APOGENT TECHNOLOGIES INC - 10-Q Quarterly Report

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For The Quarterly Period Ended December 31, 2003

Commission File Number 001-11091

APOGENT TECHNOLOGIES INC.

(Exact name of registrant as specified in its charter)


Wisconsin		22-2849508
(State or other jurisdiction of Incorporation or organization)		(I.R.S. Employer Identification No.)

30 Penhallow Street, Portsmouth, New Hampshire 03801

(Address of principal executive offices, including zip code)

(603) 433-6131

(Registrant’s telephone number, including area code)

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 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. YES x NO ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YES x NO ¨

At February 9, 2004, there were 88,545,131 shares of the Registrant’s Common Stock, par value $0.01 per share, outstanding.

APOGENT TECHNOLOGIES INC. AND SUBSIDIARIES

FORM 10-Q

QUARTER ENDED DECEMBER 31, 2003

TABLE OF CONTENTS


		Page
PART I— FINANCIAL INFORMATION

Item 1: Financial Statements

Consolidated Balance Sheets as of December 31, 2003 and September 30, 2003 (unaudited)		1

Consolidated Statements of Income for the Three Months Ended December 31, 2003 and 2002 (unaudited)		2

Consolidated Statement of Shareholders’ Equity for the Three Months Ended December 31, 2003 (unaudited)		3

Consolidated Statements of Cash Flows for the Three Months Ended December 31, 2003 and 2002 (unaudited)		4

Notes to Unaudited Consolidated Financial Statements		5

Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations		21

Cautionary Factors		33

Item 3: Quantitative and Qualitative Disclosures About Market Risk		37

Item 4: Controls and Procedures		37

PART II— OTHER INFORMATION

Item 2: Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities		38

Item 4: Submission of Matters to a Vote of Security Holders		38

Item 6: Exhibits and Reports on Form 8-K		39

SIGNATURE		40

EXHIBIT INDEX		EI-1

PART I—FINANCIAL INFORMATION

ITEM 1: Financial Statements

APOGENT TECHNOLOGIES INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(in thousands, except share and per share data)

(unaudited)


	December 31, 2003			September 30, 2003
Assets
Current assets:
Cash and cash equivalents	$	12,996		$	18,505
Marketable securites—available for sale		15,169			17,625
Accounts receivable (less allowance for doubtful accounts of $3,941 and $4,286 respectively)		172,136			179,523
Inventories		211,484			206,549
Deferred income taxes		15,308			15,308
Prepaid expenses and other current assets		18,798			16,518

Total current assets		445,891			454,028
Property, plant and equipment, net		278,789			282,752
Intangible assets, net		177,802			179,492
Goodwill		1,009,072			999,243
Other assets		41,266			34,476

Total assets	$	1,952,820		$	1,949,991

Liabilities and Shareholders’ Equity
Current liabilities:
Short-term debt and overdrafts	$	12,001		$	12,801
Current portion of long-term debt		2,259			2,281
Accounts payable		40,484			50,220
Income taxes payable		25,873			20,053
Accrued payroll and employee benefits		32,470			34,484
Accrued interest expense		3,646			8,844
Restructuring reserve		3,076			1,758
Other current liabilities		36,178			38,883

Total current liabilities		155,987			169,324
Long-term debt, less current portion		962,444			891,989
Deferred income taxes		143,183			137,683
Other liabilities		27,881			26,948
Commitments and contingent liabilities		—			—
Shareholders’ equity:
Preferred stock, $0.01 par value; authorized 20,000,000 shares		—			—
Common stock, $0.01 par value; authorized 250,000,000 shares; issued 107,057,865 shares; outstanding 87,534,709 and 92,013,345 shares, respectively		1,071			1,071
Equity rights, 50 rights at $1.09 per right		—			—
Additional paid-in capital		269,010			270,119
Retained earnings		765,550			737,045
Accumulated other comprehensive income (loss)		12,640			(3,127	)
Treasury common stock, 19,523,156 and 15,044,520 shares at cost		(384,946	)		(281,061	)

Total shareholders’ equity		663,325			724,047

Total liabilities and shareholders’ equity	$	1,952,820		$	1,949,991

See accompanying notes to the unaudited consolidated financial statements.

APOGENT TECHNOLOGIES INC. AND SUBSIDIARIES

Consolidated Statements of Income

(in thousands, except per share data)

(unaudited)


	Three Months Ended December 31,
	2003			2002
Net sales	$	278,642		$	257,798
Cost of sales:
Cost of products sold		147,988			132,957
Restructuring charges		145			—

Total cost of sales		148,133			132,957

Gross profit		130,509			124,841
Selling, general and administrative expenses		71,656			68,630
Restructuring charges and asset impairments		4,415			—

Total selling, general and administrative expenses		76,071			68,630

Operating income		54,438			56,211
Other income (expense):
Interest expense, net		(8,824	)		(10,411	)
Amortization of deferred financing fees		(1,323	)		(912	)
Loss on extinguishment of debt		(171	)		—
Other, net		355			491

Income from continuing operations before income taxes		44,475			45,379
Income taxes		16,011			16,564

Income from continuing operations		28,464			28,815
Discontinued operations, net of income taxes		41			(82	)

Net income	$	28,505		$	28,733

Basic earnings per common share from continuing operations	$	0.31		$	0.27
Discontinued operations		0.00			(0.00	)

Basic earnings per common share	$	0.31		$	0.27

Diluted earnings per common share from continuing operations	$	0.31		$	0.27
Discontinued operations	$	0.00			(0.00	)

Diluted earnings per common share	$	0.31		$	0.27

Weighted average basic shares outstanding		90,729			105,719
Weighted average diluted shares outstanding		92,039			107,010

See accompanying notes to the unaudited consolidated financial statements.

APOGENT TECHNOLOGIES INC. AND SUBSIDIARIES

Consolidated Statement of Shareholders’ Equity

For the Three Months Ended December 31, 2003

(in thousands)

(unaudited)


	Common Stock		Equity Rights		Additional Paid-In Capital			Retained Earnings		Accumulated Other Comprehensive Income (Loss)			Treasury Common Stock			Total Shareholders’ Equity
Balance at September 30, 2003	$	1,071	$	—	$	270,119		$	737,045	$	(3,127	)	$	(281,061	)	$	724,047
Comprehensive income:
Net income		—		—		—			28,505		—			—			28,505
Translation adjustment		—		—		—			—		17,296			—			17,296
Unrealized loss on marketable security net of tax of $927		—		—		—			—		(1,529	)		—			(1,529	)

Total comprehensive income		—		—		—			28,505		15,767			—			44,272
Treasury shares purchased		—		—		—			—		—			(109,542	)		(109,542	)
Shares issued in connection with stock options		—		—		(2,134	)		—		—			5,657			3,523
Tax benefit related to stock options		—		—		1,025			—		—			—			1,025

Balance at December 31, 2003	$	1,071	$	—	$	269,010		$	765,550	$	12,640		$	(384,946	)	$	663,325

See accompanying notes to the unaudited consolidated financial statements.

APOGENT TECHNOLOGIES INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Three months ended December 31,
	2003			2002
Cash flows from operating activities:
Net income	$	28,505		$	28,733
Adjustments to reconcile net income to net cash provided by operating activities:
Discontinued operations		(41	)		82
Depreciation		11,584			10,604
Amortization		5,223			4,848
Gain on sale of property plant and equipment		25			(36	)
Asset impairments		2,156			—
Loss on extinguishment of debt		171			—
Deferred income taxes		5,500			—
Changes in assets and liabilities, net of effects of businesses acquired:
Decrease in accounts receivable		9,634			16,657
Increase in inventories		(1,915	)		(12,784	)
Increase (decrease) in prepaid expenses and other current assets		(1,965	)		634
Decrease in accounts payable		(10,349	)		(7,067	)
Increase (decrease) in income taxes payable		4,045			(3,384	)
Decrease in accrued payroll and employee benefits		(2,465	)		(3,780	)
Decrease in accrued interest expense		(5,198	)		(8,443	)
Increase (decrease) in restructuring reserve		1,318			(451	)
Increase (decrease) in other current liabilities		(1,048	)		2,753
Net change in other assets and liabilities		(4,052	)		(1,103	)

Net cash provided by operating activities		41,128			27,263

Cash flows from investing activities:
Capital expenditures		(5,486	)		(9,897	)
Proceeds from sales of property, plant and equipment		1,967			254
Net payments for businesses acquired		(856	)		(20,834	)
Other investing activities		2,000			2,070

Net cash used in investing activities		(2,375	)		(28,407	)

Cash flows from financing activities:
Proceeds from revolving credit facility		144,200			117,800
Principal payments on revolving credit facility		(417,506	)		(102,100	)
Proceeds from long-term debt		345,000			—
Proceeds from the exercise of stock options		3,523			1,734
Purchase of treasury stock		(109,542	)		(19,730	)
Financing fees paid		(9,797	)		—
Premium paid on extinguishment of debt and settlement of securities lending		(171	)		—
Other financing activities		—			(1,941	)

Net cash used in financing activities		(44,293	)		(4,237	)

Effect of exchange rate changes on cash and cash equivalents		31			4,809

Net decrease in cash and cash equivalents		(5,509	)		(572	)
Cash and cash equivalents at beginning of period		18,505			16,327

Cash and cash equivalents at end of period	$	12,996		$	15,755

See accompanying notes to unaudited consolidated financial statements.

APOGENT TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share data, or when specified in millions)

1. Basis of Presentation

In the opinion of management, all adjustments that are necessary for a fair statement of the results for the interim periods presented have been included, and are of a normal recurring nature. The results for the three-month period ended December 31, 2003 are not necessarily indicative of the results to be expected for the full fiscal year. The financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and note disclosures required by generally accepted accounting principles in the United States. These statements should be read in conjunction with the Company’s annual report on Form 10-K for the fiscal year ended September 30, 2003.

Historical financial information has been restated to reflect the discontinuance of the businesses conducted by the Company’s former Applied Biotech Inc., BioRobotics Group Ltd., and Vacuum Process Technology, Inc. subsidiaries.

2. Recent Accounting Pronouncements

Financial Accounting Standards Board Interpretation No. 45

Financial Accounting Standards Board Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” (“FIN 45”), requires that upon issuance of a guarantee, the guarantor must disclose and recognize a liability for the fair value of the obligation it assumes under that guarantee. The initial recognition and measurement requirement of FIN 45 is effective for guarantees issued or modified after December 31, 2002. After December 31, 2002, Apogent entered into a new guarantee and has modified another guarantee. The modified guarantee, as described below, is only subject to the disclosure requirements of FIN 45 as the guarantee represents contingent consideration in a business combination.

The disclosure requirements of FIN 45 are effective for interim and annual periods ending after December 15, 2002, and are applicable to our product warranty liability and certain guarantees issued before December 31, 2002. Apogent has two guarantees issued prior to December 31, 2002 and that are subject to the disclosure provisions of FIN 45 and one guarantee that was entered into after December 31, 2002.

Guarantees in existence prior to December 31, 2002 which have been modified. In addition to the purchase price paid for our Capitol Vial subsidiary, we agreed to pay the sellers three times the annual revenues of Capitol Vial for product sales to the U.S. Department of Defense over the twelve-month period ending December 31, 2006, or such other earlier date as Apogent and the sellers agree. The maximum earnout payment cannot exceed $9.0 million. To date, Capitol Vial does not have a contract with the U.S. Department of Defense, and no sales to the Department have been made.

Guarantees in existence prior to December 31, 2002 which have not been modified. Our joint venture partner, Kimble Glass, is entitled to a $4.0 million preferred distribution of the joint venture’s available cash in each of the three fiscal years ending November 30, 2002, 2003, and 2004. If the available cash from the joint venture is insufficient in any of these joint venture fiscal years to pay the $4.0 million preferred distribution to Kimble Glass, then we are obligated to pay Kimble Glass the difference. The joint venture distributes its available cash quarterly. Apogent’s equity in earnings in the joint venture is recorded after giving effect to the preferred distribution to Kimble Glass. Available earnings and cash generated by the joint venture have been sufficient to satisfy the preferred distribution requirement to date and are anticipated to be sufficient to satisfy this requirement until the requirement expires on November 30, 2004. As of December 31, 2003, the maximum amount that potentially could be owed by us to Kimble Glass through November 30, 2004 would not exceed $4.0 million.

