-----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, RVisr1UNAOJhdqkFC/pG7HOtxqBJFuw4UdYHyg7L9/KWygF0diT4FxUp3W7KQHve acPc7z9dMEXtrt3USYoQcA== 0000840467-97-000006.txt : 19970222 0000840467-97-000006.hdr.sgml : 19970222 ACCESSION NUMBER: 0000840467-97-000006 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970213 SROS: NYSE 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-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-10109 FILM NUMBER: 97531065 BUSINESS ADDRESS: STREET 1: 2500 HARBOR BLVD CITY: FULLERTON STATE: CA ZIP: 92634 BUSINESS PHONE: 7148714848 10-K 1 FORM 10-K REPORT TO SEC FORM 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1996 Commission File Number 001-10109 BECKMAN INSTRUMENTS, INC. 2500 Harbor Boulevard, Fullerton, California 92834 (714) 871-4848 (Principal Executive Offices) State of Incorporation: Delaware I.R.S. Employer Identification No.: 95-104-0600 Securities registered pursuant to Section 12(b) of the Act: Title of each class: Common Stock, $.10 par value Name of each exchange on which registered: New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None 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 ( ). Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to the Form 10-K. (X) Aggregate market value of voting stock held by non-affiliates of the registrant as of January 31, 1997: $1,143,263,549. Common Stock, $.10 par value, outstanding as of January 31, 1997: 28,943,381 shares. Documents incorporated by reference in this report: Documents incorporated Form 10-K part number Annual Report to stockholders for the fiscal year ended December 31, 1996 Part I and Part II Proxy Statement for the 1997 Annual Meeting of Stockholders to be held on April 3, 1997 Part III BECKMAN INSTRUMENTS, INC. PART I Item 1. Business Beckman Instruments, Inc. ("Beckman" or "the Company") is one of the world's leading manufacturers of instrument systems and test kits that make laboratories more efficient by simplifying and automating chemistry and biology based analytical procedures. The Company designs, manufactures, markets and services a broad range of laboratory instrument systems, reagents and related products, which customers typically use to conduct basic scientific research, new product research and development or diagnostic analysis of patient samples. In 1996 approximately 63 percent of total sales were for diagnostic applications, principally in hospital laboratories, while approximately 37 percent of sales were for life science applications in universities, medical schools and research institutes, or new product research and development in pharmaceutical and biotechnology companies. Approximately 50% of reported sales were to customers outside the United States. Background The Company was founded in 1934 by Dr. Arnold O. Beckman to manufacture analytical instruments and became a publicly traded corporation in 1952, subsequently being listed on the New York Stock Exchange in 1955. In 1968 the Company expanded its laboratory instrument focus to include health care applications in clinical diagnostics. Beckman was acquired by SmithKline Corporation to form SmithKline Beckman Corporation ("SmithKline Beckman") in 1982, and the Company was operated as a subsidiary of SmithKline Beckman until 1989 when it was divested as part of a transaction involving the merger of SmithKline Beckman and Beecham Group p.l.c. ("Beecham"). Since that time Beckman has operated as a fully independent publicly owned company. Simplification and Automation of Laboratory Processes The Company's primary expertise and activity is the integration of chemical, biological, engineering and software sciences into complete systems that simplify and automate biologically focused laboratory processes and the distribution and support of those systems around the world. These laboratory processes can generally be grouped into four categories: Synthesis and Sample Preparation/Handling - Synthesizing compounds useful in subsequent analysis and scientific investigation or placing material into a proper container, with necessary pretreatment, dilution, measurement, weighing and identification. Separation - Isolating materials of interest from extraneous material or separating mixtures into individual constituents, often in preparation for subsequent processing and measurement. Detection, Measurement and Characterization - Determining the identity, structure, or quantity of specific analytes (compounds or molecules of interest) present in sample specimens. Data Processing - Acquiring, reporting, analyzing, archiving or calculating the results of laboratory analysis. Beckman's experience, knowledge and ability in simplifying and automating these processes for biological laboratories forms a technological continuum that extends across the Company. From this common technical base comes a range of products that are configured to meet specific needs of academic research, pharmaceutical and biotechnology companies, hospitals, physicians' offices and reference laboratories (large central laboratories to which hospitals and physicians refer specialized tests). By serving several customer groups with differing needs related through common science, the Company has the opportunity to broadly apply its technology. There is a corresponding scientific and technical continuum reflected in customer laboratories. Virtually all new analytical methods and tests originate in academic research in universities and medical schools. If the utility of a new method or test is demonstrated by fundamental research, it often will then be used by pharmaceutical investigators, biotechnology companies, teaching hospitals or specialized clinical laboratories in an investigatory mode. In some cases these new techniques eventually emerge in routine, high volume clinical testing at hospitals and reference labs. Generally instruments used at each stage from research to routine clinical applications employ the same fundamental processes but may differ in operating features such as number of tests performed per hour and degree of automation. Markets Beckman's products facilitate a wide range of laboratory processes in facilities concerned with cells, sub-cellular particles, biochemical compounds and analysis of patient samples. In 1996 the worldwide market for the types of products the Company provides was about $6 billion. Slightly over one-half of this market was in clinical diagnostic applications, with the remaining portion of the market in more general purpose life science applications. Other similar or related product categories not currently offered by the Company represent an additional market potential which is estimated to be approximately $10 billion. The size and growth of markets for the Company's products are influenced by technological innovation in bioanalytical practice, government funding for basic and disease related research (for example, heart disease, AIDS and cancer), research and development spending by biotechnology and pharmaceutical companies, health care spending and physician practice. Products The Company offers a wide range of instrument systems and related products, including consumables, accessories, and support services, which can be grouped into categories by type of laboratory process or application: Synthesis and Sample Preparation/Handling Separation Processes Detection, Measurement and Characterization Data Processing Automated General Chemistry for Clinical Diagnostics Special Chemistry Applications for Clinical Diagnostics PRODUCT SALES AS A PERCENT OF TOTAL PRODUCT SALES FOR CATEGORIES REPRESENTING MORE THAN 10 PERCENT OF SALES 1996 1995 1994 ---- ---- ---- Separation Processes 22 26 28 Automated General Chemistry for Clinical Diagnostics 38 41 40 Special Chemistry Applications for Clinical Diagnostics 25 19 20 Synthesis and Sample Preparation/Handling DNA Synthesizers DNA synthesizers automate the process of making synthetic oligonucleotides from organic chemicals. The Beckman Oligo Series 1000 DNA Synthesizers include a single user one-column system and a multi-user eight column system. Both systems reduce the time required for synthesis and inform the user of synthesis progress by providing reaction and reagents status throughout the process. In 1995 the Company introduced its UltraFAST synthesis chemistry in a packaging which is also compatible with certain competitive DNA synthesizers. Oligo systems sell in the $18,000 to $30,000 price range. Biorobotic Workstations The Biomek(R) automated laboratory workstations perform complex operations involving liquids, including dispensing measured samples, adding reagents, diluting, mixing and transferring small volumes between reaction vessels. The workstations handle multiple samples in parallel and may be equipped with a photometer for detection purposes. The second generation Biomek 2000 workstation includes an easy-to-use Windows*-based BioWorks(TM) operating system that can be easily programmed to automate complex and repetitive tasks, including sample preparation for DNA sequencing and automated screening of chemical libraries for new pharmaceutical drugs. Several new applications and tools were added to the Biomek during 1996, including a kit to produce samples of pure DNA from plasmids and a high density replication tool to speed up certain processes by using new 384-well microtitre plates. Biomek systems range in price from $40,000 to over $80,000. (*Windows is a trademark of Microsoft Corporation.) In December 1996 the Company acquired the laboratory robotics division of Sagian Inc. of Indianapolis, Indiana. By combining Sagian's scheduling software and robotics with its own biorobotics systems, the Company enhanced its ability to serve the pharmaceutical industry's need for high-throughput screening (HTS) of candidate compounds for new drugs. Such systems typically sell for $200,000 to $400,000. Separation Processes Centrifuges Centrifuges separate liquid sample mixtures on the basis of density (weight per unit volume) differences between the mixture's components. Samples are put into tubes which are placed in rotors and spun at speeds varying from a few thousand to 120,000 revolutions per minute ("rpm"). The resulting centrifugal forces, which can exceed 800,000 times the force of gravity, cause sample components to separate according to their density. Centrifuges are used for the nondestructive separation of protein and DNA fractions, cellular components and other materials of interest in modern biology and biotechnology. In addition to efficiency (low power consumption), reliability and an environmentally friendly design (e.g., without freon) on many models, Beckman centrifuges are distinguished from those of competitors by the wide variety of unique rotor, tube and adapter designs available to meet the precise needs of customer applications, including the separation of blood cells from serum, an important use in clinical diagnostic laboratories. Beckman manufactures a broad line of centrifuges with varying speed characteristics ranging from "low speed" (few thousand rpm) to "high speed" (10,000 to 35,000 rpm) to "ultracentrifuges" (35,000 to 120,000 rpm) and sample capacities ranging from microliters (one millionth of a liter) to liters. The Avanti(R) family of centrifuges being introduced by the Company provides a revolutionary high-torque drive system which accelerates and brakes in half the time of conventional high- speed drives, thereby significantly reducing the time required to process typical samples. Prices of the Company's centrifuges vary from about $2,000 for a small low speed centrifuge to over $50,000 for an ultracentrifuge and over $100,000 for an analytical ultracentrifuge. High Performance Liquid Chromatographs ("HPLC") HPLC systems rely upon the difference in the rates of passage of the components in a chemical mixture through a tubular column filled with chemically active material. HPLC systems are powerful separation devices for biologically active compounds, since they are generally non-destructive, sensitive and capable of resolving very complex mixtures of similar compounds. The System Gold(R) Nouveau HPLC manufactured by Beckman is designed to address the needs of the pharmaceutical, biotechnology, food, beverage and agricultural industries as well as those of life science researchers in academia. The system is modular, allowing it to be configured for a wide range of applications. Beckman's HPLC systems typically sell for $20,000 to $50,000. Electrophoresis Electrophoresis systems separate mixtures of proteins, DNA, and other molecules principally on the basis of differences in mass and electrical charge. The P/ACE(TM) capillary electrophoresis product line represents a powerful extension of electrophoresis technology by combining the discrimination power of traditional electrophoresis with the speed of HPLC. With several detection options, the result is an automated system for high speed, high sensitivity separation of a wide variety of compounds. In 1995 a new laser source for fluorescence detection and several new chemistry kits were introduced by the Company to expand the range of applications for capillary electrophoresis in DNA, protein and pharmaceutical analysis. P/ACE systems typically sell for $40,000 to $60,000. Protein Sequencers Beckman manufactures and sells protein sequencer systems and related chemicals. Protein sequencing is used to determine the primary structure, i.e., the amino acid sequence, of a protein. Protein sequencer systems sell in the range of $90,000 to $130,000. Protein Separation and DNA Sequencing In 1995 the Company formed a marketing and service alliance with BioSepra Inc. (BioSepra), a biochromatography systems manufacturer, which expands the Company's biotechnology product line with systems that provide high speed, high resolution separation of biomolecules. To further broaden these product lines, in October 1996 the Company completed its acquisition of Genomyx Corporation of Foster City, California. Genomyx is a developer and manufacturer of advanced DNA sequencing products and is expected to complement the Company's biotechnology business. Detection and Measurement Spectrophotometer Systems Spectrophotometers detect and measure the presence of compounds in liquid mixtures by sensing the absorption of specific wavelengths of light as that light passes through the sample. Some Beckman spectrophotometers have the capability of measuring changes in absorption during biological reactions. These spectrophotometers, in conjunction with Beckman software, automatically control the time, temperature and wavelength of the measurement while computing and recording the results of the experiment. In 1995, the DU(R) 640B, a flexible and affordable bio-spectrophotometer system, was introduced to address the specific needs in molecular biology laboratories and biotechnology companies. Depending on the specific model, accessories or software, Beckman spectrophotometers sell in the $9,000 to $25,000 range. Nuclear Counters Radioactive "labeling," which is the substitution or addition of a radioactive atom into a compound of interest, is a powerful and accepted method for tracing the path of a biochemical in a living system. A labeled compound which is fed to or injected into a test animal or plant can then be traced to specific tissue or waste product by detecting the presence of the radioactive label by scintillation counting. Beckman manufactures scintillation counters that incorporate sophisticated software and system features that combine accurate measurement with user convenience. The systems sell in the $16,000 to $30,000 range. Data Processing In addition to the software associated directly with Beckman's instrument systems, the Company produces computer software programs to aid in the data processing functions of analytical laboratories. These systems control laboratory instruments, direct data acquisition from the instruments, and compute, store and report the results in formats needed for internal purposes and satisfaction of regulatory requirements. Beckman's data management systems are characterized by several features, including the capability to operate on a variety of manufacturers' computers and applications flexibility which lets customers configure the system to meet their individual needs. These systems vary greatly in cost depending upon the customer's requirements, but typically range from $50,000 to $250,000. Automated General Chemistry for Clinical Diagnostics Automated general chemistry systems automatically detect and quantify various chemical substances of clinical interest (analytes) in human blood, urine and other body fluids. Beckman offers several general chemistry systems with a range of capabilities to meet specific customer requirements, principally for use in medium to large hospital laboratories, but also with some application in reference laboratories. SYNCHRON(R) Systems The Company's SYNCHRON(R) line of automated general chemistry systems is a family of modular automated diagnostic instruments and the reagents, standards and other consumable products required to perform commonly requested diagnostic tests. The SYNCHRON line was developed in response to changes in reimbursement policies for hospital and clinical laboratories that required them to be more efficient. The SYNCHRON systems have been designed as compatible modules which may be used independently or in various combinations with each other to meet the specific needs of individual customers. The smallest of these modules, the SYNCHRON CX(R)3 analyzer, determines the concentration of eight of the most commonly measured analytes. The SYNCHRON CX3 DELTA, introduced in 1994, is an extension of the original CX(R)3 that adds computer enhanced software features, including positive sample identification and up to nine "on-board" chemistries. The SYNCHRON CX4CE, CX5CE, and CX7 are computer enhanced models offering bi-directional communications with laboratory information systems. The SYNCHRON series was further extended in 1995 by the introduction of the SYNCHRON CX4 DELTA, CX5 DELTA and CX7 DELTA. These models offer industry leading, innovative software features to enhance laboratory productivity and a menu of over 65 different types of tests. The extensive menu includes immunoproteins, therapeutic drugs, drugs of abuse, and a complete listing of general chemistries. SYNCHRON systems range in price from $49,000 to $185,000 and are sold principally based on their ability to improve laboratory efficiency. Other Automated Clinical Chemistry Products The Company has a stand alone electrolyte analyzer, the SYNCHRON EL-ISE(R), that provides automated analysis of patient electrolyte concentrations such as sodium, potassium, chloride, calcium and lithium. Beckman also offers a family of low cost instruments that perform glucose, blood urea nitrogen or creatinine analysis. Special Chemistry Applications For Clinical Diagnostics Immunochemistry Systems The IMMAGE(TM) immunochemistry system, introduced at the 1996 International MEDICA Trade Show, represents an improved technology, high throughput analyzer for specific proteins, various immunologic markers and therapeutic drugs. This system provides automated random access testing which allows the operator to mix samples at random, eliminating the need to analyze in batches. The system is expected to sell for $70,000 to $90,000. The IMMAGE(TM) system builds on the extensive installed base of our current immunochemistry analyzer, the ARRAY(R) 360 protein and therapeutic drug monitoring system. The ARRAY 360 was the world's first computer enhanced, positive sample identification, bi-directional immunochemistry analyzer for determination of specific proteins and therapeutic drugs. In January 1996, the Company acquired Hybritech Incorporated ("Hybritech"), a San Diego based life sciences and diagnostics company. The acquisition expanded the Company's capabilities for the development and manufacture of high sensitivity immunoassays, including cancer tests. Chief among these products is a test for prostate specific antigen (PSA), utilized as an aid in the detection (in conjunction with digital rectal examination) and monitoring of prostate cancer. Currently this is the only FDA approved test for such detection. Additionally, during 1996 the Company obtained clearance to use its Ostase(R) assay for the management of postmenopausal osteoporosis, making it the first blood test cleared for such use. Electrophoresis For Clinical Diagnostics The Appraise(R) densitometer and the Paragon(R) Electrophoresis Systems allow the Company to offer a full range of electrophoresis products that provide specialized protein analysis for clinical laboratories. Paragon reagent kits are used in the diagnosis of diabetes, cardiac, liver and other diseases. The Appraise densitometer can be used in conjunction with Paragon kits. It ranges in price from $17,000 to $24,000. In 1995 the Company introduced the first capillary electrophoresis system specifically designed for the clinical laboratory, the Paragon CZE(TM) 2000. This system is designed to fully automate the manual and somewhat tedious conventional electrophoresis analysis of serum protein electrophoresis (SPE) and immunofixation electrophoresis (IFE). Positioned to complement the Paragon gels and the Appraise, the Paragon CZE 2000 is targeted at high volume electrophoresis labs worldwide. Point of Care - Rapid Test Products The Company also produces single use self-contained diagnostic test kits for use in physicians' offices, clinics, hospitals and other medical settings. The Hemoccult(R) product line is used as an aid in screening for gastrointestinal disease, most importantly colorectal cancer. In 1994 the Company introduced the FlexSure(R) HP test kit, a test used as an aid in the diagnosis of H.pylori infection which is associated with several gastrointestinal diseases, including peptic ulcers and gastric cancer. A convenient whole blood version of the FlexSure(R) HP was launched in 1996. Under terms of a 1995 agreement, Abbott Laboratories began worldwide marketing and distribution of the H.pylori test manufactured by the Company under the name FlexPack HP. In addition, through its Hybritech subsidiary, the Company markets the ICON(R) test kits featuring a high sensitivity pregnancy test widely used by health care practitioners. Competition The markets for the Company's products are highly competitive, with many companies participating in one or more portions of the market. Competitors in the clinical laboratory market include Bayer Diagnostics, Dade International, Inc., Hitachi LTD./Boehringer Mannheim GmbH collaboration, Hoechst Corporation (Behring Diagnostics Division), Johnson & Johnson and Abbott Laboratories. Competitors focused more directly on life sciences include Amersham International plc, Bio-Rad Laboratories, Inc., The Perkin-Elmer Corporation, Pharmacia Biotech AB, and Sorvall Products LP. Competitors include divisions or subsidiaries of corporations with substantial resources. In addition, the Company competes with several companies that sell reagents for laboratory instruments that are manufactured by Beckman and others. The Company competes primarily on the basis of improved laboratory productivity, product quality, product bundling to meet multiple instrument needs, and technology, service and price. Discounting is used as a competitive tool when necessary. Management believes that its extensive installed instrument base provides the Company with a competitive advantage in obtaining both instrument and after-market follow-on business. Research and Development The Company's new products originate from four sources: internal research and development ("R&D") programs; external collaborative efforts with individuals in academic institutions and technology companies; devices or techniques that are generated in customers' laboratories; and business acquisitions. The Company's R&D teams are skilled in optics, chemistry, electronics, software, mechanical and other engineering disciplines, in addition to a broad range of biological and chemical sciences. Research studies are usually conducted in conjunction with individuals in academic institutions or other outside scientists. Development programs focus on production of new generations of existing product lines, such as the SYNCHRON(R) analyzers, as well as new product categories not currently offered by the Company. Other areas of pursuit include innovative approaches to immunochemistry, molecular biology, advanced electrophoresis technologies, automated sample processing and information technologies The Company's R&D expenditures for fiscal years 1996, 1995, and 1994 were $108.4 million, $91.7 million and $91.5 million, respectively. Management intends to maintain the level of the Company's R&D spending in approximately the same relative range of investment. Sales and Service The Company has sales in over 120 countries and maintains its own marketing, service and sales forces throughout the world. While nearly all of the Company's products are distributed by Beckman sales groups, the Company employs independent distributors to serve those markets that are more efficiently reached through such channels. Beckman's sales force is technically educated and trained in the operation and application of the Company's products. The sales force is supported by a staff of scientists and technical specialists in each product line and in each major scientific discipline served by the Company's products. In addition to direct sales of its instruments, the Company leases certain instruments to its customers, principally those used for clinical diagnostic applications in hospitals. Beckman provides accessory products, consumables and service for its instruments worldwide. Service offices and inventory depots are associated with sales offices, subsidiaries and dealer locations. The Company considers its reputation for service responsiveness and competence to be an important competitive asset. Patents and Trademarks To complement and protect the innovations created by the Company's R&D efforts, the Company has an active patent protection program which includes more than 500 active U.S. patents and patent applications. The Company also files important corresponding applications in principal foreign countries. The Company has taken an aggressive posture in protecting its patent rights; however, no one patent is considered essential to the success of the business. The Company's primary trademark is "Beckman", with the trade name also being Beckman or Beckman Instruments, Inc. The Company vigorously protects its primary trademark, which is used on the Company's products and is recognized throughout the worldwide scientific and diagnostic community. The Company owns and uses secondary trademarks on various products, but none of these secondary trademarks is considered of primary importance to the business. Government Regulations Certain of the Company's products are subject to regulations of the U.S. Food and Drug Administration (the "FDA") which require such products to be manufactured in accordance with "good manufacturing practices". Such laws and regulations also require that such products be safe and effective and that the labeling of those products conform with specific