-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MDFpY2muXrnfH6yd/ZpuzVwewRc6ebJIZ1UoAMsU9Wo8M6Q2834jONL03W6UNPAU hGGrgPZzbAf4wD/SOVRuZQ== 0000840467-96-000009.txt : 19960425 0000840467-96-000009.hdr.sgml : 19960425 ACCESSION NUMBER: 0000840467-96-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960424 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: BECKMAN INSTRUMENTS INC CENTRAL INDEX KEY: 0000840467 STANDARD INDUSTRIAL CLASSIFICATION: LABORATORY ANALYTICAL INSTRUMENTS [3826] IRS NUMBER: 951040600 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10109 FILM NUMBER: 96550057 BUSINESS ADDRESS: STREET 1: 2500 HARBOR BLVD CITY: FULLERTON STATE: CA ZIP: 92634 BUSINESS PHONE: 7148714848 10-Q 1 10-Q REPORT TO SEC FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 (Mark One) (X)Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 1996 OR ( )Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from __________ to __________ Commission File Number 001-10109 BECKMAN INSTRUMENTS, INC. (Exact name of registrant as specified in its charter) Delaware 95-104-0600 (State of Incorporation) (I.R.S. Employer Identification No.) 2500 Harbor Boulevard, Fullerton, California 92634 (Address of principal executive offices) (Zip Code) (714) 871-4848 (Registrant's telephone number including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes (X) No ( ). APPLICABLE ONLY TO CORPORATE ISSUERS: Outstanding shares of common stock, $0.10 par value, as of April 15, 1996: 29,028,056 shares. PART I FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Statements of Earnings for the three month periods ended March 31, 1996 and 1995 Condensed Consolidated Balance Sheets as of March 31, 1996 and December 31, 1995 Condensed Consolidated Statements of Cash Flows for the three month periods ended March 31, 1996 and 1995 Notes to Condensed Consolidated Financial Statements Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations PART II OTHER INFORMATION Item 1. Legal Proceedings Item 2. Changes In Securities Item 3. Defaults Upon Senior Securities Item 4. Submission of Matters to a Vote of Security-Holders Item 5. Other Information Item 6. Exhibits and Reports on Form 8-K BECKMAN INSTRUMENTS, INC. FIRST QUARTER REPORT CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Dollars in Millions, Except Amounts Per Share) Unaudited
Three Months Ended March 31, 1996 1995 ---- ---- Sales $224.8 $205.0 Operating costs and expenses: Cost of sales 104.9 97.2 Selling, general and administrative 73.7 65.2 Research and development 24.7 22.1 Restructuring charge - 3.1 ------ ------ 203.3 187.6 ------ ------ Operating income 21.5 17.4 Nonoperating income(expense): Interest income 1.3 1.3 Interest expense (3.1) (2.8) Other, net 0.8 (0.3) ------ ------ (1.0) (1.8) ------ ------ Earnings before income taxes 20.5 15.6 Income tax provision 6.8 5.3 ------ ------ Net earnings $ 13.7 $ 10.3 ====== ====== Weighted average common shares and common share equivalents-(thousands) 29,259 28,825 Net earnings per share $ 0.47 $ 0.36 Dividends declared per share $ 0.13 $ 0.11
See accompanying notes to condensed consolidated financial statements. BECKMAN INSTRUMENTS, INC. CONSOLIDATED BALANCE SHEETS (Dollars in Millions) Unaudited
March 31, December 31, 1996 1995 -------- ----------- Assets Current assets: Cash and equivalents $ 30.3 $ 26.2 Short-term investments 8.1 8.2 Trade receivables and other 276.5 288.8 Inventories 194.9 166.2 Deferred income taxes 26.6 29.4 Other current assets 13.2 14.5 ------ ------ Total current assets 549.6 533.3 Property, plant and equipment, net 249.5 252.1 Deferred income taxes 62.4 59.8 Other assets 66.1 62.6 ------ ------ Total assets $927.6 $907.8 ====== ====== Liabilities and Stockholders' Equity Current liabilities: Notes payable $ 23.7 $ 15.8 Accounts payable and accrued expenses 202.2 190.5 Income taxes 46.5 44.9 ------ ------ Total current liabilities 272.4 251.2 Long-term debt, less current maturities 171.5 162.7 Other liabilities 130.1 146.0 ------ ------ Total liabilities 574.0 559.9 Stockholders' equity 353.6 347.9 ------ ------ Total liabilities and stockholders'equity $927.6 $907.8 ====== ======
See accompanying notes to condensed consolidated financial statements. BECKMAN INSTRUMENTS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Millions) Unaudited
Three Months Ended March 31, 1996 1995 ---- ---- Cash Flows from Operating Activities Net earnings $ 13.7 $ 10.3 Adjustments to reconcile net earnings to net cash provided (used) by operating activities: Depreciation and amortization 20.7 18.6 Net deferred income taxes (0.1) (0.6) Changes in assets and liabilities: Trade receivables and other 11.0 11.3 Inventories (29.8) (10.6) Accounts payable and accrued expenses 15.2 (9.5) Restructuring reserve (2.5) (4.5) Accrued income taxes 1.6 2.6 Other (18.4) (19.3) ------ ------ Net cash provided (used) by operating activities 11.4 (1.7) ------ ------ Cash Flows from Investing Activities Additions to property, plant and equipment (20.3) (24.2) Net disposals of property, plant and equipment 3.5 3.3 Sales (purchases) of short-term investments 0.2 (3.4) ------ ------ Net cash used by investing activities (16.6) (24.3) ------ ------ Cash Flows from Financing Activities Dividends to stockholders (3.7) (3.1) Proceeds from issuance of stock 5.5 4.4 Purchase of treasury stock (7.7) (2.1) Notes payable borrowings, net 7.0 7.4 Long-term debt borrowings 9.3 - Long-term debt reductions - (0.5) Other (1.0) (0.5) Net cash provided ------ ------ by financing activities 9.4 5.6 ------ ------ Effect of exchange rates on cash and equivalents (0.1) (0.1) ------ ------ Increase (decrease) in cash and equivalents 4.1 (20.5) Cash and equivalents -- beginning of period 26.2 44.2 ------ ------ Cash and equivalents -- end of period $ 30.3 $ 23.7 ====== ====== Supplemental Disclosures of Cash Flow Information Cash paid during the period for: Interest $ 2.4 $ 1.8 Income taxes $ 5.1 $ 3.4 Noncash investing and financing activities: Purchase of equipment under capital lease obligation $ 1.0 $ 0.8
