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 March 31, 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 333-24001
Packard BioScience Company
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(Exact name of registrant as specified in its charter)
Delaware 06-0676652
- ------------------------------------------ ---------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
800 Research Parkway, Meriden, Connecticut 06450
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 203-238-2351
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 [ ]
Shares of Common Stock Outstanding at May 14, 2001: 68,229,753
PACKARD BIOSCIENCE COMPANY AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION Page
----
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of March 31, 2001
and December 31, 2000 2
Condensed Consolidated Statements of Income (Loss) for the
Three Months Ended March 31, 2001 and 2000 3
Condensed Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 2001 and 2000 4
Notes to Condensed Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk 16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 6. Exhibits and Reports on Form 8-K 17
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PACKARD BIOSCIENCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2001 and DECEMBER 31, 2000
(In thousands)
ASSETS March 31, 2001 December 31, 2000
- ------ -------------- -----------------
CURRENT ASSETS:
Cash and cash equivalents $ 91,296 $ 13,294
Accounts receivable, net 34,941 32,578
Inventories, net 23,190 22,129
Deferred income taxes 4,040 15,089
Net current assets of discontinued operations -- 31,868
Due from COGEMA, S.A. (Note 7) 11,000 --
Other current assets 5,966 6,700
-------- --------
Total current assets 170,433 121,658
-------- --------
PROPERTY, PLANT AND EQUIPMENT, at cost 31,250 27,560
Less: Accumulated depreciation (13,914) (13,208)
-------- --------
17,336 14,352
-------- --------
OTHER ASSETS:
Goodwill, net 113,210 115,010
Deferred financing costs, net 3,712 4,196
Net noncurrent assets of discontinued operations -- 36,709
Deferred income taxes 4,506 3,828
Other 10,766 10,339
-------- --------
132,194 170,082
-------- --------
TOTAL ASSETS $319,963 $306,092
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 1,681 $ 1,884
Current portion of long-term obligations 1,073 1,183
Accounts payable and accrued liabilities 27,312 36,125
Income taxes payable 25,456 1,622
Deferred income 11,862 9,485
-------- --------
Total current liabilities 67,384 50,299
-------- --------
LONG-TERM OBLIGATIONS, net of current portion 118,218 169,344
-------- --------
OTHER NONCURRENT LIABILITIES 2,950 3,176
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (Note 3):
Common stock 164 164
Paid in capital 175,605 168,562
Retained earnings (accumulated deficit) 27,041 (22,469)
Accumulated other comprehensive income
(cumulative translation adjustment) (3,464) 65
-------- --------
199,346 146,322
Less: Treasury stock, at cost (67,329) (62,718)
Deferred compensation (606) (331)
-------- --------
Total stockholders' equity 131,411 83,273
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $319,963 $306,092
======== ========
The accompanying notes are an integral part of these condensed
consolidated financial statements.
PACKARD BIOSCIENCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
(In thousands)
Three Months Ended
March 31,
2001 2000
---- ----
REVENUES $51,455 $39,845
COST OF SALES 22,462 17,371
------- -------
GROSS PROFIT 28,993 22,474
RESEARCH AND DEVELOPMENT EXPENSES 8,577 6,228
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES (Note 6) 13,536 15,917
GOODWILL AMORTIZATION 1,466 240
------- -------
INCOME FROM OPERATIONS 5,414 329
INTEREST EXPENSE, NET (3,704) (5,979)
------- -------
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES 1,710 (5,650)
(PROVISION FOR) BENEFIT FROM
INCOME TAXES (530) 1,980
------- -------
INCOME (LOSS) FROM CONTINUING
OPERATIONS 1,180 (3,670)
INCOME (LOSS) FROM DISCONTINUED
OPERATIONS, NET OF INCOME
TAXES (Note 7) 1,172 (2,520)
GAIN ON SALE OF DISCONTINUED
OPERATIONS, NET OF INCOME TAXES (Note 7) 47,161 --
------- -------
NET INCOME (LOSS) $49,513 ($ 6,190)
======= =======
BASIC PER SHARE INFORMATION:
Income (loss) from continuing operations, net $ 0.02 ($ 0.08)
Income (loss) from discontinued operations, net 0.02 ( 0.05)
Gain on sale of discontinued operations, net 0.69 --
------- -------
Net income (loss) $ 0.73 ($ 0.13)
======= =======
DILUTED PER SHARE INFORMATION:
Income (loss) from continuing operations, net $ 0.02 ($ 0.08)
Income (loss) from discontinued operations, net 0.02 ( 0.05)
Gain on sale of discontinued operations, net 0.66 --
------- -------
Net income (loss) $ 0.70 ($ 0.13)
======= =======
The accompanying notes are an integral part of these condensed
consolidated financial statements.
