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 September 30, 1997
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
(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
(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 and 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 Outstanding at September 30, 1997
9,007,264
PACKARD BIOSCIENCE COMPANY AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of September 30, 1997 and
December 31, 1996
Condensed Consolidated Statements of Income (Loss) for the Three and
Nine Months Ended September 30, 1997 and 1996
Condensed Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 1997 and 1996
Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
PART I. FINANCIAL INFORMATION
PACKARD BIOSCIENCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 1997 and DECEMBER 31, 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
ASSETS (Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 13,004 $ 37,826
Accounts receivable, net 35,890 40,860
Inventories 28,130 21,798
Other current assets 6,808 6,432
-------- --------
Total current assets 83,832 106,916
-------- --------
PROPERTY, PLANT AND EQUIPMENT, at cost 33,906 31,185
Less - Accumulated depreciation (16,006) (13,598)
-------- --------
17,900 17,587
-------- --------
OTHER ASSETS:
Deferred financing costs, net 10,277 0
Deferred income taxes 6,725 1,238
Investments 8,668 1,818
Goodwill, net 8,729 147
Other 11,163 10,219
-------- --------
45,562 13,422
-------- --------
TOTAL ASSETS $147,294 $137,925
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES:
Notes payable $ 3,045 $ 3,524
Current portion of long-term obligations 1,910 829
Accounts payable 9,627 11,118
Accrued liabilities 14,260 15,943
Other current liabilities 17,345 16,286
-------- --------
Total current liabilities 46,187 47,700
-------- --------
LONG-TERM OBLIGATIONS, net of current portion:
Notes and other long-term obligations 6,372 6,912
Term loan and credit facility 46,500 0
Senior subordinated notes 150,000 0
-------- --------
Total long-term obligations, net 202,872 6,912
-------- --------
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST IN EQUITY OF SUBSIDIARY 0 2,720
-------- --------
STOCKHOLDERS' EQUITY (DEFICIENCY):
Common stock 137 129
Paid-in capital 0 1,320
Cumulative translation adjustment 340 2,402
Retained earnings (deficit) (909) 89,088
Unrealized investment gains, net 3,201 0
-------- --------
2,769 92,939
Less: Treasury stock, at cost 103,435 11,128
Deferred compensation 1,099 1,218
-------- --------
Total stockholders' equity (deficiency) (101,765) 80,593
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIENCY) $147,294 $137,925
======== ========
</TABLE>
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 AND NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(Unaudited)
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
NET SALES $42,965 $39,733 $130,667 $130,766
COST OF SALES 20,917 18,930 61,786 60,907
------- ------- -------- --------
GROSS PROFIT 22,048 20,803 68,881 69,859
RESEARCH AND
DEVELOPMENT EXPENSES 5,879 4,424 16,252 12,635
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 12,474 11,696 35,216 35,177
RECAPITALIZATION CHARGES 450 181 18,429 351
------- ------- -------- --------
OPERATING PROFIT (LOSS) 3,245 4,502 (1,016) 21,696
INTEREST EXPENSE (4,894) (49) (11,316) (115)
INTEREST INCOME 202 263 707 829
------- ------- -------- --------
INCOME (LOSS) BEFORE INCOME
TAXES AND MINORITY INTEREST (1,447) 4,716 (11,625) 22,410
PROVISION FOR (BENEFIT FROM)
INCOME TAXES (178) 1,411 (2,385) 7,045
MINORITY INTEREST IN INCOME
OF SUBSIDIARY 0 259 218 1,283
------- ------- -------- --------
NET INCOME (LOSS) $(1,269) $ 3,046 $ (9,458) $ 14,082
======= ======= ======== ========
Weighted average common shares
outstanding including common
share equivalents (excluding
common share equivalents in
loss periods) 9,007 25,189 13,501 25,446
Earnings (loss) per share $ (0.14) $ 0.12 $ (0.70) $ 0.55
</TABLE>
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 NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30,
1997 1996
<S> <C> <C>
CASH FLOWS FROM (USED FOR) OPERATING
ACTIVITIES:
Net income (loss) $ (9,458) $ 14,082
Adjustments to reconcile net income (loss) to net
cash from (used in) operating activities:
Depreciation and amortization of intangibles 4,734 3,719
Amortization of deferred financing costs 901 -
Other non-cash charges, net 3,759 1,113
Changes in operating assets and liabilities (6,139) 4,300
