<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q/A
(Amendment No. 1)
(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, 1998
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from __________ to __________.
Commission File Number 001-10109
BECKMAN COULTER, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-104-0600
(State of Incorporation) (I.R.S. Employer
Identification No.)
4300 N. Harbor Boulevard, Fullerton, California 92834-3100
(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 14, 1998: 28,489,675 shares.
<PAGE> 2
PART I
FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Item 1. Financial Statements Page
<S> <C>
Condensed Consolidated Statements of Operations 2
for the three month periods ended March 31,
1998 and March 31, 1997
Condensed Consolidated Balance Sheets as of 3
March 31, 1998 and March 31, 1997
Condensed Consolidated Statements of Cash Flows 4
for the three month periods ended March 31,
1998 and March 31, 1997
Notes to Condensed Consolidated Financial 5
Statements
Item 2. Management's Discussion and Analysis 10
of Financial Condition and Results of
Operations
</TABLE>
1
<PAGE> 3
BECKMAN COULTER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Millions, Except Amounts Per Share)
Unaudited
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1998 1997
---------- ----------
<S> <C> <C>
Sales $ 399.4 $ 231.9
Operating costs and expenses:
Cost of sales 229.8 109.6
Marketing, general and administrative 119.7 74.8
Research and development 41.6 24.0
---------- ----------
391.1 208.4
---------- ----------
Operating income 8.3 23.5
Nonoperating (income) expense:
Interest income (3.2) (1.9)
Interest expense 26.2 2.8
Other, net (2.3) 0.3
---------- ----------
20.7 1.2
---------- ----------
(Loss) earnings before income taxes (12.4) 22.3
Income tax (benefit)expense (4.0) 6.7
---------- ----------
Net (loss) earnings $ (8.4) $ 15.6
========== ==========
Weighted average number of shares outstanding
-(in thousands) 27,704 27,908
Basic (loss) earnings per share $ (0.30) $ 0.56
Weighted average number of shares and dilutive shares
outstanding - (in thousands) 27,704 28,861
Diluted (loss) earnings per share $ (0.30) $ 0.54
Dividends declared per share $ 0.15 $ 0.15
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
<PAGE> 4
BECKMAN COULTER, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in Millions, Except Amounts Per Share)
Unaudited
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
-------- --------
<S> <C> <C>
Assets
Current assets:
Cash and equivalents $ 31.2 $ 33.5
Trade receivables and other 495.8 524.6
Inventories 339.8 332.3
Deferred income taxes 54.1 53.0
Other current assets 35.2 33.3
-------- --------
Total current assets 956.1 976.7
Property, plant and equipment, net 389.2 410.9
Intangibles, less accumulated amortization of $14.9
in 1998 and $10.6 in 1997 439.8 444.9
Goodwill, less accumulated amortization of $9.3
in 1998 and $6.0 in 1997 400.5 402.8
Other assets 89.7 95.7
-------- --------
Total assets $2,275.3 $2,331.0
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable and current maturities of
long-term debt $ 83.0 $ 68.9
Accounts payable, accrued expenses and
other liabilities 637.6 756.4
Income taxes 62.4 69.6
-------- --------
Total current liabilities 783.0 894.9
Long-term debt, less current maturities 1,248.7 1,181.3
Other liabilities 175.8 173.0
-------- --------
Total liabilities 2,207.5 2,249.2
Stockholders' equity
Preferred stock, $0.10 par value; authorized
10.0 shares; none issued -- --
Common stock, $0.10 par value; authorized
75.0 shares; shares issued 29.1 at 1998 and 1997;
Shares outstanding 27.8 at 1998 and 27.6 at 1997 2.9 2.9
Additional paid-in capital 126.9 126.6
Retained earnings 6.3 19.0
Accumulated other comprehensive loss (19.6) (13.8)
Treasury stock, at cost (48.7) (52.9)
-------- --------
Total stockholders' equity 67.8 81.8
-------- --------
Total liabilities and stockholders' equity $2,275.3 $2,331.0
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 5
BECKMAN COULTER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Millions)
Unaudited
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1998 1997
------- -------
<S> <C> <C>
