10-Q 1 a66595e10-q.txt FORM 10-Q FOR PERIOD ENDED SEPTEMBER 30, 2000 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (Mark One) [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended September 30, 2000 OR [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from __________ to __________ Commission File Number 001-10109 BECKMAN COULTER, INC. (Exact name of registrant as specified in its charter) Delaware 95-104-0600 (State of Incorporation) (I.R.S. Employer Identification No.)
4300 N. Harbor Boulevard, Fullerton, California 92834-3100 (Address of principal executive offices) (Zip Code) (714) 871-4848 (Registrant's telephone number including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] APPLICABLE ONLY TO CORPORATE ISSUERS: Outstanding shares of common stock, $0.10 par value, as of October 31, 2000: 29,714,657 shares. 2 PART I FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Statements of Operations for the three and nine month periods ended September 30, 2000 and 1999 Condensed Consolidated Balance Sheets as of September 30, 2000 and December 31, 1999 Condensed Consolidated Statements of Cash Flows for the nine month periods ended September 30, 2000 and 1999 Notes to Condensed Consolidated Financial Statements Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Item 3. Quantitative and Qualitative Disclosures About Market Risk PART II OTHER INFORMATION Item 1. Legal Proceedings Item 2. Changes In Securities Item 3. Defaults Upon Senior Securities Item 4. Submission of Matters to a Vote of Security-Holders Item 5. Other Information Item 6. Exhibits and Reports on Form 8-K
3 PART I FINANCIAL INFORMATION Item 1. Financial Statements BECKMAN COULTER, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in Millions, Except Amounts Per Share and Share Data) Unaudited
Three Months Ended Nine Months Ended September 30, September 30, --------------------------- --------------------------- 2000 1999 2000 1999 ---------- ---------- ---------- ---------- Sales $ 457.8 $ 440.1 $ 1,361.6 $ 1,291.4 Cost of sales 243.2 231.2 720.5 676.5 ---------- ---------- ---------- ---------- Gross profit 214.6 208.9 641.1 614.9 ---------- ---------- ---------- ---------- Operating costs and expenses: Selling, general and administrative 116.4 117.4 349.0 344.8 Research and development 43.3 42.0 130.0 123.2 ---------- ---------- ---------- ---------- Total operating costs and expenses 159.7 159.4 479.0 468.0 ---------- ---------- ---------- ---------- Operating income 54.9 49.5 162.1 146.9 ---------- ---------- ---------- ---------- Nonoperating (income) and expenses: Interest income (1.4) (2.2) (4.9) (5.9) Interest expense 17.7 18.1 54.2 55.2 Other, net (3.6) (1.6) (6.8) (0.7) ---------- ---------- ---------- ---------- Total nonoperating expenses 12.7 14.3 42.5 48.6 ---------- ---------- ---------- ---------- Earnings before income taxes 42.2 35.2 119.6 98.3 Income taxes 13.1 10.8 37.1 31.0 ---------- ---------- ---------- ---------- Net earnings $ 29.1 $ 24.4 $ 82.5 $ 67.3 ========== ========== ========== ========== Basic earnings per share $ 0.98 $ 0.85 $ 2.81 $ 2.35 Weighted average number of shares outstanding (in thousands) 29,628 28,754 29,367 28,602 Diluted earnings per share $ 0.93 $ 0.82 $ 2.68 $ 2.27 Weighted average number of shares and dilutive shares outstanding (in thousands) 31,245 29,764 30,758 29,664 Dividends declared per share $ 0.16 $ 0.16 $ 0.48 $ 0.48
See accompanying notes to condensed consolidated financial statements. 4 BECKMAN COULTER, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Amounts in Millions, Except Amounts per Share)
September 30, December 31, 2000 1999 ------------ ------------ Unaudited Assets Current assets: Cash and equivalents $ 18.3 $ 34.4 Trade and other receivables 492.9 566.4 Inventories 364.8 313.1 Other current assets 48.4 52.5 -------- -------- Total current assets 924.4 966.4 Property, plant and equipment, net 287.5 305.9 Goodwill, less accumulated amortization of $34.5 and $26.3 at September 30, 2000 and December 31, 1999, respectively 342.8 344.7 Other intangibles, less accumulated amortization of $61.1 and $46.8 at September 30, 2000 and December 31, 1999, respectively 388.5 399.9 Other assets 68.1 93.9 -------- -------- Total assets $2,011.3 $2,110.8 ======== ======== Liabilities and Stockholders' Equity Current liabilities: Notes payable and current maturities of long-term debt $ 25.7 $ 50.0 Accounts payable, accrued expenses and other liabilities 374.3 474.1 Income taxes 67.8 51.8 -------- -------- Total current liabilities 467.8 575.9 Long-term debt, less current maturities 910.3 980.7 Other liabilities 327.6 326.3 -------- -------- Total liabilities 1,705.7 1,882.9 -------- -------- Stockholders' equity: Preferred stock, $0.10 par value; authorized 10.0 shares; none issued -- -- Common stock, $0.10 par value; authorized 150.0 shares; shares issued 29.7 and 29.1 at September 30, 2000 and December 31, 1999,respectively; shares outstanding 29.7 and 29.0 at September 30, 2000 and December 31, 1999, respectively 3.0 2.9 Additional paid-in capital 160.2 134.5 Retained earnings 191.3 123.0 Accumulated other comprehensive loss: Cumulative foreign currency translation adjustment (48.9) (24.3) Treasury stock, at cost -- (8.2) -------- -------- Total stockholders' equity 305.6 227.9 -------- -------- Total liabilities and stockholders' equity $2,011.3 $2,110.8 ======== ========
See accompanying notes to condensed consolidated financial statements. 5 BECKMAN COULTER, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in Millions) Unaudited
Nine Months Ended September 30, ------------------- 2000 1999 ------ ------ Cash Flows from Operating Activities Net earnings $ 82.5 $ 67.3 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 101.6 109.2 Net deferred income taxes 8.2 (0.7) Proceeds from sales of sales-type lease receivables 61.9 45.7 Gain on sale of property, plant and equipment (2.9) -- Changes in assets and liabilities: Trade and other receivables 15.0 (0.4) Inventories (46.7) (8.2) Accounts payable, accrued expenses and other liabilities (97.0) (100.8) Income taxes payable 23.0 16.4 Other 3.4 10.3 ------ ------ Net cash provided by operating activities 149.0 138.8 ------ ------ Cash Flows from Investing Activities Additions to property, plant and equipment (110.1) (104.2) Proceeds from sale of certain clinical chemistry assets 15.2 -- Proceeds from sale of property, plant and equipment 17.5 7.4 Purchase of investments (5.3) -- ------ ------ Net cash used by investing activities (82.7) (96.8) ------ ------ Cash Flows from Financing Activities Dividends to stockholders (14.2) (13.7) Proceeds from issuance of stock 27.3 14.8 Proceeds from stock purchase plan 2.0 1.8 Notes payable reductions, net (21.6) (70.3) Long-term debt borrowings -- 41.0 Long-term debt reductions (72.8) (10.6) ------ ------ Net cash used by financing activities (79.3) (37.0) ------ ------ Effect of exchange rates on cash and equivalents (3.1) 0.2 ------ ------ Increase (decrease) in cash and equivalents (16.1) 5.2 Cash and equivalents -- beginning of period 34.4 24.7 ------ ------ Cash and equivalents -- end of period $ 18.3 $ 29.9 ====== ====== Supplemental Disclosures of Cash Flow Information Cash paid during the period for: Interest $ 52.4 $ 55.0 Income taxes $ 21.1 $ 14.5 Non-cash Investing and Financing Activities: Purchase of equipment under capital lease $ 3.1 $ 2.1 Receivable from sale of certain clinical chemistry assets $ 1.4 $ --
