<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended March 31, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _____________ to _____________
Commission File Number: 1-11091
SYBRON INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
Wisconsin 22-2849508
--------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
411 East Wisconsin Avenue, Milwaukee, Wisconsin 53202
- - ----------------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
(414) 274-6600
(Registrant's telephone number, including area code)
- - --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report.)
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 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 90 days. Yes X No
--- ---
At May 6, 1996 there were 46,778,313 shares of the Registrant's Common
Stock, par value $0.01 per share, outstanding.
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SYBRON INTERNATIONAL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
Index Page
- - ------------------------------------------------------------------ -----
<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets, March 31, 1996 (unaudited)
and September 30, 1995 2
Consolidated Statements of Operations, three months ended
March 31, 1996 (unaudited) and 1995 (unaudited) and the
six months ended March 31, 1996 (unaudited) and 1995
(unaudited) 3
Consolidated Statements of Shareholders' Equity for the
six months ended March 31, 1996 (unaudited) and the
year ended September 30, 1995 4
Consolidated Statements of Cash Flows, six months ended
March 31, 1996 (unaudited) and 1995 (unaudited) 5
Notes to Unaudited Consolidated Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 7
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 17
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 17
SIGNATURES 18
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SYBRON INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
ASSETS
March 31, September 30,
1996 1995
------------- --------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . $ 12,941 $ 9,243
Accounts receivable (less allowance for doubtful
receivables of $2,277 and $2,355) . . . . . . . . . . . . 117,498 109,572
Inventories (note 2) . . . . . . . . . . . . . . . . . . . 116,531 108,675
Deferred income taxes . . . . . . . . . . . . . . . . . . . 9,615 7,696
Prepaid expenses and other current assets . . . . . . . . . 17,542 13,229
------- --------
Total current assets . . . . . . . . . . . . . . . . . 274,127 248,415
------- -------
Property, plant and equipment net of depreciation of
$119,859 and $103,497 . . . . . . . . . . . . . . . . . . 156,945 148,110
Intangible assets . . . . . . . . . . . . . . . . . . . . . 457,584 437,865
Deferred income taxes . . . . . . . . . . . . . . . . . . . 13,795 11,672
Other non-current assets . . . . . . . . . . . . . . . . . 7,215 6,021
-------- --------
Total assets . . . . . . . . . . . . . . . . . . . . . $909,666 $852,083
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . $ 26,423 $ 27,165
Current portion of long-term debt . . . . . . . . . . . . . 41,274 39,635
Income taxes payable . . . . . . . . . . . . . . . . . . . 673 17,772
Accrued payroll and employee benefits . . . . . . . . . . . 24,781 26,890
Deferred income taxes . . . . . . . . . . . . . . . . . . . 2,137 1,234
Accrued restructuring charges (note 4) . . . . . . . . . . 5,311 -
Other current liabilities . . . . . . . . . . . . . . . . . 23,665 25,459
------- ------
Total current liabilities. . . . . . . . . . . . . . . 124,264 138,155
------- -------
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . 462,128 406,547
Deferred income taxes . . . . . . . . . . . . . . . . . . . . 57,460 62,071
Other liabilities . . . . . . . . . . . . . . . . . . . . . . 13,792 17,803
Minority interest in consolidated subsidiaries . . . . . . . 273 257
Commitments and contingent liabilities:
Shareholders' equity:
Common Stock, $.01 par value; authorized 110,000,000
shares, issued 46,746,289 and 46,529,992 shares, respectively 467 465
Preferred Stock, $.01 par value; authorized 20,000,000 shares - -
Equity Rights; 1,098 rights at $1.09 per right . . . . . . 1 1
Additional paid-in capital . . . . . . . . . . . . . . . . 177,167 172,774
Retained earnings . . . . . . . . . . . . . . . . . . . . . 76,523 54,261
Cumulative foreign currency translation adjustment . . . . (1,938) 220
Treasury common stock, 2,402 shares at cost . . . . . . . . (1) (1)
Minimum pension liability adjustment . . . . . . . . . . . (470) (470)
------- -------
Total shareholders' equity . . . . . . . . . . . . 251,749 227,250
------- -------
Total liabilities and shareholders' equity . . . . . . . $909,666 $852,083
======= =======
</TABLE>
See accompanying notes to unaudited consolidated financial statements
2
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SYBRON INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
1996 1995 1996 1995
---- ----- ---- ----
<S> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . . . . $170,851 $127,936 $317,713 $239,664
Cost of sales . . . . . . . . . . . . . . . . . . . 86,471 63,326 160,483 119,471
------- ------- ------- -------
Gross profit . . . . . . . . . . . . . . . . . . . 84,380 64,610 157,230 120,193
Selling, general and administrative expenses . . . 47,673 37,093 91,192 71,209
Restructuring expense (note 4) . . . . . . . . . . 8,277 - 8,277 -
------- ------- ------- -------
Operating income . . . . . . . . . . . . . . . . . 28,430 27,517 57,761 48,984
------- ------- ------- -------
Other income (expense):
Interest expense. . . . . . . . . . . . . . . . . (8,495) (5,109) (17,265) (9,771)
Amortization of deferred financing costs . . . . (72) (233) (143) (466)
Minority interest in consolidated subsidiaries. . (34) (78) (108) (184)
Other, net . . . . . . . . . . . . . . . . . . . 44 114 24 209
------- ------- ------- -------
Income before income taxes . . . . . . . . . . . . 19,873 22,211 40,269 38,772
Income taxes . . . . . . . . . . . . . . . . . . . 9,333 8,706 18,007 15,320
------- ------- ------- -------
Net income . . . . . . . . . . . . . . . . . . . . $ 10,540 $ 13,505 $ 22,262 $ 23,452
======= ======== ======= =======
Earnings per common share . . . . . . . . . . . . $ .22 $ .29 $ .47 $ .50
======= ======== ======= =======
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
3
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SYBRON INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED SEPTEMBER 30, 1995
AND FOR THE SIX MONTHS ENDED MARCH 31, 1996
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
