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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K 405
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1996
Commission File Number 0-6994
NEW BRUNSWICK SCIENTIFIC CO., INC.
(Exact name of registrant as specified in its charter)
New Jersey 22-1630072
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(State of incorporation) (I.R.S. Employer Identification Number)
44 Talmadge Road, Edison, N.J. 08818-4005
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(Address of principal office)
Registrant's telephone number: (908) 287-1200
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Securities registered pursuant to Section 12(b) of the Act:
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Name of each exchange
Title of each class on which registered
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None N/A
Securities registered pursuant to Section 12(g) of the Act:
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Title of class
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Common stock - par value $0.0625
Common stock Purchase Rights
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.
The aggregate market value of the voting stock held by non-affiliates of the
registrant was $18,207,734 as of February 10, 1997. This figure was calculated
by reference to the high and low prices of such stock on February 10, 1997.
The number of shares outstanding of the Registrant's Common stock as of
February 10, 1997: 3,808,932
DOCUMENTS INCORPORATED BY REFERENCE
Registrant's Proxy Statement and Annual Report to be filed within 120 days after
the end of the fiscal year 1996, are incorporated in Part III herein.
The EXHIBITS INDEX is on Page 35.
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PART I
Item 1. BUSINESS
New Brunswick Scientific Co., Inc. and its subsidiaries ("NBS" or "the
Company") design, manufacture and market a variety of equipment used in
biotechnology to create, maintain, measure and control the physical and
biochemical conditions required for the growth and detection of microorganisms.
This equipment is used in medical, biological, chemical, and environmental
research and for the commercial development of antibiotics, proteins, hormones,
enzymes, monoclonal antibodies, agricultural products, fuels, vitamins, vaccines
and other substances. The equipment sold by NBS includes fermentation equipment,
bioreactors, biological shakers, nutrient sterilizing and dispensing equipment,
low temperature freezers and tissue culture apparatus. Laboratory equipment and
instrumentation manufactured by NBS and others is distributed by five
wholly-owned subsidiaries in Europe.
DGI BioTechnologies, L.L.C. (DGI) was established in 1995 by the Company
to develop and commercialize a novel technology, the Diogenesis(TM) process,
that facilitates the discovery of new drugs. DGI is eighty percent (80%) owned
and fully funded by the Company and occupies specially designed laboratory space
at the Company's headquarters facility in Edison, New Jersey. Diogenesis(TM) is
being developed to provide the pharmaceutical and biotechnology industries with
site-directed assay systems to rapidly generate small, orally available, organic
drug leads. Unlike other techniques, leads generated by DGI's process will
uniformly possess the defining characteristics of effective drugs: activity,
selectivity and affinity for the biological target.
DGI has applied for U.S. and foreign patents covering its proprietary
drug lead discovery technology which utilizes state-of-the-art
molecular-biological and immunological tools to scan known pharmaceutical
targets in a manner that offers major advantages over existing drug discovery
approaches. DGI's strategy is to enter into partnership agreements with multiple
pharmaceutical and/or biotechnology companies whereby DGI will generate focused
libraries of small molecule compounds known to be active against the partner's
target. DGI will generate revenues from research on behalf of corporate
partners, milestone payments for the identification of leads and product
royalties.
The founders of DGI hold options which can be exercised under certain
conditions and the employees, certain consultants and the Board of Managers have
been issued options, which if exercised, in the aggregate represent
approximately 12.4% of the company.
NBS was incorporated in 1958 as the successor to a business founded in
1946 by David and Sigmund Freedman, its principal stockholders and two of its
directors and executive officers. The company owns its 243,000 square foot
headquarters and primary production facility located on 17 acres of land in
Edison, New Jersey.
Products
Fermentation Equipment and Bioreactors. A fermentor is a device used to
create, maintain and control the physical, chemical, and biochemical
environmental conditions required for growing bacteria, yeast, fungi and other
similar microorganisms. Bioreactors serve an identical purpose for propagation
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of animal and plant cells. The Company's fermentors and bioreactors range in
size from laboratory benchtop models as small as 1-liter to pilot scale systems
as large as 10,000 liters. The larger systems are typically sold under contract.
The number of larger systems sold in any reporting period may materially affect
the sales and profitability of the Company.
NBS has supplied fermentors and bioreactors to universities and
pharmaceutical company laboratories since the 1950's. NBS' fermentors and
bioreactors are being used for applications which have received increased
attention in the scientific and commercial community; namely, applications using
microorganisms engineered by recombinant DNA techniques; immunology; and the
production of monoclonal antibodies. Animal and plant cells as well as bacteria
and viruses are usually grown on a small scale for research purposes. As the
process is scaled up (i.e., replicated, using larger volumes), physical and
chemical parameters, such as pH, vessel pressure and chemical composition may
change, and the equipment used may require increasingly sophisticated control
systems. Scale-up, which is one of the important uses of the Company's pilot
scale systems, is a complex technical procedure critical to successful
commercialization of biological processes. Pilot scale systems may be used to
set parameters or to determine the feasibility of production at greater volumes,
depending upon the goal of the customer. Particularly in the area of
bioreactors, the Company has developed unique designs and has applied for
patents to protect its technology.
The Company's fermentors and bioreactors incorporate sophisticated
instrumentation systems to measure, record and control a multiplicity of process
variables.
The Company manufactures digital instrumentation for control of
fermentors and bioreactors. This instrumentation significantly enhances the
utility of any size fermentor or bioreactor. Consisting of an operator display
and a series of microprocessor-controlled instrument modules, this control unit
uses software developed by the Company to simplify the operation of fermentors
and bioreactors while enhancing their performance. It automatically monitors,
displays, analyzes, and makes immediately available, data concerning the culture
process and permits automatic modification of the various growth conditions
without the need of a host computer. This system is designed to replace manually
operated controls as well as more complex and more costly automatic systems.
Since maintenance of pure culture conditions is critical for the proper
functioning of fermentors and bioreactors, NBS offers devices and procedures
which it has developed for sterilizing its systems and maintaining an aseptic
environment over long operating periods. NBS designs, manufactures and sells
benchtop and pilot scale fermentors that are sterilizable in place. Although
significantly more expensive than other models, these devices eliminate the need
to move the fermentor from its place of use for sterilization.
Biological Shakers. Biological shakers perform a function similar to
fermentors and bioreactors, as they are also used in the process of growing and
propagating biological cultures. Shakers agitate flasks under controlled
conditions containing biological cultures in a liquid media in which nutrients
are dissolved. Nutrients are the source of energy needed for growth, while
shaking furnishes the dissolved oxygen needed to permit life processes to take
place within the microorganism. NBS Shakers are in worldwide use in biological
laboratories for research, development, and in some cases, for production of
various medical, biological and chemical products. In addition, shakers are
widely used in microbiological and recombinant DNA research.
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The Company manufactures an extensive line of biological shakers ranging
in size from portable laboratory benchtop models to large multitier industrial
machines. Some models of the Company's shakers are designed to agitate flasks
under controlled environmental conditions of temperature, atmosphere and light.
Each shaker incorporates a variable speed regulator and may be equipped to
accommodate flasks of various sizes. To permit culture growth under constant and
reproducible conditions, shakers manufactured by NBS are precision engineered
and manufactured to agitate flasks uniformly and continuously over prolonged
periods.
The Company currently manufactures three distinct lines of shakers. Its
INNOVA line, which is among the most sophisticated products of their kind in the
world; its original Gyrotory(R) shaker line which has been the industry standard
for many years, and, its new "Classic" Line, which was introduced in early 1997.
The new line is intended primarily for sale to distributors and is expected to
supercede the original Gyrotory(R) line in the foreseeable future.
Nutrient Sterilizing and Dispensing Equipment. The Company manufactures
devices that automatically sterilize biological nutrients and then maintain
those nutrients at the required temperature for subsequent use. This product
line includes benchtop models used in laboratories as well as larger industrial
models. As a complement to its nutrient sterilizers, NBS sells an apparatus
which automatically fills culture dishes with sterile nutrient.
Tissue Culture Apparatus. The Company manufactures apparatus to rotate
bottles and test tubes slowly and constantly for the purpose of growing animal
and plant cells. Certain models of this apparatus may be placed into an
incubator and equipped to regulate the speed of rotation. The Company also
markets carbon dioxide incubators used in the propagation of tissue cultures.
