<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1995
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OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from __________ to ___________
Commission file number I7828
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GELMAN SCIENCES INC.
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(Exact name of registrant as specified in its charter)
MICHIGAN 38-1614806
- ------------------------------ ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
600 South Wagner Road, Ann Arbor, Michigan 48103-9019
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(Address of principal executive offices)
(Zip Code)
(313) 665-0651
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Yes X No
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Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date. At December 4, 1995,
7,831,211 shares were outstanding of the Company's $.10 par value common
stock.
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<PAGE>
GELMAN SCIENCES INC.
INDEX
Page
PART I. Financial Information Number
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
October 31, 1995 (Unaudited) and
July 31, 1995 . . . . . . . . . . . . . . . . . . . . . 3
Condensed Unaudited Consolidated Statements of
Income for the three months ended
October 31, 1995 and 1994. . . . . . . . . . . . . . . .4
Condensed Unaudited Consolidated Statements of
Cash Flows for the three months ended
October 31, 1995 and 1994. . . . . . . . . . . . . . . .5
Condensed Notes to Unaudited Consolidated
Financial Statements. . . . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results
of Operations. . . . . . . . . . . . . . . . . . . . . .7
PART II. Other Information
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . .8
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . .10
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
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<PAGE>
GELMAN SCIENCES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
October 31 July 31,
1995 1995
------------------------
ASSETS (Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 3,292 $ 3,010
Accounts receivable, less allowances 24,790 23,985
Inventories:
Finished products 5,654 6,320
Work in process 1,732 1,572
Raw material and purchased parts 6,406 7,052
---------- ----------
13,792 14,944
Other current assets 5,282 4,988
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Total Current Assets 47,156 46,927
Property, Plant and Equipment 71,310 69,842
Less Allowances for Depreciation (38,358) (37,258)
---------- ----------
32,952 32,584
Intangibles and Other Assets 2,293 2,270
---------- ----------
Total Assets $ 82,401 $ 81,781
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable $ 1,191 $ 1,368
Accounts payable 3,477 3,813
Accrued expenses 8,949 9,312
Current maturities of long-term debt 512 524
---------- ----------
Total Current Liabilities 14,129 15,017
Long-Term Debt, Exclusive of Current Maturities 5,182 5,493
Other Long-Term Liabilities 2,187 2,498
Stockholders' Equity:
Preferred stock, par value $1.00 per share
Common stock, par value $.10 per share 782 779
Additional capital 35,461 35,145
Retained earnings 25,636 23,714
Translation adjustments (676) (565)
Less loan to Employee Stock Ownership Plan (300) (300)
---------- ----------
Total Stockholders' Equity 60,903 58,773
---------- ----------
Total Liabilities and Stockholders' Equity $ 82,401 $ 81,781
========== ==========
</TABLE>
See Notes To Unaudited Consolidated Financial Statements.
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<PAGE>
GELMAN SCIENCES INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(In Thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
October 31
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1995 1994
------------ ------------
<S> <C> <C>
Net sales $ 27,335 $ 24,167
Cost and expenses:
Cost of products sold 13,493 12,010
Selling and administrative 9,574 8,512
Research and development 1,491 1,308
Other income - net (287) (5)
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Operating earnings 3,064 2,342
Interest expense 154 433
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Earnings before income taxes 2,910 1,909
Provision for income taxes 988 678
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Net earnings $ 1,922 $ 1,231
========== ==========
Primary earnings per share $ 0.24 $ 0.19
========== ==========
Weighted average common and
common equivalent shares outstanding 8,145 6,596
========== ==========
</TABLE>
See Notes To Unaudited Consolidated Financial Statements.
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<PAGE>
GELMAN SCIENCES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
Three Months Ended
October 31
--------------------------
1995 1994
------------ -----------
<S> <C> <C>
Operating Activities
Net earnings $ 1,922 $ 1,231
Loss on disposal of assets - 55
Depreciation and amortization 1,172 1,014
Decrease in inventories 1,376 695
(Increase) decrease in accounts receivable (1,247) 770
Increase in other current assets (475) (845)
Decrease in current liabilities (699) (1,393)
Decrease in liabilities for environmental activity (84) (163)
Other (162) 56
---------- ----------
Net Cash Provided by Operating Activities 1,803 1,420
Financing Activities
Long-term debt borrowings 681 6,410
Principal payments on long-term debt (982) (4,810)
Tax benefit from exercised stock options 177 0
Proceeds from exercised stock options 141 76
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Net Cash Provided by Financing Activities 17 1,676
Investment Activities
Capital expenditures (1,552) (1,284)
Proceeds from sale of assets - 11
Increase in intangibles and other assets (32) (121)
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Net Cash Used in Investment Activities (1,584) (1,394)
Effects of Exchange Rate Changes on Cash 46 (184)
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Net change in cash during the period 282 1,518
Cash at beginning of period 3,010 1,525
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Cash at end of period $ 3,292 $ 3,043
========== ==========
</TABLE>
See Notes To Unaudited Consolidated Financial Statements.
