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 September 30, 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 November 13, 1996
- ----- --------------------------------
Common Stock, $.001 par value 39,096,992
380456.1
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
Isolyser Company, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
Assets September 30, 1996 December 31, 1995
-------- -------------------------------------------------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 22,038 $ 54,816
Accounts receivable-net 26,391 22,142
Inventories
Raw materials 21,712 20,144
Work in process 18,457 7,967
Finished goods 26,331 17,952
Deferred income taxes 2,605 2,601
Prepaid expenses and other assets 3,905 3,272
Total current assets 121,439 128,894
----------------------------------
Property, plant and equipment 86,574 69,901
Less accumulated depreciation 11,061 5,860
----------------------------------
Net property, plant, and equipment 75,513 64,041
----------------------------------
Intangibles and other assets, net $ 62,214 $ 61,031
----------------------------------
$259,166 $253,966
==================================
Liabilities and Shareholders' Equity
------------------------------------
Current liabilities
Current installments of long term debt $ 4,199 $ 4,042
Accounts payable 12,982 16,437
Bank overdraft 2,084 1,800
Accrued expenses 7,123 5,566
-----------------------------------
Total current liabilities 26,388 27,845
-----------------------------------
Long term debt, excluding current installments 37,192 26,413
Deferred income taxes 3,963 3,959
Other liabilities 186 423
-----------------------------------
Total liabilities 67,729 58,640
-----------------------------------
Shareholders' equity
Common stock 39 39
Additional paid in capital 201,919 199,635
Retained earnings (7,704) (1,457)
Unearned shares restricted to employee
stock ownership plan (420) (420)
-----------------------------------
193,834 197,797
Treasury shares (2,397) (2,471)
-----------------------------------
Total shareholders' equity 191,437 195,326
-----------------------------------
$259,166 $253,966
===================================
</TABLE>
See accompanying notes.
380456.1
2
<PAGE>
<TABLE>
<CAPTION>
ISOLYSER COMPANY, INC.
Condensed Consolidated Statements of Operations
(in thousands except per share data)
(unaudited)
Three months ended Three months ended Nine months ended Nine months ended
September 30, 1996 September 30, 1995 September 30, 1996 September 30, 1995
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 42,165 $ 26,543 $ 123,598 $ 68,467
Cost of goods sold 31,736 19,183 88,556 48,380
-------------------------------------------------------------------------------------------
Gross Profit 10,429 7,360 35,042 20,087
Operating Expenses
Selling & marketing 7,401 4,859 20,896 12,756
General & administrative 3,492 2,527 9,804 6,408
Research & development 461 249 1,411 716
Amortization of intangibles 1,101 643 3,261 1,367
Non-recurring cost 3,232 -- 3,341 --
associated with the
merger of Microtek
Medical, Inc.
Restructuring charges 1,390 -- 1,390 --
-------------------------------------------------------------------------------------------
Total Operating Expenses 17,077 8,278 40,103 21,247
-------------------------------------------------------------------------------------------
Loss from Operations (6,648) (918) (5,061) (1,160)
Interest Income 337 631 1,468 2,548
Interest expense (671) (422) (1,829) (923)
Losses in joint venture (40) (17) (179) (48)
-------------------------------------------------------------------------------------------
Earnings (loss) before income (7,022) (726) (5,601) 417
taxes and extraordinary item
Estimated tax expense (benefit) (490) 365 228 842
-------------------------------------------------------------------------------------------
Loss before extraordinary item (6,532) (1,091) (5,829) (425)
Extraordinary loss from 575 575
refinancing of credit facilities,
net of tax benefit of $214
-------------------------------------------------------------------------------------------
Net loss $ (7,107) $ (1,091) $ (6,404) $ (425)
===========================================================================================
Net loss per share $ (0.18) $ (0.03) $ (0.17) $ (0.01)
Weighted average shares 38,484 32,625 38,769 34,736
outstanding
===========================================================================================
</TABLE>
See accompanying notes.
