SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): October 16, 2001
PerkinElmer, Inc.
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(Exact Name of Registrant as Specified in Charter)
Massachusetts 1-5075 04-2052042
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
45 William Street, Wellesley Massachusetts 02481
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (781) 237-5100
Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
ITEM 5. OTHER EVENTS.
On October 16, 2001 the Board of Directors of PerkinElmer, Inc. (the
"Company") voted to authorize the sale of the Company's Fluid Sciences segment.
Accordingly, the Company has accounted for the Fluid Sciences segment as a
discontinued operation in accordance with APB No. 30, Reporting the Results of
Operations. Therefore, the results of operations of the Fluid Sciences segment
have been segregated from continuing operations and reported as a separate line
item in the Company's consolidated income statements for the three years ended
December 31, 2000, the three months ended April 1, 2001 and April 2, 2000 and
the three and six months ended July 1, 2001 and July 2, 2000. The following
statements and other information are included in this filing to reflect the
Fluid Sciences segment as a discontinued operation. In addition, the following
statements give effect to the Company's Security and Detection Systems business
as a discontinued operation in accordance with APB Opinion No. 30, and the
two-for-one stock split which was effected on June 1, 2001 by means of a 100%
stock dividend to shareholders of record as of May 15, 2001, both of which were
included in the Current Report on Form 8-K filed August 3, 2001.
PERKINELMER, INC.
I. ANNUAL FINANCIAL STATEMENTS:
A. Consolidated Income Statements for the three years ended
December 31, 2000
B. Consolidated Balance Sheets as of December 31, 2000 and
January 2, 2000
C. Consolidated Statements of Stockholders' Equity for the three
years ended December 31, 2000
D. Consolidated Statements of Cash Flows for the three years
ended December 31, 2000
E. Notes to Consolidated Financial Statements
F. Report of Independent Public Accountants
II. OTHER ANNUAL INFORMATION:
A. Selected Financial Information for the five years ended
December 31, 2000
B. Management's Discussion and Analysis of Results of Operations
and Financial Condition Relating to Annual Financial
Information
III. INTERIM FINANCIAL STATEMENTS (UNAUDITED) -- April 1, 2001 and
April 2, 2000:
A. Consolidated Income Statements for the three months ended
April 1, 2001 and April 2, 2000
B. Consolidated Balance Sheets as of April 1, 2001 and December
31, 2000
C. Consolidated Statements of Cash Flows for the three months
ended April 1, 2001 and April 2, 2000
D. Notes to Consolidated Financial Statements (Unaudited)
IV. OTHER INTERIM INFORMATION -- April 1, 2001 and April 2, 2000:
A. Management's Discussion and Analysis of Results of Operations
and Financial Condition Relating to Quarterly Financial
Information
V. INTERIM FINANCIAL STATEMENTS (UNAUDITED) -- July 1, 2001 and July 2, 2000:
A. Consolidated Income Statements for the three and six months
ended July 1, 2001 and July 2, 2000
B. Consolidated Balance Sheets as of July 1, 2001 and December
31, 2000
C. Consolidated Statements of Cash Flows for the six months
ended July 1, 2001 and July 2, 2000
D. Notes to the Consolidated Financial Statements (Unaudited)
VI. OTHER INTERIM INFORMATION -- July 1, 2001 and July 2, 2000:
A. Management's Discussion and Analysis of Results of Operations
and Financial Condition Relating to Quarterly Financial
Information
VII. FORWARD LOOKING INFORMATION AND FACTORS AFFECTING FUTURE PERFORMANCE
VIII. EXHIBIT INDEX
I. ANNUAL FINANCIAL STATEMENTS
I A. CONSOLIDATED INCOME STATEMENTS FOR THE THREE YEARS ENDED DECEMBER 31, 2000
PERKINELMER, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
Years Ended
----------------------------------------------------
2000 1999 1998
---- ---- ----
(IN THOUSANDS EXCEPT PER SHARE DATA)
------------------------------------
SALES
Products ............................................ $ 1,177,714 $ 947,594 $ 532,723
Services ............................................ 157,818 103,241 12,423
----------- ----------- -----------
TOTAL SALES 1,335,532 1,050,835 545,146
----------- ----------- -----------
COST OF SALES
Products ............................................ 699,602 541,152 291,633
Services ............................................ 55,470 73,702 29,810
Revaluation of Acquired Inventory ................... 1,818 9,857 --
----------- ----------- -----------
TOTAL COST OF SALES ...................................... 756,890 624,711 321,443
Selling, General and Administrative Expenses ............. 375,942 294,707 170,533
Research and Development Expenses ........................ 76,920 66,934 40,853
In-Process Research and Development Charges .............. 24,300 23,000 2,300
Restructuring Charges, Net ............................... 3,900 14,677 34,917
Asset Impairment Charges ................................. -- 18,000 --
Gains on Dispositions .................................... (35,089) (13,764) (125,822)
----------- ----------- -----------
OPERATING INCOME FROM CONTINUING OPERATIONS .............. 132,669 22,570 100,922
Other (Expense) Income, Net .............................. (33,692) (11,074) 1,997
----------- ----------- -----------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES .... 98,977 11,496 102,919
Provision for Income Taxes ............................... 39,699 4,585 31,418
----------- ----------- -----------
INCOME FROM CONTINUING OPERATIONS ........................ 59,278 6,911 71,501
Income from Discontinued Operations, Net of Income Taxes . 26,789 37,125 30,501
Gain on Disposition of Discontinued Operations,
Net of Income Taxes .................................. 4,453 110,280 --
----------- ----------- -----------
NET INCOME ............................................... $ 90,520 $ 154,316 $ 102,002
=========== =========== ===========
BASIC EARNINGS PER SHARE
Continuing Operations ............................ $ 0.60 $ 0.08 $ 0.79
Discontinued Operations .......................... 0.32 1.62 0.34
----------- ----------- -----------
Net Income ....................................... $ 0.92 $ 1.69 $ 1.13
=========== =========== ===========
DILUTED EARNINGS PER SHARE
Continuing Operations ............................ $ 0.58 $ 0.07 $ 0.78
Discontinued Operations .......................... 0.31 1.58 0.33
----------- ----------- -----------
Net Income ....................................... $ 0.89 $ 1.66 $ 1.11
=========== =========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
I B. CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2000 AND JANUARY 2, 2000
PERKINELMER, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT PER SHARE DATA) 2000 1999
------------------------------------ ---- ----
Current Assets:
Cash and Cash Equivalents....................................................... $ 125,551 $ 126,650
Accounts Receivable, net........................................................ 292,714 291,080
Inventories..................................................................... 190,526 176,716
Other Current Assets............................................................ 169,976 139,265
Net Assets of Discontinued Operations........................................... 147,140 105,039
------- -------
TOTAL CURRENT ASSETS............................................................... 925,907 838,750
------- -------
Property, Plant and Equipment:
At Cost......................................................................... 424,141 373,230
Accumulated Depreciation and Amortization....................................... (187,375) (183,668)
--------- ---------
Net Property, Plant and Equipment.................................................. 236,766 189,562
Investments........................................................................ 36,226 14,197
Intangible Assets, net............................................................. 886,569 557,956
Other Assets....................................................................... 102,865 63,396
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TOTAL ASSETS....................................................................... $ 2,188,333 $ 1,663,861
========= =========
Current Liabilities:
Short-Term Debt................................................................. $ 183,110 $ 382,328
Accounts Payable................................................................ 118,170 123,062
Accrued Restructuring Costs..................................................... 47,444 36,159
Accrued Expenses................................................................ 296,896 260,235
------- -------
TOTAL CURRENT LIABILITIES.......................................................... 645,620 801,784
------- -------
Long-Term Debt..................................................................... 583,337 114,855
Long-Term Liabilities.............................................................. 230,987 196,446
Commitments and Contingencies
Stockholders' Equity:
Preferred Stock -- $1 par value, authorized 1,000,000 shares;
none issued or outstanding................................................... -- --
Common Stock -- $1 par value, authorized 300,000,000 shares; issued
122,908,000 shares in 2000 and 120,204,000 in 1999........................... 122,908 120,204
Capital in Excess of Par Value.................................................. 37,060 --
Retained Earnings............................................................... 835,917 701,907
Accumulated Other Comprehensive Loss............................................ (39,042) (14,040)
Cost of Shares Held in Treasury -- 23,360,000 shares in 2000 and
27,472,000 shares in 1999.................................................... (228,454) (257,295)
---------- ----------
Total Stockholders' Equity......................................................... 728,389 550,776
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ........................................ $ 2,188,333 $ 1,663,861
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
I C. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE THREE YEARS ENDED DECEMBER 31, 2000
PERKINELMER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE THREE YEARS ENDED DECEMBER 31, 2000
CAPITAL IN
COMPREHENSIVE COMMON RETAINED EXCESS OF
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) INCOME STOCK EARNINGS PAR
-------------------------------------------- ------------- ------ -------- ----------
BALANCE, DECEMBER 28, 1997.......................... $ 120,204 $ 480,277 $ --
Comprehensive income:
Net income ..................................... $ 102,002 -- 102,002 --
Other comprehensive income (loss), net of tax:
Foreign currency translation
adjustments. ............................. 4,608 -- -- --
Reclassification adjustment for translation
losses realized upon sale of Sealol
Industrial Seals .......................... 3,115 -- -- --
Unrealized losses on securities arising
during the period.......................... (137) -- -- --
-------------
Other comprehensive income....................... 7,586
-------------
Comprehensive income................................ $ 109,588
=============
Cash dividends ($.28 per share)..................... -- (25,408) --
Exercise of employee stock options and
related income tax benefits ..................... -- 6,618 --
Purchase of common stock for treasury............... -- -- --
-------------- ------------- -------------
BALANCE, JANUARY 3, 1999............................ 120,204 563,489 --
Comprehensive income:
Net income....................................... $ 154,316 -- 154,316 --
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments...... (17,804) -- -- --
Unrealized gains on securities:
Gains arising during the period............ 93
Reclassification adjustment................ (58)
-------------
Net unrealized gains.......................... 35 -- -- --
-------------
Other comprehensive loss......................... (17,769)
-------------
Comprehensive income................................ $ 136,547
=============
Cash dividends ($.28 per share)..................... -- (25,499) --
Exercise of employee stock options and
related income tax benefits....................... -- 8,369 --
Issuance of common stock for employee benefit plans. -- 1,232 --
Purchase of common stock for treasury............... -- -- --
-------------- ------------- -------------
BALANCE, JANUARY 2, 2000............................ 120,204 701,907 --
Comprehensive income:
Net income....................................... $ 90,520 -- 90,520 --
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments...... (25,484) -- -- --
Unrealized gains on securities:
Gains arising during the period............ 481
Reclassification adjustment................ 1
-------------
Net unrealized gains.......................... 482 -- -- --
-------------
Other comprehensive loss......................... (25,002)
-------------
Comprehensive income................................ $ 65,518
=============
Cash dividends ($.28 per share)..................... -- (27,533) --
Exercise of employee stock options and
related income tax benefits ..................... -- 16,000 17,230
Issuance of common stock for employee benefit plans. (155) 5,228
Purchase of common stock for treasury............... -- -- (102)
Mergers, acquisitions and other 2,704 55,178 14,704
-------------- ------------- -------------
BALANCE, DECEMBER 31, 2000.......................... $ 122,908 $ 835,917 $ 37,060
============== ============= =============
ACCUMULATED COST OF
OTHER SHARES TOTAL
COMPREHENSIVE HELD IN STOCKHOLDERS'
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) INCOME (LOSS) TREASURY EQUITY
-------------------------------------------- ------------- -------- -------------
BALANCE, DECEMBER 28, 1997 ........................................... $ (3,857) $ (268,236) $ 328,388
Comprehensive income:
Net income ........................................................ -- -- 102,002
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments........................ 4,608 -- 4,608
Reclassification adjustment for translation losses
realized upon sale of Sealol Industrial Seals................ 3,115 -- 3,115
Unrealized losses on securities arising during the period: ..... (137) -- (137)
Other comprehensive income .......................................
Comprehensive income .................................................
Cash dividends ($.28 per share)....................................... -- -- (25,408)
Exercise of employee stock options and related income tax benefits.... -- 21,698 28,316
Purchase of common stock for treasury................................. -- (41,217) (41,217)
------------- ------------- ------------
BALANCE, JANUARY 3, 1999 ............................................. 3,729 (287,755) 399,667
Comprehensive income:
Net income......................................................... -- -- 154,316
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments........................ (17,804) -- (17,804)
Unrealized gains on securities:
Gains arising during the period .............................
Reclassification adjustment..................................
Net unrealized gains............................................ 35 -- 35
Other comprehensive loss ..........................................
Comprehensive income..................................................
Cash dividends ($.28 per share) ...................................... -- -- (25,499)
Exercise of employee stock options and related income tax benefits ... -- 20,264 28,633
Issuance of common stock for employee benefit plans .................. -- 11,166 12,398
Purchase of common stock for treasury. ............................... -- (970) (970)
-------------- --------------- --------------
BALANCE, JANUARY 2, 2000.............................................. (14,040) (257,295) 550,776
Comprehensive income:
Net income......................................................... -- -- 90,520
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments ....................... (25,484) -- (25,484)
Unrealized gains on securities:
Gains arising during the period..............................
Reclassification adjustment..................................
Net unrealized gains ........................................... 482 -- 482
Other comprehensive loss ..........................................
Comprehensive income . ...............................................
Cash dividends ($.28 per share) ...................................... -- -- (27,533)
Exercise of employee stock options and related income tax benefits.... -- 34,939 68,169
Issuance of common stock for employee benefit plans................... -- 4,389 9,462
Purchase of common stock for treasury ................................ -- (10,487) (10,589)
Mergers, acquisitions and other....................................... -- -- 72,586
-------------- --------------- --------------
BALANCE, DECEMBER 31, 2000............................................ $ (39,042) $ (228,454) $ 728,389
============== =============== ==============
The accompanying notes are an integral part of these consolidated financial
statements.
I D. CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE YEARS ENDED DECEMBER 31, 2000
PERKINELMER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE YEARS ENDED DECEMBER 31, 2000
(DOLLARS IN THOUSANDS) 2000 1999 1998
--------------------- ---- ---- ----
Operating Activities:
Net income.......................................................... $ 90,520 $ 154,316 $ 102,002
Deduct net income from discontinued operations...................... (26,789) (37,125) (30,501)
Deduct net gain on disposition of discontinued operations........... (4,453) (110,280) --
------- --------- -------
Income from continuing operations .................................. 59,278 6,911 71,501
Adjustments to reconcile income from continuing operations
to net cash provided by continuing operations:
Revaluation of acquired inventory................................ 1,818 9,857 --
In-process research and development charges...................... 24,300 23,000 2,300
Noncash portion of restructuring charges......................... 2,900 2,300 12,020
Asset impairment charges......................................... -- 18,000 -
Depreciation and amortization.................................... 65,717 58,749 41,820
Amortization of deferred debt issuance cost...................... 8,567 -- --
Gains on dispositions and sales of investments, net ............. (37,189) (15,399) (126,745)
Changes in assets and liabilities which provided
(used) cash, excluding effects from companies purchased and divested:
Accounts receivable ........................................... 510 (49,346) 2,378
Inventories.................................................... (17,890) 9,101 6,074
Accounts payable and accrued expenses.......................... 18,625 56,800 11,795
Tax benefit of common stock options............................ 30,843 5,811 3,431
Accrued restructuring costs.................................... (31,474) (15,823) 18,787
Prepaid and deferred taxes..................................... -- (2,616) (12,359)
Prepaid expenses and other..................................... (27,822) (13,602) (15,728)
---------- ----------- ---------
Net Cash Provided by Continuing Operations Operating Activities........ 98,183 93,743 15,274
Net Cash Provided by Discontinued Operations Operating Activities...... 47,365 22,086 54,281
---------- ----------- ---------
Net Cash Provided by Operating Activities.............................. 145,548 115,829 69,555
---------- ----------- ---------
Investing Activities:
Capital expenditures................................................ (55,318) (34,840) (33,556)
Proceeds from dispositions of businesses and sales
of property, plant and equipment................................. 81,192 1,828 205,049
Cost of acquisitions, net of cash and cash equivalents acquired .... (411,040) (302,288) (172,872)
Proceeds from sales/costs of purchases of investments .............. (20,457) 6,086 7,623
Other............................................................... 1,919 (1,408) (160)
---------- ----------- ---------
Net Cash (Used in) Provided by Continuing Operations Investing
Activities............................................................. (403,704) (330,622) 6,084
Net Cash Provided by (Used in) Discontinued Operations Investing
Activities............................................................. 2,274 186,739 (52,575)
---------- ---------- ----------
Net Cash Used in Investing Activities.................................. (401,430) (143,883) (46,491)
----------- ----------- ----------
Financing Activities:
Proceeds from issuance of convertible debt.......................... 448,000 -- --
Increase (decrease) in commercial paper borrowings.................. 37,000 (10,000) 104,156
Payment of acquired Lumen revolving credit borrowings .............. -- -- (59,090)
Other debt increases (decreases).................................... (233,991) 69,529 7,270
Proceeds from issuance of common stock ............................. 46,902 28,923 28,316
Purchases of common stock........................................... (10,589) (970) (41,217)
Cash dividends...................................................... (27,533) (25,499) (25,408)
---------- --------- ---------
Net Cash Provided by Financing Activities.............................. 259,789 61,983 14,027
Effect of Exchange Rate Changes on Cash and Cash Equivalents .......... (5,006) (2,844) 540
---------- --------- ---------
Net (Decrease) Increase in Cash and Cash Equivalents................... (1,099) 31,085 37,631
Cash and Cash Equivalents at Beginning of Year......................... 126,650 95,565 57,934
---------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR............................... $ 125,551 $ 126,650 $ 95,565
========== ========= ==========
Supplemental Disclosures of Cash Flow Information for continuing and
discontinued operations (see also Note 2):
Cash paid during the year for:
Interest......................................................... $ 45,236 $ 28,438 $ 12,367
Income taxes..................................................... 21,819 82,368 59,029
Noncash Investing and Financing Activities:
One-year secured 5% promissory notes issued to
PE Corp. in connection with the acquisition of
the Analytical Instruments Division (Note 2)................... $ -- $ 150,000 $ --
The accompanying notes are an integral part of these consolidated financial
statements.
I E. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The consolidated financial statements
include the accounts of PerkinElmer, Inc. (formerly EG&G, Inc.) and its
subsidiaries (the Company). All material intercompany balances and transactions
have been eliminated in consolidation.
Nature of Operations: PerkinElmer, Inc. is a global high technology
company which provides products and systems to the telecom, medical,
pharmaceutical, chemical, semiconductor, photographic and other markets. The
Company's operating segments are Life Sciences, Optoelectronics and Instruments.
In August 1999, the Company divested its Technical Services segment, which is
presented as discontinued operations in accordance with Accounting Principles
Board (APB) Opinion No. 30, Reporting the Results of Operations (see Note 7). In
July 2001, the Company approved a plan to sell its Security and Detection
Systems business, which is presented as discontinued operations in accordance
with APB Opinion No. 30 (see Note 7). In October 2001, the Company approved a
plan to sell its Fluid Sciences operating segment, which is presented as part of
discontinued operations in accordance with APB Opinion No. 30 (see Note 7).
Use of Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Sales: The majority of the Company's product sales are recorded at the
time of shipment and when persuasive evidence of an arrangement exists, the
seller's price to the buyer is fixed or determinable and collectibility is
reasonably assured. Provision is made at the time the related revenue is
recognized for the cost of any installation obligations and the estimated cost
of product warranties. When other significant obligations remain after products
are delivered, including certain customer acceptance provisions, revenue is
recognized only after such obligations are fulfilled. If a loss is anticipated
on any contract, provision for the entire loss is made immediately. Revenue
related to the sale of maintenance contracts is deferred and amortized on a
straight-line basis over the service period. For equipment leased to a customer
under a sales-type lease, revenue recognition generally commences when the
equipment has been shipped and installed.
In the fourth quarter of 2000, retroactive to January 1, 2000, the
Company adopted Securities and Exchange Commission (SEC) Staff Accounting
Bulletin ("SAB") No. 101, Revenue Recognition in Financial Statements, which
provides guidance in applying generally accepted accounting principles to
certain revenue recognition issues. The adoption of SAB No. 101 did not have a
material impact on the Company's financial position or quarterly or annual
results of operations.
The former Technical Services segment had cost-reimbursement contracts
with governmental agencies. These contracts included both cost plus fixed fee
contracts and cost plus award fee contracts based on performance. Sales under
cost-reimbursement contracts were recorded as costs when incurred and included
applicable income in the proportion that costs incurred bear to total estimated
costs.
Inventories: Inventories, which include material, labor and
manufacturing overhead, are valued at the lower of cost or market. The majority
of inventories is accounted for using the first-in, first-out method of
determining inventory costs; remaining inventories are accounted for using the
last-in, first-out (LIFO) method.
Property, Plant and Equipment: For financial statement purposes, the
Company depreciates plant and equipment using the straight-line method over
their estimated useful lives, which generally fall within the following ranges:
buildings and special-purpose structures --10 to 25 years; leasehold
improvements -- estimated useful life or remaining term of lease, whichever is
shorter; machinery and equipment -- 3 to 7 years. Nonrecurring tooling costs are
capitalized, while recurring costs are expensed. For income tax purposes, the
Company depreciates plant and equipment over their estimated useful lives using
accelerated methods.
Pension Plans: The Company's funding policy provides that payments to
the U.S. pension trusts shall at least be equal to the minimum funding
requirements of the Employee Retirement Income Security Act of 1974. Non-U.S.
plans are accrued for, but generally not funded, and benefits are paid from
operating funds.
Translation of Foreign Currencies: The balance sheet accounts of
non-U.S. operations, exclusive of stockholders' equity, are translated at
year-end exchange rates, and income statement accounts are translated at
weighted-average rate in effect during the year; any translation adjustments are
made directly to a component of stockholders' equity.
Intangible Assets: In accordance with Statement of Financial Accounting
Standards (SFAS) No. 121, Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of, and APB Opinion No. 17, Intangible
Assets, the Company reviews long-lived assets and all intangible assets
(including goodwill) for impairment whenever events or changes in circumstances
indicate the carrying amount of such assets may not be recoverable.
Recoverability of these assets is determined by comparing the forecasted
undiscounted net cash flows of the operation to which the assets relate, to the
carrying amount including associated intangible assets of such operation. If the
operation is determined to be unable to recover the carrying amount of its
assets, then intangible assets are written down first, followed by the other
long-lived assets of the operation, to fair value. Fair value is determined
based on discounted cash flows or appraised values, depending upon the nature of
the assets. (See Note 4 for further discussion of asset impairment charges.)
Stock-Based Compensation: In accordance with SFAS No. 123, Accounting
for Stock-Based Compensation, the Company accounts for stock-based compensation
at intrinsic value with disclosure of the effects of fair value accounting on
net income and earnings per share on a pro forma basis.
Cash Flows: For purposes of the Consolidated Statements of Cash Flows,
the Company considers all highly liquid instruments with a purchased maturity of
three months or less to be cash equivalents. The carrying amount of cash and
cash equivalents approximates fair value due to the short maturities.
Environmental Matters: The Company accrues for costs associated with
the remediation of environmental pollution when it is probable that a liability
has been incurred and the Company's proportionate share of the amount can be
reasonably estimated. Any recorded liabilities have not been discounted.
Comprehensive Income: The Company has adopted the provisions of SFAS
No. 130, Reporting Comprehensive Income, which established standards for
reporting and display of comprehensive income and its components. Comprehensive
income is the total of net income and all other nonowner changes in
stockholders' equity.
Segments and Related Information: The Company has adopted the
provisions of SFAS No. 131, Disclosures about Segments of an Enterprise and
Related Information. The statement established standards for the way that public
business enterprises report information and operating segments in annual
financial statements and requires reporting of selected information in interim
financial reports.
Derivative Instruments and Hedging: The Financial Accounting Standards
Board issued SFAS No. 137, Accounting for Derivative Instruments and Hedging
Activities -- Deferral of the Effective Date of SFAS No. 133, in June 1999. SFAS
No. 133 is now effective for all fiscal quarters of all fiscal years beginning
after June 15, 2000; earlier adoption is allowed. The statement requires
companies to record derivatives on the balance sheet as assets or liabilities,
measured at fair value. Gains or losses resulting from changes in the values of
those derivatives would be accounted for depending on the use of the derivative
and whether it qualifies for hedge accounting. The effect of the adoption of
SFAS No. 133 as of January 1, 2001 will not be material.
Reclassifications: Certain amounts from prior years have been
reclassified to conform to the 2000 financial statement presentation.