APOGENT TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In thousands, except per share data, or when specified in millions)

Guarantees entered into after December 31, 2002. In January 2003, Apogent entered into an agreement with a customer that guarantees total payments of $1.7 million through December 2005. In return for the guarantee, Apogent is a participant in certain preferred marketing and sales promotion efforts of the customer. Apogent has recorded the transaction in accordance with the measurement and recognition requirements of FIN 45.

A rollforward of our product warranties is as follows:


	Beginning balance		Payments and other reductions		Additions		Ending balance
	(in thousands)
Year ended September 30, 2003	$	1,462	$	1,542	$	1,318	$	1,238
Three months ended December 31, 2003	$	1,238	$	189	$	88	$	1,137

In the normal course of business, Apogent indemnifies other parties, including customers, lessors, and parties to other transactions with Apogent, with respect to certain matters. In some of these contracts we have agreed to hold the other party harmless against losses arising from a breach of representations or covenants (including payment obligations), or from intellectual property infringement, or other claims made against certain parties. These agreements may limit the time within which an indemnification claim can be made and the amount of the claim. In addition, we have entered into indemnification agreements with our officers and directors.

It is not possible to determine the maximum potential amount under these indemnification agreements due to the unique facts and circumstances involved in each particular agreement. Historically, payments made under these agreements have not had a material impact on our operating results or financial position.

Financial Accounting Standards Board Interpretation No. 46(R)

In December 2003, the FASB issued FASB Interpretation No. 46(R), “Consolidation of Variable Interest Entities” (“FIN 46(R)”). FIN 46(R) clarifies situations in which entities shall be subject to consolidation. FIN 46 (R) is effective for all variable interest entities for periods ending after December 15, 2003. The Company has completed its evaluation and determined that it has no variable interest entities and that the adoption of FIN 46 (R) did not have a material impact on the Company’s financial statements.

APOGENT TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In thousands, except per share data, or when specified in millions)

3. Fair Value of Stock Options

The Company has adopted the disclosure provisions of SFAS No. 148, “Accounting for Stock-Based Compensation—Transition and Disclosure,” which is an amendment of SFAS No. 123, “Accounting for Stock-Based Compensation,” and continues to apply Accounting Principles Board Opinion No. 25 and related interpretations in accounting for its stock plans. If the Company had elected to recognize compensation cost for all of the plans based upon the fair value at the grant dates for awards under those plans, consistent with the method prescribed by SFAS No. 123, net income and earnings per share would have been changed to the pro forma amounts indicated below:


	Three Months Ended December 31,
	2003		2002
Net income, as reported	$	28,505	$	28,733
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		2,870		3,669

Pro forma net income	$	25,635	$	25,064

Earnings per share:
Basic-as reported	$	0.31	$	0.27

Basic-pro forma	$	0.28	$	0.24

Diluted-as reported	$	0.31	$	0.27

Diluted-pro forma	$	0.28	$	0.23

The fair value of the Company’s stock options used to compute pro forma net income and earnings per share disclosures is the estimated present value at grant date using the Black-Scholes option pricing model with the following weighted average assumptions:


	Three Months Ended December 31,
	2003		2002
Volatility	31.16	%	27.29	%
Risk-free rate	2.50	%	3.69	%
Expected holding period	8.0 years		8.0 years
Dividend yield	0.00	%	0.00	%

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. Because the Company’s options have characteristics significantly different from traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in the opinion of management, the existing models do not necessarily provide a reliable single value of its options and may not be representative of the future effects on reported net income or the future stock price of the Company.

APOGENT TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In thousands, except per share data, or when specified in millions)

4. Inventories

Inventories at December 31, 2003 and September 30, 2003 consisted of the following:


	December 31, 2003		September 30, 2003
Raw materials and supplies	$	73,291	$	66,816
Work in process		18,956		19,531
Finished goods		119,237		120,202

	$	211,484	$	206,549

5. Intangible Assets

Changes in foreign currency rates and final adjustments to purchase price of companies acquired during fiscal 2003 increased goodwill and intangible assets by approximately $12.5 million during the first three months of fiscal 2003. Unamortizable intangible assets (goodwill) were approximately $1,009.1 million as of December 31, 2003.

Intangible assets are as follows:


	December 31, 2003			September 30, 2003
Amortizable intangible assets
Proprietary technology	$	81,519		$	80,838
Trademarks		81,972			80,823
Patents		37,005			36,604
Licenses		12,139			11,913
Drawings		11,833			11,806
Non-compete agreements		11,053			11,007
Customer lists and other		21,461			21,342
Less: Accumulated amortization		(79,180	)		(74,841	)

Net amortizable intangible assets		177,802			179,492
Unamortizable intangible assets (goodwill)		1,009,072			999,243

	$	1,186,874		$	1,178,735

APOGENT TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In thousands, except per share data, or when specified in millions)

Intangible assets at December 31, 2003 by business segment are as follows:


	Clinical Group			Research Group			Consolidated
Proprietary technology	$	65,444		$	16,075		$	81,519
Less: Accumulated amortization		(21,504	)		(7,527	)		(29,031	)

Net proprietary technology		43,940			8,548			52,489

Trademarks		18,452			63,520			81,972
Less: Accumulated amortization		(2,342	)		(17,279	)		(19,621	)

Net trademarks		16,110			46,241			62,351

Patents		20,632			16,373			37,005
Less: Accumulated amortization		(5,364	)		(4,820	)		(10,184	)

Net patents		15,268			11,553			26,821

Licenses		9,710			2,429			12,139
Less: Accumulated amortization		(3,292	)		(336	)		(3,628	)

Net licenses		6,418			2,093			8,512

Drawings		—			11,833			11,833
Less: Accumulated amortization		—			(6,363	)		(6,363	)

Net drawings		—			5,470			5,470

Non-compete agreements		5,488			5,565			11,053
Less: Accumulated amortization		(3,858	)		(3,780	)		(7,638	)

Net non-compete agreements		1,630			1,785			3,416

Other identifiable intangible assets(a)		8,680			12,086			20,766
Less: Accumulated amortization		(875	)		(1,433	)		(2,308	)

Net other identifiable intangibles(a)		7,805			10,653			18,456

Net amortizable intangible assets(a)	$	91,171		$	86,343		$	177,514

Excess cost over net asset values acquired (goodwill)	$	513,386		$	495,686		$	1,009,072

Unamortizable intangible assets		513,386			495,686			1,009,072

Note (a): At December 31, 2003, Apogent Corporate Office had $695 of amortizable other identifiable intangible assets and $407 of related accumulated amortization that were not allocated to either of the business segments and are not included in the consolidated totals in the above table.

Amortization of intangible assets was $3,900 and $3,936 for the three months ended December 31, 2003 and 2002, respectively. Amortization expense relating to the existing identifiable intangible assets for each of the next five years (beginning with fiscal 2004) is expected to be $14,624, $13,953, $13,315, $12,782, and $11,664, respectively.

APOGENT TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In thousands, except per share data, or when specified in millions)

The changes in the carrying amount of goodwill for the three months ended December 31, 2003 are as follows:


	Clinical Group		Research Group		Consolidated
Balance at September 30, 2003	$	513,216	$	486,027	$	999,243
Adjustments to purchase price of prior year acquisition		—		856		856
Effect of change in foreign currencies		170		8,803		8,973

Balance at December 31, 2003	$	513,386	$	495,686	$	1,009,072

6. Long-Term Debt

Floating Rate CODES

On December 17, 2003, Apogent issued $300 million principal amount of its floating rate senior convertible contingent debt securities (floating rate CODES), and on December 30, 2003, Apogent issued an additional $45 million principal amount of these securities upon the exercise by the initial purchasers of their option to purchase up to an additional $45 million principal amount of floating rate CODES. The floating rate CODES are due in 2033.

The floating rate CODES bear interest at a floating rate equal to 3-month LIBOR minus 125 basis points (but not less than 0% per annum), payable in cash. The securities will be convertible into approximately 10,426 shares of Apogent common stock using a conversion price of $33.09 per share of common stock, subject to adjustment in certain circumstances (reflecting a premium of approximately 42%, relative to the closing price for Apogent’s common stock of $23.30 on December 11, 2003) under the following circumstances: (a) if the price of Apogent’s common stock exceeds the conversion price by 130% for at least 20 trading days during specified periods, (b) on or before December 15, 2028, if for at least 10 consecutive trading days, the securities trade below 98% of the average conversion value for the securities during that period, (c) if any of the credit ratings assigned to the securities fall below specified levels or other adverse credit rating developments occur, (d) if Apogent calls the securities for redemption, or (e) upon the occurrence of specified corporate transactions. Apogent may redeem all or some of the floating rate CODES on or after March 15, 2010 at par plus accrued and unpaid interest, if any, to the redemption date. Apogent may be required to repurchase the floating rate CODES, at the option of the holders, on December 15, 2008, March 15, 2010, December 15, 2014, December 15, 2019, December 15, 2024, and December 15, 2029, at par plus accrued and unpaid interest, if any, to the redemption date. Apogent may also be required to repurchase the securities upon a change in control at par plus accrued and unpaid interest, if any, to the redemption date. The floating rate CODES rank equal with all existing and future senior unsecured indebtedness and will be effectively junior to the outstanding indebtedness and other liabilities, including trade payables, of our non-guarantor subsidiaries.

2.25% CODES

On October 10, 2001, Apogent issued $300 million of senior convertible contingent debt securities (2.25% CODES). Although the 2.25% CODES will mature on October 15, 2021, the holders of the 2.25% CODES may require Apogent to repurchase all or any portion of them on October 20, 2004 and on October 15, 2006, 2011, and 2016, or upon a change of control. Apogent also has the right to redeem some or all of the 2.25% CODES on or after October 20, 2004. If the holders of the 2.25% CODES require Apogent to repurchase any or all of the 2.25% CODES on October 20, 2004, Apogent intends to refinance the obligation on a long-term basis using its revolving credit facility that matures in July 2008. Therefore, in accordance with FAS 6, Apogent has classified the 2.25% CODES as a non-current liability.

APOGENT TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In thousands, except per share data, or when specified in millions)

Although no conversion features outlined in our 2.25% CODES have been met, holders may convert any outstanding 2.25% CODES (or portions of outstanding 2.25% CODES) into approximately 9,839 shares of Apogent’s common stock at the current conversion price of approximately $30.49 per share (equal to a conversion rate of 32.7955 shares per $1,000 principal amount of 2.25% CODES) under the following circumstances: a) during any conversion period if the sale price of our common stock for at least 20 trading days in the 30 consecutive trading-day period ending on the first day of the conversion period was more than 120% of the conversion price on that thirtieth trading day; b) during the five business-day period following any 10 consecutive trading-day period in which the average of the trading prices for the 2.25% CODES for that 10 trading-day period was less than 105% of the average conversion value for the 2.25% CODES during that period; c) during any period in which the credit rating assigned to the 2.25% CODES by either Moody’s or Standard & Poor’s is lower than Ba2 or BB+, respectively, in which the credit rating assigned to the 2.25% CODES is suspended or withdrawn by either rating agency or in which neither rating agency continues to rate the 2.25% CODES or provide ratings services or coverage to Apogent; d) if the Company has called the 2.25% CODES for redemption; or e) upon the occurrence of certain corporate transactions.

7. Restructuring

During the three months ended December 31, 2003, the Company recorded additional restructuring charges of approximately $4,603 (approximately $2,981 net of tax), related to restructuring activities announced during fiscal 2003, for the consolidation of certain facilities and discontinuance of certain product lines due to product rationalizations. The restructuring charges were primarily classified as a component of selling, general, and administrative expenses which consisted of approximately $2,156 related to write-off of fixed assets and a $2,404 charge for the present value of future lease payments less assumed sublease amounts.

