FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
(Mark One)
(X)Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 1999
OR
( )Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from __________ to __________
Commission File Number 001-10109
BECKMAN COULTER, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-104-0600
(State of Incorporation) (I.R.S. Employer
Identification No.)
4300 N. Harbor Boulevard, Fullerton, California 92834-3100
(Address of principal executive offices) (Zip Code)
(714) 871-4848
(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes (X) No ( ).
APPLICABLE ONLY TO CORPORATE ISSUERS:
Outstanding shares of common stock, $0.10 par value, as of
October 25, 1999: 29,051,845 shares.
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Operations for the
three and nine month periods ended September 30, 1999
and 1998
Condensed Consolidated Balance Sheets as of September 30,
1999 and December 31, 1998
Condensed Consolidated Statements of Cash Flows for the
nine month periods ended September 30, 1999 and 1998
Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes In Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security-Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
PART I
FINANCIAL INFORMATION
BECKMAN COULTER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Millions, Except Share Data)
Unaudited
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales $440.1 $400.8 $1,291.4 $1,234.9
Cost of sales 231.2 207.0 676.5 673.3
------ ------ -------- --------
Gross profit 208.9 193.8 614.9 561.6
Operating expenses:
Selling, general and
administrative 117.4 120.2 344.8 363.5
Research and development 42.0 41.2 123.2 125.0
------ ------ -------- --------
Total operating expenses 159.4 161.4 468.0 488.5
------ ------ -------- --------
Operating income 49.5 32.4 146.9 73.1
Nonoperating expenses:
Interest income (2.2) (4.9) (5.9) (12.0)
Interest expense 18.1 19.1 55.2 68.2
Other, net (1.6) (2.2) (0.7) (5.0)
------ ------ -------- --------
Total nonoperating
expenses 14.3 12.0 48.6 51.2
Earnings before income taxes 35.2 20.4 98.3 21.9
Income taxes 10.8 6.5 31.0 7.0
------ ------ -------- --------
Net earnings $ 24.4 $ 13.9 $ 67.3 $ 14.9
====== ====== ======== ========
Basic earnings per share $ 0.85 $ 0.49 $ 2.35 $ 0.53
Weighted average number of
shares outstanding
(in thousands) 28,754 28,130 28,602 27,929
Diluted earnings per share $ 0.82 $ 0.47 $ 2.27 $ 0.51
Weighted average number of
shares and dilutive shares
outstanding (in thousands) 29,764 29,644 29,664 29,301
Dividends declared per share $ 0.16 $ 0.15 $ 0.48 $ 0.45
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE>
BECKMAN COULTER, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in Millions, Except Amounts per Share)
Unaudited
<TABLE>
<CAPTION>
September December
30, 31,
1999 1998
Assets ---- ----
<S> <C> <C>
Current assets:
Cash and equivalents $ 29.9 $ 24.7
Trade and other receivables 502.8 540.2
Inventories 311.9 302.8
Deferred income taxes 55.8 60.5
Other current assets 32.8 28.4
-------- --------
Total current assets 933.2 956.6
Property, plant and equipment, net 311.5 309.4
Intangibles, less accumulated amortization
of $42.1 in 1999 and $27.6 in 1998 404.6 419.1
Goodwill, less accumulated amortization of
$22.3 in 1999 and $14.9 in 1998 347.5 356.1
Other assets 98.4 92.1
-------- --------
Total assets $2,095.2 $2,133.3
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable and current maturities
of long-term debt $ 63.8 $ 135.1
Accounts payable, accrued expenses and
other liabilities 425.1 523.0
Income taxes 77.7 61.2
-------- --------
Total current liabilities 566.6 719.3
Long-term debt, less current maturities 1,017.0 982.2
Other liabilities 325.6 304.9
-------- --------
Total liabilities 1,909.2 2,006.4
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 1999
and 1998; shares outstanding 28.8 at
1999 and 28.4 at 1998 2.9 2.9
Additional paid-in capital 133.8 131.9
Retained earnings 88.9 35.4
Accumulated other comprehensive loss:
Cumulative foreign currency translation
adjustment (22.4) (13.9)
Treasury stock, at cost (17.2) (29.4)
-------- --------
Total stockholders' equity 186.0 126.9
-------- --------
Total liabilities and
stockholders' equity $2,095.2 $2,133.3
======== ========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE>
BECKMAN COULTER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Millions)
Unaudited
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1999 1998
---- ----
Cash Flows from Operating Activities
<S> <C> <C>
Net earnings $ 67.3 $ 14.9
Adjustments to reconcile net earnings to
net cash provided (used) by operating
activities:
Depreciation and amortization 109.2 115.0
Net deferred income taxes (0.7) (3.4)
Proceeds from sale of sales-type lease 45.7 40.1
receivables
Changes in assets and liabilities:
Trade and other receivables (0.4) (7.0)
Inventories (8.2) 4.3
Accounts payable, accrued expenses and
other liabilities (84.7) (195.5)
Accrued restructuring costs (14.3) (17.8)
Income taxes payable 16.4 (4.3)
Other 10.3 7.5
------ ------
Net cash provided (used) by
operating activities 140.6 (46.2)
------ ------
Cash Flows from Investing Activities
Additions to property, plant and equipment (104.2) (129.3)
Net disposals of property, plant and
equipment 7.4 39.5
Proceeds from sale-leaseback of real estate - 242.8
------ ------
Net cash (used) provided by
investing activities (96.8) 153.0
------ ------
Cash Flows from Financing Activities
Dividends to stockholders (13.7) (12.6)
Proceeds from issuance of stock 14.8 16.9
Notes payable (reductions) borrowings (70.3) 16.3
Long-term debt borrowings 41.0 418.0
Long-term debt reductions (10.6) (564.2)
------ ------
Net cash used by financing activities (38.8) (125.6)
------ ------
Effect of exchange rates on cash and
equivalents 0.2 0.6
------ ------
Increase (decrease) in cash and equivalents 5.2 (18.2)
Cash and equivalents - beginning of period 24.7 33.5
------ ------
Cash and equivalents - end of period $ 29.9 $ 15.3
====== ======
Supplemental Disclosures of Cash Flow
Information
Cash paid during the period for:
Interest $ 55.0 $ 55.2
Income Taxes $ 14.5 $ 11.3
Non-cash investing and financing activities:
Purchase of equipment under capital lease $ 2.1 $ 5.6
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE>
BECKMAN COULTER, INC.
Notes To Condensed Consolidated Financial Statements
September 30, 1999
Unaudited
1. Report by Management
- -------------------------
We prepared the accompanying Condensed Consolidated Financial
Statements following the requirements of the Securities and
Exchange Commission (SEC) for interim reporting. As permitted
under those rules, certain footnotes or other financial
information normally required by generally accepted accounting
principles (GAAP) have been condensed or omitted. In addition,
we have reclassified certain prior period data to conform to the
current presentation.
The financial statements include all normal and recurring
adjustments that we consider necessary for the fair presentation
of our financial position and operating results. To obtain a
more detailed understanding of our results, these Condensed
Consolidated Financial Statements should be read in conjunction
with the consolidated financial statements and notes in our
annual report on Form 10-K for the year ended December 31, 1998.
