-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KR010AF0J0BV26Fm7dHcy4ptjN3jjO58q6H549NrBPAZUJyiWWyUOrPkQ146itbI QXhu7AVOWgxSgmjVxr2asA== 0000950116-99-000559.txt : 19990330 0000950116-99-000559.hdr.sgml : 19990330 ACCESSION NUMBER: 0000950116-99-000559 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990329 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEW BRUNSWICK SCIENTIFIC CO INC CENTRAL INDEX KEY: 0000071241 STANDARD INDUSTRIAL CLASSIFICATION: LABORATORY APPARATUS & FURNITURE [3821] IRS NUMBER: 221630072 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-06994 FILM NUMBER: 99576823 BUSINESS ADDRESS: STREET 1: 44 TALMADGE RD STREET 2: PO BOX 4005 CITY: EDISON STATE: NJ ZIP: 08818-4005 BUSINESS PHONE: 9082871200 MAIL ADDRESS: STREET 1: 44 TALMADGE ROAD STREET 2: PO BOX 4005 CITY: EDISON STATE: NJ ZIP: 08818-4005 10-K405 1 FORM 10-K405 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K 405 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 1998 Commission File Number 0-6994 NEW BRUNSWICK SCIENTIFIC CO., INC. (Exact name of registrant as specified in its charter) New Jersey 22-1630072 - ------------------------ -------------------------------------- (State of incorporation) (I.R.S. Employer Identification Number) 44 Talmadge Road, Edison, N.J. 08818-4005 ------------------------------------------- (Address of principal office) Registrant's telephone number: (732) 287-1200 ---------------- Securities registered pursuant to Section 12(b) of the Act: - ----------------------------------------------------------- Name of each exchange Title of each class on which registered --------------------- ---------------------- None N/A Securities registered pursuant to Section 12(g) of the Act: - ----------------------------------------------------------- Title of class -------------- Common stock - par value $0.0625 Common stock Purchase Rights 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. The aggregate market value of the voting stock held by non-affiliates of the registrant was $18,798,230 as of February 10, 1999. This figure was calculated by reference to the high and low prices of such stock on February 10, 1999. The number of shares outstanding of the Registrant's Common stock as of February 10, 1999: 4,770,444 ----------- DOCUMENTS INCORPORATED BY REFERENCE Registrant's Proxy Statement and Annual Report to be filed within 120 days after the end of the fiscal year 1998, are incorporated in Part III herein. The EXHIBITS INDEX is on Page 44. PART I Item 1. BUSINESS New Brunswick Scientific Co., Inc. and its subsidiaries ("NBS" or "the Company") design, manufacture and market a variety of equipment used in biotechnology to create, maintain, measure and control the physical and biochemical conditions required for the growth and detection of microorganisms. This equipment is used in medical, biological, chemical, and environmental research and for the commercial development of antibiotics, proteins, hormones, enzymes, monoclonal antibodies, agricultural products, fuels, vitamins, vaccines and other substances. The equipment sold by NBS includes fermentation equipment, bioreactors, biological shakers, nutrient sterilizing and dispensing equipment, low temperature freezers and tissue culture apparatus. DGI BioTechnologies, LLC. (DGI) was established in 1995 by the Company to develop and commercialize a novel technology, the Diogenesis(TM) process, that facilitates the discovery of new drugs. DGI is more than eighty percent (80%) owned and fully funded by the Company and occupies specially designed laboratory space at the Company's headquarters facility in Edison, New Jersey. Diogenesis(TM) is being developed to provide the pharmaceutical and biotechnology industries with site-directed assay systems to rapidly generate small, orally available, organic drug leads. Unlike other techniques, leads generated by DGI's process will uniformly possess the defining characteristics of effective drugs: activity, selectivity and affinity for the biological target. DGI has applied for U.S. and foreign patents covering its proprietary drug lead discovery technology which utilizes state-of-the-art molecular-biological and immunological tools to scan known pharmaceutical targets in a manner that offers major advantages over existing drug discovery approaches. DGI's strategy is to enter into partnership agreements with multiple pharmaceutical and/or biotechnology companies whereby DGI will generate focused libraries of small molecule compounds known to be active against the partner's target. DGI will generate revenues from research on behalf of corporate partners, milestone payments for the identification of leads and product royalties. The founders of DGI hold options which can be exercised under certain conditions and the employees, certain consultants and the Board of Managers have been issued options, which if exercised, in the aggregate represent approximately 13.3% of DGI. NBS was incorporated in 1958 as the successor to a business founded in 1946 by David and Sigmund Freedman, its principal stockholders and two of its directors and executive officers. The Company owns its 243,000 square foot headquarters and primary production facility located on 17 acres of land in Edison, New Jersey. Products Fermentation Equipment and Bioreactors. A fermentor is a device used to create, maintain and control the physical, chemical, and biochemical environmental conditions required for growing bacteria, yeast, fungi and other similar microorganisms. Bioreactors serve an identical purpose for the propagation of animal and plant cells. The Company's fermentors and bioreactors range in size from small research models to large systems that are used in cGMP production facilities. The larger systems are typically sold under contract. The number of larger systems sold in any reporting period may materially affect the sales and profitability of the Company. NBS has supplied fermentors and bioreactors to universities, biotechnology and pharmaceutical company laboratories since the 1950's. NBS' fermentors and bioreactors are being used for applications which have received increased attention in the scientific and commercial community; namely, applications using microorganisms engineered by recombinant DNA techniques; immunology; and the production of monoclonal antibodies. Animal and plant cells as well as bacteria and viruses are usually grown on a small scale for research purposes. As the process is scaled up (i.e., replicated, using larger volumes), physical and chemical parameters, such as pH, vessel pressure and chemical composition may change, and the equipment used may require increasingly sophisticated control systems. Scale-up, which is one of the important uses of the Company's pilot scale systems is a complex technical procedure critical to successful commercialization of biological processes. Pilot scale systems may be used to set parameters or to determine the feasibility of production at greater volumes, depending upon the goal of the customer. Particularly in the area of bioreactors, the Company has developed unique designs and has applied for patents to protect its technology. The Company's fermentors and bioreactors -2- incorporate sophisticated instrumentation systems to measure, record and control a multiplicity of process variables. The Company manufactures digital instrumentation for control of fermentors and bioreactors. This instrumentation significantly enhances the utility of any size fermentor or bioreactor. Consisting of an operator display and a series of microprocessor-controlled instrument modules, this control unit uses software developed by the Company to simplify the operation of fermentors and bioreactors while enhancing their performance. It automatically monitors, displays, analyzes, and makes immediately available, data concerning the culture process and permits automatic modification of the various growth conditions without the need of a host computer. This system is designed to replace manually operated controls as well as more complex and more costly automatic systems. Since maintenance of pure culture conditions is critical for the proper functioning of fermentors and bioreactors, NBS offers devices and procedures which it has developed for sterilizing its systems and maintaining an aseptic environment over long operating periods. NBS designs, manufactures and sells benchtop and pilot scale fermentors that are sterilizable in place. Although significantly more expensive than other models, these devices eliminate the need to move the fermentor from its place of use for sterilization. Biological Shakers. Biological shakers perform a function similar to fermentors and bioreactors, as they are also used in the process of propagating biological cultures. Shakers agitate flasks under controlled conditions containing biological cultures in a liquid media in which nutrients are dissolved. Nutrients are the source of energy needed for growth, while shaking furnishes the dissolved oxygen needed to permit life processes to take place within the microorganism. NBS Shakers are in worldwide use in biological laboratories for research, development, and in some cases, for production of various medical, biological and chemical products. In addition, shakers are widely used in microbiological and recombinant DNA research. -3- The Company manufactures an extensive line of biological shakers ranging in size from portable laboratory benchtop models to large multitier industrial machines. Some models of the Company's shakers are designed to agitate flasks under controlled environmental conditions of temperature, atmosphere and light. Each shaker incorporates a variable speed regulator and may be equipped to accommodate flasks of various sizes. To permit culture growth under constant and reproducible conditions, shakers manufactured by NBS are precision engineered and manufactured to agitate flasks uniformly and continuously over prolonged periods. The Company currently manufactures three distinct lines of shakers. Its INNOVA(R) line, which is its most sophisticated shaker, its original Gyrotory(R) shaker line, and, its "Classic" Line, which was introduced in early 1997. The Classic line is intended primarily for sale to distributors and is expected to supercede the original Gyrotory(R) line in the near future. Nutrient Sterilizing and Dispensing Equipment. The Company manufactures devices that automatically sterilize biological nutrients and then maintain those nutrients at the required temperature for subsequent use. As a complement to its nutrient sterilizers, NBS sells an apparatus which automatically fills culture dishes with sterile nutrient. Tissue Culture Apparatus. The Company manufactures apparatus to rotate bottles and test tubes slowly and constantly for the purpose of growing animal and plant cells. Certain models of this apparatus may be placed into an incubator and equipped to regulate the speed of rotation. The Company also markets carbon dioxide incubators used in the propagation of tissue cultures. This apparatus has applications in vaccine production, cancer and heart disease research, and the commercial production of pharmaceuticals. Other Scientific Products. NBS distributes a line of centrifuges for separating cells from fermentation broth, and a line of low temperature freezers. Product Development NBS designs and develops substantially all the products it sells. Its personnel, who include biochemical, electrical, chemical, mechanical, electronic and software engineers as well as scientists and technical support staff, formulate plans and concepts for new products and improvements or modifications to existing products. The Company develops specialized software for use with its computer-coupled systems and the microprocessor-controlled instrumentation systems for shakers, fermentors and bioreactors. Manufacturing Manufacturing is conducted according to planning and production control procedures primarily on a lot production basis rather than on an assembly line. NBS fabricates its parts from purchased raw materials and components and produces most of its subassemblies. These parts, components and subassemblies are carried in inventory in anticipation of projected sales and are then assembled into finished products according to production schedules. In general, manufacturing is commenced in anticipation of orders. The manufacturing processes for the Company's products range from two weeks to many months, -4- depending upon the product size, complexity and quantity. However, a substantial portion of orders received are for items in the process of being manufactured or in inventory. The raw materials used by the Company include stainless steel, carbon steel, copper, brass, aluminum and various plastics. Some components are purchased from others, including pumps, compressors, plumbing fittings, electrical and electronic components, gauges, meters, motors, glassware and general purpose hardware. Many