-----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, RV1YRgNIO5uVLU8+9F1easJA+fbspjzM4IY4+u0jR7zkfZx5kI2sCa4FOs8Yoqtl yvAIW5+DnPiHh35PwkhFzQ== 0000950124-01-502786.txt : 20010814 0000950124-01-502786.hdr.sgml : 20010814 ACCESSION NUMBER: 0000950124-01-502786 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010813 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: 1706852 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 CORP DATE OF NAME CHANGE: 19960321 FORMER COMPANY: FORMER CONFORMED NAME: SYBRON INTERNATIONAL INC DATE OF NAME CHANGE: 19951221 10-Q 1 c64457e10-q.txt FORM 10-Q FOR QUARTER ENDING JUNE 30, 2001 1 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 JUNE 30, 2001 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) 48 CONGRESS STREET, PORTSMOUTH, NEW HAMPSHIRE 03801 (Address of principal executive offices) (Zip Code) (603) 433-6131 (Registrant's telephone number, including area code) (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 August 9, 2001, there were 105,690,103 shares of the Registrant's Common Stock, par value $0.01 per share, outstanding. 2 APOGENT TECHNOLOGIES INC. AND SUBSIDIARIES
Index Page ----- ---- PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Consolidated Balance Sheets as of June 30, 2001 and September 30, 2000 3 Consolidated Statements of Income for the three and nine months ended June 30, 2001 and 2000 4 Consolidated Statement of Shareholders' Equity for the nine months ended June 30, 2001 5 Consolidated Statements of Cash Flows for the nine months ended June 30, 2001 and 2000 6 Notes to unaudited consolidated financial statements 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION 23 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 40 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 41 Signatures 42
2 3 PART I. FINANCIAL INFORMATION Item 1. Financial Statements APOGENT TECHNOLOGIES INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share data)
JUNE 30, SEPTEMBER 30, 2001 2000 ------------- ------------- ASSETS (unaudited) Current assets: Cash and cash equivalents $ 26,820 $ 12,411 Accounts receivable (less allowance for doubtful accounts of $3,793 and $4,041 at June 30,2001 and Sept. 30, 2000, respectively) 180,254 173,585 Inventories 162,911 141,779 Deferred income taxes 13,055 13,226 Net assets held for discontinued operations - 152,970 Prepaid expenses and other current assets 23,923 16,564 ------------- ------------- Total current assets 406,963 510,535 Available for sale security 53,845 54,444 Property, plant and equipment, net 214,147 208,094 Intangible assets 1,110,189 1,008,153 Deferred income taxes 7,888 7,870 Other assets 10,719 3,268 ------------- ------------- Total assets $ 1,803,751 $ 1,792,364 ============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 49,882 $ 51,899 Advances and loans from SDS - 77,762 Current portion of long-term debt 35,287 34,327 Income taxes payable 32,827 16,604 Accrued payroll and employee benefits 29,230 30,509 Restructuring reserve 2,966 5,609 Deferred income taxes 933 807 Other current liabilities 36,220 23,622 ------------- ------------- Total current liabilities 187,345 241,139 Long-term debt 667,706 649,409 Securities lending agreement 53,845 54,444 Deferred income taxes 92,147 93,048 Other liabilities 8,868 4,808 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 105,690,166 and 105,191,692 shares respectively, outstanding 105,689,946 and 105,191,472 respectively 1,057 1,052 Equity rights, 50 rights at $1.09 per right - - Additional paid-in capital 251,299 271,739 Retained earnings 598,251 531,701 Accumulated other comprehensive income (56,767) (54,976) Treasury common stock, 220 shares at cost - - ------------- ------------- Total shareholders' equity 793,840 749,516 ============= ============= Total liabilities and shareholders' equity $ 1,803,751 $ 1,792,364 ============= =============
See accompanying notes to unaudited consolidated financial statements. 3 4 APOGENT TECHNOLOGIES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share data) (Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED JUNE 30, JUNE 30, 2001 2000 2001 2000 ----------- ----------- ----------- ----------- Net sales $ 260,396 $ 212,029 $ 726,258 $ 634,986 Cost of sales: Cost of products sold 134,715 106,492 373,843 321,925 Depreciation of purchase accounting adjustments 180 128 448 396 ----------- ----------- ----------- ----------- Total cost of sales 134,895 106,620 374,291 322,321 ----------- ----------- ----------- ----------- Gross profit 125,501 105,409 351,967 312,665 Selling, general and administrative expenses 64,817 52,183 162,749 143,218 Restructuring charge - - 583 - Depreciation and amortization of purchase accounting adjustments 2,003 2,046 23,284 19,215 ----------- ----------- ----------- ----------- Total selling, general and administrative expenses 66,820 54,229 186,616 162,433 ----------- ----------- ----------- ----------- Operating income 58,681 51,180 165,351 150,232 Other income(expense): Interest expense (12,717) (12,256) (37,109) (36,151) Amortization of deferred financing fees (133) (137) (382) (398) Other, net 240 446 5,506 613 ----------- ----------- ----------- ----------- Income from continuing operations before income taxes and extraordinary items 46,071 39,233 133,366 114,296 Income taxes 17,968 15,290 52,886 44,552 ----------- ----------- ----------- ----------- Income from continuing operations before extraordinary items 28,103 23,943 80,480 69,744 Discontinued operations (net of income tax expense of $0, $7,642 $435, and $23,635, respectively) - 11,275 (11,824) 34,873 ----------- ----------- ----------- ----------- Income before extraordinary items 28,103 35,218 68,656 104,617 Extraordinary items (net of income tax benefit of $863 and $1,359) (1,361) - (2,106) - ----------- ----------- ----------- ----------- Net income $ 26,742 $ 35,218 $ 66,550 $ 104,617 =========== =========== =========== =========== Basic earnings per common share from continuing operations $ 0.27 $ 0.23 $ 0.76 $ 0.67 Discontinued operations - 0.11 (0.11) 0.33 Extraordinary item (0.01) - (0.02) - ----------- ----------- ----------- ----------- Basic earnings per common share $ 0.25 $ 0.34 $ 0.63 $ 1.00 =========== =========== =========== =========== Diluted earning per common share from continuing operations $ 0.26 $ 0.22 $ 0.74 $ 0.65 Discontinued operations - 0.10 (0.11) 0.33 Extraordinary item (0.01) - (0.02) - ----------- ----------- ----------- ----------- Diluted earnings per common share $ 0.25 $ 0.33 $ 0.62 $ 0.98 =========== =========== =========== =========== Weighted average basic shares outstanding 105,563 104,833 105,421 104,363 Weighted average diluted shares outstanding 108,333 107,889 108,193 106,952
See accompanying notes to unaudited consolidated financial statements. 4 5 APOGENT TECHNOLOGIES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY FOR THE NINE MONTHS ENDED JUNE 30, 2001 (In thousands, except per share data) (Unaudited)
ACCUMULATED ADDITIONAL OTHER COMMON EQUITY PAID - IN RETAINED COMPREHENSIVE STOCK RIGHTS CAPITAL EARNINGS INCOME --------- ------ ----------- ----------- ------------- Balance at September 30, 2000 $ 1,052 $ - $ 271,739 $ 531,701 $ (54,976) Comprehensive income: Cumulative effect of accounting change for cash flow hedge, net of tax effect of $1,687 - - - - 2,530 Net income - - - 66,550 - Translation adjustment (14,951) Adjustment to interest rate swap agreement upon sale, net of tax benefit of $984 - - - - (1,475) Amortization of gain on sale of interest rate swaps, net of tax benefit of $310 - - - - (465) Unrealized loss on security available for sale, net of tax benefit of $243 - - - - (356) --------- ----- ----------- ----------- ----------- Total comprehensive income - - - 66,550 (14,717) Shares issued in connection with stock options 5 - 4,377 - - Tax benefit related to stock options - - 2,210 - - Distribution of the equity of Sybron Dental Specialties, Inc. on December 11, 2000, net of dividends of $142,880 - - (27,027) - 12,926 --------- ----- ----------- ----------- ----------- Balance at June 30, 2001 $ 1,057 $ - $ 251,299 $ 598,251 $ (56,767) ========= ===== =========== =========== ===========
TREASURY TOTAL COMMON SHAREHOLDERS' STOCK EQUITY ----------- ------------- Balance at September 30, 2000 $ - $ 749,516 Comprehensive income: Cumulative effect of accounting change for cash flow hedge, net of tax effect of $1,687 - 2,530 Net income - 66,550 Translation adjustment - (14,951) Adjustment to interest rate swap agreement upon sale, net of tax benefit of $984 - (1,475) Amortization of gain on sale of interest rate swaps, net of tax benefit of $310 - (465) Unrealized loss on security available for sale, net of tax benefit of $243 - (356) ----------- ----------- Total comprehensive income - 51,833 Shares issued in connection with stock options - 4,382 Tax benefit related to stock options - 2,210 Distribution of the equity of Sybron Dental Specialties, Inc. on December 11, 2000, net of dividends of $142,880 - (14,101) ----------- ----------- Balance at June 30, 2001 $ - $ 793,840 =========== ===========
See accompanying notes to unaudited consolidated financial statements. 5 6 APOGENT TECHNOLOGIES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
NINE MONTHS ENDED JUNE 30, 2001 2000 ----------- ----------- Cash flows from operating activities: Net income $ 66,550 $ 104,617 Adjustments to reconcile net income to net cash provided by operating activities Discontinued operations 11,824 (34,873) Depreciation 25,182 21,287 Amortization 32,158 26,240 Gain on sale of property, plant and equipment (4,988) (40) Provision for losses on doubtful accounts (188) 165 Inventory provisions 1,667 (904) Deferred income taxes 632 11,721 Extraordinary items 2,106 - Net changes in assets and liabilities, net of effects of spun-off business and businesses acquired (23,085) (62,421) ----------- ----------- Net cash provided by operating activities 111,858 65,792 ----------- ----------- Cash flows from investing activities: Capital expenditures (35,502) (27,436) Proceeds from sales of property, plant and equipment 11,446 384 Proceeds from sale of NPT - (2,600) Dividends received from SDS 67,900 439 Capital contributions paid to SDS (4,623) (20,398) Distribution of the net equity of SDS (14,101) - Net change in advances and loans to SDS (2,782) 56,174 Net payment for businesses acquired (139,020) (123,399) ----------- ----------- Net cash used in investing activities (116,682) (116,836) ----------- ----------- Cash flows from financing activities Proceeds from long-term debt 703,448 - Principal payments on long-term debt (680,291) (4,691) Proceeds from the exercise of stock options 4,382 12,496 Refinancing fees paid (6,721) (197) Proceeds from revolving credit facility 407,060 250,554 Principal payments on revolving credit facility (410,960) (208,434) Other financing activities 489 1,604 ----------- ----------- Net cash provided by financing activities 17,407 51,332 ----------- ----------- Effect of exchange rate changes on cash and cash equivalents 1,826 (460) ----------- ----------- Net increase (decrease) in cash and cash equivalents 14,409 (172) Cash and cash equivalents at beginning of period 12,411 12,401 ----------- ----------- Cash and cash equivalents at end of period $ 26,820 $ 12,229 =========== ===========
See accompanying notes to unaudited consolidated financial statements. 6 7 APOGENT TECHNOLOGIES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED (In thousands) (Unaudited)
NINE MONTHS ENDED JUNE 30, 2001 2000 ------------ ------------- Net changes in assets and liabilities, net of effects of spun-off business and businesses acquired: Decrease (increase) in accounts receivable $ 778 $ (3,734) Increase in inventories (21,987) (8,504) Increase in prepaid expenses and other current assets (6,623) (8,013) Decrease in accounts payable (5,466) (8,323) Increase (decrease) in income taxes payable 14,453 (13,616) Decrease in other current liabilities (3,171) (5,062) Increase (decrease) in accrued payroll and employee benefits 3,032 (12,577) Decrease in restructuring reserve (2,643) - Net change in other assets and liabilities (1,458) (2,592) ----------- ----------- Net changes in asset and liabilities, net of effect of spun-off business and businesses acquired $ (23,085) $ (62,421) =========== =========== Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 32,338 $ 35,054 =========== =========== Income taxes $ 39,066 $ 33,797 =========== =========== Capital lease obligations incurred $ - $ 56 =========== ===========
