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, 1997
Commission File Number 001-10109
BECKMAN INSTRUMENTS, INC.
2500 Harbor Boulevard, Fullerton, California 92834
(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 X 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 X 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. ( )
Aggregate market value of voting stock held by non-affiliates of
the registrant as of January 26, 1998: $1,190,023,639.
Common Stock, $.10 par value, outstanding as of January 26, 1998:
28,460,954 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, 1997 Part I and Part II
Proxy Statement for the 1998 Annual
Meeting of Stockholders to be held on
April 2, 1998 Part III
<PAGE>
BECKMAN INSTRUMENTS, INC.
PART I
Item 1. Business
Overview
Beckman Instruments, Inc. (including Coulter Corporation and
its subsidiaries ("Coulter") and all other subsidiaries of
Beckman Instruments, Inc., "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. Approximately two-thirds of the
Company's 1997 sales were for clinical diagnostics applications,
principally in hospital laboratories, while the remaining sales
were for life sciences and drug discovery applications in
universities, medical schools, and pharmaceutical and
biotechnology companies. The Company's diagnostic systems
address over 75% of the hospital laboratory test volume,
including virtually all routine laboratory tests. The Company
believes that it is a worldwide market leader in its primary
markets, with well-recognized systems and a reputation for high-
quality, reliable service.
The Company's systems improve efficiency by integrating
customer laboratory operations. The design of these systems draws
upon the Company's extensive expertise in the chemical,
biological, engineering and software sciences. Products for the
clinical diagnostics (In Vitro diagnostics ("IVD")) market
consist of systems (analytical instruments, reagents, accessories
and software) that are used to detect, quantify and classify
various substances and cells of clinical interest in human blood
and other body fluids. Products for the life sciences market
include centrifuges, flow cytometers, high performance liquid
chromatographs, spectrophotometers, laboratory robotic
workstations, capillary electrophoresis systems, DNA sequencers
and synthesizers, and the reagents and supplies for their
operation. The Company has an installed base of approximately
75,000 systems in over 120 countries, which the Company believes
will provide a recurring stream of revenue and cash flows from
the sale of reagents, consumables and services after initial
placement of the system ("After Sales"). Approximately 67% of
the Company's 1997 sales were derived from After Sales, while the
remaining 33% were derived from the direct placement of systems.
On October 31, 1997, Beckman Instruments, Inc. (excluding
Coulter, "Beckman") acquired Coulter which became a wholly owned
subsidiary of Beckman. The acquisition of Coulter was a further
extension of 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. Coulter is the world's leading manufacturer of IVD
systems for blood cell analysis (hematology), with a market share
in hematology approximately twice that of its next largest
competitor.
Beckman and Coulter serve substantially the same customer
base but have essentially no overlap in their product offerings.
As a result, the Company expects to be able to enhance the
operating efficiency of the combined entities through cross-
selling and reduced operating costs. The Company intends to
capitalize on cross-selling opportunities primarily by marketing
Beckman's clinical chemistry products to existing Coulter
customers and marketing Coulter's hematology and flow cytometry
products to Beckman's existing customers.
Background
Beckman is one of the world's leading manufacturers of
analytical instrument systems and test kits, competing in the
clinical diagnostics and life sciences markets, with Company
sales for 1997 of $1.2 billion, approximately one-half from
outside the United States. Founded by Dr. Arnold O. Beckman in
1934, Beckman entered the laboratory market by introducing the
world's first pH meter. In 1997, the Company generated
approximately 67% of its sales through After Sales revenue from
an installed base of over 75,000 systems.
Beckman became a publicly-traded corporation in 1952. In
1968 Beckman expanded its laboratory instrument focus to include
healthcare applications in clinical diagnostics. Beckman was
acquired by SmithKline Corporation to form SmithKline Beckman
Corporation in 1982, and Beckman was operated as a subsidiary of
SmithKline Beckman until 1989 when it was divested. Since that
time, Beckman has operated as a fully independent, publicly-owned
company. Beckman's principal executive offices are located at
2500 Harbor Blvd., Fullerton, California 92834, and its telephone
number is (714) 871-4848.
Customers and Markets
The two primary markets which the Company serves are the
clinical diagnostics and life sciences markets. The Company's
clinical diagnostics customers include hospital clinical
laboratories, physicians' offices and group practices and
commercial reference laboratories (large central laboratories to
which hospitals and physicians refer tests); its life sciences
customers include universities conducting academic research,
medical research laboratories, pharmaceutical companies and
biotechnology firms. The Company's customers are continually
searching for processes and systems that can perform tests
faster, more efficiently and at lower costs. The Company
believes that its focus on automated and high throughput systems
position it to capitalize on this need.
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. By serving
several customer groups with differing needs related through
common science and technology, the Company has the opportunity to
broadly apply and leverage its expertise.
The clinical diagnostics and life sciences markets are each
highly competitive and the Company encounters significant
competition in each market from many manufacturers, both domestic
and outside the United States. These markets continue to be
unfavorably impacted by the economic weakness in Europe and Asia
and cost containment initiatives in several European governmental
and healthcare systems. The life sciences market also continues
to be affected by consolidation of pharmaceutical companies and
governmental constraints on research and development spending.
Attempts to lower costs and increase efficiencies have led to
consolidation among healthcare providers in the United States,
resulting in more powerful provider groups that leverage their
purchasing power with suppliers to contain costs. Preferred
supplier arrangements and combined purchases are becoming more
commonplace. Consequently, it has become essential for
manufacturers to provide cost-effective diagnostic systems to
remain competitive. In addition, consolidation has put pressure
on diagnostic equipment manufacturers to broaden their product
offerings to encompass a wider range of testing capability,
greater automation and higher volume capacity. Manufacturers
that have the ability to automate a wide variety of tests on
integrated workstations have a distinct competitive advantage.
Broad testing menus that include immunoassays and routine
chemistry tests are highly attractive to laboratories seeking to
reduce the number of vendors they utilize. Finally,
consolidation has made it increasingly important for suppliers to
deploy a highly focused salesforce that is able to execute
innovative marketing approaches and to maintain a reliable after-
sale service network.
The size and growth of the Company's markets are influenced
by a number of factors, including: 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; and healthcare spending and physician
practice. The Company expects worldwide healthcare expenditures
and diagnostic testing to increase over the long-term, primarily
as a result of the following three factors: (1) growing demand
for services generated by the aging of the world population, (2)
increasing expenditures on diseases requiring costly treatment
(for example, AIDS and cancer) and (3) expanding demand for
improved healthcare services in developing countries.
Products
Overview
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
application:
Clinical Diagnostics
Life Sciences Research and Drug Discovery
PRODUCT SALES AS A PERCENT OF TOTAL PRODUCT SALES
FOR CATEGORIES REPRESENTING
MORE THAN 10 PERCENT OF SALES
1997 1996 1995
---- ---- ----
Clinical Diagnostics 67 63 60
Life Sciences Research and Drug
Discovery 33 37 40
Clinical Diagnostics
The clinical diagnostics industry encompasses the study and
analysis of disease by means of laboratory evaluation and
analysis of bodily fluids and other substances from patients.
Due to its important role in the diagnosis and treatment of
patients, IVD testing is an integral part of overall patient
care. Additionally, IVD testing is increasingly valued as an
effective method of reducing healthcare costs by providing
accurate, early detection of health disorders and also reducing
the length of hospital stays.
The major diagnostic fields that comprise the IVD industry
include clinical chemistry, immunochemistry, microbiology,
hematology and blood banking. The IVD industry market was
estimated to be $19 billion in 1996 and is estimated to grow at a
4% compound annual rate through the year 2001. The Company
primarily serves the hospital and reference laboratory customers
of the IVD market, which tend to use more precise, higher volume
and more automated IVD systems. Hospital and reference
laboratory customers constitute approximately $15.5 billion of
the IVD market.
IVD systems are composed of instruments, reagents,
consumables, service and data management systems. Instruments
typically have a five- to ten-year life and serve to automate
repetitive manual tasks, improve test accuracy and speed the
reporting of results. Reagents are substances that react with
the patient sample to produce measurable, objective results. The
consumables vary across application segments but are generally
items such as sample containers, adapters, pipette tips, etc.,
used during test procedures. Reagents, accessories, consumables
and services generate significant ongoing revenues for suppliers.
Sample handling and preparation devices as well as data
management systems are becoming increasingly important components
of IVD systems. These system additions further improve safety
and reduce costs through automation. The Company believes that
the most important criteria customers use to evaluate IVD systems
are operating costs, reliability, reagent quality and service,
and that providing a fully integrated system that is cost
effective, reliable and easy to use results in loyalty among
customers who value consistency and accuracy in test results.
Life Sciences Research and Drug Discovery
Life sciences research is the study of the characteristics,
behavior and structure of living organisms and their component
systems. Life sciences researchers utilize a variety of
instruments and related biochemicals and supplies in the study of
life processes, drug discovery and biotechnology. The Company
estimates that in 1996 annual sales to the global life sciences
industry for instrumentation and related service and biochemicals
totaled approximately $6.4 billion.
The segments of this market on which the Company focuses are
centrifugation and other separation systems, biorobotics for drug
screening, electrophoresis for R&D and quality control uses,
spectrophotometry, protein purification, DNA synthesis and
sequencing, and liquid scintillation, for which the Company
estimates 1996 industry wide sales totaled approximately $4.2
billion in the aggregate. Trends in the life sciences industry
include the growth in funding for drug discovery by the
pharmaceutical and biotechnology industries, driven principally
by the desire to accelerate drug discovery and development, and
the demand for increased automation and efficiency at
pharmaceutical and biotechnology laboratories.
An important application of the Company's systems is for use
as a part of the drug discovery process. Pharmaceutical groups
require the capability to screen millions of potential drug leads
against many new disease targets in shorter time periods. Makers
of bioanalytical instruments have addressed this need and helped
to make the new approach to drug discovery possible by combining
the detection capabilities of bioanalytical instruments with
advances in high throughput screening. "High throughput
screening" is a general term that refers to the automated systems
and new instruments currently being used to accelerate drug
discovery.
Product Descriptions
Clinical Diagnostics Products
Clinical Chemistry Systems - Overview
Clinical chemistry systems use electrochemical detection or
chemical reactions with patient samples to detect and quantify
substances of diagnostic interest or "analytes" in blood, urine
or other body fluids. Commonly performed tests include protein,
glucose, cholesterol, triglycerides and enzymes. The Company
offers a range of automated clinical chemistry systems to meet
the testing requirements of varying size laboratories, together
with software that allows these systems to communicate with
central hospital computers. To save time and reduce errors,
systems identify patient samples through bar codes. Automated
clinical chemistry systems are designed to be available for
testing on short notice 24 hours a day. The Company has
generally configured its systems for the work flow in medium and
large hospitals, but the systems also have application in
regional reference labs. Over 180 tests for individual analytes
are offered for use with the Company's clinical chemistry systems,
which range in price from $60,000 to over $300,000.
Clinical Chemistry Systems for Automated General
Chemistry
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 [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 CX4, CX5, and CX7 analyzers are random access
systems designed to perform routine chemistry profiles as well as
some special chemistry profiles. These models are industry
leading, innovative systems that are designed to enhance
laboratory productivity. With an extensive menu of routine
chemistry, proteins, therapeutic drugs and drugs of abuse, the
SYNCHRON systems can perform over 85% of the laboratory's general
chemistry testing requirements. In 1997 the CX series was
enhanced with additional menu and software designed to simplify
operator interface and throughput capabilities. These systems
were featured at the American Association of Clinical Chemists
(AACC) and Medical trade shows as the SYNCHRON ALX and the
SYNCHRON CX7 RTS. SYNCHRON CX systems range in price from
$49,000 to $185,000 and are sold principally based on their
ability to improve laboratory efficiency.
The launch in 1997 of the new SYNCRHON autochemistry
analyzer, SYNCRHON LX(TM)20, extends the product line into high
volume laboratories. A completely new system, the SYNCHRON LX20
has twice the throughput of the CX7 system as well as options for
additional detection capabilities that will increase opportunity
for test menu expansion. The SYNCHRON LX20 is also designed for
improved sample handling to minimize required operator interface.
The SYNCHRON LX20, together with the SYNCHRON CX product lines,
provide product offerings for varying size hospitals worldwide.
Depending upon configuration and accessories, SYNCHRON LX20
systems range in price from $250,000 to $300,000.
Immunochemistry Systems - Overview
Immunochemistry systems, like clinical chemistry systems,
use chemical reactions to detect and quantify chemical substances
of diagnostic interest in blood, urine or other body fluids. The
key difference is that immunochemistry systems use antibodies
harvested from living organisms as the central component in
analytical reactions. These antibodies are created by the
organism's immune system and when incorporated in test kits,
provide the ability to detect and quantify very low analyte
concentrations. Commonly performed tests assess thyroid
function, screen and monitor for cancer and calibrate cardiac
risk. Immunochemistry systems have been constructed to meet the
special requirements of these reactions and to simplify lab
processes. They are able to automatically identify individual
patient sample tubes and communicate with central computers. The
Company offers over 60 immunochemistry-based test kits for
individual analytes and a range of systems priced from $60,000 to
$90,000.
Immunochemistry Systems and Tests For Automated
Immunoassay
The IMMAGE(R) immunochemistry system, released in 1997,
represents an improved technology, high throughput analyzer for
specific proteins, various immunologic markers and therapeutic
drugs. This system provides automated random access testing
which allows the operator to mix samples at random, eliminating
the need to analyze in batches. The system is expected to sell
for $70,000 to $90,000.
The IMMAGE system builds on the extensive installed base of
our current immunochemistry analyzer, the ARRAY(R) 360 protein
and therapeutic drug monitoring system. The ARRAY 360 was the
world's first computer enhanced, positive sample identification,
bi-directional immunochemistry analyzer for determination of
specific proteins and therapeutic drugs.
In 1996 the Company acquired Hybritech Incorporated
("Hybritech"), a San Diego based life sciences and diagnostics
company. The acquisition expanded 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. Additionally, during 1996 the
Company obtained clearance to use its OSTASE(R) assay for the
management of postmenopausal osteoporosis, making it the first
blood test cleared for such use.
In May of 1997, the Company acquired the ACCESS(R)
immunoassay product line from Sanofi Diagnostics Pasteur. This
product line, manufactured in Chaska, Minnesota, significantly
expands the Company's menu of immunochemistry diagnostic tests,
particularly those that require high sensitivity. The ACCESS
system serves as a disease state management platform used to
assist medical professionals to detect and monitor critical
parameters for thyroid function, anemia, blood viruses,
infectious disease, cancer, allergy, fertility, proteins,
therapeutic drugs, diabetes and cardiovascular and skeletal
diseases. An ongoing relationship was established with Sanofi
Diagnostics Pasteur to research and develop new tests, primarily
in the area of infectious disease. The ACCESS system sells for
approximately $125,000.
Electrophoresis Systems 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(R) 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
and sells for approximately $95,000.
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. A convenient whole blood version of the
FlexSure(R) HP was launched in 1996. In 1997 the Company
released the FlexSure(R) OBT immunochemical test that is specific
for human blood and can detect lower gastrointestinal diseases
like colorectal cancer more accurately than the Hemoccult(R)
test. In addition, through its SKD subsidiary, the Company
markets the ICON(R) test kits featuring a high sensitivity
pregnancy test widely used by health care practitioners. In
1997, the Company acquired the rights to and introduced a user-
friendly, next generation product, ICON(R) Fx Strep A test kit
that will replace the current ICON Strep A test.
Cell Counting and Characterization Systems - Overview
The Company's blood cell systems use the principles of
physics, optics, electronics and chemistry to separate cells of
diagnostic interest and then quantify and characterize them.
These systems fall into two categories: hematology and cytometry.
Hematology systems allow clinicians to study formed elements in
blood such as red and white cells and platelets. The most common
diagnostic result is a "CBC" or complete blood count, which
provides five to eight blood cell parameters. Flow cytometers
can extend analysis beyond blood to include bone marrow, tumors
and other cells. The rise of the AIDS epidemic and the need to
monitor subclasses of white cells moved cytometry from largely a
research technique into general clinical practice. These systems
are automated, use bar codes to identify samples and can
communicate with central computers.
Cell Counting and Characterization Systems For
Hematology
The Company's hematology product line reflects the clinical
diagnostic market's trend toward increasingly distinct high and
low volume segments. The Company currently manufactures eight
primary systems; the first three systems are designed for the
high volume segment and the remaining five systems are designed
for the lower volume segment.
The systems in the higher volume segment utilize volume,
conductivity and light scatter (VCS) technology in addition to
conventional, electrical aperture-impedance (Coulter Principle)
technology. Unlike other technologies, the Coulter VCS method
counts and characterizes white blood cells while maintaining the
native integrity of the white blood cells throughout the
analysis. The systems in the lower volume segment rely
exclusively upon electrical aperture-impedance technology.
High Volume Hematology Systems
COULTER (R) GEN.S(TM) hematology system - The COULTER GEN.S
system, introduced in 1996, is the Company's state-of-the-art
automated hematology system that provides walkaway, whole blood
analysis for CBCs, five-part white blood cell differential, red
cell morphology and reticulocyte analysis with automated slide-
making from a single blood aspiration.
COULTER (R) STKS(TM) hematology system - The COULTER STKS is
a cost-effective system designed for high volume clinical
laboratories. This system is particularly well suited for
commercial reference laboratories which have minimal requirements
for automated reticulocytes and slide-making capabilities, but
need the ability to measure aged specimens accurately. The STKS
hematology system provides a CBC and five-part white blood cell
differential, red cell morphology, and semi-automated
reticulocyte analysis.
COULTER(R) MAXM(TM) hematology system - The COULTER MAXM
hematology system combines the computing power and many of the
technology features of the larger COULTER STKS hematology system
within a compact, fully automated bench-top design for moderate
throughput. The COULTER MAXM hematology system offers the same
comprehensive white cell differential and reticulocyte results as
the COULTER STKS hematology system and makes Coulter's advanced
VCS technology affordable for moderate volume testing
laboratories. The system is also an ideal back-up instrument in
high volume testing facilities.
High volume hematology systems sell in the $25,000 to
$130,000 price range.
Low Volume Hematology Systems
COULTER(R) ONYX(TM) hematology instruments - The COULTER
ONYX analyzer provides a cost-effective option for laboratories
that require only a CBC and three-part screening differential.
The COULTER ONYX analyzer is available in either a single-sample
loading or autoloading configuration for walk-away automation.
COULTER(R) MD(TM) hematology instruments - The COULTER MD
instrument is designed to meet the needs of the low volume and
"stat" test market. The COULTER MD analyzer is simple to operate
and cost effective, making it ideal for the hospital laboratory
second and third shift. The recently introduced COULTER MDII
analyzer incorporates more fully-automated features to enhance
productivity .
In response to the rapidly emerging Point-of-Care market,
the COULTER MDII analyzer integrates a unique software module
(RALS, a Remote Access Laboratory System developed in conjunction
with the University of Virginia) that enables remote operation of
the instrument. These instruments are placed at multiple
locations amidst the patient population. A standard user
interface enables a central laboratory to communicate with the
analyzer and control its operation on-line. As a result, samples
can be analyzed by untrained operators under central laboratory
supervision, thereby providing test result validation, QA, and
centralized data management at reduced cost.
COULTER(R) T Series (TM) hematology instruments - The
COULTER T Series is an established series of hematology analyzers
that provide basic 5 to 8 parameter CBC testing with a two-part
screening differential. This simple-to-operate and fully
automated system is ideal for a broad segment of laboratories as
a primary or back-up system. The COULTER T Series analyzers meet
the needs of many international customers who perform relatively
high volumes of testing but have limited operating budgets.
COULTER(R) Ac.T hematology instrument - The recently
introduced COULTER Ac.T 8 hematology analyzer is the first in a
series of very low cost automated hematology systems designed to
address the low volume market. The COULTER Ac.T 8 is an eight
parameter analyzer with an icon-driven user interface. The
Company has also introduced the COULTER Ac.T 10, a platform
extension that adds a two-part differential to the test menu.
The low volume hematology systems typically sell in the
price range of $7,500 to $30,000.
Flow Cytometry Systems
Flow cytometry systems include an instrument, consumables
and related accessories to enable and enhance the performance of
these instruments.
COULTER EPICS(R) Elite ESP(TM) flow cytometer - The COULTER
EPICS Elite ESP instrument is a state-of-the-art flow cytometer,
for advanced diagnostics and research. It is designed to
perform sophisticated cell analysis and sorting applications
using the Company's extensive portfolio of reagents. The COULTER
EPICS Elite ESP instrument simultaneously performs complex multi-
parameter applications such as DNA analysis, physiologic
measurements, chromosome enumeration and the study of the
hematopoetic process. The cell sorting capability of the system
allows for the rapid separation of very large numbers of specific
cell populations from a heterogeneous mixture. Coulter's
Elite(TM) systems typically sell for $150,000 to $400,000.
COULTER EPICS(R) XL(TM) Flow Cytometer with System II(TM)
Software -- The COULTER EPICS XL cytometer with System II
software is a state-of-the-art benchtop flow cytometer used
primarily to analyze white blood cells in clinical and clinical
research settings. Because the system is flexible and
upgradeable with varying sample preparation systems, it has
proven successful in different environments, from research labs
to high and low volume hospital and commercial labs. It features
flexible networking options with other COULTER EPICS systems and
PC networks and incorporates an advanced data management system.
XL(TM) systems generally sell for $70,000 to $140,000.
Life Sciences Research and Drug Discovery Products
The Company offers a wide range of life sciences and drug
discovery systems that are used to advance basic understanding of
life processes and in the related activities of therapeutic
development. Product categories include centrifuges, flow
cytometers, life sciences laboratory automation, DNA synthesizers
and sequencers, high performance liquid chromatography ("HPLC"),
capillary electrophoresis, spectrophotometry and liquid
scintillation.
Centrifuges separate liquid samples based on the density of
the components. Samples are rotated at up to 120,000 revolutions
per minute to create forces that exceed 800,000 times the force
of gravity. These forces result in a nondestructive separation
that allows proteins, DNA and other cellular components to retain
their biological activity. Centrifuges are offered in a wide
range of models priced from $2,000 to $150,000.
Flow cytometers rapidly count and categorize multiple types
of cells in suspension. Common research applications include
blood, bone marrow and tumor cells for the study of AIDS,
leukemias and lymphomas. These systems are also useful in
clinical applications and sell in the $150,000 to $400,000 range.
Life sciences laboratory automation consists of integrated
workstations and robotics that automatically perform exacting and
repetitive processes in biotechnology and drug discovery
laboratories. Operations include the dispensing, measuring,
dilution and mixing of samples and analysis of reactions. A key
application is for high throughput screening of candidate
compounds in drug discovery research. These systems become
functional through sophisticated scheduling and data handling
software. Prices range from $50,000 to $500,000.
