<PAGE> 1
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, 2000
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)
<TABLE>
<S> <C>
Delaware 95-104-0600
(State of Incorporation) (I.R.S. Employer
Identification No.)
</TABLE>
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 31, 2000: 29,714,657 shares.
<PAGE> 2
<TABLE>
PART I
FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Condensed Consolidated Statements of Operations for the three and
nine month periods ended September 30, 2000 and 1999
Condensed Consolidated Balance Sheets as of September 30, 2000 and
December 31, 1999
Condensed Consolidated Statements of Cash Flows for the nine month
periods ended September 30, 2000 and 1999
Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
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
</TABLE>
<PAGE> 3
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
BECKMAN COULTER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Millions, Except Amounts Per Share and Share Data)
Unaudited
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- ---------------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Sales $ 457.8 $ 440.1 $ 1,361.6 $ 1,291.4
Cost of sales 243.2 231.2 720.5 676.5
---------- ---------- ---------- ----------
Gross profit 214.6 208.9 641.1 614.9
---------- ---------- ---------- ----------
Operating costs and expenses:
Selling, general and
administrative 116.4 117.4 349.0 344.8
Research and development 43.3 42.0 130.0 123.2
---------- ---------- ---------- ----------
Total operating costs and
expenses 159.7 159.4 479.0 468.0
---------- ---------- ---------- ----------
Operating income 54.9 49.5 162.1 146.9
---------- ---------- ---------- ----------
Nonoperating (income) and expenses:
Interest income (1.4) (2.2) (4.9) (5.9)
Interest expense 17.7 18.1 54.2 55.2
Other, net (3.6) (1.6) (6.8) (0.7)
---------- ---------- ---------- ----------
Total nonoperating expenses 12.7 14.3 42.5 48.6
---------- ---------- ---------- ----------
Earnings before income taxes 42.2 35.2 119.6 98.3
Income taxes 13.1 10.8 37.1 31.0
---------- ---------- ---------- ----------
Net earnings $ 29.1 $ 24.4 $ 82.5 $ 67.3
========== ========== ========== ==========
Basic earnings per share $ 0.98 $ 0.85 $ 2.81 $ 2.35
Weighted average number of shares
outstanding (in thousands) 29,628 28,754 29,367 28,602
Diluted earnings per share $ 0.93 $ 0.82 $ 2.68 $ 2.27
Weighted average number of shares and
dilutive shares outstanding
(in thousands) 31,245 29,764 30,758 29,664
Dividends declared per share $ 0.16 $ 0.16 $ 0.48 $ 0.48
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 4
BECKMAN COULTER, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in Millions, Except Amounts per Share)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------ ------------
Unaudited
<S> <C> <C>
Assets
Current assets:
Cash and equivalents $ 18.3 $ 34.4
Trade and other receivables 492.9 566.4
Inventories 364.8 313.1
Other current assets 48.4 52.5
-------- --------
Total current assets 924.4 966.4
Property, plant and equipment, net 287.5 305.9
Goodwill, less accumulated amortization of $34.5 and
$26.3 at September 30, 2000 and December 31, 1999,
respectively 342.8 344.7
Other intangibles, less accumulated amortization of
$61.1 and $46.8 at September 30, 2000 and
December 31, 1999, respectively 388.5 399.9
Other assets 68.1 93.9
-------- --------
Total assets $2,011.3 $2,110.8
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable and current maturities of long-term
debt $ 25.7 $ 50.0
Accounts payable, accrued expenses and other
liabilities 374.3 474.1
Income taxes 67.8 51.8
-------- --------
Total current liabilities 467.8 575.9
Long-term debt, less current maturities 910.3 980.7
Other liabilities 327.6 326.3
-------- --------
Total liabilities 1,705.7 1,882.9
-------- --------
Stockholders' equity:
Preferred stock, $0.10 par value; authorized 10.0
shares; none issued -- --
Common stock, $0.10 par value; authorized 150.0
shares; shares issued 29.7 and 29.1 at September 30,
2000 and December 31, 1999,respectively; shares
outstanding 29.7 and 29.0 at September 30, 2000 and
December 31, 1999, respectively 3.0 2.9
Additional paid-in capital 160.2 134.5
Retained earnings 191.3 123.0
Accumulated other comprehensive loss:
Cumulative foreign currency translation adjustment (48.9) (24.3)
Treasury stock, at cost -- (8.2)
-------- --------
Total stockholders' equity 305.6 227.9
-------- --------
Total liabilities and stockholders' equity $2,011.3 $2,110.8
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 5
BECKMAN COULTER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Millions)
Unaudited
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------
2000 1999
------ ------
<S> <C> <C>
Cash Flows from Operating Activities
Net earnings $ 82.5 $ 67.3
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 101.6 109.2
Net deferred income taxes 8.2 (0.7)
Proceeds from sales of sales-type lease receivables 61.9 45.7
Gain on sale of property, plant and equipment (2.9) --
Changes in assets and liabilities:
Trade and other receivables 15.0 (0.4)
Inventories (46.7) (8.2)
Accounts payable, accrued expenses and other
liabilities (97.0) (100.8)
Income taxes payable 23.0 16.4
Other 3.4 10.3
------ ------
Net cash provided by operating activities 149.0 138.8
------ ------
Cash Flows from Investing Activities
Additions to property, plant and equipment (110.1) (104.2)
Proceeds from sale of certain clinical chemistry assets 15.2 --
Proceeds from sale of property, plant and equipment 17.5 7.4
Purchase of investments (5.3) --
------ ------
Net cash used by investing activities (82.7) (96.8)
------ ------
Cash Flows from Financing Activities
Dividends to stockholders (14.2) (13.7)
Proceeds from issuance of stock 27.3 14.8
Proceeds from stock purchase plan 2.0 1.8
Notes payable reductions, net (21.6) (70.3)
Long-term debt borrowings -- 41.0
Long-term debt reductions (72.8) (10.6)
------ ------
Net cash used by financing activities (79.3) (37.0)
------ ------
Effect of exchange rates on cash and equivalents (3.1) 0.2
------ ------
Increase (decrease) in cash and equivalents (16.1) 5.2
Cash and equivalents -- beginning of period 34.4 24.7
------ ------
Cash and equivalents -- end of period $ 18.3 $ 29.9
====== ======
Supplemental Disclosures of Cash Flow Information
Cash paid during the period for:
Interest $ 52.4 $ 55.0
Income taxes $ 21.1 $ 14.5
Non-cash Investing and Financing Activities:
Purchase of equipment under capital lease $ 3.1 $ 2.1
Receivable from sale of certain clinical chemistry assets $ 1.4 $ --
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 6
BECKMAN COULTER, INC.
