FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
(Mark One)
(X)Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 1997
OR
( )Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from __________ to __________
Commission File Number 001-10109
BECKMAN INSTRUMENTS, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-104-0600
(State of Incorporation) (I.R.S. Employer Identification No.)
2500 Harbor Boulevard, Fullerton, California 92834
(Address of principal executive offices) (Zip Code)
(714) 871-4848
(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15 (d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes (X) No ( ).
APPLICABLE ONLY TO CORPORATE ISSUERS:
Outstanding shares of common stock, $0.10 par value, as
of April 15, 1997: 28,610,501 shares.
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements Page
Condensed Consolidated Statements of
Earnings for the three month periods
ended March 31, 1997 and 1996 3
Condensed Consolidated Balance Sheets
as of March 31, 1997 and December 31, 1996 4
Condensed Consolidated Statements of
Cash Flows for the three month periods
ended March 31, 1997 and 1996 5
Notes to Condensed Consolidated
Financial Statements 6
Item 2. Management's Discussion and Analysis of 8
Financial Condition and Results of
Operations
PART II
OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 2. Changes In Securities 9
Item 3. Defaults Upon Senior Securities 9
Item 4. Submission of Matters to a Vote of 9
Security-Holders
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
<PAGE>
BECKMAN INSTRUMENTS, INC.
FIRST QUARTER REPORT
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars in Millions, Except Amounts Per Share)
Unaudited
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1997 1996
---- ----
<S> <C> <C>
Sales $231.9 $224.8
Operating costs and expenses:
Cost of sales 109.6 104.9
Selling, general and administrative 74.8 73.7
Research and development 24.0 24.7
------ ------
208.4 203.3
------ ------
Operating income 23.5 21.5
Nonoperating income(expense):
Interest income 1.9 1.3
Interest expense (2.8) (3.1)
Other, net (0.3) 0.8
------ ------
(1.2) (1.0)
------ ------
Earnings before income taxes 22.3 20.5
Income tax provision 6.7 6.8
------ ------
Net earnings $ 15.6 $ 13.7
====== ======
Weighted average common shares and common
share equivalents-(in thousands) 28,861 29,259
Net earnings per share $ 0.54 $ 0.47
Dividends declared per share $ 0.15 $ 0.13
</TABLE>
See accompanying notes to condensed consolidated financial
statements.
<PAGE>
BECKMAN INSTRUMENTS, INC.
FIRST QUARTER REPORT
CONSOLIDATED BALANCE SHEETS
(Dollars in Millions)
Unaudited
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
---- ----
<S> <C> <C>
Assets
Current assets:
Cash and equivalents $ 39.7 $ 34.6
Short-term investments 4.2 8.1
Trade receivables and other 284.5 309.5
Inventories 199.1 190.4
Deferred income taxes 21.6 21.4
Other current assets 15.5 15.4
------ ------
Total current assets 564.6 579.4
Property, plant and equipment, net 255.4 263.5
Deferred income taxes 50.5 50.8
Other assets 66.6 66.4
------ ------
Total assets $937.1 $960.1
====== ======
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable $ 25.3 $ 19.4
Accounts payable and accrued expenses 183.5 208.2
Income taxes 66.7 51.7
------ ------
Total current liabilities 275.5 279.3
Long-term debt, less current maturities 176.1 176.6
Other liabilities 94.8 105.3
------ ------
Total liabilities 546.4 561.2
------ ------
Stockholders' equity 390.7 398.9
------ ------
Total liabilities and
stockholders' equity $937.1 $960.1
====== ======
</TABLE>
See accompanying notes to condensed consolidated financial
statements.
<PAGE>
BECKMAN INSTRUMENTS, INC.
FIRST QUARTER REPORT
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Millions)
Unaudited
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1997 1996
---- ----
<S> <C> <C>
Cash Flows from Operating Activities
Net earnings $ 15.6 $ 13.7
Adjustments to reconcile net earnings to net
cash provided (used) by operating activities:
Depreciation and amortization 21.4 20.7
Net deferred income taxes (0.4) (0.1)
Changes in assets and liabilities:
Trade receivables and other 19.1 11.0
Inventories (11.0) (29.8)
Accounts payable and accrued expenses (22.1) 15.2
Restructuring reserve (0.5) (2.5)
Accrued income taxes 15.1 1.6
Other (11.5) (18.4)
------ ------
Net cash provided by operating activities 25.7 11.4
------ ------
Cash Flows from Investing Activities
Additions to property, plant and equipment (19.4) (20.3)
Net disposals of property, plant and equipment 3.5 3.5
Sales of short-term investments 3.9 0.2
Purchases of long-term investments (0.5) -
------ ------
Net cash used by investing activities (12.5) (16.6)
------ ------
Cash Flows from Financing Activities
Dividends to stockholders (4.2) (3.7)
Proceeds from issuance of stock 3.7 4.5
Purchase of treasury stock (12.4) (7.7)
Notes payable borrowings, net 4.4 7.0
Long-term debt borrowings 0.1 9.3
------ ------
Net cash provided (used) by financing
activities (8.4) 9.4
------ ------
Effect of exchange rates on cash and equivalents 0.3 (0.1)
------ ------
Increase in cash and equivalents 5.1 4.1
Cash and equivalents -- beginning of period 34.6 26.2
------ ------
Cash and equivalents -- end of period $ 39.7 $ 30.3
====== ======
Supplemental Disclosures of Cash Flow Information
Cash paid during the period for:
Interest $ 10.9 $ 2.4
Income taxes $ 3.8 $ 5.1
Noncash investing and financing activities:
Purchase of equipment under capital
lease obligation $ 2.5 $ 1.0
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
BECKMAN INSTRUMENTS, INC.
