SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[ X ] Annual Report Pursuant To Section 13 Or 15(d)
Of The Securities Exchange Act Of 1934
For the Fiscal Year Ended June 30, 1998
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 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 No.)
761 Main Avenue, Norwalk, Connecticut 06859-0001
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 203-762-1000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of class on which registered
Common Stock (par value New York Stock Exchange
$1.00 per share) Pacific Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Title of class
Class G Warrants
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.
X Yes 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 this Form 10-K. [X]
As of September 9, 1998, 49,395,010 shares of
Registrant's Common Stock were outstanding, and the
aggregate market value of shares of such Common Stock (based
upon the average sales price) held by non-affiliates was
approximately $ 2,999,205,733.
DOCUMENTS INCORPORATED BY REFERENCE
Annual Report to Shareholders for Fiscal Year ended June 30,
1998 - Parts I, II, and IV.
Proxy Statement for Annual Meeting of Shareholders dated
September 9, 1998 - Part III.
<PAGE>
PART I
Item 1. BUSINESS
(a) General Development of Business.
The Perkin-Elmer Corporation was incorporated in 1939
under the laws of the State of New York. Together with its
consolidated subsidiaries, The Perkin-Elmer Corporation
(hereinafter collectively referred to as "Registrant" or the
"Corporation") develops, manufactures, and markets life
science systems and analytical instruments used in the
pharmaceutical, biotechnology, environmental testing, food,
forensics, agriculture, and chemical manufacturing
industries. Registrant's industry segments are described in
Item 1.(c) below.
On November 21, 1997, Registrant acquired Molecular
Informatics, Inc., a developer of bioinformatics software
for the pharmaceutical, biotechnology, agrochemical,
forensics, and human identification markets.
On December 29, 1997, Registrant acquired approximately
52% of the voting rights and approximately 14.5% of the
equity of Tecan AG, a Swiss company. Tecan AG manufactures
and distributes laboratory automation systems for use in
life science and analytical applications.
On January 22, 1998, Registrant acquired PerSeptive
Biosystems, Inc. ("PerSeptive"). PerSeptive manufactures a
variety of products for use in the discovery, development,
and production of biopharmaceutical products.
On May 9, 1998, Registrant, Dr. J. Craig Venter, and
The Institute for Genomic Research ("TIGR") announced that
they had signed letters of intent to form a new genomics
company: Celera Genomics Corporation. The goal of Celera is
to become a primary source of genomic and medical
information to enable scientists to develop a better
understanding of human health and to facilitate the
discovery of therapeutics and diagnostics. The initial
focus is a plan to substantially complete the sequencing of
the human genome in three years. Results of operations
for Celera were not material for fiscal 1998.
On September 8, 1998, Registrant announced that it had
engaged consultants to explore strategic alternatives for
Registrant's Analytical Instruments Division. Options to be
explored include selling the business, spinning the division
off as a separate company, and retaining the division as
part of the Corporation. A decision with respect to the
various alternatives is expected by early in calendar year
1999.
Page 2
<PAGE>
(b) Financial Information About Industry Segments.
A summary of net sales to unaffiliated customers,
operating income, and identifiable assets attributable to
each of the Registrant's industry segments for the fiscal
years ended June 30, 1998, 1997, and 1996 is incorporated
herein by reference to Note 6 on Pages 50-52 of the Annual
Report to Shareholders for the fiscal year ended June 30,
1998.
(c) Narrative Description of Business.
Registrant develops, manufactures, and markets, on a
worldwide basis, life science, and analytical instrument
systems used in such markets as pharmaceutical,
biotechnology, environmental testing, food, forensics,
agriculture, and chemical manufacturing.
The Registrant's operations are comprised of three
business segments: its life sciences division, known as PE
Biosystems; its traditional Analytical Instruments business;
and the recently formed Celera Genomics Corporation.
Results of operations for Celera were not material for
fiscal 1998.
PE BIOSYSTEMS
Registrant's PE Biosystems Division develops,
manufactures, markets, sells, and services a wide range of
biochemical analytical instrument systems and products for
the biotechnology market, consisting of instruments,
associated reagents, consumables, and information management
tools.
All living organisms are composed of cells that contain
deoxyribonucleic acid ("DNA"). DNA contains information
that is used by cells as a blueprint for the organism. The
characteristics of any living thing essentially are
determined by the information in DNA. The components of DNA,
called genes, are further derived from combinations of four
different substances and usually contain between 1,000 and
100,000 instances of these substances. The entire set of
genes, called the genome, may contain between 4 million
(simple bacteria) and 3 billion (human) instances or more.
Combining DNA from different existing organisms
(plants, animals, insects, bacteria, etc.) results in
modified organisms with a combination of traits from the
parents. Scientists are now able to identify the specific
genes for many desirable traits and transfer only those
genes into another organism. Desirable traits found in
nature can theoretically be transferred into any chosen
organism. An organism genetically engineered in this way is
called transgenic. Genetic engineering is being used in
many practical situations.
One application of this technology is the development
of transgenic plants that are resistant to certain insects
or viruses. The genes for these traits have been
incorporated into the plants from other unrelated plants,
bacteria, or viruses by genetic engineering techniques.
Another use is in gene therapy, where, for
example, defective DNA in bone marrow cells is supplemented
with a copy of normal DNA, and the repaired cells are then
used by the body to generate cells with normal DNA.
Page 3
<PAGE>
Another application is pharmaceutical production.
Drugs such as insulin for diabetics, growth hormone for
individuals with pituitary dwarfism, and tissue plasminogen
activator for heart attack victims, as well as animal drugs
like the growth hormones, bovine or porcine somatotropin,
are being produced by the fermentation of transgenic
bacteria that have received the appropriate human, cow, or
pig gene.
In addition to genetic engineering, DNA information is
also used in diagnostic applications. Individuals within
any given species, breed, or hybrid line can usually be
identified by minor differences in their DNA sequences.
Scientists can diagnose viral, bacterial, or fungal
infections, distinguish between closely related individuals,
or map the locations of specific genes along the vast length
of the DNA molecules in the cells.
Registrant's PE Biosystems Division -- consisting of
Applied Biosystems, PerSeptive Biosystems, PE Informatics,
Tropix, and PE GenScope -- provides the tools that enable
scientists to implement these applications.
Applied Biosystems
Applied Biosystems develops, manufactures, and markets
systems and services for polymerase chain reaction ("PCR"),
DNA sequencing, genetic analysis, protein analysis, nucleic
acid synthesis, and peptide synthesis. These systems and
services are used in both research and commercial
applications in purifying, analyzing, synthesizing, and
sequencing proteins and genetic material.
Registrant's Applied Biosystems' offerings can be
broadly classified into the following areas:
1. Genetic Analysis. Genetic analysis primarily uses
electrophoresis techniques for separating molecules
based on their differential mobility in an electric
field. Registrant's genetic analysis products
generally perform both DNA sequencing and fragment
analysis.
DNA sequencing is used to determine the exact order of
nucleotides that make up DNA. This is done through the
fluorescent tagging of bases, each with a different
colored tag. The tagged fragments are then run through
an electrophoresis gel and are detected at the bottom
of the gel. Registrant's DNA sequencing systems
include a sequencer expandable to 96 lanes, a single-
lane capillary sequencer, and sequencing reagents.
A newly developed product, the 3700 DNA Analyzer is
scheduled for production shipments during fiscal year
1999. This product is designed to enable applications
requiring tens of thousands of samples produced weekly
by combining proven capillary electrophoresis hardware
and separation polymer chemistry with new detection
technology and automation. It is expected to be the
enabling technology for the sequencing of the human
genome by Celera Genomics Corporation, as discussed
below.
DNA fragment analyzers are used to determine the size,
quantity, or pattern of DNA fragments generated by PCR
amplification or other means. Typically this is done
by using fluorescently tagged PCR primers to generate
labeled PCR products that are then analyzed
electrophoretically. Fragment analysis applications
include gene mapping and forensic typing using
microsatellite markers, single-strand conformation
polymorphism ("SSCP")
Page 4
<PAGE>
analysis to screen for unknown mutations within genes,
and oligonucleotide ligation assay ("OLA") analysis to
detect known mutations within characterized genes.
2. PCR Products. PCR allows for the amplification of
genetic material that otherwise is of insufficient
quantity to be detected, by producing enough copies of
the material of interest to conduct numerous studies.
PCR products include 24, 48, and 96 sample
amplification systems; a combination PCR preparation
and DNA sequencing system; a combination PCR and PCR
detection system; and various reagents.
3. DNA Synthesizers. DNA synthesizers build synthetic
DNA, which is used for DNA sequencing primers and is
also used in drug discovery applications. Registrant
currently markets several models of synthesizers.
Registrant also provides custom synthesis, in which
oligonucleotides are made to order and shipped to
customers.
4. PNA. Registrant has an exclusive license for
technology to manufacture and sell peptide nucleic acid
("PNA") for molecular biology research and, subject to
certain limited reservations, for other applications.
PNA is a synthetic mimic of the DNA molecule with a
modified uncharged peptide-like "backbone." The unique
chemical structure of PNA enhances its affinity and
specificity as a DNA or RNA probe.
PerSeptive
PerSeptive develops, manufactures, and markets products
for the purification, analysis and synthesis of
biomolecules.
A variety of synthesis, purification, and analysis
procedures are conducted in each stage in the discovery,
development, and production of a biopharmaceutical product.
Synthesis involves the creation and replication of multiple
compounds that can be identical or subtly differentiated by
as little as one amino acid. Purification involves the
isolation and separation of a target biomolecule from other
substances, such as contaminants, without destroying the
biological activity of the biomolecule. Analysis involves
techniques used to measure the quantity of a biomolecule, to
identify its biological characteristics, and to assess the
nature and quantity of contaminants.
PerSeptive's products can be broadly classified into
the following categories:
1. Mass Spectrometry
Biospectrometry. PerSeptive owns a significant body of
technology relating to biological mass spectrometry
("Biospectrometry"). Although there are many different
kinds of mass spectrometers, most instruments are
defined by differences in two subsystems. One is the
ionization source that creates the ionic species, and
the other is the detection system. Biomolecular
analysis using mass spectrometry has been limited to
date by the inability of mass spectrometers to resolve
(identify) large biomolecules as well as the high cost
and difficulty of use of mass spectrometry. PerSeptive
believes that its Matrix-Assisted, Laser Desorption
Ionization Time-of-Flight Mass Spectrometry ("MALDI-
TOF/MS") technology overcomes the deficiencies of mass
spectrometry for biomolecular analysis.
Liquid Chromatography/Mass Spectrometry ("LC/MS").
LC/MS is a two stage analysis system which enables the
separation of a complex mixture and then the
quantitation and/or identification of the compounds in
the mixture. The component of the sample are first
Page 5
<PAGE>
separated in the chromatography stage and then the mass
spectrometer performs a molecular analysis, profiling
each molecule by its mass to charge ratio.
2. Perfusion Chromatography. PerSeptive's patented
Perfusion Chromatography process and media, which use
proprietary flow-through particles, separate
biomolecules 10 to 1,000 times faster than conventional
liquid chromatography ("LC") or high pressure liquid
chromatography ("HPLC") and achieve the same or better
levels of purity. Prior to the invention of Perfusion
Chromatography, it was generally accepted in the
chromatography industry that the slow speed of
diffusion was an inherent limitation to the potential
speed of chromatography.
3. ImmunoDetection. PerSeptive has developed novel
immunoassays that can be performed in a flow-through
column format ("ImmunoDetection"). ImmunoDetection
permits target molecule detection in seconds or minutes
-- far faster than conventional immunoassay techniques,
which require several hours to complete.
ImmunoDetection also takes advantage of the higher
degree of automation available in chromatography
instruments, as compared with immunoassay instruments,
and can produce results with much lower margins of
error.
4. Protein Synthesis and Analysis. Protein sequencers
provide information about the amino acids that make up
a given protein by chemically disassembling the protein
and analyzing the components. Peptide synthesizers
build peptides from amino acids through successive
reactions that involve the addition of the next amino
acid, removal of the groups in order to prevent
unwanted side reactions, activation to ready the
growing chain for the next amino acid addition, and,
finally, repeating the cycle until the desired peptide
is produced. The synthetically produced peptides are
used in understanding antibody reactions and as
potential drugs or drug analogs.
5. Superparamagnetic Bead-Based Separations. PerSeptive
owns technology relating to magnetic separations
particles and processes. Magnetic separations enable
biomedical researchers to improve the speed, purity,
and yield of many common laboratory protocols,
including separation of cell populations and isolation
and purification of nucleic acids. Researchers can
perform techniques based on magnetic separation either
manually or with automated instruments.
6. Purification Products. PerSeptive's purification
products can be incorporated readily into any stage of
the development process of a biopharmaceutical product
and offer productivity advantages over conventional
counterparts. Companies using conventional
purification technology usually make several
significant changes in materials, equipment, and
processes in moving from the development stage to
commercial manufacture. As a result, an integrated
line of purification products is expected to enhance
productivity by reducing or eliminating these costly
and time-consuming changes. Moreover, because the U.S.
Food and Drug Administration ("FDA") must approve
significant changes in manufacturing processes, an
integrated line of purification products may simplify
and expedite the process of obtaining approvals from
the FDA.
Page 6
<PAGE>
PE Informatics
Registrant's PE Informatics business develops, markets,
and distributes bioinformatics software. Principal markets
include agricultural analysis, agrochemical, automotive
industries, petrochemical industries, clinical, and
biological analysis industries, environmental testing and
monitoring, materials research, food quality management,
pharmaceutical, and semiconductors. The products provide a
comprehensive software system researchers can use to manage
and analyze genome data and include software solutions for
science and medical professionals who analyze gene sequences
in an effort to discover and develop drugs, perform clinical
trials, and perform molecular diagnostics. These systems
are necessary to meet the demand to manage, integrate, and
analyze the vast amounts of information related to
bioscience discovery processes.
Bioinformatics is a new science that enables
researchers to transform massive amounts of data into an
organized knowledge database. Customers are typically
attempting breakthroughs in gene mapping, drug discovery,
drug development, and molecular diagnostics and these
products provide the vehicles for transforming raw data into
the organized body of knowledge that enables those
breakthrough discoveries. The business is dedicated to the
development of infrastructure software for pharmaceutical,
biotechnology, and agrochemical industries that perform
genome data collection and management, gene mapping, drug
discovery, and clinical and diagnostic genetic research.
PE Informatics currently provides genomic data
management products directed toward both discovery and
development.
Discovery oriented products include:
1. BioMerge. A product that allows research groups to
store, retrieve, and analyze genetic information. The
system consists of an advanced, object-oriented
relational database and a group of programs that
organize public, proprietary, and third-party data in a
single database. The system provides for editing and
annotating sequence data and for tracking change
history of the databases.
2. BioLIMS. A product that manages automated DNA
sequencing for Registrant's Applied Biosystems
products. Sequence analysis results are entered into a
central database and allows automated genetic
information management, from data acquisition to
assembled contiguous sequences.
3. SQL GT. A product for sample tracking and sample
management for high throughput laboratories.
Development oriented products include:
1. SQL Lims. A product designed to optimize
information processing and provide information
management tools for the analytical laboratory. It
provides tools for automating the laboratory's data
acquisition, processing, and archiving functions as
well as management information to aid in the planning
and control of laboratory resources.
2. TurboChrom. The TurboChrom Client/Server
Chromatography Data System delivers distributed
computing resources across an entire organization,
while managing key data processes centrally. It enables
users throughout an enterprise to access required
Page 7
<PAGE>
information and to work collaboratively regardless of
geography, function, or local desktop environment.
Financial results from sales of SQL GT, SQL Lims and
TurboChrom products are currently reported in the
Analytical Instruments segment for the fiscal years
covered by the Annual Report to Shareholders for the
fiscal year ended June 30, 1998.
Tropix
Tropix develops, manufactures, and markets
chemiluminescent substrates and related products for the
life sciences market. Tropix also licenses its technology
to companies selling bioanalytical and clinical diagnostic
test kits.
Chemiluminescence is the conversion of chemical energy
stored within a molecule into light. Chemiluminescent
enzyme substrates are used that emit light in the presence
of a target substance that is "labeled," or connected to an
enzyme. The amount of light produced is proportional to the
amount of substrate or enzyme-labeled sample present. The
light lasts for a sufficiently long time to be measured with
instrumentation or photographic film. The substrates enable
the detection of extremely small amounts of virtually any
biological substance that can be detected. Chemiluminescent
technology is used in life science research and commercial
applications including drug discovery and development, gene
function study, molecular biology, and immunology research.
Another major use of this technology includes clinical
diagnostic tests for diseases, including early detection of
certain cancer markers.
Tropix operates a facility devoted to drug discovery
services for the pharmaceutical, biotech, and agricultural
markets. The services offered are custom assay development
using proprietary technologies and high-throughput
screening services with an initial capacity of 100,000
assays per day.
PE GenScope
PE GenScope offers customers advanced genomics
technologies including gene expression profiling, gene
discovery, high throughput DNA sequencing, complementary DNA
("cDNA") cloning, and bioinformatics, to accelerate their
drug discovery and development efforts.
PE GenScope has exclusive worldwide rights to AFLP (TM)
technology for human and animal healthcare applications.
AFLP technology was invented and patented by Keygene n.v. of
The Netherlands as a DNA fingerprinting technique for use in
genomics-based plant breeding programs and offers
substantial advantages over other gene fingerprinting
techniques. This technique is an enhancement of PCR that
allows selective analysis of any portion of genetic material
without the specific, prior sequence information normally
required for PCR.
PE GenScope products include gene expression profiling
technology that simultaneously discovers novel genes and
monitors known genes for applications such as molecular
toxicology, gene discovery, and pharmacogenomics. PE
GenScope also offers software and bioinformatics services
which allow clients to access vast amounts of proprietary
data via a secure Internet or Intranet connection, allowing
them to rapidly analyze and distribute information from
public and private sources throughout their global research
and development organizations.
Page 8
<PAGE>
Joint Venture
Registrant is engaged in the manufacture and sale of
mass spectrometry instrument systems in a joint venture,
Perkin-Elmer Sciex Instruments. These products are sold by
both the PE Biosystems and Analytical Instruments Divisions.
ANALYTICAL INSTRUMENTS
Registrant's Analytical Instruments segment, consisting
of Registrant's Analytical Instruments Division, develops,
manufactures, markets, sells, and services analytical
instrument systems.
The principal markets for Registrant's Analytical
Instrument products and services include: agricultural
analysis, automotive industries, petrochemical industries,
clinical, and biological analysis industries, environmental
testing and monitoring, materials research, food quality
management, pharmaceutical, and semiconductors.
Analytical chemistry is the science of experimentally
determining the elemental, chemical, and physical
characteristics that make up a particular sample.
Analytical instruments are the tools used to perform
analytical chemistry. These systems detect, identify, and
measure changes in properties of solids, liquids, and gases.
For example, certain types of analytical instruments are
targeted toward determining chemical composition; others are
used to study molecular structure; and still others measure
physical characteristics. Analytical instruments are also
used for testing and analysis applications, both inside and
outside of laboratories. The use of analytical instruments
is widespread in the life science, pharmaceutical, food,
chemicals, petrochemicals, material science, and
environmental industries, as well as in academic research.
Registrant's Analytical Instruments' products tend to
vary significantly in terms of their technologies, test
methodologies, applications, performance, and cost.
Moreover, there is rarely any overlap of instruments across
categories of inorganic elements/organic compound/attribute
level. That is, an instrument can be applied for use in
analyzing elements, compounds, or attributes, but typically
not more than one of these applications.
Registrant's Analytical Instruments' products can be
broadly classified into four categories:
1. Chromatography. Chromatography instruments are
designed to analyze complex mixtures by first
separating them into their components and then
measuring them quantitatively. Registrant offers two
types of chromatography products: liquid (LC) and gas
(GC).
2. Inorganic Analysis. These instruments are intended for
analysis of inorganic elements such as lead, mercury,
arsenic, or gold in a wide variety of samples from oils
and water to geological materials. Registrant offers
three types of inorganic analysis products: atomic
absorption spectrometers; inductively coupled plasma
optical emission spectrometers; and inductively coupled
plasma/mass spectrometers. These inductively coupled
plasma/mass spectrometers are provided by the joint
venture, Perkin-Elmer Sciex Instruments, referred to
previously.
3. Organic Analysis. These instruments are designed to
provide qualitative and quantitative information for
molecular and organic compounds in the broadest range
of samples.
Page 9
<PAGE>
Registrant's organic analysis products include:
infrared and near infrared spectrometers;
thermal analyzers; ultraviolet, visible, and near
infrared spectrometers; fluorescence spectrometers;
analytical balances; and polarimeters.
4. Laboratory Information Management Systems. These
systems provide data handling and data management for
analytical laboratories.
CELERA GENOMICS CORPORATION
Registrant, Dr. J. Craig Venter, and TIGR announced on
May 9, 1998 that they had signed letters of intent relating
to the formation of a new genomics company now established
as Celera Genomics Corporation. Its strategy will be
centered on a plan to substantially complete the sequencing
of the human genome in three years.
The new company's goal is to become a primary source of
genomic and associated medical information that will be used
by scientists to develop a better understanding of the
biological processes in humans and to deliver improved
healthcare. Using DNA analysis technology developed by
Registrant's PE Biosystems Division, applied to sequencing
strategies pioneered by Dr. Venter and others at TIGR,
Celera will operate a genomics sequencing facility with an
expected capacity greater than that of the current combined
world output.
Concurrently, Celera also intends to build the
scientific expertise and informatics tools necessary to
extract biological knowledge from genomic data, including
the discovery of new genes, development of polymorphism
assay systems, and databases for the scientific community.
Registrant believes that this information has significant
commercial value and that Celera can provide this
information more rapidly and more accurately than is
currently possible.
MARKETING AND DISTRIBUTION
Registrant's PE Biosystems and Analytical Instruments
businesses employ similar marketing and distribution
practices. In the United States, Registrant markets the
largest portion of its products directly through its own
sales and distribution organizations, although certain
products are marketed through independent distributors and
sales representatives. Sales to major markets outside of
the United States are generally made by the Registrant's
foreign based sales and service staff, although some sales
are made directly from the United States to foreign
customers. In certain foreign countries, sales are made
through various representative and distributorship
arrangements. Registrant owns or leases sales and service
offices in strategic regional locations in the United States
and in foreign countries through its foreign sales
subsidiaries and distribution operations. None of
Registrant's products are distributed through retail
outlets.
RAW MATERIALS
There are no specialized raw materials that are
particularly essential to the operation of Registrant's
business. Registrant's manufacturing operations require a
wide variety of raw materials, electronic and mechanical
components, chemical and biochemical materials, and other
supplies, some of which are occasionally found to be in
short supply. Registrant has multiple commercial sources
for most components and supplies but is dependent on single
sources for a limited number of such items, in
which case Registrant normally secures long-term supply
Page 10
<PAGE>
contracts. In certain cases, discontinuances of certain
sources could temporarily interrupt Registrant's business
in the PE Biosystems segment.
PATENTS, LICENSES, AND FRANCHISES
Registrant has pursued a policy of seeking patent
protection in the United States and other countries for
developments, improvements, and inventions originating
within its organization that are incorporated in
Registrant's products or that fall within its fields of
interest. Certain licenses under patents have been granted
to, and received from, other entities. Registrant has
certain rights from the Roche Group under patents relating
to PCR, one of which patents expire in 2004. Registrant
also has rights under a patent issued to the California
Institute of Technology relating to DNA sequencing, which
patent expires in 2009. In Registrant's opinion, however,
no other single patent or license, or group of patents or
licenses, or any franchise, is material to its business as a
whole or to either industry segment.
From time to time, Registrant has asserted that various
competitors and others are infringing Registrant's patents;
and similarly, from time to time, others have asserted that
Registrant was infringing patents owned by them. In most
cases, such claims are settled by mutual agreement on a
satisfactory basis and result in the granting of licenses by
Registrant or the granting of licenses to Registrant.
SEASONAL FLUCTUATIONS
Neither of Registrant's industry segments is subject to
pronounced seasonal fluctuations.
BACKLOG
Registrant's total recorded backlog at June 30, 1998
was $208.6 million, consisting of $116.1 million and $92.5
million for Registrant's PE Biosystems and Analytical
Instrument segments, respectively. At June 30, 1997
Registrant's total recorded backlog was $176.4 million, with
$86.2 million and $90.2 million for Registrant's PE
Biosystems and Analytical Instrument segements, respectively.
It is Registrant's general policy to include in backlog only
purchase orders or production releases that have firm
delivery dates within one year. Recorded backlog may not
result in sales because of cancellation or other factors.
It is anticipated that all orders included in the current
backlog will be delivered before the close of fiscal year
1999.
UNITED STATES GOVERNMENT SALES
No material portion of either of Registrant's industry
segments is subject to re-negotiation of profits or
termination of contracts or subcontracts at the election of
the United States Government.
COMPETITION
The industry segments in which Registrant operates are
highly competitive and are characterized by the application
of advanced technology. There are numerous companies that
specialize in, and a number of larger companies that devote
a significant portion of their resources to, the
development, manufacture, and sale of products that compete
with those manufactured or sold by Registrant. Many of
Registrant's competitors are well-known manufacturers with a
high degree of technical proficiency. In addition,
competition is intensified by the ever-changing nature
Page 11
<PAGE>
of the technologies in the industries in which Registrant is
engaged. The markets for Registrant's products are
characterized by specialized manufacturers that often have
strength in narrow segments of these markets. While the
absence of reliable statistics makes it difficult to
determine Registrant's relative market position in its
industry segments, Registrant is confident it is one of the
principal manufacturers in its fields, marketing a broad
line of life science systems and analytical instruments. In
addition to competing in terms of the technology that
Registrant offers, Registrant competes in terms of price,
application requirements, service, and quality.
RESEARCH, DEVELOPMENT, AND ENGINEERING
Registrant is actively engaged in basic and applied
research, development, and engineering programs designed to
develop new products and to improve existing products.
During fiscal years 1998, 1997, and 1996, Registrant spent
$161.0 million, $120.9 million, and $113.7 million,
respectively, on company-sponsored research, development,
and engineering activities.
ENVIRONMENTAL MATTERS
Registrant is subject to federal, state, and local laws
and regulations regulating the discharge of materials into
the environment, or otherwise relating to the protection of
the environment, in those jurisdictions where Registrant
operates or maintains facilities. Registrant is currently a
party to environmental legal actions as disclosed in Item 3
below. Registrant believes any liability, and compliance
with all environmental regulations will have no material
effect on its business, and no material capital expenditures
are expected for environmental control.
EMPLOYEES
As of June 30, 1998, Registrant employed 7,188 persons
worldwide. None of Registrant's United States employees is
subject to collective bargaining agreements.
(d) Financial Information About Foreign and Domestic
Operations and Export Sales.
A summary of net revenues to unaffiliated customers,
operating income, and identifiable assets attributable to
each of Registrant's geographic areas and export sales for
the fiscal years 1998, 1997, and 1996 is incorporated
herein by reference to Note 6 on Pages 50 - 52 of the Annual
Report to Shareholders for the fiscal year ended June 30,
1998.
Registrant's consolidated net revenues to unaffiliated
customers in countries other than the United States for the
fiscal years 1998, 1997, and 1996 were $880.2 million,
$841.2 million, and $779.9 million, or 57.5%, 61.3%, and
62.4%, respectively, of Registrant's consolidated net
revenues.
All of the Registrant's manufacturing facilities
outside the continental United States are located in
Germany, the United Kingdom, Japan, and Singapore.
There are currently no material foreign exchange
controls or similar limitations restricting the repatriation
to the United States of capital or earnings from operations
outside the United States.
Page 12
<PAGE>
(e) Discontinued Operations.
On September 30, 1994, Registrant sold Metco,
comprising its Material Sciences segment, headquartered in
Westbury, New York, to Sulzer Inc., a wholly owned
subsidiary of Sulzer, Ltd., Winterthur, Switzerland. The
selected financial data presents Registrant's Material
Sciences segment as a discontinued operation.
Item 2. PROPERTIES
Listed below are the principal facilities of Registrant
as of June 30, 1998. Registrant considers all facilities
listed below to be reasonably appropriate for the purpose(s)
for which they are used, including manufacturing, research
and development, and administrative purposes. All
properties are maintained in good working order and, except
for those held for sale or lease, are substantially utilized
on the basis of at least one shift. None of the leased
facilities is leased from an affiliate of Registrant.
Facilities are grouped within the business segment which is
the principal user.
Approximate
PE BIOSYSTEMS Owned or Expiration Date Floor Area
Location Leased Date of Leases In Sq.Ft.
Davis, CA Leased 1999 13,365
Foster City, CA * Leased 1999-2007 543,000
San Jose, CA Owned 81,000
Bedford, MA Leased 2000 28,000
Framingham, MA Leased 2009 196,000
Santa Fe, NM Leased 1998-2005 14,000
Houston, TX Leased 1999 21,000
Salt Lake City, UT Leased 1999 8,000
Warrington, England Owned 22,000
Singapore Leased 1999 30,000
ANALYTICAL INSTRUMENTS Approximate
Owned or Expiration Date Floor Area
Location Leased Date of Leases In Sq.Ft.
Irvine, CA Owned 22,000
Norwalk, CT Owned 402,000
Wilton, CT Owned 221,000
Beaconsfield, England Owned 70,000
Beaconsfield, England Leased 2005 8,000
Llantrisant, Wales Leased ** 113,000
Meersburg, Germany Leased 2001 24,000
Ueberlingen, Germany Owned 60,000
Ueberlingen, Germany Leased 2001 121,000
* Comprising 3 principal facilities totaling 330,000
square feet, and additional facilities totaling 213,000
square feet.