This apparatus has applications in vaccine production, cancer and heart disease
research, and the commercial production of pharmaceuticals.
Other Scientific Products. NBS distributes a line of centrifuges for
separating cells from fermentation broth, and a line of low temperature
freezers.
Product Development
NBS designs and develops substantially all the products it sells. Its
personnel, who include biochemical, electrical, chemical, mechanical, electronic
and software engineers as well as scientists and technical support staff,
formulate plans and concepts for new products and improvements or modifications
to existing products. The Company develops specialized software for use with its
computer-coupled systems and the microprocessor-controlled instrumentation
systems for shakers, fermentors and bioreactors.
Manufacturing
Manufacturing is conducted according to planning and production control
procedures primarily on a lot production basis rather than on an assembly line.
NBS fabricates its parts from purchased raw materials and components and
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produces most of its subassemblies. These parts, components and subassemblies
are carried in inventory in anticipation of projected sales and are then
assembled into finished products according to production schedules. In general,
manufacturing is commenced in anticipation of orders. The manufacturing
processes for the Company's products range from two weeks to many months,
depending upon the product size, complexity and quantity. However, a substantial
portion of orders received are for items in the process of being manufactured or
in inventory.
The raw materials used by the Company include stainless steel, copper,
brass, aluminum and various plastics. Some components are purchased from others,
including pumps, compressors, plumbing fittings, electrical and electronic
components, gauges, meters, motors, glassware and general purpose hardware. Many
of these components are built to the Company's specifications. NBS is not
dependent upon any single supplier for any raw material or component, but delay
in receipt of key components can affect the manufacturing schedule.
The Company's products are designed to operate continuously over long
periods with precision and regularity so that research and production may be
conducted under controlled, constant and reproducible conditions. The Company
manufactures its products from materials which it selects as having
characteristics necessary to meet its requirements. In addition, to ensure that
its manufacturing processes result in products meeting exacting specifications
and tolerances, NBS follows rigorous inspection procedures. NBS maintains a
Quality Assurance Department which is responsible for inspecting raw materials
and parts upon arrival at its plant as well as inspecting products during
manufacture. It also tests every piece of equipment prior to shipment. NBS'
products are serviced at its plant and at its customers' premises by Company
technicians, distributors' technicians or, in the case of minor repairs, by
sales personnel.
NBS also has a manufacturing capability in England which subcontracts
products for manufacture and assembly and monitors the quality of products
manufactured for or sold by NBS' European subsidiaries. Selected shaker products
are manufactured in England for the European market.
Marketing and Sales
The Company sells its equipment to pharmaceutical companies,
agricultural and chemical companies, other industrial customers engaged in
biotechnology, and to medical schools, universities, research institutes,
hospitals, private laboratories and laboratories of Federal, State and Municipal
government departments and agencies in the United States. While only a small
percentage of the Company's sales are made directly to United States government
departments and agencies, its domestic business is significantly affected by
government expenditures and grants for research to educational research
institutions and to industry. The Company regularly evaluates credit granted to
customers and generally requires progress payments for the purchase of custom
fermentation equipment.
NBS sells its equipment, both directly and through scientific equipment
dealers, to foreign companies, institutions, and governments. The major portion
of its foreign sales are made in Canada, Western Europe, Israel, China, Japan
and Australia. NBS also sells its products in the former Soviet Union, Eastern
Europe and Latin America. These sales may be substantially affected by changes
in the capital investment policies of foreign governments, so that sales may be
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reduced or deferred by occurrences such as the governmental changes during the
past few years in many Eastern European countries and in the former Soviet
Union.
Fisher Scientific is the exclusive U.S. distributor of the Company's
Gyrotory(R) line of biological shakers, its new classic line of biological
shakers and its automated equipment for the preparation of diagnostic agar
plates. While Fisher is the exclusive U.S. distributor for these NBS Shakers and
media preparation equipment, NBS markets and sells its shakers and other
products on a direct basis as well. Fisher also distributes a few selected
INNOVA models.
For information concerning net sales in the United States and foreign
countries, income (loss) from operations derived therefrom, identifiable assets
located in the United States and foreign countries, and export sales for each of
the three years ended December 31, 1996, see Note 9 of Notes to Consolidated
Financial Statements under the heading "Operations by geographic areas." Export
sales consist of all sales by the Company's Domestic Operations to customers
located outside the United States. Hence, foreign sales include export sales.
Substantially all of the orders of the Company's domestic operations,
including export orders are booked in United States dollars and are payable
promptly upon delivery of the equipment. The Company's wholly-owned European
subsidiaries book orders for equipment in local currencies and in some instances
in U.S. dollars. The assets and liabilities of the Company's European
subsidiaries are valued in local currencies. Fluctuations in exchange rates
between those currencies and the dollar have had an impact upon the Company's
consolidated financial statements, as measured in United States dollars.
Export sales are influenced by changes in the exchange rate of the
dollar as those changes affect the cost of the Company's equipment to foreign
purchasers. Certain countries, particularly those in Eastern Europe and the
former Soviet Union, may not be able to make substantial capital purchases in
dollars for economic or political reasons.
NBS maintains five European sales offices through wholly-owned
subsidiaries, New Brunswick Scientific (U.K.) Limited in England, NBS Benelux
B.V. in The Netherlands, New Brunswick Scientific GmbH in Germany, New Brunswick
Scientific N.V. in Belgium and NBS S.A.R.L. in France. Foreign sales of the
Company's standard products (i.e., those listed in its product catalogs) are
generally made directly by these subsidiaries.
At December 31, 1996, NBS had a backlog of unfilled orders of
approximately $7,353,000, compared with $5,452,000 at the end of 1995. The
December 31, 1996 backlog was comprised of orders for standard equipment as well
as orders for larger systems. NBS expects to fill all of its existing backlog
during the coming year.
One customer based in the United States accounted for approximately
10.0%, 12.1% and 11.7%, respectively, of consolidated net sales during the years
ended December 31, 1996, 1995 and 1994.
Research and Development
Research and development expenditures, all of which are sponsored by the
Company, amounted to $2,141,000 in 1996, $826,000 in 1995 and $617,000 in 1994.
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Twenty-four (24) of the Company's professional employees were engaged
full time in research and development activities.
Investment in Organica, Inc.
Since November 1994, the Company has invested $1,050,000 (less than a
twenty percent interest) in Organica, Inc. (Organica) which was formed in 1993
to develop and commercialize various "environmentally friendly" products
produced via fermentation processes. Organica isolates and cultures naturally
occurring microorganisms and fungi and blends them with various nutrient sources
and carriers to create its products, which are offered as alternatives to
various hazardous products. Organica has focused primarily on natural turf
products, compost accelerators, hydrocarbon remediation products, non-caustic
drain openers and septic system maintenance products.
In 1996, Organica completed a $3 million private placement and acquired
Agro-Tech 2000, a leading distributor of turf products for golf courses and
playing fields. Organica is currently in the process of raising up to a maximum
of $2,025,000 in another private placement.
Competition
The competitive factors affecting the Company's position as a
manufacturer of biotechnology equipment include availability, reliability, ease
of operation, the price of its products, its responsiveness to the technical
needs and service requirements of customers, and product innovation.
NBS encounters competition from approximately 11 domestic and 16 foreign
competitors in the sale of its products. The Company's principal competitor in
the sale of fermentation equipment and bioreactors both in the United States and
overseas is B. Braun Biotech, a German company. Additional competitors include
LSL-Biolafitte, a French company, part of Cellex Biosciences Inc., a U.S.
company; L.E. Marubishi Co., Ltd. located in Japan; Applikon, B.V., located in
The Netherlands; Abec, located in Pennsylvania and L.H. Engineering Ltd.,
located in England, a part of Inceltech, located in France. Although financial
information concerning these firms is not readily available, the Company
believes that many of its competitors have substantially greater financial
resources than the Company. NBS believes that B. Braun Biotech has significantly
greater sales of fermentation equipment than the Company, although Braun's
market share is not as significant in benchtop size models.
The Company believes that it has the largest worldwide market share for
biological shakers. LabLine Instruments, Inc. and Forma Scientific in the United
States as well as several manufacturers in Europe are strong competitors of the
Company in this market.
NBS encounters substantial competition in the sale of most of its other
equipment where its sales do not represent major market shares. Although the
Company does not encounter substantial competition in the sale of its nutrient
sterilizing and dispensing equipment in the domestic market, substantial
competition exists in foreign markets.
