Document/ExhibitDescriptionPagesSize 1: 10-K Fisher Scientific International Inc. Form 10-K HTML 976K
2: EX-10.15 EX-10.15 First Amendment to the Credit Agreement 9 34K
3: EX-10.23 EX-10.23 Amended and Restated Receivables Transfer 108 385K
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4: EX-10.25 EX-10.25 First Amendment to Receivables Purchase 8 27K
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5: EX-10.38 EX-10.38 Amended and Restated Retirement Plan 80 200K
6: EX-10.39 EX-10.39 First Amendment to the Retirement Plan 1 14K
7: EX-10.40 EX-10.40 Second Amendment to the Retirement Plan 2 19K
8: EX-10.41 EX-10.41 Third Amendment to the Retirement 1 14K
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9: EX-10.42 EX-10.42 Fourth Amendment to the Retirement Plan 5 27K
10: EX-10.43 EX-10.43 5th Amendment to the Retirement Plan 4 27K
11: EX-10.44 EX-10.44 Sixth Amendment to the Retirement Plan 2 16K
12: EX-10.45 EX-10.45 Seventh Amendment to the Retirement Plan 8 37K
13: EX-10.46 EX-10.46 Eight Amendment to the Retirement Plan 2 18K
14: EX-10.47 EX-10.47 Ninth Amendment to the Retirement Plan 2 16K
15: EX-10.48 EX-10.48 Amended and Restated Savings and Profit 90 267K
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27: EX-10.60 EX-10.60 Executive Retirement and Savings Program 30 86K
28: EX-10.61 EX-10.61 First Amendment to Executive Retirement 1 14K
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29: EX-12.01 EX-12.01 Ratios of Earnings to Fixed Charges 1 13K
30: EX-21.01 EX-21.01 List of Subsidiaries 7 55K
31: EX-23.01 EX-23.01 Consent of Deloitte & Touche LLP 1 13K
32: EX-31.01 EX-31.01 Sect. 302 Certification of the C.E.O. HTML 19K
33: EX-31.02 EX-31.02 Sect. 302 Certification of the C.F.O. HTML 19K
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Securities registered pursuant to Section 12(b) of the
Act:
Title of each class
Name of each exchange on which registered
Common Stock, par value $.01 per share
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the
Act:
None
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 þ No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the best of
registrant’s knowledge, in the definitive proxy or
information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this
Form 10-K. þ
Indicate by checkmark whether the Registrant is an accelerated
filer (as defined in Rule 12b-2 of the
Act). Yes þ No o
The aggregate market value of the voting common equity held by
non-affiliates of the registrant as of June 30, 2004 was
approximately $3,601,845,844.
The number of shares of Common Stock outstanding as of
March 1, 2005 was 119,627,922.
Fisher Scientific International Inc. (“Fisher” the
“Company,”“we,”“us” or
“our”) is a leading provider of products and services
to the global scientific research, global biopharma production
supplies, U.S. clinical laboratory and U.S. lab safety
and personal protection markets. Our customers include
pharmaceutical and biotechnology companies; colleges and
universities; medical research institutions; hospitals and
reference labs; government agencies; original equipment
manufacturers; quality control, process control and research and
development laboratories. We offer more than 600,000 products
and services to over 350,000 customers located in over 150
countries. We have a diverse customer base. No single customer
represents more than 3% of our total sales.
We offer self-manufactured, private labeled and exclusive
products (collectively “proprietary products”) and
products that we source from suppliers. Our largest supplier
represented approximately 6% of sales. Approximately 60% of our
revenues are generated from the sale of higher margin
proprietary products and approximately 80% of our revenues are
generated from the sale of consumable products. We deliver our
products and provide our services to our customers on a
worldwide basis through a global supply chain network.
Acquisitions
We continually evaluate strategic acquisitions to increase the
breadth of our proprietary product and service offerings and
accelerate our revenue growth, enhance our margins and increase
our cash flow. Since our initial public offering in 1991, we
have completed 37 acquisitions. The following is a brief
description of the material transactions we have completed since
January 1, 2004.
On August 2, 2004, we completed an approximately
$3.9 billion combination with Apogent Technologies Inc.
(“Apogent”) in a tax-free, stock-for-stock merger,
which included the assumption of debt with a fair value of
approximately $1.1 billion. Apogent shareholders received
50.6 million shares of Fisher common stock representing
0.56 shares of Fisher common stock for each share of
Apogent common stock they owned. Apogent is a diversified
worldwide leader in the design, manufacture and sale of
laboratory and life science products essential for scientific
research and healthcare diagnostics. The results of Apogent have
been included in the scientific products and services segment
and the healthcare products and services segment from the date
of acquisition.
On April 1, 2004, we acquired Dharmacon, Inc.
(“Dharmacon”) for $80 million in cash. Dharmacon
focuses on RNA technologies, including RNA interference and
small interfering RNAi, which are tools for life-science
research that increase the efficiency of the drug discovery
process. The results of Dharmacon have been included in the
scientific products and services segment from the date of
acquisition.
On March 1, 2004, we acquired Oxoid Group Holdings Limited
(“Oxoid”) for $330 million in cash. Oxoid is a
United Kingdom-based manufacturer of microbiological culture
media and other diagnostic products that test primarily for
bacteria contamination, with sales primarily outside of the
United States. The results of Oxoid have been included in the
scientific products and services segment from the date of
acquisition.
Competitive Strengths and Strategy
We believe that our key competitive strengths include our:
•
premier global brand: we have provided quality service to
scientists for over one hundred years, and, as a result, have
one of the most powerful brands in the markets we serve. The
Company is recognized in virtually every lab in the world.
strong market positions: we are a leading provider of
products and services to the markets we serve. Given the
complexity of dealing with multiple suppliers providing
thousands of products and the increased pressure to increase
efficiency and reduce costs, our customers increasingly look to
the Company to meet virtually all of their laboratory needs in a
timely and cost-effective manner.
•
broad product and service offering: we have a broad line
of products that provides a virtual one-stop shop for the
scientist. We also have a suite of services that allow us to
provide added value to our customers.
•
global sales and marketing network: we have a global
footprint of more than 3,500 sales and marketing professionals
that gives us a powerful position in the markets we serve. Our
2,700 sales representatives provide complete account management.
We augment these sales representatives with approximately 800
highly trained technical specialists who allow us to better meet
the needs of our more technical end-user customers.
•
extensive supply capabilities: we have a global supply
chain network that allows us to reduce end-to-end supply chain
costs. Utilizing state-of-the-art systems and our global
footprint, we serve more than 350,000 customers in over
150 countries on a cost-effective basis.
Our key competitive strengths provide us with a solid platform
from which to pursue profitable growth opportunities, including
acquisitions. Our key strategy is to leverage our strengths to
pursue opportunities that accelerate our revenue growth, enhance
our margins and increase our cash flow.
We are increasing our investments in research and development to
accelerate new product introductions. We are also expanding our
portfolio of specialized services to meet the increasing demands
for outsourcing activities from our customers. In addition, we
are increasing our investment in training and development to
enhance the ability of our sales representatives and technical
specialists to bundle and cross-sell products. We believe that
these initiatives will serve to accelerate revenue growth.
We plan to enhance our margin structure and increase our cash
flow by aggressively managing expenses, improving our business
processes and information systems, and increasing productivity.
The most significant near-term opportunity is executing on the
cost-saving synergies associated with the Apogent merger.
Our operations are organized into three reporting segments:
scientific products and services, healthcare products and
services, and laboratory workstations.
Scientific Products and Services
Sales in the scientific products and services segment represent
approximately 73% of our total sales. The scientific products
and services segment provides products and services primarily to
entities conducting scientific research, including drug
discovery and drug development, quality and process control and
basic research and development. This segment manufactures and/or
distributes a broad range of biochemicals and bioreagents;
organic and inorganic chemicals; sera; cell culture media;
sterile liquid-handling systems; microbiology media and related
products; scientific consumable products, instruments and
equipment; safety and personal protection products; and other
supplies. Additionally, this segment provides services to
pharmaceutical and biotechnology companies engaged in clinical
trials, including specialized packaging, over-encapsulation,
labeling and distribution for phase III and phase IV
clinical trials, as well as combinatorial chemistry,
custom-chemical synthesis, supply-chain management and a number
of other services.
The businesses in this segment primarily serve pharmaceutical
and biotechnology companies, colleges and universities, medical
research institutions, hospital research labs, government
agencies, original equipment manufacturers, quality control,
process control and research and development laboratories.
We estimate that the markets served by this segment aggregate to
approximately $40 billion and include the following: global
scientific research market estimated at approximately
$23 billion with an estimated growth rate of 5% to 8%
annually; global biopharma production supplies market estimated
at approximately $5 billion with an estimated growth rate
of 15% to 25% annually; and U.S. lab safety and personal
protection market estimated at approximately $12 billion
with an estimated growth rate of 4% to 6% annually. Scientific
research revenues are primarily driven by spending on research
and development. In addition, revenues are affected by the
increased demand for products and services that drive greater
efficiency and lower the costs of drug development, including
the demand for outsourced pharmaceutical services; the pace of
development of new medicines; as well as the demand for personal
protection equipment related to the increased threat of
bioterrorism. Proprietary products and services in this segment
are sold under such brand names as
ABgenetm,
Accumet®, Acros
Organicstm,
ART®, Barnstead®, Cole-Parmer®, Endogen®,
Fisherbrand®, Fisher Clinical Services®,
HyClone®,
Maybridgetm,
Masterflex®, MBP®, Nalgene®, Nunc®,
Oxoid®,
Piercetm,
and Remel®, among others. Safety related products include
personal protection equipment, respiratory protection systems,
environmental monitoring and sampling equipment, and other
safety and clean-room supplies.
Raw materials and supplies for our product and service offerings
in this segment are generally available in adequate quantities.
While there are some raw materials that we obtain from a single
supplier, we are not dependent on any one supplier for a
significant portion of our sales.
In the scientific products and services segment, we have
approximately 2,200 sales and customer service professionals
that provide complete account management, offering our customers
a broad portfolio of laboratory procurement and supply chain
management services. These sales and customer service
representatives are augmented by over 750 life science, chemical
and technical product specialists who allow us to better meet
the needs of our end-user customers, particularly in the more
technically oriented segments of the market. We market and sell
our products and services through the activities of our sales
and marketing organization, various catalogs, brochures and
other marketing materials and through the use of distributors.
The Fisher Catalog has been published for nearly one hundred
years and is a recognized scientific reference tool. We produce
more than three million printed copies of our various catalogs
biennially in nine different languages. Our e-commerce tools are
showcased by our Web sitewww.fishersci.com, which is a
leading e-commerce tool supporting the scientific community.
We manufacture our products throughout the United States and
Europe and we distribute our products worldwide through our
global manufacturing and logistics facilities. We deliver our
products through third party carriers and our own fleet of
delivery vehicles. United Parcel Service (“UPS”)
handles approximately 65% of our U.S. product deliveries.
Our agreement with UPS expires in May 2008.
We operate in a highly competitive market. Our principal
competitors in this segment are, among others, Becton Dickinson,
Corning, Invitrogen, Qiagen, Sigma-Aldrich and VWR
International. In addition, we compete with many of our own
product suppliers that sell their products directly to end-users
or through other distribution channels. VWR International is
also one of our largest customers. We compete on a basis of
innovative technologies, product differentiation, availability
and reliability, service and price. In addition, we believe that
our premier global brand; our broad product and service
offerings; our global supply chain network; and our global sales
and marketing foot print provide competitive advantages.
Healthcare Products and
Services
Sales in the healthcare products and services segment represent
approximately 23% of our total sales. The healthcare products
and services segment manufactures and distributes a wide array
of diagnostic kits and reagents, equipment, instruments, medical
devices and other consumable products to hospitals and
group-purchasing organizations, clinical laboratories, reference
laboratories, physicians’ offices and original equipment
manufacturers located primarily in the U.S. This segment
also provides outsourced manufacturing services for diagnostic
reagents, calibrators and controls to the healthcare and
pharmaceutical industries. We estimate the domestic clinical
laboratory market is approximately $10 billion and growing
at a rate of approximately 4% to 5% annually.
On March 7, 2005, we signed a definitive agreement to sell
our Atos Medical AB subsidiary, which manufactures ear, nose and
throat medical devices and had sales of $35 million in 2004.
Sales in the healthcare products and services segment are driven
by the administration and evaluation of diagnostic tests. We
believe that the aging population as well as the increased
demand for the development of new specialty diagnostic tests
will result in increased market growth. Products in the
healthcare products and
services segment are sold under such brand names as Atos®,
Capitol Vial®, Cedia®, Fisherbrand®, Fisher
Diagnostics®, MAS®, Richard-Allan Scientific® and
Seradyn®.
In the healthcare products and services segment, we have
approximately 400 sales and customer service professionals that
provide complete account management, offering our customers a
broad portfolio of laboratory procurement and supply chain
management services. These sales and customer service
representatives are augmented by over 50 technical product
specialists who allow us to better meet the needs of our
end-user customers, particularly in the in vitro diagnostics,
anatomical pathology, immunohistochemistry and instrumentation
segments of the market. We market and sell our products and
services through the activities of our sales forces, the Fisher
HealthCare Catalog and other marketing materials and through the
use of distributors. We have e-commerce capabilities that are
specifically designed for the clinical laboratory market. We
deliver our products in this segment through the domestic
logistics network shared with our scientific products and
services segment and directly from certain of our manufacturing
locations. We distribute our products outside the
U.S. primarily through a network of dealers.
Raw materials and supplies for our product and service offerings
are generally available in adequate quantities. While there are
some raw materials that we obtain from a single supplier, we are
not dependent on any one supplier for a significant portion of
our raw materials. However, sales of products obtained from our
two largest suppliers account for approximately 37% of segment
sales.
In this segment, we primarily compete on product breadth, value
and service. Our principal competitors in this segment include
Abbott Laboratories, Bayer, Bio-Rad, Cardinal Health, Dade
Behring, Johnson & Johnson and Roche Diagnostics. Many
of these competitors are also our customers.
Laboratory Workstations
Sales in the laboratory workstations segment represent
approximately 4% of total sales. The laboratory workstations
segment primarily manufactures and sells laboratory workstations
and fume hoods for laboratories. This segment serves primarily
pharmaceutical and biotechnology customers, medical research
institutions, colleges, universities and secondary schools, and
hospitals and reference labs. This segment also provides
laboratory design services.
Our product offerings in this segment include steel, wood and
plastic laminate casework systems, adaptable furniture systems,
airflow products and various other laboratory fixtures and
accessories. Sales of laboratory furniture and fume hoods and of
laboratory design services are driven primarily by the
construction of new laboratories and the expansion of existing
laboratories by our customers. Products in the laboratory
workstations segment are sold under product names such as
DuraMaxtm,
MAX/Lab®, MAX/Wall® and MAX/Mobile®.
Our laboratory workstations segment is project-based, selling
project-specific products and services primarily through a
competitive bidding process. As such, this segment maintains a
backlog of work. Our backlog as of December 31, 2004 was
approximately $134 million, compared with $105 million
as of December 31, 2003. A majority of orders in our
backlog are typically filled within one year. We sell our
laboratory workstations through both a network of dealers and
our own distribution channel. Our customers are primarily based
in the United States, although we also sell to international
customers.
The laboratory workstations market is highly competitive and is
influenced by capital spending cycles. We compete in this
segment primarily on the basis of quality, product innovation,
project management skills and price. Our principal competitor in
this segment is Kewaunee Scientific.
Intellectual Property
We own or license numerous patents, trademarks, trade names and
service marks in the United States and abroad. Except for
certain trade names and trademarks, such as “Fisher
Scientific,”“Nalgene,”“Remel,”“Barnstead,”“Hyclone,” and
“Oxoid,” we do not consider any one patent or other
proprietary right to be material.
A number of our operations involve handling, manufacturing, use
or sale of substances that are or could be classified as toxic
or hazardous materials within the meaning of applicable laws.
Consequently, some risk of environmental harm is inherent in
certain of our operations and products, as it is with other
companies engaged in similar businesses. Our operations are
subject to a myriad of federal, state and local environmental
requirements at our domestic and international facilities.
Our expenses for environmental requirements are incurred
generally for ongoing compliance and historic remediation
matters. Based on current information, we believe that these
compliance costs are not material. For historic remediation
obligations, our expenditures relate primarily to cost of
permitting, installing, and operating and maintaining
groundwater treatment systems and other remedial measures. These
expenses were approximately $0.8 million in 2004,
$1.0 million in 2003 and $1.0 million 2002. We
estimate our expenses for these environmental remediation
matters will continue to be approximately $1.0 million per
year.
Our Fair Lawn and Somerville, New Jersey facilities are subject
to administrative consent orders issued by the New Jersey
Department of Environmental Protection. Our Rockford IL facility
is subject to a Resource Conservation and Recovery Act
(“RCRA”) corrective action program administered by the
Illinois Environmental Protection Agency. We are required to
maintain groundwater remediation activities at these sites. As
owner of the Fair Lawn facility we are listed as a potentially
responsible party for remediation within an area called the Fair
Lawn Wellfields Superfund Site. This site was listed in 1983 on
the National Priority List under the Federal Comprehensive
Environmental Response Compensation and Liability Act of 1980
(also known as “CERCLA”). Both New Jersey sites are
also the subjects of CERCLA National Resources Damages claims,
the expected cost of which is not material individually or in
the aggregate.
We have also been notified that we are among the potentially
responsible parties under CERCLA or similar state laws for the
costs of investigating or remediating contamination at various
other third party sites. Based on current information, these are
not material individually or in the aggregate.
We record accruals for environmental liabilities based on
current interpretations of environmental laws and regulations
when it is probable that a liability has been incurred and the
amount of such liability can be reasonably estimated. We
calculate estimates based upon several factors, including
reports prepared by environmental specialists and
management’s knowledge and experience with these
environmental matters. We include in these estimates potential
costs for investigation, remediation and operation and
maintenance of cleanup sites. Accrued liabilities for
environmental matters were $32.2 million and
$32.5 million at December 31, 2004 and 2003,
respectively.
These environmental liabilities do not include third-party
recoveries to which we may be entitled. We believe that our
accrual is adequate for the environmental liabilities we
currently expect to incur. As a result, we believe that our
ultimate liability with respect to environmental matters will
not have a material adverse effect on our financial position or
results of operations or cash flows. However, we may be subject
to additional remedial or compliance costs due to future events,
such as changes in existing laws and regulations, changes in
agency direction or enforcement policies, developments in
remediation technologies, changes in the conduct of our
operations, and the impact of changes in accounting rules, which
could have a material adverse effect on our financial position,
results of operations or cash flows.
Regulatory Affairs
From time to time, various governmental agencies, such as the
U.S. Drug Enforcement Administration; the
U.S. Department of Transportation; the U.S. Food and
Drug Administration, the Bureau of Alcohol, Tobacco, Firearms
and Explosives; and U.S. Customs and Border Protection
examine certain aspects of our operations. To date, none has had
a material impact on our operations. For information regarding
legal proceedings, refer to “Item 3 — Legal
Proceedings,” which is incorporated herein by reference.
Foreign and Domestic Operations, Segment Data and Export
Sales
For information regarding foreign and domestic operations and
export sales, refer to “Item 8 — Financial
Statements and Supplementary Data —
Note 20 — Segment and Geographic Financial
Information,” which is incorporated herein by reference.
Employees
As of December 31, 2004 and 2003, we had approximately
17,500 and 10,200 full-time employees, respectively. Of
these employees, approximately 12,200 and 7,600 were located in
the United States in 2004 and 2003, respectively. We consider
relations with our employees to be good.
We are a party to several collective-bargaining agreements that
include manufacturing employees in our laboratory workstation
segment, certain of our manufacturing employees in other
operations located in the United States and certain employees
located in Europe.
Our executive officers and directors, and their ages and
positions as of December 31, 2004 are as follows:
Member of the Nominating and Corporate Governance Committee.
(4)
Effective as of March 4, 2005, Mr. DuChene resigned
his position as Senior Vice President of Corporate Development,
Chief Legal Officer and Secretary.
Paul M. Montronehas served Fisher as an executive
officer and director since 1991. Mr. Montrone has been
Chairman of the Board of Fisher since March 1998 and the Chief
Executive Officer of Fisher since 1991. Mr. Montrone served
as President and a director from 1991 to 1998.
Paul M. Meisterhas served Fisher as an executive officer
since 1991 and a director since 1998. Mr. Meister has been
Vice Chairman of the Board since March 2001. Mr. Meister
served as Vice Chairman of the Board, Executive Vice President
and Chief Financial Officer of Fisher from March 1998 to
February 2001 and was Senior Vice President and Chief Financial
Officer of Fisher from 1991 to March 1998. Mr. Meister is a
director of LKQ Corporation, M & F Worldwide Corp.
and National Waterworks, Inc.
Frank H. Jellinek, Jr. has been Chairman Emeritus at
Fisher since August 2, 2004. Mr. Jellinek served
as President and Chief Executive Officer and a director of
Apogent from December 2000 to August 2004, when it was acquired
by Fisher. He served as President and Chief Executive Officer of
Apogent’s subsidiary,
Sybron Laboratory Products Corporation from May 1998 to December
2000. He served as President of Apogent’s subsidiary, Erie
Scientific Company, from 1975 to 1998.
David T. Della Penta has served Fisher as an executive
officer since 1998. Mr. Della Penta has been President and
Chief Operating Officer since April 1998. From prior to 1996
until April 1998, Mr. Della Penta served as President of
Nalge Nunc International, a subsidiary of Sybron International
Corporation (the former name of our recently acquired
subsidiary, Apogent), a manufacturer of laboratory products.
Kevin P. Clarkhas served Fisher as an executive officer
since 1996. Mr. Clark has been Vice President and Chief
Financial Officer since March 2001. He served as Vice President
and Controller from May 1998 to February 2001. Mr. Clark
served as our Vice President and Treasurer from September 1997
to May 1998, and as our Assistant Treasurer from 1995 to 1997.
Todd M. DuChene served Fisher as an executive officer
from 1996 until his resignation on March 4, 2005.
Mr. DuChene has been Senior Vice President of Corporate
Development, Chief Legal Officer and Secretary since September
2004. He was Vice President, General Counsel and Secretary from
November 1996 to August 2004. Mr. DuChene was Senior Vice
President, General Counsel and Secretary of OfficeMax, Inc. from
March 1995 to November 1996, and was Vice President, General
Counsel and Assistant Secretary of OfficeMax, Inc. from January
1994 to March 1995.
Michael D. Dingmanhas been a director at Fisher since
1991. Mr. Dingman has been President of Shipston Group Ltd.
(international investments) since prior to 1999.
Mr. Dingman was Chairman of the Board of Fisher from 1991
to 1998.
Christopher L. Doerr has been a director at Fisher since
August 2, 2004. Mr. Doerr has served as a Co-Chief
Executive Officer of Passage Partners, LLC (a private investment
company) since October 2000. He served as President and Co-Chief
Executive Officer of Lesson Electric Corporation from December
1989 to September 2000. He is a director of Regal-Beloit
Corporation.
Simon B. Richhas been a director at Fisher since
August 2, 2004. Mr. Rich served as Chairman of Louis
Dreyfus Natural Gas Corp. (now Dominion Exploration &
Production, Inc.) from 1996 until his retirement in 2001 and
President and Chief Executive Officer from 1993 to 1996.
Mr. Rich was Chief Executive Officer and Executive Vice
President of Louis Dreyfus Holding Company from 1998 to 2000 and
from 1986 to 1990, respectively.
Charles A. Sanders, M.D. has been a director at
Fisher since May 2003. Dr. Sanders has served as Chairman
of the Foundation for National Institutes of Health since 1997.
Dr. Sanders served as Chief Executive Officer of Glaxo Inc.
from 1989 to 1994 and was Chairman of the Board from 1992 to
1995. Dr. Sanders is a director of BioPure Corp., Cephalon
Inc., Genentech Inc., Trimeris Inc. and Vertex Pharmaceuticals.
Scott M. Sperlinghas been a director at Fisher since
1998. Mr. Sperling has been employed by Thomas H. Lee
Partners, L.P., and its predecessor Thomas H. Lee Company, since
prior to 1999. Mr. Sperling currently serves as a Managing
Director of Thomas H. Lee Partners, L.P. Mr. Sperling is a
director of Houghton Mifflin Co., ProSiebenSat.1 Media AG,
Vertis Inc., Warner Music Group Inc., Warner Music Group Corp.
and Wyndham International Inc.
W. Clayton Stephenshas been a director at Fisher
since November 2002. Mr. Stephens founded Warren Capital
Corporation in 1984 and has served as a Director and President
of the firm since that time. Mr. Stephens is a member of
the Advisory Board of Sonoma National Bank.
Richard W. Vieserhas been a director at Fisher since
August 2, 2004. Mr. Vieser has been retired from
active employment since 1989 and formerly served as Chairman of
the Board, President and CEO of Lear Siegler, Inc.,
FL Industries, Inc. and FL Aerospace. He serves as
Chairman Emeritus of Varian Medical Systems, Inc. as he is a
director of Viasystems Group, Inc.
The Company files annual, quarterly and current reports, proxy
statements and other information with the U.S. Securities
and Exchange Commission (the “SEC”). You may read and
copy any documents the Company files at the SEC’s public
reference room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information on the public reference
room. The Company’s SEC filings are also available to the
public free of charge at the SEC’s Web site at
www.sec.gov. In addition, all of the Company’s
filings with the SEC are available free of charge through the
Company’s Web site at www.fisherscientific.com.
Our common stock is listed on the New York Stock Exchange, Inc.
(the “NYSE”) under the symbol “FSH”. You can
also inspect reports and other information concerning us at the
office of the NYSE, 20 Broad Street, New York, New York10005.
Corporate Information
We were founded in 1902 by Chester G. Fisher in Pittsburgh,
Pennsylvania, and became a Delaware corporation in 1991. Fisher
is a Fortune 500 company and is a component of the
S&P 500, Russell 1000 and MSCI World Indices. Our
principal executive offices are located at Liberty Lane,
Hampton, New Hampshire03842, and our telephone number is
(603) 926-5911. Our Web site is located at
www.fisherscientific.com.
Risk Factors
Our business is subject to a number of important risks and
uncertainties. You should carefully consider all the information
we have included in this Form 10-K. In addition, you
should carefully consider the risk factors described below.
Our growth strategy to acquire new businesses may not be
successful and the integration of future acquisitions may be
difficult and disruptive to our ongoing business.
Acquisitions are an important part of our growth strategy. Since
1991, we have acquired 37 businesses, and we routinely review
additional potential acquisition opportunities. Despite our
successful record in integrating the companies we have acquired,
certain risks exist, including the potential for:
•
management’s attention being diverted to the integration of
the acquired businesses;
•
difficulties in integrating the operations and systems of the
acquired businesses and realizing operating synergies; and
•
difficulties in assimilating and retaining employees and
customers of the acquired companies.
None of these difficulties historically have been material, but
if they were to be in the future we may be unable to implement
our growth strategy. In addition, we compete with other
companies to acquire suitable targets, and may not be able to
acquire certain targets that we seek. Also, certain of the
businesses we have acquired have not generated the cash flow and
earnings, or yielded other benefits, that we anticipated at the
time of their acquisition. If we are unable to successfully
complete and integrate strategic acquisitions in a timely
manner, the acquisition may adversely affect our profitability.
In addition, if we are unable to hire and retain key management
personnel, we may not be able to execute our acquisition
strategy.
During 2004, we acquired Apogent, Oxoid and Dharmacon. We
believe that we will be able to realize important strategic and
commercial benefits by combining each of these businesses with
our existing business; however, the risks discussed above could
impede our ability to realize these benefits.
Our substantial indebtedness could adversely affect our
financial health and prevent us from fulfilling our financial
obligations.
As of December 31, 2004, we had total indebtedness of
$2,348.6 million. In addition, as of December 31,2004, we had the ability to incur an additional aggregate amount
of $969.2 million of indebtedness under our existing
accounts receivable securitization facility, revolving credit
facility and term facility; further borrowing under those
facilities or incurring any other additional indebtedness would
likely increase our leverage and the risks therefrom. Our debt
agreements permit us to incur or guarantee additional
indebtedness, subject to limitations set forth in those
agreements.
Our substantial indebtedness could negatively affect our
operations in a number of ways, including:
•
increasing our vulnerability to general adverse economic and
industry conditions;
•
reducing the availability of our cash flow to fund working
capital, capital expenditures, research and development efforts,
program investment efforts, and other general corporate needs;
•
limiting our flexibility in planning for, or reacting to,
changes in our business and the industry in which we operate;
•
exposing us to the risk of increased interest rates because some
of our debt has variable interest rates; and
•
limiting our ability to borrow additional funds.
Any default under the agreements governing our credit facility
or our other outstanding indebtedness and the remedies sought by
the holders of such indebtedness could make us unable to pay
principal and interest on our outstanding indebtedness.
In addition, we will be required to repay the indebtedness under
our various debt agreements as that indebtedness matures. We may
not have sufficient funds or we may be unable to arrange for
additional financing to pay these amounts when they become due.
See “Item 7 — Management’s Discussion
and Analysis of Financial Condition and Results of
Operations — Description of Indebtedness.”
Our results of operations are affected by our
customers’ research and development efforts; these efforts
and the spending on them are beyond our control, and our results
of operations could be adversely affected if our customers do
not continue expending sufficient resources on these
activities.
A significant number of our customers include entities active in
scientific or technological research in the scientific research,
clinical laboratory and lab safety markets in the United States
and internationally. Research and development budgets and
activities have a large effect on the demand for our products
and services. Our customers determine their research and
development budgets based on several factors, including the need
to develop new products, competition and the general
availability of resources. In addition, as we continue to expand
our international operations, the research and development
spending levels in other global markets will become increasingly
important to us. Although we expect continued increases in
scientific and technology-related research and development
spending in the United States and worldwide, such spending may
decrease or become subject to cyclical swings.
We may be unable to achieve earnings forecasts, which are
based, in part, on projected volumes and sales of many product
types and services, some of which are more profitable than
others.
Demand for some of our higher margin products and services could
be subject to variation based upon the introduction of new
technologies, competition, government regulation, supply
availability, raw material contamination and changes in customer
preferences. If demand for these products and services were to
change rapidly, we may be unable to achieve our earnings
forecast.
Because we compete directly with certain of our largest
customers and product suppliers, our results of operations could
be adversely affected in the short-term if these customers and
suppliers abruptly discontinue or significantly modify their
relationship with us.