A rollforward of these restructuring activities is as follows:


	Severance(a)			Inventory(b)			Fixed Assets(b)			Facility Closure Costs(c)			Other			Total
2003 Restructuring charges	$	3,664		$	5,825		$	2,798		$	1,220		$	28		$	13,535
2003 Cash payments		(2,378	)		—			—			(1,070	)		—			(3,448	)
2003 Non-cash charges		—			(5,825	)		(2,798	)		—			(28	)		(8,651	)

September 30, 2003 balance	$	1,286		$	—		$	—		$	150		$	—		$	1,436
2004 Restructuring charges		—			—			2,156			2,404			—			4,560
2004 Cash payments		(603	)		—			—			—			—			(603	)
2004 Non-cash charges		—			—			(2,156	)		(447	)		—			(2,603	)

December 31, 2003 balance	$	683		$	—		$	—		$	2,107		$	—		$	2,790

(a)

Amount represents severance and termination costs for terminated employees (primarily sales, marketing and manufacturing personnel).

(b)

Amount represents write-offs of inventory and fixed assets associated with discontinued product lines.

(c)

Amount represents lease payments and other facility closure costs on exited operations.

As of December 31, 2003, included in the restructuring liability was a balance of $286 related to fiscal 2002 facility closure activities.

APOGENT TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In thousands, except per share data, or when specified in millions)

The Company expects to make future cash payments of approximately $1,700 associated with the above restructuring actions during fiscal 2004 and approximately $1,376 in fiscal 2005 and beyond.

8. Capital Stock

During the three months ended December 31, 2003, the Company purchased approximately 4,761 shares of its common stock at an average purchase price of $23.01 per share. The aggregate purchase price of the shares purchased was approximately $109,542.

9. Earnings Per Common Share

Basic earnings per common share is calculated by dividing net income by the weighted average number of common shares outstanding in the period presented. Diluted earnings per common share is calculated by dividing net income by the weighted average number of common shares outstanding plus the dilutive effects of potential common shares outstanding during the period. A reconciliation of shares used in calculating basic and diluted earnings per share follows (in thousands):


	Three Months Ended December 31,
	2003	2002
Basic	90,729	105,719
Effect of assumed conversion of employee stock options	1,310	2,189

Diluted	92,039	107,010

Excluded from the shares used in calculating the diluted earnings per common share in the above table are options to purchase 4,388 and 5,515 shares of common stock for the three months ended December 31, 2003 and 2002, respectively, as their effects would have been anti-dilutive. Also excluded from the shares used in calculating the diluted earnings per common share are approximately 9,839 shares of common stock issuable upon the conversion of our senior convertible contingent debt securities (2.25% CODES) based on a conversion price of $30.49 per share and approximately 10,426 shares of common stock issuable upon the conversion of our floating rate senior convertible contingent debt securities (floating rate CODES) based on a conversion price of $33.09 per share.

10. Segment Information

During fiscal 2003, we realigned our lines of business for financial reporting purposes. Our three former business segments (clinical diagnostics, labware and life sciences, and laboratory equipment) were reclassified into two business segments: Clinical Group and Research Group. The Clinical Group business segment is the former clinical diagnostics business segment. The Research Group business segment is composed of the former labware and life sciences and laboratory equipment business segments.

The Company’s operating subsidiaries are engaged primarily in the manufacture and sale of laboratory products in the United States and other countries. The Company’s products are categorized in the business segments of: the Clinical Group and the Research Group. Corporate office expenses are allocated to the business segments based on net sales. A description of the business segments follows:

Clinical Group

Our Clinical Group manufactures and sells products primarily to clinical and commercial laboratories and to scientific research and industrial customers. These products are used in a number of in vitro (out of body)

APOGENT TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In thousands, except per share data, or when specified in millions)

diagnostic applications, including specimen collection, specimen transportation, drug testing, therapeutic drug monitoring, and infectious disease detection. Other applications include human tissue research and human cell research, with an emphasis on cancer applications. Clinical group products include:

microscope slides, cover glass, and glass tubes and vials;

stains and reagents;

instrumentation for human tissue and cell research;

diagnostic test kits;

sample vials used in diagnostic testing;

culture media;

diagnostic reagents; and

other products used in detecting and/or monitoring the existence of infectious diseases and conditions, therapeutic drugs, and drugs of abuse.

Research Group

Our Research Group manufactures, distributes, and sells products primarily to the research and clinical life sciences industries. Applications of these products include general everyday laboratory uses as well as genetic research, protein research, high-throughput screening for drug discovery, cell culture, filtration, and other liquid handling. In addition, this segment manufactures, distributes, and sells basic laboratory equipment used by medical, pharmaceutical, and scientific laboratories. Research Group products include:

reusable plastic and glass products;

disposable plastic and glass products;

products for critical packaging applications;

environmental and safety containers;

liquid handling automation products;

glass liquid sample vials and seals used in various applications;

heating, cooling, shaking, stirring, mixing, and temperature control instruments; and

water purification systems.

APOGENT TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In thousands, except per share data, or when specified in millions)

The costs of some corporate functions are allocated to the business segments at predetermined rates that approximate cost. Information on these business segments is summarized as follows (unaudited):


	Clinical Group		Research Group		Eliminations			Total
Three Months Ended December 31, 2003

Revenues:
External customer	$	129,706	$	148,936	$	—		$	278,642
Intersegment		2,723		215		(2,938	)		—
Total revenues		132,429		149,151		(2,938	)		278,642
Gross profit		61,196		69,313		—			130,509
Selling general and administrative		30,215		45,856		—			76,071
Operating income		30,981		23,457		—			54,438
Depreciation and amortization		7,625		9,182		—			16,807
Interest income		18		19		—			37
Interest expense		4,125		4,736		—			8,861
Expenditures for property, plant and equipment		1,814		3,672		—			5,486
Segment assets (as of December 31, 2003)		943,342		1,009,478		—			1,952,820

Three Months Ended December 31, 2002

Revenues:
External customer	$	119,413	$	138,385	$	—		$	257,798
Intersegment		2,668		127		(2,795	)		—
Total revenues		122,081		138,512		(2,795	)		257,798
Gross profit		56,169		68,672		—			124,841
Selling general and administrative		27,986		40,644		—			68,630
Operating income		28,183		28,028		—			56,211
Depreciation and amortization		7,224		8,229		—			15,453
Interest income		15		18		—			33
Interest expense		4,844		5,600		—			10,444
Expenditures for property, plant and equipment		4,158		5,739		—			9,897

APOGENT TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In thousands, except per share data, or when specified in millions)

11. Supplementary Cash Flow Information


	Three Months Ended December 31,
	2003		2002
Supplemental disclosures of cash flow information:

Cash paid for acquisitions, net of cash acquired:
Tangible assets	$	—	$	1,964
Liabilities assumed		—		(2,113	)

Net assets assumed		—		(149	)
Goodwill and intangible assets		856		22,625
Debt issued		—		—
Less Cash acquired, if any		—		(1,642	)

Cash paid for acquisitions, net of cash acquired	$	856	$	20,834

Cash paid during the period for:
Interest	$	14,992	$	18,746

Income taxes	$	4,493	$	18,748

Capital lease obligations incurred	$	36	$	44

12. Condensed Consolidating Financial Statements

The Company’s material U.S. subsidiaries are guarantors of its revolving credit facility, 8% senior notes, both classes of CODES, and the 6¹/2% senior subordinated notes. Each of the subsidiary guarantors is 100% owned by the Company. The guarantees are full and unconditional as well as joint and several.

Below are the condensed consolidating balance sheets as of December 31, 2003 and September 30, 2003, and statements of income and statements of cash flows for the three months ended December 31, 2003 and 2002, respectively, of the Company and its subsidiaries, reflecting the subsidiary guarantors for the revolving credit facility, the 8% senior notes, both classes of CODES, and the 6¹/2% senior subordinated notes. For guarantors acquired during the period, the results of operations are included from the date of acquisition.

Certain general corporate expenses have not been allocated to the subsidiaries, and are included under the Apogent Technologies heading. As a matter of course, the Company retains certain assets and liabilities at the corporate level that are not allocated to the subsidiaries including, but not limited to, certain employee benefit, insurance, and tax liabilities. Income tax provisions for the subsidiaries are typically recorded using an estimate and finalized in total with an adjustment recorded at the corporate level. Certain debt under which Apogent is listed as the debtor has been allocated to the guarantor subsidiaries. Intercompany balances include receivables/payables incurred in the normal course of business in addition to investments and loans transacted between subsidiaries or with Apogent.

APOGENT TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In thousands, except per share data, or when specified in millions)

Condensed Consolidating Balance Sheets


	As of December 31, 2003
	Apogent Technologies			Guarantor Subsidiaries			Non Guarantor Subsidiaries			Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	12,433		$	—		$	7,500		$	(6,937	)	$	12,996
Accounts receivable, net		—			125,050			47,086			—			172,136
Inventories, net		1,263			154,124			56,097			—			211,484
Other current assets		881			28,819			19,575			—			49,275

Total current assets		14,577			307,993			130,258			(6,937	)		445,891
Property, plant and equipment, net		11,580			185,052			82,157			—			278,789
Intangible assets, net		288			961,367			225,219			—			1,186,874
Investment in subsidiaries		2,135,052			57,054			(1,185	)		(2,190,921	)		—
Other assets		31,691			8,399			1,176			—			41,266

Total assets	$	2,193,188		$	1,519,865		$	437,625		$	(2,197,858	)	$	1,952,820

Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	1,226		$	35,548		$	10,647		$	(6,937	)	$	40,484
Short-term debt and current portion of long-term debt		—			14,218			42			—			14,260
Income taxes payable		151			18,379			9,721			(2,378	)		25,873
Accrued expenses and other current liabilities		17,626			20,345			37,399			—			75,370

Total current liabilities		19,003			88,490			57,809			(9,315	)		155,987

Long-term debt, less current portion		—			962,413			31			—			962,444
Deferred income taxes		127,058			—			16,125			—			143,183
Other liabilities		23,606			2,540			1,735			—			27,881
Net intercompany payable/(receivable)		865,504			(1,188,594	)		323,055			35			—
Commitments and contingent liabilities		—			—			—			—			—
Shareholders’ equity
Preferred stock		—			—			—			—			—
Common stock		1,071			—			—			—			1,071
Equity rights		—			—			—			—			—
Additional paid-in-capital		248,538			2,114,319			78,460			(2,172,307	)		269,010
Retained earnings (deficit)		1,234,033			(479,515	)		27,303			(16,271	)		765,550
Accumulated other comprehensive income (loss)		(15,929	)		20,212			8,357			—			12,640
Treasury stock (at cost)		(309,696	)		—			(75,250	)		—			(384,946	)

Total shareholders’ equity		1,158,017			1,655,016			38,870			(2,188,578	)		663,325

Total liabilities and shareholders’ equity	$	2,193,188		$	1,519,865		$	437,625		$	(2,197,858	)	$	1,952,820

APOGENT TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In thousands, except per share data, or when specified in millions)

Condensed Consolidating Balance Sheets—(Continued)


	As of September 30, 2003
	Apogent Technologies			Guarantor Subsidiaries			Non Guarantor Subsidiaries			Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	15,999		$	—		$	5,916		$	(3,410	)	$	18,505
Accounts receivable, net		—			132,755			46,768			—			179,523
Inventories, net		1,263			151,880			53,405			—			206,548
Other current assets		4,524			25,549			19,379			—			49,452

Total current assets		21,786			310,184			125,468			(3,410	)		454,028
Property, plant and equipment, net		12,045			191,736			78,971			—			282,752
Intangible assets, net		299			963,889			214,547			—			1,178,735
Investment in subsidiaries		2,123,714			57,054			(1,185	)		(2,179,583	)		—
Other assets		23,087			10,244			1,145			—			34,476

Total assets	$	2,180,931		$	1,533,107		$	418,946		$	(2,182,993	)	$	1,949,991

Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	1,061		$	40,168		$	12,401		$	(3,410	)	$	50,220
Short-term debt and current portion of long-term debt		—			15,023			59			—			15,082
Income taxes payable		12,376			(541	)		10,596			(2,378	)		20,053
Accrued expenses and other current liabilities		24,515			22,256			37,198			—			83,969

