SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number: 1-4389
THE PERKIN-ELMER CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
New York 06-0490270
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
761 Main Avenue,
Norwalk, Connecticut 06859-0001
(Address of Principal Executive Offices, Including Zip Code)
(203) 762-1000
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes [x] No [ ]
Number of shares outstanding of Common Stock, par value $1 per share,
as of November 7, 1997: 43,929,440.
<PAGE>
THE PERKIN-ELMER CORPORATION
INDEX
Part I. Financial Information Page
Condensed Consolidated Statements of Operations for the
Three Months Ended September 30, 1997 and 1996 1
Condensed Consolidated Statements of Financial Position at
September 30, 1997 and June 30, 1997 2
Condensed Consolidated Statements of Cash Flows for the
Three Months Ended September 30, 1997 and 1996 3
Notes to Unaudited Condensed Consolidated Financial Statements 4
Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
Part II. Other Information 14
<PAGE>
THE PERKIN-ELMER CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(Dollar amounts in thousands except per share amounts)
Three months ended
September 30,
1997 1996
Net revenues $ 296,365 $ 275,736
Cost of sales 150,723 141,002
Gross margin 145,642 134,734
Selling, general and administrative 89,931 82,446
Research, development and engineering 27,193 23,855
Operating income 28,518 28,433
Gain on sale of investment 11,300
Interest expense 419 680
Interest income 1,983 1,088
Other expense, net 233
Income before income taxes 29,849 40,141
Provision for income taxes 5,837 7,763
Net income $ 24,012 $ 32,378
Net income per share $ .53 $ .73
Dividends per share $ .17 $ .17
See accompanying Notes to Unaudited Condensed
Consolidated Financial Statements.
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THE PERKIN-ELMER CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Dollar amounts in thousands)
At September 30, At June 30,
1997 1997
Assets (unaudited)
Current assets
Cash and cash equivalents $ 153,206 $ 194,745
Short-term investments 1,226 1,226
Accounts receivable, net 297,921 307,230
Inventories 198,885 188,720
Prepaid expenses and other current assets 99,624 102,263
Total current assets 750,862 794,184
Property, plant and equipment, net 197,457 173,037
Other long-term assets 146,396 137,577
Total assets $ 1,094,715 $ 1,104,798
Liabilities and Shareholders' Equity
Current liabilities
Loans payable $ 20,192 $ 18,054
Accounts payable 130,326 115,374
Accrued salaries and wages 33,247 46,470
Accrued taxes on income 91,257 97,307
Other accrued expenses 159,644 177,988
Total current liabilities 434,666 455,193
Long-term debt 31,457 33,599
Other long-term liabilities 176,346 179,134
Total liabilities 642,469 667,926
Shareholders' equity
Capital stock 45,600 45,600
Capital in excess of par value 198,768 198,570
Retained earnings 295,553 278,760
Foreign currency translation adjustments (2,967) (267)
Minimum pension liability adjustment (705) (705)
Treasury stock, at cost (84,003) (85,086)
Total shareholders' equity 452,246 436,872
Total liabilities and shareholders' equity $ 1,094,715 $ 1,104,798
See accompanying Notes to Unaudited
Condensed Consolidated Financial Statements.
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<PAGE>
THE PERKIN-ELMER CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
Three months ended
September 30,
1997 1996
<S> <C> <C>
Operating Activities
Net income $ 24,012 $ 32,378
Adjustments to reconcile net income to net
cash used by operating activities:
Depreciation and amortization 9,702 8,930
Long-term compensation programs 1,382
Deferred income taxes (961) (3,364)
Gain from the sale of assets (11,300)
Changes in operating assets and liabilities:
Decrease in accounts receivable 2,392 5,414
Increase in inventories (13,508) (9,626)
Increase in prepaid expenses and other assets (16,651) (7,609)
Decrease in accounts payable and other liabilities (22,376) (21,396)
Net cash used by operating activities (16,008) (6,573)
Investing Activities
Additions to property, plant and equipment
(net of disposals of $1,152 and $136, respectively) (32,943) (7,832)
Acquisitions/investments, net (7,238)
Proceeds from the sale of assets, net 4,195 33,663
Proceeds from the collection of note receivable 9,673
Net cash (used) provided by investing activities (26,313) 25,831
Financing Activities
Net change in loans payable 4,327 (2,929)
Dividends (7,454) (7,307)
Purchases of common stock for treasury (5,079)
Proceeds from issuance of equity put warrants 1,846
Proceeds from stock issued for stock plans 2,889 7,454
Net cash used by financing activities (238) (6,015)
Effect of exchange rate changes on cash 1,020 2,929
Net change in cash and cash equivalents (41,539) 16,172
Cash and cash equivalents beginning of period 194,745 95,361
Cash and cash equivalents end of period $ 153,206 $ 111,533
</TABLE>
See accompanying Notes to Unaudited
Condensed Consolidated Financial Statements.
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<PAGE>
THE PERKIN-ELMER CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The interim condensed consolidated financial statements should be read in
conjunction with the financial statements presented in The Perkin-Elmer
Corporation's (the Company's) 1997 Annual Report to Shareholders.
Significant accounting policies disclosed therein have not changed.
The unaudited condensed consolidated financial statements reflect, in the
opinion of the Company's management, all adjustments which are necessary
for a fair statement of the results for the interim periods. All such
adjustments are of a normal recurring nature. These results are, however,
not necessarily indicative of the results to be expected for a full year.
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,
disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those
estimates. Certain amounts in the condensed consolidated financial
statements have been reclassified for comparative purposes.
