Back to GetFilings.com
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarter Ended March 29, 2003 Commission File No. 0-6994
------
NEW BRUNSWICK SCIENTIFIC CO., INC.
State of Incorporation - New Jersey E. I. #22-1630072
-----------
44 Talmadge Road, Edison, N.J. 08818-4005
Registrant's Telephone Number: 732-287-1200
------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding twelve (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 ninety (90) days. Yes X No __
--
Indicate by checkmark whether the registrant is an accelerated files (as defined
in Rule 12b-2 of the Act). Yes No X
-
There are 7,790,796 Common shares outstanding as of May 1, 2003.
1
NEW BRUNSWICK SCIENTIFIC CO., INC.
Index
PART I. FINANCIAL INFORMATION:
PAGE NO.
---------
Consolidated Balance Sheets -
March 29, 2003 and December 31, 2002 3
Consolidated Statements of Operations -
Three Months Ended March 29, 2003 and March 31, 2002 4
Consolidated Statements of Cash Flows -
Three Months Ended March 29, 2003 and March 31, 2002 5
Consolidated Statements of Comprehensive (Loss) Income -
Three Months Ended March 29, 2003 and March 31, 2002 6
Notes to Consolidated Financial Statements 7
Management's Discussion and Analysis of Results
of Operations and Financial Condition 12
PART II. OTHER INFORMATION 17
2
NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
ASSETS
------
March 29, December 31,
2003 2002
------------ -------------
Current Assets (Unaudited)
- --------------------------------------------
Cash and cash equivalents $ 6,975 $ 9,718
Accounts receivable, net 9,642 9,991
Inventories:
Raw materials and sub-assemblies 5,272 4,514
Work-in-process 2,403 1,705
Finished goods 5,019 5,457
------------ -------------
Total inventories 12,694 11,676
Deferred income taxes 962 962
Prepaid expenses and other current assets 1,207 766
------------ -------------
Total current assets 31,480 33,113
------------ -------------
Property, plant and equipment, net 5,595 5,615
Excess of cost over net assets acquired, net 4,603 4,707
Other assets 1,829 1,829
------------ -------------
$ 43,507 $ 45,264
============ =============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities
- --------------------------------------------------------
Current installments of long-term debt $ 378 $ 373
Accounts payable and accrued expenses 5,363 6,489
--------- ---------
Total current liabilities 5,741 6,862
--------- ---------
Long-term debt, net of current installments 5,136 5,213
Other liabilities 2,526 2,547
Commitments and contingencies
Shareholders' equity:
Common stock, $0.0625 par value per share,
authorized 25,000,000 shares; issued and outstanding,
2003 and 2002 - 7,790,796 487 487
Capital in excess of par 47,959 47,959
Accumulated deficit (14,188) (13,756)
Accumulated other comprehensive loss (4,120) (4,003)
Notes receivable from exercise of stock options (34) ( 45)
--------- ---------
Total shareholders' equity 30,104 30,642
--------- ---------
$ 43,507 $ 45,264
========= =========
See notes to consolidated financial statements.
3
NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended
March 29, March 31,
2003 2002
-------------------- -----------
Net sales $ 11,585 $ 13,263
Operating costs and expenses:
Cost of sales 7,392 7,583
Selling, general and administrative expenses 4,104 4,110
Research, development and engineering expenses 857 599
-------------------- -----------
Total operating costs and expenses 12,353 12,292
-------------------- -----------
(Loss) income from operations (768) 971
Other income (expense):
Interest income 18 9
Interest expense (114) (115)
Other, net 144 6
-------------------- -----------
48 (100)
-------------------- -----------
(Loss) income before income tax (benefit) expense (720) 871
Income tax (benefit) expense (288) 305
-------------------- -----------
Net (loss) income $ (432) $ 566
==================== ===========
Basic net (loss) income per share $ (0.06) $ 0.08
==================== ===========
Diluted net (loss) income per share $ (0.06) $ 0.07
==================== ===========
Basic weighted average number of shares outstanding 7,791 7,494
==================== ===========
Diluted weighted average number of shares outstanding 7,791 7,678
==================== ===========
See notes to consolidated financial statements.