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Employees
NBS employs approximately 374 people, including 200 people engaged in
manufacturing and supervision, 48 in research, development and engineering, 85
in sales and marketing, and 41 in administrative and clerical duties.
Manufacturing employees currently work a single shift. The Company's New Jersey
manufacturing employees are represented by District 15 of the International
Association of Machinists, AFL-CIO under a recently signed contract which
expires in December 1999. The Company considers its labor relations to be good.
Working Capital
NBS maintains a substantial inventory of parts, components and
subassemblies to fill orders for its products. Management believes it has
adequate working capital for its present level of operations.
The Company has a $5 million secured line of credit with Summit Bank,
successor to United Jersey Bank/Central NA, primarily for working capital and
letters of credit, and a $1 million revolving credit line for equipment
acquisition purposes, effective through May 31, 1998.
Patents and Trademarks
NBS holds and has filed applications for United States and foreign
patents relating to many of its products, their integral components and
significant accessories. NBS also has certain registered trademarks. However,
NBS believes that its business is not dependent upon patent, trademark, or other
proprietary protection in any material respect.
Cautionary Statement
Statements included herein which are not historical facts are forward
looking statements. Such forward looking statements are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
The forward looking statements involve a number of risks and uncertainties,
including but not limited to, changes in economic conditions, demand for the
Company's products, pricing pressures, intense competition in the industries in
which the Company operates, the need for the Company to keep pace with
technological developments and timely respond to changes in customer needs, the
Company's dependence on third party suppliers, the effect on foreign sales of
currency fluctuations, acceptance of new products, consistency in the level of
orders for custom bioprocess systems, the ability of DGI to enter into corporate
partnering and/or licensing agreements, the labor relations of the Company and
its customers and other factors identified in the Company's Securities and
Exchange Commission filings.
Item 2. PROPERTY
The Company's executive, administrative, engineering and domestic sales
offices and its manufacturing operations, warehouse and other facilities are
located in a Company owned 243,000 square foot one-story steel and concrete
block building situated on a 17-acre site in Edison, New Jersey. Approximately
50,000 square feet is office space, approximately 14,000 square feet is
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laboratory space, and the balance is devoted to manufacturing and warehouse
facilities. The Company's NBS Benelux B.V. subsidiary owns its 13,000 square
foot building in Nijmegen, The Netherlands.
The Company's wholly-owned European subsidiaries lease facilities as
follows: New Brunswick Scientific (UK) Limited - 17,000 square feet, NBS GmbH -
1,400 square feet and New Brunswick Scientific N.V./S.A. - 825 square feet.
Item 3. LEGAL PROCEEDINGS
No material legal proceedings are currently pending.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
Item 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
(A) The Company's Common stock is traded in the National
over-the-counter market (Nasdaq symbol NBSC). The following table sets forth the
high and low prices for the Company's Common stock as reported by Nasdaq for the
periods indicated. The prices represent quotations between dealers reflecting
prevailing market factors which may include anticipated markups or markdowns and
do not necessarily represent actual transactions.
HIGH LOW
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1995
First Quarter $ 6-15/16 $ 5-3/4
Second Quarter 8 5-3/4
Third Quarter 7-1/8 6-1/8
Fourth Quarter 8 5-3/8
1996
First Quarter $ 7-3/4 $ 5-1/4
Second Quarter 8-3/4 6-1/8
Third Quarter 7-3/4 6
Fourth Quarter 7-3/4 6-1/4
1997
First Quarter
(through February 10, 1997) $ 7-1/2 $ 6-5/8
(B) The number of holders including beneficial owners of NBS' Common
stock as of February 10, 1997, is 1,242.
(C) NBS has declared a 10% common stock dividend payable on May 15, 1997
to shareholders of record on April 15, 1997. NBS paid a 5% common stock dividend
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on May 15, 1996 to shareholders of record on April 15, 1996 and a $.05 per share
cash dividend on April 14, 1995 to shareholders of record on March 15, 1995.
Item 6. SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial
information regarding the Company's financial position and operating results.
This information should be read in conjunction with Management's Discussion and
Analysis of Financial Condition and Results of Operations and the Consolidated
Financial Statements and Notes thereto which appear elsewhere herein.
<TABLE>
<CAPTION>
Years Ended December 31,
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1996 1995 1994 1993 1992
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(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Net sales $42,927 $39,085 $38,789 $35,950 $33,072
Net income 882 1,172 1,068 392 80
Earnings per
Common share (a) $ .23 $ .31 $ .28 $ .10 $ .02
Total assets (b) 37,226 35,685 34,504 32,628 31,869
Long-term debt, net of
current installments (b) 401 564 665 792 569
Dividends per share - $ .05 - - -
</TABLE>
(a) Adjusted to reflect 5% stock dividend distributed on May 15, 1996.
(b) At year-end
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
1996 vs. 1995
For the year ended December 31, 1996, the Company had net income of
$882,000 or $.23 per share on net sales of $42,927,000 compared with net income
of $1,172,000 or $.31 per share on net sales of $39,085,000 for the year ended
December 31, 1995.
In 1996 sales increased 9.8% due equally to higher sales in the U.S.
domestic market and in Western Europe. The increase of 9.9% in cost of sales is
directly attributable to the increase in net sales. Research, development and
engineering expenses increased 64% in 1996 due primarily to the full year effect
of the start-up in October 1995 of DGI BioTechnologies, L.L.C. (DGI), the
Company's drug discovery operation. Interest expense increased to $75,000 in
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1996 from $55,000 in 1995 due primarily to the accrual of interest on deferred
compensation. Other income (expense), net in 1996 of $26,000 consisted primarily
of bank charges and credit facility renewal fees.
Provision for income taxes as a percentage of income before taxes
decreased to 9.8% from 16.3% in 1995 since all of the Company's income emanated
from its foreign subsidiaries, a significant portion of which is not subject to
income taxes due to carryforward tax losses on which income tax benefits were
not previously recognized. U.S. operations were in a net taxable loss situation
due to the significant increase in research and development costs in 1996 to
support the operations of DGI.
During 1996, the U.S. dollar strengthened against two and weakened
against one of the currencies of the European countries where the Company has
subsidiary operations. The effect of these currency movements decreased income
from foreign operations by approximately $25,000 to $1,311,000. The effects of
balance sheet translation resulted in a currency translation adjustment of
$48,000 which is reflected in the equity section of the Consolidated Balance
Sheet.
1995 vs. 1994
For the year ended December 31, 1995, the Company had net income of
$1,172,000 or $.31 per share on net sales of $39,085,000 compared with net
income of $1,068,000 or $.28 per share on net sales of $38,789,000 for the year
ended December 31, 1994.
The increase of 26.7% in research, development and engineering expenses
was due to the establishment in late 1994 of a bioprocess equipment division and
the start-up in October 1995 by the Company of DGI. Interest income increased to
$222,000 in 1995 from $145,000 in 1994 due primarily to higher interest rates.
Interest expense declined to $55,000 in 1995 from $67,000 in 1994 due to the
continuing amortization of the principal on the Company's long-term debt.
Provision for income taxes as a percentage of income before taxes
decreased to 16.3% in 1995 from 30% in 1994 due to a larger proportion of the
1995 income emanating from the Company's foreign subsidiaries, a significant
portion of which is not subject to income taxes due to carryforward tax losses
on which income tax benefits were not previously recognized.
During 1995, there was a significant weakening of the U.S. dollar vs.
the currencies of two of the European countries where the Company has subsidiary
operations. The effect of these currency movements increased the income from
foreign operations by approximately $84,000 to $1,246,000. The effects of
balance sheet translation resulted in a currency translation adjustment of
$147,000 which is reflected in the equity section of the Consolidated Balance
Sheet.
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Financial Condition
Liquidity and Capital Resources
During the year ended December 31, 1996 cash and cash equivalents
decreased to $5,196,000 from $6,382,000 at December 31, 1995. The decrease in
cash resulted primarily from an increase in accounts receivable to $10,108,000
at December 31, 1996 from $9,135,000 at December 31, 1995. Accounts receivable
increased due to the significantly higher level of net sales in the fourth
quarter of 1996 vs. the fourth quarter of 1995. Fourth quarter 1996 net sales
amounted to $13,853,000 vs. $11,861,000 during the fourth quarter of 1995.