requirements. Testing is conducted to demonstrate performance claims and to provide other necessary assurances. Clinical systems and reagents must be reviewed by the FDA before sale and, in some instances, are subject to product standards, other special controls or a formal FDA premarket approval process. New federal regulations under the Clinical Laboratory Improvement Amendments of 1988 will, when fully implemented, require regulatory review and approval of quality assurance protocols for the Company's clinical reagent products. While adding to the overall regulatory review process, this is not expected to materially affect the sale of the Company's products. Certain of the Company's products are subject to comparable regulations in other countries as well. In 1993 the member states of the European Union (EU) began implementation of their plan for a new unified EU market with reduced trade barriers and harmonized regulations. The EU adopted a significant international quality standard, the International Organization for Standardization Series 9000 Quality Standards ("ISO 9000"). The Company's manufacturing operations in its Brea, Carlsbad, Fullerton, Palo Alto and Porterville, California; Allendale, New Jersey; Sharon Hill, Pennsylvania; Naguabo, Puerto Rico and Galway, Ireland facilities have been certified as complying with the requirements of ISO 9000. Many of the Company's international sales and service subsidiaries have also been certified, including those located in Australia, Austria, Canada, France, Germany, Italy, The Netherlands, Poland, Singapore, South Africa, Spain, Sweden, Switzerland and the United Kingdom. The design of the Company's products and the potential market for their use may be directly or indirectly affected by U.S. and foreign regulations concerning reimbursement for clinical testing services. The configuration of new products, such as the SYNCHRON(R) series of clinical analyzers, reflects the Company's response to the changes in hospital capital spending patterns such as those engendered by the Medicare Diagnostic Related Groups ("DRGs"). Under the DRG system, a hospital is reimbursed a fixed sum for the services rendered in treating a patient, regardless of the actual cost of the services provided. Medicare reimbursement of inpatient capital costs incurred by a hospital (to the extent of Medicare utilization) is in a 10- year transition period begun in 1991 from the "capital cost pass- through" payment methodology to a "prospective DRG based capital" payment methodology. To date, the Company has not experienced, and does not expect to experience in the future, any material financial impact from the change in Medicare's payment for inpatient capital costs. The current health care reform efforts in the United States and in some foreign countries are expected to further alter the methods and financial aspects of doing business in the health care field. The Company is closely following these developments so that it may position itself to take advantage of them. However, the Company cannot predict the effect on its business of these reforms should they occur nor of any other future government regulation. Environmental Matters The Company is subject to federal, state, local and foreign environmental laws and regulations. The Company believes that its operations comply in all material respects with applicable federal, state, and local environmental laws and regulations. Although the Company continues to make expenditures for environmental protection, it does not anticipate any significant expenditures in order to comply with such laws and regulations which would have a material impact on the Company's operations or financial position. In 1983 the Company discovered organic chemicals in the groundwater near a waste storage pond at a Company facility in Porterville, California. SmithKline Beckman, the Company's former controlling stockholder, agreed to indemnify the Company with respect to this matter for any costs incurred by the Company in excess of applicable insurance, eliminating any impact on the Company's earnings or financial position. SmithKline Beecham p.l.c., the surviving entity of the 1989 merger between SmithKline Beckman and Beecham, assumed the obligations of SmithKline Beckman in this respect. In 1987 soil and groundwater contamination was discovered on property in Irvine, California (the "property") formerly owned by the Company. In 1988 The Prudential Insurance Company of America ("Prudential"), which purchased the property from the Company, filed suit against the Company in U.S. District Court in California for recovery of costs and other alleged damages with respect to the soil and groundwater contamination. In 1990 the Company entered into an agreement with Prudential for settlement of the lawsuit and for sharing current and future costs of investigation, remediation and other claims. Soil and groundwater remediation have been in process since 1988. During 1994 the County formally acknowledged completion of remediation of a major portion of the soil, although there remain other areas of soil contamination that may require further remediation. The Company and Prudential continued to operate a groundwater treatment system throughout 1996. Investigations on the property are continuing and there can be no assurance that further investigation will not reveal additional contamination or result in additional costs. The Company believes that additional remediation costs, if any, beyond those already provided for the contamination discovered by the current investigations will not have a material adverse effect on the Company's operations or financial position. Employee Relations The Company and its subsidiaries presently employ approximately 6,100 persons throughout the world, including approximately 4,500 in the United States. The Company considers that its relations with its employees are generally good. Geographic Area Information Information with respect to the above-captioned item is incorporated by reference to Note 11 Business Segment Information of the Consolidated Financial Statements of the Company's Annual Report to Stockholders for the year ended December 31, 1996. Item 2. Properties The Company's primary instrument assembly and manufacturing facilities are located in Fullerton, Brea, and Palo Alto, California. Component manufacturing support facilities for parts and electronic subassemblies are located in Fullerton and Porterville, California. An additional manufacturing facility is located in Galway, Ireland. Reagents are manufactured in Carlsbad, San Diego and Palo Alto, California, Naguabo, Puerto Rico, and Galway, Ireland. The Company's computer software products business is located in Allendale, New Jersey. The Company's facility for the production of Hemoccult(R) test kits and related products is located in Sharon Hill, Pennsylvania. A portion of the Company's laboratory robotics operations (Sagian) are conducted in leased facilities in Indianapolis, Indiana and some of its DNA sequencing activities are performed in leased facilities in Foster City, California. All U.S. manufacturing facilities, including land and buildings, are owned by the Company with the exception of Allendale, Foster City, Indianapolis, San Diego and Sharon Hill which are leased facilities, and Palo Alto, where the Company has built and owns its buildings on a long-term land lease expiring in 2054. All manufacturing facilities outside the U.S. are leased. The component production facilities for the Company also include plastics molding and machine shop capabilities in Fullerton to serve the entire Company. This facility, in conjunction with electronic subassembly work done in Porterville, supplies the primary parts and subassemblies for the instrument systems to the various instrument assembly locations in California. The Company's principal distribution locations are in Brea and Fullerton, California, Somerset, New Jersey, Frankfurt, Germany and Paris, France. In 1994 the Company established a European Administration Center at a facility in Nyon, Switzerland. The Company believes that its production facilities meet applicable government environmental, health and safety regulations, and industry standards for maintenance, and that its facilities in general are adequate for its current business. Item 3. Legal Proceedings As previously reported, in 1995 a lawsuit was filed against the Company in the Superior Court of Orange County, California by two of its former employees alleging breach of contract relating to the commercial development of certain technology (Cercek v. Beckman Instruments, Inc.). The plaintiffs seek monetary damages of not less than $150 million. The Company believes that the plaintiffs' claims are without merit and that the Company has good and sufficient defenses to each such claim. The Company has retained counsel to defend it and discovery is in progress. The Company does not believe that any liability resulting from this lawsuit will have a material adverse effect on its operations or financial position. Through its Hybritech acquisition the Company obtained a patent, referred to as the Tandem Patent, that generates significant royalty income. The Tandem Patent is involved in an interference action in the U.S. Patent and Trademark Office with a patent application owned by La Jolla Cancer Research Foundation (the "Foundation"). If the Foundation wins the interference, the Company would lose the Tandem Patent and the royalty income, and a new patent would issue to the Foundation covering those products. The Company believes it has the stronger case and will prevail and does not expect this matter to have a material adverse effect on its operations or financial position. As previously reported, in 1991 Forest City Properties Corporation and F.C. Irvine, Inc. (collectively, "Forest City"), current owners and developers of a portion of the same real property in Irvine referred to under the caption "Environmental Matters" herein, filed suit against Prudential in the California Superior Court for the County of Los Angeles, alleging breach of contract and damages caused by the pollution of the property. Forest City originally sought damages of more than $20 million but subsequently increased its demand to $40 million. Forest City also seeks additional remediation of the property. Although the Company is not a named defendant in the Forest City action, it is obligated to contribute to any resolution of that action pursuant to the Company's 1990 settlement agreement with Prudential. See "Environmental Matters" herein. The trial of this matter was conducted in 1995, resulting in a jury verdict in favor of Prudential. The Court subsequently granted Forest City's motion for a new trial which Prudential has appealed. The appeal is not expected to be heard for some time because of the appellate court's backlog. Although the outcome of this litigation cannot be predicted with certainty, the Company believes that any additional liability beyond that provided for will not have a material adverse effect on the Company's operations or financial position. 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 (relating to a former Company manufacturing site) and a number of other defendants, including Motorola, Inc., Siemens Corporation, the cities of Phoenix and Scottsdale, and others. 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. These suits are currently in the discovery phase. Preliminary settlement overtures were received from the plaintiffs in 1996 but the parties remain far apart. (* Baker v. Motorola, Inc. et al (filed February 1992), Lofgren v. Motorola, Inc. et al (filed April 1993), Betancourt v. Motorola, Inc. et al (filed July 1993), Ford v. Motorola, Inc. et al (filed June 1994), and Wilkins v. Motorola, Inc., et. al. (filed July 1995).) 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 "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 Company believes the prosecutor's evidence is weak and insufficient to support a criminal conviction against certain identified employees (the Subsidiary is not a defendant). The Court has appointed economic experts to evaluate and present a comprehensive economic report on the leasing practices of the industry. Although it is very difficult to evaluate the political climate in Italy and the activities of the Italian public prosecutors, the Company does not expect this matter to have a material adverse effect on its operations or financial position. In addition, the Company and its subsidiaries are involved in a number of lawsuits which the Company considers ordinary and routine in view of its size and the nature of its business. The Company does not believe that any ultimate liability resulting from any such lawsuits will have a material adverse effect on the operations or financial position of the Company. See also "Environmental Matters" herein. Item 4. Submission of Matters to a Vote of Security Holders No matters were submitted to a vote of stockholders during the fourth quarter of the fiscal year covered by this report. Executive Officers of the Company The following is a list of the executive officers of the Company as of February 7, 1997, showing their ages, present positions and offices with the Company and their business experience during the past five or more years. Officers are elected by the Board of Directors and serve until the next annual Organization Meeting of the Board. Officers may be removed by the Board at will. There are no family relationships among any of the named individuals, and no individual was selected as an officer pursuant to any arrangement or understanding with any other person. Louis T. Rosso, 63, Chairman Mr. Rosso has been Chief of the Board and Chief Executive Officer of the Executive Officer Company since 1988 and Chairman of the Board since 1989. He served as the Company's President from 1982 until 1993. He also served as a Vice President of SmithKline Beckman from 1982 to 1989. Mr. Rosso first joined the Company in 1959 and was named Corporate Vice President in 1974. He is a director of Allergan, Inc. and American Health Properties, Inc. He is a member of the Board of Trustees of St. Jude Heritage Foundation in Fullerton, California and of Harvey Mudd College. Mr. Rosso has been a director of the Company since 1988. John P. Wareham, 55, Director, Mr. Wareham has been President President, and Chief Operating and Chief Operating Officer of Officer the Company since 1993. He served as the Company's Vice President, Diagnostic Systems Group from 1984 to 1993. Prior thereto, he had been President of Norden Laboratories, Inc., a wholly owned subsidiary of SmithKline Beckman engaged in developing, manufacturing and marketing veterinary pharmaceuticals and vaccines. Mr. Wareham first joined SmithKline Corporation, a predecessor of SmithKline Beckman, in 1968. He is a director of the Little Rapids Corporation and the Health Industry Manufacturers Association. Mr. Wareham has been a director of the Company since 1993. Dennis K. Wilson, 61, Vice Mr. Wilson has been Vice President, Finance and Chief President, Finance and Chief Financial Officer Financial Officer of the Company since 1993. He served as Vice President, Treasurer of the Company from 1989 until his current appointment. Prior thereto he had been Vice President, Corporate Accounting and Assistant Controller of SmithKline Beckman since 1984. Mr. Wilson first joined the Company in 1969. James T. Glover, 46, Vice Mr. Glover has been Vice President and Controller President and Controller of the Company since 1993. From 1989 until assuming his current position, he was Vice President, Controller - Diagnostic Systems Group. Mr. Glover joined the Company in 1983, serving in several management positions, including a two-year term at Allergan, Inc., then a Company affiliate. Prior to 1983, he held management positions with KPMG Peat Marwick and another Fortune 500 Company. Fidencio M. Mares, 50, Vice Mr. Mares was named Vice President, Human Resources President, Human Resources of the Company in 1995. Prior thereto he had been President of The Gas Company of Hawaii. Before that he was Senior Vice President of Administration and Human Resources for Pacific Resources, Inc., Corporate Wage and Salary Manager and Corporate Human Resources Services Manager for Getty Oil Company/Texaco, Inc., and held various human resources managerial positions at Southern California Edison. William H. May, 54, Vice Mr. May has been General President, General Counsel and Counsel and Secretary of the Secretary Company since 1984 and has been Vice President, General Counsel and Secretary of the Company since 1985. Mr. May first joined the Company in 1976. Bruce A. Tatarian, 48, Vice Mr. Tatarian was named Vice President, Field Operations - President, Field Operations - Emerging Markets Emerging Markets of the Company in 1995. He had been Vice President, Bioresearch Commercial Operations International of the Company since 1994. Prior thereto, he had been Vice President, Marketing Operations for the Bioanalytical Systems Group since 1991. From 1990 to 1991 he had been Vice President - Manager, Analytical Business Unit. Mr. Tatarian originally joined the Company in 1973 when he served in a number of marketing positions for a period of ten years. Arthur A. Torrellas, 66, Vice Mr. Torrellas was named Vice President, Field Operations - President, Field Operations - North America/Europe North America/Europe, of the Company in 1995. He had been Vice President, Diagnostic Commercial Operations of the Company since 1994. Prior thereto, he had been Vice President, International Operations for the Diagnostic Systems Group since 1985. Mr. Torrellas first joined the Company in 1977. He is a director of The World Trade Center Association of Orange County and of the California Manufacturing Technology Center. He is also a member of the Board of Visitors of the University of California at Irvine, College of Medicine. Albert R. Ziegler, 58, Vice Mr. Ziegler has been Vice President, Diagnostics President, Diagnostics Development Center Development Center of the Company since 1994. He joined the Company in 1986 as Vice President, North America Operations for the Diagnostic Systems Group. Prior thereto he had been President of Branson Ultrasonics Corporation, a manufacturer of industrial ultrasound instruments and a subsidiary of SmithKline Beckman until the divestiture of SmithKline Beckman's industrial instruments businesses in 1984. Mr. Ziegler first joined SmithKline Beckman in 1971. Paul Glyer, 40, Treasurer Mr. Glyer has been Treasurer of the Company since 1993. In 1995 he additionally assumed the position of Director, Corporate Business Development. He served as Assistant Treasurer since 1989 when he first joined the Company. PART II Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters Information with respect to the above-captioned Item is incorporated herein by reference to the section entitled "QUARTERLY INFORMATION (Unaudited)" of the Company's Annual Report to stockholders for the year ended December 31, 1996. During 1996 the Company paid four consecutive quarterly dividends of $.13 per share of common stock, for a total of $.52 per share for the year. During 1995 the Company paid four consecutive quarterly dividends of $.11 per share of common stock, for a total of $.44 per share for the year. Under the terms of the Company's revolving credit agreement, which expires on September 30, 1999, aggregate dividend payments are limited to the sum of $45 million and 30% of the consolidated cumulative net earnings of the Company from June 30, 1992. To date this limitation has not had an impact on the Company's dividends and is not expected to have an impact in the foreseeable future. In addition, as of January 31, 1997, there were approximately 8,642 holders of record of the Company's common stock. Item 6. Selected Financial Data Information with respect to the above-captioned Item is incorporated herein by reference to the section entitled "SELECTED FINANCIAL INFORMATION" of the Company's Annual Report to Stockholders for the year ended December 31, 1996. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Information with respect to the above-captioned Item is incorporated herein by reference to the section entitled "FINANCIAL REVIEW" of the Company's Annual Report to Stockholders for the year ended December 31, 1996. Item 8. Financial Statements and Supplementary Data Information with respect to the above-captioned Item is incorporated herein by reference to the CONSOLIDATED FINANCIAL STATEMENTS, including all the notes thereto, and the sections entitled "REPORT BY MANAGEMENT", "INDEPENDENT AUDITORS' REPORT" and "QUARTERLY INFORMATION (Unaudited)" of the Company's Annual Report to Stockholders for the year ended December 31, 1996. Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure None. PART III Item 10. Directors and Executive Officers of the Registrant Directors - The information with respect to directors required by this Item is incorporated herein by reference to those parts of the Company's Proxy Statement for the Annual Meeting of Stockholders to be held April 3, 1997 entitled "ELECTION OF DIRECTORS" and "BOARD OF DIRECTORS INFORMATION." Executive Officers - The information with respect to executive officers required by this Item is set forth in Part I of this report. Item 11. Executive Compensation The information with respect to executive compensation required by this Item is incorporated by reference to that part of the Company's Proxy Statement for the Annual Meeting of Stockholders to be held April 3, 1997 entitled "EXECUTIVE COMPENSATION", excluding those sections entitled "Organization and Compensation Committee Report on Executive Compensation" and "Performance Graph". Item 12. Security Ownership of Certain Beneficial Owners and Management The information with respect to security ownership required by this Item is incorporated by reference to that part of the Company's Proxy Statement for the Annual Meeting of Stockholders to be held April 3, 1997 entitled "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT." Item 13. Certain Relationships and Related Transactions The information with respect to certain relationships and related transactions required by this Item is incorporated by reference to that part of the Company's Proxy Statement for the Annual Meeting of Stockholders to be held April 3, 1997 entitled "BOARD OF DIRECTORS INFORMATION, Compensation Committee Interlocks and Insider Participation." PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a)(1), (a)(2) Financial Statements and Financial Statement Schedules The financial statements and financial statement schedules filed as part of the report are incorporated by reference in the "INDEX OF FINANCIAL STATEMENTS AND SCHEDULES" following this Part IV. (a)(3) Exhibits Management contracts and compensatory plans or arrangements are identified by *. 3.1 Third Restated Certificate of Incorporation of the Company, June 5, 1992 (incorporated by reference to Exhibit 3.1 of the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year ended December 31, 1992, File No. 001-10109). 3.2 Amended and Restated By-Laws of the Company, as of November 30, 1994 (incorporated by reference to Exhibit 3.2 of the Company's Annual Report to the Securities and Exchange Commission on form 10-K for the fiscal year ended December 31, 1994, File No. 001-10109). 4.1 Specimen Certificate of Common Stock (incorporated by reference to Exhibit 4.1 of Amendment No. 1 to the Company's Form S-1 registration statement, File No. 33-24572). 4.2 Rights Agreement between the Company and Morgan Shareholder Services Trust Company, as Rights Agent, dated as of March 28, 1989 (incorporated by reference to Exhibit 4 of the Company's current report on Form 8-K filed with the Securities and Exchange Commission on April 25, 1989, File No. 1-10109). 4.3 First amendment to the Rights Agreement dated as of March 28, 1989 between the Company and First Chicago Trust Company of New York (formerly Morgan Shareholder Services Trust Company), as Rights Agent, dated as of June 24, 1992 (incorporated by reference to Exhibit 1 of the Company's current report on Form 8-K filed with the Securities and Exchange Commission on July 2, 1992, File No. 001-10109). 4.4 Amendment 1993-1 to the Company's Savings and Investment Plan, adopted November 3, 1993, filed in connection with the Form S-8 Registration Statement filed with the Securities and Exchange Commission on September 1, 1992, File No. 33-51506 (incorporated by reference to Exhibit 4 of the Company's Quarterly Report to the Securities and Exchange Commission on Form 10-Q for the quarterly period ended March 31, 1994, File No. 001-10109). 4.5 Amendment 1995-1 to the Company's Savings and Investment Plan, adopted December 20, 1995, filed in connection with the Form S-8 Registration Statement filed with the Securities and Exchange Commission on September 1, 1992 and Amendment No. 1 thereto filed December 17, 1992, File No. 33-51506 (incorporated by reference to Exhibit 4.5 of the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year ended December 31, 1995, File No. 001-10109). 4.6 Amendment 1996-1 to the Company's Savings and Investment Plan, adopted December 5, 1996, filed in connection with the Form S-8 Registration Statement filed with the Securities and Exchange Commission on September 1, 1992 and Amendment No. 1 thereto filed December 17, 1992, File No. 33-51506. 4.7 Senior Indenture between the Company and The First National Bank of Chicago as Trustee, dated as of May 15, 1996, filed in connection with the Form S-3 Registration Statement filed with the Securities and Exchange Commission on April 5, 1996, File No. 333-02317 (incorporated by reference to Exhibit 10.1 of the Company's Quarterly Report to the Securities and Exchange Commission on Form 10-Q for the quarterly period ended June 30, 1996, File No. 001-10109). 4.8 7.05% Debentures Due June 1, 2026, filed in connection with the Form S-3 Registration Statement filed with the Securities and Exchange Commission on April 5, 1996, File No. 333-02317 (incorporated by reference to Exhibit 10.2 of the Company's Quarterly Report to the Securities and Exchange Commission on Form 10-Q for the quarterly period ended June 30, 1996, File No. 001-10109). 10.1 Revolving Credit Agreement, dated as of September 26, 1994, among the Company, the lenders named therein and Citicorp USA, Inc. as Agent (incorporated by reference to Exhibit 10.1 of the Company's Quarterly Report to the Securities and Exchange Commission on Form 10-Q for the quarterly period ended September 30, 1994, File No. 001-10109). 10.2 Note Agreement, dated as of February 5, 1993, among the Company, Nationwide Life Insurance Company and three other insurance companies named therein (incorporated by reference to Exhibit 10.17 of the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year ended December 31, 1992, File No. 001-10109). 10.3 Line of Credit Promissory Note in favor of Mellon Bank, N.A., dated as of October 6, 1993 (incorporated by reference to Exhibit 10.21 of the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year ended December 31, 1992, File No. 001-10109). 