FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
(Mark One)
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 1994
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 001-10109
BECKMAN INSTRUMENTS, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-104-0600
(State of Incorporation) (I.R.S. Employer
Identification No.)
2500 Harbor Boulevard, Fullerton, California 92634
(Address of principal executive offices) (Zip Code)
(714) 871-4848
(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes (X) No ( ).
APPLICABLE ONLY TO CORPORATE ISSUERS:
Outstanding shares of common stock, $0.10 par value, as of July 11,
1994: 29,078,435 shares.
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements Page
Condensed Consolidated Statements of Earnings
for the three and six month periods ended June 30,
1994 and 1993 3
Condensed Consolidated Balance Sheets
as of June 30, 1994 and December 31, 1993 4
Condensed Consolidated Statements of Cash Flows
for the six month periods ended June 30, 1994 and
1993 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II
OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes In Securities 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security-Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 12
<PAGE>
BECKMAN INSTRUMENTS, INC.
SECOND QUARTER REPORT
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars in Millions, Except Amounts Per Share)
Unaudited
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Sales $222.2 $221.8 $420.8 $423.5
Operating costs and expenses:
Cost of sales 105.2 106.7 200.3 203.8
Marketing, administrative
and general 69.2 72.1 132.6 135.4
Research, development
and engineering 22.9 22.9 44.5 45.3
Restructuring 1.1 - 2.3 -
------- ------- ------- -------
198.4 201.7 379.7 384.5
------- ------- ------- -------
Operating income 23.8 20.1 41.1 39.0
Nonoperating income (expense):
Interest income 1.2 0.9 2.3 1.8
Interest expense (3.3) (2.9) (6.0) (6.0)
Other, net (1.7) 0.1 (2.4) (0.6)
(3.8) (1.9) (6.1) (4.8)
Earnings before income taxes 20.0 18.2 35.0 34.2
Provision for income taxes 7.0 6.5 12.2 12.3
------- ------- ------- -------
Net earnings before cumulative
effect of changes in
accounting principles 13.0 11.7 22.8 21.9
Cumulative effect of changes in
accounting principles:
Accounting for income taxes - - - 26.2
Accounting for postretirement
benefits other than pensions
(net of tax benefit of $17.0) - - - (30.2)
Accounting for postemployment
benefits (net of tax
benefit of $3.0) - - (5.1) -
------- ------- ------- -------
Net earnings $13.0 $11.7 $17.7 $17.9
Average number of shares
outstanding (thousands) 27,977 27,782 27,948 27,989
Net earnings per share before
cumulative effect of changes
in accounting principles $0.46 $0.42 $0.81 $0.78
Cumulative effect of changes in
accounting principles:
Accounting for income taxes - - - 0.93
Accounting for postretirement
benefits other than pensions - - - (1.07)
Accounting for postemployment
benefits - - (0.18) -
------- ------- ------- -------
Net earnings per share $0.46 $0.42 $0.63 $0.64
------- ------- ------- -------
See accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
BECKMAN INSTRUMENTS,INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Millions)
Unaudited
<TABLE>
<CAPTION>
June 30 December 31
1994 1993
<S> <C> <C>
Assets
Current assets:
Cash and equivalents $31.5 $24.2
Short-term investments 0.3 21.9
Trade receivables 261.7 252.1
Inventories 165.5 163.9
Deferred income taxes 70.1 70.6
Other current assets 14.6 11.8
------- -------
Total current assets 543.7 544.5
Property, plant and equipment, net 219.1 216.8
Deferred income taxes 32.9 30.3
Other assets 26.2 28.4
------- -------
Total assets $821.9 $820.0
------- -------
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable $26.0 $31.7
Accounts payable and accrued expenses 217.6 242.7
Income taxes 55.2 48.9
------- -------
Total current liabilities 298.8 323.3
Long-term debt 94.8 113.7
Other liabilities 128.7 107.5
------- -------
Total liabilities 522.3 544.5
------- -------
Stockholders' equity 299.6 275.5
------- -------
Total liabilities and
stockholders' equity $821.9 $820.0
------- -------
See accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
BECKMAN INSTRUMENTS,INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Millions)
Unaudited
<TABLE>
<CAPTION>
Six Months Ended
June 30
1994 1993
<S> <C> <C>
Cash Flows From Operating Activities
Net earnings $17.7 $17.9
Adjustments to reconcile net earnings to net
cash provided (used) by operating activities:
Depreciation and amortization 33.9 31.3
Changes in assets and liabilities:
Trade receivables (3.4) 11.4
Inventories 0.6 (15.3)
Deferred income taxes (1.8) (36.9)
Accounts payable and accrued expenses (4.7) (21.9)
Restructure reserve (22.5) -
Income taxes 6.3 2.3
Other 20.2 10.0
------- -------
Net cash provided (used) by operating activities 46.3 (1.2)
------- -------
Cash Flows from Investing Activities
Additions to property, plant and equipment (41.5) (42.7)
Net disposals of property, plant and equipment 8.0 8.7
Net proceeds from investments 21.7 5.7
------- -------
Net cash used by investing activities (11.8) (28.3)
------- -------
Cash Flows from Financing Activities
Dividends to stockholders (5.6) (5.1)
Proceeds from issuance of stock 5.9 6.8
Treasury stock repurchase - (23.8)
Notes payable borrowing 3.1 3.7
Notes payable reductions (11.3) (11.0)
Long-term debt borrowing 4.6 84.7
Long-term debt reductions (23.9) (27.3)
Other (0.3) -
------- -------
Net cash provided (used) by financing activities (27.5) 28.0
------- -------
Effect of exchange rates on cash and equivalents 0.3 (0.1)
------- -------
Increase (decrease) in cash and equivalents 7.3 (1.6)
Cash and equivalents -- beginning of period 24.2 25.9
------- -------
Cash and equivalents -- end of period $31.5 $24.3
------- -------
Supplemental Disclosures of Cash Flow Information
Cash paid during the period for:
Interest $5.9 $6.7
Income taxes $4.7 $3.2
See accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
BECKMAN INSTRUMENTS, INC.
