<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000
COMMISSION FILE NO. 0-10552
------------------------
SCHERER HEALTHCARE, INC.
(Exact name of registrant as specified in its Charter)
<TABLE>
<S> <C>
DELAWARE 59-0688813
(State or other jurisdiction (I.R.S. Employer
of Identification No.)
incorporation or organization)
</TABLE>
120 INTERSTATE NORTH PARKWAY, S.E., SUITE 305, ATLANTA, GEORGIA 30339
(Address of principal executive offices, including Zip Code)
(770) 933-1800
(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 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 ____
Indicate the number of shares of each of the issuer's classes of Common Stock,
as of the latest practicable date:
<TABLE>
<S> <C>
CLASS OUTSTANDING AS OF AUGUST 4, 2000
--------------------------------------------- ---------------------------------------------
Common Stock, $0.01 par value 4,321,084
</TABLE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
SCHERER HEALTHCARE, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2000
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
NUMBER NUMBER
------ --------
<C> <S> <C>
PART I. FINANCIAL INFORMATION
1 Financial Statements:
Condensed Consolidated Balance Sheets as of June 30, 2000
and March 31, 2000.......................................... 3
Condensed Consolidated Statements of Operations for the
Three Months Ended June 30, 2000 and 1999................... 4
Condensed Consolidated Statements of Cash Flows for the
Three Months Ended June 30, 2000 and 1999................... 5
Notes to Condensed Consolidated Financial Statements........ 6
2 Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 8
PART II. OTHER INFORMATION
5 Other Events................................................ 10
6 Exhibits and Reports on Form 8-K............................ 10
SIGNATURES.................................................. 11
Index to Exhibits........................................... 12
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SCHERER HEALTHCARE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, 2000 MARCH 31, 2000
------------- --------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................. $ 3,684,000 $ 1,689,000
Accounts receivable, less allowance for doubtful accounts
of $267,000 and $257,000, respectively.................. 4,349,000 4,442,000
Interest receivable....................................... 282,000 248,000
Inventories............................................... 337,000 374,000
Prepaid and other......................................... 172,000 215,000
----------- -----------
Total current assets.................................... 8,824,000 6,968,000
----------- -----------
PROPERTY AND EQUIPMENT...................................... 8,990,000 8,670,000
Less accumulated depreciation............................. (4,622,000) (4,328,000)
----------- -----------
Net property and equipment................................ 4,368,000 4,342,000
----------- -----------
OTHER ASSETS
Intangibles, net.......................................... 1,569,000 1,544,000
Cost in excess of net assets acquired, net................ 2,082,000 2,116,000
Investments, at market value.............................. 8,491,000 9,927,000
Other investments, at cost................................ 3,350,000 3,000,000
Deferred income taxes..................................... 113,000 119,000
Other..................................................... 268,000 265,000
Net assets of discontinued operations..................... 421,000 399,000
----------- -----------
Total other assets...................................... 16,294,000 17,370,000
----------- -----------
TOTAL ASSETS................................................ $29,486,000 $28,680,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable.......................................... $ 1,051,000 $ 1,017,000
Accrued expenses.......................................... 1,397,000 1,571,000
Current maturities of debt obligations.................... 256,000 263,000
Income taxes payable...................................... 10,000 1,000
Due to officer............................................ 253,000 --
Other..................................................... 7,000 27,000
----------- -----------
Total current liabilities............................... 2,974,000 2,879,000
----------- -----------
LONG-TERM DEBT, net of current maturities................... 344,000 288,000
----------- -----------
OTHER LIABILITIES........................................... 138,000 150,000
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Convertible preferred stock--$.01 par value, 2,000,000
shares authorized; 21,992 shares issued and outstanding
at June 30, 2000 and March 31, 2000;.................... -- --
Common stock--$.01 par value, 12,000,000 shares
authorized; 4,712,115 shares issued at June 30, 2000 and
March 31, 2000; 4,337,163 shares outstanding at June 30,
2000 and March 31, 2000;................................ 47,000 47,000
Capital in excess of par value............................ 21,394,000 21,456,000
Retained earnings......................................... 7,680,000 6,951,000