Revenues, expenses, assets, and liabilities can vary between the
quarters of the year. Therefore, the results and trends in
these interim financial statements may not be the same as those
for the full year.
2. Use of Estimates
- ---------------------
In preparing the financial statements in accordance with GAAP,
we have made certain estimates and assumptions that affect the
following:
- reported amounts of assets and liabilities at the date of
the financial statements;
- disclosure of contingent assets and liabilities at the date
of the financial statements; and
- reported amounts of sales and expenses during the reporting
period.
Actual results could differ from these estimates.
3. Comprehensive Income (Loss)
- --------------------------------
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income", establishes standards for the reporting
and display of comprehensive income. Components of comprehensive
income (loss) include net earnings and foreign currency translation
adjustments. The components of comprehensive income are as
follows (in millions):
Three Months Ended Nine Months Ended
------------------ -----------------
September 30, September 30,
------------- -------------
1999 1998 1999 1998
---- ---- ---- ----
Net earnings $ 24.4 $ 13.9 $ 67.3 $ 14.9
Foreign currency
Translation
adjustment 3.5 (6.8) (8.5) (14.7)
------ ------ ------ ------
Comprehensive
income $ 27.9 $ 7.1 $ 58.8 $ 0.2
====== ====== ====== ======
4. Earnings Per Share
- -----------------------
Statement of Financial Accounting Standards No. 128, "Earnings
Per Share", establishes standards for computing and presenting
earnings per share (EPS), where:
- "basic earnings per share" includes only actual weighted
average shares outstanding; and
- "diluted earnings per share" includes the effect of any
items that are dilutive, such as stock options.
The following table summarizes the computation of EPS (in
millions, except amounts per share):
<TABLE>
<CAPTION>
Three Months Ended September 30,
--------------------------------
1999 1998
---- ----
Per Per
Net Share Net Share
Earnings Shares Amount Earnings Shares Amount
-------- ------ ------ -------- ------ ------
Basic EPS:
<S> <C> <C> <C> <C> <C> <C>
Net earnings $ 24.4 28.8 $ 0.85 $ 13.9 28.1 $ 0.49
Effect of
dilutive
stock options - 1.0 (0.03) - 1.5 (0.02)
------- ---- ------ ------- ---- ------
Diluted EPS:
Net earnings $ 24.4 29.8 $ 0.82 $ 13.9 29.6 $ 0.47
======= ==== ====== ======= ==== ======
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1999 1998
---- ----
Per Per
Net Share Net Share
Earnings Shares Amount Earnings Shares Amount
-------- ------ ------ -------- ------ ------
Basic EPS:
<S> <C> <C> <C> <C> <C> <C>
Net earnings $ 67.3 28.6 $ 2.35 $ 14.9 27.9 $ 0.53
Effect of
dilutive
stock options - 1.1 (0.08) - 1.4 (0.02)
------- ---- ------ ------- ---- ------
Diluted EPS:
Net earnings $ 67.3 29.7 $ 2.27 $ 14.9 29.3 $ 0.51
======= ==== ====== ======= ==== ======
</TABLE>
5. Sale of Receivables
- ------------------------
In the first nine months of 1999, we sold certain financial
assets (primarily consisting of sales-type lease receivables) as
part of our plan to reduce debt and provide funds for
integration purposes. The net book value of financial assets
sold was $44.4 million for which we received approximately $45.7
million in cash proceeds. In the first nine months of 1998, we
sold similar assets with a net book value of $39.3 million for
cash proceeds of $40.1 million. Under the provisions of
Statement of Financial Accounting Standards No. 125, "Accounting
for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities", the transactions were accounted
for as sales and as a result the related receivables have been
excluded from the accompanying Condensed Consolidated Balance
Sheets. We have established a reserve for potential losses,
since the sales are subject to certain recourse provisions.
6. Inventories
- ----------------
Inventories consisted of the following (in millions):
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
---- ----
<S> <C> <C>
Finished products $ 189.9 $ 183.2
Raw materials, parts and 102.2 95.1
assemblies
Work in process 19.8 24.5
------- -------
$ 311.9 $ 302.8
======= =======
</TABLE>
7. Provision for Restructuring Operations
- -------------------------------------------
We recorded a restructuring charge of $19.1 million, $11.2
million after taxes, in the fourth quarter of 1998. The
following table details the activity within the provision for
the nine months ended September 30, 1999 (in millions):
<TABLE>
<CAPTION>
Facility
Consolidation
Personnel and
and Asset-related
Other Write-offs Total
----- ---------- -----
<S> <C> <C> <C>
Balance at December 31, 1998:
Consolidation of sales, general
administrative and technical
functions $10.1 $ - $10.1
Changes in
manufacturing/production 3.2 5.8 9.0
----- ----- -----
Remaining provision included in
accrued expenses 13.3 5.8 19.1
1999 year-to-date activity:
Consolidation of sales, general
administrative and technical
functions (0.6) - (0.6)
Changes in
manufacturing/production (0.8) (0.4) (1.2)
----- ----- -----
Total 1999 year-to-date
activity (1.4) (0.4) (1.8)
----- ----- -----
Balance at September 30, 1999:
Consolidation of sales, general
administrative and technical
functions 9.5 - 9.5
Changes in
manufacturing/production 2.4 5.4 7.8
----- ----- -----
Balance at September 30, 1999 $11.9 $5.4 $17.3
===== ===== =====
</TABLE>
In the fourth quarter of 1997, we recorded a restructuring
charge of $59.4 million, $36.4 million after taxes. The
following table details the activity in the first nine months of
1999 and the balances of the major components of the 1997
restructuring provision (in millions):
<TABLE>
<CAPTION>
Facility
Consolidation
Personnel and
and Asset-related
Other Write-offs Total
----- ---------- -----
<S> <C> <C> <C>
Balance at December 31, 1998:
Consolidation of sales, general
administrative and technical
functions $12.8 $3.9 $16.7
Changes in
manufacturing/production 1.9 3.9 5.8
----- ---- -----
Remaining provision included in
accrued expenses 14.7 7.8 22.5
1999 year-to-date activity
Consolidation of sales, general
administrative and technical
functions (10.7) (1.6) (12.3)
Changes in
manufacturing/production - (0.2) (0.2)
----- ---- -----
Total 1999 year-to-date
activity (10.7) (1.8) (12.5)
----- ---- -----
Balance at September 30, 1999:
Consolidation of sales, general
administrative and technical
functions 2.1 2.3 4.4
Changes in
manufacturing/production 1.9 3.7 5.6
----- ---- -----
Balance at September 30, 1999 $ 4.0 $6.0 $10.0
===== ==== =====
</TABLE>
8. Debt Financing and Guarantor Subsidiaries
- ----------------------------------------------
In March 1998, we issued $160.0 million of 7.10% Senior Notes
due 2003 and $240.0 million of 7.45% Senior Notes due 2008 (the
"Offering"). We used the net proceeds of $394.3 million to
reduce borrowings and commitments under our bank facilities and
for operating purposes. In connection with the Offering,
certain of our subsidiaries (the "Guarantor Subsidiaries")
jointly, fully, severally, and unconditionally guaranteed such
notes. We present below the supplemental condensed financial
information (in millions) of the Company, Guarantor Subsidiaries
and Non-Guarantor Subsidiaries. Please note that in this
footnote, we used the equity method of accounting for our
investments in subsidiaries and the Guarantor Subsidiaries'
investments in Non-Guarantor Subsidiaries. This financial
information should be read in conjunction with the Condensed
Consolidated Financial Statements.