See accompanying notes to unaudited consolidated financial statements. 7 8 APOGENT TECHNOLOGIES INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands except per share data) 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 and nine month periods ended June 30, 2001 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 only be read in conjunction with the Company's annual report on Form 10-K for the fiscal year ended September 30, 2000. Certain prior period amounts have been reclassified to conform to the current period presentation. On January 30, 2001, the Company's shareholders voted to change the name of the Company from Sybron International Corporation to Apogent Technologies Inc. As used in these Notes to the Unaudited Consolidated Financial Statements, the term "Company" means Sybron International Corporation for the period prior to January 30, 2001 and Apogent Technologies Inc. thereafter. 2. INVENTORIES Inventories at June 30, 2001 and September 30, 2000 consist of the following:
JUNE 30, SEPTEMBER 30, 2001 2000 ------------ ------------- Raw materials and supplies $ 79,074 $ 59,178 Work in process 26,758 29,848 Finished goods 64,481 57,015 LIFO reserve (7,402) (4,262) ----------- ------------ $ 162,911 $ 141,779 =========== ============
3. ACQUISITIONS During the nine-month period ended June 30, 2001, the Company completed four acquisitions for cash. The aggregate purchase price (which was not significant individually), net of cash acquired, was approximately $134 million. All of these acquisitions were accounted for as purchase transactions. Accordingly, the results of the acquisitions were included as of the date they were acquired. Total goodwill and intangibles for the acquired companies was approximately $129 million, and will be amortized over 3 to 40 years. Descriptions of the acquired companies are as follows: 8 9 a) On November 9, 2000, the Company acquired Vacuum Process Technology, Inc. ("VPT"), located in Plymouth, Massachusetts, a leading manufacturer of state-of-the-art thin film deposition equipment, which is sold to a wide variety of companies in the internet infrastructure, optical and semiconductor industries. VPT's sales revenue for the fiscal year is expected to be approximately $18.4 million. VPT is included in the Clinical and Industrial business segment. b) On March 1, 2001, the Company acquired BioRobotics Group Limited ("BioRobotics") located in Haslingfield, England. BioRobotics is a leading provider of automated instrumentation solutions used in functional genomics. Sales revenues are expected to be approximately $19 million for the twelve months ending February 28, 2002. BioRobotics is included in the Labware and Life Sciences business segment. c) On April 10, 2001, the Company acquired Advanced Biotechnologies Limited ("ABgene"), located in Epsom, England. ABgene is a leading manufacturer of a comprehensive range of molecular biology reagents and special plastic consumables for the life sciences market. ABgene's sales revenues for the year ended March 31, 2001 were approximately $21 million. ABgene is included in the Labware and Life Sciences business segment. d) On April 10, 2001, the Company acquired the disposable glass culture tube business ("DCT Business") of Kimble Glass Inc. located in Vineland, New Jersey. The DCT Business will be owned by and consolidated into the Company's subsidiary, Chase Scientific Glass, Inc., which currently manufactures disposable glass culture tubes ("DCTs"). Sales revenue from this business is expected to be approximately $5.8 million for the year ending December 31, 2001. DCTs are used in a variety of general laboratory applications, particularly in blood collection, blood banking, urinalysis, and certain cell culture procedures. Chase Scientific Glass, Inc. is included in the Clinical and Industrial business segment. 4. RESTRUCTURING In June 1998, the Company recorded a restructuring charge of approximately $8,500 (approximately $5,400 after tax or $.05 per share on a diluted basis) for the rationalization of certain acquired companies, combination of certain duplicate production facilities, movement of certain customer service and marketing functions, and the exiting of several product lines. The restructuring charge was classified as components of cost of sales (approximately $1,800 relating to the write-off of inventory discussed below), and selling, general and administrative expenses (approximately $6,700). Restructuring activity since June 30, 1998 and its components are as follows: 9 10
LEASE INVENTORY FIXED SEVERANCE PAYMENTS WRITE-OFF ASSETS GOODWILL (a) (b) (c) (c) (d) TOTAL --------- -------- --------- ------ -------- ------- 1998 Restructuring Charge $3,400 $ 200 $ 1,800 $ 1,000 $ 2,100 $ 8,500 1998 Cash Payments....... 900 100 -- -- -- 1,000 1998 Non-Cash Charges.... -- -- 1,800 1,000 2,100 4,900 ------ ----- ------- ------- ------- ------- September 30, 1998 balance $2,500 $ 100 $ -- $ -- $ -- $ 2,600 1999 Cash Payments....... 1,900 100 -- -- -- 2,000 Adjustments(a)........... 300 -- -- -- -- 300 ------ ----- ------- ------- ------- ------- September 30, 1999 balance $ 900 $ -- $ -- $ -- $ -- $ 900 2000 Cash Payments....... 700 -- -- -- -- 700 ------ ----- ------- ------- ------- ------- September 30, 2000 balance $ 200 $ -- $ -- $ -- $ -- $ 200 2001 Cash payments 100 -- -- -- -- 100 ------ ----- ------- ------- ------- ------- June 30, 2001 balance.... $ 100 $ -- $ -- $ -- $ -- $ 100 ====== ===== ======= ======= ======= =======
(a) Amount represents severance and termination costs for approximately 65 terminated employees (primarily sales and marketing personnel). As of June 30, 2001, all employees have been terminated as a result of the restructuring plan. Payments will continue to certain employees previously terminated under this restructuring plan. An adjustment of approximately $300 was made in the third quarter of fiscal 1999 to adjust the accrual primarily representing under accruals for anticipated costs associated with outplacement services, accrued fringe benefits, and severance associated with employees who were previously notified of termination. No additional employees will be terminated under this restructuring plan. (b) Amount represents lease payments on exited facilities. (c) Amount represents write-offs of inventory and fixed assets associated with discontinued product lines. (d) Amount represents goodwill associated with exited product lines. The Company expects to make future cash payments of approximately $100 during the remainder of fiscal 2001. In September 2000, the Company recorded a restructuring charge of approximately $11,300 (approximately $7,500 after tax or $.07 per share on a diluted basis) for the consolidation of certain businesses, product rationalizations, changes in management structure and taxes associated with restructuring U.K. operations. The restructuring charge was classified as components of cost of sales (approximately $4,400 relating to the write-off of inventory, write-offs of fixed assets, certain lease terminations and severance associated with employees in production activities), selling, general and administrative expense of $5,800 and income tax expense of $1,000, related to the Company's restructuring of its U.K. operations. Restructuring activity since its inception in September 2000 and its components are as follows:
FIXED LEASE SHUT-DOWN SEVERANCE INVENTORY ASSETS COMMITMENTS COSTS TAX (a) (b) (b) (c) (c) (d) OTHER TOTAL --------- --------- ------- ------------- ---------- ------- -------- ----- 2000 Restructuring charge $ 5,500 $ 2,100 $ 1,000 $ 500 $ 300 $ 1,000 $ 900 $ 11,300 2000 Cash payments....... 1,100 -- -- -- -- -- -- 1,100 2000 Non-cash charges.... -- 2,100 1,000 -- -- -- 800 3,900 ------- ------- ------- ----- ----- ------- ------ -------- September 30, 2000 balance $ 4,400 $ -- $ -- $ 500 $ 300 $ 1,000 $ 100 $ 6,300 Adjustments (e) 600 600 2001 Cash payments....... 2,700 -- -- 200 100 -- -- 3,000 ------- ------- ------- ----- ----- ------- ------ -------- June 30, 2001 balance $ 2,300 $ -- $ -- $ 300 $ 200 $ 1,000 $ 100 $ 3,900 ======= ======= ======= ===== ===== ======= ====== ========
10 11 (a) Amount represents severance and termination costs for 151 terminated employees (primarily sales, marketing and corporate personnel). As of June 30, 2001, 143 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 shut down costs on exited facilities. (d) Amount represents income tax expense associated with the restructuring of our U.K. facilities. (e) Amount represents an increase in the severance costs for 16 employees (primarily corporate personnel). These employees are included in the total 151 terminated employees referenced above. The Company expects to make future cash payments of approximately $2,000 in the fourth quarter of fiscal 2001 and $1,900 in fiscal 2002 and beyond. 5. DISCONTINUED OPERATIONS On November 8, 2000, the Company announced that it had declared a pro rata distribution (or spin-off) to its shareholders of the common stock and related preferred stock purchase rights of Sybron Dental Specialties, Inc. (the "Distribution"). Shareholders of record as of November 30, 2000 received one share of Sybron Dental Specialties, Inc. ("SDS") common stock for every three shares of Sybron International common stock they owned. These consolidated financial statements have reclassified SDS and its affiliates as discontinued operations. On December 11, 2000, the Distribution was completed. The Company received no proceeds in connection with the Distribution. Immediately prior to the Distribution, Sybron Dental Management, Inc. ("SDM") then a subsidiary of Sybron, paid a dividend of $142,880 to Sybron, of which $67,900 was paid in cash and $74,980 was a settlement of intercompany loans and advances and to reflect an allocation of additional bank debt to SDS. Immediately after payment of this dividend, SDM became a subsidiary of SDS. The total allocation of bank debt to SDS was $375,000. For the nine months ended June 30, 2001 and 2000, the Company has included a net loss of $11,800 and net income of $34,900 from discontinued operations, respectively. The net loss in 2001 included transaction expenses of $12,500 relating to the spin-off of SDS. Revenues and net income from SDS through the date of the Distribution (December 11, 2000) were $67,400 and $638, respectively and offset the transaction expenses. Revenues and net income from SDS for the nine months ended June 30, 2000 were $306,600 and $34,900, respectively. As a result, these consolidated financial statements have reclassified SDS and its affiliates as discontinued operations. SDS now owns and operates what were formerly the Company's Professional Dental, Orthodontics, and Infection Control Products business segments. The components of net assets held for sale of discontinued operations included in the consolidated balance sheet September 30, 2000 are as follows: 11 12
SEPTEMBER 30, 2000 ------------- Cash.................................. $ 5,783 Net account receivables............... 85,767 Net inventories....................... 74,383 Other current assets.................. 6,497 Advances and loans to Sybron 77,762 International......................... Property plant and equipment -- net... 55,326 Intangible assets..................... 220,705 Other assets.......................... 6,967 Current portion of long term debt..... (21,761) Accounts payable...................... (11,351) Income taxes payable.................. (5,680) Accrued liabilities................... (27,859) Deferred income taxes -- net.......... (6,252) Long term debt........................ (298,482) Other liabilities..................... (8,835) --------- $ 152,970 =========