Notes To
Condensed Consolidated Financial Statements
1 Report by Management
In the opinion of the Company, the accompanying unaudited condensed
consolidated financial statements reflect all adjustments, consisting
only of normal recurring accruals, necessary for a fair presentation
of the results for the periods. The statements are prepared in
accordance with the requirements of Form 10-Q and do not include all
disclosures required by generally accepted accounting principles or
those made in the Annual Report on Form 10-K for 1993 which is on file
with the Securities and Exchange Commission.
The results of operations for the six months ended June 30, 1994 are
not necessarily indicative of the results to be expected for the year
ending December 31, 1994.
2 Inventories
Inventories are comprised of the following:
<TABLE>
<CAPTION>
June 30 December 31
1994 1993
------- -------
<S> <C> <C>
Finished products $110.6 $ 110.2
Raw materials, parts
and assemblies 47.9 42.0
Work in-process 7.0 11.7
------- -------
$165.5 $163.9
------- -------
</TABLE>
3 Changes in Accounting Principles
Postemployment benefits
Effective January 1, 1994 the Company adopted Statement of Financial
Accounting Standards No. 112 ("SFAS 112") "Employers' Accounting for
Postemployment Benefits". This statement requires the Company to
recognize an obligation for postemployment benefits provided to former
or inactive employees, their beneficiaries and covered dependents
after employment but before retirement. Accordingly, the Company
recognized a transition obligation of $8.1 million and a net expense
of $5.1 million (net of tax benefit of $3.0 million) as the cumulative
effect of the accounting change. Adoption of SFAS 112 will not have
a material impact on operating results of the Company for 1994.
<PAGE>
Income Taxes
Effective January 1, 1993 the Company adopted Statement of Financial
Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income
Taxes". Accordingly, the Company recognized deferred tax assets
reflecting the benefit expected to be realized from net deductible
temporary differences. The recognition resulted in the Company
recording income and a tax deferred asset equal to the cumulative
effect of the accounting change of $26.2 million (net of a valuation
allowance of $10.1 million).
Postretirement Benefits Other Than Pension
Effective January 1, 1993 the Company adopted SFAS 106 "Employers
Accounting for Postretirement Benefits Other Than Pensions" and
immediately recognized its obligation for prior years' service cost.
Accordingly, the Company recorded a transition obligation of $47.2
million and a net expense of $30.2 (net of tax benefits of $17.0
million) as the cumulative effect of the accounting change.
4 Contingencies
The Company is involved in the investigation and remediation of soil
and groundwater contamination for property it sold in 1984. In 1990
the Company entered into an agreement with the purchaser for
settlement of a 1988 lawsuit and for sharing current and future costs
of investigation, remediation and other claims. In 1991 a lawsuit was
filed against the 1984 purchaser by a third party that had
subsequently purchased a portion of the above property, alleging
damages caused by the pollution of the property. Although the Company
is not a named defendant in the action, the Company may be obligated
to contribute to any resolution of that action pursuant to its 1990
settlement agreement with the original purchaser. In 1993 the Company
increased its existing reserves for soil and groundwater remediation
and for resolution of the 1991 lawsuit by $12.5 million.
During 1993 the Company made substantial progress in soil remediation
on the site, although there remain some areas of soil contamination
that may require further remediation. The Company also operated a
groundwater treatment system throughout most of 1993 and in the fourth
quarter expanded the capacity of the system. The expanded system is
believed to be adequate to remediate the groundwater based upon
available information. A series of test wells were drilled on the
property which provided additional information concerning the area of
groundwater contamination. The Company believes it has established
adequate reserves to complete the remediation of any remaining soil
contamination, operation and maintenance of the expanded groundwater
treatment system and any additional groundwater investigations.
Investigations on the property are continuing and there can be no
assurance that further investigations will not reveal additional
contamination or result in additional costs. The Company believes
additional remediation costs for the contamination discovered by the
current investigations and liability for the resolution of the 1991
lawsuit, if any, beyond those already provided will not have a
material adverse effect on the Company's operations or financial
position.
<PAGE>
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
Operations
Sales for the second quarter and six months ended June 30, 1994 were
$222.2 million and $420.8 million, respectively. The second quarter
sales represent a slight increase over second quarter 1993 sales
despite the continued adverse effects of foreign currency exchange
rates. Second quarter sales would have increased by 1% had currency
exchange rates remained constant. Sales for the six month period
decreased by 1%, but would have increased by 1% without the effects of
foreign currencies. Sales for the North American diagnostic business
continue to outpace those for prior year, however sales of the
Company's North American bioresearch business are down for both the
quarter and year to date. The Company's international sales have been
adversely impacted by currency exchange rates, the European recession,
and cost containment initiatives in several European health care
systems. The weaknesses in the European markets and the North
American bioresearch market are expected to continue.
Operating profit, excluding restructuring expenses, for the second
quarter and six months ended June 30, 1994 were $24.9 million and
$43.4 million, respectively. These results represent increases of 24%
and 11% over comparable periods in the prior year as the Company
begins to realize savings from the reorganization and restructuring
begun at the end of 1993. These savings have helped to increase gross
profit margins by .8% to 52.7% for the quarter and .5% to 52.4%
year-to-date, and helped decrease Marketing, Administrative and
General Expenses by $2.9 million and $2.8 million over the same
periods in 1993. The Company continued its commitment to new product
development, investing over 10% of sales revenue in research and
development through the first six months. Including the cost of the
restructuring, the Company generated operating profits of $23.8
million and $41.1 million in the second quarter and first six months,
respectively.
The Company continues to realize savings from its reorganization and
restructuring efforts. For the six months ended June 30, 1994 the
Company saved approximately $10.0 million. These savings are primarily
attributable to personnel level reductions in excess of 600
individuals since the reorganization announcement. As the
restructuring implementation continues, these savings are expected to
increase to the anticipated savings of $25 million for 1994. Not all
of these savings however, will be incremental to earnings during this
time of transition, constrained markets and flat sales.
