<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarter Ended June 30, 1998 Commission File No. 0-6994
------
NEW BRUNSWICK SCIENTIFIC CO., INC.
State of Incorporation - New Jersey E.I. #22-1630072
-----------
44 Talmadge Road, Edison, N.J. 08818-4005
Registrant's Telephone Number: 732-287-1200
------------
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 twelve (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 ninety (90) days.
Yes X No
--- ---
There are 4,685,569 Common shares outstanding as of August 7, 1998.
Page 1
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NEW BRUNSWICK SCIENTIFIC CO., INC.
Index
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C>
PART I. FINANCIAL INFORMATION:
Item 1:
Consolidated Condensed Balance Sheets -
June 30, 1998 and December 31, 1997 3
Consolidated Condensed Statements of Operations -
Three and Six Months Ended June 30, 1998 and 1997 4
Consolidated Condensed Statements of
Cash Flows - Six Months Ended June 30, 1998 and 1997 5
Consolidated Condensed Statements of Comprehensive
Operations - Three and Six Months Ended June 30, 1998
and 1997 6
Notes to Consolidated Condensed Financial
Statements 7
Item II:
Management's Discussion and Analysis of Results
of Operations and Financial Condition 8
PART II. OTHER INFORMATION 11
</TABLE>
Page 2
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NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands, except for share data)
<TABLE>
<CAPTION>
ASSETS
------
June 30, December 31,
1998 1997
-------- --------
Current Assets (Unaudited)
<S> <C> <C>
Cash and cash equivalents $ 3,231 $ 3,968
Accounts receivable, net 8,144 10,602
Refundable income taxes 394 314
Deferred income tax benefit 134 134
Inventories:
Raw materials and sub-assemblies 7,362 7,493
Work-in-process 3,480 2,668
Finished goods 5,766 4,701
-------- --------
Total inventories 16,608 14,862
Prepaid expenses and other current assets 1,927 1,819
-------- --------
Total current assets 30,438 31,699
-------- --------
Property, plant and equipment, net 5,564 5,354
Other assets 1,115 1,100
-------- --------
$ 37,117 $ 38,153
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities
Current installments of long-term debt $ 53 $ 110
Accounts payable and accrued expenses 7,293 7,709
-------- --------
Total current liabilities 7,346 7,819
-------- --------
Long-term debt, net of current installments 233 247
-------- --------
Shareholders' equity:
Common stock, $.0625 par value, authorized 25,000,000 shares; shares issued
and outstanding, 1998 - 4,671,781 and 1997 - 4,204,845 net of shares held in
treasury, 1998 - 430,063 and 1997 - 390,967 292 263
Capital in excess of par 27,828 23,854
Retained earnings 2,350 7,085
Accumulated other comprehensive income (932) (1,115)
-------- --------
Total shareholders' equity 29,538 30,087
-------- --------
$ 37,117 $ 38,153
======== ========
</TABLE>
See notes to consolidated condensed financial statements.
Page 3
<PAGE>
NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 10,076 $ 11,517 $ 21,026 $ 21,612
Operating costs and expenses:
Cost of sales 6,136 7,098 12,975 13,480
Selling, general and administrative expenses 3,603 3,315 6,991 6,463
Research, development and engineering expenses 1,188 1,088 2,340 2,089
--------- --------- --------- --------
Total operating costs and expenses 10,927 11,501 22,306 22,032
--------- --------- --------- --------
Income (loss) from operations (851) 16 (1,280) (420)
Other income (expense):
Interest income 33 40 62 73
Interest expense (3) (19) (5) (27)
Other income (expense), net (14) (5) (19) (4)
--------- --------- --------- --------
16 16 38 42
--------- --------- --------- --------
Income (loss) before income taxes (835) 32 (1,242) (378)
Income taxes (benefit) (201) 6 (299) (76)
--------- --------- --------- --------
Net income (loss) $ (634) $ 26 $ (943) $ (302)
--------- --------- --------- --------
Basic earnings (loss) per share $ (.14) $ .01 $ (.20) $ (.07)
========= ========= ========= ========
Diluted earnings (loss) per share $ (.14) $ .01 $ (.20) $ (.07)
========= ========= ========= ========
Basic weighted average number of
shares outstanding 4,653 4,614 4,643 4,612
========= ========= ========= ========
Diluted weighted average number of
shares outstanding 4,653 4,708 4,643 4,612
========= ========= ========= ========
</TABLE>
See notes to consolidated condensed financial statements.