Total current liabilities		37,952			76,906			60,254			(5,788	)		169,324

Long-term debt, less current portion		—			891,959			30			—			891,989
Deferred income taxes		122,167			93			15,423			—			137,683
Other liabilities		22,515			2,814			1,619			—			26,948
Net intercompany payable/(receivable)		961,926			(1,267,849	)		305,888			35			—
Commitments and contingent liabilities		—			—			—			—			—
Shareholders’ equity
Preferred stock		—			—			—			—			—
Common stock		1,071			—			—			—			1,071
Equity rights		—			—			—			—			—
Additional paid-in-capital		249,648			2,102,980			78,460			(2,160,969	)		270,119
Retained earnings (deficit)		1,016,019			(287,702	)		24,999			(16,271	)		737,045
Accumulated other comprehensive income (loss)		(24,556	)		13,906			7,523			—			(3,127	)
Treasury stock (at cost)		(205,811	)		—			(75,250	)		—			(281,061	)

Total shareholders’ equity		1,036,371			1,829,184			35,732			(2,177,240	)		724,047

Total liabilities and shareholders’ equity	$	2,180,931		$	1,533,107		$	418,946		$	(2,182,993	)	$	1,949,991

APOGENT TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In thousands, except per share data, or when specified in millions)

Condensed Consolidating Statements of Income


	For the Three Months Ended December 31, 2003
	Apogent Technologies			Guarantor Subsidiaries			Non Guarantor Subsidiaries			Eliminations			Consolidated
Net sales	$	—		$	231,169		$	69,526		$	(22,053	)	$	278,642
Cost of sales		—			127,303			42,883			(22,053	)		148,133

Gross profit		—			103,866			26,643			—			130,509
Selling, general and administrative expenses		8,231			50,196			17,644			—			76,071

Operating income		(8,231	)		53,670			8,999			—			54,438
Other income (expense):
Interest expense		—			(8,772	)		(52	)		—			(8,824	)
Other, net		(1,473	)		114			220			—			(1,139	)

Income before income taxes and discontinued operations		(9,704	)		45,012			9,167			—			44,475
Income taxes		(3,494	)		16,205			3,300			—			16,011

Income from continuing operations		(6,210	)		28,807			5,867			—			28,464
Income from discontinued operations, net of tax		—			12			29			—			41

Net income (loss)	$	(6,210	)	$	28,819		$	5,896		$	—		$	28,505


	For the Three Months Ended December 31, 2002
	Apogent Technologies			Guarantor Subsidiaries			Non Guarantor Subsidiaries			Eliminations			Consolidated
Net sales	$	—		$	217,970		$	59,998		$	(20,170	)	$	257,798
Cost of sales		—			115,727			36,390			(19,160	)		132,957

Gross profit		—			102,243			23,608			(1,010	)		124,841
Selling, general and administrative expenses		7,254			46,441			14,935			—			68,630

Operating income		(7,254	)		55,802			8,673			(1,010	)		56,211
Other income (expense):
Interest expense		—			(10,348	)		(63	)		—			(10,411	)
Other, net		—			(271	)		(150	)		—			(421	)

Income before income taxes and discontinued operations		(7,254	)		45,183			8,460			(1,010	)		45,379
Income taxes		(3,016	)		16,492			3,088			—			16,564

Income from continuing operations		(4,238	)		28,691			5,372			(1,010	)		28,815
Loss from discontinued operations		—			407			(489	)		—			(82	)

Net income (loss)	$	(4,238	)	$	29,098		$	4,883		$	(1,010	)	$	28,733

APOGENT TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In thousands, except per share data, or when specified in millions)

Condensed Consolidating Statements of Cash Flows


	For the Three Months Ended December 31, 2003
	Apogent Technologies			Guarantor Subsidiaries			Non Guarantor Subsidiaries			Eliminations		Consolidated
Cash flows provided by (used in) operating activities:	$	102,575		$	(64,923	)	$	3,476		$	—	$	41,128

Cash flows from investing activities:
Capital expenditures		(122	)		(3,456	)		(1,908	)		—		(5,486	)
Proceeds from sales of property, plant and equipment		—			1,963			4			—		1,967
Net payments for businesses acquired		—			(856	)		—			—		(856	)
Other investing activities		—			2,000			—			—		2,000

Net cash used in investing activities		(122	)		(349	)		(1,904	)		—		(2,375	)

Cash flows from financing activities:
Proceeds from long-term debt		—			489,200			—			—		489,200
Principal payments on long-term debt		—			(417,487	)		(19	)		—		(417,506	)
Premium paid on extinguishment of debt and settlement of securities lending		—			(171	)							(171	)
Proceeds from the exercise of stock options and stock purchase program		3,523			—			—			—		3,523
Purchase of treasury stock		(109,542	)		—			—			—		(109,542	)
Other		—			(9,797	)		—			—		(9,797	)

Net cash provided by (used in) financing activities		(106,019	)		61,745			(19	)		—		(44,293	)
Effect of exchange rate on cash and cash equivalents		—			—			31			—		31

Net increase (decrease) in cash and cash equivalents		(3,566	)		(3,527	)		1,584			—		(5,509	)
Cash and cash equivalents at beginning of year		15,999			(3,410	)		5,916			—		18,505

Cash and cash equivalents at end of year	$	12,433		$	(6,937	)	$	7,500		$	—	$	12,996

Supplemental disclosures of cash flow information
Cash paid during the year for:
Interest	$	—		$	14,913		$	79		$	—	$	14,992

Income taxes	$	1,217		$	—		$	3,276		$	—	$	4,493

Capital lease obligations incurred	$	—		$	36		$	—		$	—	$	36

APOGENT TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In thousands, except per share data, or when specified in millions)

Condensed Consolidating Statements of Cash Flows—(Continued)


	For the Three Months Ended December 31, 2002
	Apogent Technologies			Guarantor Subsidiaries			Non Guarantor Subsidiaries			Eliminations		Consolidated
Cash flows provided by (used in) operating activities:	$	13,706		$	8,626		$	4,931		$	—	$	27,263

Cash flows from investing activities:
Capital expenditures		(377	)		(5,349	)		(4,171	)		—		(9,897	)
Proceeds from sales of property, plant and equipment		—			153			101			—		254
Net payments for businesses acquired		—			(20,834	)		—			—		(20,834	)
Other investing activities		—			2,070			—			—		2,070

Net cash used in investing activities		(377	)		(23,960	)		(4,070	)		—		(28,407	)

Cash flows from financing activities:
Proceeds from long-term debt		—			117,800			—			—		117,800
Principal payments on long-term debt		—			(102,100	)		—			—		(102,100	)
Proceeds from the exercise of stock options and stock purchase program		1,734			—			—			—		1,734
Purchase of treasury stock		(19,730	)		—			—			—		(19,730	)
Other		45			—			(1,986	)		—		(1,941	)

Net cash provided by (used in) financing activities		(17,951	)		15,700			(1,986	)		—		(4,237	)
Effect of exchange rate on cash and cash equivalents		—			—			4,809			—		4,809

Net increase (decrease) in cash and cash equivalents		(4,622	)		366			3,684			—		(572	)
Cash and cash equivalents at beginning of year		19,889			(7,553	)		3,991			—		16,327

Cash and cash equivalents at end of year	$	15,267		$	(7,187	)	$	7,675		$	—	$	15,755

Supplemental disclosures of cash flow information
Cash paid during the year for:
Interest	$	—		$	18,659		$	87		$	—	$	18,746

Income taxes	$	15,702		$	—		$	3,046		$	—	$	18,748

Capital lease obligations incurred	$	—		$	34		$	10		$	—	$	44

ITEM 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

Apogent is a leading developer and manufacturer of products for the clinical and research industries. We are organized into two business segments, the Clinical Group and the Research Group, to serve our customers in these industries.

Net sales for the first quarter of fiscal 2004 were $278.6 million, an increase of $20.8 million or 8.1% over the same period of fiscal 2003. For the quarter ended December 31, 2003, Apogent’s net income and diluted earnings per share from continuing operations were $28.5 million and $0.31, respectively. These results compare with net income and diluted earnings per share from continuing operations for the first quarter of fiscal 2003 of $28.8 million and $0.27, respectively.

During the first quarter of fiscal 2004, Apogent completed the restructuring activities announced in January 2003, and incurred special charges associated with these consolidation activities. In December 2003, Apogent issued $345.0 million floating rate senior convertible contingent debt securities (floating rate CODES), and used the proceeds to repurchase Apogent stock and repay amounts previously borrowed under our revolving credit facility to repurchase the Apogent 8% senior notes tendered pursuant to the tender offer and consent solicitation for these notes initiated in September 2003. As a result, we incurred a charge related to this debt extinguishment.

Business

Our subsidiaries manufacture most of the products we sell. Over 50% of our sales are made through distributors. In addition to distributors, our customers include pharmaceutical and biotechnology companies, clinical, academic, research and industrial laboratories, original equipment manufacturers, and others. Approximately 71% of our consolidated net sales during the first quarter of fiscal 2004 were generated from sales transactions with customers within the U.S. and the remainder was generated internationally, mostly from Europe.

The end-users of our products include scientists and lab technicians in the fields of life science research, clinical diagnostics, and basic scientific research. These individuals typically work at pharmaceutical companies, other types of manufacturing companies, hospitals, scientific research organizations, academic and government institutions, and clinical reference laboratories.

Business Strategy

Our goal is to consistently grow our worldwide market presence, net sales, earnings, and cash flows. Key elements of our strategy continue to be:

Grow earnings while maintaining a prudent capital structure;

Develop profitable new products;

Increase sales to existing and new customers;

Improve operating efficiencies; and

Make strategic acquisitions.

Subsidiaries

During the second quarter of fiscal 2003, we realigned our lines of business for financial reporting purposes. Our three former business segments (clinical diagnostics, labware and life sciences, and laboratory equipment) were reclassified into two business segments: Clinical Group and Research Group. The Clinical Group business segment is the former clinical diagnostics business segment. The Research Group business segment is composed of the former labware and life sciences and laboratory equipment business segments.

When we use the terms “we” or “our” in this report, we are referring to Apogent Technologies Inc. and its subsidiaries. Our fiscal year ends on September 30, and, accordingly, all references to quarters refer to our fiscal quarters. The quarters ended December 31, 2003 and 2002 are the Company’s first quarters of fiscal 2004 and 2003, respectively. This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” should be read in conjunction with the Company’s annual report on Form 10-K for the fiscal year ended September 30, 2003.

Results of Operations

Three Months Ended December 31, 2003 Compared to the Three Months Ended December 31, 2002

Net Sales


	Three Months Ended December 31,				Dollar Change		Percent Change
	2003		2002		Dollar Change		Percent Change
			(in thousands)
Net Sales
Clinical Group	$	129,706	$	119,413	$	10,293	8.6	%
Research Group		148,936		138,385		10,551	7.6	%

Total Net Sales	$	278,642	$	257,798	$	20,844	8.1	%

Overall Company. Net sales for the first quarter of fiscal 2004 were $278.6 million, an increase of $20.8 million or 8.1% over the same period of fiscal 2003.

Clinical Group. Increased net sales in the Clinical Group resulted primarily from: (a) increased net sales of existing products (approximately $3.6 million), (b) increased net sales of new products developed by us (approximately $3.4 million), (c) foreign currency fluctuations (approximately $2.6 million), (d) price increases (approximately $0.8 million), and (e) net sales of products of acquired companies, including base period adjustments (approximately $0.4 million). Net sales were partially reduced due to a decrease in net sales of discontinued product lines (approximately $0.4 million).

The following factors contributed to the growth in Clinical Group net sales:

Sales of new proprietary diagnostic test products;

Sales of flu test kits;

Increased average selling prices of OEM consumable glass products; and

A positive impact from foreign currency fluctuations.

Looking forward, we anticipate that, excluding foreign currency impacts, sales in fiscal 2004 will grow modestly as we seek to expand our sales through distributors and focus on growing our business organically.

