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, 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 November 4, 1999:
9,159,704
<PAGE>
PACKARD BIOSCIENCE COMPANY AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION Page
----
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
September 30, 1999 and December 31, 1998 2
Condensed Consolidated Statements of Income (Loss)
for the Three and Nine Months Ended September 30,
1999 and 1998 3
Condensed Consolidated Statements of Comprehensive
Income (Loss) for the Three and Nine Months Ended
September 30, 1999 and 1998 4
Condensed Consolidated Statements of Cash Flows for
the Nine Months Ended September 30, 1999 and 1998 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 6. Exhibits and Reports on Form 8-K 18
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PACKARD BIOSCIENCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 1999 and DECEMBER 31, 1998
(Dollars in thousands)
<TABLE>
<CAPTION>
ASSETS September 30, 1999 December 31, 1998
------ ------------------ -----------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 6,178 $ 7,929
Accounts receivable, net 54,968 48,218
Inventories, net 39,501 30,633
Deferred income taxes 4,825 4,423
Other current assets 6,341 6,268
-------- --------
Total current assets 111,813 97,471
-------- --------
PROPERTY, PLANT AND EQUIPMENT, at cost 50,053 43,469
Less - accumulated depreciation (20,805) (17,902)
-------- --------
29,248 25,567
-------- --------
OTHER ASSETS:
Goodwill, net 35,094 24,030
Deferred financing costs, net 7,187 8,346
Other 12,904 13,720
-------- --------
55,185 46,096
-------- --------
TOTAL ASSETS $196,246 $169,134
======== ========
LIABILITIES AND STOCKHOLDERS' DEFICIT
- -------------------------------------
CURRENT LIABILITIES:
Notes payable $ 3,119 $ 3,221
Current portion of long-term obligations 2,158 3,496
Accounts payable and accrued liabilities 39,859 53,635
Deferred income 13,525 12,372
-------- --------
Total current liabilities 58,661 72,724
-------- --------
LONG-TERM OBLIGATIONS, net of current portion:
Notes and other long-term obligations 5,261 9,564
Term loan and credit facility 81,737 37,365
Senior subordinated notes 150,000 150,000
-------- --------
Total long-term obligations, net 236,998 196,929
-------- --------
DEFERRED INCOME TAXES 5,031 5,489
-------- --------
COMMITMENTS AND CONTINGENCIES (Note 6)
MINORITY INTEREST IN EQUITY OF SUBSIDIARY 2,339 2,555
-------- --------
STOCKHOLDERS' DEFICIT:
Cumulative translation adjustment 1,017 1,448
-------- --------
Accumulated other comprehensive income 1,017 1,448
Common stock 137 137
Accumulated deficit (7,569) (10,012)
-------- --------
(6,415) (8,427)
Less: Treasury stock, at cost (99,726) (99,341)
Deferred compensation (642) (795)
-------- --------
Total stockholders' deficit (106,783) (108,563)
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $196,246 $169,134
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>
PACKARD BIOSCIENCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30,
1999 AND 1998 (Dollars in thousands, except
per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Sept. 30, Nine Months Ended Sept. 30,
1999 1998 1999 1998
--------------------------- --------------------------
<S> <C> <C> <C> <C>
NET SALES $64,017 $54,069 $185,198 $156,618
COST OF SALES 36,815 25,987 98,204 74,840
AMORTIZATION OF ACQUIRED INVENTORY
STEP-UP (Note 3) -- 500 1,000 1,500
------- ------- -------- --------
GROSS PROFIT 27,202 27,582 85,994 80,278
RESEARCH AND DEVELOPMENT EXPENSES 7,579 7,480 22,388 20,033
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 14,891 12,626 44,082 36,808
LITIGATION SETTLEMENT (Note 6) -- 10,370 -- 10,997
ACQUIRED IN-PROCESS RESEARCH AND
DEVELOPMENT CHARGE (Note 3) -- 3,440 -- 6,120
------- ------- -------- --------
OPERATING PROFIT (LOSS) 4,732 (6,334) 19,524 6,320
INTEREST EXPENSE, NET (5,405) (4,929) (16,007) (14,780)
TRANSLATION GAINS, NET (Note 7) 457 40 1,248 275
REALIZED INVESTMENT GAINS (Note 8) -- -- -- 3,133
------- ------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES
AND MINORITY INTEREST (216) (11,223) 4,765 (5,052)
PROVISION FOR INCOME TAXES 645 888 2,471 2,812
MINORITY INTEREST (87) -- (216) --
------- -------- -------- --------
NET INCOME (LOSS) $ (774) $(12,111) $ 2,510 $ (7,864)
======== ======== ======== ========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING, EXCLUDING COMMON
SHARE EQUIVALENTS (Note 4) 9,154,743 9,157,478 9,151,862 9,106,408
========= ========= ========= =========
BASIC EARNINGS (LOSS) PER SHARE $ (0.08) $ (1.32) $ 0.27 $ (0.86)
========= ========= ========= =========
DILUTED EARNINGS (LOSS) PER SHARE
(Note 4) $ (0.08) $ (1.32) $ 0.26 $ (0.86)
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
<PAGE>
PACKARD BIOSCIENCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended Sept. 30, Nine Months Ended Sept. 30,
1999 1998 1999 1998
--------------------------- --------------------------
<S> <C> <C> <C> <C>
Net income (loss) $ (774) $(12,111) $ 2,510 $ (7,864)
Other comprehensive income (loss):
Unrealized investment loss, net -- (4) -- (988)
Reclassification adjustment, net -- -- -- (1,880)
Foreign currency translation adjustments 2,113 508 (431) 615
-------- -------- -------- --------
Other comprehensive income (loss) 2,113 504 (431) (2,253)
-------- -------- -------- --------
COMPREHENSIVE INCOME (LOSS) $ 1,339 $(11,607) $ 2,079 $(10,117)
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
<PAGE>
PACKARD BIOSCIENCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(Dollars in thousands)
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30,
1999 1998
---------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 2,510 $(7,864)
Adjustments to reconcile net income (loss) to net
cash used for operating activities:
Depreciation and amortization of intangibles 6,937 5,841
Amortization of deferred financing costs 1,159 1,159
Acquired in-process research and development
charges -- 6,120
Amortization of acquired inventory step-up 1,000 1,500
Realized investment gains -- (3,133)
