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, 1999
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 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 12, 1999:
9,151,395
<PAGE>
PACKARD BIOSCIENCE COMPANY AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of March 31, 1999 and
December 31, 1998
Condensed Consolidated Statements of Income and Comprehensive Income
for the Three Months Ended March 31, 1999 and 1998
Condensed Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 1999 and 1998
Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K
1
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PACKARD BIOSCIENCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 1999 and DECEMBER 31, 1998
(Dollars in thousands)
ASSETS March 31, December 31,
1999 1998
--------- ---------
CURRENT ASSETS:
Cash and cash equivalents $ 15,296 $ 7,929
Accounts receivable, net 43,409 48,218
Inventories, net 35,352 30,633
Deferred income taxes 4,607 4,423
Other current assets 4,820 6,268
--------- ---------
Total current assets 103,484 97,471
--------- ---------
PROPERTY, PLANT AND EQUIPMENT, at cost 45,181 43,469
Less - accumulated depreciation (18,745) (17,902)
--------- ---------
26,436 25,567
--------- ---------
OTHER ASSETS:
Goodwill, net 28,725 24,030
Deferred financing costs, net 7,959 8,346
Other 13,053 13,720
--------- ---------
49,737 46,096
--------- ---------
TOTAL ASSETS $ 179,657 $ 169,134
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Notes payable $ 2,902 $ 3,221
Current portion of long-term obligations 1,817 3,496
Accounts payable and accrued liabilities 38,064 53,635
Deferred income 12,073 12,372
--------- ---------
Total current liabilities 54,856 72,724
--------- ---------
LONG-TERM OBLIGATIONS, net of current portion:
Notes and other long-term obligations 6,081 9,564
Term loan and credit facility 69,806 37,365
Senior subordinated notes 150,000 150,000
--------- ---------
Total long-term obligations, net 225,887 196,929
--------- ---------
DEFERRED INCOME TAXES 5,090 5,489
--------- ---------
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST IN EQUITY OF
SUBSIDIARY 2,305 2,555
--------- ---------
STOCKHOLDERS' DEFICIT:
Cumulative translation adjustment 707 1,448
--------- ---------
Accumulated other comprehensive income 707 1,448
Common stock 137 137
Deficit (8,623) (10,012)
--------- ---------
(7,779) (8,427)
Less: Treasury stock, at cost (99,943) (99,341)
Deferred compensation (759) (795)
--------- ---------
Total stockholders' deficit (108,481) (108,563)
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIT $ 179,657 $ 169,134
========= =========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
2
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PACKARD BIOSCIENCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND
COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(Dollars in thousands, except per share amounts)
Three Months Ended
March 31,
---------------------------
1999 1998
----------- -----------
NET SALES $ 58,705 $ 48,556
COST OF SALES 29,642 22,842
----------- -----------
GROSS PROFIT 29,063 25,714
RESEARCH AND DEVELOPMENT EXPENSES 7,275 6,895
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 14,285 11,390
ACQUIRED IN-PROCESS RESEARCH AND
DEVELOPMENT CHARGES (Note 3) -- 2,680
----------- -----------
OPERATING PROFIT 7,503 4,749
INTEREST EXPENSE, NET (5,266) (4,927)
REALIZED INVESTMENT GAINS -- 2,173
----------- -----------
INCOME BEFORE INCOME TAXES 2,237 1,995
PROVISION FOR INCOME TAXES 1,063 773
----------- -----------
NET INCOME $ 1,174 $ 1,222
=========== ===========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING, EXCLUDING COMMON
SHARE EQUIVALENTS (SEE NOTE 4) 9,150,795 9,037,455
=========== ===========
BASIC EARNINGS PER SHARE $ 0.13 $ 0.14
=========== ===========
DILUTED EARNINGS PER SHARE $ 0.12 $ 0.13
=========== ===========
Net income $ 1,174 $ 1,222
Other comprehensive loss:
Unrealized investment loss, net -- (548)
Foreign currency translation adjustments (741) (477)
----------- -----------
Other comprehensive loss (741) (1,025)
----------- -----------
Comprehensive Income $ 433 $ 197
=========== ===========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
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PACKARD BIOSCIENCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(Dollars in thousands)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
--------------------
1999 1998
-------- --------
<S> <C> <C>
CASH FLOWS (USED FOR) FROM OPERATING
ACTIVITIES:
Net income $ 1,174 $ 1,222
Adjustments to reconcile net income to net cash