See accompanying notes to condensed consolidated financial statements. BECKMAN INSTRUMENTS, INC. Notes To Condensed Consolidated Financial Statements (Dollars in Millions, Except Amounts Per Share) 1 Report by Management In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring accruals, necessary for a fair presentation of the results for the periods. The statements are prepared in accordance with the requirements of Form 10-Q and do not include all disclosures required by generally accepted accounting principles or those made in the Annual Report on Form 10-K/A for 1995 which is on file with the Securities and Exchange Commission. The results of operations for the period ended March 31, 1996 are not necessarily indicative of the results to be expected for the year ending December 31, 1996. 2 Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of sales and expenses during the reporting period. Actual results could differ from those estimates. 3 Stock-Based Compensation The Company has adopted Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation." Accordingly, the Company continues to follow the guidance of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." As a result, compensation related to stock options is determined at the grant date as the difference between the grant price and the fair market value of the underlying common shares. Generally, the Company issues stock options with a grant price equal to the fair market value of the Company's common shares. 4 Earnings Per Share Earnings per share is computed including the effect of common share equivalents. Common share equivalents represent the dilutive effect of outstanding stock options. Primary earnings per share approximates fully diluted earnings per share. 5 Inventories Inventories are comprised of the following:
March 31, December 31, 1996 1995 -------- ----------- Finished Products $129.6 $117.7 Raw Materials, parts and assemblies 51.1 40.5 Work in-process 14.2 8.0 ------ ------ $194.9 $166.2 ====== ======
6 Investments Effective January 2, 1996, the Company acquired Hybritech Incorporated, a San Diego-based life sciences and diagnostic company, for a purchase price not material to the Company. The acquisition expanded the Company's ability to develop and manufacture high sensitivity immunoassays, including cancer tests. The acquisition was accounted for as a purchase. 7 Contingencies Litigation As previously reported, local authorities in Palermo (Sicily), Italy are investigating the activities of officials at a local government hospital and laboratory as well as representatives of the principal worldwide companies marketing diagnostic equipment in Palermo, including the Company's Italian subsidiary. The inquiry focuses on past leasing practices for placement of diagnostic equipment which were common industry-wide practices throughout Italy, but now are alleged to be improper. The court hearings scheduled for mid- February 1996 to allow the prosecutor to present evidence of improper conduct in order to persuade the Court to hold a trial were postponed to mid-May 1996. The Company believes the evidence in the case is weak and insufficient to support a criminal conviction. Since 1992 five toxic tort lawsuits have been filed in Maricopa County Superior Court, Arizona by a number of residents of the Phoenix/Scottsdale area against the Company and a number of other defendants, including Motorola, Inc., Siemens Corporation, the cities of Phoenix and Scottsdale, and others. The Company recently received a joint settlement offer from the plaintiffs in all five cases which is substantially lower than the settlement offer received in 1995. The Company is evaluating this offer and there is no assurance that a settlement will be reached. The Company is indemnified by SmithKline Beecham p.l.c., the successor of its former controlling stockholder, for any costs incurred in these matters in excess of applicable insurance. As previously reported, the Company is obligated to contribute to any resolution of a lawsuit filed by one of the tenants of the apartment houses built on property in Irvine, California formerly owned by the Company. At a recent Court conference, the trial of this matter was scheduled to begin in October 1996. The Company and its subsidiaries are involved in a number of lawsuits which the Company considers normal in view of its size and the nature of its business. The Company does not believe that any liability resulting from any such lawsuits, or the matters described above, will have a material adverse effect on its operations or financial position. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Dollars in millions, except per share amounts) Operations Sales for the first quarter ended March 31, 1996 were $224.8, an increase of $19.8 over the prior year. Excluding the impact of changes in foreign currency exchange rates, first quarter sales were higher by $19.0. Sales for the North American diagnostic business increased over the prior year, while the North American bioresearch business experienced lower sales. The comparison of the North American bioresearch sales over prior year is impacted by decreased government funding in 1996. International diagnostic and bioresearch sales increased by more than 8% over the prior year. European markets continue to be impacted by a recession and cost containment initiatives in several European health care systems. International sales are expected to continue to be impacted by weak markets, particularly in Europe. Operating income for the first quarter ended March 31, 1996 increased to $21.5, representing an increase of 23.6% over the prior year. Operating income in 1995 included a restructuring charge of $3.1 related to the reorganization and restructuring program completed in 1995. Cost of sales for the first quarter increased over the same period in the prior year, but declined slightly as a percentage of sales. Selling, general and administrative, and research and development expenses in the first quarter of 1996 increased over 1995, but represent only a slight increase as a percentage of sales over the prior year. The reorganization and restructuring plan announced in the fourth quarter of 1993 has resulted in year-to-date 1996 savings of about $12.4 which are mainly attributable to the reduction of more than 1,400 personnel from 1993. The Company anticipates savings from the restructuring program to be about $50 in 1996, but not incremental to earnings due to certain transition costs, general salary and cost increases, as well as fluctuating foreign currencies. Nonoperating expenses decreased by $0.8 compared to prior year, primarily as a result of foreign currency exchange gains. Earnings before income taxes for the first quarter compared to the same period of the prior year increased to $20.5 from $15.6 (1995 included a restructuring charge of $3.1). The effective tax rate decreased to 33% from 34% in the prior year as a result of a lower effective tax rate in the U.S. due to the utilization of foreign tax credits. Net earnings for the first quarter were $13.7 or $0.47 per share, representing an increase of 33.0% and 30.6%, respectively, over the prior year. Net earnings in 1995 included a $3.1 restructuring charge which decreased earning per share by $0.07. Financial Condition For the three months ended March 31, 1996, the Company had positive cash flow from operating activities of $11.4 and negative cash flow from investing activities of $16.6. This represents an increase in cash flows from net operating and investing activities of $20.8 from the same period in 1995. Contributing to the increase in cash flow from operating activities compared to 1995 was the change in accounts payable and accrued expenses while the increase in cash flow from investing activities from the prior year was as a result of decreased additions to property, plant and equipment and the change in short-term investments. The ratio of debt to capitalization at March 31, 1996 was 35.6% compared to 33.9% at December 31, 1995. The ratio of current assets to current liabilities at March 31, 1996 of 2.02 is slightly lower than December 31, 1995. The Company believes it has adequate financial resources to meet expected cash flow requirements for the foreseeable future. On March 7, 1996, the Company paid a quarterly cash dividend of $0.13 per share of common stock for a total of $3.7. On April 4, 1996, the Board of Directors declared a $0.13 per share dividend payable on June 6, 1996 to shareholders of record on May 17, 1996. On April 5, 1996, the Company filed a registration statement with the SEC on Form S-3 which was subsequently declared effective by the SEC, permitting the Company to issue up to $200 of debt during the next two years. PART II OTHER INFORMATION Item 1. Legal Proceedings As previously reported, the public prosecutor in Palermo (Sicily), Italy is investigating the activities of officials at a local government hospital and laboratory as well as representatives of the principal worldwide companies marketing diagnostic equipment in Palermo, including the Company's Italian subsidiary. The inquiry focuses on past leasing practices for placement of diagnostic equipment which were common industry-wide practices throughout Italy, but now are alleged to be improper. The court hearings scheduled for mid-February 1996 to allow the prosecutor to present evidence of improper conduct in order to persuade the Court to hold a trial were postponed to mid-May 1996. The Company believes the evidence in the case is weak and insufficient to support a criminal conviction. As previously reported, since 1992 five toxic tort lawsuits have been filed in Maricopa County Superior Court, Arizona by a number of residents of the Phoenix/Scottsdale area against the Company and a number of other defendants, including Motorola, Inc., Siemens Corporation, the cities of Phoenix and Scottsdale, and others. The Company recently received a joint settlement offer from the plaintiffs in all five cases which is substantially lower than the settlement offer received in 1995. The Company is evaluating this offer and there is no assurance that a settlement will be reached. The Company is indemnified by SmithKline Beecham p.l.c., the successor of its former controlling stockholder, for any costs incurred in these matters in excess