Less treasury stock, at cost.............................. (3,091,000) (3,091,000)
----------- -----------
Total stockholders' equity.............................. 26,030,000 25,363,000
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.................. $29,486,000 $28,680,000
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
SCHERER HEALTHCARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
-----------------------
2000 1999
---------- ----------
<S> <C> <C>
NET SALES................................................... $4,626,000 $4,070,000
---------- ----------
COSTS AND EXPENSES
Cost of goods sold........................................ 2,759,000 2,340,000
Selling, general and administrative....................... 1,301,000 1,209,000
---------- ----------
Total costs and expenses................................ 4,060,000 3,549,000
---------- ----------
OPERATING INCOME............................................ 566,000 521,000
OTHER INCOME
Interest income........................................... 241,000 188,000
Other income (expense), net............................... (49,000) 20,000
---------- ----------
Total other income...................................... 192,000 208,000
---------- ----------
INCOME BEFORE INCOME TAXES.................................. 758,000 729,000
PROVISION FOR INCOME TAXES.................................. 29,000 22,000
---------- ----------
NET INCOME.................................................. $ 729,000 $ 707,000
========== ==========
Basic earnings per common share............................. $ 0.17 $ 0.16
========== ==========
Diluted earnings per common share........................... $ 0.16 $ 0.16
========== ==========
Weighted average common shares outstanding--basic........... 4,336,383 4,335,632
========== ==========
Weighted average common shares outstanding--diluted......... 4,548,142 4,547,075
========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
SCHERER HEALTHCARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
------------------------
2000 1999
---------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 729,000 $ 707,000
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization........................... 378,000 319,000
Deferred taxes.......................................... 6,000 --
Other noncash charges and credits, net.................. -- 10,000
Changes in operating assets and liabilities:
Accounts receivable..................................... 93,000 (583,000)
Interest receivable..................................... (34,000) --
Inventories............................................. 37,000 (13,000)
Prepaid and other....................................... 43,000 34,000
Income taxes, net....................................... 9,000 15,000
Accounts payable and accrued expenses................... (140,000) (404,000)
Other liabilities....................................... (32,000) (12,000)
---------- -----------
Net cash provided by operating activities of continuing
operations.............................................. 1,089,000 73,000
Net operating activities of discontinued operations....... (22,000) (22,000)
---------- -----------
Net cash provided by operating activities................. 1,067,000 51,000
---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment....................... (340,000) (160,000)
Purchase of long-term investments......................... (350,000) (1,919,000)
Sale of long-term investments............................. 1,374,000 --
Decrease in notes receivable.............................. -- 51,000
Loan from officer......................................... 253,000 --
Payout of options to former officer....................... (45,000) --
Other investing activities, net........................... (13,000) (19,000)
---------- -----------
Net cash provided by (used for) investing activities...... 879,000 (2,047,000)
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in borrowings.................................. 49,000 (75,000)
---------- -----------
Net cash provided by (used for) financing activities...... 49,000 (75,000)
---------- -----------
CHANGE IN CASH AND CASH EQUIVALENTS......................... 1,995,000 (2,071,000)
CASH AND CASH EQUIVALENTS, beginning of period.............. 1,689,000 5,433,000
---------- -----------
CASH AND CASH EQUIVALENTS, end of period.................... $3,684,000 $ 3,362,000
========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
SCHERER HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1.
The accompanying unaudited condensed consolidated financial statements of
Scherer Healthcare, Inc. and its subsidiaries (the "Company") include all
adjustments that, in the opinion of management, are necessary for a fair
presentation of the results for the period indicated. Quarterly results of
operations are not necessarily indicative of annual results.
These statements should be read in conjunction with the consolidated
financial statements and the notes thereto included in the Company's Annual
Report on Form 10-K for the fiscal year ended March 31, 2000.
NOTE 2.
