-----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, MB43oqbUtKg3qC6Up/9ksTMK5uyh6m2n94ff/zmR7X3WWMrHtyRzXGeYSKuT77fk LwiGq/JYxNl4z4AconwhVg== 0000927016-02-002890.txt : 20020515 0000927016-02-002890.hdr.sgml : 20020515 20020515131658 ACCESSION NUMBER: 0000927016-02-002890 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: APOGENT TECHNOLOGIES INC CENTRAL INDEX KEY: 0000824803 STANDARD INDUSTRIAL CLASSIFICATION: DENTAL EQUIPMENT & SUPPLIES [3843] IRS NUMBER: 222849508 STATE OF INCORPORATION: WI FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11091 FILM NUMBER: 02650200 BUSINESS ADDRESS: STREET 1: 411 E WISCONSIN AVE 24TH FLR CITY: MILWAUKEE STATE: WI ZIP: 53202 BUSINESS PHONE: 4142746600 MAIL ADDRESS: STREET 1: 411 EAST WISCONSIN AVE CITY: MILWAUKEE STATE: WI ZIP: 53202 FORMER COMPANY: FORMER CONFORMED NAME: SYBRON CORP /DE/ DATE OF NAME CHANGE: 19940114 FORMER COMPANY: FORMER CONFORMED NAME: SYBRON INTERNATIONAL INC DATE OF NAME CHANGE: 19951221 FORMER COMPANY: FORMER CONFORMED NAME: SYBRON INTERNATIONAL CORP DATE OF NAME CHANGE: 19960321 10-Q 1 d10q.txt FORM 10-Q 03/31/2002 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2002 Or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _______________ to ________________. COMMISSION FILE NUMBER: 1-11091 APOGENT TECHNOLOGIES INC. ------------------------- (Exact name of registrant as specified in its charter) - -------------------------------------------------------------------------------- Wisconsin 22-2849508 - -------------------------------------------------------------------------------- (State or other jurisdiction of (IRS Employer Identification incorporation or organization) Number) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 30 Penhallow Street, Portsmouth, New Hampshire 03801 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) - -------------------------------------------------------------------------------- (603) 433-6131 -------------- (Registrant's telephone number, including area code) 48 Congress Street, Portsmouth, NH. 03801 ----------------------------------------- (Former name, former address, former fiscal year, if changed since last report) Indicate by checkmark, whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period the registrant was required to file such reports, and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___ . --- At May 9, 2002, there were 106,776,102 shares of the Registrant's Common Stock, par value $0.01 per share, outstanding. APOGENT TECHNOLOGIES INC. AND SUBSIDIARIES
Index Page Part I - FINANCIAL INFORMATION Item 1. Financial Statements 1 Consolidated Balance Sheets as of March 31, 2002 and September 30, 2001 1 Consolidated Statements of Income for the three and six months ended March 31, 2002 and 2001 2 Consolidated Statement of Shareholders' Equity for the six months ended March 31, 2002 3 Consolidated Statements of Cash Flows for the six months ended March 31, 2002 and 2001 4 Notes to unaudited consolidated financial statements 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 25 Item 3. Quantitative and Qualitative Disclosures About Market Risk 38 Part II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 38 Item 6. Exhibits and Reports on Form 8-K 38 Signaturesc 39
PART I. FINANCIAL INFORMATION Item 1. Financial Statements -------------------- APOGENT TECHNOLOGIES INC. AND SUBSIDIARIES Consolidated Balance Sheets (In thousands, except share and per share data)
March 31, September 30, 2002 2001 ---- ---- Assets Current assets: Cash and cash equivalents $ 42,415 $ 9,192 Accounts receivable (less allowance for doubtful accounts of $4,804 and $3975, respectively) 188,685 183,278 Inventories 185,517 167,436 Deferred income taxes 13,070 13,046 Prepaid expenses and other current assets 22,694 20,985 Assets of Vacuum Process Technology, Inc.("VPT") avail. for sale 6,157 - ---------------- --------------- Total current assets 458,538 393,937 Available for sale security 51,730 55,072 Property, plant and equipment, net 244,659 223,687 Intangible assets 1,202,658 1,140,334 Deferred income taxes 6,740 6,147 Other assets 17,337 15,961 ---------------- --------------- Total assets $1,981,662 $1,835,138 ================ =============== Liabilities and Shareholders' Equity Current liabilities: Accounts payable $ 46,901 $ 53,822 Current portion of long-term debt 87,091 73,642 Income taxes payable 52,877 38,747 Accrued payroll and employee benefits 28,270 33,236 Accrued interest expense 17,429 15,292 Restructuring reserve 4,839 1,552 Deferred income taxes 791 911 Other current liabilities 28,351 26,364 Liabilities of Vacuum Process Technology, Inc. 70 - ---------------- --------------- Total current liabilities 266,619 243,566 Long-term debt 658,172 583,788 Securities lending agreement 51,730 55,072 Deferred income taxes 114,815 107,220 Other liabilities 8,219 7,002 Commitments and contingent liabilities - - Shareholders' equity: Preferred stock, $0.01 par value; authorized 20,000,000 shares - - Common stock, $0.01 par value; authorized 250,000,000 shares issued 106,478,598 and 105,875,768 shares respectively; outstanding 106,478,378 and 105,875,548 shares respectively 1,065 1,059 Equity rights, 50 rights at $1.09 per right - - Additional paid-in capital 263,310 254,637 Retained earnings 676,562 627,642 Accumulated other comprehensive income (58,830) (44,848) Treasury common stock, 220 shares at cost - - ---------------- --------------- Total shareholders' equity 882,107 838,490 ---------------- --------------- Total liabilities and shareholders' equity $1,981,662 $1,835,138 ================ ===============
See the accompanying notes to the unaudited consolidated financial statements 1 APOGENT TECHNOLOGIES INC. AND SUBSIDIARIES Consolidated Statements of Income (In thousands, except per share data) (Unaudited)
Three Months Ended Six Months Ended March 31, March 31, 2002 2001 2002 2001 ---- ---- ---- ---- Net sales $263,120 $239,979 $502,836 $457,464 Cost of sales: Cost of products sold 132,884 120,519 257,335 232,606 Restructuring charge 3,673 - 3,673 - Depreciation of purchase accounting adjustments 486 144 1,609 269 ------------ ------------- ------------- ------------- Total cost of sales 137,043 120,663 262,617 232,875 ------------ ------------- ------------- ------------- Gross profit 126,077 119,316 240,219 224,589 Selling, general and administrative expenses 58,430 52,081 111,516 97,497 Restructuring charge 1,614 583 1,614 583 Depreciation and amortization of purchase accounting adjustments 4,161 10,618 8,164 21,057 ------------ ------------- ------------- ------------- Total selling, general and administrative expenses 64,205 63,282 121,294 119,137 ------------ ------------- ------------- ------------- Operating income 61,872 56,034 118,925 105,452 Other income (expense): Interest expense (10,300) (11,864) (20,531) (24,392) Amortization of deferred financing fees (914) (140) (1,741) (158) Other, net 801 5,488 2,273 5,175 ------------ ------------- ------------- ------------- Income from continuing operations before income taxes and extraordinary item 51,459 49,518 98,926 86,077 Income taxes 18,852 19,815 36,230 34,447 ------------ ------------- ------------- ------------- Income from continuing operations before extraordinary item 32,607 29,703 62,696 51,630 Discontinued operations: (Loss) income from operations of VPT including estimated loss on sale of $13,200 (net of income tax benefit (expense) of $7,890, $(312), $368, and $(479), respectively) (13,654) 487 (13,776) 747 Loss from distribution of SDS (net of income tax expense of $0 and $435, respectively) - (838) - (11,824) ------------ ------------- ------------- ------------- Income before extraordinary item 18,953 29,352 48,920 40,553 Extraordinary item (net of income tax of $497) - - - (745) ------------ ------------- ------------- ------------- Net income $ 18,953 $ 29,352 $ 48,920 $ 39,808 =========== ============= ============= ============= Basic earnings per common share from continuing operations $ 0.31 $ 0.28 $ 0.59 $ 0.49 Discontinued operations (0.13) (0.00) (0.13) (0.11) Extraordinary item - - - (0.01) ------------ ------------- ------------- ------------- Basic earnings per common share $ 0.18 $ 0.28 $ 0.46 $ 0.38 =========== ============= ============= ============= Diluted earning per common share from continuing operations $ 0.30 $ 0.28 $ 0.58 $ 0.48 Discontinued operations (0.13) (0.00) (0.13) (0.10) Extraordinary item - - - (0.01) ------------ ------------- ------------- ------------- Diluted earnings per common share $ 0.17 $ 0.27 $ 0.45 $ 0.37 =========== ============= ============= ============= Weighted average basic shares outstanding 106,412 105,371 106,270 105,332 Weighted average diluted shares outstanding 109,043 107,480 108,996 107,558
See accompanying notes to the unaudited consolidated financial statements. 2 APOGENT TECHNOLOGIES INC. AND SUBSIDIARIES Consolidated Statement of Shareholders' Equity For the six months ended March 31, 2002 (In thousands) (Unaudited)
Accumulated Additional Other Common Equity Paid - In Retained Comprehensive Stock Rights Capital Earnings Income ----- ------ ------- -------- ------ Balance at September 30, 2001 $ 1,059 $ - $ 254,637 $ 627,642 $ (44,848) Comprehensive income: Net income - - - 48,920 - Translation adjustment - - - - (11,521) Amortization of gain on sale of interest rate swaps, net of tax benefit of $268 - - - - (456) Unrealized loss on security available for sale, net of tax benefit of $1,177 - - - - (2,005) --------------- ---------------- ---------------- ---------------- --------------- Total comprehensive income - - - 48,920 (13,982) Shares issued in connection with stock options 6 - 4,784 - - Tax benefit related to stock options - - 3,889 - - --------------- ---------------- ---------------- ---------------- --------------- Balance at March 31, 2002 $ 1,065 $ - $ 263,310 $ 676,562 $ (58,830) =============== ================ ================ ================ =============== Treasury Total Common Shareholders' Stock Equity ----- ------ Balance at September 30, 2001 $ - $ 838,490 Comprehensive income: Net income - 48,920 Translation adjustment - (11,521) Amortization of gain on sale of interest rate swaps, net of tax benefit of $268 - (456) Unrealized loss on security available for sale, net of tax benefit of $1,177 - (2,005) ---------------- ---------------- Total comprehensive income - 34,938 Shares issued in connection with stock options - 4,790 Tax benefit related to stock options - 3,889 ---------------- ---------------- Balance at March 31, 2002 $ - $ 882,107 ================ ================
See accompanying notes to the unaudited consolidated financial statements. 3 APOGENT TECHNOLOGIES INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (In thousands) (Unaudited)
Six Months Ended March 31, 2002 2001 ---- ---- Cash flows from operating activities: Net income $ 48,920 $ 39,808 Adjustments to reconcile net income to net cash provided by operating activities Discontinued operations 13,776 11,077 Depreciation 18,374 16,536 Amortization 9,108 20,610 Gain on sale of property, plant and equipment 70 (4,962) Provision for losses on doubtful accounts 404 (290) Inventory provisions 2,636 1,161 Deferred income taxes 7,300 632 Extraordinary item - 745 Changes in assets and liabilities, net of effects of businesses acquired: Increase in accounts receivable (1,314) (3,445) Increase in inventories (14,233) (15,629) Decrease (increase) in prepaid expenses and other current assets 2,609 (2,647) Decrease in accounts payable (7,875) (8,871) Increase in income taxes payable 12,708 17,136 (Decrease) increase in accrued payroll and employee benefits (5,103) 4,670 Increase in accrued interest expense 2,138 - Increase (decrease) in restructuring reserve 3,183 (4,081) Increase (decrease) in other current liabilities 1,074 (7,184) Net change in other assets and liabilities (9,684) 3 ------------- ------------- Net cash provided by operating activities 84,091 65,269 ------------- ------------- Cash flows from investing activities: Capital expenditures (17,770) (24,171) Proceeds from sales of property, plant and equipment 325 10,731 Net cash flow from SDS - 46,394 Net payment for businesses acquired (113,780) (51,206) ------------- ------------- Net cash used in investing activities (131,225) (18,252) ------------- ------------- Cash flows from financing activities: Proceeds from long-term debt 300,000 333,619 Principal payments on long-term debt - (381,012) Proceeds from the exercise of stock options 4,790 2,304 Financing fees paid (8,017) (3,900) Proceeds from revolving credit facility 179,500 359,540 Principal payments on revolving credit facility (388,000) (358,640) Other financing activities (560) (1,042) ------------- ------------- Net cash provided by (used in) financing activities 87,713 (49,131) ------------- ------------- Effect of exchange rate changes on cash and cash equivalents (7,499) 1,816 ------------- ------------- Net increase (decrease) in cash and cash equivalents 33,080 (298) Cash and cash equivalents at beginning of period 9,335 12,411 ------------- ------------- Cash and cash equivalents at end of period $ 42,415 $ 12,113 ============= ============= Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 17,819 $ 25,665 ============= ============= Income taxes $ 19,105 $ 21,147 ============= ============= Capital lease obligations incurred $ 117 $ - ============= =============
See accompanying notes to unaudited consolidated financial statements. 4 APOGENT TECHNOLOGIES INC. AND SUBSIDIARIES Notes to Unaudited Consolidated Financial Statements (dollars in thousands except per share data, or when specified in millions) 1. Basis of Presentation In the opinion of management, all adjustments that are necessary for a fair statement of the results for the interim periods presented have been included. The results for the three-month and six-month periods ended March 31, 2002 are not necessarily indicative of the results to be expected for the full year. The financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and note disclosures required by generally accepted accounting principles in the United States. These statements should be read in conjunction with the Company's annual report on Form 10-K for the fiscal year ended September 30, 2001. The Company adopted Statement No. 142, "Goodwill and Other Intangible Assets" (SFAS 142), on October 1, 2001. SFAS 142 requires that all goodwill and intangible assets with indefinite useful lives will no longer be amortized, but instead tested for impairment at least annually. The Company has performed its initial impairment tests and the results indicate no circumstances of impaired goodwill. Had the Company adopted SFAS 142 effective October 1, 2000 (the start of the fiscal year 2001), selling, general and administrative expenses would have been reduced by $7,167 and $14,210, for the three and six months ended March 31, 2001 due to the non-amortization of goodwill. As a result, income before extraordinary items would have been $34,324 and $50,408 for the three and six months ending March 31, 2001, respectively, and net income would have been $34,324 and $49,663, respectively. Basic earnings per share would have been $0.33 and $0.47 for the three and six months ended March 31, 2001, respectively, and diluted earnings per share would have been $0.32 and $0.46, respectively. 2. Inventories Inventories at March 31, 2002 and September 30, 2001 consist of the following: March 31, September 30, 2002 2001 ---- ---- Raw materials and supplies 69,330 56,660 Work in process 22,987 25,974 Finished goods 93,200 84,802 ----------- ----------- $ 185,517 $ 167,436 =========== =========== 3. Intangible Assets As a result of SFAS 142, the Company is no longer amortizing approximately $957.5 million of goodwill as of March 31, 2002. The Company added approximately $99 million to intangibles and goodwill since September 31, 2001 (approximately $32 million to goodwill and $67 million to amortizable intangible assets). The Company is currently assessing the final allocation of purchase price premium to the various tangible and intangible assets for these acquisitions. In addition, the Company wrote off approximately $21 million in goodwill and intangibles in connection with the estimated loss on sale of VPT. 5 Intangible assets are as follows:
March 31, September 30, 2002 2001 ---- ---- Proprietary technology 130,529 109,376 Trademarks 73,500 58,894 Patents 45,874 28,547 Licenses 12,841 10,703 Drawings 11,707 11,486 Non-compete agreements 14,294 13,240 Other 19,667 10,611 Less: Accumulated amortization (63,285) (53,389) ---------------- ---------------- Net amortizable intangible assets 245,127 189,468 Unamortizable intangible assets (goodwill) 957,531 950,866 ---------------- ---------------- $ 1,202,658 $ 1,140,334 ================ ================
Intangible assets at March 31, 2002 by business segment are as follows:
Clinical Labware & Laboratory Diagnostics LifeScience Equipment Consolidated ----------- ----------- --------- ------------ Proprietary technology 109,561 12,222 8,746 130,529 Less: Accumulated amortization (18,026) (3,217) (1,145) (22,388) ---------------- ---------------- ---------------- ----------------- Net proprietary technology 91,535 9,005 7,601 108,141 ---------------- ---------------- ---------------- ----------------- Trademarks 14,270 48,127 11,103 73,500 Less: Accumulated amortization (1,096) (9,470) (3,808) (14,374) ---------------- ---------------- ---------------- ----------------- Net trademarks 13,174 38,657 7,295 59,126 ---------------- ---------------- ---------------- ----------------- Patents 31,749 12,633 1,492 45,874 Less: Accumulated amortization (2,937) (1,915) (459) (5,311) ---------------- ---------------- ---------------- ----------------- Net patents 28,812 10,718 1,033 40,563 ---------------- ---------------- ---------------- ----------------- Licenses 10,514 2,327 - 12,841 Less: Accumulated amortization (3,214) (99) - (3,313) ---------------- ---------------- ---------------- ----------------- Net licenses 7,300 2,228 - 9,528 ---------------- ---------------- ---------------- ----------------- Drawings - 407 11,300 11,707 Less: Accumulated amortization - (125) (5,462) (5,587) ---------------- ---------------- ---------------- ----------------- Net drawings - 282 5,838 6,120 ---------------- ---------------- ---------------- ----------------- Non-compete agreements 7,613 6,482 199 14,294 Less: Accumulated amortization (3,345) (3,709) (127) (7,181) ---------------- ---------------- ---------------- ----------------- Net non-compete agreements 4,268 2,773 72 7,113 ---------------- ---------------- ---------------- ----------------- Other identifiable intangible assets (a) 282 3,073 - 3,355 Less: Accumulated amortization (92) (2,199) - (2,291) ---------------- ---------------- ---------------- ----------------- Net other identifiable intangibles (a) 190 874 - 1,064 ---------------- ---------------- ---------------- ----------------- Net amortizable intangible assets (a) $ 145,279 $ 64,537 $ 21,839 $ 231,655 ================ ================ ================ ================= Excess cost over net asset values acquired (goodwill) $ 505,184 $ 369,863 $ 82,484 $ 957,531 ---------------- ---------------- ---------------- ----------------- Unamortizable intangible assets 505,184 369,863 82,484 957,531 ================ ================ ================ =================
Note (a): At March 31, 2002, Apogent Corporate Office had $16,312 of amortizable other identifiable intangible assets and $2,840 of related accumulated amortization that was not allocated to any of the business segments. 6 Amortization expense relating to the existing identifiable intangible assets for each of the next five years is expected to be $19,519, $18,325, $16,974, $12,657, and $11,008, respectively. 4. Acquisitions During the six months ended March 31, 2002, the Company completed six acquisitions for cash. The aggregate purchase price for these acquiitions, net of cash acquired, was approximately $112 million. None of the acquisitions were considered individually significant. The total goodwill and identifiable intangibles assets for the acquired companies were approximately $87 million. The intangible assets will be amortized over their expected lives ranging from 3 to 20 years. The following table outlines the sales, operating income and total assets for the most recent available twelve-month period prior to each cash acquisition.
