FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
Commission File Number 001-10109
BECKMAN INSTRUMENTS, INC.
2500 Harbor Boulevard, Fullerton, California 92634
(714) 871-4848 (Principal Executive Offices)
State of Incorporation: Delaware
I.R.S. Employer Identification No.: 95-104-0600
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: Common Stock, $.10 par value
Name of each exchange on which registered: New York Stock
Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes (X) No ( ).
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to the
Form 10-K. (X)
Aggregate market value of voting stock held by non-affiliates of
the registrant as of January 26, 1996: $1,006,327,115.
Common Stock, $.10 par value, outstanding as of January 26, 1996:
29,063,599 shares.
Documents incorporated by reference in this report:
Documents incorporated Form 10-K part number
Annual Report to stockholders for
the fiscal year ended December 31, 1995 Part I and Part II
Proxy Statement for the 1996 Annual
Meeting of Stockholders to be held on
April 4, 1996 Part III
<PAGE>
BECKMAN INSTRUMENTS, INC.
PART I
Item 1. Business
Beckman Instruments, Inc. ("Beckman" or "the Company") is
one of the world's leading manufacturers of instrument systems
and test kits that make laboratories more efficient by
simplifying and automating chemistry and biology based analytical
procedures. The Company designs, manufactures, markets and
services a broad range of laboratory instrument systems, reagents
and related products, which customers typically use to conduct
basic scientific research, new product research and development
or diagnostic analysis of patient samples. In 1995 about 60
percent of total sales were for diagnostic applications,
principally in hospital laboratories, while about 40 percent of
sales were for life science applications in universities, medical
schools and research institutes, or new product research and
development in pharmaceutical and biotechnology companies.
Slightly more than one-half of reported sales were to customers
outside the United States.
Background
The Company was founded in 1934 by Dr. Arnold O. Beckman to
manufacture analytical instruments and became a publicly traded
corporation in 1952, subsequently being listed on the New York
Stock Exchange in 1955. In 1968 the Company expanded its
laboratory instrument focus to include health care applications
in clinical diagnostics. Beckman was acquired by SmithKline
Corporation to form SmithKline Beckman Corporation ("SmithKline
Beckman") in 1982, and the Company was operated as a wholly owned
subsidiary of SmithKline Beckman until November 4, 1988. At that
time approximately 16% of Beckman's common stock was sold in a
public offering and the stock was listed on the New York Stock
Exchange. On July 26, 1989, SmithKline Beckman distributed the
remainder of its Beckman common stock as a tax free dividend to
the stockholders of SmithKline Beckman. This was part of a
transaction involving the merger of SmithKline Beckman and
Beecham Group p.l.c., a public limited company organized under
the laws of the United Kingdom ("Beecham"). Since that time
Beckman has operated as a fully independent publicly owned
company.
Simplification and Automation of Laboratory Processes
The Company's primary expertise and activity is the
integration of chemical, biological, engineering and software
sciences into complete systems that simplify and automate
biologically focused laboratory processes and the distribution
and support of those systems around the world. These laboratory
processes can generally be grouped into four categories:
Synthesis and Sample Preparation/Handling -
Synthesizing compounds useful in subsequent analysis
and scientific investigation or placing material into a
proper container, with necessary pretreatment,
dilution, measurement, weighing and identification.
Separation - Isolating materials of interest from
extraneous material or separating mixtures into
individual constituents, often in preparation for
subsequent processing and measurement.
Detection, Measurement and Characterization -
Determining the identity, structure, or quantity of
specific analytes (compounds or molecules of interest)
present in sample specimens.
Data Processing - Acquiring, reporting, analyzing,
archiving or calculating the results of laboratory
analysis.
Beckman's experience, knowledge and ability in simplifying
and automating these processes for biological laboratories forms
a technological continuum that extends across the Company. From
this common technical base comes a range of products that are
configured to meet specific needs of academic research,
pharmaceutical and biotechnology companies, hospitals,
physicians' offices and reference laboratories (large central
laboratories to which hospitals and physicians refer specialized
tests). By serving several customer groups with differing needs
related through common science, the Company has the opportunity
to broadly apply its technology.
There is a corresponding scientific and technical continuum
reflected in customer laboratories. Virtually all new analytical
methods and tests originate in academic research in universities
and medical schools. If the utility of a new method or test is
demonstrated by fundamental research, it often will then be used
by pharmaceutical investigators, biotechnology companies,
teaching hospitals or specialized clinical laboratories in an
investigatory mode. In some cases these new techniques
eventually emerge in routine, high volume clinical testing at
hospitals and reference labs. Generally instruments used at each
stage from research to routine clinical applications employ the
same fundamental processes but may differ in operating features
such as number of tests performed per hour and degree of
automation.
Markets
Beckman's products facilitate a wide range of laboratory
processes in facilities concerned with cells, sub-cellular
particles, biochemical compounds and analysis of patient samples.
In 1995 the worldwide market for the types of products the
Company provides was about $6 billion. Slightly over one-half of
this market was in clinical diagnostic applications, with the
remaining portion of the market in more general purpose life
science applications. Other similar or related product
categories not currently offered by the Company represent an
additional market potential which is estimated to be
approximately $10 billion. The size and growth of markets for
the Company's products are influenced by technological innovation
in bioanalytical practice, government funding for basic and
disease related research (for example, heart disease, AIDS and
cancer), research and development spending by biotechnology and
pharmaceutical companies, health care spending and physician
practice.
Products
The Company offers a wide range of instrument systems and
related products, including consumables, accessories, and support
services, which can be grouped into categories by type of
laboratory process or application:
Synthesis and Sample Preparation/Handling
Separation Processes
Detection, Measurement and Characterization
Data Processing
Automated General Chemistry for Clinical Diagnostics
Special Chemistry Applications for Clinical Diagnostics
PRODUCT SALES AS A PERCENT OF TOTAL PRODUCT SALES
FOR CATEGORIES REPRESENTING
MORE THAN 10 PERCENT OF SALES
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Separation Processes 26 28 27
Automated General Chemistry
for Clinical Diagnostics 41 40 40
Special Chemistry Applications
for Clinical Diagnostics 19 20 20
</TABLE>
Synthesis and Sample Preparation/Handling
DNA Synthesizers
DNA synthesizers automate the process of making synthetic
oligonucleotides from organic chemicals. The Beckman Oligo
Series 1000 DNA Synthesizers include a single user one-column
system and a multi-user eight column system. Both systems reduce
the time required for synthesis and inform the user of synthesis
progress by providing reaction and reagents status throughout the
process. The Company recently introduced its UltraFAST synthesis
chemistry in a packaging which is also compatible with certain
competitive DNA synthesizers. Oligo systems sell in the $18,000
to $30,000 price range.
Robotic Workstations
The Biomek(R) automated laboratory workstations perform
complex operations involving liquids, including dispensing
measured samples, adding reagents, diluting, mixing and
transferring small volumes between reaction vessels. The
workstations handle multiple samples in parallel and may be
equipped with a photometer for detection purposes. The second
generation Biomek 2000 workstation that was introduced in 1994
includes an easy-to-use Windows*-based BioWorks(TM) operating
system that can be easily programmed to automate complex and
repetitive tasks, including sample preparation for DNA sequencing
and automated screening of chemical libraries for new
pharmaceutical drugs. These systems were well received by
customers in 1995. Biomek systems range in price from $35,000 to
over $80,000. (*Windows is a trademark of Microsoft
Corporation.)
Separation Processes
Centrifuges
Centrifuges separate liquid sample mixtures on the basis of
density (weight per unit volume) differences between the
mixture's components. Samples are put into tubes which are
placed in rotors and spun at speeds varying from a few thousand
to 120,000 revolutions per minute ("rpm"). The resulting
centrifugal forces, which can exceed 800,000 times the force of
gravity, cause sample components to separate according to their
density.
Centrifuges are used for the nondestructive separation of
protein and DNA fractions, cellular components and other
materials of interest in modern biology and biotechnology. In
addition to efficiency (low power consumption), reliability and
an environmentally friendly design (e.g., without freon) on many
models, Beckman centrifuges are distinguished from those of
competitors by the wide variety of unique rotor, tube and adapter
designs available to meet the precise needs of customer
applications, including the separation of blood cells from serum,
an important use in clinical diagnostic laboratories.
Beckman manufactures a broad line of centrifuges with
varying speed characteristics ranging from "low speed" (few
thousand rpm) to "high speed" (10,000 to 35,000 rpm) to
"ultracentrifuges" (35,000 to 120,000 rpm) and sample capacities
ranging from microliters (one millionth of a liter) to liters.
The Avanti(R) family of centrifuges being introduced by the
Company provides a revolutionary high-torque drive system which
accelerates and brakes in half the time of conventional high-
speed drives, thereby significantly reducing the time required to
process typical samples. Prices of the Company's centrifuges
vary from about $2,000 for a small low speed centrifuge to over
$50,000 for an ultracentrifuge and over $100,000 for an
analytical ultracentrifuge.
High Performance Liquid Chromatographs ("HPLC")
HPLC systems rely upon the difference in the rates of
passage of the components in a chemical mixture through a tubular
column filled with chemically active material. HPLC systems are
powerful separation devices for biologically active compounds,
since they are generally non-destructive, sensitive and capable
of resolving very complex mixtures of similar compounds. The
System Gold(R) Nouveau HPLC manufactured by Beckman is designed
to address the needs of the pharmaceutical, biotechnology, food,
beverage and agricultural industries as well as those of life
science researchers in academia. The system is modular, allowing
it to be configured for a wide range of applications. Beckman's
HPLC systems typically sell for $20,000 to $50,000.
Protein Sequencers
Beckman manufactures and sells protein sequencer systems and
related chemicals. Protein sequencing is used to determine the
primary structure, i.e., the amino acid sequence, of a protein.
Protein sequencer systems sell in the range of $90,000 to
$130,000.
Electrophoresis
Electrophoresis systems separate mixtures of proteins, DNA,
and other molecules principally on the basis of differences in
mass and electrical charge. The P/ACE(TM) capillary
electrophoresis product line represents a powerful extension of
electrophoresis technology by combining the discrimination power
of traditional electrophoresis with the speed of HPLC. With
several detection options, the result is an automated system for
high speed, high sensitivity separation of a wide variety of
compounds. In 1995 a new laser source for fluorescence detection
and several new chemistry kits were introduced by the Company to
expand the range of applications for capillary electrophoresis in
DNA, protein and pharmaceutical analysis. P/ACE systems typically
sell for $40,000 to $60,000.
Protein Separation and DNA Sequencing
In 1995 the Company formed a marketing and service alliance
with BioSepra Inc. (BioSepra), a biochromatography systems
manufacturer, which expands the Company's biotechnology product
line with systems that provide high speed, high resolution
separation of biomolecules. In addition, to further broaden
these product lines, the Company agreed to acquire over a three
year period Genomyx Corporation of Foster City, California.
Genomyx is a developer and manufacturer of advanced DNA
sequencing products and is expected to complement the Company's
biotechnology business.
Detection and Measurement
Spectrophotometer Systems
Spectrophotometers detect and measure the presence of
compounds in liquid mixtures by sensing the absorption of
specific wavelengths of light as that light passes through the
sample. Some Beckman spectrophotometers have the capability of
measuring changes in absorption during biological reactions.
These spectrophotometers, in conjunction with Beckman software,
automatically control the time, temperature and wavelength of the
measurement while computing and recording the results of the
experiment. In 1995, the DU 640B, a flexible and affordable bio-
spectrophotometer system, was introduced to address the specific
needs in molecular biology laboratories and biotechnology
companies. Depending on the specific model, accessories or
software, Beckman spectrophotometers sell in the $9,000 to
$25,000 range.
Nuclear Counters
Radioactive "labeling," which is the substitution or
addition of a radioactive atom into a compound of interest, is a
powerful and accepted method for tracing the path of a
biochemical in a living system. A labeled compound which is fed
to or injected into a test animal or plant can then be traced to
specific tissue or waste product by detecting the presence of the
radioactive label by scintillation counting. Beckman
manufactures scintillation counters that incorporate
sophisticated software and system features that combine accurate
measurement with user convenience. The systems sell in the
$16,000 to $30,000 range.
Data Processing
In addition to the software associated directly with
Beckman's instrument systems, the Company produces computer
software programs to aid in the data processing functions of
analytical laboratories. These systems control laboratory
instruments, direct data acquisition from the instruments, and
compute, store and report the results in formats needed for
internal purposes and satisfaction of regulatory requirements.
Beckman's data management systems are characterized by several
features, including the capability to operate on a variety of
manufacturers' computers and applications flexibility which lets
customers configure the system to meet their individual needs.
These systems vary greatly in cost depending upon the customer's
requirements, but typically range from $50,000 to $250,000.
Automated General Chemistry for Clinical Diagnostics
Automated general chemistry systems automatically detect and
quantify various chemical substances of clinical interest
(analytes) in human blood, urine and other body fluids. Beckman
offers several general chemistry systems with a range of
capabilities to meet specific customer requirements, principally
for use in medium to large hospital laboratories, but also with
some application in reference laboratories.
SYNCHRON(R) Systems
The Company's SYNCHRON(R) line of automated general
chemistry systems is a family of modular automated diagnostic
instruments and the reagents, standards and other consumable
products required to perform commonly requested diagnostic tests.
The SYNCHRON line was developed in response to changes in
reimbursement policies for hospital and clinical laboratories
that required them to be more efficient. The SYNCHRON systems
have been designed as compatible modules which may be used
independently or in various combinations with each other to meet
the specific needs of individual customers.
The smallest of these modules, the SYNCHRON CX(R)3 analyzer,
determines the concentration of eight of the most commonly
measured analytes. The SYNCHRON CX3 DELTA, introduced in 1994, is
an extension of the original CX(R)3 that adds computer enhanced
software features, including positive sample identification and
up to nine "on-board" chemistries.
The SYNCHRON CX4CE, CX5CE, and CX7 are computer enhanced
models offering bi-directional communications with laboratory
information systems. The SYNCHRON series was further extended in
1995 by the introduction of the SYNCHRON CX4 DELTA, CX5 DELTA and
CX7 DELTA. These models offer industry leading, innovative
software features to enhance laboratory productivity and a menu
of over 65 different types of tests. The extensive menu includes
immunoproteins, therapeutic drugs, drugs of abuse, and a complete
listing of general chemistries. SYNCHRON systems range in price
from $49,000 to $185,000 and are sold principally based on their
ability to improve laboratory efficiency.
Other Automated Clinical Chemistry Products
The Company has a stand alone electrolyte analyzer, the
SYNCHRON EL-ISE(R), that provides automated analysis of patient
electrolyte concentrations such as sodium, potassium, chloride,
calcium and lithium. Beckman also offers a family of low cost
instruments that perform glucose, blood urea nitrogen or
creatinine analysis.
Special Chemistry Applications For Clinical Diagnostics
Immunochemistry Systems
The Array(R) 360 Protein and Therapeutic Drug Monitoring
Systems combine automated instrumentation and advanced software
that significantly enhance the efficiency of protein and drug
analysis. The Array systems provide automated random access
testing which allows the operator to mix samples at random,
eliminating the need to analyze samples for the same analyte in
batches. At the customer's option, the systems can incorporate a
computer enhancement that allows automatic reading of bar-coded
sample tubes for positive sample identification and bi-
directional communication with the laboratory's information
system. Array systems sell in the $45,000 to $55,000 price
range.
In January 1996, the Company acquired Hybritech Incorporated
("Hybritech"), a San Diego based life sciences and diagnostics
company. This acquisition will expand the Company's capabilities
for the development and manufacture of high sensitivity
immunoassays, including cancer tests. Chief among these products
is a test for prostate specific antigen (PSA), utilized as an aid
in the detection (in conjunction with digital rectal examination)
and monitoring of prostate cancer. Currently this is the only
FDA approved test for such detection.
Electrophoresis For Clinical Diagnostics
The Appraise(R) densitometer and the Paragon(R)
Electrophoresis Systems allow the Company to offer a full range
of electrophoresis products that provide specialized protein
analysis for clinical laboratories. Paragon reagent kits are
used in the diagnosis of diabetes, cardiac, liver and other
diseases. The Appraise densitometer can be used in conjunction
with Paragon kits. It ranges in price from $17,000 to $24,000.
In 1995 the Company introduced the first capillary
electrophoresis system specifically designed for the clinical
laboratory, the Paragon CZE(TM) 2000. This system is designed to
fully automate the manual and somewhat tedious conventional
electrophoresis analysis of serum protein electrophoresis (SPE)
and immunofixation electrophoresis (IFE). Positioned to
complement the Paragon gels and the Appraise, the Paragon CZE
2000 is targeted at high volume electrophoresis labs worldwide.
Point of Care - Rapid Test Products
The Company also produces single use self-contained
diagnostic test kits for use in physicians' offices, clinics,
hospitals and other medical settings. The Hemoccult(R) product
line is used as an aid in screening for gastrointestinal disease,
most importantly colorectal cancer. In 1994 the Company
introduced the FlexSure(R) HP test kit, a test used as an aid in
the diagnosis of H.pylori infection which is associated with
several gastrointestinal diseases, including peptic ulcers and
gastric cancer. In addition, through its Hybritech acquisition,
the Company will offer the ICON(R) test kits featuring a high
sensitivity pregnancy test widely used by health care
practitioners.
Competition
The markets for the Company's products are highly
competitive, with hundreds of companies participating in one or
more portions of the market. There are a number of competitors
which sell both life sciences and diagnostic products, including
the Hitachi Ltd./ Boehringer Mannheim GmbH collaboration, Bio-Rad
Laboratories, Inc. and LKB Pharmacia AB. Additional competitors
focused more directly on life sciences include Hewlett-Packard
Co., The Perkin-Elmer Corporation, and E.I. du Pont de Nemours &
Co. Inc. Additional competitors in the clinical laboratory
market include Abbott Laboratories, Hoechst Corporation (Behring
Diagnostics Division), Johnson & Johnson, Inc., Dade
International, Inc. and Bayer Diagnostics. Competitors include
divisions or subsidiaries of corporations with substantial
resources. In addition, the Company competes with several
companies that sell reagents for laboratory instruments that are
manufactured by Beckman and others.
The Company competes primarily on the basis of improved
laboratory productivity, product quality, product bundling to
meet multiple instrument needs, and technology, service and
price. Discounting is used as a competitive tool when necessary.
Management believes that its extensive installed instrument base
provides the Company with a competitive advantage in obtaining
both instrument and after-market follow-on business.
Research and Development
The Company's new products originate from four sources:
internal research and development ("R&D") programs; external
collaborative efforts with individuals in academic institutions
and technology companies; devices or techniques that are
generated in customers' laboratories; and business acquisitions.
The Company's R&D teams are skilled in optics, chemistry,
electronics, software, mechanical and other engineering
disciplines, in addition to a broad range of biological and
chemical sciences. Research studies are usually conducted in
conjunction with individuals in academic institutions or other
outside scientists. Development programs focus on production of
new generations of existing product lines, such as the
SYNCHRON(R) analyzers, as well as new product categories not
currently offered by the Company. Other areas of pursuit include
innovative approaches to immunochemistry, molecular biology,
advanced electrophoresis technologies, automated sample
processing and information technologies
The Company's R&D expenditures for fiscal years 1995, 1994,
and 1993 were $91.7 million, $91.5 million and $93.3 million,
respectively. Management intends to maintain the present level
of the Company's investment in R&D spending.
Sales and Service
The Company has sales in over 120 countries and maintains
its own marketing, service and sales forces throughout the world.
While nearly all of the Company's products are distributed by
Beckman sales groups, the Company employs independent
distributors to serve those markets that are more efficiently
reached through such channels. The Company operates a European
Administration Center (EAC) in Nyon, Switzerland. In addition to
finance and administrative services, the EAC provides certain
sales and customer service administrative support to the
Company's subsidiaries located in Europe.
Beckman's sales force is technically educated and trained in
the operation and application of the Company's products. The
sales force is supported by a staff of scientists and technical
specialists in each product line and in each major scientific
discipline served by the Company's products.
In addition to direct sales of its instruments, the Company
leases certain instruments, principally those sold for clinical
diagnostic applications in hospitals. Beckman provides accessory
products, consumables and service for its instruments worldwide.
Service offices and inventory depots are associated with sales
offices, subsidiaries and dealer locations. The Company
considers its reputation for service responsiveness and
competence to be an important competitive asset.
Patents and Trademarks
To complement and protect the innovations created by the
Company's R&D efforts, the Company has an active patent
protection program which includes nearly 500 active U.S. patents
and patent applications. The Company also files important
corresponding applications in principal foreign countries. The
Company has taken an aggressive posture in protecting its patent
rights; however, no one patent is considered essential to the
success of the business.
The Company's primary trademark is "Beckman", with the trade
name also being Beckman or Beckman Instruments, Inc. The Company
vigorously protects its primary trademark, which is used on the
Company's products and is recognized throughout the worldwide
scientific and diagnostic community. The Company owns and uses
secondary trademarks on various products, but none of these
secondary trademarks is considered of primary importance to the
business.
Government Regulations
Certain of the Company's products are subject to regulations
of the U.S. Food and Drug Administration (the "FDA") which
require such products to be manufactured in accordance with "good
manufacturing practices". Such laws and regulations also require
that such products be safe and effective and that the labeling of
those products conform with specific requirements. Testing is
conducted to demonstrate performance claims and to provide other
necessary assurances. Clinical systems and reagents must be
reviewed by the FDA before sale and, in some instances, are
subject to product standards, other special controls or a formal
FDA premarket approval process. New federal regulations under
the Clinical Laboratory Improvement Amendments of 1988 will
require FDA review and approval of quality assurance protocols
for the Company's clinical reagent products. Originally
scheduled for implementation in 1994, implementation is now
scheduled for September, 1996. While adding to the overall
regulatory review process, this is not expected to materially
affect the sale of the Company's products. Certain of the
Company's products are subject to comparable regulations in other
countries as well.
In January 1993 the member states of the European Union (EU)
began implementation of their plan for a new unified EU market
with reduced trade barriers and harmonized regulations. The EU
adopted a significant international quality standard, the
International Organization for Standardization Series 9000
Quality Standards ("ISO 9000"). The Company's manufacturing
operations in its Brea, Carlsbad, Fullerton, Palo Alto
Porterville and San Jose, California; Allendale, New Jersey;
Sharon Hill, Pennsylvania; Naguabo, Puerto Rico and Galway,
Ireland facilities have been certified as complying with the
requirements of ISO 9000. Many of the Company's international
sales subsidiaries have also been certified, including those
located in Australia, Austria, Canada, France, Germany, Italy,
The Netherlands, Poland, Singapore, South Africa, Spain, Sweden,
Switzerland and the United Kingdom.
The design of the Company's products and the potential
market for their use may be directly or indirectly affected by
U.S. and foreign regulations concerning reimbursement for
clinical testing services. The configuration of new products,
such as the SYNCHRON(R) series of clinical analyzers, reflects
the Company's response to the changes in hospital capital
spending patterns such as those engendered by the Medicare
Diagnostic Related Groups ("DRGs"). Under the DRG system, a
hospital is reimbursed a fixed sum for the services rendered in
treating a patient, regardless of the actual cost of the services
provided.
Prior to the U.S. Government fiscal year which began October
1, 1991, inpatient capital costs incurred by a hospital were an
exception to the DRG system and were reimbursed, to the extent of
Medicare utilization, through a supplement to the DRG payment
known as "capital cost pass-through." Effective October 1, 1991,
the capital cost payment provisions of the Medicare Prospective
Payment System were changed to provide for the transition from a
"pass-through" payment methodology to a "prospective DRG based
capital payment" methodology for all inpatient capital related
costs incurred by a hospital.
Under this new payment methodology, "low capital costs"
hospitals are expected to receive greater capital payments from
Medicare than they would have had they remained under the prior
capital payment system. "High capital costs" hospitals are paid
under a "hold harmless" payment methodology which assures the
hospital of certain minimum payment levels for historical capital
costs and new capital costs during the ten year transition period
to a "fully prospective" payment system for inpatient capital
costs.
To date, the Company has not experienced, and does not
expect to experience in the future, any material financial impact
from the change in Medicare's payment for inpatient capital
costs.
The current health care reform efforts in the United States
and in some foreign countries are expected to further alter the
methods and financial aspects of doing business in the health
care field. The Company is closely following these developments
so that it may position itself to take advantage of them.
However, the Company cannot predict the effect on its business of
these reforms should they occur nor of any other future
government regulation.
Environmental Matters
The Company is subject to federal, state, local and foreign
environmental laws and regulations. The Company believes that
its operations comply in all material respects with applicable
federal, state, and local environmental laws and regulations.
Although the Company continues to make expenditures for
environmental protection, it does not anticipate any significant
expenditures in order to comply with such laws and regulations
which would have a material impact on the Company's operations or
financial position.
In 1983 the Company discovered organic chemicals in the
groundwater near a waste storage pond at a Company facility in
Porterville, California. SmithKline Beckman, the Company's
former controlling stockholder, agreed to indemnify the Company
with respect to this matter for any costs incurred by the Company
in excess of applicable insurance, eliminating any impact on the
Company's earnings or financial position. SmithKline Beecham
p.l.c., the surviving entity of the 1989 merger between
SmithKline Beckman and Beecham, assumed the obligations of
SmithKline Beckman in this respect.