Minority interest in net loss of subsidiary (216) --
Other non-cash charges, net (304) 29
Changes in operating assets and liabilities (17,926) (5,664)
------- -------
Net cash used for operating activities (6,840) (2,012)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of businesses, net of cash acquired (28,539) (11,595)
Investments in equity securities and ventures -- (487)
Proceeds from sale of investments -- 4,137
Capital expenditures, net (7,314) (4,789)
Product lines, patent rights and licenses acquired (290) (1,830)
------- -------
Net cash used for investing activities (36,143) (14,564)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under long-term obligations 52,342 35,704
Repayments of long-term obligations (9,666) (19,878)
Purchase of treasury stock (120) (54)
Proceeds from exercise of stock options 62 40
Sale of stock 42 461
------- -------
Net cash from investing activities 42,660 16,273
------- -------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (1,428) 647
------- -------
NET INCREASE IN CASH AND CASH EQUIVALENTS (1,751) 344
CASH AND CASH EQUIVALENTS, beginning of period 7,929 10,575
------- -------
CASH AND CASH EQUIVALENTS, end of period $ 6,178 $10,919
======= =======
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
<PAGE>
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. The effective date of SFAS No. 133 (which was deferred
through the issuance of SFAS No. 137) is the Company's calendar year commencing
January 1, 2001. This statement is not expected to have a material effect on the
Company's consolidated operating results or financial position upon adoption.
Note 2. Inventories:
Inventories consisted of the following at September 30, 1999, and December 31,
1998 (in thousands):
September 30, 1999 December 31, 1998
------------------ -----------------
Raw materials and parts $18,352 $15,963
Work in process 4,258 4,189
Finished goods 21,764 14,210
------- -------
44,374 34,362
Excess and obsolete reserves (4,873) (3,729)
------- -------
$39,501 $30,633
======= =======
<PAGE>
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
writeoff 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 writeoff the value assigned to acquired in-process
research and development. In addition, the acquisition resulted in the
recognition of a $0.5 million writeoff, during the three months ended September
30, 1998, associated with the writeoff of the step-up in inventory acquired
which was recorded at fair value at the date of acquisition.
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.
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
approximately $10.7 million, including acquisition costs, for the net operating
assets received. The acquisition resulted in a $1.0 million charge during the
three months ended June 30, 1999, to writeoff the step-up in inventory acquired
which was recorded at fair value at the date of acquisition.
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 $37.0 million as of September 30, 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 September 30, 1999, 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.
<PAGE>
The operating results of CCS, BioSignal, Harwell and Tennelec 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.
<TABLE>
<CAPTION>
(Dollars in thousands, except per share amounts)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1999 1998 1999 1998
-------------------------- --------------------------
<S> <C> <C> <C> <C>
Net sales $ 64,017 $ 59,484 $188,502 $178,515
Operating profit $ 4,732 $ 7,888 $ 21,175 $ 26,349
Net income (loss) $ (774) $ (8,619) $ 3,165 $ 135*
Basic earnings (loss) per share $ (0.08) $ (0.93) $ 0.35 $ 0.01
</TABLE>
*Includes realized investment gain of $3,133 during the nine-month period ended
September 30, 1998.
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 and nine
months ended September 30, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
------------------------- -------------------------
<S> <C> <C> <C> <C>
Basic weighted average shares outstanding 9,154,743 9,157,478 9,151,862 9,106,408
Dilutive effect of outstanding stock options N/A* N/A* 423,917 N/A*
--------- --------- --------- ---------
Diluted weighted average shares outstanding 9,154,743 9,157,478 9,575,779 9,106,408
========= ========= ========= =========
</TABLE>
*Anti-dilutive since net loss was incurred during periods specified. The
dilutive effect of outstanding stock options would have been 420,437 and 312,540
during the three months ended September 30, 1999 and 1998, respectively, and
314,170 during the nine months ended September 30, 1998.
<PAGE>
Note 5. Segment Information:
Refer to Management's Discussion and Analysis of Financial Condition and Results
of Operations included in Item 2. of this Form 10-Q for a discussion of segment
operating performance for the three and nine months ended September 30, 1999.
The Company's total identifiable assets, by industry segment, as of September
30, 1999, and December 31, 1998, are as follows:
September 30, 1999 December 31, 1998
------------------ -----------------
Packard $98,273 $100,214
Canberra 97,973 68,920
-------- ---------
Total $196,246 $169,134
======== ========
Note 6. Litigation Settlement:
On November 2, 1998, the Company settled a lawsuit brought against it by EG&G
Instruments, Inc., a subsidiary of EG&G, Inc. The total settlement was for $10.0
million plus legal fees. Refer to the Company's 1998 Form 10-K for a detailed
description of the settlement.
Note 7. Translation Gains, Net:
From time to time, the Company enters into forward exchange contracts in
anticipation of future movements in certain foreign exchange rates and to hedge
against foreign currency fluctuations associated with intercompany purchasing
activities. Realized and unrealized gains and losses on these contracts are
included in net income, except that gains and losses on contracts to hedge
specific intercompany foreign currency commitments are deferred and accounted
for as part of the underlying transaction.