The components of inventory at June 30, 2000 and March 31, 2000 consisted of
the following:
<TABLE>
<CAPTION>
JUNE 30, 2000 MARCH 31, 2000
------------- --------------
<S> <C> <C>
Finished products................................. $ 78,000 $ 68,000
Containers, packaging, and raw materials.......... 308,000 355,000
LIFO reserve...................................... (49,000) (49,000)
-------- --------
Total........................................... $337,000 $374,000
======== ========
</TABLE>
Inventories are stated at the lower of net realizable value or cost using
the last-in, first-out ("LIFO") method.
NOTE 3.
Debt and obligations under capital leases at June 30, 2000 and March 31,
2000 consisted of the following:
<TABLE>
<CAPTION>
JUNE 30, 2000 MARCH 31, 2000
------------- --------------
<S> <C> <C>
Obligations under capital leases, due in varying
installments through fiscal 2005................ $ 600,000 $ 551,000
Less current maturities........................... (256,000) (263,000)
--------- ---------
Long-term debt.................................... $ 344,000 $ 288,000
========= =========
</TABLE>
NOTE 4.
The Company has investments in long-term high-grade marketable securities
composed primarily of government and corporate fixed income bonds. These
marketable securities are classified as available-for-sale and are being carried
at fair market value based on quoted market prices. The net unrealized holding
gains or losses on these investments are reported under capital in excess of par
value.
6
<PAGE>
SCHERER HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4. (CONTINUED)
The amortized cost and fair market value of the Company's marketable
securities are as follows:
<TABLE>
<CAPTION>
NET FAIR
AMORTIZED UNREALIZED MARKET
COST LOSS VALUE
----------- ---------- ----------
<S> <C> <C> <C>
June 30, 2000
-----------------------------------------
Municipal bonds........................ $ 7,932,000 $(720,000) $7,212,000
Corporate bonds........................ 1,216,000 (160,000) 1,056,000
Preferred stocks....................... 298,000 (75,000) 223,000
----------- --------- ----------
Total................................ $ 9,446,000 $(955,000) $8,491,000
=========== ========= ==========
March 31, 2000
-----------------------------------------
Municipal bonds........................ $ 9,351,000 $(735,000) $8,616,000
Corporate bonds........................ 1,216,000 (129,000) 1,087,000
Preferred stocks....................... 298,000 (74,000) 224,000
----------- --------- ----------
Total................................ $10,865,000 $(938,000) $9,927,000
=========== ========= ==========
</TABLE>
The municipal bonds mature ranging from 2 years to 29 years and the
corporate bonds mature ranging from 10 years to 25 years.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion contains, in addition to historical information,
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of
1934, as amended, which represent the Company's expectations or beliefs. When
used in this report, the words "may," "could," "should," "would," "believe,"
"anticipate," "estimate," "expect," "intend," "plan" and similar expressions are
intended to identify forward-looking statements. These statements by their
nature involve substantial risks and uncertainties, certain of which are beyond
the Company's control. The Company cautions that various factors, including the
factors described in the Company's filings with the Securities and Exchange
Commission, as well as general economic conditions, changes in applicable laws
and regulations, industry trends, a dependence upon and/or loss of key
employees, vendors or customers, the loss of strategic product shipping
relationships, customer demand, product availability, competition (including
pricing and availability), concentrations of credit risks, distribution
efficiencies, capacity constraints and technological difficulties could cause
actual results or outcomes to differ materially from those expressed in any
forward-looking statements of the Company. Reference is made to this report as
well as the Company's most recent Annual Report on Form 10-K and other reports
filed with the Securities and Exchange Commission for other factors that could
affect the forward-looking statements. Any forward-looking statement speaks only
as of the date of this report and the Company undertakes no obligation to update
any forward-looking statement or statements to reflect events or circumstances
after the date on which such statements is made or to reflect the occurrence of
an unanticipated event. New factors emerge from time to time, and it is not
possible for the Company to predict all of such factors. Further, the Company
cannot assess the impact of each such factor on its business or the extent to
which any factor, or combination of factors, may cause actual results to differ
materially from those contained in any forward-looking statements.