In 1984 the Company sold approximately 40 acres of land in
Irvine, California to The Prudential Insurance Company of America
("Prudential"). In 1988 the Company was sued by Prudential in
U.S. District Court in California for recovery of costs and other
alleged damages with respect to soil and groundwater
contamination allegedly caused by operations on the property. In
1990 the Company entered into an agreement with Prudential for
settlement of the lawsuit and for sharing current and future
costs of investigation, remediation and other claims. Prudential
sold the property to Mola Development Corporation ("Mola") which
subsequently sold a portion of the property to F.C. Irvine, Inc.,
each local property developers. This resulted in additional
litigation against the Company and Prudential. See "Legal
Proceedings" herein. Prudential subsequently reacquired the
portion of the property owned by Mola.
Investigations conducted on the property determined that
soil and groundwater remediation is required and such remediation
is underway. During 1994 the County formally acknowledged
completion of remediation of a major portion of the soil,
although there remain other areas of soil contamination that
require further remediation. The Company and Prudential
continued to operate a groundwater treatment system throughout
1995. The Company believes that it has established adequate
reserves for remediation of any remaining soil contamination,
operation and maintenance of the groundwater treatment system and
any necessary additional groundwater investigations.
Investigations on the property are continuing and there can
be no assurance that further investigation will not reveal
additional contamination or result in additional costs. The
Company believes that additional remediation costs, if any,
beyond those already provided for the contamination discovered by
the current investigations will not have a material adverse
effect on the Company's operations or financial position.
Employee Relations
The Company and its subsidiaries presently employ
approximately 5,700 persons throughout the world, including
approximately 4,100 in the United States. The Company considers
that its relations with its employees are generally good.
Geographic Area Information
Information with respect to the above-captioned item is
incorporated by reference to Note 13 Business Segment Information
of the Company's Annual Report to Stockholders for the year ended
December 31, 1995.
Item 2. Properties
The Company's primary instrument assembly and manufacturing
facilities are located in Fullerton, Brea, and Palo Alto,
California. Central manufacturing support facilities for parts
and electronic subassemblies are located in Porterville,
California. An additional manufacturing facility is located in
Galway, Ireland. Reagents are manufactured in Carlsbad, San Diego
and San Jose, California, Naguabo, Puerto Rico, and Galway,
Ireland. The Company's computer software products business is
located in Allendale, New Jersey. The Company's facility for the
production of Hemoccult(R) test kits and related products is
located in Sharon Hill, Pennsylvania.
All U.S. manufacturing facilities, including land and
buildings, are owned by the Company with the exception of
Allendale, San Diego, San Jose and Sharon Hill which are leased
facilities, and Palo Alto, where the Company has built and owns
its buildings on a long-term land lease expiring in 2054. All
manufacturing facilities outside the U.S. are leased. The
central production facilities for the Company also include
plastics fabrication and machine shop capabilities in Fullerton
to serve the entire Company. This facility, in conjunction with
electronic subassembly work done in Porterville, supplies the
primary parts and subassemblies for the instrument systems to the
various instrument assembly locations in California. The
Company's principal distribution locations are in Brea and
Fullerton, California, Somerset, New Jersey, Frankfurt, Germany
and Paris, France. In 1994 the Company established a European
Administration Center at a facility in Nyon, Switzerland.
The Company believes that its production facilities meet
applicable government environmental, health and safety
regulations, and industry standards for maintenance, and that its
facilities in general are adequate for its current business.
Item 3. Legal Proceedings
As previously reported, in 1995 a lawsuit was filed against
the Company in the Superior Court of Orange County, California by
two of its former employees alleging breach of contract relating
to the commercial development of certain technology (Cercek v.
Beckman Instruments, Inc.). The plaintiffs seek monetary damages
of not less than $150 million and a declaratory judgment
terminating certain exclusive licenses entered into between the
plaintiffs and the Company. The Company believes that the
plaintiffs' claims are without merit and that the Company has
good and sufficient defenses to each such claim. The Company has
retained counsel to defend it and discovery is in progress. The
Company does not believe that any liability resulting from this
lawsuit will have a material adverse effect on its operations or
financial position.
Through its Hybritech acquisition the Company obtained a
patent, referred to as the Tandem Patent, that covers most of
Hybritech's important products and generates significant royalty
income. The Tandem Patent is involved in an interference action
in the U.S. Patent and Trademark Office with a patent application
owned by La Jolla Cancer Research Foundation (the "Foundation").
If the Foundation wins the interference, the Company would lose
the Tandem Patent and the royalty income, and a new patent would
issue to the Foundation covering those products. The Company
believes it has the stronger case and will prevail and does not
expect this matter to have a material adverse effect on its
operations or financial position.
As previously reported, in 1991 Forest City Properties
Corporation and F.C. Irvine, Inc. (collectively, "Forest City"),
current owners and developers of a portion of the same real
property in Irvine referred to under the caption "Environmental
Matters" herein, filed suit against Prudential in the California
Superior Court for the County of Los Angeles, alleging breach of
contract and damages caused by the pollution of the property.
Forest City originally sought damages of more than $20 million
but subsequently increased its demand to $40 million. Forest
City also seeks additional remediation of the property. Although
the Company is not a named defendant in the Forest City action,
it is obligated to contribute to any resolution of that action
pursuant to the Company's 1990 settlement agreement with
Prudential. See "Environmental Matters" herein.
The trial of this matter was conducted in 1995, resulting in
a jury verdict in favor of Prudential. The Court subsequently
granted Forest City's motion for a new trial which Prudential has
appealed. The appeal is not expected to be heard for
approximately two years because of the appellate court's backlog.
Although the outcome of this litigation cannot be predicted with
certainty, the Company believes that any additional liability
beyond that provided for will not have a material adverse effect
on the Company's operations or financial position.
As previously reported, in September 1994 Prudential, Forest
City and a number of other defendants, not including the Company,
were sued by one of the tenants of the apartment houses built by
Forest City on the above mentioned property in Irvine,
California. The complaint, filed in the California Superior Court
for the County of Orange as Etezadi v. Prudential Insurance
Company, et. al., seeks damages for alleged personal injury,
emotional distress, lost earnings, and medical expenses, as well
as punitive and other damages (no dollar amount is specified) in
connection with alleged soil and groundwater contamination of the
Irvine property. Although the Company is not a named defendant
at this time, the Company is obligated to contribute to any
resolution of this lawsuit. 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.
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 lawsuits seek damages for alleged personal
injury, emotional distress, lost earnings and medical expenses,
as well as punitive and other damages (no dollar amount is
specified) in connection with alleged groundwater contamination
in an area in Scottsdale, Arizona close to a former Company
manufacturing facility. 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.
* Baker v. Motorola, Inc. et al (filed February 1992), Lofgren
v. Motorola, Inc. et al (filed April 1993), Betancourt v.
Motorola, Inc. et al (filed July 1993), Ford v. Motorola, Inc. et
al (filed June 1994), and Wilkins v. Motorola, Inc., et. al.
(filed July 1995).
These suits are currently in the discovery phase. Trial has
been set for January, 1998 for the four cases that do not include
class action claims which have been consolidated. No trial date
has been set for the remaining case (Baker v. Motorola, Inc.)
that does include class action claims. The Company is vigorously
defending all of the suits, which it believes are without merit.
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 "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 prosecutor recently revealed the evidence from his
investigation which he alleges supports formal charges against
one present and two former employees of the Subsidiary. The
Company believes this evidence to be weak and insufficient to
support a criminal conviction. Court hearings were 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.
The results of those hearings were not available at the time this
report was prepared. Although it is very difficult to evaluate
the political climate in Italy and the activities of the Italian
public prosecutors, the Company does not expect this matter to
have a material adverse effect on its operations or financial
position.
In addition, the Company and its subsidiaries are involved
in a number of lawsuits which the Company considers ordinary and
routine in view of its size and the nature of its business. The
Company does not believe that any ultimate liability resulting
from any such lawsuits will have a material adverse effect on the
operations or financial position of the Company. See also
"Environmental Matters" herein.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of stockholders during
the fourth quarter of the fiscal year covered by this report.
Executive Officers of the Company
The following is a list of the executive officers of the
Company as of February 7, 1996, showing their ages, present
positions and offices with the Company and their business
experience during the past five or more years. Officers are
elected by the Board of Directors and serve until the next annual
Organization Meeting of the Board. Officers may be removed by
the Board at will. There are no family relationships among any
of the named individuals, and no individual was selected as an
officer pursuant to any arrangement or understanding with any
other person.
Louis T. Rosso, 62, Chairman Mr. Rosso has been Chief
of the Board and Chief Executive Officer of the
Executive Officer Company since 1988 and
Chairman of the Board since
1989. He served as the
Company's President from 1982
until 1993. He also served as
a Vice President of SmithKline
Beckman from 1982 to 1989.
Mr. Rosso first joined the
Company in 1959 and was named
Corporate Vice President in
1974. He is a director of
Allergan, Inc. and American
Health Properties, Inc. He is
a member of the Board of
Trustees of St. Jude Heritage
Foundation in Fullerton,
California and of Harvey Mudd
College. Mr. Rosso has been a
director of the Company since
1988.
John P. Wareham, 54, Director, Mr. Wareham has been President
President, and Chief Operating and Chief Operating Officer of
Officer the Company since 1993. He
served as the Company's Vice
President, Diagnostic Systems
Group from 1984 to 1993. Prior
thereto, he had been President
of Norden Laboratories, Inc.,
a wholly owned subsidiary of
SmithKline Beckman engaged in
developing, manufacturing and
marketing pharmaceutical and
veterinary vaccines. Mr.
Wareham first joined
SmithKline Corporation, a
predecessor of SmithKline
Beckman, in 1968. He is a
director of the Little Rapids
Corporation and the Health
Industry Manufacturers
Association. Mr. Wareham has
been a director of the Company
since 1993.
Dennis K. Wilson, 60, Vice Mr. Wilson has been Vice
President, Finance and Chief President, Finance and Chief
Financial Officer Financial Officer of the
Company since 1993. He served
as Vice President, Treasurer
of the Company from 1989 until
his current appointment.
Prior thereto he had been Vice
President, Corporate
Accounting and Assistant
Controller of SmithKline
Beckman since 1984. Mr. Wilson
first joined the Company in
1969.
James T. Glover, 45, Vice Mr. Glover has been Vice
President and Controller President and Controller of
the Company since 1993. From
1989 until assuming his
current position, he was Vice
President, Controller -
Diagnostic Systems Group. Mr.
Glover joined the Company in
1983, serving in several
management positions,
including a two-year term at
Allergan, Inc., then a Company
affiliate. Prior to 1983, he
held management positions with
KPMG Peat Marwick and another
Fortune 500 Company.
Fidencio Mares, 49, Vice Mr. Mares was named Vice
President, Human Resources President, Human Resources of
the Company effective May 16,
1995. Prior thereto he had
been President of The Gas
Company of Hawaii. Before
that he was Senior Vice
president of Administration
and Human Resources for
Pacific Resources, Inc.,
Corporate Wage and Salary
manager and Corporate Human
Resources Services manager for
Getty Oil Company/Texaco,
Inc., and held various human
resources managerial positions
at Southern California Edison.
William H. May, 53, Vice Mr. May has been General
President, General Counsel and Counsel and Secretary of the
Secretary Company since 1984 and has
been Vice President, General
Counsel and Secretary of the
Company since 1985. Mr. May
first joined the Company in
1976.
Bruce A. Tatarian, 47, Vice Mr. Tatarian was named Vice
President, Field Operations - President, Field operations -
Emerging Markets Emerging Markets of the
Company effective May 1, 1995.
He had been Vice President,
Bio-research Commercial
Operations International of
the Company since 1994. Prior
thereto, he had been Vice
President, Marketing
Operations for the
Bioanalytical Systems Group
since 1991. From 1990 to 1991
he had been Vice President -
Manager, Analytical Business
Unit. Mr. Tatarian originally
joined the Company in 1973
when he served in a number of
marketing positions for a
period of ten years.
Arthur A. Torrellas, 65, Vice Mr. Torrellas was named Vice
President, Field Operations - President, Field Operations -
North America/Europe North America/Europe, of the
Company effective May 1, 1995.
He had been Vice President,
Diagnostic Commercial
Operations of the Company
since 1994. Prior thereto, he
had been Vice President,
International Operations for
the Diagnostic Systems Group
since 1985. Mr. Torrellas
first joined the Company in
1977.
Albert R. Ziegler, 57, Vice Mr. Ziegler has been Vice
President, Diagnostics President, Diagnostics
Development Center Development Center of the
Company since 1994. He joined
the Company in 1986 as Vice
President, North America
Operations for the Diagnostic
Systems Group. Prior thereto
he had been President of
Branson Ultrasonics
Corporation, a manufacturer of
industrial ultrasound
instruments and a subsidiary
of SmithKline Beckman until
the divestiture of SmithKline
Beckman's industrial
instruments businesses in
1984. Mr. Ziegler first
joined SmithKline Beckman in
1971.
Paul Glyer, 39, Treasurer Mr. Glyer has been Treasurer
of the Company since 1993.
Effective May, 1995 he
additionally assumed the
position of Director,
Corporate Business
Development. He served as
Assistant Treasurer since 1989
when he first joined the
Company.
Michael T. O'Neill, 55, Senior Mr. O'Neill served as Senior
Vice President, Commercial Vice President, Commercial
Operations Operations of the Company from
1993 until April 1995 when he
left the Company to pursue
personal interests. He had
been Vice President,
Bioanalytical Systems Group
since 1989. Mr. O'Neill first
joined the Company in 1973.
Richard K. Sears, 63, Vice Mr. Sears served as Vice
President, Human Resources President, Human Resources of
the Company from 1990 until
June 30, 1995 when he retired.
Mr. Sears originally joined
the Company in 1955 when he
served in a number of
administrative and management
positions for a period of 14
years.
<PAGE>
PART II
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters
Information with respect to the above-captioned Item is
incorporated herein by reference to the sections entitled "Stock
Exchanges and Prices" and "Dividends" of the Company's Annual
Report to stockholders for the year ended December 31, 1995.
During 1995 the Company paid four consecutive quarterly dividends
of $.11 per share of common stock, for a total of $.44 per share
for the year. During 1994 the Company paid four consecutive
quarterly dividends of $.10 per share of common stock, for a
total of $.40 per share for the year. Information with respect to
dividend restrictions is incorporated by reference to Note 6 Debt
of the "NOTES TO CONSOLIDATED FINANCIAL STATEMENTS" of the
Company's Annual Report to Stockholders for the year ended
December 31, 1995. In addition, as of January 26, 1996, there
were approximately 9,373 holders of record of the Company's
common stock.
Item 6. Selected Financial Data
Information with respect to the above-captioned Item is
incorporated herein by reference to the section entitled "Five-
Year Financial and Statistical Data" of the Company's Annual
Report to Stockholders for the year ended December 31, 1995.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Information with respect to the above-captioned Item is
incorporated herein by reference to the section entitled
"FINANCIAL REVIEW" of the Company's Annual Report to Stockholders
for the year ended December 31, 1995.
Item 8. Financial Statements and Supplementary Data
Information with respect to the above-captioned Item is
incorporated herein by reference to the consolidated financial
statements, including all the notes thereto, and the sections
entitled "REPORT BY MANAGEMENT", "INDEPENDENT AUDITORS' REPORT"
and "QUARTERLY DATA (Unaudited)" of the Company's Annual Report
to Stockholders for the year ended December 31, 1995.
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure
None.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
Directors - The information with respect to directors
required by this Item is incorporated herein by reference to
those parts of the Company's Proxy Statement for the Annual
Meeting of Stockholders to be held April 4, 1996 entitled
"ELECTION OF DIRECTORS" and "BOARD OF DIRECTORS INFORMATION."
Executive Officers - The information with respect to
executive officers required by this Item is set forth in Part I
of this report.
Item 11. Executive Compensation
The information with respect to executive compensation
required by this Item is incorporated by reference to that part
of the Company's Proxy Statement for the Annual Meeting of
Stockholders to be held April 4, 1996 entitled "EXECUTIVE
COMPENSATION," excluding those sections entitled "Board
Compensation Committee Report on Executive Compensation" and
"Performance Graph."
Item 12. Security Ownership of Certain Beneficial Owners and
Management
The information with respect to security ownership required
by this Item is incorporated by reference to that part of the
Company's Proxy Statement for the Annual Meeting of Stockholders
to be held April 4, 1996 entitled "SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT."
Item 13. Certain Relationships and Related Transactions
The information with respect to certain relationships and
related transactions required by this Item is incorporated by
reference to that part of the Company's Proxy Statement for the
Annual Meeting of Stockholders to be held April 4, 1996 entitled
"BOARD OF DIRECTORS INFORMATION, Compensation Committee
Interlocks and Insider Participation."
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K
(a)(1), (a)(2) Financial Statements and Financial Statement
Schedules
The financial statements and financial statement schedules
filed as part of the report are incorporated by reference in the
"INDEX OF FINANCIAL STATEMENTS AND SCHEDULES" following this Part
IV.
(a)(3) Exhibits
Management contracts and compensatory
plans or arrangements are identified by *.
3.1 Third Restated Certificate of
Incorporation of the Company, June 5, 1992
(incorporated by reference to Exhibit 3.1 of the
Company's Annual Report to the Securities and
Exchange Commission on Form 10-K for the fiscal
year ended December 31, 1992, File No. 001-10109).
3.2 Amended and Restated By-Laws of the
Company, as of November 30, 1994 (incorporated by
reference to Exhibit 3.2 of the Company's Annual
Report to the Securities and Exchange Commission
on form 10-K for the fiscal year ended December
31, 1994, File No. 001-10109).
4.1 Specimen Certificate of Common Stock
(incorporated by reference to Exhibit 4.1 of
Amendment No. 1 to the Company's Form S-1
registration statement, File No. 33-24572).
4.2 Rights Agreement between the Company and
Morgan Shareholder Services Trust Company, as
Rights Agent, dated as of March 28, 1989
(incorporated by reference to Exhibit 4 of the
Company's current report on Form 8-K filed with
the Securities and Exchange Commission on April
25, 1989, File No. 1-10109).
4.3 First amendment to the Rights Agreement
dated as of March 28, 1989 between the Company and
First Chicago Trust Company of New York (formerly
Morgan Shareholder Services Trust Company), as
Rights Agent, dated as of June 24, 1992
(incorporated by reference to Exhibit 1 of the
Company's current report on Form 8-K filed with
the Securities and Exchange Commission on July 2,
1992, File No. 001-10109).
4.4 Amendment 1993-1 to the Company's
Savings and Investment Plan, adopted November 3,
1993, filed in connection with the Form S-8
Registration Statement filed with the Securities
and Exchange Commission on September 1, 1992, File
No. 33-51506 (incorporated by reference to Exhibit
4 of the Company's Quarterly Report to the
Securities and Exchange Commission on Form 10-Q
for the quarterly period ended March 31, 1994,
File No. 001-10109).
4.5 Amendment 1995-1 to the Company's
Savings and Investment Plan, adopted December 20,
1995, filed in connection with the Form S-8
Registration Statement filed with the Securities
and Exchange Commission on September 1, 1992 and
Amendment No. 1 thereto filed December 17, 1992,
File No. 33-51506.
10.1 Revolving Credit Agreement, dated as of
September 26, 1994, among the Company, the lenders
named therein and Citicorp USA, Inc. as Agent
(incorporated by reference to Exhibit 10.1 of the
Company's Quarterly Report to the Securities and
Exchange Commission on Form 10-Q for the quarterly
period ended September 30, 1994, File No. 001-
10109).
10.2 Note Agreement, dated as of February 5,
1993, among the Company, Nationwide Life Insurance
Company and three other insurance companies named
therein (incorporated by reference to Exhibit
10.17 of the Company's Annual Report to the
Securities and Exchange Commission on Form 10-K
for the fiscal year ended December 31, 1992, File
No. 001-10109).
10.3 Line of Credit Promissory Note in favor
of Mellon Bank, N.A., dated as of October 6, 1993
(incorporated by reference to Exhibit 10.21 of the
Company's Annual Report to the Securities and
Exchange Commission on Form 10-K for the fiscal
year ended December 31, 1992, File No. 001-10109).
10.4 Loan Agreement (Multiple Advance), dated
September 30, 1993, between Beckman Instruments
(Japan) Limited and the Industrial Bank of Japan,
Limited (English translation, including
certification as to accuracy; original document
executed in Japanese) (incorporated by reference
to Exhibit 10.21 of the Company's Annual Report to
the Securities and Exchange Commission on Form 10-
K for the fiscal year ended December 31, 1993,
File No. 001-10109).
10.5 Term Loan Agreement, dated as of
September 30, 1993, between Beckman Instruments
(Japan) Limited and Citibank, N.A., Tokyo Branch
(incorporated by reference to Exhibit 10.22 of the
Company's Annual Report to the Securities and
Exchange Commission on Form 10-K for the fiscal
year ended December 31, 1993, File No. 001-10109).
10.6 Term Loan Agreement, dated as of
December 9, 1993, between Beckman Instruments
(Japan) Limited and The Dai-Ichi Kangyo Bank
Limited (English translation, including
certification as to accuracy; original document
executed in Japanese) (incorporated by reference
to Exhibit 10.23 of the Company's Annual Report to
the Securities and Exchange Commission on Form 10-
K for the fiscal year ended December 31, 1993,
File No. 001-10109).
10.7 Trust Agreement between the Company and
The First National Bank of Chicago, as Trustee,
for the benefit of Participating Employees, dated
as of May 31, 1995.
* 10.8 The Company's Executive Incentive Plan,
adopted by the Company in 1995 (incorporated by
reference to Exhibit 10.1 of the Company's
Quarterly Report to the Securities and Exchange
Commission on Form 10-Q for the quarterly period
ended June 30, 1995, File No. 001-10109).
* 10.9 The Company's Executive Incentive Plan,
adopted by the Company in 1994 (incorporated by
reference to Exhibit 10 of the Company's Quarterly
Report to the Securities and Exchange Commission
on Form 10-Q for the quarterly period ended June
30, 1994, File No. 001-10109).
* 10.10 Supplement to the Company's Executive
Incentive Plan, adopted by the Company in 1994:
Company Memorandum, FY 94 Incentive Plans, May 11,
1994 (incorporated by reference to Exhibit 10.2 of
the Company's Quarterly Report to the Securities
and Exchange Commission on Form 10-Q for the
quarterly period ended September 30, 1994, File
No. 001-10109).
* 10.11 The Company's Executive Bonus Plan,
adopted by the Company in 1993 (incorporated by
reference to Exhibit 10.15 of the Company's Annual
Report to the Securities and Exchange Commission
on Form 10-K for the fiscal year ended December
31, 1993, File No. 001-10109).
* 10.12 The Company's Incentive Compensation
Plan of 1990, as restated with amendments of
January 29, 1992, amendments approved by
stockholders May 6, 1992 (incorporated by
reference to Exhibit 10.20 of the Company's Annual
Report to the Securities and Exchange Commission
on Form 10-K for the fiscal year ended December
31, 1992, File No. 001-10109).
* 10.13 The Company's Incentive Compensation
Plan, as amended by the Company's Board of
Directors on October 26, 1988 and as amended and
restated by the Company's Board of Directors on
March 28, 1989 (incorporated by reference to
Exhibit 10.16 of the Company's Annual Report to
the Securities and Exchange Commission on Form
10-K for the fiscal year ended December, 31 1989,
File No. 001-10109).
* 10.14 Restricted Stock Agreement and Election
(Cycle Two - Economic Value Added Incentive Plan),
adopted by the Company in 1995 (incorporated by
reference to Exhibit 10 of the Company's Quarterly
Report to the Securities and Exchange Commission
on Form 10-Q for the quarterly period ended
September 30, 1995, File No. 001-10109).
* 10.15 Beckman Instruments, Inc. Supplemental
Pension Plan, adopted by the Company October 24,
1990 (incorporated by reference to Exhibit 10.4 of
the Company's Annual Report to the Securities and
Exchange Commission on Form 10-K for the fiscal
year ended December, 31 1990, File No. 001-10109).
* 10.16 The Company's Stock Option Plan for
Non-Employee Directors, as restated with
amendments of January 29, 1992, amendments
approved by stockholders May 6, 1992 (incorporated
by reference to Exhibit 10.19 of the Company's
Annual Report to the Securities and Exchange
Commission on Form 10-K for the fiscal year ended
December 31, 1992, File No. 001-10109).
* 10.17 Form of Restricted Stock Agreement,
dated as of September 16, 1991, between the
Company, each of its Executive Officers and
certain other key employees (incorporated by
reference to Exhibit 10.19 of the Company's Annual
Report to the Securities and Exchange Commission
on Form 10-K for the fiscal year ended December
31, 1991, File No. 001-10109).
* 10.18 Form of Legended Stock Agreement and
Election For Deferral of a Portion of the FY 93
Executive Bonus Plan, between the Company and some
of its Executive Officers and other key employees
(incorporated by reference to Exhibit 10.20 of the
Company's Annual Report to the Securities and
Exchange Commission on Form 10-K for the fiscal
year ended December 31, 1993, File No. 001-10109).
