Back to GetFilings.com
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K 405
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2001
Commission File Number 0-6994
NEW BRUNSWICK SCIENTIFIC CO., INC.
(Exact name of registrant as specified in its charter)
New Jersey 22-1630072
----------- ----------
(State of incorporation) (I.R.S. Employer Identification Number)
44 Talmadge Road, Edison, N.J. 08817
------------------------------------
(Address of principal office)
Registrant's telephone number: (732) 287-1200
--------------
Securities registered pursuant to Section 12(b) of the Act:
- ------------------------------------------------------------------
Name of each exchange
Title of each class on which registered
---------------------- ------------------------
None N/A
Securities registered pursuant to Section 12(g) of the Act:
- ------------------------------------------------------------------
Title of class
----------------
Common stock - par value $0.0625
Common stock Purchase Rights
The Registrant (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports)
and (2) has been subject to such filing requirements for the past 90 days.
The aggregate market value of the voting stock held by non-affiliates of the
registrant was $28,053,433 as of February 8, 2002. This figure was calculated
by reference to the high and low prices of such stock on February 8, 2002.
The number of shares outstanding of the Registrant's Common stock as of February
8, 2002: 6,761,892.
DOCUMENTS INCORPORATED BY REFERENCE
Registrant's Proxy Statement and Annual Report to be filed within 120 days after
the end of the fiscal year 2001, are incorporated in Part III herein.
The EXHIBITS INDEX is on Page 49.
1
------
PART I
------
ITEM 1. BUSINESS
--------
New Brunswick Scientific Co., Inc. and its subsidiaries ("NBS" or "the
Company") design, manufacture and market a variety of equipment used in
biotechnology to create, maintain, measure and control the physical and
biochemical conditions required for the growth and detection of microorganisms.
This equipment is used in medical, biological, chemical, and environmental
research and for the commercial development of antibiotics, proteins, hormones,
enzymes, monoclonal antibodies, agricultural products, fuels, vitamins, vaccines
and other substances. The equipment sold by NBS includes fermentation
equipment, bioreactors, biological shakers, ultra-low temperature freezers,
nutrient sterilizing and dispensing equipment, tissue culture apparatus and air
samplers.
In October 1995, the Company entered the drug-lead discovery business by
forming a new company to develop a novel, small molecule drug discovery
platform. The company, DGI BioTechnologies, Inc. (DGI), was majority-owned and
fully funded by the Company until June 14, 2001 at which time an institutional
investor invested $5,000,000 in DGI in exchange for Series B voting convertible
preferred stock of DGI. The Series B convertible preferred stock of DGI has
certain dividend, liquidation and other rights senior to the Series A preferred
stock of DGI held by the Company. This transaction reduced the Company's
ownership interest in DGI to 47%. Accordingly, effective June 14, 2001, as
required by accounting principles generally accepted in the United States of
America, the Company no longer exercises control and ceased consolidating the
operations of DGI but reports its percentage of income or loss in DGI's
operations on the equity method of accounting based upon its continued ability
to exercise significant influence over DGI. The Company is not required to, and
has not recorded losses from its share of DGI's operations beyond the carrying
value of its investment since it has no further obligation to fund the DGI
operations. As of December 31, 2001, the Company's investment in DGI had been
reduced to zero.
The Company has entered into a two-year lease with DGI under which DGI occupies
8,800 square feet of office and specifically designed laboratory space at the
Company's headquarters facility in Edison, New Jersey for a gross rental of
$211,200 per year. Under the terms of the lease, DGI has the right to cancel
upon providing the Company with 90 days notice. The lease was established at
arm's length utilizing current market information.
On June 29, 2001, the Company announced that it had ceased accepting orders for
large fully custom-engineered bioprocess equipment which represented a small
niche business for the Company. Net sales of custom engineered products for the
year ended December 31, 2001 amounted to slightly more than $5 million,
primarily from orders received in 2000. The Company continues to market its
broad-based fermentor and bioreactor products as well as to offer special
modifications to such equipment. In addition, the Company is developing a new
family of sterilizable-in-place fermentors.
2
NBS was incorporated in 1958 as the successor to a business founded in 1946 by
David and Sigmund Freedman, its principal stockholders and two of its directors
and executive officers. The Company owns its 243,000 square foot headquarters
and primary production facility located on 17 acres of land in Edison, New
Jersey.
PRODUCTS
--------
Fermentation Equipment and Bioreactors. A fermentor is a device used to
-----------------------------------------
create, maintain and control the physical, chemical, and biochemical
environmental conditions required for growing bacteria, yeast, fungi and other
similar microorganisms. Bioreactors serve an identical purpose for the
propagation of animal and plant cells. The Company's fermentors and bioreactors
range in size from small research models to larger systems that are used in cGMP
production facilities.
NBS has supplied fermentors and bioreactors to universities, biotechnology and
pharmaceutical company laboratories since the 1950's. NBS' fermentors and
bioreactors are used for applications using microorganisms engineered by
recombinant DNA techniques; immunology; and the production of monoclonal
antibodies. Animal and plant cells as well as bacteria and viruses are usually
grown on a small scale for research purposes. As the process is scaled up
(i.e., replicated, using larger volumes), physical and chemical parameters, such
as pH, vessel pressure and chemical composition may change, and the equipment
used may require increasingly sophisticated control systems. Scale-up, which is
one of the important uses of the Company's pilot scale systems is a complex
technical procedure critical to successful commercialization of biological
processes. Pilot scale systems may be used to set parameters or to determine
the feasibility of production at greater volumes, depending upon the goal of the
customer. Particularly in the area of bioreactors, the Company has developed
unique designs and has been issued patents to protect its technology. The
Company's fermentors and bioreactors incorporate sophisticated instrumentation
systems to measure, record and control a multiplicity of process variables.
The Company manufactures digital instrumentation for control of fermentors
and bioreactors. This instrumentation significantly enhances the utility of any
size fermentor or bioreactor. Consisting of an operator display and a series of
microprocessor-controlled instrument modules, this control unit uses software
developed by the Company to simplify the operation of fermentors and bioreactors
while enhancing their performance. It automatically monitors, displays,
analyzes, and makes immediately available, data concerning the culture process
and permits automatic modification of the various growth conditions without the
need of a host computer. This system is designed to replace manually operated
controls as well as more complex and more costly automatic systems.
Biological Shakers. Biological shakers perform a function similar to fermentors
- ------------------
and bioreactors, as they are also used in the process of propagating biological
cultures. Shakers agitate flasks under controlled conditions containing
biological cultures in a liquid media in which nutrients are dissolved.
Nutrients are the source of energy needed for growth, while shaking furnishes
the dissolved oxygen needed to permit life processes to take place within the
3
microorganism. NBS Shakers are in worldwide use in biological laboratories for
research, development, and in some cases, for production of various medical,
biological and chemical products. In addition, shakers are widely used in
microbiological and recombinant DNA research.
The Company manufactures an extensive line of biological shakers ranging in size
from portable laboratory benchtop models to large multitier industrial machines.
Some models of the Company's shakers are designed to agitate flasks under
controlled environmental conditions of temperature, atmosphere and light. Each
shaker incorporates a variable speed regulator and may be equipped to
accommodate flasks of various sizes. To permit culture growth under constant
and reproducible conditions, shakers manufactured by NBS are precision
engineered and manufactured to agitate flasks uniformly and continuously over
prolonged periods.
The Company manufactures three distinct lines of shakers. Its INNOVA line,
which is its most sophisticated shaker, its C-Line which is intended primarily
for sale through distributors and its I-Series which is manufactured exclusively
for Fisher Scientific.
Ultra-Low Temperature Freezers. Ultra-low temperature (ULT) freezers are
- --------------------------------
utilized in research, clinical and industrial applications. They are primarily
- ----
used to store or conserve biological products that include specimens (cells,
tissue) stock cultures (bacteria, viruses) and vaccines. ULT freezers range in
temperature from -40 degrees C to -86 degrees C and come in both upright and
chest models of varying sizes.
The Company manufactures two distinct lines of ULT freeezers. Five models in
its space saving VIP line, which utilizes ultra-thin Vacuum Insulation Panels
for up to a 30% increase in storage capacity over traditionally insulated models
in the same footprint. The four models in the Premium line offer an economical
alternative and make use of conventional urethane insulating techniques.
To maximize storage capacity, the Company's VIP Freezers utilize a highly
efficient thermal insulation panel called NanogelTM to form ultra-thin Vacuum
Insulation Panels; the wall thickness has been reduced resulting in increased
storage capacity. The optional RS-485 interface allows remote control and
data-logging of all five models in the VIP range, which includes a
"personal-sized" freezer for use on or under the bench, as well as two large
upright and two chest-style units.
Nutrient Sterilizing and Dispensing Equipment. The Company manufactures devices
- ---------------------------------------------
that automatically sterilize biological nutrients and then maintains those
nutrients at the required temperature for subsequent use. As a complement to
its nutrient sterilizers, NBS sells an apparatus which automatically fills
culture dishes with sterile nutrient.
Tissue Culture Apparatus. The Company manufactures apparatus to rotate bottles
- -------------------------
and test tubes slowly and constantly for the purpose of growing animal and plant
cells. Certain models of this apparatus may be placed into an incubator and
equipped to regulate the speed of rotation. The Company also markets carbon
4
dioxide incubators used in the propagation of tissue cultures. This apparatus
has applications in vaccine production, cancer and heart disease research, and
the commercial production of pharmaceuticals.
Air Samplers. The Company also manufactures air samplers which are used to
------------
detect the presence of spores and other microbial organisms in the environment.
These instruments can sample large volumes in environments having limited
contamination such as clean rooms, as well as sample smaller volumes in areas
with larger amounts of viable organisms.
Other Scientific Products. NBS distributes a line of centrifuges for separating
- -------------------------
cells from fermentation broth.
PRODUCT DEVELOPMENT
- --------------------
NBS designs and develops substantially all the products it sells. Its
personnel, who include biochemical, electrical, chemical, mechanical, electronic
and software engineers as well as scientists and technical support staff,
formulate plans and concepts for new products and improvements or modifications
to existing products. The Company develops specialized software for use with
its computer-coupled systems and the microprocessor-controlled instrumentation
systems for shakers, fermentors and bioreactors.
MANUFACTURING
- -------------
Manufacturing is conducted according to planning and production control
procedures primarily on a lot production basis rather than on an assembly line.
NBS fabricates its parts from purchased raw materials and components and
produces most of its subassemblies. These parts, components and subassemblies
are carried in inventory in anticipation of projected sales and are then
assembled into finished products according to production schedules. In general,
manufacturing is commenced in anticipation of orders. The manufacturing
processes for the Company's products range from two weeks to months, depending
upon the product size, complexity and quantity. However, a substantial portion
of orders received are for items in the process of being manufactured or in
inventory.
The raw materials used by the Company include stainless steel, carbon steel,
copper, brass, aluminum and various plastics. Some components are purchased
from others, including pumps, compressors, plumbing fittings, electrical and
electronic components, gauges, meters, motors, glassware and general purpose
hardware. Many of these components are built to the Company's specifications.
NBS is not dependent upon any single supplier for any raw material or component,
but delay in receipt of key components can affect the manufacturing schedule.
5
The Company's products are designed to operate continuously over long periods
with precision and regularity so that research and production may be conducted
under controlled, constant and reproducible conditions. The Company
manufactures its products from materials which it selects as having
characteristics necessary to meet its requirements. In addition, to ensure that
its manufacturing processes result in products meeting exacting specifications
and tolerances, NBS follows rigorous inspection procedures. NBS maintains a
quality control department which is responsible for inspecting raw materials and
parts upon arrival at its plant as well as inspecting products during
manufacture. NBS' products are serviced at its plant and at its customers'
premises by Company technicians, distributors' technicians or, in the case of
minor repairs, by sales personnel.
MARKETING AND SALES
---------------------
The Company sells its equipment to pharmaceutical companies, agricultural
and chemical companies, other industrial customers engaged in biotechnology, and
to medical schools, universities, research institutes, hospitals, private
laboratories and laboratories of Federal, State and Municipal government
departments and agencies in the United States. While only a small percentage of
the Company's sales are made directly to United States government departments
and agencies, its domestic business is significantly affected by government
expenditures and grants for research to educational research institutions and to
industry. The Company regularly evaluates credit granted to customers.
NBS also sells its equipment, both directly and through scientific
equipment dealers, to foreign companies, institutions, and governments. The
major portion of its foreign sales are made in Canada, Western Europe, the
Middle East, China, Japan, India, Taiwan, Brazil and Mexico. NBS also sells its
products in the former Soviet Union, Eastern Europe, Africa, other Asian
countries and Latin America. These sales may be substantially affected by
changes in the capital investment policies of foreign governments, or by the
availability of hard currency. These sales may also be affected by US export
control regulations applicable to scientific equipment.