Cash Flows from Operating Activities
Net (loss) earnings $ (8.4) $ 15.6
Adjustments to reconcile net (loss) earnings to net
cash (used) provided by operating activities:
Depreciation and amortization 29.3 21.4
Net deferred income taxes (0.7) (0.4)
Proceeds from sale of sales type lease receivables 31.5 --
Changes in assets and liabilities:
Trade receivables and other 18.1 19.1
Inventories (5.9) (11.0)
Accounts payable and accrued expenses (102.4) (22.1)
Restructuring reserve (2.9) (0.5)
Accrued income taxes (7.2) 15.1
Other (22.0) (11.5)
------- -------
Net cash (used) provided by operating activities (70.6) 25.7
------- -------
Cash Flows from Investing Activities
Additions to property, plant and equipment (18.3) (19.4)
Net disposals of property, plant and equipment (0.6) 3.5
Sales of short-term investments -- 3.9
Sales (purchases) of long-term investments 9.7 (0.5)
------- -------
Net cash used by investing activities (9.2) (12.5)
------- -------
Cash Flows from Financing Activities
Dividends to stockholders (4.3) (4.2)
Proceeds from issuance of stock 3.8 3.7
Purchase of treasury stock -- (12.4)
Notes payable borrowings, net 8.6 4.4
Long-term debt borrowings 447.2 0.1
Long-term debt reductions (377.6) --
------- -------
Net cash provided (used) by financing activities 77.7 (8.4)
------- -------
Effect of exchange rates on cash and equivalents (0.2) 0.3
------- -------
(Decrease) increase in cash and equivalents (2.3) 5.1
Cash and equivalents -- beginning of period 33.5 34.6
------- -------
Cash and equivalents -- end of period $ 31.2 $ 39.7
======= =======
Supplemental Disclosures of Cash Flow Information
Cash paid during the period for:
Interest $ 27.3 $ 10.9
Income taxes $ 11.1 $ 3.8
Noncash investing and financing activities:
Purchase of equipment under capital
lease obligation $ 2.4 $ 2.5
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 6
BECKMAN COULTER, INC.
Notes To
Condensed Consolidated Financial Statements
Unaudited
1 Report by Management
In the opinion of Beckman Coulter, Inc. (formerly known as Beckman Instruments,
Inc. and hereafter referred to as "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. They do not include all disclosures required by
generally accepted accounting principles or those made in the Annual Report of
Beckman Instruments, Inc. on Form 10-K for 1997 which is on file with the
Securities and Exchange Commission.
The results of operations for the period ended March 31, 1998 are not
necessarily indicative of the results to be expected for the year ending
December 31, 1998.
2 Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of sales and expenses during the reporting period. Actual
results could differ from those estimates.
3 Acquisition
On October 31, 1997, the Company acquired all of the outstanding capital stock
of Coulter Corporation for $850.2 million, net of Coulter's cash on hand of
$24.8 million at the date of acquisition. Coulter is the leading manufacturer of
in-vitro diagnostic systems for blood cell analysis. Details of the transaction
and the accounting effects were disclosed in the Company's annual report for the
year ended December 31, 1997.
The first quarter 1998 results include only January and February Coulter sales
outside the United States as reporting of Coulter international sales has been
lagged by one month to be consistent with the rest of the Company.
4 Comprehensive Income (Loss)
The Company adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" (SFAS 130), in the first quarter 1998. SFAS 130
establishes standards for the reporting and display of comprehensive income.
Components of comprehensive income include net earnings (loss) and foreign
currency translation adjustments. As such, Accumulated Other Comprehensive
Income (Loss) in the Condensed Consolidated Balance Sheets represents only
cumulative foreign currency translation adjustments. Comprehensive loss was
$14.2 million for the three months ended March 31, 1998 and comprehensive income
was $4.7 million for the three months ended March 31, 1997. The adoption of SFAS
130 required additional disclosure but did not have a material effect on the
Company's financial position or results of operations.
