SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 333-24001
PACKARD BIOSCIENCE COMPANY
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 06-0676652
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
800 RESEARCH PARKWAY, MERIDEN, CONNECTICUT 06450
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: 203-238-2351
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
NONE
Securities registered pursuant to Section 12(g) of the Act:
NONE
(Title of Class)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes (X) No ( ).
Indicate by check mark 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 definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to the
Form 10-K. (X).
Aggregate market value of voting stock held by non-affiliates of the registrant
as of March 20, 1998: $125,851,829.
As of March 20, 1998, there were 9,015,174 shares of the registrant's common
stock outstanding.
Documents incorporated by reference in this report: None.
<PAGE>
PART I
ITEM 1: BUSINESS
GENERAL
Packard BioScience Company and subsidiaries (the "Company") is a leading
developer, manufacturer and marketer of analytical instruments and related
products and services for use in the drug discovery and molecular biology
segments of the life sciences industry and in the nuclear instrumentation
industry. Through Packard Instrument Company, Inc., a wholly-owned subsidiary,
and several other wholly-owned subsidiaries (collectively, "Packard"), the
Company supplies bioanalytical instruments, and related biochemical supplies
and services, to the drug discovery, genomics and molecular biology markets,
and through certain divisions and wholly-owned subsidiaries comprising Canberra
Industries (collectively, "Canberra"), the Company manufactures analytical
instruments and systems used to detect, identify, quantify and safeguard
radioactive materials for the nuclear industry and related markets. The Company
believes that it is the worldwide market leader in many of its primary product
markets, with well-recognized brand names and a reputation for high-quality,
reliable instruments.
The Company was founded in 1965 by Emery G. Olcott, its current President
and Chief Executive Officer. The Company began as a manufacturer of nuclear
instrument modules ("NIMs"), which are electronic devices used to detect and to
measure radioactive materials and the energy they emit. Throughout the 1970s
and into the early 1980s, the Company maintained a leadership position in the
nuclear spectroscopy market and continued to grow. Expertise in measuring
radiation exposure of humans (health physics) was increased through the
acquisition of Radiation Management Corporation in early 1983. Major subsequent
acquisitions by Canberra included Nuclear Data, Inc. in 1989, which specialized
in computer-based spectroscopy systems and health physics software, Jomar
Systems, Inc. in 1990, which specialized in neutron counting devices, and
Aquila Technologies Group, Inc. ("Aquila") in 1997, a manufacturer and
distributor of instrumentation used in the business of nuclear safeguarding.
In 1986, the Company purchased Packard from a subsidiary of United
Technologies Corporation. Packard was founded in 1949 by Lyle E. Packard. The
original product manufactured by Packard was a geiger counter particularly
suited to laboratory measurements of low energy radioactivity. In 1954,
Packard introduced the first commercial liquid scintillation counter, called
the Tri-Carb<reg-trade-mark> Spectrometer. With a rapid succession of
technological innovations, Packard established leadership in the emerging
scintillation spectrometry industry. In 1967, Packard was acquired by the
American Bosch Arma Corporation, which later became part of the Automotive
Division of United Technologies Corporation. During the 1960s and 1970s,
Packard increased its international presence, establishing several sales and
service companies in Europe and Australia. In 1980, Packard developed a
manufacturing presence for biochemicals and supplies in Groningen, The
Netherlands. The Company's acquisition of Packard capitalized on its knowledge
of nuclear physics, but at the same time diversified its product portfolio by
addressing entirely new markets. In 1988, the Company acquired Radiomatic
Instruments and Chemical Co., a manufacturer of flow scintillation analyzers,
which complemented Packard's product line.
The Company currently has three domestic and twelve foreign active
subsidiaries, all of which are wholly-owned. Packard Instrument Company, Inc.,
located in Downers Grove, Illinois, is the sole manufacturing facility of
Packard's products other than biochemical products, which are produced in the
Netherlands by Packard Instrument B.V. Canberra's instruments, certain
radiation detectors, applied systems and safeguards are manufactured by certain
divisions of the Company located at its headquarters in Meriden, Connecticut,
and at Aquila which is located in Albuquerque, New Mexico; certain radiation
detectors are manufactured in Belgium by Canberra Semiconductor N.V. The
Company's other subsidiaries are sales and/or service organizations.
The principal executive offices of the Company are located at 800
Research Parkway, Meriden, Connecticut 06450. Its telephone number is (203)
238-2351.
In March, 1997, the Company completed a transaction to effect a
recapitalization of the Company (the "Recapitalization"). Refer to the
consolidated financial statements included in Part II of this Form 10-K for a
detailed description of the Recapitalization transaction.
On May 8, 1997, a Packard subsidiary, Packard Japan KK ("PJKK"), entered
into an agreement to acquire the 40% interest held by its minority stockholder.
The agreement obligated PJKK to acquire approximately 60% of the minority
interest in 1997 and the remainder in future years as PJKK generates sufficient
earnings to allow for the redemption in accordance with Japanese laws and
regulations. During the year ended December 31, 1997, PJKK generated
approximately $13.1 million in net sales.
In August, 1997, the Company acquired a 19.8% equity interest in
BioSignal Inc. ("BioSignal"). The Company has an option to increase such
ownership subject to certain terms and conditions. In addition, the Company
and BioSignal announced a research and development agreement to significantly
extend their collaboration in the development of reagents and services used by
customers conducting high throughput screening in the drug discovery and
biotechnology industries. BioSignal, located in Montreal, Quebec, is a leader
in the development and commercialization of cloned genes for cell membrane
receptors and cell signaling proteins.
On September 3, 1997, the Company acquired all of the outstanding common
stock of Aquila. Aquila is a leading manufacturer and distributor of
surveillance cameras, electronic seals and other equipment utilized in the
safeguarding of nuclear materials, and an OEM manufacturer of process control
equipment. The integration of Aquila into Canberra greatly enhances Canberra's
ability to meet the total needs of the safeguards community and market. For
the twelve months ended December 31, 1997, Aquila's net sales, from operations
acquired by the Company, were approximately $13.3 million.
PACKARD
Packard is a worldwide leader in the manufacturing and marketing of
bioanalytical instruments for use in the life science research industry.
Packard's instruments and biochemicals are used principally in laboratory
research related to immunology, genetics, virology, biochemistry, toxicology
and metabolism studies, primarily as part of the drug discovery research
process. Over the past five years, pharmaceutical and biotechnology companies
have attempted to advance the drug discovery process through genomic research
and accelerated drug screening and have invested considerable resources in this
process, resulting in increased demand for Packard's newer products. Packard's
primary products include bioanalytical spectrometers, microplate readers,
imaging systems, robotic liquid handling systems and biochemicals and related
supplies. Packard's strong, long-term relationships with its customers have
been a key component of its development of new products which respond to these
industry trends. In addition, the Company believes that the quality and
reliability of its products have generated a large installed base of
instruments which allows Packard to generate a recurring stream of revenue from
service and from sales of biochemicals and other consumables. Packard
distributes and services its instruments and other products through an
extensive international sales and service organization to many of the leading
pharmaceutical, biotechnology and agrochemical companies as well as to
prominent academic, federal and hospital laboratories.
Life science is the study of the characteristics, behavior and structure
of living organisms and their component systems. Life science researchers
utilize a variety of instruments and related biochemicals and supplies in drug
discovery, the study of life processes, biotechnology and environmental
testing. Two major branches of life science are cellular biology and molecular
biology. Cellular biology is the study of live, intact cells. Molecular
biology is the study of cell components including DNA, RNA and proteins. The
Company estimates that in 1997 annual sales to the global life sciences
industry for instrumentation, related service and biochemicals totaled in
excess of $2.5 billion. The segments of this industry on which the Company
focuses are bioanalytical spectrometers, microplate readers, imaging systems,
robotic liquid handling systems, and radioisotopic and non-radioisotopic
biochemicals and supplies, for which the Company estimates 1997 annual sales
total in excess of $400 million.
The bioanalytical instrument market includes primarily bioanalytical
spectrometers, microplate readers, imaging systems and robotic liquid handling
systems. Bioanalytical spectrometers are used to measure biologically active
molecules, cells and sub-cellular components, the composition and function of
body tissues and organs, the dynamics of living systems, and the mechanics of
disease. They are used by researchers in pharmaceutical companies,
biotechnology companies, and academic institutions as well as customers in
hospitals, environmental testing laboratories and clinical testing
laboratories. Bioanalytical spectrometer samples are contained in vials, test
tubes and special transparent tubing.
A major application of Packard's bioanalytical instruments is for use in
the drug discovery process. The pharmaceutical industry has traditionally
gained most of its drug leads by evaluating natural and synthetic compounds
from their chemical libraries for molecules with possible therapeutic benefit.
However, new tools for drug discovery allowing for more rapid, thorough and
efficient identification of drug leads have evolved over the past five years.
In addition, two major technological innovations have substantially increased
the number of possible drug leads, and new avenues for disease treatment are
now available. First, molecular and cellular biology and the study of the
human genome have facilitated the identification of complex disease mechanisms
and identified genetic targets as potential and known causes of diseases.
Second, combinatorial chemistry, the production of hundreds of thousands of
compounds from functionally diverse chemicals, has enabled chemists to
synthesize huge numbers of new substances which can then be tested for
disease-fighting capability. As a result of these innovations, the challenge
for all pharmaceutical companies is how to screen this large number of
candidate drug compounds against a proliferating number of disease targets.
Pharmaceutical groups require the capability to screen millions of potential
drug leads against many new disease targets in shorter time periods and have
turned to instrumentation for "high throughput screening."
Makers of bioanalytical instruments, like Packard, have addressed this
need and helped to make the new approach to drug discovery possible by
combining the detection capabilities of its bioanalytical instruments with
advances in "high throughput screening." "High throughput screening" is a
general term that refers to the automated systems and new instruments currently
being used in drug research. Using high throughput screening, research groups
have been able to screen tens and even hundreds of thousands of compounds a
week, well beyond previous limits. The result has been an increase in both the
speed with which tests can be conducted and the volume of information available
on the binding characteristics of a given drug molecule or biological target.
The bioanalytical instrument market includes products that provide
researchers with the ability to detect the activity of biological samples by
measuring minute amounts of light. Today, there exist three different labeling
methods: isotopic, fluorescent and chemiluminescent labeling. Fluorescent and
chemiluminescent labels are considered nonisotopic methods. Isotopic methods
allow a researcher to recognize the activity of a particular molecule or
compound by labeling it with a radioactive molecule. Rather than utilize
radioactivity, fluorescent or chemiluminescent labeling distinguishes a
specific molecule or compound to be analyzed by attaching an organic
light-emitting molecule.
Microplate readers are used primarily by researchers at drug companies
and biotechnology companies when studying cellular and molecular biology.
Microplates are used in drug discovery and development for screening potential
drug candidates and by scientists conducting evaluation assays. Microplate
readers quantify the results of tests performed in the depressions, or "wells,"
of small plastic trays. Microplate readers miniaturize the tests and,
therefore, reduce the amount of samples, labels and time needed to perform such
tests. Because of their advanced technology and differentiating
characteristics, both bioanalytical spectrometers and microplate readers are
sold at higher margins than more standard instruments.
Imaging systems are also used in the study of molecular and cellular
biology, primarily by researchers in drug companies and biotechnology
companies. Imaging system samples are analyzed in flat (two-dimensional)
formats. Robotic liquid handling systems are used in laboratories to transfer
liquids from one piece of labware or apparatus to another, add or mix reagents,
perform dilutions, perform washing steps, or otherwise manipulate liquid
samples for analytical procedures. These instruments have become important as
laboratory research tools because microplate readers have reduced the size and
increased the number of samples. Robotics are necessary to complete precise
measurements and handle a large number of minute samples. Packard sells
robotic liquid handlers that are used to prepare samples in microplate readers
and bioanalytical spectrometers.
There is a trend in the life science research market moving away from
radioisotopic processes and instruments towards the use of nonisotopic
instrumentation. Because isotopic labeling has been the most widely-used
ultrasensitive biological test, it is the benchmark against which the
reliability and sensitivity of various new nonisotopic methods are measured.
Radioisotopic labeling is the most specific, easy to use and cost effective
method of testing compounds. Additionally, the Company believes that
scientists who currently use radioisotopes tend to be reluctant to switch
methodology because of the potential sources for experimental error involved in
altering their testing methods. Because radioisotopes are chemically identical
to stable elements, they can be used as effective labels without modifying
reaction chemistry. However, the Company believes that the trend towards
gradual substitutions of many of the isotopic methods is likely to continue.
Because of their radioactivity, isotopic labels are environmentally unfriendly
and difficult and potentially dangerous to handle. Their by-products bring
about waste disposal problems that are becoming increasingly more expensive.
Packard's research and development and new product introductions focus on the
nonisotopic market.
CANBERRA
Canberra is the worldwide market leader in the manufacture and marketing
of precision instruments which use advanced analytical techniques to detect,
quantify and identify radioisotopes. Canberra offers its customers a full
array of nuclear instruments and related services including: (i) a broad
product line of basic hardware and software for detection, signal processing,
data acquisition and display, and basic analysis of all types of radiation;
(ii) "applied systems," which are integrated systems of software and hardware
that address a specific application and serve as turn-key operations; and
(iii) product and applications training and customer service and support. This
comprehensive product and service offering has enabled Canberra to amass what
it believes to be the largest base of installed equipment in the nuclear
instrument industry, which generates a recurring stream of service revenues.
Canberra's customers include government institutions, utilities, research
laboratories, commercial analytical laboratories and international, national
and local regulatory agencies. In support of its worldwide customer base,
Canberra has developed an extensive sales and service organization, with
locations near most major nuclear sites in the world.
The Company estimates that worldwide sales in 1997 of instruments and
services to the segments of the industry it serves were approximately $200
million, of which approximately $120 million were generated by commercial
suppliers such as Canberra. The remaining sales were generated by captive
systems integrators (E.G., U.S. Department of Energy ("DOE") facilities such as
Los Alamos), which build their own equipment. The Company estimates that
Canberra has a more than 50% market share of the $120 million worldwide
commercial nuclear instrument market. Due to privatization of the DOE
facilities and to deregulation of the U.S. electric utility industry, the
Company believes the captive portion of this market is gradually beginning to
open to commercial companies like Canberra.
The traditional end markets for Canberra's products are the
radiochemistry, nuclear research and worker health and safety markets.
Radiochemistry is a basic analytical tool for the investigation of the chemical
composition of substances by analyzing their radioactive isotopic constituents.
As the use of radiochemical techniques has grown in recent years, the need has
grown for highly automated instruments, like those manufactured by Canberra,
that can analyze a larger number of samples more efficiently. The nuclear
research market has historically focused on basic research in nuclear physics.
In areas such as the pacific rim and South America, funding for such research
has increased, while in many industrialized countries, the focus has shifted
from basic research to applied topics such as environmental restoration. The
worker health and safety market requires instruments that measure the intake of
radioactive substances by workers who are exposed to nuclear materials.
In addition to these traditional end markets, the Company believes that
demand for its instruments may develop in the future in several emerging
markets. Given concerns about contamination of the environment (both
radioactive and non-radioactive), there is a need for measuring instruments
both to monitor radioactive and hazardous sites and to verify the success of
remediation and containment projects. The market for instruments used to
characterize nuclear waste has developed as decisions are made regarding the
permanent disposal of nuclear waste which is, for the most part, currently
stored on-site by waste generators. The use of nuclear instruments to help
safeguard the Cold War's legacy of weapons grade nuclear material has emerged
as a market for Canberra's instruments. Finally, in addition to safeguarding
nuclear materials, the decontamination and decommissioning of nuclear weapons
and other nuclear sites also represents a market opportunity for makers of
nuclear instruments.
The United States market is the most mature nuclear instrument market,
especially in the areas of research and radiochemistry. The Company believes
that existing nuclear facilities in the United States represent opportunities
in the areas of waste characterization and decontamination and decommissioning.
Worker health and safety is becoming an increasingly important market in the
United States with the advent of more stringent regulatory requirements at DOE
facilities. Additionally, the Company believes that the move to privatization
of DOE facilities is creating opportunities for new transaction-based services.
Western Europe, like the United States, is a mature market. However, the
Company believes that it differs from the United States due to its high degree
of commercial fuel reprocessing which creates additional safeguards and other
measurement opportunities. Central Europe and the former Soviet Union face the
same legacy of contaminated facilities as does the United States, but on an
even larger scale.
In other parts of the world, the Company believes that Asia is the
primary growth opportunity for commercial applications of nuclear power. This
growth potential is primarily due to Japan's aggressive pursuit of energy
self-sufficiency, as well as Korea, Taiwan, India and China becoming more
active nuclear markets. China and India, however, are subject to certain
United States export controls which may limit Canberra's ability to sell goods
and services into those markets. In addition, South America is increasing its
use of nuclear energy resulting in increased opportunities to supply
safeguards, radiochemistry and waste characterization systems.
PRODUCTS AND SERVICES
PACKARD
Packard provides the following products and services:
BIOANALYTICAL SPECTROMETERS. Bioanalytical spectrometers, used broadly
throughout life sciences research, use sensitive light measuring methods for
detecting radioisotopic labeled compounds. Packard is a leading manufacturer
and marketer of bioanalytical spectrometry instruments, including its Liquid
Scintillation Counter ("LSC"), Gamma Counter and Flow Scintillation Analyzer
("FSA") instruments. LSC and FSA spectrometers measure the emission of beta
particles from labeled samples by detecting the light these particles emit in a
liquid scintillation cocktail. Gamma Counters measure light given off when
gamma rays from labeled samples strike a sodium iodide crystal detector.
Packard's bioanalytical spectrometers typically range in price from
approximately $18,000 to $100,000 per instrument.
MICROPLATE READERS. Packard's microplate readers provide high-throughput
microplate scintillation counting used to screen compounds in drug discovery,
molecular and cellular biology, immunology and biomedical research. Packard's
current products perform detection using both radioisotopic and
chemiluminescence methods. Additionally, Packard introduced in 1997 microplate
readers using the fluorescence method for detection, including its proprietary
Homogeneous Time-Resolved Fluorescence ("HTRF<trademark>") instrument, the
Discovery<trademark>. HTRF<trademark> is a homogeneous non-isotopic detection
technique licensed from CIS bio international and marketed by Packard for high
throughput screening applications. Through the introduction of the Matrix 9600
and TopCount instruments in the early 1990s, Packard rapidly penetrated the
microplate reader market, becoming the largest supplier of these types of
instruments. Packard's microplate readers typically range in price from
approximately $12,000 to $180,000 per instrument.
IMAGING SYSTEMS. Packard's current imaging systems provide imaging of
isotopically-labeled samples, including gels, blots and high-density
microplates for use in drug development and molecular and cellular biology,
including areas such as genomics, neuroscience, immunology and biochemistry.
Packard entered the imaging market with the introduction of its InstantImager
in 1993. The Company believes that this product provides significant benefits
to users in terms of real-time, fast sample turnaround and enhanced
quantitation capabilities. Packard has broadened its product line through the
addition of the Cyclone, a low-cost storage phosphor imager in 1996 and intends
to introduce additional nonisotopic imagers over the next several years.
Packard's imaging systems typically range in price from approximately $18,000
to $200,000 per instrument. In 1997, the Company entered into an agreement
with Aurora Biosciences whereby the Company would develop a high-performance
imager for fluorescent clarity. Deliveries are expected to begin in mid-1998.
ROBOTIC LIQUID HANDLING SYSTEMS. Packard's robotic liquid handling
systems are used to prepare small volume samples to be dispensed into the wells
of microplates, which are then screened by microplate readers. Packard
believes that it has a strong position in the drug discovery market, the
current primary market for the Company's robotic liquid handling systems, where
its MultiPROBE robotic liquid handler is often sold in conjunction with the
TopCount microplate reader. Packard has developed the next generation
instrument for this market, the MultiPROBE II. Another new product, the
Biochip Processor<trademark> with ultrasmall volume liquid handling capability
and high precision mechanics to prepare samples in higher density microplates,
is scheduled to be introduced by mid-1998. Packard's robotic liquid handling
systems typically range in price from approximately $26,000 to $105,000 per
system. In 1997, the Company entered into an agreement with Aurora Biosciences
whereby the Company would develop a multi-tip dispensing head for ultra low
volume applications. Deliveries are expected to begin in mid-1998.
OTHER INSTRUMENTS. Packard manufactures other instruments for certain
original equipment manufacturers, which principally include hydrogen generators
and the new KRYPTOR fluorescence immunoassay instrument, developed in
conjunction with CIS bio international for the oncology segment of the clinical
diagnostic market.
BIOCHEMICALS AND SUPPLIES. Packard believes that it is the leading
biochemicals manufacturer for scintillation cocktails and supplies (e.g., vials
and microplates), with an estimated 45% share of the radioisotopic market
segment, which Packard estimates to be approximately $50 million annually.
Biochemicals and supplies sold by Packard are laboratory consumables used in
the operation of life science analytical instruments. Biochemicals principally
include light-emitting scintillation cocktails used in conjunction with
Packard's bioanalytical spectrometers. Scintillation cocktails are solutions
of biochemicals and radioactively labeled compounds used in a particular
bioanalytical spectrometer called a liquid scintillation counter. In early
1995, Packard introduced luminescence reagents for its TopCount product and, in
1996, introduced HTRF<trademark> reagents licensed from CIS bio international.
SERVICE AND SUPPORT. Packard provides purchasers of its instruments with
service and support primarily on a fixed fee, annual contract basis. Packard's
service and support include field service, customer support, applications
assistance and extensive training through an organization of approximately 160
factory-trained and educated service and application support personnel around
the world. Its installed product base provides it with stable, recurring
aftermarket service and support revenue as well as product upgrade and
replacement opportunities.
CANBERRA
Canberra is the world's largest manufacturer and distributor of
analytical instruments used to detect, identify and quantify radioactive
materials. Whereas there are many manufacturers of gross counting instruments
that measure radiation without regard to the source or type of emitter, the
Company believes that it is a leader among those companies that manufacture
instruments which can both quantify and identify the radioisotopes under
investigation through spectroscopic analysis. In addition to its products,
Canberra provides a variety of services to its customers, including aftermarket
product support and on-site analysis.