6. CREDIT AGREEMENTS Until December 11, 2000, Sybron and its principal domestic subsidiaries (including certain subsidiaries of SDS) were parties to a credit agreement (as amended, the "Previous Credit Agreement") with The Chase Manhattan Bank ("Chase") and certain other lenders providing for a term A loan facility of $300,000 (the "Tranche A Term Loan Facility"), a term B loan facility of $300,000 (the "Tranche B Term Loan Facility"), and a revolving credit facility of up to $600,000 (the "Previous Revolving Credit Facility"). In connection with the Distribution, on December 1, 2000, the Company entered into a new credit agreement (the "Credit Agreement") with Chase and certain other lenders providing for a term loan of $300,000. On April 4, 2001 the Company issued $325,000 of unsecured senior notes in a private placement with exchange and registration rights. The notes were offered at a discount of approximately $1,469. They will mature on April 1, 2011. Interest is fixed at an annual rate of 8% and is payable on April 1 and October 1 of each year, beginning on October 1, 2001. Interest will accrue from April 4, 2001. The notes are redeemable by the Company at any time in whole, or from time to time in part, at a price equal to the greater of (i) 100% of the principal amount of the notes to be redeemed or (ii) the sum of the present values of the remaining scheduled payments of principal and interest thereon (exclusive of interest accrued to the date of redemption) discounted to the date of redemption on a semiannual basis at the applicable Treasury Yield (as defined in the bond agreement) plus 35 basis points, plus accrued interest to the date of redemption. The Company used the proceeds from the issuance to repay all of its Term Loan Facility ($300 million) and a portion of its Revolving Credit Facility. The notes are guaranteed by the Company's material U.S. subsidiaries, which also guarantee the Company's obligations under its bank credit facility. For the nine months ended June 30, 2001, the Company recorded an extraordinary loss of $2,106 after taxes as a result of entering into the Credit Agreement and the issuance of the senior notes. This loss related to the write-off of deferred financing costs of approximately $1,200 associated with the Previous Credit Agreement paid-off in the December 2000 refinancing, and costs of approximately $2,200 associated with debt paid-off from the proceeds of the senior note issuance in April 2001. 12 13 7. DERIVATIVE INSTRUMENTS On October 1, 2000, the Company adopted Financial Accounting Standard Board (FASB) Opinion No. 133 ("SFAS 133") as modified by FASB Opinion No. 138. These standards establish accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and hedging activities. They require the recognition of all derivative instruments as assets or liabilities in the balance sheet at fair value. The accounting treatment of changes in fair value is dependent upon whether or not a derivative instrument is designated as a hedge and if so, the type of hedge. For derivatives designated as a cash flow hedge, changes in fair value are recognized in other comprehensive income until the hedged item is recognized in earnings. At October 1, 2000 the Company had no freestanding derivatives in place other than interest rate swaps used to hedge variable rate long-term debt. The interest rate swaps meet the criteria for cash flow hedge accounting. As a result, the swaps are recorded on the balance sheet as an asset at fair value with the corresponding gain or loss recorded in other comprehensive income beginning October 1, 2000. The impact on other comprehensive income upon adoption of the standard was an unrealized gain, net of tax, of approximately $2,530. In the normal course of business, we manage risks associated with foreign exchange and interest rates through a variety of strategies, including the use of hedging transactions, executed in accordance with our policies. Our hedging transactions include, but are not limited to, the use of various derivative instruments. As a matter of policy, we do not use derivative instruments unless there is an underlying exposure. Any change in the value of our derivative instruments would be substantially offset by an opposite change in the value of the underlying hedged items. We do not use derivative instruments for trading or speculative purposes. On December 11, 2000, the Company extinguished the variable rate long-term debt to which the swaps were designated and as a result the interest rate swaps ceased to be accounted for as hedges. On December 12, 2000, the Company sold the interest rate swaps for an aggregate gain of $1,055, net of tax. Upon sale of the interest rate swaps, the Company reduced the unrealized gain recorded at October 1, 2000 in other comprehensive income to reflect the fair market value net of tax on the date of sale. Because these interest rate swaps were designated as a hedge against future variable rate interest payments and the extinguished debt, the gain will continue to be carried in other comprehensive income and recognized as an adjustment of yield interest expense of the New Credit Facilities (see Note 6) over the remaining term of the interest rate contract. For the period December 12, 2000 through June 30, 2001, the Company recognized a gain of $465, net of tax. In March 2001, we entered into two foreign currency options to hedge against the effect of fluctuations in foreign exchange rates on two notes issued in British Pounds. The options of $11,500 GPB and $11,750 GPB have maturity dates approximating those of the notes, of July 31, 2002 and July 2003, respectively. Both options were priced at $0.69 GBP. These options are accounted for as a cash flow hedge. All changes in the underlying values are reflected in net income. 8. STOCK OPTIONS On December 11, 2000, in connection with the spin-off of SDS, certain employees of SDS exchanged 1,320,515 outstanding options to purchase Sybron International Corporation common stock for 2,331,214 options to purchase Sybron Dental Specialties, Inc. common 13 14 stock. All remaining stock options (owned by remaining employees and directors of the Company) were adjusted by adjusting the exercise price and the number of shares subject to each such option to reflect the change in market value of the Company's common stock resulting from the spin-off, so that the intrinsic value of the options (the spread between the market value and the exercise price of the option shares) after the spin-off was equal to their intrinsic value immediately prior to the spin-off. The spread on options for fractional shares resulting from the exchange or adjustment was paid in cash. As a result of these exchanges and adjustments, the number of outstanding employee and director stock options increased by 391,458 shares and the average exercise price decreased by approximately $3.80. 14 15 9. 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 a) Labware and Life Sciences, b) Clinical and Industrial, c) Diagnostics and Microbiology, and d) Laboratory Equipment. Information on these business segments is summarized below:
Labware Clinical Diagnostics and Life and and Laboratory Elimin- Sciences Industrial Microbiology Equipment ations (a) ---------- ---------- ------------- ----------- ---------- THREE MONTHS ENDED JUNE 30, 2000 Revenues: External customer $ 86,810 $ 50,270 $ 50,636 $ 24,313 $ - Intersegment 203 1,735 138 228 (2,130) Total revenues 87,013 52,005 50,774 24,541 (2,130) Gross profit 45,919 22,124 27,200 10,166 - Selling, general and administrative 25,096 8,800 13,736 4,806 - Operating income 20,823 13,324 13,464 5,360 - THREE MONTHS ENDED JUNE 30, 2001 Revenues: External customer 108,763 65,927 60,503 25,203 - Intersegment 345 2,132 145 87 (2,709) Total revenues 109,108 68,059 60,648 25,290 (2,709) Gross profit 55,147 26,735 32,678 10,941 - Selling, general and administrative 31,520 12,229 16,083 5,828 - Operating income 23,627 14,506 16,595 5,113 -
Total Other (a) Company --------- ------- THREE MONTHS ENDED JUNE 30, 2000 Revenues: External customer $ - $ 212,029 Intersegment - 174 Total revenues - 212,203 Gross profit - 105,409 Selling, general and administrative 1,791 54,229 Operating income (1,791) 51,180 THREE MONTHS ENDED JUNE 30, 2001 Revenues: External customer - 260,396 Intersegment - - Total revenues - 260,396 Gross profit - 125,501 Selling, general and administrative 1,160 66,820 Operating income (1,160) 58,681
Labware Clinical Diagnostics and Life and and Laboratory Elimin- Sciences Industrial Microbiology Equipment ations (a) ----------- ----------- ------------ ------------ ---------- NINE MONTHS ENDED JUNE 30, 2000 Revenues: External customer $ 252,292 $ 156,847 $ 154,431 $ 71,416 $ - Intersegment 841 5,061 331 671 (6,445) Total revenues 253,133 161,908 154,762 72,087 (6,445) Gross profit 131,942 67,034 83,633 30,056 - Selling, general and administrative 72,074 26,995 42,598 15,168 - Operating income 59,868 40,039 41,035 14,888 - NINE MONTHS ENDED JUNE 30, 2001 Revenues: External customer 291,291 184,197 174,816 75,954 - Intersegment 982 6,276 444 351 (7,985) Total revenues 292,273 190,473 175,260 76,306 (7,985) Gross profit 150,244 75,521 93,498 32,704 - Selling, general and administrative 82,626 33,826 47,825 16,543 - Operating income 67,617 41,695 45,673 16,162 - Segment assets 712,458 333,903 526,986 120,817 -
Total Other (a) Company --------- ------- NINE MONTHS ENDED JUNE 30, 2000 Revenues: External customer $ - $ 634,986 Intersegment - 459 Total revenues - 635,445 Gross profit - 312,665 Selling, general and administrative 5,598 162,433 Operating income (5,598) 150,232 NINE MONTHS ENDED JUNE 30, 2001 Revenues: External customer - 726,258 Intersegment - 68 Total revenues - 726,327 Gross profit - 351,967 Selling, general and administrative 5,796 186,616 Operating income (5,796) 165,351 Segment assets 109,587 1,803,751
(a) Includes the elimination of intercompany and corporate office activity. 15 16 10. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS Below are the condensed consolidating balance sheets, statements of operations and statements of cash flows for Apogent Technologies Inc., as of June 30, 2001 and September 30, 2000 and for the nine months ended June 30, 2001 and fiscal year ended September 30, 2000. Certain general corporate expenses have not been allocated to the subsidiaries, and are all 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 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 of the Company or with Apogent Technologies Inc. 16 17 CONDENSED CONSOLIDATING BALANCE SHEETS
As of June 30, 2001 -------------------------------------------------------------------------- Non Apogent Guarantor Guarantor (In thousands) Technologies Subsidiaries Subsidiaries Eliminations Consolidated ------------ ------------ ------------ ------------ ------------ ASSETS Current assets: Cash and cash equivalents $ 14,198 $ - $ 16,154 $ (3,532) $ 26,820 Accounts receivable, net - 144,764 35,490 - 180,254 Inventories, net 1,263 136,864 30,731 (5,947) 162,911 Other current assets 17,651 15,275 5,818 (1,766) 36,978 ---------- ---------- --------- ------------ ----------- Total current assets 33,112 296,903 88,193 (11,245) 406,963 Property, plant and equipment, net 8,893 165,147 40,107 - 214,147 Intangible asset 6,999 894,112 209,078 - 1,110,189 Deferred income taxes 7,888 - - - 7,888 Investment in subsidiaries 1,616,767 51,628 - (1,668,395) - Other assets 57,113 6,061 1,390 - 64,564 ---------- ---------- --------- ------------ ----------- Total assets $1,730,772 $1,413,851 $ 338,768 $ (1,679,640) $ 1,803,751 ========== ========== ========= ============ =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 318 $ 42,895 $ 10,201 $ (3,532) $ 49,882 Current portion of long-term debt - 35,247 40 - 35,287 Income taxes payable - 31,810 4,104 (3,087) 32,827 Accrued expenses and other current liabilities 24,257 30,940 14,152 - 69,349 ---------- ---------- --------- ------------ ----------- Total current liabilities 24,575 140,892 28,497 (6,619) 187,345 ---------- ---------- --------- ------------ ----------- Long-term debt - 667,680 26 - 667,706 Securities lending agreement 53,845 - - - 53,845 Deferred income taxes 67,985 17,523 6,639 - 92,147 Other liabilities 6,422 955 1,491 - 8,868 Net intercompany payable/(receivable) 389,684 (577,080) 187,396 - - Commitments and contingent liabilities Shareholders' equity Preferred stock - - - - - Common stock 1,057 - - - 1,057 Equity rights - - - - - Additional paid-in-capital 251,299 1,589,889 79,334 (1,669,223) 251,299 Retained earnings (deficit) 944,620 (397,817) 55,246 (3,798) 598,251 Accumulated other comprehensive income (8,715) (28,191) (19,861) - (56,767) Treasury stock (at cost) - - - - - ---------- ---------- --------- ------------ ----------- Total shareholders' equity 1,188,261 1,163,881 114,719 (1,673,021) 793,840 ---------- ---------- --------- ------------ ----------- Total liabilities and shareholders' equity $1,730,772 $1,413,851 $ 338,768 $ (1,679,640) $ 1,803,751 ========== ========== ========= ============ ===========
17 18 CONDENSED CONSOLIDATING BALANCE SHEETS - (CONTINUED)