DNA synthesizers and sequencers allow researchers to
assemble strands of DNA molecules or to determine their component
sequence through electrophoretic separation. These techniques
are central to biotechnology science and the genetic
understanding of life processes. Systems sell in the range of
$12,000 to $45,000.
HPLC uses high pressure (5,000 to 15,000 pounds per square
inch) to force liquid samples through dense columns of separating
agents. This technique is capable of separating very complex
mixtures of both organic and inorganic molecules. The Company
focuses on biologically related applications, including protein
purification, with systems that range from $20,000 to $50,000.
In addition, the Company also provides specialized software that
is capable of recording, manipulating and archiving data from
multiple HPLC systems. This type of software is essential to the
pharmaceutical development process and installations can range
from $20,000 to over $1,000,000.
Capillary electrophoresis uses the electrical charge found
on biological molecules to separate mixtures into their component
parts. Its chief advantages are its ability to process very
small sample volumes, separation speed and high resolution. The
technique is considered a complement to HPLC. The Company has
systems for basic research and pharmaceutical methods development
and quality control that sell in the range of $30,000 to $60,000.
Spectrophotometry is the optical measurement of compounds in
liquid mixtures. Among its applications is the ability to
measure changes during biological reactions. The Company's
spectrophotometers are characterized by adaptive software that
allows users to control the time, temperature and wavelength of
light used for measurement while computing and recording
experimental results. Spectrophotometers sell in the $5,000 to
$30,000 range.
Liquid scintillation techniques allow researchers to insert
radioactive "labeled" atoms into compounds that then are
introduced into biological systems. The compounds can be traced
to a specific tissue or waste product by measuring the amount of
radioactive label that is present with a liquid scintillation
counter. Liquid scintillation systems sell in the $16,000 to
$30,000 range.
Competition
The markets for the Company's products are highly
competitive, with many companies participating in one or more
segments of the market. Competitors in the clinical diagnostics
market include Abbott Laboratories (Abbott Diagnostics Division),
Bayer Diagnostics, Dade Behring, Inc., Becton Dickinson and
Company, Johnson & Johnson (Ortho Diagnostics Division), Roche
(Roche Boehringer Mannheim Diagnostics Division) and Sysmex
Corporation of America (a subsidiary of TOA Medical Electronics
Co. Ltd.). Competitors focused more directly in the life
sciences market include Amersham Pharmacia Biotech plc, Bio-Rad
Laboratories, Inc., Hewlett-Packard Company, Hitachi, Packard
BioScience Company, The Perkin-Elmer Corporation, Sorvall
Products LP. and Waters Corporation. Competitors include
divisions or subsidiaries of corporations with substantial
resources. In addition, the Company competes with several
companies that offer reagents, consumables and service for
laboratory instruments that are manufactured by the Company and
others.
The Company competes primarily on the basis of improved
laboratory productivity, product quality, products combining to
meet multiple instrument needs, technology, product reliability,
service and price. Management believes that its extensive
installed instrument base provides the Company with a competitive
advantage in obtaining both follow-on instrument sales and After
Sales business.
Research and Development
The Company's new products originate from four sources:
internal research and development programs; external
collaborative efforts with individuals in academic institutions
and technology companies; devices or techniques that are
generated in customers' laboratories; and business and technology
acquisitions. Development programs focus on production of new
generations of existing product lines as well as new product
categories not currently offered. Areas of pursuit include
innovative approaches to cell characterization, immunochemistry,
molecular biology, advanced electrophoresis technologies,
automated sample processing and information technologies. The
Company's research and development teams are skilled in optics,
chemistry, electronics, software and mechanical and other
engineering disciplines, in addition to a broad range of
biological and chemical sciences.
Both Beckman and Coulter historically have invested
considerable capital on research and development efforts,
contributing to their leadership in their respective markets and
a consistent flow of new products. The Company's research and
development expenditures for Fiscal 1997, 1996, and 1995 were
$123.6 million, $108.4 million and $91.7 million, respectively.
Sales and Service
The Company has sales in over 120 countries and maintains
its own marketing, service and sales forces throughout the world.
Most of the Company's products are distributed by the Company's
sales groups; however the Company employs independent
distributors to serve those markets that are more efficiently
reached through such channels.
The Company's sales representatives are 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 to its customers, principally those
used for clinical diagnostic applications in hospitals. This
method of instrument placement is a significant competitive
factor for the clinical diagnostics market.
The Company's ability to provide immediate after sales
service and technical support are critical to customer
satisfaction. This includes capabilities to provide immediate
technical support by phone and to deliver parts or have a service
engineer on site within hours. To have such capabilities on a
global basis requires a major investment in personnel,
facilities, and other resources. The Company's large, existing
installed base of instruments makes the required service and
support infrastructure financially viable. The Company considers
its reputation for service responsiveness and competence and its
worldwide sales and service network to be important competitive
assets.
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 approximately 700 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 trademarks are "Beckman" and
"Coulter", with the trade name also being Beckman or Beckman
Instruments, Inc. The Company vigorously protects its primary
trademarks, which are used on the Company's products and are
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.
Year 2000 Compliance
The Company is in the process of modifying, upgrading or
replacing its internal computer software applications and
information systems. The Company is also in the process of
evaluating all currently marketed and leased products and will
upgrade those products that are intended for continued marketing
and leasing beyond the year 1999. The Company is currently
evaluating possible strategies to accommodate its installed
analytical instrument systems owned by its customers.
These tasks have been assigned to a senior executive of the
Company who has established three projects, each led by a project
manager and staffed by software experts, to perform the
evaluation process: 1) product related matters, 2) mainframe
management information systems and software, and 3) all other
systems (e.g. personal computers, office machines, and supplier
systems). Analysis and evaluation activities were begun in 1996
and are in varying stages of completion at this time. The
Company recently expended approximately $250,000 on new software
that provides a suite of tools to assist in the year 2000
remediation process. Remediation activities have begun and are
planned and expected to be completed by the end of 1998. Testing
and validation of the remediated systems and any final revisions
needed will be conducted in 1999.
The Company does not expect that the cost of its year 2000
compliance program will be material to its business, financial
condition or results of operations. The Company believes that it
will be able to achieve compliance by the end of 1999 and does
not currently anticipate any material disruption in its
operations as the result of any failure by the Company to be in
compliance. Although the impact on the Company caused by the
failure of any of the Company's significant suppliers or
customers to achieve year 2000 compliance in a timely or
effective manner is uncertain, the Company's business and results
of operations could be materially adversely affected by such
failure.
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, when
fully implemented, require regulatory review and approval of
quality assurance protocols for the Company's clinical reagent
products. 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 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 Diego, California; Miami and Hialeah,
Florida; Florence, Kentucky; Allendale, New Jersey; Sharon Hill,
Pennsylvania; Chaska, Minnesota; Naguabo, Puerto Rico; Galway,
Ireland, Australia, France, Germany, Hong Kong, South Africa and
United Kingdom facilities have been certified as complying with
the requirements of ISO 9000. Many of the Company's
international sales and service subsidiaries have also been
certified, including those located in Australia, Austria, Canada,
China, 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 U.S. 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. Japan, France, Germany and Italy are among other
countries that are in the process of adopting reimbursement
policies designed to lower the cost of healthcare.
Medicare reimbursement of inpatient capital costs incurred
by a hospital (to the extent of Medicare utilization) is in a 10-
year transition period begun in 1991 from the "capital cost pass-
through" payment methodology to a "prospective capital" payment
methodology based on DRGs. 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. 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. The
Company believes that its operations comply in all material
respects with applicable federal, state, and local environmental
laws and regulations.
To address contingent environmental costs, the Company
establishes reserves when such costs are probable and can be
reasonably estimated. The Company believes that, based on
current information and regulatory requirements (and taking third
party indemnities into consideration), the reserves established
by the Company for environmental expenditures are adequate.
Based on current knowledge, to the extent that additional costs
may be incurred that exceed the reserves, such amounts are not
expected to have a material adverse effect on the Company's
operations or financial condition, although no assurance can be
given in this regard.
In 1983 the Company discovered organic chemicals in the
groundwater near a waste storage pond at its manufacturing
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 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 1987 soil and groundwater contamination was discovered on
property in Irvine, California (the "property") formerly owned by
the Company. In 1988 The Prudential Insurance Company of America
("Prudential"), which purchased the property from the Company,
filed suit against the Company in U.S. District Court in
California for recovery of costs and other alleged damages with
respect to the soil and groundwater contamination. 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.
Soil and groundwater remediation of the property have been
in process since 1988. During 1994 the County agency overseeing
the site soil remediation formally acknowledged completion of
remediation of a major portion of the soil, although there remain
other areas of soil contamination that may require further
remediation. In July 1997 the California Regional Water Quality
Control Board, the agency overseeing the site groundwater
remediation, issued a closure letter for the upper water bearing
unit. The Company and Prudential continued to operate a
groundwater treatment system throughout 1997 and expect to
continue its operation in 1998.
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
As of December 31, 1997, the Company had approximately 7,900
employees located in the United States and approximately 3,200 in
international operations. The Company believes its relations
with its employees are good.
Geographic Area Information
Information with respect to the above-captioned item is
incorporated by reference to Note 14 Business Segment Information
of the Consolidated Financial Statements of the Company's Annual
Report to Stockholders for the year ended December 31, 1997.
Item 2. Properties
The Company's primary instrument assembly and manufacturing
facilities are located in Fullerton, Brea, and Palo Alto,
California; Chaska, Minnesota; and Hialeah, Opa Locka and Miami
Lakes, Florida. The Company recently announced the termination
effective June, 1998 of manufacturing operations at a Coulter
facility located in Luton, England. Component manufacturing
support facilities for parts and electronic subassemblies are
located in Fullerton and Porterville, California. An additional
manufacturing facility is located in Galway, Ireland. Reagents
are manufactured in Carlsbad, San Diego and Palo Alto,
California; Chaska, Minnesota; Naguabo, Puerto Rico; Florence,
Kentucky; Galway, Ireland; Germany; France; Japan; Brazil;
Australia; Argentina and Hong Kong. The Company's computer
software products business is located in Allendale, New Jersey
and its facility for the production of Hemoccult(R) test kits and
related products is located in Sharon Hill, Pennsylvania. A
portion of the Company's laboratory robotics operations (Sagian)
are conducted in leased facilities in Indianapolis, Indiana and
some of its DNA sequencing activities are performed in leased
facilities in Foster City, California.
All of the Company's U.S. manufacturing facilities,
including land and buildings, are owned, with the exception of
Allendale, Foster City, Indianapolis, San Diego, Sharon Hill, Opa
Locka, Miami Lakes, eight of the facilities in Hialeah and
Florence 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 with the exception of Germany, France, Japan,
Brazil and Australia. The component production facilities for
the Company also include plastics molding and machine shop
capabilities in Fullerton. This facility, in conjunction with
electronic subassembly work done in Porterville, supplies the
primary parts and subassemblies to the various instrument
assembly locations in California. The Company's principal
distribution locations are in Brea and Fullerton, California;
Chaska, Minnesota; 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 intends to consummate several sale leaseback
transactions with respect to some of its properties during 1998
and 1999 which the Company expects will generate proceeds to the
Company of approximately $150 million in 1998 and approximately
$40 million in 1999. 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
The Company is currently, and is from time to time, subject
to claims and suits arising in the ordinary course of its
business, including those relating to intellectual property,
contractual obligations, competition and employment matters. In
certain such actions, plaintiffs request punitive or other
damages or nonmonetary relief, which may not be covered by
insurance, and in the case of nonmonetary relief, could, if
granted, materially affect the conduct of the Company's business.
The Company accrues for potential liabilities involved in these
matters as they become known and can be reasonably estimated. In
management's opinion (taking third party indemnities into
consideration), the various asserted claims and litigation in
which the Company is currently involved are not reasonably likely
to have a material adverse effect on the Company's operations or
financial position. However, no assurance can be given as to the
ultimate outcome with respect to such claims and litigation. The
resolution of such claims and litigation could be material to the
Company's operating results for any particular period, depending
upon the level of income for such period.
In January 1996, Coulter, then unrelated to Beckman notified
Hematronix, a competitive reagent manufacturer, that Hematronix
was selling certain reagents and controls that infringed upon
certain of Coulter's patents. In response, Hematronix filed a
complaint in April 1996, in the United States District Court of
the Eastern District of California against Coulter. The
complaint seeks a declaratory judgment to invalidate the patents.
The complaint also includes antitrust and related business tort
claims directed at Coulter's business and leasing activities, and
seeks 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. Discovery has been conducted by
both sides and is continuing. The Company has filed a motion for
summary judgment on the antitrust and other non-patent issues.
The motion has been heard and a decision from the court is
pending. Management of the Company believes that the patents at
issue are valid and have been infringed upon by Hematronix and
that the antitrust claims are without merit. If the matter does
proceed to trial, the trial is scheduled for October, 1998.
Although the plaintiff has claimed substantial damages, based on
the Company's analysis of the present facts and the existence of
certain indemnities by the former stockholders of Coulter, the
Company believes that the ultimate outcome of this litigation is
not reasonably likely to have a material adverse effect on the
Company's operations or financial position.
Through its Hybritech acquisition the Company obtained a
patent, referred to as the Tandem Patent, that 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"),
former 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 sought 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 Beckman'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
appealed. Prior to the Court's consideration of the appeal,
Prudential settled the lawsuit with Forest City and requested
Beckman to pay a portion of the settlement pursuant to the 1990
settlement agreement. Beckman 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.
As previously reported, since 1992 six 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 (relating to a former Company manufacturing site) and a
number of other defendants, including Motorola, Inc., Siemens
Corporation, the cities of Phoenix and Scottsdale, and others.
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. These suits are currently in
the discovery phase, with the first of several anticipated trials
in the actions scheduled for June, 1998. * 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),
Wilkins v. Motorola, Inc., et. al. (filed July 1995), and Dawson
v. Motorola, Inc., et. al. (filed August 1997).
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 Company believes the prosecutor's evidence is weak and
insufficient to support a criminal conviction against certain
identified employees (the Subsidiary is not a defendant). The
Court has appointed economic experts to evaluate and present a
comprehensive economic report on the leasing practices of the
industry. 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, 1998, 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, 64, 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
Health Foundation in
Fullerton, California and of
Harvey Mudd College. Mr.
Rosso has been a director of
the Company since 1988.
John P. Wareham, 56, 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 veterinary
pharmaceuticals and 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, 62, 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, 47, 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 M. Mares, 51, Vice Mr. Mares was named Vice
President, Human Resources President, Human Resources of
the Company in 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, 55, 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, 49, Vice Mr. Tatarian was named Vice
President, Beckman President, Beckman
Distribution Markets Operation Distribution Markets
Operation, of the Company in
October 1997. He had been
Vice President, Field
Operations - Emerging Markets
since 1995 and Vice President
Bioresearch Commercial
Operations International since
1994. Prior thereto, he had
been Vice President, Marketing
Operations for the
Bioanalytical Systems Group
since 1991. Mr. Tatarian
originally joined the Company
in 1973.
Albert R. Ziegler, 59, Vice Mr. Ziegler was named Vice
President, Clinical Chemistry President, Clinical Chemistry
Division Division of the Company in
October 1997. He had been
Vice President, Diagnostics
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, 41, Treasurer Mr. Glyer has been Treasurer
of the Company since 1993. In
1995 he additionally assumed
the position of Director,
Corporate Business Development
and Licensing. He served as
Assistant Treasurer since 1989
when he first joined the
Company.
Arthur A. Torrellas, 67, Vice Mr. Torrellas was Vice
President, Field Operations - President, Field Operations -
North America/Europe North America/Europe of the
Company from 1995 until
December, 1997 when he
retired. He had been Vice
President, Diagnostic
Commercial Operations since
1994 and Vice President,
International Operations for
the Diagnostic Systems Group
since 1985. Mr. Torrellas
first joined the Company in
1977.
<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 section entitled
"QUARTERLY INFORMATION (Unaudited)" of the Company's Annual
Report to stockholders for the year ended December 31, 1997.
During 1997 the Company paid four consecutive quarterly dividends
of $.15 per share of common stock, for a total of $.60 per share
for the year. During 1996 the Company paid four consecutive
quarterly dividends of $.13 per share of common stock, for a
total of $.52 per share for the year. Under the terms of the
Company's principal credit agreement, which expires on October
31, 2002, dividend payments are limited but not prohibited. To
date this limitation has not had an impact on the Company's
dividends and is not expected to have an impact in the
foreseeable future. In addition, as of January 26, 1998, there
were approximately 8,154 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
"SELECTED FINANCIAL INFORMATION" of the Company's Annual Report
to Stockholders for the year ended December 31, 1997.
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, 1997.
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 INFORMATION (Unaudited)" of the Company's Annual
Report to Stockholders for the year ended December 31, 1997.
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 2, 1998 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 2, 1998 entitled "EXECUTIVE
COMPENSATION", excluding those sections entitled "Organization
and 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 2, 1998 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 2, 1998 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 *.
2.1 Stock Purchase Agreement among Coulter
Corporation, The Stockholders of Coulter
Corporation and the Company, dated as of August
29, 1997 (incorporated by reference to Exhibit 2.1
of the Company's Report on Form 8-K dated November
13, 1997, File No. 001-10109). [Note:
Confidential treatment has been requested for
portions of this document.]
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
(incorporated by reference to Exhibit 4.5 of the
Company's Annual Report to the Securities and
Exchange Commission on Form 10-K for the fiscal
year ended December 31, 1995, File No. 001-10109).
4.6 Amendment 1996-1 to the Company's Savings and
Investment Plan, adopted December 5, 1996, 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 (incorporated by reference to Exhibit
4.6 of the Company's Annual Report to the
Securities and Exchange Commission on Form 10-K
for the fiscal year ended December 31, 1996, File
No. 001-10109).
4.7 Amendment 1996-2 to the Company's Savings and
Investment Plan, adopted effective December 3,
1996 (incorporated by reference to Exhibit 4.1 of
the Company's Quarterly Report to the Securities
and Exchange Commission on Form 10-Q for the
quarterly period ended June 30, 1997, File No.
001-10109).
4.8 Amendment 1997-1 to the Company's Savings and
Investment Plan, adopted June 9, 1997
(incorporated by reference to Exhibit 4.2 of the
Company's Quarterly Report to the Securities and
Exchange Commission on Form 10-Q for the quarterly
period ended June 30, 1997, File No. 001-10109).
4.9 Amendment 1997-2 to the Company's Savings and
Investment Plan, adopted June 9, 1997 (incorporated
by reference to Exhibit 4.3 of the Company's Quarterly
Report to the Securities and Exchange Commission on
Form 10-Q for the quarterly period ended June 30,
1997, File No. 001-10109).
4.10 Amendment 1997-3 to the Company's Savings and
Investment Plan, adopted December 3, 1997, 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.
4.11 Amendment 1997-4 to the Company's
Savings and Investment Plan, adopted December 17,
1997, 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.
4.12 Senior Indenture between the Company and
The First National Bank of Chicago as Trustee,
dated as of May 15, 1996, filed in connection with
the Form S-3 Registration Statement filed with the
Securities and Exchange Commission on April 5,
1996, File No. 333-02317 (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, 1996, File No. 001-10109).
4.13 7.05% Debentures Due June 1, 2026, filed in
connection with the Form S-3 Registration
Statement filed with the Securities and Exchange
Commission on April 5, 1996, File No. 333-02317
(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, 1996, File No. 001-10109).
10.1 Credit Agreement dated as of October 31,
1997 among the Company as Borrower, the Initial
Lenders and the Initial Issuing Banks 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, 1997, File No. 001-
10109).
10.2 Guaranty dated as of October 31, 1997 made by each
Guarantor Subsidiary (as defined in the Credit
Agreement, Exhibit 10.1 herein) of the Company, in
favor of the Lender Parties (as defined in the
Credit Agreement) (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, 1997,
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 Benefit Equity Amended and Restated Trust Agreement
between the Company and Mellon Bank, N.A., as Trustee,
for assistance in meeting stock-based obligations of
the Company, dated as of February 10, 1997.
* 10.8 The Company's Executive Incentive Plan,
adopted by the Company in 1996 (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 March
31, 1996, File No. 001-10109).
* 10.9 Amendment No. 1 to the Company's Executive Incentive
Plan, adopted in 1996 (incorporated by reference to
Exhibit 10.9 of the Company's Annual Report to the
Securities and Exchange Commission on Form 10-K for the
fiscal year ended December 31, 1996, File No. 001-10109).
* 10.10 The Company's Annual Incentive Plan for 1997,
adopted by the Company in 1997 (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, 1997, File No. 001-10109.
* 10.11 The Company's Incentive Compensation Plan of
1990, amended and restated April 4, 1997, with
amendments approved by stockholders April 3,
1997 and effective January 1, 1997 (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 March 31, 1997, File No. 001-10109).
* 10.12 Amendment to the Company's Incentive Compensation
Plan of 1990 adopted December 5, 1997 (incorporated
by reference to Exhibit 4.1 to Post-Effective
Amendment No. 1 to the Form S-8 Registration
Statement filed January 13, 1998, Registration
No. 333-24851.
* 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 Amendment to the Company's Incentive Compensation
Plan, adopted December 5, 1997 (incorporated by
reference to Exhibit 4.2 to Post Effective
Amendment No. 1 to the Form S-8 Registration
statement, filed January 13, 1998, Registration
No. 33-31573).
* 10.15 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).
* 10.16 Restricted Stock Agreement and Election
(Cycle Three - Economic Value Added Incentive
Plan), adopted by the Company in 1996
(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 period ended December 31, 1996, File No. 001-
10109).
* 10.17 Form of Restricted Stock Agreement, dated as
of January 3, 1997, between the Company and
certain of its Executive Officers and certain
other key employees (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, 1997,
File No. 001-10109).
* 10.18 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).
* 10.19 Amendment 1995-1 to the Company's Supplemental
Pension Plan, adopted by the Company in 1995,
effective as of October 1, 1993 (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, 1996, File No. 001-10109).
* 10.20 Amendment 1996-1 to the Company's Supplemental
Pension Plan, dated as of December 9, 1996
(incorporated by reference to Exhibit 10.18
of the Company's Annual Report to the Securities
and Exchange Commission on Form 10-K for the
fiscal year ended December 31, 1996, File No. 001-
10109).
* 10.21 Stock Option Plan for Non-Employee Directors
(Amended and Restated effective as of
August 7, 1997), incorporated by reference to
Exhibit 4.1 of the Company's Registration
Statement on Form S-8 filed with the Securities
and Exchange Commission on October 8, 1997,
Registration No. 333-37429.
* 10.22 Form of Change in Control Agreement, dated
as of May 1, 1989, between the Company,
certain 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).
* 10.23 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).
* 10.24 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).
* 10.25 Second Amendment to the December 1, 1993
Agreement Regarding Retirement Benefits of Arthur
A. Torrellas, dated as of December 16, 1996,
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, 1996, File No. 001-
10109).