of applicable insurance, and thus the outcome of these litigations, even if unfavorable to the Company, should have no material effect on the Company's operations or financial position. As previously reported, the Company is obligated to contribute to any resolution of a lawsuit filed by one of the tenants of the apartment houses built on property in Irvine, California formerly owned by the Company (Etezadi v. Prudential Insurance Company, et. al.). At a recent Court conference, the trial of this matter was scheduled to begin in October, 1996. The Company believes that any liability resulting from this lawsuit will not have a material adverse effect on the Company's operations or financial position. Item 2. Changes In Securities None. Item 3. Defaults Upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security-Holders The Annual Meeting of the Stockholders of the Company (the "Annual Meeting") was held on April 4, 1996. Three members of the Board of Directors whose terms expired at the 1996 Annual Meeting were elected to new terms expiring at the 1999 Annual Meeting. One member, Hugh K. Coble, was elected to replace David S. Tappan, Jr. who retired and whose term also expired at the 1996 Annual Meeting. Mr. Coble's term will expire at the 1999 Annual Meeting. The number of shares voting were as follows:
VOTES FOR VOTES WITHHELD ---------- -------------- Hugh K. Coble 23,846,324 253,931 Francis P. Lucier 23,707,935 392,320 John P. Wareham 23,923,660 176,595 Betty Woods 22,656,571 1,443,684
The remaining members of the Board of Directors who will continue in office and the year in which their terms expire are: Term expiring in 1997: Earnest H. Clark, Jr., Gavin S. Herbert, C. Roderick O'Neil and Louis T. Rosso; Term expiring in 1998: Carolyne K. Davis, Ph.D., Dennis C. Fill, Charles A. Haggerty and William N. Kelley, M.D. Item 5. Other Information Henry Wendt resigned from the Board of Directors in February of this year due to time constraints resulting from his involvement in current and new ventures. Charles A. Haggerty was elected by the Board in February to fill Mr. Wendt's position among the class of directors with terms expiring in 1998. Item 6. Exhibits and Reports on Form 8-K a) Exhibits 10. The Company's Executive Incentive Plan, adopted by the Company in 1996. 11. Statement re Computation of Per Share Earnings: This information is set forth in Note 4 Earnings Per Share of the Condensed Consolidated Financial Statements included in Part I herein. 15. Independent Accountants' Review Report, April 18, 1996 27. Financial Data Schedule b) Reports on Form 8-K None. Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BECKMAN INSTRUMENTS, INC. (Registrant) Date: April 23, 1996 by WILLIAM H. MAY William H. May Vice President, General Counsel and Secretary Date: April 23, 1996 by JAMES T. GLOVER James T. Glover Vice President and Controller (Principal Accounting Officer) EXHIBIT INDEX FORM 10-Q, FIRST QUARTER, 1996 Exhibit Number Description - ------- ----------- 10. The Company's Executive Incentive Plan, adopted by the Company in 1996. 11. Statement re Computation of Per Share Earnings: This information is set forth in Note 4 Earnings Per Share of the Condensed Consolidated Financial Statements included in Part I herein. 15. Independent Accountants' Review Report, April 18, 1996 27. Financial Data Schedule EX-10 2 THE COMPANY'S EXECUTIVE INCENTIVE PLAN Exhibit 10. BECKMAN FY 96 EXECUTIVE INCENTIVE PLAN CLASSES 12 AND 13 Background Key executives have two separate incentive opportunities with different time horizons and different performance measures. For the annual incentive opportunity, the focus will be on annual results in terms of Earnings Per Share Achievement as a Percent of Targeted EPS, with sales revenue and an individual performance multiplier as additional elements in determining the final incentive award. The second time horizon of incentive opportunity will be based on company "Economic Value Added" for a two-year cycle under a long-term incentive plan. ANNUAL (EPS) INCENTIVE Earnings per share continues to be a critical factor in the company's performance and valuation by the financial community. Because of its importance, the level of achievement of EPS as a percent of target is the fundamental measurement for annual incentive opportunity. The basic award guidelines for the degree of achievement are as follows:
EPS Achievement Award Percentage Percent of Target of Base Earnings _________________________________________ 104% 27.7% 102% 25.4% 100% 23.1% 98% 17.3% 96% 11.6% 94% 5.8% below 94% 0%
A pro rata percentage is calculated for achievement between the above award levels. Sales Revenue Modifier The award percentage for EPS achievement will be increased by 10% if EPS is at target or higher for FY 96 and the company's sales goal is met or exceeded. Individual Incentive Award Determination The final step in the calculation of individual incentive awards is the application of an individual performance multiplier to the award percentage for EPS achievement after any adjustment for sales revenue. EXCEL descriptions of overall performance levels will be the basis for determining individual performance multipliers. The performance multiplier, expressed as a percentage, is applied to the EPS award guideline. Base earnings for the period of incentive eligibility (eligible earnings) are then multiplied by the final award percentage to determine the amount of incentive award.