380456.1
3
<PAGE>
<TABLE>
<CAPTION>
ISOLYSER COMPANY, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Nine months ended Nine months ended
September 30, 1996 September 30, 1995
----------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (6,404) $ (425)
Net income for Microtek Medical, Inc. for
December 1995 143 --
Adjustments to reconcile net loss to net cash provided
used in operating activities:
Depreciation and amortization 8,462 2,937
Compensation expense associated with vesting of
variable options 500 --
Provision for doubtful accounts - 38
Loss on disposal of property, plant and equipment - 11
Changes in assets and liabilities, net of acquisitions (20,460) (5,611)
-----------------------------------------------------------
Net cash used in operating activities (17,939) (3,050)
-----------------------------------------------------------
Cash flows from investing activities
Additions to property, plant, and equipment net of (16,329) (26,884)
acquisitions
Acquisitions-net of cash acquired (11,362) (26,542)
-----------------------------------------------------------
Net cash used in investing activities (27,691) (53,426)
-----------------------------------------------------------
Cash flows from financing activities
Net borrowings under credit agreements 10,703 7,537
Change in bank overdraft 284 (217)
Proceeds from exercised options 1,766 564
Purchase of treasury stock -- (3,747)
Direct cost relating to issuance of common stock (20) (325)
Proceeds from issuance from stock 119 --
-----------------------------------------------------------
Net cash provided by financing activities 12,852 3,812
-----------------------------------------------------------
Net decrease in cash and cash equivalents (32,778) (52,664)
Cash and cash equivalents at beginning of period 54,816 72,014
-----------------------------------------------------------
Cash and cash equivalents at end of period $ 22,038 $ 19,350
===========================================================
</TABLE>
See accompanying notes.
380456.1
4
<PAGE>
ISOLYSER COMPANY, INC.
Notes to Consolidated Financial Statements
(unaudited)
Note 1
In the opinion of management, all adjustments, consisting only of normal
recurring adjustments that are necessary for a fair presentation, have been
included in the unaudited financial information 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 for the year ended
December 31, 1995.
Note 2
On August 30, 1996 the Company acquired Microtek Medical, Inc. ("Microtek") and,
in connection therewith, issued 7,722,965 shares of common stock for all of
Microtek's outstanding common stock. Microtek designs, manufactures and sells a
broad range of surgical and medical supplies. The merger was accounted for as a
pooling of interest and, accordingly, the Company's financial statements have
been restated to include the results of Microtek for all periods presented.
Combined and separate results of the Company and Microtek are as follows:
<TABLE>
<CAPTION>
Isolyser Microtek Eliminations Combined
--------------------------------- ----------------- -----------
(in thousands)
<S> <C> <C> <C> <C>
Nine months ended September 30, 1996:
Net Sales $ 93,886 $ 30,516 $ (804) $ 123,598
Earnings from operations $ (7,380) $ 2,593 $ (274) $ (5,061)
Net income (loss) before
extraordinary item $ (6,114) $ 285 $ -- $ (5,829)
Net income (loss) $ (6,406) $ 2 $ -- $ (6,404)
Nine months ended September 30, 1995:
(Microtek as of August 31,1995)
Net Sales $ 47,115 $ 21,809 $ (457) $ 68,467
Earnings from operations $ (4,048) $ 2,990 $ (102) $ (1,160)
Net Income (loss) $ (1,924) $ 1,499 $ -- $ (425)
</TABLE>
Note: All eliminations are related to inter-company sales and purchases.
In connection with the merger, Microtek changed its fiscal year end from
November 30 to December 31 which conforms to Isolyser's fiscal year end.
Microtek's separate results for fiscal 1996 have been restated to a December 31
year end. Microtek's separate results of operations for the month of December
1995, therefore, are not reflected in the consolidated statement of operations.