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Subsi- Subsi- Elimina- Consoli-
Parent diaries diaries tions dated
------ ------- ------- ----- -----
Condensed Consolidated
Balance Sheet at
September 30, 1999
<S> <C> <C> <C> <C> <C>
Assets:
Cash and equivalents $ (3.3) $ 1.7 $ 31.5 $ - $ 29.9
Trade and other
receivables 228.9 2.7 271.2 - 502.8
Inventories 176.0 51.0 133.1 (48.2) 311.9
Other current assets 359.0 602.7 71.9 (945.0) 88.6
------- ------- ------- --------- --------
Total current
assets 760.6 658.1 507.7 (993.2) 933.2
Property, plant and
equipment, net 152.0 86.6 145.3 (72.4) 311.5
Intangibles, net 31.0 370.0 3.6 - 404.6
Goodwill, net 10.3 328.1 9.1 - 347.5
Other assets 1,412.3 129.8 258.4 (1,702.1) 98.4
-------- -------- ------- --------- --------
Total assets $2,366.2 $1,572.6 $ 924.1 $(2,767.7) $2,095.2
======== ======== ======= ========= ========
Liabilities and
stockholders' equity:
Notes payable and
current maturities
of long-term debt $ 4.7 $ 1.4 $ 57.7 $ - $ 63.8
Accounts payable,
accrued expenses,
and other
liabilities 307.8 46.4 70.9 - 425.1
Income taxes 328.1 603.1 105.6 (959.1) 77.7
-------- -------- ------- --------- -------
Total current
liabilities 640.6 650.9 234.2 (959.1) 566.6
Long-term debt, less
current maturities 966.3 0.5 50.2 - 1,017.0
Other long-term
liabilities 573.3 298.3 182.2 (728.2) 325.6
-------- -------- ------- --------- -------
Total liabilities 2,180.2 949.7 466.6 (1,687.3) 1,909.2
Total stockholders'
equity 186.0 622.9 457.5 (1,080.4) 186.0
-------- -------- ------- --------- -------
Total liabilities
and
stockholders'
equity $2,366.2 $1,572.6 $ 924.1 $(2,767.7) $2,095.2
======== ======== ======= ========= ========
</TABLE>
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Subsi- Subsi- Elimina- Consoli-
Parent diaries diaries tions dated
------ ------- ------- ----- -----
Condensed Consolidated
Balance Sheet
December 31, 1998
<S> <C> <C> <C> <C> <C>
Assets:
Cash and equivalents $ 4.2 $ (0.1) $ 20.6 $ - $ 24.7
Trade and
other receivables 199.9 50.4 289.9 - 540.2
Inventories 146.5 52.6 134.6 (30.9) 302.8
Other current assets 149.0 396.4 86.7 (543.2) 88.9
-------- -------- ------- --------- --------
Total current
assets 499.6 499.3 531.8 (574.1) 956.6
Property, plant and
equipment, net 120.7 89.1 156.3 (56.7) 309.4
Intangibles, net 33.0 384.8 1.3 - 419.1
Goodwill, net 15.0 329.5 11.6 - 356.1
Other long-term
assets 1,357.1 176.0 253.2 (1,694.2) 92.1
-------- -------- ------- --------- --------
Total assets $2,025.4 $1,478.7 $ 954.2 $(2,325.0) $2,133.3
======== ======== ======= ========= ========
Liabilities and
stockholders'
equity:
Notes payable and
current maturities
of long-term debt $ 19.6 $ 2.6 $ 112.9 $ - $ 135.1
Accounts payable,
accrued expenses
and other
liabilities 219.5 199.7 103.8 - 523.0
Income taxes 176.0 323.9 83.2 (521.9) 61.2
-------- ------- ------- -------- --------
Total current
liabilities 415.1 526.2 299.9 (521.9) 719.3
Long-term debt, less
current maturities 950.8 0.8 30.6 - 982.2
Other long-term
liabilities 532.6 279.6 214.4 (721.7) 304.9
-------- ------- ------- -------- --------
Total liabilities 1,898.5 806.6 544.9 (1,243.6) 2,006.4
Total stockholders'
equity 126.9 672.1 409.3 (1,081.4) 126.9
-------- ------- ------- -------- --------
Total liabilities
and
stockholders'
equity $2,025.4 $1,478.7 $ 954.2 $(2,325.0) $2,133.3
======== ======== ======== ========= ========
</TABLE>
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Subsi- Subsi- Elimina- Consoli-
Parent diaries diaries tions dated
------ ------- ------- ----- -----
Condensed Consolidated
Statement of
Operations
Quarter ended
September 30, 1999
<S> <C> <C> <C> <C> <C>
Sales $304.2 $ 96.3 $200.8 $(161.2) $440.1
Operating costs and
expenses:
Cost of sales 200.1 54.9 132.1 (155.9) 231.2
Selling, general
and
administrative 51.9 18.1 47.4 - 117.4
Research and
development 26.7 14.0 1.3 - 42.0
------ ------ ------ ------- ------
Operating income 25.5 9.3 20.0 ( 5.3) 49.5
Nonoperating (income)
expense (2.4) 0.9 (1.1) 16.9 14.3
------ ------ ------ ------- ------
Earnings before
income taxes 27.9 8.4 21.1 (22.2) 35.2
Income taxes (benefit) 8.6 3.3 5.7 ( 6.8) 10.8
------ ------ ------ ------- ------
Net earnings $ 19.3 $ 5.1 $ 15.4 $ (15.4) $ 24.4
====== ====== ====== ======= ======
</TABLE>
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Subsi- Subsi- Elimina- Consoli-
Parent diaries diaries tions dated
------ ------- ------- ----- -----
Condensed Consolidated
Statement of
Operations
Quarter ended
September 30,1998
<S> <C> <C> <C> <C> <C>
Sales $176.9 $132.6 $167.7 $(76.4) $400.8
Operating costs and
expenses:
Cost of sales 107.3 71.4 106.6 (78.3) 207.0
Selling, general
and
administrative 34.7 30.1 55.4 - 120.2
Research and
development 24.6 16.6 - - 41.2
------ ------ ------ ------ ------
Operating income 10.3 14.5 5.7 1.9 32.4
Nonoperating (income)
expense (6.1) (13.1) 0.6 30.6 12.0
------ ------ ------ ------ ------
Earnings before
income taxes 16.4 27.6 5.1 (28.7) 20.4
Income taxes (benefit) 5.8 9.9 1.0 (10.2) 6.5
------ ------ ------ ------ ------
Net earnings $ 10.6 $ 17.7 $ 4.1 $(18.5) $ 13.9
====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Subsi- Subsi- Elimina- Consoli-
Parent diaries diaries tions dated
------ ------- ------- ----- -----
Condensed Consolidated
Statement of
Operations
Nine months ended
September 30, 1999
<S> <C> <C> <C> <C> <C>
Sales $886.8 $285.4 $701.5 $(582.3) $1,291.4
Operating costs and
expenses:
Cost of sales 593.3 172.1 488.1 (577.0) 676.5
Selling, general
and
administrative 160.3 44.8 139.7 - 344.8
Research and
development 78.6 40.0 4.6 - 123.2
------ ------ ------ ------ --------
Operating income
(loss) 54.6 28.5 69.1 ( 5.3) 146.9
Nonoperating (income)
expense (7.8) (0.2) (1.3) 57.9 48.6
