10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

ý  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2003

OR

o  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)

Registrant’s telephone number, including area code:  (714) 871-4848

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 ý No o.

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).  Yes ý No o.

The number of outstanding shares of the registrant’s common stock as of October 24, 2003 was 61,665,008 shares.

PART I
FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of September 30, 2003 and December 31, 2002
	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2003 and 2002
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2003 and 2002
	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
Item 4.	Controls and Procedures
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

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BECKMAN COULTER, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in millions, except amounts per share)

	September 30, 2003			December 31, 2002
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	64.8		$	91.4
Trade and other receivables, net	523.0			544.4
Inventories	403.6			363.7
Other current assets	77.8			56.7
Total current assets	1,069.2			1,056.2
Property, plant and equipment, net	387.8			370.8
Goodwill	365.6			357.8
Other intangibles, net	343.0			346.2
Other assets	134.8			132.6
Total assets	$	2,300.4		$	2,263.6
Liabilities and Stockholders’ Equity
Current liabilities:
Notes payable and current maturities of long-term debt	$	34.5		$	140.2
Accounts payable, accrued expenses and other liabilities	434.8			400.4
Income taxes payable	83.9			71.0
Total current liabilities	553.2			611.6
Long-term debt, less current maturities	629.0			626.6
Other liabilities	379.7			433.3
Total liabilities	1,561.9			1,671.5
Commitments and contingencies (Note 10)
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 64.1 and 62.6 at September 30, 2003 and December 31, 2002, respectively; shares outstanding 61.5 and 61.0 at September 30, 2003 and December 31, 2002, respectively	6.2			6.1
Additional paid-in capital	302.5			259.4
Treasury stock, at cost: 2.3 and 1.3 common shares at September 30, 2003 and December 31, 2002, respectively	(76.2		)	(38.3		)
Common stock held in grantor trust, at cost: 0.3 common shares at September 30, 2003 and December 31, 2002	(13.9		)	(14.1		)
Grantor trust liability	13.9			14.1
Retained earnings	576.3			457.4
Unearned compensation	(3.4		)	—
Accumulated other comprehensive income (loss):
Cumulative foreign currency translation adjustment	(0.8		)	(36.4		)
Derivatives qualifying as hedges	(17.0		)	(7.0		)
Minimum pension adjustment	(49.1		)	(49.1		)
Total stockholders’ equity	738.5			592.1
Total liabilities and stockholders’ equity	$	2,300.4		$	2,263.6

See accompanying notes to condensed consolidated financial statements.

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BECKMAN COULTER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in millions, except amounts per share and share data)

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2003			2002			2003			2002
Sales	$	534.8		$	501.1		$	1,553.9		$	1,463.9
Cost of sales	272.0			276.5			810.6			798.4
Gross profit	262.8			224.6			743.3			665.5
Operating costs and expenses:
Selling, general and administrative	141.6			122.0			395.8			356.4
Research and development	47.4			47.8			141.4			137.5
Restructure charge	—			—			18.5			—
Litigation settlement and related expenses	—			—			(26.9		)	—
Total operating costs and expenses	189.0			169.8			528.8			493.9
Operating income	73.8			54.8			214.5			171.6
Non-operating (income) and expenses:
Interest income	(3.1		)	(1.7		)	(7.4		)	(5.9		)
Interest expense	10.6			11.3			31.6			34.2
Other, net	11.5			5.3			16.3			3.6
Total non-operating expenses	19.0			14.9			40.5			31.9
Earnings before income taxes	54.8			39.9			174.0			139.7
Income taxes	14.8			7.8			37.2			37.7
Net earnings	$	40.0		$	32.1		$	136.8		$	102.0
Basic earnings per share	$	0.65		$	0.52		$	2.24		$	1.65
Diluted earnings per share	$	0.62		$	0.49		$	2.14		$	1.56
Weighted average number of shares outstanding (in thousands):
Basic	61,218			62,149			60,992			61,805
Diluted	64,822			65,269			64,054			65,524
Dividends declared per share	$	0.11		$	0.09		$	0.29		$	0.26

See accompanying notes to condensed consolidated financial statements.

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 BECKMAN COULTER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in millions)

(Unaudited)

	Nine Months Ended September 30,
	2003			2002
Net cash provided by operating activities	$	197.5		$	185.8
Cash Flows from Investing Activities:
Additions to property, plant and equipment	(95.4		)	(103.9		)
Proceeds from sale of property, plant and equipment	—			2.4
Payments for acquisitions	(8.0		)	(1.8		)
Net cash used in investing activities	(103.4		)	(103.3		)
Cash Flows from Financing Activities:
Dividends to stockholders	(17.9		)	(16.3		)
Proceeds from issuance of stock	35.9			26.3
Proceeds from stock purchase plan	2.4			2.6
Repurchase of common stock for treasury	(41.9		)	—
Proceeds from (repurchase of) common stock held in grantor trust	0.2			(14.0		)
Notes payable borrowings, net	24.8			6.1
Long-term debt reductions	(130.4		)	(59.7		)
Net cash used in financing activities	(126.9		)	(55.0		)
Effect of exchange rates on cash and cash equivalents	6.2			3.5
(Decrease) increase in cash and cash equivalents	(26.6		)	31.0
Cash and cash equivalents - beginning of period	91.4			36.0
Cash and cash equivalents - end of period	$	64.8		$	67.0

See accompanying notes to condensed consolidated financial statements.

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BECKMAN COULTER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2003

(Unaudited)

1.Report by Management

Beckman Coulter, Inc. and its wholly-owned subsidiaries (the “Company”) prepared the accompanying Condensed Consolidated Financial Statements following the requirements of the Securities and Exchange Commission for interim reporting.  As permitted under those rules, certain footnotes or other financial information normally required by accounting principles generally accepted in the United States have been condensed or omitted.

The financial statements include all normal and recurring adjustments that the Company considers necessary for the fair presentation of its financial position and operating results.  To obtain a more detailed understanding of the Company’s results, these Condensed Consolidated Financial Statements should be read in conjunction with the consolidated financial statements and notes in the Company’s annual report on Form 10-K for the year ended December 31, 2002.

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.

Certain prior year amounts have been reclassified to conform to the current year presentation.

2.Recent Accounting Developments

Revenue Recognition and Multiple Deliverables

Effective July 1, 2003, the Company prospectively adopted the provisions of Emerging Issues Task Force (“EITF”) 00-21, “Revenue Arrangements with Multiple Deliverables,” which provides guidance on the timing and method of revenue recognition for sales arrangements that include the delivery of more than one product or service. Under EITF 00-21, revenue is allocated to all deliverables based on the relative fair values of the individual components regardless of whether an individual element is incidental or perfunctory.  This is consistent with the Company’s historical treatment, except for certain of the Company’s sales arrangements include undelivered elements that the Company had historically considered incidental and perfunctory, primarily installation and training.  Consequently, the Company had not previously deferred the revenue related to these elements, and had instead recorded an accrual for the estimated cost of providing them.  However, upon adoption of EITF 00-21, the Company is now allocating revenue to all components of its multiple-element arrangements, including installation and training.  The impact of deferring revenues for undelivered installation and training on multi-element contracts entered into during the quarter ended September 30, 2003 resulted in a $4.0 million reduction of reported revenues.  The estimated cost that would have been accrued to cost of sales for such undelivered elements in these specific contracts prior to the adoption of EITF 00-21 was approximately $3.0 million.  Therefore, the impact of adopting EITF 00-21 related to installation and training was a reduction to earnings before income taxes of approximately $1.0 million ($0.7 million after taxes) for the quarter ended September 30, 2003.

Though management does not have access to all of the data that would be necessary to estimate the pro forma impact of adopting EITF 00-21 on all prior periods presented, based upon the data available, management believes the impacts of adopting EITF 00-21 in prior periods would not have been material.  Accordingly, no pro forma presentation of the impact of adoption on prior periods has been presented.

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Derivative Instruments and Hedging

In April 2003, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” SFAS No. 149 amends and clarifies financial accounting and reporting for hedging activities and derivative instruments including certain derivative instruments embedded in other contracts. SFAS No. 149 was effective for contracts entered into or modified after June 30, 2003 and did not have a material impact on the Company’s financial position or results of operations.

Exit or Disposal Activities

SFAS No. 146 “Accounting for Costs Associated with Exit or Disposal Activities” addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies EITF 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs incurred in a Restructuring).”  The principal difference between this Statement and EITF 94-3 relates to its requirements for recognition of a liability for a cost associated with an exit or disposal activity.  This statement requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred.  Under EITF 94-3, a liability for exit costs as defined in EITF 94-3 was recognized at the date of an entity’s commitment to an exit plan.  The provisions of this Statement were effective for exit or disposal activities that are initiated after December 31, 2002.  The Company’s adoption of SFAS No. 146 in the first quarter of 2003 did not have a material impact on its financial position or results of operations.

Stock-based Compensation

In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure-an amendment of SFAS No. 123.”  This amendment provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation.  In addition, this statement amends the disclosure requirement of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results.  SFAS No. 148 is effective for fiscal years ending after December 15, 2002.  Since the Company is continuing to account for stock-based compensation according to Accounting Principles Board (“APB”) No. 25, “Accounting for Stock Issued to Employees” the adoption of SFAS No. 148 in the first quarter of 2003 required the Company to provide prominent disclosures about the effects of SFAS No. 123 on reported net income and required it to disclose these effects in the interim financial statements (see Note 12).

3.Restructure

In January 2003, the Company announced a strategic reorganization of its business to combine its Life Science Research and Specialty Testing divisions into a single Biomedical Research Division. The objective of the restructure was to enable the Company to better leverage its technologies and products across the entire life sciences and clinical research customer base.  The reorganization plan also included a refocus of the Company’s international operations to improve profitability.  The reorganization resulted in a 3% reduction in the Company’s workforce and a pre-tax charge of $18.5 million primarily related to employee termination costs.  The charge taken against first quarter 2003 earnings represents the total amount expected to be incurred under the plan except for the potential impact of currency fluctuations relative to projected currency rates.  The reorganization plan was substantially completed in the second quarter of 2003.  However, certain employee termination costs from the restructure will be paid through the second quarter of 2004.

The following is a reconciliation of the restructure activity and accrual included in accounts payable, accrued expenses and other liabilities in the Condensed Consolidated Balance Sheet as of September 30, 2003 (in millions):

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	Initial Accrual		Cash Payments			Balance
Employee termination	17.5		(10.9		)	6.6
Other	1.0		(0.6		)	0.4
Total	$	18.5	$	(11.5	)	$	7.0

4.Derivatives

The Company uses derivative financial instruments to hedge foreign currency and interest rate exposures.  The Company’s objectives for holding derivatives are to minimize currency and interest rate risks using the most effective methods to eliminate or reduce the impacts of these exposures.  The Company does not speculate in derivative instruments in order to profit from foreign currency exchange or interest rate fluctuations; nor does the Company enter into trades for which there are no planned underlying exposures.  The following paragraphs discuss in more detail the Company’s foreign currency and interest rate exposures and related derivative instruments.

Foreign Currency

The Company manufactures its products principally in the United States, but generated approximately 43% of its revenues in 2002 from sales made outside the United States by its international subsidiaries.  Sales generated by the international subsidiaries generally are denominated in the subsidiary’s local currency, thereby exposing the Company to the risk of foreign currency fluctuations.  In order to mitigate the impact of changes in foreign currency exchange rates, the Company uses derivative financial instruments (or “foreign currency contracts”) to hedge the foreign currency exposure resulting from intercompany sales to the Company’s international subsidiaries through their anticipated cash settlement date.  These foreign currency contracts include forward and option contracts and are designated as cash flow hedges.

The Company uses foreign currency swap contracts to hedge loans between subsidiaries.  These foreign currency swap contracts are designated as fair value hedges.

Hedge ineffectiveness associated with the Company’s cash flow and fair value hedges was immaterial for the three and nine months ended September 30, 2003 and 2002.  No fair value or cash flow hedges were discontinued for the three and nine months ended September 30, 2003 and 2002.

Derivative gains and losses included in accumulated other comprehensive income are reclassified into other non-operating (income)and expenses upon the recognition of the hedged transaction.  The Company estimates that substantially all of the unrealized loss included in accumulated other comprehensive income (loss) of $28.2 million ($16.9 million after taxes) at September 30, 2003 will be reclassified to other non-operating (income) and expenses within the next twelve months.  The actual amounts that will be reclassified to earnings over the next twelve months will vary from this amount as a result of changes in market rates.  The Company has cash flow hedges at September 30, 2003 which settle as late as December 2004.

Interest Rate

The Company uses interest rate derivative contracts on certain borrowing transactions to hedge fluctuating interest rates.  Interest differentials paid or received under these contracts are recognized as adjustments to the effective yield of the underlying financial instruments hedged.