10.4 Loan Agreement (Multiple Advance), dated September 30, 1993, between Beckman Instruments (Japan) Limited and the Industrial Bank of Japan, Limited (English translation, including certification as to accuracy; original document executed in Japanese) (incorporated by reference to Exhibit 10.21 of the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year ended December 31, 1993, File No. 001-10109). 10.5 Term Loan Agreement, dated as of September 30, 1993, between Beckman Instruments (Japan) Limited and Citibank, N.A., Tokyo Branch (incorporated by reference to Exhibit 10.22 of the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year ended December 31, 1993, File No. 001-10109). 10.6 Term Loan Agreement, dated as of December 9, 1993, between Beckman Instruments (Japan) Limited and The Dai-Ichi Kangyo Bank Limited (English translation, including certification as to accuracy; original document executed in Japanese) (incorporated by reference to Exhibit 10.23 of the Company's Annual Report to the Securities and Exchange Commission on Form 10- K for the fiscal year ended December 31, 1993, File No. 001-10109). 10.7 Trust Agreement between the Company and The First National Bank of Chicago, as Trustee, for assistance in meeting stock-based obligations of the Company, dated as of May 31, 1995 (incorporated by reference to Exhibit 10.7 of the Company's Annual Report to the Securities and Exchange Commission on Form 10-K/A for the fiscal year ended December 31, 1995, File No. 001-10109). * 10.8 The Company's Executive Incentive Plan, adopted by the Company in 1996 (incorporated by reference to Exhibit 10 of the Company's Quarterly Report to the Securities and Exchange Commission on Form 10-Q for the quarterly period ended March 31, 1996, File No. 001-10109). * 10.9 Amendment No. 1 to the Company's Executive Incentive Plan, adopted in 1996. * 10.10 The Company's Executive Incentive Plan, adopted by the Company in 1995 (incorporated by reference to Exhibit 10.1 of the Company's Quarterly Report to the Securities and Exchange Commission on Form 10-Q for the quarterly period ended June 30, 1995, File No. 001-10109). * 10.11 The Company's Incentive Compensation Plan of 1990, as restated with amendments of January 29, 1992, amendments approved by stockholders May 6, 1992 (incorporated by reference to Exhibit 10.20 of the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year ended December 31, 1992, File No. 001-10109). * 10.12 Amendment 1996-1 to the Company's Incentive Compensation Plan of 1990, dated October 11, 1996, filed in connection with the Form S-8 Registration Statement filed with the Securities and Exchange Commission on August 5, 1993, File No. 33-66990 (incorporated by reference to Exhibit 10.1 of the Company's Quarterly Report to the Securities and Exchange Commission on Form 10-Q for the quarterly period ended September 30, 1996, File No. 001-10109). * 10.13 The Company's Incentive Compensation Plan, as amended by the Company's Board of Directors on October 26, 1988 and as amended and restated by the Company's Board of Directors on March 28, 1989 (incorporated by reference to Exhibit 10.16 of the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year ended December, 31 1989, File No. 001-10109). * 10.14 Restricted Stock Agreement and Election (Cycle Two - Economic Value Added Incentive Plan), adopted by the Company in 1995 (incorporated by reference to Exhibit 10 of the Company's Quarterly Report to the Securities and Exchange Commission on Form 10-Q for the quarterly period ended September 30, 1995, File No. 001-10109). * 10.15 Restricted Stock Agreement and Election (Cycle Three - Economic Value Added Incentive Plan), adopted by the Company in 1996. * 10.16 Beckman Instruments, Inc. Supplemental Pension Plan, adopted by the Company October 24, 1990 (incorporated by reference to Exhibit 10.4 of the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year ended December, 31 1990, File No. 001-10109). * 10.17 Amendment 1995-1 to the Company's Supplemental Pension Plan, adopted by the Company in 1995, effective as of October 1, 1993. * 10.18 Amendment 1996-1 to the Company's Supplemental Pension Plan, dated as of December 9, 1996. * 10.19 Amendment 1996-1 to the Company's Stock Option Plan for Non-Employee Directors, dated October 11, 1996 and effective November 1, 1996 (incorporated by reference to Exhibit 10.2 of the Company's Quarterly Report to the Securities and Exchange Commission on Form 10-Q for the quarterly period ended September 30, 1996, File No. 001-10109). * 10.20 The Company's Stock Option Plan for Non- Employee Directors, amended and restated as of November 1, 1996, filed in connection with the Form S-8 Registration Statements filed with the Securities and Exchange Commission on November 6, 1989, File No. 33-31862, and on August 5, 1993, File No. 33-66988. * 10.21 Form of Change in Control Agreement, dated as of May 1, 1989, between the Company, each of its Executive Officers and certain other key employees (incorporated by reference to Exhibit 10.34 of the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year ended December 31, 1989, File No. 001-10109). * 10.22 Agreement Regarding Retirement Benefits of Arthur A. Torrellas, adopted December 1, 1993 and dated December 20, 1993, between the Company and Arthur A. Torrellas (incorporated by reference to Exhibit 10.24 of the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year ended December 31, 1993, File No. 001-10109). * 10.23 Amendment to the December 1, 1993 Agreement Regarding Retirement Benefits of Arthur A. Torrellas, dated as of May 30, 1995, between the Company and Arthur A. Torrellas (incorporated by reference to Exhibit 10.2 of the Company's Quarterly Report to the Securities and Exchange Commission on Form 10-Q for the quarterly period ended June 30, 1995, File No. 001-10109). * 10.24 Second Amendment to the December 1, 1993 Agreement Regarding Retirement Benefits of Arthur A. Torrellas, dated as of December 16, 1996, between the Company and Arthur A. Torrellas. * 10.25 Agreement Regarding Retirement Benefits of Albert Ziegler, dated June 16, 1995, between the Company and Albert Ziegler (incorporated by reference to exhibit 10.22 of the Company's Annual Report to the Securities and Exchange Commission on Form 10-K/A for the fiscal year ended December 31, 1995, File No. 001-10109). * 10.26 Agreement Regarding Retirement Benefits of Fidencio M. Mares, adopted and dated April 30, 1996, between the Company and Fidencio M. Mares (incorporated by reference to Exhibit 10.3 of the Company's Quarterly Report to the Securities and Exchange Commission on Form 10-Q for the quarterly period ended June 30, 1996, File No. 001-10109). * 10.27 Beckman Instruments, Inc. Deferred Directors' Fee Program, adopted by the Company November 30, 1994 (incorporated by reference to Exhibit 10.21 of the Company's Annual Report to the Securities and Exchange Commission on form 10-K for the fiscal year ended December 31, 1994, File No. 001-10109). * 10.28 Amendment 1996-1 to the Company's Deferred Directors' Fee Program, dated October 11, 1996 and effective November 1, 1996 (incorporated by reference to Exhibit 10.3 of the Company's Quarterly Report to the Securities and Exchange Commission on Form 10-Q for the quarterly period ended September 30, 1996, File No. 001-10109). 10.29 The Company's Employees' Stock Purchase Plan, amended and restated as of November 1, 1996, filed in connection with the Form S-8 Registration Statement filed with the Securities and Exchange Commission on December 19, 1995, File No. 33-65155. 10.30 Distribution Agreement, dated as of April 11, 1989, among SmithKline Beckman Corporation the Company and Allergan, Inc. (incorporated by reference to Exhibit 3 to SmithKline Beckman Corporation's Current Report on Form 8-K filed with the Securities and Exchange Commission on April 14, 1989, File No. 1-4077). 10.31 Amendment to the Distribution Agreement effective as of June 1, 1989 between SmithKline Beckman Corporation, the Company and Allergan, Inc. (incorporated by reference to Exhibit 10.26 of Amendment No. 2 to the Company's Form S-1 registration statement, File No. 33-28853). 10.32 Cross-Indemnification Agreement between the Company and SmithKline Beckman Corporation (incorporated by reference to Exhibit 10.1 of Amendment No. 1 to the Company's Form S-1 registration statement, File No. 33-24572). 11. Statement regarding computation of per share earnings: This information is incorporated by reference to Note 1 Summary of Significant Accounting Policies of the Company's Annual Report to Stockholders for the year ended December 31, 1996. 13. WORDS ON NUMBERS Section of the Company's Annual Report to Stockholders for the year ended December 31, 1996. 21. Subsidiaries. 23. Consent of KPMG Peat Marwick LLP, February 12, 1997. 27. Financial Data Schedule. (b) Reports on Form 8-K During Fourth Quarter ended December 31, 1996. No Reports on Form 8-K were filed during the quarter ended December 31, 1996. Beckman Instruments, Inc. INDEX TO FINANCIAL STATEMENTS AND SCHEDULES The consolidated financial statements of the Company and the related report of KPMG Peat Marwick LLP, dated January 17, 1997 are incorporated by reference to the section entitled "WORDS ON NUMBERS" of the Company's Annual Report to Stockholders for the year ended December 31, 1996. The information required to be reported in the Supplementary Financial Schedule entitled, VIII Allowance for Doubtful Accounts, for the three year period ended December 31, 1996 is set forth in Note 12 Supplementary Information of the "NOTES TO CONSOLIDATED FINANCIAL STATEMENTS" of the Company's Annual Report to Stockholders for the year ended December 31, 1996. Schedules not included herein have been omitted because they are not applicable, are no longer required or the required information is presented in the consolidated financial statements or in the notes to the consolidated financial statements. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. Date: February 6, 1997 By /s/ Louis T. Rosso Louis T. Rosso Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date --------- ----- ---- Chairman of the Board and Chief Executive Officer (Principal /s/Louis T. Rosso Executive Officer) Louis T. Rosso February 6, 1997 President, Chief Operating Officer /s/John P. Wareham and Director John P. Wareham February 6, 1997 Vice President, Finance and Chief Financial Officer /s/D. K. Wilson (Principal Financial Officer) Dennis K. Wilson February 6, 1997 Vice President and Controller (Principal /s/James T. Glover Accounting Officer) James T. Glover February 6, 1997 /s/Earnest H. Clark, Jr. Director February 6, 1997 Earnest H. Clark, Jr. /s/Hugh K. Coble Director February 6, 1997 Hugh K. Coble Signature Title Date --------- ----- ---- ___________________ Director February _, 1997 Carolyne K. Davis, Ph.D. /s/Dennis C. Fill Director February 6, 1997 Dennis C. Fill /s/Charles A. Haggerty Director February 6, 1997 Charles A. Haggerty /s/Gavin Herbert Director February 6, 1997 Gavin S. Herbert /s/William N. Kelley Director February 6, 1997 William N. Kelley, M.D. /s/Francis P. Lucier Director February 6, 1997 Francis P. Lucier /s/C. Roderick O'Neil Director February 6, 1997 C. Roderick O'Neil /s/Betty Woods Director February 6, 1997 Betty Woods INDEX TO EXHIBITS Exhibit Number Exhibit - ------- ------- 4.6 Amendment 1996-1 to the Company's Savings and Investment Plan, adopted December 5, 1996, filed in connection with the Form S-8 Registration Statement filed with the Securities and Exchange Commission on September 1, 1992 and Amendment No. 1 thereto filed December 17, 1992, File No. 33-51506. 10.9 Amendment No. 1 to the Company's Executive Incentive Plan, adopted in 1996. 10.15 Restricted Stock Agreement and Election (Cycle Three - Economic Value Added Incentive Plan), adopted by the Company in 1996. 10.17 Amendment 1995-1 to the Company's Supplemental Pension Plan, adopted by the Company in 1995, effective as of October 1, 1993. 10.18 Amendment 1996-1 to the Company's Supplemental Pension Plan, dated as of December 9, 1996. 10.20 The Company's Stock Option Plan for Non-Employee Directors, amended and restated as of November 1, 1996, filed in connection with the Form S-8 Registration Statements filed with the Securities and Exchange Commission on November 6, 1989, File No. 33-31862, and on August 5, 1993, File No. 33-66988. 10.24 Second Amendment to the December 1, 1993 Agreement Regarding Retirement Benefits of Arthur A. Torrellas, dated as of December 16, 1996, between the Company and Arthur A. Torrellas. 10.29 The Company's Employees' Stock Purchase Plan, amended and restated as of November 1, 1996, filed in connection with the Form S-8 Registration Statement filed with the Securities and Exchange Commission on December 19, 1995, File No. 33-65155. 13. WORDS ON NUMBERS Section of the Company's Annual Report to Stockholders for the year ended December 31, 1996. 21. Subsidiaries. 23. Consent of KPMG Peat Marwick LLP, February 12, 1997. 27. Financial Data Schedule. EX-4.6 2 AMENDMENT 1996-1 TO THE COMPANY'S SAVINGS EXHIBIT 4.6 AMENDMENT 1996-1 BECKMAN INSTRUMENTS, INC. SAVINGS AND INVESTMENT PLAN WHEREAS, Beckman Instruments, Inc. ("Company") maintains the Beckman Instruments, Inc. Savings and Investment Plan ("Plan"); and WHEREAS, the Company has the right to amend the Plan; and WHEREAS, the Company recently acquired Hybritech Incorporated ("Hybritech"), and now wishes to merge The Hybritech Incorporated Employee Savings Plan ("Hybritech Plan") with the Plan; NOW, THEREFORE, the Hybritech Plan and the Plan are hereby merged, with the Plan to be the survivor of the merger; and FURTHERMORE, the merger shall be effective on the date determined by the officers of the Company; and WHEREAS, the Company wishes to amend the Plan to permit crediting of service performed by individuals who become employees of the Company, or a Related Company as a result of an acquisition by the Company; WHEREAS, the Company desires to amend the Plan to provide rules concerning the eligibility of employees having service with a foreign subsidiary of the Company; and WHEREAS, the Company desires to amend the Plan to set forth the Company's previously-existing intention with respect to coverage of individuals who are not classified by the Company as employees; and WHEREAS, the Company desires to amend the Plan to provide that it is governed by ERISA Section 404(c); and WHEREAS, the Company desires to amend the Plan to conform to new SEC Rule 16b-3 requirements for exemption from liability of certain securities transactions by participants in the Plan who are officers subject to Section 16 of the Securities Exchange Act of 1934; NOW, THEREFORE, the Plan is amended as follows, effective as set forth below: 1. The definition of "Covered Employee" in Section 1.2 is amended by adding the following to the end of the section: "Effective October 1, 1996, individuals who are employed by a foreign subsidiary of the Company are not considered 'Covered Employees,' even if such individuals are assigned to work in the United States or Puerto Rico on a temporary basis. Individuals who are not classified by the Company as Employees (including but not limited to individuals classified by the Company as independent contractors and consultants) and individuals who are classified by the Company as employees of an entity other than the Company or a Company Affiliate, are not considered Covered Employees under this Plan, even if the classification by the Company is determined to be erroneous. The foregoing sentence sets forth a clarification of the intention of the Company regarding participation in this Plan, and the foregoing sentence is therefore applicable in interpreting the Plan for any Plan Year, including Plan Years prior to the addition of such sentence to the Plan." 2. Section 2.2 is amended by adding the following to the end of the section, effective October 1, 1996: "For all purposes of the Plan, a Participant (whether or not a United States citizen), who was an Eligible Employee on October 1, 1996, shall continue to be treated as a Covered Employee and an Eligible Employee if, after he becomes a Participant, he is employed by a foreign subsidiary of the Company. The preceding sentence shall not apply to any individual who was not a Participant on October 1, 1996, even if such an individual subsequently becomes a Participant. If an individual who was not a Participant on October 1, 1996 (but who subsequently becomes a Participant) becomes covered under another plan of the Company or a foreign subsidiary (other than the Beckman Instruments, Inc. Pension Plan), such individual shall cease to participate in this Plan." 3. The following new Section 7.10 is hereby added to the Plan, effective immediately: "7.10 Section 404(c) Provisions. a. This Plan is intended to constitute a plan described in Section 404(c) of ERISA, and the regulations thereunder. As a result, with respect to elections described in this Plan and any other exercise of control by a Participant or his or her Beneficiary over assets in the Participant's Accounts, such Participant or Beneficiary shall be solely responsible for such actions, and neither the Trustee, the Committee, the Company, nor any other person or entity which is otherwise a Fiduciary shall be liable for any loss or liability which results from such Participant's or Beneficiary's exercise of control. b. The Committee shall provide to each Participant or his or her Beneficiary the information described in Section 2530.404c-1(b)(2)(i)(B)(1) of the Department of Labor Regulations. Upon request by a Participant or his or her Beneficiary, the Committee shall provide the information described in Section 2530.404c-1(b)(2)(i)(B)(2) of the Department of Labor Regulations. c. The Committee shall take such actions and establish such procedures as it deems necessary to ensure the confidentiality of information relating to the purchase, sale, and holding of Company stock, and the exercise of voting, tender and similar rights with respect to such stock by a Participant or his or her Beneficiary. Notwithstanding the foregoing, such information may be disclosed to the extent necessary to comply with applicable state and federal laws. d. In the event of a tender or exchange offer with respect to the Company, or in the event of a contested election with respect to the Board, the Company shall, at its own expense, appoint an independent Fiduciary to carry out the Committee's administrative functions with respect to the Company stock. Such independent Fiduciary shall not be an "affiliate" of the Company as such term is defined in Section 2530.404c-1(e)(3) of the Department of Labor Regulations. e. The Committee may take such other actions or implement such other procedures as it deems necessary or desirable in order that the Plan comply with Section 404(c) of ERISA." 4. Effective November 1, 1996, Section 9.13 of the Plan is amended to read as follows: "9.13 Rule 16b-3 Provisions. a. This Section 9.13 shall only apply to Participants who are officers or directors subject to the prohibitions of Section 16 of the Securities and Exchange Act of 1934 ('SEC Section 16'). The provisions of this Section 9.13 relate to 17 C.F.R. 240.16b-3 (hereinafter known as Rule 16b-3), promulgated under SEC Section 16. b. Notwithstanding any other provision of the Plan to the contrary, the Committee may (but need not) provide that, except as provided in Rule 16b-3, (1) no election of a Stock Fund Sale shall be made unless the election is made at least six months following the election of the most recent Stock Fund Purchase; (2) no election of a Stock Fund Purchase shall be made unless the election is made at least six months following the election of the most recent Stock Fund Sale. For this purpose, a Stock Fund Sale is either (1) the reallocation of the investment of a Participant's existing Account balances so that amounts in the Beckman Stock Fund are transferred to one or more other Investment Funds or (2) reduction in the Beckman Stock Fund balances due to a distribution, withdrawal or loan to a Participant pursuant to Article VI of Section 9.12. A Stock Fund Purchase is a reallocation of the investment of a Participant's existing Account balances so that there is a transfer from one or more Investment Funds to the Beckman Stock Fund. However, a transaction shall not be a Stock Fund Sale or a Stock Fund Purchase unless it is at the volition of the Participant, is not required to be made available to the Participant pursuant to the Code and is not made in connection with the Participant's death, disability, retirement or termination of employment. c. The Committee may (but need not) adopt such rules and/or take such actions or implement such measures and/or limitations as it deems desirable in order to comply with Rule 16b-3, including without limitation, rules that (1) exclude Participants subject to this Section 9.13 from making telephonic instructions and (2) provide that in-service withdrawals and loans may be made from all Investment Funds (excluding the Beckman Stock Fund), on a pro rata basis if the election of the in-service withdrawal or loan is made within six months of an election of a Stock Fund Purchase. Neither the Company, the Board, the Committee, the Investment Manager, the Trustee nor the Plan shall have any liability to any Participant in the event any Participant has any liability under SEC Section 16 due to any rule so adopted, the failure to adopt any rule, any Plan provision (or lack thereof), or any transaction under the Plan." 5. The Plan is hereby amended by adding the following Appendix C, effective October 1, 1996: "APPENDIX C - CREDITING OF SERVICE WITH PREDECESSOR EMPLOYERS. The purpose of this Appendix C is to set forth conditions under which service of an individual with an entity or business unit which is acquired by the Company shall be counted for purposes of eligibility and vesting under this Plan, notwithstanding the fact that such service was performed with the entity or business unit prior to its acquisition by the Company. An entity or business unit which is acquired by the Company shall be referred to in this Appendix C as a 'Prior Employer.' Service with a Prior Employer shall not be credited for any purpose under this Plan, unless the Prior Employer is included in Section 2 of this Appendix C. Under no circumstances will a contribution to the Plan be made on account of service with a Prior Employer prior to the date of Company acquisition. The Committee may amend Section 2 by adding additional Prior Employers. Any such changes shall be considered an amendment to the Plan, but approval of the Board of Directors shall not be required for such amendment. In determining whether a Prior Employer shall be added to Section 2, the Committee is not acting in a fiduciary capacity. The following entities are Prior Employers for which service prior to date of Company acquisition shall be counted for purposes of eligibility and vesting under this Plan: Approximate Date of Prior Employer Acquisition by Company -------------- ---------------------- Porton Instruments, Inc. May 31, 1991 Hybritech Incorporated January 1, 1996 Genomyx October 21, 1996" 6. The Plan is hereby amended to reflect the merger with Hybritech Plan by adding the following Appendix D: "APPENDIX D SPECIAL PROVISIONS FOR FORMER PARTICIPANTS IN THE HYBRITECH INCORPORATED EMPLOYEE SAVINGS PLAN 1. Plan Merger. Effective as of the date specified by the officers of the Company, the Hybritech Incorporated Employee Savings Plan ('Hybritech Plan') merged with the Plan. The Plan is the survivor of the merger. This Appendix D sets forth certain provisions applicable to the account balances transferred from the Hybritech Plan to this Plan as a result of the merger. 2. Vesting, Service and Investments. Each Participant in the Hybritech Plan who has not previously forfeited the unvested portion of his account shall, upon the merger, become fully vested in his Pre-1991 Accounts and Post-1990 Accounts, as defined below. Years of Vesting Service and Years of Eligibility Service shall include service under the Hybritech Plan. Participant's investments in the Hybritech Plan shall be transferred to the Plan's investments as follows: From Hybritech Investment Fund To Plan Investment Fund ------------------------------- ----------------------- Stable Income Interest Income Diversified Balanced U.S. Stock Market Index Aggressive Stock Equity Lilly Common Stock Interest Income 3. Hybritech Plan Accounts. Accounts which were formerly held in the Hybritech Plan prior to the merger are referred to in this Appendix D as follows: a. 'Pre-1991 Accounts,' which consist of the following: (1) 'Salary Deferral Account.' The amounts allocated to the Participant's Salary Deferral Account under the Hybritech Plan as of December 31, 1990 and the earnings thereon through the date of Plan merger; (2) 'Company Contributions Account.' The amounts allocated to the Participant's Company Contributions Account under the Hybritech Plan as of December 31, 1990 and the earnings thereon through the date of Plan merger; (3) 'Deductible Contributions Account.' The amounts allocated to the Participant's Deductible Contributions Account under the Hybritech Plan as of December 31, 1990 and the earnings thereon through the date of Plan merger; (4) 'Non-deductible Contributions Account.' The amounts allocated to the Participant's Non- deductible Contributions Account under the Hybritech Plan as of December 31, 1990 and the earnings thereon through the date of Plan merger; and (5) 'Rollover Contributions Account.' The amounts allocated to the Participant's Rollover Contributions Account under the Hybritech Plan as of December 31, 1990 and the earnings thereon through the date of Plan merger. b. 'Post-1990 Accounts,' which consist of the following: (1) 'Salary Reduction Account.' The amounts allocated to the Participant as Salary Reduction Contributions to the Hybritech Plan after December 31, 1990 and before the date of the merger, and the earnings thereon through the date of Plan merger; (2) 'Employer Profit-Sharing Account.' The Employer Contributions allocated to the Participant under the Hybritech Plan after December 31, 1990 and before the date of merger, and the earnings thereon through the date of Plan merger; and (3) 'ESOP Account.' The amounts allocated to the Participant's ESOP Account under the Hybritech Plan prior to the date of the merger, and the earnings thereon through the date of Plan merger. The Plan shall separately account for the Accounts described above. 