NOTE 2. ACQUISITIONS AND DIVESTITURES
On July 31, 2000, the Company completed its acquisition of NEN Life
Sciences, Inc. (NEN), a provider of state-of-the-art drug discovery products,
services, reagents and technologies to the life sciences industry. The Company
purchased NEN from an investor group led by Genstar Capital LLC for an aggregate
purchase price of approximately $400 million. In connection with the
acquisition, the Company paid approximately $350 million in cash and issued
warrants to purchase approximately 600,000 shares of the Company's common stock
in exchange for all of the outstanding shares, options and warrants of NEN. In
addition, the Company repaid approximately $50 million of outstanding
indebtedness of NEN. The Company financed the acquisition and repayment of the
outstanding indebtedness with $410 million of commercial paper borrowings with a
weighted-average interest rate of 7%. These short-term borrowings were repaid in
early August with proceeds from the issuance of long-term convertible debentures
(see Note 14).
NEN's operations, included in the consolidated results of the Company
from the date of acquisition, are reported in the Life Sciences segment. The
acquisition was accounted for as a purchase under APB Opinion No. 16, Business
Combinations, and the Company allocated the purchase price of NEN based on the
fair values of the net assets acquired and liabilities assumed. The allocation
of the purchase price has not yet been finalized, however, the Company does not
expect material changes. Portions of the purchase price, including intangible
assets, were valued by independent appraisers utilizing customary valuation
procedures and techniques. These intangible assets included approximately $24.3
million for acquired in-process research and development (R&D) for projects that
had not reached technological feasibility as of the acquisition date and for
which no alternative use existed. This allocation represents the estimated fair
value based on risk-adjusted cash flows related to the in-process R&D projects;
these costs were expensed in the third quarter of 2000. Other acquired
intangible assets totaling $75.9 million included the fair value of trade names,
trademarks, patents and developed technology with lives ranging from 10 - 20
years. Goodwill of $270.8 million resulting from the acquisition of NEN is being
amortized over 20 years. Approximately $4 million has been recorded as accrued
restructuring costs in connection with the acquisition of NEN. The restructuring
plans include initiatives to integrate the operations of the Company and NEN.
The primary components of these plans relate to employment costs, consolidation
of certain facilities, and the termination of certain leases and other
contractual obligations. The majority of the restructuring actions are expected
to occur during 2001 and early 2002.
The components of NEN's purchase price and preliminary allocation were
as follows:
(IN THOUSANDS)
Consideration and acquisition costs:
Cash paid to NEN.................................. $ 348,918
Debt assumed...................................... 48,262
Acquisition costs................................. 13,647
Fair value of warrants issued..................... 6,940
----------------
Total....................................... $ 417,767
================
Preliminary allocation of purchase price:
Current assets.................................... $ 34,327
Property, plant and equipment..................... 59,755
Other assets...................................... 739
Acquired intangibles.............................. 75,900
In-process R&D.................................... 24,300
Goodwill.......................................... 270,790
Liabilities....................................... (48,044)
----------------
Total....................................... $ 417,767
================
On May 28, 1999, the Company completed its acquisition of the
Analytical Instruments Division (AI) of PE Corp. for an aggregate purchase price
of approximately $425 million, plus acquisition costs. In addition, under the
terms of the Purchase Agreement dated March 8, 1999 between the Company and PE
Corp. (the "Purchase Agreement"), the Company assumed German and other pension
liabilities of approximately $65 million. These pension liabilities were
historically funded on a pay-as-you-go basis, and the funding going-forward is
expected to remain consistent. The acquisition was accounted for as a purchase
under APB Opinion No. 16. In accordance with APB Opinion No. 16, the Company
allocated the purchase price of AI based on the fair values of the net assets
acquired and liabilities assumed. AI produces high-quality analytical testing
instruments and consumables, and generated 1998 fiscal year sales of $569
million. AI's operations are reported in the Company's Instruments segment.
Portions of the purchase price, including intangible assets, were valued by
independent appraisers utilizing customary valuation procedures and techniques.
These intangible assets included approximately $23 million for acquired
in-process R&D. This allocation represents the estimated fair value based on
risk-adjusted cash flows related to the in-process R&D projects. At the date of
the acquisition of AI, the development of these projects had not yet reached
technological feasibility, and the R&D in process had no alternative future
uses. Accordingly, these costs were expensed in the second quarter of 1999.
Other acquired intangibles totaling $163.8 million included the fair value of
trade names, trademarks, patents and developed technology. These intangibles are
being amortized over their respective estimated useful lives ranging from 10-40
years. Goodwill resulting from the acquisition of AI is being amortized over 40
years. Approximately $28 million was recorded as accrued restructuring charges
in connection with the acquisition of AI. The restructuring plans include
initiatives to integrate the operations of the Company and of AI. The primary
components of these plans relate to: (a) employee termination benefits and
related costs for approximately 20% of the acquired workforce of approximately
3,000 employees; (b) consolidation or shutdown of certain operational facilities
worldwide and (c) termination of certain leases and other contractual
obligations.
During the second quarter of 2000, the Company finalized its
restructuring plan for AI. Based on continued aggressive actions by the Company
to improve the cost structure of the acquired business, and increased costs
related primarily to employment integration, the Company adjusted its original
estimate of restructuring costs recorded at the acquisition date in connection
with purchase accounting. The majority of the remaining restructuring actions
are expected to occur through fiscal 2001.
The components of the purchase price and allocation were as follows:
(IN THOUSANDS)
Consideration and acquisition costs:
Cash paid........................................... $ 275,000
Seller note......................................... 150,000
Pension liabilities assumed......................... 65,000
Acquisition costs................................... 10,000
----------------
Total...................................... $ 500,000
================
Preliminary allocation of purchase price:
Current assets................................... $ 253,777
Property, plant and equipment.................... 33,308
Acquired intangibles............................. 163,800
In-process R&D................................... 23,000
Goodwill......................................... 185,941
Liabilities...................................... (159,826)
----------------
Total...................................... $ 500,000
================
On December 16, 1998, the Company acquired substantially all of the
outstanding common stock and options of Lumen Technologies, Inc. (Lumen), a
maker of high-technology specialty light sources. The purchase price of
approximately $253 million, which included $75 million of assumed debt, was
funded with existing cash and commercial paper borrowings. The acquisition was
accounted for as a purchase under APB Opinion No. 16, and the Company allocated
the purchase price of Lumen based on the fair values of the assets acquired and
liabilities assumed. Portions of the purchase price, including intangible
assets, were valued by independent appraisers utilizing customary valuation
procedures and techniques. These intangible assets included approximately $2.3
million for acquired in-process R&D for projects that did not have future
alternative uses. This allocation represents the estimated fair value based on
risk-adjusted cash flows related to the in-process R&D projects. At the date of
the acquisition, the development of these projects had not yet reached
technological feasibility, and the R&D in process had no alternative future
uses. Accordingly, these costs were expensed in the fourth quarter of 1998.
Acquired intangibles totaling $11.8 million included the fair value of trade
names, trademarks and patents. These intangibles are being amortized over their
estimated useful life of 10 years. Goodwill resulting from the Lumen acquisition
is being amortized over 30 years. Approximately $5 million was recorded as
accrued restructuring charges in connection with the acquisition. The
restructuring plans included initiatives to integrate the operations of the
Company and Lumen. The primary components of these plans related to: (a)
transfer of certain manufacturing activities to lower-cost facilities, (b)
integration of the sales and marketing organization and (c) termination of
certain contractual obligations.
Unaudited pro forma operating results for the Company, assuming the
acquisitions of Lumen and AI occurred on December 29, 1997, and NEN occurred on
January 3, 1999, are as follows:
(IN THOUSANDS EXCEPT PER SHARE DATA) 2000 1999 1998
------------------------------------ ---- ---- ----
Sales from continuing operations............. $ 1,405,376 $ 1,369,523 $ 1,246,858
Income from continuing operations............ 66,192 (25,007) 38,313
Basic earnings per share.................. 0.67 (0.27) 0.42
Diluted earnings per share................ 0.65 (0.27) 0.42
Net Income................................... $ 97,434 $ 122,398 $ 68,814
Basic earnings per share.................. 0.99 1.34 0.76
Diluted earning per share................. 0.95 1.31 0.75
The pro forma amounts in the table above exclude the in-process R&D
charges of $24.3 million, $23 million and $2.3 million for NEN, AI and Lumen,
respectively. The unaudited pro forma financial information is provided for
informational purposes only and is not necessarily indicative of the Company's
operating results that would have occurred had the acquisitions been consummated
on the date for which the consummation of the acquisitions is being given
effect, nor is it necessarily
indicative of the Company's future operating results. The pro forma amounts do
not reflect any operating efficiencies and cost savings that the Company
believes are achievable.
During the first quarter of 2000, the Company sold its micromachined sensors
and specialty semiconductor businesses for cash of $24.3 million, resulting in a
pre-tax gain of $6.7 million. Combined financial results of the divested
businesses for 2000 and 1999 were not material to the consolidated results of
the Company.
During the fourth quarter of 2000, the Company sold its Berthold business at
a pre-tax gain of $10 million. The Company has deferred gain recognition of
approximately $11.9 million of sales proceeds from this divestiture in
connection with certain contingencies related to the sale. Revenues for 2000 and
1999 for the divested business were $30 million and $38 million, respectively.
Also during the fourth quarter of 2000, the Company recorded a pre-tax gain of
$16 million from the sale of a building.
During the second quarter of 1998, the Company sold its Sealol Industrial
Seals division for cash of $100 million, resulting in a pre-tax gain of $58.3
million. The after-tax gain of this divestiture was $42.6 million. Sealol's 1998
sales prior to the disposition were $23 million, and its operating income was
$2.1 million. In January 1998, the Company sold its Rotron division for $103
million in cash, resulting in a pre-tax gain of $64.4 million. During the first
quarter of 1998, the Company also sold a small product line for $4 million in
cash, resulting in a pre-tax gain of $3.1 million. The after-tax gain of these
divestitures was $45.2 million in 1998. During 2000 and 1999, in connection with
the 1998 dispositions of the Company's Rotron and Sealol Industrial Seals
divisions, the Company recognized approximately $3.7 million and $13.2 million
respectively, of pre-tax gains from the previously deferred sales proceeds as a
result of the favorable resolution of certain events and contingencies.
All of the gains described above are reported on the "Gains on
Dispositions" line in the consolidated income statements.
NOTE 3. RESTRUCTURING AND INTEGRATION CHARGES
The Company developed restructuring plans during 1998 to integrate and
consolidate its businesses and recorded restructuring charges in the first and
second quarters of 1998, which are discussed separately below.
During the first quarter of 1998, management developed a plan to restructure
certain businesses. A discussion of the businesses affected within each segment
is presented below. The plan resulted in pre-tax restructuring charges totaling
$16.5 million. The principal actions in the restructuring plan included
close-down or consolidation of a number of offices and facilities, transfer of
assembly activities to lower-cost geographic locations, disposal of
underutilized assets, withdrawal from certain product lines and general cost
reductions.
Specific businesses within each segment which were affected by the
restructuring actions are as follows: the Optoelectronics businesses affected
produce various lighting and sensor components and systems; the Instruments
restructuring related primarily to its Instruments for Research and Applied
Science business which produces particle detector equipment.
During the second quarter of 1998, the Company expanded its continuing
effort to restructure certain businesses to further improve performance. The
plan resulted in additional pre-tax restructuring charges of $18.3 million. The
components of the restructuring charges met the criteria set forth in Emerging
Issues Task Force Issue 94-3, Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (Including Certain
Costs Incurred in a Restructuring). The charges do not include additional costs
associated with the restructuring plans, such as training, consulting, purchase
of equipment and relocation of employees and equipment. These costs were charged
to operations or capitalized, as appropriate, when incurred.
During the third quarter of 1999, due to the substantial completion of the
actions of the 1998 restructuring plans, the Company reevaluated its 1998
restructuring plans. As a result of this review, costs associated with the
previously planned shutdown of two businesses were no longer required due to
actions taken to improve performance. As a result of these developments, the
Company recognized a restructuring credit of $3.3 million during the third
quarter of 1999, which primarily affected the Optoelectronics segment.
During the second quarter of 2000, the Company recognized an additional
restructuring credit of $6.3 million related to its 1998 restructuring plans.
This resulted from the elimination of certain planned actions, actions taken to
improve performance at costs lower than originally estimated, and the sale of
certain businesses included in the restructuring plans.
These credits are reflected in "Restructuring Charges, Net" in the
consolidated income statements.
The restructuring charges related to continuing operations recorded in 1998
were broken down as follows by operating segment:
TERMINATION OF
LEASES
EMPLOYEE DISPOSAL OF AND OTHER
SEPARATION CERTAIN PRODUCT CONTRACTUAL
(IN MILLIONS) COSTS LINES AND ASSETS OBLIGATIONS TOTAL
------------- ----- ---------------- ----------- -----
Life Sciences............................................... $ 3.6 $ 0.4 $ 0.6 $ 4.6
Optoelectronics............................................. 8.5 6.4 5.4 20.3
Instruments................................................. 4.9 0.8 0.3 6.0
Corporate and Other......................................... 3.8 -- 0.1 3.9
------- -------- -------- ---------
Total restructuring charges................................. 20.8 7.6 6.4 34.8
Amounts incurred through January 3, 1999.................... (7.8) (7.6) (1.0) (16.4)
------- -------- -------- ---------
Accrued restructuring costs at January 3, 1999.............. 13.0 -- 5.4 18.4
Amounts incurred during 1999................................ (7.1) -- (1.7) (8.8)
Amounts reversed during 1999................................ (1.2) -- (2.1) (3.3)
------- -------- -------- ---------
Accrued restructuring costs at January 2, 2000 ............. 4.7 -- 1.6 6.3
Amounts incurred during 2000 ............................... -- -- -- --
Amounts reversed during 2000................................ (4.7) -- (1.6) (6.3)
------- -------- -------- ---------
Accrued restructuring costs at December 31, 2000............ $ -- $ -- $ -- $ --
======= ======== ======== =========
The acquisitions by the Company discussed in Note 2 and the Company's
divestiture during the third quarter of 1999 of its Technical Services segment
(exiting government services) were strategic milestones in the Company's
transition to a commercial high-technology company. Consistent with the
strategic direction of the Company and concurrent with the reevaluation of
existing restructuring plans during the third quarter of 1999, the Company
developed additional plans to restructure certain businesses to continue to
improve the Company's performance.
These plans resulted in a pre-tax restructuring charge of $18.0 million
recorded in the third quarter of 1999. The principal actions in these
restructuring plans include close-down or consolidation of a number of offices
and facilities, transfer of assembly activities to lower-cost geographic
locations, disposal of underutilized assets, withdrawal from certain product
lines and general cost reductions. The restructuring plans are expected to
result in the elimination of approximately 400 positions, primarily in the
manufacturing and sales categories. The major components of the restructuring
charge were $8.4 million of employee separation costs to restructure the
worldwide organization, including the sales and manufacturing focus, $2.1
million of noncash charges to dispose of certain product lines and assets
through sale or abandonment and $7.5 million of charges to terminate lease and
other contractual obligations no longer required as a result of the
restructuring plans. The charges do not include additional costs associated with
the restructuring plans, such as training, consulting, purchase of equipment and
relocation of employees and equipment. These costs will be charged to operations
or capitalized, as appropriate, when incurred.
The restructuring actions related to the 1999 charge are broken down as
follows by business segment:
TERMINATION OF
LEASES
EMPLOYEE DISPOSAL OF AND OTHER
SEPARATION CERTAIN PRODUCT CONTRACTUAL
(IN MILLIONS) COSTS LINES AND ASSETS OBLIGATIONS TOTAL
------------- ----- ---------------- ----------- -----
Life Sciences............................................... $ 0.5 $ 0.8 $ 4.9 $ 6.2
Optoelectronics............................................. 6.1 0.8 2.1 9.0
Instruments................................................. 1.8 -- -- 1.8
Corporate and Other......................................... -- 0.5 0.5 1.0
----------- ------------- ------ ------
Total restructuring charges................................. 8.4 2.1 7.5 18.0
Amounts incurred through January 2, 2000.................... (1.7) (0.2) (0.4) (2.3)
----------- ------------- ------ ------
Accrued restructuring costs at January 2, 2000.............. $ 6.7 $ 1.9 $ 7.1 $ 15.7
Amounts incurred during 2000................................ (5.8) (0.2) (4.8) (10.8)
Amounts reversed during 2000................................ (0.9) (1.7) (2.3) (4.9)
----------- ------------- ------ ------
Accrued restructuring costs at December 31, 2000............ $ -- $ -- $ -- $ --
=========== ============= ====== ======
Further details of the Company's restructuring actions are presented
below. Specific businesses within each segment which were affected by the
restructuring actions are as follows: the Optoelectronics businesses affected
produce various lighting and sensor components and systems; the Instruments
restructuring relates to its analytical instruments business and its Instruments
for Research and Applied Science business which produces particle detector
equipment.
Close-down of certain facilities: Costs have been accrued for the
closing down of certain facilities. These costs relate primarily to the
Instruments and Optoelectronics segments.
Transfer of assembly activities: The Company continues to relocate
certain activities, primarily in its Optoelectronics segment, to lower-cost
geographic areas, such as the Philippines, Indonesia and China. The costs
included in the restructuring charges related to costs associated with exiting
the previous operations. Actual costs to physically relocate are charged to
operations as incurred.
Disposal of underutilized assets: The Company plans to dispose of
underutilized assets either through sale or abandonment, primarily in its
Instruments and Optoelectronics segments.
Withdrawal from certain product lines: The Company has made a strategic
decision to discontinue certain unprofitable product lines, primarily in its
Optoelectronics segment.
During the fourth quarter of 2000, the Company reevaluated its 1999
restructuring plan due to the substantial completion of the respective actions
and the continuing transformation of the portfolio of businesses during 2000.
This resulted in the reversal of $4.9 million of remaining reserves from the
1999 plan and the recording of a pre-tax restructuring charge of $15.1 million
for actions to be completed in 2001 (the "2000 plan"). These charges related to
the Company's Life Sciences and Optoelectronics segments. The principal actions
in the restructuring plans included close-down or consolidation of a number of
offices and facilities, transfer of assembly activities to lower cost geographic
locations, disposal of underutilized assets and general cost reductions. The
restructuring charges were broken down as follows by operating segment: The Life
Sciences' principal actions are associated with rationalization of its
distribution network and overall facility consolidation. The Optoelectronics
principal actions are associated with its Lighting and Imaging businesses and
relate to the shift of certain manufacturing to low cost geographic areas,
facility consolidation and general cost reductions.
The following table summarizes activity related to the 2000 plan:
TERMINATION OF
LEASES
EMPLOYEE DISPOSAL OF AND OTHER
SEPARATION CERTAIN PRODUCT CONTRACTUAL
(IN MILLIONS) COSTS LINES AND ASSETS OBLIGATIONS TOTAL
------------- ----- ---------------- ----------- -----
Life Sciences................................................. $ 2.9 $ .1 $ 2.1 $ 5.1
Optoelectronics............................................... 7.2 2.8 -- 10.0
----------- ---------- -------- ------
Total restructuring charges................................... 10.1 2.9 2.1 15.1
Amounts incurred during 2000.................................. -- -- -- --
----------- ---------- -------- ------
Accrued restructuring costs at December 31, 2000.............. $ 10.1 $ 2.9 $ 2.1 $ 15.1
=========== ========== ======== ======
During the second quarter of 2000, the Company finalized its
restructuring plan for AI. Based on continued aggressive actions by the Company
to improve the cost structure of the acquired business, and increased costs
related primarily to employment integration, the Company adjusted its original
estimate of restructuring costs recorded at the acquisition date in connection
with purchase accounting. The majority of the remaining restructuring actions
are expected to occur through fiscal 2001 and early fiscal 2002.
The following table summarizes reserve activity through December 31,
2000 related to the May 1999 AI acquisition as discussed in Note 2:
(IN MILLIONS)
-------------
Accrued restructuring costs at beginning of period....... $ 12.4
Provisions, through purchase accounting, net . .......... 24.0
Charges/Writeoffs........................................ (7.7)
-----------
Accrued restructuring costs.............................. $ 28.7
===========
The following table summarizes reserve activity through December 31,
2000 related to the December 1998 Lumen acquisition and July 2000 NEN
acquisition as discussed in Note 2 (all Lumen actions were completed during
2000):
(IN MILLIONS)
-------------
Accrued restructuring costs at beginning of period (Lumen).... $ 1.7
Provisions, through purchase accounting, net.................. 4.0
Charges/Writeoffs............................................. (2.1)
-----------
Accrued restructuring costs................................... $ 3.6
===========
Cash outlays during 2000 were approximately $17 million for all of
these plans. The majority of the actions remaining are expected to occur during
2001 and early fiscal 2002.
NOTE 4. ASSET IMPAIRMENT CHARGES
During the third quarter of 1999, in connection with its ongoing review
of its portfolio of businesses, the Company conducted a strategic review of
certain units within its business segments. The strategic review triggered an
impairment review of long-lived assets of certain business units that were
expected to be disposed. The Company calculated the present value of expected
cash flows of certain business units to determine the fair value of those
assets. Accordingly, in the third quarter of 1999, the Company recorded non-cash
impairment charges and wrote down goodwill by $15 million in the Instruments
segment and $3 million in the Optoelectronics segment. Sales and operating
profit for the businesses under strategic review were approximately $54 million
and $2 million, respectively, in 1999.
NOTE 5. OTHER (EXPENSE) INCOME
Other (expense) income, net, consisted of the following:
(IN THOUSANDS) 2000 1999 1998
-------------- ---- ---- ----
Interest Income ............................ $ 3,844 $ 3,020 $ 6,791
Interest Expense ........................... (36,745) (24,704) (8,820)
Gains on sales of investments, net ......... 1,294 1,952 4,465
Other ...................................... (2,085) 8,658 (439)
------------ ----------- ------------
$ (33,692) $ (11,074) $ 1,997
============ =========== ============
Other consists mainly of foreign exchange losses, and $2.2 million of
income received by the Company in 1999 related to the demutualization of a life
insurance company in which the Company is a policyholder. The increase in
interest expense in 2000 versus 1999 is due to the impact of higher debt levels
resulting from acquisitions.
NOTE 6. INCOME TAXES
The components of income from continuing operations before income taxes
for financial reporting purposes were as follows:
(IN THOUSANDS) 2000 1999 1998
-------------- ---- ---- ----
U.S. ............................. $ (11,325) $ (28,342) $ 14,843
Non-U.S .......................... 110,302 39,838 88,076
---------- ---------- -----------
$ 98,977 $ 11,496 $ 102,919
========== ========== ===========
The components of the provision for income taxes for continuing
operations were as follows:
DEFERRED
(IN THOUSANDS) CURRENT (PREPAID) TOTAL
-------------- ------- --------- -----
2000
Federal........................... $ 1,314 $ 11,561 $ 12,875
State............................. 504 2,380 2,884
Non-U.S. ......................... 25,257 (1,317) 23,940
--------- ----------- ---------
$ 27,075 $ 12,624 $ 39,699
========= ========== =========
1999
Federal............................ $ 6,511 $ (12,706) $ (6,195)
State.............................. 330 (1,970) (1,640)
Non-U.S. .......................... 13,234 (814) 12,420
--------- ----------- ---------
$ 20,075 $ (15,490) $ 4,585
========= =========== =========
1998
Federal............................ $ 25,741 $ (7,650) $ 18,091
State.............................. 3,054 (982) 2,072
Non-U.S. .......................... 15,234 (3,979) 11,255
--------- ------- ---------
$ 44,029 $ (12,611) $ 31,418
========= =========== =========
The total provision for income taxes included in the consolidated
financial statements was as follows:
(IN THOUSANDS) 2000 1999 1998
-------------- ---- ---- ----
Continuing Operations ............... $ 39,699 $ 4,585 $ 31,418
Discontinued Operations.............. 21,570 92,436 22,614
---------- ----------- -------
$ 61,269 $ 97,021 $ 54,032
========== =========== ========
The major differences between the Company's effective tax rate for
continuing operations and the federal statutory rate were as follows:
2000 1999 1998
Federal statutory rate ..................... 35.0% 35.0% 35.0%
Non-U.S. rate differential, net............. (18.7) (23.4) (21.3)
Future remittance of non-U.S. earnings...... 0.0 0.0 9.7
State income taxes, net..................... 2.0 (6.2) 1.2
Goodwill amortization....................... 12.0 29.7 0.7
Goodwill write-downs ....................... 0.0 45.6 0.0
In-process R&D ............................. 11.5 0.0 0.0
Change in valuation allowance .............. (2.5) 35.1 2.3
Other, net ................................. 0.8 (75.9) 2.9
----- ----- -----
Effective tax rate ......................... 40.1% 39.9% 30.5%
===== ===== =====
The 2000 tax provision and effective rate for continuing operations
includes tax for nonrecurring items such as the disposals of Berthold, IC
Sensors and Judson. The 1999 tax provision and effective rate for continuing
operations was impacted by a non-deductible goodwill write-down.