4
NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended
March 29, March 31,
2003 2002
-------------------- -----------
Cash flows from operating activities:
Net (loss) income $ (432) $ 566
Adjustments to reconcile net (loss) income to net cash
used in operating activities:
Depreciation and amortization 305 273
Gain on sale of property (202) -
Change in related balance sheet accounts:
Accounts and notes receivable 312 1,117
Inventories (1,048) (1,645)
Prepaid expenses and other current assets (445) (320)
Accounts payable and accrued expenses (1,237) (621)
Advance payments from customers 133 (454)
Other liabilities (21) (25)
-------------------- -----------
Net cash used in operating activities (2,635) (1,109)
-------------------- -----------
Cash flows from investing activities:
Additions to property, plant and equipment (330) (57)
Sale of property and equipment 253 -
-------------------- -----------
Net cash used in investing activities (77) (57)
-------------------- -----------
Cash flows from financing activities:
Repayment of long-term debt (65) (64)
Proceeds from issue of shares under stock option plans - 548
Payments on notes receivable related to exercised
stock options 11 12
-------------------- -----------
Net cash (used in) provided by financing activities (54) 496
-------------------- -----------
Net effect of exchange rate changes on cash 23 (29)
-------------------- -----------
Net decrease in cash and cash equivalents (2,743) (699)
Cash and cash equivalents at beginning of period 9,718 3,794
-------------------- -----------
Cash and cash equivalents at end of period $ 6,975 $ 3,095
==================== ===========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 106 $ 86
Income taxes 785 225
See notes to consolidated financial statements.
5
NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(In thousands)
(Unaudited)
Three Months Ended
March 29, March 31,
2003 2002
-------------------- -----------
Net (loss) income $ (432) $ 566
Other comprehensive loss:
Foreign currency translation adjustment (117) (316)
-------------------- -----------
Net comprehensive (loss) income $ (549) $ 250
==================== ===========
See notes to consolidated financial statements.
6
NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Interim results:
In the opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly, the financial position of the Company
as of March 29, 2003 and the results of its operations for the three months
ended March 29, 2003 and March 31, 2002 and its cash flows for the three months
ended March 29, 2003 and March 31, 2002. Interim results may not be indicative
of the results that may be expected for the year.
During the first quarter of 2003, the Company adopted a 4 week, 4 week, 5 week
quarterly closing schedule resulting in a reporting date of March 29, 2003. The
effect of this change on the consolidated financial statements is not material.
The accompaning consolidated financial statements should be read in conjunction
with the consolidated financial statements and notes thereto included in the
Company's annual report on Form 10-K.
Note 2 - Net (loss) income per share:
Basic net (loss) income per share is calculated by dividing net (loss) income by
the weighted average number of shares outstanding. Diluted net (loss) income
per share is calculated by dividing net (loss) income 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 using the treasury stock method.
Antidilutive options are excluded from the calculation of diluted net (loss)
income per share. Information related to dilutive and antidilutive stock
options is as follows: (in thousands)
Three Months Ended
March 29, March 31,
2003 2002
-------- ---------
Dilutive effect - 184
Antidilutive options 359 -
Note 3 - 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 March 29, 2003, $141,000 and $165,000 was outstanding under the
first and second mortgages, respectively. Each mortgage requires 80 equal
quarterly payments of principal.
7
On March 15, 2002, the Company and First Union National Bank (the Bank) entered
into an amendment to extend their agreement (the Bank Agreement) by three years
to May 31, 2005. The amendment to the Bank Agreement did not change the
maturity date of the acquisition credit line component, which remains at
December 1, 2006. No other provisions of the Bank Agreement were materially
amended. The $29.5 million secured line of credit provides the Company with a
$5 million revolving credit facility for both working capital and letters of
credit, a $2 million Revolving Line of Credit for equipment acquisition
purposes, a $12.5 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 other than the fixed term acquisition debt,
bear interest at the bank's prime rate less 125 basis points or libor plus 125
basis points, at the discretion of the Company. At March 29, 2003, the bank's
prime rate was 4.25% and libor was 1.25%. 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
ratio, a net worth covenant and a ratio of total liabilities to tangible net
worth. The Company is in compliance with its covenants pursuant to the Bank
Agreement at March 29, 2003.