During the nine months ended September 30, 1999, the Company has recognized
foreign currency translation gains totaling $1.3 million associated with debt
incurred by Harwell which is denominated in Euros. The debt was incurred in
connection with the acquisition. Generally accepted accounting principles
require that translation gains or losses incurred on debt instruments
denominated in a currency other than a company's functional currency be
recognized in the income statement currently.
Note 8. Investment Gains:
During the nine months ended September 30, 1998, the Company realized gains
totalling $3.1 million from the sale of stock held in a publicly-traded company.
Note 9. Credit Facility Amendment:
Subsequent to September 30, 1999, the Company obtained an amendment to its $115
million revolving credit and term loan facility, which was effective as of
September 30, 1999. Among other changes to the prior terms of the facility, the
amendment modified certain of the financial covenants. The change included
increasing the Company's maximum consolidated leverage ratio (as defined in the
revolving credit and term loan facility) from 5.50:1.00 to 5.85:1.00 for the
reporting period ended September 30, 1999. The Company was in compliance with
the amended financial covenants for the compliance reporting period ended
September 30, 1999.
Note 10. Reclassifications:
Certain reclassifications have been made to prior period information in order to
make it consistent with the current period presentation.
<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 supplies analytical
instruments and services 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.
1999 1998 (Dec.) 1999 1998 (Dec.)
------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues:
Packard $36.9 $36.5 1.1% $112.4 $101.8 10.4%
Canberra 27.1 17.6 54.0% 72.8 54.8 32.8%
----- ----- ------ ------
64.0 54.1 18.3% 185.2 156.6 18.3%
===== ===== ====== ======
Gross profit:
Packard 18.1 19.3 (6.2)% 58.5 53.6 9.1%
Canberra 9.1 8.3 9.6% 27.5 26.7 3.0%
----- ----- ------ ------
27.2 27.6 (1.4)% 86.0 80.3 7.1%
===== ===== ====== ======
Operating expenses:
Research and development 7.6 7.5 1.3% 22.4 20.0 12.0%
Selling, general and administrative 14.9 12.6 18.3% 44.1 36.8 19.8%
Other charges 0.0 13.8 N/A 0.0 17.2 N/A
----- ----- ------ ------
Operating profit (loss) 4.7 (6.3) N/A 19.5 6.3 N/A
Interest expense, net (5.4) (4.9) 10.2% (15.9) (14.8) 7.4%
Translation gains, net 0.5 0.0 N/A 1.2 0.3 N/A
Realized investment gains 0.0 0.0 N/A 0.0 3.1 N/A
----- ----- ------ ------
Income (loss) before income
taxes and minority interest (0.2) (11.2) (98.2)% 4.8 (5.1) (194.1)%
Provision for income taxes 0.7 0.9 (22.2)% 2.5 2.8 (10.7)%
Minority interest (0.1) 0.0 N/A (0.2) 0.0 N/A
----- ------ ------ ------
Net income (loss) $(0.8) $(12.1) (93.4)% $ 2.5 $ (7.9) 131.6%
===== ====== ====== ======
</TABLE>
Excluding the impact of changes in foreign currency exchange rates, consolidated
total revenues would have been $0.2 million higher during the three months ended
September 30, 1999, and $0.4 million lower during the nine months ended
September 30, 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; Harwell Instruments, Ltd.
("Harwell") - January 1, 1999; and Tennelec, Inc. ("Tennelec") - April 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 $0.4 million and $10.6 million in the
three and nine months ended September 30, 1999, in comparison with the
prior-year period. The increase was due to (1) the inclusion of CCS and
BioSignal for all of 1999, contributing total sales of $15.6 million, on a
combined basis, during the nine months ended September 30, 1999, as compared to
$8.0 million in the comparable 1998 period; and (2) increased sales at most
overseas distribution operations, particularly Japan and France. The U.S. dollar
caused Packard's revenues during the three and nine months ended September 30,
1999, to be $0.2 million and $1.0 million higher, respectively, than they would
have been had exchange rates been the same as the comparable 1998 periods.
Canberra's increased revenues in 1999 are due primarily to the inclusion of
Harwell and Tennelec in 1999, as well as growth in the domestic instrumentation
business. 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"). Exchange rate fluctuations served to reduce
Canberra's net sales by approximately $0.6 million during the nine months ended
September 30, 1999, due primarily to the U.S. dollar strengthening against the
British pound sterling.
The Company's gross profit decreased 1.4% during the three months ended
September 30, 1999, as compared to the corresponding 1998 period. During the
nine months ended September 30, 1999, the Company's gross profit increased 7.1%
as compared to the comparable 1998 period. The quarterly decline is due
primarily to the mix of Packard products sold in the 1999 period as compared to
the 1998 period. The nine-month increase is due primarily to acquisitions and
sales growth discussed above. The nine-month increase was partially offset by
Mobile Characterization Services, LLC ("MCS"), which has generated very little
revenue, yet still incurred certain fixed operating costs. During the nine
months ended September 30, 1999, the Company recognized a $1 million charge to
writeoff the step-up in inventory acquired from Tennelec. A similar charge,
totaling $1.5 million, was recognized during the nine months ended September 30,
1998, in connection with the CCS and BioSignal acquisitions.
Research and development spending, as a percentage of net sales, was relatively
consistent between the nine months ended September 30, 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. Research and development
during the nine months ended September 30, 1999, included approximately $0.7
million of costs to make certain modifications to an existing Company product.