<PAGE>
Nonoperating expenses increased, compared to the same periods in the
prior year, by $1.9 million for the quarter and $1.3 million year to
date. These increases are primarily attributable to the cost of
hedging activities undertaken to mitigate the effects of currency
fluctuations on the Company's operations.
Earnings before income taxes, excluding restructuring expenses, for
the second quarter and first six months of 1994 were $2.9 million and
$3.1 million higher than pretax earnings for the same periods in 1993.
Pretax earnings improvements were reduced to $1.8 million and $0.8
million respectively by restructuring expenses. The Company has
benefitted from a decrease in its effective income tax rate from 36%
to 35% as a larger proportion of the Company's earnings have been
generated in lower tax rate jurisdictions. In the second quarter of
1994, the Company's net earnings, excluding restructuring expenses,
increased by $2.0 million over 1993 to $13.7 million or $0.49 per
share. Net earnings for the first six months, before restructuring
expenses and changes in accounting principle, were $24.3 million or
$0.87 per share versus $21.9 million or $0.78 per share for the same
period of 1993.
In the first quarter of 1994, the Company adopted Statement of
Financial Accounting Standard No. 112 ("SFAS 112") Employers'
Accounting for Postemployment Benefits. This statement required the
Company to recognize a prior service obligation for the Company's
commitment to provide benefits to former or inactive employees, and
their beneficiaries or covered dependents after employment but before
retirement. Adoption of SFAS 112 resulted in the Company recording an
after tax charge of $5.1 million in the first quarter.
Net earnings for the second quarter of 1994 were $13.0 million, or
$0.46 per share compared to $11.7 million or $0.42 in 1993. Net
earnings for the six months ended June 30, 1994 were $17.7 million or
$.63 per share compared to $17.9 million or $.64 per share in 1993.
The following table summarizes the impact of restructuring charges and
the cumulative effect of changes in accounting principles on net
earnings per share for the quarter and six months ended June 30, 1994.
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1994 1993 1994 1993
Per Per Per Per
Amt Share Amt Share Amt Share Amt Share
----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net earnings before
restructuring expenses and
cumulative effect of changes
in accounting principles $13.7 .49 11.7 .42 24.3 .87 21.9 .78
Restructuring expenses,
net of taxes (.7) (.03) - - (1.5) (.06) - -
Cumulative effect of changes
in accounting principles - - - - (5.1) (.18) (4.0) (.14)
----- ----- ----- ----- ----- ----- ----- -----
Net Earnings $13.0 .46 11.7 .42 17.7 .63 17.9 .64
</TABLE>
Financial Condition
For the six months ended June 30, 1994, the Company had positive cash
flow from operating and investing activities of $34.5 million. This
represents an increase of $64.0 million over the same period in 1993.
Contributing to this increase were lower pension plan contributions,
lower incentive compensation payments and an increase in proceeds from
short term investments in 1994.
The Company continued to exhibit its strong financial condition as its
ratio of debt to capitalization at June 30, 1994 of 28.7% improved
from 34.5% at December 31, 1993. The ratio of current assets to
current liabilities also improved to 1.82 at June 30, 1994 from 1.68
at December 31, 1993. The Company believes it has adequate financial
resources to meet expected cash flow requirements for the foreseeable
future, including the negative short-term impact associated with the
Company's reorganization and restructuring activities. In 1995 and
beyond, the reorganization and restructuring will have a positive
impact on cash flow.
On June 2, 1994, the Company paid a quarterly cash dividend of $2.8
million or $.10 per share of common stock.
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
As previously reported, the Company is obligated to
contribute to a resolution of a lawsuit filed by Forest
City Properties Corporation and FC Irvine, Inc.
(collectively, "Forest City") against The Prudential
Insurance Company of America ("Prudential") in 1991
concerning property in Irvine, California formerly owned by
the Company. The Company's obligation arises from its 1990
settlement of earlier litigation between the Company and
Prudential concerning the same property. During the second
quarter, the court scheduled the trial of the Forest City
lawsuit to begin October 31, 1994.
Item 2. Changes In Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security-Holders
None.
Item 5. Other Information
At its May 25, 1994 meeting, the Company's Board of
Directors elected Betty Woods, President and Chief
Executive Officer of Blue Cross of Washington and Alaska,
a member of the Board. Ms. Woods' knowledge and experience
with the healthcare delivery system dynamics and economics
is expected to help guide the Company through the
challenging period of healthcare reform occurring in this
country and abroad. The addition of Ms. Woods expands the
Company's Board from eleven to twelve members, ten of whom
are outside directors. Ms. Woods' term will expire at the
Company's 1996 annual meeting.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
10. The Company's Executive Incentive Plan, adopted
by the Company in 1994.
15. Independent Accountants' Report, July 15, 1994
b) Reports on Form 8-K
None.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
BECKMAN INSTRUMENTS, INC.
(Registrant)
Date: July 19, 1994 by /s/ William H. May
------------------------
William H. May
Vice President, General
Counsel and Secretary
Date: July 19, 1994 by /s/ Dennis K. Wilson
------------------------
Dennis K. Wilson
Vice President, Finance
and Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- - ------- -----------
10. The Company's Executive Incentive Plan, adopted by the
Company in 1994.
15. Independent Accountants' Report, July 15, 1994
EXHIBIT 10
BECKMAN INSTRUMENTS INC.
EXECUTIVE INCENTIVE PLANS, 1994
FY 94 MANAGEMENT INCENTIVE PLAN
CLASSES 9 AND 10
Background:
Class 9 and 10 managers, directors and upper level technical
contributors.
Bonus Eligibility:
The key elements in determining incentive awards are:
1) Company Earnings per Share
2) Sales Revenue, and
3) Individual overall EXCEL rating
Earnings per Share:
Earnings per share continues to be a critical factor in the company's
performance and valuation by the financial community. Because of its
importance, company EPS is the fundamental measurement for the annual
incentive opportunity. The basic award guidelines for the degree of
achievement are as follows:
Award Percentage
EPS Achieved of Base Earnings
$2.15 30.0%
$2.10 22.0%
$2.05 14.0%
$2.00 9.0%
$1.95 3.5%
below $1.95 0%
A pro-rata incentive award percentage is calculated
for gradations between achievement levels.