* 10.19 Form of Change in Control Agreement,
dated as of May 1, 1989, between the Company, each
of its Executive Officers and certain other key
employees (incorporated by reference to Exhibit
10.34 of the Company's Annual Report to the
Securities and Exchange Commission on Form 10-K
for the fiscal year ended December 31, 1989, File
No. 001-10109).
* 10.20 Agreement Regarding Retirement Benefits
of Arthur A. Torrellas, adopted December 1, 1993
and dated December 20, 1993, between the Company
and Arthur A. Torrellas (incorporated by reference
to Exhibit 10.24 of the Company's Annual Report to
the Securities and Exchange Commission on Form 10-
K for the fiscal year ended December 31, 1993,
File No. 001-10109).
* 10.21 Amendment to the December 1, 1993
Agreement Regarding Retirement Benefits of Arthur
A. Torrellas, dated as of May 30, 1995, between
the Company and Arthur A. Torrellas (incorporated
by reference to Exhibit 10.2 of the Company's
Quarterly Report to the Securities and Exchange
Commission on Form 10-Q for the quarterly period
ended June 30, 1995, File No. 001-10109).
* 10.22 Agreement Regarding Retirement Benefits
of Albert Ziegler, dated June 16, 1995, between
the Company and Albert Ziegler.
* 10.23 Beckman Instruments, Inc. Deferred
Directors' Fee Program, adopted by the Company
November 30, 1994 (incorporated by reference to
Exhibit 10.21 of the Company's Annual Report to
the Securities and Exchange Commission of form 10-
K for the fiscal year ended December 31, 1994,
File No. 001-10109).
10.24 Distribution Agreement, dated as of
April 11, 1989, among SmithKline Beckman
Corporation the Company and Allergan, Inc.
(incorporated by reference to Exhibit 3 to
SmithKline Beckman Corporation's Current Report on
Form 8-K filed with the Securities and Exchange
Commission on April 14, 1989, File No. 1-4077).
10.25 Amendment to the Distribution Agreement
effective as of June 1, 1989 between SmithKline
Beckman Corporation, the Company and Allergan,
Inc. (incorporated by reference to Exhibit 10.26
of Amendment No. 2 to the Company's Form S-1
registration statement, File No. 33-28853).
10.26 Cross-Indemnification Agreement between
the Company and SmithKline Beckman Corporation
(incorporated by reference to Exhibit 10.1 of
Amendment No. 1 to the Company's Form S-1
registration statement, File No. 33-24572).
10.27 Tax Agreement, dated as of April 11,
1989, between SmithKline Beckman Corporation and
the Company (incorporated by reference to Exhibit
4 to SmithKline Beckman Corporation's Current
Report on Form 8-K filed with the Securities and
Exchange Commission on April 14, 1989, File No.
1-4077).
10.28 Tax Sharing Agreement between the
Company and SmithKline Beckman Corporation
(incorporated by reference to Exhibit 10.2 of
Amendment No. 1 to the Company's Form S-1
registration statement, File No. 33-24572).
11. Statement regarding computation of
per share earnings: This information is
incorporated by reference to Note 1 Summary of
Significant Accounting Policies of the Company's
Annual Report to Stockholders for the year ended
December 31, 1995.
13. WORDS ON NUMBERS Section of the Company's
Annual Report to Stockholders for the year ended
December 31, 1995.
21. Subsidiaries
24. Consent of KPMG Peat Marwick LLP,
February 8, 1996.
27. Financial Data Schedule.
(b) Reports on Form 8-K During Fourth Quarter ended
December 31, 1995.
No Reports on Form 8-K were filed during the quarter ended
December 31, 1995.
<PAGE>
Beckman Instruments, Inc.
INDEX TO
FINANCIAL STATEMENTS AND SCHEDULES
The consolidated financial statements of the Company and the
related report of KPMG Peat Marwick LLP, dated January 19, 1996
are incorporated by reference to the section entitled "WORDS ON
NUMBERS" of the Company's Annual Report to Stockholders for the
year ended December 31, 1995.
The information required to be reported in the Supplementary
Financial Schedule entitled, VIII Allowance for Doubtful
Accounts, for the three year period ended December 31, 1995 is
set forth in Note 14 Supplementary Information of the "NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS" of the Company's Annual Report
to Stockholders for the year ended December 31, 1995. Schedules
not included herein have been omitted because they are not
applicable, are no longer required or the required information is
presented in the consolidated financial statements or in the
notes to the consolidated financial statements.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
BECKMAN INSTRUMENTS, INC.
Date: February 1, 1996 By LOUIS T. ROSSO
Louis T. Rosso
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
Signature Title Date
--------- ----- ----
Chairman of the Board
and Chief Executive
Officer (Principal
LOUIS T. ROSSO Executive Officer)
Louis T. Rosso February 1, 1996
President,
Chief Operating Officer
JOHN P. WAREHAM and Director
John P. Wareham February 1, 1996
Vice President, Finance
and Chief Financial Officer
DENNIS K. WILSON (Principal Financial Officer)
Dennis K. Wilson February 1, 1996
Vice President and
Controller (Principal
JAMES T. GLOVER Accounting Officer)
James T. Glover February 1, 1996
EARNEST H. CLARK, JR. Director February 1, 1996
Earnest H. Clark, Jr.
CAROLYNE K. DAVIS Director February 1, 1996
Carolyne K. Davis, Ph.D.
DENNIS C, FILL Director February 1, 1996
Dennis C. Fill
GAVIN HERBERT Director February 1, 1996
Gavin S. Herbert
WILLIAM N. KELLEY Director February 1, 1996
William N. Kelley, M.D.
Director February , 1996
Francis P. Lucier
C. RODERICK O'NEIL Director February 1, 1996
C. Roderick O'Neil
DAVID S. TAPPAN, JR. Director February 1, 1996
David S. Tappan, Jr.
Director February , 1996
Henry Wendt
BETTY WOODS Director February 1, 1996
Betty Woods
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Exhibit
- ------- -------
4.5 Amendment 1995-1 to the Company's Savings
and Investment Plan, adopted December 20,
1995, filed in connection with the Form
S-8 Registration Statement filed with the
Securities and Exchange Commission on
September 1, 1992 and Amendment No. 1
thereto filed December 17, 1992, File
No. 33-51506.
10.7 Trust Agreement between the Company
and The First National Bank of Chicago,
as Trustee, for the benefit of
Participating Employees, dated as
of May 31, 1995.
10.22 Agreement Regarding Retirement
Benefits of Albert Ziegler, dated
June 16, 1995, between the Company
and Albert Ziegler.
13. WORDS ON NUMBERS Section of the Company's
Annual Report to Stockholders for the
year ended December 31, 1995.
21. Subsidiaries
24. Consent of KPMG Peat Marwick LLP,
February 8, 1996.
27. Financial Data Schedule.
Exhibit 4.5
AMENDMENT 1995-1
BECKMAN INSTRUMENTS, INC. SAVINGS AND INVESTMENT PLAN
WHEREAS Beckman Instruments, Inc. (the "Company")
maintains the Beckman Instruments, Inc. Savings and
Investment Plan (the "Plan"); and
WHEREAS the Company has the right to amend the Plan,
and the Company desires to amend the Plan to reflect recent
board resolutions adopted by the Board of Directors;
NOW, THEREFORE, the Plan is hereby amended, effective
January 1, 1995, as follows:
1. The definition of "Plan Compensation" contained in
Section 1.2 is amended by adding the following paragraph the
end thereof:
"Notwithstanding the foregoing, Plan
Compensation includes variable compensation which
is paid according to a formal program or programs
officially adopted by the Company on or after
January 1, 1995."
2. The following is added to the end of the
definition of "Valuation Date" contained in Section 1.2:
"Effective as of such date at determined by the
Committee, Valuation Date shall mean each business
day of the Plan's recordkeeper."
3. The last sentence of Section 2.2 is amended to
read as follows:
"Each Eligible Employee who enrolls must complete
and submit a beneficiary designation form."
4. Section 2.3 is amended to read as follows:
"2.3 Reemployment.
(a) A Participant or an Employee who
has met the eligibility requirements
described herein who incurs a Break in
Employment and is later reemployed as an
Eligible Employee shall resume or commence
participation immediately upon his
reemployment, if such individual then
enrolls. Such individual shall submit a
beneficiary designation form.
(b) An individual described in
subsection (a) above, shall commence to have
contributions made on his behalf on the first
day of the month following his enrollment."
5. Section 3.1(e)(i) is amended by adding the
following to the end of the section:
"The limit applicable to Puerto Rico Participants
shall be the limit established by Puerto Rico
law."
6. Section 3.1 is amended by adding the following to
the end of the section:
"Notwithstanding the foregoing, effective as
of such date as determined by the Committee and
announced to Puerto Rico Participants, a Puerto
Rico Participant may elect to make Before-Tax
Savings Contributions, in a manner prescribed by
the Committee, subject to the limitations of
Puerto Rico law."
7. The following is hereby added to the end of
Section 3.1(c):
"In the case of Puerto Rico Participants, the
Committee may impose restrictions on the amount of
Before-Tax Savings Contributions which may be
made, provide for refunds of Before-Tax Savings
Contributions, and impose such rules, limitations
and restrictions as the Committee deems necessary
or appropriate to satisfy applicable law. Such
restrictions, limitations, rules and refunds may
apply to all or any group of Puerto Rico
Participants, or any individual Puerto Rico
Participant, as determined by the Committee."
8. Section 3.2(a) is amended by adding the following
after the first sentence thereof:
"Effective as of the date determined by the
Committee and announced to Puerto Rico
Participants, the maximum percentage of After Tax
Savings Contributions for Puerto Rico Participants
is increased to 15%."
9. Section 3.3(a)(ii) is amended by replacing
"Interest Income Fund" with "Investment Funds other than the
Beckman Stock Fund".
10. Section 3.3(a) is amended by deleting the proviso
concerning matching contributions for Puerto Rico
Participants.
11. Section 3.7 is amended by adding a new sentence to
the end of the first paragraph of Section 3.7(b) and by
redesigning subsections (c), (c), and (d) as (c), (d), and
(e), respectively with the new sentence being added to the
end of the first paragraph of Section 3.7(b) to read as
follows:
"In addition, effective as of such date as
determined by the Committee and announced to
Participants, an International Equity Fund shall
be established and maintained under this Plan
subject to this Section 3.7 and Section 7.3(b).
Further, the Investment Funds shall be designated
for reference purposes as the Interest Income
Fund, Balanced Fund, Equity Fund, International
Equity Fund, Beckman Stock Fund, and Index Fund."
12. Section 3.7(b) is amended by adding a new
subsection 3.7(b)(vi) to read as follows:
"(v) International Equity Fund - A pool of
assets invested primarily in stocks and other
equity-based forms of investment in companies
operating primarily as principally outside the
United States, as determined by an Investment
Manager."
13. Section 3.7(c)(i) is amended to read as follows:
"(i) Each Participant shall allocate the
Before-Tax Savings Contributions and After-Tax
Savings Contributions made on his behalf to the
Balanced Fund, the Interest Income Fund, the Index
Fund, the International Equity Fund, the Beckman
Stock Fund, and the Equity Fund; provided,
however, that prior to the date announced by the
Committee, the After-Tax Savings Contributions
made by Puerto Rico Participants shall be invested
only in the Interested Income Fund and the Beckman
Stock Fund. The Participant's allocation shall be
in 1% increments. The Participant may change the
allocation of such contributions once a month
effective as of the first day of the month
according to the procedures established by the
Committee and subject to any restrictions imposed
by the Committee. Effective on the date announced
by the Committee, the Participant may transfer the
balances in the applicable funds attributable to
Before-Tax Savings Contributions, After-Tax
Savings Contributions and rollover Contributions
on any business day of the recordkeeper for the
Plan according to the procedures established by
the Committee and subject to any restrictions
imposed by the Committee. Such transfers shall be
designated in 1% increments of the total balance
of the Participant's Accounts attributable to
Before-Tax Savings Contributions, After-Tax
Savings Contributions and Rollover contributions.
If a Covered Employee makes a Rollover
Contribution at the time he is not yet a
Participant, he shall allocate the Rollover
Contribution among the available Investment Funds.
If a Participant makes a Rollover Contribution,
the Rollover Contribution shall be allocated
according to the Participant's existing election."
14. Section 3.7(c)(ii) is amended to read as follows:
"(ii) Participants may allocate Company
Matching Contributions among the Investment Funds
in one percent increments. Notwithstanding the
proceeding sentence, Participants who occupy a
position with the Company of Vice President or
higher may only allocate Company Matching
Contributions to the Beckman Stock Fund.
Participants may transfer existing Account
balances attributable to Company Matching
Contributions among the Investment Funds in one
percent increments. A Participant cannot transfer
Account balances attributable to Company Matching
Contributions from the Beckman Stock Fund to any
other Investment Fund, except that transfers to
another Investment Fund (in one percent
increments) are permitted after a Participant is
55 years of age (or, with respect to a Participant
who occupies a position with the Company of Vice
President or higher, after such Participant is 60
years of age). Changes in allocations are subject
to the once-a-month limitation described above for
Before-Tax Savings Contributions, After-Tax
Savings Contributions and rollover Contributions.
Effective on the date announced by the Committee,
the Participant may transfer the balances in the
applicable funds attributable to Company Matching
Contributions on any business day of the
recordkeeper for the Plan according to the
procedures established by the Committee and
subject to any restrictions imposed by the
Committee. Up to 100 percent of the Trust assets
may be invested in common stock of the Company;
the actual amount shall be determined according to
the Participants' elections and the other
provisions of this Plan."
15. Section 3.8 is amended by deleting subsections (b)
and (c).
16. Section 5.2(a)(1) is amended to read as follows:
"A Participant shall become 100 vested if,
while an Employee, he attains his Normal
Retirement Age, incurs a Disability, has an
employment termination which is classified by the
Company as a layoff, or dies; or"
17. The first sentence of Section 5.2(b) is amended to
read as follows:
"When a Participant ceases to participate,
and receives distribution of the Accounts referred
to in Section 5.1, such portion of his Company
Matching Account as of the day of the cessation as
is not vested shall be forfeited and used to
reduce Company Contributions."
18. Section 6.3 is amended by adding the following
paragraph to the end thereof:
"Effective as of the date established by the
Committee, Type III Withdrawals are no longer
permitted under the Plan."
19. Section 6.4(f) is deleted.
20. The last sentence of Section 6.5 is hereby
deleted.
21. Section 6.7(b) is amended to read as follows:
"(b) The withdrawal will be taken on a pro-
rata basis from all Investment Funds."
22. Section 6.7(c) is amended to read as follows:
"The value of all withdrawals shall be
determined as of the Valuation Date on which the
withdrawal is processed according to procedures
adopted by the Committee, except as specified in
Section 3.8. The check representing the amount of
the withdrawal shall be delivered as soon as
administratively feasible following the processing
of the withdrawal."
23. Article IX is amended by adding a new Section 9.12
to read as follows:
"9.12 - Loans to Participants.
(a) Effective as of the date established by
the Committee and announced to Participants, each
Participant shall have the right, subject to prior
approval by the Committee, to borrow from his
Accounts. Application for a loan must be
submitted by a Participant to the Committee
according to the procedures established by the
Committee. Approval shall be granted to denied as
specified in subsection (b), one the terms
specified in subsection (c). For purposes of this
Section 9.12, but only to the extent required by
Department of Labor Regulations Section 2550.408b-
1, the term "Participant" shall include any
Employee, former Employee, Beneficiary or
alternate payee under a qualified domestic
relations order, as defined in Section 414(p) of
the Code, who is a party in interest and has an
interest in the Plan that is not contingent.
Accordingly, no loan shall be granted to a former
employee who is not a party in interest; provided,
however, that solely to the extent required to
satisfy Code Section 401(a)(4), if a loan is
granted to a former employee who is a party in
interest, then loans shall be made available to
other former employees.
(b) The Committee shall grant any loan which
meets each of the requirements of paragraphs (1),
(2) and (3) below:
(1) The amount of the loan, when added
to the outstanding balance of all other loans
to the Participant from the Plan or any other
qualified plan of the Company or any Related
Company shall not exceed the lesser of:
(A) $50,000, reduced by the
excess, if any, of a Participant's
highest outstanding balance of all loans
from the Plan or any other qualified
plan maintained by the Company or any
Related Company during the preceding 12
months over the outstanding balance of
such loans on the loan date, or
(B) 50% of the value of the vested
balance of the Participant's Accounts
established as of the last business day
preceding the date upon which the loan
is made;
(2) The loan shall be for at least
$1,000; and
(c) Each loan granted shall, by its
terms, satisfy each of the following
additional requirements:
(1) Each loan must be repaid within
five years (except that if the loan proceeds
are being used to purchase the principal
residence of a Participant, the Committee
may, in its discretion, establish a term of
up to 15 years for repayment);
(2) Each loan must require
substantially level amortization over the
term of the loan, with payments not less
frequently than quarterly; and
(3) Each loan must be adequately
secured, with the security to consist of the
balance of the Participant's Accounts.
(A) In the case of any Participant
who is an Employee, automatic payroll
deductions shall be required as
additional security.
(B) In the case of any other
Participant, the outstanding loan
balance may at no time exceed 50% of the
outstanding vested balance of the
Participant's Accounts. If such limit
is at any time exceeded, or if the
Participant fails to make timely
repayment, the loan will be treated as
in default and become immediately
payable in full.
(C) If a Participant's loan is
secured by the Participant's Accounts,
the investment gain or loss attributable
to the loan shall not be included in the
calculation or allocation of the
increase or decrease in fair market
value of the general assets of the Plan
pursuant to Section 3.6. Instead, the
entire gain or loss (including any gain
or loss attributable to interest
payments or default) shall be allocated
to the Accounts of the Participant.
(4) Each loan shall bear reasonable
rate of interest, which rate shall be
established by the Committee from time to
time and shall provide the Plan with a return
commensurate with the interest rates charged
by persons in the business of lending money
for loans which would be made under similar
circumstances.
(d) All loan payments shall be
transmitted by the Company to the Trustee as soon
as practicable but not later than 45 days after
the date which such amounts were received or
withheld. Each loan may be prepaid in full at any
time. Any prepayment shall be paid directly to
the Trustee in accordance with procedures adopted
by the Committee.
(e) Each loan shall be evidenced by a
promissory note incorporated into a document
executed by the Participant and payable in full to
the Trustee, not later than the earliest of (1) a
fixed maturity date meeting the requirements of
subsection (c)(1) above, (2) the Participant's
death, or (3) the termination of the Plan. Such
promissory note shall evidence such terms as are
required by this section.
(f) The Committee shall have the power
to modify the above rules or establish any
additional rules with respect to loans extended
pursuant to this section. Such rules may be
included in a separate document or documents and
shall be considered a part of this Plan; provided,
each rule and each loan shall be made only in
accordance with the regulations and rulings of the
Internal Revenue Service and Department of Labor
and other applicable state or federal law. The
Committee shall act in its sole discretion to
ascertain whether the requirements of such
regulations and rulings and this section have been
met."
24. Article IX is further amended by adding a new
Section 9.13 to read as follows:
"9.13 - Rule 16b-3 Provisions.
(a) The provisions of this Section 9.13
are intended to ensure that the Plan complies with
17 C.F.R. 240.16b-3 ("Rule 16b-3"), promulgated
under Section 16 of the Securities and Exchange
Act of 1934, as amended ("Section 16"). This
Section shall be effective on such date at which
the transition period for purposes of new Rule 16b-
3, as to this Plan, expires. This Section shall
only apply to Participants who are subject to the
prohibitions of Section 16.
(b) The Committee may take such action
or implement such rules and procedures as are
necessary or desirable in order that the Plan
comply with Rule 16b-3 and for the purpose of
reducing the possibility of liability to
Participants pursuant to Section 16. Neither the
Company, the Committee nor the Plan shall have any
liability to any Participant in the event any
Participant has any liability under Section 16 due
to any transaction under the Plan."
IN WITNESS WHEREOF, this Amendment 1995-1 is
hereby adopted this 20th day of December, 1995.
BECKMAN INSTRUMENTS, INC.
By: DENNIS K. WILSON
Its: Vice President, Finance
Exhibit 10.7
TRUST AGREEMENT
between
BECKMAN INSTRUMENTS, INC.
and
THE FIRST NATIONAL BANK OF CHICAGO
as Trustee,
For The Benefit of
Participating Employees
TRUST AGREEMENT
Dated as of May 31, 1995
between
Beckman Instruments, Inc.
and
The First National Bank of Chicago
TABLE OF CONTENTS
SECTION 1 Definitions. . . . . . . . . . . . . . . . . . 1
SECTION 2 Establishment of the Trust . . . . . . . . . . 4
2.1 Trust Fund. . . . . . . . . . . . . . . . 4
2.2 Irrevocability. . . . . . . . . . . . . . 4
2.3 Claims of Creditors . . . . . . . . . . . 5
SECTION 3 Acceptance by the Trustee. . . . . . . . . . . 5
SECTION 4 Investment of the Trust. . . . . . . . . . . . 5
4.1 General Duty of Trustee . . . . . . . . . 5
4.2 Additional Powers of Trustee. . . . . . . 5
SECTION 5 Establishment and Maintenance of
Participant Schedule . . . . . . . . . . . . . 8
5.1 Form of Participant Schedule. . . . . . . 8
5.2 Maintaining the Plan Schedule . . . . . . 8
SECTION 6 Maintenance of Trust . . . . . . . . . . . . . 8
6.1 Trust Assets and Allocation to Plans. . . 8
6.2 Valuation of Trust and Accounts . . . . . 8
SECTION 7 Voting and Tender of Company Stock Held in
Trust . . . . . . . . . . . . . . . . . . . . 8
7.1 Voting Rights . . . . . . . . . . . . . . 8
7.2 Tender Rights . . . . . . . . . . . . . . 9
7.3 Notices and Information Statements. . . . 9
SECTION 8 Distributions from the Trust . . . . . . . . . 9
8.1 Distributions from the Trust. . . . . . . 9
8.2 Significant Event . . . . . . . . . . . .10
8.3 Protection of Trustee . . . . . . . . . .10
8.4 Company Obligations . . . . . . . . . . .11
8.5 Trustee as Holder of Legal Title
to Trust Assets . . . . . . . . . . . . .11
8.6 Federal Income Tax Consequences of
the Trust . . . . . . . . . . . . . . . .11
SECTION 9 Expenses, Compensation and Indemnification . .11
9.1 Expenses. . . . . . . . . . . . . . . . .11
9.2 Compensation. . . . . . . . . . . . . . .11
9.3 Charge on Trust Fund. . . . . . . . . . .12
9.4 Indemnification . . . . . . . . . . . . .12
9.5 Payment from Trust Fund . . . . . . . . .12
SECTION 10 Administration and Records . . . . . . . . . .12
10.1 Records . . . . . . . . . . . . . . . . .12
10.2 Settlement of Accounts. . . . . . . . . .13
10.3 Audit . . . . . . . . . . . . . . . . . .13
10.4 Judicial Settlement . . . . . . . . . . .13
10.5 Delivery of Records to Successor. . . . .13
10.6 Tax Filings . . . . . . . . . . . . . . .14
SECTION 11 Removal or Resignation of the Trustee and
Designation
of Successor Trustee . . . . . . . . . . . . .14
11.1 Removal . . . . . . . . . . . . . . . . .14
11.2 Resignation . . . . . . . . . . . . . . .14
11.3 Successor Trustee . . . . . . . . . . . .14
SECTION 12 Enforcement of Trust Agreement . . . . . . . .14
12.1 Rights of Parties to Enforce the Trust
Agreement . . . . . . . . . . . . . . . .14
12.2 Limitation on Rights of Participant
and Beneficiaries . . . . . . . . . . . .15
SECTION 13 Termination. . . . . . . . . . . . . . . . . .15
13.1 Termination upon Specific Events. . . . .15
13.2 Termination in Other Events . . . . . . .15
13.3 Limitation on Trustee Liability upon
Total Distribution; Continuation of
Trustee Powers. . . . . . . . . . . . . .15
13.4 Nonapplicability of ERISA . . . . . . . .16
SECTION 14 Amendment. . . . . . . . . . . . . . . . . . .16
14.1 Amendments in General . . . . . . . . . .16
14.2 Nonapplicability of ERISA; Preventing
Current Taxation. . . . . . . . . . . . .16
SECTION 15 Nonalienation. . . . . . . . . . . . . . . . .16
15.1 Prohibition Against Certain Transfers,
Pledges, Etc.. . . . . . . . . . . . . . 16
SECTION 16 Communications . . . . . . . . . . . . . . . .17
16.1 To the Company, Board of Directors and
Committee . . . . . . . . . . . . . . . .17
16.2 To the Trustee. . . . . . . . . . . . . .17
16.3 To a Participant. . . . . . . . . . . . .17
16.4 Binding upon Receipt. . . . . . . . . . .17
16.5 Authority to Act. . . . . . . . . . . . .18
16.6 Authenticity of Instruments . . . . . . .18
SECTION 17 Claims of Companies Bankruptcy Creditors . . .18
17.1 Bankruptcy Creditors. . . . . . . . . . .18
17.2 Resumption of Benefits, Restoration of
Accounts. . . . . . . . . . . . . . . . .18
SECTION 18 Consolidation, Merger or Sale of the Company .19
18.1 Consolidation, Merger or Sale of
the Company . . . . . . . . . . . . . . .19
SECTION 19 Miscellaneous Provisions . . . . . . . . . . .19
19.1 Binding Effect. . . . . . . . . . . . . .19
19.2 Inquiry as to Authority . . . . . . . . .19
19.3 Responsibility for the Company Action . .19
19.4 Successor to Trustee. . . . . . . . . . .19
19.5 Intercompany Agreements . . . . . . . . .19
19.6 Titles Not to Control . . . . . . . . . .20
19.7 Fractional Shares . . . . . . . . . . . .20
Schedule A
LIST OF PLANS . . . . . . . . . . . . . . . . . . . . .21
Schedule B
MINIMUM DISTRIBUTION SCHEDULE(S). . . . . . . . . . . .22
Schedule C
FEE SCHEDULE . . . . . . . . . . . . . . . . . . . . .23
TRUST AGREEMENT made and entered into as of May 31,
1995 by and between Beckman Instruments, Inc., a corporation
organized under the laws of the State of Delaware (the
"Company"), and The First National Bank of Chicago, a
national banking association, organized under the laws of
the United States of America (the "Trustee").