Business Segment: Operating Total Type of Company Acquired Acquisition Date Sales Income Assets Acquisition ---------------- ---------------- ----- ------ ------ ----------- Clinical Diagnostics: Chromacol Limited, Epsom Glass Industries Limited, and Amchro Inc. October 2001 $9,900 $350 $5,079 Stock Forefront Diagnostics, Inc. November 2001 6,300 1,700 9,900 Stock Separation Technology, Inc. January 2002 3,200 1,000 3,000 Stock Capitol Vial, Inc. February 2002 27,000 9,600 26,200 Stock Labware and Life Sciences: Cosmotec Co. Ltd. October 2001 10,500 2,500 2,600 Stock Barden Engineering October 2001 570 130 540 Asset
5. Discontinued Operations During March 2002, we made the decision to sell our vacuum deposition chamber business, Vacuum Process Technology, Inc. ("VPT"), sometime within the next twelve months. The decision was made following a recent slow-down in the telecommunications industry, in which VPT targets a majority of its products, and as a result, the business no longer meets the Company's strategic requirements. In connection with the discontinuance of this business we incurred a one-time charge of $13,200, net of income tax benefit of $7,600 related to the write down of net assets to realizable value. The decision to sell VPT represents a disposal of long-lived assets and disposal group under Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. Accordingly, results of this business have been classified as discontinued operations, and prior periods have been restated. For business reporting purposes, VPT was previously classified in the Clinical Diagnostics business segment. Operating results from VPT for the three months and six months ended March 31, 2002 and 2001 were as follows:
Three Months Ended Six Months Ended March 31, March 31, 2002 2001 2002 2001 ---- ---- ---- ---- Net Sales $ 492 $ 5,125 $ 1,972 $ 8,400 Gross Profit (18) 1,197 300 1,883 Pretax income (loss) (744) 799 (944) 1,226 Income tax benefit (expense) 290 (312) 368 (479) Net income (loss) (454) 487 (576) 747
7 Assets and liabilities of VPT were as follows: March 31, September 30, 2002 2001 ---- ---- Current assets $ 4,424 $ 6,296 Property, plant and equipment, net 881 912 Intangible assets - 21,023 Total assets 6,157 29,083 Current liabilities 70 2,392 Total liabilities 70 3,954 Net sales from VPT for the quarters ended June 30 and September 30, 2001 were $5,135 and $1,837 respectively. Net sales from VPT for the year ended September 30, 2001 were $15,372. Net income (loss) from VPT for the quarters ended June 30 and September 30, 2001 were $397 and ($154), respectively. Net income from VPT for the year ended September 30, 2001 was $990. 6. Restructuring In March 2002, the Company recorded a restructuring charge of approximately $5,300 (approximately $3,350 net of tax) for the consolidation of certain facilities and discontinuance of certain product lines due to product rationalizations. The restructuring charge was classified as components of cost of sales and selling, general and administrative expenses. The cost of sales component of approximately $3,700 related to the write-off of inventory, write-offs of fixed assets, certain lease terminations, and severance associated with employees in production activities. The selling, general and administrative component of approximately $1,600 related to severance associated with non-production employees as well as certain lease terminations and other shut-down costs. Restructuring activity is as follows:
Fixed Severance Inventory Assets Facility (a) (b) (b) Closure Costs Other Total ------------ ------------- ------------- ------------- ------------- ------------- 2002 Restructuring charge $ 1,200 $ 2,400 $ 300 $1,400 $ - $ 5,300 2002 Cash payments 600 - - 100 - 700 2002 Non-cash charges - 500 100 - - 600 ------------ ------------- ------------- ------------ ------------- ------------- March 31, 2002 balance $ 600 $ 1,900 $ 200 $1,300 $ - $ 4,000 ============ ============= ============= ============ ============= =============
(a) Amount represents severance and termination costs for 104 terminated employees (primarily sales, marketing and manufacturing personnel). As of March 31, 2002, 20 employees have been terminated as a result of the restructuring plan. (b) Amount represents write-offs of inventory and fixed assets associated with discontinued product lines. (c) Amount represents lease payments and other facility closure costs costs on exited operations. 7. Long-Term Debt On October 10, 2001, the Company issued $300 million of senior convertible contingent debt securities (CODES). The CODES have a fixed interest rate of 2.25% per annum. Interest is payable on April 15 and October 15 of each year, beginning April 15, 2002. The Company will also pay contingent interest during any six-month period if the average trading price of the CODES during a specified period of five trading days preceding the relevant six-month period is above specified levels. The CODES will mature on October 15, 2021. The CODES are convertible, subject to certain conditions (based upon specified factors including but not limited to the sale price of the Company's common stock, trading prices of the CODES, maintenance of the Company's credit ratings, and the occurrence of specified corporate transactions), into Apogent Common Stock at a price of approximately $30.49 per share. The Company 8 may redeem some or all of the CODES on or after October 20, 2004. The holders may require the Company to purchase all or a portion of their CODES on October 20, 2004 and on October 15, 2006, 2011 and 2016, or subject to specified exceptions, upon a change of control event. Certain of the Company's U.S. subsidiaries guarantee the Company's obligations under the CODES. The proceeds from the issuance were used to pay down the outstanding balance on our Revolving Credit Facility, and for general corporate purposes. 8. SEGMENT INFORMATION The Company's operating subsidiaries are engaged in the manufacture and sale of laboratory products in the United States and other countries. The Company's products are categorized in the business segments of: clinical diagnostics; labware and life sciences; and laboratory equipment. A description of each business segment follows. Products in the clinical diagnostic business segment include microscope slides, cover glass, glass tubes and vials, stains and reagents and histology and immunochemistry instrumentation for clinical testing, thin glass for watch crystals, cosmetic mirrors, precision and coated glass used in various optic applications, and precision thin film optical coating equipment. Certain products in this segment are used in drug testing, therapeutic drug monitoring, infectious disease detection, pregnancy testing, and glucose tolerance testing. Products include diagnostic test kits, culture media, diagnostic reagents, and other products used in detecting causes of various infections or diseases. Products in the labware and life sciences business segment include approximately 4,900 items, including reusable plastic products (bottles, carboys, graduated ware, beakers and flasks) and disposable plastic products (microfiltration and cryogenic storage products). Other labware products include products for critical packaging applications (bottles for packaging diagnostic and other reagents, media, pharmaceuticals and specialty chemicals), safety products (hazard labeled containers and biohazard disposal products), environmental containers, autosampler vials and seals used in chromatography analysis, and glass products for research and industrial applications, manufactured and sold through our joint venture with Kimble Glass. Life sciences products include applications of cell culture, filtration, molecular biology, cryopreservation, immunology, electrophoresis, liquid handling and high throughput screening for pharmaceutical drug discovery. Products in the laboratory equipment business segment include heating, stirring and temperature control apparatus such as hot plates, stirrers, shakers, heating tapes, muffle furnaces, incubators, dri-baths, bench top sterilizers and cryogenic storage apparatus, which are fundamental to basic procedures performed in the laboratory; systems for producing ultra pure water; bottle top dispensers, positive displacement micropipettors, and small mixers used in biomolecular research; constant temperature equipment including refrigerators/freezers, ovens, water baths, environmental chambers; and furnaces and fluorometers, spectrophotometers, and strip chart recorders. During the quarter ended March 31, 2002, the Company changed its reporting business segments by moving its Genevac subsidiary from the labware and life sciences segment to the laboratory equipment segment. This change aligns the Company's financial reporting with the management of its operational activity. All historical financial information for the three and six months ended March 31, 2001 has been restated to reflect this change. 9 The costs of some corporate functions are allocated to the business segments at predetermined rates which approximate cost. Information on these business segments is summarized as follows:
Labware Clinical and Laboratory Diagnostics Life Sciences Equipment Eliminations(a) Other (a) Total ----------- ------------- ----------- --------------- --------- ----- Three Months Ended March 31, 2002 Revenues: External customer $126,374 $ 108,681 $ 28,065 $ - $ - $ 263,120 Intersegment 1,606 252 57 (1,915) - - Total revenues 127,980 108,933 28,122 (1,915) - 263,120 Gross profit 59,352 54,311 12,414 - - 126,077 Selling general and administrative 27,047 30,121 6,872 - 165 64,205 Operating income 32,305 24,190 5,542 - (165) 61,872 Three Months Ended March 31, 2001 Revenues: External customer 115,024 92,431 32,524 - - 239,979 Intersegment 1,831 319 100 (2,250) - - Total revenues 116,855 92,750 32,624 (2,250) - 239,979 Gross profit 55,956 48,958 14,402 - - 119,316 Selling general and administrative 28,700 26,260 8,253 - 69 63,282 Operating income 27,256 22,698 6,149 - (69) 56,034
(a) Includes the elimination of intercompany and unallocated corporate office activity.