Overall Performance Performance Multiplier to be Applied to Award Guideline ___________________________________________________________ Exceptional 125% - 150% High 100% - 125% Good 75% - 100% Improved Performance Required 0
Example of How the Annual Incentive Award is Calculated Assume that EPS achievement is 102% of target and the company sales revenue goal is met or exceeded. In this example, the total annual award percentage before applying the individual performance multiplier is 27.9% (25.4% + 10% x 25.4% rounded). The 27.9% award will be increased to a 33.5% individual incentive award with an individual performance multiplier of 120%. Conversely, an individual performance modifier of 80% would reduce the 27.9% award to a 22.3% final EPS annual incentive award. Administration 1. All financial results will be measured on an "as reported" basis with no adjustment for any effect of currency fluctuations. 2. Qualifying events that may cause a modification to the original EPS award level milestones must be: 1) unanticipated; 2) non-recurring; 3) material in nature; and 4) not part of normal business operations. 3. To be eligible for an annual EPS incentive award, a participant must be in active pay status at the end of the measurement period. Partial payments will be made for retirees, as defined by the company's pension plan, who leave before the end of the fiscal year. BECKMAN TWO-YEAR ECONOMIC VALUE ADDED (EVA) INCENTIVE PLAN CYCLE FOUR BEGINNING FY 96 CLASSES 12 AND 13 Background The two year (long-term plan) incentive is based upon maintaining and improving the base amount of total company EVA through a two- year measurement cycle. EVA benchmarks for incentive eligibility will be established for each two-year cycle at its beginning and successive cycles overlap by one year. For example, the second year of cycle three, fiscal year 1996, will be the first year of cycle four. EVA Definition EVA is defined as the net operating profit after-tax, less a cost of capital charge on a thirteen-month average capital base. This performance measurement reflects the relationship between profits generated by the company and the cost of the balance sheet investment. Certain events may trigger a reassessment of the EVA targets for incentive eligibility. EVA Award Eligibility The EVA target for cycle four, ending December 31, 1997, is the midpoint between the threshold or beginning point for award eligibility and the planned EVA improvement for this period under the 1995-1999 Strategic Plan. For Class 12 and 13 executives, the achievement of target will generate a 10.0% of base earnings award. Attainment of the strategic plan EVA improvement will increase the award percentage to 15%. Gradations in performance above and below targeted EVA and the corresponding EVA award eligibility are depicted below.
EVA* CYCLE FOUR (1996 & 1997) Absolute EVA Final EVA Award __________________________________________________ maximum 20.0%
Individual Eligible Earnings for EVA Award Although the EVA measurement period is two years, the actual award calculation will be based upon an individual participant's annualized base earnings at the end of the second year of the two- year cycle. One year of eligible earnings is applied because of the overlapping nature of the two-year cycles. Deferred Stock Award Alternative Payment of the earned incentive will be made in cash, subject to standard withholding taxes and deductions, or a participant may elect to be paid in restricted stock. Details of the restricted stock payment alternative are described in the insert to this document. Administration 1. All financial results will be measured on an "as reported" basis with no adjustment for any effect of currency fluctuations. 2. Qualifying events that may cause adjustments to original approved EVA targets must be: 1) unanticipated; 2) non- recurring; 3) material in nature; and 4) not part of normal business operations. 3. To be eligible for an EVA incentive award, a participant must be in active pay status at the end of the two-year measurement period. Partial payments will be made in cash for retirees, as defined by the company's pension plan, who do not elect payment in restricted stock, and leave before completion of the EVA cycle. *The acronym EVA for economic value added is attributed to Stern Steward & Co. BECKMAN TWO-YEAR ECONOMIC VALUE ADDED (EVA) INCENTIVE PLAN - CYCLE FOUR RESTRICTED STOCK AWARD ALTERNATIVE The Organization and Compensation Committee of the Company's Board of Directors intends to accept requests to receive restricted stock in lieu of a cash payment of any award made under the Cycle Four EVA Incentive Plan. Restricted stock awards are made under the Incentive Compensation Plan of 1990, as amended, and the following terms: 1) Elections to receive restricted stock in lieu of cash must be made for the full amount of the award under this EVA Incentive Plan. The election must be made no later than August 1, 1997. 2) To encourage stock ownership, the amount of the award will be increased by a 33 1/3% premium and then converted into whole shares of Beckman common stock based on the closing price of Beckman common stock on the last trading day of the two-year EVA cycle. No fractional shares will be granted and any remainder which would have resulted in a fractional share will instead be paid in cash on the regular incentive payment date. 3) Restricted Stock will be issued pursuant to an agreement, which will provide that such stock cannot be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of for a twenty-four (24) month period beginning on the date of issuance (which will be the EVA incentive payment date established by the Company). However, these restrictions will lapse earlier in the event of termination due to death, total disability, or Normal or Late retirement (but not Early Retirement) under the Beckman Pension Plan. All shares awarded will be forfeited in the event of a voluntary termination due to Early Retirement during the twenty-four month period; provided, however, that where there has been a prior Section 83(b) election (and payment of applicable taxes) by an Early Retirement eligible employee, there will be no forfeiture of shares upon termination but, the restrictions on transferability will remain for the balance of the 24-month period. A voluntary termination other than by an Early Retirement eligible employee who has made a prior Section 83(b) election, causes forfeiture of the shares even if a prior Section 83(b) election was made. In the event of an involuntary termination, for cause or otherwise, no