Sales Revenue Modifier:
The award percentage for EPS achievement will be increased by 10% if
EPS is $2.05 or higher for FY 94 and the company's sales goal is met
or exceeded.
Individual Incentive Award Determination:
The final step in the calculation of individual incentive awards is
the application of an individual performance multiplier to the award
percentage for EPS achievement after any adjustment for sales revenue.
This multiplier is derived from the "overall rating" for Performance
Expectations in the EXCEL process and is expressed as a percentage to
be applied to the EPS award guideline. Base earnings for the period of
incentive eligibility (eligible earnings) are then multiplied by the
final award percentage to determine the amount of incentive award.
Overall Performance Rating Performance Multiplier to be
for Performance Expectations Applied to Award Guideline
Exceptional 130% - 150%
High 100% - 120%
Good 50% - 90%
Improved Performance Required 0%
Example of How the Annual Incentive Award is Calculated:
Assume that EPS achievement is $2.05 and the company sales revenue
goal is met or exceeded. In this example, the total annual award
percentage before applying the individual performance multiplier is
15.4% (14.0% + 10% x 14.0%). The 15.4% award will be increased to a
18.5% individual incentive award with an individual performance
multiplier of 120%. Conversely, an individual performance modifier of
80% would reduce the 15.4% award to a 12.3% final EPS incentive award.
Administration:
1) All financial results will be measured on an "as reported" basis
with no adjustment for any effect of currency fluctuations.
2) Any issues regarding plan interpretation will be referred for
resolution to a "Management Incentive Committee" appointed by the
Chief Executive Officer.
3) To be eligible for a management incentive award, a participant
must be in active pay status at the end of the measurement
period. Exceptions may be approved on a pro rata basis for
participants who retire in midyear or other special
circumstances.
<PAGE>
FY 94 EXECUTIVE INCENTIVE PLAN
CLASSES 12 AND 13
Background:
Beginning with FY 94, key executives will have two separate incentive
opportunities with different time horizons and different performance
measures. For the annual incentive opportunity, the focus will be on
annual results in terms of company "Earnings Per Share" (EPS) with
sales revenue and the individual overall rating for Performance
Expectations in the EXCEL process affecting the
final incentive award. The second time horizon of incentive
opportunity will be based on company "Economic Value Added" (EVA) for
a two-year cycle under a long-term incentive plan.
Annual (EPS) Incentive:
Earnings per share continues to be a critical factor in the company's
performance and valuation by the financial community. Because of its
importance, company EPS is the fundamental measurement for the annual
incentive opportunity. The basic award guidelines for the degree of
achievement are as follows:
Award Percentage
EPS Achieved of Base Earnings
$2.15 27.2%
$2.10 25.4%
$2.05 23.1%
$2.00 14.6%
$1.95 5.8%
below $1.95 0%
A pro-rata percentage is calculated for achievement
between the above award levels.
Sales Revenue Modifier:
The award percentage for EPS achievement will be increased by 10% if
EPS is $2.05 or higher for FY 94 and the company's sales goal is met
or exceeded.
Individual Incentive Award Determination:
The final step in the calculation of individual incentive awards is
the application of an individual performance multiplier to the award
percentage for EPS achievement after any adjustment for sales revenue.
This multiplier is derived from the "overall rating" for Performance
Expectations in the EXCEL process and is expressed as a percentage to
be applied to the EPS award guideline. Base earnings for the period of
incentive eligibility (eligible earnings) are then multiplied by the
final award percentage to determine the amount of incentive award.
Overall Performance Rating Performance Multiplier to be
for Performance Expectations Applied to Award Guideline
Exceptional 130% - 150%
High 100% - 120%
Good 50% - 90%
Improved Performance Required 0%
Example of How the Annual Incentive Award is Calculated:
Assume that EPS achievement is $2.10 and the company sales revenue
goal is met or exceeded. In this example, the total annual award
percentage before applying the individual performance multiplier is
27.9% (25.4% + 10% x 25.4% rounded). The 27.9% award will be increased
to a 33.5% individual incentive award with an individual performance
multiplier of 120%. Conversely, an individual performance modifier of
80% would reduce the 27.9% award to a 22.3% final EPS annual incentive
award.
Administration:
1) All financial results will be measured on an "as reported" basis
with no adjustment for any effect of currency fluctuations.
2) To be eligible for an annual EPS incentive award, a participant
must be in active pay status at the end of the measurement
period. Partial payments will be made for retirees, as defined by
the company's pension plan, who leave before the end of the
fiscal year.
<PAGE>
TWO-YEAR ECONOMIC VALUE ADDED (EVA) INCENTIVE PLAN
CYCLE ONE BEGINNING FY 93
CLASSES 12 AND 13
Background:
The two year (long-term plan) incentive is based upon maintaining and
improving the base amount of total company EVA through a two-year
measurement cycle. EVA benchmarks for incentive eligibility will be
established for each two-year cycle at its beginning and successive
cycles overlap by one year. For example, the second year of cycle one
becomes the first year of cycle two. For the start-up of the EVA
incentive, FY 93 is the first year of the first two-year cycle.
EVA Definition:
EVA is defined as the net operating profit after-tax (excluding
restructuring charges), less a cost of capital charge on a
thirteen-month average capital base (excluding restructuring
reserves). This performance measurement reflects the relationship
between profits generated by the company and the cost of the balance
sheet investment. Certain events may trigger a reassessment of the EVA
targets for incentive eligibility.
EVA Award Eligibility:
The EVA target for the first cycle, ending December 31, 1994, is $12.0
million. This represents an increase of $10.6 million over the $1.4
million EVA at the beginning of the cycle. For Class 12 and 13
executives, this will generate a 10.0% of base earnings award.
Gradations in performance above and below the targeted EVA are
depicted below.