4. Withdrawals. The following provision shall apply to withdrawals from the Hybritech Plan Accounts (references below to Type I through Type V Withdrawals and to termination withdrawals are references to the withdrawals described in Article VI of the Plan): a. Type I Withdrawals. Deductible Contributions Accounts are withdrawable as a Type I Withdrawal, to the extent such contributions were made prior to 1987. b. Type II Withdrawals. Non-deductible Contributions Accounts are withdrawable as a Type II Withdrawal to the same extent as After-Tax Savings Accounts under the Plan. Rollover Contributions Accounts are withdrawable as a Type II Withdrawal to the same extent as Rollover Accounts under the Plan. Company Contributions Accounts, Employer Profit Sharing Contributions Accounts and ESOP Accounts are withdrawable as a Type II Withdrawal to the same extent as Company Matching Accounts under the Plan. Deductible Contribution Accounts are withdrawable as Type II Withdrawals. c. Type IV Withdrawals. Non-deductible Contributions Accounts are withdrawable as a Type IV Withdrawal to the same extent as After-Tax Savings Accounts under the Plan. Rollover Contributions Accounts are withdrawable as a Type IV Withdrawal to the same extent as Rollover Accounts under the Plan. Company Contributions Accounts, Employer Profit-Sharing Contributions Accounts and ESOP Accounts are withdrawable as a Type IV Withdrawal to the same extent as Company Matching Accounts under the Plan. Salary Deferral Accounts and Salary Reduction Accounts are withdrawable as a Type IV Withdrawal to the same extent as Before-Tax Savings Accounts under the Plan; provided, however, that before withdrawing any portion of his Before-Tax Savings Account, Salary Deferral Account or Salary Reduction Contributions Account, a Participant must withdraw the entire balance of his Deductible Contributions Account. Deductible Contributions Accounts are withdrawable as Type IV Withdrawals. d. Type V Withdrawals. A Participant may withdraw his Salary Reduction Contributions Account and his Salary Deferral Contributions Account as a Type V Withdrawal to the same extent as Before-Tax Savings Accounts under the Plan. e. Termination Withdrawals. (1) All of a Participant's Hybritech Plan Accounts may be withdrawn as Termination Withdrawals under the provisions set forth in Article VI of the Plan. Furthermore, with respect to the Pre-1991 Accounts and Post-1990 Accounts of any Participant (1) whose employment with the Company terminates after the Participant reaches age 65 or a result of Disability; and (2) whose total vested account balance in the Plan exceeds $3,500, the following distribution options shall be available in addition to the lump sum distribution normally offered under the Plan: (i) Installment payments over a period (not to exceed twenty years) elected by the Participant. The amount of each installment shall be determined by dividing the Participant's account balance at the time the installment payment is calculated by the total number of remaining installment payments. Thus, for example, if a Participant elects installments over ten years, the first installment would be one-tenth of the Participant's account balance, the next annual installment would be one-ninth of the account balance as of the date of the second installment, and so on. The amount of each payment under this option will fluctuate with the investment performance of the Participant's Accounts subsequent to the time payments commence. Accordingly, neither the amount nor duration of payments under this option is guaranteed. (ii) Periodic Payments. Payments under this option will be substantially equal annual payments based upon the life expectancy of the Participant or the joint life expectancies of the Participant and his Beneficiary. Payments under this option may be made in monthly, quarterly, semi-annual, or annual payments. A Participant who elects this option may subsequently elect acceleration of all remaining annual payments into a single lump sum payment. The amount of each payment under this option will fluctuate with the investment performance of the Participant's Accounts subsequent to the time payments commence. Accordingly, neither the amount nor duration of payments under this option is guaranteed. (iii) Combination of Lump Sum and Installments. The Participant may specify a dollar amount to be paid as an initial lump sum, with the remaining balance to be paid as installments according to the provisions set forth above for installment payments. The amount of each payment under this option will fluctuate with the investment performance of the Participant's Accounts subsequent to the time payments commence. Accordingly, neither the amount nor duration of payments under this option is guaranteed. (iv) Partial Distribution. The Participant may elect to receive a partial lump sum distribution of any specified dollar amount or percentage of his or her balance. A Participant who elects this option shall be entitled to elect payment of the remaining amount at any subsequent date. The amount of each payment under this option will fluctuate with the investment performance of the Participant's Accounts subsequent to the time payments commence. Accordingly, neither the amount nor duration of payments under this option is guaranteed. Any distribution options elected under this Appendix D must conform to the provisions of Section 401(a)(9) of the Code and the Regulations promulgated thereunder, which are hereby incorporated by reference. To the extent applicable, the provisions of Section 6.9(b) shall apply. (2) With respect only to the amount credited as of the date of Plan merger to the Pre-1991 Accounts of a Participant whose total account balance exceeds $3,500, the following life annuity distribution options are available in addition to a lump sum distribution. The amount credited as of the date of Plan merger to a Participant's Pre-1991 Accounts shall be referred to as the 'Annuity-Eligible Amount.' The life annuity is in the amount which is payable by using the portion of the Participant's Pre-1991 Accounts up to the Annuity-Eligible Amount to purchase an annuity contract from an insurance company selected by the Committee. The amount of the annuity payments will be determined according to the value of the Participant's Annuity-Eligible Amount and the annuity contract with the insurance company. The forms of annuity available shall be a single life annuity which provides for payments during the life of the Participant, with no payments after the Participant dies, and a Qualified Joint and Survivor Annuity, as defined below. The automatic form of benefit payments for the Annuity-Eligible Amount for a Participant whose total vested account exceeds $3,500 shall be the Qualified Joint and Survivor Annuity. A Participant described in the previous sentence is a 'Pre-1991 Participant.' Upon the death (prior to commencement of benefits) of a Pre-1991 Participant who has a Spouse at the time of death, the Spouse's death benefit shall be provided in the form of a Qualified Preretirement Survivor Annuity, unless the Spouse waives the Qualified Preretirement Survivor Annuity. The Participant may waive the automatic form of benefit (with the consent of the Participant's spouse, if any) according to the waiver rules set forth in Section 5 of this Appendix D. f. Ordering Rule for Withdrawals; Loans. All withdrawals shall first be made from a Participant's Post-1990 Accounts, and then from the contributions made on the Participant's behalf after the merger, and then from the Participant's Pre-1991 Accounts. No portion of a Participant's Pre-1991 Accounts shall be used to secure a loan. No portion of a Participant's Pre-1991 Accounts shall be available as a loan, and all of a Participant's Pre- 1991 Accounts shall be excluded in calculating the loan amounts available under the Plan. 5. QJSA and QPSA Requirements for Pre-1991 Accounts. a. QJSA Notice. The Committee shall provide each Pre-1991 Participant, within a reasonable period prior to the commencement of benefits, a written explanation of: (i) the terms and conditions of a Qualified Joint and Survivor Annuity; (ii) the Participant's right to make and the effect of an election to waive the Qualified Joint and Survivor Annuity form of benefit; (iii) the rights of a Participant's Spouse; and (iv) the right to make, and the effect of, a revocation of a previous election to waive the Qualified Joint and Survivor Annuity. b. QJSA Waiver. A Pre-1991 Participant may waive a Qualified Joint and Survivor Annuity pursuant to a Qualified Election within the 90-day period ending on the date benefit payments will commence. c. QPSA Notice. (1) The Committee shall provide each Pre- 1991 Participant within the period beginning on the first day of the Plan Year in which the Participant attains age 32 and ending with the close of the Plan Year preceding the Plan Year in which the Participant attains age 35, a written explanation of the Qualified Preretirement Survivor Annuity in such terms and in such manner as would be comparable to the explanation provided for meeting the requirements of above applicable to a Qualified Joint and Survivor Annuity. (2) If a Pre-1991 Participant enters the Plan after he has attained age 32, the Committee shall provide notice no later than the end of the three year period commencing with the first day of the first Plan Year for which the individual is a Participant. (3) If a Pre-1991 Participant has a Break in Employment prior to age 32, the Committee shall provide notice at the time of such Break in Employment or within one year after such Break in Employment. d. QPSA Waiver. A Pre-1991 Participant may waive a Qualified Preretirement Survivor Annuity pursuant to a Qualified Election within the Election Period. e. Definitions. (1) Election Period: The period which begins on the first day of the Plan Year in which the Participant attains age 35 and ends on the date of Participant's death. If a Participant has a Break in Employment prior to the first day of the Plan Year in which age 35 is attained, with respect to his accounts as of the Break in Employment, the Election Period shall begin on the date the Break in Employment occurs. (2) Earliest Retirement Age: The earliest date on which, under the Plan, the Participant could elect to receive retirement benefits. (3) Qualified Election: A written waiver of a Qualified Joint and Survivor Annuity or a Qualified Preretirement Survivor Annuity, consented to by the Participant's Spouse, which consent must be witnessed by a Plan representative or notary public. Such consent must acknowledge any specific non-spouse beneficiary, including any class of beneficiaries or any contingent beneficiaries. If the Participant establishes to the satisfaction of a Plan representative that such written consent may not be obtained because there is no Spouse or the Spouse cannot be located, a waiver will be deemed a Qualified Election. A written consent will be valid only as to the Spouse who signs the consent and not as to any other Spouse. Notwithstanding the above in the case of a waiver which is not signed by a Spouse but is deemed a Qualified Election, the election shall be valid only as to the designated Spouse and not as to any other Spouse. Revocation of a prior waiver may be made by a Participant without the consent of the Spouse at any time before the commencement of benefits. The number of revocations shall not be limited. Any new waiver or change of Beneficiary will require a new spousal consent. Any Spouse's consent shall be irrevocable. A partial or total distribution may not be made after the annuity starting date, regardless of the present value of the non-forfeitable accrued benefit, without a consent in the form of a Qualified Election. (4) Qualified Joint and Survivor Annuity: An annuity for the life of the Participant with a survivor annuity for the life of the Spouse which is not less than 50% and not more than 100% of the amount of the annuity which is payable during the joint lives of the Participant and the Spouse and which is the amount of benefit which can be purchased with the Participant's vested Pre- 1991 Account. In the case of an unmarried Participant, a Qualified Joint and Survivor Annuity shall mean an annuity for the life of the Participant. (5) Qualified Preretirement Survivor Annuity: An annuity for the life of the surviving Spouse and which is the amount of benefit which can be purchased with the Participant's vested Pre-1991 Account. Following the Participant's death, the Spouse may elect a lump sum distribution. The surviving Spouse shall have the right to direct that payments under the Qualified Preretirement Survivor Annuity commence within a reasonable time after the Participant's death. (6) Spouse (surviving Spouse): The Spouse or surviving Spouse of the Participant, provided that a former spouse will be treated as the Spouse or surviving Spouse to the extent provided under a qualified domestic relations order as described in Section 414(p) of the Code. f. No Loans From Pre-1991 Accounts. No portion of a Pre-1991 Account may be borrowed from the Plan, and no portion of a Pre-1991 Account may serve as security for a loan from the Plan. The loan amounts available under Section 9.12 shall be calculated by disregarding a Participant's Pre- 1991 Account." IN WITNESS WHEREOF, this Amendment 1996-1 is hereby adopted this 9 day of December, 1996. BECKMAN INSTRUMENTS, INC. By /s/ Fidencio M. Mares Fidencio M. Mares Its Vice President - Human Resources EX-10.9 3 AMENDMENT NO. 1 TO COMPANY'S EXECUTIVE PLAN EXHIBIT 10.9 BECKMAN INSTRUMENTS, INC. EXECUTIVE INCENTIVE PLAN OF 1996 AMENDMENT NO. 1 EXECUTIVE PERFORMANCE MULTIPLIER FOR INDIVIDUAL INCENTIVE AWARD DETERMINATION Performance Multiplier to be Overall EXCEL Performance Level Applied to Award Guideline - ------------------------------- ---------------------------- Exceptional 125% to 150% Exceeds Expectations 110% to 125% Meets Expectations 90% to 110% Expectations Partially Met/ 0 to 90% Improvement Needed - ----------------------------------------------------------------- - ----------------------------------------------------------------- Overall EXCEL Performance Level 3.5 or higher ----------------------- Exceptional 2.6 to 3.49 ------------------------- Exceeds Expectations 1.7 to 2.59 ------------------------- Meets Expectations 1.69 or below ----------------------- Expectations Partially Met/ Improvement Needed - ----------------------------------------------------------------- EX-10.15 4 RESTRICTED STOCK AGREEMENT & ELECTION EXHIBIT 10.15 THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. BECKMAN INSTRUMENTS, INC. RESTRICTED STOCK AGREEMENT AND ELECTION (CYCLE THREE - ECONOMIC VALUED ADDED INCENTIVE PLAN) This Restricted Stock Agreement and Election ("Agreement") is entered into between Beckman Instruments, Inc., a Delaware corporation (the "Company"), and ___________________________ ____________________________________, an employee of the Company or a Subsidiary of the Company ("Employee"). RECITALS A. The Company has established the Beckman Instruments, Inc. Incentive Compensation Plan of 1990 as amended (the "Plan"), the terms of which are hereby incorporated by reference and made a part of this Agreement, which provides for the issuance of shares of the Company's Common Stock, $.10 par value, subject to certain restrictions thereon; B. The Company has established the Beckman Instruments, Inc. Economic Value Added Incentive Plan Cycle Three Beginning FY95 ("Cycle Three Incentive"), with the Committee administering the Plan approving a Restricted Stock Award Alternative to any cash payment of the Cycle Three Incentive. C. Employee has requested that any award determined pursuant to the Cycle Three Incentive, and the additional premium amount determined pursuant to the Restricted Stock Award Alternative, be made in the form of the Company's Common Stock issued under the Plan subject to certain restrictions; and D. The Committee administering the Plan has determined that it would be to the advantage and best interest of the Company and its stockholders to issue the Restricted Stock under the Plan and the terms and conditions provided for herein to Employee in consideration of past services to the Company or its Subsidiaries, has accepted Employee's request, has advised the Company thereof, and has instructed the undersigned officer to cause said Restricted Stock to be issued; THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS Section 1.1 - Definitions. Whenever the following terms are used in this Agreement they shall have the meaning specified below unless the context clearly indicates to the contrary. "Board" means the Board of Directors of the Company. "Change of Control" shall be deemed to occur if any of the following events occur: (A) any "person," as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 as amended (the "Exchange Act"), other than an employee benefit plan of the Company, or a trustee or other fiduciary holding securities under an employee benefit plan of the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding voting securities; (B) individuals who, as of the date hereof, constitute the Board of the Company (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board provided that any person becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the directors of the Company, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) shall be considered as though such person were a member of the Incumbent Board of the Company; (C) the stockholders of the Company approve a merger or consolidation with any other corporation, other than (1) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of another entity) more than 80% of the combined voting power of the voting securities of the Company or such other entity outstanding immediately after such merger or consolidation, or (2) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no person acquires 20% or more of the combined voting power of the Company's then outstanding voting securities; or (D) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets. Notwithstanding the preceding sentence, a Change of Control shall not be deemed to have occurred if the "person" described in the preceding sentence is an underwriting syndicate which has acquired the ownership of 20% or more of the combined voting power of the Company's then outstanding voting securities solely in connection with a public offering of the Company's securities. "Code" means the Internal Revenue Code of 1986, as amended. "Committee" means the Organization and Compensation Committee of the Company's Board of Directors. "Restricted Stock" shall mean Common Stock of the Company, $.10 par value, issued under the Plan and the terms of this Agreement and subject to the Restrictions imposed hereunder. "Restriction Period" means the twenty-four (24) month period beginning on the date of issuance of Restricted Stock hereunder and ending on the date that is twenty-four (24) months from the date the Restricted Stock is issued. "Restrictions" shall mean the restrictions on sale, transfer or other disposition and the exposure to forfeiture imposed upon the Restricted Stock under this Agreement. "Retirement" means Termination of Employment of Employee due to "Early Retirement", "Normal Retirement" or "Late Retirement" as such terms are defined under the provisions of the Beckman Instruments, Inc. Pension Plan, or if such plan is not applicable to Employee, then under the applicable retirement policy or plan or as determined by the Committee in its discretion. "Secretary" shall mean the Secretary of the Company. "Subsidiary" shall mean any corporation in an unbroken chain of corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain then owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. "Termination of Employment" shall mean that the employee- employer relationship between Employee and the Company or a Subsidiary has ended for any reason, but excluding any termination where there is a simultaneous reemployment by the Company or a Subsidiary. "Total Disability" shall mean that Employee has satisfied the criteria for determination of disability (without regard to any age requirement) for extended basic life insurance under the Company's life insurance program; provided, however, that such determination shall in no way be construed to mean or imply that Employee is otherwise eligible for extended basic life insurance. "Treasurer" shall mean the Treasurer of the Company. ARTICLE II ELECTION FOR RESTRICTED STOCK IN LIEU OF CASH Section 2.1 - Election Employee hereby irrevocably elects to receive the award, if any, determined pursuant to the Cycle Three Incentive and the premium described in Section 2.2(b) below, in the form of whole shares of Restricted Stock under a grant from the Plan subject to the provisions of the Plan and the terms and conditions herein, in lieu of a cash payment. Section 2.2 - Acknowledgements With regard to the election in Section 2.1 above, Employee acknowledges and agrees as follows: (a) This election to receive Restricted Stock, the amount of which is determined under subparagraph (b) below, is effective only if received by the Company on or before August 1, 1996 and no Termination of Employment has occurred between the date of this election and the date of issuance of the Restricted Stock; (b) This election to receive Restricted Stock in lieu of cash payment is made for the full amount of any award under the Cycle Three Incentive and such amount will be increased by and shall include a thirty-three and one-third percent (33-1/3%) premium. Such sum shall then be converted into whole shares of Restricted Stock based on the closing price of Beckman stock on the last trading day of the two- year Cycle Three Incentive cycle; and (c) Amounts which would otherwise result in fractional shares will be paid in cash on the regular Cycle Three Incentive payment date. ARTICLE III ISSUANCE OF RESTRICTED STOCK Section 3.1 - Issuance of Restricted Stock In consideration of Employee's agreement to remain in the employ of the Company or a Subsidiary and for other good and valuable consideration, the Company agrees to issue to Employee the number of shares of Restricted Stock, determined pursuant to Section 2.2(b) above and set forth in Schedule A, upon the terms and conditions set forth in this Agreement. Schedule A shall be distributed to Employee on or about the regular payment date for the Cycle Three Incentive. The date of issuance of the Restricted Stock shall be the date shown on Schedule A. Section 3.2 - Consideration to Company As partial consideration for the issuance of Restricted Stock by the Company, Employee agrees to render faithful and efficient services to the Company or a Subsidiary with such duties and responsibilities as the Company shall from time to time prescribe. Nothing in this Agreement or in the Plan shall confer upon Employee any right to continue in the employ of the Company or any Subsidiary or shall interfere with or restrict in any way the rights of the Company and its Subsidiaries, which are hereby expressly reserved, to terminate employment of Employee at any time for any reason, with or without cause. ARTICLE IV RESTRICTIONS Section 4.1 - Forfeiture of Restricted Stock (a) All shares of Restricted Stock shall be forfeited to the Company immediately upon a voluntary Termination of Employment or an Early Retirement occurring within twenty-four (24) months from the date of issuance; provided, however, that where Employee terminates employment due to Early Retirement and has made a prior Code Section 83(b) election, no forfeiture shall occur but Restrictions on sale, transfer or other disposition pursuant to Sections 4.2 and 5.2 will remain in effect for any remainder of the Restriction Period. (b) Notwithstanding Section 4.1(a) above, no shares shall be forfeited to the Company in the event of a Termination of Employment due to Normal or Late Retirement, Total Disability, or death. In the event of an involuntary Termination of Employment, for cause or otherwise, no shares shall be forfeited but the restrictions on sale, transfer or other disposition pursuant to Sections 4.2 and 5.2 shall remain in effect for any remainder of the Restriction Period. Section 4.2 - Legend Certificates representing shares of Restricted Stock issued pursuant to this Agreement shall, until all restrictions lapse and new certificates are issued pursuant to Section 4.3, bear the following legend: "The shares represented by this certificate are subject to reacquisition by Beckman Instruments, Inc., and such shares may not be sold or otherwise transferred except pursuant to the provisions of the Restricted Stock Agreement by and between Beckman Instruments, Inc. and the registered owner of such shares." Section 4.3 - Lapse of Restrictions (a) If no forfeiture pursuant to Section 4.1(a) has occurred, the Restrictions shall lapse with respect to 100% of the shares of Restricted Stock on the date which is twenty-four (24) months from the date the Restricted Stock is issued. (b) Notwithstanding subsection 4.3(a) above, all Restrictions will lapse with respect to 100% of the shares of Restricted Stock in the following events: (i) A Termination of Employment by death, Normal or Late Retirement (but not Early Retirement) or Total Disability; (ii) Death or Total Disability of Employee during the the Restriction Period where during the Restriction Period Employee had terminated employment due to Early Retirement and had made a prior Code Section 83(b) election or where an involuntary Termination of Employment had previously occurred during the Restriction Period; or (iii) A Change of Control of the Company or other occurrence of events as described in Sections 4.4 or 4.5 below if the Committee deems the lapse of Restrictions appropriate. (c) As soon as practicable, the Company shall, upon the lapse of the Restrictions, cause new certificates to be issued and delivered to Employee or his or her legal representative, free from the legend provided for in Section 4.2. Notwithstanding the foregoing, no such new certificate shall be delivered to Employee or his or her legal representative unless and until Employee or such legal representative shall have paid to the Company (or other employer corporation), in cash, the full amount of all federal, state or local income tax withholdings and other employment taxes applicable to the taxable income of Employee resulting from the lapse of Restrictions. Section 4.4 - Merger, Consolidation, Exchange, Acquisition, Liquidation or Dissolution In the event that the Company is succeeded by another corporation in a reorganization, merger, consolidation, acquisition of property or stock, separation or liquidation, the Board or the Committee may, in its absolute discretion and on such terms and conditions as it deems appropriate, provide, by a resolution adopted prior to the occurrence of the reorganization, merger, consolidation, acquisition of property or stock, separation, or liquidation, that (i) for some period of time prior to such event, all Restrictions on such shares of Restricted Stock shall lapse or expire, (ii) obligations of the Company in relation to such shares of Restricted Stock shall be assumed by such successor corporation, (iii) such shares of Restricted Stock shall be cancelled and replaced by substitute shares of Restricted Stock of the successor corporation, or (iv) such shares of Restricted Stock shall be forfeited to the Company in consideration for a cash payment in an amount to be determined by the Committee. Section 4.5 - Restrictions on New Shares In the event that the outstanding shares of the Company's Common Stock are changed into or exchanged for a different number or kind of shares or other securities of the Company or of another corporation pursuant to a merger of the Company into another corporation, or the exchange of all or substantially all of the assets of the Company for the securities of another corporation, or the acquisition by another corporation of 80% or more of the Company's then outstanding voting