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 March 31, 1996
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
April 15, 1996: 29,028,056 shares.
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of
Earnings for the three month periods
ended March 31, 1996 and 1995
Condensed Consolidated Balance Sheets
as of March 31, 1996 and December 31, 1995
Condensed Consolidated Statements of
Cash Flows for the three month periods
ended March 31, 1996 and 1995
Notes to Condensed Consolidated
Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes In Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of
Security-Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
BECKMAN INSTRUMENTS, INC.
FIRST QUARTER REPORT
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars in Millions, Except Amounts Per Share)
Unaudited
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
---- ----
<S> <C> <C>
Sales $224.8 $205.0
Operating costs and expenses:
Cost of sales 104.9 97.2
Selling, general and administrative 73.7 65.2
Research and development 24.7 22.1
Restructuring charge - 3.1
------ ------
203.3 187.6
------ ------
Operating income 21.5 17.4
Nonoperating income(expense):
Interest income 1.3 1.3
Interest expense (3.1) (2.8)
Other, net 0.8 (0.3)
------ ------
(1.0) (1.8)
------ ------
Earnings before income taxes 20.5 15.6
Income tax provision 6.8 5.3
------ ------
Net earnings $ 13.7 $ 10.3
====== ======
Weighted average common shares and common
share equivalents-(thousands) 29,259 28,825
Net earnings per share $ 0.47 $ 0.36
Dividends declared per share $ 0.13 $ 0.11
</TABLE>
See accompanying notes to condensed consolidated financial
statements.
<PAGE>
BECKMAN INSTRUMENTS, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in Millions)
Unaudited
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
-------- -----------
Assets
<S> <C> <C>
Current assets:
Cash and equivalents $ 30.3 $ 26.2
Short-term investments 8.1 8.2
Trade receivables and other 276.5 288.8
Inventories 194.9 166.2
Deferred income taxes 26.6 29.4
Other current assets 13.2 14.5
------ ------
Total current assets 549.6 533.3
Property, plant and equipment, net 249.5 252.1
Deferred income taxes 62.4 59.8
Other assets 66.1 62.6
------ ------
Total assets $927.6 $907.8
====== ======
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable $ 23.7 $ 15.8
Accounts payable and accrued expenses 202.2 190.5
Income taxes 46.5 44.9
------ ------
Total current liabilities 272.4 251.2
Long-term debt, less current maturities 171.5 162.7
Other liabilities 130.1 146.0
------ ------
Total liabilities 574.0 559.9
Stockholders' equity 353.6 347.9
------ ------
Total liabilities and stockholders'equity $927.6 $907.8
====== ======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
BECKMAN INSTRUMENTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Millions)
Unaudited
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
---- ----
<S> <C> <C>
Cash Flows from Operating Activities
Net earnings $ 13.7 $ 10.3
Adjustments to reconcile net earnings to
net cash provided (used) by operating
activities:
Depreciation and amortization 20.7 18.6
Net deferred income taxes (0.1) (0.6)
Changes in assets and liabilities:
Trade receivables and other 11.0 11.3
Inventories (29.8) (10.6)
Accounts payable and accrued expenses 15.2 (9.5)
Restructuring reserve (2.5) (4.5)
Accrued income taxes 1.6 2.6
Other (18.4) (19.3)
------ ------
Net cash provided (used)
by operating activities 11.4 (1.7)
------ ------
Cash Flows from Investing Activities
Additions to property, plant and equipment (20.3) (24.2)
Net disposals of property, plant and equipment 3.5 3.3
Sales (purchases) of short-term investments 0.2 (3.4)
------ ------
Net cash used by investing activities (16.6) (24.3)
------ ------
Cash Flows from Financing Activities
Dividends to stockholders (3.7) (3.1)
Proceeds from issuance of stock 5.5 4.4
Purchase of treasury stock (7.7) (2.1)
Notes payable borrowings, net 7.0 7.4
Long-term debt borrowings 9.3 -
Long-term debt reductions - (0.5)
Other (1.0) (0.5)
Net cash provided ------ ------
by financing activities 9.4 5.6
------ ------
Effect of exchange rates on cash and equivalents (0.1) (0.1)
------ ------
Increase (decrease) in cash and equivalents 4.1 (20.5)
Cash and equivalents -- beginning of period 26.2 44.2
------ ------
Cash and equivalents -- end of period $ 30.3 $ 23.7
====== ======
Supplemental Disclosures of Cash Flow
Information
Cash paid during the period for:
Interest $ 2.4 $ 1.8
Income taxes $ 5.1 $ 3.4
Noncash investing and financing activities:
Purchase of equipment under capital
lease obligation $ 1.0 $ 0.8
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
BECKMAN INSTRUMENTS, INC.
