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 June 30, 1999 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 Blvd NW
Norcross, Georgia 30093
(Address of principal executive offices)
(770) 806-9898
(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 August 12, 1999
Common Stock, $.001 par value 40,483,328
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ISOLYSER COMPANY, INC.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
ASSETS JUNE 30, 1999 DECEMBER 31, 1998
------
--------------------------------------------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 4,341 $ 7,325
Accounts receivable, net 14,613 18,118
Inventories, net 22,588 23,647
Prepaid expenses and other assets 1,506 1,413
Net assets held for sale 16,149 9,873
--------------------------------------------
Total current assets 59,197 60,376
--------------------------------------------
Property, plant and equipment 21,319 31,072
Less accumulated depreciation (12,457) (15,511)
--------------------------------------------
Property, plant, and equipment, net 8,862 15,561
--------------------------------------------
Intangibles and other assets, net 27,410 33,581
--------------------------------------------
$ 95,469 $ 109,518
============================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current installments of long term debt $ 941 $ 9,395
Accounts payable 3,023 6,247
Bank overdraft 485
361
Accrued expenses
3,584 5,250
--------------------------------------------
Total current liabilities 8,033 21,253
--------------------------------------------
Long term debt, excluding current installments 17,134 19,376
Other liabilities - 214
--------------------------------------------
Total liabilities 25,167 40,843
--------------------------------------------
Shareholders' equity
Common stock 40 40
Additional paid in capital 204,359 203,364
Accumulated deficit (133,363) (133,980)
Cumulative translation adjustment (60) (75)
Unearned shares restricted to employee stock ownership plan (240) (240)
--------------------------------------------
70,736 69,109
Treasury shares, at cost (434) (434)
--------------------------------------------
Total shareholders' equity
70,302 68,675
--------------------------------------------
$ 95,469 $ 109,518
============================================
</TABLE>
See accompanying notes.
<PAGE>
ISOLYSER COMPANY, INC.
Condensed Consolidated Statement of Operations
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three months Three months Six months Six months
ended ended ended ended
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 32,251 $ 38,874 $ 67,020 $ 80,104
Cost of goods sold 19,424 30,132 43,223 60,720
------------------------------------------------------------------------
Gross profit 12,827 8,742 23,797 19,384
Operating expenses:
Selling, general and administrative 8,481 10,036 18,133 19,827
Research & development 588 1,122 1,043 1,803
Impairment loss 1,590 5,300 1,590 5,300
Amortization of intangibles 446 521 897 1,048
------------------------------------------------------------------------
Total operating expenses 11,105 16,979 21,663 27,978
------------------------------------------------------------------------
Income (loss) from operations 1,722 (8,237) 2,134 (8,594)
Interest income 32 79 82 171
Interest expense (588) (1,022) (1,212) (1,971)
Income from joint venture - 10 13
------------------------------------------------------------------------
Income (loss) before income tax expense 1,166 (9,170) 1,004 (10,381)
Income tax expense 182 90 387 166
------------------------------------------------------------------------
Net income (loss) $ 984 $ (9,260) $ 617 $ (10,547)
------------------------------------------------------------------------
Other comprehensive income (loss)
Foreign currency translation (loss)
gain $ (37) $ 9 $ 15 $ 10
------------------------------------------------------------------------
Comprehensive income (loss) $ 947 $ (9,251) $ 632 $ (10,537)
========================================================================
Net income (loss) per common share:
Basic $ 0.02 $ (0.23) $ 0.02 $ (0.26)
========================================================================
Diluted $ 0.02 $ (0.23) $ 0.02 $ (0.26)
========================================================================
Weighted average number of common shares
outstanding:
Basic 40,126 40,000 40,040 39,824
========================================================================
Diluted 41,221 40,000 40,555 39,824
========================================================================
</TABLE>
See accompanying notes.
<PAGE>
ISOLYSER COMPANY, INC.