Pursuant to the Company’s reverse interest rate swap agreements associated with the Senior Notes due 2011, the Company receives an average fixed interest rate of 5.7%, and pays a floating interest rate based on the LIBOR (1.2% at September 30, 2003).  These reverse interest rate swaps are designated as fair value hedges and are deemed perfectly effective.  At September 30, 2003, the fair value of the reverse interest rate swaps

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associated with the Senior Notes due 2011 was $27.5 million and is included in other long-term assets.  An offsetting $27.5 million credit is included in long-term debt as a fair value adjustment.

5.Comprehensive Income

The Company’s components of comprehensive income include net earnings, foreign currency translation adjustments and derivatives qualifying as hedges, as follows (in millions):

	Three Months Ended September 30,					Nine Months Ended September 30,
	2003			2002		2003			2002
Net earnings	$	40.0		$	32.1	$	136.8		$	102.0
Foreign currency translation adjustment	(31.9		)	12.1		35.6			19.4
Derivatives qualifying as hedges:
Net derivative gains (losses), net of income taxes of $(4.7) and $(2.1) for the three and nine months ended September 30, 2003, respectively, and zero for 2002.	7.2			6.8		3.3			(14.4		)
Reclassifications to non-operating income, net of income taxes of $4.2 and $8.8 for the three and nine months ended September 30, 2003, respectively, and zero for 2002.	(6.4		)	1.8		(13.3		)	(0.9		)
	0.8			8.6		(10.0		)	(15.3		)
Comprehensive income	$	8.9		$	52.8	$	162.4		$	106.1

6.Earnings Per Share

The following is a reconciliation of the numerators and denominators used in computing basic and diluted earnings per share (“EPS”) (in millions, except amounts per share):

	Three Months Ended September 30,
	2003						2002
	Net Earnings		Shares	Per Share Amount			Net Earnings		Shares	Per Share Amount
Basic EPS:
Net earnings	$	40.0	61.218	$	0.65		$	32.1	62.149	$	0.52
Effect of dilutive stock options	—		3.604	(0.03		)	—		3.120	(0.03		)
Diluted EPS:
Net earnings	$	40.0	64.822	$	0.62		$	32.1	65.269	$	0.49

	Nine Months Ended September 30,
	2003						2002
	Net Earnings		Shares	Per Share Amount			Net Earnings		Shares	Per Share Amount
Basic EPS:
Net earnings	$	136.8	60.992	$	2.24		$	102.0	61.805	$	1.65
Effect of dilutive stock options	—		3.062	(0.10		)	—		3.719	(0.09		)
Diluted EPS:
Net earnings	$	136.8	64.054	$	2.14		$	102.0	65.524	$	1.56

For the three and nine months ended September 30, 2003, there were 0.1 million and 2.6 million shares, respectively, relating to the possible exercise of outstanding stock options excluded from the computation of diluted EPS as their effect would have been anti-dilutive.  For the three and nine months ended September 30, 2002, there were 1.4 million and 0.1 million shares, respectively, relating to the possible exercise of

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outstanding stock options that were not included in the computation of diluted EPS.

7.Sale of Assets

During the nine months ended September 30, 2003, the Company sold certain receivables (“Receivables”) as part of its plan to reduce debt.  The net book value of financial assets sold was $90.7 million for which the Company received approximately $93.6 million in cash proceeds.  During the nine months ended September 30, 2002, the Company sold similar assets with a net book value of $102.3 million for cash proceeds of $105.0 million. These transactions were accounted for as sales and as a result the related receivables have been excluded from the accompanying Condensed Consolidated Balance Sheets.  The agreements underlying the Receivable sales (“Agreements”) contain provisions that indicate the Company is responsible for up to 15% of end-user customer payment defaults on sold Receivables.  Accordingly, the Company accrues a reserve for the probable and reasonably estimable portion of these liabilities.  Additionally, the Company typically services the sold Receivables whereby it continues collecting payments from the end user customer on the behalf of the purchaser of the Receivables.  The Company estimates the fair value of this service arrangement as a percentage of the sold Receivables and amortizes this amount to income over the remaining life of the service period.  At September 30, 2003 and December 31, 2002, there was $1.1 million and $1.2 million, respectively of deferred service fees included in accrued liabilities on the Condensed Consolidated Balance Sheets.  For the three months ended September 30, 2003 and 2002, there was $0.1 million of deferred service fees amortized to income.  For the nine months ended September 30, 2003 and 2002, there was $0.2 million of deferred service fees amortized to income.

8.Composition of Certain Financial Statement Items

Inventories consisted of the following (in millions):

	September 30, 2003		December 31, 2002
Finished products	$	279.1	$	250.0
Raw materials, parts and assemblies	103.2		94.6
Work in process	21.3		19.1
	$	403.6	$	363.7

Changes in the product warranty obligation for the nine months ended September 30, 2003 are as follows (in millions):

Balance as of December 31, 2002	$	12.9
New warranties	51.5
Payments and adjustments	(50.9		)
Balance as of September 30, 2003	$	13.5

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9.Goodwill and Other Intangible Assets

The Company accounts for goodwill and other intangible assets in accordance with SFAS No. 142, “Goodwill and Other Intangible Assets.”  SFAS No. 142 requires that goodwill and other intangible assets that have indefinite lives not be amortized but instead be tested at least annually for impairment, or more frequently when events or changes in circumstances indicate that the assets might be impaired by comparing the carrying value to the fair value of the reporting unit to which they are assigned.  The Company considers its SFAS No. 131 operating segments - Clinical Diagnostics, Life Science Research and Specialty Testing in 2002 and Clinical Diagnostics and Biomedical Research in 2003 - to be its reporting units for purposes of testing for impairment as the components within each operating segments have similar economic characteristics and thus do not represent separate reporting units.

For goodwill, a two-step test is used to identify the potential impairment and to measure the amount of goodwill impairment, if any.  The first step is to compare the fair value of a reporting unit with its carrying amount, including goodwill.  If the fair value of a reporting unit exceeds its carrying amount, goodwill is considered not impaired; otherwise, goodwill is impaired and the loss is measured by performing step two.  Under step two, the impairment loss is measured by comparing the implied fair value of the reporting unit with the carrying amount of goodwill.

To determine the fair value of the Company’s reporting units as of January 1, 2003, the Company used a comparable industry revenue multiple approach for each of the two reportable units.  Under this approach, the Company determined the average number of years’ sales for certain companies in its reporting unit’s industry that are required to equal that company’s Enterprise Value, as defined (“comparable industry revenue multiple”).  The Company then took the product of the revenues for each reporting unit and the comparable industry revenue multiple, which represented that reporting unit’s fair value.  In all cases, the fair value of the reporting unit was in excess of the reporting unit’s book value, which resulted in no goodwill impairment (and thus step two of the goodwill impairment test was not required to be performed).

The following presents activity for goodwill (in millions):

	Clinical Diagnostics		Biomedical Research		Total
Goodwill, December 31, 2002	$	316.3	$	41.5	$	357.8
Minority interest acquisition	2.8		—		2.8
Settlements of pre-acquisition tax contingencies	4.2		—		4.2
Currency translation adjustment	—		0.8		0.8
Goodwill, September 30, 2003	$	323.3	$	42.3	$	365.6

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The following provides information about the Company’s intangible assets (in millions):

	September 30, 2003							December 31, 2002
	Gross Carrying Amount		Accumulated Amortization			Net		Gross Carrying Amount		Accumulated Amortization			Net
Amortized intangible assets:
Technology	$	56.2	$	(18.4	)	$	37.8	$	56.2	$	(16.1	)	$	40.1
Customer contracts	167.1		(38.8		)	128.3		167.1		(33.7		)	133.4
Other	46.0		(14.2		)	31.8		45.5		(12.9		)	32.6
	269.3		(71.4		)	197.9		268.8		(62.7		)	206.1
Unamortized intangible assets:
Tradename	73.5		—			73.5		73.5		—			73.5
Core technology	71.6		—			71.6		66.6		—			66.6
	$	414.4	$	(71.4	)	$	343.0	$	408.9	$	(62.7	)	$	346.2

Core technology at September 30, 2003 includes a preliminary purchase price allocation of approximately $5.0 million related to a business acquisition during the second quarter of 2003.  The Company will evaluate the net assets acquired and will finalize the purchase price allocation within the next quarter at which time amounts may be allocated to tangible or other intangible assets, goodwill and/or in-process research and development.

Recorded intangible asset amortization expense for the three months ended September 30, 2003 and 2002 was $3.0 million and $2.9 million, respectively.  For the nine months ended September 30, 2003 and 2002 recorded intangible amortization expense was $9.4 million and $8.7 million, respectively.  Estimated intangible asset amortization expense (based on existing intangible assets) for the years ended December 31, 2003, 2004, 2005, 2006 and 2007 is $12.4 million, $12.1 million, $12.0 million, $11.6 million and $11.2 million, respectively.

10.Commitments and Contingencies

The Company is 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 of these lawsuits will have a material adverse effect on its results of operations, financial position or liquidity.  However, the Company cannot give any assurances regarding the ultimate outcome of these lawsuits and their resolution could be material to the Company’s operating results for any particular period, depending upon the level of income for the period.

In September 2003, an Orange County, California Superior Court jury awarded the Company approximately $934 million in compensatory and punitive damages as the result of a lawsuit filed against Flextronics International, Ltd. and its U.S. subsidiary Flextronics USA, Inc., formerly known as Dovatron.  The lawsuit was filed in the second quarter of 2001 seeking damages for breach of contract and other claims.  Since the amount of damages which the Company may ultimately receive cannot be quantified until the legal review process is complete, no gain has been recorded in the financial statements for this award.

In March 2003, the Company settled a dispute associated with an escrow account created as part of the 1997 acquisition of Coulter Corporation to cover pre-acquisition liabilities.  As a result of the settlement, the Company recorded a $28.9 million non-taxable credit to operating income. The Company also recorded a tax deductible charge of approximately $2.0 million for legal fees related to its escrow claim and settlement.  The credit settles all of Beckman Coulter’s claims against the escrow account, including the patent litigation settlement charge taken in the fourth quarter of 2002.

11.Business Segment Information

The Company is engaged primarily in the design, manufacture and sale of laboratory instrument systems and related products.  In 2002 the Company’s organization had three reportable segments: (1) Clinical Diagnostics, (2) Life Science Research and (3) Specialty Testing.  In the first quarter of 2003, the Company consolidated the Life Science Research and Specialty Testing segments under a new Biomedical Research segment.  The Clinical Diagnostics segment encompasses diagnostic applications, principally in

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hospital laboratories.  The Biomedical Research segment includes life sciences and drug discovery applications in universities, medical schools, medical centers, reference laboratories and pharmaceutical and biotechnology companies.  It also focuses on customers in medical centers, reference laboratories and pharmaceutical research organizations who perform clinical trials, conduct disease related research and perform esoteric testing.  All corporate and centralized activities, including financing transactions, are captured in a central shared services “Center”, which is reflected in the tables below.  The Company evaluates performance based on profit or loss from operations.  Reportable segments are managed separately, since each business requires different technologies or products.

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	Three Months Ended September 30,						Nine Months Ended September 30,
	(unaudited)						(unaudited)
(in millions)	2003			2002			2003			2002
Net sales:
Clinical Diagnostics	$	381.1		$	349.1		$	1,103.1		$	1,019.1
Biomedical Research	153.7			152.0			450.8			444.8
Center	—			—			—			—
Consolidated	$	534.8		$	501.1		$	1,553.9		$	1,463.9
Operating income:
Clinical Diagnostics	$	82.5		$	65.7		$	221.6		$	194.1
Biomedical Research	22.3			15.5			61.3			46.6
Center	(31.0		)	(26.4		)	(68.4		)	(69.1		)
Consolidated	$	73.8		$	54.8		$	214.5		$	171.6
Interest income:
Clinical Diagnostics	$	(1.5	)	$	(1.4	)	$	(4.7	)	$	(5.0	)
Biomedical Research	—			—			—			—
Center	(1.6		)	(0.3		)	(2.7		)	(0.9		)
Consolidated	$	(3.1	)	$	(1.7	)	$	(7.4	)	$	(5.9	)
Interest expense:
Clinical Diagnostics	$	—		$	—		$	—		$	—
Biomedical Research	—			—			—			—
Center	10.6			11.3			31.6			34.2
Consolidated	$	10.6		$	11.3		$	31.6		$	34.2
Sales to external customers:
Americas United States	$	307.7		$	292.2		$	889.6		$	854.1
Canada and Latin America	29.9			28.3			86.6			93.2
	337.6			320.5			976.2			947.3
Europe	131.0			122.5			394.9			352.0
Asia	66.2			58.1			182.8			164.6
Consolidated	$	534.8		$	501.1		$	1,553.9		$	1,463.9

	September 30, 2003		December 31, 2002
	(unaudited)
Long-lived assets:
Americas United States	$	1,047.7	$	1,035.2
Canada and Latin America	28.1		32.1
	1,075.8		1,067.3
Europe	128.7		118.0
Asia	26.7		22.1
Consolidated	$	1,231.2	$	1,207.4
Total assets:
Clinical Diagnostics	$	1,468.3	$	1,488.8
Biomedical Research	507.7		497.6
Center	324.4		277.2
Consolidated	$	2,300.4	$	2,263.6

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12.Stockholders’ Equity

Tax Benefit on Stock Options Exercised

During the three and nine months ended September 30, 2003, the Company recorded a $5.4 million and $7.4 million, respectively, increase to additional paid-in capital with an offsetting decrease to income taxes payable as a result of the tax benefit received from employees exercising non-qualified stock options.