INSTRUMENTS AND DETECTORS. Canberra's instruments are stand-alone
electronic measurement components. These products are not used independently
but are the building blocks for assembling radiation measurement applications,
which are utilized for a variety of purposes. Canberra has three key
instrument product lines: NIMs, radiation detectors, and data acquisition
systems ("DAS"). NIMs are used to amplify, filter, shape, time and in other
ways process the signals generated by radiation detectors. DAS are used to
sort digitized data from the NIMs into frequency distributions according to
incoming pulse heights.
APPLIED SYSTEMS. Applied systems are integrated turn-key radiation
measurement systems that have all the required hardware and software necessary
to meet specific application needs. This category of products has recently
been the fastest growing segment of Canberra's business. Canberra manufactures
both standard systems and customized systems used for more specific
applications. Canberra's standard systems are used for worker health and
safety systems, radioactive waste analysis, environmental monitoring and
safeguards applications. The worker health and safety systems include whole
body counters, in vitro analysis systems and database information systems, and
provide accurate measurement of internal radiation dosage, maintain long-term
records of exposure and control access to radiation areas, a key component in
worker health and safety. Canberra provides such systems as permanent
installations, mobile facilities and temporary rental units, and all are
available as complete turn-key systems.
The Company believes that the application of safeguards, the means of
accounting for fissile materials and preventing diversion, is expanding due to:
(i) the growth of reprocessing facilities and associated mixed oxide (MOX) fuel
facilities, (ii) the submission of former weapons facilities to international
inspection, (iii) the large volume of weapons materials being extracted from
decommissioned weapons, and (iv) the disposition of those materials in new
facilities. Through the 1997 acquisition of Aquila, Canberra was able to
expand the breadth of its products and services offered to the safeguards
markets. Aquila is an industry leader in the production of digital
surveillance systems and review stations, and electronic seals and tags for the
worldwide nuclear safeguards community. Digital surveillance cameras, Gemini
Automatic Review Stations and IN SITU verifiable seals are some of Aquila's
more prominent products.
The Company believes that Canberra has been a commercial leader in
radioactive waste analysis systems for nearly 20 years. The new waste assay
systems that the Company has developed and is continuing to develop address the
needs of temporary and permanent off-site repositories that are currently being
planned and established for radioactive waste. Canberra's full array of
transportable radioanalysis systems, which range from portable systems to
mobile trailers, address the requirements for environmental restoration and
monitoring. With the introduction of its new in suta object counting system
("ISBCS"), Canberra believes it is positioned to capture new business.
AFTERMARKET SERVICE AND SUPPORT. Canberra's instrumentation and applied
system product segments generate continuing service demand in the form of
maintenance, product enhancement, general repair and training. Canberra
believes that it has developed a reputation in the industry for high quality
customer service, provided by approximately 90 factory-trained and educated
service personnel worldwide. Its installed product base provides it with
stable, recurring aftermarket service and support revenue as well as product
upgrade and replacement opportunities.
TRANSACTION-BASED SERVICES. Canberra has started conducting the analysis
and other transaction-based services required by its customers. These services
were developed in response to the DOE's privatization initiatives. An example
of Canberra's full service approach is its ability to assume total performance
responsibility for nuclear waste characterization in connection with
environmental restoration projects. Canberra can provide all necessary
equipment, mobile systems and personnel to characterize and sort waste into
treatment and disposal streams. Canberra's environmental restoration
specialists review data and work with team members to maximize operational
efficiencies. Canberra provides characterization of containerized waste based
on fixed-unit pricing.
A permanent waste repository is scheduled to open in May 1998 in
Carlsbad, New Mexico, to be called the Waste Isolation Pilot Plant (the
"WIPP"). The WIPP will provide permanent underground storage for DOE
transuranic waste ("TRU") produced since 1970. It is estimated that there are
approximately 3 million barrels and 1 million boxes of TRU stored at sites
around the country. In order to move this waste to the WIPP, it must be
characterized. Such characterization, which Canberra performs, is estimated to
cost between $2,000 to $10,000 per barrel and as much as $100,000 per box.
Once the WIPP is opened, it is expected that shipments to it will continue for
at least ten years.
RESEARCH AND DEVELOPMENT
The Company's research and development ("R&D") efforts are focused on
supporting its business development efforts, and each project is scrutinized
for feasibility, return on investment and time to market. The Company has a
program of both internal and external R&D projects in support of its overall
growth initiatives. The Company's R&D expenditures during 1995, 1996 and 1997
were $14.4 million, $17.9 million and $23.5 million, respectively. The
Company's increased expenditures on R&D during the 1995 through 1997 period
primarily reflects Packard's investment in product enhancement and new product
development.
Packard's principal R&D mission is to develop a broad portfolio of
technologies, products and core competencies in what it believes are the two
most attractive business segments of the life sciences industry, drug discovery
and genomic research. Packard's R&D focus is on the development and rapid
commercialization of technology. Rather than seek to develop fundamental
technological advances through its own research, Packard emphasizes
evolutionary technological improvements and the commercial application of
technologies obtained through acquisitions, licenses, joint ventures or
collaborations as well as its own research. Because of its strong, long-term
customer relationships, Packard's customers often identify technologies of
which the customer has become aware that would be suitable for development and
commercialization by Packard. In addition, Packard's global research and
technology collaborations complement its internal R&D resources by expanding
the breadth of Packard's basic research. Packard's R&D is organized into
business units to support new product development for existing product lines
and a group to research and create new technology platforms. Products are
developed by cross-functional teams and reviewed by a peer group to enhance
institutional learning.
The Company believes that Canberra's technical expertise and new product
development efforts are among the best in the commercial nuclear instrument
industry. It employs approximately 30 Ph.D. nuclear spectroscopists, Ph.D.
nuclear engineers, certified health physicists, master-degreed physicists,
nuclear engineers and radiochemists. The Company believes that this group of
scientists and engineers enables Canberra to transform research-level systems
into standardized, user-friendly products that enjoy broad market support. An
important route to technology commercialization is through Cooperative Research
and Development Agreements ("CRADA") with the DOE. The CRADA process is one in
which a commercial company and a national laboratory share the cost of
developing and commercializing innovative technologies. The Company has
entered into various CRADA's requiring milestone payments and future royalty
payments upon satisfaction of certain criteria as specified in such agreements.
The Company has a successful history of technology transfers from DOE national
laboratories.
MARKETING, SALES AND SERVICE
Packard's organization is divided into four business units, organized to
support its major product lines and identify new market opportunities, lead
acquisition activities and create new technology platforms. Business unit
managers in each business unit have responsibility for maintaining a leadership
position with existing products. New market development managers have
responsibility for cultivating new markets, identifying new technologies and
creating new products in Packard's principal growth areas of drug discovery and
genomic research. Packard's marketing strategy relies heavily on extensive
training of direct sales and distributor organizations, consultative selling
approaches, responsive on-site customer support, applications education and the
use of electronic communication vehicles such as Lotus Notes, E-mail and an
Internet WorldWide Website. These communication links give business unit
managers, new market development managers and application scientists the
ability to have interactive dialogue with customers around the world, helping
to guide Packard's efforts to find new ways to deliver customer benefits and to
identify product innovations.
Packard has direct sales and service organizations in the United States,
Australia, Austria, Belgium, Denmark, France, Germany, Italy, Japan, The
Netherlands, Russia, Switzerland and the United Kingdom. Products are also
sold through exclusive, independent distributors in Canada, Mexico, South
Korea, Spain, Taiwan and over 40 other countries active in bioanalytical
research. Packard's sales representatives are compensated with a combination
of base salary and, to the extent sales and service goals are achieved or
exceeded, incentive compensation. Through its global organization of direct
sales representatives and distributors, who are supported by a network of
experienced application and service support personnel, Packard has access to
life sciences researchers in academic, government, hospital and industrial
laboratories worldwide.
Packard has skilled service engineers and technical specialists available
worldwide providing service, maintenance and application consulting in the
laboratory. With the added convenience of service agreements and routine,
preventive and value-added maintenance, Packard seeks to ensure that its
instrumentation is producing precise results for its customers. In addition,
the close relationship between customers and service personnel provide Packard
with access to new product and application ideas as well as new sales
opportunities.
Canberra's marketing organization is divided into two groups:
(i) industry or market specialists, who are responsible for sales and marketing
strategy in Canberra's largest industry segments (i.e. nuclear power, nuclear
fuel manufacturing and weapons material production); and (ii) product or
applications managers who are responsible for specific product or applications
segments in all industries. The two groups work as a team in defining and
promoting products and applications into each market segment. They also form a
team with the sales engineers for significant sales situations. In addition,
there is a business development group which is responsible for strategic
marketing for Canberra and investigation into and implementation of new
opportunities, both from a technical and market perspective. Canberra's
marketing strategy is to position Canberra as an applications expert. In so
doing, Canberra seeks to exploits its ability to offer worldwide distribution,
worldwide service, multi-platform software support, as well as worldwide
applications and training support.
In the United States, Canberra's sales force consists of 13 sales
engineers who cover the breadth of its product line with extensive support from
field and in-house specialists. Canberra's European sales force is comprised
of direct sales operations in Austria, Belgium, France, Germany and the United
Kingdom, and distributors in the remainder of Europe. The sales organization
for other international markets consists of direct sales operations in Russia
and Australia, one minority-owned distributor covering Central Europe and the
Ukraine, and approximately 40 independent exclusive distributors covering over
50 countries. Canberra compensates its sales force with a combination of base
salary and, to the extent sales and service goals are achieved or exceeded,
incentive compensation. Canberra provides worldwide service and support
through two manufacturing locations in the United States and one in Europe,
five U.S.-based field service offices, and sales and service offices in nine
countries. The Company has sales and service operations near most major
nuclear sites with a strong international presence and contacts in emerging
markets such as South America. The Company believes that it is well recognized
in the industry for high quality service, and that its extensive sales and
distribution network provide it with strong relationships with almost every
major user of nuclear instruments in the world.
As of December 31, 1997, the number of Company employees in sales and
marketing and service were approximately as follows:
<TABLE>
<CAPTION>
PACKARD CANBERRA Total
<S> <C> <C> <C>
Sales and Marketing 171 74 245
Service 168 95 263
Total 339 169 508
</TABLE>
MANUFACTURING
The Company has created a well-disciplined, low cost manufacturing
culture and believes that it is a low cost producer for instruments
manufactured by both Packard and Canberra. The Company's manufacturing
facilities have established a "focused cell system" in which employees are
divided into distinct manufacturing cells, each of which is wholly responsible
for a specific product line. Employees are also cross-trained to work on
multiple cells. The Company utilizes "just-in-time" inventory management,
which resulted in inventory turns of approximately four times per year in 1997.
To further reduce its average production cycle time and the cost of raw
materials, the Company uses outsourced standard components and sub-assemblies
as well as standard, "off-the-shelf" products, such as printed circuit boards
and power supplies.
Packard manufactures all of its instruments at its Downers Grove,
Illinois facility. Chemical production of scintillation and luminescence
products occurs at Packard's facility in Groningen, The Netherlands. Packard's
manufacturing operations are certified to ISO 9001 quality standards, and all
Packard products sold in the United States, Canada and Mexico are certified by
the Canadian Standards Association, which monitors safety standards throughout
North America. All of Packard's instruments sold in Europe are in conformity
with current European Community directives regarding safety, quality and
electromagnetic compatibility and have qualified under the European Community's
"CE Mark."
Canberra manufactures most of its nuclear instruments, radiation
detectors and applied systems at its Meriden, Connecticut, and Albuquerque, New
Mexico facilities. Certain of Canberra's radiation detectors are also
manufactured in its Olen, Belgium, facility. Canberra has established a
certified and documented quality system as a means of ensuring that products
and services conform to specifications, and this system has been certified to
ISO 9001 standards and complies with the American National Standards Institute
quality standards. The Company has also qualified a significant portion of its
product line under the "CE Mark."
CUSTOMERS
The Company's customers include pharmaceutical, biotechnology, electric
utility, chemical and industrial companies as well as academic institutions,
government laboratories and private foundations. Customers of Packard include
Amgen Inc., Bristol-Meyers Squibb Company, Fujisawa Pharmaceutical Co. Ltd.,
Genentech, Inc., Gen-Probe Incorporated, Glaxo Wellcome PLC, Harvard Medical
School, Hoffman LaRoche AG, Merck & Co., Inc., National Institutes of Health,
Pasteur Institute, and the University of California. Customers of Canberra
include DOE sites Los Alamos National Laboratory, Savannah River Site and Rocky
Flats; Commonwealth Edison Company; Southern Nuclear Company; Duke Power
Company; Power Reactor and Nuclear Fuel Development Corporation; COGEMA;
EURATOM and the International Atomic Energy Agency. Sales to the DOE were
approximately 7% of the Company's fiscal 1997 revenues and approximately 20% of
Canberra's fiscal 1997 revenues. Total DOE sales are diversified among 13
major nuclear sites in the United States, each with numerous and distinct
projects, laboratories and priorities. Moreover, the nuclear mission of the
DOE is divided into three diverse categories: environmental restoration and
management, treaty obligations (SALT, START, and Safeguards) and new weapons
production. No customer of the Company accounted for more than 10% of the
Company's revenues in fiscal 1997.
COMPETITION
Packard competes with several manufacturers in both domestic and foreign
markets within the drug discovery and molecular biology segments of the life
sciences instrumentation industry. Moreover, Packard encounters different
competitors in each of its key product lines. Beckman Instruments, Inc., EG&G
Wallac Inc. and Tecan AG compete in a number of Packard's product lines, and
several companies compete in one of Packard's product lines.
Packard competes principally on the basis of quality, product features,
product performance, price and service. Competition within the markets that
Packard serves is primarily driven by the need for innovative products that
address the needs of customers. Packard attempts, to the extent possible, to
counter competition by seeking to develop differentiated new products and
provide quality products and services that meet customers' needs.
Canberra's end markets are characterized by a small number of large
competitors. Over the past decade, significant consolidation in the industry
has been led by Canberra, Eurisys Mesures (a subsidiary of SGN/COGEMA) in
France, and British Nuclear Fuels PLC in the United Kingdom. Within the
applied systems market, the Company believes that it is the only company that
has a leading position within every market category. Canberra competes
principally on the basis of applications expertise and also benefits from
superior quality, product reliability, performance and service. EG&G Ortec and
Eurisys Mesures compete in a number of Canberra's product lines, and several
companies compete in one of Canberra's product lines.
RAW MATERIALS
The Company uses many standard parts and components in its products and
believes there are a number of competent vendors for most parts and components.
However, a number of important components are developed by and purchased from
single sources due to price, quality, technology (including patent protection)
or other considerations. Canberra purchases high purity germanium crystals as
part of the manufacture of high resolution radiation detectors. Germanium
detectors represent a significant portion of total Canberra sales. The sources
of supply of these crystals are limited to two manufacturers (Oxford
Instruments Inc. and Union Miniere) from whom Canberra makes purchases.
Canberra has secured under contract what it believes to be a long-term,
dependable supply of these crystals from one of the two manufacturers. The
term of the supply contract has no fixed termination date, but continues until
terminated by either party upon four years' written notice. The supply
contract also provides for termination by the other party upon (i) the
manufacturer's failure to meet its supply obligations, (ii) the manufacturer's
failure to honor certain warranty claims, (iii) Canberra's failure to pay
invoices in a timely manner, (iv) the assignment of the contract by either
party in violation of the contract and (v) the bankruptcy or liquidation of
either party. In the case of clause (i) above, the supply contract may be
terminated only after certain dispute resolution procedures have been
exhausted. Other features of the supply contract include price increase
limitations linked to the costs of crystal production and the grant to Canberra
of a right of first refusal to acquire the germanium crystal vendor's
production capability if the vendor proposes to sell or discontinue its crystal
business. Notwithstanding the terms of this contract, there can be no
assurance that the supply of germanium crystals will continue at the level and
prices Canberra currently enjoys.
INTELLECTUAL PROPERTY
The Company owns numerous United States and foreign patents, and has
patent applications pending in the United States and abroad. Further, the
Company licenses certain intellectual property rights to or from third parties.
In addition to its patent portfolio, the Company possesses a wide array of
unpatented proprietary technology and know-how. The Company also owns numerous
United States and foreign trademarks and trade names and has applications for
the registration of trademarks and trade names pending in the United States and
abroad. The Company believes that patents and other proprietary rights are
important to the development of its business, but also relies upon trade
secrets, know-how, continuing technological innovations and licensing
opportunities to develop and maintain its competitive position.
Packard licenses technology from a number of third parties, including,
among others, licenses in connection with certain of its liquid handling
systems, imager products and microplate readers. The licenses are generally
long-term and require Packard to pay royalties to the licensor in connection
with sales of the product utilizing the licensed technology. Certain of the
licenses, including the license agreement with CIS bio international for
HTRF<trademark> technology in connection with Packard's Discovery<trademark>
product, may be terminated by the licensor if Packard fails to meet certain
volume targets. The licenses are generally exclusive licenses, but some are
nonexclusive in particular geographic regions and others may be made
nonexclusive if Packard fails to meet certain volume targets. Packard does not
believe that it is dependent on any single license or that the loss of any
single license would have a material adverse effect on the Company's results of
operations.
In some cases, litigation or other proceedings may be necessary to defend
against or assert claims of infringement, to enforce patents issued to the
Company or its licensors, to protect trade secrets, know-how or other
intellectual property rights owned by the Company, or to determine the scope
and validity of the proprietary rights of the Company or of third parties.
Such litigation could result in substantial costs to and diversion of resources
by the Company. An adverse outcome in any such litigation or proceeding could
subject the Company to significant liabilities and expenses (e.g., reasonable
royalties, lost profits, attorney's fees, trebling of damages for willfulness,
etc.), require the Company to cease using the disputed intellectual property or
cease the sale of a commercial product, or require the Company to license the
disputed rights from third parties, any of which could have a material adverse
effect on the Company's business, financial condition and results of
operations.
The Company is currently involved in two separate litigations with EG&G
Instruments, Inc. ("EG&G Instruments") concerning intellectual property. See
"ITEM 3: LEGAL PROCEEDINGS."
EMPLOYEES
As of February 28, 1998, the Company had 1,085 employees. 71% of
employees as of that date were located in the United States. The Company's
workforce is non-union, and the Company believes that its relations with
employees are satisfactory.
ENVIRONMENTAL MATTERS
The Company's operations are subject to federal, state, local and foreign
environmental laws and regulations that impose limitations on the discharge of,
and establish standards for the possession, distribution, handling, generation,
emission, release, discharge, export, import, treatment, storage and disposal
and clean up of, certain materials, substances and wastes. To the best of the
Company's knowledge, its operations are in material compliance with all
applicable environmental laws and regulations as currently interpreted. The
Company and local authorities in Groningen, The Netherlands, are in the process
of negotiating a remediation plan involving groundwater contamination at the
Duinkerkenstraat facility. See "ITEM 3: LEGAL PROCEEDINGS."
Management cannot predict with any certainty whether future events, such
as changes in existing laws and regulations or the discovery of conditions not
currently known to the Company, may give rise to additional environmental
costs. Furthermore, actions by federal, state, local and foreign governments
concerning environmental matters could result in laws or regulations that could
increase the costs of producing the Company's products, or providing its
services, or otherwise adversely affect the demand for its products or
services. During fiscal 1997, the Company did not expense any amount relating
to environmental remediation.
REGULATION
The Company, in the ordinary course of business, handles a variety of
low-level radioactive sources for purposes of quality control and calibration
of its products. The Company maintains United States Nuclear Regulatory
Commission ("NRC") and appropriate state licenses for all sources of radiation
in its possession. In addition, the Company has a radiation safety program at
each licensed site the objective of which is to assure proper handling and
control of all radioactive materials. The Company believes that it is in
material compliance with all of its NRC and state licenses.
Under NRC regulations, the NRC must be advised of any proposed transfer
of the ownership of a license granted by the NRC. Pursuant to these
regulations, the NRC was advised of and consented to the transfer of ownership
effected by the Recapitalization.
GEOGRAPHIC INFORMATION
Financial information about the Company's foreign and domestic operations
and export sales is set forth in Note 10 to the consolidated financial
statements included in Part II of this Form 10-K, to which reference is hereby
made.
ITEM 2: PROPERTIES
As of March 20, 1998, the Company owned the manufacturing facilities set
forth below:
<TABLE>
<CAPTION>
LOCATION FUNCTION SQUARE FEET
<S> <C> <C>
Meriden, Connecticut Headquarters, training, service, customer support, engineering, 170,000
software development and manufacturing (Packard and Canberra)
Downers Grove, Illinois Manufacturing, service, engineering and R&D (Packard) 109,000
Groningen, The Netherlands Manufacturing (chemicals and supplies) (Packard) 31,000
Olen, Belgium Detector manufacturing (Canberra) 10,000
</TABLE>
In addition, Aquila leases an administration, manufacturing and
warehousing facility in Albuquerque, New Mexico. The facility is approximately
22,700 square feet. The lease expires in June 2004.
The Company owns two sales and distribution facilities occupied by its
foreign subsidiaries. The others are leased.
The Company believes that its facilities are suitable for their present
and intended purposes and are adequate for the Company's current and expected
level of operation.
ITEM 3: LEGAL PROCEEDINGS
The Company is currently, and is from time to time, subject to claims and
suits arising in the ordinary course of its business, including those relating
to product liability, safety and health and employment matters. In certain
such actions, plaintiffs request punitive or other damages that may not be
covered by insurance. The Company accrues for these items as they become known
and can be reasonably estimated. It is the opinion of management that the
various asserted claims and litigation in which the Company is currently
involved will not have a material adverse effect on the Company's financial
position or results of operations. However, no assurance can be given as to
the ultimate outcome with respect to such claims and litigation. The
resolution of such claims and litigation could be material to the Company's
operating results for any particular period, depending upon the level of income
for such period.