CUMULATIVE AMOUNT
FOREIGN RELATED TO
ADDITIONAL CURRENCY TREASURY RECORDING
COMMON EQUITY PAID-IN RETAINED TRANSLATION COMMON MINIMUM
STOCK RIGHTS CAPITAL EARNINGS ADJUSTMENTS STOCK PENSION LIABILITY
------- ------ --------- -------- ------------ ------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1994 . . . $ 464 $ 2 $ 170,927 $ 5,346 $ 38 $ (2) $ -
Shares issued in connection
with the exercise of 135,268
stock options . . . . . . . . . . 1 - 1,550 - - - -
Conversion of 294 equity rights
to common stock . . . . . . . . . - (1) - - - 1 -
Tax benefits related to stock
options . . . . . . . . . . . . . - - 297 - - - -
Net income . . . . . . . . . . . . - - - 48,915 - - -
Cumulative foreign currency
translation adjustment . . . . . . - - - - 182 - -
Amount related to recording
minimum pension liability . . . . - - - - - - (470)
------ ----- --------- -------- ------ ----- ----
Balance at September 30, 1995 $ 465 $ 1 $ 172,774 $ 54,261 $ 220 $ (1) $(470)
====== ===== ========= ======== ====== ===== ====
Shares issued in connection
with the exercise of 216,297
stock options . . . . . . . . . . 2 - 2,983 - - - -
Tax benefits related to stock
options . . . . . . . . . . . . . - - 1,410 - - - -
Net income (Unaudited) . . . . . . - - - 22,262 - - -
Cumulative foreign currency
translation adjustment . . . . . . - - - - (2,158) - -
------ ----- --------- -------- ------ ----- ----
Balance at March 31, 1996
(Unaudited) . . . . . . . . . . . $ 467 $ 1 $ 177,167 $ 76,523 $(1,938) $ (1) $(470)
====== ===== ========= ======== ======= ===== ====
TOTAL
SHAREHOLDERS'
EQUITY
------------
<S> <C>
Balance at September 30, 1994 . . . $176,775
Shares issued in connection
with the exercise of 135,268
stock options . . . . . . . . . . . 1,551
Conversion of 294 equity right
to common stock . . . . . . . . . . -
Tax benefits related to stock
options . . . . . . . . . . . . . . 297
Net income . . . . . . . . . . . . . 48,915
Cumulative foreign currency
translation adjustment . . . . . . . 182
Amount related to recording
minimum pension liability . . . . . (470)
--------
Balance at September 30, 1995 $227,250
========
Shares issued in connection
with the exercise of 216,297
stock options . . . . . . . . . . . 2,985
Tax benefits related to stock
options . . . . . . . . . . . . . . 1,410
Net income (Unaudited) . . . . . . . 22,262
Cumulative foreign currency
translation adjustment . . . . . . . (2,158)
--------
Balance at March 31, 1996
(Unaudited) . . . . . . . . . . . . $251,749
========
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE> 6
SYBRON INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Ended
March 31,
1996 1995
------ ------
<S> <C> <C>
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $22,262 $23,452
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,754 9,666
Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,556 6,548
Provision for losses on doubtful accounts . . . . . . . . . . . . . . 238 222
Inventory provisions . . . . . . . . . . . . . . . . . . . . . . . . 829 294
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,750) (4,295)
Changes in assets and liabilities:
Increase in accounts receivable . . . . . . . . . . . . . . . . . . . (2,949) (9,466)
Increase in inventories . . . . . . . . . . . . . . . . . . . . . . . (4,112) (8,236)
Increase in prepaid expenses and other current assets . . . . . . . . (3,572) (963)
Decrease in accounts payable . . . . . . . . . . . . . . . . . . . . (2,234) (2,715)
Increase (decrease) in taxes payable . . . . . . . . . . . . . . . . (17,278) 145
Increase (decrease) in accrued payroll and employee benefits . . . . (2,646) 1,145
Increase in restructuring reserve . . . . . . . . . . . . . . . . . . 5,311 -
Increase (decrease) in other current liabilities . . . . . . . . . . (4,034) 3,083
Net change in other assets and liabilities . . . . . . . . . . . . . (4,905) (4,348)
--------- -------
Total adjustments . . . . . . . . . . . . . . . . . . . . . . . (20,792) (8,920)
--------- -------
Net cash provided by operating activities . . . . . . . . . . . . 1,470 14,532
Cash flows from investing activities:
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . (10,464) (8,578)
Proceeds from sales of property, plant, and equipment . . . . . . . . 555 221
Payments for businesses acquired . . . . . . . . . . . . . . . . . . (42,121) (27,531)
-------- --------
Net cash used in investing activities . . . . . . . . . . . . . . (52,030) (35,888)
Cash flows from financing activities:
Net change in the revolving credit facility . . . . . . . . . . . . . 69,400 30,900
Principal payments long-term debt . . . . . . . . . . . . . . . . . . (18,316) (13,233)
Proceeds from the exercise of common stock options and warrants . . . 2,985 35
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 892 2,325
--------- --------
Net cash provided by financing activities . . . . . . . . . . . . . . 54,961 20,027
Effect of exchange rate changes on cash . . . . . . . . . . . . . . . . (703) (1,047)
Net increase (decrease) in cash . . . . . . . . . . . . . . . . . . . . 3,698 (2,376)
Cash and cash equivalents at beginning of year . . . . . . . . . . . . 9,243 11,194
-------- --------
Cash and cash equivalents at end of period . . . . . . . . . . . . . . $ 12,941 $ 8,818
======== =======
Supplemental disclosures of cash flow information:
Cash paid during the period for interest . . . . . . . . . . . . . . . $ 24,787 $ 9,098
Cash paid during the period for income taxes . . . . . . . . . . . . . 22,118 18,018
Capital lease obligations incurred . . . . . . . . . . . . . . . . . . 478 707
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
5
<PAGE> 7
SYBRON INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of management, all adjustments which are necessary for a
fair statement of the results for the interim period have been included.
All such adjustments were of a normal recurring nature. The results for
the six month period ended March 31, 1996 are not necessarily indicative
of the results to be expected for the full year. Certain amounts from the
six month period ended March 31, 1995, as originally reported, have been
reclassified to conform with the six month period ended March 31, 1996
presentation.
2. Inventories at March 31, 1996 consist of the following:
<TABLE>
<CAPTION>
(In thousands)
<S> <C>
Raw materials $ 35,666
Work-in-process 22,491
Finished goods 62,953
LIFO Reserve (4,579)
--------
$ 116,531
=======
</TABLE>
3. On February 28, 1996, Erie Scientific Company, a subsidiary of the
Company, acquired the stock of The Naugatuck Glass Company ("Naugatuck").