------ ------ ------ ------ --------
Earnings before
income taxes 62.4 28.7 70.4 (63.2) 98.3
Income taxes (benefit) 19.6 12.3 19.0 (19.9) 31.0
------ ------ ------ ------ --------
Net earnings $ 42.8 $ 16.4 $ 51.4 $ (43.3) $ 67.3
====== ====== ====== ====== ========
</TABLE>
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Subsi- Subsi- Elimina- Consoli-
Parent diaries diaries tions dated
------ ------- ------- ----- -----
Condensed Consolidated
Statement of
Operations
Nine Months ended
September 30, 1998
<S> <C> <C> <C> <C> <C>
Sales $556.9 $406.2 $526.6 $(254.8) $1,234.9
Operating costs and
expenses:
Cost of sales 346.0 236.8 340.4 (249.9) 673.3
Selling, general
and
administrative 117.2 97.5 148.8 - 363.5
Research and
development 72.8 49.7 2.5 - 125.0
------ ------ ------ ------- -------
Operating income 20.9 22.2 34.9 ( 4.9) 73.1
Nonoperating expense
(income) 4.7 (30.3) 2.4 74.4 51.2
------ ------ ------ ------- -------
Earnings before
income taxes 16.2 52.5 32.5 (79.3) 21.9
Income taxes (benefit) 5.7 18.9 6.2 (23.8) 7.0
------ ------ ------ ------- -------
Net earnings $ 10.5 $ 33.6 $ 26.3 $ (55.5) $ 14.9
====== ====== ====== ======= =======
</TABLE>
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Subsi- Subsi- Consoli-
Parent diaries diaries dated
------ ------- ------- -----
Condensed Consolidated
Statement of Cash
Flows
Nine months ended
September 30, 1999
<S> <C> <C> <C> <C>
Net cash provided
(used) by
operating
activities $50.6 $ (19.9) $ 109.9 $ 140.6
----- ------- ------- -------
Cash flows from
investing
activities:
Additions to property,
plant and equipment (49.3) (3.4) (51.5) (104.2)
Net disposals of
property,
plant and equipment 4.8 2.6 - 7.4
------ ------ ------- ------
Net cash used by
investing
activities (44.5) (0.8) (51.5) (96.8)
------ ------ ------ ------
Cash flows from
financing
activities:
Dividends to
stockholders (13.7) - - (13.7)
Proceeds from
issuance
of stock 14.8 - - 14.8
Notes payable
(reductions)
borrowings (13.7) (1.0) (55.6) (70.3)
Net intercompany
(reductions)
borrowings (16.0) 23.6 (7.6) -
Long-term debt
borrowings
(reductions) 15.0 (0.1) 15.5 30.4
------ ------- ------ ------
Net cash (used)
provided
by financing
activities (13.6) 22.5 (47.7) (38.8)
------ ------- ------ ------
Effect of exchange
rates on cash
and equivalents - - 0.2 0.2
------ ------- ------ ------
(Decrease) increase in
cash and equivalents (7.5) 1.8 10.9 5.2
Cash and equivalents
- beginning of period 4.2 (0.1) 20.6 24.7
------ ------ ------ ------
Cash and equivalents
- end of period $ (3.3) $ 1.7 $ 31.5 $ 29.9
====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Subsi- Subsi- Elimina- Consoli-
Parent diaries diaries tions dated
------ ------- ------- ----- -----
Condensed Consolidated
Statement of Cash
Flows
Nine Months ended
September 30, 1998
<S> <C> <C> <C> <C> <C>
Net cash provided
(used) by
operating
activities $32.5 $(66.2) $(12.5) $ - $ (46.2)
----- ------ ------ ------ -------
Cash flows from
investing
activities:
Additions to property,
plant and equipment (39.7) (10.7) (78.9) - (129.3)
Net disposals of
property, plant
and equipment 1.4 - 38.1 - 39.5
Proceeds from sale-
leaseback of real
estate 186.1 - - 56.7 242.8
------ ------ ------ ------ ------
Net cash provided
(used) by
investing
activities 147.8 (10.7) (40.8) 56.7 153.0
------ ------ ------ ------ ------
Cash flows from
financing
activities:
Dividends to
stockholders (12.6) - - - (12.6)
Proceeds from
issuance
of stock 16.9 - - - 16.9
Notes payable
borrowings
(reductions) 23.7 0.1 (7.5) - 16.3
Intercompany
(reductions)
borrowings (65.0) 70.0 51.7 (56.7) -
Long-term
(reductions)
borrowings (153.0) (2.2) 9.0 - (146.2)
------ ------ ------ ------ ------
Net cash (used)
provided
by financing
activities (190.0) 67.9 53.2 (56.7) (125.6)
------ ------ ------ ------ ------
Effect of exchange
rates on cash
and equivalents - - 0.6 - 0.6
------ ------ ------ ------ ------
(Decrease) increase
in cash and
equivalents (9.7) (9.0) 0.5 - (18.2)
Cash and equivalents
- beginning of
period 13.9 7.3 12.3 - 33.5
------ ------ ------ ------ ------
Cash and equivalents
- end of period $ 4.2 $ (1.7) $ 12.8 $ - $ 15.3
====== ====== ====== ====== ======
</TABLE>
9. Contingencies
- ------------------
We are involved in a number of lawsuits, which we consider
normal in view of our size and the nature of our business. We
do not believe that any liability resulting from any such
lawsuits will have a material adverse effect on our operations,
financial position or liquidity.
10. Business Segment Information
- ---------------------------------
We adopted Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related
Information" ("SFAS 131"), beginning with the 1998 annual
report. SFAS 131 requires segments to be determined and reported
based on how management measures performance and makes decisions
about allocating resources.
We are engaged primarily in the design, manufacture and sale of
laboratory instrument systems and related products. Our
organization has two reportable segments: (1) clinical
diagnostics and (2) life science research. The clinical
diagnostics segment encompasses diagnostic applications,
principally in hospital laboratories. The life science research
segment includes life sciences and drug discovery applications
in universities, medical schools, and pharmaceutical and
biotechnology companies. All corporate activities including
financing transactions are captured in a central services
"Center", which is reflected in the table below. We evaluate
performance based on profit or loss from operations. Although
primarily operating in the same industry, reportable segments
are managed separately, since each business requires different
marketing strategies and has different customers.
