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, 2000 Commission File No. 0-6994
------
NEW BRUNSWICK SCIENTIFIC CO., INC.
State of Incorporation - New Jersey E. I. #22-1630072
-----------
44 Talmadge Road, Edison, N.J. 08818-4005
Registrant's Telephone Number: 732-287-1200
------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding twelve (12) months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past ninety (90) days.
Yes X No
---
There are 6,090,320 Common shares outstanding as of November 6, 2000.
1
<PAGE>
NEW BRUNSWICK SCIENTIFIC CO., INC.
Index
<TABLE>
<CAPTION>
PAGE NO.
-----------------------------
<S> <C> <C>
PART I. FINANCIAL INFORMATION:
Consolidated Balance Sheets -
September 30, 2000 and December 31, 1999 3
Consolidated Statements of Operations -
Three and Nine Months Ended September 30, 2000 and 1999 4
Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 2000 and 1999 5
Consolidated Statements of Comprehensive Loss -
Three and Nine Months Ended September 30, 2000 and 1999 6
Notes to Consolidated Financial Statements 7
Management's Discussion and Analysis of Results
of Operations and Financial Condition 11
PART II.OTHER INFORMATION 16
</TABLE>
2
<PAGE>
NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except for share and per share data)
ASSETS
------
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
--------------- -------------
Current Assets (Unaudited)
--------------------------------------------
<S> <C> <C>
Cash and cash equivalents $ 1,473 $ 2,111
Accounts receivable, net 10,517 13,769
Refundable income taxes 238 28
Deferred income taxes 85 85
Inventories:
Raw materials and sub-assemblies 8,287 6,397
Work-in-process 4,305 3,669
Finished goods 5,435 4,931
--------------- -------------
Total inventories 18,027 14,997
Prepaid expenses and other current assets 869 719
--------------- -------------
Total current assets 31,209 31,709
--------------- -------------
Property, plant and equipment, net 6,168 7,023
Excess of cost over net assets acquired, net 4,407 4,751
Deferred income taxes 153 153
Other assets 1,595 2,390
--------------- -------------
$ 43,532 $ 46,026
=============== =============
</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<TABLE>
<CAPTION>
Current Liabilities
--------------------
<S> <C> <C>
Current installments of long-term debt $ 240 $ 236
Advance payments from customers 2,133 462
Accounts payable and accrued expenses 7,262 7,831
-------- --------
Total current liabilities 9,635 8,529
-------- --------
Long-term debt, net of current installments 8,083 7,347
-------- --------
Other liabilities 262 380
Shareholders' equity:
Common stock, $0.0625 par value per share,
authorized 25,000,000 shares; outstanding, 2000
- 6,079,040; 1999 - 5,344,000 net of shares held
in treasury, 2000 - 520,375 and 1999 - 473,069 381 334
Capital in excess of par 36,804 32,907
Accumulated deficit (9,172) (2,107)
Accumulated other comprehensive loss (2,399) (1,032)
Notes receivable from exercise of stock options (62) (332)
-------- --------
Total shareholders' equity 25,552 29,770
-------- --------
$43,532 $46,026
======== ========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------- --------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 12,597 $ 12,146 $ 34,793 $ 38,491
Operating costs and expenses:
Cost of sales 7,534 7,250 20,458 23,361
Selling, general and administrative
expenses 3,769 3,678 11,699 11,297
Research, development and engineering
expenses 1,594 1,595 5,247 4,488
----------- ----------- ------------ -----------
Total operating costs and expenses 12,897 12,523 37,404 39,146
----------- ----------- ------------ -----------
Loss from operations (300) (377) (2,611) (655)
Other income (expense):
Interest income 15 11 36 35
Interest expense (166) (23) (468) (38)
Other income (expense), net (34) 39 (57) 23
Writedown of investment (150) - (950) -
Equity in loss in joint venture company (8) (15) (14) (33)
----------- ----------- ------------ -----------
(343) 12 (1,453) (13)
----------- ----------- ------------ -----------
Loss before income taxes (643) (365) (4,064) (668)
Income tax expense (benefit) (12) 120 (105) 120
----------- ----------- ------------ -----------
Net loss $ (631) $ (485) $ (3,959) $ (788)
=========== =========== ============ ===========
