FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
(Mark One)
(X)Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 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
April 27, 1999: 28,675,372 shares.
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of
Operations for the three month periods
ended March 31, 1999 and 1998
Condensed Consolidated Balance Sheets
as of March 31, 1999 and December 31, 1998
Condensed Consolidated Statements of
Cash Flows for the three month periods
ended March 31, 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>
BECKMAN COULTER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Millions, Except Amounts Per Share and Share Data)
Unaudited
<TABLE>
<CAPTION>
Three Months
Ended
March 31,
1999 1998
---- ----
<S> <C> <C>
Sales $405.1 $399.4
Cost of sales 211.2 229.8
----- -----
Gross profit 193.9 169.6
Operating expenses:
Selling, general and
administrative 111.8 119.7
Research and development 38.8 41.6
----- -----
Total operating expenses 150.6 161.3
----- -----
Operating income 43.3 8.3
Nonoperating expenses:
Interest income (2.0) (3.2)
Interest expense 18.2 26.2
Other, net 2.0 (2.3)
----- -----
Total nonoperating expenses 18.2 20.7
----- -----
Earnings (loss) before income taxes 25.1 (12.4)
Income tax expense (benefit) 8.0 (4.0)
----- -----
Net earnings (loss) $17.1 $ (8.4)
===== =====
Basic earnings (loss) per share $0.60 $(0.30)
Weighted average number of shares
outstanding (in thousands) 28,460 27,704
Diluted earnings (loss)per share $0.58 $(0.30)
Weighted average number of shares and
dilutive shares outstanding (in
thousands) 29,558 27,704
Dividends declared per share $0.16 $ 0.15
</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>
March December
31, 31,
1999 1998
---- ----
Assets
Current assets:
<S> <C> <C>
Cash and equivalents $ 19.1 $ 24.7
Trade receivables and other 570.9 540.2
Inventories 313.6 302.8
Deferred income taxes 57.1 60.5
Other current assets 31.6 28.4
----- -----
Total current assets 992.3 956.6
Property, plant and equipment, net 306.6 309.4
Intangibles, less accumulated amortization of
$32.5 in 1999 and $27.6 in 1998 414.2 419.1
Goodwill, less accumulated amortization of
$17.6 in 1999 and $14.9 in 1998 353.0 356.1
Other assets 69.7 92.1
------- -------
Total assets $2,135.8 $2,133.3
======= =======
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable and current maturities of
long-term debt $ 117.1 $ 135.1
Accounts payable, accrued expenses and
other liabilities 488.6 523.0
Income taxes payable 65.6 61.2
------- -------
Total current liabilities 671.3 719.3
Long-term debt, less current maturities 1,016.3 982.2
Other liabilities 317.4 304.9
------- -------
Total liabilities 2,005.0 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 28.5
at 1999 and 28.4 at 1998 2.9 2.9
Additional paid-in capital 133.1 131.9
Retained earnings 47.9 35.4
Accumulated other comprehensive loss:
Cumulative foreign currency translation
adjustment (25.2) (13.9)
Treasury stock, at cost (27.9) (29.4)
------- -------
Total stockholders' equity 130.8 126.9
Total liabilities and stockholders'
equity $2,135.8 $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>
Three Months Ended
March 31,
1999 1998
---- ----
<S> <C> <C>
Cash Flows from Operating Activities
Net earnings (loss) $17.1 $ (8.4)
Adjustments to reconcile net earnings
(loss) to net
cash provided(used) by operating
activities:
Depreciation and amortization 37.6 29.3
Net deferred income taxes (0.6) (0.7)
Proceeds from sale of sales-type lease
receivables 18.7 31.5
Changes in assets and liabilities:
Trade and other receivables (33.4) 18.1
Inventories (11.9) (5.9)
Accounts payable, accrued expenses and
other liabilities (30.1) (102.4)
Accrued restructuring costs (3.3) (2.9)
Income taxes payable 4.4 (7.2)
Other 16.5 (22.0)
----- -----
Net cash provided (used) by operating
activities 15.0 (70.6)
----- -----
Cash Flows from Investing Activities
Additions to property, plant and equipment (35.5) (29.0)
Net disposals of property, plant and
equipment 0.6 10.1
Sale of investments - 9.7
----- -----
Net cash used by investing activities (34.9) (9.2)
----- -----
Cash Flows from Financing Activities
Dividends to stockholders (4.6) (4.3)
Proceeds from issuance of stock 3.1 3.8
Notes payable (reductions) borrowings (13.2) 8.6
Long-term debt borrowings 35.0 447.2
Long-term debt reductions (6.2) (377.6)
----- -----
Net cash provided by financing
activities 14.1 77.7
----- -----
Effect of exchange rates on cash and
equivalents 0.2 (0.2)
----- -----
Decrease in cash and equivalents (5.6) (2.3)
Cash and equivalents - beginning of period 24.7 33.5
----- -----
Cash and equivalents - end of period $ 19.1 $ 31.2
===== =====
Supplemental Disclosures of Cash Flow
Information
Cash paid during the period for:
Interest $ 15.4 $ 27.3
Income taxes $ 3.6 $ 11.1
Non-cash investing and financing activities:
Purchase of equipment under capital lease $ 2.1 $ 2.4
</TABLE>
See accompanying Notes to Condensed Consolidated Financial
Statements.