Notes To Condensed Consolidated Financial Statements
September 30, 2000
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 year
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, 1999.
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. Comprehensive Income
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income", establishes standards for the reporting and display of comprehensive
income. Components of comprehensive income include net earnings and foreign
currency translation adjustments. The components of comprehensive income are as
follows (in millions):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2000 1999 2000 1999
------ ------ ------ -----
<S> <C> <C> <C> <C>
Net earnings $29.1 $24.4 $ 82.5 $67.3
Foreign currency translation
adjustment 1.5 3.5 (24.6) (8.5)
----- ----- ------ -----
Comprehensive income $30.6 $27.9 $ 57.9 $58.8
===== ===== ====== =====
</TABLE>
3. 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):
<PAGE> 7
<TABLE>
<CAPTION>
Three Months Ended September 30,
---------------------------------------------------------------
2000 1999
----------------------------- ------------------------------
Per Per
Net Share Net Share
Earnings Shares Amount Earnings Shares Amount
-------- ------ ------ -------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS:
Net earnings $29.1 29.6 $ 0.98 $24.4 28.8 $ 0.85
Effect of dilutive
stock options -- 1.6 (0.05) -- 1.0 (0.03)
----- ----- ------ ----- ----- ------
Diluted EPS:
Net earnings $29.1 31.2 $ 0.93 $24.4 29.8 $ 0.82
===== ===== ====== ===== ===== ======
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended September 30,
--------------------------------------------------------------
2000 1999
---------------------------- -----------------------------
Per Per
Net Share Net Share
Earnings Shares Amount Earnings Shares Amount
-------- ------ ------ -------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS:
Net earnings $82.5 29.4 $ 2.81 $67.3 28.6 $ 2.35
Effect of dilutive
stock options -- 1.4 (0.13) -- 1.1 (0.08)
----- ----- ------ ----- ----- ------
Diluted EPS:
Net earnings $82.5 30.8 $ 2.68 $67.3 29.7 $ 2.27
===== ===== ====== ===== ===== ======
</TABLE>
4. Sale of Receivables
During the nine months ended September 30, 2000, we sold certain sales-type
lease receivables as part of our plan to reduce debt. The net book value of the
financial assets sold was $61.6 million for which we received $61.9 million in
cash proceeds. During the nine months ended September 30, 1999, we sold similar
assets with a net book value of $44.4 million for cash proceeds of $45.7
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 limited recourse provisions.
5. Inventories
Inventories consisted of the following (in millions):
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------- ------------
<S> <C> <C>
Finished products $239.3 $210.9
Raw materials, parts and assemblies 103.3 87.2
Work in process 22.2 15.0
------ ------
$364.8 $313.1
====== ======
</TABLE>
6. Goodwill
During the quarter ended June 30, 2000, we recorded a $6.3 million net increase
to goodwill. This increase was the result of adjustments to deferred income
taxes related to the 1997 acquisition of Coulter Corporation partially offset by
a reversal of excess purchase liabilities.
<PAGE> 8
7. Provision for Restructuring Operations
In the fourth quarter of 1999, we recorded a restructuring charge of $4.3
million, $2.6 million after taxes, for consolidation of selling, general,
administrative and technical functions. The following table details the activity
within the accrual for the nine months ended September 30, 2000 (in millions):
<TABLE>
<CAPTION>
Facility
Consolidation
Personnel and
and Asset-related
Other Write-offs Total
--------- ------------- -----
<S> <C> <C> <C>
Remaining provision included in accrued expenses at
December 31, 1999 $ 3.0 $ 0.6 $ 3.6
2000 year-to-date utilization (2.7) (0.6) (3.3)
----- ----- -----
Balance at September 30, 2000 $ 0.3 $ -- $ 0.3
===== ===== =====
</TABLE>
In the fourth quarter of 1998, we recorded a restructuring charge of $19.1
million, $11.2 million after taxes. The following table details the activity
within the accrual for the nine months ended September 30, 2000 (in millions):
<TABLE>
<CAPTION>
Facility
Consolidation
Personnel and
and Asset-related
Other Write-offs Total
--------- ------------- -----
<S> <C> <C> <C>
Balance at December 31, 1999:
Consolidation of selling, general,
administrative and technical functions $ 8.3 $ -- $ 8.3
Changes in manufacturing operations 1.1 4.5 5.6
----- ----- -----
Remaining provision included in
accrued expenses at December 31, 1999 $ 9.4 $ 4.5 $13.9
===== ===== =====
2000 year-to-date utilization:
Consolidation of selling, general,
administrative and technical functions $(4.6) $ -- $(4.6)
Changes in manufacturing operations (0.6) (4.3) (4.9)
----- ----- -----
Total 2000 year-to-date utilization $(5.2) $(4.3) $(9.5)
===== ===== =====
Balance at September 30, 2000:
Consolidation of selling, general,
administrative and technical functions $ 3.7 $ -- $ 3.7
Changes in manufacturing operations 0.5 0.2 0.7
----- ----- -----
Balance at September 30, 2000 $ 4.2 $ 0.2 $ 4.4
===== ===== =====
</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
within the accrual for the nine months ended September 30, 2000 (in millions):
<PAGE> 9
<TABLE>
<CAPTION>
Facility
Consolidation
Personnel and
and Asset-related
Other Write-offs Total
--------- ------------- -----
<S> <C> <C> <C>
Balance at December 31, 1999:
Consolidation of selling, general,
administrative and technical functions $ 1.7 $ 1.7 $ 3.4
Changes in manufacturing operations 1.6 -- 1.6
----- ----- -----
Remaining provision included in
accrued expenses at December 31, 1999 $ 3.3 $ 1.7 $ 5.0
===== ===== =====
2000 year-to-date utilization:
Consolidation of selling, general,
administrative and technical functions $(1.6) $(0.8) $(2.4)
Changes in manufacturing operations (1.6) -- (1.6)
----- ----- -----
Total 2000 year-to-date utilization $(3.2) $(0.8) $(4.0)
===== ===== =====
Balance at September 30, 2000:
Consolidation of selling, general,
administrative and technical functions $ 0.1 $ 0.9 $ 1.0
Changes in manufacturing operations -- -- --
----- ----- -----
Balance at September 30, 2000 $ 0.1 $ 0.9 $ 1.0
===== ===== =====
</TABLE>
8. Contingencies
In December 1999, Streck Laboratories, Inc. ("Streck") served Beckman Coulter
and Coulter Corporation with a complaint filed in the United States District
Court for the District of Nebraska. The complaint alleges that control products
sold by Beckman Coulter and/or Coulter Corporation infringe each of five patents
owned by Streck, and seeks injunctive relief, damages, attorney fees and costs.