The Company is currently involved in two separate litigations with EG&G
Instruments, a subsidiary of EG&G, Inc., concerning intellectual property
rights. In the first lawsuit, Packard sued EG&G Instruments on March 5, 1996,
in District Court I in Munich, Germany, 21st Civil Division. Packard contends
that EG&G Instruments' 1450 cross-talk free microplate infringes a Packard
German patent. The EG&G Instruments product at issue competes with a Packard
Viewplate product. In the second lawsuit, EG&G Instruments sued the Company on
September 17, 1996, in the United States District Court for the Eastern
District of Tennessee, alleging patent infringement. The lawsuit concerns an
automatic pole-zero cancellation circuit which is utilized in three amplifiers
presently manufactured and sold by the Company, and EG&G Instruments is seeking
a judgment of infringement, a permanent injunction, damages not less than a
reasonable royalty and an accounting of the Company's profits with pre-judgment
interest. EG&G Instruments has also asserted that the Company's infringement
is willful and therefore has requested that damages be trebled and that
attorneys' fees be awarded. The Company has counterclaimed, alleging EG&G's
patents are invalid. Although the Company believes that it will prevail in
this litigation and intends to defend this claim vigorously, there can be no
assurance as to the outcome of the lawsuit or that, if determined adversely,
the outcome would not have a material adverse effect on the Company's financial
condition or results of operations.
The Company and provincial authorities in Groningen, The Netherlands, are
in the process of negotiating a remediation plan involving groundwater
contamination at the Company's Duinkerkenstraat facility. The Company believes
that the causes of this contamination entirely predate the Company's
acquisition of Packard in 1986 and has sought indemnification under the
purchase agreement from United Technologies Automotive Holdings, Inc. ("UTAH"),
a subsidiary of United Technologies Corporation. UTAH has assumed an active
role in seeking to resolve this matter and, to date, has held Packard harmless
pursuant to an indemnification procedures agreement entered into by the parties
in 1989. The Groningen property is owned by Packard BioScience B.V. ("PBBV"),
a subsidiary of the Company. Although the liability associated with this
matter could be material, the Company believes that any liability of PBBV in
this matter is covered by the indemnification provisions of the purchase
agreement with UTAH. However, there can be no assurance that UTAH will
continue to indemnify the Company for all liability, and that the Company will
not incur any material costs, related to contamination at the Duinkerkenstraat
facility in Groningen.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the year ending December 31, 1997.
<PAGE>
PART II
ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock has not been registered under The Securities
Act of 1933 and is not publicly traded. As a result, there are no established
public trading markets for such securities. The fair values noted in the table
below are based upon annual independent appraisals, with the exception of the
first three quarters of 1997 which are based upon the arm's-length value
assigned to the Company's common stock in connection with the Recapitalization.
The fair market value of the Company's common stock, based upon yearly
independent appraisals, as of the end of each quarter of 1997 and 1996, is
indicated below (all amounts reflect the Company's one-for-one stock dividend
declared in May 1997, described in Note 5 to the consolidated financial
statements contained herein):
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
1st Quarter $11.125 $8.00
2nd Quarter $11.125 $8.00
3rd Quarter $11.125 $8.00
4th Quarter $13.96 $8.00
</TABLE>
During 1996, the Company paid a $0.40 per share dividend ($0.20 per
share, reflecting a one-for-one stock dividend declared in May 1997). No
dividend was paid during 1997. In connection with the Recapitalization
effected in March 1997, the Company is prohibited from paying any future
dividends (refer to Note 4 to the consolidated financial statements included in
Part II of this Form 10-K).
As of March 20, 1998, there were 174 record holders of the Company's
common stock.
ITEM 6: SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following table sets forth selected historical consolidated financial
data with respect to the Company for the periods ended and as of the dates
indicated. The selected historical consolidated financial data for the years
ended December 31, 1997, 1996 and 1995 are derived from the audited
consolidated financial statements of the Company included elsewhere in this
Form 10-K. This information should be read in conjunction with the
consolidated financial statements of the Company, the notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing elsewhere in this Form 10-K. The selected historical
consolidated financial data for the years ended December 31, 1994 and 1993, are
derived from audited consolidated financial statements of the Company that are
not included in this Form 10-K.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED DECEMBER 31,
(Dollars in thousands, except per share amounts)
1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C>
Operating Statement Data:
Total revenues $156,735 $165,384 $169,114 $184,018 $184,113
Cost of revenues 81,228 85,299 82,635 85,757 87,616
Gross profit 75,507 80,085 86,479 98,261 96,497
Research and development
expenses 13,494 13,726 14,414 17,852 23,480
Selling, general and
administrative expenses 45,066 45,062 47,322 48,830 49,855
Other charges (1) -- 3,450 -- 837 18,429
Income from operations 16,947 17,847 24,743 30,742 4,733
Interest expense (175) (558) (616) (122) (18,119)
Other income (expense), net (630) 2,940 1,153 1,149 790
Flood (costs) savings (2) (1,897) 551 -- -- --
Income (loss) before
provision for income taxes
and minority interest 14,245 20,780 25,280 31,769 (12,596)
Provision for income taxes 2,488 8,470 9,875 11,187 5,941
Minority interest in income
of subsidiary 909 768 800 1,346 218
Net income (loss) $ 10,848 $ 11,542 $ 14,605 $ 19,236 ($18,755)
Weighted average, diluted,
shares outstanding (3) 27,852,508 26,646,136 25,882,444 25,139,484 12,463,671
Diluted earnings (loss) per
share (3) $0.39 $0.43 $0.56 $0.77 ($1.50)
BALANCE SHEET DATA:
Working capital $ 46,191 $ 44,776 $ 51,341 $ 59,216 $ 32,265
Total assets 112,384 115,212 120,602 137,925 140,651
Long-term debt (net of
current portion) 2,547 2,399 1,753 2,037 192,193
Stockholders' equity (deficit) 65,581 65,867 72,429 80,593 (112,014)
</TABLE>
(1) Amount in 1994 relates to a restructuring charge incurred in connection
with the Company's shutdown of its Itasca, Illinois, facility and the
relocation of most of its operations to Meriden, Connecticut. Most of
these costs incurred related to employee terminations and a lease
buy-out. Amounts in 1996 and 1997 relate to expenses incurred in
connection with the Recapitalization (refer to Note 11 to the
consolidated financial statements included herein).
(2) In 1993, additional costs were incurred by the Company for temporary
facilities and a provision was made for the termination of the remaining
lease obligation of the old headquarters, which was flooded in 1992.
During 1994, the recorded obligation to the previous landlord was settled
for an amount less than that accrued as of December 31, 1993.
(3) The weighted average shares outstanding and earnings (loss) per share
amounts have been computed based on the average shares outstanding during
each of the periods presented, including the impact of outstanding
options determined under the treasury stock method, with the exception of
1997. The 1997 weighted average shares outstanding and loss per share
amounts exclude the impact of outstanding options as their effect is
anti-dilutive.
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the consolidated financial statements and related notes included elsewhere in
this Form 10-K.
This report contains statements which, to the extent they are not
recitations of historical facts, constitute "forward-looking" statements. Many
factors could cause actual results to differ materially from these statements.
These factors include, but are not limited to, (1) loss of market share through
competition, (2) dependence on customers' capital spending policies and
government funding, (3) limited source supply of key raw materials, (4)
reliance on, and ability to protect, key patents and intellectual property, (5)
complexity and technological feasibility of research and development and new
product introductions, (6) decline in utilization of products and technology,
(7) stability of economies overseas and fluctuating foreign currencies, (8)
changes in environmental laws and regulations, (9) loss of key employees, and
(10) other factors which might be described from time to time in the Company's
filing with the Securities and Exchange Commission. As a result, there can be
no assurances that the forward-looking statements will be achieved.
GENERAL
The Company is a leading developer, manufacturer and marketer of
analytical instruments and related products and services for use in the drug
discovery and molecular biology segments of the life sciences industry and in
nuclear research, safeguarding and environmental remediation. Through Packard,
the Company supplies bioanalytical instruments and related biochemical supplies
and services to the drug discovery and molecular biology markets, and through
Canberra, the Company manufactures and sells analytical instruments used to
detect, identify and quantify radioactive materials for the nuclear industry
and related markets.
RESULTS OF OPERATIONS (DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED DECEMBER 31,
1995 1996 1997
<S> <C> <C> <C>
Total revenues:
Packard $107,156 $122,676 $120,286
Canberra 61,958 61,342 63,827
169,114 184,018 184,113
Gross profit:
Packard 56,519 68,158 65,918
Canberra 29,960 30,103 30,579
86,479 98,261 96,497
Operating expenses:
Research and development 14,414 17,852 23,480
Selling, general and administrative 47,322 48,830 49,855
Recapitalization charges 0 837 18,429
Operating profit 24,743 30,742 4,733
Interest expense (616) (122) (18,119)
Other income, net 1,153 1,149 790
Income (loss) before provision for
income taxes and minority interest 25,280 31,769 (12,596)
Provision for income taxes 9,875 11,187 5,941
Minority interest in income of
subsidiary 800 1,346 218
Net income (loss) $ 14,605 $ 19,236 $(18,755)
</TABLE>
Excluding the impact of changes in foreign currency exchange rates,
consolidated total revenues would have been $8.3 million higher than reported
in 1997. The 1997 period reflects the operating results of Aquila Technologies
Group, Inc. ("Aquila"), a manufacturer and distributor of products used in the
nuclear safeguarding business, which was acquired effective September 1, 1997.
Aquila's post-acquisition operating results are included with those of Canberra
and the Company on a consolidated basis. During the four month period of
September 1 through December 31, 1997, Aquila generated net revenues of $4.8
million, gross profit of $1.8 million and operating income of approximately
$1.0 million. During this same period, Aquila incurred approximately $0.5
million of selling, general and administrative expenses representing over half
of the increase in the Company's total selling, general and administrative
expenses between 1997 and 1996.
Consolidated revenues in 1996 increased to $184.0 million from the $169.1
million level generated in 1995. Had exchange rates in 1996 remained unchanged
from those in 1995, revenues would have been approximately $6.0 million higher
than reported.
Packard's total revenues decreased slightly during 1997 as compared to
1996. The decrease was due primarily to the stronger U.S. dollar during 1997
compared to 1996, and reduced sales at the Company's Japanese subsidiary,
Packard Japan KK ("PJKK"). The lower sales volume at PJKK is a direct result
of the Japanese government's efforts during 1996 to stimulate the Japanese
economy through increased spending in areas including the Company's products
and services. During 1997, the Japanese government's spending level in these
areas decreased dramatically. Sales at PJKK declined from $21.7 million in
1996 to $13.1 million in 1997. Of this decline, $1.5 million was attributable
to the stronger U.S. dollar, compared to the Japanese yen, during 1997. This
decrease at PJKK was partially offset by increases in sales of new products
including the HTRF<trademark> instrument, Kryptor<trademark>, liquid handling
equipment and imagers, as well as increased chemical and supply sales.
The increase in Packard's 1996 revenues as compared to 1995 is due
primarily to strong sales growth in certain instrument product lines as well as
an increase in sales by PJKK primarily for reasons described in the preceding
paragraph.
Canberra's increased revenues in 1997 of $2.5 million to $63.8 million
was due primarily to the acquisition of Aquila in September 1997. This
increase was negatively affected by the unfavorable exchange impact of the
strengthening U.S. dollar in 1997 as compared to 1996 as well as pressure
within some of the European countries in which Canberra operates to purchase
products manufactured within such countries rather than from overseas.
Canberra's 1996 revenues declined slightly from its 1995 levels due
primarily to the unfavorable effect of foreign exchange rates, partially offset
by higher sales of standalone instruments.
The Company's gross profit for the 1997 year was down in comparison with
the prior year period due to the lower sales volume at PJKK as well as
unfavorable currency exchange rate fluctuations. PJKK's gross profit declined
from $10.2 million in 1996 to $6.0 million in 1997, due to a combination of
lower sales volume and the unfavorable translation impact of the stronger U.S.
dollar during 1997. This decline was partially offset by $1.8 million of
gross profit generated by Aquila since the date of acquisition as well as new
product introductions mentioned above. The Aquila gross profit was partially
offset by a one-time $0.8 million charge associated with the write-off of
Aquila inventory acquired which was recorded at fair market value at the date
of acquisition under purchase accounting requirements.
The significant growth in the Company's consolidated gross profit in 1996
as compared to 1995 is the result of increased sales from PJKK, improved
Company-wide manufacturing efficiencies and improved sales and related margins
achieved by Packard's European subsidiaries.
The increase in research and development from $17.9 million in 1996 to
$23.5 million in 1997, a 31% increase, primarily reflects increased investment
primarily on the part of Packard, in the areas of product enhancement, new
product development and collaborative research and development arrangements.
Research and development spending in 1997 was the equivalent of 12.8% of total
revenues.
The increase in selling, general and administrative expenses during 1997
as compared to 1996 is due primarily to inclusion of Aquila. As a percentage
of total revenues, selling, general and administrative costs decreased in 1996
as compared to 1995 due primarily to the effect of a higher revenue base in
1996.
During 1997 and 1996, the Company recorded $18.4 million and $0.8
million, respectively, in charges associated with the Recapitalization. Refer
to Note 11 to the consolidated financial statements included in this Form 10-K
for a detailed description of the Recapitalization and related costs.
The consolidated operating profit of $4.7 million during 1997 compares
with $30.7 million in 1996 and $24.7 million in 1995. In addition to the
Recapitalization charge, the 1997 operating profit reflects the negative impact
of the lower Japanese operating results, increased research and development
spending and the stronger U.S. dollar as compared to 1996. The 1996 increase
in operating profit over the 1995 level was due primarily to the significant
increase in sales volume experienced at PJKK, partially offset by the effects
of the stronger U.S. dollar.
The increase in interest expense and decrease in interest income during
1997 is a direct result of the funds used for the Recapitalization and
associated increase in indebtedness.
The 1997 consolidated effective tax rate was 47%, representing a tax
provision on a pre-tax loss. The effective rate reflects the Company's
recognition of a valuation allowance against the future tax benefit associated
with the 1997 domestic net operating loss carryforward and credit
carryforwards. Such carryforwards will be available to offset future domestic
taxable income for statutorily specified periods. However, due to the
uncertainty as to whether the benefits of such carryforwards will be realized,
a valuation allowance has been provided against the related tax assets. The
effective tax rate also reflects taxes provided on overseas earnings including
higher tax rate countries such as Japan. The effective tax rate in 1996 and
1995 was 35% and 39%, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Over half of the Company's consolidated revenues are generated from
foreign sources, denominated in currencies other than the U.S. dollar. As
such, the Company's reported operating results are effected by changes in
foreign currency exchange rates. A strengthening U.S. dollar against the
currencies through which the Company conducts foreign business has a negative
impact on U.S. dollar reported operating results. To manage the exposure of
fluctuating foreign currency exchange rates, the Company employs hedging
strategies. Refer to Note 1 to the consolidated financial statements for a
description of the Company's hedging practices.
The Company has historically generated sufficient cash flow from
operations to meet its working capital requirements as well as to fund capital
expenditures, debt service and equity transactions such as dividend payments
and stock repurchases. In connection with the Recapitalization, the Company
increased its long-term indebtedness by $190.0 million and, as a result, debt
service requirements have increased significantly as compared to historical
levels. The Company has, as of March 20, 1998, $64.0 million of funds
available under a $75 million revolving credit facility secured as part of the
Recapitalization. Monies available under this credit facility are subject to
certain restrictions and provisions contained therein. (Refer to Note 4 to the
consolidated financial statements contained in this Form 10-K for a description
of the indebtedness and repayment terms and conditions). Prior to the time at
which significant levels of principal on the term loan and subordinated notes
become due in fiscal 2002, the Company will evaluate and identify the most
advantageous options available to service such debt. Options may include
refinancing such principal under potentially new terms and conditions or
repaying such debt through funds obtained through other sources or means.
However, there can be no assurance that any new financing will be available or
that the terms thereof will be favorable to the Company.
The Company expects to generate adequate cash from operations to meet
most of its working capital needs as well as to provide for necessary debt
service requirements during the next several years. The Company can and will
borrow monies from the revolving credit facility in order to meet temporary or
seasonal shortfalls which may arise in the level of cash generated from
operations, to fund contingent payments associated with recent acquisitions
(see Note 13 to the consolidated financial statements included herein) and to
fund acquisitions. The Company expects that, should the generation of excess
available operating cash flow be insufficient, it will utilize the revolving
credit facility to fund a significant portion of its strategic acquisition
program and new product development initiatives, as well as a portion of
capital expenditures for machinery, equipment and facility expansions as well
as technology related investments.
Operating activities generated $2.2 million, $33.2 million and $18.8
million of cash during 1997, 1996 and 1995, respectively. The reduced
operating cash flow in 1997 compared with 1996 was primarily a result of the
cash portion of the Recapitalization charge ($9.0 million) recognized in 1997,
the additional interest incurred on the Recapitalization indebtedness and the
lower operating results during 1997 as compared to the prior year. The
Company utilized a significant amount of cash (approximately $25.1 million)
during 1996 and 1997 to fund Recapitalization related fees and other related
expenses. The increased operating cash flow in 1996 compared with 1995 was
primarily due to increased earnings in 1996 as well as higher levels of
accounts payable and accrued expenses at the end of 1996 as compared with
yearend 1995.
During 1997, the Company's investing cash flow requirements consisted
primarily of the following:
o In May 1997, PJKK entered into an agreement to acquire the 40%
interest held by its minority stockholder for approximately $7.5 million.
(Refer to Note 12 to the consolidated financial statements included
herein.) The acquisition has been funded through a combination of cash
on hand and notes payable to the minority stockholder. The Company
expects that PJKK will be able to fund the remainder of the debt service
obligations as they become due without additional funding by the parent
company.
o In August 1997, the Company acquired a 19.8% equity interest in
BioSignal Inc., a developer of cloned genes for cell membrane receptors
and cell signaling proteins. The Company has options to increase its
ownership interest subject to certain terms and conditions. The initial
investment of approximately $1.5 million was funded through available
cash.
o In September 1997, the Company acquired Aquila. (Refer to Note 13
to the consolidated financial statements included herein.) Aquila
manufactures surveillance cameras, electronic seals and other equipment
utilized in the safeguarding of nuclear materials and process control
equipment. The Company financed the initial purchase price of
approximately $6.7 million, including costs incurred in connection with
the acquisition, through a borrowing under the revolving credit facility
discussed above. A portion of this borrowing was subsequently paid
down. The Company may make additional future payments contingent upon
post-acquisition operating results through calendar year 2000 up to a
maximum of $10.4 million in additional payments (the "Contingent
Payments"). The Company currently expects to fund such payments through
operating cash flow or additional borrowings on the revolving credit
facility.
In addition to the above investments, the Company's combined capital and
technology-related investments totaled approximately $5.7 million in 1997 as
compared with $6.8 million and $4.0 million in 1996 and 1995, respectively.
The revolving credit facility contains certain financial covenants with
which the Company must comply. At December 31, 1997, the Company was not in
compliance with the maximum leverage ratio covenant. However, a waiver of such
requirement, as of December 31, 1997, was received from the banks participating
in the revolving credit facility.
The revolving credit facility limits, among other things, the amount of
annual expenditures which the Company may incur associated with capital and
technology items to a maximum of $10 million plus up to $3 million of unspent
funds from the prior year. On November 25, 1997, the Company obtained a waiver
and amendment to the revolving credit agreement which allows the Company to
exclude from the definition of capital expenditures the lesser of the net
proceeds of certain asset sales, as defined, or certain costs relating to
enhancing the Company's management information systems. As of December 31,
1997, $13 million plus the net proceeds referred to above were available for
capital expenditures and technology acquisitions during 1998.
The revolving credit facility prohibits the Company from paying cash
dividends on its common stock. In addition, the guarantee and collateral
agreement supporting the revolving credit facility required the Company to
pledge 65% of its stock ownership in foreign subsidiaries.
SEASONALITY
Below is a table summarizing the seasonality of the Company's
consolidated revenues and operating results by quarter, by year:
<TABLE>
<CAPTION>
FOR THE YEAR ENDING DECEMBER 31, 1997
First Quarter Second Quarter Third Quarter Fourth Quarter
<S> <C> <C> <C> <C>
Revenues 23% 25% 23% 29%
Operating Profit* 30% 30% 15% 25%
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDING DECEMBER 31, 1996
First Quarter Second Quarter Third Quarter Fourth Quarter
<S> <C> <C> <C> <C>
Revenues 25% 24% 22% 29%
Operating Profit* 31% 24% 15% 30%
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDING DECEMBER 31, 1995
First Quarter Second Quarter Third Quarter Fourth Quarter
<S> <C> <C> <C> <C>
Revenues 23% 25% 24% 28%
Operating Profit 18% 26% 21% 35%
</TABLE>
* Percentages exclude the effect of the Recapitalization charges recorded
during 1997 and 1996.
Seasonality in revenues, which is typical in most years, is due primarily
to Canberra's dependence upon customers' seasonal purchasing patterns.
Operating profit, as a percentage of the total year, is usually at its lowest
in the third quarter. The first quarter of 1996 reflects the unusually strong
revenues and profits generated at PJKK. The first and second quarter of 1997
operating profit percentages reflect the overall decline in operating results
for the full year and, in particular, the lower fourth quarter of 1997
operating performance.
BACKLOG
As of February 28, 1998 and 1997, the Company's order backlog was
approximately $34.2 million (including $6.0 million of Aquila backlog) and
$30.8 million, respectively. The Company includes in backlog only those orders
for which it has received purchase orders and does not include in backlog
service contracts or orders for service. The Company's backlog as of any
particular date may not be representative of actual sales for any succeeding
period.