of these components are built to the Company's specifications. NBS is not dependent upon any single supplier for any raw material or component, but delay in receipt of key components can affect the manufacturing schedule. The Company's products are designed to operate continuously over long periods with precision and regularity so that research and production may be conducted under controlled, constant and reproducible conditions. The Company manufactures its products from materials which it selects as having characteristics necessary to meet its requirements. In addition, to ensure that its manufacturing processes result in products meeting exacting specifications and tolerances, NBS follows rigorous inspection procedures. NBS maintains a Quality Assurance Department which is responsible for inspecting raw materials and parts upon arrival at its plant as well as inspecting products during manufacture. It also tests every piece of equipment prior to shipment. NBS' products are serviced at its plant and at its customers' premises by Company technicians, distributors' technicians or, in the case of minor repairs, by sales personnel. Marketing and Sales The Company sells its equipment to pharmaceutical companies, agricultural and chemical companies, other industrial customers engaged in biotechnology, and to medical schools, universities, research institutes, hospitals, private laboratories and laboratories of Federal, State and Municipal government departments and agencies in the United States. While only a small percentage of the Company's sales are made directly to United States government departments and agencies, its domestic business is significantly affected by government expenditures and grants for research to educational research institutions and to industry. The Company regularly evaluates credit granted to customers and generally requires progress payments for the purchase of custom bioprocess equipment. NBS also sells its equipment, both directly and through scientific equipment dealers, to foreign companies, institutions, and governments. The major portion of its foreign sales are made in Canada, Western Europe, the Middle East, China, Japan and Australia. NBS also sells its products in the former Soviet Union, Eastern Europe, Africa, other Asian countires and Latin America. These sales may be substantially affected by changes in the capital investment policies of foreign governments, or by the availability of hard currency. Fisher Scientific is the exclusive U.S. distributor of the Company's Classic line of biological shakers. While Fisher is the exclusive U.S. distributor for these NBS Shakers and media preparation equipment, NBS markets and sells its shakers and other products on a direct basis as well. Fisher also distributes a few selected INNOVA models. For information concerning net sales in the United States and foreign countries, income (loss) from operations derived therefrom, identifiable -5- assets located in the United States and foreign countries, and export sales for each of the three years ended December 31, 1998, see Note 9 of Notes to Consolidated Financial Statements under the heading "Operations by Geographic Areas." Export sales consist of all sales by the Company's Domestic Operations to customers located outside the United States. Hence, foreign sales include export sales. Substantially all of the orders of the Company's domestic operations, including export orders are booked in United States dollars and are payable promptly upon delivery of the equipment. The Company's wholly owned European subsidiaries book orders for equipment in local currencies and in some instances in U.S. dollars. The assets and liabilities of the Company's European subsidiaries are valued in local currencies. Fluctuations in exchange rates between those currencies and the dollar have had an impact upon the Company's consolidated financial statements, as measured in United States dollars. Export sales are influenced by changes in the exchange rate of the dollar as those changes affect the cost of the Company's equipment to foreign purchasers. Certain countries, particularly those in Eastern Europe and the former Soviet Union, may not be able to make substantial capital purchases in dollars for economic or political reasons. NBS maintains five European sales offices through wholly-owned subsidiaries, New Brunswick Scientific (U.K.) Limited in England, NBS Benelux B.V. in The Netherlands, New Brunswick Scientific GmbH in Germany, New Brunswick Scientific NV/SA in Belgium and New Brunswick Scientific S.a.r.l. in France. In mid-December 1998, the Company acquired for an insignificant amount the assets of Inceltech, a small fermentor manufacturing company located in Toulouse, France and established NBS/Inceltech as part of the Company's existing French subsidiary New Brunswick Scientific Sarl. Inceltech had a customer base in southern France and the United Kingdom which NBS/Inceltech will continue to serve. Foreign sales of the Company's standard products (i.e., those listed in its product catalogs) are generally made directly by these subsidiaries. At December 31, 1998, NBS had a backlog of unfilled orders of approximately $8,726,000, compared with $7,858,000 at the end of 1997. The December 31, 1998 backlog was comprised of orders for standard equipment as well as orders for larger systems. NBS expects to fill all of its existing backlog during the coming year. One customer based in the United States accounted for approximately 11.6%, 12.0% and 10.0%, respectively, of consolidated net sales during the years ended December 31, 1998, 1997 and 1996. Research and Development Research and development expenditures, all of which are sponsored by the Company, amounted to $2,995,000, in 1998, $2,637,000 in 1997 and $2,141,000 in 1996. Twenty-Seven (27) of the Company's professional employees were engaged full time in research and development activities. -6- Investment in Organica, Inc. Since November 1994, the Company has invested $950,000 (less than a twenty-percent interest) in Organica, Inc. (Organica) which was formed in 1993 to develop and commercialize various "environmentally friendly" products produced via fermentation processes. Organica isolates and cultures naturally occurring microorganisms and fungi and blends them with various nutrient sources and carriers to create its products, which are offered as alternatives to various hazardous products. Organica has focused primarily on natural turf products, compost accelerators, hydrocarbon remediation products and non-caustic drain openers. Competition The competitive factors affecting the Company's position as a manufacturer of biotechnology equipment include availability, reliability, ease of operation, the price of its products, its responsiveness to the technical needs and service requirements of customers, and product innovation. NBS encounters competition from approximately 11 domestic and 15 foreign competitors in the sale of its products. The Company's principal competitor in the sale of fermentation equipment and bioreactors both in the United States and overseas is B. Braun Biotech, a German company. Additional competitors include L.E. Marubishi Co., Ltd. located in Japan; Applikon, B.V., located in The Netherlands; and Abec, located in Pennsylvania. Although financial information concerning these firms is not readily available, the Company believes that many of its competitors have substantially greater financial resources than the Company. The Company believes that it has the largest worldwide market share for biological shakers. LabLine Instruments, Inc. and Forma Scientific in the United States as well as several manufacturers in Europe are strong competitors of the Company in this market. NBS encounters substantial competition in the sale of most of its other equipment where its sales do not represent major market shares. Although the Company does not encounter substantial competition in the sale of its nutrient sterilizing and dispensing equipment in the U.S. market, substantial competition exists in foreign markets. Employees NBS employs approximately 433 people, including 222 people engaged in manufacturing and supervision, 56 in research, development and engineering (including 17 employed by DGI), 109 in sales and marketing, and 46 in administrative and clerical duties. Manufacturing employees currently work a single shift, however, in certain areas a second shift has been employed. The Company's New Jersey manufacturing employees are represented by District 15 of the International Association of Machinists, AFL-CIO under a contract which expires in December 1999. The Company considers its labor relations to be good. -7- Working Capital NBS maintains a substantial inventory of parts, components and subassemblies to fill orders for its products. Management believes it has adequate working capital for its present level of operations. The Company has a $5 million secured line of credit with Summit Bank, primarily for working capital and letters of credit, and a $1 million revolving credit line for equipment acquisition purposes, effective through May 31, 1999. Patents and Trademarks NBS holds and has filed applications for United States and foreign patents relating to many of its products, their integral components and significant accessories. NBS also has certain registered trademarks. However, NBS believes that its business is not dependent upon patent, trademark, or other proprietary protection in any material respect. DGI has filed patent applications covering its platform technology and certain assays. DGI has also applied for a number of trademarks. Cautionary Statement Statements included herein which are not historical facts are forward looking statements. Such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward looking statements involve a number of risks and uncertainties, including but not limited to, changes in economic conditions, demand for the Company's products, pricing pressures, intense competition in the industries in which the Company operates, the need for the Company to keep pace with technological developments and timely respond to changes in customer needs, the Company's dependence on third party suppliers, the effect on foreign sales of currency fluctuations, acceptance of new products, consistency in the level of orders for custom bioprocess systems, the ability of DGI to achieve its scientific objectives and enter into corporate partnering and/or licensing agreements, the labor relations of the Company and its customers and other factors identified in the Company's Securities and Exchange Commission filings. Item 2. PROPERTY The Company's executive, administrative, engineering and domestic sales offices and its manufacturing operations, warehouse and other facilities are located in a Company owned 243,000 square foot one-story steel and concrete block building situated on a 17-acre site in Edison, New Jersey. Approximately 50,000 square feet is office space, approximately 14,000 square feet is laboratory space (including 7,500 square feet occupied by DGI), and the balance is devoted to manufacturing and warehouse facilities. The Company's NBS Benelux B.V. subsidiary owns its 13,000 square foot building in Nijmegen, The Netherlands. The Company's wholly-owned European subsidiaries lease facilities as follows: New Brunswick Scientific (UK) Limited - 17,000 square feet, New Brunswick Scientific, S.a.r.l. -8- - - approximately 27,000 square feet, NBS GmbH - 1,400 square feet and New Brunswick Scientific NV/SA - 825 square feet. Item 3. LEGAL PROCEEDINGS No material legal proceedings are currently pending. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. Item 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS (A) The Company's Common stock is traded in the National over-the-counter market (Nasdaq symbol NBSC). The following table sets forth the high and low prices for the Company's Common stock as reported by Nasdaq for the periods indicated. The prices represent quotations between dealers reflecting prevailing market factors which may include anticipated markups or markdowns and do not necessarily represent actual transactions. HIGH LOW ---- --- 1997 First Quarter $ 8.25 $ 6.50 Second Quarter 8.00 6.25 Third Quarter 7.25 6.00 Fourth Quarter 9.50 6.88 1998 First Quarter $ 9.40 $ 6.82 Second Quarter 13.00 8.63 Third Quarter 8.94 4.00 Fourth Quarter 7.38 5.25 1999 First Quarter (through February 10, 1999) $ 7.28 $ 4.88 (B) The number of holders, including beneficial owners, of NBS' Common stock as of February 10, 1999, is 1,467. (C) NBS paid 10% Common stock dividends on May 15, 1998 and 1997. -9- Item 6. SELECTED FINANCIAL DATA The following table sets forth-selected consolidated financial information regarding the Company's financial position and operating results. This information should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated Financial Statements and Notes thereto which appear elsewhere herein.
