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, 1999 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 5,330,712 Common shares outstanding as of November 8, 1999.
1
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NEW BRUNSWICK SCIENTIFIC CO., INC.
Index
PAGE NO.
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PART I. FINANCIAL INFORMATION:
Consolidated Balance Sheets -
September 30, 1999 and December 31, 1998 . . . . . . . . 3
Consolidated Statements of Operations -
Three and Nine Months Ended September 30, 1999 and 1998 4
Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1999 and 1998. . . . . . 5
Consolidated Statements of Comprehensive Loss -
Three and Nine Months Ended September 30, 1999 and 1998. 6
Notes to Consolidated Financial Statements. . . . . . . . 7
Management's Discussion and Analysis of Results
of Operations and Financial Condition. . . . . . . . . . 9
PART II. OTHER INFORMATION 13
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2
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NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except for share and per share amounts)
ASSETS
------
September 30, December 31,
1999 1998
----------- ----------
Current Assets (Unaudited)
- -------------------------------------------------
<S> <C> <C>
Cash and cash equivalents . . . . . . . . . . . $ 2,049 $ 3,793
Accounts receivable, net. . . . . . . . . . . . 11,110 10,230
Refundable income taxes . . . . . . . . . . . . 79 173
Deferred income taxes . . . . . . . . . . . . . 134 134
Inventories:
Raw materials and sub-assemblies. . . . . . . 6,898 7,091
Work-in-process . . . . . . . . . . . . . . . 3,122 3,457
Finished goods. . . . . . . . . . . . . . . . 5,486 5,375
-------- --------
Total inventories . . . . . . . . . . . . . 15,506 15,923
Prepaid expenses and other current assets . . . 2,189 2,025
-------- --------
Total current assets. . . . . . . . . . . . . 31,067 32,278
-------- --------
Property, plant and equipment, net. . . . . . . . 5,634 5,622
Deferred income taxes . . . . . . . . . . . . . . 361 361
Other assets. . . . . . . . . . . . . . . . . . . 1,077 1,062
-------- --------
$38,139 $39,323
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
- -------------------------------------------------
Current Liabilities
- -------------------------------------------------
Current installments of long-term debt. . . . . $ 24 $ 27
Accounts payable and accrued expenses . . . . . 6,487 8,118
-------- --------
Total current liabilities . . . . . . . . . . 6,511 8,145
-------- --------
Long-term debt, net of current installments . . . 1,693 239
-------- --------
Other liabilities . . . . . . . . . . . . . . . . 492 492
Shareholders' equity:
Common stock, $0.0625 par authorized 25,000,000
shares; outstanding, 1999 - 5,330,712;
1998 - 4,770,444; net of shares held in
treasury, 1999 - 473,069 and 1998 - 430,063. . 333 298
Capital in excess of par. . . . . . . . . . . . 32,843 28,361
(Accumulated deficit) retained earnings . . . . (1,747) 3,137
Accumulated other comprehensive loss. . . . . . (1,654) (985)
Notes receivable from exercise of stock options (332) (364)
-------- --------
Total shareholders' equity. . . . . . . . . . 29,443 30,447
-------- --------
$38,139 $39,323
======== ========
</TABLE>
See notes to consolidated financial statements.
3
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NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------- --------------
1999 1998 1999 1998
---- ---- ---- ----
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Net sales. . . . . . . . . . . . . . . . . $ 12,146 $ 11,711 $ 38,491 $ 32,737
Operating costs and expenses:
Cost of sales. . . . . . . . . . . . . . 7,250 7,074 23,361 20,049
Selling, general and administrative
Expenses. . . . . . . . . . . . . . . . 3,678 3,381 11,297 10,372
Research, development and engineering
Expenses. . . . . . . . . . . . . . . . 1,595 1,208 4,488 3,548
---------- ----------- ----------- ----------
Total operating costs and expenses . . 12,523 11,663 39,146 33,969
---------- ----------- ----------- ----------
Income (loss) from operations. . . . . . . (377) 48 (655) (1,232)
Other income (expense):
Interest income. . . . . . . . . . . . . 11 29 35 91
Interest expense . . . . . . . . . . . . (23) (1) (38) (6)
Other income (expense), net. . . . . . . 39 8 23 (11)
Equity in loss in joint venture company. (15) (18) (33) (18)
---------- ----------- ----------- ----------
12 18 (13) 56
---------- ----------- ----------- ----------
Income (loss) before income taxes. . . . . (365) 66 (668) (1,176)
Income taxes (benefit) . . . . . . . . . . 120 16 120 (283)
---------- ----------- ----------- ----------
Net income (loss). . . . . . . . . . . . . $ (485) $ 50 $ (788) $ (893)
========== =========== =========== ==========
Basic earnings (loss) per share. . . . . . $ (.09) $ .01 $ (.15) $ (.17)
========== =========== =========== ==========
Diluted earnings (loss) per share. . . . . $ (.09) $ .01 $ (.15) $ (.17)
========== =========== =========== ==========
Basic weighted average number of
Shares outstanding. . . . . . . . . . . . 5,329 5,192 5,297 5,138
========== =========== =========== ==========
Diluted weighted average number of
Shares outstanding. . . . . . . . . . . . 5,329 5,277 5,297 5,138
========== =========== =========== ==========
</TABLE>
See notes to consolidated financial statements.