PACKARD BIOSCIENCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
(In thousands)
For the Three Months Ended
March 31,
2001 2000
---- ----
OPERATING ACTIVITIES:
Net income (loss) $ 49,513 ($ 6,190)
(Income) loss from discontinued operations, net (1,172) 2,520
Gain on sale of discontinued operations, net (47,161) --
-------- --------
Income (loss) from continuing operations 1,180 (3,670)
Adjustments to reconcile income (loss) from continuing
operations to net cash used for operating activities:
Non-cash stock compensation charges (Note 6) -- 4,724
Depreciation and amortization of intangibles 2,908 1,546
Amortization of deferred financing costs 128 386
Other, net (456) (413)
Changes in operating assets and liabilities (7,704) (5,069)
-------- --------
Net cash used for operating activities (3,944) (2,496)
-------- --------
INVESTING ACTIVITIES:
Acquisitions of businesses, net of cash acquired (5,452) (5,488)
Net proceeds from sale of discontinued operations,
excluding cash sold 154,178 --
Capital expenditures, net (3,859) (723)
Product lines, patent rights and licenses acquired (250) (500)
-------- --------
Net cash provided by (used for) investing activities 144,617 (6,711)
-------- --------
FINANCING ACTIVITIES:
Borrowings under long-term obligations 45,000 24,300
Repayments of long-term obligations (96,322) (3,062)
Purchase of treasury stock (12,373) (124)
Proceeds from exercise of stock options 4,350 3,302
Proceeds from sale of common stock, net of expenses -- 264
-------- --------
Net cash (used for) provided by financing activities (59,345) 24,680
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (3,326) (1,012)
-------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 78,002 14,461
CASH AND CASH EQUIVALENTS, beginning of period 13,294 4,432
-------- --------
CASH AND CASH EQUIVALENTS, end of period $ 91,296 $ 18,893
======== ========
The accompanying notes are an integral part of these condensed
consolidated financial statements.
PACKARD BIOSCIENCE COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated financial statements and related notes included
herein have been prepared by Packard BioScience Company (the "Company") without
audit, except for the December 31, 2000, condensed consolidated balance sheet
which was derived from the Company's Annual Report on Form 10-K, as amended, for
the year ended December 31, 2000 (the "Company's 2000 Form 10-K"), pursuant to
the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures which normally accompany financial
statements prepared in accordance with accounting principles generally accepted
in the United States have been omitted from the accompanying condensed
consolidated financial statements, as permitted by the Securities and Exchange
Commission's rules and regulations. The Company believes that the accompanying
disclosures and notes are adequate to make the financial statements not
misleading. Such financial statements reflect all adjustments which are normal
and recurring and, in the opinion of management, necessary for a fair
presentation of the results of operations and financial position of the Company
for the periods reported herein. These financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's 2000 Form 10-K.
Note 1. Basis of Presentation and Significant Accounting Policies:
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General -
- -------
The accompanying financial statements have been prepared in accordance with the
accounting policies described in Note 1 to the consolidated financial statements
included in the Company's 2000 Form 10-K. The Company's practices of recognizing
assets, liabilities, revenues, expenses and other transactions which impact the
accompanying financial information are consistent with such note.
On February 27, 2001, the Company sold its Canberra division (see Note 7). The
accompanying condensed consolidated financial statements as of and for the three
months ended March 31, 2000, have been reclassified to reflect the net assets
and operating results of the Canberra operating segment as a discontinued
operation. The gain on the sale, net of related expenses and income taxes, was
$47.2 million and is reflected in the accompanying financial statements. The
amounts below relate only to the Company's continuing operations unless
otherwise noted.
New Accounting Standard -
- -----------------------
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standard No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No. 133"), which establishes the accounting and
reporting standards for derivative instruments and for hedging activities. The
Company purchases forward contracts to cover foreign exchange fluctuation risks
on intercompany sales to certain of its foreign operations which are not
designated as hedging instruments under SFAS No. 133, as amended. Effective
January 1, 2001, the Company reflects such forward contracts in its consolidated
financial statements at their current market values based upon the actual
exchange rates in effect as compared to the forward contracted rates. Resulting
gains and losses are reflected in the Company's condensed consolidated
statements of income (loss). The effect of adopting this statement of $0.2
million as of January 1, 2001, is included in cost of sales for the three months
ended March 31, 2001. The cumulative effect of adopting SFAS No. 133 has not
been classified separately since the amount is not material.
