<PAGE>
This Form 10-Q consists of 18 sequentially numbered pages. The exhibit index
appears on sequentially numbered page 16.
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 September 30, 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 October 31, 1996 was
20,089,606.
1
<PAGE>
FISHER SCIENTIFIC INTERNATIONAL INC.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1996
INDEX
Page No.
Part I - Financial Information:
Item 1 - Financial Statements:
Introduction to the Financial Statements.................. 3
Income Statements -
Three and Nine Months Ended September 30, 1996 and 1995... 4
Balance Sheets -
September 30, 1996 and December 31, 1995.................. 5
Statements of Cash Flows -
Nine Months Ended September 30, 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.......................... 13
SIGNATURE............................................................... 14
EXHIBIT INDEX........................................................... 16
2
<PAGE>
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
<PAGE>
FISHER SCIENTIFIC INTERNATIONAL INC.
INCOME STATEMENTS
(in millions, except per share amounts)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
------ ------ -------- -----
Sales $541.0 $333.7 $1,589.2 $951.7
Cost of sales 394.6 243.6 1,164.3 686.3
Selling, general and
administrative expense 121.0 80.1 358.4 224.9
Restructuring charge -- 34.3 -- 34.3
----- ------ ------- -----
Income (loss) from operations 25.4 (24.3) 66.5 6.2
Interest expense 5.7 2.4 22.1 7.2
Other (income) expense, net (1.5) (0.1) (0.4) (2.0)
----- ------ ------- -----
Income before income taxes 21.2 (26.6) 44.8 1.0
Income tax provision (benefit) 9.7 (10.8) 20.4 (0.2)
----- ------ ------- -----
Net income (loss) $11.5 $(15.8) $24.4 $1.2
===== ====== ======= =====
Earnings (loss) per common share:
Primary $.56 $(.96) $1.35 $.07
===== ====== ======= =====
Fully diluted $.56 $(.96) $1.29 $.07
===== ====== ======= =====
See the accompanying notes to financial statements.
4
<PAGE>
FISHER SCIENTIFIC INTERNATIONAL INC.
BALANCE SHEETS
(in millions)
September 30, December 31,
1996 1995
-------- --------
(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $13.6 $63.7
Receivables, net 321.0 297.3
Inventories 236.9 242.7
Other current assets 63.3 69.9
-------- --------
Total current assets 634.8 673.6
Property, plant and equipment, net 209.1 207.6
Goodwill 272.9 270.4
Other assets 107.0 118.9
-------- --------
$1,223.8 $1,270.5
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short-term debt $7.9 $11.7
Accounts payable 215.8 231.2
Accrued and other current liabilities 153.2 146.7
-------- --------
Total current liabilities 376.9 389.6
Long-term debt 276.5 446.3
Other liabilities 195.5 208.6
-------- --------
Total liabilities 848.9 1,044.5
Stockholders' equity 374.9 226.0
-------- --------
$1,223.8 $1,270.5
======== ========
See the accompanying notes to financial statements.
5
<PAGE>
FISHER SCIENTIFIC INTERNATIONAL INC.
STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
Nine Months Ended
September 30,
1996 1995
-------- --------
Cash flows from operating activities:
Net income $24.4 $1.2
Adjustments to reconcile net income to
cash provided (used) by operating activities:
Noncash restructuring charge -- 34.3
Depreciation and amortization 32.4 17.7
Gain on sale of property, plant and equipment (1.5) --
Deferred income taxes 7.4 (11.9)
Changes in working capital:
Receivables, net (25.0) (14.4)
Inventories 4.5 (17.4)
Payables, accrued and other current
liabilities (26.1) (2.0)
Other working capital changes 5.2 0.2
Other assets and liabilities -- (9.7)
-------- --------
Cash provided (used) by operating
activities 21.3 (2.0)
-------- --------
Cash flows from investing activities:
Acquisitions, net of cash acquired (4.7) (25.3)
Marketable securities proceeds -- 21.3
Capital expenditures (24.4) (17.2)
Proceeds from sale of property, plant
and equipment 2.4 --
Other investing activities (0.4) (2.9)
-------- --------
Cash used in investing activities (27.1) (24.1)
-------- --------
Cash flows from financing activities:
Proceeds from stock options exercised 6.6 3.2
Dividends paid (1.1) (1.0)
Long-term debt proceeds 5.5 3.7
Long-term debt payments (55.3) (1.5)
-------- --------
Cash provided (used) by financing
activities (44.3) 4.4
-------- --------
Net change in cash and cash equivalents (50.1) (21.7)
Cash and cash equivalents - beginning of period 63.7 36.9
-------- --------
Cash and cash equivalents - end of period $13.6 $15.2
======== ========
See the accompanying notes to financial statements.