Year Ended December 31, ------------------------------------------------------------------- 1998 1997 1996 1995 1994 (In thousands, except per share amounts) Net sales $46,495 $45,596 $42,927 $39,085 $38,789 Net income (loss) (156) 1,012 882 1,172 1,068 Basic earnings (loss) Per Share (a) (.03) .22 .19 .26 .23 Diluted earnings (loss) per Share (a) (.03) .21 .19 .25 .23 Total assets (b) 39,323 38,090 37,226 35,685 34,504 Long-term debt, net of current installments (b) 239 247 401 564 665 Cash dividends per Share - - - .05 -
(a) Adjusted to reflect 10% stock dividend distributed on May 15, 1998. (b) At year-end Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Statements included herein which are not historical facts are forward looking statements. Such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward looking statements involve a number of risks and uncertainties, including but not limited to, changes in economic conditions, demand for the Company's products, pricing pressures, intense competition in the industries in which the Company operates, the need for the Company to keep pace with technological developments and timely respond to changes in customer needs, the Company's dependence on third party suppliers, the effect on foreign sales of currency fluctuations, acceptance of new products, consistency in the level of orders for custom bioprocess systems, the ability of DGI to achieve its scientific objectives and enter into corporate partnering and/or licensing agreements, the labor relations of the Company and its customers and other factors identified in the Company's Securities and Exchange Commission filings. -10- Results of Operations 1998 vs. 1997 For the year ended December 31, 1998, the Company incurred a net loss of $156,000 or $.03 per diluted share on net sales of $46,495,000 compared with net income of $1,012,000 or $.21 per diluted share on net sales of $45,596,000 for the year ended December 31, 1997. In 1998, U.S. domestic sales increased 21.6%, but were offset by a 14.2% decrease in international sales resulting in an overall increase in consolidated net sales of 2%. International sales were affected by the Asian financial crisis and its spread to other areas of the world where the Company does business. Gross profit as a percentage of sales declined to 39.3% in 1998 from 40.1% in 1997 as a result of increased shipments in 1998 of custom bioprocess systems which carry lower profit margins than core products. Selling, general and administrative expenses increased to $13,801,000 in 1998 from $13,086,000 in 1997 due to normal annual increases and as the result of an effort to strengthen the Company's sales and service capabilities. Research, development and engineering expenses increased to $4,843,000 in 1998 from $4,139,000 in 1997 due primarily to the strengthening of the Company's bioprocess engineering division as well as its new product development efforts and also included $2,196,000 and $1,923,000, respectively, for 1998 and 1997 to support the research efforts of DGI BioTechnologies, the Company's drug lead discovery operation. Interest income decreased to $114,000 in 1998 from $149,000 in 1997 due to a lower level of invested cash and lower interest rates. The reduction in interest expense in 1998 is primarily the result of the inclusion in 1997 of interest costs related to the settlement of tax audits. The increase in other expense to $43,000 in 1998 from $9,000 in 1997 is primarily due to costs related to the disposal of fixed assets. The Company incurred a loss of $36,000 related to the joint venture entered into during 1998. During 1998, the U.S. dollar remained stable against the currencies of the European countries where the Company has subsidiary operations resulting in virtually no effect on income from foreign operations. The effects of balance sheet translation resulted in a currency translation adjustment of $622,000 which is reflected as a component of accumulated other comprehensive loss in the equity section of the Consolidated Balance Sheet. 1997 vs. 1996 For the year ended December 31, 1997, the Company had net income of $1,012,000 or $.21 per diluted share on net sales of $45,596,000 compared with net income of $882,000 or $.19 per diluted share on net sales of $42,927,000 for the year ended December 31, 1996. -11- In 1997, net sales increased 6.2% due to a 19% increase in U.S. domestic sales and higher sales in the United Kingdom which benefited from the delivery of a large custom bioprocess system. Gross margins improved to 40.1% in 1997 from 38.8% in 1996 due to continuing improvements in productivity in the Company's manufacturing operations and from the higher component of domestic sales which tends to carry a somewhat higher margin than export sales, a large portion of which go through dealers and distributors. Research, development and engineering expenses increased 13.9% in 1997 primarily to support the operations of DGI BioTechnologies, L.L.C. (DGI), the Company's majority-owned drug lead discovery operation. Interest income decreased to $149,000 in 1997 from $244,000 in 1996 primarily as a result of lower average cash available for investment. During 1997, the U.S. dollar strengthened against the currencies of the European countries where the Company has subsidiary operations. The effect of these currency movements decreased income from foreign operations by approximately $102,000 to $1,542,000. The effects of balance sheet translation resulted in a currency translation adjustment of $723,000 which is reflected in the equity section of the Consolidated Balance Sheet. Financial Condition Liquidity and Capital Resources During the year ended December 31, 1998 work-in-process inventories increased to $3,457,000 from $2,668,000 for the year ended 1997 primarily as a result of contracts for custom bioprocess systems which will be delivered during the first quarter 1999. Inventories of finished goods increased to $5,375,000 at the end of 1998 compared with $4,701,000 at the end of 1997. The increase in finished goods is due primarily to equipment which was shipped prior to December 31, 1998 but had terms of FOB destination and therefore was added back to inventory and not recorded as a 1998 sale. Cash Flows from Operating Activities During the year ended December 31, 1998 net cash provided by operating activities amounted to $659,000 as compared to net cash used of $45,000 during the year ended December 31, 1997. The primary reasons for the $704,000 net increase from 1997 to 1998 were: a decrease in accounts receivable of $721,000 in 1998 as compared to an increase of $964,000 in 1997; an increase in inventories of $905,000 in 1998 as compared to an increase of $2,171,000 in 1997 offset by a net loss of $156,000 in 1998 as compared to net income of $1,012,000 in 1997; and an increase in the deferred income tax benefit of $361,000 in 1998 as compared to $37,000 in 1997. Cash Flows from Investing Activities Net cash used in investing activities was $1,234,000 in 1998 as compared to $965,000 in 1997, primarily as a result of additions to property, plant and equipment in both years as well as from an investment in another entity in 1997. -12- Cash Flows from Financing Activities Net cash provided by financing activities amounted to $334,000 in 1998 as compared to net cash used of $47,000 in 1997. The 1998 amount includes $449,000 as proceeds from the issuance of shares under stock purchase and options plans partially offset by the repayment of long-term debt. The 1997 amount reflects the repayment of long-term debt, partially offset by proceeds from the issuance of shares under stock purchase and option plans. Management believes that the resources available to the Company, including a $21 million revolving line of credit which the Company is in the process of closing with First Union National Bank, are sufficient to meet its near and intermediate-term needs. Other Matters Recently Issued Accounting Standards In June 1997, Statement of Financial Accounting Standards (SFAS) No. 131 "Disclosure About Segments of an Enterprise and Related Information", was issued to establish standards for public business enterprises reporting information regarding operating segments in annual and interim financial statements issued to shareholders. It also establishes standards for related disclosures about products and services, geographic areas and major customers. This statement is effective for financial statements for periods beginning after December 15, 1997. As required, the Company has adopted the disclosures required by SFAS No. 131 in its 1998 consolidated financial statements. In June 1998, SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities", was issued to establish standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. This statement is effective for all quarters of fiscal years beginning after June 15, 1999. The Company does not believe that this statement will have a material impact on the consolidated financial statements. Drug Lead Discovery Business In October 1995, the Company entered the drug-lead discovery business by forming a new company to develop a novel, small molecule drug discovery platform. The company, DGI BioTechnologies, L.L.C. (DGI), is majority-owned and fully funded by the Company and occupies specially designed laboratory space at the Company's headquarters facility in Edison, New Jersey. DGI's operations have had a significant negative impact on the Company's 1998 and 1997 earnings and will continue to do so during the balance of its development phase, which is expected to last through 1999. During 1998 and 1997, $2,196,000 and $1,923,000, respectively, were charged to operations. It is currently anticipated that expenditures for 1999 will exceed $3,000,000. This amount could be affected by revenues from licensing agreements and other corporate collaborations which are currently being pursued. -13- Year 2000 Issues The Company has no internally developed software that it utilizes for its operations, but uses Version 11 of Computer Associates ManMan Classic software, a total MRPII system which it employs for its manufacturing, sales and accounting needs and Windows NT which is used for the Company's network. Management believes, based on the representations of the software companies, that both of these software packages are Year 2000 (Y2K) compliant. In addition, the Company uses a number of computer controlled machine tools which are all Y2K compliant. Most of the Company's products have no date functions and consequently do not have a Y2K problem with the exception of its process control software products which do have data related functions but with one exception are Y2K compliant. The exception is a now obsolete DOS-based process control system introduced in 1987 for which a Y2K compliant upgrade is available. The Company has sent letters to the majority of its suppliers and companies accounted for using the equity method requesting information as to their readiness for the Y2K and is in the process of evaluating responses. The Company expects to complete the survey of its suppliers during the first quarter of 1999 and make changes as it sees necessary in order to ensure that its operations are not negatively affected. The Company also intends to replace obsolete, non-compliant personal computers by the middle of 1999 in the normal course of events since these older machines are not capable of running the latest software upgrades. Any costs which will be incurred as the result of the acceleration of purchases due to Y2K considerations are not material to the consolidated financial statements. The Company is in the process of developing business contingency plans to mitigate the risk of the potential of a noncompliant vendor or system and will continue to assess its exposure to possible Y2K problems or potential disruptions. Based upon all of the information it has developed to date, Management believes that no disruptions will occur in the Company's operations. However, the Company is subject to financial and other risks should the Company or a third party vendor or service provider be unable to resolve issues related to the Year 2000. Costs of addressing the Year 2000 issue have not been material to date and, based on information gathered to date from the Company and its vendors, are not currently expected to have a material adverse impact on the Company's consolidated financial position, results of operations or cash flows. Euro Conversion On January 1, 1999, eleven of the fifteen member countries of the European Union (the "participating countries") established fixed conversion rates between their existing sovereign currencies (the "legacy currencies") and the Euro. The participating countries adopted the Euro as their common legal currency on that date. As of January 1, 1999, a newly created European Central Bank was established to control monetary policy, including money supply and interest rates for the participating countries. The legacy currencies are scheduled to remain legal tender in the participating countries as denominations -14- of the Euro between January 1, 1999 and January 1, 2002 (the "transition period"). During the transition period, public and private parties may pay for goods and services using either the Euro or the participating country's legacy currency on a "no compulsion, no prohibition" basis. The Company has initiated and is evaluating on an on-going basis the effects, if any, of the Euro conversion upon its business. Factors being considered include, but are not limited to: the possible impact of the Euro conversion on revenues, expenses and income from operations, the ability to adapt information technology to accommodate Euro-denominated transactions, the market risks with respect to financial instruments, the continuity of material contracts, and the potential tax consequences. The Company does not believe that the Euro-conversion will have a material operational or financial impact. -15- Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Independent Auditors' Report Consolidated Balance Sheets as of December 31, 1998 and 1997 Consolidated Statements of Operations for the years ended December 31, 1998, 1997 and 1996 Consolidated Statements of Shareholders' Equity for the years ended December 31, 1998, 1997 and 1996 Consolidated Statements of Cash Flows for the years ended December 31, 1998, 1997 and 1996 Consolidated Statements of Comprehensive Income for the years ended December 31, 1998, 1997 and 1996 Notes to Consolidated Financial Statements Schedule II - Valuation and Qualifying Accounts -16- Independent Auditors' Report The Board of Directors and Shareholders New Brunswick Scientific Co., Inc.: We have audited the consolidated financial statements of New Brunswick Scientific Co., Inc. and subsidiaries as listed in the accompanying index. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedule as listed in the accompanying index. These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of New Brunswick Scientific Co., Inc. and subsidiaries as of December 31, 1998 and 1997, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1998 in conformity with generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. KPMG LLP Short Hills, New Jersey February 10, 1999 -17- NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1998 AND 1997 (In thousands, except for share data)