Research Group. Increased net sales in the Research Group resulted primarily from: (a) increased net sales of new products developed by us (approximately $5.4 million), (b) net sales of products of acquired companies, (approximately $6.2 million), (c) foreign currency fluctuations (approximately $4.1 million), and (d) price increases (approximately $1.2 million). Net sales were partially reduced by a decrease in net sales of existing products (approximately $4.4 million) and a decrease in net sales of discontinued product lines (approximately $1.9 million).

The following factors contributed to the growth in Research Group net sales:

Sales by newly-acquired businesses, primarily our Quality Scientific Plastics (QSP) subsidiary acquired in August 2003;

An increase in sales of newly developed laboratory equipment and life science consumable products;

Sales of new outdoor consumer bottles; and

A positive impact from foreign currency fluctuations.

The increase in net sales is partially offset by a decrease in sales of life science instrumentation, general labware consumables, and sales of discontinued products related to the restructuring activities announced in fiscal 2003.

Looking forward, we anticipate that, excluding foreign currency impacts, sales in fiscal 2004 will grow modestly as we seek to focus on growing our business organically and to a lesser extent from recently completed acquisitions. We expect sales of equipment by our Research Group to remain flat.

Gross Profit


	Three Months Ended December 31, 2003		Percent of Sales		Three Months Ended December 31, 2002		Percent of Sales		Dollar Change		Percent Change
	(in thousands)
Gross Profit
Clinical Group	$	61,196	47.2	%	$	56,169	47.0	%	$	5,027	8.9	%
Research Group		69,313	46.5	%		68,672	49.6	%		641	0.9	%

Total Gross Profit	$	130,509	46.8	%	$	124,841	48.4	%	$	5,668	4.5	%

Overall Company. Gross profit for the first quarter of fiscal 2004 was $130.5 million, or 46.8% of net sales, as compared to $124.8 million, or 48.4% of net sales for the same period of fiscal 2003.

Clinical Group. Gross profit dollars increased and gross margin percentage remained relatively consistent. Increased gross profit in the Clinical Group resulted primarily from: (a) increases in volume (approximately $2.1 million), (b) the effects of new products (approximately $1.7 million), (c) foreign currency fluctuations (approximately $1.0 million), (d) price increases (approximately $0.8 million), and (d) the effects of acquired companies (approximately $0.1 million). Gross profit was partially reduced by: (a) increased manufacturing overhead (approximately $0.4 million), (b) increases in restructuring charges (approximately $0.2 million), and (c) product mix (approximately $0.1 million).

The factors described above that contributed to our growth in net sales also contributed to higher gross profit.

We anticipate that gross profit dollars will continue to grow in proportion with our growth in net sales as described above. We expect that our gross margin percentage will remain relatively consistent, as decreases in gross margin percentage caused by modest shifts from direct sales to sales through distributors at our Remel subsidiary will be offset by internal cost saving strategies aimed at increasing gross margin percentage.

Research Group. Gross profit dollars increased, but gross margin percentage decreased from 49.6% to 46.5%. Increased gross profit in the Research Group resulted primarily from: (a) the effects of new products (approximately $2.0 million), (b) product mix (approximately $1.4 million), (c) the effects of acquired companies (approximately $1.3 million), (d) price increases (approximately $1.2 million), and (e) foreign currency fluctuations (approximately $1.1 million). Gross profit was partially reduced by: (a) decreases in volume (approximately $3.8 million) and (b) increased manufacturing overhead (approximately $2.6 million).

The factors described above that contributed to our growth in net sales also contributed to the change in gross profit.

The decrease in gross margin percentage is primarily due to the acquisition of QSP and the unfavorable impact of foreign exchange on average selling prices compared to the impact on costs.

Selling, General and Administrative Expenses


	Three Months Ended December 31,				Dollar Change		Percent Change
	2003		2002		Dollar Change		Percent Change
			(in thousands)
Selling, General and Administrative Expenses
Clinical Group	$	30,215	$	27,986	$	2,229	8.0	%
Research Group		41,441		40,644		797	2.0	%
Restructuring charges and asset impairments
Research Group		4,415		—		4,415

Total Selling, General and Administrative Expenses	$	76,071	$	68,630	$	7,441	10.8	%

Overall Company. Selling, general and administrative expenses for the first quarter of fiscal 2004 were $76.1 million, an increase of $7.4 million, or 10.8%, over the same period of fiscal 2003.

Clinical Group. Increased selling, general and administrative expenses in the Clinical Group resulted primarily from: (a) foreign currency fluctuations (approximately $0.8 million), (b) marketing expenses (approximately $0.7 million), (c) research and development expenses (approximately $0.5 million), and (d) administrative, finance and legal expenses (approximately $0.3 million). Selling, general and administrative expenses were partially decreased by lower amortization expenses (approximately $0.1 million).

The following factors contributed to the increase in selling, general and administrative expenses:

Increased payroll and other employee related expenses from higher headcounts;

Increased consulting and outside service expenses;

Increased product marketing and advertising expenses;

Increased depreciation due to the impact of prior year capital expenditures;

Increased pension, insurance, and workers’ compensation costs;

Increased travel expenses; and

A negative impact from foreign currency fluctuations.

Research Group. Increased selling, general and administrative expenses in the Research Group resulted primarily from: (a) higher restructuring expenses (approximately $4.4 million), (b) foreign currency fluctuations (approximately $1.5 million), and (c) expenses of acquired businesses (approximately $0.6 million). Selling, general and administrative expenses were partially decreased by: (a) research and development expenses (approximately $0.5 million), (b) administrative, finance and legal expenses (approximately $0.4 million), (c) lower marketing expenses (approximately $0.3 million), and (d) lower amortization expenses ($0.1 million).

The following factors contributed to the increase in selling, general and administrative expenses:

Increased payroll and other employee-related expenses from higher headcounts due to the acquisition of QSP;

Increased restructuring expenses;

Increased travel expenses;

Increased pension, insurance, and workers’ compensation costs; and

A negative impact from foreign currency fluctuations.

These increases were offset partially by decreases in freight charges, depreciation expenses, and marketing materials expenses.

Operating Income


	Three Months Ended December 31,				Dollar Change			Percent Change
	2003		2002		Dollar Change			Percent Change
			(in thousands)
Operating Income
Clinical Group	$	30,981	$	28,183	$	2,798		9.9	%
Research Group		23,457		28,028		(4,571	)	-16.3	%

Total Operating Income	$	54,438	$	56,211	$	(1,773	)	-3.2	%

Operating income for the first quarter of fiscal 2004 was $54.4 million, a decrease of $1.8 million, or 3.2%, compared to $56.2 million for the same period of fiscal 2003.

Interest Expense

Interest expense, net, was $8.8 million for the first quarter of fiscal 2004, as compared to $10.4 million for the same period of fiscal 2002. The decrease in interest expense is primarily due to a reduction in the Company’s weighted average interest rate offset in part by an increase in our outstanding debt obligations.

Other Income

Other income was $0.4 million for the first quarter of fiscal 2004, as compared to other income of $0.5 million in the same period of fiscal 2003.

Income Taxes

Taxes on income from continuing operations for the first quarter of fiscal 2004 were $16.0 million, a decrease of $0.6 million from the same period of fiscal 2002. The decrease in income taxes resulted from both a decrease in net income and a decrease in our effective tax rate to 36.0% from 36.5%.

Income from Continuing Operations

Income from continuing operations for the first quarter of fiscal 2004 was $28.5 million, a decrease of $0.3 million, from $28.8 million for the same period of fiscal 2003.

Discontinued Operations

Income from discontinued operations, net of tax, for the first quarter of fiscal 2004 was $0.04 million, as compared to a loss of $0.08 million for the same period of fiscal 2003.

Net Income

Net income for the first quarter of fiscal 2004 was $28.5 million, as compared to $28.7 million for the same period of fiscal 2003.

Restructuring Charges

During the three months ended December 31, 2003, the Company recorded restructuring charges of approximately $4.6 million (approximately $3.0 million net of tax), related to restructuring activities announced during fiscal 2003, for the consolidation of certain facilities and discontinuance of certain product lines due to product rationalizations. The restructuring charges were primarily classified as a component of selling, general, and administrative expenses, which consisted of approximately $2.2 million related to the write-off of fixed assets and a $2.4 million charge for the present value of future lease payments less assumed sublease amounts.

A rollforward of these restructuring activities is as follows:


	Severance(a)			Inventory(b)			Fixed Assets(b)			Facility Closure Costs(c)			Other			Total
2003 Restructuring charges	$	3,664		$	5,825		$	2,798		$	1,220		$	28		$	13,535
2003 Cash payments		(2,378	)		—			—			(1,070	)		—			(3,448	)
2003 Non-cash charges		—			(5,825	)		(2,798	)		—			(28	)		(8,651	)

September 30, 2003 balance	$	1,286		$	—		$	—		$	150		$	—		$	1,436
2004 Restructuring charges		—			—			2,156			2,404			—			4,560
2004 Cash payments		(603	)		—			—			—			—			(603	)
2004 Non-cash charges		—			—			(2,156	)		(447	)		—			(2,603	)

December 31, 2003 balance	$	683		$	—		$	—		$	2,107		$	—		$	2,790

(a)

Amount represents severance and termination costs for terminated employees (primarily sales, marketing and manufacturing personnel).

(b)

Amount represents write-offs of inventory and fixed assets associated with discontinued product lines.

(c)

Amount represents lease payments and other facility closure costs on exited operations.

As of December 31, 2003, included in the restructuring liability was a balance of $0.3 million related to fiscal 2002 facility closure activities.

The Company expects to make future cash payments of approximately $1.7 million associated with the above restructuring actions during fiscal 2004 and approximately $1.4 million in fiscal 2005 and beyond.

Liquidity and Capital Resources

Our capital requirements arise principally from indebtedness incurred in connection with our working capital needs, primarily related to inventory and accounts receivable, our capital expenditures, primarily related to purchases of machinery and molds, our stock repurchase program, the purchase of various businesses and product lines in execution of our acquisition strategy, the periodic expansion and/or acquisition of physical facilities, funding of pension plan obligations, and our obligation to pay rent under the sale/leaseback facility.

Net cash provided by operating activities was $41.1 million for the first quarter of fiscal 2004 as compared to $27.3 million for the same period during fiscal 2003. The cash outflow resulting from the net change in working capital, net of the effects of acquisitions and divestitures, was $12.0 million for the three months ended December 31, 2003. This cash outflow was primarily the result of reductions in accounts payable (approximately $10.3 million), accrued interest (approximately $5.2 million), payroll and payroll related accruals (approximately $2.5 million) due to the timing of cash payments, a decrease in our accrued bonus (approximately $1.3 million), and increases in inventories (approximately $1.9 million) due to the timing of manufacturing cycles, primarily in our Research Group. The cash outflows were partially offset by decreases in accounts receivable (approximately $9.6 million) due primarily to improved timing of customer payments, the timing of cash payments made on income taxes (approximately $4.0 million), and an increase in our restructuring reserve (approximately $1.3 million).

Net cash used in investing activities was $2.4 million for the first quarter of fiscal 2004, as compared to $28.4 million for the same period of fiscal 2003. Net cash used in investing activities for the first quarter of fiscal 2004 primarily reflects capital expenditures of $5.5 million, offset in part by proceeds received from a distribution of $2.0 million received from an equity investment in a joint venture and proceeds from the sale of property, plant and equipment. Apogent has no current material commitments, but does expect to incur approximately $50.0 million for capital expenditures during the next twelve months.

Net cash used in financing activities was $44.3 million for the first quarter of fiscal 2004, as compared to cash provided by financing activities of $4.2 million for the same period of fiscal 2003. The net cash used in financing activities for the first quarter of fiscal 2004 primarily resulted from $273.3 million of net payments on the revolving credit facility, $109.5 million in treasury stock purchases, and financing fees of $14.9 million paid in connection with the issuance of the floating rate CODES offset by $345.0 million in gross proceeds received on the issuance of floating rate CODES.

