SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1996 Commission File No. 0-24866
ISOLYSER COMPANY, INC.
(Exact name of Registrant as specified in its charter)
Georgia 58-1746149
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
4320 International Boulevard, N.W.
Norcross, Georgia 30093
(Address of principal executive offices)
(770) 381-7566
(Registrant's telephone number, including area code)
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 at least the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date.
Class Outstanding at May 10, 1996
Common Stock, $.001 par value 30,652,135
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
ISOLYSER COMPANY, INC.
Consolidated Balance Sheets
(unaudited)
(Whole Dollars)
Assets March 31, 1996 December 31, 1995
Current Assets:
Cash and cash equivalents $45,754,687 $54,507,970
Accounts receivable, net 18,619,240 16,549,990
Inventories, net 38,550,578 35,195,796
Prepaid inventories 973,393 1,177,900
Prepaid expenses and other assets 2,194,010 1,501,442
Deferred income taxes 2,393,331 2,393,331
----------- ----------
Total current assets 108,485,239 11,326,429
----------- ----------
Property and Equipment 61,788,899 57,985,504
Less accumulated depreciation <3,753,979> <2,597,140>
----------- ----------
Property and equipment, net at cost 58,034,920 55,388,364
----------- ----------
Deposits on machinery & equipment 3,531,520 3,058,985
Intangible Assets 41,248,750 41,162,455
Less accumulated amortization <4,146,952> <3,333,035>
----------- ----------
Intangible assets, net at cost 37,101,798 37,829,420
----------- ----------
Investments in Joint Ventures 404,205 438,915
Other Assets 597,261 669,721
------------ ------------
$208,154,943 $208,711,834
============ ============
See accompanying notes.
<PAGE>
Liabilities and Shareholders' Equity March 31, 1996 December 31, 1995
Current Liabilities:
Bank overdraft $ 1,888,601 $ 1,800,042
Accounts payable 12,455,264 13,634,753
Accrued compensation 2,463,051 2,447,429
Other accrued liabilities 1,530,868 1,112,668
Current portion of long-term debt 1,512,616 1,565,110
---------- ----------
Total Current Liabilities 19,850,400 20,560,002
---------- ----------
Long-term debt 9,899,479 9,821,439
Deferred income taxes 3,727,813 3,727,813
Other liabilities 270,253 423,269
Shareholders' equity
Common stock, $.001 par - 100,000,000
shares authorized, 30,892,454 and
30,773,836 shares issued 30,892 30,774
Additional paid-in capital 181,202,054 180,671,727
Accumulated deficit <4,429,368> <4,051,925>
------------ ------------
176,803,578 176,650,576
Shares held in treasury, at cost
(319,544 and 329,502 shares) <2,396,580> <2,471,265>
Total shareholders' equity 174,406,998 174,179,311
------------ ------------
$208,154,943 $208,711,834
============ ============
See accompanying notes.
<PAGE>
ISOLYSER COMPANY, INC.
Consolidated Statements of Operations
(unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended Three months ended
March 31, 1996 March 31, 1995
<S> <C> <C>
Net sales $31,008 $12,155
Cost of goods sold (including related party
rent expenses of approximately $125 and $120
respectively) 23,880 9,530
-------- -------
Gross profit 7,128 2,625
Operating expenses:
Selling & marketing 4,963 2,292
General & administrative 2,049 1,055
Research & development 297 209
Amortization of intangibles 807 273
------- ------
Total operating expenses 8,116 3,829
------- ------
Loss from operations <988> <1,204>
Interest income 641 1,005
Interest expense <229> <102>
Losses in joint ventures <67> ---
------- ------
Loss before income tax benefit <643> <301>
Income tax benefit <266> <155>
------- ------
Net loss $<377> $<146>
Net loss per common share $<.01> $<.01>
Weighted average number of common
shares outstanding 30,500 24,468
</TABLE>
See accompanying notes.
<PAGE>
ISOLYSER COMPANY, INC.