Note 2. Inventories:
- --------------------
Inventories consisted of the following at March 31, 2001, and December 31, 2000
(in thousands):
March 31, 2001 December 31, 2000
-------------- -----------------
Raw materials and parts $12,160 $11,330
Work in process 845 1,022
Finished goods 12,724 12,427
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25,729 24,779
Excess and obsolete reserves (2,539) (2,650)
------- -------
$23,190 $22,129
======= =======
Note 3. Stockholders' Equity:
- -----------------------------
Below is a summary of the changes in selected components of stockholders' equity
for the three-month period ended March 31, 2000 (in thousands):
Paid-In Treasury
Capital Stock
------- --------
Balance, December 31, 2000 $168,562 ($62,718)
Compensation expense recognized in
connection with stock option
modifications 10,091 --
Purchases of treasury stock -- (12,373)
Exercises of stock options (2,925) 7,275
Restricted stock grants, net of
forfeitures and amortization (123) 487
-------- --------
Balance, March 31, 2001 $175,605 ($67,329)
======== ========
In December 2000, the Company's board of directors approved a modification to
the Company's existing employee stock option plans extending the period Canberra
employees have to exercise their outstanding stock options from 30 to 90 days
immediately following the closing of the sale. This modification generated a new
measurement date and a compensation charge for all outstanding options for
Canberra employees when the employees separated from the Company on February 27,
2001. The charge is based on the difference between the closing price of the
Company's common stock on the date that the board of directors approved the
modification and the exercise prices of the outstanding Canberra employee
options as of February 27, 2001, and is reduced by compensation expense
previously recognized on such options.
In connection with this modification, the Canberra optionholders elected to
exercise their options resulting in the Company issuing 1,271,650 shares of
common stock out of treasury stock at an average price of $4.37 per share. In
lieu of a cash payment of the exercise price and related taxes, the
optionholders elected to sell back 630,660 shares of common stock to the Company
at a fair value of $10.75 per share, which was recorded as an increase in
treasury stock. Lastly, on the same date, an additional 520,018 shares of common
stock were sold back to the Company and accounted for as an increase in treasury
stock at a fair value of $10.75 per share.
Note 4. Acquisitions:
- ---------------------
In March 2000, the Company acquired a 51% equity interest in Carl Consumable
Products, LLC ("CCP") for an initial cash payment of $510,000, with an option to
acquire the remaining 49% equity interest for (a) a cash payment of $490,000,
plus (b) earn-out payments equal to 25% of the operating profit (as defined in
the purchase agreement) of CCP in excess of $530,000 which is generated in each
calendar year occurring during the four-year period following exercise of the
option (unless the option is exercised prior to March 6, 2001, in which case the
applicable earn-out percentage will be increased from 25% to 35%). As of March
31, 2001, the option had not been exercised. CCP designs and manufactures
sophisticated pipettes used in the liquid dispensing process of drug discovery
and genomic research.
In April 2000, the Company acquired certain net operating assets, primarily
intangibles, of Cambridge Imaging Limited ("CIL"), effective March 31, 2000. The
Company paid $1.25 million initially with additional contingent payments, up to
$4.0 million, that may be made through April 2005, subject to the operations
achieving certain post-acquisition performance levels through calendar year
2004. As of March 31, 2001, no contingent earn-out payments had been earned or
accrued. The assets and technology acquired are used to develop and manufacture
biomedical imaging technology and devices.
Effective October 1, 2000, the Company acquired the net operating assets of a
division of GSI Lumonics, Inc. ("GSLI") (now operating as a division of Packard
BioChip Technologies, LLC, a wholly-owned subsidiary of the Company). The total
amount paid consisted of approximately $40 million in cash and 4.5 million
shares of Company common stock valued for financial reporting purposes at $65.2
million. GSLI is a leading provider of imaging equipment for biochip and
microarray applications. The acquisition resulted in a charge in October 2000
totaling $12.1 million to write-off the value assigned to acquired in-process
research and development which had not yet reached technological feasibility.