from (used for) operating activities:
Depreciation and amortization of intangibles 2,450 2,476
Amortization of deferred financing costs 386 386
Acquired in-process research and development
charges -- 2,680
Realized investment gains -- (2,173)
Minority interest in net loss of subsidiary (250) --
Other non-cash charges, net (53) (151)
Changes in operating assets and liabilities (6,725) 1,352
-------- --------
Net cash used for operating activities (3,018) 5,792
-------- --------
CASH FLOWS USED FOR INVESTING ACTIVITIES:
Acquisitions of businesses, net of cash acquired (17,310) (4,021)
Investments in equity securities and ventures -- (64)
Proceeds from sale of investments -- 2,750
Capital expenditures, net (2,458) (656)
Product lines, patent rights and licenses acquired (54) (2,850)
-------- --------
Net cash used for investing activities (19,822) (4,841)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under long-term obligations 33,250 11,000
Repayments of long-term obligations (2,097) (10,375)
Proceeds from exercise of stock options 13 2
Sale of stock -- 111
-------- --------
Net cash from investing activities 31,166 738
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (959) (412)
-------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 7,367 1,277
CASH AND CASH EQUIVALENTS, beginning of period 7,929 10,575
-------- --------
CASH AND CASH EQUIVALENTS, end of period $ 15,296 $ 11,852
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
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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, 1998, condensed consolidated balance sheet
which was derived from the Company's Annual Report on Form 10-K for the year
ended December 31, 1998 (the "Company's 1998 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 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. These financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's 1998 Form 10-K.
Note 1. Basis of Presentation and Significant Accounting Policies:
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 1998 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.
New Accounting Standard -
In June 1998, the Financial Accounting Standards Board 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. Such contracts
qualify as foreign currency cash flow hedges under SFAS No. 133 and, as such,
require that gains and losses on such contracts be presented as a component of
comprehensive income. SFAS No. 133 is effective for the Company commencing
January 1, 2000. This statement is not expected to have a material effect on the
Company's consolidated operating results or financial position.
Note 2. Inventories:
Inventories consisted of the following at March 31, 1999, and December 31, 1998
(in thousands):
March 31, 1999 December 31, 1998
-------------- -----------------
Raw materials and parts $ 15,824 $ 15,963
Work in process 5,040 4,189
Finished goods 18,520 14,210
-------- --------
39,384 34,362
Excess and obsolete reserves (4,032) (3,729)
-------- --------
$ 35,352 $ 30,633
======== ========
5
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Note 3. Acquisitions:
On March 31, 1998, the Company acquired all of the outstanding common stock of
Carl Creative Systems, Inc. (now known as CCS Packard, Inc.) ("CCS"), a
developer, manufacturer and distributor of high throughput liquid handling
systems used in the life science, in-vitro diagnostics and pharmaceutical drug
discovery markets. The Company issued 108,883 common shares of the Company
(valued at $13.96 per share) and paid $6.3 million in cash, including costs
incurred in connection with the acquisition. The acquisition resulted in a
charge of $2.68 million during the three months ended March 31, 1998, to write
off the value assigned to acquired in-process research and development which had
not reached technological feasibility and had no probable alternative future
uses. In addition, the acquisition resulted in a one-time charge of $1.0 million
during the three months ended June 30, 1998, associated with the writeoff of the
step-up in acquired inventory which was recorded at fair value at the date of
acquisition. Additional contingent payments, up to a maximum of $18.7 million,
may be made through the year 2002, contingent upon CCS achieving certain
post-acquisition operating performance levels through calendar 2001. During the
period since acquisition through December 31, 1998, an additional $4.5 million
of such contingent payments have been earned and reflected in the accompanying
condensed consolidated financial statements.