** Leased on a month-to-month basis as the facility is
being closed.
In addition to the facilities listed above, Registrant
leases space in certain industrial centers for use as
regional sales and service offices, technical demonstration
centers, and warehouses. Registrant also owns undeveloped
land in Vacaville, California; and Ueberlingen, Germany.
Page 13
<PAGE>
In addition to the properties used by Registrant in its
operations, Registrant owns a facility in Wilton,
Connecticut (approximately 42,000 square feet) leased to a
third-party on a long-term basis.
Item 3. LEGAL PROCEEDINGS
Registrant has been named as a defendant in
various legal actions arising from the conduct of its normal
business activities. Although the amount of any liability
that might arise with respect to any of these matters cannot
be accurately predicted, the resulting liability, if any,
will not, in the opinion of management of Registrant, have a
material adverse effect on the consolidated financial
statements of Registrant.
Registrant was one of approximately 125 third-party
defendants named in a third-party complaint dated February
19, 1993 in United States of America v. Davis et al., which
is pending in the United States District Court for the
District of Rhode Island. The third-party plaintiffs, who
were named as defendants and potentially responsible parties
in the Government's initial complaint, sought equitable
contribution and indemnification in the event they were
found liable for remediation costs relating to the removal
of hazardous substances from a site located in Smithfield,
Rhode Island. (Such costs initially were estimated by the
Government to be $27.8 million, but most recent estimates of
such costs appear to be in the $40 million range.) All but
one of the third-party plaintiffs settled with the
Government for a total of approximately $6 million, and a
trial on the question of the remaining third-party
plaintiff's liability to the Government resulted in an April
22, 1995 Memorandum and Order in which the Court found such
plaintiff, United Technologies Corporation, liable as a
"generator" of hazardous wastes deposited at the site.
Thereafter, the Court permitted United Technologies
Corporation to proceed with its claims against third
parties. Approximately one-half of the third-party claims
have been settled. The claim against Registrant was brought
to trial in late spring 1998. The Court has not yet issued
a decision.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders,
through the solicitation of proxies or otherwise, during the
fourth quarter of the fiscal year covered by this report.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
(a) Market Information.
The principal United States market where Registrant's
Common Stock is traded is the New York Stock Exchange,
although such stock is also traded on the Pacific Stock
Exchange.
The following information, which appears in
Registrant's Annual Report to Shareholders for the fiscal
year ended June 30, 1998, is hereby incorporated by
reference in this Form 10-K: the high and low sales prices
of Registrant's Common Stock for each quarterly period
during the fiscal years 1998 and 1997 (Note 13, Page 61 of
the Annual Report to Shareholders for the fiscal year ended
June 30, 1998).
Page 14
<PAGE>
(b) Holders.
On September 9, 1998, the approximate number of holders
of Common Stock of Registrant was 6,895. The approximate
number of holders is based upon the actual number of holders
registered in the books of Registrant at such date and does
not include holders of shares in "street name" or persons,
partnerships, associations, corporations, or other entities
identified in security position listings maintained by
depository trust companies. The calculation of the number
of shares of Registrant's Common Stock held by non-
affiliates shown on the cover of this Form 10-K was made on
the assumption that there were no affiliates other than
executive officers and directors.
(c) Dividends.
The amount of quarterly dividends during fiscal years
1998 and 1997 (Note 13, Page 61 of Registrant's Annual
Report to Shareholders for the fiscal year ended June 30,
1998) is hereby incorporated by reference in this Form 10-K.
(d) Sale of Unregistered Securities
Registrant has sold no securities during the fiscal
year ended June 30, 1998 that were not registered under the
Securities Act of 1933.
Item 6. SELECTED FINANCIAL DATA
Registrant hereby incorporates by reference in this
Form 10-K, Page 29 of Registrant's Annual Report to
Shareholders for the fiscal year ended June 30, 1998.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Registrant hereby incorporates by reference in this
Form 10-K, Pages 30 - 38 of Registrant's Annual Report to
Shareholders for the fiscal year ended June 30, 1998.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
Registrant hereby incorporates by reference in this
Form 10-K, Page 35 and Note 12 on Pages 58-60 of
Registrant's Annual Report to Shareholders for the fiscal
year ended June 30, 1998.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements and the
supplementary financial information included in Registrant's
Annual Report to Shareholders for the fiscal year ended June
30, 1998 are incorporated by reference in this Form 10-K:
the Consolidated Financial Statements and the report thereon
of PricewaterhouseCoopers LLP dated July 31, 1998, and Pages
39-62 of said Annual Report, including Note 13, Page 61,
which contains unaudited quarterly financial information.
Page 15
<PAGE>
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Registrant has not changed its public accounting firm
within 24 months prior to June 30, 1998, the date of
Registrant's most recent financial statements. There have
been no unresolved disagreements on any matter of accounting
principles or practices, financial statement disclosure, or
auditing scope or procedure.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS
OF THE REGISTRANT
(a) Identification and Background of Directors.
Registrant hereby incorporates by reference in this
Form 10-K, Pages 1-3 of Registrant's Proxy Statement dated
September 9, 1998, in connection with its Annual Meeting of
Shareholders to be held on October 15, 1998.
(b) Identification of Executive Officers.
The following is a list of Registrant's executive
officers, their ages, and their positions and offices with
the Registrant, as of September 9, 1998.
Name Age Present Positions and Year First Elected
Noubar B. Afeyan 36 Vice President (1998)
Manuel A. Baez 56 Senior Vice President and President,
Analytical Instruments Division (1996)
Peter Barrett 45 Vice President (1994), Executive Vice
President, Celera Genomics Corporation.(1998)
Ugo D. DeBlasi 36 Corporate Controller (1997)
Ronald D. Edelstein 49 Vice President and Chief
Information Officer (1998)
Elaine J. Heron 50 Vice President (1995),
General Manager Applied Biosystems (1998)
Michael W. Hunkapiller 49 Senior Vice President (1998);
President, PE Biosystems Division (1994)
Joseph E. Malandrakis 53 Vice President (1993),
General Manager, PerSeptive Biosystems (1998)
William B. Sawch 43 Senior Vice President,
General Counsel and Secretary (1993)
Tony L. White 52 Chairman, President, and
Chief Executive Officer (1995)
Dennis L. Winger 50 Senior Vice President and
Chief Financial Officer (1997)
Each of the foregoing named officers was either elected
at the last organizational meeting of the Board of Directors
held on October 16, 1997 or elected by the Board since that
date. The term of each officer will expire on October 15,
1998, the date of the next scheduled organizational meeting
of the Board of Directors, unless renewed for another year.
(c) Identification of Certain Significant Employees.
Not applicable.
(d) Family Relationships.
To the best of Registrant's knowledge and belief, there
is no family relationship between any of Registrant's
directors, executive officers, or persons nominated or
chosen by Registrant to become a director or an executive
officer.
Page 16
<PAGE>
(e) Business Experience.
With respect to the business experience of Registrant's
directors and persons nominated to become directors,
Registrant hereby incorporates by reference in this Report
on Form 10-K Pages 1-3 of Registrant's Proxy Statement dated
September 9, 1998, in connection with its Annual Meeting of
Shareholders to be held on October 15, 1998. With respect
to the executive officers of Registrant, each such officer
has been employed by Registrant or a subsidiary in one or
more executive or managerial capacities for at least the
past five years, with the exception of Dr. Afeyan, Mr.
Baez, Mr. Edelstein, Dr. Heron, Mr. White, and Mr. Winger.
Dr. Afeyan was elected Vice President of Registrant on
February 19, 1998. Prior to his employment by Registrant in
January 1998, Dr. Afeyan founded PerSeptive, a manufacturer
of products for use in the discovery, development and
production of biopharmaceutical products, in 1987.
PerSeptive was acquired by Registrant in January 1998.
Before founding PerSeptive, he served as Technology Transfer
Officer for the Biotechnology Process Engineering Center at
The Massachusetts Institute of Technology which conducts
biotechnology research and education.
Mr. Baez was elected Senior Vice President of
Registrant on June 20, 1996. Prior to his employment by
Registrant in June 1996, Mr. Baez was employed by Baxter
International Inc., a manufacturer of health care products
and instruments, for 22 years, most recently as Executive
Vice President, International.
Mr. Edelstein was elected Vice President of Registrant
on June 18, 1998. Prior to his employment by Registrant in
June 1998, Mr. Edelstein served as Vice President and Chief
Information Officer of Witco Corporation, a manufacturer of
specialty chemicals, for seven years.
Dr. Heron was elected Vice President of Registrant on
December 21, 1995. She was most recently appointed Vice
President and General Manager of Registrant's Applied
Biosystems business in July 1998. Previously Dr. Heron
served as Vice President, Worldwide Sales, Service, and
Marketing since December 1995. She had served as Vice
President of Marketing at Affymetrix, Inc., a supplier of
genetic analysis equipment, for the year prior to this
appointment and previously was Director of Marketing for
Applied Biosystems beginning in 1990.
Mr. White was elected Chairman, President, and Chief
Executive Officer of Registrant in September 1995. Prior to
his joining Registrant, he was Executive Vice President and
a member of the Office of the Chief Executive of Baxter
International Inc. He also served as Group Vice President
of Baxter International Inc. from 1986 to 1992. Mr. White
is also a director of C.R. Bard, Inc. and Ingersoll-Rand
Company.
Mr. Winger was elected Senior Vice President and Chief
Financial Officer on October 16, 1997. Prior to his
employment by Registrant in September 1997, Mr. Winger was
employed by Chiron Corporation, which conducts research and
development in the fields of biological proteins, gene
therapy and combinatorial chemistry, where he was Senior
Vice President, Finance and Administration, and Chief
Financial Officer since 1989.
(f) Involvement in Certain Legal Proceedings.
To the best of Registrant's knowledge and belief, none
of Registrant's directors, persons nominated to become
directors, or executive officers has been involved in any
proceedings during
Page 17
<PAGE>
the past five years that are material to an evaluation of
the ability or integrity of such persons to be directors or
executive officers of Registrant.
(g) Compliance with Section 16(a) of the Securities
Exchange Act of 1934.
Information concerning compliance with Section 16(a) of
the Securities Exchange Act of 1934 is incorporated by
reference to Page 7 of Registrant's Proxy Statement dated
September 9, 1998, in connection with its Annual Meeting of
Shareholders to be held on October 15, 1998.
Item 11. EXECUTIVE COMPENSATION
Registrant hereby incorporates by reference in this
Form 10-K, Pages 8-10 and 12-17 of Registrant's Proxy
Statement dated September 9, 1998, in connection with its
Annual Meeting of Shareholders to be held on October 15,
1998.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners.
Registrant hereby incorporates by reference in this
Form 10-K, Page 6 of Registrant's Proxy Statement dated
September 9, 1998, in connection with its Annual Meeting of
Shareholders to be held on October 15, 1998.
(b) Security Ownership of Management.
Information concerning the security ownership of
management is hereby incorporated by reference to Pages 2-3
and 7 of Registrant's Proxy Statement dated September 9,
1998, in connection with its Annual Meeting of Shareholders
to be held on October 15, 1998.
(c) Changes in Control.
Registrant knows of no arrangements, including any
pledge by any person of securities of Registrant, the
operation of which may at a subsequent date result in a
change in control of Registrant.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
(a) 1. Financial Statements.
The following consolidated financial statements,
together with the report thereon of PricewaterhouseCoopers
LLP dated July 31, 1998, appearing on Pages 39-62 of
Registrant's
Page 18
<PAGE>
Annual Report to Shareholders for the fiscal
year ended June 30, 1998, are incorporated by reference in
this Form 10-K. With the exception of the aforementioned
information and that which is specifically incorporated in
Parts I and II, the Annual Report to Shareholders for the
fiscal year ended June 30, 1998 is not to be deemed filed as
part of this report on Form 10-K.
Annual
10-K Page Report
No. Page No.
Consolidated Statements of
Operations - fiscal years
1998, 1997, and 1996................ -- 39
Consolidated Statements of
Financial Position at June 30,
1998 and 1997....................... -- 40
Consolidated Statements of
Cash Flows - fiscal years
1998, 1997, and 1996................ -- 41
Consolidated Statements of
Shareholders' Equity - fiscal years
1998, 1997, and 1996................ -- 42
Notes to Consolidated Financial
Statements.......................... -- 43-61
Report of Management.................. -- 62
Report of PricewaterhouseCoopers LLP.. -- 62
(a) 2. Financial Statement Schedule.
The following additional financial data should be read
in conjunction with the consolidated financial statements in
said Annual Report to Shareholders for the fiscal year ended
June 30, 1998. Schedules not included with this additional
financial data have been omitted because they are not
applicable or the required information is shown in the
consolidated financial statements or notes thereto.
Annual
10 -K Report
Page No. Page No.
Report of Independent Accountants
on Financial Statement Schedule 25 --
Schedule II - Valuation and
Qualifying Accounts and
Reserves 26 --
Page 19
<PAGE>
(a) 3. Exhibits.
Exhibit
No.
2(1) Agreement dated April 18, 1994 between Sulzer Inc. and
The Perkin-Elmer Corporation, as amended through August
31, 1994 (incorporated by reference to Exhibit 2(4) to
Annual Report on Form 10-K of the Corporation for fiscal
year ended June 30, 1994 (Commission file number 1-
4389)).
2(2) Agreement and Plan of Merger, dated August 23, 1997,
among the Registrant, Seven Acquisition Corp. and
PerSeptive Biosystems, Inc. (incorporated by reference
to Exhibit 2 to Current Report on Form 8-K of the
Corporation dated August 23, 1997 (Commission file
number 1-4389)).
2(3) 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 (Commission File No. 1-4389)).
3(i) Restated Certificate of Incorporation of the Company
(incorporated by reference to Exhibit 4.1 to the
Corporation's Registration Statement on Form S-3 (No.
333-39549)).
3(ii) Amended and Restated By-laws of the Corporation, as
amended through July 15, 1993 (incorporated by
reference to Exhibit 3(ii) to Annual Report on Form 10-K
of the Corporation for fiscal year ended June 30, 1993
(Commission file number 1-4389)).
4(1) Three Year Credit Agreement dated June 1, 1994, among
Morgan Guaranty Trust Company, certain banks named in
such Agreement, and the Corporation, as amended July 20,
1995 (incorporated by reference to Exhibit 4(1) to
Annual Report on Form 10-K of the Corporation for fiscal
year ended June 30, 1995 (Commission file number 1-
4389)).
4(2) Amendment dated March 31, 1996 to the Three Year
Credit Agreement dated June 1, 1994, among Morgan
Guaranty Trust Company, certain banks named in such
Agreement, and the Corporation, as amended July 20, 1995
(incorporated by reference to Exhibit 4(2) to Annual
Report on Form 10-K of the Corporation for fiscal year
ended June 30, 1997 (Commission file number 1-4389)).
4(3) Shareholder Protection Rights Agreement dated April 30,
1989, between The Perkin-Elmer Corporation and The First
National Bank of Boston (incorporated by reference to
Exhibit 4 to Current Report on Form 8-K of the
Corporation dated April 20, 1989 (Commission file number
1-4389)).
10(1) The Perkin-Elmer Corporation 1984 Stock Option Plan for
Key Employees, as amended through May 21, 1987
(incorporated by reference to Exhibit 28(c) to Post
Effective Amendment No. 1 to the Corporation's
Registration Statement on Form S-8 (No. 2-95451)).*
10(2) The Perkin-Elmer Corporation 1988 Stock Incentive Plan
for Key Employees (incorporated by reference to Exhibit
10(4) to Annual Report on Form 10-K of the Corporation
for the fiscal year ended July 31, 1988 (Commission file
number 1-4389)).*
10(3) The Perkin-Elmer Corporation 1993 Stock Incentive Plan
for Key Employees (incorporated by reference to Exhibit
99 to the Corporation's Registration Statement on Form S-
8 (No. 33-50847)).*
10(4) The Perkin-Elmer Corporation 1996 Stock Incentive Plan
(incorporated by reference to Exhibit 99 to the
Corporation's Registration Statement on Form S-8 (No.
333-15189)).*
10(5) The Perkin-Elmer Corporation 1996 Employee Stock
Purchase Plan (incorporated by reference to Exhibit 99
to the Corporation's Registration Statement on Form S-8
(No. 333-15259)).*
10(6) The Perkin-Elmer Corporation 1997 Stock Incentive Plan
(incorporated by reference to Exhibit 99 to the
Company's Registration Statement on Form S-8 (No. 333-
38713)).*
10(7) PerSeptive Biosystems, Inc. 1989 Stock Plan, as amended
August 1, 1991 (incorporated by reference to Exhibit
3(i) of the Company's Quarterly Report on Form 10-Q for
the fiscal quarter ended March 31, 1998 (Commission File
No. 1-4389)).*
10(8) PerSeptive Biosystems, Inc. 1992 Stock Plan, as amended
January 20, 1997 (incorporated by reference to Exhibit
4.1 to the Quarterly Report on Form 10-Q of PerSeptive
Biosystems, Inc. for the fiscal quarter ended March 29,
1997 (Commission File No. 0-20032)).*
Page 20
<PAGE>
10(9) Molecular Informatics, Inc. 1997 Equity Ownership Plan
(incorporated by reference to Exhibit 99 to the
Corporation's Registration Statement on Form S-8 (No.
333-42683)).*
10(10) Agreement dated September 12, 1995, between Registrant
and Tony L. White (incorporated by reference to Exhibit
10(21) to Annual Report on Form 10-K of the Corporation
for the fiscal year ended June 30, 1995 (Commission file
number 1-4389)).*
10(11) Agreement dated June 3, 1996, between Registrant and
Manuel A. Baez (incorporated by reference to Exhibit
10(10) to Annual Report on Form 10-K of the Corporation
for the fiscal year ended June 30, 1997 (Commission file
number 1-4389)).*
10(12) Deferred Compensation Contract dated September 15, 1994,
between Registrant and Michael W. Hunkapiller
(incorporated by reference to Exhibit 10(7) to Annual
Report on Form 10-K of the Corporation for the fiscal
year ended June 30, 1995 (Commission file number 1-
4389)).*
10(13) Change of Control Agreement dated September 12, 1995
between Registrant and Tony L. White (incorporated by
reference to Exhibit 10(16) to Annual Report on Form 10-
K of the Corporation for the fiscal year ended June 30,
1995 (Commission file number 1-4389)).*
10(14) Employment Agreement dated November 16, 1995, between
Registrant and Michael W. Hunkapiller (incorporated by
reference to Exhibit 10(11) to Annual Report on Form 10-
K of the Corporation for fiscal year ended June 30, 1996
(Commission file number 1-4389)).*
10(15) Employment Agreement dated June 20, 1996, between
Registrant and Manuel A. Baez (incorporated by
reference to Exhibit 10(14) to Annual Report on Form 10-
K of the Corporation for the fiscal year ended June 30,
1997 (Commission file number 1-4389)).*
10(16) Employment Agreement dated November 16, 1995, between
Registrant and William B. Sawch.*
10(17) Employment Agreement dated September 25, 1997, between
Registrant and Dennis L. Winger.*
10(18) Letter Agreement dated June 24, 1997, between Registrant
and Dennis L. Winger.*
10(19) Deferred Compensation Contract dated July 15, 1993
between Registrant and William B. Sawch.*
10(20) Pledge Agreement and Promissory Note between Registrant
and Michael W. Hunkapiller (incorporated by reference
to Exhibit 10 to Quarterly Report on Form 10-Q of the
Corporation for the quarter ended March 31, 1996
(Commission file number 1-4389)).
10(21) Contingent Compensation Plan for Key Employees of The
Perkin-Elmer Corporation, as amended through August 1,
1990 (incorporated by reference to Exhibit 10(5) to
Annual Report on Form 10-K of the Corporation for the
fiscal year ended July 31, 1992 (Commission file number
1-4389)).*
10(22) The Perkin-Elmer Corporation Supplemental Retirement
Plan as amended through August 1, 1991 (incorporated by
reference to Exhibit 10(6) to Annual Report on Form 10-K
of the Corporation for the fiscal year ended July 31,
1991 (Commission file number 1-4389)).*
10(23) The Excess Benefit Plan of The Perkin-Elmer Corporation
dated August 1, 1984, as amended through June 30, 1993
(incorporated by reference to Exhibit 10(17) to Annual
Report on Form 10-K of the Corporation for the fiscal
year ended June 30, 1993 (Commission file number 1-
4389)).*
10(24) 1993 Director Stock Purchase and Deferred Compensation
Plan as amended June 19, 1997 (incorporated by
reference to Exhibit 10(18) to Annual Report on Form 10-
K of the Corporation for the fiscal year ended June 30,
1997 (Commission file number 1-4389)).*
10(25) The Division Long-Term Incentive Plan of The Perkin-
Elmer Corporation dated July 1, 1996 (incorporated by
reference to Exhibit 10(20) to Annual Report on Form 10-
K of the Corporation for the fiscal year ended June 30,
1997 (Commission file number 1-4389)).*
10(26) The Performance Unit Bonus Plan of The Perkin-Elmer
Corporation (incorporated by reference to Exhibit
10(21) to Annual Report on Form 10-K of the Corporation
for the fiscal year ended June 30, 1997 (Commission file
number 1-4389)).*
10(27) The Estate Enhancement Plan of The Perkin-Elmer
Corporation (incorporated by reference to Exhibit
10(22) to Annual Report on Form 10-K of the Corporation
for the fiscal year ended June 30, 1997 (Commission file
number 1-4389)).
10(28) Deferred Compensation Plan, as amended and restated
effective as of January 1, 1998 (incorporated by
reference to Exhibit 4 to the Company's Registration
Statement on Form S-8 (No. 333-45187)).*
Page 21
<PAGE>
11 Computation of Net Income (Loss) per Share for the three
years ended June 30, 1998 (incorporated by reference to
Note 1 to Consolidated Financial Statements of Annual
Report to Shareholders for the fiscal year ended June
30, 1998).
13 Annual Report to Shareholders for 1998 (to the extent
incorporated herein by reference).
21 List of Subsidiaries.
23 Consent of PricewaterhouseCoopers LLP.
27 Financial Data Schedule.
* Management contract or compensatory plan or arrangement.
Note: None of the Exhibits listed in Item 14(a) 3 above,
except Exhibit 23, is included with this Form 10-K Annual
Report. Registrant will furnish a copy of any such Exhibit
upon written request to the Secretary at the address on the
cover of this Form 10-K Annual Report accompanied by payment
of $3.00 U.S. for each Exhibit requested.
(b) Reports on Form 8-K.
Registrant filed Amendment No. 1 to Form 8-K on April
6, 1998, responding to Items 2 and 7 on Form 8-K dated
January 22, 1998. The amendment included the following
financial statements:
Consolidated Balance Sheets at December 27, 1997 and September
30, 1997
Consolidated Statements of Operations for the Three months ended
December 27, 1997 and December 28, 1996
Consolidated Statements of Cash Flows for the Three months ended
December 27, 1997 and December 28, 1996
Notes to Unaudited Consolidated Financial Statements
Introduction to Unaudited Pro Forma Condensed Combined Financial
Statements
Unaudited Pro Forma Condensed Combined Statements of Financial
Position at December 31, 1997
Unaudited Pro Forma Condensed Combined Statements of Operations
for the Six months ended December 31, 1997
Unaudited Pro Forma Condensed Combined Statements of Operations
for the Six months ended December 31, 1996
Unaudited Pro Forma Condensed Combined Statements of Operations
for the fiscal years ended June 30, 1997, 1996 and 1995
Notes to Unaudited Pro Forma Condensed Combined Financial
Statements
Page 22
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, Registrant has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
THE PERKIN-ELMER CORPORATION
By /s/ William B. Sawch
William B. Sawch
Vice President, General
Counsel and Secretary
Date: September 21, 1998
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following persons on behalf of Registrant and in the
capacities and on the dates indicated.
/s/ Tony L. White September 22, 1998
Tony L. White
Chairman of the Board of Directors, President
and Chief Executive Officer
(Principal Executive Officer)
/s/ Dennis L. Winger September 21, 1998
Dennis L. Winger
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
/s/ Ugo D. DeBlasi September 22, 1998
Ugo D. DeBlasi
Corporate Controller
(Principal Accounting Officer)
/s/ Joseph F. Abely, Jr. September 16, 1998
Joseph F. Abely, Jr.
Director
Page 23
<PAGE>
/s/ Richard H. Ayers September 17, 1998
Richard H. Ayers
Director
/s/ Jean-Luc Belingard September 17, 1998
Jean-Luc Belingard
Director
/s/ Robert H. Hayes September 17, 1998
Robert H. Hayes
Director
/s/ Georges C. St. Laurent, Jr. September 16, 1998
Georges C. St. Laurent, Jr.
Director
/s/ Carolyn W. Slayman September 17, 1998
Carolyn W. Slayman
Director
/s/ Orin R. Smith September 17, 1998
Orin R. Smith
Director
Page 24
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
of The Perkin-Elmer Corporation
Our audits of the consolidated financial statements
referred to in our report dated July 31, 1998, appearing on
Page 62 of the 1998 Annual Report to Shareholders of The
Perkin-Elmer Corporation (which report and consolidated
financial statements are incorporated by reference in this
Annual Report on Form 10-K) also included an audit of the
Financial Statement Schedule listed in Item 14(a)2 of this
Form 10-K. In our opinion, the Financial Statement Schedule
presents fairly, in all material respects, the information
set forth therein when read in conjunction with the related
consolidated financial statements.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Stamford, Connecticut
July 31, 1998
Page 25
<PAGE>
THE PERKIN-ELMER CORPORATION
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE FISCAL YEARS ENDED JUNE 30, 1998, 1997, AND 1996
(Amounts in thousands)
ALLOWANCE FOR
DOUBTFUL ACCOUNTS
Balance at June 30,1995........................ $ 10,648
Charged to income in fiscal year 1996.......... 2,365
Deductions from reserve in fiscal year 1996.... (3,782)
Balance at June 30, 1996....................... 9,231
Charged to income in fiscal year 1997.......... 1,187
Deductions from reserve in fiscal year 1997.... (3,011)
Balance at June 30, 1997 (1)................... 7,407
Charged to income in fiscal year 1998.......... 4,673
Acquired businesses (2)........................ 495
Deductions from reserve in fiscal year 1998.... (3,298)
Balance at June 30, 1998 (1)................... $ 9,277
(1) Deducted in the Consolidated Statements of Financial
Position from accounts receivable.
(2) See Note 2 to the Consolidated Financial Statements.
SCHEDULE II
Page 26
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in
the Registration Statements on Form S-3 (No. 333-39549) and
Form S-8 (Nos. 2-95451, 33-25218, 33-44191, 33-50847, 33-
50849, 33-58778, 333-15189, 333-152259, 333-38713, 333-
38881, 333-42683, and 333-45187) of The Perkin-Elmer
Corporation of our report dated July 31, 1998, appearing on
page 62 of the Annual Report to Shareholders which is
incorporated in this Annual Report on Form 10-K. We also
consent to the incorporation by reference of our report on
the Financial Statement Schedule, which appears on page 25
of this Form 10-K.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Stamford, Connecticut
September 25, 1998
EXHIBIT 23
Page 27
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
10(16) Employment Agreement dated November 16, 1995,
between Registrant and William B. Sawch.
10(17) Employment Agreement dated September 25, 1997,
between Registrant and Dennis L. Winger.
10(18) Letter Agreement dated June 24, 1997,
between Registrant and Dennis L. Winger.
10(19) Deferred Compensation Contract dated July 15, 1993
between Registrant and William B. Sawch.
13 Annual Report to Shareholders for the fiscal year
ended June 30, 1998 (to the extent incorporated
herein by reference).
21 List of Subsidiaries.
23 Consent of PricewaterhouseCoopers LLP.
27 Financial Data Schedule.
Page 28
<PAGE>
EMPLOYMENT AGREEMENT
AGREEMENT entered into as of November 16, 1995, between
THE PERKIN-ELMER CORPORATION, a New York corporation having its
principal place of business at Norwalk, Connecticut (the
"Company") and William B. Sawch residing at 146 Lyons Plains
Road, Weston, Connecticut 06883 (the "Employee").
WHEREAS, the Employee has rendered and/or will render
valuable services to the Company and it is regarded essential by
the Company that it have the benefit of Employee's services in
future years; and
WHEREAS, the Board of Directors of the Company believes
that it is essential that, in the event of the possibility of a
Change in Control of the Company (as defined herein), the
Employee be able to continue his attention and dedication to his
duties and to assess and advise the Board of Directors of the
Company (the "Board") whether such proposals would be in the best
interest of the Company and its shareholders without distraction
regarding any uncertainty concerning his future with the Company;
and
WHEREAS, the Employee is willing to agree to continue
to serve the Company in the future;
NOW, THEREFORE, it is mutually agreed as follows:
1. Employment. The Company agrees to employ Employee,
and the Employee agrees to serve as an employee of the Company or
one or more of its subsidiaries after a Change of Control during
the Period of Employment (as those terms are defined in Section 2
Page 1
<PAGE>
hereof) in such executive capacity as Employee served immediately
prior to the Change in Control which caused the commencement of
the Period of Employment. The Employee also agrees to serve
during the Period of Employment, if elected or appointed thereto,
as a Director of the Board of Directors of the Company and as a
member of any committee of the Board of Directors. Notwith-
standing anything to the contrary herein, the Period of
Employment shall not commence and the Employee shall not be
entitled to any rights, benefits, or payments hereunder unless
and until a Change in Control has occurred.
