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This Form 10-Q consists of 17 sequentially numbered pages. The exhibit index
appears on sequentially numbered page 15.
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
Commission file number: 01-10920
Fisher Scientific International Inc.
(Exact name of registrant as specified in its charter)
Delaware 02-0451017
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Liberty Lane
Hampton, New Hampshire 03842
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (603) 926-5911
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 .
---- ----
The number of shares of Common Stock outstanding at April 30, 1996 was
16,401,915.
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FISHER SCIENTIFIC INTERNATIONAL INC.
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1996
INDEX
PAGE NO.
--------
Part I - Financial Information:
Item 1 - Financial Statements:
Introduction to the Financial Statements.................... 3
Income Statements -
Three Months Ended March 31, 1996 and 1995.................. 4
Balance Sheets -
March 31, 1996 and December 31, 1995........................ 5
Statements of Cash Flows -
Three Months Ended March 31, 1996 and 1995.................. 6
Notes to Financial Statements............................... 7
Item 2 - Management's Discussion and Analysis of Results of
Operations and Financial Condition.......................... 9
Part II - Other Information:
Item 6 - Exhibits and Reports on Form 8-K............................ 12
SIGNATURE............................................................... 13
EXHIBIT INDEX........................................................... 15
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FISHER SCIENTIFIC INTERNATIONAL INC.
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
INTRODUCTION TO THE FINANCIAL STATEMENTS
The condensed financial statements included herein have been prepared by
Fisher Scientific International Inc. ("Fisher" or the "Company"), without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission. The December 31, 1995 balance sheet was derived from the audited
balance sheet included in the Company's 1995 Annual Report on Form 10-K.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. The Company believes that the disclosures are adequate to make
the information presented not misleading when read in conjunction with the
financial statements included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1995.
The financial information presented herein reflects all adjustments
(consisting only of normal recurring adjustments) that are, in the opinion of
management, necessary for a fair presentation of the results for the interim
periods presented. The results for interim periods are not necessarily
indicative of the results to be expected for the full year.
3
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FISHER SCIENTIFIC INTERNATIONAL INC.
INCOME STATEMENTS
(in millions, except per share amounts)
(unaudited)
THREE MONTHS ENDED
MARCH 31,
1996 1995
---- ----
Sales $516.0 $303.1
Cost of sales 380.4 219.2
Selling, general and
administrative expense 118.4 70.4
------ -------
Income from operations 17.2 13.5
Interest expense 8.6 2.3
Other (income) expense, net 0.5 (0.1)
------ -------
Income before income taxes 8.1 11.3
Income tax provision 3.6 4.5
------ -------
Net income $ 4.5 $ 6.8
------ -------
------ -------
Earnings per common share:
Primary $ .27 $ .42
------ -------
------ -------
Fully diluted $ .27 $ .40
------ -------
------ -------
See the accompanying notes to financial statements.
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FISHER SCIENTIFIC INTERNATIONAL INC.
BALANCE SHEETS
(in millions)
(unaudited)
MARCH 31, DECEMBER 31,
1996 1995
--------- ------------
ASSETS
Current Assets:
Cash and cash equivalents $ 18.5 $ 63.7
Receivables, net 301.5 297.3
Inventories 237.1 242.7
Other current assets 66.1 69.9
-------- --------
Total current assets 623.2 673.6
Property, plant and equipment, net 205.5 207.6
Goodwill 270.4 270.4
Other assets 116.3 118.9
-------- --------
1,215.4 1,270.5
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short-term debt 8.2 11.7
Accounts payable 214.5 231.2
Accrued and other current liabilities 133.0 146.7
-------- --------
Total current liabilities 355.7 389.6
Long-term debt 421.1 446.3
Other liabilities 205.8 208.6
-------- --------
Total liabilities 982.6 1,044.5
-------- --------
Stockholders' Equity:
Common Stock 0.2 0.2
Capital in excess of par value 139.3 135.5
Preferred stock -- --
Foreign currency translation
adjustment (3.9) (2.8)
Retained earnings 97.2 93.1
-------- --------
Total stockholders' equity 232.8 226.0
-------- --------
$1,215.4 $1,270.5
-------- --------
-------- --------
See the accompanying notes to financial statements.
5
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FISHER SCIENTIFIC INTERNATIONAL INC.
STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
THREE MONTHS ENDED
MARCH 31,
1996 1995
---- ----
Cash flows from operating activities:
Net income $ 4.5 $ 6.8
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization 10.7 5.6
Deferred income taxes 1.5 (1.2)
Changes in working capital:
Receivables, net (4.3) (5.7)
Inventories 5.6 (15.9)
Payables, accrued and other current liabilities (32.2) 15.1
Other working capital charges 2.9 1.2
Other assets and liabilities (1.8) (1.7)
-------- -------
Cash provided (used) by operating activities (13.1) 4.2
-------- -------
Cash flows from investing activities:
Acquisitions, net of cash acquired (2.1) (6.4)
Marketable securities proceeds -- 7.7
Capital expenditures (5.1) (4.7)
Other investing activities (0.4) (0.9)
-------- -------
Cash used in investing activities (7.6) (4.3)
-------- -------
Cash flows from financing activities:
Proceeds from stock options exercised 3.7 --
Dividends paid (0.3) (0.3)
Proceeds from long-term debt 2.3 0.7
Payments on long-term debt (30.2) (0.2)
-------- -------
Cash provided (used) by financing activities (24.5) 0.2
-------- -------
Net change in cash and cash equivalents (45.2) 0.1
Cash and cash equivalents - beginning of period 63.7 36.9
-------- -------
Cash and cash equivalents - end of period $ 18.5 $ 37.0
-------- -------
-------- -------
See the accompanying notes to financial statements.
6
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FISHER SCIENTIFIC INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
Fisher Scientific International Inc.'s ("Fisher" or the "Company")
operations are conducted by wholly owned and majority-owned subsidiaries,
joint ventures, equity interests and agents, located in North and South
America, Europe, the Far East, the Middle East and Africa. The Company's
activities relate principally to one business segment -- scientific and
clinical products. This includes operations engaged in the supply, marketing,
service and manufacture of scientific, clinical, educational, occupational
health and safety products.
Certain prior period amounts have been reclassified to conform to their
current presentation.
NOTE 2 - ACCOUNTING PRONOUNCEMENTS
Effective January 1,1996, the Company adopted SFAS 121 "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of." The new standard did not have any effect on the Company's financial
statements.
NOTE 3 - INVENTORIES
The components of inventories were as follows (in millions):
MARCH 31, DECEMBER 31,
1996 1995
--------- -----------
Raw materials $ 13.6 $ 13.3
Work in process 3.2 3.9
Finished products 220.3 225.5
------ ------
$237.1 $242.7
------ ------
------ ------
On January 1, 1996, the Company changed its method of accounting for
substantially all inventories of its newly acquired subsidiary Curtin
Matheson Scientific Inc. (approximately $84 million) from the first-in,
first-out (FIFO) method to the last-in, first-out (LIFO) method to conform
CMS's accounting policies with that of Fisher Scientific Company, the
Company's principal United States operating subsidiary. The Company believes
the LIFO method better matches current costs with current selling prices.
The change did not have a significant effect on the results of operations in
the first quarter. In 1995 the Company's inventory costs would not have been
materially different under either of the two methods.
7
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NOTE 4 - DIVIDENDS
On March 7, 1996, Fisher's Board of Directors declared a quarterly cash
dividend of $.02 per share, payable April 5, 1996 to shareholders of record
March 21, 1996.
8
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
This Form 10-Q contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. The Company's actual results could differ materially
from those set forth in the forward-looking statements. Certain factors that
might cause such a difference include those factors discussed in the section
entitled "Management's Discussion and Analysis of Results of Operations and
Financial Condition - Overview" contained in the Company's Form 10-K for the
year ended December 31, 1995.
RESULTS OF OPERATIONS
SALES
Sales for the three months ended March 31, 1996 increased 70% to $516.0
million from $303.1 million for the comparable period in 1995. The sales
increase primarily reflects sales of the laboratory supplies division of
Fisons plc acquired in October 1995 which consisted of Curtin Matheson
Scientific Inc. ("CMS") and Fisons Scientific Equipment Ltd. (now named
Fisher Scientific U.K. Ltd.), other smaller businesses acquired during the
past year as well as growth in Fisher's North American operations.
GROSS PROFIT
Fisher's gross profit increased 62% to $135.6 million for the first three
months of 1996 from $83.9 million for the comparable period in 1995,
primarily resulting from the aforementioned sales growth.
