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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
------------------------
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
COMMISSION FILE NUMBER: 01-10920
FISHER SCIENTIFIC INTERNATIONAL INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER.)
<TABLE>
<S> <C>
DELAWARE 02-0451017
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
ONE LIBERTY LANE, HAMPTON, NEW HAMPSHIRE 03842
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
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, 2000 was
40,109,568.
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FISHER SCIENTIFIC INTERNATIONAL INC.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2000
INDEX
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<CAPTION>
PAGE NO.
--------
<S> <C>
PART I -- FINANCIAL INFORMATION:
Item 1 -- Financial Statements:
Introduction to the Financial Statements.................. 2
Statement of Operations -- Three and Nine Months Ended
September 30, 2000 and 1999............................ 3
Balance Sheet -- September 30, 2000 and December 31,
1999................................................... 4
Statement of Cash Flows -- Nine Months Ended September 30,
2000 and 1999.......................................... 5
Notes to Financial Statements............................. 6
Item 2 -- Management's Discussion and Analysis of Results of
Operations and Financial Condition........................ 9
Item 3 -- Quantitative and Qualitative Disclosures About
Market Risk............................................... 11
PART II -- OTHER INFORMATION:
Item 6 -- Exhibits and Reports on Form 8-K.................. 13
SIGNATURE................................................... 14
EXHIBIT INDEX............................................... 15
</TABLE>
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FISHER SCIENTIFIC INTERNATIONAL INC.
PART 1 -- FINANCIAL INFORMATION
ITEM 1 -- FINANCIAL STATEMENTS
INTRODUCTION TO THE FINANCIAL STATEMENTS
The 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, 1999 balance sheet is the balance sheet included in the audited
financial statements as shown in the Company's 1999 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, 1999.
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.
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FISHER SCIENTIFIC INTERNATIONAL INC.
STATEMENT OF OPERATIONS
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ ----------------------
2000 1999 2000 1999
------ ------ -------- --------
<S> <C> <C> <C> <C>
Sales........................................ $650.4 $631.6 $1,942.3 $1,848.0
Cost of sales................................ 469.7 453.0 1,399.9 1,320.4
Selling, general and administrative
expense.................................... 138.5 133.6 420.0 402.6
Loss from operations to be disposed of....... -- 0.5 -- 11.3
------ ------ -------- --------
Income from operations....................... 42.2 44.5 122.4 113.7
Interest expense............................. 24.4 26.4 75.0 79.2
Other income, net............................ 1.3 3.3 4.3 8.6
------ ------ -------- --------
Income before income taxes................... 19.1 21.4 51.7 43.1
Income tax provision......................... 6.0 13.0 20.7 25.6
------ ------ -------- --------
Net income................................... $ 13.1 $ 8.4 $ 31.0 $ 17.5
====== ====== ======== ========
Earnings per common share:
Basic...................................... $ 0.33 $ 0.21 $ 0.77 $ 0.44
====== ====== ======== ========
Diluted.................................... $ 0.30 $ 0.20 $ 0.70 $ 0.41
====== ====== ======== ========
</TABLE>
See the accompanying notes to financial statements.
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FISHER SCIENTIFIC INTERNATIONAL INC.
BALANCE SHEET
(IN MILLIONS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 34.2 $ 50.3
Receivables, net.......................................... 314.7 286.1
Inventories............................................... 241.8 223.3
Other current assets...................................... 67.8 75.1
-------- --------
Total current assets.............................. 658.5 634.8
Property, plant and equipment, net.......................... 245.4 247.5
Goodwill.................................................... 330.7 356.2
Other assets................................................ 170.4 164.1
-------- --------
Total assets...................................... $1,405.0 $1,402.6
======== ========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Short-term debt........................................... $ 50.4 $ 41.7
Accounts payable.......................................... 309.9 307.6
Accrued and other current liabilities..................... 151.8 170.2
-------- --------
Total current liabilities......................... 512.1 519.5
Long-term debt.............................................. 1,000.5 1,011.1
Other liabilities........................................... 209.5 202.6
-------- --------
Total liabilities................................. 1,722.1 1,733.2
-------- --------
Commitments and contingencies............................... -- --
Stockholders' deficit:
Preferred stock........................................... -- --
Common stock.............................................. 0.4 0.4
Capital in excess of par value............................ 317.3 315.8
Accumulated deficit....................................... (563.6) (594.6)
Accumulated other comprehensive loss...................... (70.8) (51.6)
Treasury stock............................................ (0.4) (0.6)
-------- --------
Total stockholders' deficit....................... (317.1) (330.6)
-------- --------
Total liabilities and stockholders' deficit....... $1,405.0 $1,402.6
======== ========
</TABLE>
See the accompanying notes to financial statements.
