-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, DJbh49I7HpdBSbtjABU0/UM9avyZMpCiTX8ws+QubJahNhZVmygEZ4db5UV84qrH Cvx1ovssYGBzLc4UjNqB2g== 0000310252-95-000009.txt : 19950614 0000310252-95-000009.hdr.sgml : 19950614 ACCESSION NUMBER: 0000310252-95-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950430 FILED AS OF DATE: 19950613 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: GELMAN SCIENCES INC CENTRAL INDEX KEY: 0000310252 STANDARD INDUSTRIAL CLASSIFICATION: LABORATORY APPARATUS & FURNITURE [3821] IRS NUMBER: 381614806 STATE OF INCORPORATION: MI FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07828 FILM NUMBER: 95546784 BUSINESS ADDRESS: STREET 1: 600 SOUTH WAGNER RD CITY: ANN ARBOR STATE: MI ZIP: 48103-9019 BUSINESS PHONE: 3136650651 MAIL ADDRESS: STREET 1: 600 S WAGNER RD STREET 2: 600 S WAGNER RD CITY: ANN ARBOR STATE: MI ZIP: 48103-9019 FORMER COMPANY: FORMER CONFORMED NAME: GELMAN INSTRUMENT CO DATE OF NAME CHANGE: 19600201 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the quarterly period ended April 30, 1995 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the transition period from __________ to ___________ Commission file number I7828 ---------------- GELMAN SCIENCES INC. ----------------------------------------------------- (Exact name of registrant as specified in its charter) MICHIGAN 38-1614806 - ------------------------------- ---------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 600 South Wagner Road, Ann Arbor, Michigan 48103-9019 ------------------------------------------------------ Address of principal executive offices) (Zip Code) (313) 665-0651 ---------------------------------------------------- (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 and 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 the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. At June 1, 1995, 7,736,939 shares were outstanding of the Company's $.10 par value common stock. 1 GELMAN SCIENCES INC. INDEX
Page PART I. Financial Information Number Item 1. Financial Statements Condensed Consolidated Balance Sheets of April 30, 1995 (Unaudited) and July 31, 1994. . . . . . . . . . . . . . . . . . . . . .3 Condensed Unaudited Consolidated Statements of Operations for the three and nine months ended April 30, 1995 and 1994 . . . . . . . . . . . . . . . . 4 Condensed Unaudited Consolidated Statements of Cash Flows for the nine months ended April 30, 1995 and 1994 . . . . . . . . . . . . . . . . 5 Condensed Notes to Unaudited Consolidated Financial Statements . . . . . . . . . . . . . . . . . 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. . . . . . . . . . . . . . . . . . . . . 7 PART II. Other Information Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . .10 Item 5. Other Information . . . . . . . . . . . . . . . . . . .10 Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . .11 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2 GELMAN SCIENCES INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in Thousands)
April 30, July 31, 1995 1994 ----------- ----------- ASSETS (Unaudited) Current Assets: Cash $ 2,274 $ 1,525 Accounts receivable, less allowances 25,322 20,859 Inventories: Finished products 6,536 5,790 Work in process 1,783 1,555 Raw material and purchased parts 7,280 6,645 ---------- ---------- 15,599 13,990 Other current assets 4,885 3,849 ---------- ---------- Total Current Assets 48,080 40,223 Property, Plant and Equipment 67,650 63,554 Less Allowances for Depreciation (36,117) (34,392) ---------- ---------- 31,533 29,162 Intangibles and Other Assets 2,337 2,302 ---------- ---------- Total Assets $ 81,950 $ 71,687 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Notes payable $ 1,788 $ 1,549 Accounts payable 5,764 5,611 Accrued expenses 8,748 7,784 Current maturities of long-term debt 553 1,829 ---------- ---------- Total Current Liabilities 16,853 16,773 Long-Term Debt, Exclusive of Current Maturities 6,967 21,820 Other Long-Term Liabilities 2,336 2,659 Stockholders' Equity: Preferred stock, par value $1.00 per share Common stock, par value $.10 per share 772 613 Additional capital 34,414 14,055 Retained earnings 21,550 17,092 Translation adjustments (492) (875) Less loan to Employee Stock Ownership Plan (450) (450) ---------- ---------- Total Stockholders' Equity 55,794 30,435 ---------- ---------- Total Liabilities and Stockholders' Equity $ 81,950 $ 71,687 ========== ==========
See Notes To Unaudited Consolidated Financial Statements. 3 GELMAN SCIENCES INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In Thousands, Except Per Share Amounts)