Notes To
Condensed Consolidated Financial Statements
(Dollars in Millions, Except Amounts Per Share)
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/A for 1995 which is on
file with the Securities and Exchange Commission.
The results of operations for the period ended March 31, 1996
are not necessarily indicative of the results to be expected
for the year ending December 31, 1996.
2 Use of Estimates
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, the disclosure of contingent assets
and liabilities at the date of the financial statements, and
the reported amounts of sales and expenses during the reporting
period. Actual results could differ from those estimates.
3 Stock-Based Compensation
The Company has adopted Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation."
Accordingly, the Company continues to follow the guidance of
Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees." As a result, compensation related
to stock options is determined at the grant date as the
difference between the grant price and the fair market value of the
underlying common shares. Generally, the Company issues stock
options with a grant price equal to the fair market value of the
Company's common shares.
4 Earnings Per Share
Earnings per share is computed including the effect of common share
equivalents. Common share equivalents represent the dilutive effect
of outstanding stock options. Primary earnings per share
approximates fully diluted earnings per share.
5 Inventories
Inventories are comprised of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
-------- -----------
<S> <C> <C>
Finished Products $129.6 $117.7
Raw Materials, parts and assemblies 51.1 40.5
Work in-process 14.2 8.0
------ ------
$194.9 $166.2
====== ======
</TABLE>
6 Investments
Effective January 2, 1996, the Company acquired Hybritech
Incorporated, a San Diego-based life sciences and diagnostic
company, for a purchase price not material to the Company. The
acquisition expanded the Company's ability to develop and
manufacture high sensitivity immunoassays, including cancer tests.
The acquisition was accounted for as a purchase.
7 Contingencies
Litigation
As previously reported, local authorities in Palermo (Sicily), Italy
are investigating the activities of officials at a local government
hospital and laboratory as well as representatives of the principal
worldwide companies marketing diagnostic equipment in Palermo,
including the Company's Italian subsidiary. The inquiry focuses on
past leasing practices for placement of diagnostic equipment which
were common industry-wide practices throughout Italy, but now are
alleged to be improper. The court hearings scheduled for mid-
February 1996 to allow the prosecutor to present evidence of
improper conduct in order to persuade the Court to hold a trial were
postponed to mid-May 1996. The Company believes the evidence in the
case is weak and insufficient to support a criminal conviction.
Since 1992 five toxic tort lawsuits have been filed in Maricopa
County Superior Court, Arizona by a number of residents of the
Phoenix/Scottsdale area against the Company and a number of other
defendants, including Motorola, Inc., Siemens Corporation, the
cities of Phoenix and Scottsdale, and others. The Company recently
received a joint settlement offer from the plaintiffs in all five
cases which is substantially lower than the settlement offer
received in 1995. The Company is evaluating this offer and there is
no assurance that a settlement will be reached. The Company is
indemnified by SmithKline Beecham p.l.c., the successor of its
former controlling stockholder, for any costs incurred in these
matters in excess of applicable insurance.