Page 4
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NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-------------------------
1998 1997
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (943) $ (302)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation 507 429
Discount from fair market value upon issue
of options under stock option plan for
nonemployee directors -- 35
Change in assets and liabilities:
Accounts receivable 2,530 1,816
Refundable income taxes (80) 99
Inventories (1,714) (2,244)
Prepaid expenses and other current assets (100) 134
Accounts payable and accrued expenses (295) (733)
Advance payments from customers (120) (334)
------- -------
Net cash used by operating activities (215) (1,100)
------- -------
Cash flows from investing activities:
Capital expenditures (729) (470)
Investment -- (250)
Sale of equipment 56 17
------- -------
Net cash used by investing activities (673) (703)
------- -------
Cash flows from financing activities:
Repayment of long-term debt (66) (60)
Proceeds from issue of shares under Employee
Stock Purchase Plan 44 38
Proceeds from issue of Common stock under
stock option plans 167 8
------- -------
Net cash provided (used) by financing activities 145 (14)
------- -------
Net effect of exchange rate changes on cash 6 (158)
------- -------
Net decrease in cash and cash equivalents (737) (1,975)
Cash and cash equivalents at beginning of period 3,968 5,196
------- -------
Cash and cash equivalents at end of period $ 3,231 $ 3,221
======= =======
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 5 $ 26
Income taxes 89 213
</TABLE>
See notes to consolidated condensed financial statements.
Page 5
<PAGE>
NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income (loss) $ (634) $ 26 $ (943) $ (302)
Other comprehensive income (loss):
Foreign currency translation adjustment 57 (184) 183 (731)
------- ------- ------- -------
Total comprehensive loss (577) (158) (760) (1,033)
Income taxes -- -- -- --
------- ------- ------- -------
Net comprehensive loss $ (577) $ (158) $ (760) $(1,033)
======= ======= ======= =======
</TABLE>
See notes to consolidated condensed financial statements.
Page 6
<PAGE>
NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Interim results:
In the opinion of the Company, the accompanying unaudited consolidated condensed
financial statements contain all adjustments (consisting only of normal
recurring accruals) necessary to present fairly, its financial position as of
June 30, 1998 and the results of its operations and cash flows for the six
months ended June 30, 1998 and 1997. Interim results may not be indicative of
the results that may be expected for the year.
Note 2 - Earnings (loss) per Common share:
Basic earnings (loss) per share is calculated by dividing net income (loss) by
the weighted average number of shares outstanding. Diluted earnings (loss) per
share is calculated by dividing net income by the sum of the weighted average
number of shares outstanding plus the dilutive effect, if any, of stock options
which have been issued by the Company. The weighted average number of shares
outstanding for the three and six month periods ended June 30, 1997, have been
restated to reflect a 10% stock dividend distributed on May 15, 1998.
Note 3 - Consolidated condensed statements of shareholders' equity:
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------------------------
1998 1997
-------- --------
(In thousands)
<S> <C> <C>
Balance at beginning of period $ 30,087 $ 29,251
Net loss (943) (302)
Other comprehensive income (loss) 183 (731)
Discount from fair market value upon issue of options under stock
option plan for nonemployee directors -- 35
Issue of shares under Employee Stock Purchase Plan 44 38
Issue of shares under stock option plans 167 8
-------- --------
Balance at end of period $ 29,538 $ 28,299
======== ========
</TABLE>
Page 7
<PAGE>
NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
Forward-looking statements, within the meaning of Section 21E of the Securities
Exchange Act of 1934, are made throughout this Management's Discussion and
Analysis of Financial Condition and Results of Operations. For this purpose, any
statements contained herein that are not statements of historical fact may be
deemed to be forward-looking statements. Without limiting the foregoing, the
words "believes," "anticipates," "plans," "expects," "seeks," "estimates," and
similar expressions are intended to identify forward-looking statements. There
are a number of important factors that could cause the results of the Company to
differ materially from those indicated by such forward-looking statements.