Basic loss per share $ (.10) $ ( .08) $ (.66) $ (.14)
=========== =========== ============ ===========
Diluted loss per share $ (.10) $ (.08) $ (.66) $ (.14)
=========== =========== ============ ===========
Basic weighted average number of
shares outstanding 6,071 5,862 6,017 5,827
=========== =========== ============ ===========
Diluted weighted average number of
shares outstanding 6,071 5,862 6,017 5,827
=========== =========== ============ ===========
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------------------
2000 1999
------- -------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $(3,959) $ (788)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 865 738
Writedown of investment 950 -
Change in related balance sheet accounts:
Accounts receivable 2,623 (1,292)
Refundable income taxes (210) 94
Inventories (3,267) 204
Prepaid expenses and other current assets (195) (228)
Accounts payable and accrued expenses (121) (235)
Advance payments from customers 1,697 (1,248)
Other assets (218) -
Other liabilities (118) -
-------- --------
Net cash used in operating activities (1,953) (2,755)
-------- --------
Cash flows from investing activities:
Additions to property, plant and equipment (289) (875)
Sale of equipment 3 25
Increase in excess of cost over net assets acquired
related to acquisition costs (205) -
-------- --------
Net cash used in investing activities (491) (850)
-------- --------
Cash flows from financing activities:
Repayment of long-term debt (163) (18)
Borrowings under revolving credit facility 1,000 1,250
Proceeds from mortgage - 247
Proceeds from issue of common stock under
stock purchase and option plans 838 421
Payments on notes receivable related to
exercised stock options 270 32
-------- --------
Net cash provided by financing activities 1,945 1,932
-------- --------
Net effect of exchange rate changes on cash (139) (71)
-------- --------
Net decrease in cash and cash equivalents (638) (1,744)
Cash and cash equivalents at beginning of period 2,111 3,793
-------- --------
Cash and cash equivalents at end of period $ 1,473 $ 2,049
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 443 $ 42
Income taxes 291 104
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------- --------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net loss $ (631) $(485) $(3,959) $ (788)
Other comprehensive income (loss):
Foreign currency translation adjustment (638) 149 (1,367) (669)
-------- ------ -------- --------
Net comprehensive loss $(1,269) $(336) $(5,326) $(1,457)
======== ------ ======== ========
</TABLE>
See notes to consolidated financial statements.
6
<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 September
30, 2000 and the results of its operations and cash flows for the three and nine
months ended September 30, 2000. 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 and nine months ended
September 30, 2000 and 1999:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
------------ ------------
Laboratory Drug Laboratory Drug
Research Lead Total Research Lead Total
Equipment DiscoverySegmentsEquipment DiscoverySegments
--------- --------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
2000
------
Net sales $12,504 $ 93 $12,597 $34,465 $ 328 $34,793
Percentage of sales 99.3% 0.7% 100% 99.1% 0.9% 100%
Income (loss) from operations 428 (728) (300) (323) (2,288) (2,611)
Total assets (1) 43,163 369 43,532
Capital expenditures 64 - 64 289 - 289
Depreciation and amortization (1) 187 - 187 865 - 865
1999
------
Net sales $12,053 $ 93 $12,146 $36,798 $ 1,693 $38,491
Percentage of sales 99.2% 0.8% 100% 95.6% 4.4% 100%
Income (loss) from operations 396 (773) (377) (70) (585) (655)
Total assets (1) 37,415 724 38,139
Capital expenditures 158 - 158 875 - 875
Depreciation and amortization (1) 243 - 243 738 - 738
<FN>
(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.
</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
7
<PAGE>
average number of shares outstanding plus the dilutive effect, if any, of stock
options which have been issued by the Company. Since the Company incurred
losses for all periods presented, the inclusion of options in the calculation of
weighted average common shares is anti-dilutive and therefore there is no
difference between basic and diluted earnings per share.