shares will be forfeited but the restrictions on transferability will remain in effect for the full 24-month period from the date of issuance of the Restricted Stock. Under current tax law, compensation income is not recognized until the earliest to occur of (i) the last day of the full 24- month period beginning on the date of issuance of the Restricted Stock, (ii) the date of occurrence of death or termination due to total disability, the date of eligibility for Normal Retirement (but not Early Retirement) under the Company's Pension Plan, or the date of issuance of Restricted Stock if eligible for Normal or Late Retirement under the Company's Pension Plan on that date, (iii) the date of any other termination of employment, if forfeiture does not occur as a result thereof, or (iv) the date of issuance of Restricted Stock, if an Section 83(b) election is made. The amount of income to be recognized by you will be equal to the closing price of Beckman common stock on the date of the applicable event described above, times the number of Beckman common shares awarded to you under this alternative. All applicable payroll taxes are due at that time also. IMPORTANT The Restricted Stock Agreement and Election Form will be distributed for your consideration closer to the election deadline. Information will be provided on the effect of such an election on certain of Beckman's other benefit plans as well as additional tax information. Certain reporting requirements under Section 16(a) of the Securities Exchange Act of 1934 apply. Also, participants are advised to consult with counsel in advance of making any election to determine potential Section 16(b) issues regarding the purchase and sale of the Company's common stock. BECKMAN FY 96 EXECUTIVE INCENTIVE PLAN CLASSES 14 THROUGH 16 Background Key executives have two separate incentive opportunities with different time horizons and different performance measures. For the annual incentive opportunity, the focus will be on annual results in terms of company Earnings Per Share Achievement as a Percent of Targeted EPS, with sales revenue and an individual performance multiplier as additional elements in determining the final incentive award. The second time horizon of incentive opportunity will be based on company "Economic Value Added" for a two-year cycle under a long-term incentive plan. ANNUAL (EPS) INCENTIVE Earnings per share continues to be a critical factor in the company's performance and valuation by the financial community. Because of its importance, the level of achievement of EPS as a percent of target is the fundamental measurement for the annual incentive opportunity. The basic award guidelines for the degree of achievement are as follows:
EPS Achievement Award Percentage Percent of Target of Base Earnings ______________________________________________ 104% 35.3% 102% 32.3% 100% 29.4% 98% 22.1% 96% 14.7% 94% 7.4% below 94% 0%
A pro rata percentage is calculated for achievement between the above award levels. Sales Revenue Modifier The award percentage for EPS achievement will be increased by 10% if EPS is at target or higher for FY 96 and the company's sales goal is met or exceeded. Individual Incentive Award Determination The final step in the calculation of individual incentive awards is the application of an individual performance multiplier to the award percentage for EPS achievement after any adjustment for sales revenue. EXCEL descriptions of overall performance levels will be the basis for determining individual performance multipliers. The performance multiplier, expressed as a percentage, is applied to EPS award guideline. Base earnings for the period of incentive eligibility (eligible earnings) are then multiplied by the final award percentage to determine the amount of incentive award.
Overall Performance Performance Multiplier to be Applied to Award Guideline ____________________________________________________________ Exceptional 125% - 150% High 100% - 125% Good 75% - 100% Improved Performance Required 0
Example of How the Annual Incentive Award is Calculated Assume that EPS achievement is 102% of target and the company sales revenue goal is met or exceeded. In this example, the total annual award percentage before applying the individual performance multiplier is 35.5% (32.3% + 10% x 32.3% rounded). The 35.5% award will be increased to a 42.6% individual incentive award with an individual performance multiplier of 120%. Conversely, an individual performance modifier of 80% would reduce the 35.5% award to a 28.4% final EPS annual incentive award. Administration 1. All financial results will be measured on an "as reported" basis with no adjustment for any effect of currency fluctuations. 2. Qualifying events that may cause a modification to the original approved EPS award level milestones must be: 1) unanticipated; 2) non-recurring; 3) material in nature; and 4) not part of normal business operations. 3. To be eligible for an annual EPS incentive award, a participant must be in active pay status at the end of the measurement period. Partial payments will be made for retirees, as defined by the company's pension plan, who leave before the end of the fiscal year. BECKMAN TWO-YEAR ECONOMIC VALUE ADDED (EVA) INCENTIVE PLAN CYCLE FOUR BEGINNING FY 96 CLASSES 14 THROUGH 16 Background The two year (long-term plan) incentive is based upon maintaining and improving the base amount of total company EVA through a two- year measurement cycle. EVA benchmarks for incentive eligibility will be established for each two-year cycle at its beginning and successive cycles overlap by one year. For example, the second year of cycle three, fiscal year 1996, will be the first year of cycle four. EVA Definition EVA is defined as the net operating profit after-tax, less a cost of capital charge on a thirteen-month average capital base. This performance measurement reflects the relationship between profits generated by the company and the cost of the balance sheet investment. Certain events may trigger a reassessment of the EVA targets for incentive eligibility. EVA Award Eligibility The EVA target for the cycle four, ending December 31, 1997, is the midpoint between the threshold or beginning point for award eligibility and the planned EVA improvement for this period under the 1995-1999 Strategic Plan. For Class 14-16 executives, the achievement of target will generate a 12.6% of base earnings award. Attainment of the strategic plan EVA improvement will increase the award percentage to 18.9%. Gradations in performance above and below the targeted EVA are depicted below.