2. Definitions.
(a) Cause. During the Period of Employment, "Cause"
means termination upon (i) the willful and continued failure by
the Employee to perform substantially his duties with the Company
(other than any such failure resulting from the Employee's
incapacity due to physical or mental illness) after a demand for
a substantial performance is delivered to the Employee by the
Chief Executive Officer of the Company ("CEO") which specifically
identifies the manner in which the CEO believes that the Employee
has not substantially performed his duties, or (ii) the willful
engaging by the Employee in illegal conduct which is materially
and demonstrably injurious to the Company. For purposes of this
Section 2(a), no act, or failure to act, on the part of the
Employee shall be considered "willful" unless done, or omitted to
be done, by the Employee in bad faith and without reasonable
belief that the Employee's action or omission was in, or not
Page 2
<PAGE>
opposed to, the best interests of the Company. Any act, or
failure to act, based upon authority given pursuant to a
resolution duly adopted by the Board or based upon the advice of
counsel for the Company shall be conclusively presumed to be
done, or omitted to be done, by the Employee in good faith and in
the best interests of the Company. Notwithstanding the
foregoing, the Employee shall not be deemed to have been
terminated for Cause unless and until there shall have been
delivered to the Employee a copy of a resolution duly adopted by
the affirmative vote of not less than three quarters of the
entire membership of the Board at a meeting of the Board called
and held for that purpose (after reasonable notice to the
Employee and an opportunity for him, together with counsel, to be
heard before the Board), finding that in the good faith opinion
of the Board the Employee was guilty of the conduct set forth
above in (i) or (ii) of this Section 2(a) and specifying the
particulars thereof in detail.
(b) Cash Compensation. "Cash Compensation" shall mean
the sum of (i) Employee's Base Salary (determined in accordance
with the provisions of Section 4(a) hereof) and (ii) Executive's
incentive compensation (provided for under Section 4(b) hereof),
which shall be an amount equal to the greatest of (x) the average
of the amount of Employee's incentive compensation for the last
three completed fiscal years immediately prior to the Employee's
termination of employment (whether or not such years occurred
during the Period of Employment), (y) the target amount of such
Page 3
<PAGE>
Employee's incentive compensation for the fiscal year in which
his termination of employment occurs or (z) the Employee's target
amount for the fiscal year in which the Change in Control occurs.
(c) Change in Control. "Change in Control" means the
occurrence of any of the following: an event that would be
required to be reported (assuming such event has not been
"previously reported") in response to Item 1(a) of the Current
Report on Form 8-K, as in effect on the date hereof, pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934;
provided, however, that, without limitation, such a Change in
Control shall be deemed to have occurred at such time as (i) any
"person" within the meaning of Section 14(d) of the Securities
Exchange Act of 1934 becomes the "beneficial owner" as defined in
Rule 13d-3 thereunder, directly or indirectly, of more than 25%
of the Company's Common Stock; (ii) during any two-year period,
individuals who constitute the Board of Directors of the Company
(the "Incumbent Board") as of the beginning of the period cease
for any reason to constitute at least a majority thereof,
provided that any person becoming a director during such period
whose election or nomination for election by the Company's
stockholders was approved by a vote of at least three quarters of
the Incumbent Board (either by a specific vote or by approval of
the proxy statement of the Company in which such person is named
as a nominee for director without objection to such nomination)
shall be, for purposes of this clause (ii), considered as though
such person were a member of the Incumbent Board; or (iii) the
Page 4
<PAGE>
approval by the Company's stockholders of the sale of all or
substantially all of the stock or assets of the Company.
(d) Disability. "Disability" means the absence of the
Employee from his duties with the Company on a full-time basis
for one hundred eighty (180) consecutive days as a result of
incapacity due to physical or mental illness.
(e) Good Reason. During the Period of Employment,
"Good Reason" means:
(i) an adverse change in the status of the Employee
(other than any such change primarily attributable to the fact
that the Company may no longer be publicly owned) or position(s)
as an officer of the Company as in effect immediately prior to
the Change in Control or the assignment to the Employee of any
duties or responsibilities which, in his reasonable judgment, are
inconsistent with such status or position(s), or any removal of
the Employee from or any failure to reappoint or reelect him to
such position(s) (except in connection with the termination of
the Employee's employment for Cause, Disability, or upon
attaining age 65 or upon taking early retirement under any of the
Company's retirement plans, or as a result of death or by the
Employee other than for Good Reason);
(ii) a reduction by the Company after a Change in
Control in the Employee's Base Salary;
(iii) a material reduction after a Change in Control
in the Employee's total annual compensation; provided, however,
that for these purposes a reduction for any year of over 10% of
Page 5
<PAGE>
total compensation measured by the preceding year without a
substantially similar reduction to all other executives
participating in incentive compensation plans shall be considered
"material"; and the failure of the Company to adopt or renew a
stock option plan or to grant amounts of restricted stock or
stock options, which are consistent with the Company's prior
practices, to the Employee shall also be considered a material
reduction, unless the Employee participates in substitute
programs that provide substantially equivalent economic value to
the Employee;
(iv) the failure by the Company to continue in effect
any Benefit Plan (as hereinafter defined) in which Employee was
participating at the time of the Change in Control (or Benefit
Plans providing Employee with at least substantially similar
benefits) other than as a result of the normal expiration of any
such Benefit Plan in accordance with its terms as in effect at
the time of the Change in Control, or the taking of any action,
or the failure to act, by the Company which would adversely
affect Employee's continued participation in any such Benefit
Plans on at least as favorable a basis to Employee as is the case
immediately prior to the Change in Control or which would
materially reduce Employee's benefits in the future under any of
such Benefit Plans or deprive Employee of any material benefit
enjoyed by Employee immediately prior to the Change in Control;
(v) the failure by the Company after a Change in
Control to provide and credit Employee with the number of paid
Page 6
<PAGE>
vacation days to which Employee was then entitled in accordance
with the Company's normal vacation policy as in effect
immediately prior to the Change in Control; or
(vi) the Company's requiring the Employee after a
Change in Control to be based more than fifty miles from the
Employee's principal place of business immediately prior to the
Change in Control except for required travel on the Company's
business to an extent substantially consistent with the business
travel obligations which he undertook on behalf of the Company
prior to the Change in Control.
(f) Period of Employment. (i) "Period of Employment"
means, subject to the provisions of Section 2(f)(ii), the period
of thirty-six (36) months commencing on the date of a Change in
Control (as defined in Section 2(c) hereof) and the period of any
extension or extensions thereof in accordance with the terms of
this Section. The Period of Employment shall be extended
automatically by one week for each week in which the Employee's
employment continues after the date of a Change in Control.
(ii) Notwithstanding the provisions of Section 2(f)(i)
hereof, the Period of Employment shall terminate upon the
occurrence of the earliest of (A) the Employee's attainment of
age 65, or the election by the Employee to retire early from the
Company under any of its retirement plans, (B) the death of the
Employee, (C) the Disability of the Employee or (D) a termination
of Employee's employment by the Company for Cause or by the
Employee without Good Reason.
Page 7
<PAGE>
(g) Termination Date. "Termination Date" means the
date on which the Period of Employment terminates.
3. Duties During the Period of Employment. While
employed by the Company during the Period of Employment, the
Employee shall devote his full business time, attention, and best
efforts to the affairs of the Company and its subsidiaries;
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 prohibit 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.
4. Current Cash Compensation.
(a) Base Salary. The Company will pay to the Employee
while employed by the Company during the Period of Employment an
annual base salary ("Base Salary") in an amount determined by the
Board of Directors or its Compensation Committee which shall
never be less than the greater of (i) the Employee's Base Salary
prior to the commencement of the Period of Employment or (ii) his
Base Salary during the preceding year of the Period of
Employment; provided, however, that it is agreed between the
parties that the Company shall review annually the Employee's
Base Salary, and in light of such review may, in the discretion
Page 8
<PAGE>
of the Board of Directors or its Compensation Committee, increase
such Base Salary taking into account the Employee's responsi-
bilities, inflation in the cost of living, increase in salaries
of executives of other corporations, performance by the Employee,
and other pertinent factors. The Base Salary shall be paid in
substantially equal biweekly installments while Employee is
employed by the Company.
(b) Incentive Compensation. While employed by the
Company during the Period of Employment, the Employee shall
continue to participate in such of the Company's incentive
compensation programs for executives as the Employee participated
in prior to the commencement of the Period of Employment. Any
amount awarded to the Employee under such programs shall be paid
to Employee in accordance with the terms thereof.
5. Employee Benefits.
(a) Vacation and Sick Leave. The Employee shall be
entitled during the Period of Employment to a paid annual
vacation of not less than twenty (20) business days during each
calendar year while employed by the Company and to reasonable
sick leave.
(b) Regular Reimbursed Business Expenses. The Company
shall reimburse the Employee for all expenses and disbursements
reasonably incurred by the Employee in the performance of his
duties during the Period of Employment.
(c) Employment Benefit Plans or Arrangements. While
employed by the Company, Employee shall be entitled to
Page 9
<PAGE>
participate in all employee benefit plans, programs, or
arrangements ("Benefit Plans") of the Company, in accordance with
the terms thereof, as in effect from time to time, which provide
benefits to senior executives of the Company. For purposes of
this Agreement, Benefit Plans shall include, without limitation,
any compensation plan such as an incentive, deferred, stock
option or restricted stock plan, or any employee benefit plan
such as a thrift, pension, profit sharing, pre-tax savings,
medical, dental, disability, salary continuation, accident, life
insurance plan, or a relocation plan or policy, or any other
plan, program, or policy of the Company intended to benefit
employees.
6. Termination of Employment.
(a) Termination by the Company for Cause or
Termination by the Employee Other Than for Good Reason. If
during the Period of Employment the Company terminates the
employment of the Employee for Cause or if the Employee
terminates his employment other than for Good Reason the Company
shall pay the Employee (i) the Employee's Base Salary through the
end of the month in which the Termination Date occurs, (ii) any
incentive compensation payable to him pursuant to Section 4(b)
hereof, including a pro rata share for any partial year, (iii)
any accrued vacation pay, and (iv) benefits payable to him
pursuant to the Company's Benefit Plans as provided in Section
5(c) hereof through the end of the month in which the Termination
Date occurs. The amounts and benefits set forth in clauses (i),
Page 10
<PAGE>
(ii), (iii) and (iv) of the preceding sentence shall hereinafter
be referred to as "Accrued Benefits."
(b) Termination by the Company Without Cause or by the
Employee for Good Reason. If during the Period of Employment the
Company terminates the Employee's employment with the Company
without Cause or the Employee terminates his employment with the
Company for Good Reason, the Company will pay to Employee all
Accrued Benefits and, in addition, pay or provide to the Employee
the following:
(i) within thirty (30) days after the date
of termination, a lump sum equal to the greater of
(A) the Employee's Cash Compensation for the
remainder of the Period of Employment or (B) two
times the Employee's Cash Compensation;
(ii) for the greater of two years or the
remainder of the Period of Employment immediately
following the Employee's date of termination, the
Employee and Employee's family shall continue to
participate in any Benefit Plans of the Company (as
defined in Section 5(c) hereof) in which Employee
or Employee's family participated at any time
during the one-year period ending on the day
immediately preceding Employee's termination of
employment, provided that (a) such continued
participation is possible under the terms of such
Benefit Plans, and (b) the Employee continues to
pay contributions for
Page 11
<PAGE>
such participation at the
rates paid for similar participation by active
Company employees in similar positions to that held
by the Employee immediately prior to the date of
termination. If such continued participation is
not possible, the Company shall provide, at its
sole cost and expense, substantially identical
benefits to the Employee plus pay an additional
amount to the Employee equal to the Employee's
liability for federal, state and local income taxes
on any amounts includible in the Employee's income
by virtue of the terms of this Section 6(b)(ii) so
that Employee does not have to personally pay any
federal, state and local income taxes by virtue of
the terms of this Section 6(b)(ii);
(iii) three additional years of service
credit under the Company's Non-Qualified Plans
and, for purposes of such plans, Employee's final
average pay shall be deemed to be his Cash
Compensation for the year in which the date of
termination occurs;
(iv) the Company shall take all reasonable
actions to cause any Company restricted stock
("Restricted Stock") granted to Employee to become
fully vested and any options to purchase Company
stock ("Options") granted to Employee to become
fully exercisable, and in the event the Company cannot
Page 12
<PAGE>
effect such vesting or acceleration within
sixty (60) days, the Company shall pay within
thirty (30) days thereafter to Employee (i) with
respect to each Option, an amount equal to the
product of (x) the number of unvested shares
subject to such Option, multiplied by (y) the
excess of the fair market value of a share of
Company common stock on the date of Employee's
termination of employment, over the per share
exercise price of such Option and (ii) with
respect to each unvested share of Restricted Stock
an amount equal to the fair market value of a
share of Company common stock on the date of
Employee's termination of employment.
Except as provided in the following sentence, the amounts payable
to the Employee under this Section 6(b) shall be absolutely owing
and shall not be subject to reduction or mitigation as a result
of employment of the Employee elsewhere after the date of
termination. Notwithstanding any provision herein to the
contrary, the benefits described in clauses (i), (ii) and (iii)
of this Section 6(b) shall only be payable with respect to the
period ending upon the earlier of (i) the end of the period
specified in each such clause or (ii) Employee's attainment of
age 65.
7. Gross-Up. In the event any amounts due to the
Employee under this Agreement after a Change in Control, under
the terms of any Benefit Plan, or otherwise payable by the
Page 13
<PAGE>
Company or an affiliate of the Company are subject to excise
taxes under Section 4999 of the Internal Revenue Code of 1986, as
amended ("Excise Taxes"), the Company shall pay to the Employee,
in addition to any other payments due under other provisions of
this Agreement, an amount equal to the amount of such Excise
Taxes plus the amount of any federal, state and local income or
other taxes and Excise Taxes attributable to all amounts,
including income taxes, payable under this Section 7, so that
after payment of all income, Excise and other taxes with respect
to the amounts due to the Employee under this Agreement, the
Employee will retain the same net after tax amount with respect
to such payments as if no Excise Taxes had been imposed.
8. Governing Law. This Agreement is governed by, and
is to be construed and enforced in accordance with, the laws of
the State of Connecticut. If under such laws any portion of this
Agreement is at any time deemed to be in conflict with any
applicable statute, rule, regulation, or ordinance, such portion
shall be deemed to be modified or altered to conform thereto or,
if that is not possible, to be omitted from this Agreement, and
the invalidity of any such portion shall not affect the force,
effect, and validity of the remaining portion hereof.
9. Notices. All notices under this Agreement shall be
in writing and shall be deemed effective when delivered in person
(in the Company's case, to its Secretary) or seventy-two (72)
hours after deposit thereof in the U.S. mail, postage prepaid,
for delivery as registered or certified mail -- addressed, in the
Page 14
<PAGE>
case of the Employee, to the Employee at Employee's residential
address, and in the case of the Company, to its corporate
headquarters, attention of the Secretary, or to such other
address as the Employee or the Company may designate in writing
at any time or from time to time to the other party. In lieu of
personal notice or notice by deposit in the U.S. mail, a party
may give notice by telegram, fax or telex.
10. Miscellaneous. This Agreement shall supersede the
prior Employment Agreement dated November 21, 1991, with the
Employee. This Agreement may be amended only by a subsequent
written agreement of the Employee and the Company. This Agreement
shall be binding upon and shall inure to the benefit of the
Employee, the Employee's heirs, executors, administrators,
beneficiaries, and assigns and to the benefit of the Company and
its successors. Notwithstanding anything in this Agreement to
the contrary, nothing herein shall prevent or interfere with the
ability of the Company to terminate the employment of the
Employee prior to a Change in Control nor be construed to entitle
Employee to be continued in employment prior to a Change in
Control and this Agreement shall terminate if Employee or the
Company terminates Employee's employment prior to a Change in
Control. Similarly, nothing herein shall prevent the Employee
from retiring under any of the Company's retirement plans and
receiving the corresponding benefits thereunder consistent with
the treatment of other Company employees.
Page 15
<PAGE>
11. Fees and Expenses. The Company shall pay all
reasonable legal fees and related expenses incurred by the
Employee in connection with this Agreement following a Change in
Control of the Company, including without limitation, all such
fees and expenses, if any, incurred in connection with:
(i) contesting or disputing, any termination of the Employee's
employment hereunder; or (ii) the Employee seeking to obtain or
enforce any right or benefit provided by the Agreement.
12. Arbitration. Any dispute or controversy arising
under or in connection with this Agreement shall be settled
exclusively by arbitration in Connecticut by three arbitrators in
accordance with the rules of the American Arbitration Association
then in effect. Judgment may be entered on the arbitrator's
award in any court having jurisdiction; provided, however, that
the Employee shall be entitled to be paid as if his or her
employment continued during the pendency of any dispute or
controversy arising under or in connection with this Agreement.
The Company shall bear all costs and expenses arising in
connection with any arbitration pursuant to this Section 12.
Page 16
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the year and day first above written.
THE PERKIN-ELMER CORPORATION
By: /s/ Tony L. White
Tony L. White
Chairman, President and
Chief Executive Officer
ATTEST:
By: /s/ Michael J. McPartland
Michael J. McPartland
Vice President
ACCEPTED AND AGREED:
/s/ W.B. Sawch
William B. Sawch
Page 17
EMPLOYMENT AGREEMENT
AGREEMENT entered into as of September 25, 1997,
between THE PERKIN-ELMER CORPORATION, a New York corporation
having its principal place of business at Norwalk, Connecticut
(the "Company") and Dennis L. Winger, residing at 19 Prospect
Ridge, Quail Ridge Unit 56, Ridgefield, CT 06877 (the
"Employee").
WHEREAS, the Employee has rendered and/or will render
valuable services to the Company and it is regarded essential by
the Company that it have the benefit of Employee's services in
future years; and
WHEREAS, the Board of Directors of the Company believes
that it is essential that, in the event of the possibility of a
Change in Control of the Company (as defined herein), the
Employee be able to continue his attention and dedication to his
duties and to assess and advise the Board of Directors of the
Company (the "Board") whether such proposals would be in the best
interest of the Company and its shareholders without distraction
regarding any uncertainty concerning his future with the Company;
and
WHEREAS, the Employee is willing to agree to continue
to serve the Company in the future;
NOW, THEREFORE, it is mutually agreed as follows:
1. Employment. The Company agrees to employ Employee,
and the Employee agrees to serve as an employee of the Company or
one or more of its subsidiaries after a Change of Control during
Page 1
<PAGE>
the Period of Employment (as those terms are defined in Section 2
hereof) in such executive capacity as Employee served immediately
prior to the Change in Control which caused the commencement of
the Period of Employment. The Employee also agrees to serve
during the Period of Employment, if elected or appointed thereto,
as a Director of the Board of Directors of the Company and as a
member of any committee of the Board of Directors. Notwith-
standing anything to the contrary herein, the Period of
Employment shall not commence and the Employee shall not be
entitled to any rights, benefits, or payments hereunder unless
and until a Change in Control has occurred.
2. Definitions.
(a) Cause. During the Period of Employment, "Cause"
means termination upon (i) the willful and continued failure by
the Employee to perform substantially his duties with the Company
(other than any such failure resulting from the Employee's
incapacity due to physical or mental illness) after a demand for
a substantial performance is delivered to the Employee by the
Chief Executive Officer of the Company ("CEO") which specifically
identifies the manner in which the CEO believes that the Employee
has not substantially performed his duties, or (ii) the willful
engaging by the Employee in illegal conduct which is materially
and demonstrably injurious to the Company. For purposes of this
Section 2(a), no act, or failure to act, on the part of the
Employee shall be considered "willful" unless done, or omitted to
be done, by the Employee in bad faith and without reasonable
Page 2
<PAGE>
belief that the Employee's action or omission was in, or not
opposed to, the best interests of the Company. Any act, or
failure to act, based upon authority given pursuant to a
resolution duly adopted by the Board or based upon the advice of
counsel for the Company shall be conclusively presumed to be
done, or omitted to be done, by the Employee in good faith and in
the best interests of the Company. Notwithstanding the
foregoing, the Employee shall not be deemed to have been
terminated for Cause unless and until there shall have been
delivered to the Employee a copy of a resolution duly adopted by
the affirmative vote of not less than three quarters of the
entire membership of the Board at a meeting of the Board called
and held for that purpose (after reasonable notice to the
Employee and an opportunity for him, together with counsel, to be
heard before the Board), finding that in the good faith opinion
of the Board the Employee was guilty of the conduct set forth
above in (i) or (ii) of this Section 2(a) and specifying the
particulars thereof in detail.
(b) Cash Compensation. "Cash Compensation" shall mean
the sum of (i) Employee's Base Salary (determined in accordance
with the provisions of Section 4(a) hereof) and (ii) Employee's
incentive compensation (provided for under Section 4(b) hereof),
which shall be an amount equal to the greatest of (x) the average
of the amount of Employee's incentive compensation for the last
three completed fiscal years immediately prior to the Employee's
termination of employment (whether or not such years occurred
Page 3
<PAGE>
during the Period of Employment), (y) the target amount of such
Employee's incentive compensation for the fiscal year in which
his termination of employment occurs or (z) the Employee's target
amount for the fiscal year in which the Change in Control occurs.
(c) Change in Control. "Change in Control" means the
occurrence of any of the following: an event that would be
required to be reported (assuming such event has not been
"previously reported") in response to Item 1(a) of the Current
Report on Form 8-K, as in effect on the date hereof, pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934;
provided, however, that, without limitation, such a Change in
Control shall be deemed to have occurred at such time as (i) any
"person" within the meaning of Section 14(d) of the Securities
Exchange Act of 1934 becomes the "beneficial owner" as defined in
Rule 13d-3 thereunder, directly or indirectly, of more than 25%
of the Company's Common Stock; (ii) during any two-year period,
individuals who constitute the Board of Directors of the Company
(the "Incumbent Board") as of the beginning of the period cease
for any reason to constitute at least a majority thereof,
provided that any person becoming a director during such period
whose election or nomination for election by the Company's
stockholders was approved by a vote of at least three quarters of
the Incumbent Board (either by a specific vote or by approval of
the proxy statement of the Company in which such person is named
as a nominee for director without objection to such nomination)
shall be, for purposes of this clause (ii), considered as though
Page 4
<PAGE>
such person were a member of the Incumbent Board; or (iii) the
approval by the Company's stockholders of the sale of all or
substantially all of the stock or assets of the Company.
(d) Disability. "Disability" means the absence of the
Employee from his duties with the Company on a full-time basis
for one hundred eighty (180) consecutive days as a result of
incapacity due to physical or mental illness.
(e) Good Reason. During the Period of Employment,
"Good Reason" means:
(i) an adverse change in the status of the Employee
(other than any such change primarily attributable to the fact
that the Company may no longer be publicly owned) or position(s)
as an officer of the Company as in effect immediately prior to
the Change in Control or the assignment to the Employee of any
duties or responsibilities which, in his reasonable judgment, are
inconsistent with such status or position(s), or any removal of
the Employee from or any failure to reappoint or reelect him to
such position(s) (except in connection with the termination of
the Employee's employment for Cause, Disability, or upon
attaining age 65 or upon taking early retirement under any of the
Company's retirement plans, or as a result of death or by the
Employee other than for Good Reason);
(ii) a reduction by the Company after a Change in
Control in the Employee's Base Salary;
(iii) a material reduction after a Change in Control
in the Employee's total annual compensation; provided, however,
Page 5
<PAGE>
that for these purposes a reduction for any year of over 10% of
total compensation measured by the preceding year without a
substantially similar reduction to all other executives
participating in incentive compensation plans shall be considered
"material"; and the failure of the Company to adopt or renew a
stock option plan or to grant amounts of restricted stock or
stock options, which are consistent with the Company's prior
practices, to the Employee shall also be considered a material
reduction, unless the Employee participates in substitute
programs that provide substantially equivalent economic value to
the Employee;
(iv) the failure by the Company to continue in effect
any Benefit Plan (as hereinafter defined) in which Employee was
participating at the time of the Change in Control (or Benefit
Plans providing Employee with at least substantially similar
benefits) other than as a result of the normal expiration of any
such Benefit Plan in accordance with its terms as in effect at
the time of the Change in Control, or the taking of any action,
or the failure to act, by the Company which would adversely
affect Employee's continued participation in any such Benefit
Plans on at least as favorable a basis to Employee as was the
case immediately prior to the Change in Control or which would
materially reduce Employee's benefits in the future under any of
such Benefit Plans or deprive Employee of any material benefit
enjoyed by Employee immediately prior to the Change in Control;
Page 6
<PAGE>
(v) the failure by the Company after a Change in
Control to provide and credit Employee with the number of paid
vacation days to which Employee was then entitled in accordance
with the Company's normal vacation policy as in effect
immediately prior to the Change in Control; or
(vi) the Company's requiring the Employee after a
Change in Control to be based more than fifty miles from the
Employee's principal place of business immediately prior to the
Change in Control except for required travel on the Company's
business to an extent substantially consistent with the business
travel obligations which he undertook on behalf of the Company
prior to the Change in Control.
(f) Period of Employment. (i) "Period of Employment"
means, subject to the provisions of Section 2(f)(ii), the period
of thirty-six (36) months commencing on the date of a Change in
Control (as defined in Section 2(c) hereof) and the period of any
extension or extensions thereof in accordance with the terms of
this Section. The Period of Employment shall be extended
automatically by one week for each week in which the Employee's
employment continues after the date of a Change in Control.
(ii) Notwithstanding the provisions of Section 2(f)(i)
hereof, the Period of Employment shall terminate upon the
occurrence of the earliest of (A) the Employee's attainment of
age 65, or the election by the Employee to retire early from the
Company under any of its retirement plans, (B) the death of the
Employee, (C) the Disability of the Employee or (D) a termination
Page 7
<PAGE>
of Employee's employment by the Company for Cause or by the
Employee without Good Reason.
(g) Termination Date. "Termination Date" means the
date on which the Period of Employment terminates.
3. Duties During the Period of Employment. While
employed by the Company during the Period of Employment, the
Employee shall devote his full business time, attention, and best
efforts to the affairs of the Company and its subsidiaries;
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 prohibit 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.
4. Current Cash Compensation.
(a) Base Salary. The Company will pay to the Employee
while employed by the Company during the Period of Employment an
annual base salary ("Base Salary") in an amount determined by the
Board of Directors or its Compensation Committee which shall
never be less than the greater of (i) the Employee's Base Salary
prior to the commencement of the Period of Employment or (ii) his
Base Salary during the preceding year of the Period of
Employment; provided, however, that it is agreed between the
Page 8
<PAGE>
parties that the Company shall review annually the Employee's
Base Salary, and in light of such review may, in the discretion
of the Board of Directors or its Compensation Committee, increase
such Base Salary taking into account the Employee's responsi-
bilities, inflation in the cost of living, increase in salaries
of executives of other corporations, performance by the Employee,
and other pertinent factors. The Base Salary shall be paid in
substantially equal biweekly installments while Employee is
employed by the Company.
(b) Incentive Compensation. While employed by the
Company during the Period of Employment, the Employee shall
continue to participate in such of the Company's incentive
compensation programs for executives as the Employee participated
in prior to the commencement of the Period of Employment. Any
amount awarded to the Employee under such programs shall be paid
to Employee in accordance with the terms thereof.
5. Employee Benefits.
(a) Vacation and Sick Leave. The Employee shall be
entitled during the Period of Employment to a paid annual
vacation of not less than twenty (20) business days during each
calendar year while employed by the Company and to reasonable
sick leave.
(b) Regular Reimbursed Business Expenses. The Company
shall reimburse the Employee for all expenses and disbursements
reasonably incurred by the Employee in the performance of his
duties during the Period of Employment.
Page 9
<PAGE>
(c) Employment Benefit Plans or Arrangements. While
employed by the Company, Employee shall be entitled to
participate in all employee benefit plans, programs, or
arrangements ("Benefit Plans") of the Company, in accordance with
the terms thereof, as in effect from time to time, which provide
benefits to senior executives of the Company. For purposes of
this Agreement, Benefit Plans shall include, without limitation,
any compensation plan such as an incentive, deferred, stock
option or restricted stock plan, or any employee benefit plan
such as a thrift, pension, profit sharing, pre-tax savings,
medical, dental, disability, salary continuation, accident, life
insurance plan, or a relocation plan or policy, or any other
plan, program, or policy of the Company intended to benefit
employees.
6. Termination of Employment.
(a) Termination by the Company for Cause or
Termination by the Employee Other Than for Good Reason. If
during the Period of Employment the Company terminates the
employment of the Employee for Cause or if the Employee
terminates his employment other than for Good Reason the Company
shall pay the Employee (i) the Employee's Base Salary through the
end of the month in which the Termination Date occurs, (ii) any
incentive compensation payable to him pursuant to Section 4(b)
hereof, including a pro rata share for any partial year, (iii)
any accrued vacation pay, and (iv) benefits payable to him
pursuant to the Company's Benefit Plans as provided in
Page 10
<PAGE>
Section 5(c) hereof through the end of the month in which the
Termination Date occurs. The amounts and benefits set forth in
clauses (i), (ii), (iii) and (iv) of the preceding sentence shall
hereinafter be referred to as "Accrued Benefits."