First Quarter 1997 Report
Notes To
Condensed Consolidated Financial Statements
(In Millions, Except Amounts Per Share)
Unaudited
1 Report by Management
In the opinion of the Company, the accompanying unaudited
condensed consolidated financial statements reflect all
adjustments, consisting only of normal recurring accruals,
necessary for a fair presentation of the results for the periods.
The statements are prepared in accordance with the requirements
of Form 10-Q and do not include all disclosures required by
generally accepted accounting principles or those made in the
Annual Report on Form 10-K for 1996 which is on file with the
Securities and Exchange Commission.
The results of operations for the period ended March 31, 1997 are
not necessarily indicative of the results to be expected for the
year ending December 31, 1997.
2 Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the financial statements, and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
3 Net Earnings Per Share
Net earnings per share is computed including the effect of common
share equivalents. Common share equivalents represent the
dilutive effect of outstanding stock options. The following table
summarizes the impact of the dilutive effect of common share
equivalents on net earnings per share:
<TABLE>
<CAPTION>
Three Months ended March 31, 1997 1996
---- ----
Net Net
Earnings Earnings
Shares Per Share Shares Per Share
------ --------- ------ ---------
<S> <C> <C> <C> <C>
Weighted average shares of common
stock outstanding 27.9 $ 0.56 28.4 $ 0.48
Common share equivalents 1.0 (0.02) 0.9 (0.01)
---- ------ ---- ------
Weighted average common and common
share equivalents 28.9 $ 0.54 29.3 $ 0.47
==== ====== ==== ======
</TABLE>
In February 1997, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 128 ("SFAS
128"), "Earnings Per Share." SFAS 128 simplifies the computation
of earnings per share ("EPS") currently required in Accounting
Principles Board (APB) Opinion No. 15, "Earnings Per Share," by
replacing primary and fully diluted EPS with basic and diluted
EPS. Under SFAS 128, basic EPS is calculated by dividing net
earnings by the weighted-average common shares outstanding during
the period. Diluted EPS reflects the potential dilution to basic
EPS that could occur upon conversion or exercise of securities,
options, or other such items, to common shares using the weighted-
average fair value of the Company's common shares during the
period. SFAS 128 is required to be adopted by the Company in its
year end 1997 annual report. Had the Company been required to
adopt SFAS 128 currently, the first quarter basic EPS for 1997
and 1996, respectively, would have been $0.56 and $0.48, and
diluted EPS would have equaled the current and historically
reported net (primary) earnings per share.
4 Inventories
Inventories are comprised of the following:
[CAPTION]
<TABLE>
March 31, December 31,
1997 1996
---- ----
<S> <C> <C>
Finished products $122.2 $123.8
Raw materials, parts and assemblies 63.7 53.0
Work in-process 13.2 13.6
------ ------
$199.1 $190.4
====== ======
</TABLE>
5 Investments
In March 1997, the Company entered into an agreement to purchase an automated
immunochemistry product line, including the related manufacturing facility,
from Sanofi Diagnostics Pasteur, adding significantly to Beckman's diagnostic
testing capability and complementing the Hybritech business acquired in 1996.
Beckman will now have one of the broadest test menus available from a single
supplier for hospitals and commercial laboratories. The acquisition, which is
expected to close on April 30, 1997, also establishes an ongoing alliance in
immunochemistry between Beckman and Sanofi Diagnostic Pasteur. The acquisition
was for a purchase price not material to the Company and will be accounted
for as a purchase.
6 Contingencies
As previously reported, although not a named defendant, the
Company is obligated to contribute to any resolution of a lawsuit
filed by one of the previous owners and developers of property in
Irvine, California formerly owned by the Company. The Company
was recently informed that the lawsuit was settled and is
currently disputing its portion of the settlement. 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.
In the first quarter of 1997, the Company was notified by the
California Department of Toxic Substances Control that it,
together with a large number of other companies, is a potentially
responsible party (PRP) with respect to remediation of a
hazardous waste landfill located in Kern County, California. It
is not possible at this time to reasonably estimate the amount of
loss, if any, related to this matter.
The Company and its subsidiaries are involved in a number of
lawsuits which the Company considers normal in view of its size
and the nature of its business. The Company does not believe
that any liability resulting from any such lawsuits, or the
matters described above, will have a material adverse effect on
its operations or financial position.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
(Dollars in millions, except per share amounts)
Operations
Sales growth of 3%, 5% in constant currency, over the first
quarter of the prior year, resulted from increased market share,
primarily in North America and international markets excluding
Europe. Sales were unfavorably impacted in 1997 by 1% from the
Company placing more instruments with customers using operating-
type leases in 1997 versus sales-type leases in 1996. Revenues
are recognized over the lease term for operating-type leases
while being recognized immediately under sales-type leases.