Note 4 - Long-term debt and credit agreement:
On April 16, 1999, the Company 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. The Bank Agreement was amended in November
1999 in connection with the acquisition of the DJM Cryo-Research Group. The
Company was not in compliance with certain covenants at June 30, 2000, however,
on August 3, 2000, the Company and the bank entered into an amendment to the
Bank Agreement which waived such noncompliance at June 30, 2000, and amended
certain financial covenants prospectively based upon certain financial
information provided by the Company. At September 30, 2000 the Company was in
compliance with the amended bank covenants. At September 30, 2000, $7,604,000
was outstanding under the Bank Agreement.
In November 1999, the Company issued notes in the amount of 250,000 ($392,500
at the date of acquisition) in connection with the acquisition of the DJM
Cryo-Research Group. The notes bear interest at 6% which are payable annually
and principal is payable in five equal annual installments commencing November
2004. At September 30, 2000 the balance of the notes was $369,000.
8
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Note 5 - Consolidated statements of shareholders' equity:
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
---------------------
2000 1999
------- --------
(In thousands)
<S> <C> <C>
Balance at beginning of period $29,770 $30,447
Net loss (3,959) (788)
Other comprehensive loss (1,367) (669)
Issuance of shares under stock purchase plan 52 49
Issuance of shares under stock option plans 786 350
Tax benefit related to exercise of stock options - 22
stock options 270 32
-------- --------
Balance at end of period $25,552 $29,443
======== ========
</TABLE>
Note 6 - Stock dividend
On February 28, 2000, the Company declared a 10% stock dividend, payable May 15,
2000 to shareholders of record as of April 14, 2000. Upon distribution of the
stock dividend, the weighted average number of shares outstanding for the three
and nine months ended September 30, 1999 was retroactively restated.
Note 7 - Investment in Organica, Inc.
Since November 1994, the Company has invested $950,000 (less than a
twenty-percent interest) in Organica, Inc. (Organica) which was formed in 1993
to develop and commercialize various "environmentally friendly" products
produced via fermentation processes.
As previously described in the Company's Annual Report on Form 10-K and
quarterly reports, there had been continuing uncertainties as to the future
direction of Organica, Inc. as it continued to generate net losses. The Company
concluded that a significant writedown of the Company's investment in Organica
was warranted and in the second quarter, the Company recorded an $800,000
writedown to reduce its minority investment to a book value of $150,000. During
the quarter ended September 30, 2000 the two members of the Organica Board of
Directors appointed by the Company resigned. On October 30, 2000 Organica filed
in the United States Bankruptcy Court for the District of Delaware, a voluntary
petition for reorganization under Chapter 11 of the Bankruptcy Code. Based on
the information presently available, the Company is unable to determine whether
the investment is recoverable and has, accordingly, written off the remaining
$150,000 investment.
9
<PAGE>
Note 8 - Acquisition
On November 23, 1999, the Company acquired all of the outstanding common stock
of DJM Cryo-Research Limited and the net assets of DJM Fabrications
(collectively, "DJM Cryo-Research Group"), a United Kingdom Corporation and
Partnership under common control, respectively, located in Tollesbury, England
(the Acquisition). The purchase price consisted of 3.5 million ($5.5 million)
in cash, and 250,000 ($392,500) in term notes payable in annual installments
over a five year period beginning in November 2004 with 6.00% interest payable
annually. The source of the cash consideration paid was the Company's line of
credit for acquisition purposes provided by First Union National Bank, payable
in monthly installments of $52,513 with 8.14% fixed interest. DJM Cryo-Research
Group is in the business of designing, developing, and manufacturing ultra-low
temperature freezers for laboratories. The acquisition has been accounted for
by the purchase method and, accordingly, the results of operations of DJM
Cryo-Research Group have been included in the Company's consolidated financial
statements from November 23, 1999. The excess of the purchase price over the
fair value of net identifiable assets acquired has been recorded as goodwill and
is being amortized on a straight-line basis over 25 years. The allocation of
the purchase price is preliminary and will be completed in the fourth quarter
after appraisals are finalized.