<TABLE>
<CAPTION>
(in millions) For the quarters ended For the nine months
September 30, ended September 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales
Clinical diagnostics $ 347.2 $ 315.6 $ 1,027.4 $ 979.4
Life science
research 92.9 85.2 264.0 255.5
Center - - - -
------- ------- --------- --------
Consolidated $ 440.1 $ 400.8 $ 1,291.4 $1,234.9
------- ------- --------- --------
Operating income (loss)
Clinical diagnostics $ 57.9 $ 44.0 $ 165.9 $ 112.4
Life science
research 12.8 6.8 29.6 18.6
Center (21.2) (18.4) (48.6) (57.9)
------- ------- --------- --------
Consolidated $ 49.5 $ 32.4 $ 146.9 $ 73.1
------- ------- --------- --------
Interest income
Clinical diagnostics $ (0.8) $ (4.0) $ (2.3) $ (9.8)
Life science
research - - - -
Center (1.4) (0.9) (3.6) (2.2)
------- ------- --------- --------
Consolidated $ (2.2) $ (4.9) $ (5.9) $ (12.0)
------- ------- --------- --------
Interest expense
Clinical diagnostics $ - $ - $ - $ -
Life science
research - - - -
Center 18.1 19.1 55.2 68.2
------- ------- --------- --------
Consolidated $ 18.1 $ 19.1 $ 55.2 $ 68.2
------- ------- --------- --------
</TABLE>
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1998
------------------ -----------------
<S> <C> <C>
Total assets
Clinical diagnostics $1,489.6 $1,519.2
Life science research 167.7 199.2
Center 437.9 414.9
-------- --------
Consolidated $2,095.2 $2,133.3
======== ========
</TABLE>
Geographic areas
<TABLE>
<CAPTION>
For the quarters ended For the nine months
ended
(in millions) September 30, September 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales to external
customers
North America $250.5 $226.3 $ 725.8 $ 688.0
Europe 120.1 117.0 374.3 357.9
Asia and Rest of World 69.5 57.5 191.3 189.0
------ ------ -------- --------
Consolidated $440.1 $400.8 $1,291.4 $1,234.9
====== ====== ======== ========
</TABLE>
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1998
------------------ -----------------
<S> <C> <C>
Long-lived assets
North America $ 776.8 $ 814.7
Europe 293.8 273.3
Asia and Rest of World 91.4 88.7
-------- --------
Consolidated $1,162.0 $1,176.7
======== ========
</TABLE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Overview
- --------
Beckman Coulter, Inc. (formerly known as Beckman Instruments,
Inc. and renamed Beckman Coulter, Inc. after the acquisition of
Coulter Corporation), is a world leader in providing systems
that simplify and automate laboratory processes. We design,
manufacture and service 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.
Our strategy is to solidify our position as a leading provider
of laboratory systems. On October 31, 1997, we achieved a
significant milestone in accomplishing this strategy when we
acquired Coulter Corporation ("Coulter"). Through this
acquisition we added Coulter's leading market position in
hematology and number two position in flow cytometry to our
existing market position.
The next milestone towards our global strategy, "One Face to
the Customer", offering our customers a single sales source, a
single sales contact and a single organization for service to
meet all their testing needs, was fully operational in the first
quarter of 1999.
In the third quarter of 1999, we achieved the following
milestones:
- We launched three key products - the Coulter HmX Hematology
System, Fragment Analysis on the CEQ 2000 System, and the Avanti
J High Capacity Centrifuge.
- We finalized an agreement with Instrumentation Laboratory
to expand coagulation product distribution in North America, an
example of our strategy to leverage our global infrastructure
with additional product lines.
- We also resolved our manufacturing scale-up issues
associated with the Total and free PSA tests for use on the
ACCESS(R) Immunoassay System. These companion tests are on track
to be available in Europe early next year and in the U.S. by the
middle of next year.
We believe that the success of our integration programs has
allowed us to meet our profitability targets, while our combined
clinical diagnostics portfolio is providing important sales
synergy and competitive wins in a constrained market. However,
we do not guarantee the extent to which we will continue to
realize the benefits of the integration, or the timing of any
such realization.
Results of Operations
- ---------------------
Sales in the third quarter of 1999 were $440.1 million, an
increase of 9.8% (9.5% excluding the effect of foreign currency
rate changes) compared to the same period in the prior year.
Clinical diagnostics sales were $347.2 million and life science
research sales were $92.9 million in the third quarter of 1999,
an increase of 10.0% and 9.0%, respectively, compared to the
same period in 1998. Sales in North America, Europe, and Asia
and Rest of World markets increased 10.7%, 2.6%, and 20.9%,
respectively, during the third quarter compared to the same
period in the prior year. In North America and Europe, increased
instrument sales resulted in an increase in revenues compared to
the same period in the prior year. The increase in European
sales was dampened by the continuing softness in the German
market. The increase in sales in Asia and Rest of World markets
is the result of a stronger economy in the Asia Pacific region
including Japan as compared to 1998.
Sales in the first nine months of 1999 grew 4.6% (4.1% excluding
the effect of foreign currency rate changes) compared to the
first nine months of 1998. Sales in the clinical diagnostics segment
increased 4.9% and sales in the life science research segment increased
3.3% during the nine months ended September 1999 as compared to the same
period in 1998. During the nine month period in 1999, sales in
North America and Europe increased 5.5% and 4.6%, respectively,
whereas sales in Asia and Rest of World markets increased 1.2%
compared to the nine month period in 1998.
The increase in sales was due to the factors mentioned
previously as well as:
- inclusion of nine months of Coulter international sales in
the first nine months of 1999 compared to only eight months in
the first nine months of 1998 due to the lagging of Coulter
international results of operations; offset by
- inclusion of higher sales in the first nine months of 1998
from what would have traditionally been the fourth quarter for
the old Coulter business (Coulter's fiscal year previously ended
on March 31).
Gross profit as a percentage of sales in the third quarter of
1999 was 47.5%, 0.9 percentage points lower than the same period
in the prior year. The decline in gross profit percentage is due
to a higher proportion of instrument sales, which typically
carry a lower gross margin compared to reagents, and due to
increased service costs related to Year 2000 issues.
For the first nine months of 1999, gross profit as a percentage
of sales was 47.6%, 2.1 percentage points higher than the same
period in 1998. In 1998 gross margins were lower due to a one-
time increase in cost of sales of $5.7 million in the first
quarter related to an inventory revaluation from the Coulter
acquisition. The absence of this one-time charge in 1999,
combined with the synergies from the combination of the Beckman
and Coulter organizations contributed to higher gross margins
for the nine month period in 1999.