Condensed Consolidated Statement of Cash Flows
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1999 JUNE 30, 1998
---------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 617 $ (10,547)
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities
Depreciation 2,013 1,937
Amortization 886 1,048
Provision for doubtful accounts 124 88
Loss on disposal of property, plant and equipment - 10
Impairment loss 1,590 5,300
Changes in assets and liabilities (4,937) 347
---------------------------------------------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES: 293 (1,817)
---------------------------------------------------
Cash flows from investing activities
Additions to property, plant and equipment (1,037) (2,856)
Proceeds from disposition of net assets held for sale 8,012 -
---------------------------------------------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES: 6,975 (2,856)
---------------------------------------------------
Cash flows from financing activities:
Net (repayments) borrowings under credit agreements (11,728) 2,743
Changes in bank overdraft 482 48
Proceeds from exercised stock options 591 -
Proceeds from issuance of common stock 403 255
Issuance of stock to 401(k) Plan - 251
---------------------------------------------------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES: (10,252) 3,297
---------------------------------------------------
Net decrease in cash and cash equivalents (2,984) (1,376)
Cash and cash equivalents at beginning of period 7,325 9,299
---------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,341 $ 7,923
===================================================
</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, 1998.
2) Inventories are stated at the lower of cost or market and are summarized as
follows:
At December 31, 1998, the Company's LIFO inventory is included as a component of
net assets held for sale.
At June 30, 1999 and December 31, 1998 the net OREX inventory is approximately
$7,378,000 and $4,920,000 respectively.
3) The net assets of the Company's MedSurg subsidiary at June 30, 1999 and the
Company's White Knight Healthcare subsidiary ("White Knight") and the Company's
former headquarters at December 31, 1998 are classified as held for sale in the
accompanying condensed consolidated financial statements, and are comprised of
the following:
June 30, 1999 December 31, 1998
--------------- -----------------
Assets:
Accounts receivable .................... $ 5,108,000 $ 3,589,000
Inventory .............................. 5,527,000 6,744,000
Prepaid expense and other assets ....... 227,000 71,000
Property and equipment, net ............ 5,522,000 2,000,000
Other assets ........................... 5,351,000 73,000
----------- -----------
Total assets ............... 21,735,000 12,477,000
----------- -----------
Liabilities:
Accounts payable ....................... 3,367,000 1,441,000
Bank overdraft ......................... -- 361,000
Accrued liability ...................... 1,806,000 786,000
Long-term debt ......................... 413,000 16,000
----------- -----------
Total liabilities .......... 5,586,000 2,604,000
----------- -----------
Net assets held for sale ... $16,149,000 $ 9,873,000
=========== ===========
On March 31, 1999, the Company disposed of its former headquarters for proceeds
of $1.9 million in cash. On May 31, 1999, the Company disposed of the stock of
White Knight for proceeds of $8.2 million in cash. These proceeds were used to
repay outstanding borrowings under the Company's Credit Agreement.
On July 12, 1999, the Company disposed of its MedSurg subsidiary and entered
into an OREX License and Supply Agreement with Allegiance Healthcare, for
proceeds of $31.3 million in cash. A portion of these proceeds were used to
pay-off the remaining balance of the Company's Credit Agreement.
The following represents the results of operations of the above noted disposed
entities for the three and six months ended June 30, 1999 and 1998:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------------------------------------
1999 1998 1999 1998
------------------------------------------------
Net Sales ................... $16,802,000 $24,325,000 $37,315,000 $53,404,000
Net income (loss) ........... 324,000 (8,694,000) (421,422) (10,671,000)
Net income (loss) per share-basic 0.01 (0.22) (0.01) (0.27)
Net income (loss) per share-diluted (0.01) (0.22) (0.01) (0.27)
4) Basic per share earnings (loss) is computed using the weighted average number
of common shares outstanding for the period. Diluted per share earnings (loss)
is computed including the dilutive effect of all contingently issuable shares.
The difference between basic and diluted weighted average shares is attributable
only to dilutive stock options.
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
Net sales for the three months ended June 30, 1999 (the "1999 Quarter) were
$32.3 million compared to $38.9 million for the three months ended June 30, 1998
(the "1998 Quarter"), a decrease of 17.0%. Net sales for the six month period
ended June 30, 1999 (the "1999 Period") were $67.0 million compared to $80.1
million for the six month period ended June 30, 1998 (the "1998 Period"), a
decrease of 16.4%. Excluding sales of White Knight, the industrial division of
White Knight ("White Knight Industrial"), SafeWaste, and Struble and Moffitt
(businesses disposed of prior to June 30, 1999), net sales for the 1999 Quarter
and Period increased 3.1% and decreased 1.2%, respectively, as compared to the
1998 Quarter and Period. Sales of Microtek products increased 26.4% during the
1999 Quarter as compared to the 1998 Quarter and increased 22.4% in the 1999
Period as compared to the 1998 Period. This increase was primarily a result of
increased sales from a short-term manufacturing contract arrangement with a
customer and new business. Sales of safety products increased 18.8% during the
1999 Quarter as compared to the 1998 Quarter and increased 17.2% during the 1999
Period as compared to the 1998 Period. This increase was a result of
substantially increased purchases by a distributor. Sales of custom procedure
trays and related products declined 15.5% during the 1999 Quarter as compared to
the 1998 Quarter and declined 18.6% during the 1999 Period as compared to the
1998 Period. This decline was primarily attributed to reduced inventories
carried by distributors, increased competition with other procedure tray
companies and group purchasing organizations and, for the 1998 Period, relief of
previous year backlog with no comparable backlog in the 1999 Period. On July 12,
1999, the Company disposed of the net assets of MedSurg to Allegiance Healthcare
Corporation.