The tax effects of temporary differences and carryovers that gave rise
to deferred income tax assets and liabilities as of December 31, 2000 and
January 2, 2000 were as follows:
(IN THOUSANDS) 2000 1999
-------------- ---- ----
Deferred tax assets:
Inventory reserves ............................ $ 149 $ 3,895
Other reserves................................. 17,300 10,645
Deferred income................................ 6,179 6,024
Vacation pay .................................. 4,991 4,072
Net operating loss carryforwards............... 14,447 28,562
Post-retirement health benefits................ 5,191 4,282
Restructuring reserve ......................... 15,995 15,557
In-process R&D ................................ 10,726 8,970
All other, net ................................ 45,806 48,837
---------- ----------
Total deferred tax assets ........................ 120,784 130,844
---------- ----------
Deferred tax liabilities:
Pension contribution........................... (11,912) (10,555)
Amortization .................................. (5,877) (995)
Depreciation .................................. (26,467) (8,324)
All other, net ................................ (16,081) (16,852)
---------- ----------
Total deferred tax liabilities ................... (60,337) (36,726)
---------- ----------
Valuation allowance .............................. (14,447) (28,580)
---------- ----------
Net prepaid taxes ................................ $ 46,000 $ 65,538
========== ==========
At December 31, 2000, the Company had non-U.S. (primarily from Germany)
net operating loss carryovers of $53.4 million, substantially all of which carry
forward indefinitely. The valuation allowance results primarily from these
carryovers, for which the Company currently believes it is more likely than not
that they will not be realized.
Current deferred tax assets of $53 million and $84 million were
included in other current assets at December 31, 2000 and January 2, 2000,
respectively. Long-term deferred tax liabilities of $8 million and $19 million
were included in long-term liabilities at December 31, 2000 and January 2, 2000,
respectively.
In general, it is the practice and intention of the Company to reinvest
the earnings of its non-U.S. subsidiaries in those operations. Repatriation of
retained earnings is done only when it is advantageous. Applicable federal taxes
are provided only on amounts planned to be remitted. In connection with 1998
divestitures, certain proceeds will not be permanently reinvested in those
operations, and, accordingly, federal taxes in the amount of $10 million were
provided in connection with those earnings.
NOTE 7. DISCONTINUED OPERATIONS
On August 20, 1999, the Company sold the assets of its Technical
Services segment, including the outstanding capital stock of EG&G Defense
Materials, Inc., a subsidiary of the Company, to EG&G Technical Services, Inc.,
an affiliate of The Carlyle Group L.P. (the "Buyer"), for approximately $250
million in cash and the assumption by the Buyer of certain liabilities of the
Technical Services segment. Approximately $2.1 million of the cash purchase
price will be paid by the Buyer to the Company on the seventh anniversary of the
closing of this transaction. The Company recorded an additional pre-tax gain of
$7.3 million on the disposition of discontinued operations as a result of a
post-closing selling price settlement in the second quarter of 2000.
The results of operations of the Technical Services segment were
previously reported as one of five business segments of the Company. The Company
accounted for the sale of its Technical Services segment as a discontinued
operation in accordance with APB Opinion No. 30 and, accordingly, the results of
operations of the Technical Services segment have been segregated from
continuing operations and reported as a separate line item on the Company's
Consolidated Income Statements. The Company recorded a pre-tax gain on
disposition of discontinued operations of $181 million, net of transaction and
related costs, during 1999. The $110 million after-tax gain was reported
separately from the results of the Company's continuing operations.
The Company's former Department of Energy (DOE) segment is also
presented as discontinued operations in accordance with APB Opinion No. 30. The
Company's last DOE management and operations contract expired in 1997. The
Company is in the process of negotiating contract closeouts and does not
anticipate incurring any material loss in excess of previously established
reserves.
In July 2001, the Company approved a plan to sell its Security and
Detection Systems business. The results of operations of the Security and
Detection Systems business were previously reported as part of the Instruments
segment. In October 2001, The Company approved a plan to sell its Fluid Sciences
segment. The Company has accounted for the plan to sell both businesses as
discontinued operations in accordance with APB Opinion No. 30, and accordingly,
the results of operations of the Security and Detection Systems business and the
Fluid Sciences segment have been segregated from continuing operations and
reported as a separate line on the Company's Consolidated Income Statements.
Summary operating results of the discontinued operations for the
Technical Services and Fluid Sciences segments and the Security and Detection
Systems business (through December 31, 2000) were as follows:
(IN THOUSANDS) 2000 1999 1998
-------------- ---- ---- ----
Sales............................................ $ 359,735 $ 615,070 $ 862,750
Costs and Expenses .............................. 305,829 546,454 808,196
------------- ------------- -------------
Operating income from discontinued operations.... 53,906 68,616 54,554
Other expense.................................... (8,394) (9560) (1,439)
------------- -------------- --------------
Income from discontinued operations before
income taxes ............................... 45,512 59,056 53,115
Provision for income taxes ...................... 18,723 21,931 22,614
------------- ------------- -------------
Income from discontinued operations, net of
income taxes ............................... $ 26,789 $ 37,125 $ 30,501
============= ============= =============
NOTE 8. EARNINGS PER SHARE
Basic earnings per share was computed by dividing net income by the
weighted-average number of common shares outstanding during the year. Diluted
earnings per share was computed by dividing net income by the weighted-average
number of common shares outstanding plus all potentially dilutive common shares
outstanding, primarily shares issuable upon the exercise of stock options using
the treasury stock method. The following table reconciles the number of shares
utilized in the earnings per share calculations:
(IN THOUSANDS) 2000 1999 1998
-------------- ---- ---- ----
Number of common shares -- basic ......... 98,212 91,044 90,644
Effect of dilutive securities
Stock options........................ 4,022 2,030 1,032
Other ............................... 44 64 92
------- ------ ------
Number of common shares -- diluted........ 102,278 93,138 91,768
======= ====== ======
Options to purchase 54,400 and 184,000 shares of common stock were not
included in the computation of diluted earnings per share for 2000 and 1998,
respectively, because the options' exercise prices were greater than the average
market price of the common shares and thus their effect would have been
antidilutive. Additionally, the Company's zero coupon senior convertible
debentures (See Note 14) are currently convertible into 10.8 million shares of
the Company's common stock at approximately $42.50 per share. Conversion of the
debentures was not assumed in the computation of diluted earnings per share
because the effect of assumed conversion would have been antidilutive.
NOTE 9. ACCOUNTS RECEIVABLE
Accounts receivable were net of reserves for doubtful accounts of $13.3
million and $11.7 million as of December 31, 2000 and January 2, 2000,
respectively. The increase is primarily due to the higher revenues in 2000
versus 1999 and the inclusion of NEN in 2000.
NOTE 10. INVENTORIES
Inventories as of December 31, 2000 and January 2, 2000, consisted of
the following:
(IN THOUSANDS) 2000 1999
-------------- ---- ----
Raw materials............... $ 61,564 $ 81,606
Work in progress............ 46,785 21,272
Finished goods ............. 82,177 73,838
------------- -------------
$ 190,526 $ 176,716
============= =============
The increase in inventories was primarily due to the acquisition of NEN
in 2000.
NOTE 11. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, at cost, as of December 31, 2000 and
January 2, 2000 consisted of the following:
(IN THOUSANDS) 2000 1999
-------------- ---- ----
Land ..................................... $ 23,767 $ 23,815
Building and leasehold improvements....... 125,830 105,349
Machinery and equipment................... 274,544 244,066
------------- -------------
$ 424,141 $ 373,230
============= =============
Increases in property, plant and equipment due to the acquisition of
NEN and capital expenditures during 2000 were partially offset by decreases
resulting from dispositions and the effect of translating fixed assets
denominated in non-U.S. currencies at current exchange rates.
NOTE 12. INVESTMENTS
Investments as of December 31, 2000 and January 2, 2000 consisted of
the following:
(IN THOUSANDS) 2000 1999
-------------- ---- ----
Marketable investments ..................... $ 21,936 $ 11,082
Joint venture and other investments......... 14,290 3,115
------------- -------------
$ 36,226 $ 14,197
============= =============
The primary components of the increase in investments in 2000 versus
1999 are certain strategic alliances and equity investments made through the
Company's Life Sciences and Optoelectronics segments.
Joint venture investments are accounted for using the equity method.
Marketable investments consisted of trust assets which were carried at market
value and were primarily invested in common stocks and fixed-income securities
to meet the supplemental executive retirement plan obligation, as well as an $8
million equity investment in Genomic Solutions made in 2000. The market values
were based on quoted market prices. As of December 31, 2000 the fixed-income
securities, on average, had maturities of approximately 15 years.
The net unrealized holding gain on marketable investments, net of
deferred income taxes, reported as a component of accumulated other
comprehensive income (loss) in stockholders' equity, was $0.9 million and $0.4
million at December 31, 2000 and January 2, 2000, respectively. During 2000, the
Company completed a strategic alliance with and made an initial $5 million
investment in Bragg Photonics, a maker of key fiber optic components. The
Company's initial 13% investment in Bragg Photonics was increased to 26% during
the year for a total investment at December 31, 2000 of $10 million.
Marketable investments classified as available for sale as of December
31, 2000 and January 2, 2000 consisted of the following:
GROSS UNREALIZED HOLDING
MARKET ------------------------
(IN THOUSANDS) VALUE COST GAINS (LOSSES)
-------------- ----- ---- ----- --------
2000
Common stocks................ $ 17,356 $ 16,021 $ 1,689 $ (354)
Fixed-income security........ 4,143 4,074 69 --
Other........................ 437 492 -- (55)
--------- --------- --------- ---------
$ 21,936 $ 20,587 $ 1,758 $ (409)
========= ========= ========= =========
1999
Common stocks ............... $ 7,046 $ 6,345 $ 721 $ (20)
Fixed-income security........ 3,360 3,449 -- (89)
Other........................ 676 652 24 --
--------- --------- --------- ---------
$ 11,082 $ 10,446 $ 745 $ (109)
========= ========= ========= =========
NOTE 13. INTANGIBLE ASSETS
Intangible assets consist mainly of goodwill from acquisitions
accounted for using the purchase method of accounting, representing the excess
of cost over the fair market value of the net assets of the acquired businesses.
Goodwill is being amortized over periods of 10-40 years. Goodwill, net of
accumulated amortization, was $631 million and $386 million at December 31, 2000
and January 2, 2000, respectively. Other identifiable intangible assets from
acquisitions include patents, trademarks, trade names and developed technology
and are being amortized over periods of 10-40 years. Other identifiable
intangible assets, net of accumulated amortization, were $256 million and $172
million at December 31, 2000 and January 2, 2000, respectively. Intangible
assets as of December 31, 2000 and January 2, 2000 consisted of the following:
(IN THOUSANDS) 2000 1999
-------------- ---- ----
Goodwill ..................................... $ 677,029 $ 438,406
Other identifiable intangible assets.......... 293,900 178,550
------------- -------------
970,929 616,956
Less: Accumulated amortization .............. 84,360 59,000
------------- -------------
$ 886,569 $ 557,956
============= =============
The increase in intangible assets resulted primarily from the NEN
acquisition.
NOTE 14. DEBT
Short-term debt at December 31, 2000 was $183 million and was comprised
primarily of commercial paper borrowings. The weighted average interest rate on
the commercial paper borrowings, which had maturities of 60 days or less, was
6.7%.
Short-term debt at January 2, 2000 was $382 million and included
one-year promissory notes of $150 million issued to PE Corp. at an interest rate
of 5%, money market loans of $85 million and commercial paper borrowings of $140
million.
In March 2001, the Company's $300 million revolving credit facility was
refinanced and will expire in March 2002 and the Company also refinanced an
additional $100 million revolving credit facility which expires in March 2006.
These agreements, which serve as backup facilities for the commercial paper
borrowings, have no significant commitment fees. There were no amounts
outstanding under these lines at December 31, 2000 or January 2, 2000.
At December 31, 2000 and January 2, 2000, long-term debt was $583.3
million and $114.9 million, respectively, and included $115 million of unsecured
ten-year notes issued in October 1995 at an interest rate of 6.8%, which mature
in 2005 as well as $460 million of zero coupon senior convertible debentures
described below. The carrying amount of the unsecured ten-year notes
approximated the estimated fair value at December 31, 2000, based on a quoted
market price. The estimated fair value of the convertible debentures
approximated $558 million at December 31, 2000, also based on a quoted market
price.
In August 2000, the Company sold zero coupon senior convertible
debentures with an aggregate purchase price of $460 million. The Company used
the offering's net proceeds of approximately $448 million to repay a portion of
its commercial paper borrowings, which had been increased temporarily to finance
the NEN acquisition. Deferred issuance costs of $12 million were recorded as a
noncurrent asset and are being amortized over three years. The debentures, which
were offered by a prospectus supplement pursuant to the Company's effective
shelf registration statement, are due August 2020, and were priced with a yield
to maturity of 3.5%. At maturity, the Company will repay $921 million, comprised
of $460 million of original purchase price plus accrued original issue discount.
The Company may redeem some or all of the debentures at any time on or after
August 7, 2003 at a redemption price equal to the issue price plus accrued
original issue discount through the redemption date. Holders of the debentures
may require the Company to repurchase some or all of the debentures in August
2003 and August 2010, or at any time when there is a change in control of the
Company, as is customary and ordinary for debentures of this nature, at a
repurchase price equal to the initial price to the public plus accrued original
issue discount through the date of the repurchase. The debentures are currently
convertible into 10.8 million shares of the Company's common stock at
approximately $42.50 per share.
In connection with the completion of the NEN acquisition on July 31,
2000, the Company paid approximately $350 million in cash as a part of the
purchase price. In addition, the Company repaid approximately $50 million of
outstanding indebtedness of NEN. The Company financed the acquisition and
repayment of the outstanding indebtedness with $410 million of commercial paper
borrowings with a weighted-average interest rate of 7%. These short-term
borrowings were repaid in early August with proceeds from the issuance of
long-term convertible debentures, as discussed above.
NOTE 15. ACCRUED EXPENSES
Accrued expenses as of December 31, 2000 and January 2, 2000 consisted
of the following:
(IN THOUSANDS) 2000 1999
-------------- ---- ----
Payroll and incentives ......................... $ 34,498 $ 26,285
Employee benefits .............................. 42,126 44,375
Federal, non-U.S. and state income taxes........ 39,973 47,808
Other accrued operating expenses ............... 180,299 141,767
------------- -------------
$ 296,896 $ 260,235
============= =============
The increase is due primarily to the inclusion of NEN, which was
acquired in 2000.
NOTE 16. EMPLOYEE BENEFIT PLANS
The following employee benefit plan disclosures include amounts and
information, on a combined basis, for both the continuing and discontinued
operations of the Company.
Savings Plan: The Company has a savings plan for the benefit of
qualified U.S. employees. Under this plan, the Company contributes an amount
equal to the lesser of 55% of the amount of the employee's voluntary
contribution or 3.3% of the employee's annual compensation. Savings plan expense
charged to continuing operations was $5.4 million in 2000, $3.9 million in 1999,
and $2.7 million in 1998.
Pension Plans: The Company has defined benefit pension plans covering
substantially all U.S. employees and non-U.S. pension plans for non-U.S.
employees. The plans provide benefits that are based on an employee's years of
service and compensation near retirement. Assets of the U.S. plan are comprised
primarily of equity and debt securities.
Net periodic pension cost included the following components:
(IN THOUSANDS) 2000 1999 1998
-------------- ------------- ------------- -------------
Service cost .......................... $ 6,063 $ 8,539 $ 9,365
Interest cost ......................... 16,974 19,528 18,300
Expected return on plan assets......... (17,998) (23,130) (23,360)
Net amortization and deferral.......... (487) (645) (825)
------------- ------------- -------------
$ 4,552 $ 4,292 $ 3,480
============= ============= =============
The following table sets forth the changes in the funded status of the
principal U.S. pension plan and the principal non-U.S. pension plans and the
amounts recognized in the Company's consolidated balance sheets as of December
31, 2000 and January 2, 2000.
2000 1999
------------------------ ------------------------
(IN THOUSANDS) NON-U.S. U.S. NON-U.S. U.S.
-------------- ----------- ----------- ---------- ----------
Actuarial present value of benefit obligations:
Accumulated benefit obligations ................................. $ 63,518 $ 157,587 $ 84,110 $ 144,588
=========== =========== ========== ==========
Projected benefit obligations at beginning of year............... $ 91,888 $ 171,106 $ 32,571 $ 259,468
AI projected benefit obligations at date of acquisition.......... -- -- 67,780 --
Service cost .................................................... 1,439 4,624 1,528 7,011
Interest cost ................................................... 4,778 12,196 3,872 15,656
Benefits paid ................................................... (3,398) (9,677) (2,345) (11,802)
Actuarial loss (gain) ........................................... (4,168) (3,898) (4,489) 1,859
Effect of exchange rate changes ................................. (6,251) -- (7,029) --
Dispositions .................................................... (17,584) -- -- --
Settlement loss - discontinued operations ....................... -- -- -- 20,316
Curtailment gain - discontinued operations ...................... -- -- -- (13,798)
Reduction of projected benefit obligations-discontinued operations -- -- -- (107,604)
----------- ----------- ---------- ----------
Projected benefit obligations at end of year .................... 66,704 174,351 91,888 171,106
----------- ----------- ---------- ----------
Fair value of plan assets at beginning of year .................. -- 254,535 -- 310,024
Actual return on plan assets..................................... -- (14,038) -- 65,040
Benefits paid and plan expenses ................................. -- (9,678) -- (12,679)
Transfer out - discontinued operations........................... -- (472) -- (107,850)
----------- ----------- ---------- ----------
Fair value of plan assets at end of year ........................ -- 230,347 -- 254,535
----------- ----------- ---------- ----------
Plan assets less (greater) than projected benefit obligations ... 66,704 (55,996) 91,888 (83,429)
Unrecognized net transition asset................................ -- 512 -- 1,024
Unrecognized prior service costs ................................ (732) (52) (918) (54)
Unrecognized net gain ........................................... 3,252 19,469 2,385 48,078
----------- ----------- ---------- ----------
Accrued pension liability (asset) ............................... $ 69,224 $ (36,067) $ 93,355 $ (34,381)
=========== =========== ========== ==========
Actuarial assumptions as of the year-end measurement date:
Discount rate ................................................ 6.0% 7.5% 5.8% 7.5%
Rate of compensation increase ................................ 3.3% 4.5% 3.5% 4.5%
Expected rate of return on assets ............................ -- 9.0% -- 9.0%
Non-U.S. accrued pension liabilities classified as long-term
liabilities totaled $86 million and $122 million as of December 31, 2000 and
January 2, 2000, respectively. The U.S. pension asset was classified as other
noncurrent assets.
The Company also sponsors a supplemental executive retirement plan to
provide senior management with benefits in excess of normal pension benefits. At
December 31, 2000 and January 2, 2000, the projected benefit obligations were
$16.4 million and $14.9 million, respectively. Assets with a fair value of $9.2
million and $9.8 million segregated in a trust, were available to meet this
obligation as of December 31, 2000 and January 2, 2000, respectively. Pension
expense for this plan was approximately $2.0 million in 2000, $1.8 million in
1999 and $1.4 million in 1998.
Postretirement Medical Plans: The Company provides health care benefits
for eligible retired U.S. employees under a comprehensive major medical plan or
under health maintenance organizations where available. The majority of the
Company's U.S. employees become eligible for retiree health benefits if they
retire directly from the Company and have at least ten years of service.
Generally, the major medical plan pays stated percentages of covered expenses
after a deductible is met and takes into consideration payments by other group
coverage's and by Medicare. The plan requires retiree contributions under most
circumstances and has provisions for cost-sharing changes. For employees
retiring after 1991, the Company has capped its medical premium contribution
based on employees' years of service. The Company funds the amount allowable
under a 401(h) provision in the Company's defined benefit pension plan. Assets
of the plan are comprised primarily of equity and debt securities.
Net periodic post-retirement medical benefit cost (credit) included the
following components:
(IN THOUSANDS) 2000 1999 1998
-------------- ---- ---- ----
Service cost ....................... $ 232 $ 289 $ 360
Interest cost ...................... 992 1,036 1,250
Expected return on plan assets...... (1,219) (1,304) (1,245)
Net amortization and deferral....... (1,516) (1,022) (402)
------------- ------------- -------------
$ (1,511) $ (1,001) $ (37)
============= ============= =============
The following table sets forth the changes in the postretirement
medical plan's funded status and the amounts recognized in the Company's
consolidated balance sheets at December 31, 2000 and January 2, 2000:
(IN THOUSANDS) 2000 1999
-------------- ---- ----
Actuarial present value of benefit obligations:
Retirees ................................................................. $ 10,379 $ 13,672
Active employees eligible to retire ...................................... 371 800
Other active employees.................................................... 2,117 5,256
------------- -------------
Accumulated benefit obligations at beginning of year .......................... 12,867 19,728
------------- -------------
Service cost .................................................................. 232 289
Interest cost ................................................................. 992 1,036
Benefits paid ................................................................. (1,196) (1,204)
Actuarial loss (gain).......................................................... 430 (2,782)
Plan adjustments............................................................... 530 --
Settlement loss - discontinued operations...................................... -- 381
Curtailment gain - discontinued operations .................................... -- (2,350)
Reduction of projected benefit obligations - discontinued operations .......... -- (2,231)
------------- -------------
Change in accumulated benefit obligations during the year...................... 988 (6,861)
------------- -------------
Retirees ................................................................. 10,651 10,379
Active employees eligible to retire ...................................... 400 371
Other active employees.................................................... 2,804 2,117
------------- -------------
Accumulated benefit obligations at end of year................................. 13,855 12,867
------------- -------------
Fair value of plan assets at beginning of year................................. 14,474 15,255
Actual return on plan assets .................................................. (590) 3,214
Benefits paid and plan expenses................................................ (1,630) (757)
Transfer out - discontinued operations ........................................ -- (3,238)
------------- -------------
Fair value of plan assets at end of year ...................................... 12,254 14,474
Fair value of plan assets less (greater) than accumulated benefit obligations . 1,601 (1,605)
Unrecognized prior service costs .............................................. (489) --
Unrecognized net gain.......................................................... 4,614 9,234
------------- -------------
Accrued post-retirement medical liability ..................................... $ 5,726 $ 7,629
============= =============
Actuarial assumptions as of the year-end measurement date:
Discount rate ............................................................ 7.5% 7.5%
Expected rate of return on assets ........................................ 9.0% 9.0%
Health care cost trend rate:
First year ........................................................... 8.0% 9.0%
Ultimate ............................................................. 5.5% 5.5%
Time to reach ultimate................................................ 3 years 4 years
The accrued postretirement medical liability included $4.7 million and
$6.6 million classified as long-term liabilities as of December 31, 2000 and
January 2, 2000, respectively.
If the health care cost trend rate was increased 1%, the accumulated
postretirement benefit obligations would have increased by approximately $0.6
million at December 31, 2000. The effect of this increase on the annual cost for
2000 would have been approximately $42,000. If the health care cost trend rate
was decreased 1%, the accumulated postretirement benefit obligations would have
decreased by approximately $0.5 million at December 31, 2000. The effect of this
decrease on the annual cost for 2000 would have been approximately $37,000.
Deferred Compensation Plans: During 1998, the Company implemented
certain nonqualified deferred compensation programs that provide benefits
payable to officers and certain key employees or their designated beneficiaries
at specified future dates, upon retirement or death. Benefit payments under
these plans are funded by a combination of contributions from participants and
the Company.
Other: In April 1999, the Company's stockholders approved the 1999
Incentive Plan, under which cash performance awards as well as an aggregate of
3.5 million shares of the Company's common stock were made available for option
grants, restricted stock awards, performance units and other stock-based awards.
NOTE 17. REIMBURSEMENT OF INVESTED CAPITAL
In 1997, the Company received a $30.4 million payment as part of the
negotiation of a joint development contract. This payment represented a $27
million reimbursement of previously invested capital, which will be amortized to
income over the estimated life of the related assets, and a $3.4 million
reimbursement of cost of capital, which was included in other income. The
reimbursement, net of accumulated amortization, included in long-term
liabilities was $11 million as of December 31, 2000 and $15.3 million as of
January 2, 2000.