Fisher Scientific is the exclusive U.S. distributor of the Company's C-Line
and I-Series biological shakers. While Fisher is the exclusive U.S. distributor
for these NBS Shakers, NBS markets and sells its INNOVA shakers and other
products on a direct basis as well. Fisher also distributes a few selected
INNOVA models.
For information concerning net sales in the United States and foreign countries,
income (loss) from operations derived therefrom, identifiable assets located in
the United States and foreign countries, and export sales for each of the three
years ended December 31, 2001, see Note 12 of Notes to Consolidated Financial
Statements. Export sales consist of all sales by the Company's domestic
operations to customers located outside the United States. Hence, foreign sales
include export sales.
6
Substantially all of the orders of the Company's domestic operations, including
export orders are recorded in United States dollars. The Company's wholly-owned
European subsidiaries book orders for equipment in local currencies and in some
instances in United States dollars. The assets and liabilities of the Company's
European subsidiaries are valued in local currencies. Fluctuations in exchange
rates between those currencies and the dollar have had an impact upon the
Company's consolidated financial statements, as measured in United States
dollars.
Export sales are influenced by changes in the exchange rate of the dollar as
those changes affect the cost of the Company's equipment to foreign purchasers.
Certain countries, particularly those in Eastern Europe and the former Soviet
Union, may not be able to make substantial capital purchases in dollars for
economic or political reasons.
NBS maintains five European sales offices through wholly-owned subsidiaries, New
Brunswick Scientific (U.K.) Limited, in England, New Brunswick Scientific B.V.
in The Netherlands, New Brunswick Scientific GmbH in Germany, New Brunswick
Scientific NV/SA in Belgium and New Brunswick Scientific S.a.r.l. in France.
NBS with three offices, also sells on a direct basis in China.
In November 1999, the Company acquired DJM Cryo-Research Limited
(subsequently renamed NBS Cryo-Research Limited) (DJM), a manufacturer of
ultra-low temperature freezers located in Tollesbury, England. Prior to the
acquisition, substantially all of DJM's sales were to the Company. The Company
sells these freezers on a direct basis in the United Kingdom, the Netherlands,
Belgium and Germany and through distributors in many other countries. The
freezers, which had not previously been sold in the U.S. market, were introduced
to the U.S. beginning in early 2001.
At December 31, 2001, NBS had a backlog of unfilled orders of $10,381,000,
compared with $12,543,000 at the end of 2000. NBS expects to satisfy all of its
existing backlog during the coming year.
One customer based in the United States accounted for approximately 12.3%, 12.5%
and 10.4%, respectively, of consolidated net sales during the years ended
December 31, 2001, 2000 and 1999. Net sales to no other customer exceeded 10%
of consolidated net sales in any year.
RESEARCH AND DEVELOPMENT
- --------------------------
Research and development expenditures, all of which are sponsored by the
Company, amounted to $2,744,000 in 2001, $3,981,000 in 2000 and $3,661,000 in
1999. Research expenditures related to DGI included in these amounts were
$1,312,000 in 2001, $3,480,000 in 2000 and $3,198,000 in 1999.
Twenty-three (23) of the Company's professional employees were engaged full
time in research and development activities.
7
COMPETITION
- -----------
The competitive factors affecting the Company's position as a manufacturer
of biotechnology equipment include availability, reliability, ease of operation,
the price of its products, its responsiveness to the technical needs and service
requirements of customers, and product innovation.
NBS encounters competition from approximately 11 domestic and 15 foreign
competitors in the sale of its products. The Company's principal competitors in
the sale of fermentation equipment and bioreactors both in the United States and
overseas are B. Braun Biotech, a German company and Applikon, B.V., located in
The Netherlands. Although financial information concerning these firms is not
readily available, the Company believes that B. Braun has substantially greater
financial resources than the Company.
The Company believes that it has the largest worldwide market share for
biological shakers. LabLine Instruments, Inc. and Forma Scientific in the
United States as well as several manufacturers in Europe are competitors of the
Company in this market.
The Company, having begun just recently to sell ultra-low temperature freezers
there, has a very low market share in the U.S. but believes it has a substantial
market share for freezers in the European market where it has been selling
freezers for over 20 years. The Company's main competitors in the sale of
freezers are Revco, Forma and Sanyo.
NBS encounters substantial competition in the sale of most of its other
equipment where its sales do not represent major market shares. Although the
Company does not encounter substantial competition in the sale of its nutrient
sterilizing and dispensing equipment in the U.S. market, substantial competition
exists in foreign markets.
EMPLOYEES
---------
NBS employs approximately 417 people, including 236 people engaged in
manufacturing and supervision, 27 in research, development and engineering, 111
in sales and marketing, and 43 in administrative and clericalcapacities.
Manufacturing employees currently work a single shift, however, in certain areas
a second shift has been employed. The Company's New Jersey manufacturing
employees are represented by District 15 of the International Association of
Machinists, AFL-CIO under a contract which expires in December 2003. The
Company considers its labor relations to be good.
WORKING CAPITAL
----------------
NBS maintains a substantial inventory of parts, components and
subassemblies to fill orders for its products. Management believes it has
adequate working capital for its present level of operations.
8
On April 16, 1999, the Company entered into an agreement (the Bank
Agreement) with First Union National Bank for a three year, $31 million secured
line of credit. The Bank Agreement provides the Company with a $5 million
revolving credit facility for both working capital and for letters of credit, a
$1 million Revolving Line of Credit for equipment acquisition purposes, a $15
million credit line for acquisitions and a $10 million foreign exchange
facility. There are no compensating balance requirements and any borrowings
under the Bank Agreement bear interest at various rates based upon a function of
the bank's prime rate or Libor at the discretion of the Company. All of the
Company's domestic assets, which are not otherwise subject to lien, have been
pledged as security for any borrowings under the Bank Agreement. The Bank
Agreement contains various business and financial covenants including among
other things, a debt service coverage ratio, a net worth covenant, and a ratio
of total liabilities to tangible net worth. The Company was not in compliance
with certain financial covenants at December 31, 2000 and March 31, 2001 which
non-compliance was waived by the bank. On May 10, 2001 and on November 13,
2001, the financial covenants were amended and, as a result, the Company is in
compliance with the amended covenants at December 31, 2001 and expects to be in
compliance for the ensuing twelve months. At December 31, 2001, $6,350,000 was
outstanding under the Bank Agreement related to working capital and acquisition
loans and $1,790,000 was being utilized for letters of credit and foreign
exchange transactions. On March15, 2002, the Bank Agreement was amended to
extend its maturity date to May 31, 2005.
PATENTS AND TRADEMARKS
- ------------------------
NBS holds and has filed applications for United States and foreign patents
relating to many of its products, their integral components and significant
accessories. NBS also has certain registered trademarks. However, NBS believes
that its business is not dependent upon patent, trademark, or other proprietary
protection in any material respect.
CAUTIONARY STATEMENT
---------------------
Statements included herein which are not historical facts are
forward-looking statements. Such forward looking statements are made pursuant
to the safe harbor provision of the Private Securities Litigation Reform Act of
1995. The forward-looking statements involve a number of risks and
uncertainties, including but not limited to, changes in economic conditions,
demand for the Company's products, pricing pressures, intense competition in the
industries in which the Company operates, the need for the Company to keep pace
with technological developments and timely respond to changes in customer needs,
the Company's dependence on third party suppliers, the effect on foreign sales
of currency fluctuations, acceptance of new products, the labor relations of the
Company and its customers and other factors identified in the Company's
Securities and Exchange Commission filings.
ITEM 2. PROPERTY
--------
The Company's executive, administrative, engineering and domestic sales
offices and its manufacturing operations, warehouse and other facilities are
located in a Company-owned 243,000 square foot one-story steel and concrete
block building situated on a 17-acre site in Edison, New Jersey. Approximately
9
50,000 square feet is office space, approximately 7,300 square feet is
laboratory space, approximately 8,800 square feet is leased to DGI, and the
balance is devoted to manufacturing and warehouse facilities. The Company's NBS
B.V. subsidiary owns its 22,825 square foot building in Nijmegen, The
Netherlands.
The Company's wholly-owned European subsidiaries lease facilities as follows:
New Brunswick Scientific (UK) Limited - 17,000 square feet, NBS Cryo-Research
Limited - 24,664 square feet, NBS GmbH - 1,400 square feet and New Brunswick
Scientific NV/SA - 825 square feet.
ITEM 3. LEGAL PROCEEDINGS
------------------
No material legal proceedings are currently pending.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
-----------------------------------------------------------
None.
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED SECURITY HOLDER
-------------------------------------------------------------------
MATTERS
-----
(A) The Company's Common stock is traded in the National
over-the-counter market (Nasdaq symbol NBSC). The following table sets forth
the high and low prices for the Company's Common stock as reported by Nasdaq for
the periods indicated. The prices represent quotations between dealers
reflecting prevailing market factors which may include anticipated markups or
markdowns and do not necessarily represent actual transactions.
HIGH LOW
------ -----
2000
First Quarter $16.82 $4.55
Second Quarter 7.84 4.94
Third Quarter 9.38 5.88
Fourth Quarter 8.25 3.38
2001
First Quarter $ 4.09 $3.13
Second Quarter 5.80 3.00
Third Quarter 4.95 3.80
Fourth Quarter 6.25 3.70
2002
First Quarter
(through February 8, 2002) $ 6.00 $5.35
(B) The number of holders, including beneficial owners, of NBS' Common stock
as of February 8, 2002, is 1,828.
(C) NBS paid 10% Common stock dividends on May 15, 2001 and 2000.
10
ITEM 6. SELECTED FINANCIAL DATA
-------------------------
The following table sets forth selected consolidated financial information
regarding the Company's financial position and operating results. This
information should be read in conjunction with Management's Discussion and
Analysis of Financial Condition and Results of Operations and the Consolidated
Financial Statements and Notes thereto which appear elsewhere herein.
Year Ended December 31,
-----------------------
2001 2000 1999 1998 1997
------- ----------- -------- -------- -------
(In thousands, except per share amounts)
Net sales
$60,294 $ 49,864 $54,866 $46,968 $46,059
Net income (loss) (a) 2,211 (3,927)(b) (1,148) (156) 1,012
Basic income (loss) per share (c) .33 (.59) (.18) (.02) .16
Diluted income (loss) per share (c) .33 (.59) (.18) (.02) .16
Total assets (d) 44,543 43,006 46,026 39,066 38,090
Long-term debt, net of current
installments (d) 6,751 694 7,347 239 247
(a) Includes charges of $260,000 in 2001 and $663,000 in 1999 related to non-recurring
severance costs.
(b) Includes a charge of $950,000 related to the write-off of investment in Organica,
Inc.
(c) Adjusted to reflect 10% stock dividend distributed on May 15, 2001.
(d) At year-end.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
-------------------------------------------------------------------
RESULTS OF OPERATIONS
-------------------
Statements included herein which are not historical facts are
forward-looking statements. Such forward-looking statements are made pursuant
to the safe harbor provision of the Private Securities Litigation Reform Act of
1995. The forward-looking statements involve a number of risks and
uncertainties, including but not limited to, changes in economic conditions,
demand for the Company's products, pricing pressures, intense competition in the
industries in which the Company operates, the need for the Company to keep pace
with technological developments and timely respond to changes in customer needs,
the Company's dependence on third party suppliers, the effect on foreign sales
of currency fluctuations, acceptance of new products, the labor relations of the
Company and its customers and other factors identified in the Company's
Securities and Exchange Commission filings.
11
Results of Operations
---------------------
2001 vs. 2000
- ---------------
For the year ended December 31, 2001, the Company had net income of
$2,211,000 or $.33 per diluted share on net sales of $60,294,000 compared with a
net loss of $3,927,000 or $.59 per diluted share on net sales of $49,864,000 for
the year ended December 31, 2000.
The 20.9% increase in net sales resulted from increases in both the U.S.
and export markets as well as from the Company's European subsidiary operations.
Sales of shakers, fermentation equipment and ultra-low temperature freezers
increased 8%, 50% and 68%, respectively, as sales in Europe rebounded from a
significant downturn which occurred in 2000 and from the strong demand for
laboratory research equipment in the United States. While only a small
percentage of the Company's sales are made directly to United States and foreign
government departments and agencies, its business is significantly affected by
government expenditures and grants for research to educational research
institutions and to industry
Gross profit for the year ended December 31, 2001 increased to $24,029,000 from
$20,154,000 for 2000. The 19.2% increase is due primarily to the 20.9% increase
in net sales as gross margin declined slightly to 39.9% in 2001 from 40.4% in
2000.