Labware Clinical and Laboratory Diagnostics Life Sciences Equipment Eliminations (a) Other (a) Total ----------- ------------- --------- --------------- --------- ----- Six Months Ended March 31, 2002 Revenues: External customer $ 241,834 $ 204,132 $ 56,870 $ - $ - $ 502,836 Intersegment - - - - - - Total revenues 241,834 204,132 56,870 - - 502,836 Gross profit 113,697 102,224 24,298 - - 240,219 Selling general and administrative 51,018 56,474 13,435 - 367 121,294 Operating income 62,679 45,750 10,863 - (367) 118,925 Segment assets 965,567 706,477 167,442 - 142,176 1,981,662 Six Months Ended March 31, 2001 Revenues: External customer 221,617 173,664 62,183 - - 457,464 Intersegment 3,403 637 207 (4,247) - - Total revenues 225,020 174,301 62,390 (4,247) - 457,464 Gross profit 106,927 90,471 27,191 - - 224,589 Selling general and administrative 54,602 49,619 15,549 - (633) 119,137 Operating income 52,325 40,852 11,642 - 633 105,452
(a) Includes the elimination of intercompany and unallocated corporate office activity. 10 9. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS The Company's material U.S. subsidiaries are guarantors to its Revolving Credit Facility and Senior Notes. Each of the subsidiary guarantors is 100% owned by the Company. The guarantees are full and unconditional as well as joint and several. Below are the condensed consolidating balance sheets as of March 31, 2002 and September 30, 2001, statements of operations for the three and six months ended March 31, 2002 and 2001, and statements of cash flows for the six months ended March 31, 2002 and 2001, of Apogent Technologies Inc and its subsidiaries, reflecting the subsidiary guarantors for the Revolving Credit Facility and Senior Notes. Certain general corporate expenses have not been allocated to the subsidiaries, and are included under the Apogent Technologies Inc. heading. As a matter of course, the Company retains certain assets and liabilities at the corporate level that are not allocated to the subsidiaries including, but not limited to, certain employee benefit, insurance and tax liabilities. Income tax provisions for the subsidiaries are typically recorded using an estimate and finalized in total with an adjustment recorded at the corporate level. Certain debt under which Apogent Technologies Inc. is listed as the debtor has been allocated to the Guarantor subsidiaries. Intercompany balances include receivables/payables incurred in the normal course of business in addition to investments and loans transacted between subsidiaries or with Apogent Technologies Inc. 11 Condensed Consolidating Balance Sheets
As of March 31, 2002 --------------------- Non Apogent Guarantor Guarantor (In thousands) Technologies Subsidiaries Subsidiaries Eliminations Consolidated ------------ ------------ ------------ ------------ ------------ Assets ------ Current assets: Cash and cash equivalents $ 18,113 $ 14,441 $ 9,861 $ - $ 42,415 Accounts receivable, net - 149,746 38,939 - 188,685 Inventories, 1,262 153,917 35,667 (5,329) 185,517 Other current assets 21,950 11,325 8,646 - 41,921 ------------ -------------- ---------- ------------- ------------ Total current assets 41,325 329,429 93,113 (5,329) 458,538 Property, plant and equipment, net 10,308 187,402 46,949 - 244,659 Intangible assets 13,474 972,975 216,209 - 1,202,658 Deferred income taxes 5,762 121 857 - 6,740 Investment in subsidiaries 2,065,405 43,492 - (2,108,897) - Other assets 55,193 12,947 927 - 69,067 ------------ -------------- ---------- ------------- ------------ Total assets $ 2,191,467 $ 1,546,366 $ 358,055 $ (2,114,226) $ 1,981,662 ============ ============== ========== ============= ============ Liabilities and Shareholders' Equity ------------------------------------ Current liabilities: Accounts payable $ 593 $ 35,327 $ 10,981 $ - $ 46,901 Current portion of long-term debt - 87,068 23 - 87,091 Income taxes payable 12,108 36,313 5,934 (1,478) 52,877 Accrued expenses and other current liabilities 23,323 33,330 23,097 - 79,750 ------------ -------------- ---------- ------------- ------------ Total current liabilities 36,024 192,038 40,035 (1,478) 266,619 ------------ -------------- ---------- ------------- ------------ Long-term debt - 658,150 22 - 658,172 Securities lending agreement 51,730 - - - 51,730 Deferred income taxes 77,477 24,758 12,580 - 114,815 Other liabilities 2,963 3,833 1,423 - 8,219 Net intercompany payable/(receivable) 782,658 (1,013,376) 230,718 - - Commitments and contingent liabilities - Shareholders' equity Preferred stock - - - - - Common stock 1,065 - - - 1,065 Equity rights - - - - - Additional paid-in-capital 242,715 2,033,549 77,296 (2,090,250) 263,310 Retained earnings (deficit) 996,094 (352,586) 55,552 (22,498) 676,562 Other comprehensive income 741 - (59,571) - (58,830) Treasury stock (at cost) - - - - - ------------ -------------- ---------- ------------- ------------ Total shareholders' equity 1,240,615 1,680,963 73,277 (2,112,748) 882,107 ------------ -------------- ---------- ------------- ------------ Total liabilities and shareholders' equity $ 2,191,467 $ 1,546,366 $ 358,055 $ (2,114,226) $ 1,981,662 ============ ============== ========== ============= ============
12 Condensed Consolidating Balance Sheets - Continued
As of September 30, 2001 ------------------------ Non Apogent Guarantor Guarantor (In thousands) Technologies Subsidiaries Subsidiaries Eliminations Consolidated ------------ ------------ ------------ ------------ ------------ Assts ----- Current assets: Cash and cash equivalents $ 4,145 $ - $ 10,699 $ (5,652) $ 9,192 Accounts receivable, net - 146,981 36,297 - 183,278 Inventories, net 1,263 136,906 33,335 (4,068) 167,436 Other current assets 15,010 13,458 5,969 (406) 34,031 -------------- ------------- ---------- ------------ ------------ Total current assets 20,418 297,345 86,300 (10,126) 393,937 Property, plant and equipment, net 9,553 169,032 45,102 - 223,687 Intangible assets 7,003 913,651 219,680 - 1,140,334 Deferred income taxes 6,147 - - - 6,147 Investment in subsidiaries 1,593,800 46,461 - (1,640,261) - Other assets 58,605 11,543 885 - 71,033 -------------- ------------- ---------- ------------ ------------ Total assets $ 1,695,526 $ 1,438,032 $ 351,967 $(1,650,387) $ 1,835,138 ============== ============= ========== ============ ============ Liabilities and Shareholders' Equity ------------------------------------ Current liabilities: Accounts payable $ 787 $ 46,802 $ 11,885 $ (5,652) $ 53,822 Current portion of long-term debt 378 73,228 36 - 73,642 Income taxes payable 33,432 - 6,638 (1,323) 38,747 Accrued expenses and other current liabilities 33,784 28,603 14,968 - 77,355 -------------- ------------- ---------- ------------ ------------ Total current liabilities 68,381 148,633 33,527 (6,975) 243,566 -------------- ------------- ---------- ------------ ------------ Long-term debt - 583,765 23 - 583,788 Securities lending agreement 55,072 - - - 55,072 Deferred income taxes 74,411 20,778 12,031 - 107,220 Other liabilities 3,231 2,453 1,318 - 7,002 Net intercompany payable/(receivable) 375,705 (599,911) 224,169 37 - Commitments and contingent liabilities - Shareholders' equity Preferred stock - - - - - Common stock 1,059 - - - 1,059 Equity rights - - - - - Additional paid-in-capital 234,166 1,561,854 80,265 (1,621,648) 254,637 Retained earnings (deficit) 880,299 (279,540) 48,684 (21,801) 627,642 Other comprehensive income 3,202 - (48,050) - (44,848) Treasury stock (at cost) - - - - - -------------- ------------- ---------- ------------ ------------ Total shareholders' equity 1,118,726 1,282,314 80,899 (1,643,449) 838,490 -------------- ------------- ---------- ------------ ------------ Total liabilities and shareholders' equity $ 1,695,526 $ 1,438,032 $ 351,967 $(1,650,387) $ 1,835,138 ============== ============= ========== ============ ============
13 Condensed Consolidating Statements of Operations
For the Three Months Ended March 31, 2002 ----------------------------------------- Non Apogent Guarantor Guarantor (In thousands) Technologies Subsidiaries Subsidiaries Eliminations Consolidated ------------ ------------ ------------ ------------ ------------- Net sales $ - $ 224,765 $ 56,761 $ (18,406) $ 263,120 Cost of sales - 121,322 33,533 (17,812) 137,043 ---------- ------------ ----------- ----------- ------------ Gross profit - 103,443 23,228 (594) 126,077 Selling, general and administrative expenses 9,159 41,950 13,096 - 64,205 ---------- ------------ ----------- ----------- ------------ Operating income (9,159) 61,493 10,132 (594) 61,872 Other income (expense): Interest expense - (10,344) 45 - (10,299) Other, net - (127) 13 - (114) Income before income taxes, discontinued operations ---------- ------------ ----------- ----------- ------------ and extraordinary items (9,159) 51,022 10,190 (594) 51,459 Income taxes (3,565) 18,878 3,770 (231) 18,852 ---------- ------------ ----------- ----------- ------------ Income from continuing operations before extraordinary items (5,594) 32,144 6,420 (363) 32,607 Loss from discontinued operations - (13,654) - - (13,654) ---------- ------------ ----------- ----------- ------------ Income before extraordinary items (5,594) 18,490 6,420 (363) 18,953 Extraordinary item - - - - - ---------- ------------ ----------- ----------- ------------ Net income $ (5,594) $ 18,490 $ 6,420 $ (363) $ 18,953 ========== ============ =========== =========== ============
For the Three Months Ended March 31, 2001 ----------------------------------------- Non Apogent Guarantor Guarantor (In thousands) Technologies Subsidiaries Subsidiaries Eliminations Consolidated ------------ ------------ ------------ ------------ ------------ Net sales $ - $ 208,564 $ 44,594 $ (13,179) $ 239,979 Cost of sales - 107,458 26,204 (12,999) 120,663 ------------ ----------- ---------- ------------ ----------- Gross profit - 101,106 18,390 (180) 119,316 Selling, general and administrative expenses 11,417 41,956 9,909 - 63,282 ------------ ----------- ---------- ------------ ----------- Operating income (11,417) 59,150 8,481 (180) 56,034 Other income (expense): Interest expense - (11,864) - - (11,864) Other, net 4,373 1,489 (514) - 5,348 ------------ ----------- ---------- ------------ ----------- Income before income taxes, discontinued operations and extraordinary items (7,044) 48,775 7,967 (180) 49,518 Income taxes (2,889) 19,517 3,187 - 19,815 ------------ ----------- ---------- ------------ ----------- Income from continuing operations before extraordinary items (4,155) 29,258 4,780 (180) 29,703 Loss from discontinued operations (838) 487 - - (351) ------------ ----------- ---------- ------------ ----------- Income before extraordinary items (4,993) 29,745 4,780 (180) 29,352 Extraordinary item - - - - - ------------ ----------- ---------- ------------ ----------- Net income $ (4,993) $ 29,745 $ 4,780 $ (180) $ 29,352 ============ =========== ========== ============ ===========
14 Condensed Consolidating Statements of Operations - Continued
For the Six Months Ended March 31, 2002 --------------------------------------- Non Apogent Guarantor Guarantor (In thousands) Technologies Subsidiaries Subsidiaries Eliminations Consolidated ------------ ------------ ------------ ------------ ------------ Net sales $ - $ 428,984 $ 109,136 $ (35,284) $ 502,836 Cost of sales - 231,471 65,169 (34,023) 262,617 ----------- ------------ ----------- ------------ ------------ Gross profit - 197,513 43,967 (1,261) 240,219 Selling, general and administrative expenses 14,942 80,095 26,257 - 121,294 ----------- ------------ ----------- ------------ ------------ Operating income (14,942) 117,418 17,710 (1,261) 118,925 Other income (expense): Interest expense - (20,548) 17 - (20,531) Other, net (31) 542 21 - 532 ----------- ------------ ----------- ------------ ------------ Income before income taxes, discontinued operations and extraordinary items (14,973) 97,412 17,748 (1,261) 98,926 Income taxes (5,815) 36,042 6,567 (564) 36,230 ----------- ------------ ----------- ------------ ------------ Income from continuing operations before extraordinary items (9,158) 61,370 11,181 (697) 62,696 Loss from discontinued operations - (13,776) - - (13,776) ----------- ------------ ----------- ------------ ------------ Income before extraordinary items (9,158) 47,594 11,181 (697) 48,920 Extraordinary item - - - - - ----------- ------------ ----------- ------------ ------------ Net income $ (9,158) $ 47,594 $ 11,181 $ (697) $ 48,920 =========== ============ =========== ============ ============
For the Six Months Ended March 31, 2001 --------------------------------------- Non Apogent Guarantor Guarantor (In thousands) Technologies Subsidiaries Subsidiaries Eliminations Consolidated ------------ ------------ ------------ ------------ ------------ Net sales $ - $ 402,041 $ 79,517 $ (24,094) $ 457,464 Cost of sales - 209,488 46,604 (23,217) 232,875 ----------- ----------- ----------- ------------ ------------ Gross profit - 192,553 32,913 (877) 224,589 Selling, general and administrative expenses 16,035 84,530 18,572 119,137 ----------- ----------- ----------- ------------ ------------ Operating income (16,035) 108,023 14,341 (877) 105,452 Other income (expense): Interest expense - (24,377) (15) - (24,392) Other, net 3,785 1,630 (398) - 5,017 ---------- ----------- ----------- ------------ ------------ Income before income taxes, discontinued operations and extraordinary items (12,250) 85,276 13,928 (877) 86,077 Income taxes (5,251) 34,127 5,571 - 34,447 ---------- ----------- ----------- ------------ ------------ Income from continuing operations before extraordinary items (6,999) 51,149 8,357 (877) 51,630 Loss from discontinued operations (11,824) 747 - - (11,077) ---------- ----------- ----------- ------------ ------------ Income before extraordinary items (18,823) 51,896 8,357 (877) 40,553 Extraordinary item - (745) - - (745) ---------- ----------- ----------- ------------ ------------ Net income $ (18,823) $ 51,151 $ 8,357 $ (877) $ 39,808 ========== =========== =========== ============ ============
15 Condensed Consolidating Statements of Cash Flows
For the Six Months Ended March 31, 2002 --------------------------------------- Non Apogent Guarantor Guarantor (In thousands) Technologies Subsidiaries Subsidiaries ------------ ------------ ------------ Cash flows (used by) provided by operating activities: $ 13,563 $ 58,915 $ 11,613 --------------- ---------------- --------------- Cash flows from investing activities: Capital expenditures (1,040) (11,578) (5,152) Proceeds from sales of property, plant and equipment - 113 212 Net payments for businesses acquired - (113,780) - --------------- ---------------- --------------- Net cash provided by (used in) investing activities (1,040) (125,245) (4,940) --------------- ---------------- --------------- Cash flows from financing activities: Proceeds from long-term debt - 479,500 - Principal payments on long-term debt - (396,298) (12) Proceeds from the exercise of stock options 4,787 - - Other (3,342) 3,078 - --------------- ---------------- --------------- Net cash provided by (used in) financing activities 1,445 86,280 (12) Effect of exchange rate on cash and cash equivalents - - (7,499) --------------- ---------------- --------------- Net (decrease) increase in cash and cash equivalents 13,968 19,950 (838) Cash and cash equivalents at beginning of year 4,145 (5,509) 10,699 --------------- ---------------- --------------- Cash and cash equivalents at end of year $ 18,113 $ 14,441 $ 9,861 =============== ================ =============== Supplemental disclosures of cash flow information Cash paid during the year for: Interest $ $ 17,654 $ 165 =============== ================ ================ Income taxes $ 12,961 $ 390 $ 5,754 =============== ================ ================ Capital lease obligations incurred $ $ 117 $ - =============== ================ ================ (In thousands) Eliminations Consolidated ------------ ------------ Cash flows (used by) provided by operating activities: $ - $ 84,091 ---------------- ------------- Cash flows from investing activities: Capital expenditures - (17,770) Proceeds from sales of property, plant and equipment - 325 Net payments for businesses acquired - (113,780) ---------------- ------------- Net cash provided by (used in) investing activities - (131,225) ---------------- ------------- Cash flows from financing activities: Proceeds from long-term debt - 479,500 Principal payments on long-term debt - (396,310) Proceeds from the exercise of stock options - 4,787 Other - (264) ---------------- ------------- Net cash provided by (used in) financing activities - 87,713 Effect of exchange rate on cash and cash equivalents - (7,499) ---------------- ------------- Net (decrease) increase in cash and cash equivalents - 33,080 Cash and cash equivalents at beginning of year - 9,335 ---------------- ------------- Cash and cash equivalents at end of year $ - $ 42,415 ================ ============= Supplemental disclosures of cash flow information Cash paid during the year for: Interest $ - $ 17,819 ================ ============= Income taxes $ - $ 19,105 ================ ============= Capital lease obligations incurred $ - $ 117 ================ =============
16 Condensed Consolidating Statements of Cash Flows - Continued