YEAR 2000
The Company is currently in the process of addressing issues associated
with the year 2000 and its effect on date sensitive management information and
other data systems which the Company operates (the "Year 2000"). All aspects
of the Company's business including administration, production and distribution
are being evaluated as to the effect of Year 2000. Based upon preliminary
estimates, management does not believe the costs associated with complying with
Year 2000 requirements will have a material effect on the Company's
consolidated financial position or on its results of operations. Managements'
estimate is based on numerous assumptions pertaining to future events including
compliance of the Company's customers and vendors with Year 2000 as well as
other factors. As such, there can be no guarantee that such estimates will be
achieved and, therefore Year 2000 could have a material adverse financial
impact.
NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued several new
accounting standards during 1997 which became effective in 1997 or will become
effective at some future date. See Note 1 to the consolidated financial
statements included herein for a detailed description of these new standards
and their effect on the Company. None of these new standards have or will have
a material effect on the Company's consolidated financial position or results
of operations.
ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Refer to Note 1 to the consolidated financial statements contained herein
for a description of the Company's hedging practice as it relates to foreign
currency transactions.
<PAGE>
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
PACKARD BIOSCIENCE COMPANY AND SUBSIDIARIES
(FORMERLY KNOWN AS CANBERRA INDUSTRIES, INC.)
CONSOLIDATED FINANCIAL STATEMENTS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CONSOLIDATED FINANCIAL STATEMENTS: PAGE
<S> <C>
Report of Independent Public Accountants . . . . . . . . . . . . . . . . . . . 19
Consolidated Balance Sheets as of December 31, 1996 and 1997 . . . . . . . . . 20
Consolidated Statements of Income (Loss) for the Years Ended December 31,
1995, 1996 and 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Consolidated Statements of Stockholders' Equity (Deficit) for the Years
Ended December 31, 1995, 1996 and 1997 . . . . . . . . . . . . . . . . . . . 22
Consolidated Statements of Cash Flows for the Years Ended December 31,
1995, 1996 and 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . 25
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Packard BioScience Company:
We have audited the accompanying consolidated balance sheets of Packard
BioScience Company (a Delaware corporation, formerly known as Canberra
Industries, Inc.) and subsidiaries as of December 31, 1996 and 1997, and the
related consolidated statements of income (loss), stockholders' equity
(deficit) and cash flows for each of the three years in the period ended
December 31, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Packard BioScience
Company and subsidiaries as of December 31, 1996 and 1997, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1997 in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
February 13, 1998
<PAGE>
PACKARD BIOSCIENCE COMPANY AND SUBSIDIARIES
(FORMERLY KNOWN AS CANBERRA INDUSTRIES, INC.)
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS)
</TABLE>
<TABLE>
<CAPTION>
ASSETS 1996 1997
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 37,826 $ 10,575
Accounts receivable, net 40,860 40,688
Inventories 21,798 27,538
Deferred income taxes 1,689 1,970
Other 4,743 4,272
Total current assets 106,916 85,043
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land and improvements 1,598 1,755
Buildings and improvements 14,632 15,308
Machinery, equipment and furniture 14,955 16,097
31,185 33,160
Less: Accumulated depreciation 13,598 15,240
17,587 17,920
OTHER ASSETS:
Goodwill, net of amortization 147 9,498
Deferred financing costs, net of amortization -- 9,891
Investments 1,818 8,216
Deferred income taxes 1,238 --
Other 10,219 10,083
13,422 37,688
$137,925 $140,651
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) 1996 1997
<S> <C> <C>
CURRENT LIABILITIES:
Notes payable $ 3,524 $ 1,929
Current portion of long-term obligations 829 1,794
Accounts payable 11,118 13,995
Accrued liabilities 15,943 21,142
Income taxes payable 6,685 2,302
Deferred income 9,601 11,616
Total current liabilities 47,700 52,778
LONG-TERM OBLIGATIONS, less current portion 2,037 192,193
DEFERRED INCOME TAXES -- 4,167
OTHER NONCURRENT LIABILITIES 4,875 3,527
COMMITMENTS AND CONTINGENCIES - See Note 8
MINORITY INTEREST IN EQUITY OF SUBSIDIARY 2,720 --
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock 129 137
Paid-in capital 1,320 --
Cumulative translation adjustment 2,402 (344)
Retained earnings (deficit) 89,088 (10,220)
Unrealized investment gains, net of income taxes -- 2,885
92,939 (7,542)
Less: Treasury stock, at cost 11,128 103,448
Deferred compensation 1,218 1,024
12,346 104,472
Total stockholders' equity (deficit) 80,593 (112,014)
$137,925 $140,651
Number of shares of common stock outstanding 12,146,352 9,005,174
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
PACKARD BIOSCIENCE COMPANY AND SUBSIDIARIES
(FORMERLY KNOWN AS CANBERRA INDUSTRIES, INC.)
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
FOR THE YEARS ENDED
DECEMBER 31, 1995, 1996 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1995 1996 1997
<S> <C> <C> <C>
NET PRODUCT SALES $113,169 $124,067 $120,637
SERVICE REVENUE 35,603 37,197 37,988
CHEMICALS AND SUPPLIES SALES 20,342 22,754 25,488
169,114 184,018 184,113
COST OF PRODUCT SALES 44,906 49,551 49,718
SERVICE EXPENSE 25,829 26,649 27,703
COST OF CHEMICALS AND SUPPLIES SALES 11,900 9,557 10,195
82,635 85,757 87,616
Gross profit 86,479 98,261 96,497
RESEARCH AND DEVELOPMENT EXPENSES 14,414 17,852 23,480
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 47,322 48,830 49,855
RECAPITALIZATION CHARGES (Note 11) -- 837 18,429
Operating profit 24,743 30,742 4,733
INTEREST EXPENSE (616) (122) (18,119)
OTHER INCOME, net 1,153 1,149 790
Income (loss) before provision for income taxes and minority interest 25,280 31,769 (12,596)
PROVISION FOR INCOME TAXES 9,875 11,187 5,941
MINORITY INTEREST IN INCOME OF SUBSIDIARY 800 1,346 218
Net income (loss) $ 14,605 $ 19,236 ($18,755)
BASIC EARNINGS (LOSS) PER SHARE $ 0.58 $ 0.78 ($ 1.50)
DILUTED EARNINGS PER SHARE $ 0.56 $ 0.77 N/A
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
PACKARD BIOSCIENCE COMPANY AND SUBSIDIARIES
(FORMERLY KNOWN AS CANBERRA INDUSTRIES, INC.)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK TREASURY STOCK
Cumulative Unrealized Retained Deferred
Paid-in Translation Investment Earnings Compen-
Shares Amount Capital Adjustment Gains, Net (Deficit) Shares Amount sation
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31,
1994 12,811,401 $128 $ -- $3,055 $ -- $64,429 40,000 ($432) ($1,313)
Net shares issued in
connection with
restricted stock plan
including deferred
compensation and
amortization 18,718 346 (188)
Shares issued in
connection with
exercise of stock
options, including
related tax benefits 69,100 1 684
Purchase of treasury
stock 424,227 (5,833)
Repayment of deferred
ESOP contribution 145
Cash dividend paid -
$.33 per share (4,205)
Change during year 1,009
Net income 14,605
Other (2)
BALANCE, December 31,
1995 12,899,219 $129 $1,030 $4,064 $ -- $74,827 464,227 ($6,265) ($1,356)
Net shares issued in
connection with
restricted stock plan
including deferred
compensation and
amortization 1,602 36 138
Shares issued in
connection with
exercise of stock
options, including
related tax benefits 23,400 254
Purchase of treasury
stock 313,642 (4,863)
Cash dividend paid -
$.40 per share (4,972)
Change during year (1,662)
Net income 19,236
Other (3)
BALANCE, December 31,
1996 12,924,221 $129 $1,320 $2,402 $ -- $89,088 777,869 ($11,128) ($1,218)
Net shares forfeited
in connection with
restricted stock plan
including deferred
compensation and
amortization (898) (6) 194
Shares issued in
connection with
exercise of stock
options, including
related tax benefits 798,500 8 17,758 (2) (200) 4
Purchase of treasury
stock 9,389,469 (208,882)
Sale of treasury stock (3,409) (1,104,160) 24,468
Recapitalization fees (864) (3,252)
Stock dividend (18,208) (77,142) (4,346,329) 95,340
Change during year (2,746)
Net loss (18,755)
Unrealized investment
gains, net of income
taxes 2,885
BALANCE, December 31,
1997 13,721,823 $137 ($0) ($344) $2,885 ($10,220) 4,716,649 ($103,448) ($1,024)
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
PACKARD BIOSCIENCE COMPANY AND SUBSIDIARIES
(FORMERLY KNOWN AS CANBERRA INDUSTRIES, INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1996 1997
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $14,605 $19,236 ($18,755)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization of intangibles 4,675 5,135 7,172
Amortization of deferred financing costs -- -- 1,287
Compensation expense from stock options exercised -- -- 9,436
Minority interest in net income of subsidiary 800 1,346 218
Increase in deferred income taxes, net 342 802 1,113
Other (437) 371 39
Changes in assets and liabilities excluding effects
from company and product line acquired:
(Increase) decrease in accounts receivable (4,659) (1,043) 3,077
(Increase) decrease in inventories 1,282 (653) (3,469)
Decrease in other current assets 2,298 2,111 852
(Increase) in other noncurrent operating assets (368) (459) (797)
Increase (decrease) in accounts payable and other accrued expenses (3,851) 6,681 4,047
Increase (decrease) in deferred income 3,161 (1,130) (333)
(Decrease) increase in other noncurrent liabilities 907 790 (1,647)
Net cash provided by operating activities 18,755 33,187 2,240
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of a business -- -- (7,491)
Investments in equity securities -- (1,768) (9,065)
Capital expenditures (3,327) (2,715) (3,622)
Product lines, patent rights and licenses acquired (700) (4,046) (2,036)
Other investments (1,080) -- --
Proceeds from sale of fixed assets and investments 529 43 5
Net cash used for investing activities (4,578) (8,486) (22,209)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of long-term obligations 7 23 206,710
Repayments of long-term obligations (646) (693) (14,992)
Purchase of treasury stock (5,833) (3,751) (208,882)
Proceeds from sale of treasury stock -- -- 21,059
Increase (decrease) in notes payable to banks (1,153) 1,529 (1,595)
Proceeds from exercise of stock options, including tax benefits 685 254 8,333
Recapitalization fees deferred or charged to equity (see Note 11) -- -- (15,295)
Dividends paid (4,205) (4,972) --
Net cash used for financing activities (11,145) (7,610) (4,662)
EFFECT OF EXCHANGE RATE CHANGES ON CASH 534 (1,780) (2,620)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,566 15,311 (27,251)
CASH AND CASH EQUIVALENTS, beginning of year 18,949 22,515 37,826
CASH AND CASH EQUIVALENTS, end of year $22,515 $37,826 $10,575
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 372 $ 249 $10,191
Income taxes $ 7,987 $ 5,935 $ 6,842
NON-CASH FINANCING ACTIVITIES:
Debt issued for the purchase of treasury stock $ -- $ 1,112 $ --
Stock issued under terminated restricted stock plan $ 406 $ 54 $ --
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
PACKARD BIOSCIENCE COMPANY AND SUBSIDIARIES
(FORMERLY KNOWN AS CANBERRA INDUSTRIES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996 AND 1997
1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES:
OPERATIONS -
Packard BioScience Company and subsidiaries (the Company) is a worldwide
developer, manufacturer and marketer of analytical instruments and
related products and services that have applications extending into the
physics research, environmental monitoring, life sciences research and
health care clinical testing markets. In March, 1997, the Company
changed its name from Canberra Industries, Inc. to Packard BioScience
Company.
The Company operates primarily in two industry segments. Through its
Packard segment, the Company supplies bioanalytical instruments, and the
related biochemical supplies and services, to the drug discovery and
molecular biology markets. The Canberra segment manufactures analytical
instruments and systems used to detect, identify and quantify radioactive
materials for the nuclear industry and related markets.
CONSOLIDATION -
The accompanying consolidated financial statements include the accounts
of the Company and its majority-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
FOREIGN OPERATIONS -
The Company translates foreign currency financial statements using the
current rate method. Translation gains and losses are recorded as a
separate component of stockholders' equity (deficit), cumulative
translation adjustment.
The Company purchases various foreign currency forward contracts
primarily for the purpose of hedging firm inventory purchase commitments.
As of December 31, 1996 and 1997, the Company had total forward contracts
outstanding of approximately $3,649,000 and $10,879,000, respectively,
whose settlement prices substantially approximated year end exchange
rates. The following table summarizes by currency the outstanding
forward contracts as of December 31, 1996 and 1997 (in 000's):
<TABLE>
<CAPTION>
1996 1997
<S> <C> <C>
German Deutschemark $ 1,689 $ 4,979
Belgian Franc 700 2,500
French Franc 660 2,400
Japanese Yen -- 1,000
British Pound Sterling 600 --
$ 3,649 $10,879
</TABLE>
The forward contracts outstanding at December 31, 1997, mature at various
times through September 30, 1998. Foreign exchange transaction losses
(gains), inclusive of forward contracts settled, were $1,158,000,
($592,000) and ($377,000) in 1995, 1996 and 1997, respectively, and were
included in cost of sales in the accompanying consolidated statements of
income.
CASH AND CASH EQUIVALENTS -
For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid debt instruments with an original maturity of
three months or less to be cash equivalents.
INVENTORIES -
Inventories are valued at the lower of cost or market using the first-in,
first-out (FIFO) method. A reserve for potential nonsaleable inventory
due to excess stocks or obsolescence is provided based upon a detailed
review of inventory components, past history, and expected future usage.
PROPERTY, PLANT AND EQUIPMENT -
Property, plant and equipment are recorded at cost. Equipment, furniture
and leasehold improvements are depreciated using the straight-line method
over their estimated useful lives or term of the lease ranging from 2 to
20 years. Buildings and improvements are depreciated over 5 to 40 years
using the straight-line method.
GOODWILL, NET OF AMORTIZATION -
The Company estimates the life of goodwill for each individual
acquisition. Goodwill included in the accompanying consolidated balance
sheets is being amortized over 20 to 40 years. As of December 31, 1996
and 1997, the Company had accumulated amortization of approximately
$2,098,000 and $2,395,000, respectively. The Company assesses
realizability of goodwill based on future estimates of profitability of
businesses acquired. Based on this assessment, the Company believes
there is no impairment of goodwill as of December 31, 1997.
DEFERRED FINANCING COSTS, NET OF AMORTIZATION -
Deferred financing costs represent a portion of fees incurred by the
Company for issuance of debt instruments in connection with its 1997
recapitalization (see Note 11). Such costs are being amortized over the
average life of the debt to which they relate, ranging from 5 to 10
years.
INVESTMENTS -
Investments consist primarily of a marketable equity investment which the
Company holds in a publicly-traded business. The Company classifies this
investment as available for sale. As such, the investment is reflected
in the accompanying consolidated balance sheets at its market value as of
December 31, 1997, and the unrealized gain, net of income taxes, is
reflected in a separate component of stockholders' equity (deficit)
titled, "Unrealized investment gains, net of income taxes." All other
investments are reflected using the cost method.
PATENT RIGHTS AND LICENSE ACQUISITIONS -
The Company capitalizes amounts paid for patent rights and licenses
acquired to manufacture certain products. These amounts are amortized
over the lives of the respective agreements or the estimated lives of the
products, if shorter. The amortization lives range from 3 to 10 years.
As of December 31, 1996 and 1997, the Company had an unamortized balance
of $4,348,000 and $5,216,000, respectively, associated with patent rights
and license acquisitions, which amounts were reflected in other assets in
the accompanying consolidated balance sheets.
REVENUE RECOGNITION AND DEFERRED INCOME -
Revenue is recognized when title to a product is transferred or services
have been rendered. Revenues from service contracts are recognized on a
straight-line basis over the contract period. Deferred income results
from the billing of certain field service maintenance contracts and other
customer advances.
WARRANTY -
The Company generally provides a warranty for a one-year period
subsequent to installation of its product. The Company accrues for the
estimated cost of the warranty at the time of sale of the related
product.
INCOME TAXES -
The Company uses an asset and liability approach for financial accounting
and reporting of income taxes. The provision for income taxes includes
Federal, foreign and state income taxes currently payable and those
deferred because of temporary differences between income reported for tax
and financial statement purposes.
The Company has not provided for possible U.S. taxes on undistributed
earnings of foreign subsidiaries that are considered to be reinvested
indefinitely. Undistributed earnings of foreign subsidiaries considered
to be reinvested indefinitely amounted to $9,578,000 and $10,050,000 at
December 31, 1996 and 1997, respectively. If and when earnings are
remitted, credit for foreign taxes already paid on subsidiary earnings
and withholdings may offset a portion of applicable U.S. income taxes.
OTHER INCOME AND EXPENSE -
Other income and expense includes interest income of approximately
$1,247,000, $1,149,000 and $790,000 in 1995, 1996 and 1997, respectively,
and certain other non-operating revenues and expenses.
LONG-LIVED ASSETS -
In March 1995, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards (SFAS) No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of." This statement requires that long-lived
assets, including premises and equipment and identifiable intangible
assets be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amounts of an asset may not be
recoverable. The adoption and application of this standard in 1996 and
1997 did not have any impact on the Company's consolidated financial
position or results of operations.
NEW PRONOUNCEMENTS -
Several new accounting standards have been issued by FASB which became
effective during 1997 or will become effective at some future date. Such
standards and their effect on the Company are summarized below.
SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishment of Liabilities" (SFAS No. 125), was adopted effective
January 1, 1997. SFAS 125 requires that companies recognize financial
and servicing assets it controls and derecognize financial assets when
control is surrendered and liabilities have been extinguished. The
adoption of this statement had no effect on the Company.
SFAS No. 128, "Earnings Per Share" (SFAS No. 128), was issued in
February, 1997, and became effective as of December 31, 1997. This
statement modifies the computation and presentation of earnings per
share. Basic earnings per share, excluding all dilutive securities, must
be presented along with diluted earnings per share. The computation of
earnings (loss) per share for the years ending December 31, 1995 through
1997, is as follows:
<TABLE>
<CAPTION>
1995 1996 1997
<S> <C> <C> <C>
Net income (loss) (000's) $14,605 $19,236 ($18,755)
Basic earnings per share -
weighted average shares outstanding 25,325,128 24,548,172 12,463,671
Effect of dilutive outstanding stock options 557,316 591,312 N/A
Diluted earnings per share -
weighted average shares outstanding 25,882,444 25,139,484 N/A
Basic earnings (loss) per share $0.58 $0.78 ($1.50)
Diluted earnings per share $0.56 $0.77 N/A
</TABLE>
Diluted earnings per share has not been presented for the year ending
December 31, 1997, as the effect of stock options would be anti-dilutive.
SFAS No. 130, "Reporting Comprehensive Income," was issued by the FASB in
June, 1997, and will become effective for the Company on January 1, 1998.
This statement requires companies to report all components of
comprehensive income in their financial statements, including all non-
owner transactions and events which impact a company's equity, even if
those items do not directly effect net income. The primary components of
comprehensive income not included in the consolidated statements of
income (loss) are cumulative translation adjustments and the unrealized
gain on equity securities held by the Company. The adoption of SFAS No.
130 will have no effect on the Company's results of operations or
financial position.
USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS -
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities as of the date of the
financial statements and the reported amounts of income and expenses
during the reporting periods. Operating results in the future could vary
from the amounts derived from management's estimates and assumptions.
DISCLOSURES ABOUT FAIR VALUES OF FINANCIAL INSTRUMENTS -
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is practicable
to estimate that value:
CASH AND CASH EQUIVALENTS - The carrying amount approximates fair
value because of the short maturity of those instruments.
MORTGAGE RECEIVABLE - At December 31, 1997, the Company has two
long-term mortgages receivable with a total face amount of
$3,300,000, which exceeded the current carrying value of $851,000
included in other assets in the accompanying consolidated balance
sheets. The estimated fair value of these investments are
approximately $1,500,000 based upon a third-party offer to purchase
the mortgages.
NOTES PAYABLE - The fair value of the Company's notes payable are
estimated to approximate recorded amounts due to the relative short
maturity.
LONG-TERM OBLIGATIONS - The fair value of the Company's long-term
obligations is estimated based on the quoted market prices for
similar issues or on the current rates offered to the Company for
obligations with the same remaining maturities. The estimated fair
value of the Senior Notes described in Note 4 was $144,000,000 at
December 31, 1997. The estimated fair value of all other long-term
obligations approximated their carrying amount.
FOREIGN CURRENCY CONTRACTS - The fair value of foreign currency
contracts (primarily used for hedging firm commitments) is
estimated by obtaining closing rates and comparing them to the
actual contract rates. The total value of the open contracts
approximated the estimated fair value.
RECLASSIFICATIONS -
Certain prior year amounts have been reclassified to conform with the
current year classification.
2. ACCOUNTS RECEIVABLE, NET:
Accounts receivable, net, consisted of the following at December 31 (in
thousands):
<TABLE>
<CAPTION>
1996 1997
<S> <C> <C>
Trade $40,018 $40,108
Other 1,317 1,162
Allowance for doubtful accounts (475) (582)
$40,860 $40,688
</TABLE>
3. INVENTORIES:
Inventories consisted of the following at December 31 (in thousands):
<TABLE>
<CAPTION>
1996 1997
<S> <C> <C>
Raw materials and parts $13,532 $14,908
Work in progress 944 1,995
Finished goods 9,085 12,556
23,561 29,459
Excess and obsolete reserve (1,763) (1,921)
$21,798 $27,538
</TABLE>
4. LONG-TERM OBLIGATIONS AND NOTES PAYABLE:
The Company had the following notes payable and long-term obligations at
December 31, 1997, as described below (in thousands):
<TABLE>
<CAPTION>
INTEREST RATE MATURITY CURRENT LONG-TERM TOTAL
<S> <C> <C> <C> <C> <C>
Senior subordinated notes 9.375% 2007 $ -- $150,000 $150,000
Bank term loan LIBOR + 2.75% 2003 400 39,400 39,800
Bank revolving credit facility LIBOR + 2.375% 2002 -- -- --
Notes payable 3.9% to 4.0% 1998 1,929 -- 1,929
Other long-term obligations 2.0% to 13.0% 1998-2002 1,394 2,793 4,187
$3,723 $192,193 $195,916
</TABLE>
During 1997, the Company issued $150,000,000 principal amount of 9.375%
senior subordinated notes (the "Senior Notes") due March 1, 2007. The
proceeds received from the sale of the Senior Notes, net of initial
purchasers' discount of $4,500,000, were used to repay certain of the
outstanding indebtedness under previous obligations and to repurchase
certain of the Company's outstanding common stock (see Note 11).
