<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 September 30, 1998 Commission File No. 0-6994
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NEW BRUNSWICK SCIENTIFIC CO., INC.
State of Incorporation - New Jersey E. I. #22-1630072
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44 Talmadge Road, Edison, N.J. 08818-4005
Registrant's Telephone Number: 732-287-1200
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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 4,762,259 Common shares outstanding as of November 6, 1998.
Page 1
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NEW BRUNSWICK SCIENTIFIC CO., INC.
Index
PAGE NO.
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PART I. FINANCIAL INFORMATION:
Item 1:
Consolidated Condensed Balance Sheets -
September 30, 1998 and December 31, 1997 3
Consolidated Condensed Statements of Operations -
Three and Nine Months Ended September 30, 1998 and 1997 4
Consolidated Condensed Statements of
Cash Flows - Nine Months Ended September 30, 1998 and 1997 5
Consolidated Condensed Statements of Comprehensive
Operations - Three and Nine Months Ended September 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 12
Page 2
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NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands, except for share data)
ASSETS
September 30, December 31,
1998 1997
------------- ------------
Current Assets (Unaudited)
- --------------
Cash and cash equivalents $ 2,211 $ 3,968
Accounts receivable, net 9,052 10,602
Refundable income taxes 178 314
Deferred income tax benefit 134 134
Inventories:
Raw materials and sub-assemblies 7,617 7,493
Work-in-process 3,775 2,668
Finished goods 5,143 4,701
-------- -------
Total inventories 16,535 14,862
Prepaid expenses and other current assets 2,079 1,819
-------- -------
Total current assets 30,189 31,699
-------- -------
Property, plant and equipment, net 5,656 5,354
Other assets 1,063 1,037
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$ 36,908 $38,090
======== =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
- -------------------
Current installments of long-term debt $ 27 $ 110
Accounts payable and accrued expenses 6,603 7,709
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Total current liabilities 6,630 7,819
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Long-term debt, net of current installments 239 247
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Shareholders' equity:
Common stock, $.0625 par value, authorized
25,000,000 shares; shares issued and
outstanding, 1998 - 4,762,259 and 1997 -
4,204,845 net of shares held in treasury,
1998 - 430,063 and 1997 - 390,967 298 263
Capital in excess of par 28,317 23,854
Retained earnings 2,400 7,085
Accumulated other comprehensive loss (610) (1,115)
Notes receivable from exercise of stock options (366) (63)
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Total shareholders' equity 30,039 30,024
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$ 36,908 $38,090
======== =======
See notes to consolidated condensed financial statements.
Page 3
<PAGE>
NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $11,711 $9,856 $32,737 $31,468
Operating costs and expenses:
Cost of sales 7,074 5,723 20,049 19,203
Selling, general and administrative expenses 3,381 3,062 10,372 9,525
Research, development and engineering expenses 1,208 1,024 3,548 3,113
------- ------ ------- -------
Total operating costs and expenses 11,663 9,809 33,969 31,841
------- ------ ------- -------
Income (loss) from operations 48 47 (1,232) (373)
Other income (expense):
Interest income 29 35 91 108
Interest expense (1) (26) (6) (53)
Other income (expense), net (10) (3) (29) (7)
------- ------ ------- -------
18 6 56 48
------- ------ ------- -------
Income (loss) before income taxes 66 53 (1,176) (325)
Income taxes (benefit) 16 11 (283) (65)
------- ------ ------- -------
Net income (loss) $ 50 $ 42 $ (893) $ (260)
======= ====== ======= =======
Basic earnings (loss) per share $ .01 $ .01 $ (.19) $ (.06)
======= ====== ======= =======
Diluted earnings (loss) per share $ .01 $ .01 $ (.19) $ (.06)
======= ====== ======= =======
Basic weighted average number of
shares outstanding 4,720 4,619 4,671 4,614
======= ====== ======= =======
Diluted weighted average number of
shares outstanding 4,797 4,691 4,671 4,614
======= ====== ======= =======
</TABLE>
See notes to consolidated condensed financial statements.
Page 4
<PAGE>
NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended
September 30,
------------------------
1998 1997
---------- ----------
Cash flows from operating activities:
Net loss $ (893) $ (260)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation 805 712
Discount from fair market value upon issue
of options under stock option plan for
nonemployee directors - 35
Change in assets and liabilities:
Accounts receivable 1,749 2,067
Refundable income taxes 136 100
Inventories (1,584) (2,888)
Prepaid expenses and other current assets (239) (41)
Accounts payable and accrued expenses (985) (621)
Advance payments from customers (172) 610
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Net cash used by operating activities (1,183) (286)
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Cash flows from investing activities:
Capital expenditures (1,042) (616)
Investment - (250)
Sale of equipment 56 17
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Net cash used by investing activities (986) (849)
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Cash flows from financing activities:
Repayment of long-term debt (77) (93)
Proceeds from issue of shares under Employee
Stock Purchase Plan 44 38
Proceeds from exercise of stock options 359 8
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Net cash provided (used) by financing activities 326 (47)
------ ------
Net effect of exchange rate changes on cash 86 (179)
------ ------
Net decrease in cash and cash equivalents (1,757) (1,361)
Cash and cash equivalents at beginning of period 3,968 5,196
------ ------
Cash and cash equivalents at end of period $2,211 $3,835
====== ======
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 7 $ 54
Income taxes 100 363
Non-cash financing activities:
Notes received upon exercise of stock options (303) -
See notes to consolidated condensed financial statements.