Three Months Ended Nine Months Ended April 30, April 30, ---------------------- ---------------------- 1995 1994 1995 1994 ---------- ---------- ---------- ---------- Net Sales $ 26,893 $ 24,377 $ 75,078 $ 69,953 Cost and Expenses: Cost of products sold 12,825 12,335 36,408 35,366 Selling and administrative 9,528 8,222 26,848 24,521 Research and development 1,366 1,188 3,990 3,514 Other income - net (241) (68) (363) (146) ---------- ---------- ---------- ---------- Operating Earnings 3,415 2,700 8,195 6,698 Interest Expense 311 434 1,193 1,311 ---------- ---------- ---------- ---------- Earnings Before Income Taxes and Extraordinary Item 3,104 2,266 7,002 5,387 Provision For Income Taxes 1,133 784 2,544 1,913 ---------- ---------- ---------- ---------- Earnings Before Extraordinary Item 1,971 1,482 4,458 3,474 Extraordinary Item - Early Extinguishment of Debt - 183 - 183 ---------- ---------- ---------- ---------- Net Earnings $ 1,971 $ 1,299 $ 4,458 $ 3,291 ========== ========== ========== ========== Primary Earnings Per Share Before Extraordinary Item $ 0.26 $ 0.23 $ 0.64 $ 0.56 ========== ========== ========== ========== Primary Earnings Per Share $ 0.26 $ 0.20 $ 0.64 $ 0.53 ========== ========== ========== ========== Weighted Average Common and Common Equivalent Shares Outstanding 7,587 6,353 6,927 6,240 ========== ========== ========== ==========
See Notes To Unaudited Consolidated Financial Statements. 4 GELMAN SCIENCES INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in Thousands)
Nine Months Ended April 30 ----------------------- 1995 1994 ----------- ----------- Operating Activities Net earnings $ 4,458 $ 3,291 Loss (gain) on disposal of assets 54 (211) Extraordinary item - 295 Depreciation and amortization 3,288 3,188 Increase in inventories (1,228) (1,404) Increase in accounts receivable (3,867) (3,872) Increase in other current assets (948) (153) Increase (decrease) in current liabilities 927 (479) Decrease in liabilities for environmental activities (515) (960) Tax benefit from exercised stock options 394 482 Other 92 48 ---------- ---------- Net Cash Provided by Operating Activities 2,655 225 Financing Activities Net proceeds from issuance of common stock 19,424 - Long-term debt borrowings 22,353 26,591 Principal payments on long-term debt (38,480) (23,061) Proceeds from exercised stock options 682 782 ---------- ---------- Net Cash Provided by Financing Activities 3,979 4,312 Investment Activities Capital expenditures (5,536) (5,050) Proceeds from sale of assets 25 470 Increase in intangibles and other assets (143) (368) Payment of note receivable - common stock - 895 ---------- ---------- Net Cash Used in Investment Activities (5,654) (4,053) Effects of Exchange Rate Changes on Cash (231) 75 ---------- ---------- Net change in cash during the period 749 559 Cash at beginning of period 1,525 1,142 ---------- ---------- Cash at end of period $ 2,274 $ 1,701 ========== ==========
See Notes To Unaudited Consolidated Financial Statements. 5 GELMAN SCIENCES INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS General In the opinion of the Company, the accompanying unaudited consolidated financial statements contain all adjustments (which are of a normal recurring nature) necessary to present fairly the financial position of Gelman Sciences Inc. and subsidiaries as of April 30, 1995, and the results of their operations and cash flows for the three months and nine months ended April 30, 1995 and 1994. These financial statements should be read in conjunction with the financial statements and notes set forth in the Company's Annual Report and Form 10-K for the year ended July 31, 1994. The results of operations for the three months and nine months ended April 30, 1995 and 1994 are not necessarily indicative of the results of the full year. Public Offering During the quarter, the Company issued 1,437,500 shares of common stock at a price of $14.625 per share in a public common stock offering. The net proceeds of $19.4 million were used to repay a term note payable to NBD Bank N.A. and to reduce outstanding indebtedness under the Company's Credit Agreement. Pollution Related Matters The Company has settled several law suits related to groundwater contamination and has begun remediation activities. The remediation plan requires the Company to treat the groundwater to the extent necessary to reduce contaminants to a defined level. Management estimates that remediation will take eight years. Total costs to the Company of pollution related activities will be dependent upon the efficacy and duration of the remediation plan and obtaining a cost free repository for treated groundwater. The ultimate costs to be incurred could exceed the amount provided of $840,000 at April 30, 1995. However, it is the opinion of management that these additional costs, if any, will not have a material adverse effect on the Company's operations because the cash outflows would be spread over many future years. Extraordinary item The extraordinary item in fiscal 1994 resulted from the redemption of 7.98% Industrial Development Revenue Bonds issued in 1989. The redemption was funded by the issuance of 1994 Industrial Development Revenue Bonds in the amount equal to the principal balance of the 1989 Bonds of $5.1 million. The Company recorded a charge of $295,000 net of $112,000 tax benefit or $.03 per share to write-off deferred finance charges and record a redemption premium and fees related to the 1989 Bonds. 