W I T N E S S E T H:
WHEREAS, the Company has in place various qualified and
non-qualified employee benefit plans and arrangements for
the benefit of some or all of the employees of the Company
and certain of its subsidiaries and affiliates and may from
time to time adopt one or more additional plans or
arrangements;
WHEREAS, the Company and its subsidiaries or affiliates
have and will have certain legal obligations under these
employee benefit plans or arrangements;
WHEREAS, the Company wishes to establish a trust to
assist it in meeting certain of these obligations and
intends to make contributions to such trust at such time or
times and in such amount or amounts as it may determine;
WHEREAS, the Company intends that such contributions
shall be held by the Trustee and invested and reinvested
primarily in common stock of the Company, all in accordance
with the provisions of this Trust Agreement;
WHEREAS, inasmuch as the income and corpus of such
trust may and will be applied in discharge of the Company's
legal obligations, such trust is intended to be a "grantor
trust" within the meaning of Section 671 of the Internal
Revenue Code of 1986; and
WHEREAS, the Company intends that the assets of such
trust at all times shall be subject to the claims of
bankruptcy and other general creditors of the Company and
its subsidiaries and affiliates that maintain the employee
benefit plans and arrangements as provided in Section 17 of
this Trust Agreement.
NOW THEREFORE, in consideration of the mutual covenants
herein contained, the Company and the Trustee declare and
agree as follows:
SECTION 1 Definitions.
As used in this Trust Agreement, the following
definitions apply to the terms indicated below:
1.1 "Administrator" or "Administrators" shall refer to
the committee, person or persons charged with responsibility
for overseeing and administering the Plans.
1.2 "Affiliate" shall refer to any subsidiary or other
firm related by direct or indirect stock ownership that has
adopted a Plan while each such entity remains a subsidiary
or related firm of the Company.
1.3 "Beneficiary" shall mean any person entitled to
receive benefits under any Plan on the death of a
Participant.
1.4 "Benefits" shall mean amounts that the Company or
an Affiliate has an obligation pursuant to any Plan to (i)
pay from its general assets, (ii) provide for the payment of
by making contributions from its general assets, or (iii)
deliver in shares of Company Stock.
1.5 "Board of Directors" shall mean the Board of
Directors of the Company.
1.6 "Change in Control" shall be deemed to occur if
the Secretary of the Company certifies to the Trustee that
any of the following events has occurred:
1.6.1 Any "person", as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), other than an
employee benefit plan of the Company, or a trustee or
other fiduciary holding securities under an employee
benefit plan of the Company, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of
the Company representing 20% or more of the combined
voting power of the Company's then outstanding voting
securities. Notwithstanding the preceding sentence, a
Change of control shall not be deemed to have occurred
if the "person" described in the preceding sentence is
an underwriting syndicate which has acquired the
ownership of 20% or more of the combined voting power
of the Company's then outstanding voting securities
solely in connection with a public offering of the
Company's securities.
1.6.2 Individuals who, as of the date hereof,
constitute the Board of the Company (the "Incumbent
Board"), cease for any reason to constitute at least a
majority of the Board provided that any person becoming
a director subsequent to the date hereof whose
election, or nomination for election by the Company's
stockholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent
Board (other than an election or nomination of an
individual whose initial assumption of office is in
connection with an actual or threatened election
contest relating to the election of the directors of
the Company, as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act)
shall be considered as though such person were a member
of the Incumbent Board of the Company.
1.6.3 The stockholders of the Company approve a
merger or consolidation with any corporation, other
than (A) a merger or consolidation which would result
in the voting securities of the Company outstanding
immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted
into voting securities of another entity) more than 80%
of the combined voting power of the voting securities
of the Company or such other entity outstanding
immediately after such merger or consolidation or (B) a
merger or consolidation effected to implement a
recapitalization of the Company (or similar
transaction) in which no person acquires 20% or more
the combined voting power of the Company's then
outstanding voting securities.
1.6.4 The stockholders of the Company approve a
plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of
all or substantially all of the Company's assets.
1.7 "Code" shall mean the Internal Revenue Code of
1986 as it may be amended from time to time.
1.8 "Committee" shall mean such committee as the Board
of Directors shall appoint from time to time to administer
the Trust. The Committee shall consist of three or more
persons. The members of the Committee will be certified to
the Trustee by the Secretary or Assistant Secretary of the
Board of Directors.
1.9 "Company Stock" shall mean the common stock of the
Company, par value $.10 per share.
1.10 "Daily Value" shall mean, with respect to a share
of Company Stock, the closing reported sales price per share
of Company Stock on the New York Stock Exchange Composite
Tape, or if Company Stock is not traded on such stock
exchange, the principal national securities exchange on
which Company Stock is traded, or if not so traded, the mean
between the highest bid and lowest asked quotation on the
over-the-counter market as reported by the National
Quotations Bureau, or any similar organization, on any
relevant date, or if not so reported, as determined by the
Committee in a manner consistently applied.
1.11 "Eligible Participant" shall mean a Participant
who is an Employee and who, during the 6-month period
preceding the date as of which Eligible Participants are to
be determined for purposes of this Trust Agreement,
purchased Common Stock pursuant to the Beckman Instruments
Employee Stock Purchase Plan.
1.12 "Employee" shall mean any individual who is
actively employed by the Company or an Affiliate.
1.13 "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time.
1.14 "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended from time to time.
1.15 "Minimum Distribution Schedule" shall mean the
schedule (or schedules) set forth in Schedule B.
1.16 "Other Assets" shall mean any asset or investment
aside from cash held by the Trust that is not Company Stock.
1.17 "Participant Schedule" shall mean the schedule
prepared by the Company pursuant to Section 5.2.
1.18 "Participants" shall mean those individuals who
participate in one or more of the Plans described in
Appendix A.
1.19 "Plans" shall mean the plans or arrangements
referred to in Schedule A, as amended from time to time.
1.20 "Trust" shall mean the trust established pursuant
to this Trust Agreement.
1.21 "Trust Fund" shall mean all Company Stock, money
or other property from time to time contributed to the Trust
and all investments and reinvestments made therewith or
proceeds thereof and all earnings and profits thereon, less
all payments and charges as authorized herein.
SECTION 2 Establishment of the Trust.
2.1 Trust Fund. The Company hereby establishes the
Trust. The Trust Fund shall consist of such sums of Company
Stock, money and other property acceptable to the Trustee as
are from time to time paid or delivered to the Trustee. The
Company shall have no duty or obligation to make any
contribution to the Trust and the Trustee shall have no duty
or obligation to require the company to make any
contribution to the Trust. The Trust Fund shall be held by
the Trustee in trust and shall be dealt with in accordance
with the provisions of this Trust Agreement. The Trustee,
and any successor Trustee appointed pursuant to Section 11
hereof or resulting under Section 19.4 hereof shall at all
times be a bank and trust company or other national banking
association that is neither a subsidiary of nor other firm
related by direct or indirect stock ownership to the
Company.
2.2 Irrevocability. Except as provided in Section 17
hereof, the Trust shall be for the exclusive purpose of
assisting the Company in providing Benefits and defraying
expenses of the Trust in accordance with the provisions of
this Trust Agreement. No part of the income or corpus of
the Trust Fund shall be recoverable by the Company;
provided, however, that the Trust Fund shall be applied in
discharge of the Company's legal obligations as provided in
this Trust Agreement.
2.3 Claims of Creditors. Notwithstanding anything in
this Trust Agreement or the Plans to the contrary, the Trust
Fund shall at all times be subject to the claims of
bankruptcy and other general creditors of the Company and
its affiliates, as provided in Section 17 hereof. No
Participant or Plan shall have any claim against the Trust
Fund other than as a general unsecured creditor of the
Company.
SECTION 3 Acceptance by the Trustee.
The Trustee accepts the Trust established under this
Trust Agreement on the terms and subject to the provisions
set forth herein. The Trustee agrees to discharge and
perform fully and faithfully all of the duties and
obligations imposed upon it under this Trust Agreement.
SECTION 4 Investment of the Trust.
4.1 General Duty of Trustee. Except as otherwise
directed by the Committee pursuant to this Section 4.1, and
except as otherwise expressly provided in this Trust
Agreement, all assets received by the Trustee other than
Company Stock shall be invested as soon as practicable in,
and remain invested in, Company Stock. The Trustee shall
acquire shares of Company Stock in the open market or
through the method of purchase and sales which is used by
the Trustee in the normal course of its security
transactions, including transactions with the Company. The
Committee may direct that cash or Other Assets received by
the Trustee may be retained and invested in Other Assets
provided that, after payment of the costs of the Trust,
including, without limitations, Trustee fees and expenses,
through the end of the calendar year during which such cash
or other Assets are received by the Trustee, any such cash
or Other Assets remaining shall be distributed by the
Trustee at the end of such calendar year to such Plans,
Participants or Employees as determined by the Committee in
good faith taking into account the best interests of a broad
cross-section of Employees.
4.1.1 Upon any purchase by or contribution to the
Trust of Company Stock pursuant to this Section 4, the
Trustee shall promptly take such steps as are necessary
to register such Company Stock in accordance with
Section 4.2.13 hereof.
4.2 Additional Powers of Trustee. Subject to the
provisions of Section 4.1, the Trustee shall have the
following additional powers and authority with respect to
all property constituting a part of the Trust Fund:
4.2.1 To purchase securities or any other kind of
property and to retain such securities or other
property, regardless of diversification and without
being limited to investments authorized by law for the
investment of trust funds; provided however, "property"
shall not include any direct or indirect interest in
real estate. For this purpose, "real estate" includes,
but is not limited to real property, mortgages,
leaseholds, mineral interests, and any form of asset
which is secured by any of the foregoing.
4.2.2 Subject to Section 7 hereof, the sell,
exchange or transfer any such property at public or
private sale for cash or on credit and grant options
for the purchase or exchange thereof.
4.2.3 Subject to Section 7 hereof, to participate
in any plan of reorganization, consolidation, merger,
combination, liquidation or other similar plan relating
to any such property, and to consent to or oppose any
such plan or any action thereunder, or any contract,
lease, mortgage, purchase, sale or other action by any
corporation or other entity any of the securities of
which may at any time be held in the Trust Fund, and to
do any act with reference thereto.
4.2.4 To deposit cash or any Other Assets with
any protective, reorganization or similar committee; to
delegate discretionary power to any such committee; and
to pay part of the expenses and compensation of any
such committee and any assessments levied with respect
to any property so deposited.
4.2.5 To exercise any conversion privilege or
subscription right available in connection with any
such property, and to do any act with referenced
thereto, including the exercise of options, the making
of agreements or subscriptions and the payment of
expenses, assessments or subscriptions, which may be
deemed necessary or advisable in connection therewith,
and to hold and retain any securities or other property
which it may so acquire.
4.2.6 To commence or defend suits or legal
proceedings and to represent the Trust in all suits or
legal proceedings; to settle, compromise or submit to
arbitration any claims, debts or damages, due or owing
to or from the Trust.
4.2.7 Subject to Section 7 hereof, to exercise,
personally or by general or limited power of attorney,
any right, including the right to vote, appurtenant to
any securities or other such property.
4.2.8 To hold cash awaiting investment
uninvested, and to maintain such additional cash
balances as it shall deem reasonable or necessary to
meet anticipated cash distributions from or
administrative costs of the Trust.
4.2.9 To invest cash or Other Assets at The First
National Bank of Chicago, or another bank and trust
company or national banking association in any type of
interest-bearing investment, including, without
limitation, deposit accounts, certificates of deposit
and repurchase agreements.
4.2.10 To invest and reinvest all or any specified
portion of cash or Other Assets (i) through the medium
of any common trust fund which has been or may
hereafter be established and maintained by the Trustee,
or (ii) in shares of open end or closed end investment
companies provided that, prior to investing any portion
of the Trust Fund for the first time in any such common
trust fund or investment company, the Trustee shall
advise the Company of its intent to make such an
investment and furnish to the Company any information
it may reasonably request with respect to such
investment.
4.2.11 To form corporations or partnerships and to
create trusts to hold title to any cash or Other Assets
constituting the Trust Fund, upon such terms and
conditions as may be deemed advisable.
4.2.12 To engage legal counsel, including (except
following the occurrence of a Change in Control)
counsel to the Company, or any other suitable agents,
to consult with such counsel or agents with respect to
the implementation or construction of this Trust
Agreement, the duties of the Trustee hereunder, the
transactions contemplated by this Trust Agreement or
any act which the Trustee proposes to take or omit, to
rely upon the advice of such counsel or agents, and to
pay any such counsel's or agent's reasonable fees,
expenses and compensation.
4.2.13 To register or hold any securities or other
property held by it in its own name or in the name of
any custodian of such property or of its nominee,
including the nominee of any system for the central
handling of securities, with or without the addition of
words indicting that such securities are held in a
fiduciary capacity, to deposit or arrange for the
deposit of any such securities with such a system and
to hold any securities in bearer form.
4.2.14 To make, execute and deliver, as Trustee,
any and all deeds, leases, notes, bonds, guarantees,
mortgages, conveyances, contracts, waivers, releases or
other instruments in writing that are necessary or
proper for the accomplishment of any of the foregoing
powers.
4.2.15 Pursuant to the direction of the Committee
as to all aspects of the transaction, including without
limitation interest rate, term and identity of lender,
to undertake a borrowing sufficient to enable the Trust
to acquire newly issued Company Stock.
4.2.16 Subject to Section 7 hereof, generally, to
exercise any of the powers of an owner with respect to
property held in the Trust fund.
SECTION 5 Establishment and Maintenance of Participant
Schedule.
5.1 Form of Participant Schedule. The Company shall
prepare, and shall deliver to the Trustee in accordance with
Section 5.2 hereof, a schedule that sets forth the name of
each Participant entitled to receive a Benefit under a Plan.
Such Schedule shall also include a list of Eligible
Participants.
5.2 Maintaining the Participant Schedule. As soon as
practicable after execution of this Trust Agreement, the
Company shall deliver to the Trustee the Participant
Schedule. The Company shall from time to time update the
Participant Schedule. Each Participant Schedule shall state
the date as of which it applies, and the trustee shall be
entitled to rely upon such Participant Schedule, without a
duty of further inquiry, until it receives an updated
Participant Schedule bearing a later date. Each Participant
Schedule shall contain all information concerning a
Participant which the Trustee will need to complete its
responsibilities under this Agreement.
SECTION 6 Maintenance of Trust.
6.1 Trust Assets and Allocation to Plans. The Trustee
shall hold all assets contributed or otherwise obtained by
the Trust and shall distribute such contributions and any
earnings thereon to such Administrators, Employees or
Participants as the Committee may from time to time direct
pursuant to Section 8 hereof or as may be required pursuant
to Section 8 hereof.
6.2 Valuation of Trust and Accounts. The Trustee
shall revalue the Trust Fund as of the last business day of
each calendar quarter. Shares of Company Stock shall be
valued at the Daily Value of Company Stock as of such date.
SECTION 7 Voting and Tender of Company Stock Held in Trust.
7.1 Voting Rights. The Trustee shall vote the shares
of Company Stock held by the Trust in accordance with
directions received by Eligible Participants determined as
of the record date. As soon as practicable following the
record date in question, the Company shall deliver to the
Trustee a Participant Schedule listing Eligible Participants
determined as of such record date. Each Eligible
Participant listed on such Participant Schedule shall have
the right to direct the vote with respect to that number of
shares of Company Stock held by the trust as is equal to the
total number of shares of Company Stock held by the trust as
of such record date divided by the number of Eligible
Participants listed on the Participant Schedule who submit
such voting directions. The Trustee shall devise and
implement a procedure to assure confidentiality of any
directions given by Eligible Participants in respect of
votes. All actions taken by Eligible Participants pursuant
to this Section 7.1 shall be held confidential by the
Trustee and shall not be divulged or released to any person,
other than (i) agents of the Trustee who are not affiliated
with the Company or its Affiliates, (ii) by virtue of the
execution by the Trustee of any proxy, consent or letter of
transmittal for the shares of Company Stock held in the
Trust, or (iii) as may be required by court order.
7.2 Tender Rights. If any person shall commence a
tender or exchange offer or any similar transaction with
respect to the Company Stock, the Trustee shall pass through
tender or exchange rights to Eligible Participants
determined as of the Commencement of such tender or exchange
offer. As soon as practicable following the commencement of
such tender or exchange offer, the Company shall deliver to
the Trustee a Participant Schedule listing the Eligible
Participants determined as of the commencement of such
tender or exchange offer. Each Eligible Participant listed
on such Participant Schedule shall have the right to direct
the tender or exchange of that number of shares of Company
Stock held by the Trust as is equal to the total number of
shares of Company Stock held by the Trust divided by the
number of Eligible Participants listed on the Participant
Schedule who submit such directions. The Trustee shall
devise and implement a procedure to assure the
confidentiality of any directions given by Eligible
Participants in response to such offers. All actions taken
by Eligible Participants pursuant to this Section 7.2 shall
be held confidential by the Trustee and shall not be
divulged or released to any person, other than (i) agents of
the Trustee who are not affiliated with the Company or its
Affiliates, (ii) by virtue of the execution by the Trustee
of any proxy, consent or letter of transmittal for the
shares of Company Stock held in the Trust, or (iii) as may
be required by court order.
7.3 Notices and Information Statements. The Company
shall provide the Trustee in a timely manner with notices
and information statements (including proxy statements) when
voting rights are to be exercised, and with respect to
tender, exchange or similar offers, at the same time and in
the same manner (except to the extent the Exchange Act
requires otherwise) as such notices and information
statements (including proxy statements) are provided to
shareholders of the Company generally. The Trustee shall,
in turn provide all material received by the Company
pursuant to this Section 7.3 to Eligible Participants
described in Sections 7.1 and 7.2.
SECTION 8 Distributions from the Trust.
8.1 Distributions from the Trust. Except as otherwise
provided in Section 8.2, the Trustee shall distribute
Company Stock held in the Trust in accordance with the
Minimum Distribution Schedule applicable to such transfer of
stock. The particular Plan with respect to which any
distribution from the Trust is made will be determined by
the Committee in accordance with the following directions:
(a) to the extent available, shares of Company Stock
sufficient to meet the obligations of the Beckman
Instruments Inc. Employee Share Purchase Program shall first
be allocated to the Administrator of such Plan, and (b)
remaining shares of Company Stock (if any) shall first be
allocated to the Administrators of other Plans or directly
to Participants in such other Plans or Employees, as
determined by the Committee in good faith taking into
account the best interests of a broad cross-section of
Participants.
8.1.1 Reliance Upon Committee Instruction. The
Committee shall inform the Trustee in writing of how
many shares are required to fund 8.1(a). The Trustee
may rely upon written instructions received by the
Committee to carry out the instructions contained in
this Section 8.1 and shall have no responsibility to
verify or monitor the determinations made by the
Committee. If no direction regarding allocation of
shares of Company Stock pursuant to clause (b) of
Section 8.1 is received by the Trustee from the
Committee by the date specified in the Minimum
Distribution Schedule, the shares of Company Stock
subject to such allocation under said clause (b) shall
be distributed to all participants in an equal amount
per Participant as determined by reference to the most
recent Participant Schedule received by the Trustee.
8.1.2 Acceleration. Notwithstanding anything
herein to the contrary, the Committee can direct that
the number of shares distributed in any year exceed the
number of shares required to be distributed under the
Minimum Distribution Schedule and/or that shares be
distributed prior to the date specified in such
schedule. If, in any year, the Committee directs that
the number of shares distributed exceeds the number
required to be distributed pursuant to the Minimum
Distribution Schedule, such Schedule shall be revised
by the Committee, so that all remaining minimum
distribution amounts will be reduced proportionately.
8.2 Significant Event. If an event occurs that causes
30 percent or more of the Participants to cease to be
Employees within a 12-month period, as certified by the
Committee, then all remaining distribution amounts under the
Minimum Distribution Schedule will be reduced in direct
proportion to such reduction and the Minimum Distribution
Schedule will be correspondingly extended.
8.3 Protection of Trustee. The Trustee shall, to the
maximum extent permitted by applicable law, be fully
protected in acting upon the Participant Schedule and any
written statement, affidavit or certification referred to in
this Trust Agreement. The Trustee shall at all times, to
the maximum extend permitted by applicable law, be fully
protected in making distributions pursuant to Sections 4.1,
8, 13 and 17 hereof.
8.4 Company Obligations. Notwithstanding the
provisions of this Trust Agreement, the Company and its
Affiliates shall remain obligated with respect to the
Benefits attributable to their respective employees.
Nothing in this Trustee Agreement shall relieve the Company
or any of its Affiliates of their respective liabilities
with respect to the Benefits except to the extent such
amounts are paid to a Plan or a Participant from the Trust,
it nevertheless being the Company's intent that the Trust
Fund shall be applied in discharge of the Company's legal
obligations as provided in this Trust Agreement.
8.5 Trustee as Holder of Legal Title to Trust Assets.
Subject to Section 17 hereof, the Trustee shall hold legal
title to all assets in the Trust for benefit of the
Participants and Employees.
8.6 Federal Income Tax Consequences of the Trust. The
Trust Fund may be applied in the discharge of legal
obligations of the Company as provided herein. Accordingly,
the Company shall take into account in computing its tax
liability, those items of income, deductions and credits
against tax attributable to assets held in the Trust to
which the Company would have been entitled had the Trust not
been in existence. The Trustee shall notify the Company
promptly after it becomes aware of any tax liability
assessed against, or imposed upon, the Trust or the Trustee
in its capacity as Trustee of the Trust. The Company shall
be responsible for all matters in respect of such assessment
or imposition, and shall have sole responsibility for any
defense in connection therewith. Payments in respect of any
tax liability of the Company arising in connection with
earnings, gain or activities relating to the Trust,
including, without limitation, interest and penalties, shall
be made from the Trust fund after a final determination of
such liability, unless the Company promptly pays such
liability. In the event the assets of the Trust are
insufficient to pay such liability, any deficit shall be
paid promptly by the Company.
SECTION 9 Expenses, Compensation and Indemnification.
9.1 Expenses. The Trustee shall be reimbursed by the
Company for its reasonable expenses of implementation,
management and administration of the Trust, including
brokerage commissions and the reasonable compensation of
attorneys or other agents engaged by the Trustee or by the
Company to assist in such implementation, management and
administration.
9.2 Compensation. The Company shall pay the Trustee
compensation in accordance with the compensation schedule
attached hereto as Schedule C, unless the Company and the
Trustee otherwise agree in writing.
9.3 Charge on Trust Fund. All expense and
compensation referred to in Sections 9.1 and 9.2 hereof
shall be a charge on the Trust Fund and shall constitute a
lien on the Trust Fund in favor of the Trustee and shall be
payable from the Trust Fund unless paid when due by the
Company.
9.4 Indemnification. The Company hereby agrees to
indemnify and hold harmless the Trustee from and against any
losses, costs, damages, claims or expenses, including
without limitation reasonable attorneys' fees, which the
Trustee may incur or pay out in connection with, or
otherwise arising out of:
9.4.1 the performance by the Trustee of its duties
hereunder, unless any such loss, cost, damage, claim or
expense is a result of negligence or willful misconduct
by the trustee or the breach by the Trustee of its
fiduciary duties hereunder; or
9.4.2 any action taken by the Trustee in good
faith pursuant to the written direction of the Company.
In the event that any action or regulatory proceeding shall
be commenced or claim asserted which may entitle the Trustee
to be indemnified hereunder, the Trustee shall give the
Company written notice of such action or claim promptly
after becoming aware of such commencement or assertion
unless the Company has otherwise received notice of such
action or claim. The Company shall be entitled to
participate in and, upon notice to the Trustee, assume the
defense of any such action or claim using counsel reasonably
acceptable to the Trustee. The Trustee shall cooperate with
the Company in connection with the defense of any such
action or claim. Subject to Section 17, the Trustee shall
have no claim on the assets of the Trust Fund in respect of
amounts payable to the Trustee under this Section 9.4.