We, on behalf of ourselves and on behalf of Coulter Corporation, have answered
the complaint and have filed a counterclaim against Streck for patent
infringement. We continue to believe that there is no reasonable basis for us to
conclude that this litigation could lead to an outcome that would have a
material adverse effect on our consolidated operations or financial position.
In addition to the above matter, we are involved in a number of other 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 consolidated operations or financial position.
<PAGE> 10
9. Business Segment Information
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.
In the first quarter of 2000, we realigned our geographic reporting structure.
Our Latin America operations, which were formerly reported with the "Asia and
Rest of World" geographic area, are now reported in the "Americas" geographic
area along with our North America operations. Prior year amounts have been
reclassified to conform to the current year presentation.
<PAGE> 11
<TABLE>
<CAPTION>
For the quarters ended For the nine months ended
(in millions) September 30, September 30,
----------------------- -------------------------
2000 1999 2000 1999
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
Net sales
Clinical diagnostics $ 358.8 $ 347.2 $1,078.9 $1,027.4
Life science research 99.0 92.9 282.7 264.0
Center -- -- -- --
-------- -------- -------- --------
Consolidated $ 457.8 $ 440.1 $1,361.6 $1,291.4
======== ======== ======== ========
Operating income (loss)
Clinical diagnostics $ 53.2 $ 57.9 $ 174.1 $ 165.9
Life science research 17.0 12.8 39.8 29.6
Center (15.3) (21.2) (51.8) (48.6)
-------- -------- -------- --------
Consolidated $ 54.9 $ 49.5 $ 162.1 $ 146.9
======== ======== ======== ========
Interest income
Clinical diagnostics $ (0.6) $ (0.8) $ (1.3) $ (2.3)
Life science research -- -- -- --
Center (0.8) (1.4) (3.6) (3.6)
-------- -------- -------- --------
Consolidated $ (1.4) $ (2.2) $ (4.9) $ (5.9)
======== ======== ======== ========
Interest expense
Clinical diagnostics $ -- $ -- $ -- $ --
Life science research -- -- -- --
Center 17.7 18.1 54.2 55.2
-------- -------- -------- --------
Consolidated $ 17.7 $ 18.1 $ 54.2 $ 55.2
======== ======== ======== ========
Sales to external customers
Americas $ 291.6 $ 264.8 $ 840.1 $ 763.3
Europe 112.8 120.1 357.2 374.3
Asia 53.4 55.2 164.3 153.8
-------- -------- -------- --------
Consolidated $ 457.8 $ 440.1 $1,361.6 $1,291.4
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------- ------------
<S> <C> <C>
Long-lived assets
Americas $ 990.3 $1,010.7
Europe 75.9 97.8
Asia 20.7 35.9
-------- --------
Consolidated $1,086.9 $1,144.4
======== ========
Total assets
Clinical diagnostics $1,386.2 $1,460.8
Life science research 186.4 178.4
Center 438.7 471.6
-------- --------
Consolidated $2,011.3 $2,110.8
======== ========
</TABLE>
10. Stockholders' Equity
On April 6, 2000, our stockholders approved an amendment to the Certificate of
Incorporation to increase the authorized shares of common stock from 75,000,000
to 150,000,000.
During the quarter ended September 30, 2000, we recorded a $6.6 million increase
to additional paid-in capital with an offsetting decrease to income tax payable
as a result of the tax benefit we received from employees exercising
non-qualified stock options.
11. Recent Accounting Developments
In December 1999, the SEC issued Staff Accounting Bulletin No. 101 ("SAB 101").
SAB 101 provides the SEC's views in applying generally accepted accounting
principles to selected revenue recognition issues. As amended, calendar year-end
companies that have not applied the accounting requirements of SAB 101 may
report a change in accounting principle no
<PAGE> 12
later than December 31, 2000, including retroactive restatement of all affected
quarters within 2000. We are currently evaluating the impact of SAB 101 on our
consolidated financial statements and results of operations.
12. 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 Parent, 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.