As previously reported, the Company is obligated to contribute to
any resolution of a lawsuit filed by one of the tenants of the
apartment houses built on property in Irvine, California formerly
owned by the Company. At a recent Court conference, the trial of
this matter was scheduled to begin in October 1996.
The Company and its subsidiaries are involved in a number of
lawsuits which the Company considers normal in view of its size and
the nature of its business. The Company does not believe that any
liability resulting from any such lawsuits, or the matters described
above, will have a material adverse effect on its operations or
financial position.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
(Dollars in millions, except per share amounts)
Operations
Sales for the first quarter ended March 31, 1996 were $224.8,
an increase of $19.8 over the prior year. Excluding the impact
of changes in foreign currency exchange rates, first quarter
sales were higher by $19.0. Sales for the North American
diagnostic business increased over the prior year, while the
North American bioresearch business experienced lower sales.
The comparison of the North American bioresearch sales over
prior year is impacted by decreased government funding in 1996.
International diagnostic and bioresearch sales increased by
more than 8% over the prior year. European markets continue to
be impacted by a recession and cost containment initiatives in
several European health care systems. International sales are
expected to continue to be impacted by weak markets,
particularly in Europe.
Operating income for the first quarter ended March 31, 1996
increased to $21.5, representing an increase of 23.6% over the
prior year. Operating income in 1995 included a restructuring
charge of $3.1 related to the reorganization and restructuring
program completed in 1995. Cost of sales for the first quarter
increased over the same period in the prior year, but declined
slightly as a percentage of sales. Selling, general and
administrative, and research and development expenses in the
first quarter of 1996 increased over 1995, but represent only a
slight increase as a percentage of sales over the prior year.
The reorganization and restructuring plan announced in the
fourth quarter of 1993 has resulted in year-to-date 1996
savings of about $12.4 which are mainly attributable to the
reduction of more than 1,400 personnel from 1993. The Company
anticipates savings from the restructuring program to be about
$50 in 1996, but not incremental to earnings due to certain
transition costs, general salary and cost increases, as well as
fluctuating foreign currencies.
Nonoperating expenses decreased by $0.8 compared to prior year,
primarily as a result of foreign currency exchange gains.
Earnings before income taxes for the first quarter compared to
the same period of the prior year increased to $20.5 from $15.6
(1995 included a restructuring charge of $3.1). The effective
tax rate decreased to 33% from 34% in the prior year as a
result of a lower effective tax rate in the U.S. due to the
utilization of foreign tax credits.
Net earnings for the first quarter were $13.7 or $0.47 per
share, representing an increase of 33.0% and 30.6%,
respectively, over the prior year. Net earnings in 1995
included a $3.1 restructuring charge which decreased earning
per share by $0.07.
Financial Condition
For the three months ended March 31, 1996, the Company had
positive cash flow from operating activities of $11.4 and
negative cash flow from investing activities of $16.6. This
represents an increase in cash flows from net operating and
investing activities of $20.8 from the same period in 1995.
Contributing to the increase in cash flow from operating
activities compared to 1995 was the change in accounts payable
and accrued expenses while the increase in cash flow from
investing activities from the prior year was as a result of
decreased additions to property, plant and equipment and the
change in short-term investments.
The ratio of debt to capitalization at March 31, 1996 was 35.6%
compared to 33.9% at December 31, 1995. The ratio of current
assets to current liabilities at March 31, 1996 of 2.02 is
slightly lower than December 31, 1995. The Company believes it
has adequate financial resources to meet expected cash flow
requirements for the foreseeable future.
On March 7, 1996, the Company paid a quarterly cash dividend of
$0.13 per share of common stock for a total of $3.7. On April
4, 1996, the Board of Directors declared a $0.13 per share
dividend payable on June 6, 1996 to shareholders of record on
May 17, 1996.
