare budgets which could affect demand for or pricing of the
Company's products.
- Factors affecting the Company's financial performance or condition,
including tax legislation, unanticipated restrictions on the Company's
ability to transfer funds from its subsidiaries and changes in applicable
accounting principles or environmental laws and regulations.
- The cost and other effects of claims involving the Company's
products and other legal and administrative proceedings,
including the expense of investigating, litigating and settling any
claims.
- Factors affecting the Company's ability to produce products on a
competitive basis, including the availability of raw materials at
reasonable prices.
Unanticipated technological developments that result in competitive
disadvantages and create the potential for impairment of existing assets.
The Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS:
See the Exhibit Index following the Signature page in this report,
which is incorporated herein by reference.
(b) REPORTS ON FORM 8-K:
No reports on Form 8-K were filed during the quarter for which this
report is filed.
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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 thereunto duly authorized.
SYBRON INTERNATIONAL CORPORATION
--------------------------------
(Registrant)
Date August 13, 1996 /s/ Dennis Brown
- --------------------- --------------------------------
Dennis Brown
Vice President - Finance, Chief
Financial Officer & Treasurer*
* executing as both the principal
financial officer and the duly
authorized officer of the Company.
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SYBRON INTERNATIONAL CORPORATION
(THE "REGISTRANT")
(COMMISSION FILE NO. 1-11091)
EXHIBIT INDEX
TO
QUARTERLY REPORT ON FORM 10-Q FOR QUARTER ENDED JUNE 30, 1996
INCORPORATED
EXHIBIT HEREIN BY FILED
NUMBER DESCRIPTION REFERENCE TO HEREWITH
4.1 First Amendment, dated as X
of July 9, 1996, to the Amended and
Restated Credit Agreement, dated
as of July 31, 1995 (as amended,
supplemented or otherwise modified
from time to time, the "Credit
Agreement"), among the Registrant
and certain of its subsidiaries,
the several Lenders from time to
time parties thereto, Chase
Securities Inc. (formerly known
as Chemical Securities Inc.), as
Arranger, and Chemical Bank, as
Administrative Agent for the
Lenders
4.2 Form of Revolving Credit Note, X
dated as of July 9, 1996, executed
pursuant to the Credit Agreement
4.3 Form of CAF Advance Note, dated as of X
July 9, 1996, executed pursuant
to the Credit Agreement
4.4 Amended and Restated Parent X
Pledge Agreement, dated as of
July 9, 1996, executed pursuant
to the Credit Agreement
4.5 Form of Amended and Restated X
Subsidiaries Guarantee,
dated as of July 9, 1996,
executed pursuant to the Credit
Agreement
4.6 Form of Amended and Restated X
Subsidiaries Pledge Agreement,
dated as of July 9, 1996, executed
pursuant to the Credit Agreement
11 Statement re Computation of Per
Share Earnings X
27 Financial Data Schedule X
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