See accompanying notes to condensed consolidated financial statements. 6 BECKMAN COULTER, INC. Notes To Condensed Consolidated Financial Statements September 30, 2000 Unaudited 1. Report by Management We prepared the accompanying Condensed Consolidated Financial Statements following the requirements of the Securities and Exchange Commission ("SEC") for interim reporting. As permitted under those rules, certain footnotes or other financial information normally required by generally accepted accounting principles ("GAAP") have been condensed or omitted. In addition, we have reclassified certain prior period data to conform to the current year presentation. The financial statements include all normal and recurring adjustments that we consider necessary for the fair presentation of our financial position and operating results. To obtain a more detailed understanding of our results, these Condensed Consolidated Financial Statements should be read in conjunction with the consolidated financial statements and notes in our annual report on Form 10-K for the year ended December 31, 1999. Revenues, expenses, assets, and liabilities can vary between the quarters of the year. Therefore, the results and trends in these interim financial statements may not be the same as those for the full year. 2. Comprehensive Income Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income", establishes standards for the reporting and display of comprehensive income. Components of comprehensive income include net earnings and foreign currency translation adjustments. The components of comprehensive income are as follows (in millions):
Three Months Ended Nine Months Ended September 30, September 30, ------------------ ----------------- 2000 1999 2000 1999 ------ ------ ------ ----- Net earnings $29.1 $24.4 $ 82.5 $67.3 Foreign currency translation adjustment 1.5 3.5 (24.6) (8.5) ----- ----- ------ ----- Comprehensive income $30.6 $27.9 $ 57.9 $58.8 ===== ===== ====== =====
3. Earnings Per Share Statement of Financial Accounting Standards No. 128, "Earnings Per Share", establishes standards for computing and presenting earnings per share ("EPS"), where: - "basic earnings per share" includes only actual weighted average shares outstanding; and - "diluted earnings per share" includes the effect of any items that are dilutive, such as stock options. The following table summarizes the computation of EPS (in millions, except amounts per share): 7
Three Months Ended September 30, --------------------------------------------------------------- 2000 1999 ----------------------------- ------------------------------ Per Per Net Share Net Share Earnings Shares Amount Earnings Shares Amount -------- ------ ------ -------- ------- ------ Basic EPS: Net earnings $29.1 29.6 $ 0.98 $24.4 28.8 $ 0.85 Effect of dilutive stock options -- 1.6 (0.05) -- 1.0 (0.03) ----- ----- ------ ----- ----- ------ Diluted EPS: Net earnings $29.1 31.2 $ 0.93 $24.4 29.8 $ 0.82 ===== ===== ====== ===== ===== ======
Nine Months Ended September 30, -------------------------------------------------------------- 2000 1999 ---------------------------- ----------------------------- Per Per Net Share Net Share Earnings Shares Amount Earnings Shares Amount -------- ------ ------ -------- ------ ------ Basic EPS: Net earnings $82.5 29.4 $ 2.81 $67.3 28.6 $ 2.35 Effect of dilutive stock options -- 1.4 (0.13) -- 1.1 (0.08) ----- ----- ------ ----- ----- ------ Diluted EPS: Net earnings $82.5 30.8 $ 2.68 $67.3 29.7 $ 2.27 ===== ===== ====== ===== ===== ======
4. Sale of Receivables During the nine months ended September 30, 2000, we sold certain sales-type lease receivables as part of our plan to reduce debt. The net book value of the financial assets sold was $61.6 million for which we received $61.9 million in cash proceeds. During the nine months ended September 30, 1999, we sold similar assets with a net book value of $44.4 million for cash proceeds of $45.7 million. Under the provisions of Statement of Financial Accounting Standards No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities", the transactions were accounted for as sales and as a result the related receivables have been excluded from the accompanying Condensed Consolidated Balance Sheets. We have established a reserve for potential losses, since the sales are subject to limited recourse provisions. 5. Inventories Inventories consisted of the following (in millions):
September 30, December 31, 2000 1999 ------------- ------------ Finished products $239.3 $210.9 Raw materials, parts and assemblies 103.3 87.2 Work in process 22.2 15.0 ------ ------ $364.8 $313.1 ====== ======
6. Goodwill During the quarter ended June 30, 2000, we recorded a $6.3 million net increase to goodwill. This increase was the result of adjustments to deferred income taxes related to the 1997 acquisition of Coulter Corporation partially offset by a reversal of excess purchase liabilities. 8 7. Provision for Restructuring Operations In the fourth quarter of 1999, we recorded a restructuring charge of $4.3 million, $2.6 million after taxes, for consolidation of selling, general, administrative and technical functions. The following table details the activity within the accrual for the nine months ended September 30, 2000 (in millions):
Facility Consolidation Personnel and and Asset-related Other Write-offs Total --------- ------------- ----- Remaining provision included in accrued expenses at December 31, 1999 $ 3.0 $ 0.6 $ 3.6 2000 year-to-date utilization (2.7) (0.6) (3.3) ----- ----- ----- Balance at September 30, 2000 $ 0.3 $ -- $ 0.3 ===== ===== =====
In the fourth quarter of 1998, we recorded a restructuring charge of $19.1 million, $11.2 million after taxes. The following table details the activity within the accrual for the nine months ended September 30, 2000 (in millions):
Facility Consolidation Personnel and and Asset-related Other Write-offs Total --------- ------------- ----- Balance at December 31, 1999: Consolidation of selling, general, administrative and technical functions $ 8.3 $ -- $ 8.3 Changes in manufacturing operations 1.1 4.5 5.6 ----- ----- ----- Remaining provision included in accrued expenses at December 31, 1999 $ 9.4 $ 4.5 $13.9 ===== ===== ===== 2000 year-to-date utilization: Consolidation of selling, general, administrative and technical functions $(4.6) $ -- $(4.6) Changes in manufacturing operations (0.6) (4.3) (4.9) ----- ----- ----- Total 2000 year-to-date utilization $(5.2) $(4.3) $(9.5) ===== ===== ===== Balance at September 30, 2000: Consolidation of selling, general, administrative and technical functions $ 3.7 $ -- $ 3.7 Changes in manufacturing operations 0.5 0.2 0.7 ----- ----- ----- Balance at September 30, 2000 $ 4.2 $ 0.2 $ 4.4 ===== ===== =====