9.5 Payment from Trust Fund. All payments of expenses
and compensation referred to in Sections 9.1 and 9.2 hereof
may be made without approval or direction of the Company.
SECTION 10 Administration and Records.
10.1 Records. Subject to Sections 7.1 and 7.2, the
Trustee shall keep or cause to be kept accurate and detailed
accounts of any investments, receipts, disbursements and
other transactions hereunder and all accounts, books and
records relating thereto shall be open to inspection and
audit at all reasonable times by any person designated by
the Company. The Trustee shall preserve all such accounts,
books, and records, in original form or on microfilm,
magnetic tape or any other similar process, for such period
as the Trustee may determine, but the Trustee may destroy
such accounts, books and records only after first notifying
the Company in writing of its intention to do so and
transferring to the Company, subject to Section 7.1 and 7.2
hereof, any of such accounts, books and records that the
Company shall request.
10.2 Settlement of Accounts. Subject to Sections 7.1
and 7.2 hereof, within 60 days after the close of each
calendar year, and within 60 days after the removal or
resignation of the Trustee or the termination of the Trust
(or any portion thereof), the Trustee shall file with the
Company a written account setting forth all investments,
receipts, disbursements and other transactions effected by
it with respect to the Trust during the preceding calendar
year or during the period from the close of the preceding
calendar year to the date of such removal, resignation or
termination, including a description of all investments and
securities purchased and sold, with the cost or net proceeds
of such purchases or sales, and showing all cash, securities
and other property held at the end of such calendar year or
other period.
It shall be the duty of the Company to review such
written account promptly within 90 days from the date of
filing any such account and if, within such 90-day period,
the Company does not file with the Trustee a written notice
of objection to any of the Trustee's acts or transactions,
the initial account shall become an account stated between
the Trustee and the Company. If the Company files a written
notice of objection with the Trustee, the Trustee may file
with the Company an adjusted account, in which case it shall
be the duty of the Company to review such adjusted account
promptly within 30 days from the date of its filing. If,
within such 30-day period, the Company fails to file a
written notice of objection to any of the Trustee's acts or
transactions as so adjusted with the Trustee, the adjusted
account shall become an account stated between the Trustee
and the Company.
Unless an account is fraudulent, when it becomes an
account stated it shall be finally settled, and the Trustee
shall, to the maximum extend permitted by applicable law, be
forever released and discharged from all liability and
accountability with respect to the propriety of its acts and
transactions shown in such account.
10.3 Audit. The Trustee shall from time to time permit
an independent public accountant selected by the Company to
have access during ordinary business hours to such records
as may be necessary to audit the Trustee's accounts.
10.4 Judicial Settlement. Nothing contained in this
Trust Agreement shall be construed as depriving the Trustee
or the Company of the right to have a judicial settlement of
the Trustee's accounts. Upon any proceeding for a judicial
settlement of the Trustee's accounts or for instructions the
only necessary party thereto in addition to the Trustee
shall be the Company.
10.5 Delivery of Records to Successor. In the event of
the removal or resignation of the Trustee, the Trustee shall
deliver to the successor Trustee all records which shall be
required by the successor Trustee to enable it to carry out
the provisions of this Trust Agreement.
10.6 Tax Filings. In addition to any returns required
of the Trustee by law (e.g. any information return required
to the be filed on IRS Form 1041), the Trustee shall prepare
and file such tax reports and other returns as the Company
and the Trustee may from time to time agree.
SECTION 11 Removal or Resignation of the Trustee and
Designation of Successor Trustee.
11.1 Removal. At any time prior to the occurrence of a
Change in Control, the Company may remove the Trustee with
or without cause upon at least 60 days' notice in writing to
the Trustee. At any time after the occurrence of a Change
in Control, the Trustee may not be removed except by order
of a court of competent jurisdiction. No removal of the
Trustee shall be effective until the Company has appointed
in writing a successor Trustee, and such successor has
accepted the appointment in writing.
11.2 Resignation. Trustee may resign at any time upon
at least 60 days' notice in writing to the Company, except
that any such resignation shall not be effective until the
Company has appointed in writing a successor Trustee, and
such successor has accepted the appointment in writing. At
any time after 30 days following the sending of such notice
of resignation, if the Company is unable to appoint a
successor Trustee or if a successor Trustee has not accepted
an appointment, the Trustee shall be entitled, at the
expense of the Company, to petition a United States District
Court or any of the courts of the Commonwealth of
Pennsylvania or other court having jurisdiction to appoint
its successor.
11.3 Successor Trustee. Subject to Section 2.1 hereof,
each successor Trustee, during such period as it shall act
as such, shall have the powers and duties herein conferred
upon the Trustee, and the word "Trustee" wherever used
herein, except where the context otherwise requires, shall
be deemed to include any successor Trustee. Upon
designation of a successor Trustee and delivery to the
resigned or removed Trustee of written acceptance by the
successor Trustee of such designation, such resigned or
removed Trustee shall promptly assign, transfer, deliver and
pay over to such Trustee, in conformity with the
requirements of applicable law, the funds and properties in
its control or possession then constituting the Trust Fund.
SECTION 12 Enforcement of Trust Agreement.
12.1 Rights of Parties to Enforce the Trust Agreement.
The Company and the Trustee shall have the right to enforce
any provision of this Trust Agreement. In any action or
proceeding affecting the Trust, the only necessary parties
shall be the Company and the Trustee and, except as
otherwise required by applicable law, no other person shall
be entitled to any notice or service of process. Any
judgement entered in such an action or proceeding shall, to
the maximum extend permitted by applicable law, be binding
and conclusive on all persons having or claiming to have any
interest in the Trust or any Plan.
12.2 Limitation on Rights of Participants and
Beneficiaries. Neither the Plans nor any Participant or
Beneficiary shall have any rights with respect to the Trust
Fund, no Plan shall be deemed to have any beneficial
interest in the Trust Fund and no Employee shall be deemed
to have any beneficial interest in the Trust Fund arising
from his participation in any particular Plan.
SECTION 13 Termination.
13.1 Termination upon Specific Events. The Trust shall
be terminated as soon as practicable after the Trustee has
received written notice from the Committee that one or more
of the following events has occurred:
13.1.1 in the Committee's sole discretion, the
Department of Labor or a court of competent
jurisdiction has determined or would be likely to
determine that the assets of the Trust are subject to
Part 4 of Subtitle B of Title I of ERISA,
13.1.2 in the Committee's sole discretion, the
Internal Revenue Service or a court of competent
jurisdiction has determined or would be likely to
determine that any portion of the Trust Fund is
presently taxable to any Participant or Beneficiary, or
13.1.3 a Change in Control has occurred.
In the event of a termination pursuant to this
Section 13.1, the Trustee shall distribute all assets
then constituting the Trust Fund to all Participants
listed on the Participant Schedule in a equal amount
per Participant.
13.2 Termination in Other Events. Notwithstanding
anything herein to the contrary, the Trust shall terminate
on the earliest of (a) 21 years following the death of the
youngest Participant included on the Participant Schedules
received by the Trustee in 1993, (b) the date on which the
Committee informs the Trustee in writing that the Company
and its Affiliates have no obligations under any Plans (or
the date on which there are no Plans) or (c) the date on
which the Trust contains no assets and retains no claims to
recover assets from the Company and its Affiliates pursuant
to any provision hereof, whichever shall first occur. In
the event of a termination described in clauses (a) or (b)
of this Section, the Trustee shall distribute the assets
remaining in the Trust Fund to all participants listed on
the Participant Schedule in an equal amount per Participant.
13.3 Limitation on Trustee Liability upon Total
Distribution; Continuation of Trustee Powers. Upon a total
distribution of the Trust assets pursuant to Sections 8 or
13, the Trustee shall be relieved from all further
liability. The powers of the Trustee hereunder shall
continue so long as any assets of the Trust remain in its
hands.
13.4 Nonapplicability of ERISA. Notwithstanding
anything herein to the contrary, no amount shall be
distributed to any Participant pursuant to this Section 13
if such distribution could, in the opinion of independent
counsel, cause the Trust to be subject to ERISA (other than
as an unfunded plan described in ERISA section 201(2)).
Prior to a distribution pursuant to this Section, the
Committee shall provided the Trustee with a Schedule of
Participants eligible for a distribution (taking into
account this subsection 13.4).
SECTION 14 Amendment.
14.1 Amendments in General. The Company may, in its
sole discretion, from time to time amend, in whole or in
part, any or all of the provisions of this Trust Agreement,
including, without limitation, by adding to, or subtracting
from Schedule A hereto one or more employee benefit plans
(within the meaning of Section 3(3) of ERISA) or plans or
arrangements that are not employee benefit plans (within the
meaning of such Section); provided, that (a) in making any
modification to Schedule A hereto, the Company shall act in
good faith taking into account the best interests of a broad
cross-section of employees, and (b) the Company shall ensure
that at all times Schedule A shall include at least one
employee benefit plan that is not an employee benefit plan
within the meaning of Section 3(3) of ERISA. No amendment
to this Trust Agreement or the Plans shall be made that
would (a) purport to alter the irrevocable character of the
Trust, (b) without the Trustee's prior written consent,
adversely affect the Trustee's rights, increase the
Trustee's duties or responsibilities or decrease the
Trustee's compensation hereunder, or (c) alter Section 1.6,
2, 4, 6, 7, 8, 13, or subsection 14.1.
14.2 Nonapplicability of ERISA; Preventing Current
Taxation. Notwithstanding subsection 14.1, the Company may
amend this Trust Agreement from time to time in such a
manner as may be necessary, in the opinion of independent
counsel, to prevent this Trust Agreement or the Trust from
becoming subject to ERISA and to prevent the current
taxation of the Trust Fund to Participants.
SECTION 15 Non-alienation.
15.1 Prohibition Against Certain Transfers, Pledges,
Etc. Except as otherwise provided by this Trust Agreement
and except as otherwise may be required by applicable law,
(a) no amount payable to or in respect of any Plan,
Participant or Employee at any time under the Trust shall be
subject in any manner to alienation by anticipation, sale,
transfer, assignment, bankruptcy, pledge, attachment,
charge, or encumbrance of any kind, and any attempt to so
alienate, sell, transfer, assign, pledge, attach, charge or
otherwise encumber any such amount, whether presently or
thereafter payable, shall be void and (b) the Trust Fund
shall in no manner be liable for or subject to the debts or
liabilities of any Participants.
SECTION 16 Communications.
16.1 To the Company, Board of Directors and Committee.
Communications to the Company, the Board of Directors and
the Committee shall be addressed to:
Beckman Instruments, Inc.
2500 Harbor Boulevard
Fullerton, CA 92634
Attn: Dennis K. Wilson
with a copy to:
Beckman Instruments, Inc.
2500 Harbor Boulevard
Fullerton, CA 92634
Attn: William H. May, Esq.
provided, however, that upon the Company's written request,
such communications shall be sent to such other address as
the Company may specify.
16.2 To the Trustee. Communications to the Trustee
shall be addressed to:
Mary C. Murray
The First National Bank of Chicago
2 First National Plaza
Suite 0108, 2-17
Chicago, IL 60670-0108
provided, however, that upon the Trustee's written request,
such communications shall be sent to such other address as
the Trustee may specify.
16.3 To a Participant. Communications to a Participant
or to his Beneficiaries shall be addressed to the
Participant or his Beneficiaries, respectively at the
address indicated on the Participant Schedule as in effect
at the time of the communication.
16.4 Binding upon Receipt. No communication shall be
binding on the Trustee until it is received by the Trustee,
and no communication shall be binding on the Company, the
Board of Directors or the Committee until it is received by
the Company, the Board of Directors or the Committee,
respectively and no communication shall be binding on a
Participant or the Participant's Beneficiaries until it is
received by the Participant or the Participant's
Beneficiaries, respectively.
16.5 Authority to Act. The Secretary of the Company
shall from time to time certify to the Trustee the person or
persons authorized to act for the Company, the Committee and
the Board of Directors, and shall provide the Trustee with
such information regarding the Company as the Trustee may
reasonably request. The Trustee may continue to rely on any
such certification until notified to the contrary.
16.6 Authenticity of Instruments. The Trustee shall be
fully protected in acting upon any instrument, certificate,
or paper reasonably believed by it to be genuine and to be
signed or presented by the proper person or persons, and the
Trustee shall be under no duty to make any investigation or
inquiry as to any statement contained in any such writing
but may accept the same as conclusive evidence of the truth
and accuracy of the statements therein contained.
SECTION 17 Claims of Companies' Bankruptcy Creditors.
17.1 Bankruptcy Creditors. In the event of the
Company's "insolvency," the assets of the Trust shall be
available to pay the claims of any creditor of the Company
to whom a distribution may be made in accordance with state
and federal bankruptcy laws. The Company shall be deemed to
be "insolvent" if it is either (a) unable to pay its debt
and liabilities as they become due or (b) subject to a
pending proceeding as a debtor under the federal Bankruptcy
Code (or any successor federal statute) or any state
bankruptcy code. In the event the Company becomes
insolvent, the Board of Directors and the Chief Executive
Officer of the Company shall notify the Trustee of the event
as soon as practicable. Upon receipt of such notice, or if
the Trustee receives other written allegations of the
Company's insolvency from a third party considered by the
trustee to be reliable and responsible, the Trustee shall
cease making any distributions from the assets of the Trust,
shall hold the assets in the Trust for the benefit of the
Company's creditors and shall take such steps as are
necessary to determine within a reasonable period of time
whether the Company is insolvent. In making such
determination, the Trustee may rely upon a certificate of
the Board of Directors and the Chief Executive Officer of
the Company or a determination by a court of competent
jurisdiction that the Company is or is not insolvent. In
the case of the Trustee's determination of the Company's
insolvency, the Trustee will deliver assets of the Trust to
satisfy claims of the Company's creditors as directed
pursuant to a final order of a court of competent
jurisdiction.
17.2 Resumption of Benefits; Restoration of Accounts.
In the event the Trustee ceases making distributions by
reason of Section 17.1, the Trustee shall resume making
distributions pursuant to Sections 4, 8, or 13 of this
Agreement only after the Trustee has determined that the
Company is no longer insolvent or upon receipt of an order
of a court of competent jurisdiction requiring such
distributions. In making any determination under this
Section, the Trustee may rely upon a certificate of the
Board of Directors and the Chief Executive Officer of the
Company.
SECTION 18 Consolidation, Merger or Sale of the Company.
18.1 Consolidation, Merger or Sale of the Company.
Effective upon consolidation of the Company with, or merger
of the Company into, any corporation or corporations, or any
sale or conveyance of all or substantially all of the assets
of the Company, the Trustee shall deal with the corporation
formed by such consolidation, or with or into which the
Company is merged, or the person that acquires the assets of
the Company on the same basis as it dealt with the Company
prior to such transactions and, in such event, the term
"Company" within this Agreement shall mean such corporation
or person.
SECTION 19 Miscellaneous Provisions.
19.1 Binding Effect. This Trust Agreement shall be
binding on the Company and the Trustee and their respective
successors and assigns.
19.2 Inquiry as to Authority. A third party dealing
with the Trustee shall not be required to make inquiry as to
the authority of the trustee to take any action nor be under
any obligations to follow the proper application by the
Trustee of the proceeds of sale of any property sold by the
Trustee or to inquire into the validity or propriety of any
act of the Trustee.
19.3 Responsibility for Company Action. The Trustee
assumes no obligation or responsibility with respect to any
action required by this Trust Agreement on the part of the
Company, the Board of Directors, the Committee, any
Affiliate, the Participants or any Beneficiaries. The
Trustee shall be under no duties except such duties as are
specifically set forth as such in this Trust Agreement or
under applicable law, and no implied covenant or obligation
shall be read into this Trust Agreement against the Trustee.
19.4 Successor to Trustee. Subject to Section 2.1, any
corporation into which the Trustee may be merged or with
which it may be consolidated, or any corporation resulting
from any merger, reorganization or consolidation to which
the Trustee may be a party, or any corporation to which all
or substantially all the trust business of the Trustee may
be transferred shall be the successor of the Trustee
hereunder without the execution or filing of any instrument
or the performance of any act.
19.5 Intercompany Agreements. The Company may require
any Affiliate to enter into such other agreement or
agreements as it shall deem necessary to obligate such
Affiliate to reimburse the Company for any other amounts
paid by the Company hereunder, directly or indirectly, in
respect of such Affiliate's employees.
19.6 Titles Not to Control. Titles to the Sections of
this Trust Agreement are included for convenience only and
shall not control the meaning or interpretation of any
provision of this Trust Agreement.
19.7 Fractional Shares. Notwithstanding anything
herein to the contrary, the Trustee may distribute any
fractional share otherwise required to be distributed to
Administrators or Participants pursuant to Sections 8 or 13,
in cash in an amount equal to the Daily Value, multiplied by
such fraction.
IN WITNESS WHEREOF, this Trust Agreement has been duly
executed by the parties hereto as of the day and year first
above written.
BECKMAN INSTRUMENTS, INC.
Attest: WILLIAM W. DAVIS By: D. K. WILSON
THE FIRST NATIONAL BANK OF CHICAGO
as Trustee
Attest: M. IORIO By: MARY C. MURRAY
Trust Officer
<PAGE>
SCHEDULE A
BECKMAN INSTRUMENTS, INC.
BENEFIT EQUITY FUND
THE FIRST NATIONAL BANK OF CHICAGO, TRUSTEE
LIST OF PLANS
Beckman Instruments, Inc. Emloyees' Stock Purchase Plan
Beckman Instruments, Inc. Incentive Compensation Plan of 1990
Beckman Instruments, Inc. Savings and Investment Plan
Beckman Instruments, Inc. Pension Plan
Other non-discretionary base compensation
<PAGE>
SCHEDULE B
BECKMAN INSTRUMENTS, INC.
BENEFIT EQUITY FUND
THE FIRST NATIONAL BANK OF CHICAGO, TRUSTEE
MINIMUM DISTRIBUTION SCHEDULE
AS OF FEBRUARY 1, 1993
<TABLE>
<CAPTION>
SHARES REMAINING MINIMUM SHARES
AT BEGINNING TO BE SHARES REMAINING
YEAR OF YEAR DISTRIBUTED AT END OF YEAR
- ------------------------------------------------------------
<S> <C> <C> <C>
1993 800,000 100,000 700,000
1994 700,000 100,000 600,000
1995 600,000 100,000 500,000
1996 500,000 100,000 400,000
1997 400,000 100,000 300,000
1998 300,000 100,000 200,000
1999 200,000 100,000 100,000
2000 100,000 100,000 0
</TABLE>
<PAGE>
SCHEDULE C
ANNUAL FEE $7,500.00
GUARANTEED FOR 2 YEARS.
Exhibit 10.22
AGREEMENT REGARDING RETIREMENT BENEFITS
OF ALBERT ZIEGLER
WHEREAS, Albert Ziegler ("Executive") has been
employed by Beckman Instruments, Inc. ("Company") since
August 5, 1986, and was previously employed by SmithKline
Beckman or a subsidiary, and
WHEREAS, certain service of Executive was
performed in Switzerland; and
WHEREAS, the Executive and the Company wish to
formalize an agreement made at the inception of Executive's
Beckman employment providing for a retirement benefit that
recognizes Executive's service with SmithKline Beckman and
adjusts for any loss of Social Security as a result of his
SmithKline Beckman service in Switzerland;
NOW, THEREFORE, this Agreement between the Company
and the Executive ("Agreement") is hereby adopted this 16th
of June, 1995.
1. Supplemental Pension Plan Benefit. Executive and
Company agree that Executive's retirement benefit under the
Beckman Instruments, Inc. Supplemental Pension Plan
("Supplemental Plan") shall be the sum of (a) and (b), less
(c) below:
(a) The difference between the Executive's benefit
under the Beckman Instruments, Inc. Pension Plan ("Pension
Plan") and the benefit that would have been payable under
the Pension Plan had Executive's SmithKline Beckman
employment from April 1, 1971, until February 29, 1984 been
included as Benefit Service (as defined in the Pension
Plan);
(b) The benefit, if any, payable from the Supplemental
Plan as a result of application of Sections 404(a)17 and 415
of the Code;
(c) The U.S. dollar equivalent of 16,837 Swiss francs
per year. The conversion of Swiss francs to U.S. dollars
shall be made at the exchange rate in effect at the time
Executive commences to receive benefits from the
Supplemental Plan. The exchange rate shall be determined
according to Appendix II of the Pension Plan.
2. Social Security Supplement. The "Social Security
Supplement" described below shall be provided to Executive
as an additional benefit under the Supplemental Plan. The
Social Security Supplement shall be determined as follows:
(a) The Company shall calculate the United States
Social Security benefit payable to Executive upon his
retirement, or, if later, upon the earliest age at which
Executive may commence to receive payments under the United
States Social Security program. The result shall be the
"actual Social Security benefit." The Company shall
calculate the Social Security benefit to which the Executive
would have been entitled (as of the same commencement date)
had he performed all of the service referred to in paragraph
1(a) in the United States. The result shall be the
"hypothetical Social Security benefit."
(b) The Company shall calculate Executive's actual
benefits under any Swiss programs providing benefits similar
to United States Social Security benefits. The result shall
be the "actual Swiss benefit." The Company shall calculate
the benefit Executive would have been entitled to under any
Swiss program providing benefits similar to Social Security
if the employee had performed all of the service referred to
in paragraph 1 in Switzerland. The result shall be the
"hypothetical Swiss benefit." The Company shall, using the
exchange rate method described in Appendix II of the Pension
Plan, convert the actual Swiss benefit and the hypothetical
Swiss benefit to U.S. dollars. If the actual Swiss benefit
and the hypothetical Swiss benefit commence at a different
date than the actual Social Security benefit and the
hypothetical Social Security benefit, the Company shall
calculate the actuarial equivalent of the hypothetical Swiss
benefit and the actual Swiss benefit, based upon the
commencement date of the actual Social Security benefit and
the hypothetical Social Security benefit. The result of the
conversion and calculation described above is the "adjusted
actual Swiss benefit" and the "adjusted hypothetical Swiss
benefit."
(c) The Company shall deduct from the greater of the
hypothetical Social Security benefit and the adjusted
hypothetical Swiss benefit the sum of the actual Social
Security benefit and the adjusted actual Swiss benefit. To
the extent the result of such calculation is a positive
number (i.e., the greater of the hypothetical Social
Security benefit and the adjusted hypothetical Swiss benefit
exceeds the sum of the actual Social Security benefit and
the adjusted actual Swiss benefit) then such remaining
amount shall be the Social Security Supplement. Such amount
shall be paid as an additional retirement benefit under the
Supplemental Plan. The Social Security Supplement shall be
paid as a fixed monthly benefit at the time the actual
Social Security benefit commences.
3. Other Supplemental Plan and Pension Plan
Provisions. It is understood that, except as specifically
set forth in this Agreement, the benefit of the Executive
under the Supplemental Plan shall be calculated and paid
according to the generally applicable terms of the
Supplemental Plan. Accordingly, the Executive's benefit,
calculated as set forth herein, will be subject to the
Supplemental Plan's provisions for cash lump sum
distributions. In the event Executive's combined benefit,
if applicable, exceeds the Supplemental Plan limit for lump
sum distributions, such combined benefit will be payable in
the same form of payment and at the same time as Executive
elects for his Pension Plan benefit. Furthermore, any death
benefits shall be paid under the terms of the Supplemental
Plan and the Pension Plan based upon the Executive's benefit
calculated as set forth herein. Furthermore, it is
understood that the benefit of the Executive under the
Pension Plan shall be calculated according to the generally
applicable terms of the Pension Plan.
4. This Agreement shall be considered an exhibit to
the Supplemental Plan and shall constitute an official plan
document for the Supplemental Plan.
5. This Agreement shall be construed in accordance
with applicable federal law, and to the extent that state
law is not preempted by federal law, according to the laws
of the State of California.
6. This Agreement shall not modify any of the terms
and conditions of Executive's employment except as
explicitly set forth herein.
This Agreement is entered into this 16th day of
June, 1995.
EXECUTIVE
By ALBERT ZIEGLER
Albert Ziegler
COMPANY
BECKMAN INSTRUMENTS, INC.
By RICHARD K. SEARS
Its V.P. Human Resources
EXHIBIT 13
WORDS ON NUMBERS
Section of the Company's
Annual Report to Stockholders
for the year ended
December 31, 1995
FINANCIAL REVIEW
Dollars In Millions, Except Amounts Per Share
Overview
The Company designs, manufactures, markets and services a
broad range of laboratory instrument systems, reagents and
related products, that address the needs of diagnostic
laboratories in hospitals and independent clinical reference
laboratories as well as bioanalytical laboratories in the life
sciences market, including those in universities, research
institutes, pharmaceutical companies and biotechnology firms.
Generally, the Company's products simplify and automate
laboratory processes, saving time and money. Products for
clinical diagnostic laboratories include general and special
chemistry systems together with reagents, accessories and
software, which are used to detect and quantify various
substances of clinical interest in human blood and other body
fluids. Products for life sciences laboratories include
centrifuges, high performance liquid chromatographs,
spectrophotometers, laboratory robotic workstations, capillary
zone electrophoresis systems, nuclear counters, protein
sequencers, DNA synthesizers and the reagents and supplies for
their operation. Beckman supports its products with a worldwide
sales and service network.