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FISHER SCIENTIFIC INTERNATIONAL INC.
STATEMENT OF CASH FLOWS
(IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
2000 1999
------ ------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 31.0 $ 17.5
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation and amortization.......................... 47.5 46.5
Loss (gain) on sale of property, plant and equipment
and write-off of assets............................... 0.5 (4.1)
Deferred income taxes.................................. 3.5 3.2
Changes in working capital:
Receivables, net..................................... (13.9) (27.8)
Inventories.......................................... (13.5) (5.2)
Payables, accrued and other current liabilities...... 2.1 6.2
Other working capital changes........................ 7.8 (1.7)
Net cash flow from operations to be disposed of........ -- 2.6
Other assets and liabilities........................... (13.2) (6.9)
------ ------
Cash provided by operating activities............. 51.8 30.3
------ ------
Cash flows from investing activities:
Acquisitions, net of cash acquired........................ (22.3) (34.4)
Capital expenditures...................................... (18.7) (29.5)
Proceeds from sale of property, plant and equipment....... 0.8 10.7
Other investing activity.................................. (6.2) (1.0)
------ ------
Cash used in investing activities................. (46.4) (54.2)
------ ------
Cash flows from financing activities:
Proceeds from common stock options........................ 0.3 0.3
Reduction in accounts receivable securitization, net...... (21.7) (17.5)
Proceeds from long-term debt.............................. 8.3 9.1
Payments of long-term debt................................ (11.7) (7.0)
Changes in short-term debt, net........................... 6.2 9.7
------ ------
Cash used in financing activities................. (18.6) (5.4)
------ ------
Effect of exchange rate changes on cash..................... (2.9) (2.4)
------ ------
Net change in cash and cash equivalents..................... (16.1) (31.7)
Cash and cash equivalents -- beginning of period............ 50.3 65.6
------ ------
Cash and cash equivalents -- end of period.................. $ 34.2 $ 33.9
====== ======
</TABLE>
See the accompanying notes to financial statements.
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FISHER SCIENTIFIC INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- NATURE OF BUSINESS AND RESULTS OF OPERATIONS
Fisher Scientific International Inc. ("Fisher" or the "Company") was formed
in September 1991. The Company's operations are conducted throughout North and
South America, Europe, the Far East, the Middle East and Africa through one or
more subsidiaries, joint ventures, agents and dealers. The Company is managed in
three business segments: domestic distribution, international distribution, and
laboratory workstations. The domestic and international distribution segments
engage in the supply, marketing, service and manufacture of scientific,
clinical, educational, and occupational health and safety products. The
laboratory workstations segment manufactures and sells laboratory workstations,
fume hoods, and computer (LAN) furniture.
Certain prior year amounts have been reclassified to conform to their
current presentation.
NOTE 2 -- TERMINATED MERGER AGREEMENT
On September 1, 2000, the Company and PSS World Medical, Inc. ("PSS")
announced that the boards of directors of both companies terminated, by mutual
consent, the merger agreement between the two companies pursuant to which PSS
would have become a wholly owned subsidiary of Fisher. The board of directors of
each of the respective companies determined that the merger was not in the best
interest of its shareholders.
NOTE 3 -- ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for
Derivative Instruments and Hedging Activities, which was subsequently amended by
SFAS No. 137 and 138, and is effective for Fisher on January 1, 2001. SFAS No.