<PAGE> 13
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Subsi- Subsi- Elimina- Consoli-
Parent diaries diaries tions dated
------ --------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Condensed Consolidated
Statement of Operations
Three Months Ended
September 30, 2000
Sales $353.2 $ 67.1 $227.7 $(190.2) $457.8
Operating costs and
expenses:
Cost of sales 219.0 49.8 166.0 (191.6) 243.2
Selling, general and
administrative 61.7 11.2 43.5 -- 116.4
Research and
development 25.1 17.2 1.0 -- 43.3
------ ------ ------ ------- ------
Operating income
(loss) 47.4 (11.1) 17.2 1.4 54.9
Nonoperating (income) and
expenses 8.0 3.3 (1.5) 2.9 12.7
------ ------ ------ ------- ------
Earnings (loss) before
income taxes 39.4 (14.4) 18.7 (1.5) 42.2
Income taxes (benefit) 11.3 (6.2) 7.5 0.5 13.1
------ ------ ------ ------- ------
Net earnings (loss) $ 28.1 $ (8.2) $ 11.2 $ (2.0) $ 29.1
====== ====== ====== ======= ======
</TABLE>
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Subsi- Subsi- Elimina- Consoli-
Parent diaries diaries tions dated
------ --------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Condensed Consolidated
Statement of Operations
Three Months Ended
September 30, 1999
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) and
expenses (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 8.6 3.3 5.7 (6.8) 10.8
------ ------ ------ ------- ------
Net earnings $ 19.3 $ 5.1 $ 15.4 $ (15.4) $ 24.4
====== ====== ====== ======= ======
</TABLE>
<PAGE> 14
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Subsi- Subsi- Elimina- Consoli-
Parent diaries diaries tions dated
------ --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
Condensed Consolidated
Statement of Operations
Nine Months Ended
September 30, 2000
Sales $1,033.3 $ 226.8 $ 705.5 $ (604.0) $1,361.6
Operating costs and
expenses:
Cost of sales 646.9 163.6 517.2 (607.2) 720.5
Selling, general and
administrative 188.3 34.0 126.7 -- 349.0
Research and
development 75.1 51.0 3.9 -- 130.0
-------- -------- -------- -------- --------
Operating income
(loss) 123.0 (21.8) 57.7 3.2 162.1
Nonoperating (income) and
expenses 15.8 10.0 (3.7) 20.4 42.5
-------- -------- -------- -------- --------
Earnings (loss) before
income taxes 107.2 (31.8) 61.4 (17.2) 119.6
Income taxes (benefit) 26.9 (9.8) 19.0 1.0 37.1
-------- -------- -------- -------- --------
Net earnings (loss) $ 80.3 $ (22.0) $ 42.4 $ (18.2) $ 82.5
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Subsi- Subsi- Elimina- Consoli-
Parent diaries diaries tions dated
------ --------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Condensed Consolidated
Statement of Operations
Nine Months Ended
September 30, 1999
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 54.6 28.5 69.1 (5.3) 146.9
Nonoperating (income) and
expenses (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 19.6 12.3 19.0 (19.9) 31.0
-------- -------- -------- -------- --------
Net earnings $ 42.8 $ 16.4 $ 51.4 $ (43.3) $ 67.3
======== ======== ======== ======== ========
</TABLE>
<PAGE> 15
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Subsi- Subsi- Elimina- Consoli-
Parent diaries diaries tions dated
------ --------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Condensed Consolidated
Balance Sheet
September 30, 2000
Assets:
Cash and equivalents $ (42.2) $ (3.9) $ 64.4 $ -- $ 18.3
Trade and other
receivables 241.7 3.1 248.1 -- 492.9
Inventories 248.8 42.1 120.2 (46.3) 364.8
Other current assets 759.2 877.6 64.7 (1,653.1) 48.4
-------- -------- -------- --------- --------
Total current
assets 1,207.5 918.9 497.4 (1,699.4) 924.4
Property, plant and
equipment, net 163.0 82.3 112.8 (70.6) 287.5
Goodwill, net 12.1 330.5 0.2 -- 342.8
Other intangibles, net 28.2 354.2 6.1 -- 388.5
Other assets 1,254.8 22.2 269.6 (1,478.5) 68.1
-------- -------- -------- --------- --------
Total assets $2,665.6 $1,708.1 $ 886.1 $(3,248.5) $2,011.3
======== ======== ======== ========= ========
Liabilities:
Notes payable and
current maturities
of long-term debt $ 3.5 $ 0.2 $ 22.0 $ -- $ 25.7
Accounts payable and
accrued expenses 265.1 27.9 81.3 -- 374.3
Other current
liabilities 746.0 439.7 94.5 (1,212.4) 67.8
-------- -------- -------- --------- --------
Total current
liabilities 1,014.6 467.8 197.8 (1,212.4) 467.8
Long-term debt, less
current maturities 851.2 -- 59.1 -- 910.3
Other liabilities 490.1 575.0 148.4 (885.9) 327.6
-------- -------- -------- --------- --------
Total liabilities 2,355.9 1,042.8 405.3 (2,098.3) 1,705.7
Total stockholders'
equity 309.7 665.3 480.8 (1,150.2) 305.6
-------- -------- -------- --------- --------
Total liabilities
and stockholders'
equity $2,665.6 $1,708.1 $ 886.1 $(3,248.5) $2,011.3
======== ======== ======== ========= ========
</TABLE>
<PAGE> 16
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Subsi- Subsi- Elimina- Consoli-
Parent diaries diaries tions dated
------ --------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Condensed Consolidated
Balance Sheet
December 31, 1999
Assets:
Cash and equivalents $ (5.3) $ 3.7 $ 36.0 $ -- $ 34.4
Trade and other
receivables 255.8 6.0 304.6 -- 566.4
Inventories 201.0 32.1 122.7 (42.7) 313.1
Other current assets 455.4 725.7 95.4 (1,224.0) 52.5
-------- -------- -------- --------- --------
Total current
assets 906.9 767.5 558.7 (1,266.7) 966.4
Property, plant and
equipment, net 152.4 84.6 142.3 (73.4) 305.9
Goodwill, net 10.3 325.6 8.8 -- 344.7
Other intangibles, net 30.2 366.2 3.5 -- 399.9
Other assets 1,457.9 35.8 279.2 (1,679.0) 93.9
-------- -------- -------- --------- --------
Total assets $2,557.7 $1,579.7 $ 992.5 $(3,019.1) $2,110.8
======== ======== ======== ========= ========
Liabilities:
Notes payable and