The Senior Notes are redeemable, at the option of the Company, after
March 1, 2002, at rates starting at 104.688% of the principal amount
reduced annually through March 1, 2004, at which time they become
redeemable at 100% of the principal amount. According to the terms of
the Senior Notes, if a change of control occurs, as defined, each holder
of Senior Notes will have the right to require the Company to repurchase
such holder's Senior Notes at 101% of the principal amount thereof.
Other circumstances exist under the terms of the Senior Notes which would
permit or require the Company to partially redeem the Senior Notes
earlier than their stated maturity date. Such circumstances include the
Company's receipt of proceeds from a public offering of the Company's
common stock or the proceeds received upon the sale of a stipulated
amount of assets.
During 1997, the Company also entered into a senior credit agreement (the
"Agreement" and together with the Senior Notes, the "Financings") with a
group of banks which provides for a $40,000,000 term loan facility and
the availability of up to $75,000,000 in a revolving credit facility with
a sub-limit for letters of credit up to $11,000,000 in the aggregate.
The term loan facility matures in six years and bears interest, at the
Company's option, at the customary base rate (defined as a certain bank's
reference rate, or the federal funds rate plus 0.5%, whichever is higher)
plus 1.75%, or at the customary reserve adjusted Eurodollar rate plus
2.75%. The outstanding revolving credit facility balance, if any, is due
and payable on March 31, 2002. The revolving credit facility bears
interest, at the Company's option, at the customary base rate plus
1.375%, or at the customary reserve adjusted Eurodollar rate plus 2.375%.
The credit agreement also provides for a commitment fee of 0.5% on any
unused portion of the revolving credit facility. At December 31, 1997,
the three-month Eurodollar rate was 5.91%.
The Agreement contains certain financial covenants including, but not
limited to, a minimum fixed charge coverage test, a minimum interest
coverage test and a maximum leverage test. The Financings contain
certain financial and non-financial covenants including, but not limited
to, limitations on capital expenditures and technology acquisitions. The
Company is prohibited by the Financings from paying any cash dividends
and is limited in the amount of capital stock that it may repurchase, the
incurrence of additional indebtedness and liens or dispositions of assets
by the Company or any of its subsidiaries. As of December 31, 1997, the
Company was out of compliance with the maximum leverage ratio covenant.
However, a waiver of such requirement, as of December 31, 1997, was
received from the banks participating in the revolving credit facility.
In connection with the Agreement, the Company pledged as collateral
substantially all of the tangible and intangible assets of the Company
and its domestic subsidiaries, and 65% of the capital stock of the
Company's foreign subsidiaries.
Notes payable existing at December 31, 1996 and 1997, consisted of
amounts outstanding under overseas lines of credit which permitted
maximum borrowings of approximately $13,500,000 and $9,000,000,
respectively. Borrowings are due on demand. At December 31, 1996 and
1997, $3,524,000 and $1,929,000, respectively, were outstanding under
these arrangements with interest rates ranging from 3.5% to 7.9% and 3.9%
to 4.0%, respectively. The weighted average interest rates on these
borrowing were 4.4% and 3.9% in 1996 and 1997, respectively. The maximum
amount outstanding during 1997 was $3,524,000.
Other long-term obligations as of December 31, 1997, consist primarily of
notes payable related to the acquisition of a minority interest described
in Note 12. These notes payable have an effective interest rate of 2.0%
and are payable through 2000. As of December 31, 1996, other long-term
obligations consisted primarily of building loans and notes payable to
employee stockholders, all of which were paid in full in connection with
the Recapitalization.
As of December 31, 1997, aggregate principal payments of long-term
obligations and notes payable required during the next five years ending
December 31 and thereafter are approximately as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
1998 $ 3,723
1999 1,789
2000 1,789
2001 410
2002 19,205
Thereafter 169,000
$195,916
</TABLE>
5. COMMON STOCK AND STOCK OPTIONS:
At December 31, 1997, the Company had authorized common stock of
15,000,000 shares with a par value of $.01 per share. A one-for-one
dividend of common stock on all outstanding shares was effected May 15,
1997. The average number of shares, the number of stock options
outstanding, the number of unvested restricted stock shares and all per
share amounts, as presented in the consolidated financial statements and
accompanying notes, have been retroactively restated for the stock
dividend. The dividend has not been retroactively reflected in the
consolidated statements of stockholders' equity (deficit).
The Company has granted non-qualified stock options to selected
employees. The exercise price of most options at the date of grant is
the fair value, based upon an independent appraisal, and is approved by
the Board of Directors. During 1997, the Company granted 265,000
performance options to various employees with an exercise price of
$13.625 which exceeded the $11.125 fair value of the Company's stock on
the date of grant. The options expire at various dates through the year
2007. A summary of stock option activity is as follows:
<TABLE>
<CAPTION>
Weighted
Number Avg. Price
Of Shares Per Share
<S> <C> <C>
Outstanding at December 31, 1994 2,472,100 $ 4.54
Granted 184,000 7.15
Cancelled (40,000) 4.28
Exercised (138,200) 3.49
Outstanding at December 31, 1995 2,477,900 4.80
Granted 330,000 8.00
Cancelled (17,400) 5.41
Exercised (46,800) 3.82
Outstanding at December 31, 1996 2,743,700 5.19
Granted 961,500 11.81
Exercised or purchased by the Company (2,143,900) 5.18
Outstanding at December 31, 1997 1,561,300 $ 9.28
</TABLE>
As of December 31, 1997, 273,000 of the 1,561,300 options have exercise
prices between $3.17 and $4.06, with a weighted averaged exercise price
of $3.22 and a weighted average remaining contractual life of 3 years.
All of these options are exercisable as of December 31, 1997.
Of the total options outstanding at December 31, 1997, 327,000 have
exercise prices between $6.43 and $8.00, with a weighted average price of
$6.88 and a weighted average remaining contractual life of 7.3 years.
All of these options are exercisable as of December 31, 1997.
The remaining 961,300 options have exercise prices of either $11.125 or
$13.625, with a weighted average exercise price of $11.81 and a weighted
average remaining contractual life of 9.5 years. Of the 961,300 options,
404,100 are exercisable as of December 31, 1997, at a weighted average
price of $11.81.
If compensation cost for stock options granted under these plans,
subsequent to 1994, had been determined under the fair-value based
methodology of SFAS No. 123, "Accounting for Stock-Based Compensation,"
the Company's net income (loss) would have been $14,504,000, $18,937,000
and ($22,579,000) on a pro forma basis for the years ended December 31,
1995, 1996 and 1997, respectively. For purposes of this calculation, the
fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model (minimum value method) with the
following assumptions:
<TABLE>
<CAPTION>
<S> <C>
Expected dividend yield N/A
Expected stock price volatility N/A
Risk-free interest rate 6.04% - 6.49%
Expected life of options 10 years
</TABLE>
The Company terminated a restricted stock plan which provided for the
issuance of common stock for no consideration to officers and key
employees, with vesting over an eight-year period. No new shares can be
granted but shares previously issued are still vesting over the original
grant period. Compensation expense, determined as of the date of grant,
is being recognized ratably in accordance with the vesting schedule.
Compensation expense recognized was $158,000, $173,000 and $194,000 in
1995, 1996 and 1997, respectively. At December 31, 1996 and 1997,
$1,218,000 and $1,024,000 of future compensation expense associated with
208,280 and 167,531 unvested shares, respectively, has been deferred and
is included in deferred compensation in the accompanying consolidated
balance sheets.
6. INCOME TAXES:
The sources of the Company's income (loss) before provision for income
taxes and minority interest were as follows (in thousands):
<TABLE>
<CAPTION>
1995 1996 1997
<S> <C> <C> <C>
United States $13,116 $15,271 ($23,207)
Foreign 12,164 16,498 10,611
$25,280 $31,769 ($12,596)
</TABLE>
<TABLE>
<CAPTION>
The provision for income taxes is as follows
(in thousands):
1995 1996 1997
<S> <C> <C> <C>
Current:
Federal $ 4,010 $ 2,697 $ 92
Foreign 4,536 7,081 4,774
State 356 694 50
8,902 10,472 4,916
Deferred:
Federal 1,150 674 784
Foreign (330) (113) (357)
State 153 154 598
973 715 1,025
Total $ 9,875 $11,187 $ 5,941
</TABLE>
The effective income tax rate varies from the U.S. Federal statutory
rate, as a percentage of income (loss) before provision for income taxes
and minority interest, as follows:
<TABLE>
<CAPTION>
1995 1996 1997
<S> <C> <C> <C>
Anticipated statutory rate 35% 35% 35%
Increases (decreases) resulting from:
Valuation allowance -- -- (66)
Net tax effect relating to foreign
operations and sales (2) (3) (20)
Research credits (1) (1) --
State income taxes 2 3 4
Other, net 5 1 --
Effective income tax rate 39% 35% (47%)
</TABLE>
At December 31, 1996 and 1997, deferred tax assets and
liabilities were comprised of the following elements (in thousands):
<TABLE>
<CAPTION>
1996 1997
<S> <C> <C>
DEFERRED TAX ASSETS:
Net operating loss carryforwards $ -- $ 7,715
Inventory related items 1,294 1,329
Non-deductible accruals 1,786 1,486
Foreign and other tax credit carryforwards 392 3,178
Other 1,282 551
Gross deferred tax assets 4,754 14,260
Less: valuation allowance 350 9,193
Total deferred tax assets, net of valuation allowance 4,404 5,066
DEFERRED TAX LIABILITIES:
Unrealized investment gains -- 1,971
International transactions -- 3,823
Accelerated depreciation 471 359
Acquisition related tax liabilities 439 888
Other 567 222
Total deferred tax liabilities 1,477 7,263
Net deferred tax assets (liabilities) $ 2,927 ($2,197)
</TABLE>
During 1997, the Company incurred a domestic net operating loss of
approximately $18.1 million and generated approximately $2.8 million of
foreign tax credits. At December 31, 1997, the Company has recorded a
deferred tax asset representing the future tax benefit associated with
these loss and credit carryforwards. A valuation allowance has been
provided for the full amount of the deferred tax asset, net of existing
deferred tax liabilities, due to the uncertainties associated with the
Company's ability to utilize the associated tax benefits before they
expire. The 1997 federal net operating loss carryforward expires in
2018. The foreign tax credit carryforwards expire in 2002.
7. BENEFIT PLANS:
The Company and a domestic subsidiary, Packard Instrument Company, Inc.,
offer a contributory defined contribution plan (the "Profit Sharing
Plan") covering substantially all domestic employees who have completed
at least one year of service, as defined. In 1997, the Profit Sharing
Plan provided that eligible participants may make a basic contribution
from 1% to 4% of their annual pay, with additional contributions allowed
up to an additional 7% of annual pay. The Company made matching
contributions equal to 125% of a participant's basic contribution, which
amounted to approximately $1,600,000 for the year ended December 31,
1997. Prior to 1997, the Company made matching contributions equal to
80% of a participant's basic contribution, which was limited to 3% of
their annual pay. Total matching contributions for the years ended
December 31, 1995 and 1996, were $627,000 and $729,000, respectively.
Another domestic subsidiary, Aquila Technologies Group, Inc. (see Note
13), maintains a similar defined contribution plan whereby Aquila makes a
matching contribution equal to a percentage of the employees' annual
salaries, as defined.
The Company also had a noncontributory employee stock ownership plan (the
ESOP) and related trust, which was terminated in March, 1997. Each year
the Company made a contribution from profits, as defined, of an amount
determined by its Board of Directors, but not to exceed 15% of the
aggregate compensation of all participants in the ESOP in any plan year.
Contributions under the ESOP for any individual participant in any year
were limited to the lower of $30,000 or 25% of the participant's
compensation. The Company provided for contributions of $850,000 in 1995
and $800,000 in 1996, plus interest due by the ESOP. The trust had used
the contributions to first service debt incurred, if any, and then to
purchase outstanding shares of the Company's stock. The ESOP was merged
into the Profit Sharing Plan during 1997 pursuant to the Recapitalization
and Stock Purchase Agreement. The transactions consummated pursuant to
the Recapitalization and Stock Purchase Agreement are described in Note
11.
8. COMMITMENTS AND CONTINGENCIES:
The Company conducts certain of its operations from leased facilities.
In addition, the Company leases automobiles and various types of
machinery and equipment under operating leases generally expiring during
the next three years.
The following is a schedule of future minimum rental payments under
operating leases (excluding autos) that have initial or remaining non-
cancelable lease terms extending beyond December 31, 1998 (in thousands):
<TABLE>
<CAPTION>
<S> <C>
1998 $ 719
1999 642
2000 522
2001 467
2002 341
Thereafter 1,437
$4,128
</TABLE>
Rental expense for the years ended December 31, 1995, 1996 and 1997, was
approximately $4,028,000, $4,005,000 and $4,037,000, respectively.
The Company has entered into various cooperative research and development
agreements in 1996 and 1997 requiring the Company, upon satisfaction of
certain criteria, to make milestone payments and future royalty payments
as specified in the agreements.
The Company is subject to litigation, claims and assessments arising in
the ordinary course of business. The Company accrues the cost of these
items as they become known and are reasonably estimable. The Company is
currently involved in litigation with a company concerning intellectual
property rights. Although the Company believes that it will prevail in
this litigation, there can be no assurance as to the outcome and, if it
is determined adversely, the Company cannot estimate its loss. In the
opinion of management, none of the currently known contingencies are
expected to have a material adverse effect on the Company's results of
operations or financial position.
9. RELATED PARTY TRANSACTIONS:
The Company had a trade receivable of approximately $1,061,000 and
$2,328,000 at December 31, 1996 and 1997, respectively, from CIS bio
international, an affiliate of a significant stockholder prior to the
Recapitalization described in Note 11. In addition, the accompanying
consolidated statements of income (loss) include revenues from CIS bio
international of approximately $99,000, $1,065,000 and $4,968,000 for
1995, 1996 and 1997, respectively, and reimbursements of research and
development expenses of $2,961,000, $1,536,000 and $236,000 for 1995,
1996 and 1997, respectively.
10. GEOGRAPHIC INFORMATION AND INDUSTRY SEGMENTS:
The Company operates predominately in three major geographic areas and
two industry segments. Transfers between geographic areas are made at
the estimated market value of the merchandise transferred. The
eliminations result from intercompany or intersegment sales, receivables
and profit in inventory.
The following tables summarize the Company's operations by
geographic area and industry segment for 1995, 1996 and 1997 (in
thousands):
<TABLE>
<CAPTION>
GEOGRAPHIC AREAS 1995 1996 1997
<S> <C> <C> <C>
Revenues*
United States, including third party $ 83,952 $ 88,552 $105,020
export sales**
Europe 72,399 73,808 66,297
Japan 14,818 21,741 13,052
Eliminations, net (2,055) (83) (256)
Total consolidated $169,114 $184,018 $184,113
Operating profit (loss)***
United States, including export sales $ 13,674 $ 16,165 $(4,525)
Europe 8,855 9,745 6,993
Japan 4,169 6,623 3,235
Eliminations, net (1,955) (1,791) (970)
Total consolidated $ 24,743 $ 30,742 $ 4,733
Identifiable assets
United States $ 89,428 $105,495 $121,692
Europe 48,275 44,044 43,339
Japan 9,075 12,999 8,737
Eliminations, net (26,495) (24,613) (33,117)
Total consolidated $120,283 $137,925 $140,651
</TABLE>
* Includes only sales to unaffiliated customers.
** Includes $16,480, $20,162 and $30,690 of third-party export
sales for 1995, 1996 and 1997, respectively.
*** Operating profit (loss) for 1996 and 1997 includes
Recapitalization charges of $837 and $18,429, respectively,
within the United States related to transactions as described in
Note 11.
<PAGE>
<TABLE>
<CAPTION>
INDUSTRY SEGMENT 1995 1996 1997
<S> <C> <C> <C>
Revenues*
Packard $107,156 $122,676 $120,286
Canberra 61,958 61,342 63,827
Total consolidated $169,114 $184,018 $184,113
Operating profit (loss)
Packard $ 19,243 $ 25,737 $ 17,951
Canberra 8,260 8,401 7,729
General corporate expenses (2,453) (2,318) (2,518)
Recapitalization charges -- (837) (18,429)
Eliminations (307) (241) --
Total consolidated $ 24,743 $ 30,742 $ 4,733
Capital expenditures
Packard $ 1,702 $ 1,513 $ 1,650
Canberra 1,625 1,202 1,972
Total consolidated $ 3,327 $ 2,715 $ 3,622
Depreciation and amortization
Packard $ 2,427 $ 2,971 $ 3,396
Canberra 2,248 2,164 3,776
Total consolidated $ 4,675 $ 5,135 $ 7,172
Identifiable assets
Packard $ 81,457 $ 98,912 $ 95,540
Canberra 38,826 39,013 45,111
Total consolidated $120,283 $137,925 $140,651
</TABLE>
* Includes only sales to unaffiliated customers.
11. RECAPITALIZATION AND STOCK PURCHASE AGREEMENT:
On March 4, 1997, Stonington Capital Appreciation 1994 Fund, L.P.
(Stonington) acquired approximately 69% of the common stock of the
Company on a fully-diluted basis as a result of the transactions
described below. The transactions include (a) acquisition by Stonington
and certain other investors of $54.0 million of common stock from certain
continuing stockholders, (b) acquisition by Stonington of $17.5 million
of common stock from the Company, (c) a tender offer by the Company to
all non-continuing stockholders for $208.6 million, and (d) cancellation
of all stock options held by the non-continuing stockholders for $3.3
million. The price per share for the above transactions was $22.25
(prior to the effect of a one-for-one stock dividend) except for the
option redemption where the price was $22.25 (prior to the effect of a
one-for-one stock dividend) less the exercise price of such stock
options. The Company used the proceeds of the stock offering, $8.3
million from the exercise of certain options, cash on hand and $190.0
million in proceeds from the Financings to redeem the shares in the
tender offer, purchase certain outstanding options (approximately $12.9
million) and pay transaction fees and expenses (approximately $21.5
million), of which $2.5 million was a fee paid to Stonington. All of the
foregoing transactions are collectively referred to as the
Recapitalization. The transaction fees and expenses include costs
associated with the stock offering, the Financings and other expenses.
As a part of the Recapitalization, the Company and certain executives of
the Company who were party to a supplemental retirement plan (SERP)
agreed to terminate the plan for a payment of $2.4 million in the
aggregate. The transaction fees and expenses also include the cost of
terminating the SERP. Approximately $837,000 and $18,429,000 of
recapitalization related expenses have been included as Recapitalization
charges in the accompanying consolidated statements of income (loss) for
1996 and 1997, respectively.
Pursuant to the terms of a Stockholders Agreement among the Company,
Stonington, certain other stockholders of the Company, and certain
members of management of the Company ("Management Stockholders"), the
Management Stockholders have the right, prior to the earlier of an
initial public offering of common stock of the Company and the tenth
anniversary of the Recapitalization, to require the Company to purchase
common stock and options held by such Management Stockholders upon
termination of employment due to death, disability, retirement or certain
cases of involuntary termination. Under certain circumstances, the
Company may pay or may be required to pay for the common stock or options
with a subordinated note of the Company.
12. MINORITY INTEREST ACQUISITION:
In May, 1997, a subsidiary of the Company, Packard Japan KK ("PJKK"),
entered into an agreement, for a fixed amount denominated in Japanese
yen, to acquire the 40% interest held by its minority stockholder for
approximately $7.5 million. The agreement obligates PJKK to acquire
approximately 60% of the minority interest in 1997 and the remainder in
future years as PJKK generates sufficient earnings to allow the
transaction to occur in accordance with Japanese laws and regulations.
Under the agreement, the minority stockholder has surrendered the rights
to any dividends from PJKK subsequent to December 31, 1996. The Company
has reflected the acquisition in full as of the effective date of the
agreement which was April 1, 1997, and, as a result, the minority
interest has been eliminated and the related acquisition obligations as
well as resulting goodwill have been recorded as of such date.
13. ACQUISITION OF AQUILA TECHNOLOGIES GROUP, INC.:
On September 3, 1997, the Company acquired all of the outstanding common
stock of Aquila Technologies Group, Inc. (Aquila), a manufacturer and
distributor of surveillance cameras, electronic seals and other equipment
utilized in the safeguarding of nuclear materials, and an original
equipment manufacturer ("OEM") of process control equipment. The Company
acquired Aquila for approximately $6.7 million in cash with additional
future payments to be made contingent upon post-acquisition operating
results through calendar year 2000 up to a maximum of $10.4 million in
additional payments (the "Contingent Payments").
The acquisition has been accounted for using the purchase method of
accounting and, accordingly, the purchase price has been allocated to the
assets purchased and the liabilities assumed based upon the fair values
at the date of acquisition. The excess of the purchase price over the
fair values of the net assets acquired was approximately $4.3 million and
has been reflected as goodwill in the accompanying consolidated balance
sheets. As future Contingent Payments are made, the related goodwill
will increase. An additional $1.2 million was earned as Contingent
Payments during the period of September 4 through December 31, 1997. The
goodwill is being amortized on a straight-line basis over 20 years.
The operating results of Aquila have been reflected in the accompanying
consolidated statements of income (loss) from the date of acquisition.