5 Net Earnings (Loss) Per Share
5
<PAGE> 7
The Company adopted Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" (SFAS 128) in the fourth quarter of 1997. SFAS 128
simplifies the computation of earnings per share ("EPS") previously required in
Accounting Principles Board (APB) Opinion No. 15, "Earnings Per Share," by
replacing primary and fully diluted EPS with basic and diluted EPS. Earnings Per
Share for the three months ended March 31, 1997, have been restated in
accordance with SFAS 128. The following table summarizes the computation of EPS
(in millions, except amounts per share):
<TABLE>
<CAPTION>
Three Months Ended March 31,
1998 1997
Net Per Share Net Per Share
Loss Shares Amount Earnings Shares Amount
<S> <C> <C> <C> <C> <C> <C>
Basic EPS
Net (loss) earnings $(8.4) 27.7 $(0.30) $15.6 27.9 $0.56
Effect of dilutive stock
Options -- -- -- -- 1.0 (0.02)
----- ----- ----- ----- ----- -----
Diluted EPS
Net (loss) earnings $(8.4) 27.7 $(0.30) $15.6 28.9 $0.54
===== ===== ====== ===== ===== =====
</TABLE>
Under generally accepted accounting principles, as the Company was in a net loss
position in the current quarter, 1.2 million common share equivalents were not
used to compute diluted loss per share, as the effect was antidilutive.
6 Sale of Receivables
In March 1998, the Company sold $31.9 million of sales type lease receivables,
net of allowances, for cash proceeds of $31.5 million. Under the provisions of
Statement of Financial Accounting Standards No. 125, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishment of Liabilities" (SFAS 125),
the transaction was accounted for as a sale and as a result the related
receivables have been excluded from the accompanying Consolidated Balance
Sheets. The sale is subject to certain recourse provisions and as such the
Company established a reserve for potential losses. Proceeds from the
transaction were used to reduce outstanding borrowings.
7 Inventories
Inventories are comprised of the following (in millions):
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
------ ------
<S> <C> <C>
Finished products $216.4 $206.5
Raw materials, parts and assemblies 100.6 99.1
Work in-process 22.8 26.7
------ ------
$339.8 $332.3
====== ======
</TABLE>
6
<PAGE> 8
8. Provision for Restructuring Operations
The Company recorded a restructuring charge of $59.4 million, $36.4 million
after taxes, in the fourth quarter of 1997. This provision is for severance
related costs and facility consolidation. The following table details the
activity within the accrued liability in the first quarter of 1998 (in
millions):
<TABLE>
<CAPTION>
Facility
consolidation and
asset related
Personnel write-offs Total
--------- ----------------- -----
<S> <C> <C> <C>
BALANCE AT DECEMBER 31, 1997
Consolidation of sales, general
administrative and technical functions $26.5 $13.2 $39.7
Changes in manufacturing operations 3.0 3.9 6.9
----- ----- -----
Total Accrued Liability 29.5 17.1 46.6
First Quarter 1998 Activity
Consolidation of sales, general
administrative and technical functions 0.4 2.5 2.9
Changes in manufacturing operations -- -- --
----- ----- -----
Total First Quarter Activity 0.4 2.5 2.9
BALANCE AT MARCH 31, 1998
Consolidation of sales, general
administrative and technical functions 26.1 10.7 36.8
Changes in manufacturing operations 3.0 3.9 6.9
----- ----- -----
Total Accrued Liability $29.1 $14.6 $43.7
===== ===== =====
</TABLE>
9. Long-term debt
In March, the Company issued $160.0 million of 7.10% Senior Notes due 2003 and
$240.0 million of 7.45% Senior Notes due 2008 (the "Offering"). The net proceeds
of $394.3 million were used to pay down existing debt balances and for operating
purposes.
In connection with the Offering, certain of the Company's subsidiaries (the
"Guarantor Subsidiaries") jointly, fully, severally, and unconditionally
guaranteed such notes. Supplemental condensed financial information of the
Company, Guarantor Subsidiaries and Non-Guarantor Subsidiaries, each on a
combined basis is presented below. This financial information is prepared using
the equity method of accounting for the Company's investments in subsidiaries
and the Guarantor Subsidiaries' investments in Non-Guarantor Subsidiaries. This
supplemental financial information should be read in conjunction with the
Consolidated Financial Statements.