All of the above acquisitions have been accounted for using the purchase method
of accounting and, accordingly, the purchase prices have been allocated to the
assets purchased and the liabilities assumed based upon the estimated fair
values at the dates of acquisition. The excess of the purchase prices over the
fair values of the net assets acquired has been reflected as goodwill in the
accompanying consolidated balance sheets. As contingent payments are earned, the
related goodwill will increase. The goodwill associated with these acquisitions
is being amortized on a straight-line basis over 20 years from the initial
acquisition dates. The operating results of all acquisitions have been reflected
in the accompanying condensed consolidated statements of income (loss) since
their dates of acquisition.
The following unaudited consolidated information is presented on a pro forma
basis, as if the GSLI acquisition had occurred as of January 1, 2000. In the
opinion of management, the pro forma information reflects all adjustments
necessary for a fair presentation. The pro forma adjustments include: (1)
amortization of goodwill associated with the acquisition; (2) adjustments to
reflect additional interest expense relating to the financing of the
acquisition; and (3) adjustments to reflect the related income tax effects of
the above. The pro forma impact of the CCP and CIL acquisitions is immaterial to
the Company's historical actual results of operations and therefore, no pro
forma adjustments have been made for such acquisitions.
(In thousands, except per share amount)
Three Months Ended
March 31, 2000
------------------
Revenues $43,223
Loss from operations (1,261)
Loss from continuing operations (5,159)
Basic and diluted loss per share
from continuing operations ($ 0.09)
Note 5. Earnings Per Share:
- ---------------------------
Basic earnings per share is computed based upon the weighted average shares
outstanding during each of the periods presented. Diluted earnings per share is
computed based upon the weighted average shares outstanding during each of the
periods presented, including the impact of outstanding options, determined under
the treasury stock method, to the extent their inclusion is dilutive. Basic and
diluted weighted average shares outstanding during the three months ended March
31, 2001 and 2000 are as follows (in thousands):
Three Months Ended
March 31,
2001 2000
---- ----
Basic weighted average shares outstanding 67,803 46,815
Dilutive effect of outstanding stock options 3,112 --
------ ------
Diluted weighted average shares outstanding 70,915 46,815
====== ======
For the three months ended March 31, 2000, 3,829,000 common stock equivalents
were excluded from diluted weighted average shares outstanding as their effect
was antidilutive.
Note 6. Stock Compensation Charges:
- -----------------------------------
In December 1999, the Company granted certain options to employees which, in
accordance with financial reporting guidelines, required the Company to
recognize compensation expense over the vesting period of such options. On March
20, 2000, the Company's Board of Directors approved the acceleration of the
vesting of all outstanding unvested stock options, making them 100% vested,
effective March 17, 2000. This resulted in the recognition of a non-cash
compensation charge of $4.1 million during the three months ended March 31,
2000, associated with the options granted in December 1999.
In March 2000, certain members of the Company's management gifted shares of
their own Company common stock to substantially all of the Company's employees
who did not own shares or options to purchase shares of the Company's common
stock on the date of the gifting. This resulted in a non-cash compensation
charge of $0.6 million during the three months ended March 31, 2000.
Both of the charges discussed above are included in selling, general and
administrative expenses in the accompanying condensed consolidated statements of
income (loss).
Note 7. Discontinued Operations:
- --------------------------------
On February 27, 2001, the Company sold its Canberra operating segment for $170
million. Under the terms of the sale, there will be an adjustment to the $170
million sales price based upon the net asset value at February 27, 2001. The
Company has quantified the net asset adjustment and has recorded the sale and
related gain based upon its estimate of the ultimate sales price, including the
receivable related to the net asset adjustment. The Company does not believe
that the ultimate amount received for the net asset adjustment will be
materially different from the amount estimated. The Company expects to receive
the cash related to the net asset adjustment in the second quarter of 2001. Any
difference between the amount estimated and the amount received will be
reflected as a change in the gain on disposition in the second quarter of 2001.
Amounts previously reported for Canberra have been reclassified and presented as
discontinued operations in the accompanying condensed consolidated financial
statements. Summary information of the discontinued operations is as follows (in
thousands):
Two Months Ended Three Months Ended
February 28, 2001 March 31, 2000
----------------- ------------------
Net sales $14,746 $22,640
Total costs and expenses (13,204) (25,893)
(Provision for) benefit from income taxes (370) 733
------- -------
Income (loss) from discontinued operations $ 1,172 ($2,520)
======= =======
For purposes of presenting operating results of the Company's continuing
operations, all corporate interest expense and interest income has been charged
or credited to continuing operations. Corporate interest expense consists of all
interest associated with the subordinated notes, term loan facility and
revolving credit facility. Corporate interest income represents income earned on
corporate invested funds. None of this interest expense or income has been
allocated to discontinued operations. Discontinued operations includes interest
expense on local borrowings related to the applicable foreign subsidiaries.