NOTE 2 - INVENTORIES
Inventories are stated at the lower of cost (on a first-in, first-out
basis) or market. Inventories included the following components:
(Dollar amounts in millions) September 30, June 30,
1997 1997
Raw materials and supplies $ 22.8 $ 23.7
Work-in-process 19.6 15.7
Finished products 156.5 149.3
Total inventories $ 198.9 $ 188.7
NOTE 3 - ACQUISITIONS AND INVESTMENTS
During the fourth quarter of fiscal 1997 the Company entered into a
strategic partnership with Hyseq, Inc., acquiring a minority equity
interest for an initial cash investment of $5.0 million. Hyseq applies
proprietary DNA array technology to develop gene-based therapeutic product
candidates and diagnostic products and tests. In the first quarter of
fiscal 1998 the Company increased its investment by $5.0 million resulting
in a 6% total ownership interest. Under the terms of a collaboration
agreement, the Company also received exclusive worldwide rights to
commercialize sequencing systems utilizing Hyseq's proprietary DNA
HyChip(TM) technology. Each company will contribute additional funds
to support the development of the technology. The collaboration has an
initial term of five years, with provisions for automatic extension
thereafter.
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<PAGE>
The Company acquired a minority equity interest in Biometric Imaging, Inc.
for a cash investment of $2.0 million in the first quarter of fiscal 1998.
The Company and Biometric Imaging will also collaborate on the development
and manufacturing of a high-throughput screening system for use by
pharmaceutical research companies to accelerate the drug discovery
process. The Company received exclusive worldwide marketing rights for
that market. Biometric Imaging products are designed to help ensure the
integrity of transfused products, optimize cell therapy procedures, and
monitor disease progression and the efficacy of therapy.
During the first quarter of fiscal 1997, the Company sold part of its
equity interest in Etec Systems, Inc. for net cash proceeds of $14.2
million, resulting in a before-tax gain of $11.3 million, or $.23 per
share after tax.
NOTE 4 - DERIVATIVES
The Company operates internationally, with manufacturing and distribution
facilities in various countries throughout the world; therefore, results
could continue to be affected by fluctuations in foreign currency exchange
rates or changes in economic conditions in foreign markets. The Company
derived 57% of its revenues from countries outside of the United States
for the three months ended September 30, 1997.
Derivatives. The Company utilizes foreign exchange forward and option
contracts and interest rate swap agreements to manage foreign currency and
interest rate exposures. The principal objective of these contracts is to
minimize the risks and/or costs associated with global financial and
operating activities. The Company does not use derivative financial
instruments for trading or other speculative purposes, nor is the Company
a party to leveraged derivatives.
Foreign Currency Risk Management. Foreign exchange forward and option
contracts are used primarily to hedge reported and anticipated cash flows
resulting from the sale of products in foreign locations. Under the
foreign exchange option contracts, the Company has the right, but not the
obligation, to purchase or sell foreign currencies at fixed rates at
various maturity dates. These contracts are utilized primarily when the
amount and/or timing of the foreign currency exposures are not certain.
At September 30, 1997, the Company had foreign exchange forward and option
contracts outstanding of $167.2 million for the sale of foreign currencies
at fixed rates and $6.8 million for the purchase of foreign currencies at
fixed rates.
Foreign exchange contracts are accounted for as hedges of net investments,
firm commitments and foreign currency transactions. Gains and losses on
foreign currency hedge contracts are recognized in income and offset the
foreign exchange gains and losses on the related transactions.
Interest Rate Risk Management. In fiscal 1997, the Company entered into
an interest rate swap in conjunction with a five year Japanese Yen debt
obligation. The interest rate swap agreement involves the payment of a
fixed rate of interest and the receipt of a floating rate of interest
without the exchange of the underlying notional loan principal amount.
Under this contract, the Company will make fixed interest payments of 2.1%
while receiving interest at a LIBOR floating rate. No other cash payments
will be made unless the contract is terminated prior to maturity, in which
case the amount to be paid or received in settlement is established by
agreement at the time of termination.
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<PAGE>
The agreed upon amount customarily represents the net present value at the
then existing interest rates of the remaining obligations to exchange
payments under the terms of the contract.
Concentrations of Credit Risk. The forward contracts, options, and swaps
used by the Company in managing its foreign currency and interest rate
exposures contain an element of risk that the counterparties may be unable
to meet the terms of the agreements. However, the Company minimizes such
risk exposure by limiting the counterparties to a diverse group of highly
rated domestic and international financial institutions with which the
Company has other financial relationships. The Company is exposed to
potential losses in the event of non-performance by these counterparties;
however, the Company does not expect to record any losses as a result of
counterparty default. The Company does not require and is not required to
place collateral for these financial instruments.
Fair Value. The fair value of foreign currency forward and option
contracts is estimated based on quoted market prices of comparable
contracts and reflects the amounts the Company would receive or pay to
terminate the contracts at the reporting date. At September 30, 1997, the
notional amount of forward and option contracts outstanding was $174.0
million with a fair value of $.8 million.
NOTE 5 - RESTRUCTURING
Fiscal 1997. During the fourth quarter of fiscal 1997, the Company
announced a follow-on phase to the Analytical Instrument Division's profit
improvement program begun by the Company in fiscal 1996. The
restructuring cost for this action was $24.2 million before-tax and
included $19.4 million for costs focused on further improving the
operating efficiency of manufacturing facilities in the United States,
Germany, and the United Kingdom. These actions are designed to help
transition the Analytical Instruments Division from a highly vertical
manufacturing operation to one that relies more heavily on outsourcing
functions not considered core competencies. The restructuring charge also
included $4.8 million to finalize the consolidation of sales and
administrative support, primarily in Europe where seventeen facilities
will be closed.
The workforce reductions under this plan total approximately 285 employees
in production labor and 25 employees in sales and administrative support.
The charge included $11.9 million for severance related costs. The $12.3
million provided for facility consolidation and asset related write-offs
included $1.2 million for lease termination payments and $11.1 million for
the write-off of machinery, equipment, and tooling associated with those
functions to be outsourced.