The following is a condensed statement of income for Microtek for the month of
December 1995.
380456.1
5
<PAGE>
<TABLE>
<CAPTION>
Month of
December 1995
(in thousands)
-------------------
<S> <C>
Net Sales $ 2,701
Cost of goods sold 1,423
-------------------
Gross profit 1,278
Selling, general, and administrative 939
-------------------
Earnings from operations 339
Interest expense 105
-------------------
Income before taxes 234
Estimated tax expense 91
-------------------
Net income $ 143
===================
</TABLE>
The consolidated financial statements for all periods prior to 1996 have not
been restated for the change in fiscal years. They include the Company's result
of operations on a December 31, fiscal year basis, and Microtek's on a November
30, fiscal year basis.
Cost related to the merger of $3,341,000 were charged to expense primarily in
the third quarter of fiscal 1996.
Note 3
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.
380456.1
6
<PAGE>
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Results of Operations
The Company's consolidated statements of operations have been restated to
include the operating results of Microtek which was acquired in a pooling of
interest transaction on August 30, 1996. The operations of White Knight
Healthcare, Inc. ("White Knight"), acquired effective September 1, 1995, are
included in the Company's consolidated statements of operations only from such
acquisition date.
Net sales for the three months ended September 30, 1996 (the "1996 Quarter")
were $42.2 million compared to $26.5 million for the three months ended
September 30, 1995 (the "1995 Quarter"), an increase of 59 percent. Net sales
for the nine months ended September 30, 1996 (the "1996 Period") were $123.6
million compared to $68.5 million for the nine months ended September 30, 1995
(the "1995 Period"), an increase of 80 percent. The increase in net sales
partially resulted from the $14.2 million and $44.9 million of net sales
contributed by White Knight during the 1996 Quarter and 1996 Period,
respectively, compared with $4.9 million of sales by White Knight included in
the Company's results for the 1995 Quarter and Period. Microtek sales for the
1996 Quarter and 1996 Period were $10.5 million and $29.8 million, respectively,
an increase of $3.0 million and $8.4 million, respectively, over the prior
corresponding periods of 1995 primarily due to Microtek acquisitions in recent
months. Sales of procedure trays and related products increased $2.6 million or
26 percent in the 1996 Quarter and $4.7 million or 15 percent in the 1996 Period
over the prior corresponding periods of 1995. Sales of safety products and
services were $2.6 million and $8.2 million in the 1996 Quarter and the 1996
Period, respectively, compared to $2.4 million and $6.5 million during the 1995
Quarter and 1995 Period, respectively. The sales of the Company during the 1995
Period include the net revenues of SafeWaste Corporation from the May 31, 1995
acquisition date.
The Company's sales of OREX Degradables in the 1996 Quarter and 1996 Period were
$1.5 million and $5.5 million, respectively (which amounts are included in the
sales figures described above). 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. The Company's ability to achieve such objectives is subject to a
number of risks described in the Company's Annual Report on Form 10-K for the
year ended December 31, 1995 (the "Annual Report") including, without
limitation, those described in the Annual Report under "Risk Factors - Risks of
New Products", "- Risks of Expansion" and "- Manufacturing and Supply Risks".
Included in cost of goods sold for the 1996 Quarter and 1996 Period are charges
of $531,000 for inventory shrinkage relating to product quality deficiencies in
the OREX non-woven fabrics manufacturing operation, and a $1 million reserve for
slow moving and potentially obsolete inventory throughout the Company. After
adjusting gross profit by eliminating these charges,
380456.1
7
<PAGE>
gross profit for the 1996 Quarter and the 1996 Period was 28.4 percent and 29.6
percent of net sales respectively, compared to 27.7 percent and 29.3 percent of
net sales, respectively for the 1995 Quarter and 1995 Period. Pending increased
utilization of the Company's existing manufacturing capacity at its Arden and
Abbeville OREX manufacturing facilities, the Company will continue to encounter
low profit margins on sales of its OREX Degradables products. During the 1996
Quarter and Period the Company manufactured more OREX Degradable towels than
were sold. While the Company plans to sell such surplus towels, no assurances
can be provided that the Company will be successful in such efforts. The
possible inability of the Company to sell its towel supplies at acceptable
prices could materially adversely affect the Company's operating margins and
profitability.