EVA CYCLE ONE (1993 & 1994)
Absolute EVA Final EVA
($million) Award
less than $1.4 0%
$1.4 5.0%
$12.0 10.0%
$20.3 20.0%
greater than $20.3 20.0%
A pro rata incentive award percentage is calculated
for gradations between EVA improvement levels.
Individual Eligible Earnings for EVA Award:
Although the EVA measurement period is two years, the actual award
calculation will be based upon an individual participant's total base
earnings for the second year of the two-year cycle. One year of
eligible earnings is applied because of the overlapping nature of the
two-year cycles.
Deferred Stock Award Alternative:
Payment of the earned incentive will be made in cash, subject to
standard withholding taxes and deductions, or a participant may elect
to be paid in restricted stock. Details of the restricted stock
alternative are described in the insert to this document.
Administration:
1) All financial results will be measured on an "as reported" basis
with no adjustment for any effect of currency fluctuations.
2) Qualifying events that may cause adjustments to original approved
EVA targets must be: 1) unanticipated; 2) non-recurring; 3)
material in nature; and 4) not part of normal business
operations.
3) To be eligible for a full EVA incentive award, a participant must
be in active pay status at the end of the two-year measurement
period. Partial payments will be made in cash for retirees, as
defined by the company's pension plan, who do not elect payment
in restricted stock and leave before completion of the EVA cycle.
<PAGE>
TWO-YEAR ECONOMIC VALUE ADDED (EVA) INCENTIVE PLAN
CYCLE TWO BEGINNING FY 94
CLASSES 12 AND 13
Background:
The two year (long-term plan) incentive is based upon maintaining and
improving the base amount of total company EVA through a two-year
measurement cycle. EVA benchmarks for incentive eligibility will be
established for each two-year cycle at its beginning and successive
cycles overlap by one year. For example, the second year of cycle one,
fiscal year 1994, will be the first year of cycle two.
EVA Definition:
EVA is defined as the net operating profit after-tax (excluding
restructuring charges), less a cost of capital charge on a
thirteen-month average capital base (excluding restructuring
reserves). This performance measurement reflects the relationship
between profits generated by the company and the cost of the balance
sheet investment. Certain events may trigger a reassessment of the EVA
targets for incentive eligibility.
EVA Award Eligibility:
The EVA target for cycle two, ending December 31, 1995, is $20.6
million. This represents an increase of $20.0 million over the $0.6
million EVA at the beginning of the cycle. For Class 12 and 13
executives, this will generate a 10.0% of base earnings award.
Gradations in performance above and below the targeted EVA are
depicted below.
EVA CYCLE TWO (1994 & 1995)
Absolute EVA Final EVA
($million) Award
less than $0.6 0%
$0.6 5.0%
$20.6 10.0%
$30.0 20.0%
greater than $30.0 20.0%
A pro rata incentive award percentage is calculated
for gradations between EVA improvement levels.
Individual Eligible Earnings for EVA Award:
Although the EVA measurement period is two years, the actual award
calculation will be based upon an individual participant's total base
earnings for the second year of the two-year cycle. One year of
eligible earnings is applied because of the overlapping nature of the
two-year cycles.
Deferred Stock Award Alternative:
Payment of the earned incentive will be made in cash, subject to
standard withholding taxes and deductions, or a participant may elect
to be paid in restricted stock. Details of the restricted stock
payment alternative are described in the insert to this document.
Administration:
1) All financial results will be measured on an "as reported" basis
with no adjustment for any effect of currency fluctuations.
2) Qualifying events that may cause adjustments to original approved
EVA targets must be: 1) unanticipated; 2) non-recurring; 3
material in nature; and 4) not part of normal business
operations.
3) To be eligible for an EVA incentive award, a participant must be
in active pay status at the end of the two-year measurement
period. Partial payments will be made in cash for retirees, as
defined by the company's pension plan, who do not elect payment
in restricted stock, and leave before completion of the EVA
cycle.
<PAGE>
FY 94 EXECUTIVE INCENTIVE PLAN
CLASSES 14 THROUGH 17
Background:
Beginning with FY 94, key executives will have two separate incentive
opportunities with different time horizons and different performance
measures. For the annual incentive opportunity, the focus will be on
annual results in terms of company "Earnings Per Share" (EPS) with
sales revenue and the individual overall rating for Performance
Expectations in the EXCEL process affecting the final incentive award.
The second time horizon of incentive opportunity will be based on
company "Economic Value Added" (EVA) for a two-year cycle under a
long-term incentive plan.
Annual (EPS) Incentive:
Earnings per share continues to be a critical factor in the company's
performance and valuation by the financial community. Because of its
importance, company EPS is the fundamental measurement for the annual
incentive opportunity. The basic award guidelines for the degree of
achievement are as follows:
Award Percentage
EPS Achieved of Base Earnings
$2.15 35.3%
$2.10 32.3%
$2.05 29.4%
$2.00 18.5%
$1.95 7.4%
below $1.95 0%
A pro-rata percentage is calculated for achievement
between the above award levels.
Sales Revenue Modifier:
The award percentage for EPS achievement will be increased by 10% if
EPS is $2.05 or higher for FY 94 and the company's sales goal is met
or exceeded.
Individual Incentive Award Determination:
The final step in the calculation of individual incentive awards is
the application of an individual performance multiplier to the award
percentage for EPS achievement after any adjustment for sales revenue.
This multiplier is derived from the "overall rating" for Performance
Expectations in the EXCEL process and is expressed as a percentage to
be applied to the EPS award guideline. Base earnings for the period of
incentive eligibility (eligible earnings) are then multiplied by the
final award percentage to determine the amount of incentive award.
Overall Performance Rating Performance Multiplier to be
for Performance Expectations Applied to Award Guideline
Exceptional 130% - 150%
High 100% - 120%
Good 50% - 90%
Improved Performance Required 0%
Example of How the Annual Incentive Award is Calculated:
Assume that EPS achievement is $2.10 and the company sales revenue
goal is met or exceeded. In this example, the total annual award
percentage before applying the individual performance multiplier is
35.5% (32.3% + 10% x 32.3% rounded). The 35.5% award will be increased
to a 42.6% individual incentive award with an individual performance
multiplier of 120%. Conversely, an individual performance modifier of
80% would reduce the 35.5% award to a 28.4% final EPS annual incentive
award.