Included in the foregoing sales figures are $800,000 in sales of OREX
Degradables and Enviroguard products during the 1999 Quarter and $1.6 million
during the 1999 Period as compared to $1.3 million and $3.1 million during the
corresponding periods of 1998. Sales of OREX Degradables did not contribute any
gross profits to the Company's operating results. During 1997, the Company
substantially reduced selling and marketing efforts to increase sales of OREX
Degradables and focused on preserving its existing base of hospitals purchasing
OREX Degradables and evaluating means to exploit the market position of OREX
Degradables within its various market potentials. During 1998, the Company
substantially revised its strategy to commercialize its OREX products. As a
result of these efforts, in April 1999, the Company introduced new degradable
products to the healthcare industry under the mark Enviroguard which uses a
hydroentanglement manufacturing process to produce a spunlaced fabric. 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 and Enviroguard line of products at
acceptable profit margins. In connection with the July 12, 1999, sale by the
Company of the assets of MedSurg to Allegiance Healthcare, the Company granted
to Allegiance Healthcare a worldwide exclusive license to Isolyser's OREX and
Enviroguard proprietary technologies to make, use and sell products made from
material which can be dissolved and disposed of through a sanitary sewer system
for healthcare applications. There can be no assurances that OREX Degradables or
Enviroguard products will achieve or maintain substantial acceptance in their
target markets. See the risks described under "Risk Factors" in the Company's
Annual Report on Form 10-K for the period ending December 31, 1998 (the "1998
Annual Report") including, without limitation, "Risk Factors- Limited Operating
History; Net Losses," "-Risks of New Products" and "-Manufacturing and Supply
Risks" in the Company's 1998 Annual Report.
Gross profit for the 1999 Quarter was $12.8 million or 39.8% of net sales as
compared $8.7 million or 22.5% of net sales in the 1998 Quarter. Gross profit
for the 1999 Period was $23.8 million, or 35.5% of net sales, as compared to
$19.4 million, or 24.2% of net sales for the 1998 Period. Included as a
reduction of cost of sales during the 1999 Quarter and Period was $1.6 million
of excess OREX inventory reserve primarily due to anticipated usage under the
aforementioned Allegiance supply agreement, which increased gross profit.
Included in cost of sales for the 1998 Quarter and Period was approximately
$900,000 in inventory reserves recorded in connection with the sale of the
industrial division of White Knight, which reduced gross profit. Exclusive of
these adjustments, gross profit was 35.0% and 33.2% of net sales for the 1999
Quarter and Period, respectively, as compared to 24.8% and 25.3% of net sales in
the 1998 Quarter and Period, respectively. The improvement in gross profit is
attributable to improved gross profit at the Company's Microtek subsidiary as a
result of increased sales as well as sales mix, and reduced manufacturing costs
associated with the sale of the Company's Arden and Abbeville OREX manufacturing
facilities in August 1998 and October 1998, respectively.
Selling, general and administrative expenses were $8.5 million or 26.3% of net
sales in the 1999 Quarter as compared to $10.0 million or 25.8% of net sales in
the 1998 Quarter. Selling, general and administrative expenses were $18.1
million or 27.0% of net sales in the 1999 Period as compared to $19.8 million or
24.8% of net sales in the 1998 Period. Included in selling, general and
administrative expenses for the 1998 Quarter and Period were approximately
$300,000 in charges related to the disposition of White Knight Industrial. The
reduction in selling, general and administrative expense is primarily attributed
to implementation of the Company's operating plan which focused on reorganizing
marketing and sales efforts to achieve reductions in selling and marketing
expenses.
Research and development expenses were $588,000 or 1.8% of net sales in the 1999
Quarter as compared to $1.1 million or 2.9% of net sales in the 1998 Quarter.