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
<S> <C> <C> <C> <C> <C>
Condensed Consolidating
Balance Sheet March 31, 1998
Assets:
Cash and equivalents $ 16.1 $ 9.0 $ 6.1 $ -- $ 31.2
Trade receivables and other 124.3 98.6 272.9 -- 495.8
Inventories 130.0 97.3 129.1 (16.6) 339.8
</TABLE>
7
<PAGE> 9
<TABLE>
<S> <C> <C> <C> <C> <C>
Other current assets 177.1 139.4 67.6 (294.8) 89.3
-------- -------- -------- --------- --------
Total current assets 447.5 344.3 475.7 (311.4) 956.1
Property, plant and
equipment, net 130.1 111.7 147.4 -- 389.2
Intangibles, net 26.2 397.5 16.1 -- 439.8
Goodwill, net 5.1 395.3 0.1 -- 400.5
Other long-term assets 1,175.1 226.0 207.8 (1,519.2) 89.7
-------- -------- -------- --------- --------
Total assets $1,784.0 $1,474.8 $ 847.1 $(1,830.6) $2,275.3
======== ======== ======== ========= ========
Liabilities:
Notes payable and current
maturities of
long-term debt $ 5.6 $ 3.5 $ 73.9 $ -- $ 83.0
Accounts payable and
accrued expenses 191.1 332.9 113.6 -- 637.6
Other current liabilities 114.2 0.8 66.5 (119.1) 62.4
-------- -------- -------- --------- --------
Total current liabilities 310.9 337.2 254.0 (119.1) 783.0
Long-term debt, less
current maturities 1,188.0 7.2 53.5 -- 1,248.7
Other long-term liabilities 217.3 401.4 163.9 (606.8) 175.8
-------- -------- -------- --------- --------
Total liabilities 1,716.2 745.8 471.4 (725.9) 2,207.5
Stockholders' equity 67.8 729.0 375.7 (1,104.7) 67.8
-------- -------- -------- --------- --------
Total liabilities and
stockholders' equity $1,784.0 $1,474.8 $ 847.1 $(1,830.6) $2,275.3
======== ======== ======== ========= ========
</TABLE>
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
<S> <C> <C> <C> <C> <C>
Condensed Consolidating
Statement of Operations
Quarter ended March 31, 1998
Sales $ 189.8 $ 141.1 $ 155.8 $ (87.3) $ 399.4
Operating costs and expenses
Cost of sales 120.9 88.4 107.8 (87.3) 229.8
Marketing, general and
administrative 42.2 34.0 43.5 -- 119.7
Research and development 23.3 17.1 1.2 -- 41.6
Restructuring charge (0.6) -- 0.6 -- --
-------- -------- -------- --------- --------
Operating income 4.0 1.6 2.7 -- 8.3
Nonoperating expense (income) 20.6 (8.1) 8.2 -- 20.7
-------- -------- -------- --------- --------
(Loss) earnings before
income taxes (16.6) 9.7 (5.5) -- (12.4)
Income taxes (5.1) 1.0 2.4 (2.3) (4.0)
-------- -------- -------- --------- --------
Net (loss) earnings $ (11.5) $ 8.7 $ (7.9) $ 2.3 $ (8.4)
======== ======== ======== ========= ========
</TABLE>
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Parent Subsidiaries Subsidiaries Consolidated
<S> <C> <C> <C> <C>
Condensed Consolidating
Statement of Cash Flow
Quarter ended March 31, 1998
Net cash provided (used) by
operating activities $ (38.8) $ (0.1) $ (31.7) $ (70.6)
Cash flows from investing
activities
Additions to property, plant
and equipment (5.5) (4.4) (8.4) (18.3)
</TABLE>
8
<PAGE> 10
<TABLE>
<S> <C> <C> <C> <C>
Net disposals of property,
plant and equipment 2.7 0.7 (4.0) (0.6)
Proceeds from sales-
leaseback transactions -- 7.6 (7.6) --
Investments and acquisitions 9.7 (0.4) 0.4 9.7
------- ------ ------- -------
Net cash (used) provided by
investing activities 6.9 3.5 (19.6) (9.2)
Cash flows from financing
activities
Dividends to stockholders (4.3) -- -- (4.3)
Proceeds from issuance
of stock 3.8 -- -- 3.8
Notes payable borrowings
(reductions) (2.0) -- 10.6 8.6
Long-term debt borrowings
(reductions) 66.0 (0.9) 4.5 69.6
------- ------ ------- -------
Net cash provided (used) by
financing activities 63.5 (0.9) 15.1 77.7
Effect of exchange rates on
cash and equivalents (0.4) (0.8) 1.0 (0.2)
(Decrease) increase in cash
and equivalents 31.2 1.7 (35.2) (2.3)
Cash and equivalents -
beginning of year 13.9 7.3 12.3 33.5
------- ------ ------- -------
Cash and equivalents -
end of year $ 45.1 $ 9.0 $ (22.9) $ 31.2
======= ====== ======= =======
</TABLE>
10. Contingencies
As previously reported, in January, 1996, Coulter Corporation, then unrelated to
the Company, notified Hematronix, a competitive reagent manufacturer, that