Sales of the Company's equipment to foreign companies, institutions and
governments may be affected by United States export control regulations. The
Company believes that after the September 11, 2001 terrorist attacks, these
regulations may be made more restrictive.
Selling general and administrative expenses increased modestly to $16,205,000
in 2001 from $15,607,000 in 2000. The 3.8% increase was due to normal annual
salary and other increases.
Research, development and engineering expenses decreased $672,000 or 19.6% due
primarily to a reduction in engineering expenses related to the fully
custom-engineered bioprocess equipment business for which the Company ceased
accepting orders effective June 29, 2001. Custom-engineered products had
represented a small niche business for the Company. The $260,000 of
non-recurring severance costs incurred in 2001 are in connection with the
Company's withdrawal from this business.
DGI research expenses declined to $1,312,000 in 2001 from $3,480,000 in 2000 as
a result of DGI having received an infusion of funds on June 14, 2001 from an
institutional investor, as described below and the fact that DGI's operations
were no longer consolidated with those of the Company after June 14, 2001, as
the Company's ownership interest was reduced to 47% and the investment is now
accounted for using the equity method.
Interest expense decreased to $561,000 in 2001 from $638,000 in 2000 due
primarily to lower interest rates.
12
Write-off of investment decreased from $950,000 in 2000 to zero in 2001 since
all of the costs which relate to the Company's investment in Organica, Inc. were
written-off in 2000.
As a result of carryforward losses related primarily to DGI, income tax expense
for 2001 represents tax provisions of the Company's European subsidiaries,
partially offset by a U.S. tax benefit. The primary reason for the Company's
effective tax rate of 5% for 2001 vs. the statutory tax rate of 34% was a
reduction in the valuation allowance allocated to income tax expense.
Equity in operations of DGI resulted in a charge of $527,000 in 2001 and relates
to the Company's 47% equity interest in DGI. The Company is not required to,
and will not record losses in the future from DGI's operations since it has no
further obligations to fund the DGI operations and the carrying value of its
investment had been reduced to zero at December 31, 2001.
The following table reconciles income before income taxes on an as reported
basis with proforma income before income taxes before the effects of DGI,
non-recurring severance costs in 2001 and write-off of investment in 2000 (in
thousands): Such proforma amounts are not intended to be a measurement in
accordance with generally accepted accounting principles.
Year Ended December 31,
-----------------------
2001 2000
------- ----------
Income (loss) before income tax expense
(benefit) and equity in operations of DGI
as reported $2,883 $ (3,975)
Add: DGI research and other expenses 1,312 3,480
Non-recurring severance costs 260 -
Write-off of investment - 950
Less: DGI revenues (400) (420)
------- ----------
Proforma $4,055 $ 35
======= ==========
During 2001, the U.S. dollar strengthened against the currencies of the European
countries where the Company has subsidiary operations. The effect of balance
sheet translation resulted in a currency translation adjustment of $825,000,
which is reflected as a component of accumulated other comprehensive loss in the
equity section of the Consolidated Balance Sheet.
2000 vs. 1999
- ---------------
For the year ended December 31, 2000, the Company incurred a net loss of
$3,927,000 or $.59 per diluted share on net sales of $49,864,000 compared with a
net loss of $1,148,000 or $.18 per diluted share on net sales of $54,866,000 for
the year ended December 31, 1999.
13
The 9.1% decrease in net sales in 2000 resulted primarily from a decrease in DGI
revenues of $1,365,000 from $1,785,000 in 1999 to $420,000 in 2000, a
significant downturn in shipments by the Company's European subsidiaries as a
result of the continued strength of the U.S. dollar against currencies in the
countries where the Company's European subsidiaries operate and what management
believes to be a short-term weakening in the European market. In addition, the
sale of a large custom bioprocess system in Europe in the amount of $800,000 was
included in 1999 sales with no comparable sale in 2000. No tax benefit was
recognized for the Company's U.S. operating losses which are primarily
attributable to losses incurred by the Company's majority-owned drug-lead
discovery operation, DGI BioTechnologies (DGI).
Gross margins increased to 40.4% in 2000 from 39.7% in 1999 inclusive of DGI
revenues against which there is no cost of sales (2000 - $420,000 and 1999 -
$1,785,000). Excluding DGI revenues from the 2000 and 1999 periods, gross
margins increased to 39.9% in 2000 from 37.7% in 1999, primarily as a result of
the Company's acquisition of DJM Cryo-Research in November 1999, which prior to
the acquisition was a supplier to the Company. In addition, in 2000 the Company
benefited from a more profitable mix of products sold than in 1999.
Selling, general and administrative expenses remained relatively flat at
$15,607,000 in 2000 and $15,506,000 in 1999. During 2000, the Company did not
incur any significant increases to its selling, general and administrative
expenses and made some reductions in order to offset normal inflationary
increases in salaries and other expenses.
Research, development and engineering expenses increased $727,000 or 11.8% to
$6,903,000 (DGI - $3,480,000) in 2000 from $6,176,000 (DGI - $3,198,000) in 1999
primarily as the result of an 8.8% increase in costs to support the research
efforts of DGI, the Company's drug-lead discovery operation whose expenses
increased to $3,480,000 in 2000 from $3,198,000 in 1999. Also contributing to
the increase were expenses of DJM (which was acquired in November 1999), and
consequently not included in the Company's results of operations for most of
1999 and additional costs incurred during 2000 to strengthen the Company's
engineering staff.
Non recurring severance costs decreased from $663,000 to zero as all such costs
were accrued at December 31, 1999.
Interest expense increased to $638,000 in 2000 compared with $127,000 for 1999
as a result of borrowings under the Company's bank agreement for the acquisition
of DJM in November 1999 and for working capital purposes.
The $950,000 write-off of the Company's investment in Organica, Inc. during 2000
is a result of a permanent impairment of its investment in Organica as described
in Item 1. Business, Investment in Organica, Inc. in the Company's Annual Report
on Form 10K for the year ended December 31, 2000, and in "Other Matters", below.
Other expense, net was $87,000 in 2000 and $53,000 in 1999 due primarily to the
disposal of fixed assets and the Company's equity loss in a joint venture
entered into in 1998.
14
During 2000, the U.S. dollar strengthened against the currencies of the European
countries where the Company has subsidiary operations. The effects of balance
sheet translation resulted in a currency translation adjustment of $827,000,
which is reflected as a component of accumulated other comprehensive loss in the
equity section of the Consolidated Balance Sheet.
Financial Condition
-------------------
Liquidity and Capital Resources
----------------------------------
Working capital increased to $24,389,000 at December 31, 2001 from
$15, 208,000 at December 31, 2000 and cash and cash equivalents increased to
$3,794,000 from $2,473,000 at December 31, 2000. Accounts receivable increased
to $12,811,000 at December 31, 2001 from $10,403,000 at December 31, 2000 due
primarily to an 18.6% increase in sales in the fourth quarter of 2001 compared
with the fourth quarter of 2000. Inventories decreased to $15,168,000 at
December 31, 2001 from $16,721,000 at December 31, 2000 primarily as a result of
a significant decrease in inventory related to fully custom- engineered
bioprocess systems for which the Company ceased accepting orders at the end of
June 2001. Current installments of long-term debt decreased to $266,000 at
December 31, 2001 from $7,598,000 at December 31, 2000 due to the
reclassification to non-current of the Company's bank debt. The Bank Agreement,
which was due to mature on May 31, 2002, was amended on March 15, 2002 to extend
its maturity date to May 31, 2005. Other liabilities increased to $2,094,000 at
December 31, 2001 from $572,000 at December 31, 2000 primarily as a result of a
significant increase in the minimum pension liability adjustment.
On April 16, 1999, the Company entered into an agreement (the Bank
Agreement) with First Union National Bank for a three year, $31 million secured
line of credit. The Bank Agreement provides the Company with a $5 million
revolving credit facility for both working capital and for letters of credit, a
$1 million Revolving Line of Credit for equipment acquisition purposes, a $15
million credit line for acquisitions and a $10 million foreign exchange
facility. There are no compensating balance requirements and any borrowings
under the Bank Agreement bear interest at various rates based upon a function of
the bank's prime rate or Libor at the discretion of the Company. All of the
Company's domestic assets, which are not otherwise subject to lien, have been
pledged as security for any borrowings under the Bank Agreement. The Bank
Agreement contains various business and financial covenants including among
other things, a debt service coverage ratio, a net worth covenant, and a ratio
of total liabilities to tangible net worth. The Company was not in compliance
with certain financial covenants at December 31, 2000 and March 31, 2001 which
non-compliance was waived by the bank. On May 10, 2001 and on November 13,
2001, the financial covenants were amended and, as a result, the Company is in
compliance with the amended covenants at December 31, 2001 and expects to be in
compliance for the ensuing twelve months. At December 31, 2001, $6,350,000 was
outstanding under the Bank Agreement related to working capital and acquisition
loans, $1,790,000 was being utilized for letters of credit and foreign exchange
transactions and the following amounts were available: $2,008,000 for working
capital and letters of credit, $1,000,000 for equipment acquisitions, $9,900,000
for acquisitions and $9,952,000 under the foreign exchange facility. On March
15
15, 2002, the Bank Agreement, which was due to mature on May 31, 2002 was
amended to extend its maturity date to May 31, 2005.
In November 1999, the Company issued notes in the amount of 250,000
($392,500 at the date of acquisition) in connection with the acquisition of the
DJM Cryo-Research Group. The notes bear interest at 6% which are payable
annually and principal is payable in five equal annual installments commencing
November 2004. At December 31, 2001 the balance due on the notes was $364,000.
The Company's contractual obligatons and commitments principally include
obligations associated with its outstanding indebtedness and future minimum
operating lease obligations as set forth in the following table:
Payments Due by Period
----------------------
(In thousands)
Contractual Obligations:
Within 1 1-2 3-4 After 4
Total Year Years Years Years
- ------------------------- ------- ------ -------- ------
Long-term debt, notes and
credit facility $ 7,017 $ 266 $ 588 $5,842 $ 321
Operating leases 4,147 610 964 765 1,808
------- ------ -------- ------ ------
Total contractual
cash obligations $11,164 $ 876 $ 1,552 $6,607 $2,129
======= ====== ======== ====== ======
Drug-Lead Discovery Business
------------------------------
In October 1995, the Company entered the drug-lead discovery business by forming
a new company to develop a novel, small molecule drug discovery platform. The
company, DGI BioTechnologies, Inc. (DGI), was majority-owned and fully funded by
the Company and occupies specially designed laboratory space at the Company's
headquarters facility in Edison, New Jersey. DGI's operations have had a
significant negative impact on the Company's 2001 and 2000 earnings. During the
year ended December 31, 2001 and 2000, $1,312,000 and $3,480,000, respectively,
of research and development expenses were charged to operations resulting in
operating losses related to DGI of $912,000 in 2001 and $3,061,000 in 2000. On
June 14, 2001 an institutional investor invested $5,000,000 in DGI in exchange
for Series B voting convertible preferred stock of DGI. The Series B
convertible preferred stock of DGI has certain dividend, liquidation and other
rights senior to the Series A preferred stock of DGI held by the Company. This
transaction reduced the Company's ownership interest in DGI to 47%.
Accordingly, effective June 14, 2001, as required by accounting principles
generally accepted in the United States of America, the Company no longer
exercises control and ceased consolidating the operations of DGI but reports its
percentage of income or loss in DGI's operations on the equity method of
accounting based upon its continued ability to exercise significant influence
over DGI. The Company is not required to, and has not recorded losses from its
share of DGI's operations beyond the carrying value of its investment since it
16
has no further obligations to fund the DGI operations. As of December 31, 2001,
the carrying value of the Company's investment in DGI had been reduced to zero.
The Company has entered into a two-year lease with DGI under which DGI
occupies 8,800 square feet of office and specifically designed laboratory space
at the Company's headquarters facility in Edison, New Jersey for a gross rental
of $211,200 per year. Under the terms of the lease, DGI has the right to cancel
upon providing the Company with 90 days notice. The lease was established at
arm's length utilizing market value information.
Cash Flows from Operating Activities
----------------------------------------
Net cash provided by operating activities was $3,180,000 in 2001 compared
with net cash used in operating activities of $753,000 in 2000. Net cash
provided by operating activities in 2001 was composed of net income of
$2,211,000 adjusted for depreciation and amortization and equity in operations
of DGI which are non-cash items aggregating $1,842,000 and net cash used for
changes in operating assets and liabilities of $873,0000 which are primarily
attributable to an increase in accounts receivable due to the high level of
shipments late in the year and a substantial reduction in other assets directly
related to the reduction in the valuation allowance against the deferred tax
asset due to the significant improvement in the Company's operating income,
offset by a decrease in inventories partly attributable to the Company's
decision to stop accepting orders for large fully custom-engineered bioprocess
equipment.