* 10.26 Third Amendment to the December 1, 1993
Agreement Regarding Retirement Benefits of Arthur
A. Torrellas, dated as of July 18, 1997, between
the Company and Arthur A. Torrellas.
* 10.27 Agreement Regarding Retirement Benefits
of Albert Ziegler, dated June 16, 1995, between
the Company and Albert Ziegler (incorporated by
reference to exhibit 10.22 of the Company's Annual
Report to the Securities and Exchange Commission
on Form 10-K/A for the fiscal year ended December
31, 1995, File No. 001-10109).
* 10.28 Agreement Regarding Retirement Benefits of
Fidencio M. Mares, adopted and dated April 30,
1996, between the Company and Fidencio M. Mares
(incorporated by reference to Exhibit 10.3 of the
Company's Quarterly Report to the Securities and
Exchange Commission on Form 10-Q for the quarterly
period ended June 30, 1996, File No. 001-10109).
10.29 Amendment 1997-1 to the Company's Employees'
Stock Purchase Plan, adopted effective
January 1, 1998 and dated October 20, 1997
(incorporated by reference to Exhibit 10.3 of the
Company's Quarterly Report to the Securities and
Exchange Commission on Form 10-Q for the quarterly
period ended September 30, 1997, File No. 001-
10109).
* 10.30 The Company's Executive Deferred Compensation Plan,
effective January 1, 1998, dated November 5, 1997
(incorporated by reference to Exhibit 10.4 of the
Company's Quarterly Report to the Securities and
Exchange Commission on Form 10-Q for the quarterly
period ended September 30, 1997, File No. 001-10109).
* 10.31 The Company's Executive Restoration Plan, effective
January 1, 1998, dated November 5, 1997 (incorporated
by reference to Exhibit 10.5 of the Company's Quarterly
Report to the Securities and Exchange Commission on
Form 10-Q for the quarterly period ended September 30,
1997, File No. 001-10109).
* 10.32 The Company's Amended and Restated Deferred
Directors' Fee Program, amended as of June 5,
1997 (incorporated by reference to Exhibit
10.6 of the Company's Quarterly Report to the
Securities and Exchange Commission on Form 10-Q
for the quarterly period ended September 30, 1997,
File No. 001-10109).
* 10.33 Amendment 1997-2 to the Company's Supplemental
Pension Plan, adopted as of October 31,
1997 (incorporated by reference to Exhibit 10.7
of the Company's Quarterly Report to the Securities
and Exchange Commission on Form 10-Q for the
quarterly period ended September 30, 1997, File
No. 001-10109).
* 10.34 Form of Restricted Stock Award Agreement
between the Company and its non-employee
Directors, effective as of October 3, 1997
(incorporated by reference to Exhibit 4.1 of the
Company's Registration Statement on Form S-8 filed
with the Securities and Exchange Commission on
October 8, 1997, Registration No. 333-37429).
* 10.35 Form of Stock Option Grant for non-employee
Directors (incorporated by reference to
Exhibit 4.3 of the Company's Registration
Statement on Form S-8 filed with the Securities
and Exchange Commission on October 8, 1997,
Registration No. 333-37429).
10.36 The Company's Employees' Stock Purchase Plan,
amended and restated as of November 1, 1996,
filed in connection with the Form S-8 Registration
Statement filed with the Securities and Exchange
Commission on December 19, 1995, File No. 33-65155
(incorporated by reference to Exhibit 10.29 of the
Company's Annual Report to the Securities and
Exchange Commission on Form 10-K for the fiscal
year ended December 31, 1997, File No. 001-10109).
* 10.37 The Company's Option Gain Deferral Program,
dated January 14, 1998 (incorporated by
reference to Exhibit 4.2 of Post-Effective
Amendment No. 1 to the Form S-8 Registration
Statement filed with the Securities and Exchange
Commission on January 13, 1998, Registration No.
333-24851).
* 10.38 Form of Coulter's Special Incentive Plan and
Sharing Bonus Plan, assumed by the Company
October 31, 1997.
10.39 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).
10.40 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).
10.41 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).
11. Statement regarding computation of per share
earnings: This information is incorporated
by reference to Note 1 Summary of Significant
Accounting Policies and Note 13 Earnings Per
Share of the Consolidated Financial Statements
of the Company's Annual Report to Stockholders
for the year ended December 31, 1997.
13. WORDS ON NUMBERS Section of the Company's Annual
Report to Stockholders for the year ended December
31, 1997.
21. Subsidiaries.
23. Consent of KPMG Peat Marwick LLP, February 9, 1998.
27. Financial Data Schedule.
(b) Reports on Form 8-K During Fourth Quarter ended
December 31, 1997.
The following reports on Form 8-K were filed during the
quarter ended December 31, 1997:
1. Item 5. Other Events. Beckman Instruments, Inc.
Announces Plans for Debt Offering, September 23, 1997.
2. Item 5. Other Events. Summary of the acquisition
of Coulter Corporation by Beckman Instruments, Inc.
and the related financing transactions, October 15,
1997. Includes financial statements for Coulter
Corporation for its last three fiscal years and pro
forma financial statements for the most recent fiscal
year.
3. Item 2. Acquisition of Assets. Beckman
Consummates its Acquisition of Coulter
Corporation, November 13, 1997. Includes pro
forma financial statements for the year ended
December 31, 1996 and for the six month period
ended June 30, 1997.
<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 23, 1998
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, 1997.
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, 1997 is
set forth in Note 15 Supplementary Information of the "NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS" of the Company's Annual Report
to Stockholders for the year ended December 31, 1997. 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.
<PAGE>
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 5, 1998 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 5, 1998
President,
Chief Operating Officer
JOHN P. WAREHAM and Director
John P. Wareham February 4, 1998
Vice President, Finance
and Chief Financial Officer
D. K. WILSON (Principal Financial Officer)
Dennis K. Wilson February 4, 1998
Vice President and
Controller (Principal
JAMES T. GLOVER Accounting Officer)
James T. Glover February 5, 1998
HUGH K. COBLE Director February 4, 1998
Hugh K. Coble
CAROLYNE K. DAVIS Director February 4, 1998
Carolyne K. Davis, Ph.D.
<PAGE>
Signature Title Date
--------- ----- ----
PETER B. DERVAN Director February 4, 1998
Peter B. Dervan, Ph.D.
DENNIS C. FILL Director February 4, 1998
Dennis C. Fill
CHARLES A. HAGGERTY Director February 4, 1998
Charles A. Haggerty
GAVIN HERBERT Director February 4, 1998
Gavin S. Herbert
WILLIAM N. KELLEY Director February 4, 1998
William N. Kelley, M.D.
FRANCIS P. LUCIER Director February 4, 1998
Francis P. Lucier
C. RODERICK O'NEIL Director February 4, 1998
C. Roderick O'Neil
BETTY WOODS Director February 4, 1998
Betty Woods
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Exhibit
- ------- -------
4.10 Amendment 1997-3 to the Company's Savings and Investment
Plan, adopted December 3, 1997, 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.
4.11 Amendment 1997-4 to the Company's Savings and Investment
Plan, adopted December 17, 1997, 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 Benefit Equity Amended and Restated Trust Agreement
between the Company and Mellon Bank, N.A., as Trustee,
for assistance in meeting stock-based obligations of the
Company, dated as of February 10, 1997.
10.25 Third Amendment to the December 1, 1993 Agreement
Regarding Retirement Benefits of Arthur A. Torrellas,
dated as of July 18, 1997, between the Company and
Arthur A. Torrellas.
10.38 Form of Coulter's Special Incentive Plan and Sharing
Bonus Plan, assumed by the Company October 31, 1997.
13. WORDS ON NUMBERS Section of the Company's Annual Report
to Stockholders forthe year ended December 31, 1997.
21. Subsidiaries.
23. Consent of KPMG Peat Marwick LLP, February 9, 1998.
27. Financial Data Schedule.
EXHIBIT 4.10
AMENDMENT 1997-3
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 is establishing the Beckman
Instruments, Inc. Executive Restoration Plan (the "Restoration
Plan") effective January 1, 1998, and now wishes to clarify
certain provisions with respect to employees who are eligible to
participate under the Plan and the Restoration Plan; and
WHEREAS, the Company has the right to amend the Plan;
NOW, THEREFORE, the Plan is hereby amended, effective
for contributions made and benefits earned in the Plan Year
commencing January 1, 1998, as set forth below:
1. Section 1.2 of the Plan is amended by inserting the
following definition of "Annual Bonus" after the definition of
"Anniversary Date" therein:
"'Annual Bonus' or 'Annual Bonuses' shall mean the portion
of Plan Compensation paid by Company as variable compensation on an
annual basis under a formal program maintained by the Company. Annual
Bonus includes payments under the Company's executive and management
incentive and performance sharing programs."
2. The first sentence of Section 3.1(a) of the Plan is
amended to read as follows:
"Subject to the limitations in this Section and Section 4.1,
each Participant may elect to make Before-Tax Savings Contributions, in
accordance with procedures prescribed by the Committee, in whole
percentages from 1% to 15% of the portion of said Participant's Plan
Compensation other than Annual Bonus for each pay period and/or from 1%
to 80% of said Participant's Annual Bonus."
3. Section 3.1(a) of the Plan is further amended by
adding the following paragraph at the end thereof:
"Notwithstanding the foregoing, a Participant is not
eligible to elect to make Before-Tax Savings Contributions of a
percentage greater than 15% of the portion of his or her Plan
Compensation consisting of an Annual Bonus in any year that he or she
is also eligible to be a participant in the Beckman Instruments, Inc.
Executive Restoration Plan."
4. Section 3.2(a) of the Plan is amended to read as
follows:
"Subject to the limitations of Sections 3.4 and 4.1, each
Participant may elect to make After-Tax Savings Contributions on his own
behalf in accordance with procedures prescribed by the Committee in
whole percentages from 1% to 15% of the portion of said Participant's
Plan Compensation other than Annual Bonus for each payroll period and/or
from 1% to 80% of said Participant's Annual Bonus. Notwithstanding the
foregoing, the sum of the After-Tax Savings Contributions and the
Before-Tax Savings Contributions by a Participant in a Plan Year shall
not exceed 15% of said Participant's Plan Compensation other than Annual
Bonus and 80% of said Participant's Annual Bonus.
Notwithstanding the foregoing paragraph, a Participant is
not eligible to elect to make After-Tax Savings Contributions of a
percentage greater than 15% of the portion of his or her Plan
Compensation consisting of Annual Bonus in any year that he or she is
also eligible to be a participant in the Beckman Instruments, Inc.
Executive Restoration Plan."
5. Section 3.5 of the Plan is amended by adding the
following two paragraphs at the end thereof:
"A Participant who is also a participant in the Beckman
Instruments, Inc. Executive Restoration Plan or the Beckman Instruments,
Inc. Executive Deferred Compensation Plan for a Plan Year shall be
permitted to change his or her election of Before-Tax Savings
Contributions effective as of the first day of a Plan Year, and
shall be entitled to change his or her election of After-Tax Savings
Contributions during a Plan Year, in each case according to the manner
prescribed by the Committee. However, such a Participant shall only be
permitted to change his or her election of Before-Tax Savings
Contributions during a Plan Year by completely discontinuing all Before-
Tax Savings Contributions and After-Tax Savings Contributions under this
Plan and all contributions under the Beckman Instruments, Inc. Executive
Restoration Plan and the Beckman Instruments, Inc. Executive Deferred
Compensation Plan. Such a Participant may not resume contributions to
this Plan or such other plans for the remainder of the Plan Year and the
following Plan Year. In addition, a Participant who is also a
participant in the Beckman Instruments, Inc. Executive Deferred
Compensation Plan who discontinues his or her salary and/or bonus
deferrals during the year under the Executive Deferred Compensation Plan
must at the same time discontinue all Before-Tax Savings Contributions
and After-Tax Savings Contributions under this Plan and the Beckman
Instruments, Inc. Executive Restoration Plan. Such a Participant may
not resume contributions to this Plan or such other plans for the
remainder of the Plan Year and the following Plan Year.
If a Participant who is a participant under the Beckman
Instruments, Inc. Executive Restoration Plan does not, during the period
prior to a Plan Year prescribed by the procedures established by the
Committee, submit a new election concerning his or her Before-Tax
Savings Contributions for the following Plan Year, he or she shall be
deemed to have initially elected no Before-Tax Savings Contribution for
such Plan Year, but shall be entitled to change his or her election
concerning Before-Tax Savings Contributions under the generally-
applicable procedures of this Plan."
IN WITNESS WHEREOF, this Amendment 1997-3 is hereby adopted this 3
day of December, 1997.
BECKMAN INSTRUMENTS, INC.
By: FIDENCIO M. MARES
Name: Fidencio M. Mares
Title: Vice President, Human Resources
EXHIBIT 4.11
AMENDMENT 1997-4
BECKMAN INSTRUMENTS, INC.
SAVINGS AND INVESTMENT PLAN
WHEREAS, Beckman Instruments, Inc. ("Beckman")
maintains the Beckman Instruments, Inc. Savings and Investment
Plan (the "Plan"); and
WHEREAS, as of October 31, 1997 Beckman acquired
Coulter Corporation, a Delaware corporation ("Coulter") and now
wishes to amend the Plan to clarify certain provisions with
respect to Coulter employees; and
WHEREAS, it is expected that Beckman will seek
shareholder approval to change its name to include reference to
Coulter; and
WHEREAS, Beckman has the right to amend the Plan;
NOW, THEREFORE, the Plan is hereby amended as
follows, effective as of October 31, 1997:
1. Contingent upon approval of the change of the
name of Beckman Instruments, Inc., any reference to Beckman
Instruments, Inc. herein shall be changed to a reference to the
name approved by the shareholders of Beckman Instruments, Inc.
at their 1998 annual meeting.
2. The first sentence of the definition of "Covered
Employee" under Section 1.2 of the Plan is amended to read as
follows:
"'Covered Employee' shall mean any Employee of the Company who is
'Beckman Employee,' as described in the definition of `Employee' in this
Section 1.2, and who is paid through a payroll system of the Company or
a Participating Affiliate with its principal place of business in the
United States or Puerto Rico; except that there shall be excluded all
leased employees described in Section 414(n) of the Code, those
Employees covered by a collective bargaining agreement between the
Company and any collective bargaining representative if retirement
benefits were the subject of good faith bargaining between such
representative and the Company, unless the Employee is a member of a
group of employees to whom this Plan has been extended by a collective
bargaining agreement between the Company and its collective bargaining
representative, and those Employees who are non-resident aliens with no
United States source income. 'Coulter Employees,' as described in the
definition of 'Employee' in this Section 1.2 shall not be Covered
Employees."
3. The definition of "Employee" under Section 1.2 is amended to read
as follows:
"(a) 'Employee' shall mean any person employed by the Company, or a
Related Company, including any leased employee described in Section
414(n) of the Code. For purposes of this Plan, Employees shall be
classified by the Company as 'Beckman Employees' and 'Coulter
Employees'. A 'Beckman Employee' shall be any Employee who, as of
October 31, 1997, is classified by the Company as an employee rendering
services to Beckman Instruments, Inc. A 'Coulter Employee' shall be any
Employee who, as of October 31, 1997 is classified by the Company as an
employee rendering services to Coulter Corporation.
With respect to persons not employed by the Company as of October 31,
1997, if the person's first Hour of Service after October 31, 1997 is
performed at a facility, location or operation determined by the Company
to be primarily related to the portion of the Company's business other
than that acquired through the acquisition of Coulter Corporation, that
person shall be a 'Beckman Employee' under this Plan. If the person's
first Hour of Service after October 31, 1997 is performed at a facility,
location or operation determined by the Company to be primarily related
to the portion of the Company's business acquired through the
acquisition of Coulter Corporation, that person shall be a 'Coulter
Employee' under this Plan. The initial classification of an Employee as
a 'Beckman Employee' or a 'Coulter Employee' shall continue
notwithstanding any change to the Employee's facility, location or
operation."
IN WITNESS WHEREOF, this Amendment 1997-4 is hereby adopted this
17th day of December, 1997.
BECKMAN INSTRUMENTS, INC.
By: FIDENCIO M. MARES
Name: Fidencio M. Mares
Title: Vice President, Human Resources
EXHIBIT 10.7
BECKMAN INSTRUMENTS, INC.
BENEFIT EQUITY
AMENDED AND RESTATED TRUST AGREEMENT
BETWEEN
BECKMAN INSTRUMENTS, INC.
AND
MELLON BANK, N.A.
AS TRUSTEE
<PAGE>
BECKMAN INSTRUMENTS, INC.
BENEFIT EQUITY AMENDED AND RESTATED TRUST AGREEMENT
Dated as of February 10, 1997
between
Beckman Instruments, Inc.
and
Mellon Bank, N.A.
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 7
5.1 Form of Participant Schedule 7
5.2 Maintaining the Participant Schedule 7
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 8
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 10
8.5 Trustee as Holder of Legal Title to Trust Assets 10
8.6 Federal Income Tax Consequences of the Trust 10
i
<PAGE>
SECTION 9 Expenses, Compensation and Indemnification 11
9.1 Expenses 11
9.2 Compensation 11
9.3 Charge on Trust Fund 11
9.4 Indemnification 11
9.5 Force Majeure 12
9.6 Payment from Trust Fund 12
SECTION 10 Administration and Records 12
10.1 Records 12
10.2 Settlement of Accounts 12
10.3 Audit 12
10.4 Judicial Settlement 13
10.5 Delivery of Records to Successor 13
10.6 Tax Filings 13
SECTION 11 Removal or Resignation of the Trustee and
Designation of Successor Trustee 13
11.1 Removal 13
11.2 Resignation 13
11.3 Successor Trustee 13
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 14
SECTION 13 Termination 14
13.1 Termination upon Specific Events 14
13.2 Termination in Other Events 14
13.3 Limitation on Trustee Liability upon Total
Distribution; Continuation of Trustee Powers 15
13.4 Nonapplicability of ERISA 15
SECTION 14 Amendment 15
14.1 Amendments in General 15
14.2 Nonapplicability of ERISA; Preventing Current Taxation 15
SECTION 15 Nonalienation 15
15.1 Prohibition Against Certain Transfers, Pledges, Etc. 15
ii
<PAGE>
SECTION 16 Communications 16
16.1 To the Company, Board of Directors and Committee 16
16.2 To the Trustee 16
16.3 To a Participant 17
16.4 Binding upon Receipt 17
16.5 Authority to Act 17
16.6 Authenticity of Instruments l7
SECTION 17 Claims of Companies' Bankruptcy Creditors 17
17.1 Bankruptcy Creditors 17
17.2 Resumption of Benefits; Restoration of Accounts 18
SECTION 18 Consolidation, Merger or Sale of the Company 18
18.1 Consolidation, Merger or Sale of the Company 18
SECTION 19 Miscellaneous Provisions 18
19.1 Binding Effect 18
19.2 Inquiry as to Authority 18
19.3 Responsibility for Company Action 18
19.4 Successor to Trust 18
19.5 Intercompany Agreements 19
19.6 Titles Not to Control 19
19.7 Laws of the Commonwealth of Pennsylvania 19
19.8 Fractional Shares 19
Schedule A
LIST OF PLANS 20
Schedule B
MINIMUM DISTRIBUTION SCHEDULE(S) 21
Schedule C
TRUSTEE'S COMPENSATION SCHEDULE 22
iii
<PAGE>
THE BECKMAN INSTRUMENTS, INC. BENEFIT EQUITY AMENDED AND RESTATED
TRUST AGREEMENT ("Trust Agreement") made and entered into as of
February 10, 1997 by and between Beckman Instruments, Inc., a
corporation organized under the laws of the State of Delaware
(the "Company"), and Mellon Bank, N.A., a national banking
association, organized under the law of the United States of
America (the "Trustee").
WITNESSETH:
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 established The Beckman Instruments,
Inc. Benefit Equity Trust Agreement as of January 31, 1993 (the
"Original 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;
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;
WHEREAS the Company desires to appoint the Trustee to serve
as Trustee of the Original Trust and the Trustee accepts such
appointment; and
WHEREAS the Company and the Trustee desire to restate the
terms of the Original Trust as provided herein and to have the
terms of this Trust Agreement supersede such 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 of 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 amended and restated
pursuant to this Trust Agreement.
1.21 "Trust Fund" shall mean all Company Stock, money and
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 amends and restates 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
limitation, 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, to 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
reference 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 Mellon Bank, N.A., 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 of its nominee or in the name of any affiliate
or of its nominee 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 indicating
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 To take all action necessary to settle authorized
transactions, including exercising the power to borrow or raise moneys
from any lender, which may be the Trustee in its corporate capacity or
any affiliate or agent of the Trustee, upon such terms and conditions as
are necessary to settle security purchases and/or foreign exchange or
contracts for foreign exchange and to secure the repayments thereof by
pledging all or any part of the Trust Fund.
4.2.17 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 from 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, at no expense to itself,
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 form 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 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 extent 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 Trust 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 maybe 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, gains 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. The Company acknowledges that, as
part of the Trustee's compensation, the Trustee will earn
interest on balances, including disbursement balances and
balances arising from purchase and sale transactions. To the
extent the Trustee advances funds to the Trust Fund for
disbursements or to effect the settlement of purchase
transactions, the Trustee shall be entitled to collect from the
Trust Fund an amount equal to what would have been earned on the
sums advanced (an amount approximating the "federal funds"
interest rate).
9.3 Charge on Trust Fund. All expenses 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 Force Majeure. The Trustee shall not be responsible or
liable for any losses to the Trust Fund resulting from
nationalization, expropriation, devaluation, seizure, or similar
action by any governmental authority, de facto or de jure; or
enactment, promulgation, imposition or enforcement by any such
governmental authority of currency restrictions, exchange
controls, levies or other charges affecting the property; or acts
of war, terrorism, insurrection or revolution; or acts of God; or
any other similar event beyond the control of the Trustee or its
agents. This Section shall survive the termination of this Trust
Agreement.
9.6 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, book 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 Sections 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 extent 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 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 judgment entered in such an action or
proceeding shall, to the maximum extent 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 an
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 provide 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 Sections 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 Nonalienation.
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 Participant.
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
Attention: Dennis K. Wilson
with a copy to:
Beckman Instruments, Inc.
2500 Harbor Boulevard
Fullerton, CA 92634
Attention: 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:
Mellon Bank, N.A.
Institutional Trust Services Group
Suite 955
One Mellon Bank Center
Pittsburgh, PA 15258
Attention: O. Bruce Anderson
with a copy to:
Mellon Bank, N.A.
One Embarcadero Center
Suite 2340
San Francisco, CA 94111-9123
Attention: Lucinda M.S. Smith
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
obligation 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 Laws of the Commonwealth of Pennsylvania to Govern.
This Trust Agreement and the Trust established hereunder shall be
governed by and construed, enforced, and administered in
accordance with the laws of the Commonwealth of Pennsylvania,
without reference to the principles of conflicts of law thereof.
19.8 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.