Gross profit as a percentage of sales decreased slightly due to
a change in unfavorable foreign currency fluctuations and
product mix.
Operating income increased $2.0 over the comparable quarter in
1996 due to the company managing its operating costs to the 1996
level while continuing to grow sales.
Net earnings for the first quarter were $15.6 or $0.54 per
share, representing an increase of 14% and 15%, respectively,
over the prior year.
Financial Condition
Net cash provided by operating activities for the first three
months of 1997 increased $14.3, from the comparable period in
1996, to $25.7. Contributing to this increase are the changes
in trade receivables and other, accrued income taxes, and the
level of purchases of inventory compared to the prior year. Net
cash used in investing activities decreased to $12.5, from $16.6
in the first quarter of 1996, primarily because of cash received
from the sale of short-term investments.
The ratio of debt-to-total capital at March 31, 1997 of 34.0%
compared to 32.9% at December 31, 1996 is due mainly to
purchases of treasury stock in the first quarter of 1997. The
ratio of current assets to current liabilities at March 31, 1997
of 2.0 is comparable to December 31, 1996. The Company believes
it has adequate financial resources to meet expected cash flow
requirements for the foreseeable future.
On March 13, 1997, the Company paid a quarterly cash dividend of
$0.15 per share of common stock for a total of $4.2. On April
3, 1997, the Board of Directors declared a $0.15 per share
dividend payable on June 5, 1997 to shareholders of record on
May 16, 1997.
Business Climate
The diagnostics and life sciences markets continue to be
unfavorably impacted by the European recession and cost
containment initiatives in several European governmental and
health care systems.
The life sciences market also continues to be affected by
reductions of pharmaceutical capital spending in response to the
consolidations of companies and constraints on research and
development spending. 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.
<PAGE>
PART II
OTHER INFORMATION
Item 1. 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.). A Court-
supervised mandatory settlement conference was
held which did not result in settlement of the
case. Discovery is continuing and the Court has
scheduled the trial to begin September 22, 1997.
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 does not believe that any liability
resulting from this lawsuit will 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"), previous owners and
developers of a portion of certain real property
in Irvine, California (the "property") formerly
owned by the Company, filed suit against The
Prudential Insurance Company of America
("Prudential"), alleging breach of contract and
damages caused by pollution 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 a 1990 settlement agreement with
Prudential which purchased the property from the
Company. The Company was recently informed by
Prudential that Prudential settled the lawsuit
with Forest City in October 1996 and requested the
Company to pay a portion of the settlement
pursuant to the 1990 settlement agreement. The
Company does not agree with Prudential's claims
and believes it has significant defenses to them .
Although the outcome of this dispute 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.
Item 2. Changes In Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security-Holders
The Annual Meeting of the Stockholders of the
Company (the "Annual Meeting") was held on April 3,
1997. Three members of the Board of Directors
whose terms expired at the 1997 Annual Meeting were
elected to new terms expiring at the 2000 Annual
Meeting. One member, Peter B. Dervan, Ph.D.,was elected
to replace Earnest H. Clark, Jr. who retired and
whose term also expired at the 1997 Annual Meeting.
Mr. Dervan's term will expire at the 2000 Annual
Meeting. The number of shares voting were as
follows:
VOTES FOR VOTES WITHHELD
---------- --------------
Peter B. Dervan 25,402,660 101,578
Gavin S. Herbert 25,384,025 120,213
C. Roderick O'Neil 25,402,419 101,819
Louis T. Rosso 25,380,247 123,991
The remaining members of the Board of
Directors who will continue in office and the year
in which their terms expire are: Term expiring in
1998: Carolyne K. Davis, Ph.D., Dennis C. Fill,
Charles A. Haggerty and William N. Kelley, M.D.;
Term expiring in 1999: Hugh K. Coble, Francis P.
Lucier, John P. Wareham and Betty Woods.
Proposed amendments to the Company's Incentive
Compensation Plan of 1990, which had been approved
by the Board of Directors at its December 5, 1996
and February 6, 1997 meetings, were also presented
to the Stockholders at the Annual Meeting. The
amendments, to be effective January 1, 1997,
increase flexibility for post-termination stock
option exercise periods and satisfy certain
Internal Revenue Code requirements. The number of
shares voting on the proposed amendments were as
follows:
FOR AGAINST ABSTAIN
24,535,838 831,919 136,481
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
10. The Company's Incentive
Compensation Plan of 1990, as restated
with amendments of December 5, 1996 and
February 6, 1997, amendments approved by
stockholders April 3, 1997 and effective
January 1, 1997.
11. Statement re Computation
of Per Share Earnings: This information
is set forth in Note 3 Earnings Per Share
of the Condensed Consolidated Financial
Statements included in Part I herein.
15. Independent Accountants' Review Report,
April 17, 1997
27. Financial Data Schedule
b) Reports on Form 8-K
None.