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NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended
September 30,
---------------------------
1999 1998
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Cash flows from operating activities:
Net loss. . . . . . . . . . . . . . . . . . . . . . . . . $ (788) $ (893)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation. . . . . . . . . . . . . . . . . . . . . . 738 805
Change in related balance sheet accounts:
Accounts receivable . . . . . . . . . . . . . . . . . . (1,292) 1,749
Refundable income taxes . . . . . . . . . . . . . . . . 94 136
Inventories . . . . . . . . . . . . . . . . . . . . . . 204 (1,584)
Prepaid expenses and other current assets . . . . . . . (228) (239)
Accounts payable and accrued expenses . . . . . . . . . (235) (985)
Advance payments from customers . . . . . . . . . . . . (1,248) (172)
-------- --------
Net cash used in operating activities . . . . . . . . . . (2,755) (1,183)
-------- --------
Cash flows from investing activities:
Additions to property, plant and equipment. . . . . . . (875) (1,042)
Sale of equipment . . . . . . . . . . . . . . . . . . . 25 56
-------- --------
Net cash used in investing activities . . . . . . . . . . (850) (986)
-------- --------
Cash flows from financing activities:
Repayment of long-term debt . . . . . . . . . . . . . . (18) (77)
Proceeds from mortgage. . . . . . . . . . . . . . . . . 247 -
Borrowings under long-term credit facility 1,250
Proceeds from issue of shares under Employee
Stock Purchase Plan. . . . . . . . . . . . . . . . . . 49 44
Proceeds from issue of common stock under
stock option plans . . . . . . . . . . . . . . . . . . 372 359
Proceeds from notes receivable related to
exercised stock options. . . . . . . . . . . . . . . . 32 -
-------- --------
Net cash provided by financing activities . . . . . . . . 1,932 326
-------- --------
Net effect of exchange rate changes on cash . . . . . . . (71) 86
-------- --------
Net decrease in cash and cash equivalents . . . . . . . . (1,744) (1,757)
Cash and cash equivalents at beginning of period. . . . . 3,793 3,968
-------- --------
Cash and cash equivalents at end of period. . . . . . . . $ 2,049 $ 2,211
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest. . . . . . . . . . . . . . . . . . . . . . . . $ 42 $ 7
Income taxes. . . . . . . . . . . . . . . . . . . . . . 104 100
Supplemental disclosure of non-cash financing activities:
Tax benefit related to exercise of stock options. . . . $ 22 $ -
Notes received upon exercise of stock options . . . . . - (303)
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See notes to consolidated financial statements.
5
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NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------- --------------
1999 1998 1999 1998
---- ---- ---- ----
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Net income (loss). . . . . . . . . . . . . $(485) $ 50 $ (788) $(893)
Other comprehensive income (loss):
Foreign currency translation adjustment. 149 322 (669) 505
------ ---- -------- ------
Net comprehensive income (loss). . . . . . $(336) $372 $(1,457) $(388)
====== ==== ======== ------
</TABLE>
See notes to consolidated financial statements.
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NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands)
(Unaudited)
Note 1 - Interim results:
In the opinion of the Company, the accompanying unaudited consolidated financial
statements contain all adjustments (consisting only of normal recurring
accruals) necessary to present fairly, its financial position as of September
30, 1999 and the results of its operations and cash flows for the three and nine
months ended September 30, 1999 and 1998. Interim results may not be indicative
of the results that may be expected for the year.
Note 2 - Segment Information:
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Three Months Ended Nine Months Ended
September 30 September 30
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Laboratory Drug Laboratory Drug
Research . Lead Research Lead
Equipment. Discovery Total Equipment Discovery Total
---------- --------- ---------- --------- --------- -----
<S> <C> <C> <C> <C> <C> <C>
1999
- -------
Net sales from external customers. $12,053 $ 93 $12,146 $36,798 $ 1,693 $38,491
Income (loss) from operations. . . 396 (773) (377) (70) (585) (655)
Depreciation (1) . . . . . . . . . 243 - 243 738 - 738
1998
- -------
Net sales from external customers. $11,711 $ - $11,711 $32,737 $ - $32,737
Income (loss) from operations. . . 583 (535) 48 340 (1,572) (1,232)
Depreciation (1) . . . . . . . . . 298 - 298 805 - 805
<FN>
(1) Depreciation related to the Drug Lead Discovery segment is not allocated to the
segment as the related assets are owned directly by New Brunswick Scientific Co., Inc. and
are included in the Laboratory Research Equipment Segment. However, rental expense in lieu
of depreciation expense is charged to the Drug Lead Discovery segment which is comprised of
DGI BioTechnologies, the Company's drug lead discovery operation.