In the fourth quarter of 1997, we recorded a restructuring charge of $59.4 million, $36.4 million after taxes. The following table details the activity within the accrual for the nine months ended September 30, 2000 (in millions): 9
Facility Consolidation Personnel and and Asset-related Other Write-offs Total --------- ------------- ----- Balance at December 31, 1999: Consolidation of selling, general, administrative and technical functions $ 1.7 $ 1.7 $ 3.4 Changes in manufacturing operations 1.6 -- 1.6 ----- ----- ----- Remaining provision included in accrued expenses at December 31, 1999 $ 3.3 $ 1.7 $ 5.0 ===== ===== ===== 2000 year-to-date utilization: Consolidation of selling, general, administrative and technical functions $(1.6) $(0.8) $(2.4) Changes in manufacturing operations (1.6) -- (1.6) ----- ----- ----- Total 2000 year-to-date utilization $(3.2) $(0.8) $(4.0) ===== ===== ===== Balance at September 30, 2000: Consolidation of selling, general, administrative and technical functions $ 0.1 $ 0.9 $ 1.0 Changes in manufacturing operations -- -- -- ----- ----- ----- Balance at September 30, 2000 $ 0.1 $ 0.9 $ 1.0 ===== ===== =====
8. Contingencies In December 1999, Streck Laboratories, Inc. ("Streck") served Beckman Coulter and Coulter Corporation with a complaint filed in the United States District Court for the District of Nebraska. The complaint alleges that control products sold by Beckman Coulter and/or Coulter Corporation infringe each of five patents owned by Streck, and seeks injunctive relief, damages, attorney fees and costs. We, on behalf of ourselves and on behalf of Coulter Corporation, have answered the complaint and have filed a counterclaim against Streck for patent infringement. We continue to believe that there is no reasonable basis for us to conclude that this litigation could lead to an outcome that would have a material adverse effect on our consolidated operations or financial position. In addition to the above matter, we are involved in a number of other lawsuits, which we consider normal in view of our size and the nature of our business. We do not believe that any liability resulting from any such lawsuits will have a material adverse effect on our consolidated operations or financial position. 10 9. Business Segment Information We are engaged primarily in the design, manufacture and sale of laboratory instrument systems and related products. Our organization has two reportable segments: (1) clinical diagnostics and (2) life science research. The clinical diagnostics segment encompasses diagnostic applications, principally in hospital laboratories. The life science research segment includes life sciences and drug discovery applications in universities, medical schools, and pharmaceutical and biotechnology companies. All corporate activities including financing transactions are captured in a central services "Center", which is reflected in the table below. We evaluate performance based on profit or loss from operations. Although primarily operating in the same industry, reportable segments are managed separately, since each business requires different marketing strategies and has different customers. In the first quarter of 2000, we realigned our geographic reporting structure. Our Latin America operations, which were formerly reported with the "Asia and Rest of World" geographic area, are now reported in the "Americas" geographic area along with our North America operations. Prior year amounts have been reclassified to conform to the current year presentation. 11
For the quarters ended For the nine months ended (in millions) September 30, September 30, ----------------------- ------------------------- 2000 1999 2000 1999 -------- -------- --------- --------- Net sales Clinical diagnostics $ 358.8 $ 347.2 $1,078.9 $1,027.4 Life science research 99.0 92.9 282.7 264.0 Center -- -- -- -- -------- -------- -------- -------- Consolidated $ 457.8 $ 440.1 $1,361.6 $1,291.4 ======== ======== ======== ======== Operating income (loss) Clinical diagnostics $ 53.2 $ 57.9 $ 174.1 $ 165.9 Life science research 17.0 12.8 39.8 29.6 Center (15.3) (21.2) (51.8) (48.6) -------- -------- -------- -------- Consolidated $ 54.9 $ 49.5 $ 162.1 $ 146.9 ======== ======== ======== ======== Interest income Clinical diagnostics $ (0.6) $ (0.8) $ (1.3) $ (2.3) Life science research -- -- -- -- Center (0.8) (1.4) (3.6) (3.6) -------- -------- -------- -------- Consolidated $ (1.4) $ (2.2) $ (4.9) $ (5.9) ======== ======== ======== ======== Interest expense Clinical diagnostics $ -- $ -- $ -- $ -- Life science research -- -- -- -- Center 17.7 18.1 54.2 55.2 -------- -------- -------- -------- Consolidated $ 17.7 $ 18.1 $ 54.2 $ 55.2 ======== ======== ======== ======== Sales to external customers Americas $ 291.6 $ 264.8 $ 840.1 $ 763.3 Europe 112.8 120.1 357.2 374.3 Asia 53.4 55.2 164.3 153.8 -------- -------- -------- -------- Consolidated $ 457.8 $ 440.1 $1,361.6 $1,291.4 ======== ======== ======== ========
September 30, December 31, 2000 1999 ------------- ------------ Long-lived assets Americas $ 990.3 $1,010.7 Europe 75.9 97.8 Asia 20.7 35.9 -------- -------- Consolidated $1,086.9 $1,144.4 ======== ======== Total assets Clinical diagnostics $1,386.2 $1,460.8 Life science research 186.4 178.4 Center 438.7 471.6 -------- -------- Consolidated $2,011.3 $2,110.8 ======== ========
10. Stockholders' Equity On April 6, 2000, our stockholders approved an amendment to the Certificate of Incorporation to increase the authorized shares of common stock from 75,000,000 to 150,000,000. During the quarter ended September 30, 2000, we recorded a $6.6 million increase to additional paid-in capital with an offsetting decrease to income tax payable as a result of the tax benefit we received from employees exercising non-qualified stock options. 11. Recent Accounting Developments In December 1999, the SEC issued Staff Accounting Bulletin No. 101 ("SAB 101"). SAB 101 provides the SEC's views in applying generally accepted accounting principles to selected revenue recognition issues. As amended, calendar year-end companies that have not applied the accounting requirements of SAB 101 may report a change in accounting principle no 12 later than December 31, 2000, including retroactive restatement of all affected quarters within 2000. We are currently evaluating the impact of SAB 101 on our consolidated financial statements and results of operations. 12. Debt Financing and Guarantor Subsidiaries In March 1998, we issued $160.0 million of 7.10% Senior Notes due 2003 and $240.0 million of 7.45% Senior Notes due 2008 (the "Offering"). We used the net proceeds of $394.3 million to reduce borrowings and commitments under our bank facilities and for operating purposes. In connection with the Offering, certain of our subsidiaries (the "Guarantor Subsidiaries") jointly, fully, severally, and unconditionally guaranteed such notes. We present below the supplemental condensed financial information (in millions) of the Parent, Guarantor Subsidiaries and Non-Guarantor Subsidiaries. Please note that in this footnote, we used the equity method of accounting for our investments in subsidiaries and the Guarantor Subsidiaries' investments in Non-Guarantor Subsidiaries. This financial information should be read in conjunction with the Condensed Consolidated Financial Statements. 13