stock, or the liquidation or dissolution of the Company, or a stock split-up or stock dividend, such new or additional or different shares or securities which are attributable to Employee in his or her capacity as the owner of the Restricted Stock, shall be considered to be Restricted Stock and shall be subject to all of the Restrictions, unless the Committee provides, pursuant to Section 4.4 or Section 4.3(b), for the expiration of the Restrictions on the shares of Restricted Stock underlying the distribution of the new or additional shares or securities. ARTICLE V MISCELLANEOUS Section 5.1 - Administration The Committee shall have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret or revoke any such rules. Any dispute or disagreement which shall arise under or as a result of or pursuant to this Agreement or the grant or issuance of Restricted Stock shall be determined by the Committee in its sole discretion. All actions taken and all interpretations and determinations made by the Committee in good faith shall be final, binding and conclusive upon Employee, the Company and all other interested persons. No member of the Committee shall be personally liable for any action, determination, or interpretation made in good faith with respect to the Plan or the Restricted Stock. Section 5.2 - Restricted Stock Not Transferable Neither the Restricted Stock nor any interest or right therein or part thereof shall be liable for the debts, contracts, or engagements of Employee or his or her successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy) and any attempted disposition of such Restricted Stock, interest or right therein or part thereof, shall be null and void and of no effect; provided, however, that this Section 5.2 shall not prevent transfers by will or by the applicable laws of descent and distribution. Section 5.3 - Conditions to Issuance of Stock Certificates The Company shall not be required to issue or deliver any certificate or certificates for shares of stock pursuant to this Agreement prior to fulfillment of all of the following conditions: (a) The admission of such shares to listing on all stock exchanges on which such class of stock is then listed; (b) The completion of any registration or other qualification of such shares under any state or federal law or under rulings or regulations of the Securities and Exchange Commission or of any other governmental regulatory body, which the Committee shall, in its absolute discretion, deem necessary or advisable; (c) The obtaining of any approval or other clearance from any state or federal governmental agency which the Committee shall, in its absolute discretion, determine to be necessary or advisable; and (d) The compliance with all other requirements, including but not limited to the payment or withholding of income, employment or other taxes, as legally required or which the Committee shall, in its absolute discretion, determine to be necessary or advisable. (e) The lapse of such reasonable period of time as the Committee may from time to time establish for reasons of administrative convenience. Section 5.4 - Escrow The Treasurer or such other escrow holder as the Committee may appoint shall retain physical custody of the certificates representing the Restricted Stock, including shares of Restricted Stock issued pursuant to Section 4.5, until all of the Restrictions expire or shall have been removed; provided, however, that in no event shall Employee retain physical custody of any certificates representing Restricted Stock issued to him or her. Section 5.5 - Notices Any notice required or permitted hereunder shall be effective when addressed to the Company in care of its Secretary at 2500 Harbor Boulevard, Fullerton, CA. 92634-3100, or to the Employee at the Employee's last known address shown on Company records, as the case may be, and deposited, postage prepaid and registered or certified, in the United States mail. Either party may, by notice to the other given in the above-described manner, change such party's address for future notices. Any notice which is required to be given to Employee shall, if Employee is then deceased, be given to Employee's personal representative if such representative has previously informed the Company of his or her status and address by written notice in the manner described in this Section. Section 5.6 - Rights as Stockholder Except as otherwise provided herein, Employee shall have all the rights of a stockholder with respect to the Restricted Stock, including the right to vote the Restricted Stock and the right to receive all dividends or other distributions paid or made with respect to the Restricted Stock. Section 5.7 - Entire Agreement; Modification This Agreement constitutes the entire agreement between the parties hereto and supersedes any and all other written or oral agreements, understandings, representations or proposals which may have been made prior to or concurrently with the execution of the Agreement. No modification or amendment of this Agreement or any additional agreement concerning Restricted Stock will take effect unless it is approved by the Committee and is in writing and signed by Employee and the Vice President of Human Resources. Any modification, amendment, or additional agreement must expressly state the intention of the parties to modify or supplement the terms of this Agreement. Section 5.8 - Receipt of Documents Employee acknowledges the receipt of the Cycle Three Incentive Plan with restriced stock award alternative, the Incentive Compensation Plan of 1990 as amended and restated May 6, 1992, the 1996 prospectus appendix for the Incentive Compensation Plan of 1990, and tax information. Employee acknowledges that he has been encouraged to seek tax and securities counsel before making the election herein. Section 5.9 - Titles Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement. IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto. EMPLOYEE BECKMAN INSTRUMENTS, INC. _________________________ By________________________________ Vice President - Human Resources Date:____________________ EX-10.17 5 AMENDMENT 1995-1 TO COMPANY'S SUPPLEMENTAL PENSION PLAN EXHIBIT 10.17 AMENDMENT 1995-1 TO BECKMAN INSTRUMENTS, INC. SUPPLEMENTAL PENSION PLAN WHEREAS, Beckman Instruments, Inc. (the "Company") maintains the Beckman Instruments, Inc. Supplemental Pension Plan (the "Supplemental Plan"); and WHEREAS, the Company may amend the Supplemental Plan pursuant to a resolution of the Board of Directors of the Company; and WHEREAS, the Company desires to amend the Supplemental Plan to provide that the actuarial basis for computing lump sum distributions be the same as that used under the Beckman Instruments, Inc. Pension Plan retroactive to participants terminating on or after October 1, 1993. NOW, THEREFORE, the Company hereby adopts this Amendment 1995-1, effective as of October 1, 1993 as follows: The last sentence of Section 4(a) is deleted in its entirety and replaced with the following: "For purposes of this paragraph (a), the term actuarial equivalent shall have the same meaning as specified under the Pension Plan." IN WITNESS WHEREOF, the Company has adopted this Amendment 1995-1 as of the date first above written. BECKMAN INSTRUMENTS, INC. By: /s/Fidencio Mares Fidencio Mares Its: Vice President, Human Resources EX-10.18 6 AMENDMENT 1996-1 TO COMPANY'S SUPPLEMENTAL PENSION PLAN EXHIBIT 10.18 AMENDMENT 1996-1 BECKMAN INSTRUMENTS, INC. SUPPLEMENTAL PENSION PLAN WHEREAS, Beckman Instruments, Inc. ("Company") maintains the Beckman Instruments, Inc. Supplemental Pension Plan (the "Supplemental Plan"); and WHEREAS, the Company has the right to amend the Supplemental Plan; and WHEREAS, the Company desires to amend the Supplemental Plan in order to supplement the monthly pension benefit payable to a participant in the Beckman Instruments, Inc. Pension Plan (the "Pension Plan") to the extent that such benefit is reduced because of an election made by the participant to defer compensation pursuant to a deferred compensation plan maintained by the Company which has the effect of reducing the amount of the participant's compensation taken into account under the Pension Plan; NOW, THEREFORE, the Company hereby adopts this Amendment 1996-1, effective as of January 1, 1997 as follows: 1. The third sentence of Section 3 of the Supplemental Plan is hereby amended by inserting "or written deferred compensation plan" immediately following "written bonus program". IN WITNESS WHEREOF, this Amendment 1996-1 is hereby adopted this 9th day of December, 1996. BECKMAN INSTRUMENTS, INC. By /s/Fidencio M. Mares Fidencio M. Mares Its: Vice President - Human Resources EX-10.20 7 THE COMPANY'S STOCK OPTION PLAN EXHIBIT 10.20 BECKMAN INSTRUMENTS, INC. STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS (Restated November 1, 1996) 1. Purpose. This Stock Option Plan for Non-Employee Directors (the "Plan") is intended to attract and retain the services of experienced and knowledgeable independent directors of Beckman Instruments, Inc. (the "Company") for the benefit of the Company and its stockholders and to provide additional incentive for such directors to continue to work for the best interests of the Company and its stockholders. 2. Stock Subject to the Plan. There are reserved for issuance upon the exercise of options granted under the Plan 100,000 shares of Common Stock of the Company (the "Common Stock"). Such shares may be authorized and unissued shares of the Common Stock or previously outstanding shares of Common Stock then held in the Company's treasury. If any option granted under the Plan shall expire or terminate for any reason without having been exercised in full, the shares subject thereto shall again be available for the purposes of issuance upon the exercise of options granted under the Plan. 3. Administration. The Plan shall be administered by the Board of Directors of the Company (the "Board"). Subject to the express provisions of the Plan, the Board shall have plenary authority to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to it, to determine the terms and provisions of the option grants or agreements (which shall comply with and be subject to the terms and conditions of the Plan) and to make all other determinations necessary or advisable for the administration of the Plan. The Board's determinations of the matters referred to in this Paragraph 3 shall be conclusive. 4. Eligibility. Each director of the Company who is not otherwise an employee of the Company, a parent corporation, or a subsidiary of either the Company or a parent corporation, and who has not been an employee of the Company, a parent corporation, or a subsidiary of either the Company or a parent corporation for a period of at least one year prior to the date of the grant of an option under the Plan shall automatically be granted on the date of each annual meeting of the stockholders of the corporation an option for 1,000 shares of Common Stock (subject to adjustment as provided in Paragraph 7). "Parent corporation" means any corporation in an unbroken chain of corporations ending with the Company if each of the corporations other than the Company then owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. "Subsidiary" means any corporation in an unbroken chain of corporations beginning with the Company, or a parent corporation as applicable, if each of the corporations other than the last corporation in the unbroken chain then owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. Only non-qualified stock options (options which do not qualify as "incentive stock options" under Section 422 of the Internal Revenue Code of 1986, as amended) shall be granted under the Plan. 5. Option Grants. (a) The purchase price of the Common Stock under each option granted under the Plan shall be 100% of the fair market value of the stock at the time such option is granted. Such fair market value shall be taken as the average of the high and low sales prices of the Common Stock on the New York Stock Exchange on the date of grant of the option. (b) Options shall become fully exercisable six months after the date of grant. No option shall be exercisable during such six-month period. The term of each option shall be ten years from the date of grant thereof, or such shorter period as is prescribed in Paragraphs 5(d) and 5(e). Except as provided in Paragraphs 5(d) and 5(e), no option may be exercised at any time unless the holder thereof is then a director of the Company. Upon exercise, the option price is to be paid in full in cash or, at the discretion of the Board, in Common Stock owned by the optionee having a market value on the date of the exercise equal to the aggregate option price, or, at the discretion of the Board, in a combination of cash and stock. Upon exercise of an option, the Company shall have the right to retain or sell without notice sufficient shares of stock to cover government withholding taxes or deductions, if any, as described in Paragraph 9. For purposes of this paragraph, the market value of shares tendered to exercise an option shall be the average of the high and low sales prices of the Common Stock on the New York Stock Exchange on the exercise date; if the Common Stock is not traded on the exercise date, the fair market value on such date shall be determined under Treasury Regulation section 20.2031-2. (c) In the event that an optionee shall cease to be a director of the Company during the six month period following the date of grant of the option, the option shall forthwith terminate on the date the optionee ceases to serve as a director. (d) In the event that the optionee shall cease to serve as a director (unless the option shall have been previously terminated pursuant to the provisions of Paragraph 5(c)) the optionee may exercise the option at any time prior to the earlier of (i) the expiration of the term of the option or (ii) the first anniversary of the date of termination. Nothing in the Plan or in any option granted pursuant to the Plan shall confer on any individual any right to continue as a director of the Company or interfere in any way with the right of the Company to terminate the optionee's service as a director at any time. (e) In the event of the death of a director to whom an option has been granted under the Plan, the option theretofore granted to such director (unless the option shall have been previously terminated pursuant to the provisions of Paragraph 5(c)) may be exercised by a legatee or legatees of the optionee under his or her last will or by the director's personal representatives or distributees at any time prior to the earlier of (i) the expiration of the term of the option or (ii) the first anniversary of the date of death, to the extent of the remaining shares covered by his or her option whether or not such shares had become purchasable by such individual at the date of death. In the event that an individual to whom an option has been granted under the Plan dies after such individual has ceased to be a director, the option theretofore granted to the optionee (if not previously terminated pursuant to the provisions of Paragraph 5(c)) may be exercised by a legatee or legatees of the optionee under his or her last will, or by the optionee's personal representatives or distributees, at any time during the term that the option could have been exercised by the optionee under Paragraph 5(d). 6. Transferability and Stockholder Rights of Holders of Options. No option granted under the Plan shall be transferable otherwise than by will or by the laws of descent and distribution, and an option may be exercised, during the lifetime of the holder thereof, only by the optionee. The optionee shall have none of the rights of a stockholder until the shares subject thereto shall have been registered in the name of the person or persons exercising such option on the transfer books of the Company upon such exercise. 7. Adjustments upon Changes in Capitalization. Notwithstanding any other provision of the Plan, the number and class of shares subject to the options and the option prices of the options covered thereby shall be proportionately adjusted in the event of changes in the outstanding Common Stock by reason of stock dividends, stock splits, recapitalizations, mergers, consolidations, combinations or exchanges of shares, split-ups, split-offs, spin-offs, liquidations or other similar changes in capitalization, or any distribution to common stockholders other than cash dividends and, in the event of any such change in the outstanding Common Stock, the aggregate number and class of shares available under the Plan and the number of shares as to which options may be granted shall be appropriately adjusted by the Board. 8. Amendment and Termination. Unless the Plan shall theretofore have been terminated as hereinafter provided, the Plan shall terminate on, and no awards of options shall be made after, December 31, 2001; provided, however, that such termination shall have no effect on options granted prior thereto. The Plan may be terminated, modified or amended by the stockholders of the Company. The Board of Directors of the Company may also terminate the Plan or modify or amend the Plan in such respects as it shall deem advisable in order to conform to any change in any law or regulation applicable thereto, or in other respects which shall not change (i) the total number of shares as to which options may be granted, (ii) the class of persons eligible to receive options under the Plan, (iii) the manner of determining the option prices, (iv) the period during which options may be granted or exercised, (v) the provisions relating to the administration of the Plan by the directors of the Company, or (vi) any provision requiring stockholder approval under any provision of law or any requirement of the stock exchange on which shares of Common Stock are then trading. 9. Withholding. Upon the transfer of the Common Stock as a result of the exercise of an option, the Company shall have the right to retain or sell without notice sufficient shares of stock (taken at the average of the high and low sales prices of such stock on the New York Stock Exchange on such date or dates as may be determined by the Board, but not more than five business days prior to the date on which such shares would otherwise have been delivered) to cover the amount of any tax required by any government to be withheld or otherwise deducted and paid with respect to such payment, remitting any balance to the optionee; provided, however, that the optionee shall have the right to provide the Company with the funds to enable it to pay such tax. 10. Effectiveness of the Plan. The Plan shall become effective on the date the Plan is approved by the vote of the holders of a majority of the shares of Common Stock present, or represented, and entitled to vote at a meeting of the stockholders within twelve months after the date of adoption of the Plan by the Board of Directors. 11. Plan Construction. It is the intent of the Company that transactions in and affecting options granted under this Plan satisfy any then applicable requirements of Rule 16b-3 so that directors (unless they otherwise agree) will be entitled to the benefits of Rule 16b-3 or other exemptive rules under Section 16 of the Securities and Exchange Act of 1934 in respect of those transactions and will not be subjected to avoidable liability thereunder. If any provision of this Plan or of any option would otherwise frustrate or conflict with the intent expressed above, that provision to the extent possible shall be interpreted as to avoid such conflict. If the conflict remains irreconcilable, the Board may disregard the provisions if it concludes that to do so furthers the interest of the Company and is consistent with the purposes of this Plan as to such persons in the circumstances. EX-10.24 8 SECOND AMENDMENT TO 12/1/93 AGREEMENT-RETIREMENT EXHIBIT 10.24 SECOND AMENDMENT TO THE DECEMBER 1, 1993 AGREEMENT REGARDING RETIREMENT BENEFITS OF ARTHUR A. TORRELLAS WHEREAS, Arthur A. Torrellas (Executive") has been employed by Beckman Instruments, Inc. ("Company") for approximately 19 years; and WHEREAS, the Executive and the Company entered into the Agreement Regarding Retirement Benefits of Arthur A. Torrellas as of December 1, 1993 and executed on December 20, 1993 ("the Agreement") and subsequently entered into a First Amendment to the Agreement as of May 30, 1995 so that the Executive will continue to remain employed by and provide unique worldwide field operations experience to the Company. WHEREAS, the Executive and the Company wish to amend the Agreement and the First Amendment so that the Executive will continue to remain employed by and provide unique worldwide field operations experience to the Company beyond December 31, 1996. NOW, THEREFORE, this Second Amendment to the Agreement between the Executive and the Company is hereby adopted as of December 16, 1996 and amends the Agreement as follows: 1. All reference to October 31, 1995 in the Agreement is changed to July 31, 1997 except for paragraph 2 entitled Voluntary Termination Before or After October 31, 1995 which is deleted and the following inserted. 2. Voluntary Termination. The increase referred to in paragraph 1 does not apply if Executive, before December 31, 1996 or after July 31, 1997, voluntarily terminates employment (retires). The benefit payable under such circumstances would be the benefit normally payable from the Pension Plan and the Supplemental Plan. If the Executive voluntarily terminates employment (retires) after December 31, 1996, but before July 31, 1997, the Executive would receive the increase referred to in paragraph 1. 2. All other terms and provisions of the Agreement shall remain the same. This Amendment to the Agreement is entered into as of December 16, 1996. EXECUTIVE By: /s/Arthur a. Torrellas Arthur A. Torrellas COMPANY BECKMAN INSTRUMENTS, INC. By: /s/John P. Wareham John P. Wareham Its: President and Chief Operating Officer EX-10.29 9 COMPANY'S EMPLOYEES'STOCK PURCHASE PLAN EXHIBIT 10.29 BECKMAN INSTRUMENTS, INC. EMPLOYEES' STOCK PURCHASE PLAN (Amended and Restated as of November 1, 1996) 1. Purpose The purpose of the Beckman Employees' Stock Purchase Plan is to furnish to eligible employees an incentive to advance the best interests of the Company by providing a method whereby they voluntarily may purchase stock of Beckman Instruments, Inc. at a favorable price and upon favorable terms. 2. Eligibility (a) General statement; "Eligible Employees". Subject to the exceptions and limitations stated in subparagraph (b) and any applicable local law, all regular full-time employees, as defined in subparagraph (c), of Beckman Instruments, Inc., a Delaware corporation, (the "Company") are "Eligible Employees" who may participate in the plan, and, in addition, all regular full-time employees of any present or future subsidiary of the Company to which the plan may be extended on a nondiscriminatory basis by Company management, shall be "Eligible Employees" who may participate in the plan. (b) Exceptions and limitations. The exceptions and limitations referred to in subparagraph (a) are the following: (i) no employee shall be eligible to participate in the plan unless prior to the date of grant (as defined in subparagraph 4(a)) he or she has completed at least one full calendar month of continuous full-time employment, (ii) no employee shall be eligible to participate to the extent that suspension is required pursuant to Section 401(k) of the Internal Revenue Code of 1986, as amended (the "Code"), because of a hardship withdrawal from a 401(k) plan, and (iii) no option shall be granted to an employee if such employee immediately after the option is granted, owns stock possessing five percent or more of the total combined voting power or value of all classes of stock of the Company or of a subsidiary company. (c) Regular full-time employees defined. The term "regular full-time employees" means all employees of the Company and, as the case may be, of a subsidiary of the Company who are regularly employed for continuous full-time employment. A person is not a regular full-time employee if his or her customary employment is less than 20 hours per week. 3. Stock subject to the plan Subject to the provisions of paragraph 10 (relating to adjustment upon changes in stock), a number of shares of the Company's $.10 par value common stock ("common stock") in an amount equal to 1.25% of the total number of issued and outstanding shares of such common stock as of May 6, 1992 (the "1.25% Limit") shall become available for issuance under the plan on July 1, 1992, and thereafter, a number of shares of common stock in an amount equal to the 1.25% Limit shall become available for issuance under the plan each calendar year (commencing with the calendar year beginning on January 1, 1993). In addition, any unused portion of the shares of such common stock remaining from those reserved in 1991 for issuance under the plan and any unused portion of the 1.25% Limit for any calendar year shall remain available for issuance under the plan. Such shares of the Company's common stock may be unissued shares or reacquired shares or shares bought on the market for purposes of the plan. 4. Grant of options (a) General statement; "date of grant"; "option period"; "date of exercise". Following the effective date of the plan and continuing while the plan remains in force, the Company will offer options under the plan to all eligible employees, subject, however, to the limitation stated in subparagraph 6(e) which limits the rights of eligible employees who withdraw from the plan. Options shall become effective each January 1 and each July 1 (each of which dates hereinafter is referred to as "date of grant"). The term of each option is six months ("the option period") ending June 30 and December 31 in each year (each of which dates hereinafter is referred to as "date of exercise"). (b) Election to participate; payroll deduction authorization. An eligible employee may participate in the plan only by means of payroll deduction. Each eligible employee who elects to participate in the plan shall deliver to the Company, prior to the beginning of the payroll period from which payroll deductions will be made for the option period commencing on such date of grant, a payroll deduction authorization by a method or on a form acceptable to the Company whereby notice is given of the employee's election to participate in the plan as of the next following date of grant, and whereby the employee designates a stated amount to be deducted from his or her compensation on each pay day and paid into the plan for that employee's account. The total amount of a participant's payroll deductions may not exceed either of the following: (i) 10% per option period of the amount of "eligible compensation" (as defined in subparagraph (d)) from which the deduction is made, or (ii) an amount which will result in noncompliance with either the $25,000 per calendar year or the maximum number of shares per option period limitations stated in subparagraph (e). An option under the plan shall be deemed to have been granted automatically on the next following date of grant to each eligible employee who delivers to the Company a payroll deduction authorization within the time and in the form and manner stated in this subparagraph. (c) Continuing grant of options; changes in options. Each eligible employee who is a participant in the plan automatically and without any act on his or her part shall be continued as a participant in the plan as long as he or she remains eligible or, as the case may be, until such employee withdraws from the plan. An option under the plan shall be granted automatically on each date of grant to each eligible employee who remains a participant in the plan. Any eligible employee who is a participant in the plan may change the extent of his or her participation by delivering to the Company prior to the beginning of the payroll period from which payroll deductions will be made for the option period commencing on such date of grant, an amended payroll deduction authorization by a method or on a form acceptable to the Company which designates the change in the stated amount to be deducted from his or her eligible compensation commencing on the next following date of grant. After commencement of the option period, a participant in the plan may decrease the extent of his or her participation to as low as 1% effective at the beginning of any month during the option period by delivering an amended payroll deduction authorization, by a method or on a form acceptable to the Company, prior to the first payroll period of any such month. (d) "Eligible compensation" defined. The term "eligible compensation" includes the following: regular earnings, overtime, sick pay, shift differential, shift premium, vacation pay, incentive compensation, bonuses subject to formal programs, variable pay subject to formal programs, call-in pay, patent payments and holiday pay. Eligible compensation also includes any amounts contributed to a plan qualifying under Sections 401(k), 125 and 129 of the Code as salary reduction contributions. Any other form of compensation is excluded from eligible compensation, including but not limited to the following: prizes, awards, housing allowances, stock option exercises, stock appreciation rights, restricted stock exercises, performance awards, auto allowances, loss of company car, tuition reimbursement, article payments, tax reimbursement, Christmas gift, special awards, non-recurring bonuses, move-related payments, forms of imputed income, and Share Value Plan payments. The Organization and Compensation Committee of the Board of Directors of the Company (the "Committee") may include compensation components within the definition of eligible compensation as it deems desirable. (e) $25,000 and maximum number of shares limitations. No employee shall be permitted to purchase stock under the plan or under any other employee stock purchase plan of the Company or of any of its subsidiaries or related corporations at a rate which exceeds $25,000 in fair market value of stock (determined at the time the option is granted) for each calendar year in which any such option granted to such employee is outstanding at any time. In addition, no employee shall be permitted to purchase in excess of 4,000 shares per option period (subject to adjustment in accordance with paragraph 10). To the extent payroll deductions are made which would result in a participant exceeding either of these limitations, the Company shall refund to the participant the excess amounts deducted promptly following such determination. 