NOTE 18. COMMITMENTS AND CONTINGENCIES
The Company is subject to various claims, legal proceedings and
investigations covering a wide range of matters that arise in the ordinary
course of its business activities. Each of these matters is subject to various
uncertainties, and it is possible that some of these matters may be resolved
unfavorably to the Company. The Company has established accruals for matters
that are probable and reasonably estimable. Management believes that any
liability that may ultimately result from the resolution of these matters in
excess of amounts provided will not have a material adverse effect on the
financial position or results of operations of the Company.
In addition, the Company is conducting a number of environmental
investigations and remedial actions at current and former Company locations and,
along with other companies, has been named a potentially responsible party (PRP)
for certain waste disposal sites. The Company accrues for environmental issues
in the accounting period that the Company's responsibility is established and
when the cost can be reasonably estimated. The Company has accrued $5.4 million
as of December 31, 2000, representing management's estimate of the total cost of
ultimate disposition of known environmental matters. Such amount is not
discounted and does not reflect any recovery of any amounts through insurance or
indemnification arrangements. These cost estimates are subject to a number of
variables, including the stage of the environmental investigations, the
magnitude of the possible contamination, the nature of the potential remedies,
possible joint and several liability, the timeframe over which remediation may
occur and the possible effects of changing laws and regulations. For sites where
the Company has been named a PRP, management does not currently anticipate any
additional liability to result from the inability of other significant named
parties to contribute. The Company expects that such accrued amounts could be
paid out over a period of up to five years. As assessments and remediation
activities progress at each individual site, these liabilities are reviewed and
adjusted to reflect additional information as it becomes available. There have
been no environmental problems to date that have had or are expected to have a
material effect on the Company's financial position or results of operations.
While it is reasonably possible that a material loss exceeding the amounts
recorded may have been incurred, the preliminary stages of the investigations
make it impossible for the Company to reasonably estimate the range of potential
exposure.
During the third quarter of 2001 the Company received notice from the
Internal Revenue Service (IRS) that a previously brought US Tax Court case had
been settled in the Company's favor, resulting in a immaterial refund. The
total additional tax proposed by the IRS previously amounted to $74 million
plus interest.
NOTE 19. RISKS AND UNCERTAINTIES
For information concerning various investigations, claims, legal
proceedings, environmental investigations and remedial actions, and notices from
the IRS, see Note 18. For information concerning factors affecting future
performance, see Management's Discussion and Analysis.
Costs incurred under cost-reimbursable government contracts, primarily
in the former Technical Services segment, which is presented as discontinued
operations, are subject to audit by the government. The results of prior audits,
completed through 1996, have not had a material effect on the Company.
The Company's management and operations contracts with the DOE are
presented as discontinued operations. The Company's last DOE management and
operations contract expired on September 30, 1997. The Company is in the process
of negotiating contract closeouts and does not anticipate incurring any material
loss in excess of previously established reserves.
NOTE 20. STOCKHOLDERS' EQUITY
Stock-Based Compensation: Under the 1999 Incentive Plan, 3.5 million
additional shares of the Company's common stock were made available for option
grants, restricted stock awards, performance units and other stock-based awards.
At December 31, 2000, 1.9 million shares of the Company's common stock were
reserved for employee benefit plans.
The Company has nonqualified and incentive stock option plans for
officers and key employees. Under these plans, options may be granted at prices
not less than 100% of the fair market value on the date of grant. Options expire
7-10 years from the date of grant, and options granted become exercisable, in
ratable installments, over periods of 3-5 years from the date of grant. The
Compensation Committee of the Board of Directors, at its sole discretion, may
also include stock appreciation rights in any option granted. There are no stock
appreciation rights outstanding under these plans.
The following table summarizes stock option activity for the three
years ended December 31, 2000:
2000 1999 1998
-------------------- ------------------ ----------------------
WEIGHTED- WEIGHTED- WEIGHTED-
NUMBER AVERAGE NUMBER AVERAGE NUMBER AVERAGE
(SHARES IN THOUSANDS) OF SHARES PRICE OF SHARES PRICE OF SHARES PRICE
--------------------- ---------- --------- ----------- -------- ---------- --------
Outstanding at beginning of year................... 9,144 $ 11.77 6,600 $ 10.03 8,374 $ 9.82
Granted............................................ 5,564 25.39 5,422 12.97 1,136 11.41
Exercised ......................................... (3,724) 10.12 (2,218) 9.54 (2,418) 9.94
Lapsed ............................................ (1,334) 15.51 (660) 11.64 (492) 10.15
---------- ----------- ----------
Outstanding at end of year ........................ 9,650 19.52 9,144 11.77 6,600 10.03
========== =========== ==========
Exercisable at end of year......................... 2,490 12.71 3,702 9.66 3,080 9.73
========== =========== ==========
The following table summarizes information about stock options
outstanding at December 31, 2000:
OPTIONS OUTSTANDING
------------------- OPTIONS EXERCISABLE
WEIGHTED- --------------------------
AVERAGE WEIGHTED- WEIGHTED-
REMAINING AVERAGE AVERAGE
RANGE OF NUMBER OF CONTRACTUAL EXERCISE NUMBER OF EXERCISE
EXERCISE PRICES SHARES LIFE (YEARS) PRICE SHARES PRICE
--------------- --------- ------------ -------- --------- ---------
(SHARES IN THOUSANDS)
$1.55-10.82................................. 1,244 4.8 $ 9.77 750 $ 9.26
10.88-13.88................................. 2,316 5.6 13.13 1,376 13.22
14.22-19.86................................. 4,312 5.9 18.47 342 15.02
20.32-59.28................................. 1,778 6.6 36.77 124 47.43
During 2000, approximately 5,564,000 options were granted pursuant to
the 1999 Incentive Plan at exercise prices ranging from $19.83 per share to
$59.28 per share. During 1999, 3,222,000 options were granted pursuant to the
1992 Stock Option Plan at exercise prices ranging from $12.88 per share to
$14.41 per share; 842,000 options were granted pursuant to the 1999 Incentive
Plan at exercise prices ranging from $14.85 per share to $19.60 per share and
500,000 options were granted to an officer at an exercise price of $13.63 per
share pursuant to a plan other than the 1992 and 1999 Plans. In connection with
the acquisition of Lumen Technologies, Lumen options were converted into
approximately 858,000 Company stock options, effective January 5, 1999. These
options had an average exercise price of $7.24 per share and were fully vested.
In January 1998, the Board of Directors granted 800,000 options to an officer at
an exercise price of $10.60 per share; 400,000 options were granted pursuant to
the 1992 Plan, and 400,000 options were granted pursuant to a plan other than
the 1992 Plan. In addition, 335,000 options were granted pursuant to the 1992
Plan at various dates in 1998 at exercise prices ranging from $11.57 per share
to $15.13 per share.
The weighted-average fair values of options granted during 2000, 1999
and 1998 were $8.83, $4.57 and $3.42, respectively. The values were estimated on
the date of grant using the Black-Scholes option pricing model. The following
weighted-average assumptions were used in the model:
2000 1999 1998
Risk-free interest rate................ 6.5% 4.9% 5.4%
Expected dividend yield................ 2% 2% 2%
Expected lives......................... 3.7 years 5.5 years 6 years
Expected stock volatility.............. 46% 27% 27%
In April 1999, the Company's stockholders approved the 1998 Employee
Stock Purchase Plan, whereby participating employees currently have the right to
purchase common stock at a price equal to 85% of the lower of the closing price
on the first day or the last day of the six-month offering period. The number of
shares which an employee may purchase, subject to certain aggregate limits, is
determined by the employee's voluntary contribution, which may not exceed 10% of
base compensation. During 2000, the Company issued 420,288 shares under this
plan at a weighted-average price of $21.84 per share. During 1999, the Company
issued 716,000 shares under this plan at a weighted-average price of $11.07 per
share. There remains available for sale to employees an aggregate of 3.8 million
shares of the Company's stock out of 5 million shares authorized by the
stockholders.
As permitted by SFAS No. 123, Accounting for Stock-Based Compensation,
the Company continues to apply APB Opinion No. 25 in accounting for its stock
option and stock purchase plans. As required, the following table discloses pro
forma net income and diluted earnings per share had compensation cost for the
Company's stock-based compensation plans been determined based on the fair value
approach:
(IN THOUSANDS EXCEPT PER SHARE DATA) 2000 1999 1998
------------------------------------ ---- ---- ----
Net income:
As reported..........................$ 90,520 $ 154,316 $ 102,002
Pro forma............................ 76,092 145,354 100,000
Diluted earnings per share:
As reported.......................... .89 1.66 1.11
Pro forma............................ .76 1.56 1.09
Pro forma compensation cost may not be representative of that to be
expected in future years since the estimated fair value of stock options is
amortized to expense over the vesting period, and additional options may be
granted in future years.
Shareholder Rights Plan: Under a Shareholder Rights Plan, preferred
stock purchase rights were distributed on February 8, 1995 as a dividend at the
rate of one right for each share of common stock outstanding. Each right, when
exercisable, entitles a stockholder to purchase one one-thousandth of a share of
a new series of junior participating preferred stock at a price of $30. The
rights become exercisable only if a person or group acquires 20% or more or
announces a tender or exchange offer for 30% or more of the Company's common
stock. This preferred stock is nonredeemable and will have 1,000 votes per
share. The rights are nonvoting, expire in 2005 and may be redeemed prior to
becoming exercisable. The Company has reserved 70,000 shares of preferred stock,
designated as Series C Junior Participating Preferred Stock, for issuance upon
exercise of such rights. If a person (an Acquiring Person) acquires or obtains
the right to acquire 20% or more of the Company's outstanding common stock
(other than pursuant to certain approved offers), each right (other than rights
held by the Acquiring Person) will entitle the holder to purchase shares of
common stock of the Company at one-half of the current market price at the
date of occurrence of the event. In addition, in the event that the Company is
involved in a merger or other business combination in which it is not the
surviving corporation or in connection with which the Company's common stock is
changed or converted, or it sells or transfers 50% or more of its assets or
earning power to another person, each right that has not previously been
exercised will entitle its holder to purchase shares of common stock of such
other person at one-half of the current market price of such common stock at the
date of the occurrence of the event.
Comprehensive Income: The components of accumulated other comprehensive
income (loss) were as follows:
FOREIGN CURRENCY ACCUMULATED OTHER
TRANSLATION UNREALIZED GAINS COMPREHENSIVE
(IN THOUSANDS) ADJUSTMENTS ON SECURITIES INCOME (LOSS)
-------------- ----------- -- ---------- ------ ------
Balance, December 28, 1997.......... $ (4,380) $ 523 $ (3,857)
Current year change ................ 7,723 (137) 7,586
------------ ------------- -----------
Balance, January 3, 1999 ........... 3,343 386 3,729
Current year change ................ (17,804) 35 (17,769)
------------ ------------- -----------
Balance, January 2, 2000 ........... (14,461) 421 (14,040)
Current year change ................ (25,484) 482 (25,002)
------------ ------------- -----------
Balance, December 31, 2000.......... $ (39,945) $ 903 $ (39,042)
============ ============= ===========
The tax effects related to each component of other comprehensive income
(loss) were as follows:
BEFORE-TAX TAX (PROVISION) AFTER-TAX
(IN THOUSANDS) AMOUNT BENEFIT AMOUNT
-------------- ------ ------- ------
2000
Foreign currency translation adjustments .................... $ (25,484) $ -- $ (25,484)
Unrealized losses on securities:
Losses arising during the period ......................... 673 (192) 481
Reclassification adjustment .............................. 1 -- 1
---------- ----------- ----------
Net unrealized gains ........................................ 674 (192) 482
---------- ----------- ----------
Other comprehensive loss .................................... $ (24,810) $ (192) $ (25,002)
========== =========== ==========
1999
Foreign currency translation adjustments..................... $ (17,804) $ -- $ (17,804)
Unrealized gains on securities:
Gains arising during the period .......................... 143 (50) 93
Reclassification adjustment .............................. (89) 31 (58)
---------- ----------- ----------
Net unrealized gains ........................................ 54 (19) 35
---------- ----------- ----------
Other comprehensive loss .................................... $ (17,750) $ (19) $ (17,769)
========== =========== ==========
1998
Foreign currency translation adjustments..................... $ 4,608 $ -- $ 4,608
Reclassification adjustment for translation
losses realized upon sale of Sealol Industrial Seals...... 3,115 -- 3,115
Unrealized losses on securities arising during the period.... (211) 74 (137)
---------- ----------- ----------
Other comprehensive income................................... $ 7,512 $ 74 $ 7,586
========== =========== ==========
NOTE 21. FINANCIAL INSTRUMENTS
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of temporary cash investments
and accounts receivable. The Company believes it had no significant
concentrations of credit risk as of December 31, 2000.
In the ordinary course of business, the Company enters into foreign
exchange forward contracts for periods consistent with its committed exposures
to mitigate the effect of foreign currency movements on transactions denominated
in foreign currencies. Transactions covered by hedge contracts include
intercompany and third-party receivables and payables. The contracts are
primarily in European and Asian currencies, generally have maturities that do
not exceed one month and have no cash requirements until maturity. Credit risk
and market risk are minimal because the forward contracts are with very large
banks, and gains and losses are offset against foreign exchange gains and losses
on the underlying hedged transactions. Realized gains and losses on foreign
currency instruments, which are hedges of committed transactions on assets and
liabilities, are recognized at the time the underlying transaction is completed.
Realized and unrealized gains and losses on forward contracts, which
are not hedges of committed transactions, are recognized in income. The notional
amount of outstanding forward contracts was approximately $190 million as of
December 31, 2000 and $75 million at January 2, 2000. The carrying value as of
December 31, 2000 and January 2, 2000, which approximated fair value, was not
significant.
See Notes 1, 12 and 14 for disclosures about fair values, including
methods and assumptions, of other financial instruments.
NOTE 22. LEASES
The Company leases certain property and equipment under operating
leases. Rental expense charged to continuing operations for 2000, 1999 and 1998
amounted to $17.2 million, $18.1 million and $9.4 million, respectively. Minimum
rental commitments under noncancelable operating leases are as follows: $15.0
million in 2001, $7.3 million in 2002, $6.0 million in 2003, $5.0 million in
2004, $4.7 million in 2005 and $27.3 million after 2005.
Rental expenses charged to discontinued operations for 2000, 1999 and
1998 amounted to $1.8 million, $1.1, and $0.7, respectively. Minimum rental
commitments under noncancelable operating leases are as follows: $1.4 million in
2001, $1.0 million in 2002, $0.5 million in 2003, $0.3 million in 2004, $0.3
million in 2005 and $3.7 million after 2005.
NOTE 23. INDUSTRY SEGMENT AND GEOGRAPHIC AREA INFORMATION
In 1998, the Company adopted SFAS No. 131, Disclosures about Segments
of an Enterprise and Related Information, which changed the way the Company
reports information about its operating segments. The Company's businesses are
reported as three reportable segments which reflect the Company's management and
structure under three strategic business units ("SBUs"). The accounting policies
of the reportable segments are the same as those described in Note 1. The
Company evaluates the performance of its operating segments based on operating
profit. Intersegment sales and transfers are not significant.
The operating segments and their principal products and services are:
Life Sciences: Sample handling and measuring instruments, computer
software and chemical reagents for use in bio-screening and population screening
laboratories. Bio-screening activities include academic research applications
and drug discovery applications in high throughput screening laboratories of
major pharmaceutical companies. Population screening activities include
inherited and infectious disease screening, as well as routine clinical
diagnostics.
Optoelectronics: A broad spectrum of optoelectronic products, including
large area amorphous silicon detectors, high volume and high-performance
specialty lighting sources, detectors, imaging devices, as well as telecom
products, which include emitters, receivers and mux arrays.
Instruments: Products and services for measurement and testing
applications, including analytical instruments for the pharmaceutical, food and
beverage, environmental, chemical and plastics industries.
Sales to U.S. government agencies, which were predominantly to the
Department of Defense and NASA in the former Technical Services segment, which
is reflected as discontinued operations in the accompanying financial statements
(see Note 7), were $326 million and $524 million in 1999 and 1998, respectively.
Sales and operating profit by segment for the three years ended
December 31, 2000 are shown in the table below:
(IN THOUSANDS) 2000 1999 1998
-------------- ---- ---- ----
LIFE SCIENCES
Sales............................ $ 221,401 $ 158,009 $ 134,635
Operating Profit (Loss).......... (3,636) 15,768 9,044
OPTOELECTRONICS
Sales............................ 496,851 447,681 274,506
Operating Profit (Loss).......... 96,931 40,317 (4,133)
INSTRUMENTS
Sales............................ 617,280 445,145 108,338
Operating Profit (Loss).......... 56,897 (25,334) 1,708
OTHER
Sales............................ -- -- 27,667
Operating Profit................. (17,523) (8,181) 94,303
CONTINUING OPERATIONS
Sales............................ $ 1,335,532 $ 1,050,835 $ 545,146
Operating Profit................. $ 132,669 $ 22,570 $ 100,922
The Company's Technical Services segment, former Department of Energy
segment, Detection and Security Systems business (formerly included in the
Instruments segment) and Fluid Sciences segment are presented as discontinued
operations and, therefore, are not included in the preceding table. The results
for the periods presented included certain nonrecurring items which are
discussed in the Management's Discussion and Analysis section of this document.
Additional information relating to the Company's operating segments is
as follows:
DEPRECIATION AND
AMORTIZATION EXPENSE CAPITAL EXPENDITURES
--------------------------------- --------------------------------
(IN THOUSANDS) 2000 1999 1998 2000 1999 1998
-------------- ---- ---- ---- ---- ---- -------
Life Sciences................................ $ 17,719 $ 6,189 $ 5,059 $ 16,239 $ 7,465 $ 5,415
Optoelectronics ............................. 25,967 34,430 25,615 34,242 21,155 17,256
Instruments ................................. 21,172 17,019 9,925 3,881 4,818 7,774
Other ....................................... 859 1,111 1,221 956 1,402 3,111
--------- --------- --------- --------- --------- ---------
Continuing operations................... $ 65,717 $ 58,749 $ 41,820 $ 55,318 $ 34,840 $ 33,556
========= ========= ========= ========= ========= =========
Discontinued operations................. $ 13,431 $ 8,207 $ 8,559 $ 15,280 $ 7,593 $ 12,966
========= ========= ========= ========= ========= =========
TOTAL ASSETS
(IN THOUSANDS) 2000 1999
-------------- ------------- -------------
Life Sciences.................................... $ 600,168 $ 125,025
Optoelectronics.................................. 512,395 448,453
Instruments...................................... 720,195 821,271
Other (including discontinued operations)........ 355,575 269,112
------------- -------------
$ 2,188,333 $ 1,663,861
============= =============
The following geographic area information for continuing operations
includes sales based on location of external customer and net property, plant
and equipment based on physical location:
SALES
(IN THOUSANDS) 2000 1999 1998
-------------- ------------- ------------- -------------
U.S.............................. $ 551,264 $ 453,497 $ 240,394
United Kingdom................... 86,081 48,067 20,139
Germany.......................... 92,926 90,604 60,407
Japan ........................... 75,986 71,685 27,113
France .......................... 41,097 26,739 11,993
Italy ........................... 50,228 49,496 14,484
Other Non-U.S.................... 437,950 310,747 170,616
------------- ------------- -------------
$ 1,335,532 $ 1,050,835 $ 545,146
============= ============= =============
NET PROPERTY, PLANT AND
EQUIPMENT
(IN THOUSANDS) 2000 1999
-------------- ------------- -------------
U.S......................... $ 126,414 $ 99,631
Germany .................... 14,137 21,570
Finland .................... 26,356 17,277
Canada ..................... 19,051 14,718
United Kingdom ............. 12,376 12,822
Other Non-U.S. ............. 38,432 23,544
------------- -------------
$ 236,766 $ 189,562
============= =============
NOTE 24. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Selected quarterly financial information follows:
FIRST SECOND THIRD FOURTH
(IN THOUSANDS EXCEPT PER SHARE DATA) QUARTER QUARTER QUARTER QUARTER YEAR
2000
Sales................................................ $311,752 $309,169 $340,140 $374,471 $1,335,532
Operating income from continuing operations ......... 31,373 36,973 9,005 55,318 132,669
Income (loss) from continuing operations before
income taxes 25,141 30,811 (2,552) 45,577 98,977
Income (loss) from continuing operations ............ 17,396 22,654 (10,275) 29,503 59,278
Net income .......................................... 16,243 35,573 2,080 36,624 90,520
Basic earnings (loss) per share:
Continuing operations .......................... 0.18 0.23 (0.10) 0.30 0.60
Net income ..................................... 0.17 0.36 0.02 0.37 0.92
Diluted earnings (loss) per share:
Continuing operations .......................... 0.17 0.22 (0.10) 0.28 0.58
Net income ..................................... 0.16 0.35 0.02 0.35 0.89
Cash dividends per common share ................ 0.07 0.07 0.07 0.07 0.28
Market price of common stock:
High ........................................... 39.63 34.38 53.50 59.57 59.57
Low ........................................... . 19.53 25.00 31.07 44.53 19.53
Close .......................................... 33.25 33.07 52.19 52.50 52.50
1999
Sales ............................................ $171,179 $ 227,706 $ 306,735 $345,215 $1,050,835
Operating income (loss) from continuing operations .. 9,819 (8,515) (13,066) 34,332 22,570
Income (loss) from continuing operations
before income taxes ............................ 6,089 (11,868) (18,421) 35,696 11,496
Income (loss) from continuing operations............. 5,727 (11,313) (11,565) 24,062 6,911
Net income .......................................... 14,087 3,617 103,773 32,839 154,316
Basic earnings (loss) per share:
Continuing operations .......................... 0.06 (0.12) (0.13) 0.26 0.08
Net income ..................................... 0.16 0.04 1.13 0.36 1.69
Diluted earnings (loss) per share:
Continuing operations .......................... 0.06 (0.12) (0.13) 0.25 0.07
Net income ..................................... 0.15 0.04 1.13 0.35 1.66
Cash dividends per common share ................ 0.07 0.07 0.07 0.07 0.28
Market price of common stock:
High ........................................... 15.10 18.13 19.97 22.50 22.50
Low ............................................ 12.75 13.25 15.75 18.32 12.75
Close .......................................... 13.38 17.88 19.38 20.85 20.85
NOTE 25. SUBSEQUENT EVENT
Stock Split
At the Company's April 24, 2001 Annual Meeting of Stockholders, an
increase in the number of authorized shares of common stock from 100,000,000 to
300,000,000 was approved. At the April 24, 2001 Board of Directors' Meeting a
two-for-one stock split was approved and was effected on June 1, 2001 by means
of a 100% stock dividend to stockholders of record on May 15, 2001.
NOTE 26. EVENTS (UNAUDITED) SUBSEQUENT TO DATE OF AUDITORS' REPORT
Acquisition
On November 13, 2001 the Company completed the acquisition of Packard
Bioscience Company (Packard). Packard is a leading supplier of automated liquid
handling, sample preparation tools and advanced biochip technologies and
generated sales of approximately $165 million for its fiscal year ended December
31, 2000. The transaction was a stock merger whereby the shareholders of Packard
received 0.311 shares of the Company's common stock for each share of Packard
common stock. Excluding assumed options, the Company expects to issue
approximately 21.7 million shares of its common stock in the transaction. The
transaction will be accounted for as a purchase in accordance with recently
issued SFAS No. 141, Business Combinations, and SFAS No. 142, Intangible Assets,
whereby the purchase price will be allocated to the assets, including all
intangible assets, and liabilities assumed based on their respective fair
values.
I F. REPORT OF INDEPENDENT ACCOUNTANTS
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of PerkinElmer, Inc.:
We have audited the accompanying consolidated balance sheets of
PerkinElmer, Inc. (a Massachusetts corporation) and subsidiaries as of December
31, 2000 and January 2, 2000 and the related consolidated statements of income,
stockholders' equity and cash flows for the years ended December 31, 2000,
January 2, 2000, and January 3, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of PerkinElmer,
Inc. and subsidiaries as of December 31, 2000 and January 2, 2000, and the
results of their operations and their cash flows for the years ended December
31, 2000, January 2, 2000 and January 3, 1999 in conformity with accounting
principles generally accepted in the United States.