</TABLE>
Note 3 - 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 (loss) by the sum of the weighted
average number of shares outstanding plus the dilutive effect of stock options
which have been issued by the Company unless the effect of the stock options is
antidilutive.
7
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Note 4 - Credit Agreement:
The Company had a $5 million secured revolving credit agreement with Summit Bank
which was effective through May 31, 1999. On April 16, 1999, the Company
terminated the credit agreement with Summit Bank and entered into an agreement
(the Bank Agreement) with First Union National Bank for a three year, $31
million secured line of credit. The Bank Agreement provides the Company with a
$5 million revolving credit facility for both working capital and for letters of
credit, a $1 million revolving line of credit for equipment acquisition
purposes, a $15 million credit line for acquisitions and a $10 million foreign
exchange facility. There are no compensating balance requirements and any
borrowings under the Bank Agreement bear interest at various rates based upon a
function of the bank's prime rate or Libor at the discretion of the Company.
All of the Company's domestic assets, which are not otherwise subject to lien,
have been pledged as security for any borrowings under the Bank Agreement. The
Bank Agreement contains various business and financial covenants including,
among other things, a debt service coverage ratio, a net worth covenant, and a
ratio of total liabilities to tangible net worth.
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Note 5 - Consolidated statements of shareholders' equity:
Nine Months Ended
September 30,
---------------------
1999 1998
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(In thousands)
<S> <C> <C>
Balance at beginning of period. . . . . . . . . . . $30,447 $30,024
Net loss. . . . . . . . . . . . . . . . . . . . . . (788) (893)
Other comprehensive income (loss) . . . . . . . . . (669) 505
Proceeds from issuance of shares under
stock option plans . . . . . . . . . . . . . . . . 350 535
Proceeds from issuance of shares under
Employee Stock Purchase Plan . . . . . . . . . . . 49 44
Tax benefit related to exercise of stock options. . 22 127
Proceeds (issues) from notes receivable related to
exercised stock options. . . . . . . . . . . . . . 32 (303)
-------- --------
Balance at end of period. . . . . . . . . . . . . . $29,443 $30,039
======== ========
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Note 6 - Stock Dividend
On March 17, 1999, the Company declared a 10% stock dividend, payable May 14,
1999 to shareholders of record as of April 15, 1999. Upon distribution of the
stock dividend, the weighted average number of shares outstanding for the three
and nine months ended September 30, 1998 were restated.
Note 7 - Research and License Agreement
On May 28, 1999, DGI BioTechnologies, LLC., majority owned by the Company,
entered into a Research and License Agreement (the Agreement) with Novo Nordisk
A/S, a corporation based in Denmark (Novo). Under the terms of the Agreement,
DGI granted to Novo a license to use and sell products worldwide under certain
DGI patent rights and technology. In exchange, DGI will receive $1.6 million in
non-refundable license fees of which $1.1 million was paid in July 1999 and the
remaining $500 thousand is due in June 2000. In addition, the Agreement
provides for additional payments if specified development milestones are met and
the payment of royalties on future sales of a Novo product resulting from the
use of DGI's technology.
8
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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, 1999.
Results of Operations
---------------------
Quarter Ended September 30, 1999 vs. Quarter Ended September 30, 1998.
- --------------------------------------------------------------------------------
For the quarter ended September 30, 1999, net sales were $12,146,000 compared
with net sales of $11,711,000 for the quarter ended September 30, 1998, an
increase of 3.7%. The net loss for the 1999 quarter of $485,000 or $.09 per
diluted share compared with net income of $50,000 or $.01 per diluted share for
the third quarter of 1998.
Sales for the 1999 quarter were up slightly over the third quarter of 1998.
Gross margins increased during the quarter ended September 30, 1999 to 40.3%
from 39.6% during the quarter ended September 30, 1998.
Selling, general and administrative expenses increased 8.8% during the 1999
quarter compared with the third quarter of 1998 as a result of normal year to
year increases, and the strengthening of the Company's European sales and
marketing organization including the operating costs of Inceltech, the French
fermentor manufacturer acquired by the Company in late 1998.
