0001104659-04-033380.txt : 20041104 0001104659-04-033380.hdr.sgml : 20041104 20041103193141 ACCESSION NUMBER: 0001104659-04-033380 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20040930 FILED AS OF DATE: 20041104 DATE AS OF CHANGE: 20041103 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BECKMAN COULTER INC CENTRAL INDEX KEY: 0000840467 STANDARD INDUSTRIAL CLASSIFICATION: LABORATORY ANALYTICAL INSTRUMENTS [3826] IRS NUMBER: 951040600 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10109 FILM NUMBER: 041117711 BUSINESS ADDRESS: STREET 1: 4300 N HARBOR BLVD STREET 2: PO BOX 3100 CITY: FULLERTON STATE: CA ZIP: 92834-3100 BUSINESS PHONE: 7147736907 MAIL ADDRESS: STREET 1: 4300 N HARBOR BLVD STREET 2: PO BOX 3100 CITY: FULLERTON STATE: CA ZIP: 92834-3100 FORMER COMPANY: FORMER CONFORMED NAME: BECKMAN INSTRUMENTS INC DATE OF NAME CHANGE: 19920703 10-Q 1 a04-12398_110q.htm 10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2004

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 or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
4300 N. Harbor Boulevard, Fullerton, California	92834-3100
(Address of principal executive offices)	(Zip Code)

(714) 871-4848

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o.

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

The number of outstanding shares of the registrant’s common stock as of October 22, 2004 was 60,795,563 shares.

BECKMAN COULTER, INC.

FORM 10-Q
For the quarterly period ended September 30, 2004

Table of Contents

Part I. Financial Information
Item 1.	Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4.	Controls and Procedures	26
Part II. Other Information
Item 1.	Legal Proceedings	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 6.	Exhibits	28

Part I. Financial Information

Item 1. Financial Statements

BECKMAN COULTER, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, except amounts per share)

	September 30, 2004				December 31, 2003
	(unaudited)
Assets
Current assets:
Cash and cash equivalents		$	31.3			$	74.6
Trade and other receivables, net		548.1				580.0
Inventories		478.9				389.0
Other current assets		97.1				89.0
Total current assets		1,155.4				1,132.6
Property, plant and equipment, net		418.4				398.9
Goodwill		392.4				388.8
Other intangibles, net		324.0				323.4
Other assets		353.7				285.9
Total assets		$	2,643.9			$	2,529.6
Liabilities and Stockholders’ Equity
Current liabilities:
Notes payable and current maturities of long-term debt		$	109.7			$	39.3
Accounts payable, accrued expenses and other liabilities		422.4				456.2
Income taxes payable		74.2				54.1
Total current liabilities		606.3				549.6
Long-term debt, less current maturities		613.2				625.6
Deferred income taxes		151.0				151.9
Other liabilities		300.2				304.8
Total liabilities		1,670.7				1,631.9
Commitments and contingencies (Note 11)
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 66.1 and 64.7 at September 30, 2004 and December 31, 2003, respectively; shares outstanding 60.8 and 61.9 at September 30, 2004 and December 31, 2003, respectively		6.6				6.5
Additional paid-in capital		385.0				327.5
Retained earnings		768.4				639.9
Accumulated other comprehensive income (loss):
Cumulative foreign currency translation adjustment		44.8				34.6
Derivatives qualifying as hedges		(8.2		)		(25.0		)
Minimum pension liability adjustment		(2.5		)		(2.5		)
Treasury stock, at cost: 5.0 and 2.5 common shares at September 30, 2004 and December 31, 2003, respectively		(218.6		)		(80.2		)
Unearned compensation		(2.3		)		(3.1		)
Common stock held in grantor trust, at cost: 0.3 common shares at September 30, 2004 and December 31, 2003		(15.2		)		(14.1		)
Grantor trust liability		15.2				14.1
Total stockholders’ equity		973.2				897.7
Total liabilities and stockholders’ equity		$	2,643.9			$	2,529.6

See accompanying notes to condensed consolidated financial statements.