At March 29, 2003, $4,814,000 was outstanding under the Bank Agreement related
to acquisition loans bearing fixed interest at 8% per annum, $361,000 was being
utilized for letters of credit and zero for foreign exchange transactions. The
following amounts were available at March 29, 2003 under the Bank Agreement:
$4,639,000 for working capital and letters of credit, $2,000,000 for equipment
acquisitions, $7,686,000 for acquisitions and $10,000,000 under the foreign
exchange facility.
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
2003. At March 29, 2003 the balance of the notes was $394,000.
Note 4 - Adoption of new accounting standards:
In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations ("SFAS No. 143"). SFAS No. 143 requires the Company to record the
fair value of an asset retirement obligation as a liability in the period in
which it incurs a legal obligation associated with the retirement of tangible
long-lived assets that result from the acquisition, construction, development
and/or normal use of the assets. The Company also records a corresponding asset
which is depreciated over the life of the asset. Subsequent to the initial
measurement of the asset retirement obligation, the obligation will be adjusted
at the end of each period to reflect the passage of time and changes in the
estimated future cash flows underlying the obligation. The Company adopted SFAS
No. 143 on January 1, 2003. The adoption did not have any effect on the
Company's consolidated financial statements.
8
In June 2002, the FASB issued Statement No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." This Statement nullifies EITF
Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits
and Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)." Statement No. 146 is different from EITF Issue No. 94-3 in
that Statement No. 146 requires that a liability be recognized for a cost
associated with an exit or disposal activity only when the liability is
incurred, that is when it meets the definition of a liability in the FASB's
conceptual framework. Statement No. 146 also establishes fair value as the
objective for initial measurement of liabilities related to exit or disposal
activities. In contrast, under EITF Issue 94-3, a company recognized a
liability for an exit cost when it committed to an exit plan. Statement No. 146
is effective for exit or disposal activities that are initiated after December
31, 2002. The adoption of Statement No. 146 can be expected to impact the
timing of liability recognition associated with any future exit activities.
In November 2002, the FASB issued Interpretation No. 45, Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness to Others. This Interpretation elaborates on the disclosures to be
made by a guarantor in its interim and annual financial statements about its
obligations under guarantees issued. The Interpretation also clarifies that a
guarantor is required to recognize, at inception of a guarantee, a liability for
the fair value of the obligation undertaken. The initial recognition and
measurement provisions of the Interpretation are applicable to guarantees issue
or modified after December 31, 2002, and the adoption of this interpretation did
not have a material effect on the Company's consolidated financial statements.
Note 5 - Stock dividend:
On February 20, 2003 and February 12, 2002, respectively, the Company declared
10% stock dividends. The February 20, 2003 stock dividend is payable on May 15,
2003 to shareholders of record as of April 18, 2003.
Note 6 - Stock compensation:
At March 31, 2003, the Company has stock based employee compensation 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. No stock based employee compensation cost is
reflected in net (loss) income, as all options granted under those plans had an
exercise price equal to the market value of the underlying common stock on the
date of grant. 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. The following table
illustrates the effect on net (loss) income and per share amounts if the Company
had applied the fair value recognition provisions of SFAS No. 123 to stock based
employee compensation:
9
Three Months Ended
March 29, March 31,
2003 2002
-------------------- ----------
Net (loss) income, as reported: $ (432) $ 566
Deduct: Total stock-based employee
compensation expense determined under
fair value based method,
net of related tax effects 96 133
-------------------- ----------
Pro forma net (loss) income $ (528) $ 433
Net (loss) income per share:
Basic-as reported $ (0.06) $ 0.08
Basic-pro forma $ (0.07) $ 0.06
Diluted-as reported $ (0.06) $ 0.07
Diluted-pro forma $ (0.07) $ 0.06
The fair value of each stock option granted during the period is estimated on
the date of grant using the Black-Scholes option pricing model with the
following assumptions:
Three Months Ended
March 29, March 31,
2003 2002
-------------------- -----------
Expected life (years) 6.0 5.2
Expected volatility 75.80% 63.67%
Expected dividend yield - -
Risk-free interest rate 3.10% 4.34%
Weighed average fair value of options
Granted during the period $ 4.90 $ 3.09
10
Note 7 - Reclassifications:
Certain amounts in the 2002 consolidated financial statements have been
reclassified to conform to the 2003 financial statement presentation.
