<PAGE>
This Form 10-Q consists of 24 sequentially numbered pages. The exhibit index
appears on sequentially numbered page 22.
FORM 10-Q
UNITED STATES
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 June 30, 1997
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 July 31, 1997 was
20,310,546.
<PAGE>
FISHER SCIENTIFIC INTERNATIONAL INC.
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1997
INDEX
PAGE NO.
--------
Part I--Financial Information:
Item 1--Financial Statements:
Introduction to the Financial Statements....................3
Income Statements -
Three and Six Months Ended June 30, 1997 and 1996...........4
Balance Sheets -
June 30, 1997 and December 31, 1996.........................5
Statements of Cash Flows -
Six Months Ended June 30, 1997 and 1996.....................6
Notes to Financial Statements...............................7
Item 2--Management's Discussion and Analysis of Results
of Operations and Financial Condition.....................10
Part II--Other Information:
Item 2--Changes in Securities.....................................15
Item 4--Submission of Matters to a Vote of Security Holders.......18
Item 6--Exhibits and Reports on Form 8-K..........................19
SIGNATURE.............................................................20
EXHIBIT INDEX.........................................................22
2
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FISHER SCIENTIFIC INTERNATIONAL INC.
PART 1--FINANCIAL INFORMATION
ITEM 1--FINANCIAL STATEMENTS
INTRODUCTION TO THE FINANCIAL STATEMENTS
The condensed consolidated 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. 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 December 31, 1996 balance sheet
is the balance sheet included in the audited financial statements as shown in
the Company's 1996 Annual Report on Form 10-K. 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, 1996.
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)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -----------------
1997 1996 1997 1996
------- ------ ------ -------
<S> <C> <C> <C> <C>
Sales $542.6 $532.2 $1,069.3 $1,048.2
Cost of sales 394.1 389.3 774.5 769.7
Selling, general and
administrative expense 127.4 119.0 248.9 237.4
------ ------ ------- --------
Income from operations 21.1 23.9 45.9 41.1
Interest expense 6.0 7.8 12.1 16.4
Other (income) expense, net (2.8) 0.6 (4.4) 1.1
------ ------ ------- --------
Income before income taxes 17.9 15.5 38.2 23.6
Income tax provision 8.3 7.1 17.6 10.7
Net income $ 9.6 $ 8.4 $ 20.6 $ 12.9
------ ------ ------- --------
------ ------ ------- --------
Earnings per common share:
Primary $ 0.47 $ 0.49 $ 1.00 $ 0.76
------ ------ ------- --------
------ ------ ------- --------
Fully diluted $ 0.46 $ 0.46 $ 0.99 $ 0.74
------ ------ ------- --------
------ ------ ------- --------
</TABLE>
See the accompanying notes to financial statements.
4
<PAGE>
FISHER SCIENTIFIC INTERNATIONAL INC.
BALANCE SHEETS
(in millions)
June 30, December 31,
1997 1996
----------- ------------
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 16.3 $ 24.7
Receivables, net 316.6 316.6
Inventories 245.9 256.0
Other current assets 70.1 55.5
-------- ------------
Total current assets 648.9 652.8
Property, plant and equipment, net 212.8 209.5
Goodwill 295.1 292.7
Other assets 103.0 107.7
-------- ------------
$1,259.8 $ 1,262.7
-------- ------------
-------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 19.6 $ 14.6
Accounts payable 218.5 234.5
Accrued and other current liabilities 126.0 143.9
-------- ------------
Total current liabilities 364.1 393.0
Long-term debt 295.5 281.5
Other liabilities 194.1 202.0
-------- ------------
Total liabilities 853.7 876.5
-------- ------------
Commitments and contingencies
Stockholders' equity:
Preferred stock -- --
Common stock 0.2 0.2
Capital in excess of par value 275.7 270.7
Retained earnings 148.2 128.4
Other (18.0) (13.1)
-------- ------------
Total stockholders' equity 406.1 386.2
-------- ------------
$1,259.8 $ 1,262.7
-------- ------------
-------- ------------
See the accompanying notes to financial statements.
5
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FISHER SCIENTIFIC INTERNATIONAL INC.
STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
Six Months Ended
June 30,
------------------
1997 1996
------ ------
Cash flows from operating activities:
Net income $ 20.6 $ 12.9
Adjustments to reconcile net income to
cash used by operating activities:
Depreciation and amortization 22.3 21.9
Gain on sale of assets (2.8) --
Deferred income taxes 2.5 3.3
Changes in working capital:
Receivables, net 1.3 2.1
Inventories 11.5 1.9
Payables, accrued and other current
liabilities (30.0) (43.8)
Other working capital changes 2.5 4.9
Other assets and liabilities (20.1) 0.8
------ ------
Cash provided by operating activities 7.8 4.0
------ ------
Cash flows from investing activities:
Acquisitions, net of cash acquired (8.6) (4.7)
Capital expenditures (32.4) (11.6)
Other investing activities 1.8 (0.4)
------ ------
Cash used in investing activities (39.2) (16.7)
------ ------
Cash flows from financing activities:
Proceeds from stock options exercised 4.0 4.8
Dividends paid (0.8) (0.7)
Long-term debt proceeds 89.1 2.1
Long-term debt payments (69.3) (40.5)
------ ------
Cash provided (used) by financing
activities 23.0 (34.3)
------ ------
Net change in cash and cash equivalents (8.4) (47.0)
Cash and cash equivalents - beginning
of period 24.7 63.7
------ ------
Cash and cash equivalents - end of period $ 16.3 $ 16.7
------ ------
------ ------
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 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. Other activities include third-party services and
electronic commerce.
NOTE 2--ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings per Share" (SFAS No. 128). SFAS No. 128
establishes new standards for computing and presenting earnings per share.
The Company is required to adopt SFAS No. 128 in the fourth quarter of 1997.
If the provisions of SFAS No. 128 had been used to calculate EPS for the
three and six months ended June 30, 1997 and 1996, the effect on earnings per
share would have been insignificant.
NOTE 3--INVENTORIES
The following is a summary of inventories by major category (in millions):
June 30, December 31,
1997 1996
-------- -------------
Raw material $ 13.6 $ 11.2
Work in process 3.5 3.0
Finished products 228.8 241.8
-------- -------------
$ 245.9 $ 256.0
-------- -------------
-------- -------------
7
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NOTE 4--OTHER CURRENT ASSETS
In the second quarter of 1997, the Company sold a non-core asset
resulting in a $1.5 million gain classified in other income and expense and a
$17.6 million receivable classified in other current assets at June 30, 1997.
This amount was collected in the third quarter of 1997.
NOTE 5--DEBT
The following is a summary of debt and other obligations (in millions):
June 30, December 31,
1997 1996
-------- -------------
Bank Credit Facility $ 134.3 $ 116.8
7 1/8% Notes (net of a discount
of $1.1 million at June 30, 1997
and December 31, 1996) 148.9 148.9
Other 31.9 30.4
Less current portion of long-term debt (19.6) (14.6)
-------- -------------
$ 295.5 $ 281.5
-------- -------------
-------- -------------
NOTE 6--STOCKHOLDERS' EQUITY
On June 4, 1997, the Board of Directors of Fisher declared a quarterly
cash dividend of $0.02 per share, payable July 3, 1997 to stockholders of
record June 18, 1997.
On June 9, 1997, the Board of Directors of Fisher declared a dividend of
one preferred share purchase right (a "Right") for each outstanding share of
common stock ("Common Shares") of the Company. The dividend was payable on
June 19, 1997 to stockholders of record on that date. The description of all
terms of the Rights are set forth in a Rights Agreement between the Company
and ChaseMellon Shareholder Services, L.L.C. (the "Rights Agreement"). Until
the occurrence of a Distribution Date (as defined in the Rights Agreement),
the Rights will be evidenced by the Common Stock certificates and may be
transferred only with the Common Stock. Each Right, when exercisable,
entitles the registered holder to purchase from the Company one one-hundredth
of a share of Series A Junior Participating Preferred Stock, without par
value (the "Preferred Shares"), of the Company at a price of $190 per one
one-hundredth of a Preferred Share, subject to adjustment. There are 500,000
authorized shares of Series A Junior Preferred Stock. When issued, each
Preferred Share is entitled to an aggregate dividend of 100 times the
8
<PAGE>
dividend declared per Common Share. Additionally, in the event of
liquidation, the holders of the Preferred Shares will be entitled to an
aggregate payment of 100 times the payment made per Common Share. Each
Preferred Share will also have 100 votes. In the event of a transaction in
which Common Shares are exchanged, each Preferred Share will be entitled to
receive 100 times the amount received per Common Share.
The Rights will expire on June 8, 2007 (the "Final Expiration Date"),
unless the Final Expiration Date is extended or unless the Rights are earlier
redeemed or exchanged by the Company.