Non- Guarantor Guarantor Subsi- Subsi- Elimina- Consoli- Parent diaries diaries tions dated ------ --------- --------- -------- -------- Condensed Consolidated Statement of Operations Three Months Ended September 30, 2000 Sales $353.2 $ 67.1 $227.7 $(190.2) $457.8 Operating costs and expenses: Cost of sales 219.0 49.8 166.0 (191.6) 243.2 Selling, general and administrative 61.7 11.2 43.5 -- 116.4 Research and development 25.1 17.2 1.0 -- 43.3 ------ ------ ------ ------- ------ Operating income (loss) 47.4 (11.1) 17.2 1.4 54.9 Nonoperating (income) and expenses 8.0 3.3 (1.5) 2.9 12.7 ------ ------ ------ ------- ------ Earnings (loss) before income taxes 39.4 (14.4) 18.7 (1.5) 42.2 Income taxes (benefit) 11.3 (6.2) 7.5 0.5 13.1 ------ ------ ------ ------- ------ Net earnings (loss) $ 28.1 $ (8.2) $ 11.2 $ (2.0) $ 29.1 ====== ====== ====== ======= ======
Non- Guarantor Guarantor Subsi- Subsi- Elimina- Consoli- Parent diaries diaries tions dated ------ --------- --------- -------- -------- Condensed Consolidated Statement of Operations Three Months Ended September 30, 1999 Sales $304.2 $ 96.3 $200.8 $(161.2) $440.1 Operating costs and expenses: Cost of sales 200.1 54.9 132.1 (155.9) 231.2 Selling, general and administrative 51.9 18.1 47.4 -- 117.4 Research and development 26.7 14.0 1.3 -- 42.0 ------ ------ ------ ------- ------ Operating income 25.5 9.3 20.0 (5.3) 49.5 Nonoperating (income) and expenses (2.4) 0.9 (1.1) 16.9 14.3 ------ ------ ------ ------- ------ Earnings before income taxes 27.9 8.4 21.1 (22.2) 35.2 Income taxes 8.6 3.3 5.7 (6.8) 10.8 ------ ------ ------ ------- ------ Net earnings $ 19.3 $ 5.1 $ 15.4 $ (15.4) $ 24.4 ====== ====== ====== ======= ======
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Non- Guarantor Guarantor Subsi- Subsi- Elimina- Consoli- Parent diaries diaries tions dated ------ --------- ---------- -------- -------- Condensed Consolidated Statement of Operations Nine Months Ended September 30, 2000 Sales $1,033.3 $ 226.8 $ 705.5 $ (604.0) $1,361.6 Operating costs and expenses: Cost of sales 646.9 163.6 517.2 (607.2) 720.5 Selling, general and administrative 188.3 34.0 126.7 -- 349.0 Research and development 75.1 51.0 3.9 -- 130.0 -------- -------- -------- -------- -------- Operating income (loss) 123.0 (21.8) 57.7 3.2 162.1 Nonoperating (income) and expenses 15.8 10.0 (3.7) 20.4 42.5 -------- -------- -------- -------- -------- Earnings (loss) before income taxes 107.2 (31.8) 61.4 (17.2) 119.6 Income taxes (benefit) 26.9 (9.8) 19.0 1.0 37.1 -------- -------- -------- -------- -------- Net earnings (loss) $ 80.3 $ (22.0) $ 42.4 $ (18.2) $ 82.5 ======== ======== ======== ======== ========
Non- Guarantor Guarantor Subsi- Subsi- Elimina- Consoli- Parent diaries diaries tions dated ------ --------- --------- -------- -------- Condensed Consolidated Statement of Operations Nine Months Ended September 30, 1999 Sales $ 886.8 $ 285.4 $ 701.5 $ (582.3) $1,291.4 Operating costs and expenses: Cost of sales 593.3 172.1 488.1 (577.0) 676.5 Selling, general and administrative 160.3 44.8 139.7 -- 344.8 Research and development 78.6 40.0 4.6 -- 123.2 -------- -------- -------- -------- -------- Operating income 54.6 28.5 69.1 (5.3) 146.9 Nonoperating (income) and expenses (7.8) (0.2) (1.3) 57.9 48.6 -------- -------- -------- -------- -------- Earnings before income taxes 62.4 28.7 70.4 (63.2) 98.3 Income taxes 19.6 12.3 19.0 (19.9) 31.0 -------- -------- -------- -------- -------- Net earnings $ 42.8 $ 16.4 $ 51.4 $ (43.3) $ 67.3 ======== ======== ======== ======== ========
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Non- Guarantor Guarantor Subsi- Subsi- Elimina- Consoli- Parent diaries diaries tions dated ------ --------- --------- -------- -------- Condensed Consolidated Balance Sheet September 30, 2000 Assets: Cash and equivalents $ (42.2) $ (3.9) $ 64.4 $ -- $ 18.3 Trade and other receivables 241.7 3.1 248.1 -- 492.9 Inventories 248.8 42.1 120.2 (46.3) 364.8 Other current assets 759.2 877.6 64.7 (1,653.1) 48.4 -------- -------- -------- --------- -------- Total current assets 1,207.5 918.9 497.4 (1,699.4) 924.4 Property, plant and equipment, net 163.0 82.3 112.8 (70.6) 287.5 Goodwill, net 12.1 330.5 0.2 -- 342.8 Other intangibles, net 28.2 354.2 6.1 -- 388.5 Other assets 1,254.8 22.2 269.6 (1,478.5) 68.1 -------- -------- -------- --------- -------- Total assets $2,665.6 $1,708.1 $ 886.1 $(3,248.5) $2,011.3 ======== ======== ======== ========= ======== Liabilities: Notes payable and current maturities of long-term debt $ 3.5 $ 0.2 $ 22.0 $ -- $ 25.7 Accounts payable and accrued expenses 265.1 27.9 81.3 -- 374.3 Other current liabilities 746.0 439.7 94.5 (1,212.4) 67.8 -------- -------- -------- --------- -------- Total current liabilities 1,014.6 467.8 197.8 (1,212.4) 467.8 Long-term debt, less current maturities 851.2 -- 59.1 -- 910.3 Other liabilities 490.1 575.0 148.4 (885.9) 327.6 -------- -------- -------- --------- -------- Total liabilities 2,355.9 1,042.8 405.3 (2,098.3) 1,705.7 Total stockholders' equity 309.7 665.3 480.8 (1,150.2) 305.6 -------- -------- -------- --------- -------- Total liabilities and stockholders' equity $2,665.6 $1,708.1 $ 886.1 $(3,248.5) $2,011.3 ======== ======== ======== ========= ========
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Non- Guarantor Guarantor Subsi- Subsi- Elimina- Consoli- Parent diaries diaries tions dated ------ --------- --------- -------- -------- Condensed Consolidated Balance Sheet December 31, 1999 Assets: Cash and equivalents $ (5.3) $ 3.7 $ 36.0 $ -- $ 34.4 Trade and other receivables 255.8 6.0 304.6 -- 566.4 Inventories 201.0 32.1 122.7 (42.7) 313.1 Other current assets 455.4 725.7 95.4 (1,224.0) 52.5 -------- -------- -------- --------- -------- Total current assets 906.9 767.5 558.7 (1,266.7) 966.4 Property, plant and equipment, net 152.4 84.6 142.3 (73.4) 305.9 Goodwill, net 10.3 325.6 8.8 -- 344.7 Other intangibles, net 30.2 366.2 3.5 -- 399.9 Other assets 1,457.9 35.8 279.2 (1,679.0) 93.9 -------- -------- -------- --------- -------- Total assets $2,557.7 $1,579.7 $ 992.5 $(3,019.1) $2,110.8 ======== ======== ======== ========= ======== Liabilities: Notes payable and current maturities of long-term debt $ 4.4 $ 1.1 $ 44.5 $ -- $ 50.0 Accounts payable and accrued expenses 368.3 32.7 95.6 (22.5) 474.1 Other current liabilities 530.9 213.1 131.0 (823.2) 51.8 -------- -------- -------- --------- -------- Total current liabilities 903.6 246.9 271.1 (845.7) 575.9 Long-term debt, less current maturities 913.0 0.1 67.6 -- 980.7 Other liabilities 513.2 647.9 213.0 (1,047.8) 326.3 -------- -------- -------- --------- -------- Total liabilities 2,329.8 894.9 551.7 (1,893.5) 1,882.9 Total stockholders' equity 227.9 684.8 440.8 (1,125.6) 227.9 -------- -------- -------- --------- -------- Total liabilities and stockholders' equity $2,557.7 $1,579.7 $ 992.5 $(3,019.1) $2,110.8 ======== ======== ======== ========= ========