Note 8 - Investment in DGI:
As previously reported, the Company has an equity investment in DGI
BioTechnologies, Inc. ("DGI") that was written down to zero in 2001. DGI had
anticipated closing a significant financing transaction with an investment group
during the first half of 2003, however, it has recently become definite that the
financing with this group will not take place. On May 13, 2003, DGI entered into
an agreement for certain new short-term financing. Under the terms of the
agreement, DGI issued preferred shares in exchange for a $200,000 cash infusion
from an investment group consisting of certain members of DGI management and
other investors and warrants to BankInvest (an existing equity investor) to
purchase up to $100,000 of DGI preferred stock exercisable through October 2003.
The agreement includes a provision that if such warrant is not exercised, the
investment group has the right, but not the obligation to invest an additional
$100,000 in preferred stock under the same terms as the BankInvest warrant.
Additionally, under the terms of the agreement, the Company agreed to accept
additional shares of DGI preferred stock on a monthly basis in lieu of the next
12 months of rent payments due the Company from DGI (rent is due at $12,367 per
month). For financial reporting purposes, the Company will attribute no value
to shares received under this arrangement. DGI management believes that the new
short-term financing, together with its expected limited revenues during 2003,
should enable DGI to continue operating into the first quarter of 2004. As a
result of the short-term financing obtained by DGI, the Company's fully diluted
interest in DGI will be reduced to 23.4% and will be below this amount prior to
the receipt of the DGI stock in lieu of rent over the 12-month period.
11
NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
Forward-looking statements, within the meaning of Section 21E of the Securities
Exchange Act of 1934, are made throughout this Management's Discussion and
Analysis of Results of Operations and Financial Condition. For this purpose,
any statements contained herein that are not statements of historical fact may
be deemed to be forward-looking statements. Without limiting the foregoing, the
words "believes," "anticipates," "plans," "expects," "seeks," "estimates," and
similar expressions are intended to identify forward-looking statements. There
are a number of important factors that could cause the results of the Company to
differ materially from those indicated by such forward-looking statements.
The following is Management's discussion and analysis of significant factors
that have affected the Company's operating results and financial condition
during the three month period ended March 29, 2003, which should be read in
conjunction with the Company's December 31, 2002 financial statements.
Results of Operations
---------------------
Quarter Ended March 29, 2003 vs. Quarter Ended March 31, 2002
- -----------------------------------------------------------------------
For the quarter ended March 29, 2003, the Company incurred a net loss of
$432,000 or $0.06 per diluted share on net sales of $11,585,000 compared with
net income of $566,000 or $0.07 per diluted share on net sales of $13,263,000
for the first quarter of 2002.
Net sales decreased $1,678,000 or 12.7% from $13,263,000 to $11,585,000 for the
quarter ended March 29, 2003 as compared to the corresponding quarter of the
prior year. Net sales for the 2003 quarter have been negatively affected both in
the United States and in export markets by the continuing weakness in the market
for life science equipment. All of the Company's product lines were impacted by
lower sales with the exception of ultra low temperature freezers, which had
relatively strong sales during the quarter.
Gross profit for the 2003 quarter of $4,193,000 is down 26.2% from the
$5,680,000 reported in the first quarter of 2002 due primarily to the decrease
in net sales and unabsorbed manufacturing overhead due to lower manufacturing
activity and downward pressure on prices. Consolidated gross margins decreased
to 36.2% for the 2003 quarter from 42.8% for the first quarter of 2002. The
margin decrease is primarily attributable to the aforementioned unabsorbed
manufacturing overhead and downward pressure on prices.
Selling, general and administrative expenses of $4,104,000 in 2003 were flat
compared with $4,110,000 in the 2002 quarter. The normal salary and benefit
increases were offset by reduced commission accruals as a result of lower
revenues.
Research, development and engineering expenses increased 43.1% to $857,000 in
2003 from $599,000 in the 2002 quarter due primarily to normal increases and
expenditures related to the Company's product development program including the
cost of prototypes and consultants.
12
Interest income increased to $18,000 in the 2003 quarter from $9,000 in the
prior year quarter due to higher average invested cash, although at lower
interest rates.