Stock Options

The Company follows the guidance of APB No. 25, whereby compensation related to stock options is the difference between the grant price and the fair market value of the underlying common shares at the grant date.  Generally, the Company issues options to employees with a grant price equal to the market value of its common stock on the grant date.  Accordingly, the Company has recognized no compensation expense on its stock option plans.  The following represents pro forma information as if the Company recorded compensation cost using the fair value of the issued compensation instrument under SFAS No. 123, “Accounting for Stock Based Compensation” (in millions, except amounts per share):

	Three months ended September 30,						Nine months ended September 30,
	2003			2002			2003			2002
Net earnings as reported	$	40.0		$	32.1		$	136.8		$	102.0
Assumed stock compensation cost, net of tax	(2.9		)	(2.9		)	(8.9		)	(8.2		)
Pro forma net earnings	$	37.1		$	29.2		$	127.9		$	93.8
Earnings per share:
Basic-as reported	$	0.65		$	0.52		$	2.24		$	1.65
Basic-pro forma	$	0.61		$	0.47		$	2.10		$	1.52
Diluted-as reported	$	0.62		$	0.49		$	2.14		$	1.56
Diluted-pro forma	$	0.57		$	0.45		$	2.00		$	1.43

Unearned Compensation on Restricted Stock

During the nine months ended September 30, 2003, the Company issued 133,866 shares of restricted stock which vest based on the passage of time (3 to 5 years).  The Company has accounted for the issuance of the restricted stock by crediting the fair value of the restricted shares on the date of grant of $4.0 million to treasury stock.  An offsetting amount was recorded to unearned compensation, and is included in stockholders’ equity.  Unearned compensation is being amortized to income over the respective 3 to 5 year vesting periods and amounted to $0.3 million and $0.6 million in the three and nine months ended September 30, 2003, respectively.

13.Income Taxes

Income taxes as a percentage of earnings before income taxes (“effective tax rate”) were 27.0% and 19.5% for the three months ended September 30, 2003 and 2002, respectively.  The lower effective tax rate in the third quarter of 2002 was primarily due to the impact of a cumulative tax credit resulting from a reduction in the 2002 expected annual effective tax rate on income from continuing operations of three percentage points due to a number of factors, including the utilization of various tax deductions related to export sales and R&D tax credits.  The effective tax rate was 21.4% and 27% for the nine months ended September 30, 2003 and 2002, respectively.  The decrease in the effective tax rate for the nine months ended September 30, 2003 was due to the impact of certain unusual separately reported items in the first quarter of 2003, including the non-taxable credit to earnings related to the escrow account settlement and the incremental tax rate benefit of the restructure charge.

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Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

Beckman Coulter simplifies and automates laboratory processes used in all phases of the battle against disease. We design, manufacture and market systems that consist of instruments, chemistries, software and supplies that meet a variety of biomedical laboratory needs. Our products are used in a range of applications, from instruments used for pioneering medical research, clinical trials and drug discovery to diagnostic systems found in hospitals and physicians’ offices to aid in patient care.  We compete in market segments that we estimate totaled approximately $35 billion in annual sales worldwide in 2002.  We currently have products that address approximately half of that market.

Our product lines include over 90% of all blood tests routinely performed in hospital laboratories and a range of systems for medical and pharmaceutical research. We have more than 200,000 systems operating in laboratories around the world, with approximately 62% of 2002 revenues coming from after-market customer purchases of operating supplies, chemistry kits and service.  We market our products in more than 130 countries, with approximately 43% of revenues in 2002 coming from sales outside the United States.

Our strategy is to grow the core business, leverage the biomedical testing continuum and invest in high potential areas.  To this end, we achieved the following significant milestones during the quarter ended September 30, 2003:

•Acquired the technologies and assets of Peoples Genetics, Inc. for comprehensive genetic analysis of large pooled populations of DNA for disease association research.

•Signed a development and supply agreement with Hycor Biomedical Inc. for autoimmune disease tests used on the entire immunoassay family of products including the new UniCel DxIÔ and SYNCHRON LXâi systems.

•Awarded $934 million in compensatory and punitive damages as a result of a lawsuit against Flextronics International, Ltd.  The award is pending further judicial review. Since the amount of the award that the Company may ultimately receive cannot be quantified until the legal review process is complete, no gain has been recorded in the financial statements.  The Company may incur additional costs defending this award in the future which are not quantifiable at this time.

•Signed a three-year renewal agreement with AmeriNet, Inc. to provide a line of immunoassay systems, test kits, supplies and service.

•Paid a quarterly dividend of eleven cents ($0.11) per share on September 4, 2003 to all stockholders of record on August 15, 2003, the company’s 58th consecutive quarterly cash dividend and a 22% increase over prior year quarter.

•Shipped the CEQä 8800 genetic analysis system, doubling the throughput and adding sample tracking capabilities to the product line.

•Launched LH1500 series hematology automation system designed to boost lab productivity, maximize labor efficiency, reduce errors, improve operator safety and lower overall costs.

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Results of Operations

Sales were $534.8 million during the quarter ended September 30, 2003, an increase of 6.7% compared to $501.1 million during the same period in the prior year.  On a constant currency basis*, sales increased 3.4% in the third quarter of 2003.  Sales were $1,553.9 million during the nine months ended September 30, 2003, an increase of 6.1% compared to $1,463.9 million in the same period in the prior year.  Sales on a constant currency basis* increased 2.4% during the nine months ended September 30, 2003.  The following provides key product and geographical sales information (dollar amounts in millions):

KEY PRODUCT SALES (unaudited)

	Three months ended September 30,				Reported		Constant Currency
	2003		2002		Growth %		Growth % *
Routine Chemistry	$	150.3	$	143.0	5.1		2.5
Immunodiagnostics	104.5		94.0		11.2		7.3
Total Chemistry	254.8		237.0		7.5		4.4
Hematology	126.3		112.1		12.7		9.6
Total Clinical Diagnostics	381.1		349.1		9.2		6.1
Robotic Auto./Genetic Analysis	35.5		41.2		(13.8	)	(17.0	)
Centrifuge/Analytical Systems	65.4		65.7		(0.5	)	(4.3	)
Specialty Testing	52.8		45.1		17.1		11.8
Total Biomedical Research	153.7		152.0		1.1		(3.0	)
Consolidated	$	534.8	$	501.1	6.7		3.4

	Nine months ended September 30,				Reported		Constant Currency
	2003		2002		Growth %		Growth % *
Routine Chemistry	$	445.9	$	414.3	7.6		4.8
Immunodiagnostics	303.6		273.0		11.2		7.1
Total Chemistry	749.5		687.3		9.0		5.7
Hematology	353.6		331.8		6.6		3.2
Total Clinical Diagnostics	1,103.1		1,019.1		8.2		4.9
Robotic Auto./Genetic Analysis	105.6		115.0		(8.2	)	(12.5	)
Centrifuge/Analytical Systems	190.6		194.7		(2.1	)	(6.3	)
Specialty Testing	154.6		135.1		14.4		8.2
Total Biomedical Research	450.8		444.8		1.3		(3.5	)
Consolidated	$	1,553.9	$	1,463.9	6.1		2.4

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GEOGRAPHICAL SALES (unaudited)

	Three months ended September 30,				Reported	Constant Currency
	2003		2002		Growth %	Growth % *
Americas
United States	$	307.7	$	292.2	5.3	5.3
Canada and Latin America	29.9		28.3		5.7	(1.1	)
	337.6		320.5		5.3	4.7
Europe	131.0		122.5		6.9	(4.2	)
Asia	66.2		58.1		13.9	11.7
Total Beckman Coulter	$	534.8	$	501.1	6.7	3.4

	Nine months ended September 30,				Reported		Constant Currency
	2003		2002		Growth %		Growth % *
Americas
United States	$	889.6	$	854.1	4.2		4.2
Canada and Latin America	86.6		93.2		(7.1	)	(10.2	)
	976.2		947.3		3.1		2.7
Europe	394.9		352.0		12.2		(0.7	)
Asia	182.8		164.6		11.1		6.7
Total Beckman Coulter	$	1,553.9	$	1,463.9	6.1		2.4

*Constant currency growth is not a U.S. GAAP defined measure of revenue growth.  Constant currency growth as presented herein represents:

Current period constant currency sales (see below) less prior year reported sales

Prior year reported sales

We define constant currency sales as current period sales in local currency translated to U.S. dollars at the prior year’s foreign currency exchange rate.  This measure provides information on sales growth assuming that foreign currency exchange rates have not changed between the prior year and the current period.  Constant currency sales and constant currency growth as defined or presented by the Company may not be comparable to similarly titled measures reported by other companies.  Additionally, constant currency sales is not an alternative measure of revenues on a U.S. GAAP basis.

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Sales during the three and nine months ended September 30, 2003 were affected by the following:

•In the Clinical Diagnostics Division, immunodiagnostics sales grew in double digits, bolstered by placements of the new SYNCHRON LXâi combination routine chemistry and immunoassay system and UniCel DxIä immunoassay system,

•Hematology product sales were up 12.7% and 6.6% for the quarter and year to date, respectively, due to a renewed contract with a large commercial laboratory network in the U.S. and growth in product placements in Asia,

•In the Biomedical Research Division, the specialty testing product area continues to grow, up more than 17.1% and 14.4% for the quarter and year to date, respectively.  These increases were led by sales of Cytomics FC 500 Series flow cytometers,

•A strengthening of foreign currencies versus the US dollar, which is reflected in the percentages noted above,

•Continued softness in the pharmaceutical and biotechnology capital equipment markets which negatively impacted the Biomedical Research Division,

•A decline in sales in Europe, excluding the benefits of currency, that was due primarily to the timing and mix of instrument sales and the discontinuation of a product line in the current year and

•The negative $4.0 million impact of the prospective adoption of EITF 00-21 in the third quarter of 2003.  See Note 2 to the Condensed Consolidated Financial Statements for more information.

Gross profit as a percent of sales (“gross margin”) was 49.1% and 44.8% for the three months ended September 30, 2003 and 2002, respectively, a 4.3 percentage point increase.  The increase in reported gross margin was primarily due to the following:

•Favorable mix positively impacted the gross margin rate by 1.4 percentage points,

•Non-recurring items favorably impacted gross margin by 1.0 percentage points, including the impact of a charge in the third quarter of 2002 attributable to certain inventory adjustments during a system conversion and the impact of adopting EITF 00-21 prospectively in the third quarter of 2003,

•Foreign currency exchange rates favorably impacted the gross margin rate by 0.8 percentage points and

•Improved efficiencies in manufacturing and service organizations impacted the gross margin rate by 0.8 percentage points.

Gross profit as a percent of sales was 47.8% and 45.5% for the nine months ending September 30, 2003 and 2002, respectively, a 2.3 percentage point increase.  The increase in reported gross margin was primarily due to the following:

•Foreign currency exchange rates favorably impacted the gross margin rate by 0.9 percentage points,

•Favorable mix positively impacted the gross margin rate by 0.4 percentage points,

•Non-recurring items favorably impacted gross margin by 0.4 percentage points, including the impact of a charge in the third quarter of 2002 attributable to certain inventory adjustments during a system conversion and the impact of adopting EITF 00-21 prospectively in the third quarter of 2003 and

•Improved efficiencies in manufacturing and service organizations impacted the gross margin rate by 0.3 percentage points.

Selling, general and administrative (“SG&A”) expenses increased $19.6 million to $141.6 million or 26.5% of sales in the third quarter of 2003 from $122.0 million or 24.3% of sales in the third quarter of 2002.  The dollar increase was primarily due to currency, investments in marketing

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activities for new products and increased accruals under certain stock based incentive compensation programs.

SG&A expenses increased $39.4 million to $395.8 million or 25.5% of sales in the nine months ended September 30, 2003 from $356.4 million or 24.3% of sales in the nine months ended September 30, 2002.  The dollar increase was primarily due to currency and marketing related expenses associated with new products.

