UNITED STATES
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 The Quarterly Period Ended December 31, 2003
Commission File Number 001-11091
APOGENT TECHNOLOGIES INC.
(Exact name of registrant as specified in its charter)
| Wisconsin | 22-2849508 | |
| (State or other jurisdiction of Incorporation or organization) | (I.R.S. Employer Identification No.) |
30 Penhallow Street, Portsmouth, New Hampshire 03801
(Address of principal executive offices, including zip code)
(603) 433-6131
(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 the past 90 days. YES x NO ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YES x NO ¨
At February 9, 2004, there were 88,545,131 shares of the Registrant’s Common Stock, par value $0.01 per share, outstanding.
APOGENT TECHNOLOGIES INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED DECEMBER 31, 2003
TABLE OF CONTENTS
APOGENT TECHNOLOGIES INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except share and per share data)
(unaudited)
| December 31, 2003 |
September 30, 2003 |
|||||||
| Assets | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 12,996 | $ | 18,505 | ||||
| Marketable securites—available for sale |
15,169 | 17,625 | ||||||
| Accounts receivable (less allowance for doubtful accounts of $3,941 and $4,286 respectively) |
172,136 | 179,523 | ||||||
| Inventories |
211,484 | 206,549 | ||||||
| Deferred income taxes |
15,308 | 15,308 | ||||||
| Prepaid expenses and other current assets |
18,798 | 16,518 | ||||||
| Total current assets |
445,891 | 454,028 | ||||||
| Property, plant and equipment, net |
278,789 | 282,752 | ||||||
| Intangible assets, net |
177,802 | 179,492 | ||||||
| Goodwill |
1,009,072 | 999,243 | ||||||
| Other assets |
41,266 | 34,476 | ||||||
| Total assets |
$ | 1,952,820 | $ | 1,949,991 | ||||
| Liabilities and Shareholders’ Equity | ||||||||
| Current liabilities: |
||||||||
| Short-term debt and overdrafts |
$ | 12,001 | $ | 12,801 | ||||
| Current portion of long-term debt |
2,259 | 2,281 | ||||||
| Accounts payable |
40,484 | 50,220 | ||||||
| Income taxes payable |
25,873 | 20,053 | ||||||
| Accrued payroll and employee benefits |
32,470 | 34,484 | ||||||
| Accrued interest expense |
3,646 | 8,844 | ||||||
| Restructuring reserve |
3,076 | 1,758 | ||||||
| Other current liabilities |
36,178 | 38,883 | ||||||
| Total current liabilities |
155,987 | 169,324 | ||||||
| Long-term debt, less current portion |
962,444 | 891,989 | ||||||
| Deferred income taxes |
143,183 | 137,683 | ||||||
| Other liabilities |
27,881 | 26,948 | ||||||
| Commitments and contingent liabilities |
— | — | ||||||
| Shareholders’ equity: |
||||||||
| Preferred stock, $0.01 par value; authorized 20,000,000 shares |
— | — | ||||||
| Common stock, $0.01 par value; authorized 250,000,000 shares; issued 107,057,865 shares; outstanding 87,534,709 and 92,013,345 shares, respectively |
1,071 | 1,071 | ||||||
| Equity rights, 50 rights at $1.09 per right |
— | — | ||||||
| Additional paid-in capital |
269,010 | 270,119 | ||||||
| Retained earnings |
765,550 | 737,045 | ||||||
| Accumulated other comprehensive income (loss) |
12,640 | (3,127 | ) | |||||
| Treasury common stock, 19,523,156 and 15,044,520 shares at cost |
(384,946 | ) | (281,061 | ) | ||||
| Total shareholders’ equity |
663,325 | 724,047 | ||||||
| Total liabilities and shareholders’ equity |
$ | 1,952,820 | $ | 1,949,991 | ||||
See accompanying notes to the unaudited consolidated financial statements.