Administration:
1) All financial results will be measured on an "as reported" basis
with no adjustment for any effect of currency fluctuations.
2) To be eligible for an annual EPS incentive award, a participant
must be in active pay status at the end of the measurement
period. Partial payments will be made for retirees, as defined by
the company's pension plan, who leave before the end of the
fiscal year.
<PAGE>
TWO-YEAR ECONOMIC VALUE ADDED (EVA) INCENTIVE PLAN
CYCLE ONE BEGINNING FY 93
CLASSES 14 THROUGH 17
Background:
The two year (long-term plan) incentive is based upon maintaining and
improving the base amount of total company EVA through a two-year
measurement cycle. EVA benchmarks for incentive eligibility will be
established for each two-year cycle at its beginning and successive
cycles overlap by one year. For example, the second year of cycle one
becomes the first year of cycle two. For the start-up of the EVA
incentive, FY 93 is the first year of the first two-year cycle.
EVA Definition:
EVA is defined as the net operating profit after-tax (excluding
restructuring charges), less a cost of capital charge on a
thirteen-month average capital base (excluding restructuring
reserves). This performance measurement reflects the relationship
between profits generated by the company and the cost of the balance
sheet investment. Certain events may trigger a reassessment of the EVA
targets for incentive eligibility.
EVA Award Eligibility:
The EVA target for the first cycle, ending December 31, 1994, is $12.0
million. This represents an increase of $10.6 million over the $1.4
million EVA at the beginning of the cycle. For Class 14 - 17
executives, this will generate a 12.6% of base earnings award.
Gradations in performance above and below the targeted EVA are
depicted below.
EVA CYCLE ONE (1993 & 1994)
Absolute EVA Final EVA
($million) Award
less than $1.4 0%
$1.4 6.3%
$12.0 12.6%
$20.3 25.2%
greater than $20.3 25.2%
A pro rata incentive award percentage is calculated
for gradations between EVA improvement levels.
Individual Eligible Earnings for EVA Award:
Although the EVA measurement period is two years, the actual award
calculation will be based upon an individual participant's total base
earnings for the second year of the two-year cycle. One year of
eligible earnings is applied because of the overlapping nature of the
two-year cycles.
Deferred Stock Award Alternative:
Payment of the earned incentive will be made in cash, subject to
standard withholding taxes and deductions, or a participant may elect
to be paid in restricted stock. Details of the restricted stock
alternative are described in the insert to this document.
Administration:
1) All financial results will be measured on an "as reported" basis
with no adjustment for any effect of currency fluctuations.
2) Qualifying events that may cause adjustments to original approved
EVA targets must be: 1) unanticipated; 2) non-recurring; 3)
material in nature; and 4) not part of normal business
operations.
3) To be eligible for a full EVA incentive award, a participant must
be in active pay status at the end of the two-year measurement
period. Partial payments will be made in cash for retirees, as
defined by the company's pension plan, who do not elect payment
in restricted stock and leave before completion of the EVA cycle.
<PAGE>
TWO-YEAR ECONOMIC VALUE ADDED (EVA) INCENTIVE PLAN
CYCLE TWO BEGINNING FY 94
CLASSES 14 THROUGH 17
Background:
The two year (long-term plan) incentive is based upon maintaining and
improving the base amount of total company EVA through a two-year
measurement cycle. EVA benchmarks for incentive eligibility will be
established for each two-year cycle at its beginning and successive
cycles overlap by one year. For example, the second year of cycle one,
fiscal year 1994, will be the first year of cycle two.
EVA Definition:
EVA is defined as the net operating profit after-tax (excluding
restructuring charges), less a cost of capital charge on a
thirteen-month average capital base (excluding restructuring
reserves). This performance measurement reflects the relationship
between profits generated by the company and the cost of the balance
sheet investment. Certain events may trigger a reassessment of the EVA
targets for incentive eligibility.
EVA Award Eligibility:
The EVA target for the cycle two, ending December 31, 1995, is $20.6
million. This represents an increase of $20.0 million over the $0.6
million EVA at the beginning of the cycle. For Class 14-17 executives,
this will generate a 12.6% of base earnings award. Gradations in
performance above and below the targeted EVA are depicted below.
EVA CYCLE TWO (1994 & 1995)
Absolute EVA Final EVA
($million) Award
less than $0.6 0%
$0.6 6.3%
$20.6 12.6%
$30.0 25.2%
greater than $30.0 25.2%
A pro rata incentive award percentage is calculated
for gradations between EVA improvement levels.
Individual Eligible Earnings for EVA Award:
Although the EVA measurement period is two years, the actual award
calculation will be based upon an individual participant's total base
earnings for the second year of the two-year cycle. One year of
eligible earnings is applied because of the overlapping nature of the
two-year cycles.
Deferred Stock Award Alternative:
Payment of the earned incentive will be made in cash, subject to
standard withholding taxes and deductions, or a participant may elect
to be paid in restricted stock. Details of the restricted stock
payment alternative are described in the insert to this document.
Administration:
1) All financial results will be measured on an "as reported" basis
with no adjustment for any effect of currency fluctuations.
2) Qualifying events that may cause adjustments to original approved
EVA targets must be: 1) unanticipated; 2) non-recurring; 3)
material in nature; and 4) not part of normal business
operations.
3) To be eligible for a full EVA incentive award, a participant must
be in active pay status at the end of the two-year measurement
period. Partial payments will be made in cash for retirees, as
defined by the company's pension plan, who do not elect payment
in restricted stock and leave before completion of the EVA cycle.