By: D. K. WILSON
Attest: WILLIAM W. DAVIS
MELLON BANK, N.A., as Trustee
By: H. JOHN GEIS
Vice President
Attest: F---- CELL
1/24/97:ljd:backfax.doc
<PAGE>
SCHEDULE A
BECKMAN INSTRUMENTS, INC.
BENEFIT EQUITY FUND
MELLON BANK, N.A. TRUSTEE
LIST OF PLANS
Beckman Instruments, Inc. Employees' 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
MELLON BANK, N.A. TRUSTEE
MINIMUM DISTRIBUTION SCHEDULE
AS OF FEBRUARY 1, 1993
REVISED January 27, 1997
SHARES REMAINING SHARES SHARES SHARES REMAINING
YEAR BEGINNING OF YEAR DEPOSITED DISTRIBUTED END OF YEAR
- -----------------------------------------------------------------------------
1993 0 1,400,000 (411,893) 988,107
1994 988,107 614,480 (568,739) 1,033,848
1995 1,033,848 400,000 (649,898) 783,950
1996 783,950 812,372 (200,000) 1,396,322
1997 1,396,322 0 (200,000) 1,196,322
1998 1,196,322 0 (200,000) 996,322
1999 996,322 0 (200,000) 796,322
2000 796,322 0 (200,000) 596,322
2001 596,322 0 (200,000) 396,322
2002 396,322 0 (200,000) 196,322
2003 196,322 0 (196,322) 0
<PAGE>
SCHEDULE C
TRUSTEE'S COMPENSATION SCHEDULE
Trustee Compensation to be in accordance with separate
Schedule of Fees mutually agreed upon from time to time between
Beckman Instruments, Inc. and Mellon Bank, N. A., Trustee.
<PAGE>
BECKMAN INSTRUMENTS, INC.
BENEFIT EQUITY TRUST
SCHEDULE OF FEES
EFFECTIVE: FEBRUARY 1, 1997
When Mellon Bank acts as Trustee for the Beckman Instruments,
Inc. Benefit Equity Trust, the annual compensation shall be a
flat fee of $12,000. This fee shall be charged to the account
monthly on or about the first of each month.
Included in the Trust/Custody flat fee are the following components:
* Account Fee - accounts in excess of one(1) charged at $3,500/annum
* Asset Fee
* Issue Fee
* Security Transaction Fee
* Stock Share Issuances to Participants
Ancillary services available at additional charge:
* Tax Return Preparation Expenses - charges based on time and materials
* Disbursement Payments
- Non-periodic Disbursements $8.00/payee plus postage
(Federal tax withholding included)
- Expense Disbursement $8.00/payee plus postage
(other than to Mellon)
- Wire transfers $15.00/wire transfer
(domestic)
$25.00/wire transfer
(international)
Note: Disbursement expenses invoiced quarterly; postage charged
at prevailing rate.
Mellon Trust will pass through to the Beckman Instruments any out-
of-pocket expenses including, but no limited to, postage,
courier, registration fees, stamp duties, telex, custom reporting
or custom programming, international/external tax, legal or
consulting costs, proxy voting expenses, etc.
<PAGE>
Beckman Instruments, Inc. Benefit Equity Trust
Effective: February 1, 1997
Page 2
Mellon Trust reserves the right to amend its fees if the service
requirements change in any way that materially affect our
responsibilities or costs. Support of global securities
processing, derivative investment strategies or special
processing requirements (e.g. external cash sweep, third party
securities lending, etc.) may result in additional fees.
Mellon Trust guarantees its fee schedule for two (2) years from
the effective date specified above, i.e. from February 1, 1997
through January 31, 1999, unless modified by Beckman Instruments
and/or Mellon Bank with concurrence of both parties. Subsequent
to January 31, 1999, this Schedule shall remain in effect unless
either party gives 90 days advance written notice to renegotiate.
Approved:
BECKMAN INSTRUMENTS, INC.
By RICHARD COONAN Date 1/23/97
MELLON BANK
By L---SMITH Date 1/21/97
EXHIBIT 10.25
THIRD AMENDMENT TO THE DECEMBER 1, 1993 AGREEMENT
REGARDING RETIREMENT BENEFITS OF ARTHUR A. TORRELLAS
WHEREAS, Arthur A. Torrellas (Executive") has been employed
by Beckman Instruments, Inc. ("Company") for approximately 20
years; and
WHEREAS, the Executive and the Company entered into the
Agreement Regarding Retirement Benefits of Arthur A. Torrellas as
of December 1, 1993 and executed on December 20, 1993 ("the
Agreement") and subsequently entered into a First Amendment to
the Agreement as of May 30, 1995 and a Second Amendment to the
Agreement as of December 16, 1996, respectively, so that the
Executive will continue to remain employed by and provide unique
worldwide field operations experience to the Company.
WHEREAS, the Executive and the Company wish to amend the
Agreement, the First Amendment, and Second Amendment so that the
Executive will continue to remain employed by and provide unique
worldwide field operations experience to the Company beyond July
31, 1997.
NOW, THEREFORE, this Third Amendment to the Agreement
between the Executive and the Company is hereby adopted as of
July 18, 1997 and amends the Agreement as follows:
1. All reference to October 31, 1995 in the Agreement is
changed to December 31, 1997 except for paragraph 2 entitled
Voluntary Termination Before or After October 31, 1995 which is
deleted and the following inserted.
2. Voluntary Termination. The increase referred
to in paragraph 1 does not apply if Executive, before July 31,
1997 or after December 31, 1997, voluntarily terminates
employment (retires). The benefit payable under such
circumstances would be the benefit normally payable from
the Pension Plan and the Supplemental Plan. If the Executive
voluntarily terminates employment (retires) after July 31,
1997, but on or before December 31, 1997, the Executive would
receive the increase referred to in paragraph 1.
2. All other terms and provisions of the Agreement shall
remain the same.
This Amendment to the Agreement is entered into as of July 18, 1997.
EXECUTIVE
By: ARTHUR A. TORRELLAS
Arthur A. Torrellas
COMPANY
BECKMAN INSTRUMENTS, INC.
By: JOHN P. WAREHAM
John P. Wareham
Its: President and Chief Operating Officer
EXHIBIT 10.38
COMPANY PRIVATE
COULTER CORPORATION
SPECIAL INCENTIVE PLAN
SHARING BONUS PLAN
ARTICLE I. PURPOSE
1.1 Purpose.
a. Special Incentive Plan. The purpose of this Special
Incentive Plan (the "S.I. Plan") is to inspire and reinforce
outstanding performance in selected key employees who have direct
impact on and whose efforts contribute substantially to the
creation of Company value. The S.I. Plan is designed to
strengthen the alignment of managements objectives with those of
the owners of the Company. It is intended to promote and
motivate the best efforts of Participants to focus on Company
objectives. (Subsidiaries and affiliates of Coulter Corporation
are intended to be included as part of the Company in determining
the book value of the Company's assets for purposes of Section
2.6 for determining the valuation of the Company for the first
paragraph of Section 5.2, and for purposes of Sections 2.4 and
2.8 if, and to the extent that they are part of the
transaction(s) with the Alliance Partner(s), as determined by the
OTP.) The S.I. Plan (and the SB Plan) recognizes that Alliance
Partners could become greater than 50% owners, resulting in a
Change of Control.
Participation is limited to Groups A, B, and C. Participation
and reward levels are established based on level of
responsibility, competitive practice, past contributions, tenure
and position. It is of significant importance to the owner's of
the Company to maximize the performance of the management team
and the value of the Company.
The goals of the S.I. Plan is to -
(i) strengthen and foster a team orientation among the top management of
the Company, and
(ii) retain the services and commitment of a superior, high quality
management staff.
b. Sharing Bonus Plan. The Sharing Bonus Plan (the "S.B.
Plan") recognizes that management and employees throughout the
Company (but who are not members of Group A, B, or C) have made
contributions to the long term growth of the Company and its
present dominant position in the marketplace. It also recognizes
the ongoing performance mandate in an increasingly competitive
environment, and that it is in the owners' best interest to
reward management and all Employees for future and for past
performance resulting in the building of value. Participation
will be by Groups D and E.
The goals of the S.B. Plan are to -
(i) retain the continuation of services and commitment of a superior,
high quality management staff, and
(ii) to provide special bonuses to middle management and nonmanagement
employees.
1.2 Establishment. The S.I. Plan and the S.B. Plan
(collectively, the "Plans") are effective as of April 1, 1997.
1.3 Plan Period. The S.I. and the S.B. Plans are expected to
remain in effect for FY 97/98 and will continue until formally
terminated by the Advisory Board.
ARTICLE II. DEFINITIONS
2.1 Award means an S.I. Plan or S.B. Plan payment.
2.2 OTP means the Office of The President. Following a Change
In Control, the functions of the OTP under the S.I. Plan and the
S.B. Plan shall be performed by a committee named by the Board of
Directors of the acquiring company.
2.3 Disability means that the Participant suffers from a
physical or a mental condition which, based on appropriate
medical reports and examinations, is expected to result in death
or be of long and of indefinite duration and which renders the
Participant incapable of performing the customary duties of the
Company.
2.4 Participant means an Employee of the Company who has been
designated as a Participant in the S.I. Plan or who meets the
definition of Participant in the S.B. Plan.
2.5 Retirement means termination at or after age 65, or at age
55 with 5 or more years of service with the Company for all
United States - based Employees. Similar rules will apply for
non-United States-based Employees, but modified as appropriate by
OTP for local country practices (taking into account the
definition of retirement in local country retirement plans).
2.6 Change In Control shall occur when the "Coulter Family",
defined to be Wallace H. Coulter, the children of Joseph R.
Coulter, Jr., the Coulter Family Limited Partnership, the Wallace
H. Coulter trust, and the Joseph R. Coulter, Jr. trust in
combination, cease to own directly or indirectly more than fifty
percent (50%) of the combined voting power of the then
outstanding voting securities of the Company, or there occurs any
sale, exchange or other disposition of all or more than fifty
percent (50%) of the book value of the Company's assets in a
single transaction, or series of related transactions other than
to an entity more than fifty percent (50%) of the voting power of
the then outstanding securities (or other interests) which are
owned, directly or indirectly, by the Coulter Family.
2.7 Group A, B, C, D, E, respectively, is the group of Employees
(including retired and disabled former Employees, as defined by
OTP) defined as follows:
Group A: Top tier management with key responsibility in leading and
directing the Company and in representing the owners to a potential
Alliance Partner(s).
Group B: Member's of the Coulter Alliance Team (as the Alliance Team is
determined by the OTP) and others who are key members of management and
are critical to the process of representing the owners to a potential
Alliance Partner(s).
Group C: Executives and senior managers defined as all executives in
grades 21 - 25, key country management and other key contributors and
management.
Group D: Senior managers generally defined as grade 19 and 20 or senior
managers in equivalent grades or positions in local country locations.
Group E: All Employees worldwide; provided that an individual may not
participate in Group E and in Group A-D.
2.8 Employee will mean any full-time employee of the Company.
2.9 Cause shall mean (i) a material breach by the Employee of
the Employee's obligations of his or her regularly assigned
position (other than as a result of incapacity due to physical or
mental illness) which is demonstrably willful and deliberate on
the Employee's part, which is committed in bad faith or without
reasonable belief that such breach is in the best interests of
the Company and which is not remedied in a reasonable period of
time after receipt of written notice from the Company specifying
such breach, (ii) a material breach by the Employee in the
confidentiality requirements of the S.I. Plan contained in
Section 7.1, (iii) the conviction of the Employee of a felony
involving moral turpitude, or (iv) acts of fraud which cause
material harm to the Company, embezzlement, or any other material
and deliberate act of dishonesty which causes material harm to
the Company.
ARTICLE III. ADMINISTRATION
3.1 Administration. The S.I. and S.B. Plans will be
administered by the OTP, with consultation with the Compensation
and Personnel Committee of the Advisory Board. Following a
Change In Control, the S.I. and S.B. Plans will be administered
by a committee appointed by the Board of Directors of the
acquiring company. The OTP has exclusive power to:
a. Establish the measures on which Awards are based
including minimum objectives below which no Awards will be paid.
b. Select the Employees (either individually or by
category) to participate in the S.I. and S.B. Plans and modify
individual participation as circumstances warrant. Generally it
is intended that Employees in Groups A through C will participate
in the S.I. Plan and Employees in Groups D and E will participate
in the S.B. Plan.
c. Determine the amount (or method of determining the
amount) of Award to be made to each Employee selected.
d. Determine the time or times under the S.I. and S.B.
Plans when Awards will be made; provided, however that following
a Change in Control, Awards will be distributed as soon as
administratively practicable, which normally shall be within 6
months of the Change in Control, except as otherwise provided
herein.
e. Determine the conditions for receipt of the Awards.
f. Change the performance measures previously established
for the S.I. Plan if the OTP determines that significant
unforeseen changes in the business operations, structure, or
other conditions make the measures no longer suitable.
3.2 Rules and Plan Interpretation. The OTP shall have the
authority, subject to the provisions of the S.I. or S.B. Plan, as
applicable, to establish or revise such rules and regulations and
to make all such determinations relating to the applicable plan
as it may deem necessary or advisable for the administration of
that plan. The Compensation Committee of the Board shall have
the right to review and make recommendations as to any such Award
or determination by the OTP and to advise on changes in the
Plans.
Any disagreement between the OTP and the Compensation Committee
shall be resolved by a committee consisting of all the members of
the OTP and the Compensation Committee (the "Review Committee").
The Review Committee will meet within 30 days of the request by
any of the members of the OTP or the Compensation Committee, and
at such other times as it determines, to resolve disputes, if
any, between the OTP and the Compensation Committee regarding the
S.I. and S.B. Plans, and to hear appeals, if any, by individual
Participants in the S.I. Plan regarding the interpretation and
application of the S.I. Plan, and to consider such other matters
as it deems appropriate. Any such decisions by the Review
Committee shall be made in its sole discretion.
Following a Change In Control, the committee which assumes the
functions of the OTP shall also perform the functions of the
Compensation Committee, and therefor a Review Committee shall not
be necessary.
The Review Committee shall establish such additional committee or
committees as it determines to hear appeals, if any, by
individual Participants in the S.B. Plan regarding the
interpretation and application of the S.B. Plan.
Notwithstanding any other provisions in the S.I. Plan to the
contrary, following a Change In Control, neither the OTP, the
Compensation Committee, the Review Committee, Coulter nor an
Alliance Partner/buyer shall have the power to amend, modify, or
interpret the S.I. Plan, or exercise any other powers under the
S.I. Plan in a way which would materially adversely affect the
Participants in the S.I. Plan. However, this shall not preclude
the OTP, the Compensation Committee, the Review Committee or
Coulter from exercising the powers in Section 6.3, or applying
the provisions of the S.I. Plan to Groups A, B, or C or to
Employees or Participants within any such Group using rules and
procedures which were established prior to the date of the Change
In Control; nor shall it prevent Coulter from performing its
normal prerogatives as an employer such as hiring, firing,
promoting, and disciplining its employees.
Notwithstanding any other provisions in the S.B. Plan to the
contrary, following a Change In Control, neither the OTP, the
Compensation Committee, nor the Review Committee, Coulter nor an
Alliance Partner/buyer shall have the power to amend the S.B.
Plan in a way which would materially adversely affect the
Participants in the S.B. Plan as a group. This shall not prevent
the OTP from establishing the exact criteria for participation in
and Awards from the S.B. Plan and from varying the participation
and Awards criteria among different groups of participants (e.g.,
from country to country).
3.3 Limitations on OTP. No member of the OTP shall be permitted
to vote in any aspect of making an Award to himself under the
S.I. Plan. However, this shall not preclude the owner members of
the OTP (i.e., members of the Coulter Family) from making an
Award to a member of the OTP who is otherwise qualified to
receive an Award, provided that the Compensation Committee of the
Board shall have the right to review any such Award or
determination by the OTP.
ARTICLE IV. ELIGIBILITY
4.1 Participation. The OTP is responsible for selecting
Employees individually for participation in the S.I. Plan.
Employees shall be grouped at Group A, B, or C levels (and at
levels within such Groups, if appropriate) as determined by the
OTP and changes may occur at any time prior to the Change in
Control at the discretion of the OTP. However, once an
individual has been selected for and notified (by the OTP) of,
participation in the S.I. Plan, he or she cannot be removed from
participation without Cause, as long as he or she remains an
Employee. There will be a written notification to any previously
notified participant in Group A, B, C as to reclassification
among Group A, B, or C, or removal from participation, of that
individual and as to any change in manner of determining his or
her Award.
ARTICLE V. AWARDS
5.1 Cash or Stock. Any Award under the S.I. or S.B. Plan shall
be paid in cash or publicly traded stock of the Alliance Partner
and (i) in the case of the S.I. Plan shall be based on
performance against the measurement criteria established by the
OTP, and (ii) in the case of the S.B. Plan shall be based on
satisfaction of the criteria established by the OTP.
5.2 Special Incentive/Sharing Bonus Pool (the SI/SB Pool).
Should an alliance or merger result in a Change In Control, an
SI/SB Pool will be established at approximately 12% of the
valuation of the Company as determined by any final sale
documents, after reductions for transaction fees including, but
not limited to, financial, legal and broker. The determination
of the exact amount of the SI/SB Pool will be made by the OTP.
In no event will the SI/SB Pool exceed $100 million.
The SI/SB Pool will be allocated in two parts, Part One to be
used for Awards under the S.I. Plan, and Part Two (which shall
consist of the amount which remains in the SI/SB Pool after Part
One has been subtracted) for Awards under the S.B. Plan.
Provided, however, if the funds allocated to Part Two exceed the
amount of the Awards under the S.B. Plan, the OTP, with the
advice of the Compensation Committee, will determine the
disposition of the remaining amount of Part Two funds, such as a
purpose designed to benefit individuals who are employees of the
Company (including paying the costs of administering the Plans).
S. I. Plan
Funds in Part One will be distributed to Participants in Groups A B, and
C. The incentive to each of the Participants in Groups A, B, and C will
be calculated as reflected in the table attached hereto as Schedule "A".
In determining the Award level and participation for any individual
within Group A, B, or C under the S. I. Plan, the OTP will take into
account a Participants responsibility level, performance, potential, and
cash compensation level, as well as other considerations it deems
appropriate. An individual shall not receive an Award under the S.I.
Plan under more than one Group.
S. B. Plan
After the amounts of the SVSB Pool allocated to the S.I. Plan have been
determined, the remaining portion of the SI/SB Pool will be allocated to
the S.B. Plan. Awards under the S.B. Plan will be allocated to Groups D
and E. The OTP will determine what percentage of the remaining SVSB
Pool will be allocated to Group D and to Group E. After the allocation
between Groups D and E has been determined, the amount to be allocated
to individual Employees in Groups D and E respectively will be based
largely on seniority and the amount determined by the OTP. The decision
to allocate Awards under the S.B. Plan to certain individuals and not to
others based on seniority or other criteria will be determined by the
OTP, or by a committee or committees appointed by the OTP.
5.3 Separation from Coulter. In the event of a Participant's
death, disability, or retirement during the establishment of the
S.I. or the S.B. Plan and before a Change in Control, payment of
any Award will be at the discretion of the OTP (or by a committee
or committees appointed by the OTP in the case of the S.B. Plan).
After a Change in Control, the entitlement to an Award will vest
(except as set forth in this Section 5.3 or Section 6.3),
although the amount of the Award must be determined by the OTP.
If so determined by the OTP (or by a committee or committees
appointed by the OTP in the case of Awards under the S.B. Plan),
an Award will be paid to the Participant, the Participants
estate, or the Participants beneficiary, as appropriate.
A Participant who voluntarily terminates employment or who is
terminated for Cause, with the Company prior to a Change In
Control, during the performance period, or prior to payment of a
portion of the Award, will forfeit any right to the Award or to
subsequent Award payments, as the case may be. The OTP (or a
committee or committees appointed by the OTP in the case of
Awards under the S.B. Plan) may vary this policy in its
discretion.
5.4 Form and Timing of Payment. All Awards under the S.I. Plan
shall be paid in a lump sum as soon as practicable which normally
will not exceed six months following a Change In Control and
reconciliation of the transaction costs or, at the discretion of
the OTP, in staged payments not exceeding one year in duration.
All Awards under the S.B. Plan shall be paid in a lump sum as
soon as practicable which normally will not exceed six months
following a Change In Control and reconciliation of the
transaction costs.
ARTICLE VI. GENERAL
6.1 Tax Withholding. The employer or a subsidiary, as
appropriate, shall have the right to deduct from all Awards paid
in cash any federal (or foreign), state, or local taxes as
required by law to be withheld for the cash payments.
6.2 Beneficiaries. Any payment of Awards due under this plan to
a deceased Participant, subject to Section 5.3, shall be paid to
the beneficiary designated by the Participant. If no such
beneficiary has been designated or survives the Participant
payment shall be made to the Participants estate.
6.3 Termination For Cause. In the event a Participant is
terminated for Cause (whether before or after a Change in
Control), as defined in Section 2.9, the Company shall have no
further liability or obligation whatsoever to pay to the
Participant an Award under the S. 1. or the S.B. Plan.
Termination for Cause for purposes of the S.I. Plan must be
determined by a consensus vote of the OTP after having given the
Participant the opportunity to address the OTP on this matter,
and the opportunity to be represented by legal counsel at the
meeting. Termination for Cause for purposes of the S.B. Plan must
be determined by a majority vote of a committee (or applicable
committee if more than one) appointed by the OTP after having
given the Participant the opportunity to address that committee
on this matter, and the opportunity to be represented by legal
counsel at the meeting. The Participant is responsible for the
fees and expenses of his or her counsel.
6.4 Relationship to Other Benefits. No payment under the S.I.
Plan or the S.B. Plan shall be taken into account in determining
any benefits under any pension, retirement, profit sharing, group
insurance, or other benefit plan of the Company or subsidiary,
except as otherwise specifically required by applicable law.
6.5 Invalidity or unenforceability. The invalidity or
unenforceability of any provision of these Plans shall not affect
the validity or enforceability of any other provision of these
Plans.
6.6 Florida Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida,
without reference to principles of conflict of laws. The captions
of this Agreement are not part of the provisions hereof and shall
have no force or effect.
6.7 Binding Arbitration. Any dispute arising under the Plans,
whether involving a Participants claim for an Award, or
otherwise, shall be settled by binding arbitration, to be held in
Miami, Florida, unless the parties to the dispute agree to a
different location for binding arbitration. Each party shall
select an arbitrator and the arbitrator selected by each party
shall jointly select a third arbitrator. If there are more than
two parties to the dispute each class of parties (e.g., all
Participants shall be a single class) shall select one
arbitrator. The cost of arbitration shall be paid by the
applicable Plan or by the Company, if it so chooses; provided
that each party shall pay the fees and expenses of his or her
legal counsel. If there are more than two classes of parties to
the dispute, each will select an arbitrator, if this results in
an even number of arbitrators, the arbitrators shall select an
additional arbitrator.