Selling and marketing expenses were $7.4 million or 17.6 percent of net sales in
the 1996 Quarter and $4.9 million or 18.3% of net sales in the 1995 Quarter.
Selling and marketing expenses were $20.9 million or 16.9 percent of net sales
in the 1996 Period and $12.8 million or 18.6 percent of net sales in the 1995
Period. This increase in real dollars reflects primarily the acquisition of
White Knight, and the corresponding distribution and selling expenses associated
with White Knight's sales volume.
General and administrative expenses were $3.5 million or 8.3 percent of net
sales in the 1996 Quarter and $2.5 million or 9.5 percent of net sales in the
1995 Quarter. These expenses were $9.8 million or 7.9% of net sales in the 1996
Period and $6.4 million or 9.4 percent of net sales in the 1995 Period. This
increase in real dollars reflects primarily the acquisition of White Knight.
Research and development expenses were $461,000 or 1.1 percent of net sales in
the 1996 Quarter compared to $249,000 or 0.9 percent of net sales in the l995
Quarter. Research and development expenses were $1.4 million or 1.1 percent of
net sales in the 1996 Period and $716,000 or 1.0 percent of net sales in the
1995 Period.
Amortization of intangibles in the 1996 Quarter and 1995 Quarter was $1.1
million and $643,000 respectively. Amortization of intangibles in the 1996
Period and 1995 Period was $3.3 million and $1.4 million respectively. This
increase in costs reflects the amortization of intangibles relating to the White
Knight and other acquisitions.
The Company incurred non-recurring costs associated with the acquisition of
Microtek of $3.2 million in the 1996 Quarter and $3.3 million in the 1996
Period. Restructuring charges relating to severance packages and consolidation
cost primarily as a result of the Microtek acquisition of $1.4 million were
charged in both the 1996 Quarter and Period. The resulting loss from operations
for the 1996 Quarter was $6.6 million compared to $918,000 for the 1995 Quarter.
Loss from operations for the 1996 Period was $5.1 million compared to $1.2
million for the 1995 Period. After eliminating the above noted $1.5 million
inventory charges included in costs of goods sold and non-recurring acquisition
costs, the resulting income <loss> from operations was $<500,000> and $1.2
million for the 1996 Quarter and 1996 Period, respectively.
380456.1
8
<PAGE>
Interest income was $337,000 in the 1996 Quarter compared to $631,000 for the
1995 Quarter, and $1.5 million in the 1996 Period compared to $2.5 million in
the 1995 Period. This decrease in interest income reflects a reduction in short
term U. S. government and U. S. government- backed securities invested during
1996, and a lower interest rate on those investments.
Interest expense was $671,000 and $422,000 for the 1996 and 1995 Quarters
respectively, and $1.8 million and $923,000 for the 1996 and 1995 Periods
respectively. This increase in interest expense in the 1996 Quarter and Period
reflects primarily interest on debt of White Knight.
The Company recorded an income tax benefit for the 1996 Quarter of $490,000 and
an income tax expense for the 1996 Period of $228,000 compared to a tax expense
of $365,000 for the 1995 Quarter and $842,000 for the 1995 Period. The
differences in effective rates are primarily the result of the nondeductible
nature of the Microtek merger costs combined with the taxable nature of Microtek
operations prior to the merger.
The extraordinary loss of $575,000 results from the refinancing of the Company's
credit facilities concurrent with the Microtek merger.