-------- --------
Net cash from (used in)operating activities (6,203) 23,214
-------- --------
CASH FLOWS FROM (USED FOR) INVESTING
ACTIVITIES:
Acquisition of business, net of acquired cash (6,291) -
Purchase of minority interest in subsidiary (7,551) -
Capital expenditures, net (2,799) (2,079)
Purchase of investments (1,438) (1,768)
Product lines, patent rights and licenses acquired (2,036) (4,065)
-------- --------
Net cash used in investing activities (20,115) (7,912)
-------- --------
CASH FLOWS FROM (USED FOR) FINANCING
ACTIVITIES:
Borrowings under long-term obligations 201,710 1,135
Repayments of long-term obligations (3,377) (526)
Purchase of treasury stock (208,848) (4,863)
Sale of stock 21,051 -
Proceeds from exercise of stock options 8,331 233
Recapitalization costs deferred or charged to equity (15,295) -
Dividend paid - (4,972)
-------- --------
Net cash from (used in) financing activities 3,572 (8,993)
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (2,076) (1,195)
-------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (24,822) 5,114
CASH AND CASH EQUIVALENTS, beginning of period 37,826 22,515
-------- --------
CASH AND CASH EQUIVALENTS, end of period $ 13,004 $ 27,629
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
PACKARD BIOSCIENCE COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1997 AND 1996
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, 1996 condensed consolidated balance sheet
which was derived from the Company's registration statement on Form S-4, filed
with the Securities and Exchange Commission on June 5, 1997 (the Registration
Statement), under the Securities Act of 1933. The Registration Statement was
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission and contains audited consolidated financial statements of the
Company for the years ended December 31, 1994, 1995 and 1996. The Company
suggests that the condensed consolidated financial statements be read in
conjunction with the consolidated financial statements and related notes to the
consolidated financial statements contained in the Registration Statement.
Certain information and footnote disclosures which normally accompany financial
statements prepared in accordance with generally accepted accounting principles
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.
Note 1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES:
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 Registration Statement. The Company's practices of
recognizing assets, liabilities, revenues, expenses and other transactions
which impact the accompanying financial information is consistent with such
note.
In connection with a collaborative research and development alliance, the
Company has an equity investment in a company that designs and develops
proprietary drug discovery systems, services and technologies to accelerate and
enhance the discovery of new medicines. The Company has classified this
investment as available for sale securities in accordance with Financial
Accounting Standards Board (FASB) Statement of Financial Accounting Standard
No. 115, "Accounting for Certain Investments in Debt and Equity Securities".
As such, the investment is reflected in the accompanying financial statements
at its market value as of September 30, 1997 and the unrealized gain, net of
taxes, as of that date is reflected in a separate component of stockholders'
equity titled "Unrealized investment gains, net".
Note 2. NEW ACCOUNTING STANDARDS:
During 1997, the FASB issued several new Statements of Financial Accounting
Standards (SFAS). A brief description of each SFAS and its expected impact on
the Company is described below.
SFAS No. 128, " Earnings Per Share" - SFAS No. 128 changes the manner in which
earnings per share amounts are calculated and presented. The most significant
change that this standard introduces is the required presentation of "basic"
earnings per share which is based solely on the weighted average number of
common shares outstanding during the period reported, excluding the dilutive
impact of any potential common stock equivalents such as stock options. SFAS
No. 128, which will be effective for the Company beginning with the annual
period ending December 31, 1997, will result in the Company's presentation of
basic as well as diluted earnings per share. All historical earnings per share
information will be restated to conform to the provisions of SFAS No. 128.