/s/ ARTHUR ANDERSEN LLP
________________________________________
Boston, Massachusetts
January 25, 2001 (except with respect to the matters discussed in Notes 7, 18
and 25, for which the dates are November 9, 2001, September 20, 2001 and
June 1, 2001, respectively)
II. OTHER ANNUAL INFORMATION
II A. SELECTED FINANCIAL INFORMATION FOR THE FIVE YEARS ENDED DECEMBER 31, 2000
PERKINELMER, INC. AND SUBSIDIARIES
SELECTED FINANCIAL INFORMATION
FOR THE FIVE YEARS ENDED DECEMBER 31, 2000
(IN THOUSANDS WHERE APPLICABLE) 2000 1999 1998 1997 1996
OPERATIONS:
Sales................................................ $ 1,335,532 $ 1,050,835 $ 545,146 $653,144 $514,919
Operating income (loss) from continuing operations .. 132,669 22,570 100,922 (8,411) 9,856
Income (loss) from continuing operations............. 59,278 6,911 71,501 (9,126) 7,856
Income from discontinued operations,
net of income taxes ............................ 26,789 37,125 30,501 42,818 52,300
Gain on dispositions of discontinued
operations, net of income taxes ................ 4,453 110,280 -- -- --
Net income........................................... 90,520 154,316 102,002 33,692 60,156
Basic earnings (loss) per share:
Continuing operations .......................... 0.60 0.08 0.79 (0.10) 0.08
Discontinued operations ........................ 0.32 1.62 0.34 0.47 0.55
Net income ..................................... 0.92 1.69 1.13 0.37 0.64
Diluted earnings (loss) per share:
Continuing operations .......................... 0.58 0.07 0.78 (0.10) 0.08
Discontinued operations ........................ 0.31 1.58 0.33 0.47 0.55
Net income...................................... 0.89 1.66 1.11 0.37 0.63
Weighted-average common shares outstanding:
Basic........................................... 98,212 91,044 90,644 91,514 94,596
Diluted......................................... 102,278 93,138 91,768 91,796 94,944
FINANCIAL POSITION:
Total assets......................................... $ 2,188,333 $ 1,663,861 $1,069,136 $719,050 $ 689,838
Short-term debt ..................................... 183,110 382,328 161,548 46,167 21,499
Long-term debt ...................................... 583,337 114,855 129,830 114,863 114,923
Long-term liabilities ............................... 230,987 196,446 124,768 96,014 73,199
Stockholders' equity ................................ 728,389 550,776 399,667 328,388 365,106
Total debt/total capital ............................ 51% 47% 42% 33% 27%
Common shares outstanding ........................... 99,548 92,732 89,492 90,666 92,618
CASH FLOWS:
Cash flows from continuing operations................ $ 98,183 $ 93,743 $ 15,274 $ (26,250) $ 17,682
Cash flows from discontinued operations ............. 47,365 22,086 54,281 23,651 62,476
Cash flows from operating activities ................ 145,548 115,829 69,555 (2,599) 80,158
Depreciation and amortization from continuing
operations ..................................... 65,717 58,749 41,820 31,643 24,644
Capital expenditures for continuing operations....... 55,318 34,840 33,556 33,638 50,063
Purchases of common stock............................ 10,589 970 41,217 28,104 30,760
Cash dividends per common share ..................... .28 .28 .28 .28 .28
Note: The information presented above includes in-process research and
development charges, revaluation of acquired inventory, gains,
restructuring and other nonrecurring items discussed in greater detail
within Management's Discussion and Analysis of Results of Operations
and Financial Condition.
II B. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION RELATING TO ANNUAL FINANCIAL INFORMATION
OVERVIEW
Fiscal 2000 represented the third year of the Company's transformation
into a global, high technology leader. During 2000, the Company continued its
focus on shifting the portfolio of businesses to higher growth potential. The
Company completed several acquisitions and divestitures including:
- acquisition of NEN Life Sciences
- divestiture of Judson business
- divestiture of IC Sensors business
In the second quarter of 2001, the Company announced its plan to
dispose of its Security and Detection Systems business. In the third quarter of
2001, the Company announced its plan to dispose of its Fluid Sciences operating
segment. Both businesses have appropriately been reflected as discontinued
operations in the Company's consolidated financial statements.
These transactions resulted in gains from divestitures,
acquisition-related charges and restructuring charges. The table presented below
reconciles the reported results of the Company in the accompanying financial
statements to the financial results before nonrecurring items. On this adjusted
basis, EPS increased 22% during 2000 to $1.05 versus $.86 in 1999. Cash EPS
increased 25% to $1.34 in 2000 versus $1.07 in 1999.
2000 1999
-------- --------
Diluted EPS, as reported .................... $ .89 $ 1.66
Gains on dispositions ....................... (.28) (1.32)
Acquisition and divestiture related charges . .39 .26
Restructuring related charges ............... .05 .26
-------- --------
"Adjusted" EPS .............................. 1.05 .86
Goodwill and intangibles amortization ....... .29 .21
-------- --------
"Cash" EPS .................................. $ 1.34 $ 1.07
======== ========
Excluding results of discontinued operations, 2000 adjusted EPS was
$0.67 versus $0.40 in 1999, representing an increase of 68%.
ACQUISITIONS AND DIVESTITURES
On July 31, 2000, the Company completed its acquisition of NEN Life
Sciences, Inc. (NEN), a provider of state-of-the-art drug discovery products,
services, reagents and technologies to the life sciences industry.
The Company purchased NEN from an investor group led by Genstar Capital
LLC for an aggregate purchase price of approximately $400 million. In connection
with the acquisition, the Company paid approximately $350 million in cash and
issued warrants to purchase approximately 600,000 shares of the Company's common
stock in exchange for all of the outstanding shares, options and warrants of
NEN. In addition, the Company repaid approximately $50 million of outstanding
indebtedness of NEN. The Company financed the acquisition and repayment of the
outstanding indebtedness with $410 million of commercial paper borrowings with a
weighted-average interest rate of 7%. These short-term borrowings were repaid in
early August with proceeds from the issuance of long-term convertible
debentures.
NEN's operations, included in the consolidated results of the Company
from the date of acquisition, are reported in the Life Sciences segment. The
acquisition was accounted for as a purchase under APB Opinion No.16, and the
Company allocated the purchase price of NEN based on the fair values of the net
assets acquired and liabilities assumed. The allocation of the purchase price
has not yet been finalized, however, the Company does not expect material
changes. Portions of the purchase price, including intangible assets, were
valued by independent appraisers utilizing customary valuation procedures and
techniques. These intangible assets included approximately $24.3 million for
acquired in-process R&D for projects that had not reached technological
feasibility as of the acquisition date and for which no alternative use existed.
This allocation represents the estimated fair value based on risk-adjusted cash
flows related to the in-process R&D projects; these costs were expensed in the
third quarter of 2000. Other acquired intangible assets totaling $75.9 million
included the fair value of trade names, trademarks, patents and developed
technology. Goodwill of $270.8 million resulting from the acquisition of NEN is
being amortized over 20
years. Approximately $4 million has been recorded as accrued restructuring costs
in connection with the acquisition of NEN. The restructuring plans include
initiatives to integrate the operations of the Company and NEN, and to reduce
overhead. The primary components of these plans relate to employment costs,
consolidation of certain facilities, and the termination of certain leases and
other contractual obligations. Management is in the process of developing its
restructuring plans related to NEN, and accordingly, the amounts recorded are
based on management's current estimate of these costs. The Company will finalize
these plans during 2001, and the majority of the restructuring actions are
expected to occur during 2001.
On May 28, 1999, the Company completed its acquisition of the
Analytical Instruments Division (AI) of PE Corp. for an aggregate purchase price
of approximately $425 million, plus acquisition costs. In addition, under the
terms of the Purchase Agreement dated March 8, 1999 between the Company and PE
Corp. (the "Purchase Agreement"), the Company assumed German and other pension
liabilities of approximately $65 million. These pension liabilities were
historically funded on a pay-as-you go basis, and the funding going-forward is
expected to remain consistent. The acquisition was accounted for as a purchase
under Accounting Principles Board (APB) Opinion No. 16 and the Company allocated
the purchase price of AI based on the fair values of the net assets acquired and
liabilities assumed. AI produces high-quality analytical testing instruments and
consumables, and generated 1998 fiscal year sales of $569 million. AI's
operations are reported in the Company's Instruments segment. Portions of the
purchase price, including intangible assets, were valued by independent
appraisers utilizing customary valuation procedures and techniques. These
intangible assets included approximately $23 million for acquired in-process
R&D. This allocation represents the estimated fair value based on risk-adjusted
cash flows related to the in-process R&D projects. At the date of the
acquisition of AI, the development of these projects had not yet reached
technological feasibility, and the R&D in process had no alternative future
uses. Accordingly, these costs were expensed in the second quarter of 1999.
Other acquired intangibles totaling $163.8 million included the fair value of
trade names, trademarks, patents and developed technology. These intangibles are
being amortized over their respective estimated useful lives ranging from 10-40
years. Goodwill resulting from the acquisition of AI is being amortized over 40
years. Approximately $28 million was recorded as accrued restructuring charges
in connection with the acquisition of AI. The restructuring plans include
initiatives to integrate the operations of the Company and of AI, and reduce
overhead. The primary components of these plans relate to: (a) employee
termination benefits and related costs for approximately 20% of the acquired
workforce of approximately 3,000 employees; (b) consolidation or shutdown of
certain operational facilities worldwide and (c) termination of certain leases
and other contractual obligations.
During the second quarter of 2000, the Company finalized its
restructuring plan for AI. Based on continued aggressive actions by the Company
to improve the cost structure of the acquired business, and increased costs
related primarily to employment integration, the Company adjusted its original
estimate of restructuring costs in connection with purchase accounting. The
majority of the remaining restructuring actions are expected to occur through
fiscal 2001.
On December 16, 1998, the Company acquired substantially all of the
outstanding common stock and options of Lumen Technologies, Inc. (Lumen), maker
of high-technology specialty light sources. The purchase price of approximately
$253 million, which included $75 million of assumed debt, was funded with
existing cash and commercial paper borrowings. The acquisition was accounted for
as a purchase under APB Opinion No. 16, and the Company allocated the purchase
price of Lumen based on the fair values of the assets acquired and liabilities
assumed. Portions of the purchase price, including intangible assets, were
valued by independent appraisers utilizing customary valuation procedures and
techniques. These intangible assets included approximately $2.3 million for
acquired in-process R&D for projects that did not have future alternative uses.
This allocation represents the estimated fair value based on risk-adjusted cash
flows related to the in-process R&D projects. At the date of the acquisition,
the development of these projects had not yet reached technological feasibility,
and the R&D in process had no alternative future uses. Accordingly, these costs
were expensed in the fourth quarter of 1998. Acquired intangibles totaling $11.8
million included the fair value of trade names, trademarks and patents. These
intangibles are being amortized over their estimated useful life of 10 years.
Goodwill resulting from the Lumen acquisition is being amortized over 30 years.
Approximately $5 million was recorded as accrued restructuring charges in
connection with the acquisition. The restructuring plans included initiatives to
integrate the operations of the Company and Lumen, and to reduce overhead. The
primary components of these plans related to: (a) transfer of certain
manufacturing activities to lower-cost facilities, (b) integration of the sales
and marketing organization and (c) termination of certain contractual
obligations. The restructuring actions have been completed.
During the first quarter of 2000, the Company sold its micromachined
sensors and specialty semiconductor businesses for cash of $24.3 million,
resulting in a pre-tax gain of $6.7 million. Combined financial results of the
divested businesses for 2000 and 1999 were not material to the consolidated
results of the Company.
During the fourth quarter of 2000, the Company sold its Berthold
business at a pre-tax gain of $10 million. The Company has deferred gain
recognition of approximately $11.9 million of sales proceeds from this
divestiture in connection with certain contingencies related to the sale.
Revenues for 2000 and 1999 for the divested business were $30 million and $38
million, respectively. Also during the fourth quarter of 2000, the Company
recorded a pre-tax gain of $16 million from the sale of a building.
During the second quarter of 1998, the Company sold its Sealol
Industrial Seals division for cash of $100 million, resulting in a pre-tax gain
of $58.3 million. The after-tax gain of this divestiture was $42.6 million.
Sealol's 1998 sales prior to the disposition were $23 million and its operating
income was $2.1 million. In January 1998, the Company sold its Rotron division
for $103 million in cash, resulting in a pre-tax gain of $64.4 million. During
the first quarter of 1998, the Company also sold a small product line for $4
million in cash, resulting in a pre-tax gain of $3.1 million. The after-tax gain
of these divestitures was $45.2 million in 1998. During 2000 and 1999, in
connection with the 1998 dispositions of the Company's Rotron and Sealol
Industrial Seals divisions, the Company recognized approximately $3.7 million
and $13.2 million, respectively, of pre-tax gains from the previously deferred
sales proceeds as a result of the favorable resolution of certain events and
contingencies.
The gains described above are reported on the "Gains on Dispositions"
line in the consolidated income statements.
DISCUSSION OF CONSOLIDATED RESULTS OF OPERATIONS -- 2000 COMPARED TO 1999
Revenues for 2000 were $1,336 million, increasing $285 million, or 27%,
versus revenues of $1,051 million in 1999. Revenues by segment during 2000
versus 1999 are discussed in further detail below under the caption "Segment
Results of Operations."
Due to the number of changes in the portfolio of businesses, the table
presented below reconciles reported net income to net income before nonrecurring
items and goodwill and intangibles amortization.
(IN THOUSANDS) 2000 1999
-------------- --------- ---------
Adjusted Income from Continuing Operations ..................... $ 165,276 $ 97,801
Other Expense, Net ............................................. (34,593) (11,074)
--------- ---------
Adjusted Income from Continuing Operations Before Income Taxes . 130,683 86,727
Continuing Operations Nonrecurring Items:
Acquisition-Related Charges ................................. (29,316) (32,857)
Gains on Dispositions ....................................... 35,989 14,422
Restructuring Charges, net .................................. (5,809) (33,059)
Other Nonrecurring Items, net ............................... (1,617) (878)
--------- ---------
Net Nonrecurring Items ...................................... (753) (52,372)
Goodwill and Intangibles Amortization .......................... (30,953) (22,859)
--------- ---------
Income from Continuing Operations Before Income Taxes .......... 98,977 11,496
Provision for Income Taxes ..................................... (39,699) (4,585)
--------- ---------
Income from Continuing Operations .............................. 59,278 6,911
Gain/Income from Discontinued Operations, Net of Income Taxes .. 31,242 147,405
--------- ---------
Net Income ..................................................... $ 90,520 $ 154,316
========= =========
Adjusted operating income before goodwill and intangibles amortization,
gains, acquisition charges, restructuring and other nonrecurring items was
$165.3 million in 2000 versus $100.8 million in 1999, representing an increase
of $64.5 million, or 64%, during 2000. This increase during 2000 was due to
higher revenues discussed above, the benefits of restructuring and productivity
initiatives, and the favorable shift of the portfolio to higher margin
businesses through acquisitions and divestitures completed during 2000.
SEGMENT RESULTS OF OPERATIONS
The Company's businesses are reported as three segments, reflecting the
Company's management methodology and structure. The Company's Technical Services
segment, Security and Detection Systems business, previously reported as part of
the Company's Instruments segment, and Fluid Sciences segment have been
classified as discontinued operations. The accounting policies of the segments
are the same as those described in the footnotes to the accompanying
consolidated financial statements. The Company evaluates performance based on
operating profit of the respective segments. The discussion that follows is a
summary analysis of the primary changes in operating results by segment for 2000
versus 1999 and 1999 versus 1998.
LIFE SCIENCES
2000 Compared to 1999
Sales of $221.4 million for 2000 increased $63.4 million, or 40%,
versus 1999. Organic revenue growth for 2000 was 18%. Higher volumes from high
throughput screening, drug discovery applications, revenues from new products,
and the inclusion of revenues from NEN Life Sciences acquired in August 2000,
were the primary drivers of the increase in 2000 versus 1999.
Purchase accounting and restructuring charges contributed to a reported
operating loss of $3.6 million for 2000 versus reported operating income of
$15.8 million in 1999. The 2000 operating loss included goodwill and intangibles
amortization of $9.3 million and certain acquisition related charges and other
nonrecurring items including a $24.3 million charge for acquired in-process R&D;
a $1.8 million charge for the revaluation of acquired inventory; $3.9 million of
net restructuring charges and $3.5 million of other acquisition-related charges.
The 1999 operating profit included goodwill and intangibles amortization of $2.4
million and net restructuring charges of $5.8 million. Operating profit before
goodwill and intangibles amortization and nonrecurring items for 2000 was $39.2
million, representing an increase of $15.2 million, or 63%, versus 1999. Higher
revenues
discussed above, particularly sales of higher-margin new products, and revenues
from the NEN acquisition contributed to the increase in operating profit before
goodwill and intangibles amortization and nonrecurring items in 2000 versus
1999.
1999 Compared to 1998
Sales of $158 million for 1999 increased $23.4 million versus 1998.
Adjusting for the impact of the stronger dollar, revenue growth during 1999 was
17%. Higher volumes from continued strength in the high throughput screening and
genetic disease screening markets, and revenues from new products were the
primary contributors to this increase during 1999.
Reported operating profit was $15.8 million during 1999 versus $9
million in 1998, representing an increase of $6.8 million, or 76%. 1999
operating profit included net restructuring charges of $5.8 million. Excluding
nonrecurring items in 1999 and 1998, operating profit increased $7.9 million
during 1999 to $21.6 million, representing a 58% increase versus 1998. Higher
sales discussed above and increased gross margins across most businesses, driven
primarily by higher-margin new products sold in 1999, were the primary
contributors for the overall 1999 increase compared to 1998.
OPTOELECTRONICS
2000 Compared to 1999
Sales for 2000 were $496.9 million versus $447.7 million in 1999,
representing an increase of $49.2 million, or 11%. Organic revenue growth for
2000 was 22%. Strong revenue growth across all businesses contributed to this
increase in 2000 versus 1999.
Reported operating profit increased $56.6 million in 2000 to $96.9
million versus $40.3 million in 1999, representing a 140% increase. The 2000
operating profit included goodwill and intangibles amortization of $8.1 million
and certain nonrecurring items: gains on dispositions of $23.4 million;
restructuring credits of $9.9 million; restructuring charges of $10 million and
restructuring-related charges of $1.9 million related to the shift by the
Company to lower-cost manufacturing areas. The 1999 operating profit included
goodwill and intangibles amortization of $9.5 million and certain nonrecurring
items: net restructuring charges of $5.5 million and an asset impairment charge
of $3 million. Operating profit before goodwill and intangibles amortization and
nonrecurring items for 2000 was $83.6 million, increasing $25.3 million, or 43%,
versus 1999. The increase in 2000 was due primarily to higher revenues discussed
above, the sale of higher margin new products and the continued benefits of Six
Sigma and other manufacturing initiatives.
1999 Compared to 1998
Sales for 1999 were $447.7 million, compared to 1998 sales of $274.5
million, representing an increase of $173.2 million, or 63%. Revenue from the
acquired specialty lighting business and strong organic growth was partially
offset by weakness in the sensors business and exited businesses.
Reported operating profit for 1999 was $40.3 million versus an
operating loss of $4.1 million in 1998. The 1999 operating income included net
restructuring charges of $5.5 million and an asset impairment charge of $3
million. Excluding nonrecurring items, operating profit in 1999 and 1998 was
$48.8 million and $18.5 million, respectively, representing an increase of $30.3
million, or 164%. The 1999 increase was primarily due to higher revenues
discussed above, higher margin new products, the Company's exit from
unprofitable businesses and the shift by the Company to lower-cost manufacturing
areas.
INSTRUMENTS
2000 Compared to 1999
Sales for 2000 were $617.3 million, increasing $172.2 million, or 39%,
versus 1999. Organic revenue growth in 2000 was basically flat. The increase in
reported 2000 revenues versus 1999 was due primarily to the inclusion of the AI
business for a full year, partially offset by the company's sale of its Berthold
business in the fourth quarter and the effects of a stronger dollar in 2000.
Reported operating profit for 2000 was $56.9 million versus an
operating loss in 1999 of $25.3 million. The 2000 operating profit included
goodwill and intangibles amortization of $14 million and certain acquisition
charges and restructuring-related charges and other nonrecurring items: $10
million of gains on dispositions; $0.7 million of acquisition-related charges
and $1.8 million of other restructuring-related items. The 1999 operating profit
included goodwill and intangibles amortization of $11 million, certain
acquisition-related charges and other nonrecurring items: $23 million charge
for acquired in-process R&D; $15 million asset impairment charge; $9.8 million
charge for the revaluation of acquired inventory and restructuring-related and
other charges of $2.8 million.
For 2000, operating profit before goodwill and intangibles amortization
and nonrecurring items was $61.7 million versus $36.3 million in 1999,
representing an increase of $25.4 million, or 70%. The increase is due primarily
to the inclusion of the AI acquisition for a full year in 2000, improvements in
manufacturing cost structure and benefits from restructuring actions.
1999 Compared to 1998
Sales for 1999 and 1998 were $445.1 million and $108.3 million,
respectively, increasing $336.8 million, or 311%, during 1999 compared to 1998.
1999 revenues from acquisitions during 1999 offset the effects of divestitures
and lower revenues in certain base businesses, primarily automotive, compared to
1998.
AI acquisition purchase accounting charges and certain nonrecurring
items during 1999 contributed to a reported operating loss of $25.3 million
versus operating income of $1.7 million in 1998. The 1999 operating loss
included the following: $23 million charge related to acquired in-process
research and development; a $9.8 million charge related to the revaluation of
acquired inventory; net restructuring charges of $1.4 million; an asset
impairment charge of $15 million and other repositioning costs of $1.4 million.
Excluding nonrecurring items in 1999 and 1998, operating profit in 1999
increased $17.6 million, or 229%, to $25.3 million compared to 1998. Operating
profit from the acquired AI and Lumen photolithography businesses were partially
offset by the effects of depressed market conditions in the automotive business
during most of 1999.
CONSOLIDATED RESULTS -- RESTRUCTURING AND ASSET IMPAIRMENT CHARGES
The Company developed restructuring plans during 1998 to integrate and
consolidate its businesses and recorded restructuring charges in the first and
second quarters of 1998, which are discussed separately below.
During the first quarter of 1998, management developed a plan to
restructure certain businesses. The plan resulted in pre-tax restructuring
charges totaling $16.5 million. As discussed in Note 3 to the accompanying
consolidated financial statements, the principal actions in the restructuring
plan included close-down or consolidation of a number of offices and facilities,
transfer of assembly activities to lower-cost geographic locations, disposal of
underutilized assets, withdrawal from certain product lines and general cost
reductions.
During the second quarter of 1998, the Company expanded its continuing
effort to restructure certain businesses to further improve performance. The
plan resulted in additional pre-tax restructuring charges of $18.3 million. As
discussed in Note 3, the principal actions in this restructuring plan included
the integration of operating divisions into five strategic business units
(SBUs), close-down or consolidation of a number of production facilities and
general cost reductions. The Technical Services segment was subsequently sold
during the third quarter of 1999.
The following table summarizes the current year restructuring activity
related to the 1998 plans:
(IN MILLIONS)
Accrued restructuring costs at beginning of period .. $6.3
Provisions .......................................... --
Reversals ........................................... (6.3)
Charges/Writeoffs ................................... --
----
Accrued restructuring costs ......................... $ --
====
The components of the restructuring charges met the criteria set forth
in Emerging Issues Task Force Issue 94-3, Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity (Including
Certain Costs Incurred in a Restructuring). The charges do not include
additional costs associated with the restructuring plans, such as training,
consulting, purchase of equipment and relocation of employees and equipment.
These costs were charged to operations or capitalized, as appropriate, when
incurred.
During the third quarter of 1999, due to the substantial completion of
the actions of the 1998 restructuring plans, the Company reevaluated its 1998
restructuring plans. As a result of this review, costs associated with the
previously planned shutdown of two businesses were no longer required due to
actions taken to improve performance. As a result of these developments, the
Company recognized a restructuring credit of $3.3 million during the third
quarter of 1999, which primarily affected the Optoelectronics segments. The $3.3
million credit is reflected in "Restructuring Charges, Net" in the consolidated
income statements.
During the second quarter of 2000, the Company recognized a
restructuring credit of $6.3 million related to its 1998 restructuring plans.
This resulted from the Company's strategic review during the second quarter of
2000 of its portfolio of businesses, actions taken to improve performance at
costs lower than originally estimated, and the sale of certain businesses
included in the restructuring plans.
The acquisitions by the Company discussed in Note 2 and the Company's
divestiture during the third quarter of 1999 of its Technical Services segment
(exiting government services) were strategic milestones in the Company's
transition to a commercial high technology company. Consistent with the
strategic direction of the Company and concurrent with the reevaluation of
existing restructuring plans during the third quarter of 1999, the Company
developed additional plans to restructure certain businesses to continue to
improve the Company's performance.