133 requires all derivatives to be measured at fair value and recognized as
assets or liabilities on the balance sheet. Changes in the fair value of
derivatives should be recognized in either net earnings or other comprehensive
earnings, depending on the designated purpose of the derivative. SFAS No. 133 is
not expected to have a material impact on the Company's financial position or
results of operations.
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements." SAB 101 summarizes certain of the SEC's views in applying generally
accepted accounting principles to revenue recognition in financial statements.
The Company is required to adopt SAB 101 in the fourth quarter of fiscal 2000.
The Company does not anticipate that the adoption of SAB 101 will have a
material effect on the Company's financial position or results of operations.
NOTE 4 -- INVENTORIES
The following is a summary of inventories by major category (in millions):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
<S> <C> <C>
Raw material............................................... $ 30.9 $ 21.8
Work in process............................................ 9.4 2.7
Finished products.......................................... 201.5 198.8
------ ------
Total................................................. $241.8 $223.3
====== ======
</TABLE>
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NOTE 5 -- INVESTMENTS
In August 2000, the Company became a founding member of the New Health
Exchange, an internet healthcare exchange founded by the Company, AmeriSource
Health Corporation, Cardinal Health, Inc. and McKesson HBOC, Inc. Pursuant to
the Limited Liability Company Agreement executed by Fisher, Fisher has committed
to invest approximately $6.5 million in the entity in exchange for an
approximate 13% ownership interest.
NOTE 6 -- COMPREHENSIVE INCOME
The following is a summary of comprehensive income for the three and nine
months ended September 30, 2000 and 1999 (in millions). Comprehensive income
components included in stockholders' deficit include any changes in equity
during a period that are not the result of transactions with the Company's
stockholders.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ ------------------
2000 1999 2000 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income.............................................. $ 13.1 $ 8.4 $ 31.0 $ 17.5
Foreign currency translation adjustment................. (13.0) (11.7) (25.3) (20.7)
Unrealized gains on securities.......................... 4.6 -- 6.1 --
------ ------ ------ ------
Comprehensive income.................................... $ 4.7 $ (3.3) $ 11.8 $ (3.2)
====== ====== ====== ======
</TABLE>
NOTE 7 -- EARNINGS PER SHARE
The following is a reconciliation of the shares used in the computation of
basic and diluted earnings per share for the three and nine months ended
September 30, 2000 and 1999 (in millions):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ ------------------
2000 1999 2000 1999
------ ------ ------ ------
<S> <C> <C> <C> <C>
Weighted average shares of common stock outstanding
used in the computation of basic earnings per
share............................................... 40.1 40.1 40.1 40.0
Common stock equivalents (a).......................... 3.5 2.5 4.2 2.5
---- ---- ---- ----
Shares used in the computation of diluted earnings per
share............................................... 43.6 42.6 44.3 42.5
==== ==== ==== ====
</TABLE>
---------------
(a) The amount of outstanding antidilutive common stock options excluded from
the computation of diluted earnings per share for the three and nine months
ended September 30, 2000 was 0.6 million and 0.3 million, respectively. The
amount of outstanding antidilutive common stock options excluded from the
computation of diluted earnings per share for the three and nine months
ended September 30, 1999 was 0.7 million and 2.0 million, respectively.
NOTE 8 -- RESTRUCTURING
In the fourth quarter of 1999, the Company recorded a $1.5 million net
restructuring credit, which consisted of $2.1 million of restructuring charges
related to its long-term restructuring plan and a $3.6 million reversal of prior
period restructuring charges due to revised estimates. The 1999 charge related
to the consolidation of certain locations of the Company's German operations.
The balance of the restructuring accrual at December 31, 1999 was $2.1 million.
In the third quarter of 2000, the Company reversed $0.7 million of this charge
based upon revised estimates of severance and related obligations. Spending
against this accrual was $0.7 million during the nine months ended September 30,
2000.