(b) Termination by the Company Without Cause or by the
Employee for Good Reason. If during the Period of Employment the
Company terminates the Employee's employment with the Company
without Cause or the Employee terminates his employment with the
Company for Good Reason, the Company will pay to Employee all
Accrued Benefits and, in addition, pay or provide to the Employee
the following:
(i) within thirty (30) days after the date
of termination, a lump sum equal to the greater of
(A) the Employee's Cash Compensation for the
remainder of the Period of Employment or (B) two
times the Employee's Cash Compensation;
(ii) for the greater of two years or the
remainder of the Period of Employment immediately
following the Employee's date of termination, the
Employee and Employee's family shall continue to
participate in any Benefit Plans of the Company (as
defined in Section 5(c) hereof) in which Employee
or Employee's family participated at any time
during the one-year period ending on the day
immediately preceding Employee's termination of
employment, provided that (a) such continued
participation is
Page 11
<PAGE>
possible under the terms of such
Benefit Plans, and (b) the Employee continues to
pay contributions for such participation at the
rates paid for similar participation by active
Company employees in similar positions to that held
by the Employee immediately prior to the date of
termination. If such continued participation is
not possible, the Company shall provide, at its
sole cost and expense, substantially identical
benefits to the Employee plus pay an additional
amount to the Employee equal to the Employee's
liability for federal, state and local income taxes
on any amounts includible in the Employee's income
by virtue of the terms of this Section 6(b)(ii) so
that Employee does not have to personally pay any
federal, state and local income taxes by virtue of
the terms of this Section 6(b)(ii);
(iii) three additional years of service
credit under the Company's Non-Qualified Plans
and, for purposes of such plans, Employee's final
average pay shall be deemed to be his Cash
Compensation for the year in which the date of
termination occurs;
(iv) the Company shall take all reasonable
actions to cause any Company restricted stock
("Restricted Stock") granted to Employee to become
fully vested and any options to purchase Company
stock
Page 12
<PAGE>
("Options") granted to Employee to become
fully exercisable, and in the event the Company
cannot effect such vesting or acceleration within
sixty (60) days, the Company shall pay within
thirty (30) days thereafter to Employee (i) with
respect to each Option, an amount equal to the
product of (x) the number of unvested shares
subject to such Option, multiplied by (y) the
excess of the fair market value of a share of
Company common stock on the date of Employee's
termination of employment, over the per share
exercise price of such Option and (ii) with
respect to each unvested share of Restricted Stock
an amount equal to the fair market value of a
share of Company common stock on the date of
Employee's termination of employment.
Except as provided in the following sentence, the amounts payable
to the Employee under this Section 6(b) shall be absolutely owing
and shall not be subject to reduction or mitigation as a result
of employment of the Employee elsewhere after the date of
termination. Notwithstanding any provision herein to the
contrary, the benefits described in clauses (i), (ii) and (iii)
of this Section 6(b) shall only be payable with respect to the
period ending upon the earlier of (i) the end of the period
specified in each such clause or (ii) Employee's attainment of
age 65.
Page 13
<PAGE>
7. Gross-Up. In the event any amounts due to the
Employee under this Agreement after a Change in Control, under
the terms of any Benefit Plan, or otherwise payable by the
Company or an affiliate of the Company are subject to excise
taxes under Section 4999 of the Internal Revenue Code of 1986, as
amended ("Excise Taxes"), the Company shall pay to the Employee,
in addition to any other payments due under other provisions of
this Agreement, an amount equal to the amount of such Excise
Taxes plus the amount of any federal, state and local income or
other taxes and Excise Taxes attributable to all amounts,
including income taxes, payable under this Section 7, so that
after payment of all income, Excise and other taxes with respect
to the amounts due to the Employee under this Agreement, the
Employee will retain the same net after tax amount with respect
to such payments as if no Excise Taxes had been imposed.
8. Governing Law. This Agreement is governed by, and
is to be construed and enforced in accordance with, the laws of
the State of Connecticut. If under such laws any portion of this
Agreement is at any time deemed to be in conflict with any
applicable statute, rule, regulation, or ordinance, such portion
shall be deemed to be modified or altered to conform thereto or,
if that is not possible, to be omitted from this Agreement, and
the invalidity of any such portion shall not affect the force,
effect, and validity of the remaining portion hereof.
9. Notices. All notices under this Agreement shall be
in writing and shall be deemed effective when delivered in person
Page 14
<PAGE>
(in the Company's case, to its Secretary) or seventy-two (72)
hours after deposit thereof in the U.S. mail, postage prepaid,
for delivery as registered or certified mail -- addressed, in the
case of the Employee, to the Employee at Employee's residential
address, and in the case of the Company, to its corporate
headquarters, attention of the Secretary, or to such other
address as the Employee or the Company may designate in writing
at any time or from time to time to the other party. In lieu of
personal notice or notice by deposit in the U.S. mail, a party
may give notice by telegram, fax or telex.
10. Miscellaneous. This Agreement may be amended only
by a subsequent written agreement of the Employee and the
Company. This Agreement shall be binding upon and shall inure to
the benefit of the Employee, the Employee's heirs, executors,
administrators, beneficiaries, and assigns and to the benefit of
the Company and its successors. Notwithstanding anything in this
Agreement to the contrary, nothing herein shall prevent or
interfere with the ability of the Company to terminate the
employment of the Employee prior to a Change in Control nor be
construed to entitle Employee to be continued in employment prior
to a Change in Control and this Agreement shall terminate if
Employee or the Company terminates Employee's employment prior to
a Change in Control. Similarly, nothing herein shall prevent the
Employee from retiring under any of the Company's retirement
plans and receiving the corresponding benefits thereunder
consistent with the treatment of other Company employees.
Page 15
<PAGE>
11. Fees and Expenses. The Company shall pay all
reasonable legal fees and related expenses incurred by the
Employee in connection with this Agreement following a Change in
Control of the Company, including without limitation, all such
fees and expenses, if any, incurred in connection with:
(i) contesting or disputing, any termination of the Employee's
employment hereunder; or (ii) the Employee seeking to obtain or
enforce any right or benefit provided by the Agreement.
12. Arbitration. Any dispute or controversy arising
under or in connection with this Agreement shall be settled
exclusively by arbitration in Connecticut by three arbitrators in
accordance with the rules of the American Arbitration Association
then in effect. Judgment may be entered on the arbitrator's
award in any court having jurisdiction; provided, however, that
the Employee shall be entitled to be paid as if his or her
employment continued during the pendency of any dispute or
controversy arising under or in connection with this Agreement.
The Company shall bear all costs and expenses arising in
connection with any arbitration pursuant to this Section 12.
Page 16
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the year and day first above written.
THE PERKIN-ELMER CORPORATION
By: /s/ Tony L. White
Tony L. White
Chairman, President and
Chief Executive Officer
ATTEST:
By: /s/ W.B. Sawch
William B. Sawch
Vice President
General Counsel & Secretary
ACCEPTED AND AGREED:
/s/ Dennis L. Winger
Dennis L. Winger
Page 17
The Perkin-Elmer Corporation
Norwalk, Connecticut 06859
Michael J. McPartland
Vice President
Human Resources
June 24, 1997
Mr. Dennis Winger
2828 Jackson Street
San Francisco, CA 94115
Dear Dennis:
This will confirm our offer to you of a position as Senior
Vice President, Finance and Chief Financial Officer. At the
Board of Directors meeting, following your date of hire, it
will be recommended that you be elected a Senior Vice
President and Officer of the Corporation. In this position,
you will report to Tony L. White. Reporting to you will be
Ugo DeBlasi, Corporate Controller; John Ostaszewski,
Assistant Treasurer; John Ryan, Vice President, Tax; John
McBennett, Vice President, Audit; Charles Poole, Vice
President, Investor Relations; and John Hill, Vice
President, Information Technology.
The annual starting salary for the position is $375,000.
Your salary will be reviewed annually, beginning in August,
1998. In addition, you will be recommended to the
Management resources Committee of the Board as a participant
in our Contingent Compensation Program. As a member of the
program, you are eligible to earn a bonus award of 60% of
your salary for achieving target-level performance. In FY
98, you will participate with full share potential based on
Corporate performance.
As Chief Financial Officer, you will be eligible along with
the CEO for an annual cash flow related Restricted Stock
Award. Upon achieving target performance, that Award would
provide you with 1,500 shares of Perkin-Elmer stock. At 10%
over target performance, this increases to a maximum award
of 3,000 shares. Obviously at 90% of target performance,
there is no award. Details of this Award will be set forth
in a separate agreement.
<PAGE>
Mr. Dennis Winger
June 24, 1997
Page 2
We will recommend to the Board that you be granted a 50,000
share stock option at the Board meeting following your date
of hire. The option grant will be valued according to the
average market price of the stock on that day. Each year,
you will be eligible for a stock option grant. At current
guidelines used by the Board, this would be an annual grant
of 25,000 shares. Also, subject to Board approval, will be
the establishment of a change-of-control contract giving you
certain rights and salary payments if such a situation
arises. Details of these programs will be furnished in
separate letters after the Board meeting.
You will also be eligible to receive 30,000 performance
based options. These options will be equally divided in
5,000 share increments with performance targets of $80 / $87
/ $94 / $101 / $108 / $115. These shares vest when the
target price is achieved for a 90 day period. There is an
additional vesting requirement of three year active
employment which must be satisfied. Enclosed is a copy of
the briefing paper which we provided to the Board describing
this program.
In addition to the foregoing, the position offered to you
entitles you to an annual car allowance of $15,000,
financial planning and tax preparation assistance from a
provider of your choice and four weeks annual vacation. The
usual range of other benefits is also included. I have
enclosed a copy of our Employee Guidebook which outlines our
benefit programs.
As we discussed, we propose protecting your gain of
$1,270,000 in Chiron equity in the following manner:
- - A $250,000 cash payment at the time you join Perkin-
Elmer.
- - A separate grant of 15,000 Perkin-Elmer options with a
four year vesting period. If at the end of the four year
vesting period, the aggregate appreciation of the options
does not equal $1,000,000 (gross), the Company will provide
a cash bonus to ensure that you receive $1.0M in pre tax
gain. Obviously, if the aggregate appreciation of this
option grant exceeds $1.0M, you will forgo any further
payment.
<PAGE>
Mr. Dennis Winger
June 24, 1997
Page 3
In some instances, your awards will be made subject to
shareholder approval of the shares to support the grant. If
for some reason we fail to receive that approval, we would
be prepared to honor our commitments with cash payments.
Although Connecticut will be your principal residence, we
understand that you will maintain a residence in California.
In order to assist you in this living arrangement, we will
reimburse reasonable travel expenses for your wife to
accompany you between California and Connecticut.
Dennis, we hope that you will accept this offer and join
Perkin-Elmer. Speaking personally, I look forward to
working with you and offer you my full support and
cooperation in the fulfillment of your responsibilities.
The other members of the management team are also very
enthusiastic about the prospect of having you as a
colleague.
Please do not hesitate to call me at my office (203-761-
5451) or my home
(203-259-6012), if you have any questions.
Sincerely,
/s/ Michael J. McPartland
/jk
cc: T.L. White
<PAGE>
The Perkin-Elmer Corporation
Norwalk, Connecticut 068599
July 21, 1997
Amended August 11, 1997
Tony L. White
Chairman and President
Chief Executive Officer
Mr. Dennis Winger
2828 Jackson Avenue
San Francisco, CA 94115
Dear Dennis:
This will confirm our conversation of today. The following
additions and clarifications to your offer letter of June 24
will be applicable in the event of your determination for
any reason other than cause.
1. Regarding the 15,000 share option on page 2 (last ).
The one million dollars guarantee would vest 25% per year
for 4 years beginning with your first anniversary as a
Perkin-Elmer employee.
2. Should you be terminated for anything other than cause
within the first two years, you could expect two years of
base pay and continuation of health benefits. This
commitment will be extended annually, unless either party
gives six months' notice of intent not to renew.
3. Your initial payment of $250,000 will be earned and
paid after you have completed two weeks employment with the
company.
Dennis, we are delighted you have accepted this position and
we look forward to getting the start date finalized and
starting to work with you. My best to Barbara.
Sincerely,
/s/ Tony L. White
Tony L. White
DEFERRED COMPENSATION CONTRACT
AGREEMENT entered into as of July 15, 1993, between THE
PERKIN-ELMER CORPORATION, a New York corporation having its
principal place of business at Norwalk, Connecticut (hereinafter
referred to as the "Company") and William B. Sawch, of 146 Lyons
Plain Road, Weston, Connecticut 06883 (hereinafter referred to
as the "Employee").
WHEREAS, the Employee has rendered valuable service to the
Company, and it is regarded as essential by the Company that it
shall have the benefit of his services during future years, and
WHEREAS, it is the desire of the Company to assist the
Employee in providing for the contingencies of death and old age
dependency, and
WHEREAS, it appears desirable to provide for retirement at
an age prior to the current normal retirement age of 65 years in
appropriate cases so as to facilitate an orderly succession in
senior management positions of the Company.
NOW, THEREFORE, it is hereby mutually agreed as follows:
(1) Should the Employee still be in the employ of the
Company at age 65, the Company (beginning on a date to be
determined by the Company but within 6 months from the Employee's
retirement date) will pay him $25,000 each year for a continuous
period of 10 years. Payment of this amount shall be made in
quarterly installments on the first day of the fiscal quarters of
the Company.
<PAGE>
Should the Employee be in the employ of the Company at age
65 and thereafter die before the entire said 10 annual payments
have been paid, the unpaid balance of the 10 annual payments will
continue to be paid by the Company to that person designated by
the Employee in a written notice of election as the Employee's
beneficiary hereunder (hereinafter referred to as the
"Beneficiary"). The Employee may change such designation at any
time by giving the Company written notice of such intent; and
such change shall become effective only upon being received and
acknowledged by the Company.
If the Beneficiary shall die after receiving benefits under
this Agreement and further payments are payable, such further
payments shall be paid to the estate of the Beneficiary. If the
Employee shall survive the Beneficiary without designating
another Beneficiary, any payments hereunder shall be paid to the
estate of the Employee.
The Employee may elect in writing at any time prior to his
normal retirement date one of the following optional forms of
payment in lieu of the normal form of payment set forth above,
with the annual value of such optional form of payment being
actuarially reduced from such normal form of payment; provided,
however, that such optional forms of payment are not available to
an Employee in the event he dies or terminates his employment and
is covered by Paragraphs (2), (4), (5), or (6) of this Agreement:
page 2
<PAGE>
Option 1. Reduced annual payments payable during his life with
the provision that if he shall not survive a period of ten years,
such reduced annual payments shall continue to be paid after the
death of the Employee and during the remainder of such ten-year
period to the Beneficiary.
Option 2. Reduced annual payments payable during his life, with
the provision that after his death such reduced annual payments
shall continue during the life of, and shall be paid to the
Beneficiary (provided the Beneficiary survives the Employee).
Option 3. Reduced annual payments payable during his life, with
the provision that after his death annual payments equal to 50%
of such reduced annual payments shall continue during the life
of, and shall be paid to, the Beneficiary (provided the
Beneficiary survives the Employee).
Option 4. Reduced annual payments payable to the Employee during
his life.
Notwithstanding any contrary provisions herein, the Employee
may not change his Beneficiary in Options 2 and 3, above, after
the Employee has begun to receive payments hereunder.
(2) Should the Employee die before age 65 while in the
employ of the Company, the Company (beginning on a date to be
determined by the Company but within 6 months from the date of
death) will pay the Beneficiary $25,000 each year for a
continuous period of 10 years. Payment of this amount shall be
Page 3
<PAGE>
made in quarterly installments on the first day of the fiscal
quarters of the Company.
(3) If the Employee shall retire on or after age 60 and
before age 65, with the written consent or at the request of the
Company, payments will be made by the Company in the amount and
in the manner provided in Paragraph (1) to commence within 6
months of the date of retirement.
(4) Should the Employee's employment be terminated at
any time after the date hereof and prior to his attaining age 60,
with the written consent or by the act of the Company, the
Company will make payments in the manner provided in Paragraph
(1) to commence when the Employee attains age 60 or the date of
his prior death in an amount determined by multiplying the
benefit set forth in Paragraph (1) by a fraction, the numerator
of which shall be the number of whole months or major part
thereof from the date hereof to the date of termination of
employment, and the denominator of which shall be the number of
whole months or major part thereof from the date hereof to the
date he attains age 60.
(5) Unless the Company shall consent in writing, the
Employee, if his employment be terminated other than by death or
disability or as provided in Paragraphs (3) or (4) prior to his
attaining age 65, shall forfeit all right to benefits hereunder
and the Company shall have no liability for any payment to the
Page 4
<PAGE>
Employee or the Beneficiary.
Notwithstanding any other provision of this Agreement, if
within three years of a Change in Control the employment of the
Employee is terminated by the Employee for Good Reason or by the
Company without Cause, then the Company will pay Employee the
amount referred to in Paragraph (1) of this Agreement within 60
days of such termination of employment. For purposes hereof:
(a) A "Change in Control" shall have occurred if (i) any
"person" within the meaning of Section 14 (d) of the Securities
Exchange Act of 1934 becomes the "beneficial owner" as defined in
Rule 13d-3 thereunder, directly or indirectly, of more than 25%
of the Company's Common Stock, (ii) any "person" acquires by
proxy or otherwise, other than pursuant to solicitations by the
Incumbent Board (as hereinafter defined), the right to vote more
than 35% of the Company's Common Stock for the election of
directors, for any merger or consolidation of the Company or for
any other matter or question, (iii) during any two-year period,
individuals who constitute the Board of Directors of the Company
(the "Incumbent Board") as of the beginning of the period cease
for any reason to constitute at least a majority thereof,
provided that any person becoming a director during such period
whose election or nomination for election by the Company's
stockholders was approved by a vote of at least three-quarters
of the Incumbent Board (either by a specific vote or by approval
Page 5
<PAGE>
of the proxy statement of the Company in which such person is
named as a nominee for director without objection to such
nomination) shall be, for purposes of this clause (iii),
considered as though such person were a member of the Incumbent
Board, or (iv) the Company's Stockholders approve the sale of all
or substantially all of the assets of the Company.
(b) Termination by the Company of the employment of the
Employee for "Cause" shall mean termination upon (i) the willful
and continued failure by the Employee to perform substantially his
duties with the Company (other than any such failure resulting
from the Employee's incapacity due to physical or mental illness)
after a demand for substantial performance is delivered to the
employee by the Chairman of the Board or President of the Company
which specifically identifies the manner in which such executive
believes that the Employee has not substantially performed his
duties, or (ii) the willful engaging by the Employee in illegal
conduct which is materially and demonstrably injurious to the
Company. For purposes of this subparagraph (b), no act or failure
to act on the part of the Employee shall be considered "willful"
unless done, or omitted to be done, by the Employee in bad faith
and without reasonable belief that the Employee's action or
omission was in, or not opposed to, the best interests of the
Company. Any act, or failure to act, based upon authority given
pursuant to a resolution duly adopted by the Board or based upon
Page 6
<PAGE>
the advice of counsel for the Company shall conclusively presumed
to be done, or omitted to be done, by the Employee in good faith
and in the best interests of the Company. Notwithstanding the
foregoing, the Employee shall not be deemed to have been
terminated for Cause unless and until there shall have been
delivered to the Employee a copy of a resolution, duly adopted by
the affirmative vote of not less than three-quarters of the
entire membership of the Board at a meeting of the Board called
and held for that purpose (after reasonable notice to the
employee and an opportunity for him, together with his counsel,
to be heard before the Board), finding that in the good faith
opinion of the Board the Employee was guilty of the conduct set
forth in sections (i) or (ii) of this subparagraph (b) and
specifying the particulars thereof in detail.
(c) Termination by the employee of employment for "Good
Reason" shall mean termination based on:
(i) an adverse change in the status of the Employee (other
than any such change primary attributable to the fact that the
Company may no longer be publicly owned) or the Employee's
position(s) as an officer of the Company as in effect immediately
prior to the Change in Control, or the assignment to the Employee
of any duties or responsibilities which, in his reasonable
judgment, are inconsistent with such status or position(s), or
any removal of the Employee from, or any failure to reappoint
Page 7
<PAGE>
or reelect him to, such position(s) (except in connection with
the termination of the Employee's employment for Cause, total
disability, or retirement on or after attaining age 65 or as a
result of death or by the Employee other than for Good Reason);
(ii) a reduction by the Company in the Employee's base
salary as in effect immediately prior to the Change in Control;
(iii) a material reduction in the Employee's total annual
compensation; a reduction for any year of over 10% of total
compensation measured by the preceding year without a
substantially similar reduction to other executives shall be
considered "material"; provided, however, the failure of the
Company to adopt or renew a stock option plan or to grant stock
options to the Employee shall not be considered a reduction; and
(iv) the Company's requiring the employee to be more than
fifty miles from Norwalk, Connecticut, except for required travel
on the Company's business to an extent substantially consistent
with the business travel obligations which he undertook on behalf
of the Company prior to the Change in Control.
(6) In the event the Employee shall become disabled so that
he is unable to perform his duties as an employee and so that he
is entitled to benefits under a long range disability insurance
program made available by the Company, or so that he would have
been eligible for such benefits had he elected to insure himself
thereunder, the Company will make payments as provided in
Paragraph (1) above to commence at age 65.
Page 8
<PAGE>
In the event the Employee should die at any time after
becoming disabled and before attaining age 65, payments as
provided in this Paragraph (6) will be made to the Beneficiary
commencing as of the date of the Employee's death.
(7) The Company has or may procure a policy or policies of
life insurance upon the life of the Employee to aid it in meeting
its obligations under this Agreement. It is understood, however,
that such policy or policies held by the Company and the proceeds
therefrom shall be treated as the general assets of the Company;
that they shall in no way represent any vested, secured, or
preferred interest of the Employee or his beneficiaries under
this Agreement; and that the Company shall be under no obligation
either to procure or to continue life insurance in force upon the
life of the Employee.
The employee hereby agrees that he already has or will
submit to a physical examination and answer truthfully and
completely without mental reservation or concealment any question
or request for information by any insurance company in connection
with the issuance of any policy procured by the Company under
this Paragraph. (7). In the event the Employee fails to do soor
in the event the Employee dies by suicide, and the liability of
the insurer under such policy is restricted as a result of such
failure or suicide, then the Company shall thereby be released
from all of its obligations under Paragraph (2) above.
Page 9
<PAGE>
(8) If the Company shall procure any policy or policies of
life insurance in accordance with Paragraph (7) above and shall
have the option of including in any such policy an accidental
death or so-called "double indemnity" provision, the Company will
so advise the Employee and, if the Employee requests and agrees
to pay any additional premium resulting therefrom, will include
in the policy such accidental death or double indemnity
provisions as may be available and will further provide or cause
to be provided that any benefit payable under or by reason of
such provisions shall be paid as a death benefit to the
beneficiary designated by the Employee hereunder; provided that
in the event the Employee shall cease to pay such additional
premium the Company may cancel any accidental death or double
indemnity provision; and further provided that the inclusion of
such a provision shall in no way affect the Company's right to
cancel or otherwise dispose of the policy, even though such
action may have the effect of terminating such provision.
(9) If during a period of 10 years from the termination of
his employment with the Company the Employee shall: engage in a
business competitive with any business activity engaged in by the
Company at any time while he was employed; enter into the service
of any organization so engaged in such business (or any
subsidiary or affiliate of such an organization); or personally
engage in or enter the service of any organization that is
Page 10
<PAGE>
engaged in consulting work or research or development or
engineering activities for any organization so engaged in
such business (or any subsidiary or affiliate of such an
organization), then any liability of the Company to make any
further payments hereunder shall cease. The investment of funds
by the Employee in securities of a corporation listed on a
recognized stock exchange shall not be considered to be a breach
of this Paragraph.
(10) The Company may in its sole discretion grant the
Employee a leave of absence for a period not to exceed one year
during which time the Employee will be considered to be still in
the employ of the Company for the purposes of this Agreement.
(11) The Company in its sole discretion and without the
consent of the Employee, his estate, his beneficiaries, or any
other person claiming through or under him, may commute any
payments which are due hereunder at the rate of 4% per annum to a
lump sum and pay such lump sum to the Employee or to the
beneficiary or beneficiaries entitled to receive payment at the
date of commutation, and such payment shall be a full discharge
of the Company's liabilities hereunder. The Company may also in
its sole discretion and without the consent of any other person
accelerate the payment of any of the sums payable hereunder.
(12) The right to receive payments under this Agreement
shall not be assignable or subject to anticipation, nor shall
Page 11
<PAGE>
such right be subject to garnishment, attachment, or any other
legal process of creditors of the Employee or of any person or
persons designated as beneficiaries hereunder except to the
extent that this provision may be contrary to law.
(13) This Agreement creates no rights in the Employee to
continue in the employ of the Company for any length of time nor
does it create any rights in the Employee or obligations on the
part of the Company other than those set forth herein.
(14) If the Company, or any corporation surviving or
resulting from any merger or consolidation to which the Company
may be a party or to which substantially all the assets of the
Company shall be sold or otherwise transferred, shall at any time
be merged or consolidated with or into any other corporation or
corporations or shall otherwise transfer substantially all its
assets to another corporation, the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of the
corporation surviving or resulting from such merger or
consolidation or to which such assets shall be so sold or
otherwise transferred. Except as herein provided, this Agreement
shall not be assignable by the Company or the Employee.
This Agreement is solely between the Company and the
Employee. The Employee and his beneficiaries shall have recourse
only against the Company for enforcement, and the Agreement shall
be binding upon the beneficiaries, heirs, executors, and
administrators of the Employee and upon the successors and
assigns of the Company.
Page 12
<PAGE>
This Agreement has been made, executed, and delivered in the
State of Connecticut; and shall be governed in accordance with
the laws thereof.
IN WITNESS WHEREOF, the parties hereto have set their hands
and affixed the seal of the Corporation as of the date first
written above.
THE PERKIN-ELMER CORPORATION
By: /s/ Gaynor N. Kelley
Gaynor N. Kelley
Chairman and Chief Executive
Officer
ATTEST: /s/ Charles J. Heinzer
By:
ACCEPTED AND AGREED:
By /s/ W.B. Sawch
(B)
kec/208/1
Page 13
<PAGE>
I hereby designate the estate of Wm B. Sawch
, my , as beneficiary under my Deferred
Compensation Contract between The Perkin-Elmer Corporation and
myself.
/s/ W.B. Sawch
8/4/93
Date
SELECTED FINANCIAL DATA The Perkin-Elmer Corporation
<TABLE>
<CAPTION>
(Dollar amounts in thousands except per share amounts)
For the years ended June 30, 1998 1997 1996 1995 1994
Financial Operations <C> <C> <C> <C> <C>
Net revenues $ 1,531,165 $ 1,373,282 $ 1,248,967 $ 1,152,935 $ 1,070,522
Income from operations before special items 127,133 116,602 77,995 63,548 54,647
Per diluted share of common stock 2.53 2.33 1.67 1.40 1.15
Special items, net of taxes (70,745) 13,796 (114,518) (17,241) (14,681)
Income (loss) from continuing operations 56,388 130,398 (36,523) 46,307 39,966
Per share of common stock
Basic 1.16 2.74 (.80) 1.04 .87
Diluted 1.12 2.63 (.80) 1.02 .84
Discontinued operations (22,851)
Net income (loss) 56,388 130,398 (36,523) 46,307 17,115
Per share of common stock
Basic 1.16 2.74 (.80) 1.04 .37
Diluted 1.12 2.63 (.80) 1.02 .36
Dividends per share .68 .68 .68 .68 .68
Other information
Cash and short-term investments $ 84,091 $ 217,222 $ 121,145 $ 103,826 $ 50,605
Working capital 287,991 354,741 229,639 256,607 171,068
Capital expenditures 116,708 69,822 44,309 50,191 46,588
Total assets 1,334,474 1,238,749 1,062,979 1,027,051 1,021,746
Long-term debt 33,726 59,152 33,694 64,524 61,500
Total debt 45,825 89,068 89,801 123,224 145,052
Shareholders' equity 564,248 504,270 373,727 369,807 364,123
</TABLE>
Results for fiscal 1998, 1997, 1996, and 1995 included net before-
tax restructuring and other merger costs of $48.1 million, $13.0
million, $89.1 million, and $38.5 million, respectively, and before-
tax gains related to investments of $1.6 million, $64.9 million,
$11.7 million, and $20.8 million, respectively. Other special items
affecting comparability included acquired research and development
charges of $28.9 million, $26.8 million, $33.9 million, and $14.7
million for fiscal 1998, 1997, 1996,and 1994, respectively; before-tax
charges for the impairment of assets of $7.5 million and $9.9 million
for fiscal 1997 and 1996, respectively; and a $22.9 million charge for
discontinued operations in fiscal 1994.
Page 29
<PAGE>
Management's Discussion and Analysis
Management's Discussion of Operations
The following discussion should be read in conjunction with the
consolidated financial statements and related notes included on pages
39 through 61. Historical results and percentage relationships are
not necessarily indicative of operating results for any future
periods.
Events Impacting Comparability
Acquisitions and Investments. On January 22, 1998, The Perkin-Elmer
Corporation (the Company) acquired PerSeptive Biosystems, Inc.
(PerSeptive). The acquisition has been accounted for as a pooling of
interests and, accordingly, the Company's financial results have been
restated to include the combined operations.
The Company acquired Molecular Informatics, Inc. (Molecular
Informatics) and a 14.5% interest, and approximately 52% of the voting
rights, in Tecan AG (Tecan) during the second quarter of fiscal 1998,
and GenScope, Inc. (GenScope) during the third quarter of fiscal 1997.
The results of operations for the above acquisitions, each of which
was accounted for as a purchase, have been included in the
consolidated financial statements since the date of each respective
acquisition. A discussion of the Company's significant acquisitions
and investments is provided in Note 2.
Restructuring and Other Merger Costs. During fiscal 1998, the Company
recorded $48.1 million of before-tax charges, or $.87 per diluted
share after-tax, for restructuring and other merger costs to integrate
PerSeptive into the Company. The charge included $4.1 million of
inventory-related write-offs, recorded in cost of sales, associated
with the rationalization of certain product lines. The objectives of
the integration plan are to lower PerSeptive's cost structure by
reducing excess manufacturing capacity, achieve broader worldwide
distribution of PerSeptive's products, and combine sales, marketing,
and administrative functions.