6
<PAGE>
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, Africa and Australia. 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 and
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 Statement of Financial
Accounting Standards Number 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.
Also effective January 1, 1996, the Company adopted Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation". This statement allowed for, and the Company retained, the
current method of accounting for employee stock-based compensation
arrangements in accordance with Accounting Principles Board No. 25,
"Accounting for Stock Issued to Employees". The new standard did not have a
material effect on the Company's financial statements.
NOTE 3 - INVENTORIES
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.
NOTE 4 - DEBT
September 30, December 31,
1996 1995
-------- --------
in millions
Bank Credit Facility $113.4 $161.5
7 1/8% Notes (net of a discount
of $1.2 million at September 30, 1996
and December 31, 1995) 148.8 148.8
Convertible subordinated notes -- 125.0
Capital lease obligations 6.1 7.8
Other 16.1 14.9
Less current portion of long-term debt (7.9) (11.7)
-------- --------
$276.5 $446.3
======== ========
7
<PAGE>
On June 12, 1996, the Company called for the redemption of its $125
million step-up convertible subordinated notes due 2003, at a price of
103.65% of principal, plus accrued interest. The notes could also be
converted into common stock at a conversion price of $35 1/8 per share. On
June 25, 1996, approximately 97%, or $121.6 million, of the notes were
converted into 3,463,154 shares of the Company's common stock. On July 2,
1996, the Company redeemed the remaining notes for $3.5 million plus accrued
interest. The conversion resulted in an increase in stockholders' equity
and a reduction in long-term debt of approximately $125 million.
NOTE 5 - STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Capital
in
Common Excess of Retained
Stock Par Value Other Earnings Total
----- --------- ----- -------- -------
<S> <C> <C> <C> <C> <C>
in millions
Balance, December 31, 1995 $0.2 $135.5 $(2.8) $93.1 $226.0
Net Income -- -- -- 24.4 24.4
Proceeds from stock options -- 6.6 -- -- 6.6
Tax benefit from exercise
of stock options -- 1.3 -- -- 1.3
Dividends ($0.06 per share) -- -- -- (1.1) (1.1)
Other -- -- (7.7) -- (7.7)
Conversion of Convertible
Subordinated Notes -- 125.4 -- -- 125.4
----- ------ ----- ------ ------
Balance, September 30, 1996 $0.2 $268.8 $(10.5) $116.4 $374.9
===== ====== ===== ====== ======
</TABLE>
On September 18, 1996, Fisher's Board of Directors declared a quarterly cash
dividend of $0.02 per share, payable October 17, 1996 to shareholders of
record October 3, 1996.
8
<PAGE>
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 and nine months ended September 30, 1996 increased
62% and 67% to $541.0 million and $1,589.2 million, respectively, from $333.7
million and $951.7 million for the comparable periods in 1995. The sales
increases in both periods primarily reflect 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. ("FSE"
- -now named Fisher Scientific U.K. Ltd.), as well as growth in Fisher's
historical North American operations.
GROSS PROFIT
Fisher's gross profit for the three and nine month periods ended
September 30, 1996 increased 62% and 60% to $146.4 million and $424.9
million, respectively, from $90.1 million and $265.4 million for the
comparable periods in 1995, primarily resulting from the aforementioned sales
growth.