Hematronix was selling certain reagents and controls that infringed upon certain
of Coulter's patents. In response, in April, 1996, Hematronix filed a complaint
against Coulter in the United States District Court for the Eastern District of
California. The complaint sought a declaratory judgment to invalidate the
patents. The complaint also included antitrust and related business tort claims
directed at Coulter's business and leasing activities, and sought actual,
treble, and punitive damages in an unspecified amount, as well as injunctive
relief. Coulter answered the complaint by denying violations of the antitrust
laws and business tort claims and counterclaimed that Hematronix willfully
infringed the patents at issue. Trial was scheduled for October, 1998. In March,
1998, the matter was resolved and the lawsuit was dismissed without material
adverse effect on the Company's earnings or financial position.
As previously reported, in 1991, Forest City Properties Corporation and F.C.
Irvine, Inc. (collectively, "Forest City"), filed suit against the Prudential
Insurance Co. in the California Superior Court for the County of Los Angeles
alleging breach of contract and damages caused by pollution of property that
Forest Cities had bought from Prudential. Although the Company was not a named
defendant in the Forest City action, it was obligated to contribute to any
resolution of that action pursuant to a 1990 settlement agreement with
Prudential. The trial of the matter was conducted in 1995, resulting in a jury
verdict in favor of Prudential. The Court granted Forest City's motion for a new
trial, which Prudential appealed. Prior to the Court's consideration of the
appeal, Prudential settled the lawsuit with Forest City and requested the
Company to pay a portion of the settlement pursuant to the 1990 settlement
agreement. The Company did not agree with Prudential's claims and has negotiated
a settlement for an amount not material to the Company's earnings or financial
position.
9
<PAGE> 11
The Company and its subsidiaries are involved in a number of other 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 earnings or financial position. However, no assurance can be
given as to the ultimate outcome with respect to such lawsuits. The resolution
of such lawsuits could be material to the Company's operating results for any
particular period, depending upon the level of income for such period.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview
Beckman Coulter, Inc. (formerly known as Beckman Instruments, Inc. and hereafter
referred to as "the Company") is a world leader in providing systems that
simplify and automate laboratory processes. The Company designs, manufactures
and services a broad range of laboratory systems consisting of instruments,
reagents and related products that customers use to conduct basic scientific
research, drug discovery research and diagnostic analysis of patient samples. On
October 31, 1997, the Company acquired Coulter Corporation ("Coulter"). The
acquisition of Coulter represented a significant milestone in accomplishing the
Company's strategy to solidify its position as a leading provider of laboratory
systems, adding Coulter's leading market position in hematology and number two
position in flow cytometry.
As previously discussed in some detail in the Company's 1997 Annual Report to
Stockholders, incorporated by reference in the Company's Annual Report on Form
10-K for the Fiscal year Ended December 31, 1997 under the heading "Management's
Discussion and Analysis" (the "10-K MD&A"), the acquisition of Coulter and the
related financing have had numerous consequences that affect the comparability
of the Company's results of operations and financial position for periods prior
to and after the acquisition. In particular, the acquisition and related
financing are expected to lower the net earnings of the Company through 1998 as
a result of a substantial increase in interest expense, amortization of
intangible assets and goodwill and various other adjustments resulting from
purchase accounting.