The following unaudited pro forma financial information presents the combined
results of operations of the Company and DJM Cryo-Research Group as if the
acquisition had occurred on January 1, 1999, after giving effect to certain
adjustments, including amortization of goodwill, additional depreciation
expense, increased interest expense on debt related to the acquisition, and
related income tax effects. The unaudited pro forma financial information does
not necessarily reflect the results of operations that would have occurred had
the Company and DJM Cryo-Research Group constituted a single entity during such
period.
<TABLE>
<CAPTION>
Three months ended Nine Months ended
September 30, 1999 September 30, 1999
------------------ ------------------
(in thousands, except per share amounts)
----------------------------------------
<S> <C> <C>
Net sales $12,180 $38,593
Net (loss) $ (542) $ (959)
Loss per diluted share $ (.09) $ (.16)
</TABLE>
Note 9 - Reclassifications:
Certain balance sheet reclassifications have been made to the prior year's
presentation to conform to the 2000 presentation.
10
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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, 2000.
Results of Operations
---------------------
Quarter Ended September 30, 2000 vs. Quarter Ended September 30, 1999.
--------------------------------------------------------------------------------
For the quarter ended September 30, 2000, net sales were $12,597,000 compared
with net sales of $12,146,000 for the quarter ended September 30, 1999, an
increase of 3.7%. The net loss for the 2000 quarter of $631,000 or $.10 per
diluted share compared with a net loss of $485,000 or $.08 per diluted share for
the third quarter of 1999.
Domestic shipments in the U.S. market continued to show strength with a 15%
increase over the 1999 quarter, however, these gains were partially offset by
continued weakness in the Company's European operations primarily as a result of
the strength of the U.S. dollar vs. the Euro and the other currencies in the
countries where the Company operates. As a result of the higher mix of domestic
sales and the acquisition of DJM in November 1999, which prior to the
acquisition was a supplier to the Company, the Company has been able to maintain
its gross margins which were 40.2% for the 2000 quarter as compared with 40.3%
for the 1999 quarter.
Interest expense increased to $166,000 in the 2000 quarter compared with $23,000
for the 1999 quarter as a result of borrowings under the Company's line of
credit for the acquisition of DJM and for working capital purposes. Other
income (expense), net was an expense of $34,000 in 2000 vs. income of $39,000 in
1999 due primarily to the inclusion in the 1999 amount of $51,000 as the result
of a foreign currency transaction gain.
During the quarter the Company wrote off its remaining $150,000 investment in
Organica, Inc. (See Other Matters - Investment in Organica, Inc.)
11
<PAGE>
No tax benefit was taken during the quarter for the losses incurred by the
Company's U.S. operations, however, a tax benefit was provided for the losses of
the Company's European subsidiaries due to those subsidiaries ability to
carryback such losses if necessary.
Nine Months Ended September 30, 2000 vs. Nine Months Ended September 30, 1999
--------------------------------------------------------------------------------
For the nine months ended September 30, 2000, net sales were $34,793,000
compared with net sales of $38,491,000 for the nine months ended September 30,
1999, a decrease of 9.6%. The net loss for the 2000 period of $3,959,000 or
$.66 per diluted share compared with a net loss of $788,000 or $.14 per diluted
share for the comparable 1999 period.
The decrease in net sales for the first nine months of 2000 resulted primarily
from the inclusion of $1,693,000 of DGI revenues in the 1999 period compared
with $328,000 of DGI revenues for the first nine months of 2000 and a
significant downturn in shipments by the Company's European subsidiaries as a
result of the continued strength of the U.S. dollar against the currencies in
the countries where the Company's European subsidiaries operate and due to what
continues to appear to be a short-term weakening in the European market. In
addition, the sale of a custom bioprocess system in Europe in the amount of
$800,000 was reflected in the 1999 period with no comparable sale in 2000.