These plans resulted in a pre-tax restructuring charge of $18.0 million
recorded in the third quarter of 1999. As discussed in Note 3, the principal
actions in these restructuring plans include close-down or consolidation of a
number of offices and facilities, transfer of assembly activities to lower-cost
geographic locations, disposal of underutilized assets, withdrawal from certain
product lines and general cost reductions. The restructuring plans are expected
to result in the elimination of approximately 400 positions, primarily in the
manufacturing and sales categories. The major components of the restructuring
charge were $8.4 million of employee separation costs to restructure the
worldwide organization, including the sales and manufacturing focus, $2.1
million of noncash charges to dispose of certain product lines and assets
through sale or abandonment and $7.5 million of charges to terminate lease and
other contractual obligations no longer required as a result of the
restructuring plans. The charges do not include additional costs associated with
the restructuring plans, such as training, consulting, purchase of equipment and
relocation of employees and equipment. These costs will be charged to operations
or capitalized, as appropriate, when incurred.
The following table summarizes the current year restructuring activity
related to the 1999 plan:
(IN MILLIONS)
Accrued restructuring costs at beginning of period .. $15.7
Reversals ........................................... (4.9)
Charges/Writeoffs ................................... (10.8)
-----
Accrued restructuring costs at end of period ........ $ --
=====
During the fourth quarter of 2000, the Company reevaluated its 1999
restructuring plan due to the substantial completion of the respective actions
and the continuing transformation of the portfolio of businesses during 2000.
This resulted in the reversal of $4.9 million of remaining reserves from the
1999 plan and the recording of a pre-tax restructuring charge of $15.1 million
for actions to be completed in 2001 (the "2000 plan"). These charges related to
the Company's Life Sciences and Optoelectronics segments. The principal actions
in the restructuring actions included close-down or consolidation of a number of
offices and facilities, transfer of assembly activities to lower cost geographic
locations, disposal of unutilized assets and general cost reductions. The
restructuring charges were broken down as follows by operating segment: The Life
Sciences' principal actions are associated with rationalization of its
distribution network and overall facility consolidation. The Optoelectronics'
principal actions are associated with its Lighting and Imaging businesses and
relate to the shift of certain manufacturing to low cost geographic areas,
facility consolidation and general cost reductions.
The following table summarizes activity related to the 2000 plan:
TERMINATION OF
EMPLOYEE DISPOSAL OF LEASES AND OTHER
SEPARATION CERTAIN PRODUCT CONTRACTUAL
(IN MILLIONS) COSTS LINES AND ASSETS OBLIGATIONS TOTAL
------------- ----- ---------------- ----------- -----
Life Sciences ..................................... $ 2.9 $ .1 $ 2.1 $ 5.1
Optoelectronics ................................... 7.2 2.8 -- 10.0
-------- -------- -------- --------
Total restructuring charges ....................... 10.1 2.9 2.1 15.1
Amounts incurred during 2000 ...................... -- -- $ -- $ --
-------- -------- -------- --------
Accrued restructuring costs at December 31, 2000 .. $ 10.1 $ 2.9 $ 2.1 $ 15.1
======== ======== ======== ========
During the second quarter of 2000, the Company finalized its original
estimates of the goodwill and restructuring plans related to the acquired AI
business. As a result of strategic review of the acquired business, continued
aggressive actions by the Company to improve the cost structure of the acquired
business, and increased costs related primarily to employment integration, the
Company adjusted its original estimate of restructuring costs recorded at the
acquisition date in connection with purchase accounting.
Approximately $4 million was recorded as accrued restructuring costs in
connection with the NEN acquisition in the third quarter of 2000.
The following table summarizes the current year restructuring activity
related to the Lumen, AI, and NEN acquisitions (all Lumen actions were
completed during 2000):
(IN MILLIONS)
Accrued restructuring costs at beginning of period .. $14.1
Provisions, through purchase accounting, net ........ 28.0
Charges/Writeoffs ................................... (9.8)
-----
Accrued restructuring costs ......................... $32.3
=====
There are no accrued restructuring costs related to Lumen at December
31, 2000 as all respective actions were completed during 2000. Cash outlays
during 2000 were approximately $17 million for all of these plans. The majority
of the actions remaining are expected to occur during 2001 and early fiscal
2002.
DISCONTINUED OPERATIONS
On August 20, 1999, the Company sold the assets of its Technical
Services segment, including the outstanding capital stock of EG&G Defense
Materials, Inc., a subsidiary of the Company, to EG&G Technical Services, Inc.,
an affiliate of The Carlyle Group LP (the "Buyer"), for approximately $250
million in cash and the assumption by the Buyer of certain liabilities of the
Technical Services segment. Details of the transaction are discussed in Note 7
to the accompanying consolidated financial statements.
The results of operations of the Technical Services segment were
previously reported as one of five business segments of the Company. The Company
accounted for the sale of its Technical Services segment as a discontinued
operation in accordance with APB Opinion No. 30, Reporting the Results of
Operations - Reporting the Effects of Disposal of a Segment of a Business and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions.
Accordingly, the results of operations of the Technical Services segment have
been segregated from continuing operations and reported as a separate line item
on the Company's accompanying consolidated income statements.
In July 2001, the Company announced its plan to sell its Security and
Detection Systems business. The company has accounted for the planned sale of
its Security and Detection Systems business as a discontinued operation in
accordance with APB Opinion No. 30 and, accordingly, the results of operations
of Security and Detection System business have been segregated from continuing
operations and reported as a separate line item on the Company's accompanying
consolidated income statements.
In October 2001, the Company announced its plan to sell its Fluid
Sciences segment. The Company has accounted for the planned sale as a
discontinued operation in accordance with APB Opinion No. 30 and, accordingly,
the results of operations of the Fluid Sciences segment have been segregated
from continuing operations and reported as a separate line item on the Company's
accompanying consolidated income statements.
OTHER EXPENSE
2000 Compared to 1999
Other expense, net, was $33.7 million in 2000 versus $11.1 million in
1999. This net increase in other expense was due primarily to the higher
interest expense on increased debt levels resulting from acquisitions.
1999 Compared to 1998
Other expense, net, was $11.1 million in 1999 versus Other income, net,
of $2.0 million in 1998. This net increase in other expense was due primarily to
the impact of higher interest expense on increased debt levels, at higher 1999
short-term rates, resulting from acquisitions. Included in 1999 other expense
was $2.2 million of income received by the Company related to the
demutualization of a life insurance company in which the Company is a
policyholder.
INCOME TAX PROVISION
The provision for income taxes on pre-tax income from continuing
operations for 2000 and 1999 was $39.7 million and $4.6 million, respectively.
Reported income tax expense as a percent of pre-tax income for 2000 and 1999 was
40% due, in part, to the income tax effect on nonrecurring items.
FINANCIAL CONDITION
Short-term debt at December 31, 2000 was $183.1 million and was
comprised primarily of commercial paper borrowings. The weighted-average
interest rate on the commercial paper borrowings, which had maturities of 60
days or less, was 6.7%.
Short-term debt at January 2, 2000 was $382.3 million and included
one-year promissory notes of $150 million issued to PE Corp. at interest rate of
5%, money market loans of $85 million and commercial paper borrowings of $140
million.
In March 2001, the Company's $300 million revolving credit facility was
refinanced and will expire in March 2002 and the Company also refinanced an
additional $100 million revolving credit facility which expires in March 2006.
These agreements, which serve as backup facilities for the commercial paper
borrowings, have no significant commitment fees. There were no amounts
outstanding under these lines at January 2, 2000 or December 31, 2000.
At December 31, 2000 and January 2, 2000, long-term debt was $583.3
million and $114.9 million, respectively, and included $115 million of unsecured
ten-year notes issued in October 1995 at an interest rate of 6.8%, which mature
in 2005. The carrying amount approximated the estimated fair value at December
31, 2000, based on a quoted market price.
In August 2000, the Company sold zero coupon senior convertible
debentures with an aggregate purchase price of $460 million. The Company used
the offering's net proceeds of approximately $448 million to repay a portion of
its commercial paper borrowings, which had been increased temporarily to finance
the NEN acquisition. Deferred issuance costs of $12 million were recorded as a
noncurrent asset and are being amortized over three years. The debentures, which
were offered by a prospectus supplement pursuant to the Company's effective
shelf registration statement, are due August 2020, and were priced with a yield
to maturity of 3.5%. At maturity, the Company will repay $921 million, comprised
of $460 million of original purchase price plus accrued interest. The Company
may redeem some or all of the debentures at any time on or after August 7, 2003
at a redemption price equal to the issue price plus accrued original issue
discount through the redemption date. Holders of the debentures may require the
Company to repurchase some or all of the debentures in August 2003 and August
2010, or at any time when there is a change in control of the Company, as is
customary and ordinary for debentures of this nature, at a repurchase price
equal to the initial price to the public plus accrued original issue discount
through the date of the repurchase. The debentures are currently convertible
into 10.8 million shares of the Company's common stock at approximately $42.50
per share.
In connection with the completion of the NEN acquisition on July 31,
2000, the Company paid approximately $350 million in cash and issued warrants to
purchase approximately 600,000 shares of the Company's common stock in exchange
for all of the outstanding shares, options and warrants of NEN. In addition, the
Company repaid approximately $50 million of outstanding indebtedness of NEN. The
Company financed the acquisition and repayment of the outstanding indebtedness
with
$410 million of commercial paper borrowings with a weighted-average interest
rate of 7%. These short-term borrowings were repaid in August 2000 with proceeds
from the issuance of long-term convertible debentures, as discussed above.
Cash and cash equivalents decreased by $1.1 million and were $125.6
million at the end of fiscal 2000. Net cash provided by continuing operations
operating activities for 2000 was $98.2 million. This was comprised of net
income before depreciation, amortization and other noncash items, net, of $162.6
million, partially offset by gains on dispositions and sales of investments,
net, of $37.2 million and a $27.2 million net change in certain assets and
liabilities and other items during 2000. The primary components of this net
change included a $17.9 million increase in inventory and $31.5 million of cash
outlays associated with restructuring activities. The increase in inventory is
due primarily to the inclusion of NEN acquired in 2000. Capital expenditures
were $55.3 million in 2000.
During 2000 and 1999, the Company purchased 396 thousand and 40
thousand shares, respectively, of its common stock through periodic purchases on
the open market at a cost of $10.6 million and $1.0 million, respectively. As of
December 31, 2000 the Company had authorization to purchase 11.4 million
additional shares.
The Company has relatively limited involvement with derivative
financial instruments and uses forward contracts to mitigate the effect of
foreign currency movements on transactions denominated in foreign currencies.
The contracts generally have maturities that do not exceed one month and have no
cash requirements until maturity. Credit risk and market risk are minimal
because the contracts are with large banks and gains and losses are offset
against foreign exchange gains and losses on the underlying hedged transactions.
The notional amount of outstanding forward contracts was approximately $190
million as of December 31, 2000.
DIVIDENDS
During fiscal 2000, the Company's Board of Directors declared four
regular quarterly cash dividends of 7 cents per share each, resulting in an
annual rate of 28 cents per share.
STOCK SPLIT
At the Company's Annual Meeting of Stockholders, an increase in the
number of authorized shares of common stock from 100,000,000 shares to
300,000,000 shares was approved. At the April 24, 2001 Board of Directors
Meeting a two-for-one stock split was approved. The stock split has been
retroactively reflected in these consolidated financial statements.
ENVIRONMENTAL
The Company is conducting a number of environmental investigations and
remedial actions at current and former Company locations and, along with other
companies, has been named a potentially responsible party (PRP) for certain
waste disposal sites. The Company accrues for environmental issues in the
accounting period that the Company's responsibility is established and when the
cost can be reasonably estimated. The Company has accrued $5.4 million as of
December 31, 2000, representing management's estimate of the total cost of
ultimate disposition of known environmental matters. Such amount is not
discounted and does not reflect any recovery of any amounts through insurance or
indemnification arrangements. These cost estimates are subject to a number of
variables, including the stage of the environmental investigations, the
magnitude of the possible contamination, the nature of the potential remedies,
possible joint and several liability, the timeframe over which remediation may
occur and the possible effects of changing laws and regulations. For sites where
the Company has been named a PRP, management does not currently anticipate any
additional liability to result from the inability of other significant named
parties to contribute. The Company expects that such accrued amounts could be
paid out over a period of up to five years. As assessments and remediation
activities progress at each individual site, these liabilities are reviewed and
adjusted to reflect additional information as it becomes available. There have
been no environmental problems to date that have had or are expected to have a
material effect on the Company's financial position or results of operations.
While it is reasonably possible that a material loss exceeding the amounts
recorded may have been incurred, the preliminary stages of the investigations
make it impossible for the Company to reasonably estimate the range of potential
exposure.
III. INTERIM FINANCIAL STATEMENTS (UNAUDITED):
III A. CONSOLIDATED INCOME STATEMENTS FOR THE THREE MONTHS ENDED APRIL 1, 2001
AND APRIL 2, 2000
PERKINELMER, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(UNAUDITED)
THREE MONTHS ENDED
------------------
APRIL 1, APRIL 2,
(IN THOUSANDS EXCEPT PER SHARE DATA) 2001 2000
--------- ---------
SALES .......................................................... $ 334,899 $ 311,752
Cost of Sales .................................................. 184,724 181,912
Research and Development Expenses .............................. 21,230 19,044
Selling, General and Administrative Expenses ................... 98,073 86,390
Restructuring Charges (Credits), Net ........................... -- --
Gains on Dispositions .......................................... (1,779) (6,967)
--------- ---------
OPERATING INCOME FROM CONTINUING OPERATIONS .................... 32,651 31,373
Other Expense, Net ............................................. (11,879) (6,232)
--------- ---------
Income From Continuing Operations Before Income Taxes .......... 20,772 25,141
Provision for Income Taxes ..................................... 7,744 7,745
--------- ---------
INCOME FROM CONTINUING OPERATIONS .............................. $ 13,028 $ 17,396
Income (loss) from Discontinued Operations, Net Income of Taxes 10,468 (1,153)
--------- ---------
Net Income ..................................................... $ 23,496 $ 16,243
========= =========
BASIC EARNINGS (LOSS) PER SHARE:
Continuing Operations ....................................... $ 0.13 $ 0.18
Discontinued Operations ..................................... 0.10 (0.01)
--------- ---------
Net Income ............................................... $ 0.23 $ 0.17
========= =========
DILUTED EARNINGS (LOSS) PER SHARE:
Continuing Operations ....................................... 0.13 0.17
Discontinued Operations ..................................... 0.10 (0.01)
--------- ---------
Net Income ............................................... $ 0.23 $ 0.16
========= =========
Weighted Average Shares of Common Stock Outstanding:
Basic .................................................... 100,154 96,926
Diluted .................................................. 104,100 100,822
Cash Dividends Per Common Share ............................. $ .07 $ .07
The accompanying unaudited notes are an integral part of these consolidated
financial statements.
III B. CONSOLIDATED BALANCE SHEETS AS OF APRIL 1, 2001 AND DECEMBER 31, 2000
PERKINELMER, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
APRIL 1, DECEMBER 31,
(IN THOUSANDS EXCEPT PER SHARE DATA) 2001 2000
------------------------------------ ---- ----
(UNAUDITED)
Current Assets:
Cash and Cash Equivalents ............................................... $ 136,658 $ 125,551
Accounts Receivable, net ................................................ 281,380 292,714
Inventories ............................................................. 206,243 190,526
Other Current Assets .................................................... 211,693 169,976
Net Assets of Discontinued Operations ................................... 159,250 147,140
----------- -----------
TOTAL CURRENT ASSETS ......................................................... 995,224 925,907
----------- -----------
Property, Plant and Equipment:
At Cost ................................................................. 431,373 424,141
Accumulated Depreciation and Amortization ............................... (195,202) (187,375)
----------- -----------
Net Property, Plant and Equipment ............................................ 236,171 236,766
Investments .................................................................. 36,046 36,226
Intangible Assets, net ....................................................... 875,997 886,569
Other Assets ................................................................. 69,441 102,865
----------- -----------
TOTAL ASSETS ................................................................. $ 2,212,879 $ 2,188,333
=========== ===========
Current Liabilities:
Short-Term Debt ......................................................... $ 225,877 $ 183,110
Accounts Payable ........................................................ 121,003 118,170
Accrued Restructuring Costs ............................................. 37,556 47,444
Accrued Expenses ........................................................ 271,464 296,896
----------- -----------
TOTAL CURRENT LIABILITIES .................................................... 655,900 645,620
----------- -----------
Long-Term Debt ............................................................... 585,661 583,337
Long-Term Liabilities ........................................................ 232,160 230,987
Commitments and Contingencies
Stockholders' Equity:
Preferred Stock -- $1 par value, authorized 1,000,000
shares; none issued or outstanding .................................. -- --
Common Stock -- $1 par value, authorized 300,000,000 shares;
issued 122,908,000 shares at April 1, 2001 and at December 31, 2000 . 122,908 122,908
Capital in Excess of Par Value .......................................... 44,760 37,060
Retained Earnings ....................................................... 852,427 835,917
Accumulated Other Comprehensive Loss .................................... (57,829) (39,042)
Cost of Shares Held in Treasury -- 23,150,800 shares at April 1, 2001
and 23,360,000 shares at December 31, 2000 .......................... (223,108) (228,454)
----------- -----------
Total Stockholders' Equity ................................................... 739,158 728,389
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ................................... $ 2,212,879 $ 2,188,333
=========== ===========
The accompanying unaudited notes are an integral part of these consolidated
financial statements.
III C. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED
APRIL 1, 2001 AND APRIL 2, 2000.
PERKINELMER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED
APRIL 1, APRIL 2,
(IN THOUSANDS) 2001 2000
-------------- ---- ----
OPERATING ACTIVITIES:
Net income ................................................................. $ 23,496 $ 16,243
(Deduct) Add (Net Income) Net Loss from Discontinued Operations ............ (10,468) 1,153
--------- ---------
Net Income from Continuing Operations ...................................... $ 13,028 $ 17,396
Adjustments to reconcile net income from continuing operations to net cash
provided by continuing operations:
Noncash portion of restructuring ...................................... (1,800) --
Amortization of debt discount and issuance costs ...................... 5,072 --
Depreciation and amortization ......................................... 19,014 15,183
Gains on dispositions and sales of investments, net ................... (1,807) (7,625)
Changes in assets and liabilities which provided (used) cash,
excluding effects from companies purchased and divested:
Accounts receivable ............................................... 5,911 10,875
Inventories ....................................................... (19,378) (16,202)
Accounts payable and accrued expenses ............................. (12,153) (18,977)
Accrued restructuring costs ....................................... (7,772) (817)
Other assets and liabilities ...................................... (2,514) 6,655
--------- ---------
NET CASH (USED IN) PROVIDED BY CONTINUING OPERATIONS OPERATING ACTIVITIES .. (2,399) 6,488
NET CASH PROVIDED BY DISCONTINUED OPERATIONS OPERATING ACTIVITIES .......... 12,152 5,846
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES .................................. 9,753 12,334
--------- ---------
INVESTING ACTIVITIES:
Capital expenditures .................................................. (13,319) (13,054)
Proceeds from dispositions of businesses and sales of
property, plant and equipment, net ................................ 1,410 23,267
Proceeds from sales/cost of purchases of investments .............. (6,942) (15,007)
--------- ---------
NET CASH (USED IN) CONTINUING OPERATIONS INVESTING ACTIVITIES............... (18,851) (4,794)
NET CASH (USED IN) PROVIDED BY DISCONTINUED OPERATIONS INVESTING ACTIVITIES. (16,187) 10,703
--------- ---------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES ........................ (35,038) 5,909
--------- ---------
FINANCING ACTIVITIES:
Increase in commercial paper borrowings ............................... 43,000 40,000
Decrease in other debt ................................................ (2,999) (81,721)
Proceeds from issuance of common stock ................................ 8,368 19,014
Purchases of common stock ............................................. (793) (358)
Cash dividends ........................................................ (7,015) (6,747)
--------- ---------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES ........................ 40,561 (29,812)
--------- ---------
Effect of Exchange Rate Changes on Cash and Cash Equivalents ............... (4,169) (3,078)
--------- ---------
Net Increase (Decrease) in Cash and Cash Equivalents ....................... 11,107 (14,647)
Cash and Cash Equivalents at Beginning of Period ........................... 125,551 126,650
--------- ---------
Cash and Cash Equivalents at End of Period ................................. $ 136,658 $ 112,003
========= =========
The accompanying unaudited notes are an integral part of these consolidated
financial statements.
III D. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(1) BASIS OF PRESENTATION
The consolidated financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission (the "SEC"). Certain information in
footnote disclosures normally included in financial statements has been
condensed or omitted in accordance with the rules and regulations of the SEC.
These statements should be read in conjunction with the Company's Annual Report
for the fiscal year ended December 31, 2000, filed on Form 8-K with the SEC (the
"2000 Form 10-K"). The balance sheet amounts at December 31, 2000 in this report
were extracted from the Company's audited 2000 financial statements included in
the 2000 Form 10-K. Certain prior period amounts have been reclassified to
conform to the current-year financial statement presentation. The information
set forth in these statements may be subject to normal year-end adjustments. The
information reflects all adjustments that, in the opinion of management, are
necessary to present fairly the Company's results of operations, financial
position and cash flows for the periods indicated. The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. The results of operations for the three
months ended April 1, 2001 are not necessarily indicative of the results for the
entire fiscal year.
During July 2001, the Company approved a plan to sell its Security and
Detection Systems business. The results of operations of the Security and
Detection Systems business were previously reported as part of the Instruments
segment. During October 2001, the Company also approved a plan to sell its Fluid
Sciences segment. The Company has accounted for the plan to sell its Security
and Detection Systems business and Fluid Sciences segment as discontinued
operations in accordance with APB Opinion No. 30, Reporting the Results of
Operations, and, accordingly, the results of operations of the Security and
Detection Systems business and Fluid Sciences segment have been segregated from
continuing operations and reported as a separate line on the Company's
Consolidated Income Statements and Statements of Cash Flows. The net assets of
the Security and Detection Systems business and Fluid Sciences segment are
reflected as Net Assets of Discontinued Operations in the accompanying
Consolidated Balance Sheets.
(2) ACQUISITIONS
On July 31, 2000, the Company completed its acquisition of NEN Life
Sciences, Inc. (NEN), a provider of state-of-the-art drug discovery products,
services, reagents and technologies to the life sciences industry. Details of
the transaction and pro forma financial information were reported on a Current
Report on Form 8-K filed with the SEC on August 1, 2000 and in the 2000 Form
10-K.
Unaudited pro forma operating results for the Company for the three
months ended April 2, 2000, assuming the acquisition of NEN was completed as of
January 3, 2000, would be as follows: sales of $402.4 million; net income of
$16.0 million; basic and diluted earnings of $.17 and $.16 per share,
respectively.
The unaudited pro forma financial information is provided for
informational purposes only. It is not necessarily indicative of the Company's
operating results that would have occurred had the acquisitions been consummated
on the date for which the consummation of the acquisitions is being given
effect, nor is it necessarily indicative of the Company's future operating
results. The unaudited pro forma financial information does not give effect to
acquisitions, other than NEN, does not adjust for businesses divested, nor does
it adjust for foreign exchange. The pro forma amounts exclude acquisition
related charges of $24.3 million for purchased in-process R&D related to NEN.
(3) RESTRUCTURING CHARGES
The Company recorded a pre-tax restructuring charge of $15.1 million
during the fourth quarter of 2000 as a result of the continued transformation of
the portfolio of businesses within the Life Sciences and Optoelectronics
segments (the "2000 plan"). The principal actions in the restructuring plans
included close-down or consolidation of a number of offices and facilities,
transfer of assembly activities to lower cost geographic locations, disposal of
underutilized assets and general cost reductions. Details of the 2000 plan are
discussed more fully in the 2000 Form 10-K.
The following table summarizes the restructuring activity related to
the 2000 plan:
THREE MONTHS
ENDED
(IN MILLIONS) APRIL 1, 2001
------------- -------------
Accrued restructuring costs at beginning of period $ 15.1
Provisions ........................................ --
Charges ........................................... (3.9)
---------
Accrued restructuring costs at end of period ...... $ 11.2
=========
The Company finalized its restructuring plans related to its
acquisition of the Analytical Instruments Division (AI) of PE Corp. (May 1999)
during 2000. Additionally, the Company recorded approximately $4 million as
accrued restructuring costs in connection with the NEN acquisition in August
2000. These plans include actions primarily to integrate the operations of the
acquired businesses and improve their cost structures through consolidation or
shutdown of certain facilities, workforce and overhead reductions and the
termination of certain leases and other contractual obligations.
The following table summarizes the restructuring activity related to
the AI and NEN acquisitions:
THREE MONTHS
ENDED
(IN MILLIONS) APRIL 1, 2001
------------- -------------
Accrued restructuring costs at beginning of period $ 32.3
Provisions, through purchase accounting ........... --
Charges ........................................... (6.0)
-----------
Accrued restructuring costs at end of period ...... $ 26.3
===========
Cash outlays during the three months ended April 1, 2001 were $8.7
million for all of these plans. The majority of the actions remaining at April
1, 2001 are expected to occur in fiscal 2001 and early fiscal 2002.