BECKMAN COULTER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except amounts per share and share data)
(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2004			2003			2004			2003
Sales	$	581.2		$	534.8		$	1,715.3		$	1,553.9
Cost of sales	301.5			272.0			894.4			810.6
Gross profit	279.7			262.8			820.9			743.3
Operating costs and expenses:
Selling, general and administrative	148.1			142.5			432.9			397.8
Research and development	51.5			46.5			146.2			139.4
Restructure (credit) charge	(0.3		)	—			(0.7		)	18.5
Litigation settlement and related expenses	—			—			—			(26.9		)
Total operating costs and expenses	199.3			189.0			578.4			528.8
Operating income	80.4			73.8			242.5			214.5
Non-operating (income) and expenses:
Interest income	(3.4		)	(3.1		)	(9.3		)	(7.4		)
Interest expense	9.1			10.6			25.7			31.6
Other, net	7.4			11.5			28.4			16.3
Total non-operating expenses	13.1			19.0			44.8			40.5
Earnings before income taxes	67.3			54.8			197.7			174.0
Income taxes	10.1			14.8			46.6			37.2
Net earnings	$	57.2		$	40.0		$	151.1		$	136.8
Basic earnings per share	$	0.93		$	0.65		$	2.45		$	2.24
Diluted earnings per share	$	0.87		$	0.62		$	2.30		$	2.14
Weighted average number of shares outstanding (in thousands):
Basic	61,392			61,218			61,711			60,992
Diluted	65,413			64,822			65,790			64,054
Dividends declared per share	$	0.13		$	0.11		$	0.35		$	0.29

See accompanying notes to condensed consolidated financial statements.

BECKMAN COULTER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(Unaudited)

	Nine Months Ended September 30,
	2004			2003
Net Cash Provided By Operating Activities	$	131.5		$	197.5
Cash Flows from Investing Activities:
Additions to property, plant and equipment	(106.6		)	(95.4		)
Payments for business acquisitions and technology licenses	(8.3		)	(8.0		)
Net cash used in investing activities	(114.9		)	(103.4		)
Cash Flows from Financing Activities:
Dividends to stockholders	(22.6		)	(17.9		)
Proceeds from issuance of stock	45.6			35.9
Proceeds from stock purchase plan	2.7			2.4
Repurchases of common stock for treasury	(138.3		)	(41.9		)
(Repurchases of) proceeds from common stock held in grantor trust	(1.1		)	0.2
Notes payable borrowings, net	59.8			24.8
Long-term debt reductions	(8.1		)	(130.4		)
Net cash used in financing activities	(62.0		)	(126.9		)
Effect of exchange rates on cash and cash equivalents	2.1			6.2
Decrease in cash and cash equivalents	(43.3		)	(26.6		)
Cash and cash equivalents—beginning of period	74.6			91.4
Cash and cash equivalents—end of period	$	31.3		$	64.8

See accompanying notes to condensed consolidated financial statements.

BECKMAN COULTER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(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.

Certain Company Subsidiaries outside of the United States are included in the consolidated financial statements on the basis of fiscal years ending November 30 (and a current quarter ending August 31, 2004) in order to facilitate timely consolidation. This one-month reporting lag will be eliminated as of the beginning of 2005 for these international subsidiaries. The December 2004 results of operations for these entities which have historically been reported in the first quarter of the new year, will be recorded as an adjustment to retained earnings on January 1, 2005. Both fiscal years ending December 31, 2004 and 2005 will have twelve months of operating results.

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, 2003.

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

On May 19, 2004, the FASB issued FASB Staff Position (“FSP”) No. FAS 106-2, “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003.” This FSP provides guidance on the accounting for the effects of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 for employers that sponsor postretirement health care plans that provide prescription drug benefits. The Company adopted FSP FAS 106-2 on a prospective basis effective July 1, 2004. See Note 10 “Retirement Benefits” for more information.

3. Provision for Restructuring Operations

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 reorganization 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 represented 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.

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 Sheets (in millions):

	Initial Accrual			Cash Payments in 2003				Balance at December 31, 2003			Cash Payments in 2004				Adjustments				Balance at September 30, 2004
Employee termination		$	17.5		$	(14.1	)		$	3.4		$	(2.7	)		$	(0.7	)		$	—
Other		1.0			(1.0		)		—			—				—				—
Total		$	18.5		$	(15.1	)		$	3.4		$	(2.7	)		$	(0.7	)		$	—

In the nine months ended September 30, 2004, approximately $0.7 million of the restructure accrual was reversed, as it was determined that these amounts were not going to be utilized.