For the Six Months Ended March 31, 2001 --------------------------------------- Non Apogent Guarantor Guarantor (In thousands) Technologies Subsidiaries Subsidiaries ------------ ------------ ------------ Cash flows provided by operating activities: $ (52,215) $ 111,617 $ 5,867 --------------- ---------------- ---------------- Cash flows from investing activities: Capital expenditures (6,738) (13,712) (3,721) Proceeds from sales of property, plant and equipment 9,679 1,017 35 Net cash inflow from SDS 46,394 - - Net payments for businesses acquired - (51,206) - --------------- ---------------- ---------------- Net cash used in investing activities 49,335 (63,901) (3,686) --------------- ---------------- ---------------- Cash flows from financing activities: Proceeds from long-term debt - 693,159 - Principal payments on long-term debt - (739,629) (23) Proceeds from the exercise of stock options 2,304 - - Other (1,042) (3,900) - --------------- ---------------- ---------------- Net cash provided by financing activities 1,262 (50,370) (23) Effect of exchange rate on cash and cash equivalents - - 1,816 --------------- ---------------- ---------------- Net (decrease) increase in cash and cash equivalents (1,618) (2,654) 3,974 Cash and cash equivalents at beginning of year 7,086 (2,577) 7,902 --------------- ---------------- ---------------- Cash and cash equivalents at end of year $ 5,468 $ (5,231) $ 11,876 =============== ================ ================ Supplemental disclosures of cash flow information Cash paid during the year for: Interest $ - $ 25,410 $ 255 =============== ================ ================ Income taxes $ 21,147 $ - $ - =============== ================ ================ Capital lease obligations incurred $ - $ - $ - =============== ================ ================ (In thousands) Eliminations Consolidated ------------ ------------ Cash flows provided by operating activities: $ - $ 65,269 ---------------- ------------- Cash flows from investing activities: Capital expenditures - (24,171) Proceeds from sales of property, plant and equipment - 10,731 Net cash inflow from SDS - 46,394 Net payments for businesses acquired - (51,206) ---------------- ------------- Net cash used in investing activities - (18,252) ---------------- ------------- Cash flows from financing activities: Proceeds from long-term debt - 693,159 Principal payments on long-term debt - (739,652) Proceeds from the exercise of stock options - 2,304 Other - (4,942) ---------------- ------------- Net cash provided by financing activities - (49,131) Effect of exchange rate on cash and cash equivalents - 1,816 ---------------- ------------- Net (decrease) increase in cash and cash equivalents - (298) Cash and cash equivalents at beginning of year - 12,411 ---------------- ------------- Cash and cash equivalents at end of year $ - $ 12,113 ================ ============= Supplemental disclosures of cash flow information Cash paid during the year for: Interest $ - $ 25,665 ================ ============= Income taxes $ - $ 21,147 ================ ============= Capital lease obligations incurred $ - $ - ================ =============
17 CONDENSED CONSOLIDATING FINANCIAL STATEMENTS - CONTINUED A majority of the Company's material U.S. subsidiaries are guarantors to its CODES. However, certain recently acquired subsidiaries are guarantors under the Senior Notes and Revolving Credit Facility but are currently non-guarantors under the CODES. This variation in guarantors may continue intermittently while our resale registration statement for the CODES remains effective with the Securities and Exchange Commission. Each of the subsidiary guarantors is 100% owned by the Company. The guarantees are full and unconditional as well as joint and several. Below are the condensed consolidating balance sheets as of March 31, 2002 and September 30, 2001, statements of operations for the three and six months ended March 31, 2002 and 2001, and statements of cash flows for the six months ended March 31, 2002 and 2001, of Apogent Technologies Inc and its subsidiaries, reflecting the subsidiary guarantors for the CODES. Certain general corporate expenses have not been allocated to the subsidiaries, and are included under the Apogent Technologies Inc. heading. As a matter of course, the Company retains certain assets and liabilities at the corporate level that are not allocated to the subsidiaries including, but not limited to, certain employee benefit, insurance and tax liabilities. Income tax provisions for the subsidiaries are typically recorded using an estimate and finalized in total with an adjustment recorded at the corporate level. Certain debt under which Apogent Technologies Inc. is listed as the debtor has been allocated to the Guarantor subsidiaries. Intercompany balances include receivables/payables incurred in the normal course of business in addition to investments and loans transacted between subsidiaries or with Apogent Technologies Inc. 18
Condensed Consolidating Balance Sheets As of March 31, 2002 -------------------- Non Apogent Guarantor Guarantor (In thousands) Technologies Subsidiaries Subsidiaries Eliminations Consolidated ------------ ------------ ------------ ------------ ------------ Assets ------ Current assets: Cash and cash equivalents $ 18,113 $ 12,737 $ 11,565 $ - $ 42,415 Accounts receivable, net - 146,432 42,253 - 188,685 Inventories, net 1,262 149,851 39,733 (5,329) 185,517 Other current assets 21,950 11,325 8,646 - 41,921 --------------- --------------- --------------- --------------- --------------- Total current assets 41,325 320,345 102,197 (5,329) 458,538 Property, plant and equipment, net 10,308 170,329 64,022 - 244,659 Intangible assets 13,474 923,291 265,893 - 1,202,658 Deferred income taxes 5,762 121 857 - 6,740 Investment in subsidiaries 2,065,405 43,492 - (2,108,897) - Other assets 55,193 12,947 927 - 69,067 --------------- --------------- --------------- --------------- --------------- Total assets $ 2,191,467 $ 1,470,525 $ 433,896 $ (2,114,226) $ 1,981,662 =============== =============== =============== =============== =============== Liabilities and Shareholders' Equity ------------------------------------ Current liabilities: Accounts payable $ 593 $ 34,443 $ 11,865 $ - $ 46,901 Current portion of long-term debt - 84,120 2,971 - 87,091 Income taxes payable 12,108 36,205 6,042 (1,478) 52,877 Accrued expenses and other current liabilities 23,323 32,992 23,435 - 79,750 --------------- --------------- --------------- --------------- --------------- Total current liabilities 36,024 187,760 44,313 (1,478) 266,619 --------------- --------------- --------------- --------------- --------------- Long-term debt - 658,150 22 - 658,172 Securities lending agreement 51,730 - - - 51,730 Deferred income taxes 77,477 24,758 12,580 - 114,815 Other liabilities 2,963 3,833 1,423 - 8,219 Net intercompany payable/(receivable) 782,658 (1,084,939) 302,281 - - Commitments and contingent liabilities - Shareholders' equity Preferred stock - - - - - Common stock 1,065 - - - 1,065 Equity rights - - - - - Additional paid-in-capital 242,715 2,033,549 77,296 (2,090,250) 263,310 Retained earnings (deficit) 996,094 (352,586) 55,552 (22,498) 676,562 Other comprehensive income 741 - (59,571) - (58,830) Treasury stock (at cost) - - - - - --------------- --------------- --------------- --------------- --------------- Total shareholders' equity 1,240,615 1,680,963 73,277 (2,112,748) 882,107 --------------- --------------- --------------- --------------- --------------- Total liabilities and shareholders' equity $ 2,191,467 $ 1,470,525 $ 433,896 $ (2,114,226) $ 1,981,662 =============== =============== =============== =============== ===============
19
Condensed Consolidating Balance Sheets - Continued As of September 30, 2001 ------------------------ Non Apogent Guarantor Guarantor (In thousands) Technologies Subsidiaries Subsidiaries Eliminations Consolidated ------------ ------------ ------------ ------------ ------------ Assets ------- Current assets: Cash and cash equivalents $ 4,145 $ - $ 10,699 $ (5,652) $ 9,192 Accounts receivable, net - 146,981 36,297 - 183,278 Inventories, net 1,263 136,906 33,335 (4,068) 167,436 Other current assets 15,010 13,458 5,969 (406) 34,031 --------------- --------------- --------------- --------------- --------------- Total current assets 20,418 297,345 86,300 (10,126) 393,937 Property, plant and equipment, net 9,553 169,032 45,102 - 223,687 Intangible assets 7,003 913,651 219,680 - 1,140,334 Deferred income taxes 6,147 - - - 6,147 Investment in subsidiaries 1,593,800 46,461 - (1,640,261) - Other assets 58,605 11,543 885 - 71,033 --------------- --------------- --------------- --------------- --------------- Total assets $ 1,695,526 $ 1,438,032 $ 351,967 $ (1,650,387) $ 1,835,138 =============== =============== =============== =============== =============== Liabilities and Shareholders' Equity ------------------------------------ Current liabilities: Accounts payable $ 787 $ 46,802 $ 11,885 $ (5,652) $ 53,822 Current portion of long-term debt 378 73,228 36 - 73,642 Income taxes payable 33,432 - 6,638 (1,323) 38,747 Accrued expenses and other current liabilities 33,784 28,603 14,968 - 77,355 --------------- --------------- --------------- --------------- --------------- Total current liabilities 68,381 148,633 33,527 (6,975) 243,566 --------------- --------------- --------------- --------------- --------------- Long-term debt - 583,765 23 - 583,788 Securities lending agreement 55,072 - - - 55,072 Deferred income taxes 74,411 20,778 12,031 - 107,220 Other liabilities 3,231 2,453 1,318 - 7,002 Net intercompany payable/(receivable) 375,705 (599,911) 224,169 37 - Commitments and contingent liabilities - Shareholders' equity Preferred stock - - - - - Common stock 1,059 - - - 1,059 Equity rights - - - - - Additional paid-in-capital 234,166 1,561,854 80,265 (1,621,648) 254,637 Retained earnings (deficit) 880,299 (279,540) 48,684 (21,801) 627,642 Other comprehensive income 3,202 - (48,050) - (44,848) Treasury stock (at cost) - - - - - --------------- --------------- --------------- --------------- --------------- Total shareholders' equity 1,118,726 1,282,314 80,899 (1,643,449) 838,490 --------------- --------------- --------------- --------------- --------------- Total liabilities and shareholders' equity $ 1,695,526 $ 1,438,032 $ 351,967 $ (1,650,387) $ 1,835,138 =============== =============== =============== =============== ===============
20
Condensed Consolidating Statements of Operations For the Three Months Ended March 31, 2002 ----------------------------------------- Non Apogent Guarantor Guarantor (In thousands) Technologies Subsidiaries Subsidiaries Eliminations Consolidated ------------ ------------- -------------- ------------- -------------- Net sales $ - $ 221,941 $ 59,585 $ (18,406) $ 263,120 Cost of sales - 119,580 35,275 (17,812) 137,043 ------------ -------------- -------------- ------------- -------------- Gross profit - 102,361 24,310 (594) 126,077 Selling, general and administrative expenses 9,159 41,671 13,375 - 64,205 ------------ -------------- -------------- ------------- -------------- Operating income (9,159) 60,690 10,935 (594) 61,872 Other income (expense): Interest expense - (10,344) 45 - (10,299) Other, net - (127) 13 - (114) ------------ -------------- -------------- ------------- -------------- Income before income taxes, discontinued operations and extraordinary items (9,159) 50,219 10,993 (594) 51,459 Income taxes (3,565) 18,581 4,067 (231) 18,852 ------------ -------------- -------------- ------------- -------------- Income from continuing operations before extraordinary items (5,594) 31,638 6,926 (363) 32,607 Loss from discontinued operations - (13,654) - - (13,654) ------------ -------------- -------------- ------------- -------------- Income before extraordinary items (5,594) 17,984 6,926 (363) 18,953 Extraordinary item - - - - - ------------ -------------- -------------- ------------- -------------- Net income $ (5,594) $ 17,984 $ 6,926 $ (363) $ 18,953 ============ ============== ============== ============= ==============
For the Three Months Ended March 31, 2001 ----------------------------------------- Non Apogent Guarantor Guarantor (In thousands) Technologies Subsidiaries Subsidiaries Eliminations Consolidated ------------ ------------ ------------ ------------ -------------- Net sales $ - $ 208,564 $ 44,594 $ (13,179) $ 239,979 Cost of sales - 107,458 26,204 (12,999) 120,663 ------------ -------------- -------------- ------------- -------------- Gross profit - 101,106 18,390 (180) 119,316 Selling, general and administrative expenses 11,417 41,956 9,909 - 63,282 ------------ -------------- -------------- ------------- -------------- Operating income (11,417) 59,150 8,481 (180) 56,034 Other income (expense): Interest expense - (11,864) - - (11,864) Other, net 4,373 1,489 (514) - 5,348 ------------ -------------- -------------- ------------- -------------- Income before income taxes, discontinued operations and extraordinary items (7,044) 48,775 7,967 (180) 49,518 Income taxes (2,889) 19,517 3,187 - 19,815 ------------ -------------- -------------- ------------- -------------- Income from continuing operations before extraordinary items (4,155) 29,258 4,780 (180) 29,703 Loss from discontinued operations (838) 487 - - (351) ------------ -------------- -------------- ------------- -------------- Income before extraordinary items (4,993) 29,745 4,780 (180) 29,352 Extraordinary item - - - - - ------------ -------------- -------------- ------------- -------------- Net income $ (4,993) $ 29,745 $ 4,780 $ (180) $ 29,352 ============ ============== ============== ============== ==============
21
Condensed Consolidating Statements of Operations - Continued For the Six Months Ended March 31, 2002 --------------------------------------- Non Apogent Guarantor Guarantor (In thousands) Technologies Subsidiaries Subsidiaries Eliminations Consolidated ------------ -------------- -------------- ------------- -------------- Net sales $ - $ 426,160 $ 111,960 $ (35,284) $ 502,836 Cost of sales - 229,729 66,911 (34,023) 262,617 ------------ -------------- -------------- ------------- -------------- Gross profit - 196,431 45,049 (1,261) 240,219 Selling, general and administrative expenses 14,942 79,816 26,536 - 121,294 ------------ -------------- -------------- ------------- -------------- Operating income (14,942) 116,615 18,513 (1,261) 118,925 Other income (expense): Interest expense - (20,548) 17 - (20,531) Other, net (31) 542 21 - 532 ------------ -------------- -------------- ------------- -------------- Income before income taxes, discontinued operations and extraordinary items (14,973) 96,609 18,551 (1,261) 98,926 Income taxes (5,815) 35,745 6,864 (564) 36,230 ------------ -------------- -------------- ------------- -------------- Income from continuing operations before extraordinary items (9,158) 60,864 11,687 (697) 62,696 Loss from discontinued operations - (13,776) - - (13,776) ------------ -------------- -------------- ------------- -------------- Income before extraordinary items (9,158) 47,088 11,687 (697) 48,920 Extraordinary item - - - - - ------------ -------------- -------------- ------------- -------------- Net income $ (9,158) $ 47,088 $ 11,687 $ (697) $ 48,920 ============ ============== ============== ============= ==============
For the Six Months Ended March 31, 2001 --------------------------------------- Non Apogent Guarantor Guarantor (In thousands) Technologies Subsidiaries Subsidiaries Eliminations Consolidated ------------ -------------- -------------- ------------- -------------- Net sales $ - $ 402,041 $ 79,517 $ (24,094) $ 457,464 Cost of sales - 209,488 46,604 (23,217) 232,875 ------------ -------------- -------------- ------------- -------------- Gross profit - 192,553 32,913 (877) 224,589 Selling, general and administrative expenses 16,035 84,530 18,572 119,137 ------------ -------------- -------------- ------------- -------------- Operating income (16,035) 108,023 14,341 (877) 105,452 Other income (expense): Interest expense - (24,377) (15) - (24,392) Other, net 3,785 1,630 (398) - 5,017 ------------ -------------- -------------- ------------- -------------- Income before income taxes, discontinued operations and extraordinary items (12,250) 85,276 13,928 (877) 86,077 Income taxes (5,251) 34,127 5,571 - 34,447 ------------ -------------- -------------- ------------- -------------- Income from continuing operations before extraordinary items (6,999) 51,149 8,357 (877) 51,630 Loss from discontinued operations (11,824) 747 - - (11,077) ------------ -------------- -------------- ------------- -------------- Income before extraordinary items (18,823) 51,896 8,357 (877) 40,553 Extraordinary item - (745) - - (745) ------------ -------------- -------------- ------------- -------------- Net income $ (18,823) $ 51,151 $ 8,357 $ (877) $ 39,808 ============ ============== ============== ============= ==============
22
Condensed Consolidating Statements of Cash Flows For the Six Months Ended March 31, 2002 --------------------------------------- Non Apogent Guarantor Guarantor (In thousands) Technologies Subsidiaries Subsidiaries Eliminations Consolidated ------------ ------------ ------------ ------------ ------------ Cash flows (used by) provided by operating activities: $ 13,563 $ 57,221 $ 13,357 $ - $ 84,091 --------------- --------------- --------------- --------------- --------------- Cash flows from investing activities: Capital expenditures (1,040) (11,588) (5,142) - (17,770) Proceeds from sales of property, plant and equipment - 113 212 - 325 Net payments for businesses acquired - (113,780) - - (113,780) --------------- --------------- --------------- --------------- --------------- Net cash provided by (used in) investing activities (1,040) (125,245) (4,930) - (131,225) --------------- --------------- --------------- --------------- --------------- Cash flows from financing activities: Proceeds from long-term debt - 479,500 - - 479,500 Principal payments on long-term debt - (396,298) (12) - (396,310) Proceeds from the exercise of stock options 4,787 - - - 4,787 Other (3,342) 3,078 - - (264) --------------- --------------- --------------- --------------- --------------- Net cash provided by (used in) financing activities 1,445 86,280 (12) - 87,713 Effect of exchange rate on cash and cash equivalents - - (7,499) - (7,499) --------------- --------------- --------------- --------------- --------------- Net (decrease) increase in cash and cash equivalents 13,968 19,950 (838) - 33,080 Cash and cash equivalents at beginning of year 4,145 (5,509) 10,699 - 9,335 --------------- --------------- --------------- --------------- --------------- Cash and cash equivalents at end of year $ 18,113 $ 12,737 $ 11,565 $ - $ 42,415 =============== =============== =============== =============== =============== Supplemental disclosures of cash flow information Cash paid during the year for: Interest $ - $ 17,654 $ 165 $ - $ 17,819 =============== =============== =============== =============== =============== Income taxes $ 12,961 $ 390 $ 5,754 $ - $ 19,105 =============== =============== =============== =============== =============== Capital lease obligations incurred $ - $ 117 $ - $ - $ 117 =============== =============== =============== =============== ===============