These changes are scheduled to be substantially completed by June 1998.
As of September 30, 1997, approximately 65 employees were separated under
the plan and the actions are proceeding as planned. There have been no
adjustments made to increase or decrease the liabilities originally
provided for this restructuring.
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<PAGE>
The following table details the major components of the fiscal 1997
restructuring plan:
Facility
Consolidation
and Asset
Related
(Dollar amounts in millions) Personnel Write-offs Total
Provision
Changes in manufacturing operations $ 9.6 $ 9.8 $19.4
Consolidation of sales and administrative support 2.3 2.5 4.8
Total provision $11.9 $12.3 $24.2
Fiscal 1997 activity
Changes in manufacturing operations $ .1 $ 4.6 $ 4.7
Consolidation of sales and administrative support
Total fiscal 1997 activity $ .1 $ 4.6 $ 4.7
Fiscal 1998 activity
Changes in manufacturing operations $ 1.9 $ .3 $ 2.2
Consolidation of sales and administrative support .5 .2 .7
Total fiscal 1998 activity $ 2.4 $ .5 $ 2.9
Balance at September 30, 1997
Changes in manufacturing operations $ 7.6 $ 4.9 $12.5
Consolidation of sales and administrative support 1.8 2.3 4.1
Balance at September 30, 1997 $ 9.4 $ 7.2 $16.6
Fiscal 1996. The fiscal 1996 before-tax restructuring charge of $71.6
million recorded in the third quarter of fiscal 1996 was the first phase
of a plan focused on improving the profitability and cash flow performance
of the Analytical Instruments Division. In connection with the plan, the
division was reorganized into three vertically integrated, fiscally
accountable operating units, a distribution center in Holland was
established to centralize the European infrastructure for shipping,
administration, and related functions, and a program was implemented to
eliminate excess production capacity in Germany. The charge contemplated
worldwide workforce reductions of 390 positions in manufacturing, sales
and support, and administrative functions at a cost of $37.8 million. The
charge also included $33.8 million for facility consolidation and asset
related write-offs associated with the discontinuation of various product
lines.
In the fourth quarter of fiscal 1997, the Company finalized the actions
associated with the restructuring plan announced in 1996. Workforce
reductions are now expected to total 360 employees. The costs to implement
the program were $11.2 million below the $71.6 million charge recorded in
fiscal 1996. As a result, during the fourth quarter of fiscal 1997, the
Company recorded an $11.2 million reduction of charges required to
implement the fiscal 1996 plan.
As of September 30, 1997, 346 employees were separated under the plan.
The balance remaining at September 30, 1997 represents future severance
and deferred payments which will extend through fiscal 1998.
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<PAGE>
The following table details the major components of the fiscal 1996
restructuring plan:
<TABLE>
<CAPTION>
Facility
Consolidation
and Asset
Related
(Dollar amounts in millions) Personnel Write-offs Total
<S>
Provision <C> <C> <C>
Reduction of excess European manufacturing capacity $ 19.7 $ 23.0 $ 42.7
Reduction of European distribution and administrative capacity 11.5 6.0 17.5
Other worldwide workforce reductions and facility closings 6.6 4.8 11.4
Total provision $ 37.8 $ 33.8 $ 71.6
Fiscal 1996 activity
Reduction of excess European manufacturing capacity $ 2.1 $ 6.7 $ 8.8
Reduction of European distribution and administrative capacity 1.6 .7 2.3
Other worldwide workforce reductions and facility closings 1.9 1.6 3.5
Total fiscal 1996 activity $ 5.6 $ 9.0 $ 14.6
Fiscal 1997 activity
Reduction of excess European manufacturing capacity $ 10.9 $ 6.6 $ 17.5
Adjustment to decrease liabilities originally accrued for excess
European manufacturing capacity 4.7 6.5 11.2
Reduction of European distribution and administrative capacity 6.2 4.4 10.6
Other worldwide workforce reductions and facility closings 1.9 2.0 3.9
Total fiscal 1997 activity $ 23.7 $ 19.5 $ 43.2
Fiscal 1998 activity
Reduction of excess European manufacturing capacity $ 1.4 $ .5 $ 1.9
Reduction of European distribution and administrative capacity .6 .2 .8
Other worldwide workforce reductions and facility closings .3 .1 .4
Total fiscal 1998 activity $ 2.3 $ .8 $ 3.1
Balance at September 30, 1997
Reduction of excess European manufacturing capacity $ .6 $2.7 $3.3
Reduction of European distribution and administrative capacity 3.1 .7 3.8
Other worldwide workforce reductions and facility closings 2.5 1.1 3.6
Balance at September 30, 1997 $6.2 $4.5 $10.7
</TABLE>
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<PAGE>
NOTE 6 - CHANGES IN ACCOUNTING PRINCIPLES
The Company is required to implement Statement of Financial Accounting
Standards (SFAS) No. 128, "Earnings per Share," in the second quarter of
fiscal 1998. This statement replaces the presentation of earnings per
share (EPS) with a presentation of basic EPS and requires dual
presentation of basic and diluted EPS on the face of the income statement.
Basic EPS excludes common stock equivalents and is computed by dividing
income available to shareholders by the weighted average number of common
shares outstanding for the period. Diluted EPS is computed similarly to
fully diluted EPS under the provisions of APB Opinion No. 15, "Earnings
per Share." The following table illustrates the pro forma disclosure of
EPS data in accordance with SFAS No. 128:
Three months ended
September 30,
1997 1996
As Presented Under APB Opinion No. 15
Primary EPS $ .53 $ .73
Fully diluted EPS $ .53 $ .73
As Calculated Under SFAS No. 128
Basic EPS $ .55 $ .75
Diluted EPS $ .53 $ .73
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<PAGE>
THE PERKIN-ELMER CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the condensed
consolidated financial statements and related notes included on pages 1-9
of this report, and "Management's Discussion and Analysis" appearing on
pages 35 - 41 of the Company's 1997 Annual Report to Shareholders.