The increase of 32% in research, development and engineering expense during the
1999 quarter compared with the third quarter of 1998 is primarily attributable
to increased spending of $331,000 by DGI. Interest income declined during the
1999 quarter due to a lower level of average available cash. Interest expense
increased as a result of borrowings under the Company's long-term revolving
credit facility. Other income (expense), net increased primarily as the result
of a foreign currency transaction gain. Equity in loss in joint venture company
relates to the Company's interest in NBS Projects, a joint venture with an
engineering company, which provides turnkey bioprocess projects for
pharmaceutical and biotechnology industry customers which began operations in
mid-1998. No tax benefit was taken during the quarter for the losses incurred
by the Company's U.S. operations, however, an income tax provision was provided
for the earnings of the Company's European subsidiaries.
Nine Months Ended September 30, 1999 vs. Nine Months Ended September 30, 1998.
- --------------------------------------------------------------------------------
For the nine months ended September 30, 1999, net sales were $38,491,000
compared with net sales of $32,737,000 for the nine months ended September 30,
1998, an increase of 17.6%. The net loss for the first nine months of 1999 of
$788,000 or $.15 per diluted share compared with a net loss of $893,000 or $.17
per diluted share for the nine months ended September 30, 1998.
9
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The increase in net sales for the nine months ended September 30, 1999 of 17.6%
is primarily attributable to $1,693,000 of revenues for DGI as a result of its
agreement with Novo Nordisk A/S and significant increases in the Company's
shaker, fermentation, cell culture and ultra low freezer product lines.
Gross margins benefited in the 1999 period from the inclusion in net sales of
the $1,693,000 of licensing income for DGI against which there is no cost of
sales and was partially offset by lower margins on its core products due to a
significant increase in export sales which carry lower margins than sales in the
U.S. market.
Selling, general and administrative expenses increased 8.9% during the 1999
period compared with the first nine months of 1998 as a result of normal year to
year increases, expenses related to the higher level of sales and the
strengthening of the Company's European sales and marketing organization
including the operating costs of Inceltech, the French fermentor manufacturer
acquired by the Company in late 1998.
The increase of 26.5% in research, development and engineering expenses is
primarily attributable to increased spending of $706,000 by DGI. Interest
income declined during 1999 due to a lower level of average available cash.
Interest expense increased as a result of borrowings under the Company's
long-term revolving credit facility. Other income (expense), net increased
primarily as the result of a foreign currency transaction gain. Equity in loss
in joint venture company relates to the Company's interest in NBS Projects,
which began operations in mid-1998. No tax benefit was taken during the period
for the losses incurred by the Company's U.S. operations, however, an income tax
provision was provided for the earnings of the Company's European subsidiaries.
Financial Condition
-------------------
Liquidity and Capital Resources
- ----------------------------------
Working capital increased from $24,133,000 at December 31, 1998 to $24,556,000
at September 30, 1999 and cash and cash equivalents decreased from $3,793,000 at
December 31, 1998 to $2,049,000 at September 30, 1999 as a result of the
following:
Cash Flows from Operating Activities
- ----------------------------------------
During the nine months ended September 30, 1999 and 1998 net cash used in
operating activities amounted to $2,755,000 and $1,183,000, respectively. The
primary reasons for the $1,572,000 change between the two periods were an
increase in accounts receivable of $1,292,000 in 1999 vs. a decrease of
$1,749,000 in 1998, a decrease in accounts payable and accrued expenses of
$235,000 in 1999 vs. a decrease of $985,000 in 1998 and a decrease in advance
payments from customers in 1999 of $1,248,000 vs. a decrease of $172,000 in 1998
partially offset by a decrease inventories in 1999 of $204,000 vs. an increase
of $1,584,000 in 1998 and the net loss of $788,000 in 1999 vs. a net loss of
$893,000 in 1998.
Cash Flows from Investing Activities
- ----------------------------------------
Net cash used in investing activities amounted to $850,000 in 1999 vs. $986,000
in 1998, primarily as a result of additions to property, plant and equipment in
both periods.
Cash Flows from Financing Activities
- ----------------------------------------
Net cash provided by financing activities amounted to $1,932,000 in 1999 vs.
$326,000 in 1998. The 1999 amount includes $372,000 from the exercise of stock
options and the 1998 amount includes $359,000 from the exercise of stock options
and the 1999 period includes $1,250,000 of borrowings under the Company's
long-term revolving credit facility and $247,000 of proceeds from a mortgage
partially offset in both periods by the repayment of long-term debt.
10
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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 the funding commitments for DGI BioTechnologies.
Investment
- ----------
As previously disclosed in the Company's annual report, Organica, Inc., in which
the Company has invested and which is a manufacturer of environmentally friendly
consumer products, is in transition as its Chief Executive Officer has left the
Company and its executive offices have been consolidated with its Pennsylvania
production facility. While the Company continues to believe in the
marketability of Organica's products, it is closely monitoring its investment in
Organica relative to Organica's operations and financial results during this
transition period.