Gross profit as a percent of sales decreased to 26.3% for the three
months ended March 31, 1996 from 27.7% for the same period in 1995. The
decrease in gross profit as a percent of sales reflects lower gross margins
associated with the recently acquired CMS business, partially offset by
improvements in gross margins of Fisher's historical North American
operations.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
Selling, general and administrative expense for the three months ended
March 31, 1996 increased 68% to $118.4 million from $70.4 million for the
comparable period in 1995. These costs increased primarily as a result of
the inclusion of selling, general and administrative expenses of recently
acquired businesses, costs to integrate CMS into Fisher and nonrecurring
costs associated with the implementation of the restructuring plan that began
in the third quarter of 1995. Certain costs resulting from the temporary
duplication of operations, relocation of inventories and employees, hiring
and training new employees, and other one-time and redundant costs, which
will be eliminated as the restructuring plan is implemented, are recognized
as incurred. Approximately $5.5 million of nonrecurring and redundant costs
have been recorded in
9
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the three months ended March 31, 1996, $4.9 million of which are included in
selling, general and administrative expense.
INCOME FROM OPERATIONS
Income from operations increased by 27.4% to $17.2 million for the three
months ended March 31, 1996, compared with $13.5 million for the
corresponding period in 1995. This increase reflects the factors described
above. Income from operations as a percent of sales decreased to 3.3% for
the three months ended March 31, 1996, compared with 4.5% for the same period
in 1995. This decrease in percentage primarily reflects the decrease in
gross profit as a percent of sales described above.
INTEREST EXPENSE
Interest expense increased to $8.6 million from $2.3 million for the
comparable period in 1995. The increase principally reflects interest
related to borrowings used to finance the acquisition of CMS and Fisher
Scientific U.K. in the fourth quarter of 1995.
NET INCOME
Net income for the three months ended March 31, 1996 decreased to $4.5
million from $6.8 million for the comparable period in 1995. Income before
taxes for the quarter ended March 31, 1996 decreased to $8.1 million from
$11.3 million for the comparable period in 1995 due to the factors discussed
above. The income tax provision for the quarter reflected a higher effective
tax rate than the comparable period in 1995, as the prior period's rate
reflected the benefit of certain domestic net operating loss carryforwards.
LIQUIDITY AND CAPITAL RESOURCES
During the three months ended March 31, 1996, the Company's operations
used $13.1 million of cash compared with providing $4.2 million for the same
period in 1995. This decrease in cash flow from operations primarily
resulted from significant decreases in accounts payable and accrued
liabilities. These changes are principally attributable to payments of
previously accrued restructuring and integration amounts, payments of accrued
compensation and benefit amounts, timing of interest payments and timing of
payment of other previously accrued amounts. These changes in accounts
payable and accruals were partially offset by a smaller change in inventories
compared to the prior year.
10
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The Company's current ratio, the ratio of current assets to current
liabilities, was 1.8 at March 31, 1996, compared with 1.7 at December 31,
1995. Excluding the effect, if any, of future acquisitions, the Company's
operating working capital requirements are not anticipated to increase
substantially throughout the remainder of 1996.
During the three months ended March 31, 1996, the Company used $7.6
million of cash for investing activities compared with $4.3 million for the
same period in 1995. The increase in cash used for investing activities is
primarily due to a decrease in cash provided by proceeds from sales of
marketable securities, partially offset by a reduction in cash used for
acquisitions. For the three months ended March 31, 1996 and 1995, the
Company had capital expenditures of $5.1 million and $4.7 million,
respectively.
During the three months ended March 31, 1996, the Company used $24.5
million for financing activities compared with $0.2 million for the same
period in 1995. This change is primarily due to $30.0 million in prepayments
of the Company's bank term debt. The Company may continue to prepay this
debt to the extent of its surplus cash.
Fisher expects that cash flows from operations, together with cash and
cash equivalents on hand and funds available under existing credit
facilities, will be sufficient to meet ongoing operating and capital
expenditure requirements.
On March 7, 1996, Fisher's Board of Directors declared a quarterly cash
dividend of $.02 per share, payable April 5, 1996 to shareholders of record
March 21, 1996. The Company plans to continue paying regular quarterly
dividends, which will be funded by cash generated from operations. No
dividend will be payable unless declared by the Fisher Board of Directors and
funds are legally available for payment of a dividend.