As anticipated, the integration and consolidation of Coulter is requiring
substantial management, financial and other resources. While the Company
believes the early results of this effort are encouraging, the acquisition of
Coulter necessarily involves a number of significant risks, including potential
difficulties in assimilating the technologies, services and products of Coulter
or in achieving the expected synergies and cost reductions, as well as other
unanticipated risks and uncertainties. As a result, there can be no assurance as
to the extent to which the anticipated benefits with respect to the acquisition
will be realized, or the timing of any such realization.
Operations
Sales growth of 72%, 77% in constant currency, over the first quarter of the
prior year, resulted primarily from the addition of Coulter operations. These
results were depressed due to the inclusion of only January and February Coulter
sales outside the United States as reporting of Coulter international sales has
been lagged by one month to be consistent with the rest of the Company.
Excluding Coulter, sales grew 5% primarily as a result of increased market
share, partially offset by an unfavorable change in foreign currency exchange
rates which negatively affected reported international sales by approximately
5%. As discussed in the 10-K MD&A, the Company derives approximately 50% of its
sales from sources outside of the United States, and appreciation of the U.S.
dollar against the Company's major trading currencies has a negative impact on
the Company's results of operations.
10
<PAGE> 12
<PAGE> 13
Gross profit as a percentage of sales decreased due to lower margins for Coulter
products, a hardware mix shift associated with new product introductions and
competitive pricing pressures. An unfavorable change in foreign currency
exchange rates also negatively affected the gross profit. The purchase
accounting treatment for acquired Coulter inventory required that it be written
up to fair value. This had the effect of increasing cost of sales in the first
quarter by $5.7 million as inventory was delivered to customers.
Marketing, general and administrative expenses as a percentage of sales
decreased to 30.0% from 32.3% for the first quarter of 1997. The improvement was
achieved by spreading fixed costs over a larger sales volume and through the
early successes of Coulter integration objectives. Research and development
expenses as a percentage of sales remained consistent at 10.4% and 10.3% for the
first quarters of 1998 and 1997, respectively.
Operating income decreased $15.2 million over the comparable quarter in 1997
primarily due to the lower gross profit as a percentage of sales as discussed
above.
Net loss for the first quarter was $8.4 million or $0.30 per diluted share,
compared to net earnings for the first quarter of 1997 of $15.6 million or $0.54
per diluted share. The decrease is largely the result of decreased operating
income as discussed above and increased interest expense as a result of larger
outstanding borrowings due to funding of the Coulter acquisition.
Financial Condition
As discussed in greater detail in the 10-K MD&A, the Company is highly
leveraged, with a debt-to-capital ratio of 95.2% at March 31, 1998. Among other
things, the Company's high level of debt increases the Company's vulnerability
to general adverse economic and industry conditions, could limit the Company's
ability to obtain additional financing on favorable terms, exposes the Company
to the risk of increased interest rates and requires the dedication of a
substantial portion of the Company's cash flow from operations to the payment of
principal and interest on its indebtedness. In addition, the Company's
agreements with its lenders contain a number of covenants that significantly
restrict the operations of the Company and require it to comply with specified
financial ratios and tests.
As discussed in the 10-K MD&A, the Company is in the process of executing a plan
to reduce its debt and provide additional funds for the integration of Coulter.
As part of this plan, during the first quarter of fiscal 1998, the Company sold
$31.9 million of sale type lease receivables, net of allowances, for cash
proceeds of $31.5 million. The sale was subject to certain recourse provisions
and, as a result, the Company established a reserve for potential losses. The
proceeds from the sale were used to pay down outstanding borrowing. During the
remainder of 1998, the Company expects to consummate several sale leaseback
transactions with respect to some of its real estate assets for cash proceeds of
approximately $240 million. The Company also intends to consummate additional
sale leaseback transactions in 1999 which the Company expects will generate
proceeds of approximately $30 million.
<PAGE> 14
These sales are expected to marginally reduce operating income while decreasing
nonoperating expenses, resulting in a slightly negative impact on the Company's
pretax results.