On July 7, 1998, the Company acquired 100% of the outstanding common stock of
BioSignal, Inc. ("BioSignal"), a biotechnology company located in Canada. Prior
to the July acquisition, the Company owned a 19% interest in BioSignal. The
Company acquired the remaining 81% ownership interest for approximately $8.6
million in cash and 7,163 shares of the Company's common stock valued at
$100,000. In connection with the acquisition, the Company recognized a charge of
$3.44 million in July 1998 to write off the value assigned to acquired
in-process research and development. In addition, the acquisition resulted in
the recognition of a $0.5 million writeoff of the step-up in inventory acquired,
which was charged to operations during the three months ended September 30,
1998.
On January 7, 1999, the Company acquired Harwell Instruments from AEA
Technologies plc, located in the United Kingdom. A new subsidiary called Harwell
Instruments, Ltd. ("Harwell") was formed to execute the acquisition. Harwell
manufactures and distributes nuclear instrumentation used in waste assay,
safeguards, and decommissioning and decontamination. The Company paid 6.0
million British pounds sterling (approximately $10.0 million, including
acquisition costs, based upon foreign exchange rates in effect at time of
acquisition) to acquire Harwell.
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, in the
aggregate, over the fair values of the net assets acquired has been reflected as
goodwill in the accompanying condensed consolidated balance sheets. Gross
goodwill totals approximately $29.9 million as of March 31, 1999, including
goodwill resulting from the Company's 1997 acquisitions of Aquila Technologies
Group, Inc. and the minority ownership in the Company's Japanese subsidiary,
Packard Japan KK. The goodwill amount includes contingent payments earned
through December 31, 1998, and will increase to the extent future contingent
payments are earned. The goodwill is being amortized on a straight-line basis
over 20 to 40 years from the initial acquisition dates.
The operating results of CCS, BioSignal and Harwell have been reflected in the
accompanying condensed consolidated statements of income since their dates of
acquisition. The following unaudited consolidated information is presented on a
pro forma basis, as if the acquisitions had occurred as of the beginning of the
periods presented. In the opinion of management, the pro forma information
reflects all adjustments necessary for a fair presentation. The pro forma
adjustments primarily consist of: addback of nonrecurring charges taken in
connection with the acquisitions associated with in-process research and
development costs and acquired inventory step-up writeoff, amortization of
goodwill associated with the acquisitions, adjustments to certain historical
compensation and personnel levels to be more indicative of post-acquisition
levels, adjustments to reflect additional interest expense relating to the
financing of the acquisitions, and adjustments to reflect the related income tax
effects, if any, of the above.
6
<PAGE>
(Dollars in thousands, except per share amounts)
For the Three Months
Ended March 31,
1999 1998
---- ----
Net sales $58,705 $55,961
Operating profit $ 7,503 $ 8,723
Net income $ 1,174 $ 4,403*
Basic earnings per share $ 0.13 $ 0.47
*Includes realized investment gain of $2,173.
Note 4. 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 not anti-dilutive.