Research and development (“R&D”) expenses decreased $0.4 million to $47.4 million in the third quarter of 2003 from $47.8 million in the third quarter of 2002.  R&D increased $3.9 million to $141.4 million for the nine months ended September 30, 2003 from $137.5 million in the nine months ended September 30, 2002.  R&D as a percentage of sales was 8.9% and 9.5% for the three months ended September 30, 2003 and 2002, respectively, and was 9.1% and 9.4% for the nine months ended September 30, 2003 and 2002, respectively.  The strengthening of certain foreign currencies did not impact R&D, as substantially all R&D efforts are in the U.S., resulting in a decrease in R&D as a percentage of sales.

The restructure charge of $18.5 million recorded in the first quarter of 2003 represents the anticipated total cost associated with a reorganization to form the Biomedical Research Division, a refocus of international operations and a workforce reduction of nearly 300 positions worldwide.  Certain employee termination costs from the reduction will be paid through the second quarter of 2004.  See Note 3 “Restructure” of the Condensed Consolidated Financial Statements for more information.

The litigation settlement credit recorded in the first quarter of 2003 represents a non-recurring credit of $26.9 million (net of certain related legal costs of $2.0 million) associated with the settlement of an escrow account created as part of the 1997 acquisition of Coulter Corporation to cover pre-acquisition liabilities.  The credit settled all of Beckman Coulter’s claims against the escrow account, including the charge taken in the fourth quarter of 2002.

Interest expense decreased $0.7 million to $10.6 million in the third quarter of 2003 from $11.3 million in the third quarter of 2002.  Interest expense decreased $2.6 million to $31.6 for the nine months ended September 30, 2003 from $34.2 million for the nine months ended September 30, 2002.  The decreases from the prior year periods are primarily due to lower interest rates on the variable rate portion of our borrowings and lower debt balances.

Other non-operating (income)/expense was $11.5 million for the quarter ended September 30, 2003, and primarily consisted of a loss on foreign currency related activities of $11.6 million, partially offset by a gain on sales of certain receivables of $(0.5) million (see Note 7 “Sale of Assets” of the Condensed Consolidated Financial Statements).  Other non-operating (income)/expense was $5.3 million for the quarter ended September 30, 2002 and primarily consisted of a gain on the sales of certain receivables of $(1.3) million, a gain of $(1.0) million on the sale of certain intellectual property rights, a write-down of $4.0 million from a reduction in the fair value of a biotechnology equity investment and a loss on foreign currency related activities of $3.0 million.

Other non-operating (income)/expense was $16.3 million for the nine months ended September 30, 2003, and primarily consisted of a loss on foreign currency related activities of $19.4 million and write-downs of an investment in a marketable equity security and an unconsolidated investee of $2.8 million, partially offset by the gain of $(3.6) million on the sale of the assets of Laboratory Automation Operations (“LAO”) and a gain on sales of certain sales-type lease receivables of $(2.9) million (see Note 7 “Sale of Assets” of the Condensed Consolidated Financial Statements).  Other non-operating (income)/expense was $3.6 million for the nine months ended September 30, 2002 and primarily consisted of a write-down of $4.0 million from a reduction in the fair value of a biotechnology equity investment and a loss on foreign currency related activities of $2.6 million, offset by a gain on the sale of certain receivables of $(2.7) million and a gain of $(1.0) million on the sale of certain intellectual property rights.

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Income taxes as a percentage of earnings before income taxes (“effective tax rate”) were 27.0% and 19.5% for the three months ended September 30, 2003 and 2002, respectively.  The lower effective tax rate in the third quarter of 2002 was primarily due to the impact of a cumulative tax credit resulting from a reduction in the 2002 expected annual effective tax rate on income from continuing operations of three percentage points due to a number of factors, including the utilization of various tax deductions related to export sales and R&D tax credits.  The effective tax rate was 21.4% and 27% for the nine months ended September 30, 2003 and 2002, respectively.  The decrease in the effective tax rate for the nine months ended September 30, 2003 was due to the impact of certain unusual separately reported items in the first quarter of 2003, including the non-taxable credit to earnings related to the escrow account settlement and the incremental tax rate benefit of the restructure charge.  The effective tax rate on income from continuing operations is currently expected to be approximately 27% for the remainder of 2003.

Earnings were $40.0 million for the third quarter of 2003 or $0.62 per diluted share compared to earnings of $32.1 million or $0.49 per diluted share in the third quarter of 2002.  Earnings for the nine months ended September 30, 2003 were $136.8 million or $2.14 per diluted share compared to $102.0 million or $1.56 per diluted share for the nine months ended September 30, 2002.

Financial Condition

The debt-to-equity ratio has improved from 56.4% at December 31, 2002 to 47.3% at September 30, 2003.  Among other things, our debt level:

•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 portion of our cash flow from operations to interest on indebtedness and the future payments of principal.

Our agreements with our lenders contain a number of covenants, which, among other things, require us to comply with specified financial ratios and covenants.  At September 30, 2003, we were in compliance with all such financial ratios and covenants.

Cash provided by operating activities was $197.5 million in the first nine months of 2003 compared to $185.8 million in the first nine months of the prior year, an increase of $11.7 million.  The increase was primarily due to a $34.8 million increase in earnings to $136.8 million in 2003 from $102.0 million in 2002, due in part from the credit associated with the litigation settlement in the first quarter of 2003.  Also contributing to the increase in cash provided by operating activities were net changes to working capital accounts of $36.0 million for the nine months ended September 30, 2003 as compared to the same period in 2002.  Partially offsetting these increases were $62.0 million in contributions to the U.S. qualified pension plan during the first nine months of 2003, as compared to $10.0 million in contributions made during the same period in 2002, and a $6.7 million net decrease attributable to the Company’s deferred tax assets in 2003 as compared to 2002.

Investing activities used cash of $103.4 million in 2003 comparable to the prior year amount of $103.3 million.

Net cash used by financing activities was $126.9 million in 2003 compared to $55.0 million in 2002.  The increase in cash used by financing activities was primarily due to long-term debt reductions of $130.4 million in 2003 as compared to $59.7 million in 2002 primarily due to the repayment of $119.2 million in Senior Notes that matured in March 2003.  Cash used by financing activities also increased due to the repurchase of stock for $41.9 million in 2003 with no stock repurchases in the first nine months of 2002.  We paid $17.9 million and $16.3 million in dividends to our stockholders during the first nine months of 2003 and 2002, respectively.  Proceeds received from the issuance of stock were $35.9 million and $26.3 million in the first nine months of 2003 and 2002, respectively.

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In addition to the $62.0 million of year to date contributions to the Company’s U.S. pension plan noted above, the Company intends to make an additional contribution of approximately $38.0 million during the quarter ended December 31, 2003.

We have chosen to implement an ERP system to achieve a single, globally integrated infrastructure.  This includes functionality for Finance, Human Resources, Supply Chain, Order Management, Sales and Service to replace or complement existing legacy systems and business processes.  Through September 30, 2003, we have capitalized $105.3 million of costs associated with this ERP system (which includes $30.9 million of capitalized internal labor costs).  Based on our geographic rollout strategy, as of September 30, 2003, we have essentially implemented functionality for Finance, Human Resources and certain purchasing systems for our global operations.  Sales functionality has been implemented on a limited integration basis for our U.S. and Canadian operations.  We expect that the majority of the work required to implement the remaining new systems will take place through 2004.  If we are unable to implement and effectively manage the transition to these new systems, our future consolidated operating results could be adversely affected.

Based upon current levels of operations and expected future growth, we believe our cash flows from operations together with available borrowings under our credit facility which we entered into in July 2002 (see Note 7 “Debt Financing” of the December 31, 2002 Consolidated Financial Statements) and other sources of liquidity (including leases and any other available financing sources) will be adequate to meet our anticipated requirements for interest payments and other debt service obligations, working capital, capital expenditures, lease payments, pension contributions and other operating needs.  There can be no assurance, however, that our business will continue to generate cash flow at or above current levels or that estimated cost savings or growth can be achieved.  Future operating performance and our ability to service or refinance existing indebtedness will be subject to future economic conditions and to financial, business and other factors, many of which are beyond our control.

In March 1998, we issued $160.0 million of 7.10% unsecured Senior Notes due March 2003 (see further discussion in our 2002 annual report).  During the first quarter of 2003, we repaid the outstanding $119.2 million Senior Notes through our credit facility.

As of September 30, 2003 and December 31, 2002, there were no amounts outstanding on the $400.0 million credit facility.

In September 2003, we paid a quarterly cash dividend of $0.11 per share of common stock, for a total of $6.8 million.

In October 2003, the Company’s Board of Directors declared a quarterly cash dividend of $0.11 per share. This dividend is payable on November 6, 2003 to stockholders of record on October 16, 2003.  This dividend represents the 59^th consecutive quarterly dividend payout.

At September 30, 2003, there have been no material changes in the Company’s significant contractual obligations and commercial commitments as disclosed in its Annual Report on Form 10-K for the year ended December 31, 2002.

Incentive Compensation Plans

In the fourth quarter of 2003, the Company plans to issue options and/or restricted stock to certain officers and employees under the 1998 Incentive Compensation Plan (the “1998 Plan”).  We are anticipating that these incentive awards will utilize the majority of the remaining shares available for issuance under the 1998 Plan (approximately 1.4 million shares).  Accordingly, in early 2004, the Company intends to request shareholder approval to reserve up to an additional 8.0 million shares for issuance under a new incentive compensation plan.  The Company then intends to begin issuing awards under this new plan in late 2004 or early 2005.

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Critical Accounting Policies

The U.S. Securities and Exchange Commission defines critical accounting policies as those that are, in management’s view, most important to the portrayal of the company’s financial condition and results of operations and most demanding in their calls on judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods.  We are not aware of any reasonably possible events or circumstances that would result in different amounts being reported that would have a material effect on our results of operations or financial position.  We believe our most critical accounting policies relate to:

Revenue recognition, including customer leased equipment

For products, revenue is recognized when risk of loss transfers, when persuasive evidence of an arrangement exists, the price to the buyer is determinable and collectibility is reasonably assured, except when a customer enters into an operating-type lease agreement, in which case 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 on maintenance contracts are recognized ratably over the life of the service agreement or as service is performed, if not under contract. For those equipment sales that include multiple deliverables, such as installation, training, after-market supplies or service, we allocate revenue based on the relative fair values of the individual components as determined in accordance with EITF 00-21.  See Note 2 “Recent Accounting Developments” of the Condensed Consolidated Financial Statements for a discussion of the adoption impact of EITF 00-21.  Credit is extended based upon the evaluation of the customer’s financial condition and we generally do not require collateral.

Reserves for doubtful accounts

We maintain reserves for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. These reserves are determined by 1) analyzing specific customer accounts that have known or potential collection issues and 2) applying historical loss rates to the aging of the remaining accounts receivable balances.  If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional reserves may be required.

Inventory adjustments for write-down of inventories to fair value

Inventories, which include material, labor and manufacturing overhead, are valued at the lower of cost or market using the first-in, first-out (FIFO) method of determining inventory costs. Inventory schedules are regularly analyzed by finance and logistics personnel, and where necessary, provisions for excess and obsolete inventory are recorded based primarily on our estimated forecast of product demand and production requirements. A significant increase in the forecasted demand for our products could result in a short-term increase in the cost of inventory purchases while a significant decrease in forecasted demand could result in an increase in the amount of excess inventory quantities on hand requiring additional inventory write-downs.

Determination of useful lives and assessments of impairment for identifiable intangibles, including goodwill

Intangible assets with definite lives are amortized over their estimated useful lives.  Useful lives are based on the expected number of years the asset will generate revenue.

The Company accounts for goodwill and other intangible assets in accordance with SFAS No. 142 which requires that goodwill and other intangible assets that have indefinite lives not be amortized but instead be tested at least annually for impairment, or more frequently when events or change in circumstances indicate that the asset might be impaired.  For indefinite lived intangible assets, impairment is tested by comparing the carrying

23

value of the asset to the fair value of the reporting unit to which they are assigned.  For goodwill, a two-step test is used to identify the potential impairment and to measure the amount of impairment, if any.  The first step is to compare the fair value of a reporting unit with its carrying amount, including goodwill.  If the fair value of a reporting unit exceeds its carrying amount, goodwill is considered not impaired; otherwise, goodwill is impaired and the loss is measured by performing step two.  Under step two, the impairment loss is measured by comparing the implied fair value of the reporting unit with the carrying amount of goodwill.  See Note 9 “Goodwill and Other Intangible Assets” of the Condensed Consolidated Financial Statements for further discussion.

Environmental obligations

We establish provisions for exposure related to environmental matters.  Our compliance with federal, state and foreign environmental laws and regulations may require us to remove or mitigate the effects of the disposal or release of chemical substances in jurisdictions where we do business or maintain properties.  We establish reserves when such costs are probable and can be reasonably estimated. Provision amounts are estimated based on currently available information, regulatory requirements, remediation strategies, our relative share of the total remediation costs and a relevant discount rate.  Changes in these assumptions could impact our future reported results.