As of September 30, 2000 ------------------------------------------------------------------------ Non Apogent Guarantor Guarantor (In thousands) Technologies Subsidiaries Subsidiaries Eliminations Consolidated ------------ ------------ ------------ ------------ ------------ ASSETS Current assets: Cash and cash equivalents $ 7,086 $ - $ 7,902 $ (2,577) $ 12,411 Accounts receivable, net - 146,564 27,021 - 173,585 Inventories, net 1,187 120,399 24,020 (3,827) 141,779 Net assets held for discontinued operations 152,970 - - - 152,970 Other current assets 16,467 28,387 4,112 (19,176) 29,790 ----------- ----------- --------- ---------- ----------- Total current assets 177,710 295,350 63,055 (25,580) 510,535 Property, plant and equipment, net 8,840 162,431 36,823 - 208,094 Intangible assets 2,922 895,583 109,648 - 1,008,153 Deferred income taxes 12,563 (4,693) - - 7,870 Investment in subsidiaries 813,152 51,069 - (864,221) - Other assets 52,154 3,914 1,644 - 57,712 ----------- ----------- --------- ---------- ----------- Total assets $ 1,067,341 $ 1,403,654 $ 211,170 $ (889,801) $ 1,792,364 =========== =========== ========= ========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 594 $ 37,361 $ 16,521 $ (2,577) $ 51,899 Advances and loans from SDS 77,762 - - - 77,762 Current portion of long-term debt - 34,252 75 - 34,327 Income taxes payable 34,117 - 2,523 (20,036) 16,604 Accrued expenses and other current liabilities 17,331 29,782 13,434 - 60,547 ----------- ----------- --------- ---------- ----------- Total current liabilities 129,804 101,395 32,553 (22,613) 241,139 ----------- ----------- --------- ---------- ----------- Long-term debt - 649,383 26 - 649,409 Securities lending agreement 54,444 - - - 54,444 Deferred income taxes 70,388 14,793 7,867 93,048 Other liabilities 1,164 3,772 1,060 (1,188) 4,808 Net intercompany payable/(receivable) (519,063) 463,622 55,232 209 - Commitments and contingent liabilities Shareholders' equity Preferred stock - - - - - Common stock 1,052 - - - 1,052 Equity rights - - - - - Additional paid-in-capital 271,739 786,251 77,970 (864,221) 271,739 Retained earnings (deficit) 1,055,421 (615,562) 93,830 (1,988) 531,701 Accumulated other comprehensive income 2,392 - (57,368) - (54,976) Treasury stock (at cost) - - - - - ----------- ----------- --------- ---------- ----------- Total shareholders' equity 1,330,604 170,689 114,432 (866,209) 749,516 ----------- ----------- --------- ---------- ----------- Total liabilities and shareholders' equity $ 1,067,341 $ 1,403,654 $ 211,170 $ (889,801) $ 1,792,364 =========== =========== ========= ========== ===========
18 19 CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the Three Months Ended June 30, 2001 ----------------------------------------------------------------------------- Non Apogent Guarantor Guarantor (In thousands) Technologies Subsidiaries Subsidiaries Eliminations Consolidated ----------- ------------ ------------ ------------ ------------ Net sales $ - $ 226,546 $ 49,457 $ (15,607) $ 260,396 Cost of sales - 121,465 28,653 (15,223) 134,895 ---------- ---------- ---------- ----------- ----------- Gross profit - 105,081 20,804 (384) 125,501 Selling, general and administrative expenses 7,154 47,807 11,859 66,820 ---------- ---------- ---------- ----------- ----------- Operating income (7,154) 57,274 8,945 (384) 58,681 Other income (expense): Interest income (expense) - (12,757) 40 - (12,717) Other, net (163) 114 156 - 107 ---------- ---------- ---------- ----------- ----------- Income before income taxes, discontinued operations and extraordinary item (7,317) 44,631 9,141 (384) 46,071 Income taxes (3,541) 17,852 3,656 - 17,968 ---------- ---------- ---------- ----------- ----------- Income from continuing operations before extraordinary item (3,776) 26,779 5,485 (384) 28,103 Discontinued operations - - - - - ---------- ---------- ---------- ----------- ----------- Income before extraordinary item (3,776) 26,779 5,485 (384) 28,103 Extraordinary item - (1,361) - - (1,361) ---------- ---------- ---------- ----------- ----------- Net income $ (3,776) $ 25,418 $ 5,485 $ (384) $ 26,742 ========== ========== ========== =========== ===========
For the Three Months Ended June 30, 2000 ------------------------------------------------------------------------ Non Apogent Guarantor Guarantor (In thousands) Technologies Subsidiaries Subsidiaries Eliminations Consolidated ------------ ------------- ------------ ------------ ------------ Net sales $ - $ 187,927 $ 36,765 $ (12,663) $ 212,029 Cost of sales - 97,864 21,145 (12,389) 106,620 ---------- ----------- ---------- ---------- ----------- Gross profit - 90,063 15,620 (274) 105,409 Selling, general and administrative expenses 1,579 43,482 9,168 - 54,229 ---------- ----------- ---------- ---------- ----------- Operating income (1,579) 46,581 6,452 (274) 51,180 Other income (expense): Interest income (expense) - (12,268) 12 - (12,256) Other, net 399 493 (583) - 309 ---------- ----------- ---------- ---------- ----------- Income before income taxes and discontinued operations (1,180) 34,806 5,881 (274) 39,233 Income taxes (985) 13,922 2,352 15,290 ---------- ----------- ---------- ---------- ----------- Income from continuing operations (195) 20,884 3,529 (274) 23,943 Discontinued operations 11,275 - - - 11,275 ---------- ----------- ---------- ---------- ----------- Net income $ 11,080 $ 20,884 $ 3,529 $ (274) $ 35,218 ========== =========== ========== ========== ===========
19 20 CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS - (CONTINUED)
For the Nine Months Ended June 30, 2001 -------------------------------------------------------------------------- Non Apogent Guarantor Guarantor (In thousands) Technologies Subsidiaries Subsidiaries Eliminations Consolidated ------------ ------------ ------------ ------------ ------------ Net sales $ - $ 636,985 $ 128,974 $ (39,701) $ 726,258 Cost of sales - 337,474 75,257 (38,440) 374,291 ----------- ----------- ----------- ----------- ----------- Gross profit - 299,511 53,717 (1,261) 351,967 Selling, general and administrative expenses 23,189 132,996 30,431 - 186,616 ----------- ----------- ----------- ----------- ----------- Operating income (23,189) 166,515 23,286 (1,261) 165,351 Other income (expense): - - - - Interest income (expense) - (37,134) 25 - (37,109) Other, net 3,622 1,744 (242) - 5,124 ----------- ----------- ----------- ----------- ----------- Income before income taxes, discontinued operations - - - - And extraordinary item (19,567) 131,125 23,069 (1,261) 133,366 Income taxes (8,792) 52,450 9,228 - 52,886 ----------- ----------- ----------- ----------- ----------- Income from continuing operations before - - - - Extraordinary item (10,775) 78,675 13,841 (1,261) 80,480 Discontinued operations (11,824) - - - (11,824) ----------- ----------- ----------- ----------- ----------- Income before extraordinary items (22,599) 78,675 13,841 (1,261) 68,656 Extraordinary items - (2,106) - - (2,106) ----------- ----------- ----------- ----------- ----------- Net income $ (22,599) $ 76,569 $ 13,841 $ (1,261) $ 66,550 =========== =========== =========== =========== ===========
For the Nine Months Ended June 30, 2000 --------------------------------------------------------------------- Non Apogent Guarantor Guarantor (In thousands) Technologies Subsidiaries Subsidiaries Eliminations Consolidated ------------ ------------ ------------ ------------- ------------ Net sales $ - $ 559,583 $ 108,747 $ (33,344) $ 634,986 Cost of sales - 291,254 63,686 (32,619) 322,321 ---------- ----------- ----------- ----------- ----------- Gross profit - 268,329 45,061 (725) 312,665 Selling, general and administrative expenses 5,469 131,214 25,750 - 162,433 ---------- ----------- ----------- ----------- ----------- Operating income (5,469) 137,115 19,311 (725) 150,232 Other income (expense): Interest expense - (36,103) (48) - (36,151) Other, net 858 666 (1,309) - 215 ---------- ----------- ----------- ----------- ----------- Income before income taxes and discontinued operations (4,611) 101,678 17,954 (725) 114,296 Income taxes (3,301) 40,671 7,182 - 44,552 ---------- ----------- ----------- ----------- ----------- Income from continuing operations (1,310) 61,007 10,772 (725) 69,744 Discontinued operations 34,873 - - - 34,873 ---------- ----------- ----------- ----------- ----------- Net income $ 33,563 $ 61,007 $ 10,772 $ (725) $ 104,617 ========== =========== ========== ========== ===========
20 21 CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the Nine Months Ended June 30, 2001 ------------------------------------------------------------------ Non Apogent Guarantor Guarantor Elimina- (In thousands) Technologies Subsidiaries Subsidiaries tions Consolidated ------------ ------------- ------------ -------- ------------ Cash flows (used in) provided by operating activities: $ (47,066) $ 144,410 $ 14,514 $ - $ 111,858 ---------- ---------- --------- -------- ------------ Cash flows from investing activities: Capital expenditures (7,254) (22,360) (5,888) - (35,502) Proceeds from sales of property, plant and equipment 10,167 1,136 143 - 11,446 Net cash inflow from SDS 46,394 - - - 46,394 Net payments for businesses acquired - (136,709) (2,311) - (139,020) ---------- ---------- --------- -------- ------------ Net cash provided by (used in) investing activities 49,307 (157,933) (8,056) - (116,682) ---------- ---------- --------- -------- ------------ Cash flows from financing activities: Proceeds from long-term debt - 1,110,508 - - 1,110,508 Principal payments on long-term debt - (1,091,219) (32) - (1,091,251) Proceeds from the exercise of stock options 4,384 - - - 4,384 Other 487 (6,721) - - (6,234) ---------- ---------- --------- -------- ------------ Net cash provided by (used in) financing activities 4,871 12,568 (32) - 17,407 Effect of exchange rate on cash and cash equivalents - - 1,826 - 1,826 ---------- ---------- --------- -------- ------------ Net increase (decrease) in cash and cash equivalents 7,112 (955) 8,252 - 14,409 Cash and cash equivalents at beginning of year 7,086 (2,577) 7,902 - 12,411 ---------- ---------- --------- -------- ------------ Cash and cash equivalents at end of period $ 14,198 $ (3,532) $ 16,154 $ - $ 26,820 ========== ========== ========= ======== ============ Supplemental disclosures of cash flow information Cash paid during the period for: Interest $ - $ 31,996 $ 342 $ - $ 32,338 ========== ========== ========= ======== ============ Income taxes $ 37,025 $ 131 $ 1,910 $ - $ 39,066 ========== ========== ========= ======== ============ Capital lease obligations incurred $ - $ - $ - $ - $ - ========== ========== ========= ======== ============
21 22 CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS - (CONTINUED)
For the Nine Months Ended June 30, 2000 ---------------------------------------------------------------------- Non Apogent Guarantor Guarantor Elimina- Consoli- (In thousands) Technologies Subsidiaries Subsidiaries tions dated ------------ ------------ ------------ -------- ----------- Cash flows (used in) provided by operating activities: $ (51,685) $ 109,164 $ 8,313 $ - $ 65,792 ---------- ----------- --------- -------- ---------- Cash flows from investing activities: Capital expenditures (635) (23,173) (3,628) - (27,436) Proceeds from sales of property, plant and equipment - 335 49 - 384 Proceeds from sale of NPT (2,600) - - - (2,600) Net cash inflow from SDS 36,215 - - - 36,215 Net payments for businesses acquired - (123,399) - - (123,399) ---------- ----------- --------- -------- ---------- Net cash provided by (used in) investing activities 32,980 (146,237) (3,579) - (116,836) ---------- ----------- --------- -------- ---------- Cash flows from financing activities: Proceeds from long-term debt - 250,554 - - 250,554 Principal payments on long-term debt - (213,081) (44) - (213,125) Proceeds from the exercise of stock options 12,496 - - - 12,496 Other 5,376 (2,200) (1,769) - 1,407 ---------- ----------- --------- -------- ---------- Net cash provided by (used in) financing activities 17,872 35,273 (1,813) - 51,332 Effect of exchange rate on cash and cash equivalents - - (460) - (460) ---------- ----------- --------- -------- ---------- Net (decrease) increase in cash and cash equivalents (833) (1,800) 2,461 - (172) Cash and cash equivalents at beginning of year 6,708 (2,433) 8,126 - 12,401 ---------- ----------- --------- -------- ---------- Cash and cash equivalents at end of period $ 5,875 $ (4,233) $ 10,587 $ - $ 12,229 ========== =========== ========= ======== ========== Supplemental disclosures of cash flow information Cash paid during the year for: Interest $ - $ 34,811 $ 243 $ - $ 35,054 ========== =========== ========= ======== ========== Income taxes $ 33,658 $ 85 $ 54 $ - $ 33,797 ========== =========== ========= ======== ========== Capital lease obligations incurred $ - $ 56 $ - $ - $ 56 ========== =========== ========= ======== ==========