Historical results and percentage relationships are not necessarily
indicative of operating results for any future periods.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997
The Company reported net income of $24.0 million, or $.53 per share, for
the first quarter of fiscal 1998 compared with net income of $32.4
million, or $.73 per share, in the first quarter of fiscal 1997. The
prior year's first quarter included a before-tax gain of $11.3 million, or
$.23 per share after-tax, resulting from the partial sale of an equity
interest in Etec Systems, Inc. Excluding the special gain in last year's
first quarter, net income increased 8.1%.
Net revenues were $296.4 million for the first quarter of fiscal 1998, an
increase of 7.5% over the $275.7 million reported for the first quarter of
fiscal 1997. The effects of currency rate movements decreased net
revenues by approximately $17 million, or 6%, in the quarter compared to
the prior year, as the U.S. dollar continued to strengthen against certain
European currencies and the Japanese Yen. Geographically, the Company
reported revenue growth of approximately 13% in the United States and 17%
in the Far East, offsetting a decline of 4% in Europe. Excluding currency
effects, revenues in the Far East and Europe would have increased
approximately 26% and 9%, respectively. Regions outside the United States
accounted for 57% of the consolidated first quarter revenues, compared
with 59% in the prior year.
Net revenues for the Applied Biosystems Division increased 20.7% to $164.6
million in the first quarter of fiscal 1998. The negative effects of a
strong U.S. dollar reduced the division's revenues by approximately $8
million, or 6%. All geographic markets reported increased revenues over
the prior year. Net revenues in the United States and Europe increased
17.3% and 16.6%, respectively. The strongest performance was in the Far
East where revenues increased 22.5% over the prior year's first quarter.
Increased demand for liquid chromatography-mass spectrometry (LC/MS)
systems, automated DNA sequencing systems, recently introduced sequencing
chemistries, and polymerase chain reaction (PCR) based products were the
primary contributors. Applied Biosystems continued to experience strong
demand for its integrated systems, both for pharmaceutical drug discovery
and development, for rapidly growing applied markets, such as forensics.
Net revenues for the Analytical Instruments Division were $131.8 million,
a decrease of 5.4% from the $139.3 million reported in the prior year's
first quarter. Currency rate movements reduced revenues by approximately
$9 million, or 6%. Excluding currency effects, revenues would have
increased approximately 1%. Geographically, revenues in the Far East and
Latin America increased by 10.6% and 21.0%, respectively. European
revenues, which generally account for over 40% of the division's revenues,
decreased 16% as a result of currency and a weak economy. Overall, demand for
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<PAGE>
the division's Elan(TM) inductively coupled plasma/mass spectrometry
(ICP/MS) instrument and its new Optima(TM) ICP product were strong.
Gross margin as a percentage of net revenues was 49.1% in the first
quarter of fiscal 1998 compared with 48.9% in the first quarter of fiscal
1997. Gross margin as a percentage of net revenues for the Applied
Biosystems Division remained constant with the prior year. The Analytical
Instruments Division's gross margin as a percentage of net revenues
decreased in the quarter. Improved gross margins for the Analytical
Instrument Division in both the U.S. and Europe were more than offset by
lower margins in the Far East and Latin America regions. The lower
margins were primarily a result of currency and product mix. Excluding
the effects of currency, the gross margin percentage for the Company would
have increased approximately 1%.
Selling, general and administrative (SG&A) expenses were $89.9 million in
the first quarter of fiscal 1998 compared with $82.4 million in the first
quarter of fiscal 1997. The 9.1% increase in the quarter was primarily
due to higher planned expenses for the Applied Biosystems Division and
higher planned corporate expenses. The Analytical Instruments Division's
expenses were essentially unchanged compared with prior year. As a
percentage of net revenues, SG&A expenses remained constant with the prior
year at approximately 30%.
Research, development and engineering (R&D) expenses of $27.2 million
increased 14.0% over the prior year. R&D spending in the Applied
Biosystems Division increased 23.1% over the prior year as the Company
continued its product development efforts for the bioresearch and
pharmaceutical markets. The division's spending accounted for nearly 63%
of the Company's R&D expense. R&D expenses for the Analytical Instruments
Division were essentially unchanged from the prior year reflecting the
objectives of restructuring actions. As a percentage of net revenues, the
Company's R&D expenses increased to 9.2% compared with 8.7% for the prior
year.
The restructuring actions announced in the fourth quarter of fiscal 1997
are proceeding as planned. These actions focused on the transition of the
Analytical Instruments Division from a vertical manufacturing operation to
one that relies more on outsourcing functions not considered core
competencies (see Note 5). It also included actions to finalize
consolidation of sales and administrative support, primarily in Europe.
The Company expects to achieve before-tax savings from these actions
of approximately $8 million in fiscal 1998, when the program is
fully implemented, and $16 million in succeeding fiscal years.
Total operating expenses were $117.1 million in the first quarter of
fiscal 1998 compared with $106.3 million in the prior year's first
quarter. Operating income of $28.5 million was essentially unchanged
compared with the prior year. The effects of currency rate movements
decreased operating income by approximately $6 million. On a comparable
basis excluding the effects of currency, operating income would have
increased approximately 21%.
As a result of lower interest rates, interest expense in the first quarter
of fiscal 1998 decreased $.3 million compared with the first quarter of
fiscal 1997. Interest income was $.9 million higher than the prior year
as a result of maintaining higher cash and cash equivalent balances.
The effective income tax rate for the first quarter of fiscal 1998 was
19.6% compared with 23% in the first quarter of fiscal 1997, excluding the
special gain on the partial sale of an equity interest. In the
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<PAGE>
first quarter of fiscal 1998 the Company finalized certain outstanding tax
related matters resulting in the one-time rate decrease. The Company
expects the tax rate for the balance of fiscal 1998 to be approximately
25%.