Note 8. Registration Statement - Subsequent Event:
- --------------------------------------------------
In February 2001, the Company filed a registration statement on Form S-1
relating to an offering of 10 million shares of the Company's common stock by
selling stockholders and the Company. In light of current market conditions, on
April 27, 2001, the Company filed an application with the Securities and
Exchange Commission to withdraw the Form S-1 registration statement.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with our
condensed consolidated financial statements and accompanying notes included
elsewhere in this Form 10-Q.
This report contains forward-looking statements within the meaning of Section
27A of the Securities Act and Section 21E of the Securities Exchange Act. These
statements relate to future events or our future financial performance. We have
attempted to identify forward-looking statements by terminology including "can,"
"continue," "could," "estimate," "expect," "intend," "may," "plan," "predict,"
"should" or "will" or the negative of these terms or other comparable
terminology. These statements are only predictions and involve known and unknown
risks, uncertainties and other factors, including the following:
- - intense competition in the markets we target;
- - our inability to successfully introduce new products and platforms or to
expand the application range for our current products;
- - our inability to effectively protect our intellectual property;
- - the possibility that our products may infringe on the intellectual property
rights of others;
- - a decline in the use of radioisotopic processes and instruments;
- - our failure to maintain, enhance or establish technology partnerships and
academic arrangements;
- - our inability to pursue strategic acquisitions;
- - costs associated with strategic acquisitions we may effect;
- - a decrease in capital spending by our customers or in government funding;
- - exchange rate and other risks affecting our foreign operations;
- - competition in the technology labor market;
- - fluctuations in our operating results;
- - conflict with the interests of our controlling stockholder;
- - our declared intention not to pay cash dividends; and
- - the large number of shares eligible for future sale.
Overview
- --------
Packard BioScience Company ("Packard" or the "Company") and its subsidiaries are
leading global developers, manufacturers and marketers of instruments and
related consumables and services for use in drug discovery and other life
sciences research. Packard is a leader in laboratory automation and has
developed scalable platforms built on its worldwide leadership in the
manufacturing and marketing of bioanalytical instruments for use in the life
sciences research industry.
Packard's revenues are derived primarily from sales of instruments and
consumables with additional sales from services. Packard is marketing its
instruments as parts of integrated platforms, which it expects will generate
increasing instrument and consumable sales at higher gross margins than its
service business.
The Company's profitability varies among the sources of revenues, consisting of
sales of instruments, services and consumables. The major reasons for such
variances are:
- - technological differences between Packard's products and those of its
competitors;
- - maturity of product life cycles;
- - competitive environment and supply of services and consumables; and
- - Packard's market position and differences in the markets within the
geographic areas it operates.
Packard's operating results also vary among geographic territories. Major
reasons for such variances are:
- - effects of foreign exchange rate fluctuations in countries where it
conducts business in currencies other than the U.S. dollar, primarily
England (British Pound), Euro-based countries and Japan (Japanese Yen);
- - Packard's market position and mix of products sold affect the margins in
each geographic area; and
- - to the extent that Packard's operating results reflect special charges or
credits, and such can be designated to specific geographic operations,
operating results will vary.
On February 27, 2001, the Company sold its Canberra division to COGEMA, S.A. for
$170 million. In addition, in the second quarter of 2001, the Company expects to
receive additional sale proceeds in excess of $10 million through the net asset
adjustment provisions associated with the sale. The Company used $71 million of
the proceeds to repay the outstanding balance on its credit facility on February
28, 2001. In addition, in March 2001, the Company used approximately $9.3
million of the proceeds to repurchase options held by Canberra employees and
paid sale-related expenses of $6.5 million through March 31, 2001. The Company
intends to use the remainder of the net proceeds to pay other fees, expenses and
taxes associated with the sale, totaling approximately $45 million, as well as
to increase spending associated with research and development, new product
development, enhancement of existing products and strategic partnerships and
acquisitions, and for general corporate purposes.
The consolidated financial statements have been reclassified to reflect the net
assets and operating results of the Canberra operating segment as a discontinued
operation. The amounts below relate only to continuing operations unless
otherwise noted.
Results of Operations (dollars in millions)
- ---------------------
Three Months Ended
March 31,
% Inc.
2001 2000 (Dec.)