Page 5
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NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE OPERATIONS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income (loss) $ 50 $ 42 $(893) $ (260)
Other comprehensive income (loss):
Foreign currency translation adjustment 322 (138) 505 (869)
---- ----- ----- -------
Net comprehensive income (loss) $372 $( 96) $(388) $(1,129)
==== ===== ===== =======
</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
September 30, 1998 and the results of its operations and cash flows for the nine
months ended September 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 nine month periods ended September 30, 1997, have
been restated to reflect a 10% stock dividend distributed on May 15, 1998.
Note 3 - Consolidated condensed statements of shareholders' equity:
Nine Months Ended
September 30,
---------------------
1998 1997
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(In thousands)
Balance at beginning of period $30,024 $29,188
Net loss (893) (260)
Other comprehensive income (loss) 505 (869)
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
Stock option exercises (including tax benefits
of $127,000 in 1998) 662 8
Notes receivable from exercise of stock options (303) -
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Balance at end of period $30,039 $28,140
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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 nine months ended September 30, 1998.
Results of Operations
---------------------
Quarter Ended September 30, 1998 vs. Quarter Ended September 30, 1997.
- ----------------------------------------------------------------------
For the quarter ended September 30, 1998, net sales were $11,711,000 compared
with net sales of $9,856,000 for the quarter ended September 30, 1997, an
increase of 18.8%. Net income for the 1998 quarter of $50,000 or $.01 per
diluted share compares with net income of $42,000 or $.01 per diluted share for
the third quarter of 1997.
During the quarter ended September 30, 1998, shipments of custom bioprocess
systems were significantly higher than in the comparable 1997 quarter. Sales of
core products in the U.S. and European markets also increased, however, there
has been a decrease in export sales, particularly to Asia due to the adverse
financial situation in that part of the world.
Cost of sales as a percentage of net sales increased to 60.4% for the quarter
ended September 30, 1998 from 58.1% for the comparable 1997 quarter due
primarily to the higher shipments of custom bioprocess systems which carry lower
profit margins than core products.
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 $1,208,000 in the
1998 quarter from $1,024,000 in the third 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 $535,000 and $475,000,
respectively, for the quarters ended September 30, 1998 and 1997 related to
costs to support the research efforts of DGI BioTechnologies, the Company's drug
lead discovery operation.
The reduction in interest expense in the 1998 period is the result of the 1997
period including interest costs related to the settlement of tax audits.
Nine Months Ended September 30, 1998 vs. Nine Months Ended September 30, 1997
- -----------------------------------------------------------------------------
For the nine months ended September 30, 1998, net sales were $32,737,000
compared with net sales of $31,468,000 for the nine months ended September 30,
1997. The net loss for the 1998 period of $893,000 or $.19 per diluted share
compares with a net loss of $260,000 or $.06 per diluted share for the nine
months ended September 30, 1997.
Page 8
<PAGE>
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 $3,548,000 in the
1998 period from $3,113,000 in the first nine 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 $1,572,000 and $1,449,000,
respectively, for the nine months ended September 30, 1998 and 1997 related to
costs to support the research efforts of DGI BioTechnologies, the Company's drug
lead discovery operation.
The reduction in interest expense in the 1998 period is the result of the 1997
period including interest costs related to the settlement of tax audits.
The increase in the loss from operations in the 1998 period over the 1997 period
is directly attributable to the increased operating expenses indicated above.
Financial Condition
-------------------
Liquidity and Capital Resources
- -------------------------------
During the nine months ended September 30, 1998, Cash and Cash Equivalents
decreased to $2,211,000 from $3,968,000 at December 31, 1997. The decrease in
cash resulted primarily from the net loss for the period of $893,000, an
increase in inventories of $1,673,000, and a decrease in accounts payable and
accrued expenses of $1,106,000, partially offset by a decrease in accounts
receivable of $1,550,000.
Work-in-process inventories increased to $3,775,000 at September 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 fourth quarter.
Cash Flows from Operating Activities
- ------------------------------------
During the period ended September 30, 1998 and 1997 net cash used by operating
activities amounted to $1,183,000 and $286,000, respectively. The primary
reasons for the $897,000 change between the two periods were a decrease in
accounts receivable of $1,749,000 in 1998 vs. a decrease of $2,067,000 in 1997 a
decrease in advance payments from customers in 1998 of $172,000 vs. an increase
of $610,000 in 1997, a decrease in accounts payable and accrued expenses in 1998
of $985,000 vs. a decrease of $621,000 in 1997 and the net loss of $893,000 in
1998 vs. the net loss of $260,000 in 1997 and were partially offset by an
increase in inventories of $1,584,000 in 1998 vs. an increase of $2,888,000 in
1997.