We believe that the financing actions described above are in alignment with our strategic financial goals to productively use our cash flow and credit resources to grow shareholder value. Specifically, our level of investment in acquisitions has been reduced this year from historical levels because fewer attractive acquisition opportunities have become available. At the same time, we have found our own stock to be an attractive and accretive investment opportunity. Therefore, using a combination of our cash flow from operations and our ability to supplement that by borrowing at historically low rates of interest, we have been repurchasing Apogent stock.

During the three months ended December 31, 2003, the Company purchased approximately 4.8 million shares of its common stock at an average purchase price of $23.01 per share. The aggregate purchase price of the shares purchased was approximately $109.5 million. Our board of directors has authorized the repurchase of up to 6.8 million additional shares through September 2005. Shares may be repurchased at times and prices deemed appropriate by the Company. We may use cash generated from operations as well as available credit facilities in order to finance the repurchase of these shares.

On December 17, 2003, we issued $300.0 million principal amount of its floating rate senior convertible contingent debt securities (floating rate CODES), and on December 30, 2003, Apogent issued an additional $45.0 million principal amount of these securities upon the exercise by the initial purchasers of their option to purchase up to an additional $45.0 million principal amount of floating rate CODES. The floating rate CODES are due in 2033. The floating rate CODES bear interest at a floating rate equal to 3-month LIBOR minus 125 basis points (but not less than 0% per annum), payable in cash. The securities will be convertible into 10.4 million shares of Apogent common stock at a conversion price of $33.09 per share of common stock, subject to adjustment in certain circumstances (reflecting a premium of approximately 42%, relative to the closing price for our common stock of $23.30 on December 11, 2003): (a) if the price of Apogent’s common stock exceeds the conversion price by 130% for at least 20 trading days during specified periods, (b) on or before December 15, 2028, if for at least 10 consecutive trading days, the securities trade below 98% of the average conversion value for the securities during that period, (c) if any of the credit ratings assigned to the securities fall below specified levels or other adverse credit rating developments occur, (d) if Apogent calls the securities for redemption, or (e) upon the occurrence of specified corporate transactions. Apogent may redeem all or some of the floating rate CODES on or after March 15, 2010 at par plus accrued and unpaid interest, if any, to the redemption date. Apogent may be required to repurchase the floating rate CODES, at the option of the holders, on December 15, 2008, March 15, 2010, December 15, 2014, December 15, 2019, December 15, 2024, and December 15, 2029, at par plus accrued and unpaid interest, if any, to the redemption date. Apogent may also be required to repurchase the securities upon a change in control at par plus accrued and unpaid interest, if any, to the redemption date. The floating rate CODES rank equal with all existing and future senior unsecured indebtedness and are effectively junior to the outstanding indebtedness and other liabilities, including trade payables, of our non-guarantor subsidiaries.

On July 29, 2003, Apogent and three of our domestic subsidiaries, as co-borrowers, entered into a new $500 million revolving credit facility that matures on July 29, 2008, and terminated our former revolving credit facility, as amended, that was scheduled to mature on December 1, 2005. The new revolving credit facility contains essentially the same terms and conditions as our previous credit facility, as amended. As of December 31, 2003, the covenants under our revolving credit facility limited our capacity for additional borrowings, other than to replace our existing indebtedness, to approximately $154.0 million, even though total availability under our revolving credit facility was approximately $441.0 million.

On June 2, 2003, we issued $250.0 million aggregate principal amount of 6¹/2% senior subordinated notes due 2013. We used the proceeds from the 6¹/2% senior subordinated notes to repay borrowings under our revolving credit facility (including borrowings used to repurchase shares of our common stock pursuant to the Dutch Auction tender offer described above), to repurchase shares on the open market and otherwise, and for general corporate purposes. We may redeem some or all of the 6¹/2% senior subordinated notes at any time on or after May 15, 2008. The holders may require us to purchase all or a portion of their 6¹/2% senior subordinated notes at 101% upon a change in control event. The notes are Apogent’s general unsecured obligations and guaranteed on a senior subordinated basis by our domestic subsidiaries that have guaranteed, and our subsidiaries that will in the future guarantee, obligations under our revolving credit facility. The 6¹/2% senior subordinated notes and the guarantees rank junior in right of payment to all of Apogent’s and each subsidiary guarantor’s existing and future senior debt, and rank equally in right of payment with all of Apogent’s and each subsidiary guarantor’s senior subordinated debt.

On October 10, 2001, we issued $300.0 million of senior convertible contingent debt securities (2.25% CODES). The 2.25% CODES have a fixed interest rate of 2.25% per annum, payable on April 15 and October 15 of each year. The 2.25% CODES provide that we are required to pay contingent interest during a six-month interest payment period if the average trading price of a 2.25% CODES for the five trading days ending on the second trading day immediately preceding the beginning of the relevant six-month period equals 120% or more of the principal amount of the 2.25% CODES. So far, we have not been required to pay contingent interest. The rate of contingent interest on the outstanding 2.25% CODES, should the contingency occur, would equal 1/20 of our estimated annual borrowing rate for senior non-convertible fixed-rate indebtedness with a maturity date comparable to the 2.25% CODES, but not less than 0.30% per annum. Based on our current borrowing costs, the contingent interest rate would be approximately 0.4% per annum, so the expense from contingent interest would be $1.2 million per year on the $300.0 million of outstanding 2.25% CODES, if the contingent interest provisions were applicable. Although the 2.25% CODES will mature on October 15, 2021, the holders of the 2.25% CODES may require us to repurchase all or any portion of them on October 20, 2004 and on October 15, 2006, 2011, and 2016, or upon a change of control. We also have the right to redeem some or all of the 2.25% CODES on or after October 20, 2004. We believe that our ability to borrow funds, either under our revolving credit agreement or otherwise, will be sufficient to enable us to make any required repurchase of 2.25% CODES in 2004. Although the 2.25% CODES are not currently convertible into our common stock, they will become convertible under various circumstances and at a conversion price specified in the indenture for the 2.25% CODES. The conversion price is currently $30.49 per share, so the 2.25% CODES would be convertible into approximately 9.8 million shares of Apogent common stock. If the holders of the 2.25% CODES require us to repurchase any or all of the 2.25% CODES on October 20, 2004, Apogent intends to refinance the obligation on a long-term basis using our revolving credit facility that matures in July 2008. Therefore, in accordance with FAS 6, Apogent has classified the 2.25% CODES as a non-current liability.

On April 4, 2001, we issued $325.0 million of unsecured 8% senior notes in a private placement with registration rights, and in August 2001, we completed a registered exchange of the privately placed notes for similar notes that had been registered with the Securities and Exchange Commission. We repurchased approximately $317.9 million of our 8% senior notes that were tendered pursuant to our tender offer and consent solicitation dated September 16, 2003 for those notes. The total purchase price and consent payment aggregated approximately $374.5 million, plus $12.5 million of accrued interest. We funded the purchase through borrowings under our $500.0 million revolving credit facility, together with other available funds. The floating rate CODES, 6¹/2% senior subordinated notes, 2.25% CODES, and the revolving credit facility all contain certain cross default provisions. The revolving credit facility includes financial and operating covenants which, if not met, could result in acceleration of payments on outstanding balances. In addition, floating rate CODES, the 6¹/2% senior subordinated notes, 2.25% CODES, and/or the revolving credit facility contain covenants which, among other things, restrict investments, loans, and advances, require that we maintain certain financial ratios, require that we maintain certain credit ratings, restrict our ability to create or permit liens or to pay dividends or make other restricted payments (as defined), and limit our incurrence of additional indebtedness. We are not aware of any violations of these covenants and do not anticipate any violations in light of current business conditions.

We believe that loans under our revolving credit facility, floating rate CODES, proceeds from the sale of the 6¹/2% senior subordinated notes, and currently available cash and short term investments, along with cash generated from operations, will be sufficient to meet our long-term and short-term working capital needs, as well as our commitments for capital expenditures and business development needs for the next twelve months and the foreseeable future.

We may, in the future, depending on business and market conditions, refinance our debt or replace all or a portion of the cash used to purchase shares with proceeds from the sale of new debt or equity securities or such other financing, as we deem appropriate.

Disclosures About Contractual Obligations and Commercial Commitments

In our day-to-day business activities, we incur certain obligations and commitments to make future payments under contracts such as debt and lease agreements. Maturities of these obligations are set forth in the following tables as of December 31, 2003 (in millions):


	Payments Due by Period
Contractual Obligations	Total			Less than 1 Year		1-3 Years		4-5 Years		More than 5 Years
Long-Term Debt Obligations(1)	$	964.2		$	2.0	$	1.9	$	50.7	$	909.6
Capital Lease Obligations		0.5			0.3		0.2		—		—
Operating Lease Obligations		82.8			14.1		21.9		17.4		29.4
Purchase Obligations		15.5			12.8		2.7		—		—
Other Long-Term Liabilities		None			—		—		—		—

Total Contractual Obligations	$	1,063.0		$	29.2	$	26.7	$	68.1	$	939.0


	Total Amounts Committed			Amount of Commitment Expiration Per Period
Other Commercial Commitments	Total Amounts Committed			Less Than 1 Year		1-3 Years		4-5 Years		Over 5 Years
Lines of Credit	$	12.8		$	12.8	$	—	$	—	$	—
Available Standby Letters of Credit		6.5			6.5		—		—		—
Guarantees(2)		None	(1)		—		—		—		—
Standby Repurchase Obligations		None			—		—		—		—
Other		None			—		—		—		—

Total Commercial Commitments	$	19.3		$	19.3	$	—	$	—	$	—

(1)

On October 10, 2001, we issued $300.0 million of senior convertible contingent debt securities (2.25% CODES). Although the 2.25% CODES will mature on October 15, 2021, the holders of the 2.25% CODES may require us to repurchase all or any portion of them on October 20, 2004 and on October 15, 2006, 2011, and 2016, or upon a change of control. We also have the right to redeem some or all of the 2.25% CODES on or after October 20, 2004. If the holders of the 2.25% CODES require us to repurchase any or all of the them on October 20, 2004, Apogent intends to refinance the obligation on a long-term basis using our revolving credit facility that matures in July 2008 and therefore, in accordance with FAS 6, has classified the 2.25% CODES as a non-current liability.

(2)

Certain of our domestic subsidiaries are guarantors under our revolving credit facility, 8% senior notes, both series of CODES, and 6¹/2% senior subordinated notes.

Off-Balance Sheet Arrangement

We own 49% of Glass & Plastic Labware LLC, an unconsolidated joint venture that we hold as an equity investment. The joint venture combines the marketing and sales expertise of our Nalge Nunc International subsidiary with the supply-side manufacturing strength of an unaffiliated company, Kimble Glass and its Kontes specialty glass division. Through the joint venture, Nalge Nunc International’s sales team is able to offer

laboratory customers both the plastic labware that is Nalge’s core competency and glass labware supplied through the joint venture. As of December 31, 2003, our equity investment in the joint venture was approximately $7.6 million, and was classified as “Other Assets.” Net income from the joint venture for the first quarter of fiscal 2004 was $0.2 million and was included in “Other Income.”

Application of Critical Accounting Policies

The preparation of the financial statements contained within this report requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, management evaluates these estimates and judgments. Certain of our accounting policies represent a selection among acceptable alternatives under GAAP; however, management believes the policies used best represent the underlying transactions reflected in the financial statements. Apogent believes the following critical accounting policies affect its more significant estimates and judgments used in the preparation of its consolidated financial statements.

Revenue Recognition

The Company recognizes revenue upon shipment of products when persuasive evidence of a sales arrangement exists, the price to the buyer is fixed or determinable, and collectibility of the sales price is reasonably assured. Large portions of the Company’s sales are sold through distributors. Revenues associated with sales to distributors are also recognized upon shipment of products when the risks and rewards of ownership of the product have passed. Sales incentives are offered to our customers based on sales volume requirements. These incentives are recorded initially based on estimates by the Company and accounted for as a reduction of sales in accordance with Emerging Issues Task Force (EITF) Issue No. EITF 01-9, “Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor´s Products).” Warranties and product returns are estimated and accrued for at the time sales are recorded. Service agreements on our equipment are typically sold separately from the sale of the equipment. Revenues on these service agreements are recognized ratably over the life of the agreement, typically one year, in accordance with FASB Technical Bulletin FTB 90-1, “Accounting for Separately Priced Extended Warranty and Product Maintenance Contracts.”