Signatures
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
BECKMAN INSTRUMENTS, INC.
(Registrant)
Date: April 24, 1997 by /S/WILLIAM W. MAY
William H. May
Vice President, General
Counsel and Secretary
Date: April 24, 1997 by /S/DENNIS K. WILSON
Dennis K. Wilson
Vice President, Finance and
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
FORM 10-Q, FIRST QUARTER, 1997
Exhibit
Number Description
- ------- -----------
10. The Company's Incentive Compensation Plan of
1990, as restated with amendments of December 5,
1996 and February 6, 1997, amendments approved by
stockholders April 3, 1997 and effective January
1, 1997.
11. Statement re Computation of Per Share
Earnings: This information is set forth in Note 3
Earnings Per Share of the Condensed Consolidated
Financial Statements included in Part I herein.
15. Independent Accountants' Review Report, April 17, 1997
27. Financial Data Schedule
EXHIBIT 10
BECKMAN INSTRUMENTS, INC.
INCENTIVE COMPENSATION PLAN OF 1990
(1997 Restatement)
1. Purpose of Plan.
The purpose of this Plan is to enable Beckman Instruments,
Inc. and certain of its Subsidiaries to continue to compete
successfully in attracting and retaining Employees with
outstanding abilities by making it possible for them to acquire
Shares of the Company's Common Stock on terms which will give
them a more direct and continuing incentive to make substantial
contributions to the future success of the Company's business.
2. Definitions.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of l986, as amended,
or any successor code thereto.
"Company" means Beckman Instruments, Inc., a Delaware
corporation.
"Committee" means the Board or a committee appointed by the
Board to administer this Plan, which committee shall be comprised
only of two or more directors or such greater number of directors
as may be required under applicable law, each of whom (i) in
respect of any transaction at a time when the affected
Participant may be subject to Section 162(m) of the Code, shall
be an "outside director" within the meaning of Section 162(m) of
the Code, and (ii) in respect of any transaction at a time when
the affected Participant may be subject to Section 16 of the
Securities and Exchange Act of 1934 as amended ("Exchange Act"),
shall be a "Non-Employee Director" within the meaning of Rule 16b-
3(b)(3) under the Exchange Act. The Organization and
Compensation Committee may be this committee if it meets these
requirements.
"Common Stock" means common stock of the Company, par value
$.10 per Share.
"Employee" means a person regularly employed by the Company
or by a Subsidiary.
"Incentive" means any option, restricted stock or
performance award granted or issued under the Plan.
"Parent Corporation" means any corporation in an unbroken
chain of corporations ending with the Company if each of the
corporations other than the Company then owns stock possessing
50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
"Participant" means an Employee who receives an Incentive
which, in whole or in part, remains outstanding.
"Plan" means the Beckman Instruments, Inc. Incentive
Compensation Plan of 1990, as amended.
"Retirement" means termination of employment of a
Participant pursuant to the Company's applicable retirement
policy or plan as determined by the Committee in its discretion.
"Shares" means shares of Common Stock of the Company.
"Subsidiary" means any corporation in an unbroken chain of
corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken
chain then owns stock possessing 50% or more of the total
combined voting power of all classes of stock in one of the other
corporations in such chain.
3. Stock Available for Incentives.
(a) Stock Subject to the Plan. For each calendar year from
and including the calendar year beginning January 1, 1993, a
number of Shares equal to the amount of 1.5% of the total number
of issued and outstanding Shares as of December 31 of the
calendar year immediately preceding such year (the "1.5% Limit")
shall become available for issuance under the Plan. In addition,
(i) any unused portion of the Shares remaining from those
reserved in 1990 for issuance under the Plan, (ii) any Shares
relating to Incentives granted at any time under the Plan which
have expired or have been surrendered, including but not limited
to Shares covered by options which have expired or which have
been surrendered without having been exercised and Shares of
restricted stock forfeited to the Company, and (iii) any unused
portion of the 1.5% Limit for any calendar year, shall be added
to the aggregate number of Shares available for issuance in each
calendar year under the Plan. In no event, except as subject to
adjustment as provided in Section 3(b), shall more than 2,175,000
Shares be cumulatively available for issuance pursuant to the
exercise of options awarded under the Plan which qualify as
incentive stock options ("ISOs") under the Code. The maximum
number of Shares subject to options that are granted during any
calendar year to any individual shall be limited to 150,000
shares, subject to adjustments contemplated by Section 3(b).
(b) Adjustments and Reorganizations. The number of Shares
subject to this Plan shall be appropriately adjusted if the
outstanding Shares are hereafter changed into or exchanged for a
different number or kind of shares or other securities of the
Company, or of another corporation, by reason of reorganization,
merger, consolidation, recapitalization, reclassification, stock
split-up, stock dividend or combination of shares. The number of
shares covered by outstanding options and the exercise price
therefor shall likewise be appropriately adjusted whenever the
number or kind of shares shall be increased or reduced by any
such procedure after the date or dates on which such options were
granted; provided, however, that, in the case of ISOs, each such
adjustment shall be made in such manner as not to constitute a
"modification" within the meaning of Section 424(h)(3) of the
Code.