current maturities
of long-term debt $ 4.4 $ 1.1 $ 44.5 $ -- $ 50.0
Accounts payable and
accrued expenses 368.3 32.7 95.6 (22.5) 474.1
Other current
liabilities 530.9 213.1 131.0 (823.2) 51.8
-------- -------- -------- --------- --------
Total current
liabilities 903.6 246.9 271.1 (845.7) 575.9
Long-term debt, less
current maturities 913.0 0.1 67.6 -- 980.7
Other liabilities 513.2 647.9 213.0 (1,047.8) 326.3
-------- -------- -------- --------- --------
Total liabilities 2,329.8 894.9 551.7 (1,893.5) 1,882.9
Total stockholders'
equity 227.9 684.8 440.8 (1,125.6) 227.9
-------- -------- -------- --------- --------
Total liabilities
and stockholders'
equity $2,557.7 $1,579.7 $ 992.5 $(3,019.1) $2,110.8
======== ======== ======== ========= ========
</TABLE>
<PAGE> 17
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Subsi- Subsi- Consoli-
Parent diaries diaries dated
------ --------- --------- -------
<S> <C> <C> <C> <C>
Condensed Consolidated
Statement of Cash Flows
Nine Months Ended September 30, 2000
Net cash (used) provided by operating
activities $ 44.4 $ (6.5) $111.1 $149.0
------ ------ ------ ------
Cash flows from investing activities:
Additions to property, plant and
equipment (51.4) (7.5) (51.2) (110.1)
Proceeds from sale of certain clinical
chemistry assets -- -- 15.2 15.2
Proceeds from sale of property, plant
and equipment -- 2.3 15.2 17.5
Investments (4.8) -- (0.5) (5.3)
------ ------ ------ ------
Net cash used by
investing activities (56.2) (5.2) (21.3) (82.7)
------ ------ ------ ------
Cash flows from financing activities:
Dividends to stockholders (14.2) -- -- (14.2)
Proceeds from issuance of stock 27.3 -- -- 27.3
Proceeds from stock purchase
plan 2.0 -- -- 2.0
Notes payable reductions (0.1) (0.8) (20.7) (21.6)
Net intercompany (reductions)
borrowings 20.7 5.0 (25.7) --
Long-term debt reductions (60.8) (0.1) (11.9) (72.8)
------ ------ ------ ------
Net cash provided (used) by
financing activities (25.1) 4.1 (58.3) (79.3)
------ ------ ------ ------
Effect of exchange rates on cash and
equivalents -- -- (3.1) (3.1)
------ ------ ------ ------
(Decrease) increase in cash and
equivalents (36.9) (7.6) 28.4 (16.1)
Cash and equivalents -- beginning of
period (5.3) 3.7 36.0 34.4
------ ------ ------ ------
Cash and equivalents -- end of period $(42.2) $ (3.9) $ 64.4 $ 18.3
====== ====== ====== ======
</TABLE>
<PAGE> 18
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Subsi- Subsi- Consoli-
Parent diaries diaries dated
------ --------- --------- -------
<S> <C> <C> <C> <C>
Condensed Consolidated
Statement of Cash Flows
Nine Months Ended September 30, 1999
Net cash (used) provided by operating
activities $ 48.8 $(19.9) $109.9 $ 138.8
------ ------ ------ -------
Cash flows from investing activities:
Additions to property, plant and
equipment (49.3) (3.4) (51.5) (104.2)
Proceeds from sale 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
Proceeds from stock purchase
plan 1.8 -- -- 1.8
Notes payable reductions (13.7) (1.0) (55.6) (70.3)
Net intercompany (reductions)
borrowings (16.0) 23.6 (7.6) --
Long-term debt borrowings
(reductions), net 15.0 (0.1) 15.5 30.4
------ ------ ------ -------
Net cash (used) provided by
financing activities (11.8) 22.5 (47.7) (37.0)
------ ------ ------ -------
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>
13. Subsequent Events
On October 5, 2000, the Board of Directors declared a two-for-one stock split in
the form of a 100% stock dividend. The split entitles each stockholder of record
on November 15, 2000 to receive one additional share of common stock for every
share held on that date. The accompanying condensed consolidated financial
statements do not reflect the stock split.
Also on October 5, 2000, the Board of Directors approved a quarterly cash
dividend of $0.17 per share on a pre-split basis, payable on November 10, 2000,
to stockholders of record on October 20, 2000.
<PAGE> 19
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview
Beckman Coulter, Inc. is a world leader in providing systems that simplify and
automate laboratory processes used in all phases of the battle against disease.
We design, manufacture, market and service a broad range of laboratory systems
consisting of instruments, chemistries, software, and supplies that meet a
variety of laboratory needs. Our products are used in a range of applications,
from instruments used for pioneering medical research and drug discovery to
diagnostic tools found in hospitals and physicians' offices. We compete in
market segments that total approximately $28 billion in annual sales worldwide.
Our diagnostics product lines cover virtually all blood tests routinely
performed in hospital laboratories. For medical and pharmaceutical research, we
provide a wide range of systems used in genomic, cellular and proteomic testing.
We have approximately 125,000 systems operating in laboratories around the
world, with 68% of annual revenues coming from after-market customer purchases
of operating supplies, chemistry kits, and service. We market our products in
approximately 130 countries, generating nearly 45% of revenues outside the
United States.
Results of Operations
Sales in the third quarter of 2000 were $457.8 million, an increase of 4.0%
(5.7% excluding the effect of foreign currency rate changes) compared to the
same period in the prior year. Clinical diagnostics sales were $358.8 million
and life science research sales were $99.0 million, an increase of 3.3% and
6.6%, respectively, compared to the same period in 1999. Sales in the Americas
increased 10.1%, while sales in Europe and Asia decreased 6.1% and 3.3%,
respectively, during the quarter compared to the same period in the prior year.