22 23 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL The subsidiaries of Apogent are leading manufacturers of value-added products for the labware and life sciences, clinical and industrial, diagnostics and microbiology, and laboratory equipment markets in the United States and abroad. Apogent provides products under four business segments -- Labware and Life Sciences, Clinical and Industrial, Diagnostics and Microbiology, and Laboratory Equipment. The primary subsidiaries in each of our business segments are as follows: LABWARE AND LIFE SCIENCES CLINICAL AND INDUSTRIAL - ------------------------- ------------------------ Advance Biotechnologies Ltd. Chase Scientific Glass, Inc. BioRobotics Group Limited Erie Electroverre S.A. Genevac Limited Erie Scientific Company Matrix Technologies Corporation Gerhard Menzel Glasbearbeitungswerk Molecular BioProducts, Inc. GmbH & Co. K.G. Nalge Nunc International Corporation Microm International GmbH Nalge Nunc International K.K. The Naugatuck Glass Company National Scientific Company Richard-Allan Scientific Company Nunc A/S Samco Scientific Corporation Robbins Scientific Corporation DIAGNOSTICS AND MICROBIOLOGY LABORATORY EQUIPMENT - ---------------------------- -------------------- Applied Biotech, Inc. Barnstead Thermolyne Corporation Microgenics Corporation Electrothermal Engineering, Ltd. Remel Inc. Lab-Line Instruments, Inc. Over the past several years, Apogent has been pursuing a growth strategy designed to increase sales and enhance operating margins. Elements of that strategy include emphasis on acquisitions, product development, product line extensions, new product introductions, internal growth, and rationalization of existing businesses and product lines. 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 June 30, 2001 and 2000 are the Company's third quarters of fiscal 2001 and 2000, respectively. As used in this report, the term "Company" means Sybron International Corporation for the period prior to January 30, 2001 and Apogent Technologies Inc. thereafter. SPIN-OFF OF SYBRON DENTAL SPECIALTIES On December 11, 2000, Apogent Technologies Inc. ("Apogent" or the "Company"), then known as Sybron International Corporation ("Sybron"), completed the spin-off of its dental business as a separate publicly traded company. The spin-off was effected by way of a pro-rata distribution of all the outstanding common stock and related preferred stock purchase rights of Sybron Dental 23 24 Specialties, Inc. ("SDS") to the Company's shareholders (the "Distribution" or "Spin-Off"). SDS is now an independent public company operating what was Sybron's dental business. Immediately prior to the Distribution, Sybron Dental Management, Inc. ("SDM"), then a subsidiary of Sybron, paid a dividend of $142,880 to Sybron, of which $67,900 was paid in cash and $74,980 was a settlement of intercompany loans and advances and to reflect an allocation of additional bank debt to SDS. Immediately after payment of the dividend, SDM became a subsidiary of SDS. The total allocation of bank debt to SDS was $375,000. As a result of the Spin-Off, all historical financial data relating to the operations of SDS and its affiliates has been reclassified to discontinued operations. RESULTS OF OPERATIONS OVERVIEW Both our sales and our operating income for the quarter and year to date period ended June 30, 2001 grew over the corresponding prior year periods. Net sales increased 22.8% during the quarter ended June 30, 2001 to $260.4 million from $212.0 million in the quarter ended June 30, 2000. Operating income and income from continuing operations before extraordinary item for the quarter ended June 30, 2001 was $58.7 million and $28.1 million, respectively, as compared to $51.2 million and $23.9 million for the quarter ended June 30, 2000, representing increases of 14.7% and 17.4%, respectively. Net sales increased 14.4% during the nine months ended June 30, 2001 to $726.3 million from $635.0 million in the nine months ended June 30, 2000. Operating income was $165.4 million for the nine months ended June 30, 2001 as compared to $150.2 million for the nine months ended June 30, 2000. Income from continuing operations before extraordinary items increased 15.4% to $80.5 million for the nine months ended June 30, 2001, from $69.7 million for the nine months ended June 30, 2000. Income from continuing operations for the nine months ended June 30, 2001 included a $0.6 million charge relating to revisions in restructuring reserves and a $4.1 million gain on the sale of an asset. Sales growth in the quarter was strong both domestically and internationally. Domestic and international net sales increased by 20.6% and 29.7%, respectively, for the quarter ended June 30, 2001 as compared to the corresponding fiscal 2000 period. The strengthening of the U.S. dollar negatively impacted international sales growth. Without the negative currency effects, international sales growth would have been 34.2% over the corresponding fiscal 2000 quarter. We continue to maintain an active program of developing and marketing new products and product line extensions, as well as pursuing growth through acquisitions. We completed four acquisitions during the first nine months of fiscal 2001. (See Note 3 to the Unaudited Consolidated Financial Statements.) 24 25 QUARTER ENDED JUNE 30, 2001 COMPARED TO THE QUARTER ENDED JUNE 30, 2000 NET SALES
FISCAL FISCAL DOLLAR PERCENT 2001 2000 CHANGE CHANGE --------- --------- -------- ------- NET SALES (IN THOUSANDS) Labware and Life Sciences $ 108,763 $ 86,810 $ 21,953 25.3% Clinical and Industrial 65,927 50,270 15,657 31.1% Diagnostics and Microbiology 60,503 50,636 9,867 19.5% Laboratory Equipment 25,203 24,313 890 3.7% --------- --------- -------- Total Net Sales $ 260,396 $ 212,029 $ 48,367 22.8% ========= ========= ========
Overall Company. Net sales for the third quarter ended June 30, 2001 increased by $48.4 million or 22.8% from the corresponding fiscal 2000 quarter. 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 $10.6 million), (b) increased net sales of existing products (approximately $8.0 million), and (c) increased net sales of new products (approximately $5.2 million). Net sales were partially reduced by: (a) foreign currency fluctuations (approximately $1.7 million) and (b) price decreases (approximately $0.1 million). Clinical and Industrial. Increased net sales in the Clinical and Industrial segment resulted primarily from: (a) net sales of products of acquired companies (approximately $10.2 million), (b) increased sales of existing products (approximately $4.8 million), (c) increased net sales of new products (approximately $0.7 million), and (d) price increases (approximately $0.4 million). Net sales were partially reduced by foreign currency fluctuations (approximately $0.5 million). Diagnostics and Microbiology. Increased net sales in the Diagnostics and Microbiology segment resulted primarily from: (a) increased net sales of existing products (approximately $6.2 million), (b) net sales of products of acquired companies (approximately $4.4 million), and (c) increased net sales of new products (approximately $0.7 million). Net sales were partially reduced by price decreases (approximately $1.4 million). Laboratory Equipment. Increased net sales in the Laboratory Equipment segment resulted primarily from: (a) increased net sales of new products (approximately $1.1 million) and (b) price increases (approximately $0.7 million). Net sales were partially reduced by: (a) decreased net sales of existing products (approximately $0.8 million) and (b) foreign currency fluctuations (approximately $0.1 million). 25 26 GROSS PROFIT
FISCAL PERCENT FISCAL PERCENT DOLLAR PERCENT 2001 OF SALES 2000 OF SALES CHANGE CHANGE --------- --------- -------- -------- --------- -------- GROSS PROFIT (IN THOUSANDS) Labware and Life Sciences $ 55,147 21.2% $ 45,919 21.7% $ 9,228 20.1% Clinical and Industrial 26,735 10.3% 22,124 10.4% 4,611 20.8% Diagnostics and Microbiology 32,678 12.5% 27,200 12.8% 5,478 20.1% Laboratory Equipment 10,941 4.2% 10,166 4.8% 775 7.6% --------- -------- -------- Total Gross Profit $ 125,501 48.2% $105,409 49.7% $ 20,092 19.1% ========= ======== ========
Overall Company. Gross profit for the third quarter ended June 30, 2001 increased by $20.1 million or 19.1% from the corresponding fiscal 2000 period. Labware and Life Sciences. Increased gross profit in the Labware and Life Sciences segment resulted primarily from: (a) the effects of acquired companies (approximately $3.8 million), (b) the effects of new products (approximately $3.8 million), (c) product mix (approximately $2.7 million), and (d) increased volume (approximately $1.4 million). Gross profit was partially reduced by: (a) increased manufacturing overhead (approximately $1.3 million) and (b) foreign currency fluctuations (approximately $1.2 million). Clinical and Industrial. Increased gross profit in the Clinical and Industrial segment resulted primarily from: (a) the effects of acquired companies (approximately $2.5 million), (b) product mix (approximately $2.4 million), (c) price increases (approximately $0.4 million), (d) the effects of new products (approximately $0.5 million), and (e) increased volume (approximately $0.2 million). Gross profit was partially reduced by an increase in manufacturing overhead (approximately $1.4 million). Diagnostics and Microbiology. Increased gross profit in the Diagnostics and Microbiology segment resulted primarily from: (a) product mix (approximately $4.0 million), (b) the effects of acquired companies (approximately $3.7 million), (c) increased volume (approximately $2.9 million), and (d) the effects of new products (approximately $0.4 million). Gross profit was partially reduced by: (a) inventory adjustments (approximately $2.2 million), (b) increased manufacturing overhead (approximately $2.1 million), and (c) price decreases (approximately $1.2 million). Laboratory Equipment. Increased gross profit in the Laboratory Equipment segment resulted primarily from: (a) price increases (approximately $0.7 million), (b) the effects of new products (approximately $0.6 million), and (c) inventory adjustments (approximately $0.4 million). Gross profit was partially reduced by: (a) increased manufacturing overhead (approximately $0.7 million) and (b) decreased volume (approximately $0.2 million). 26 27 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
FISCAL FISCAL DOLLAR PERCENT SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 2001 2000 CHANGE CHANGE -------- -------- -------- ------- (IN THOUSANDS) Labware and Life Sciences $ 31,520 $ 25,096 $ 6,424 25.6% Clinical and Industrial 12,229 8,800 3,429 39.0% Diagnostics and Microbiology 16,083 13,736 2,347 17.1% Laboratory Equipment 5,828 4,806 1,022 21.3% --------- --------- -------- Subtotal 65,660 52,438 13,222 25.2% Corporate Office 1,160 1,791 (631) -35.2% --------- --------- -------- Total Selling, General and Administrative Expenses $ 66,820 $ 54,229 $ 12,591 23.2% ========= ========= ========
Overall Company. Selling, general and administrative expenses for the quarter ended June 30, 2001 increased by $12.6 million or 23.2% from the corresponding fiscal 2000 quarter. Labware and Life Sciences. Increased selling, general and administrative expenses in the Labware and Life Sciences segment resulted primarily from: (a) acquired businesses (approximately $4.0 million), (b) general and administrative expenses (approximately $2.5 million), (c) marketing expenses (approximately $0.4 million), and (d) research and development expenses (approximately $0.1 million). Selling, general and administrative expenses were partially reduced by foreign currency fluctuations (approximately $0.6 million). Clinical and Industrial. Increased selling, general and administrative expenses in the Clinical and Industrial segment resulted primarily from: (a) acquired businesses (approximately $1.3 million), (b) general and administrative expenses (approximately $1.0 million), (c) marketing expenses (approximately $1.0 million), and (d) increased amortization of intangibles primarily as a result of acquisitions (approximately $0.1 million). Diagnostics and Microbiology. Increased selling, general and administrative expenses in the Diagnostic and Microbiology segment resulted primarily from: (a) general and administrative expenses (approximately $1.0 million), (b) increased amortization of intangibles primarily as a result of acquisitions (approximately $0.7 million), (c) marketing expenses (approximately $0.3 million), (d) acquired businesses (approximately $0.3 million), and (e) research and development expenses (approximately $0.1 million). Selling, general and administrative expenses were partially reduced by foreign currency fluctuations (approximately $0.1 million). Laboratory Equipment. Increased selling, general and administrative expenses in the Laboratory Equipment segment resulted primarily from: (a) general and administrative expenses (approximately $0.6 million), (b) marketing expenses (approximately $0.2 million), and (c) research and development expenses (approximately $0.2 million). 27 28 OPERATING INCOME
FISCAL FISCAL DOLLAR PERCENT 2001 2000 CHANGE CHANGE -------- --------- --------- -------- OPERATING INCOME (IN THOUSANDS) Labware and Life Sciences $ 23,627 $ 20,823 $ 2,804 13.5% Clinical and Industrial 14,506 13,324 1,182 8.9% Diagnostics and Microbiology 16,595 13,464 3,131 23.3% Laboratory Equipment 5,113 5,360 (247) -4.6% -------- -------- -------- Subtotal 59,841 52,971 6,870 13.0% Corporate Office (1,160) (1,791) 631 -35.2% -------- -------- -------- Total Operating Income $ 58,681 $ 51,180 $ 7,501 14.7% ======== ======== ========