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
(Whole Dollars) Three months ended Three months ended
March 31, 1996 March 31, 1995
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $<377,411> $<145,577>
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 1,156,839 187,085
Amortization 813,921 272,734
Provision for doubtful accounts 9,000 9,000
Equity in losses of joint ventures 64,710 ---
Changes in assets and liabilities:
Accounts receivable <2,078,250> <60,127>
Inventories <3,354,782> <3,657,031>
Prepaid inventories 204,507 ---
Prepaid expenses and other assets <692,568> <1,045,187>
Deferred income taxes --- <155,000>
Other assets 72,460 ---
Accounts payable <1,179,489> 2,774,125
Accrued compensation 15,622 140,012
Other accrued liabilities 418,200 ---
Other liabilities <153,016> <246,069>
---------- ----------
Net cash used in operating activities <5,080,257> <1,926,035>
Investing activities:
Purchase of and deposits for property and
equipment <4,275,930> <10,861,539>
Investment in Joint Ventures <30,000> ---
Purchase of businesses, net of cash acquired <86,299> ---
----------- ------------
Net cash used in investing activities <4,392,229> <10,861,539>
Financing activities:
Proceeds from term note payable --- 10,000,000
Repayment of term note payable <250,000> <250,000>
Borrowings under line of credit agreement 405,158 ---
Repayment of other notes payable <129,612> ---
Increase in bank overdraft 88,559 ---
Proceeds from exercise of stock options and
warrants 501,088 191,340
Purchase of treasury stock --- <2,002,545>
Proceeds from issuance of common stock 118,500 ---
Direct costs relating to issuance of common
stock <14,490> ---
Net cash provided by financing activities 719,203 7,938,795
Net decrease in cash and cash equivalents <8,753,283> <4,848,779>
Cash and cash equivalents at beginning of period 54,507,970 71,780,859
Cash and cash equivalents at end of period $45,754,687 $66,932,080
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of interest capitalized) $40,052 $102,000
Income Taxes $70,125 ---
</TABLE>
See accompanying notes.
<PAGE>
ISOLYSER COMPANY, INC.
Notes to Consolidated Financial Statements
(unaudited)
(1) In the opinion of management, the information furnished
reflects all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of the financial
position, results of operations and cash flows for the interim
periods. Results for the interim periods are not necessarily
indicative of results to be expected for the full year. These
consolidated financial statements should be read in conjunction with
the consolidated financial statements and notes thereto contained in
the Company's Annual Report on Form 10-K at December 31, 1995.
(2) Inventories are stated at the lower of cost or market and are
summarized as follows:
March 31, 1996 December 31, 1995
Raw materials and supplies $17,151,230 $17,883,452
Work in process 9,558,983 6,578,302
Finished goods 11,875,357 10,740,753
Total 38,585,570 35,202,507
Less reserve for LIFO inventory <34,992> <6,711>
Total $38,550,578 $35,195,796
The first-in first-out ("FIFO") valuation method is used to
determine the cost of inventories except for inventories held by the
Company's subsidiary, White Knight Healthcare, Inc. ("White
Knight"). White Knight uses the last-in first-out ("LIFO")
inventory valuation method. At March 31, 1996 and December 31, 1995,
LIFO inventories approximated $17,333,000 and $13,675,000.
(3) Investments in joint ventures are accounted for using the
equity method of accounting.
(4) Loss per common share is computed using the weighted average
number of common shares outstanding during the respective periods.
There is no significant difference between primary and fully diluted
per share amounts for these periods.
(5) On March 15, 1996, the Company executed a merger agreement with
Microtek Medical, Inc. ("Microtek"), a manufacturer of infection and
fluid control products, headquartered in Columbus, Mississippi.
Upon consummation of the transaction, the Company will exchange
approximately 5.3 million shares of its common stock (subject to
adjustment as set forth in the merger agreement) valued at $16.50
per share for all of the outstanding shares and assumption of all
outstanding stock options of Microtek. The Company anticipates that
that merger will be accounted for using the pooling of interests
method of accounting.