<PAGE>
BECKMAN COULTER, INC.
Notes To Condensed Consolidated Financial Statements
March 31, 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 that are normally required by generally accepted
accounting principles (GAAP) can be condensed or omitted. We
have reclassified certain prior year data to conform to the 1999
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. These are
condensed financial statements. To obtain a more detailed
understanding of our results, one should also read the consolidated
financial statements and notes in our annual report on Form 10-K for the
year ended December 31, 1998, which is on file with the SEC.
Revenues, expenses, assets, and liabilities can vary between the
various 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 conforming to GAAP, we have
made 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 those estimates.
3. Comprehensive Income (Loss)
We adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" (SFAS 130), in the first quarter
of 1998. SFAS 130 establishes standards for the reporting and
display of comprehensive income. Components of comprehensive
income include net earnings (loss) and foreign currency translation
adjustments. As such, Accumulated Other Comprehensive Loss in the
Condensed Consolidated Balance Sheets represents only cumulative
foreign currency translation adjustments. Comprehensive income
was $5.8 million for the three months ended March 31, 1999
compared to a comprehensive loss of $14.2 million during the
comparable period in the prior year. The adoption of SFAS 130
required additional disclosures but did not have a material
effect on our financial position or results of operations.
4. Net Earnings Per Share
We adopted Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" (SFAS 128) in the fourth quarter of 1997.
SFAS 128 simplifies the computation of earnings per share (EPS),
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 March 31
1999 1998
---- ----
Per Per
Net Share Net Share
Earnings Shares Amount Loss Shares Amount
-------- ------ ------ ---- ------ ------
Basic EPS:
Net earnings
<S> <C> <C> <C> <C> <C> <C>
(loss) $ 17.1 28.5 $ 0.60 $ (8.4) 27.7 $(0.30)
Effect of
dilutive
stock options - 1.1 (0.02) - - -
---- ---- ---- ---- ---- ----
Diluted EPS:
Net earnings
(loss) $ 17.1 29.6 $ 0.58 $ (8.4) 27.7 $(0.30)
===== ==== ==== ==== ==== ====
</TABLE>
We were in a net loss position in the three months ended March
31, 1998, and under generally accepted accounting principles, 1.2
million common share equivalents were not used to compute diluted
loss per share, as the effect was anti-dilutive.