Net cash used in operating activities of $753,000 in 2000 resulted
primarily from the net loss of $3,927,000 adjusted for non-cash charges of
$1,501,000 for depreciation and amortization and $950,000 for the write-off of
an investment and net cash provided by changes in operating assets and
liabilities of $723,000 which are primarily attributable to a decrease in
accounts receivable due to a lower level of shipments in 2000 and an increase in
advance payments from customers offset by an increase in inventories and a
decrease in accounts payable and accrued expenses.
Cash Flows from Investing Activities
----------------------------------------
Net cash used in investing activities amounted to $700,000 in 2001 compared
with $832,000 in 2000. Both years included expenditures for property, plant and
equipment and 2000 included $352,000 of additional goodwill related to
acquisition costs of DJM Cryo-Research.
Cash Flows from Financing Activities
----------------------------------------
Net cash used in financing activities amounted to $1,101,000 in 2001
compared with net cash provided of $2,037,000 in 2000. Both years reflect the
scheduled repayment of long-term debt, proceeds under stock purchase and option
plans (2001 - $116,000; 2000 - $999,000), and proceeds from notes receivable
related to exercised stock options (2001 - $5,000; 2000 - $270,000). 2001 also
reflects a $1 million repayment under the Company's revolving credit facility.
17
Management believes that the resources available to the Company, including
current cash and cash equivalents, cash generated from operations and its line
of credit which matures May 31, 2005, will satisfy its expected working capital
needs and capital expenditures for the near and intermediate term.
Other Matters
-------------
Significant Accounting Policies
---------------------------------
Revenue Recognition
--------------------
Revenue is recognized when products are shipped. The Company's
products are tested by its quality control department prior to shipment. The
Company has no other obligation associated with its products once shipment has
occurred except for customary warranty provisions. Historically, returns have
been immaterial to the Company's consolidated financial statements and are
projected to remain at a consistent immaterial level in the future. The Company
reports all amounts billed to customers related to shipping and handling as
revenue and includes all costs incurred for shipping and handling as cost of
sales.
Recently Issued Accounting Standards
---------------------------------------
In July 2001, the FASB issued Statement No. 141, Business Combinations
("SFAS 141") and Statement No. 142, Goodwill and Other Intangible Assets ("SFAS
142"). SFAS 141 requires that the purchase method of accounting be used for all
business combinations completed after June 30, 2001. SFAS 141 also specifies
the criteria that intangible assets acquired in a purchase method business
combination must meet to be recognized and reported apart from goodwill. SFAS
142 requires that goodwill and intangible assets with indefinite useful lives no
longer be amortized, but instead they will be tested for impairment at least
annually in accordance with the provisions of SFAS 142. SFAS 142 also requires
that intangible assets with definite useful lives be amortized over their
respective estimated useful lives to their 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 SFAS 141 for
acquisitions initiated after June 30, 2001, and SFAS 142 effective January 1,
2002. Goodwill and intangible assets acquired in business combinations
completed before July 1, 2001 have been amortized through December 31, 2001.
SFAS 142 requires that the Company perform an assessment of whether there is an
indication that goodwill is impaired based on the provisions of SFAS 142. To
the extent an indication exists that the goodwill may be impaired, the Company
must measure the impairment loss, if any. The Company has completed its
assessment and has determined that there is no impairment to its goodwill
balance of $4,256,000 as of December 31, 2001. Amortization expense related to
goodwill was $182,000 and $195,000 for the years ended December 31, 2001 and
2000, respectively. After December 31, 2001, the Company will no longer be
18
amortizing goodwill. The Company has adopted the provisions of SFAS 142
effective January 1, 2002 and the results of the adoption have had no effect on
its consolidated financial statements.
Impact of Terrorist Activities and Responses
-------------------------------------------------
The Company cannot assess at this time whether the terrorist attacks on
September 11, 2001 and subsequent terrorist activities or the response of the
United States and foreign governments to those attacks and activities will have
any specific impact on the Company. The Company notes that its equipment is
used by pharmaceutical and biotechnology companies in the development of
vaccines and antibiotics. Sales of the Company's equipment to foreign companies,
institutions and governments may be affected by United States export control
regulations. The Company believes that after the September 11, 2001 terrorist
attacks, these regulations may be made more restrictive.
Investment in Organica, Inc.
- -------------------------------
Beginning in November 1994, the Company invested $950,000 (less than a
twenty-percent voting interest) in Organica, Inc. (Organica) which was formed in
1993 to develop and commercialize various "environmentally friendly" products
produced via fermentation processes. As previously described in the Company's
prior year Annual Report on Form 10-K, there had been continuing uncertainties
as to the future direction of Organica, Inc. as it continued to generate losses.
The Company concluded that a portion of its investment in Organica, Inc. had
become permanently impaired and recorded an $800,000 writedown in the second
quarter of 2000 to reduce its investment balance to $150,000, the then estimated
recoverable amount. Subsequently, the two members of the Organica Board of
Directors appointed by the Company resigned. On October 30, 2000 Organica filed
in the United States Bankruptcy Court for the District of Delaware, a voluntary
petition for reorganization under Chapter 11 of the Bankruptcy Code. Based on
the information available at that time, the Company determined that the
investment was not recoverable and, accordingly, wrote off the remaining
$150,000 investment in the third quarter of 2000.
Quantitative and Qualitative Disclosures About Market Risk
----------------------------------------------------------------
In the normal course of business, the Company is exposed to fluctuations in
interest rates as it seeks debt financing to make capital expenditures,
potential acquisitions, and invest in cash equivalents and marketable debt
securities. Cash equivalents and other marketable investments are carried at
fair value on the consolidated balance sheets. At times, management employs
specific strategies, such as the use of derivative instruments or hedging to
manage foreign currency or other exposures. Further, the Company does not
expect its market risk exposures to change in the near term.
19
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-----------------------------------------------
NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Independent Auditors' Report
Consolidated Balance Sheets as of December 31, 2001 and 2000
Consolidated Statements of Operations for the years ended December 31, 2001,
2000 and 1999
Consolidated Statements of Shareholders' Equity for the years ended December 31,
2001, 2000 and 1999
Consolidated Statements of Cash Flows for the years ended December 31, 2001,
2000 and 1999
Consolidated Statements of Comprehensive Income (Loss) for the years ended
December 31, 2001, 2000 and 1999
Notes to Consolidated Financial Statements
Schedule II - Valuation and Qualifying Accounts
20
Independent Auditors' Report
The Board of Directors and Shareholders
New Brunswick Scientific Co., Inc.:
We have audited the consolidated financial statements of New Brunswick
Scientific Co., Inc. and subsidiaries as listed in the accompanying index. In
connection with our audits of the consolidated financial statements, we also
have audited the financial statement schedule as listed in the accompanying
index. These consolidated financial statements and financial statement schedule
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements and financial
statement schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of New Brunswick
Scientific Co., Inc. and subsidiaries as of December 31, 2001 and 2000, and the
results of their operations and their cash flows for each of the years in the
three year period ended December 31, 2001 in conformity with accounting
principles generally accepted in the United States of America. Also in our
opinion, the related financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
/s/ KPMG LLP
KPMG LLP
Short Hills, New Jersey
February 11, 2002, except for
the third paragraph of Note 6,
which is as of March 15, 2002
21
NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2001 AND 2000
(In thousands, except share and per share amounts)
2001 2000
--------- --------
ASSETS
Current assets:
Cash and cash equivalents $ 3,794 $ 2,473
Accounts receivable, net of allowance for doubtful accounts,
2001 - $466 and 2000 - $354 12,811 10,403
Inventories 15,168 16,721
Deferred income taxes 1,162 225
Prepaid expenses and other current assets 856 1,184
--------- --------
Total current assets 33,791 31,006
--------- --------
Property, plant and equipment, net 4,868 5,936
Excess of cost over net assets acquired less accumulated
amortization of $386 in 2001 and $208 in 2000 4,256 4,552
Other assets 1,628 1,512
--------- --------
$ 44,543 $43,006
========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $ 266 $ 7,598
Accounts payable and accrued expenses 9,136 8,200
--------- --------
Total current liabilities 9,402 15,798
--------- --------
Long-term debt, net of current installments 6,751 694
Other liabilities 2,094 572
Commitments and contingencies
Shareholders' equity:
Common stock, $0.0625 par; authorized 25,000,000 shares;
issued and outstanding: 2001 - 6,761,892 shares;
2000 - 6,115,557 shares 423 383
Capital in excess of par 40,124 36,963
Accumulated deficit (10,014) (9,140)
Accumulated other comprehensive loss (4,180) (2,202)
Notes receivable from exercise of stock options (57) (62)
--------- --------
Total shareholders' equity 26,296 25,942
--------- --------
$ 44,543 $43,006
========= ========
See notes to consolidated financial statements.
22
NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
DECEMBER 31, 2001, 2000 AND 1999
(In thousands, except share and per share amounts)
2001 2000 1999
----------- ---------- ----------
Net sales $ 60,294 $ 49,864 $ 54,866
Operating costs and expenses:
Cost of sales 36,265 29,710 33,089
Selling, general and administrative
expenses 16,205 15,607 15,506
Research, development and engineering
expenses 2,751 3,423 2,978
DGI research expenses 1,312 3,480 3,198
Non-recurring severance costs 260 - 663
----------- ---------- ----------
Total operating costs and expenses 56,793 52,220 55,434
----------- ---------- ----------
Income (loss) from operations 3,501 (2,356) (568)
----------- ---------- ----------
Other income (expense):
Interest income 56 56 45
Interest expense (561) (638) (127)
Other expense, net (113) (87) (53)
Write-off of investment - (950) -
----------- ---------- ----------
(618) (1,619) (135)
----------- ---------- ----------
Income (loss) before income tax expense
(benefit) and equity in operations of DGI 2,883 (3,975) (703)
Income tax expense (benefit) 145 (48) 445
----------- ---------- ----------
Income (loss) before equity in operations
of DGI 2,738 (3,927) (1,148)
Equity in operations of DGI (527) - -
----------- ---------- ----------
Net income (loss) $ 2,211 $ (3,927) $ (1,148)
=========== ========== ==========
Basic income (loss) per share $ .33 $ (.59) $ (.18)
=========== ========== ==========
Diluted income (loss) per share $ .33 $ (.59) $ (.18)
=========== ========== ==========
Basic weighted average number of shares
outstanding 6,738 6,640 6,421
=========== ========== ==========
Diluted weighted average number of shares
outstanding 6,772 6,640 6,421
=========== ========== ==========
See notes to consolidated financial statements.
23
NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(Dollars in thousands, except share amounts)
Notes
Receivable
Accumulated From
Capital Other Exercise
Common Stock in Excess Accumulated ComprehensiveOf Stock
-------------
Shares Amount Of Par Deficit Loss Options Total
------------- ----------- ------------ --------------- ---------- --------- -------
Balance, January 1, 1999 4,770,444 $ 298 $ 28,361 $ 3,137 $ (985) $ (364) $30,447
Issue of shares under employee
Stock purchase plan 21,790 2 106 108
Issue of shares under stock
option plans 69,895 4 346 350
Tax benefits related to exercise
of stock options 28 28
Payment on notes receivable from
exercise of stock options 32 32
10% stock dividend 481,871 30 4,066 (4,096) -
Net loss (1,148) (1,148)
Other comprehensive loss
adjustment (47) (47)
Balance, December 31, 1999 5,344,000 $ 334 $ 32,907 $ (2,107) $ (1,032) $ (332) $29,770
Issue of shares under employee
stock purchase plan 27,545 2 117 119
Issue of shares under stock
option plans 194,823 13 867 880
Payment on notes receivable from
exercise of stock options 270 270
10% stock dividend 549,189 34 3,072 (3,106) -
Net loss (3,927) (3,927)
Other comprehensive loss
adjustment (1,170) (1,170)
------------- -----------
Balance, December 31, 2000 6,115,557 $ 383 $ 36,963 $ (9,140) $ (2,202) $ (62) $25,942
Issue of shares under employee
stock purchase plan 34,939 2 114 116
Payment on notes receivable from
exercise of stock options 5 5
10% stock dividend 611,396 38 3,047 (3,085) -
Net income 2,211 2,211
Other comprehensive loss
Adjustment (1,978) (1,978)
------------- -----------
$
================================
Balance, December 31, 2001 6,761,892 $ 423 $ 40,124 $ (10,014) $ (4,180) $ (57) $26,296
============= =========== ============ =============== ========== ========= =======
See notes to consolidated financial statements.