On April 5, 1996, the Company filed a registration statement
with the SEC on Form S-3 which was subsequently declared
effective by the SEC, permitting the Company to issue up to
$200 of debt during the next two years.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
As previously reported, the public prosecutor in
Palermo (Sicily), Italy is investigating the
activities of officials at a local government
hospital and laboratory as well as representatives of
the principal worldwide companies marketing diagnostic
equipment in Palermo, including the Company's Italian subsidiary.
The inquiry focuses on past leasing practices for placement
of diagnostic equipment which were common industry-wide
practices throughout Italy, but now are alleged to be improper.
The court hearings scheduled for mid-February 1996 to
allow the prosecutor to present evidence of improper
conduct in order to persuade the Court to hold a
trial were postponed to mid-May 1996. The Company
believes the evidence in the case is weak and insufficient to
support a criminal conviction.
As previously reported, since 1992 five toxic
tort lawsuits have been filed in Maricopa County
Superior Court, Arizona by a number of residents of
the Phoenix/Scottsdale area against the Company and a
number of other defendants, including Motorola, Inc.,
Siemens Corporation, the cities of Phoenix and
Scottsdale, and others. The Company recently
received a joint settlement offer from the plaintiffs
in all five cases which is substantially lower than
the settlement offer received in 1995. The Company
is evaluating this offer and there is no assurance
that a settlement will be reached. The Company is
indemnified by SmithKline Beecham p.l.c., the
successor of its former controlling stockholder, for
any costs incurred in these matters in excess of
applicable insurance, and thus the outcome of these
litigations, even if unfavorable to the Company,
should have no material effect on the Company's
operations or financial position.
As previously reported, the Company is obligated
to contribute to any resolution of a lawsuit filed by
one of the tenants of the apartment houses built on
property in Irvine, California formerly owned by the
Company (Etezadi v. Prudential Insurance Company, et.
al.). At a recent Court conference, the trial of
this matter was scheduled to begin in October, 1996.
The Company believes that any liability resulting
from this lawsuit will not have a material adverse
effect on the Company's operations or financial
position.
Item 2. Changes In Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security-Holders
The Annual Meeting of the Stockholders of the
Company (the "Annual Meeting") was held on April 4,
1996. Three members of the Board of Directors whose
terms expired at the 1996 Annual Meeting were elected
to new terms expiring at the 1999 Annual Meeting. One
member, Hugh K. Coble, was elected to replace David S.
Tappan, Jr. who retired and whose term also expired at
the 1996 Annual Meeting. Mr. Coble's term will expire
at the 1999 Annual Meeting. The number of shares
voting were as follows:
<TABLE>
<CAPTION>
VOTES FOR VOTES WITHHELD
---------- --------------
<S> <C> <C>
Hugh K. Coble 23,846,324 253,931
Francis P. Lucier 23,707,935 392,320
John P. Wareham 23,923,660 176,595
Betty Woods 22,656,571 1,443,684
</TABLE>
The remaining members of the Board of Directors
who will continue in office and the year in which
their terms expire are: Term expiring in 1997:
Earnest H. Clark, Jr., Gavin S. Herbert, C. Roderick
O'Neil and Louis T. Rosso; Term expiring in 1998:
Carolyne K. Davis, Ph.D., Dennis C. Fill, Charles A.
Haggerty and William N. Kelley, M.D.
Item 5. Other Information
Henry Wendt resigned from the Board of Directors
in February of this year due to time constraints
resulting from his involvement in current and new
ventures. Charles A. Haggerty was elected by the
Board in February to fill Mr. Wendt's position among
the class of directors with terms expiring in 1998.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
10. The Company's Executive Incentive Plan,
adopted by the Company in 1996.
11. Statement re Computation of Per Share
Earnings: This information is set forth in
Note 4 Earnings Per Share of the Condensed
Consolidated Financial Statements included
in Part I herein.
15. Independent Accountants' Review Report,
April 18, 1996
27. Financial Data Schedule
b) Reports on Form 8-K
None.