11
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PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 11 - Computation of Earnings Per Common Share for the
Three Months Ended March 31, 1996 and 1995.
Exhibit 18 - Letter Regarding Change in Method of Accounting
for Certain Inventories from Deloitte & Touche LLP.
(b) Reports on Form 8-K:
None
12
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SIGNATURE
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.
FISHER SCIENTIFIC INTERNATIONAL INC.
Date: MAY 14, 1996 Paul M. Meister
--------------------------------------
PAUL M. MEISTER
Senior Vice President -
Chief Financial Officer
13
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______________________________________________________________________________
______________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________
FISHER SCIENTIFIC INTERNATIONAL INC.
EXHIBITS
TO
FORM 10-Q
for the three months ended March 31, 1996
______________________________________________________________________________
______________________________________________________________________________
14
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE
- - ----------- ----------- ----
11 Computation of Earnings 16
Per Common Share for the
Three Months Ended
March 31, 1996 and 1995
18 Letter Regarding Change 17
in Method of Accounting for
Certain Inventories from
Deloitte & Touche LLP
15
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EXHIBIT 11
FISHER SCIENTIFIC INTERNATIONAL INC.
COMPUTATION OF EARNINGS PER COMMON SHARE
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(unaudited)
PRIMARY EARNINGS PER SHARE WERE CALCULATED AS FOLLOWS:
Three Months Ended
March 31,
1996 1995
----- -----
Total income used for primary
earnings per share $ 4.5 $ 6.8
----- -----
----- -----
Average common shares
outstanding 16.4 16.0
Other 0.4 0.3
----- -----
Average shares and equivalents 16.8 16.3
----- -----
----- -----
Primary earnings per share $0.27 $0.42
FULLY DILUTED EARNINGS PER SHARE WERE CALCULATED AS FOLLOWS:
Three Months Ended
March 31,
1996 1995
----- -----
Net income $ 4.5 $ 6.8
Interest expense of
Convertible Subordinated Notes,
net of taxes 1.1 1.1
----- -----
Total income used for fully
diluted earnings per share $ 5.6 $ 7.9
----- -----
----- -----
Average common shares
outstanding 16.4 16.0
Common equivalent shares
for Convertible Subordinated Notes 3.6 3.6
Other 0.4 0.3
----- -----
Average shares and equivalents 20.4 19.9
----- -----
----- -----
Fully diluted earnings per share $0.27 $0.40
----- -----
----- -----
Note: Amounts may not calculate due to rounding.
16
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EXHIBIT 18
LETTER REGARDING CHANGE IN METHOD OF ACCOUNTING
FOR CERTAIN INVENTORIES
May 8, 1996
Fisher Scientific International Inc.
Liberty Lane
Hampton, New Hampshire 03842
Dear Sirs:
At your request, we have read the description included in Note 3 to the
condensed consolidated financial statements of Fisher Scientific
International Inc. (the "Company") as of and for the three months ended March
31, 1996 included in your Quarterly Report on Form 10-Q to the Securities and
Exchange Commission for the quarter ended March 31, 1996 of the facts
relating to a change in the method of accounting for certain inventories of
the Company's newly acquired subsidiary, Curtin Matheson Scientific Inc.,
from the first-in, first-out method to the last-in, first-out method. You
have advised us that you believe the change is to a preferable method in your
circumstances because the last-in, first-out method is the method used by the
Company's principal United States operating subsidiary, Fisher Scientific
Company, for similar inventories and because this method more closely matches
current costs with current selling prices. While there are no specific
authoritative criteria for determining a "preferable" inventory cost method
based on particular circumstances, we believe, based on the facts so set
forth and other information furnished to us by appropriate officials of the
Company, that the accounting change described in your Form 10-Q is to an
alternative accounting principle that is preferable under the circumstances.
We have not audited any consolidated financial statements of Fisher
Scientific International Inc. as of any date or for any period subsequent to
December 31, 1995. Therefore, we are unable to express, and do not express
an opinion on the facts set forth in the above-mentioned Form 10-Q, on the
information furnished to us by officials of the Company, or on the financial
position, results of operations, or cash flows of Fisher Scientific
International Inc. as of any date or for any period subsequent to December
31, 1995.
Yours truly,
DELOITTE & TOUCHE LLP
17