Selling, general and administrative expenses ("SG&A") declined
$2.8 million to $117.4 million or 26.7% of sales in the third
quarter of 1999 from $120.2 million or 30.0% of sales in the
third quarter of 1998. In the first nine months of 1999, SG&A
was $344.8 million or 26.7% of sales compared to $363.5 million
or 29.4% of sales in the first nine months of 1998 representing
a decrease of $18.7 million or 5.1% from the prior period. SG&A
declined in absolute dollars and as a percentage of sales in the
three and nine month periods ended September 30, 1999 as
compared to the same periods in the prior year due to continuing
progress with our integration activities.
In accordance with our integration plans, we continue to move
the manufacturing of certain products from our manufacturing
operations in Germany and the United States to Ireland. We
expect the additional expenses associated with these moves to be
offset by tax savings, which will result from manufacturing in a
more tax-advantaged location. In addition to the tax savings,
the move will expand our manufacturing and technical knowledge
base for these products in Ireland, as well as accommodate
future Far East volume requirements for the same products with
minimal incremental expenditure. As part of our integration
efforts, we intend to continue to make further opportunistic
changes in the remainder of 1999 and beyond.
Net earnings for the third quarter of 1999 was $24.4 million or
$0.82 per diluted share compared to $13.9 million or $0.47 per
diluted share in 1998. For the first nine months of 1999, net
earnings was $67.3 million or $2.27 per diluted share, compared to
$14.9 million or $0.51 per diluted share during the same period
in 1998. The increase in net earnings is primarily due to the
various reasons discussed previously. In addition, a lower
average debt balance as well as slightly lower interest rates in
1999 contributed to a decrease in interest expense from 1998 to
1999, which in turn contributed to the increase in net earnings.
These results of operations have us on track to meet 1999 goals
of 4% sales growth and diluted EPS of $3.50. For the year 2000,
we again expect a 4% core sales increase and EPS growth of
approximately 13%.
Financial Condition
- -------------------
As discussed in greater detail in our 1998 annual report,
Beckman Coulter is a highly leveraged company. Although the
debt-to-capital ratio has declined from 89.8% at December 31,
1998 to 85.3% at September 30, 1999, among other things, our
high level of debt:
- increases our vulnerability to general adverse economic and
industry conditions;
- could limit our ability to obtain additional financing on
favorable terms; and
- requires the dedication of a substantial portion of our
cash flow from operations to the payment of principal and
interest on indebtedness.
In addition, our agreements with our lenders contain a number of
covenants, which, among other things, require us to comply with
specified financial ratios and tests. At September 30, 1999, we
believe that we are in compliance with such financial ratios and
tests.
We have and will continue to evaluate opportunities to provide
additional cash flow by monetizing assets during 1999 and
beyond, including sales of certain financial assets (primarily
consisting of sales-type lease receivables) and real estate assets.
If the remaining sales are consummated as expected, we believe the
total proceeds generated for 1999 will be approximately $55.0 million,
less any costs to complete the transactions.
Operating activities provided net cash of $140.6 million in the
first nine months of 1999 compared to net cash usage of $46.2
million in the first nine months of the prior year. The primary
reasons were:
- net earnings were $67.3 million in 1999 compared to $14.9
million in 1998;
- payments towards costs accrued as part of the Coulter
purchase and assumed liabilities in 1999 were $21.5 million
compared to $135.2 million in 1998; and
- an increase in income tax liability due to higher pre-tax
income and differences in timing of payments compared to the
prior year.
In 1999, investing activities used $96.8 million of net cash
primarily for capital purchases, whereas in 1998, investing
activities provided $153.0 million of net cash, which included
$129.3 million in capital purchases offset by $242.8 million of
net proceeds from the sale and leaseback of four of our
properties.
Net cash used by financing activities was $38.8 million for the
nine-month period in 1999 compared to $125.6 million in 1998.
Cash generated from the sale-leaseback of our properties
mentioned previously was used to reduce our debt in 1998.
In addition to the decline in our debt-to-capital ratio
mentioned previously, the ratio of current assets to current
liabilities ("current ratio") improved to 1.6 at September 30,
1999 from 1.3 at December 31, 1998. The decrease in current
liabilities was due to payments towards reducing debt and
accrued expenses related to the purchase of Coulter Corporation
and restructure. The decrease in current assets was primarily
due to the decrease in trade and other receivables offset by
slight increases in cash and net inventories. Based upon
current levels of operations and anticipated cost savings and
future growth, we believe that our cash flow from operations,
together with available borrowings under the credit facility and
other sources of liquidity will be adequate to meet our
anticipated requirements until the maturity of the credit
facility in 2002. However, we cannot give any assurance that
our business will continue to generate cash flows at or above
current levels or that estimated cost savings or growth can be
achieved. Our future operating performance and ability to
service or refinance our 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 our control.
On September 9, 1999, we paid a quarterly cash dividend of $0.16
per share of common stock, for a total of $4.6 million.
Year 2000
- ---------
We believe we have implemented a comprehensive Year 2000 program
that is on schedule for completion by the end of 1999, and that
there will be no material impact on our business, results of
operations, financial position or liquidity as a result of Year
2000 issues.
Our Year 2000 program, implemented worldwide, is directed by our
senior management and includes six main projects:
1. products and services;
2. management information systems;
3. suppliers (materials and services);
4. engineering and manufacturing processes;
5. office equipment; and
6. facilities and utilities.
These projects generally include five phases:
1. inventory;
2. assessment;
3. remediation;
4. testing/validation; and
5. implementation.
The following table is a summary of our Year 2000 program
schedule target dates (1):
Testing/ Implementa-
Inventory Assessment Remediation validation tion
Products & Complete Complete Complete Complete Complete(2)
services
Management
information Complete Complete Complete Q4 1999(4) Q4 1999(4)
systems
Suppliers
(materials Complete Complete Complete Complete Q4 1999(4)
& services)
Engineering
& Complete Complete Complete Complete Q4 1999(4)
manufacturing
processes
Office Complete Complete Complete Complete Complete
equipment
Facilities Complete Complete Complete Complete Q4 1999(4)
and
Utilities Complete Complete (3) (3) (3)
Notes:
(1) The target date, Q4 1999, refers to the end of the fourth quarter of
1999.
(2) Implementation phase for products is defined as the
availability of necessary software and/or hardware upgrades.
(3) These phases will not be performed for utilities, but have
been considered as part of our contingency plan.
(4) Reflects extension from prior quarter; procedures in
process, only minor issues remain.
A number of our products include computer hardware and
software, including substantial custom software. During 1998,
we began providing our customers information about the Year 2000
status of our products, and made all upgrades available by the
end of the first quarter of 1999 (see table above). At the
beginning of the second quarter of 1999, we put into practice a
new plan to manage the field implementation of these upgrades,
which will extend into the fourth quarter of 1999. We believe
there are no significant Year 2000 product performance issues
with respect to products that we will continue to support after
January 1, 2000. We believe the impact to our business based on
Year 2000 product performance issues or litigation related to
those issues will not be material.
We believe our Year 2000 program will be completed as
indicated in the current schedule. But the schedule is based on
a number of factors and assumptions, such as:
- the accuracy and completeness of responses to our
inquiries; and
- the availability of skilled personnel to complete the
program.