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Comparison of Nine months ended April 30, 1995 and 1994 Net Sales for the nine months ended April 30, 1995 increased by $5.1 million or 7.3% to $75.1 million as compared to net sales of $70.0 million for the nine months ended April 30, 1994. Net sales for the nine months ended April 30, 1994 included non-recurring sales of $3.7 million related to the Company's Australian non-core product lines that have been divested. Net sales for the nine months ended April 30, 1995 were favorably affected by the weakened U.S. dollar, which increased reported sales by $1.5 million. The Company's sales growth, adjusted for these items, was 11.1%. Sales to customers in North, Central and South America increased 9.8% over the same period of the prior fiscal year primarily due to a 28.8% increase in sales of medical devices. Sales to customers in Europe increased 12.7%, mainly due to increases in sales of process filtration products in Italy and France. Sales to customers in the Asia/Pacific region declined 11.6% as a result of the divestiture of the Australian non-core product lines. Without the effect of these sales, Asia/Pacific sales would have increased 39.4%, primarily attributable to increases in sales of process filtration products in Japan and Korea. Worldwide sales of laboratory products, process filtration products and medical devices increased 9.5%, 21.7% and 24.0%, respectively. Worldwide sales of microporous membranes decreased 4.0% as a result of a special shipment to a single customer in the first half of fiscal 1994. Without the effect of this shipment, sales of microporous membrane would have increased 9.9%. Gross profit increased $4.1 million or 11.8% to $38.7 million in the nine months ended April 30, 1995, as compared to $34.6 million in the nine months ended April 30, 1994. As a percentage of net sales, gross profit increased to 51.5% from 49.4%. The improvement in gross margin is primarily attributable to the divestiture of the lower margin non- core product lines and improved operating efficiencies, which was partially offset by a less favorable product mix due to lower membrane sales as a percentage of total sales. Selling and administrative expense increased by $2.3 million or 9.5% to $26.8 million in the nine months ended April 30, 1995, compared to $24.5 million in the nine months ended April 30, 1994. The increase in selling and administrative expense was primarily due to efforts in selling and promotional activity in accordance with the Company's growth strategy. Research and development expense increased by $476,000 or 13.5% to $4.0 million in the nine months ended April 30, 1995, compared to $3.5 million in the nine months ended April 30, 1994. As a percentage of net sales, these expenses were 5.3% and 5.0%, respectively. The higher research and development spending is a result of an increased effort to develop and modify products to meet customer requirements. 7 The effective tax rate for each of the nine months ended April 30,1995 and 1994 was 36.3% and 35.5%, respectively. The higher tax rate reflects a greater percentage of income from subsidiaries with higher corporate tax rates in fiscal 1995. Net earnings increased $1,167,000 or 35.5% to $4.5 million or $.64 per share for the nine months ended April 30, 1995, compared to $3.3 million or $.53 per share for the nine months ended April 30, 1994. Earnings for fiscal 1994 included the extraordinary item plus the gain on sale of Australian assets. Excluding the effect of these two non- recurring items, net earnings would have increased 32.4%. Comparison of Three Months ended April 30, 1995 and 1994 Net sales for the third quarter ended April 30, 1995 increased by 10.3% to $26.9 million as compared to $24.4 million for the third quarter of fiscal 1994. The third quarter sales for fiscal 1994 were affected by the non-recurring sales discussed under the nine month sales comparison in the amount of $700,000. The third quarter fiscal 1995 sales were favorably affected by the weakened U.S. dollar, which increased reported sales by $658,000. The Company's sales growth for the third quarter of fiscal 1995 versus the same period last fiscal year, adjusted for the non-recurring sales and the fluctuation in foreign currency, was 10.8%. Worldwide