Results Of Operations
The following table sets forth, for the periods indicated, the
results of operations as a percentage of sales:
<TABLE>
<CAPTION>
Years ended December 31, 1995 1994 1993
- ------------------------ ---- ---- ----
<S> <C> <C> <C>
Sales 100.0% 100.0% 100.0%
Operating costs and expenses
Cost of sales 45.9 46.8 47.8
Marketing, administrative and
general 32.3 31.8 31.7
Operating income before research
and development (1) 21.8 21.4 20.5
Research and development 9.9 10.3 10.7
Operating income (1) 11.9 11.1 9.8
Earnings before income taxes (2) 10.8 9.7 8.4
Net earnings before cumulative
effect of changes in accounting
principles (2) 7.1% 6.4% 5.4%
(1) Excludes restructuring charge of $27.7, 3.0% of sales;
$11.3, 1.3% of sales; and, $114.7, 13.1% of sales, in 1995,
1994, and 1993, respectively. Including the restructuring
charge, 1995 and 1994 operating income was 8.9% and 9.8% of
sales, respectively, and 1993 operating loss was 3.3% of
sales.
(2) Excludes the effect of restructuring charges for all years
presented. The 1993 percentage excludes a pretax
environmental charge of 1.4%, 0.9% after tax. Including
these special charges, the Company reported earnings (loss)
before income taxes of 7.8%, 8.4% and (6.1)% in 1995, 1994,
1993, respectively, and net earnings (loss) before
cumulative effect of changes in accounting principles of
5.3% in 1995 and 1994, and (3.8)% in 1993.
</TABLE>
<PAGE>
Redirected Business Strategy and Reorganization
In 1993 the Company announced a redirected business strategy
and new organization. Beckman is concentrating on clinical
diagnostics and centrifugation, while at the same time shifting
its investment to the biotechnology-based portion of the life
sciences business, including molecular biology and related
sciences. To implement this strategy, Beckman's former operating
groups, the Bioanalytical Systems Group and Diagnostic Systems
Group, were reorganized into a single unit. The planned
reorganization included a net reduction of approximately 800
positions worldwide, primarily in 1994. The restructuring plan
included a voluntary separation program for U.S. based long-term
employees, including an enhanced early retirement program;
consolidation of European finance and administrative functions;
and consolidation of U.S.-based manufacturing, finance, and
administrative functions.
The Company has made substantial progress in implementing the
restructuring plan including the following: 350 U.S. based long-
term employees participated in the voluntary separation program;
400 employees were reduced internationally as the Company began
the centralization of certain European administrative and
financial functions in Switzerland as well as other operational
consolidations; 450 U.S. employees were reduced through
consolidation processes; and, the cable assembly operation was
sold, which included 100 employees. In addition, the Company
began the process of consolidating previously separate operations
into new facilities in the United Kingdom and Japan. Since
implementation of the restructuring plan, employee levels have
declined by approximately 1,300.
In 1993, the Company established a restructure reserve of
$114.7, for incurred expenses, as part of the overall $135.0
restructuring plan. Through 1995, $114.0 was charged against the
reserve which primarily included costs associated with the U.S.
based voluntary separation program and worldwide employee
termination costs. In addition, restructure charges of $27.7 and
$11.3 were recorded in 1995 and 1994, respectively, for facility
moves and transition costs which were anticipated and directly
associated with the 1993 restructuring plan, but could not be
recognized in establishment of the original restructuring reserve
under generally accepted accounting principles. Additionally,
the 1995 charge was incurred to support further reductions in
1996 of approximately 120 positions worldwide and consolidation
of administrative, finance and manufacturing functions not
previously affected. At the end of 1995, $13.2 remains as a
liability.
Savings from the restructuring program were approximately $48
in 1995 and $29 in 1994. Partially offsetting these savings were
constrained market conditions, restructuring transition costs and
general salary and cost increases.
1995 Compared To 1994
Sales in 1995 were $930.1, representing an increase of 4.7%
from 1994. Favorable currency exchange rates increased sales,
compared to the prior year rates, by 2.2%. Sales to areas
outside the United States were more than 50% of total sales.
Gross profit as a percentage of sales increased to 54.1% from
53.2% in 1994.
Both diagnostic and life sciences markets continue to be
unfavorably impacted by the European recession and cost
containment initiatives in several European health care systems.
The life sciences market also continues to be affected by
reductions of pharmaceutical capital spending in response to the
consolidation of companies and constraints on research and
development spending. While these markets are highly competitive,
sales growth has been obtained through continued market
penetration. Diagnostic sales, which represent approximately 60%
of total sales, increased in 1995 by 5.3%. Life sciences sales
increased 3.7% in 1995. Cost containment initiatives in U.S. and
European health care systems are expected to be continuing
factors which may affect the Company's sales in the short-term.
Excluding the impact of the restructuring charge of $27.7 and
$11.3 in 1995 and 1994, respectively (see "Redirected Business
Strategy and Reorganization"), operating income increased by
12.0% to $110.8 in 1995 from $98.9 in 1994. Operating income
before the restructuring charge increased as a percent of sales
to 11.9% in 1995 from 11.1% in 1994. The increase of $11.9 in
operating income was the result of expense reductions resulting
from the restructuring plan and process improvements from the
redirected strategy. The Company's investment in research and
development of $91.7 is comparable to the prior year in absolute
dollars and as a percent of sales. The Company's rate of
profitability before and after investment in research and
development continues to improve as indicated in the preceding
table. Including the restructuring charges, operating income was
$83.1 in 1995 compared to $87.6 in 1994.
Net nonoperating expenses decreased by $2.0 to $10.7 in 1995.
The decrease is primarily the result of the Company experiencing
net foreign currency transaction gains in 1995 compared to the
losses experienced in 1994 from the weaker dollar.
Earnings before income taxes, excluding the restructuring
charge, increased 16.1% to $100.1. Including the restructuring
charge, earnings before income taxes were $72.4. The 1995
effective tax rate, before the restructuring charge, compared to
1994 held constant at 34%. The effective tax rate of 38% on the
restructuring charge was due to certain elements of the charges
being incurred in jurisdictions with higher tax rates. The 1995
effective tax rate was 1.5 percentage points lower than the rate
experienced in the first three quarters due to the impact of the
restructuring charge.
The following table summarizes the impact of special charges
on net earnings and net earnings per share for 1995. The table
also illustrates the impact of including the effect of common
share equivalents for 1995. Common share equivalents were not
included in previous years as they did not have a significant
dilutive effect. Common share equivalents are comprised of stock
options.
<TABLE>
<CAPTION>
Year ended December 31, 1995 Amount Per Share
- ---------------------------- ------ ---------
<S> <C> <C>
Net earnings before special charges
and dilutive effect of common
share equivalents $ 66.1 $ 2.35
Dilutive effect of common share
equivalents - (0.06)
Net earnings before special charges 66.1 2.29
------- -------
Special Charges
Restructuring charge, net of tax
benefit (17.2) (0.59)
------- -------
Net earnings $ 48.9 $ 1.70
======= =======
</TABLE>
Net earnings before special charges increased by approximately
16% to $66.1 compared to 1994. The restructuring charge reduced
net earnings in 1995 by $17.2. The Company reported net earnings
of $48.9 in 1995 compared to $42.2 in 1994.
Net earnings per share, before special charges increased
approximately 13% to $2.29 (an increase of approximately 16% to
$2.35 before the dilutive effect of common share equivalents).
The restructuring charge reduced earnings per share by $0.59
resulting in net earnings per share of $1.70 for 1995 compared to
$1.50 in 1994.
1994 COMPARED TO 1993
Sales in 1994 were $888.6 representing an increase of 1.5%
from 1993. Differences in currency exchange rates did not
materially impact sales compared to the prior year. Sales to
areas outside the United States were over 50% of total sales.
Both diagnostic and life sciences markets were unfavorably
impacted by the European recession, and cost containment
initiatives in several European health care systems. Diagnostic
sales, which represent approximately 60% of total sales,
increased in 1994 by 3%. The diagnostic market remains highly
competitive with sales growth obtained through continued market
penetration. Life sciences sales declined by 1% in 1994. In
addition to the factors mentioned above, the life sciences market
was adversely affected by reductions of U.S. pharmaceutical
capital spending in response to anticipated health care
legislation.
In 1994, SmithKline Diagnostics, Inc. (SKD), a wholly owned
subsidiary, and Procter & Gamble Pharmaceuticals Germany G.m.b.H.
(P&G) completed an agreement that allowed SKD to reassume control
of the well-recognized H(A)EMOCCULT brand fecal occult blood
testing products in Germany, Austria and several other
international countries. The agreement returns a license to SKD
from P&G under which P&G manufactured and sold the H(A)EMOCCULT
diagnostic products.
Excluding the impact of the restructuring charge of $11.3 and
$114.7 in 1994 and 1993, respectively (see "Redirected Business
Strategy and Reorganization"), operating income increased by 16%
to $98.9 in 1994 from $85.6 in 1993. Operating income before the
restructuring charges increased as a percent of sales to 11.1% in
1994 from 9.8% in 1993. The increase of $13.3 in operating income
was primarily the result of expense reductions resulting from the
restructuring plan. The Company's investment in research and
development decreased 2% from the prior year to $91.5. The
Company's rate of profitability before, and after, investment in
research and development continued to improve. Including the
restructuring charges, operating income was $87.6 in 1994
compared to an operating loss of $29.1 in 1993.
Net nonoperating expenses, excluding a $12.5 environmental
charge in 1993, increased by $0.4 to $12.7 in 1994. Including
the 1993 environmental charge, net nonoperating expenses
decreased by $12.1 from 1993.
Earnings before income taxes, excluding the restructuring and
environmental charges, increased by 18% to $86.2. Including the
restructuring charge, earnings before income taxes were $74.9.
The 1994 effective tax rate, before the restructuring charge, was
reduced to 34% from 36% in 1993 as a result of favorable
withholding tax rates and increased income in lower tax rate
jurisdictions. The effective tax rate of 15% on the
restructuring charge was due to the limited tax benefits
available for certain elements of the restructuring charge. The
1994 effective tax rate was 1.8 percentage points higher than the
rate experienced in the first three quarters due to the impact of
the restructuring charge.
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 requires
the Company to recognize the prior service obligations resulting
from the Company's commitment to provide benefits to former or
inactive employees, their beneficiaries and covered dependents
after employment but before retirement. Adoption of SFAS 112
resulted in the Company recording an aftertax charge of $5.1 in
the first quarter. The impact on 1994 operations was not
material and is not expected to be material in future years as a
result of the newly adopted accounting principle.
The following table summarizes the impact of special charges
on net earnings and earnings per share for the year.
<TABLE>
<CAPTION>
Year ended December 31, 1994 Amount Per Share
- ---------------------------- ------ ---------
<S> <C> <C>
Net earnings before special charges $56.9 $ 2.03
Special charges
Restructuring charge, net of
tax benefit (9.6) (0.35)
Cumulative effect of change in
accounting principle
Accounting for postemployment
benefits (5.1) (0.18)
------ ------
Net earnings $42.2 $ 1.50
====== ======
</TABLE>
Net earnings before special charges increased by approximately
20% to $56.9 compared to 1993. Special charges reduced net
earnings in 1994 by $9.6 and $5.1, respectively. The Company
reported net earnings of $42.2 in 1994 compared to a net loss of
$37.6 in 1993.
Net earnings per share, before special charges in 1994 and
1993, including an environmental charge in 1993, increased 20%
from 1993 to $2.03. Special charges in 1994 reduced net earnings
per share by $0.53 resulting in net earnings per share of $1.50
for 1994 compared to a loss of $1.35 in 1993.
FINANCIAL CONDITION
Liquidity and Capital Resources
Net cash provided by operating activities in 1995 was $60.2
compared to $111.1 in 1994 and $53.3 in 1993. Contributing to
the decrease in 1995 was an increase in receivables from sales-
type and operating leases, trade receivables and inventories.
Also contributing to the decrease was increased funding to the
Company's pension plan. Net cash used by investing activities
was $113.0 in 1995, an increase of $52.4 from 1994, resulting
from the purchase of short-term investments and investments in
unaffiliated companies. The Company believes that net cash
provided by operating activities, supplemented as necessary with
funds expected to be available under the Company's credit
agreement, will provide sufficient resources to meet present and
reasonably foreseeable working capital requirements, debt service
and other cash needs.
The Company is authorized, through 1998, to acquire common
stock to meet the needs of the Company's existing stock-related
employee benefit plans. Under this program, Beckman repurchased
approximately 471,686 shares of its common stock during 1995.
The Company maintains a $150.0 revolving Credit Agreement (the
"Credit Agreement") expiring on September 30, 1999. Borrowings
under the Credit Agreement are determined by current market rates
and are subject to a number of conditions, including the absence
of a significant change in control of the Company. As of
December 31, 1995, there were no borrowings against the line.
See further discussion in Note 6 "Debt."
Capital Expenditures
Expenditures for property, plant and equipment, including
instruments provided to customers on an operating lease basis,
totaled $110.0 in 1995 compared with $98.7 in 1994 and $92.8 in
1993. The Company plans to invest at approximately the same
level in 1996 and intends to finance this capital spending
primarily through cash provided by operating activities.
Investing Activities
In September 1995, the Company agreed to acquire Hybritech
Incorporated, a San Diego-based life sciences and diagnostic
company, effective January 2, 1996. The acquisition will expand
the Company's capabilities for the development and manufacture of
high sensitivity immunoassays, including cancer tests. The
acquisition will be accounted for as a purchase.
In May 1995, the Company agreed to acquire Genomyx Corporation
of Foster City, California. Genomyx is a developer and
manufacturer of advanced DNA sequencing products and complements
the Company's biotechnology business. The acquisition will take
place over the next two years and is being accounted for as a
step-acquisition. Through December 31, 1995, the Company
invested approximately $8.1 in convertible notes receivable and a
less than 20% ownership of Genomyx common stock.
In March 1995, the Company formed a marketing and service
alliance with BioSepra Inc. (BioSepra), a biochromatography
systems manufacturer, to offer systems for high speed, high
resolution separation of biomolecules. The Company paid $3.5 for
the exclusive rights to market and sell certain BioSepra
products.
Also in March 1995, the Company made a $5.0 investment in
Sepracor Inc. (Sepracor), receiving exchangeable preferred stock
and certain rights in regard to the disposition of Sepracor's
shares of its subsidiary, BioSepra.
Dividends
The Company paid cash dividends to stockholders each quarter
for a total of $0.44 in 1995, $0.40 per share in 1994, and $0.36
per share in 1993. In February 1996, the Board of Directors
declared a quarterly dividend of $0.13 per share. This dividend
is payable March 7, 1996 to stockholders of record on February
16, 1996. The Company intends to continue paying cash dividends
of at least the current per share amount, subject to future
business conditions, requirements of the operations and financial
condition of the Company.
Inflation
Inflation increases the costs of goods and services used by
the Company. Competitive and regulatory conditions in many
markets restrict the Company's capability to fully recover the
higher costs of acquired goods and services through price
increases. The Company continues to improve productivity and
reduce costs to mitigate the effects of inflation.
Foreign Currency
The Company derives over 50% of its sales from sources outside
of the United States. In the short-term, the relative strength
or weakness of the U.S. dollar is not likely to have a material
effect on the Company's business decisions. The Company actively
manages its foreign currency exposures through foreign currency
contracts. The Company may adjust certain aspects of its
operations in the event of a sustained material change in such
exchange rates.
Environmental Matters
The Company is subject to federal, state, local and foreign
environmental laws and regulations. The Company believes that
its operations comply in all material respects with applicable
federal, state, and local environmental laws and regulations and
has adequate reserves to cover such items. Although the Company
continues to make expenditures for environmental protection, it
does not anticipate any significant expenditures in order to
comply with such laws and regulations which would have a material
impact on the Company's operations or financial position. See
further discussion in Note 11 "Commitments and Contingencies."
Litigation
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 these matters will have a material adverse
effect on its operations or financial position. See further
discussion of these matters in Note 11 "Commitments and
Contingencies."
Accounting Matters
In March 1995, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards No.
121 ("SFAS 121"), "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of." SFAS 121
requires the Company to adopt the provisions of the new statement
no later than fiscal 1996. SFAS 121 requires an impairment loss
to be recorded as a reduction to operating income if the sum of
the expected undiscounted cash flows derived from an asset is
less than the assets carrying value. The Company does not
believe adoption will have a material impact on its operations or
financial position.
In October 1995, the FASB issued Statement of Financial
Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock-
Based Compensation." SFAS 123, establishes a fair value based
method of accounting for stock based compensation plans. SFAS
123 encourages, but does not require, adopting the fair value
based method. The Company has elected not to adopt the fair
value based method and will continue to report under Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees". As a result, SFAS 123 will not have an impact on the
Company's operations or financial position. The Company, in
accordance with SFAS 123, will disclose in the footnotes in 1996
the impact as if the fair value based method was adopted.
<TABLE>
<CAPTION>
Consolidated Balance Sheets
Dollars In Millions, Except Amounts Per Share
December 31, 1995 1994
- ------------ ---- ----
<S> <C> <C>
Assets
Current assets
Cash and equivalents $ 26.2 $ 44.2
Short-term investments 8.2 0.7
Trade receivables and other 288.8 265.9
Inventories 166.2 150.7
Deferred income taxes 29.4 37.8
Other current assets 14.5 12.7
------ ------
Total current assets 533.3 512.0
Property, plant and equipment, net 252.1 232.6
Deferred income taxes 59.8 56.6
Other assets 62.6 27.9
------ ------
Total assets $907.8 $829.1
====== ======
Liabilities and Stockholders' Equity
Current liabilities
Notes payable $ 15.8 $ 12.2
Accounts payable 50.6 44.4
Accrued compensation 40.4 43.4
Other accrued expenses 99.5 115.1
Income taxes 44.9 53.7
------ ------
Total current liabilities 251.2 268.8
Long-term debt, less current
maturities 162.7 117.3
Other liabilities 146.0 126.0
------ ------
Total liabilities 559.9 512.1
------ ------
Stockholders' equity
Preferred stock, $0.10 par value;
authorized 10,000,000 shares;
none issued - -
Common stock, $0.10 par value;
authorized 75,000,000 shares;
shares issued 29,124,457 at 1995 and
1994; shares outstanding 28,275,245
at 1995 and 28,004,957 at 1994 2.9 2.9
Additional paid-in capital 129.0 130.0
Foreign currency translation
adjustment 8.4 8.6
Retained earnings 240.0 203.4
Minimum pension liability (9.9) -
Treasury stock, at cost (22.5) (27.9)
------- -------
Total stockholders' equity 347.9 317.0
------- -------
Commitments and contingencies
Subsequent event - Note 5
Total liabilities
and stockholders' equity $907.8 $829.1
====== ======
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
Dollars in millions, except amounts per share
Years ended December 31, 1995 1994 1993
- ------------------------ ---- ---- ----
<S> <C> <C> <C>
Sales $930.1 $888.6 $875.7
Operating costs and expenses
Cost of sales 427.2 416.3 418.3
Marketing, administrative
and general 300.4 281.9 278.5
Research and development 91.7 91.5 93.3
Restructuring charge 27.7 11.3 114.7
----- ----- -----
847.0 801.0 904.8
----- ----- -----
Operating income (loss) 83.1 87.6 (29.1)
Nonoperating income (expense)
Interest income 5.3 5.1 4.1
Interest expense (13.4) (13.2) (12.7)
Other, net (2.6) (4.6) (16.2)
----- ----- -----
(10.7) (12.7) (24.8)
----- ----- -----
Earnings (loss) before income 72.4 74.9 (53.9)
taxes
Income tax provision (benefit) 23.5 27.6 (20.3)
----- ----- -----
Net earnings (loss) before
cumulative effect of changes in
accounting principles 48.9 47.3 (33.6)
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 (loss) $ 48.9 $ 42.2 $(37.6)
===== ===== =====
Weighted average common shares
and common share
equivalents - (in
thousands) 28,807 28,079 27,827
Net earnings (loss) per share
before cumulative effect of
changes in accounting principles $1.70 $1.68 $(1.21)
Cumulative effect of changes in
accounting principles
Accounting for income taxes - - 0.95
Accounting for postretirement
benefits other than pensions - - (1.09)
Accounting for postemployment
benefits - (0.18) -
----- ------- ------
Net earnings (loss) per share $ 1.70 $ 1.50 $(1.35)
===== ======= ======
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Dollars in millions
Years ended December 31, 1995 1994 1993
- ----------------------- ---- ---- ----
<S> <C> <C> <C>
Cash Flows from Operating
Activities
Net earnings (loss) $ 48.9 $ 42.2 $(37.6)
Adjustments to reconcile net
earnings (loss) to net cash
provided by operating activities
Depreciation and amortization 79.1 70.1 63.5
Net deferred income taxes 10.2 6.9 (39.2)
Changes in assets and
liabilities
Trade receivables and other (23.7) (7.0) (1.5)
Inventories (15.7) 15.8 (5.8)
Accounts payable and accrued
expenses 0.7 5.9 (13.1)
Restructuring reserve (12.9) (42.1) 66.8
Accrued income taxes (8.8) 6.3 7.0
Other (17.6) 13.0 13.2
----- ----- -----
Net cash provided by operating
activities 60.2 111.1 53.3
----- ----- -----
Cash Flows from Investing
Activities
Additions to property, plant and
equipment (103.2) (97.4) (90.4)
Net disposals of property, plant
and equipment 13.2 17.1 19.7
Sales (purchases) of short-term
investments (7.5) 21.2 (1.8)
Investments - (15.5) (1.5)
----- ----- -----
Net cash used by investing
activities (113.0) (60.6) (72.5)
----- ----- -----
Cash Flows from Financing
Activities
Dividends to stockholders (12.3) (11.2) (10.1)
Proceeds from issuance of stock 18.7 15.0 13.5
Purchases of treasury stock (13.3) (14.6) (28.3)
Notes payable borrowings
(reductions) 2.8 (21.9) (10.8)
Long-term debt borrowings 43.4 4.9 82.0
Long-term debt reductions (3.5) (1.9) (27.3)
Other (1.0) (1.1) (0.9)
----- ----- -----
Net cash provided (used) by
financing activities 34.8 (30.8) 18.1
----- ----- -----
Effect of exchange rates on cash - 0.3 (0.6)
and equivalents
Increase (decrease) in cash and (18.0) 20.0 (1.7)
equivalents
Cash and equivalents-beginning of 44.2 24.2 25.9
year
----- ----- -----
Cash and equivalents-end of year $ 26.2 $ 44.2 $ 24.2
===== ===== =====
Supplemental Disclosures of Cash
Flow Information
Cash payments for income taxes $ 22.0 $ 11.8 $ 14.5
Cash payments for interest 12.0 14.5 12.4
Noncash Investing and
Financing Activities
Minimum pension liability 9.9 - -
Purchase of equipment under
capital lease obligation $ 6.8 $ 1.3 $ 2.4
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dollars in millions, except amounts per share
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of
Beckman Instruments, Inc., and its wholly owned subsidiaries.
The consolidated entity is referred to as the Company in the
accompanying consolidated financial statements.
All significant transactions among the consolidated entities
have been eliminated from the consolidated financial statements.
The accounts of most of the Company's non-U.S. subsidiaries are
included on the basis of their fiscal years ended November 30.
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 revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Foreign Currency Translation
Non-U.S. assets and liabilities are translated into U.S.
dollars at fiscal year-end exchange rates. Operating results are
translated at exchange rates prevailing during the year. The
resulting translation adjustments are accumulated as a separate
component of stockholders' equity.
Gains and losses resulting from foreign currency transactions
and translation adjustments relating to foreign entities deemed
to be operating in U.S. dollar functional currency or in highly
inflationary economies are included in the statement of
operations in "other, net". The Company experienced net foreign
currency gains (losses) of $2.3 in 1995, $(4.5) in 1994, and
$(2.1) in 1993.
Derivatives
Gains and losses on hedges of existing assets or liabilities
are included in the carrying amounts of those assets or
liabilities and are ultimately recognized in income as part of
those carrying amounts. Gains and losses related to qualifying
hedges of firm commitments or anticipated transactions also are
deferred and are recognized in income in "other, net" or as
adjustments of carrying amounts when the hedged transaction
occurs. Gains and losses on hedges of foreign net asset
positions are included in stockholders' equity, under the caption
"Foreign currency translation adjustment."
Cash and Equivalents
For purposes of the consolidated statements of cash flows, the
Company considers cash and equivalents to include cash in banks,
time deposits and investments having an original maturity of
three months or less. All cash and equivalents are carried at
cost which approximates market.
Short-Term Investments
Short-term investments are principally comprised of
investments with original maturities in excess of three months
but less than one year. Investments are carried at cost which
approximates market.
Investments
The Company periodically makes investments in unaffiliated
companies through debt and equity securities. The Company's
investments are considered available-for-sale and carried at
current fair value with unrealized gains or losses reported as a
separate component of stockholders' equity. Investments in
which the Company is able to exercise significant influence
and/or owns a 20% to 50% equity interest are accounted for using
the equity method. Fair values are determined using a
combination of publicly quoted prices and financial and credit
information.