5. Sale of receivables
In the first quarter of 1999 we sold certain financial assets
(primarily consisting of customer 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 $18.0
million for which we received approximately $18.7 million in cash
proceeds. In the first quarter of 1998, we sold similar assets
with a net book value of $31.9 million for cash proceeds of $31.5
million. Under the provisions of Statement of Financial
Accounting Standards No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities",
the transactions were accounted for as sales and as a result the
related receivables have been excluded from the accompanying
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>
March 31, December 31,
1999 1998
---- ----
<S> <C> <C>
Finished products $ 192.6 $ 183.2
Raw materials, parts and 98.2 95.1
assemblies
Work in process 22.8 24.5
----- -----
$ 313.6 $ 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
three months ended March 31, 1999 (in millions):
<TABLE>
<CAPTION>
Facility
Consolidation
and
Personnel Asset related
and Other Write-offs Total
--------- ---------- -----
Balance at December 31, 1998
Consolidation of sales, general
administrative and technical
<S> <C> <C> <C>
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 activity through first
quarter
Consolidation of sales, general
administrative and technical
functions (0.3) - (0.3)
Changes in
manufacturing/production - - -
---- ---- ----
Total 1999 activity through
first quarter (0.3) - (0.3)
Balance at March 31, 1999
Consolidation of sales, general
administrative and technical
functions 9.8 - 9.8
Changes in
manufacturing/production 3.2 5.8 9.0
---- ---- ----
Balance at March 31, 1999 $13.0 $5.8 $18.8
==== ==== ====
</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 quarter of 1999 and the
balances of the major components of the 1997 restructuring
provision (in millions):
<TABLE>
<CAPTION>
Facility
Consolidation
and
Personnel Asset related
and Other Write-offs Total
--------- ---------- -----
Balance at December 31, 1998
Consolidation of sales, general
administrative and technical
<S> <C> <C> <C>
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 activity through first
quarter
Consolidation of sales, general
administrative and technical
functions (7.6) (0.7) (8.3)
Changes in
manufacturing/production - - -
---- ---- ----
Total 1999 activity through
first quarter (7.6) (0.7) (8.3)
Balance at March 31, 1999
Consolidation of sales, general
administrative and technical
functions 5.2 3.2 8.4
Changes in
manufacturing/production 1.9 3.9 5.8
---- ---- ----
Balance at March 31, 1999 $7.1 $7.1 $14.2
</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 Elimina- Consoli-
Parent Subsi- Subsi- tions dated
diaries diaries
------ ------- ------- ----- -----
Condensed
Consolidated
Balance Sheet
March 31, 1999
<S> <C> <C> <C> <C> <C>
Assets:
Cash and
equivalents $ 25.3 $ 1.2 $ (7.4) $ - $ 19.1
Trade receivables
and other 263.0 18.1 289.8 - 570.9
Inventories 160.3 50.6 144.9 (42.2) 313.6
Other current
assets 183.3 483.3 70.1 (648.0) 88.7
------- ----- ----- ------- -----
Total current
assets 631.9 553.2 497.4 (690.2) 992.3
Property, plant and
equipment, net 138.7 90.5 147.7 (70.3) 306.6
Intangibles, net 32.5 378.1 3.6 - 414.2
Goodwill, net 9.6 334.0 9.4 - 353.0
Other long-term
assets 1,319.5 96.6 314.9 (1,661.3) 69.7
------- ------- ----- ------- -------
Total assets $2,132.2 $1,452.4 $973.0 $(2,421.8) $2,135.8
======= ======= ===== ======= =======
Liabilities:
Notes payable and
current maturities
oflong-term debt $ 30.8 $ 2.0 $ 84.3 $ - $ 117.1
Accounts payable
and accrued expenses 331.6 60.4 96.6 - 488.6
Other current
liabilities 133.7 504.1 91.9 (664.1) 65.6
------- ------- ----- ------ ------
Total current
liabilities 496.1 566.5 272.8 (664.1) 671.3
Long-term debt,
less current
maturities 985.7 0.9 29.7 - 1,016.3
Other long-term
liabilities 519.6 271.9 250.2 (724.3) 317.4
-------- ------ ----- ------ -------
Total liabilities 2,001.4 839.3 552.7 (1,388.4) 2,005.0
Total
stockholders'