Credit Agreement
- -----------------
The Company had a $5 million secured revolving credit agreement with Summit Bank
which was effective through May 31, 1999. On April 16, 1999, the Company
terminated the credit agreement with Summit Bank and entered into an agreement
(the Bank Agreement) with First Union National Bank for a three year, $31
million secured line of credit. The Bank Agreement provides the Company with a
$5 million revolving credit facility for both working capital and for letters of
credit, a $1 million revolving line of credit for equipment acquisition
purposes, a $15 million credit line for acquisitions and a $10 million foreign
exchange facility. There are no compensating balance requirements and any
borrowings under the Bank Agreement bear interest at various rates based upon a
function of the bank's prime rate or Libor at the discretion of the Company.
All of the Company's domestic assets, which are not otherwise subject to lien,
have been pledged as security for any borrowings under this Bank Agreement. The
Bank Agreement contains various business and financial covenants including,
among other things, a debt service coverage ratio, a net worth calculation, and
a debt to tangible net worth ratio. At September 30, 1999, $1,250,000 was
outstanding under the working capital portion of the revolving credit facility.
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
are all Y2K compliant.
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 date 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 and companies
accounted for using the equity method requesting information as to their
readiness for the Y2K and based upon the responses believes that the respondents
are prepared for the Y2K. 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 has developed a business contingency plan 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.
11
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Costs of addressing the Year 2000 issue have not been material to date and,
based on information gathered to date, are not currently expected to have a
material adverse impact on the Company's consolidated 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") - established fixed conversion rates between
their existing sovereign currencies (the "legacy currencies") and the Euro. The
participating countries adopted the Euro as their common legal currency on that
date. As of January 1, 1999, a newly created European Central Bank was
established to control monetary policy, including money supply and interest
rates for the participating countries. The legacy currencies are scheduled to
remain legal tender in the participating countries as denominations of the Euro
between January 1, 1999 and January 1, 2002 (the "transition period"). During
the transition period, public and private parties may pay for goods and services
using either the Euro or the participating country's legacy currency on a "no
compulsion, no prohibition" basis.
The Company has initiated and is evaluating on an on-going basis the effects, if
any, of the Euro conversion upon its business. Factors being considered
include, but are not limited to: the possible impact of the Euro conversion on
revenues, expenses and income from operations, the ability to adapt information
technology to accommodate Euro-denominated transactions, the market risks with
respect to financial instruments, the continuity of material contracts, and the
potential tax consequences.
The Company believes that the Euro-conversion will not have a material
operational or financial impact.
Recent Accounting Pronouncements
- ----------------------------------
In June 1998, Statement of Financial Accounting Standards (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 recognizes all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. This statement was effective for all quarters of fiscal years
beginning after June 15, 1999. In June 1999, SFAS No. 137 was issued which
defers the effective date of SFAS No. 133 so that it is effective for all fiscal
quarters of all fiscal years beginning after June 15, 2000. The Company does
not believe that this statement will have a material impact on the financial
statements.
12
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NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
- ------------------------------------------------
a) The exhibits to this report are listed on the Exhibit Index included
elsewhere herein.
b) No reports on Form 8-K have been filed during the quarter ended September
30, 1999.
c) Appointment of Directors:
At a meeting of the Board of Directors (the Board) of the Company held on
August 10, 1999, the Board elected Kenneth Freedman as a Class III director
(term expiring at the 2002 Annual Meeting) as a replacement for Dr. Marvin
Weinstein who retired as a director at the May 1999 Annual Meeting. Kenneth
Freedman is the son of David Freedman, Chairman of the Board of the Company and
the nephew of Sigmund Freedman, Treasurer of the Company.
Kenneth Freedman is 40 years old and since February 1992 has been the
President/Executive Director of Auricle Communications, a not-for-profit
corporation dedicated to public radio programming.
The Board also elected Peter Schkeeper as a Class I director (term expiring
at the 2000 Annual Meeting). Mr. Schkeeper is 55 years old and since January 1,
1993 has been the President of Schkeeper Inc., a professional engineering
inspection services company.
13
<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 12, 1999
/s/ Ezra Weisman
-----------------------
Ezra Weisman
President
(Chief Executive Officer)
/s/ Samuel Eichenbaum
-----------------------
Samuel Eichenbaum
Vice President - Finance
(Principal Accounting Officer)
14
<PAGE>
<TABLE>
<CAPTION>
NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
EXHIBIT INDEX
-------------
Exhibit No. Exhibit. Page No.