Our largest customer in the scientific products and services
segment and our largest customer in the healthcare products and
services segment are also significant competitors. Our business
may be harmed in the short-term if our competitive relationship
in the marketplace with these customers results in
discontinuation of their purchases from us. In addition, we
manufacture products that compete directly with products that we
source from third party suppliers. We also source competitive
products from multiple suppliers. Our business could be
adversely affected in the short-term if any of our large third
party suppliers abruptly discontinues selling products to us.
Because we rely heavily on third party package delivery
services, a significant disruption in these services or
significant increases in prices may disrupt our ability to ship
products and increase our costs and lower our
profitability.
We ship a significant portion of our products to our customers
through independent package delivery companies, such as UPS. We
also maintain a small fleet of transportation vehicles dedicated
to the delivery of our products. In 2004, we shipped
approximately 65% of our products in the United States via UPS.
Our agreement with UPS expires in May 2008. We also ship our
products through other carriers, including national and regional
trucking firms, overnight carrier services and the
U.S. Postal Service. If UPS or another third party package
delivery provider experiences a major work stoppage, as UPS did
in 1997, such that either our products would not be delivered in
a timely fashion or we would incur additional shipping costs
that we could not pass on to our customers, our costs may
increase and our relationships with certain of our customers may
be adversely affected. In addition, if UPS or our other third
party package delivery providers increase prices, and we are not
able to find comparable alternatives or make adjustments to our
delivery network, our profitability could be adversely affected.
We are subject to regulation by various federal, state and
foreign agencies, which require us to comply with a wide variety
of regulations, including regulations regarding the manufacture
of products, the shipping of our products and environmental
matters.
Some of our operations are subject to regulation by the
U.S. Food and Drug Administration and similar international
agencies. These regulations govern a wide variety of product
activities, from design and development to labeling,
manufacturing, promotion, sales and distribution. If we fail to
comply with the U.S. Food and Drug Administration’s
regulations or those of similar international agencies, we may
have to recall products and cease their manufacture and
distribution, which would increase our costs and reduce our
revenues.
We are subject to federal, state, local and international laws
and regulations that govern the handling, transportation,
manufacture, use or sale of substances that are or could be
classified as toxic or hazardous substances. Some risk of
environmental damage is inherent in our operations and the
products we
manufacture, sell or distribute. This requires us to devote
significant resources to maintain compliance with applicable
environmental laws and regulations, including the establishment
of reserves to address potential environmental costs, and manage
environmental risks.
If we lose our key personnel, our business could be
adversely affected.
We depend heavily on the services of our senior management,
including Paul M. Montrone, our Chairman of the Board and Chief
Executive Officer, and Paul M. Meister, our Vice Chairman of the
Board, both of whom are important to the implementation of our
acquisition and earnings growth strategy. We believe that our
future success will depend upon the continued services of our
senior management. Our business could be adversely affected by
the loss of any member of our senior management, including
Mr. Montrone or Mr. Meister. We do not maintain
key-man life insurance in respect of Mr. Montrone or
Mr. Meister.
We are subject to economic, political and other risks
associated with our significant international sales and
operations, which could adversely affect our business.
We conduct international operations through a variety of wholly
owned subsidiaries, majority-owned subsidiaries, joint ventures,
equity investments and agents located in North and South
America, Europe, the Far East, the Middle East and Africa. A
significant portion of the revenues of our international
operations is generated in Europe. Expansion of these activities
could increase the risks associated with our international
operations. Sales outside the United States were approximately
25% and 20% of total sales in 2004 and 2003, respectively. We
anticipate that revenue from international operations will
continue to represent a growing portion of our revenues. In
addition, many of our manufacturing facilities, employees and
suppliers are located outside the United States, including areas
in Europe that are undergoing slow, if any, economic growth. Our
sales and earnings could be adversely affected by a variety of
factors resulting from our international operations, including:
•
changes in the political or economic conditions in a country or
region, particularly in developing or emerging markets;
•
future fluctuations in exchange rates;
•
trade protection measures and import or export licensing
requirements;
•
differing tax laws and changes in those laws;
•
difficulty in staffing and managing widespread
operations; and
•
differing regulatory requirements and changes in those
requirements.
We may be unable to adjust to rapid changes in the
healthcare industry, some of which could adversely affect our
business.
The healthcare industry has undergone significant changes in an
effort to reduce costs. These changes include:
•
development of large and sophisticated purchasing groups of
medical and surgical supplies;
•
wider implementation of managed care;
•
legislative healthcare reform;
•
consolidation of pharmaceutical companies;
•
increased out-sourcing of select activities, including to
low-cost offshore locations;
•
consolidation of pharmaceutical and medical and surgical supply
distributors; and
We expect the healthcare industry to continue to change
significantly in the future. Some of these potential changes,
such as a reduction in governmental support of healthcare
services or adverse changes in legislation or regulations
governing the delivery or pricing of healthcare services or
mandated benefits, may cause healthcare industry participants to
purchase fewer of our products and services or to reduce the
price that they are willing to pay for our products or services.
We may incur unexpected costs from increases in raw
material prices, which could reduce our earnings and cash
flow.
Our primary commodity exposures are for petroleum-based resins
and steel. We may incur increased costs for the procurement of
these materials that we may not be able to pass along to our
customers in the form of higher prices. If we are unable to pass
along higher raw material prices, our earnings and cash flow
could be adversely affected.
If we experience a significant disruption in our
information technology systems or if we fail to implement new
systems and software successfully, our business could be
adversely affected.
We depend on the information systems throughout our Company to
process orders, manage inventory and process shipments to
customers. If we were to experience a prolonged system
disruption in the information technology systems that involve
our interactions with customers and suppliers, it could result
in the loss of sales and customers, which could adversely affect
our business.
Item 2.
Properties
Our principal executive offices are located in Hampton, New
Hampshire. We believe that our property and equipment are
generally well maintained, in good operating condition and
adequate for our present needs. The inability to renew any
short-term real property lease would not have a material adverse
effect on our operations.
The following table identifies our principal facilities, which
are owned unless otherwise indicated:
We are a party to various lawsuits and other legal proceedings
including consolidated multi-party product liability actions for
products we may have distributed or manufactured. We believe
that some of the costs incurred in defending and ultimately
disposing of most of these claims for personal injury and other
matters may be covered in part by insurance policies previously
maintained by several insurance carriers or subject to
indemnification by our suppliers or purchasers and that the
ultimate liability with respect to these matters, if any, will
not have a material adverse effect on our results of operations,
financial position or cash flows. Actual costs incurred will
depend on the solvency of our insurance carriers and former
carriers, the degree of coverage with respect to any partial
claim, our success in litigating these claims and the third
parties who may be jointly and severally liable.
See “Item 1 — Business —
Environmental Matters” for legal proceedings involving
environmental and health and safety matters.
We are subject to the jurisdiction of various regulatory
agencies including, among others, the U.S. Food and Drug
Administration and the Agency for International Development.
Various governmental agencies conduct investigations from time
to time to examine matters relating to our operations. Some
operations involve and have involved the handling, manufacture,
use or sale of substances that are classified as toxic or
hazardous substances within the meaning of applicable
environmental laws. Consequently, some risk of environmental and
other damage is inherent in particular operations and products
as it is with other companies
engaged in similar businesses, and we cannot assure that
material damage will not occur or be discovered or be determined
to be material in the future. We are currently involved in
various stages of investigation and remediation relative to
environmental protection matters. We believe that such
investigations and remediation expenditures in connection
therewith, individually and in the aggregate, will not have a
material adverse effect upon our results of operations,
financial position, or cash flows.
Item 4.
Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders in the
fourth quarter of 2004.
PART II
Item 5.
Market For Registrant’s Common Equity and Related
Stockholder Matters
Market Information
Our common stock is listed on the NYSE under the trading symbol
“FSH”. For information regarding the high and low
closing sale prices of our common stock, see
“Item 8 — Financial Statements and
Supplementary Data — Note 24 —
Unaudited Quarterly Financial Information,” which is
incorporated herein by reference.
The last reported sale price of our common stock on the NYSE on
March 14, 2005 was $60.59 per share. As of March 14,2005 we had approximately 958 holders of record of our
common stock.
Dividends
We have not paid a cash dividend on our common stock during the
last three fiscal years. Our credit facility and other debt
agreements restrict our ability to pay cash dividends. See
“Item 7 — Management’s Discussion and
Analysis of Financial Condition and Results of
Operations — Description of Indebtedness.”
Accordingly, we do not anticipate paying cash dividends on
common stock at any time in the foreseeable future.
Equity Compensation Plans
The following is a summary of our equity compensation plan
information as of December 31, 2004:
Number of Securities
Remaining for Future
Number of Securities
Issuance Under Equity
to be Issued Upon
Weighted-Average
Compensation Plans
Exercise of
Exercise Price of
(Excluding Securities
Plan Category
Outstanding Options
Outstanding Options
Reflected in Column (a))
(a)(2)
(b)
(c)(1)(2)
Equity compensation plans approved by security holders
9,471,816
$
31.59
1,526,054
Equity compensation plans not approved by security holders
1,526,054 of the shares listed in column (c) may be issued
in the form of other stock-based awards, which include
restricted or unrestricted stock, restricted or unrestricted
stock units or dividend equivalents, pursuant to the 2001 and
2003 Equity and Incentive Plans.
(2)
Does not include 3,533,068 shares issuable upon the
exercise of options under the plans assumed in connection with
the merger with Apogent.
This summary of selected financial data for the five-year period
ended December 31, 2004 should be read in conjunction with
Management’s Discussion and Analysis of Financial Condition
and Results of Operations and the Financial Statements presented
elsewhere herein. See “Item 8 — Financial
Statements and Supplementary Data —
Note 1 — Nature of Operations and
Note 2 — Summary of Significant Accounting
Policies” for a further discussion of the basis of
presentation, principles of consolidation and defined terms.
Income before cumulative effect of accounting change
166.4
78.4
96.7
16.4
22.7
Net income(b)
166.4
78.4
50.6
16.4
22.7
Share Data:
Net income per common share:
Basic income per common share before cumulative effect of
accounting change
$
1.93
$
1.38
$
1.77
$
0.33
$
0.57
Cumulative effect of accounting change
—
—
(0.84
)
—
—
Basic net income per common share
$
1.93
$
1.38
$
0.93
$
0.33
$
0.57
Diluted income per common share before cumulative effect of
accounting change
$
1.80
$
1.29
$
1.67
$
0.31
$
0.51
Cumulative effect of accounting change
—
—
(0.80
)
—
—
Diluted net income per common share
$
1.80
$
1.29
$
0.87
$
0.31
$
0.51
Weighted average common shares outstanding:
Basic
86.2
56.9
54.5
49.4
40.1
Diluted
92.2
60.6
57.9
53.0
44.4
Balance Sheet Data (at end of year):
Working capital
$
723.3
$
362.3
$
186.1
$
120.1
$
142.8
Total assets
8,090.2
2,859.4
1,871.4
1,839.2
1,385.7
Long-term debt
2,309.2
1,386.1
921.8
956.1
991.1
(a)
In 2004, income from operations includes charges of
$82.9 million ($53.0 million, net of tax) to step-up
the fair value of inventory from the Apogent, Oxoid, Dharmacon,
and Perbio acquisitions, $25.0 million ($16.6 million,
net of tax) of integration costs, $7.8 million
($5.2 million, net of tax) of restructuring charges,
$6.0 million ($3.8 million, net of tax) of a
charitable contribution, and $67.6 million
($43.7 million, net of tax) of impairment charges for
goodwill and other long-lived assets. Income from operations
also includes charges of $18.1 million ($11.4 million,
net of tax) to step-up the fair value of inventory from the
Perbio acquisition in 2003, $2.2 million
($1.4 million, net of tax) of restructuring credits
relating to a reduction in estimated severance costs in 2002,
$61.2 million ($38.5 million, net of tax) of
restructuring and other charges in 2001, and $8.4 million
($5.2 million, net of tax) of restructuring credits and
other charges in 2000. Refer to “Item 7 —
Management’s Discussion and Analysis of Financial Condition
and Results of Operations.”
(b)
Net income includes the charges described in (a) above and,
in 2004, includes $14.4 million ($9.0 million, net of
tax) of debt refinancing charges, $22.7 million
($21.5 million, net of tax) gain on
sale of investment, $2.2 million ($1.4 million, net of
tax) charge for the termination of a foreign currency contract,
and a $10.9 million tax provision credit related to
finalizing certain domestic and foreign tax audits and
negotiations. Net income in 2003 includes the charges described
in (a) above and charges of $43.8 million
($27.6 million, net of tax) for call premiums and
$22.1 million ($13.9 million, net of tax) for the
write-off of deferred financing fees, as well as
$15.7 million ($9.9 million, net of tax) for the
purchase of options to hedge foreign currency exposure and
$2.8 million ($1.8 million, net of tax) for bridge
financing fees, each related to the Perbio acquisition. Net
income in 2002 includes the amounts described in (a) above
and includes a charge of $11.2 million ($7.1 million,
net of tax) consisting of $7.1 million of fixed-swap unwind
costs and $4.1 million of deferred financing and other
costs associated with the refinancing of our term debt. Net
income in 2000 includes the amounts in (a) above and a
$23.6 million ($14.9 million, net of tax) write down
of investments in certain internet-related ventures.
Item 7.
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
The discussion and analysis presented below refer to and should
be read in conjunction with the financial statements and related
notes appearing elsewhere in the Form 10-K.
Overview
We generate our revenues through the sale of more than 600,000
products and services to the global scientific research, global
biopharma production supplies, U.S. clinical laboratory,
and U.S. lab safety and personal protection markets. We
generated approximately 80% of our revenues from the sale of
consumable products. We offer both proprietary products and
products that we source from suppliers.
We offer and sell our products and services to over
350,000 customers located in over 150 countries. Our
customers include pharmaceutical and biotechnology companies;
colleges and universities; medical research institutions;
hospitals and reference labs; government agencies; original
equipment manufacturers; quality control and process control and
research and development laboratories. No single customer
represents more than 3% of our total sales. For further
information regarding our business, refer to
“Item 1 — Business” which is
incorporated herein by reference.
Acquisitions
We continually evaluate potential strategic acquisitions to
increase the breadth of our proprietary product and service
offerings and accelerate our revenue growth, enhance our margins
and increase our cash flow. Since our initial public offering in
1991, we have completed 37 acquisitions. The following is a
brief description of the material transactions we have completed
since January 1, 2002.
On August 2, 2004 we completed an approximately
$3.9 billion combination with Apogent in a tax-free,
stock-for-stock merger including the assumption of debt with a
fair value of approximately $1.1 billion. Apogent
shareholders received 50.6 million shares of Fisher
Scientific common stock representing 0.56 shares of Fisher
common stock for each share of Apogent common stock they owned.
Apogent is a diversified worldwide leader in the design,
manufacture and sale of laboratory and life science products
essential for scientific research and healthcare diagnostics.
The results of Apogent have been included in the scientific
products and services segment and the healthcare products and
services segment from the date of acquisition.
On April 1, 2004, we acquired Dharmacon for
$80 million in cash. Dharmacon focuses on RNA technologies,
including RNA interference and small interfering RNAi, which are
tools for life-science research that increase the efficiency of
the drug discovery process. The results of Dharmacon have been
included in the scientific products and services segment from
the date of acquisition.
On March 1, 2004, we acquired Oxoid for $330 million
in cash. Oxoid is a United Kingdom-based manufacturer of
microbiological culture media and other diagnostic products that
test primarily for bacteria contamination, with sales primarily
outside of the United States. The results of Oxoid have been
included in the scientific products and services segment from
the date of acquisition.
On September 8, 2003, we acquired Perbio Science AB
(“Perbio”), a Swedish public company, for
$689 million in cash plus assumed net debt of approximately
$44 million. Perbio manufactures and sells consumable tools
for protein-related research and protein-based biopharma drug
production. The acquisition of Perbio enhanced our footprint in
the life sciences market and increased our proprietary product
offerings. From the date of acquisition, the Bioresearch and
Cell Culture divisions of Perbio, which accounted for
approximately 90% of total Perbio revenues, have been included
in the scientific products and services segment, and its medical
device division, which accounted for the remaining 10% of total
Perbio revenues, has been included in the healthcare products
and services segment.
Results of Operations
Our operations are organized into three reporting segments:
scientific products and services, healthcare product and
services, and laboratory workstations.
1.
Scientific products and services segment provides
products and services primarily to entities conducting
scientific research, including drug discovery and drug
development, quality and process control and basic research and
development. This segment manufactures and/or distributes a
broad range of biochemicals and bioreagents; organic and
inorganic chemicals; sera; cell culture media; sterile
liquid-handling systems; microbiology media and related
products; scientific consumable products, instruments and
equipment; safety and personal protection products; and other
consumables and supplies. Additionally, this segment provides
services to pharmaceutical and biotechnology companies engaged
in clinical trials, including specialized packaging,
over-encapsulation, labeling and distribution for phase III
and phase IV clinical trials, as well as combinatorial
chemistry, custom-chemical synthesis, supply-chain management
and a number of other services.
2.
Healthcare products and services segment manufactures
and/or distributes a wide array of diagnostic kits and reagents,
equipment, instruments, medical devices and other consumables
products to hospitals and group-purchasing organizations,
clinical laboratories, reference laboratories, physicians’
offices, original equipment manufacturers and other distributors
that service such customers located primarily in the
U.S. In addition, we also manufacture and distribute ear,
nose and throat medical devices outside the U.S. This
segment also provides outsourced manufacturing services for
diagnostic reagents, calibrators and controls to the healthcare
and pharmaceutical industries.
3.
Laboratory workstations segment manufactures and sells
laboratory workstations and fume hoods and provides lab-design
services for pharmaceutical and biotechnology customers,
colleges, universities and secondary schools, hospitals and
reference labs.
Sales
The following table presents sales and sales growth by
reportable segment for the years ended December 31, 2004,
2003 and 2002 (dollars in millions):
2004
2003
2002
Sales
Sales
Sales
Growth
Sales
Growth
Sales
Scientific products and services
$
3,454.7
38%
$
2,501.0
11%
$
2,258.0
Healthcare products and services
1,067.4
22%
877.2
9%
806.7
Laboratory workstations
176.1
(15)%
206.1
6%
193.9
Eliminations
(35.5
)
(19.9
)
(20.2
)
$
4,662.7
31%
$
3,564.4
10%
$
3,238.4
Consolidated. Sales growth of 31% in 2004 was favorably
impacted by foreign exchange translation of $95.1 million
representing 3 points of sales growth and acquisitions completed
in 2003 and 2004 that accounted for approximately 21 points of
sales growth. Our organic sales growth rate of approximately 7%
in 2004 was driven by strong customer demand in the scientific
product and services segment, partially offset by
slower growth in our healthcare products and services segment
and a decline in sales in our laboratory workstations segment,
as more fully described below. Consolidated 2003 sales growth of
10% was favorably impacted by foreign exchange translation of
$76.6 million representing 2 points of sales growth and
acquisitions completed in 2002 and 2003 that accounted for
approximately 3% of sales growth. Our organic sales growth rate
of approximately 5% in 2003 resulted from revenue growth in all
three segments as more fully described below.
Scientific Products and Services. Sales growth of 38% in
2004 was favorably impacted by foreign exchange translation of
$89.8 million representing 4 points of growth. Sales growth
impact from acquired companies in 2003 and 2004 represented
approximately 23 points of growth, primarily from Apogent, Oxoid
and Perbio. Organic sales growth of approximately 11% was
primarily due to strong demand from pharmaceutical, biotech and
academic customers, as well as an improvement in our
international markets. In addition, the segment experienced
increased demand for safety-related products driven in large
part by domestic preparedness and bioterrorism readiness
initiatives, as well as increased demand from the
U.S. government. We expect organic growth of 8% - 10%
in 2005. Sales growth of 11% in 2003 was favorably impacted by
foreign exchange translation of $75.9 million representing
approximately 3.5 points of growth. Sales growth impact from
acquired companies in 2002 and 2003 represented approximately 4
points of growth, primarily from Perbio. Our 2003 organic growth
rate of approximately 3.5% was favorably impacted by an increase
in demand for safety-related products and was adversely affected
by a decline in sales to our U.S. biotechnology customers
and a decline in international sales due to weakness in the
European economy and associated reductions in research funding
from governments.
Healthcare Products and Services. Sales growth of 22% in
2004 was largely due to the impact of the Apogent and Perbio
acquisitions, which accounted for approximately 20 points of the
growth rate. Organic growth and the favorable impact of foreign
exchange each accounted for approximately 1 point of growth. Our
organic growth rate was negatively impacted in 2004 due to our
efforts to improve operating margins at the expense of sales
growth. We expect organic growth of approximately 2% in 2005,
reflecting flat to negative growth in the first half of the year
with stronger growth in the second half of the year. Sales
growth of 9% in 2003 was largely due to strong organic growth
which contributed approximately 8 points of growth and
approximately 1 point from acquisitions. The organic growth rate
was primarily due to an increase in demand for clinical
laboratory products in both the hospitals and reference labs
customer segments.
Laboratory Workstations. Sales decrease of 15% in 2004
was primarily due to the timing of large projects and a decrease
in market demand for small projects. This compares to a 6% sales
growth rate in 2003 that reflected strong demand in both large
and small projects. Order activity for large projects was strong
in 2004, which is reflected in the increase in backlog at
December 31, 2004 to $134 million compared to
$105 million at December 31, 2003. Laboratory
workstations is a project-based business which operates from a
backlog, a majority of which may be shipped in less than one
year. Delivery and installation of projects, which are driven by
the timing of construction projects, result in a corresponding
reduction in backlog.
The following table presents income from operations and income
from operations as a percentage of sales by reportable segment
for the years ended December 31, 2004, 2003 and 2002
(dollars in millions):
Income from Operations as a
Income from Operations
Percentage of Sales
2004
2003
2002
2004
2003
2002
Scientific products and services
$
375.5
$
230.0
$
206.2
10.9%
9.2%
9.1%
Healthcare products and services
98.3
35.7
25.2
9.2%
4.1%
3.1%
Laboratory workstations
2.8
11.1
11.7
1.6%
5.4%
6.0%
Eliminations
(0.3
)
(0.1
)
(0.2
)
Sub-total
476.3
276.7
242.9
10.2%
7.8%
7.5%
Other charges:
Inventory step-up
82.9
18.1
—
Goodwill impairment
64.9
—
—
Restructuring charges (credits), net
7.8
—
(2.2
)
Other charges
33.7
—
—
Total
$
287.0
$
258.6
$
245.1
6.2%
7.3%
7.6%
Consolidated. Income from operations in 2004 of
$287.0 million represents an increase of 11% from 2003. As
a percentage of sales, income from operations declined to 6.2%
of sales in 2004 from 7.3% of sales in 2003. The decline in
operating margins as a percentage of sales is due to
$189.3 million of special charges in 2004 compared to
$18.1 million of such charges in 2003. Special charges in
2004 were comprised of $82.9 million of inventory step-up
included in cost of sales for 2003 and 2004 acquisitions, $64.9
million of goodwill impairment, $7.8 million of
restructuring charges, and $33.7 million of other charges.
Included in other charges is $25.0 million of integration
costs (of which $5.6 million is recorded in cost of sales
and $19.4 million is in selling, general and administrative
expense); $2.7 million of intangible and fixed asset
impairment charges and a $6.0 million contribution to our
charitable foundation which are both recorded in selling,
general and administrative expense. Special charges in 2003 were
comprised of inventory step-up for acquisitions. The impact of
the increase in these charges was partially offset by operating
margin improvements in both the scientific products and services
and healthcare products and services segments as described
below. Excluding the impact of special charges, operating
margins increased to 10.2% of sales in 2004 compared to 7.8% of
sales in 2003.
Income from operations of $258.6 million in 2003 represents
an increase of 5.5% from 2002. As a percentage of sales, income
from operations declined to 7.3% of sales in 2003 from 7.6% of
sales in 2002. The decline in operating margins as a percentage
of sales is due to $18.1 million of inventory step-up
charges in 2003 compared to $2.2 million of restructuring
credits in 2002. Excluding the impact of special charges,
operating margins increased to 7.8% of sales in 2003 compared to
7.5% of sales in 2002. This improvement was due to increased
operating margins in each of our segments as described below.
Scientific Products and Services. Operating income in
2004 increased $145.5 million from 2003 to
$375.5 million with operating margins improving to 10.9% in
2004 from 9.2% in 2003. The improvement in operating margins was
primarily due to the impact of the Oxoid and Apogent
acquisitions during 2004. These acquisitions contributed to an
increase in gross margin as a percentage of sales with a
partially offsetting increase in selling, general and
administrative expenses as a percentage of sales. Organic
operating margins improved slightly during 2004 which was
partially offset by investments in sales and marketing
activities and increased external and internal audit-related
expenditures. We expect a continuing increase in operating
margins in 2005 reflecting the full year contribution of Apogent
and the related synergy initiatives, as well as organic margin
improvements from business initiatives and fixed cost leverage.
Operating income in 2003 increased $23.8 million from 2002,
with operating margins improving to 9.2% in 2003 from 9.1% in
2002. The increase in operating margins in 2003 was attributable
to the impact of the Perbio acquisition, continued
improvements in international operating margins, partially
offset by a decrease in sales volume to U.S. biotechnology
companies and increased investments in sales and marketing
initiatives.
Healthcare Products and Services. Operating income in
2004 increased $62.6 million from 2003 to
$98.3 million with operating margins improving to 9.2% in
2004 from 4.1% in 2003. The improvement in operating margins was
due to the impact of the Apogent acquisition during 2004 along
with strong organic margin improvement, which was partially
offset by increased external and internal audit-related
expenditures. Apogent contributed to an increase in gross margin
as a percentage of sales with a partially offsetting increase in
selling, general and administrative expenses as a percentage of
sales. Organic operating margin improvement was primarily the
result of our focus on margin improvement initiatives at the
expense of revenue growth. We expect a continuing increase in
operating margins in 2005, reflecting the full year contribution
of Apogent and the related synergy initiatives as well as
continuing organic margin improvement initiatives and fixed cost
leverage. Operating income in 2003 increased $10.5 million
from 2002, with operating margins improving to 4.1% in 2003 from
3.1% in 2002. The increase in operating margins in 2003 was
primarily reflective of a broad-based increase in volume for
clinical laboratory products.
Laboratory Workstations. Operating income in 2004
decreased $8.3 million from 2003 to $2.8 million with
operating margins declining to 1.6% in 2004 from 5.4% in 2003.
The decline in operating margins was primarily a result of the
overall decline in revenue during 2004 as a result of decreased
market demand for higher margin small projects and the impact of
increased steel prices. We expect margins to remain relatively
flat in 2005. Operating income in 2003 decreased
$0.6 million from 2002, with operating margins declining to
5.4% in 2003 from 6.0% in 2002. The decline in operating margins
in 2003 was primarily the result of a one-time order from the
Federal government completed in 2002 that did not repeat in 2003.
Interest Expense
Interest expense in 2004, 2003, and 2002 was
$104.8 million, $84.8 million and $91.3 million,
respectively. The increase in interest expense in 2004 is
primarily attributable to the increase in debt in 2004 resulting
from the assumption of debt upon the merger with Apogent on
August 2, 2004 and the issuance of $300 million of
3.25% convertible debt on March 3, 2004 to fund the
acquisition of Oxoid. The decrease in interest expense in 2003
is attributable to our debt refinancing activities in 2003 and
2002, and a decrease in the rate on variable rate debt.
Other (Income) Expense, Net
Other expense, net, includes the following for the years ended
December 31, 2004, 2003 and 2002 (in millions):
2004
2003
2002
Debt refinancing costs
$
14.4
$
65.9
$
4.1
Acquisition-related foreign currency hedges
2.2
15.7
—
Fixed-swap unwind costs
—
—
7.1
Interest income and other
(4.1
)
(3.9
)
1.1
Gain on sale of investment
(22.7
)
—
—
Other (income) expense, net
$
(10.2
)
$
77.7
$
12.3
Debt refinancing costs in 2004 primarily relate to third party
costs incurred to refinance the debt assumed in the Apogent
merger and the write-off of deferred financing fees and third
party costs related to the Fisher credit facility that was
refinanced upon consummation of the Apogent merger. Amounts in
2003 primarily relate to call premiums and the write-off of
deferred financing fees for the redemption of our 9% senior
subordinated notes and
71/8% notes.
We recognized a gain in the fourth quarter of 2004 from the
liquidation of our investment in ProcureNet Inc.
(“ProcureNet”). ProcureNet is a former subsidiary that
was spun off from Fisher in 1999.
Our effective tax rate in 2004, 2003, and 2002 was 13.5%, 18.4%
and 31.7%, respectively. The decrease in the effective tax rate
in 2004 from 2003 was due to a $10.9 million credit in 2004
due to the finalization of certain foreign and domestic tax
audits and negotiations and a basis difference relating to the
Company’s disposal of its investment in ProcureNet,
partially offset by the effect of the merger with Apogent. The
decrease in the effective tax rate in 2003 from 2002 was
primarily due to a lower effective tax rate on foreign earnings
in 2003 as compared to 2002 as a result of reorganizations and
integration efforts within the group that have produced tax
savings.
Cumulative Effect of Accounting Change
During 2002, we completed our transitional assessment in
accordance with Statement of Financial Accounting Standards
No. 142, “Goodwill and Other Intangible Assets”
(“SFAS 142”) to determine if goodwill was
impaired as of January 1, 2002. As a result, we recorded a
non-cash charge of $63.8 million ($46.1 million, net
of tax) in our statement of operations reflecting the cumulative
effect of the accounting change to adjust goodwill to its
current fair-value. The scientific products and services segment
and laboratory workstations segment accounted for
$19.7 million and $44.1 million of the charge,
respectively.
The impairment charge in the scientific products and services
segment related to certain of our smaller-market international
distribution businesses where operating performance was lower
than originally forecasted. Our laboratory workstations segment
is sensitive to changes in capital spending, and several of the
markets to which the laboratory workstations segment sells,
including the technology industry, experienced a significant
economic slowdown causing a reduction in capital spending in
those markets. As a result, sales growth was significantly less
than originally forecast, resulting in decreased profitability.
SFAS 142 also requires that goodwill be tested annually and
between annual tests if events occur or circumstances change
that would more likely than not reduce the fair value of a
reporting unit below its carrying amount. We have elected to
perform the annual tests for indications of goodwill impairment
as of October 31 each year.