23
Condensed Consolidating Statements of Cash Flows - Continued For the Six Months Ended March 31, 2001 --------------------------------------- Non Apogent Guarantor Guarantor (In thousands) Technologies Subsidiaries Subsidiaries Eliminations Consolidated ------------ ------------ ------------ ------------ ------------ Cash flows provided by operating activities: $ (52,215) $ 111,617 $ 5,867 $ - $ 65,269 -------------- -------------- -------------- -------------- -------------- Cash flows from investing activities: Capital expenditures (6,738) (13,712) (3,721) - (24,171) Proceeds from sales of property, plant and equipment 9,679 1,017 35 - 10,731 Net cash inflow from SDS 46,394 - - - 46,394 Net payments for businesses acquired - (51,206) - - (51,206) -------------- -------------- -------------- -------------- -------------- Net cash used in investing activities 49,335 (63,901) (3,686) - (18,252) -------------- -------------- -------------- -------------- -------------- Cash flows from financing activities: Proceeds from long-term debt - 693,159 - - 693,159 Principal payments on long-term debt - (739,629) (23) - (739,652) Proceeds from the exercise of stock options 2,304 - - - 2,304 Other (1,042) (3,900) - - (4,942) -------------- -------------- -------------- -------------- -------------- Net cash provided by financing activities 1,262 (50,370) (23) - (49,131) Effect of exchange rate on cash and cash equivalents - - 1,816 - 1,816 -------------- -------------- -------------- -------------- -------------- Net (decrease) increase in cash and cash equivalents (1,618) (2,654) 3,974 - (298) Cash and cash equivalents at beginning of year 7,086 (2,577) 7,902 - 12,411 -------------- -------------- -------------- -------------- -------------- Cash and cash equivalents at end of year $ 5,468 $ (5,231) $ 11,876 $ - $ 12,113 ============== ============== ============== ============== ============== Supplemental disclosures of cash flow information Cash paid during the year for: Interest $ - $ 25,410 $ 255 $ - $ 25,665 ============== =============== ============== ============= ============== Income taxes $ 21,147 $ - $ - $ - $ 21,147 ============== =============== ============== ============= ============== Capital lease obligations incurred $ - $ - $ - $ - $ - ============== =============== ============== ============= ==============
24 Item 2. Management's Discussion and Analysis of Financial Condition and --------------------------------------------------------------- Result of Operations - -------------------- GENERAL The subsidiaries of Apogent are leading manufacturers of value-added products for the clinical diagnostics, labware and life sciences, and laboratory equipment markets in the United States and abroad. Apogent provides products under three business segments - clinical diagnostics, labware and life Sciences, and laboratory equipment. The primary subsidiaries in each of our business segments are as follows: Clinical Diagnostics Labware and Life Sciences -------------------- ------------------------- Applied Biotech, Inc. Advance Biotechnologies Ltd. Capitol Vial, Inc. BioRobotics Group Limited Chase Scientific Glass, Inc. Matrix Technologies Corporation Erie Electroverre S.A. Molecular BioProducts, Inc. Erie Scientific Company Nalge Nunc International Corporation Forefront Diagnostics, Inc. Nalge Nunc International K.K. Gerhard Menzel Glasbearbeitungswerk National Scientific Company GmbH & Co. K.G. Nunc A/S Microgenics Corporation Microm International GmbH Laboratory Equipment -------------------- The Naugatuck Glass Company Richard-Allan Scientific Company Barnstead Thermolyne Corporation Remel Inc. Electrothermal Engineering, Ltd. Samco Scientific Corporation Lab-Line Instruments, Inc. Genevac Limited When we use the terms "we" or "our" in this report, we are referring to Apogent Technologies Inc. and its subsidiaries. Our fiscal year ends on September 30, and accordingly, all references to quarters refer to our fiscal quarters. The quarters ended March 31, 2002 and 2001 are the Company's second quarters of fiscal 2002 and 2001, respectively. During the quarter ended March 31, 2002, the Company changed its reporting business segments by moving its Genevac subsidiary from the labware and life sciences segment to the laboratory equipment segment. This change aligns the Company's financial reporting with the management of its operational activity. All historical financial information for the three and six months ended March 31, 2001 has been restated to reflect this change. 25 RESULTS OF OPERATIONS Quarter Ended March 31, 2002 Compared to the Quarter Ended March 31, 2001 Net Sales Fiscal Fiscal Dollar Percent (in thousands) 2002 2001 Change Change ---- ---- ------ ------ Clinical Diagnostics $ 126,374 $ 115,024 $ 11,350 10% Labware and Life Sciences 108,681 92,431 16,250 18% Laboratory Equipment 28,065 32,524 (4,459) -14% ------------ ----------- ----------- $ 263,120 $ 239,979 $ 23,141 10% ============ =========== =========== Overall Company. Net sales for the quarter ended March 31, 2002 increased by $23.1 million or 10% over the corresponding fiscal 2001 quarter. Clinical Diagnostics. Increased net sales in the clinical diagnostics segment resulted primarily from: (a) net sales of products of acquired companies (approximately $8.8 million), (b) price increases (approximately $4.6 million), and (c) increased net sales of new products developed by us (approximately $2.1 million). Net sales were partially reduced by: (a) a decrease in net sales of existing products (approximately $3.5 million) and (b) foreign currency fluctuations (approximately $0.6 million). Labware and Life Sciences. Increased net sales in the labware and life sciences segment resulted primarily from: (a) net sales of products of acquired companies (approximately $12.5 million), (b) increased net sales of new products developed by us (approximately $3.2 million), and (c) price increases (approximately $2.8 million). Net sales were partially reduced by: (a) foreign currency fluctuations (approximately $1.4 million) and (b) a decrease in net sales of existing products (approximately $0.8 million). Laboratory Equipment. Reduced net sales in the laboratory equipment segment resulted primarily from: (a) a decrease in net sales of existing products (approximately $4.9 million) and (b) foreign currency fluctuations (approximately $0.1 million). Net sales were partially increased by: (a) price increases (approximately $0.5 million) and (b) increased net sales of new products developed by us (approximately $0.1 million).
Gross Profit Fiscal Percent Fiscal Percent Dollar Percent (in thousands) 2002 of Sales 2001 of Sales Change Change ---- -------- ---- -------- ------ ------ Clinical Diagnostics $ 59,352 47% $ 55,956 49% $ 3,396 6% Labware and Life Sciences 54,311 50% 48,958 53% 5,353 11% Laboratory Equipment 12,414 44% 14,402 44% (1,988) -14% ------------ ------------ ----------- $ 126,077 48% $ 119,316 50% $ 6,761 6% ============ ============ ===========
Overall Company. Gross profit for the quarter ended March 31, 2002 increased by $6.8 million or 6% over the corresponding fiscal 2001 quarter. Clinical Diagnostics. Increased gross profit in the clinical diagnostics segment resulted primarily from: (a) price increases (approximately $4.6 million), (b) the effects of acquired companies (approximately $4.1 million), (c) inventory adjustments (approximately $1.5 million), (d) the effects of new products (approximately $1.3 million), and (e) product mix (approximately $1.0 million). Gross profit was 26 partially reduced by: (a) increased manufacturing overhead (approximately $6.5 million), (b) restructuring charges (approximately $1.3 million), (c) decreased volume (approximately $1.2 million), and (d) foreign currency fluctuations (approximately $0.1 million). Labware and Life Sciences. Increased gross profit in the labware and life sciences segment resulted primarily from: (a) the effects of acquired companies (approximately $3.3 million), (b) product mix (approximately $3.1 million), (c) price increases (approximately $2.8 million), (d) the effects of new products (approximately $1.5 million), and (e) increased volume (approximately $0.2 million). Gross profit was partially reduced by: (a) restructuring charges (approximately $2.4 million), (b) increased manufacturing overhead (approximately $1.5 million), (c) foreign currency fluctuations (approximately $1.1 million), and (d) inventory adjustments (approximately $0.5 million). Laboratory Equipment. Decreased gross profit in the laboratory equipment segment resulted primarily from: (a) decreased volume (approximately $2.3million), (b) increased manufacturing overhead (approximately $1.2 million), and (c) foreign currency fluctuations (approximately $0.1 million). Gross profit was partially increased by: (a) product mix (approximately $0.6 million), (b) inventory adjustments (approximately $0.5 million), and (c) price increases (approximately $0.5 million). Selling General and Administrative Expenses Fiscal Fiscal Dollar Percent (in thousands) 2002 2001 Change Change ---- ---- ------ ------ Clinical Diagnostics $ 27,047 $ 28,700 $ (1,653) -6% Labware and Life Sciences 30,121 26,260 3,861 15% Laboratory Equipment 6,872 8,253 (1,381) -17% ----------- ----------- ----------- Subtotal 64,040 63,213 827 1% Other 165 69 96 ----------- ----------- ----------- Total $ 64,205 $ 63,282 $ 923 1% =========== ========== =========== Overall Company. Selling, general and administrative expenses for the quarter ended March 31, 2002 increased by $0.1 million or 1% over the corresponding fiscal 2001 quarter. Clinical Diagnostics. Decreased selling, general and administrative expenses in the clinical diagnostics segment resulted primarily from: (a) a decrease in amortization expense as a result of the implementation of Statement No. 142, "Goodwill and Other Intangible Assets" (SFAS 142) - see Note 1 to the Unaudited Consolidated Financial Statements (approximately $3.9 million) and (b) foreign currency fluctuations (approximately $0.1 million). Selling, general and administrative expenses were partially increased by: (a) general and administrative expenses (approximately $0.6 million), (b) restructuring expenses (approximately $0.6 million), (c) research and development expenses (approximately $0.6 million), (d) marketing expenses (approximately $0.5 million), and (e) acquired businesses (approximately $0.1 million). Labware and Life Sciences. Increased selling, general and administrative expenses in the labware and life sciences segment resulted primarily from: (a) acquired businesses (approximately $3.1 million), (b) marketing expenses (approximately $1.1 million), (c) general and administrative expenses (approximately $0.9 million), (d) research and development expense (approximately $0.5 million), and (e) restructuring charges (approximately $0.4 million). Selling, general and administrative expenses were partially reduced by: (a) decreased amortization expense as a result of SFAS 142 (approximately $2.0 million), and (b) foreign currency fluctuations (approximately $0.2 million). Laboratory Equipment. Decreased selling, general and administrative expenses in the laboratory equipment segment resulted primarily from: (a) decreased amortization expense as a result of SFAS 142 (approximately $0.6 million), (b) general and administrative expenses (approximately $0.7 million), and (c) 27 foreign currency fluctuations (approximately $0.1 million). Selling, general and administrative expenses were partially increased by research and development expense (approximately $0.1 million). Operating Income Fiscal Fiscal Dollar Percent (in thousands) 2002 2001 Change Change ---- ---- ------ ------ Clinical Diagnostics $ 32,305 $ 27,256 $ 5,049 19% Labware and Life Sciences 24,190 22,698 1,492 7% Laboratory Equipment 5,542 6,149 (607) -10% ----------- ----------- ---------- Subtotal 62,037 56,103 5,934 11% Other (165) (69) (96) ----------- ----------- ---------- Total $ 61,872 $ 56,034 $ 5,838 10% =========== =========== ========== As a result of the foregoing, operating income for the quarter ended March 31, 2002 increased by $5.8 million or 10% over the corresponding fiscal 2001 quarter. SFAS 142 would have increased operating income to $63.2 million for the fiscal 2001 quarter, had it been effective at the time. Restructuring In March 2002, the Company recorded a restructuring charge of approximately $5.3 million (approximately $3.4 million net of tax) for the consolidation of certain facilities, and discontinuance of certain product lines due to product rationalizations. The restructuring charge was classified as components of cost of sales and selling, general and administrative expenses. The cost of sales component of approximately $3.7 million related to the write-off of inventory, write-offs of fixed assets, certain lease terminations, and severance associated with employees in production activities. The selling, general and administrative component of approximately $1.6 million related to severance associated with non-production employees as well certain lease terminations and other shut down costs. Restructuring activity is as follows (dollars in thousands):
Fixed Severance Inventory Assets Facility (a) (b) (b) Closure Costs Other Total ----------- ---------- ---------- ------------- ---------- ----- 2002 Restructuring charge $ 1,200 $ 2,400 $ 300 $ 1,400 $ - $ 5,300 2002 Cash payments 600 - - 100 - 700 2002 Non-cash charges - 500 100 - - 600 ---------- ----------- --------- ------------ ---------- ---------- March 31, 2002 balance $ 600 $ 1,900 $ 200 $ 1,300 $ - $ 4,000 ========== =========== ========= ============ ========== ==========
(a) Amount represents severance and termination costs for 104 terminated employees (primarily sales, marketing and manufacturing personnel). As of March 31, 2002, 20 employees have been terminated as a result of the restructuring plan. (b) Amount represents write-offs of inventory and fixed assets associated with discontinued product lines. (c) Amount represents lease payments and other facility closure costs on exited operations. Interest Expense Interest expense was $10.3 million for the quarter ended March 31, 2002, as compared to $11.9 million for the corresponding fiscal 2001 quarter. The decrease is the result of lower average interest rates, offset in part by an increase in average debt levels. 28 Other Income Other income was $0.8 million for the quarter ended March 31, 2002, as compared to other income of $5.5 million in the corresponding fiscal 2001 quarter. This decrease is primarily due to gains on sales of fixed assets of approximately $4.4 million in the corresponding fiscal 2001 quarter. Income Taxes Taxes on income from continuing operations for the quarter ended March 31, 2002 were $18.9 million, a decrease of $1.0 million from the corresponding fiscal 2001 quarter. This decrease resulted primarily from a decrease in the effective tax rate due to the implementation of SFAS 142. Income from Continuing Operations As a result of the foregoing, income from continuing operations for the quarter ended March 31, 2002 was $32.6 million, an increase of $2.9 million from the corresponding fiscal 2002 quarter. Discontinued Operations The loss from the discontinued operations for the quarter ended March 31, 2002 was a result of an operating loss from VPT of $0.5 million and an estimated loss on sale of VPT of $13.2 million. For the corresponding fiscal 2001 quarter, the loss from discontinued operations was a result of expenses relating to the distribution of Sybron Dental Specialties ("SDS") of $0.8 million, offset by operating income from VPT of $0.5 million. Net Income As a result of the foregoing, net income was $19.0 million for the quarter ended March 31, 2002 as compared to $29.4 million for the corresponding fiscal 2001 quarter. SFAS 142 would have increased net income to $34.3 million for the fiscal 2001 quarter, had it been effective at the time. Six Months Ended March 31, 2002 Compared to the Six Months Ended March 31, 2001 Net Sales Fiscal Fiscal Dollar Percent (in thousands) 2002 2001 Change Change ---- ---- ------ ------ Clinical Diagnostics $ 241,834 $ 221,617 $ 20,217 9% Labware and Life Sciences 204,132 173,664 30,468 18% Laboratory Equipment 56,870 62,183 (5,313) -9% ------------ ------------ ---------- $ 502,836 $ 457,464 $ 45,372 10% ============ ============ ========== Overall Company. Net sales for the six months ended March 31, 2002 increased by $45.4 million or 10% over the corresponding fiscal 2001 period. Clinical Diagnostics. Increased net sales in the clinical diagnostics segment resulted primarily from: (a) net sales of products of acquired companies (approximately $13.2 million), (b) price increases (approximately $8.2 million), and (c) increased net sales of new products developed by us (approximately $3.6 million). Net sales were partially reduced by: (a) a decrease in net sales of existing products (approximately $4.6 million) and (b) foreign currency fluctuations (approximately $0.2 million). 29 Labware and Life Sciences. Increased net sales in the labware and life sciences segment resulted primarily from: (a) net sales of products of acquired companies (approximately $24.6 million), (b) increased net sales of new products developed by us (approximately $4.9 million), and (c) price increases (approximately $3.1 million). Net sales were partially reduced by: (a) foreign currency fluctuations (approximately $1.7 million) and (b) a decrease in net sales of existing products (approximately $0.5 million). Laboratory Equipment. Reduced net sales in the laboratory equipment segment resulted primarily from: (a) a decrease in net sales of existing products (approximately $6.6 million) and (b) foreign currency fluctuations (approximately $0.1 million). Net sales were partially increased by: (a) price increases (approximately $0.9 million) and (b) increased net sales of new products developed by us (approximately $0.5 million).