FINANCIAL RESOURCES AND LIQUIDITY
At September 30, 1997, the Company's total cash position, including cash
equivalents, was $153.2 million compared with $194.7 million at June 30,
1997. Net cash used by operating activities was $16.0 million for the
first three months of fiscal 1998 compared with $6.6 million for the same
period in fiscal 1997. The use of cash in both periods included
seasonal payments to fund the Company's benefit plans, prepayments for
insurance premiums, payments related to restructuring actions (see Note
5), and increased inventory levels.
Net cash used by investing activities was $26.3 million for the first
three months of fiscal 1998 compared with $25.8 million provided by
investing activities for the first three months of fiscal 1997. In the
current year, the Company generated $13.9 million in net cash proceeds
from the sale of certain non-operating assets and the collection of a note
receivable, compared with $33.7 million in fiscal 1997. The fiscal 1998
cash proceeds were more than offset by capital expenditures of $34.1
million, primarily related to improvement of the Company's information
technology infrastructure, and $7.2 million related to various investments
and collaborations (see Note 3).
Net cash used by financing activities was $.2 million in fiscal 1998
compared with $6.0 million in fiscal 1997. In the first quarter of fiscal
1998 the Company received $2.9 million in proceeds from employee stock
option exercises compared with $7.5 million in fiscal 1997. The
first quarter of fiscal 1997 included $5.1 million for the purchase of .1
million shares of common stock for treasury and proceeds of $1.8 million
from the issuance of equity put warrants on shares of the Company's common
stock. During the first quarter of fiscal 1998 there were no share
repurchases of common stock for treasury or sales of equity put warrants.
OUTLOOK
As the underlying demand for life science products continues to grow, the
Applied Biosystems Division is expected to continue its revenue growth and
maintain profitability. The Company continues to grow this business
through increased internal development efforts and through acquisitions,
equity investments, and other collaborations. The first quarter
investments and collaborations in Hyseq, Inc. and Biometric Imaging, Inc.
are indicators of the Company's continued focus in this business segment.
As the Analytical Instruments Division continues to restructure its global
manufacturing and European sales and service organizations, the Company is
optimistic these actions will improve cash flow and profitability of the
division. The Company continues to examine the division's product
portfolio to determine an appropriate growth strategy for that business.
However, adverse currency effects remain a concern for both divisions and
could continue if the relationship of the U.S. dollar to certain major
European and Far Eastern currencies is maintained at current levels, or if
the U.S. dollar continues to strengthen.
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<PAGE>
FORWARD LOOKING STATEMENTS
Certain statements contained in this report may be forward looking and are
subject to a variety of risks and uncertainties. Many factors could cause
actual results to differ materially from these statements. These factors
include, but are not limited to, (1) complexity and uncertainty regarding
the development of new high technology products; (2) loss of market share
through competition; (3) introduction of competing products or
technologies by other companies; (4) pricing pressures from competitors
and/or customers; (5) changes in the life sciences or analytical
instrument industries; (6) changes in the pharmaceutical, environmental,
research or chemical markets; (7) variable government funding in key
geographical regions; (8) the Company's ability to protect proprietary
information and technology or to obtain necessary licenses on commercially
reasonable terms; (9) the loss of key employees; (10) fluctuations in
foreign currency exchange rates; and (11) other factors which might be
described from time to time in the Company's filings with the Securities
and Exchange Commission.
A significant portion of the Company's life science business operations
are located near major California earthquake faults. The ultimate impact
of earthquakes on the Company, significant suppliers and the general
infrastructure is unknown, but operating results could be materially
affected in the event of a major earthquake. The Company maintains
insurance to reduce its exposure to losses and interruptions caused by
earthquakes.
Although the Company believes it has the product offerings and resources
needed for continuing success, future revenue and margin trends cannot be
reliably predicted and may cause the Company to adjust its operations.
Factors external to the Company can result in volatility of the Company's
common stock price. Because of the foregoing factors, recent trends
should not be considered reliable indicators of future stock prices or
financial results.
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<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security-Holders.
The Company held its Annual Meeting of Shareholders on October 16, 1997.
At such meeting, the shareholders of the Company elected all of the nominees
for director and approved all other proposals submitted by the Company to
shareholders for approval at the meeting, each as described in the Notice of
Annual Meeting and Proxy Statement dated September 8, 1997. The results of the
voting of the shareholders with respect to such matters is set forth below.
I. Election of Directors.
Total Vote
Total Vote For Withheld From
Each Director Each Director
Joseph F. Abely, Jr. 37,738,242 98,055
Richard H. Ayers 37,752,931 83,366
Jean-Luc Belingard 37,753,281 83,016
Robert H. Hayes 37,753,745 82,552
Georges C. St. Laurent, Jr. 37,752,569 83,728
Carolyn W. Slayman 37,754,630 81,667
Orin R. Smith 37,743,857 92,440
Tony L. White 37,751,668 84,629
II. Ratification of the selection of Price Waterhouse LLP as the
Company's independent accountants for the fiscal year ending June 30, 1998.
FOR AGAINST ABSTAIN NON-VOTE
37,761,095 21,517 53,685 0
III. Approval of an amendment to the Company's Restated Certificate of
Incorporation to increase the number of authorized shares of Common
Stock.
FOR AGAINST ABSTAIN NON-VOTE
31,919,332 5,835,198 81,767 0
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<PAGE>
IV. Approval of the 1997 Stock Incentive Plan.
FOR AGAINST ABSTAIN NON-VOTE
33,176,904 4,555,916 103,477 0
Item 5. Other Information.