Impairment Testing

In connection with annual impairment tests for goodwill, fair market valuations are performed for each of the reporting units. These valuations require certain assumptions from management regarding future operating performance as well as various industry trends. Fluctuations in these assumptions could have a material impact on the values ascribed to the reporting units and could result in an indication of impairment. These assumptions include, but are not limited to, estimated future cash flows, estimated sales growth, and weighted average cost of capital for each of the reporting units. In order to make informed assumptions, management relies on certain public information and statistical and industry information as well as internal forecasts to determine the various assumptions. In the event that industry, general economic, and company trends change, these assumptions will change and impact the calculated fair market values.

Through our acquisition program, we have accumulated a large amount of intangible assets. The allocation of purchase price premiums to intangible assets, tangible assets, and goodwill involves estimates based on fair value assumptions. Estimated lives assigned to the tangible and intangible assets acquired in a business purchase also involve the use of estimates. These matters that are subject to judgments and estimates are inherently uncertain, and different amounts could be reported using different methodologies. Management uses its best estimate in determining the appropriate values and estimated lives to reflect in the financial statements, using historical experience, market data, and all other available information. In most instances, we use outside valuation firms to recommend purchase price allocations and estimated lives after an acquisition is completed.

Pensions

We account for our defined benefit pension plans using actuarial models required by SFAS No. 87, “Employers’ Accounting for Pensions.” These models use an attribution approach that generally spreads individual events over the service lives of the employees in the plan. Examples of “events” are plan amendments and changes in actuarial assumptions such as discount rate, rate of compensation increases and mortality. See the

next paragraph for information on the expected long-term rate of return on pension plan assets. The principle underlying the required attribution approach is that employees render service over their service lives on a relatively smooth basis and therefore, the income statement effects of pensions are earned in, and should follow, the same pattern.

One of the principal components of the net periodic pension (income)/cost calculation is the expected long-term rate of return on plan assets. We use long-term historical actual return information, the targeted mix of investments that comprise plan assets, and future estimates of long-term investment returns to develop our expected return on plan assets. The required use of an expected long-term rate of return on plan assets may result in recognized pension income that is greater or less than the actual returns of those plan assets in any given year. Over time, however, the expected long-term returns are designed to approximate the actual long-term returns and therefore result in a pattern of income and expense recognition that more closely matches the pattern of the services provided by the employees. Our mix of pension plan investments among asset classes also affects the long-term expected rate of return on plan assets. Our current target asset mix used in determining the expected return is 60% equities and 40% fixed income securities.

Differences between actual and expected returns are recognized in the calculation of net periodic pension (income)/cost over the average remaining expected future working lifetime of active plan participants, which is approximately fifteen years as provided for in accordance with generally accepted accounting principles. This expected return may change upward or downward at some point in the future depending on our analysis of prospective market returns. With the current asset base of our pension plans, a 25 basis point increase/decrease in the asset return assumption would decrease/increase our annual pension expense by approximately $135,000.

The discount rate assumptions used for pension accounting reflect the prevailing rates available on high-quality, fixed-income debt instruments with terms that match the average expected duration of our defined benefit pension plan obligations. We use the Moody’s Aa-rated long-term corporate bonds, which match the average duration of our pension plan liability of approximately 20 years. We start with the Moody’s Aa yield, add 15 basis points to account for annualization of the interest rate, and then round up to the nearest 25 basis point increment to arrive at a tentative discount rate. We then consider other factors to determine whether this tentative rate is reasonable before making our determination. The amount of pension expense is highly sensitive to changes in the discount rate. At the current asset base in our pension plans, a 25 basis point increase/decrease in the discount rate would decrease/increase our annual pension expense by approximately $600,000.

The assumed rate of compensation increase is another significant assumption used in the actuarial model for pension accounting and is determined based upon our long-term plans for such increases.

As required by SFAS No. 87, for instances in which pension plan assets are less than the accumulated benefit obligation (ABO) as of the end of the reporting period (defined as an unfunded ABO position), a minimum liability equal to this difference is established in the consolidated balance sheet. The ABO is the present value of the actuarially determined company obligation for pension payments assuming no further salary increases for the employees. The offset to the minimum liability is a charge to equity, net of tax. In addition, any prepaid pension asset in excess of unrecognized prior service cost must be reversed through a net-of-tax charge to equity. The charge to equity is included in the accumulated other comprehensive gains and (losses) not affecting the retained earnings section of the stockholders’ equity in the consolidated balance sheet.

Deferred Taxes

We record a valuation allowance to reduce our deferred tax assets to an amount that management estimates is more likely than not to be realized. While management has considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance, should management determine that we would be able to realize our deferred assets in the future in excess of the net recorded amount, an adjustment to the deferred tax asset would increase income in the period such determination

was made. However, should management determine that Apogent would not be able to realize all or part of the net deferred tax asset in the future, an adjustment to the deferred tax asset would be charged to income in the period such a determination was made.

Recent Accounting Pronouncements

Financial Accounting Standards Board Interpretation No. 45

Guarantees entered into after December 31, 2002. In January 2003, Apogent entered into an agreement with a customer that guarantees total payments of $1.7 million through December 2005. In return for the guarantee, Apogent is a participant in certain preferred marketing and sales promotion efforts of the customer. Apogent has recorded the transaction in accordance the measurement and recognition requirements of FIN 45.

A rollforward of our product warranties is as follows:


	Beginning balance		Payments and other reductions		Additions		Ending balance
	(in thousands)
Year ended September 30, 2003	$	1,462	$	1,542	$	1,318	$	1,238
Three months ended December 31, 2003	$	1,238	$	189	$	88	$	1,137

In the normal course of business, Apogent indemnifies other parties, including customers, lessors and parties to other transactions with Apogent, with respect to certain matters. In some of these contracts we have agreed to hold the other party harmless against losses arising from a breach of representations or covenants (including payment obligations), or from intellectual property infringement or other claims made against certain parties. These agreements may limit the time within which an indemnification claim can be made and the amount of the claim. In addition, we have entered into indemnification agreements with our officers and directors.

Financial Accounting Standards Board Interpretation No. 46(R)

In December 2003, the FASB issued FASB Interpretation No. 46(R), “Consolidation of Variable Interest Entities” (“FIN 46(R)”). FIN 46(R) clarifies situations in which entities shall be subject to consolidation. FIN 46(R) is effective for all variable interest entities for periods ending after December 15, 2003. The Company has completed its evaluation and determined that it has no variable interest entities and that the adoption of FIN 46 (R) did not have a material impact on the Company’s financial statements.

Cautionary Factors

This report contains various forward-looking statements concerning our prospects that are based on the current expectations and beliefs of management. We may also make forward-looking statements from time to time in other reports and documents as well as oral presentations. When used in written documents or oral statements, the words “anticipate,” “believe,” “continue,” “estimate,” “goal,” “expect,” “objective,” “outlook” and similar expressions are intended to identify forward-looking statements. The statements contained herein and such future statements involve or may involve certain assumptions, risks and uncertainties, many of which are beyond our control, that could cause our actual results and performance to differ materially from what is expected. In addition to the assumptions and other factors referenced specifically in connection with such statements, the following factors could impact our business and financial prospects and affect our future results of operations and financial condition:

Our ability to service our indebtedness depends on our receipt of funds from our subsidiaries. Restrictions on their ability to loan or distribute funds to us could adversely affect our ability to service our indebtedness.

We are organized as a holding company, with all of our net sales generated through our subsidiaries. Consequently, our operating cash flow and ability to service indebtedness depend in part upon the operating cash flow of our subsidiaries, including our foreign subsidiaries, and the payment of funds by them to us in the form of loans, dividends or otherwise. Their ability to pay dividends and make loans, advances and other payments to us depends upon any statutory or other contractual restrictions that apply, which may include requirements to maintain minimum levels of working capital and other assets.

A significant portion of our revenue is generated from foreign activities; changes in exchange rates and other changes in world events could have an adverse effect on our business.

We have significant operations outside the United States. Approximately 24% of our net sales for 2003 were from foreign subsidiaries. We are therefore subject to risks affecting our international operations, including relevant foreign currency exchange rates, which can affect the cost of our products or the ability to sell our

products in foreign markets, and the value in U.S. dollars of sales made in foreign currencies. Our net sales were increased by $22.6 million and $2.9 million in 2003 and 2002, respectively and reduced by $10.1 million in 2001 by the impact of currency fluctuations. Other factors include:

our ability to obtain effective hedges against fluctuations in currency exchange rates;

foreign trade, monetary and fiscal policies;

laws, regulations and other activities of foreign governments, agencies, and similar organizations;

risks associated with having major manufacturing facilities located in countries that have historically been less stable than the United States in several respects, including fiscal and political stability; and

risks associated with an economic downturn in other countries.

In addition, world events can increase the volatility of the currency markets, and such volatility could affect our financial results. In particular, the September 11, 2001 attacks in New York and Washington, D.C. disrupted commerce throughout the United States and other parts of the world. The continued threat of similar attacks throughout the world and military action taken and to be taken by the United States and other nations in Iraq and elsewhere, as well as the threat of military confrontation on the Korean peninsula, may cause significant disruption to commerce throughout the world. In addition, severe acute respiratory syndrome (SARS) has caused disruption in commerce in East Asia and may cause significant disruption to commerce throughout the world. To the extent that such disruptions further slow the global economy or, more particularly, result in delays or cancellation of purchase orders, our business and results of operations could be materially and adversely affected. We are unable to predict whether the threat of new epidemics or attacks or the responses thereto will result in any long-term commercial disruptions or if such activities or responses will have a long-term material adverse effect on our business, results of operations, or financial condition.

The operating and financial restrictions imposed by our debt agreements limit our ability to finance operations and capital needs and engage in other business activities.

Our debt agreements contain covenants that restrict our ability to:

incur additional indebtedness (including guarantees);

incur liens;

dispose of assets;

make some acquisitions;

pay dividends and make other restricted payments;

issue some types of preferred stock;

enter into sale and leaseback transactions;

make loans and investments;

enter into new lines of business;

enter into some leases; and

engage in some transactions with affiliates.

In addition, our credit facilities require us to comply with specified financial covenants including minimum interest coverage ratios, maximum leverage ratios, and minimum net worth requirements.

Our ability to meet these covenants and requirements in the future may be affected by events beyond our control, including prevailing economic, financial, and industry conditions. Our breach of or failure to comply with any of these covenants could result in a default under our debt agreements.

Our failure to keep pace with the technological demands of our customers or with the products and services offered by our competitors could significantly harm our business.

Some of the industries we serve are characterized by rapid technological changes and new product introductions. Some of our competitors may invest more heavily in research or product development than we do. Successful new product offerings depend upon a number of factors, including our ability to:

accurately anticipate customer needs;

innovate and develop new technologies and applications;

successfully commercialize new products in a timely manner;

price our products competitively and manufacture and deliver our products in sufficient volumes and on time; and

differentiate our offerings from those of our competitors.

If we do not introduce new products in a timely manner and make enhancements to meet the changing needs of our customers, some of our products could become obsolete over time, in which case our customer relationships, revenue, and operating results would suffer.

Our operating results may suffer if the industries into which we sell our products are in downward cycles.

Some of the industries and markets into which we sell our products are cyclical. Any further downturn in our customers’ markets or in general economic conditions could result in reduced demand for our products and could harm our business.

Acquisitions have been an important part of our growth strategy; failure to successfully integrate acquisitions could adversely impact our results.

A significant portion of our growth over the past several years has been achieved through our acquisition program. Although we have reduced our level of acquisitions, we may decide to increase our acquisition activity in the future. Our ability to grow our business through acquisitions is subject to various factors including the cost of capital, the availability of suitable acquisition candidates at reasonable prices, competition for appropriate acquisition candidates, our ability to realize the synergies expected to result from acquisitions, our ability to retain key personnel in connection with acquisitions, and the ability of our existing personnel to efficiently handle increased transitional responsibilities resulting from acquisitions.