Research and development during the nine months ended September 30, 1998,
included approximately $2.3 million of costs related to canceling projects and
collaborative arrangements during such period.
Selling, general and administrative expenses increased during the nine months
ended September 30, 1999, as compared to the comparable 1998 period, due
primarily to the inclusion of the above-mentioned acquisitions. As a percentage
of net sales, such expenses are comparable between the periods presented (24%).
During the nine months ended September 30, 1998, the Company recorded the
following charges to operating profit:
- - $6.12 million associated with the writeoff of in-process research and
development ("R&D") acquired in connection with the Company's purchase
of CCS and BioSignal.
- - $11.0 million associated with the settlement of litigation.
Consolidated operating profit of $4.7 million and $19.5 million for the three
and nine months ended September 30, 1999, respectively, compares with an
operating loss of ($6.3) million and operating profit of $6.3 million during the
corresponding 1998 periods. Excluding the effects of the one-time charges
associated with the writeoff of in-process research and development,
amortization of inventory step-up and litigation settlement discussed above,
operating profit decreased approximately $4.4 million during the nine months
ended September 30, 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 and the mobile characterization business, as well as the Company's
increased spending on research and development.
.........
Net interest expense increased during 1999, as compared to 1998, as a result of
increased indebtedness associated with the Company's 1998 and 1999 acquisitions,
including contingent earnout payments, mentioned above.
From time to time, the Company enters into forward exchange contracts in
anticipation of future movements in certain foreign exchange rates and to hedge
against foreign currency fluctuations associated with intercompany purchasing
activities. Realized and unrealized gains and losses on these contracts are
included in net income, except that gains and losses on contracts to hedge
specific intercompany foreign currency commitments are deferred and accounted
for as part of the underlying transaction.
During the nine months ended September 30, 1999, the Company has recognized
foreign currency translation gains totaling $1.3 million associated with debt
incurred by Harwell which is denominated in Euros. The debt was incurred in
connection with the acquisition. Generally accepted accounting principles
require that currency gains or losses incurred on financial instruments
denominated in a currency other than a company's functional currency be
recognized in the income statement as incurred.
During the nine months ended September 30, 1998, the Company realized gains
totaling $3.1 million from the sale of marketable equity securities.
The Company's consolidated effective tax rate was 51.9% and 55.8% during the
nine months ending September 30, 1999 and 1998, respectively. The 1998 rate
represents a provision on a consolidated pre-tax loss. 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 51.9% rate in effect during the first nine months
of 1999 was due primarily to (1) the incurrence of a year-to-date domestic loss
which is tax-effected at a rate higher than statutory due to the effect of
non-deductible goodwill amortization; and (2) no benefit provided on losses
incurred at certain overseas locations as realization of such benefits is not
assured. The 1998 effective rate was due to (1) taxable income generated in
lower tax rate countries; (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; and (3) no tax benefit provided on the writeoff
of acquired R&D and inventory step-up amortization.
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 $6.8 million of cash during the nine months ended
September 30, 1999, compared to $2.0 million of cash used in the comparable 1998
period. The use of cash during the first nine months of 1999 is due primarily to
a significant amount of accrued obligations as of December 31, 1998, being paid
out in 1999, including $3 million associated with a litigation settlement (refer
to the Company's 1998 Form 10-K), as well as cash required to fund the working
capital requirements of Harwell.
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.
On April 1, 1999, the Company acquired the net operating assets of Tennelec,
paying approximately $10.7 million, including acquisition-related costs. This
acquisition was funded through use of the Company's revolving credit facility.
Significant investing activities during the first nine months of 1998 included
(1) the March 31, 1998, acquisition of CCS which was effected in exchange for
$6.3 million in cash and 108,883 common shares of the Company; and (2) the July
1, 1998, acquisition of BioSignal which was effected in exchange for $8.6
million in cash and Company stock with an aggregate value of $100,000. These
acquisitions were funded through the use of the revolving credit facility. In
addition, during the first nine months of 1998, the Company sold equity
securities it held in a publicly-traded company, realizing gross proceeds
totaling $4.1 million and a pre-tax gain of $3.1 million.
Financing Activities -
During the nine months ended September 30, 1999, the Company borrowed under its
revolving credit facility primarily for the following reasons: (1) to fund the
acquisitions of Harwell and Tennelec; (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 nine months of 1998 were used
primarily in connection with the CCS and BioSignal acquisitions and to fund the
semi-annual senior subordinated notes interest payment. Repayments of borrowings
during the first nine months 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 September 30, 1999 and 1998, the Company's gross third-party order backlog
was approximately $50.0 million and $45.3 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 or its services business. The
Company's backlog as of any particular date may not be representative of actual
sales for any succeeding period.
<PAGE>
Year 2000
The Company has been engaged in a concerted effort to ready its business systems
and products in anticipation of the year 2000 ("Y2K") issue as it affects the
Company's business operations. The term "Y2K issue" is used to refer to all
difficulties the turn of the century may introduce to users of computers and
other electronic equipment. In general terms, the Y2K issue arises from the fact
that many existing computer systems and other equipment containing
date-sensitive embedded technology (including non-information technology
equipment and systems) use only two digits to identify a year in the date field,
with the assumption that the first two digits of the year are always "19." This,
as well as certain other common date-related programming errors, may result in
miscalculations, other malfunctions or the total failure of such systems. Some
of the Company's products contain date-sensitive technology, and the Company's
business operations are dependent upon the proper functioning of computer
systems and other equipment containing date-sensitive technology. A failure of
such products, systems or equipment to be Y2K compliant could have a material
adverse effect on the Company. If not remedied, potential risks include business
interruption or shutdown, loss of customers, harm to the Company's reputation,
financial loss and legal liability.