EVA CYCLE FOUR (1996 & 1997) Absolute EVA Final EVA Award __________________________________________________ maximum 25.2%
Individual Eligible Earnings for EVA Award Although the EVA measurement period is two years, the actual award calculation will be based upon an individual participant's annualized base earnings at the end of the second year of the two- year cycle. One year of eligible earnings is applied because of the overlapping nature of the two-year cycles. Deferred Stock Award Alternative Payment of the earned incentive will be made in cash, subject to standard withholding taxes and deductions, or a participant may elect to be paid in restricted stock. Details of the restricted stock payment alternative are described in the insert to this document. Administration 1. All financial results will be measured on an "as reported" basis with no adjustment for any effect of currency fluctuations. 2. Qualifying events that may cause adjustments to original approved EVA targets must be: 1) unanticipated; 2) non- recurring; 3) material in nature; and 4) not part of normal business operations. 3. To be eligible for an EVA incentive award, a participant must be in active pay status at the end of the two-year measurement period. Partial payments will be made in cash for retirees, as defined by the company's pension plan, who do not elect payment in restricted stock, and leave before completion of the EVA cycle. The acronym EVA for economic value added is attributed to Stern Steward & Co. BECKMAN TWO-YEAR ECONOMIC VALUE ADDED (EVA) INCENTIVE PLAN - CYCLE FOUR RESTRICTED STOCK AWARD ALTERNATIVE The Organization and Compensation Committee of the Company's Board of Directors intends to accept requests to receive restricted stock in lieu of a cash payment of any award made under the Cycle Four EVA Incentive Plan. Restricted stock awards are made under the Incentive Compensation Plan of 1990, as amended, and the following terms: 1) Elections to receive restricted stock in lieu of cash must be made for the full amount of the award under this EVA Incentive Plan. The election must be made no later than August 1, 1997. 2) To encourage stock ownership, the amount of the award will be increased by a 33 1/3% premium and then converted into whole shares of Beckman common stock based on the closing price of Beckman common stock on the last trading day of the two-year EVA cycle. No fractional shares will be granted and any remainder which would have resulted in a fractional share will instead be paid in cash on the regular incentive payment date. 3) Restricted Stock will be issued pursuant to an agreement, which will provide that such stock cannot be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of for a twenty-four (24) month period beginning on the date of issuance (which will be the EVA incentive payment date established by the Company). However, these restrictions will lapse earlier in the event of termination due to death, total disability, or Normal or Late retirement (but not Early Retirement) under the Beckman Pension Plan. All shares awarded will be forfeited in the event of a voluntary termination due to Early Retirement during the twenty-four month period; provided, however, that where there has been a prior Section 83(b) election (and payment of applicable taxes) by an Early Retirement eligible employee, there will be no forfeiture of shares upon termination but, the restrictions on transferability will remain for the balance of the 24-month period. A voluntary termination other than by an Early Retirement eligible employee who has made a prior Section 83(b) election, causes forfeiture of the shares even if a prior Section 83(b) election was made. In the event of an involuntary termination, for cause or otherwise, no shares will be forfeited but the restrictions on transferability will remain in effect for the full 24-month period from the date of issuance of the Restricted Stock. Under current tax law, compensation income is not recognized until the earliest to occur of (i) the last day of the full 24- month period beginning on the date of issuance of the Restricted Stock, (ii) the date of occurrence of death or termination due to total disability, the date of eligibility for Normal Retirement (but not Early Retirement) under the Company's Pension Plan, or the date of issuance of Restricted Stock if eligible for Normal or Late Retirement under the Company's Pension Plan on that date, (iii) the date of any other termination of employment, if forfeiture does not occur as a result thereof, or (iv) the date of issuance of Restricted Stock if an Section 83(b) election is made. The amount of income to be recognized by you will be equal to the closing price of Beckman common stock on the date of the applicable event described above, times the number of Beckman common shares awarded to you under this alternative. All applicable payroll taxes are due at that time also. IMPORTANT The Restricted Stock Agreement and Election Form will be distributed for your consideration closer to the election deadline. Information will be provided on the effect of such an election on certain of Beckman's other benefit plans as well as additional tax information. Certain reporting requirements under Section 16(a) of the Securities Exchange Act of 1934 apply. Also, participants are advised to consult with counsel in advance of making any election to determine potential Section 16(b) issues regarding the purchase and sale of the Company's common stock. BECKMAN FY '96 OFFICER EXECUTIVE INCENTIVE PLAN TREASURER AND DIRECTOR, CORPORATE BUSINESS DEVELOPMENT AND LICENSING Bonus Eligibility The key elements in determining incentive awards are: 1) EPS Achievement 2) Sales Revenue, and 3) Individual overall EXCEL rating EPS Achievement Earnings per share continues to be a critical factor in the company's performance and valuation by the financial community. Because of its importance, the level of achievement of EPS as a percent of target is the fundamental measurement for the annual incentive opportunity. The basic award guidelines for the degree of achievement are as follows:
EPS Achievement Award Percentage Percent of Target* of Base Earnings ______________________________________________ 104% 30.0% 102% 22.0% 100% 14.0% 98% 10.5% 96% 7.0% 94% 3.5% below 94% 0%
A pro rata incentive award percentage is calculated for gradations between achievement levels. Sales Revenue Modifier The award percentage for EPS achievement will be increased by 10% if EPS is at target or higher for FY '96 and the company's sales goal is met or exceeded. Individual Incentive Award Determination The final step in the calculation of individual incentive awards is the application of an individual performance multiplier to the award percentage for EPS achievement after any adjustment for sales revenue. EXCEL descriptions of overall performance levels will be the basis for determining individual performance multipliers. The performance multiplier, expressed as a percentage, is applied to the EPS award guideline. Base earnings for the period of incentive eligibility (eligible earnings) are then multiplied by the final award percentage to determine the amount of incentive award.