In fiscal 1997 and 1996, the Company implemented restructuring
actions primarily targeted to improve the profitability and cash flow
performance of the Analytical Instruments Division (Analytical
Instruments). The fiscal 1997 plan focused on the transition from a
highly vertical manufacturing operation to one that relies more on
outsourcing functions not considered core competencies. The fiscal
1996 plan was a broad program designed to reduce administrative and
manufacturing overhead and improve operating efficiency, primarily in
Europe and the United States. The before-tax charges associated with
the implementation of these actions were $24.2 million, or $.31 per
diluted share after-tax, in fiscal 1997, and $71.6 million, or $1.35
per diluted share after-tax, in fiscal 1996. Fiscal 1997 also
reflected an $11.2 million before-tax, or $.13 per diluted share after-
tax, reduction of charges associated with the fiscal 1996 plan.
Also in fiscal 1996, a before-tax charge of $17.5 million, or $.38
per diluted share after-tax, was recorded by PerSeptive for
restructuring actions and other related costs. A complete discussion
of the Company's restructuring programs is provided in Note 10.
Acquired Research and Development. During fiscal 1998, 1997, and
1996, the Company recorded charges for purchased in-process research
and development in connection with certain acquisitions for the PE
Biosystems Division (PE Biosystems). The charges recorded in fiscal
1998, 1997, and 1996 were $28.9 million, $26.8 million, and $33.9
million, or $.57, $.54, and $.72 per diluted share after-tax,
respectively (see Note 2).
Impairment of Assets. Cost of sales for fiscal 1997 included $7.5
million, or $.13 per diluted share after-tax, for the write-down of
goodwill and other assets. The fiscal 1997 charge, as a result of
adopting 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," included $5.6 million to write-down
goodwill associated with the fiscal 1995 acquisition of Photovac Inc.
and $1.9 million of other assets associated primarily with Analytical
Instruments. In fiscal 1996, the Company recorded a before-tax cost
of sales charge of $9.9 million, or $.21 per diluted share after-tax,
for the impairment of certain production assets associated with the
realignment of the product offerings of PerSeptive (see Note 1).
Gain on Investments. Fiscal 1998, 1997, and 1996 included before-tax
gains of $1.6 million, $64.9 million, and $11.7 million, respectively,
related to the sale and release of contingencies on minority equity
investments. The fiscal 1998, 1997, and 1996 after-tax gains per
diluted share were $.03, $1.15, and $.19, respectively (see Note 2).
Results of Operations - 1998 Compared with 1997
The Company reported net income of $56.4 million, or $1.12 per diluted
share, for fiscal 1998, compared with net income of $130.4 million, or
$2.63 per diluted share, for fiscal 1997. On a comparable basis,
excluding the special items previously described, net income increased
9.0% to $127.1 million for fiscal 1998 compared with $116.6 million
for fiscal 1997, and earnings per diluted share increased 8.6% to
$2.53 for fiscal 1998 from $2.33 for fiscal 1997. Excluding the
effects of currency translation and special items, earnings per
diluted share would have increased approximately 25% compared with the
prior year.
Net revenues were $1,531.2 million for fiscal 1998, compared with
$1,373.3 million for fiscal 1997, an increase of 11.5%. Excluding
Tecan, revenues increased 7.8% compared with the prior year. The
effects of currency translation decreased net revenues by
approximately $68 million, or 5%, compared with the prior year, as the
U.S. dollar strengthened against most European and Far Eastern
currencies. Geographically, the Company reported revenue growth in
all regions compared with the prior year. The United States
reported the strongest growth with revenues increasing 22.3%,
or 18.6% excluding Tecan, benefiting from growth in both the
PE Biosystems and Analytical Instruments business segments.
Revenues increased 5.4% in Europe, 1% in the Far East, and 14.9%
in other markets, specifically Latin America, where revenues
Page 30
<PAGE>
increased 36% compared with the prior year. Excluding Tecan, revenues
remained essentially unchanged in Europe and the Far East compared
with the prior year. Before the effects of currency translation and
excluding Tecan, revenues would have increased approximately 8% in
Europe, 9% in the Far East, and 19% in other markets. Growth in the
Far East market was adversely affected by the economic turmoil in
the Pacific Rim and the weakening of the Japanese Yen.
Net revenues by business segment
(Dollar amounts in millions) 1998 1997
PE Biosystems $ 921.8 $ 749.2
Analytical Instruments 609.4 624.1
$ 1,531.2 $ 1,373.3
On a business segment basis, net revenues of PE Biosystems, the
Company's life science division, which includes PE Applied Biosystems,
PerSeptive, Molecular Informatics, Tropix, GenScope, and Tecan,
increased 23.0% to $921.8 million for fiscal 1998 compared with $749.2
million for the prior year. Excluding Tecan, revenues increased 16.3%
over the prior year. The negative effects of a strong U.S. dollar
reduced the division's revenues by approximately $33 million, or 4%.
On a worldwide basis, excluding Tecan and the effects of currency
translation, revenues would have increased approximately 21% compared
with the prior year. Increased demand for genetic analysis, liquid
chromatography/mass spectrometry (LC/MS), and polymerase chain
reaction (PCR) product lines was the primary contributor. All
geographic markets reported increased revenues over the prior year.
Excluding Tecan, net revenues in the United States, Europe, and the
Far East increased 25.3%, 10.2%, and 4.5%, respectively. Before the
effects of currency translation, and excluding Tecan, revenues in
Europe and the Far East would have increased approximately 18% and
14%, respectively, compared with the prior year. The Company believes
slower Japanese government funding in the second half of fiscal 1998
and the lack of a supplemental budget, which added to fiscal 1997
revenues, contributed to a lower growth rate of only 3% in the
Japanese market.
Net revenues for Analytical Instruments were $609.4 million for
fiscal 1998 compared with $624.1 million for the prior year, a
decrease of 2.4%. The effects of currency translation decreased net
revenues by approximately $35 million, or 6%. Excluding currency
effects, revenues would have increased approximately 3%. Increased
revenues of chromatography products, primarily data handling and LIMS
(Laboratory Information Management Systems), were more than offset by
lower demand for organic and inorganic products. Geographically,
revenues in the United States and other markets increased 6.5% and
10.1%, respectively. Revenues in Latin America, included in other
markets, increased 25% compared with the prior year. Revenues in
Europe and the Far East decreased 7.5% and 9.6%, respectively;
however, excluding the effects of currency translation, revenues in
the Europe and the Far East remained essentially unchanged compared
with fiscal 1997.
Gross margin as a percentage of net revenues was 50.9% for fiscal
1998 compared with 49.5% for fiscal 1997. Fiscal 1998 gross margin
included $4.1 million of inventory-related write-offs associated with
the rationalization of certain product lines in connection with the
acquisition of PerSeptive, and fiscal 1997 included a charge of $7.5
million for the impairment of assets associated primarily with
Analytical Instruments. Excluding the special items, fiscal 1998
gross margin increased to 51.2% of revenues compared with 50.1% for
fiscal 1997. Benefits realized by PE Biosystems from the sale of
higher-margin genetic analysis products, increased royalty revenues in
the United States, and cost savings resulting from Analytical
Instruments' restructuring actions more than offset the negative
effects of currency translation.
Selling, general, and administrative (SG&A) expenses were $459.6
million for fiscal 1998 compared with $416.3 million for the prior
year. The 10.4% increase in expenses, or 6.7% excluding Tecan, was
due to higher planned worldwide selling and marketing expenses for PE
Biosystems, commensurate with the substantially higher revenue and
order growth. Before the effects of currency translation and Tecan,
SG&A expenses increased 10.6% compared with the prior year. SG&A
expenses for Analytical Instruments decreased 3.3% compared with the
prior year, primarily because of lower expenses in Europe resulting in
part from the restructuring plans. As a percentage of net revenues,
SG&A expenses for the Company remained essentially unchanged from the
prior year at 30%.
Research, development, and engineering (R&D) expenses of $152.2
million increased 25.9% over the prior year, or 21.2% excluding Tecan.
R&D spending in PE Biosystems increased 37.0%, or 29.8% excluding
Tecan, over the prior year as the Company continued its product
development efforts and preparation for new product launches in this
segment. The division's spending accounted for 71% of the Company's
R&D expenses. R&D expenses for Analytical Instruments remained
essentially unchanged compared with the prior year. As a percentage
of net revenues, the Company's R&D expenses increased to 9.9% compared
with 8.8% for the prior year.
During fiscal 1998, the Company recorded $48.1 million of charges
for restructuring and other merger costs to integrate PerSeptive into
the Company following the acquisition (see Note 10). The objectives
of the integration plan are to lower PerSeptive's cost structure by
reducing excess manufacturing capacity, achieve broader worldwide
distribution of PerSeptive's products, and combine sales, marketing,
and administrative functions. The charge included: $33.9 million for
restructuring the combined operations; $8.6 million for transaction
costs; and $4.1 million of inventory-related write-offs, recorded in
cost of sales, associated with the rationalization of certain product
lines. Additional non-recurring acquisition costs of $1.5 million
for training, relocation, and communication costs were recognized
as period expenses in the third and fourth quarters and were
classified as other merger-related costs. The
Page 31
<PAGE>
Company expects to incur an additional $6.5 million to $8.5 million
of acquisition-related costs for training, relocation, and
communication in fiscal 1999. These costs will be recognized as period
expenses when incurred and will be classified as other merger costs.
The $33.9 million restructuring charge includes $13.8 million
severance-related costs and workforce reductions of approximately 170
employees, consisting of 114 employees in production labor and 56
employees in sales and administrative support. The remaining $20.1
million represents facility consolidation and asset-related write-offs
and includes: $11.7 million for contract and lease terminations and
facility related expenses in connection with the reduction of excess
manufacturing capacity; $3.2 million for dealer termination payments,
sales office consolidations, and consolidation of sales and
administrative support functions; and $5.2 million for the write-off
of certain tangible and intangible assets and the termination of
certain contractual obligations. These restructuring actions are
expected to be substantially completed by the end of fiscal 1999.
Transaction costs of $8.6 million include acquisition-related
investment banking and professional fees. As of June 30, 1998,
approximately 12 employees were separated under the plan and the
actions are proceeding as planned.
The restructuring plan actions announced in the fourth quarter of
fiscal 1997 have been proceeding as planned. These actions focused on
the transition of Analytical Instruments from a highly vertical
manufacturing operation to one that relies more on outsourcing
functions not considered core competencies. The plan also included
actions to finalize consolidation of sales and administrative support,
primarily in Europe (see Note 10). For the year ended June 30, 1998,
the Company achieved approximately $9 million in before-tax savings
attributable to this plan, and expects to achieve approximately $19
million in succeeding fiscal years.
Fiscal 1998 included $28.9 million of purchased in-process research
and development associated with the acquisition of Molecular
Informatics. In fiscal 1997, the Company recorded a charge of $26.8
million primarily for in-process research and development related to
the acquisition of GenScope.
Operating income decreased to $94.5 million for fiscal 1998 compared
with $103.0 million for the prior year. Excluding special items,
operating income increased 14.1% to $171.4 million for fiscal 1998
compared with $150.3 million for fiscal 1997. Excluding Tecan and
special items, operating income increased by 9% compared with the
prior year. On a comparable basis excluding special items, Tecan, and
the effects of currency translation, operating income would have
increased 26% compared with the prior year. The effects of currency
translation decreased operating income by approximately $25 million
compared with the prior year. A combination of revenue growth in PE
Biosystems and reduced expense levels, contributed to the improvement.
Operating income by business segment
PE Analytical
(Dollar amounts in millions) Biosystems Instruments
1998
Segment income $ 150.8 $ 57.4
Restructuring and other merger costs (48.1)
Acquired R&D (28.9)
Operating income $ 73.8 $ 57.4
1997
Segment income $ 125.4 $ 56.1
Restructuring (13.0)
Acquired R&D (26.8)
Impairment of assets (.7) (6.8)
Operating income $ 97.9 $ 36.3
Operating income for PE Biosystems decreased to $73.8 million for
fiscal 1998 compared with $97.9 million for fiscal 1997. Excluding
the special charges for restructuring and other merger costs, acquired
research and development, and the impairment of assets, operating
income increased $25.4 million, or 20.3%, primarily as a result of
increased volume and improved margins. Excluding Tecan, operating
income increased 14.5% compared with the prior year. Before the
effects of currency translation and excluding Tecan, fiscal 1998
operating income increased 28.1% compared with the prior year.
Geographically, fiscal 1998 segment income increased 39% in the United
States, 20% in the Far East, and 17% in Europe compared with fiscal
1997. A 23.5% increase in operating income from higher-margin
sequencing and mapping systems was the primary contributor. Excluding
the effects of currency translation, segment income would have
increased approximately 34%. As a percentage of net revenues, segment
income, before special items, remained essentially unchanged compared
with the prior year.
Operating income for Analytical Instruments increased to $57.4
million for fiscal 1998 compared with $36.3 million for fiscal 1997.
Operating income for the division, excluding the fiscal 1997 charges
for restructuring costs and impairment of assets, increased by 2.3%
compared with the prior year. Lower expense levels resulting from
cost control and the actions of the restructuring programs were
essentially offset by lower sales volume. Excluding currency effects,
segment income would have increased approximately 17%. As a
percentage of net revenues, segment income before special items
increased to 9.4% for fiscal 1998 from 9.0% for fiscal 1997.
In fiscal 1998 and 1997, the Company recorded gains of $1.6 million
and $64.9 million, respectively, on the sale and release of
contingencies on minority equity investments (see Note 2).
Interest expense was $4.9 million for fiscal 1998 compared with $5.9
million for the prior year. This decrease was primarily due to
the refinancing of PerSeptive's 8 - 1/4% Convertible Subordinated
Page 32
<PAGE>
Notes (the PerSeptive Notes) together with slightly lower outstanding
debt balances and lower average interest rates. Interest income was
$5.9 million for fiscal 1998 compared with $8.8 million for the prior
year, primarily because of lower cash balances resulting from the use
of cash to fund the Company's continued investments and acquisitions
in the life sciences segment, as well as from lower interest rates.
Other income, net for fiscal 1998 of $3.5 million, primarily related
to the sale of certain operating and non-operating assets, compared
with other income, net of $1.8 million for the prior year.
The Company's effective tax rate was 38.4% for fiscal 1998 and 24.5%
for fiscal 1997. Excluding Tecan in fiscal 1998, and special items in
fiscal 1998 and fiscal 1997, the effective income tax rate was 25% for
fiscal 1998 compared with 21% for fiscal 1997. The rate for fiscal
1997 was favorably impacted by PerSeptive's utilization of loss
carryforwards. An analysis of the differences between the federal
statutory income tax rate and the effective rate is provided in Note
4.
Minority interest expense of $5.6 million was recognized in fiscal
1998 relating to the Company's 14.5% financial interest in Tecan (see
Note 2).
Results of Operations - 1997 Compared with 1996
The Company reported net income of $130.4 million, or $2.63 per
diluted share, for fiscal 1997 compared with a net loss of $36.5
million, or $.80 per diluted share, for fiscal 1996. On a comparable
basis, excluding the special items previously described, net income
and earnings per diluted share increased 49.5% and 39.5%,
respectively.
Net revenues for fiscal 1997 were $1,373.3 million, an increase of
10% over the $1,249.0 million reported for fiscal 1996. The effects
of currency rate movements decreased net revenues by approximately $45
million, or 4%, as the U.S. dollar strengthened against the Japanese
Yen and certain European currencies.
All geographic markets experienced revenue growth for fiscal 1997.
Net revenues in the United States increased 13.4% over the prior year,
benefiting from growth in both PE Biosystems and Analytical
Instruments. Net revenues in Europe and the Far East increased 8.6%
and 8.2%, respectively, as higher revenues from PE Biosystems were
partially offset by decreases in Analytical Instruments revenues. In
Europe, a 26.3% increase in revenues from PE Biosystems was partially
offset by a 2.3% decline in Analytical Instruments' revenues. In the
Far East, a 16.3% increase in PE Biosystems revenues was partially
offset by a 2.3% decrease in Analytical Instruments' revenues.
Excluding currency effects, total revenues in Europe and the Far East
would have increased approximately 13% and 18%, respectively.
Net revenues by business segment
(Dollar amounts in millions) 1997 1996
PE Biosystems $ 749.2 $ 618.4
Analytical Instruments 624.1 630.6
$ 1,373.3 $ 1,249.0
Including currency effects, which reduced reported revenues by
approximately $25 million, or 4%, net revenues of PE Biosystems
increased 21.2% over fiscal 1996. Net revenues in the United States,
Europe, and the Far East increased 20.7%, 26.3%, and 16.3%,
respectively. Increased demand for genetic analysis, LC/MS, and the
PCR product lines was the primary contributor.
Analytical Instruments experienced a 1% decline in net revenues
compared with the prior year. Currency rate movements reduced
revenues by approximately $20 million, or 3%. While revenues in the
United States increased 2.5%, this was offset by a decrease of 2.3% in
both Europe and the Far East. Excluding the effects of currency
translation, revenues in Europe and the Far East would have increased
approximately 2% and 4%, respectively.
Gross margin as a percentage of net revenues was 49.5% for fiscal
1997 compared with 47.7% for fiscal 1996. Excluding the $7.5 million
and $9.9 million charges for impaired assets, recorded in cost of
sales, for fiscal 1997 and 1996, respectively, gross margin was 50.1%
compared with 48.5%. Both divisions experienced improved gross margin
for fiscal 1997. PE Biosystems' improvement was the result of the
overall unit volume increase and product mix. The benefits realized
from the fiscal 1996 restructuring plan, combined with a more
favorable product mix, contributed to an improved gross margin for
Analytical Instruments.
SG&A expenses were $416.3 million for fiscal 1997 compared with
$380.4 million for fiscal 1996, an increase of 9.4%. Lower expense
levels resulting from cost controls and the actions of the
restructuring programs in Analytical Instruments were more than
offset by increased expenses of 20.5% in PE Biosystems and costs for
the Company's restricted stock and performance-based compensation
programs, including a long-term divisional plan that was effective for
fiscal 1997. The total expense for the restricted stock, performance-
based programs, and long-term division plan was $26.3 million and
$11.8 million for fiscal 1997 and 1996, respectively. As a percentage
of net revenues, SG&A expenses for the Company remained essentially
unchanged at approximately 30% for both fiscal 1997 and fiscal 1996.
R&D expenses were $120.9 million for fiscal 1997 compared with
$113.7 million for fiscal 1996. R&D spending in PE Biosystems
increased 29.2% over the prior year as the Company continued its
product development efforts for the bioresearch markets. In fiscal
1997, Analytical Instruments recorded a 20.9% decrease in R&D
Page 33
<PAGE>
expenditures, which reflected the objectives of restructuring actions
and product line reviews.
Operating income for fiscal 1997 was $103.0 million compared with an
operating loss of $21.5 million for fiscal 1996. Fiscal 1997 and 1996
included charges of $26.8 million and $33.9 million, respectively, for
acquired research and development related to acquisitions for PE
Biosystems. Fiscal 1997 and 1996 also included charges for
restructuring of $13.0 million and $89.1 million, respectively. On a
comparable basis, excluding special items in both years, operating
income increased 34.9% compared with the prior year.
During the fourth quarter of fiscal 1997, the Company announced a
follow-on phase to Analytical Instruments' profit improvement program.
The restructuring cost for this action was $24.2 million 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 were designed to transition
Analytical Instruments from a highly vertical manufacturing operation
to one that relies more 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 were closed.
The workforce reductions under this action totaled 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 the functions to be
outsourced.
The fiscal 1996 restructuring charge included $71.6 million for the
first phase of Analytical Instruments' profit improvement plan. In
connection with the program, 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 included $37.8 million for
worldwide workforce reductions of approximately 390 positions in
manufacturing, sales and support, and administrative functions. The
charge also included $33.8 million for facility consolidation costs
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 this program. The costs
to implement the program were $11.2 million less than 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 program.
Fiscal 1996 also included a restructuring charge of $17.5 million
for restructuring actions and other related costs associated with
PerSeptive.
Operating income (loss) by business segment
PE Analytical
(Dollar amounts in millions) Biosystems Instruments
1997
Segment income $ 125.4 $ 56.1
Restructuring (13.0)
Acquired R&D (26.8)
Impairment of assets (.7) (6.8)
Operating income $ 97.9 $ 36.3
1996
Segment income $ 107.2 $ 28.7
Restructuring (17.5) (71.6)
Acquired R&D (33.9)
Impairment of assets (9.9)
Operating income (loss) $ 45.9 $ (42.9)
Operating income for PE Biosystems, excluding special items,
increased $18.2 million, or 17.0%, as a result of increased volume and
improved margin. All geographic markets contributed to the improved
segment income. An increase in operating income from high-margin
sequencing systems was the primary contributor. The strongest growth
was in Europe, where fiscal 1997 segment income increased 33% compared
with fiscal 1996. Excluding currency translation effects, segment
income would have increased approximately 27%. As a percentage of net
revenues, segment income decreased to 16.7% for fiscal 1997 from 17.3%
for fiscal 1996.
Operating income for Analytical Instruments, excluding the charges
for restructuring and impairment of assets, increased to $56.1 million
for fiscal 1997 from $28.7 million for fiscal 1996. As a percentage
of net revenues, segment income increased to 9.0% for fiscal 1997 from
4.6% for fiscal 1996. The cost savings realized from the
restructuring actions and cost controls were the primary reasons for
the improvement. Compared with the prior year, operating income in
Europe decreased 2.9% resulting primarily from the effects of a
stronger U.S. dollar and was more than offset by improvements in other
geographic areas, primarily the United States.
In fiscal 1997 and 1996, the Company recorded before-tax gains of
$64.9 million and $11.7 million, respectively, on the sale and release
of contingencies on minority equity investments.
Interest expense was $5.9 million for fiscal 1997 compared with $8.4
million for fiscal 1996. Lower average borrowing levels for fiscal
1997 and lower weighted average interest rates on short-term debt
accounted for the reduction in interest costs. As a result of
maintaining higher cash and cash equivalent balances, interest income
increased by $3.5 million to $8.8 million for fiscal 1997.
Other income, net was $1.8 million for fiscal 1997 compared with
other expense, net of $2.1 million for fiscal 1996. The fiscal 1997
amount consisted primarily of a fourth quarter gain on the sale of
real estate.
The effective income tax rate for fiscal 1997 was 24.5%. Fiscal
1996 incurred a provision of $21.6 million on a before-tax
Page 34
<PAGE>
loss of $15.0 million. Both years were impacted by special items. The
charges for acquired research and development were not deductible for
tax purposes. Additionally, the fiscal 1996 charge for restructuring
and the fiscal 1997 charge for impairment of assets were only
partially deductible, and no tax benefit was recognized for
PerSeptive's fiscal 1996 net operating loss, which resulted in a
significant increase in the tax rate for the fiscal year.
In the fourth quarter of fiscal 1997, the Company reduced its
deferred tax valuation allowance, resulting in the recognition of a
$50.0 million deferred tax benefit. The benefit resulting from the
valuation allowance release was substantially offset by a fourth
quarter accrual for tax costs related to gains on foreign
reorganizations.
Market Risk
The Company operates internationally, with manufacturing and
distribution facilities in various countries throughout the world.
The Company derived approximately 57% of its revenues from countries
outside of the United States for fiscal 1998. Results continue to be
affected by market risk, including fluctuations in foreign currency
exchange rates and changes in economic conditions in foreign markets.
The Company's risk management strategy utilizes derivative financial
instruments, including forwards, swaps, purchased options, and
synthetic forward contracts to hedge certain foreign currency and
interest rate exposures, with the intent of offsetting losses and
gains that occur on the underlying exposures with gains and losses on
the derivatives. The Company does not use derivative financial
instruments for trading or other speculative purposes, nor is the
Company a party to leveraged derivatives. At June 30, 1998,
outstanding hedge contracts covered approximately 80% of the estimated
foreign currency exposures related to cross-currency cash flows to be
realized in fiscal 1999. The outstanding hedges were a combination of
forward, option, and synthetic forward contracts maturing in fiscal
1999.
The Company performed a sensitivity analysis as of June 30, 1998
assuming a hypothetical 10% adverse movement in foreign currency
exchange rates applied to its outstanding hedge contracts and
associated exposures. The analysis indicated that such a market
movement would not have had a material effect on the Company's
consolidated financial position, results of operations, or cash flows.
Actual gains and losses in the future could, however, differ
materially from this analysis, based on changes in the timing and
amount of foreign currency exchange rate movements and the Company's
actual exposures and hedges.
Interest rate swaps are used to hedge underlying debt obligations.
In fiscal 1997, the Company executed an interest rate swap in
conjunction with its entering into a five-year Japanese Yen debt
obligation. Under the terms of the swap agreement, the Company pays a
fixed rate of interest at 2.1% and receives a floating LIBOR interest
rate. At June 30, 1998, the notional amount of indebtedness covered
by the interest rate swap was Yen 3.8 billion ($27.0 million). The
maturity date of the swap coincides with the maturity of the Yen loan
in March 2002.
Based on the Company's overall interest rate exposure at June 30,
1998, including derivative and other interest rate sensitive
instruments, a near-term change in interest rates would not materially
affect the consolidated financial position, results of operations, or
cash flows of the Company. Further discussion of the Company's
foreign currency and interest rate management activities is provided
in Note 12.
Management's Discussion of Financial Resources and Liquidity
The following discussion of financial resources and liquidity focuses
on the Consolidated Statements of Financial Position (page 40) and the
Consolidated Statements of Cash Flows (page 41).
The Company's financial position at June 30, 1998 was strong, with
cash and cash equivalents totaling $82.9 million compared with $213.0
million at June 30, 1997, and total debt of $45.8 million at June 30,
1998 compared with $89.1 million at June 30 1997. The decrease in
cash was primarily a result of expenditures related to acquisitions
for PE Biosystems, cash outlays associated with restructuring actions,
and expenditures for the Company's strategic program to improve its
information technology infrastructure. Working capital was $288.0
million at June 30, 1998 compared with $354.7 million at June 30,
1997. Debt to total capitalization decreased to 8% at June 30, 1998
from 15% at June 30, 1997. The decrease was attributable to the
prepayment of long-term debt.
Significant Changes in the Consolidated Statements of Financial
Position
Accounts receivable and inventory balances increased from June 30,
1997 to June 30, 1998 by $41.0 million and $25.4 million,respectively.
Excluding Tecan, accounts receivable and inventory balances increased
by $19.5 million and $15.6 million, respectively, from June 30, 1997
to June 30, 1998, reflecting the growth in PE Biosystems.
Other long-term assets increased to $279.5 million at June 30, 1998
from $192.1 million at June 30, 1997. The change included $70.9
million of intangible assets associated with the acquisition of Tecan
and Molecular Informatics, $11.5 million of minority equity
investments for PE Biosystems, and a $10.2 million increase in prepaid
pension asset, partially offset by the sale of certain non-operating
assets.
Total short-term and long-term borrowings were $45.8 million at June
30, 1998 compared with $89.1 million at June 30, 1997. The decrease
was due in part to the redemption of PerSeptive's 8 - 1/4% Convertible
Subordinated Notes Due 2001 on March 23, 1998. The redemption price
was $1,055.81 per $1,000 principal amount of the PerSeptive Notes,
which represented the redemption premium and aggregate principal plus
accrued and unpaid interest to the redemption date. The aggregate
outstanding principal amount of the PerSeptive Notes was $27.2 million
at March 23, 1998. A total of $26.1 million was paid in cash,
representing $24.7 million of principal and $1.4 million of accrued
interest and premium relating to the PerSeptive Notes.
Additionally, $2.5 million of the
Page 35
<PAGE>
principal amount of the PerSeptive Notes was converted by the holders
thereof into 35,557 shares of the Company's common stock.
Accounts payable increased $33.9 million to $165.3 million at June
30, 1998 from $131.4 million at June 30, 1997. The increase resulted
from higher purchases to support production and operating
requirements.
At June 30, 1998, $43.8 million of minority interest was recognized
in connection with Tecan.
Statements of Cash Flows
Operating activities generated $78.2 million of cash in fiscal 1998
compared with $113.2 million in fiscal 1997 and $90.9 million in
fiscal 1996. In fiscal 1998, higher income-related cash flow was more
than offset by a net increase in operating assets and liabilities.
The increase related primarily to PE Biosystems, reflecting the
division's continued growth.
Net cash used by investing activities was $169.9 million in fiscal
1998 compared with net cash provided by investing activities of $13.4
million in fiscal 1997. During fiscal 1998, the Company generated
$19.5 million in net cash proceeds from the sale of assets and $9.7
million from the collection of a note receivable. The proceeds were
more than offset by $116.7 million of capital expenditures and $98.0
million for acquisitions and investments, primarily Tecan and
Molecular Informatics (see Note 2). For fiscal 1997, the Company
generated $99.7 million in net cash proceeds from the sale of its
equity interests in Etec Systems, Inc. and Millennium Pharmaceuticals,
Inc. and from the sale of certain other non-operating assets. These
proceeds were partially offset by the $27.7 million used for
acquisitions, primarily GenScope (see Note 2), and $69.8 million for
capital expenditures. In fiscal 1996, $119.2 million of cash was used
for acquisitions and $44.3 million was used for capital expenditures.
This was partially offset by $102.3 million of cash proceeds generated
from the sale of minority equity investments and non-operating assets.