Naugatuck, with annual sales of approximately $19.0 million, is a leading
manufacturer of thin glass mirrors principally used in the cosmetic
industry.
4. In March of 1996, the Company recorded a restructuring charge of
$8,277,000 ($6,087,000 after tax or $.13 per share) for the
rationalization of certain acquired companies, combination of certain
production facilities, movement of certain customer service and marketing
functions, and the exiting of several product lines. The majority of
expenditures related to the restructuring plan are expected to be
made during fiscal 1996, except for expenditures related to leases and
severance commitments which have terms expiring later. As of March 31,
1996, approximately $5,311,000 of the established liability remains to be
expended. Principal items included in the reserve are severance and
termination costs for approximately 130 notified employees (primarily
production, sales and marketing personnel) (approximately $2,300,000),
remaining lease payments and shut down costs on exited facilities
(approximately $2,100,000), the non-cash write-off of certain fixed assets
and inventory associated with exited product lines, primarily at Sybron
Dental Specialties (approximately $2,500,000), and other related
restructuring costs (approximately $1,300,000).
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
Both sales and operating income for Sybron International Corporation (the
"Company") for the quarter and six months ended March 31, 1996 (the second
quarter and year to date of fiscal 1996) grew over the corresponding prior year
periods despite an $8.3 million restructuring charge, described below, in the
second quarter of fiscal 1996. Net sales for the quarter and year to date
ended March 31, 1996 increased by 33.5% and 32.6%, respectively, over the
corresponding fiscal 1995 periods. Sales growth in the second quarter of
fiscal 1996 were strong both domestically and internationally with increases of
30.9% and 38.1%, respectively, over the corresponding 1995 period.
Approximately 29.9 percentage points of the 33.5% overall sales growth in the
second quarter were attributable to acquired businesses, with the balance
coming from existing businesses. Sales revenues in businesses acquired in
fiscal 1995 and 1996 grew 13% in the second quarter when compared to the
corresponding period prior to the Company's ownership. The Company's modest
internal growth came from the dental supply segment.
The results of operations of the Company reflect goodwill amortization,
other amortization, and depreciation. These non-cash charges totaled $11.6
million and $8.1 million for the quarters ended March 31, 1996 and 1995,
respectively, and $22.3 million and $16.2 million for the first six months of
fiscal years 1996 and 1995, respectively. The Company's earnings before
interest, taxes, depreciation and amortization ("EBITDA") which, as discussed
below in "Liquidity and Capital Resources", the Company believes is the
appropriate measure of the Company's ability to internally fund its liquidity
requirements, amounted to $48.3 million and $35.4 million for the quarters
ended March 31, 1996 and 1995, respectively, and $88.1 million and $64.8
million for the first six months of fiscal years 1996 and 1995, respectively.
EBITDA represents, for any relevant period, net income plus (i) interest
expense, (ii) provision for income taxes, (iii) depreciation, (iv) amortization
and (v) the restructuring charge, described below, all determined on a
consolidated basis and in accordance with generally accepted accounting
principles.
Substantial portions of the Company's sales, income and cash flows are
derived from international operations. The financial position and the results
of operations from substantially all of the Company's international operations,
other than most U.S. export sales, are measured using the local currency of the
countries in which such operations are conducted and are translated into U.S.
dollars. While the reported income of foreign subsidiaries will be impacted by
a weakening or strengthening of the U.S. dollar in relation to a particular
local currency, the effects of foreign currency fluctuations are partially
mitigated by the fact that manufacturing costs and other expenses of foreign
subsidiaries are generally incurred in the same currencies in which sales are
generated. Such effects of foreign currency fluctuations are also mitigated by
the fact that such subsidiaries' operations are conducted in numerous foreign
countries and, therefore, in numerous foreign currencies. In addition, the
Company's U.S. export sales may be impacted by foreign currency fluctuations to
the relative value of the U.S. dollar as foreign customers may adjust their
level of purchases upward or downward according to the weakness or strength of
the U.S. dollar. In order to hedge against future strengthening of the U.S.
dollar, in October 1994, the Company employed currency hedges through the
purchase of a series of
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options. The options purchased in October 1994 had a U.S. dollar notional
amount of approximately $21.2 million at a cost of approximately $0.2 million.
The October 1994 options employed by the Company were designed to protect the
Company from potential detrimental effects of currency movements as compared to
the prior year. Because of a steadily declining dollar throughout fiscal 1994,
the Company was able to take advantage of the favorable currency rates to
employ a series of "out of the money" options to accomplish that purpose at a
minimal cost. These contracts all expired worthless in fiscal 1995. The Company
has decided not to employ foreign currency hedges at this time. From time to
time, management may employ currency hedges to mitigate the impact of foreign
currency fluctuations.
In March of 1996, the Company recorded a restructuring charge of
$8,277,000 ($6,087,000 after tax or $.13 per share) for the rationalization of
certain acquired companies, combination of certain production facilities,
movement of certain customer service and marketing functions, and the exiting
of several product lines. The majority of expenditures related to the
restructuring plan are expected to be made during fiscal 1996, except for
expenditures related to leases and severance commitments which have terms
expiring later. As of March 31, 1996, approximately $5,311,000 of the
established liability remains to be expended. Principal items included in the
reserve are severance and termination costs for approximately 130 notified
employees (primarily production, sales and marketing personnel) (approximately
$2,300,000), remaining lease payments and shut down costs on exited facilities
(approximately $2,100,000), the non-cash write-off of certain fixed assets and
inventory associated with exited product lines, primarily at Sybron Dental
Specialties (approximately $2,500,000), and other related restructuring costs
(approximately $1,300,000). The Company estimates that savings from this
restructuring will approximate $3.8 million annually, before income taxes. It
is anticipated that the realization of most of the savings will begin in fiscal
1997.