RESULTS OF OPERATIONS
NET SALES AND OPERATING INCOME (LOSS).
The following table sets forth, for the periods indicated, the net sales and
operating income (loss) for each segment of the business of the Company and its
subsidiaries:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
-----------------------
2000 1999
---------- ----------
<S> <C> <C>
NET SALES:
Waste Management Services Segment.................. $4,204,000 $3,678,000
Consumer Healthcare Products Segment............... 422,000 392,000
---------- ----------
Company Totals................................... $4,626,000 $4,070,000
========== ==========
OPERATING INCOME (LOSS):
Waste Management Services Segment.................. $ 585,000 $ 555,000
Consumer Healthcare Products Segment............... 167,000 164,000
Corporate.......................................... (186,000) (198,000)
---------- ----------
Company Totals................................... $ 566,000 $ 521,000
========== ==========
</TABLE>
The Company's net sales increased 14% to $4,626,000 for the first quarter of
fiscal 2001 from $4,070,000 for the first quarter of fiscal 2000. The Company's
operating income increased 9% to $566,000 for the first quarter of fiscal 2001
from $521,000 during the same period in fiscal 2000. The Company's cost of goods
sold increased to 60% of net sales for the quarter ended June 30, 2000 from 58%
of net sales for the quarter ended June 30, 1999. Selling, general and
administrative expenses decreased to 28% of net
8
<PAGE>
sales for the first quarter of fiscal 2001 from 30% for the first quarter of
fiscal 2000. The primary reasons for these changes are discussed below.
The results of operations of the Company are dependent upon the results of
operations of each of its subsidiaries operating in the Company's individual
business segments. Set forth below is a discussion of the results of operations
of each of these segments.
WASTE MANAGEMENT SERVICES SEGMENT
Net sales in the Company's Waste Management Services Segment, which operates
through Bio Systems Partners, Bio Waste Systems, Inc., and Medical Waste
Systems, Inc. (collectively, "Bio Systems"), increased to $4,204,000 for the
first quarter of fiscal 2001 from $3,678,000 for the first quarter of fiscal
2000. As in the past few years, the sales growth is primarily due to securing
new hospital contracts for Bio Systems' core business of providing "sharps"
(including sharp-edged medical waste such as scalpels, syringes, and needles)
disposal services which utilize cost effective reusable containers.
Primarily as a result of the increase in net sales, Bio Systems' operating
income increased 5% to $585,000 for the quarter ended June 30, 2000 from
$555,000 for the quarter ended June 30, 1999. Bio Systems' cost of goods sold
increased to 62% of net sales for the first quarter of fiscal 2001 from 60% of
net sales for the first quarter of fiscal 2000. Selling, general and
administrative expenses decreased to 24% of net sales for the quarter ended
June 30, 2000 from 25% of net sales during the same period in fiscal 2000.
CONSUMER HEALTHCARE PRODUCTS SEGMENT
Net sales for the Consumer Healthcare Products Segment, which operates
through Scherer Laboratories, Inc. ("Scherer Labs"), increased 8% to $422,000
for the first quarter of fiscal 2001 from $392,000 during the same period in
fiscal 2000.
Scherer Labs' operating income increased 2% to $167,000 for the first
quarter of fiscal 2001 from $164,000 for the first quarter of fiscal 2000.
CORPORATE
The Company's operating expenses in the Corporate Segment decreased to
$186,000 for the quarter ended June 30, 2000 from $198,000 for the quarter ended
June 30, 1999. Certain administrative, accounting, management oversight and
payroll services are performed by the Company's Corporate office. The Corporate
operating expenses include the salaries and wages of the personnel who perform
these functions (including the Company's executive officers) rent expense, and
professional accounting and legal fees. The decrease in the Corporate operating
expenses is primarily due to the decrease in legal fees incurred during the
first quarter of fiscal 2000.