The following unaudited consolidated information is presented on a pro
forma basis, as if the acquisition had occurred as of the beginning of
the periods presented. In the opinion of management, the pro forma
information reflects all adjustments necessary (consisting only of normal
recurring items) for a fair presentation. The pro forma adjustments
primarily consist of: amortization of goodwill associated with the
acquisition, removal of pre-acquisition discontinued operations,
adjustments to certain historical Aquila compensation levels to be more
indicative of post-acquisition levels, additional interest expense
relating to the financing of the acquisition, and related income tax
effects, if any, of the above.
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
UNAUDITED
FOR THE YEARS ENDED DECEMBER 31,
1996 1997
<S> <C> <C>
Net sales $202,130 $192,620
Operating profit $ 31,237 $ 6,588
Net income (loss) $ 18,982 ($ 17,474)
Basic earnings (loss) per share $ 0.77 ($ 1.40)
</TABLE>
ITEM 9: CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable; there was no change in or disagreements with the Company's
independent public accountants.
<PAGE>
PART III
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth information concerning the executive
officers and directors of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Emery G. Olcott 59 Chairman of the Board, Chief Executive Officer and President
Richard T. McKernan 60 Senior Vice President and Director of the Company and
President, Packard
George Serrano 52 Vice President, Secretary and Director of the Company and
President, Canberra
Benjamin Campagnuolo 57 Vice President, International Sales, Canberra
Ben D. Kaplan 40 Vice President and Chief Financial Officer
Orren K. Tench, Jr. 55 Vice President and General Manager, Detector Products Division,
Canberra
Robert F. End 42 Director
Bradley J. Hoecker 36 Director
Stephen M. McLean 40 Director
Alexis P. Michas 40 Director
Peter P. Tong 56 Director
</TABLE>
The directors are appointed to serve in such positions until such time as
the Board elects and qualifies their successors.
Emery G. Olcott is the Chief Executive Officer and President of the
Company, positions he has held for at least five years. He also became
Chairman of the Board effective as of the Recapitalization closing. Mr. Olcott
co-founded the Company in 1965. Mr. Olcott is a Director of Yankee Energy
System, Inc., a gas distribution company.
Richard T. McKernan is the President of Packard, a position he has held
for at least five years, and a Senior Vice President and Director of the
Company.
George Serrano is the President of Canberra, a position he has held since
January 1994. Mr. Serrano became a Director of the Company effective as of the
Recapitalization closing. Mr. Serrano is also a Vice President and Secretary
of the Company, a position he has held for at least five years. From
April 1991 to December 1993, he was the Vice President for Canberra
International Operations, during which time he managed the Company's sales and
service subsidiaries and European operations.
Benjamin Campagnuolo is Vice President of International Sales for
Canberra, a position he has held for at least five years.
Ben D. Kaplan has been a Vice President and the Chief Financial Officer
of the Company since February 1997. From August 1992 to January 1997, he was a
partner at Arthur Andersen LLP, a public accounting firm.
Orren K. Tench, Jr. is Vice President and General Manager of Canberra's
Detector Products Division, a position he has held since 1992.
Robert F. End is a Partner and a Director of Stonington Partners, Inc.
("Stonington I"), a position that he has held since 1993, and is also a Partner
and a Director of Stonington Partners, Inc. II, a Delaware corporation
("Stonington II"), a position he has held since 1994. He has also been a
Director of Merrill Lynch Capital Partners, Inc. ("MLCP"), a private investment
firm associated with Merrill Lynch & Co., since 1993 and a Consultant to MLCP
since 1994. He was a Partner of MLCP from 1993 to 1994 and Vice President of
MLCP from 1989 to 1993. Mr. End was also a Managing Director of the Investment
Banking Division of Merrill Lynch & Co. from 1993 to July 1994 and a Director
of the Investment Banking Division of Merrill Lynch & Co. from 1990 to 1993.
Mr. End is also a Director of Goss Graphic Systems, Inc. and United Artists
Theatre Circuit, Inc. and several privately held corporations.
Bradley J. Hoecker is a Partner of Stonington I, a position that he has
held since 1993. He was a Principal of MLCP from 1993 to 1994 and an Associate
of MLCP from 1989 to 1993 and has been a Consultant to MLCP since 1994. Mr.
Hoecker was also an Associate in the Investment Banking Division of Merrill
Lynch & Co. from 1989 to 1994. Mr. Hoecker is also a Director of several
privately held corporations.
Stephen M. McLean is a Partner and a Director of Stonington I, a position
that he has held since 1993, and is also a Partner and a Director of
Stonington II, a position he has held since 1994. He has also been a Director
of MLCP since 1987 and a Consultant to MLCP since 1994. He was a Partner of
MLCP from 1993 to 1994 and a Senior Vice President of MLCP from 1987 to 1993.
Mr. McLean was also a Managing Director of the Investment Banking Division of
Merrill Lynch & Co. from 1987 to 1994. Mr. McLean is also a Director of CMI
Industries, Inc., Dictaphone Corporation, Pathmark Stores, Inc., Supermarkets
General Holding Corp. and several privately held corporations.
Alexis P. Michas is a Managing Partner and a Director of Stonington I, a
position he has held since 1993, and is also a Managing Partner and a Director
of Stonington II, a position he has held since 1994. Mr. Michas has also been
a Director of MLCP since 1989. He was a Partner of MLCP from 1993 to 1994 and
Senior Vice President of MLCP from 1989 to 1993. Mr. Michas was also a
Managing Director of the Investment Banking Division of Merrill Lynch & Co.
from 1991 to 1994 and a Director in the Investment Banking Division of Merrill
Lynch & Co. from 1990 to 1991. Mr. Michas is also a Director of Blue Bird
Corporation, Borg-Warner Automotive, Inc., Borg-Warner Security Corporation,
Merisel, Inc., Dictaphone Corporation, Goss Graphic Systems, Inc. and several
privately held corporations.
Peter P. Tong served as the Co-President of Marquette Electronics, Inc.,
a manufacturer of medical equipment, from January 1996 to May 1996. From 1991
to 1996, he served as President, Chairman and Chief Executive Officer of E for
M Corporation, also a manufacturer of medical equipment. Since May 1996, Mr.
Tong has been self-employed as a private investor. Mr. Tong is also a director
of Dictaphone Corporation, Marquette Electronics, Inc. and several privately
held corporations.
ITEM 11: EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by the Company to
its Chief Executive Officer and to each of its four most highly-compensated
executive officers (other than the Chief Executive Officer) whose total
compensation exceeded $100,000 during the last fiscal year, for the year ended
December 31, 1997:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
SECURITIES ALL OTHER
UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS (1)(2)
($) ($) (#) ($)
<S> <C> <C> <C> <C> <C>
Emery G. Olcott, Chairman of the Board,
Chief Executive Officer
and President 1997 $348,340 $135,000 140,000 $2,197,128
1996 $358,752 $330,000 30,000 $ 51,448
Richard T. McKernan, President,
Packard 1997 $251,656 $ 65,200 140,000 $1,207,328
1996 $241,539 $145,000 50,000 $ 18,805
George Serrano, President,
Canberra 1997 $161,153 $ 70,000 75,000 $ 163,066
1996 $158,848 $ 94,000 25,000 $ 10,287
Ben D. Kaplan, Vice President and Chief
Financial Officer (3) 1997 $172,004 $ 60,000 100,000 $ 144,750
Staf van Cauter, Vice President,
Packard 1997 $167,044 $ 27,000 30,000 $ 28,000
1996 $173,312 $ 38,500 20,000 $ 7,389
Orren K. Tench, Jr., Vice President and
General Manager, Canberra 1997 $145,262 $ 50,000 30,000 $ 281,462
1996 $139,539 $ 60,000 -- $ 9,037
</TABLE>
(1) 1997 amounts consist of payments made upon the termination of the
Company's supplemental executive retirement plan ("SERP") (Messrs.
Olcott, McKernan and Tench received $1,369,726, $799,927 and $246,700,
respectively), special bonuses for efforts expended in connection with
the Recapitalization transaction ($255,000, $250,000, $115,000, $140,000
and $20,000 for Messrs. Olcott, McKernan, Serrano, Kaplan and van Cauter,
respectively), Company contributions made pursuant to the Company's
defined contribution plan ($8,000 each for Messrs. Olcott, McKernan,
Serrano, Tench and van Cauter and $4,750 for Mr. Kaplan), payments made
for premiums and liquidation of cash surrender values of split-dollar
life insurance policies ($523,822, $146,601, $37,266 and $25,762 for
Messrs. Olcott, McKernan, Serrano and Tench, respectively) and payments
made for personal tax consultation services rendered by the Company's
income tax advisors ($40,580, $2,800, $2,800 and $1,000 for Messrs.
Olcott, McKernan, Serrano and Tench, respectively).
(2) 1996 amounts consist of split-dollar premiums in the amount of $44,059,
$11,416, $2,898 and $1,648 paid by the Company on behalf of Messrs.
Olcott, McKernan, Serrano and Tench, respectively, and Company
contributions made pursuant to the Company's defined contribution plans
in the amount of $7,389 for each of Messrs. Olcott, McKernan, Serrano,
van Cauter and Tench.
(3) Mr. Kaplan commenced employment with the Company in February 1997 and, as
such, there was no 1996 compensation.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS GRANT DATE
UNDERLYING GRANTED TO EXERCISE OR PRESENT
OPTIONS/SARS EMPLOYEES IN BASE PRICE VALUE
NAME GRANTED(#)(1) FISCAL YEAR ($/SHARE) EXPIRATION DATE ($)(2)
<S> <C> <C> <C> <C> <C>
Emery G. Olcott 95,000 9.88% $13.625 6/24/07 $617,975
45,000 4.68% $11.125 6/24/07 $239,013
Richard T. McKernan 95,000 9.88% $13.625 6/24/07 $617,975
45,000 4.68% $11.125 6/24/07 $239,013
George Serrano 45,000 4.68% $13.625 6/24/07 $292,725
30,000 3.12% $11.125 6/24/07 $159,342
Ben D. Kaplan 100,000 10.40% $11.125 6/24/07 $531,140
Staf van Cauter 5,000 0.52% $13.625 6/24/07 $ 32,525
25,000 2.60% $11.125 6/24/07 $132,785
Orren K. Tench, Jr. 20,000 2.08% $13.625 6/24/07 $130,100
10,000 1.04% $11.125 6/24/07 $ 53,114
</TABLE>
(1) The terms of the stock options granted in fiscal 1997 provided that the
$13.625 options vest immediately at the grant date and the $11.125
options become exercisable in 20% annual installments commencing with the
date of grant.
(2) The grant date present value was determined using the Black-Scholes model
of option pricing. The assumptions used in calculating the grant date
present values were as follows:
<TABLE>
<CAPTION>
STOCK OPTION
<S> <C> <C>
$13.625 $11.125
Expected volatility 0.00% 0.00%
Risk-free rate of return 6.49% 6.02%-6.49%
Dividend yield 0.00% 0.00%
Expected life 10 years 10 years
Minimum option value $6.51 $5.31
</TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND OPTION/SAR VALUES AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS/SARS IN-THE-MONEY OPTIONS/SARS
AT FISCAL YEAR END (#) AT FISCAL YEAR END ($)
SHARES
ACQUIRED ON VALUE
NAME EXERCISE(#)(1) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
Emery G. Olcott 344,000 $4,340,313 164,000 36,000 $656,440 $102,060
Richard T. McKernan 188,000 $2,041,647 164,000 36,000 $646,780 $102,060
George Serrano 102,500 $1,139,175 103,000 24,000 $528,375 $ 68,040
Ben D. Kaplan 0 $ 0 20,000 80,000 $ 56,700 $226,800
Staf van Cauter 38,000 $ 390,988 44,000 20,000 $348,560 $ 56,700
Orren K. Tench, Jr. 0 $ 0 22,000 8,000 $ 12,370 $ 22,680
</TABLE>
(1) In connection with the Recapitalization, certain outstanding options, as
indicated in the table above, were purchased from management and
employees. The values reflected in the above table represent the
difference between the price paid for the options and the purchased
options respective exercise prices.
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENTS
The Company entered into SERPs with each of Messrs. Olcott, McKernan and
Tench. The SERPs were not funded, but provided that, upon a change of control,
the Company would establish grantor trusts funded with assets to fund the
benefits under them. At the Recapitalization closing, in lieu of establishing
such grantor trusts, the Company made a lump sum payment to Messrs. Olcott,
McKernan and Tench of $2.4 million in the aggregate to satisfy the Company's
obligations under the SERPs, and the SERPs were terminated.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with
Messrs. Olcott, McKernan, Serrano, Kaplan, van Cauter and Tench. Set forth
below is a summary of the material provisions of the employment agreements with
Messrs. Olcott, McKernan, Serrano, Kaplan, van Cauter and Tench, which is
qualified in its entirety by reference to the provisions of such employment
agreements, copies of which have been incorporated by reference as exhibits
hereto.
The employment agreements with Messrs. Olcott, McKernan, Serrano, Kaplan,
van Cauter and Tench (each, an "Executive") supersede any other agreement
between any of them and the Company concerning their employment. Mr. Olcott
serves as Chairman of the Board, Chief Executive Officer and President of the
Company; Mr. McKernan serves as Senior Vice President and a Director of the
Company, and as President of Packard; Mr. Serrano serves as Vice President,
Secretary and a Director of the Company, and as President of Canberra; Mr.
Kaplan serves as Vice President and Chief Financial Officer; Mr. van Cauter
serves as Vice President of Packard, or in such other capacity as may be
assigned to him by the Chief Executive Officer of the Company or the President
of Packard; and Mr. Tench serves as a Vice President of the Company and General
Manager of its Detector Products Division. Each of the employment agreements
provides for an initial employment term of three years, except for an initial
employment term of two years in the case of Mr. van Cauter. Under each
employment agreement, excluding Mr. Kaplan, the initial employment term will be
automatically extended for additional 13-month terms on the first day of the
calendar month following each anniversary of the date of the employment
agreements, beginning on the second anniversary of the date of the employment
agreements (the first anniversary in the case of Mr. van Cauter), unless
affirmatively terminated by the Company. There is an agreed-upon annual base
salary for each executive, with annual increases no less than the increase in
the U.S. Consumer Price Index - All Urban Consumers. Each Executive is also
eligible to receive an annual cash bonus determined in accordance with the
terms of the Company's annual bonus incentive plans then in effect.
Upon termination of employment by the Company other than for "cause" or
"disability," or upon termination by the Executive for "good reason" (as such
terms are defined in the employment agreements), the Company will pay to the
Executive an amount in cash equal to the sum of (i) accrued annual base salary
as of the date of termination, a pro rata portion of the target annual bonus
accrued to the date of termination and any other accrued but unpaid annual
bonuses, vacation pay or deferred compensation not yet paid (the "Accrued
Obligations"), (ii) annual base salary and annual bonus amounts for the
remainder of the employment period, and (iii) additional contributions to the
thrift savings plan, if any, to which the Executive would have been entitled
had his employment continued for a period of three years (two years in the case
of Mr. van Cauter) after the date of termination. In addition, the Executive
will be entitled to participate in all welfare benefit plans for a period of
three years (two years in the case of Mr. van Cauter) after the date of
termination on terms at least as favorable as those that would have been
applicable had his employment not been terminated and, to the extent that any
form of compensation will not be fully vested or require additional service,
the Executive will be credited with additional service of three years (two
years in the case of Mr. van Cauter) after the date of termination. Upon
termination of employment due to death or disability, the Company will pay to
the Executive or to his respective beneficiaries, all amounts that would have
been due had such Executive remained in the employ of the Company until the end
of his employment period. If employment is terminated for cause, the Company
will pay to the Executive annual base salary through the date of termination
and any deferred compensation not yet paid, and if the Executive voluntarily
terminates employment other than for good reason, the Company will pay to the
Executive in a lump sum the Accrued Obligations other than any accrued bonus
amount.
Excluding Mr. Kaplan, each of the employment agreements also provides
that, during employment and (unless employment terminates by reason of death or
disability) for one year (two years in the case of Messrs. Serrano, van Cauter
and Tench) after employment ends or, if later, for one year (two years in the
case of Messrs. Serrano, van Cauter, and Tench) after employment would have
ended had it not been previously terminated, each Executive will not solicit
any employees of the Company or compete with the Company. In consideration for
such noncompetition covenant, the Company will pay to each Executive the sum of
his annual base salary and his target annual bonus, such amount payable in
equal monthly installments during the portion of the noncompetition period
following the date of termination.
MANAGEMENT STOCK INCENTIVE PLAN
At the Recapitalization closing, the Company adopted the Management Stock
Incentive Plan (the "Plan") pursuant to which directors, officers and key
employees of the Company and its subsidiaries (the "Eligible Participants")
will be granted nonstatutory stock options exercisable into shares of Common
Stock (the "New Options"). The Plan is not related to the Company's Stock
Option Plan of 1971 (the "Existing Options"). The Plan is administered by
either the Compensation Committee of the Board (the "Committee") or the Board.
The Committee or the Board has the discretion to select those to whom New
Options will be granted (from among those eligible). The Board or the
Committee has the authority to interpret and construe the Plan, and any
interpretation or construction of the provisions of the Plan or of any New
Options granted under the Plan by the Board or the Committee will be final and
conclusive.
New Options to purchase up to 952,840 shares of Common Stock at an
exercise price equal to $11.125 per share (the "Incentive Options") are
permitted to be granted under the Plan. The Incentive Options vest ratably and
become exercisable per year on each of the first through fifth anniversaries of
the date of grant, provided that the Eligible Participant continues to be
employed by the Company or a subsidiary of the Company. In addition, New
Options to purchase up to 278,052 shares of Common Stock at an exercise price
equal to $13.625 per share (the "Performance Options") are permitted to be
granted under the Plan. All of the Performance Options will be vested and
fully exercisable immediately upon the date of grant. In the event of an
Extraordinary Transaction (as defined in the Plan) of the Company prior to the
fifth anniversary of the date of grant of an Incentive Option, all outstanding
Incentive Options will become fully vested upon consummation of the
Extraordinary Transaction. The Company granted 696,500 Incentive Options and
265,000 Performance Options during 1997.
The terms and conditions of a New Option grant are set forth in a related
New Option agreement (the "New Option Agreement"). New Options granted under
the Plan will terminate upon the earliest to occur of (a) the tenth anniversary
of the date of the New Option Agreement; (b) the date on which the Company
acquires any shares of Common Stock, Existing Options or New Options held by
the Eligible Participant in connection with the exercise of a Put Right (as
defined in the Stockholders' Agreement); (c) the one-hundred-eighty-day
anniversary of the date of death, Retirement (as defined in the Stockholders'
Agreement) or Disability (as defined in the Stockholders' Agreement) of the
Eligible Participant; (d) the thirty-day anniversary of the date that the
Eligible Participant ceases to be a full-time employee of the Company or its
subsidiaries for any reason other than as set forth in (c) above or in
(e) below; and (e) immediately upon an Eligible Participant's voluntary
termination of employment other than due to death, Retirement or Disability, or
termination for Cause (as defined in the Stockholders' Agreement). Payment of
the New Option exercise price must be made in cash.
If New Options granted under the Plan are repurchased by the Company
pursuant to the "Put Rights" and "Call Rights" contained in the Stockholders'
Agreement, described below, the shares covered by such New Options will again
be available for grant under the Plan. In the event of the declaration of a
stock dividend, or a reorganization, merger, consolidation, acquisition,
disposition, separation, recapitalization, stock split, split-up, spin-off,
combination or exchange of any shares of Common Stock or like event, the number
or character of the shares subject to the New Option or the exercise price of
any New Option may be appropriately adjusted as deemed appropriate by the
Committee or the Board.
The Plan terminates upon, and no New Options will be granted after, the
tenth anniversary of the Recapitalization closing, unless the Plan has sooner
terminated due to grant and full exercise of New Options covering all the
shares of Common Stock available for grant under the Plan. The Board may at
any time amend, suspend or discontinue the Plan; provided, however, that the
Board may not alter, amend, discontinue or revoke or otherwise impair any
outstanding New Options granted under the Plan and which remain unexercised in
a manner adverse to the holders thereof, except if the written consent of such
holder is obtained.
COMPENSATION OF DIRECTORS
The Company does not pay any compensation to directors. At the
Recapitalization closing, Peter P. Tong, a director, was granted Incentive
Options for 10,000 shares of Common Stock and purchased 22,470 shares
(reflecting the effect of the one-for-one stock dividend) of Common Stock from
the Company at the same price per share of Common Stock paid by the Company in
the tender offer associated with the Recapitalization.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Through the Recapitalization date, the Company's Compensation Committee
during 1997 consisted of Emery G. Olcott, the Company's President and Chief
Executive Officer, David R. Meredith and Charles Panneciere, former directors.
Subsequent to the Recapitalization, the Compensation Committee consisted of Mr.
Olcott, Alexis P. Michas and Robert F. End.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Common Stock of the Company as of December 31, 1997, by (i)
each stockholder known to the Company to own beneficially more than 5% of the
outstanding Common Stock of the Company and (ii) each director, each executive
officer and all directors and officers as a group. Except as set forth in the
footnotes to the table, each stockholder listed below has informed the Company
that such stockholder has sole voting and investment power with respect to the
shares of Common Stock of the Company beneficially owned by such stockholder.
<TABLE>
<CAPTION>
SHARES OF COMPANY
COMMON STOCK
BENEFICIALLY OWNED(a)
NAME AND ADDRESS PERCENT
OF BENEFICIAL OWNER NUMBER (b)
<S> <C> <C>
Stonington Capital Appreciation 1994 Fund, L.P. ("The Fund") (c) 6,404,496 64.0%
Emery G. Olcott (d) 652,000 6.5%
Richard T. McKernan (e) 307,904 3.1%
George Serrano (f) 182,400 1.8%
Ben D. Kaplan (g) 24,000 *
Staf van Cauter (h) 54,000 *
Orren K. Tench, Jr. (i) 202,000 2.0%
Robert F. End (j) 0 --
Bradley J. Hoecker (j) 0 --
Stephen M. McLean (j) 0 --
Alexis P. Michas (j) 0 --
Peter P. Tong (k) 24,470 *
Directors and Executive Officers as a group (11 persons) (j)(l) 1,467,774 14.7%
</TABLE>
* Signifies less than 1%.