---- ---- -------
Total revenues $ 51.5 $ 39.8 29.4%
Gross profit 29.0 22.5 28.9%
Operating expenses:
Research and development 8.6 6.2 38.7%
Selling, general and administrative 15.0 16.0 N/A
------ ------
Income from operations 5.4 0.3
Interest expense, net (3.7) (6.0) (38.3%)
------ ------
Income (loss) from continuing operations
before income taxes 1.7 (5.7) N/A
Provision for (benefit from) income taxes 0.5 (2.0) N/A
------ ------
Income (loss) from continuing operations 1.2 (3.7) N/A
Income (loss) from discontinued operations, net 1.2 (2.5) N/A
Gain on sale of discontinued operations, net 47.1 -- N/A
------ ------
Net income (loss) $ 49.5 $ (6.2)
====== ======
Revenues
- --------
Revenues increased $11.7 million, or 29.4%, to $51.5 million in the first
quarter of 2001 from $39.8 million in the comparable 2000 period. The 2001
period includes revenues of approximately $4.7 million from the life sciences
division of GSI Lumonics, Inc. (now known as Packard BioChip Technologies, LLC)
("Packard BioChip") which the Company acquired effective October 1, 2000. During
the first quarter of 2000, this business generated revenues totaling $3.4
million, which are not reflected in the accompanying financial statements. On a
pro forma basis, including Packard BioChip's 2000 first quarter revenues,
revenues increased $8.3 million, or 19.2%, between the periods reported. Foreign
currency exchange rates continued to have an unfavorable effect on the Company
during the first quarter of 2001. Had exchange rates remained the same during
the first quarter of 2001, as in the 2000 period, revenues would have been $1.6
million higher. The Japanese Yen, British Pound and Euro were 10%, 10% and 7%
weaker, respectively, than the U.S. dollar during the first quarter of 2001 as
compared to the first quarter of 2000. Excluding the effect of foreign currency
fluctuations, and including the pro forma prior year revenues of Packard
BioChip, revenues increased $9.9 million, or 22.9%, in the first quarter of 2001
as compared to the 2000 period. The current year increase is primarily due to
growth in our instrumentation sales within our major product lines, particularly
our automated liquid handling and sample preparation instruments where revenues
increased $4.6 million, or 48.5%, to $14.7 million in 2001 from $9.9 million in
2000, excluding the effect of foreign currency fluctuations. Offsetting this
growth was an expected decline in revenues produced from our bioanalytical
scintillation instruments, referred to as our legacy products, where revenues
declined $1.4 million, or 11.3%, excluding the effect of foreign exchange rate
fluctuations.
Service revenues decreased $0.8 million, or 9.5%, to $7.6 million in the first
quarter of 2001 from $8.4 million in the comparable 2000 period. This decrease
is primarily the result of the 2000 period benefiting from services, primarily
software upgrade services performed to make some of our products Y2K compliant,
which continued subsequent to the passage of January 1, 2000. The 2000 first
quarter was the last period to significantly benefit from such services.
Gross Profit
- ------------
Gross profit increased $6.5 million, or 28.9%, to $29.0 million in the first
quarter of 2001 from $22.5 million in the first quarter of 2000. Gross profit as
a percentage of revenues remained relatively the same between the two periods at
approximately 56%. The growth in gross profit dollars is a direct result of the
increased revenues discussed above.
Operating Expenses
- ------------------
Research and Development. Research and development spending increased $2.4
million, or 38.7%, from $6.2 million in the first quarter of 2000 to $8.6
million in the 2001 first quarter. As a percentage of revenues, research and
development expenses represented 16.7% in the first quarter of 2001 compared to
15.6% in the 2000 period. The increase in spending is due primarily to the
Company's October 2000 acquisition of the Packard BioChip. During the first
quarter of 2001, research and development spending by this business was $2.3
million. The prior year amount does not include any amount associated with this
business as it had not been acquired.
Selling, General and Administrative. Selling, general and administrative
expenses decreased $1.0 million, or 6.3%, from $16.0 million in the first
quarter of 2000 to $15.0 million in the first quarter of 2001. This decrease is
due solely to the 2000 period including non-cash stock compensation charges
totaling $4.7 million associated with the Company's April 2000 initial public
offering of its common stock. Excluding these charges, selling, general and
administrative expenses increased $3.7 million, or 32.7%, in the first quarter
of 2001 compared to the first quarter of 2000. This increase is due to the
inclusion of the Packard BioChip business in 2001, as well as a $1.2 million
increase in goodwill amortization due primarily to the goodwill resulting from
the Packard BioChip acquisition. The stronger U.S. dollar helped to partially
offset the above-mentioned increases in selling, general and administrative
costs.