- ----------- ------------------------------------- --------
<S> <C> <C>
Financial Data Schedule
27 (Filed electronically with SEC only)
28 Indemnification Agreements with
newly appointed Directors of the
Company, Peter Schkeeper
and Kenneth Freedman
</TABLE>
15
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 2049
<SECURITIES> 0
<RECEIVABLES> 11110
<ALLOWANCES> 0
<INVENTORY> 15506
<CURRENT-ASSETS> 31067
<PP&E> 5634
<DEPRECIATION> 0
<TOTAL-ASSETS> 38139
<CURRENT-LIABILITIES> 6511
<BONDS> 0
<COMMON> 333
0
0
<OTHER-SE> 29110
<TOTAL-LIABILITY-AND-EQUITY> 38139
<SALES> 38491
<TOTAL-REVENUES> 38491
<CGS> 23361
<TOTAL-COSTS> 39146
<OTHER-EXPENSES> (25)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 38
<INCOME-PRETAX> (668)
<INCOME-TAX> 120
<INCOME-CONTINUING> (788)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (788)
<EPS-BASIC> (.15)
<EPS-DILUTED> (.15)
</TABLE>
INDEMNIFICATION AGREEMENT
--------------------------
AGREEMENT dated August 10,1999, between NEW BRUNSWICK SCIENTIFIC CO., INC.,
a New Jersey corporation (the "Corporation") and Peter Schkeeper (the
"Director").
WHEREAS, the Director is a member of the board of directors of the Corporation
and an officer of the Corporation; and
WHEREAS, proceedings based upon the Director's performance of his duties may be
brought from time to time against or involving him; and
WHEREAS, the Corporation recognizes that the threat of such proceedings might
inhibit the Director in his performance of his duties and/or cause the Director
to cease serving as a director of the Corporation; and
WHEREAS, to reduce any such inhibition, the Corporation wishes to indemnify the
Director against liabilities he may incur as a result of certain proceedings, as
well as expenses he may incur in his defense in such proceedings; and
WHEREAS, in certain proceedings involving claims relating to the Employee
Retirement Income Security Act of 1974, as amended, Federal law may apply to
limit the permissible scope of indemnification; and
NOW, THEREFORE, the parties hereto, for valuable consideration, incident to the
Director's service to, and to induce the continued service of the Director to
the Corporation, agree as follows:
1
<PAGE>
ARTICLE I
----------
DEFINITIONS
-----------
1.1 Proceeding. "Proceeding" shall mean any pending, threatened or
----------
completed civil, criminal, administrative or arbitrative action, suit or
proceeding, any appeal from any such action, suit or proceeding, and any inquiry
or investigation which could lead to any such action, suit or proceeding.
1.2 Expenses. "Expenses" shall mean reasonable costs, disbursements and
--------
counsel fees.
1.3 Liabilities. "Liabilities" shall mean amounts paid or incurred in
-----------
satisfaction or settlements, judgments, fines and penalties.
1.4 Derivative Suit. "Derivative Suit" shall mean a Proceeding against the
----------------
Director brought by or in the right of the Corporation, which involves the
Director by reason of his being or having been a director, officer or agent of
the Corporation or a subsidiary thereof.
1.5 Breach Of The Director's Duty of Loyalty. "Breach Of The Director's
--------------------------------------------
Duty Of Loyalty" shall mean an act or omission which that person knows or
believes to be contrary to the best interests of the Corporation or its
Shareholders in connection with a matter in which he has a material conflict of
interest.
1.6 ERISA Suit. "ERISA Suit" shall mean a proceeding against the Director
-----------
brought by or on behalf of a participant(s) or beneficiary of any employee
welfare or pension benefit plan by reason of his being or having been a Trustee
or fiduciary of such plan, or by reason of his actions with respect to the plan
which he has taken in his capacity as a Director.
2
<PAGE>
ARTICLE II
-----------
INDEMNIFICATION
---------------
2.1 Personal Liability. The Director shall not be personally liable to
------------------
the Corporation or its stockholders for damages for breach of any duty owed to
the Corporation or its stockholders unless such breach of duty is based upon an
act or omission (a) in Breach Of The Director's Duty Of Loyalty to the
Corporation or its stockholders; (b) not in good faith or involving a knowing
violation of law; or (c) resulting in receipt by the Director of an improper
personal benefit.
2.2 Expenses. Unless otherwise expressly prohibited by law, the Corporation
--------
shall indemnify the Director against his Expenses and all Liabilities in
connection with any Proceeding involving the Director, including a proceeding by
or in the right of the Corporation, unless such breach of duty is based upon an
act or omission (a) in Breach Of The Director's Duty Of Loyalty to the
Corporation or its stockholders; (b) not in good faith or involving a knowing
violation of law; or (c) resulting in receipt by the Director of an improper
personal benefit.