The program schedule could be adversely impacted if any of the
factors and assumptions is incorrect. We cannot give assurance
that our Year 2000 program will be completed on schedule or that
we will not uncover Year 2000 issues that could create a
material impact on our performance.
We do not believe that we have a material relationship with
any single third party supplier or customer. Although a
significant interruption in our suppliers' and customers'
activities (due to Year 2000 issues) is unlikely, we could
experience a material impact in our financial results if such an
interruption occurs. Also, a portion of our revenues is
indirectly dependent upon our customers' reimbursement from
federal, state, municipal and foreign government agencies, and
the state of readiness of those government agencies is of
concern. At this time, we believe the most reasonably likely
worst case scenario involves a significant interruption in the
ability of one or more government agencies to reimburse those
customers, which could lead to a significant interruption in
cash received from affected customers. We are unable to
estimate either the likelihood or the potential cost of such an
occurrence.
We do not expect that the cost of our Year 2000 program
will be material to our business, results of operations,
financial position or liquidity. We anticipate that the total
cost for our Year 2000 program through 1999 will be
approximately $7.5 million. Through September 30, 1999 we have
spent approximately $6.1 million on our Year 2000 program. The
majority of these costs are for the remediation or replacement
of management information systems. Most of the funding for our
Year 2000 program is separately budgeted, but a portion of the
funding is part of our management information systems budget.
Year 2000 program funding has delayed the implementation of
certain other management information systems changes, but this
delay will have only a minor impact on managing the Company. We
have incurred service-related costs for implementing product
upgrades in the field, but those costs have not been separately
tracked and are not included in the cost of our Year 2000
program. Those costs are primarily the payroll and travel
expenses for service engineers to install the upgrades and are
not expected to be material to our business.
We have established and are implementing a contingency
planning process with respect to Year 2000 issues (including
most reasonably likely worst case Year 2000 scenarios).
Although several plans have been developed, we continue to
determine the extent and depth necessary for each aspect of our
business.
Euro - the new European currency
- --------------------------------
Eleven countries of the European Union have adopted a
single currency known as the "euro". The euro came into
existence on January 1, 1999, and is the official currency for
the countries of the Economic and Monetary Union (Austria,
Belgium, Finland, France, Germany, Holland, Ireland, Italy,
Luxembourg, Portugal and Spain) with national currencies
expressed as a denomination (national currency units) of the
euro. During the three-year transition period following its
introduction, countries will be allowed to transact business
both in the euro and in their own currencies at fixed conversion
rates. On January 1, 2002, the euro will be the only currency
in Economic and Monetary Union countries.
We conduct business in more than 120 countries, generating
approximately 50% of revenues outside the United States. A
significant portion of our business is conducted in Europe. The
introduction of the euro requires that we make modifications to
our internal operations as well as to our external business
arrangements. For example, product pricing and sales proposals
are now available in the euro. Similarly, our billing and
disbursement functions have been modified to reflect the use of
the euro.
Early in 1997, we established a task force reporting to the chief
financial officer to identify the issues related to the introduction
of the euro and to develop and implement a plan to address those issues.
The task force has developed a detailed plan for the euro implementation
addressing all areas of operations, both internal and external. Major
initiatives resulting from the recommendations of the task force
are:
- create a "Beckman Coulter Euro Information Center" to
facilitate worldwide communication related to the euro;
- accommodate our customers' preferences for their national
currency or the euro during the transition period;
- operate in a multi-currency environment (including the
euro, national currency and the U.S. dollar), during the
transition period, in all the European countries in which we do
business; and
- adopt use of the euro for internal systems and reporting as
of December 1, 2001.
We do not expect the cost of this effort to have a material
effect on our business, results of operations, financial
position or liquidity. However, we cannot guarantee that all
problems will be foreseen and corrected, or that no material
disruption of our business will occur. There is also likely to
be competitive implications on our pricing and marketing
strategies related to the conversion to the euro; however, we do
not know the effects of any such impact at this time.
Business Climate
- ----------------
In the U.S., the clinical diagnostics market is under pressure
from significant cost containment efforts and the overall
restructuring of the industry, compounded by the uncertainty of
the future direction of healthcare reforms. The life science
research market continues to improve, stimulated by the general
economy. In 1999, the portions of these markets served by us are
expected to grow in the low single digits.
In general, the European clinical diagnostics and life science
research markets continue to be dampened by cost containment
initiatives as part of governmental fiscal management policies.
These policies are driven in large part by the requirements for
the ongoing European monetary union.
Although Asia and Rest of World markets, including Japan have
started to show signs of improvement in 1999 compared to 1998,
they continue to be impacted by economic uncertainty.
Forward Looking Statements
- --------------------------
All statements contained in this quarterly report, or in any
document we file with the Securities and Exchange Commission, or
in any press release or other written or oral communication by
or on behalf of our company, that do not directly and
exclusively relate to historical facts constitute "forward-
looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995.
This 10-Q report contains such forward-looking statements,
including statements regarding, among other items:
1. anticipated benefits, including potential tax savings, from
integration of manufacturing operations;
2. anticipated proceeds from the sale of assets;
3. anticipated trends in our business and market growth;
4. our cash flow, liquidity requirements, and our ability to
service debt;
5. anticipated sales and earnings per share in 1999 and 2000;
and
6. the impact of Year 2000 issues on our operations.
These forward-looking statements are based on our expectations
and are subject to a number of risks and uncertainties, some of
which are beyond our control. These risks and uncertainties
include, but are not limited to:
1. complexity and uncertainty regarding development of new
high-technology products;
2. loss of market share through aggressive competition in the
clinical diagnostics and life science research markets;
3. our dependence on capital spending policies and government
funding;
4. the effect of potential healthcare reforms;
5. general economic conditions in countries in which we do
business, such as, Japan and Germany;
6. fluctuations in foreign exchange rates and interest rates;
7. reliance on patents and other intellectual property;
8. delays in obtaining any government approvals necessary to
market new products, particularly in clinical diagnostics;
9. difficulties, delays or failure in effectively integrating
worldwide operations;
10. unanticipated Year 2000 or euro problems; and
11. other factors that cannot be identified at this time.
Although we believe we have the product offerings and resources
required to achieve our objectives, actual results could differ
materially from those anticipated by these forward-looking
statements. There can be no assurance that events anticipated by
these forward-looking statements will in fact transpire as
expected.
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes In Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security-Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
10.1 1999 Annual Incentive Plan
10.2 Amendment 1999-1 Beckman Coulter, Inc. Executive
Restoration Plan, October 22, 1999
11. Statement re Computation of Per Share Earnings:
This information is set forth in Note 4, Net Earnings
Per Share of the Notes to Condensed Consolidated
Financial Statements included in Part I herein.
15. Independent Accountants' Review Report, October
22, 1999
27. Financial Data Schedule for the three and nine
month periods ended September 30, 1999
b) Reports on Form 8-K
None.
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
BECKMAN COULTER, INC.