At December 31, 1999, the Company also had $7.9 million of accruals
remaining from restructuring charges recorded in years prior to 1999. These
plans were substantially completed at December 31, 1999. The
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remaining accruals relate primarily to long-term lease and severance
obligations. In the third quarter of 2000, $1.3 million of these accruals were
reversed based upon revised estimates. Spending against these accruals was $2.8
million during the nine months ended September 30, 2000.
NOTE 9 -- SEGMENT INFORMATION
Selected business segment financial information for the three and nine
months ended September 30, 2000 and 1999 is shown below (in millions):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ --------------------
2000 1999 2000 1999
------- ------- -------- --------
<S> <C> <C> <C> <C>
Sales:
Domestic distribution.............................. $544.6 $504.5 $1,605.9 $1,470.2
International distribution......................... 105.9 115.5 334.1 347.6
Laboratory workstations............................ 37.3 47.0 113.3 134.7
Eliminations....................................... (37.4) (35.4) (111.0) (104.5)
------ ------ -------- --------
Total...................................... $650.4 $631.6 $1,942.3 $1,848.0
====== ====== ======== ========
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ --------------------
2000 1999 2000 1999
------- ------- -------- --------
<S> <C> <C> <C> <C>
Income (loss) from operations:
Domestic distribution.............................. $ 36.7 $ 34.8 $ 111.0 $ 101.2
International distribution......................... 2.6 2.6 6.2 2.6
Laboratory workstations............................ 1.2 7.3 4.0 20.6
Technology......................................... -- (0.5) -- (11.3)
Restructuring credit............................... 2.0 -- 2.0 --
Eliminations....................................... (0.3) 0.3 (0.8) 0.6
------ ------ -------- --------
Total...................................... $ 42.2 $ 44.5 $ 122.4 $ 113.7
====== ====== ======== ========
</TABLE>
Income (loss) from operations is revenue less related costs and direct and
allocated expenses. Intercompany sales and transfers between segments were not
material for the three and nine months ended September 30, 2000 and 1999.
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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 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, 1999. The Company
undertakes no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties and assumptions, the forward-looking
events discussed in the report might not occur.
RESULTS OF OPERATIONS
The following table sets forth the Company's sales and income from
operations by segment for the three and nine months ended September 30, 2000 and
1999 (in millions):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ --------------------
2000 1999 2000 1999
------- ------- -------- --------
<S> <C> <C> <C> <C>
Sales:
Domestic distribution.................... $544.6 $504.5 $1,605.9 $1,470.2
International distribution............... 105.9 115.5 334.1 347.6
Laboratory workstations.................. 37.3 47.0 113.3 134.7
Eliminations............................. (37.4) (35.4) (111.0) (104.5)
------ ------ -------- --------
Total............................ $650.4 $631.6 $1,942.3 $1,848.0
====== ====== ======== ========
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ --------------------
2000 1999 2000 1999
------- ------- -------- --------
<S> <C> <C> <C> <C>
Income (loss) from operations:
Domestic distribution.................... $ 36.7 $ 34.8 $ 111.0 $ 101.2
International distribution............... 2.6 2.6 6.2 2.6
Laboratory workstations.................. 1.2 7.3 4.0 20.6
Technology............................... -- (0.5) -- (11.3)
Restructuring credit..................... 2.0 -- 2.0 --
Eliminations............................. (0.3) 0.3 (0.8) 0.6
------ ------ -------- --------
Total............................ $ 42.2 $ 44.5 $ 122.4 $ 113.7
====== ====== ======== ========
</TABLE>
Sales
Sales for the three and nine months ended September 30, 2000 increased 3.0%
and 5.1% to $650.4 million and $1,942.3 million, respectively, from $631.6
million and $1,848.0 million for the comparable periods in 1999. Excluding the
impact of foreign exchange, sales increased 4.5% and 6.4% for the three and nine
months ended September 30, 2000 compared to the same periods in 1999. Sales
growth in the domestic distribution segment was primarily due to internal sales
growth. Sales decline in the laboratory workstations segment was due primarily
to a slowdown in the industrial research laboratory construction market. The
Company anticipates this trend in the laboratory workstations segment to
continue for the remainder of 2000.