The Company's assessment of the Y2K issue is organized to address the three
major affected areas: 1) products and services which the Company provides to its
customers; 2) supplier implications; and 3) administrative and management
information systems used by the Company. The assessment and resulting action
plans are in various stages of completion. Areas which require corrective action
have been identified as a result of the work performed to date and a significant
amount of such corrective action has already been successfully completed.
However, additional assessments need to be performed by the Company in order to
minimize the risks and exposures associated with Y2K. The following is an
overview of the Company's current state of readiness as it relates to Y2K along
with a summary of the process the Company plans to follow to address Y2K issues,
including the related potential risks and costs:
Products and Services -
To assess the Y2K issue as it affects the Company's products and services, the
Company has divided its efforts between its major business segments, Canberra
and Packard. Certain management personnel within each segment have been assigned
primary responsibility to perform Y2K product and services assessments, and Y2K
committees have been formed to supervise and coordinate the Company's Y2K
efforts. Both Canberra and Packard have completed testing of all of their active
products to identify Y2K-related problems, and each has disclosed the results of
those tests on the Company's internet web pages. Certain "inactive" products
will not be tested, and may not be Y2K compliant. For many of these inactive
products, customers have been offered the opportunity to purchase replacement
products from the Company's active product group.
Both Canberra and Packard have developed and tested upgrades for each of its
active products in which Y2K issues were identified. The Company believes that
these upgrades will remedy known Y2K problems. The Company is in the process of
completing the installation of upgrade kits ordered by its customers on or
before October 31, 1999. The Company expects to have completed these
installations by December 31, 1999. While it is the Company's objective to
install upgrades ordered after October 31, 1999, by December 31, 1999, there can
be no assurance that the Company will accomplish this objective.
The Company has implemented a policy of notifying all of its customers of the
Y2K status of the products purchased by such customers, either through direct
mailing or through direct telephone contact with the customer. Current customers
of the Company are asked to review the Company's internet web pages for the most
up-to-date information with respect to the Company's products. While it is the
Company's objective to notify all of its customers of potential Y2K issues, and
to implement corrective actions in a timely manner where feasible, there can be
no assurance that the Company will accomplish this objective or adequately
address all Y2K issues or problems which may arise.
<PAGE>
Vendors/Suppliers -
The Company has gathered information about the significant vendors and service
providers for Packard and Canberra to determine whether the vendors/service
providers have remediated their own Y2K issues, and what risks their potential
non-compliance poses to the Company. To date, no significant issues with third
parties' systems have been identified. The Company does not believe that its
critical vendors/suppliers will be prevented from providing mission critical
services and supplies to the Company due to the Y2K issue. However, the Company
has not received complete responses from all of its vendors/suppliers, and there
can be no assurance that the responses it has received are accurate or complete.
If the third parties on which the Company or its subsidiaries rely have Y2K
problems that are not remedied, resulting problems could include, among other
things, the inability to obtain crucial supplies or services, the loss of
telecommunications and electrical service, the receipt of inaccurate financial
and billing-related information, and the disruption of capital flow potentially
resulting in liquidity stress. These could have a material impact on the
financial position and results of operations of the Company.
Contingency plans are being implemented in order to mitigate the potential
effects of Y2K problems with the Company's vendors or suppliers. Such
contingency plans include identification of acceptable, alternative suppliers
and vendors where such Y2K exposures appear not to exist, advance purchasing of
required supplies or materials at levels necessary to sustain business
operations for an extended period of time if a Y2K problem were to arise, and
identification of alternative methods and procedures for completing critical
activities. However, there can be no assurances that the Company's contingency
plans will be effective in addressing Y2K issues that may arise, or in
mitigating the impact of such issues on the Company's business and operations.
Administration -
The Company has completed an internal audit of all hardware and system software
utilized internally by the Company and by each of the Company's key
subsidiaries. The Company believes it has identified all hardware and software
that is not Y2K compliant, and has replaced or upgraded such non-compliant
hardware and software where deemed appropriate. Substantially all required
modifications and conversions of existing software and certain hardware at
Canberra and Packard were completed on or before October 31, 1999. The Company
believes that the Y2K issue will not pose significant operational issues for its
internal systems. All other administrative systems are expected to be Y2K
compliant by December 31, 1999. The Company has completed its assessment of
other Y2K administrative implications such as facility security systems, HVAC
requirements, production machinery and power needs, etc. Many of the Y2K risks
associated with the Company's administrative technology can be addressed through
manual versus automated means or other acceptable contingency plans. However,
there can be no assurance that the Company has identified all Y2K issues, or
that its remedial steps will be effective. To mitigate the risks posed by this
uncertainty, the Company is implementing contingency plans to minimize the
potential disruption caused by unanticipated Y2K problems. Failure to adequately
address these issues could have a material impact on the consolidated financial
position or results of operations of the Company.
Subsidiaries -
The Company is in the process of completing its evaluation of the Y2K status of
each of its wholly-owned subsidiaries, including an assessment of the internal
systems, products and services, and suppliers and vendors. The Company expects
to have completed this assessment by December 1, 1999. To date, the Company has
not identified any material Y2K problems at its subsidiaries. The Company does
not believe that Y2K issues at any one subsidiary will have a material adverse
effect on the Company's consolidated financial position or results of
operations. However, if a number of the Company's subsidiaries have significant
Y2K issues which are not remediated effectively, such Y2K issues could have a
material impact on the consolidated financial position or results of operations
of the Company.