Research and development expenses were $1.0 million or 1.6% of net sales in the
1999 Period as compared to $1.8 million or 2.3% of net sales in the 1998 Period.
The decline in research and development expense is primarily related to reduced
costs associated with the development and registration of the Company's LTS Plus
product as well as reduced development cost associated with the introduction of
the Company's Enviroguard product line.
Effective May 31, 1999, the Company disposed of the stock of White Knight for
proceeds of $8.2 million in cash. In conjunction with this disposition, the
Company recorded impairment charges of $1.6 million. On August 11, 1998, the
Company disposed of its Arden and Charlotte, North Carolina manufacturing
facilities, White Knight Industrial and substantially all of the assets of its
SafeWaste subsidiary for proceeds of approximately $13.4 million in cash. The
Company also contracted to sell its Abbeville, South Carolina OREX manufacturing
facility which was subsequently sold in October 1998. In conjunction with these
sales, the Company recorded impairment charges of $5.3 million during the 1998
Quarter.
Amortization of intangibles was $446,000 and $897,000 in the 1999 Quarter and
Period, respectively, as compared to $521,000 and $1.0 million in the
corresponding periods of 1998. The decline in amortization expenses was due to
the sale of White Knight Industrial during 1998.
The resulting income from operations was $1.7 million and $2.1 million for the
1999 Quarter and Period, respectively, as compared to a loss from operations of
$8.2 million and $8.6 million for the 1998 Quarter and Period, respectively.
Interest expense, net of interest income, was $556,000 and $1.1 million in the
1999 Quarter and Period respectively, as compared to $943,000 and $1.8 million
in the corresponding periods of 1998. The decline in interest expense is
attributed to reduced borrowings during the 1999 Quarter and Period offset by
increases in the Company's borrowing interest rate combined with lower interest
income as a result of lower cash balances during the 1999 Quarter and Period.
Provisions for income taxes reflects an expense of $182,000 and $387,000 in the
1999 Quarter and Period, respectively, as compared to $90,000 and $166,000 in
the corresponding periods of 1998.
The resulting net income was $984,000 and $617,000 for the 1999 Quarter and 1999
Period, respectively, as compared to a net loss of $9.3 million and $10.5
million in the corresponding periods of 1998.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1999, the Company's cash and equivalents totaled $4.3 as compared to
$7.3 million at December 31, 1998.
During the 1999 Period, the Company generated $293,000 of cash from operating
activities as compared to a use of $1.8 million in the 1998 Period. The
generation of cash in the 1999 Period is primarily attributable to improved
operating results offset by $1.7 million decline in accrued expenses. The
Company generated $7.0 million from investing activities during the 1999 Period
consisting primarily of $8.2 million from the disposition of White Knight and
the Company's former headquarters. These amounts were offset by approximately
$1.0 million in capital expenditures during the 1999 Period as compared to $2.9
million used during the 1998 Period. The decline in cash used in investing
activities is due to substantial completion of the Company's investment in
information systems at its Microtek and MedSurg subsidiaries. During the 1999
Period, the Company used approximately $10.2 million in cash from financing
activities compared to proceeds from financing activities of $3.3 million in the
1998 Period. The Company utilized cash proceeds from dispositions to reduce
amounts outstanding under its Credit Agreement.
As more fully described in the Company's 1998 Annual Report, the Company
maintains a $25 million credit agreement (as amended to date, the "Credit
Agreement") consisting of a revolving credit facility maturing on June 30, 2000.
Current additional borrowing availability under the revolving credit facility at
June 30, 1999 was approximately $7.0 million. Outstanding borrowings under the
revolving credit facility were approximately $13.4 million at June 30, 1999. The
Credit Agreement provides for the issuance of up to $3 million in letters of
credit. Outstanding letters of credit were $50,000 at June 30, 1999. Through
June 1999, the Bank and the Company amended the Credit Agreement to reduce the
credit facility, revise certain covenants and extend the term of the facility.
At June 30, 1999, the Company was in compliance with the covenants contained in
its Credit Agreement.
On March 31, 1999, the Company disposed of its former corporate headquarters for
proceeds of approximately $1.9 million in cash. Effective May 31, 1999, the
Company disposed of the stock of White Knight for proceeds of $8.2 million in
cash. These proceeds were subsequently used to reduce outstanding borrowings
under the Company's Credit Agreement. On July 12, 1999, the Company disposed of
its MedSurg subsidiary and entered into an OREX License and Supply Agreement
with Allegiance Healthcare, for cash proceeds at closing of $31.3 million. A
portion of these proceeds were subsequently used to repay the remaining balance
of the Company's Credit Agreement.