equity 130.8 613.1 420.3 (1,033.4) 130.8
Total liabilities
and stockholders'
equity $2,132.2 $1,452.4 $ 973.0$(2,421.8) $2,135.8
======== ======= ====== ======== =======
</TABLE>
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor Elimina- Consoli-
Parent Subsi- Subsi- tions dated
diaries diaries
------ ------- ------- ------- --------
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:
Notes payable and
current maturities
of long-term debt $19.6 $2.6 $112.9 $ - $ 135.1
Accounts payable and
accrued expenses 219.5 199.7 103.8 - 523.0
Other current
liabilities 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
March 31, 1999
<S> <C> <C> <C> <C> <C>
Sales $282.0 $88.2 $216.5 $(181.6) $405.1
Operating costs and
expenses:
Cost of sales 181.2 56.6 151.2 (177.8) 211.2
Selling, general and
administrative 51.5 14.0 46.3 - 111.8
Research and
development 24.7 12.7 1.4 - 38.8
----- ----- ----- ----- -----
Operating income 24.6 4.9 17.6 (3.8) 43.3
Nonoperating expense
(income) 28.5 (2.6) 1.1 (8.8) 18.2
Earnings (loss) before
income taxes (3.9) 7.5 16.5 5.0 25.1
Income taxes (benefit) (2.0) 1.1 7.1 1.8 8.0
----- ----- ----- ----- -----
Net earnings (loss) $(1.9) $ 6.4 $ 9.4 $ 3.2 $ 17.1
===== ===== ===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Subsi- Subsi- Elimina- Consoli-
Parent diaries diaries tions dated
------ ------- ------- ------- -------
Condensed Consolidated
Statement of
Operations
Quarter ended
March 31, 1998
<S> <C> <C> <C> <C> <C>
Sales $189.8 $141.1 $155.8 $(87.3) $399.4
Operating costs and
expenses:
Cost of sales 120.9 88.4 107.8 (87.3) 229.8
Selling, general and
administrative 42.2 34.0 43.5 - 119.7
Research and
development 23.3 17.1 1.2 - 41.6
Restructuring charge (0.6) - 0.6 - -
----- ----- ----- ----- -----
Operating income 4.0 1.6 2.7 - 8.3
Nonoperating expense
(income) 20.6 (8.1) 8.2 - 20.7
----- ----- ----- ----- -----
(Loss) earnings before
income taxes (16.6) 9.7 (5.5) - (12.4)
Income
tax(benefit)expense (5.1) 1.0 2.4 (2.3) (4.0)
----- ----- ----- ----- -----
Net earnings (loss) $(11.5) $ 8.7 $ (7.9) $ 2.3 $ (8.4)
===== ===== ===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Subsi- Subsi- Consoli-
Parent diaries diaries dated
------ ------- ------- ------
Condensed Consolidated
Statement of Cash
Flows
Three Months ended
March 31, 1999
<S> <C> <C> <C> <C>
Net cash provided
(used)
by operating
activities $16.0 $(31.6) $ 30.6 $ 15.0
Cash flows from
investing
activities:
Additions to property,
plant and equipment (13.0) (1.4) (21.1) (35.5)
Net disposals of
property,
plant and equipment 0.6 - - 0.6
---- ---- ---- ----
Net cash used by
investing
activities (12.4) (1.4) (21.1) (34.9)
---- ---- ---- ----
Cash flows from
financing
activities:
Dividends to
stockholders (4.6) - - (4.6)
stockholders
Proceeds from issuance
of stock 3.1 - - 3.1
Notes payable
(reductions) (11.2) - (2.0) (13.2)
Net intercompany
(reductions)borrowings (4.8) 34.6 (29.8) -
Long-term debt
borrowings
(reductions) 35.0 (0.3) (5.9) 28.8
---- ---- ---- ----
Net cash provided
(used)
by financing
activities 17.5 34.3 (37.7) 14.1
---- ---- ---- ----
Effect of exchange
rates on cash and
equivalents - - 0.2 0.2
Increase (decrease) in
cash and equivalents 21.1 1.3 (28.0) (5.6)
Cash and equivalents -
beginning of period 4.2 (0.1) 20.6 24.7
---- ---- ---- ----
Cash and equivalents -
end of period $ 25.3 $1.2 $ (7.4) $ 19.1
==== ==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Subsi- Subsi- Consoli-
Parent diaries diaries dated
------ ------- ------- -------
Condensed Consolidated
Statement of Cash
Flows
Three Months ended
March 31, 1998
<S> <C> <C> <C> <C>
Net cash provided
(used)
by operating
activities $ (38.8) $(0.1) $ (31.7) $ (70.6)
Cash flows from
investing
activities:
Additions to property,
plant and equipment (5.5) (4.4) (8.4) (18.3)
Net disposals of
property,
plant and equipment 2.7 0.7 (4.0) (0.6)
Proceeds from sales-
leaseback transactions - 7.6 (7.6) -
Investments and
acquisitions 9.7 (0.4) 0.4 9.7
---- ---- ---- ----
Net cash provided
(used) by investing