Fiscal 1998 capital expenditures were $116.7 million: $72.6 million
for PE Biosystems, $42.9 million for Analytical Instruments, and $1.2
million for corporate. The Company's expenditures included $65.9
million as part of the strategic program to improve its information
technology infrastructure. Capital expenditures for fiscal 1997
totaled $69.8 million: $42.1 million for PE Biosystems, $14.1 million
for Analytical Instruments, and $13.6 million for corporate. Fiscal
1997 expenditures included $11.1 million for information technology
infrastructure improvements and $12.1 million for the acquisition of a
corporate airplane.
Net cash used by financing activities was $37.7 million for fiscal
1998, $15.9 million for fiscal 1997, and $22.2 million for fiscal
1996. During fiscal 1998, proceeds from employee stock plan exercises
were $33.6 million. This was more than offset by shareholder
dividend payments and the redemption of the PerSeptive Notes. During
fiscal 1997, the Company generated $1.8 million from the sale of
equity put warrants (see Note 7) and $33.6 million in proceeds from
employee stock plan exercises, compared with $65.0 million from
employee stock plan exercises in fiscal 1996. This was more than
offset by shareholder dividends of approximately $29 million for both
fiscal 1997 and 1996, and for the purchase of common stock for
treasury. During fiscal 1997, .4 million shares were repurchased at a
cost of $25.1 million, compared with .8 million shares at a cost of
$41.0 million in fiscal 1996. Common stock purchases for treasury
were made in support of the Company's various stock plans. No shares
were repurchased during fiscal 1998.
As previously mentioned, the Company recorded before-tax
restructuring charges and other merger costs of $48.1 million, $24.2
million, and $89.1 million in fiscal 1998, 1997, and 1996,
respectively. Fiscal 1997 also included an $11.2 million before-tax
reduction of charges associated with the fiscal 1996 restructuring
plan. During fiscal 1998, the Company made cash payments of $39.5
million for obligations related to restructuring plans and other
merger costs. Liabilities remaining at June 30, 1998 were $26.9
million and $4.4 million for the fiscal 1998 and 1997 plans,
respectively (see Note 10). The funding for the remaining
restructuring liabilities will be from current cash balances,
including realized benefits from the restructuring activities.
The Company believes its cash and short-term investments, funds
generated from operating activities, and available borrowing
facilities are sufficient to provide for its anticipated financing
needs over the next two years. At June 30, 1998, the Company had
unused credit facilities totaling $343 million.
Impact of Inflation and Changing Prices
Inflation and changing prices are continually monitored. The Company
attempts to minimize the impact of inflation by improving productivity
and efficiency through continual review of both manufacturing capacity
and operating expense levels. When operating costs and manufacturing
costs increase, the Company attempts to recover such costs by
increasing, over time, the selling price of its products and services.
The Company believes the effects of inflation have been appropriately
managed and therefore have not had a material impact on its historic
operations and resulting financial position.
Year 2000
In fiscal 1997, the Company initiated a worldwide program to assess
the expected impact of the Year 2000 date recognition problem on its
existing internal computer systems, including embedded and process-
control systems, product offerings, and significant suppliers. The
purpose of this program is to ensure the event does not have a
material adverse effect on the Company's business operations.
Regarding the Company's existing internal computer systems, the
program involves a mix of purchasing new systems and modifying
existing systems, with the emphasis on replacement of applications
developed in-house. Replacement projects are currently underway, and
are anticipated to be substantially completed for all business-
critical systems in the United States by December 31, 1998, and
worldwide by December 31, 1999. The program focuses largely on
replacement of applications that, for reasons other than Year 2000
noncompliance, had been previously selected for replacement. The
replacement projects, which began in fiscal 1997,are expected to offer
improved functionality and commonality over current systems, while at
the same time addressing the Year 2000 problem.
Page 36
<PAGE>
With respect to the Company's current product offerings, the program
involves performing an inventory of current products, assessing their
compliance status, and constructing a remediation plan where
appropriate. Progress has been made in each of these three phases and
the Company expects its product offerings to be Year 2000 compliant by
December 31, 1999.
The program also addresses the Year 2000 compliance efforts of the
Company's significant suppliers, vendors, and third-party interface
systems. As part of this analysis, the Company is seeking written
assurances from these suppliers, vendors, and third parties that they
will be Year 2000 compliant. While the Company has begun such
efforts, there can be no assurance that the systems of other companies
with which the Company deals, or on which the Company's systems rely
will be timely converted, or that any such failure to convert by
another company could not have a material adverse effect on the
Company. The Company has not fully determined the extent to which the
Company's interface systems may be impacted by third parties' systems,
which may not be Year 2000 compliant.
The Company's preliminary estimate of the total cost for this multi-
year program covering 3-4 years is approximately $150 million. This
includes amounts previously budgeted for information technology
infrastructure improvements and estimates of remediation costs on
components not yet fully assessed. Incremental spending has not been
and is not expected to be material because most Year 2000 compliance
costs will be met with amounts that are normally budgeted for
procurement and maintenance of the Company's information systems,
production and facilities equipment. The redirection of spending to
implement Year 2000 compliance plans may in some instances delay
productivity improvements.
The Company has also engaged a consulting firm to provide periodic
assessments of the Company's Year 2000 project plans and progress.
Because of the importance of addressing the Year 2000 problem, the
Company has created a Year 2000 business continuity planning team to
review and develop, by April 1999, business contingency plans to
address any issues that may not be corrected by implementation of the
Company's Year 2000 compliance plan in a timely manner. If the
Company is not successful in implementing its Year 2000 compliance
plan, or there are delays in and/or increased costs associated with
implementing such changes, the Year 2000 problem could have a material
adverse impact on the Company's consolidated results of operations and
financial condition.
Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133,
"Accounting for Derivative Instruments and Hedging Activities." The
provisions of the statement require the recognition of all derivatives
as either assets or liabilities in the statement of financial position
and the measurement of those instruments at fair value. The
accounting for changes in the fair value of a derivative depends on
the intended use of the derivative and the resulting designation. The
Company is required to implement the statement in the first quarter of
fiscal 2000. The Company is currently analyzing the statement to
determine the impact, if any, on the consolidated financial
statements.
The FASB issued the following Statement of Financial Accounting
Standards, which will become effective for the Company's fiscal 1999
financial statements: SFAS No. 132, "Employers' Disclosures about
Pensions and other Postretirement Benefits," which requires additional
disclosures relating to a company's pension and postretirement benefit
plans; SFAS No. 131, "Disclosure about Segments of an Enterprise and
Related Information," which requires certain financial and descriptive
information about a company's reportable operating statements; and
SFAS No. 130, "Reporting Comprehensive Income," which requires
disclosure of comprehensive income and its components, as defined.
The adoption of these new accounting standards may require additional
disclosures but should not have a material effect, if any, on the
consolidated financial statements of the Company.
Outlook
As the underlying demand for life science products continues to grow,
PE Biosystems is expected to continue to grow and maintain
profitability on the strength of robust demand and several new
products to be introduced, primarily during the second and third
quarters of fiscal 1999. New products planned for fiscal 1999 include
the ultra-high-throughput model 3700 genetic analysis system; the next
generation LC/MS instruments, which should reach full production in
fiscal 1999; and several applied genetic kits, including one for HIV.
The Company continues to expand this business through increased
internal development efforts as well as acquisitions, strategic equity
investments, and other collaborations. The acquisitions, investments,
and collaborations in PerSeptive, Tecan, Molecular Informatics, Hyseq,
Inc., Biometric Imaging, Inc., and GenScope are indicators of the
Company's continued focus on this business segment. While the Company
expects to realize benefits from these acquisitions, integration is
complex.
For Analytical Instruments, revenue growth is expected in the low
single digits for fiscal 1999. The fiscal 1997 restructuring actions
are expected to continue to increase the profitability and cash flow
of the division.
Adverse currency effects remain a concern for the Company because
approximately 57% of its revenues are derived from markets outside the
United States. These adverse effects could continue if the
relationship of the U.S. dollar to certain major European and Far
Eastern currencies is maintained at current levels, or could worsen if
the U.S. dollar continues to strengthen. The Company has absorbed
negative currency impacts of approximately $.38, $.19, and $.04 per
diluted share for fiscal 1998, 1997, and 1996, respectively. The
Company expects its currency and economic exposures in Southeast Asia
to be reduced from fiscal 1998 levels. However, the Japanese Yen
remains weak, and further U.S. dollar strengthening could impact
future results.
On May 9, 1998, the Company, Dr. J. Craig Venter, and The
Institute for Genomic Research (TIGR) announced that they had signed
letters of intent relating to the formation by the Company and Dr.
Venter of a new genomics company. The strategy of the new
company, Celera Genomics Corporation, will be centered on a plan to
substantially complete the sequencing of the human genome in three
years. The Company is currently reviewing several structural alter-
Page 37
<PAGE>
natives for the new company and has not yet determined the
financial impact on the Company.
Forward Looking Statements
Certain statements contained in this annual report, including the
Outlook section, are forward looking and are subject to a variety of
risks and uncertainties. These statements may be identified by the
use of forward looking words or phrases such as "believe," "expect,"
"anticipate," "should," "planned," "estimated," and "potential,"
among others. These forward looking statements are based upon the
Company's current expectations. The Private Securities Litigation
Reform Act of 1995 provides a "safe harbor" for such forward looking
statements. In order to comply with the terms of the safe harbor, the
Company notes that a variety of factors could cause the Company's
actual results and experience to differ materially from the
anticipated results or other expectations expressed in such forward
looking statements. The risks and uncertainties that may affect the
operations, performance, development, and results of the Company's
business include, but are not limited to:
Dependence on New Products and Rapid Technological Change. The life
sciences and analytical instrumentation markets are characterized by
rapid technological change, complexity, and uncertainty regarding the
development of new high technology products. The Company's future
success will depend on its ability to enhance its current products and
to develop and introduce, on a timely and cost effective basis, new
products that address the evolving needs of its customers. In
addition, the transition from existing products to new products could
adversely affect the Company's future operating results.
Substantial Competition. The Company expects substantial competition
in the future with respect to existing and planned products and
especially with respect to efforts to develop and introduce products
in new markets. New product announcements, pricing changes, strategic
alliances, and other actions by competitors could adversely affect the
Company's market share or render its products obsolete or non-
competitive.
Customers' Capital Spending Policies. The Company's customers include
pharmaceutical, environmental, research, and chemical companies. Any
decrease in capital spending or change in spending policies of these
companies could have a significant effect on the demand for the
Company's products.
Patents, Proprietary Technology, and Trade Secrets. The Company's
ability to compete may be affected by its ability to protect
proprietary technology and intellectual property rights, and to obtain
necessary licenses on commercially reasonable terms. Changes in the
interpretation of copyright or patent law could expand or reduce the
extent to which the Company and its competitors are able to protect
their intellectual property or require changes in the designs of
products, which could have an adverse effect on the Company.
Government Sponsored Research. A substantial portion of the Company's
sales are to universities or research laboratories whose funding is
dependent upon both the level and timing of funding from government
sources. The timing and amount of revenues from these sources may vary
significantly due to budgetary pressures, particularly in the United
States and Japan, that may result in reduced allocations to government
agencies that fund research and development activities.
Key Employees. The Company is highly dependent on the principal
members of its management and scientific staff. The Company believes
that its future success will depend in large part upon its ability to
attract and retain highly skilled personnel.
Currency Exchange Risks; International Sales and Operations. The
Company's reported and anticipated operating results and cash flows
are subject to fluctuations due to material changes in foreign
currency exchange rates that are beyond the Company's control.
International sales and operations may also be adversely affected by
the imposition of governmental controls, export license requirements,
restrictions on the export of critical technology, political and
economic instability, trade restrictions, changes in tariffs and
taxes, difficulties in staffing and managing international operations,
and general economic conditions.
Potential Difficulties in Implementing Business Strategy. The
Company's strategy to integrate and develop acquired businesses or
strategic investments involves a number of elements that management
may not be able to implement as expected. For example, The Company
may encounter operational difficulties in the integration of
manufacturing or other facilities, and advances resulting from the
integration of technologies may not be achieved as successfully or as
rapidly anticipated, if at all.
Other Risks. Other risks and uncertainties that may affect the
operations, performance, development, and results of the business
include: (1) the development of new sequencing strategies and the
commercialization of information derived from sequencing operations;
(2) the impact of earthquakes on the Company, since a significant
portion of the Company's life science operations are located near
major California earthquake faults; and (3) other factors which may be
described from time to time in the Company's filings with the
Securities and Exchange Commission.
Future Performance. 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.
Page 38
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS The Perkin-Elmer Corporation
<TABLE>
<CAPTION>
(Dollar amounts in thousands except per share amounts)
For the years ended June 30, 1998 1997 1996
<S> <C> <C> <C>
Net revenues $ 1,531,165 $ 1,373,282 $ 1,248,967
Cost of sales 752,045 693,343 653,427
Gross margin 779,120 679,939 595,540
Selling, general and administrative 459,635 416,305 380,390
Research, development and engineering 152,202 120,875 113,680
Restructuring and other merger costs 43,980 13,000 89,054
Acquired research and development 28,850 26,801 33,878
Operating income (loss) 94,453 102,958 (21,462)
Gain on investments 1,605 64,850 11,704
Interest expense 4,905 5,859 8,444
Interest income 5,938 8,826 5,376
Other income (expense), net 3,511 1,846 (2,140)
Income (loss) before income taxes 100,602 172,621 (14,966)
Provision for income taxes 38,617 42,223 21,557
Minority interest 5,597
Net income (loss) $ 56,388 $ 130,398 $ (36,523)
Net income (loss) per share:
Basic $ 1.16 $ 2.74 $ (0.80)
Diluted $ 1.12 $ 2.63 $ (0.80)
</TABLE>
See accompanying notes to consolidated financial statements.
Page 39
<PAGE>
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION The Perkin-Elmer Corporation
<TABLE>
<CAPTION>
(Dollar amounts in thousands)
At June 30, 1998 1997
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 82,865 $ 213,028
Short-term investments 1,226 4,194
Accounts receivable, less allowances for doubtful accounts of $9,277 ($7,407 - 1997) 374,898 333,915
Inventories 240,031 214,618
Prepaid expenses and other current assets 97,116 83,576
Total current assets 796,136 849,331
Property, plant and equipment, net 258,800 197,367
Other long-term assets 279,538 192,051
Total assets $ 1,334,474 $ 1,238,749
Liabilities and shareholders' equity
Current liabilities
Loans payable $ 12,099 $ 29,916
Accounts payable 165,289 131,413
Accrued salaries and wages 48,999 48,183
Accrued taxes on income 79,860 98,307
Other accrued expenses 201,898 186,771
Total current liabilities 508,145 494,590
Long-term debt 33,726 59,152
Other long-term liabilities 184,598 180,737
Total liabilities 726,469 734,479
Minority interest 43,757
Commitments and contingencies (see Note 11)
Shareholders' equity
Capital stock
Preferred stock $1 par value: 1,000,000 shares authorized; none issued
Common stock $1 par value: 180,000,000 shares authorized; shares issued
1998 - 50,148,384 and 1997 - 50,122,390 50,148 50,122
Capital in excess of par value 379,974 374,423
Retained earnings 190,966 167,482
Foreign currency translation adjustments (7,799) (5,052)
Unrealized (loss) gain on investments (1,363) 3,086
Minimum pension liability adjustment (351) (705)
Treasury stock, at cost (shares: 1998 - 831,213; 1997 - 1,795,563) (47,327) (85,086)
Total shareholders' equity 564,248 504,270
Total Liabilities and shareholders' equity $ 1,334,474 $ 1,238,749
</TABLE>
See accompanying notes to consolidated financial statements.
Page 40
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS The Perkin-Elmer Corporation
<TABLE>
<CAPTION>
(Dollar amounts in thousands)
For the years ended June 30, 1998 1997 1996
<S> <C> <C> <C>
Operating activities
Net income (loss) $ 56,388 $ 130,398 $ (36,523)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 53,126 43,879 51,770
Long-term compensation programs 8,062 11,678 5,072
Deferred income taxes 12,892 (37,799) (13,110)
Gains from the sale of assets (3,052) (66,636) (11,704)
Provision for restructured operations and other merger costs 48,080 13,000 89,054
Acquired research and development 28,850 26,801 33,878
Impairment of assets 7,500 9,906
Changes in operating assets and liabilities:
Increase in accounts receivable (26,637) (68,313) (33,141)
(Increase) decrease in inventories (24,975) 5,198 (11,225)
Increase in prepaid expenses and other assets (48,298) (3,662) (8,959)
Increase (decrease) in accounts payable and other liabilities (26,277) 51,151 15,890
Net cash provided by operating activities 78,159 113,195 90,908
Investing activities
Additions to property, plant and equipment
(net of disposals of $15,588, $6,188 and $4,927, respectively) (101,120) (63,634) (39,382)
Acquisitions and investments, net (97,998) (27,676) (119,189)
Proceeds from the sale of assets, net 19,496 99,710 102,318
Proceeds from the collection of notes receivable 9,673 4,978
Proceeds from short-term investments 5,773
Net cash (used) provided by investing activities (169,949) 13,378 (50,480)
Financing activities
Net change in loans payable (6,797) (4,914) (17,040)
Proceeds from long-term debt 31,033
Principal payments on long-term debt (25,449) (22,908)
Dividends (39,072) (29,459) (29,095)
Purchases of common stock for treasury (25,126) (41,028)
Proceeds from issuance of equity put warrants 1,846
Proceeds from stock issued for stock plans 33,629 33,637 64,954
Net cash used by financing activities (37,689) (15,891) (22,209)
Elimination of PerSeptive results from
July 1, 1997 to September 30, 1997 (see Note 1) 2,590
Effect of exchange rate changes on cash (3,274) 1,601 (2,699)
Net change in cash and cash equivalents (130,163) 112,283 15,520
Cash and cash equivalents beginning of year 213,028 100,745 85,225
Cash and cash equivalents end of year $ 82,865 $ 213,028 $ 100,745
</TABLE>
See accompanying notes to consolidated financial statements.
Page 41
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY The Perkin-Elmer Corporation
<TABLE>
<CAPTION>
Foreign Unrealized Minimum
Common Capital In Currency Gain Pension
Stock $1.00 Excess Of Retained Translation (Loss) on Liability Treasury Stock
(Dollar amounts and shares in thousands) Par Value Par Value Earnings Adjustments Investments Adjustment At Cost Shares
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1995 $ 48,760 $ 311,043 $ 142,741 $ 10,030 $ - $(34,445) $(108,322) (3,490)
Net loss (36,523)
Cash dividends declared (29,095)
Share repurchases (41,028) (800)
Shares issued under stock plans 45 1,336 (5,627) 51,202 1,559
Tax benefit related to employee stock options 5,280
Minimum pension liability adjustment 5,080
Restricted stock plan 4,079 993 30
Unrealized gain on investments, net 23,175
Foreign currency translation adjustments (10,957)
Common stock issuances for acquisitions 1,077 34,796
Other 144 1,920 (1,977)
Balance at June 30, 1996 50,026 358,454 69,519 (927) 23,175 (29,365) (97,155) (2,701)
Net income 130,398
Cash dividends declared (29,536)
Share repurchases (25,126) (428)
Shares issued under stock plans 61 2,065 (1,459) 31,615 1,146
Tax benefit related to employee stock options 4,568
Minimum pension liability adjustment 28,660
Restricted stock plan 6,098 5,580 187
Sale of equity investment (23,245)
Unrealized gain on investments, net 3,156
Sale of equity put warrants 1,846
Foreign currency translation adjustments (4,125)
Other 35 1,392 (1,440)
Balance at June 30, 1997 50,122 374,423 167,482 (5,052) 3,086 (705) (85,086) (1,796)
Net income 56,388
Cash dividends declared (31,604)
Shares issued under stock plans 26 1,358 (3,468) 37,759 965
Tax benefit related to employee stock options 2,335
Minimum pension liability adjustment 354
Restricted stock plan 1,858 (136)
Unrealized loss on investments, net (4,449)
Foreign currency translation adjustments (2,747)
Elimination of PerSeptive results from
July 1, 1997 to September 30, 1997 (see Note 1) 2,590
Other (286)
Balance at June 30, 1998 $ 50,148 $ 379,974 $ 190,966 $ (7,799) $ (1,363) $ (351) $ (47,327) (831)
</TABLE>
See accompanying notes to consolidated financial statements.
Page 42
<PAGE>
Notes to Consolidated Financial Statements
Note 1 Accounting Policies and Practices
Principles of Consolidation. The consolidated financial statements
include the accounts of all majority-owned subsidiaries of The Perkin-
Elmer Corporation (PE or the Company). 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 consolidated financial statements and notes have been
reclassified for comparative purposes.
On January 22, 1998, the Company acquired PerSeptive Biosystems,
Inc. (PerSeptive). The acquisition has been accounted for as a
pooling of interests and, accordingly, the Company's financial results
have been restated to include the combined operations (see Note 2).
The Company's fiscal year ended June 30 and PerSeptive's fiscal year
ended September 30. The fiscal 1998 Consolidated Statements of
Operations combined the Company's operating results for the year ended
June 30, 1998 with PerSeptive's operating results for the nine months
ended June 30, 1998 and the three months ended September 30, 1997
(PerSeptive's fiscal 1997 fourth quarter). The fiscal 1997 and 1996
Consolidated Statements of Operations combined the Company's results
of operations for the years ended June 30, 1997 and 1996 with
PerSeptive's results of operations for the fiscal years ended
September 30, 1997 and 1996, respectively. In order to conform
PerSeptive to a June 30 fiscal year-end in fiscal 1998, PerSeptive's
results of operations for the three months ended September 30, 1997
have been included in the Company's Consolidated Statements of
Operations for the fiscal years ended June 30, 1998 and 1997.
Recently Issued Accounting Standards. In June 1998, the Financial
Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The provisions of the statement
require the recognition of all derivatives as either assets or
liabilities in the statement of financial position and the measurement
of those instruments at fair value. The accounting for changes in the
fair value of a derivative depends on the intended use of the
derivative and the resulting designation. The Company is required to
implement the statement in the first quarter of fiscal 2000. The
Company is currently analyzing the statement to determine the impact,
if any, on the consolidated financial statements.
Earnings per Share. During the second quarter of fiscal 1998, the
Company adopted SFAS No. 128, "Earnings per Share." The statement
establishes new standards for computing and presenting earnings per
share and requires presentation of basic and diluted earnings per
share on the face of the income statement. Basic earnings per share
is computed by dividing net income for the period by the weighted
average number of common shares outstanding. Diluted earnings per
share is computed similarly to the Company's previously disclosed
amounts by dividing net income for the period by the weighted average
number of common shares outstanding including the dilutive effect of
common stock equivalents. Earnings per share amounts for all prior
periods have been restated to conform with the provisions of this
statement.
The table below presents a reconciliation of basic and diluted
earnings (loss) per share for the following fiscal years:
(Amounts in thousands
except per share amounts) 1998 1997 1996
Weighted average number
of common shares used
in the calculation of basic
earnings (loss) per share 48,560 47,517 45,859
Common stock equivalents 1,592 1,996
Shares used in the
calculation of diluted
earnings (loss) per share 50,152 49,513 45,859
Net income (loss) used in
the calculation of basic
and diluted earnings
(loss) per share $ 56,388 $ 130,398 $ (36,523)
Net income (loss) per share
Basic $ 1.16 $ 2.74 $ (.80)
Diluted $ 1.12 $ 2.63 $ (.80)
Options and warrants to purchase 1.4 million, .2 million, and 2.1
million shares of the Company's common stock were outstanding at June
30, 1998, 1997, and 1996, respectively, but were not included in the
computation of diluted earnings per share because the effect was
antidilutive.
Foreign Currency. Assets and liabilities of foreign operations, where
the functional currency is the local currency, are translated into
U.S. dollars at the fiscal year-end exchange rates. The related
translation adjustments are recorded as a separate component of
shareholders' equity. Foreign currency revenues and expenses are
translated using monthly average exchange rates prevailing during the
year. Foreign currency transaction gains and losses, as well as
translation adjustments of foreign operations where the functional
currency is the U.S. dollar, are included in net income.
Derivative Financial Instruments. The Company uses derivative
financial instruments to offset exposure to market risks arising from
changes in foreign currency exchange rates and interest rates.
Derivative financial instruments currently utilized by the
Page 43
<PAGE>
Company include foreign currency forward contracts, synthetic forward
contracts, foreign currency options, and an interest rate swap (see
Note 12).
Cash, Short-Term Investments, and Marketable Securities. Cash
equivalents consist of highly liquid debt instruments, time deposits,
and certificates of deposit with original maturities of three months
or less. Time deposits and certificates of deposit with original
maturities of three months to one year are classified as short-term
investments. Short-term investments, which include marketable
securities, are recorded at cost, which generally approximates market
value.
Accounts Receivable. The Company periodically sells accounts
receivable arising from business conducted in Japan. During fiscal
1998, 1997, and 1996, the Company received cash proceeds of $111.9
million, $82.9 million, and $83.0 million, respectively, from the sale
of such receivables. The Company believes it has adequately provided
for any risk of loss that may occur under these arrangements.
Investments. The equity method of accounting is used for investments
in joint ventures that are 50% owned or less. Minority equity
investments are classified as available-for-sale and carried at market
value in accordance with SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities."
Inventories. Inventories are stated at the lower of cost (on a first-
in, first-out basis) or market. Inventories at June 30, 1998 and 1997
included the following components:
(Dollar amounts in millions) 1998 1997
Raw materials and supplies $ 62.6 $ 40.3
Work-in-process 16.9 18.0
Finished products 160.5 156.3
Total inventories $ 240.0 $ 214.6
Property, Plant, and Equipment and Depreciation. Property, plant and
equipment are recorded at cost and consisted of the following at June
30, 1998 and 1997:
(Dollar amounts in millions) 1998 1997
Land $ 21.8 $ 23.1
Buildings and leasehold improvements 171.9 156.2
Machinery and equipment 316.7 266.9
Property, plant and equipment, at cost 510.4 446.2
Accumulated depreciation
and amortization 251.6 248.8
Property, plant and equipment, net $ 258.8 $ 197.4
Major renewals and improvements that significantly add to productive
capacity or extend the life of an asset are capitalized. Repairs,
maintenance and minor renewals, and improvements are expensed when
incurred. Machinery and equipment included capitalized internal-use
software, primarily related to the Company's worldwide strategic
program to improve its information technology infrastructure, of $77.0
million and $11.1 million at June 30, 1998 and 1997, respectively.
Provisions for depreciation of owned property, plant and equipment
are based upon the expected useful lives of the assets and computed
primarily by the straight-line method. Leasehold improvements are
amortized over their estimated useful lives or the term of the
applicable lease, whichever is less, using the straight-line method.
Internal-use software costs are amortized primarily over the expected
useful lives, not to exceed seven years.
Capitalized Software. Internal software development costs incurred
from the time technological feasibility of the software is established
until the software is ready for its intended use are capitalized and
included in other long-term assets. Research and development costs
and other computer software maintenance costs related to software
development are expensed as incurred. The costs are amortized using
the straight-line method over a maximum of three years or the expected
life of the product, whichever is less. At June 30, 1998, capitalized
software costs, net of accumulated amortization, were $9.0 million.
Amounts were not material at June 30, 1997.
Intangible Assets. The excess of purchase price over the net asset
value of companies acquired is amortized on a straight-line method
over periods not exceeding 40 years. Patents and trademarks are
amortized using the straight-line method over their expected useful
lives. At June 30, 1998 and 1997, other long-term assets included
goodwill, net of accumulated amortization, of $84.5 million and $32.7
million, respectively. Accumulated amortization of goodwill was $17.4
million and $14.0 million at June 30, 1998 and 1997, respectively.
Asset Impairment. The Company periodically reviews all long-lived
assets for impairment in accordance with SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of." Assets are written down to the net realizable value
when the carrying costs exceed this amount. In fiscal 1997, the
Company recorded a $7.5 million cost of sales charge to write-down
$5.6 million of goodwill associated with the fiscal 1995 acquisition
of Photovac Inc. and $1.9 million of other assets primarily associated
with the Analytical Instruments Division. In fiscal 1996, the Company
recorded a cost of sales charge of $9.9 million for the impairment of
certain production assets associated with the realignment of the
product offerings of PerSeptive. The impairment losses were
determined based upon estimated future cash flows and fair values.
Page 44
<PAGE>
Revenues. Revenues are recorded at the time of shipment of products
or performance of services. Revenues from service contracts are
recorded as deferred service contract revenues and reflected in net
revenues over the term of the contract, generally one year.
Research, Development and Engineering. Research, development and
engineering costs are expensed when incurred.
Income Taxes. The Company accounts for certain income and expense
items differently for financial reporting and income tax purposes.
Deferred tax assets and liabilities are determined based on
differences between the financial reporting and the tax basis of
assets and liabilities, and are measured by applying enacted tax rates
to taxable years in which the differences are expected to reverse.
Supplemental Cash Flow Information. Cash paid for interest and income
taxes for the fiscal years ended June 30, 1998, 1997, and 1996 was as
follows:
(Dollar amounts in millions) 1998 1997 1996
Interest $ 5.7 $ 6.0 $ 8.9
Income taxes $ 60.5 $ 31.3 $ 15.0
Note 2 Acquisitions and Dispositions
PerSeptive Biosystems, Inc. The merger (the Merger) of Seven
Acquisition Corp., a wholly-owned subsidiary of the Company, and
PerSeptive was consummated on January 22, 1998. PerSeptive develops,
manufactures, and markets an integrated line of proprietary consumable
products and advanced instrumentation systems for the purification,
analysis, and synthesis of biomolecules. As a result of the Merger,
PerSeptive, which was the surviving corporation of the Merger, became
a wholly-owned subsidiary of the Company on that date. Each
outstanding share of PerSeptive common stock was converted into shares
of the Company's common stock at an exchange ratio equal to 0.1926.