1998 1997 ---- ---- ASSETS Current assets: Cash and cash equivalents $ 3,793 $ 3,968 Accounts receivable, net of allowance for doubtful accounts, 1998 - $235 and 1997 - $284 10,230 10,602 Refundable income taxes 173 314 Deferred income taxes (Note 7) 134 134 Inventories (Note 2) 15,923 14,862 Prepaid expenses and other current assets 2,025 1,819 -------- -------- Total current assets 32,278 31,699 -------- -------- Property, plant and equipment, net (Notes 3 and 5) 5,622 5,354 Deferred income taxes (Note 7) 361 -- Other assets (Note 4) 1,062 1,037 -------- -------- $ 39,323 $ 38,090 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current installments of long-term debt (Note 5) $ 27 $ 110 Accounts payable and accrued expenses (Note 6) 8,118 7,709 -------- -------- Total current liabilities 8,145 7,819 -------- -------- Long-term debt, net of current installments (Note 5) 239 247 Other liabilities (Note 8) 492 -- Commitments and contingencies (Note 12) Shareholders' equity (Note 9): Common stock, $0.0625 par; authorized 25,000,000 shares; issued and outstanding, 1998 - 4,770,444 shares; 1997 - 4,204,845 shares; net of shares held in treasury, 1998 - 430,063 and 1997 - 390,967 298 263 Capital in excess of par 28,361 23,854 Retained earnings 3,137 7,085 Accumulated other comprehensive loss (985) (1,115) Notes receivable from exercise of stock options (364) (63) -------- -------- 30,447 30,024 -------- -------- $ 39,323 $ 38,090 ======== ========
See notes to consolidated financial statements. -18- NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (In thousands, except per share amounts)
1998 1997 1996 ---- ---- ---- Net sales $ 46,495 $ 45,596 $ 42,927 Operating costs and expenses: Cost of sales 28,242 27,319 26,280 Selling, general and administrative Expenses 13,801 13,086 12,179 Research, development and engineering Expenses 4,843 4,139 3,633 -------- -------- -------- Total operating costs and expenses 46,886 44,544 42,092 -------- -------- -------- Income (loss) from operations (391) 1,052 835 -------- -------- -------- Other income (expense): Interest income 114 149 244 Interest expense (8) (71) (75) Other income (expense), net (43) (9) (26) Equity in loss in joint venture company (36) -- -- -------- -------- -------- 27 69 143 -------- -------- -------- Income (loss) before income tax expense (benefit) (364) 1,121 978 Income tax expense (benefit) (Note 7) (208) 109 96 -------- -------- -------- Net income (loss) $ (156) $ 1,012 $ 882 ======== ======== ======== Basic income (loss) per share $ (.03) $ .22 $ .19 ======== ======== ======== Diluted income (loss) per share $ (.03) $ .21 $ .19 ======== ======== ======== Basic weighted average number of shares Outstanding 4,693 4,616 4,583 ======== ======== ======== Diluted weighted average number of shares Outstanding 4,693 4,727 4,643 ======== ======== ========
See notes to consolidated financial statements. -19- NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (Dollars in thousands)
Notes Receivable Accumulated From Common Stock Capital Other Exercise ------------------ in Excess Retained Comprehensive Of Stock Shares Amount of Par Earnings Income (Loss) Options Total ------ ------ ------ -------- ------------- ------- ----- Balance, January 1, 1996 3,595,651 $225 $19,283 $ 9,488 $ (815) $ -- $ 28,181 Issue of shares under employee stock purchase plan 13,492 1 75 76 Issue of shares under stock option plans 20,065 1 113 114 5% stock dividend 179,724 11 1,267 (1,278) -- Net income 882 882 Other comprehensive loss adjustment (2) (2) --------- ---- ------- -------- ------- ----- -------- Balance, December 31, 1996 3,808,932 $238 $20,738 $ 9,092 $ (817) $ -- $ 29,251 Issue of shares under employee stock purchase plan 13,997 1 78 79 Discount from fair market value upon issue of options under stock option plan for nonemployee directors 35 35 Issue of shares under stock option plans 1,050 8 8 Notes receivable from exercise of stock options (63) (63) 10% stock dividend 380,866 24 2,995 (3,019) -- Net income 1,012 1,012 Other comprehensive loss adjustment (298) (298) --------- ---- ------- -------- ------- ----- -------- Balance, December 31, 1997 4,204,845 $263 $23,854 $ 7,085 $(1,115) $ (63) $ 30,024 Issue of shares under employee stock purchase plan 14,813 1 90 91 Issue of shares under stock option plans 129,430 8 524 532 Tax benefits related to exercise of stock options 127 127 Notes receivable from exercise of stock options (301) (301) 10% stock dividend 421,356 26 3,766 (3,792) -- Net loss (156) (156) Other comprehensive income Adjustment 130 130 --------- ---- ------- -------- ------- ----- -------- Balance, December 31, 1998 4,770,444 $298 $28,361 $ 3,137 $ (985) $(364) $ 30,447 ========= ==== ======= ======= ======= ===== ========
See notes to consolidated financial statements. -20- NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (In thousands)
1998 1997 1996 ---- ---- ---- Cash flows from operating activities: Net income (loss) $ (156) $ 1,012 $ 882 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation 1,178 931 858 Deferred income taxes (361) (37) 91 Discount from fair market value upon issue of Options under stock option plan for Nonemployee directors -- 35 -- Change in related balance sheet accounts: Accounts receivable 721 (964) (1,005) Refundable income taxes 141 20 (118) Inventories (905) (2,171) (310) Prepaid expenses and other current assets (169) (37) (520) Accounts payable and accrued expenses 232 536 92 Advance payments from customers (22) 630 581 ------- ------- ------- Net cash provided by (used in) operating activities 659 (45) 551 ------- ------- ------- Cash flows from investing activities: Additions to property, plant and equipment (1,280) (733) (1,355) Sale of equipment 46 18 22 Investment in Organica -- (250) (400) ------- ------- ------- Net cash used in investing activities (1,234) (965) (1,733) ------- ------- ------- Cash flows from financing activities: Repayments of long-term debt (115) (134) (154) Proceeds from issuance of shares under stock purchase and option plans 449 87 128 ------- ------- ------- Net cash provided by (used in) financing activities 334 (47) (26) Net effect of exchange rate changes on cash 66 (171) 22 ------- ------- ------- Net decrease in cash and cash equivalents (175) (1,228) (1,186) Cash and cash equivalents at beginning of year 3,968 5,196 6,382 ------- ------- ------- Cash and cash equivalents at end of year $ 3,793 $ 3,968 $ 5,196 ======= ======= ======= Supplemental disclosures of cash flow information: Cash paid during the year for: Interest $ 6 $ 58 $ 63 Income taxes 104 377 128 Supplemental disclosure of non cash financing activities: Notes received upon exercise of stock options $ 301 $ -- $ 63
See notes to consolidated financial statements. -21- NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (In thousands)
1998 1997 1996 ---- ---- ---- Net income (loss) $ (156) $ 1,012 $ 882 Other comprehensive income (loss): Foreign currency translation adjustment 622 (723) (48) Pension liability adjustment (492) 425 46 ------- ------- ------- Net comprehensive income (loss) $ (26) $ 714 $ 880 ======= ======= =======
See notes to consolidated financial statements. -22- NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 1. Summary of significant accounting policies: Principles of consolidation: The consolidated financial statements include the accounts of New Brunswick Scientific Co., Inc., its wholly owned subsidiaries and majority owned limited liability company (the Company). All significant intercompany transactions and balances have been eliminated. Translation of foreign currencies: Translation adjustments for the Company's foreign operations are included as a component of accumulated other comprehensive loss in shareholders' equity. Transaction gains and losses, which are not significant in amount, are included in the consolidated statements of operations as part of "Other income (expense), net." Cash and cash equivalents: The Company considers all highly liquid debt instruments with original maturities of three months or less to be cash equivalents in the statement of cash flows. Inventories: Inventories are stated at the lower of cost (first in, first out or average) or market. Cost elements include material, labor and manufacturing overhead. Property, plant and equipment: Property, plant and equipment are stated at cost. Gains and losses resulting from sales or disposals, which are not significant in amount, are included in "Other income (expense), net". The cost of repairs, maintenance and replacements which do not significantly improve or extend the life of the respective assets are charged to expense as incurred. Depreciation is provided by the straight-line method over the estimated useful lives of the related assets, generally 33-1/3 years for buildings and 10 years for machinery and equipment. Investments: In December 1998, the Company acquired the assets of Inceltech, a manufacturer of fermentors and cell culture bioreactors in France, for an immaterial purchase price. -23- NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 The acquisition was accounted for as a purchase and, accordingly, the results of operations of Inceltech (which are immaterial) are included in the Company's results of operations from the date of acquisition. The fair value of the assets acquired approximated the purchase price. The effects of the acquisition and the allocation of the purchase price is immaterial to the consolidated financial statements. In June 1998, the Company entered into a joint venture, New Brunswick Scientific Projects Limited, with W.H. Promation Ltd. in the United Kingdom with each party owning 50%. The joint venture specializes in the design and construction of bioprocess systems for the pharmaceutical and biotechnology industries. No monies were invested at inception, however, investments in the joint venture may occur based upon the future needs of the joint venture. This investment is accounted for using the equity method. The Company has an investment (representing approximately 14% of the outstanding shares of common stock) in Organica, Inc. Organica manufactures and distributes environmentally friendly products for cleaning, grease removal, and other applications. This investment is accounted for using the cost method. Research and development: Research and development costs are expensed as incurred. Income taxes: Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. No provision has been made for federal income or withholding taxes which may be payable on the remittance of the undistributed retained earnings of foreign subsidiaries. These earning have been reinvested to meet future operating requirements and the Company intends to continue such policy for the foreseeable future. Earnings per share: Basic earnings per share is calculated by dividing net income by the weighted average number of shares outstanding. Diluted earnings per share is calculated by dividing net income by the sum of the weighted average number of shares outstanding plus the dilutive effect of -24- NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 stock options which have been issued by the Company. The dilutive effect of stock options was zero, 110,569, and 59,818 shares for the years ended December 31, 1998, 1997, and 1996, respectively. 