NOTE 7--SUBSEQUENT EVENTS
On August 7, 1997, the Company and FSI Merger Corp. ("FSI"), a Delaware
corporation formed by Thomas H. Lee Company ("THL Co.") entered into an
agreement and plan of merger (the "Merger Agreement") providing for a
recapitalization of Fisher. Under the terms of the Merger Agreement,
approximately 97% of the fully diluted common stock of Fisher will be
converted into the right to receive $51.00 per share in cash (approximately
$1.06 billion in the aggregate). Pursuant to an election process that gives
priority to eligible employees presently holding Fisher Common Stock and
opting to purchase Fisher Common Stock, the remaining shares will be retained
by existing stockholders and will represent ownership in the recapitalized
company. Consummation of the merger is subject among other things to certain
customary conditions, including certain regulatory and stockholder approvals,
receipt of necessary financing and customary conditions including the absence
of material adverse changes to the Company. In the event the Merger Agreement
is terminated for any reason other than a material breach by FSI, the Merger
Agreement requires the Company to reimburse THL or FSI for all out-of-pocket
expenses and fees incurred by THL or FSI up to a stated maximum. The Merger
Agreement also provides for the payment to FSI of a Termination Fee under
certain circumstances. A copy of the Merger Agreement is included as Exhibit
4.3 to this Form 10-Q. If the Merger is consummated, the transaction would
qualify as a change in control and vesting of outstanding common stock
options may accelerate. The Company also has agreements with certain of its
key executives and severance plans for key employees which provide for
severance payments under certain circumstances in the event an employee is
severed following a change in control.
In connection with the Merger Agreement, the Board of Directors of the
Company approved a First Amendment, dated as of August 7, 1997 (the "First
Amendment"), to the Rights Agreement. The First Amendment provides, among
other things, that FSI and its Affiliates (as defined in the First Amendment)
would not be deemed an Acquiring Person (as such term is defined in the
Rights Agreement).
9
<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--Cautionary Factors Regarding Forward-Looking Statements"
contained in the Company's Form 10-K for the year ended December 31, 1996.
RESULTS OF OPERATIONS
SALES
Sales for the three and six months ended June 30, 1997 each increased 2%
to $542.6 million and $1,069.3 million, respectively, from $532.2 million and
$1,048.2 million for the comparable periods in 1996. Sales growth in Fisher's
historical North American and international operations was partially offset
by a decrease in sales to the U.S. clinical laboratory market. As a result of
the slowdown in sales to the clinical laboratory market and the current
strike of United Parcel Service of America, Inc., the Company expects
near-term revenue growth to remain below historical levels.
GROSS PROFIT
Fisher's gross profit for the three- and six-month periods ended June 30,
1997 increased 4% and 6% to $148.5 million and $294.8 million, respectively,
from $142.9 million and $278.5 million for the comparable periods in 1996,
primarily resulting from improvements in gross profit as a percent of sales.
Gross profit as a percent of sales increased to 27.6% for the six months
ended June 30, 1997 from 26.6% for the same period in 1996. The increase
largely reflects improvements in gross margins of Fisher's historical North
American operations.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
Selling, general and administrative expense for the three and six months
ended June 30, 1997 increased 7% and 5% to $127.4 million and $248.9 million,
respectively, from $119.0 million and $237.4 million for the comparable
periods in 1996. Selling, general and administrative expense in both periods
includes nonrecurring costs associated with the implementation of the
restructuring plan that began in the third quarter of 1995, the integration
of Curtin Matheson Scientific Inc. ("CMS"), acquired in October 1995, into
Fisher, actions taken this year to improve operating efficiencies and the
Board of Directors' recent review of strategic alternatives. Nonrecurring
integration and restructuring-related costs include costs resulting from the
temporary duplication of
10
<PAGE>
operations, relocation of inventories and employees, hiring
and training new employees, and other one-time and redundant costs, which
will be eliminated as the integration and restructuring plans are completed.
These costs are recognized as incurred. For the three and six months ended
June 30, 1997, $6.4 million and $8.3 million, respectively, of such costs
were included in selling, general and administrative expense compared with
$5.1 million and $10.0 million for the comparable periods in 1996. The
Company expects these costs to approximate $12 million to $17 million for
1997.
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 fully realized.
INCOME FROM OPERATIONS
Income from operations for the three months ended June 30, 1997 decreased
to $21.1 million from $23.9 million for the corresponding period in 1996.