24
NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(in thousands)
2001 2000 1999
--------- --------- --------
Cash flows from operating activities:
Net income (loss) $ 2,211 $ (3,927) $(1,148)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization 1,315 1,501 1,111
Equity in operations of DGI 527 - -
Write-off of investment - 950 -
Change in related balance sheet accounts,
Excluding effect of acquisition:
Accounts receivable (2,632) 2,985 (3,242)
Inventories 1,326 (1,868) 1,101
Prepaid expenses and other current assets (622) (324) 321
Other assets (274) (85) (178)
Accounts payable and accrued expenses 1,370 (1,292) 506
Advance payments from customers (336) 1,611 (956)
Other liabilities 295 (304) 380
--------- --------- --------
Net cash provided by (used in) operating activities 3,180 (753) (2,105)
--------- --------- --------
Cash flows from investing activities:
Additions to property, plant and equipment (577) (351) (1,435)
Sale of equipment 18 3 129
Acquisition of DJM Cryo-Research Group,
net of cash acquired - (352) (5,476)
Increase in insurance cash surrender value (141) (132) (120)
--------- --------- --------
Net cash used in investing activities (700) (832) (6,902)
--------- --------- --------
Cash flows from financing activities:
Proceeds from mortgage - - 215
Borrowings under long-term credit facility - 1,000 6,745
Repayments of long-term debt (1,222) (232) (23)
Proceeds from issue of shares under stock
purchase and option plans 116 999 486
Proceeds from notes receivable related to exercised
stock options 5 270 32
--------- --------- --------
Net cash provided by (used in) financing activities (1,101) 2,037 7,455
--------- --------- --------
Net effect of exchange rate changes on cash (58) (90) (130)
--------- --------- --------
Net increase (decrease) in cash and cash equivalents 1,321 362 (1,682)
Cash and cash equivalents at beginning of year 2,473 2,111 3,793
--------- --------- --------
Cash and cash equivalents at end of year $ 3,794 $ 2,473 $ 2,111
========= ========= ========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 551 $ 647 $ 85
Income taxes 155 621 145
Supplemental disclosure of non cash financing
Activities:
Non-cash contribution of equipment to DGI $ 429 $ - $ -
Notes payable related to DJM Cryo-Research
Acquisition - - 404
See notes to consolidated financial statements.
25
NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(In thousands)
2001 2000 1999
--------- -------- --------
Net income (loss) $ 2,211 $(3,927) $(1,148)
Other comprehensive income (loss):
Foreign currency translation adjustment (825) (827) (539)
Minimum pension liability adjustment (1,153) (343) 492
--------- -------- --------
Net comprehensive income (loss) $ 233 $(5,097) $(1,195)
========= ======== ========
See notes to consolidated financial statements.
26
NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(In thousands)
1. Summary of significant accounting policies:
Principles of consolidation:
The consolidated financial statements include the accounts of New Brunswick
Scientific Co., Inc., and its wholly-owned subsidiaries (the Company). All
significant intercompany transactions and balances have been eliminated.
Translation of foreign currencies:
Translation adjustments for the Company's foreign operations are included
as a component of accumulated other comprehensive loss in shareholders' equity.
Transaction gains and losses, which are not significant in amount, are included
in the consolidated statements of operations as part of "Other income
(expense), net".
Cash and cash equivalents:
The Company considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents in the consolidated
statements of cash flows.
Inventories:
Inventories are stated at the lower of cost (first in, first out or
average) or market. Cost elements include material, labor and manufacturing
overhead.
Property, plant and equipment:
Property, plant and equipment are stated at cost. The cost of repairs,
maintenance and replacements which do not significantly improve or extend the
life of the respective assets are charged to expense as incurred.
Depreciation is provided by the straight-line method over the estimated
useful lives of the related assets, generally 33-1/3 years for buildings and 10
years for machinery and equipment.
Goodwill:
All goodwill on the Company's consolidated balance sheets at December 31, 2001
and 2000 was acquired in connection with the acquisition of DJM Cryo-Research
Group as described in Note 4, represents the excess of purchase price over fair
value of net assets acquired and is amortized on a straight-line basis over the
expected periods to be benefited, generally 25 years. The Company assesses the
recoverability of this intangible asset by determining whether the amortization
of the goodwill balance over its remaining life can be recovered through
undiscounted future operating cash flows of the acquired operation. The amount
27
of goodwill impairment, if any, is measured based on projected discounted future
operating cash flows using a discount rate reflecting the Company's average cost
of funds. The assessment of the recoverability of goodwill will be impacted if
estimated future operating cash flows are not achieved.
In July 2001, the FASB issued Statement No. 141, Business Combinations ("SFAS
141") and Statement No. 142, Goodwill and Other Intangible Assets ("SFAS 142").
SFAS 141 requires that the purchase method of accounting be used for all
business combinations completed after June 30, 2001. SFAS 141 also specifies
the criteria that intangible assets acquired in a purchase method business
combination must meet to be recognized and reported apart from goodwill. SFAS
142 requires that goodwill and intangible assets with indefinite useful lives no
longer be amortized, but instead they will be tested for impairment at least
annually in accordance with the provisions of SFAS 142. SFAS 142 also requires
that intangible assets with definite useful lives be amortized over their
respective estimated useful lives to their 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 SFAS 141 for acquisitions
initiated after June 30, 2001, and SFAS 142 effective January 1, 2002. Goodwill
and intangible assets acquired in business combinations completed before July 1,
2001 have been amortized through December 31, 2001. SFAS 142 requires that the
Company perform an assessment of whether there is an indication that goodwill is
impaired based on the provisions of SFAS 142. To the extent an indication
exists that the goodwill may be impaired, the Company must measure the
impairment loss, if any. The Company has completed its assessment and has
determined that there is no impairment to its goodwill balance of $4,256,000 as
of December 31, 2001. Amortization expense related to goodwill was $182,000 and
$195,000 for the years ended December 31, 2001 and 2000, respectively. After
December 31, 2001, as part of the adoption of SFAS142 the Company will no longer
be amortizing goodwill.
Research and development:
Research and development costs are expensed as incurred.
Income taxes:
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
28
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
No provision has been made for federal income or withholding taxes which
may be payable on the remittance of the undistributed retained earnings of
foreign subsidiaries. These earnings have been reinvested to meet future
operating requirements and the Company intends to continue such policy for the
foreseeable future.
Income per share:
Basic income (loss) per share is calculated by dividing net income (loss)
by the weighted average number of shares outstanding. Diluted income (loss) per
share is calculated by dividing net income (loss) by the sum of the weighted
average number of shares outstanding plus the dilutive effect of stock options
which have been issued by the Company. The dilutive effect of stock options was
34,331 shares for the year ended December 31, 2001 and zero for the years ended
December 31, 2000 and 1999. The number of stock options that are antidilutive
are 306,350, 147,620 and 99,824 for the years ended December 31, 2001, 2000 and
1999, respectively. A 10% stock dividend was distributed on May 15, 2001, The
weighted average number of shares outstanding used in the computation of basic
and diluted income (loss) per share for prior periods have been restated to
reflect this dividend.
Stock option plans:
The Company accounts for its stock option plans in accordance with the
provisions of Accounting Principles Board (APB) Opinion No. 25, "Accounting for
Stock Issued to Employees", and related interpretations. As such, compensation
expense is recorded on the date of grant only if the current market price of the
underlying stock exceeds the exercise price. The Company has adopted the
disclosure standards of Statement of Financial Accounting Standards (SFAS) No.
123, "Accounting for Stock-Based Compensation", which requires the Company to
provide pro forma net income and pro forma earnings per share disclosures for
employee stock option grants made in 1995 and future years as if the
fair-value-based method of accounting for stock options as defined in SFAS No.
123 had been applied.
Financial instruments:
The carrying values of the Company's financial instruments, principally
cash and cash equivalents, accounts receivable and accounts payable, accrued
expenses, and long-term debt, at December 31, 2001 approximate their estimated
fair values. Fair values were determined through a combination of management
estimates and information obtained from independent third parties using the
latest available market data.
29
Use of estimates:
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and revenue and expenses,
such as the valuation of accounts receivable and inventories, and the disclosure
of contingent assets and liabilities to prepare the consolidated financial
statements in conformity with accounting principles generally accepted in the
United States of America. Actual results could differ from those estimates.
Impairment of long-lived assets and long-lived assets to be disposed of:
The Company accounts for long-lived assets in accordance with the provisions of
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of". This Statement requires that long-lived
assets and certain identifiable intangibles be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to future net cash
flows expected to be generated by the asset. If such assets are considered to
be impaired, the impairment to be recognized is measured by the amount by which
the carrying amount of the assets exceeds the fair value of the assets. Assets
to be disposed of are reported at the lower of the carrying amount or fair value
less costs to sell.
Comprehensive income:
On January 1, 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive
Income". SFAS No. 130 establishes standards for reporting and presentation of
comprehensive income (loss) and its components in a full set of financial
statements. Comprehensive loss consists of net income (loss), foreign currency
translation adjustment, and minimum pension liability adjustment and is
presented in the consolidated statements of comprehensive loss. The Statement
requires only additional disclosures in the consolidated financial statements;
it does not affect the Company's financial position or results of operations.
Segment information:
As of December 31, 1998, the Company adopted the provisions of SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information". This
Statement requires the Company to disclose financial information on the basis
that is used internally for evaluating segment performance and deciding how to
allocate resources to segments. It also establishes standards for related
disclosures about products and services, geographic areas and major customers.
Effective June 14, 2001, as a result of the Company's reduction in ownership in
DGI to 47%, the Company ceased consolidating the operations of DGI and,
30
accordingly, has only one segment. 2001 segment information for the Drug Lead
Discovery segment represents the operations of DGI from January 1 to June 14,
2001.
Revenue Recognition:
Revenue is recognized when products are shipped. The Company's products are
tested by its quality control department prior to shipment. The Company has no
other obligation associated with its products once shipment has occurred except
for customary warranty provisions. Historically, returns have been immaterial
to the Company's consolidated financial statements and are projected to remain
at a consistent immaterial level in the future. The Company reports all amounts
billed to customers related to shipping and handling as revenue and includes all
costs incurred for shipping and handling as cost of sales.
Derivative instruments and hedging activities:
In June 1998 the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Certain Hedging Activities." In June 2000 the FASB issued SFAS
No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging
Activity, an Amendment of SFAS 133." SFAS No. 133 and SFAS No. 138 require that
all derivative instruments be recorded on the balance sheet at their respective
fair values. SFAS No. 133 and SFAS No. 138 are effective for all fiscal
quarters of all fiscal years beginning after June 30, 2000. The Company adopted
SFAS No. 133 and SFAS No. 138 on January 1, 2001. The adoption did not have an
effect on the Company's consolidated financial statements.
From time to time, the Company has entered into forward foreign exchange
contracts to hedge certain firm and anticipated sales commitments, net of
offsetting purchases, denominated in certain foreign currencies. The purpose of
such foreign currency hedging activities is to protect the Company from the risk
that the eventual cash flows resulting from the sale of products to certain
foreign customers (net of purchases from applicable foreign suppliers) will be
adversely affected by fluctuations in exchange rates. At December 31, 2001 and
2000, the Company did not have any derivative instruments.
Reclassifications:
Certain amounts in the 2000 and 1999 consolidated financial statements have been
reclassified to conform to the 2001 financial statement presentation.
31
2. Inventories at December 31 consist of:
2001 2000
------- -------
(In thousands)
Raw materials and sub-assemblies $ 6,704 $ 6,325
Work-in-process 2,647 4,344
Finished goods 5,817 6,052
------- -------
$15,168 $16,721
======= =======
3. Property, plant and equipment at December 31 consists of:
2001 2000
-------- --------
(In thousands)
Land $ 800 $ 800
Buildings and improvements 4,294 4,339
Machinery and equipment 12,753 13,283
-------- --------
17,847 18,422
Less accumulated depreciation 12,979 12,486
-------- --------
$ 4,868 $ 5,936
======== ========
4. Acquisitions and dispositions:
On November 23, 1999, the Company acquired all of the outstanding common stock
of DJM Cryo-Research Limited and the net assets of DJM Fabrications
(collectively, "DJM Cryo-Research Group"), a United Kingdom Corporation and
Partnership under common control, respectively, located in Tollesbury, England
(the Acquisition). The purchase price consisted of 3.5 million ($5.5 million)
in cash, and 250,000 ($392,500 at the date of acquisition) in term notes
payable in annual installments over a five-year period beginning in November
2004 with 6% interest payable annually. The source of the cash consideration
paid was the Company's line of credit for acquisition purposes provided by First
Union National Bank, payable in monthly installments of $52,513 with 8.07% fixed
interest. DJM Cryo-Research Group is in the business of designing, developing
and manufacturing ultra-low temperature freezers for laboratories. The
acquisition has been accounted for by the purchase method and, accordingly, the
results of operations of DJM Cryo-Research Group have been included in the
Company's consolidated financial statements from November 23, 1999. The excess
of the purchase price over the fair value of net identifiable tangible assets
acquired (which was finalized in 2000 upon completion of the appraisal) of
$4,760,000 has been recorded as goodwill and is being amortized on a
straight-line basis over 25 years. There were no intangible assets acquired.