Accordingly, the Company issued 4.6 million shares of its common stock
for all outstanding shares of PerSeptive common stock. Each
outstanding option and warrant for shares of PerSeptive common stock
was converted into options and warrants for the number of shares of
the Company's common stock that would have been received if such
options and warrants had been exercised immediately prior to the
effective time of the Merger. All shares of Series A Redeemable
Convertible Preferred Stock of PerSeptive outstanding immediately
prior to the effective time of the Merger were converted in accordance
with their terms into shares of PerSeptive common stock which were
then converted into shares of the Company's common stock. As a result
of the Merger, PerSeptive's 8-1/4% Convertible Subordinated Notes Due
2001 (the PerSeptive Notes) became convertible into shares of the
Company's common stock. On March 23, 1998, the Company redeemed the
PerSeptive Notes for a total of $26.1 million representing $24.7
million of principal and $1.4 million of accrued interest and premium
relating to the PerSeptive Notes. Additionally, $2.5 million of the
principal amount of the PerSeptive Notes was converted by the holders
thereof into 35,557 shares of the Company's common stock.
The Merger qualified as a tax-free reorganization and has been
accounted for as a pooling of interests. Accordingly, the Company's
financial results have been restated to include the combined
operations. Combined and separate results of the Company and
PerSeptive during the periods preceding the Merger were as follows:
(Dollar amounts
in millions) Perkin-Elmer PerSeptive Adjustment Combined
Six months ended
December 31,1997
(unaudited)
Net revenues $ 639.3 $ 52.6 $ 691.9
Net income (loss) $ 32.2 $ (5.4) $ .6 $ 27.4
Fiscal year ended
June 30, 1997
Net revenues $ 1,276.8 $ 96.5 $ 1,373.3
Net income $ 115.2 $ 15.2 $ 130.4
Fiscal year ended
June 30, 1996
Net revenues $ 1,162.9 $ 86.1 $ 1,249.0
Net income (loss) $ 13.9 $ (50.4) $ (36.5)
The adjustment for the six months ended December 31, 1997 reflects
the inclusion of PerSeptive's operating results within the Company's
consolidated tax provision. There were no material intercompany
transactions between the Company and PerSeptive during any period
presented.
Tecan AG. The Company acquired a 14.5% interest and approximately 52%
of the voting rights in Tecan AG (Tecan) in December 1997. Tecan is a
world leader in the development and manufacturing of automated sample
processors, liquid handling systems, and microplate photometry. Used
in research, industrial, and clinical markets, these products provide
automated solutions for pharmaceutical drug discovery, molecular
biology, genomic testing, and clinical diagnostics. The acquisition
cost was $53.2 million in cash and was accounted for as a purchase
with a minority interest of $41.3 million. The excess purchase price
over the fair market value of the underlying assets was $46.2 million
and is being amortized over fifteen years.
Page 45
<PAGE>
Molecular Informatics, Inc. During the second quarter of fiscal 1998,
the Company acquired Molecular Informatics, Inc. (Molecular
Informatics), a leader in the development of infrastructure software
for the pharmaceutical, biotechnology, and agrochemical industries as
well as for applied markets such as forensics and human
identification. The acquisition cost was $53.9 million and was
accounted for as a purchase. In connection with the acquisition,
$28.9 million was expensed as purchased in-process research and
development and $24.7 million was allocated to goodwill and other
intangible assets. Goodwill of $9.0 million is being amortized over
ten years, and other intangible assets of $15.7 million are being
amortized over periods of four to seven years.
Biometric Imaging, Inc. During fiscal 1998, the Company acquired a
minority equity interest in Biometric Imaging, Inc. for $4.0 million.
The Company and Biometric Imaging, Inc. are collaborating 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 products developed 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.
GenScope, Inc. During the third quarter of fiscal 1997, the Company
acquired GenScope, Inc., (GenScope) a company solely engaged in the
development of gene expression technology, for $26.8 million. The
acquisition represented the purchase of development stage technology
not at the time considered commercially viable in the health care
applications that the Company intends to pursue. As a result, $25.4
million of the acquisition cost was allocated to purchased in-process
research and development and was expensed in the third quarter of
fiscal 1997.
Other Acquisitions. During the fourth quarter of fiscal 1998, the
Company made a minority equity investment of $2.5 million in ACLARA
BioSciences, Inc. The companies are collaborating on the development
of advanced genetic analysis systems.
The Company entered into a strategic partnership with Hyseq, Inc.,
acquiring a minority equity interest for an initial cash investment of
$5.0 million, during the fourth quarter of fiscal 1997. Hyseq, Inc.
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.
The Company acquired Linkage Genetics, Inc., a provider of genetic
services in the agriculture industry, during the fourth quarter of
fiscal 1997. The cash acquisition cost of $1.4 million was accounted
for as a purchase. The entire acquisition cost was expensed as
purchased in-process research and development.
In fiscal 1996, the Company acquired Zoogen, Inc., a leading
provider of genetic analysis services; Tropix, Inc., a world leader in
the development, manufacture, and sale of chemiluminescent detection
technology and a minority equity interest in Paracel, Inc., a provider
of information filtering technologies for a total cost, net of cash
acquired, of $42.5 million. In connection with these and other life
science acquisitions, $33.9 million of purchased in-process research
and development was expensed in fiscal 1996.
The net assets and results of operations for the above acquisitions
accounted for under the purchase method have been included in the
consolidated financial statements since the date of each acquisition.
The pro forma effect of these acquisitions, individually or in the
aggregate, on the Company's consolidated financial statements was not
significant.
Dispositions
Millennium Pharmaceuticals, Inc. During fiscal 1998, the Company
recorded a before-tax gain of $1.6 million in connection with the
release of previously existing contingencies on shares of Millennium
Pharmaceuticals, Inc. (Millennium) common stock. During fiscal 1997,
the Company recognized a before-tax gain of $27.5 million associated
with the sale of approximately 50% of its investment in Millennium and
the release of previously existing contingencies. The gain included
$25.9 million from the Company's exchange of a 34% equity interest in
ChemGenics Pharmaceuticals, Inc. for an approximate 6% equity interest
in Millennium.
Etec Systems, Inc. In fiscal 1997, the Company completed the sale of
its entire equity interest in Etec Systems, Inc. Before-tax gains of
$37.4 million and $11.7 million were recognized for fiscal 1997 and
1996, respectively. Net cash proceeds from the sales were $45.8
million and $16.6 million for fiscal 1997 and 1996, respectively.
Page 46
<PAGE>
Note 3 Debt and Lines of Credit
There were no domestic borrowings outstanding at June 30, 1998 or
1997. Foreign loans payable and long-term debt at June 30, 1998 and
1997 are summarized below:
(Dollar amounts in millions) 1998 1997
Loans payable
Notes payable, banks $ 12.1 $ 23.1
Current portion of convertible
subordinated notes 6.8
Total loans payable $ 12.1 $ 29.9
Long-term debt
Yen loan $ 27.0 $ 33.6
Convertible subordinated notes 20.4
Other 6.7 5.2
Total long-term debt $ 33.7 $ 59.2
The weighted average interest rates at June 30, 1998 and 1997 for
notes payable to foreign banks were 1.8% and 3.6%, respectively.
On March 23, 1998, the Company redeemed Perseptive's 8 1/4%
convertible subordinated notes (see Note 2).
During the third quarter of fiscal 1997, the Company replaced its
Yen 2.8 billion loan, which matured in February 1997, with a Yen 3.8
billion variable rate long-term loan which matures in March 2002.
Through an interest rate swap agreement (see Note 12), the effective
interest rate for the new loan is 2.1% compared with 3.3% for the
previous loan.
On June 1, 1994, the Company entered into a $100 million three year
revolving credit agreement. The agreement was amended in fiscal 1996
to extend the maturity an additional three years to June 1, 2000.
Commitment and facility fees are based on leverage and interest
coverage ratios. Interest rates on amounts borrowed vary depending on
whether borrowings are undertaken in the domestic or Eurodollar
markets. There were no borrowings under the facility at June 30, 1998
or 1997.
At June 30, 1998, the Company had unused credit facilities for short-
term borrowings from domestic and foreign banks in various currencies
totaling $343 million.
Under various debt and credit agreements, the Company is required to
maintain certain minimum net worth and interest coverage ratios.
There are no maturities of long-term debt scheduled for fiscal 1999,
2000, 2001, or 2003. The Yen 3.8 billion loan matures in fiscal 2002.
Note 4 Income Taxes
Income (loss) before income taxes for fiscal 1998, 1997, and 1996 is
summarized below:
(Dollar amounts in millions) 1998 1997 1996
United States $ (3.9) $ 121.0 $ (28.5)
Foreign 104.5 51.6 13.5
Total $ 100.6 $ 172.6 $ (15.0)
The components of the provision for income taxes for fiscal 1998,
1997, and 1996 consisted of the following:
(Dollar amounts in millions) 1998 1997 1996
Currently payable:
Domestic $ .1 $ 56.2 $ 10.4
Foreign 25.6 23.8 24.3
Total currently payable 25.7 80.0 34.7
Deferred:
Domestic 11.0 (41.0) (4.4)
Foreign 1.9 3.2 (8.7)
Total deferred 12.9 (37.8) (13.1)
Total provision for income taxes $ 38.6 $ 42.2 $ 21.6
Significant components of deferred tax assets and liabilities at
June 30, 1998 and 1997 are summarized below:
(Dollar amounts in millions) 1998 1997
Deferred tax assets:
Intangibles $ 5.8 $ 6.4
Inventories 7.9 8.4
Postretirement and postemployment
benefits 35.0 35.7
Other reserves and accruals 40.0 54.3
Tax credit and loss carryforwards 50.1 50.9
Subtotal 138.8 155.7
Valuation allowance (71.7) (78.6)
Total deferred tax assets 67.1 77.1
Deferred tax liabilities:
Inventories .5 .5
Millennium equity transaction 4.3
Other reserves and accruals 7.9 6.1
Total deferred tax liabilities 8.4 10.9
Total deferred tax assets, net $ 58.7 $ 66.2
Page 47
<PAGE>
A reconciliation of the federal statutory tax to the Company's
tax provision for fiscal 1998, 1997, and 1996 is set forth in the
following table:
(Dollar amounts in millions) 1998 1997 1996
Federal statutory rate 35% 35% 35%
Tax at federal statutory rate $ 35.2 $ 60.4 $ (5.2)
State income taxes
(net of federal benefit) .3 .2 (1.5)
Effect on income from foreign
operations 6.7 42.6 14.7
Effect on income from foreign
sales corporation (7.5) (4.8) (3.2)
Acquired research and
Development 10.1 9.4 11.9
Restructuring and other merger costs 5.2
Domestic temporary differences
for which benefit is recognized (11.1) (60.6) (12.7)
Benefit of loss not recognized/
(utilization of net operating losses) (7.6) 16.9
Other (.3) 2.6 .7
Total provision for income taxes $ 38.6 $ 42.2 $ 21.6
At June 30, 1998, the Company had a U.S. alternative minimum tax
credit carryforward of $4.9 million with an indefinite carryforward
period. The Company's subsidiary, PerSeptive, has domestic loss
carryforwards of approximately $64 million that will expire between
the years 2003 and 2012. The amount of these net operating loss
carryforwards that can be utilized annually to offset future taxable
income or tax liability has been limited under the Internal Revenue
Code as a result of the acquisition. The Company also has loss
carryforwards of approximately $38 million in various foreign
countries with varying expiration dates.
U.S. income taxes have not been provided on approximately $144
million of net unremitted earnings from foreign subsidiaries since the
Company intends to permanently reinvest substantially all of such
earnings in the operations of the subsidiaries. These earnings include
income from manufacturing operations in Singapore, which is tax exempt
through the year 2004. In those instances where the Company expects to
remit earnings, the effect on the results of operations, after
considering available tax credits and amounts previously accrued, was
not significant.
The Company and its subsidiaries are subject to tax examinations in
various U.S. and foreign jurisdictions. The Company believes that
adequate tax payments have been made and adequate accruals have been
recorded for all years.
Note 5 Retirement and Other Benefits
Pension Plans. The Company maintains or sponsors pension plans that
cover substantially all worldwide employees. Pension benefits earned
are generally based on years of service and compensation during active
employment. However, the level of benefits and terms of vesting vary
among the plans. Pension plan assets are administered by trustees and
are principally invested in equity and fixed income securities. The
funding of pension plans is determined in accordance with statutory
funding requirements.
The total worldwide pension expense for all employee pension plans
was $14.0 million, $15.1 million, and $15.2 million for fiscal 1998,
1997, and 1996, respectively. The components of net pension expense
are set forth in the following tables:
(Dollar amounts in millions) 1998 1997 1996
Domestic Plans
Service cost $ 9.0 $ 8.0 $ 7.6
Interest cost 41.3 37.0 33.0
Actual return on assets (40.5) (35.6) (32.1)
Net amortization and
deferral (1.8) (1.0) (1.4)
Net pension expense $ 8.0 $ 8.4 $ 7.1
Foreign Plans
Service cost $ 2.7 $ 2.7 $ 3.2
Interest cost 5.9 6.3 6.7
Actual return on assets (5.7) (3.5) (4.0)
Net amortization and
deferral 3.1 1.2 2.2
Net pension expense $ 6.0 $ 6.7 $ 8.1
Page 48
<PAGE>
The following table sets forth the funded status of the plans and
amounts recognized in the Company's Consolidated Statements of
Financial Position at June 30, 1998 and 1997:
Domestic Plans
Assets Exceed Accumulated
Accumulated Benefits
Benefits Exceed Assets
(Dollar amounts in millions) 1998 1997 1998 1997
Plan assets at fair value $ 559.4 $ 474.2 $ - $ -
Projected benefit obligation 544.5 475.0 12.2 10.7
Plan assets greater (less) than
projected benefit obligation 14.9 (.8) (12.2) (10.7)
Unrecognized items
Net actuarial loss 33.4 43.3 2.8 1.7
Prior service cost (4.7) (5.5) 2.6 3.0
Net transition (asset)
obligation (4.8) (7.2) .4 .5
Minimum pension
liability adjustment (4.1) (3.8)
Prepaid (accrued)
pension expense $ 38.8 $ 29.8 $(10.5) $ (9.3)
Actuarial present value
of accumulated benefits $ 530.4 $ 470.2 $ 10.5 $ 9.3
Accumulated benefit
obligation related
to vested benefits $ 522.0 $ 461.7 $ 9.5 $ 8.0
A minimum pension liability adjustment is required when the
actuarial present value of accumulated benefits exceeds plan assets
and accrued pension liabilities. The minimum liability adjustment,
less allowable intangible assets, net of tax benefit, is reported as a
reduction of shareholders' equity and totaled $.4 million and $.7
million at June 30, 1998 and 1997, respectively.
Foreign Plans
Assets Exceed Accumulated
Accumulated Benefits
Benefits Exceed Assets
(Dollar amounts in millions) 1998 1997 1998 1997
Plan assets at fair value $ 36.2 $ 32.0 $ - $ -
Projected benefit obligation 36.9 30.3 62.0 64.9
Plan assets greater (less) than
projected benefit obligation (.7) 1.7 (62.0) (64.9)
Unrecognized items
Net actuarial (gain) loss 6.6 3.2 (5.1) (2.5)
Prior service cost 1.3 1.5
Net transition (asset)
obligation (1.5) (1.9) 3.4 4.0
Prepaid (accrued)
pension expense $ 5.7 $ 4.5 $(63.7) $(63.4)
Actuarial present value
of accumulated benefits $ 33.7 $ 28.0 $ 55.3 $ 56.1
Accumulated benefit
obligation related
to vested benefits $ 33.6 $ 27.8 $ 52.4 $ 52.5
The following actuarial assumptions were used in accounting for the
defined benefit plans:
1998 1997
Domestic Plans:
Assumptions
Discount rate 8% 8 1/2%
Compensation increase 4% 4%
Long-term rate of return 8 1/2 - 9 1/4% 8 1/2 - 9 1/4%
Foreign Plans:
Assumptions
Discount rate 5 1/2 - 6 3/4% 6 - 8%
Compensation increase 3 1/2 - 4 1/2% 3 1/2 - 4 1/2%
Long-term rate of return 6 1/2 - 9 1/2% 6 1/2 - 9 1/2%
Savings Plan. The Company provides a 401(k) savings plan, for most
domestic employees, with automatic Company contributions of 2% of
eligible compensation and a dollar-for-dollar matching contribution of
up to 4% of eligible compensation. The Company's contributions to
this plan were $10.7 million, $9.6 million, and $7.4 million for
fiscal 1998, 1997, and 1996, respectively.
Page 49
<PAGE>
Retiree Health Care and Life Insurance Benefits. The Company provides
certain health care and life insurance benefits to domestic employees
hired prior to January 1, 1993, who retire and satisfy certain service
and age requirements. Generally, medical coverage pays a stated
percentage of most medical expenses, reduced for any deductible and
for payments made by Medicare or other group coverage. The cost of
providing these benefits is shared with retirees. The plan is
unfunded.
The following table sets forth the accrued postretirement benefit
liability recognized in the Company's Consolidated Statements of
Financial Position at June 30, 1998 and 1997:
(Dollar amounts in millions) 1998 1997
Actuarial present value
of postretirement
benefit obligation
Retirees $ 60.7 $ 60.6
Fully eligible active participants 1.4 1.0
Other active participants 10.3 9.7
Accumulated postretirement benefit
obligation (APBO) 72.4 71.3
Unrecognized net gain 21.5 24.4
Accrued postretirement
benefit liability $ 93.9 $ 95.7
The net postretirement benefit cost for fiscal 1998 and 1997
included the following components:
(Dollar amounts in millions) 1998 1997
Service cost $ .6 $ .6
Interest cost 5.7 5.8
Amortization of unrecognized gain (1.4) (1.3)
Net postretirement benefit cost $ 4.9 $ 5.1
The discount rate used in determining the APBO was 8% in fiscal 1998
and 8.5% in fiscal 1997. The assumed health care cost trend rate used
for measuring the APBO was divided into two categories:
1998 1997
Participants under age 65 9.6% 10.3%
Participants age 65 and over 7.4% 7.7%
Both rates were assumed to decline to 5.5% over seven and eight
years in fiscal 1998 and 1997, respectively.
If the health care cost trend rate were increased 1%, the APBO, as
of June 30, 1998, would have increased 11%. The effect of this change
on the aggregate of service and interest cost for fiscal 1998 would be
an increase of 10%.
Postemployment Benefits. The Company provides certain postemployment
benefits to eligible employees. These benefits generally include
severance, disability, and medical-related costs paid after employment
but before retirement.
Note 6 Business Segments and Geographic Area Information
Business Segments. The Company is comprised of three separate
segments: PE Biosystems, Analytical Instruments, and the recently
formed Celera Genomics Corporation. PE Biosystems includes PE Applied
Biosystems, PerSeptive, Molecular Informatics, Tropix, GenScope, and
Tecan. PE Biosystems manufactures and markets biochemical instrument
systems and associated consumable products for life science research
and related applications. These automated systems are used for
synthesis, amplification, purification, isolation, analysis, and
sequencing of nucleic acids, proteins, and other biological molecules.
Analytical Instruments manufactures and markets equipment and
systems used for determining the composition and molecular structure
of chemical substances, both organic and inorganic, and systems for
data handling and data management. Through a joint venture, the
Company manufactures mass spectrometry instrument systems that are
sold in the PE Biosystems and Analytical Instruments segments.
During the fourth quarter of fiscal 1998, Celera Genomics
Corporation was formed by the Company and Dr. J. Craig Venter of The
Institute for Genomic Research. The new company's strategy is focused
on a plan to become the definitive source of genomic information that
will be used to develop a better understanding of biological processes
in humans. The plan is to substantially complete the sequencing of
the human genome over the next three years. The company intends to
build the scientific expertise and informatics tools necessary to
extract biological knowledge from genomic data. Results were not
material for fiscal 1998.
Geographic Areas. Revenues between geographic areas are primarily
comprised of the sale of products by the Company's manufacturing
units. The revenues reflect the rules and regulations of the
respective governing tax authorities. Net revenues and operating
profits are reported in the region of destination. Operating income
is determined by deducting from net revenues the related costs and
operating expenses attributable to the region. Research, development
and engineering expenses are reflected in the area where the activity
was performed. Identifiable assets include all assets directly
identified with those geographic areas. Corporate assets include cash
and short-term investments, deferred tax assets, property, plant, and
equipment, and other assets that are corporate in nature.
Export net revenues for fiscal 1998, 1997, and 1996 were $50.7
million, $51.3 million, and $50.0 million, respectively.
Page 50
<PAGE>
Business Segments
<TABLE>
<CAPTION> PE Analytical
(Dollar amounts in millions) Biosystems Instruments Corporate Consolidated
<S> <C> <C> <C> <C>
1998
Net revenues $ 921.8 $ 609.4 $ - $ 1,531.2
Segment income (loss) $ 150.8 $ 57.4 $ (36.7) $ 171.5
Restructuring and other
merger costs (48.1) (48.1)
Acquired research and development (28.9) (28.9)
Operating income (loss) $ 73.8 $ 57.4 $ (36.7) $ 94.5
Identifiable assets $ 719.2 $ 426.0 $ 189.3 $ 1,334.5
Capital expenditures $ 72.6 $ 42.9 $ 1.2 $ 116.7
Depreciation and amortization $ 33.5 $ 17.7 $ 1.9 $ 53.1
1997
Net revenues $ 749.2 $ 624.1 $ - $ 1,373.3
Segment income (loss) $ 125.4 $ 56.1 $ (31.2) $ 150.3
Restructuring charge (13.0) (13.0)
Acquired research and development (26.8) (26.8)
Impairment of assets (.7) (6.8) (7.5)
Operating income (loss) $ 97.9 $ 36.3 $ (31.2) $ 103.0
Identifiable assets $ 504.0 $ 384.5 $ 350.2 $ 1,238.7
Capital expenditures $ 42.1 $ 14.1 $ 13.6 $ 69.8
Depreciation and amortization $ 23.6 $ 18.6 $ 1.7 $ 43.9
1996
Net revenues $ 618.4 $ 630.6 $ - $ 1,249.0
Segment income (loss) $ 107.2 $ 28.7 $ (24.5) $ 111.4
Restructuring charge (17.5) (71.6) (89.1)
Acquired research and development (33.9) (33.9)
Impairment of assets (9.9) (9.9)
Operating income (loss) $ 45.9 $ (42.9) $ (24.5) $ (21.5)
Identifiable assets $ 435.6 $ 401.6 $ 225.8 $ 1,063.0
Capital expenditures $ 30.1 $ 13.6 $ .6 $ 44.3
Depreciation and amortization $ 22.7 $ 28.7 $ .4 $ 51.8
</TABLE>
Page 51
<PAGE>
Geographic Areas
<TABLE>
<CAPTION> United Far Other
(Dollar amounts in millions) States Europe East Countries Corporate Consolidated
<S> <C> <C> <C> <C> <C> <C>
1998
Total revenues $ 732.7 $ 679.7 $ 419.2 $ 103.6 $ - $ 1,935.2
Transfers between geographic areas (81.7) (132.6) (157.1) (32.6) (404.0)
Revenues to unaffiliated customers $ 651.0 $ 547.1 $ 262.1 $ 71.0 $ $ 1,531.2
Income (loss) $ 27.1 $ 108.9 $ 65.6 $ 6.6 $ (36.7) $ 171.5
Restructuring and other merger costs (26.2) (21.7) (.2) (48.1)
Acquired research and development (28.9) (28.9)
Operating income (loss) $ (28.0) $ 87.2 $ 65.4 $ 6.6 $ (36.7) $ 94.5
Identifiable assets $ 630.5 $ 377.6 $ 100.4 $ 36.7 $ 189.3 $ 1,334.5
1997
Total revenues $ 599.3 $ 663.6 $ 407.7 $ 83.5 $ - $ 1,754.1
Transfers between geographic areas (67.2) (144.6) (147.3) (21.7) (380.8)
Revenues to unaffiliated customers $ 532.1 $ 519.0 $ 260.4 $ 61.8 $ $ 1,373.3
Income (loss) $ 3.2 $ 101.3 $ 68.6 $ 8.4 $ (31.2) $ 150.3
Restructuring charge (5.2) (5.9) (.9) (1.0) (13.0)
Acquired research and development (26.8) (26.8)
Impairment of assets (1.9) (5.6) (7.5)
Operating income (loss) $ (30.7) $ 95.4 $ 67.7 $ 1.8 $ (31.2) $ 103.0
Identifiable assets $ 462.5 $ 280.2 $ 117.1 $ 28.7 $ 350.2 $ 1,238.7
1996
Total revenues $ 529.7 $ 606.7 $ 365.2 $ 79.3 $ - $ 1,580.9
Transfers between geographic areas (60.6) (128.8) (124.6) (17.9) (331.9)
Revenues to unaffiliated customers $ 469.1 $ 477.9 $ 240.6 $ 61.4 $ $ 1,249.0
Income (loss) $ (18.1) $ 73.7 $ 70.9 $ 9.4 $ (24.5) $ 111.4
Restructuring charge (29.9) (59.2) (89.1)
Acquired research and development (33.9) (33.9)
Impairment of assets (9.9) (9.9)
Operating income (loss) $ (91.8) $ 14.5 $ 70.9 $ 9.4 $ (24.5) $ (21.5)
Identifiable assets $ 433.5 $ 269.7 $ 103.4 $ 30.6 $ 225.8 $ 1,063.0
</TABLE>
Page 52
<PAGE>
Note 7 Shareholders' Equity
Treasury Stock. Common stock purchases have been made in support of
the Company's various stock plans and as part of a general share
repurchase authorization. The general share repurchase authorization
was rescinded by the Board of Directors in fiscal 1998. There were no
share purchases in fiscal 1998. During fiscal 1997 and 1996, the
Company purchased .4 million and .8 million shares, respectively, to
support various stock plans.
Stock Purchase Warrants. As a result of the Merger with PerSeptive,
each outstanding warrant for shares of PerSeptive common stock was
converted into warrants for the number of shares of the Company's
common stock that would have been received by the holder if such
warrants had been exercised immediately prior to the effective time of
the Merger.
At June 30, 1998, the following warrants to purchase common stock
were outstanding:
Number of Exercise Expiration
Shares Price Date
Class C 4,097 $ 37.95 March 1999
Class E 8,065 $ 171.34 December 1998
Class F 10,266 $ 39.56 October 2002
Class G 53,799 $ 65.73 September 2003
Equity Put Warrants. During the first quarter of fiscal 1997, the
Company sold in a private placement 600,000 put warrants on shares of
its common stock. Each warrant obligated the Company to purchase the
shares from the holder, at specified prices, if the closing price of
the common stock was below the exercise price on the maturity date.
The cash proceeds from the sale of the put warrants were $1.8 million
and have been included in capital in excess of par value. During
fiscal 1997, all 600,000 warrants expired unexercised. No equity put
warrants were sold in fiscal 1998.
Shareholders' Protection Rights Plan. The Company has a Shareholders'
Protection Rights Plan designed to protect shareholders against
abusive takeover tactics by declaring a dividend of one right on each
outstanding share of common stock. Each right entitles shareholders
to buy one one-hundredth of a newly issued share of participating
preferred stock having economic and voting terms similar to those of
one share of common stock at an exercise price of $90, subject to
adjustment.
The rights will be exercisable only if a person or a group: (a)
acquires 20% or more of the Company's shares or (b) commences a tender
offer that will result in such person or group owning 20% or more of
the Company's shares. Before that time, the rights trade with the
common stock, but thereafter they become separately tradeable.
Upon exercise, after a person or a group acquires 20% or more of the
Company's shares, each right (other than rights held by the acquiring
person) will entitle the shareholder to purchase a number of shares of
preferred stock of the Company having a market value of two times the
exercise price. If the Company is acquired in a merger or other
business combination, each right will entitle the shareholder to
purchase at the then exercise price a number of shares of common stock
of the acquiring company having a market value of two times such
exercise price. If any person or group acquires between 20% and 50%
of the Company's shares, the Company's Board of Directors may, at its
option, exchange one share of the Company's common stock for each
right. The rights are redeemable at the Company's option at one cent
per right prior to a person or group becoming an acquiring person.
Common Stock. In October 1997, the Company's shareholders approved an
increase in the number of authorized shares of the Company's common
stock from 90 million to 180 million.
Note 8 Stock Plans
Stock Option Plans. Under the Company's stock option plans, officers
and other key employees may be, and directors are, granted options,
each of which allows for the purchase of common stock at a price of
not less than 100% of fair market value at the date of grant. Under
the normal vesting requirements, 50% of the options are exercisable
after one year and 100% after two years. Options generally expire ten
years from the date of grant.
Transactions relating to the stock option plans of the Company are
summarized below:
Number Weighted
Of Average
Options Exercise
Price
Fiscal 1996
Outstanding at June 30, 1995 4,597,214 $ 29.97
Granted 820,495 $ 46.43
Exercised 1,393,807 $ 29.48
Cancelled 201,367 $ 34.17
Outstanding at June 30, 1996 3,822,535 $ 34.05
Exercisable at June 30, 1996 2,544,100 $ 30.17
Fiscal 1997
Granted 1,595,528 $ 59.78
Exercised 1,167,179 $ 29.73
Cancelled 95,281 $ 43.17
Outstanding at June 30, 1997 4,155,603 $ 45.03
Exercisable at June 30, 1997 2,254,052 $ 35.24
Fiscal 1998
Granted 1,997,041 $ 70.41
Exercised 780,994 $ 34.76
Cancelled 154,686 $ 71.42
Outstanding at June 30, 1998 5,216,964 $ 55.51
Exercisable at June 30, 1998 2,936,389 $ 43.12
Page 53
<PAGE>
At June 30, 1998, 241,437 shares remained available for option
grant.