(6) The following items comprise the Company's outstanding purchase
commitments at March 31, 1996 and December 31, 1995:
March 31, 1995 December 31, 1995
Equipment for Arden, North Carolina
manufacturing plant $ 3,116,882 $4,199,777
Equipment for Abbeville, South
Carolina manufacturing plant 861,275 938,005
Financial system software 1,250,000 1,500,000
Norcross, Georgia corporate
headquarters 2,400,000 ---
OREX Degradables inventory 9,790,280 12,322,755
Other equipment 441,286 382,150
----------- ----------
$17,859,723 $19,342,687
=========== ===========
On March 22, 1995, the Internal Revenue Service issued a report
proposing certain adjustments to White Knight's income tax return
for 1992 which approximate $864,000 without penalties and interest.
White Knight has filed a protest with the District Director of
Internal Revenue contesting such adjustments. The Company does not
believe that the ultimate resolution of such matter will have a
material effect on its financial condition or results of operations.
In any event, all taxes, interest and penalties arising as a result
of such audit are the subject matter of provisions indemnifying the
Company negotiated between the Company and the sellers of White
Knight as a part of the White Knight acquisition.
A complaint was filed against the Company as well as its
President and Chief Financial Officer on December 13, 1995 on behalf
of Peter Salit in the United States District Court for the Northern
District of Georgia. In the complaint, the plaintiff seeks class
certification and damages relative to certain alleged wrongful
disclosures and omissions in various of the Company's filings with
the Securities and Exchange Commission, including allegations that
certain OREX Degradables do not dissolve as represented and cannot
be manufactured as represented. The Company intends to vigorously
defend this litigation which remains in the preliminary stages.
The Company is involved in routine litigation and proceedings
in the ordinary course of business. Management believes that
pending litigation matters will not have a material adverse effect
on the Company's financial position or results of operations.
(7) At March 31, 1996, the Company was not in compliance with the
restrictive covenant of its credit facility pertaining to net
income. This existing covenant violation was waived by the
Company's lenders on May 15, 1996.
(8) On August 31, 1995, the Company's Board of Directors approved
a 2 for 1 stock split effected in the form of a 100% stock dividend
paid on October 2, 1995 to shareholders of record on September 15,
1995. All share and per share data have been adjusted to give
retroactive effect to this stock split.
(9) In March, 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 121,
"Accounting for the Impairment of Long-Lived Assets and Long-Lived
Assets to be disposed of, which the Company adopted effective
January 1, 1996. SFAS No. 121 requires that long-lived assets and
certain identifiable intangibles be reviewed for impairment when
events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable, with any impairment losses being
reported in the period on which the recognition criteria are first
applied based on the fair value of the asset. Long lived assets and
certain intangibles to be disposed of are required to be reported at
the lower of carrying amount or fair value less cost to sell. The
initial adoption of SFAS No. 121 had no impact on the Company
results of operations.
In October 1995, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards (SFAS) No. 123
"Accounting for Stock-Based Compensation" which the Company adopted
effective January 1, 1996. SFAS No. 123 requires expanded
disclosures of stock-based compensation arrangements with employees
and encourages (but does not require) compensation cost to be
measured based on the fair value of the equity instrument awarded.
Companies are permitted, however, to continue to apply APB Opinion
No. 25, which recognizes compensation cost based on the intrinsic
value of the equity instrument awarded. The Company will continue
to apply APB Opinion No. 25 to its stock based compensation awards
to employees and will disclose the required pro forma effect on net
income and earnings per share in its 1996 Annual Report.
Accordingly, the initial adoption of SFAS No. 123 had no impact on
the Company's results of operations.
(10) Certain prior period amounts have been reclassified for
comparative purposes.