The resulting net loss was $7.1 million and $6.4 million for the 1996 Quarter
and Period, respectively, compared to losses of $1.1 million and $425,000 for
the 1995 Quarter and Period, respectively.
Financial Condition and Liquidity
At September 30, 1996 the Company's cash and equivalents totaled $22.0 million
compared to $54.8 million at December 31, 1995.
During the 1996 Period, the Company used $17.9 million of cash in operating
activities as compared to $3.1 million in the 1995 Period. This use of cash is
primarily associated with the $20 million increase in inventories relating
primarily to OREX products. The Company used $27.7 million of cash during the
1996 Period in investing activities as compared to $53.4 million in the 1995
Period. The decrease in cash used in investing activities is the result of lower
capital expenditures (related primarily to purchases of equipment for the
Company's OREX manufacturing facilities) and acquisitions of which the cash
portion of the consideration in 1996 was less than 1995. The increase in cash
used in operating activities, offset by the combination of decreases in cash
used in investing activities and net borrowings of $10.7 million, resulted in a
net decrease in cash and cash equivalents during the 1996 Period of $32.8
million.
At September 30, 1996, the Company had outstanding commitments to purchase
approximately $5.3 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. Other material activity in the Company's
plants and equipment include further investments in the Company's OREX extrusion
manufacturing equipment located in Norcross, Georgia, and the acquisition of PVA
fiber manufacturing equipment currently located in Charlotte, North Carolina and
now operating on a test basis only.
380456.1
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<PAGE>
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.
On August 30, 1996 the Company purchased land and a building in Norcross,
Georgia at a cost of approximately $2.4 million, including estimated
refurbishment cost. The Company anticipates moving into this building as it
corporate headquarters during the fourth quarter of 1996.
At September 30, 1996, the Company had outstanding debt, including current
portion, of $41.4 million. As a result of the Microtek acquisition, the Company
assumed all of Microtek's debt which amounted to approximately $22 million.
Concurrent with the Microtek merger, the Company increased its existing credit
facility to $55 million. As of September 30, 1996, the Company had outstanding
$15 million under its term facility and $21 million under its revolving credit
facility leaving additional borrowing available under the revolving facility of
approximately $19 million.
Based on its current business plan, the Company anticipates that existing cash
and cash equivalents, together with borrowing availability under its existing
credit facility, will be sufficient to fund its currently foreseeable liquidity
and capital requirements over the next year. While the Company is unable to make
any assurances in such regard, the Company anticipates that a combination of
improvements in operating results and reductions in requirements for the Company
to heavily invest in inventory will reduce its historically negative cash flow.
In the event that appropriate opportunities arise to acquire as yet unidentified
product lines or businesses related to the Company's business, the Company may
require additional financing to pursue such opportunities.
Statements made in this Management's Discussion and Analysis of Financial
Condition and Results of Operations, including those in immediately preceding
paragraph, include forward- looking statements made under the provisions of the
Private Securities Litigation Reform Act. The Company's actual results could
differ materially from such forward-looking statements and such results will be
affected by various risks described in the Company's Annual Report including,
without limitation, those described in the Annual Report under "Risk Factors -
Limited Operating History; Net Losses", "- Risks of New Products", "- Risks of
Expansion" and "- Manufacturing and Supply Risks".
Effects of Currency Exchange Rates
The Company currently purchases materials used in its products in U.S. dollars.
During the 1996 Period, the Company had export sales denominated in British
pounds of 700,000 or $1.0 million dollars. As sales denominated in British
pounds or other foreign currency increase, the Company could be affected by the
relationship of the U. S dollar to foreign currency.
380456.1
10
<PAGE>
New Accounting Pronouncements
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. This requires impairment losses to be
recorded on long-lived assets used in operations when indicators of impairment
are present and the undiscounted cash flows estimated to be generated by those
assets are less than the assets carrying amount. The initial adoption of SFAS
No. 121 had no impact on the Company's results from 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
on the fair value of the equity instrument awarded. Companies are permitted,
however, to continue to apply APB Opinion No. 25, which recognizes compensation
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.