SFAS No. 128 will have no impact on the Company's results of operations or
financial position.
SFAS No. 129, "Disclosure of Information about Capital Structure" - SFAS
No. 129 requires companies to disclose in their financial statements all
pertinent rights and privileges of all securities other than ordinary common
stock, similar to existing disclosure rules. This statement will be effected
beginning with the Company's annual period ending December 31, 1997. SFAS
No. 129 will have no impact on the Company's results of operations or financial
position.
SFAS No. 130, "Reporting Comprehensive Income" - SFAS No. 130 requires
companies to report all components of comprehensive income in the financial
statements. Comprehensive income includes all non-owner transactions or events
which impact a company's equity, including items which do not directly effect
net income. SFAS No. 130 will be effective January 1, 1998, and will not effect
the Company's results of operations or financial position.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information" - SFAS No. 131 requires companies to disclose segment information
in a manner that corresponds to the way management organizes units and
evaluates performance internally. This statement will become effective in
1998. SFAS No. 131 will not change the way in which the Company reports on its
main business segments nor will it effect the Company's results of operations
or financial position.
In addition to the above statements, the FASB has issued several other new
accounting standards which became effective after January 1, 1996 (refer to
Note 1 to the consolidated financial statements included in the Registration
Statement). The impact of adopting these standards was not material to the
consolidated financial position or results of operations of the Company.
Note 3. INVENTORIES:
Inventories consisted of the following at September 30, 1997 and December 31,
1996 (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
<S> <C> <C>
Raw materials and parts $15,128 $13,532
Work in process 1,676 944
Finished goods 13,293 9,085
------- -------
30,097 23,561
Excess and obsolete reserve (1,967) (1,763)
------- -------
$28,130 $21,798
======= =======
</TABLE>
Note 4. RECAPITALIZATION:
Refer to Notes 4 and 12 to the 1996 consolidated financial statements and
Notes 3 and 4 to the condensed consolidated financial statements included in the
Registration Statement for a detailed description of the Recapitalization of
the Company which occurred in March 1997 (the Recapitalization).
Note 5. MINORITY INTEREST ACQUISITION:
In May 1997, a subsidiary of the Company, Packard Japan KK ("PJKK"), entered
into an agreement, for a fixed amount denominated in Japanese yen, to acquire
the 40% interest held by its minority stockholder for approximately
$7.5 million. The agreement obligates PJKK to acquire approximately 60% of the
minority interest in 1997 and the remainder in future years as PJKK generates
sufficient earnings to allow the transaction to occur in accordance with
Japanese laws and regulations. Under the agreement, the minority stockholder
has surrendered the rights to any dividends from PJKK subsequent to
December 31, 1996. The Company has reflected the acquisition in full as of the
effective date of the agreement which was April 1, 1997 and, as a result, the
minority interest has been eliminated and the related obligations as well as
resulting goodwill have been recorded as of such date.
Note 6. STOCK DIVIDEND:
On May 15, 1997, the Board of Directors declared a 1-for-1 stock dividend on
shares outstanding on that date. The dividend was paid from shares held in
treasury by the Company. The impact of the issuance of the treasury shares
was charged against paid-in capital to the extent available with the remainder
charged to retained earnings. All per share and number of shares information,
except for treasury stock, included in the accompanying condensed consolidated
financial statements and notes thereto have been restated to reflect the stock
dividend.
Note 7. STOCK OPTION PLANS:
In connection with the Recapitalization, the Company redeemed all stock options
of noncontinuing stockholders and acquired a portion of the then outstanding
options held by management. Subsequent to the Recapitalization, all remaining
outstanding options, amounting to 600,000, became fully vested. Such options
will expire at various dates through the year 2006.