activities 6.9 3.5 (19.6) (9.2)
---- ---- ---- ----
Cash flows from
financing
activities:
Dividends to
stockholders (4.3) - - (4.3)
Proceeds from issuance
of stock 3.8 - - 3.8
Notes
payable(reductions)
borrowings (2.0) - 10.6 8.6
Long-term debt
borrowings
(reductions) 66.0 (0.9) 4.5 69.6
---- ---- ---- ----
Net cash provided
(used)
by financing
activities 63.5 (0.9) 15.1 77.7
Effect of exchange
rates on cash and
equivalents (0.4) (0.8) 1.0 (0.2)
---- ---- ---- ----
Increase (decrease) in
cash and equivalents 31.2 1.7 (35.2) (2.3)
Cash and equivalents -
beginning of period 13.9 7.3 12.3 33.5
---- ---- ---- ----
Cash and equivalents -
end of period $ 45.1 $9.0 $ (22.9) $ 31.2
==== ==== ==== ====
</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>
For the quarters ended 1999 1998
March 31, ---- ----
(in millions)
<S> <C> <C>
Net sales
Clinical diagnostics $ 326.7 $ 321.4
Life science research 78.4 78.0
Center - -
----- -----
Consolidated $ 405.1 $ 399.4
===== =====
Operating income (loss)
Clinical diagnostics $ 54.9 $ 28.7
Life science research 6.3 0.3
Center (17.9) (20.7)
----- -----
Consolidated $ 43.3 $ 8.3
===== =====
Interest income
Clinical diagnostics $ (1.0) $ (2.6)
Life science research - -
Center (1.0) (0.6)
----- -----
Consolidated $ (2.0) $ (3.2)
===== =====
Interest expense
Clinical diagnostics $ - $ -
Life science research - -
Center 18.2 26.2
----- -----
Consolidated $ 18.2 $ 26.2
===== =====
</TABLE>
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
---- ----
Total assets
<S> <C> <C>
Clinical diagnostics $1,446.9 $1,519.2
Life science research 208.2 199.2
Center 480.7 414.9
------- -------
Consolidated $2,135.8 $2,133.3
======= =======
Geographic areas
For the quarters ended 1999 1998
March 31, ---- ----
(in millions)
Sales to external
customers
North America -- $ 227.1 $ 238.1
domestic
North America -- export 21.9 21.7
Europe 109.1 97.5
Asia and other areas 47.0 42.1
------ ------
Consolidated $ 405.1 $ 399.4
====== ======
March 31, December 31,
1999 1998
---- ----
Long-lived assets
North America $ 717.8 $ 814.7
Europe 344.8 273.2
Asia and other areas 80.9 88.7
------- -------
Consolidated $1,143.5 $1,176.6
======= =======
</TABLE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Overview
- --------
We are Beckman Coulter, Inc. (formerly known as Beckman
Instruments, Inc. and renamed Beckman Coulter, Inc. after the
acquisition of Coulter Corporation),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.
We believe our focus on improving customer economies and patient
outcomes has resulted in our meeting our profitability objectives
in the first quarter of 1999 in a constrained market. But, we do
not guarantee the extent to which we will continue to realize the
benefits of the acquisition, or the timing of any such
realization.
Results of operations for the three months ended March 31, 1999
- ---------------------------------------------------------------
Sales grew 1.4% (0.7% excluding the effect of foreign currency
rate changes) in the first quarter of 1999 compared to the first
quarter of 1998. Sales growth was affected by the following:
- - the first quarter of 1999 included three months of Coulter
international sales compared to only two months in the first
quarter of 1998 due to the lagging of Coulter international
results of operations as previously reported;
- - compared to the first quarter of 1999, the first quarter of
1998 for the combined Beckman Coulter organization included
higher sales from what would have traditionally been the fourth
quarter for the old Coulter business; and
- - the number of sales-type leases entered into in the first
quarter of 1999 decreased compared to the first quarter of 1998
as more sales transactions were placed under operating-type lease
arrangements in the current period. This resulted in a decrease
in reported revenues as revenues on operating-type leases are
recognized over the lives of the leases, whereas revenues on the
instrument portion of sales-type leases are recognized
immediately.