(Registrant)
Date: November 3, 1999 by WILLIAM H. MAY
_____________________________
William H. May
Vice President,
General Counsel and Secretary
Date: November 3, 1999 by JAMES T. GLOVER
_____________________________
James T. Glover
Vice President and Controller
<PAGE>
EXHIBIT INDEX
FORM 10-Q, THIRD QUARTER, 1999
Exhibit
Number Description
- ------- -----------
10.1 1999 Annual Incentive Plan
10.2 Amendment 1999-1 Beckman Coulter, Inc. Executive Restoration
Plan, October 22, 1999
11. Statement re Computation of Per Share Earnings: This
information is set forth in Note 4, Net Earnings Per Share,
of the Notes to the Condensed Consolidated Financial Statements
included in Part I herein.
15. Independent Accountants' Review Report, October 22, 1999
27. Financial Data Schedule for the three and nine month
periods ended September 30, 1999
Exhibit 15
KPMG LLP
Center Tower
650 Town Center Drive
Costa Mesa, CA 92626
Independent Accountants' Review Report
--------------------------------------
The Stockholders and Board of Directors
Beckman Coulter, Inc.:
We have reviewed the condensed consolidated balance sheet of
Beckman Coulter, Inc. and subsidiaries as of September 30, 1999,
the related condensed consolidated statements of operations for
the three-month and nine-month periods ended September 30, 1999
and 1998, and the condensed consolidated statements of cash
flows for the nine-month periods ended September 30, 1999 and
1998. These condensed consolidated financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established
by the American Institute of Certified Public Accountants. A
review of interim financial information consists principally of
applying analytical procedures to financial data and making
inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an
opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the condensed consolidated
financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally
accepted auditing standards, the consolidated balance sheet of
Beckman Coulter, Inc. and subsidiaries as of December 31, 1998,
and the related consolidated statements of operations,
stockholders' equity and cash flows for the year then ended (not
presented herein); and in our report dated January 22, 1999, we
expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of December
31, 1998, is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has
been derived.
(KPMG LLP)
Orange County, California
October 22, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Condensed Consolidated Balance Sheet and the Condensed Consolidated Statement
of Operations and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 30
<SECURITIES> 0
<RECEIVABLES> 528
<ALLOWANCES> 25
<INVENTORY> 312
<CURRENT-ASSETS> 933
<PP&E> 641
<DEPRECIATION> 329
<TOTAL-ASSETS> 2095
<CURRENT-LIABILITIES> 567
<BONDS> 1081
0
0
<COMMON> 3
<OTHER-SE> 183
<TOTAL-LIABILITY-AND-EQUITY> 2095
<SALES> 1291
<TOTAL-REVENUES> 1291
<CGS> 677
<TOTAL-COSTS> 677
<OTHER-EXPENSES> 468
<LOSS-PROVISION> 5
<INTEREST-EXPENSE> 55
<INCOME-PRETAX> 98
<INCOME-TAX> 31
<INCOME-CONTINUING> 67
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 67
<EPS-BASIC> 2.35
<EPS-DILUTED> 2.27
</TABLE>
EXHIBIT 10.1
BECKMAN COULTER
1999 ANNUAL INCENTIVE PLAN (AIP)
WHO PARTICIPATES:
Key executives designated by the Chairman of the Board based on
qualifying factors established by the Organization and Compensation
Committee (the Committee) of the Board of Directors.
FUNDING THE AIP:
The company must achieve a minimum of (minimum amount) EPS for
any funding of AIP awards, regardless of any other financial or
non-financial results or individual performance.
WHAT IS MEASURED - THE AIP COMPONENTS:
There are four financial measurements, as well as the individual
performance evaluation, which comprise the 1999 AIP award opportunity.
The financial metrics have been selected because they directly align
with the company's overall goals and objectives:
- Earnings Per Share (EPS)
- Company Sales
- Pre-tax Margin
- Debt/EBITDA
The individual performance evaluation is linked to the achievement of
your goals and objectives, as well as competency development,
established and measured through the Performance Success management process.
INDIVIDUAL AIP AWARD DETERMINATION:
Individual incentive awards are determined by adding the percentages
earned based on the level of achievement for financial measurements and
your individual performance evaluation. A pro rata incentive award
percentage is calculated for gradations between achievement levels for
financial results.
The sum of the percentages is multiplied by your annual base pay
as of December 31, 1999 to arrive at your award amount. For participants
with an individual performance rating of "Needs Improvement", the total
incentive award for financial results may be reduced by up to 100%.
AIP ADMINISTRATION GUIDELINES:
The Committee administers the AIP on behalf of the company. This
responsibility includes interpretation of the plan and the sole
and absolute discretion to establish plan provisions, performance
measures, performance targets, specific award levels and participation
eligibility. All Committee interpretations, determinations, and actions
will be final, conclusive and binding on all participants. The Committee
has authorized the Chairman of the Board as its designee in matters of
annual plan administration upon its approval of performance measures and
targets.
AIP TERMS AND CONDITIONS:
1. All financial results will be measured on an "as reported"
basis with no adjustment for any effect of currency fluctuations.
2. To be eligible for an AIP award, a participant must be in
active pay status continuously through the last company-scheduled
workday of the year. Partial payments may be considered, at
the full discretion of the Committee or its designee, for retirees as
defined by the company's retirement plan, who leave before the end
of the plan year.
3. The Committee or its designee may determine in its sole and
absolute discretion, the status and incentive award level for any
participant whose responsibilities are changed, and of any key
employee who becomes eligible to participate in the plan after the
beginning of the performance period.
4. The Committee at any time and from time to time may terminate,
suspend, modify or amend the plan. Nothing in this plan or any award
granted shall confer on a participant any right to continue in
the employ of the company or interfere in any way with the right
of the company to terminate any employment.
EXHIBIT 10.2
AMENDMENT 1999-I
BECKMAN COULTER, INC.
EXECUTIVE RESTORATION PLAN
(As Amended and Restated Effective as of September 1,1998)
WHEREAS, Beckman Coulter, Inc. (the "Company") maintains the
Beckman Coulter, Inc. Executive Restoration Plan (the "Plan");
WHEREAS, the Company amended and restated the Plan effective
as of September 1, 1998, to make certain changes to the method of
crediting of deferrals and matching amounts under the Plan and
authorized the officers of the Company to prepare and execute, on
behalf of the Company, any and all amendments and other documents
and to take such other and further actions as may be necessary or
appropriate in connection with such amendment and restatement;
WHEREAS, there is an error in the provisions in the
restatement of the Plan regarding the method of crediting
matching amounts; and
WHEREAS, it is necessary to amend the Plan to correct this
error.
NOW, THEREFORE, the Plan is amended, effective as of
September 1, 1998, as follows:
Clause (i) of Section 4.2(a) is amended in its entirety to
read as follows:
"(i) is the additional amount that the Company would
have contributed to the Participant's Company Matching
Account under the 401(k) Plan for that pay period if the
limitations referred to in Section 2.1 of this Plan did
not apply to the 401(k) Plan."
IN WITNESS WHEREOF, the Company has caused its duly
authorized officer to execute this amendment to the Plan this
22nd day of October, 1999.
BECKMAN COULTER, INC.
By /s/ Fidencio M. Mares
Fidencio M. Mares
Human Resources