On a constant currency basis, sales in the third quarter in Europe increased
2.1% while sales in Asia decreased 6.9% compared to the same period in the prior
year.
Sales growth for the third quarter was driven by the following:
- The clinical diagnostics segment experienced solid sales increases in
routine chemistry, immunodiagnostics and flow cytometry. Our Hematology
product line declined when compared with a particularly strong quarter
in 1999.
- The life science research segment was led by our robotic
automation/genetic analysis products, including placements of Sagian(TM)
Core systems and our Biomek(R) 2000 and new Biomek(R) FX liquid handling
systems, offset by decreased sales of analytical systems.
- European sales were down due to currency.
- Asia sales faced difficult comparisons due to this region experiencing a
rebound in sales in the quarter ended September 30, 1999.
Sales in the first nine months of 2000 grew 5.4% (7.2% excluding the effect of
foreign currency rate changes) compared to the first nine months of 1999 due to
factors mentioned previously and a one-time $16.6 million sale of clinical
chemistry assets in Spain in the quarter ended March 31, 2000. For the quarter
ended March 31, 1999, sales generated from the clinical chemistry operations in
Spain were $5.4 million.
<PAGE> 20
Gross profit as a percentage of sales in the third quarter of 2000 was 46.9%,
0.6 percentage points lower than the same period in the prior year. The decrease
was due to the effects of foreign currency exchange rates and a slightly higher
mix of instruments to after-market sales of supplies, chemistry kits and
services. On a constant currency basis, gross profit as a percentage of sales in
the third quarter of 2000 was 47.2%, 0.3 percentage points lower than the same
period in the prior year. Gross profit as a percentage of sales for the first
nine months of 2000 was 47.1%, 0.5 percentage points lower than the same period
in the prior year. The decline in gross profit percentage is primarily due to
the effects of foreign currency exchange rates and to the one-time $16.6 million
sale of clinical chemistry assets in Spain which contributed a lower gross
margin than historical company levels. On a constant currency basis, and
excluding the aforementioned one-time transaction, gross profit would have been
47.8% for the first nine months of 2000.
Selling, general and administrative expenses ("SG&A") declined as a percentage
of sales both in the three and nine-month periods ended September 30, 2000 as
compared to the same periods in the prior year. For the quarter ended September
30, 2000, SG&A was $116.4 million or 25.4% of sales, as compared to $117.4
million or 26.7% of sales in the same period in the prior year. For the nine
months ended September 30, 2000, SG&A was $349.0 million or 25.6% of sales, as
compared to $344.8 million or 26.7% of sales in the same period in the prior
year. The improvement in SG&A as a percentage of sales is due to further
synergies from the Coulter integration.
Interest expense declined both in the three and nine-month periods ended
September 30, 2000 as compared to the same periods in the prior year primarily
due to debt reduction, partially offset by increased interest rates.
During the third quarter of 2000, we sold a facility in Australia, which
resulted in proceeds of $1.2 million and a pretax gain of $1.2 million. During
the second quarter of 2000, we sold a facility in Japan, which resulted in
proceeds of $12.0 million and a pretax gain of $1.7 million. These gains are
included in "Other nonoperating (income) and expenses" on the accompanying
condensed consolidated statements of operations.
During the quarters ended September 30, 2000 and 1999, we recognized $3.0
million and $1.3 million of net foreign currency hedging gains, respectively.
During the nine months ended September 30, 2000 and 1999, we recognized $4.3
million of foreign currency hedging gains and $0.1 million of foreign currency
hedging losses, respectively. These gains and losses are included in "Other
nonoperating (income) and expenses" on the accompanying condensed consolidated
statements of operations.
Under the normal course of our business, we have significant transactions each
quarter. During the quarter ended September 30, 2000, the following transactions
were recorded:
- As a result of our annual actuarial study of our domestic
post-employment benefits, we reduced our liability related to
post-employment benefits by $7.0 million.
- Under the Company's stock appreciation rights program, we have
previously awarded rights to certain employees in our international
subsidiaries. During the third quarter, the Company recognized $2.3
million in compensation expense under this program, primarily due to the
recent increase in the Company's stock price.
<PAGE> 21
- The Company records inventory using the standard cost method, valued at
the lower of cost or market. Under the standard cost method, planned
variances between actual costs and standard costs are recognized during
interim periods when those variances are not expected to be absorbed by
the end of the fiscal year. As a result of manufacturing efficiencies,
we recorded a $1.8 million reduction in our inventory during the third
quarter (a similar adjustment in the amount of $1.9 million was recorded
in the second quarter of 2000). This amount represents the difference
between our standard costs and actual costs that are not expected to
reverse by the end of the year.
The net impact of the above transactions was a $2.9 million increase in pre-tax
income, $2.0 million after tax.
Net earnings for the third quarter of 2000 were $29.1 million or $0.93 per
diluted share compared to $24.4 million or $0.82 per diluted share in 1999. For
the nine months of 2000, net earnings were $82.5 million or $2.68 per diluted
share compared to $67.3 million or $2.27 per diluted share in the prior year.
The increase in net earnings is primarily due to the various reasons discussed
previously.
Financial Condition
As discussed in greater detail in our 1999 annual report, Beckman Coulter is a
highly leveraged company. Although the debt-to-capital ratio has declined from
81.9% at December 31, 1999 to 75.4% at September 30, 2000, 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, 2000, 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 2000 and beyond, including sales of certain
financial assets (primarily consisting of sales-type lease receivables) and real
estate assets.
Operating activities provided net cash of $149.0 million in the first nine
months of 2000 compared to net cash provided of $138.8 million in the first nine
months of the prior year. The primary contributors were:
- net earnings were $82.5 million in 2000 compared to $67.3 million in
1999;
- proceeds from the sale of sales-type lease receivables were $61.9
million in 2000 compared to $45.7 million in 1999;
- reductions in trade and other receivables contributed $15.0 million in
2000 compared to $0.4 million used in 1999.