The increase in prepaid expenses and other current assets relates
primarily to the timing of European Value Added Tax payments. Other assets
increased primarily as a result of an increase in an investment in another
entity.
Other liabilities at December 31, 1996 and 1995 of $425,000 and
$471,000, respectively, consist of a pension liability and is a non-cash item
which is offset by a direct reduction in shareholders' equity of a like amount.
Accounts payable and accrued expenses increased as a result of higher
advance payments from customers, which amounted to $846,000 at December 31, 1996
vs. $265,000 at December 31, 1995.
Drug Lead Discovery Business
In October 1995, the Company entered the drug-lead discovery business by
forming a new company to develop a novel, small molecule drug discovery
platform. The company, DGI BioTechnologies, L.L.C. (DGI), is majority-owned and
fully funded by the Company and occupies specially designed laboratory space at
the Company's headquarters facility in Edison, New Jersey. DGI's operations have
had a significant negative impact on the Company's 1996 earnings and will
continue to do so during the balance of its development phase, which is
estimated at between one and two additional years. During 1996 and 1995,
$1,535,000 and $205,000, respectively, was charged to operations. It is
currently anticipated that expenditures for 1997 will be approximately
$1,800,000. This amount could be affected by revenues from licensing agreements
and other corporate collaborations.
Recently Issued Accounting Standards
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of ("SFAS No. 121"). SFAS No. 121 requires that long-lived
assets, certain identifiable intangibles and goodwill to be held and used by an
entity be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. SFAS No.
121 is effective for the Company's fiscal year 1996. Adoption of this accounting
standard has not had a material impact on the company's operating results or
financial condition.
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Cash Flows from Operating Activities
During the year ended December 31, 1996, net cash provided by operating
activities amounted to $551,000 vs. net cash provided by operating activities of
$444,000 for the year ended December 31, 1995. Some of the reasons for the
$107,000 net increase from 1995 to 1996 were: (a) accounts receivable increased
$1,005,000 in 1996 vs. an increase of $1,522,000 in 1995; (b) refundable income
taxes increased $118,000 in 1996 vs. an increase of $216,000 in 1995 and were
offset by (a) an increase in inventories of $310,000 in 1996 vs. an increase of
$51,000 in 1995 and (b) an increase in prepaid expenses and other current assets
of $520,000 in 1996 vs. an increase of $160,000 in 1995.
Cash Flows from Investing Activities
Net cash used by investing activities which amounted to $1,733,000 in
1996 resulted primarily from $1,355,000 of additions to property, plant and
equipment and $400,000 from an investment made in another entity. In 1995, net
cash used was primarily from additions to property, plant and equipment of
$950,000 and from an investment made in another entity of $100,000.
Cash Flows from Financing Activities
Net cash used by financing activities amounted to $26,000 in 1996 vs.
cash used of $239,000 in 1995. The major reasons for the difference resulted
from a Common stock dividend paid by the Company in the amount of $179,000 in
1995 and proceeds from the issuance of shares under stock purchase and option
plans of $128,000 in 1996 vs. $71,000 in 1995.
Management believes that the resources available to the Company,
including its line of credit which has been extended to May 31, 1998, are
sufficient to meet its near and intermediate-term needs, including present
funding commitments for DGI, and its strong unleveraged balance sheet provides
the basis for any long-term financing if the need should arise.
-13-
<PAGE>
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Independent Auditors' Report
The Board of Directors and Shareholders
New Brunswick Scientific Co., Inc.:
We have audited the consolidated balance sheets of New Brunswick Scientific Co.,
Inc. and subsidiaries as of December 31, 1996 and 1995 and the related
consolidated statements of operations, shareholders' equity, and cash flows for
each of the years in the three-year period ended December 31, 1996. In
connection with our audits of the consolidated financial statements, we also
have audited the related financial statement schedule as listed in Part IV, Item
14(a)2. The consolidated financial statements and financial statement schedule
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements and financial
statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of New Brunswick
Scientific Co., Inc. and subsidiaries as of December 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1996 in conformity with generally accepted
accounting principles. Also in our opinion, the related financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly, in all material respects, the
information set forth therein.
KPMG Peat Marwick LLP
Short Hills, New Jersey
February 10, 1997
-14-
<PAGE>
NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
(In thousands, except for share data)
<TABLE>
<CAPTION>
1996 1995
---- -----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,196 $ 6,382
Accounts receivable, net of allowance for
doubtful accounts, 1996 - $224 and 1995 - $306 10,108 9,135
Refundable income taxes 334 216
Deferred income tax benefit (Note 6) 97 188
Inventories (Note 2) 12,980 12,692
Prepaid expenses and other current assets (Note 7) 1,880 1,364
-------- --------
Total current assets 30,595 29,977
-------- --------
Property, plant and equipment, net (Notes 3 and 4) 5,701 5,237
Other assets 930 471
-------- --------
$ 37,226 $ 35,685
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt (Note 4) $ 135 $ 130
Accounts payable and accrued expenses (Note 5) 7,014 6,339
-------- --------
Total current liabilities 7,149 6,469
-------- --------
Long-term debt, net of current installments (Note 4) 401 564
Other liabilities (Note 7) 425 471
-------- --------
Commitments and contingencies (Notes 10 and 11)
Shareholders' equity (Note 8):
Common stock, $0.0625 par; authorized 25,000,000 shares;
issued and outstanding, 1996 - 3,808,932 shares;
1995 - 3,595,651 shares; net of shares held in treasury,
1996 - 355,425 and 1995 - 338,500 238 225
Capital in excess of par 20,738 19,283
Retained earnings 9,092 9,488
Currency translation adjustment (392) (344)
Pension liability adjustment (Note 7) (425) (471)
-------- --------
29,251 28,181
-------- --------
$ 37,226 $ 35,685
======== ========
</TABLE>
See notes to consolidated financial statements.
-15-
<PAGE>
NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Net sales $ 42,927 $ 39,085 $ 38,789
Operating costs and expenses:
Cost of sales 26,280 23,919 23,973
Selling, general and administrative
expenses 12,179 11,717 11,623
Research, development and engineering
expenses 3,633 2,215 1,748
-------- -------- --------
42,092 37,851 37,344
-------- -------- --------
Income from operations 835 1,234 1,445
-------- -------- --------
Other income (expense):
Interest income 244 222 145
Interest expense (75) (55) (67)
Other income (expense), net (26) (1) 3
-------- -------- --------
143 166 81
-------- -------- --------
Income before income taxes 978 1,400 1,526
Income taxes (Note 6) 96 228 458
-------- -------- --------
Net income $ 882 $ 1,172 $ 1,068
======== ======== ========
Earnings per Common share $ .23 $ .31 $ .28
======== ======== ========
Weighted average number of shares
outstanding 3,781 3,766 3,753
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
-16-
<PAGE>
NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(Dollars in thousands)
<TABLE>
<CAPTION>
Common Stock Capital Currency Pension
--------------------- in Excess Retained Translation Liability
Shares Amount of Par Earnings Adjustment Adjustment Total
------ ------ ------ -------- ---------- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1994 3,568,888 $ 223 $ 19,158 $ 7,427 $ (555) $ -- $ 26,253
Issue of shares under employee
stock purchase plan 11,945 1 53 54
Issue of shares under stock option
plan for nonemployee directors 450 2 2
Net income 1,068 1,068
Currency translation adjustment 358 358
---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance, December 31, 1994 3,581,283 $ 224 $ 19,213 $ 8,495 $ (197) $ -- $ 27,735
Issue of shares under employee
stock purchase plan 14,368 1 70 71
Equity adjustment for additional
minimum pension liability (471) (471)
Dividends ($.05 per share) (179) (179)
Net income 1,172 1,172
Currency translation adjustment (147) (147)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance, December 31, 1995 3,595,651 $ 225 $ 19,283 $ 9,488 $ (344) $ (471) $ 28,181
Issue of shares under employee
stock purchase plan 13,492 1 75 76
Issue of shares under stock
option plans 20,065 1 113 114
Equity adjustment for additional
minimum pension liability 46 46
5% stock dividend 179,724 11 1,267 (1,278) --
Net income 882 882
Currency translation adjustment (48) (48)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance, December 31, 1996 3,808,932 $ 238 $ 20,738 $ 9,092 $ (392) $ (425) $ 29,251
========== ========== ========== ========== ========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
-17-
<PAGE>
NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(In thousands)
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 882 $ 1,172 $ 1,068
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation 858 585 628
Deferred income taxes 91 114 248
Change in related balance sheet accounts:
Accounts receivable (1,005) (1,522) (693)
Refundable income taxes (118) (216) --
Inventories (310) (51) 2,212
Prepaid expenses and other current assets (520) (160) (207)
Accounts payable and accrued expenses 673 522 29
------- ------- -------
Net cash provided by operating activities 551 444 3,285
------- ------- -------
Cash flows from investing activities:
Additions to property, plant and equipment (1,355) (950) (580)
Sale of equipment 22 16 4
Investment (400) (100) (300)
------- ------- -------
Net cash used by investing activities (1,733) (1,034) (876)
------- ------- -------
Cash flows from financing activities:
Cash dividends (179) --
Repayments of long-term debt (154) (131) (206)
Proceeds from issuance of shares under
stock purchase and option plans 128 71 56
------- ------- -------
Net cash used by financing activities (26) (239) (150)
------- ------- -------
Net effect of exchange rate changes on cash 22 69 110
------- ------- -------
Net increase (decrease) in cash and cash equivalents (1,186) (760) 2,369
Cash and cash equivalents at beginning of year 6,382 7,142 4,773
------- ------- -------
Cash and cash equivalents at end of year $ 5,196 $ 6,382 $ 7,142
======= ======= =======
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 63 $ 58 $ 71
Income taxes 128 152 319
Supplemental disclosure of non cash financing activities:
Shares issued for note receivable $ 62 $ -- $ --
</TABLE>
See notes to consolidated financial statements.