Income from operations for the six month period ended June 30, 1997 increased
to $45.9 million from $41.1 million for the corresponding period in 1996.
Income from operations as a percent of sales increased to 4.3% for the six
months ended June 30, 1997, compared with 3.9% for the same period in 1996.
INTEREST EXPENSE
Interest expense for the three- and six-month periods ended June 30, 1997
decreased to $6.0 million and $12.1 million, respectively from $7.8 million
and $16.4 million for the comparable periods in 1996. These decreases
principally reflect the June 1996 conversion and redemption of the Company's
$125 million step-up convertible notes.
OTHER (INCOME) EXPENSE, NET
Other (income) expense, net for the three- and six-month periods ended
June 30, 1997 increased to $2.8 million and $4.4 million of income,
respectively, from $0.6 million and $1.1 million of expense for the
comparable periods in 1996. These increases were primarily due to gains on
sales of non-core assets.
NET INCOME
Net income for the three and six months ended June 30, 1997 increased to
$9.6 million and $20.6 million, respectively, from $8.4 million and $12.9
million for the comparable periods in 1996 as a result of the factors
discussed above.
11
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
During the six months ended June 30, 1997, the Company's operations
provided $7.8 million of cash compared with $4.0 million for the same period
in 1996. This increase in cash provided by operating activities primarily
resulted from an increase in net income and changes in operating working
capital, discussed below.
The Company's operating working capital (defined as receivables plus
inventories less accounts payable and accrued liabilities) increased to
$218.0 million at June 30, 1997 from $194.2 million at December 31, 1996.
This increase is due to decreases in accounts payable and accrued liabilities
partially offset by a decrease in inventories. The decreases in accounts
payable and accrued liabilities are principally attributable to payments of
previously accrued restructuring and integration amounts, payments of accrued
compensation and benefit amounts and timing of payment of other previously
accrued amounts. The decrease in inventories is due to an overall plan to
reduce inventories while maintaining service levels.
Excluding the effect, if any, of future acquisitions and anticipated
temporary inventory duplications as the Company completes the consolidation
and relocation of its logistical facilities in North America, the Company's
operating working capital requirements are not anticipated to increase
substantially throughout the remainder of 1997.
During the six months ended June 30, 1997, the Company used $39.2 million
of cash for investing activities compared with $16.7 million for the same
period in 1996. The increase in cash used for investing activities is
primarily due to capital expenditures. For the six months ended June 30, 1997
and 1996, the Company had capital expenditures of $32.4 million and $11.6
million, respectively. This increase is due to the Company's investment in
new logistical facilities in North America and the Far East.
During the six months ended June 30, 1997, the Company's financing
activities provided $23.0 million compared with using $34.3 million for the
same period in 1996. This change is primarily due to $19.8 million in net
long-term debt proceeds in the first six months of 1997, which were used to
fund capital expenditures and acquisitions. In the same period in 1996, the
Company made net long-term debt payments of $38.4 million, primarily funded
from 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 June 4, 1997, the Board of Directors of Fisher declared a quarterly cash
dividend of $0.02 per share, payable July 3, 1997 to shareholders of record
June 18, 1997. 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.
12
<PAGE>
On June 9, 1997, the Board of Directors of Fisher declared a dividend of
one preferred share purchase right (a "Right") for each outstanding share of
common stock ("Common Shares") of the Company. The dividend was payable on
June 19, 1997 to stockholders of record on that date. The description of all
terms of the Rights are set forth in a Rights Agreement between the Company
and ChaseMellon Shareholder Services, L.L.C. (the "Rights Agreement"). Until
the occurrence of a Distribution Date (as defined in the Rights Agreement),
the Rights will be evidenced by the Common Stock certificates and may be
transferred only with the Common Stock. Each Right, when exercisable,
entitles the registered holder to purchase from the Company one one-hundredth
of a share of Series A Junior Participating Preferred Stock, without par
value (the "Preferred Shares"), of the Company at a price of $190 per one
one-hundredth of a Preferred Share, subject to adjustment. There are 500,000
authorized shares of Series A Junior Preferred Stock. When issued, each
Preferred Share is entitled to an aggregate dividend of 100 times the
dividend declared per Common Share. Additionally, in the event of
liquidation, the holders of the Preferred Shares will be entitled to an
aggregate payment of 100 times the payment made per Common Share. Each
Preferred Share will also have 100 votes. In the event of a transaction in
which Common Shares are exchanged, each Preferred Share will be entitled to
receive 100 times the amount received per Common Share.