These improvements were partially offset by increases in inventories of $46.7
million in 2000 compared to $8.2 million in 1999. Inventories were
<PAGE> 22
up due to changes in our distribution channels and the ramp up for expected
sales in the fourth quarter.
In 2000, investing activities used $82.7 million of net cash consisting of
$110.1 million of net capital purchases and $5.3 million of investments, offset
by $15.2 million and $17.5 million in proceeds from the sale of clinical
chemistry assets in Spain and sale of property, plant and equipment,
respectively. In 1999, investing activities used $96.8 million of net cash,
primarily for capital purchases.
Net cash used by financing activities was $79.3 million and $37.0 million for
the nine month periods in 2000 and 1999, respectively. During the first nine
months of 2000, we made $94.4 million in cash payments towards reducing our debt
compared to $39.9 million for the same period in 1999. Proceeds from the
issuance of stock were $27.3 million and $14.8 million for the nine month
periods in 2000 and 1999, respectively.
In addition to the improvement in our debt-to-capital ratio mentioned
previously, the ratio of current assets to current liabilities ("current ratio")
improved to 2.0 at September 30, 2000 from 1.7 at December 31, 1999. The
decrease in current assets was primarily due to reductions in cash as a result
of debt reduction payments and the decrease in trade and other receivables
partially offset by an increase in net inventories. The decrease in current
liabilities was due to cash payments on notes payable, current maturities of
long-term debt, accounts payable, accrued expenses and other liabilities
partially offset by an increase in income taxes payable. 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 our
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 1, 2000, we paid a quarterly cash dividend of $0.16 per share of
common stock, for a total of $4.8 million.
On October 5, 2000, the Board of Directors declared a two-for-one stock split in
the form of a 100% stock dividend. The split entitles each stockholder of record
on November 15, 2000 to receive one additional share of common stock for every
share held on that date. Also on October 5, 2000, the Board of Directors
approved a quarterly cash dividend of $0.17 per share on a pre-split basis,
payable on November 10, 2000, to stockholders of record on October 20, 2000.
Business Climate
The clinical diagnostics and life science research markets are highly
competitive and we encounter significant competition in each market from many
manufacturers, both domestic and outside the United States. These markets
continue to be unfavorably impacted by the economic weakness in parts of Europe
and Japan and government and healthcare cost containment initiatives in general.
Although the life science research market is enjoying strong growth, it
continues to be affected by consolidations of
<PAGE> 23
pharmaceutical companies and governmental constraints on research and
development spending, especially outside the United States.
In the clinical diagnostics market, attempts to lower costs and to increase
productivity have led to further consolidation among healthcare providers in the
United States, resulting in more powerful provider groups that continue to
leverage their purchasing power to contain costs. Preferred supplier
arrangements and combined purchases are becoming more commonplace. Consequently,
it has become essential for manufacturers to provide cost-effective diagnostic
systems to remain competitive. Cost containment initiatives in the United States
and in the European healthcare systems will continue to be factors which may
affect our ability to maintain or increase sales. Future profitability may also
be adversely affected if the relative value of the U.S. dollar strengthens
against certain currencies.
The continuing consolidation trend among United States healthcare providers,
mentioned previously, has increased pressure on diagnostic equipment
manufacturers to broaden their product offerings to encompass a wider range of
testing capability, greater automation and higher volume capacity at a lower
cost. With our current product offerings, we believe Beckman Coulter is well
suited to provide a broad range of systems with automation capabilities that
speed test results, lower labor costs, and improve the overall efficiency of
laboratories.
With our leadership position in cellular analysis and our extensive capabilities
in routine chemistry and immunodiagnostics, we are able to offer a broad range
of automated systems that together can perform more than 75% of a hospital
laboratory's test volume and essentially all of the blood tests that are
considered routine. We believe we are able to provide significant value-added
benefits, enhanced through our expertise in simplifying and automating
laboratory processes, to our customers.
Our new products originate from four sources:
- internal research and development programs;
- external collaborative efforts with individuals in academic institutions
and technology companies;
- devices and techniques that are generated in customers' laboratories;
and
- business and technology acquisitions.
During 2000, we have made a commitment to the commercialization of a new
Tetramer technology, which operates on flow cytometry platforms. This new
cellular immune response technology has the potential to establish an entirely
new testing category for measuring and monitoring the immune response system. We
have established an Immunomics operation to focus on this technology with sales
of our standard iTAg(TM) MHC Tetramers for HIV and melanoma set to begin during
the quarter ending December 31, 2000.
The following agreements and business developments were significant during the
third quarter:
- Signed an agreement with Premier, Inc., the largest healthcare alliance
enterprise in the United States, valued at $35 million annually. Under
the terms of the agreement, we will provide hematology instrument
systems and supplies to Premier's membership alliance, which purchases
approximately $10 billion in products annually. This alliance comprises
957 healthcare facilities nationwide and is affiliated with more than
900 others.
<PAGE> 24
- Dissolved our distribution agreement with BIO-RAD for our Access
immunoassay systems in 90 countries located throughout Europe, Africa
and the Pacific Rim. As a result, we will assume sales responsibility
for these instrument systems and related test kits. We believe that we
can leverage more placements by selling the system in concert with our
chemistry and progressive automation approach.
- Formed a strategic alliance with Oncotech to develop and commercialize
gene expression technologies that can be used to diagnose cancer and
determine the most appropriate treatment plan.
The following agreements and business developments were significant subsequent
to the third quarter:
- Signed an agreement with Promega Corporation that grants us the
non-exclusive distribution rights to Promega's Wizard SV 96 Plasmid DNA
Purification System (the "System") in the United States and other
selected countries. We have automated the System on our Biomek(R) FX
and Biomek(R) 2000 liquid handling workstations, which is used by
researchers in university, medical research, biotechnology and
pharmaceutical laboratories.