Interest expense decreased to $114,000 in the 2003 quarter from $115,000 in 2002
due primarily to lower average outstanding bank debt due to the repayment of the
Company's working capital debt during the first quarter of 2002, offset by the
foreign exchange effect on interest on the Company's foreign debt as a result of
the weakening of the U.S. dollar vs. the pound and the euro.
Other income increased to $144,000 in the 2003 quarter from $6,000 in 2002 due
primarily to a gain on the sale of property.
Income tax benefit for the three months ended March 29, 2003 was $288,000, an
effective rate of 40% compared with income tax expense of $305,000 in 2002, an
effective rate of 35.0%. The increase in the effective tax rate in 2003 is due
to an increase in the effective tax rate for state income taxes.
Financial Condition
-------------------
Liquidity and Capital Resources
- ----------------------------------
Working capital decreased to $25,739,000 at March 29, 2003 from $26,251,000 at
December 31, 2002.
Net cash used in operating activities was $2,635,000 in the first three months
of 2003 as compared with cash used of $1,109,000 in the first three months of
2002. The $2,635,000 of cash used in operating activities for the first three
months of 2003 was due to changes in operating assets and liabilities in the
ordinary course of business, primarily (i) net loss of $432,000, (ii) a gain on
sale of property of $202,000, (iii) an increase in inventories of $1,048,000,
(iv) an increase in prepaid expenses and other current assets of $445,000, and
(v) a decrease in accounts payable and accrued expenses of $1,237,000 partially
offset by (i) depreciation and amortization of $305,000, (ii) a decrease in
accounts receivable of $312,000, and (iii) an increase in advance payments from
customers of $133,000.
Net cash used in investing activities amounted to $77,000 in the first three
months of 2003 as compared with $57,000 in the first three months of 2002 and
primarily represented capital expenditures for equipment partially offset by the
sale of property.
Net cash used in financing activities amounted to $54,000 in the first three
months of 2003 as compared with net cash provided of $496,000 in the first three
months of 2002. Both periods reflect the repayment of long-term debt and the
2002 period includes $548,000 of proceeds resulting from the exercise of stock
options under the Company's stock option plans.
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 March 29, 2003, $141,000 and $165,000 was outstanding under the
13
first and second mortgages, respectively. Each mortgage requires 80 equal
quarterly payments of principal.
On March 15, 2002, the Company and First Union National Bank (the Bank) entered
into an amendment to extend their agreement (the Bank Agreement) by three years
to May 31, 2005. The amendment to the Bank Agreement did not change the
maturity date of the acquisition credit line component, which remains at
December 1, 2006. No other provisions of the Bank Agreement were materially
amended. The $29.5 million secured line of credit provides the Company with a
$5 million revolving credit facility for both working capital and letters of
credit, a $2 million Revolving Line of Credit for equipment acquisition
purposes, a $12.5 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 other than the fixed term acquisition debt,
bear interest at the bank's prime rate less 125 basis points or libor plus 125
basis points, at the discretion of the Company. At March 29, 2003, the bank's
prime rate was 4.25% and libor was 1.25%. 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
ratio, a net worth covenant and a ratio of total liabilities to tangible net
worth. The Company is in compliance with its covenants pursuant to the Bank
Agreement at March 29, 2003.
At March 29, 2003, $4,814,000 was outstanding under the Bank Agreement related
to acquisition loans bearing fixed interest at 8% per annum, $361,000 was being
utilized for letters of credit and zero for foreign exchange transactions. The
following amounts were available at March 29, 2003 under the Bank Agreement:
$4,639,000 for working capital and letters of credit, $2,000,000 for equipment
acquisitions, $7,686,000 for acquisitions and $10,000,000 under the foreign
exchange facility.
