<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 March 31, 1999 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
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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 4,820,446 Common shares outstanding as of May 3, 1999.
<PAGE>
NEW BRUNSWICK SCIENTIFIC CO., INC.
Index
PAGE NO.
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PART I. FINANCIAL INFORMATION:
Item I:
Consolidated Balance Sheets -
March 31, 1999 and December 31, 1998 3
Consolidated Statements of Operations -
Three Months Ended March 31, 1999 and 1998 4
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1999 and 1998 5
Consolidated Statements of Comprehensive Loss -
Three Months Ended March 31, 1999 and 1998 6
Notes to Consolidated Financial Statements 7
Item II:
Management's Discussion and Analysis of Results
of Operations and Financial Condition 9
PART II. OTHER INFORMATION 13
<PAGE>
NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except for share and per share data)
ASSETS
------
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
--------- ------------
(Unaudited)
<S> <C> <C>
Current Assets
- --------------
Cash and cash equivalents $ 2,042 $ 3,793
Accounts receivable, net 9,708 10,230
Refundable income taxes 8 173
Deferred income taxes 134 134
Inventories:
Raw materials and sub-assemblies 6,864 7,091
Work-in-process 3,965 3,457
Finished goods 5,577 5,375
------- -------
Total inventories 16,406 15,923
Prepaid expenses and other current assets 2,036 2,025
------- -------
Total current assets 30,334 32,278
------- -------
Property, plant and equipment, net 5,692 5,622
Deferred income taxes 361 361
Other assets 1,065 1,062
------- -------
$37,452 $39,323
======= =======
</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
-----------------------------------
<TABLE>
<CAPTION>
Current Liabilities
- -------------------
<S> <C> <C>
Current installments of long-term debt $ 24 $ 27
Accounts payable and accrued expenses 7,574 8,118
------- -------
Total current liabilities 7,598 8,145
------- -------
Long-term debt, net of current installments 214 239
------- -------
Other liabilities 492 492
Commitments and contingencies
Shareholders' equity:
Common stock, $0.0625 par value per share,
authorized 25,000,000 shares; outstanding, 1999
- 4,802,659; 1998 - 4,770,444; net of shares held in
treasury, 1999 and 1998 - 430,063 300 298
Capital in excess of par 28,525 28,361
Retained earnings 2,142 3,137
Accumulated other comprehensive loss (1,455) (985)
Notes receivable from exercise of stock options (364) (364)
------- -------
Total shareholders' equity 29,148 30,447
------- -------
$37,452 $39,323
======= =======
</TABLE>
See notes to consolidated financial statements.
<PAGE>
NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------------
1999 1998
------ ------
<S> <C> <C>
Net sales $11,754 $10,950
Operating costs and expenses:
Cost of sales 7,715 6,839
Selling, general and administrative expenses 3,670 3,388
Research, development and engineering expenses 1,371 1,152
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Total operating costs and expenses 12,756 11,379
------- -------
Loss from operations (1,002) (429)
Other income (expense):
Interest income 14 29
Interest expense (2) (2)
Other income (expense), net 7 (5)
Equity in loss in joint venture company (12) -
------- -------
7 22
------- -------
Loss before income tax benefit (995) (407)
Income tax benefit - (98)
------- -------
Net loss $ (995) $ (309)
======= ========
Basic loss per share $ (.21) $ (.07)
======= ========
Diluted loss per share $ (.21) $ (.07)
======= ========
Basic weighted average number of shares outstanding 4,782 4,631
======= ========
Diluted weighted average number of shares outstanding 4,782 4,631
======= ========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------
1999 1998
------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (995) $ (309)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 259 332
Change in related balance sheet accounts:
Accounts receivable 232 1,099
Refundable income taxes 165 (105)
Inventories (632) (193)
Prepaid expenses and other current assets (11) (194)
Accounts payable and accrued expenses (303) (684)
Advance payments from customers (138) (360)
------- -------
Net cash used in operating activities (1,423) (414)
------- -------
Cash flows from investing activities:
Additions to property, plant and equipment (414) (433)
Sale of equipment 15 -
------- -------
Net cash used in investing activities (399) (433)
------- -------
Cash flows from financing activities:
Repayment of long-term debt ( 8) (39)
Proceeds from issue of common stock under
stock option plans 166 49
------- -------
Net cash provided by financing activities 158 10
------- -------
Net effect of exchange rate changes on cash (87) (6)
------- -------
Net decrease in cash and cash equivalents (1,751) (843)
Cash and cash equivalents at beginning of period 3,793 3,968
------- -------
Cash and cash equivalents at end of period $2,042 $ 3,125
====== =======
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 5 $ 2
Income taxes 5 117
</TABLE>
See notes to consolidated financial statements.
<PAGE>
NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
(Unaudited)
Three Months Ended
March 31,
-------------------------
1999 1998
------ ------
Net loss $ (995) $(309)
Other comprehensive income (loss):
Foreign currency translation adjustment (470) 126
------- -----
Net comprehensive loss $(1,465) $(183)
======= =====
See notes to consolidated financial statements.
<PAGE>
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 March 31,
1999 and the results of its operations and cash flows for the three months ended
March 31, 1999 and 1998. Interim results may not be indicative of the results
that may be expected for the year.