Legal obligations

We are involved in a number of legal proceedings that we consider to be normal for our type of business operations.  As a global company active in a wide range of life sciences activities, we may, in the normal course of our business, become involved in proceedings relating to matters such as:

•patent validity and infringement disputes related to intellectual property;

•contractual obligations; and

•employment matters.

We cannot predict with certainty the outcome of any proceedings in which we are or may become involved. An adverse decision in a lawsuit seeking damages from us could result in a monetary award to the plaintiff and, to the extent not covered by our insurance policies or third party indemnities, could significantly harm the results of our operations.  An adverse decision in a lawsuit seeking an injunction or other similar relief could significantly harm our business operations.  If we lose a case in which we seek to enforce our patent rights, we could sustain a loss of future revenue as other manufacturers begin to market products we developed. Litigation cases and claims raise difficult and complex legal issues and are subject to many uncertainties and complexities, including, but not limited to, the facts and circumstances of each particular case and claim, the jurisdiction in which each suit is brought, and differences in applicable law. Upon resolution of any pending legal matters, we may incur charges in excess of presently established provisions and related insurance or third party coverage. It is possible that our results of operations and cash flows could be materially affected by an ultimate unfavorable outcome of certain pending litigation.  Although we believe that our provisions are appropriate, and in accordance with SFAS No. 5, “Accounting for Contingencies”, changes in events or circumstances could have a material adverse effect on our financial position, profitability or liquidity.

Tax valuation allowances and obligations

We account for income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes”, which prescribes an asset and liability approach. Under the asset and liability method, deferred income taxes are recognized for the tax consequences of “temporary differences” by applying enacted statutory tax rates applicable to future years to the difference between the financial statement carrying amounts and the tax basis of existing assets and liabilities. The effect on deferred taxes of a change in tax rates is recognized in tax expenses in the period that includes the

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enactment date. We establish a valuation allowance to reduce deferred tax assets to an amount whose realization is more likely than not.  Uncertainties exist in respect to our future tax rates due to uncertainties as to the amount and timing of future taxable income and changes in enacted statutory tax rates. Differences between actual results and our assumptions, or changes in our assumptions in future periods, could result in adjustments to tax expense in future periods.

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Pension Plans

Our funding policy provides that payments to our domestic pension trusts shall at least be equal to the minimum funding requirements of the Employee Retirement Income Security Act of 1974. In accordance with SFAS No. 87, “Employers’ Accounting for Pensions”, the expected long-term rate of return on plan assets is an assumption as to the rate of return on plan assets reflecting the average rate of earnings expected on the funds invested or to be invested to provide for the benefits included in the projected benefit obligation.  We view this assumption as a long-term return assumption.  This assumption is reviewed at least annually in conjunction with the review of our pension plan investment advisors and actuaries.  We also review the plan’s historical cumulative returns.  The rate of return is dependent upon an investment strategy and the asset allocation of plan assets.  We then review the selected prospective return rate against benchmark information that we gather on other pension plans adjusting for relative size, investment strategies and funding levels.  Since this is a long-term return assumption, it is likely to change when there are long protracted trends in equity, bond and real estate markets.  While our plan’s historical return performance is no absolute predictor of future performance, it is indicative of what our plan’s rate of return could be in the future.  We believe this historical performance is a fair approximation of what our pension plan’s rate of return can achieve over a variety of market conditions.  Over the long run, given our U.S. pension plan’s current funded condition, a 0.25% decrease in the annual rate of return assumption would generate approximately $1.0 million in additional annual pension expense.  This additional expense would be allocated to all operating line items based upon the relative salaries included in each line.  Similarly, a 0.25% increase in the rate of return assumption would decrease our annual pension expense by approximately $1.0 million with similar effects to the statement of operations.  Until 2002, there had been no changes to this assumption in the previous three years because our historical cumulative U.S. pension plan rate of return had exceeded our 9.75% return rate assumption through 2001.  However, in 2002, we lowered our prospective return rate assumption to 9.00% from 9.75%.  This action was taken after our annual review of our 1) cumulative pension plan returns and 2) consultation and discussions with our pension plan investment and actuary advisors.  We believe our new rate of return assumption is reasonable based on our long term investment strategy and allocation of our plan assets, which at December 31, 2002 had an allocation as follows: 74% equities, 18% corporate bonds and 8% real estate.  We will consider reducing or increasing the rate of return in the future if sustained U.S. pension plan returns change significantly and if the market and peer pension plan information indicate a different rate is more indicative of expected long-term returns.  Pension benefits for domestic employees are based on age, years of service and compensation rate.  Assets of the plan consist principally of corporate stocks and bonds, real estate and government fixed income securities.  Non-U.S. subsidiaries have separate pension plan arrangements, which include both funded and unfunded plans.  Unfunded non-U.S. plans are accrued for, but generally not fully funded, and benefits are paid from operating funds.

We use a combination of historical results and anticipated future events to estimate and make assumptions relating to our critical accounting policies.  Actual results could differ from our estimates.

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Business Climate

The clinical diagnostics and biomedical research markets are highly competitive with many manufacturers around the world and are subject to certain business risks. In addition, these markets are impacted by global economic and political conditions. In particular, government policies regarding (1) reimbursement for health care costs and (2) the approval of and reimbursement for new therapeutics have a significant impact on investment by pharmaceutical and biotechnology companies and hospitals.  Future profitability may also be adversely affected if the relative value of the U.S. dollar strengthens against certain currencies.

Clinical Diagnostics

The clinical diagnostics market can be unfavorably impacted by economic weakness and government and healthcare cost containment initiatives in general.  The weakness in these markets as well as general economic conditions have affected the availability of funds for capital expenditures.  In the area of healthcare cost containment initiatives, the U.S. Congress is currently considering bills that contain proposed increases in the co-payments for diagnostic laboratory tests and other changes to the way these tests are reimbursed.

In addition, 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.

The continuing consolidation trend among United States healthcare providers 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.  In the United States hospital market, the primary focus of Beckman Coulter’s diagnostic business, funding is better than it has been in several years but could be impacted by current economic conditions.  In addition, as labor shortages continue to be an issue in clinical laboratories, our automated systems are helping to fill the void.

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 testing needs and more than 90% 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.

Biomedical Research

The biomedical research market has been growing in recent years as an increasing understanding of genomics, cytomics, and proteomics has begun to move from scientific research toward having a real impact on clinical therapy. However, spending in this market also continues to be affected by governmental constraints on research and development spending, especially outside the United States, and pharmaceutical/biotechnology capital investment.

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While United States supported research has been positive in recent years, it is subject to yearly approval by Congress and continued increases in funding are not guaranteed. Spending also may be negatively impacted by a prolonged recession, attempts to contain government spending in order to balance the budget and reduce deficit spending, or the need to make funds available for other programs. Even when funds are available, they may be used for other purposes. For example, while the National Institutes of Health funding was increased by 15% in 2002, funding went into infrastructure at the expense of capital equipment purchases.

Spending on research by biotechnology and pharmaceutical companies is also dependent on global economic health.  An ongoing recession can affect the number of biotechnology start-ups building laboratories and conducting research as well as the rate of research investment by biopharmaceutical companies. Pharmaceutical company research investment may also be negatively impacted by governmental intervention and regulations, including prescription drug costs, new drug approvals, switching of prescription drugs to generics, as well as industry consolidation.  We believe that a recovery in capital spending in these markets may not occur until the end of 2003 or early 2004, with the pharmaceutical market recovering before the biotechnology market.

Longer term, we continue to see tight pharmaceutical and biotechnology discovery spending.  In 2002, spending moved from drug discovery into drug development, as pharmaceutical companies focus on bringing new products to market, faster. However, we believe this move opens new opportunities for robotic automation systems and in clinical research and clinical trial applications.

Other Factors

Our new products originate from four sources:

•internal research and development programs;

•external collaborative efforts with individuals in academic institutions and technology companies;

•devices or techniques that are generated in customers’ laboratories; and

•business and technology acquisitions.

The size and growth of our markets are influenced by a number of factors, including:

•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;

•healthcare spending; and

•physician practice patterns.

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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 or extended 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, certain other factors may influence our business:

•currency fluctuations -  as approximately 43% of our revenues in 2002 were generated outside the United States, and given the recent fluctuations in foreign currencies, we may experience volatility in sales, operating income and other non-operating income and expense;

•interest rates - as approximately 42% of our debt at September 30, 2003 is under variable interest rate terms.  This percentage includes the effect of our reverse interest rate swap derivatives which change the character of the interest rate on certain of our long-term debt by effectively converting a fixed rate to a variable rate;

•general economic conditions - as the weakened global economy has pressured our customers, vendors and partners, the carrying value of various assets could be negatively impacted in future periods.  This would include, but is not limited to, the various pension plan and post-employment benefit assets and liabilities.  Assumptions are used in determining the annual expense of these costs.  Items such as the market value of plan assets, discount rates and other assumptions are based on current economic conditions.  Certain other assumptions are based upon a longer term economic view.  We review and discuss these assumptions annually as to their reasonableness with our independent actuary and investment consultants.  We believe that the assumptions we have used are reasonable.  However, these assumptions are subject to change with future economic conditions and as such our annual benefits expense may vary; and

•social, health and political events - social, health and political events, such as major political unrest or worldwide health issues such as a Severe Acute Respiratory Syndrome (SARS) epidemic, could have the potential to disrupt our business. For example, a SARS epidemic, by impacting travel and the delivery of health care, could delay completing sales presentations and the sale and installation of new systems.

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Forward-Looking Statements

This periodic report contains forward-looking statements, including statements regarding, among other items:

•the schedule for completion of our ERP program;

•anticipated benefits from restructuring activities including the consolidation of our Life Science Research and Specialty Testing Divisions into a single, Biomedical Research Division;

•anticipated effective tax rates, debt reduction, cash flow available to be applied to debt reduction and the availability of additional financing;

•our business strategy and anticipated developments in our markets;

•our liquidity requirements and capital resources, adequacy of our reserves and the effects of litigation;

•anticipated proceeds from sales of assets;

•the effects of inflation and other economic conditions on our operations;

•earnings and sales growth; and

•our plans related to our incentive compensation plans.

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:

•unanticipated delays in completing our ERP program;

•complexity and uncertainty regarding development of new high-technology products;

•loss of market share through aggressive competition in the clinical diagnostic, life science research and specialty testing markets;

•our dependence on capital spending policies and government funding;

•the effects of potential healthcare reforms;

•fluctuations in foreign exchange rates and interest rates;

•reliance on patents and other intellectual property;

•global economic and political conditions;

•unanticipated reductions in cash flows and difficulty in sales of assets;

•future effective tax rates;

•future effects of current world pandemic health issues including, but not limited to SARS; 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.

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Item 3.Quantitative and Qualitative Disclosures About Market Risk

The Securities and Exchange Commission requires that registrants include information about potential effects of changes in currency exchange and interest rates in their periodic filings.  Several alternatives, all with some limitations, have been offered.  The following discussion is based on a sensitivity analysis, which models the effects of fluctuations in currency exchange rates and interest rates.  This analysis is constrained by several factors, including the following:

•it is based on a single point in time; and

•it does not include the effects of other complex market reactions that would arise from the changes modeled.

Although the results of the analysis may be useful as a benchmark, they should not be viewed as forecasts.

Our most significant foreign currency exposures relate to the Euro, Japanese Yen, British Pound Sterling, Canadian Dollar, Mexican Peso and the Australian Dollar.  As of September 30, 2003 and December 31, 2002, the net fair value of all derivative foreign exchange contracts was a net liability of $(26.0) million and $(9.0) million, respectively.  We estimated the sensitivity of the fair value of all derivative foreign exchange contracts to a hypothetical 10% strengthening and 10% weakening of the spot exchange rates for the U.S. dollar against the foreign currencies at September 30, 2003.  The analysis showed that a 10% strengthening of the U.S. dollar would result in a gain from a fair value change of $36.7 million and a 10% weakening of the U.S. dollar would result in a loss from a fair value change of $38.6 million in these instruments.  Losses and gains on the underlying transactions being hedged would largely offset any gains and losses on the fair value of derivative contracts.  These offsetting gains and losses are not reflected in the above analysis. Significant foreign currency exposures at September 30, 2003 were not substantially different than those at December 31, 2002.

Similarly, we performed a sensitivity analysis on our variable rate debt instruments and derivatives.  A one percentage point increase or decrease in interest rates was estimated to decrease or increase the remainder of the year’s pre-tax earnings by $0.7 million based on the amount of variable rate debt outstanding at September 30, 2003.

Additional information with respect to our foreign currency and interest rate exposures are discussed in Note 4 “Derivatives” of the Condensed Consolidated Financial Statements.

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Item 4.Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.  In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As of September 30, 2003, the end of the fiscal quarter covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and the Company’s Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures.  Based on the foregoing, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective at the reasonable assurance level.