Basic and diluted weighted average shares outstanding during the three months
ended March 31, 1999 and 1998 are as follows:
Three Months Ended
March 31,
-----------------------
1999 1998
--------- ---------
Basic weighted average shares outstanding 9,150,795 9,037,445
Dilutive effect of outstanding stock options 427,756 315,329
--------- ---------
Diluted weighted average shares outstanding 9,578,551 9,352,774
========= =========
Note 5. Subsequent Event:
On April 1, 1999, the Company acquired the net operating assets of
Tennelec/Nucleus, Inc. and formed a new subsidiary, Tennelec, Inc. ("Tennelec")
to effect the purchase. Tennelec manufactures and distributes nuclear
instrumentation and high-purity germanium crystals. The Company paid $9.5
million, subject to adjustment, for the net operating assets received. Tennelec
will be included in the Company's consolidated operating results and financial
position subsequent to April 1, 1999.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This report contains statements which constitute "forward-looking" statements
and are prospective. In addition, the Company may occasionally make
forward-looking statements and estimates such as forecasts and projections of
the Company's future performance and statements of managements' plans and
objectives. These forward-looking statements may be contained in, among other
things, filings with the Securities and Exchange Commission and press releases
made by the Company, and oral and written statements made by officers of the
Company. Many factors could cause actual results to differ materially from these
statements. These factors include, but are not limited to, (1) loss of market
share through competition; (2) dependence on customers' capital spending
policies and government funding; (3) limited supply of key raw materials; (4)
reliance on, and ability to protect, key patents and intellectual property; (5)
complexity and technological feasibility of research and development and new
product introductions; (6) decline in utilization of products and technology;
(7) stability of economies overseas and fluctuating foreign currencies; (8)
changes in environmental laws and regulations; (9) loss of key employees; (10)
the factors incorporated under the subheading "Year 2000" below; and (11) other
factors which might be described from time to time in the Company's filings with
the Securities and Exchange Commission. As a result, there can be no assurances
that the forward-looking statements will be achieved.
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. and several other wholly owned subsidiaries (collectively,
"Packard"), the Company supplies bioanalytical instruments, and related
biochemical supplies and services, to the drug discovery, genomics and molecular
biology markets, and through certain divisions and wholly owned subsidiaries
comprising Canberra Industries ("Canberra"), 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)
Three Months Ended
March 31,
% Inc.
1999 1998 (Dec.)
----- ----- -----
Total revenues:
Packard $38.2 $29.7 28.5%
Canberra 20.5 18.9 8.9%
----- ----- -----
58.7 48.6 20.9%
----- ----- -----
Gross profit:
Packard 20.8 16.2 28.1%
Canberra 8.3 9.5 (12.6%)
----- ----- -----
29.1 25.7 13.0%
----- ----- -----
Operating expenses:
Research and development 7.3 6.9 5.5%
Selling, general and
administrative 14.3 11.4 25.4%
In-process research &
development charges -- 2.7 N/A
----- ----- -----
Operating profit 7.5 4.7 58.0%
Interest expense, net (5.3) (4.9) 6.9%
Realized investment gains -- 2.2 N/A
----- ----- -----
Income before income taxes 2.2 2.0 12.1%
Provision for income taxes 1.0 0.8 25.0%
----- ----- -----
Net income $ 1.2 $ 1.2 (3.9%)
===== ===== =====
8
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Excluding the impact of changes in foreign currency exchange rates, consolidated
total revenues would have been $0.6 million lower during the three months ended
March 31, 1999. The accompanying results of operations reflect the Company's
acquisitions during 1999 and 1998 since the dates such companies were acquired.
The acquired companies and their acquisition dates are as follows: Carl Creative
Systems, Inc. (now known as CCS Packard, Inc.) ("CCS") - March 31, 1998;
BioSignal Inc. ("BioSignal") - July 1, 1998; and Harwell Instruments, Ltd.
("Harwell") - January 1, 1999. Refer to Note 3 to the accompanying condensed
consolidated financial statements included in Item 1 of this Form 10-Q for
pro-forma results reflecting the above-mentioned acquisitions.
Packard's revenues increased approximately $8.5 million in the three months
ended March 31, 1999, in comparison with the prior-year period. The increase was
due to (1) the inclusion of CCS and BioSignal in 1999, contributing total
third-party sales (excluding intercompany) of $4.6 million, on a combined basis;
and (2) increased sales at all overseas distribution operations, particularly
Japan, France and the U.K., which, on a combined basis, contributed increased
sales totaling $3.2 million. The weaker U.S. dollar caused Packard's revenues
during the three months ended March 31, 1999, to be $0.6 million higher than
they would have been had exchange rates been the same as the comparable 1998
period.