Combustion Engineering, Inc. ("CE"), a subsidiary of ABB Asea Brown Boveri
Ltd ("ABB"), has commenced legal proceedings (the "CE Litigation") against the
Company with respect to the former Taylor Instruments facility in Rochester, New
York (the "Rochester Site"), a discontinued operation. The CE Litigation,
brought in the New York Supreme Court, County of Monroe, relates to the
previously reported claims ABB made for reimbursement of expenses associated
with the remediation of alleged environmental contamination at the Rochester
Site. Taylor was sold to CE in 1983 by the predecessor of a subsidiary of the
Company. According to CE's complaint, its claims are based on an asset purchase
and sale agreement dated as of September 30, 1983, pursuant to which Taylor was
sold to CE (the "1983 Agreement"), and an agreement between a subsidiary of the
Company and CE dated August 14, 1987 (the "1987 Agreement"). The complaint
alleges that under the 1983 Agreement the Company retained certain liabilities
for, and indemnified CE with respect to, environmental contamination, hazards
and other conditions that existed at the time of the sale of Taylor to CE, and
that under the 1987 agreement, the Company agreed to bear 70 percent of the
costs thereafter incurred to clean up, remediate and remove mercury from the
land and buildings at the Rochester Site. CE's complaint seeks declaratory
relief and claims damages of at least $10 million with respect to expenses CE
has incurred and expects to incur to remediate and remove mercury contamination
from the land and buildings sold to CE at the Rochester Site. The complaint
also seeks declaratory relief and claims damages in excess of $1 million with
respect to expenses incurred and expected to be incurred for remediating other
alleged environmental hazards associated with the Rochester Site. Some of CE's
claims relate to the cost to demolish and
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<PAGE> 10
dispose of the buildings at the Rochester Site, which CE maintains it had to do
because the buildings were contaminated with mercury. CE previously informed
the Company that CE claims that the Company's share of such demolition and
disposal costs is approximately $4.2 million. The Company has denied it has any
liability for such costs. CE's remaining claims relate to alleged soil and
groundwater contamination, including mercury contamination. CE implemented a
plan in early 1996 to assess the extent of potential soil and groundwater
contamination at the Rochester Site, the preliminary results of which were
expected by mid-1996. The Company has received only limited soil data from CE
with respect to this assessment, and CE has not shared any groundwater data
from such assessment with the Company. Thus, the extent to which the site is
contaminated remains unknown to the Company. In addition, the degree to which
the contamination would be required to be remediated, if at all, is unknown.
At this time the cost to the Company with respect to the soil and groundwater
remediation claims cannot be estimated. Prior to commencing the CE Litigation,
and prior to beginning its current site assessment, CE had indicated to the
Company that, based on information available to it and subject to a number of
caveats, including the lack of assessment information and the fact that
clean-up standards which may be applied to the facility have not been
determined, the cost to remediate the soil and groundwater will range from $3
million to $5 million. The Company intends to pursue insurance coverage for
CE's claims and has therefore provided notice of CE's claims to its third party
liability insurance carriers. To date the carriers have denied coverage.
RESULTS OF OPERATIONS
QUARTER ENDED MARCH 31, 1996 COMPARED TO THE QUARTER ENDED MARCH 31, 1995
NET SALES. Net sales for the three months ended March 31, 1996 were
$170.9 million, an increase of $42.9 million (33.5%) from net sales of $127.9
million for the corresponding three months ended March 31, 1995. Sales in the
laboratory segment were $98.5 million for the three months ended March 31,
1996, an increase of 50.9% from the corresponding 1995 fiscal period.
Increased sales in the laboratory segment resulted primarily from (i) sales of
products of acquired companies (approximately $32.8 million), (ii) increased
volume from sales of existing products at Erie (approximately $0.6 million),
(iii) price increases at Nalge Nunc International (approximately $0.4 million)
and (iv) a favorable foreign currency impact at Erie (approximately $0.3).
Increased sales in the laboratory segment were partially offset by (i) a
reduction in sales of existing products at Nalge Nunc International
(approximately $1.2 million) and at Barnstead/Thermolyne (approximately $0.4
million). In the dental segment, net sales were $72.4 million for the three
months ended March 31, 1996, an increase of 15.4% from the corresponding fiscal
1995 period. Increased sales in the dental segment resulted primarily from (i)
sales of products of acquired companies (approximately $4.7 million), (ii)
increased volume from sales of new products (approximately $3.7 million;
primarily the ORTHOS(TM) product line manufactured by Ormco and Kerr's TYTIN
FC(TM) Alloy), (iii) favorable foreign currency impacts (approximately $0.7
million) and (iv) increased volume from sales of existing products
(approximately $0.6 million).
GROSS PROFIT. Gross profit for the second quarter of fiscal 1996 was
$84.4 million, an increase of 30.6% from gross profit of $64.6 million for the
corresponding fiscal 1995 period. Gross profit in the laboratory segment was
$45.0 million (45.7% of net segment sales) in the
9
<PAGE> 11
second quarter of fiscal 1996, an increase of 53.2% from gross profit of $29.4
million (45.0% of net segment sales) during the corresponding fiscal 1995
period. Gross profit in the laboratory segment increased primarily as a result
of (i) the effects of acquired companies (approximately $14.9 million), (ii) an
improved product mix at Barnstead/Thermolyne (approximately $0.4 million),
(iii) lower unit costs at Nalge Nunc International (approximately $0.4
million), (iv) a reduction in material costs at Nalge Nunc International
(approximately $0.3 million) and (v) increased volume at Nalge Nunc
International (approximately $0.2 million). Increased gross profit was
partially offset by an unfavorable product mix at Erie (approximately $0.6
million). In the dental segment, gross profit was $39.4 million (54.4% of net
segment sales) in the second quarter of fiscal 1996, an increase of 11.8% from
gross profit of $35.3 million (56.2% of net segment sales) during the
corresponding fiscal 1995 period. Increased gross profit in the dental segment
resulted primarily from (i) the effects of acquired companies (approximately
$3.1 million), (ii) increased volume (approximately $2.1 million), (iii)
favorable foreign currency impacts (approximately $0.5 million), partially
offset by inventory adjustments (approximately $1.6 million). Decreased gross
margins were attributable to a combination of factors, namely lower margins at
Metrex, some margin erosion at Ormco Europe, manufacturing absorption at Kerr
and lower margins in the industrial/jewelry product line.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the second quarter of fiscal 1996 were $47.7
million (27.9% of net sales) as compared to $37.1 million (29.0% of net sales)
in the corresponding fiscal 1995 period. General and administrative expenses
at the corporate level, including amortization of purchase accounting
adjustments and goodwill associated with acquisitions, were $6.4 million in the
second quarter of fiscal 1996, representing an increase of 20.4% from $5.3
million in the corresponding fiscal 1995 period. Increases at the corporate
level were primarily due to increased amortization of the purchase accounting
valuation as a result of the acquisition of Nunc (approximately $1.2 million).