At a meeting of the Board of Directors of the Company held immediately
following the Annual Meeting of Shareholders referred to in Item 4, above, the
Board of Directors elected the following persons as officers of the Company:
Tony L. White Chairman, President and Chief Executive Officer
Manuel A. Baez Senior Vice President and President, Analytical
Instruments Division
Peter Barrett Vice President
Ugo D. DeBlasi Corporate Controller
Elaine J. Heron Vice President
Michael W. Hunkapiller Senior Vice President and President, Applied
Biosystems Division
Thomas P. Livingston Assistant Secretary
Joseph E. Malandrakis Vice President
John S. Ostaszewski Assistant Treasurer, Director of Finance
Mark C. Rogers Senior Vice President, Corporate Development
and Chief Technology Officer
William B. Sawch Senior Vice President, General Counsel and
Secretary
Dennis L. Winger Senior Vice President, Chief Financial Officer
and Treasurer
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<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
2.1. Agreement and Plan of Merger, dated as of August 23, 1997,
among the Company, Seven Acquisition Corp. and PerSeptive Biosystems,
Inc. (incorporated by reference to Exhibit 2 to the Company's Current
Report on Form 8-K dated August 23, 1997 and filed on August 26, 1997
(Commission File No. 1-4389)).
2.2. Stock Option Agreement, dated as of August 23, 1997, between the
Company and PerSeptive Biosystems, Inc. (incorporated by reference
to Exhibit 10 to the Company's Current Report on Form 8-K dated
August 23, 1997 and filed on August 26, 1997 (Commission File
No. 1-4389)).
10. Agreement, dated September 30, 1997, between the Company and
Stephen O. Jaeger.
11. Computation of Net Income Per Share.
27. Financial Data Schedule.
(b) Reports on Form 8-K.
During the quarter ended September 30, 1997, the Company filed a
Current Report on Form 8-K dated August 23, 1997 and filed on August
26, 1997 to report under Item 5 thereof that the Company, Seven
Acquisition Corp., a wholly-owned subsidiary of the Company ("Sub"),
and PerSeptive Biosystems, Inc. ("PerSeptive") had entered into an
Agreement and Plan of Merger, dated as of August 23, 1997, whereby Sub
will be merged with and into PerSeptive with PerSeptive as the
surviving entity.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE PERKIN-ELMER CORPORATION
By: /s/ Dennis L. Winger
Dennis L. Winger
Senior Vice President, Chief
Financial Officer and Treasurer
By: /s/ Ugo D. DeBlasi
Ugo D. DeBlasi
Corporate Controller (Chief
Accounting Officer)
Dated: November 14, 1997
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<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit
10. Agreement, dated September 30, 1997,
between the Company and Stephen O. Jaeger
11. Computation of Net
Income Per Share
27. Financial Data
Schedule
AGREEMENT
Stephen O. Jaeger (herein referred to as "Employee") and The Perkin-Elmer
Corporation (herein referred to as the "Company") have reached the following
Agreement.
Whereas, Employee has rendered valuable services to the Company.
Now, therefore, it is mutually agreed as follows:
1. RESIGNATION
(a) Employee and the Company hereby agree that Employee shall resign his
employment and position as an officer with the Company on or before
September 30, 1997 (herein referred to as the "Resignation Date").
If Employee provides Company a written notice of resignation before
September 30, 1997, the date of such notice shall be the Resignation
Date hereunder. On the Resignation Date, Employee will resign from
all directorships and any other positions with subsidiaries of the
Company, with the exception of Strategic Diagnostics Inc. It is the
Company's intention that Employee remain the Company's representative
on the Strategic Diagnostics Inc. Board of Directors.
(b) The Employee shall devote his full business time, attention and best
efforts to the affairs of the Company and its subsidiaries until the
Resignation Date; provided, however, that the Employee may engage in
other activities, such as activities involving charitable,
educational, religious and similar types of organizations, speaking
engagements, membership on the board of directors of other
organizations, and similar types of activities to the extent that
such other activities do not interfere with the performance of his
duties under this Agreement, or inhibit or conflict in any material
way with the business of the Company and its subsidiaries.
2. BENEFITS UPON RESIGNATION OR CERTAIN CONDITIONS OF RESIGNATION
Commencing with the Resignation Date, the Company shall provide Employee
the following:
(a) The Company agrees to make weekly payments to Employee of $6,346.15
inclusive of Employee's weekly car allowance of $288.46. Such
payments shall commence upon the first regular Company payroll
payment date after the Resignation Date and end one hundred four
(104) weeks thereafter. Employee understands that the Company will
deduct from these gross payments federal and state withholding taxes
and other deductions in accordance with normal Company practices.
(b) During the period of time commencing upon the Resignation Date, and
ending twenty four (24) months thereafter, Employee will be
considered to be on a personal leave of absence from the Company
solely in order to be eligible for the following specific
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<PAGE>
benefits, such benefits to be provided to Employee by the Company in
accordance with that status and the then current terms of the Company's plans.
(i) coverage under the Company's medical, dental and life insurance
plans (unless Employee commences work for and becomes eligible
for coverage under one or more such plans of another employer
with comparable coverages during such twenty four (24) month
period, in which event one or more of such coverages shall
terminate upon the date of Employee's earliest eligibility for
such comparable coverage).
(ii) participation in the Perkin-Elmer Employees Pension and Savings
Plans, the Supplemental Retirement Plan, and the Employee Stock
Purchase Plan.
(c) The last day of the above described personal leave of absence will be
treated as the Employee's termination date for purposes of rights
associated with any options held by the Employee under the Company's
Stock Option Plans and Stock Purchase Plan.
(d) The Company shall make available to Employee the services of an
outplacement consultant in accordance with the Company's standard
executive arrangement with Drake Beam Morin Inc. or Manchester
Partners and will provide financial planning services consistent with
the Company's practice for senior management for a period of 24
months following Resignation Date.