During the 2000 period the order backlog increased to $12,698,000 from
$8,569,000 at December 31, 1999 primarily as a result of orders for custom
bioprocess equipment which require six months or more to complete. A
significant portion of the backlog is expected to be shipped during the fourth
quarter of 2000.
Excluding DGI revenues from the 2000 and 1999 periods, gross margins increased
to 40.6% from 36.5% in the nine months of 1999 primarily as a result of the
Company's acquisition of DJM in November 1999, which prior to the acquisition
was a supplier to the Company, as well as a more profitable mix of products sold
in the 2000 period.
The increase of 16.9% in research, development and engineering expenses is
primarily attributable to increased spending by DGI BioTechnologies, the
Company's drug lead discovery operation, expenses of DJM (which was acquired in
November 1999), and consequently not included in the Company's results of
operations for the first nine months of 1999 and a strengthening of the
Company's engineering staff.
Interest expense increased to $468,000 in the 2000 period compared with $38,000
for the nine months of 1999 as a result of borrowings under the Company's line
of credit for the acquisition of DJM and for working capital purposes. Other
income (expense), net was an expense of $57,000 in 2000 vs. income of $23,000
for the 1999 period due primarily to the inclusion in the 1999 amount of $51,000
as the result of a foreign currency transaction gain.
The writedown in investment during the 2000 period is a result of the Company's
writedown of its investment in Organica, Inc. (See Other Matters - Investment in
Organica, Inc.)
No tax benefit was taken during the period for the losses incurred by the
Company's U.S. operations, however, a tax benefit was provided for the losses of
the Company's European subsidiaries due to those subsidiaries' ability to
carryback such losses if necessary.
12
<PAGE>
Financial Condition
-------------------
Liquidity and Capital Resources
----------------------------------
Working capital decreased from $23,180,000 at December 31, 1999 to $21,574,000
at September 30, 2000 and cash and cash equivalents decreased from $2,111,000 at
December 31, 1999 to $1,473,000 at September 30, 2000. During the period ended
September 30, 2000, accounts receivable decreased to $10,517,000 from
$13,769,000 at December 31, 1999 due to the lower level of net sales in the
quarter ended September 30, 2000 compared with the quarter ended December 31,
1999. The cash proceeds related to the decrease in accounts receivable was
offset by an increase in inventories to $18,027,000 at September 30, 2000
compared with $14,997,000 at December 31, 1999. The increase in inventories
resulted primarily from slower than anticipated sales by the Company's European
subsidiaries and the related build-up of inventory and an increase in the number
of custom bioprocess units in production which take from six to nine months to
complete.
On April 16, 1999, the Company 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 covenant, and a ratio of total
liabilities to tangible net worth. The Bank Agreement was amended in November
1999 in connection with the acquisition of DJM Cryo-Research Group. The Company
was not in compliance with certain covenants at June 30, 2000, however, on
August 3, 2000, the Company and the bank entered into an amendment to the Bank
Agreement which waived such noncompliance at June 30, 2000, and amended certain
financial covenants prospectively based upon certain financial information
provided by the Company. At September 30, 2000, the Company was in compliance
with the amended bank covenants and management believes that the Company will be
in compliance with all covenants through December 31, 2000.
In November 1999, the Company issued notes in the amount of 250,000 ($392,500
at the date of acquisition) in connection with the acquisition of the DJM
Cryo-Research Group. The notes bear interest at 6% which are payable annually
and principal is payable in five equal annual installments commencing November
2004. At September 30, 2000 the balance of the notes was $369,000.
Cash Flows from Operating Activities
----------------------------------------
During the nine months ended September 30, 2000 and 1999 net cash used in
operating activities amounted to $1,953,000 and $2,755,000, respectively. The
primary reasons for the $802,000 net change from 1999 to 2000 were a decrease in
accounts receivable in 2000 of $2,623,000 vs. an increase of $1,292,000 in 1999
13
<PAGE>
and an increase in advance payments from customers of $1,697,000 in 2000 vs. a
decrease of $1,248,000 in 1999 partially offset by (i) a net loss in 2000 of
$3,959,000 compared with a net loss of $788,000 in 1999, (ii) an increase in
refundable income taxes of $210,000 in 2000 vs. a decrease of $94,000 in 1999
and (iii) an increase in inventories of $3,267,000 in 2000 vs. a decrease of
$204,000 in 1999.