380456.1
11
<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 sought 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. On September 25, 1996, a judgment was entered by
the District Court dismissing the complaint with prejudice.
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
Except as previously reported at Exhibits 3.1 and 20.2 of the Company's
Current Report on Form 8-K filed with the Securities and Exchange Commission on
July 29, 1996, 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
None.
Item 4. Submission of Matters to a Vote of Securityholders
During the period covered by this report, the Company filed with the
Securities and Exchange (the "Commission") and delivered to its shareholders the
Company's Proxy Statement for Special Meeting of Shareholder held August 30,
1996 (the "Proxy Statement").
(a) The Company's Special Meeting of Shareholders was held on August
30, 1996.
(b) The meeting did not involve the election of directors.
380456.1
12
<PAGE>
(c) With respect to each matter (as more fully described in the Proxy
Statement) voted upon at the meeting, the inspector of election tabulated the
following votes:
(i) Approval of Issuance of Shares for Microtek Acquisition
Number of Votes Number Votes Abstentions and
For Against Broker Non-Votes
--- ------- ----------------
15,271,394 359,227 1,819,732
(ii) Proposal to Amend Isolyser's Stock Option Plan
Abstentions and
For Against Broker Non-Votes
--- ------- ----------------
15,979,413 1,189,726 281,284
(d) There was no solicitation subject to Rule 14a-11 of Regulation 14A
under the Securities Exchange Act of 1934.
Item 5. Other Information
None.
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.
3.3** First Amendment of the 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
and amended as of June 23, 1996 and July 29, 1996 among
Isolyser Company, Inc., Microtek Medical, Inc. and MMI
Merger Corp.
380456.1
13
<PAGE>
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 the Company's Current Report
on Form 8-K filed on July 29, 1996.
*** Incorporated by reference to the Company's Registration
Statement on Form S-4 (File No. 333-7977).
(b) The Company filed a Current Report on Form 8-K on July 29, 1996
and September 13, 1996.
380456.1
14
<PAGE>
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 November 14, 1996.
ISOLYSER COMPANY, INC.
By: /s/ Robert L. Taylor
-------------------------------------------
Robert L. Taylor
President and Chief Executive Officer
(principal executive officer)
By: /s/ Dan R. Lee
-------------------------------------------
Dan R. Lee
Chief Financial Officer
(principal financial officer)
380456.1
15
<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 QUARTERLY PERIOD ENDED SEPTEMBER 30, 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 22,038<F1>
<SECURITIES> 0
<RECEIVABLES> 26,383<F2>
<ALLOWANCES> 0
<INVENTORY> 66,499
<CURRENT-ASSETS> 121,431
<PP&E> 75,513
<DEPRECIATION> 11,061
<TOTAL-ASSETS> 259,157
<CURRENT-LIABILITIES> 24,529
<BONDS> 39,051
0
0
<COMMON> 39
<OTHER-SE> 191,398
<TOTAL-LIABILITY-AND-EQUITY> 259,166
<SALES> 123,598
<TOTAL-REVENUES> 0
<CGS> 88,555
<TOTAL-COSTS> 88,555
<OTHER-EXPENSES> 40,104
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,829
<INCOME-PRETAX> (7,022)
<INCOME-TAX> (490)
<INCOME-CONTINUING> (6,532)
<DISCONTINUED> 0
<EXTRAORDINARY> (575)
<CHANGES> 0
<NET-INCOME> (7,107)
<EPS-PRIMARY> (0.18)
<EPS-DILUTED> (0.18)
<FN>
<F1> INCLUDES CASH EQUIVALENTS.
<F2> ACCOUNTS RECEIVABLE ARE SHOWN NET OF ALLOWANCE FOR DOUBTFUL ACCOUNTS.
</FN>
</TABLE>