5. Exercise of options (a) General statement. Each eligible employee who is a participant in the plan automatically and without any act on his or her part will be deemed to have exercised his or her option on each date of exercise to the extent that the balance then in such employee's account under the plan is sufficient to purchase at the "option price" (as defined in subparagraph (b)) whole and fractional shares of the stock subject to the plan. Notwithstanding the above, if the total number of shares purchasable pursuant to options granted in any option period exceeds the number of shares available for issuance as determined under paragraph 3 above, each participant's option shall be exercisable only for the number of shares equal to his or her pro rata portion of the remaining number of shares so available. Such pro rata portion shall be determined by multiplying the number of shares purchasable pursuant to each participant's option by a fraction the numerator of which is the number of shares remaining available for issuance and the denominator of which is the number of shares purchasable pursuant to outstanding options issued in the option period. Following such adjustment, the Company shall, at the Committee's discretion, either refund to the participant any remaining balance in a participant's account or carry any remaining balance forward in such account to apply toward the purchase price of shares on the next date of exercise. (b) "Option price" defined. The option price per share to be paid by each optionee on each exercise of his or her option shall be a sum equal to 90% of the fair market value of the stock subject to the plan on the date of exercise or on the date of grant, whichever amount is lesser. Fair market value of the stock on the date of exercise or, as the case may be, on the date of grant shall be the official closing price of such stock on such date on the New York Stock Exchange; and if no sale of the stock shall have been made on said exchange on such date, then fair market value on such date shall be the official closing price of the stock on said exchange on the next preceding date on which there was a sale. (c) Delivery of share certificates. As soon as practicable following the date of exercise, the Company will deliver a certificate issued in the optionee's name with respect to which the option was exercised and for which the option price has been paid. The Company will deliver such certificate to the optionee; however, in the event the Company makes available an alternate arrangement for delivery to a book entry service, the Committee in its discretion may either require or permit the optionee to elect that such certificate be delivered to such book entry service. No interest or right under the plan shall be created by delivery of such certificate to a book entry service. In the event the Company is required to obtain from any commission or agency authority to issue any such certificate, the Company will seek to obtain such authority. Inability of the Company to obtain from any such commission or agency authority which counsel for the Company deems necessary for the lawful issuance of any such certificate shall relieve the Company from liability to any participant in the plan except to return to the participant the amount of the balance in his or her account. 6. Withdrawal from the plan (a) General statement. Any participant may withdraw from the plan at any time during an option period or immediately following an exercise of an option. A participant who wishes to withdraw from the plan must deliver to the Company a notice of withdrawal by a method or on a form acceptable to the Company. (b) Withdrawal during an option period. For a participant withdrawing during an option period, the Company, promptly following the time when the notice of withdrawal is received, will refund to the participant the amount of the balance in his or her account under the plan; and thereupon, automatically and without any further act on the participant's part, such participant's payroll deduction authorization, interest in the plan, and interest in his or her option under the plan shall terminate. (c) Withdrawal immediately following an exercise of an option. For a participant withdrawing immediately following an exercise of an option, and before any payroll deductions have been made for the next following option period, such participant's payroll deduction authorization and interest in the plan shall terminate automatically and without any further act on the participant's part and the participant shall be deemed to have withdrawn effective on the date of grant following such exercise. (d) Withdrawal resulting from loss of eligibility. If a participant for any reason becomes ineligible for participation in the plan, the participant automatically and without any act on his or her part shall be deemed to have withdrawn from the plan as of the date when he or she became ineligible to participate. The Company promptly will refund to the participant the amount of the balance of his or her account under the plan, and as of the date when the participant became ineligible to participate, the participant's payroll deduction authorization, interest in the plan, and interest in his or her option under the plan shall terminate. A participant shall become ineligible at the time when he or she no longer can comply with the requirements for eligibility stated in paragraph 2 or any requirements imposed by applicable local law. (e) Limitation upon participation following withdrawal. A participant who withdraws effective on a date of grant as stated in subparagraph (c) may participate commencing on the next following date of grant, unless otherwise ineligible or prohibited by operation of law, rule or regulation. In all other instances, a participant who withdraws from the plan, either by his or her election to withdraw as stated in subparagraph (b), or by loss of eligibility to participate as stated in subparagraph (d), shall not be eligible for participation in the plan for the option period next following the option period during which he or she withdrew, or, if applicable, for any option period or part of an option period during which a participant has been prohibited or suspended from participation by operation of law, rule or regulation; but thereafter if eligible he or she again may participate. The limitation stated in this subparagraph (e) shall not be applicable in the case of a participant who withdraws from the plan or becomes ineligible to participate in the plan by reason of his or her entering the military service of the United States. 7. Termination of employment (a) Termination of employment other than by retirement or death. If the employment of a participant terminates other than by retirement or death, the participant automatically and without any act on his or her part shall be deemed to have withdrawn from the plan on the day following the effective date of termination of his or her employment. The Company promptly will refund to the participant the amount of the balance in his or her account under the plan, and thereupon the participant's interest in the plan shall terminate. (b) Termination by retirement. If, on or after the day that is three months before the date of exercise, a participant retires or early retires (as such terms are defined in the then current retirement plan for Company employees), such participant may, at his or her election, by a method or on a form acceptable to the Company, either (i) provide notice to the Company on or before his or her retirement date of exercise of his or her outstanding option in which event the Company shall retain the balance in such participant's account during the then current option period and then apply the balance in such account under the plan to purchase at the option price shares of the Company's stock, or (ii) provide notice to the Company requesting payment of the balance in such account, in which event the Company promptly shall make payment, and thereupon the participant's interest in the plan and in his or her outstanding option under the plan shall terminate. If the participant elects to exercise his or her option, the date of exercise for the purpose of computing the amount of the purchase price of the Company's stock shall be the end of the then current option period. If a participant retires prior to the day that is three months before the date of exercise, the Company promptly will refund the amount in the participant's account, and thereupon the participant's interest in the plan and in his or her outstanding option under the plan shall terminate. (c) Termination by death. If the employment of a participant is terminated by death, the Company promptly will pay the balance of the participant's account under the plan to the person whom the participant has named beneficiary to receive the benefits of the Company's basic group life insurance plan, or to the participant's estate if he or she has not named any such beneficiary, and thereupon the participant's interest in the plan and in his or her option under the plan shall terminate. 8. Restriction upon assignment An option granted under the plan shall not be transferable. An option may not be exercised to any extent except by the optionee. The Company will not recognize and shall be under no duty to recognize any assignment or purported assignment by an optionee of his or her option or of any rights under his or her option. (The effect of death upon the rights of an optionee is stated in subparagraph 7(c).) 9. No rights of stockholder until certificate issued With respect to shares subject to an option, an optionee shall not be deemed to be a stockholder of the Company and he or she shall not have any of the rights or privileges of such a stockholder. An optionee shall have the rights and privileges of a stockholder of the Company when, but not until, a certificate for shares has been issued to the participant following exercise of his or her option or recorded to the participant's account with a book entry service. 10. Changes in stock; adjustments Whenever any change is made in the stock subject to the plan, or subject to options outstanding under the plan (through merger, consolidation, reorganization, recapitalization, stock dividend, stock split, combination of shares, exchange of shares, change in corporate structure, or otherwise), appropriate action will be taken by the Board of Directors to adjust accordingly the number of shares subject to the plan and the number and option price of shares subject to options outstanding under the plan. 11. Use of funds; no interest paid. All funds received or held by the Company under the plan will be included in the general funds of the Company and may be used for any corporate purpose. No interest will be paid to any participant or credited to his or her account under the plan. 12. Amendment of the plan. The Board of Directors may amend or suspend the plan at any time and from time to time subject to the limitation that approval by the vote of the holders of more than 50% of the outstanding shares of the Company entitled to vote shall be required to amend the plan (i) to change the number of shares reserved for option under the plan, (ii) to decrease the option price below a price computed in the manner stated in subparagraph 5(b), or (iii) in any manner which requires stockholder approval under any provision of law or under any requirement of the stock exchange on which shares are then trading. 13. Administration by Committee; rules and regulations The plan shall be administered by the Committee (as such term is previously defined), none of whom shall be eligible to participate in the plan. The Committee shall have the power to make, amend, and repeal rules and regulations and establish such procedures as it deems appropriate for the interpretation and administration of the plan. The Committee may construe the plan, correct defects, supply omissions and reconcile inconsistencies to the extent necessary to effectuate the plan, provided that such does not conflict with the plan, and such action shall be conclusive. 14. Effective date; term; early termination The plan shall become effective July l, l989, and shall remain in force until December 31, 2001, unless it is sooner terminated effective at the close of business on June 30 or December 3l of any year by a resolution adopted by the Company's Board of Directors pursuant to authority which hereby expressly is reserved. Termination of the plan by action of the Board of Directors shall not diminish the rights of any optionee nor impair the obligations of the Company under any outstanding option; and the obligation of the Company to any participant with respect to an outstanding option shall be the same as though he or she had elected not to participate in the plan following the date as of which it was terminated by action of the Board of Directors. 15. Plan construction. It is the intent of the Company that transactions in and affecting options in the case of participants who are or may be subject to the prohibitions of Section 16 of the Securities and Exchange Act of 1934 ("SEC Section 16") satisfy any then applicable requirements of 17 C.F.R. 240.16b-3 (hereinafter known as Rule 16b-3) so that such persons (unless they otherwise agree) will be entitled to the exemptive relief of Rule 16b-3 in respect of those transactions and will not be subjected to avoidable liability thereunder. Accordingly, this plan shall be deemed to contain, and such options shall contain, and the shares issued upon exercise thereof shall be subject to, such additional conditions and restrictions as may be required by Rule 16b-3 to qualify for the maximum exemption from SEC Section 16 with respect to plan transactions. If any provision of this Plan or of any option would otherwise frustrate or conflict with the intent expressed above, that provision to the extent possible shall be interpreted as to avoid such conflict. If the conflict remains irreconcilable, the Committee may disregard the provisions if it concludes that to do so furthers the interest of the Company and is consistent with the purposes of this plan as to such persons in the circumstances. EX-13 10 COMPANY'S ANNUAL REPORT TO STOCKHOLDERS EXHIBIT 13 WORDS ON NUMBERS Section of the Company's Annual Report to Stockholders for the year ended December 31, 1996 SELECTED FINANCIAL INFORMATION Dollars in millions, except amounts per share
Years Ended December 31, 1996 1995 1994 1993 1992 Summary of Operations Sales $1,028.0 $ 930.1 $ 888.6 $ 875.7 $ 908.8 Operating income (1) $ 122.5 $ 110.8 $ 98.9 $ 85.6 $ 87.2 Net earnings before special charges $ 74.7 $ 66.1 $ 56.9 $ 46.9 $ 43.8 Special charges Restructuring charge, net of tax benefit - (17.2) (9.6) (73.0) - Environmental charge, net of tax benefit - - - (7.5) - Changes in accounting principles - - (5.1) (4.0) - -------- ------- --------- -------- ------- Net earnings $ 74.7 $ 48.9 $ 42.2 $ (37.6) $ 43.8 ======== ======= ========= ======== ======= Net earnings per share before special charges $ 2.58 $ 2.29 $ 2.03 $ 1.69 $ 1.53 Net earnings (loss) per share $ 2.58 $ 1.70 $ 1.50 $ (1.35) $ 1.53 Dividends paid per share of common stock $ 0.52 $ 0.44 $ 0.40 $ 0.36 $ 0.30 Shares outstanding (millions) 28.0 28.3 28.0 27.8 28.6 Weighted average common shares and common share equivalents (millions) 28.9 28.8 28.1 27.8 28.7 Other Information Total Assets $ 960.1 $ 907.8 $ 829.1 $ 820.0 $ 738.4 Long-term debt, less current maturities $ 176.6 $ 162.7 $ 117.3 $ 113.7 $ 59.5 Working capital $ 300.1 $ 282.1 $ 243.2 $ 221.2 $ 227.3 Return on average equity (percent) 20.0 14.7 14.2 (11.9) 12.5 Capital expenditures $ 117.4 $ 110.0 $ 98.7 $ 92.8 $ 91.4 Depreciation expense $ 85.8 $ 77.6 $ 69.1 $ 62.3 $ 63.9 Number of employees 6,079 5,702 5,963 6,689 6,980
(1)Excludes pretax special charges. Special charges include pretax restructuring charges of $27.7, $11.3 and $114.7 in 1995, 1994 and 1993, respectively, and a pretax environmental charge of $12.5 in 1993. Including these special charges, the Company reported operating income (loss) of $83.1 in 1995, $87.6 in 1994 and $(29.1) in 1993. FINANCIAL REVIEW In millions, except amounts per share Results Of Operations The following table sets forth, for the periods indicated, the results of operations as a percentage of sales and on a comparative basis:
% % % 1996 1995 Years ended of of of compared compared December 31, 1996 Sales 1995 Sales 1994 Sales to 1995(2) to 1994(2) Sales Diagnostics $ 652.0 63.4 $558.5 60.0 $530.2 59.7 $93.5 $ 28.3 Life sciences 376.0 36.6 371.6 40.0 358.4 40.3 4.4 13.2 -------- ----- ------ ----- ------ ----- ----- ------ Total Sales $1,028.0 100.0 $930.1 100.0 $888.6 100.0 $97.9 $ 41.5 ======== ===== ====== ===== ====== ===== ===== ====== Gross profit $ 550.2 53.5 $502.9 54.1 $472.3 53.2 $47.3 $ 30.6 Marketing, general and administrative 319.3 31.1 300.4 32.3 281.9 31.8 18.9 18.5 Research and development 108.4 10.5 91.7 9.9 91.5 10.3 16.7 0.2 -------- ----- ------ ----- ------ ----- ------ ------- Operating income(1) 122.5 11.9 110.8 11.9 98.9 11.1 11.7 11.9 Net nonoperating expense 11.0 1.0 10.7 1.1 12.7 1.4 0.3 (2.0) -------- ----- ------ ----- ------ ----- ------ ------- Earnings before income taxes(1) 111.5 10.9 100.1 10.8 86.2 9.7 11.4 13.9 Income tax provision 36.8 3.6 34.0 3.7 29.3 3.3 2.8 4.7 -------- ----- ------ ----- ------ ----- ------ ------- Net earnings(1) $ 74.7 7.3 $ 66.1 7.1 $ 56.9 6.4 $ 8.6 $ 9.2 ======== ===== ====== ===== ====== ===== ====== ======= Net earnings including special charges $ 74.7 $ 48.9 $ 42.2 $ 25.8 $ 6.7 Net earnings per share before special charges $ 2.58 $ 2.29 $ 2.03 $ 0.29 $ 0.26 Net earnings per share $ 2.58 $ 1.70 $ 1.50 $ 0.88 $ 0.20 Dividends paid per share of common stock $ 0.52 $ 0.44 $ 0.40 $ 0.08 $ 0.04
(1) Amounts exclude special charges. Special charges include restructuring charges of $27.7, 3.0% of sales, and $11.3, 1.3% of sales, in 1995 and 1994, respectively. Including the restructuring charge, operating income was $83.1, 8.9% of sales, and $87.6, 9.8% of sales, in 1995 and 1994, respectively. Including special charges, the Company reported earnings before income taxes of $72.4, 7.8% of sales, and $74.9, 8.4% of sales, in 1995 and 1994, respectively. 1994 also includes a special charge for the cumulative effect of a change in accounting principle of $5.1, net of tax benefit. (2) Decreases from the comparative period are designated by (). Redirected Business Strategy and Reorganization The restructure charges recorded in 1995 and 1994 were for facility moves and transition costs that were anticipated and directly associated with the Company's 1993 restructuring plan but could not be recognized in the establishment of the original restructuring reserve under generally accepted accounting principles. 1996 compared to 1995 Sales growth of 11%, 13% in constant currency, over the prior year was attributable to increased market share in diagnostics products, primarily in the North American and European markets; increased market share in life sciences products, primarily in non-European international markets; continued success from the Company's SmithKline Diagnostics subsidiary's HEMOCCULT product; and, sales from Hybritech products (Hybritech was acquired effective January 2, 1996). International sales represented approximately 50% of total sales. The gross profit percentage decrease resulted from changes in product mix, unfavorable foreign currency fluctuations and competitive pricing pressures. The increase in operating costs was due to a higher rate of investment in research and development costs related to Hybritech products. 1995 compared to 1994 Sales grew 5% over the prior year although the Company experienced relatively flat market conditions. The sales growth was attributable to sales from the Company's SmithKline Diagnostics subsidiary's HEMOCCULT product (the license for which was acquired in 1995); increased market share in diagnostics products, primarily in the North American and non-European international markets; and, increased market share in life sciences products, primarily in non-European international markets. Sales were also favorably impacted by 2% from foreign currency fluctuations. International sales represented approximately 53% of total sales. Gross profit increased from greater sales volume and the effect of cost containment initiatives resulting from the Company's restructuring. Net nonoperating expense decreased primarily from gains recognized from foreign currency hedging activities. Financial Condition Liquidity and Capital Resources Net cash provided by operating activities in 1996 was $139.1 compared to $60.2 in 1995 and $111.1 in 1994. Contributing to the increase in 1996 was an increase in accounts payable, accrued expenses and accrued income taxes. Also contributing to the increase in operating cash flow was $25.3 received upon the sale of a portion of the Company's sales-type lease receivables. Net cash used by investing activities was $114.6 in 1996, an increase of $1.6 resulting from 1996 acquisitions net of decreased purchases of short-term equity investments compared to 1995. Investing activities are primarily expenditures for property, plant and equipment, which totaled $117.4 in 1996, compared to $110.0 in 1995 and $98.7 in 1994. Included in capital expenditures are expenditures for customer leased equipment of $72.7, $68.9 and $74.5 in 1996, 1995 and 1994, respectively. Of the capital expenditures for customer leased equipment, $24.9 in 1996, $39.0 in 1995, and $51.3 in 1994 represent an increase in the gross amount of customer leases. The Company plans to invest at approximately the same level in 1997 and intends to finance this capital spending primarily through cash provided by operating activities. In June 1996, the Company issued $100.0 of debentures (See Note 5 "Debt"). The net proceeds received of $98.5 were used to repay amounts then outstanding under the Company's commercial paper program. The Company is authorized, through 1998, to acquire common stock to meet the needs of the Company's existing stock-related employee benefit plans. Under this program, Beckman repurchased 991,543 shares of its common stock during 1996. The Company maintains a $150.0 revolving credit agreement expiring on September 30, 1999. As of December 31, 1996, there were no borrowings against the line. See further discussion in Note 5 "Debt." The Company also has the ability to issue, until June 1998, up to $100.0 of additional debt under a Form S-3 Registration Statement filed with the SEC which was declared effective on April 16, 1996. The Company believes that net cash provided by operating activities, supplemented as necessary with funds expected to be available under the Company's credit agreement, will provide sufficient resources to meet present and reasonably foreseeable working capital requirements, debt service and other cash needs. Acquisition Activities In December 1996 the Company acquired the assets and assumed the liabilities of the laboratory robotics division of Sagian Inc. of Indianapolis, Indiana. By combining Sagian's scheduling software and robotics with its own biorobotics systems, the Company enhanced its ability to serve the pharmaceutical industry's need for high- throughput screening (HTS) of candidate compounds for new drugs. The acquisition was accounted for as a purchase. Effective January 2, 1996, the Company acquired the assets and assumed the liabilities of Hybritech Incorporated, a San Diego-based life sciences and diagnostics 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. In May 1995, the Company agreed to acquire Genomyx Corporation of Foster City, California. Genomyx is a developer and manufacturer of advanced DNA sequencing products and complements the Company's biotechnology business. The acquisition was completed on October 21, 1996 and was accounted for as a purchase. The purchase prices of the acquisitions and results of operations were not material to the Company individually or in the aggregate. Business Climate The diagnostics and life sciences markets continue to be unfavorably impacted by the European recession and cost containment initiatives in several European governmental and health care systems. The life sciences market also continues to be affected by reductions of pharmaceutical capital spending in response to the consolidation of companies and constraints on research and development spending. While these markets are highly competitive, sales growth has been obtained through continued market penetration. Cost containment initiatives in U.S. and European health care systems are expected to be continuing factors which may affect the Company's sales in the short-term. Inflation increases the cost of goods and services used by the Company. Competitive and regulatory conditions in many markets restrict the Company's ability to fully recover the higher costs of acquired goods and services through price increases. The Company continues to improve productivity and reduce costs to mitigate the effects of inflation. The Company derives approximately 50% of its sales from sources outside of the United States. In the short-term, the relative strength or weakness of the U.S. dollar is not likely to have a material effect on the Company's business decisions. The Company actively manages its foreign currency exposures through foreign currency contracts. The Company may adjust certain aspects of its operations in the event of a sustained material change in such exchange rates and pricing pressures. Environmental Matters The Company is subject to federal, state, local and foreign environmental laws and regulations. The Company believes that its operations comply in all material respects with applicable federal, state, and local environmental laws and regulations. Although the Company continues to make expenditures for environmental protection, it does not anticipate any significant expenditures in order to comply with such laws and regulations which would have a material impact on the Company's operations or financial position. See further discussion in Note 9 "Commitments and Contingencies." Litigation 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 these matters will have a material adverse effect on its operations or financial position. See further discussion of these matters in Note 9 "Commitments and Contingencies." CONSOLIDATED BALANCE SHEETS In millions