10% stock dividends were distributed on May 15, 1998 and 1997, respectively, and a 5% stock dividend was distributed on May 15, 1996. The weighted average number of shares outstanding for prior periods have been restated to reflect these dividends. Stock option plans: Prior to January 1, 1996, the Company accounted for its stock option plans in accordance with the provisions of Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees", and related interpretations. As such, compensation expense would be recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price. On January 1, 1996, the Company adopted SFAS No. 123, "Accounting for Stock-Based Compensation", which permits entities to recognize as expense over the vesting period the fair value of all stock-based awards on the date of grant. Alternatively, SFAS No. 123 also allows entities to continue to apply the provisions of APB Opinion No. 25 and provide pro forma net income and pro forma earnings per share disclosures for employee stock option grants made in 1995 and future years as if the fair-value-based method defined in SFAS No. 123 had been applied. The Company has elected to continue to apply the provisions of APB Opinion No. 25 and provide the pro forma disclosure provisions of SFAS No. 123. Treasury stock: Repurchase of the Company's outstanding Common stock is accounted for by treating the stock as if retired. Financial instruments: The carrying values of the Company's financial instruments, principally cash and cash equivalents, accounts receivable and accounts payable, accrued expenses, and long-term debt, at December 31, 1998 approximate their estimated fair values. Fair values were determined through a combination of management estimates and information obtained from independent third parties using latest available market data. Use of estimates: Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and revenue and expenses, and the disclosure of contingent assets and liabilities to prepare the financial statements in conformity with -25- NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 generally accepted accounting principles. Actual results could differ from those estimates. Impairment of long-lived assets and long-lived assets to be disposed of: The Company accounts for long-lived assets in accordance with the provisions of SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of". This Statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. Pension and other postretirement plans: On January 1, 1998, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 132, "Employers' Disclosures about Pension and Other Postretirement Benefits". SFAS No. 132 revises employers' disclosures about pension and other postretirement benefit plans. SFAS No. 132 does not change the method of accounting for such plans. Comprehensive income: On January 1, 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive Income". SFAS No. 130 establishes standards for reporting and presentation of comprehensive income and its components in a full set of financial statements. Comprehensive income consists of net income, foreign currency translation adjustment, and pension liability adjustment and is presented in the consolidated statements of comprehensive income. The Statement requires only additional disclosures in the consolidated financial statements; it does not affect the Company's financial position or results of operations. Prior financial statements have been reclassified to conform to the requirements of SFAS No. 130. Segment information: As of December 31, 1998, the Company adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 131, "Disclosures about Segments of an Enterprise and Related Information." This Statement requires the Company to disclose financial information on the basis that is used internally for -26- NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 evaluating segment performance and deciding how to allocate resources to segments. It also establishes standards for related disclosures about products and services, geographic areas and major customers. Reclassifications: Certain reclassifications have been made to the prior years presentation to conform to the 1998 presentation. 2. Inventories:
1998 1997 ---- ---- (In thousands) Raw materials and sub-assemblies $7,091 $7,493 Work-in-process 3,457 2,668 Finished goods 5,375 4,701 ------- ------- $15,923 $14,862 ======= =======
3. Property, plant and equipment, net:
1998 1997 ---- ---- (In thousands) Land $ 800 $ 800 Buildings and improvements 4,111 3,983 Machinery and equipment 11,689 10,572 -------- -------- 16,600 15,355 Less accumulated depreciation 10,978 10,001 -------- -------- $ 5,622 $ 5,354 ======== ========
4. Other assets: Other assets consists primarily of an investment in Organica, Inc. of $950,000 (representing ownership of less than 20%), carried at cost, as of December 31, 1998 and 1997. Organica, Inc. manufactures and distributes environmentally friendly products for cleaning, grease removal, and other applications. 5. Long-term debt and credit agreement: The Company is a party to a mortgage on the facility of the Company's Netherlands subsidiary which bears interest of 7.5% per annum. During the twenty-year term of the mortgage, the Company is obligated to make monthly payments of interest and 80 equal quarterly payments of -27- NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 principal. At December 31, 1998 and 1997, $266,000 and $272,000, respectively, was outstanding. Aggregate annual maturities of long-term debt are as follows: Year ending December 31 Amount ----------------------- ------ (In thousands) 1999 $ 27 2000 27 2001 27 2002 27 2003 27 After 2003 131 ---- $266 The Company has a $5 Million Secured Revolving Credit Agreement (the Agreement) with Summit Bank (the Bank), which expires May 31, 1999. The Agreement provides the Company with a facility for both working capital and for letters of credit. In addition, the Bank has provided a $1 million Revolving Line of Credit for equipment acquisition purposes. There are no compensating balance requirements and any borrowings under the Agreement bear interest at the Bank's prime rate. All of the Company's domestic assets, with the exception of its headquarters facility, which are not otherwise subject to lien have been pledged as security for any borrowings under this Agreement. As of and during the years ended December 31, 1998 and 1997, there were no outstanding balances under the Summit Bank facility. -28- NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 6. Accounts payable and accrued expenses:
1998 1997 ---- ---- (In thousands) Accounts payable-trade $ 3,772 $ 2,652 Accrued salaries, wages and payroll taxes 1,622 1,712 Accrued foreign dealer commissions 354 761 Advance payments from customers 1,454 1,476 Other accrued liabilities 916 1,108 ------- ------- $ 8,118 $ 7,709 ====== =======
7. Income taxes:
1998 1997 1996 ---- ---- ---- (In thousands) Income (loss) before income taxes: Domestic $(1,014) $ (446) $ (327) Foreign 650 1,567 1,305 ------- ------ ------ $ (364) $1,121 $ 978 ======= ====== ====== Income tax expense (benefit): Federal: Current $ -- $ - $ (106) Deferred (361) (37) 91 State-current 3 7 15 Foreign-current 150 139 96 ------- ------ ------ $ (208) $ 109 $ 96 ======= ====== ======
-29- NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at December 31, 1998 and 1997 are as follows:
1998 1997 ---- ---- (In thousands) Deferred tax asset/(liability): Accumulated depreciation $(247) $(221) Inventories 326 296 Allowance for doubtful accounts 58 53 Accrued expenses 231 184 Other liabilities (116) (162) Alternative minimum tax credit carryforward 88 138 Domestic net operating loss carryforward 588 107 Domestic capital loss and contribution carryforwards 10 69 Foreign net operating loss carryforwards -- 176 ------ ----- 938 640 Less: Valuation allowance 443 506 ----- ----- Net deferred tax asset $ 495 $ 134 ===== ====
The net change in the total valuation allowance for the years ended December 31, 1998 and 1997 was a decrease of $63,000 and $112,000, respectively. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods which the deferred tax assets are deductible, management believes it is more likely than not the Company will realize the benefits of these deductible differences, net of the existing valuation allowances at December 31, 1998. The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced. The domestic net operating loss carryforward is available to offset future taxable income, if any, through 2018. -30- NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 The Company's effective income tax rates for 1998, 1997 and 1996 were (57.1)%, 9.7% and 9.8%, respectively. These rates differ from the statutory Federal income tax rates as follows:
Percentage of income before taxes ---------------------------------------------- 1998 1997 1996 ---- ---- ---- Computed "expected" tax expense (benefit) (34.0)% 34.0% 34.0% Increase (decrease) in taxes resulting From: Rate differential between U.S. and foreign income taxes -- (13.0) (10.0) Change in valuation allowance (17.3) (10.0) (12.7) Other (5.8) (1.3) (1.5) ----- ----- ----- (57.1)% 9.7% 9.8% ===== ===== =====
8. Pension plans: The Company has a noncontributory defined benefit pension plan covering qualified U.S. salaried employees, including officers. Additionally, the Company made contributions to a union sponsored multi-employer defined benefit plan, in the amount of $124,000, $110,000 and $107,000 in 1998, 1997 and 1996, respectively. -31- NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 The following table sets forth the U.S. defined benefit plan's benefit obligation, fair value of plan assets and funded status at December 31, 1998 and 1997:
1998 1997 ---- ---- (in thousands) Change in benefit obligation Benefit obligation at beginning of year $ 5,159 $ 4,693 Actuarial loss 223 165 Service cost 260 224 Interest cost 376 343 Benefits paid (306) (266) ------- ------- Benefit obligation at end of year $ 5,712 $ 5,159 ======= ======= Change in plan assets Fair value of plan assets at beginning of year $ 4,635 $ 4,016 Actual return on plan assets 645 657 Employer contribution 132 300 Benefits paid (306) (291) Other expenses (47) (47) ------- ------- Fair value of plan assets at end of year $ 5,059 $ 4,635 ======= ======= Change in prepaid pension cost Prepaid benefit cost at beginning of year $ 502 $ 535 Net periodic pension cost (260) (333) Contributions 132 300 ------- ------- Prepaid benefit cost at end of year $ 374 $ 502 ======= ======= Miscellaneous items at end of year Funded status $ (653) $ (524) Unrecognized net transition obligation $ 149 $ 168 Unrecognized prior service cost $ (31) $ (35) Unrecognized net loss $ 908 $ 893 Prepaid benefit cost before additional liability $ 374 $ 502 Additional liability $ 610 $ -- Prepaid (accrued) benefit cost after additional liability $ (236) $ 502 Intangible asset $ 118 $ --
1998 1997 1996 ---- ---- ---- (in thousands except percentages) Components of net periodic benefit cost Service cost $ 207 $ 224 $ 202 Interest cost 376 343 312 Expected return on plan assets (385) (305) (275) Transition obligation 19 19 19 Amortization of prior service cost (4) (4) (4) Recognized net actuarial loss 47 56 53 ------- ------- ------- Net periodic benefit cost $ 260 $ 333 $ 307 ======= ======= ======= Weighted-average assumptions as of December 31 Discount rate 7.25% 7.25% 7.25% Expected return on plan assets 7.50% 7.50% 7.50% Rate of compensation increase 4.00% 4.00% 4.00%
-32- NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 The 1998 minimum additional pension liability is a non cash item which is offset by a direct reduction to shareholders' equity of $492,000. In 1997, there was no additional pension liability. The Company has a defined contribution plan for its U.S. employees, with a specified matching Company contribution. The expense to the Company in 1998, 1997 and 1996 was $160,000, $130,000 and $123,000, respectively. International pension expense in 1998, 1997 and 1996 was not material. Foreign plans generally are insured or otherwise fully funded. 9. Shareholders' equity: The 1997 and 1996 data for the stock options and rights plans described below have been restated to reflect 10% stock dividends which were distributed on May 15, 1998 and 1997, respectively. The 1991 Non-Qualified Stock Option Plan (the 1991 Plan) for officers and key employees of the Company provides for the granting of options to purchase up to 728,200 shares of the Company's Common stock. Options are exercisable in five equal installments commencing one year after date of grant. Options expire up to 10 years from the date of grant. The exercise price per share of each option may not be less than the fair market value on the date of grant. Shares under option at December 31 are as follows:
1998 1997 1996 --------------------------- -------------------------- -------------------------- Weighted-Average Weighted-Average Weighted-Average Exercise Exercise Exercise Shares Price Shares Price Shares Price ------ ----- ------ ----- ------ ----- Outstanding, beginning of year 359,660 $ 6.15 224,872 $ 4.21 313,487 $ 4.40 Granted 214,000 5.83 138,600 9.24 -- -- Exercised (125,267) 4.04 -- -- (23,325) 4.77 Cancelled (8,549) 5.02 (3,812) 4.03 (4,128) 4.92 Expired -- -- -- -- (61,162) 4.92 -------- ------- -------- Outstanding, end of year 439,844 $ 6.62 359,660 $ 6.15 224,872 $ 4.21 ======== ======= =======
-33- NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 During 1998, options were granted at $5.19, $5.63, $10.00, $12.50 and $15.00 per share and during 1997, options were granted at $5.45, $9.09, $13.64 and $18.18 per share. No options were granted in 1996. At December 31, 1998, options were exercisable as follows: Exercise Shares Price ------ ----- 46,500 $ 4.23 15,620 5.45 9,147 5.51 2,200 9.09 3,300 13.64 5,500 18.18 At December 31, 1998, 139,763 options were available for future grant. The weighted-average remaining contractual life for the options outstanding at December 31, 1998 was 3.8 years. In 1989, the Company adopted a stock option plan for nonemployee directors. The plan provides for the granting of options to purchase up to 337,050 shares of the Company's Common stock. No options may be granted under the Plan after April 30, 1999. Options may be exercised over five years in cumulative installments of 20% per year and expire up to ten years after grant. The exercise price per share of each option may not be less than eighty-five percent (85%) of the fair market value on the date of grant. Shares under option at December 31, are as follows:
1998 1997 1996 -------------------------- -------------------------- -------------------------- Weighted-Average Weighted-Average Weighted-Average Exercise Exercise Exercise Shares Price Shares Price Shares Price ------ ----- ------ ----- ------ ----- Outstanding, beginning of year 221,999 $ 5.72 87,969 $ 5.06 93,683 $ 5.02 Granted 60,000 5.19 135,300 6.14 -- -- Exercised (5,194) 4.92 (1,270) 5.31 (951) 3.94 Cancelled -- -- -- -- (4,763) 4.49 ------- ------- ------ Outstanding, end of year 276,805 $ 5.62 221,999 $ 5.72 87,969 $ 5.06 ======= ======= ======
During 1998, options were granted at $5.19 per share and during 1997, options were granted at $5.53 and $6.36 per share. No options were -34- NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 granted in 1996. At December 31, 1998, 2,853, 27,748, 32,406, 7,260 and 19,800 options were exercisable at prices of $3.94, $4.97, $5.31, $5.53 and $6.36 per share, respectively, and 52,258 options were available for future grant. The weighted-average remaining contractual life for the options outstanding at December 31, 1998 was 4.1 years. During 1998, 50,000 options were granted at $5.75 per share under the 1998 Stock Option Plan for 10% Shareholder-Directors and were outstanding but not exercisable at December 31, 1998 and 50,000 options were available for future grant. The weighted-average remaining contractual life for the options outstanding at December 31, 1998 was 5.9 years. At December 31, 1998, there were 242,021 additional shares available for grant under the stock option plans. The per share weighted-average fair value of stock options granted during 1998 and 1997 was $2.79 and $2.66, respectively, on the date of grant using the Black Scholes option-pricing model with the following weighted-average assumptions: 1998 - no expected dividend yield, risk-free interest rate of 4.59%, volatility factor of 52.4%, and an expected life of 5.12 years; 1997 - no expected dividend yield, risk-free interest rate of 6.46%, volatility factor of 45.2%, and an expected life of 3 years. In 1987, the Company adopted an Employee Stock Purchase Plan. Under the Stock Purchase Plan, employees may purchase shares of the Company's Common stock at 85% of fair market value on specified dates. The Company has reserved 254,100 shares of its authorized shares of Common stock for this purpose. During 1998, 1997 and 1996, 14,813, 13,997 and 13,492 Common shares, respectively, were issued under the plan. The Company applies APB Opinion No. 25 in accounting for its Plans and, accordingly, no compensation cost has been recognized for its stock options in the financial statements with the exception of $35,000 in 1997 relating to the discount from fair market value of options issued under the stock option plan for nonemployee directors. Had the Company determined compensation cost based on the fair value at the grant date for its stock options under SFAS No. 123, the Company's 1998, 1997 and 1996 net income and earnings per share would have been reduced to the proforma amounts as follows:
1998 1997 1996 ---- ---- ---- Net income (loss) (in thousands): As reported $ (156) $1,012 $ 882 Proforma (374) 902 812 Basic income (loss) per share: As reported $ (.03) $ .22 $ .19 Proforma (.08) .20 .18 Diluted income (loss) per share: As reported $ (.03) $ .21 $ .19 Proforma (.08) .19 .17
-35- NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 Pro forma net income (loss) reflects only options granted in 1998 and 1997, no options were granted in 1996. Therefore, the full impact of calculating compensation cost for stock options under SFAS No. 123 is not reflected in the pro forma net income amounts presented above because compensation cost is reflected over the options' vesting periods of 5 and 10 years and compensation cost for options granted prior to January 1, 1995 is not considered. On October 27, 1989, the Company declared a dividend of one common share purchase right (the "Rights") on each share of Common stock outstanding. The rights entitle the holder to purchase one share of Common stock at $23.61 per share. Upon the occurrence of certain events related to non-negotiated attempts to acquire control of the Company, the Rights: (i) will entitle holders to purchase at the exercise price that number of shares of Common stock having an aggregate fair market value of two times the exercise price; (ii) will become exchangeable at the Company's election for that number of shares of Common stock having a fair market value of two times the exercise price; and (iii) will become tradable separately from the Common stock. Further, if the Company is a party to a merger or business combination transaction, the Rights will entitle the holders to purchase at the exercise price, shares of Common stock of the surviving company having a fair market value of two times the exercise price. In 1989, the Company adopted an Employee Stock Ownership Plan and Declaration of Trust (ESOP). The ESOP provides for the annual contribution by the Company of cash, Company stock or other property to a trust for the benefit of eligible employees. The amount of the Company's annual contribution to the ESOP is within the discretion of the Board of Directors but must be of sufficient amount to repay indebtedness incurred by the ESOP trust, if any, for the purpose of acquiring the Company's stock. The Company made contributions to the ESOP of $1,900, $4,235 and $9,330 during 1998, 1997 and 1996, respectively. Shareholders' Equity includes non-interest bearing notes receivable, resulting from the exercise of stock options, from the President and Chief Executive Officer of the Company due in 2006 and in 2008 aggregating $164,500, from the Vice President, Finance in the amount of $51,250, and from other key employees in the amount of $148,000. Inputed interest on these loans amounted to $8,244 in 1998. 10. Segment information: As discussed in Note 1, the Company has adopted the provisions of SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." Management of the Company has evaluated the way the business is organized internally for operating decisions and has determined that the Company is comprised of two operating segments. -36- NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 The first operating segment is laboratory research equipment. This segment consists of the manufacture and marketing of equipment used in the pharmaceutical, medical, biotechnology, chemical and environmental research fields throughout the world. The second operating segment is DGI BioTechnologies, L.L.C. This segment is involved in the development of a novel technology that facilitates the discovery of new drugs. This segment is still in the development phase and therefore has not generated revenues since inception in 1995. -37- Summarized segment information for the years ended December 31, 1998, 1997 and 1996 are as follows (in thousands, except percentages);
Laboratory Research DGI Total Equipment BioTechnologies Segments ---------- --------------- -------- 1998 ---- Net sales from external customers $ 46,495 $ -- $ 46,495 Intersegment net sales -- -- -- -------- -------- -------- Total net sales 46,495 -- 46,495 Earnings (loss) from operations 1,805 (2,196) (391) Percentage of sales 100% -- 100% Total assets (1) 39,205 118 39,323 Capital expenditures 1,280 -- 1,280 Depreciation (1) 1,178 -- 1,178 1997 ---- Net sales from external customers $ 45,596 $ -- $ 45,596 Intersegment net sales -- -- -- -------- -------- -------- Total net sales 45,596 -- 45,596 Earnings (loss) from operations 2,975 (1,923) 1,052 Percentage of sales 100% -- 100% Total assets (1) 38,090 -- 38,090 Capital expenditures 733 -- 733 Depreciation (1) 931 -- 931 1996 ---- Net sales from external customers $ 42,927 $ -- $ 42,927 Intersegment net sales -- -- -- -------- -------- -------- Total net sales 42,927 -- 42,927 Earnings (loss) from operations 2,370 (1,535) 835 Percentage of sales 100% -- 100% Total assets (1) 37,226 -- 37,226 Capital expenditures 1,355 -- 1,355 Depreciation (1) 858 -- 858
(1) Fixed assets and depreciation related to the DGI BioTechnolgoies segment are not allocated to the segment as the assets are owned directly by New Brunswick Scientific Co., Inc., however, rental expense is charged to the DGI BioTechnologies segment in lieu of depreciation expense. -38- NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 11. Operations by geographic areas: The Company sells its equipment to pharmaceutical companies, agricultural and chemical companies, other industrial customers engaged in biotechnology, and to medical schools, universities, research institutes, hospitals, private laboratories and laboratories of Federal, State and Municipal government departments and agencies in the United States and abroad. While only a small percentage of the Company's sales are made directly to United States government departments and agencies, its domestic business is significantly affected by government expenditures and grants for research to educational research institutions and to industry. The Company regularly evaluates credit granted to customers and generally requires progress payments for the purchase of custom bioprocess equipment which is typically sold under contract. The number of these larger systems sold in any reporting period may materially affect the sales and profitability of the Company. The following table sets forth the Company's operations by geographic area for 1998, 1997 and 1996. The information shown under the caption "Europe" represents the operations of the Company's wholly owned foreign subsidiaries (in thousands):
Transfers and eliminations United between geo- Conso- States Europe graphic areas lidated ------ ------ ------------- ------- Net sales: 1998 $36,848 $14,375 $4,728 $46,495 1997 34,270 15,586 4,260 45,596 1996 32,939 14,172 4,184 42,927 Income (loss) from operations: 1998 $(1,036) $ 645 $ (391) 1997 (490) 1,542 1,052 1996 (476) 1,311 835 Identifiable assets: 1998 $29,624 $ 9,699 $39,323 1997 29,243 8,847 38,090 1996 28,341 8,885 37,226
Total sales by geographic area include both sales to unaffiliated customers and transfers between geographic areas. Such transfers are accounted for at prices comparable to normal unaffiliated customer sales. One customer based in the United States accounted for approximately 11.6%, 12.0% and 10.0%, respectively, of consolidated net sales during the years ended December 31, 1998, 1997 and 1996. -39- NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 Income from operations from the United States has been significantly affected by the research and development costs of DGI BioTechnologies, L.L.C., the Company's drug lead discovery operation (Note 10). During 1998, 1997 and 1996, net sales from domestic operations to foreign customers were $7,104,000, $9,442,000 and $11,413,000, respectively. Export sales from the U.S. are made to many countries and areas of the world including the Far East, the Middle East, Canada, South America, India and Australia. 12. Commitments and contingencies: The Company is obligated under the terms of various operating leases. Rental expense under such leases for 1998, 1997 and 1996 was $581,000, $616,000 and $614,000, respectively. As of December 31, 1998, estimated future minimum annual rental commitments under noncancelable leases expiring through 2014 are as follows (in thousands): 1999 $ 656 2000 615 2001 447 2002 345 2003 323 After 2003 2,183 ------ Total minimum payments required $4,569* ====== * Minimum payments have not been reduced by minimum sublease rentals of $339,000 due in the future under noncancelable subleases. From time to time, the Company is involved in litigation in the normal course of business, which management believes, after consultation with counsel, the ultimate disposition of which will not have a material adverse effect on the Company's consolidated results of operations or financial position. The Company enters into forward foreign exchange contracts to hedge certain firm and anticipated sales commitments, net of offsetting purchases, denominated in certain foreign currencies. The purpose of such foreign currency hedging activities is to protect the Company from the risk that the eventual cash flows resulting from the sale of products to certain foreign customers (net of purchases from applicable foreign suppliers) will be adversely affected by fluctuations in exchange rates. At December 31, 1998 and 1997, the Company had $5,001,000 and $5,965,000, respectively, of forward exchange contracts outstanding, primarily to exchange various European currencies for U.S. dollars. Substantially, all contracts mature within a period of 13 months. Gains and losses on forward exchange contracts in connection with firm commitments that are -40- NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 designated and effective as hedges of such transactions are deferred and recognized in income in the same period as the hedged transactions. At December 31, 1998, less than $56,000 of unrecognized net gains were deferred on such contracts. Gains and losses on forward exchange contracts in connection with anticipated transactions are marked to market monthly with the resulting gain or loss recognized immediately in the consolidated statement of operations. Item 9. DISAGREEMENT ON ACCOUNTING AND FINANCIAL DISCLOSURE None. -41- PART III The information required by Part III is contained in the Registrant's proxy statement which will be filed pursuant to Regulation 14A or an information statement pursuant to Regulation 14C of the General Rules and Regulations under the Securities Exchange Act of 1934 not later than 120 days after the close of the fiscal year ended December 31, 1998. The information is incorporated herein by reference. PART IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) The following documents are filed as a part of this report: 1. Financial statements and supplementary data included in Part II of this report: New Brunswick Scientific Co., Inc. and Subsidiaries, consolidated financial statements: Consolidated Balance Sheets as of December 31, 1998 and 1997 Consolidated Statements of Operations for the years ended December 31, 1998, 1997 and 1996 Consolidated Statements of Shareholders' Equity for the years ended December 31, 1998, 1997 and 1996 Consolidated Statements of Cash Flows for the years ended December 31, 1998, 1997 and 1996 Consolidated Statements of Comprehensive Income for the years ended December 31, 1998, 1997 and 1996 Notes to Consolidated Financial Statements 2. Financial statement schedules included in part IV of this report: Schedule II Schedules other than those listed above have been omitted because they are not applicable or the required information is shown in the financial statements or notes thereto. 3. Exhibits: The Exhibits index is on Page 44 -42- Schedule II NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (In thousands)