As a result of the foregoing, operating income in the third quarter ended June 30, 2001 increased by 14.7% or $7.5 million over operating income in the corresponding quarter of fiscal 2000. INTEREST EXPENSE Interest expense for the third quarter ended June 30, 2001 increased by $0.5 million to $12.7 million from the corresponding quarter of fiscal 2000. The increase in interest expense is primarily a result of higher debt levels, resulting from funding acquisitions. INCOME TAXES Taxes on income from continuing operations for the third quarter ended June 30, 2001 were $18.0 million, an increase of $2.7 million from the corresponding 2000 quarter. The increase resulted primarily from increased taxable earnings. INCOME FROM CONTINUING OPERATIONS BEFORE EXTRAORDINARY ITEM As a result of the foregoing, the Company had net income from continuing operations before an extraordinary item of $28.1 million for third quarter ended June 30, 2001, as compared to $23.9 million in the corresponding 2000 period, representing an increase of 17.4%. DISCONTINUED OPERATIONS Losses from discontinued operations were $11.3 million (net of income taxes of $7.6 million) in the third quarter ended June 30, 2000. The 2000 income related to the operating results of SDS. On December 11, 2000 we completed the spin-off of SDS. There were no related operations for the comparable quarter in fiscal 2001. 28 29 EXTRAORDINARY ITEM As a result of the April 4, 2001 senior note offering, Apogent wrote off deferred financing costs of approximately $2.2 million that related to the term loan that was paid off with proceeds. This was recorded as an extraordinary item of $1.4 million, net of income taxes. NET INCOME As a result of the foregoing, we had net income of $26.7 million in the third quarter ended June 30, 2001, as compared to net income of $35.2 million in the corresponding 2000 period. DEPRECIATION AND AMORTIZATION EXPENSE Depreciation and amortization expense is allocated among cost of sales, selling, general and administrative expenses and other expense. Depreciation expense and amortization expense increased $3.4 million in the third quarter ended June 30, 2001 due to additional depreciation and amortization from goodwill and intangibles recorded from the various acquisitions as well as routine operating capital expenditures. NINE MONTHS ENDED JUNE 30, 2001 COMPARED TO NINE MONTHS ENDED JUNE 30, 2000
FISCAL FISCAL DOLLAR PERCENT 2001 2000 CHANGE CHANGE --------- --------- -------- ------- NET SALES (IN THOUSANDS) Labware and Life Sciences $ 291,291 $ 252,292 $ 38,999 15.5% Clinical and Industrial 184,197 156,847 27,350 17.4% Diagnostics and Microbiology 174,816 154,431 20,385 13.2% Laboratory Equipment 75,954 71,416 4,538 6.4% --------- --------- -------- Total Net Sales $ 726,258 $ 634,986 $ 91,272 14.4% ========= ========= ========
NET SALES Overall Company. Net sales for the nine months ended June 30, 2001 increased by $91.3 million or 14.4% over the corresponding period in fiscal 2000. 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 $18.4 million), (b) increased net sales of new products (approximately $13.3 million), (c) increased net sales of existing products (approximately $8.6 million), and (d) price increases (approximately $4.1 million). Net sales were partially reduced by foreign currency fluctuations (approximately $5.5 million). Clinical and Industrial. Increased net sales in the Clinical and Industrial segment resulted primarily from: (a) net sales of products of acquired companies (approximately $23.4 million), (b) increases sales of existing products (approximately $3.5 million), (c) increased net sales of new products (approximately $1.8 million), and (d) price increases (approximately $1.1 million). Net sales were partially reduced by foreign currency fluctuations (approximately $2.4 million). 29 30 Diagnostics and Microbiology. Increased net sales in the Diagnostics and Microbiology segment resulted primarily from: (a) net sales of products of acquired companies (approximately $15.5 million), (b) increased net sales of existing products (approximately $3.9 million), and (c) increased net sales of new products (approximately $2.1 million). Net sales were partially reduced by: (a) price decreases (approximately $0.6 million), and (b) foreign currency fluctuations (approximately $0.5 million). Laboratory Equipment. Increased net sales in the Laboratory Equipment segment resulted primarily from: (a) increase in net sales of new products (approximately $3.5 million), and (b) price increases (approximately $1.9 million). Net sales were partially reduced by: (a) foreign currency fluctuations (approximately $0.5 million), and (b) decreased net sales of existing products (approximately $0.4 million). GROSS PROFIT
FISCAL PERCENT FISCAL PERCENT DOLLAR PERCENT 2001 OF SALES 2000 OF SALES CHANGE CHANGE --------- -------- --------- -------- --------- --------- GROSS PROFIT (IN THOUSANDS) Labware and Life Sciences $ 150,244 20.7% $ 131,942 20.8% $ 18,302 13.9% Clinical and Industrial 75,521 10.4% 67,034 10.6% 8,487 12.7% Diagnostics and Microbiology 93,498 12.9% 83,633 13.2% 9,865 11.8% Laboratory Equipment 32,704 4.5% 30,056 4.7% 2,648 8.8% -------- -------- -------- Total Gross Profit $ 351,967 48.5% $ 312,665 49.2% $ 39,302 12.6% ======== ======== ========
Overall Company. Gross profit for the nine months ended June 30, 2001 increased by $39.3 million or 12.6% over the corresponding fiscal 2000 period. Labware and Life Sciences. Increased gross profit in the Labware and Life Sciences segment resulted primarily from: (a) the effects of acquired companies (approximately $9.1 million), (b) the effects of new products (approximately $7.6 million), (c) price increases (approximately $4.3 million), and (d) increased volume (approximately $3.6 million). Gross profit was partially reduced by: (a) unfavorable foreign currency fluctuations (approximately $2.9 million), (b) increased manufacturing overhead (approximately $1.9 million), (c) product mix (approximately $1.4 million), and (d) inventory adjustments (approximately $0.1 million). Clinical and Industrial. Increased gross profit in the Clinical and Industrial segment resulted primarily from: (a) the effects of acquired companies (approximately $6.4 million), (b) product mix (approximately $2.4 million), (c) price increases (approximately $1.1 million), (d) the effects of new products (approximately $0.9 million), and (e) inventory adjustments ($0.1 million). Gross profit was partially reduced by: (a) reduced volume (approximately $1.6 million) and (b) unfavorable foreign currency fluctuations (approximately $0.9 million). Diagnostics and Microbiology. Increased gross profit in the Diagnostics and Microbiology segment resulted primarily from: (a) the effects of acquired companies (approximately $11.6 million), (b) product mix (approximately $7.2 million), (c) increased volume (approximately $1.9 million), and (d) the effects of new products (approximately $0.8 million). Gross profit was partially reduced by: (a) increased manufacturing overhead (approximately $6.4 million), (b) inventory adjustments (approximately $4.8 million), (c) price decreases (approximately $0.4 million), and (d) foreign currency fluctuations (approximately $0.1 million). 30 31 Laboratory Equipment. Increased gross profit in the Laboratory Equipment segment resulted primarily from: (a) price increases (approximately $1.9 million), (b) the effects of new products (approximately $1.6 million), and (c) inventory adjustments (approximately $0.3 million). Gross profit was partially reduced by: (a) increased manufacturing overhead (approximately $0.9 million), and (b) foreign currency fluctuations (approximately $0.3 million). SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
FISCAL FISCAL DOLLAR PERCENT 2001 2000 CHANGE CHANGE --------- ---------- ---------- ------- SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (IN THOUSANDS) Labware and Life Sciences $ 82,626 $ 72,074 $ 10,552 14.6% Clinical and Industrial 33,826 26,995 6,831 25.3% Diagnostics and Microbiology 47,825 42,598 5,227 12.3% Laboratory Equipment 16,543 15,168 1,375 9.1% --------- ---------- -------- Subtotal 180,820 156,835 23,985 15.3% Corporate Office 5,796 5,598 198 3.5% --------- ---------- -------- Total Selling, General and Administrative Expenses $ 186,616 $ 162,433 $ 24,183 14.9% ========= ========== ========
Overall Company. Selling, general and administrative expenses for the nine months ended June 30, 2001 increased by $24.1 million or 14.9% from the corresponding fiscal 2000 period. Labware and Life Sciences. Increased selling, general and administrative expenses in the Labware and Life Sciences segment resulted primarily from: (a) acquired businesses (approximately $7.3 million), (b) general and administrative expenses (approximately $2.6 million), (c) increased amortization of intangibles primarily as a result of acquisitions (approximately $0.9 million), (d) marketing expenses (approximately $0.3 million), and (e) research and development expense (approximately $0.3 million). Selling, general and administrative expenses were partially reduced by foreign currency fluctuations (approximately $0.9 million). Clinical and Industrial. Increased selling, general and administrative expenses in the Clinical and Industrial segment resulted primarily from: (a) acquired businesses (approximately $3.0 million), (b) marketing expenses (approximately $2.2 million), (c) general and administrative expenses (approximately $1.1 million), (d) increased amortization of intangibles primarily as a result of acquisitions (approximately $0.7 million), and (e) research and development expenses (approximately $0.1 million). Selling, general and administrative expenses were partially reduced by foreign currency fluctuations (approximately $0.3 million). Diagnostics and Microbiology. Increased selling, general and administrative expenses in the Diagnostic and Microbiology segment resulted primarily from: (a) increased amortization of intangibles primarily as a result of acquisitions (approximately $2.8 million), (b) marketing expenses (approximately $1.4 million), (c) general and administrative expenses (approximately $1.5 million), and (d) acquired businesses (approximately $0.4 million). Selling, general and administrative expenses were partially reduced by: (a) research and development expense (approximately $0.6 million) and (b) foreign currency fluctuations (approximately $0.3 million). Laboratory Equipment. Increased selling, general and administrative expenses in the Laboratory Equipment segment resulted primarily from: (a) general and administrative expenses (approximately $0.7 million), (b) research and development expenses (approximately $0.6 31 32 million), and (c) marketing expenses (approximately $0.2 million). Selling, general and administrative expenses were partially reduced by foreign currency fluctuations (approximately $0.1 million). SPECIAL CHARGES Results for the nine-months ended June 30, 2001 include a charge of approximately $0.6 million ($0.4 million after tax) relating to adjustments made to the 2000 restructuring reserve, consisting of additional severance. This charge is included in the corporate office selling, general and administrative expenses. OPERATING INCOME
FISCAL FISCAL DOLLAR PERCENT 2001 2000 CHANGE CHANGE --------- --------- -------- ------- OPERATING INCOME (IN THOUSANDS) Labware and Life Sciences $ 67,617 $ 59,868 $ 7,749 12.9% Clinical and Industrial 41,695 40,039 1,656 4.1% Diagnostics and Microbiology 45,673 41,035 4,638 11.3% Laboratory Equipment 16,162 14,888 1,274 8.6% --------- --------- -------- Subtotal 171,147 155,830 15,317 9.8% Corporate Office (5,796) (5,598) (198) 3.5% --------- --------- -------- Total Operating Income $ 165,351 $ 150,232 $ 15,119 10.1% ========= ========= ========