sales of laboratory products, process filtration products and medical devices increased 6.6%, 25.5% and 24.9%, respectively, as compared to the third quarter of fiscal 1994. The growth in laboratory and process filtration products has been mainly in the international markets. Medical devices increased mainly in the American market in the intravenous therapy applications. Membrane sales increased 3.2%. Gross profit increased $2.0 million or 16.8% to $14.1 million in the three months ended April 30, 1995, as compared to $12.1 million in the three months ended April 30, 1994. As a percentage of net sales, gross profit increased to 52.3% from 49.4%. The improvement in gross margin is primarily attributable to capacity utilization and manufacturing efficiency improvements, partially offset by a less favorable product mix due to lower membrane sales as a percentage of sales. Other income - net, increased to $241,000 for the three months ended April 30, 1995 mainly due to exchange gains on foreign currency transactions recorded net of hedging contracts. Other income - net, for the three months ended April 30, 1994 included $108,000 gain on the sale of Australian assets relating to the divested product lines. Net earnings increased $672,000 or 51.7% to $2.0 million or $.26 per share for the three months ended April 30, 1995, compared to $1.3 million or $.20 per share for the three months ended April 30, 1994. Earnings for the third quarter fiscal 1994 included the two non- recurring items mentioned in the nine month discussion. Excluding the effect of these two non-recurring items, net earnings would have increased 43.4%. Fiscal 1995 earnings per share includes the effect of the recently completed secondary public offering of 1,437,500 shares of common stock. The weighted average shares for the third quarter of fiscal 1995 and 1994 were 7.6 million and 6.4 million, respectively. 8 Liquidity and Capital Resources For the nine months ended April 30, 1995, the Company generated cash from operations in the amount of $2.7 million. Finance activities include the issuance, during the third quarter, of 1,437,500 shares of common stock at a price of $14.625 per share in a public common stock offering. The net proceeds of $19.4 million were used to repay a $4 million term note payable to NBD Bank N.A. and to reduce outstanding indebtedness under the Company's Credit Agreement in the amount of $12.1 million. The remainder of the net proceeds plus the cash provided from operations were used to fund capital expenditures of $5.7 million. Working capital at April 30, 1995 and July 31, 1994 was $31.2 million and $23.4 million, respectively. The increase in working capital is attributed mainly to higher levels of trade receivables. The higher level of sales in the last two months of the third quarter compared to the fourth quarter of fiscal 1994 plus the increased volume of international sales which have longer collection periods have affected trade receivables. Also increasing working capital is the reduction in current maturities of long term debt of $1.3 million due to the repayment of the term note mentioned above. At April 30, 1995, the Company's unused portion of its Credit Agreement was $21.2 million. During the quarter, the Company settled its interest rate swap agreement on $5 million notional amount at a gain of $48,000. The gain has been deferred and will be reflected as adjustments to interest expense over the appropriate periods relevant to the agreement. 9 PART II. OTHER INFORMATION Item 1. Legal Proceedings The Company is involved in various legal actions in the normal course of business. In addition, the Company is currently a party to various legal actions arising under statutes regulating the discharge of materials into or otherwise protecting the environment. These have been described in the Company's 1994 Annual Report and Item 1. "Environmental Regulations" and Item 3. "Legal Proceedings" of the Company's Form 10-K for the year ended July 31, 1994, and Item 1. "Legal Proceedings of Part II of the Company's Forms 10-Q for the quarters ended October 31, 1994, and January 31, 1995. The following sets forth these environmental matters to the extent any material developments have occurred since the filing of the Company's Form 10-Q for the quarter ended January 31, 1995. "Thermo Chem" Superfund Site, Muskegon, Michigan. By correspondence dated January 2, 1992, the United States Environmental Protection Agency ("USEPA") identified the Company as a potentially responsible party ("PRP") under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA") for past and future response costs in connection with the Thermo Chem Superfund site, a waste chemical reclamation and disposal site. The USEPA issued an Administrative Order mandating remediation of the site to a number of generator PRPs. On July 22, 1994, the Company and the USEPA entered into a settlement agreement under which the Company agreed to pay $124,100. A consent order based on that agreement became effective February 8, 1995. Payment was made on March 10, 1995. Item 5. OTHER INFORMATION. On March 18, 1995, Kim A. Davis, President and Chief Operating Officer of the Company, was elected a Director of the Company by the Board of Directors. Effective June 16, 1995, James J. Fahrner has resigned as Chief Financial Officer and Vice President, Finance, of the Company to take a position with an acquisition-oriented company. On June 5, 1995, Karen A. Radtke was appointed Treasurer of the Company. 