Performance Multiplier to be Overall Performance Applied to Award Guideline ___________________________________________________________ Exceptional 125% - 150% High 100% - 125% Good 75% - 100% Improved Performance Required 0%
Example of How the Annual Incentive Award is Calculated Assume that EPS achievement is 100% of target and the company sales revenue goal is met or exceeded. In this example, the total annual award percentage before applying the individual performance multiplier is 15.4% (14.0% + 10% x 14.0%). The 15.4% award will be increased to a 18.5% individual incentive award with an individual performance multiplier of 120%. Conversely, an individual performance modifier of 80% would reduce the 15.4% award to a 12.3% final EPS incentive award. Administration 1. All financial results will be measured on an "as reported" basis with no adjustment for any effect of currency fluctuations. 2. Qualifying events that may cause a modification to the original EPS award level milestones must be: 1) unanticipated; 2) non-recurring; 3) material in nature; and 4) not part of normal business operations. 3. To be eligible for an incentive award, a participant must be in active pay status at the end of the measurement period. Exceptions may be approved on a pro rata basis for participants who retire in midyear or other special circumstances. EXECUTIVE INCENTIVE AWARD GUIDELINES PRESIDENT AND CHIEF OPERATING OFFICER FY 96 ANNUAL (EPS) INCENTIVE
EPS Achievement Percent of Target Award Percentage _________________________________________ 104% 46.2% 102% 42.4% 100% 38.5% 98% 28.9% 96% 19.3% 94% 9.6% below 94% 0.0%
A pro rata incentive award percentage is calculated for gradations between achievement levels.
EVA* CYCLE THREE (1995 & 1996) EVA* CYCLE FOUR (1996 & 1997) Absolute EVA Final EVA Absolute EVA Final EVA Award Award __________________________ ___________________________ maximum 33.0% maximum 33.0% >maximum 33.0%
A pro rata incentive award is calculated for gradations between EVA improvement and achievement levels. *The acronym EVA for economic value added is attributed to Stern Steward & Co.
EXECUTIVE INCENTIVE AWARD GUIDELINES CHIEF EXECUTIVE OFFICER FY 96 ANNUAL INCENTIVE EPS Achievement Percent of Target* Award Percentage _________________________________________ 104% 50.4% 102% 46.2% 100% 42.0% 98% 31.5% 96% 21.0% 94% 10.5% below 94% 0.0%
A pro rata incentive award percentage is calculated for gradations between achievement levels.
EVA* CYCLE THREE (1995 & 1996) EVA* CYCLE FOUR (1996 & 1997) Absolute EVA Final EVA Absolute EVA Final EVA Award Award __________________________ _____________________________ maximum 36.0% maximum 36.0% >maximum 36.0%
A pro rata incentive award is calculated for gradations between EVA improvement and achievement levels. *The acronym EVA for economic value added is attributed to Stern Steward & Co. EX-15 3 INDEPENDENT ACCOUNTANTS' REVIEW REPORT KPMG Peat Marwick LLP Exhibit 15 Certified Public Accountants Orange County Office Center Tower 650 Town Center Drive Costa Mesa, CA 92626 Independent Accountants' Review Report The Stockholders and Board of Directors Beckman Instruments, Inc: We have reviewed the condensed consolidated balance sheet of Beckman Instruments, Inc. and subsidiaries as of March 31, 1996, and the related condensed consolidated statements of earnings and cash flows for the three-month periods ended March 31, 1996 and 1995. These condensed consolidated financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical review procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of Beckman Instruments, Inc. and subsidiaries as of December 31, 1995, and the related consolidated statements of operations and cash flows for the year then ended (not presented herein); and in our report dated January 19, 1996, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 1995, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. KPMG PEAT MARWICK LLP Orange County, California April 18, 1996 EX-27 4 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Condensed Consolidated Balance Sheet and the Condensed Consolidated Statement of Earnings and is qualified in its entirety by reference to such financial statements. 1,000,000 3-MOS DEC-31-1996 MAR-31-1996 30 8 288 11 195 550 637 387 928 272 172 0 0 3 351 928 188 225 80 105 0 0 3 21 7 14 0 0 0 14 0.47 0.47
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