The Rights will expire on June 8, 2007 (the "Final Expiration Date"),
unless the Final Expiration Date is extended or unless the Rights are earlier
redeemed or exchanged by the Company.
FINANCIAL CONDITION
At June 30, 1997, current assets decreased $3.9 million from December 31,
1996, with a decrease in cash and inventories of $8.4 million and $10.1
million, respectively, partially offset by an increase of $14.6 million in
other current assets. The decrease in cash resulted primarily from capital
expenditures related to the Company's investment in new logistical facilities
in North America and the Far East in excess of net proceeds on long-term
debt. The decrease in inventories is due to an overall plan to reduce
inventories while maintaining service levels. The increase in other current
assets is primarily due to a receivable on the sale of a non-core asset
recorded in the second quarter of 1997. Long-term assets increased by $1.0
million from December 31, 1996, with increases of $3.3 million in property,
plant and equipment, net and of $2.4 million in goodwill partially offset by
a decrease of $4.7 million in other assets. The increase in property, plant
and equipment, net resulted from the capital expenditures discussed above,
partially offset by the sale of a non-core asset recorded and depreciation.
The increase in goodwill is due to small international acquisitions and the
decrease in other assets resulted from a reduction in deferred taxes
primarily related to restructuring and integration spending. Changes in other
current liabilities and long-term debt are discussed above. Other long-term
liabilities decreased $7.9 million, primarily due to integration-related
items.
13
<PAGE>
On August 7, 1997, the Company and FSI Merger Corp. ("FSI"), a Delaware
corporation formed by Thomas H. Lee Company ("THL Co.") entered into an
agreement and plan of merger (the "Merger Agreement") providing for a
recapitalization of Fisher. Under the terms of the Merger Agreement,
approximately 97% of the fully diluted common stock of Fisher will be
converted into the right to receive $51.00 per share in cash (approximately
$1.06 billion in the aggregate). Pursuant to an election process that gives
priority to eligible employees presently holding Fisher Common Stock and
opting to purchase Fisher Common Stock, the remaining shares will be retained
by existing stockholders and will represent ownership in the recapitalized
company. Consummation of the merger is subject among other things to certain
customary conditions, including certain regulatory and stockholder approvals,
receipt of necessary financing and customary conditions including the absence
of material adverse changes to the Company. In the event the Merger Agreement
is terminated for any reason other than a material breach by FSI, the Merger
Agreement requires the Company to reimburse THL or FSI for all out-of-pocket
expenses and fees incurred by THL or FSI up to a stated maximum. The Merger
Agreement also provides for the payment to FSI of a Termination Fee under
certain circumstances. A copy of the Merger Agreement is included as Exhibit
4.3 to this Form 10-Q. If the Merger is consummated, the transaction would
qualify as a change in control and vesting of outstanding common stock
options may accelerate. The Company also has agreements with certain of its
key executives and severance plans for key employees which provide for
severance payments under certain circumstances in the event an employee is
severed following a change in control.
In connection with the Merger Agreement, the Board of Directors of the
Company approved a First Amendment, dated as of August 7, 1997 (the "First
Amendment"), to the Rights Agreement. The First Amendment provides, among
other things, that FSI and its Affiliates (as defined in the First Amendment)
would not be deemed an Acquiring Person (as such term is defined in the
Rights Agreement).
As a national distributor, Fisher utilizes the services of United Parcel
Service of America, Inc. ("UPS") for a significant portion of its domestic
shipments. Although the Company has implemented a logistics plan to minimize
the impact of the current strike, a prolonged work stoppage at UPS would have
an adverse impact on future results of the Company.
14
<PAGE>
PART II--OTHER INFORMATION
ITEM 2--CHANGES IN SECURITIES
On June 9, 1997, the Board of Directors of Fisher Scientific
International Inc. (the "Company") declared a dividend of one preferred share
purchase right (a "Right") for each outstanding share of common stock, par
value $0.01 per share (the "Common Shares"), of the Company. The dividend was
payable on June 19, 1997 (the "Record Date") to the stockholders of record on
that date. Each Right entitles the registered holder to purchase from the
Company one one-hundredth of a share of Series A Junior Participating
Preferred Stock, without par value (the "Preferred Shares"), of the Company
at a price of $190 per one one-hundredth of a Preferred Share (the "Purchase
Price"), subject to adjustment. The description and terms of the Rights are
set forth in a Rights Agreement (the "Rights Agreement") between the Company
and ChaseMellon Shareholder Services, L.L.C., as Rights Agent (the "Rights
Agent").