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Non- Guarantor Guarantor Subsi- Subsi- Consoli- Parent diaries diaries dated ------ --------- --------- ------- Condensed Consolidated Statement of Cash Flows Nine Months Ended September 30, 2000 Net cash (used) provided by operating activities $ 44.4 $ (6.5) $111.1 $149.0 ------ ------ ------ ------ Cash flows from investing activities: Additions to property, plant and equipment (51.4) (7.5) (51.2) (110.1) Proceeds from sale of certain clinical chemistry assets -- -- 15.2 15.2 Proceeds from sale of property, plant and equipment -- 2.3 15.2 17.5 Investments (4.8) -- (0.5) (5.3) ------ ------ ------ ------ Net cash used by investing activities (56.2) (5.2) (21.3) (82.7) ------ ------ ------ ------ Cash flows from financing activities: Dividends to stockholders (14.2) -- -- (14.2) Proceeds from issuance of stock 27.3 -- -- 27.3 Proceeds from stock purchase plan 2.0 -- -- 2.0 Notes payable reductions (0.1) (0.8) (20.7) (21.6) Net intercompany (reductions) borrowings 20.7 5.0 (25.7) -- Long-term debt reductions (60.8) (0.1) (11.9) (72.8) ------ ------ ------ ------ Net cash provided (used) by financing activities (25.1) 4.1 (58.3) (79.3) ------ ------ ------ ------ Effect of exchange rates on cash and equivalents -- -- (3.1) (3.1) ------ ------ ------ ------ (Decrease) increase in cash and equivalents (36.9) (7.6) 28.4 (16.1) Cash and equivalents -- beginning of period (5.3) 3.7 36.0 34.4 ------ ------ ------ ------ Cash and equivalents -- end of period $(42.2) $ (3.9) $ 64.4 $ 18.3 ====== ====== ====== ======
18
Non- Guarantor Guarantor Subsi- Subsi- Consoli- Parent diaries diaries dated ------ --------- --------- ------- Condensed Consolidated Statement of Cash Flows Nine Months Ended September 30, 1999 Net cash (used) provided by operating activities $ 48.8 $(19.9) $109.9 $ 138.8 ------ ------ ------ ------- Cash flows from investing activities: Additions to property, plant and equipment (49.3) (3.4) (51.5) (104.2) Proceeds from sale of property, plant and equipment 4.8 2.6 -- 7.4 ------ ------ ------ ------- Net cash used by investing activities (44.5) (0.8) (51.5) (96.8) ------ ------ ------ ------- Cash flows from financing activities: Dividends to stockholders (13.7) -- -- (13.7) Proceeds from issuance of stock 14.8 -- -- 14.8 Proceeds from stock purchase plan 1.8 -- -- 1.8 Notes payable reductions (13.7) (1.0) (55.6) (70.3) Net intercompany (reductions) borrowings (16.0) 23.6 (7.6) -- Long-term debt borrowings (reductions), net 15.0 (0.1) 15.5 30.4 ------ ------ ------ ------- Net cash (used) provided by financing activities (11.8) 22.5 (47.7) (37.0) ------ ------ ------ ------- Effect of exchange rates on cash and equivalents -- -- 0.2 0.2 ------ ------ ------ ------- (Decrease) increase in cash and equivalents (7.5) 1.8 10.9 5.2 Cash and equivalents -- beginning of period 4.2 (0.1) 20.6 24.7 ------ ------ ------ ------- Cash and equivalents -- end of period $ (3.3) $ 1.7 $ 31.5 $ 29.9 ====== ====== ====== =======
13. Subsequent Events On October 5, 2000, the Board of Directors declared a two-for-one stock split in the form of a 100% stock dividend. The split entitles each stockholder of record on November 15, 2000 to receive one additional share of common stock for every share held on that date. The accompanying condensed consolidated financial statements do not reflect the stock split. Also on October 5, 2000, the Board of Directors approved a quarterly cash dividend of $0.17 per share on a pre-split basis, payable on November 10, 2000, to stockholders of record on October 20, 2000. 19 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Overview Beckman Coulter, Inc. is a world leader in providing systems that simplify and automate laboratory processes used in all phases of the battle against disease. We design, manufacture, market and service a broad range of laboratory systems consisting of instruments, chemistries, software, and supplies that meet a variety of laboratory needs. Our products are used in a range of applications, from instruments used for pioneering medical research and drug discovery to diagnostic tools found in hospitals and physicians' offices. We compete in market segments that total approximately $28 billion in annual sales worldwide. Our diagnostics product lines cover virtually all blood tests routinely performed in hospital laboratories. For medical and pharmaceutical research, we provide a wide range of systems used in genomic, cellular and proteomic testing. We have approximately 125,000 systems operating in laboratories around the world, with 68% of annual revenues coming from after-market customer purchases of operating supplies, chemistry kits, and service. We market our products in approximately 130 countries, generating nearly 45% of revenues outside the United States. Results of Operations Sales in the third quarter of 2000 were $457.8 million, an increase of 4.0% (5.7% excluding the effect of foreign currency rate changes) compared to the same period in the prior year. Clinical diagnostics sales were $358.8 million and life science research sales were $99.0 million, an increase of 3.3% and 6.6%, respectively, compared to the same period in 1999. Sales in the Americas increased 10.1%, while sales in Europe and Asia decreased 6.1% and 3.3%, respectively, during the quarter compared to the same period in the prior year. On a constant currency basis, sales in the third quarter in Europe increased 2.1% while sales in Asia decreased 6.9% compared to the same period in the prior year. Sales growth for the third quarter was driven by the following: - The clinical diagnostics segment experienced solid sales increases in routine chemistry, immunodiagnostics and flow cytometry. Our Hematology product line declined when compared with a particularly strong quarter in 1999. - The life science research segment was led by our robotic automation/genetic analysis products, including placements of Sagian(TM) Core systems and our Biomek(R) 2000 and new Biomek(R) FX liquid handling systems, offset by decreased sales of analytical systems. - European sales were down due to currency. - Asia sales faced difficult comparisons due to this region experiencing a rebound in sales in the quarter ended September 30, 1999. Sales in the first nine months of 2000 grew 5.4% (7.2% excluding the effect of foreign currency rate changes) compared to the first nine months of 1999 due to factors mentioned previously and a one-time $16.6 million sale of clinical chemistry assets in Spain in the quarter ended March 31, 2000. For the quarter ended March 31, 1999, sales generated from the clinical chemistry operations in Spain were $5.4 million. 