Liquidity and Capital Resources
Cash generated from operating activities was $392.8 million
in 2004 compared with $218.0 million in 2003. The increase
in cash from operations in 2004 was primarily from an increase
in net income as adjusted for items such as depreciation and
amortization, debt refinancing charges, goodwill impairment and
the gain on sale of investment. Accounts receivable provided
$35.0 million of cash in 2004 compared to a use of
$17.0 million in 2003. This change in cash from accounts
receivable is primarily due to the impact of Apogent in 2004 and
improvements in collections. The decrease in inventories
provided $54.6 million of cash in 2004 compared to
$37.6 million in 2003. Excluding the rollout of the
inventory step up of $82.9 million in 2004 and
$18.1 million in 2003, we invested $28.3 million in
inventory in 2004 compared to reducing inventories by
$19.5 million in 2003. The change in cash relating to
inventory in 2004 is primarily due to an increased investment in
inventory related to our life sciences entities, increases in
inventory due to certain of our integration projects combined
with a decrease in inventory levels at certain of our entities
in 2003 that did not recur in 2004. Cash generated from
operating activities was $218.0 million in 2003 compared
with $159.3 million in 2002. The increase in cash from
operations in 2003 was related primarily to an increase in net
income and continued improvements in working capital management,
partially offset by an increase of approximately
$33 million in contributions to our pension plan and
supplemental nonqualified executive retirement program.
We used $407.0 million of cash for investing activities in
2004 compared with $766.4 million in 2003. The decrease in
cash used in 2004 is primarily due to a decrease in cash used
for acquisitions. In 2004, we acquired Oxoid and Dharmacon for
cash and merged with Apogent in a stock-for-stock transaction.
The cash acquired from the merger with Apogent is shown as a
reduction in cash used for acquisitions in 2004. In 2003, we
acquired Perbio for cash. In addition, included in other
investing activities is $26 million of proceeds from the
liquidation of our investment in ProcureNet in 2004 and a
$15.7 million use of cash in 2003 to purchase
options to hedge foreign currency exposures related to the
Perbio acquisition. Significant capital expenditures in 2004
included facility expansions at our clinical services business
and Perbio entities and construction of a manufacturing facility
in Mexico for our lab workstations unit. We expect capital
spending to increase in 2005 to approximately $155 million
which will include completion of the aforementioned facility
expansions in 2004, additional expansions related to the
integration of select manufacturing operations and the transfer
of production to lower-cost facilities. We used
$766.4 million of cash for investing activities in 2003
compared with $105.4 million in 2002. The increase in cash
used in investing activities is primarily attributable to the
acquisition of Perbio and continued capital spending for our
chemical manufacturing capabilities, our west coast warehouse
that opened late in 2003 and spending associated with Perbio
facility expansions.
Financing activities provided $83.2 million of cash in 2004
compared with $583.7 million of cash in 2003. The
significant financing activities during 2004 and 2003 are
discussed below.
During 2004 we completed the following significant financing
transactions:
•
On March 3, 2004, we sold $300 million of our
3.25% Convertible Senior Subordinated Notes due 2024 and on
March 23, 2004 sold an additional $30 million
principal amount upon exercise of the over-allotment option by
the initial purchasers of the notes.
•
On March 31, 2004, we retired $80 million of bank debt
outstanding under our term loan facility reducing the then
outstanding balance to $360 million.
•
On August 3, 2004, we issued and sold pursuant to
Rule 144A $300 million of our
63/4% Senior
Subordinated Notes due 2014. We used the proceeds from this
offering to repay Apogent’s
61/2% Senior
Subordinated Notes due 2013.
In connection with the Apogent merger, we engaged in the
following financing transactions:
•
We entered into a new credit facility (the “New Credit
Facility”) to replace our existing credit facility, to pay
off other existing indebtedness (including indebtedness of our
subsidiaries), to provide working capital and for general
corporate purposes. The New Credit Facility consists of
(i) a $500 million revolving credit facility (the
“New Revolving Credit Facility”) and (ii) a
$700 million term loan facility (the “New Term
Facility”) in three tranches: (a) a $250 million
tranche (“Tranche A-1”), (b) a
$300 million tranche (“Tranche A-2”) and
(c) a $150 million tranche
(“Tranche B”). In addition, we have the ability,
upon satisfaction of certain conditions, to request incremental
term loans from the lenders under the New Credit Facility. The
Tranche A-2 loan was unfunded at the closing of the New
Credit Facility and the lenders’ commitment to fund the
Tranche A-2 loan was originally scheduled to expire on
December 31, 2004. On December 29, 2004, we amended
the New Credit Facility to extend the term of this commitment
through December 31, 2005 and lower the interest rate on
commitments and borrowings under the New Credit Facility.
•
Our wholly owned subsidiary, Apogent, completed an exchange
offer for its $345 million aggregate principal amount of
Floating Rate Senior Convertible Contingent Debt Securities due
2033 (the “Floating Rate CODES”). The exchange offer
for the Floating Rate CODES aligned the conversion terms of
Apogent’s convertible debt with Fisher’s currently
outstanding convertible debt. 99.9 percent of the
outstanding principal amount of the Floating Rate CODES were
tendered for exchange with a like principal amount of Floating
Rate Convertible Senior Debentures and an exchange fee of
0.50 percent of the principal amount of the securities
tendered was paid. In addition, Apogent paid a consent fee of
0.60 percent to not register the notes as required per the
original registration rights agreement. Neither Fisher nor
Apogent received any proceeds from the issuance of the new
debentures in the exchange offer.
•
Our wholly owned subsidiary, Apogent, completed an exchange
offer for its $300 million aggregate principal amount of
2.25% Senior Convertible Contingent Debt Securities due
2021 (the “2.25% CODES”). The exchange offer for the
2.25% CODES aligned the conversion terms of Apogent’s
convertible debt with Fisher’s currently outstanding
convertible debt. 99.6 percent of the outstanding principal
amount of the 2.25% CODES were tendered for exchange with a like
principal amount of
2.25% Convertible Senior Debentures and an exchange fee of
0.50 percent of the principal amount of the securities
tendered was paid. Neither Fisher nor Apogent received any
proceeds from the issuance of the new debentures in the exchange
offer.
•
Concurrently with the two exchange offers, Fisher’s wholly
owned subsidiary, Apogent, completed a cash tender offer for the
$250 million aggregate principal amount of the
61/2% Senior
Subordinated Notes due 2013. Apogent accepted for payment
$249.6 million aggregate principal amount representing
99.8 percent of the outstanding principal amount of the
61/2% Senior
Subordinated Notes due 2013. A concurrent consent solicitation
amended the indenture for any notes that remained outstanding to
eliminate restrictive covenants in that indenture. The purchase
price for notes that were tendered and for which a consent was
given was $1,107.50 in cash per $1,000 principal amount, plus
accrued and unpaid interest.
•
On September 20, 2004, our wholly owned subsidiary,
Apogent, issued a notice of redemption for approximately
$298.8 million of the 2.25% Convertible Senior
Debentures and approximately $1.0 million of the 2.25%
CODES for cash at a price equal to 100 percent of the
principal amount plus accrued and unpaid interest and contingent
interest, as defined in the indentures. Noteholders had the
option of converting their notes until October 18, 2004.
Approximately $295.7 million of the notes were converted
and settled in cash. Notes that were not converted were redeemed
on October 20, 2004.
During 2003, we completed the following significant financing
transactions:
•
On January 14, 2003, we sold $200 million of our
81/8% senior
subordinated notes due 2012.
•
In January and November 2003, we redeemed $149.2 million of
our
71/8% senior
notes due 2005.
•
In February and March 2003, we redeemed $600 million of our
9% senior subordinated notes due 2008.
•
On July 7, 2003, we sold $300 million of our
2.50% convertible senior notes due 2023.
•
In August and November 2003, we sold $300 million of our
8% senior subordinated notes due 2013.
•
On September 30, 2003, we sold 6,634,526 shares of our
common stock for proceeds of $260.6 million, net of
underwriters’ discounts and offering costs.
•
On November 24, 2003, we redeemed $46 million of our
outstanding
81/8% senior
subordinated notes due 2012.
•
On December 3, 2003, we amended our senior credit facility
to create a $440 million term loan facility that refinanced
the outstanding term loan facility at a lower interest rate.
In April 2003, the Company entered into various fixed interest
rate swaps to hedge a portion of the variability of cash flows
related to changes in interest rates on bank borrowings of
variable rate debt obligations. The interest rate swaps have a
notional value of $200 million and expire at various dates
between March 2008 and March 2010.
Financing activities used $94.6 million of cash in 2002.
The use of cash in 2002 was primarily related to the repayment
of bank term debt totaling $211.3 million which was retired
using proceeds from the issuance of $150 million of
81/8% senior
subordinated notes in April 2002, proceeds from our accounts
receivable securitization facility and cash on hand.
The following table sets forth our capitalization as of
December 31, 2004 and December 31, 2003. You should
read this table along with our financial statements and related
notes included elsewhere herein.
2004
2003
Revolving Credit Facility(1)
$
—
$
—
Term Facility
393.0
—
Prior credit facility
—
440.0
Other Debt
60.8
36.6
2.50% Convertible Senior Notes
300.0
300.0
Floating Rate Convertible Senior Debentures
344.6
—
3.25% Convertible Senior Subordinated Notes
330.0
—
81/8% Senior
Subordinated Notes
309.9
310.4
8% Senior Subordinated Notes
310.3
311.1
63/4% Senior
Subordinated Notes
300.0
—
Total Debt
2,348.6
1,398.1
Stockholders’ Equity
3,870.0
575.4
Total Capitalization
$
6,218.6
$
1,973.5
(1)
Our revolving credit commitments are $500.0 million. As of
December 31, 2004, approximately $38.1 million of this
facility was utilized for letters of credit outstanding.
As of December 31, 2004, we had the ability to borrow an
aggregate of $969.2 million under our accounts receivable
securitization facility, revolving credit facility and term
facility.
The following table summarizes maturities for our significant
financial obligations as of December 31, 2004 (in millions):
Payments Due by Period
Less Than
More Than
Contractual Obligations
Total
1 Year
1-3 Years
3-5 Years
5 Years
Debt, including short-term debt(a)
$
2,309.6
$
36.3
$
54.5
$
187.8
$
2,031.0
Capital lease obligations
22.8
3.1
5.8
5.9
8.0
Operating leases
244.6
47.0
77.4
53.9
66.3
Unconditional purchase obligations(b)
3.4
2.2
1.2
0.0
—
Other long-term liabilities reflected on the balance sheet(c)
2.7
0.6
1.5
0.4
0.2
Total contractual obligations
$
2,583.1
$
89.2
$
140.4
$
248.0
$
2,105.5
(a)
Amounts represent the expected cash payments for our debt and do
not include any unamortized discounts or premiums and deferred
issuance costs.
(b)
Unconditional purchase obligations include agreements to
purchase goods or services that are enforceable and legally
binding and that specify all significant terms, including: fixed
or minimum quantities to be purchased; fixed, minimum or
variable price provisions; and the approximate timing of the
transaction. Purchase obligations exclude agreements that are
cancelable at anytime without penalty.
(c)
Includes only long-term liabilities where both the timing and
amount of payment streams are known.
In addition to the contractual obligations noted above, the
Company has outstanding standby letters of credit totaling
$38.1 million expiring over the next year.
We expect to satisfy our short-term funding requirements from
operating cash flow, together with cash and cash equivalents on
hand or available through our accounts receivable securitization
facility and revolving credit facility. A change in demand for
the Company’s goods and services would reduce free
operating cash
flow available to fund our operations. If such a decrease in
demand were significant and free operating cash flow were
reduced significantly, we could utilize the receivables
securitization facility (see “Item 8 —
Financial Statements and Supplementary Data —
Note 4 Accounts Receivable”) to the extent that we
have qualified receivables to sell through the facility. We
believe that these funding sources are sufficient to meet our
ongoing operating, capital expenditure and debt service
requirements for at least the next twelve months. Cash
requirements for periods beyond the next twelve months depend on
our profitability, our ability to manage working capital
requirements and our growth rate. We may seek to raise
additional funds from public or private debt or equity
financings, or from other sources for general corporate purposes
or for the acquisition of businesses or products. There can be
no assurance that additional funds will be available at all or
that, if available, will be obtained at terms favorable to us.
Additional financing could also be dilutive to earnings per
share.
Description of Indebtedness
The following is a summary of the pricing, maturity, ratings and
collateral of our indebtedness, including our accounts
receivable securitization facility, followed by more detailed
descriptions:
The Tranche A-1 term loan currently bears interest at LIBOR
+ 100 and matures in 2009 and the Tranch B term loan bears
interest at LIBOR + 150 and matures in 2011.
Our New Credit Facility requires us to meet certain financial
ratio covenants, including among others, a maximum consolidated
leverage ratio, a maximum senior leverage ratio and a minimum
consolidated interest coverage ratio. As of December 31,2004, we were in compliance with all covenants under our New
Credit Facility.
Securitization Facility
On February 12, 2004, we entered into a 365-day receivables
securitization facility and on February 4, 2005, we entered
into a new three-year receivables securitization facility (the
“Receivables Securitization”). The following summary
is a description of the material provisions of the relevant
agreements. A copy of such agreements are filed as exhibits to
this Form 10-K, and the following summary is qualified in
its entirety by reference to them.
The Receivables Securitization provides for the sale, on a
revolving basis, of all of the accounts receivable of Fisher
Scientific Company L.L.C., Cole-Parmer Instrument Company,
Fisher Clinical Services Inc., and
Fisher Hamilton L.L.C. to FSI Receivables Company LLC
(“FSI”), a special purpose, bankruptcy remote indirect
wholly owned subsidiary of the Company. In connection with the
Receivables Securitization, FSI and Fisher, as servicer, entered
into a receivables transfer agreement with certain financial
institutions, which provides for the transfer on a revolving
basis of an undivided percentage ownership interest in a
designated pool of accounts receivable up to a maximum amount of
$225 million to be funded in cash from time to time to FSI.
Under the terms of the Receivables Securitization, the
originators retain collection and administrative
responsibilities for the receivables in the pool. The effective
funded interest rate on the three-year Receivables
Securitization is approximately commercial paper rate plus a
usage fee of 60 basis points. The unfunded annual
commitment fee is 30 basis points.
Credit Facility
On August 2, 2004, we entered into the New Credit Facility
to replace our prior credit facility, to pay off other existing
indebtedness (including indebtedness of our subsidiaries), to
provide working capital and for general corporate purposes. The
New Credit Facility consists of (i) a $500 million New
Revolving Credit Facility and (ii) a $700 million New
Term Facility in three tranches: (a) a $250 million
Tranche A-1, (b) a $300 million Tranche A-2
and (c) a $150 million Tranche B. In addition, we
have the ability, upon satisfaction of certain conditions, to
request incremental term loans from the lenders under the New
Credit Facility. The Tranche A-2 loan was unfunded at the
closing of the New Credit Facility and the lenders’
commitment to fund the Tranche A-2 loan was originally
scheduled to expire on December 31, 2004. On
December 29, 2004, we amended the New Credit Facility to
extend the term of this $300 million commitment through
December 31, 2005 and lower the interest rate on
commitments and borrowings under the New Credit Facility.
As of December 31, 2004 the Tranche A-2 loan was
unfunded, and approximately $38.1 million of the New
Revolving Credit Facility was utilized for letters of credit
outstanding. There were no other borrowings outstanding under
the New Revolving Credit Facility as of December 31, 2004.
Bank of America, N.A. is the Administrative Agent for the
syndicate of lenders providing the New Credit Facility; Banc of
America Securities LLC and Deutsche Bank Securities Inc. are
Joint Lead Arrangers; Bank of America Securities LLC, Deutsche
Bank Securities Inc. and Credit Suisse First Boston, acting
through its Cayman Islands Branch or one of its affiliates, are
Joint Book Managers; and Deutsche Bank Securities Inc., Credit
Suisse First Boston, acting through its Cayman Islands Branch or
one of its affiliates, ABN AMRO Bank, N.V. and Merrill Lynch
Capital Corporation are Co-Syndication and Co-Documentation
Agents.
The loans under the New Revolving Credit Facility, the
Tranche A-1 loan and the Tranche A-2 loan bear
interest at our election at either (a) LIBOR plus a margin
of between 0.625% and 1.50% per annum or (b) Prime
Rate (or if it is greater, Federal Funds Rate plus 0.500%) plus
a margin of between 0.000% and 0.500%, depending in each case on
our ratings. The Tranche B loan bears interest at our
election at either (a) LIBOR plus a margin of 1.500% or
1.750% per annum or (b) Prime Rate (or if it is
greater, Federal Funds Rate plus 0.500%) plus a margin of 0.500%
or 0.750%, depending in each case on our ratings. Commitment
fees are payable on the unborrowed amounts of the New Revolving
Credit Facility at a rate of between 0.175% and 0.375% per
annum depending on the Company’s credit ratings, while such
commitments remain outstanding. Commitment fees are payable on
the unborrowed amount of the Tranche A-2 loan at a rate of
0.250% per annum, while such commitment remains
outstanding. As of December 31, 2004, $461.9 million
of borrowings were available under the New Revolving Credit
Facility.
The New Revolving Credit Facility includes a sub-limit for the
issuance of letters of credit and a sub-limit for the issuance
of local currency loans. Letters of credit and local currency
loans outstanding will reduce the availability of the New
Revolving Credit Facility. The New Credit Facility permits
borrowers to be designated in the future to borrow loans
designated in their local currencies from individual lenders
thereunder, either on a negotiated basis or through a
competitive bidding process. Negotiated local currency loans
bear interest at the negotiated rate and loans obtained pursuant
to a competitive bidding process bear interest at a rate equal
either to (a) LIBOR for the specified currency plus a
margin specified by the applicable lender or (b) a fixed
rate specified by such lender.
Interest based on the Prime Rate is payable quarterly in arrears
and interest based on LIBOR is payable in arrears at the earlier
of (i) the end of the applicable interest period and
(ii) every three months after the first day of the relevant
interest period. Borrowings bearing interest at a rate
determined by reference to LIBOR are available in one, two,
three- or six-month interest periods, or in the case of certain
competitive local currency loans, nine-month interest periods.
Our obligations under the New Credit Facility are secured by a
pledge of the stock or other ownership interests of our material
domestic subsidiaries and 65% of the stock or other ownership
interests of our material foreign subsidiaries. Our obligations
under the New Credit Facility are guaranteed by all of our
material domestic subsidiaries (excluding FSI Receivables
Company LLC and any material domestic subsidiaries of Apogent),
and these guarantees are secured by a pledge of the stock or
other ownership interests of their material domestic
subsidiaries and 65% of the stock or other ownership interests
of their material foreign subsidiaries.
The New Credit Facility requires us to meet the following
financial tests on the last day of each fiscal quarter:
Consolidated Interest Expense Coverage Ratio. We cannot
permit the ratio of (a) Consolidated EBITDA to
(b) Consolidated Cash Interest Expense, in each case for
any period of four consecutive fiscal quarters, to be less than
a ratio of 3.00 to 1.00.
Total Leverage Ratio. We cannot permit the ratio of
(a) Consolidated Funded Indebtedness as of the last day of
any fiscal quarter to (b) Consolidated EBITDA for the most
recent four consecutive fiscal quarters ending during any period
set forth below to exceed the ratio set forth below opposite
such period:
Senior Leverage Ratio. We cannot permit the ratio of
(a) Consolidated Funded Indebtedness (excluding
Subordinated Indebtedness) as of the last day of any fiscal
quarter to (b) Consolidated EBITDA for the most recent four
consecutive fiscal quarters ending during any period set forth
below to exceed the ratio set forth below opposite such period:
The New Credit Facility contains additional covenants, including
restrictions on our ability and our subsidiaries’ ability
to take certain actions such as (a) incurring more
indebtedness, (b) granting liens, (c) making loans and
investments, as well as prohibitions on the payment of dividends
to, or the repurchase or redemption of stock from our
shareholders, (d) the sale or transfer of assets,
(e) mergers, acquisitions and other business combinations,
(f) voluntary prepayment of certain debt of the Company or
its subsidiaries, (g) transactions with affiliates and
(h) other matters customarily restricted in such credit
facilities. Pursuant to the terms of the New Credit Facility,
and subject to applicable grace periods, in certain
circumstances, a default will occur upon the non-payment of
principal or interest when due under the New Credit Facility or
upon the non-fulfillment of the covenants described above, or
upon the occurrence of certain changes in
control of the ownership of the Company or of any of various
other events described therein. If such a default occurs, the
lenders under the New Credit Facility will be entitled to
accelerate the amounts due under the New Credit Facility and may
require all such amounts to be immediately paid in full. The
lenders under the New Credit Facility may also take all remedies
permitted to be taken by a secured creditor under the security
documents entered into to secure the New Credit Facility and the
Uniform Commercial Code.
2.50% Convertible Senior Notes due 2023
On July 7, 2003, we sold in a private offering
$300 million principal amount of our 2.50% convertible
senior notes due 2023. We filed, and on January 6,2004 caused to become effective, a shelf registration statement
with respect to the resale of these notes and the sale of the
shares of common stock issuable upon conversion of these notes.
The following summary is a description of the material
provisions of the indenture, dated July 7, 2003, by and
between us and J.P. Morgan Trust Company, National
Association as trustee, for such notes. It does not restate the
indenture in its entirety. A copy of the indenture is filed as
an exhibit to this Form 10-K, and the following summary is
qualified in its entirety by reference to it.
Interest on the notes is payable on April 1 and
October 1 of each year. The notes mature on October 1,2023. The notes may be converted into shares of our common stock
(unless earlier redeemed or repurchased by us) under the
following circumstances: (1) note holders may convert their
notes in a conversion period (defined as the period from and
including the eleventh trading day in a fiscal quarter to, but
excluding, the eleventh trading day of the following quarter) on
any date on or prior to October 1, 2018, if the closing
sale price of our common stock for at least 20 trading days in
the period of the 30 consecutive trading days ending on the
first day of such conversion period was more than 120% of the
then current conversion price; (2) if, on any date after
October 1, 2018, the closing sale price of our common stock
is more than 120% of the then current conversion price, then
note holders will have such conversion right at all times
thereafter; (3) we have called the notes for redemption;
(4) we distribute to all or substantially all holders of
our common stock rights, options or warrants entitling them to
purchase common stock at less than the closing sale price of our
common stock on the day preceding the declaration for such
distribution; (5) we distribute to all or substantially all
holders of our common stock cash, assets, debt securities or
capital stock, which distribution has a per share value as
determined by our board of directors exceeding 10% of the
closing sale price of our common stock on the day preceding the
declaration for such distribution; (6) during any period in
which the credit rating of the notes assigned by Moody’s is
Caa1 or lower and by Standard & Poor’s is CCC+ or
lower, or neither Moody’s (or its successors) nor
Standard & Poor’s (or its successors) continues to
rate the notes; or (7) if we are party to a consolidation
or merger pursuant to which our common stock would be converted
into cash or property other than securities. Note holders may
also convert their notes into shares of our common stock for the
five business day period after any five consecutive trading day
period in which the average trading price for the notes was less
than 97% of the average conversion value for the notes during
that period.
Upon conversion, we will have the right to deliver, in lieu of
common stock, cash or a combination of cash and common stock. It
is our current intention to satisfy our obligation upon a
conversion of the notes first, in cash, in an amount equal to
the principal amount of the notes converted and second, in
shares of our common stock, to satisfy the remainder, if any, of
our conversion obligation. Our ability to deliver cash at the
time of conversion will be subject to many factors, including
the amount of cash we have available to us, whether the
agreements governing our indebtedness would permit such a cash
settlement, our then existing cash needs, and other factors. The
initial conversion rate is 21.0686 shares of common stock
per each $1,000 principal amount of notes. This is equivalent to
an initial conversion price of $47.46 per share.
On or after October 2, 2010, we have the option to redeem
all or a portion of the notes that have not been previously
converted or repurchased at a redemption price of 100% of the
principal amount plus accrued interest and liquidated damages
owed, if any, to the redemption date. Note holders have the
option, subject to certain conditions, to require us to
repurchase any notes held by them on October 1, 2010,
October 1, 2015 and October 1, 2020, or upon a change
of control, at prices equal to 100% of the principal amount of
the notes plus accrued interest and liquidated damages owed, if
any, to the date of repurchase. A change of control will
be deemed not to have occurred if the sale price of our common
stock exceeds specified levels for specified periods or if the
consideration received in such change of control is freely
tradable stock and the notes become convertible into that stock.
We must pay the repurchase price for any notes repurchased on
October 1, 2010 in cash. We may choose to pay the
repurchase price for any notes repurchased on October 1,2015 or October 1, 2020 in cash, shares of our common
stock, or a combination of cash and shares of our common stock;
provided, however, that we may, at our sole discretion,
terminate at any time our right to pay all or a portion of the
repurchase price on either of these dates in shares of our
common stock. If we elect to pay note holders in common stock or
a combination of cash and common stock, our common stock will be
valued at 95% of the average closing sale price for the five
trading days ending on the third trading day preceding the
applicable purchase date.
Floating Rate Convertible Senior Debentures
On August 3, 2004, our wholly owned subsidiary, Apogent,
completed an exchange offer for its $345 million aggregate
principal amount of the Floating Rate CODES. The exchange offer
for the Floating Rate CODES aligned the conversion terms of
Apogent’s convertible debt with Fisher’s currently
outstanding convertible debt. 99.9 percent of the
outstanding principal amount of the Floating Rate CODES were
tendered for exchange with a like principal amount of Floating
Rate Convertible Senior Debentures and an exchange fee of
0.50 percent of the principal amount of the securities
tendered was paid. In addition, Apogent paid a consent fee of
0.60 percent to not register the notes as required per the
original registration rights agreement. Neither Fisher nor
Apogent received any proceeds from the issuance of the new
debentures in the exchange offer.
The following summary is a description of the material
provisions of the indenture, dated August 3, 2004, by and
between us, Apogent Technologies Inc. and The Bank of New York,
as trustee, for such notes. It does not restate the indenture in
its entirety. A copy of the indenture is filed as an exhibit to
this Form 10-K, and the following summary is qualified in
its entirety by reference to it.
In connection with the exchange offer, we agreed to provide a
senior unsecured guarantee of the Floating Rate Convertible
Senior Debentures upon the earlier of (1) the date that
Apogent’s reporting obligations under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)
were terminated or suspended or (2) February 23, 2010.
Apogent ceased to be subject to reporting requirements under the
Exchange Act following Apogent’s year end of
September 30, 2004 and pursuant to our senior unsecured
guaranty, the notes are guaranteed by Fisher.
Interest on the notes is payable on March 15, June 15,
September 15 and December 15 of each year, at an annual rate of
LIBOR minus 1.25%. In addition, under certain circumstances
additional amounts of contingent interest will be payable
commencing with the quarterly interest period beginning
December 15, 2009. The notes mature on December 15,2033. The notes may be converted into shares of our common stock
(unless earlier redeemed or repurchased by us) under the
following circumstances: (1) note holders may convert their
notes during any fiscal quarter if the closing sale price of our
common stock for at least 20 trading days in the period of the
30 consecutive trading days ending on the last day of the
preceding fiscal quarter was more than 130% of the then current
conversion price; (2) we have called the notes for
redemption; (3) we distribute to all or substantially all
holders of our common stock rights entitling them to purchase
common stock at less than the closing sale price of our common
stock on the day preceding the declaration for such
distribution; (4) we distribute to all or substantially all
holders of our common stock cash or other assets, debt
securities or certain rights to purchase its securities, which
distribution has a per share value exceeding 5% of the closing
sale price of our common stock on the day preceding the
declaration for such distribution; (5) during any period in
which (a) the credit rating of the notes assigned by
Moody’s is below B3 or by Standard & Poor’s
is below B-, (b) the credit rating assigned to the notes is
suspended or withdrawn by either rating agency or
(c) neither agency continues to rate the notes; (6) if
we are party to a consolidation or merger pursuant to which our
common stock would be converted into cash, securities or other
property; or (7) a change of control occurs, but holders do
not have the right to require Apogent to repurchase the notes
because the sale price of our common stock exceeds specified
levels for specified periods or because the consideration
received in such change of control is freely tradable stock and
the notes become convertible into that stock.
Note holders may also convert their notes into shares of our
common stock on or before December 15, 2028, for the five
business day period after any five consecutive trading day
period in which the average trading price for the notes, as
determined following a request by a holder to make a
determination, was less than 97% of the average conversion value
for the notes during that period.
Upon conversion, we will have the right to deliver, in lieu of
common stock, cash or a combination of cash and common stock. It
is our current intention to satisfy our obligation upon a
conversion of the notes first, in cash, in an amount equal to
the principal amount of the notes converted and second, in
shares of our common stock, to satisfy the remainder, if any, of
our conversion obligation. Our ability to deliver cash at the
time of conversion will be subject to many factors, including
the amount of cash we have available to us, whether the
agreements governing our indebtedness would permit such a cash
settlement, our then existing cash needs, and other factors. The
initial conversion rate is 16.9233 shares of common stock
per each $1,000 principal amount of notes. This is equivalent to
an initial conversion price of $59.09 per share.
On or after March 15, 2010, we have the option to redeem
all or a portion of the notes that have not been previously
converted or repurchased at a redemption price of 100% of the
principal amount plus accrued interest to the redemption date.
Note holders have the option, subject to certain conditions, to
require us to repurchase any notes held by them on
December 15, 2008, March 15, 2010, December 15,2014, December 15, 2019, December 15, 2024,
December 15, 2029, or upon a change of control, at prices
equal to 100% of the principal amount of the notes plus accrued
interest to the date of purchase. A change of control will be
deemed not to have occurred if the sale price of our common
stock exceeds specified levels for specified periods or if the
consideration received in such change of control is freely
tradable stock and the notes become convertible into that stock.
3.25% Convertible Senior Subordinated Notes due
2024
On March 3, 2004, we issued and sold $300 million
principal amount of our 3.25% convertible senior
subordinated notes due March 1, 2024. On March 23,2004, we sold an additional $30 million principal amount of
these notes due to the exercise of the over-allotment option by
the underwriters. We sold these notes under a “shelf”
registration statement dated September 3, 2003 pursuant to
which we may issue and sell up to $750 million of our debt
and equity securities.
The following summary is a description of the material
provisions of the supplemental indenture, dated March 3,2004, by and between us and J.P. Morgan Trust Company,
National Association, as trustee, for such notes. It does not
restate the supplemental indenture in its entirety. A copy of
the supplemental indenture is filed as an exhibit to this
Form 10-K, and the following summary is qualified in its
entirety by reference to it.