The following is Management's discussion and analysis of significant factors
that have affected the Company's operating results and financial condition
during the quarter and six months ended June 30, 1998.
Results of Operations
---------------------
Quarter Ended June 30, 1998 vs. Quarter Ended June 30, 1997.
For the quarter ended June 30, 1998, net sales were $10,076,000 compared with
net sales of $11,517,000 for the quarter ended June 30, 1997, a decrease of
12.5%. The net loss for the 1998 quarter of $634,000 or $.14 per diluted share
compares with net income of $26,000 or $.01 per diluted share for the second
quarter of 1997.
During the quarter ended June 30, 1998, shipments of custom bioprocess systems,
due to their timing and nature, were significantly lower than in the comparable
1997 quarter and there has also been a decrease in export sales, particularly to
Asia due to the adverse financial situation in that part of the world.
Sales to Asia which amounted to approximately 12% for the second quarter of 1997
amounted to approximately 5% for the second quarter of 1998.
Selling, general and administrative expenses increased due to normal annual
increases and as the result of an effort to strengthen the Company's sales and
service capabilities.
Cost of sales as a percentage of net sales decreased to 60.9% for the quarter
ended June 30, 1998 from 61.6% for the comparable 1997 quarter due to the lower
shipments of custom bioprocess systems and lower export sales during the 1998
quarter since both carry lower profit margins than core products sold
domestically.
Research, development and engineering expenses increased to $1,188,000 in the
1998 quarter from $1,088,000 in the second quarter of 1997 due primarily to the
strengthening of the Company's bioprocess engineering division as well as its
new product development efforts and included $556,000 and $516,000,
respectively, for the quarters ended June 30, 1998 and 1997 related to costs to
support the research efforts of DGI BioTechnologies, the Company's drug lead
discovery operation.
Six Months Ended June 30, 1998 vs. Six Months Ended June 30, 1997
- -----------------------------------------------------------------
For the six months ended June 30, 1998, net sales were $21,026,000 compared with
net sales of $21,612,000 for the six months ended June 30, 1997. The net loss
for the 1998 period of
Page 8
<PAGE>
$943,000 or $.20 per diluted share compares with a net loss of $302,000 or $.07
per diluted share for the six months ended June 30, 1997.
Selling, general and administrative expenses increased due to normal annual
increases and as the result of an effort to strengthen the Company's sales and
service capabilities.
Research, development and engineering expenses increased to $2,340,000 in the
1998 period from $2,089,000 in the first six months of 1997 due primarily to the
strengthening of the Company's bioprocess engineering division as well as its
new product development efforts and included $1,037,000 and $974,000,
respectively, for the six months ended June 30, 1998 and 1997 related to costs
to support the research efforts of DGI BioTechnologies, the Company's drug lead
discovery operation.
Financial Condition
-------------------
Liquidity and Capital Resources
- -------------------------------
During the six months ended June 30, 1998, Cash and Cash Equivalents decreased
to $3,231,000 from $3,968,000 at December 31, 1997. The decrease in cash
resulted primarily from the net loss for the period of $943,000, an increase in
inventories of $1,746,000, and a decrease in accounts payable and accrued
expenses of $416,000, partially offset by a decrease in accounts receivable of
$2,458,000.
Work-in-process inventories increased to $3,480,000 at June 30, 1998 from
$2,668,000 at December 31, 1997, primarily as a result of contracts for custom
bioprocess systems which will be delivered during the third and fourth quarters.
Finished goods inventories increased to $5,766,000 at June 30, 1998 from
$4,701,000 at December 31, 1997, as a result of less than anticipated sales
during the period.