In the event that the Company is succeeded by another
corporation in a reorganization, merger, consolidation,
acquisition of property or stock, separation or liquidation, the
Committee may, in its absolute discretion and on such terms and
conditions as it deems appropriate, provide, either by terms of
the Incentive or a resolution adopted prior to the occurrence of
the reorganization, merger, consolidation, acquisition of
property or stock, separation or liquidation, that for some
period of time prior to such event:
(i) for any option granted under this Plan, such option (A)
shall be exercisable as to all Shares covered thereby, (B)
shall be assumed by such successor corporation, (C) shall be
canceled and be replaced by a substitute option of the
successor corporation or (D) shall be canceled in
consideration for a cash payment in an amount equal to the
Fair Market Value of the Shares covered by such option less
their aggregate exercise price; and
(ii) for any such Shares of restricted stock that are still
subject to restrictions, (A) all restrictions on such Shares
of restricted stock shall terminate or expire, (B)
obligations of the Company in relation to such Shares of
restricted stock shall be assumed by such successor
corporation, (C) such Shares of restricted stock shall be
canceled and replaced by substitute shares of restricted
stock of the successor corporation or (D) such Shares of
restricted stock shall be forfeited to the Company in
consideration for a cash payment in an amount to be
determined by the Committee.
(c) Reservation of Shares. Shares delivered in connection
with any Incentive shall, in the discretion of the Committee, be
either Shares heretofore or hereafter authorized and then
unissued, or previously issued Shares heretofore or hereafter
acquired through purchase in the open market or otherwise, or
some of each. The Company shall be under no obligation to reserve
or to retain in its treasury any particular number of Shares at
any time, and no particular Shares, whether unissued or held as
treasury shares, shall be identified as those related to this
Plan.
4. Granting of Incentives.
The Committee, is authorized to grant options to selected
Employees pursuant to this Plan during the calendar years 1990
through 2001 but not thereafter, to issue restricted stock to
selected Employees pursuant to this Plan during the calendar
years 1991 through 2001 but not thereafter, and to issue
performance awards to selected Employees pursuant to this Plan
during the calendar years 1993 through 2001 but not thereafter.
Incentives under the Plan may be granted in any one or a
combination of (a) stock options, (b) restricted stock, and (c)
performance awards. All Incentives shall be subject to the terms
and conditions set forth herein and to such other terms and
conditions as may be established by the Committee. The type of
Incentive or combination thereof, the number of Shares, if any,
covered by Incentives granted in each year; the Employees to whom
Incentives are granted; and the number of Shares covered by
Incentives granted to each Employee selected shall be wholly
within the discretion of the Committee, subject only to the
limitations prescribed in Sections 3, 5 and 7.
5. Stock Options.
The Committee may grant options qualifying as incentive
stock options ("ISOs") under Section 422 of the Code and
nonqualified stock options (collectively, "options"). Options
granted under this Plan shall be subject to the following terms
and conditions and such other terms and conditions as the
Committee may determine:
(a) Option Price. The option price shall be fixed by the
Committee; provided, however, that the price per Share shall not
be less than 100% of the fair market value of the Shares on the
date such option is granted; provided further, that, in the case
of ISOs, the price per Share shall not be less than 100% (110% in
the case of a Participant then owning (within the meaning of
Section 424(d) of the Code) more than 10% of the total combined
voting power of all classes of stock of the Company, any
Subsidiary or any Parent Corporation) of the Fair Market Value of
the Shares on the date such option is granted. For purposes of
ISOs granted under this Plan, the "Fair Market Value" of the
Company's Common Stock shall be determined by the Committee in
accordance with Section 422 of the Code and the regulations
promulgated thereunder.
(b) Non-transferable. Options shall not be transferable
otherwise than by will or by the laws of descent and distribution
and shall be exercisable, during the Participant's lifetime, only
by the Participant or the Participant's guardian or legal
representative. No option shall be subject, in whole or in part,
to attachment, execution or levy of any kind.
(c) Option Period; Expiration. Each option shall expire
and all rights thereunder shall end at the expiration of such
period (which shall not be more than ten years) after the date on
which it was granted as shall be fixed by the Committee, subject
in all cases to earlier expiration as provided in paragraphs (d)
and (e) of this Section 5 in the event of termination of
employment or death. No ISO may be granted to any person who, at
the time the option is granted, owns (or is deemed to own under
Section 424(d) of the Code) Shares possessing more than 10% of
the total combined voting power of all classes of stock of the
Company, any Subsidiary or any Parent Corporation, unless such
option by its terms is not exercisable after the expiration of
five years from the date such option is granted.