Interest on the notes is payable on March 1 and
September 1 of each year. The notes mature on March 1,2024. The notes may be converted into shares of our common stock
(unless earlier redeemed or repurchased by us) under the
following circumstances: (1) note holders may convert their
notes in a conversion period (defined as the period from and
including the eleventh trading day in a fiscal quarter to, but
excluding, the eleventh trading day of the following quarter) on
any date on or prior to March 1, 2019, if the closing sale
price of our common stock for at least 20 trading days in the
period of the 30 consecutive trading days ending on the first
day of such conversion period was more than 120% of the then
current conversion price; (2) if, on any date after
March 1, 2019, the closing sale price of our common stock
is more than 120% of the then current conversion price, then
note holders will have such conversion right at all times
thereafter; (3) we have called the notes for redemption;
(4) we distribute to all or substantially all holders of
our common stock rights, options or warrants entitling them to
purchase common stock at less than the closing sale price of our
common stock on the day preceding the declaration for such
distribution; (5) we distribute to all or substantially all
holders of our common stock cash, assets, debt securities or
capital stock, which distribution has a per share value as
determined by our board of directors exceeding 10% of the
closing sale price of our common stock on the day preceding the
declaration for such distribution; (6) during any period in
which the credit rating of the notes assigned by Moody’s is
Caa2 or lower and by Standard & Poor’s is CCC or
lower, or neither Moody’s (or its successors) nor
Standard & Poor’s (or its successors) continues to
rate the notes or (7) if we are party to a consolidation or
merger pursuant to which our common stock would be converted
into cash or property other
than securities. Note holders may also convert their notes into
shares of our common stock for the five business day period
after any five consecutive trading day period in which the
average trading price for the notes was less than 97% of the
average conversion value for the notes during that period.
Upon conversion, we will have the right to deliver, in lieu of
common stock, cash or a combination of cash and common stock. It
is our current intention to satisfy our obligation upon a
conversion of the notes first, in cash, in an amount equal to
the principal amount of the notes converted and second, in
shares of our common stock, to satisfy the remainder, if any, of
our conversion obligation. Our ability to deliver cash at the
time of conversion will be subject to many factors, including
the amount of cash we have available to us, whether the
agreements governing our indebtedness would permit such a cash
settlement, our then existing cash needs, and other factors. The
initial conversion rate is 12.4378 shares of common stock
per each $1,000 principal amount of notes. This is equivalent to
an initial conversion price of $80.40 per share.
On or after March 2, 2011, we have the option to redeem all
or a portion of the notes that have not been previously
converted or repurchased at a redemption price of 100% of the
principal amount plus accrued interest to the redemption date.
Note holders have the option, subject to certain conditions, to
require us to repurchase any notes held by them on March 1,2011, March 1, 2016 and March 1, 2021, or upon a
change of control, at prices equal to 100% of the principal
amount of the notes plus accrued interest to the date of
repurchase. A change of control will be deemed not to have
occurred if the sale price of our common stock exceeds specified
levels for specified periods or if the consideration received in
such change of control is freely tradable stock and the notes
become convertible into that stock. We must pay the repurchase
price for any notes repurchased on March 1, 2011 in cash.
We may choose to pay the repurchase price for any notes
repurchased on March 1, 2016 or March 1, 2021 in cash,
shares of our common stock, or a combination of cash and shares
of our common stock; provided, however, that we may, at
our sole discretion, terminate at any time our right to pay all
or a portion of the repurchase price on either of these dates in
shares of our common stock. If we elect to pay note holders in
common stock or a combination of cash and common stock, our
common stock will be valued at 95% of the average closing sale
price for the five trading days ending on the third trading day
preceding the applicable purchase date.
81/8% Senior
Subordinated Notes due 2012
On April 24, 2002, we issued and sold $150 million
principal amount of our
81/8% senior
subordinated notes due 2012, and on January 14, 2003 issued
and sold another $200 million of such notes, and on
November 24, 2003 redeemed $46 million of such notes.
These two series of notes were issued under the same indenture,
dated as of April 24, 2002 by and between us and
J.P. Morgan Trust Company, National Association as
trustee, and are treated as a single class of securities for all
purposes.
The following summary is a description of the material
provisions of the indenture. It does not restate the indenture
in its entirety. A copy of the indenture is filed as an exhibit
to this Form 10-K, and the following summary is qualified
in its entirety by reference to it.
Our
81/8% senior
subordinated notes mature on May 1, 2012. We pay interest
on May 1 and November 1 of each year.
We will be able to redeem the notes at our option, in whole or
in part on a pro rata basis at any time and from time to time,
on and after May 1, 2007 at specified redemption prices.
Also, on or prior to May 1, 2005, at our option, we may
redeem in the aggregate up to 40% of the aggregate principal
amount of the notes at a redemption price equal to 108.125% of
the principal amount of the notes, plus accrued and unpaid
interest, if any, to the date of redemption, with the proceeds
of one or more equity offerings.
The notes are unsecured senior subordinated obligations and are
subordinated in right of payment to all our existing and future
senior debt, including debt under the New Credit Facility, our
floating rate convertible senior debentures and our
2.50% convertible senior notes. The notes rank equally in
right of payment with our other senior subordinated debt,
including our 8% senior subordinated notes due 2013, our
63/4% senior
subordinated notes due 2014 and our 3.25% convertible
senior subordinated notes. The notes are effectively
subordinated to any current or future secured indebtedness
outstanding.
If a change of control triggering event occurs, each holder of
the notes will have the right to require us to purchase such
holder’s notes at a purchase price equal to 101% of the
principal amount of the notes, together with accrued and unpaid
interest, if any, to the date of purchase. On and after
May 1, 2007, we may exercise our optional redemption right
to redeem all or a portion of the notes, at specified redemption
prices, even if a change of control has occurred. After
May 1, 2010, this redemption price will be lower than the
price we have to pay if holders require us to purchase the notes
upon the occurrence of a change of control triggering event. If
a change of control triggering event occurs, prior to
repurchasing the notes, we must first either repay the New
Credit Facility or get a waiver or consent from the lenders
under the New Credit Facility to repurchase the notes from the
note holders. A change of control triggering event is defined as
a change of control accompanied by the failure of the notes to
be rated investment grade by Moody’s and
Standard & Poor’s.
The indenture restricts our ability and the ability of our
restricted subsidiaries to, among other things: (1) incur
additional indebtedness; (2) pay dividends or make other
distributions in respect of our capital stock;
(3) repurchase equity interests or subordinated
indebtedness; (4) create certain liens; (5) enter into
certain transactions with affiliates; (6) consummate
certain asset sales; and (7) merge or consolidate. These
covenants are subject to important exceptions and qualifications.
The indenture pursuant to which the notes have been issued sets
forth certain events, the occurrence of which constitute an
event of default. An event of default occurs if, among other
things, Fisher: (1) fails to pay interest when due for
30 days, (2) fails to pay principal when due,
(3) defaults in the performance of a covenant regarding the
merger or sale of substantially all assets of Fisher,
(4) defaults in the observance or performance of other
covenants for 30 days after written notice from the trustee
or holders representing 25% or more of the outstanding principal
amount of the notes, (5) fails to pay or has accelerated
certain other indebtedness aggregating $15 million or more,
(6) is subject to one or more unpaid judgments aggregating
$15 million or more, or (7) Fisher or one of its
significant subsidiaries files for or is otherwise subject to a
declaration of bankruptcy.
Upon the happening of any event of default, the trustee or the
holders of at least 25% in principal amount of outstanding notes
may declare the principal of and accrued interest on all the
notes to be due and payable by notice in writing to Fisher and
the trustee specifying the respective event of default and that
it is a “notice of acceleration”, and the notes shall
become immediately due and payable. If an event of default with
respect to bankruptcy proceedings of Fisher occurs and is
continuing, all notes will become immediately due and payable
without any declaration or other act on the part of the trustee
or any holder of notes.
8% Senior Subordinated Notes due 2013
On August 20, 2003, we issued and sold $150 million
principal amount of our 8% senior subordinated notes due
2013, and on November 4, 2003 issued and sold another
$150 million of such notes. These two series of notes were
issued under the same indenture, dated as of August 20,2003 by and between us and J.P. Morgan Trust Company,
National Association as trustee, and are treated as a single
class of securities for all purposes.
The following summary is a description of the material
provisions of the indenture. It does not restate the indenture
in its entirety. A copy of the indenture is filed as an exhibit
to this Form 10-K, and the following summary is qualified
in its entirety by reference to it.
Our 8% senior subordinated notes mature on
September 1, 2013. We pay interest on March 1 and
September 1 of each year.
We will be able to redeem the notes at our option, in whole or
in part on a pro rata basis at any time and from time to time,
on and after September 1, 2008 at specified redemption
prices. At any period prior to September 1, 2008, we may
redeem the notes at a redemption price of 100% of their
principal amount plus a specified make-whole premium. Also, on
or prior to September 1, 2006, at our option, we may redeem
in the aggregate up to 40% of the aggregate principal amount of
the notes at a redemption price equal to 108% of the principal
amount of the notes, plus accrued and unpaid interest, if any,
to the date of redemption, with the proceeds of one or more
equity offerings.
The notes are unsecured senior subordinated obligations and are
subordinated in right of payment to all our existing and future
senior debt, including debt under the New Credit Facility, our
floating rate convertible senior debentures and our
2.50% convertible senior notes. The notes rank equally in
right of payment with our other senior subordinated debt,
including our
81/8% senior
subordinated notes due 2012, our
63/4% senior
subordinated notes due 2014 and our 3.25% convertible
senior subordinated notes. The notes are effectively
subordinated to any current or future secured indebtedness
outstanding.
If a change of control triggering event occurs, each holder of
the notes will have the right to require us to purchase such
holder’s notes at a purchase price equal to 101% of the
principal amount of the notes, together with accrued and unpaid
interest, if any, to the date of purchase. On and after
September 1, 2008, we may exercise our optional redemption
right to redeem all or a portion of the notes, at specified
redemption prices, even if a change of control has occurred.
After September 1, 2011, this redemption price will be
lower than the price we have to pay if holders require us to
purchase the notes upon the occurrence of a change of control
triggering event. If a change of control triggering event
occurs, prior to repurchasing the notes, we must first either
repay the New Credit Facility or get a waiver or consent from
the lenders under the New Credit Facility to repurchase the
notes from the note holders. A change of control triggering
event is defined as a change of control accompanied by the
failure of the notes to be rated investment grade by
Moody’s and Standard & Poor’s.
The indenture restricts our ability and the ability of our
restricted subsidiaries to, among other things: (1) incur
additional indebtedness; (2) pay dividends or make other
distributions in respect of our capital stock;
(3) repurchase equity interests or subordinated
indebtedness; (4) create certain liens; (5) enter into
certain transactions with affiliates; (6) consummate
certain asset sales; and (7) merge or consolidate. These
covenants are subject to important exceptions and qualifications.
The indenture pursuant to which the notes have been issued sets
forth certain events, the occurrence of which constitutes an
event of default. An event of default occurs if, among other
things, Fisher: (1) fails to pay interest when due for
30 days, (2) fails to pay principal when due,
(3) defaults in the performance of a covenant regarding the
merger or sale of substantially all assets of Fisher,
(4) defaults in the observance or performance of other
covenants for 30 days after written notice from the trustee
or holders representing 25% or more of the outstanding principal
amount of the notes, (5) fails to pay or has accelerated
certain other indebtedness aggregating $25 million or more,
(6) is subject to one or more unpaid judgments aggregating
$25 million or more, or (7) Fisher or one of its
significant subsidiaries files for or is otherwise subject to a
declaration of bankruptcy.
Upon the happening of any event of default, the trustee or the
holders of at least 25% in principal amount of outstanding notes
may declare the principal of and accrued interest on all the
notes to be due and payable by notice in writing to Fisher and
the trustee specifying the respective event of default and that
it is a “notice of acceleration”, and the notes shall
become immediately due and payable. If an event of default with
respect to bankruptcy proceedings of Fisher occurs and is
continuing, all notes will become immediately due and payable
without any declaration or other act on the part of the trustee
or any holder of notes.
63/4% Senior
Subordinated Notes due 2014
On August 3, 2004, we issued and sold $300 million
principal amount of our
63/4% senior
subordinated notes due 2014. The following summary is a
description of the material provisions of the indenture dated
August 3, 2004, by and between us and The Bank of New York,
as trustee, for such notes. It does not restate the indenture in
its entirety. A copy of the indenture is filed as an exhibit to
this Form 10-K, and the following summary is qualified in
its entirety by reference to it.
Our
63/4% senior
subordinated notes mature on August 15, 2014. We pay
interest on February 15 and August 15 of each year.
We will be able to redeem the notes at our option, in whole or
in part on a pro rata basis at any time and from time to time,
on and after August 15, 2009 at specified redemption
prices. At any period prior to August 15, 2009, we may
redeem the notes at a redemption price of 100% of their
principal amount plus a specified make-whole premium. Also, on
or prior to August 15, 2007, at our option, we may redeem
in the
aggregate up to 40% of the aggregate principal amount of the
notes at a redemption price equal to 106.75% of the principal
amount of the notes, plus accrued and unpaid interest, if any,
to the date of redemption, with the proceeds of one or more
equity offerings.
The notes are unsecured senior subordinated obligations and are
subordinated in right of payment to all our existing and future
senior debt, including debt under the New Credit Facility, our
floating rate convertible senior debentures and our
2.50% convertible senior notes. The notes rank equally in
right of payment with our other senior subordinated debt,
including our
81/8% senior
subordinated notes due 2012, our 8% senior subordinated
notes due 2013 and our 3.25% convertible senior
subordinated notes. The notes are effectively subordinated to
any current or future secured indebtedness outstanding.
If a change of control triggering event occurs, each holder of
the notes will have the right to require us to purchase such
holder’s notes at a purchase price equal to 101% of the
principal amount of the notes, together with accrued and unpaid
interest, if any, to the date of purchase. On and after
August 15, 2009, we may exercise our optional redemption
rights to redeem all or a portion of the notes, at specified
redemption prices, even if a change of control has occurred.
After August 15, 2012, this redemption price will be lower
than the price we have to pay if holders require us to purchase
the notes upon the occurrence of a change of control triggering
event. If a change of control triggering event occurs, prior to
repurchasing the notes, we must first either repay the New
Credit Facility or get a waiver or consent from the lenders
under the New Credit Facility to repurchase the notes from the
note holders. A change of control triggering event is defined as
a change of control accompanied by the failure of the notes to
be rated investment grade by Moody’s and
Standard & Poor’s.
The indenture restricts our ability and the ability of our
restricted subsidiaries to, among other things: (1) incur
additional indebtedness; (2) pay dividends or make other
distributions in respect of its capital stock;
(3) repurchase equity interest or subordinated
indebtedness; (4) create certain liens; (5) enter into
certain transactions with affiliates; (6) consummate
certain asset sales; and (7) merge or consolidate. These
covenants are subject to important exceptions and qualifications.
The indenture pursuant to which the notes have been issued sets
forth certain events, the occurrence of which constitutes an
event of default. An event of default occurs if, among other
things, Fisher: (1) fails to pay interest when due for
30 days, (2) fails to pay principal when due,
(3) defaults in the performance of a covenant regarding the
merger or sale of substantially all assets of Fisher,
(4) defaults in the observance or performance of other
covenants for 30 days after written notice from the trustee
or holders representing 25% or more of the outstanding principal
amount of the notes, (5) fails to pay or has accelerated
certain other indebtedness aggregating $40 million or more,
(6) is subject to one or more unpaid judgments aggregating
$40 million or more, or (7) Fisher or one of its
significant subsidiaries files for or is otherwise subject to a
declaration of bankruptcy.
Upon the happening of any event of default, the trustee or the
holders of at least 25% in principal amount of outstanding notes
may declare the principal of and accrued interest on all the
notes to be due and payable by notice in writing to Fisher and
the trustee specifying the respective event of default and that
it is a “notice of acceleration”, and the notes shall
become immediately due and payable. If an event of default with
respect to bankruptcy proceedings of Fisher occurs and is
continuing, all notes will become immediately due and payable
without any declaration or other act on the part of the trustee
or any holder of notes.
Critical Accounting Policies
The discussion and analysis of our financial condition and
results of operations are based on our consolidated financial
statements, which have been prepared in accordance with
accounting principles generally accepted in the United States of
America. The preparation of these financial statements requires
us to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting period. On an on-going basis, management
evaluates its estimates and judgments. Those estimates and
assumptions are based on our historical experience, our
observance of trends in the industry, and various other factors
that are believed to be reasonable under the circumstances and
form
the basis for making judgments about the carrying values of
assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates under
different assumptions or conditions.
Our significant accounting policies are described in
“Item 8 — Financial Statements and
Supplementary Data — Note 2 — Summary
of Significant Accounting Policies” and are herein
incorporated by reference. We believe the critical accounting
policies discussed below are those most important for an
understanding of our financial condition and results of
operations.
Revenue Recognition — we record product revenue
when persuasive evidence of an arrangement exists, the price is
fixed or determinable, title and risk of loss have been
transferred to the customer and collectibility of the resulting
receivable is reasonably assured. Risk of loss is generally
transferred to the customer upon delivery. Products are
typically delivered without significant post-sale obligations to
customers. When significant post-sale obligations exist, revenue
recognition is deferred until the obligations are satisfied. We
record reductions to revenue for estimated returns. Should a
greater number of products be returned to us, additional
reductions to revenue may be required. We also provide for the
estimated cost of product warranties at the time revenue is
recognized. Although our facilities undergo quality assurance
and testing procedures throughout the production process and we
monitor our suppliers for Fisher branded products, our warranty
obligation is affected by product failure rates, material usage
and service delivery costs incurred in correcting a product
failure. Although our actual product returns and warranty costs
have not historically fluctuated, should actual product failure
rates, material usage or service delivery costs differ from our
estimates, revisions to the estimated warranty liability may be
required. Pharmaceutical outsourcing service revenues, which can
consist of specialized packaging, warehousing and distribution
of products, and arrangements with multiple elements, are
recognized as each of the elements are provided. The Company
recognizes revenue for each element based on the fair value of
the element provided, which has been determined by referencing
historical pricing policies when the element is sold separately.
Business Combinations — assumptions and
estimates are used in determining the fair value of assets
acquired and liabilities assumed in a business combination. A
significant portion of the purchase price in many of our
acquisitions is assigned to intangible assets that require
management to use significant judgment in determining fair
value. We utilize third-party valuation experts for this
process. In addition, current and future amortization expense
for such intangibles is impacted by purchase price allocations
as well as the assessment of estimated useful lives of such
intangibles, excluding goodwill. We believe the assets recorded
and the useful lives established are appropriate based upon
current facts and circumstances.
Goodwill — we perform an evaluation of whether
goodwill is impaired annually or when events occur or
circumstances change that would more likely than not reduce the
fair value of a reporting unit below its carrying amount. Fair
value is determined using a combination of discounted cash flow
and multiple of earnings valuation techniques. Our estimates are
based upon historical trends, management’s knowledge and
experience, and overall economic factors. While we believe our
estimates are reasonable, different assumptions regarding items
such as future cash flows and volatility in the markets we serve
could affect our evaluations and result in write-downs to the
carrying amount of our goodwill. We perform our annual test of
goodwill impairment as of October 31 of each year. We recorded
an impairment charge of $64.9 million on a separate line in
the statement of operations for the year ended December 31,2004. There was no impairment of goodwill recorded in 2003 or
2002 based upon our annual impairment test.
Pension Plans — we have defined benefit pension
plans covering a significant number of domestic and
international employees. Accounting for these plans requires the
use of assumptions, including estimates on the expected
long-term rate of return on assets, discount rates and the
average rate of increase in employee compensation. In order to
make informed assumptions, management consults with actuaries
and reviews public market data and general economic information.
A majority of our plans’ benefit obligations and assets
relate to our U.S.-based plans, which returned a gain of
approximately 10% on plan assets for 2004 and generated a
ten-year weighted-average return on plan assets of approximately
10%. A 50 basis point change in the assumption of our
expected long-term rate of return on plan assets for our
U.S.-based plans would result in a change in our pension cost of
approximately $1.4 million. A 50 basis point change in
the assumption of our discount rate for our U.S.-based plan
would result in a change in our benefit obligation of
approximately
$28 million. We continually assess these assumptions based
on market conditions, and if those conditions change, our
pension cost and pension obligation may be adjusted accordingly.
Convertible Notes — At December 31, 2004,
we had $975 million of convertible notes outstanding. These
notes and their conversion events are described in more detail
under “Description of Indebtedness.” Upon conversion,
we have the right to deliver, in lieu of common stock, cash or a
combination of cash and common stock to settle the principal
amount of the notes. These notes are included in our diluted EPS
calculation under the “treasury stock method” when the
average price of our stock for the period is greater than the
conversion price. We apply the treasury stock method as it is
our current intention to settle the principal portion of the
notes in cash upon conversion. The conversion prices of our
convertible notes are $47.46, $59.09 and $80.40 for our
2.50% convertible senior notes, floating rate convertible
senior debentures and 3.25 convertible senior notes,
respectively. Under the treasury stock method, only the shares
required to settle the conversion premium are included in our
weighted average shares outstanding. Based upon the application
of the treasury stock method, 1.0 million shares were
included in our 2004 weighted average share calculation. If we
did not have the intention or ability to settle the principal
amount of the notes in cash, we would apply the “if
converted” method of accounting to calculate the shares
included in the weighted average share calculation. Under this
method, approximately 12.2 million shares would have been
included in our 2004 weighted average share calculation, and
$10.8 million of interest expense, net of tax, would have
been added back to net income in calculating diluted earnings
per share.
Income Tax Reserves — we establish an estimated
liability for federal, state and foreign income tax exposures
that arise and meet the criteria for accrual under
SFAS No. 5, “Accounting for Contingencies.”
This liability addresses a number of issues for which we may
have to pay additional taxes (and interest) when all
examinations by taxing authorities are concluded. We have
developed a methodology for estimating our tax liability related
to such matters and have consistently followed such methodology
from period to period. The liability amounts for such matters
are based on an evaluation of the underlying facts and
circumstances, a thorough research of the technical merits of
our arguments, and an assessment of the chances of us prevailing
in our arguments. We consult with external tax advisers in
researching our conclusions. Amounts accrued for a particular
period are not adjusted upward or downward unless a significant
change in facts or circumstances has occurred and been formally
documented. Amounts not expected to be settled within one year
are classified in other liabilities on the balance sheet.
Stock Options — we measure compensation expense
for our stock-based employee compensation plans using the
intrinsic value method prescribed by APB Opinion No. 25,
“Accounting for Stock Issued to Employees.” Under the
intrinsic value method, compensation cost is the excess, if any,
of the quoted market price of the stock at the grant date over
the amount an employee must pay to acquire the stock. Statement
of Financial Accounting Standards No. 123, “Accounting
for Stock-Based Compensation” (“SFAS 123”)
defines a fair value method of accounting for an employee stock
option or similar equity instrument. Under SFAS 123, fair
value of the stock option is determined using an option-pricing
model that takes into account the stock price at the grant date,
the exercise price, the expected life of the option, the
volatility of the underlying stock and its expected dividends,
and the risk-free interest rate over the expected life of the
option, and is amortized as compensation cost over the vesting
period of the stock option. We determine the fair value of our
stock options using the Black-Scholes option-pricing model. Had
we recorded compensation expense as prescribed by SFAS 123,
our net income in 2004, 2003 and 2002 would have been
$137.0 million, $59.2 million and $41.5 million,
respectively, and our diluted net income per share would have
been $1.48, $0.98 and $0.72, respectively.
Recent Accounting Pronouncements
For information on recent accounting pronouncements, refer to
“Item 8 — Financial Statements and
Supplementary Data — Note 23 — Recent
Accounting Pronouncements,” which is incorporated herein by
reference.
This Annual Report on Form 10-K includes forward-looking
statements within the meaning of Section 21E of the
Exchange Act. All statements other than statements of historical
facts included in this Form 10-K may constitute
forward-looking statements. Words such as
“anticipates,”“estimates,”“expects,”“forecasts,”“projects,”“intends,”“plans,”“believes” and words and terms of similar substance
used in connection with any discussion of future operating
results or financial performance identify forward-looking
statements.
The Company has based forward-looking statements on its current
expectations and projections about future events. Although the
Company believes that its assumptions made in connection with
the forward-looking statements are reasonable, there can be no
assurance that the assumptions and expectations will prove to
have been correct. All forward-looking statements reflect the
Company’s present expectations of future events and are
subject to a number of important assumptions, factors, and risks
and uncertainties that could cause actual results to differ
materially from those described in the forward-looking
statements. The factors listed in “Item 1 —
Business — Risk Factors,” as well as any
cautionary language in this Form 10-K, provide examples of
these risks and uncertainties. Some of the uncertainties and
assumptions to which these forward-looking statements are
subject include the following:
•
our outstanding indebtedness and leverage, and the restrictions
imposed by our indebtedness;
•
fluctuations in the amount of research and development spending
by our customers;
•
the ability to achieve earnings forecasts due to variability in
the demand for our higher margin products and services;
•
the effects of domestic and international economic and business
conditions on our businesses;
•
the high degree of competition in the markets served by certain
of our businesses, and the potential for new competitors to
enter into these markets;
•
the extent to which we undertake new acquisitions or enter into
strategic joint ventures or partnerships, and our ability to
realize the expected benefit of such acquisitions or strategic
joint ventures or partnerships;
•
future modifications to existing laws and regulations,
including, but not limited to, those regarding the environment;
•
discovery of unknown contingent liabilities, including
environmental contamination at our facilities and liability with
respect to products we distribute and manufacture;
•
fluctuations in interest rates and in foreign currency exchange
rates;
•
availability, or increases in the cost, of raw materials and
other inputs used to make our products;
•
the loss of major customers or suppliers, including significant
disruptions to or increases in the prices of or services
provided by third party package delivery services;
•
our ability to adjust to rapid changes in the healthcare
industry;
•
the loss of our key personnel; and
•
our ability to generate free cash flow or to obtain other
sufficient resources to finance working capital and capital
expenditure needs.
You are cautioned not to place undue reliance on the
forward-looking statements, which speak only as of the date of
this Form 10-K or in the case of documents incorporated by
reference, as of the dates of those documents.
The Company is under no obligation, and expressly disclaims any
obligation, to update or alter any forward-looking statements,
whether as a result of new information, future events or
otherwise. You should
review any additional disclosures the Company makes in its
filings with the SEC, including its Quarterly Reports on
Form 10-Q, Current Reports on Form 8-K and our proxy
statement for our shareholders’ meeting.
Item 7A.
Quantitative and Qualitative Disclosures About Market
Risk
General
In the normal course of business, we use derivative financial
instruments, including foreign currency forward exchange
contracts and options, commodity swaps and options and interest
rate swaps to manage market risks. Additional information
regarding our financial instruments is contained in
“Item 8 — Financial Statements and
Supplementary Data” —
“Note 12 — Fair Value of Financial
Instruments” and “Note 10 — Debt.”
The objective in managing our exposure to changes in foreign
currency exchange rates is to reduce volatility on earnings and
cash flow associated with these changes. The objective in
managing our exposure to commodities prices is to reduce our
volatility on earnings and cash flow associated with these
changes. The objective in managing our exposure to changes in
interest rates is to limit the impact of these changes on
earnings and cash flow and to lower our overall borrowing costs.
We do not hold derivatives for trading purposes.
We measure our market risk related to our holdings of financial
instruments based on changes in foreign currency rates,
commodities prices and interest rates utilizing a sensitivity
analysis. The sensitivity analysis measures the potential loss
in fair values, cash flows and earnings based on a hypothetical
10% change in these market rates. We use year-end market rates
on our financial instruments to perform the sensitivity
analysis. We do not include items such as lease contracts,
insurance contracts, and obligations for pension and other
post-retirement benefits in the analysis.
We operate manufacturing and logistical facilities as well as
offices around the world and utilize fixed and floating rate
debt to finance global operations. As a result, we are subject
to business risks inherent in non-U.S. activities,
including political and economic uncertainty, import and export
limitations, and market risk related to changes in interest
rates and foreign currency exchange rates. We believe the
political and economic risks related to foreign operations are
mitigated due to the stability of the countries in which our
largest foreign operations are located.
Interest Rate Risk Management
Our primary interest rate exposures result from floating rate
borrowings. Our interest rate risk is mitigated through the use
of interest rate swaps. The potential loss in fair values is
based on an immediate change in the net present values of our
interest rate-sensitive exposures resulting from a 10% change in
interest rates. The potential loss in cash flows and earnings is
based on the change in the interest expense over a one-year
period due to an immediate 10% change in rates. A hypothetical
10% change in interest rates would not have had a material
impact on our fair values, cash flows or earnings for 2004, 2003
or 2002.
Currency Risk Management
We operate and conduct business in many foreign countries and as
a result are exposed to movements in foreign currency exchange
rates. Our exposure to exchange rate effects includes
(1) exchange rate movements on financial instruments and
transactions denominated in foreign currencies which impact
earnings and (2) exchange rate movements upon translation
of net assets in foreign subsidiaries for which the functional
currency is not the U.S. dollar, which impact our net equity.
Our primary currency rate exposures relate to our intercompany
debt, trade payables and receivables, foreign cash and foreign
currency forward and option contracts. The potential loss in
fair values is based on an immediate change in the
U.S. dollar equivalent balances of our currency exposures
due to a 10% shift in exchange rates. The potential loss in cash
flows and earnings is based on the change in cash flow and
earnings over a one-year period resulting from an immediate 10%
change in currency exchange rates. A hypothetical 10% change in
the currency exchange rates would not have had a material impact
on our fair values, cash flows or earnings for 2004, 2003 or
2002.
Our primary commodity exposures relate to the procurement of raw
material components and our use of diesel fuel for
transportation and natural gas for manufacturing and heating
purposes. We believe our primary raw material exposures
currently are petroleum-based resins and steel used in our
manufacturing operations. We enter into swap and option
contracts with durations generally 12 months or less to
hedge our exposure to diesel fuel and natural gas. We do not
hedge our exposure to raw materials prices.
A hypothetical 10% change in our primary commodities would not
have had a material impact on our fair values or cash flows for
2004, 2003 and 2002 or on our earning for 2003 and 2002.
However, due to increased raw material exposure from the merger
with Apogent, a 10% change in market rates of petroleum-based
resins and steel could have had a material impact on our
earnings in 2004.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Fisher Scientific International Inc.