On August 7, 1997, the Company entered into an Agreement and Plan of
Merger (the "Merger Agreement") with FSI Merger Corp., a Delaware corporation
("FSI") founded by Thomas H. Lee Company. The Merger Agreement contemplates,
among other things, the merger of FSI with and into the Company (the
"Merger"). In connection with the Merger Agreement, the Board of Directors of
the Company approved a First Amendment, dated as of August 7, 1997 (the
"First Amendment"), to the Rights Agreement. The First Amendment provides,
among other things, that FSI and its Affiliates (as defined in the First
Amendment) would not be deemed an Acquiring Person (as such term is defined
in the Rights Agreement).
The following is a description of the Company's Rights Agreement, as
amended by the First Amendment.
Until the earlier to occur of (i) 10 days following a public
announcement that a person or group of affiliated or associated persons (an
"Acquiring Person") have acquired beneficial ownership of 15% or more of the
outstanding Common Shares or (ii) 10 business days (or such later date as may
be determined by action of the Board of Directors prior to such time as any
person or group of affiliated persons becomes an Acquiring Person) following
the commencement of, or announcement of an intention to make, a tender offer
or exchange offer the consummation of which would result in the beneficial
ownership by a person or group of 15% or more of the outstanding Common
Shares (the earlier of such dates being called the "Distribution Date"), the
Rights will be evidenced, with respect to any of the Common Share
certificates outstanding as of the Record Date, by such Common Share
certificate with a copy of this Summary of Rights attached thereto.
The Rights Agreement provides that, until the Distribution Date (or
earlier redemption or expiration of the Rights), the Rights will be
transferred with and only with the Common Shares. Until the Distribution Date
(or earlier redemption or expiration of
15
<PAGE>
the Rights), new Common Share certificates issued after the Record Date upon
transfer or new issuance of Common Shares will contain a notation
incorporating the Rights Agreement by reference. Until the Distribution Date
(or earlier redemption or expiration of Rights), the surrender for transfer
of any certificates for Common Shares outstanding as of the Record Date, even
without such notation or a copy of this Summary of Rights being attached
thereto, will also constitute the transfer of the Rights associated with the
Common Shares represented by such certificate. As soon as practicable
following the Distribution Date, separate certificates evidencing the Rights
("Right Certificates") will be mailed to holders of record of the Common
Shares as of the close of business on the Distribution Date and such separate
Right Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date. The Rights
will expire on June 8, 2007 and immediately prior to the Effective Time (as
defined in the Merger Agreement) (the "Final Expiration Date"), unless the
Final Expiration Date is extended or unless the Rights are earlier redeemed
or exchanged by the Company in each case, as described below.
The Purchase Price payable, and the number of Preferred Shares or other
securities or property issuable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the
Preferred Shares, (ii) upon the grant to holders of the Preferred Shares of
certain rights or warrants to subscribe for or purchase Preferred Shares at a
price, or securities convertible into Preferred Shares with a conversion
price, less than the then-current market price of the Preferred Shares or
(iii) upon the distribution to holders of the Preferred Shares of evidences
of indebtedness or assets (excluding regular periodic cash dividends paid out
of earnings or retained earnings or dividends payable in Preferred Shares) or
of subscription rights or warrants (other than those referred to above).
The number of outstanding Rights and the number of one one-hundredths of
a Preferred Share issuable upon exercise of each Right are also subject to
adjustment in the event of a stock split of the Common Shares or a stock
dividend on the Common Shares payable in Common Shares or subdivisions,
consolidations or combinations of the Common Shares occurring, in any such
case, prior to the Distribution Date.
Preferred Shares purchasable upon exercise of the Rights will not be
redeemable. Each Preferred Share will be entitled to a minimum preferential
quarterly dividend payment of $1 per share but will be entitled to an
aggregate dividend of 100 times the dividend declared per Common Share. In
the event of liquidation, the holders of the Preferred Shares will be
entitled to a minimum preferential liquidation payment of $100 per share but
will be entitled to an aggregate payment of 100 times the payment made per
Common Share. Each Preferred Share will have 100 votes, voting together with
the Common Shares. Finally, in the event of any merger, consolidation or
other transaction in which Common Shares are exchanged, each Preferred Share
will be entitled to receive 100 times the amount received per Common Share.