<PAGE>
Costs -
The Company estimates the total cost associated with required modifications to
become Y2K compliant to be approximately $2.2 million. The total amount expended
through September 30, 1999, was approximately $2.0 million. The estimated future
cost of completing the Company's Y2K compliance efforts is expected to be
approximately $0.2 million. The Company has funded, and expects to continue to
fund, the costs of its Y2K efforts through operating cash flow, and to expense
such costs as incurred.
Risk -
This description of matters relating to the Y2K problem contains a number of
forward-looking statements. The Company's assessment of the costs of its Y2K
program and the timetable for completing its Y2K preparations are based on
current estimates, which reflect numerous assumptions about future events,
including the continued availability of certain resources, the timing and
effectiveness of third-party remediation plans and other factors. The Company
can give no assurance that these estimates will be achieved, and actual results
could differ materially from those currently anticipated. In addition, there can
be no assurance that the Company's Y2K program will be effective or that its
contingency plans will be sufficient to address unanticipated Y2K problems.
Due to the general uncertainty in the Y2K problem, resulting in part from the
uncertainty as to the Y2K readiness of third-party suppliers and customers, the
Company is unable to determine at this time whether the consequences of Y2K
failures will have a material impact on the Company's results of operations,
liquidity or financial condition. The Company believes that with the completion
of its Y2K compliance plans as scheduled, the possibility of significant
interruptions of normal operations should be reduced.
The information contained herein constitutes a Year 2000 Readiness Disclosure
under the Year 2000 Information and Readiness Disclosure Act.
<PAGE>
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 1998 Form 10-K.
<PAGE>
PART II. OTHER INFORMATION
PACKARD BIOSCIENCE COMPANY
Item 1. Legal Proceedings
Certain legal proceedings and related developments were disclosed in the
Company's Quarterly Report on Form 10-Q for the quarterly periods ended March
31, 1999, and June 30, 1999, as well as in the Company's 1998 Form 10-K. Since
the June 30, 1999, Form 10-Q, the Company settled one of the two unrelated
lawsuits brought against the Company by former employees, as disclosed in the
Company's 1998 Form 10-K. The settlement of the claim did not have a material
effect on the consolidated results of operations or financial position of the
Company.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit No. Description
---------- -----------------------------------------------------
4.9 Third Amendment, dated as of October 8, 1999, to the
Credit Agreement (the Credit Agreement has been filed
previously)
27 Financial data schedule pursuant to Article 5 of
Regulation S-X
(b) Reports on Form 8-K:
None.
<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 4, 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
<PAGE>
EXHIBIT 4.9
THIRD AMENDMENT
THIRD AMENDMENT (this "Third Amendment"), dated as of October 8, 1999,
to the Credit Agreement, dated as of March 4, 1997, as modified by the Waiver
and First Amendment dated as of November 25, 1997, the Waiver dated as of
February 11, 1998, the Waiver and Second Amendment dated as of May 27, 1998 and
the Waiver dated as of November 13, 1998 (as the same may be further amended,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
among PACKARD BIOSCIENCE COMPANY, a Delaware corporation ("Packard"), the
Subsidiary Borrowers party thereto, the lenders from time to time parties
thereto (the "Lenders"), BANC OF AMERICA SECURITIES LLC (formerly known as
NATIONSBANC MONTGOMERY SECURITIES LLC) and CIBC OPPENHEIMER CORP. (formerly
known as CIBC-WOOD GUNDY SECURITIES CORP.), as co-arrangers and co-syndication
agents (in such capacities, the "Co-Arrangers" and the "Co-Syndication Agents"),
CANADIAN IMPERIAL BANK OF COMMERCE, as documentation agent (in such capacity,
the "Documentation Agent"), and BANK OF AMERICA, N.A. (formerly known as BANK OF
AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION), as administrative agent.
W I T N E S S E T H :
WHEREAS, Packard has requested that the Lenders agree to amend the
Credit Agreement upon the terms and subject to the conditions set forth herein;
and
WHEREAS, the Lenders have agreed to such amendment only upon the terms
and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto hereby agree as follows:
1. Defined Terms. Capitalized terms not otherwise defined herein have
the meanings ascribed to such terms in the Credit Agreement.
2. Section 1.1--Consolidated EBITDA. The definition of Consolidated
EBITDA contained in Section 1.1 of the Credit Agreement is hereby amended by
adding the following new clause (g) immediately after clause (f) thereof:
"and (g) up to $2,000,000 of professional fees paid in connection
with the Foreign Subsidiary Corporate Reorganization"
3. Section 1.1--Consolidated Interest Expense. The definition of
Consolidated Interest Expense contained in Section 1.1 of the Credit Agreement
is hereby amended by adding the words ", but excluding the Amendment Fee
referred to in the Third Amendment hereto" at the end of the last parenthetical
contained therein.
4. Section 1.1--Consolidated Total Debt. The definition of Consolidated
Total Debt contained in Section 1.1 of the Credit Agreement is hereby amended
and restated in its entirety as follows:
"Consolidated Total Debt": at any date, the aggregate principal
amount of all Indebtedness of Packard and its Subsidiaries at such
date (other than the principal amount of the Japan Debt to the extent
Packard Japan KK has an equivalent amount of cash ("Equivalent
Japanese Cash") on hand on such date), determined on a consolidated
basis in accordance with GAAP; provided, that, except for calculations
of the Consolidated Leverage Ratio pursuant to the Pricing Grid, such
amount shall be reduced by the aggregate amount of cash on hand (other
than Equivalent Japanese Cash) held by the Borrower or any of its
Subsidiaries (not to exceed $8,000,000).
5. Section 1.1--Fronted Offshore Revolving Credit Loan Sublimit. The
definition of Fronted Offshore Revolving Credit Loan Sublimit contained in
Section 1.1 of the Credit Agreement is hereby amended by changing the amount
"$35,000,000" to the amount "$50,000,000".