-18-
<PAGE>
NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1. Summary of significant accounting policies:
Principles of consolidation:
The consolidated financial statements include the accounts of New
Brunswick Scientific Co., Inc., its wholly-owned subsidiaries and
majority owned limited liability company (the Company). Investments in
which the Company's ownership is less than 20% are accounted for using
the cost method. All significant intercompany transactions and balances
have been eliminated.
Translation of foreign currencies:
Translation adjustments for the Company's foreign operations are
accumulated as a separate component of shareholders' equity.
Transaction gains and losses, which are not significant in amount, are
included in the consolidated statements of operations as part of "Other
income (expense), net."
Cash and Cash Equivalents:
The Company considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents in the
statement of cash flows.
Inventories:
Inventories are stated at the lower of cost (first-in, first-out or
average) or market. Cost elements include material, labor and
manufacturing overhead.
Property, plant and equipment:
Property, plant and equipment are stated at cost. Gains and losses
resulting from sales or disposals, which are not significant in amount,
are included in "Other income (expense), net". The cost of repairs,
maintenance and replacements which do not significantly improve or
extend the life of the respective assets is charged to expense as
incurred.
Depreciation is provided by the straight-line method over the estimated
useful lives of the related assets, generally 33-1/3 years for
buildings and 10 years for machinery and equipment. Depreciation
expense amounted to $858,000 in 1996, $585,000 in 1995, and $628,000 in
1994.
-19-
<PAGE>
NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
Research and development:
Research and development costs are expensed as incurred.
Income taxes:
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the enactment date.
Earnings per Common share:
Earnings per Common share is based on the weighted average number of
shares outstanding. Stock options are not included in the calculation
as they had no significant dilutive effect on earnings per share. A 5%
stock dividend was declared on March 29, 1996 and distributed on May
15, 1996. The weighted average number of shares outstanding for prior
periods have been restated to reflect this dividend.
Stock option plans:
Prior to January 1, 1996, the Company accounted for its stock option
plans in accordance with the provisions of Accounting Principles Board
("APB") Opinion No. 25, Accounting for Stock Issued to Employees, and
related interpretations. As such, compensation expense would be
recorded on the date of grant only if the current market price of the
underlying stock exceeded the exercise price. On January 1, 1996, the
Company adopted SFAS No. 123, Accounting for Stock-Based Compensation,
which permits entities to recognize as expense over the vesting period
the fair value of all stock-based awards on the date of grant.
Alternatively, SFAS No. 123 also allows entities to continue to apply
the provisions of APB Opinion No. 25 and provide pro forma net income
and pro forma earnings per share disclosures for employee stock option
grants made in 1995 and future years as if the fair-value-based method
defined in SFAS No. 123 had been applied. The Company has elected to
continue to apply the provisions of APB Opinion No. 25 and provide the
pro forma disclosure provisions of SFAS No. 123.
-20-
<PAGE>
NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
Treasury stock:
Repurchase of the Company's outstanding Common stock is accounted for
by treating the stock as if retired.
Financial instruments:
The carrying values of the Company's financial instruments at December
31, 1996 approximate their estimated fair values. The carrying amounts
of cash and cash equivalents, accounts receivable and accounts payable
and accrued expenses approximate fair value due to the short-term
maturity of such instruments. The carrying value of long-term debt
approximates fair value based on the current rates offered on debt with
similar maturities and characteristics. Derivative financial
instruments (forward exchange contracts) are recorded at market value,
with resultant gains or losses recognized in the statement of
operations immediately, unless the instrument is an effective hedge of
a firm, committed transaction, in which case the associated gain or
loss is deferred and recognized in connection with the underlying
transaction exposure.
Use of estimates:
Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities to prepare the
financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
2. Inventories:
<TABLE>
<CAPTION>
1996 1995
------ -----
<S> <C> <C>
(In thousands)
Raw materials and sub-assemblies $ 6,762 $ 6,786
Work-in-process 2,327 2,062
Finished goods 3,891 3,844
------- -------
$12,980 $12,692
====== ======
</TABLE>
-21-
<PAGE>
3. Property, plant and equipment, net:
<TABLE>
<CAPTION>
1996 1995
------ -----
<S> <C> <C>
(In thousands)
Land $ 800 $ 800
Buildings and improvements 4,009 4,057
Machinery and equipment 10,214 8,984
------ ------
15,023 13,841
Less accumulated depreciation 9,322 8,604
-------- ------
$ 5,701 $ 5,237
======= ======
</TABLE>
4. Long-term debt and credit agreement:
There is a mortgage on the facility of the Company's Netherlands
subsidiary which bears interest of 7.5% per annum. During the twenty-year
term of the mortgage, the Company is obligated to make monthly payments
of interest and 80 equal quarterly payments of principal. At December 31,
1996 and 1995, $345,000 and $404,000, respectively, was outstanding.
In 1993, the Company entered into a capitalized lease obligation, due
September 1998, with imputed interest of 6.85%, relating to the purchase
of equipment. At December 31, 1996 and 1995, $191,000 and $290,000,
respectively, was outstanding.
Property, plant and equipment with a net book value of $637,000 and
$704,000, is pledged as security for long-term debt as indicated above at
December 31, 1996 and 1995, respectively. Machinery and equipment (see
Note 3) includes equipment under capital lease of $490,000, which has a
net book value of $323,000 and $372,000 at December 31, 1996 and 1995,
respectively.
Aggregate annual maturities of long-term debt, including capitalized
lease obligations, are as follows:
<TABLE>
<CAPTION>
Year ending December 31 Amount
------------------------ --------
<S> <C> <C>
(In thousands)
1997 $135
1998 114
1999 29
2000 29
2001 29
After 2001 200
---
$536
===
</TABLE>
-22-
<PAGE>
NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
The Company has a $5 Million Secured Revolving Credit Agreement (the
Agreement) with Summit Bank, the successor to United Jersey Bank/Central
NA (the Bank) effective through May 31, 1998. The agreement provides the
Company with a facility for both working capital and for letters of
credit. In addition, the Bank has provided a $1 million Revolving Line of
Credit for equipment acquisition purposes. There are no compensating
balance requirements and any borrowings under the Agreement bear interest
at the Bank's prime rate. All of the Company's domestic assets, with the
exception of its headquarters facility, which are not otherwise subject
to lien have been pledged as security for any borrowings under this
Agreement. As of and during the years ended December 31, 1996 and 1995,
there were no outstanding balances.