Based upon its current business plan, the Company currently expects that cash
equivalents and short term investments on hand, the Company's existing credit
facility, funds budgeted to be generated from operations and proceeds from sales
of assets will be adequate to meet its liquidity and capital requirements
through 1999. Currently unforeseen future developments and increased working
capital requirements may require additional debt financing or issuance of common
stock in 1999 and subsequent years. There can be no assurances that the Company
could obtain any required additional debt financing or successfully consummate
an issuance of common stock on terms favorable to the Company, if at all.
YEAR 2000 ISSUE
Many companies are affected by the year 2000 issue, which could cause equipment
reliant upon computer applications to fail or create erroneous results due to
the failure of computer programs to correctly identify the year 2000 after
December 31, 1999.
During 1996, as part of a program to install improved information systems on a
Company-wide basis, the Company initiated a conversion from existing management
information software to programs that are year 2000 compliant. The Company's
Microtek operations substantially completed such conversion in September 1998.
The Company's corporate operations substantially completed such conversion in
July 1999. Costs incurred to date for such conversions approximate $8 million of
which $2.5 million have been expensed with $5.5 million representing capital
expenditures. The Company estimates that costs remaining to be incurred before
scheduled completion of such conversion will be approximately $92,000, all of
which are expected to be capitalized. The Company has begun, but not completed,
a program to evaluate year 2000 compliance of non-information technology assets.
The Company has scheduled to complete compliance solutions on such assets by
third quarter 1999, and estimates related costs at less than $200,000. Other
than such costs, the Company does not believe its efforts to become year 2000
compliant will have a material adverse impact upon the Company. Estimated costs
to be incurred and the schedule to become year 2000 compliant are subject to
uncertainties and risks (including, for example, failure to timely identify and
correct non-compliant systems, encountering unanticipated delays or impediments
to conversion and disruptions of ordinary business operations), and the failure
of the Company to complete such conversion within budget and on schedule could
adversely affect the Company.
The Company is not currently aware of any of its customers, product users,
suppliers or other vendors which are non-compliant with year 2000 in a manner
which would have an adverse effect upon the Company or its operations; however,
the Company has not yet completed its inquiries to third parties concerning
their compliance with the year 2000 issue. The Company plans to complete such
inquiries in the third quarter of 1999. The Company continues to evaluate the
potential impact upon the Company of noncompliance with year 2000 issues by
third parties with which the Company deals. The Company's customers are
primarily healthcare institutions or vendors to such institutions.
The Company has not adopted a specific contingency plan to address year 2000
non-compliance issues. The Company's experience in installing replacement
information systems has caused the Company to become familiar with the
consequences of reliance on such technology and short term solutions for
temporary interruptions to such systems. If the Company experiences critical
interruptions to its information systems or technologies, the Company will be
required to engage additional clerical services and would expect to incur
additional distribution expenses which could have a material adverse effect on
the Company's operating results.
The statements made under this caption are Year 2000 Readiness Disclosure under
the Year 2000 Information and Readiness Disclosure Act.
FORWARD LOOKING STATEMENTS
Statements made in this Management's Discussion and Analysis of Financial
Condition and Results of Operations 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 risks described in the Company's
1998 Annual Report including, without limitation, those described under "Risk
Factors - Limited Operating History; Net Losses", "-Risks of New Products",
"-Risks of Planned Divestitures", and "-Manufacturing & Supply Risks".
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's greatest sensitivity on market risk is to changes in the general
level of U.S. interest rates and its effect upon the Company's interest expense.
At June 30, 1999, $13.4 million of the Company's long-term and short-term debt
bears interest at floating rates. Because these rates are variable, an increase
in interest rates would result in additional interest expense and a reduction in
interest rates would result in reduced interest expense.
On July 12, 1999, the Company paid off the remaining long-term and short-term
debt that bears interest at floating rates.
<PAGE>
PART II
OTHER INFORMATION
ITEM 1.
LEGAL PROCEEDINGS
Not applicable.
ITEM 2.