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
BECKMAN INSTRUMENTS, INC.
(Registrant)
Date: April 23, 1996 by WILLIAM H. MAY
William H. May
Vice President, General
Counsel and Secretary
Date: April 23, 1996 by JAMES T. GLOVER
James T. Glover
Vice President and
Controller (Principal
Accounting Officer)
<PAGE>
EXHIBIT INDEX
FORM 10-Q, FIRST QUARTER, 1996
Exhibit
Number Description
- ------- -----------
10. The Company's Executive Incentive Plan, adopted
by the Company in 1996.
11. Statement re Computation of Per Share Earnings:
This information is set forth in Note 4 Earnings Per
Share of the Condensed Consolidated Financial
Statements included in Part I herein.
15. Independent Accountants' Review Report, April 18, 1996
27. Financial Data Schedule
Exhibit 10.
BECKMAN
FY 96 EXECUTIVE INCENTIVE PLAN
CLASSES 12 AND 13
Background
Key executives 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 Earnings Per Share Achievement as a Percent
of Targeted EPS, with sales revenue and an individual performance
multiplier as additional elements in determining the final
incentive award. The second time horizon of incentive
opportunity will be based on company "Economic Value Added" 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, the level of achievement of EPS as a
percent of target is the fundamental measurement for annual
incentive opportunity. The basic award guidelines for the degree
of achievement are as follows:
<TABLE>
<CAPTION>
EPS Achievement Award Percentage
Percent of Target of Base Earnings
_________________________________________
<S> <C> <C>
104% 27.7%
102% 25.4%
100% 23.1%
98% 17.3%
96% 11.6%
94% 5.8%
below 94% 0%
</TABLE>
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 at target or higher for FY 96 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. EXCEL descriptions of overall performance levels
will be the basis for determining individual performance
multipliers. The performance multiplier, expressed as a
percentage, is 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.
<TABLE>
<CAPTION>
Overall Performance Performance Multiplier to be
Applied to Award Guideline
___________________________________________________________
<S> <C> <C>
Exceptional 125% - 150%
High 100% - 125%
Good 75% - 100%
Improved Performance Required 0
</TABLE>
Example of How the Annual Incentive Award is Calculated
Assume that EPS achievement is 102% of target 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. Qualifying events that may cause a modification to the
original EPS award level milestones 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 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>
BECKMAN
TWO-YEAR ECONOMIC VALUE ADDED (EVA) INCENTIVE PLAN
CYCLE FOUR BEGINNING FY 96
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 three, fiscal year 1996, will be the first year of
cycle four.
EVA Definition
EVA is defined as the net operating profit after-tax, less a cost
of capital charge on a thirteen-month average capital base. 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 four, ending December 31, 1997, is the
midpoint between the threshold or beginning point for award
eligibility and the planned EVA improvement for this period under
the 1995-1999 Strategic Plan. For Class 12 and 13 executives,
the achievement of target will generate a 10.0% of base earnings
award. Attainment of the strategic plan EVA improvement will
increase the award percentage to 15%. Gradations in performance
above and below targeted EVA and the corresponding EVA award
eligibility are depicted below.
<TABLE>
<CAPTION>
EVA* CYCLE FOUR (1996 & 1997)
Absolute EVA Final EVA
Award
__________________________________________________
<S> <C>
<threshold 0.0%
threshold 5.0%
target 10.0%
plan 15.0%
maximum 20.0%
>maximum 20.0%
</TABLE>
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
annualized base earnings at the end of 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.
*The acronym EVA for economic value added is attributed to
Stern Steward & Co.
<PAGE>
BECKMAN
TWO-YEAR ECONOMIC VALUE ADDED (EVA) INCENTIVE PLAN - CYCLE FOUR
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 Four 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, 1997.
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 (24) month period
beginning on the date of issuance (which will be the EVA
incentive payment date established by the Company).