20 Gross profit as a percentage of sales in the third quarter of 2000 was 46.9%, 0.6 percentage points lower than the same period in the prior year. The decrease was due to the effects of foreign currency exchange rates and a slightly higher mix of instruments to after-market sales of supplies, chemistry kits and services. On a constant currency basis, gross profit as a percentage of sales in the third quarter of 2000 was 47.2%, 0.3 percentage points lower than the same period in the prior year. Gross profit as a percentage of sales for the first nine months of 2000 was 47.1%, 0.5 percentage points lower than the same period in the prior year. The decline in gross profit percentage is primarily due to the effects of foreign currency exchange rates and to the one-time $16.6 million sale of clinical chemistry assets in Spain which contributed a lower gross margin than historical company levels. On a constant currency basis, and excluding the aforementioned one-time transaction, gross profit would have been 47.8% for the first nine months of 2000. Selling, general and administrative expenses ("SG&A") declined as a percentage of sales both in the three and nine-month periods ended September 30, 2000 as compared to the same periods in the prior year. For the quarter ended September 30, 2000, SG&A was $116.4 million or 25.4% of sales, as compared to $117.4 million or 26.7% of sales in the same period in the prior year. For the nine months ended September 30, 2000, SG&A was $349.0 million or 25.6% of sales, as compared to $344.8 million or 26.7% of sales in the same period in the prior year. The improvement in SG&A as a percentage of sales is due to further synergies from the Coulter integration. Interest expense declined both in the three and nine-month periods ended September 30, 2000 as compared to the same periods in the prior year primarily due to debt reduction, partially offset by increased interest rates. During the third quarter of 2000, we sold a facility in Australia, which resulted in proceeds of $1.2 million and a pretax gain of $1.2 million. During the second quarter of 2000, we sold a facility in Japan, which resulted in proceeds of $12.0 million and a pretax gain of $1.7 million. These gains are included in "Other nonoperating (income) and expenses" on the accompanying condensed consolidated statements of operations. During the quarters ended September 30, 2000 and 1999, we recognized $3.0 million and $1.3 million of net foreign currency hedging gains, respectively. During the nine months ended September 30, 2000 and 1999, we recognized $4.3 million of foreign currency hedging gains and $0.1 million of foreign currency hedging losses, respectively. These gains and losses are included in "Other nonoperating (income) and expenses" on the accompanying condensed consolidated statements of operations. Under the normal course of our business, we have significant transactions each quarter. During the quarter ended September 30, 2000, the following transactions were recorded: - As a result of our annual actuarial study of our domestic post-employment benefits, we reduced our liability related to post-employment benefits by $7.0 million. - Under the Company's stock appreciation rights program, we have previously awarded rights to certain employees in our international subsidiaries. During the third quarter, the Company recognized $2.3 million in compensation expense under this program, primarily due to the recent increase in the Company's stock price. 21 - The Company records inventory using the standard cost method, valued at the lower of cost or market. Under the standard cost method, planned variances between actual costs and standard costs are recognized during interim periods when those variances are not expected to be absorbed by the end of the fiscal year. As a result of manufacturing efficiencies, we recorded a $1.8 million reduction in our inventory during the third quarter (a similar adjustment in the amount of $1.9 million was recorded in the second quarter of 2000). This amount represents the difference between our standard costs and actual costs that are not expected to reverse by the end of the year. The net impact of the above transactions was a $2.9 million increase in pre-tax income, $2.0 million after tax. Net earnings for the third quarter of 2000 were $29.1 million or $0.93 per diluted share compared to $24.4 million or $0.82 per diluted share in 1999. For the nine months of 2000, net earnings were $82.5 million or $2.68 per diluted share compared to $67.3 million or $2.27 per diluted share in the prior year. The increase in net earnings is primarily due to the various reasons discussed previously. Financial Condition As discussed in greater detail in our 1999 annual report, Beckman Coulter is a highly leveraged company. Although the debt-to-capital ratio has declined from 81.9% at December 31, 1999 to 75.4% at September 30, 2000, among other things, our high level of debt: - increases our vulnerability to general adverse economic and industry conditions; - could limit our ability to obtain additional financing on favorable terms; and - requires the dedication of a substantial portion of our cash flow from operations to the payment of principal and interest on indebtedness. In addition, our agreements with our lenders contain a number of covenants, which, among other things, require us to comply with specified financial ratios and tests. At September 30, 2000, we are in compliance with such financial ratios and tests. We have and will continue to evaluate opportunities to provide additional cash flow by monetizing assets during 2000 and beyond, including sales of certain financial assets (primarily consisting of sales-type lease receivables) and real estate assets. Operating activities provided net cash of $149.0 million in the first nine months of 2000 compared to net cash provided of $138.8 million in the first nine months of the prior year. The primary contributors were: - net earnings were $82.5 million in 2000 compared to $67.3 million in 1999; - proceeds from the sale of sales-type lease receivables were $61.9 million in 2000 compared to $45.7 million in 1999; - reductions in trade and other receivables contributed $15.0 million in 2000 compared to $0.4 million used in 1999. These improvements were partially offset by increases in inventories of $46.7 million in 2000 compared to $8.2 million in 1999. Inventories were 22 up due to changes in our distribution channels and the ramp up for expected sales in the fourth quarter. In 2000, investing activities used $82.7 million of net cash consisting of $110.1 million of net capital purchases and $5.3 million of investments, offset by $15.2 million and $17.5 million in proceeds from the sale of clinical chemistry assets in Spain and sale of property, plant and equipment, respectively. In 1999, investing activities used $96.8 million of net cash, primarily for capital purchases. Net cash used by financing activities was $79.3 million and $37.0 million for the nine month periods in 2000 and 1999, respectively. During the first nine months of 2000, we made $94.4 million in cash payments towards reducing our debt compared to $39.9 million for the same period in 1999. Proceeds from the issuance of stock were $27.3 million and $14.8 million for the nine month periods in 2000 and 1999, respectively. In addition to the improvement in our debt-to-capital ratio mentioned previously, the ratio of current assets to current liabilities ("current ratio") improved to 2.0 at September 30, 2000 from 1.7 at December 31, 1999. The decrease in current assets was primarily due to reductions in cash as a result of debt reduction payments and the decrease in trade and other