(e) The Company shall pay to Employee a share of the Contingent
Compensation award for fiscal year 1998 that would otherwise be made
to Employee on a pro rata basis for that portion of the fiscal year
prior to Resignation Date. Such payment shall be made on or about
the time Contingent Compensation awards for that fiscal year are made
to other eligible employees. Employee shall not be eligible for any
Contingent Compensation award for any fiscal years after 1998.
(f) The Employee remains eligible for a share of the 3,000 performance
shares subject to the August 15, 1996 Performance Share Plan Award
Agreement. The Company agrees to deliver to Employee a pro rata
share of the 3,000 performance shares earned under said Plan in
fiscal year 1998. The pro rata determination will be based upon that
portion of the fiscal year prior to Resignation Date.
(g) Employee shall receive the value of the 3,333 Series A Performance
Units granted under the Performance Unit Bonus Plan corresponding to
the $80 stock price target if, when and to the extent paid to other
holders of such units who remain with the Company through June 26,
2000.
(h) Employee shall be credited with five (5) years of service as an
employee under the terms of the Pension Plan.
3. BENEFITS TO BE IN LIEU OF ANY SEVERANCE PAYMENTS
Employee acknowledges and agrees that the benefits provided
under Section 2 are in lieu of and in excess of Company's standard
severance benefits. Employee understands and agrees
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<PAGE>
that, except for pension or other retirement benefits to which the Employee
may be entitled under the Company's standard retirement programs, Employee
shall receive no further wage, vacation, severance or other benefits from the
Company beyond those described in Section 2 hereof, and, as of the Resignation
Date, Employee's Employment Agreement dated November 16, 1995 shall terminate.
Should the Company become obligated to make payments under such
Employment Agreement prior to the Resignation Date, this Agreement shall
be null and void.
4. UNDERTAKINGS OF EMPLOYEE
Employee agrees not to:
(a) for a period of 24 months following the Resignation Date,
solicit for employment, either directly or through any
corporation or other business entity of which Employee may
become an officer, director, employee, or agent, any then
current employee(s) of the Company, for any business activities,
whether competitive or not;
(b) make any derogatory statement, public or otherwise, concerning
the Company, its officers, or its directors;
(c) criticize, denigrate, or disparage the Company, its officers, or
its directors;
(d) assist or participate in any activities that would trigger a
"Change in Control" as such term is defined in Employee's
Employment Agreement dated November 16, 1995 with the Company;
(e) initiate, participate in, or assist with any activity
specifically directed toward, and not solicited by, the Company,
its officers, or its directors other than good faith,
commercially acceptable activities between business competitors;
or
(f) engage in any other activities, directly or indirectly, which
may be deemed contrary to the best interests of the Company, its
officers, or its directors.
Notwithstanding Section 4(f) but subject to the other restrictions in
this Section 4, the parties acknowledge and agree that Employee shall
not be prevented from entering into employment with, and carrying out
his legitimate obligations to, business associations which may be
competitive with the Company's businesses.
5. CONFIDENTIALITY; RELEASE.
Employee is reminded of the terms of Employee's confidentiality agreement
with the Company, which, among other things, prohibits Employee from
using, or disclosing to others, any confidential business or technical
information belonging to the Company. All of the benefits afforded to
Employee under this Agreement are expressly conditioned upon Employee
executing within 10 days from the Resignation Date an agreement in the
form of Exhibit A.
-3-
<PAGE>
6. CONSEQUENCES OF EMPLOYEE VIOLATION OF PROMISES
All of the Company's obligations hereunder beyond those otherwise
required by law are specifically subject to Employee fulfilling
completely each of the promises and requirements set forth herein as well
as under Exhibit A. Employee's failure to comply with each promise and
requirement herein shall be cause for the immediate termination of any
remaining financial benefits accorded Employee by the terms of this
Agreement. If Employee breaks Employee's promise in Section (c) of
Exhibit A to this Agreement and files a lawsuit or proceeding based on
legal claims that Employee has released, Employee will pay for all costs
incurred by the Company, any related companies, or the directors or
employees of any of them, including reasonable attorneys' fees, in
defending against the Employee's claim. Employee and the Company agree
that a breach of Employee's obligations under this Agreement will cause
irreparable harm to the Company, and that, in the event of such a breach,
the Company shall be entitled to obtain a decree specifically enforcing
such covenants in any court of competent jurisdiction. In addition, the
Company expressly reserves the right to exercise any other legal remedies
to which it may be entitled.
7. PERIOD FOR REVIEW AND CONSIDERATION OF AGREEMENT
Employee understands that Employee has been given a period of 21 days to
review and consider this Agreement before signing it. Employee further
understands that Employee may use as much of this 21 day period as
Employee wishes prior to signing.
8. ENCOURAGEMENT TO CONSULT WITH ATTORNEY
Employee is strongly encouraged to consult with an attorney before
signing this Agreement. Employee understands that whether or not to do
so is Employee's decision.
9. SUCCESSORS
This Agreement shall be binding upon and shall inure to the benefit of
Employee's heirs, executors, administrators, assigns, successors,
beneficiaries and agents.
10. ENTIRE AGREEMENT/MODIFICATION
This Agreement constitutes the entire agreement and understanding
concerning the subject matter addressed herein between the parties. This
Agreement can only be modified by a writing signed by both parties and
referencing this Agreement.
11. SEVERABILITY
If any provision of this Agreement or the application thereof is held
invalid, the invalidity shall not affect other provisions or applications
of the Agreement, which can be given effect without the invalid
provisions or applications, and to this end the provisions of this
Agreement are declared to be severable. Notwithstanding the foregoing,
if the release contained in Exhibit A is challenged by Employee as to its
enforceability and is held to be
-4-
<PAGE>
unenforceable or void by a court of competent jurisdiction, then all
benefits paid or to be paid hereunder shall be forfeited by Employee.
12. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the
laws of the State of Connecticut.