<PAGE>
EXECUTIVE INCENTIVE PLAN AWARD GUIDELINES
VICE PRESIDENT - BIORESEARCH COMMERCIAL OPERATIONS, INTERNATIONAL
FY 94 ANNUAL FY 94 ANNUAL
(EPS) INCENTIVE WW OPERATING PROFIT
EPS Award % Budget Award
Achieved Percentage Achievement Guideline
$2.15 16.8% 110% 21.0%
$2.10 15.4% 105% 17.5%
$2.05 14.0% 100% 14.0%
$2.00 8.8% 95% 8.8%
$1.95 3.5% 90% 3.5%
below $1.95 0% below 90% 0%
A pro rata incentive award percentage is calculated for
gradations between achievement levels.
EVA CYCLE ONE (1993 & 1994) EVA CYCLE TWO (1994 & 1995)
Absolute EVA Final EVA Absolute EVA Final EVA
($million) Award ($million) Award
less than $1.4 0% less than $0.6 0%
$1.4 7.0% $0.6 7.0%
$12.0 14.0% $20.6 14.0%
$20.3 28.0% $30.0 28.0%
greater than $20.3 28.0% greater than $30.0 28.0%
A pro rata incentive award percentage is calculated for
gradations between EVA improvement levels.
<PAGE>
EXECUTIVE INCENTIVE PLAN AWARD GUIDELINES
VICE PRESIDENT - DIAGNOSTIC COMMERCIAL OPERATIONS
FY 94 ANNUAL FY 94 ANNUAL
(EPS) INCENTIVE WW OPERATING PROFIT
EPS Award % Budget Award
Achieved Percentage Achievement Guideline
$2.15 16.8% 110% 21.0%
$2.10 15.4% 105% 17.5%
$2.05 14.0% 100% 14.0%
$2.00 8.8% 95% 8.8%
$1.95 3.5% 90% 3.5%
below $1.95 0% below 90% 0%
A pro rata incentive award percentage is calculated for
gradations between achievement levels.
EVA CYCLE ONE (1993 & 1994) EVA CYCLE TWO (1994 & 1995)
Absolute EVA Final EVA Absolute EVA Final EVA
($million) Award ($million) Award
less than $1.4 0% less than $0.6 0%
$1.4 7.0% $0.6 7.0%
$12.0 14.0% $20.6 14.0%
$20.3 28.0% $30.0 28.0%
greater than $20.3 28.0% greater than $30.0 28.0%
A pro rata incentive award percentage is calculated for
gradations between EVA improvement levels.
<PAGE>
EXECUTIVE INCENTIVE AWARD GUIDELINES
SENIOR VICE PRESIDENT
FY 94 ANNUAL(EPS) INCENTIVE
EPS Award
Achieved Percentage
$2.15 42.0%
$2.10 38.5%
$2.05 35.0%
$2.00 22.1%
$1.95 8.8%
below $1.95 0%
A pro rata incentive award percentage is calculated
for gradations between achievement levels.
EVA CYCLE ONE (1993 & 1994) EVA CYCLE TWO (1994 & 1995)
Absolute EVA Final EVA Absolute EVA Final EVA
($million) Award ($million) Award
less than $1.4 0% less than $0.6 0%
$1.4 7.5% $0.6 7.5%
$12.0 15.0% $20.6 15.0%
$20.3 30.0% $30.0 30.0%
greater than $20.3 30.0% greater than $30.0 30.0%
A pro rata incentive award percentage is calculated for
gradations between EVA improvement levels.
<PAGE>
EXECUTIVE INCENTIVE AWARD GUIDELINES
PRESIDENT AND CHIEF OPERATING OFFICER
FY 94 ANNUAL (EPS) INCENTIVE
EPS Award
Achieved Percentage
$2.15 46.2%
$2.10 42.4%
$2.05 38.5%
$2.00 24.3%
$1.95 9.6%
below $1.95 0%
A pro rata incentive award percentage is calculated
for gradations between achievement levels.
EVA CYCLE ONE (1993 & 1994) EVA CYCLE TWO (1994 & 1995)
Absolute EVA Final EVA Absolute EVA Final EVA
($million) Award ($million) Award
less than $1.4 0% less than $0.6 0%
$1.4 8.25% $0.6 8.25%
$12.0 16.5% $20.6 16.5%
$20.3 33.0% $30.0 33.0%
greater than $20.3 33.0% greater than $30.0 33.0%
A pro rata incentive award percentage is calculated for
gradations between EVA improvement levels.
<PAGE>
EXECUTIVE INCENTIVE AWARD GUIDELINES
CHIEF EXECUTIVE OFFICER
FY 94 ANNUAL (EPS) INCENTIVE
EPS Award
Achieved Percentage
$2.15 50.4%
$2.10 46.2%
$2.05 42.0%
$2.00 26.5%
$1.95 10.5%
below $1.95 0%
A pro rata incentive award percentage is calculated
for gradations between achievement levels.
EVA CYCLE ONE (1993 & 1994) EVA CYCLE TWO (1994 & 1995)
Absolute EVA Final EVA Absolute EVA Final EVA
($million) Award ($million) Award
less than $1.4 0% less than $0.6 0%
$1.4 9.0% $0.6 9.0%
$12.0 18.0% $20.6 18.0%
$20.3 36.0% $30.0 36.0%
greater than $20.3 36.0% greater than $30.0 36.0%
A pro rata incentive award percentage is calculated
for gradations between EVA improvement levels.
<PAGE>
TWO-YEAR ECONOMIC VALUE ADDED (EVA) INCENTIVE PLAN - CYCLE ONE
RESTRICTED STOCK AWARD ALTERNATIVE
The Organization and Compensation Committee of the Company's Board of
Directors intends to accept requests to receive restricted stock in
lieu of a cash payment of any award made under the Cycle One EVA
Incentive Plan. Restricted stock awards are made under the Incentive
Compensation Plan of 1990, as amended, and the following terms:
1) Elections to receive restricted stock in lieu of cash must be
made for the full amount of the award under this EVA Incentive
Plan. The election must be made no later than August 1, 1994.
2) To encourage stock ownership, the amount of the award will be
increased by a 33-1/3% premium and then converted into whole
shares of Beckman common stock based on the closing price of
Beckman common stock on the last trading day of the two-year EVA
cycle. No fractional shares will be granted and any remainder
which would have resulted in a fractional share will instead be
paid in cash on the regular incentive payment date.