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net sales for the three months ended March 31, 1996 (the "1996
Quarter") were $31.0 million compared to $12.2 million for the three
months ended March 31, 1995 (the "1995 Quarter"), an increase of 154
percent. The $18.8 million increase in net sales over the 1995
Quarter reflects primarily the $15.3 million of net sales by White
Knight during the 1996 Quarter, with no corresponding sales during
the 1995 Quarter as the acquisition of White Knight was consummated
as of September 1, 1995. Procedure trays and related products
contributed $12.6 million to net sales in the 1996 Quarter, up 21.2
percent over the $10.4 million in net sales of similar products
during the 1995 Quarter, reflecting primarily the increased sales of
OREX Degradables described below. Net sales of safety products and
services were $3.2 million in the 1996 Quarter or 77.8 percent
higher than the $1.8 million during the 1995 Quarter, related
primarily to a distributor increasing its inventory in the Company's
LTS products and increased revenues from the Company's Onsyte
systems. The net sales of the Company for the 1996 Quarter include
the net revenues of SafeWaste Corporation ("SafeWaste"), which the
Company acquired on May 31, 1995.
The Company's sales of OREX Degradables in the 1996 Quarter
were $1.6 million (which amount is included in the sales figures
described above), as the Company's OREX products were sold in
procedure trays and sterile packs. While small quantities of OREX
Degradables were sold in the 1995 Quarter, the Company's production
facility for producing non-woven fabric was not producing commercial
quantities until the third quarter of 1995 and, therefore, related
finished goods were not available until the fourth quarter, during
which $514,000 of OREX Degradables were sold in custom procedure
trays and sterile packs. The Company's future performance will
depend to a substantial degree upon market acceptance of and the
Company's ability to successfully manufacture, market, deliver and
expand its OREX Degradables line of products.
Gross profit for the 1996 Quarter and 1995 Quarter was 23.0
percent and 21.6 percent of net sales, respectively, reflecting the
somewhat higher gross profit margin on White Knight products, and an
increase in sales of the more profitable safety products in the 1996
Quarter over the 1995 Quarter. Gross profit margins in the 1996
Quarter were adversely impacted by $651,000 of unabsorbed
manufacturing costs (i.e., manufacturing costs added to costs of
goods sold rather than being included in inventory of manufactured
product) due to manufacturing inefficiencies. As manufacturing
rates increased during the 1996 Quarter, the Company was able to
more fully absorb manufacturing costs and thereby reduce operating
losses and achieve a modest net income in the last month of the 1996
Quarter.
Selling and marketing expenses were $5.0 million or 16.1
percent of net sales in the 1996 Quarter and $2.3 million or 18.9
percent of net sales in the 1995 Quarter. This increase in real
dollars reflects the acquisition of White Knight, and the
corresponding distribution and selling expenses associated with
White Knight's sales volume, coupled with expenses relating to the
internal sales growth in the 1996 Quarter over the 1995 Quarter.
General and administrative expenses were $2.0 million or 6.6
percent of net sales in the 1996 Quarter compared to $1.1 million or
8.7 percent of net sales for the 1995 Quarter. The major portion of
the increase in the 1996 Quarter reflects the acquisition of White
Knight effective September 1, 1995 and its general and
administrative expenses.
Research and development expenses were $297,000 or 1.0 percent
of net sales in the 1996 Quarter compared to $209,000 or 1.7 percent
of net sales for the 1995 Quarter.
Amortization of intangibles in the 1996 Quarter and 1995
Quarter was $807,000 and $273,000, respectively. This increase in
cost reflects the amortization of intangibles relating to the White
Knight and SafeWaste acquisitions.
The resulting loss from operations for the 1996 Quarter was
$988,000 compared to $1.2 million for the 1995 Quarter.
Interest income was $641,000 in the 1996 Quarter compared to
$1.0 million for the 1995 Quarter. This decrease in interest income
reflects a reduction in short term U.S. government and U.S.
government-backed securities invested in the 1996 Quarter, and a
lower interest rate on those investments.
Interest expense was $229,000 for the 1996 Quarter compared to
$102,000 for the 1995 Quarter. Long term debt decreased from March
31, 1995 to March 31, 1996 by $6.6 million. However, much of the
interest in the 1995 Quarter was capitalized because the assets
financed by the debt were still under construction.