Interest Expense, Net
- ---------------------
Interest expense, net, decreased from $6.0 million during the first three months
of 2000 to $3.7 million during the comparable 2001 period. This decrease is a
direct result of the net proceeds received by the Company in connection with the
April 2000 initial public offering as well as the net proceeds received in
connection with the February 2001 sale of Canberra. The Company used a portion
of the proceeds from these transactions to reduce indebtedness, thereby reducing
interest expense. In addition, the average invested cash balance was higher
during the first quarter of 2001 as compared to the first quarter of 2000,
resulting in increased interest income earned on invested funds. Based upon the
invested cash balance on hand at March 31, 2001, and known significant net cash
requirements throughout the remainder of 2001, the Company expects that
quarterly net interest expense will average approximately $2.0 million through
the remainder of 2001. However, events or market conditions could arise during
this period that could cause actual net interest expense to differ materially
from this estimate. The majority of the Company's interest expense is incurred
on fixed rate subordinated notes whereas the interest earned on short-term
investment instruments fluctuates with market conditions which, during the first
quarter of 2001, experienced declining interest earning rates.
Effective Tax Rate
- ------------------
The Company's effective tax rate was 31% during the first quarter of 2001
compared to 35% in the comparable 2000 period. The 2000 rate represents a
benefit on a pre-tax loss. The reduction in the effective rate between the
periods presented is due primarily to an increase in the estimated research and
development tax credit the Company will generate and utilize in 2001 as a result
of the planned increase in research and development spending.
Discontinued Operations
- -----------------------
Income (loss) from discontinued operations, net of income taxes, consists of the
following (in thousands):
For the Three Months Ended
March 31,
2001 2000
---- ----
Revenues $14,746 $22,640
Total costs and expenses (13,204) (25,893)
(Provision for) benefit from
income taxes (370) 733
------- -------
Income (loss) from discontinued
operations, net of income taxes $ 1,172 ($ 2,520)
======= =======
For purposes of presenting operating results of continuing operations, all
corporate interest expense has been charged, and all corporate interest income
has been credited, to continuing operations. Discontinued operations for 2000
included non-cash stock compensation charges totaling $3.5 million and a
restructuring charge at Canberra's manufacturing operation in England totaling
$2.4 million.
The gain recognized in connection with the sale of Canberra totaled $47.2
million, net of related expenses, costs and income taxes.
Liquidity and Financial Resources
- ---------------------------------
The Company's liquidity requirements arise from operational needs, including
research and development expenditures, interest payments on outstanding
indebtedness, capital expenditures and funding of acquisitions and other
partnerships. Our first quarter 2001 cash requirements were met through
available invested cash, proceeds from the Canberra sale, borrowings under our
revolving credit facility and overseas bank facilities, and proceeds from the
exercise of stock options. Our first quarter 2000 cash requirements were met
primarily through borrowings on our credit facilities and proceeds received from
the exercise of stock options.
Approximately half of our revenues are generated from foreign sources, most of
which are denominated in currencies other than the U.S. dollar. As a result, our
reported earnings and financial position are affected by changes in the foreign
currency exchange rates. A strengthening U.S. dollar against the foreign
currencies through which we conduct our business has had, and may continue to
have, a negative impact on our U.S. dollar denominated operating results. To
manage the exposure of foreign currency exchange rates, we engage in hedging
strategies. We purchase various foreign currency forward contracts, at specified
levels of coverage, generally for the purpose of hedging firm intercompany
inventory purchase commitments.
Net cash used by continuing operating activities was $3.9 million in the first
quarter of 2001 compared to $2.5 million in the first quarter of 2000. The
increased use of cash for operating activities was due primarily to an increase
in the first quarter 2001 customer accounts receivable associated with the
significant increase in revenues as compared to the first quarter of 2000. This
increased use of cash was partially offset by a reduction in cash interest
payments made in the first quarter of 2001, as compared to the prior year
period, resulting from the Company's repurchase of approximately $32 million of
senior subordinated notes in May, August and December of 2000, as well as a
lower average outstanding balance on the Company's revolving credit facility
during the 2001 period as compared to 2000.