These rights are protected by customary antidilution provisions.
16
<PAGE>
Because of the nature of the Preferred Shares' dividend, liquidation and
voting rights, the value of the one one-hundredth interest in a Preferred
Share purchasable upon exercise of each Right should approximate the value of
one Common Share.
In the event that the Company is acquired in a merger or other business
combination transaction or 50% or more of its consolidated assets or earning
power are sold after a person or group has become an Acquiring Person, proper
provision will be made so that each holder of a Right will thereafter have
the right to receive, upon the exercise thereof at the then current exercise
price of the Right, that number of shares of common stock of the acquiring
company which at the time of such transaction will have a market value of two
times the exercise price of the Right. In the event that any person or group
of affiliated or associated persons becomes an Acquiring Person, proper
provision shall be made so that each holder of a Right, other than Rights
beneficially owned by the Acquiring Person (which will thereafter be void),
will thereafter have the right to receive upon exercise that number of Common
Shares having a marker value of two times the exercise price of the Right.
At any time after any person or group becomes an Acquiring Person and
prior to the acquisition by such person or group of 50% or more of the
outstanding Common Shares, the Board of Directors of the Company may exchange
the Rights (other than Rights owned by such person or group which will have
become void), in whole or in part, at an exchange ratio of one Common Share,
or one one-hundredth of a Preferred Share (or of a share of a class or series
of the Company's preferred stock having equivalent rights, preferences and
privileges), per Right (subject to adjustment).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional Preferred Shares will be issued (other
than fractions which are integral multiples of one one-hundredth of a
Preferred Share, which may, at the election of the Company, be evidenced by
depository receipts) and in lieu thereof, an adjustment in cash will be made
based on the market price of the Preferred Shares on the last trading day
prior to the date of exercise.
At any time prior to the acquisition by a person or group of affiliated
or associated persons of beneficial ownership of 15% or more of the
outstanding Common Shares, the Board of Directors of the Company may redeem
the Rights in whole, but not in part, at a price of $.01 per Right (the
"Redemption Price"). The redemption of the Rights may be made effective at
such time on such basis with such conditions as the Board of Directors in its
sole discretion may establish. Immediately upon any redemption of the Rights,
the right to exercise the Rights will terminate and the only right of the
holders of Rights will be to receive the Redemption Price.
The terms of the Rights may be amended by the Board of Directors of the
Company without the consent of the holders of the Rights, including an
amendment to lower certain thresholds described above to not less than the
greater of (i) the sum of .001% and the
17
<PAGE>
largest percentage of the outstanding Common Shares then known to the Company
to be beneficially owned by any person or group of affiliated or associated
persons and (ii) 10%, except that from and after such time as any person or
group of affiliated or associated persons becomes an Acquiring Person no such
amendment may adversely affect the interests of the holders of the Rights.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the
right to vote or to receive dividends.
The Rights Agreement, dated as of June 9, 1997 between the Company and
ChaseMellon Shareholders Services, L.L.C., as Rights Agent, pursuant to which
the Rights were issued and the First Amendment dated August 7, 1997, are
attached hereto as Exhibits 4.1 and 4.2, respectively. The foregoing summary
of the Rights does not purport to be complete and is qualified in its
entirety by reference to such exhibit, which is hereby incorporated herein by
this reference in its entirety.
ITEM 4--SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The annual meeting of stockholders of the Company was held on
May 13, 1997.
(b) At the annual meeting, Paul M. Montrone and Lt. Gen. Thomas P.
Stafford were each elected for a three-year term expiring in 2000. The
terms of Philip E. Beckman, Michael D. Dingman, Robert A. Day,
Gerald J. Lewis and Edward A. Montgomery as directors of the
Company continued after the annual meeting.
(c) The results of the voting on the proposals considered at the annual
meeting of stockholders are as follows:
1. ELECTION OF DIRECTORS
VOTES
VOTES FOR WITHHELD
--------- --------
Mr. Montrone 14,694,952 1,776,366
Lt. Gen. Stafford 14,643,808 1,827,510
18
<PAGE>
2. PROPOSAL TO APPROVE THE COMPANY'S 1997 EQUITY-BASED AWARD PLAN
The proposal to approve the 1997 Equity-Based Award Plan of the
Company was approved and voting results were as follows:
9,338,591, FOR, 3,955,824 AGAINST, 1,895,263 ABSTAINED and
1,281,640 Broker Non-Votes.