Gross profit as a percent of sales for the three and nine month periods
ended September 30, 1996 was 27.1% and 26.7%, respectively, compared with
27.0% and 27.9% for the corresponding periods in 1995. The decrease in gross
profit as a percent of sales for the nine months ended September 30, 1996
reflects the inclusion of lower gross margins associated with the recently
acquired CMS and FSE businesses (including $1.0 million of costs associated
with the revaluation of acquired inventory) partially offset by improvements
in gross margins of Fisher's historical North American operations. The slight
increase in gross profit as a percent of sales for the three months ended
September 30, 1996 is due to an increase in the effect of the improvements at
the historical North American operations throughout the year.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
Selling, general and administrative expense for the three and nine months
ended September 30, 1996 increased 51.1% and 59.4% to $121.0 million and
$358.4 million, respectively, from $80.1 million and $224.9 million for the
comparable periods in 1995. These increases resulted from the inclusion of
selling, general and administrative expenses of recently acquired businesses,
9
<PAGE>
nonrecurring 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
should be eliminated as the restructuring plan is fully implemented, are
recognized as incurred. For the three and nine month periods ended September
30, 1996, approximately $4.6 million and $14.6 million, respectively, of such
charges have been recorded and are included in selling, general and
administrative expense.
Operations outside of the United States continue to have significantly
higher selling, general and administrative expense as a percentage of sales
as compared with that of Fisher's domestic operations. These higher costs
are being incurred as part of a plan to develop an integrated worldwide
supply capability, the benefit of which has not been realized.
INCOME FROM OPERATIONS
Income (loss) from operations for the three and nine month periods ended
September 30, 1996 increased to $25.4 million and $66.5 million,
respectively, compared with ($24.3) million and $6.2 million for the
corresponding periods in 1995. These increases reflect the effect of the
restructuring charge of $34.3 million recorded in the third quarter of 1995
as well as the factors described above.
INTEREST EXPENSE
Interest expense for the three and nine month periods ended September
30, 1996 increased to $5.7 million and $22.1 million, respectively, from $2.4
million and $7.2 million for the comparable periods in 1995. The increases
primarily reflect interest on borrowings used to finance the acquisition of
CMS and FSE in the fourth quarter of 1995 partially offset by the June 1996
redemption of the Company's $125 million step-up convertible notes discussed
below.
OTHER (INCOME) EXPENSE, NET
Other (income) expense, net for the three month period ended September
30, 1996 increased to ($1.5) million from ($0.1) million for the comparable
period in 1995. This increase is primarily due to $1.5 million of gains on
sales of fixed assets, $0.7 million of which are due to fixed assets sales
related to the restructuring plan. Other (income) expense, net for the nine
month period ended September 30, 1996 decreased to ($0.4) million from ($2.0)
million as the gains on sales of fixed assets discussed above were offset by
reduced income from an inactive insurance subsidiary and by other expenses.
10
<PAGE>
INCOME TAX PROVISION
The income tax provision for the three and nine month periods ended
September 30, 1996 increased to $9.7 million and $20.4 million, respectively,
compared with an income tax benefit of $10.8 million and $0.2 million for the
corresponding periods in 1995. The effective tax rate for the nine months
ended September 30, 1996 increased to 45.5% compared with (20.0%) for the
same period in 1995. The effective tax rate for the comparable period in
1995 was benefited by certain domestic net operating loss carryforwards.
NET INCOME
Net income (loss) for the three and nine months ended September 30, 1996
increased to $11.5 million and $24.4 million, respectively, from ($15.8)
million and $1.2 million for the comparable periods in 1995 as a result of
the factors discussed above.
LIQUIDITY AND CAPITAL RESOURCES
During the nine months ended September 30, 1996, the Company's
operations provided $21.3 million of cash compared with the $2.0 million of
cash used during the same period in 1995. This $23.3 million increase in
cash flow from operations primarily resulted from an increase in net income
adjusted for depreciation and amortization, deferred income taxes and the
noncash restructuring charges. The Company's operating working capital
(defined as receivables plus inventories less accounts payable and accrued
liabilities) increased to $188.9 million at September 30, 1996 from $162.1
million at December 31, 1995. The increase in operating working capital is
primarily due to increases in receivables which were due to increases in
sales volume and the impact of the integration of CMS into Fisher.
Excluding the effect, if any, of future acquisitions and anticipated
temporary inventory duplications as the Company completes its consolidation
and relocation of logistical functions, the Company's operating working
capital requirements are not anticipated to increase substantially throughout
the remainder of 1996.
During the nine months ended September 30, 1996, the Company used $27.1
million of cash for investing activities compared with $24.1 million for the
same period in 1995. The increase in cash used for investing activities is
primarily due to increases in capital expenditures. For the nine months
ended September 30, 1996 the Company's capital expenditures increased to
$24.4 million from $17.2 million for the comparable period in 1995,
reflecting capital expenditures associated with the consolidation and
relocation of logistical and administrative functions.