Net cash provided by investing activities was $144.6 million during the first
quarter of 2001 compared to a use of $6.7 million of cash in the comparable 2000
period. The sale of Canberra generated net cash proceeds of approximately $154.2
million in the first quarter of 2001, consisting of the initial sales proceeds
of $170 million, less $6.5 million of fees paid through March 31, 2001,
associated with the transaction and net of cash sold. There will be additional
fees of approximately $3.0 million, as well as income taxes of approximately
$36.0 million, paid from the proceeds in future periods. In addition, in
accordance with the purchase and sale agreement associated with the sale, there
will be a net asset settlement which will effect the final purchase price paid
by COGEMA, S.A., the company which acquired Canberra. The Company has estimated
this settlement to be in excess of $10 million which it expects to receive
before June 30, 2001. Other investing cash use during the first quarter of 2001
included $5.5 million of acquisition related activity, primarily payment of
contingent earn-outs accrued as of December 31, 2000, and capital expenditures
and technology purchases totaling $4.1 million. During the first quarter of
2000, the Company's investing use of cash consisted of $5.5 million of
acquisition related activity, including payment of contingent earn-outs, and
$1.2 million of capital expenditures and technology purchases. The increase in
the first quarter 2001 capital expenditures, as compared to the 2000 period, is
due primarily to the Company's purchase of a new facility which Packard BioChip
will occupy at some point during the second quarter of 2001.
Net cash used for financing activities during the first quarter of 2001
consisted of a net reduction in outstanding indebtedness of $51.3 million,
consisting primarily of the February 28, 2001, repayment of the $71 million
outstanding revolving credit balance discussed above, offset by additional
borrowings incurred to service cash needs such as scheduled interest payments
and contingent earn-out payments made during the first three months of 2001. In
addition, the 2001 period includes $9.3 million of net cash used to repurchase
options held by Canberra employees. The first quarter of 2000 cash provided by
financing activities was primarily used to fund scheduled interest payments and
contingent earn-out payments made during the first three months of 2000, as well
as to fund operational requirements, as needed. Both periods reflect proceeds
received from employees upon the exercise of stock options.
Backlog
- -------
As of both March 31, 2001 and 2000, the Company's instrument and consumables
order backlog was approximately $22.4 million. The Company expects that
substantially all of the March 31, 2001, backlog will be filled by December 31,
2001. The Company includes in backlog only those orders for which it has
received purchase orders and does not include in backlog orders for service. The
Company's backlog as of any particular date may not be representative of actual
sales for any succeeding period.
New Accounting Standard
- -----------------------
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standard No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No. 133"), which establishes the accounting and
reporting standards for derivative instruments and for hedging activities. The
Company purchases forward contracts to cover foreign exchange fluctuation risks
on intercompany sales to certain of its foreign operations which are not
designated as hedging instruments under SFAS No. 133, as amended. Effective
January 1, 2001, the Company reflects such forward contracts in its consolidated
financial statements at their current market values based upon the actual
exchange rates in effect as compared to the forward contracted rates. Resulting
gains and losses are reflected in the Company's condensed consolidated
statements of income (loss). The effect of adopting this statement of $0.2
million as of January 1, 2001, is included in cost of sales for the three months
ended March 31, 2001. The cumulative effect of adopting SFAS No. 133 has not
been classfied separately since the amount is not material.
Registration Statement - Subsequent Event
- -----------------------------------------
In February 2001, the Company filed a registration statement on Form S-1
relating to an offering of 10 million shares of the Company's common stock by
selling stockholders and the Company. In light of current market conditions, on
April 27, 2001, the Company filed an application with the Securities and
Exchange Commission to withdraw the Form S-1 registration statement.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There has been no significant change in this area since the filing of the
Company's 2000 Form 10-K.
PART II. OTHER INFORMATION
PACKARD BIOSCIENCE COMPANY
Item 1. Legal Proceedings
There has been no significant change in this area since the filing of the
Company's 2000 Form 10-K.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
None.
(b) Reports on Form 8-K:
A report on Form 8-K dated February 27, 2001, was filed on
March 13, 2001.
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, in the City of Meriden, State of
Connecticut, on May 14, 2001.
PACKARD BIOSCIENCE COMPANY
By: /s/ Emery G. Olcott
--------------------------------------------
Emery G. Olcott
Chairman of the Board and
Chief Executive Officer
By: /s/ Ben D. Kaplan
--------------------------------------------
Ben D. Kaplan
Vice President and Chief
Financial Officer
By: /s/ David M. Dean
--------------------------------------------
David M. Dean
Corporate Controller