We may incur restructuring charges that would reduce our earnings.

We have in the past and may in the future restructure some of our operations. In such circumstances, we may take actions that would result in a charge and reduce our earnings, including as a result of our inability to dispose of discontinued operations or risks associated with discontinued operations. These restructurings have or may be undertaken to realign our subsidiaries, eliminate duplicative functions, rationalize our operating facilities and products, and reduce our staff. These restructurings may be implemented to improve the operations of recently acquired subsidiaries as well as subsidiaries that have been part of our operations for many years. For a discussion of our recent restructuring activities, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Restructuring Charges.”

We may incur impairment charges on our intangible assets with indefinite lives that would reduce our earnings.

On October 1, 2001, we adopted Statement of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible Assets,” which requires that goodwill and intangible assets that have an indefinite useful life be tested at least annually for impairment. Goodwill and other intangible assets with indefinite lives must

also be tested for impairment between the annual tests if an event occurs that would more likely than not reduce the fair value of the asset below its carrying amount. As of December 31, 2003, goodwill and other intangible assets with indefinite lives represented approximately 52% of our total assets. If during the testing an impairment is determined, our financial results for the relevant period will be reduced by the amount of the impairment, net of income tax effects, if any.

We rely heavily upon sales to key distributors and original equipment manufacturers, and could lose sales if any of them stop doing business with us.

Our three most significant distributors represent a significant portion of our revenues. For example, sales to Fisher Scientific, VWR, and Allegiance Corporation accounted for approximately 15%, 11%, and 7% of revenues during the first quarter of fiscal, respectively. Our reliance on major independent distributors for a substantial portion of our sales subjects our sales performance to volatility in demand from distributors. We can experience volatility when distributors merge or consolidate, when inventories are not managed to end-user demand, or when distributors experience softness in their sales. We rely primarily upon the long-standing and mutually beneficial nature of our relationships with our key distributors, rather than on contractual rights, to protect these relationships. Volatility in end-user demand can also arise with large original equipment manufacturers and private label customers to whom we sell directly, particularly when our customers fail to manage inventories to end-user demand, discontinue product lines, or switch business to other manufacturers. Sales to our original equipment manufacturer customers are sometimes unpredictable and wide variances sometimes occur quarter to quarter.

We rely heavily on manufacturing operations to produce the products we sell, and we could be injured by disruptions of our manufacturing operations.

We rely upon our manufacturing operations to produce most of the products we sell. Any significant disruption of those operations for any reason, such as strikes, labor disputes, or other labor unrest, power interruptions, fire, war, or other force majeure, could adversely affect our sales and customer relationships and therefore adversely affect our business. In particular, nearly all of the white glass used in our Clinical Group’s worldwide manufacturing operations is produced in our glass manufacturing facility in Switzerland. Disruption in this supply can result from delays encountered in connection with the periodic rebuilding of the sheet glass furnace or furnace malfunctions. Although most of our raw materials are available from a number of potential suppliers, our operations also depend upon our ability to obtain raw materials at reasonable prices.

The success of many of our products depends on the effectiveness of our patents, trademarks, and licenses to defend our intellectual property rights. If we fail to adequately defend our intellectual property rights, competitors may produce and market products similar to ours.

Our success with many of our products depends, in part, on our ability to protect our current and future innovative products and to defend our intellectual property rights. Our subsidiaries’ products are sold under a variety of trademarks and trade names. They own or license all of the trademarks and trade names we believe to be material to the operation of their businesses. We also rely upon a combination of non-disclosure and other contractual agreements and trade secret, copyright, patent, and trademark laws to protect our intellectual property rights. Disputes may arise concerning the ownership of intellectual property or the applicability of confidentiality agreements. If we fail to adequately protect our intellectual property, competitors may manufacture and market products similar to ours.

We are subject to risk of product liability and other litigation which could adversely affect our business.

We are subject to the risks of claims involving our products (including those of businesses we no longer own) and other legal and administrative proceedings, including the expense of investigating, litigating, and settling any claims. Although we currently maintain insurance against some of these risks, uninsured losses could occur.

Our business is subject to regulatory risks, and changes in regulation could adversely affect our business.

Our ability to continue manufacturing and selling those of our products that are subject to regulation by the United States Food and Drug Administration or other domestic or foreign governments or agencies is subject to a number of risks. If the FDA determines that we are not in compliance with existing laws and regulations with respect to a particular product or a particular manufacturing facility, we could be subject to delays in the release of products, product recalls, suspension or revocation of authority necessary for product production and sale, and other administrative, civil or criminal sanctions. In the future, some of our products may be affected by the passage of stricter laws or regulations, reclassification of our products into categories subject to more stringent requirements, or the withdrawal of approvals needed to sell one or more of our products. Additionally, violations of any environmental, health and safety laws or regulations, or the release of toxic or hazardous materials used in our operations into the environment could expose us to significant liability. Similarly, third party lawsuits relating to environmental and workplace safety issues could result in substantial liability. Although we currently maintain insurance against some of these risks uninsured losses could occur.

Our business is subject to quarterly variations in operating results due to factors outside of our control.

Our business is subject to quarterly variation in operating results caused by a number of factors, including business and industry conditions, timing of acquisitions, distribution and original equipment manufacturers customer issues, and other factors listed here. All these factors make it difficult to predict operating results for any particular period.

Other risks may arise.

We may be subject to risks arising from other business and investment considerations that may be disclosed from time to time in our Securities and Exchange Commission filings or in other publicly available written documents.

We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

ITEM 3: Quantitative and Qualitative Disclosures About Market Risk

There has been no substantial change in market risk to the Company since September 30, 2003, the end of our prior fiscal year.

ITEM 4: Controls and Procedures

Disclosure Controls and Procedures: The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by this report. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act.

Internal Control Over Financial Reporting: The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, also conducted an evaluation of the Company’s internal control over financial reporting to determine whether any changes occurred during the Company’s first fiscal quarter ended December 31, 2003 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. Based on that evaluation, there has been no such change during the Company’s first fiscal quarter.

PART II—OTHER INFORMATION

ITEM 2: Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities

The following table discloses our purchases of our equity securities during the first quarter of fiscal 2004.

ISSUER PURCHASES OF EQUITY SECURITIES


Period	Total Number of Shares Purchased(a)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(b)	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs(c)
October 1, 2003 to October 31, 2003	—	$	—	—	11,559,716
November 1, 2003 to November 30, 2003	1,761,400	$	22.51	1,761,400	9,798,316
December 1, 2003 to December 31, 2003	3,000,000	$	23.30	3,000,000	6,798,316

Total	4,761,400	$	23.01	4,761,400

(a)

Shares were purchased in open market and block transactions.

(b)

Apogent’s stock repurchase program was publicly announced in July 2002 and amended during fiscal 2003. It is scheduled to expire in September 2005.

(c)

The Board of Directors authorized the repurchase of shares of Apogent common stock on the following dates: July 15, 2002 – 2,000,000 shares; January 28, 2003 – 5,000,000 shares; April 21, 2003 – 5,000,000 shares; and May 28, 2003 – 9,000,000 shares.

ITEM 4: Submission of Matters to a Vote of Security Holders

The Company, a Wisconsin corporation, held its Annual Meeting of Shareholders on January 27, 2004. A quorum was present at the Annual Meeting, with 81,830,728 shares out of a total of 87,460,479 (93.6%) shares entitled to cast votes represented in person or by proxy at the meeting. The 87,460,479 shares entitled to vote represent the 90,460,479 shares outstanding and entitled to vote at the December 1, 2003 record date minus 3 million shares repurchased by the Company prior to the date of the Annual Meeting.

The only matter submitted for a vote was a proposal to elect four directors to serve as Class III Directors until the 2007 Annual Meeting of Shareholders and until their respective successors are duly elected and qualified.

The shareholders voted to elect Mary G. Puma, Simon B. Rich, Joe L. Roby, and Kenneth F. Yontz to serve as Class III directors until the 2007 Annual Meeting of Shareholders and until their respective successors are duly elected and qualified. The results of the vote are as follows:


	Mary G. Puma	Simon B. Rich	Joe L. Roby	Kenneth F. Yontz
For	69,570,321	69,072,477	69,572,157	70,368,609
Withheld From	12,260,407	12,758,251	12,258,571	11,462,119

The terms of office as directors of William H. Binnie, Don H. Davis, Jr., Christopher L. Doerr, Stephen R. Hardis, R. Jeffrey Harris, Frank H. Jellinek, Jr., and Richard W. Vieser continued after the meeting.

ITEM 6: Exhibits and Reports on Form 8-K

(a) Exhibits:

See Exhibit Index following the Signature page in this report, which is incorporated herein by reference.

(b) Reports on Form 8-K:

On October 16, 2003, Apogent filed a Current Report on Form 8-K dated October 15, 2003, reporting the expiration, at 5:00 p.m. New York City time on October 15, 2003, of its tender offer and consent solicitation for any and all of its 8% senior notes due 2011. On October 24, 2003, Apogent filed a Current Report on Form 8-K/A solely to amend the original Form 8-K filed on May 13, 2003 to correct the audit period referenced in the opinion paragraph of the Independent Auditors’ Report.

On November 12, 2003, Apogent furnished a Current Report on Form 8-K dated November 10, 2003, providing the Company’s fourth quarter and 2003 fiscal year financial results and related information, and reporting certain succession planning information.

On December 11, 2003, Apogent filed a Current Report on Form 8-K announcing the offering of floating rate senior convertible debt securities.

On December 12, 2003, Apogent filed a Current Report on Form 8-K announcing the pricing of floating rate senior convertible debt securities.

On December 31, 2003, Apogent filed a Current Report on Form 8-K dated December 30, 2003, announcing the completion of the sale of floating rate senior convertible debt securities.

On January 22, 2004, subsequent to the end of the quarter for which this report is filed, Apogent furnished a Current Report on Form 8-K providing the public disclosure of first quarter financial results.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereto duly authorized.

Date: February 13, 2004


APOGENT TECHNOLOGIES INC.
(Registrant)

/s/ DENNIS BROWN
		Dennis Brown Chief Financial Officer*
* Executing as both the principal financial officer and a duly authorized officer of the Company

APOGENT TECHNOLOGIES INC.

(COMMISSION FILE NO. 1-11091)

EXHIBIT INDEX

QUARTERLY REPORT ON FORM 10-Q FOR

THE QUARTERLY PERIOD ENDED DECEMBER 31, 2003


Exhibit Number	Description	Incorporated Herein By Reference To	Filed or Submitted Herewith
4.10	First Amendment to the Credit Agreement, dated as of July 29, 2003, among the Registrant, Erie Scientific Company, Nalge Nunc International Corporation, and Remel Inc., each as a Subsidiary Borrower, the several lenders from time to time parties thereto (“the Lenders”), Fleet National Bank, as Syndication Agent, JPMorgan Chase Bank, as Administrative Agent for the Lenders, ABN AMRO Bank N.V., Bank of America N.A. and SunTrust Bank, as Co-Documentation Agents, and J.P. Morgan Securities Inc. and Fleet Securities, Inc., as Joint Lead Arrangers and Joint Bookrunners		X

4.11	Second Amendment to the Credit Agreement, dated as of July 29, 2003, among the Registrant, Erie Scientific Company, Nalge Nunc International Corporation, and Remel Inc., each as a Subsidiary Borrower, the several lenders from time to time parties thereto (“the Lenders”), Fleet National Bank, as Syndication Agent, JPMorgan Chase Bank, as Administrative Agent for the Lenders, ABN AMRO Bank N.V., Bank of America N.A. and SunTrust Bank, as Co-Documentation Agents, and J.P. Morgan Securities Inc. and Fleet Securities, Inc., as Joint Lead Arrangers and Joint Bookrunners		X

12.1	Computation of Ratio of Earnings to Fixed Charges		X

31.1	Certification Pursuant to Rule 13a-14(a) or 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (CEO)		X

31.2	Certification Pursuant to Rule 13a-14(a) or 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (CFO)		X

32.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (CEO)		X

32.2	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (CFO)		X

EI-1