The Company recorded an income tax benefit of $266,000 and
$155,000 for the 1996 Quarter and the 1995 Quarter, respectively.
The resulting net loss was $377,000 for the 1996 Quarter and
$146,000 for the 1995 Quarter.
Upon and in the event of the Company's successful consummation
of the Microtek transaction, the Company intends to account for such
transaction as a pooling of interests which will result, among other
things, in a restatement of the Company's financial statements for
prior periods in order to include the operations of Microtek. In
addition, the Company currently anticipates that the consummation of
the Microtek transaction will cause the Company to record
approximately $2.8 million in merger expenses and $538,000 of
compensation costs. These merger expenses include investment
banking, legal, accounting and miscellaneous transaction costs.
Plans for the integration and consolidation of the companies'
operations are currently being developed, but associated costs are
not presently estimable. The accounting policies utilized by the
Company and Microtek are currently being studied from a conformity
perspective; however, the impact of any potential conformity
adjustment is not presently expected to be material.
Sterile Concepts is a significant customer of White Knight,
accounting for approximately 11 percent of White Knight's net sales
and 5.6 percent of the Company's net sales during the 1996 quarter.
On March 27, 1996, Sterile Concepts announced that it had engaged
an investment banking firm to advise Sterile Concepts on its strategic
alternatives, including a possible sale of Sterile Concepts.
If Sterile Concepts is sold to a manufacturer of disposable medical
products, such sale could adversely affect the Company's sales.
FINANCIAL CONDITION AND LIQUIDITY
At March 31, 1996, the Company's cash and equivalents totalled
$45.8 million compared to $54.5 million at December 31, 1995.
For the 1996 Quarter, the Company used $5.1 million of its cash
in operating activities compared to $1.9 million for the 1995
Quarter. The use of cash in the 1996 Quarter included a $2.1
million increase in accounts receivable and a $3.4 million increase
in inventories (primarily OREX raw materials) offset by a $1.2
million increase in accounts payable, $1.5 million and $1.4 million in
capital expenditures for the Company's OREX towel plant and OREX roll-stock
plant, respectively, and $500,000 in capital expenditures for the Company's
financial system software.
At March 31, 1996, the Company had outstanding commitments to
purchase approximately $5.7 million of equipment in 1996. These
commitments relate primarily to the OREX roll stock plant in Arden,
North Carolina, the OREX towel plant in Abbeville, South Carolina
(reflecting modifications and additions to those plants and related
equipment) and the purchase of equipment for the Company's financial
system software. The Company is currently substantially dependent
upon third party manufacturers and suppliers located in the Peoples
Republic of China and elsewhere outside the United States for the
raw materials and certain of the finished goods comprising the OREX
Degradables line. Such dependence exposes the Company to various
risks concerning the costs and availability of raw materials and
finished products. The Company anticipates continued significant
capital expenditures to expand its manufacturing capabilities to
enable the Company to manufacture more of its OREX Degradables
products internally thereby giving it more control over its
operations, including product quality, availability and cost. The
Company anticipates that such capital expenditures may require
additional term loan financing or issuances of common stock to the
extent not funded from available cash.
On March 15, 1996, the Company executed a merger agreement with
Microtek. Among other objectives sought to be achieved by the
Company through this merger, the Company believes Microtek will
facilitate the conversion manufacturing and marketing of OREX
Degradables film products. Upon closing of such acquisition,
Isolyser would issue approximately 5.3 million shares of its common
stock (subject to certain adjustments specified in the merger
agreement) in exchange for all of the outstanding shares and stock
options of Microtek. The closing of the transaction, which the
Company plans to account for as a pooling of interests, is subject
to Microtek shareholder and various government approvals as well as
certain other customary conditions. There can be no assurance that
such transaction will be consummated. The Company's growth strategy
includes other possible acquisitions which may require use of cash,
incurring debt or issuing common stock.
On March 26, 1996, the Company signed an agreement to purchase
land and a building in Norcross, Georgia for approximately $2.4
million, including estimated refurbishment costs. The closing of
this transaction is expected to occur no later than August 31, 1996.