6.8 Release. The payment of Awards may, in the discretion of
the OTP (but in a manner which is consistent for similarly
situated Participants and Beneficiaries in the S.I. Plan or the
S.B. Plan, as applicable), be conditioned upon receiving a
release from the Participant, or Beneficiary, if applicable, to
the effect that he or she has no further claims under, or with
respect to, the S.I. or S.B. Plan, as applicable.
ARTICLE VII. CONFIDENTIALITY
7.1 Confidentiality. Except as otherwise required by applicable
law, in the administration of the S.I. Plan, or by other
practices of the Company, the fact that an individual is
participating in the S.I. Plan, his or her classification in
Group A, B, or C, and the amount of any Award to which the
Participant is or may be entitled shall be kept confidential by
the OTP, the Compensation Committee, the Review Committee and the
Participant.
7.2 Breach by Participant. The material breach of the
confidentiality requirement in Section 7.1 by a Participant in
the S.I. Plan (or by a beneficiary of the Participant if the
Participant is deceased) shall be sufficient cause for lowering
the Group A or B classification of the Participant, changing the
level within a Group (if applicable), reducing the amount of an
Award, or removing the Participant from the S.I. Plan. However,
it shall not be a breach of the confidentiality requirement for a
Participant to discuss his or her Award under the S.I. Plan with
his or her attorney or certified public accountant, provided that
any information regarding the S.I. Plan revealed by such attorney
or certified public accountant to third parties will be treated
as an action by the Participant for purposes of determining
whether a breach of the confidentiality requirement has occurred.
<PAGE>
Schedule "A"
Valuation $ 1,000
(in millions)
Estimated Fees $ 25
SI/SB Pool $ 100
Net Proceeds $ 875
12% Pool $ 105
($100 million cap) $ 100
Incentive Group Award
A 3.00% $3.0 million
B 1.80% $1.8 million
Ci 0.60% $ .6 million
ii 0.40% $ .4 million
EXHIBIT 13
WORDS ON NUMBERS
Section of the Company's
Annual Report to Stockholders
For the Year Ended
December 31, 1997
TABLE OF CONTENTS
Selected Financial Information
Financial Review
Management's Discussion and Analysis
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Quarterly Information
Report by Management
Independent Auditors' Report
Corporate Directory
Other Information
Bar Chart: Cash Provided by Operations (millions)
Year 1993 1994 1995 1996 1997
Cash provided $ 53.3 $111.1 $ 60.2 $139.1 $137.8
Bar Chart: Shares Outstanding (millions)
Year 1993 1994 1995 1996 1997
Shares
Outstanding 27.8 28.0 28.3 28.0 27.6
<PAGE>
SELECTED FINANCIAL INFORMATION
Dollars in millions, except amounts per share
<TABLE>
<CAPTION>
Years Ended December 31, 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Summary of Operations
Sales $1,198.0 $1,028.0 $ 930.1 $ 888.6 $ 875.7
Operating income (1) $ 104.4 $ 122.5 $ 110.8 $ 98.9 $ 85.6
Earnings before special
and non recurring charges,
after taxes $ 54.0 $ 74.7 $ 66.1 $ 56.9 $ 46.9
Special charges:
In-process research and
development (282.0) - - - -
Restructuring charge, net of
tax benefit (36.4) - (17.2) (9.6) (73.0)
Non-recurring charges:
Environmental charge, net of
tax benefit - - - - (7.5)
Changes in accounting
principles - - - (5.1) (4.0)
--------- -------- ------- ------- --------
Net (loss) earnings $ (264.4) $ 74.7 $ 48.9 $ 42.2 $ (37.6)
--------- -------- ------- ------- --------
Diluted earnings per share
before special charges $ 1.88 $ 2.58 $ 2.29 $ 2.03 $ 1.69
Diluted (loss) earnings
per share $ (9.58) $ 2.58 $ 1.70 $ 1.50 $ (1.35)
Dividends paid per share
of common stock $ 0.60 $ 0.52 $ 0.44 $ 0.40 $ 0.36
Shares outstanding
(millions) 27.6 28.0 28.3 28.0 27.8
Weighted average common
shares and dilutive common
share equivalents
(millions)(2) 27.6 28.9 28.8 28.1 27.8
Other Information
Total assets $2,331.0 $ 960.1 $ 907.8 $ 829.1 $ 820.0
Long-term debt, less
current
maturities $1,181.3 $ 176.6 $ 162.7 $ 117.3 $ 113.7
Working capital $ 81.8 $ 300.1 $ 282.1 $ 243.2 $ 221.2
EBITDA before special
charges (1) $ 228.0 $ 217.4 $ 192.6 $ 161.4 $ 89.8
EBITDA $ (113.4) $ 217.4 $ 164.9 $ 150.1 $ (24.9)
Debt to EBITDA before
special
charges(1) 5.5 0.9 0.9 0.8 1.62
Capital expenditures $ 110.7 $ 117.4 $ 110.0 $ 98.7 $ 92.8
Depreciation and
amortization
expenses $ 109.1 $ 87.8 $ 79.1 $ 70.1 $ 63.5
Number of employees at
December 31, 11,171 6,079 5,702 5,963 6,689
</TABLE>
(1)Excludes pretax special charges. Special charges include: 1)
restructuring charges of $59.4, $27.7, $11.3 and $114.7 in 1997,
1995, 1994 and 1993, respectively, and 2) a one time write-off
of $282.0 of acquired in-process research and development
relating to the Coulter acquisition in 1997. Including these
special charges, the Company reported operating (loss) income of
($237.0), $83.1, $87.6 and ($29.1) in 1997, 1995, 1994 and 1993
respectively. The Company did not incur any special charges in
1996.
(2)Under generally accepted accounting principles, as the Company
was in a net loss position in the current year, 1.0 million
common share equivalents were not used to compute diluted loss
per share, as the effect was antidilutive.
Bar Chart: EBITDA Before Special Charges (millions)
Year 1993 1994 1995 1996 1997
EBITDA $ 89.8 $161.4 $192.6 $217.4 $228.0
Bar Chart: Dividends paid per Common Stock
Year 1993 1994 1995 1996 1997
Dividends
Paid
($ per
share) 0.36 0.40 0.44 0.52 0.60
<PAGE>
FINANCIAL REVIEW
In millions, except amounts per share
Results Of Operations
The following table sets forth, for the periods indicated, the
results of operations as a percentage of sales and on a comparative
basis:
<TABLE>
<CAPTION>
% % % 1997 1996
Years ended 1997 of 1996 of 1995 of Compared Compared
December 31, Sales Sales Sales to to
1996(2) 1995(2)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales
Diagnostics $ 802.4 67.0 $ 652.0 63.4 $558.5 60.0 $150.4 $ 93.5
Life sciences 395.6 33.0 376.0 36.6 371.6 40.0 19.6 4.4
------ ---- ------ ---- ------ ---- ------ ------
Total Sales $1,198.0 100.0 $1,028.0 100.0 $930.1 100.0 $170.0 $ 97.9
======== ===== ======== ===== ====== ===== ====== ======
Gross profit $ 588.3 49.1 $ 550.2 53.5 $502.9 54.1 $ 38.1 $ 47.3
Marketing,
general
and
administrative 360.3 30.1 319.3 31.1 300.4 32.3 41.0 18.9
Research and
development(1) 123.6 10.3 108.4 10.5 91.7 9.9 15.2 16.7
----- ---- ----- ---- ---- --- ---- ----
Operating
income (1) 104.4 8.7 122.5 11.9 110.8 11.9 (18.1) 11.7
Net nonoperating
expense 14.9 1.2 11.0 1.0 10.7 1.1 3.9 0.3
----- ---- ----- ---- ----- ---- ----- ----
Earnings before
income taxes 89.5 7.5 111.5 10.9 100.1 10.8 (22.0) 11.4
Income tax
provision 35.5 3.0 36.8 3.6 34.0 3.7 ( 1.3) 2.8
----- ---- ----- ---- ----- ---- ----- ----
Earnings before
special
charges,
after taxes $ 54.0 4.5 $ 74.7 7.3 $ 66.1 7.1 $(20.7) $ 8.6
Net (loss)
earnings $(264.4) $ 74.7 $ 48.9 $(339.1) $ 25.8
Diluted earnings
per share
before
special
charges $ 1.88 $ 2.58 $ 2.29 $ (0.70) $ 0.29
Diluted (loss)
earnings per
share $ (9.58) $ 2.58 $ 1.70 $(12.16) $ 0.88
Dividends paid
per share of
common
stock $ 0.60 $ 0.52 $ 0.44 $ 0.08 $ 0.08
</TABLE>
(1) Amounts exclude special charges. Special charges include: l)
restructuring charges of $59.4, 5.0% of sales, and $27.7, 3.0% of
sales, in 1997 and 1995, respectively, and 2) a one time write-off of
$282.0, 23.5% of sales, of acquired in-process research and
development relating to the Coulter acquisition in 1997. Including
these special charges: 1) operating (loss) income was $(237.0),
(19.8%) of sales, and $83.1, 8.9% of sales, in 1997 and 1995,
respectively, and 2) (loss) earnings before income taxes was $(251.9),
(21.0%) of sales, and $72.4, 7.8% of sales, in 1997 and 1995,
respectively. The Company did not incur any special charges in 1996.
(2) Decreases from the comparative period are designated by
parentheses.
Bar Chart: MGA as a % of Sales
Year 1995 1996 1997
MGA (% of
Sales) 32.3 31.1 30.1
Bar Chart: R&D Expenses Before Write-off of In-Process R&D (millions)
Year 1995 1996 1997
R&D Expenses $ 91.7 $108.4 $123.6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following review should be read in conjunction with the
consolidated financial statements and related notes included on pages
16 through 37. Historical results and percentage relationships are
not necessarily indicative of operating results for any future
periods.
Overview
Beckman Coulter ("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. Approximately
two-thirds of the Company's 1997 sales were for clinical diagnostics
applications, principally in hospital laboratories, while the
remaining sales were for life sciences and drug discovery applications
in universities, medical schools, and pharmaceutical and biotechnology
companies. The Company's diagnostics systems address over 75% of the
hospital laboratory test volume, including virtually all routine
laboratory tests. The Company believes that it is a worldwide market
leader in its primary markets, with well-recognized systems and a
reputation for high-quality, reliable service.
1. Acquisition Activities
The primary focus of the acquisition strategy of Beckman
Instruments, Inc. (excluding Coulter, "Beckman") has been to broaden
its product offerings. Beckman significantly strengthened its
diagnostic immunochemistry offerings, including products for cancer
diagnostics, through the acquisition of Hybritech Incorporated in
January 1996 and the Access immunoassay product line of Sanofi
Diagnostics Pasteur in April 1997. Beckman also acquired high
throughput screening and robotics technology for drug discovery from
Sagian, Inc. in December 1996 and DNA sequencing technology through
the acquisition of Genomyx Inc. in October 1996.
The acquisition of Coulter Corporation in October 1997, further
extended Beckman'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. The
purchase price of the acquisition totaled $1,178.0 million, consisting
of $875.0 million in cash, assumed liabilities of $170.0 million and
purchase liabilities of $133.0 million. This acquisition and the
related financing is 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. A complete
discussion of the Company's acquisition activities is provided in Note
3 "Acquisitions" to the Consolidated Financial Statements.
2.Events Impacting Comparability
Acquired Research and Development:
As a direct result of the acquisition of Coulter Corporation in
October 1997, the Company recorded a $282.0 million charge for
purchased in-process research and development. This charge relates to
projects that have economic value but that cannot be capitalized for
purposes of generally accepted accounting principles.
Goodwill and Intangible Assets:
As a result of the acquisition of Coulter, $404.0 million was
recorded as the fair value of patents, trademarks and other
intangibles ("Intangible Assets") and $374.4 million was recorded as
the excess of purchase price, purchase liabilities and liabilities
assumed over the fair value of identifiable net assets and in-process
research and development projects acquired ("Goodwill"). Intangible
Assets are amortized using the straight-line method over their
expected useful lives, ranging from 15 to 30 years. Goodwill is
amortized on a straight-line basis over 40 years. See further
discussion at Note 3 "Acquisitions" to the Consolidated Financial
Statements.
Restructuring Charges:
The Company recorded a $59.4 million restructuring charge in the
fourth quarter 1997. This charge, is the result of a restructuring
plan focused on asset redeployment, reduction of duplicate overhead
and improved operating efficiency, on a worldwide basis. On an after-
tax basis, the restructuring charge was $36.4 million or $1.32 per
share.
The restructuring charges recorded in 1995 and 1994 were for
facility moves and transition costs that were anticipated and directly
associated with the Company's 1993 restructuring plan, but which could
not be recognized in the establishment of the original restructuring
reserve under generally accepted accounting principles. A more
detailed discussion of the restructuring charges taken by the Company,
is provided in Note 4 "Provision for Restructuring Operations" to the
Consolidated Financial Statements.
Sale of Assets:
The Company has sold certain financial assets (primarily consisting
of equipment subject to customer leases and lease receivables) as part
of its plan to reduce debt and provide funds for integration purposes.
The net book value of financial assets sold was $71.2 million for
which the Company received approximately $75.0 million in cash
proceeds. The Company will continue to evaluate opportunities to
provide additional cash flow by monetizing other assets during 1998
and beyond. The Company intends to consummate several sale-leaseback
transactions with respect to some of its real estate assets which the
Company expects will generate proceeds to the Company of approximately
$150.0 million in 1998 and approximately $40.0 million in 1999. 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. See further discussion in
Note 5 "Sale of Assets" to the Consolidated Financial Statements.
Tax Aspects:
As a result of expenses related to the acquisition of Coulter
including the Coulter bonus sharing plan payments, deductions for
interest on indebtedness and certain other expenses incurred in
connection with the Coulter acquisition, the Company does not expect
that it will have to pay federal income taxes for the next several
years. The deferred income tax liability of $153.5 million, which is
related to the intangible assets acquired, will be reduced by the tax
effect of the amortization of the intangible assets, which is not
deductible for income tax purposes. The amortization of goodwill of
$1.6 million is not deductible for income tax purposes, which has the
impact of increasing the effective tax rate by approximately 0.2
percentage points for 1997.
3.Results of Operations
1997 Compared with 1996:
Sales for 1997 were $1,198.0 million, an increase of 16.5% over the
$1,028.0 million reported in 1996. The sales growth in constant
currency over the prior year was 20.2%. More than half of the growth
resulted from the previously mentioned acquisition of Coulter
Corporation. Despite continuing market-driven pricing pressures and
adverse currency fluctuations, core businesses grew in all geographic
areas. As an example, the Company was able to leverage its product
offerings that reduce total laboratory cost, provide workstation
consolidation and progressive automation, into a $100.0 million, five-
year contract signed with AmeriNet, Inc., one of the largest
healthcare purchasing organizations in the United States. In addition,
a new contract was signed with University Healthsystem Consortium ("UHC").
The UHC agreement will complement the existing agreement with Voluntary
Hospitals of America ("VHA"), which has recently acquired UHC. In 1997 as
in 1996, international sales accounted for approximately 50% of total sales.
Gross profit at 49.1% of sales was 4.4 percentage points lower than
the 1996 level of 53.5%. Cost of sales resulting from the inventory
written-up to market value in connection with the acquisition of
Coulter accounted for $11.3 million or one percentage point of the
reduction. Unfavorable foreign currency fluctuations contributed
another one percentage point. Lower margins for Coulter products and
competitive pricing pressures made up the balance of the percentage
reduction.
Marketing, general and administrative expenses at 30.1% of sales
were one percentage point lower than the 1996 level of 31.1%, despite
the costs of acquisition activities incurred during the year.
Research and development expenses remained at last year's levels, at
just over 10% of sales.
As a result, operating income before pretax special charges was
$104.4 million or 8.7% of sales in 1997, compared with operating
income of $122.5 million and 11.9% in 1996. However, the 1997
operating income before pretax special charges, unlike 1996 operating
income, includes charges for inventory recorded at fair value
(mentioned previously) and on-going goodwill and intangible
amortization expenses arising out of the Coulter acquisition. Without
these items, the 1997 operating income margin would have been 10.0%.
One-time charges of $282.0 million for in-process research and
development expenses and restructure charges of $59.4 million
(discussed previously in item 2 ) resulted in the reported operating
loss of $237.0 million.
Incremental interest expense associated with the debt incurred by
the Company to fund the Coulter acquisition increased nonoperating
expenses, but was partially offset by gains due to hedging activities.
The net loss for the year was $264.4 million compared with net
earnings of $74.7 million in 1996. The current year net loss excludes
any tax benefit for the $282.0 million charge for in-process research
and development as a result of its ineligibility for income tax
purposes.
1996 Compared with 1995:
Sales growth of 11%, 13% in constant currency, over the prior year
was attributable to increased market share in diagnostics products,
primarily in the North American and European markets; increased market
share in life sciences products, primarily in non-European
international markets; continued success from the Company's SKD
subsidiary's HEMOCCULT product; and, sales from Hybritech products
(Hybritech was acquired effective January 2, 1996). International
sales represented approximately 50% of total sales.
The gross profit percentage decrease resulted from changes in
product mix, unfavorable foreign currency fluctuations and competitive
pricing pressures.
The increase in operating costs was due to a higher rate of
investment in research and development costs related to Hybritech
products.
Earnings before income taxes for the year ended December 31, 1996
compared to the same period of the prior year increased to $111.5
million from $72.4 million (1995 included a restructuring charge of
$27.7 million).
Net earnings for the year ended December 31, 1996 were $74.7 million
or $2.58 per share, representing an increase of 53% and 52%,
respectively, over the prior year. Net earnings in 1995 included a
$17.2 million after tax restructuring charge which decreased net
earnings per share by $0.59.
4. Financial Condition
Foreign Currency and Interest Rate Risk Management:
The Company derives approximately 50% of its sales from sources
outside of the United States. The Company's international operations
are subject to foreign currency fluctuations. Consequently, the
reported and the anticipated cash flows resulting from the sale of
products and services in foreign countries may be adversely affected
by changes in foreign currency exchange rates. U.S. dollar
denominated costs and expenses represent a much greater percentage of
the Company's operating costs and expenses than U.S. dollar-
denominated sales represent of total net sales. As a result,
appreciation of the U.S. dollar against the Company's major trading
currencies has a negative impact on the Company's results of
operations, and depreciation of the U.S. dollar against such
currencies has a positive impact. Since the Company actively hedges
its foreign currency exposure, 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 may adjust certain aspects
of its operations in the event of a sustained material change in
exchange rates. See further discussion of this topic in Note 7
"Derivatives" to the Consolidated Financial Statements.
Liquidity and Capital Resources:
The Company broadly defines liquidity as its ability to generate
sufficient cash flows from operating activities to meet its
obligations and commitments. In addition, liquidity includes the
ability to obtain appropriate financing and to convert into cash flows
those assets that are no longer required to meet existing strategic
and financing objectives. Therefore, liquidity cannot be considered
separately from capital resources that consist of current and
potentially available funds for use in achieving long-range business
objectives and meeting debt service commitments.
Currently, the Company's liquidity needs arise primarily from debt
service on the substantial indebtedness incurred in connection with
the Coulter acquisition, and the funding of costs of integrating the
operations of Beckman and Coulter, as well as its working capital
requirements and capital expenditures.
Operating activities generated $137.8 million of cash flows compared
with $139.1 million in 1996 and $60.2 million in 1995. The 1997
results were primarily achieved through net results from operations,
after adding back the effects of depreciation, amortization and
special charges, including the write-off of acquired in-process
research and development in connection with the acquisition of
Coulter. Additionally, the Company received $35.7 million in cash
proceeds from the sale of sales-type lease receivables (see Note 5
"Sale of Assets" to the Consolidated Financial Statements).
Investing activities used $929.1 million of cash. Investments and
acquisitions used $893.9 million primarily relating to the Coulter
acquisition. Capital expenditures used $100.9 million of cash which
is consistent with historical levels. An additional $39.6 million of
cash proceeds was provided through the sale and leaseback of
instruments (see Note 5 "Sale of Assets" to the Consolidated Financial
Statements.)
Financing activities provided $790.6 million of cash. This was
achieved primarily through borrowing of $827.8 million, net of
repayments, under short term notes payable, long term debt and credit
facilities. These proceeds were primarily used to fund the
acquisition of Coulter. Purchases of treasury stock used $20.6
million, net of proceeds from sales of treasury stock, and dividends
to stockholders used $16.6 million.
During the fourth quarter of 1997 the Company secured a new $1.3
billion credit facility to finance the acquisition of Coulter. See a
further discussion of the credit facility and borrowing availability
thereunder and under the Company's other borrowing facilities in Note
6 "Debt" to the Consolidated Financial Statements. The interest
expense associated with the debt outstanding under the credit facility
creates an increased demand on future operating cash flows. Although
the Company believes that its consolidated operations will provide
sufficient cash flow in excess of anticipated operating requirements
in order to service the debt, a plan has been implemented to decrease
the level of outstanding borrowings more rapidly. This ultimately
will provide savings on the associated interest cost, which will be
partially offset by increased rental expense as a result of any sale
leaseback transactions. Subsequent to consummation of the Coulter
acquisition, the Company has pursued sales of certain financial assets
(primarily consisting of equipment subject to customer leases and
sales-type lease receivables) and real estate assets, as part of its
plan to reduce debt and provide funds for integration purposes. The
Company has sold $71.2 million of financial assets for cash proceeds
of approximately $75.0 million and intends to consummate several sale
leaseback transactions with respect to some of its real estate assets
during 1998 and 1999, which the Company expects will generate proceeds
to the Company of approximately $190 million. In addition to these
asset sales, the Company's capital expenditures include expenditures
for customer leased equipment. Such expenditures in the future may be
reduced by increased reliance on third party leasing arrangements,
which would accordingly reduce the Company's liquidity needs.
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 (including leases, any
other available financing sources, and the proceeds of the planned
asset sales discussed above), will be adequate to meet its anticipated
requirements for interest payments and other debt service obligations,
working capital, capital expenditures, lease payments and other
operating needs, until the maturity of the 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.
Inflation:
Inflation and the effects of changing prices are monitored
continually by the Company. Inflation increases the cost of goods and
services used by the Company. Competitive and regulatory conditions in
many markets restrict the Company's ability to fully recover the
higher costs of acquired goods and services through price increases.
The Company attempts to mitigate the impact of inflation by
implementing continuous process improvement solutions to enhance
productivity and efficiency and, as a result, lower costs and
operating expenses. The effects of inflation have, in the Company's
opinion, been managed appropriately and as a result have not had a
material impact on its operations and resulting financial position.