Canberra's increased revenues in 1999 are due to (1) the inclusion of Harwell in
1999 which added $2.4 million in revenues to the three-month period ended March
31, 1999; and (2) increased sales ($1.1 million) by Canberra's U.S.
instrumentation manufacturing and service businesses. Such increases were
partially offset by reduced revenues from Canberra's U.S. detectors operations
and the Company's subsidiary, Aquila Technologies Group, Inc. ("Aquila"). The
effect of exchange rate changes had a nominal effect on Canberra's sales during
1999 as compared to 1998.
The Company's gross profit increased 13.0% during the three months ended March
31, 1999, as compared to the corresponding 1998 period. This increase is
attributable primarily to the acquisitions and sales growth discussed above.
These increases were partially offset by lower margins (as a percentage of
sales) generated at Harwell during the three months ended March 31, 1999,
associated with several projects that were in process at the time of acquisition
that were realizing negligible margins. In addition, the Company's mobile
characterization business generated very little revenue during the first quarter
of 1999, yet still incurred certain fixed operating costs, contributing to the
lower gross margin percentage.
Excluding a one-time charge of $1.0 million incurred in the first quarter of
1998 associated with terminating a license agreement, research and development
spending, as a percentage of net sales, was relatively consistent between 1999
and 1998 (approximately 12%). Research and development spending, in terms of
total dollars, has increased in 1999 in comparison with 1998, reflecting the
Company's commitment to new product development and enhancement of its existing
product lines as well as the acquisitions referred to above.
Selling, general and administrative expenses increased during 1999, as compared
to 1998, due primarily to the inclusion of the above-mentioned acquisitions. As
a percentage of net sales, such expenses are comparable between the periods
presented.
During the first quarter of 1998, the Company recorded a $2.68 million charge
associated with the writeoff of in-process research and development ("R&D")
acquired in connection with the Company's purchase of CCS. The charge represents
that portion of the purchase price which was assigned to the acquired R&D
through purchase accounting as determined utilizing guidance put forth by the
Securities and Exchange Commission.
Consolidated operating profit of $7.5 million for the three months ended March
31, 1999, compares with $4.7 million during the corresponding 1998 period.
Excluding the effects of the one-time charge associated with the writeoff of
in-process research and development discussed above, operating profit increased
$0.1 million during the three months ended March 31, 1999, when compared to the
corresponding 1998 period. The operating profit growth attributable to the
acquisitions discussed above was offset by unfavorable performances by certain
Canberra operations, particularly Aquila, U.S. detectors and the mobile
characterization business.
9
<PAGE>
The increase in net interest expense during 1999 is a direct result of the
increased indebtedness associated with the acquisitions of CCS, BioSignal and
Harwell, partially offset by lower average interest rates during the 1999 period
as compared to the 1998 period.
During the three months ended March 31, 1998, the Company realized gains
totaling $2.2 million from the sale of marketable equity securities.
The Company's consolidated effective tax rate was 47.5% and 38.7% during the
three months ending March 31, 1999 and 1998, respectively. The Company's average
statutory effective rate (consisting of federal, state and foreign components)
would be approximately 42.5%, assuming certain profit levels at the various
worldwide locations and considering the tax rates in effect at the various
foreign locations which the Company operates. As compared to this average
statutory effective rate, the 47.5% rate in effect during the first quarter of
1999 was due primarily to (1) taxable income generated in higher tax rate
countries, particularly Japan; and (2) the effect of non-deductible goodwill
amortization. The 38.7% first quarter 1998 effective rate was due to (1) taxable
income generated in lower tax rate countries; and (2) no provision for income
taxes being provided on domestically-generated taxable income in light of the
Company's net operating loss position generated in 1997.
Financial Condition - Liquidity and Capital Resources
General -
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 existing under certain of the Company's
acquisitions. 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, and the litigation settlement discussed below.