5. Accounts payable and accrued expenses:
<TABLE>
<CAPTION>
1996 1995
------ -----
<S> <C> <C>
(In thousands)
Accounts payable-trade $ 2,781 $ 2,620
Accrued salaries, wages and payroll taxes 1,683 1,479
Accrued foreign dealer commissions 692 715
Advance payments from customers 846 265
Other accrued liabilities 1,012 1,260
------- -------
$ 7,014 $ 6,339
======= =======
</TABLE>
6. Income taxes:
<TABLE>
<CAPTION>
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
(In thousands)
Income (loss) before income taxes:
Domestic $ (327) $ 155 $ 909
Foreign 1,305 1,245 617
----- ----- -------
$ 978 $1,400 $ 1,526
====== ===== ======
Income taxes (benefit):
Federal:
Current $ (106) $ (20) $ 210
Deferred 91 114 248
State-current 15 - -
Foreign-current 96 134 -
------- ------- --------
$ 96 $ 228 $ 458
======= ====== ======
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 31, 1996
and 1995 are as follows:
-23-
<PAGE>
NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
(In thousands)
Deferred tax asset/(liability):
Accumulated depreciation $ (199) $ (176)
Inventory 258 233
Allowance for doubtful accounts 29 67
Accrued expenses 148 163
Other liabilities (177) (98)
Alternative minimum tax credit carryforward 138 -
Domestic net operating loss carryforward 27 -
Domestic capital loss and
contribution carryforwards 67 63
Foreign net operating loss carryforwards 424 678
----- ------
715 930
Less: Valuation allowance 618 742
----- ------
Net deferred tax asset $ 97 $ 188
====== ======
</TABLE>
The valuation allowance for deferred tax assets as of January 1, 1996 and
1995 was $618,000 and $742,000, respectively. The net change in the total
valuation allowance for the years ended December 31, 1996 and 1995 was a
decrease of $124,000 and $348,000, respectively. In assessing the
realizability of deferred tax assets, management considers whether it is
more likely than not that some portion or all of the deferred tax assets
will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods
in which those temporary differences become deductible. Management
considers the scheduled reversal of deferred tax liabilities, projected
future taxable income, and tax planning strategies in making this
assessment. Based upon the level of historical taxable income and
projections for future taxable income over the periods which the deferred
tax assets are deductible, management believes it is more likely than not
the Company will realize the benefits of these deductible differences,
net of the existing valuation allowances at December 31, 1996. The amount
of the deferred tax asset considered realizable, however, could be
reduced in the near term if estimates of future taxable income during the
carryforward period are reduced.
The foreign net operating loss carryforwards relate to operations in the
United Kingdom and Germany and are not subject to expiration date
limitations.
The Company's effective income tax rates for 1996, 1995 and 1994 were
9.8%, 16.3%, and 30.0%, respectively. These rates differ from the
statutory Federal income tax rates as follows:
-24-
<PAGE>
NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
Percentage of income before taxes
-------------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Computed "expected" tax expense 34.0% 34.0% 34.0%
Increase (decrease) in taxes resulting from:
Rate differential between U.S. and foreign
income taxes (10.0) - -
Change in valuation allowance related to
net temporary differences (12.7) (24.9) (10.4)
Other (1.5) 7.2 6.4
------ ------ -----
9.8% 16.3% 30.0%
====== ===== ====
</TABLE>
7. Pension plans:
The Company has a noncontributory defined benefit pension plan covering
qualified U.S. salaried employees, including officers. Additionally, the
Company made contributions to a union sponsored multi-employer defined
benefit plan, in the amount of $107,000, $104,000 and $99,000 in 1996,
1995 and 1994, respectively.
Pension expense attributable to the defined benefit plan covering U.S.
employees includes the following components:
<TABLE>
<CAPTION>
1996 1995 1994
----- ----- -----
(In thousands)
<S> <C> <C> <C>
Service cost $ 202 $ 169 $ 184
Interest cost on projected obligation 312 298 271
Actual return on plan assets (311) (468) 109
Net amortization and deferral 104 281 (299)
----- ------ -----
Net pension expense $ 307 $ 280 $ 265
===== ===== ======
</TABLE>
The following table sets forth the plan's funded status and amounts
recognized in the Company's consolidated balance sheet:
-25-
<PAGE>
NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995
----- -----
(In thousands)
<S> <C> <C>
Actuarial present value of:
Vested benefit obligation $ 4,068 $ 3,793
===== =====
Accumulated benefit obligation $ 4,096 $ 3,862
===== =====
Projected benefit obligation $ 4,693 $ 4,425
Plan assets at fair value 4,017 3,625
----- ------
Excess of projected benefit obligation
over plan assets 676 800
Unrecognized net loss (1,021) (1,034)
Unrecognized transition obligation (187) (206)
Unrecognized prior service cost 39 39
Adjustment for additional liability 573 638
------- -------
Accrued pension cost $ 80 $ 237
======== =======
</TABLE>
The projected benefit obligation was determined using the following
assumptions:
<TABLE>
<CAPTION>
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Discount rate 7.25% 7.25% 8.5%
Rate of return 7.5% 7.5% 7.5%
Future compensation increases 4.0% 4.0% 4.0%
</TABLE>
The 1996 and 1995 minimum additional pension liability is a non-cash item
which is offset by a direct reduction in shareholders' equity of $425,000
and $471,000, respectively.
In addition, the Company has a defined contribution plan for its U.S.
employees, with a specified matching Company contribution. The expense to
the Company in 1996, 1995 and 1994 was $123,000, $113,000 and $110,000,
respectively.
International pension expense in 1996, 1995 and 1994 was not material.
Foreign plans generally are insured or otherwise fully funded.
8. Stock options, rights and stock purchase plan:
The 1995 and 1994 data for the stock options and rights plans described
below have been restated to reflect a 5% stock dividend which was
distributed on May 15, 1996.
-26-
<PAGE>
NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
The 1991 Non-Qualified Stock Option Plan (the 1991 Plan) for officers and
key employees of the Company provides for the granting of options to
purchase up to 420,000 shares of the Company's Common stock. Options are
exercisable in five equal installments commencing one year after date of
grant. Options expire up to 10 years from the date of grant. The exercise
price per share of each option may not be less than the fair market value
on the date of grant.
Shares under option at December 31 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------------------ ----------------------- --------------------
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------- ----- ------ ----- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Outstanding,
beginning of
year 259,087 $5.32 179,287 $5.30 180,862 $5.31
Granted - - 80,850 5.36 - -
Exercised (19,278) 5.78 - - - -
Cancelled (3,412) 5.95 (1,050) 5.95 (1,575) 5.95
Expired (50,547) 5.95 - - - -
------- --------- ---------
Outstanding,
end of year 185,850 5.09 259,087 5.32 179,287 5.30
======= ======= =======
</TABLE>
During 1995, options were granted at $6.67 and at $5.12 per share. No
options were granted in 1996 and 1994. At December 31, 1996, 63,000,
13,650, and 2,520 options were exercisable at prices of $4.88, $5.12 and
$6.67 per share, respectively, and 214,872 options were available for
future grant. The weighted-average remaining contractual life for the
options outstanding at December 31, 1996 was 2.9 years.
In 1987, the Company adopted an Employee Stock Purchase Plan. Under the
Stock Purchase Plan, employees may purchase shares of the Company's
Common stock at 85% of fair market value on specified dates. The Company
has reserved 210,000 shares of its authorized but unissued shares of
Common stock for this purpose. During 1996, 1995 and 1994, 13,492, 14,368
and 11,945 Common shares, respectively, were issued under the plan.
In 1989, the Company adopted a stock option plan for nonemployee
directors. The plan provides for the granting of options to purchase up
to 105,000 shares of the Company's Common stock. No options may be
granted under the Plan after April 30, 1999. Options may be exercised
over five years in cumulative installments of 20% per year and expire up
to ten years after grant. The exercise price per share of each option may
not be less than eighty-five percent (85%) of the fair market value on
the date of grant.
-27-
<PAGE>
Shares under option at December 31, are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------------------ ----------------------- -----------------------
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Outstanding,
beginning of
year 77,433 $6.08 35,433 $6.16 38,058 $6.14
Granted - - 42,000 6.01 - -
Exercised (787) 4.76 - - (472) 4.76
Cancelled (3,937) 5.43 - - (2,153) 6.19
------ ------ ------
Outstanding,
end of year 72,709 6.13 77,433 6.08 35,433 6.16
====== ====== ======
</TABLE>
During 1995, options were granted at $6.01 per share. No options were
granted in 1996 and 1994. At December 31, 1996, 3,148, 29,661 and 7,980
options were exercisable at prices of $4.76, $6.43 and $6.01 per share,
respectively, and 31,028 options were available for future grant. The
weighted-average remaining contractual life for the options outstanding
at December 31, 1996 was 6.4 years.