receivables partially offset by an increase in net inventories. The decrease in current liabilities was due to cash payments on notes payable, current maturities of long-term debt, accounts payable, accrued expenses and other liabilities partially offset by an increase in income taxes payable. Based upon current levels of operations and anticipated cost savings and future growth, we believe that our cash flow from operations, together with available borrowings under our credit facility and other sources of liquidity will be adequate to meet our anticipated requirements until the maturity of the credit facility in 2002. However, we cannot give any assurance that our business will continue to generate cash flows at or above current levels or that estimated cost savings or growth can be achieved. Our future operating performance and ability to service or refinance our existing indebtedness, including the credit facility, will be subject to future economic conditions and to financial, business and other factors, many of which are beyond our control. On September 1, 2000, we paid a quarterly cash dividend of $0.16 per share of common stock, for a total of $4.8 million. On October 5, 2000, the Board of Directors declared a two-for-one stock split in the form of a 100% stock dividend. The split entitles each stockholder of record on November 15, 2000 to receive one additional share of common stock for every share held on that date. Also on October 5, 2000, the Board of Directors approved a quarterly cash dividend of $0.17 per share on a pre-split basis, payable on November 10, 2000, to stockholders of record on October 20, 2000. Business Climate The clinical diagnostics and life science research markets are highly competitive and we encounter significant competition in each market from many manufacturers, both domestic and outside the United States. These markets continue to be unfavorably impacted by the economic weakness in parts of Europe and Japan and government and healthcare cost containment initiatives in general. Although the life science research market is enjoying strong growth, it continues to be affected by consolidations of 23 pharmaceutical companies and governmental constraints on research and development spending, especially outside the United States. In the clinical diagnostics market, attempts to lower costs and to increase productivity have led to further consolidation among healthcare providers in the United States, resulting in more powerful provider groups that continue to leverage their purchasing power to contain costs. Preferred supplier arrangements and combined purchases are becoming more commonplace. Consequently, it has become essential for manufacturers to provide cost-effective diagnostic systems to remain competitive. Cost containment initiatives in the United States and in the European healthcare systems will continue to be factors which may affect our ability to maintain or increase sales. Future profitability may also be adversely affected if the relative value of the U.S. dollar strengthens against certain currencies. The continuing consolidation trend among United States healthcare providers, mentioned previously, has increased pressure on diagnostic equipment manufacturers to broaden their product offerings to encompass a wider range of testing capability, greater automation and higher volume capacity at a lower cost. With our current product offerings, we believe Beckman Coulter is well suited to provide a broad range of systems with automation capabilities that speed test results, lower labor costs, and improve the overall efficiency of laboratories. With our leadership position in cellular analysis and our extensive capabilities in routine chemistry and immunodiagnostics, we are able to offer a broad range of automated systems that together can perform more than 75% of a hospital laboratory's test volume and essentially all of the blood tests that are considered routine. We believe we are able to provide significant value-added benefits, enhanced through our expertise in simplifying and automating laboratory processes, to our customers. Our new products originate from four sources: - internal research and development programs; - external collaborative efforts with individuals in academic institutions and technology companies; - devices and techniques that are generated in customers' laboratories; and - business and technology acquisitions. During 2000, we have made a commitment to the commercialization of a new Tetramer technology, which operates on flow cytometry platforms. This new cellular immune response technology has the potential to establish an entirely new testing category for measuring and monitoring the immune response system. We have established an Immunomics operation to focus on this technology with sales of our standard iTAg(TM) MHC Tetramers for HIV and melanoma set to begin during the quarter ending December 31, 2000. The following agreements and business developments were significant during the third quarter: - Signed an agreement with Premier, Inc., the largest healthcare alliance enterprise in the United States, valued at $35 million annually. Under the terms of the agreement, we will provide hematology instrument systems and supplies to Premier's membership alliance, which purchases approximately $10 billion in products annually. This alliance comprises 957 healthcare facilities nationwide and is affiliated with more than 900 others. 24 - Dissolved our distribution agreement with BIO-RAD for our Access immunoassay systems in 90 countries located throughout Europe, Africa and the Pacific Rim. As a result, we will assume sales responsibility for these instrument systems and related test kits. We believe that we can leverage more placements by selling the system in concert with our chemistry and progressive automation approach. - Formed a strategic alliance with Oncotech to develop and commercialize gene expression technologies that can be used to diagnose cancer and determine the most appropriate treatment plan. The following agreements and business developments were significant subsequent to the third quarter: - Signed an agreement with Promega Corporation that grants us the non-exclusive distribution rights to Promega's Wizard SV 96 Plasmid DNA Purification System (the "System") in the United States and other selected countries. We have automated the System on our Biomek(R) FX and Biomek(R) 2000 liquid handling workstations, which is used by researchers in university, medical research, biotechnology and pharmaceutical laboratories. - Signed a two-year, multimillion-dollar agreement with Health Trust Purchasing Group ("HPG") in Nashville, Tennessee. Under the terms of the agreement, we will be a provider of hematology instrument systems and supplies to HPG's membership, which is comprised of 350 acute-care facilities, 124 surgery centers and 62 psychiatric facilities across the United States. - Received U.S. regulatory clearance to market a test to detect the presence of the drug commonly known as "ecstasy" and other amphetamines in urine. These tests are performed on our Synchron(R) CX and LX clinical