(4) INVENTORIES
Inventories consisted of the following:
APRIL 1, DECEMBER 31,
(IN THOUSANDS) 2001 2000
-------------- ---- ----
Raw materials.................... $ 68,388 $ 61,564
Work in progress................. 42,617 46,785
Finished goods................... 95,238 82,177
-------------- -------------
$ 206,243 $ 190,526
============== =============
(5) COMPREHENSIVE INCOME
Comprehensive income consisted of the following:
THREE MONTHS ENDED
APRIL 1, APRIL 2,
(IN THOUSANDS) 2001 2000
-------------- ---- ----
Net income........................................... $ 23,496 $ 16,243
Other comprehensive (loss), net of tax:
Gross foreign currency translation adjustments.. (14,577) (10,793)
Unrealized (losses) gains on securities......... (4,210) 70
-------- --------
(18,787) (10,723)
-------- --------
Comprehensive income................................. $ 4,709 $ 5,520
======== ========
The components of accumulated other comprehensive loss were as follows:
APRIL 1, DECEMBER 31,
(IN THOUSANDS) 2001 2000
-------------- ---- ----
Foreign currency translation adjustments.. $(54,524) $(39,945)
Unrealized (losses) gains on securities... (3,305) 903
-------- --------
Accumulated other comprehensive (loss)... $(57,829) $(39,042)
======== ========
(6) INDUSTRY SEGMENT INFORMATION
The Company's businesses are reported as three reportable segments
which reflect the Company's management and structure under three strategic
business units (SBUs). The accounting policies of the reportable segments are
the same as those described in Note 1 of the 2000 Form 10-K. The Company
evaluates the performance of its operating segments based on operating profit.
Intersegment sales and transfers are not significant. Unaudited sales and
operating profit information by segment for the first three months of 2001 and
2000 are discussed in Item 2 of this Quarterly Report on Form 10-Q and are
considered an integral part of this note.
(7) DISCONTINUED OPERATIONS
During October 2001, the Board of Directors approved a plan to sell the
Fluid Sciences segment. As such, the Company has accounted for this segment as a
discontinued operation in accordance with Accounting Principles Board (APB)
Opinion No. 30, Reporting the Results of Operations, and, accordingly, the
results of operations and related cash flows of the Fluid Sciences segment have
been segregated from continuing operations and reported as a separate line on
the Company's Consolidated Income Statements and Statements of Cash Flows. The
net assets of the Fluid Sciences segment are reflected as Net Assets of
Discontinued Operations in the accompanying Consolidated Balance Sheets.
In July 2001, the Board of Directors approved a plan to sell the
Security and Detection Systems business. The results of operations of the
Security and Detection Systems business were previously reported as part of the
Instruments segment. The Company has accounted for its Security and Detection
Systems business as a discontinued operation in accordance with APB Opinion No.
30, and, accordingly, the results of operations of this business and related
cash flows have been segregated from continuing operations and reported as a
separate line on the Company's Consolidated Income Statements and Statements of
Cash Flows. The net assets of the businesses are reflected as Net Assets of
Discontinued Operations in the accompanying Consolidated Balance Sheets in
accordance with APB Opinion No. 30.
Summary operation results of the Fluid Sciences segment and the
Security and Detection Systems business were as follows:
THREE MONTHS ENDED
APRIL 1, APRIL 2,
In Thousands 2001 2000
------------ -------- --------
Sales $ 90,798 $ 90,534
Costs and expenses 72,255 86,019
-------- --------
Operating income from discontinued operations 18,543 4,515
Other (expense) (1,856) (2,343)
-------- --------
Income from discontinued operations before income taxes 16,687 2,172
Provision for income taxes 6,219 3,325
-------- --------
Income (loss) from discontinued operations, net of income tax $ 10,468 $ (1,153)
======== ========
(8) NEW ACCOUNTING PRONOUNCEMENTS
The Company adopted Financial Accounting Standards Board Statement of
Financial Accounting Standards (SFAS) No. 137, Accounting for Derivative
Instruments and Hedging Activities -- Deferral of the Effective Date of SFAS No.
133, effective January 1, 2001. The statement requires companies to record
derivatives on the balance sheet as assets or liabilities, measured at fair
value. Gains or losses resulting from changes in the values of those derivatives
are accounted for depending on the use of the derivative and whether it
qualifies for hedge accounting. If a derivative is a hedge, depending on the
nature of the hedge, changes in the fair value of the derivative are either
offset against the change in fair value of the hedged item through earnings or
recognized in other comprehensive income until the hedged item is recognized in
earnings. The Company immediately records in earnings the extent to which a
hedge is not effective in achieving offsetting changes in fair value. The
adoption of SFAS No. 133 did not have a material effect on the Company's results
of operations or financial position.
Forward currency exchange contracts are used by the Company primarily
to hedge certain operational (cash-flow hedges) and balance sheet (fair value
hedges) exposures resulting from changes in currency exchange rates. Such
exposures result from sales that are denominated in currencies other than
functional currencies of the respective operations. The Company
enters into these currency exchange contracts to hedge anticipated product sales
and recorded accounts receivable made in the normal course of business, and
accordingly, the hedges are not speculative in nature. As part of the Company's
overall strategy to manage the level of exposure to the risk of currency
exchange fluctuations, certain operating units hedge a portion of their currency
exposures anticipated over the ensuing twelve month period, using exchange
contracts that have maturities of twelve months or less. The Company does not
hold or engage in transactions involving derivative instruments for purposes
other than risk management.
The Company records its forward currency exchange contracts at fair
value in its consolidated balance sheet as other current assets or other accrued
expenses and, for cash flow hedges, the related gains or losses on these
contracts are deferred as a component of other comprehensive items in the
accompanying balance sheet. These deferred gains and losses are recognized in
income in the period in which the underlying anticipated transaction occurs. At
April 1, 2001, the Company had no deferred gains recorded. Unrealized gains and
losses resulting from the impact of currency exchange rate movements on fair
value hedges are recognized in earnings in the period in which the exchange
rates change and offset the currency gains and losses on the underlying exposure
being hedged.
(9) SUBSEQUENT EVENTS
Stock Split: At the Company's April 24, 2001 Annual Meeting of
Stockholders, an increase in the number of authorized shares of common stock
from 100,000,000 shares to 300,000,000 shares was approved. At the April 24,
2001 Board of Directors meeting, a two-for-one stock split was approved and was
effected on June 1, 2001 by means of a 100% stock dividend to stockholders of
record as of May 15, 2001. The stock split has been retroactively reflected in
these financial statements.
Acquisition: On November 13, 2001 the Company completed the acquisition
of Packard Bioscience Company (Packard). Packard is a leading supplier of
automated liquid handling, sample preparation tools and advanced biochip
technologies and generated sales of approximately $165 million for its fiscal
year ended December 31, 2000. The transaction was a stock merger whereby the
shareholders of Packard received 0.311 shares of the Company's common stock for
each share of Packard common stock. Excluding assumed options, the Company
expects to issue approximately 21.7 million shares of its common stock in the
transaction. The transaction will be accounted for as a purchase in accordance
with recently issued SFAS No. 141, Business Combinations, and SFAS No. 142,
Intangible Assets, whereby the purchase price will be allocated to the assets,
including all intangible assets, and liabilities assumed based on their
respective fair values.
IV. OTHER INTERIM INFORMATION -- April 1, 2001 and April 2, 2000
IV A. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION RELATING TO QUARTERLY FINANCIAL INFORMATION
ACQUISITIONS AND DIVESTITURES
On July 31, 2000, the Company completed its acquisition of NEN Life
Sciences, Inc. (NEN), a provider of state-of-the-art drug discovery products,
services, reagents and technologies to the life sciences industry. Details of
the transaction and pro forma financial information were reported on a current
report on Form 8-K filed with the SEC on August 1, 2000 and in the 2000 Form
10-K.
In July 2001 and October 2001, respectively, the Board of Directors
approved separate plans to sell the Security and Detection Systems business and
the Fluid Sciences segment. Both businesses have appropriately been reflected as
discontinued operations in the Company's consolidated financial statements.
DISCUSSION OF CONSOLIDATED RESULTS OF OPERATIONS
Revenues
Revenues for the first quarter of 2001 were $334.9 million, up 7% from
$311.8 million for the first quarter last year. The 2001 period was positively
affected by the acquisition of the NEN business, which occurred in the second
half of 2000. On an organic revenue basis, adjusted for the impact of foreign
exchange and the impact of acquisitions and divestitures, revenues increased by
4% from the comparable period in prior year. Organic growth in the first quarter
was driven by 8% growth in Life Sciences, especially drug discovery tools and
genetic screening, a 5% increase in Optoelectronics and a 2% increase in
Instruments.
Gross Margin
Gross margins as a percentage of sales improved to 45% for the first
quarter of 2001 from 42% for the first quarter of 2000 These improvements
reflect the Company's improving portfolio of businesses and product mix, strong
focus on operations and aggressive approach to cost controls, including low cost
sourcing.
Research and Development
Research and developments expenses approximated 6% of sales for both
the first quarter of 2001 and 2000. The rate of research and development
expenditures as a percentage of sales is reflective of the Company's continued
commitment to new product development.
Selling, General and Administrative Expenses
Selling, general and administrative expenses as a percentage of sales
increased to 29% for the first quarter of 2001 from 28% for the first quarter of
2000. The increases were primarily related to incremental goodwill amortization
resulting from the acquisition of NEN which occurred on July 31, 2000, as well
as certain costs related to moving production facilities to lower cost
locations.
Gains on Dispositions and Restructuring Credits
During the first quarter of 2001, the Company recognized $1.8 million
in previously deferred pre-tax gains relating to businesses previously divested.
During the first quarter of 2000, the Company sold its micromachined
sensors and specialty semiconductor businesses, resulting in a pre-tax gain of
$6.7 million which was recognized as a Gains on Dispositions. The financial
results of the divested businesses for all periods were not material to the
consolidated results of the Company.
Other Expense
Other expense was $11.9 million for the first quarter of 2001 versus
$6.2 million for the same period of 2000. This increase in other expense was due
primarily to the impact of higher interest expense on increased debt levels
resulting from recent acquisitions.
Income Tax Expense
Reported income tax expense from continuing operations as a percentage
of pre-tax income was approximately 37% and 31% for the first quarter of 2001
and 2000, respectively, due, in part, to the income tax effect of nondeductible
goodwill associated with the NEN acquisition.
SEGMENT RESULTS OF OPERATIONS
The table below presents earnings per share from continuing operations
before nonrecurring items and the amortization of goodwill and intangibles,
discussed below under the caption "Segment Results of Continuing Operation":
THREE MONTHS ENDED
------------------
APRIL 1 APRIL 2,
2001 2000
---- ----
Sales ........................................... $ 334,899 $ 311,752
Costs of Sales .................................. 184,210 181,912
Research and Development Costs .................. 21,230 19,044
Selling, General and Administrative Expenses .... 86,722 80,531
--------- ---------
Operating Income from Continuing Operations ..... 42,737 30,265
Other Expense, Net .............................. (11,879) (6,232)
--------- ---------
Income from Continuing Operations, Before Income
Taxes ......................................... 30,858 24,033
Provision for Income taxes ...................... 9,120 6,220
--------- ---------
Income from Continuing Operations, Net of Income
Tax .......................................... $ 21,738 $ 17,813
========= =========
Diluted Cash Earnings Per Share, from Continuing
Operations .................................. $ 0.21 $ 0.18
THREE MONTHS ENDED
------------------
APRIL 1 APRIL 2,
2001 2000
---- ----
Adjusted Income from Continuing Operations Before
Income Taxes...................................... $ 30,858 $ 24,033
Nonrecurring Items:
Deferred Gain Recognition, Net of Restructuring
Revaluation of Inventory........................ (514) --
Related Charges................................. (154) 6,967
-------- --------
Net Nonrecurring Items.......................... (668) 6,967
Goodwill and Intangibles Amortization................ (9,418) (5,859)
-------- --------
Income from Continuing Operations Before
Income Taxes....................................... 20,772 25,141
Provision for Income Taxes .......................... 7,744 7,745
-------- --------
Net Income from Continuing Operations................ $ 13,028 $ 17,396
======== ========
Earnings per Share from Continuing Operations
Basic............................................. $ 0.13 $ 0.18
Diluted........................................... $ 0.13 $ 0.17
LIFE SCIENCES
Revenues increased $29.6 million, or 75%, to $69.2 million for the
first quarter of 2001 versus $39.6 million for the same period of 2000.
Inclusion of revenues from the NEN acquisition and increased revenues in drug
discovery and genetic screening were the reasons for the increase in the first
quarter of 2001.
Operating profit for the first quarter of 2001 included goodwill and
intangibles amortization from the NEN acquisition and certain nonrecurring
acquisition-related charges of $1.9 million and was $3.6 million compared to
$4.3 million for the first quarter of 2000. Operating profit for the first
quarter of 2001 before nonrecurring charges and goodwill and intangibles
amortization was $10.5 million versus $4.8 million for the same period of 2000,
representing an increase of $5.7 million, or 119%. Higher revenues discussed
above, increased sales of reagents and improvements in gross margin due to lower
manufacturing costs during the first quarter of 2001 drove this increase in
operating profit.
OPTOELECTRONICS
Revenues for the first quarter of 2001 increased $6.4 million, or 6%,
and were $120.9 million versus $114.5 million in the first quarter of 2000.
Strong revenue growth in telecom and digital imaging were primary contributors
to the increase.
Operating profit was $18.5 million for the first quarter of 2001 versus
$20.2 million for the first quarter of 2000. The operating profit for the first
quarter of 2000 included nonrecurring pre-tax gains on dispositions of $6.7
million. Operating profit before nonrecurring items and goodwill and intangibles
amortization was $20.2 million for the first quarter of 2001 versus $15.6
million for the first quarter of 2000. This represents an increase of $4.6
million, or 29%, before nonrecurring and goodwill and intangibles amortization
compared to the same period in 2000. The increase in operating profit was due
primarily to higher revenues discussed above, materials savings and benefits
from recently completed restructuring actions.
INSTRUMENTS
Revenues for the first quarter of 2001 were $144.8 million compared to
$157.6 million for the first quarter of 2000. This decrease was due primarily to
the sale of the Company's Berthold business in late 2000.
Operating profit was $14.7 million for the first quarter of 2001,
increasing $3.4 million, or 30%, versus the same period of 2000. The operating
profit for the first quarter of 2001 included deferred gain recognition from a
prior period divestiture of approximately $1 million. Operating profit before
nonrecurring items and goodwill and intangibles amortization for the first
quarter of 2001 was $16.1 million versus $14.3 million for the first quarter of
2000.
FINANCIAL CONDITION
Short-term debt at April 1, 2001 was $225.9 million and was comprised
primarily of commercial paper borrowings of $220 million. In March 2001, the
Company's $300 million revolving credit facility was refinanced and will now
expire in March 2002. The Company also refinanced the existing $100 million
revolving credit facility which now expires in March 2006. These agreements
serve as backup facilities for the commercial paper borrowings. There were no
amounts outstanding under these lines at April 1, 2001 or December 31, 2000.
Long-term debt at April 1, 2001 was approximately $585.7 million,
consisting of $115 million of unsecured notes which mature in 2005 and $471
million of convertible debentures. In early August 2000, the Company sold zero
coupon senior convertible debentures with an aggregate purchase price of $460
million. The Company used the offering's net proceeds of approximately $448
million to repay a portion of its commercial paper borrowings, which had been
increased temporarily to finance the NEN acquisition. Deferred issuance costs of
$12 million were recorded as a noncurrent asset and are being amortized over
three years. The debentures, which were offered by a prospectus supplement
pursuant to the Company's effective shelf registration statement, are due August
2020 and were priced with a yield to maturity of 3.5%. At maturity, the Company
will repay $921 million, comprised of $460 million of original purchase price
plus accrued original issue discount. The Company may redeem some or all of the
debentures at any time on or after August 7, 2003 at a redemption price equal to
the issue price plus accrued original issue discount through the redemption
date. Holders of the debentures may require the Company to repurchase some or
all of the debentures in August 2003 and August 2010, or at any time when there
is a change in control of the Company, as is customary and ordinary for
debentures of this nature, at a repurchase price equal to the initial price plus
accrued original issue discount through the date of repurchase. The debentures
are currently convertible into 10.8 million shares of the Company's common stock
at approximately $42.5 per share. Conversion of the debentures was not assumed
in the computation of diluted earnings per share because the effect of
conversion would have been antidilutive.
Cash and cash equivalents increased by $11.1 million to $136.7 million
at the end of the first quarter of 2001. Net cash used by continuing operations
operating activities for the first quarter of 2001 was $2.4 million and was
comprised of net income from continuing operations before depreciation,
amortization and other noncash items of $33.5 million and a $35.9 million net
change in certain assets and liabilities during the first quarter of 2001. The
largest component of this net change was a $19.4 million increase in
inventories. Capital expenditures for the first quarter of 2001 were $13.3
million.
V. Interim Financial Statements (Unaudited) -- July 1, 2001 and July 2, 2000
V A. Consolidated Income Statements for the three and six months ended
July 1, 2001 and July 2, 2000
PERKINELMER, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ----------------
JULY 1, JULY 2, JULY 1, JULY 2,
2001 2000 2001 2000
---- ---- ---- ----
(IN THOUSANDS EXCEPT PER SHARE DATA)
SALES .................................................... $ 331,806 $ 309,169 $ 666,705 $ 620,921
Cost of Sales ............................................ 175,619 173,835 360,343 355,747
Research and Development Expenses ........................ 19,435 18,643 40,665 37,687
Selling, General and Administrative Expenses ............. 101,301 87,434 199,374 173,774
Restructuring Credits .................................... -- (6,300) -- --
Gains on Dispositions .................................... -- (1,416) (1,779) (14,633)
--------- --------- --------- ---------
OPERATING INCOME FROM CONTINUING OPERATIONS .............. 35,451 36,973 68,102 68,346
Other Expense, Net ....................................... (7,199) (6,162) (19,078) (12,394)
--------- --------- --------- ---------
Income From Continuing Operations Before Income Taxes .... 28,252 30,811 49,024 55,952
Provision for Income Taxes ............................... 8,297 8,157 16,041 15,902
--------- --------- --------- ---------
INCOME FROM CONTINUING OPERATIONS ........................ 19,955 22,654 32,983 40,050
Income from Discontinued Operations, Net of Income Taxes . 9,454 8,466 19,922 7,313
Gain on Disposition of Discontinued Operations ........... -- 4,453 -- 4,453
--------- --------- --------- ---------
NET INCOME ............................................... $ 29,409 $ 35,573 $ 52,905 $ 51,816
========= ========= ========= =========
BASIC EARNINGS PER SHARE:
Continuing Operations .................................. $ 0.20 $ 0.23 $ 0.33 $ 0.41
Discontinued Operations ................................ 0.09 0.13 0.20 0.12
--------- --------- --------- ---------
Net Income ............................................. $ 0.29 $ 0.36 $ 0.53 $ 0.53
========= ========= ========= =========
DILUTED EARNINGS PER SHARE:
Continuing Operations .................................. $ 0.19 $ 0.22 $ 0.32 $ 0.40
Discontinued Operations ................................ 0.09 0.13 0.19 0.12
--------- --------- --------- ---------
Net Income ............................................. $ 0.28 $ 0.35 $ 0.51 $ 0.51
========= ========= ========= =========
Weighted Average Shares of Common Stock Outstanding:
Basic ............................................... 100,622 98,070 100,388 97,498
Diluted ............................................. 104,097 101,592 104,099 101,208
Cash Dividends Per Common Share .......................... $ .07 $ .07 $ .14 $ .14
The accompanying unaudited notes are an integral part of these consolidated
financial statements.
V B. Consolidated Balance Sheets as of July 1, 2001 and December 31, 2000
PERKINELMER, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JULY 1, DECEMBER 31,
2001 2000
----------- ------------
(UNAUDITED)
(IN THOUSANDS EXCEPT
SHARE DATA)
Current Assets:
Cash and Cash Equivalents............................................... $ 133,935 $ 125,551
Accounts Receivable..................................................... 281,544 292,714
Inventories............................................................. 217,213 190,526
Other Current Assets.................................................... 213,627 169,976
Net Assets of Discontinued Operations................................... 139,667 147,140
----------- -----------
TOTAL CURRENT ASSETS............................................ 985,986 925,907
----------- -----------
Property, Plant and Equipment:
At Cost................................................................. 429,790 424,141
Accumulated Depreciation and Amortization............................... (179,263) (187,375)
----------- -----------
Net Property, Plant and Equipment......................................... 250,527 236,766
Investments............................................................... 34,937 36,226
Intangible Assets......................................................... 871,538 886,569
Other Assets.............................................................. 77,294 102,865
----------- -----------
TOTAL ASSETS.................................................... $ 2,220,282 $ 2,188,333
=========== ===========
Current Liabilities:
Short-Term Debt......................................................... $ 227,960 $ 183,110
Accounts Payable........................................................ 86,765 118,170
Accrued Restructuring Costs............................................. 29,411 47,444
Accrued Expenses........................................................ 283,938 296,896
----------- -----------
TOTAL CURRENT LIABILITIES....................................... 628,074 645,620
----------- -----------
Long-Term Debt............................................................ 589,760 583,337
Long-Term Liabilities..................................................... 229,186 230,987
Commitments and Contingencies
Stockholders' Equity:
Preferred Stock -- $1 par value, authorized 1,000,000 shares;
none issued or outstanding ........................................... -- --
Common Stock -- $1 par value, authorized 300,000,000 shares;
issued 122,908,000 shares at July 1, 2001 and December 31, 2000....... 122,908 122,908
Capital in Excess of Par Value.......................................... 52,264 37,060
Retained Earnings....................................................... 874,782 835,917
Accumulated Other Comprehensive Loss.................................... (59,184) (39,042)
Cost of Shares Held in Treasury -- 22,576,000 shares at
July 1, 2001 and 23,360,000 shares at December 31, 2000............... (217,508) (228,454)
----------- -----------
Total Stockholders' Equity...................................... 773,262 728,389
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY...................... $ 2,220,282 $ 2,188,333
=========== ===========
The accompanying unaudited notes are an integral part of these consolidated
financial statements.
V C. Consolidated Statements of Cash Flows for the six months ended
July 1, 2001 and July 2, 2000
PERKINELMER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED
----------------
JULY 1, JULY 2,
2001 2000
---- ----
(IN THOUSANDS)
OPERATING ACTIVITIES:
Net income ............................................................. $ 52,905 $ 51,816
Deduct net income from discontinued operations ......................... (19,922) (7,313)
Deduct net gain on disposition of discontinued operations .............. -- (4,453)
--------- ---------
Income from continuing operations ...................................... 32,983 40,050
Adjustments to reconcile net income from continuing operations to
net cash provided by continuing operations:
In-process research and development charges .......................... -- --
Noncash portion of restructuring ..................................... (2,500) --
Amortization of debt discount and issuance costs ..................... 10,018 --
Depreciation and amortization ........................................ 38,261 31,253
Gains on dispositions and sales of investments, net .................. (1,897) (10,036)
Changes in assets and liabilities which provided (used) cash,
excluding effects from companies purchased and divested:
Accounts receivable ................................................ 3,887 22,126
Inventories ........................................................ (30,177) (25,203)
Accounts payable and accrued expenses .............................. (26,977) (11,634)
Accrued restructuring costs ........................................ (15,112) (22,254)
Other assets and liabilities ....................................... (4,456) (8,524)
--------- ---------
NET CASH PROVIDED BY CONTINUING OPERATIONS OPERATING ACTIVITIES......... 4,030 15,778
NET CASH PROVIDED BY DISCONTINUED OPERATIONS OPERATING ACTIVITIES....... 30,627 24,896
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES .............................. 34,657 40,674
INVESTING ACTIVITIES:
Capital expenditures ................................................. (40,501) (25,373)
Proceeds from dispositions of businesses and sales of
property, plant and equipment, net ................................... (3,608) 24,482
Cost of acquisitions, net of cash acquired ........................... (5,103) --
Purchases of investments ............................................. (7,062) (15,226)
Proceeds from sale of investments .................................... 5,500 --
Other ................................................................ -- 1,571
--------- ---------
NET CASH USED IN CONTINUING OPERATIONS INVESTING ACTIVITIES............. (50,774) (14,546)
NET CASH (USED IN) PROVIDED BY DISCONTINUED OPERATIONS INVESTING
ACTIVITIES............................................................ (13,359) 13,391
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES .................................. (64,133) (1,155)
FINANCING ACTIVITIES:
Increase in commercial paper borrowings .............................. 45,000 187,264
Decrease in other debt ............................................... (3,516) (236,429)
Proceeds from issuance of common stock ............................... 17,327 21,188
Purchases of common stock ............................................ (705) (10,486)
Cash dividends ....................................................... (14,081) (13,624)
--------- ---------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES .................... 44,025 (52,087)
Effect of Exchange Rate Changes on Cash and Cash Equivalents ........... (6,165) (4,811)
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ................... 8,384 (17,379)
Cash and Cash Equivalents at Beginning of Period ....................... 125,551 126,650
--------- ---------
Cash and Cash Equivalents at End of Period ............................. $ 133,935 $ 109,271
========= =========
The accompanying unaudited notes are an integral part of these consolidated
financial statements.