(d) Participant Only; Upon Termination of Employment by
Reason Other Than Death; Expiration. During the lifetime of a
Participant, his or her option shall be exercisable only by the
Participant and, unless otherwise provided in the option
agreement or by resolution adopted after the date of grant, only
while employed by the Company or a Subsidiary or within (i) three
years after Retirement or total disability if and to the extent
exercisable by the Participant on the last day of employment
prior to such event, or (ii) three months after the Participant
otherwise ceases to be so employed if and to the extent the
option was exercisable by the Participant on the last day of such
employment; provided, that in the case of an option which is an
ISO a Participant must exercise his or her option within (i)
three months from the date the Participant ceases to be so
employed other than by reason of death or total disability, or
(ii) twelve months after the Participant ceases to be so employed
by reason of his or her total disability. The option, to the
extent not exercisable on the date of termination from
employment, shall terminate. Notwithstanding the above, in no
event shall options be exercisable later than the end of the
period fixed by the Committee in accordance with the provisions
of paragraph (c) of this Section 5.
(e) Upon Death; Expiration. If a Participant dies within a
period during which the option could have been exercised by the
Participant, his or her option may be exercised within three
years after such Participant's death (but not later than the end
of the period fixed by the Committee in accordance with the
provisions of paragraph (c) of this Section 5) by those entitled
under the Participant's will or the laws of descent and
distribution, but only if and to the extent the option was
exercisable by the Participant immediately prior to death. The
option, to the extent not exercisable on the date of death (or,
if earlier, termination from employment), shall terminate.
(f) Exercisable Pursuant to Terms of Grant; Acceleration.
Options shall become exercisable and in such installments (which
may be cumulative) as the Committee shall provide in the terms of
each individual option; provided, however, by resolution adopted
after an option is granted, the Committee may on such terms and
conditions as it may determine to be appropriate, accelerate the
time at which such option or any portion thereof may be
exercised.
(g) Full or Partial Exercise. As the Committee may fix at
or after the time of grant, options may be exercised in whole at
one time or in part from time to time.
(h) Delivery of Shares; Payment. No Shares shall be
delivered upon the exercise of an option until (i) the option
price has been paid in full in cash or, at the discretion of the
Committee, in whole or in part in Common Stock owned by the
Participant valued at fair market value on the date of exercise;
(ii) all amounts which the Company (or other employer
corporation) is required to withhold under federal, state or
local law in connection with the exercise of the option have been
paid in full in cash; (iii) such Shares have been admitted to
listing on all stock exchanges on which such class of stock is
then listed; (iv) the registration or other qualification
requirements for such Shares, which the Committee, in its
absolute discretion, deem necessary or advisable, have been
completed; and (v) the approval or clearances from any state or
federal governmental agency, which the Committee shall, in its
absolute discretion, determine to be necessary or advisable, have
been obtained. Subject to the Committee's consent, the full
payment required under subparagraph (i) above may be made by
retention by the Company of Shares to be issued pursuant to such
option exercise with an aggregate fair market value on the date
of exercise equal to the total exercise price for the options
being exercised.
(i) ISO $100,000 Limit. To the extent that the aggregate
Fair Market Value (within the meaning of Section 5(a)) of Shares
with respect to which ISOs first become exercisable by a
Participant in any calendar year exceeds $100,000, taking into
account both Common Stock subject to ISOs under this Plan and
stock subject to incentive stock options under all other plans of
the Company or any Parent Corporation, such options shall be
treated as nonqualified stock options. For this purpose, the
"Fair Market Value" of the stock subject to options shall be
determined as of the date the options were awarded. In reducing
the number of options treated as ISOs to meet the $100,000 limit,
the most recently granted options shall be reduced first. To the
extent a reduction of simultaneously granted options is necessary
to meet the $100,000 limit, the Committee may, in the manner and
to the extent permitted by law, designate which shares of Common
Stock are to be treated as shares acquired pursuant to the
exercise of an ISO.
6. Restricted Stock.
Shares of restricted stock granted under this Plan
shall be subject to the following terms and conditions and such
other terms and conditions as the Committee may determine:
(a) Price; Legal Consideration. The price for issuance of
the Shares of restricted stock shall be fixed by the Committee;
provided that legal consideration shall be required for each
issuance of Shares of restricted stock.
(b) Non-transferable. Shares of restricted stock shall not
be transferable until the expiration or termination of all
restrictions on such Shares, and, prior to the expiration or
termination of such restrictions, Shares of restricted stock
shall not be subject, in whole or in part, to attachment,
execution or levy of any kind.
(c) Restrictions; Expiration. The Shares of restricted
stock issued under this Plan shall be subject to such
restrictions as the Committee shall provide and all such
restrictions shall terminate or expire at the end of such period
(which shall not be more than ten years) after the date on which
such restricted shares were issued as shall be fixed by the
Committee, subject in all cases to earlier expiration as provided
in paragraph (d) of this Section 6.
(d) Vesting; Acceleration. Restricted stock shall vest as
the Committee shall provide in the terms of each individual
grant; provided, however, by resolution adopted after restricted
stock is granted, the Committee may, on such terms and conditions
as it may determine to be appropriate, accelerate the time at
which such restricted stock or any portion thereof shall vest.