systems. The size and growth of our markets are influenced by a number of factors, including: - technological innovation in bio-analytical practice; - government funding for basic and disease-related research (for example, heart disease, AIDS and cancer); - research and development spending by biotechnology and pharmaceutical companies; - healthcare spending; and - physician practice. We expect worldwide healthcare expenditures and diagnostic testing to increase over the long-term, primarily as a result of the following: - growing demand for services generated by the increasing size and aging of the world population; - increasing expenditures on diseases requiring costly treatment (for example, AIDS and cancer); and - expanding demand for improved healthcare services in developing countries. In addition to the business climate factors discussed previously, the following economic factors may influence our business: - currency fluctuations -- as nearly 45% of our revenues are generated outside the United States and given the recent fluctuations in foreign currencies, we may experience volatility in sales and operating income; and 25 - interest rates -- as of the date of the filing of this Form 10-Q, approximately 70% of our debt is under variable interest rate terms. Recent Accounting Pronouncements In December 1999, the SEC issued Staff Accounting Bulletin No. 101 ("SAB 101"). SAB 101 provides the SEC's views in applying generally accepted accounting principles to selected revenue recognition issues. As amended, calendar year-end companies that have not applied the accounting requirements of SAB 101 may report a change in accounting principle no later than December 31, 2000, including retroactive restatement of all affected quarters within 2000. We are currently evaluating the impact of SAB 101 on our consolidated financial statements and results of operations. Forward Looking Statements This Form 10-Q contains forward-looking statements, including statements regarding, among other items: - our business strategy; - anticipated trends in our business; and - our liquidity requirements and capital resources. These forward-looking statements are based on our expectations and are subject to a number of risks and uncertainties, some of which are beyond our control. These risks and uncertainties include, but are not limited to: - complexity and uncertainty regarding development of new high-technology products; - loss of market share through aggressive competition in the clinical diagnostics and life science research markets; - our dependence on capital spending policies and government funding; - the effect of potential healthcare reforms; - fluctuations in foreign exchange rates and interest rates; - reliance on patents and other intellectual property; - unanticipated reductions in cash flows and difficulty in sales of assets; - future effective tax rate; - unanticipated euro problems; and - other factors that cannot be identified at this time. Although we believe we have the product offerings and resources required to achieve our objectives, actual results could differ materially from those anticipated by these forward-looking statements. There can be no assurance that events anticipated by these forward-looking statements will in fact transpire as expected. Item 3. Quantitative and Qualitative Disclosures About Market Risk The Company's cash flow and earnings are subject to fluctuations due to changes in foreign currency exchange rates and interest rates. The Company attempts to limit its exposure to these market risks through the use of various financial instruments. Assuming a hypothetical 10% strengthening and 10% weakening of the spot exchange rates for the U.S. dollar against 26 the foreign currencies at September 30, 2000, a 10% strengthening of the U.S. dollar would result in a gain in fair value of $21.9 million and a 10% weakening of the U.S. dollar would result in a loss in fair value of $22.7 million in these instruments. With respect to interest rates, a one percentage point increase or decrease in interest rates would decrease or increase current year's pre-tax earnings by $0.8 million. For further discussion of the Company's market risk exposures, refer to the section entitled "Financial Risk Management" included in "Management's Discussion and Analysis" of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999. 27 PART II OTHER INFORMATION Item 1. Legal Proceedings In December 1999, Streck Laboratories, Inc. served Beckman Coulter and Coulter Corporation with a complaint filed in the United States District Court for the District of Nebraska. The complaint alleges that control products sold by Beckman Coulter and/or Coulter Corporation infringe each of five patents owned by Streck, and seeks injunctive relief, damages, attorney fees and costs. We, on behalf of ourselves and on behalf of Coulter Corporation have answered the complaint and have filed a counterclaim against Streck for patent infringement. We continue to believe that there is no reasonable basis for us to conclude that this litigation could lead to an outcome that would have a material adverse effect on our consolidated operations or financial position. Item 2. Changes In Securities None. Item 3. Defaults Upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security-Holders None. Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K a) Exhibits 10.1 Beckman Coulter, Inc. Executive Deferred Compensation Plan, Amendment 2000-1, dated October 19, 2000 10.2 Beckman Coulter, Inc. Executive Deferred Compensation Plan, Amendment 2000-2, dated October 19, 2000 10.3 Beckman Coulter, Inc. Executive Restoration Plan, Amendment 2000-1, dated October 19, 2000 11. Statement re Computation of Per Share Earnings: This information is set forth in Note 3, Earnings Per Share of the Condensed Consolidated Financial Statements included in Part I herein. 15. Independent Accountants' Review Report, October 24, 2000 27. Financial Data Schedule as of and for the nine month period ended September 30, 2000 b) Reports on Form 8-K None. 28 Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BECKMAN COULTER, INC. (Registrant) Date: November 8, 2000 by /s/ WILLIAM H. MAY ----------------------------- William H. May Vice President General Counsel and Secretary Date: November 8, 2000 by /s/ JAMES T. GLOVER ----------------------------- James T. Glover Vice President and Treasurer 29 EXHIBIT INDEX FORM 10-Q, THIRD QUARTER, 2000
Exhibit Number Description ------- ----------- 10.1 Beckman Coulter, Inc. Executive Deferred Compensation Plan, Amendment 2000-1, dated October 19, 2000 10.2 Beckman Coulter, Inc. Executive Deferred Compensation Plan, Amendment 2000-2, dated October 19, 2000 10.3 Beckman Coulter, Inc. Executive Restoration Plan, Amendment 2000-1, dated October 19, 2000 11. Statement re Computation of Per Share Earnings: This information is set forth in Note 3, Earnings Per Share, of the Condensed Consolidated Financial Statements included in Part I herein. 15. Independent Accountants' Review Report, October 24, 2000 27. Financial Data Schedule as of and for the nine month period ended September 30, 2000