Inventories
Inventories are valued at the lower of cost or market (net
realizable value). Cost is determined by the first-in, first-out
method.
Property, Plant and Equipment and Depreciation
Land, buildings and machinery and equipment are carried at
cost. The cost of additions and improvements are capitalized,
while maintenance and repairs are expensed as incurred.
Depreciation is computed generally on the straight-line method
over the estimated useful lives of the related assets. Buildings
are depreciated over 20 to 40 years, machinery and equipment over
3 to 10 years and instruments subject to lease over the lease
term but not in excess of 5 years. Leasehold improvements are
amortized over the lesser of the life of the asset or the term of
the lease but not in excess of 20 years.
Earnings Per Share
Net earnings (loss) per share is calculated using the weighted
average number of common shares outstanding during the period,
including the effect of common share equivalents. The effect of
common share equivalents was not included prior to 1995 as the
dilutive effect was not significant. Common share equivalents
are comprised of the dilutive effect of outstanding stock
options. Primary earnings per share approximates fully diluted
earnings per share for each period presented. Net earnings
(loss) per share are calculated as follows at December 31:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
Net Net Net
Earnings Earnings Loss
(In thousands, Shares Per Share Shares Per Share Shares Per Share
except amounts
per share)
<S> <C> <C> <C> <C> <C> <C>
Weighted average
shares of common
stock outstanding 28,086 $1.74 28,079 $1.50 27,827 $(1.35)
Common share
equivalents 721 (0.04) * * * *
------ ------ ------ ----- ------ ------
Weighted average common
and common share
equivalents 28,807 $1.70 28,079 $1.50 27,827 $(1.35)
====== ====== ====== ===== ====== ======
* Less than 3% dilutive
</TABLE>
Revenue Recognition
In general, revenue is recognized as the product is shipped.
When a customer enters into an operating-type lease agreement,
revenue is recognized over the life of the lease. Under a sales-
type lease agreement, revenue is recognized at the time of
shipment with interest income recognized over the life of the
lease. Service revenues are recognized ratably over the life of
the service agreement or as service is performed, if not under
contract.
Income Taxes
In the first quarter of 1993, the Company adopted Statement of
Financial Accounting Standards No. 109 ("SFAS 109"), "Accounting
for Income Taxes". Accordingly, the Company uses the asset and
liability method of accounting for income taxes. Under the asset
and liability method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or
settled. As a result of adopting SFAS 109, 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
deferred tax asset equal to the cumulative effect of the
accounting change of $26.2 (net of a valuation allowance of
$10.1) in the first quarter of 1993.
Reclassifications
Certain amounts from the prior years have been reclassified to
conform to the current presentation.
<PAGE>
2. REDIRECTED BUSINESS STRATEGY AND REORGANIZATION
In the fourth quarter of 1993, the Company announced a
redirected business strategy and a new organization. The Company
is concentrating on clinical diagnostics and centrifugation while
shifting its investment to the biotechnology-based portion of the
life sciences business, including molecular biology and related
sciences. The redirected strategy positions the Company to
capitalize on the technical and market continuum that exists
between the life sciences and clinical fields by enabling the
Company to serve a growing research market today that will spawn
clinical opportunities in the future. To implement this strategy
the Company's operating groups, the Bioanalytical Systems Group
and Diagnostic Systems Group, were reorganized into a single
unit.
In support of the redirected business strategy and adjustment
to unfavorable market conditions, including the European
recession, the worldwide drive to contain health care costs and
generally weak economic conditions, the Company announced a
restructuring plan. The restructure resulted in a net reduction
of approximately 1,300 positions worldwide. The plan included a
voluntary separation program for U.S. based long-term employees,
including an enhanced early retirement program, consolidation of
European finance and administrative functions and consolidation
of U.S. based manufacturing, finance and administrative
functions.
In support of the restructuring plan, a pretax restructuring
charge of $114.7 was recorded in the fourth quarter of 1993. The
1993 charge included an accrual for pension and postretirement
costs of approximately $43.0 and asset disposal costs of
approximately $4.1 (see Note 8 "Pension and Retirement
Benefits"). The Company incurred an additional restructuring
charge of approximately $27.7 in 1995 and $11.3 in 1994. The
1995 and 1994 restructuring charges include costs for facility
moves and transition costs which were anticipated and directly
associated with the 1993 restructuring plan but could not be
recognized in establishment of the original restructuring reserve
under generally accepted accounting principles. Additionally,
the 1995 charge was incurred to support further reductions in
1996 of approximately 120 positions worldwide and consolidation
of administrative, finance and manufacturing functions not
previously affected. The restructuring charge in 1993 consisted
primarily of employee-related severance, pension and
postretirement costs, as well as costs associated with the
reduction of facilities.
At December 31, 1995 and 1994, the Company's remaining
obligations relating to the restructuring charges were $13.2 and
$26.1, respectively, and are included in "other accrued
expenses".
3. DISTRIBUTION OF COMPANY STOCK OWNED BY SMITHKLINE
In 1989 SmithKline Beckman ("SmithKline") entered into an
agreement to reorganize and combine certain of its businesses
with Beecham Group p.l.c. This agreement was approved by the
stockholders of both companies creating the new company of
SmithKline Beecham p.l.c. As a result of this agreement, all
shares of Beckman Common Stock owned by SmithKline were
distributed to the holders of SmithKline stock, effective July
1989. In conjunction with the distribution of Beckman Common
Stock, the Company entered into a tax agreement ("Tax Agreement")
and a distribution agreement with SmithKline. Certain provisions
of such agreements are still in effect at December 31, 1995.
<TABLE>
<CAPTION>
4. COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS
</CAPTION>
1995 1994
---- ----
Trade receivables and other
<S> <C> <C>
Trade receivables $270.3 $257.2
Other receivables 21.5 16.3
Current portion of lease receivables 6.1 2.8
Less allowance for doubtful receivables (9.1) (10.4)
------ ------
$288.8 $265.9
====== ======
Inventories
Finished products $117.7 $104.1
Raw materials, parts and assemblies 40.5 41.3
Work in process 8.0 5.3
------ ------
$166.2 $150.7
====== ======
Property, plant and equipment, net
Land $ 10.5 $ 10.3
Buildings 142.0 135.9
Machinery and equipment 218.0 215.4
Instruments subject to lease (a) 256.7 217.7
------ ------
627.2 579.3
Less accumulated depreciation
Building, machinery and equipment (224.2) (225.9)
Instruments subject to lease (a) (150.9) (120.8)
------ ------
$252.1 $232.6
====== ======
Other accrued expenses
Restructure reserve $ 13.2 $ 26.1
Unrealized service income 35.6 36.1
Insurance 23.9 26.0
Accrued warranty and installation
costs 4.7 5.9
Other 22.1 21.0
------ ------
$ 99.5 $115.1
====== ======
</TABLE>
(a) Includes instruments leased to customers under three-to
five-year cancelable operating leases.
5.Investments
Effective January 2, 1996, the Company purchased the assets
and assumed the liabilities of Hybritech Incorporated, a San
Diego-based life sciences and diagnostic company, for a purchase
price not material to the Company. The acquisition will expand
the Company's capabilities for the development and manufacture of
high sensitivity immunoassays, including cancer tests and will be
accounted for as a purchase.
In May 1995, the Company agreed to acquire Genomyx Corporation
of Foster City, California. Genomyx is a developer and
manufacturer of advanced DNA sequencing products and complements
the Company's biotechnology business. The acquisition will take
place over the next two years and is being accounted for as a
step-acquisition. Through December 31, 1995, the Company
invested approximately $8.1 in convertible notes receivable and a
less than 20% ownership of Genomyx common stock.
In March 1995, the Company formed a marketing and service
alliance with BioSepra Inc. (BioSepra), a biochromatography
systems manufacturer, to offer systems for high speed, high
resolution separation of biomolecules. The Company paid $3.5 for
the exclusive rights to market and sell certain BioSepra
products.
Also in March 1995, the Company made a $5.0 investment in
Sepracor Inc. (Sepracor), receiving exchangeable preferred stock
and certain rights in regard to the disposition of Sepracor's
shares of its subsidiary, BioSepra.
The carrying values of the Company's investments approximate
their current fair values at December 31, 1995 and are reported
in non-current "other assets."
6. Debt
Notes payable consist primarily of bank borrowings by the
Company's subsidiaries outside the U.S. under local line of
credit facilities and the current portion of long-term debt. The
bank borrowings are short-term borrowings at rates which
approximate the current market rates; therefore, the carrying
value of the notes approximates the market value. At December
31, 1995 approximately $119.0 of unused short-term lines of
credit were available to the Company's subsidiaries outside the
U.S. at various interest rates. Within the U.S., the Company had
available $20.0 in committed unused short-term lines of credit at
market rates. Compensating balances and commitment fees on these
lines of credit are not material and there are no withdrawal
restrictions.
The Company has a $150.0 revolving credit agreement (the
"Credit Agreement") expiring on September 30, 1999. Borrowings
under the Credit Agreement bear interest at current market rates
and are subject to a number of conditions, including the absence
of a significant change in control of the Company. In addition,
the Credit Agreement requires the Company to maintain minimum
consolidated tangible net worth and specified ratios of debt to
total capital and operating income to interest charges. The
Credit Agreement also limits the Company's ability to mortgage
its assets, to merge or consolidate or to sell certain assets.
Defaults under the Credit Agreement include nonpayment, breach of
covenants, bankruptcy and certain cross defaults to other Company
debt. Aggregate dividend payments are limited to the sum of
$45.0 and 30% of consolidated cumulative net earnings of the
Company from June 30, 1992. As of December 31, 1995, there were
no borrowings against the credit line and the Company is in
compliance with the covenants of the Credit Agreement.
Long-term debt consisted of the following at December 31:
<TABLE>
<CAPTION>
Average
Rate of
Interest 1995 1994
-------- ------ ------
<S> <C> <C> <C>
Senior notes, maturing
2000, unsecured 7.4% $ 50.0 $ 50.0
Commercial paper 5.8% 92.0 46.6
Other long-term debt 5.9% 23.6 22.5
------ ------
165.6 119.1
Less current maturities 2.9 1.8
------ ------
Long-term debt, less
current maturities $162.7 $117.3
====== ======
</TABLE>
The $50.0 senior notes mature in the year 2000 and are
comprised of Series A $20.0 and Series B $30.0. Series A notes
bear interest at 7.3%, and series B notes bear interest at 7.4%
annually. Interest is payable semiannually on both Series A and
Series B notes. The terms and conditions of the senior notes are
similar to those of the Credit Agreement. The market value of
the senior notes has been determined by quotes from a financial
institution. At December 31, 1995, the market value of the
senior notes is approximately $2.7 higher than the carrying
value.
The commercial paper program is backed by the Company's Credit
Agreement. The commercial paper is issued at current market
rates; therefore, the carrying value approximates the market
value.
Other long-term debt at December 31, 1995 and 1994 consists
principally of $16.8 and $17.2 of yen denominated senior notes.
Of the 1995 balance, $6.9 matures in 1998 and $9.9 matures in
1999. Capitalized leases of $6.8 in 1995 and $5.3 in 1994 are
also included in other long-term debt.
The aggregate maturities of long-term debt for the five years
subsequent to December 31, 1995 are $2.9 in 1996, $2.7 in 1997,
$8.0 in 1998, $102.0 in 1999, and $50.0 in 2000.
7. Income Taxes
The components of earnings (loss) before income taxes were:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
U.S. $21.2 $30.5 $(66.0)
Non-U.S. 51.2 44.4 12.1
----- ----- ------
$72.4 $74.9 $(53.9)
===== ===== ======
</TABLE>
The provision (benefit) for income taxes consisted of the
following:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
---- ---- ----
Current
U.S. federal $ 5.1 $ 6.1 $ 4.8
Non-U.S. 7.7 9.5 9.3
U.S. state and Puerto Rico
(0.6) 3.0 2.7
----- ----- -----
Total current 12.2 18.6 16.8
----- ----- -----
Deferred
U.S. federal 4.3 7.8 (20.2)
Non-U.S. 7.0 1.2 (16.9)
----- ----- -----
Total deferred, net 11.3 9.0 (37.1)
----- ----- -----
Total $23.5 $27.6 $(20.3)
===== ===== =====
</TABLE>
The reconciliations of the U.S. federal statutory tax rate to
the consolidated effective tax rate is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Statutory tax rate 35.0% 35.0% (35.0)%
State taxes, net of U.S. tax
benefit 0.8 0.5 1.1
Ireland and Puerto Rico
income (13.6) (8.0) (14.9)
Non-U.S. taxes 10.9 9.3 6.0
Tax credit utilization (3.6) (6.9) -
Foreign income taxed in the
U.S. 4.0 5.3 5.3
Other (1.0) 1.6 (0.2)
----- ----- -----
Effective tax rate 32.5% 36.8% (37.7)%
===== ===== =====
</TABLE>
Certain income of subsidiaries operating in Puerto Rico and
Ireland is taxed at substantially lower income tax rates than the
U.S. federal statutory tax rate. The lower rates reduced expected
income taxes by approximately $9.8 in 1995, $6.0 in 1994, and
reduced the net loss in 1993 by approximately $8.1. Since April
1990, earnings from manufacturing operations in Ireland are
subject to a 10% tax. The lower Puerto Rico income tax rate
expires in July 2003.
The components of the provision for deferred income taxes are:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Restructuring costs $13.2 $14.5 $(43.5)
International
transactions (4.7) (2.2) 5.9
Accelerated depreciation 0.4 (0.5) (0.7)
Accrued expenses (0.6) 2.4 (5.0)
Pension costs 1.7 (5.3) 5.0
Postretirement
medical costs (0.5) (1.1) (0.9)
Other 1.8 1.2 2.1
----- ----- -----
Total $11.3 $ 9.0 $(37.1)
===== ===== =====
</TABLE>
Based upon the Company's historical pretax earnings, adjusted
for significant items such as non-recurring charges, management
believes it is more likely than not that the Company will realize
the benefit of the existing deferred tax asset at December 31,
1995. Management believes the existing net deductible temporary
differences will reverse during periods in which the Company
generates net taxable income. Certain tax planning or other
strategies will be implemented, if necessary, to supplement
income from operations to fully realize recorded tax benefits.
The tax effect of temporary differences which give rise to
significant portions of deferred tax assets and liabilities
consists of the following at December 31:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Deferred tax assets
Receivables $ 0.9 $ 1.2
Inventories 3.3 2.6
Capitalized expenses 1.6 1.9
Intercompany transactions 2.6 5.2
Pension costs 11.1 8.1
Accrued expenses 22.1 23.8
Restructuring costs 4.0 16.5
Environmental costs 5.1 5.0
Postretirement benefits 24.7 24.1
Other 31.0 22.6
----- -----
106.4 111.0
Less: Valuation allowance (14.5) (14.4)
----- -----
Total deferred tax assets 91.9 96.6
Deferred tax liabilities
Depreciation 1.6 2.2
Other 1.1 -
----- -----
Net deferred tax asset $ 89.2 $ 94.4
====== ======
</TABLE>
At December 31, 1995 and 1994 the Company recorded a valuation
allowance of $14.5 and $14.4 for certain deductible temporary
differences for which it is more likely than not that the Company
will not receive future benefits.
Non-U.S. withholding taxes and U.S. taxes have not been
provided on approximately $184.7 of unremitted earnings of
certain non-U.S. subsidiaries because such earnings are or will
be reinvested in operations or will be offset by appropriate
credits for foreign income taxes paid.
SmithKline and its consolidated subsidiaries (including the
Company through July 26, 1989) have settled all issues with the
U.S. Internal Revenue Service through 1989. All U.S. federal
income tax liability issues between the Company and SmithKline
have been resolved through 1986 in accordance with the Tax
Agreement. Such resolution did not have a material effect on the
Company's consolidated financial position or operating results.
The Company believes that its ultimate U.S. federal income tax
liability to SmithKline, if any, for all applicable post 1986 tax
years will not have a material effect on the consolidated
financial position or operations.
8. Pension and Retirement Benefits
The Company has defined benefit pension plans covering
substantially all of its employees. Consolidated pension expense
was $13.3 in 1995, $17.8 in 1994, and $53.0 in 1993, including
amounts associated with the restructuring.
U.S. pension benefits are based on years of service and
compensation during the five highest consecutive earnings years.
Components of U.S. pension expense were:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Service cost $ 7.1 $ 10.2 $ 11.5
Interest cost 24.0 24.4 20.4
Actual return on
plan assets (23.8) (23.0) (23.5)
Net amortization
and deferral 1.2 2.2 3.1
------ ------ ------
Total $ 8.5 $ 13.8 $ 11.5
====== ====== ======
</TABLE>
As part of the Company's reorganization in 1993, (see Note 2
"Redirected Business Strategy and Reorganization"), the Company
implemented a voluntary separation program for U.S. based long-
term employees. Eligible voluntary separation program
participants also received a substantial enhancement to their
pension benefit. Eligible participants' pension benefit was
calculated by adding five years to their age and five years to
their service period. This enhanced pension benefit resulted in
the Company recording in 1993 a $35.9 pension expense associated
with the restructuring.
The Company's funding policy is to provide currently for
accumulated benefits, subject to federal regulations. Plan assets
consist principally of U.S. government fixed income securities
and corporate stocks and bonds. Funded status of the Company's
pension liabilities and assets and amounts recognized in the
Company's consolidated financial statements with respect to the
U.S. plan were:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Vested benefit obligation $314.6 $246.7
------ ------
Accumulated benefit obligation $316.9 $248.2
Projected compensation increases 41.9 27.9
------ ------
Projected benefit obligation 358.8 276.1
Plan assets at fair market value (273.4) (225.1)
------ ------
Projected benefit obligation
in excess of plan assets 85.4 51.0
Unrecognized transition obligation (2.4) (2.9)
Unrecognized net loss (54.5) (8.7)
Unrecognized prior service cost (8.2) (9.2)
Required minimum pension liability
(unfunded accumulated benefits) 24.5 -
------ ------
Accrued pension cost
in other liabilities $ 44.8 $ 30.2
====== ======
</TABLE>
In accordance with the provisions of Statement of Financial
Accounting Standards No. 87, "Employers' Accounting for
Pensions," the Company recorded, as shown in the above table, an
additional minimum liability during 1995 representing the excess
of the accumulated benefit obligation over the fair value of plan
assets and accrued pension cost. The liability has been offset
by an intangible asset up to the amount of unrecognized prior
service cost, with the remaining balance reported as a reduction
to stockholders' equity, net of tax.
The expected long-term rate of return on U.S. plan assets was
9.75% in 1995 and 1994. The discount rate used in determining
obligations was 7% in 1995 and 9% in 1994, and the assumed
average rate of increase in future compensation levels was 4.25%
in 1995 and 1994.
Certain subsidiaries outside the U.S. have separate pension
plan arrangements which include both funded and unfunded plans.
Unfunded foreign pension obligations are recorded as a liability
on the Company's consolidated balance sheets. Plan assets and
accrued liabilities for those plans exceed vested benefits.
Pension expense for plans outside of the U.S. was $4.8 in 1995,
$4.0 in 1994, and $4.5 in 1993.
The Company has a voluntary defined contribution savings plan
for its U.S. employees. Eligible employees may contribute a
portion of their compensation to this plan. Company
contributions, which are based on a percentage of employee
contributions, were $3.6 in 1995, $3.8 in 1994, and $4.2 in 1993.
Employees generally become fully vested with respect to Company
contributions after three years of service with the Company.
In addition to pension benefits, the Company and its
subsidiaries presently provide certain health care and life
insurance benefits for retired U.S. employees and their
dependents. Eligibility for the plan and participant cost
sharing is dependent upon the participant's age at retirement,
years of service and retirement date. In January 1993, the
Company adopted Statement of Financial Accounting Standards No.
106 ("SFAS 106"), "Employers' Accounting for Postretirement
Benefits Other Than Pensions." This statement required the
Company to accrue, as current costs, the postretirement benefits
during the period the employees provide their service. SFAS 106
also required the Company to recognize a transition obligation
for prior years' service cost. Accordingly, the Company recorded
a transition obligation for past service of $47.2 million and a
net expense of $30.2 (net of tax benefits of $17.0) as the
cumulative effect of the accounting change in 1993.
Annual pretax postretirement benefits expense for 1993
increased $2.6 due to the implementation of SFAS 106.
The net periodic cost for postretirement health care and life
insurance benefits includes the following:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Service cost $1.0 $2.0 $1.4
Interest cost 3.0 4.9 3.9
---- ---- ----
Total $4.0 $6.9 $5.3
==== ==== ====
</TABLE>
The voluntary separation program resulted in a curtailment
loss to the postretirement benefits plan of $7.2 which was
recognized in 1993 as a component of the 1993 restructuring cost
of $114.7 (see Note 2 "Redirected Business Strategy and
Reorganization").
The following table sets forth the plan's funded status and
amounts recognized in the Company's consolidated balance sheet in
"other liabilities" at December 31:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Accumulated postretirement benefit
obligations:
Retirees $33.3 $29.2
Fully eligible active plan
participants 2.0 1.6
Other active plan participants 19.3 12.0
---- ----
Total obligation 54.6 42.8
Plan assets - -
---- ----
Accumulated postretirement benefit
obligation in excess of plan assets 54.6 42.8
Unrecognized net gain 6.5 17.2
----- -----
Accrued postretirement benefit
liability $61.1 $60.0
===== =====
</TABLE>
In 1995 and 1994, the costs of the retiree health and life
insurance benefits were calculated using a health care cost trend
rate of 8% with the rate decreasing to 5.5% by the year 2004. In
1993, a health care cost trend rate was used which assumed a 12%
increase in 1994 with the rate decreasing to 6% by 2007. An
assumed 1% increase in the health care cost trend rate for each
year would have resulted in an increase in the net periodic cost
to $4.7 in 1995, $8.1 in 1994 and $6.1 in 1993 and an accumulated
postretirement benefit obligation of $67.9 in 1995 and $47.6 in
1994. The accumulated postretirement benefit obligation was
calculated using a discount rate of 7% in 1995 and 9% in 1994.
Employees outside the U.S. generally receive similar benefits
from government-sponsored plans.
9. Benefit and Stock Option Plans
In 1988, the Company adopted an Incentive Compensation Plan
for its officers and key employees, which provided for stock-
based incentive awards based upon several factors including
Company performance. This plan expired on December 31, 1990, but
options outstanding on that date were not affected by such
termination. Pursuant to this plan, the Company has granted
options to purchase approximately 755,000 shares, with an
expiration date of ten years from the date of grant.
The Company has also adopted the Incentive Compensation Plan
of 1990. This 1990 plan reserves shares of the Company's common
stock for grants of options and restricted stock. Granted
options expire ten years from the date of grant. Subsequent to
stockholder approval in 1992, amendments were adopted to extend
the expiration of the plan to 2001 and to increase each year,
commencing January 1, 1993, the number of shares available under
the plan by 1.5% of the number of common stock shares issued and
outstanding as of the prior December 31. As of January 1, 1996,
671,033 shares remain available for grant under this plan.
The following is a summary of transactions of the Incentive
Compensation Plans of 1988 and 1990:
<TABLE>
<CAPTION>
Number of Price Per
Shares Share Amount
-------- --------- ------
<S> <C> <C> <C>
Options outstanding
at Dec. 31, 1992 2,069,267 $13.88 - $20.00 $38.6
Granted 438,000 22.50 9.9
Exercised (163,825) 13.88 - 20.00 (3.0)
Cancelled (17,395) 18.38 - 22.50 (0.4)
--------- -------------- ----
Options outstanding
at Dec. 31, 1993 2,326,047 $13.88 - $22.50 $45.1
Granted 773,200 26.38 - 28.88 20.4
Exercised (353,534) 16.50 - 22.00 (6.6)
Cancelled (56,434) 18.88 - 28.00 (1.4)
--------- -------------- ----
Options outstanding
at Dec. 31, 1994 2,689,279 $13.88 - $28.88 $57.5
Granted 418,250 27.88 - 29.25 12.2
Exercised (424,653) 20.00 - 29.25 (8.3)
Cancelled (48,958) 13.88 - 29.25 (1.3)
--------- -------------- ----
Options outstanding
at Dec. 31, 1995 (a) 2,633,918 $13.88 - $29.25 $60.1
========= ============== ====
</TABLE>
(a) At December 31, 1995 1,705,072 shares were exercisable under
these plans.
Stock Purchase Plan
The Company's stock purchase plan allows all U.S. employees
and employees of certain subsidiaries outside of the U.S. to
purchase the Company's common stock at favorable prices and upon
favorable terms. Subsequent to stockholder approval in 1992,
amendments were adopted to extend the expiration of the plan to
December 31, 2001, and in each calendar year commencing in 1992,
to reserve additional shares of common stock for use in the plan
based upon the number of common shares issued and outstanding as
of the annual stockholders' meeting. Employees purchased 212,224
shares in 1995. At December 31, 1995, 730,649 shares remain
available for use in the plan.