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<PAGE>
GELMAN SCIENCES INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
General
In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all adjustments (which are of a normal
recurring nature) necessary to present fairly the financial position of
Gelman Sciences Inc. and subsidiaries as of October 31, 1995, and the
results of their operations and cash flows for the three months ended
October 31, 1995 and 1994. These financial statements should be read in
conjunction with the financial statements and notes set forth in the
Company's Annual Report and Form 10-K for the year ended July 31, 1995.
The results of operations for the three months ended October 31, 1995 and
1994 are not necessarily indicative of the results of the full year.
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Net sales for the first quarter ended October 31, 1995 increased 13% to
$27.3 million as compared to net sales of $24.2 million for the quarter
ended October 31, 1994. The increase was due mainly to strong international
sales led by medical device products. Foreign currency fluctuations
represented less than 1 percent of the overall percentage increase.
Overall, sales to customers in Europe increased 27% due mainly to increases
in medical device products used in intravenous therapy and OEM membrane.
Sales to customers in Asia/Pacific increased 24% due to sales increases in
process products used in high-technology filtration systems. Sales to
customers in the Americas increased 8% over the same period of last fiscal
year. Sales of microporous membrane, in the Americas, were level compared
to last fiscal first quarter.
Worldwide sales by product lines, as compared to the first quarter of last
fiscal year, in the laboratory market of our business increased 8%.
Medical Device sales improved 22%. Process filtration sales improved 16%
and sales of microporous membrane improved 15%.
Gross margin for the quarter was 50.6% as compared to 50.3% for the prior
year first quarter. The gross margin improvement is attributed to
international sales growth plus continued manufacturing efficiencies.
Selling and administrative costs as a percentage of sales was 35% for the
quarters ended October 31, 1995 and 1994. Research and development costs
also remained level as a percentage of sales at 5.5%. The effective tax
rate for the first quarters ended October 31, 1995 and 1994 was 34% and
35%, respectively. The increase in Other income - net is due mainly to
gains on foreign currency transactions. Interest expense decreased $279,000
due to the repayment of outstanding indebtedness in the third quarter of
fiscal 1995.
Net earnings for the first quarter ended October 31, 1995 increased 56% to
$1.9 million or $.24 per share, as compared with $1.2 million or $.19 per
share.
Liquidity and Capital Resources
The Company generated cash from operations of $1.8 million for the first
quarter ended October 31, 1995 compared to $1.4 million for the quarter
ended October 31, 1994. The Company used the cash to fund capital
expenditures of $1.6 million. Working capital at October 31, 1995 was $33.0
million compared to $31.9 million at July 31,1995. The decrease in current
liabilities was due to timing of payments on trade payables and the
payment, during the quarter, of accrued liabilities at July 31, 1995. At
October 31, 1995, the Company's unused portion of lines of credit under the
revolving credit agreement was $15 million.
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<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is involved in various legal actions in the normal course of
business. In addition, the Company is currently a party to various legal
actions arising under statutes regulating the discharge of materials into
the environment or otherwise protecting the environment. These have been
described in the Company's 1995 Annual Report and Item 1. Environmental
Regulations and Item 3. Legal Proceedings of the Company's Form 10-K for
the year ended July 31, 1995. The following sets forth these environmental
matters to the extent any material developments have occurred since the
filing of the Company's Form 10-K for the year ended July 31, 1995.
Scarbrough, et al. v. Gelman Sciences Inc., et al. (Circuit Court for
Washtenaw County, Michigan, Case No. 88-35594-CE). By Complaint filed
August 8, 1988, and amended September 15, 1988, 27 residents of the
Westover subdivision located near the main facility of the Company sued the
Company and 8 other defendants for damages associated with alleged
contamination of residential water supplies and for the cost of court-
supervised medical surveillance. The total demand was $3,095,000. On
March 9, 1990, plaintiffs settled with 7 of the 8 other defendants for
$100,000. (The suit against the remaining other defendant was subsequently
dismissed by the Court.) Thereafter, 15 plaintiffs settled with the
Company for a total of $175,535. Twelve plaintiffs refused to settle. On
November 30, 1990, a jury returned a verdict in favor of the 12 plaintiffs,
awarding damages totalling $119,756. After adjustment for the March 9,
1990, settlement between plaintiffs and 7 other defendants, the net jury
verdict against the Company was $62,250, plus interest. On December 11,
1991, the Court awarded the Company costs totalling $87,529.38, plus
interest. The 12 plaintiffs who went to trial appealed the outcome of the
case. On July 27, 1994, the Court of Appeals affirmed the jury verdict.