7. Performance Awards.
The Committee may, in its discretion, grant performance-
based awards to eligible Employees based upon such factors as the
Committee shall deem relevant in light of the specific type and
terms of the award. In addition, and without limiting the
generality of the foregoing, the Committee may grant performance-
based awards within the meaning of Section 162(m) of the Code
("Performance Awards"), whether in the form of Shares, restricted
stock performance stock, phantom stock, cash awards or other
rights, whether or not related to stock values or appreciation,
the grant, vesting, exercisability or payment of which depends on
the degree of achievement of the Performance Criteria (within the
meaning of Section 7(b) below) relative to preestablished
targeted levels for (i) the Company on a consolidated, segment,
subsidiary or division basis, or (ii) an individual. An award
that is intended to satisfy the requirements of Section 7
applicable to Performance Awards shall be designated as such at
the time of grant. Such Performance Awards shall be subject to
the following terms and conditions and such other terms and
conditions as the Committee may prescribe:
(a) Eligible Class. The eligible class of persons for
Performance Awards under this Section 7 shall be executive
officers of the Company and, in the discretion of the Committee,
other key employees of the Company.
(b) Award Period; Performance Criteria. The Committee
shall determine and include in a Performance Award grant the
period of time for which a Performance Award is made ("Award
Period"). The applicable Award Period may not be less than one
year nor more than 10 years. The Committee shall also establish
the criteria by which the performance will be measured
("Performance Criteria") during the Award Period as a basis for
determination of the amount payable under the Performance Award.
The Performance Criteria may include: earnings per share, sales
growth, pre-tax margin, net earnings (before or after taxes,
interest depreciation and/or amortization), cash flow, economic
value added, return on equity or on assets or on net investment,
or cost containment or reduction, or any combination thereof.
The Performance Criteria may include minimum and optimum
objectives or a single set of objectives. The applicable
Performance Criteria and specific performance target or targets
("targets") must be approved by the Committee in advance of
applicable deadlines under the Code and while the performance
relating to such targets remains substantially uncertain.
Performance targets may be adjusted to mitigate the unbudgeted
impact of material, unusual or nonrecurring gains or losses,
accounting changes or other extraordinary events not foreseen at
the time the targets were set, to the extent permitted by Section
162(m) and applicable regulations and interpretations thereunder.
(c) Payment; Maximum Award. The Committee shall establish
the method of calculating the amount of payment to be made under
a Performance Award based on the extent to which the Performance
Criteria are met. After the completion of an Award Period, the
performance shall be measured against the Performance Criteria,
and the Committee shall determine the amount to be paid under the
Performance Award. The Committee, in its discretion, may elect
to make payment in Shares, restricted stock, cash or any
combination of Shares, restricted stock or cash, and such payment
form shall be specified in the applicable Performance Award
agreement. In no event shall grants of Performance Awards in any
calendar year to a Participant, whether payment in cash, Shares,
restricted stock or combination of cash, Shares, or restricted
stock relate to a cash amount of more than $2 million. For
purposes of this limit, each Performance Award which is payable
in Shares or restricted stock shall be deemed to be converted as
of the date of grant to an equivalent cash amount, determined by
multiplying the number of Shares or restricted stock subject to
such Performance Award by the closing price of a Share of the
Company's Common Stock on the New York Stock Exchange as of the
date of grant of the Performance Award. Performance Awards that
are canceled during the year shall be counted against this limit
to the extent required by Code Section 162(m). Stock options
satisfying the requirements of Code 162(m) are subject to the
individual limit as set forth in Section 3(a) and not the
preceding individual limit.
(d) Committee Certification. Before any Performance Award
is paid, the Committee must certify in writing that the
Performance Criteria and any other material terms of the
Performance Award were satisfied; provided, however, that a
Performance Award may be paid without regard to the satisfaction
of the applicable Performance Criteria in the event of a change
in control event, death or total disability, to the extent
permitted under Section 162(m) of the Code and Section 3(b).
(e) Terms and Conditions of Awards. The Committee will
have the discretion to determine the restrictions or other
limitations of the individual awards granted under this Section 7
including the authority to reduce awards, payouts or vesting or
to pay no awards, in its sole discretion, if the Committee
preserves such authority at the time of grant by language to this
effect in its authorizing resolutions or otherwise.
(f) Non-Transferable. Performance Awards are not
transferable, and are not subject in whole or in part, to
attachment, execution or levy of any kind.
8. Continuation of Employment.
Neither this Plan nor any Incentive issued hereunder shall
confer upon any Employee any right to continue in the employ of
the Company or any Subsidiary or limit in any respect the right
of the Company or any Subsidiary to terminate his or her
employment at any time for any reason, with or without cause.
9. Administration.
The Committee may make such rules and regulations and
establish such procedures as it deems appropriate for the
administration of this Plan. The Committee's authority to
administer this Plan shall include, but not be limited to, the
ability to accelerate or to extend the exercisability or post-
termination exercise period of any or all outstanding Incentives
within the maximum terms of Incentives permitted hereunder. In
the event of a disagreement as to the interpretation of this Plan
or any amendment thereto or any rule, regulation or procedure
thereunder or as to any right or obligation arising from or
related to this Plan, the decision of the Committee shall be
final and binding upon all persons in interest, including the
Company and its stockholders.