Effective March 4, 1997, the Company adopted the Management Stock Incentive
Plan. Under this nonqualified plan, the Company is authorized to issue
incentive and performance options to certain employees and directors. The
plan allows for the issuance of up to 952,840 incentive options and up to
278,052 performance options with exercise prices of $11.125 and $13.625,
respectively. The options vest over a four year period commencing from the
date of grant and expire within ten years from grant. The Company granted
696,500 incentive options and 265,000 performance options generally effective
as of June 24, 1997.
Note 8. ACQUISITION OF AQUILA TECHNOLOGIES GROUP, INC.:
On September 3, 1997, the Company acquired all of the outstanding common stock
of Aquila Technologies Group, Inc. (Aquila), a manufacturer and distributor of
surveillance cameras, electronic seals and other equipment utilized in the
safeguarding of nuclear materials and an OEM manufacturer of process control
equipment. The Company acquired Aquila for approximately $6.7 million in cash
with additional future payments to be made contingent upon post-acquisition
operating results through calendar year 2000 up to a maximum of $10.4 million
in additional payments (the "Contingent Payments").
The acquisition has been accounted for using the purchase method of accounting
and, accordingly, the purchase price has been allocated to the assets purchased
and the liabilities assumed based upon the fair values at the date of
acquisition. The excess of the purchase price over the fair values of the net
assets acquired was approximately $4.3 million and has been reflected as
goodwill in the accompanying condensed consolidated balance sheets. As future
Contingent Payments are made, the related goodwill will increase. The goodwill
is being amortized on a straight-line basis over 20 years.
The operating results of Aquila have been reflected in the accompanying
condensed consolidated statements of income (loss) from the date of
acquisition. The following unaudited consolidated information is presented on
a pro forma basis, as if the acquisition had occurred as of the beginning of
the periods presented. In the opinion of management, the pro forma information
reflects all adjustments necessary (consisting only of normal recurring items)
for a fair presentation. The pro forma adjustments primarily consist of
amortization of goodwill associated with the acquisition, adjustments to
certain historical Aquila compensation levels to be more indicative of post-
acquisition levels, additional interest expense relating to the financing of
the acquisition, and related income tax effects, if any, of the above.
<TABLE>
<CAPTION>
(Dollars in thousands, except per share amounts)
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Net sales $43,964 $43,970 $139,056 $144,348
Operating profit (loss) $ 3,154 $ 4,763 $ 417 $ 21,937
Net income (loss) $(1,351) $ 2,982 $ (8,769) $ 13,814
Earnings (loss) per share $ (0.15) $ 0.12 $ (0.65) $ 0.54
</TABLE>
Note 9. STOCKHOLDER'S EQUITY (DEFICIENCY):
During the nine months ended September 30, 1997, changes in selected
stockholders' equity (deficiency) accounts and related share information
consisted of the following (dollar amounts in thousands):
<TABLE>
<CAPTION>
Retained
Common Stock Treasury Stock Paid-in Earnings
SHARES AMOUNT SHARES AMOUNT CAPITAL (DEFICIT)
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996 12,924,221 $ 129 777,869 $ (11,128) $ 1,320 $89,088
Restricted stock plan shares
forfeited (898) (6)
Shares issued in connection
with the exercise of stock
options 798,500 8 17,758
Purchase of treasury stock 9,386,432 (208,847)
Sale of treasury stock (1,103,413) 24,452 (3,407)
Fees related to Recapitalization (3,252) (864)
Stock dividend (4,346,329) 95,340 (18,208) (77,132)
Net loss (9,458)
---------- ------ --------- --------- ------- -------
Balance, September 30, 1997 13,721,823 $ 137 4,714,559 $(103,435) $ 0 $ (909)
---------- ------ --------- --------- ------- -------
</TABLE>
Note 10. EARNINGS PER SHARE:
For all periods presented in the accompanying condensed consolidated financial
statements, there were no differences between primary and fully diluted
earnings per share. Outstanding stock options were factored into the
determination of weighted average common shares outstanding to the extent they
had a dilutive effect on earnings per share. During the three and nine month
periods ending September 30, 1996, the effect of outstanding stock options
increased weighted average shares outstanding by 857,532 and 848,312,
respectively. The treasury stock method was applied in calculating the
dilutive impact of the stock options. For both of the 1997 periods presented
in the accompanying condensed consolidated financial statements, stock options
were not factored into the determination of weighted average common shares
outstanding as their effect would be antidilutive in light of the net losses
incurred during such periods.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
This report contains statements which, to the extent they are not recitations
of historical facts, constitute "forward-looking" statements and are
prospective. All such forward-looking statements are intended to be subject to
the safe harbor protection of the Securities Litigation Reform Act of 1995.