As a result of the foregoing, operating income for the nine months ended June 30, 2001 increased by $15.1 million or 10.1% over the corresponding period in fiscal 2000. INTEREST EXPENSE Interest expense was $37.1 million for the nine months ended June 30, 2001, an increase of $1.0 million from the corresponding fiscal 2000 period. The increase in interest expense is primarily a result of higher debt levels, resulting from funding acquisitions. OTHER INCOME Other income for the nine months ended June 30, 2001 was $5.5 million, an increase of $4.9 million over the corresponding 2000 period. The increase resulted primarily from the gain on the sale of asset of $4.1 million during the second quarter of fiscal 2001. 32 33 INCOME TAXES Taxes on income from continuing operations for the nine months ended June 30, 2001 were $52.9 million, an increase of $8.3 million from the corresponding fiscal 2000 period. The increase resulted primarily from increased taxable earnings. INCOME FROM CONTINUING OPERATIONS BEFORE EXTRAORDINARY ITEMS As a result of the foregoing, for the nine months ended June 30, 2001, income from continuing operations was $80.5 million as compared to $69.7 million in the corresponding fiscal 2000 period. DISCONTINUED OPERATIONS Losses from discontinued operations were $11.8 million (net of income taxes of $0.4 million) for the nine months ended June 30, 2001, as compared to income of $34.9 million (net of income tax of $23.6 million) in the corresponding period of fiscal 2000. The 2001 loss from discontinued operations resulted from transaction expenses relating to the spin-off of approximately $12.4 million offset by the operating results of SDS (through December 11, 2000) of $0.6 million. On December 11, 2000 we completed the spin-off of SDS. EXTRAORDINARY ITEMS As a result of the December 2000 debt refinancing and the April 2001 bond issuance, the Company wrote off deferred financing costs of approximately $3.5 million that related to prior debt agreements. This was recorded as an extraordinary item of $2.1 million, net of income taxes. NET INCOME As a result of the foregoing, the Company had net income of $66.6 million for the nine months ended June 30, 2001, as compared to net income of $104.6 for the corresponding fiscal 2000 period. DEPRECIATION AND AMORTIZATION Depreciation and amortization expense is allocated among cost of sales, selling, general and administrative expenses and other expense. Depreciation expense and amortization expense increased $9.8 million for the nine months ended June 30, 2001 due to additional depreciation and amortization from goodwill and intangibles recorded from the various acquisitions as well as routine operating capital expenditures. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS In July 2001, the FASB issued Statement No. 141, "Business Combinations", and Statement No. 142, "Goodwill and Other Intangible Assets". Statement 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001 as well as all purchase method business combinations completed after June 30, 2001. Statement 141 also specifies criteria that intangible assets acquired in a purchase method business combination must meet to be recognized and reported apart from goodwill noting that any purchase price allocable to an assembled workforce may not be accounted for separately. Statement 142 will require that 33 34 goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually in accordance with the provisions of Statement 142. Statement 142 will also require that intangible assets with definite useful lives be amortized over their respective estimated useful lives to the estimated residual values, and reviewed for impairment in accordance with SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. The Company is required to adopt the provisions of Statement 141 immediately, and expects to adopt Statement 142 effective October 1, 2001. Furthermore, any goodwill and any intangible asset determined to have an indefinite useful life that are acquired in a purchase business combination completed after June 30, 2001 will not be amortized, but will continue to be evaluated for impairment in accordance with the appropriate pre-Statement 142 accounting literature. Goodwill and intangible assets acquired in a business combination completed before July 1, 2001 will continue to be amortized prior to the adoption of Statement 142. Statement 141 will require upon adoption of Statement 142, that the Company evaluate its existing intangible assets and goodwill that were acquired in a prior business combination, and to make any necessary reclassification in order to conform with the new criteria in Statement 141 for recognition apart from goodwill. Upon adoption of Statement 142, the Company will be required to reassess the useful lives and residual values of all intangible assets acquired in purchase business combinations, and make any necessary amortization period adjustments by the end of the first interim period after adoption. In addition, to the extent an intangible asset is identified as having an indefinite useful life, the Company will be required to test the intangible asset for impairment in accordance with the provisions of Statement 142 within the first interim period. Any impairment loss will be measured as of the date of adoption and recognized as the cumulative effect of a change in accounting principle in the first interim period. In connection with the transition goodwill impairment evaluation, Statement 142 will require the Company to perform an assessment of whether there is an indication that goodwill (and equity -method goodwill) is impaired as of the date of adoption. To accomplish this the Company must identify its reporting units and determine the carrying value of each reporting unit by assigning the assets and liabilities, including the existing goodwill and intangible assets, to those reporting units as of the date of adoption. The Company will then have up to six months from the date of adoption to determine the fair value of each reporting unit and compare it to the reporting unit's carrying amount. To the extent a reporting unit's carrying amount exceeds its fair value, an indication exists that the reporting unit's goodwill may be impaired and the Company must perform the second step of the transitional impairment test. In the second step, the Company must compare the implied fair value of the reporting unit's goodwill, determined by allocating the reporting unit's fair value to all of its assets (recognized and unrecognized) and liabilities in a manner similar to a purchase price allocation in accordance with Statement 141, to its carrying amount, both of which would be measured as of the date of adoption. This second step is required to be completed as soon as possible, but no later than the end of the year of adoption. Any transitional impairment loss will be recognized as the cumulative effect of a change in accounting principle in the Company's statement of earnings. At June 30, 2001, the Company had unamortized goodwill and unamortized identifiable intangible assets in the amount of $887.4 million and $222.8 million, respectively, all of which will be subject to the transition provisions of Statements 141 and 142. Amortization expense relating to goodwill was $20.5 million for the fiscal year ended September 30, 2000 and $19.1 million for the nine months ended June 30, 2001. At this time it is not practical to estimate the impact of the adoption of both statements on the Company. 34 35 LIQUIDITY AND CAPITAL RESOURCES As a result of the acquisition of the Company's 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 $102 million in the nine months ended June 30, 2001, primarily as a result of continued acquisition activity. Our capital requirements arise principally from indebtedness incurred in connection with the permanent financing for the 1987 acquisition and our subsequent refinancings, our obligation to pay rent under the Sale/ Leaseback facility (as defined herein), our working capital needs, 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, payments to be made in connection with our restructuring in 2000, and the periodic expansion of physical facilities. It is currently our intent to continue to pursue our current acquisition strategy. If acquisitions continue at our historical pace, of which there can be no assurance, we may require financing beyond the capacity of our Credit Facilities (as defined below). The statement contained in the immediately preceding paragraph concerning our intent to continue to pursue our acquisition strategy is a forward-looking statement. Our ability to continue our acquisition strategy is subject to a number of uncertainties, including, but not limited to, our ability to raise capital beyond the capacity of our Credit Facilities and the availability of suitable acquisition candidates at reasonable prices. See "Cautionary Factors" below. Approximately $111.9 million of cash was generated from operating activities in the nine months ended June 30, 2001, an increase of $46.2 million or 70.3% from the corresponding period in fiscal 2000. Non-cash depreciation and amortization charged against net income increased approximately $9.8 million for the nine months ended June 30, 2001 as compared to the corresponding period in fiscal 2000. The cash outflow resulting from the net change in working capital, net of the effects of acquisitions and divestitures, was $23.1 million for the nine months ended June 30, 2001, or an increase in cash flow of $39.3 million, as compared to $62.4 million in cash outflow for the corresponding period in fiscal 2000. This resulted in an increase in cash flow of $39.3 million for the nine months ended June 30, 2001 as compared to the corresponding period in fiscal 2000. These changes are set forth in detail in the Consolidated Statement of Cash Flows. The increase in working capital accounts over the nine months ended June 30, 2001 is attributable to the higher level of business activity as reflected in our increased sales. Investing activities in the nine months ended June 30, 2001 used approximately $116.7 million of cash. Increased cash outflow from investing activities as compared to fiscal 2000 resulted primarily from an increase in net payments for businesses acquired of approximately $15.6 million, an increase in capital expenditures of $8.1 million, and an increase in net payments to SDS of $9.9 million, offset in part by an increase in the proceeds from sales of property, plant and equipment of $11.0 million. Financing activities provided approximately $17.4 million of cash. Proceeds from long-term debt relating to acquisitions of $79.9 million were offset in part by the payments made on the revolving Credit Facilities in excess of proceeds of $3.9 million and payments made on prior 35 36 acquisition debt of $6 million. In addition, the Company paid down a further $51.0 million on the Term Loan Facilities above the results of the December 2000 refinancing and April 2001 bond issuance (discussed below). Financing fees of $6.7 million were paid in connection with the December 2000 refinancing and April 2001 bond issuance. Prior to the Spin-Off, the Company was party to a credit agreement (the "Old Credit Agreement") with The Chase Manhattan Bank ("Chase") and certain other lenders providing for a tranche A term loan facility of $300 million (the "Old Tranche A Term Loan Facility"), a tranche B term loan facility of $300 million (the "Old Tranche B Term Loan Facility") and a revolving credit facility of up to $600 million (the "Old Revolving Credit Facility"), and together with the Old Tranche A Term Loan Facility and the Old Tranche B Term Loan Facility, the "Old Credit Facilities"). Both the Company and SDM were obligors under the Old Credit Facilities and as such, certain outstanding amounts under the Old Credit Facilities were historically recorded on the books of SDM. Outstanding amounts under the Old Tranche A Term Loan Facility, the Old Tranche B Term Loan Facility and the Old Revolving Credit Facility at September 30, 2000 (including amounts recorded on the books of SDM) were $270.8 million, $299.3 million, and $379.0 million, respectively. Outstanding amounts under the Old Tranche A Term Loan Facility, the Old Tranche B Term Loan Facility, and the Old Revolving Credit Facility at September 30, 2000 recorded on the books of the Company were $201.0 million, $179.9 million, and $256.4 million, respectively. On December 1, 2000, the Company entered into a new credit agreement (the "Credit Agreement") with Chase and certain other lenders providing for a term loan facility of $300 million (the "Term Loan Facility") due in a single payment on December 1, 2005, and a revolving credit facility of up to $500 million for a period of up to five years (the "Revolving Credit Facility") and together with the Term Loan Facility, the "Credit Facilities"). On December 11, 2000, the Company borrowed approximately $563.0 million under the Credit Facilities and together with funds aggregating $375.0 million ($307.1 million, the amount equal to the outstanding amounts under the Old Credit Facilities attributable to SDS on December 11, 2000 including accrued interest plus a cash dividend of $67.9 million from SDM to the Company), used such funds to repay all of the outstanding amounts under the Old Credit Facilities, aggregating $938.0 million (including accrued interest). On April 4, 2001, the Company issued $325 million of unsecured senior notes in a private placement with exchange and registration rights. The Company used the proceeds from the issuance to repay all of its Term Loan Facility ($300 million) and a portion of its Revolving