We have audited the accompanying consolidated balance sheets of
Fisher Scientific International Inc. and subsidiaries (the
“Company”) as of December 31, 2004 and 2003, and the
related consolidated statements of operations, cash flows and
changes in stockholders’ equity and other comprehensive
income for each of the three years in the period ended December31, 2004. Our audits also included the financial statement
schedule listed in the Index at Item 15. These financial
statements and financial statement schedule are the
responsibility of the Company’s management. Our
responsibility is to express an opinion on the financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of
Fisher Scientific International Inc. and subsidiaries at
December 31, 2004 and 2003, and the results of their operations
and their cash flows for each of the three years in the period
ended December 31, 2004, in conformity with accounting
principles generally accepted in the United States of America.
Also, in our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
As discussed in Note 18 to the financial statements, effective
January 1, 2002, the Company changed its method of accounting
for goodwill and intangible assets upon adoption of Statement of
Financial Accounting Standard No. 142, “Goodwill and Other
Intangible Assets”.
We have also audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
effectiveness of the Company’s internal control over
financial reporting as of December 31, 2004 based on the
criteria established in Internal Control — Integrated
Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission and our report dated March 15, 2005
expressed an unqualified opinion on management’s assessment
of the effectiveness of the Company’s internal control over
financial reporting and an unqualified opinion on the
effectiveness of the Company’s internal control over
financial reporting.
Preferred stock ($0.01 par value; 15,000,000 shares
authorized, none outstanding)
—
—
Common stock ($0.01 par value; 500,000,000 shares
authorized; 118,928,952 and 63,218,083 shares issued;
118,673,977 and 62,955,438 shares outstanding at
December 31, 2004 and 2003, respectively)
1.1
0.6
Capital in excess of par value
4,006.1
964.5
Accumulated deficit
(260.1
)
(426.5
)
Accumulated other comprehensive income
126.9
40.0
Treasury stock, at cost, (254,975 and 262,645 shares at
December 31, 2004 and 2003, respectively)
(4.0
)
(3.2
)
Total stockholders’ equity
3,870.0
575.4
Total liabilities and stockholders’ equity
$
8,090.2
$
2,859.4
See the accompanying notes to financial statements.
Fisher Scientific International Inc. (“Fisher,” or
“the Company”) was founded in 1902 and was
incorporated as a Delaware corporation in 1991. The
Company’s operations are conducted throughout North and
South America, Europe, the Far East, Australia, the Middle East
and Africa, directly or through one or more subsidiaries, joint
ventures, agents or dealers. The Company’s operations are
organized into the following three business segments:
1. Scientific products and services segment provides
products and services primarily to entities conducting
scientific research, including drug discovery and drug
development, quality and process control and basic research and
development. This segment manufactures and distributes a broad
range of biochemicals and bioreagents; organic and inorganic
chemicals; sera; cell culture media; sterile liquid-handling
systems; microbiology media and related products; scientific
consumable products, instruments and equipment; safety and
personal protection products; and other consumables and
supplies. Additionally, this segment provides services to
pharmaceutical and biotechnology companies engaged in clinical
trials, including specialized packaging, over-encapsulation,
labeling and distribution for phase III and phase IV
clinical trials, as well as combinatorial chemistry,
custom-chemical synthesis, supply-chain management and a number
of other services.
2. Healthcare products and services segment
manufactures and distributes a wide array of diagnostic kits and
reagents, equipment, instruments, medical devices and other
consumable products to hospitals and group-purchasing
organizations, clinical laboratories, reference laboratories,
physicians’ offices and original equipment manufacturers
located primarily in the U.S. In addition, we manufacture and
distribute ear, nose and throat medical devices outside the U.S.
This segment also provides outsourced manufacturing services for
diagnostic reagents, calibrators and controls to the healthcare
and pharmaceutical industries.
3. Laboratory workstations segment manufactures and
sells laboratory workstations and fume hoods and provides
lab-design services for pharmaceutical and biotechnology
customers, colleges, universities and secondary schools,
hospitals and reference labs.
Note 2 —
Summary of Significant Accounting Policies
Principles of Consolidation — The financial
statements include the accounts of the Company and its
subsidiaries. All significant intercompany accounts and
transactions have been eliminated.
Cash and Cash Equivalents — Cash and cash
equivalents consist primarily of highly liquid investments with
original maturities of three months or less at the date of
acquisition. These investments are carried at cost, which
approximates market value.
Allowance for Doubtful Accounts — The allowance
for doubtful accounts receivable reflects the best estimate of
probable losses inherent in the Company’s receivables
determined on the basis of historical experience, specific
allowances for known troubled accounts and other currently
available evidence.
Inventories — Inventories are valued at the
lower of cost or market, cost being determined principally by
the first-in, first-out (“FIFO”) method with certain
of the Company’s subsidiaries utilizing the last-in,
first-out (“LIFO”) method. The Company periodically
reviews quantities of inventories on hand and compares these
amounts to the expected use of each product or product line. The
Company records a charge to cost of sales for the amount
required to reduce the carrying value of inventory to net
realizable value. Costs associated with the procurement and
warehousing of inventories, such as inbound freight charges,
purchasing and receiving costs, and internal transfer costs, are
included in the cost of sales line item within the statement of
operations.
Investments — Long-term investments in
marketable equity securities that represent less than twenty
percent ownership are marked to market at the end of each
accounting period. Unrealized gains and losses are
credited or charged to other comprehensive income within
shareholders’ equity for available for sale securities
unless an unrealized loss is deemed to be other than temporary,
in which case such loss is charged to earnings. At
December 31, 2004, the Company had investments of
$19.0 million classified as available for sale securities
which were reported at fair value and included in other current
assets within the balance sheet. Unrealized gains on available
for sale securities, net of tax, included in accumulated other
comprehensive income for the year ended December 31, 2004
was $3.7 million. Included in other assets are securities
held in a rabbi trust for a supplemental nonqualified executive
retirement program as more fully described in
Note 17 — Employee Benefit Plans. These
securities had a fair market value of approximately
$34 million and $23 million at December 31, 2004
and 2003, respectively, and are classified as available for
sale. Unrealized gains on these securities net of tax included
in accumulated other comprehensive income for the year ended
December 31, 2004 and 2003 were $0.4 million and
$1.2 million, respectively.
Other equity investments for which the Company does not have the
ability to exercise significant influence and for which there is
not a readily determinable market value are accounted for under
the cost method of accounting. The Company periodically
evaluates the carrying value of its investments accounted for
under the cost method of accounting, such that they are recorded
at the lower of cost or estimated net realizable value.
For equity investments in which the Company owns or controls
twenty percent or more of the voting shares, or over which it
exerts significant influence over operating and financial
policies, the equity method of accounting is used. The
Company’s share of net income or losses of equity
investments is included in the other (income) expense, net line
item within the statement of operations and was not material in
any period presented.
Property, Plant and Equipment — Property, plant
and equipment are recorded at cost. Major improvements are
capitalized while expenditures for maintenance, repairs and
minor improvements are charged to expense. When assets are
retired or otherwise disposed of, the assets and related
accumulated depreciation are eliminated from the accounts and
any resulting gain or loss is reflected in the statement of
operations. Depreciation is generally based upon the following
estimated useful lives: buildings and improvements 5 to
30 years; machinery, equipment and other 3 to
10 years. Depreciation is computed using the straight-line
method.
Goodwill and Indefinite Lived Intangible
Assets — Goodwill and indefinite-lived intangible
assets are not amortized but instead reviewed for impairment and
written down with a resulting charge to the results of
operations in the period in which the recorded value of goodwill
and indefinite-lived intangible assets exceeds its fair value.
Fair value is determined using a combination of discounted cash
flow and multiple of earnings valuation techniques. Our
estimates are based upon historical trends, management’s
knowledge and experience, and overall economic factors. The
Company performs its annual test for indications of impairment
as of October 31 each year — see
Note 8 — “Goodwill and other Intangible
Assets.”The Company performed an initial test to evaluate
whether goodwill and indefinite-lived intangible assets were
impaired as of January 1, 2002 and determined goodwill was
impaired — see Note 18 — “Change
in Accounting Principle.”
Intangible Assets — Intangible assets with a
finite useful life are amortized on a straight-line basis over
their estimated useful lives, with periods ranging from 3 to
22 years
Deferred Financing Fees — Deferred financing
fees of $33.3 million and $24.9 million at
December 31, 2004 and 2003, respectively, are included in
other assets within the balance sheet and are amortized over the
term of the related debt. During 2004, 2003 and 2002, the
Company recorded as interest expense the amortization for
deferred financing fees of $5.0 million, $3.9 million,
and $4.5 million, respectively. Upon retiring debt,
unamortized deferred financing fees are recognized in the other
(income) expense, net line item within the statement of
operations.
Impairment of Long-Lived Assets — Property,
plant and equipment and other long-term assets are reviewed for
impairment whenever changes in circumstances indicate that the
carrying amount may not be
recoverable. Impairment losses are charged to the statement of
operations for the difference between the fair value and
carrying value of the asset. During 2004, the Company recognized
$2.6 million of impairment losses on long-lived assets. The
assets determined to be impaired were tested for recovery based
on circumstances whereby goodwill was impaired as a result of
the Company’s annual test for indications of impairment.
The impairment charge is reflected in selling, general and
administrative expense on the statement of operations and has
been included in the scientific products and services segment.
No impairment losses were recorded on long-lived assets in 2003
or 2002.
Accounts Payable — The Company maintains a zero
balance cash management system for its U.S. accounts
payable. Accordingly, included in accounts payable at
December 31, 2004 and 2003, are $102.0 million and
$64.0 million of checks that did not clear the bank,
respectively.
Environmental Remediation Costs — The Company
is subject to laws and regulations relating to protecting the
environment. Fisher provides for expenses associated with
environmental remediation obligations when such amounts are
probable and can be reasonably estimated.
Insurable Liabilities — The Company records
liabilities for its workers’ compensation, product, general
and auto liabilities up to pre-determined program deductibles
subsequent to which risk of loss is transferred to the
Company’s insurance carriers. The determination of these
liabilities and related expenses is dependent on claims
experience. For certain of these liabilities, claims incurred
but not yet reported are estimated by utilizing actuarial
valuations based on historical claims experience.
Advertising — The Company expenses advertising
costs as incurred, except for certain direct-response
advertising, which is capitalized and amortized over its
expected period of future benefit, generally two years.
Direct-response advertising consists of catalog production and
mailing costs and amortization begins on the date the catalogs
are mailed. Advertising expense, which includes internal
employment costs for marketing personnel and amortization of
capitalized direct-response advertising, was $72.2 million,
$39.9 million and $37.5 million for the three years
ended December 31, 2004, 2003, and 2002, respectively.
Included in advertising expense was catalog amortization of
$13.3 million, $14.3 million, and $14.5 million
for 2004, 2003 and 2002, respectively.
Revenue Recognition — The Company records
product revenue when persuasive evidence of an arrangement
exists, the price is fixed or determinable, title and risk of
loss has been transferred to the customer and collectibility of
the resulting receivable is reasonably assured. Title generally
transfers at shipping point, however, full risk of loss is
generally transferred to the customer upon delivery. Products
are typically delivered without significant post-sale
obligations to customers. When significant post-sale obligations
exist, revenue recognition is deferred until the obligations are
satisfied. Provisions for discounts, warranties, rebates to
customers, returns and other adjustments are provided for in the
period the related sales are recorded. Pharmaceutical
outsourcing service revenues, which can consist of specialized
packaging, warehousing and distribution of products, and
arrangements with multiple elements, are recognized as each of
the elements are provided. The Company recognizes revenue for
each element based on the fair value of the element provided,
which has been determined by referencing historical pricing
policies when the element is sold separately. Other service
revenue is recognized as the services are performed. Certain
contracts associated with the Company’s laboratory
workstation segment are recorded under the
percentage-of-completion method of accounting. Changes in
estimates to complete and revisions in overall profit estimates
on percentage-of-completion contracts are recognized in the
period in which they are determined.
Research and Development — The Company expenses
costs associated with the development of new products. Research
and development expenses are charged to selling, general and
administrative expenses and were $36.7 million,
$11.8 million and $7.7 million for the years ended
December 31, 2004, 2003 and 2002, respectively.
Income Taxes — The Company accounts for income
taxes in accordance with Statement of Financial Accounting
Standard No. 109, “Accounting for Income Taxes”
(“SFAS 109”). SFAS 109 requires the asset
and liability approach to account for income taxes by
recognizing deferred tax assets and liabilities for the expected
future tax consequences of differences between the financial
statement basis and the tax basis of assets and liabilities,
calculated using enacted tax rates in effect for the year in
which the differences are expected to be reflected in the tax
return. The Company records a valuation allowance to reduce
deferred tax assets to the amount that is more likely than not
to be realized. The Company establishes an estimated liability
for federal, state and foreign income tax exposures that arise
and meet the criteria for accrual under SFAS No. 5,
“Accounting for Contingencies.” This liability
addresses a number of issues for which the Company may have to
pay additional taxes (and interest) when all examinations by
taxing authorities are concluded. The liability amounts for such
matters are based on an evaluation of the underlying facts and
circumstances, a thorough research of the technical merits of
the Company’s arguments, and an assessment of the chances
of the Company prevailing in their arguments. Amounts not
expected to be settled within one year are classified in other
liabilities on the balance sheet.
Stock-Based Compensation — The Company measures
compensation expense for its stock-based employee compensation
plans using the intrinsic value method. The Company has adopted
the disclosure-only provisions of Statement of Financial
Accounting Standards No. 148, “Accounting for
Stock-Based Compensation — Transition and
Disclosure” (“SFAS No. 148”), an
amendment of FASB Statement No. 123. Therefore, the Company
has recognized compensation expense only for restricted stock
units and similar awards as all options granted had an exercise
price equal to the market value of the underlying stock on the
date of grant. Had compensation expense for the Company’s
stock option plans been determined based on the fair value at
the grant date for awards under the Company’s stock plans,
consistent with the methodology prescribed under
SFAS No. 148, the Company’s net income and net
income per common share would have approximated the pro forma
amounts indicated below (in millions, except per share amounts):
2004
2003
2002
Net income as reported
$
166.4
$
78.4
$
50.6
Add: stock-based employee compensation included in reported net
income, net of tax
0.8
—
—
Deduct: stock-based compensation expense determined using fair
value based method for all awards, net of tax
The fair value of the Company’s stock options included in
the preceding pro forma amounts were estimated using the
Black-Scholes option-pricing model with the following weighted
average assumptions:
2004
2003
2002
Risk free interest rate
3.3
%
2.8
%
3.8
%
Expected life of option
5 years
5 years
5 years
Volatility
39
%
41
%
47
%
Expected dividend yield
0.0
%
0.0
%
0.0
%
Foreign Currency Translation — Assets and
liabilities of the Company’s foreign subsidiaries, where
the functional currency is the local currency, are translated
into U.S. dollars using year-end exchange rates. Revenues
and expenses of foreign subsidiaries are translated at the
average exchange rates in effect during the year. Adjustments
resulting from financial statement translations are included as
a component of accumulated other comprehensive income
(“OCI”) within shareholders’ equity. Gains and
losses resulting from foreign currency transactions are reported
on the income statement line item corresponding with the
transaction when recognized and were immaterial for all periods
presented.
Derivative Financial Instruments — The Company
accounts for derivative financial instruments in accordance with
Statement of Financial Accounting Standards No. 133,
“Accounting for Derivative Instruments and Hedging
Activities,” as amended. All derivatives, whether
designated in hedging relationships or not, are recorded on the
balance sheet at fair value. If the derivative is designated as
a fair value hedge, the changes in the fair value of the
derivative and of the hedged item attributable to the hedged
risk are recognized in the results of operations. If the
derivative is designated as a cash flow hedge, the effective
portions of changes in the fair value of the derivative are
recorded in accumulated other comprehensive income and are
recognized in the results of operations when the hedged item
affects earnings. Ineffective portions of changes in the fair
value of cash flow hedges are recognized in the results of
operations. For derivative instruments not designated as hedging
instruments, changes in fair value are recognized in the results
of operations in the current period.
The nature of the Company’s business activities requires
the management of various financial and market risks, including
those related to changes in interest rates, foreign currency and
commodity rates. The Company uses derivative financial
instruments to mitigate or eliminate certain of those risks. The
Company assesses, both at the inception of the hedge and on an
on-going basis, whether the derivatives that are used in hedging
transactions are highly effective in offsetting changes in cash
flows of hedged items. When it is determined that a derivative
is not highly effective as a hedge, the Company discontinues
hedge accounting prospectively. The Company does not hold
derivatives for trading purposes.
The Company uses interest-rate swap agreements in order to
manage its exposure to interest rate risk. These interest rate
swaps are designated as cash flow hedges of the Company’s
variable rate debt. During the three years ended
December 31, 2004, no ineffectiveness was recognized in the
results of operations on these hedges. Amounts accumulated in
OCI are reclassified into earnings as interest is accrued on the
hedge transactions. The amounts accumulated in OCI will
fluctuate based on changes in the fair value of the
Company’s derivatives at each reporting period.
The Company enters into forward currency and option contracts to
hedge exposure to fluctuations in foreign currency rates. For
foreign currency contracts that are designated as hedges,
changes in the fair value are recorded in OCI to the extent of
hedge effectiveness and are subsequently recognized in the
results of operations once the forecasted transactions are
recognized. For forward currency contracts not designated as
hedges, changes in fair value are recognized in the results of
operations in the current period. These changes in fair value
are not material to the financial statements for any periods
presented.
The Company enters into commodity swaps and option contracts to
hedge exposure to fluctuations in commodity prices. For
contracts that are designated as hedges, changes in the fair
value are recorded in OCI to the extent of hedge effectiveness
and are subsequently recognized in the results of operations
once the forecasted transactions are recognized. For contracts
not designated as hedges, changes in fair value are recognized
in the results of operations in the current period. These
changes in fair value are not material to the financial
statements for any periods presented.
Other Comprehensive Income — Other
comprehensive income refers to revenues, expenses, gains and
losses that under accounting principles generally accepted in
the United States are included in other comprehensive income,
but are excluded from net income as these amounts are recorded
directly as an adjustment to stockholders’ equity, net of
tax. The Company’s other comprehensive income is comprised
of unrealized gains and losses on available-for-sale securities,
unrealized losses on cash flow hedges, minimum pension liability
and foreign currency translation adjustments.
Earnings per Share — Basic net income per share
is computed by dividing net income available for common
stockholders by the weighted average number of shares of common
stock outstanding during the period. Except where the result
would be antidilutive, diluted net income per share is computed
by dividing net income available for common stockholders by the
weighted average number of shares of common stock outstanding,
including potential common shares from the exercise of stock
option and warrants, and conversion of convertible securities,
using the treasury stock method. At December 31, 2004, the
Company had $975 million of convertible notes outstanding.
These notes and their conversion events are described in more
detail in Note 10 — Debt. Upon conversion, the
Company has the right to deliver, in lieu of common stock, cash
or a combination of cash and common stock to settle the
principal amount of the notes. These notes are included in our
diluted EPS calculation under the “treasury stock
method” when the average price of our stock for the period
is greater than the conversion price. The Company applies the
treasury stock method as it is our current intention to settle
the principal portion of the notes in cash upon conversion. The
conversion prices of our convertible notes are $47.46, $59.09
and $80.40 for our 2.50% convertible senior notes, floating rate
convertible senior debentures and 3.25% convertible senior
notes, respectively. Under the treasury stock method, only the
shares required to settle the conversion premium are included in
our weighted average shares outstanding. Based upon the
application of the treasury stock method, 1.0 million
shares were included in our 2004 weighted average share
calculation.
The following table sets forth basic and diluted net income per
share computational data for the years ended December 31,2004, 2003 and 2002 (in millions, except per share amounts):
2004
2003
2002
Net income available to common shareholders
$
166.4
$
78.4
$
50.6
Weighted average common shares outstanding used in computing
basic net income per common share
86.2
56.9
54.5
Dilutive securities:
Stock options(a)
5.0
3.7
3.4
Convertible notes
1.0
—
—
Weighted average common shares outstanding used in computing
diluted net income per common share
92.2
60.6
57.9
Basic net income per common share
$
1.93
$
1.38
$
0.93
Diluted net income per common share
$
1.80
$
1.29
$
0.87
(a)
The weighted average amount of outstanding antidilutive common
stock options excluded from the computation of diluted net
income per common share was 0.9 million, 0.2 million
and 1.3 million at December 31, 2004, 2003 and 2002,
respectively.
Use of Estimates — The preparation of the
Financial Statements in conformity with accounting principles
generally accepted in the United States of America requires
management to make extensive use of estimates and assumptions
that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities and the reported
amounts of revenues and expenses. Significant estimates in these
Financial Statements include the fair value and estimated lives
of intangible assets assumed in business combinations,
restructuring charges and credits, acquisition liabilities,
allowances for doubtful accounts receivable, estimates of future
cash flows associated with asset impairments, useful lives for
depreciation and amortization, loss contingencies, net
realizable value of inventories, fair values of financial
instruments, estimated contract revenue and related costs,
environmental remediation and legal liabilities, insurable
liabilities, income taxes and tax valuation reserves, and the
determination of discount and other rate assumptions for pension
and postretirement employee benefit expenses. Actual results
could differ materially from these estimates. Changes in
estimates are recorded in results of operations in the period
that the event or circumstance giving rise to such changes occur.
Reclassifications — Certain reclassifications
have been made to all periods presented in order to conform to
the current year presentation.
Note 3 — Business Combinations
Merger with Apogent Technologies Inc.
On August 2, 2004, the Company completed an approximately
$3.9 billion combination with Apogent Technologies Inc.
(“Apogent”) in a tax-free, stock-for-stock merger,
which included the assumption of debt with a fair value of
$1.1 billion. Apogent shareholders received
0.56 shares of Fisher common stock for each share of
Apogent common stock they owned. Upon completion of the merger,
Apogent became a wholly-owned subsidiary of Fisher. The results
of Apogent have been included in the scientific products and
services segment and the healthcare products and services
segment from the date of acquisition.
The Company believes the combination of Fisher with Apogent may
result in several strategic benefits, including providing the
Company with an enhanced:
•
Life-science market position.The Company’s
life-science footprint may grow substantially as a result of
this combination. In addition, Apogent’s wide range of
consumable products for protein-based research and other drug
discovery applications may enhance the Company’s
life-science portfolio.
•
Biopharma-production and diagnostic-reagent offering. The
combination of Fisher with Apogent may strengthen the
Company’s offerings in biopharma-production and
diagnostic-reagents.
•
Global market presence. Apogent has manufacturing
operations throughout the world that may complement and enhance
the Company’s existing worldwide distribution and supply
network.
The Company also anticipates that the merger may result in
several key financial benefits, including:
•
Enhanced margins.The Company expects higher-margin,
proprietary products to approximate 60 percent of its total
annual sales.
•
Synergy opportunities.The Company expects to achieve
cost savings and other benefits in 2005 and beyond. These
synergies may come from, among other things, facility
consolidations, sourcing opportunities, administrative
efficiencies and the elimination of duplicative marketing and
distribution functions.
•
Earnings and revenue growth.The Company believes that
its revenue and earnings may be enhanced as a result of the
merger with Apogent.
•
Operating cash flow.The Company anticipates cash flow
from operations may increase as a result of the merger and
result in increased financial flexibility that may enhance the
Company’s ability to pursue strategic growth opportunities.
The following table summarizes the purchase by Fisher of the
outstanding shares of Apogent common stock.
Aggregate value of stock consideration
$
2,658.8
Value of Apogent stock options assumed by Fisher
109.9
Aggregate consideration
2,768.7
Tax benefit of Apogent stock options exercised
(22.7
)
Net consideration
$
2,746.0
The value of the 50.6 million shares of Fisher common
stock, $0.01 par value, issued in the merger for the
acquisition of approximately 90.4 million shares of Apogent
common stock outstanding on July 30, 2004 was based on
$52.51 per share, which represents the five-day average
closing price of Fisher’s common stock beginning two days
prior to the merger announcement date of March 17, 2004.
The estimated fair value, based upon a Black-Scholes valuation,
of Fisher’s stock options issued for the conversion of
approximately 11.2 million of Apogent stock options
outstanding on July 30, 2004 was calculated based on a
price of $52.51 per share. The Company also acquired
49,843 shares of common stock deposited in treasury stock
in a non-cash exchange. The allocation of the purchase price
paid by the Company includes $45 million of direct merger
costs, $14.2 million of termination benefits and
$3.5 million of other exit costs. Through December 31,2004, $33.6 million of the direct merger costs,
$4.4 million of termination benefits, and $0.3 million
of other exit costs were paid by the Company. The
$14.2 million of termination benefits primarily represents
costs to involuntarily terminate employees associated with
Apogent’s corporate headquarters and other certain
facilities. The activities associated with involuntary
termination of such employees is expected to be completed by
December 31, 2005. The $3.5 million of other exit
costs is primarily comprised of contract termination costs.
These costs include the exit of certain non-cancelable leases
that include payments through 2009. The unpaid direct merger,
termination benefits and exit costs outstanding as of
December 31, 2004 have been classified in accrued and other
current liabilities in the balance sheet.
The following table summarizes the allocation of purchase price
to the estimated fair values of the assets acquired and
liabilities assumed as of August 2, 2004, the date of the
merger, in accordance with SFAS 141. The Company’s
initial allocation was based on a preliminary evaluation whereby
data gathering was ongoing and represented management’s
good faith best estimates based on the data then available. As a
result, the initial allocation of purchase price has been
revised and the evaluation process is substantially completed,
with the remaining allocation to be completed primarily related
to finalizing the value of liabilities assumed in connection
with certain leased facilities. The amount allocated to goodwill
is non-deductible for tax purposes.
(In millions)
Current assets
$
671.2
Property, plant, and equipment
292.7
Intangible assets
1,225.1
In-process research and development
2.4
Goodwill
2,529.2
Other assets
17.3
Total assets acquired
4,737.9
Current liabilities
272.7
Long-term debt
1,061.9
Other liabilities
657.3
Total liabilities assumed
1,991.9
Net assets acquired
$
2,746.0
The estimated fair value of long-term debt assumed as of
August 2, 2004 is comprised of the following Apogent debt
securities.
•
The Company assumed $250 million aggregate principal amount
of the
61/2% senior
subordinated notes due 2013 (the
“61/2% Notes”).
The
61/2% Notes
were recorded at a fair value of $276.9 million based upon
the tender price for the notes, which was $1,107.50 in cash per
$1,000 principal amount, plus accrued and unpaid interest. The
tender price is assumed to be equal to the market price. The
61/2% Notes
were tendered and a consent was given to amend the indenture for
any notes that remained outstanding to eliminate restrictive
covenants in that indenture. The cash tender offer was completed
concurrently with the merger.
•
The Company assumed $300 million aggregate principal amount
of 2.25% Senior Convertible Contingent Debt Securities due
2021 (the “2.25% CODES”). The 2.25% CODES were
recorded at a fair value of $335.4 million based upon the
market price for the debt security at July 30, 2004,
reflecting a premium of $33.9 million and a liability of
$1.5 million for exchange fees to be paid. The Company
determined that the premium was due to the equity conversion
feature of the debt and recorded the amount of the premium to
capital in excess of par value.
•
The Company assumed $345 million aggregate principal amount
of Floating Rate Senior Convertible Contingent Debt Securities
due 2033 (the “Floating Rate CODES”). The Floating
Rate CODES were recorded at a fair value of $426.3 million
based upon the market price for the debt security at
July 30, 2004, reflecting a premium of $77.5 million
and a liability of $3.8 million for exchange and consent
solicitation fees to be paid. The Company determined that the
premium was due to the equity conversion feature of the debt and
recorded the amount of the premium to capital in excess of par.
The Company assumed $7 million of remaining aggregate
principal amount of 8% senior notes due 2011 (the
“8% Notes”). The 8% Notes were recorded at a
fair value of $7.6 million based upon the market value for
the debt security at July 30, 2004, reflecting a premium of
$0.6 million.
•
The Company assumed sale/ leaseback obligations of
$10.5 million. The obligations were recorded at a fair
value of $15.7 million based upon third-party appraisals.
The Company has also recorded an estimated liability of
approximately $11 million pertaining to a put feature associated
with these obligations whereby the Company could be obligated to
purchase the associated facilities at a price based upon a
prescribed calculation methodology in the lease agreement. This
liability is based on management’s current best estimate
and is subject to revision.
The allocation of purchase price also includes $5.5 million
for an asset held for sale recorded at fair value less cost to
sell and has been included in property, plant and equipment but
not depreciated. This asset was not considered to be a
productive asset to the operations of the combined company and
was being actively marketed for immediate sale. The sale of this
asset was consummated during the three months ended
March 31, 2005.
The initial allocation of purchase price has been revised for an
increase in the allocation to identifiable intangible assets.
Identifiable intangible assets total approximately
$1,225.1 million. The Company made a corresponding revision
to other liabilities to reflect the corresponding deferred tax
liability. The Company’s estimated value of intangible
assets relates to trademarks, trade names, customer
relationships, supplier agreements and developed technology.
The following table summarizes the allocation of the estimated
fair values to identified amortizable intangible assets acquired
(in millions):
Fair
Weighted-Average
Value
Life
Customer relationships
$
226.1
20.9
Developed technology
175.5
9.4
Supplier arrangements
5.8
10.0
Other amortizable intangible assets
0.6
2.0
$
408.0
15.7
The Company also allocated $817.1 million to trademarks
with an indefinite-life.
The Company has also revised its initial allocation of purchase
price to allocate $2.4 million to in-process research and
development, which represents an estimate of the fair value of
purchased in-process technology for research projects that, as
of the date of the merger, had not reached technological
feasibility and have no alternative future use. This amount was
recorded as research and development expense and is included in
selling, general and administrative expenses on the statement of
operations for the year ended December 31, 2004.
The following unaudited pro forma financial information presents
the results of operations as if the Apogent merger had occurred
at the beginning of 2003. Amortization of the acquired
intangibles is included on a straight-line basis and both
periods include a charge for the step-up of inventory to fair
value in the amount of $74.3($48.3 net of tax). This unaudited
pro forma information does not purport to indicate the
results that would have actually been obtained had the merger
been completed on the assumed date or for the periods presented,
or which may be realized in the future.
On March 1, 2004, the Company acquired Oxoid Group Holdings
Limited (“Oxoid”) to further expand the Company’s
Life Science Product Portfolio. Oxoid is a United Kingdom-based
manufacturer of microbiological culture media and other
diagnostic products that test for bacterial contamination. The
purchase price was approximately $330 million and was
funded through the sale of an initial $300 million
principal amount of 3.25% convertible senior notes and
borrowings under the Company’s accounts receivable
securitization facility and revolving credit facilities. The
results of Oxoid have been included in the scientific products
and services segment from the date of acquisition.