Cash Flows from Investing Activities
----------------------------------------
Net cash used by investing activities amounted to $491,000 in 2000 vs. $850,000
in 1999. The 2000 period consisted of expenditures for property, plant and
equipment and additional goodwill related to additional acquisition costs of DJM
Cryo-Research. The 1999 period consisted primarily of expenditures for
property, plant and equipment.
Cash Flows from Financing Activities
----------------------------------------
Net cash provided by financing activities amounted to $1,945,000 in 2000 vs.
$1,932,000 in 1999. The 2000 and the 1999 periods include $838,000 and
$421,000, respectively, from the issuance of Common stock under stock purchase
and option plans and $1,000,000 and $1,250,000, respectively, from borrowings
under the Company's revolving credit facility. The 2000 period also includes
$270,000 of repayments on notes receivable related to exercised stock options
and the 1999 period includes $247,000 of proceeds from a mortgage related to the
expansion of the Company's building in the Netherlands. The proceeds in both
periods were partially offset 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 its funding commitments for DGI BioTechnologies.
Other Matters
-------------
Recently Issued Accounting Standards
---------------------------------------
In June 1998, SFAS No. 133 "Accounting for Derivative Instruments and Hedging
Activities" (SFAS No. 133), 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 was
amended so that it is effective for all quarters of fiscal years beginning after
June 15, 2000. The Company does not believe that this statement will have a
material impact on the consolidated financial statements.
Drug-Lead Discovery Business
------------------------------
In October 1995, the Company entered the drug-lead discovery business by forming
a new company to develop a novel, small molecule drug discovery platform. The
company, DGI BioTechnologies, Inc. (DGI), is majority-owned by the Company and
occupies specially designed laboratory space at the Company's headquarters
facility in Edison, New Jersey. To date, DGI has been fully funded by the
Company. DGI's operations have had a significant negative impact on the
Company's 2000 and 1999 earnings and will continue to do so. During the nine
14
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months ended September 30, 2000 and 1999, $2,616,000 and $2,278,000,
respectively, of research and development expenses were charged to operations.
During the 2000 and 1999 periods DGI also recorded $328,000 and $1,693,000,
respectively, of revenues primarily for services and licensing fees related to
the Research and License Agreement with Novo Nordisk A/S. Management believes
DGI needs to become financially self-sufficient in the near term. We are
continuing actively to explore means to accomplish this.
Investment in Organica, Inc.
-------------------------------
Since November 1994, the Company has invested $950,000 (less than a
twenty-percent interest) in Organica, Inc. (Organica) which was formed in 1993
to develop and commercialize various "environmentally friendly" products
produced via fermentation processes.
As previously described in the Company's Annual Report on Form 10-K and
quarterly reports, there had been continuing uncertainties as to the future
direction of Organica, Inc. as it continued to generate net losses. The Company
concluded that a significant writedown of the Company's investment in Organica
was warranted and in the second quarter, the Company recorded an $800,000
writedown to reduce its minority investment to a book value of $150,000. During
the quarter ended September 30, 2000 the two members of the Organica Board of
Directors appointed by the Company resigned. On October 30, 2000 Organica filed
in the United States Bankruptcy Court for the District of Delaware, a voluntary
petition for reorganization under Chapter 11 of the Bankruptcy Code. Based on
the information presently available, the Company is unable to determine whether
the investment is recoverable and has, accordingly, written off the remaining
$150,000 investment.
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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,
2000.
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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 10, 2000 /s/ David Freedman
--------------------
David Freedman
Chairman
/s/ Samuel Eichenbaum
-----------------------
Samuel Eichenbaum
Vice President - Finance
(Principal Accounting Officer)
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