Selling, general and administrative expenses at the subsidiary level, including
amortization of intangibles, were $41.3 million (24.2% of sales), representing
an increase of 29.9% from $31.8 million (24.8% of sales) in the corresponding
fiscal 1995 period. Increases at the subsidiary level were primarily due to
(i) expenses related to newly acquired businesses (approximately $6.9 million),
(ii) increased marketing expense (approximately $1.4 million), (iii) increased
amortization of intangible assets as a result of acquisitions (approximately
$0.6 million), (iv) increased research and development expenses (approximately
$0.5 million) and (v) unfavorable foreign currency impacts (approximately $0.3
million).
RESTRUCTURING CHARGE. In March of 1996, the Company recorded a
restructuring charge of $8,277,000 ($6,087,000 after tax or $.13 per share) for
the rationalization of certain acquired companies, combination of certain
production facilities, movement of certain customer service and marketing
functions, and the exiting of several product lines. The majority of
expenditures related to the restructuring plan are expected to be made during
fiscal 1996, except for expenditures related to leases and severance
commitments which have terms expiring later. As of March 31, 1996,
approximately $5,311,000 of the established liability remains to be expended.
Principal items included in the reserve are severance and termination costs for
approximately 130 notified employees (primarily production, sales and marketing
personnel) (approximately $2,300,000), remaining lease payments and shut down
costs on exited facilities (approximately $2,100,000), the non-cash write-off
of certain fixed assets and inventory associated with exited product lines,
primarily at Sybron Dental Specialties (approximately $2,500,000), and other
10
<PAGE> 12
related restructuring costs (approximately $1,300,000).
OPERATING INCOME. As a result of the foregoing, operating income was
$28.4 million (16.6% of net sales) in the second quarter of fiscal 1996
compared to $27.5 million (21.5% of net sales) in the corresponding fiscal 1995
period. Operating income prior to the restructuring charge was $36.7 million
(21.5% of net sales). Operating income in the laboratory segment, prior to the
restructuring charge described above, was $21.9 million (22.3% of net segment
sales) in the second quarter of fiscal 1996 compared to $13.5 million (20.7% of
net segment sales) in the corresponding fiscal 1995 period. Operating income
in the dental segment, prior to the restructuring charge described above, was
$14.8 million (20.4% of net segment sales) in the second quarter of fiscal 1996
compared to $14.0 million (22.3% of net segment sales) in the corresponding
fiscal 1995 period.
INTEREST EXPENSE. Interest expense was $8.5 million in the second quarter
of fiscal 1996 compared to $5.1 million in the corresponding fiscal 1995
period. The increase resulted from a higher debt balance primarily from
increased acquisition activity. Interest expense during the three months ended
March 31, 1996 and 1995 included additional non-cash interest expense of $0.3
million resulting from the adoption of SFAS No. 106.
INCOME TAXES. Taxes on income increased $0.6 million in the second
quarter of fiscal 1996, primarily as a result of increased earnings from
operations and an increase in nondeductible amortization primarily related to
the Nunc acquisition, partially offset by a reduction in taxes associated with
the restructuring charge.
NET INCOME. As a result of the foregoing, the Company had net income of
$10.5 million in the second quarter of fiscal 1996 compared to $13.5 million
in the corresponding 1995 period. Without the restructuring charge, net income
in the second quarter of fiscal 1996 would have been $16.6 million.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense is
allocated among cost of sales, selling, general and administrative expenses and
other expense. Depreciation and amortization increased by $3.5 million (43.7%)
in the second quarter of fiscal 1996 when compared to the corresponding 1995
period. This increase is primarily due to increased amortization of intangible
assets and depreciation of property, plant and equipment related to acquired
companies.
SIX MONTHS ENDED MARCH 31, 1996 COMPARED TO THE SIX MONTHS ENDED MARCH 31, 1995
NET SALES. Net sales for the six months ended March 31, 1996 were $317.7
million, an increase of $78.0 million (32.6%) from net sales of $239.7 million
for the corresponding six months ended March 31, 1995. Sales in the laboratory
segment were $183.4 million for the six months ended March 31, 1996, an
increase of 53.3% from the corresponding 1995 fiscal period. Increased sales
in the laboratory segment resulted primarily from (i) sales of products of
acquired companies (approximately $61.7 million), (ii) increased prices at
Barnstead/Thermolyne (approximately $1.0 million) and at Nalge Nunc
International (approximately $0.8 million), (iii) a favorable foreign currency
impact at Erie (approximately $0.7), (iv) increased volume from sales of
existing products at Erie (approximately $0.6 million) and (v) increased
volume from
11
<PAGE> 13
sales of new products at Nalge Nunc International (approximately $0.5 million;
primarily silicone tubing products). Increased sales in the laboratory segment
were partially offset by (i) a reduction in volume from sales of existing
products at Nalge Nunc International (approximately $1.0 million) and at
Barnstead/Thermolyne (approximately $0.1 million) and (ii) price reductions at
Erie (approximately $0.4 million). In the dental segment, net sales were
$134.3 million for the six months ended March 31, 1996, an increase of 11.9%
from the corresponding fiscal 1995 period. Increased sales in the dental
segment resulted primarily from (i) sales of products of acquired companies
(approximately $9.3 million), (ii) increased volume from sales of new products
(approximately $6.3 million; primarily the ORTHOS(TM) product line manufactured
by Ormco and Kerr's TYTIN FC(TM) Alloy) and (iii) favorable foreign currency
impacts (approximately $1.7 million), partially offset by a reduction in volume
from sales of existing products (approximately $3.1 million).