The following table summarizes the allocation of the estimated
fair values to identified amortizable intangible assets acquired
(in millions):
Fair
Weighted-Average
Value
Life
Customer relationships
$
26.4
25.0
Non-competition agreements
0.4
1.0
Developed technology
6.9
7.1
Supplier arrangements
7.4
9.9
Other amortizable intangible assets
1.6
3.0
$
42.7
18.4
The Company allocated $213 million to goodwill, which is
non-deductible for tax purposes. The Company also allocated
$72.2 million to trademarks with an indefinite-life.
The following unaudited pro forma financial information presents
the results of operations as if the Oxoid acquisition had
occurred at the beginning of 2003. The unaudited pro forma
financial information is provided for information purposes only
and does not purport to be indicative of the Company’s
results of operations that would actually have been achieved had
the acquisition been completed for the period presented, or that
may be achieved in the future (in millions, except per share
amounts).
On April 1, 2004, the Company acquired Dharmacon, Inc.
(“Dharmacon”) to further expand the Company’s
Life Science Product Portfolio. Dharmacon focuses on RNA
technologies, including RNA interference and small interfering
RNAi; which are tools for life-science research that increase
the efficiency of the drug discovery process. The purchase price
was approximately $80 million of cash. In connection with
this transaction, exercisable options to purchase Dharmacon
common stock were converted at fair market value into the right
to receive 57,713 shares of Fisher common stock, issued
from treasury stock. The results of Dharmacon have been included
in the scientific products and services segment from the date of
acquisition.
The following table summarizes the allocation of the estimated
fair values to identified amortizable intangible assets acquired
(in millions):
Weighted-Average
Fair Value
Life
Customer relationships
$
3.1
10.0
Non-competition agreements
0.3
2.0
Developed technology
8.1
9.3
$
11.5
9.3
The Company allocated $60.6 million to goodwill, which is
non-deductible for tax purposes. The Company also allocated
$11.5 million to trademarks with an indefinite-life.
Acquisition of Perbio Science AB
On September 8, 2003, the Company acquired the outstanding
stock of Perbio Science AB (“Perbio”), a Swedish
public company, in a public tender offer pursuant to the rules
of the Stockholm Stock Exchange. Perbio manufactures and sells
consumable tools for protein-related research and protein-based
biopharma drug production. The purchase price was approximately
$689 million in cash plus assumed net debt of approximately
$44 million. The Perbio acquisition was financed
principally through the sale of $300 million principal
amount of 2.50% convertible senior notes, the issuance and
sale of $150 million principal amount of 8% senior
subordinated notes and the borrowing of an additional
$250 million of term loans under the Company’s senior
credit facility. The Bioresearch and Cell Culture divisions of
Perbio have been included in the scientific products and
services segment and the medical device division of Perbio has
been included in the healthcare products and services segment
from the date of acquisition.
The following table summarizes the estimated fair values of the
assets acquired and liabilities assumed in the Perbio
acquisition at the date of the acquisition net of cash and debt
acquired.
The allocation of the Perbio purchase price resulted in an
allocation to identifiable intangible assets of
$112.0 million. The Company valued intangible assets
related to trademarks, tradenames, customer lists, supplier
agreements and developed technology. A majority of the
intangible assets acquired relate to trademarks and trade names.
The following table summarizes the allocation of the estimated
fair values of identified amortizable intangible assets acquired
(in millions):
Weighted-Average
Fair Value
Life
Customer relationships
$
22.8
5.0
Developed technology
16.6
5.7
Other amortizable intangible assets
8.3
8.0
$
47.7
5.8
The Company also allocated $64.3 million to trademarks with
an indefinite-life.
The following unaudited pro forma financial information presents
the results of operations as if the Perbio acquisition had
occurred at the beginning of 2003. The unaudited pro forma
financial information is provided for information purposes only
and does not purport to be indicative of the Company’s
results of operations that would actually have been achieved had
the Perbio acquisition been completed for the periods presented,
or that may be achieved in the future (in millions, except per
share amounts).
In November 2002, the Company acquired Maybridge Chemical
Holdings Limited (“Maybridge”) and Mimotopes Pty.
Limited (“Mimotopes”.) Maybridge is a United
Kingdom-based provider of organic compounds and combinatorial
libraries for use in drug discovery. Mimotopes is an
Australia-based manufacturer of custom peptides and peptide
libraries used in conducting scientific research. These
acquisitions had an aggregate purchase price of
$53.2 million and were funded with cash on hand. The
results of Maybridge and Mimotopes have been included in our
scientific products and services segment from their respective
dates of acquisition.
In July 2002, the Company acquired a Netherlands-based
distributor operating under the names Retsch and Emergo. Retsch
and Emergo are distributors of instruments, equipment and
supplies to the scientific research and industrial markets. The
net purchase price of $7.9 million was funded with cash on
hand. The results of Retsch and Emergo have been included in the
scientific products and services segment from the date of
acquisition.
In April 2002, the Company acquired an additional interest in
Medical Analysis Systems, Inc. (“MAS”), increasing the
Company’s existing ownership interest in MAS acquired in
June 2001, to 91%. In September 2002, the Company caused MAS to
merge with and into a wholly owned merger subsidiary of the
Company. The results of MAS have been included in the healthcare
products and services segment from the date of acquisition.
The following is a summary of accounts receivable at
December 31, 2004 and 2003 (in millions):
2004
2003
Gross accounts receivable
$
663.7
$
469.3
Allowance for doubtful accounts
(27.1
)
(36.6
)
Accounts receivable, net
$
636.6
$
432.7
In February 2004, the Company amended its existing receivables
securitization facility (“2004 Receivables
Securitization”) extending the facility’s maturity
date to February 2005. The $225 million facility provides
for the sale, on a revolving basis, of all of the accounts
receivable of Cole-Parmer Instrument Company, Fisher Clinical
Services Inc., Fisher Hamilton L.L.C. and Fisher Scientific
Company L.L.C. to FSI Receivables Company LLC (“FSI”),
a special purpose, bankruptcy remote indirect wholly owned
subsidiary of the Company. On the same date, FSI and the
Company, as servicer, entered into a receivables transfer
agreement with certain financial institutions that provides for
the transfer on a revolving basis of an undivided percentage
ownership interest in a designated pool of accounts receivable
up to a maximum amount of $225 million. During 2004 and
2003, the Company collected and reinvested, on a revolving
basis, approximately $360 million and $57 million of
receivables, respectively. Due to the short-term nature of the
receivables, the Company’s retained interest in the pool
during the year is valued at historical cost which approximates
fair value. The effective funded interest rate on the 2004
Receivables Securitization was a commercial paper rate plus a
usage fee of 45 basis points. The unfunded annual
commitment fee for the 2004 Receivables Securitization was
25 basis points. The Company recorded $1.6 million,
$0.9 million and $1.8 million of losses on the sale of
receivables as interest expense during the years ended
December 31, 2004, 2003 and 2002, respectively. As of
December 31, 2004 and 2003 there were no amounts
outstanding under the facility and the unutilized capacity of
the facility was $207.2 million and $186.0 million,
respectively.
On February 4, 2005the Company amended its existing
$225 million 2004 Receivables Securitization facility
extending the facility’s maturity date to February 2008.
The effective funded interest rate on the amended Receivables
Securitization is a commercial paper rate plus a usage fee of
60 basis points. The unfunded annual commitment fee changed
from 25 basis points to 30 basis points.
Note 5 — Inventories
Inventories consisted of the following as of December 31,2004 and 2003 (in millions):
2004
2003
Raw materials
$
137.2
$
64.2
Work in process
65.4
22.6
Finished goods
423.1
268.6
Total
$
625.7
$
355.4
The value of inventory maintained using the LIFO method was
$128.5 million and $141.4 million, which was below
estimated replacement cost by approximately $36.7 million
and $34.8 million for the years ended December 31,2004 and 2003, respectively. The value of inventory maintained
using the FIFO method was $497.2 million and
$214.0 million as of December 31, 2004 and 2003,
respectively.
The following is a summary of other current assets as of
December 31, 2004 and 2003 (in millions):
2004
2003
Deferred income taxes
$
162.4
$
92.1
Other
103.8
46.8
Total
$
266.2
$
138.9
Note 7 —
Property, Plant and Equipment
The following is a summary of property, plant and equipment by
major class of asset as of December 31, 2004 and 2003 (in
millions):
2004
2003
Land, buildings and improvements
$
485.2
$
324.5
Machinery, equipment and other
656.5
383.8
Total
1,141.7
708.3
Accumulated depreciation
(353.1
)
(267.4
)
Property, plant and equipment, net
$
788.6
$
440.9
Depreciation expense, including amortization of assets under
capital leases, was $92.3 million, $53.0 million and
$47.0 million for the years ended December 31, 2004,
2003 and 2002, respectively.
Note 8 —
Goodwill and Other Intangible Assets
The following is a reconciliation of changes in the carrying
amounts of goodwill by segment for the year ended:
The Company performed its annual test for indications of
goodwill impairment as of October 31, 2004. As a result,
the Company recorded a noncash charge of $64.9 million on a
separate line in the statement of operations. The scientific
products and services and laboratory workstations segment
accounted for $11.9 million and $53.0 million of the
charge, respectively.
The laboratory workstations segment is sensitive to changes in
capital spending. Due to the timing of projects and slower
market demand for smaller projects, sales growth was less than
forecasted, resulting in decreased profitability. The impairment
charge for a reporting unit within the scientific products and
services segment was due to the shut down of an operation as the
Company was able to identify a lower cost sourcing alternative.
The Company utilized a combination of an income approach and a
market approach for
determining fair value of its reporting units. As of
October 31, 2003 and 2002, there were no impairments of
goodwill.
The following is a summary of other intangible assets subject to
amortization at December 31, 2004 and 2003 (in millions):
2004
2003
Customer relationships (net of accumulated amortization of
$21.4 million and $10.2 million at December 31,2004 and 2003, respectively)
$
281.0
$
38.1
Non-compete agreements (net of accumulated amortization of
$21.5 million and $18.3 million at December 31,2004 and 2003, respectively)
0.5
3.2
Patents and tradenames (net of accumulated amortization of
$9.0 million and $8.4 million at December 31,2004 and 2003, respectively)
9.4
8.5
Developed technology (net of accumulated amortization of
$16.7 million and $2.9 million at December 31,2004 and 2003, respectively)
193.6
16.6
Supplier arrangements (net of accumulated amortization of
$2.8 million and $0.6 million at December 31,2004 and 2003, respectively)
18.3
7.7
Other amortizable intangible assets (net of accumulated
amortization of $7.6 million and $7.4 million at
December 31, 2004 and 2003, respectively)
21.8
24.0
Amortizable intangible assets, net of accumulated amortization
$
524.6
$
98.1
The Company’s annual test for impairment of goodwill
resulted in the recording of a goodwill impairment charge. As a
result, the Company evaluated its other intangible assets for
impairment and recorded a noncash charge of $0.8 million on
the selling, general and administrative line of the statement of
operations and related to the scientific products and services
segment.
For the years ended December 31, 2004, 2003 and 2002, the
Company recorded amortization expense of $32.6 million,
$12.1 million and $8.1 million, respectively, related
to other amortizable intangible assets.
The estimated amortization expense for each of the five
succeeding years and thereafter is as follows (in millions):
As of December 31, 2004 and 2003, the Company had
indefinite-lived intangible assets in the scientific products
and services segment of $859.0 million and
$130.8 million, respectively. As of December 31, 2004
and 2003, the Company had indefinite-lived intangible assets in
the healthcare products and services segment of
$188.2 million and $12.1 million, respectively.
Indefinite-lived intangible assets consist of trademarks and
trade secrets acquired through the Company’s acquisitions
of Cole-Parmer and MAS in 2001, Maybridge in 2002, Perbio in
2003 and Apogent, Oxoid and Dharmacon in 2004.
The following is a summary of accrued and other current
liabilities as of December 31, 2004 and 2003 (in millions):
2004
2003
Wages and benefits
$
104.4
$
77.3
Interest
31.5
16.4
Other
322.2
165.1
Total
$
458.1
$
258.8
Note 10 —
Debt
The following is a summary of debt obligations as of
December 31, 2004 and 2003 (in millions):
2004
2003
Term Facility
$
393.0
$
—
Prior credit facility
—
440.0
Other debt
60.8
36.6
2.50% Convertible Senior Notes, due 2023, convertible at
$47.46 per share
300.0
300.0
Floating Rate Convertible Senior Debentures, due 2033,
convertible at $59.09 per share
344.6
—
3.25% Convertible Senior Subordinated Notes, due 2024,
convertible at $80.40 per share
330.0
—
81/8% Senior
Subordinated Notes, due 2012 (includes $5.9 million and
$6.4 million of unamortized debt premium as of
December 31, 2004 and December 31, 2003, respectively)
309.9
310.4
8% Senior Subordinated Notes, due 2013 (includes
$10.3 million and $11.1 million of unamortized debt
premium as of December 31, 2004 and December 31, 2003,
respectively)
310.3
311.1
63/4% Senior
Subordinated Notes, due 2014
300.0
—
Total debt
2,348.6
1,398.1
Less: short-term portion
(39.4
)
(12.0
)
Total long-term debt
$
2,309.2
$
1,386.1
In connection with the Apogent merger on August 2, 2004,
the Company entered into a new credit facility (the “New
Credit Facility”). The New Credit Facility consists of
(i) a $500 million revolving credit facility (the
“New Revolving Credit Facility”) and (ii) a
$700 million term loan facility (the “New Term
Loan Facility”) in three tranches: (a) a
$250 million tranche (“Tranche A-1”),
(b) a $300 million tranche
(“Tranche A-2”) and (c) a $150 million
tranche (“Tranche B”). In addition, the Company
has the ability, upon satisfaction of certain conditions, to
request incremental term loans from the lenders under the New
Credit Facility. The Tranche A-2 loan was unfunded at the
closing of the New Credit Facility and the lenders’
commitment to fund the Tranche A-2 loan was originally
scheduled to expire on December 31, 2004. On
December 29, 2004, the Company amended the New Credit
Facility to extend the term of this commitment through
December 31, 2005 and lower the interest rate on
commitments and borrowings under the New Credit Facility.
Proceeds from the New Term Facility were used to repay the
Company’s prior credit facility.
The loans under the New Revolving Credit Facility, the
Tranche A-1 loan and the Tranche A-2 loan bear
interest at the Company’s election at either (a) LIBOR
plus a margin of between 0.625% and 1.50% per annum or
(b) Prime Rate (or if it is greater, Federal Funds Rate
plus 0.500%) plus a margin of between 0.000% and 0.500%,
depending in each case on the Company’s ratings. The
Tranche B loan bears interest at the Company’s
election at either (a) LIBOR plus a margin of 1.500% or
1.750% per annum or (b) Prime Rate (or if it is
greater, Federal Funds Rate plus 0.500%) plus a margin of 0.500%
or 0.750%, depending in each case on the Company’s ratings.
The Company’s weighted average borrowing rate for all term
loan debt for the year ended December 31, 2004, including
the term loan debt refinanced with the New Credit Facility, was
3.2%. Commitment fees are payable on the unborrowed amounts of
the New Revolving Credit Facility at a rate of between 0.175%
and 0.375% per annum depending on the Company’s credit
ratings, while such commitments remain outstanding. Commitment
fees are payable on the unborrowed amount of the
Tranche A-2 loan at a rate of 0.250% per annum, while
such commitment remains outstanding. As of December 31,2004, $761.9 million of borrowings were available under the
New Revolving Credit Facility and the Tranche A-2 facility.
The Company’s obligations under the New Credit Facility are
secured by a pledge of the stock or other ownership interests of
the Company’s material domestic subsidiaries and 65% of the
stock or other ownership interests of the Company’s
material foreign subsidiaries. The Company’s obligations
under the New Credit Facility are guaranteed by all of the
Company’s material domestic subsidiaries (excluding FSI
Receivables Company LLC and any material domestic subsidiaries
of Apogent), and these guarantees are secured by a pledge of the
stock or other ownership interests of their material domestic
subsidiaries and 65% of the stock or other ownership interests
of their material foreign subsidiaries. The Company’s debt
obligations restrict, among other things, the ability of the
Company and its subsidiaries to (a) incur more debt,
(b) grant liens, (c) make loans, investments or pay
dividends or make certain other restricted payments to the
Company’s stockholders, (d) enter into mergers,
acquisitions and other business combinations,
(e) voluntarily prepay certain debt of the Company or its
subsidiaries, (f) sell or transfer assets, (g) enter
into transactions with affiliates, and other various covenants
that are customary for similar obligations. The Company is in
compliance with all covenants at December 31, 2004. The
financial covenants for 2005 and beyond are as follows:
Consolidated Interest Expense Coverage Ratio. We cannot
permit the ratio of (a) Consolidated EBITDA to
(b) Consolidated Cash Interest Expense, in each case for
any period of four consecutive fiscal quarters, to be less than
a ratio of 3.00 to 1.00.
Total Leverage Ratio. We cannot permit the ratio of
(a) Consolidated Funded Indebtedness as of the last day of
any fiscal quarter to (b) Consolidated EBITDA for the most
recent four consecutive fiscal quarters ending during any period
set forth below to exceed the ratio set forth below opposite
such period:
Senior Leverage Ratio. We cannot permit the ratio of
(a) Consolidated Funded Indebtedness (excluding
Subordinated Indebtedness) as of the last day of any fiscal
quarter to (b) Consolidated EBITDA for the most recent four
consecutive fiscal quarters ending during any period set forth
below to exceed the ratio set forth below opposite such period:
In connection with the Apogent merger, Fisher assumed
$250 million aggregate principal amount of the
61/2% senior
subordinated notes due 2013 (the
61/2% Notes”).
The
61/2% Notes
were recorded at a fair value of $276.9 million,
representing a premium of $26.9 million. On August 3,2004, Apogent completed a cash tender offer for the
$250 million aggregate principal amount of its
61/2% Notes.
Apogent accepted for payment $249.6 million aggregate
principal amount representing 99.8 percent of the
outstanding principal amount of the
61/2% Notes.
The purchase price for the notes was $1,107.50 in cash per
$1,000 principal amount, plus accrued and unpaid interest. A
concurrent consent solicitation amended the indenture for any
61/2% Notes
that remained outstanding to eliminate certain restrictive
covenants in that indenture.
On August 3, 2004, the Company sold $300 million
principal amount of
63/4% senior
subordinated notes. Interest on the notes is payable
February 15 and August 15 of each year. The notes are
unsecured senior subordinated obligations and are subordinated
in right of payment to all existing and future senior debt,
including debt under the New Credit Facility, the floating rate
convertible senior debentures and the 2.50% convertible
senior notes. The notes rank equally in right of payment with
other senior subordinated debt.
The proceeds from the sale of the
63/4% senior
subordinated notes, together with a portion of the
Company’s available cash and borrowings under the New
Credit Facility were used to repay Apogent’s
61/2% senior
subordinated notes (including tender premium and consent fee),
repay amounts outstanding under the prior credit facility and to
pay fees and expenses related to the merger with Apogent,
financings and related transactions.
In connection with the Apogent merger, Fisher assumed
$345.0 million aggregate principal amount of Floating Rate
Senior Convertible Contingent Debt Securities due 2033 (the
“Floating Rate CODES”). The Floating Rate CODES were
recorded at an initial fair value of $426.3 million based
upon their market price at July 30, 2004, representing a
premium of $77.5 million and a liability of
$3.8 million for exchange and consent solicitation fees to
be paid. The Company determined that the premium was due to the
equity conversion feature of the debt and, accordingly,
reclassified the premium to capital in excess of par value. On
August 3, 2004 Apogent completed its exchange offer for the
Floating Rate CODES, which aligned the conversion terms of
Apogent’s convertible debt with Fisher’s currently
outstanding convertible debt and consent solicitation to not
register the notes as required per the original registration
rights requirement. 99.9 percent of the outstanding
principal amount of the Floating Rate CODES were tendered for
exchange with a like principal amount of Floating Rate
Convertible Senior Debentures, and an exchange and consent
solicitation fee totaling 1.10 percent of the principal
amount of the securities tendered was paid. Neither Fisher nor
Apogent received any proceeds from the issuance of the new
debentures in the exchange offer.
Interest on the Floating Rate Convertible Senior Debentures is
payable on March 15, June 15, September 15 and
December 15 of each year, at an annual rate of LIBOR minus
1.25%. In addition, under certain circumstances additional
amounts of contingent interest will be payable commencing with
the quarterly interest period beginning December 15, 2009.
The notes may be converted into shares of the Company’s
common stock under the following circumstances: (1) during
any fiscal quarter if the closing sale price of the
Company’s common stock for at least 20 trading days in the
period of the 30 consecutive trading days ending on the last day
of the preceding fiscal quarter was more than 130% of the then
current conversion price; (2) the Company has called the
notes for redemption; (3) the Company distributes to all or
substantially all holders of the Company’s common stock
rights entitling them to purchase common stock at less than the
closing sale price of the Company’s common stock on the day
preceding the declaration for such distribution; (4) the
Company distributes to all or substantially all holders of the
Company’s common stock cash or other assets, debt
securities or certain rights to purchase its securities, which
distribution has a per share value exceeding 5% of the closing
sale price of the Company’s common stock on the day
preceding the declaration for such distribution; (5) during
any period in which (a) the credit rating of the notes
assigned by Moody’s is below B3 or by Standard &
Poor’s is below B-, (b) the credit rating assigned to
the notes is suspended or withdrawn by either rating agency or
(c) neither agency continues to rate the notes; (6) if
the Company is party to a consolidation or merger pursuant to
which the Company’s common stock would be converted into
cash, securities or other property; (7) a change of control
occurs, but holders do not have the right to require Apogent to
repurchase the notes because the sale price of the
Company’s common stock exceeds specified levels for
specified periods or because the consideration received in such
change of control is freely tradable stock and the notes become
convertible into that stock; or (8) for the five business
day period after any five consecutive trading day period in
which the average trading price for the notes, as determined
following a request by a holder to make a determination, was
less than 97% of the average conversion value for the notes
during that period. Upon conversion, the Company has the right
to deliver, in lieu of common stock, cash or a combination of
cash and common stock. It is the Company’s current
intention to satisfy the Company’s obligation upon a
conversion of the notes first, in cash, in an amount equal to
the principal amount of the notes converted and second, in
shares of the Company’s common stock, to satisfy the
remainder, if any, of the Company’s conversion obligation.
The initial conversion rate is 16.9233 shares of common
stock per each $1,000 principal amount of notes and is
equivalent to an initial conversion price of $59.09 per
share.
In connection with the Apogent merger, Fisher assumed
$300 million aggregate principal amount of
2.25% Senior Convertible Contingent Debt Securities due
2021 (the “2.25% CODES”). The 2.25% CODES were
recorded at an initial fair value of $335.4 million based
upon its market price at July 30, 2004, representing a
premium of $33.9 million and a liability of
$1.5 million for exchange fees to be paid. The Company
determined that the premium was due to the equity conversion
feature of the debt and, accordingly, reclassified the premium
to capital in excess of par value. On August 3, 2004,
Apogent completed its exchange offer for the 2.25% CODES, which
aligned the conversion terms of Apogent’s convertible debt
with Fisher’s currently outstanding convertible debt.
99.6 percent of the outstanding principal amount of the
2.25% CODES were tendered for exchange with a like principal
amount of 2.25% Convertible Senior Debentures and an
exchange fee of 0.50 percent of the principal amount of the
securities tendered was paid. On September 20, 2004, Apogent
issued a notice for redemption of approximately
$298.8 million of 2.25% Convertible Senior Debentures
and approximately $1.0 million of the 2.25% CODES for cash
at a price equal to 100% of the principal amount plus accrued
and unpaid interest and contingent interest, as defined in the
indentures. Note holders had the option of converting their
notes until October 18, 2004. Approximately
$295.7 million of the notes were converted. Notes that were
not converted were redeemed on October 20, 2004.
Principally all the converted notes were settled in cash and a
premium of $11 million was paid. Upon conversion, the
premium paid was offset against a portion of the premium
originally recorded in capital in excess of par value.
On March 3, 2004, the Company sold $300 million of
3.25% Convertible Senior Subordinated Notes due 2024 and on
March 23, 2004 sold an additional $30 million
principal amount upon exercise of the over-allotment option by
the initial purchasers of the notes. The proceeds from the
issuance of notes were used to fund the acquisition of Oxoid.
Interest on the notes is payable on March 1 and
September 1 of each year. The notes mature on March 1,2024. The notes may be converted into shares of the
Company’s common stock under the following circumstances:
(1) if, on any date on or prior to March 1, 2019, the
closing sale price of the Company’s common stock for a
required period of trading days was more than 120% of the
conversion price; (2) if, on any date after March 1,2019, the closing sale price of the Company’s common stock
is more than 120% of the then current conversion price, then
note holders will have such conversion rights at all times
thereafter; (3) the Company has called the notes for
redemption; (4) the Company distributes to all or
substantially all holders of the Company’s common stock
rights, options or warrants entitling them to purchase common
stock at less than the closing sale price of the Company’s
common stock on the day preceding the declaration for such
distribution; (5) the Company distributes to all or
substantially all holders of the Company’s common stock
cash, assets, debt securities or capital stock, which
distribution has a per share value as determined by the
Company’s board of directors exceeding 10% of the closing
sale price of the Company’s common stock on the day
preceding the declaration for such distribution; (6) during
any period in which the credit rating of the notes assigned by
Moody’s is Caa2 or lower and by Standard &
Poor’s is CCC or lower, or neither Moody’s (or its
successors) nor Standard & Poor’s (or its
successors) continues to rate the notes; (7) if the Company
is party to a consolidation or merger pursuant to which the
Company’s common stock would be converted into cash or
property other than securities; or (8) for the five
business day period after any five consecutive trading day
period in which the average trading price for the notes was less
than 97% of the average conversion value for the notes during
that period. Upon conversion, the Company will have the right to
deliver, in lieu of common stock, cash or a combination of cash
and common stock. It is our current intention to satisfy our
obligation upon a conversion of the notes first, in cash, in an
amount equal to the principal amount of the notes converted and
second, in shares of our common stock, to satisfy the remainder,
if any, of our conversion obligation. The initial conversion
rate is 12.4378 shares of common stock per each $1,000
principal amount of notes. This is equivalent to an initial
conversion price of $80.40 per share.
On August 20, 2003, the Company issued and sold
$150 million principal amount of 8% senior
subordinated notes and on November 4, 2003 issued and sold
another $150 million of such notes. Interest on the
8% senior subordinated notes is payable March 1 and
September 1 of each year. The notes are unsecured senior
subordinated obligations and are subordinated in right of
payment to all existing and future senior debt, including debt
under the New Credit Facility, the floating rate convertible
senior debentures and the 2.50% convertible senior notes.
The notes rank equally in right of payment with other senior
subordinated debt. The net proceeds from the sale of the notes
in August were used to fund a portion of the purchase price of
Perbio. The net proceeds from the sale of notes in November were
used to fund the tender for the Company’s
71/8% notes
due 2005 and to repay term loans under the credit facility.
On July 7, 2003, the Company sold $300 million
principal amount of 2.50% convertible senior notes.
Interest on the notes is payable on April 1 and
October 1 of each year. The notes may be converted into
shares of the Company’s common stock under the following
circumstances: (1) if, on any date on or prior to
October 1, 2018, the closing sale price of the
Company’s common stock for a required period of trading
days was more than 120% of the conversion price; (2) if on
any date after October 1, 2018, the closing sale price of
the Company’s common stock is more than 120% of the then
current conversion price, then note holders will have such
conversion right at all times thereafter; (3) the Company
has called the notes for redemption; (4) the Company
distributes to all or substantially all holders of the
Company’s common stock rights, options or warrants
entitling them to purchase common stock at less than the closing
sale price of the Company’s common stock on the day
preceding the declaration for such distribution; (5) the
Company distributes to all or substantially all holders of the
Company’s common stock cash, assets, debt securities or
capital stock, which distribution has a per share value as
determined by the Company’s board of directors exceeding
10% of the closing sale price of the Company’s common stock
on the day preceding the declaration for such distribution;
(6) during any period in which the credit rating of the
notes assigned by Moody’s is Caa1 or lower and by
Standard & Poor’s is CCC+ or lower, or neither
Moody’s (or its successors) nor Standard &
Poor’s (or its successors) continues to rate the notes;
(7) if the Company is party to a consolidation or merger
pursuant to which the Company’s common stock would be
converted into cash or property other than securities; or
(8) for the five business day period after any five
consecutive trading day period in which the average trading
price for the notes was less than 97% of the average conversion
value for the notes during that period. Upon conversion, the
Company has the right to deliver, in lieu of common stock, cash
or a combination of cash and common stock. It is the
Company’s current intention to satisfy the Company’s
obligation upon a conversion of the notes first, in cash, in an
amount equal to the principal amount of the notes converted and
second, in shares of the
Company’s common stock, to satisfy the remainder, if any,
of the Company’s conversion obligation. The initial
conversion rate is 21.0686 shares of common stock per each
$1,000 principal amount of notes and is equivalent to an initial
conversion price of $47.46 per share.
On April 24, 2002, the Company issued and sold
$150 million principal amount of
81/8% senior
subordinated notes and on January 14, 2003 issued and sold
another $200 million of such notes. Interest on the
81/8% senior
subordinated notes is payable May 1 and November 1 of
each year. The notes are unsecured senior subordinated
obligations and are subordinated in right of payment to all
existing and future senior debt, including debt under the New
Credit Facility, the floating rate convertible senior debentures
and the 2.50% convertible senior notes. The notes rank
equally in right of payment with other senior subordinated debt.
The net proceeds from the sale of the notes in April were used
to repay amounts outstanding under the credit facility. The net
proceeds from the sale of notes in January were used to
partially redeem the Company’s previously outstanding
9% senior subordinated notes through an optional
redemption. In 2003, the Company also redeemed $46 million
of the
81/8% senior
subordinated notes.
In April 2003, the Company entered into various pay-fixed
interest rate swaps to hedge a portion of the variability of
cash flows related to changes in interest rates on borrowings of
variable rate debt obligations. The interest rate swaps have a
total notional value of $200 million and expire at various
dates between March 2008 and March 2010.