A number of important factors affecting the Company's business and financial
results could cause actual results to differ materially from those stated in
the forward-looking statements. Those factors include, but are not limited to,
developments in technology, changes in legislative, political and regulatory
conditions, and the overall competitive environment in addition to such other
factors disclosed herein, in the Registration Statement and in the Company's
other securities filings.
GENERAL
The Company is a leading developer, manufacturer and marketer of analytical
instruments and related products and services for use in the drug discovery and
molecular biology segments of the life sciences industry and in nuclear
research, safeguarding and environmental remediation. Through Packard
Instrument Company, Inc., a wholly-owned subsidiary, and several other wholly-
owned subsidiaries (collectively, "Packard Instrument"), the Company supplies
bioanalytical instruments, and related biochemical supplies and services, to
the drug discovery and molecular biology markets, and through certain divisions
and wholly-owned subsidiaries comprising the Canberra Nuclear Products Group
("Canberra Nuclear"), the Company manufactures analytical instruments used to
detect, identify and quantify radioactive materials for the nuclear industry
and related markets.
RESULTS OF OPERATIONS (DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
% Inc. % Inc.
1997 1996 (DEC.) 1997 1996 (DEC.)
<S> <C> <C> <C> <C> <C> <C>
Total revenues:
Packard Instrument $27.4 $28.0 (2.3)% $ 88.2 $ 90.8 (2.9)%
Canberra Nuclear 15.6 11.7 33.1 42.5 40.0 6.2
----- ----- ---- ------ ------ ----
Consolidated 43.0 39.7 8.1 130.7 130.8 (0.0)
----- ----- ---- ------ ------ ----
Gross profit:
Packard Instrument 15.0 15.3 (2.5) 48.6 50.9 (4.6)
Canberra Nuclear 7.1 5.5 29.8 20.3 19.0 7.2
----- ----- ---- ------ ------ ----
Consolidated 22.1 20.8 6.0 68.9 69.9 (1.4)
----- ----- ---- ------ ------ ----
Operating expenses:
Research and development 5.9 4.4 32.9 16.3 12.6 28.6
Selling, general and administrative 12.5 11.7 6.7 35.2 35.2 (0.0)
Recapitalization charges .4 .2 N/A 18.4 .4 N/A
----- ----- ---- ------ ------ ----
Operating profit (loss) $ 3.3 $ 4.5 (27.9) $ (1.0) $ 21.7 N/A
----- ----- ---- ------ ------ ----
</TABLE>
Excluding the impact of changes in foreign currency exchange rates,
consolidated total revenues would have been $2.0 million and $5.7 million
higher for the three and nine months ended September 30, 1997, respectively.
The 1997 periods reflect the operating results of Aquila Technologies Group,
Inc. (Aquila), a manufacturer and distributor of surveillance cameras,
electronic seals and other equipment utilized in the safeguarding of nuclear
materials and an OEM manufacturer of process control equipment, which was
acquired effective September 1, 1997. Aquila's post-acquisition operating
results are included with those of Canberra Nuclear and the Company on a
consolidated basis. In September, Aquila generated net revenues of $2.1
million, gross profit of $0.6 million and operating income of approximately
$0.3 million.