32
The acquisition of DJM Cryo-Research Group consisted of the following (in
thousands):
The acquisition of DJM Cryo-Research Group consisted of the following (in
thousands):
Net cash paid $ 5,476
Liabilities assumed 1,576
Fair value of tangible assets acquired (2,292)
---------
Goodwill $ 4,760
=========
The following unaudited pro forma financial information presents the combined
results of operations of the Company and DJM Cryo-Research Group for the year
ended December 31, 1999, as if the acquisition had occurred as of the beginning
of 1999, after giving effect to certain adjustments, including amortization of
goodwill, additional depreciation expense, increased interest expense on debt
related to the acquisition and related income tax effects. The pro forma
financial information does not necessarily reflect the results of operations
that would have occurred had the Company and DJM Cryo-Research Group constituted
a single entity during such period: (In thousands, except per share amounts)
(unaudited)
Net sales $55,002
Net loss (1,375)
Net loss per share $ (.24)
In October 1995, the Company entered the drug-lead discovery business
by forming a new company to develop a novel, small molecule drug discovery
platform. The company, DGI BioTechnologies, Inc. (DGI), was majority-owned and
fully funded by the Company until June 14, 2001 at which time an institutional
investor invested $5,000,000 in DGI in exchange for Series B voting convertible
preferred stock of DGI. The Series B convertible preferred stock of DGI has
certain dividend, liquidation and other rights senior to the Series A preferred
stock of DGI held by the Company. This transaction reduced the Company's
ownership interest in DGI to 47%. Accordingly, effective June 14, 2001, as
required by accounting principles generally accepted in the United States of
America, the Company no longer exercises control and ceased consolidating the
operations of DGI but reports its percentage of income or loss in DGI's
operations on the equity method of accounting based upon its continued ability
to exercise significant influence over DGI. The Company is not required to, and
has not recorded losses from its share of DGI's operations beyond the carrying
value of its investment since it has no further obligations to fund the DGI
operations. As of December 31, 2001, the Company's investment in DGI had been
reduced to zero.
On June 29, 2001, the Company announced that it had ceased
accepting orders for large fully custom-engineered bioprocess equipment which
represented a small niche business for the Company. Net sales of custom
33
engineered products for the year ended December 31, 2001 amounted to slightly
more than $5 million, primarily from orders received in 2000In connection
therewith, the Company recorded a $260,000 charge for severance costs in 2001.
The Company continues to market its broad-based fermentor and bioreactor
products as well as to offer special modifications to such equipment
5. Other assets:
Beginning in November 1994, the Company invested $950,000 (less than a
twenty-percent voting interest) in Organica, Inc. (Organica) which was formed in
1993 to develop and commercialize various "environmentally friendly" products
produced via fermentation processes. As previously described in the Company's
prior year Annual Report on Form 10-K, there had been continuing uncertainties
as to the future direction of Organica, Inc. as it continued to generate losses.
The Company concluded that a portion of its investment in Organica, Inc. had
become permanently impaired and recorded an $800,000 writedown in the second
quarter of 2000 to reduce its investment balance to $150,000, the then estimated
recoverable amount. Subsequently, the two members of the Organica Board of
Directors appointed by the Company resigned. On October 30, 2000 Organica filed
in the United States Bankruptcy Court for the District of Delaware, a voluntary
petition for reorganization under Chapter 11 of the Bankruptcy Code. Based on
the information available at that time, the Company determined that its
investment was not recoverable and, accordingly, wrote off the remaining
$150,000 investment in the third quarter of 2000.
6. Long-term debt and credit agreement:
The Company is a party to first and second mortgages on the facility of the
Company's Netherlands subsidiary, which bear interest of 5.50% and 5.65%,
respectively, per annum. During the terms of the mortgages, the Company is
obligated to make monthly payments of interest and quarterly payments of
principal. At December 31, 2001, $141,000 and $162,000, was outstanding under
the first and second mortgages, respectively, and at December 31, 2000, $171,000
and $193,000, was outstanding under the first and second mortgages,
respectively. Each mortgage requires 80 equal quarterly payments of principal.
On April 16, 1999, the Company entered into an agreement (the Bank
Agreement) with First Union National Bank for a three year, $31 million secured
line of credit. The Bank Agreement provides the Company with a $5 million
revolving credit facility for both working capital and for letters of credit, a
$1 million Revolving Line of Credit for equipment acquisition purposes, a $15
million credit line for acquisitions and a $10 million foreign exchange
facility. There are no compensating balance requirements and any borrowings
under the Bank Agreement bear interest at various rates based upon a function of
the bank's prime rate or Libor at the discretion of the Company. All of the
Company's domestic assets, which are not otherwise subject to lien, have been
pledged as security for any borrowings under the Bank Agreement. The Bank
Agreement contains various business and financial covenants including among
other things, a debt service coverage ratio, a net worth covenant, and a ratio
34
of total liabilities to tangible net worth. The Company was not in compliance
with certain financial covenants at December 31, 2000 and March 31, 2001 which
non-compliance was waived by the bank. On May 10, 2001 and on November 13,
2001, the financial covenants were amended, and, as a result, the Company is in
compliance with the amended covenants at December 31, 2001 and expects to be in
compliance for the ensuing twelve months. At December 31, 2001, $6,350,000 was
outstanding under the Bank Agreement related to working capital and acquisition
loans, $1,790,000 was being utilized for letters of credit and foreign exchange
transactions and the following amounts were available: $2,008,000 for working
capital and letters of credit, $1,000,000 for equipment acquisitions, $9,900,000
for acquisitions and $9,952,000 under the foreign exchange facility. On March
15, 2002, the Bank Agreement which was due to mature on May 31, 2002 was amended
to extend its maturity date to May 31, 2005. However, $3,795,618 outstanding
under the acquisition line matures on December 1, 2006.
In November 1999, the Company issued notes in the amount of 250,000 ($392,500
at the date of acquisition) in connection with the acquisition of DJM
Cryo-Research Group. The notes bear interest at 6% which are payable annually
and principal is payable in five equal annual installments commencing November
2004. At December 31, 2001 the balance of the notes was $364,000.
Aggregate annual maturities of long-term debt are as follows:
Year ending December 31 Amount
- --------------------------------------- ---------------
(In thousands)
2002 $ 266
2003 285
2004 303
2005 1,650
2006 4,192
After 2006 321
---------------
7,017
==============
7. Accounts payable and accrued expenses at December 31, consists of:
2001 2000
------ ------
(In thousands)
Accounts payable-trade $2,875 $3,109
Accrued salaries, wages and payroll taxes 2,501 1,842
Accrued foreign dealer commissions 431 367
Advance payments from customers 1,715 2,057
Accrued income taxes 624 128
Other accrued liabilities 990 697
------ ------
$9,136 $8,200
====== ======
35
8. Income taxes:
Years Ended December 31
------------------------------
2001 2000 1999
------- ---------- ----------
(In thousands)
Income (loss) before income tax
expense (benefit) and equity in
operations of DGI in 2001:
Domestic $1,975 $ (2,690) $ (2,149)
Foreign 908 (1,285) 1,446
------- ---------- ----------
$2,883 $ (3,975) $ (703)
======= ========== ==========
Income tax expense (benefit) consists of:
Federal:
Current $ 611 $ - $ -
Deferred (962) - -
State-current 71 - -
Foreign-current 425 (48) 445
------- ---------- ----------
$ 145 $ (48) $ 445
======= ========== ==========
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and liabilities at December 31, 2001 and 2000 are as
follows:
2001 2000
------ -------
(In thousands)
Deferred tax assets:
Inventories $ 755 $ 290
Allowance for doubtful accounts 100 122
Accrued expenses 585 702
Alternative minimum tax credit carryforward 67 67
Domestic net operating loss carryforward - 1,911
Domestic capital loss and contribution carryforwards 360 15
------ -------
Gross deferred tax assets 1,867 3,107
Less: valuation allowance 360 2,477
------ -------
1,507 630
------ -------
Deferred tax liabilities:
Accumulated depreciation 218 255
Other liabilities 89 137
------ -------
Deferred tax liabilities 307 392
------ -------
Net deferred tax asset $1,200 $ 238
====== =======
36
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. The Company has capital
loss carryforwards at December 31, 2001 of $919,000 which expire in 2006. The
Company also has alternative minimum tax credit carryforwards of $67,000 at
December 31, 2001 and 2000, respectively, with no expiration. Based upon the
projections for future taxable income over the periods which the deferred tax
assets are deductible, management believes it is more likely than not the
Company will realize the benefits of these deductible differences, net of the
existing valuation allowances at December 31, 2001. The amount of the deferred
tax asset considered realizable, however, could be reduced in the near term if
estimates of future taxable income are reduced, however, with the elimination of
the operating losses previously associated with DGI, the Company expects taxable
income to increase, leading to the utilization of these tax benefits in the
future. The net change in the total valuation allowance for the year ended
December 31, 2001 and 2000 was a decrease of $2,117,000 and an increase of
$1,264,000, respectively.
The Company's effective income tax rates for 2001, 2000 and 1999 differed
from the U.S. statutory Federal income tax rate of 34% as follows:
Percentage of income (loss) before taxes
-----------------------------------------
2001 2000 1999
----------------------------------------- ------- -------
Computed "expected" tax expense
(benefit) 34.0% (34.0)% (34.0)%
Increase (decrease) in taxes resulting
From:
State taxes, net of federal benefit 1.6 - -
Rate differential between U.S. and
foreign income taxes 6.7 - (6.6)
Change in valuation allowance
allocated to income tax expense (37.8) 31.8 98.1
Benefit due to foreign loss
carryback - (1.2) -
Other .5 2.2 5.8
----------------------------------------- ------- -------
Actual tax expense (benefit) 5.0% (1.2)% 63.3%
========================================= ======= =======
37
9. Pension plans and other liabilities:
The Company has a noncontributory defined benefit pension plan covering
qualified U.S. salaried employees, including officers. Additionally, the
Company made contributions to a union sponsored multi-employer defined benefit
plan, in the amount of $131,000, $133,000 and $131,000 in 2001, 2000 and 1999,
respectively.
The following table sets forth the U.S. defined benefit plan's benefit
obligation, fair value of plan assets and funded status at December 31, 2001 and
2000:
2001 2000
------- -------
(In thousands)
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year $6,216 $5,912
Actuarial loss (gain) 563 (49)
Service cost 227 269
Interest cost 443 420
Benefits paid (354) (336)
---------------------------------- -------
Benefit obligation at end of year $7,095 $6,216
======= =======
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year $5,452 $6,044
Actual return on plan assets (453) (331)
Employer contribution 465 75
Benefits paid (354) (336)
------- -------
Fair value of plan assets at end of year $5,110 $5,452
======= =======
MISCELLANEOUS ITEMS AT END OF YEAR
Funded status $(1,985) $ (764)
Unrecognized net transition obligation 92 111
Unrecognized prior service cost ( 19) (23)
Unrecognized net loss 2,375 913
------- -------
(Accrued) prepaid pension $ 463 $ 237
======= =======
AMOUNTS RECOGNIZED IN FINANCIAL STATEMENTS
Accrued benefit cost $(1,569) $ (431)
Intangible asset 73 88
-------- -------
Accumulated other comprehensive loss (1,496) (343)
Unfunded pension liability 1,959 580
-------- -------
(Accrued) prepaid pension $ 463 $ 237
======== =======
2001 2000 1999
---------------------------------- ------- ------
COMPONENTS OF NET PERIODIC BENEFIT COST (In thousands except percentages)
Service cost $ 227 $ 269 $ 228
Interest cost 443 420 402
Expected return on plan assets (474) (503) (426)
Transition obligation 19 19 19
Amortization of prior service cost (4) (4) (4)
Recognized net actuarial loss 28 - 30
------- ------- ------
Net periodic benefit cost $ 239 $ 201 $ 249
======= ======= ======
WEIGHTED-AVERAGE ASSUMPTIONS AS OF DECEMBER 31
Discount rate 6.50% 7.25% 7.25%
Expected return on plan assets 8.50% 8.50% 8.50%
Rate of compensation increase 3.00% 3.00% 4.00%
38
The minimum additional pension liability in 2001 and 2000 are non-cash
items which are offset by a direct reduction to shareholders' equity of
$1,496,000 and $343,000, respectively.