At December 31, 1996, there were 245,900 additional shares available for
grant under the Plans. The per share weighted-average fair value of stock
options granted during 1995 was $2.93 on the date of grant using the
Black Scholes option-pricing model with the following weighted-average
assumptions: 1995 - no expected dividend yield, risk-free interest rate
of 6.12%, volatility factor of 49%, and an expected life of 5.57 years.
The Company applies APB Opinion No. 25 in accounting for its Plans and,
accordingly, no compensation cost has been recognized for its stock
options in the financial statements. Had the Company determined
compensation cost based on the fair value at the grant date for its stock
options under SFAS No. 123, the Company's 1996 and 1995 net income and
earnings per Common share would have been reduced to the proforma amounts
as follows:
-28-
<PAGE>
NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995
----- -----
<S> <C> <C>
Net income (in thousands):
As reported $882 $1,172
Proforma 812 1,150
Earnings per Common share:
As reported $.23 $ .31
Proforma .21 .30
</TABLE>
Pro forma net income reflects only options granted in 1995, no options
were granted in 1996. Therefore, the full impact of calculating
compensation cost for stock options under SFAS No. 123 is not reflected
in the pro forma net income amounts presented above because compensation
cost is reflected over the options' vesting periods of 5 and 10 years and
compensation cost for options granted prior to January 1, 1995 is not
considered.
On October 27, 1989, the Company declared a dividend of one common share
purchase right (the "Rights") on each share of Common stock outstanding.
The rights entitle the holder to purchase one share of Common stock at
$28.57 per share. Upon the occurrence of certain events related to
non-negotiated attempts to acquire control of the Company, the Rights:
(i) will entitle holders to purchase at the exercise price that number of
shares of Common stock having an aggregate fair market value of two times
the exercise price; (ii) will become exchangeable at the Company's
election for that number of shares of Common stock having a fair market
value of two times the exercise price; and (iii) will become tradable
separately from the Common stock. Further, if the Company is a party to a
merger or business combination transaction, the Rights will entitle the
holders to purchase at the exercise price, shares of Common stock of the
surviving company having a fair market value of two times the exercise
price.
In 1989, the Company adopted an Employee Stock Ownership Plan and
Declaration of Trust ("ESOP"). The ESOP provides for the annual
contribution by the Company of cash, Company stock or other property to a
trust for the benefit of eligible employees. The amount of the Company's
annual contribution to the ESOP is within the discretion of the Board of
Directors but must be of sufficient amount to repay indebtedness incurred
by the ESOP trust, if any, for the purpose of acquiring the Company's
stock. The Company made contributions to the ESOP of $7,500 during 1996
and 1994, respectively, no contributions were made in 1995.
9. Operations by geographic areas:
The Company sells its equipment to pharmaceutical companies, agricultural
and chemical companies, other industrial customers engaged in
biotechnology, and to medical schools, universities, research institutes,
hospitals, private laboratories and laboratories of Federal, State and
Municipal government departments and agencies in the United States and
abroad.
-29-
<PAGE>
NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
While only a small percentage of the Company's sales are made directly to
United States government departments and agencies, its domestic business
is significantly affected by government expenditures and grants for
research to educational research institutions and to industry. The
Company regularly evaluates credit granted to customers and generally
requires progress payments for the purchase of custom fermentation
equipment which is typically sold under contract. The number of these
larger systems sold in any reporting period may materially affect the
sales and profitability of the Company.
The following table sets forth the Company's operations by geographic
area for 1996, 1995 and 1994. The information shown under the caption
"Europe" represents the operations of the Company's wholly-owned foreign
subsidiaries (in thousands):
<TABLE>
<CAPTION>
Transfers and
eliminations
United between geo- Conso-
States Europe graphic areas lidated
--------- --------- ------------------ -----------
<S> <C> <C> <C> <C>
Net sales:
1996 $32,939 $14,172 $4,184 $42,927
1995 30,456 12,117 3,488 39,085
1994 31,394 10,310 2,915 38,789
Income from operations:
1996 $ (476) $ 1,311 $ 835
1995 (12) 1,246 1,234
1994 809 636 1,445
Identifiable assets:
1996 $28,341 $ 8,885 $37,226
1995 28,156 7,529 35,685
1994 28,234 6,270 34,504
</TABLE>
Total sales by geographic area include both sales to unaffiliated
customers and transfers between geographic areas. Such transfers are
accounted for at prices comparable to normal unaffiliated customer
sales. One customer based in the United States accounted for
approximately 10.0%, 12.1% and 11.7%, respectively, of consolidated net
sales during the years ended December 31, 1996, 1995 and 1994.
During 1996, 1995 and 1994, net sales from domestic operations to foreign
customers were $11,413,000, $11,622,000 and $9,886,000, respectively.
Export sales from the U.S. are made to many countries and areas of the
world including the Far East, the Middle East, Canada, South America,
India and Australia.
-30-
<PAGE>
NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
10. Commitments and contingencies:
The Company is obligated under the terms of various operating leases.
Rental expense under such leases for 1996, 1995 and 1994 was $614,000,
$533,000 and $613,000, respectively. As of December 31, 1996, estimated
future minimum annual rental commitments under noncancelable leases
expiring through 2014 are as follows (in thousands):
1997 $ 521
1998 464
1999 330
2000 235
2001 171
After 2001 2,834
-----
Total minimum payments required $4,555*
=====
* Minimum payments have not been reduced by minimum sublease rentals of
$471,000 due in the future under noncancelable subleases.
At December 31, 1996, the Company was involved in litigation, which
Company management believes, after consultation with counsel, that the
ultimate disposition of such litigation will not have a material adverse
effect on the Company's consolidated financial position.
11. Other matters:
The Company enters into forward foreign exchange contracts to hedge
certain firm and anticipated sales commitments, net of offsetting
purchases, denominated in certain foreign currencies. The purpose of such
foreign currency hedging activities is to protect the Company from the
risk that the eventual cash flows resulting from the sale of products to
certain foreign customers (net of purchases from applicable foreign
suppliers) will be adversely affected by fluctuations in exchange rates.
At December 31, 1996 and 1995, the Company had $2,640,000 and $663,000,
respectively, of forward exchange contracts outstanding, primarily to
exchange various European currencies for U.S. dollars. Substantially, all
contracts mature within a period of 11 months. Gains and losses on
forward exchange contracts in connection with firm commitments that are
designated and effective as hedges of such transactions are deferred and
recognized in income in the same period as the hedged transactions. At
December 31, 1996, less than $12,000 of unrecognized net gains were
deferred on such contracts. Gains and losses on forward exchange
contracts in connection with anticipated transactions are marked to
market monthly with the resulting gain or loss recognized immediately in
the consolidated statement of operations.
-31-
<PAGE>
Other assets includes a non-interest bearing note receivable from the
President and Chief Executive Officer of the Company due in 2006 in the
amount of $62,500.
Item 9. DISAGREEMENT ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
-32-
<PAGE>
PART III
--------
The information required by Part III is contained in the
Registrant's proxy statement which will be filed pursuant to Regulation 14A or
an information statement pursuant to Regulation 14C of the General Rules and
Regulations under the Securities Exchange Act of 1934 not later than 120 days
after the close of the fiscal year ended December 31, 1996 The information is
incorporated herein by reference.
PART IV
-------
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
------------------------------------------------------------
ON FORM 8-K
-----------
(a) The following documents are filed as a part of this
report:
1. Financial statements and supplementary data
included in Part II of this report:
New Brunswick Scientific Co., Inc. and
Subsidiaries, consolidated financial statements:
Consolidated Balance Sheets as of December 31,
1996 and 1995
Consolidated Statements of Operations for the
years ended December 31, 1996, 1995 and 1994
Consolidated Statements of Shareholders' Equity
for the years ended December 31, 1996, 1995 and
1994
Consolidated Statements of Cash Flows for the
years ended December 31, 1996, 1995 and 1994
Notes to Consolidated Financial Statements
2. Financial statement schedules included in part IV
of this report:
Schedule II
Schedules other than those listed above have been
omitted because they are not applicable or the
required information is shown in the financial
statements or notes thereto.
3. Exhibits:
The Exhibits index is on page 35.