Cash Flows from Investing Activities
- ------------------------------------
Net cash used by investing activities amounted to $986,000 in 1998 vs. $849,000
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 $326,000 in 1998 vs. cash
used of $47,000 in 1997. The 1998 amount includes $359,000 from the exercise of
stock options of which includes $127,000 of related tax benefits 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.
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<PAGE>
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 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.
Year 2000
- ---------
The Company has no internally developed software that it utilizes for its
operations, but uses Version 11 of Computer Associates ManMan Classic software,
a total MRPII system which it employs for its manufacturing, sales and
accounting needs and Windows NT which is used for the Company's network.
Management believes, based on the representations of the software companies that
both of these software packages are Year 2000 (Y2K) compliant. In addition, the
Company uses a number of computer controlled machine tools which it is in the
process of evaluating, as well as numerous personal computers, some of which are
not Y2K compliant but are scheduled to be replaced in the normal course of
business during 1999.
Most of the Company's products have no date functions and consequently do not
have a Y2K problem with the exception of its process control software products
which do have data related functions but with one exception are Y2K compliant.
The exception is a now obsolete DOS-based process control system introduced in
1987 for which a Y2K compliant upgrade is available.
The Company has sent letters to the majority of its suppliers requesting
information as to their readiness for the Y2K and is in the process of
evaluating responses. The Company expects to complete the survey of its
suppliers during the first quarter of 1999 and make changes as it sees necessary
in order to ensure that its operations are not negatively affected. The Company
also intends to replace obsolete, non-compliant personal computers by the middle
of 1999 in the normal course of events since these older machines are not
capable of running the latest software upgrades. Any costs which will be
incurred as the result of the acceleration of purchases due to Y2K
considerations are not material to the consolidated financial statements.
The Company is beginning the process of developing business contingency plans to
mitigate the risk of the potential of a noncompliant vendor or system and will
continue to assess its exposure to possible Y2K problems or potential
disruptions. Based upon all of the information it has developed to date,
Management believes that no disruptions will occur in the Company's operations.
However, the Company is subject to financial and other risks should the Company
or a third party vendor or service provider be unable to resolve issues related
to the Year 2000.
Costs of addressing the Year 2000 issue have not been material to date and,
based on information gathered to date from the Company and its vendors, are not
currently expected to have a material adverse impact on the Company's financial
position, results of operations or cash flows.
Euro Conversion
- ---------------
On January 1, 1999, eleven of the fifteen member countries of the European Union
(the "participating countries") - are scheduled to establish fixed conversion
rates between their existing sovereign currencies (the "legacy currencies") and
the euro. The participating countries have agreed to adopt the euro as their
common legal currency on that date. The euro will then trade on currency
exchanges and be available for non-cash transactions. The participating
countries will issue sovereign debt exclusively in euro, and will redenominate
outstanding sovereign debt. Presently, the Company does not believe that, the
euro-conversion will have a material operational or financial impact.
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
Page 10
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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 11
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NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
The exhibits to this report are listed on the Exhibit Index included elsewhere
herein.
No reports on Form 8-K have been filed during the quarter ended September 30,
1998.
Page 12
<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: November 13, 1998 /s/ Ezra Weisman
-------------------------------------------
Ezra Weisman
President
(Chief Executive Officer)
/s/ Samuel Eichenbaum
-------------------------------------------
Samuel Eichenbaum
Vice President - Finance
(Principal Accounting Officer)
Page 13
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NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
EXHIBIT INDEX
-------------
Exhibit No. Exhibit Page No.
- ----------- ------- --------
27 Financial Data Schedule Attached
(Filed electronically with SEC only)
Page 14
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000071241
<NAME> NEW BRUNSWICK SCIENTIFIC CO., INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 2,211,000
<SECURITIES> 0
<RECEIVABLES> 9,052,000
<ALLOWANCES> 0
<INVENTORY> 16,535,000
<CURRENT-ASSETS> 30,189,000
<PP&E> 5,656,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 36,908,000
<CURRENT-LIABILITIES> 6,630,000
<BONDS> 0
0
0
<COMMON> 298,000
<OTHER-SE> 29,741,000
<TOTAL-LIABILITY-AND-EQUITY> 36,908,000
<SALES> 32,737,000
<TOTAL-REVENUES> 32,737,000
<CGS> 20,049,000
<TOTAL-COSTS> 33,969,000
<OTHER-EXPENSES> (62,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,000
<INCOME-PRETAX> (1,176,000)
<INCOME-TAX> (283,000)
<INCOME-CONTINUING> (893,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (893,000)
<EPS-PRIMARY> (.19)
<EPS-DILUTED> (.19)
</TABLE>