OTHER INCOME.
The Company's interest income increased to $241,000 for the first quarter of
fiscal 2001 from $188,000 for the first quarter of fiscal 2000. The increase is
a result of the Company's interest earned on convertible debt instruments
carried in other investments at cost.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents totaled $3,684,000 at June 30, 2000,
an increase of $1,995,000 from March 31, 2000. During the quarter ended
June 30, 2000, the Company sold marketable securities for $1,374,000. After the
sale of marketable securities during the first quarter of 2001, the balance, at
fair market value, of the Company's long-term investments was $8,491,000 at
June 30, 2000, as compared to $9,927,000 at March 31, 2000. After the investment
changes in the first quarter of 2001, the
9
<PAGE>
Company's working capital increased to $5,704,000 at June 30, 2000, from
$4,089,000 at March 31, 2000. The Company's long-term debt increased slightly to
$344,000 at June 30, 2000, from $288,000 at March 31, 2000. The primary reasons
for these changes are discussed below.
CASH FLOWS FROM OPERATING ACTIVITIES.
The Company's cash provided by operating activities from continuing
operations totaled $1,034,000 for the first quarter of fiscal 2001, as compared
to $73,000 for the first quarter of fiscal 2000. Bio Systems' operations
provided cash of $793,000 for the first quarter of fiscal 2001, as compared to
using cash of $81,000 for the first quarter of fiscal 2000. This change is
primarily due to the timing of collection of its accounts receivable and payment
of accounts payable. Scherer Labs' cash provided from operating activities
increased to $157,000 for the quarter ended June 30, 2000, from $90,000 for the
quarter ended June 30, 1999. Primarily due to the timing of income tax payments,
cash provided by operations in the Corporate Segment increased to $84,000 for
the first quarter of fiscal 2001 from $64,000 for the first quarter of fiscal
2000.
CASH FLOWS FROM INVESTING AND FINANCING ACTIVITIES.
The Company's investing activities provided cash of $924,000 during the
quarter ended June 30, 2000, as compared to using $2,047,000 during the quarter
ended June 30, 1999. In the first quarter of 2001, the Company decreased its
investment in marketable securities by $1,374,000 when it sold an investment in
fixed income government bonds, and increased its investment in convertible debt
instruments by $350,000. The Company's marketable securities are composed of
municipal bonds, corporate bonds and preferred stocks and mature over periods
ranging from 2 years to 29 years. See Note 4 of the accompanying Notes to
Condensed Consolidated Financial Statements included elsewhere herein.
New capital lease obligations associated with the Waste Management Service
Segment, increased the Company's cash from financing activities by $47,000 for
the first quarter of fiscal 2001 compared with $75,000 used during the first
quarter of fiscal 2000.
Management of the Company believes that its current cash on hand and its
current cash flow is sufficient to maintain its current operations. The Company
continues to evaluate its long-term options with regard to the use of its
remaining cash on hand.
PART II. OTHER INFORMATION
Item 5. OTHER EVENTS.
On July 18, 2000, two shareholders of the Company announced an unsolicited
offer to acquire the Company for a cash price of $5.00 per share. The Company
currently is reviewing the proposal and is considering all of its strategic
alternatives.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K.
None.
10
<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.
<TABLE>
<S> <C>
SCHERER HEALTHCARE, INC.
(Registrant)
Date: August 14, 2000 /s/ ROBERT P. SCHERER, JR.
------------------------------------------------
Robert P. Scherer, Jr.
CHAIRMAN, CHIEF EXECUTIVE OFFICER AND PRESIDENT
Date: August 14, 2000 /s/ DONALD P. ZIMA
------------------------------------------------
Donald P. Zima
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
</TABLE>
11
<PAGE>
SCHERER HEALTHCARE, INC.
INDEX OF EXHIBITS
The following exhibits are being filed with this report.
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
------- ------------------------------------------------------------ --------
<S> <C> <C>
27 Financial Data Schedule
(included only in EDGAR filing) 13
</TABLE>
12