Gross Profit
Fisher's gross profit for the three and nine months ended September 30,
2000 increased 1.2% and 2.8% to $180.7 million and $542.4 million, respectively,
from $178.6 million and $527.6 million for the comparable periods in 1999,
primarily as a result of increased sales volume, which was partially offset by a
decrease in
9
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gross profit margins. Gross profit as a percent of sales decreased to 27.8% and
27.9% for the three and nine months ended September 30, 2000, respectively, from
28.3% and 28.5% for the comparable periods in 1999. The reduction in gross
profit as a percent of sales is primarily due to a decline in higher margin
sales in the laboratory workstations segment stemming from the slowdown in the
industrial research laboratory construction market coupled with a change in
product mix.
Selling, General and Administrative Expense
Selling, general and administrative expense for the three and nine months
ended September 30, 2000 increased 3.7% and 4.3% to $138.5 million and $420.0
million, respectively, from $133.6 million and $402.6 million for the comparable
periods in 1999. The increase in selling, general and administrative expense in
2000 is primarily due to increased sales volume. Excluding nonrecurring costs,
selling, general and administrative expense as a percentage of sales was 20.8%
and 21.5% for the three and nine months ended September 30, 2000, respectively,
and 21.0% and 21.7% for the comparable periods in 1999, respectively. The three
and nine month periods ended September 30, 2000 include $3.5 million of
nonrecurring costs consisting of $5.5 million of costs incurred by the domestic
distribution segment for business combinations that were not consummated, offset
in part by a $2.0 million credit for revised estimates of prior year
restructuring reserves. The three and nine month periods ended September 30,
1999 include $0.9 million and $2.1 million, respectively, of nonrecurring costs
associated with the temporary duplication of operations, relocation of
inventories and employees, hiring and training new employees and other one-time,
redundant costs.
The international distribution segment continues to have significantly
higher selling, general and administrative expenses as a percentage of sales as
compared with those of Fisher's domestic distribution segment.
On March 8, 2000, the Company announced that it had combined its e-commerce
activities into a new subsidiary, Alchematrix. The Company has expensed
approximately $1.5 million through September 30, 2000 and anticipates additional
increases in operating expenses for the remainder of 2000 and into 2001
associated with Alchematrix as the Company increases its investment in
e-commerce technology, services, sales and marketing.
Loss From Operations to be Disposed of
In December 1998 the Company's Board of Directors approved a plan to
dispose of the Company's technology business segment. The disposition was
completed through the distribution to the Company's stockholders of ProcureNet
on April 15, 1999 and the sale of the UniKix Technology software business on
July 22, 1999. The results of operations of this segment are reported separately
in the statement of operations. Loss from operations to be disposed of includes
a $5.2 million write-off of in-process research and development costs associated
with an acquisition made during the first quarter of 1999.
Income from Operations
Excluding nonrecurring costs of $3.5 million for the three and nine months
ended September 30, 2000 and $0.9 million and $7.3 million for the three and
nine months ended September 30, 1999, income from operations for the three and
nine months ended September 30, 2000 increased to $45.7 million and $125.9
million from $45.4 and $121.0 million for the comparable periods in 1999 due to
the factors described above.
Other Income, Net
Other income for the three and nine months ended September 30, 2000
decreased to $1.3 million and $4.3 million, respectively, from $3.3 million and
$8.6 million for the comparable periods in 1999. The decrease in income in 2000
was primarily due to the inclusion of gains from the sales of property, plant
and equipment associated with the Company's consolidation plans and a gain on
the sale of the UniKix Technology software business in the 1999 periods.
10
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Income Tax Provision
The income tax provision for the three and nine months ended September 30,
2000 was $6.0 million and $20.7 million, respectively, compared with $13.0
million and $25.6 million for the corresponding periods in 1999. The effective
income tax rate for the three and nine months ended September 30, 2000 was 31%
and 40% compared with 61% and 59% for the corresponding periods in 1999,
respectively. The decrease in the effective tax rate in 2000 is primarily due to
the implementation of domestic and international tax planning initiatives and a
reduction in foreign losses for which no tax benefits are recorded.