3. APPOINTMENT OF INDEPENDENT AUDITORS
The appointment of Deloitte & Touche LLP as independent auditors
for the current fiscal year was ratified, and voting results were
as follows:
14,740,571 FOR, 71,504 AGAINST AND 1,859,543 ABSTAINED.
ITEM 6--EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 11--Computation of Earnings Per Common Share for the Three
and Six Months Ended June 30, 1997 and 1996.
Exhibit 27--Financial Data Schedule
(b) Reports on Form 8-K:
The Company filed the following Current Reports on Form 8-K during
the period covered by this report:
1. Current Report on Form 8-K dated June 9, 1997 reporting Item 5 -
Other Events, filed with the Securities and Exchange Commission
on June 9, 1997.
2. Current Report on Form 8-K dated August 7, 1997 reporting
Item 5 - Other Events, filed with the Securities and Exchange
Commission on August 8, 1997.
19
<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: August 13, 1997 /S/ PAUL M. MEISTER
---------------- ---------------------------
PAUL M. MEISTER
Senior Vice President -
Chief Financial Officer
20
<PAGE>
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FISHER SCIENTIFIC INTERNATIONAL INC.
EXHIBITS
TO
FORM 10-Q
for the quarter ended June 30, 1997
EXHIBIT INDEX
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
21
<PAGE>
EXHIBIT DESCRIPTION
EXHIBIT NO. DESCRIPTION PAGE
- ------------------- -------------------------- -----------
4 Rights agreement dated as of (1)
June 9, 1997, between the
Company and ChaseMellon
Shareholder Services L.L.P., as
Rights Agent, which
includes the form of Right
Certificate as Exhibit A and the
Summary of Rights to Purchase
Common Shares as Exhibit B.
4.2 First Amendment to Rights (2)
Agreement dated as of August 7,
1997, between the Company and
ChaseMellon Shareholder
Services, L.L.C.
4.3 Agreement and Plan of Merger dated (3)
as of August 7, 1997, by and between
the Company and FSI Merger Corp.
11 Computation of Earnings Per 23
Common Share for the Three and
Six Months Ended June 30, 1997
and 1996
27 Financial Data Schedule 24
(1) Filed as Exhibit 1.1 to the Registration Statement on
Form 8-A filed with the Securities and Exchange Commission
on June 9, 1997.
(2) Filed as Exhibit 3 to the Current Report on Form 8-K dated
August 7, 1997, filed with the Securities and Exchange Commission
on August 8, 1997.
(3) Filed as Exhibit 1 to the Current Report on Form 8-K dated
August 7, 1997, filed with the Securities and Exchange Commission
on August 8, 1997.
22
<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 Six Months Ended
June 30, June 30,
------------------- ----------------
1997 1996 1997 1996
---- ---- ---- ----
Total income used for primary
earnings per share.................. $ 9.6 $ 8.4 $20.6 $12.9
----- ----- ----- -----
Average common shares
outstanding......................... 20.2 16.6 20.2 16.5
Other................................ 0.5 0.5 0.5 0.4
----- ----- ----- -----
Average shares and equivalents....... 20.7 17.1 20.7 16.9
----- ----- ----- -----
Primary earnings per share........... $0.47 $0.49 $1.00 $0.76
----- ----- ----- -----
Fully diluted earnings per share were calculated as follows:
- ------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1997 1996 1997 1996
---- ---- ---- ----
Net income........................... $ 9.6 $ 8.4 $20.6 $12.9
Interest expense of
Convertible Subordinated Notes,
net of taxes....................... -- 1.1 -- 2.1
----- ----- ----- ------
Total income used for fully
diluted earnings per share.......... $ 9.6 $ 9.5 $20.6 $15.0
----- ----- ----- ------
Average common shares
outstanding......................... 20.2 16.6 20.2 16.5
Common equivalent shares
for Convertible Subordinated
Notes.............................. -- 3.4 -- 3.5
Other................................ 0.7 0.5 0.7 0.4
----- ----- ----- ------
Average shares and equivalents....... 20.9 20.5 20.9 20.4
----- ----- ----- ------
Fully diluted earnings per share..... $0.46 $0.46 $0.99 $0.74
----- ----- ----- ------
Note: Amounts may not calculate due to rounding.
23
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF JUNE 30, 1997 AND THE INCOME STATEMENT FOR THE SIX MONTHS ENDED JUNE
30, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
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