6. Section 1.1--New Definition. Section 1.1 of the Credit Agreement is
hereby amended by adding the following new definition in the appropriate
alphabetical order:
"Foreign Subsidiary Corporate Reorganization": a corporate
reorganization pursuant to which certain of Packard's Foreign
Subsidiaries shall become Subsidiaries of one or more Wholly Owned
Subsidiaries organized under the laws of countries that are members of
the European Union or the laws of Switzerland. Packard hereby agrees
to give the Administrative Agent at least 30 days' advance notice of
the Foreign Subsidiary Corporate Reorganization, which notice shall be
accompanied by a substantially final description, in reasonable
detail, of such reorganization.
7. Section 8.9(d). Section 8.9(d) of the Credit Agreement is hereby
amended by changing the phrase "Packard or any of its Subsidiaries" (which
appears twice in said Section) to the phrase "Packard or any of its Domestic
Subsidiaries".
8. Section 9.1(a). The third, fourth and fifth rows of the table set
forth in Section 9.1(a) are hereby amended and restated in their entirety as
follows:
December 31, 1998 - September 29, 1999 5.50:1.00
September 30, 1999 - December 30, 1999 5.85:1.00
December 31, 1999 - June 29, 2000 5.35:1.00
June 30, 2000 - December 30, 2000 5.15:1.00
December 31, 2000 - March 30, 2001 4.80:1.00
March 31, 2001 - December 30, 2001 4.50:1.00
9. Section 9.1(c). The first row of the table set forth in Section
9.1(c) is hereby amended and restated in its entirety as follows:
June 30, 1997 - September 29, 1999 1.00:1.00
September 30, 1999 - December 30, 1999 0.90:1.00
December 31, 1999 - March 30, 2000 1.00:1.00
10. Section 9.2 (d). Section 9.2(d) of the Credit Agreement is hereby
amended and restated in its entirety as follows:
"(d) Indebtedness of any Wholly Owned Foreign Subsidiary to
Packard or any Wholly Owned Subsidiary Guarantor in an aggregate
amount not to exceed $25,000,000 at any one time outstanding, provided
that (i) such Indebtedness is evidenced by a note that is pledged as
collateral under the Guarantee and Collateral Agreement, (ii) no more
than $5,000,000 of such Indebtedness shall result from cash loans to
any such Foreign Subsidiary (with any such Indebtedness not resulting
from cash loans being referred to herein as "Non-Cash Indebtedness")
and (iii) in the case of any such Indebtedness issued in connection
with a transfer of property (other than cash) to a Foreign Subsidiary,
such transfer constitutes a Disposition expressly permitted by Section
9.5;"
11. Section 9.6.
(a) Section 9.6 of the Credit Agreement is hereby amended by changing
the amount "$2,000,000" to the amount "$5,000,000".
(b) Section 9.6 of the Credit Agreement is hereby amended by adding
the following new clause (C) to the end thereof:
<PAGE>
"and (C) Packard may make cash payments in respect of tax
obligations of employees or directors of Packard or any of its
Subsidiaries resulting from the exercise by such Persons of options to
purchase common stock of Packard in exchange for a corresponding
reduction in the number of shares obtainable upon such exercise"
12. Section 9.7. Section 9.7 of the Credit Agreement is hereby amended
by changing the amounts "$10,000,000" and "$3,000,000" to the amounts
"$15,000,000" and "$5,000,000", respectively.
13. Section 9.8(f). Section 9.8(f) of the Credit Agreement is hereby
amended and restated in its entirety as follows:
"(f) (i) investments by Packard or any of its Subsidiaries in
Packard or any Person that, prior to such investment, is a Wholly
Owned Subsidiary Guarantor, (ii) any investment resulting from
intercompany reorganizations to the extent expressly permitted by
Section 9.5(d) or (e) and (iii) any investment resulting from the
issuance of Non-Cash Indebtedness (as defined in Section 9.2(d));"
14. Section 9.8(g).
(a) The second parenthetical contained in Section 9.8(g) of the
Credit Agreement is hereby amended and restated in its entirety as follows:
"(or, (x) in the case of investments in CCS Packard Inc.,
$27,000,000 and (y) in the case of one other investment during the
term of this Agreement, $40,000,000)"
(b) Clause (ii) of the proviso to Section 9.8(g) of the Credit
Agreement is hereby amended by changing the amount "$20,000,000" to the amount
"$23,000,000".
15. Section 9.9(b). Section 9.9(b) of the Credit Agreement is hereby
amended by changing the amount "$2,000,000" to the amount "$5,000,000".