Net Income
Net income for the three and nine months ended September 30, 2000 increased
to $13.1 million and $31.0 million, respectively, from $8.4 million and $17.5
million for the comparable periods in 1999, due to the factors discussed above.
LIQUIDITY AND CAPITAL RESOURCES
During the nine months ended September 30, 2000, the Company's operations
provided $51.8 million of cash compared with $30.3 million of cash for the same
period in 1999. This change in cash provided by operating activities is
primarily due to higher net income earned in 2000, decreased income tax payments
in 2000, and a $12 million customer advance received in conjunction with an
acquisition during 2000, which were offset in part by a decrease in the amount
of cash generated from accounts payable increases in 2000 compared to 1999.
During the nine months ended September 30, 2000, the Company used $46.4
million of cash for investing activities compared with $54.2 million for the
same period in 1999. The decrease in cash used for investing activities is
primarily due to a decrease in acquisition spending. During 2000, the Company
acquired a manufacturing facility for $22.3 million. During 1999, the Company
completed two acquisitions and acquired the remaining shares of Bioblock
Scientific S.A. for an aggregate net purchase price of $34.4 million. The
acquisitions were funded with cash on hand and through the sale of receivables
under a receivables securitization facility. The Company anticipates its 2000
annual capital expenditures will be at a similar level as 1999 capital
expenditures.
In August 2000, the Company became a founding member of the New Health
Exchange, an internet healthcare exchange founded by the Company, AmeriSource
Health Corporation, Cardinal Health, Inc. and McKesson HBOC, Inc. Pursuant to
the Limited Liability Company Agreement executed by Fisher, Fisher has committed
to invest approximately $6.5 million in the entity in exchange for an
approximate 13% ownership interest.
During the nine months ended September 30, 2000, the Company's financing
activities used $18.6 million of cash compared with $5.4 million of cash for the
same period in 1999. Financing activities in both periods primarily relate to
activity under the receivables securitization facility and short-term borrowings
at the Company's international operations. At September 30, 2000, the entire
receivables securitization facility of $170 million was available.
The Company 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.
ITEM 3 -- QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's primary interest rate exposures relate to its cash, fixed and
variable rate debt and interest rate swaps. The potential loss in fair values is
based on an immediate change in the net present values of the Company's interest
rate sensitive exposures resulting from a 10% change in interest rates. The
potential loss in cash flows and earnings is based on the change in the net
interest income/expense over a one-year period due to an immediate 10% change in
rates. A hypothetical 10% change in interest rates does not have a material
effect on the fair values, cash flows or earnings of the Company.
11
<PAGE> 13
The Company's primary currency rate exposures are to its intercompany debt,
cash and foreign currency forward contracts. The potential loss in fair values
is based on an immediate change in the U.S. dollar equivalent balances of the
Company's currency exposures due to a 10% shift in exchange rates. The potential
loss in cash flows and earnings is based on the change in cash flow and earnings
over a one-year period resulting from an immediate 10% change in currency
exchange rates. A hypothetical 10% change in the currency exchange rates does
not have a material effect on the fair values, cash flows or earnings of the
Company.
12
<PAGE> 14
PART II -- OTHER INFORMATION
ITEM 6 -- EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 27 -- Financial Data Schedule
(b) Reports on Form 8-K:
The following current reports on Form 8-K were filed during the
quarter ended September 30, 2000:
<TABLE>
<CAPTION>
DATE OF REPORT ITEMS REPORTED
-------------- --------------
<S> <C>
September 7, 2000 Announcing that Fisher and PSS World Medical, Inc. had
terminated by mutual consent the Agreement and Plan of
Merger, dated as of June 21, 2000, among Fisher, PSS
World Medical, Inc. and FSI Merger Corporation.
</TABLE>
13
<PAGE> 15
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.
/s/ PAUL M. MEISTER
----------------------------------------
Paul M. Meister
Vice Chairman of the Board,
Executive Vice President and Chief
Financial
Officer and Director
Date: November 13, 2000
14
<PAGE> 16
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
27 Financial Data Schedule
</TABLE>
15