The following table summarizes the maturities of the
Company’s indebtedness, excluding debt premiums, at
December 31, 2004 (in millions):
Floating
Rate
2.50%
3.25%
63/4%
8%
81/8%
Convertible
Convertible
Convertible
Senior
Senior
Senior
Term
Senior
Senior
Senior
Subordinated
Subordinated
Subordinated
Facility
Debentures
Notes
Notes
Notes
Notes
Notes
Other(1)
Total
2005
$
16.5
$
—
$
—
$
—
$
—
$
—
$
—
$
22.9
$
39.4
2006
22.8
—
—
—
—
—
—
7.8
30.6
2007
26.5
—
—
—
—
—
—
3.2
29.7
2008
99.0
—
—
—
—
—
—
5.6
104.6
2009
86.5
—
—
—
—
—
—
2.6
89.1
2010 and beyond
141.7
344.6
(2)
300.0
330.0
300.0
300.0
304.0
18.7
2,039.0
Total
$
393.0
$
344.6
$
300.0
$
330.0
$
300.0
$
300.0
$
304.0
$
60.8
$
2,332.4
(1)
Other debt primarily consists of capital lease obligations and
borrowings at subsidiary levels.
(2)
The floating rate convertible senior debentures mature in 2033,
but can be put to the Company by the debenture holders in 2008.
Note 11 —
Other Liabilities
The following is a summary of other liabilities as of
December 31, 2004 and 2003 (in millions):
The Company’s financial instruments consist primarily of
cash and cash equivalents held at financial institutions,
accounts receivable, accounts payable, short and long-term debt,
interest rate swaps, foreign currency forward and option
contracts, and commodities swap and option contracts. The
carrying amounts for cash and cash equivalents, accounts
receivable, accounts payable, and short-term debt approximate
fair value due to the short-term nature of these instruments.
The carrying amount and fair value of the Company’s
long-term debt, foreign currency forward and option contracts,
interest rate swap agreements, and commodities swap and option
contracts are as follows (in millions):
The fair value of debt with variable rates approximates the net
carrying value. The fair value of the long-term fixed rate debt
at the end of 2004 and 2003 was estimated based on current
quotes from bond traders making a market in the debt instrument.
The fair value of the foreign currency forward and options
contracts was estimated based on what the Company would receive
(pay) upon liquidation of the contracts, taking into account the
change in currency exchange rates. The fair value of
interest-rate swap agreements was estimated based on what the
Company would receive (pay) upon liquidation of the contracts,
taking into account interest rates, market expectation for
future interest rates and the creditworthiness of the Company.
The fair value of the commodities swap and options contracts was
estimated based on what the Company would receive (pay) upon
liquidation of the contracts, taking into account the change in
commodities prices.
The Company also had off-balance-sheet standby letters of credit
with notional amounts of $38.1 million and
$28.2 million at December 31, 2004 and 2003,
respectively.
None of the Company’s financial instruments represents a
concentration of credit risk as the Company deals with a variety
of major banks worldwide, and its accounts receivable are spread
among a number of customers and geographic areas.
The Company leases certain logistics, office, and manufacturing
facilities. The following is a summary of annual future minimum
lease and rental commitments under non-cancelable operating
leases as of December 31, 2004 (in millions):
2005
$
47.0
2006
40.8
2007
36.6
2008
29.7
2009
24.2
Thereafter
66.3
Net minimum lease payments
$
244.6
Rent expense included in the accompanying statement of
operations was $37.7 million, $23.6 million, and
$23.1 million for the years ended December 31, 2004,
2003 and 2002, respectively.
As of December 31, 2004, the Company had letters of credit
outstanding totaling $38.1 million, which primarily
represent guarantees issued to local banks in support of
borrowings by foreign subsidiaries of the Company, guarantees
with respect to various insurance activities and performance
letters of credit issued in the normal course of business.
There are various lawsuits and claims pending against the
Company involving contract, product liability and other issues.
In addition, the Company has assumed certain specified insurance
liabilities, including liabilities related to an inactive
insurance subsidiary, primarily related to certain historical
businesses of its former parent. In view of the Company’s
financial condition and the accruals established for related
matters, management does not believe that the ultimate
liability, if any, related to these matters will have a material
adverse effect on the Company’s financial condition,
results of operations or cash flows.
The Company is currently involved in various stages of
investigation and remediation related to environmental matters.
The Company cannot predict the potential costs related to
environmental remediation matters and the possible impact on
future operations given the uncertainties regarding the extent
of the required cleanup, the complexity and interpretation of
applicable laws and regulations, the varying costs of
alternative cleanup methods and the extent of the Company’s
responsibility. However, these costs could be material. Expenses
for environmental remediation matters relate to the costs of
permit requirements and installing, operating and maintaining
groundwater treatment systems and other remedial activities
related to historical environmental contamination at the
Company’s domestic and international facilities. These
expenses were approximately $0.8 million in 2004,
$1.0 million in 2003 and $1.0 million 2002. The
Company records accruals for environmental remediation
liabilities, based on current interpretations of environmental
laws and regulations, when it is probable that a liability has
been incurred and the amount of such liability can be reasonably
estimated. The Company calculates estimates based upon several
factors, including reports prepared by environmental specialists
and management’s knowledge and experience with these
environmental matters. The Company includes in these estimates
potential costs for investigation, remediation and operation and
maintenance of cleanup sites. Accrued liabilities for
environmental matters were $32.2 million and
$32.5 million at December 31, 2004 and 2003,
respectively.
Although these environmental remediation liabilities do not
include third-party recoveries, the Company may be subject to
indemnification from third parties for liabilities relating to
certain sites. Management believes that this accrual is adequate
for the environmental remediation liabilities the Company
expects to incur. As a result, the Company believes that the
ultimate liability with respect to environmental remediation
matters will not have a material adverse effect on the
Company’s financial position, results of operations or
cash flows. However, the Company may be subject to additional
remedial or compliance costs due to future events, such as
changes in existing laws and regulations, changes in agency
direction or enforcement policies, developments in remediation
technologies or changes in the conduct of the Company’s
operations, which could have a material adverse effect on the
Company’s financial position, results of operations or cash
flows.
Note 14 —
Stockholders’ Equity
Preferred and Common Stock
The preferred and common stock of the Company are each issuable
in one or more series or classes, any or all of which may have
such voting powers, full or limited, or no voting powers, and
such designations, preferences and related participating,
optional or other special rights and qualifications, limitations
or restrictions thereof, as are set forth in the Restated
Certificate of Incorporation of Fisher or any amendment thereto,
or in the resolution or resolutions providing for the issue of
such stock adopted by Fisher’s Board of Directors, which is
expressly authorized to set such terms for any such issue. Under
the Restated Certificate of Incorporation, the Company is
authorized to issue up to 500,000,000 shares of common
stock and 15,000,000 shares of preferred stock. As of
December 31, 2004 and 2003, respectively, there were
warrants outstanding to purchase 1,653,585 shares of
common stock at an exercise price of $9.65 per share.
In September 2003, the Company issued and sold 6.6 million
shares of common stock in a public offering at a price of
$40.75 per share. The Company sold these shares under a
“shelf” registration statement pursuant to which it
may issue and sell up to $750 million of its debt and
equity securities. Proceeds to the Company from the offering
were $260.6 million, net of underwriters’ discounts
and offering costs.
In February 2002, certain of the Company’s stockholders
sold 7.4 million shares of common stock in an underwritten
public offering. The Company did not receive any of the proceeds
from this offering.
Stock Plans
Under the terms of the Apogent merger agreement, each
outstanding option to purchase shares of Apogent common stock
became fully vested and was assumed by Fisher. Each option
outstanding at the time of the merger was converted into the
right to acquire shares of Fisher common stock determined by
multiplying (i) the number of shares of Apogent common
stock subject to the option immediately prior to the effective
date of merger (August 2, 2004) by (ii) .56; rounded
down to the nearest whole number. The per share exercise price
for the Fisher common stock issuable upon the conversion of the
Apogent options was adjusted by dividing the exercise price per
share of the Apogent common stock that otherwise could have been
purchased under the Apogent stock option by .56; rounded up
to the nearest whole cent. On August 2, 2004 Apogent had
11,184,155 options outstanding, which were converted into
6,263,127 options to purchase Fisher shares. As of
December 31, 2004 there were 3,533,068 options
outstanding from the former Apogent awards.
Under the Company’s 2003 Equity and Incentive Plan, the
Company may grant up to 2,700,000 shares of common stock in
the form of incentive stock options, non-qualified stock
options, other stock based awards, including, but not limited
to, restricted stock units or dividend payments. No more than
15% of the shares reserved for issuance shall be issued as
restricted stock, restricted units or similar full share value
awards. The aggregate awards granted during any fiscal year to
any single individual shall not exceed either
1,100,000 shares subject to options or stock appreciation
rights or 400,000 shares subject to other stock-based
awards (other than stock appreciation rights). Options granted
have a term of five or ten years and generally vest over three
years. The exercise price of any option granted may not be less
than fair market value of the common stock on the date of the
grant. As of December 31, 2004, 41,668 shares are
available for grant.
Under the Company’s 2001 Equity and Incentive Plan (the
“2001 Plan”), the Company may grant up to
8,000,000 shares of common stock in the form of incentive
stock options, non-qualified stock options, other stock based
awards, including but not limited to restricted stock units or
dividend payments. No more than
3,000,000 shares of common stock may be awarded in respect
to options, restricted stock, restricted stock units or other
stock-based awards to any individual under the 2001 Plan.
Options granted have a term of five or ten years and generally
vest over three years. The exercise price of any option may not
be granted at less than the fair market value of the common
stock on the date of the grant. As of December 31, 2004,
1,484,386 shares are available for grant. During 2004, the
Company granted compensatory restricted stock units under the
2001 Plan and at December 31, 2004 had 34,623 restricted
stock units outstanding. The restricted stock units vest over a
two year period.
Upon adoption of the 2001 Plan, the Company ceased granting
awards under the 1998 Equity and Incentive Plan (the “1998
Plan”). As of December 31, 2004, there were
1,968,151 shares outstanding under the 1998 Plan. Awards
under the 1998 Plan were authorized to be made in the form of
options (whether incentive or otherwise), stock appreciation
rights, restricted stock, dividend equivalents and other stock
based awards. Options granted under the 1998 Plan have a term of
ten years and generally vest either over a three to five year
period in equal installments, or in one installment nine years
from the date of grant, unless sooner vested upon the
achievement of certain performance targets or other factors. The
Company also granted options to purchase 758,333 shares of
common stock having a ten year term and vesting five to nine
years from the date of grant, unless sooner vested upon the
achievement of certain performance targets or unless
“put” to the Company by the executive or
“called” by the Company in accordance with the terms
of the respective grant agreements. The total “put”
and/or “call” rights are limited to $10.0 million
plus interest and are recorded in other liabilities.
A summary of the status of the Company’s stock option plans
as of December 31, 2004, 2003 and 2002, and changes during
the years then ended is presented in the following table:
Other (income) expense, net, consists of interest income on cash
and cash equivalents and other non-operating income and expense
items. Other expense, net, includes the following for the years
ended December 31, 2004, 2003 and 2002 (in millions):
2004
2003
2002
Debt refinancing costs
$
14.4
$
65.9
$
4.1
Acquisition-related foreign currency hedges
2.2
15.7
—
Fixed-swap unwind costs
—
—
7.1
Interest income and other
(4.1
)
(3.9
)
1.1
Gain on sale of investment
(22.7
)
—
—
Other (income) expense, net
$
(10.2
)
$
77.7
$
12.3
Debt refinancing costs in 2004 primarily relate to third party
costs incurred to refinance the debt assumed in the Apogent
merger and the write-off of deferred financing fees and third
party costs related to the Fisher credit facility that was
refinanced upon consummation of the Apogent merger. Amounts in
2003 primarily relate to call premiums and the write-off of
deferred financing fees for the redemption of our previously
outstanding 9% senior subordinated notes and
71/8% notes.
In the fourth quarter of 2004 the Company received proceeds of
$26 million, and recognized a gain of $22.7 million,
from the liquidation of an investment in ProcureNet Inc.
(“ProcureNet”). ProcureNet is a former subsidiary that
was spun off from Fisher in 1999.
The domestic and foreign components of income before income
taxes are as follows for the years ended December 31, 2004,
2003 and 2002 (in millions):
2004
2003
2002
Domestic
$
76.2
$
37.0
$
88.9
Foreign
116.2
59.1
52.6
Income before income taxes
$
192.4
$
96.1
$
141.5
The components of the income tax provision are as follows for
the years ended December 31, 2004, 2003 and 2002 (in
millions):
2004
2003
2002
Current income tax expense:
Federal
$
4.9
$
11.2
$
0.5
State
2.3
2.3
1.8
Foreign
21.8
4.7
6.4
Total current
29.0
18.2
8.7
Deferred income tax expense (benefit):
Federal
6.6
0.7
29.4
State
0.4
0.2
1.3
Foreign
(10.0
)
(1.4
)
5.4
Total deferred
(3.0
)
(0.5
)
36.1
Total income tax provision
$
26.0
$
17.7
$
44.8
A reconciliation of income tax expense at the
U.S. statutory rate to the recorded income tax provision is
as follows for the years ended December 31, 2004, 2003 and
2002 (in millions):
2004
2003
2002
Taxes computed at statutory rate
$
67.3
$
33.6
$
49.5
Foreign tax rate differential and foreign losses not tax
benefited
The tax effects of temporary items that gave rise to significant
portions of the deferred tax assets and liabilities are as
follows as of December 31, 2004 and 2003 (in millions):
2004
2003
Deferred tax assets:
Postretirement benefit costs other than pension
$
20.5
$
21.2
Environmental accruals
11.2
11.2
Net operating loss and capital loss carry forwards
147.8
91.4
Accrued employee benefits
22.7
19.9
Charitable loss
5.1
4.7
Reserves and other accruals
40.4
24.7
Inventory reserves
28.9
8.9
Allowance for doubtful accounts
4.7
8.0
Investments
7.4
7.7
Property, plant and equipment
7.2
—
Pension
11.6
—
Other
31.2
18.0
Tax credits
6.1
—
Gross deferred tax assets
344.8
215.7
Less valuation allowance
(72.1
)
(42.7
)
Total deferred tax assets
272.7
173.0
Deferred tax liabilities:
Goodwill and other intangibles
609.7
41.7
Property, plant and equipment
59.8
21.9
Pension
33.1
18.3
Inventory
5.0
—
Other
22.7
16.7
Total deferred tax liabilities
730.3
98.6
Net deferred tax assets
$
—
$
74.4
Net deferred tax liabilities
$
457.6
$
—
At December 31, 2004, the net deferred tax liability is
classified on the balance sheet as $162.4 million of
current deferred tax assets, $10.4 million of long-term
deferred tax assets, $1.8 million of current deferred tax
liabilities and $628.6 million of long-term deferred tax
liabilities. At December 31, 2003, the net deferred tax
asset is classified on the balance sheet as $92.1 million
of current deferred tax assets and $17.7 million of
long-term deferred tax liabilities. The Apogent acquisition
resulted in an increase to current deferred tax assets of
$33.4 million, current deferred tax liabilities of
$1.2 million and long-term deferred tax liabilities of
$569.4 million.
Deferred tax assets include the benefit of net operating loss
carryforwards subject to appropriate valuation allowances. The
Company evaluates the tax benefits of net operating loss
carryforwards on an ongoing basis taking into consideration such
factors as the future reversals of existing taxable temporary
differences, projected
future operating results, the available carryforward period and
other circumstances. At December 31, 2004, the Company had
accumulated net operating loss carryforwards for tax purposes
expiring as follows (in millions):
Foreign
State
Federal
2005 - 2014
$
17.4
$
76.0
$
—
2015 - 2024
—
196.5
172.9
No Expiration
147.4
—
—
Total
$
164.8
$
272.5
$
172.9
At December 31, 2004, the Company had capital loss carry
forwards of $40.7 million that expire December 31,2007. The valuation allowances at December 31, 2004 and
2003 predominantly represent allowances against foreign and
state net operating losses and capital loss carryforwards, which
are not anticipated to result in future tax benefits. At
December 31, 2004, $18.9 million of the valuation
allowances may ultimately reduce goodwill if the corresponding
losses or credits are utilized.
Undistributed earnings of the Company’s foreign
subsidiaries amounted to approximately $269.2 million at
December 31, 2004. Upon distribution of those earnings in
the form of dividends or otherwise, the Company would be subject
to both U.S. income taxes (subject to an adjustment for
foreign tax credits) and withholding taxes payable to the
various foreign countries. No additional provision has been
recorded as such earnings are expected to be permanently
reinvested.
On October 22, 2004, the President signed the American Jobs
Creation Act of 2004 (the “Act”). The Act creates a
temporary incentive for U.S. corporations to repatriate
accumulated income earned abroad by providing an 85 percent
dividends received deduction for certain dividends from
controlled foreign corporations. This deduction is subject to a
number of limitations and, as of today, uncertainty remains as
to how to interpret numerous provisions in the Act. As such, the
Company is not yet in a position to decide on whether, and to
what extent, it might repatriate foreign earnings that have not
yet been remitted to the U.S. The Company expects to be in
a position to finalize its assessment by December 31, 2005.
During the fourth quarter of 2004, the Company finalized its
federal audit with the Internal Revenue Service for the taxable
years 1999 through 2001. The Company also completed negotiations
with certain foreign tax authorities. As a result of these
items, a credit of $10.9 million is reflected in the 2004
income tax provision.
Note 17 —
Employee Benefit Plans
The Company has defined benefit pension plans available to
substantially all employees that are either fully paid for by
the Company or provide for mandatory employee contributions as a
condition of participation. Under the cash balance plan in the
United States, a participating employee accumulates a cash
balance account, which is credited monthly with an allocation
equal to 3.5% of compensation and interest. The Company funds
annually, at a minimum, the statutorily required minimum amount
as actuarially determined. During 2004 and 2003, the Company
made voluntary contributions of approximately $40 million
and $50 million, respectively, to its U.S. and
international plans.
The Company also maintains a supplemental nonqualified executive
retirement program for certain of its executives. The benefit
obligation related to this program is included in the tables
below and is approximately $49 million and $25 million
at December 31, 2004 and 2003, respectively. Assets of
approximately $34 million are set aside in a rabbi trust
established for this program and are included in other assets on
the balance sheet.
The Company, generally at its own discretion, provides a
postretirement healthcare program that is administered by the
Company to employees who elect to and are eligible to
participate. The Company funds a portion of the costs of this
program on a self-insured and insured-premium basis.
The changes in benefit obligations and plan assets under the
defined benefit pension plans and accumulated benefit
obligations were as follows at December 31, 2004 and 2003
(in millions):
Other
Postretirement
Pension Benefits
Benefits
Change in benefit obligation
2004
2003
2004
2003
Benefit obligation at beginning of year
$
343.6
$
293.8
$
28.2
$
25.1
Business combination
187.9
—
7.0
—
Service costs
18.8
12.6
0.4
0.4
Interest costs
27.8
19.0
1.9
1.6
Plan amendment
12.9
—
—
—
Plan participants’ contribution
1.9
1.0
2.0
1.6
Actuarial loss(a)
24.1
20.9
0.8
0.7
Benefits paid
(18.9
)
(17.4
)
(3.5
)
(2.5
)
Currency translation adjustment
13.6
13.7
0.3
1.3
Benefit obligation at end of year
$
611.7
$
343.6
$
37.1
$
28.2
Pension Benefits
Change in plan assets
2004
2003
Fair value of plan assets at beginning of year
$
329.2
$
249.7
Business combination
112.2
—
Actual return on plan assets
31.6
33.7
Employer contribution
46.7
50.6
Plan participants’ contribution
1.9
1.0
Benefits paid
(18.9
)
(17.4
)
Currency translation adjustment
11.4
11.6
Fair value of plan assets at end of year
$
514.1
$
329.2
(a)
Includes a $1.9 million gain in other postretirement
benefits to reflect the impact of FASB Staff Position No. 106-2
(FSP 106-2), “Accounting and Disclosure Requirements
Related to the Medicare Prescription Drug, Improvement and
Modernization Act of 2003” as discussed in Note 23,
“Recent Accounting Pronouncements.”
The funded status of the Company’s defined benefit pension
and postretirement programs was as follows at December 31,2004 and 2003 (in millions):
Other
Postretirement
Pension Benefits
Benefits
2004
2003
2004
2003
Funded status
$
(97.6
)
$
(14.4
)
$
(36.7
)
$
(28.1
)
Unrecognized net actuarial (gain) loss
110.4
81.8
(19.2
)
(22.1
)
Unrecognized prior service costs
8.4
(3.5
)
(2.5
)
(4.7
)
Unrecognized net transition obligation
0.5
0.4
—
—
Net amount recognized
$
21.7
$
64.3
$
(58.4
)
$
(54.9
)
Prepaid benefit asset
$
93.0
$
85.5
Accrued benefit liability
(96.0
)
(30.1
)
Intangible asset
12.7
1.4
Accumulated other comprehensive income
12.0
7.5
Net amount recognized
$
21.7
$
64.3
Accumulated benefit obligation
$
550.3
$
316.2
The projected benefit obligation and fair value of plan assets
for pension plans with projected benefit obligations in excess
of plan assets are as follows (in millions):
Pension Benefits
2004
2003
Projected benefit obligation
$
367.5
$
123.7
Fair value of plan assets
240.9
84.1
The accumulated benefit obligation and fair value of plan assets
for pension plans with accumulated benefit obligations in excess
of plan assets are as follows (in millions):
Pension Benefits
2004
2003
Accumulated benefit obligation
$
233.3
$
38.3
Fair value of plan assets
162.9
12.6
Weighted-average assumptions used to determine the projected
benefit obligations for the years ended December 31, 2004,
2003 and 2002 are as follows:
2004
2003
2002
Discount rate
5.70
%
6.00
%
6.75
%
Average rate of increase in employee compensation
4.00
%
4.00
%
4.00
%
Weighted-average assumptions used to determine the net benefit
cost (income) for the years ended December 31, 2004, 2003
and 2002 are as follows:
The overall expected long-term rate of return is developed from
the expected future return of each asset class, weighted by the
expected allocation of pension assets to that asset class. The
Company considers historical performance for the types of assets
in which the plans invest, independent market forecasts and
management estimates when developing the expected rate of return
for each class of assets. The measurement date for our plans is
October 31.
The net periodic pension benefits cost (income) and
postretirement healthcare benefit includes the following
components for the years ended December 31, 2004, 2003 and
2002 (in millions):
Other
Pension Benefits
Postretirement Benefits
2004
2003
2002
2004
2003
2002
Components of net periodic benefit cost (income)
Service cost
$
18.8
$
12.6
$
10.9
$
0.4
$
0.4
$
0.4
Interest cost
27.8
19.0
17.7
1.9
1.6
1.6
Expected return on plan assets
(33.3
)
(25.1
)
(24.0
)
—
—
—
Amortization of unrecognized net (gain) loss
0.3
0.4
0.3
(1.9
)
(2.3
)
(2.1
)
Amortization of unrecognized prior service benefit
1.0
(0.5
)
(0.5
)
(2.2
)
(1.5
)
(2.2
)
Amortization of unrecognized net transition asset
(0.1
)
(0.1
)
(0.1
)
—
—
—
Recognized net actuarial loss
0.8
0.7
0.1
—
—
0.1
Settlement/curtailment (gain) loss
1.2
1.3
(0.1
)
—
—
—
Net periodic benefit cost (income)
$
16.5
$
8.3
$
4.3
$
(1.8
)
$
(1.8
)
$
(2.2
)
Contributions, consisting of primarily voluntary contributions,
for 2005 are estimated at between $20 million and
$30 million.
Future benefit payments during the next five years and in the
aggregate for the five fiscal years thereafter, are as follows
(in millions):
In 1993, the Company amended certain of its existing
postretirement healthcare programs creating an unrecognized
prior service benefit. The unrecognized prior service benefit is
being amortized over approximately 13 years.
The Company’s investment policy for its pension plans is to
balance risk and return through a diversified portfolio of
U.S. equities, non-U.S. equities, fixed income
securities and private equity investments. Maturities for fixed
income securities are managed such that sufficient liquidity
exists to meet near-term benefit payment obligations.
The weighted-average asset allocations presented above are
consistent with the Company’s asset allocation targets.
A 14.0% annual rate of increase in per capita cost of covered
healthcare benefits was assumed for 2005, which gradually
decreases to an ultimate rate of 6.0% in 2012. A change in the
assumed healthcare cost trend rate by 1 percentage point
effective January 2004 would change the accumulated
postretirement benefit obligation as of December 31, 2004
by approximately $1.4 million and the aggregate of the
service and interest cost components of net periodic
postretirement benefit cost (income) for the year ended
December 31, 2004 by approximately $0.1 million.
The Company also maintains a defined contribution savings and
profit sharing plan (the “Plan”). The Company also
assumed a defined contribution plan from the Apogent merger.
Eligible employees are allowed to participate in the Plan
immediately upon employment. Participants may elect to
contribute between 1 percent and 15 percent of their
annual compensation, as defined in the Plan. The Company is
obligated to contribute an amount equal to 25 percent of
each employee’s basic contribution, as defined, and may, at
the discretion of the Company, contribute additional amounts.
For the years ended December 31, 2004, 2003 and 2002, the
Company’s contributions to the Plan were
$10.7 million, $6.5 million, and $4.4 million,
respectively.
Note 18 —
Change in Accounting Principle
During 2002, the Company completed its transitional assessment
in accordance with SFAS 142 to determine if goodwill was
impaired as of January 1, 2002. As a result, the Company
recorded a non-cash charge of $63.8 million
($46.1 million, net of tax) in our statement of operations
reflecting the cumulative effect of the accounting change to
adjust goodwill to its current fair-value. The scientific
products and services segment and laboratory workstations
segment accounted for $19.7 million and $44.1 million
of the charge, respectively.
The impairment charge in the scientific products and services
segment related to certain of our smaller-market international
distribution businesses where operating performance was lower
than originally forecasted. The laboratory workstations segment
is sensitive to changes in capital spending, and several of the
markets to which the laboratory workstations segment sells,
including the technology industry, experienced a significant
economic slowdown causing a reduction in capital spending in
those markets. As a result, sales growth was significantly less
than originally forecasted, resulting in decreased profitability.
Note 19 — Restructuring Charges
During 2004, the Company implemented restructuring plans
(collectively the “2004 Restructuring Plan”) focused
on the integration of certain international operations and the
streamlining of domestic operations. These plans include the
consolidation of office, warehouse, and manufacturing
facilities. As a result of these actions, the Company recorded a
restructuring charge of $7.8 million. The scientific
products and services, healthcare products and services and
laboratory workstations segments accounted for
$6.4 million, $1.2 million and $0.2 million,
respectively, of this charge.
These charges include $6.0 million for estimated employee
separation costs and $1.8 million of other exit costs. The
$6.0 million for employee separation costs relates to
termination and other severance costs associated with
414 salaried and hourly employees. The other exit costs
primarily represent legal and contract termination costs. At
December 31, 2004, the Company had $4.8 million in
accruals related to the ongoing 2004 Restructuring Plan included
in the balance sheet. $3.3 million in restructuring
accruals as of December 31, 2004 related to employee
separation costs with the remainder pertaining to other exit
activities. These costs are expected to be paid during 2005.
During 2002, the Company recorded net restructuring credits of
$2.2 million for the reversal of certain costs accrued in
the Company’s 2001 Restructuring Plan. $2.0 million of
the restructuring credits are primarily related to a reduction
in estimated severance costs due to certain employees electing
to voluntarily separate from the Company. The scientific
products and services and healthcare products and services
segments accounted for $2.1 million and $0.1 million
of the restructuring credit, respectively.
As of December 31, 2004 and 2003, $1.3 million and
$2.2 million, respectively, in accruals related to ongoing
lease commitments are included on the balance sheet related to
the 2001 Restructuring Plan.
Note 20 — Segment and Geographic Financial
Information
The Company reports financial results on the basis of three
reportable segments: scientific products and services,
healthcare products and services, and laboratory workstations.
The Company’s segments are organized by customer markets.
Segment financial performance is evaluated based upon operating
income excluding items that the Company considers to be
nonrecurring to the Company’s operations.
Selected business segment financial information for the years
ended December 31, 2004, 2003 and 2002 is presented below
(in millions):
Sales
Income from Operations
2004
2003
2002
2004
2003
2002
Scientific products and services
$
3,454.7
$
2,501.0
$
2,258.0
$
375.5
$
230.0
$
206.2
Healthcare products and services
1,067.4
877.2
806.7
98.3
35.7
25.2
Laboratory workstations
176.1
206.1
193.9
2.8
11.1
11.7
Eliminations
(35.5
)
(19.9
)
(20.2
)
(0.3
)
(0.1
)
(0.2
)
Segment sub-total
4,662.7
3,564.4
3,238.4
476.3
276.7
242.9
Other charges:
Inventory step-up
—
—
—
82.9
18.1
—
Restructuring charges (credits)
—
—
—
7.8
—
(2.2
)
Goodwill impairment
—
—
—
64.9
—
—
Other charges
—
—
—
33.7
—
—
Total
$
4,662.7
$
3,564.4
$
3,238.4
$
287.0
$
258.6
$
245.1
Income from operations is revenue less related direct and
allocated expenses.
In 2004, the Company recorded charges of $82.9 million to
step-up the fair value of inventory from the Apogent, Oxoid,
Dharmacon and Perbio acquisitions, $25.0 million of
integration costs, $7.8 million of restructuring charges,
$6.0 million of a charitable contribution,
$64.9 million of impairment charges for goodwill and
$2.7 million of impairment charges for other long-lived
assets. In 2003, the Company recorded a charge of
$18.1 million related to the step-up of Perbio’s
inventory to its acquired fair value. In 2002, the Company
recorded a restructuring credit of $2.2 million.
Total assets, capital expenditures and depreciation and
amortization by segment for the years ended December 31,2004, 2003 and 2002 are as follows (in millions):
Depreciation and
Assets
Capital Expenditures
Amortization
2004
2003
2002
2004
2003
2002
2004
2003
2002
Scientific products and services
$
5,917.4
$
2,387.8
$
1,336.0
$
70.1
$
63.1
$
32.3
$
111.7
$
67.2
$
57.6
Healthcare products and services
2,113.1
365.3
411.5
12.4
11.6
6.8
27.4
11.6
12.3
Laboratory workstations
59.7
106.3
123.9
10.9
5.5
4.8
4.2
4.0
5.0
Total
$
8,090.2
$
2,859.4
$
1,871.4
$
93.4
$
80.2
$
43.9
$
143.3
$
82.8
$
74.9
Sales outside the United States were approximately 25%, 20% and
18% of total sales in 2004, 2003 and 2002, respectively. No
single foreign country or customer accounted for more than 10%
of sales during any of the three years ended December 31,2004.