2.3 Advancement of Expenses. The Corporation shall advance or pay those
-------------------------
Expenses incurred by the Director in a Proceeding as and when incurred,
provided, however, that the Director shall, as a condition to receipt of such
-------
advances, undertake to repay all amounts advanced if it shall finally be
adjudicated that the breach of duty by the Director was based on an act or
omission (a) in Breach Of The Director's Duty Of Loyalty to the Corporation or
its stockholders; (b) not in good faith or involving a knowing violation of the
law; or (c) resulting in receipt of an improper personal benefit.
3
<PAGE>
ARTICLE III
-----------
INDEMNIFICATION FOR ERISA SUITS
----------------------------------
3.1 Indemnification. The Corporation shall, to the extent
---------------
indemnification is not available to the Director under Article II of this
Agreement, indemnify the Director against any and all Liabilities and Expenses
which he may incur in connection with any ERISA Suit, if:
(a) he acted in good faith, and
(b) in a manner which did not constitute a breach of fiduciary obligations
as defined by the Employee Retirement Income Security Act, 29 U.S.C. 1101-1114.
3.2 No Presumption. The termination of any proceeding in connection
---------------
with any ERISA Suit by judgment, order or settlement should not of itself create
a presumption that the Director did not meet the applicable standards of conduct
set forth in subparagraphs (a) and (b) above.
3.3 Determination. Any determination concerning whether the Director met
-------------
the standards of conduct set forth in subparagraphs 3.1(a) and (b) above shall
be made:
(a) by the Board of Directors of the Corporation or a committee thereof
acting by a majority vote of a quorum consisting of directors who were not
parties to or otherwise involved in the proceeding; or
(b) by the Shareholders, if provided by the Certificate of Incorporation,
the by-laws of the Corporation, or a resolution of either the Board of Directors
or the Shareholders of the Corporation; or
4
<PAGE>
(c) by independent legal counsel in a written opinion, if a quorum of
the Board of Directors cannot be obtained, or if a quorum of the Board of
Directors or a committee thereof by a majority vote of the disinterested
directors so directs. Such counsel shall be designated by the Board of
Directors.
ARTICLE IV
-----------
MISCELLANEOUS
-------------
4.1 Agreement Effective Despite Service Prior to Effective Date and
-------------------------------------------------------------------
After Termination of Director. This Agreement shall be effective without regard
--------------------------
to the service of the Director as a Director of the Corporation prior to the
date hereof and this Agreement shall remain effective notwithstanding the
removal, resignation, death or other termination of the Director from any
position with the Corporation.
4.2 Binding Effect Upon Successors of Corporation. This Agreement
--------------------------------------------------
shall bind the Corporation, its successors and assigns.
4.3 Insurance. The Corporation, at its sole discretion, may purchase and
---------
maintain insurance on behalf of the Director.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
ATTEST: NEW BRUNSWICK SCIENTIFIC CO., INC.
______________________ By:_______________________________________
________________________________________
5
<PAGE>
INDEMNIFICATION AGREEMENT
--------------------------
AGREEMENT dated August 10,1999, between NEW BRUNSWICK SCIENTIFIC CO., INC.,
a New Jersey corporation (the "Corporation") and Kenneth Freedman (the
"Director").
WHEREAS, the Director is a member of the board of directors of the Corporation
and an officer of the Corporation; and
WHEREAS, proceedings based upon the Director's performance of his duties may be
brought from time to time against or involving him; and
WHEREAS, the Corporation recognizes that the threat of such proceedings might
inhibit the Director in his performance of his duties and/or cause the Director
to cease serving as a director of the Corporation; and
WHEREAS, to reduce any such inhibition, the Corporation wishes to indemnify the
Director against liabilities he may incur as a result of certain proceedings, as
well as expenses he may incur in his defense in such proceedings; and
WHEREAS, in certain proceedings involving claims relating to the Employee
Retirement Income Security Act of 1974, as amended, Federal law may apply to
limit the permissible scope of indemnification; and
NOW, THEREFORE, the parties hereto, for valuable consideration, incident to the
Director's service to, and to induce the continued service of the Director to
the Corporation, agree as follows:
1
<PAGE>
ARTICLE I
----------
DEFINITIONS
-----------
1.1 Proceeding. "Proceeding" shall mean any pending, threatened or
----------
completed civil, criminal, administrative or arbitrative action, suit or
proceeding, any appeal from any such action, suit or proceeding, and any inquiry
or investigation which could lead to any such action, suit or proceeding.
1.2 Expenses. "Expenses" shall mean reasonable costs, disbursements and
--------
counsel fees.
1.3 Liabilities. "Liabilities" shall mean amounts paid or incurred in
-----------
satisfaction or settlements, judgments, fines and penalties.