December 31, 1996 1995 Assets Current assets Cash and equivalents $ 34.6 $ 26.2 Short-term investments 8.1 8.2 Trade receivables and other 309.5 288.8 Inventories 190.4 166.2 Deferred income taxes 21.4 29.4 Other current assets 15.4 14.5 ------ ------ Total current assets 579.4 533.3 Property, plant and equipment, net 263.5 252.1 Deferred income taxes 50.8 59.8 Other assets 66.4 62.6 ------ ------ Total assets $960.1 $907.8 ====== ====== Liabilities and Stockholders' Equity Current liabilities Notes payable $ 19.4 $ 15.8 Accounts payable 45.6 50.6 Accrued compensation 47.4 40.4 Other accrued expenses 115.2 99.5 Income taxes 51.7 44.9 ------ ------ Total current liabilities 279.3 251.2 Long-term debt, less current maturities 176.6 162.7 Other liabilities 105.3 146.0 ------ ------ Total liabilities 561.2 559.9 ------ ------ Stockholders' equity Preferred stock, $0.10 par value; authorized 10.0 shares; none issued - - Common stock, $0.10 par value; authorized 75.0 shares; shares issued 29.1 at 1996 and 1995; share outstanding 28.0 at 1996 and 28.3 at 1995 2.9 2.9 Additional paid-in capital 128.9 129.0 Foreign currency translation adjustment 3.9 8.4 Retained earnings 300.0 240.0 Minimum pension liability - (9.9) Treasury stock, at cost (36.8) (22.5) ------ ------ Total stockholders' equity 398.9 347.9 ------ ------ Commitments and contingencies Total liabilities and stockholders' equity $960.1 $907.8 ====== ======
See accompanying notes to consolidated financial statements. CONSOLIDATED STATEMENTS OF EARNINGS In millions, except amounts per share
Years ended December 31, 1996 1995 1994 Sales $1,028.0 $930.1 $888.6 Operating costs and expenses Cost of sales 477.8 427.2 416.3 Marketing, general and administrative 319.3 300.4 281.9 Research and development 108.4 91.7 91.5 Restructuring charge - 27.7 11.3 ------- ------ ------ 905.5 847.0 801.0 ------- ------ ------ Operating income 122.5 83.1 87.6 Nonoperating income (expense) Interest income 5.8 5.3 5.1 Interest expense (18.1) (13.4) (13.2) Other, net 1.3 (2.6) (4.6) ------- ------ ------ (11.0) (10.7) (12.7) ------- ------ ------ Earnings before income taxes 111.5 72.4 74.9 Income taxes 36.8 23.5 27.6 ------- ------ ------ Net earnings before cumulative effect of change in accounting principle 74.7 48.9 47.3 Cumulative effect of change in accounting principle - accounting for postemployment benefits (net of tax benefit of $3.0) - - (5.1) ------- ------ ------ Net earnings $ 74.7 $ 48.9 $ 42.2 ======= ====== ====== Weighted average common shares and common share equivalents 28.9 28.8 28.1 Net earnings per share before cumulative effect of change in accounting principle $ 2.58 $ 1.70 $ 1.68 Cumulative effect of change in accounting principle - - (0.18) ------- ------ ------ Net earnings per share $ 2.58 $ 1.70 $ 1.50 ======= ====== ======
See accompanying notes to consolidated financial statements. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY In millions
Foreign Additional Currency Minimum Common Paid-in Translation Retained Pension Treasury Stock Capital Adjustment Earnings Liability Stock ----- --------- ----------- -------- --------- -------- Balances, December 31, 1993 $ 2.9 $129.6 $(1.1) $172.4 - $ (28.3) Net earnings 42.2 Foreign currency translation adjustments 9.7 Dividends to stockholders (11.2) Purchases of treasury stock (14.6) Vesting of restricted stock 0.1 Employee stock purchases 0.3 15.0 ---- ------ ----- ------ ----- ------ Balances, December 31, 1994 $ 2.9 $130.0 $8.6 $203.4 - $(27.9) Net earnings 48.9 Foreign currency translation adjustments (0.2) Dividends to stockholders (12.3) Purchases of treasury stock (13.3) Vesting of restricted stock 0.1 Employee stock purchases (1.1) 18.7 Minimum pension liability (9.9) ---- ----- ----- ----- ---- ---- Balances, December 31, 1995 $ 2.9 $129.0 $8.4 $240.0 $(9.9) $(22.5) Net earnings 74.7 Foreign currency translation adjustments (4.5) Dividends to stockholders (14.7) Purchases of treasury stock (35.9) Employee stock purchases (0.1) 21.6 Minimum pension liability 9.9 ----- ------ ---- ------ ---- ------ Balances, December 31, 1996 $ 2.9 $128.9 $3.9 $300.0 - $(36.8) =====- ====== ==== ====== ==== ======
See accompanying notes to consolidated financial statements. CONSOLIDATED STATEMENTS OF CASH FLOWS In millions
Years ended December 31, 1996 1995 1994 Cash Flows from Operating Activities Net earnings $ 74.7 $ 48.9 $ 42.2 Adjustments to reconcile net earnings to net cash provided by operating activities Depreciation and amortization 87.8 79.1 70.1 Net deferred income taxes 11.3 10.2 6.9 Changes in assets and liabilities Trade receivables and other (26.1) (23.7) (7.0) Inventories (26.4) (15.7) 15.8 Accounts payable and accrued expenses 30.7 0.7 5.9 Restructuring reserve (10.6) (12.9) (42.1) Accrued income taxes 7.0 (8.8) 6.3 Other (9.3) (17.6) 13.0 ----- ----- ----- Net cash provided by operating activities 139.1 60.2 111.1 ----- ----- ----- Cash Flows from Investing Activities Additions to property, plant and equipment (110.5) (103.2) (97.4) Net disposals of property, plant and equipment 18.7 13.2 17.1 Sales (purchases) of short-term investments 0.2 (7.5) 21.2 Investments and acquisitions (23.0) (15.5) (1.5) ------ ----- ----- Net cash used by investing activities (114.6) (113.0) (60.6) ------ ----- ----- Cash Flows from Financing Activities Dividends to stockholders (14.7) (12.3) (11.2) Proceeds from issuance of stock 21.5 17.6 15.3 Purchases of treasury stock (35.9) (13.3) (14.6) Notes payable borrowings (reductions) (2.4) 2.8 (21.9) Long-term debt borrowings 128.3 43.4 4.9 Long-term debt reductions (113.0) (3.5) (1.9) Other - 0.1 (1.4) ----- ---- ---- Net cash provided (used) by financing activities (16.2) 34.8 (30.8) ----- ---- ---- Effect of exchange rates on cash and equivalents 0.1 - 0.3 ----- ---- ---- Increase (decrease) in cash and equivalents 8.4 (18.0) 20.0 Cash and equivalents-beginning of year 26.2 44.2 24.2 ------ ------ ------ Cash and equivalents-end of year $ 34.6 $ 26.2 $ 44.2 ====== ====== ====== Supplemental Disclosures of Cash Flow Information Cash payments for income taxes $ 13.0 $ 22.0 $ 11.8 Cash payments for interest 18.3 12.0 14.5 Noncash Investing and Financing Activities Conversion of notes receivable 8.1 - - Minimum pension liability (9.9) 9.9 - Purchase of equipment under capital lease obligation $ 6.9 $ 6.8 $ 1.3
See accompanying notes to consolidated financial statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS In millions, except amounts per share 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The consolidated financial statements include the accounts of Beckman Instruments, Inc., and its wholly owned subsidiaries. The consolidated entity is referred to as the Company in the accompanying consolidated financial statements. All significant transactions among the consolidated entities have been eliminated from the consolidated financial statements. The accounts of most of the Company's non-U.S. subsidiaries are included on the basis of their fiscal years ended November 30. 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 revenues and expenses during the reporting period. Actual results could differ from those estimates. Financial Instruments The carrying value of cash and cash equivalents, trade receivables and other, other current assets, investments, notes payable, accounts payable, and amounts included in other accrued expenses meeting the definition of a financial instrument, approximate their fair value at December 31, 1996. The carrying value of the Company's debt, $180.9, and derivative instruments, $1.2, also approximate their fair value at December 31, 1996. Market values of the Company's financial instruments, other than debt and derivative instruments, are based upon management estimates. Market values of the Company's debt and derivative instruments are determined by quotes from financial institutions. Foreign Currency Translation Non-U.S. assets and liabilities are translated into U.S. dollars at fiscal year-end exchange rates. Operating results are translated at exchange rates prevailing during the year. The resulting translation adjustments are accumulated as a separate component of stockholders' equity. Gains and losses resulting from foreign currency transactions and translation adjustments relating to foreign entities deemed to be operating in U.S. dollar functional currency or in highly inflationary economies are included in the statement of earnings in "other, net". The Company experienced net foreign currency gains (losses) of $2.2 in 1996, $2.3 in 1995, and $(4.5) in 1994. Revenue Recognition In general, revenue is recognized when a product is shipped. When a customer enters into an operating-type lease agreement, revenue is recognized over the life of the lease. Under a sales-type lease agreement, revenue is recognized at the time of shipment with interest income recognized over the life of the lease. Service revenues are recognized ratably over the life of the service agreement or as service is performed, if not under contract. Income Taxes The Company uses the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Stock Compensation Typically, the Company issues options with a grant price equal to the fair value of the Company's common stock. Accordingly, no compensation cost has been recognized for its stock option or stock purchase plans. The Company discloses in Note 7 "Employee Benefits" the effect on the Company's earnings as if compensation cost was recorded as the estimated value of the stock option granted. Derivatives Gains and losses on hedges of existing assets or liabilities are included in the carrying amounts of those assets or liabilities and are ultimately recognized in income as part of those carrying amounts. Gains and losses related to qualifying hedges of firm commitments or anticipated transactions also are deferred and are recognized in income in "other, net" or as adjustments of carrying amounts when the hedged transaction occurs. Gains and losses on hedges of foreign net asset positions are included in stockholders' equity, under the caption "Foreign currency translation adjustment." Gains and losses on interest rate swaps accounted for as hedges are recognized over the term of the swap as a reduction or increase in "interest expense." Earnings Per Share Net earnings per share is calculated using the weighted average number of common shares outstanding during the period, including the effect of common share equivalents. Common share equivalents are comprised of the dilutive effect of outstanding stock options. Common share equivalents reduced net earnings per share by $0.08 in 1996 and $0.04 in 1995. The effect of common share equivalents was not included prior to 1995 as the dilutive effect was not significant. Primary earnings per share approximates fully diluted earnings per share for each period presented. Cash and Equivalents The Company considers cash and equivalents to include cash in banks, time deposits and investments having an original maturity of three months or less. Short-Term Investments Short-term investments are principally comprised of investments with original maturities in excess of three months but less than one year. Investments The Company periodically makes investments in unaffiliated companies through debt and equity securities. The investments are considered available-for-sale and carried at current fair value with unrealized gains or losses reported as a separate component of stockholders' equity, if necessary. Investments in which the Company is able to exercise significant influence and/or owns a 20% to 50% equity interest are accounted for using the equity method. Investments are included in "other assets." Inventories Inventories are valued at the lower of cost or market (net realizable value). Cost is determined by the first-in, first-out method. Property, Plant and Equipment and Depreciation Land, buildings and machinery and equipment are carried at cost. The cost of additions and improvements are capitalized, while maintenance and repairs are expensed as incurred. Depreciation is computed generally on the straight-line method over the estimated useful lives of the related assets. Buildings are depreciated over 20 to 40 years, machinery and equipment over 3 to 10 years and instruments subject to lease over the lease term but not in excess of 7 years. Leasehold improvements are amortized over the lesser of the life of the asset or the term of the lease but not in excess of 20 years. Reclassifications Certain amounts from the prior years have been reclassified to conform to the current presentation. 2. REDIRECTED BUSINESS STRATEGY AND REORGANIZATION The Company incurred restructuring charges of approximately $27.7 in 1995 and $11.3 in 1994. The 1995 and 1994 restructuring charges include costs for facility moves and transition costs which were anticipated and directly associated with the 1993 restructuring plan but could not be recognized in establishment of the original restructuring reserve under generally accepted accounting principles. At December 31, 1996 and 1995, the Company's remaining obligations relating to the restructuring charges were $2.6 and $13.2, respectively, and are included in "other accrued expenses". 3. COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS
1996 1995 ---- ---- Trade receivables and other Trade receivables $295.3 $270.3 Other receivables 20.7 21.5 Current portion of lease receivables 3.1 6.1 Less allowance for doubtful receivables (9.6) (9.1) ------ ------ $309.5 $288.8 ====== ====== Inventories Finished products $123.8 $117.7 Raw materials, parts and assemblies 53.0 40.5 Work in process 13.6 8.0 ------ ------ $190.4 $166.2 ====== ====== Property, plant and equipment, net Land $ 9.1 $ 10.5 Buildings 144.1 142.0 Machinery and equipment 239.1 218.0 Instruments subject to lease(a) 281.6 256.7 ------ ------ 673.9 627.2 Less accumulated depreciation Building, machinery and equipment (236.4) (224.2) Instruments subject to lease(a) (174.0) (150.9) ------ ------ $263.5 $252.1 ====== ====== Other accrued expenses Restructure reserve $ 2.6 $ 13.2 Royalties 7.7 0.7 Unrealized service income 36.9 35.6 Insurance 23.1 23.9 Accrued warranty and installation costs 4.5 4.7 Other 40.4 21.4 ------ ------ $115.2 $ 99.5 ====== ======
(a) Includes instruments leased to customers under three-to five-year cancelable operating leases. 4. Acquisitions In December 1996 the Company acquired the assets and assumed the liabilities of the laboratory robotics division of Sagian Inc. of Indianapolis, Indiana. By combining Sagian's scheduling software and robotics with its own biorobotics systems, the Company enhanced its ability to serve the pharmaceutical industry's need for high- throughput screening (HTS) of candidate compounds for new drugs. The acquisition was accounted for as a purchase. Effective January 2, 1996, the Company acquired the assets and assumed the liabilities of Hybritech Incorporated, a San Diego-based life sciences and diagnostics 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. In May 1995, the Company agreed to acquire Genomyx Corporation of Foster City, California. Genomyx is a developer and manufacturer of advanced DNA sequencing products and complements the Company's biotechnology business. Through December 31, 1995, the Company invested approximately $8.1 in convertible notes receivable and a less than 20% ownership of Genomyx common stock. On October 21, 1996, the Company acquired the remaining shares of Genomyx voting common stock for cash and conversion of the $8.1 convertible note. The acquisition was accounted for as a purchase. The purchase prices of the acquisitions and results of operations were not material to the Company individually or in the aggregate. 5. Debt Notes payable consist primarily of bank borrowings by the Company's subsidiaries outside the U.S. under local line of credit facilities and the current portion of long-term debt. The bank borrowings are short-term borrowings at rates which approximate current market rates; therefore, the carrying value of the notes approximates the market value. At December 31, 1996 approximately $116.0 of unused short-term lines of credit were available to the Company's subsidiaries outside the U.S. at various interest rates. Within the U.S., the Company had available $20.0 in committed unused short-term lines of credit at market rates. Compensating balances and commitment fees on these lines of credit are not material and there are no withdrawal restrictions. In June 1996, the Company issued $100.0 of debentures bearing an interest rate of 7.05% per annum due June 1, 2026. Interest is payable semi-annually in June and December. The debentures were recorded net of discount and issuance costs of approximately $1.5 which are being amortized to interest expense over the term of the debentures. The debentures may be repaid on June 1, 2006 at the option of the holders of the debentures, at 100% of their principal amount, together with accrued interest to June 1, 2006, in accordance with the terms of the debenture agreement. The debentures may be redeemed, in whole or in part, at the option of the Company at any time after June 1, 2006 at a redemption price equal to the greater of the principal amount of the debentures or the sum of the present values of the remaining scheduled payments of principal and interest thereon discounted to the redemption date on a semiannual basis at a comparable treasury issue rate plus 0.1%. The Company has a $150.0 revolving credit agreement (the "Credit Agreement") expiring on September 30, 1999. Borrowings under the Credit Agreement bear interest at current market rates and are subject to a number of conditions, including the absence of a significant change in control of the Company. As of December 31, 1996, there were no borrowings against the credit line. Long-term debt consisted of the following at December 31:
Average Rate of Interest 1996 1995 -------- ---- ---- Debentures 7.05% $100.0 $ - Senior notes, unsecured 7.4% 50.0 50.0 Commercial paper 5.5% - 92.0 Other long-term debt 4.9% 30.9 23.6 ------ ------ 180.9 165.6 Less current maturities 4.3 2.9 ------ ------ Long-term debt, less current maturities $176.6 $162.7 ====== ======
The $50.0 senior notes mature in the year 2000 and are comprised of Series A $20.0 and Series B $30.0. Series A notes bear interest at 7.3%, and Series B notes bear interest at 7.4% annually. Interest is payable semiannually on both Series A and Series B notes. The terms and conditions of the senior notes are similar to those of the Credit Agreement. Other long-term debt at December 31, 1996 and 1995 consists principally of $22.1 and $16.8 of yen denominated senior notes. Of the 1996 balance, $6.2 matures in 1998, $8.8 matures in 1999 and $7.1 matures in 2002. Capitalized leases of $8.8 in 1996 and $6.8 in 1995 are also included in other long-term debt. Certain of the Company's borrowing agreements contain covenants that the Company must comply with, for example: minimum consolidated net worth, several specified ratios, and the limitation on the sale or mortgage of certain assets. At December 31, 1996, the Company was in compliance with all such covenants. The aggregate maturities of long-term debt for the five years subsequent to December 31, 1996 are $4.3 in 1997, $9.5 in 1998, $9.9 in 1999, $50.1 in 2000, $0.0 in 2001 and $107.1 thereafter. 6. Income Taxes The components of earnings before income taxes were:
1996 1995 1994 ---- ---- ---- U.S. $ 42.5 $21.2 $30.5 Non-U.S. 69.0 51.2 44.4 ------ ----- ----- $111.5 $72.4 $74.9 ====== ===== =====
The provision (benefit) for income taxes consisted of the following:
1996 1995 1994 ---- ---- ---- Current U.S. federal $ 9.6 $ 5.1 $ 6.1 Non-U.S. 12.4 7.7 9.5 U.S. state and Puerto Rico 4.0 (0.6) 3.0 ----- ----- ----- Total current 26.0 12.2 18.6 ---- ---- ---- Deferred U.S. federal 9.0 4.3 7.8 Non-U.S. 1.8 7.0 1.2 ----- ----- ----- Total deferred, net 10.8 11.3 9.0 ----- ----- ----- Total $36.8 $23.5 $27.6 ===== ===== =====
The reconciliations of the U.S. federal statutory tax rate to the consolidated effective tax rate is as follows:
1996 1995 1994 ---- ---- ---- Statutory tax rate 35.0% 35.0% 35.0% State taxes, net of U.S. tax benefit 0.4 0.8 0.5 Ireland and Puerto Rico income (6.8) (13.6) (8.0) Non-U.S. taxes 5.0 10.9 9.3 Foreign income taxed in the U.S., net of credits (2.8) 0.4 (1.6) Other 2.2 (1.0) 1.6 ---- ---- ---- Effective tax rate 33.0% 32.5% 36.8% ==== ==== ====
Certain income of subsidiaries operating in Puerto Rico and Ireland is taxed at substantially lower income tax rates than the U.S. federal statutory tax rate. The lower rates reduced expected income taxes by approximately $7.6 in 1996, $9.8 in 1995, and $6.0 in 1994. Since April 1990, earnings from manufacturing operations in Ireland are subject to a 10% tax. The lower Puerto Rico income tax rate expires in July 2003. The components of the provision for deferred income taxes are:
1996 1995 1994 ---- ---- ---- Restructuring costs $ 3.0 $13.2 $14.5 International transactions 1.3 (4.7) (2.2) Accelerated depreciation (0.5) 0.4 (0.5) Accrued expenses 3.3 (0.6) 2.4 Pension costs 6.9 1.7 (5.3) Postretirement medical costs (1.7) (0.5) (1.1) Other (1.5) 1.8 1.2 ----- ----- ----- Total $10.8 $11.3 $ 9.0 ===== ===== =====
The tax effect of temporary differences which give rise to significant portions of deferred tax assets and liabilities consists of the following at December 31:
1996 1995 ---- ---- Deferred tax assets Receivables $ 0.6 $ 0.9 Inventories 2.9 3.3 Capitalized expenses 1.0 1.6 Intercompany transactions 0.3 2.6 Pension costs 2.4 11.1 Accrued expenses 19.9 22.1 Restructuring costs 0.6 4.0 Environmental costs 5.0 5.1 Postretirement benefits 26.5 24.7 Other 31.1 31.0 ----- ----- 90.3 106.4 Less: Valuation allowance (14.5) (14.5) ----- ----- Total deferred tax assets 75.8 91.9 Deferred tax liabilities Depreciation 2.3 1.6 Other 1.3 1.1 ----- ----- Net deferred tax asset $ 72.2 $ 89.2 ====== ======
Based upon the Company's historical pretax earnings, adjusted for significant items such as non-recurring charges, management believes it is more likely than not that the Company will realize the benefit of the existing net deferred tax asset at December 31, 1996. Management believes the existing net deductible temporary differences will reverse during periods in which the Company generates net taxable income. Certain tax planning or other strategies will be implemented, if necessary, to supplement income from operations to fully realize recorded tax benefits. At December 31, 1996 and 1995 the Company recorded a valuation allowance of $14.5 for certain deductible temporary differences for which it is more likely than not that the Company will not receive future benefits. Non-U.S. withholding taxes and U.S. taxes have not been provided on approximately $112.2 of unremitted earnings of certain non-U.S. subsidiaries because such earnings are or will be reinvested in operations or will be offset by credits for foreign income taxes paid. All income tax liability issues between the Company and its former parent SmithKline Beckman have been resolved in accordance with a tax agreement between the two companies. Such resolution did not have a material effect on the Company's consolidated financial position or operating results. 7. Employee Benefits Incentive Compensation Plans In 1988, the Company adopted an Incentive Compensation Plan for its officers and key employees, which provided for stock-based incentive awards based upon several factors including Company performance. This plan expired on December 31, 1990, but options outstanding on that date were not affected by such termination. Pursuant to this plan, the Company granted options to purchase approximately 755,000 shares, with an expiration date of ten years from the date of grant. The Company has also adopted the Incentive Compensation Plan of 1990. This 1990 plan reserves shares of the Company's common stock for grants of options and restricted stock. Granted options typically vest over three years and expire ten years from the date of grant. Subsequent to stockholder approval in 1992, amendments were adopted to extend the expiration of the plan to 2001 and to increase each year, commencing January 1, 1993, the number of shares available under the plan by 1.5% of the number of common shares issued and outstanding as of the prior December 31. As of January 1, 1997, 731,720 shares remain available for grant under this plan. The following is a summary of the Company's option activity, including weighted average option information (in thousands, except per option information):