There has been no change in the Company’s internal controls over financial reporting during the company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal controls over financial reporting.

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PART II

OTHER INFORMATION

Item 1.Legal Proceedings

The Company is 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 of these lawsuits will have a material adverse effect on its results of operations, financial position or liquidity. However, the Company cannot give any assurances regarding the ultimate outcome of these lawsuits and their resolution could be material to the Company’s operating results for any particular period.

In September 2003, an Orange County, California Superior Court jury awarded the Company approximately $934 million in compensatory and punitive damages as the result of a lawsuit filed against Flextronics International, Ltd. and its U.S. subsidiary Flextronics USA, Inc., formerly known as Dovatron.  The lawsuit was filed in the second quarter of 2001 seeking damages for breach of contract and other claims.  Since the amount of damages which the Company may ultimately receive cannot be quantified until the legal review process is complete, no gain has been recorded in the financial statements for this award.

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

3.Amended and Restated Bylaws Dated July 10, 2003.

11.Statement re Computation of Per Share Earnings: This information is set forth in Note 6, “Earnings Per Share” of the Condensed Consolidated Financial Statements included in Part I herein.

15.Independent Accountants’ Review Report, October 30, 2003.

15.1Letter of Acknowledgement of Use of Report on Unaudited Interim Financial Information

31.Rule 13a-14(a)/15d-14(a) Certifications

32.Section 1350 Certifications

b)Reports on Form 8-K

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The following reports on Form 8-K were filed during the period July 1, 2003 through September 30, 2003:

Press Release “Beckman Coulter Announces Record Second Quarter 2003 Results, 22% Dividend Increase”, filed July 31, 2003.

Press Release “Beckman Coulter Announces Management Change”, filed August 6, 2003.

Press Release “Beckman Coulter Wins Jury Verdict in Breach of Contract Lawsuit”, filed September 24, 2003.

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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: October 30, 2003	By	/s/ John P. Wareham
	John P. Wareham
	Chairman of the Board, President, and Chief Executive Officer
Date: October 30, 2003	By	/s/ James T. Glover
	James T. Glover
	Vice President, Controller and Interim Chief Financial Officer

EXHIBIT INDEX

FORM 10-Q, THIRD QUARTER, 2003

Exhibit Number	Description
3.	Amended and Restated Bylaws Dated July 10, 2003.
11.	Statement re Computation of Per Share Earnings: This information is set forth in Note 6, “Earnings Per Share”, of the Condensed Consolidated Financial Statements included in Part I herein.
15.	Independent Accountants’ Review Report, October 30, 2003.
15.1	Letter of Acknowledgement of Use of Report on Unaudited Interim Financial Information
31.	Rule 13a-14(a)/15d-14(a) Certifications
32.	Section 1350 Certifications

EX-3

Exhibit 3

BECKMAN COULTER, INC.

AMENDED AND RESTATED BY-LAWS

ARTICLE I

Offices

Section 1.  REGISTERED OFFICE.  The registered office shall be National Registered Agents, Inc., 9 Loockerman Street, in the city of Dover, County of Kent, State of Delaware, 19901.

Section 2.  PRINCIPAL OFFICE.  The principal office for the transaction of the business of the corporation is hereby fixed and located at 4300 North Harbor Boulevard, Fullerton, Orange County, California.

ARTICLE II

Meetings of Stockholders

Section 1.  PLACE OF MEETINGS.  All annual meetings of stockholders shall be held at the principal office of the corporation, unless from time to time the Board of Directors, pursuant to authority hereby expressly conferred by resolution, fixes a different place where annual meetings of stockholders shall be held.

All other meetings of stockholders shall be held at the principal office or at any other place which may be designated by the Board of Directors pursuant to authority hereby expressly granted.

Section 2.  ANNUAL MEETINGS.  The annual meetings of stockholders shall be held on the first Thursday of April of each year, at 10:00 o’clock A.M. of said day or such

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other day and time as may be designated by resolution of the Board of Directors; provided, however, that should said day fall upon a legal holiday, then any such annual meeting of stockholders shall be held at the same time and place on the next day thereafter ensuing which is not a legal holiday.

At an annual meeting of stockholders, only such business shall be conducted, and only such proposals shall be acted upon, as shall have been brought before the annual meeting (a) by, or at the direction of, a majority of the Directors, or (b) by any stockholder of the corporation who complies with the notice procedures set forth in this section.  For a proposal to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the secretary of the corporation.  To be timely, a stockholder’s notice must be delivered to, or mailed and received at, the principal executive offices of the corporation not less than 60 days prior to the scheduled annual meeting, regardless of any postponements, deferrals or adjournments of that meeting to a later date; provided, however, that if less than 70 days’ notice or prior public disclosure of the date of the scheduled annual meeting is given or made, notice by the stockholder, to be timely, must be so delivered or received not later than the close of business on the tenth day following the earlier of the day on which such notice of the date of the scheduled annual meeting was mailed or the day on which such public disclosure was made.  A stockholder’s notice to the secretary shall set forth as to each matter the stockholder proposes to bring before the annual meeting (a) a brief description of the proposal desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (b) the name and address, as they appear on the corporation’s books, of the stockholder proposing such business and any other stockholders known by such

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stockholder to be supporting such proposal, (c) the class and number of shares of the corporation’s stock which are beneficially owned by the stockholder on the date of such stockholder notice and by any other stockholders known by such stockholder to be supporting such proposal on the date of such stockholder notice, and (d) any financial interest of the stockholder in such proposal.

The presiding officer of the annual meeting shall determine and declare at the annual meeting whether the stockholder proposal was made in accordance with the terms of this section.  If the presiding officer determines that a stockholder proposal was not made in accordance with the terms of this section, he shall so declare at the annual meeting and any such proposal shall not be acted upon at the annual meeting.

This provision shall not prevent the consideration and approval or disapproval at the annual meeting of reports of officers, directors and committees of the Board of Directors, but, in connection with such reports, no new business shall be acted upon at such annual meeting unless stated, filed and received as herein provided.

Section 3.  NOTICE OF MEETINGS AND ADJOURNED MEETING.  Written notice stating the place, date and hour of any meeting shall be given not fewer than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting.  If mailed, notice is given when deposited in the United States mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the corporation.

When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken.  At the adjourned meeting the corporation may transact any

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business that might have been transacted at the original meeting.  If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

Section 4.  SPECIAL MEETINGS.  Special meetings of the stockholders of the corporation for any purpose or purposes may be called at any time by the Board of Directors, the chairman of the Board of Directors or the chief executive officer of the corporation.  Special meetings of the stockholders of the corporation may not be called by any other person or persons.  Except in special cases where other express provision is made by statute, notice of such special meetings shall be given in the same manner as for annual meetings of the stockholders.  Notices of any special meetings shall specify, in addition to the place, day and hour of such meeting, the general nature of the business to be transacted.

Section 5.  VOTING; PROXIES.  The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder.  Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, at the principal place of business of the corporation.  The list also shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.

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Upon the willful neglect or refusal of the Directors to produce such a list at any meeting for the election of Directors, they shall be ineligible for election to any office at such meeting.

Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for him by proxy.  A stockholder may grant such authority by (a) executing a writing authorizing another person or persons to act for him as proxy, which execution may be accomplished by the stockholder or his authorized officer, director, employee or agent signing such writing or causing his or her signature to be affixed to such writing by any reasonable means including, but not limited to, by facsimile signature, or (b) authorizing another person or persons to act for him as proxy by transmitting or authorizing the transmission of a telegram, cablegram, or other means of electronic transmission (including without limitation by use of telephone keypad or by means of the internet) to the person who will be the holder of the proxy or to a proxy solicitation firm, proxy support service organization or like agent duly authorized by the person who will be the holder of the proxy to receive such transmission, provided that any such telegram, cablegram or other means of electronic transmission must either set forth or be submitted with information (for example, a password or other similar means) from which it can be determined that the telegram, cablegram or other electronic transmission was authorized by the stockholder, and further provided that any such electronic transmission is recorded electronically or otherwise in a manner that permits conversion of such records into clearly legible paper form within a reasonable time.  If it is determined that such telegrams, cablegrams or other electronic transmissions are valid, the inspectors or, if there are no inspectors, such other persons making that determination shall specify the information upon

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which they relied.  Any copy, facsimile telecommunication or other reliable reproduction of the writing or transmission created pursuant to the foregoing subsection (b) may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the original writing or transmission could be used, provided that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing or transmission.  Each original writing, telegram, cablegram or other means of electronic transmission, or a copy, facsimile telecommunication or other reliable reproduction thereof, shall be filed with the secretary of the corporation not later than the day on which exercised.

Except as otherwise specifically provided by law, the Certificate of Incorporation or these by-laws, the affirmative vote of the majority of shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders.  Elections of Directors need not be by written ballot.  Except as otherwise specifically provided by law, all other votes may be viva voce or by ballot.

Section 6.  QUORUM.  Except as otherwise provided by the law, the Certificate of Incorporation or these by-laws, the presence, in person or by proxy, of the holders of a majority of the outstanding shares entitled to vote shall constitute a quorum, but in no event shall a quorum consist of less than one-third (1/3) of the shares entitled to vote at a meeting.  The stockholders present at a duly organized meeting can continue to do business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum.

Section 7.  WAIVER OF NOTICE.  The transactions of any meeting of stockholders, either annual or special, however called and noticed, shall be as valid as though had at a

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meeting duly held after regular call and notice, if a quorum be present either in person or by proxy, and if, either before or after the meeting, each of the persons entitled to vote, not present in person or by proxy, signs a written waiver of notice.  Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.  All such waivers shall be filed with the corporate records or made a part of the minutes of the meeting.

Section 8.  NO ACTION WITHOUT MEETING.  Any action required or permitted to be taken at any annual or special meeting of stockholders may be taken only upon the vote of the stockholders at an annual or special meeting duly called and may not be taken by written consent of the stockholders.

ARTICLE III

Directors

Section 1.  POWERS.

(a)General Powers.  The Board of Directors shall have all powers necessary or appropriate to the management of the corporation, and, in addition to the power and authority conferred by these by-laws, may exercise all powers of the corporation and do all such lawful acts and things as are not by statute, these by-laws or the Certificate of Incorporation  directed or required to be exercised or done by the stockholders.

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(b)Specific Powers.  Without limiting the general powers conferred by the last preceding clause and the powers conferred by the Certificate of Incorporation and by-laws of the corporation, it is expressly declared that the Board of Directors shall have the following powers:

First -To select and remove all the other officers, agents and employees of the corporation, prescribe such powers and duties for them as may not be inconsistent with law, with the Certificate of Incorporation or the by-laws, fix their compensation and require from them security for faithful service.

Second -To  conduct,  manage and  control the affairs and business of the corporation, and to make such rules and regulations therefor not inconsistent with law, or with the Certificate of Incorporation or the by-laws, as they may deem best.

Third -To change the principal office for the transaction of the business of the corporation from one location to another as provided in Article I, Section 2 hereof; to designate the place and time of annual and other meetings of stockholders as provided in Article II, Section 2 and Article II, Section 4 of these by-laws; and to adopt, make and use a corporate seal, and to prescribe the forms of certificates of stock, and to alter the form of such seal and of such certificates from time to time, as in their judgment they may deem best, provided such seal and such certificates shall at all times comply with the provisions of law.

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Fourth -To authorize the issuance of shares of stock of the corporation from time to time, upon such terms as may be lawful, in consideration of cash, services rendered, personal property, real property, leases of real property, or a combination thereof, or in the case of shares issued as a dividend against amounts transferred from surplus to stated capital.

Fifth -To borrow money and incur indebtedness for the purposes of the corporation, and to cause to be executed and delivered therefor, in the corporate name, promissory notes, bonds, debentures, deeds of trust, mortgages, pledges, hypothecations or other evidences of debt and securities therefor.

Sixth -To appoint an Executive Committee and other committees, and to delegate to the Executive Committee, to the extent allowed by law, any of the powers and authority of the Board in the management of the business and affairs of the corporation.  The Board of Directors shall have the power to prescribe the manner in which proceedings of the Executive Committee and other committees shall be conducted.  The Executive Committee shall be composed of two or more Directors.  Unless the Board of Directors shall otherwise provide:  meetings of the Executive Committee may be called by the Chairman of the Board, chief executive officer, president, any Board elected Vice President who is a member of the Executive Committee, or any two members thereof, upon written notice to the members of the Executive Committee of the time and place of such meeting given in the manner provided for the giving of written

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notice to members of the Board of Directors of the time and place of special meetings of the Board of Directors; vacancies in the membership of the Executive Committee may be filled by the Board of Directors; a majority of the authorized number of members of the Executive Committee shall constitute a quorum for the transaction of business; and transactions of any meeting of the Executive Committee, however called and noticed or wherever held, after regular call and notice, if a quorum be present and if, either before or after the meeting, each of the members not present signs a written waiver of notice or a consent to holding such meeting or an approval of the minutes thereof.  All such waivers, consents or approvals shall be filed with the corporate records or made a part of the minutes of the meeting.