(a) The figures assume exercise by only the stockholder or group named in
each row of all options for the purchase of Common Stock held by such
stockholder or group which were exercisable by March 1, 1998.
(b) Figures are based upon 9,005,174 shares of Common Stock outstanding as of
December 31, 1997.
(c) The Fund is the record holder of 6,179,778 shares of Common Stock. The
Fund also controls, but disclaims beneficial ownership of, an additional
224,718 shares purchased by two institutional investors pursuant to the
Stockholders' Agreement. The Fund is a Delaware limited partnership
whose limited partners consist of certain institutional investors, formed
to invest in corporate acquisitions organized by Stonington. Stonington
Partners, L.P. ("SPLP"), a Delaware limited partnership, is the general
partner of the Fund, with a 1% economic interest in the Fund. Except for
such economic interest, SPLP disclaims beneficial ownership of the shares
set forth above. Stonington II is the general partner of SPLP with a 1%
economic interest in SPLP. Except for such economic interests,
Stonington II disclaims beneficial ownership of the shares set forth
above.
Pursuant to a management agreement with the Fund, Stonington has full
discretionary authority with respect to the investments of the Fund,
including the authority to make and dispose of such investments.
Furthermore, Stonington has a 7.4% economic interest in SPLP. Stonington
disclaims beneficial ownership of the shares set forth above. The
address for each of the entities and individuals listed in this footnote
is c/o Stonington Partners, Inc., 767 Fifth Avenue, New York, NY 10153.
(d) Includes shares held by Mr. Olcott's spouse, mother and minor child and
family trusts of which Mr. Olcott is trustee. Includes 164,000 shares
subject to options which were exercisable by March 1, 1998. Mr. Olcott's
address is c/o Packard BioScience Company, 800 Research Parkway, Meriden,
Connecticut 06450.
(e) Includes shares held by Mr. McKernan's spouse and the McKernan Family
Partnership. Includes 164,000 shares subject to options which were
exercisable by March 1, 1998.
(f) Includes 103,000 shares subject to options which were exercisable by
March 1, 1998.
(g) Includes 20,000 shares subject to options which were exercisable by March
1, 1998.
(h) Includes 44,000 shares subject to options which were exercisable by March
1, 1998.
(i) Includes 22,000 shares subject to options which were exercisable by March
1, 1998.
(j) Excludes shares held by the Fund of which Mr. End, Mr. Hoecker, Mr.
McLean and Mr. Michas may be deemed to be beneficial owners as a result
of their ownership of stock in, and membership on the Boards of Directors
of, Stonington and Stonington II, but they disclaim such beneficial
ownership.
(k) Includes 2,000 shares subject to options which were exercisable by March
1, 1998.
(l) Includes shares held by certain family members, trusts and similar
entities. Includes 530,000 shares subject to options which were
exercisable by March 1, 1998.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
STOCKHOLDERS' AGREEMENT
The Company, the Fund, three institutional investors, the Management
Stockholders, certain Continuing Stockholders and other stockholders of the
Company (each, a "Stockholder") entered into a stockholders' agreement (the
"Stockholders' Agreement"), which contains, among other terms and conditions,
provisions relating to corporate governance, certain restrictions with respect
to the transfer of Common Stock by certain parties thereunder, certain rights
related to puts and calls and certain registration rights granted by the
Company with respect to shares of Common Stock.
Pursuant to the terms of the Stockholders' Agreement, each of the
Stockholders has agreed to elect an initial slate of directors of the Company
who have been nominated by the Fund; provided that such initial slate shall
consist of three Management Stockholders, four designees of the Fund and two
independent directors mutually agreed upon by the Fund and the Chief Executive
Officer of the Company. After the initial slate of directors has been elected,
the Fund has the right to nominate at any time and from time to time all
directors of the Company (including the right to reduce or expand the Board of
Directors and to fill vacancies created thereby) and, subject to applicable
law, has the right to remove such directors at any time and from time to time
and each of the Stockholders has agreed to vote in favor of such nomination or
removal of directors. The initial slate of directors has been elected.
Pursuant to the terms of the Stockholders' Agreement, in the event that,
prior to an Initial Public Offering (as defined in the Stockholders'
Agreement), the Fund proposes to sell securities which, in the aggregate,
represent 40% or more of the common equity on a fully diluted basis to a third
party which is not, and following such sale will not be, an affiliate of the
Fund, the Management Stockholders and the Continuing Stockholders have the
right to elect to participate in such sale with respect to a certain number of
shares of Common Stock held by them on a pro rata basis. In the event that,
prior to an Initial Public Offering, the Fund proposes to sell securities
which, in the aggregate, represent 40% or more of the common equity on a fully
diluted basis to a third party which is not, and following such sale will not
be, an affiliate of the Fund, the Fund has the right to require each Management
Stockholder, Continuing Stockholder and such other Stockholders who have agreed
to be bound by the Stockholders' Agreement to participate in such sale with
respect to a certain number of shares of Common Stock held by them on a pro
rata basis.
Management Stockholders and Continuing Stockholders are not permitted,
without the prior consent of the Company, to sell or transfer shares of Common
Stock, other than to permitted transferees (I.E., family members, in the case
of Management Stockholders, and, upon the death of a Management Stockholder or
a Continuing Stockholder, to his or her estate or executors), prior to the
occurrence of the earlier of March 4, 2002, and an Initial Public Offering.
Following an Initial Public Offering, Management Stockholders and Continuing
Stockholders may transfer shares subject to applicable restrictions under the
Securities Act and other federal and state securities laws. On or after March
4, 2002, and prior to March 4, 2007, if an Initial Public Offering has not
occurred, Management Stockholders and Continuing Stockholders are permitted to
sell Common Stock to third parties after first giving the Company, the other
Management Stockholders and the Continuing Stockholders a right of first
refusal for the same number of shares of Common Stock at the same price.
Prior to the earlier of an Initial Public Offering or March 4, 2007, the
Company has the right to require a Management Stockholder to sell to the
Company his or her shares of Common Stock, New Options and Existing Options
upon a termination of employment for any reason. Such right is exercisable
within a period of 190 days after the date of termination of employment,
subject to certain extensions, at a price per share, depending on the reason
for termination of employment and whether such shares were shares of Common
Stock retained by such Management Stockholder in the Recapitalization or
Existing Options, equal to the Fair Value Price (as defined in the
Stockholders' Agreement) or the Original Purchase Price (as defined in the
Stockholders' Agreement) of a share of Common Stock and at a price per New
Option or Existing Option equal to the difference between the Fair Value Price
or the Original Purchase Price of the shares of Common Stock covered by such
New Option or Existing Option and the exercise price of the shares of Common
Stock covered by such New Option or Existing Option, multiplied by the number
of shares of Common Stock covered by the New Option or Existing Option.
Prior to the earlier of an Initial Public Offering or March 4, 2007, each
Management Stockholder has the right to require the Company to purchase his or
her shares of Common Stock, New Options or Existing Options upon termination of
employment due to death, Disability, Retirement or certain instances of
Involuntary Termination (as defined in the Stockholders' Agreement). Such a
right is exercisable within a period of 180 days after the date of termination
of employment due to death, Disability, Retirement or certain instances of
Involuntary Termination, subject to certain extensions, (a) at a price per
share of Common Stock equal to the Fair Value Price thereof, and (b) at a price
per New Option or Existing Option equal to the difference between the Fair
Value Price of the shares of Common Stock covered by such New Option or
Existing Option and the exercise price of the shares of Common Stock covered by
such New Option or Existing Option, multiplied by the number of shares of
Common Stock covered by the New Option or Existing Option. If the payment for
the shares of Common Stock, New Options or Existing Options would constitute or
cause a breach or default under any agreement or instrument to which the
Company or any of its subsidiaries is bound or violate any law applicable to
the Company or any of its subsidiaries, the Company is permitted to pay for the
shares or options with a subordinated note of the Company that will, among
other things, contain subordination terms which are reasonably satisfactory to
the relevant senior lenders to the Company or any of its subsidiaries.
In the event that a Management Stockholder's employment is terminated due
to Voluntary Resignation (as defined in the Stockholders' Agreement) or
Involuntary Termination, but not if such termination is for Cause (as defined
in the Stockholders' Agreement), and the Company does not repurchase such
Management Stockholder's Existing Options pursuant to the Company's rights set
forth in the preceding paragraph, the Stockholders' Agreement provides that the
term of such Existing Options shall be extended for five years from such
termination or until 30 days following an Initial Public Offering, if sooner.
The Company has also agreed, pursuant to the Stockholders' Agreement, to
indemnify Management Stockholders against additional tax liability arising from
the exercise of "Put Rights" and "Call Rights" contained in the Stockholders'
Agreement resulting in "dividend" distributions under Section 302 of the Code.
Stockholders are, subject to certain limitations, entitled to register
shares of Common Stock in connection with a registration statement prepared by
the Company to register common equity beneficially owned by the Fund. The Fund
has the right to require the Company to take such steps as necessary to
register all or part of the Common Stock held by the Fund under the Securities
Act pursuant to the provisions of the Stockholders' Agreement. After an
Initial Public Offering, Stockholders other than the Fund have the right on one
occasion to require the Company to take such steps as necessary to register
shares of Common Stock held by such Stockholders under the Securities Act,
subject to certain minimum amounts and other limitations. The Stockholders'
Agreement contains customary terms and provisions with respect to, among other
things, registration procedures and certain rights to indemnification granted
by parties thereunder in connection with the registration of Common Stock
subject to such agreement.
OTHER RELATED PARTY TRANSACTIONS
Prior to the Recapitalization, Compagnie Oris Industrie, S.A. ("Oris")
owned 30.7% of the outstanding Common Stock of the Company. Oris sold all of
its shares of Common Stock pursuant to the Recapitalization and does not own
any Common Stock of the Company. In 1996, Packard entered into an agreement
with CIS bio international ("CIS"), an affiliate of Oris, pursuant to which
Packard agreed to become the exclusive worldwide manufacturer of the KRYPTOR
system for CIS. The agreement terminates on December 31, 2002, but may be
extended upon agreement of the parties. In 1995, Packard entered into another
agreement with CIS pursuant to which Packard obtained a 10-year license to
certain HTRF<trademark> technology owned by CIS. Packard agreed to pay CIS
$700,000 plus specified annual royalties. CIS may cancel the license or make
it nonexclusive if certain targets are not met. CIS may also cancel the
license if the Company is controlled by a competitor of CIS. The Company had
revenues from CIS of approximately $99,000, $1,065,000 and $4,968,000 for 1995,
1996 and 1997, respectively, and CIS reimbursed the Company for certain R&D
expenses in the amounts of $2,961,000, $1,536,000 and $236,000 for 1995, 1996
and 1997, respectively. The Company also had a non-interest bearing, trade
receivable from CIS of approximately $1,061,000 and $2,328,000 at December 31,
1996 and 1997, respectively.
Stonington received a structuring fee and reimbursement for certain out-
of-pocket expenses totaling $2.6 million in the aggregate.
<PAGE>
PART IV
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
(a) Documents filed as part of this Form 10-K:
1. Financial Statements.
Report on Independent Public Accountants
Consolidated Balance Sheets as of December 31, 1996 and 1997
Consolidated Statements of Income (Loss) for the Years Ended
December 31, 1995, 1996 and 1997
Consolidated Statements of Stockholders' Equity (Deficit)
for the Years Ended December 31, 1995, 1996 and 1997
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1995, 1996 and 1997
Notes to Consolidated Financial Statements
2. Financial Statements Schedules.
Report of Independent Auditors on Consolidated Financial
Statement Schedule
Schedule II - Valuation and Qualifying Accounts
All other schedules have been omitted because they are not
applicable or required.
3. Exhibits.
Unless otherwise indicated, all exhibits are hereby incorporated by
reference to the Company's Registration Statement on Form S-4, Commission File
No. 333-24001. Following a description of each exhibit that is incorporated by
reference to such registration statement is a number in parenthesis indicating
the exhibit number by which such exhibit is identified in such registration
statement.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
<S> <C>
3.1 Amended and Restated Certificate of Incorporation of the Company (3.1)
3.2 By-Laws of the Company (3.2)
4.1 Indenture, dated as of March 4, 1997, between the Company and The Bank of New
York, as Trustee (4.1)
4.2 Form of 9 3/8% Senior Subordinated Notes due 2007 (4.2)
4.3 Form of 9 3/8% Senior Subordinated Notes due 2007, Series B (4.3)
4.4 Credit Agreement, dated as of March 4, 1997, by and among the Company, the
Subsidiary Borrowers from time to time party thereto, the several banks and
other financial institutions or entities from time to time party thereto,
Canadian Imperial Bank of Commerce, as documentation agent, BancAmerica
Securities, Inc. and CIBC Wood Gundy Securities Corp., each as a co-arranger and
a co-syndication agent, and Bank of America National Trust and Savings
Association, as administrative agent (4.4)
4.5 Waiver and First Amendment, dated as of November 25, 1997, to the Credit
Agreement*
4.6 Waiver to Credit Agreement and Guarantee and Collateral Agreement, dated as of
February 11, 1998*
10.1 Management Stock Incentive Plan (10.5)
10.2 Stock Option Plan of 1971 (10.6)
10.3 Stockholders' Agreement, dated as of March 4, 1997, by and among the Company,
Merrill Lynch KECALP L.P. 1994, KECALP Inc., the Management Investors listed in
Schedule 1 thereto, the Non-Management Investors listed in Schedule 2 thereto
and Stonington Capital Appreciation 1994 Fund, L.P. (10.7)
10.4 Amendment No. 1 to Stockholders' Agreement; Amendment No. 1, dated as of June 2,
1997, to the Stockholders' Agreement, dated as of March 4, 1997*
10.5 Employment Agreement, dated as of March 4, 1997, by and between the Company and
Emery G. Olcott (10.3)
10.6 Employment Agreement, dated as of March 4, 1997, by and between the Company and
Richard T. McKernan (10.4)
10.7 Employment Agreement by and between the Company and George Serrano (10.8)
10.8 Employment Agreement by and between the Company and Staf van Cauter (10.9)
10.9 Employment Agreement by and between the Company and Orren K. Tench, Jr. (10.10)
10.10 Employment Agreement by and between the Company and Ben D. Kaplan (incorporated
by reference to the Company's Form 10-Q for the period ended June 30, 1997)
21 List of subsidiaries of the Company*
27 Financial Data Schedule*
</TABLE>
*Filed herewith.
(b) Reports on Form 8-K:
The Company has not filed any reports on Form 8-K during the quarter
ended December 31, 1997.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized on March 26, 1998.
Date: March 26, 1998 By: /s/ Emery G. Olcott
Emery G. Olcott
Chairman of the Board, Chief
Executive Officer and President
Date: March 26, 1998 By: /s/ Ben D. Kaplan
Ben D. Kaplan
Vice President and Chief
Financial Officer
Date: March 26, 1998 By: /s/ David M. Dean
David M. Dean
Corporate Controller
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 26, 1998 By: /s/ Richard T. McKernan
Richard T. McKernan
Senior Vice President and Director
President, Packard
Date: March 26, 1998 By: /s/ George Serrano
George Serrano
Vice President, Secretary and Director
President, Canberra
Date: March 26, 1998 By: /s/ Robert F. End
Robert F. End
Director
Date: March 26, 1998 By: /s/ Bradley J. Hoecker
Bradley J. Hoecker
Director
Date: March 26, 1998 By: /s/ Stephen M. McLean
Stephen M. McLean
Director
Date: March 26, 1998 By: /s/ Alexis P. Michas
Alexis P. Michas
Director
Date: March 26, 1998 By: /s/ Peter P. Tong
Peter P. Tong
Director
No annual report or proxy material has been sent to the Company's
security holders.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To Packard BioScience Company:
We have audited in accordance with generally accepted auditing standards,
the consolidated balance sheets of Packard BioScience Company and subsidiaries
as of December 31, 1996 and 1997, and the related consolidated statements of
operations, stockholders' equity (deficit) and cash flows for each of the three
years in the period ended December 31, 1997, included in this Form 10-K, and
have issued our report thereon dated February 13, 1998. Our audits were made
for the purpose of forming an opinion on the basic financial statements taken
as a whole. The accompanying schedule on page 49 is the responsibility of the
Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. The information reflected in the schedule has been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, fairly states, in all material
respects, the financial data required to be set forth therein in relation to
the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
February 13, 1998
<PAGE>
SCHEDULE II
PACKARD BIOSCIENCE COMPANY AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE THREE YEAR PERIOD ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
BALANCE AT CHARGED TO CHARGED TO BALANCE
BEGINNING COSTS AND OTHER AT END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
<S> <C> <C> <C> <C> <C>
For the year ended December 31, 1995:
Reserves which are deducted in the
balance sheet from assets to which they apply -
Reserves for uncollectible amounts $421,615 $ 28,912 $ 29,164 $421,363
For the year ended December 31, 1996:
Reserves which are deducted in the
balance sheet from assets to which they apply -
Reserves for uncollectible amounts $421,363 $100,113 $ 46,138 $475,338
For the year ended December 31, 1997:
Reserves which are deducted in the
balance sheet from assets to which they apply -
Reserves for uncollectible amounts $475,338 $165,898 $40,000(a) $ 98,740 $582,496
(a)Represents recorded reserve at date of
acquisition.
</TABLE>
EXHIBIT 4.5
WAIVER AND FIRST AMENDMENT
WAIVER AND FIRST AMENDMENT (this "FIRST AMENDMENT"), dated as of November
25, 1997, to the Credit Agreement, dated as of March 4, 1997 (as the same may
be amended, supplemented or otherwise modified from time to time, the "CREDIT
AGREEMENT"), among PACKARD BIOSCIENCE COMPANY, a Delaware corporation
("PACKARD"), the Subsidiary Borrowers party thereto, the lenders from time to
time parties thereto (the "LENDERS"), BANCAMERICA ROBERTSON STEPHENS (formerly
known as BancAmerica Securities, Inc.) and CIBC WOOD GUNDY SECURITIES CORP., as
co-arrangers and co-syndication agents (in such capacities, the "CO-ARRANGERS"
and the "CO-SYNDICATION AGENTS"), CANADIAN IMPERIAL BANK OF COMMERCE, as
documentation agent (in such capacity, the "DOCUMENTATION AGENT"), and BANK OF
AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as administrative agent.
WITNESSETH:
WHEREAS, Packard has requested that the Lenders agree to waive compliance
with certain provisions of the Credit Agreement and amend certain provisions of
the Credit Agreement upon the terms and subject to the conditions set forth
herein; and
WHEREAS, the Lenders have agreed to such waivers and amendments only upon
the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties hereto hereby agree as follows:
1. DEFINED TERMS. Capitalized terms not otherwise defined herein have
the meanings ascribed to such terms in the Credit Agreement.
2. WAIVER OF SECTIONS 8.1(C) AND (D). The Administrative Agent and
the Lenders hereby waive compliance with the provisions of Sections 8.1(c)(ii)
and (d) of the Credit Agreement for the months of October and November of 1997;
PROVIDED that in lieu of the financial statements otherwise required to be
provided for these months pursuant to Sections 8.1(c)(ii) and (d), Packard
shall furnish to the Administrative Agent and the Lenders financial statements
satisfying the requirements of clauses (A) and (B ) of Section 8.1(c)(i) for
such months within the time period stated in Section 8.1(c)(ii).
3. AMENDMENT OF SECTION 1.1. Section 1.1 of the Credit Agreement is
hereby amended by:
(a) inserting in correct alphabetical order the following definition:
" "AURORA ASSET SALE": the Disposition by Packard or its
Subsidiaries of any or all of its or their interest in Aurora
BioScience Company.";
(b) amending clause (a) of the definition of the term "Asset Sale" by
changing the reference to "(f)" therein to a reference to "(g)";
(c) amending clause (a) of the definition of the term "Interest Period"
by inserting after the words "PROVIDED that," in the tenth line
thereof the following:
"in order to match amortization payment requirements when due in
accordance with Section 2.3, Packard may select, in addition to
those specified above, interest periods of not less than 14 days;
PROVIDED FURTHER that,";
(d) amending the definition of the term "Reinvestment Prepayment Date"
by inserting after the words "nine months" in the second line
thereof the following:
"(or, in the case of an Aurora Asset Sale, 18 months)"; and
(e) amending clause (d) of the definition of "Consolidated Fixed
Charges" by deleting the parenthetical language therein and
substituting in lieu thereof the following:
"(excluding (i) Capital Expenditures directly utilizing the
proceeds from the Aurora Asset Sale for the upgrade or replacement
of Packard's management information systems, including hardware,
software and related consultant's fees, and (ii) the principal
amount of Indebtedness incurred in connection with such
expenditures)".
4. AMENDMENT OF SECTION 5.5(A). Section 5.5(a) of the Credit
Agreement is hereby amended by adding at the end thereof the following:
"All Term Loans hereunder may be converted into, or continued as,
Base Rate Loans without reference to minimum principal amount
requirements for Base Rate Loans."
5. AMENDMENT OF SECTION 9.5. Section 9.5 of the Credit Agreement is
hereby amended by
(a) deleting the word "and" after clause (e) thereof;
(b) relettering the current clause "(f)" to be "(g)", and changing the
references therein to "Section 9.5(f)" and "paragraph (f)" to
"Section 9.5(g)" and "paragraph (g)", respectively; and
(c) inserting the following new clause (f):
"(f) the Aurora Asset Sale(s); and".