1996 1995 1994 ---- ---- ---- Exercise Exercise Exercise Price Per Price Per Price Per Options Option Options Option Options Option ------- ------ ------- ------ ------- ------ Outstanding at beginning of year 2,634 $22.83 2,689 $21.39 2,326 $19.38 Granted 447 $40.72 418 $29.33 773 $26.44 Exercised (372) $19.97 (424) $19.57 (354) $18.52 Cancelled (37) $37.12 (49) $27.20 (56) $25.75 ----- ----- ----- Outstanding at end of year 2,672 $26.03 2,634 $22.83 2,689 $21.39 ===== ====== ===== ====== ===== ======
Remaining Range of Outstanding Exercisee Contractural Exercisable Exercise Exercise at December Price Per Life at December Price Per Prices 31, 1996 Option (Years) 31, 1996 (1) Option ------ -------- ------ ------- ------------ ------ $16.50 to $22.50 1,223 $19.71 4.4 1,223 $19.71 $26.38 to $28.88 645 $26.44 7.2 546 $26.42 $29.25 to $35.13 383 $29.34 8.3 142 $29.33 $40.56 to $40.75 421 $40.75 9.3 - - ----- ----- $16.50 to $40.75 2,672 $26.03 6.4 1,911 $22.34 ===== =====
(1) Options exercisable at December 31, 1995 and 1994 (in thousands) were 1,705 and 1,671, respectively. The following represents pro forma information as if the Company recorded compensation cost using the fair value of the issued compensation instrument (the results may not be indicative of the actual effect on net income in future years):
1996 1995 Net earnings as reported $74.7 $48.9 Assumed stock compensation cost 2.6 0.9 ----- ----- Pro forma net earnings $72.1 $48.0 ===== ===== Earnings per share as reported $2.58 $1.70 Pro forma earnings per share $2.49 $1.67
The Company uses the Black-Scholes valuation model for estimating the fair value of its compensation instruments. The following represents the estimated fair value of options granted and the assumptions used for calculation:
1996 1995 Estimated fair value per option granted $14.56 $11.29 Average exercise price per option granted $40.72 $29.33 Stock volatility 18.0% 20.6% Risk-free interest rate 6.7% 7.2% Annual rate of forfeiture 3.0% 3.0% Option term - years 10.0 10.0 Stock dividend yield 1.5% 1.5%
Stock Purchase Plan The Company's stock purchase plan allows all U.S. employees and employees of certain subsidiaries outside of the U.S. to purchase the Company's common stock at favorable prices and upon favorable terms. Employee purchases are settled at six month intervals as of June 30 and December 31. The difference between the purchase price and fair value is not material. Employees purchased 175,257 shares in 1996. At December 31, 1996, 916,122 shares remain available for use in the plan. Treasury Stock The Company is authorized to purchase on the open market up to 1,000,000 shares of the Company's common stock each year through December 1998. Treasury shares have been, and are expected to continue to be, reissued to satisfy the Company's obligations under existing employee benefit plans. At December 31, 1996, 1,124,345 shares remain in treasury of which 1,026,652 are held by the Benefit Equity Fund having a market value of $39.4 at December 31, 1996. In January 1993 the Company created the Benefit Equity Fund (BEF), a trust for prefunding future stock-related obligations of employee benefit plans. The BEF does not change these plans or the amounts of stock expected to be issued for these plans. The BEF is funded by existing shares in treasury as well as from additional shares the Company purchases on the open market over time. While shares in the BEF are not considered outstanding for the calculation of earnings per share, the shares within the BEF are voted by the participants of the Stock Purchase Plan. Postemployment Benefits Effective January 1, 1994 the Company adopted Statement of Financial Accounting Standards No. 112 ("SFAS 112") "Employers' Accounting for Postemployment Benefits". This statement required the Company to recognize an obligation for postemployment benefits provided to former or inactive employees, their beneficiaries and covered dependents after employment but before retirement. Accordingly, the Company recognized a transition obligation of $8.1 and a net expense of $5.1 (net of tax benefit of $3.0) as the cumulative effect of the accounting change. Additional accruals for postemployment benefits, subsequent to adopting SFAS 112, were approximately $0.8 in 1996 and 1995, and $0.7 in 1994. 8. Retirement Benefits Pension Plans The Company has pension benefits covering substantially all of its employees. Consolidated pension expense was $18.3 in 1996, $13.3 in 1995, and $17.8 in 1994. U.S. pension benefits are based on years of service and compensation during the five highest consecutive earnings years. Components of U.S. pension expense were:
1996 1995 1994 ---- ---- ---- Service cost $ 10.8 $ 7.1 $ 10.2 Interest cost 25.7 24.0 24.4 Actual return on plan assets (23.2) (23.8) (23.0) Net amortization and deferral 1.0 1.2 2.2 ------ ------ ------ Total $ 14.3 $ 8.5 $ 13.8 ====== ====== ======
The Company's funding policy is to provide currently for accumulated benefits, subject to federal regulations. Plan assets consist principally of U.S. government fixed income securities and corporate stocks and bonds. The funded status of the Company's pension liabilities and assets and amounts recognized in the Company's consolidated financial statements with respect to the U.S. plan were:
1996 1995 ---- ---- Vested benefit obligation $312.2 $314.6 ------ ------ Accumulated benefit obligation $314.2 $316.9 Projected compensation increases 45.0 41.9 ------ ------ Projected benefit obligation 359.2 358.8 Plan assets at fair market value (314.1) (273.4) ------ ------ Projected benefit obligation in excess of plan assets 45.1 85.4 Unrecognized transition obligation (1.9) (2.4) Unrecognized net loss (35.6) (54.5) Unrecognized prior service cost (7.3) (8.2) Required minimum pension liability (unfunded accumulated benefits) - 24.5 ------ ------ Accrued pension cost in other liabilities $ 0.3 $ 44.8 ====== ====== Assumptions used in calculations Expected long-term rate of return 9.8% 9.8% Discount rate 7.8% 7.0% Average rate of increase in compensation 4.3% 4.3%
In accordance with the provisions of Statement of Financial Accounting Standards No. 87, "Employers' Accounting for Pensions," the Company recorded, as shown in the above table, an additional minimum liability during 1995 representing the excess of the accumulated benefit obligation over the fair value of plan assets and accrued pension cost. The liability was offset by an intangible asset up to the amount of unrecognized prior service cost, with the remaining balance reported as a reduction to stockholders' equity, net of tax. The minimum pension liability was not required at December 31, 1996. Certain subsidiaries outside the U.S. have separate pension plan arrangements which include both funded and unfunded plans. Unfunded foreign pension obligations are recorded as a liability on the Company's consolidated balance sheets. Plan assets exceed accrued liabilities and vested benefits. Pension expense for plans outside of the U.S. was $4.0 in 1996, $4.8 in 1995, and $4.0 in 1994. The Company has a voluntary defined contribution savings plan for its U.S. employees. Eligible employees may contribute a portion of their compensation to this plan. Company contributions, which are based on a percentage of employee contributions, were $4.5 in 1996, $3.6 in 1995, and $3.8 in 1994. Employees generally become fully vested with respect to Company contributions after three years of service with the Company. Health Care and Life Insurance Benefits The Company and its subsidiaries presently provide certain health care and life insurance benefits for retired U.S. employees and their dependents. Eligibility for the plan and participant cost sharing is dependent upon the participant's age at retirement, years of service and retirement date. The net periodic cost for postretirement health care and life insurance benefits includes the following:
1996 1995 1994 ---- ---- ---- Service cost $1.4 $1.0 $2.0 Interest cost 2.8 3.0 4.9 ---- ---- ---- Total $4.2 $4.0 $6.9 ==== ==== ====
The following table sets forth the plan's funded status and amounts recognized in the Company's consolidated balance sheet in "other liabilities" at December 31:
1996 1995 ---- ---- Accumulated postretirement benefit obligations Retirees $27.2 $33.3 Fully eligible active plan participants 2.2 2.0 Other active plan participants 17.3 19.3 ----- ----- Total obligation 46.7 54.6 Plan assets - - ----- ----- Accumulated postretirement benefit obligation in excess of plan assets 46.7 54.6 Unrecognized net gain 17.8 6.5 ----- ----- Accrued postretirement benefit liability $64.5 $61.1 ===== =====
1996 1995 1994 ---- ---- ---- Assumptions used in calculations Healthcare cost trend rate 8.0% 8.0% 8.0% Healthcare cost trend rate at end of eight years 5.5% 5.5% 5.5% Discount rate 7.8% 7.0% 9.0%
An assumed 1% increase in the healthcare cost trend rate for each year would have resulted in an increase in the net periodic pension cost to $5.1 in 1996, $4.7 in 1995 and $8.1 in 1994 and an accumulated post retirement benefit obligation of $71.5 in 1996 and $67.9 in 1995. Employees outside the U.S. generally receive similar benefits from government-sponsored plans. 9. Commitments and Contingencies Environmental The Company is subject to federal, state, local and foreign environmental laws and regulations. The Company believes that its operations comply in all material respects with applicable federal, state and local environmental laws and regulations. Although the Company continues to make expenditures for environmental protection, it does not anticipate any significant expenditures in order to comply with such laws and regulations which would have a material impact on the Company's operations or financial position. In 1983, the Company discovered organic chemicals in the groundwater near a waste storage pond at a Company facility in Porterville, California. The Company is indemnified by SmithKline Beecham p.l.c. with respect to this matter for any costs incurred by the Company in excess of applicable insurance, eliminating any impact on the Company's earnings or financial position. The Company continues to operate a groundwater treatment system on previously owned land in Irvine, California. Areas of soil contamination remain on the property that may require remediation in the future. Also related to this property is a pending lawsuit, alleging damages caused by the pollution of the property, against the party who purchased the property from the Company. Although the Company is not a defendant in the suit, it is obligated to contribute to any resolution of the matter. The Company believes it has established adequate reserves for ongoing remediation and the outcome of the litigation, and that any liability beyond that provided for will not have a material adverse effect on the Company's operations or financial position. Litigation In 1995, a lawsuit was filed against the Company in the Superior Court of Orange County, California by two of its former employees alleging breach of contract relating to the commercial development of certain technology. The plaintiffs seeks monetary damages of not less than $150.0. The Company believes that the plaintiffs' claims are without merit and that the Company has good and sufficient defenses to each such claim. 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 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. 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 diagnostics equipment in Italy, including the Company's Italian subsidiary. The inquiry focuses on past leasing practices for placement of diagnostics equipment which were common industrywide practices throughout Italy, but now are alleged to be improper. The Company believes the evidence in the case is weak and insufficient to support a criminal conviction. Through its Hybritech acquisition (see note 4 "Acquisitions"), the Company obtained a patent, referred to as the Tandem Patent, that generates royalty income. The Tandem Patent is involved in an interference action in the U.S. Patent and Trademark Office with a patent application owned by La Jolla Cancer Research Foundation (the "Foundation"). If the Foundation wins the interference, the Company would lose the Tandem Patent and the royalty income, and a new patent would be issued to the Foundation covering those products. The Company believes it has the stronger case and expects to prevail. 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. Lease Commitments The Company leases certain facilities, equipment and automobiles. Certain of the leases provide for payment of taxes, insurance and other charges by the lessee. Rent expense was $32.9 in 1996, $32.4 in 1995, and $27.3 in 1994. Minimum annual rentals payable under non-cancelable operating leases aggregate $46.4, which is payable $13.8 in 1997, $10.0 in 1998, $5.7 in 1999, $3.7 in 2000, $2.9 in 2001, and $10.3 thereafter. Other In February of 1997, the Board of Directors declared a quarterly dividend of $0.15 per share, which approximates $4.2 in total. This dividend is payable March 13, 1997 to stockholders of record on February 21, 1997. 10. Derivatives The Company manufactures its products principally in the United States, but generates approximately half of its revenues from sales made outside the U.S. by its international subsidiaries utilizing the subsidiary's local currency, exposing the Company to the risk of foreign currency fluctuations. Also, as the Company is a net borrower, it is exposed to the risk of fluctuating interest rates. The Company utilizes derivative instruments in an effort to mitigate these risks. Typically, the Company does not hold or issue financial instruments for trading purposes. Various foreign currency contracts are used to hedge firm commitments denominated in foreign currencies and to mitigate the impact of changes in foreign currency exchange rates on the Company's operations. At December 31, 1996, the Company had foreign currency swaps totaling $89.8 expiring at various dates through March 1997. At December 31, 1995, the Company had foreign currency swaps totaling $111.2. The Company uses purchased foreign currency options, forward contracts and complex options, consisting of purchased options and call spreads, to hedge anticipated transactions with its foreign customers. Anticipated transactions represent estimated minimum probable sales, denominated in foreign currencies, not in excess of one year from the balance sheet date. Anticipated transactions are estimated based upon historical, budgeted and forecasted operations at the Company's international subsidiaries. The hedge instruments mature at various dates with resulting gains or losses recognized at the maturity date, which approximate the transaction date. The contract values are summarized as follows at December 31:
1996 1995 ---- ---- Purchased Options $28.5 $46.0 Forward Contracts 63.6 36.0 Complex Options - 32.3
The Company occasionally uses purchased foreign currency contracts to hedge the market risk of a subsidiary's net asset position. At December 31, 1996 and 1995, the Company had $3.5 and $9.4 purchased foreign currency options related to net asset positions, expiring in the first quarter of 1997 and 1996, respectively. The purchased foreign currency options resulted in favorable foreign currency translation adjustments of $1.2 at December 31, 1996 and 1995. In 1996, the Company purchased foreign currency call options totaling $45.9 at December 31, 1996 which did not qualify for hedge accounting treatment. The call options were purchased to create synthetic puts when combined with forward contracts. The call options mature at various dates throughout 1997 with resulting gains recognized at maturity. The contracts' average value during the period approximated the year end value. In December 1996, the Company entered into a $50.0 interest rate swap on its $100.0 debenture in which the Company receives a fixed interest rate of 6.1% and pays a floating interest rate equal to the three-month LIBOR less 27 basis points (5.2% at December 31, 1996). The interest rate swap is accounted for as a hedge. The Company is exposed to credit risk in the event of non- performance of the counterparties to its foreign currency contracts and interest rate swap agreements, which the Company believes is remote. Nevertheless, the Company monitors its counterparty credit risk and utilizes netting agreements and internal policies to mitigate its risk. The disclosed derivatives are indicative of the volume and types of instruments used throughout the year. Unrealized gains or losses on derivative instruments were not material at December 31, 1996. 11. Business Segment Information Industry Segment The Company is engaged primarily in the design, manufacture and sale of laboratory instrument systems and related products.
1996 1995 1994 ---- ---- ---- Geographic areas Sales United States-domestic $ 738.5 $ 606.1 $ 588.2 United States-export 36.0 28.9 24.2 Europe 318.6 312.9 292.9 Asia and other areas 163.1 160.2 153.8 Transfers between areas (228.2) (178.0) (170.5) -------- ------- ------- Total sales $1,028.0 $ 930.1 $ 888.6 ======== ======= ======= Operating income United States before research and development $ 180.1 $ 137.2 $ 147.7 Research and development (a) (108.4) (91.7) (91.5) ------- ------- ------- United States 71.7 45.5 56.2 Europe 45.4 28.2 22.5 Asia and other areas 5.4 9.4 8.9 ------- ------- ------- Total operating income (b) $ 122.5 $ 83.1 $ 87.6 ======= ======= ======= Identifiable assets United States $ 503.3 $ 446.3 $ 381.8 Europe 243.1 228.8 213.0 Asia and other areas 94.0 89.4 88.8 Corporate 119.7 143.3 145.5 ------- ------- ------- Total assets $ 960.1 $ 907.8 $ 829.1 ======= ======= =======
(a) The Company's principal research and development efforts are performed in the United States. (b) Includes restructuring charges of $27.7 and $11.3 in 1995 and 1994, respectively. Identifiable assets are those assets used by the operations in each geographic location. Corporate assets consist primarily of cash and equivalents, short-term investments, deferred tax assets, lease receivables and fixed assets of a corporate nature. Asia and other areas include, primarily, operations in Japan, Canada and Latin America. Inter-area sales are made at terms that allow for a reasonable profit to the seller. At December 31, 1996 trade receivables and other by geographic area were United States $120.9, Europe $135.8 and Asia and other areas $52.8. At December 31, 1995 trade receivables and other by geographic area were United States $92.9, Europe $141.6 and Asia and other areas $54.3. 12. Supplementary Information Allowance for Doubtful Accounts
Balance at Additions Balance Beginning Charged to Cost at End of of Period and Expenses Deductions Period December 31, 1996 $ 9.1 $2.2 (a) $ 1.1 (b) $ 9.6 0.6 (d) December 31, 1995 10.4 0.7 (a) 2.8 (b) 9.1 (0.8)(d) December 31, 1994 11.9 0.7 (a) 2.6 (b) 10.4 0.1 (c) (0.3)(d)
(a) Provision charged to earnings. (b) Accounts written-off. (c) Collection of accounts previously written-off. (d) Adjustments from translating at current exchange rates. ___________________________________________________ QUARTERLY INFORMATION (Unaudited) In millions, except amounts per share
First Quarter Second Quarter Third Quarter Fourth Quarter ------------- -------------- ------------- -------------- 1996 1995 1996 1995 1996 1995 1996 1995 ---- ---- ---- ---- ---- ---- ---- ---- Sales $224.8 $205.0 $265.2 $230.6 $252.8 $229.9 $285.2 $264.6 Cost of sales 104.9 97.2 123.6 108.0 117.8 106.9 131.5 115.1 Marketing, general and administrative 73.7 65.2 83.3 73.8 77.7 73.1 84.6 88.3 Research and development 24.7 22.1 27.3 22.0 26.1 22.9 30.3 24.7 Restructuring charge - 3.1 - 3.4 - 4.1 - 17.1 Operating income 21.5 17.4 31.0 23.4 31.2 22.9 38.8 19.4 Earnings before income taxes 20.5 15.6 28.3 20.9 27.9 21.0 34.8 14.9 Net earnings $ 13.7 $ 10.3 $ 19.0 $ 13.8 $ 18.7 $ 13.9 $ 23.3 $ 10.9 Net earnings per share $ 0.47 $ 0.36 $ 0.65 $ 0.48 $ 0.65 $ 0.48 $ 0.81 $ 0.38 Dividends per $ 0.13 $ 0.11 $ 0.13 $ 0.11 $ 0.13 $ 0.11 $ 0.13 $ 0.11 share Stock price - High $39 1/8 $31 1/2 $41 1/8 $30 5/8 $39 7/8 $30 5/8 $39 1/4 $35 7/8 Stock price - Low $33 1/2 $27 $35 1/8 $26 1/2 $32 $26 7/8 $35 $30 1/8
REPORT BY MANAGEMENT The consolidated financial statements and related information for the years ended December 31, 1996, 1995 and 1994 were prepared by management in accordance with generally accepted accounting principles. Financial data included in other sections of this Annual Report are consistent with that in the consolidated financial statements. Management maintains a system of internal accounting controls which is designed to provide reasonable assurance, at appropriate costs, that its financial and related records fairly reflect transactions, that proper accountability for assets exists, and that established policies and procedures are followed. A professional staff of internal auditors reviews compliance with corporate policies. Among these policies is an ethics policy, which requires employees to maintain high standards in conducting the Company's affairs, and requires management level employees to submit certificates of compliance annually. Management continually monitors the system of internal accounting controls for compliance and believes the system is appropriate to accomplish its objectives. The Company's independent auditors examine the Company's consolidated financial statements in accordance with generally accepted auditing standards. Their report expresses an independent opinion on the fairness of the Company's reported operating results and financial position. In performing this audit, the auditors consider the Company's internal control structure and perform such other tests and auditing procedures as they deem necessary. The Board of Directors, through its Audit Committee, reviews both internal and external audit results and internal controls. The Audit Committee consists of four outside Directors and meets periodically with management, internal auditors and the independent auditors to review the scope and results of their examinations. Both the independent auditors and the internal auditors have free access to this Committee, with and without management being present, to discuss the results of their audits. LOUIS T. ROSSO D.K. WILSON Louis T. Rosso Dennis K. Wilson Chairman and Vice President, Finance Chief Executive Officer and Chief Financial Officer INDEPENDENT AUDITORS' REPORT To the Stockholders and Board of Directors of Beckman Instruments,Inc.: We have audited the accompanying consolidated balance sheets of Beckman Instruments, Inc. and subsidiaries as of December 31, 1996 and 1995, and the related consolidated statements of earnings, stockholders' equity and cash flows for each of the years in the three-year period ended December 31, 1996. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. 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 Beckman Instruments, Inc. and subsidiaries as of December 31, 1996 and 1995, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1996 in conformity with generally accepted accounting principles. As discussed in Note 7 to the consolidated financial statements, the Company adopted the provisions of the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits," in 1994. /s/ KPMG PEAT MARWICK Orange County, California January 17, 1997 Other Information Annual Meeting The annual meeting of stockholders will be held on April 3, 1997 at the Company's headquarters in Fullerton, California. Each stockholder of record will receive formal notice of the meeting together with the proxy statement and proxy card. The record date for the 1997 Annual Meeting was February 4, 1997. Form 10-K Annual Report Available to Stockholders A copy of Beckman's Form 10-K annual report filed with the Securities and Exchange Commission may be obtained without charge by writing to the Company as follows: Beckman Instruments, Inc. Michael J. Whelan, Director Office of Investor Relations, M/S A-37-C 2500 Harbor Boulevard Fullerton, California, 92834-3100 Telephone: 714-773-7620 FAX: 714-773-8111 There are no accounting differences between the financial statements presented in this Annual Report and the Form 10-K report, but the Form 10-K report does provide certain supplemental information as required by Securities and Exchange Commission regulations. Stock Symbol Beckman's stock is traded on the New York Stock Exchange under the stock symbol BEC. Transfer Agent, Registrar and Dividend Disbursing Agent First Chicago Trust Company of New York P.O. Box 2500 Jersey City, New Jersey 07303-2500 Telephone: 212-324-1644 Select Subsidiaries Beckman Analytical S.p.A. Beckman Eurocenter S.A. Beckman Instruments (Australia) Pty. Ltd. Beckman Instruments (Canada), Inc. Beckman Instruments (Naguabo), Inc. Beckman Instruments Espana S.A. Beckman Instruments France S.A. Beckman Instruments G.m.b.H. Beckman Instruments (Hong Kong), Ltd. Beckman Instruments (Ireland), Inc. Beckman Instruments (Japan), Ltd. Beckman Instruments (United Kingdom), Ltd. Beckman Instruments International S.A. Hybritech Incorporated SmithKline Diagnostics, Inc. EX-21 11 SUBSIDIARIES Exhibit 21 SUBSIDIARIES The following table lists current subsidiaries of the Company whose results are included in the Company's combined financial statements. The list of subsidiaries does not include certain subsidiaries which, when considered in the aggregate, do not constitute a significant subsidiary of the Company. Jurisdiction Name of Company of Incorporation - --------------- ---------------- Beckman Instruments (Australia) Pty. Ltd. Australia Beckman Instruments (Naguabo) Inc. California Hybritech Incorporated California Beckman Instruments (Canada) Inc. Canada SmithKline Diagnostics, Inc. Delaware Beckman Instruments (United Kingdom) Ltd. England Beckman Instruments France S.A. France Beckman Instruments G.m.b.H. Germany Beckman Eurocenter S.A. Germany Beckman Instruments (Hong Kong) Ltd. Hong Kong Beckman Analytical S.p.A. Italy Beckman Instruments (Japan) Ltd. Japan Beckman Instruments (Ireland) Inc. Panama Beckman Instruments Espana S.A. Spain Beckman Instruments International S.A. Switzerland EX-23 12 CONSENT OF KPMG PEAT MARWICK LLP EXHIBIT 23 The Board of Directors Beckman Instruments, Inc.: We consent to incorporation by reference in the registration statements (No. 333-02317) on Form S-3 and (Nos. 33-31573, 33-31862, 33-41519, 33-51506, 33-55778, 33-66990, 33-66988, and 33-65155) on Form S-8 of Beckman Instruments, Inc. of our report dated January 17, 1997, relating to the consolidated balance sheets of Beckman Instruments, Inc. and subsidiaries as of December 31, 1996 and 1995, and the related consolidated statements of earnings, stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1996, which report appears in the December 31, 1996 annual report on Form 10-K of Beckman Instruments, Inc. Our report refers to the adoption of the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits", in 1994. /s/ KPMG Peat Marwick LLP Orange County, California February 12, 1997 EX-27 13 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Consolidated Balance Sheet and the Consolidated Statement of Earnings and is qualified in its entirety by reference to such financial statements. 12-MOS DEC-31-1996 DEC-31-1996 35 8 320 10 190 579 674 410 960 279 177 0 0 3 396 960 872 1028 377 478 0 1 18 112 37 75 0 0 0 75 2.58 2.58
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