Section 2.  INDEFINITE NUMBER OF DIRECTORS AUTHORIZED.  The authorized number of Directors shall be not less than six nor more than twelve.  The exact number of Directors shall be fixed from time to time, within the limits specified in this section, by a resolution duly adopted by the Board of Directors.

Section 3.  ELECTION AND TERM OF OFFICE.  The Directors shall be elected at each annual meeting of the stockholders but, if any such annual meeting is not held or the Directors are not elected thereat, the Directors may be elected at any special meeting of stockholders held for that purpose.

The Directors of the corporation shall be divided into three classes, as nearly equal in number as reasonably possible, with the Directors in each class to hold office until their successors are elected and qualified.  At each annual meeting of stockholders of the

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corporation, the successors to the class of Directors whose term shall then expire shall be elected to hold office for a three year term.  If the number of Directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of Directors in each class as nearly equal as possible, and any additional Directors of any class elected to fill a vacancy resulting from an increase in such class shall hold office for a term that shall coincide with the remaining term of that class, but in no case will a decrease in the number of Directors shorten the term of any incumbent Director.  A Director shall hold office until the annual meeting for the year in which his term expires and until his successor shall be elected and shall qualify, subject, however, to prior death, resignation, retirement disqualification or removal from office.

Notwithstanding the foregoing, no person shall be elected or serve as a Director if such person is in a management position with or a director of a direct competitor of the corporation.

Notwithstanding the foregoing, whenever the holders of any one or more classes or series of Preferred Stock issued by the corporation shall have the right, voting separately by class or series, to elect Directors at an annual or special meeting of stockholders, the election, term of office, filling of vacancies and other features of such directorships shall be governed by the terms of the Certificate of Incorporation or the resolution or resolutions adopted by the Board of Directors pursuant to Paragraph 4 of the Certificate of Incorporation, and such Directors so elected shall not be divided into classes pursuant to this section unless expressly provided by such terms.

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Subject to the rights, if any, of the holders of shares of Preferred Stock then outstanding only persons who are nominated in accordance with the following procedures shall be eligible for election as Directors.  Nominations of persons for election to the Board of Directors of the corporation may be made at a meeting of stockholders by or at the direction of the Board of Directors by any nominating committee or person appointed by the board or by any stockholder of the corporation entitled to vote for the election of Directors at the meeting who complies with the notice procedures set forth in this section.  Such nominations, other than those made by or at the direction of the Board, shall be made pursuant to timely notice in writing to the secretary of the corporation.  To be timely, a stockholder’s notice must be delivered to, or mailed and received at, the principal executive offices of the corporation not less than 60 days prior to the scheduled annual meeting, regardless of any postponement, deferrals or adjournments of that meeting to a later date; provided, however, that if less than 70 days’ notice or prior public disclosure of the date of the scheduled annual meeting is given or made, notice by the stockholder, to be timely, must be so delivered or received not later than the close of business on the tenth day following the earlier of the day on which such notice of the date of the scheduled annual meeting was mailed or the day on which such public disclosure was made.  A stockholder’s notice to the secretary shall set forth (a) as to each person whom the stockholder proposes to nominate for election or reelection as a Director, (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class and number of shares of capital stock of the corporation which are beneficially owned by the person and (iv) any other information relating to the person that is required to be disclosed in solicitations for proxies for election of Directors pursuant to Regulation 14A

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under the Securities Exchange Act of 1934, as amended; and (b) as to the stockholder giving the notice (i) the name and address, as they appear on the corporation’s books, of the stockholder and (ii) the class and number of shares of the corporation’s stock which are beneficially owned by the stockholder on the date of such stockholder notice.  The corporation may require any proposed nominee to furnish such other information as may reasonably be required  by the corporation to determine the eligibility of such proposed nominee to serve as Director of the corporation.

The presiding officer of the annual meeting shall determine and declare at the annual meeting whether the nomination was made in accordance with the terms of this section.  If the presiding officer determines that a nomination was not made in accordance with the terms of this section, he shall so declare at the annual meeting and any such defective nomination shall be disregarded.

Section 4.  VACANCIES.  Newly created directorships resulting from any increase in the number of Directors or any vacancy on the Board of Directors resulting from death, resignation, disqualification, removal or other cause shall be filled solely by the affirmative vote of a majority of the remaining Directors then in office, even though less than a quorum, or by a sole remaining Director.  Any Director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the class of Directors in which the new directorship was created or the vacancy occurred and until such Director’s successor shall have been elected and qualified.  No decrease in the number of Directors constituting the Board of Directors shall shorten the term of any incumbent Director.

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Section 5.  PLACE OF MEETING.  Regular meetings of the Board of Directors shall be held at any place within or without the State of Delaware as a majority of the Directors from time to time may designate or by written consent of all members of the Board.  In the absence of such designation regular meetings shall be held at the principal office for the transaction of business of the corporation.  Special meetings of the Board may be held either at a place so designated or at the principal office.

Section 6.  ORGANIZATION MEETING.  Immediately following each annual meeting of the stockholders the Board of Directors shall hold a regular meeting for the purpose of organization, election of officers, and the transaction of other business.  Notice of such organizational meetings is hereby dispensed with.

Section 7.  MEETINGS.  Meetings of the Board of Directors for any purpose or purposes shall be called at any time by the chairman of the Board, chief executive officer or the president or, if the chief executive officer and president are absent or unable or refuse to act, by any Board elected vice president or by any two Directors.

Written notice of the time and place of meetings shall be delivered personally to each Director or sent to each Director by mail, e-mail, facsimile, or by other form of written communication, charges prepaid, addressed to him at his address as it is shown upon the records of the corporation or, if it is not so shown on such records or is not readily ascertainable, at the place in which the meetings of the Directors are regularly held.  In case such notice is mailed or telegraphed, it shall be deposited in the United States mail or delivered to the telegraph company in the place in which the principal office of the corporation is located at least forty-eight (48) hours prior to the time of the holding of the meeting.  In case such notice is delivered personally as above provided, it shall be so

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delivered at least twenty-four (24) hours prior to the time of the holding of the meeting.  Such mailing, telegraphing or delivery as above provided shall be due, legal and personal notice to such Director.

Section 8.  NOTICE OF ADJOURNMENT.  Notice of the time and place of holding an adjourned meeting need not be given to absent Directors if the time and place be fixed at the meeting adjourned.

Section 9.  CONSENT OF ABSENTEES; WAIVER OF NOTICE.  The transactions of any meeting of the Board of Directors, however called and noticed or wherever held, shall be as valid as though had at a meeting duly held after regular call and notice, if a quorum be present and if, either before or after the meeting, each of the Directors not present signs a written waiver of notice or a consent to holding such meeting or an approval of the minutes thereof.  Attendance of a Director at a meeting shall constitute a waiver of notice of such meeting, except when the Director attends  meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.  All such waivers, consents or approvals shall be filed with the corporate records or made a part of the minutes of the meeting.

Section 9.1  ACTION WITHOUT A MEETING.  Any action required or permitted to be taken by the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of the Board or committee, as the case may be, individually or collectively consent in writing to such action.  Such written consent or consents shall be filed with the minutes of the proceedings of the Board or committee.  Such action by written consent shall have the same force and effect as a unanimous vote of the Directors.

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Section 10.  QUORUM.  A majority of the total number of Directors shall be necessary to constitute a quorum for the transaction of business, except to adjourn as hereinafter provided.  Every act or decision done or made by a majority of the Directors present at a meeting duly held at which a quorum is present shall be regarded as the act of the Board of Directors, unless a greater number be required by law or by the Certificate of Incorporation.

Section 11.  ADJOURNMENT.  A quorum of the Directors may adjourn any Directors’ meeting to meet again at a stated day and hour; provided, however, that in the absence of a quorum a majority of the Directors present at any Directors’ meeting, either regular or special, may adjourn from time to time until the time fixed for the next regular meeting of the Board.

Section 12.  FEES AND COMPENSATION.  Directors and members of committees may receive such compensation, if any, for their services, and such reimbursement for expenses, as may be fixed or determined by resolution of the Board.

Section 13.  REMOVAL OF DIRECTORS BY STOCKHOLDERS.  Subject to the rights, if any, of the holders of shares of Preferred Stock then outstanding, any or all of the Directors of the corporation may be removed from office by the stockholders at any annual or special meeting of stockholders of the corporation, the notice of which shall state that the removal of a Director or Directors is among the purposes of the meeting, but only for cause, by the affirmative vote of at least 66-2/3% of the outstanding shares of Common Stock of the corporation.

Section 14.  RESIGNATIONS.  Any Director may resign at any time by submitting his written resignation to the corporation.  Such resignation shall take effect at the time of its

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receipt by the corporation unless another time be fixed in the resignation, in which case it shall become effective at the time so fixed.  The acceptance of a resignation shall not be required to make it effective.

Section 15.  PARTICIPATION BY CONFERENCE TELEPHONE.  Directors may participate in regular or special meetings of the Board by telephone or similar communications equipment by means of which all other persons at the meeting can hear each other, and such participation shall constitute presence in person at the meeting.

Section 16.  AGE LIMITATION.  A person shall not hold office as a director following the annual meeting of stockholders held on or after the date of such person’s 72nd birthday.

ARTICLE IV

Officers

Section 1.  OFFICERS.  The officers of the corporation shall be a chief executive officer, a president, a vice president, a secretary and a treasurer.  The corporation may also have, at the discretion of the Board of Directors, a chairman of the Board, one or more additional vice presidents, one or more assistant secretaries, one or more assistant treasurers, and such other officers as may be appointed in accordance with the provisions of Section 3 of this Article.  One person may hold two or more offices except that the secretary shall not be the same person as the chief executive officer or the president.

Section 2.  ELECTION.  The officers of the corporation, except such officers as may be appointed in accordance with the provisions of Section 3 or Section 5 of this Article IV, shall be chosen annually by the Board of Directors, and each shall hold his office until he

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shall resign or shall be removed or otherwise disqualified to serve, or his successor shall be elected and qualified.

Section 3.  SUBORDINATE OFFICERS, ETC.  The Board of Directors may appoint such other officers as the business of the corporation require, each of whom shall hold office for such period, shall have such authority and shall perform such duties as are provided in the by-laws or as the Board of Directors may from time to time determine.

Section 4.  REMOVAL AND RESIGNATION.  Any officer may be removed either with or without cause, by the Board of Directors, at any regular or special meeting thereof, or, except in the case of an officer chosen by the Board of Directors pursuant to Section 2 of this Article IV, by any officer upon whom such power of removal may be conferred by the Board of Directors.

Any officer may resign at any time by giving written notice to the Board of Directors, the Chairman of the Board, the chief executive officer, the president, or the secretary of the corporation.  Any such resignation shall take effect at the date of the receipt of such notice or at any later time specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

Section 5.  VACANCIES.  A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled in the manner prescribed in the by-laws for regular appointments to such office.

Section 6.  DELEGATION OF OFFICE.  The Board of Directors may delegate the powers or duties of any officer of the corporation to any other officer or to any Director from time to time.

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Section 7.  CHAIRMAN OF THE BOARD.  The Chairman of the Board, if there shall be such an officer, shall, if present, preside at all meetings of the Board of Directors and exercise and perform such other powers and duties as may be from time to time assigned to him by the Board of Directors or prescribed by the by-laws.

Section 8.  CHIEF EXECUTIVE OFFICER.  Subject to such supervisory powers, if any, as may be given by the Board of Directors to the Chairman of the Board, if there be such an officer, the chief executive officer of the corporation shall, subject to the control of the Board of Directors, have general supervision, direction and control of the business and officers of the corporation.  He shall preside at all meetings of the stockholders and, in the absence of the Chairman of the Board, or if there be none, at all meetings of the Board of Directors.  He shall have the general powers and duties of management usually vested in the office of chief executive officer of a corporation, and shall have such other powers and duties as may be prescribed by the Board of Directors or the by-laws.

Section 9.  PRESIDENT.  The president shall be the chief operating officer of the corporation next in authority to the Chairman of the Board and the chief executive officer both of whom he shall assist in the management of the business of the corporation and the implementation of orders and resolutions of the Board of Directors.  In the absence of the Chairman of the Board and the chief executive officer, he shall preside at all meetings of the shareholders and of the Board of Directors and shall exercise all other powers and perform all other duties of the chairman of the Board of Directors and the chief executive officer; and he shall perform such other duties as the Board of Directors may from time to time prescribe.

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Section 10.  DIVISION PRESIDENTS.In the absence or disability of the chief executive officer, the president or the chief operating officer, the most senior of the board elected division presidents in order of their rank as fixed by the Board of Directors or, if not ranked, the division president designated by the Board of Directors, shall perform all the duties of the chief executive officer, and when so acting shall have all the powers of, and be subject to all the restrictions upon, the chief executive officer.  The Board elected division presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the Board of Directors or the by-laws.