However, these 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. All shares awarded will be
forfeited in the event of a voluntary termination due to
Early Retirement during the twenty-four month period;
provided, however, that where there has been a prior
Section 83(b) election (and payment of applicable taxes)
by an Early Retirement eligible employee, there will be no
forfeiture of shares upon termination but, the
restrictions on transferability will remain for the
balance of the 24-month period. A voluntary termination
other than by an Early Retirement eligible employee who
has made a prior Section 83(b) election, causes forfeiture
of the shares even if a prior Section 83(b) election was
made. In the event of an involuntary termination, for
cause or otherwise, no shares will be forfeited but the
restrictions on transferability will remain in effect for
the full 24-month period from the date of issuance of the
Restricted Stock.
Under current tax law, compensation income is not recognized
until the earliest to occur of (i) the last day of the full 24-
month period beginning on the date of issuance of the Restricted
Stock, (ii) the date of occurrence of death or termination due to
total disability, the date of eligibility for Normal Retirement
(but not Early Retirement) under the Company's Pension Plan, or
the date of issuance of Restricted Stock if eligible for Normal
or Late Retirement under the Company's Pension Plan on that date,
(iii) the date of any other termination of employment, if
forfeiture does not occur as a result thereof, or (iv) the date
of issuance of Restricted Stock, if an Section 83(b) election is
made. 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. Information will be provided on the effect of
such an election on certain of Beckman's other benefit
plans as well as 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>
BECKMAN
FY 96 EXECUTIVE INCENTIVE PLAN
CLASSES 14 THROUGH 16
Background
Key executives 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 Achievement as a
Percent of Targeted EPS, with sales revenue and an individual
performance multiplier as additional elements in determining the
final incentive award. The second time horizon of incentive
opportunity will be based on company "Economic Value Added" 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, the level of achievement of EPS as a
percent of target is the fundamental measurement for the annual
incentive opportunity. The basic award guidelines for the degree
of achievement are as follows:
<TABLE>
<CAPTION>
EPS Achievement Award Percentage
Percent of Target of Base Earnings
______________________________________________
<S> <C> <C>
104% 35.3%
102% 32.3%
100% 29.4%
98% 22.1%
96% 14.7%
94% 7.4%
below 94% 0%
</TABLE>
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 at target or higher for FY 96 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. EXCEL descriptions of overall performance levels
will be the basis for determining individual performance
multipliers. The performance multiplier, expressed as a
percentage, is applied to 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.
<TABLE>
<CAPTION>
Overall Performance Performance Multiplier to be
Applied to Award Guideline
____________________________________________________________
<S> <C> <C>
Exceptional 125% - 150%
High 100% - 125%
Good 75% - 100%
Improved Performance Required 0
</TABLE>
Example of How the Annual Incentive Award is Calculated
Assume that EPS achievement is 102% of target 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. Qualifying events that may cause a modification to the
original approved EPS award level milestones 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 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>
BECKMAN
TWO-YEAR ECONOMIC VALUE ADDED (EVA) INCENTIVE PLAN
CYCLE FOUR BEGINNING FY 96
CLASSES 14 THROUGH 16
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 three, fiscal year 1996, will be the first year of
cycle four.
EVA Definition
EVA is defined as the net operating profit after-tax, less a cost
of capital charge on a thirteen-month average capital base. 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 four, ending December 31, 1997, is
the midpoint between the threshold or beginning point for award
eligibility and the planned EVA improvement for this period under
the 1995-1999 Strategic Plan. For Class 14-16 executives, the
achievement of target will generate a 12.6% of base earnings
award. Attainment of the strategic plan EVA improvement will
increase the award percentage to 18.9%. Gradations in
performance above and below the targeted EVA are depicted below.