10. Termination or Amendment of the Plan.
The Board without further action by the stockholders may
terminate this Plan at any time prior to December 31, 2001 and
may from time to time amend this Plan as permitted by applicable
statutes as it deems desirable. Any amendment that would (i)
materially increase the benefits accruing to Participants under
this Plan, (ii) materially increase the aggregate number of
securities that may be issued under this Plan, or (iii)
materially modify the requirements as to eligibility for
participation in this Plan, shall be subject to stockholder
approval only to the extent then required by Section 422 of the
Code or applicable law, or deemed necessary or advisable by the
Board. Without limiting any other express authority of the
Committee under but subject to the express limits of this Plan,
the Committee by agreement or resolution may waive conditions of
or limitations on Incentives that the Committee in the prior
exercise of its discretion has imposed, without the consent of a
Participant, and may make other changes to the terms and
conditions of Incentives that do not affect in any manner
materially adverse to the Participant, his or her rights and
benefits under an Incentive. No amendment, suspension or
termination of this Plan or change of or affecting any
outstanding Incentive shall, without written consent of the
Participant, affect in any manner materially adverse to the
Participant any rights or benefits of the Participant or
obligations of the Company under any Incentive granted under this
Plan prior to the effective date of such change. Changes
contemplated by Section 3(b) shall not be deemed to constitute
changes or amendments for purposes of this Section 10. No
Incentive shall be granted or issued under the Plan after
December 31, 2001, but Incentives granted or issued prior thereto
may extend beyond that date.
11. Taxes.
Prior to any distribution of cash or stock to any
Participant, appropriate arrangements shall be made for the
payment of any taxes required to be withheld by federal, state or
local law. The Company shall be entitled to require cash
payment, to withhold the amount or to retain Shares with a fair
market value equal to the amount of any tax attributable to any
amount payable or Shares deliverable under the Plan after giving
the person entitled to receive such amount or Shares notice as
far in advance as practicable.
12. Stockholder Approval of Plan.
This Plan will be submitted for the approval of the
Company's stockholders within twelve months after the date of the
Board's initial adoption of this Plan or adoption of any
amendments requiring stockholder approval. Options may be
granted and Shares of restricted stock may be issued prior to
such stockholder approval; provided, however, that such options
shall not be exercisable and the restrictions on such Shares of
restricted stock shall not expire or terminate prior to the time
when this Plan is approved by the stockholders; provided,
further, that if such approval has not been obtained at the end
of said twelve-month period, all options previously granted and
all Shares of restricted stock issued under this Plan shall
thereupon be canceled and become null and void. No Shares may be
granted or issued with respect to Performance Awards prior to
stockholder approval of the amendment making such awards
available as Incentives under this Plan.
13. Plan Construction.
(a) Rule 16b-3. It is the intent of the Company that
transactions in and affecting Incentives in the case of
Participants who are or may be subject to Section 16 of the
Exchange Act satisfy any then applicable requirements of Rule 16b-
3 so that such persons (unless they otherwise agree) will be
entitled to the benefits of Rule 16b-3 or other exemptive rules
under Section 16 of the Exchange Act in respect of those
transactions and will not be subjected to avoidable liability
thereunder. If any provision of this Plan or of any Incentive
would otherwise frustrate or conflict with the intent expressed
above, that provision to the extent possible shall be interpreted
as to avoid such conflict. If the conflict remains
irreconcilable, the Committee may disregard the provision if it
concludes that to do so furthers the interest of the Company and
is consistent with the purposes of this Plan as to such persons
in the circumstances.
(b) Rule 162(m). It is the further intent of the Company
that options with an exercise price not less than fair market
value on the date of grant and Performance Awards under Section 7
of this Plan that are granted to or held by a covered employee
(within the meaning of Code Section 162(m) and regulations
thereunder) shall qualify as performance-based compensation under
Section 162(m) of the Code, and this Plan shall be interpreted
consistent with such intent.
KPMG Peat Marwick LLP Exhibit 15
Certified Public Accountants
Orange County Office
Center Tower
650 Town Center Drive
Costa Mesa, CA 92626
Independent Accountants' Review Report
The Stockholders and Board of Directors
Beckman Instruments, Inc:
We have reviewed the condensed consolidated balance sheet of Beckman
Instruments, Inc. and subsidiaries as of March 31, 1997, and the related
condensed consolidated statements of earnings and cash flows for the
three-month periods ended March 31, 1997 and 1996. These condensed
consolidated financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical
procedures to financial data and making inquiries of persons responsible
for financial and accounting matters. It is substantially less in scope
than an audit conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly, we do
not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the condensed consolidated financial statements
referred to above for them to be in conformity with generally accepted
accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet of Beckman
Instruments,Inc. and subsidiaries as of December 31, 1996, and the
related consolidated statements of earnings, stockholders' equity and
cash flows for the year then ended (not presented herein); and in our
report dated January 17, 1997, we expressed an unqualified opinion on
those consolidated financial statements. In our opinion, the information
set forth in the accompanying condensed consolidated balance sheet as
of December 31, 1996, is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.
(KPMG Peat Marwick LLP)
Orange County, California
April 17, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Condensed Consolidated Balance Sheet and the Condensed Consolidated Statement of
Earnings and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
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0
0
<COMMON> 3
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