Environmental Matters:
The Company is subject to federal, state, local and foreign
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 that would have a material impact on the Company's
operations or financial position. The Company believes that its
operations comply in all material respects with applicable federal,
state, and local environmental laws and regulations. To address
contingent environmental costs, the Company establishes reserves when
such costs are probable and can be reasonably estimated. The Company
believes that, based on current information and regulatory compliance
(and taking third party indemnities into consideration), the reserves
established by the Company for environmental expenditures are
adequate. Based on current knowledge, to the extent that additional
costs may be incurred that exceed the reserves, such amounts are not
expected to have a material impact on the Company's operations or
financial condition, although no assurance can be given in this
regard. See further discussion in Note 12 "Commitments and
Contingencies" to the Consolidated Financial Statements.
Litigation:
The Company is currently, and is from time to time, subject to
claims and lawsuits arising in the ordinary course of its business,
including those relating to intellectual property, contractural
obligations, competition and employment matters. In certain such
actions, plaintiffs request punitive or other damages or nonmonetary
relief, which may not be covered by insurance, and in the case of
nonmonetary relief, could if granted materially affect the conduct of
the Company's business. The Company accrues for potential liabilities
involved in these matters as they become known and can be reasonably
estimated. In the Company's opinion (taking third party indemnities
into consideration), the various asserted claims and litigation in
which the Company is currently involved are not reasonably likely to
have a material adverse effect on the Company's business, results of
operations or financial condition. However, no assurance can be given
as to the ultimate outcome with respect to such claims and litigation.
The resolution of such claims and litigation could be material to the
Company's operating results for any particular period, depending on
the level of income for such period. See further discussion of these
matters in Note 12 "Commitments and Contingencies" to the Consolidated
Financial Statements.
Year 2000:
The Company is in the process of modifying, upgrading or replacing
its internal computer software applications and information systems.
The Company is also in the process of evaluating all currently
marketed and leased products and will upgrade those products that are
intended for continued marketing and leasing beyond the year 1999.
The Company is currently evaluating possible strategies to accommodate
its installed analytical instrument systems owned by its customers.
These tasks have been assigned to a senior executive of the Company
who has established three projects, each led by a project manager and
staffed by software experts, to perform the evaluation process: 1)
product related matters, 2) mainframe management information systems
and software, and 3) all other systems (e.g. personal computers,
office machines, and supplier systems). Analysis and evaluation
activities were begun in 1996 and are in varying stages of completion
as of the date of this report. The Company recently expended
approximately $250,000 on new software that provides a suite of tools
to assist in the year 2000 remediation process. Remediation
activities have begun and are planned and expected to be completed by
the end of 1998. Testing and validation of the remediated systems and
any final revisions needed will be conducted in 1999.
The Company does not expect that the cost of its year 2000
compliance program will be material to its business, results of
operations or financial condition. The Company believes that it will
be able to achieve compliance by the end of 1999 and does not
currently anticipate any material disruption of its operations as the
result of any failure by the Company to be in compliance. Although
the impact on the Company caused by the failure of the Company's significant
suppliers or customers to achieve year 2000 compliance in a timely or
effective manner is uncertain, the Company's business and results of
operations could be materially adversely affected by such failure.
Recent Accounting Developments:
The Company intends to adopt Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" (SFAS 130), and
Statement of Financial Accounting Standards No. 131, "Disclosures
about Segments of an Enterprise and Related Information"(SFAS 131), in
fiscal 1998. Both standards will require additional disclosure, but
will not have a material effect on the Company's financial position or
results of operations. SFAS 130 establishes standards for the
reporting and display of comprehensive income and is expected to first
be reflected in the Company's first quarter of 1998 interim financial
statements. Components of comprehensive income include items such as
net earnings, foreign currency translation adjustments and changes in
value of available-for-sale securities. SFAS 131 changes the way
companies report segment information and requires segments to be
determined and reported based on how management measures performance
and makes decisions about allocating resources. SFAS 131 will first
be reflected in the Company's 1998 Annual Report.
5. Business Climate
The clinical diagnostics and life sciences markets are each highly
competitive and the Company encounters significant competition in each
market from many manufacturers, both domestic and outside the United
States. These markets continue to be unfavorably impacted by the
economic weakness in Europe and Asia and cost containment initiatives
in several European governmental and healthcare systems. The life
sciences market also continues to be affected by consolidations of
pharmaceutical companies and governmental constraints on research and
development spending. In the United States, attempts to lower costs
and to increase productivity have led to further consolidation among
healthcare providers. This has resulted in more powerful provider
groups that continue to leverage their purchasing power with suppliers
to contain costs. Cost containment initiatives in the United States
and in the European healthcare systems will continue to be factors,
which may affect the Company's ability to maintain or increase sales.
Future profitability may also be adversely affected if the
relationship of the U.S. dollar to certain currencies is maintained or
strengthened.
The Company intends to grow its business through increased internal
development efforts, and in part through collaborations that will help
to expand its technology base. The continuing consolidation trend
among United States healthcare providers, mentioned previously, has
increased pressure on diagnostic equipment manufacturers to broaden
their product offerings to encompass a wider range of testing
capability, greater automation and higher volume capacity. The
Company's October 1997 acquisition of Coulter Corporation was a clear
indicator of the Company's resolve to complete a key initiative to
become a broad-based world leader in in-vitro diagnostic testing, by
expanding its product offering. Coulter is the world's leading
manufacturer of hematology systems for the clinical analysis of blood
cells, where it has a market share twice the size of its next largest
competitor. In addition, Coulter is considered a technology leader in
cell counting and characterization and has a number two position in
flow cytometry, which is used for both research and clinical
applications.
The size and growth of the Company's markets are influenced by a
number of factors, including: 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; and healthcare spending and physician practices. The
Company expects worldwide healthcare expenditures and diagnostic
testing to increase over the long-term, primarily as a result of the
following three factors: (1) growing demand for services generated by
the aging of the world population; (2) increasing expenditures on
diseases requiring costly treatment (for example, AIDS and cancer) and
(3) expanding demand for improved healthcare services in developing
countries.
With Coulter and the two earlier acquisitions in immunochemistry-
based diagnostics, Hybritech Incorporated and the Access immunoassay
product business of Sanofi Diagnostics Pasteur, the Company completed
a major strategic initiative intended to build on its leadership
position in automated clinical chemistry and create a broad based
capability in routine clinical chemistry. The Company will be able to
offer hospital laboratories worldwide, a broad range of automated
systems that together can perform more than 75% of their test volume
and essentially all of the tests that are considered routine. This
positions the Company to be able to provide significant value added
benefits to its customers, which the Company expects to further
enhance through the Company's expertise in simplifying and automating
laboratory processes.
6. Taxes
The Company is subject to taxation in many jurisdictions throughout
the world. The Company's effective tax rate and tax liability will be
affected by a number of factors, such as the amount of taxable income
in a particular jurisdiction, the tax rate in such jurisdictions, tax
treaties between jurisdictions, the extent to which the Company
transfers funds between jurisdictions and income is repatriated, and
future changes in the law. Generally, the tax liability for each
legal entity is determined either (i) on a non-consolidated basis or
(ii)on a consolidated basis only with other entities incorporated in
the same jurisdiction, in either case without regard to the taxable
losses of nonconsolidated affiliated entities. As a result, the
Company may pay income taxes in certain jurisdictions even though the
Company on an overall basis incurs a net loss for the period.
7.Forward Looking Statements
This annual 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; (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 failures in
effectively integrating worldwide operations; (viii) achievement of
year 2000 compliance; and (ix) other factors that cannot be identified
at this time.
Although Beckman 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.
CONSOLIDATED BALANCE SHEETS
In millions, except amounts per share
December 31, 1997 1996
<TABLE>
<CAPTION>
<S> <C> <C>
Assets
Current assets
Cash and equivalents $ 33.1 $ 34.6
Short-term investments 0.4 8.1
Trade receivables and other 524.6 309.5
Inventories 332.3 190.4
Deferred income taxes 53.0 21.4
Other current assets 33.3 15.4
------ ------
Total current assets 976.7 579.4
Property, plant and equipment, net 410.9 263.5
Intangibles, less accumulated
amortization
of $10.6 in 1997 and $4.2
in 1996 444.9 34.1
Goodwill, less accumulated
amortization of
$6.0 in 1997 and $3.1 in 1996 402.8 13.7
Deferred income taxes - 50.8
Other assets 95.7 18.6
-------- ------
Total assets $2,331.0 $960.1
======== ======
Liabilities and Stockholders' Equity
Current liabilities
Notes payable $ 49.0 $ 15.1
Current maturities of
long-term debt 19.9 4.3
Accounts payable 96.3 45.6
Accrued compensation 84.6 47.4
Other accrued expenses 575.5 115.2
Income taxes 69.6 51.7
----- -----
Total current liabilities 894.9 279.3
Long-term debt, less current
maturities 1,181.3 176.6
Deferred income taxes 40.3 -
Other liabilities 132.7 105.3
------- -----
Total liabilities 2,249.2 561.2
Commitments and contingencies (Note
12)
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 1997 and 1996; shares
outstanding 27.6
at 1997 and 28.0 at 1996 2.9 2.9
Additional paid-in capital 126.6 128.9
Foreign currency translation
adjustment (13.8) 3.9
Retained earnings 19.0 300.0
Treasury stock, at cost (52.9) (36.8)
------ ------
Total stockholders' equity 81.8 398.9
------ ------
Total liabilities
and stockholders' equity $2,331.0 $ 960.1
======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
In millions, except amounts per share
<TABLE>
<CAPTION>
Years ended December 31, 1997 1996 1995
<S> <C> <C> <C>
Sales $1,198.0 $1,028.0 $ 930.1
Operating costs and expenses
Cost of sales 609.7 477.8 427.2
Marketing, general and
administrative 360.3 319.3 300.4
Research and development 123.6 108.4 91.7
In-process research and
development 282.0 - -
Restructuring charge 59.4 - 27.7
-------- ------ -----
1,435.0 905.5 847.0
-------- ------ -----
Operating (loss) income (237.0) 122.5 83.1
Nonoperating expense
Interest income (6.1) (5.8) (5.3)
Interest expense 29.4 18.1 13.4
Other, net (8.4) (1.3) 2.6
------ ------ -----
14.9 11.0 10.7
------ ------ -----
(Loss) earnings before income taxes (251.9) 111.5 72.4
Income taxes 12.5 36.8 23.5
Net (loss) earnings $(264.4) $ 74.7 $ 48.9
Basic (loss) earnings per share $ (9.58) $ 2.66 $ 1.74
Weighted average number of shares
outstanding 27.6 28.0 28.1
Diluted (loss) earnings per share $ (9.58) $ 2.58 $ 1.70
Weighted average number of shares
outstanding 27.6 28.9 28.8
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
In millions, except amounts per share
<TABLE>
<CAPTION>
Foreign
Additional Currency Minimum
Common Paid-in Translation Retained Pension Treasury
Stock Capital Adjustment Earnings Liability Stock Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balances,
December 31,
1994 $2.9 $130.0 $8.6 $203.4 - $(27.9) $317.0
Net earnings 48.9 48.9
Foreign currency
translation
adjustments (0.2) (0.2)
Dividends to
stockholders,
$0.44 per
share (12.3) (12.3)
Purchases of
treasury
stock (13.3) (13.3)
Vesting of
restricted
stock 0.1 0.1
Employee stock
purchases (1.1) 18.7 17.6
Minimum pension
liability (9.9) (9.9)
--------------------------------------------------------------
Balances,
December 31,
1995 $2.9 $129.0 $8.4 $240.0 $(9.9) $(22.5) $347.9
Net earnings 74.7 74.7
Foreign currency
translation
adjustments (4.5) (4.5)
Dividends to
stockholders,
$0.52 per
share (14.7) (14.7)
Purchases of
treasury
stock (35.9) (35.9)
Employee stock
purchases (0.1) 21.6 21.5
Minimum pension
liability 9.9 9.9
---------------------------------------------------------------
Balances,
December 31,
1996 $2.9 $128.9 $3.9 $300.0 - $(36.8) $398.9
Net (loss) (264.4) (264.4)
Foreign currency
translation
adjustments (17.7) (17.7)
Dividends to
stockholders,
$0.60 per
share (16.6) (16.6)
Purchases of
treasury
stock (43.7) (43.7)
Employee stock
purchases (2.3) 27.6 25.3
----------------------------------------------------------------
Balances,
December 31,
1997 $2.9 $126.6 $(13.8) $19.0 - $(52.9) $81.8
=================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
In millions
<TABLE>
<CAPTION>
Years ended December 31, 1997 1996 1995
<S> <C> <C> <C>
Cash Flows from Operating
Activities
Net (loss) earnings $(264.4) $ 74.7 $ 48.9
Adjustments to reconcile net
(loss) earnings to net cash
provided by operating
activities
Depreciation and amortization 109.1 87.8 79.1
Net deferred income taxes (5.1) 11.3 10.2
Write-off of acquired in-
process research and
development 282.0 - -
Proceeds from sale of sales-type
lease receivables 35.7 - -
Changes in assets and
liabilities, net of
acquisitions
Trade receivables and other (53.1) (26.1) (23.7)
Inventories 18.2 (26.4) (15.7)
Accounts payable and accrued
expenses (3.4) 30.7 0.7
Accrued restructuring costs 44.4 (10.6) (12.9)
Accrued income taxes 1.0 7.0 (8.8)
Other (26.6) (9.3) (17.6)
------------------------
Net cash provided by
operating activities 137.8 139.1 60.2
activities
------------------------
Cash Flows from Investing
Activities
Additions to property, plant and
equipment (100.9) (110.5) (103.2)
Net disposals of property, plant
and equipment 18.4 18.7 13.2
Sales (purchases) of short-term
investments 7.7 0.2 (7.5)
Proceeds from sale-leaseback
transaction 39.6 - -
Investments and acquisitions (893.9) (23.0) (15.5)
-------------------------
Net cash used by investing
activities (929.1) (114.6) (113.0)
-------------------------
Cash Flows from Financing
Activities
Dividends to stockholders (16.6) (14.7) (12.3)
Proceeds from issuance of stock 23.1 21.5 17.6
Purchases of treasury stock (43.7) (35.9) (13.3)
Notes payable borrowings
(reductions) 11.7 (2.4) 2.9
Long-term debt borrowings 1,164.2 128.3 43.4
Long-term debt reductions (348.1) (113.0) (3.5)
--------------------------
Net cash provided (used)
by financing
activities 790.6 (16.2) 34.8
--------------------------
Effect of exchange rates on cash
and equivalents (0.8) 0.1 -
--------------------------
(Decrease) increase in cash and
equivalents (1.5) 8.4 (18.0)
Cash and equivalents-beginning
of year 34.6 26.2 44.2
--------------------------
Cash and equivalents-end of year $ 33.1 $ 34.6 $ 26.2
==========================
Supplemental Disclosures of Cash
Flow Information
Cash payments for income taxes $ 12.9 $ 19.2 $ 22.0
Cash payments for interest 18.7 18.3 12.0
Noncash Investing and
Financing Activities
Conversion of notes receivable - 8.1 -
Minimum pension liability - (9.9) 9.9
Purchase of equipment
under capital
lease obligation 9.8 6.9 6.8
Issuance of Restricted Stock
as employee compensation 2.2 - -
</TABLE>
See accompanying notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 many 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.
Financial Instruments
The carrying values of the Company's financial instruments
approximate their fair value at December 31, 1997 and 1996. Market
value of cash and cash equivalents, trade and other receivables, other
current assets, investments, notes payable, accounts payable, and
amounts included in other accrued expenses meeting the definition of a
financial instrument are based upon management estimates. Market
values of the Company's debt and derivative instruments are determined
by quotes from financial institutions.
Foreign Currency Translation
Non-U.S. assets and liabilities are translated into U.S. dollars
using 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 hedging
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 Consolidated Statements of
Operations.
Derivatives
The Company utilizes derivative financial instruments to hedge
foreign currency and interest rate market exposures of underlying
assets, liabilities and other obligations and not for speculative or
trading purposes. Gains and losses on currency forward contracts,
options and swaps that are designated as hedges of existing
transactions are recognized in income in the same period as losses and
gains on the underlying transactions are recognized and generally
offset. Gains and losses on currency forward contracts and options
that are designated as hedges of anticipated transactions for which a
firm commitment has been attained are deferred and recognized in
income in the same period that the underlying transactions are
settled. Gains and losses on any instruments not meeting the above
criteria would be recognized in income in the current period. Income
or expense on interest rate swaps is accrued as an adjustment to the
yield of the related debt that they hedge.
Stock-Based Compensation
The Company implemented Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS
123) in 1996. As permitted by SFAS 123, the Company continues to
follow the guidance of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees." Consequently,
compensation related to stock options is the difference between the
grant price and the fair market value of the underlying common
shares at the grant date. Generally, the Company issues options to
employees with a grant price equal to the fair value of the
Company's common stock. Accordingly, no compensation expense has
been recognized on the Company's stock option or stock purchase
plans. The Company discloses in Note 10 "Employee Benefits" the
effect on earnings if compensation costs were recorded at the
estimated fair value of the stock options granted, as prescribed by
SFAS 123.
Cash and Equivalents
Cash and equivalents include cash in banks, time deposits and
investments having maturities of three months or less from the date of
acquisition.
Short-Term Investments
Short-term investments are principally comprised of investments with
final maturities in excess of three months but less than one year from
the date of acquisition.
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, if necessary.
Inventories
Inventories are valued at the lower of cost or market using 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 basis 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 terms but not in excess of
7 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.
Goodwill and Other Intangibles
Goodwill represents the excess of the purchase price of acquired
companies over the estimated fair value of the tangible and intangible
net assets acquired. Goodwill is amortized on a straight line basis
over 40 years. Other intangibles consist primarily of patents,
trademarks and customer base arising from business combinations.
Intangibles are amortized on a straight line basis over periods
ranging from 15 to 30 years.
Accounting for Long-Lived Assets
The Company adopted Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to Be Disposed Of" (SFAS 121) in 1996. SFAS 121
establishes accounting standards for the impairment of long-lived
assets to be reviewed whenever events or changes in circumstances
indicate that the carrying value of an asset may not be recoverable.
In addition, SFAS 121 requires that certain long-lived assets be
reported at the lower of carrying value or the fair value less costs
to sell. Adopting SFAS 121 had no material impact on the Company's
results of operations and financial position for 1997 and 1996.
Environmental Expenditures
The Company accrues for environmental expenses resulting from
existing conditions that relate to operations when the costs are
probable and reasonable to estimate.
Revenue Recognition
In general, revenue is recognized when a 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.
Research and Development
Research and development costs are charged to operations as
incurred. In-process research and development is charged to
operations in the period acquired.
Other Nonoperating Income and Expenses
Other nonoperating income and expenses for the Company are generally
comprised of five primary items: (i) interest expense, (ii) interest
income, (iii) foreign exchange gains or losses, (iv) investments that
are non-core or are accounted for as a minority interest and (v) other
nonoperating gains or losses. Interest income typically includes
income form sales-type leases and interest on cash equivalents and
other investments. Foreign exchange gains or losses are primarily the
result of the Company's hedging activities (net of revaluation) and
are recorded net of premiums paid. Other nonoperating gains and
losses are most frequently the result of one-time items such as asset
sales or other items.
Income Taxes
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.
Earnings (Loss) Per Share
The Company adopted Statement of Financial Accounting Standards No.
128, "Earnings Per Share" (SFAS 128) in 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. Under SFAS 128, basic EPS is calculated by dividing net
earnings (loss) 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 treasury
stock method based upon the weighted-average fair value of the
Company's common shares during the period. SFAS 128 was required to
be adopted by the Company in its year-end 1997 Annual Report, and
earnings per share for prior periods have been restated in accordance
with SFAS 128. See Note 13 "Earnings Per Share" for computation of
EPS.
Recent Accounting Developments
The Company intends to adopt Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" (SFAS 130), and
Statement of Financial Accounting Standards No. 131, "Disclosures
about Segments of an Enterprise and Related Information"(SFAS 131), in
1998. Both standards will require additional disclosure, but will not
have a material effect on the Company's financial position or results
of operations. SFAS 130 establishes standards for the reporting and
display of comprehensive income and is expected to first be reflected
in the Company's first quarter of 1998 interim financial statements.
Components of comprehensive income include items such as net earnings,
foreign currency translation adjustments and changes in value of
available-for-sale securities. SFAS 131 changes the way companies
report segment information and requires segments to be determined and
reported based on how management measures performance and makes
decisions about allocating resources. SFAS 131 will first be
reflected in the Company's 1998 Annual Report.
Reclassifications
Certain reclassifications have been made to prior year amounts to
conform with the current year presentation.
2. Composition of Certain Financial Statement Captions
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Trade receivables and other
Trade receivables $ 488.5 $ 295.3
Other receivables 30.0 20.7
Current portion of lease receivables 23.5 3.1
Less allowance for doubtful (17.4) (9.6)
receivables
$ 524.6 $ 309.5
Inventories
Finished products $ 206.5 $ 123.8
Raw materials, parts and assemblies 99.1 53.0
Work in process 26.7 13.6
$ 332.3 $ 190.4
Property, plant and equipment, net
Land $ 74.1 $ 9.1
Buildings 240.2 144.1
Machinery and equipment 382.9 239.1
Instruments subject to lease(a) 205.6 281.6
$ 902.8 $ 673.9
Less accumulated depreciation
Building, machinery and equipment (365.4) (236.4)
Instruments subject to lease(a) (126.5) (174.0)
$ 410.9 $ 263.5
Other accrued expenses
Accrued restructuring costs 47.2 2.6
Unrealized service income 63.8 36.9
Insurance 27.2 23.1
Accrued warranty and installation
costs 18.6 4.5
Severance and related costs 109.6 -
Closure of offices and manufacturing
facilities 23.0 -
Change in control payments 36.0 -
Contractual obligations of Coulter
to its employees 103.0 -
employees
Other 147.1 48.1
$ 575.5 $ 115.2
</TABLE>
(a) Includes instruments leased to customers under three to five year
cancelable operating leases.
3. Acquisitions
During 1997, 1996 and 1995, the Company made the following
acquisitions, all of which were accounted for using the purchase
method of accounting. The operating results of these acquired
businesses have been included in the Consolidated Statements of
Operations from the dates of acquisition.
On October 31, 1997, the Company acquired all of the outstanding
capital stock of Coulter Corporation for $850.2, net of Coulter's cash
on hand of $24.8 at the date of acquisition. Coulter is the leading
manufacturer of in-vitro diagnostics systems for blood cell analysis.
The purchase of Coulter was financed with the net proceeds from a new
$1,300.0 credit facility (see Note 6 "Debt").
As a result of the acquisition, $374.4 in goodwill was recorded by
the Company. Goodwill reflects the excess of the purchase price,
purchase liabilities and liabilities assumed over the fair value of
net identifiable assets and in-process research and development
projects acquired. Acquired in-process research and development of
$282.0 was charged to expense in the fourth quarter in accordance with
generally accepted accounting principles. Purchase liabilities
recorded included approximately $110.0 for severance and related costs
and $23.0 for costs associated with the closure of certain offices and
manufacturing facilities. The Company expects to complete its
termination of certain employees and closure of certain facilities in
fiscal 1998. Assumed liabilities recorded included approximately
$103.0 of contractual obligations of Coulter to its employees, $36.0
of change in control payments and $31.0 of other assumed liabilities.