1.4 Derivative Suit. "Derivative Suit" shall mean a Proceeding against the
----------------
Director brought by or in the right of the Corporation, which involves the
Director by reason of his being or having been a director, officer or agent of
the Corporation or a subsidiary thereof.
1.5 Breach Of The Director's Duty of Loyalty. "Breach Of The Director's
--------------------------------------------
Duty Of Loyalty" shall mean an act or omission which that person knows or
believes to be contrary to the best interests of the Corporation or its
Shareholders in connection with a matter in which he has a material conflict of
interest.
1.6 ERISA Suit. "ERISA Suit" shall mean a proceeding against the Director
-----------
brought by or on behalf of a participant(s) or beneficiary of any employee
welfare or pension benefit plan by reason of his being or having been a Trustee
or fiduciary of such plan, or by reason of his actions with respect to the plan
which he has taken in his capacity as a Director.
2
<PAGE>
ARTICLE II
-----------
INDEMNIFICATION
---------------
2.1 Personal Liability. The Director shall not be personally liable to
------------------
the Corporation or its stockholders for damages for breach of any duty owed to
the Corporation or its stockholders unless such breach of duty is based upon an
act or omission (a) in Breach Of The Director's Duty Of Loyalty to the
Corporation or its stockholders; (b) not in good faith or involving a knowing
violation of law; or (c) resulting in receipt by the Director of an improper
personal benefit.
2.2 Expenses. Unless otherwise expressly prohibited by law, the Corporation
--------
shall indemnify the Director against his Expenses and all Liabilities in
connection with any Proceeding involving the Director, including a proceeding by
or in the right of the Corporation, unless such breach of duty is based upon an
act or omission (a) in Breach Of The Director's Duty Of Loyalty to the
Corporation or its stockholders; (b) not in good faith or involving a knowing
violation of law; or (c) resulting in receipt by the Director of an improper
personal benefit.
2.3 Advancement of Expenses. The Corporation shall advance or pay those
-------------------------
Expenses incurred by the Director in a Proceeding as and when incurred,
provided, however, that the Director shall, as a condition to receipt of such
-------
advances, undertake to repay all amounts advanced if it shall finally be
adjudicated that the breach of duty by the Director was based on an act or
omission (a) in Breach Of The Director's Duty Of Loyalty to the Corporation or
its stockholders; (b) not in good faith or involving a knowing violation of the
law; or (c) resulting in receipt of an improper personal benefit.
3
<PAGE>
ARTICLE III
-----------
INDEMNIFICATION FOR ERISA SUITS
----------------------------------
3.1 Indemnification. The Corporation shall, to the extent
---------------
indemnification is not available to the Director under Article II of this
Agreement, indemnify the Director against any and all Liabilities and Expenses
which he may incur in connection with any ERISA Suit, if:
(a) he acted in good faith, and
(b) in a manner which did not constitute a breach of fiduciary obligations
as defined by the Employee Retirement Income Security Act, 29 U.S.C. 1101-1114.
3.2 No Presumption. The termination of any proceeding in connection
---------------
with any ERISA Suit by judgment, order or settlement should not of itself create
a presumption that the Director did not meet the applicable standards of conduct
set forth in subparagraphs (a) and (b) above.
3.3 Determination. Any determination concerning whether the Director met
-------------
the standards of conduct set forth in subparagraphs 3.1(a) and (b) above shall
be made:
(a) by the Board of Directors of the Corporation or a committee thereof
acting by a majority vote of a quorum consisting of directors who were not
parties to or otherwise involved in the proceeding; or
(b) by the Shareholders, if provided by the Certificate of Incorporation,
the by-laws of the Corporation, or a resolution of either the Board of Directors
or the Shareholders of the Corporation; or
4
<PAGE>
(c) by independent legal counsel in a written opinion, if a quorum of
the Board of Directors cannot be obtained, or if a quorum of the Board of
Directors or a committee thereof by a majority vote of the disinterested
directors so directs. Such counsel shall be designated by the Board of
Directors.
ARTICLE IV
-----------
MISCELLANEOUS
-------------
4.1 Agreement Effective Despite Service Prior to Effective Date and
-------------------------------------------------------------------
After Termination of Director. This Agreement shall be effective without regard
- --------------------------
to the service of the Director as a Director of the Corporation prior to the
date hereof and this Agreement shall remain effective notwithstanding the
removal, resignation, death or other termination of the Director from any
position with the Corporation.
4.2 Binding Effect Upon Successors of Corporation. This Agreement
--------------------------------------------------
shall bind the Corporation, its successors and assigns.
4.3 Insurance. The Corporation, at its sole discretion, may purchase and
---------
maintain insurance on behalf of the Director.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
ATTEST: NEW BRUNSWICK SCIENTIFIC CO., INC.
______________________ By:_______________________________________
________________________________________
5
<PAGE>