Operating Activities -
Operating activities used $3.0 million of cash during the three months ended
March 31, 1999, compared to $5.8 million of cash generated in the comparable
1998 period. The use of cash during the first quarter of 1999, as compared to
the cash generated in the comparable 1998 period, is due primarily to a
significant amount of accrued obligations as of December 31, 1998, being paid
out in the first quarter of 1999, including $3 million associated with a
litigation settlement (refer to the Company's 1998 Form 10-K). In addition, the
level of accounts receivable collection during the first quarter of 1999 was
lower than that of the comparable 1998 period.
Investing Activities -
In January 1999, the Company acquired Harwell. The Company paid 6.0 million
British pounds sterling (approximately $10.0 million, including acquisition
costs, based upon the foreign exchange rates in effect at the time of
acquisition) for the acquisition, all of which was funded through the use of the
Company's available revolving credit facility.
During the first quarter of 1999, the Company paid out amounts owed under
contingent payment arrangements associated with the CCS and Aquila acquisitions
which were consummated in 1998 and 1997, respectively (refer to the Company's
1998 Form 10-K). The amount paid was $7.3 million which was funded through a
combination of available cash and use of the revolving credit facility.
Contingent payments made in connection with acquisitions are reflected as
additional goodwill in the accompanying condensed consolidated balance sheets.
Significant investing activities during the first quarter of 1998 included the
March 31, 1998, acquisition of CCS which was effected in exchange for $5.1
million in cash and 108,883 common shares of the Company.
10
<PAGE>
This acquisition was funded through the use of the revolving credit facility. In
addition, during the first quarter of 1998, the Company sold equity securities
it held in a publicly-traded company, realizing proceeds totaling $2.8 million
and a pre-tax gain of $2.2 million.
Financing Activities -
During the three months ended March 31, 1999, the Company borrowed under its
revolving credit facility primarily for the following reasons: (1) to fund the
acquisition of Harwell; (2) payment of the contingent payments required in
connection with the CCS and Aquila acquisitions discussed above; (3) payment of
the semi-annual interest due on the $150 million senior subordinated notes; and
(4) to fund operations as needed, including the $3 million litigation settlement
payment made in January 1999 (refer to the Company's 1998 Form 10-K).
The Company's borrowings during the first quarter of 1998 were used primarily in
connection with the CCS acquisition and to fund the semi-annual senior
subordinated notes interest payment. Repayments of borrowings during the first
quarter of 1998 were funded through cash flow generated from operations as well
as proceeds from the sale of equity securities discussed above.
Backlog -
As of March 31, 1999 and 1998, the Company's gross third-party order backlog was
approximately $46.7 million and $42.2 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.
Year 2000
Refer to the Company's 1998 Form 10-K. There have been no significant changes or
developments in the area of Year 2000 as it relates to the Company and its plans
for addressing Year 2000 related issues since the filing of the Company's 1998
Form 10-K.
Subsequent Event - Acquisition
On April 1, 1999, the Company acquired the net operating assets of
Tennelec/Nucleus, Inc. and formed a new subsidiary, Tennelec, Inc. ("Tennelec")
to effect the purchase. Tennelec manufactures and distributes nuclear
instrumentation and high-purity germanium crystals. The Company paid $9.5
million, subject to adjustment, for the net operating assets received. Tennelec
will be included in the Company's consolidated operating results and financial
position subsequent to April 1, 1999. The acquisition was funded through use of
the Company's revolving credit facility.
11
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
12
<PAGE>
PART II. OTHER INFORMATION
PACKARD BIOSCIENCE COMPANY
Item 1. Legal Proceedings
On April 26, 1999, an action was filed in the U.S. District Court for the
Eastern District of Tennessee alleging that the Company infringed a patent owned
by EG&G Instruments, Inc. by its manufacture, use and sale of certain products.
The Company is currently in the process of evaluating the merits of this
litigation. The Company does not believe that the action, even if meritorious,
would have a material adverse impact on the financial position, results of
operations or cash flows of the Company. Nevertheless, the final outcome of any
legal proceeding is subject to a great many variables and cannot be predicted
with any degree of certainty.
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
None.
13
<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 May 12, 1999.
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
By: /s/ David M. Dean
---------------------------------
David M. Dean
Corporate Controller
14
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