<TABLE>
<CAPTION>
EVA CYCLE FOUR (1996 & 1997)
Absolute EVA Final EVA
Award
__________________________________________________
<S> <C>
<threshold 0.0%
threshold 6.3%
target 12.6%
plan 18.9%
maximum 25.2%
>maximum 25.2%
</TABLE>
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
annualized base earnings at the end of 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.
The acronym EVA for economic value added is attributed to Stern
Steward & Co.
<PAGE>
BECKMAN
TWO-YEAR ECONOMIC VALUE ADDED (EVA) INCENTIVE PLAN - CYCLE FOUR
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 Four 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, 1997.
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 (24) month period
beginning on the date of issuance (which will be the EVA
incentive payment date established by the Company).
However, these 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. All shares awarded will be
forfeited in the event of a voluntary termination due to
Early Retirement during the twenty-four month period;
provided, however, that where there has been a prior
Section 83(b) election (and payment of applicable taxes)
by an Early Retirement eligible employee, there will be no
forfeiture of shares upon termination but, the
restrictions on transferability will remain for the
balance of the 24-month period. A voluntary termination
other than by an Early Retirement eligible employee who
has made a prior Section 83(b) election, causes forfeiture
of the shares even if a prior Section 83(b) election was
made. In the event of an involuntary termination, for
cause or otherwise, no shares will be forfeited but the
restrictions on transferability will remain in effect for
the full 24-month period from the date of issuance of the
Restricted Stock.
Under current tax law, compensation income is not recognized
until the earliest to occur of (i) the last day of the full 24-
month period beginning on the date of issuance of the Restricted
Stock, (ii) the date of occurrence of death or termination due to
total disability, the date of eligibility for Normal Retirement
(but not Early Retirement) under the Company's Pension Plan, or
the date of issuance of Restricted Stock if eligible for Normal
or Late Retirement under the Company's Pension Plan on that date,
(iii) the date of any other termination of employment, if
forfeiture does not occur as a result thereof, or (iv) the date
of issuance of Restricted Stock if an Section 83(b) election is
made. 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. Information will be provided on the effect of
such an election on certain of Beckman's other benefit plans
as well as 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>
BECKMAN
FY '96 OFFICER EXECUTIVE INCENTIVE PLAN
TREASURER AND DIRECTOR,
CORPORATE BUSINESS DEVELOPMENT AND LICENSING
Bonus Eligibility
The key elements in determining incentive awards are:
1) EPS Achievement
2) Sales Revenue, and
3) Individual overall EXCEL rating
EPS Achievement
Earnings per share continues to be a critical factor in the
company's performance and valuation by the financial community.
Because of its importance, the level of achievement of EPS as a
percent of target is the fundamental measurement for the annual
incentive opportunity. The basic award guidelines for the degree
of achievement are as follows:
<TABLE>
<CAPTION>
EPS Achievement Award Percentage
Percent of Target* of Base Earnings
______________________________________________
<S> <C> <C>
104% 30.0%
102% 22.0%
100% 14.0%
98% 10.5%
96% 7.0%
94% 3.5%
below 94% 0%
</TABLE>
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 at target or higher for FY '96 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. EXCEL descriptions of overall performance levels
will be the basis for determining individual performance
multipliers. The performance multiplier, expressed as a
percentage, is 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.
<TABLE>
<CAPTION>
Performance Multiplier to be
Overall Performance Applied to Award Guideline
___________________________________________________________
<S> <C> <C>
Exceptional 125% - 150%
High 100% - 125%
Good 75% - 100%
Improved Performance Required 0%
</TABLE>
Example of How the Annual Incentive Award is Calculated
Assume that EPS achievement is 100% of target 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. Qualifying events that may cause a modification to the
original EPS award level milestones 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 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.