The Company anticipates utilizing this location for its corporate
headquarters. The Company anticipates funding this purchase from
available cash.
At March 31, 1996, long term debt, including current portion,
consisted primarily of $9.2 million outstanding under the Company's
term loan and revolving credit facility which was used to partially
finance its OREX roll stock plant. As of March 31, 1996, there was
current additional borrowing available under the revolving facility
of approximately $22.0 million. In connection with the proposed
acquisition of Microtek described above, the Company will be
required to assume Microtek's outstanding debt, which at February
29, 1996, approximated $21.0 million. To facilitate such debt
assumption, and from time to time as the Company's working capital
requirements increase, the Company anticipates increasing its
revolving line of credit to the extent such requirements are not
otherwise satisfied out of available cash flow or borrowings under
the Company's existing line of credit. In addition, the proposed
acquisition of Microtek will require the consent of the Company's
senior lender. There can be no assurance that an increase to the
Company's revolving credit facility and such consent will be
available to the Company.
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
A complaint was filed against the Company as well as its
President and Chief Financial Officer on December 13, 1995 on behalf
of Peter Salit in the United States District Court for the Northern
District of Georgia. In the complaint, the plaintiff seeks class
certification and damages relative to certain alleged wrongful
disclosures and omissions in various of the Company's filings with
the Securities and Exchange Commission, including allegations that
certain OREX Degradables do not dissolve as represented and cannot
be manufactured as represented. The Company intends to vigorously
defend this litigation which remains in the preliminary stages.
On March 22, 1995, the Internal Revenue Service issued a report
proposing certain adjustments to White Knight's income tax return
for 1992 which approximate $864,000 without penalties and interest.
White Knight has filed a protest with the District Director of
Internal Revenue contesting such adjustments. The Company does not
believe that the ultimate resolution of such matter will have a
material effect on its financial condition or results of operations.
In any event, all taxes, interest and penalties arising as a result
of such audit are the subject matter of provisions indemnifying the
Company negotiated between the Company and the sellers of White
Knight as a part of the White Knight Acquisition.
The Company is involved in routine litigation and proceedings
in the ordinary course of business. Management believes that
pending litigation matters will not have a material adverse effect
on the Company's financial position or results of operations.
Item 2. Changes in Securities
There have been no material modifications in the instruments
defining the rights of shareholders. None of the rights evidenced
by the shares of the Company's common stock have been materially
limited or qualified by the issuance or modification of any other
class of securities.
Item 3. Defaults Upon Senior Securities
At March 31, 1996, the Company was not in compliance with the
restrictive covenant of its credit facility pertaining to net
income. This existing covenant violation was waived by the
Company's lenders on May 15, 1996.
Item 4. Submission of Matters to a Vote of Securityholders
None.
Item 5. Other Information
The Company currently obtains most of the raw materials for
OREX Degradables, primarily polyvinyl alcohol ("PVA") fiber, from
suppliers in the People's Republic of China. The Company does not
have any long-term supply contracts or other formal contractual
arrangements with any of its raw materials suppliers or contract
manufacturers. While raw materials and contract manufacturing for
OREX Degradables are also currently available from other domestic
and foreign independent manufacturers, there can be no assurance
that the Company will continue to be able to obtain raw materials
and contract manufacturing for its products on a commercially
reasonable basis, if at all. A domestic manufacturer of PVA has
sought to have anti-dumping duties imposed against imports of PVA
from certain foreign producers, recently resulting in final
determinations by the Department of Commerce and the International