Additions --------- Charged to Balance Balance Costs and Charged to At End Beginning (Credited) Other of of Period Expenses Accounts Deductions Period --------- ---------- ---------- ---------- ------ Allowance deducted from asset to which it applies: Allowance for doubtful accounts: Year ended December 31, 1998 $284 $(14) -- $35(a) $235 Year ended December 31, 1997 224 60 -- -- 284 Year ended December 31, 1996 306 (82) -- -- 224
- -------- Notes: (a) Uncollected receivables written off. -43- EXHIBIT INDEX (3a) Restated Certificate of Incorporation, as amended is incorporated herein by reference from Exhibit (4) to the Registrant's Registration Statement on Form S-8 on file with the commission (No. 33-15606), and with respect to two amendments to said Restated Certificate of Incorporation, to Exhibit (4b) of Registrant's Registration Statement on Form S-8 (No. 33-16024). (3b) By laws of the Company as amended and restated as of August 19, 1991 is incorporated herein by reference to Exhibit (3b) from Registrant's Annual Report on Form 10-K for the year ended December 31, 1991. (3c) Rights Agreement dated as of October 31, 1989 between the Company and American Stock Transfer & Trust Company as Rights Agent, incorporated therein by reference to Exhibit 1 to the Company's Report on Form 8-K filed with the Commission on or about November 22, 1989. (4) See the provisions relating to capital structure in the Restated Certificate of Incorporation, amendment thereto, incorporated herein by reference from the Exhibits to the Registration Statements identified in Exhibit (3) above. (10-2) Pension Plan is incorporated herein by reference from Registrant's Form 10-K for the year ended December 31, 1985. (10-3) The New Brunswick Scientific Co., Inc., 1989 Stock Option Plan for Nonemployee Directors is incorporated herein by reference to Exhibit "A" appended to the Company's Proxy Statement filed with the Commission on or about April 22, 1989. (10-5)* Employment Agreement with David Freedman. (10-6) Employment Agreement with Ezra Weisman is incorporated herein by reference to Exhibit 10-6 of Registrants Report on Form 10-K for the year ended December 31, 1993. (10-7) Nonqualified stock option agreement with Ezra Weisman is incorporated herein by reference to Exhibit (10-7) of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1990. (10-8) Termination Agreement with David Freedman is incorporated herein by reference to Exhibit (10-8) of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1990. -44- (10-9) Termination Agreement with Samuel Eichenbaum is incorporated herein by reference to Exhibit (10-9) of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1991. (10-10) Termination Agreement with Ezra Weisman is incorporated herein by reference to Exhibit (10-10) of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1990. (10-11) Termination Agreement with Sigmund Freedman is incorporated herein by reference to Exhibit (10-11) of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1990. (10-12) 1991 Nonqualified Stock Option Plan is incorporated herein by reference to Exhibit (10-12) of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1991. (10-13) Indemnification Agreements in substantially the same form as with all the Directors and Officers of the Company is incorporated herein by reference to Schedule A to Exhibit (10-13) of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1991. (10-14) Loan and Security Agreement with Summit Bank, the successor to United Jersey Bank/Central NA dated February 17, 1993, is incorporated herein by reference to Exhibit (10-14) of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1992. (10-16) Nonqualified stock option agreement with Ezra Weisman is incorporated herein by reference to the Registrant's Report on Form 10-K for the year ended December 31, 1993. (10-17) Amendment dated December 29, 1995 to Loan and Security Agreement with Summit Bank, the successor to United Jersey Bank/Central NA dated February 17, 1993. (13) Annual Report to Shareholders, to be filed within 120 days of the end of the fiscal year ended December 31, 1998, is incorporated herein by reference. (22) Subsidiaries of the Company appear on Page 46. (24a)* Consent of KPMG LLP. * Filed herewith. -45- EX-22 2 SUBSIDIARIES OF THE COMPANY EXHIBIT 22 SUBSIDIARIES OF THE COMPANY Percentage of Name and Place of Incorporation Ownership ------------------------------- -------------- New Brunswick Scientific (U.K.) Limited Incorporated in The United Kingdom 100% NBS Benelux B.V. Incorporated in The Netherlands 100% New Brunswick Scientific NV/SA Incorporated in Belgium 100% New Brunswick Scientific GmbH Incorporated in Germany 100% New Brunswick Scientific of Delaware, Inc. Incorporated in the State of Delaware 100% New Brunswick Scientific International, Inc. Incorporated in the State of Delaware 100% NBS Sales Co., Limited Incorporated in Jamaica 100% New Brunswick Scientific West Inc. Incorporated in the State of California 100% New Brunswick Scientific S.a.r.l. Incorporated in France 100% -46- SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. NEW BRUNSWICK SCIENTIFIC CO., INC. Dated: March 17, 1999 By: /s/ Ezra Weisman ---------------------------------- Ezra Weisman President (Principal Executive Officer) and Director Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Dated: March 17, 1999 By: /s/ David Freedman ----------------------------- David Freedman Chairman of the Board Dated: March 17, 1999 By: /s/ Adele Lavender ----------------------------- Adele Lavender Corporate Secretary Dated: March 17, 1999 By: /s/ Sigmund Freedman ----------------------------- Sigmund Freedman Treasurer and Director Dated: March 17, 1999 By: /s/ Samuel Eichenbaum ----------------------------- Samuel Eichenbaum Vice President, Finance -47- Dated: March 17, 1999 By: /s/ Ernest Gross ----------------------------- Ernest Gross Director Dated: March 17, 1999 By: /s/ Bernard Leon ----------------------------- Bernard Leon Director Dated: March 17, 1999 By: /s/ Kiyoshi Masuda ----------------------------- Kiyoshi Masuda Director Dated: March 17, 1999 By: /s/ Dr. David Pramer ----------------------------- Dr. David Pramer Director Dated: March 17, 1999 By: /s/ Martin Siegel ----------------------------- Martin Siegel Director Dated: March 17, 1999 By: /s/ Dr. Marvin Weinstein ----------------------------- Dr. Marvin Weinstein Director -48- EX-10.5 3 EMPLOYMENT AND CONSULTING AGREEMENT (EXHIBIT 10-5) EMPLOYMENT AND CONSULTING AGREEMENT between NEW BRUNSWICK SCIENTIFIC CO., INC. and DAVID FREEDMAN January 1, 1999 EMPLOYMENT AND CONSULTING AGREEMENT AGREEMENT, made as of the 1st day of January 1999 between NEW BRUNSWICK SCIENTIFIC, CO., INC., a New Jersey corporation, with its principal place of business located at 44 Talmadge Road, P.O. Box 4005, Edison, New Jersey, 08818-4005 (referred to in this Agreement as the "Company") and DAVID FREEDMAN, residing in Highland Park, New Jersey (referred to in this Agreement as "Freedman"). W I T N E S S E T H : WHEREAS, the Company currently employs Freedman under an Employment Agreement dated January 1, 1996 which expired December 31, 1998 and WHEREAS, the Company desires to continue to retain Freedman's services as an officer of the Company upon the terms and conditions set forth in this Agreement, and Freedman desires to continue such employment, and WHEREAS, the parties desire to provide for the terms and conditions upon which the Company may secure the services of Freedman as a consultant to the Company following the expiration of Freedman's term of service as an employee of the Company, NOW, THEREFORE, in consideration of the promises and mutual covenants herein contained, the parties agree as follows: ARTICLE 1 EMPLOYMENT 1.1 Employment. The Company hereby employs Freedman and Freedman hereby accepts such employment. Freedman will devote his best efforts and substantially all his full business time and attention to performing such duties. 1.2 Consultant. Following the expiration of Freedman's period of service as an employee of the Company, as provided in Section 4.1 below, Freedman agrees to serve as a consultant and independent contractor to the Company, rendering such advice and assistance to the Company as they may mutually agree. Freedman agrees to render services as reasonably requested by the Company on 10-days' advance notice, written or oral, subject to a maximum of 50 full or partial days of service during each twelve-month period following the commencement of his services as a consultant under this Agreement. 1.3 Performance of Services. Freedman shall observe and comply with such rules, regulations and policies as may be determined from time to time by the Board of Directors of the Company (the "Board") in writing, within the scope of his duties as an employee or consultant. 1 ARTICLE 2 COMPENSATION 2.1 Salary. For his services under this Agreement as an employee of the Company, Freedman shall receive a salary, payable in such regular intervals as shall be determined by the Company, which shall be at the rate of Two Hundred and Thirty-Five Thousand Five Hundred Dollars ($235,500.00). 2.2 Salary Increases. The rate of salary provided for in Section 2.1 shall be reviewed by the Board not less often than annually and may be increased from time to time and in such amount as the Board, in its discretion, may determine, on the basis of the same criteria used for other executive employees of the Company. 2.3 Discretionary Bonus. The Company may, but is not required to, pay Freedman such bonus or bonuses as the Board may from time to time determine, consistent with the bonuses paid to other executive employees of the Company, and in addition to such bonuses as may be payable to Freedman pursuant to other bonus plans or arrangements. During his period of service as an employee, Freedman shall be entitled to participate in bonus programs or arrangements generally available for executive employees of the Company, but the Board retains full discretion as to the amount of the bonus, if any, to be paid to Freedman. 2.4 Consulting Payments. In exchange for his services as a consultant to the Company pursuant to Section 1.2, Freedman shall be paid at the rate of One Hundred Thousand Dollars ($100,000.00) per year. Payments shall be made in regular equal installments as the Company and Freedman may agree, but no less frequently than monthly. 2.5 Withholding. All payments of salary, bonuses and other compensation for services pursuant to this Agreement shall be subject to the customary withholding of taxes as required by law. ARTICLE 3 FRINGE BENEFITS 3.1 Participation in Plans. (a) During his period of service as an employee of the Company, Freedman shall be entitled to all additional fringe benefits, including, but not limited to, health and life insurance programs which may be generally available to other executive employees of the Company, subject to Section 3.1(c). (b) Following termination of Freedman's services to the Company as an employee, for any reason other than a termination pursuant to Section 4.3(b), the Company shall pay all premiums necessary to continue the medical and life insurance coverage previously provided to Freedman and his spouse under Section 3.1(a), or other comparable coverage, until the death of Freedman and his spouse. However, following his period of service as an employee 2 of the Company, in place of the health insurance plan generally available for executives employees of the Company, the Company shall thereafter provide for Freedman (and for his spouse when she attains the age of 65) a policy of medical insurance that offers coverage as a supplement to Medicare benefits. The basic terms of such policy shall provide, in conjunction with Medicare, benefits that are comparable to the coverage previously provided to Freedman as an executive employee of the Company. (c) All matters of eligibility for coverage of benefits under any plan or plans of health, hospitalization, life or other insurance provided by the Company shall be determined in accordance with the provisions of the insurance policies. The Company shall not be liable to Freedman, or his spouse or beneficiaries or other successors, for any amount payable or claimed to be payable under any plan of insurance. So long as Freedman beneficially holds 10% or more of the Common stock of the Company, he shall not be eligible to participate in any plan of the Company involving the Common stock or any derivative security of the Company (although otherwise eligible) where his participation in that plan would prevent the Common stock or derivative securities issued under that plan from qualifying for exemption under Section 16(b) of the Securities Exchange Act of 1934, as amended. 3.2 Holidays and Sick Leave. During his period of service as an employee of the Company, Freedman shall be entitled to such paid holidays and sick leave, and other benefit programs, as and to the extent that the Company generally provides the same from time to time to other executive employees. 