GROSS PROFIT. Gross profit for the six months ended March 31, 1996 was
$157.2 million, an increase of 30.8% from gross profit of $120.2 million for
the corresponding fiscal 1995 period. Gross profit in the laboratory segment
was $83.5 million (45.5% of net segment sales) for the six months ended March
31, 1996, an increase of 56.5% from gross profit of $53.3 million (44.6% of net
segment sales) during the corresponding fiscal 1995 period. Gross profit in
the laboratory segment increased primarily as a result of (i) the effects of
acquired companies (approximately $27.7 million), (ii) increased sales volume
at Nalge Nunc International (approximately $0.4 million) and at
Barnstead/Thermolyne (approximately $0.4 million), (iii) lower unit costs at
Nalge Nunc International (approximately $0.7 million), (iv) an improved product
mix at Nalge Nunc International (approximately $0.3 million) and at
Barnstead/Thermolyne (approximately $0.2 million) and (v) a reduction in
material costs at Nalge Nunc International (approximately $0.4 million). In
the dental segment, gross profit was $73.8 million (54.9% of net segment sales)
for the six months ended March 31, 1996, an increase of 10.3% from gross profit
of $66.9 million (55.7% of net segment sales) during the corresponding fiscal
1995 period. Increased gross profit in the dental segment resulted primarily
from (i) the effects of acquired companies (approximately $5.8 million), (ii)
favorable foreign currency impacts (approximately $1.4 million) and (iii)
increased volume (approximately $1.1 million), partially offset by inventory
adjustments (approximately $1.6 million). Decreased gross margins were
attributable to a combination of factors, namely lower margins at Metrex, some
margin erosion at Ormco Europe, manufacturing absorption at Kerr and lower
margins in the industrial/jewelry product line.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the six months ended March 31, 1996 were $91.2
million (28.7% of net sales) as compared to $71.2 million (29.7% of net sales)
in the corresponding fiscal 1995 period. General and administrative expenses
at the corporate level, including amortization of purchase accounting
adjustments and goodwill associated with acquisitions, were $11.9 million for
the six months ended March 31, 1996, representing an increase of 14.9% from
$10.4 million in the corresponding fiscal 1995 period. Increases at the
corporate level were primarily due to increased amortization of purchase
accounting adjustments as a result of the acquisition of Nunc (approximately
$2.4 million), offset by a reduction in employee benefit costs (approximately
$0.8 million). Selling, general and administrative expenses at the subsidiary
level, including amortization of intangibles, were $79.3 million (24.9% of
sales), representing an increase of 30.3% from $60.8 million (25.4% of sales)
in the corresponding fiscal 1995 period. Increases
12
<PAGE> 14
at the subsidiary level were primarily due to (i) expenses related to newly
acquired businesses (approximately $15.6 million), (ii) increased amortization
of intangible assets as a result of acquisitions (approximately $1.0 million),
(iii) increased research and development expenses (approximately $0.7 million),
(iv) unfavorable foreign currency impacts (approximately $0.5 million), (v)
increased marketing expense (approximately $0.4 million) and (vi) increased
general and administrative expense (approximately $0.4 million).
RESTRUCTURING CHARGE. In March of 1996, the Company recorded a
restructuring charge of $8,277,000 ($6,087,000 after tax or $.13 per share) for
the rationalization of certain acquired companies, combination of certain
production facilities, movement of certain customer service and marketing
functions, and the exiting of several product lines. The majority of
expenditures related to the restructuring plan are expected to be made during
fiscal 1996, except for expenditures related to leases and severance
commitments which have terms expiring later. As of March 31, 1996,
approximately $5,311,000 of the established liability remains to be expended.
Principal items included in the reserve are severance and termination costs for
approximately 130 notified employees (primarily production, sales and marketing
personnel) (approximately $2,300,000), remaining lease payments and shut down
costs on exited facilities (approximately $2,100,000), the non-cash write-off
of certain fixed assets and inventory associated with exited product lines,
primarily at Sybron Dental Specialties (approximately $2,500,000), and other
related restructuring costs (approximately $1,300,000).
OPERATING INCOME. As a result of the foregoing, operating income was
$57.8 million (18.2% of net sales) for the six months ended March 31, 1996
compared to $49.0 million (20.4% of net sales) in the corresponding fiscal 1995
period. Operating income prior to the restructuring charge was $66.0 million
(20.8% of net sales). Operating income in the laboratory segment, prior to the
restructuring charge described above, was $39.4 million (21.5% of net segment
sales) for the six months ended March 31, 1996 compared to $23.7 million (19.8%
of net segment sales) in the corresponding fiscal 1995 period. Operating
income in the dental segment, prior to the restructuring charge described
above, was $26.6 million (19.8% of net segment sales) for the six months ended
March 31, 1996 compared to $25.3 million (21.0% of net segment sales) in the
corresponding fiscal 1995 period.
INTEREST EXPENSE. Interest expense was $17.3 million for the six months
ended March 31, 1996 compared to $9.8 million in the corresponding fiscal 1995
period. The increase resulted from a higher debt balance primarily from
increased acquisition activity. Interest expense during the six months ended
March 31, 1996 and 1995 included additional non-cash interest expense of $0.6
million resulting from the adoption of SFAS No. 106.
INCOME TAXES. Taxes on income increased $2.7 million in the six months
ended March 31, 1996, primarily as a result of increased earnings from
operations and an increase in nondeductible amortization primarily related to
the Nunc acquisition, partially offset by a reduction in taxes associated with
the restructuring charge.
NET INCOME. As a result of the foregoing, the Company had net income of
$22.3 million for the six months ended March 31, 1996 compared to $23.5
million in the corresponding 1995 period. Without the restructuring charge,
net income would have been $28.3 million.
13
<PAGE> 15
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense is
allocated among cost of sales, selling, general and administrative expenses and
other expense. Depreciation and amortization increased $6.1 million (37.6%) in
the six months ended March 31, 1996 when compared to the corresponding 1995
period. This increase is primarily due to increased amortization of intangible
assets and depreciation of property, plant and equipment related to acquired
companies.
INFLATION. The Company does not believe that inflation has had a material
impact on net sales or income during any of the periods presented above. There
can be no assurance, however, that the Company's business will not be affected
by inflation in the future.