Trade Commission to issue an anti-dumping order which requires that
domestic importers of PVA resin pay cash deposits in the amount of
certain scheduled margins (the "Anti-dumping Margins") of 19% (for
PVA imported from Taiwan), 77% (for PVA imported from Japan), and
116% (for PVA imported from producers in the People's Republic of
China other than Sichuan Vinylon Works which has been excluded from
the case) of the raw material cost upon importing such raw
materials. The Anti-Dumping Margins do not operate as a ceiling
upon anti-dumping duties which could be levied on affected imports
of PVA resin. The final determinations explicitly exclude PVA fiber
from the case. PVA resin is a raw material required to manufacture
OREX Degradables film, extruded and thermoformed OREX Degradables
and PVA fiber, and PVA fiber is the raw material required to
manufacture OREX Degradables woven and non-woven products. PVA
resin is available to the Company from a number of alternative
suppliers not subject to the anti-dumping order. The Company
anticipates that these determinations will result in increased
prices of PVA resin generally, which would be expected to have a
negative impact upon the Company. The materiality of such impact
upon the Company depends upon a number of factors including the
amount of the anti-dumping duties actually levied on the imports,
the cost and availability of alternative supplies not subject to
such anti-dumping duties, the quantity of PVA resin used by the
Company, and the ability of the Company to satisfactorily
manufacture finished goods requiring PVA resin as a raw material in
locations which would not require the Company to incur anti-dumping
duty costs. As the Company currently uses PVA resin in minimal
quantities, the Company believes that the anti-dumping order
currently has no material effect on the Company. The Company is
pursuing and evaluating a number of measures to reduce the potential
future impact upon the Company of anti-dumping duties and
anticipated price increases on PVA resin, including the development
of manufacturing facilities dependent upon PVA resin in foreign
countries. No assurances, however, can be provided that such anti-
dumping order will not materially adversely affect the Company.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit No. Description
3.1* Articles of Incorporation of Isolyser
Company, Inc.
3.2* Amended and Restated Bylaws of Isolyser
Company, Inc.
4.1* Specimen Certificate of Common Stock
10.1** Agreement and Plan of Merger dated as of
March 15, 1996 among Isolyser Company,
Inc., Microtek Medical, Inc. and MMI
Merger Corp.
27.1 Financial Data Schedule
- - ------------------
* Incorporated by reference to the Company's registration
statement on Form S-1 (File No. 33-83474).
** Incorporated by reference to Exhibit 2.14 of the Company's
Annual Report on Form 10-K, for the fiscal year ended
December 31, 1995.
(b) No current reports on Form 8-K were filed during the
quarter for which this report is filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has caused this quarterly report on Form 10-Q
to be signed on its behalf by the undersigned thereunto duly
authorized on May 15, 1996.
ISOLYSER COMPANY, INC.
By: /s/ Robert L. Taylor
Robert L. Taylor
President and Chief Executive Officer
(principal executive officer)
By: /s/ C. Fred Harlow
C. Fred Harlow
Senior Vice President of Finance,
Chief Financial Officer and Treasurer
(principal financial officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S UNAUDITED FINANCIAL STATEMENTS CONTAINED IN ITS REPORT ON FORM
10-Q FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000929299
<NAME> Isolyser Company, Inc.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 45,755<F1>
<SECURITIES> 0
<RECEIVABLES> 18,619<F2>
<ALLOWANCES> 0
<INVENTORY> 38,551
<CURRENT-ASSETS> 108,485
<PP&E> 58,035
<DEPRECIATION> 3,754
<TOTAL-ASSETS> 208,155
<CURRENT-LIABILITIES> 19,850
<BONDS> 9,899
0
0
<COMMON> 31
<OTHER-SE> 174,376
<TOTAL-LIABILITY-AND-EQUITY> 208,155
<SALES> 31,008
<TOTAL-REVENUES> 0
<CGS> 23,880
<TOTAL-COSTS> 23,880
<OTHER-EXPENSES> 8,116
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 229
<INCOME-PRETAX> (643)
<INCOME-TAX> (266)
<INCOME-CONTINUING> (377)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (377)
<EPS-PRIMARY> ( 0.01)
<EPS-DILUTED> ( 0.01)
<FN>
<F1>INCLUDES CASH EQUIVALENTS.
<F2>ACCOUNTS RECEIVABLE ARE SHOWN NET OF ALLOWANCE FOR DOUBTFUL ACCOUNTS.
</FN>
</TABLE>