Gross Profit Fiscal Percent Fiscal Percent Dollar Percent (in thousands) 2002 of Sales 2001 of Sales Change Change ---- -------- ---- -------- ------ ------ Clinical Diagnostics $ 113,697 47% $ 106,927 48% $ 6,770 6% Labware and Life Sciences 102,224 50% 90,471 52% 11,753 13% Laboratory Equipment 24,298 43% 27,191 44% (2,893) -11% ----------- ------------ $ 240,219 48% $ 224,589 49% 15,630 7% =========== ============
Overall Company. Gross profit for the six months ended March 31, 2002 increased by $15.6 million or 7% over the corresponding fiscal 2001 period. Clinical Diagnostics. Increased gross profit in the clinical diagnostics segment resulted primarily from: (a) price increases (approximately $8.2 million), (b) the effects of acquired companies (approximately $5.8 million), (c) inventory adjustments (approximately $2.7 million), and (d) the effects of new products (approximately $2.0 million). Gross profit was partially reduced by: (a) decreased volume (approximately $5.0 million), (b) increased manufacturing overhead (approximately $4.0 million), (c) product mix (approximately $1.7 million), and (d) restructuring charges (approximately $1.3 million). Labware and Life Sciences. Increased gross profit in the labware and life sciences segment resulted primarily from: (a) the effects of acquired companies (approximately $6.9 million), (b) product mix (approximately $5.9 million), (c) price increases (approximately $3.1 million), (d) the effects of new products (approximately $2.1 million), and (e) increased volume (approximately $0.6 million). Gross profit was partially reduced by: (a) restructuring charges (approximately $2.4 million), (b) increased manufacturing overhead (approximately $2.1 million), (c) foreign currency fluctuations (approximately $1.5 million), and (d) inventory adjustments (approximately $0.8 million). Laboratory Equipment. Decreased gross profit in the laboratory equipment segment resulted primarily from: (a) decreased volume (approximately $3.2 million), (b) increased manufacturing overhead (approximately $1.5 million), and (c) foreign currency fluctuations (approximately $0.1 million). Gross profit was partially increased by: (a) price increases (approximately $0.9 million), (b) product mix (approximately $0.4 million), (c) the effects of new products (approximately $0.3 million), and (d) inventory adjustments (approximately $0.2 million). 30 Selling General and Administrative Expenses Fiscal Fiscal Dollar Percent (in thousands) 2002 2001 Change Change ---- ---- ------ ------ Clinical Diagnostics $ 51,018 $ 54,602 $ (3,584) -7% Labware and Life Sciences 56,474 49,619 6,855 14% Laboratory Equipment 13,435 15,549 (2,114) -14% ----------- ------------ ------------ Subtotal 120,927 119,770 1,157 1% Other 367 (633) 1,000 ----------- ------------ ------------ Total $ 121,294 $119,137 $ 2,157 2% =========== ============ ============ Overall Company. Selling, general and administrative expenses for the six months ended March 31, 2002 increased by $2.2 million or 2% over the corresponding fiscal 2001 period. Clinical Diagnostics. Decreased selling, general and administrative expenses in the clinical diagnostics segment resulted primarily from: (a) a decrease in amortization expense as a result of the implementation of SFAS 142 (approximately $7.9 million) and (b) foreign currency fluctuations (approximately $0.1 million). Selling, general and administrative expenses were partially increased by: (a) marketing expenses (approximately $1.7 million), (b) general and administrative expenses (approximately $1.0 million), (c) research and development expenses (approximately $0.8 million), (d) restructuring charges (approximately $0.6 million), and (e) acquired businesses (approximately $0.4 million). Labware and Life Sciences. Increased selling, general and administrative expenses in the labware and life sciences segment resulted primarily from: (a) acquired businesses (approximately $5.9 million), (b) marketing expenses (approximately $2.7 million), (c) general and administrative expenses (approximately $1.3 million), (d) research and development expense (approximately $0.9 million), and (e) restructuring charges (approximately $0.4 million). Selling, general and administrative expenses were partially reduced by: (a) decreased amortization expense as a result of SFAS 142 (approximately $3.9 million), and (b) foreign currency fluctuations (approximately $0.5 million). Laboratory Equipment. Decreased selling, general and administrative expenses in the laboratory equipment segment resulted primarily from: (a) decreased amortization expense as a result of SFAS 142 (approximately $1.1 million), (b) general and administrative expenses (approximately $0.8 million), (c) marketing expenses (approximately $0.2 million), and (d) foreign currency fluctuations (approximately $0.1 million). Selling, general and administrative expenses were partially increased by research and development expense (approximately $0.2 million). Operating Income Fiscal Fiscal Dollar Percent (in thousands) 2002 2001 Change Change ---- ---- ------ ------ Clinical Diagnostics $ 62,679 $ 52,325 $ 10,354 20% Labware and Life Sciences 45,750 40,852 4,898 12% Laboratory Equipment 10,863 11,642 (779) -7% ----------- ----------- ------------ Subtotal 119,292 104,819 14,473 14% Other (367) 633 (1,000) ----------- ----------- ------------ Total $ 118,925 $105,452 $ 13,473 13% =========== =========== ============ As a result of the foregoing, operating income for the six months ended March 31, 2002 increased by $13.5 million or 13% over the corresponding fiscal 2001 period. SFAS 142 would have increased operating income to $119.7 million for the six months ended March 31, 2001, had it been effective at the time. 31 Interest Expense Interest expense was $20.5 million for the six months ended March 31, 2002, as compared to $24.4 million for the corresponding fiscal 2001 period. The decrease is the result of lower average interest rates offset in part by an increase in average debt levels. Other Income Other income was $2.3 million for the six months ended March 31, 2002, as compared to other income of $5.2 million in the corresponding fiscal 2001 period. This decrease is primarily due to gains on the sales of assets of approximately $4.4 million included in other income for the six months ended March 31, 2001. Income Taxes Taxes on income from continuing operations for the six months ended March 31, 2002 were $36.2 million, an increase of $1.8 million from the corresponding fiscal 2001 period. This increase resulted primarily from increased taxable earnings offset in part by lower effective tax rates resulting from the implementation of SFAS 142. Income from Continuing Operations Before Extraordinary Items As a result of the foregoing, income from continuing operations before extraordinary items for the six months ended March 31, 2002 was $62.7 million, and increase of $11.1 million from the corresponding fiscal 2002 period. Discontinued Operations The loss from the discontinued operations for the six months ended March 31, 2002 was a result of an operating loss from VPT of $0.6 million and an estimated loss on sale of VPT of $13.2 million. For the corresponding fiscal 2001 period, the loss from discontinued operations was a result of a loss from the distribution of SDS of $11.8 million, offset by operating income from VPT of $0.7 million. Net Income As a result of the foregoing, net income was $48.9 million for the six months ended March 31, 2002 as compared to $39.8 million for the corresponding fiscal 2001 period. SFAS 142 would have increased net income to $49.7 million for the fiscal 2001 period, had it been effective at the time. LIQUIDITY AND CAPITAL RESOURCES As a result of the acquisition of our predecessor in 1987 and the acquisitions we completed since 1987, we have increased the carrying value of certain tangible and intangible assets consistent with accounting principles generally accepted in the United States. Accordingly, our results of operations include a significant level of non-cash expenses related to the depreciation of fixed assets and the amortization of intangible assets, including goodwill. Goodwill and intangible assets, net of amortization, increased by approximately $87 million during the first six months of 2002, primarily as a result of continued acquisition activity. However, the non-cash amortization expense relating to intangible assets and goodwill has been reduced substantially following the adoption of SFAS 142 on October 1, 2001. Our capital requirements arise principally from indebtedness incurred in connection with our obligation to pay rent under the Sale/Leaseback facility (as defined herein), our working capital needs, 32 primarily related to inventory and accounts receivable, our capital expenditures, primarily related to purchases of machinery and molds, the purchase of various businesses and product lines in execution of our acquisition strategy, and the periodic expansion of physical facilities. It is currently our intent to continue to pursue our acquisition strategy. Approximately $84.1 million of cash was generated from operating activities in the first six months of fiscal 2002, an increase of $18.8 million or 29% from the corresponding fiscal 2001 period. Non-cash depreciation and amortization charged against net income decreased approximately $9.7 million, primarily as a result of the adoption of SFAS 142. The cash outflow resulting from the net change in working capital, net of the effects of acquisitions and divestitures, was $6.8 million for the first six months of fiscal 2002. These changes are set forth in detail in the Consolidated Statements of Cash Flows. Investing activities in the first six months of fiscal 2002 used approximately $131.2 million of cash. This outflow was due primarily to cash used for acquisitions of $113.8 million. Capital expenditures were $17.8 million for the first six months of fiscal 2002, compared to $24.2 million in the corresponding fiscal 2001 period. Financing activities provided approximately $87.7 million of cash in the first six months of fiscal 2002. Proceeds from our CODES offering (discussed below) were used to pay off approximately $208 million outstanding on the Revolving Credit facilities. Financing fees of $8 million were paid in connection with the CODES offering. As a result of the cash flow from operations and excess of proceeds from the CODES offering over the payments on the Revolving Credit Facilities and financing fees paid, the Company had $42.4 million of cash at March 31, 2002. On October 10, 2001, the Company issued $300 million of senior convertible contingent debt securities (CODES). The CODES have a fixed interest rate of 2.25% per annum. Interest is payable on April 15 and October 15 of each year, beginning April 15, 2002. The Company will also pay contingent interest during any six-month period if the average trading price of the CODES during a specified period of five trading days preceding the relevant six-month period is above specified levels. The CODES will mature on October 15, 2021. The CODES are convertible, subject to certain conditions (based on specified factors) including but not limited to the sale price of the Company's common stock, trading prices of the CODES, maintenance of the Company's credit ratings, and the occurrence of specified corporate transactions), into Apogent Common Stock at a price of approximately $30.49 per share. The Company may redeem some or all of the CODES on or after October 20, 2004. The holders may require the Company to purchase all or a portion of their CODES on October 20, 2004 and on October 15, 2006, 2011 and 2016, or subject to specified exceptions, upon a change of control event. Certain of the Company's U.S. subsidiaries guarantee the Company's obligations under the CODES. The proceeds from the issuance were used to pay down the outstanding balance on our Revolving Credit Facility, and for general corporate purposes. The CODES, 8% Senior Notes, and Revolving Credit Facilities all contain certain cross default provisions. Some of these provisions include financial and operating covenants which, if not met, could cause acceleration of payments on outstanding balances. The covenants include, among other things; restrictions on investments, requirements that the Company maintain certain financial ratios, requirements that the Company maintain certain credit ratings, restrictions on the ability of the Company and its subsidiaries to create or permit liens, or to pay dividends or make other restricted payments (as defined), and limitations on incurrence of additional indebtedness. The Company is not aware of any violations of these covenants and does not foresee any such violations in light of current business conditions. APPLICATION OF CRITICAL ACCOUNTING POLICIES In connection with the Company's transitional impairment test for SFAS 142, fair market valuations were performed for each of the reporting units. These valuations required certain assumptions from management regarding future operating performance as well as various industry trends. Fluctuations in these assumptions could have a material impact on the values ascribed to the reporting units and could 33 result in an indication of impairment. These assumptions include, but are not limited to, estimated future cash flows, estimated sales growth, and weighted average cost of capital for each of the reporting units. In order to make informed assumptions, management relied on certain public information and statistical and industry information as well as internal forecasts to determine the various assumptions. In the event that industry, general economic and company trends change, these assumptions will change and impact the calculated fair market values. OFF-BALANCE SHEET ARRANGEMENTS The Company holds a minority interest in two unconsolidated joint ventures that are accounted for as equity investments. In both instances the Company owns less than 50% of the underlying joint venture. As of March 31, 2002 equity investments in these entities, included in "Other Assets", totaled approximately $8.3 million. Net income from joint ventures and minority interests for the first six months of fiscal 2002 was approximately $2.2 million and is included in Other Income. The joint ventures are limited to the extent they can incur any debt other than trade payables arising out of their business activities and do not hold any assets other than inventory and trade receivables. As of March 31, 2002, the joint ventures did not have any debt other than trade payables arising out of their business activities. DISCLOSURES ABOUT CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS In its day-to-day business activities, the Company incurs certain obligations and commitments to make future payments under contracts such as debt and lease agreements. Maturities of these obligations are set forth in the following table (in millions):
- -------------------------------------------------------------------------------------------------------------- Payments Due by Period - -------------------------------------------------------------------------------------------------------------- Less than 1 After 5 Contractual Obligations Total Year 1 - 3 Years 4 - 5 Years Years - -------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------- Long-Term Debt $ 750.5 $ 73.6 $ 41.8 $ 1.2 $ 633.9 - -------------------------------------------------------------------------------------------------------------- Capital Lease Obligations 0.6 0.3 0.3 --- --- - -------------------------------------------------------------------------------------------------------------- Operating Leases 51.6 9.6 21.9 8.5 11.6 - -------------------------------------------------------------------------------------------------------------- Unconditional Purchase Obligations 15.0 2.5 6.5 3.0 3.0 - -------------------------------------------------------------------------------------------------------------- Other Long-Term Obligations None - -------------------------------------------------------------------------------------------------------------- Total Contractual Cash Obligations $ 817.7 $ 86.0 $ 70.5 $ 12.7 $ 648.5 - --------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------- Total Amount of Commitment Expiration Per Period ------------------------------------------------------- Amounts Less Than Over 5 Other Commercial Commitments Committed 1 Year 1 - 3 Years 4 - 5 Years Years - -------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------- Lines of Credit $ 10.7 $ 10.7 $ --- $ --- $ --- - -------------------------------------------------------------------------------------------------------------- Standby Letters of Credit 107.9 34.8 73.1 - -------------------------------------------------------------------------------------------------------------- Guarantees None /(1)/ - -------------------------------------------------------------------------------------------------------------- Standby Repurchase Obligations None - -------------------------------------------------------------------------------------------------------------- Other Commercial Commitments None - -------------------------------------------------------------------------------------------------------------- Total Commercial Commitments $ 118.6 $ 45.5 $ 73.1 $ --- $ --- - --------------------------------------------------------------------------------------------------------------
/(1)/ Certain of the Company's domestic subsidiaries are guarantors under the Company's Revolving Line of Credit, 8% Senior Notes, and CODES. 34 CAUTIONARY FACTORS This report contains various forward-looking statements concerning our prospects that are based on the current expectations and beliefs of management. We may also make forward-looking statements from time to time in other reports and documents as well as oral presentations. When used in written documents or oral statements, the words "anticipate," "believe," "continue," "estimate," "goal," "expect," "objective," "outlook" and similar expressions are intended to identify forward-looking statements. The statements contained herein and such future statements involve or may involve certain assumptions, risks and uncertainties, many of which are beyond our control, that could cause our actual results and performance to differ materially from what is expected. In addition to the assumptions and other factors referenced specifically in connection with such statements, the following factors could impact our business and financial prospects: Our holding company structure increases financial risks. We are organized as a holding company, with all of our net sales generated through our subsidiaries. Consequently, our operating cash flow and ability to service indebtedness depend in part upon the operating cash flow of our foreign subsidiaries and the payment of funds by them to us in the form of loans, dividends or otherwise. Their ability to pay dividends and make loans, advances and other payments to us depends upon statutory or other contractual restrictions that apply, which may include requirements to maintain minimum levels of working capital and other assets. Our international operations pose currency and other risks. We have significant operations outside the United States, where a significant portion of our revenue is generated. We are therefore subject to risk factors affecting our international operations, including relevant foreign currency exchange rates, which can affect the cost of our products or the ability to sell our products in foreign markets, and the value in U.S. dollars of sales made in foreign currencies. Other factors include our ability to obtain effective hedges against fluctuations in currency exchange rates; foreign trade, monetary and fiscal policies; laws, regulations and other activities of foreign governments, agencies and similar organizations; risks associated with having major manufacturing facilities located in countries that have historically been less stable than the United States in several respects, including fiscal and political stability; and risks associated with an economic downturn in other countries. In addition, world events can increase the volatility of the currency markets, and such volatility could affect our financial results. Our failure to keep pace with the technological demands of our customers or with the products and services offered by our competitors could significantly harm our business. Some of the industries served by our products are characterized by rapid technological changes and new product introductions. Some of our competitors may invest more heavily in research or product development than we do. Successful new product offerings depend upon a number of factors, including our ability to: . accurately anticipate customer needs; . innovate and develop new technologies and applications; . successfully commercialize new products in a timely manner; . price our products competitively and manufacture and deliver our products in sufficient volumes and on time; and . differentiate our offerings from those of our competitors. If we do not introduce new products in a timely manner and make enhancements to meet the changing needs of our customers, some of our products could become obsolete over time, in which case our customer relationships, revenue, and operating results would suffer. Our operating results may suffer if the industries into which we sell our products are in downward cycles. Some of the industries and markets into which we sell our products are cyclical. Any significant downturn in our customers' markets or in general economic conditions could result in reduced demand for our products and could harm our business. 