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
2003. At March 29, 2003 the balance of the notes was $394,000.
The Company's contractual obligations and commitments principally include
obligations associated with outstanding indebtedness and future minimum
operating lease obligations as set forth in the following table:
Payments Due by Period
------------------------
(In thousands)
Contractual Obligations:
Within 1-2 3-4 After 4
Total 1 Year Years Years Years
- ------------------------- ------------------------ ------ -------- ------
Long-term debt, notes and
credit facility $ 5,514 $ 378 $ 817 $4,258 $ 61
Operating leases 4,149 852 1,241 790 1,266
------------------------ ------ -------- ------ ------
Total contractual
cash obligations $ 9,663 $1,230 $ 2,058 $5,048 $1,327
======================== ====== ======== ====== ======
14
As previously reported, the Company has an equity investment in DGI
BioTechnologies, Inc. ("DGI") that was written down to zero in 2001. DGI had
anticipated closing a significant financing transaction with an investment group
during the first half of 2003, however, it has recently become definite that the
financing with this group will not take place. On May 13, 2003, DGI entered into
an agreement for certain new short-term financing. Under the terms of the
agreement, DGI issued preferred shares in exchange for a $200,000 cash infusion
from an investment group consisting of certain members of DGI management and
other investors and warrants to BankInvest (an existing equity investor) to
purchase up to $100,000 of DGI preferred stock exercisable through October 2003.
The agreement includes a provision that if such warrant is not exercised, the
investment group has the right, but not the obligation to invest an additional
$100,000 in preferred stock under the same terms as the BankInvest warrant.
Additionally, under the terms of the agreement, the Company agreed to accept
additional shares of DGI preferred stock on a monthly basis in lieu of the next
12 months of rent payments due the Company from DGI (rent is due at $12,367 per
month). For financial reporting purposes, the Company will attribute no value
to shares received under this arrangement. DGI management believes that the new
short-term financing, together with its expected limited revenues during 2003,
should enable DGI to continue operating into the first quarter of 2004. As a
result of the short-term financing obtained by DGI, the Company's fully diluted
interest in DGI will be reduced to 23.4% and will be below this amount prior to
the receipt of the DGI stock in lieu of rent over the 12-month period.
In response to the difficult market conditions currently being experienced, the
Company initiated a 9% reduction-in-force at its Edison, New Jersey facility in
April 2003 which will result in a second quarter change of approximately
$100,000.
Management believes that the resources available to the Company, including
current cash and cash equivalents, working capital, cash to be 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.
Recently Adopted Accounting Standards
-------------------------------------
In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations ("SFAS No. 143"). SFAS No. 143 requires the Company to record the
fair value of an asset retirement obligation as a liability in the period in
which it incurs a legal obligation associated with the retirement of tangible
long-lived assets that result from the acquisition, construction, development
and/or normal use of the assets. The Company also records a corresponding asset
which is depreciated over the life of the asset. Subsequent to the initial
measurement of the asset retirement obligation, the obligation will be adjusted
at the end of each period to reflect the passage of time and changes in the
estimated future cash flows underlying the obligation. The Company adopted SFAS
No. 143 on January 1, 2003. The adoption did not have any effect on the
Company's consolidated financial statements.
In June 2002, the FASB issued Statement No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." This Statement nullifies EITF
Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits
and Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)." Statement No. 146 is different from EITF Issue No. 94-3 in
15
that Statement No. 146 requires that a liability be recognized for a cost
associated with an exit or disposal activity only when the liability is
incurred, that is when it meets the definition of a liability in the FASB's
conceptual framework. Statement No. 146 also establishes fair value as the
objective for initial measurement of liabilities related to exit or disposal
activities. In contrast, under EITF Issue 94-3, a company recognized a
liability for an exit cost when it committed to an exit plan. Statement No. 146
is effective for exit or disposal activities that are initiated after December
31, 2002. The adoption of Statement No. 146 can be expected to impact the
timing of liability recognition associated with any future exit activities.
In November 2002, the FASB issued Interpretation No. 45, Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness to Others. This Interpretation elaborates on the disclosures to be
made by a guarantor in its interim and annual financial statements about its
obligations under guarantees issued. The Interpretation also clarifies that a
guarantor is required to recognize, at inception of a guarantee, a liability for
the fair value of the obligation undertaken. The initial recognition and
measurement provisions of the Interpretation are applicable to guarantees issue
or modified after December 31, 2002, and the adoption of this interpretation did
not have a material effect on the Company's consolidated financial statements.
Critical Accounting Policies
----------------------------
No changes have been made in the Company's critical accounting policies during
the three months ended March 29, 2003.
16
NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 3. Quantitative and Qualitative Disclosures about Market Risk
- --------------------------------------------------------------------------
The information required by Item 3 has been disclosed in Item 7 of the Company's
Annual Report on Form 10-K for the year ended December 31, 2002. There has been
no material change in the disclosures regarding market risk.