The Company expects to pay for the above obligations throughout fiscal
1998. At December 31, 1997 substantially all of the purchase
liabilities and $150.4 of the assumed liabilities remained on the
balance sheet. The Company does not believe that the final purchase
price allocation will differ significantly from the preliminary
purchase price allocation recorded in the current fiscal year.
The Company estimates, based upon current exchange rates, that its
cash funding requirements for the previously mentioned costs
associated with the Coulter acquisition will amount to approximately
$180.0 from the consummation of the Coulter acquisition through the
end of 1998, and approximately $50.0 to $65.0 in each of the following
two years. This includes up to $103.0 of sharing bonus plan payments
which will be made to Coulter's employees.
As the Company's 1997 financial statements only include two months
of operations of Coulter, the following selected unaudited pro forma
information is being provided to present a summary of the combined
results of Beckman and Coulter as if the acquisition had occurred as
of January 1, 1997 and 1996, giving effect to purchase accounting
adjustments. The pro forma data is for informational purposes only
and may not necessarily reflect the results of operations of Beckman
had Coulter operated as part of the Company for the years ended
December 31, 1997 and 1996.
<TABLE>
<CAPTION>
Pro Forma Years Ended
December 31, 1997 December 31, 1996
<S> <C> <C>
Sales $1,790.1 $1,722.6
Net earnings $ 9.0 $ 28.9
Basic earnings per share $ 0.33 $ 1.03
Diluted earnings per share $ 0.31 $ 1.00
</TABLE>
The pro forma amounts reflect the results of operations for
Beckman, Coulter and the following purchase accounting adjustments for
the periods presented:
* Amortization of intangible assets and goodwill based on the
purchase price allocation for each period presented.
* Amortization of debt financing fees and expenses over the term of
the new credit facility.
* The addition of interest expense on debt incurred to finance the
acquisition offset by a reduction of historical interest expense as a
result of the elimination of Coulter's debt.
* Additional cost of sales expense as a result of a step-up in the
basis of inventory.
* Estimated income tax effect on the pro forma adjustments.
The pro forma statements do not include the $282.0 write-off of in-
process research and development and the $59.4 accrued restructuring
costs, as they are non-recurring charges. These charges are included
in the Consolidated Statements of Operations of the Company for 1997.
The pro forma diluted net earnings per share is based on the weighted
average number of common shares and dilutive common share equivalents
of Beckman during 1997 and 1996.
In April 1997 the Company acquired the Access immunoassay product
line and related manufacturing facility from Sanofi Diagnostics
Pasteur, Inc. ("Sanofi"). The acquisition also established an ongoing
alliance in immunochemistry between the Company and Sanofi. The
Access product line, together with the earlier acquisition of
Hybritech Incorporated ("Hybritech") and the Company's own
immunochemistry/protein products, create a major presence for the
Company in the field of immunochemistry.
In December 1996 the Company acquired the assets and assumed the
liabilities of the laboratory robotics division of Sagian Inc. of
Indianapolis, Indiana. By combining Sagian's scheduling software and
robotics with its own biorobotics systems, the Company enhanced its
ability to serve the pharmaceutical industry's need for high-
throughout screening (HTS) of candidate compounds for new drugs.
In January 1996, the Company acquired the assets and assumed the
liabilities of Hybritech, a San Diego-based life sciences and
diagnostic company. The acquisition expanded the Company's ability to
develop and manufacture high sensitivity immunoassays, including
cancer tests.
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 was completed on October 21,
1996.
With the exception of Coulter, the purchase prices of the
acquisitions and the effects on consolidated results of operations
were not material to the Company individually or in the aggregate.
4. Provision for Restructuring Operations
1997 Restructuring:
The Company recorded a restructuring charge of $59.4, $36.4 after
taxes or $1.32 per share, in the fourth quarter of 1997. The work
force reductions anticipated under this plan, some of which occurred
prior to year-end total approximately 500 employees in Europe, Asia
and North America in sales, general, administrative and technical
functions and approximately 100 employees in production related areas.
The charge included $37.3 for severance related costs. The $22.1
provided for facility consolidation and asset related write-offs
included $2.5 for lease termination payments, $12.2 for the write-off
of machinery, equipment and tooling associated with those functions to
be consolidated, and $7.4 for exiting non-core investment activities.
These changes are scheduled to be substantially completed by December
1998. At December 31, 1997, the Company's remaining obligation
related to the restructuring charges was $46.6, which is included in
"Other Accrued Expenses."
The following table details the major components of the 1997
restructuring provision:
<TABLE>
<CAPTION>
Facility
consolidation
and asset
Provision Personnel related Total
write-offs
<S> <C> <C> <C>
Consolidation of sales,
general,
administrative and
technical functions $ 34.3 $ 18.2 $ 52.5
Changes in manufacturing
operations 3.0 3.9 6.9
------------------------------
Total provision 37.3 22.1 59.4
Fiscal 1997 Activity
Consolidation of sales,
general,
administrative and
technical functions 7.8 5.0 12.8
Changes in manufacturing
operations - - -
------------------------------
Total 1997 activity 7.8 5.0 12.8
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
-------------------------------
Balance at December 31,
1997 $ 29.5 $ 17.1 $ 46.6
===============================
</TABLE>
Prior Years Restructuring:
The Company also recorded a restructuring charge of approximately
$27.7 in 1995. This restructuring charge included 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. At December 31, 1997
and 1996, the Company's remaining obligation relating to this
restructuring charge was $0.4 and $2.6, respectively, and is included
in "Other Accrued Expenses".
5. Sale of Assets
In December 1997, the Company sold $34.2 of Coulter's sales-type
lease receivables, net of $2.6 of allowances, for cash proceeds of
$35.7. 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 Sheet. The sale is subject to certain recourse provisions and
as such the Company established a $1.5 reserve for potential losses.
Also in December 1997, the Company entered into an agreement for the
sale and leaseback of certain instruments which are subject to various
three to five year cancelable operating-type leases to customers.
These instruments had a net book value of $37.0 and were sold for cash
proceeds of $39.6. The gain is being deferred and credited to income,
as a rent expense adjustment over the lease term. Obligations under
the operating lease agreement are included in the lease commitments
disclosure in Note 12 "Commitments and Contingencies".
Proceeds from the above transactions were used to reduce outstanding
borrowings under the new $1,300 credit facility (see Note 6 "Debt").
6. Debt
Notes payable consist primarily of short-term bank borrowings by the
Company's subsidiaries outside the U.S. under local lines of credit.
The bank borrowings are at rates which approximate current market
rates; therefore, the carrying value of the notes approximates the
market value. At December 31, 1997 approximately $139.9 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 $18.0 in unused committed 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.
Long-term debt consisted of the following at December 31:
<TABLE>
<CAPTION>
Average
Rate of
Interest 1997 1996
<S> <C> <C> <C>
Credit Agreement -
Term loan facility 6.75% $ 400.0 $ -
Credit Agreement -
Revolving credit
facility 6.47% 600.0 -
Debentures 7.05% 100.0 100.0
Senior notes, unsecured - - 50.0
Other long-term debt 6.39% 101.2 30.9
------- -----
1,201.2 180.9
Less current maturities 19.9 4.3
------- -----
Long-term debt, less
current maturities $1,181.3 $176.6
======== ======
</TABLE>
In October 1997, in conjunction with the acquisition of Coulter, the
Company cancelled its $150.0 credit agreement and entered into a new
credit agreement (the "Credit Agreement") with a group of financial
institutions. The Credit Agreement provides up to a maximum aggregate
amount of $1,300.0 through a $500.0 senior unsecured term loan
facility (the "Term Loan") and an $800.0 senior unsecured revolving
credit facility (the "Credit Facility"). Borrowings under the Credit
Agreement generally bear interest at current market rates plus a
margin based upon the Company's senior unsecured debt rating or debt
to earnings ratio, whichever is more favorable to the Company, except
in the case of competitive bid advances (as defined in the Credit
Agreement) which may bear interest at a fixed rate. The Company is
accordingly subject to fluctuations in such interest rates, which
could cause its interest expense to increase or decrease in the
future. As a result of the substantial indebtedness incurred in
connection with the Coulter acquisition, the Company's interest
expense will be higher and will have a much greater proportionate
impact on net earnings in comparison to pre-acquisition periods. The
Company must also pay a quarterly facility fee on the average Credit
Facility commitment. In addition, approximately $6.8 of fees paid to
enter the Credit Agreement are being amortized to interest expense
over the term of the Credit Agreement. The Credit Agreement provides
for mandatory prepayment of the Term Loan and Credit Facility
borrowings (and, to the extent provided, reductions in commitments)
thereunder from excess cash flow (as defined in the Credit Agreement),
and from proceeds of certain equity or debt offerings, asset sales and
extraordinary receipts. The Credit Facility is not subject to any
scheduled principal amortization. Beginning in March 2000, the
Company will be required to make scheduled quarterly principal
payments of $25.0 on the Term Loan borrowings with a final maturity in
October 2002. The Credit Facility matures on the same date as the
Term Loan. As of the date of this report, the Company's remaining
borrowing availability under the Credit Facility is $200.00 . Undrawn
amounts under the Credit Facility will be available to meet future
working capital and other business needs of the Company.
In June 1996, the Company issued $100.0 of debentures bearing an
interest rate of 7.05% per annum due June 1, 2026. Interest is
payable semi-annually in June and December. The debentures were
recorded net of discount and issuance costs of approximately $1.5
which are being amortized to interest expense over the term of the
debentures. The debentures may be repaid on June 1, 2006 at the
option of the holders of the debentures, at 100% of their principal
amount, together with accrued interest to June 1, 2006, in accordance
with the terms of the debenture agreement. The debentures may be
redeemed, in whole or in part, at the option of the Company at any
time after June 1, 2006 at a redemption price equal to the greater of
the principal amount of the debentures or the sum of the present
values of the remaining scheduled payments of principal and interest
thereon discounted to the redemption date on a semiannual basis at a
comparable treasury issue rate plus a margin.
The Company had $50.0 senior notes, comprised of Series A $20.0 and
Series B $30.0 notes, that were repaid with borrowings under the
Credit Agreement in October 1997. In addition, the Company paid a
premium of approximately $2.0 to redeem the notes.
Other long-term debt at December 31, 1997 consists principally of
$76.6 of notes used to fund the operations of the Company's
international subsidiaries and notes given as partial consideration
for an acquisition. Some of the notes issued by the Company's
international subsidiaries are secured by their assets. Notes used to
fund the Company's international subsidiaries amounted to $22.1 in
1996. Capitalized leases of $24.6 in 1997 and $8.8 in 1996 are also
included in other long-term debt.
Certain of the Company's borrowing agreements contain covenants that
the Company must comply with, for example: minimum net worth, maximum
capital expenditures, a debt to earnings ratio, a minimum interest
coverage ratio and a maximum amount of debt incurrence. At December
31, 1997, the Company was in compliance with all such covenants.
The aggregate maturities of long-term debt for the five years
subsequent to December 31, 1997 are $19.9 in 1998, $24.6 in 1999,
$110.7 in 2000, $107.4 in 2001, $814.6 in 2002 and $124.0 thereafter.
7. Derivatives
The Company manufactures its products principally in the United
States, but generates approximately half of its revenues from sales
made outside the U.S. by its international subsidiaries. Sales
generated by the international subsidiaries generally utilize the
subsidiary's local currency, thereby 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's policy is not to speculate in derivative
instruments to profit on the foreign currency exchange or interest
rate price fluctuation, nor to enter trades for which there are no
underlying exposures, nor enter into trades to intentionally increase
the underlying exposure. Instruments used as hedges must be
effective at reducing the risk associated with the exposure being
hedged and are designated as a hedge at the inception of the
contract. Accordingly, changes in market values of hedge instruments
are highly correlated with changes in market values of underlying
hedged items both at the inception of the hedge and over the life of
the hedge contract.
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. The Company uses forward contracts, purchased option
contracts, and complex option contracts, consisting of purchased and
sold options, to hedge transactions with its foreign customers. The
hedge instruments mature at various dates with premiums and resulting
gains or losses recognized at the maturity date, which approximates
to the transaction date. The notional values of contracts afforded
hedge accounting treatment are summarized as follows at December 31:
<TABLE>
<CAPTION>
<S> <C> <C>
1997 1996
Forward Contracts $66.9 $63.6
Purchased Option
Contracts 45.0 28.5
Complex Option
Contracts 28.5 -
</TABLE>
When the Company uses foreign currency contracts and the dollar
strengthens against foreign currencies, the decline in the value of
future foreign currency cash flows is partially offset by the
recognition of gains in the value of the foreign currency contracts
designated as hedges of the transactions. Conversely, when the dollar
weakens, the increase in the value of future foreign currency cash
flows is reduced by (i) the recognition of the net premium paid to
acquire option contracts; (ii) the recognition of any loss in the
value of the forward contracts designated as hedges of the
transactions and (iii) the recognition of any loss on sold options.
Market value gains and losses and premiums on these contracts are
recognized in "Other, net nonoperating expense" when the hedged
transaction is recognized. The net premiums paid for purchased and
complex options are reported in current assets.
The Company held purchased foreign currency call option contracts
totaling $20.4 and $45.9 at December 31, 1997 and 1996, respectively,
which did not qualify for hedge accounting treatment. The call
options were purchased to create synthetic puts when combined with
forward and complex option contracts, thereby cost effectively
reducing the Company's risk. The purchased call options mature at
various dates throughout 1998 with resulting gains recognized at
maturity. Premiums paid for these contracts are recognized
immediately in "Other, net nonoperating expense".
The Company also uses foreign currency swap contracts to hedge
loans between subsidiaries. At December 31, 1997, the Company had
foreign currency swap contracts totaling $103.7 expiring at various
dates through February 1998. At December 31, 1996, the Company had
foreign currency swap contracts totaling $89.8. As monetary assets
and liabilities are marked to market and recorded in earnings,
foreign currency swap contracts designated as hedges of the monetary
assets and liabilities are also marked to market with the resulting
gains and losses similarly recognized in earnings. Gains and losses
on foreign currency swap contracts are, included in "Other, net
nonoperating expense" and offset losses and gains on the hedged
monetary assets and liabilities. The carrying value of foreign
currency swap contracts is reported in current assets and current
liabilities.
The Company occasionally uses purchased foreign currency option
contracts to hedge the market risk of a subsidiary's net asset
position. At December 31, 1997, the Company had no purchased foreign
currency option contracts related to net asset positions. At December
31, 1996 the Company had $3.5 purchased foreign currency option
contracts related to net asset positions. Purchased foreign currency
option contracts resulted in favorable foreign currency translation
adjustments of $1.5 and $1.2 at December 31, 1997 and 1996,
respectively. Purchased foreign currency option contracts to hedge the
market risk of a subsidiary's net asset position are recognized in
"Foreign currency translation adjustments" when the hedged transaction
is recognized. The foreign currency translation adjustments are only
recognized in "Other, net nonoperating expense" upon liquidation of
the subsidiary.
The Company uses interest rate contracts on certain borrowing
transactions to hedge fluctuating interest rates. Interest rate
contracts are intended to be an integral part of borrowing transactions
and, therefore, are not recognized at fair value. Interest differentials
paid or received under these contracts are recognized as adjustments to
the effective yield of the underlying financial instruments hedged.
Interest rate contracts would only be recognized at fair value if the
hedged relationship is terminated. Gains or losses accumulated prior to
termination of the hedged relationship would be amortized as a yield
adjustment over the shorter of the remaining life of the contract or the
remaining period to maturity of the underlying instrument hedged. If the
contract remained outstanding after termination of the hedged
relationship, subsequent changes in market value of the contract would be
recognized in "Interest expense".
In October 1997, the Company entered into interest rate contracts
associated with its $1,100.0 in borrowing arising from the acquisition
of Coulter. Specifically, the Company entered into $500.0 in interest
rate swap agreements in which the Company receives an average floating
interest rate equal to the three-month LIBOR (5.8% at December 31,
1997) and pays an average fixed interest rate of 6.2%. The Company
also entered into $400.0 in treasury rate lock agreements to hedge the
U.S. Treasury Note rate underlying an expected refinancing. The
interest rate swaps and the U.S. Treasury rate locks are accounted for
as hedges.
The Company is exposed to credit risk in the event of non-
performance of the counterparties to its foreign currency and interest
rate contracts, 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. The disclosed
derivatives are indicative of the volume and types of instruments used
throughout the year after giving consideration to the increase in
volume arising from the acquisition of Coulter. The market value of
all derivative instruments amounted to an unrecognized loss of $8.0 at
December 31, 1997.
8. Income Taxes
The components of (loss) earnings before income taxes were:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
U.S. $(304.5) $ 42.5 $ 21.2
Non-U.S. 52.6 69.0 51.2
------ ------ ------
$(251.9) $ 111.5 $ 72.4
</TABLE>
<TABLE>
<CAPTION>
The provision (benefit) for income taxes consisted of the following:
1997 1996 1995
<S> <C> <C> <C>
Current
U.S. federal $ 5.2 $ 9.6 $ 5.1
Non-U.S. 5.3 12.4 7.7
U.S. state and Puerto
Rico 3.5 4.0 (0.6)
------ ----- -----
Total current 14.0 26.0 12.2
Deferred
U.S. federal 0.7 9.0 4.3
Non-U.S. (2.2) 1.8 7.0
Total deferred, net (1.5) 10.8 11.3
------ ------ ------
Total $ 12.5 $ 36.8 $ 23.5
</TABLE>
<TABLE>
<CAPTION>
The reconciliation of the U.S. federal statutory tax rate to the
consolidated effective tax rate is as follows:
<S> <C> <C> <C>
1997 1996 1995
Statutory tax rate (35.0)% 35.0% 35.0%
In-process research and
development 39.2 - -
State taxes, net of U.S.
tax 0.1 0.4 0.8
benefit
Ireland and Puerto Rico
income (2.0) (6.8) (13.6)
Non-U.S. taxes 0.9 5.0 10.9
Foreign income taxed in
the U.S., net of
credits 1.4 (2.8) 0.4
Other 0.4 2.2 (1.0)
---- ---- ----
Effective tax rate 5.0% 33.0% 32.5%
==== ==== ====
</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 $5.1 in 1997, $7.6 in 1996, and $9.8 in 1995. 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.
<TABLE>
<CAPTION>
The components of the (benefit) provision for deferred income taxes
are:
<S> <C> <C> <C>
1997 1996 1995
Restructuring costs $ (15.7) $ 3.0 $ 13.2
Compensation 18.7 - -
Inventory (4.0) - -
Net operating loss (2.6) - -
International transactions 2.2 1.3 (4.7)
Accelerated depreciation (0.4) (0.5) 0.4
Accrued expenses (4.2) 3.3 (0.6)
Pension costs 8.9 6.9 1.7
Postretirement medical
costs (1.7) (1.7) (0.5)
Other (2.7) (1.5) 1.8
-------- ------- -------
Total $ (1.5) $ 10.8 $ 11.3
======== ======= =======
</TABLE>
<TABLE>
<CAPTION>
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:
<S> <C> <C>
1997 1996
Deferred tax assets
Inventories $ 9.8 $ 2.9
Capitalized expenses 0.7 1.0
International 22.7 -
Tax credits 23.8 -
Purchase and assumed liabilities
(see Note 3) 87.4 -
Pension costs - 2.4
Accrued expenses 43.9 19.9
Restructuring costs 16.3 0.6
Environmental costs 4.8 5.0
Postretirement benefits 38.6 26.5
Other 28.3 32.0
------ ------
276.3 90.3
Less: Valuation allowance (42.4) (14.5)
------ ------
Total deferred tax assets 233.9 75.8
Deferred tax liabilities
Depreciation 1.8 2.3
Pension costs 9.9 -
Intangible assets 140.4 -
Fixed assets 17.5 -
Leases 9.9 -
Deferred service contracts 3.2 -
International transactions 6.4 -
Other 32.1 1.3
------- -------
Total deferred tax liabilities 221.2 3.6
------- -------
Net deferred tax asset $ 12.7 $ 72.2
======= =======
</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 net deferred tax asset at December 31, 1997.
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.
At December 31, 1997 and 1996 the Company recorded a valuation
allowance of $42.4 and $14.5 respectively, for certain deductible
temporary differences for which it is more likely than not that the
Company will not receive future benefits. The change in the valuation
allowance was $27.9 and $0 for 1997 and 1996, respectively. The
change in the valuation allowance was primarily due to the acquisition
of Coulter.
Non-U.S. withholding taxes and U.S. taxes have not been provided on
approximately $111.4 of unremitted earnings of certain non-U.S.
subsidiaries because such earnings are or will be reinvested in
operations or will be offset by credits for foreign income taxes paid.
All income tax liability issues between the Company and its former
parent SmithKline Beckman have been resolved in accordance with a tax
agreement between the two companies. Such resolution did not have a
material effect on the Company's consolidated financial position or
operating results.
9. Stockholders' Equity
The Company had been authorized, through 1998, to acquire its common
stock to meet the needs of its existing stock-related employee benefit
plans. Under this program, the Company repurchased 1.0 shares of its
common stock during 1997 and 1.0 shares during 1996. The Company
elected to discontinue this stock repurchase program in connection
with the Coulter acquisition. The credit facility generaly prohibits
market repurchase of the Company's stock. Treasury shares have been,
and are expected to continue to be, reissued to satisfy the Company's
obligations under existing stock-related employee benefit plans.
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
Employee Stock Purchase Plan. At December 31, 1997, 1.4 shares remain
in treasury of which 0.7 are held by the BEF.
10. Employee Benefits
Incentive Compensation 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 granted options to purchase approximately 0.8 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 typically
vest over three years and 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 issued and outstanding as
of the prior December 31. As of January 1, 1998, 0.6 shares remain
available for grant under this plan.
The following is a summary of the Company's option activity,
including weighted average option information (in thousands, except
per option information):
<TABLE>
<CAPTION>
1997 1996 1995
Exercise Exercise Exercise
Price Per Price Per Price Per
Options Option Options Option Options Option
<S> <C> <C> <C> <C> <C> <C>
Outstanding
at beginning
of year 2,672 $26.03 2,634 $ 22.83 2,689 $ 21.39
Granted 536 $40.49 447 $ 40.72 418 $ 29.33
Exercised (302) $26.77 (372) $ 19.97 (424) $ 19.57
Canceled (11) $33.38 (37) $ 37.12 (49) $ 27.20
Outstanding
at end of
year 2,895 $28.60 2,672 $ 26.03 2,634 $ 22.83
</TABLE>
<TABLE>
<CAPTION>
Outstanding Exercise Remaining Exercisable Exercise
Range of at December Price Contractual at December Price Per
Exercise 31, 1997 Per Life 31, 1997 Option
Prices Option (Years) (a)
<S> <C> <C> <C> <C> <C>
$16.50 to
$22.50 1,049 $19.72 3.5 1,049 $19.72
$26.38 to
$28.88 585 $26.43 6.2 585 $26.43
$29.25 to
$35.13 369 $29.34 7.3 249 $29.34
$39.56 to
$41.19 892 $40.16 8.7 151 $40.88
$16.50 to
$41.19 2,895 $28.60 6.1 2,034 $24.40
</TABLE>
(a) Options exercisable at December 31, 1996 and 1995 (in thousands)
were 1,911 and 1,705, respectively.