6. AMENDMENT OF SECTION 9.6. Section 9.6 of the Credit Agreement is
hereby amended by deleting clause (iii)(A) therefrom and substituting therefor
the following:
"(A) (1) repurchase shares of its Capital Stock from employees,
former employees, directors or former directors of Packard or any
of its Subsidiaries pursuant to the terms of the agreements
(including employment agreements) or plans (or amendments thereto)
approved by the Board of Directors of Packard under which such
individuals purchase or sell or are granted the option to purchase
or sell, shares of such Capital Stock and (2) in addition to any
other repurchases expressly permitted by the foregoing provisions
of this Section 9.6, repurchase shares of its Capital Stock from
any Person, PROVIDED, in each case, that the aggregate amount of
such repurchases in any calendar year (excluding any such
repurchases made through the issuance of Management Notes)
permitted by clause (1) (collectively, "MANAGEMENT STOCK PAYMENTS")
and clause (2) above, when added to the amount of any Management
Note Payments made during such calendar year, shall not exceed
$2,000,000;".
7. AMENDMENT OF SECTION 9.7. Section 9.7 of the Credit Agreement is
hereby amended by inserting after the word "Capital Expenditure" as it first
appears in the third line thereof the following:
"(other than Capital Expenditures directly utilizing the proceeds
from the Aurora Asset Sale(s) for the upgrading or replacement of
Packard's management information systems, including hardware,
software and related consultant's fees)".
8. AMENDMENT OF SECTION 9.8. Section 9.8 of the Credit Agreement is
hereby amended by deleting the word "and" after clause (f) thereof and
inserting after the amount "$10,000,000" as it appears at the end of clause (g)
thereof the following:
";
(h) the Japan Acquisition; provided that the aggregate
consideration for such acquisition does not exceed 900,000,000
Japanese Yen"; and
(i) the investment account, established on terms previously
disclosed to the Agent, for the benefit of and managed by Mr.
Kuwashima in connection with the Japan Acquisition".
9. CONDITIONS TO EFFECTIVENESS. This First Amendment shall become
effective (the actual date of such effectiveness, the "FIRST AMENDMENT
EFFECTIVE DATE") as of the date first above written when counterparts hereof
shall have been duly executed and delivered by each of the parties hereto and
acknowledged by each Subsidiary Guarantor.
10. COMPANY REPRESENTATIONS. The Company represents and warrants that:
(a) this First Amendment has been duly authorized, executed and
delivered by Packard;
(b) each of this First Amendment, and the Credit Agreement as amended
by this First Amendment, constitutes the legal, valid and binding
obligation of Packard;
(c) each of the representations and warranties set forth in Section 6
of the Credit Agreement are true and correct as of the First
Amendment Effective Date; provided that references in the Credit
Agreement to this "Agreement" shall be deemed references to the
Credit Agreement as amended by this First Amendment; and
(d) after giving effect to this First Amendment, there does not exist
any Default or Event of Default.
11. CONTINUING EFFECTS. Except as expressly waived hereby, the Credit
Agreement shall continue to be and shall remain in full force and effect in
accordance with its terms.
12. EXPENSES. The Company agrees to pay and reimburse the
Administrative Agent for all of its out-of-pocket costs and expenses incurred
in connection with the negotiation, preparation, execution, and delivery of
this First Amendment, including the reasonable fees and expenses of counsel to
the Administrative Agent.
13. COUNTERPARTS. This First Amendment may be executed on any number
of separate counterparts and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.
14. GOVERNING LAW. THIS FIRST AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment
to be duly executed and delivered by their proper and duly authorized officers
as of the day and year first above written.
PACKARD BIOSCIENCE COMPANY
By:
Name:
Title:
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as Administrative Agent
By:
Name:
Title:
CANADIAN IMPERIAL BANK OF COMMERCE, as
Documentation Agent and as a Lender
By:
Name:
Title:
CIBC WOOD GUNDY SECURITIES CORP., as a Co-
Arranger and a Co-Syndication Agent
By:
Name:
Title:
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION (as successor by merger with
Bank of America Illinois, as a Lender
By:
Name:
Title:
ABN AMRO BANK N.V., as a Lender
By:
Name:
Title:
By:
Name:
Title:
BANKBOSTON, N.A. (formerly known as The
First National Bank of Boston), as a Lender
By:
Name:
Title:
BANK OF SCOTLAND, as a Lender
By:
Name:
Title:
FLEET NATIONAL BANK, as a Lender
By:
Name:
Title:
IBJ SCHRODER BANK & TRUST COMPANY, as a
Lender
By:
Name:
Title:
THE LONG-TERM CREDIT BANK OF JAPAN,
LIMITED, NEW YORK BRANCH, as a Lender
By:
Name:
Title:
STATE STREET BANK AND TRUST COMPANY, as a
Lender
By:
Name:
Title:
ALLSTATE LIFE INSURANCE COMPANY, as a
Lender
By:
Name:
Title:
THE ING CAPITAL SENIOR SECURED HIGH INCOME
FUND, L.P., as a Lender
By:
Name:
Title:
MERRILL LYNCH SENIOR FLOATING RATE FUND,
INC., as a Lender
By:
Name:
Title:
THE NORTHWESTERN MUTUAL LIFE INSURANCE
COMPANY, as a Lender
By:
Name:
Title:
PILGRIM AMERICAN PRIME RATE TRUST, as a
Lender
By:
Name:
Title:
SENIOR DEBT PORFOLIO, as a Lender
By:
Name:
Title:
COMMERCIAL LOAN TRUST I, as a Lender
By:
Name:
Title:
FEDERAL STREET PARTNERS, as a Lender
By:
Name:
Title:
PAMCO CAYMAN LTD., as a Lender
By:
Name:
Title:
<PAGE>
ACKNOWLEDGEMENT AND CONSENT
The undersigned does hereby acknowledge and consent to the foregoing
First Amendment. The undersigned does hereby confirm and agree that, after
giving effect to such First Amendment, the Guarantee and Collateral Agreement
and the other Security Documents in favor of the Administrative Agent to which
it is a party are and shall continue to be in full force and effect and are
hereby confirmed and ratified in all respects.
PACKARD INSTRUMENT COMPANY, INC.
By:
Name:
Title:
EXHIBIT 4.6
WAIVER TO CREDIT AGREEMENT
AND GUARANTEE AND COLLATERAL AGREEMENT
WAIVER (this "WAIVER"), dated as of February 11, 1998, to the Credit
Agreement, dated as of March 4, 1997 (as the same may be amended, supplemented
or otherwise modified from time to time, the "CREDIT AGREEMENT"), among PACKARD
BIOSCIENCE COMPANY, a Delaware corporation ("PACKARD"), the Subsidiary
Borrowers party thereto, the lenders from time to time parties thereto (the
"LENDERS"), BANCAMERICA ROBERTSON STEPHENS (formerly known as BancAmerica
Securities, Inc.) and CIBC OPPENHEIMER CORP. (formerly known as CIBC-WOOD GUNDY
SECURITIES CORP.), as co-arrangers and co-syndication agents (in such
capacities, the "CO-ARRANGERS" and the "CO-SYNDICATION AGENTS"), CANADIAN
IMPERIAL BANK OF COMMERCE, as documentation agent (in such capacity, the
"DOCUMENTATION AGENT"), and BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as administrative agent (in such capacity, the "ADMINISTRATIVE
AGENT"), and to the Guarantee and Collateral Agreement, dated as of March 4,
1997 (as the same may be amended, supplemented or otherwise modified from time
to time the "GUARANTEE AND COLLATERAL AGREEMENT"), made by Packard and certain
of its subsidiaries in favor of the Administrative Agent for the benefit of the
Lenders.
WITNESSETH:
WHEREAS, Packard has requested that the Administrative Agent and the
Lenders agree to waive compliance with certain provisions of the Credit
Agreement and the Guarantee and Collateral Agreement upon the terms and subject
to the conditions set forth herein; and
WHEREAS, the Administrative Agent and the Lenders have agreed to such
waivers only upon the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties hereto hereby agree as follows:
15. DEFINED TERMS. Capitalized terms not otherwise defined herein
have the meanings ascribed to such terms in the Credit Agreement.
16. GENERAL WAIVER OF VIOLATION. To the extent that the failure of
Packard to create a valid and binding first priority security interest in the
stock of Canberra Packard Ges. m.b.h. (Austria), a wholly-owned subsidiary of
Packard ("PACKARD AUSTRIA"), in favor of the Administrative Agent and the
Lenders has resulted in a violation of any of the terms of the Credit Agreement
or the Guarantee and Collateral Agreement, such violation is hereby waived;
PROVIDED that Packard shall take all actions necessary, or cause all actions
necessary to be taken, to create a first priority security interest in the
stock of Packard Austria in favor of the Administrative Agent and the Lenders
as soon as practicable.
17. WAIVER OF SECTION 9.1(A) OF THE CREDIT AGREEMENT. Compliance with
Section 9.1(a) of the Credit Agreement on December 31, 1997 is hereby waived;
PROVIDED that the Consolidated Leverage Ratio of Packard as of such date does
not exceed 6.15:1.00.
18. CONDITIONS TO EFFECTIVENESS. This Waiver shall become effective
(the actual date of such effectiveness, the "WAIVER EFFECTIVE DATE") as of the
date first above written when (a) counterparts hereof shall have been duly
executed and delivered by the Required Lenders, each Borrower and each
Subsidiary Guarantor and (b) the Administrative Agent shall have received a
Share Pledge Agreement executed by Packard whereby Packard grants the Lenders
and the Administrative Agent a valid, first priority security interest in the
shares of Packard Austria.
19. COMPANY REPRESENTATIONS. The Company represents and warrants that:
(a) this Waiver has been duly authorized, executed and delivered by
each of Packard and Packard Instrument Company,
Inc. (the "SUBSIDIARY GUARANTOR");
(b) each of this Waiver, the Credit Agreement and the Guarantee and
Collateral Agreement constitutes the legal, valid and binding
obligation of Packard;
(c) each of the Waiver and the Guarantee and Collateral Agreement
constitutes the legal, valid and binding obligation of the
Subsidiary Guarantor;
(d) each of the representations and warranties set forth in each of
Section 6 of the Credit Agreement and Section 4 of the Guarantee
and Collateral Agreement are true and correct as of the Waiver
Effective Date; PROVIDED that (i) references in the Credit
Agreement to this "Agreement" shall be deemed references to the
Credit Agreement after giving effect to this Waiver and (ii)
references in the Guarantee and Collateral Agreement to this
"Agreement" shall be deemed references to the Guarantee and
Collateral Agreement after giving effect to this Waiver; and
(e) after giving effect to this Waiver, there does not exist any
Default or Event of Default.
20. CONTINUING EFFECTS. Except as expressly waived hereby, each of the
Credit Agreement and the Guarantee and Collateral Agreement shall continue to
be and shall remain in full force and effect in accordance with its terms.
21. EXPENSES. Packard agrees to pay and reimburse the Administrative
Agent for all of its out-of-pocket costs and expenses incurred in connection
with the negotiation, preparation, execution, and delivery of this Waiver,
including the reasonable fees and expenses of counsel to the Administrative
Agent.
22. COUNTERPARTS. This Waiver may be executed on any number of
separate counterparts and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.
23. GOVERNING LAW. THIS WAIVER SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have caused this Waiver to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first above written.
PACKARD BIOSCIENCE COMPANY
By:
Name:
Title:
PACKARD INSTRUMENT COMPANY, INC.
By:
Name:
Title:
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as Administrative Agent
By:
Name:
Title:
CANADIAN IMPERIAL BANK OF COMMERCE, as
Documentation Agent and as a Lender
By:
Name:
Title:
CIBC OPPENHEIMER CORP. (formerly known as
CIBC-Wood Gundy Securities Corp.), as a Co-
Arranger and a Co-Syndication Agent
By:
Name:
Title:
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION (as successor by merger with
Bank of America Illinois), as a Lender
By:
Name:
Title:
ABN AMRO BANK N.V., as a Lender
By:
Name:
Title:
By:
Name:
Title:
BANKBOSTON, N.A. (formerly known as The
First National Bank of Boston), as a Lender
By:
Name:
Title:
BANK OF SCOTLAND, as a Lender
By:
Name:
Title:
FLEET NATIONAL BANK, as a Lender
By:
Name:
Title:
IBJ SCHRODER BANK & TRUST COMPANY, as a
Lender
By:
Name:
Title:
THE LONG-TERM CREDIT BANK OF JAPAN,
LIMITED, NEW YORK BRANCH, as a Lender
By:
Name:
Title:
STATE STREET BANK AND TRUST COMPANY, as a
Lender
By:
Name:
Title:
ALLSTATE LIFE INSURANCE COMPANY, as a
Lender
By:
Name:
Title:
THE ING CAPITAL SENIOR SECURED HIGH INCOME
FUND, L.P., as a Lender
By:
Name:
Title:
MERRILL LYNCH SENIOR FLOATING RATE FUND,
INC., as a Lender
By:
Name:
Title:
THE NORTHWESTERN MUTUAL LIFE INSURANCE
COMPANY, as a Lender
By:
Name:
Title:
SENIOR DEBT PORTFOLIO, as a Lender
By: Boston Management & Research, as
Investement Advisor
By:
Name:
Title:
COMMERCIAL LOAN FUNDING TRUST I, as a
Lender
By: Lehman Commercial Paper Inc., not in
its individual capacity but solely as
Administrative Agent
By:
Name:
Title:
PAMCO CAYMAN LTD., as a Lender
By: Protective Asset Management Company, as
Collateral Manager
By:
Name:
Title:
ML CBO IV (CAYMAN) LTD., as a Lender
By: Protective Asset Management Company, as
Collateral Manager
By:
Name:
Title:
FEDERAL STREET PARTNERS, as a Lender
By:
Name:
Title:
EXHIBIT 10.4
AMENDMENT NO. 1 TO STOCKHOLDERS' AGREEMENT
AMENDMENT NO. 1, dated as of June 2, 1997, to the Stockholders'
Agreement, dated as of March 4, 1997 (the "Stockholders' Agreement"), by and
among Packard BioScience Company, a Delaware corporation ("Packard"), the
Management Stockholders listed in Schedule 1 thereto, the Non-Management
Stockholders listed in Schedule 2 thereto, Merrill Lynch KECALP L.P. 1994,
KECALP Inc. and Stonington Capital Appreciation 1994 Fund, L.P.
WHEREAS, pursuant to, and in accordance with, Section 6.4 of the
Stockholders' Agreement, the parties hereto wish to amend the Stockholders'
Agreement on the terms contained herein.
NOW THEREFORE, the parties hereto agree as follows:
1. Amendments. The Stockholders' Agreement is hereby amended as
follows:
(a) Definitions.
(i) The following definitions shall be added to Article I of the
Stockholders' Agreement after the definition of the term
"Agreement" and before the definition of the term "Board of
Directors":
"Baird Investors" shall mean Baird Capital Partners II
Limited Partnership, a Wisconsin limited partnership, and BCP
II Affiliates Fund Limited Partnership, a Wisconsin limited
partnership.
"Baird Shares" shall mean the Shares (from time to time)
beneficially owned by the Baird Investors.
(ii) The definition of the term "Registrable Securities" in
Article I of the Stockholders' Agreement shall be amended by
adding to the second line of such definition after the words
"Institutional Shares" the words
", the Baird Shares".
(iii) The definition of the term "Stockholders" in Article I of the
Stockholders' Agreement shall be amended by adding to the
fifth line of such definition after the words "Institutional
Shares" the words ", the Baird Shares".
(b) Sale of Shares to a Third Party.
(i) Section 2.5(a) of the Stockholders' Agreement shall be
amended as follows: the words "and the Baird Investors"
shall be added to the tenth line thereof after the words
"Permitted Transferees" and to the twentieth line thereof
after the words "Packard Investors"; the words "or Baird
Shares, as the case may be," shall be added to the fourteenth
line thereof after the words "Packard Shares"; the words "and
each Baird Investor" shall be added to the twenty-second line
thereof after the words "Packard Investor"; and the words "or
a Baird Investor" shall be added to the twenty-seventh line
thereof after the words "Packard Investor".
(ii) Section 2.5(b) of the Stockholders' Agreement shall be
amended as follows: the words "and the Baird Investors"
shall be added to the twelfth line thereof after the words
"Permitted Transferees"; and the words "or Baird Shares, as
the case may be," shall be added to the fifteenth line
thereof after the words "Packard Shares".
(c) Certain Limitations. Section 2.7 of the Stockholders' Agreement
shall be amended to read in its entirety as follows:
"Limitation on Certain Investors. Notwithstanding anything
contained herein to the contrary, neither the Baird Investors nor the
Institutional Investors may, without the prior written consent of Stonington,
sell or otherwise dispose of their Baird Shares or their Institutional Shares,
as the case may be, prior to the sale or other disposition by Stonington of a
like proportion of its Stonington Shares and then only on the same terms and
conditions as Stonington's sale or other disposition; provided that, if Merrill
Lynch KECALP L.P. 1997 agrees in writing, in form and substance reasonably
satisfactory to Stonington and Packard, to become bound, and becomes bound, by
all the terms of this Agreement to the same extent as the Institutional
Investors are so bound, KECALP Inc. may transfer all, but not less than all, of
its Institutional Shares to Merrill Lynch KECALP L.P. 1997; and provided,
further, that (i) each Baird Investor may transfer Baird Shares held by it to
the other Baird Investor and (ii) each Baird Investor may sell Baird shares
held by such Baird Investor in accordance with the terms of Section 2.5
hereof."
(d) Waiver and Amendment. Section 6.4(a) of the Stockholders'
Agreement shall be amended to add to the end of the first proviso therein the
following words: ", and that any amendment that adversely affects the rights of
the Baird Investor shall be of no force or effect unless the Baird Investor
shall have consented in writing thereto".
(e) Notices. Section 6.6 of the Stockholders' Agreement shall be
amended to add after clause (d) thereof the following:
"(e) If to the Baird Investor, to the address of the Baird Investor
as shown in the stock record book of Packard or as from time to time designated
by the Baird Investor in writing to Packard"
2. Governing Law. This Amendment shall be governed by and construed in
accordance with the internal laws of the State of Delaware without reference to
the application of principles of conflicts of law.
3. Reaffirmation. In all respects not inconsistent with the terms and
provisions of this Amendment No. 1, the Stockholders' Agreement shall continue
to be in full force and effect in accordance with the terms and conditions
thereof, and is hereby ratified, adopted, approved and confirmed. From and
after the date hereof, each reference to the Stockholders' Agreement in any
other instrument or document shall be deemed a reference to the Stockholders'
Agreement as amended hereby, unless the context otherwise requires.
4. No Waiver. None of the execution, delivery or performance of this
Amendment No. 1 shall operate as a waiver of any condition, power, remedy or
right exercisable in accordance with the Stockholders' Agreement, or constitute
a waiver of any provision of the Stockholders' Agreement, except as expressly
provided herein.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Amendment No. 1, or has caused this Amendment No. 1 to be duly executed, as of
the date first above written.
PACKARD BIOSCIENCE COMPANY
By:
Name:
Title:
STONINGTON CAPITAL APPRECIATION 1994 FUND,
L.P.
By: Stonington Partners, L.P.,
its general partner
By: Stonington Partners, Inc. II,
its general partner
By:
Name:
Title:
Emery G. Olcott
Richard T. McKernan
George Serrano
Orren Tench
<PAGE>
COUNTERPART TO STOCKHOLDERS' AGREEMENT
The undersigned, by causing this Amendment No. 1 to be executed, hereby
agrees to be bound by all of the terms and conditions of the Stockholders'
Agreement as amended by this Amendment No. 1; this signature page also being
deemed to be a counterpart to the Stockholders' Agreement.
Dated as of the date
first written above:
BAIRD CAPITAL PARTNERS II LIMITED
PARTNERSHIP
By:
Name:
Title:
BCP II AFFILIATES FUND LIMITED PARTNERSHIP
By:
Name:
Title:
EXHIBIT 21
LIST OF SUBSIDIARIES OF THE COMPANY
(AS OF MARCH 20, 1998)
<TABLE>
<CAPTION>
ENTITY PLACE OF INCORPORATION
<S> <C>
Amplitudes, Incorporated Connecticut
Canberra Corporation (Dormant) Delaware
Canberra-Packard International, Inc. Barbados
Packard Instrument Company, Inc. Delaware
Aquila Technologies Group, Inc. New Mexico
Canberra-Packard Inc. (Dormant) Delaware
Canberra-Packard Pty. Ltd. Australia
Canberra-Packard Ges m.b.h. Austria
Canberra-Packard Benelux NV SA
(includes Canberra-Packard
Danish branch) Belgium
Canberra Semiconductor NV Belgium
Packard Instrument S.A. France
Canberra Electronique S.A. France
Canberra-Packard GmbH Germany
Canberra-Packard Ltd. Great Britain
Canberra-Packard s.r.l. Italy
Packard BioScience BV The Netherlands
Canberra-Packard Trading Corp. Russia
Canberra-Packard AG Switzerland
PIISA (Dormant) Panama
Packard Japan KK Japan
NOTE: ALL OF THE ABOVE ARE 100%, WHOLLY-OWNED SUBSIDIARIES WITH THE EXCEPTION
OF PACKARD JAPAN KK; THE COMPANY IS CURRENTLY IN THE PROCESS OF ACQUIRING THE
REMAINING MINORITY INTEREST IN PACKARD JAPAN KK.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 10,575
<SECURITIES> 0
<RECEIVABLES> 41,270
<ALLOWANCES> 582
<INVENTORY> 27,538
<CURRENT-ASSETS> 85,043
<PP&E> 33,160
<DEPRECIATION> 15,240
<TOTAL-ASSETS> 140,651
<CURRENT-LIABILITIES> 52,778
<BONDS> 0
0
0
<COMMON> 137
<OTHER-SE> (112,151)
<TOTAL-LIABILITY-AND-EQUITY> 140,651
<SALES> 184,113
<TOTAL-REVENUES> 184,113
<CGS> 87,616
<TOTAL-COSTS> 87,616
<OTHER-EXPENSES> 91,764
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,119
<INCOME-PRETAX> (12,596)
<INCOME-TAX> 5,941
<INCOME-CONTINUING> (12,596)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (18,755)
<EPS-PRIMARY> (1.50)
<EPS-DILUTED> (1.50)
</TABLE>