The Company has a defined contribution plan for its U.S. employees, with a
specified matching Company contribution. The expense to the Company in 2001,
2000 and 1999 was $173,000, $180,000 and $163,000, respectively.
International pension expense in 2001, 2000 and 1999 was not material.
Foreign plans generally are insured or otherwise fully funded.
In October 1999, the Company and its President agreed that the President
would leave the Company to pursue other business interests. In accordance with
a pre-existing employment contract the Company is making severance payments over
three years in the amount of $200,000 per year. At December 31, 1999, the
Company accrued the present value of the future payments ($235,000 outstanding
at December 31, 2001) and is recognizing interest expense over the three-year
term.
10. Shareholders' equity:
All stock options were issued with exercise prices equal to the fair market
value of the Company's common stock on the date of grant.
2000 and all previous years data for the stock options and rights plans
described below have been restated to reflect the 10% stock dividend which was
distributed on May 15, 2001.
2001 NON-QUALIFIED STOCK OPTION PLAN
In 2001, the Company adopted the 2001 Non-Qualified Stock Option Plan (the
2001 Plan) for officers and key employees which replaced the 1991 Non-Qualified
Stock Option Plan which expired in 2001. The Plan provides for the granting of
options to purchase up to 200,000 shares of the Company's Common stock. Options
generally may be exercised over five years in cumulative installments of 20% per
year and expire up to ten years from the date of grant. The exercise price per
share of each option may not be less than the fair market value of the Company's
common stock on the date of grant. No options have been granted or were
outstanding under the 2001 plan as of December 31, 2001.
1991 NON-QUALIFIED STOCK OPTION PLAN
In 1991, the Company adopted the 1991 Non-Qualified Stock Option Plan (the
1991 Plan) for officers and key employees of the Company which expired on
December 11, 2001. The Plan provided for the granting of options to purchase up
to 969,234 shares of the Company's Common stock. Options granted are generally
39
exercisable in five equal installments commencing one year after date of grant.
Options expire up to 10 years from the date of grant. The exercise price per
share of each option could not be less than the fair market value of the
Company's common stock on the date of grant.
As of December 31, 2001, no further options will be granted under the 1991
Plan due to its expiration during 2001.
1999 STOCK OPTION PLAN FOR NONEMPLOYEE DIRECTORS
The 1999 Stock Option Plan for Nonemployee Directors (the 1999 Plan)
provides for the granting of options to purchase up to 121,000 shares of the
Company's Common stock. No options may be granted under the 1999 Plan after
March 17, 2009. Options generally may be exercised over five years in
cumulative installments of 20% per year and expire up to ten years from the date
of grant. The exercise price per share of each option may not be less than
eighty-five percent (85%) of the fair market value of the Company's common stock
on the date of grant.
1998 STOCK OPTION PLAN FOR 10% SHAREHOLDER - DIRECTORS
The 1998 Stock Option Plan for 10% Shareholder-Directors (the 1998 Plan)
provides for the granting of options to purchase up to 133,100 shares of the
Company's Common stock. No options may be granted under the 1998 Plan after
March 17, 2008. Options generally may be exercised over five years in
cumulative installments of 20% per year and expire up to ten years after grant.
The exercise price per share of each option may not be less than the fair market
value of the Company's common stock on the date of grant.
The following table summarizes the Company's activity in the aggregate, for
the aforementioned stock option plans:
Weighted
Stock Range of Average
Options Exercise Prices Exercise Price
---------- ---------------- ---------------
Outstanding, December 31, 1998 1,020,362 $ 2.95 - $12.42 $ 4.58
Granted 93,170 3.76 3.76
Exercised ( 73,708) 2.95 - 4.10 3.79
---------- ---------------- ---------------
Outstanding, December 31, 1999 1,039,824 3.18 - 12.42 4.56
Granted 343,750 5.57 - 6.36 5.85
Exercised (222,866) 3.18 - 4.78 3.79
Cancelled (156,376) 3.18 - 12.42 6.85
---------- ---------------- ---------------
Outstanding, December 31, 2000 1,004,332 3.73 - 11.27 4.82
Granted 5,500 2.73 2.73
Cancelled (161,808) 3.76 - 11.27 5.25
---------- ---------------- ---------------
Outstanding, December 31, 2001 848,024 $ 2.73 - $6.36 $ 4.72
========== ================ ===============
40
Information regarding stock options outstanding as of December 31, 2001 is as
follows:
Outstanding
----------------
Weighted
Average Number of
Exercise Number of Remaining Shares
Price Shares Contractual Life Exercisable
- --------- ---------------- ---------------- -----------
2.73 5,500 5.28 -
3.73 32,463 3.66 32,463
3.76 76,532 3.21 48,581
3.90 194,049 3.06 118,974
4.10 64,096 0.64 64,096
4.16 25,845 0.19 25,845
4.32 66,550 2.92 39,930
4.78 76,639 0.65 76,639
5.57 185,350 4.58 37,070
6.36 121,000 3.59 121,000
---------------- ---------------- -----------
848,024 3.02 564,598
========= ================ ===========
In the aggregate, related to the aforementioned stock option plans, there
were 304,500 additional shares available for grant at December 31, 2001. The
per share weighted-average fair value of stock options granted during 2001, 2000
and 1999 was $2.73, $5.85 and $3.76, respectively, on the date of grant using
the Black Scholes option-pricing model with the following weighted-average
assumptions: 2001- no expected dividend yield, risk-free interest rate of 5.17%,
volatility factor of 71.21%: and an expected life of 5.7 years; 2000 - no
expected dividend yield, risk-free interest rate of 5.39%, volatility factor of
68.3%, and an expected life of 7.4 years and 1999 - no expected dividend yield,
risk-free interest rate of 5.52%, volatility factor of 61.6%, and an expected
life of 5.2 years.
The Company applies APB Opinion No. 25 in accounting for its Plans and,
accordingly, no compensation cost has been recognized for stock options issued
with an exercise price at least equal to the fair value of the stock at the date
of grant. Had the Company determined compensation cost based on the fair value
at the grant date for its stock options under SFAS No. 123, the Company's 2001,
2000 and 1999 net income (loss) and income (loss) per share would have been as
follows:
2001 2000 1999
------ -------- --------
Net income (loss) (in thousands):
As reported $2,211 $(3,927) $(1,148)
Proforma 2,198 (4,312) (1,531)
Basic income (loss) per share:
As reported $ .33 $ (.59) $ (.18)
Proforma .32 (.65) (.24)
Diluted income (loss) per share:
As reported $ .33 $ (.59) $ (.18)
Proforma .32 (.65) (.24)
41
In 1987, the Company adopted an Employee Stock Purchase Plan. Under the
Stock Purchase Plan, employees may purchase shares of the Company's Common stock
at 85% of fair market value on specified dates. The Company has reserved
338,207 shares of its authorized shares of Common stock for this purpose.
During 2001, 2000 and 1999, 34,939, 27,545 and 21,790 Common shares,
respectively, were issued under the plan.
On October 15, 1999, the Company declared a dividend of one Common share
purchase right (the Rights) on each share of Common stock outstanding. The
Rights entitle the holder to purchase one share of Common stock at $20.66 (the
Purchase Price) per share. Upon the occurrence of certain events related to
non-negotiated attempts to acquire control of the Company, the Rights: (i) will
entitle holders to purchase at the Purchase Price that number of shares of
Common stock having an aggregate fair market value of two times the Purchase
Price; (ii) will become exchangeable at the Company's election at an exchange
ratio of one share of Common stock per right; and (iii) will become tradable
separately from the Common stock. Further, if the Company is a party to a
merger or business combination transaction, the Rights will entitle the holders
to purchase at the Purchase Price, shares of Common stock of the surviving
company having a fair market value of two times the Purchase Price.
In 1989, the Company adopted an Employee Stock Ownership Plan and
Declaration of Trust (ESOP). The ESOP provides for the annual contribution by
the Company of cash, Company stock or other property to a trust for the benefit
of eligible employees. The amount of the Company's annual contribution to the
ESOP is within the discretion of the Board of Directors but must be of
sufficient amount to repay indebtedness incurred by the ESOP trust, if any, for
the purpose of acquiring the Company's stock. The Company made contributions to
the ESOP of $3,500, $2,600 and $2,500 during 2001, 2000 and 1999, respectively.
Shareholders' Equity includes non-interest bearing notes receivable,
resulting from the exercise of stock options, from the Vice President, Finance
in the amount of $46,250, and from another key employee in the amount of
$10,250. Imputed interest on these loans amounted to $3,012, $5,498 and
$22,418, during 2001, 2000 and 1999, respectively.
11. Segment information:
Business segments are defined by Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" ("SFAS
131)" as components of an enterprise about which separate financial information
is available that is evaluated regularly by the chief operating decision maker
assessing performance and making operating and capital decisions.
The first operating segment is laboratory research equipment. This segment
consists of the manufacture and marketing of equipment used in the
pharmaceutical, medical, biotechnology, chemical and environmental research
fields throughout the world.
42
The second operating segment is DGI BioTechnologies, Inc. (DGI). This segment
was involved in the development of a novel technology that facilitates the
discovery of new drugs. Effective June 14, 2001, as a result of the Company's
reduction in ownership in DGI to 47%, the Company ceased consolidating the
operations of DGI and, accordingly, has only one segment. 2001 segment
information for the Drug Lead Discovery segment represents the operations of DGI
from January 1 to June 14, 2001.
Summarized segment information for the years ended December 31, 2001, 2000 and
1999 are as follows (in thousands, except percentages):
Laboratory
Research DGI Total
Equipment BioTechnologies Segments
------------ ----------------- ----------
2001
- -----
Net sales from external customers $ 59,894 $ 400 $ 60,294
Income (loss) from operations 4,413 (912) 3,501
Percentage of sales 99.3% 0.7% 100%
Total assets (1) 44,543 - 44,543
Capital expenditures 577 - 577
Depreciation (1) 1,126 - 1,126
2000
- -----
Net sales from external customers $ 49,444 $ 420 $ 49,864
Income (loss) from operations 704 (3,060) (2,356)
Percentage of sales 99.2% 0.8% 100%
Total assets (1) 42,636 370 43,006
Capital expenditures 351 - 351
Depreciation (1) 1,270 - 1,270
1999
- -----
Net sales from external customers $ 53,081 $ 1,785 $ 54,866
Income (loss) from operations 845 (1,413) (568)
Percentage of sales 96.7% 3.3% 100%
Total assets (1) 45,321 705 46,026
Capital expenditures 1,435 - 1,435
Depreciation (1) 1,072 - 1,072
(1) The Company's interest in DGI was reduced to 47% as of June 14, 2001 and
subsequent to that date, is reported using the equity method of accounting.
Fixed assets and depreciation related to the Drug Lead Discovery segment were
not allocated to the segment as the assets were owned directly by the Company
and were included in the Laboratory Research Equipment Segment. However, rental
expense in lieu of depreciation expense was charged to the Drug Lead Discovery
segment which is comprised of DGI BioTechnologies, Inc. through the transaction
date of June 14, 2001.
43
12. Operations by geographic areas:
The Company sells its equipment to pharmaceutical companies, agricultural
and chemical companies, other industrial customers engaged in biotechnology, and
to medical schools, universities, research institutes, hospitals, private
laboratories and laboratories of Federal, State and Municipal government
departments and agencies in the United States and abroad.
While only a small percentage of the Company's sales are made directly to
United States government departments and agencies, its domestic business is
significantly affected by government expenditures and grants for research to
educational research institutions and to industry. The Company regularly
evaluates credit granted to customers.
The following table sets forth the Company's operations by geographic area
for 2001, 2000 and 1999. The information shown under the caption "Europe"
represents the operations of the Company's wholly-owned foreign subsidiaries
primarily in the UK, The Netherlands, Belgium and Germany (in thousands):
Transfers and
eliminations
United between geo- Conso-
States Europe graphic areas lidated
--------------- -------------- --------------- --------
Net sales:
2001 $ 48,855 $ 17,605 $ 6,166 $ 60,294
2000 41,657 13,921 5,714 49,864
1999 42,057 19,174 6,365 54,866
Income (loss) from operations:
2001 $ 2,161 $ 1,340 $ 3,501
2000 (1,719) (637) (2,356)
1999 (2,100) 1,532 (568)
Identifiable assets:
2001 $ 23,304 $ 21,239 $ 44,543
2000 22,261 20,745 43,006
1999 29,210 16,816 46,026
Total sales by geographic area include both sales to unaffiliated customers
and transfers between geographic areas. Such transfers are accounted for at
prices comparable to normal unaffiliated customer sales. One customer based in
the United States accounted for approximately 12.3%, 12.5% and 10.4%,
respectively, of consolidated net sales during the years ended December 31,
2001, 2000 and 1999.