Credit Facility. The notes were offered at a discount of approximately $1,469. They will mature on April 1, 2011. Interest is fixed at an annual rate of 8% and is payable on April 1 and October 1 of each year, beginning on October 1, 2001. Interest will accrue from April 4, 2001. The notes are redeemable by the Company at any time in whole, or from time to time in part, at a price equal to the greater of (i) 100% of the principal amount of the notes to be redeemed or (ii) the sum of the present values of the remaining scheduled payments of principal and interest thereon (exclusive of interest accrued to the date of redemption) discounted to the date of redemption on a semiannual basis at the applicable Treasury Yield (as defined in the bond agreement) plus 35 basis points, plus accrued interest to the date of redemption. These notes are guaranteed by the Company's material U.S. subsidiaries, which also guarantee the Company's obligations under its bank credit facility. EUROPEAN ECONOMIC MONETARY UNIT On January 1, 1999, eleven of the European Union countries (including one country in which we have operations) adopted the Euro as their single currency. At that time, a fixed exchange rate was established between the Euro and the individual countries' existing currencies (the "legacy 36 37 currencies"). The Euro trades on currency exchanges and is available for non-cash transactions. Following the introduction of the Euro, the legacy currencies will remain legal tender in the participating countries during a transition period from January 1, 1999 through January 1, 2002. Beginning on January 1, 2002, the European Central Bank will issue Euro-denominated bills and coins for use in cash transactions. Our German operating units affected by the Euro conversion intend to keep their books in their respective legacy currencies through a portion of the transition period. At this time, we do not expect Euro conversions to have a material adverse effect on our business operations or financial condition. 37 38 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", "expect", "goal", "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: o We have operations outside the United States. We are therefore subject to factors affecting our international operations, including relevant foreign currency exchange rates, which can affect the cost to produce 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, such as Mexico and Hungary, which have historically been less stable than the United States in several respects, including fiscal and political stability; and risks associated with economic downturn in other countries. o A significant portion of our growth over the past several years has been achieved through our acquisition program, which has generated approximately 70 acquisitions since 1993. 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 our ability to raise capital beyond the capacity of our existing credit facilities or to use our stock for acquisitions, the cost of the capital required to effect our acquisition strategy, the availability of suitable acquisition candidates at reasonable prices, competition for appropriate candidates, our ability to realize the synergies expected to result from acquisitions, and the ability of our existing personnel to efficiently handle increased transitional responsibilities resulting from acquisitions. o We are organized as a holding company. As a result, all of our revenues are generated through our subsidiaries, including foreign subsidiaries. Consequently, our operating cash flow and ability to service indebtedness and other obligations depend upon the operating cash flow of our U.S. and 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 restrictions (including insolvency and fraudulent conveyance laws) and contractual restrictions (which may include requirements to maintain minimum levels of working capital and other assets). o 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. This volatility in demand can also arise with large OEM customers to whom we sell direct. Sales to our distributors and 38 39 OEM customers are sometimes unpredictable and wide variances sometimes occur quarter to quarter. o Our ability to increase revenues and to profitably distribute and sell our products is subject to a number of risks, such as any changes in our business relationships with our principal distributors or OEM customers, competitive factors such as the entrance of additional competitors into our markets, pricing and technological competition, risks associated with the development and marketing of new products in order to remain competitive by keeping pace with advancing laboratory and life science technologies, particularly in the genomics and other rapidly developing technologies, factors affecting certain high growth industries we serve, such as consolidation in the drug discovery and diagnostics industries, and risks of unanticipated technological developments that result in competitive disadvantages and create the potential for impairment of our existing assets. o 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. o With respect to the Clinical and Industrial segment, factors affecting our Erie Electroverre S.A. subsidiary's ability to manufacture the glass used by the Clinical and Industrial segment's worldwide manufacturing operations, including delays encountered in connection with the periodic rebuild of the sheet glass furnace and furnace malfunctions at a time when inventory levels are not sufficient to sustain this segment's flat glass operations. o Factors affecting our ability to obtain raw materials at reasonable prices, especially white glass, which comes from a single source, our Electroverre, S.A. facility in Switzerland. o Our ability to hire and retain competent employees is subject to a number of risks, including unionization of our non-union employees and changes in relationships with our unionized employees. There is a risk of strikes or other labor disputes at those locations that are unionized which could affect our operations. o Our business currently has a significant amount of floating rate debt and can be adversely affected by a rise in interest rates. o Our ability to continue manufacturing and selling those of our products that are subject to regulation by the FDA or other domestic or foreign governments or agencies is subject to a number of risks, including the promulgation of stricter laws or regulations, reclassification of our products into categories subject to more stringent requirements, or the withdrawal of the approval needed to sell one or more of our products. o The impact of changing public and private health care budgets, including reimbursement by private or governmental insurance programs, may affect demand for or pricing of our products. o Our business is subject to the risks of claims involving our products and other legal and administrative proceedings, including the expense of investigating, litigating and settling any claims. 39 40 o SDS has agreed to indemnify Apogent from and after the spin-off with respect to certain liabilities and obligations. Our ability to collect on such indemnities, if applicable, from SDS will depend upon SDS's financial strength at the time of any such indemnity claim. o Our financial performance or condition may be affected by changes in tax legislation, applicable accounting principles, or environmental laws and regulations. o 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. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK RISK MANAGEMENT We are exposed to market risk from changes in foreign currency exchange rates and interest rates. To achieve our objectives, we identify these risks and manage them through our regular operations and financing activities and when deemed appropriate, we occasionally enter into various hedging transactions. We do not anticipate material changes to our primary market risks other than fluctuations in magnitude from increased or decreased foreign currency denominated business activity or floating rate debt levels. We do not use financial instruments for trading purposes and are not a party to any leveraged derivatives. Foreign Exchange We have, from time to time, used foreign currency options to hedge our exposure from adverse changes in foreign currency rates. Hedging is accomplished by the use of foreign currency options, and the gain or loss on these options is used to offset gains or losses in the foreign currencies to which they pertain. Hedges of anticipated transactions are accomplished with options that expire on or near the maturity date of the anticipated transaction. In March 2001, we entered into two foreign currency options to hedge against the effect of fluctuations in foreign exchange rates on two notes issued in British Pounds. The options of $11,500 GPB and $11,750 GPB have maturity dates approximating those of the notes, of July 31, 2002 and July 2003, respectively. Both options were priced at $0.69 GBP. In part due to the aforementioned options, the Company's exposure to market risk from changes in interest rates and foreign currency exchange rates has not changed materially from its exposure as of the most recent year ended September 30, 2000. 40 41 PART II - OTHER INFORMATION 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. B) REPORTS ON FORM 8-K: A Form 8-K was filed on April 9, 2001 to report under items 5 and 7 the announcement of a private placement of senior notes pursuant to the Company's press release of April 4, 2001. 41 42 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: August 13, 2001 /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 42 43 APOGENT TECHNOLOGIES INC. (THE "REGISTRANT") (COMMISSION FILE NO. 1-11091) EXHIBIT INDEX TO QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2001
EXHIBIT FILED NUMBER DESCRIPTION INCORPORATED HEREIN BY REFERENCE TO HEREWITH - ------- ----------- ----------------------------------- -------- 2.1 Contribution Agreement, Plan and Exhibit 2.1 to the Registrant's Form 10-K Agreement of Reorganization and for the fiscal year ended September 30, Distribution, dated as of November 2000 (the "2000 10-K) 28, 2000, between the Registrant and Sybron Dental Specialties, Inc. ("SDS") and Sybron Dental Management, Inc. (excluding the forms of the ancillary agreements attached thereto as exhibits, definitive copies of which are filed as Exhibits 2.2 through 2.8 below) 2.2 General Assignment, Assumption and Exhibit 2.2 to the 2000 10-K Agreement Regarding Litigation, Claims and Other Liabilities, dated as of December 11, 2000, between the Registrant and SDS 2.3 Trade Name Assignment and Exhibit 2.3 to the 2000 10-K Transitional Trade Name Use and License Agreement, dated as of December 11, 2000, between the Registrant and SDS 2.4 Insurance Matters Agreement, dated Exhibit 2.4 to the 2000 10-K as of December 11, 2000, between the Registrant and SDS 2.5 Employee Benefits Agreement, dated Exhibit 2.5 to the 2000 10-K as of December 11, 2000, between the Registrant and SDS 2.6 Tax Sharing and Indemnification Exhibit 2.6 to the 2000 10-K Agreement, dated as of December 11, 2000, between the Registrant and SDS 2.7 Interim Administrative Services Exhibit 2.7 to the 2000 10-K Agreement, dated as of December 11, 2000, between the Registrant and SDS 2.8 Confidentiality and Nondisclosure Exhibit 2.8 to the 2000 10-K Agreement, dated as of December 11, 2000, between the Registrant and SDS 3.1 (a) Composite Restated Articles of Exhibit 3.1(a) to the Registrant's Incorporation of the Registrant, Form 10-Q for the quarter ended as amended through February 5, December 31, 2000 (the "12/31/00 10-Q") 2001 to change the name of the Registrant to Apogent Technologies Inc. and increase the size of the Board of Directors from between six and nine to between six and twelve directors 3.2 (b) Articles of Amendment Exhibit 3.1(b) to the 2000 10-K containing Certificate of Designation, Preferences and Rights of Series A Preferred Stock 3.2 Bylaws of the Registrant, as Exhibit 3.2 to the 12/31/00 10-Q amended as of January 30, 2001 to amend Section 3.01 to reflect the increase in the maximum number of directors to twelve 4.1 Indenture, dated April 4, 2001 Exhibit 4.1 to the Registrant's among the Registrant, Subsidiary Form 10-Q for the quarter ended Guarantor parties thereto, and The March 31, 2001 (the "3/31/01 10-Q") Bank of New York, as Trustee 4.2 Exchange and Registration Rights Agreement, dated April 4, 2001, Exhibit 4.2 to the 3/31/01 10-Q among the Registrant, Subsidiary Guarantors and Chase Securities Inc., Bank of America Securities LLC, Banc One Capital Markets Inc., Credit Suisse First Boston Corporation and First Union Securities Inc. (collectively, as Initial Purchasers)
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