<TABLE>
EXECUTIVE INCENTIVE AWARD GUIDELINES
PRESIDENT AND CHIEF OPERATING OFFICER
FY 96 ANNUAL (EPS) INCENTIVE
<CAPTION>
EPS Achievement
Percent of Target Award Percentage
_________________________________________
<S> <C> <C>
104% 46.2%
102% 42.4%
100% 38.5%
98% 28.9%
96% 19.3%
94% 9.6%
below 94% 0.0%
</TABLE>
A pro rata incentive award percentage is
calculated for gradations between achievement levels.
<TABLE>
<CAPTION>
EVA* CYCLE THREE (1995 & 1996) EVA* CYCLE FOUR (1996 & 1997)
Absolute EVA Final EVA Absolute EVA Final EVA
Award Award
__________________________ ___________________________
<S> <C> <S> <C>
<threshold 0.0% <threshold 0.0%
threshold 8.25% threshold 8.25%
target 16.5% target 16.5%
maximum 33.0% plan 24.75%
>maximum 33.0% maximum 33.0%
>maximum 33.0%
</TABLE>
A pro rata incentive award is calculated for
gradations between EVA improvement and achievement
levels.
*The acronym EVA for economic value added is
attributed to Stern Steward & Co.
<PAGE>
<TABLE>
<CAPTION>
EXECUTIVE INCENTIVE AWARD GUIDELINES
CHIEF EXECUTIVE OFFICER
FY 96 ANNUAL INCENTIVE
EPS Achievement
Percent of Target* Award Percentage
_________________________________________
<S> <C> <C>
104% 50.4%
102% 46.2%
100% 42.0%
98% 31.5%
96% 21.0%
94% 10.5%
below 94% 0.0%
</TABLE>
A pro rata incentive award percentage is
calculated for gradations between achievement levels.
<TABLE>
<CAPTION>
EVA* CYCLE THREE (1995 & 1996) EVA* CYCLE FOUR (1996 & 1997)
Absolute EVA Final EVA Absolute EVA Final EVA
Award Award
__________________________ _____________________________
<S> <C> <S> <C>
<threshold 0.0% <threshold 0.0%
threshold 9.0% threshold 9.0%
target 18.0% target 18.0%
maximum 36.0% plan 27.0%
>maximum 36.0% maximum 36.0%
>maximum 36.0%
</TABLE>
A pro rata incentive award is calculated for
gradations between EVA improvement and achievement
levels.
*The acronym EVA for economic value added is
attributed to Stern Steward & Co.
KPMG Peat Marwick LLP Exhibit 15
Certified Public Accountants
Orange County Office
Center Tower
650 Town Center Drive
Costa Mesa, CA 92626
Independent Accountants' Review 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 March 31, 1996, and the related
condensed consolidated statements of earnings and cash flows for the
three-month periods ended March 31, 1996 and 1995. These condensed
consolidated financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of 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 conducted 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, 1995, and the
related consolidated statements of operations and cash flows for the
year then ended (not presented herein); and in our report dated January
19, 1996, 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,
1995, is fairly stated, in all material respects, in relation to the
consolidated balance sheet from which it has been derived.
KPMG PEAT MARWICK LLP
Orange County, California
April 18, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Condensed Consolidated Balance Sheet and the Condensed Consolidated Statement of
Earnings and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 30
<SECURITIES> 8
<RECEIVABLES> 288
<ALLOWANCES> 11
<INVENTORY> 195
<CURRENT-ASSETS> 550
<PP&E> 637
<DEPRECIATION> 387
<TOTAL-ASSETS> 928
<CURRENT-LIABILITIES> 272
<BONDS> 172
0
0
<COMMON> 3
<OTHER-SE> 351
<TOTAL-LIABILITY-AND-EQUITY> 928
<SALES> 188
<TOTAL-REVENUES> 225
<CGS> 80
<TOTAL-COSTS> 105
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3
<INCOME-PRETAX> 21
<INCOME-TAX> 7
<INCOME-CONTINUING> 14
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14
<EPS-PRIMARY> 0.47
<EPS-DILUTED> 0.47
</TABLE>