3.3 Vacation and Professional Leave. During his period of service as an employee of the Company, Freedman shall be entitled to vacation and additional leave to attend conventions and professional meetings each year during this Agreement as permitted under the employment policies of the Company in effect at such time. 3.4 Business Expenses. The parties acknowledge that Freedman shall incur, from time to time as either an employee or as a consultant, for the benefit of the Company and in furtherance of the Company's business, various business expenses. The Company agrees that it shall either pay such expenses directly, advance sums to Freedman to be used for payment of such expenses, or reimburse Freedman for such expenses incurred by him. Freedman agrees to submit to the Company such documentation as may be reasonably necessary to substantiate that all expenses paid or reimbursed hereunder were reasonably related to the performance of his duties as an employee or consultant. 3.5 Company Car. The Company recognizes that Freedman, whether serving as an employee or as a consultant, requires the use of an automobile in the performance of his duties and therefore agrees to furnish an automobile to Freedman for his sole use. Title to such automobile shall at all times remain with the Company. The automobile will be replaced upon request by Freedman, but not more frequently than every three (3) years. The Company shall pay for the fuel, insurance, maintenance, and repair costs associated with said automobile, except the cost of fuel consumed in driving the automobile for personal use. Upon termination of this Agreement for any reason, the automobile shall be 3 returned to the Company unless Freedman elects, within thirty (30) days after such termination, to purchase the automobile from the Company. Any purchase pursuant to the preceding sentence shall be at book value unless a lesser price is mutually agreed to and shall be completed within sixty (60) days after the termination of this Agreement. 3.6 Split-Dollar Insurance Coverage. The Company and Freedman are currently parties to a split-dollar life insurance agreement, providing for the division of rights and obligations in connection with a One Million Dollar ($1,000,000.00) life insurance policy on Freedman's life. The Company and Freedman hereby ratify that agreement and further provide that, following termination of this Agreement and for remainder of Freedman's life, the Company will continue to contribute the sum of Forty Thousand Dollars ($40,000.00) (or the actual amount of the premiums, whichever is less) towards each annual premium due under such policy, or replacement policy obtained by Freedman. The Company's contribution following the termination of this Agreement shall be taken into account in determining the amount to which the Company is entitled to receive from the policy proceeds upon Freedman's death. Except, as specifically set forth in this Section 3.6, all matters regarding the insurance policy shall be governed by the terms of the split-dollar life insurance agreement pertaining to the policy. ARTICLE 4 TERM AND TERMINATION OF EMPLOYMENT 4.1 Employment Term. The employment term of this Agreement shall be three (3) years commencing on January 1, 1999 (the "Employment term"), unless terminated prior to such date in accordance with the terms of this Agreement. 4.2 Consultant Term. Upon expiration of the three-year employment term of this Agreement pursuant to Section 4.1, this Agreement shall continue for an additional three-year period, during which time Freedman shall serve as a consultant to the Company, as provided in Article 1.2 above (the "Consultant term"), unless this Agreement is terminated prior to such date in accordance with the terms of this Agreement. 4.3 Termination. This Agreement shall terminate prior to the expiration of its Employment or Consultant term upon occurrence of any one or more of the following events: (a) Mutual Agreement. The parties may mutually agree to terminate this Agreement at any time. (b) Termination for Cause. The Company may terminate this Agreement for cause at any time. "Cause" shall include, but not be limited to the following: any material violation of the terms of this Agreement by Freedman; conviction of Freedman of any crime (or found criminally liable for any fraud) against the Company or its property or any crime involving moral turpitude or reasonably likely to bring discredit upon the Company; material failure to perform or meet 4 reasonable standards of performance established in writing by the Board of Directors of the Company with respect to Freedman's position; and any material violation of reasonable operating policy formally adopted by the Company from time to time. The determination of whether Cause exists shall be made in good faith by a majority vote of the entire Board. (c) Death of Freedman. This Agreement shall immediately terminate upon the death of Freedman. (d) Disability of Freedman. In the event that Freedman becomes "disabled", as defined below, the Company shall have the option to terminate this Agreement by giving 30-days' advance written notice to Freedman. For purposes of this Agreement, the term "disabled" or "disability" shall mean the inability of Freedman to perform his regular duties for the Company for a period of six (6) consecutive months, as reasonably determined by the Board, in accordance with uniform rules consistently applied to all employees and supported by the written opinion of at least one (1) physician. For purposes of this Agreement, Freedman shall first be deemed disabled on the date that is six (6) months after the initial onset of his condition, as described above. (e) Termination of Consulting by Freedman. At any time during the Consultant term of this Agreement, Freedman may terminate this Agreement by written notice to the Company. 4.4 Termination Benefits. Following termination of this Agreement, the Company shall make the following payments to Freedman, as applicable, subject, however, to Sections 2.6 and 4.5, and without limitation on Freedman's rights and obligations, if any, arising other than under this Agreement: (a) Accrued Compensation. Regardless of the reason for termination of this Agreement, the Company shall pay, within a reasonable period of time following such termination, all compensation payments (including accrued and unused vacation compensation during the Employment term) and reimbursement for expenses as may be due, accrued or payable as of the date of such termination. Payments for Freedman's services as a consultant shall be deemed to accrue on an equal daily basis throughout the year, regardless of the number of days of consulting services actually rendered during the final partial year prior to termination of this Agreement. Following termination of this Agreement, Freedman, or his successors, as the case may be, shall also be entitled to the deferred compensation pursuant to Section 2.5 and entitled to fringe benefits as expressly provided in Article 3 with regard to the period after termination of this Agreement. (b) Death Benefit. In the event that this Agreement is terminated by reason of Freedman's death, the Company shall pay to Freedman's beneficiary (as designated in writing by Freedman and delivered to the Company during the lifetime of Freedman), or if no such beneficiary is so designated, then to the personal representative of Freedman's estate, a death benefit equal to the annual compensation (exclusive of fringe benefits under Article 3) 5 payable by the Company to Freedman at the time of his death. The payment by the Company shall be made within forty-five (45) days of such termination of employment. (c) Disability Benefit. In the event that this Agreement is terminated by reason of Freedman's disability, the Company shall pay to Freedman (or his personal representative) a disability benefit equal to the annual compensation (exclusive of fringe benefits under Article 3) payable by the Company to Freedman at the time of such disability. The payment by the Company shall be made within forty-five (45) days of such termination of employment. 4.5 Limit on Termination Payments. In no event shall the amounts payable by the Company pursuant to Section 4.4 exceed the amounts that would be deductible by the Company under the provisions of Section 280G of the Internal Revenue Code of 1986, as amended. The amount deductible by the Company shall be determined by the independent auditors regularly retained by the Company. ARTICLE 5 MISCELLANEOUS 5.1 Assignment Prohibited. This Agreement is personal to Freedman hereto and he may not assign or delegate any of his rights or obligations hereunder without first obtaining the written consent of the Company. The Company may not assign this Agreement without the written consent of Freedman, except in connection with (i) a merger or consolidation of the Company (in which case the merged or consolidated entity shall remain fully liable for its obligations as the Company under this Agreement), or (ii) a transfer of this Agreement to a subsidiary or affiliate, provided that the subsidiary or affiliate continues the primary business of the Company, and further, provided that, in the case of a transfer to a subsidiary or affiliate, the Company shall remain liable for its obligations under this Agreement. 5.2 Amendments. No amendments or additions to this agreement shall be binding unless in writing and signed by the party against whom enforcement of such amendment of addition is sought. 5.3 Paragraph Headings. The paragraph headings used in this Agreement are included solely for convenience and shall not affect or be used in connection with the interpretation of this Agreement. 5.4 Legal Expenses of Enforcement. If either party commences a legal action or other proceeding for enforcement of this Agreement, or because of an alleged dispute, breach, default or misrepresentation in connection with any of the provisions of this Agreement, the prevailing party shall be entitled to reasonable attorneys' fees and other costs incurred in connection with that action or proceeding, in addition to any other relief to which it may be entitled. 6 5.5 Severability. If any provision of this Agreement is declared invalid by any tribunal, then such provision shall be deemed automatically modified to conform to the requirements for validity as declared at such time, and as so modified, shall be deemed a provision of this Agreement as though originally included herein. In the event that the provision invalidated is of such a nature that it cannot be so modified, the provision shall be deemed deleted from this Agreement as though the provision had never been included herein. In either case, the remaining provisions of this Agreement shall remain in effect. 5.6 Arbitration. Any controversy, claim or dispute arising out of or relating to this Agreement or its construction and interpretation shall be settled by arbitration in accordance with the rules of the American Arbitration Association, and judgment upon the award rendered in such arbitration may be entered in any court having jurisdiction thereof. In addition, any controversy, claim or dispute concerning the scope of this arbitration clause or whether a particular dispute falls within this arbitration clause shall also be settled by arbitration in accordance with the rules of the American Arbitration Association. 5.7 Choice of Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New Jersey. 5.8 Other Agreements. This Agreement is not intended to and shall not affect the rights and obligations of the Company or Freedman under any other agreement between them, pertaining to stock option rights, severance benefits, or otherwise. 5.9 Notices. All notices required or permitted hereunder shall be in writing and shall be delivered in person or sent by certified or registered mail, return receipt requested, postage prepaid to each party at the address first written above or at such other address as provided in writing. 5.10 Binding Effect. This Agreement shall be binding upon, and inure to the benefit of, the parties, their heirs, successors and assigns. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. ATTEST: NEW BRUNSWICK SCIENTIFIC CO., INC. [Corporate Seal] By: ------------------------------------ Ezra Weisman - ---------------------------------- Secretary - ---------------------------------- ------------------------------------ Witness David Freedman 7 EX-24.(A) 4 INDEPENDENT AUDITORS' CONSENT (EXHIBIT 24a) Independent Auditors' Consent The Board of Directors New Brunswick Scientific Co., Inc. We consent to incorporation by reference in the registration statements (No. 33-70452, No. 333-06029 and No. 33016024) on Form S-8 of New Brunswick Scientific Co., Inc. of our report dated February 10, 1999, relating to the consolidated balance sheets of New Brunswick Scientific Co., Inc. and subsidiaries as of December 31, 1998 and 1997, and the related consolidated statements of operations, shareholders' equity, cash flows, and comprehensive income for each of the years in the three-year period ended December 31, 1998, and related schedule, which report appears in the December 31, 1998 annual report on from 10-K of New Brunswick Scientific Co., Inc.. KPMG LLP Short Hills, New Jersey March 29, 1999 EX-27 5 FINANCIAL DATA SCHEDULE
5 0000071241 NEW BRUNSWICK SCIENTIFIC CO, INC. 12-MOS DEC-31-1998 DEC-31-1998 3,793,000 0 10,230,000 0 15,923,000 32,278,000 5,622,000 0 39,323,000 8,145,000 0 0 0 298,000 30,149,000 39,323,000 46,495,000 46,495,000 28,242,000 46,886,000 (35,000) 0 8,000 (364,000) (208,000) (156,000) 0 0 0 (156,000) (.03) (.03)
-----END PRIVACY-ENHANCED MESSAGE-----