CHANGES IN SECURITIES
During the quarter for which this report is filed, there were no material
modifications in the instruments defining the rights of shareholders. During the
quarter for which this report is filed, none of the rights evidenced by the
shares of the Company's common stock were materially limited or qualified by the
issuance or modification of any other class of securities. During the quarter
for which this report is filed, the Company sold no equity securities of the
Company that were not registered under the Securities Act of 1933, as amended.
ITEM 3.
DEFAULT UPON SENIOR SECURITIES
Not applicable.
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 Commission (the "Commission") and delivered to its shareholders the
Company's Proxy Statement for its Annual Meeting of Shareholders held May 27,
1999 (the "Proxy Statement").
(a) The Company's annual meeting of shareholders was held on May 27, 1999.
(b) The nominees for the Board of Directors of the Company are identified
below.
(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. Election of Directors
NUMBER OF VOTES NUMBER OF VOTES ABSTENTION AND
NOMINEE FOR OFFICE FOR WITHHELD BROKER NONVOTES
------------------ --- -------- ---------------
Gene R. McGrevin 36,071,226 391,397 -0-
Migirdic Nalbantyan 36,100,857 361,766 -0-
Travis W. Honeycutt 36,086,097 376,526 -0-
Rosdon Hendrix 36,062,031 400,592 -0-
Dan R. Lee 36,099,577 363,066 -0-
Kenneth F. Davis 36,074,437 388,186 -0-
John E. McKinley 36,077,582 385,041 -0-
Ronald L. Smorada 36,078,307 384,316 -0-
ii. Adoption of 1999 Long-Term Incentive Plan
FOR AGAINST ABSTENTIONS AND BROKER AND NONVOTES
--- ------- -----------------------------------
34,245,913 1,980,219 236,491
iii. Adoption of 1999 Employee Stock Purchase Plan:
FOR AGAINST ABSTENTIONS AND BROKER AND NONVOTES
--- ------- -----------------------------------
35,233,387 1,074,824 154,412
ITEM 5.
OTHER INFORMATION
None.
ITEM 6.
EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit No. Description
- ----------- -----------
3.1(1) Articles of Incorporation of Isolyser Company, Inc.
3.2(2) Articles of Amendment to Articles of Incorporation of Isolyser Company,
Inc.
3.3(1) Amended and Restated Bylaws of Isolyser Company, Inc.
3.4(3) First Amendment to Amended and Restated Bylaws of Isolyser Company, Inc.
3.5(4) Second Amendment to Amended and Restated Bylaws of Isolyser Company, Inc.
4.1(1) Specimen Certificate of Common Stock
27.1 Financial Data Schedule
- ------------------
(1) Incorporated by reference to the Company's Registration Statement on Form
S-1 (File No. 33-83474).
(2) Incorporated by reference to Exhibit 3.2 of the Company's Annual Report on
Form 10-K for the year ended December 31, 1996.
(3) Incorporated by reference to Exhibit 3.1 to the Company's Current Report on
Form 8-K filed July 29, 1996.
(4) Incorporated by reference to Exhibit 3.1 to the Company's Current Report on
Form 8-K filed December 20, 1996.
(b) No current reports on Form 8-K were filed during the quarter for which this
report is filed; however, the Company filed a current report on Form 8-K on
July 13, 1999 and July 27, 1999.
<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 August 13, 1999.
ISOLYSER COMPANY, INC.
By: /s/ Migirdic Nalbantyan
Migirdic Nalbantyan
President & CEO
(principal executive officer)
By: /s/ Peter A. Schmitt
Peter A. Schmitt
Chief Financial Officer
(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 SIX MONTH PERIOD ENDED JUNE 30, 1999 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> 6-mos
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 4,341
<SECURITIES> 0
<RECEIVABLES> 15,343
<ALLOWANCES> 730
<INVENTORY> 22,588
<CURRENT-ASSETS> 59,197
<PP&E> 21,319
<DEPRECIATION> 12,457
<TOTAL-ASSETS> 95,469
<CURRENT-LIABILITIES> 8,033
<BONDS> 0
0
0
<COMMON> 40
<OTHER-SE> 70,262
<TOTAL-LIABILITY-AND-EQUITY> 95,469
<SALES> 67,020
<TOTAL-REVENUES> 67,020
<CGS> 43,223
<TOTAL-COSTS> 43,223
<OTHER-EXPENSES> 21,663
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,212
<INCOME-PRETAX> 1,004
<INCOME-TAX> 387
<INCOME-CONTINUING> 617
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 617
<EPS-BASIC> 0.02
<EPS-DILUTED> 0.02
</TABLE>