3) Restricted Stock will be issued pursuant to an agreement, which
will provide that such stock cannot be sold, assigned,
transferred, pledged, hypothecated or otherwise disposed of for
a twenty-four month period beginning on the date of issuance
(which will be the EVA incentive payment date established by the
Company). All shares awarded will be forfeited in the event of a
voluntary termination within the twenty-four month period.
However, restrictions will lapse earlier in the event of
termination due to death, total disability, or Normal or Late
Retirement (but not Early Retirement) under the Beckman Pension
Plan. In the event of an involuntary termination, for cause or
otherwise, no shares will be forfeited but the restrictions will
remain in effect for the full twenty-four month period from the
date of issuance.
4) Under current tax law, income is not recognized until the
earliest to occur of (i) the last day of the full twenty-four
month period, (ii) the date of occurrence of death, total
disability, or Normal or Late Retirement (but not Early
Retirement) under the Company's Pension Plan, or (iii) the date
of severance from Beckman as a result of any involuntary
termination. The amount of income to be recognized by you will be
equal to the closing price of Beckman common stock on the date of
the applicable event described above, times the number of Beckman
common shares awarded to you under this alternative. All
applicable payroll taxes are due at that time also.
<PAGE>
IMPORTANT
The Restricted Stock Agreement and Election Form will be distributed
for your consideration closer to the election deadline. The materials
distributed will include information on the effect on certain of
Beckman's other benefit plans and additional tax information. Certain
reporting requirements under Section 16(a) of the Securities Exchange
Act of 1934 apply. Also, participants are advised to consult with
counsel in advance of making any election to determine potential
Section 16(b) issues regarding the purchase and sale of the Company's
common stock.
<PAGE>
TWO-YEAR ECONOMIC VALUE ADDED (EVA) INCENTIVE PLAN - CYCLE TWO
RESTRICTED STOCK AWARD ALTERNATIVE
The Organization and Compensation Committee of the Company's Board of
Directors intends to accept requests to receive restricted stock in
lieu of a cash payment of any award made under the Cycle Two EVA
Incentive Plan. Restricted stock awards are made under the Incentive
Compensation Plan of 1990, as amended, and the following terms:
1) Elections to receive restricted stock in lieu of cash must be
made for the full amount of the award under this EVA Incentive
Plan. The election must be made no later than August 1, 1995.
2) To encourage stock ownership, the amount of the award will be
increased by a 33-1/3% premium and then converted into whole
shares of Beckman common stock based on the closing price of
Beckman common stock on the last trading day of the two-year EVA
cycle. No fractional shares will be granted and any remainder
which would have resulted in a fractional share will instead be
paid in cash on the regular incentive payment date.
3) Restricted Stock will be issued pursuant to an agreement, which
will provide that such stock cannot be sold, assigned,
transferred, pledged, hypothecated or otherwise disposed of for
a twenty-four month period beginning on the date of issuance
(which will be the EVA incentive payment date established by the
Company). All shares awarded will be forfeited in the event of a
voluntary termination within the twenty-four month period.
However, restrictions will lapse earlier in the event of
termination due to death, total disability, or Normal or Late
Retirement (but not Early Retirement) under the Beckman Pension
Plan. In the event of an involuntary termination, for cause or
otherwise, no shares will be forfeited but the restrictions will
remain in effect for the full twenty-four month period from the
date of issuance.
4) Under current tax law, income is not recognized until the
earliest to occur of (i) the last day of the full twenty-four
month period, (ii) the date of occurrence of death, total
disability, or Normal or Late Retirement (but not Early
Retirement) under the Company's Pension Plan, or (iii) the date
of severance from Beckman as a result of any involuntary
termination. The amount of income to be recognized by you will be
equal to the closing price of Beckman common stock on the date of
the applicable event described above, times the number of Beckman
common shares awarded to you under this alternative. All
applicable payroll taxes are due at that time also.
IMPORTANT
The Restricted Stock Agreement and Election Form will be distributed
for your consideration closer to the election deadline. The materials
distributed will include information on the effect on certain of
Beckman's other benefit plans and additional tax information. Certain
reporting requirements under Section 16(a) of the Securities Exchange
Act of 1934 apply. Also, participants are advised to consult with
counsel in advance of making any election to determine potential
Section 16(b) issues regarding the purchase and sale of the Company's
common stock.
KPMG Peat Marwick Exhibit 15
Certified Public Accountants
Orange County Office
Center Tower
650 Town Center Drive
Costa Mesa, CA 92626
Independent Accountants' Report
The Stockholders and Board of Directors
Beckman Instruments, Inc:
We have reviewed the condensed consolidated balance sheet of Beckman
Instruments, Inc. and subsidiaries as of June 30, 1994, and the
related condensed consolidated statements of earnings for the three
month and six month periods ended June 30, 1994 and 1993 and the
condensed consolidated statements of cash flows for the six month
periods ended June 30, 1994 and 1993 in accordance with standards
established by the American Institute of Certified Public Accountants.
A review of interim financial information consists principally of
obtaining an understanding of the system for the preparation of
interim financial information, applying analytical review procedures
to financial data, and making inquiries of persons responsible for
financial and accounting matters. It is substantially less in scope
than an audit in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly, we
do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the condensed consolidated financial statements
referred to above for them to be in conformity with generally accepted
accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet of Beckman
Instruments, Inc. and subsidiaries as of December 31, 1993, and the
related consolidated statements of earnings and cash flows for the
year then ended (not presented herein); and in our report dated
January 20, 1994, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information
set forth in the accompanying condensed consolidated balance sheet as
of December 31, 1993, is fairly presented, in all material respects,
in relation to the consolidated balance sheet from which it has been
derived.
As discussed in Note 3 to the condensed consolidated financial
statements, the Company changed its method of accounting for
postemployment benefits in 1994 and income taxes and postretirement
benefits other than pensions in 1993.
(KPMG Peat Marwick)
Orange County, California
July 15, 1994