13. EFFECTIVE DATE
Employee may revoke this Agreement in writing for a period of seven (7)
calendar days after Employee's execution of this Agreement (the
"revocation period"). Revocation must be made by delivering a written
notice of revocation to the Company's Vice President - Human Resources at
761 Main Avenue, Norwalk, CT, 06859-0325. For revocation to be
effective, such written notice must be received no later than midnight on
the seventh (7th) day after Employee signs this Agreement. If Employee
revokes this Agreement it shall not be effective or enforceable and
Employee will not receive the benefits described herein. The Agreement
shall become effective automatically upon the expiration of the
revocation period.
14. TERMINATION
Employee acknowledges that, if this Agreement becomes effective,
Employee's employment with the Company will end irrevocably and forever
on the Resignation Date, and will not be resumed again at any time in the
future. The Employee will not seek or accept employment in the future
with the Company and the Company shall have no obligation to consider any
application for employment from the Employee. Notwithstanding the
foregoing, if Company offers Employee a position with Company that
Employee accepts, this agreement shall become null and void and no
further benefits as specified hereunder shall continue except the release
contained in Exhibit A shall continue to be valid and in force.
15. LIABILITY INSURANCE
The Company acknowledges that Employee remains covered under its
applicable Directors and Officers Liability Insurance Policy for any
conduct through and including the Resignation Date.
-5-
<PAGE>
EMPLOYEE ACKNOWLEDGES READING THIS AGREEMENT, UNDERSTANDING IT, AND
VOLUNTARILY ENTERING INTO IT.
STEPHEN O. JAEGER THE PERKIN-ELMER CORPORATION
/s/ Stephen O. Jaeger By: /s/ Tony L. White
Dated: September 30, 1997 Dated: September 30, 1997
Chairman, President and
Chief Executive Officer
WITNESS
/s/ Charles J. Heinzer /s/ Thomas P. Livingston
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<PAGE>
EXHIBIT A
RELEASE
(a) In consideration of the benefits under the Agreement to which this Release
is an exhibit, Employee releases, waives, and forever discharges the
Company, any related companies, and the employees, officers,
representatives, agents and directors of any of them from all claims,
demands, actions, suits, covenants, contracts, agreements, promises and
liabilities of any kind whatsoever, known or unknown which Employee,
Employee's heirs, executors or assigns may have had, now have or could in
the future have including, without limitation, those based on Employee's
employment with the Company, or the termination of that employment. This
includes, for example, a release of any rights or claims Employee may have
under the Age Discrimination in Employment Act, which prohibits age
discrimination in employment; Title VII of the Civil Rights Act of 1964,
which prohibits discrimination in employment based on race, color,
national origin, religion or sex; the Equal Pay Act, which prohibits
paying men and women unequal pay for equal work; or any other federal,
state or local laws or regulations prohibiting employment discrimination.
This also includes a release by Employee of any claims for wrongful
discharge or breach of employment agreement. This release covers both
claims that Employee knows about and those he may not know about.
(b) This Release does not include, however, a release of Employee's right, if
any, to benefits under the Company's Employee Pension and Savings Plans,
whether qualified or non-qualified for federal income tax purposes, a
release of any claim made by Employee under any welfare benefit plan prior
to the signing of this Agreement, or a release of any rights or claims
that Employee may have under the Age Discrimination in Employment Act
which arise after the date the Employee signs this Release. Furthermore,
this Release does not include a release of any rights of Employee or
Employee's heirs, executors, or assigns relating to enforcement of
obligations of the Company: (i) under the Agreement to which this Release
is an exhibit; or (ii) pertaining to indemnification of Employee as an
officer, director, or employee of the Company.
(c) Employee further promises never to file or join in a lawsuit or other
proceeding asserting any claims that are released in Section (a) hereof.
(d) Nothing in this Agreement shall be inferred to be an admission of any
fault by the Company.
Employee
Date:
EXHIBIT 11
THE PERKIN-ELMER CORPORATION
COMPUTATION OF NET INCOME PER SHARE
(unaudited)
(Amounts in thousands except per share amounts)
Three months ended
September 30,
1997 1996
Weighted average number
of common shares 43,838 42,967
Common stock equivalents 1,396 1,190
Weighted average number of
common shares used in calculating
primary net income per share 45,234 44,157
Additional dilutive stock options 90 202
Shares used in calculating fully
diluted net income per share 45,324 44,359
Calculation of primary and fully
diluted net income per share:
Net income used in the
calculation of primary and fully
diluted net income per share $ 24,012 $ 32,378
Primary net income per share $ .53 $ .73
Fully diluted net income per share $ .53 $ .73
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE
THREE MONTHS ENDED SEPTEMBER 30, 1997 AND THE CONDENSED CONSOLIDATED
STATEMENT OF FINANCIAL POSITION AT SEPTEMBER 30, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> SEP-30-1997
<CASH> 153,206
<SECURITIES> 0
<RECEIVABLES> 303,553
<ALLOWANCES> (5,632)
<INVENTORY> 198,885
<CURRENT-ASSETS> 750,862
<PP&E> 432,172
<DEPRECIATION> (234,715)
<TOTAL-ASSETS> 1,094,715
<CURRENT-LIABILITIES> 434,666
<BONDS> 0
<COMMON> 45,600
0
0
<OTHER-SE> 406,646
<TOTAL-LIABILITY-AND-EQUITY> 1,094,715
<SALES> 296,365
<TOTAL-REVENUES> 296,365
<CGS> 150,723
<TOTAL-COSTS> 150,723
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 221
<INTEREST-EXPENSE> 419
<INCOME-PRETAX> 29,849
<INCOME-TAX> (5,837)
<INCOME-CONTINUING> 24,012
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,012
<EPS-PRIMARY> .53
<EPS-DILUTED> .53
</TABLE>