Long lived assets and revenue by geographic area for the years
ended December 31, 2004, 2003 and 2002 is as follows (in
millions):
Long-Lived Assets
2004
2003
Long-lived assets by geographic area:
Domestic
$
5,065.6
$
1,273.9
International
1,127.5
414.9
Total
$
6,193.1
$
1,688.8
Revenue
2004
2003
2002
Revenue by geographic area:
Domestic
$
3,621.9
$
2,917.4
$
2,689.5
International
1,166.6
696.3
584.6
Eliminations
(125.8
)
(49.3
)
(35.7
)
Total
$
4,662.7
$
3,564.4
$
3,238.4
Sales are attributable to the geographic region based upon the
location of the entity generating the sale.
Note 21 —
Related Parties
The Company is a party to a rental and service agreement with
Latona Associates Inc. (which is controlled by a stockholder of
the Company) under which the Company provides office space and
certain building administrative services. The Company received
$250,000 under the agreement for each of the three years ended
December 31, 2004, 2003 and 2002. The Company made
contributions of $7.0 million (including $6.0 million
in the fourth quarter of 2004), $0.8 million and
$1.7 million to the Winthrop Foundation (the
“Foundation”) in 2004, 2003 and 2002, respectively.
The Foundation is a charitable private foundation that makes
charitable contributions on behalf of the Company and its
employees and has common board members with the Company. The
Company is not obligated to make future contributions to the
Foundation.
In 2003, the Company recorded a charge of $1.5 million to
terminate the management agreement between the Company and
Thomas H. Lee Company (“THL”), pursuant to which THL
and certain of its affiliates provided consulting and management
advisory services. This agreement was originally set to expire in
2004 and would have resulted in fees totaling $1.8 million
being paid to THL for the period from the termination date
through the end of the original term of the agreement. THL is no
longer affiliated with the company.
Note 22 — Subsequent Events
On March 7, 2005, the Company signed a definitive agreement
to sell Atos Medical AB, a manufacturer of ear, nose and throat
medical devices with 2004 sales totaling $35 million in
exchange for $110 million in cash. The agreement is subject
to customary closing procedures. Atos Medical AB is included in
the healthcare products and services segment.
Note 23 — Recent Accounting Pronouncements
In April 2004, the FASB issued Staff Position No. 129-1,
“Disclosure Requirements under FASB Statement No. 129,
Disclosure of Information about Capital Structure, Relating to
Contingently Convertible Securities”
(“FSP 129-1”). FSP 129-1 requires additional
quantitative and qualitative disclosure regarding the nature of
the contingency and the potential impact of contingently
convertible securities. The adoption of this pronouncement did
not have a material effect on the Company’s financial
position or results of operations.
The Emerging Issues Task Force (“EITF”) reached a
tentative consensus at its July meeting on the draft abstract
for EITF Issue No. 04-8, “The Effect of Contingently
Convertible Debt on Diluted Earnings Per Share”
(“EITF 04-8”). EITF 04-8 would require
contingently convertible debt to be included in diluted earnings
per share computations, if dilutive, regardless of whether a
conversion event has occurred. The effective date of this issue
is for reporting periods ending on or after December 15,2004. In accordance with the guidance, prior periods earnings
per share amounts presented for comparative purposes have been
restated to conform to this consensus.
In May 2004, the FASB issued Staff Position No. 106-2,
“Accounting and Disclosure Requirements Related to the
Medicare Prescription Drug, Improvement, and Modernization Act
of 2003,” (the “Act”)
(“FSP 106-2”). FSP 106-2 supercedes the
accounting and disclosure requirements of FSP 106-1 issued
in December 2003. FSP 106-2 requires presently enacted
changes in relevant laws to be considered in current period
measurements of net periodic postretirement benefit cost and the
accumulated projected benefit obligation (the “APBO”).
The Company has completed its evaluation of the impact of
FSP 106-2’s initial recognition, measurement and
disclosure provisions on its plans, and has recorded an
approximately $1.8 million decrease to its APBO as of
December 31, 2004.
In November 2004, the EITF reached a consensus on EITF Issue
No. 03-1, “The Meaning of Other-Than-Temporary
Impairment and its Application to Certain Investments”
(“EITF 03-1”). EITF 03-1 provides guidance
on determining other-than-temporary impairments and its
application to marketable equity and debt securities accounted
for under SFAS No. 115, “Accounting for Certain
Investments in Debt and Equity Securities,” as well as
investments accounted for under the cost method of accounting.
In September 2004, the FASB issued FASB Staff Position
(“FSP”) EITF Issue 03-1-1 which delayed the
effective date for the measurement and recognition guidance
contained in EITF 03-1 pending finalization of the draft
FSP EITF Issue 03-1-a, “Implementation Guidance for
the Application of Paragraph 16 of
EITF 03-1.” The disclosure requirements of
EITF 03-1 remain in effect. The Company adopted the
disclosure requirements of EITF 03-1 as of
December 31, 2004. The adoption of the recognition and
measurement provisions of EITF 03-1 when finalized are not
expected to have a material impact on the Company’s results
of operations, financial position or cash flows.
In November 2004, the FASB issued SFAS No. 151,
“Inventory Costs, an amendment of ARB No. 43,
Chapter 4.” (“SFAS No. 151”)
SFAS No. 151 amends Accounts Research
Bulletin No. 43, Chapter 4, to clarify that
abnormal amounts of idle facility expense, freight, handling
costs and wasted materials (spoilage) should be recognized
as current-period charges. In addition, SFAS No. 151
requires that allocation
of fixed production overhead to inventory be based on the normal
capacity of the production facilities. SFAS No. 151 is
effective for inventory costs incurred during fiscal years
beginning after June 15, 2005. The Company is currently
assessing the impact that SFAS No. 151 will have on
the results of operations, financial position or cash flows.
In December 2004, the FASB issued SFAS No. 123
(revised 2004), “Share-Based Payment”(“SFAS 123R”). SFAS 123R addresses the
accounting for share-based payments to employees, including
grants of employee stock options. Under the new standard,
companies will no longer be able to account for share-based
compensation transactions using the intrinsic method in
accordance with APB Opinion No. 25, “Accounting for
Stock Issued to Employees”. Instead, companies will be
required to account for such transactions using a fair-value
method and recognize the related expense associated with
share-based payments in the consolidated statement of
operations. SFAS 123R will be effective for periods
beginning after June 15, 2005 and allows, but does not
require, companies to restate the full fiscal year of 2005 or
retroactive restatement to earlier periods to reflect the impact
of expensing share-based payments under SFAS 123R. The
Company has not yet determined which fair-value method and
transitional provision it will follow. The Company is currently
assessing the impact that FAS 123R will have on the results
of operations.
Note 24 — Unaudited Quarterly Financial
Information
The Company’s common stock is listed on the New York Stock
Exchange (“NYSE”) under the trading symbol FSH. The
following is a summary of quarterly financial information for
2004 and 2003 including the high and low closing sales prices of
the stock as reported by the NYSE for each of the quarterly
periods listed (in millions, except per share data):
2004
First
Second
Third
Fourth
Year
Sales
$
1,011.0
$
1,057.6
$
1,263.0
$
1,331.1
$
4,662.7
Gross Profit(a)
275.8
307.9
362.9
430.5
1,377.1
Net Income (loss)(b)(f)
$
34.6
$
44.7
$
36.1
$
51.0
$
166.4
Net Income (loss) per common share:
Basic(e)(f)
$
0.54
$
0.70
$
0.36
$
0.43
$
1.93
Diluted(e)(f)
$
0.51
$
0.64
$
0.34
$
0.41
$
1.80
Market price:
High
$
56.20
$
60.10
$
59.61
$
62.60
$
62.60
Low
$
39.76
$
54.15
$
53.26
$
53.49
$
39.76
2003
First
Second
Third
Fourth
Year
Sales
$
833.4
$
864.5
$
890.0
$
976.5
$
3,564.4
Gross Profit(c)
218.5
227.8
239.0
254.2
939.5
Net Income (loss)(d)
$
(0.9
)
$
33.0
$
27.7
$
18.6
$
78.4
Net Income (loss) per common share:
Basic
$
(0.02
)
$
0.60
$
0.50
$
0.30
$
1.38
Diluted
$
(0.02
)
$
0.57
$
0.47
$
0.28
$
1.29
Market price:
High
$
32.30
$
35.47
$
40.83
$
42.24
$
42.24
Low
$
27.70
$
26.19
$
35.04
$
38.48
$
26.19
(a)
During 2004, the Company recorded charges totaling
$90.4 million consisting of $82.9 million to step-up
the fair value of inventory from the Apogent, Oxoid, Dharmacon,
and Perbio acquisitions, $5.6 million of integration costs,
and $1.9 million of impairment charges for fixed assets.
During 2004, the Company recorded charges totaling
$100.3 million, net of tax, consisting of the items noted
in (a) above as well as $7.8 million of restructuring
charges, a $6.0 million charitable contribution,
$65.7 million impairment charge for long-lived assets
$16.6 million of refinancing charges, $22.7 million
gain on sale of investment, and $10.9 million tax provision
credit related to finalizing certain domestic and foreign tax
audits and negotiations.
(c)
During 2003, the Company recorded a charge of $18.1 million
related to the step-up of Perbio’s inventory to its
acquired fair value.
(d)
During 2003, the Company recorded charges totaling
$81.6 million, consisting of $15.7 million for options
to hedge the foreign currency exposure related to the
acquisition of Perbio and $65.9 million in call premiums
and the write-off of financing fees associated with the
retirement of debt.
(e)
The Company has adopted the provisions of EITF Issue
No. 04-8 (EITF 04-8), “The Effect of Contingently
Convertible Debt on Diluted Earnings Per Share” in
calculating quarterly diluted earnings per common share for 2004.
(f)
Reflects adjustments as disclosed in Form 10-Q/A for the
quarter ended September 30, 2004.
Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
Item 9A.
Controls and Procedures
As of the end of the period covered by this Annual Report on
Form 10-K, the Company’s management, with the
participation of the Company’s Chief Executive Officer and
Chief Financial Officer, evaluated the effectiveness of the
Company’s disclosure controls and procedures (as such term
is defined in Rule 13a-15(e) under the Exchange Act). Based
on that evaluation, the Chief Executive Officer and the Chief
Financial Officer concluded that, as of the end of the period
covered by this report, the design and operation of 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 and
are effective in ensuring that information required to be
disclosed by the Company in the reports that it files or submits
under the Exchange Act is accumulated and communicated to the
Company’s management, including the Company’s Chief
Executive Officer and Chief Financial Officer, as appropriate to
allow timely decisions regarding required disclosure.
The Apogent merger was completed on August 2, 2004. As of
September 30, 2004, and as disclosed in Note 3 of the
financial statements in its original Form 10-Q for the
period ended on such date, the Company completed an initial
allocation of the purchase price using estimated values and
management judgments. In completing its final purchase price
allocation subsequent to the filing of its Form 10-Q for
the period ended September 30, 2004, the Company identified
errors in certain aspects of the initial purchase price
accounting requiring the restatement of its financial statements
for the three and nine months ended September 30, 2004. The
correction of these errors reflect non-cash adjustments to the
value recorded for certain Apogent debt securities, for Fisher
stock issued in the Apogent merger, tax benefits related to the
exercise of stock options assumed in the merger and the deferred
tax liability for indefinite-lived intangible assets acquired.
In connection with the above, management subsequently remediated
certain control procedures around the selection and application
of accounting guidance related to purchase accounting. The
errors in question resulted in the adjustments discussed above
and resulted in the restated financial statements for the three
and nine months ended September 30, 2004.
The Company has taken a series of steps designed to remediate
the control procedures that resulted in the errors described in
its Form 10-Q/A. In connection therewith, prior to
December 31, 2004, the Company created additional
accounting and finance positions and hired or appointed
experienced individuals to those positions and modified its
procedures regarding the appropriate selection and application
of accounting principles. The Company created the positions of
Chief Accounting Officer and Vice President of Finance
Integrations, among other positions that report to the Chief
Accounting Officer and Vice President of Finance Integrations,
in the process of remediating its existing internal control over
financial reporting. Both of these positions were fully
transitioned prior to the end of the fourth quarter.
Management of the Company is responsible for establishing and
maintaining adequate internal control over financial reporting.
Management assessed the effectiveness of the Company’s
internal control over financial reporting as of
December 31, 2004. In making this assessment, management
used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in
Internal Control — Integrated Framework. Based
on its assessment, management concluded that, as of
December 31, 2004, the Company’s internal control over
financial reporting is effective. Deloitte & Touche
LLP, the Company’s independent registered public accounting
firm, has issued an audit report on management’s assessment
of the Company’s internal control over financial reporting.
This report appears on page 86.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Fisher Scientific International Inc.
We have audited management’s assessment, included in the
accompanying Management’s Report on Internal Control Over
Financial Reporting that Fisher Scientific International Inc.
(the “Company”) maintained effective internal control
over financial reporting as of December 31, 2004, based on
criteria established in Internal Control — Integrated
Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission. The Company’s management is
responsible for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness
of internal control over financial reporting. Our responsibility
is to express an opinion on management’s assessment and an
opinion on the effectiveness of the Company’s internal
control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, evaluating
management’s assessment, testing and evaluating the design
and operating effectiveness of internal control, and performing
such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable
basis for our opinions.
A company’s internal control over financial reporting is a
process designed by, or under the supervision of, the
company’s principal executive and principal financial
officers, or persons performing similar functions, and effected
by the company’s board of directors, management, and other
personnel to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance of
records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the
financial statements.
Because of the inherent limitations of internal control over
financial reporting, including the possibility of collusion or
improper management override of controls, material misstatements
due to error or fraud may not be prevented or detected on a
timely basis. Also, projections of any evaluation of the
effectiveness of the internal control over financial reporting
to future periods are subject to the risk that the controls may
become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may
deteriorate.
In our opinion, management’s assessment that the Company
maintained effective internal control over financial reporting
as of December 31, 2004, is fairly stated, in all material
respects, based on the criteria established in Internal
Control — Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission. Also in
our opinion, the Company maintained, in all material respects,
effective internal control over financial reporting as of
December 31, 2004, based on the criteria established in Internal
Control — Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated financial statements and financial statement
schedule as of and for the year ended December 31, 2004 of the
Company and our report dated March 15, 2005 expressed an
unqualified opinion on those financial statements and financial
statement schedule.
The information appearing in Fisher’s Proxy Statement for
its Annual Meeting of Stockholders to be held on May 6,2005 (the “Proxy Statement”) under the caption
“Nomination and Election of Directors” is incorporated
herein by reference.
Compliance with Section 16(a) of the Exchange Act.
The information appearing in the Proxy Statement under the
caption “Section 16(a) Beneficial Ownership Reporting
Compliance” is incorporated herein by reference.
Code of Conduct. The information set forth under the
caption “Board of Directors, Committee Meetings and
Executive Sessions” in the Proxy Statement for its Annual
Meeting of Shareholders is incorporated herein by reference.
Item 11.
Executive Compensation
The information appearing in the Proxy Statement under the
caption “Compensation of Executive Officers” is
incorporated herein by reference.
Item 12.
Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters
The information appearing in the Proxy Statement under the
caption “Security Ownership of Certain Beneficial Owners
and Management” is incorporated herein by reference.
Item 13.
Certain Relationships and Related Transactions
The information appearing in the Proxy Statement under the
caption “Certain Relationships and Related
Transactions” is incorporated herein by reference.
Item 14.
Principal Accountant Fees and Services
The information appearing in the Proxy Statement under the
caption “Audit Fees” is incorporated herein by
reference.
Exhibits, Financial Statement Schedules, and Reports on
Form 8-K
(a) (1) Financial Statements. See Index to Financial
Statements at Item 8 herein.
(2) Schedules. Financial statement schedules are
listed under Item 15(d) in this Annual Report.
(3) Exhibits. Exhibits 10.1 through 10.61
constitute all of the management contracts and compensation
plans and arrangements of the Company required to be filed as
exhibits to this Annual Report.
Certificate of Designation of Non-Voting Stock of the
registrant. Incorporated by reference to Exhibit 3.3 to the
registrant’s Annual Report on Form 10-K filed on
March 31, 1999.
3.03
Certificate of Designation of Series B Non-Voting Common
Stock. Incorporated by reference to Exhibit 3.4 to the
registrant’s Annual Report on Form 10-K filed on
March 31, 1999.
Certificate of Correction to the Restated Certificate of
Incorporation of Fisher Scientific International Inc.
Incorporated by reference to Exhibit 3.6 to the
registrant’s Annual Report on Form 10-K filed on
March 28, 2002.
Indenture dated as of April 24, 2002 between the Company
and J.P. Morgan Trust Company, National Association, as
Trustee, relating to the
81/8
percent Senior Subordinated Notes due 2012. Incorporated by
reference to Exhibit 4.1 to the registrant’s
Registration Statement on Form S-4 (Registration no.
333-88362) filed on May 15, 2002.
Indenture, dated as of August 3, 2004, among Apogent
Technologies Inc., the Company and The Bank of New York as
Trustee, relating to Apogent Technologies Inc.’s Floating
Rate Convertible Senior Debentures due 2033. Incorporated by
reference to Exhibit 4.1 to Apogent Technologies
Inc.’s Form 10-Q filed on August 9, 2004.
Registration Rights Agreement, dated as of August 3, 2004,
among the Company, Banc of America Securities LLC, Goldman
Sachs & Co., Deutsche Bank Securities, Credit Suisse
First Boston LLC, Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Lazard Frères & Co. LLC.
Incorporated to Exhibit 4.16 to the Company’s
Registration Statement on Form S-4 (Registration No.
333-120864) filed on November 30, 2004.
Employment Agreement, dated as of March 31, 1998, between the
Company and David T. Della Penta. Included as an exhibit to
the Company’s Form 10-Q, filed with the Securities and
Exchange Commission on August 14, 1998 and incorporated
herein by reference.
10.04
Amendment to Employment Agreement, dated as of December 31,2003, between the Company and David T. Della Penta. Incorporated
by reference to Exhibit 10.03 to the Company’s
Registration Statement on Form S-3 (Registration no.
333-110038) filed on January 6, 2004.
Fisher Scientific International Inc. Deferred Compensation Plan
for Non-Employee Directors. Included as an exhibit to the
Company’s Annual Report on Form 10-K for the year ended
December 31, 1992, filed with the Securities and Exchange
Commission on March 24, 1993 and incorporated herein by
reference.
10.07
Retirement Plan for Non-Employee Directors of Fisher Scientific
International Inc. Included as an exhibit to the Company’s
Annual Report on Form 10-K for the year ended December 31,1992, filed with the Securities and Exchange Commission on
March 24, 1993 and incorporated herein by reference.
10.08
Fisher Scientific International Inc. 1998 Equity and Incentive
Plan. Included as an exhibit to Post-Effective Amendment
No. 1 to the Company’s Registration Statement on
Form S-4 (Registration No. 333-42777) filed with the
Securities and Exchange Commission on February 2, 1998 and
incorporated herein by reference.
Fisher Scientific International Inc. Long-Term Incentive Plan,
effective January 1, 1990. Included as an exhibit to the
Company’s Annual Report on Form 10-K for the year ended
December 31, 1992, filed with the Securities and Exchange
Commission on March 24, 1993 and incorporated herein by
reference.
10.12
Form of Fisher Scientific International Inc. Non-Qualified Stock
Option Award Agreement (Management Options — Fisher
Scientific International Inc. 2001 Equity and Incentive Plan).
Included as an exhibit to the Company’s Form 10-Q, filed
with the Securities and Exchange Commission on November 9,2004 and incorporated herein by reference.
10.13
Form of Fisher Scientific International Inc. Non-Qualified Stock
Option Award Agreement (Management Options — Fisher
Scientific International Inc. 2003 Equity and Incentive Plan).
Included as an exhibit to the Company’s Form 10-Q, filed
with the Securities and Exchange Commission on November 9,2004 and incorporated herein by reference.
10.14
Credit Agreement, dated as of August 2, 2004, among the
Company, each lender from time to time party thereto, Bank of
America, N.A., as Administrative Agent and Swing Line Lender,
Banc of America Securities LLC, Deutsche Bank Securities Inc.
and Credit Suisse First Boston, acting through its Cayman
Islands Branch or one of its affiliates, ABN Amro Bank, N.V. and
Merrill Lynch Capital Corporation, as Co-Syndication and
Co-Documentation Agents. Incorporated by reference to the
Company’s Form 10-Q filed on August 9, 2004.
First Amendment to Credit Agreement, dated as of
December 29, 2004, among the Company, each lender from time
to time party thereto, Bank of America, N.A., as Administrative
Agent and Swing Line Lender, Banc of America Securities LLC,
Deutsche Bank Securities Inc. and Credit Suisse First Boston,
acting through its Cayman Islands Branch or one of its
affiliates, ABN Amro Bank, N.V. and Merrill Lynch Capital
Corporation, as Co-Syndication and Co-Documentation Agents.
10.16
Amended and Restated Credit Agreement, dated as of
September 10, 2003, among the Company, Fisher Scientific
Company L.L.C., The Lenders Party thereto and JPMorgan Chase
Bank, as Administrative Agent. Included as an exhibit to the
Company’s Form 8-K, filed with the Securities and
Exchange Commission on September 18, 2003, incorporated
herein by reference.
10.17
First Amendment to Amended and Restated Credit Agreement, dated
December 3, 2003, among the Company, Fisher Scientific
Company L.L.C., the lenders party thereto, JP Morgan Chase Bank,
as resigning administrative agent, and Deutsche Bank AG, as
successor administrative agent. Included as an exhibit to the
Company’s Form 8-K, filed with the Securities and Exchange
Commission on December 3, 2003 and incorporated herein by
reference.
10.18
Second Amendment to Amended and Restated Credit Agreement, dated
as of February 25, 2004, among the Company, Fisher
Scientific Company L.L.C., the financial institutions listed on
the signature page thereof, Deutsche Bank AG, New York Branch,
as administrative agent, Deutsche Bank Securities Inc., as Joint
Lead-Arranger and Credit Suisse First Boston, and Bank of
America N.A., as Syndication agents. Included as an exhibit to
the Registration Statement on Form S-4 (Registration
No. 333-113225) filed with the Securities and Exchange
Commission on March 2, 2004 and incorporated herein by
reference.
Collateral Sharing Agreement, dated as of February 14,2003, among the Company, Fisher Scientific Company L.L.C.,
certain other Subsidiaries of the Company party hereto and
JPMorgan Chase Bank, as Collateral Agent. Incorporated by
reference to Exhibit 10.17 to the registrant’s
Registration Statement on Form S-4 (Registration no.
333-104361) filed on April 7, 2003.
10.21
Receivables Transfer Agreement dated as of February 14,2003 among FSI Receivables Company LLC, as Transferor, the
Company, as Servicer, Blue Ridge Asset Funding Corporation,
Wachovia Bank, National Association, Liberty Street Funding
Corp., The Bank of Nova Scotia, and Wachovia Bank, National
Association, as Administrative Agent. Included as an exhibit to
the Company’s Registration Statement on Form S-4
(Registration no. 333-104361) filed on April 7, 2003.
10.22
First Amendment to Receivables Transfer Agreement, dated as of
February 12, 2004, among FSI Receivables Company LLC, as
Transferor, the Company, as Servicer, Blue Ridge Asset Funding
Corporation, Liberty Street Funding Corp., Wachovia Bank,
National Association, The Bank of Nova Scotia, and Wachovia
Bank, National Association, as Administrative Agent. Included as
an exhibit to the Registration Statement on Form S-4
(Registration No. 333-113225) filed with the Securities and
Exchange Commission on March 2, 2004 and incorporated
herein by reference.
10.23
*
Amended and Restated Receivables Transfer Agreement, dated as of
February 4, 2005 among FSI Receivables Company LLC, as
Transferor, Fisher Scientific International Inc., as Servicer,
Liberty Street Funding Corp., The Bank of Nova Scotia, Atlantic
Asset Securitization Corp., Calyon New York Branch and The Bank
of Nova Scotia, as Administrative Agent.
10.24
Amended and Restated Receivables Purchase Agreement dated as of
February 14, 2003 among Cole-Parmer Instrument Company,
Fisher Clinical Services Inc., Fisher Hamilton L.L.C, and Fisher
Scientific Company L.L.C., as Originators, the Company, as
Originator Agent and FSI Receivables Company LLC, as Buyer.
Incorporated by reference to Exhibit 10.19 to the
registrant’s Registration Statement on Form S-4
(Registration no. 333-104361) filed on April 7, 2003.
First Amendment to Amended and Restated Receivables Purchase
Agreement, dated as of February 4, 2005 among Cole-Palmer
Instrument Company, Fisher Clinical Services Inc., Fisher
Hamilton L.L.C. and Fisher Scientific Company L.L.C. as
Originators, Fisher Scientific International Inc., as Originator
Agent and FSI Receivables Company LLC, as Buyer.
10.26
Lease Agreement, dated as of December 21, 1988, between
Corporate Property Associates 7 and Corporate Property
Associates 8, as landlord, and Barnstead Thermolyne
Corporation, as tenant. Incorporated by reference to
Exhibit 10(cc) to Sybron Corporation’s Registration
Statement on Form S-1 (Registration no. 22-24640).
10.27
First Amendment to Lease Agreement, dated as of
December 11, 2000, by and among Corporate Property
Associates — 7 and Corporate Property
Associates 8, L.P. and Barnstead Thermolyne Corporation.
Incorporated by reference to Exhibit 10.23 to Apogent
Technologies Inc.’s Form 10-K filed on December 19,2000.
10.28
Lease Agreement, dated as of December 21, 1988, between
Corporate Property Associates 7 and Corporate Property
Associates 8, as landlord, and Erie Scientific Company, as
tenant. Incorporated by reference to Exhibit 10(ee) to
Sybron Corporation’s Registration Statement on
Form S-1 (Registration no. 22-24640).
10.29
First Amendment to Lease Agreement, dated as of
December 11, 2000, by and among Corporate Property
Associates — 7 and Corporate Property
Associates 8, L.P. and Erie Scientific Company.
Incorporated by reference to Exhibit 10.25 to Apogent
Technologies Inc.’s Form 10-K filed on December 19,2000.
10.30
Lease Agreement, dated as of December 21, 1988, between
Corporate Property Associates 7 and Corporate Property
Associates 8, as landlord, and Nalge Nunc International
Corporation, as tenant. Incorporated by reference to
Exhibit 10(ff) to Sybron Corporation’s Registration
Statement on Form S-1 (Registration no. 22-24640).
10.31
First Amendment to Lease Agreement, dated as of
December 11, 2000, by and among Corporate Property
Associates — 7 and Corporate Property
Associates 8, L.P. and Nalge Nunc Corporation. Incorporated
by reference to Exhibit 10.27 to Apogent Technologies
Inc.’s Form 10-K filed on December 19, 2000.
10.32
Amended and Restated Guaranty and Suretyship Agreement, dated as
of December 11, 2000 between Apogent Technologies Inc. and
Corporate Property Associates 7 and Corporate Property
Associates 8. Incorporated by reference to Exhibit 10.28 to
Apogent Technologies Inc.’s Form 10-K filed
December 19, 2000.
Sybron International Corporation Amended and Restated 1994
Outside Directors’ Stock Option Plan. Included as
Exhibit 99.3 to the registrant’s Registration
Statement on Form S-8 (Registration No. 333-118239)
and incorporated herein by reference.
10.36
Sybron International Corporation 1999 Outside Directors’
Stock Option Plan. Included as Exhibit 99.4 to the
registrant’s Registration Statement on Form S-8
(Registration No. 333-118239) and incorporated herein by
reference.
Third amendment to the amended and restated Fisher Scientific
International Inc. Retirement Plan.
10.42
*
Fourth amendment to the amended and restated Fisher Scientific
International Inc. Retirement Plan.
10.43
*
Fifth amendment to the amended and restated Fisher Scientific
International Inc. Retirement Plan.
10.44
*
Sixth amendment to the amended and restated Fisher Scientific
International Inc. Retirement Plan.
10.45
*
Seventh amendment to the amended and restated Fisher Scientific
International Inc. Retirement Plan.
10.46
*
Eighth amendment to the amended and restated Fisher Scientific
International Inc. Retirement Plan.
10.47
*
Ninth amendment to the amended and restated Fisher Scientific
International Inc. Retirement Plan.
10.48
*
Amended and Restated Fisher Scientific International Inc.
Savings and Profit Sharing Plan.
10.49
*
First amendment to the amended and restated Fisher Scientific
International Inc. Savings and Profit Sharing Plan.
10.50
*
Second amendment to the amended and restated Fisher Scientific
International Inc. Savings and Profit Sharing Plan.
10.51
*
Third amendment to the amended and restated Fisher Scientific
International Inc. Savings and Profit Sharing Plan.
10.52
*
Fourth amendment to the amended and restated Fisher Scientific
International Inc. Savings and Profit Sharing Plan.
10.53
*
Fifth amendment to the amended and restated Fisher Scientific
International Inc. Savings and Profit Sharing Plan.
10.54
*
Sixth amendment to the amended and restated Fisher Scientific
International Inc. Savings and Profit Sharing Plan.
10.55
*
Seventh amendment to the amended and restated Fisher Scientific
International Inc. Savings and Profit Sharing Plan.
10.56
*
Eighth amendment to the amended and restated Fisher Scientific
International Inc. Savings and Profit Sharing Plan.
10.57
*
Ninth amendment to the amended and restated Fisher Scientific
International Inc. Savings and Profit Sharing Plan.
10.58
*
Tenth amendment to the amended and restated Fisher Scientific
International Inc. Savings and Profit Sharing Plan.
10.59
*
Eleventh amendment to the amended and restated Fisher Scientific
International Inc. Savings and Profit Sharing Plan.
10.60
*
Fisher Scientific International Inc. Executive Retirement and
Savings Program, originally effective August 1, 1992, as
restated effective June 23, 1997.
10.61
*
First amendment to the Fisher Scientific International Inc.
Executive Retirement and Savings Program.
12.01
*
Statement re computation of Ratios of Earnings to Fixed Charges
and Earnings to Fixed Charges.
Certification of Chief Executive Officer pursuant to Rule
13a-14(a)/15(d)-14(a) of the Securities Exchange Act of 1934, as
amended, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer pursuant to Rule
13a-14(a)/15(d)-14(a) of the Securities Exchange Act of 1934, as
amended, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
32.01
*
Certification of Chief Executive Officer pursuant to
18 U.S.C. 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
32.02
*
Certification of Chief Financial Officer pursuant to
18 U.S.C. 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has caused this
report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the
date indicated.