Net cash used in operating activities for the first three months of 1998
increased $96.3 million from the comparable period in 1997 to $70.6 million. The
primary reasons for this change were a $24.0 million decrease in net earnings,
reduction of trade payables and the payment of $77.7 million in bonus, severance
and related costs which were accrued as part of the purchase liability at
December 31, 1997. This decrease was partially offset by proceeds of $31.5
million from the sale of sales type lease receivables. Net cash used in
investing activities decreased to $9.2 million, from $12.5 million in the first
quarter of 1997. Net cash provided by financing activities increased to $77.7
million, an increase of $86.1 million from the first quarter of 1997. This was
primarily the result of additional borrowings, net of repayments. In March, the
Company issued $160.0 million of 7.10% Senior Notes due 2003 and $240.0 million
of 7.45% Senior Notes due 2008. The net proceeds of this issuance were used to
pay down existing debt balances and for operating purposes.
The ratio of debt-to-total capital at March 31, 1998 was 95.2% compared to 93.9%
at December 31, 1997. The change is due mainly to a net increase in borrowings
and the net loss reported for the first quarter. The ratio of current assets to
current liabilities at March 31, 1998 of 1.2 is comparable to the 1.1 ratio at
December 31, 1997. Based upon current levels of operations and anticipated cost
savings and future growth, the Company believes that its cash flow from
operations, together with available borrowings under the credit facility and its
other sources of liquidity will be adequate to meet its anticipated requirements
until the maturity of its credit facility in 2002. There can be no assurance,
however, that the Company's business will continue to generate cash flow at or
above current levels or that estimated cost savings or growth can be achieved.
The Company's future operating performance and ability to service or refinance
its existing indebtedness, including the credit facility, will be subject to
future economic conditions and to financial, business and other factors, many of
which are beyond the Company's control.
On April 2, 1998, the Company paid a quarterly cash dividend of $0.15 per share
of common stock for a total of $4.3 million. On April 6, 1998, the Board of
Directors declared a $0.15 per share dividend payable on June 4, 1998 to
stockholders of record on May 15, 1998.
Business Climate
The general U.S. economic environment is showing signs of improvement in both
the life science and diagnostic markets.
The Asia Pacific market, including Japan, continues to be affected by the
prevailing economic conditions which are suppressing investment in the research
and development market segments.
In general, the European diagnostics and life sciences markets continue to be
unfavorably impacted by cost containment initiatives as part of governmental
fiscal management policies. These policies are driven by the requirements for
the impending European monetary union.
<PAGE> 15
Forward Looking Statements
This 10-Q report contains forward-looking statements, including statements
regarding, among other items, (i) the Company's business strategy; (ii)
anticipated trends in the Company's business and its plans to consummate sale
leaseback transactions; (iii) the Company's liquidity requirements and capital
resources; (iv) anticipated synergies; and (v) future cost reductions. These
forward-looking statements are based largely on the Company's expectations and
are subject to a number of risks and uncertainties, certain of which are beyond
the Company's control. These risks and uncertainties include, but are not
limited to, (i) the complexity and uncertainty regarding development of new
high-technology products; (ii) the loss of market share through aggressive
competition in the clinical diagnostics and life sciences markets; (iii) the
Company's dependence on capital spending policies and government funding; (iv)
the effect of potential health-care reforms; (v) fluctuations in foreign
exchange rates and interest rates; (vi) reliance on patents and other
intellectual property; (vii) difficulties, delays or failure in effectively
integrating worldwide operations; and (viii) other factors that cannot be
identified at this time.
Although the Company believes that it has the product offerings and resources
required to achieve its objectives, actual results could differ materially from
those anticipated by these forward-looking statements as there can be no
assurance that events anticipated by these forward-looking statements will in
fact transpire as anticipated.
<PAGE> 16
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 COULTER, INC.
(Registrant)
Date: June 30, 1998 by WILLIAM H. MAY
William H. May
Vice President,General
Counsel and Secretary
Date: June 30, 1998 by JAMES T. GLOVER
James T. Glover
Vice President and
Controller
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