V D. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(1) BASIS OF PRESENTATION
The consolidated financial statements included herein have been prepared by
the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission (the "SEC"). Certain information in footnote
disclosures normally included in financial statements has been condensed or
omitted in accordance with the rules and regulations of the SEC. These
statements should be read in conjunction with the Company's Annual Report for
the fiscal year ended December 31, 2000, filed on Form 8-K with the SEC
(the "2000 Form 10-K"). The balance sheet amounts at December
31, 2000 in this report were extracted from the Company's audited 2000 financial
statements included in the 2000 Form 10-K. Certain prior period amounts have
been reclassified to conform to the current-year financial statement
presentation. The information set forth in these statements may be subject to
normal year-end adjustments. The information reflects all adjustments that, in
the opinion of management, are necessary to present fairly the Company's results
of operations, financial position and cash flows for the periods indicated. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period. The
results of operations for the six months ended July 1, 2001 are not necessarily
indicative of the results for the entire fiscal year.
During July 2001, the Company approved a plan to sell its Security and
Detection Systems business. The results of operations of the Security and
Detection Systems business were previously reported as part of the Instruments
segment. During October 2001, the Company also approved a plan to sell its Fluid
Sciences segment. The Company has accounted for the plan to sell its Security
and Detection Systems business and Fluid Sciences segment as discontinued
operations in accordance with APB Opinion No. 30, Reporting the Results of
Operations, and, accordingly, the results of operations and related cash flows
of the Security and Detection Systems business and Fluid Sciences segment have
been segregated from continuing operations and reported as a separate line on
the Company's Consolidated Income Statements and Statements of Cash Flows. The
net assets of the Security and Detection Systems business and Fluid Sciences
segment are reflected as Net Assets of Discontinued Operations in the
accompanying Consolidated Balance Sheets.
At the Company's April 24, 2001 Annual Meeting of Stockholders, an increase
in the number of authorized shares of common stock from 100,000,000 shares to
300,000,000 shares was approved. At the April 24, 2001 Board of Directors'
meeting, a two-for-one stock split was approved and was effected on June 1, 2001
by means of a 100% stock dividend to stockholders of record as of May 15, 2001.
(2) ACQUISITIONS
On July 31, 2000, the Company completed its acquisition of NEN Life
Sciences, Inc. (NEN), a provider of state-of-the-art drug discovery products,
services, reagents and technologies to the life sciences industry. Details of
the transaction and pro forma financial information were reported on a Current
Report on Form 8-K filed with the SEC on August 1, 2000 and in the 2000 Form
10-K.
Unaudited pro forma operating results for the Company for the six months
ended July 2, 2000, assuming the acquisition of NEN was completed as of January
3, 2000, would be as follows: sales of $855.0 million; net income of $43.2
million; basic and diluted earnings of $.43 and $.42 per share, respectively.
The unaudited pro forma financial information is provided for informational
purposes only. It is not necessarily indicative of the Company's operating
results that would have occurred had the acquisition been consummated on the
date for which the consummation of the acquisition is being given effect, nor is
it necessarily indicative of the Company's future operating results. The
unaudited pro forma financial information does not give effect to acquisitions,
other than NEN, does not adjust for businesses divested and does not adjust for
foreign exchange. The pro forma amounts exclude acquisition related charges of
$24.3 million for purchased in-process research and development related to NEN.
(3) RESTRUCTURING CHARGES
The Company recorded a pre-tax restructuring charge of $15.1 million during the
fourth quarter of 2000 as a result of the continued transformation of the
portfolio of businesses within the Life Sciences and Optoelectronics segments
(the "2000 plan") These charges related to the Company's Life Sciences and
Optoelectronics segments. The principal actions in the restructuring plans
included close-down or consolidation of a number of offices and facilities,
transfer of assembly activities to lower cost geographic locations, disposal of
underutilized assets and general cost reductions. Details of the 2000 plan are
discussed more fully in the 2000 Form 10-K.
The following table summarizes the restructuring activity related to the
2000 plan:
SIX MONTHS ENDED
JULY 1, 2001
----------------
(IN MILLIONS)
Accrued restructuring costs at beginning of period .. $ 15.1
Charges ............................................. (7.9)
-------
Accrued restructuring costs at end of period ........ $ 7.2
=======
The Company finalized its restructuring plans related to its acquisition of
the Analytical Instruments Division (AI) of PE Corp. (May 1999) during 2000.
Additionally, the Company recorded approximately $4 million as accrued
restructuring costs in connection with the NEN acquisition in August 2000. These
plans include actions primarily to integrate the operations of the acquired
businesses and improve their cost structures through consolidation or shutdown
of certain facilities, workforce and overhead reductions and the termination of
certain leases and other contractual obligations.
The following table summarizes the restructuring activity related to the AI
and NEN acquisitions:
SIX MONTHS ENDED
JULY 1, 2001
----------------
(IN MILLIONS)
Accrued restructuring costs at beginning of period .. $ 32.3
Charges ............................................. (10.1)
-------
Accrued restructuring costs at end of period ........ $ 22.2
=======
Cash outlays during the six months ended July 1, 2001 were $14.7 million for
all of these plans. The majority of the remaining restructuring actions at July
1, 2001 are expected to occur in fiscal 2001 and early fiscal 2002.
(4) INVENTORIES
Inventories consisted of the following:
JULY 1, DECEMBER 31,
2001 2000
-------- ------------
(IN THOUSANDS)
Raw materials .... $ 67,131 $ 61,564
Work in progress . 47,909 46,785
Finished goods ... 102,173 82,177
-------- --------
$217,213 $190,526
======== ========
(5) COMPREHENSIVE INCOME
Comprehensive income consisted of the following:
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ----------------
JULY 1, JULY 2, JULY 1, JULY 2,
2001 2000 2001 2000
---- ---- ---- ----
(IN THOUSANDS)
Net income ..................................... $ 29,409 $ 35,573 $ 52,905 $ 51,816
Other comprehensive income (loss), net of tax:
Gross foreign currency translation
adjustments .................................. (4,829) (7,144) (19,407) (17,937)
Unrealized gains (losses) on securities:
Gains (losses) arising during the period ..... 3,473 6,670 (736) 6,740
Reclassification adjustment .................. -- (96) -- (96)
-------- -------- -------- --------
Net unrealized gains (losses) .................. 3,473 6,574 (736) 6,644
-------- -------- -------- --------
(1,356) (570) (20,143) (11,293)
-------- -------- -------- --------
Comprehensive income ........................... $ 28,053 $ 35,003 $ 32,762 $ 40,523
======== ======== ======== ========
The components of accumulated other comprehensive loss were as follows:
JULY 1, DECEMBER 31,
2001 2000
-------- ------------
(IN THOUSANDS)
Foreign currency translation adjustments . $(59,351) $(39,945)
Unrealized gains on securities ........... 167 903
-------- --------
Accumulated other comprehensive loss ..... $(59,184) $(39,042)
======== ========
(6) INDUSTRY SEGMENT INFORMATION
The Company's businesses are reported as three reportable segments which
reflect the Company's management and structure under three strategic business
units (SBUs); Life Sciences, Optoelectronics and Instruments. The accounting
policies of the reportable segments are the same as those described in Note 1 of
the 2000 Form 10-K. The Company evaluates the performance of its operating
segments based on operating profit. Intersegment sales and transfers are not
significant. Unaudited sales and operating profit information by segment for the
first six months of 2001 and 2000 are discussed in Item 2 of this Quarterly
Report on Form 10-Q and are considered an integral part of this note.
(7) DISCONTINUED OPERATIONS
During October 2001, the Board of Directors approved a plan to sell the
Fluid Sciences segment. As such, the Company has accounted for this segment as a
discontinued operation in accordance with APB Opinion No. 30 and, accordingly,
the results of operations and related cash flows of the Fluid Sciences segment
have been segregated from continuing operations and reported as a separate line
on the Company's Consolidated Income Statements and Statements of Cash Flows.
The net assets of the Fluid Sciences segment are reflected as Net Assets of
Discontinued Operations in the accompanying Consolidated Balance Sheets.
In July 2001, the Board of Directors approved a plan to sell the Security
and Detection Systems business. The results of operations of the Security and
Detection Systems business were previously reported as part of the Instruments
segment. The Company has accounted for its Security and Detection Systems
business as a discontinued operation in accordance with APB Opinion No. 30, and,
accordingly, the results of operations of this business and related cash flows
have been segregated from continuing operations and reported as a separate line
on the Company's Consolidated Income Statements and Statements of Cash Flows.
The net assets of the business are reflected as Net Assets of Discontinued
Operations in the accompanying Consolidated Balance Sheets in accordance with
APB Opinion No. 30.
Summary operation results of the Fluid Sciences segment and the Security
and Detection Systems business were as follows:
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ----------------
JULY 1, JULY 2, JULY 1, JULY 2,
2001 2000 2001 2000
---- ---- ---- ----
(IN THOUSANDS)
Sales .................................... $ 78,922 $ 89,536 $ 169,720 $ 180,070
Costs and expenses ....................... 62,094 75,045 134,349 161,064
--------- --------- --------- ---------
Operating income from discontinued
operations ............................. 16,828 14,491 35,371 19,006
Other expense ............................ (1,541) (1,772) (3,397) (4,115)
--------- --------- --------- ---------
Operating income from discontinued
operations before income taxes ......... 15,287 12,719 31,974 14,891
Provision for income taxes ............... 5,833 4,253 12,052 7,578
--------- --------- --------- ---------
Income from discontinued operations, net
of income taxes ........................ $ 9,454 $ 8,466 $ 19,922 $ 7,313
========= ========= ========= =========
(8) NEW ACCOUNTING PRONOUNCEMENTS
The Company adopted Financial Accounting Standards Board Statement of
Financial Accounting Standards (SFAS) No. 137, Accounting for Derivative
Instruments and Hedging Activities -- Deferral of the Effective Date of SFAS No.
133, effective January 1, 2001. The statement requires companies to record
derivatives on the balance sheet as assets or liabilities, measured at fair
value. Gains or losses resulting from changes in the values of those derivatives
are accounted for depending on the use of the derivative and whether it
qualifies for hedge accounting. If a derivative is a hedge, depending on the
nature of the hedge, changes in the fair value of the derivative are either
offset against the change in fair value of the hedged item through earnings or
recognized in other comprehensive income until the hedged item is recognized in
earnings. The Company immediately records in earnings the extent to which a
hedge is not effective in achieving offsetting changes in fair value. The
adoption of SFAS No. 133 did not have a material effect on the Company's results
of operations or financial position.
In July 2001, the Financial Accounting Standards Board (FASB) issued
Statements of Financial Accounting Standards (SFAS) No. 141, Business
Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets. Under
these new Standards the FASB eliminated accounting for any mergers and
acquisitions as poolings of interests, eliminated amortization of goodwill and
indefinite life intangible assets, and established new impairment measurement
procedures for goodwill. For
calendar-year reporting companies, the standards become effective for all
acquisitions completed on or after June 30, 2001. Changes in financial statement
treatment for goodwill and intangible assets arising from mergers and
acquisitions completed prior to June 30, 2001 become effective January 1, 2002.
The Company is currently assessing the impact of implementing these standards.
(9) SUBSEQUENT EVENT
On November 13, 2001 the Company completed the acquisition of Packard
Bioscience Company (Packard). Packard is a leading supplier of automated liquid
handling, sample preparation tools and advanced biochip technologies and
generated sales of approximately $165 million for its fiscal year ended December
31, 2000. The transaction was a stock merger whereby the shareholders of Packard
received 0.311 shares of the Company's common stock for each share of Packard
common stock. Excluding assumed options, the Company expects to issue
approximately 21.7 million shares of its common stock in the transaction. The
transaction will be accounted for as a purchase in accordance with recently
issued SFAS No. 141, Business Combinations, and SFAS No. 142, Intangible Assets,
whereby the purchase price will be allocated to the assets, including all
intangible assets, and liabilities assumed based on their respective fair
values.
VI. OTHER INTERIM INFORMATION -- JULY 1, 2001 AND JULY 2, 2000
VI. A. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
ACQUISITIONS AND DIVESTITURES
On July 31, 2000, the Company completed its acquisition on NEN Life
Sciences, Inc. (NEN), a provider of state-of-the-art drug discovery products,
services, reagents and technologies to the life sciences industry. Details of
the transaction and pro forma financial information were reported on a current
report on Form 8-K filed with the SEC on August 1, 2000 and in the 2000 Form
10-K.
In July 2001 and October 2001, respectively, the Board of Directors
approved separate plans to sell the Security and Detection Systems business and
the Fluid Sciences segment. Both businesses have appropriately been reflected as
discontinued operations in the Company's consolidated financial statements.
DISCUSSION OF CONSOLIDATED RESULTS OF OPERATIONS
Revenues
Revenues for the second quarter were $331.8 million, up 7% from $309.2
million for the second quarter last year. For the six month period, revenues
increased to $666.7 million, up 7% from $620.9 million for the same period last
year. Both periods were affected by the acquisition of the NEN business, which
occurred in the second half of 2000. On an organic revenue basis, adjusted for
the impact of foreign exchange and the impact of acquisitions and divestitures,
revenues grew by 5% in the second quarter. Organic growth was driven by 12%
growth in Life Sciences, especially drug discovery tools and genetic screening,
9% growth in Instruments, especially chromatography, offset by a 6% decrease in
Optoelectronics.
Gross Margin
Gross margins as a percentage of sales improved to 47% from 44% in the
second quarter of 2001 and improved to 46% from 43% in the six-month period of
2001. This improvement is a direct reflection of the Company's improving
portfolio of businesses and product mix, strong focus on operations and
aggressive approach to cost controls, including low cost sourcing.
Research and Development
Research and development expenses increased $0.8 million and $3.0 million
for the quarter and six months ended July 1, 2001, respectively, versus the same
periods of 2000. The Company maintained research and development expense at
approximately 6% of sales for the 2001 periods despite higher revenues in 2001
versus 2000.
Selling, General and Administrative Expenses
Selling, general and administrative expenses as a percentage of sales
increased to 31% from 28% for the quarter and to 30% from 28% for the six month
period. This increase is primarily related to the goodwill amortization
resulting from the NEN acquisition, the costs of moving production facilities to
lower cost locations and costs associated with the integration of NEN.
Gains on Dispositions and Restructuring Credits
During the first quarter of 2001, the Company recognized $1.8 million in
previously deferred pre-tax gains relating to businesses previously divested.
During the first two quarters of 2000, the Company sold its micro-machined
sensors and specialty semiconductor businesses, resulting in a pre-tax gain of
$6.7 million and recognized $1.6 million of pre-tax gains from previously
deferred sales proceeds, both of which were recognized as Gains on Dispositions.
The financial results of the divested business for all periods were not material
to the consolidated results of the Company.
Other Expense, Net
Other expense was $7.2 million for the second quarter of 2001 versus $6.2
million for the same period of 2000. Other expense increased $6.7 million to
$19.1 million for the first six months of 2001, versus $12.4 million for the
same period of
2000. These increases were due primarily to the impact of higher interest
expense on increased debt levels resulting from recent acquisitions.
Income Tax Expense
Reported income tax expense as a percent of pre-tax income was approximately
33% and 28% for the first six months of 2001 and 2000, respectively. The
increase in the rate of income tax is largely attributable to nondeductible
goodwill from the acquisition of NEN.
The table below presents earnings per share from continuing operations
before nonrecurring items and goodwill and intangibles amortization, discussed
below under the caption "Segment Results of Operations":
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ----------------
JULY 1, JULY 2, JULY 1, JULY 2,
2001 2000 2001 2000
---- ---- ---- ----
(IN THOUSANDS EXCEPT PER SHARE DATA)
Sales ...................................................... $ 331,806 $ 309,169 $ 666,705 $ 620,921
Cost of Sales .............................................. 173,072 173,835 357,282 355,747
Research and Development Costs ............................. 19,435 18,643 40,665 37,687
Selling, General and Administrative Expenses ............... 90,093 80,421 176,815 160,951
--------- --------- --------- ---------
Operating Income from Continuing Operations ................ 49,206 36,270 91,943 66,536
Other Expense, Net ......................................... (7,199) (7,062) (19,078) (13,295)
--------- --------- --------- ---------
Income from Continuing Operations Before Income Taxes ...... 42,007 29,208 72,865 53,241
Provision for Income Taxes ................................. 10,917 7,626 20,037 13,846
--------- --------- --------- ---------
Income from Continuing Operations, Net of Income Tax ....... $ 31,090 $ 21,582 $ 52,828 $ 39,395
========= ========= ========= =========
Diluted Cash Earnings Per Share, from Continuing Operations $ 0.30 $ 0.21 $ 0.51 $ 0.39
========= ========= ========= =========
The table presented below reconciles adjusted income from continuing
operations to net income from continuing operations:
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ----------------
2001 2000 2001 2000
---- ---- ---- ----
(IN THOUSANDS EXCEPT PER SHARE DATA)
Adjusted Income from Continuing Operations
Before Income Taxes.............................................. $ 42,007 $ 29,208 $ 72,865 $ 53,241
Nonrecurring Items:
Revaluation of Inventory........................................... -- -- (514) --
Deferred Gain Recognition, Net of
Restructuring-Related Charges.................................. (4,325) 8,241 (4,479) 15,208
-------- -------- -------- --------
Net Nonrecurring Items................................... (4,325) 8,241 (4,993) 15,208
Goodwill and Intangibles Amortization.............................. (9,430) (6,638) (18,848) (12,497)
-------- -------- -------- --------
Income from Continuing Operations Before Income Taxes.............. 28,252 30,811 49,024 55,952
Provision for Income Taxes......................................... 8,297 8,157 16,041 15,902
-------- -------- -------- --------
Net Income from Continuing Operations.............................. $ 19,955 $ 22,654 $ 32,983 $ 40,050
======== ======== ======== ========
Earnings Per Share from Continuing Operations:
Basic............................................................ $ 0.20 $ 0.23 $ 0.33 $ 0.41
Diluted.......................................................... $ 0.19 $ 0.22 $ 0.32 $ 0.40
SEGMENT RESULTS OF OPERATIONS
Life Sciences
Revenues for the second quarter were $77.7 million versus $41.9 million for
the prior period, increasing 85%, and revenues for the first six months were
$146.9 million versus $81.6 million for the prior period, increasing 80%.
Revenues increased from the prior period as a result of the inclusion of
revenues from the NEN acquisition and increased revenues from the Company's drug
discovery and genetic screening businesses.
Operating profit for the second quarter was $9.4 million compared to $6.1
million for the prior period, increasing 53%, and for the first six months was
$13.0 million versus $10.4 million for the prior period, increasing 25%. The
increases, for both the quarter and the six month periods, were a result of the
addition of NEN, higher overall sales volume and increased profitability in the
genetic screening business.
Operating profit before net nonrecurring items and goodwill and intangibles
amortization for the second quarter was $15.2 million versus $6.3 million for
the prior period, increasing 142%, and was $25.7 million for the first six
months versus $11.1 million for the prior period, increasing 132%. For both 2001
periods, the principal element of the nonrecurring and amortization charges was
the goodwill amortization associated with the acquisition of NEN.
Optoelectronics
Revenues for the second quarter were $108.0 million versus $120.9 million
for the prior period, resulting in a decrease of 11%. For the first six months,
revenues were $228.9 million versus $235.4 million for the prior period,
resulting in a decrease of 3%. Higher revenues in telecom and digital imaging
were offset by lower revenues in the photography and semiconductor markets which
accounted for the decreases in both the quarter and the six month periods.
Operating profit for the second quarter was $16.2 million compared to $22.5
million for the prior period, decreasing 28%, and for the first six months was
$34.7 million compared to $42.6 million for the prior period, decreasing 19%.
The decline in operating profit for both periods is due to lower revenues, the
cost of moving production facilities to lower cost locations and the beneficial
impact of nonrecurring credits recorded in the prior year.
Operating profit before net nonrecurring items and goodwill and intangibles
amortization for the second quarter was $20.7 million versus $19.4 million for
the prior period, increasing 7%, and for the first six months was $40.9 million
versus $35.0 million for the prior period, increasing 17%. In the prior year,
significant nonrecurring items for the second quarter included restructuring
credits and for the six month period, certain nonrecurring pre-tax gains.
Instruments
Revenues for the second quarter were $146.1 million versus $146.3 million
for the prior period and for the first six months were $290.9 million versus
$304.0 million for the prior period, decreasing 4%. The decrease in revenues for
both periods is primarily attributable to the sale of the Company's Berthold
business in late 2000.
Operating profit for the second quarter was $14.6 million compared to $9.8
million for the prior period, increasing 48%, and for the first six months was
$29.3 million versus $21.0 million for the prior period, increasing 39%. The
increase for both periods of 2001 is attributable to the sale of higher-margin
new products and the benefits of restructuring actions in 2001, as well as
incremental restructuring charges recorded in 2000.
Operating profit before net nonrecurring items and goodwill and intangibles
amortization for the second quarter was $18.0 million versus $15.3 million for
the prior period, increasing 18%, and for the first six months was $34.2 million
versus $29.9 million, increasing 14%. The primary component of nonrecurring and
amortization charges is the amortization of goodwill.
FINANCIAL CONDITION
Short-term debt at July 1, 2001 was $228 million and was comprised primarily
of commercial paper borrowings of $222 million. The Company also has a $300
million revolving credit facility which expires in March 2002 and a $100 million
revolving credit facility expiring in March 2006. There were no outstanding
balances on either facility at July 1, 2001 or December 31, 2000. Long-term debt
at July 1, 2001 was approximately $590 million, consisting of $115 million of
unsecured notes which mature in 2005 and $475 million of convertible debentures.
The debentures are currently convertible into 10.8 million shares of the
Company's common stock at approximately $42.50 per share.
Cash and cash equivalents increased by $8.4 million to $133.9 million at the
end of the first six months of 2001. Net cash provided by continuing operating
activities for the first six months of 2001 was $4.0 million and was comprised
of net income from continuing operations before depreciation, amortization and
other noncash items of $76.9 million and a $72.8 million net change in certain
assets and liabilities. The net change in assets and liabilities was comprised
primarily of a $30.2 million increase in inventory, a $15.1 million decrease in
accrued restructuring costs and a $27.0 decrease in accounts payable and accrued
expenses. Capital expenditures for the first six months of 2001 were $40.5
million.
VII. FORWARD-LOOKING INFORMATION AND FACTORS AFFECTING FUTURE PERFORMANCE
This Quarterly Report contains "forward-looking" statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. For this purpose, any statements contained in
this Quarterly Report that relate to prospective events or developments are
deemed to be forward-looking statements. Words such as "believes,"
"anticipates," "plans," "expects," "will" and similar expressions are intended
to identify forward-looking statements. While the Company may elect to update
forward-looking statements in the future, it specifically disclaims any
obligation to do so, even if the Company's estimates change, and readers should
not rely on these forward-looking statements as representing the Company's views
as of any date subsequent to the date of this Quarterly Report. A number of
important
factors and uncertainties could cause actual results to differ materially from
those described in these forward-looking statements, including without
limitation the risk factors set forth in the Company's registration statement on
Form S-4, filed on August 3, 2001 with the SEC, under the caption, "Risk Factors
-- Risks Relating to PerkinElmer's Business," which risk factors are attached to
this Quarterly Report as Exhibit 99.1 and are expressly incorporated by
reference herein.
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 hereunto duly authorized.
PERKINELMER, INC.
Date: November 13, 2001 By: /s/ Robert F. Friel
-------------------------------------
Robert F. Friel
Senior Vice President and Chief
Financial Officer
(Principal Financial Officer)
VIII. Exhibits Index
23.1 Consent of Independent Public Accountants
99.1 Risk Factors set forth in the Company's registration
statement on Form S-4, filed on August 3, 2001 with the
SEC, under caption, "Risk Factors -- Risks Relating to
Perkin Elmer's Business."