Cash Flows from Operating Activities
- ------------------------------------
During the period ended June 30, 1998 and 1997 net cash used by operating
activities amounted to $215,000 and $1,100,000, respectively. The primary
reasons for the $885,000 change between the two periods were a decrease in
accounts receivable of $2,530,000 in 1998 vs. a decrease of $1,816,000 in 1997,
an increase in inventories of $1,714,000 in 1998 vs. an increase of $2,244,000
in 1997, a decrease in advance payments from customers in 1998 of $120,000 vs. a
decrease of $334,000 in 1997 and a decrease in accounts payable and accrued
expenses in 1998 of $295,000 vs. a decrease of $733,000 in 1997.
Cash Flows from Investing Activities
- ------------------------------------
Net cash used by investing activities amounted to $673,000 in 1998 vs. $703,000
in 1997, primarily as a result of additions to property, plant and equipment
during 1998 and 1997 as well as from an investment in another entity in 1997.
Cash Flows from Financing Activities
- ------------------------------------
Net cash provided by financing activities amounted to $145,000 in 1998 vs. cash
used of $14,000 in 1997. The 1998 amount includes $167,000 from the exercise of
stock options and $44,000 from the issue of shares under the Company's Employee
Stock Purchase Plan, partially offset by the repayment of long-term debt. The
1997 amount includes $8,000 from the exercise of stock options and $38,000 from
the issue of shares under the Company's Employee Stock Purchase Plan, partially
offset by repayment of long-term debt.
Management believes that the resources available to the Company, including its
line of credit are sufficient to meet its near and intermediate-term needs,
including funding commitments for DGI
Page 9
<PAGE>
BioTechnologies, and its strong unleveraged balance sheet and debt-free real
estate provide the basis for any long-term financing if the need should arise.
Recent Accounting Pronouncements
- --------------------------------
In June 1997, Statement of Financial Accounting Standards (SFAS) No. 131
"Disclosure About Segments of an Enterprise and Related Information", was issued
to establish standards for public business enterprises reporting information
regarding operating segments in annual and interim financial statements issued
to shareholders. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. This statement is
effective for financial statements for periods beginning after December 15,
1997. The Company has adopted SFAS 131 which does not require interim period
reporting in the year of adoption. The Company is completing its evaluation of
the disclosure requirements of SFAS 131 and will begin such disclosures in its
Form 10-K filing for the year ended December 31, 1998. This statement does not
have any effect on the results of operations or financial position of the
Company.
In June 1998, SFAS No. 133 "Accounting for Derivative Instruments and Hedging
Activities", was issued to establish standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. This statement is effective for all quarters of
fiscal years beginning after June 15, 1999. The Company does not believe that
this statement will have a material impact on the financial statements.
Page 10
<PAGE>
NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
- ----------------------------------------
No reports on Form 8-K have been filed during the quarter ended June 30, 1998.
Page 11
<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.
NEW BRUNSWICK SCIENTIFIC CO., INC.
----------------------------------
(Registrant)
Date: August 10, 1998 /s/ Ezra Weisman
----------------------------------
Ezra Weisman
President
(Chief Executive Officer)
/s/ Samuel Eichenbaum
----------------------------------
Samuel Eichenbaum
Vice President - Finance
(Principal Accounting Officer)
Page 12
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000071241
<NAME> NEW BRUNSWICK SCIENTIFIC CO., INC.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 3,231,000
<SECURITIES> 0
<RECEIVABLES> 8,144,000
<ALLOWANCES> 0
<INVENTORY> 16,608,000
<CURRENT-ASSETS> 30,438,000
<PP&E> 5,564,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 37,117,000
<CURRENT-LIABILITIES> 7,346,000
<BONDS> 0
0
0
<COMMON> 292,000
<OTHER-SE> 29,246,000
<TOTAL-LIABILITY-AND-EQUITY> 37,117,000
<SALES> 21,026,000
<TOTAL-REVENUES> 21,026,000
<CGS> 12,975,000
<TOTAL-COSTS> 22,306,000
<OTHER-EXPENSES> (43,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,000
<INCOME-PRETAX> (1,242,000)
<INCOME-TAX> (299,000)
<INCOME-CONTINUING> (943,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (943,000)
<EPS-PRIMARY> (.20)
<EPS-DILUTED> (.20)
</TABLE>