- Signed a two-year, multimillion-dollar agreement with Health Trust
Purchasing Group ("HPG") in Nashville, Tennessee. Under the terms of the
agreement, we will be a provider of hematology instrument systems and
supplies to HPG's membership, which is comprised of 350 acute-care
facilities, 124 surgery centers and 62 psychiatric facilities across the
United States.
- Received U.S. regulatory clearance to market a test to detect the
presence of the drug commonly known as "ecstasy" and other amphetamines
in urine. These tests are performed on our Synchron(R) CX and LX
clinical systems.
The size and growth of our markets are influenced by a number of factors,
including:
- technological innovation in bio-analytical practice;
- government funding for basic and disease-related research (for example,
heart disease, AIDS and cancer);
- research and development spending by biotechnology and pharmaceutical
companies;
- healthcare spending; and
- physician practice.
We expect worldwide healthcare expenditures and diagnostic testing to increase
over the long-term, primarily as a result of the following:
- growing demand for services generated by the increasing size and aging
of the world population;
- increasing expenditures on diseases requiring costly treatment (for
example, AIDS and cancer); and
- expanding demand for improved healthcare services in developing
countries.
In addition to the business climate factors discussed previously, the following
economic factors may influence our business:
- currency fluctuations -- as nearly 45% of our revenues are generated
outside the United States and given the recent fluctuations in foreign
currencies, we may experience volatility in sales and operating income;
and
<PAGE> 25
- interest rates -- as of the date of the filing of this Form 10-Q,
approximately 70% of our debt is under variable interest rate terms.
Recent Accounting Pronouncements
In December 1999, the SEC issued Staff Accounting Bulletin No. 101 ("SAB 101").
SAB 101 provides the SEC's views in applying generally accepted accounting
principles to selected revenue recognition issues. As amended, calendar year-end
companies that have not applied the accounting requirements of SAB 101 may
report a change in accounting principle no later than December 31, 2000,
including retroactive restatement of all affected quarters within 2000. We are
currently evaluating the impact of SAB 101 on our consolidated financial
statements and results of operations.
Forward Looking Statements
This Form 10-Q contains forward-looking statements, including statements
regarding, among other items:
- our business strategy;
- anticipated trends in our business; and
- our liquidity requirements and capital resources.
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:
- complexity and uncertainty regarding development of new high-technology
products;
- loss of market share through aggressive competition in the clinical
diagnostics and life science research markets;
- our dependence on capital spending policies and government funding;
- the effect of potential healthcare reforms;
- fluctuations in foreign exchange rates and interest rates;
- reliance on patents and other intellectual property;
- unanticipated reductions in cash flows and difficulty in sales of
assets;
- future effective tax rate;
- unanticipated euro problems; and
- 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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company's cash flow and earnings are subject to fluctuations due to changes
in foreign currency exchange rates and interest rates. The Company attempts to
limit its exposure to these market risks through the use of various financial
instruments. Assuming a hypothetical 10% strengthening and 10% weakening of the
spot exchange rates for the U.S. dollar against
<PAGE> 26
the foreign currencies at September 30, 2000, a 10% strengthening of the U.S.
dollar would result in a gain in fair value of $21.9 million and a 10% weakening
of the U.S. dollar would result in a loss in fair value of $22.7 million in
these instruments. With respect to interest rates, a one percentage point
increase or decrease in interest rates would decrease or increase current year's
pre-tax earnings by $0.8 million. For further discussion of the Company's market
risk exposures, refer to the section entitled "Financial Risk Management"
included in "Management's Discussion and Analysis" of the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1999.
<PAGE> 27
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
In December 1999, Streck Laboratories, Inc. served Beckman Coulter and
Coulter Corporation with a complaint filed in the United States District
Court for the District of Nebraska. The complaint alleges that control
products sold by Beckman Coulter and/or Coulter Corporation infringe
each of five patents owned by Streck, and seeks injunctive relief,
damages, attorney fees and costs. We, on behalf of ourselves and on
behalf of Coulter Corporation have answered the complaint and have filed
a counterclaim against Streck for patent infringement. We continue to
believe that there is no reasonable basis for us to conclude that this
litigation could lead to an outcome that would have a material adverse
effect on our consolidated operations or financial position.
Item 2. Changes In Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security-Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
10.1 Beckman Coulter, Inc. Executive Deferred Compensation
Plan, Amendment 2000-1, dated October 19, 2000
10.2 Beckman Coulter, Inc. Executive Deferred Compensation
Plan, Amendment 2000-2, dated October 19, 2000
10.3 Beckman Coulter, Inc. Executive Restoration Plan,
Amendment 2000-1, dated October 19, 2000
11. Statement re Computation of Per Share Earnings: This
information is set forth in Note 3, Earnings Per Share
of the Condensed Consolidated Financial Statements
included in Part I herein.
15. Independent Accountants' Review Report, October 24, 2000
27. Financial Data Schedule as of and for the nine month
period ended September 30, 2000
b) Reports on Form 8-K
None.
<PAGE> 28
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 8, 2000 by /s/ WILLIAM H. MAY
-----------------------------
William H. May
Vice President
General Counsel and Secretary
Date: November 8, 2000 by /s/ JAMES T. GLOVER
-----------------------------
James T. Glover
Vice President and Treasurer
<PAGE> 29
EXHIBIT INDEX
FORM 10-Q, THIRD QUARTER, 2000
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
10.1 Beckman Coulter, Inc. Executive Deferred Compensation Plan,
Amendment 2000-1, dated October 19, 2000
10.2 Beckman Coulter, Inc. Executive Deferred Compensation Plan,
Amendment 2000-2, dated October 19, 2000
10.3 Beckman Coulter, Inc. Executive Restoration Plan, Amendment 2000-1,
dated October 19, 2000
11. Statement re Computation of Per Share Earnings: This information is
set forth in Note 3, Earnings Per Share, of the Condensed
Consolidated Financial Statements included in Part I herein.
15. Independent Accountants' Review Report, October 24, 2000
27. Financial Data Schedule as of and for the nine month period ended
September 30, 2000
</TABLE>