The following table summarizes information regarding options
outstanding and exercisable at June 30, 1998:
Weighted Average
Contractual
Life
Number of Remaining Exercise
(Option prices per share) Options in Years Price
Options outstanding
At $ 2.04 - $ 29.95 448,472 4.2 $ 20.93
At $30.25 - $ 59.75 2,038,936 7.0 $ 40.87
At $60.06 - $ 85.69 2,713,648 9.3 $ 71.83
At $90.86 - $163.55 15,908 5.4 $120.86
Options exercisable
At $ 2.04 - $ 29.95 448,472 4.2 $ 20.93
At $30.25 - $ 59.75 1,992,736 6.9 $ 40.53
At $60.06 - $ 83.69 479,273 8.7 $ 72.07
At $90.86 - $163.55 15,908 5.4 $120.86
Employee Stock Purchase Plan. The Employee Stock Purchase Plan offers
domestic and certain foreign employees the right to purchase, over a
certain period, shares of common stock on an annual offering date.
The purchase price in the United States is equal to the lower of 85%
of the average market price of the common stock on the offering date
or 85% of the average market price of the common stock on the last day
of the purchase period. Provisions of the plan for employees in
foreign countries vary according to local practice and regulations.
Common stock issued under the Employee Stock Purchase Plan during
fiscal 1998, 1997, and 1996 totaled 174,000 shares, 111,000 shares,
and 77,000 shares, respectively. At June 30, 1998, 499,000 shares
remained available for issuance.
Director Stock Purchase and Deferred Compensation Plan. The Company
has a Director Stock Purchase and Deferred Compensation Plan that
requires non-employee directors of the Company to apply at least 50%
of their annual retainer to the purchase of common stock. The
purchase price is the fair market value on the first business day of
the third month of each fiscal quarter. At June 30, 1998,
approximately 87,000 shares were available for issuance.
Restricted Stock. As part of the Company's stock incentive plans, key
employees may be, and non-employee directors are, granted shares of
restricted stock that will vest when certain continuous
employment/service restrictions and/or specified performance goals are
achieved. The fair value of shares granted is generally expensed over
the restricted periods, which may vary depending on the estimated
achievement of performance goals.
Restricted stock granted to key employees and non-employee directors
during fiscal 1998, 1997, and 1996 totaled 4,350 shares, 42,000 shares
and 185,000 shares (155,000 of which were subject to shareholder
approval in fiscal 1997), respectively. Compensation expense
recognized for these awards was $1.8 million, $11.7 million, and $5.1
million in fiscal 1998, 1997, and 1996, respectively.
Performance Unit Bonus Plan. The Company has a Performance Unit
Bonus Plan whereby employees may be awarded performance units in
conjunction with an equal number of stock options. The performance
units vest upon shares of the Company's common stock attaining and
maintaining specified stock price levels for a specified period, and
are payable on or after June 26, 2000. As of June 30, 1998, 324,500
performance units were outstanding. Compensation expense recognized
for these awards totaled $6.3 million in fiscal 1998.
Accounting for Stock-Based Compensation. The Company applies
Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees," in accounting for its stock-based compensation
plans. Accordingly, no compensation expense has been recognized for
its stock option and employee stock purchase plans, as all options
have been issued at fair market value.
Pro forma net income and earnings per share information, as required
by SFAS No. 123, "Accounting for Stock-Based Compensation," has been
determined for employee stock plans under the statement's fair value
method. The fair value of the options was estimated at grant date
using a Black-Scholes option pricing model with the following weighted
average assumptions:
For the years ended June 30, 1998 1997 1996
Dividend yield .94% .85% .89%
Volatility 27.00% 29.07% 35.32%
Risk-free interest rates 5.64% 6.42% 6.24%
Expected option life in years 5.70 5.12 4.87
Page 54
<PAGE>
For purposes of pro forma disclosure, the estimated fair value of the
options is amortized to expense over the options' vesting period. The
Company's pro forma information for the years ended June 30, 1998,
1997, and 1996 is presented below:
(Dollar amounts in millions,
except per share amounts) 1998 1997 1996
Net income (loss)
As reported $ 56.4 $ 130.4 $ (36.5)
Pro forma $ 25.4 $ 120.2 $ (38.9)
Basic earnings (loss) per share
As reported $ 1.16 $ 2.74 $ (.80)
Pro forma $ .52 $ 2.53 $ (.85)
Diluted earnings (loss) per share
As reported $ 1.12 $ 2.63 $ (.80)
Pro forma $ .51 $ 2.43 $ (.85)
Fiscal 1998 pro forma net income includes compensation expense of $9.8
million, or $.19 per diluted share after-tax, owing to the immediate
vesting of options as a result of the acquisitions of PerSeptive and
Molecular Informatics.
The weighted average fair value of options granted was $24.83,$20.17,
and $16.58 per share for fiscal 1998, 1997, and 1996, respectively.
Note 9 Additional Information
Selected Accounts. The following table provides the major components
of selected accounts of the Consolidated Statements of Financial
Position:
(Dollar amounts in millions)
At June 30, 1998 1997
Other long-term assets
Goodwill $ 84.5 $ 32.7
Other 195.0 159.4
Total other long-term assets $ 279.5 $ 192.1
Other accrued expenses
Deferred service contract revenues $ 54.8 $ 45.1
Accrued pension liabilities 17.5 17.9
Restructuring provisions 31.3 33.3
Other 98.3 90.5
Total other accrued expenses $ 201.9 $ 186.8
Other long-term liabilities
Accrued pension liabilities $ 62.7 $ 62.3
Accrued postretirement benefits 87.4 91.2
Other 34.5 27.2
Total other long-term liabilities $ 184.6 $ 180.7
Related Party Transactions. One of the Company's directors is an
employee of the Roche Group, a pharmaceutical manufacturer and
strategic partner of the Company in the biotechnology field. The
Company made payments to the Roche Group and its affiliates, for the
purchase of reagents and consumables, of $72.5 million, $68.2 million,
and $59.7 million in fiscal 1998, 1997 and 1996, respectively.
Page 55
<PAGE>
Note 10 Restructuring and Other Merger Costs
The Company initiated a restructuring plan in fiscal 1998 for actions
associated with the acquisition of PerSeptive. In fiscal 1997 and
1996, restructuring actions were undertaken primarily to improve the
profitability and cash flow performance of Analytical Instruments.
Fiscal 1996 also included a charge by PerSeptive for restructuring
actions and other related costs. The before-tax charges associated
with the implementation of these restructuring plans were $48.1
million, $24.2 million, and $89.1 million for fiscal 1998, 1997, and
1996, respectively. In addition, fiscal 1997 reflected an $11.2
million before-tax reduction of charges required to implement the
fiscal 1996 Analytical Instruments' plan.
Fiscal 1998. During fiscal 1998, the Company recorded a $48.1 million
before-tax charge for restructuring and other merger costs to
integrate PerSeptive into the Company following the acquisition. The
objectives of this plan are to lower PerSeptive's cost structure by
reducing excess manufacturing capacity, achieve broader worldwide
distribution of PerSeptive's products, and combine sales, marketing,
and administrative functions. The charge included: $33.9 million for
restructuring the combined operations; $8.6 million for transaction
costs; and $4.1 million of inventory-related write-offs, recorded in
costs of sales, associated with the rationalization of certain product
lines. Additional non-recurring acquisition costs of $1.5 million for
training, relocation, and communication were recognized as period
expenses in the third and fourth quarters of fiscal 1998, and
classified as other merger-related costs. The Company expects to
incur an additional $6.5 million to $8.5 million of acquisition-
related costs for training, relocation, and communication in fiscal
1999. These costs will be recognized as period expenses when incurred
and will be classified as other merger costs.
The $33.9 million restructuring charge includes $13.8 million for
severance-related costs and workforce reductions of approximately 170
employees, consisting of 114 employees in production labor and 56
employees in sales and administrative support. The remaining $20.1
million represents facility consolidation and asset-related write-offs
and includes: $11.7 million for contract and lease terminations and
facility related expenses in connection with the reduction of excess
manufacturing capacity; $3.2 million for dealer termination payments,
sales office consolidations, and consolidation of sales and
administrative support functions; and $5.2 million for the write-off
of certain tangible and intangible assets and the termination of
certain contractual obligations. These restructuring actions are
expected to be substantially completed by the end of fiscal 1999.
Transaction costs of $8.6 million include acquisition-related
investment banking and professional fees. As of June 30, 1998,
approximately 12 employees were separated under the plan, and the
actions are proceeding as planned.
The following table details the major components of the fiscal 1998
restructuring provision:
Facility
Consolidation
And Asset
Related
(Dollar amounts in millions) Personnel Write-offs Total
Provision:
Reduction of excess European
manufacturing capacity $ 5.1 $ 11.7 $ 16.8
Consolidation of sales
and administrative support 8.7 3.2 11.9
Other 5.2 5.2
Total provision $ 13.8 $ 20.1 $ 33.9
Fiscal 1998 activity:
Reduction of excess European
manufacturing capacity $ - $ .4 $ .4
Consolidation of sales
and administrative support .3 1.2 1.5
Other 5.1 5.1
Total fiscal 1998 activity $ .3 $ 6.7 $ 7.0
Balance at June 30, 1998:
Reduction of excess European
manufacturing capacity $ 5.1 $ 11.3 $ 16.4
Consolidation of sales
and administrative support 8.4 2.0 10.4
Other .1 .1
Balance at June 30, 1998 $ 13.5 $ 13.4 $ 26.9
Fiscal 1997. During the fourth quarter of fiscal 1997, the Company
announced a follow-on phase to Analytical Instruments' profit
improvement program begun by the Company in fiscal 1996. The 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 were designed to help transition Analytical
Instruments from a highly vertical manufacturing operation to one that
relies more 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 were 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
Page 56
<PAGE>
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.
The following table details the major components of the fiscal 1997
restructuring provision:
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 $ 7.8 $ 4.9 $ 12.7
Consolidation of sales
and administrative support 1.3 1.1 2.4
Total fiscal 1998 activity $ 9.1 $ 6.0 $ 15.1
Balance at June 30, 1998:
Changes in manufacturing
operations $ 1.7 $ .3 $ 2.0
Consolidation of sales
and administrative support 1.0 1.4 2.4
Balance at June 30, 1998 $ 2.7 $ 1.7 $ 4.4
Fiscal 1996. The fiscal 1996 before-tax restructuring charge of
$71.6 million was the first phase of a plan focused on improving the
profitability and cash flow performance of Analytical Instruments.
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 included $37.8 million for
worldwide workforce reductions of approximately 390 positions in
manufacturing, sales and support, and administrative functions. The
charge also included $33.8 million for facility consolidation and
asset-related write-offs associated with the discontinuation of
various product lines.
In fiscal 1996, the Company transferred the development and
manufacturing of certain analytical instrument product lines from its
facility in Germany to other sites, primarily in the United States.
The facility in Germany remains the principal site for the development
of atomic absorption products.
In fiscal 1996, a distribution center in Holland was established to
provide an integrated sales, shipment, and administration support
infrastructure for the Company's European operations and to integrate
certain operating and business activities. The European distribution
center includes certain administrative, financial, and information
systems functions previously transacted at individual locations
throughout Europe.
In the fourth quarter of fiscal 1997, the Company finalized actions
associated with the restructuring plan announced in fiscal 1996. 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.
The following table details the major components of the $71.6
million fiscal 1996 restructuring provision:
Facility
Consolidation
And Asset
Related
(Dollar amounts in millions) Personnel Write-offs Total
Provision:
Reduction of excess European
manufacturing capacity $ 19.7 $ 23.0 $ 42.7
Reduction of European
distribution and
adminstrative 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
Page 57
<PAGE>
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 $ 2.0 $ 3.2 $ 5.2
Reduction of European
distribution and
administrative capacity 3.7 .9 4.6
Other worldwide workforce
reductions and
facility closings 2.8 1.2 4.0
Total fiscal 1998 activity $ 8.5 $ 5.3 $ 13.8
Balance at June 30, 1998 $ - $ - $ -
A before-tax charge of $17.5 million was also recognized by
PerSeptive for restructuring actions and other related costs in fiscal
1996.
As of June 30, 1998, all costs associated with the 1996 restructuring
plans have been incurred.
Note 11 Commitments and Contingencies
Future minimum payments at June 30, 1998 under non-cancelable
operating leases for real estate and equipment were as follows:
(Dollar amounts in millions)
1999 $ 25.0
2000 18.9
2001 16.1
2002 13.9
2003 12.6
2004 and thereafter 61.2
Total $ 147.7
Rental expense was $33.7 million in fiscal 1998, $32.0 million in
fiscal 1997, and $33.9 million in fiscal 1996.
On July 10, 1998, the Company entered into a ten year non-cancelable
lease for a facility for Celera Genomics Corporation in Rockville,
Maryland, effective August 1, 1998. Total lease payments over the ten
year period will be approximately $22 million. In fiscal 1997, the
Company entered into a fifteen year non-cancelable lease for a
facility in Foster City, California, effective July 1, 2000. Total
lease payments over the fifteen year period will be approximately $42
million.
The Company has been named as a defendant in several legal actions,
including patent, commercial, and environmental, arising from the
conduct of its normal business activities. Although the amount of any
liability that might arise with respect to any of these matters
cannot be accurately predicted, the resulting liability, if any, will
not in the opinion of management have a material adverse effect on the
financial statements of the Company.
Note 12 Financial Instruments
Derivatives. The Company utilizes foreign exchange forward, option,
and synthetic forward contracts and an interest rate swap agreement 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.
Page 58
<PAGE>
Foreign Currency Risk Management. Foreign exchange forward, option,
and synthetic forward contracts are used primarily to hedge reported
and anticipated cash flows resulting from the sale of products in
foreign locations. Option contracts outstanding at June 30, 1998 were
purchased at a cost of $4.1 million. Under these 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. Synthetic forward
contracts outstanding at June 30, 1998 were purchased having no up-
front cost. Under these contracts, the Company may participate in
some favorable currency movements but is protected against adverse
currency changes. These contracts are used as an alternative to
options to reduce the cost of the Company's hedging program.
At June 30, 1998 and 1997, the Company had forward, option, and
synthetic forward contracts outstanding for the sale and purchase of
foreign currencies at fixed rates as summarized in the table below:
1998 1997
(Dollar amounts in millions) Sale Purchase Sale Purchase
Japanese Yen $ 109.2 $ - $ 83.5 $ -
French Francs 28.3 .2 18.1
Australian Dollars 10.8 13.7
German Marks 28.3 1.9 13.4 2.3
Italian Lira 38.0 1.4 5.6 1.2
British Pounds 29.2 19.6 8.3
Swiss Francs 10.5 4.0 5.4
Swedish Krona 11.9 2.4
Danish Krona 10.3 1.7
Other 44.7 5.1 5.8
Total $ 321.2 $ 32.2 $ 149.6 $ 11.8
Foreign exchange contracts are accounted for as hedges of firm
commitments and anticipated foreign currency transactions. With
respect to firm commitments, unrealized gains and losses are deferred
and included in the basis of the transaction underlying the
commitment. Gains and losses on foreign currency transactions are
recognized in income and offset the foreign exchange losses and gains,
respectively, on the related transactions. The amount of the
contracts covering anticipated transactions is marked to market and
recognized in income.
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 (see Note 3). 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. The agreed upon amount usually represents the
net present value at the then existing interest rates of the remaining
obligation to exchange payments under the terms of the contract.
Based on the level of interest rates prevailing at June 30, 1998,
the fair value of the Company's floating rate debt approximated its
carrying value. There would be a payment of $.9 million to terminate
the related interest rate swap contract, which would equal the
unrealized loss. Unrealized gains or losses on debt or interest rate
swap contracts are not recognized for financial reporting purposes
unless the debt is retired or the contracts are terminated prior to
maturity. A change in interest rates would have no impact on the
Company's reported interest expense and related cash payments because
the floating rate debt and fixed rate swap contract have the same
maturity and are based on the same interest rate index.
Concentrations of Credit Risk. The forward contracts, options,
synthetic forwards, 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 major domestic and international financial insti-
Page 59
<PAGE>
tutions 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, option (net
of fees), and synthetic forward contracts, as well as interest rate
swaps, 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. The following table
presents notional amounts and fair values of the Company's derivatives
at June 30, 1998 and 1997:
1998 1997
Notional Fair Notional Fair
(Dollar amounts in millions) Amount Value Amount Value
Forward contracts $ 179.2 $ 2.8 $ 114.0 $ (3.7)
Purchased options $ 112.7 $ 1.6 $ 47.4 $ .7
Synthetic forwards $ 61.5 $ 1.9
Interest rate swap $ 27.0 $ (.9) $ 33.6 $ .2
The following methods are used in estimating the fair value of other
significant financial instruments held or owed by the Company. Cash
and short-term investments approximate their carrying amount due to
the duration of these instruments. Fair values of minority equity
investments and notes receivable are estimated based on quoted market
prices, if available, or quoted market prices of financial instruments
with similar characteristics. The fair value of debt is based on the
current rates offered to the Company for debt of similar remaining
maturities. The following table presents the carrying amounts and fair
values of the Company's other financial instruments at June 30,
1998 and 1997:
1998 1997
Carrying Fair Carrying Fair
(Dollar amounts in millions) Amount Value Amount Value
Cash and short-term investments $ 84.1 $ 84.1 $ 217.2 $ 217.2
Minority equity investments $ 29.2 $ 29.2 $ 22.6 $ 22.6
Note receivable $ 7.2 $ 7.2
Short-term debt $ 12.1 $ 12.1 $ 29.9 $ 29.9
Long-term debt $ 33.7 $ 34.6 $ 59.2 $ 59.0
Net unrealized gains and losses on minority equity investments are
reported as a separate component of shareholders' equity. The Company
reported an unrealized holding loss of $1.4 million at June 30, 1998
and a $3.1 million unrealized holding gain at June 30, 1997.
Page 60
<PAGE>
Note 13 Quarterly Financial Information (Unaudited)
The following is a summary of quarterly financial results:
<TABLE>
<CAPTION>
First Quarter Second Quarter Third Quarter Fourth Quarter
(Dollar amounts in millions
except per share amounts) 1998 1997 1998 1997 1998 1997 1998 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues $ 322.7 $ 296.8 $ 369.2 $ 354.0 $ 390.8 $ 348.8 $ 448.5 $ 373.7
Gross margin 157.4 144.8 190.2 174.3 199.2 178.5 232.3 182.3
Net income (loss) 21.4 28.6 6.0 73.6 (7.0) 9.3 36.0 18.9
Net income (loss) per basic share .45 .61 .12 1.56 (.14) .20 .73 .39
Net income (loss) per diluted share .43 .59 .12 1.49 (.14) .19 .71 . 38
Events Impacting Comparability:
Fiscal 1998. First and fourth quarter results included before-tax
gains of $.8 million in each quarter, or $.02 and $.01 per diluted
share after-tax, respectively, relating to the Company's release of
contingencies on minority equity investments (see Note 2). Second
quarter results included a $28.9 million before-tax charge, or $.57
per diluted share after-tax, for acquired research and development(see
Note 2). Third and fourth quarter results included before-tax charges
for restructuring and other merger costs of $47.0 million and $1.1
million, respectively, or $.85 and $.02 per diluted share after-tax,
respectively (see Note 10). In the third quarter the Company also
recognized one-time royalty revenues and capitalized certain legal
expenses relating to the successful defense of certain patents. The
net effect of these items increased third quarter net income by
approximately $4.2 million, $.08 per diluted share.
Fiscal 1997. First and second quarter results included before-tax
gains of $11.3 million and $26.1 million, or $.21 and $.38 per diluted
share after-tax, respectively, from the sale of the Company's
remaining equity interest in Etec Systems, Inc. (see Note 2). Second,
third, and fourth quarter results included before-tax gains of $25.9
million, $.8 million, and $.8 million, or $.52, $.02, and $.02 per
diluted share after-tax, respectively, relating to the sale and
release of contingencies on minority equity investments (see Note 2).
Third quarter results included a $25.4 million before-tax charge, or
$.51 per diluted share after-tax, for acquired research and
development (see Note 2). Fourth quarter results included a net
restructuring charge of $13.0 million, or $.18 per diluted share
after-tax (see Note 10); a $1.4 million before-tax charge, or $.03 per
diluted share after-tax, for acquired research and development (see
Note 2); and a $7.5 million before-tax charge, or $.13 per diluted
share after-tax, for asset impairment (see Note 1). In addition, the
Company recognized deferred royalty income, other miscellaneous income,
and certain compensation-related expenses. The net effect of these
items increased fourth quarter net income by approximately $5.0
million, or $.10 per diluted share.
Stock Prices and Dividends 1998 1997
Stock Prices High Low High Low
First Quarter $ 86 1/8 $ 72 1/8 $ 58 1/8 $ 44 1/4
Second Quarter $ 74 $ 59 1/4 $ 61 7/8 $ 52 1/2
Third Quarter $ 76 $ 55 13/16 $ 77 1/8 $ 57 7/8
Fourth Quarter $ 75 1/8 $ 58 11/16 $ 81 1/8 $ 60 3/8
Dividends per share 1998 1997
First Quarter $ .17 $ .17
Second Quarter .17 .17
Third Quarter .17 .17
Fourth Quarter .17 .17
Total dividends per share $ .68 $ .68
Page 61
<PAGE>
REPORT OF MANAGEMENT
To The Shareholders of
The Perkin-Elmer Corporation
Management is responsible for the accompanying consolidated financial
statements, which have been prepared in conformity with generally
accepted accounting principles. In preparing the financial
statements, it is necessary for management to make informed judgments
and estimates which it believes are in accordance with generally
accepted accounting principles appropriate in the circumstances.
Financial information presented elsewhere in this annual report is
consistent with that in the financial statements.
In meeting its responsibility for preparing reliable financial
statements, the Company maintains a system of internal accounting
controls designed to provide reasonable assurance that assets are
safeguarded and transactions are properly recorded and executed in
accordance with corporate policy and management authorization. The
Company believes its accounting controls provide reasonable assurance
that errors or irregularities which could be material to the financial
statements are prevented or would be detected within a timely period.
In designing such control procedures, management recognizes judgements
are required to assess and balance the costs and expected benefits of
a system of internal accounting controls. Adherence to these polices
and procedures is reviewed through a coordinated audit effort of the
Company's internal audit staff and independent accountants.
The Audit Committee of the Board of Directors is comprised solely
of outside directors and is responsible for overseeing and monitoring
the quality of the Company's accounting and auditing practices. The
independent accountants and internal auditors have full and free
access to the Audit Committee and meet periodically with the committee
to discuss accounting, auditing, and financial reporting matters.
/s/ Dennis L. Winger
Dennis L. Winger
Senior Vice President and
Chief Financial Officer
/s/ Tony L. White
Tony L. White
Chairman, President and
Chief Executive Officer
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of
The Perkin-Elmer Corporation
In our opinion, the accompanying consolidated statements of financial
position and the related consolidated statements of operations, of
shareholders' equity, and of cash flows present fairly, in all
material respects, the financial position of The Perkin-Elmer
Corporation and its subsidiaries at June 30, 1998 and 1997, and the
results of their operations and their cash flows for each of the three
fiscal years in the period ended June 30, 1998, in conformity with
generally accepted accounting principles. 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 of these statements in accordance
with generally accepted auditing standards which 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, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
July 31, 1998
Page 62
</TABLE>
SUBSIDIARIES OF THE PERKIN-ELMER CORPORATION
State or
Jurisdiction
of Incorporation
Name or Organization
EXHIBIT 21
LIST OF SUBSIDIARIES
PKN Overseas Corporation (New York, USA)
Perkin-Elmer Pty Limited (Australia)
Perkin-Elmer (Canada) Ltd. (Canada)
Perkin-Elmer Sciex * (Canada)
Perkin-Elmer Taiwan Corporation (Delaware, USA)
Perkin-Elmer (Thailand) Limited (Thailand)
Perkin-Elmer AG (Switzerland)
Perkin-Elmer Japan Co. Ltd. (Japan)
Perkin-Elmer SA (France)
Perkin-Elmer (Sweden) AB (Sweden)
Perkin-Elmer AB (Sweden)
Perkin-Elmer OY (Finland)
Perkin-Elmer Holding BV (The Netherlands)
Perkin-Elmer Holdings Limited (UK)
Tecan AG ** (Switzerland)
Perkin-Elmer (UK) Pension Trustees Limited (UK)
Perkin-Elmer Limited (UK)
Spartan Ltd. (Channel Isles)
Listronagh Company (Ireland)
Applied Biosystems Ltd. (UK)
Perkin-Elmer BV (The Netherlands)
Perkin-Elmer Europe BV (The Netherlands)
Perkin-Elmer Belgium NV (Belgium)
Perkin-Elmer Sro (Czech Republic)
Perkin-Elmer Hungaria Kft (Hungary)
Perkin-Elmer Polska Spolka zoo (Poland)
Perkin-Elmer Genscope GmbH (Switzerland)
Perkin-Elmer GenScope Belgium BVBA (Belgium)
Joint Stock Company Perkin-Elmer AO (Russia)
Perkin-Elmer Instruments Asia Pte. LTD (Singapore)
Perkin-Elmer Instruments (Malaysia) SDN. BHD. (Malaysia)
Perkin-Elmer Instruments (Philippines) Corporation (Philippines)
Perkin-Elmer Holding GmbH (Germany)
Perkin-Elmer South Africa (PTY) Limited (South Africa)
Bodenseewerk Perkin-Elmer GmbH (Germany)
Perkin-Elmer GmbH (Austria)
Perkin-Elmer Italia SpA (Italy)
Perkin-Elmer Hong Kong, Ltd. (Hong Kong)`
Perkin-Elmer Analytical and Biochemical
Instruments (Beijing) Co., Ltd. (China)
Perkin-Elmer de Centro America, S.A. (Costa Rica)
Perkin-Elmer Industria e Comercio Ltda. (Brazil)
Page 1
<PAGE>
State or
Jurisdiction
of Incorporation
Name or Organization
Perkin-Elmer International, Inc. (Delaware, USA)
Perkin-Elmer Egypt (Egypt)
Perkin-Elmer de Argentina S.R.L. (Argentina)
Perkin-Elmer Korea Corporation (Delaware, USA)
Perkin-Elmer de Mexico SA (Mexico)
Perkin-Elmer Overseas Ltd. (Cayman Islands)
Perkin-Elmer Colombia Limitada (Colombia)
Perkin-Elmer Chile Limitada (Chile)
PECO Insurance Company Limited (Bermuda)
Perkin-Elmer China, Inc. (Delaware, USA)
Perkin-Elmer FSC, Inc. (U.S.Virgin Islands)
Perkin-Elmer Hispania SA (Spain)
Hitachi Perkin-Elmer, Ltd. (Inactive) ** (Japan)
Tropix, Inc. (Delaware, USA)
GenScope, Inc. (Delaware, USA)
PE AgGen, Inc. (Utah, USA)
Applied Biosystems GmbH (Germany)
PerSeptive Biosystems, Inc. (U.S. Corp.)
PerSeptive Biosystems GmbH (Germany)
Nihon PerSeptive KK (Japan)
PerSeptive International Holdings (Delaware, USA)
PerSeptive Biosystems (France) Ltd. (Delaware, USA)
PerSeptive Biosystems (UK) Ltd. (UK)
PerSeptive Biosystems (Canada) Ltd. (Canada)
PerSeptive Technologies II Corporation (Delaware, USA)
GC Biotechnologies LLC *** (Delaware, USA)
Celera Genomics Corporation **** (Delaware, USA)
Note: Persons directly owned by subsidiaries of The Perkin-
Elmer Corporation are indented and listed below their
immediate parent.
* 50% ownership
** 52% voting
*** 49% ownership
**** 80% ownership
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in
the Registration Statements on Form S-3 (No. 333-39549) and
Form S-8 (Nos. 2-95451, 33-25218, 33-44191, 33-50847, 33-
50849, 33-58778, 333-15189, 333-152259, 333-38713, 333-
38881, 333-42683, and 333-45187) of The Perkin-Elmer
Corporation of our report dated July 31, 1998, appearing on
page 62 of the Annual Report to Shareholders which is
incorporated in this Annual Report on Form 10-K. We also
consent to the incorporation by reference of our report on
the Financial Statement Schedule, which appears on page 25
of this Form 10-K.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Stamford, Connecticut
September 25, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
the Consolidated Statement of Operations for the Twelve Months Ended
June 30, 1998 and the Consolidated Statement of Financial Position at
June 30, 1998 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> JUN-30-1998
<CASH> 82,865
<SECURITIES> 0
<RECEIVABLES> 384,175
<ALLOWANCES> (9,277)
<INVENTORY> 240,031
<CURRENT-ASSETS> 796,136
<PP&E> 510,430
<DEPRECIATION> (251,630)
<TOTAL-ASSETS> 1,334,474
<CURRENT-LIABILITIES> 508,145
<BONDS> 0
<COMMON> 50,148
0
0
<OTHER-SE> 514,100
<TOTAL-LIABILITY-AND-EQUITY> 1,334,474
<SALES> 1,531,165
<TOTAL-REVENUES> 1,531,165
<CGS> 752,045
<TOTAL-COSTS> 752,045
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 4,673
<INTEREST-EXPENSE> 4,905
<INCOME-PRETAX> 100,602
<INCOME-TAX> (38,617)
<INCOME-CONTINUING> 56,388
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 56,388
<EPS-PRIMARY> 1.16
<EPS-DILUTED> 1.12
</TABLE>