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 44% of its revenues in 2003 from sales made outside the United States through its international subsidiaries. Sales generated by 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 the Company’s intercompany sales to its 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 and no cash flow or fair value hedges were discontinued in the three and nine months ended September 30, 2004 and 2003.

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 $13.4 million ($8.0 million after taxes) of the $13.7 million ($8.2 million after taxes) of unrealized loss included in accumulated other comprehensive income at September 30, 2004 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, 2004 which settle as late as December 2005.

Interest Rate

The Company uses interest rate swap agreements to hedge fluctuating interest rates on its Senior Notes due in 2011. 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 the Company receives an average fixed interest rate of 5.7%, and pays a floating interest rate based on the LIBOR (1.7% at September 30, 2004). These reverse interest rate swaps have been designated as fair value hedges and have been deemed perfectly effective. In September 2004, the Company terminated one of these reverse interest rate swap contracts with a notional value of $95.0 million, resulting in a deferred gain of $9.5 million. This amount will be amortized over the remaining original term of the Senior Note through November 2011. At September 30, 2004, the fair value of the remaining reverse interest rate swap, with a notional amount of $140.0 million, was $13.3 million and is included in other long-term assets. An offsetting $13.3 million credit is included in long-term debt as a fair value adjustment.

5. Comprehensive Income

The reconciliation of net income to comprehensive income is as follows (in millions):

	Three Months Ended September 30,								Nine Months Ended September 30,
	2004				2003				2004			2003
Net earnings		$	57.2			$	40.0		$	151.1		$	136.8
Foreign currency translation adjustment		(2.1		)		(31.9		)	10.2			35.6
Derivatives qualifying as hedges:
Net derivative gains (losses), net of income taxes of $0.8 and $0.2 for the three and nine months ended September 30, 2004, respectively, and $3.7 and $15.5 for the three and nine months ended September 30, 2003, respectively		(1.1		)		(5.6		)	(0.3		)	(23.3		)
Reclassifications to non-operating income, net of income taxes of $3.2 and $11.4 for the three and nine months ended September 30, 2004, respectively, and $4.2 and $8.8 for the three and nine months ended September 30, 2003, respectively		4.8				6.4			17.1			13.3
		3.7				0.8			16.8			(10.0		)
Comprehensive income		$	58.8			$	8.9		$	178.1		$	162.4

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,
	2004								2003
	Net Earnings			Shares	Per Share Amount				Net Earnings			Shares	Per Share Amount
Basic EPS:
Net earnings		$	57.2	61.392		$	0.93			$	40.0	61.218		$	0.65
Effect of dilutive stock options		—		4.021		(0.06		)		—		3.604		(0.03		)
Diluted EPS:
Net earnings		$	57.2	65.413		$	0.87			$	40.0	64.822		$	0.62

	Nine Months Ended September 30,
	2004								2003
	Net Earnings			Shares	Per Share Amount				Net Earnings			Shares	Per Share Amount
Basic EPS:
Net earnings		$	151.1	61.711		$	2.45			$	136.8	60.992		$	2.24
Effect of dilutive stock options		—		4.079		(0.15		)		—		3.062		(0.10		)
Diluted EPS:
Net earnings		$	151.1	65.790		$	2.30			$	136.8	64.054		$	2.14

For the three and nine months ended September 30, 2004, there were no shares relating to the possible exercise of outstanding stock options excluded from the computation of diluted EPS. 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.

7. Sale of Assets

The Company sold certain receivables (“Receivables”) during the nine months ended September 30, 2004, primarily in Japan. In 2003, the receivables sold were primarily in Japan and the U.S. During the nine month period ended September 30, 2004, the net book value of financial assets sold was $59.0 million for which the Company received approximately $58.8 million in cash proceeds. During the nine months ended September 30, 2003, the Company sold Receivables with a net book value of $81.5 million for cash proceeds of approximately $84.4 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 sale of Receivables in 2003 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 these sold Receivables and amortizes this amount to income over the remaining life of the service period. At September 30, 2004 and December 31, 2003, there was $0.9 million and $1.1 million, respectively of deferred service fees included in accrued liabilities on the Condensed Consolidated Balance Sheets. For the three months ended September 30, 2004 and 2003, there was $0.1 million and $0.1 million, respectively, of deferred service fees amortized to income.