On September 21, 1994, the Court of Appeals denied plaintiffs Motion for
Rehearing. Plaintiffs filed an Application for Leave to Appeal with the
Michigan Supreme Court. On June 30, 1995, the Supreme Court denied the
Application. Plaintiffs filed a Motion for Reconsideration, which was
denied on October 31, 1995.
-8-
<PAGE>
Dawson, et ano v. Gelman Sciences Inc., et al. (Circuit Court for
Washtenaw County, Michigan, Case No. 92-43975-CE). On November 3, 1992,
two residents in the Evergreen subdivision located near the main facility
of the Company filed a Complaint against the Company, the Chairman of the
Company, and eight other defendants for damages associated with alleged
contamination of residential water supplies. On January 7, 1993, the
Company and its Chairman filed their Answers denying liability and cross-
claiming against the co-defendants. On October 27, 1993, the Court granted
the motion of the Company and its Chairman for summary judgment. An Order
dismissing this case was entered on December 15, 1993. Plaintiffs
appealed, and, on November 7, 1995, the Michigan Court of Appeals affirmed
the dismissal.
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<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
(4) Instruments Defining the Rights of Security Holders
(1) Pursuant to 17 CFR 229.601(b)(4)(iii), instruments with respect
to long-term debt issues have been omitted where the amount of
securities authorized under each instrument does not exceed 10% of
the total consolidated assets of the Company. The Company hereby
agrees to furnish a copy of each such instrument to the Commission
upon its request.
(11) Statement re computation of per share earnings for the three
months ended October 31, 1995 and 1994.
(27) Financial Data Schedules
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fiscal quarter ended
October 31, 1995.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant had duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GELMAN SCIENCES INC.
--------------------------------
(Registrant)
Date: December 12, 1995 /s/ Charles Gelman
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Charles Gelman, Chairman of the Board
and Chief Executive Officer
Date: December 12, 1995 /s/ David J. DiMaggio
----------------------------------------
David J. DiMaggio, Controller
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Exhibit 11
Computation of Earnings Per Common Share
Primary and Fully Diluted
<TABLE>
<CAPTION>
Three Months Ended
October 31
-----------------------
1995 1994
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<S> <C> <C>
Net income for computing primary and fully diluted
earnings per common share $ 1,922,000 $ 1,231,000
Primary shares
Weighted average number of common shares outstanding 7,810,109 6,142,707
Additions from assumed exercise of stock options and warrants 335,204 445,938
----------- -----------
Weighted average of common and common equivalent shares 8,145,314 6,588,645
=========== ===========
Fully diluted shares
Weighted average number of common shares outstanding 7,810,109 6,142,707
Additions from assumed exercise of stock options and warrants 346,428 445,938
----------- -----------
Weighted average of common and common equivalent shares 8,156,538 6,588,645
=========== ===========
Net income per common share
Primary $0.24 $0.19
=========== ===========
Fully diluted $0.24 $0.19
=========== ===========
</TABLE>
Primary additions from assumed exercise of stock options and warrants are
net of assumed purchase of common shares at the average market price during
the period. Fully diluted earnings per share was determined in the same
manner except that the greater of period end or period average stock price
was used.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
(a) Gelman Sciences Inc. Statement of Income and Consolidated Statement
of Cash Flows for the three months ended October 31, 1995 an the
Consolidated Balance Sheet as of October 31, 1995 and is qualified in its
entirety by reference to such (b) Form 10-Q for the fist quarter
ended October 31, 1995.
</LEGEND>
<CIK> 0000310252
<NAME> GELMAN SCIENCES INC.
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-END> Oct-31-1995
<EXCHANGE-RATE> 1
<CASH> 3,292
<SECURITIES> 0
<RECEIVABLES> 26,154
<ALLOWANCES> 1,364
<INVENTORY> 13,792
<CURRENT-ASSETS> 47,156
<PP&E> 71,310
<DEPRECIATION> 38,358
<TOTAL-ASSETS> 82,401
<CURRENT-LIABILITIES> 14,129
<BONDS> 7,369
<COMMON> 782
0
0
<OTHER-SE> 60,121
<TOTAL-LIABILITY-AND-EQUITY> 82,401
<SALES> 27,335
<TOTAL-REVENUES> 27,335
<CGS> 13,493
<TOTAL-COSTS> 13,493
<OTHER-EXPENSES> 10,702
<LOSS-PROVISION> 76
<INTEREST-EXPENSE> 154
<INCOME-PRETAX> 2,910
<INCOME-TAX> 988
<INCOME-CONTINUING> 1,922
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,922
<EPS-PRIMARY> 0.24
<EPS-DILUTED> 0.24
</TABLE>