Item 4. Controls and Procedures
- -----------------------------------
As required by Rule 13a-15 under the Exchange Act, within the 90 days prior to
the filing date of this report, the Company carried out an evaluation of the
effectiveness of the design and operation of the Company's disclosure controls
and procedures. This evaluation was carried out under the supervision and with
the participation of the Company's management, including the Company's Chief
Executive Officer along with the Company's Chief Financial Officer. Based upon
that evaluation, the Company's Chief Executive Officer along with the Company's
Chief Financial Officer concluded that the Company's disclosure controls and
procedures are effective. There have been no significant changes in the
Company's internal controls or in other factors, which could significantly
affect internal controls subsequent to the date the Company carried out its
evaluation.
Disclosure controls and procedures are controls and other procedures that are
designed to ensure that information required to be disclosed in Company reports
filed or submitted under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the Securities and Exchange
Commission's rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed in Company reports filed under the Exchange Act is
accumulated and communicated to management, including the Company's Chief
Executive Officer and Chief Financial Officer as appropriate, to allow timely
decisions regarding disclosure.
Item 6. Exhibits and Reports on Form 8-K
- ------------------------------------------------
The exhibits to this report are listed on the Exhibit Index included elsewhere
herein.
No reports on Form 8-K have been filed during the quarter ended March 29, 2003.
17
------
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NEW BRUNSWICK SCIENTIFIC CO., INC.
--------------------------------------
(Registrant)
Date: May 13, 2003 /s/ David Freedman
--------------------
David Freedman
Chairman and
Chief Executive Officer
Date: May 13, 2003 /s/ Samuel Eichenbaum
-----------------------
Samuel Eichenbaum
Vice President, Finance and
Chief Financial Officer
(Principal Accounting Officer)
18
EXHIBIT 31
CERTIFICATIONS
--------------
I, David Freedman, hereby certify that the periodic report being filled
herewith containing financial statements fully complies with the requirements of
section 13(a) or 15(d) of the Securities Exchange Act of 1934 (16 U.S. C. 78m or
78o(d)) and that the information contained in said periodic report fairly
presents, in all material respects, the financial condition and results of
operations of New Brunswick Scientific Co., Inc. for the period covered by said
periodic report.
May 13, 2003 /s/ David Freedman
--------------------
Name: David Freedman
Chairman and
Chief Executive Officer
I, Samuel Eichenbaum, hereby certify that the periodic report being filled
herewith containing financial statements fully complies with the requirements of
section 13(a) or 15(d) of the Securities Exchange Act of 1934 (16 U.S. C. 78m or
78o(d)) and that the information contained in said periodic report fairly
presents, in all material respects, the financial condition and results of
operations of New Brunswick Scientific Co., Inc. for the period covered by said
periodic report.
May 13, 2003 /s/ Samuel Eichenbaum
-----------------------
Name: Samuel Eichenbaum
Vice President, Finance and
Chief Financial Officer
19
- ------
EXHIBIT 32
We, David Freedman and Samuel Eichenbaum, certify that:
1. We have reviewed this quarterly report on Form 10-Q of New Brunswick
Scientific Co., Inc. (the "Registrant");
2. Based on our knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on our knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
Registrant as of, and for, the periods presented in this quarterly report;
4. We are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the Registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the Registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. We have disclosed, based on our most recent evaluation, to the
Registrant's auditors and the audit committee of Registrant's board of
directors:
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the Registrant's ability to record,
process, summarize and report financial data and have identified for the
Registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrant's internal controls; and
6. We have indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: May 13, 2003 /s/ David Freedman /s/ Samuel Eichenbaum
-------------------- -----------------------
Chairman and Vice President, Finance and
Chief Executive Officer Chief Financial Officer
A signed original of this written statement required by Section 906 has been
provided to New Brunswick Scientific Co., Inc. and will be retained by New
Brunswick Scientific Co., Inc. and furnished to the Securities and Exchange
Commission or its staff upon request.
20
NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES
EXHIBIT INDEX
-------------
Exhibit No. Exhibit Page No.
- ----------- -------------------------- --------
31 Section 906 Certifications 19
32 Section 302 Certfication 20
21