Treasury Stock
The Board of Directors approved a stock repurchase program
whereby the Company was authorized to purchase on the open market
3,000,000 shares of the Company's common stock through December
1993 of which 2,969,000 were purchased. In addition the Company
may purchase 1,000,000 shares per year through 1995. In total
5,000,000 shares were authorized for purchase. The shares have
been, and will continue to be, reissued to satisfy the Company's
obligations under existing employee benefit plans. Through
December 1995, the Company had purchased 3,940,909 shares of its
common stock for $91.3 and at December 31, 1995, 849,212 shares
remain in treasury of which 783,950 are held by the Benefit
Equity Fund (see below). In December 1995, the Board of
Directors authorized an additional 1,000,000 shares to be
purchased per year beginning January 1996 and continuing through
1998.
In January 1993 the Company created the Benefit Equity Fund
(BEF), a trust for prefunding future stock-related obligations of
employee benefit plans. The BEF does not change these plans or
the amounts of stock expected to be issued for these plans. The
BEF is funded by existing shares in treasury as well as from
additional shares the Company purchases on the open market over
time. While shares in the BEF are not considered outstanding for
the calculation of earnings per share, the shares within the BEF
are voted by the participants of the Stock Purchase Plan.
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 required
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) as the cumulative effect of the
accounting change. Additional accruals for postemployment
benefits, subsequent to adopting SFAS 112, were approximately
$0.8 in 1995 and $0.7 in 1994.
10. STOCKHOLDERS' EQUITY
Changes in stockholders' equity were as follows:
<TABLE>
<CAPTION>
Foreign
Additional Currency Minimum
Common Paid-in Translation Retained Pension Treasury
Stock Capital Adjustment Earnings Liability Stock
----- ------- ---------- -------- --------- -----
<S> <C> <C> <C> <C> <C> <C>
Balances, December
31, 1992 $2.9 $130.5 $17.4 $220.1 $ - $(13.5)
Net loss (37.6)
Foreign currency
translation
adjustments (18.5)
Dividends to
stockholders (10.1)
Purchases of
treasury stock (28.3)
Vesting of
restricted stock 0.2
Employee stock
purchases (1.1) 13.5
---- ----- ---- ----- ---- -----
Balances, December
31, 1993 2.9 129.6 (1.1) 172.4 - (28.3)
Net earnings 42.2
Foreign currency
translation
adjustments 9.7
Dividends to
stockholders (11.2)
Purchases of
treasury stock (14.6)
Vesting of
restricted stock 0.1
Employee stock
purchases 0.3 15.0
---- ----- ---- ------ ---- -----
Balances, December
31, 1994 2.9 130.0 8.6 203.4 - (27.9)
Net earnings 48.9
Foreign currency
translation
adjustments (0.2)
Dividends to
stockholders (12.3)
Purchases of
treasury stock (13.3)
Vesting of
restricted stock 0.1
Employee stock
purchases (1.1) 18.7
Required minimum
pension liability (9.9)
---- ------ ----- ------ ----- -----
Balances,
December
31, 1995 $2.9 $129.0 $ 8.4 $240.0 $(9.9) $(22.5)
==== ====== ===== ====== ===== ======
</TABLE>
11. Commitments and Contingencies
Environmental
The Company is subject to federal, state, local and foreign
environmental laws and regulations. The Company believes that its
operations comply in all material respects with applicable federal,
state and local environmental laws and regulations. Although the
Company continues to make expenditures for environmental protection,
it does not anticipate any significant expenditures in order to
comply with such laws and regulations which would have a material
impact on the Company's operations or financial position.
In 1983 the Company discovered organic chemicals in the
groundwater near a waste storage pond at a Company facility in
Porterville, California. SmithKline Beckman, the Company's former
controlling stockholder, agreed to indemnify the Company with
respect to this matter for any costs incurred by the Company in
excess of applicable insurance, eliminating any impact on the
Company's earnings or financial position. SmithKline Beecham p.l.c,
the surviving entity of the merger between SmithKline Beckman and
Beecham Group p.l.c., assumed the obligations of SmithKline Beckman
in this respect.
The Company is also 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 is
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.
During 1994, the County formally acknowledged completion of
remediation of a major portion of the soil, although there remain
some areas of soil contamination that may require further
remediation. The Company continued to operate a groundwater
treatment system throughout 1995. The Company believes it has
established adequate reserves to complete the remediation of any
remaining soil contamination, operation and maintenance of the
groundwater treatment system and any necessary additional
groundwater investigations.
In September 1994, one of the tenants of the apartment houses
built on the above-mentioned property filed a lawsuit against the
original purchaser and a number of other defendants, not including
the Company. The lawsuit alleges damages caused by the pollution of
the property. Although the Company is not a named defendant at this
time, the Company is obligated to contribute to any resolution of
this lawsuit.
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
and 1994 lawsuits, if any, beyond those already provided will not
have a material adverse effect on the Company's operations or
financial position.
Litigation
In 1995 a lawsuit was filed against the Company in the Superior
Court of Orange County, California by two of its former employees
alleging breach of contract relating to the commercial development
of certain technology. The plaintiffs seek monetary damages of not
less than $150 million and a declaratory judgment terminating
certain exclusive licenses entered into between the plaintiffs and
the Company. The Company believes that the plaintiffs' claims are
without merit and that the Company has good and sufficient defenses
to each such claim.
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 lawsuits seek damages for alleged personal injury, emotional
distress, lost earnings and medical expenses, as well as punitive
and other damages (no dollar amount is specified) in connection
with alleged groundwater contamination in an area in Scottsdale,
Arizona close to a former Company manufacturing facility. 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.
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 Italy, including the
Company's Italian subsidiary . The inquiry focuses on past leasing
practices for placement of diagnostic equipment which were common
industrywide practices throughout Italy, but now are alleged to be
improper. The Company believes the evidence in the case is weak and
insufficient to support a criminal conviction.
Through its Hybritech acquisition (see note 5 "Investments"), the
Company obtained a patent, referred to as the Tandem Patent, that
covers most of Hybritech's important products and generates royalty
income. The Tandem Patent is involved in an interference action in
the U.S. Patent and Trademark Office with a patent application owned
by La Jolla Cancer Research Foundation (the "Foundation"). If the
Foundation wins the interference, the Company would lose the Tandem
Patent and the royalty income, and a new patent would be issued to
the Foundation covering those products. The Company believes it has
the stronger case and expects to prevail.
In addition, 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.
Lease Commitments
The Company leases certain facilities, equipment and automobiles.
Certain of the leases provide for payment of taxes, insurance and
other charges by the lessee. Rent expense was $32.4 in 1995, $27.3
in 1994, and $34.5 in 1993.
Minimum annual rentals payable under non-cancelable operating
leases with a remaining term of more than one year from December 31,
1995, aggregate $34.0 and for each of the next five years are $10.0
in 1996, $7.3 in 1997, $4.5 in 1998, $3.1 in 1999, $2.2 in 2000, and
$6.9 in 2001 and beyond.
Other
During 1995, the Company guaranteed trade receivables of
Hybritech Incorporated (see Note 5 "Investments"), which were
factored, amounting to approximately $8.4. The Company is
contingently liable for the possible uncollected portion of the
factored trade receivables, if any, which was $8.4 at December 31,
1995.
12. Derivatives
The Company manufactures its products principally in the United
States, but generates more than half of its revenues from sales made
outside the U.S. by its international subsidiaries utilizing the
subsidiary's local currency, exposing the Company to the risk of
foreign currency fluctuations. Also, as the Company is a net
borrower, it is exposed to the risk of fluctuating interest rates.
The Company utilizes derivative instruments in an effort to mitigate
these risks. The Company does not hold or issue financial
instruments for trading purposes.
Various foreign currency contracts are used to hedge firm
commitments denominated in foreign currencies and to mitigate the
impact of changes in foreign currency exchange rates on the
Company's operations. At December 31, 1995, the Company had foreign
currency swaps totaling $111.2 expiring at various dates through May
1996. At December 31, 1994, the Company had foreign currency swaps
totaling $81.1 and purchased foreign currency options related to
firm commitments of $37.1. At December 31, 1995 and 1994 carrying
values approximated market.
The Company uses purchased foreign currency options, forward
contracts and complex options, consisting of purchased options and
call spreads, to hedge anticipated transactions with its
international subsidiaries. Anticipated transactions represent
estimated minimum probable sales, denominated in foreign currencies,
not in excess of one year from the balance sheet date. Anticipated
transactions are estimated based upon historical, budgeted and
forecasted operations at the Company's international subsidiaries.
The hedge instruments mature at various dates throughout 1996 with
resulting gains or losses recognized at the maturity date, which
approximate the transaction date. The contract values and
associated net unrealized gains are summarized as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
Net Net
Contract Unrealized Contract Unrealized
Values Gains Values Gains
------ ----- ------ -----
<S> <C> <C> <C> <C>
Purchased Options $46.0 $0.9 $9.0 $0.1
Forward Contracts 36.0 0.4 - -
Complex Options 32.3 0.1 - -
</TABLE>
The Company occasionally uses purchased foreign currency
contracts to hedge the market risk of a subsidiary's net asset
position. At December 31, 1995, the Company had a $9.4 purchased
foreign currency option related to a net asset position, expiring in
February 1996. The market value of the purchased foreign currency
option resulted in a favorable foreign currency translation
adjustment of $1.2 at December 31, 1995. The Company did not have
purchased foreign currency options related to net asset positions
outstanding at December 31, 1994.
Market values of foreign currency contracts and complex options
are determined by solicitation of dealer quotes. The disclosed
derivatives are indicative of the volume and types of instruments
used throughout the year.
The Company is exposed to credit risk in the event of non-
performance of the counterparties to its foreign currency contacts,
complex options, forward contracts, purchased options and interest
rate swap agreements, which the Company believes is remote.
Nevertheless, the Company monitors its counterparty credit risk and
utilizes netting agreements and internal policies to mitigate its
risk.
13. Business Segment Information
Industry Segment
The Company is engaged primarily in the design, manufacture and
sale of laboratory instrument systems and related products.
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Geographic areas
Sales
United States-domestic $ 606.1 $ 588.2 $ 581.2
United States-export 28.9 24.2 24.1
Europe 312.9 292.9 303.6
Asia and other areas 160.2 153.8 144.7
Transfers between areas (178.0) (170.5) (177.9)
------- ------- -------
Total sales $ 930.1 $ 888.6 $ 875.7
======= ======= =======
Operating income (loss)
United States before
research and
development $ 137.2 $ 147.7 $ 68.8
Research and
development (a) (91.7) (91.5) (93.3)
------- ------- -------
United States 45.5 56.2 (24.5)
Europe 28.2 22.5 (9.2)
Asia and other areas 9.4 8.9 4.6
------- ------- -------
Total operating income
(loss) $ 83.1 $ 87.6 $ (29.1)
======= ======= =======
Identifiable assets
United States $ 446.3 $ 381.8 $ 370.5
Europe 228.8 213.0 205.6
Asia and other areas 89.4 88.8 92.2
Corporate 143.3 145.5 151.7
------- ------- -------
Total assets $ 907.8 $ 829.1 $ 820.0
======= ======= =======
</TABLE>
(a) The Company's principal research and development efforts are
performed in the United States.
Identifiable assets are those assets used by the operations in
each geographic location. Corporate assets consist primarily of cash
and equivalents, short-term investments, deferred tax assets, lease
receivables and fixed assets of a corporate nature. Asia and other
areas include primarily operations in Japan, Canada and Latin
America. Inter-area sales are made at terms that allow for a
reasonable profit to the seller. At December 31, 1995 trade
receivables and other by geographic area were United States $92.9,
Europe $141.6 (including certain countries where normal trade terms
are substantially longer than U.S. terms) and Asia and other areas
$54.3. At December 31, 1994 trade receivables by geographic area
were United States $84.1, Europe $131.2 and Asia and other areas
$50.6.
14. Supplementary Information
Allowance for Doubtful Accounts
<TABLE>
<CAPTION>
Balance
at Additions Charged Balance
Beginning to Cost and at End of
of Period Expenses Deductions Period
--------- -------- ---------- ------
<S> <C> <C> <C> <C>
December 31, 1995 $10.4 $0.7 (a) $ 2.8 (b) $ 9.1
(0.8)(d)
December 31, 1994 11.9 0.7 (a) 2.6 (b) 10.4
0.1 (c) (0.3)(d)
December 31, 1993 12.1 2.4 (a) 2.0 (b) 11.9
0.6 (d)
(a) Provision charged to earnings.
(b) Accounts written-off.
(c) Collection of accounts previously written-off.
(d) Adjustments from translating at current exchange rates.
</TABLE>
<PAGE>
REPORT BY MANAGEMENT
The consolidated financial statements and related information for
the years ended December 31, 1995, 1994 and 1993 were prepared by
management in accordance with generally accepted accounting
principles. Financial data included in other sections of this
Annual Report are consistent with that in the consolidated financial
statements.
Management maintains a system of internal accounting controls
which is designed to provide reasonable assurance, at appropriate
costs, that its financial and related records fairly reflect
transactions, that proper accountability for assets exists, and that
established policies and procedures are followed. A professional
staff of internal auditors reviews compliance with corporate
policies. Among these policies is an ethics policy, which requires
employees to maintain high standards in conducting the Company's
affairs, and requires management level employees to submit
certificates of compliance annually. Management continually
monitors the system of internal accounting controls for compliance
and believes the system is appropriate to accomplish its objectives.
The Company's independent auditors examine the Company's
consolidated financial statements in accordance with generally
accepted auditing standards. Their report expresses an independent
opinion on the fairness of the Company's reported operating results
and financial position. In performing this audit, the auditors
consider the Company's internal control structure and perform such
other tests and auditing procedures as they deem necessary.
The Board of Directors, through its Audit Committee, reviews both
internal and external audit results and internal controls. The
Audit Committee consists of five outside Directors and meets
periodically with management, internal auditors and the independent
auditors to review the scope and results of their examinations.
Both the independent auditors and the internal auditors have free
access to this Committee, with and without management being present,
to discuss the results of their audits.
LOUIS T. ROSSO D.K. WILSON
Louis T. Rosso Dennis K. Wilson
Chairman and Vice President, Finance
Chief Executive Officer and Chief Financial Officer
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors of Beckman Instruments,
Inc.:
We have audited the accompanying consolidated balance sheets of
Beckman Instruments, Inc. and subsidiaries as of December 31, 1995
and 1994, and the related consolidated statements of operations and
cash flows for each of the years in the three-year period ended
December 31, 1995. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is
to express an opinion on these consolidated financial statements
based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Beckman Instruments, Inc. and subsidiaries as of
December 31, 1995 and 1994, and the results of their operations and
their cash flows for each of the years in the three-year period
ended December 31, 1995 in conformity with generally accepted
accounting principles.
As discussed in Note 1, Note 8 and Note 9 to the consolidated
financial statements, the Company adopted the provisions of the
Financial Accounting Standards Board's Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits," in 1994 and Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," and
Statement of Financial Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," in 1993.
KPMG PEAT MARWICK LLP
Orange County, California
January 19, 1996
<PAGE>
Five-Year Financial and Statistical Data
<TABLE>
<CAPTION>
Dollars in Millions, Except Amounts Per Share
Years Ended December 31, 1995 1994 1993 1992 1991
- ------------------------ ---- ---- ---- ---- ----
Summary of Operations
- ---------------------
<S> <C> <C> <C> <C> <C>
Sales $930.1 $888.6 $875.7 $908.8 $857.9
Cost of sales 427.2 416.3 418.3 440.9 417.7
Marketing, administrative 300.4 281.9 278.5 294.8 283.1
and general
Research and development 91.7 91.5 93.3 85.9 82.2
Restructuring charge 27.7 11.3 114.7 - -
Operating income (loss) 83.1 87.6 (29.1) 87.2 74.9
Nonoperating expense, net 10.7 12.7 24.8 16.5 11.1
Earnings (loss) before 72.4 74.9 (53.9) 70.7 63.8
income taxes
Net earnings (loss) before
accounting changes 48.9 47.3 (33.6) 43.8 38.1
Net earnings (loss) $ 48.9 $ 42.2 $(37.6) $ 43.8 $ 38.1
Weighted average common
shares and common share
equivalents *
(millions) 28.8 28.1 27.8 28.7 29.0
Return on average 14.7% 14.2% (11.9%) 12.5% 11.4%
stockholders'equity
Net earnings (loss) per
share before accounting
changes $ 1.70 $ 1.68 $(1.21) $ 1.53 $ 1.32
Net earnings (loss) per 1.70 1.50 (1.35) 1.53 1.32
share
Dividends paid per share of
common stock $ 0.44 $ 0.40 $ 0.36 $ 0.30 $ 0.28
Financial Position at
December 31
- ---------------------
Current assets $533.3 $512.0 $544.5 $508.6 $491.7
Current liabilities 251.2 268.8 323.3 281.3 264.4
Working capital 282.1 243.2 221.2 227.3 227.3
Property, plant and 252.1 232.6 216.8 213.0 203.0
equipment, net
Total assets 907.8 829.1 820.0 738.4 712.2
Long-term debt, less
current maturities 162.7 117.3 113.7 59.5 59.0
Stockholders' equity $347.9 $317.0 $275.5 $357.4 $343.0
Shares outstanding 28.3 28.0 27.8 28.6 28.9
(millions)
Other Statistics
Capital expenditures $110.0 $ 98.7 $ 92.8 $ 91.4 $ 69.7
Depreciation expense $ 77.6 $ 69.1 $ 62.3 $ 63.9 $ 55.5
Number of employees 5,702 5,963 6,689 6,980 6,996
*Common share equivalents were not included prior to 1995 as the
dilutive effect was not significant.
</TABLE>
<PAGE>
Quarterly Data (Unaudited)
Dollars in Millions, Except Amounts Per Share
<TABLE>
<CAPTION>
March 31 June 30 Sept 30 Dec 31 Total
-------- ------- ------- ------ -----
<S> <C> <C> <C> <C> <C>
1995 Quarter Ended
- ------------------
Sales $205.0 $230.6 $229.9 $264.6 $930.1
Cost of sales 97.2 108.0 106.9 115.1 427.2
Marketing,
administrative
and general 65.2 73.8 73.1 88.3 300.4
Research and development 22.1 22.0 22.9 24.7 91.7
Restructuring charge 3.1 3.4 4.1 17.1 27.7
Operating income 17.4 23.4 22.9 19.4 83.1
Earnings before income 15.6 20.9 21.0 14.9 72.4
taxes
Net earnings 10.3 13.8 13.9 10.9 48.9
Net earnings per share $ 0.36 $ 0.48 $ 0.48 $ 0.38 $ 1.70
1994 Quarter Ended
- ------------------
<S> <C> <C> <C> <C> <C>
Sales $198.6 $222.2 $217.8 $250.0 $888.6
Cost of sales 95.1 105.2 103.0 113.0 416.3
Marketing,
administrative
and general 63.4 69.2 65.7 83.6 281.9
Research and development 21.6 22.9 23.9 23.1 91.5
Restructuring charge 1.2 1.1 4.8 4.2 11.3
Operating income 17.3 23.8 20.4 26.1 87.6
Earnings before income 15.0 20.0 17.4 22.5 74.9
taxes
Net earnings before
accounting changes 9.8 13.0 11.3 13.2 47.3
Net earnings 4.7 13.0 11.3 13.2 42.2
Net earnings per share
before accounting 0.35 0.46 0.40 0.47 1.68
changes
Net earnings per share $ 0.17 $ 0.46 $ 0.40 $ 0.47 $ 1.50
</TABLE>
<PAGE>
STOCK PRICES AND OTHER INFORMATION
Stock Exchanges and Prices
The Company's common stock is listed on the New York Stock
Exchange. Its ticker symbol is BEC. The following presents a
summary of the price range for the common stock as reported on the
New York Stock Exchange Composite Tape for 1995 and 1994.
<TABLE>
<CAPTION>
1995 Quarter 1st 2nd 3rd 4th
------------ --- --- --- ---
<S> <C> <C> <C> <C>
High 31 1/2 30 5/8 30 5/8 35 7/8
Low 27 26 1/2 26 7/8 30 1/8
1994 Quarter 1st 2nd 3rd 4th
------------ --- --- --- ---
High 28 3/4 27 32 1/2 30 3/8
Low 25 23 24 3/4 27 3/8
</TABLE>
Dividends
The Company paid cash dividends to stockholders of $0.44 per
share in 1995, $0.40 per share in 1994, and $0.36 per share in 1993.
The Company intends to continue paying cash dividends of at least
the current per share amount, subject to future business conditions,
requirements of the operations and financial condition of the
Company. In February 1996 the Board of Directors declared a
quarterly dividend of $0.13 per share. This dividend is payable
March 7, 1996 to stockholders of record on February 16, 1996.
Annual Meeting
The annual meeting of stockholders will be held on April 4, 1996
at the Company's headquarters in Fullerton, California. Formal
notice of the meeting together with the proxy statement and form of
proxy will be mailed to each stockholder of record on February 6,
1996.
<PAGE>
Form 10-K Annual Report Available to Stockholders
A copy of Beckman Instruments' Form 10-K annual report filed with
the Securities and Exchange Commission may be obtained without
charge by writing to the Company as follows:
Beckman Instruments, Inc.
Michael J. Whelan, Director
Office of Investor Relations, M/S A-37-C
2500 Harbor Boulevard
Fullerton, California, 92634-3100
Telephone: 714-773-7620
FAX: 714-773-8111
There are no accounting differences between the financial
statements presented in this Annual Report and the Form 10-K report,
but the Form 10-K report does provide certain supplemental
information as required by Securities and Exchange Commission
regulations.
Transfer Agent, Registrar and Dividend Disbursing Agent
First Chicago Trust Company of New York
P.O. Box 2500
Jersey City, New Jersey 07303-2500
Telephone: 212-324-1644
Significant Subsidiaries
Beckman Analytical S.p.A.
Beckman Eurocenter S.A.
Beckman Instruments (Australia) Pty. Ltd.
Beckman Instruments (Canada), Inc.
Beckman Instruments (Naguabo), Inc.
Beckman Instruments Espana S.A.
Beckman Instruments France S.A.
Beckman Instruments G.m.b.H.
Beckman Instruments (Hong Kong), Ltd.
Beckman Instruments (Ireland), Inc.
Beckman Instruments (Japan), Ltd.
Beckman Instruments (United Kingdom), Ltd.
Beckman Instruments International S.A.
Hybritech Incorporated
SmithKline Diagnostics, Inc.
Exhibit 21
SUBSIDIARIES
The following table lists current subsidiaries of the Company
whose results are included in the Company's combined financial
statements. The list of subsidiaries does not include certain
subsidiaries which, when considered in the aggregate, do not
constitute a significant subsidiary of the Company.
Jurisdiction
of
Name of Company Incorporation
- --------------- -------------
Beckman Instruments (Australia) Pty. Ltd. Australia
Beckman Instruments (Naguabo) Inc. California
Hybritech Incorporated California
Beckman Instruments (Canada) Inc. Canada
SmithKline Diagnostics, Inc. Delaware
Beckman Instruments (United Kingdom) Ltd. England
Beckman Instruments France S.A. France
Beckman Instruments G.m.b.H. Germany
Beckman Eurocenter S.A. Germany
Beckman Instruments (Hong Kong) Ltd. Hong Kong
Beckman Analytical S.p.A. Italy
Beckman Instruments (Japan) Ltd. Japan
Beckman Instruments (Ireland) Inc. Panama
Beckman Instruments Espana S.A. Spain
Beckman Instruments International S.A. Switzerland
KPMG PEAT MARWICK Exhibit 24
Certified Public Accountants
Orange County Office
Center Tower
650 Town Center Drive
Costa Mesa, CA 92626
The Board of Directors
Beckman Instruments, Inc.
We consent to incorporation by reference in the registration statements (nos.
33-31573, 33-31862, 33-41519, 33-51506, 33-55778, 33-66990, 33-66988, and 33-
65155) on Form S-8 of Beckman Instruments, Inc. of our report dated January
19, 1996, relating to the consolidated balance sheets of Beckman Instruments,
Inc. and subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of operations and cash flows for each of the years in
the three-year period ended December 31, 1995, which report appears in the
December 31, 1995 annual report on Form 10-K of Beckman Instruments, Inc.
Our report refers to the adoption of the Financial Accounting Standards
Board's Statement of Financial Accounting Standards No. 112, "Employers'
Accounting for Postemployment Benefits", in 1994 and Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes", and Statement of
Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions", in 1993.
KPMG PEAT MARWICK
Orange County
February 8, 1996
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF
OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 26.2
<SECURITIES> 8.2
<RECEIVABLES> 297.9
<ALLOWANCES> 9.1
<INVENTORY> 166.2
<CURRENT-ASSETS> 533.3
<PP&E> 627.2
<DEPRECIATION> 375.1
<TOTAL-ASSETS> 907.8
<CURRENT-LIABILITIES> 251.2
<BONDS> 162.7
0
0
<COMMON> 2.9
<OTHER-SE> 345.0
<TOTAL-LIABILITY-AND-EQUITY> 907.8
<SALES> 776.4
<TOTAL-REVENUES> 930.1
<CGS> 327.8
<TOTAL-COSTS> 427.2
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0.7
<INTEREST-EXPENSE> 13.4
<INCOME-PRETAX> 72.4
<INCOME-TAX> 23.5
<INCOME-CONTINUING> 48.9
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 48.9
<EPS-PRIMARY> 1.70
<EPS-DILUTED> 1.70
</TABLE>