For the quarter, gross profit as a percentage of sales was 5.4
percentage points higher than the same period in 1998. This was
primarily due to:
- - lower gross margins in 1998 due to a one-time increase in
cost of sales of $5.7 million related to inventory revaluation
from the Coulter acquisition; and
- - synergies in 1999 from the combination of the Beckman and
Coulter organizations.
Selling, general and administrative expenses as a percentage of
sales decreased to 27.6% from 30.0% for the first quarter of
1998. We achieved this through continuing progress with the
integration activities.
Operating income increased $35.0 million compared to the same
quarter in 1998 primarily due to the changes discussed above.
Net income for the first quarter of 1999 was $17.1 million or
$0.58 per diluted share, compared to a loss of $8.4 million or
$0.30 per diluted share in the first quarter of 1998. In
addition to the increase in operating income, discussed above,
interest expense decreased by $8.0 million during the first
quarter of 1999 due to a lower average debt balance as well as
slightly lower interest rates.
Financial Condition
- -------------------
As discussed in greater detail in our 1998 annual report, we are
a highly leveraged company. Although the debt-to-capital ratio
has declined, as planned, from 95.2% at March 31, 1998 to 89.7%
at March 31, 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.
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 equipment subject to customer leases and sales-type lease
receivables) and real estate assets. If these sales are
consummated as expected, we believe they will generate proceeds
of approximately $30.0 million in 1999, less any costs to
complete the transactions.
Operating activities provided net cash of $15.0 million in the
first quarter of 1999 compared to net cash usage of $70.6 million
in the first quarter of the prior year. The primary reasons were:
- - net earnings were $17.1 million in 1999 compared to a net
loss of $8.4 million in 1998; and
- - cash paid to settle accounts payable, accrued expenses and
other liabilities were lower, $30.1 million in 1999 compared to
$102.4 million in 1998.
Net cash used by investing activities increased to $34.9 million
from $9.2 million in the comparable period in 1998. This increase
was primarily due to increased additions to property, plant and
equipment in 1999 compared to 1998 in addition to reduced cash
proceeds from disposals.
Since our operating activities required less cash from financing,
net cash provided by financing activities decreased to $14.1
million compared to $77.7 million in the prior year's comparable
quarter.
The ratio of debt-to-capital decreased slightly at March 31, 1999
to 89.7% from 89.8% at December 31, 1998. The ratio of current
assets to current liabilities improved to 1.5 at March 31, 1999
from 1.3 at December 31, 1998. 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 flow 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 March 11, 1999, we paid a quarterly cash dividend of $0.16 per
share of common stock for a total of $4.6 million. On April 8,
1999, the Board of Directors declared a quarterly cash dividend
of $0.16 per share of common stock payable on June 3, 1999 to
shareholders of record on May 14, 1999.
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):
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Testing/ Implement-
Inventory Assessment Remediation validation ation
Products & Complete Complete Complete Complete Complete (2)
services
Management
information Complete Complete Complete Q2 1999 Q2 1999
systems
Suppliers
(materials Complete Complete Complete Q2 1999 (4) Q2 1999 (4)
& services)
Engineering
& Complete Complete Q2 1999 Q3 1999 Q3 1999
manufacturing
processes
Office Complete Complete Q2 1999 Q2 1999 Q2 1999
equipment
Facilities Complete Q2 1999 Q2 1999 Q3 1999 Q3 1999
and
Utilities Complete Q2 1999 (3) (3) (3)
</TABLE>
Note:
(1) The target dates are the ends of the quarters referred to.
For example Q2 1999 refers to the end of the second 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 will
be considered as part of the contingency planning.
(4) Revised target date.
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. 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. However, we cannot give any assurances to that effect
until our entire inventory, assessment, and remediation
activities are completed for all projects in the table
above.
We believe our Year 2000 program will be completed on
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 $9.0
million. Through March 31, 1999 we have spent approximately $4.3
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 are currently determining the extent to which contingency
plans are necessary for each aspect of our business with respect
to Year 2000 issues (including most reasonably likely worst case
Year 2000 scenarios). We are currently establishing those
contingency plans.
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 six-member 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 life science research market is showing signs of
improvement, stimulated by the general economy. The clinical
diagnostic market is under pressure from significant cost
containment efforts and the overall restructuring of the
industry. In 1999 the portions of these markets served by us are
expected to grow in the low single digits.