The following represents pro forma information as if the Company
recorded compensation cost using the fair value of the issued
compensation instrument (the results may not be indicative of the
actual effect on net income in future years):
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Net (loss) earnings as reported $(264.4) $ 74.7
Assumed stock compensation cost 5.7 2.6
------- ------
Pro forma net (loss) earnings $(270.1) $ 72.1
======= ======
Diluted (loss) earnings per share as
reported $ (9.58) $ 2.58
Pro forma diluted (loss) earnings per
share $ (9.79) $ 2.49
</TABLE>
The Company uses the Black-Scholes valuation model for estimating
the fair value of its compensation instruments. The following
represents the estimated fair value of options granted and the
assumptions used for calculation:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Weighted average estimated fair value
per option granted $ 15.73 $ 14.56
Average exercise price per option
granted $ 40.49 $ 40.72
Stock volatility 22.0% 18.0%
Risk-free interest rate 5.9% 6.7%
Option term - years 10.0 10.0
Stock dividend yield 1.4% 1.5%
</TABLE>
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.
Employee purchases are settled at six month intervals as of June 30
and December 31. The difference between the purchase price and fair
value is not material. Employees purchased 0.2 shares during 1997 and
1.1 shares remain available for use in the plan at December 31, 1997.
Postemployment Benefits
Effective January 1, 1994 the Company adopted Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits" (SFAS 112). 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. Additional
accruals for postemployment benefits, subsequent to adopting SFAS 112,
were approximately $0.9 in 1997 and $0.8 in 1996 and 1995.
11.Retirement Benefits
Pension Plans
Beckman provides pension benefits covering substantially all of its
employees. Coulter provides similar benefits covering foreign
employees. Consolidated pension expense was $8.6 in 1997, $18.3 in
1996, and $13.3 in 1995.
Pension benefits for Beckman's domestic employees are based on age,
years of service and compensation rates. Components of combined
pension expense related to these plans were:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Service cost $ 10.0 $ 10.8 $ 7.1
Interest cost 26.6 25.7 24.0
Actual return on plan
assets (66.2) (23.2) (23.8)
Net amortization and
deferral 35.9 1.0 1.2
------- ------ ------
Total $ 6.3 $ 14.3 $ 8.5
======= ====== ======
</TABLE>
Beckman's funding policy is to provide currently for accumulated
benefits, subject to federal regulations. Assets of the plans consist
principally of government fixed income securities and corporate stocks
and bonds. The funded status of the pension liabilities and assets
and amounts recognized in the consolidated financial statements with
respect to Beckman's domestic plan were:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Vested benefit obligation $ 353.6 $ 312.2
Accumulated benefit obligation 356.2 314.2
Projected compensation increases 51.7 45.0
Projected benefit obligation 407.9 359.2
Plan assets at fair market value (408.9) (314.1)
Projected benefit obligation
(less than) in excess of plan
assets (1.0) 45.1
Unrecognized net obligations
at transition (1.4) (1.9)
Unrecognized net (loss) (15.2) (35.6)
Unrecognized prior service cost (6.4) (7.3)
(Prepaid) accrued pension cost (24.0) 0.3
Assumptions used in calculations
Expected long-term rate of 9.8% 9.8%
return
Discount rate 7.0% 7.8%
Average rate of increase in
compensation 4.3% 4.3%
</TABLE>
Certain subsidiaries of Beckman and Coulter 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. Pension
expense for Beckman plans outside of the U.S. was $4.5 in 1997, $4.0
in 1996, and $4.8 in 1995. Pension expenses for Coulter plans were
$0.5 for the two month period ended December 31, 1997.
Beckman and Coulter have separate defined contribution plans for
their respective domestic employees. Under each plan, eligible
employees may contribute a portion of their compensation. Employer
contributions are primarily based on a percentage of employee
contributions. Additional Coulter contributions to its plan are based
on the age and salary levels of employees. Beckman contributed $4.8
in 1997, $4.5 in 1996 and $3.6 in 1995. Coulter contributed $2.0 for
the two months ended December 31, 1997. Employees under both plans
generally become fully vested with respect to employer contributions
after three to five years of qualifying service as defined by each
plan.
Health Care and Life Insurance 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.
The postretirement benefits for both active and retired employees of
Coulter were continued after the acquisition. The amounts below
reflect the assumption of these additional liabilities and costs from
November 1, 1997.
The net periodic cost for postretirement health care and life
insurance benefits includes the following:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Service cost $ 1.2 $ 1.4 $ 1.0
Interest cost 3.3 3.3 3.7
Net amortization (1.2) (0.5) (0.7)
------ ------ ------
Total $ 3.3 $ 4.2 $ 4.0
====== ====== ======
</TABLE>
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>
1997 1996
<S> <C> <C>
Accumulated postretirement benefit
obligations
Retirees $ 38.9 $ 27.2
Fully eligible active plan
participants 7.1 2.2
Other active plan participants 27.1 17.3
---- ----
Total obligation 73.1 46.7
Plan assets - -
Accumulated postretirement benefit
obligation in excess of plan assets 73.1 46.7
Unrecognized prior service cost 1.1 -
Unrecognized net gain 20.8 17.8
---- ----
Accrued postretirement benefit
liability $ 95.0 $ 64.5
==== ====
</TABLE>
<TABLE>
<CAPTION>
Assumptions used in 1997 1996 1995
calculations
<S> <C> <C> <C>
Weighted average discount
rate 7.2% 7.8% 7.0%
Calculation of obligation,
excluding Coulter:
Healthcare cost trend rate 8.0% 8.0% 8.0%
Decreasing to ultimate rate
by the year 2004 5.5% 5.5% 5.5%
Calculation of Coulter
obligation:
Healthcare cost trend rate 7.0% - -
Decreasing to ultimate rate
by year 2002 5.0% - -
</TABLE>
An assumed 1% increase in the healthcare cost trend rate for each year
would have resulted in an increase in the net periodic pension cost by
$0.7 in 1997, $0.9 in 1996 and $0.7 in 1995 and in the accumulated post
retirement benefit obligation by $10.9 in 1997 and by $7.0 in 1996.
Employees outside the U.S. generally receive similar benefits from
government-sponsored plans.
12. Commitments and Contingencies
Environmental Matters
The Company is subject to federal, state, local and foreign
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. The Company believes
that its operations comply in all material respects with applicable
federal, state, local and foreign environmental laws and regulations.
In 1983, the Company discovered organic chemicals in the groundwater
near a waste storage pond at its manufacturing 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 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
obligation of SmithKline Beckman in this respect.
In 1987 soil and groundwater contamination was discovered on
property in Irvine, California (the "property") formerly owned by the
Company. In 1988 The Prudential Insurance Company of America
("Prudential"), which purchased the property from the Company, filed
suit against the Company in U.S. District Court in California for
recovery of costs and other alleged damages with respect to the soil
and groundwater contamination. 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.
Soil and groundwater remediation of the property have been in
process since 1988. During 1994 the County agency overseeing the site
soil remediation formally acknowledged completion of remediation of a
major portion of the soil, although there remain other areas of soil
contamination that may require further remediation. In July 1997 the
California Regional Water Quality Control Board, the agency overseeing
the site groundwater remediation, issued a closure letter for the
upper water bearing unit. The Company and Prudential continued to
operate a groundwater treatment system throughout 1997 and expect to
continue its operation in 1998.
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 investigation
will not have a material adverse effect on the Company's operations or
financial position.
Litigation
The Company is currently, and is from time to time, subject to
claims and suits arising in the ordinary course of its business,
including those relating to intellectual property, contractual
obligations, competition and employment matters. In certain such
actions, plaintiffs request punitive or other damages or nonmonetary
relief, which may not be covered by insurance, and in the case of
nonmonetary relief, could, if granted, materially affect the conduct
of the Company's business. The Company accrues for potential
liabilities involved in these matters as they become known and can be
reasonably estimated. In the Company's opinion (taking third party
indemnities into consideration), the various asserted claims and
litigation in which the Company is currently involved are not
reasonably likely to have a material adverse effect on the Company's
operations or financial position. However, no assurance can be given
as to the ultimate outcome with respect to such claims and litigation.
The resolution of such claims and litigation could be material to the
Company's operating results for any particular period, depending upon
the level of income for such period.
In January 1996, Coulter, then unrelated to Beckman, notified
Hematronix, a competitive reagent manufacturer, that Hematronix was
selling certain reagents and controls that infringed upon certain of
Coulter's patents. In response, Hematronix filed a complaint against
Coulter in April 1996, in the United States District Court of the
Eastern District of California. The complaint seeks a declaratory
judgment to invalidate the patents. The complaint also includes
antitrust and related business tort claims directed at Coulter's
business and leasing activities, and seeks 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. Discovery has been
conducted by both sides and is continuing. The Company has filed a
motion for summary judgment on the antitrust and other non-patent
issues. The motion has been heard and a decision from the court is
pending. The Company believes that the patents at issue are valid and
have been infringed upon by Hematronix and that the antitrust claims
are without merit. If the matter does proceed to trial, the trial is
scheduled for October, 1998. Although the plaintiff has claimed
substantial damages, based on the Company's analysis of the present
facts and the existence of certain indemnities by the former
stockholders of Coulter, the Company believes that the ultimate
outcome of this litigation is not reasonably likely to have a material
adverse effect on the Company's operations or financial position.
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 diagnostics equipment in Italy, including the Company's
Italian subsidiary. The inquiry focuses on past leasing practices for
placement of diagnostics 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 against certain identified employees
(the subsidiary is not a defendant). The Court has appointed economic
experts to evaluate and present a comprehensive economic report on the
leasing practices of the industry. 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.
Through its Hybritech acquisition (see Note 3 "Acquisitions"), the
Company obtained a patent, referred to as the Tandem Patent, that
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 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"), former 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 but subsequently increased its demand to $40 . Forest
City also sought 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
discussion of "Environmental Matters" above.
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 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 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.
As previously reported, since 1992 six 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 (relating
to a former Company manufacturing site) and a number of other
defendants, including Motorola, Inc., Siemens Corporation, the cities
of Phoenix and Scottsdale, and others. 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. These suits are
currently in the discovery phase, with the first of several
anticipated trials in the actions scheduled for June 1998.
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 its operations or
financial position. See environmental discussion above.
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 $35.4 in 1997, $32.9 in 1996, and
$32.4 in 1995.
As of December 31, 1997, minimum annual rentals payable under
non-cancelable operating leases aggregate $94.5, which is payable
$30.1 in 1998, $22.0 in 1999, $17.6 in 2000, $13.7 in 2001, $3.0 in
2002 and $8.1 thereafter.
Other
Under the Company's dividend policy, the Company pays a regular
quarterly dividend to its stockholders which amounted to $16.6 in
1997 and $14.7 in 1996. In February of 1998, the Board of Directors
declared a quarterly dividend of $0.15 per share, which approximates
$4.1 in total. This dividend is payable April 2, 1998 to
stockholders of record on February 3, 1998. The Credit Facility
restricts (but does not prohibit) the Company's ability to pay
dividends.
13. Earnings (loss) Per Share
In accordance with SFAS 128, the following is a reconciliation of the
numerators and denominators of the basic and diluted EPS computations.
<TABLE>
<CAPTION>
1997
Income Shares Per-Share
(Numerator) (Denominator) Amount
<S> <C> <C> <C>
Basic EPS
Net (loss) $ (264.4) 27.6 $ (9.58)
Effect of dilutive stock
options - - -
-------- ---- -------
Diluted EPS (1)
Net (loss) $ (264.4) 27.6 $ (9.58)
======== ==== =======
</TABLE>
(1)Under generally accepted accounting principles, as the Company was
in a net loss position in the current year, 1.0 million common share
equivalents were not used to compute diluted loss per share, as the
effect was antidilutive.
<TABLE>
<CAPTION>
1996
Income Shares Per-Share
(Numerator) (Denominator) Amount
<S> <C> <C> <C>
Basic EPS
Net earnings $ 74.7 28.0 $ 2.66
Effect of dilutive stock
options - 0.9 (0.08)
------ ---- -----
Diluted EPS
Net earnings $ 74.7 28.9 $ 2.58
====== ==== =====
</TABLE>
<TABLE>
<CAPTION>
1995
Income Shares Per-Share
(Numerator) (Denominator) Amount
<S> <C> <C> <C>
Basic EPS
Net earnings $ 48.9 28.1 $ 1.74
Effect of dilutive stock
options - 0.7 (0.04)
------ ---- ------
Diluted EPS
Net earnings $ 48.9 28.8 $ 1.70
====== ==== ======
</TABLE>
14. Business Segment Information
Industry Segment
<TABLE>
<CAPTION>
The Company is engaged primarily in the design, manufacture and
sale of laboratory instrument systems and related products.
1997 1996 1995
<S> <C> <C> <C>
Geographic areas
Sales
United States-domestic $ 889.2 $ 738.5 $ 606.1
United States-export 60.8 36.0 28.9
Europe 342.4 318.6 312.9
Asia and other areas 191.5 163.1 160.2
Transfers between areas (285.9) (228.2) (178.0)
------ ------- ------
Total sales $1,198.0 $ 1,028.0 $ 930.1
======= ======= ======
Operating (loss) income
United States before
research and
development $ 162.9 $ 180.1 $ 137.2
Research and
development (a) (123.6) (108.4) (91.7)
In-process research and
development (282.0) - -
------ ------ ------
United States (242.7) 71.7 45.5
Europe 3.6 45.4 28.2
Asia and other areas 2.1 5.4 9.4
------ ------ ------
Total operating (loss)
income(b) $ (237.0) $ 122.5 $ 83.1
====== ====== ======
Identifiable assets (c)
United States $ 857.4 $ 503.3 $ 446.3
Europe 444.3 243.1 228.8
Asia and other areas 218.5 94.0 89.4
Corporate 810.8 119.7 143.3
------ ------ ------
Total assets $2,331.0 $ 960.1 $ 907.8
====== ====== ======
</TABLE>
(a) The Company's principal research and development efforts are
performed in the United States.
(b) Includes restructuring charges of $59.4 and $27.7 in 1997 and
1995 respectively. The Company did not incur restructuring charges in
1996.
(c) 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,
fixed assets of a corporate nature, intangible assets and goodwill.
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, 1997 trade
receivables and other by geographic area were United States $226.4,
Europe $188.0 and Asia and other areas $110.2. At December 31, 1996
trade receivables and other by geographic area were United States
$120.9, Europe $135.8 and Asia and other areas $52.8.
15. Supplementary Information
Allowance for Doubtful Accounts
<TABLE>
<CAPTION>
Balance Additions
at Charged to Balance at
Beginning Cost and End of
of Period Expenses Deductions Other Period
<S> <C> <C> <C> <C> <C>
December 31,
1997 $ 9.6 $ 2.4(a) $ 3.5(b) $ 9.4(d) $ 17.4
0.5(c)
December 31,
1996 9.1 2.2(a) 1.1(b) - 9.6
0.6(c)
December 31,
1995 10.4 0.7(a) 2.8(b) - 9.1
0.8(c)
</TABLE>
(a) Provision charged to earnings.
(b) Accounts written-off.
(c) Adjustments from translating at current exchange rates.
(d) Allowance acquired as part of the Coulter acquisition.
<PAGE>
<TABLE>
<CAPTION>
QUARTERLY INFORMATION (Unaudited)
In millions, except amounts per share
First Second Third Fourth For
Quarter Quarter Quarter Quarter the Year
1997 1996 1997 1996 1997 1996 1997 1996 1997 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $231.9 $224.8 $270.6 $265.2 $271.6 $252.8 $423.9 $285.2 $1,198.0 $1,028.0
Cost
of
sales 109.6 104.9 130.7 123.6 132.1 117.8 237.3 131.5 609.7 477.8
Marketing,
general
and
adminis-
trative 74.8 73.7 79.7 83.3 82.9 77.7 122.9 84.6 360.3 319.3
Research
and
develop-
ment 24.0 24.7 28.6 27.3 27.7 26.1 43.3 30.3 123.6 108.4
In-process
research
and
develop-
ment - - - - - - 282.0 - 282.0 -
Restructu-
ring
Charge - - - - - - 59.4 - 59.4 -
Operating
income
(loss) 23.5 21.5 31.6 31.0 28.9 31.2 (321.0) 38.8 (237.0) 122.5
Earnings
(loss)
before
income
taxes 22.3 20.5 29.7 28.3 27.7 27.9 (331.6) 34.8 (251.9) 111.5
Net
earnings
(loss) $15.6 $13.7 $20.8 $19.0 $19.4 $18.7$(320.2) $23. 3 $(264.4) $74.7
Basic
earnings
(loss)
per
share $0.56 $0.48 $0.75 $0.68 $0.71 $0.67$(11.60) $ 0.83 $ (9.58) $2.66
Diluted
earnings
(loss)
per
share $0.54 $ 0.47 $0.72 $0.65 $0.68 $0.65$(11.63) $ 0.81 $(9.58) $2.58
Dividends
per
share $0.15 $ 0.13 $0.15 $0.13 $0.15 $0.13$ 0.15 $0.13 $ 0.60 $0.52
Stock price
- High 44 3/8 39 1/8 49 3/16 41 1/8 52 5/16 39 7/8 44 1/2 39 1/4 52 5/16 41 1/8
Stock price
- - Low 37 7/8 33 1/2 40 3/8 35 1/8 39 3/4 32 37 3/8 35 37 3/8 32
</TABLE>
Bar Chart: Stock Price By Quarter 1997
Quarter 1st 2nd 3rd 4th
$ Per Share
High 44 3/8 49 3/16 52 5/16 44 1/2
Low 37 7/8 40 3/8 39 3/4 37 3/8
Bar Chart: Stock Price By Quarter 1996
Quarter 1st 2nd 3rd 4th
$ Per Share
High 39 1/8 41 1/8 39 7/8 39 1/4
Low 33 1/2 35 1/8 32 35
Bar Chart: Sales By Quarter 1997 (millions)
Quarter 1st 2nd 3rd 4th
Sales $231.9 270.6 271.6 423.9
Bar Chart: Sales By Quarter 1996 (millions)
Quarter 1st 2nd 3rd 4th
Sales $224.8 265.2 252.8 285.2
<PAGE>
REPORT BY MANAGEMENT
The consolidated financial statements and related information for
the years ended December 31, 1997, 1996 and 1995 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 four 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
<PAGE>
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, 1997
and 1996, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the years in the
three-year period ended December 31, 1997. 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, 1997 and 1996, and the results of their operations and their cash
flows for each of the years in the three-year period ended December
31, 1997 in conformity with generally accepted accounting principles.
As described in Note 1 to the Consolidated Financial Statements, in
1997, the Company adopted the provisions of Statement of Financial
Accounting Standards No. 128, "Earnings Per Share," and has restated
prior year earnings per share in accordance with that statement.
KPMG PEAT MARWICK LLP
Orange County, California
January 23, 1998
<PAGE>
Annual Meeting
The annual meeting of stockholders will be held on April 2, 1998 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 3, 1998.
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, 92834-3100
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
Select 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.
Coulter Corporation
Coulter Electronics G.m.b.H
Coulter Electronics (Hong Kong) Ltd.
Coulter Electronics Industria E Comercia LTDA
Coulter Electronics of Canada, Ltd.
Coultronics France, S.A.
Coulter K.K.
Coulter Leasing Corporation
Coulter de Mexico S.A. De C.V.
Coulter Scientific, Inc.
Hybritech Incorporated
Immunotech S.A.
SKD, 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
Name of Company of Incorporation
- --------------- ----------------
Beckman Analytical S.p.A. Italy
Beckman Eurocenter S.A. Switzerland
Beckman Instruments (Australia) Pty. Ltd. Australia
Beckman Instruments (Canada) Inc. Canada
Beckman Instruments (Naguabo) Inc. California
Beckman Instruments Espana S.A. Spain
Beckman Instruments France S.A. France
Beckman Instruments G.m.b.H. German
Beckman Instruments (Hong Kong) Ltd. Hong Kong
Beckman Instruments (Ireland) Inc. Panama
Beckman Instruments (Japan) Ltd. Japan
Beckman Instruments (United Kingdom) Ltd. England
Beckman Instruments International S.A. Switzerland
Coulter Corporation Delaware
Coulter Electronics G.m.b.H. Germany
Coulter Electronics (H. K.) Ltd. Hong Kong
Coulter Electronics Industria E Comercio LTDA Brazil
Coulter Electronics Ltd. United Kingdom
Coulter Electronics of Canada, Ltd. Canada
Coultronics France S.A. France
Coulter K.K. Japan
Coulter Leasing Corporation Illinois
Coulter de Mexico, S.A. de C.V. Mexico
Coulter Scientific, Inc. Illinois
Hybritech Incorporated California
SKD, Inc. Delaware
EXHIBIT 23
The Board of Directors
Beckman Instruments, Inc.:
We consent to incorporation by reference in the registration
statements (No. 333-02317) on Form S-3 and (Nos. 333-24851, 333-
37429, 33-31573, 33-31862, 33-41519, 33-51506, 33-66990, 33-
66988, and 33-65155) on Form S-8 of Beckman Instruments, Inc. of
our report dated January 23, 1998, relating to the consolidated
balance sheets of Beckman Instruments, Inc. and subsidiaries as
of December 31, 1997 and 1996, and the related consolidated
statements of operations, stockholders' equity, and cash flows
for each of the years in the three-year period ended December 31,
1997, which report appears in the December 31, 1997 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.
128, "Earnings Per Share", in 1997.
KPMG PEAT MARWICK LLP
Orange County, California
February 9, 1998
<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>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 31
<SECURITIES> 0
<RECEIVABLES> 542
<ALLOWANCES> 17
<INVENTORY> 332
<CURRENT-ASSETS> 977
<PP&E> 903
<DEPRECIATION> 492
<TOTAL-ASSETS> 2331
<CURRENT-LIABILITIES> 895
<BONDS> 1181
0
0
<COMMON> 3
<OTHER-SE> 79
<TOTAL-LIABILITY-AND-EQUITY> 2331
<SALES> 1198
<TOTAL-REVENUES> 1198
<CGS> 610
<TOTAL-COSTS> 610
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2
<INTEREST-EXPENSE> 29
<INCOME-PRETAX> (252)
<INCOME-TAX> 13
<INCOME-CONTINUING> (264)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (264)
<EPS-PRIMARY> (9.58)
<EPS-DILUTED> (9.58)
</TABLE>