35 Future acquisitions may not be available or may create transitional challenges. A significant portion of our growth over the past several years has been achieved through our acquisition program. Our rate of continued growth is therefore subject to factors affecting our ability to continue pursuing our current acquisition strategy and to be successful with that strategy. These factors include the cost of the capital required to effect our acquisition strategy, the availability of suitable acquisition candidates at reasonable prices, competition for appropriate acquisition candidates, our ability to realize the synergies expected to result from acquisitions, our ability to retain key personnel in connection with acquisitions and the ability of our existing personnel to efficiently handle increased transitional responsibilities resulting from acquisitions. We may incur restructuring or impairment charges that would reduce our earnings. We have in the past and may in the future restructure some of our operations. In such circumstances, we may take actions that would result in a charge and reduce our earnings. These restructurings have or may be undertaken to realign our subsidiaries, eliminate duplicative functions, rationalize our operating facilities and products and reduce our staff. These restructurings may be implemented to improve the operations of recently acquired subsidiaries as well as subsidiaries that have been part of our operations for many years. Additionally, on October 1, 2001 we adopted SFAS 142, "Goodwill and Other Intangible Assets," which requires that goodwill and intangible assets that have an indefinite useful life be tested at least annually for impairment. The Company has performed its initial impairment tests and the results indicate no circumstances of impaired goodwill, but future impairment may occur at any time. We rely heavily upon sales to key distributors and original equipment manufacturers, and could lose sales if any of them stop doing business with us. Our three most significant distributors represent a significant portion of our revenues. Our reliance on major independent distributors for a substantial portion of our sales subjects our sales performance to volatility in demand from distributors. We can experience volatility when distributors merge or consolidate, when inventories are not managed to end-user demand, or when distributors experience softness in their sales or make alternate sourcing decisions. We rely primarily upon the long-standing and mutually beneficial nature of our relationships with our key distributors, rather than on contractual rights, to protect these relationships. Volatility in end-user demand can also arise with large OEM customers to whom we sell directly. The loss of a substantial contract could adversely affect our business. Sales to our OEM customers are sometimes unpredictable and wide variances sometimes occur quarter to quarter. We could be injured by disruptions of our manufacturing operations. We rely upon our manufacturing operations to produce most of the products we sell. Any significant disruption of those operations for any reason, such as strikes, labor disputes or other labor unrest, power interruptions, fire, war, or other force majuere, could adversely affect our sales and customer relationships and therefore adversely affect our business. In particular, the supply of white glass, which is used in our clinical diagnostics segment's worldwide manufacturing operations, comes solely from our glass manufacturing facility in Switzerland. Risks include delays encountered in connection with the periodic rebuilding of the sheet glass furnace or furnace malfunctions. Although most of our raw materials are available from a number of potential suppliers, our operations also depend upon our ability to obtain raw materials at reasonable prices. The success of many of our products depends on the effectiveness of our patents, trademarks, and licenses to defend our intellectual property rights. Our success with many of our products depends, in part, on our ability to protect our current and future innovative products and to defend our intellectual property rights. Our subsidiaries' products are sold under a variety of trademarks and trade names. They own or license all of the trademarks and trade names we believe to be material to the operation of their businesses. We also rely upon a combination of non-disclosure and other contractual agreements and trade secret, copyright, patent, and trademark laws to protect our intellectual property rights. Disputes may arise concerning the ownership of intellectual property or the applicability of confidentiality agreements. If we fail to adequately protect our intellectual property, competitors may manufacture and market products similar to ours. We could be hurt by product liability claims or other litigation. 36 Our business is subject to the risks of claims involving our products and facilities (past and present) and other legal and administrative proceedings, including the expense of investigating, litigating and settling any claims. Although we currently maintain insurance against some of these risks, uninsured losses could occur. Our business is subject to regulatory risks. Our ability to continue manufacturing and selling those of our products that are subject to regulation by the United States Food and Drug Administration or other domestic or foreign governments or agencies is subject to a number of risks. In the future, some of our products may be affected by the passage of stricter laws or regulations, reclassification of our products into categories subject to more stringent requirements, or the withdrawal of approvals needed to sell one or more of our products. Some of our products are affected by general levels of insurance and reimbursement. The demand for and pricing of some of our products can be affected by changing levels of public and private health care budgets, including reimbursement by private or governmental insurance programs. We could be harmed by the loss of key management. The success of our operations depends in significant part upon the experience and expertise of our management team, both within Apogent and in our operating subsidiaries. Any loss of these key personnel could harm our business. We sometimes experience quarterly variations in our operating results. Our business is subject to quarterly variations in operating results caused by a number of factors, including business and industry conditions, timing of acquisitions, distribution and OEM customer issues, and other factors listed here. All these factors make it difficult to predict operating results for any particular period. Other risks may arise. We may be subject to risks arising from other business and investment considerations that may be disclosed from time to time in our Securities and Exchange Commission filings or in other publicly available written documents. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. 37 Item 3. Quantitative and Qualitative Disclosures About Market Risk ---------------------------------------------------------- There has been no substantial change in market risk to the Company since September 30, 2001, the end of our prior fiscal year. PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- The Company, a Wisconsin corporation, held its Annual Meeting of Shareholders on January 28, 2002. A quorum was present at the Annual Meeting, with 100,135,313 shares out of a total of 106,129,455 shares entitled to cast votes represented in person or by proxy at the meeting. Proposal Number 1: To elect four directors to serve as Class I Directors until the 2005 Annual Meeting of Shareholders and until their respective successors are duly elected and qualified. The shareholders voted to elect William H. Binnie, Don H. Davis, Jr., Christopher L. Doerr and Richard W. Vieser to serve as Class I directors until the 2005 Annual Meeting of Shareholders and until their respective successors are duly elected and qualified. The results of the vote are as follows:
Mr. Binnie Mr. Davis Mr. Doerr Mr. Vieser ---------- --------- --------- ---------- For 99,858,639 99,803,189 98,615,795 99,914,697 Withheld From 276,674 332,124 1,519,518 220,616
The terms of office as directors of Stephen R. Hardis, R. Jeffrey Harris, Frank H. Jellinek, Jr., William U. Parfet, Joe L. Roby and Kenneth F. Yontz continued after the meeting. Proposal Number 2: To approve the Company's 2001 Equity Incentive Plan. The shareholders voted to approve the Company's 2001 Equity Incentive Plan. The results of the vote are as follows: For: 89,267,980 Against: 3,806,454 Abstentions: 81,136 Broker Non-Votes 6,979,743 Proposal Number 3: To approve the Company's Employee Stock Purchase Plan. The shareholders voted to approve the Company's Employee Stock Purchase Plan. The results of the vote are as follows: For: 92,754,974 Against: 310,191 Abstentions: 90,405 Broker Non-Votes: 6,979,743 Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits: See Exhibit Index following the Signature page in this report, which is incorporated herein by reference. 38 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereto duly authorized. APOGENT TECHNOLOGIES INC. --------------------------------------------- (Registrant) Date: May 15, 2002 /s/ JEFFREY C. LEATHE - ---------------------- --------------------------------------------- Jeffrey C. Leathe Executive Vice President - Finance, Chief Financial Officer and Treasurer* * Executing as both the financial officer and the duly authorized officer of the Company 39 APOGENT TECHNOLOGIES INC. (the "Registrant") (Commission File No. 1-11091) EXHIBIT INDEX to QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2002
Exhibit Filed Number Description Incorporated Herein By Reference To Herewith - -------- ----------------------------------- ------------------------------------- ---------- Apogent Technologies Inc. 2001 Appendix A to the Registrant's 10.1 Equity Incentive Plan Proxy Statement dated December 26, 2001. 10.2 Apogent Technologies Inc. Employee Appendix B to the Registrant's Stock Purchase Plan Proxy Statement dated December 26, 2001. 10.3 Form of Revised Nonstatutory Stock X Option Agreement under the 1993 Long-Term Incentive Plan 10.4 Form of Nonstatutory Stock Option X Agreement under the 2001 Equity Incentive Plan 12 Computation of ratio of earnings X to fixed charges
40 EX-10.3 3 dex103.txt FORM OF REVISED NONSTATUTORY STOCK OPTION 1993 EXHIBIT 10.3 ------------ APOGENT TECHNOLOGIES INC. AMENDED AND RESTATED 1993 LONG-TERM INCENTIVE PLAN NONQUALIFIED STOCK OPTION AGREEMENT THIS AGREEMENT is made and entered into as of the [day] day of [month, year], between Apogent Technologies Inc., a Wisconsin corporation (the "Company"), and [optionee] (the "Participant") in connection with the grant of a Nonqualified Stock Option under the Sybron International Corporation Amended and Restated 1993 Long-Term Incentive Plan. W I T N E S S E T H: WHEREAS, the Participant is an employee of the Company or one of its Subsidiaries in a key position, and the Company desires to promote the success and enhance the value of the Company by linking the personal interests of the Participant to those of Company shareholders, and by providing the Participant with an incentive for outstanding performance; AND WHEREAS, in light of the above, the Company desires to grant to the Participant a Nonqualified Stock Option to purchase shares of Company common stock under the Company's Amended and Restated 1993 Long-Term Incentive Plan. NOW, THEREFORE, in consideration of these premises, the parties agree that the following shall constitute the Agreement between the Company and the Participant: 1. Definitions. For purposes of this Agreement, the terms used ----------- herein shall have the meanings specified in the Plan, a copy of which is attached hereto and incorporated herein by reference pursuant to Section 10 below. 2. Grant of Nonqualified Stock Option. Subject to the terms and ---------------------------------- conditions set forth herein, the Company grants to the Participant a Nonqualified Stock Option to purchase from the Company [# of Shares] Shares at an Option Price of [US$00.00] per share, subject to adjustment as provided in Section 8 hereof. This Option shall vest and become exercisable as follows: (a) as to [QtrShr] shares any time after December 7, 2002, and (b) an additional [1/48Share] shares after the [day] day of each month thereafter for the next 36 months until this option is fully vested (i.e., 100% vested in four years). This Option shall expire on [month day, year]; provided, however, that (i) if -------- ------- the Participant's employment with the Company is terminated prior to the exercise in full of this Option, then the rules of Section 7 hereof shall apply, and (ii) notwithstanding anything to the contrary herein, the Company shall not be required to issue or transfer any certificates for Shares purchased upon exercise of this Option until all applicable requirements of law have been complied with and, if applicable, such Shares shall have been duly listed on any securities exchange on which Shares may then be listed. 3. Notice of Exercise. This Option may be exercised in whole or ------------------ in part, from time to time, in accordance with Section 2 by the delivery of written notice to the Vice President of Human Resources of the Company at the address provided in Section 13, which notice shall: (a) specify the number of Shares to be purchased and the total Option Price to be paid therefor; (b) if the person exercising this Option is not the Participant himself or herself, contain or be accompanied by evidence satisfactory to the Committee of such person's right to exercise this Option; and (c) be accompanied by payment in full of the Option Price (i) in cash or its equivalent, or (ii) with the Committee's consent, by tendering previously acquired Shares having a Fair Market Value at the time of exercise equal to the Option Price (provided such previously acquired Shares have been held by the Participant for at least 6 months prior to such tender), (iii) with the Committee's consent, by a combination of cash and such tendered Shares, or (iv) with the Committee's consent, through a cashless exercise as permitted under Federal Reserve Board Regulation T or by any other means which the Committee deems consistent with the Plan and applicable law. As soon as practicable after receipt of an exercise notice and full payment of the Option Price, the Company shall deliver to the Participant, in the Participant's name, Share certificates in an appropriate amount based upon the number of Shares purchased upon the exercise. The Committee may impose such restrictions on any Shares acquired pursuant to an exercise as it deems advisable, including without limitation restrictions under applicable Federal securities laws, under the requirements of any stock exchange or market upon which such Shares are then listed and/or traded, and under blue sky or state securities laws applicable to such Shares. 4. Transfer and Exercise of Option. This Option shall not be ------------------------------- sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. During the Participant's lifetime, this Option may be exercised only by him or her. In accordance with the provisions of the Plan, the Participant may, from time to time, name any beneficiary or beneficiaries (who may be named contingently or successively) who shall be entitled to exercise this Option in the event of the Participant's death and to the extent this Option is exercisable at that time. In the absence of any such designation, this Option may be exercised, to the extent exercisable, by the administrator of the Participant's estate. 5. Status of Participant. The Participant shall not be deemed a --------------------- stockholder of the Company with respect to any of the Shares subject to this Option, except to the extent that such Shares shall have been purchased and transferred to him. 6. No Effect on Capital Structure. This Option shall not affect ------------------------------ the right of the Company or any Subsidiary thereof to reclassify, recapitalize or otherwise change its capital or debt structure or to merge, consolidate, convey any or all of its assets, dissolve, liquidate, windup, or otherwise reorganize. 7. Premature Expiration of Option. ------------------------------ 7.1 Termination of Employment Other Than For Cause. (a) If the ---------------------------------------------- employment of the Participant shall terminate for any reason other than Cause, this Option, to the extent (if any) it is not yet exercisable, shall terminate immediately and be forfeited to the Company; provided, however, that if the employment of the Participant shall terminate by reason of death, disability or retirement and further that this Option has been held by the Participant for at least six (6) months from the date of grant at the time of such termination, this Option, to the extent it is not yet exercisable, shall immediately vest and remain exercisable until the earlier to occur of one (1) year from the date of termination or the scheduled expiration date of this Option; and provided further that the Committee, in its sole discretion, shall have the right to immediately vest, upon any other termination without Cause, all or any portion of this Option, subject to such terms as the Committee, in its sole discretion, deems appropriate, provided that the maximum exercise period which may be permitted upon any such acceleration of vesting shall be the shorter of one year or the scheduled expiration date of this Option. (b) To the extent that this Option is exercisable as of the effective date of a termination other than for Cause, this Option may be exercised by the Participant within the period beginning on the effective date of termination and ending on the earlier to occur of the scheduled expiration date of the Option or: (i) one year following the effective date of termination in the case of termination by reason of death, disability or retirement, and (ii) three months following such date in the case of termination for any other reason (other than for Cause). 7.2 Termination of Employment For Cause. If the employment of the ----------------------------------- Participant shall terminate for Cause, this Option shall terminate immediately and be forfeited to the Company, and no additional exercise period shall be allowed, regardless of the exercisability of this Option at the time of such termination. 8. Adjustments Upon Changes in Capitalization, Merger, Etc. ------------------------------------------------------- Notwithstanding any other provision herein, in the event of any merger, reorganization, consolidation, recapitalization, separation, liquidation, stock 2 dividend, split-up, share combination, or other change in the corporate structure of the Company affecting the Shares, such adjustment shall be made in the number and class of Shares subject to this Option and the Option Price as may be determined by the Committee, in its sole discretion, to be appropriate and equitable to prevent dilution or enlargement of rights, provided that any fractional share resulting from such adjustment shall be eliminated. 9. Committee Authority. Any question concerning the ------------------- interpretation of this Agreement, any adjustments required to be made under Section 8 of this Agreement, and any controversy which may arise under this Agreement shall be determined by the Committee, in its sole discretion, which determination shall be final, conclusive and binding on all Persons, including without limitation the Company and the Participant. 10. Plan Controls. The terms of this Agreement are governed by the ------------- terms of the Plan, a copy of which is attached hereto as Exhibit A and made a part hereof as if fully set forth herein, and in the case of any inconsistency between the terms of this Agreement and the terms of the Plan, the terms of the Plan shall control. 