Section 11.  VICE PRESIDENTS.  In the absence or disability of the chief executive officer, the president, the chief operating officer or the division presidents, the most senior of the board elected vice presidents in order of their rank as fixed by the Board of Directors or, if not ranked, the vice president designated by the Board of Directors, shall perform all the duties of the chief executive officer, and when so acting shall have all the powers of, and be subject to all the restrictions upon, the chief executive officer.  The Board elected vice presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the Board of Directors or the by-laws.

Section 12.  SECRETARY.  The secretary shall keep or cause to be kept, at the principal office or such other place as the Board of Directors may order, a book of minutes of all meetings of Directors and stockholders, with the time and place of holding, whether regular or special, and, if special, how authorized, the notice thereof given, the names of those present at Directors’ meetings, the number of shares present or represented at stockholders’ meetings, and the proceedings thereof.

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The secretary shall keep, or cause to be kept, at the principal office or at the office of the corporation’s transfer agent, a share register, or a duplicate share register, showing the names of the stockholders and their addresses, the number and classes of shares held by each, the number and date of certificates issued for the same, and the number and date of cancellation of every certificate surrendered for cancellation.

The secretary shall give, or cause to be given, notice of all the meetings of the stockholders and of the Board of Directors required by the by-laws or by law to be given, and he shall keep the seal of the corporation in safe custody, and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or by the by-laws.

Section 13.  TREASURER.  The treasurer shall keep and maintain, or cause to be kept and maintained, adequate and correct accounts of the properties and business transactions of the corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, surplus and shares.  Any surplus, including earned surplus, paid-in surplus and surplus arising from a reduction of stated capital, shall be classified according to source and shown in a separate account.  The books of account shall at all reasonable times be open to inspection by any Director.

The treasurer shall deposit all moneys and other valuables in the name and to the credit of the corporation with such depositories as may be designated by the Board of Directors.  He shall disburse the funds of the corporation, shall render to the chief executive officer, the president and Directors, whenever they request it, an account of all of his transactions as treasurer and of the financial condition of the corporation, and shall have

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such other powers and perform such other duties as may be prescribed by the Board of Directors or the by-laws.

ARTICLE V

Miscellaneous

Section l.  RECORD DATE.  The Board of Directors may fix, in advance, a record date to determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action.  Such date shall be not more than sixty (60) nor fewer than ten (10) days before the date of any such meeting, nor more than sixty (60) days prior to any other action.

If no record date is fixed, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held.

The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, the Board of Directors may fix a new record date for the adjourned meeting.

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Section 2.  ANNUAL REPORTS.  The Board of Directors of the corporation may cause to be sent to the stockholders, not later than one hundred twenty (120) days after the close of the fiscal or calendar year, an annual report in such form as may be deemed appropriate by the Board of Directors.

Section 3.  CERTIFICATES OF STOCK.  A certificate or certificates for shares of the capital stock of the corporation shall be issued to each stockholder when any such shares are fully paid up.  All such certificates shall be signed by the chairman of the board, chief executive officer, president or a Board elected division president or vice president and the secretary or an assistant secretary, or be authenticated by facsimiles of the signatures of the chairman of the board, chief executive officer, president and secretary or by a facsimile of the signature of the president and the written signature of the secretary or an assistant secretary.  Every certificate authenticated by a facsimile of a signature must be countersigned by a transfer agent or transfer clerk, and be registered by an incorporated bank or trust company, either domestic or foreign, as registrar of transfers, before issuance.

Section 4.  REPRESENTATIONS OF SHARES OF OTHER CORPORATIONS.  The chief executive officer or president or any Board elected vice president and the secretary or assistant secretary of this corporation are authorized to vote, represent and exercise on behalf of this corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of this corporation.  The authority herein granted to said officers to vote or represent on behalf of this corporation any and all shares held by this corporation in any other corporation or corporations may be exercised either by such officers in person or by any other person authorized so to do by proxy or power of attorney duly executed by said officers.

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Section 5.  INSPECTION OF BY-LAWS.  The corporation shall keep in its principal office for the transaction of business the original or a copy of the by-laws as amended or otherwise altered to date, certified by the secretary, which shall be open to inspection by the stockholders at all reasonable times during office hours.

Section 6.  TRANSFER OF SHARES.  Transfer of shares shall be made on the books of the corporation only upon surrender of the share certificate, fully endorsed and otherwise in proper form for transfer, which certificate shall be canceled at the time of the transfer.  No transfer of shares shall be made on the books of this corporation if such transfer is in violation of a lawful restriction noted conspicuously on the certificate.

Section 7.  LOST, STOLEN OR DESTROYED SHARE CERTIFICATES.  The corporation may issue a new certificate of stock or uncertificated shares in place of any certificate previously issued by it, alleged to have been lost, stolen or destroyed, and the corporation may require the owner of the lost, stolen, or destroyed certificate, or his legal representative, to give the corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares.

Section 8.  CONSTRUCTION AND DEFINITIONS.   Unless the context otherwise requires, the general provisions, rules of construction and definitions contained in the General Corporation Law of the State of Delaware shall govern the construction of these by-laws.  Without limiting the generality of the foregoing the masculine gender includes the feminine and neuter, the singular number includes the  plural and the plural number includes the singular, and the term “person” includes a corporation as well as a natural person.

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ARTICLE VI

Seal

The form of the seal of the corporation, called the corporate seal of the corporation, shall be as impressed adjacent hereto. [Form of Seal]

ARTICLE VII

Fiscal Year

The fiscal year of the corporation shall begin on January 1 and end on December 31.

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ARTICLE VIII

Indemnification of Directors and Officers and Other Persons

Section 1.  INDEMNIFICATION.  Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative, (hereinafter a “proceeding”), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a Director or officer of the corporation or is or was serving at the request of the corporation as a Director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a Director, officer, employee or agent or in any other capacity while serving as a Director, officer, employee or agent, shall be indemnified and held harmless by the corporation to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than said law permitted the corporation to provide prior  to such amendment), against all expense, liability and loss (including attorneys’ fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a Director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that, except as provided in Section 2 of this Article VIII, the corporation shall indemnify any such person

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seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board of Directors of the corporation.  The right to indemnification conferred in this Article VIII shall be a contract right and shall include the right to be paid by the corporation the expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that, if the Delaware General Corporation Law requires, the payment of such expenses incurred by a Director or officer in his or her capacity as a Director or officer (and not in any other capacity in which service was or is rendered by such person while a Director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made upon delivery to the corporation of an undertaking, by or on behalf of such Director or officer, to repay all amounts so advanced if it shall  ultimately be determined that such Director or officer is not entitled to be indemnified under this Article VIII or otherwise.  The right to indemnification conferred in this Article VIII shall include any claim made against the lawful spouse (whether such status is derived by reason of statutory law, common law or otherwise of any applicable jurisdiction in the world) of a Director or officer for claims arising solely out of his or her capacity as the spouse of a Director or officer, including such claims that seek damages recoverable from marital community property, property jointly held by the Director or officer and the spouse, or property transferred from the Director or officer to the spouse; provided, however, that this right shall not include any claim for any actual or alleged Wrongful Act of the spouse and that this right of indemnification shall apply only to actual or alleged Wrongful Acts of a Director or officer.  The corporation may, by action of its Board of

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Directors, provide indemnification to employees and agents of the corporation with the same scope and effect as the foregoing indemnification of Directors  and officers.

Section 2.  CLAIM FOR INDEMNIFICATION.  If a claim under Section 1 of this Article VIII is not paid in full by the corporation within thirty days after a written claim has been received by the corporation, the claimant may at any time thereafter bring suit against the corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim.  It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the corporation) that the claimant has not met the standards of conduct which make it permissible under the Delaware General Corporation Law for the corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the corporation.  Neither the failure of the corporation (including its Board of Directors, independent legal counsel or its  stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable  standard of conduct.

Section 3.  RIGHT NOT EXCLUSIVE.  The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred

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in this Article VIII shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, by-law, agreement, vote of stockholders or disinterested Directors or otherwise.

Section 4.  INSURANCE.  The corporation may maintain insurance, at its expense, to protect itself and any Director, officer, employee or agent of the corporation or another corporation, partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the corporation would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law.

ARTICLE IX

Amendments

Section 1.  AMENDMENTS.

(a)By Stockholders.  These by-laws may be amended or repealed in whole or in part, and new or additional by-laws may be adopted, by the vote of stockholders entitled to exercise a majority of the voting power of the corporation, except that the vote of stockholders holding more than eighty percent (80%) of the voting power shall be necessary to reduce the authorized number of Directors below five.

(b)By the Board of Directors.  If the Certificate of Incorporation so provides, these by-laws may be adopted, amended, or repealed by the Board of Directors, provided, however, that no alteration, amendment or repeal of these by-laws that limits indemnification rights or changes the manner or vote required to make such alteration, amendment or repeal, shall be made except by the affirmative vote of

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stockholders entitled to exercise a majority of the voting power of the corporation.  The fact that the power has been so conferred upon the Board of Directors to adopt, amend or repeal these by-laws shall not divest the stockholders of the power nor limit their power to adopt, amend or repeal by-laws.

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EX-15

Exhibit 15

KPMG LLP

Plaza Tower

600 Anton Blvd.

Costa Mesa, CA 92626

Independent Accountants’ Review Report

The Stockholders and Board of Directors

Beckman Coulter, Inc.:

We have reviewed the condensed consolidated balance sheet of Beckman Coulter, Inc. and subsidiaries as of September 30, 2003, the related condensed consolidated statements of operations for the three-month and nine-month periods ended September 30, 2003 and 2002, and the condensed consolidated statements of cash flows for the nine-month periods ended September 30, 2003 and 2002.  These condensed consolidated financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants.  A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters.  It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the financial statements taken as a whole.  Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet of Beckman Coulter, Inc. and subsidiaries as of December 31, 2002, and the related consolidated statements of operations, stockholders’ equity and cash flows for the year then ended (not presented herein); and in our report dated January 24, 2003, we expressed an unqualified opinion on those consolidated financial statements.  In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2002, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

	/s/ KPMG LLP
Orange County, California
October 30, 2003

EX-15.1

Exhibit 15.1

October 30, 2003

Beckman Coulter, Inc.

4300 N. Harbor Boulevard

Fullerton, CA 92834-3100

Re:   Registration Statement No. 333-100904, 333-24851, 333-37429, 33-31573, 33-41519, 33-51506, 33-66990, 33-66988, 333-69291, 333-59099, 333-69249, 333-69251, 333-72896 and 333-72892

With respect to the subject registration statements, we acknowledge our awareness of the use therein of our report dated October 30, 2003 related to our review of interim financial information.

Pursuant to Rule 436 under the Securities Act of 1933 (the “Act”), such report is not considered part of a registration statement prepared or certified by an accountant, or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of the Act.

/s/ KPMG LLP

Orange County, California

EX-31

Exhibit 31

RULE 13A-14(A)/15D-14(A) CERTIFICATIONS

PRINCIPAL EXECUTIVE OFFICER

I, John P. Wareham, certify that:

1)I have reviewed this quarterly report on Form 10-Q for the period ended September 30, 2003 of Beckman Coulter, Inc.;

2)Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3)Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4)The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5)The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 30, 2003
By	/s/ John P. Wareham
Chairman of the Board, President and Chief Executive Officer

RULE 13A-14(A)/15D-14(A) CERTIFICATIONS

PRINCIPAL FINANCIAL OFFICER

I, James T. Glover, certify that:

1)I have reviewed this quarterly report on Form 10-Q for the period ended September 30, 2003 of Beckman Coulter, Inc.;

2)Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3)Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4)The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5)The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 30, 2003
By	/s/ James T. Glover
Vice President, Controller and Interim Chief Financial Officer

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EX-32

Exhibit 32

SECTION 1350 CERTIFICATIONS

PRINCIPAL EXECUTIVE OFFICER

Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Beckman Coulter, Inc. (the “Company”) hereby certifies, to such officer’s knowledge, that:

(i)  the accompanying Quarterly Report on Form 10-Q of the Company for the period ended September 30, 2003 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(ii)  the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: October 30, 2003
By	/s/ John P. Wareham
Chairman of the Board, President and Chief Executive Officer

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

SECTION 1350 CERTIFICATIONS

PRINCIPAL FINANCIAL OFFICER

Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Beckman Coulter, Inc. (the “Company”) hereby certifies, to such officer’s knowledge, that:

(i)  the accompanying Quarterly Report on Form 10-Q of the Company for the period ended September 30, 2003 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(ii)  the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: October 30, 2003
By	/s/ James T. Glover
Vice President, Controller and Interim Chief Financial Officer

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

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