33
<PAGE>
Schedule II
NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(In thousands)
<TABLE>
<CAPTION>
Additions
---------
Charged to Balance
Balance Costs and Charged to At End
Beginning (Credited) Other of
of Period Expenses Accounts Deductions Period
--------- -------- -------- ---------- ------
Allowance deducted
from asset to which
it applies:
Allowance for
doubtful accounts:
<S> <C> <C> <C> <C> <C>
Year ended
December 31, 1996 $ 306 $ (82) $ - $ - $224
Year ended
December 31, 1995 340 (27) - (7) (a) 306
Year ended
December 31, 1994 223 122 - (5) (a) 340
</TABLE>
- ---------------------
Notes:
(a) Uncollected receivables written off.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) 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.
NEW BRUNSWICK SCIENTIFIC CO., INC.
Dated: March 12, 1997 By: /s/ Ezra Weisman
----------------------------------
Ezra Weisman
President (Principal Executive
Officer) and Director
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
Dated: March 12, 1997 By: /s/ David Freedman
----------------------------------
David Freedman
Chairman of the Board
Dated: March 12, 1997 By: /s/ Adele Lavender
----------------------------------
Adele Lavender
Corporate Secretary
Dated: March 12, 1997 By: /s/ Sigmund Freedman
----------------------------------
Sigmund Freedman
Treasurer and Director
Dated: March 12, 1997 By: /s/ Samuel Eichenbaum
----------------------------------
Samuel Eichenbaum
Vice President, Finance
<PAGE>
Dated: March 12, 1997 By: /s/ Ernest Gross
----------------------------------
Ernest Gross
Director
Dated: March 12, 1997 By: /s/ Bernard Leon
----------------------------------
Bernard Leon
Director
Dated: March 12, 1997 By: /s/ Kiyoshi Masuda
----------------------------------
Kiyoshi Masuda
Director
Dated: March 12, 1997 By: /s/ Dr. David Pramer
----------------------------------
Dr. David Pramer
Director
Dated: March 12, 1997 By: /s/ Martin Siegel
----------------------------------
Martin Siegel
Director
Dated: March 12, 1997 By: /s/ Dr. Marvin Weinstein
----------------------------------
Dr. Marvin Weinstein
Director
<PAGE>
EXHIBIT INDEX
(3a) Restated Certificate of Incorporation, as amended is
incorporated herein by reference from Exhibit (4) to the
Registrant's Registration Statement on Form S-8 on file with
the commission (No. 33-15606), and with respect to two
amendments to said Restated Certificate of Incorporation, to
Exhibit (4b) of Registrant's Registration Statement on Form
S-8 (No. 33-16024).
(3b) By laws of the Company as amended and restated as of August
19, 1991 is incorporated herein by reference to Exhibit (3b)
from Registrant's Annual Report on Form 10-K for the year
ended December 31, 1991.
(3c) Rights Agreement dated as of October 31, 1989 between the
Company and American Stock Transfer & Trust Company as Rights
Agent, incorporated therein by reference to Exhibit 1 to the
Company's Report on Form 8-K filed with the Commission on or
about November 22, 1989.
(4) See the provisions relating to capital structure in the
Restated Certificate of Incorporation, amendment thereto,
incorporated herein by reference from the Exhibits to the
Registration Statements identified in Exhibit (3) above.
(10-2) Pension Plan is incorporated herein by reference from
Registrant's Form 10-K for the year ended December 31, 1985.
(10-3) The New Brunswick Scientific Co., Inc., 1989 Stock Option Plan
for Nonemployee Directors is incorporated herein by reference
to Exhibit "A" appended to the Company's Proxy Statement filed
with the Commission on or about April 22, 1989.
(10-5) Employment Agreement with David Freedman is incorporated
herein by reference to Exhibit (6-28b) of the Registrant's
Report on Form 10-Q for the quarter ended March 31, 1992.
(10-6) Employment Agreement with Ezra Weisman is incorporated herein
by reference to Exhibit 10-6 of Registrants Report on Form
10-K for the year ended December 31, 1993.
(10-7) Nonqualified stock option agreement with Ezra Weisman is
incorporated herein by reference to Exhibit (10-7) of the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1990.
(10-8) Termination Agreement with David Freedman is incorporated
herein by reference to Exhibit (10-8) of the Registrant's
Annual Report on Form 10-K for the year ended December 31,
1990.
<PAGE>
(10-9) Termination Agreement with Samuel Eichenbaum is incorporated
herein by reference to Exhibit (10-9) of the Registrant's
Annual Report on Form 10-K for the year ended December 31,
1991.
(10-10) Termination Agreement with Ezra Weisman is incorporated herein
by reference to Exhibit (10-10) of the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1990.
(10-11) Termination Agreement with Sigmund Freedman is incorporated
herein by reference to Exhibit (10-11) of the Registrant's
Annual Report on Form 10-K for the year ended December 31,
1990.
(10-12) 1991 Nonqualified Stock Option Plan is incorporated herein by
reference to Exhibit (10-12) of the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1991.
(10-13) Indemnification Agreements in substantially the same form as
with all the Directors and Officers of the Company is
incorporated herein by reference to Schedule A to Exhibit
(10-13) of the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1991.
(10-14) Loan and Security Agreement with Summit Bank, the successor to
United Jersey Bank/Central NA dated February 17, 1993, is
incorporated herein by reference to Exhibit (10-14) of the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1992.
(10-16) Nonqualified stock option agreement with Ezra Weisman is
incorporated herein by reference to the Registrant's Report on
Form 10-K for the year ended December 31, 1993.
(10-17) Amendment dated December 29, to Loan and Security Agreement
with Summit Bank, the successor to United Jersey Bank/Central
NA dated February 17, 1993.
(13) Annual Report to Shareholders, to be filed within 120 days of
the end of the fiscal year ended December 31, 1996, is
incorporated herein by reference.
(22) Subsidiaries of the Company appear on Page 37.
(24a)* Consent of KPMG Peat Marwick LLP.
* Filed herewith.
<PAGE>
EXHIBIT 22
SUBSIDIARIES OF THE COMPANY
Percentage of
Name and Place of Incorporation Ownership
------------------------------- -------------
New Brunswick Scientific (U.K.) Limited
Incorporated in The United Kingdom 100%
NBS Benelux B.V.
Incorporated in The Netherlands 100%
New Brunswick Scientific N.V.
Incorporated in Belgium 100%
New Brunswick Scientific GmbH
Incorporated in Germany 100%
New Brunswick Scientific of Delaware, Inc.
Incorporated in the State of Delaware 100%
New Brunswick Scientific International, Inc.
Incorporated in the State of Delaware 100%
NBS Sales Co., Limited
Incorporated in Jamaica 100%
New Brunswick Scientific West Inc.
Incorporated in the State of California 100%
New Brunswick Scientific S.A.R.L.
Incorporated in France 100%
<PAGE>
EXHIBIT (24a)
Independent Auditors' Consent
The Board of Directors
New Brunswick Scientific Co., Inc.
We consent to incorporation by reference in the registration statements (No.
33-70452 and No. 333-06029) on Form S-8 of New Brunswick Scientific Co., Inc. of
our report dated February 10, 1997, relating to the consolidated balance sheets
of New Brunswick Scientific Co., Inc. and subsidiaries as of December 31, 1996
and 1995, and the related consolidated statements of operations, shareholders'
equity, and cash flows and related schedule for each of the years in the
three-year period ended December 31, 1996, which report appears in the December
31, 1996 annual report on Form 10-K of New Brunswick Scientific Co., Inc..
KPMG Peat Marwick LLP
Short Hills, New Jersey
March 18, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 5,196,000
<SECURITIES> 0
<RECEIVABLES> 10,108,000
<ALLOWANCES> 0
<INVENTORY> 12,980,000
<CURRENT-ASSETS> 30,595,000
<PP&E> 5,701,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 37,226,000
<CURRENT-LIABILITIES> 7,149,000
<BONDS> 0
0
0
<COMMON> 238,000
<OTHER-SE> 29,013,000
<TOTAL-LIABILITY-AND-EQUITY> 37,226,000
<SALES> 42,927,000
<TOTAL-REVENUES> 42,927,000
<CGS> 26,280,000
<TOTAL-COSTS> 42,092,000
<OTHER-EXPENSES> (218,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 75,000
<INCOME-PRETAX> 978,000
<INCOME-TAX> 96,000
<INCOME-CONTINUING> 882,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 882,000
<EPS-PRIMARY> .23
<EPS-DILUTED> 0
</TABLE>