Note 2 - Segment Information as of and for the three months ended March 31, 1999
and 1998:
<TABLE>
<CAPTION>
Laboratory Drug
Research Lead
Equipment Discovery Total
---------- --------- -----
<S> <C> <C> <C>
1999: Net sales from external customers 11,754 - 11,754
Loss from operations (362) (640) (1,002)
Total assets (1) 37,313 139 37,452
Capital expenditures 414 - 414
Depreciation (1) 259 - 259
1998: Net sales from external customers 10,950 - 10,950
Earnings (loss) from operations 52 (481) (429)
Total assets (1) 36,817 93 36,910
Capital expenditures 433 - 433
Depreciation (1) 332 - 332
</TABLE>
(1) Fixed assets and depreciation related to the Drug Lead Discovery
segment are not allocated to the segment as the 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.
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.
<PAGE>
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 Agreement) with First Union National Bank for a three year, $31 million
secured line of credit. The 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 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 Agreement.
Note 5 - Consolidated statements of shareholders' equity:
Three Months Ended
March 31,
-----------------------
1999 1998
--------- --------
(In thousands)
Balance at beginning of period $30,447 $30,087
Net loss (995) (309)
Other comprehensive income (loss) (470) 126
Issuance of shares under stock option plans 166 49
------- -------
Balance at end of period $29,148 $29,953
======= =======
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 issuance of the stock
dividend, all share data will be retroactively restated.
<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 ended March 31, 1999.
Results of Operations
Quarter Ended March 31, 1999 vs. Quarter Ended March 31, 1998.
- --------------------------------------------------------------
For the quarter ended March 31, 1999, net sales were $11,754,000 compared with
net sales of $10,950,000 for the quarter ended March 31, 1998, an increase of
7.3%. The net loss for the 1999 quarter of $995,000 or $.21 per diluted share
compares with a net loss of $309,000 or $.07 per diluted share for the first
quarter of 1998.
The increase in sales for the 1999 quarter is primarily attributable to the
Company's European operations. Gross margins declined during the quarter ended
March 31, 1999 to 34.4% from 37.5% during the quarter ended March 31, 1998 due
to the fact that margins on certain product lines and in some market areas were
lower than anticipated but margins are expected to return to historical levels
for the remainder of the year.
Selling, general and administrative expenses increased 8.3% during the 1999
quarter compared with the first 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 19% in research, development and engineering expenses is
primarily attributable to increased spending by DGI BioTechnologies, the
Company's drug lead discovery operation. Interest income declined during the
1999 quarter due to a lower level of average available cash. 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 income tax benefit was established for the quarter ended March
31, 1999 as a valuation allowance was established to offset the deferred tax
asset created by the net operating loss generated in the first quarter of 1999.
<PAGE>
Financial Condition
-------------------
Liquidity and Capital Resources
- -------------------------------
Working capital decreased from $24,133,000 at December 31, 1998 to $22,736,000
at March 31, 1999 and cash and cash equivalents decreased from $3,793,000 at
December 31, 1998 to $2,042,000 at March 31, 1999 as a result of the following:
Cash Flows from Operating Activities
- ------------------------------------
During the quarters ended March 31, 1999 and 1998 net cash used in operating
activities amounted to $1,423,000 and $414,000, respectively. The primary
reasons for the $1,009,000 change between the two periods were a decrease in
accounts receivable of $232,000 in 1999 vs. a decrease of $1,099,000 in 1998, an
increase in inventories of $632,000 in 1999 vs. an increase of $193,000 in 1998
and the net loss of $995,000 in 1999 vs. the net loss of $309,000 in 1998, a
decrease in accounts payable and accrued expenses of $303,000 in 1999 vs. a
decrease of $684,000 in 1998.
Cash Flows from Investing Activities
- ------------------------------------
Net cash used in investing activities amounted to $399,000 in 1999 vs. $433,000
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 $158,000 in 1999 vs.
$10,000 in 1998. The 1999 amount includes $166,000 from the exercise of stock
options and the 1998 amount includes $49,000 from the exercise of stock options,
partially offset in both periods by the 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 the funding commitments for DGI BioTechnologies.
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 Agreement) with First Union National Bank for a three year, $31 million
secured line of credit. The 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 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 Agreement.
<PAGE>
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. The Company 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 in 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
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.
<PAGE>
The Company does not believe that the Euro-conversion will have a material
operational or financial impact.
Recent Accounting Pronouncements
- --------------------------------
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 recognizes 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>
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 March 31, 1999.
<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: May 10, 1999 /s/ Ezra Weisman
-----------------------------------------
Ezra Weisman
President
(Chief Executive Officer)
/s/ Samuel Eichenbaum
-----------------------------------------
Samuel Eichenbaum
Vice President - Finance
(Principal Accounting Officer)
<PAGE>
NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
EXHIBIT INDEX
-------------
Exhibit No. Exhibit Page No.
- ----------- ------- --------
27 Financial Data Schedule
(Filed electronically with SEC only) 15
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000071241
<NAME> NEW BRUNSWICK SCIENTIFIC CO., INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 2,042,000
<SECURITIES> 0
<RECEIVABLES> 9,708,000
<ALLOWANCES> 0
<INVENTORY> 16,406,000
<CURRENT-ASSETS> 30,334,000
<PP&E> 5,692,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 37,452,000
<CURRENT-LIABILITIES> 7,598,000
<BONDS> 0
0
0
<COMMON> 300,000
<OTHER-SE> 28,848,000
<TOTAL-LIABILITY-AND-EQUITY> 37,452,000
<SALES> 11,754,000
<TOTAL-REVENUES> 11,754,000
<CGS> 7,715,000
<TOTAL-COSTS> 12,756,000
<OTHER-EXPENSES> (9,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,000
<INCOME-PRETAX> (995,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (995,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (995,000)
<EPS-PRIMARY> (.21)
<EPS-DILUTED> (.21)
</TABLE>