Packard Instrument's total revenues decreased slightly during both the
three-month and year-to-date periods ended September 30, 1997. The decreases
are due primarily to the stronger U.S. dollar during 1997 compared to 1996, and
reduced sales at the Company's Japanese subsidiary, Packard Japan KK ("PJKK").
The lower sales volume at PJKK is a direct result of the Japanese government's
efforts during 1996 to stimulate the Japanese economy through increased
spending in areas including the Company's products and services. During 1997,
the Japanese government's spending level in these areas has decreased
dramatically. The above decreases were partially offset by increases in sales
of new products including the Homogeneous Time-Resolved Flourescence
(HTRF) (TM) instrument, Kryptor (TM), liquid handling equipment and imagers as
well as increased chemical and supply sales.
Canberra Nuclear's increased sales, both third quarter and year-to-date 1997,
are due primarily to the acquisition of Aquila in September 1997 and sales
volume growth in the nuclear products and detector businesses. These increases
were negatively affected by the unfavorable exchange impact of the
strengthening U.S. dollar in 1997 as compared to 1996 as well as pressure
within some of the European countries in which the Company operates to purchase
products manufactured within such countries rather than from overseas.
The Company's gross profit increase during the three months ended September 30,
1997, as compared to the corresponding 1996 period, is due primarily to the
acquisition of Aquila as well as growth within the Canberra Nuclear business.
Gross profit for the year-to-date period ending September 30, 1997 was down in
comparison with the prior year period due to the lower sales volume at PJKK as
well as unfavorable currency exchange fluctuations.
Research and development spending increased during both of the 1997 periods
presented, as compared to 1996, reflecting increased investment on the part of
Packard Instrument in the areas of product enhancement and new product
development.
Selling, general and administrative expenses were flat during the nine month
periods ending September 30, 1997 and 1996. The increase in selling, general
and administrative expenses during the third quarter of 1997 is due primarily
to inclusion of Aquila as well as increases in professional and legal services.
As a percentage of total revenues such costs remained relatively consistent
with 1996, on both a quarterly and year-to-date basis.
During the first quarter of 1997, the Company recorded an $18.0 million charge
associated with the Recapitalization. Such charge was increased $0.4 million
during the third quarter of 1997 to reflect revisions in the Company's original
estimate of costs associated with the Recapitalization.
The consolidated operating profit (loss) of $3.3 million and $(1.0) million for
the three and nine months ended September 30, 1997 compares with $4.5 million
and $21.7 million during the corresponding 1996 periods. In addition to the
Recapitalization charge, 1997 operating profit (loss) for the periods presented
reflects the negative impact of the lower Japanese operating results, increased
research and development spending and the stronger U.S. dollar as compared to
1996.
The increase in interest expense and decrease in interest income during the
1997 periods are a direct result of the funds used for the Recapitalization
(refer to the Registration Statement) and associated increase in indebtedness.
For the nine months ended September 30, 1997, the consolidated effective tax
rate was a benefit of 20.5% compared to a 31.4% provision during the same
period in 1996. The reduced rate was primarily a result of the tax benefit
provided on a portion of the Recapitalization charges being realized at a lower
effective rate than the rate on income generated in higher tax rate countries,
particularly Japan.
FINANCIAL CONDITION - LIQUIDITY AND CAPITAL RESOURCES
The Company has historically generated sufficient cash flow from operations to
meet its working capital requirements as well as to fund capital expenditures,
debt service and equity transactions such as dividend payments and stock
repurchases. In connection with the Recapitalization, the Company increased
its long-term indebtedness by $190.0 million and, as a result, debt service
requirements have increased significantly as compared to historical levels.
The Company has, as of November 12, 1997, $68.0 million of funds available
under a revolving credit facility secured as part of the Recapitalization.
Monies available under this credit facility are subject to certain restrictions
and provisions contained therein. Refer to the Registration Statement for a
detailed description of the Recapitalization including the related indebtedness
and repayment terms and conditions. Prior to the time at which significant
levels of principal on the term loan and subordinated notes becomes due in
fiscal 2002, the Company will evaluate and identify the most advantageous
options available to service such debt. Options may include refinancing such
principal under potentially new terms and conditions or repaying such debt
through funds obtained through other sources or means. However, there can be
no assurance that any new financing will be available or that the terms thereof
will be favorable to the Company.