16. Standby Letters of Credit in Offshore Currencies. The Credit
Agreement is hereby amended to the extent necessary to permit standby Letters of
Credit in Offshore Currencies ("Offshore Letters of Credit") to be issued on
terms and conditions comparable to those applicable to Letters of Credit under
the Credit Agreement and, to the extent relevant, the Fronted Offshore Revolving
Credit Subfacility. Without limiting the generality of the foregoing, the
following terms and conditions shall be applicable to Offshore Letters of
Credit: (1) the account party must be a Borrower (and, accordingly, all
obligations of the type applicable to Packard under Section 3 of the Credit
Agreement shall, in the case of Offshore Letters of Credit, be obligations of
such Borrower), (2) each L/C Participant will be obligated to make payments to
the Issuing Lender in respect of Offshore Letters of Credit in the relevant
Offshore Currency (or, at the option of the Issuing Lender, in Dollars based
upon the Dollar Equivalent of the relevant Reimbursement Obligation) under the
circumstances described in Section 3.4 of the Credit Agreement, (3) the limits
described in clauses (a), (b) and (c) of Section 4.1 of the Credit Agreement
shall apply to each issuance of an Offshore Letter of Credit, (4) the procedures
specified in Section 4.5 of the Credit Agreement shall apply to each Offshore
Currency utilized for the Offshore Letters of Credit, (5) Offshore Letters of
Credit shall count as utilization of the Revolving Credit Commitments, the
Fronted Offshore Revolving Credit Sublimit and the L/C Commitment (determined on
the basis of the Dollar Equivalent thereof), including, without limitation, for
the purposes of Section 5.4(g) of the Credit Agreement, (6) references to
Fronted Offshore Revolving Credit Loans shall, to the extent relevant, be deemed
to include the L/C Obligations in respect of Offshore Letters of Credit for the
purposes of interpreting provisions relating to the administration of Offshore
Currency matters, including, without limitation, (I) the definitions of "Banking
Day", "Calculation Date" and "Cost of Funds" and (II) Section 5.10(e) of the
Credit Agreement, (7) relevant determinations to be made by the Fronting Lender
in respect of Offshore Currency matters shall, in the case of Offshore Letters
of Credit, be made by the Issuing Lender, (8) the Offshore Currencies for which
Offshore Letters of Credit are available, as well as administrative matters
relating to Offshore Letters of Credit, shall be determined pursuant to a
separate agreement between the Issuing Lender and the relevant Borrowers.
17. Release of Liens. The parties hereto (a) acknowledge that the
Foreign Subsidiary Corporate Reorganization may result in certain direct Foreign
Subsidiaries of the Loan Parties becoming indirect Foreign Subsidiaries of the
Loan Parties and (b) confirm the authority of the Administrative Agent, as
provided in Section 11.10 of the Credit Agreement, to release any Liens on the
Capital Stock of such formerly direct Foreign Subsidiaries created pursuant to
the Security Documents.
18. Conditions to Effectiveness. This Third Amendment shall become
effective (the actual date of such effectiveness, the "Third Amendment Effective
Date") as of the date first above written when (a) counterparts hereof shall
have been duly executed and delivered by the Required Lenders, Packard and the
Administrative Agent and acknowledged by each Subsidiary Guarantor and (b)
Packard shall have paid to the Administrative Agent for distribution to the
relevant Lenders an amendment fee (the "Amendment Fee") equal to 0.25% of the
sum of the Revolving Credit Commitment and Term Loans of each Lender that has
submitted an executed signature page to this Amendment by facsimile transmission
to the Administrative Agent or its counsel prior to 12:00 Noon, New York City
time, on October 8, 1999.
19. Representations. Packard represents and warrants that:
(a) this Third Amendment has been duly authorized, executed and
delivered by Packard;
(b) each of this Third Amendment, and the Credit Agreement as amended
by this Third Amendment, constitutes the legal, valid and binding
obligation of Packard;
(c) each of the representations and warranties set forth in
Section 6 of the Credit Agreement are true and correct as of the Third Amendment
Effective Date; provided that references in the Credit Agreement to this
"Agreement" shall be deemed references to the Credit Agreement as amended by
this Third Amendment; and
(d) after giving effect to this Third Amendment, there does not exist
any Default or Event of Default.
20. Continuing Effect. Except as expressly amended or waived hereby,
the Credit Agreement shall continue to be and shall remain in full force and
effect in accordance with its terms.
21. Expenses. Packard agrees to pay and reimburse the Administrative
Agent for all of its out-of-pocket costs and expenses incurred in connection
with the negotiation, preparation, execution, and delivery of this Third
Amendment, including the reasonable fees and expenses of counsel to the
Administrative Agent.
22. Counterparts. This Third Amendment may be executed on any number
of separate counterparts and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.
23. GOVERNING LAW. THIS THIRD AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment
to be duly executed and delivered by their proper and duly authorized officers
as of the day and year first above written.
PACKARD BIOSCIENCE COMPANY
By:
Name:
Title:
<PAGE>
ACKNOWLEDGEMENT AND CONSENT
Each of the undersigned does hereby acknowledge and consent to
the foregoing Third Amendment. Each of the undersigned does hereby confirm and
agree that, after giving effect to such Third Amendment, the Guarantee and
Collateral Agreement and the other Security Documents in favor of the
Administrative Agent to which it is a party are and shall continue to be in full
force and effect and are hereby confirmed and ratified in all respects.
PACKARD INSTRUMENT COMPANY, INC.
By:
Name:
Title:
AQUILA TECHNOLOGIES GROUP, INC.
By:
Name:
Title:
CCS PACKARD, INC.
By:
Name:
Title:
HARWELL INSTRUMENTS LIMITED
By:
Name:
Title:
TENNELEC, INC.
By:
Name:
Title:
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 6,178
<SECURITIES> 0
<RECEIVABLES> 55,575
<ALLOWANCES> (607)
<INVENTORY> 39,501
<CURRENT-ASSETS> 111,813
<PP&E> 50,053
<DEPRECIATION> (20,805)
<TOTAL-ASSETS> 196,246
<CURRENT-LIABILITIES> 58,661
<BONDS> 0
0
0
<COMMON> 137
<OTHER-SE> (106,920)
<TOTAL-LIABILITY-AND-EQUITY> 196,246
<SALES> 185,198
<TOTAL-REVENUES> 185,198
<CGS> 99,204
<TOTAL-COSTS> 99,204
<OTHER-EXPENSES> 66,470
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,007
<INCOME-PRETAX> 4,765
<INCOME-TAX> 2,471
<INCOME-CONTINUING> 2,510
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,510
<EPS-BASIC> .27
<EPS-DILUTED> .26
</TABLE>