LIQUIDITY AND CAPITAL RESOURCES
As a result of the leveraged buyout in 1987 of a company known at the time
as Sybron Corporation, ("the Acquisition"), subsequent adoption of SFAS 109 and
the acquisitions completed since 1987, the Company increased the carrying value
of certain tangible and intangible assets consistent with generally accepted
accounting principles. Also, as a result of the permanent financing, effected
in August 1988 for the Acquisition, the Company has incurred approximately $372
million of debt. Accordingly, the Company's results of operations include a
significant level of non-cash expenses related to the depreciation of fixed
assets and the amortization of intangible assets, including goodwill. Goodwill
and intangible assets increased by $14.2 million and $31.4 million,
respectively, in the second quarter and year to date of fiscal 1996,
respectively, as a result of seven acquisitions. The Company believes,
therefore, that EBITDA represents the more appropriate measure of the Company's
ability to internally fund its capital requirements.
The Company's capital requirements arise principally from indebtedness
incurred in connection with the permanent financing for the Acquisition and its
subsequent refinancings, the Company's working capital needs, primarily related
to inventory and accounts receivable, the Company's capital expenditures,
primarily related to purchases of machinery and molds, the purchase of various
businesses and product lines in execution of the Company's acquisition strategy,
the periodic expansion of physical facilities and, in the short term, payments
related to the restructuring charge (as described above). In addition, in the
event the Company should be held liable for CE's claims in the CE Litigation
(described above), liability for which the Company denies, the Company could
require capital to satisfy such liabilities, depending upon their magnitude.
With respect to the restructuring charge, as of March 31, 1996, the Company has
paid approximately $0.5 million and charged an additional $2.5 million to
inventory and fixed assets. The Company intends to expend an additional $4.2
million by the end of fiscal 1996 and $1.1 million over the remaining terms of
exited facilities leases and severance agreements. With respect to
acquisitions, it is currently the Company's intent to continue to pursue its
acquisition strategy. If acquisitions are to continue at the Company's
historical pace, the Company will require financing beyond the capacity of its
existing Credit Facilities (as defined below). In addition, certain
acquisitions previously completed contain "earnout provisions" requiring further
payments in the future if certain financial results are achieved by the acquired
companies.
The statement contained in the immediately preceding paragraph concerning
the Company's intent to continue to pursue its acquisition strategy is a
forward looking statement. The
14
<PAGE> 16
company's ability to continue its acquisition strategy is subject to a number
of uncertainties, including, but not limited to, its ability to raise capital
beyond the capacity of its existing Credit Facilities, and the availability of
suitable acquisitions candidates at reasonable prices.
On July 31, 1995, the Company and its domestic subsidiaries entered into a
new credit agreement (the "Credit Agreement") with Chemical Bank and certain
other lenders providing for a term loan facility of $300 million (the "Term
Loan Facility"), and a revolving credit facility of $250 million (the
"Revolving Credit Facility") (collectively the "Credit Facilities"). On the
same day, the Company and its subsidiaries borrowed a total of approximately
$422.5 million under the Credit Facilities. The Company borrowed $300 million
under the Term Loan Facility and approximately $122.5 million was borrowed
under the Revolving Credit Facility. Approximately $167.6 million of the
borrowed funds were used to finance the acquisition of the Nunc group of
companies. The remaining borrowed funds of approximately $254.9 million were
used to repay outstanding amounts, including accrued interest, under the
Company's previous senior bank credit facilities (the "Previous Credit
Facilities") and to pay certain fees in connection with such refinancing.
Payment of principal and interest with respect to the Credit Facilities
and the Sale/Leaseback (as defined later herein) are anticipated to be the
Company's largest use of funds in the future. As with the Company's Previous
Credit Facilities, the Credit Facilities provide for an annual interest rate,
at the option of the Company, equal to (a) the higher of (i) the rate from time
to time publicly announced by Chemical Bank in New York City as its prime rate,
(ii) the federal funds rate plus 1/2 of 1%, and (iii) the base CD rate plus
1%, or (b) the London interbank offered rate ("LIBOR") plus 1/2% to 1%
depending upon the level of certain financial ratios. Under the Previous
Credit Facilities, the LIBOR margin was at 3/4% through February 3, 1995. Upon
application of the financial ratios for the period ending December 31, 1994,
the Company received a reduction in the LIBOR margin from 3/4% to 5/8%, which
took effect on February 4, 1995. On May 15, 1995, the LIBOR margin was
increased back to 3/4% and remained at that level through the first six months
of fiscal 1996. The primary reason for the rate increase was increased
borrowings under the Previous Credit Facilities and the Credit Facilities to
fund acquisitions completed in the second and third fiscal quarters of 1995 and
the first and second quarters of fiscal 1996. Upon application of the
financial ratios to the second quarter results of fiscal 1996, the Company will
experience an increase in the LIBOR margin from 3/4% to 1%. This increase will
be effective on May 15, 1996 and will continue until the financial ratios
dictate a lesser margin. The primary reason for the rate increase was the
restructuring charge of $8.3 million before tax, which is included in the ratio
calculation.
As a result of the terms of the Credit Agreement and the agreement
governing the Previous Credit Facilities, the Company is sensitive to a rise in
interest rates. In order to reduce its sensitivity to such interest rate
increases, on July 2, 1993, the Company entered into two interest rate swaps,
aggregating $100 million, to hedge against a rise in interest rates. The first
swap was effective July 7, 1993, and fixed the interest rate on $50 million of
the Company's borrowings under the Credit Facilities and the Previous Credit
Facilities for a period of five years. A second swap was effective August 13,
1993, and fixed the interest rate on an additional $50 million of the Company's
borrowings for a period of six years. These rates, currently at 5.92% and
6.19%, respectively, are subject to change and will increase to 6.17% and
6.44%, respectively on May 15, 1996 as a result of changes in the LIBOR margin
as discussed above.
15
<PAGE> 17
The Company executed three additional interest rate swaps effective
December 8, 1995 with notional amounts of $50 million each. The three swaps
are currently at interest rates of 6.098%, 6.31% and 6.374%, subject to
adjustment, and will adjust to 6.348%, 6.56% and 6.624%, respectively, on May
15, 1996, based upon the Company's increased LIBOR margin. The swap
arrangements expire on December 9, 1996, September 8, 2000 and September 10,
2001, respectively.