The Company expects to generate adequate cash from operations to meet most of
its working capital needs as well as to provide for necessary debt service
requirements during the next several years. The Company can and will borrow
monies from the revolving credit facility in order to meet temporary or seasonal
shortfalls which may arise in the level of cash generated from operations and
to fund the Contingent Payments. The Company expects that, should the
generation of excess available operating cash flow be insufficient, it will
also utilize the revolving credit facility to fund a significant portion of its
strategic acquisition program and new product development initiatives, as well
as a portion of capital expenditures for machinery, equipment and facility
expansions.
Operating activities utilized $6.2 million of cash during the nine months ended
September 30, 1997 compared to $23.2 million of cash generated from operations
in the comparable 1996 period. The reduced operating cash flow is primarily a
result of the cash portion of the Recapitalization charge ($8.5 million)
recognized in the first quarter of 1997, the additional interest incurred on
the Recapitalization indebtedness and the lower operating results during the
nine months ended September 30, 1997 as compared to the prior year period. The
Company has utilized a significant amount of cash (approximately $21.7 million
during 1996 and 1997) to fund Recapitalization related fees and other related
expenses.
In May 1997, PJKK entered into an agreement to acquire the 40% interest held
by its minority stockholder for approximately $7.5 million. (Refer to Note 5
to the condensed consolidated financial statements included herein). To date,
the acquisition has been funded through a combination of cash on hand and notes
payable issued to the minority stockholder. The Company expects that PJKK will
be able to fund the remainder of acquisition through a similar combination of
sources.
In September 1997, the Company acquired Aquila. The Company financed the
initial purchase price of approximately $6.7 million, including costs incurred
in connection with the acquisition, through a $7.0 million borrowing on the
revolving credit facility discussed above. The Company will make additional
contingent payments based upon post-acquisition operating performance through
calendar year 2000. (Refer to Note 8 to the condensed consolidated financial
statements included herein).
As of September 30, 1997 and 1996, the Company's order backlog was
approximately $38.9 million and $32.2 million, respectively. 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.
PART II. OTHER INFORMATION
PACKARD BIOSCIENCE COMPANY
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
EXHIBIT NO. DESCRIPTION
27 Financial data schedule pursuant to Article 5 of
Regulation S-X
(b) Reports on Form 8-K
Not applicable.
<PAGE>
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 November 12, 1997.
PACKARD BIOSCIENCE COMPANY
By: /s/ Emery G. Olcott
-------------------------------------------
Emery G. Olcott
Chairman of the Board, Chief
Executive Officer and President
By: /s/ Ben D. Kaplan
-------------------------------------------
Ben D. Kaplan
Vice President and Chief
Financial Officer
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5 EXHIBIT 27
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 13,004
<SECURITIES> 0
<RECEIVABLES> 35,890
<ALLOWANCES> 455
<INVENTORY> 28,130
<CURRENT-ASSETS> 83,832
<PP&E> 33,906
<DEPRECIATION> 16,006
<TOTAL-ASSETS> 147,294
<CURRENT-LIABILITIES> 46,187
<BONDS> 0
0
0
<COMMON> 137
<OTHER-SE> (101,902)
<TOTAL-LIABILITY-AND-EQUITY> 147,294
<SALES> 130,667
<TOTAL-REVENUES> 130,667
<CGS> 61,786
<TOTAL-COSTS> 61,786
<OTHER-EXPENSES> 69,897
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,316
<INCOME-PRETAX> (11,625)
<INCOME-TAX> (2,385)
<INCOME-CONTINUING> (9,458)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,458)
<EPS-PRIMARY> (.70)
<EPS-DILUTED> (.70)
</TABLE>