The Asia Pacific market, including Japan, continues to be
severely impacted by economic uncertainty. The two key factors
are:
1. the recession in Japan, which is limiting the release of
life science research funding; and
2. the currency crisis which has affected most countries in
Southeast Asia.
In general, the European clinical diagnostics and life science
research markets continue to be unfavorably impacted by cost
containment initiatives as part of governmental fiscal management
policies. These policies are driven in large part by the
requirements for the impending European monetary union.
Forward Looking Statements
- --------------------------
This 10-Q report contains forward-looking statements, including
statements regarding, among other items:
1. our business strategy;
2. anticipated trends in our business and plans to reduce
indebtedness;
3. our liquidity requirements and capital resources;
4. anticipated synergies and future cost reductions from our
"One Face to the Customer" initiatives; and
5. the impact of Year 2000 problems and the euro conversion 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 health-care reforms;
5. fluctuations in foreign exchange rates and interest rates;
6. reliance on patents and other intellectual property;
7. difficulties, delays or failure in effectively integrating
worldwide operations;
8. unanticipated Year 2000 or euro problems; and
9. 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.
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
The annual meeting of the Stockholders of the
Company (the "Annual Meeting") was held on April 8,
1999. Four members of the Board of Directors whose
terms expired at the 1999 Annual Meeting were elected
to new terms expiring at the 2002 Annual Meeting. The
number of shares voting were as follows:
Votes For Votes Withheld
--------- --------------
Hugh H. Coble 24,345,920 404,397
Van B. Honeycutt 24,345,536 404,781
John P. Wareham 24,337,454 412,863
Betty Woods 24,349,158 401,159
The remaining members of the Board of Directors
who will continue in office and the year in which their
terms expire are: Term expiring 2001: Carolyne K.
Davis, Ph.D., Ronald W. Dollens, Charles A. Haggerty
and William N. Kelly, M.D. Term Expiring in 2000:
Peter B. Dervan, Ph.D., Gavin S. Herbert, C. Roderick
O'Neil.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
11. Statement re Computation of Per Share Earnings: This
information is set forth in Note 4, Net Earnings Per
Share of the Condensed Consolidated Financial Statements
included in Part I herein.
15. Independent Accountants' Review Report, April 23, 1999
27. Financial Data Schedule for the three month period ended
March 31, 1999
b) Reports on Form 8-K
None.
Signatures
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
BECKMAN COULTER, INC.
(Registrant)
Date: April 30, 1999 by WILLIAM H. MAY
William H. May
Vice President,
General Counsel and Secretary
Date: April 30, 1999 by DENNIS K. WILSON
Vice President, Finance
and Chief Financial Officer
<PAGE>
EXHIBIT INDEX
FORM 10-Q, FIRST QUARTER, 1999
Exhibit
Number Description
- ------- -----------
11. Statement re Computation of Per Share Earnings: This information
is set forth in Note 4, Net Earnings Per Share, of the Condensed
Consolidated Financial Statements included in Part I herein.
15. Independent Accountants' Review Report, April 23, 1999
27. Financial Data Schedule for the three month period ended
March 31, 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 March 31, 1999, and
the related condensed consolidated statements of operations and
cash flows for the three-month periods ended March 31, 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
April 23, 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
Earnings and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 19
<SECURITIES> 0
<RECEIVABLES> 594
<ALLOWANCES> 23
<INVENTORY> 314
<CURRENT-ASSETS> 992
<PP&E> 629
<DEPRECIATION> 322
<TOTAL-ASSETS> 2136
<CURRENT-LIABILITIES> 671
<BONDS> 1133
0
0
<COMMON> 3
<OTHER-SE> 128
<TOTAL-LIABILITY-AND-EQUITY> 2136
<SALES> 405
<TOTAL-REVENUES> 405
<CGS> 211
<TOTAL-COSTS> 211
<OTHER-EXPENSES> 151
<LOSS-PROVISION> 3
<INTEREST-EXPENSE> 18
<INCOME-PRETAX> 25
<INCOME-TAX> 8
<INCOME-CONTINUING> 17
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17
<EPS-PRIMARY> 0.60
<EPS-DILUTED> 0.58
</TABLE>