Also as part of the permanent financing for the Acquisition, on December
22, 1988, the Company entered into the sale and leaseback of its principal
domestic facilities (the "Sale/Leaseback"). In January 1994, the annual
obligation under the Sale/Leaseback increased from $2.9 million to $3.3
million, payable monthly. On the fifth anniversary of the leases and every
five years thereafter (including renewal terms), the rent will be increased by
the percentage equal to 75% of the percentage increase in the Consumer Price
Index over the preceding five years. The percentage increase to the rent in
any five-year period is capped at 15%. The next adjustment will not occur
until January 1, 1999.
The Company intends to fund its acquisitions, working capital
requirements, capital expenditure requirements, principal and interest
payments, obligations under the Sale/Leaseback, restructuring expenditures,
other liabilities and periodic expansion of facilities, to the extent
available, with funds provided by operations and short-term borrowings under
the Revolving Credit Facility. To the extent that funds are not available,
particularly with respect to the Company's acquisition strategy, the Company
will have to raise additional capital.
As set forth above, the Revolving Credit Facility will provide up to $250
million in available credit. As of March 31, 1996, there was $56.0 million of
available credit under the Revolving Credit Facility. Under the Term Loan
Facility, on October 31, 1995 the Company began to repay principal in 28
consecutive quarterly installments. Annual payments are due as follows: $35
million, $35 million, $40 million, $40 million, $50 million, $50 million, and
$50 million in fiscal years 1996 through 2002, respectively. Through April 30,
1996, the Company has paid $26.25 million of the $35 million obligation due in
fiscal 1996.
The Credit Agreement contains numerous financial and operating covenants,
including, among other things, restrictions on investments; requirements that
the Company maintain certain financial ratios; restrictions on the ability of
the Company and its subsidiaries to incur indebtedness or to create or permit
liens, to make capital expenditures, or to pay cash dividends in excess of
$50.0 million plus 50% of the defined consolidated net income of the Company
for each fiscal quarter ending after September 30, 1995, less any dividends
paid after June 22, 1994; restrictions on annual capital expenditures to
amounts ranging from $36.0 million to $40.0 million during the remaining term
of the Credit Agreement; and limitations on incurrence of additional
indebtedness. The Credit Agreement permits the Company to make acquisitions
provided the Company continues to satisfy all financial covenants upon any such
acquisition. The ability of the Company to meet its debt service requirements
and to comply with such covenants is dependent upon the Company's future
performance, which is subject to financial, economic, competitive and other
factors affecting the Company, many of which are beyond its control.
16
<PAGE> 18
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The following information should be read in conjunction with Item 3,
"Legal Proceedings", in Part I of the Company's Annual Report on Form 10-K for
the fiscal year ended September 30, 1995 and with Item 1, "Legal Proceedings",
in Part II of the Company's Quarterly Report on Form 10-Q for the quarterly
period ended December 31, 1995.
On May 2, 1996, Combustion Engineering, Inc. ("CE"), a subsidiary of
ABB Asea Brown Boveri Ltd ("ABB"), commenced legal proceedings (the "CE
Litigation") against the Company with respect to the former Taylor Instruments
facility in Rochester, New York (the "Rochester Site"), a discontinued
operation. The CE Litigation, brought in the New York Supreme Court, Monroe
County, New York, relates to the previously reported claims ABB has made for
reimbursement to it of expenses associated with the remediation of alleged
environmental contamination at the Rochester Site. The Rochester Site was sold
to CE in 1983 by the predecessor of a Subsidiary of the Company.
See Part I, Item 2, "Management's Discussion and Analysis of Financial
Condition and Results of Operations - General" for additional information
regarding the CE litigation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Information concerning the Company's Annual Meeting of Shareholders
held on January 24, 1996 has been previously reported in Item 4, "Submission of
Matters to a Vote of Security Holders", in Part II of the Company's Quarterly
Report on Form 10-Q for the quarterly period ended December 31, 1995.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS:
See the Exhibit Index following the Signature page in this
report, which is incorporated herein by reference.
(b) REPORTS ON FORM 8-K:
No reports on Form 8-K were filed during the quarter for which
this report is filed.
17
<PAGE> 19
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.
SYBRON INTERNATIONAL CORPORATION
--------------------------------
(Registrant)
Date May 14, 1996 /s/ Dennis Brown
------------ --------------------------------
Dennis Brown
Vice President - Finance, Chief
Financial Officer & Treasurer*
* executing as both the principal
financial officer and the duly
authorized officer of the
Company.
18
<PAGE> 20
SYBRON INTERNATIONAL CORPORATION
(COMMISSION FILE NO. 1-11091)
EXHIBIT INDEX
TO
QUARTERLY REPORT ON FORM 10-Q FOR QUARTER ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
INCORPORATED
EXHIBIT HEREIN BY FILED
NUMBER DESCRIPTION REFERENCE TO HEREWITH
<S> <C> <C>
11 Statement re Computation of Per Share X
Earnings
27 Financial Data Schedule X
</TABLE>
19
<PAGE> 1
EXHIBIT 11
SYBRON INTERNATIONAL CORPORATION AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Primary:
Net income $10,540 $13,505 $22,262 $23,452
====== ====== ====== ======
Shares
Weighted average Common shares . . . . . . . . . 46,687 46,396 46,619 46,396
Common equivalent shares . . . . . . . . . . . . 1,125 422 1,027 380
------ ------- ------ -------
47,812 46,818 47,646 46,776
====== ====== ====== ======
Primary earnings per share . . . . . . . . . . . $ .22 $ .29 $ .47 $ .50
=== === ==== ===
</TABLE>
18
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 12,941
<SECURITIES> 0
<RECEIVABLES> 117,498
<ALLOWANCES> 2,277
<INVENTORY> 116,531
<CURRENT-ASSETS> 274,127
<PP&E> 156,945
<DEPRECIATION> 119,859
<TOTAL-ASSETS> 909,666
<CURRENT-LIABILITIES> 124,264
<BONDS> 462,128
0
0
<COMMON> 467
<OTHER-SE> 251,282
<TOTAL-LIABILITY-AND-EQUITY> 909,666
<SALES> 317,713
<TOTAL-REVENUES> 317,713
<CGS> 160,483
<TOTAL-COSTS> 99,469
<OTHER-EXPENSES> 227
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,265
<INCOME-PRETAX> 40,269
<INCOME-TAX> 18,007
<INCOME-CONTINUING> 22,262
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,262
<EPS-PRIMARY> .47
<EPS-DILUTED> .47
</TABLE>