1
APOGENT TECHNOLOGIES INC. AND SUBSIDIARIES
Consolidated Statements of Income
(in thousands, except per share data)
(unaudited)
| Three Months Ended December 31, |
||||||||
| 2003 |
2002 |
|||||||
| Net sales |
$ | 278,642 | $ | 257,798 | ||||
| Cost of sales: |
||||||||
| Cost of products sold |
147,988 | 132,957 | ||||||
| Restructuring charges |
145 | — | ||||||
| Total cost of sales |
148,133 | 132,957 | ||||||
| Gross profit |
130,509 | 124,841 | ||||||
| Selling, general and administrative expenses |
71,656 | 68,630 | ||||||
| Restructuring charges and asset impairments |
4,415 | — | ||||||
| Total selling, general and administrative expenses |
76,071 | 68,630 | ||||||
| Operating income |
54,438 | 56,211 | ||||||
| Other income (expense): |
||||||||
| Interest expense, net |
(8,824 | ) | (10,411 | ) | ||||
| Amortization of deferred financing fees |
(1,323 | ) | (912 | ) | ||||
| Loss on extinguishment of debt |
(171 | ) | — | |||||
| Other, net |
355 | 491 | ||||||
| Income from continuing operations before income taxes |
44,475 | 45,379 | ||||||
| Income taxes |
16,011 | 16,564 | ||||||
| Income from continuing operations |
28,464 | 28,815 | ||||||
| Discontinued operations, net of income taxes |
41 | (82 | ) | |||||
| Net income |
$ | 28,505 | $ | 28,733 | ||||
| Basic earnings per common share from continuing operations |
$ | 0.31 | $ | 0.27 | ||||
| Discontinued operations |
0.00 | (0.00 | ) | |||||
| Basic earnings per common share |
$ | 0.31 | $ | 0.27 | ||||
| Diluted earnings per common share from continuing operations |
$ | 0.31 | $ | 0.27 | ||||
| Discontinued operations |
$ | 0.00 | (0.00 | ) | ||||
| Diluted earnings per common share |
$ | 0.31 | $ | 0.27 | ||||
| Weighted average basic shares outstanding |
90,729 | 105,719 | ||||||
| Weighted average diluted shares outstanding |
92,039 | 107,010 | ||||||
See accompanying notes to the unaudited consolidated financial statements.
2
APOGENT TECHNOLOGIES INC. AND SUBSIDIARIES
Consolidated Statement of Shareholders’ Equity
For the Three Months Ended December 31, 2003
(in thousands)
(unaudited)
| Common Stock |
Equity Rights |
Additional Paid-In Capital |
Retained Earnings |
Accumulated Other Comprehensive Income (Loss) |
Treasury Common Stock |
Total Shareholders’ Equity |
|||||||||||||||||||
| Balance at September 30, 2003 |
$ | 1,071 | $ | — | $ | 270,119 | $ | 737,045 | $ | (3,127 | ) | $ | (281,061 | ) | $ | 724,047 | |||||||||
| Comprehensive income: |
|||||||||||||||||||||||||
| Net income |
— | — | — | 28,505 | — | — | 28,505 | ||||||||||||||||||
| Translation adjustment |
— | — | — | — | 17,296 | — | 17,296 | ||||||||||||||||||
| Unrealized loss on marketable security net of tax of $927 |
— | — | — | — | (1,529 | ) | — | (1,529 | ) | ||||||||||||||||
| Total comprehensive income |
— | — | — | 28,505 | 15,767 | — | 44,272 | ||||||||||||||||||
| Treasury shares purchased |
— | — | — | — | — | (109,542 | ) | (109,542 | ) | ||||||||||||||||
| Shares issued in connection with stock options |
— | — | (2,134 | ) | — | — | 5,657 | 3,523 | |||||||||||||||||
| Tax benefit related to stock options |
— | — | 1,025 | — | — | — | 1,025 | ||||||||||||||||||
| Balance at December 31, 2003 |
$ | 1,071 | $ | — | $ | 269,010 | $ | 765,550 | $ | 12,640 | $ | (384,946 | ) | $ | 663,325 | ||||||||||
See accompanying notes to the unaudited consolidated financial statements.
3
APOGENT TECHNOLOGIES INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
| Three months ended December 31, |
||||||||
| 2003 |
2002 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net income |
$ | 28,505 | $ | 28,733 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Discontinued operations |
(41 | ) | 82 | |||||
| Depreciation |
11,584 | 10,604 | ||||||
| Amortization |
5,223 | 4,848 | ||||||
| Gain on sale of property plant and equipment |
25 | (36 | ) | |||||
| Asset impairments |
2,156 | — | ||||||
| Loss on extinguishment of debt |
171 | — | ||||||
| Deferred income taxes |
5,500 | — | ||||||
| Changes in assets and liabilities, net of effects of businesses acquired: |
||||||||
| Decrease in accounts receivable |
9,634 | 16,657 | ||||||
| Increase in inventories |
(1,915 | ) | (12,784 | ) | ||||
| Increase (decrease) in prepaid expenses and other current assets |
(1,965 | ) | 634 | |||||
| Decrease in accounts payable |
(10,349 | ) | (7,067 | ) | ||||
| Increase (decrease) in income taxes payable |
4,045 | |||||||