During the nine months ended September 30, 1996, the Company's financing
activities used $44.3 million compared with providing $4.4 million in the
same period in 1995. This change is primarily due to approximately $48
million in prepayments of the Company's bank credit facility. The Company
may continue to prepay this debt to the extent of its surplus cash.
11
<PAGE>
On June 12, 1996, the Company called for the redemption of its $125
million step-up convertible subordinated notes due 2003, at a price of
103.65% of principal, plus accrued interest. The notes could also be
converted into common stock at a conversion price of $35 1/8 per share. On
June 25, 1996, approximately 97%, or $121.6 million, of the notes were
converted into 3,463,154 shares of the Company's common stock. On July 2,
1996, the Company redeemed the remaining notes for $3.5 million plus accrued
interest. The conversion resulted in an increase in stockholders' equity and
a reduction in long-term debt of approximately $125 million.
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 September 18, 1996, Fisher's Board of Directors declared a quarterly
cash dividend of $.02 per share, payable October 17, 1996 to shareholders of
record October 3, 1996.
12
<PAGE>
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 and Nine Months Ended September 30, 1996 and 1995.
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K:
None.
13
<PAGE>
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: November 13, 1996 /S/ PAUL F. PATEK
----------------- -------------------------------------
PAUL F. PATEK
Vice President - Controller
14
<PAGE>
_______________________________________________________________________________
_______________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________
FISHER SCIENTIFIC INTERNATIONAL INC.
EXHIBITS
TO
FORM 10-Q
for the quarter ended September 30, 1996
_______________________________________________________________________________
_______________________________________________________________________________
15
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE
11 Computation of Earnings 17
Per Common Share for the
Three and Nine Months Ended
September 30, 1996 and 1995
27 Financial Data Schedule 18
16
<PAGE>
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 Nine Months Ended
September 30, September 30,
------------------ -----------------
1996 1995 1996 1995
---- ---- ---- ----
Total income (loss) used for primary
earnings per share $11.5 $(15.8) $24.4 $ 1.2
===== ======= ===== =====
Average common shares
outstanding 20.0 16.0 17.7 16.0
Other 0.5 0.4 0.4 0.4
----- ------- ----- -----
Average shares and equivalents 20.5 16.4 18.1 16.4
===== ======= ===== =====
Primary earnings (loss) per share $ .56 $(0.96) $1.35 $0.07
===== ======= ===== =====
FULLY DILUTED EARNINGS PER SHARE WERE CALCULATED AS FOLLOWS:
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1996 1995 1996 1995
---- ---- ---- ----
Net income (loss) $11.5 $(15.8) $24.4 $ 1.2
Interest expense of
Convertible Subordinated Notes,
net of taxes -- 1.1 2.1 3.1
----- ------- ----- -----
Total income (loss) used for fully
diluted earnings per share $11.5 $(14.7) $26.5 $ 4.3
===== ======= ===== =====
Average common shares
outstanding 20.0 16.0 17.7 16.0
Common equivalent shares
for Convertible Subordinated Notes -- 3.6 2.3 3.6
Other 0.6 0.4 0.5 0.4
----- ------- ----- -----
Average shares and equivalents 20.6 20.0 20.5 20.0
===== ======= ===== =====
Fully diluted earnings (loss) per share $ .56 $(0.73) $1.29 $0.22
===== ======= ===== =====
Note: Amounts may not calculate due to rounding.
17
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEET AS OF SEPTEMBER 30, 1996 AND THE INCOME STATEMENT FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 14
<SECURITIES> 0
<RECEIVABLES> 321
<ALLOWANCES> 0
<INVENTORY> 237
<CURRENT-ASSETS> 635
<PP&E> 209
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,224
<CURRENT-LIABILITIES> 377
<BONDS> 277
0
0
<COMMON> 0
<OTHER-SE> 375
<TOTAL-LIABILITY-AND-EQUITY> 1,224
<SALES> 1,589
<TOTAL-REVENUES> 1,589
<CGS> 1,164
<TOTAL-COSTS> 1,164
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22
<INCOME-PRETAX> 45
<INCOME-TAX> 20
<INCOME-CONTINUING> 24
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24
<EPS-PRIMARY> 1.35
<EPS-DILUTED> 1.29
</TABLE>