11. Change In Control. Upon the occurrence of a Change in Control, ----------------- unless otherwise specifically prohibited by law, this Option shall become immediately exercisable and shall remain as such for the duration of its term; provided, however, the Committee shall have authority to make any modifications to this Option which are consistent with the provisions of the Plan and determined by the Committee to be appropriate before the effective date of the Change in Control. 12. Tax Withholding. The Company shall have the power and right to --------------- deduct or withhold, or require the Participant to remit to the Company, an amount sufficient to satisfy Federal, state and local taxes required by law to be withheld with respect to the grant of this Option, its exercise or any payment made under or as a result of this Option or the Plan. The Participant may elect, subject to the approval of the Committee, to satisfy this withholding requirement, in whole or in part, by having the Company withhold Shares having a Fair Market Value on the date the tax is to be determined equal to the minimum marginal total tax which could be imposed on the transaction. Any such election shall be irrevocable, made in writing, signed by the Participant and comply with one of the following requirements: (a) Written notice of the withholding election is delivered to the Committee at least six months prior to the date specified by the Participant on which the Option exercise is to occur; or (b) The withholding election is made in connection with an Option exercise which occurs during a Window Period. 13. Notice. Whenever any notice is required, permitted or ------ contemplated hereunder, such notice shall be given to the non-notifying party via hand delivery or United States mail, postage prepaid, at the address stated below or at such other address specified in a notice given hereunder: If to the Company: APOGENT TECHNOLOGIES INC. 48 Congress Street Portsmouth, NH 03801 Attention: Vice President of Human Resources If to the Participant: [name of optionee] c/o [name of company] [address] [city, state zip] [country] Any notice given via United States mail shall be deemed effectively given two (2) days after mailing. 14. Tax Treatment. This Option is not intended to qualify as, -------------- and shall not be treated as, an "incentive stock option" within the meaning of Section 422 of the Code. 15. Governing Law. To the extent not preempted by Federal law, ------------- this Agreement shall be construed in accordance with and governed by the laws of the State of Wisconsin. 3 16. Successors. All obligations of the Company under this ---------- Agreement shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company. 17. Employment/Participation. Nothing in this Agreement shall ------------------------ interfere with or limit in any way the right of the Company to terminate the Participant's employment at any time, nor confer upon the Participant any right to continue in the employ of the Company. Furthermore, nothing contained herein shall confer upon the Participant any right to be selected to receive an award in the future under the Plan. IN WITNESS WHEREOF, the Company has caused this Agreement to be executed and the Participant has hereunto set his hand on the day and year first above written. APOGENT TECHNOLOGIES INC. ________________________________________________ VICE PRESIDENT OF HUMAN RESOURCES ________________________________________________ SIGNATURE OF PARTICIPANT 4 EX-10.4 4 dex104.txt FORM OF NONSTATUTORY STOCK OPTION AGR. 2001 EXHIBIT 10.4 ------------ APOGENT TECHNOLOGIES INC. 2001 EQUITY INCENTIVE PLAN NONQUALIFIED STOCK OPTION AGREEMENT THIS AGREEMENT is made and entered into as of the ___ day of ________, 2002 (the "Grant Date"), between Apogent Technologies Inc., a Wisconsin corporation (the "Company"), and Name of Participant (the "Participant") in connection with the grant of a Non-Qualified Stock Option under the Apogent Technologies Inc. 2001 Equity Incentive Plan (the "Plan"). W I T N E S S E T H: WHEREAS, Participant is an employee of the Company or one of its Subsidiaries in a key position, and the Company desires to promote the success and enhance the value of the Company by linking the personal interests of Participant to those of Company shareholders, and by providing Participant with an incentive for outstanding performance; and WHEREAS, in light of the above, the Company desires to grant to Participant a Non-Qualified Stock Option ("Option") to purchase Shares of Company common stock under the Company's 2001 Equity Incentive Plan. NOW, THEREFORE, in consideration of these premises, the parties agree that the following shall constitute the agreement ("Agreement") between the Company and Participant: 1. Plan Controls. This Option is granted under and is subject to ------------- the terms of the Plan. In the case of any inconsistency between the terms of this Agreement and the terms of the Plan, the terms of the Plan shall control. For purposes of this Agreement, the terms used herein shall have the meanings specified in the Plan and terms which are not defined in the Plan shall have the meanings specified in Section 11 of this Agreement. 2. Grant of Non-Qualified Stock Option. Subject to the terms and ----------------------------------- conditions set forth herein, the Company grants to Participant a Non-Qualified Stock Option to purchase from the Company TotalShares Shares at an Option price of US$ Amount per share ("Option Price"), subject to adjustment as provided in Section 9 hereof. This Option shall not be exercisable until Participant completes one year of service from the Grant Date. When Participant has completed one year of service from the Grant Date, the Option shall be exercisable for 25% of the Shares covered by this Option. Thereafter, the Option shall become exercisable for an additional 1/48 of the total Shares covered by this Option for each full month of employment with the Company. (E.g., the Option will be exercisable for 37.5% of the Shares if Participant continues in employment for eighteen months after the Grant Date, 75% of the Shares if Participant continues in employment for thirty-six months after the Grant Date, and 100% of the Shares if Participant continues in employment for forty-eight months after the Grant Date.) No fractional Shares shall be issued upon exercise of this Option and if the application of the fractions set forth above would result in a fractional share, the number of Shares exercisable shall be rounded up to the next full share. Notwithstanding the foregoing, this Option shall become immediately exercisable in full if (a) Participant's employment terminates because of death or Disability or (b) in the event of a Change in Control (as provided in Section 12 hereof). 3. Expiration of Option. This Option shall expire ten years from -------------------- the Grant Date; provided, however, that (a) if Participant's employment with the Company is terminated prior to the exercise in full of this Option, then the rules of Section 8 hereof shall apply, and (b) notwithstanding anything to the contrary herein, the Company shall not be required to issue or transfer any certificates for Shares purchased upon exercise of this Option until all applicable requirements of law have been complied with and, if applicable, such Shares shall have been duly listed on any securities exchange on which Shares may then be listed. 4. Notice of Exercise. This Option may be exercised in whole or ------------------ in part from time to time in accordance with Section 2 hereof, by the delivery of written notice to the Vice President of Human Resources of the Company at the address provided in Section 14, which notice shall: (a) specify the number of Shares to be purchased and the per share Option Price therefor; (b) if the Person exercising this Option is not the Participant, contain or be accompanied by evidence satisfactory to the Committee of such person's right to exercise this Option; and (c) be accompanied by payment in full of the total Option Price (i) in cash or its equivalent, (ii) by tendering previously acquired Shares having a Fair Market Value at the time of exercise equal to the Option Price (provided such previously acquired Shares have been held by Participant for at least six months prior to such tender), (iii) by a combination of cash and such tendered Shares, (iv) with the Committee's consent, through a cashless exercise as permitted under Federal Reserve Board Regulation T, or (v) by any other means which the Committee deems consistent with the Plan and applicable law. As soon as practicable after receipt of an exercise notice and full payment of the Option Price, the Company shall deliver to Participant, in Participant's name, Share certificates in an appropriate amount based upon the number of Shares purchased upon the exercise. The Committee may impose such restrictions on any Shares acquired pursuant to an exercise as it deems advisable, including without limitation restrictions under applicable Federal securities laws, under the requirements of any stock exchange or market upon which such Shares are then listed and/or traded, and under blue sky or state securities laws applicable to such Shares. 5. Transfer and Exercise of Option. This Option may not be sold, ------------------------------- transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution, and shall be exercisable by a Participant during his or her lifetime only by Participant, except that any portion of this Option that is then exercisable may be transferred by Participant during his lifetime to a family member (as defined in the General Instructions to SEC Form S-8). In accordance with the provisions of the Plan, Participant may, from time to time, name any beneficiary or beneficiaries (who may be named contingently or successively) who shall be entitled to exercise this Option in the event of Participant's death and to the extent this Option is exercisable at that time. In the absence of any such designation, this Option may be exercised, to the extent exercisable, by the administrator of Participant's estate. 2 6. Status of Participant. The Participant shall not be deemed ---------------------- a shareholder of the Company with respect to any of the Shares subject to this Option, except to the extent that such Shares shall have been purchased and transferred to him. 7. No Effect on Capital Structure. This Option shall not affect ------------------------------ the right of the Company or any Subsidiary thereof to reclassify, recapitalize or otherwise change its capital or debt structure or to merge, consolidate, convey any or all of its assets, dissolve, liquidate, windup, or otherwise reorganize. 8. Termination of Employment. ------------------------- (a) If the employment of Participant shall terminate for any reason other than Cause or Retirement, this Option, to the extent (if any) it is not yet exercisable, shall terminate immediately and be forfeited to the Company; provided, however, that if the employment of Participant shall terminate by reason of death or Disability, this Option, to the extent it is not yet exercisable, shall immediately vest and become exercisable until the earlier to occur of three years from the date of termination or the scheduled expiration date of this Option; and provided further that the Committee, in its sole discretion, shall have the right to immediately vest, upon any other termination without Cause, all or any portion of this Option, subject to such terms as the Committee, in its sole discretion, deems appropriate, provided that the maximum exercise period which may be permitted upon any such acceleration of vesting shall be the shorter of three years or the scheduled expiration date of this Option. (b) If the employment of Participant shall terminate by reason of Retirement, this Option, to the extent it is not yet exercisable, shall continue in existence and shall continue to vest during the three-year period following the date of Retirement as if the Participant remained in the employ of the Company (subject to acceleration in the event of Participant's death or in the event of a Change of Control). The Option shall remain exercisable until the earlier to occur of three years from the date of Retirement or the scheduled expiration date of this Option; and provided further that the Committee, in its sole discretion, shall have the right to immediately vest all or any portion of this Option, subject to such terms as the Committee, in its sole discretion, deems appropriate, provided that the maximum exercise period which may be permitted upon any such acceleration of vesting shall be the shorter of three years or the scheduled expiration date of this Option. (c) To the extent that this Option is exercisable as of the effective date of a termination other than for Cause, this Option may be exercised by Participant within the period beginning on the effective date of termination and ending on the earlier to occur of the scheduled expiration date of the Option or: (i) three years following the effective date of termination in the case of termination by reason of death, Disability or Retirement, and (ii) three months following such date in the case of termination for any other reason (other than for Cause). (d) If the employment of Participant shall terminate for Cause, this Option shall terminate immediately and be forfeited to the Company, and no additional exercise period shall be allowed, regardless of the exercisability of this Option at the time of such termination. 3 9. Adjustments Upon Changes in Capitalization, Merger, Etc. ------------------------------------------------------- Notwithstanding any other provision herein, in the event of any merger, reorganization, consolidation, recapitalization, separation, liquidation, stock dividend, split-up, share combination, or other change in the corporate structure of the Company affecting the Shares, such adjustment shall be made in the number and class of Shares subject to this Option and the Option Price as may be determined by the Committee, in its sole discretion, to be appropriate and equitable to prevent dilution or enlargement of rights, provided that any fractional share resulting from such adjustment shall be eliminated. 10. Committee Authority. Any question concerning the ------------------- interpretation of this Agreement, any adjustments required to be made under Section 9 of this Agreement, and any controversy which may arise under this Agreement shall be determined by the Committee, in its sole discretion, which determination shall be final, conclusive and binding on all Persons, including without limitation the Company and Participant. 11. Definitions. For purposes of this Agreement, the terms used ----------- in this Agreement shall have the following meanings: (a) Cause. "Cause" means fraud, dishonesty, competition ----- with the Company, unauthorized use of the Company's trade secrets or confidential information, or continued gross neglect by Participant of the duties assigned to him by the Board (if such neglect continues for thirty days after notice by the Board to Participant specifying the duties being neglected by Participant). (b) Change in Control. "Change in Control" shall mean ------------------ a change in control of the Company of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), whether or not the Company is then subject to such reporting requirement; provided that, without limitation, such a Change in Control shall be deemed to have occurred if: (i) any Person is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 25% or more of the combined voting power of the Company's then outstanding securities; (ii) during any period of two consecutive years (not including any period prior to the execution of this Agreement), individuals, who at the beginning of such period constitute the Board and any new director added during the period whose election to the Board or nomination for election to the Board by the Company's shareholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was approved prior to the beginning of the period, cease for any reason to constitute a majority of the Board; (iii) the shareholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 66 2/3% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (iv) the shareholders of the Company approve a plan of complete liquidation of the Company or an agreement for the 4 sale or disposition by the Company of all or substantially all of the Company's assets. 12. Change In Control. Upon the occurrence of a Change in Control, ----------------- unless otherwise specifically prohibited by law, this Option shall become immediately exercisable and shall remain as such for the duration of its term (subject to Section 8 hereof); provided, however, that the Committee shall have authority to make any modifications to this Option which are consistent with the provisions of the Plan and determined by the Committee to be appropriate before the effective date of the Change in Control. 13. Tax Withholding. The Company shall have the power and right --------------- to deduct or withhold, or require Participant to remit to the Company, an amount sufficient to satisfy Federal, state and local taxes required by law to be withheld with respect to the grant of this Option, its exercise or any payment made under or as a result of this Option or the Plan. The Participant may make a written election, subject to the approval of the Committee, to satisfy this withholding requirement, in whole or in part, by having the Company withhold Shares having a Fair Market Value on the date the tax is to be determined equal to the minimum marginal total tax which could be imposed on the transaction. 14. Notice. Whenever any notice is required, permitted or ------ contemplated hereunder, such notice shall be given to the non-notifying party via hand delivery or United States mail, postage prepaid, at the address stated below or at such other address specified in a notice given hereunder: If to the Company: APOGENT TECHNOLOGIES INC. 30 Penhallow Street Portsmouth, NH 03801 Attention: Vice President of Human Resources If to Participant: Participant Name c/o CompanyName Street City, State Zip Country Any notice given via United States mail shall be deemed effectively given four days after mailing. 15. Tax Treatment. This Option is not intended to qualify as, -------------- and shall not be treated as, an "incentive stock option" within the meaning of Section 422 of the Code. 16. Governing Law. To the extent not preempted by Federal law, -------------- this Agreement shall be construed in accordance with and governed by the laws of the State of Wisconsin. 17. Successors. All obligations of the Company under this ---------- Agreement shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company. 18. Employment/Participation. Nothing in this Agreement shall ------------------------ interfere with or limit in any way the right of the Company to terminate Participant's employment at any time, nor confer upon Participant any right to continue in the employ of the Company. Furthermore, nothing contained 5 herein shall confer upon Participant any right to be selected to receive an award in the future under the Plan. 19. Gender and Number. Except where otherwise indicated by the ----------------- context, any masculine term used herein also shall include the feminine; the plural shall include the singular; and the singular shall include the plural. IN WITNESS WHEREOF, the Company has caused this Agreement to be executed and Participant has hereunto set his hand on the day and year first above written. APOGENT TECHNOLOGIES INC. ___________________________________________ Vice President of Human Resources ___________________________________________ Signature of Participant 6 EX-12 5 dex12.txt COMPUTATION OF RATION OF EARNINGS TO FIXED CHARGES Apogent Technologies Inc. EXHIBIT 12 Ratio of Earnings to Fixed Charges 3/31/02 Six Months Ended Fiscal Year Ended September 30, March 31, ----------------------------------------------- 1997 1998 1999 2000 2001 2002 ---- ---- ---- ---- ---- ---- Fixed Charges: Interest expense 24,999 33,772 40,073 48,684 48,698 20,531 Deferred financing 152 151 224 533 563 1,741 1/3 Rental expense 1,076 1,343 2,235 3,145 3,751 2,108 ----------------------------------------------- -------- 26,227 35,266 42,532 52,362 53,012 24,380 Earnings: Pre tax income from continuing operations 73,996 86,836 127,392 144,325 180,739 98,926 Add: Fixed charges 26,227 35,266 42,532 52,362 53,012 24,380 Earnings 100,223 122,102 169,924 196,687 233,751 123,306 Ratio of Earnings to Fixed Charges 3.8 3.5 4.0 3.8 4.4 5.1 =============================================== ======== Rental Expense 3,229 4,028 6,704 9,434 11,253 6,325 =============================================== ======== -----END PRIVACY-ENHANCED MESSAGE-----