10 Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits (4) Instruments Defining the Rights of Security Holders (1) Pursuant to 17 CFR 229.601(b)(4)(iii), instruments with respect to long-term debt issues have been omitted where the amount of securities authorized under each instrument does not exceed 10% of the total consolidated assets of the Company. The Company hereby agrees to furnish a copy of each such instrument to the Commission upon its request. (11) Statement re computation of per share earnings for the three and nine months ended April 30, 1995 and 1994. (b) Reports on Form 8-K No reports on Form 8-K were filed during the fiscal quarter ended April 30, 1995. 11 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant had duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. GELMAN SCIENCES INC. ------------------------------------ (Registrant) Date: June 12, 1995 /s/ Charles Gelman --------------------------------------- Charles Gelman, Chairman of the Board and Chief Executive Officer Date: June 12, 1995 /s/ James J. Fahrner --------------------------------------------- James J. Fahrner, Vice President, Finance and Chief Financial Officer 12 Exhibit Index
Page Exhibit Description Number - --------- ----------- ------ (4) Instruments Defining the Rights of Security Holders (1) Pursuant to 17 CFR 229.601(b)(4)(iii), instruments with respect to long-term debt issues have been omitted where the amount of securities authorized under each instrument does not exceed 10% of the total consolidated assets of the Company. The Company hereby agrees to furnish a copy of each such instrument to the Commission upon its request. (11) Statement re computation of per share earnings for the three and nine months ended April 30, 1995 and 1994. (27) Financial Data Schedule
13 EX-11 2 Exhibit 11 Computation of Earnings Per Common Share Primary and Fully Diluted
Three Months Ended Nine Months Ended April 30 April 30 ---------------------------------------------- 1995 1994 1995 1994 ----------- ----------- ----------- ---------- Net income for computing primary and fully diluted earnings per common share $1,971,000 $1,299,000 $4,458,000 $3,291,000 Primary shares Weighted average number of common shares outstanding 7,211,448 5,736,974 6,519,800 5,682,149 Additions from assumed exercise of stock options and warrants 375,919 615,930 407,171 557,387 ---------- ---------- ---------- ---------- Weighted average of common and common equivalent shares 7,587,367 6,352,904 6,926,971 6,239,535 =========== =========== =========== ========== Fully diluted shares Weighted average number of common shares outstanding 7,211,448 5,736,974 6,519,800 5,682,149 Additions from assumed exercise of stock options and warrants 418,442 615,930 421,345 615,930 ---------- ---------- ---------- ---------- Weighted average of common and common equivalent shares 7,629,890 6,352,904 6,941,145 6,298,079 =========== =========== =========== ========== Net income per common share Primary $0.26 $0.20 $0.64 $0.53 =========== =========== =========== ========== Fully diluted $0.26 $0.20 $0.64 $0.53 =========== =========== =========== ==========
Primary additions from assumed exercise of stock options and warrants is net of assumed purchase of common shares at the average market price during the period. Fully diluted earnings per share was determined in the same manner except that the greater of period end or period average stock price was used. EX-27 3
5 This schedule contains summary financial information extracted from (a) Gelman Sciences Inc. Statement of Operations and Consolidated Statement of Cash Flow for the nine months ended April 30, 1995 and the Consolidated Balance Sheet as of April 30, 1995 and is qualified in its entirety by reference to such (b) Form 10-Q for the third quarter ended April 30, 1995. 9-MOS JUL-31-1995 APR-30-1995 2,274 0 26,318 996 15,599 48,080 67,650 36,117 81,950 16,853 9,303 772 0 0 55,022 81,950 75,078 75,078 36,408 36,408 30,269 206 1,193 7,002 2,544 4,458 0 0 0 4,458 .64 .64
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