Income from operations from the United States has been significantly
affected by the research and development costs of DGI BioTechnologies, Inc.
(Note 11).
44
During 2001, 2000 and 1999, net sales from domestic operations to foreign
customers were$11,916,000, $9,284,000 and $8,711,000, respectively. Export
sales from the United States are made to many countries and areas of the world
including the Far East, the Middle East and South America with the most
significant sales going to Canada, China, Israel, Japan, Switzerland and Taiwan.
David Freedman, Chairman of the Board of the Company, is the owner of
Bio-Instrument Ltd., a foreign firm that acts as an agent for sales of the
Company's products to customers in Israel, and earns commissions on those sales.
During 2001, 2000 and 1999, this firm earned commissions in the amounts of
$212,128, $204,357 and $141,408, respectively, on purchases by customers in
Israel of the Company's products. These commissions paid by the Company to
Bio-Instrument Ltd. were comparable to commissions paid to unrelated
distributors and sales representatives.
13. Commitments and contingencies:
The Company is obligated under the terms of various operating leases.
Rental expense under such leases for 2001, 2000 and 1999 was $762,000, $849,000
and $786,000, respectively. As of December 31, 2001, estimated future minimum
annual rental commitments under noncancelable leases expiring through 2014 are
as follows (in thousands):
Sublease
Obligation Rentals Net
----------------- ------- -----
2002 $ 661 $ 51 $ 610
2003 565 51 514
2004 492 42 450
2005 386 - 386
2006 379 - 379
After 2006 1,808 - 1,808
----------------- ---- ------
Total minimum payments required $ 4,291 $144 $4,147
================= ==== ======
From time to time, the Company is involved in litigation in the normal
course of business, which management believes, after consultation with counsel,
the ultimate disposition of which will not have a material adverse effect on the
Company's consolidated results of operations or financial position.
45
14. Quarterly financial information (unaudited) (in thousands, except per
share amounts):
First Second Third Fourth Total
-------- ----------- --------- ------- --------
Year ended December 31, 2001
Net sales $14,700 $ 14,799 $ 13,542 $17,253 $60,294
Gross profit 5,818 6,096 5,042 7,073 24,029
Net income 114 138 123 1,836 2,211
Income per share: (a)
Basic $ .02 $ .02 $ .02 $ .27 $ .33
Diluted .02 .02 .02 .27 .33
Year ended December 31, 2000
Net sales $10,541 $ 12,007 $ 12,771 $14,545 $49,864
Gross profit 4,441 4,831 5,063 5,819 20,154
Net income (loss) (1,378) (1,950)(b) (631)(c) 32 (3,927)
Income (loss) per share: (a)
Basic $ (.21) $ (.29) $ (.09) - $ (.59)
Diluted (.21) (.29) (.09) - (.59)
(a) Due to rounding, the sum of the quarters does not necessarily equal the
amount for the full year.
(b) Includes $800,000 related to writedown of Organica investment.
(c) Includes $150,000 related to writeoff of balance of Organica investment.
ITEM 9. DISAGREEMENT ON ACCOUNTING AND FINANCIAL DISCLOSURE
--------------------------------------------------------
None.
46
PART III
--------
The information required by Part III is contained in the Registrant's proxy
statement which will be filed pursuant to Regulation 14A or an information
statement pursuant to Regulation 14C of the General Rules and Regulations under
the Securities Exchange Act of 1934 not later than 120 days after the close of
the fiscal year ended December 31, 2001. The information is incorporated herein
by reference.
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
------------------------------------------------------------------
(a) The following documents are filed as a part of this report:
1 Financial statements and supplementary data included in Part II of
this report:
New Brunswick Scientific Co., Inc. and Subsidiaries, consolidated
financial statements:
Consolidated Balance Sheets as of December 31, 2001 and 2000
Consolidated Statements of Operations for the years ended
December 31, 2001, 2000 and 1999
Consolidated Statements of Shareholders' Equity for the years ended
December 31, 2001, 2000 and 1999
Consolidated Statements of Cash Flows for the years ended
December 31, 2001, 2000 and 1999
Consolidated Statements of Comprehensive Loss for the years ended
December 31, 2001, 2000 and 1999
Notes to Consolidated Financial Statements
2. Financial statement schedules included in part IV of this report:
Schedule II
Schedules other than those listed above have been omitted because they
are not applicable or the required information is shown in the
financial statements or notes thereto.
3. Exhibits:
The Exhibits index is on Page 49.
47
Schedule II
NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(In thousands)
Additions
----------------------
Balance Charged to Balance
At Costs and Charged to At End
Beginning (Credited) to Other of
of Period Expenses Accounts Deductions Period
----------- -------------- ---------- ----------- -------
Allowance deducted
from asset to which
it applies:
Allowance for
doubtful accounts:
Year ended
December 31, 2001 $ 354 $ 145 - $ 33 $ 466
Year ended
December 31, 2000 339 22 - 7 354
Year ended
December 31, 1999 235 104 - - 339
48
EXHIBIT INDEX
-------------
(3a) Restated Certificate of Incorporation, as amended is incorporated
herein by reference from Exhibit (4) to the Registrant's Registration Statement
on Form S-8 on file with the commission (No. 33-15606), and with respect to two
amendments to said Restated Certificate of Incorporation, to Exhibit (4b) of
Registrant's Registration Statement on Form S-8 (No. 33-16024).
(3b) Restated By-Laws of the Company, as amended and restated, is
incorporated herein by reference to Exhibit (3) of the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 2000.
(3c) Rights Agreement dated as of October 31, 1999 between New Brunswick
Scientific Co., Inc. and American Stock Transfer & Trust Company, as Rights
Agent, which includes the Form of Right Certificate as Exhibit A and the Summary
of Terms of the Rights Agreement as Exhibit B is incorporated herein by
reference to Registrant's Current Report on Form 8-K filed on October 29, 1999.
(3d) Amendment to the Restated Certificate of Incorporation of the Company
is incorporated herein by reference to Item 2 of Registrant's Proxy Statement
filed with the Commission on or about April 13, 1999.
(4) See the provisions relating to capital structure in the Restated
Certificate of Incorporation, amendment thereto, incorporated herein by
reference from the Exhibits to the Registration Statements identified in Exhibit
(3) above.
(10-2) Pension Plan is incorporated herein by reference from Registrant's
Form 10-K for the year ended December 31, 1985.
(10-3) The New Brunswick Scientific Co., Inc., 1989 Stock Option Plan for
Nonemployee Directors is incorporated herein by reference to Exhibit "A"
appended to the Company's Proxy Statement filed with the Commission on or about
April 22, 1989.
(10-5) Employment Agreement (as amended) with David Freedman is incorporated
herein by reference from Registrant's Form 10-K for the year ended December 31,
2000.
(10-8) Termination Agreement with David Freedman is incorporated herein by
reference to Exhibit (10-8) of the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1990.
(10-9) Termination Agreement with Samuel Eichenbaum is incorporated herein
by reference to Exhibit (10-9) of the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1991.
49
(10-11) Termination Agreement with Sigmund Freedman is incorporated herein
by reference to Exhibit (10-11) of the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1990.
(10-12) 1991 Nonqualified Stock Option Plan is incorporated herein by
reference to Exhibit (10-12) of the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1991.
(10-13) Indemnification Agreements in substantially the same form as with
all the Directors and Officers of the Company is incorporated herein by
reference to Schedule A to Exhibit (10-13) of the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1991.
(10-18) Research and Licensing Agreement between DGI BioTechnologies LLC.
and Novo Nordisk A/S dated May 28, 1999 is incorporated herein by reference to
Exhibit (10-18) of the Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1999.
(10-19) Credit Agreement between New Brunswick Scientific Co., Inc. and
First Union National Bank dated April 1, 1999 is incorporated herein by
reference to Exhibit (10-19) of the Registrant's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1999.
(10-20) Financial Statements and Proforma financial information related to
the Company's acquisition of the outstanding Common stock of DJM Cryo-Research
Limited and the net assets of DJM Fabrications, collectively (DJM) are
incorporated herein by reference to Registrant's Current Report on Form 8-K/A
filed on February 4, 2000.
(10-21) Purchase Agreement and Cross Option Agreement related to the
acquisition of DJM are incorporated herein by reference to the exhibits
contained in Registrant's Current Report on Form 8-K filed on December 8, 1999.
(10-22) Settlement Agreement and General Release between New Brunswick
Scientific Co., Inc. and Ezra Weisman is incorporated herein by reference to
Registrant's Current Report on Form 8-K filed on February 2, 2000.
(10-23) Indemnification Agreements with Kenneth Freedman and Peter Schkeeper
are incorporated herein by reference to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1999.
(10-24) Indemnification Agreements with Jerome Birnbaum and Lee Eppstein are
incorporated herein by reference to Exhibit (10-24) of the Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30, 2000.
(10-25)* Indemnification Agreements with James T. Orcutt and Daniel S. Van
Riper
50
(10-26) The New Brunswick Scientific Co., Inc., 1998 Nonqualified Stock
Option Plan for Ten Percent Shareholder - Directors is incorporated herein by
reference to Appendix "A" appended to the Company's Proxy Statement filed with
the Commission on or about April 10, 1998.
(10-27) The New Brunswick Scientific Co., Inc., 1999 Stock Option Plan for
Nonemployee Directors is incorporated herein by reference to Appendix "C"
appended to the Company's Proxy Statement filed with the Commission on or about
April 13, 1999.
(10-28) The New Brunswick Scientific Co., Inc. 2001 Nonqualified Stock
Option Plan for Officers and Key Employees is incorporated herein by reference
to Appendix "A" appended to the Company's Proxy Statement filed with the
Commission on or about April 17, 2001.
(13) Annual Report to Shareholders, to be filed within 120 days of the end
of the fiscal year ended December 31, 2001, is incorporated herein by reference.
(22) Subsidiaries of the Company appear on Page 52.
(24a)* Consent of KPMG LLP.
* Filed herewith.
51
------
EXHIBIT 22
----------
SUBSIDIARIES OF THE COMPANY
---------------------------
Percentage of
Name and Place of Incorporation Ownership
- ------------------------------------------------- ------------------
New Brunswick Scientific (U.K.) Limited
Incorporated in the United Kingdom 100%
New Brunswick Scientific B.V.
Incorporated in The Netherlands 100%
New Brunswick Scientific N.V.
Incorporated in Belgium 100%
New Brunswick Scientific GmbH
Incorporated in Germany 100%
New Brunswick Scientific of Delaware, Inc.
Incorporated in the State of Delaware 100%
New Brunswick Scientific International, Inc.
Incorporated in the State of Delaware 100%
NBS Sales Co., Limited
Incorporated in Jamaica 100%
New Brunswick Scientific West Inc.
Incorporated in the State of California 100%
New Brunswick Scientific S.a.r.l.
Incorporated in France 100%
NBS ULT Limited
Incorporated in the United Kingdom 100%
NBS Cryo-Research Limited
Incorporated in the United Kingdom 100%
52
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
NEW BRUNSWICK SCIENTIFIC CO., INC.
Dated: March 25, 2002 By: /s/ David Freedman
--------------------
David Freedman
Chairman of the Board
Principal Executive Officer) and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: March 25, 2002 By: /s/ Adele Lavender
--------------------
Adele Lavender
Corporate Secretary
Dated: March 25, 2002 By: /s/ Sigmund Freedman
----------------------
Sigmund Freedman
Treasurer and Director
Dated: March 25, 2002 By: /s/ Samuel Eichenbaum
-----------------------
Samuel Eichenbaum
Vice President, Finance
Dated: March 25, 2002 By: /s/ James T. Orcutt
----------------------
James T. Orcutt
President and Director
53
Dated: March 25, 2002 By: /s/ Dr. Jerome Birnbaum
--------------------------
Dr. Jerome Birnbaum
Director
Dated: March 25, 2002 By: /s/ Kenneth Freedman
----------------------
Kenneth Freedman
Director
Dated: March 25, 2002 By: /s/ Ernest Gross
------------------
Ernest Gross
Director
Dated: March 25, 2002 By: /s/ Kiyoshi Masuda
--------------------
Kiyoshi Masuda
Director
Dated: March 25, 2002 By: /s/ Dr. David Pramer
-----------------------
Dr. David Pramer
Director
Dated: March 25, 2002 By: /s/ Peter Schkeeper
---------------------
Peter Schkeeper
Director
Dated: March 25, 2002 By: /s/ Daniel S. Van Riper
---------------------------
Daniel S. Van Riper
Director
54