8. Composition of Certain Financial Statement Items

Inventories consisted of the following (in millions):

	September 30, 2004			December 31, 2003
Finished products		$	325.9		$	274.5
Raw materials, parts and assemblies		127.4			95.6
Work in process		25.6			18.9
		$	478.9		$	389.0

Changes in the product warranty obligation for the nine months ended September 30, 2004 were as follows (in millions):

Balance as of December 31, 2003	$	14.7
New warranties expense	43.0
Payments and adjustments	(43.5		)
Balance as of September 30, 2004	$	14.2

The Company records a liability for product warranty obligations at the time of sale based upon historical warranty experience. The term of the warranty is generally twelve months. The Company also records an additional liability for specific warranty matters when they become known and are reasonably estimable. The Company’s product warranty obligations are included in accrued expenses.

9. Goodwill and Other Intangible Assets

Changes in the carrying amount of goodwill for the nine months ended September 30, 2004 were as follows (in millions):

	Clinical Diagnostics			Biomedical Research			Total
Goodwill, December 31, 2003		$	335.1		$	53.7	$	388.8
Minority interest		0.2			—		0.2
Settlements of pre-acquisition tax contingencies		0.3			—		0.3
Excess purchase price adjustments		—			2.9		2.9
Currency translation adjustments		—			0.2		0.2
Goodwill, September 30, 2004		$	335.6		$	56.8	$	392.4

Other intangible assets consisted of the following (in millions):

	September 30, 2004									December 31, 2003
	Gross Carrying Amount			Accumulated Amortization				Net		Gross Carrying Amount			Accumulated Amortization				Net
Amortized intangible assets:
Technology		$	59.1		$	(21.7	)	$	37.4		$	56.2		$	(19.2	)	$	37.0
Customer contracts		167.1			(45.5		)	121.6			167.1			(40.4		)	126.7
Other		42.8			(17.9		)	24.9			34.9			(15.3		)	19.6
		269.0			(85.1		)	183.9			258.2			(74.9		)	183.3
Unamortized intangible assets:
Tradename		73.5			—			73.5			73.5			—			73.5
Core technology		66.6			—			66.6			66.6			—			66.6
		$	409.1		$	(85.1	)	$	324.0		$	398.3		$	(74.9	)	$	323.4

Recorded intangible asset amortization expense for the three months ended September 30, 2004 and 2003 was $3.6 million and $3.0 million, respectively. For the nine months ended September 30, 2004 and 2003 recorded intangible amortization expense was $10.2 million and $9.4 million, respectively. Estimated intangible asset amortization expense (based on existing intangible assets) for the years ended December 31, 2004, 2005, 2006, 2007 and 2008 is $13.4 million, $13.9 million, $13.8 million, $12.9 million and $12.7 million, respectively.

10. Retirement Benefits

The following tables list the components of the net periodic benefit cost for the three and nine months ended September 30, 2004 and 2003 (in millions):

	Pension Plans
	Three months Ended September 30,								Nine months Ended September 30,
	2004				2003				2004				2003
Service cost		$	4.6			$	4.3			$	13.8			$	12.9
Interest cost		8.8				9.1				26.4				27.3
Expected return on plan assets		(13.0		)		(10.2		)		(37.9		)		(30.6		)
Amortization of prior service costs		0.6				0.6				1.8				2.0
Amortization of actuarial loss		1.7				1.1				5.1				3.3
Net periodic benefit cost		$	2.7			$	4.9			$	9.2			$	14.9

	Postretirement Plans
	Three months Ended September 30,								Nine months Ended September 30,
	2004				2003				2004				2003
Service cost		$	0.5			$	0.7			$	1.9			$	2.1
Interest cost		1.3				2.0				4.9				6.0
Amortization of prior service costs		(1.2		)		(1.0		)		(3.6		)		(3.0		)
Amortization of actuarial loss		—				0.4				0.8				1.2
Net periodic benefit cost		$	0.6			$	2.1			$	4.0			$	6.3

In May 2004, the Company contributed $40.0 million to its U.S. Pension Plan. No further contributions are expected to be made in 2004.

The Company adopted FSP FAS 106-2: “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003” on a prospective basis effective July 1, 2004. This adoption resulted in a reduction of the Company’s accumulated postretirement benefit obligation of $26.7 million at July 1, 2004 and a reduction of the net periodic benefit cost of $1.1 million for the quarter ended September 30, 2004.

11. 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.

Certain tests sold by Beckman Coulter and manufactured by Acon Laboratories allegedly infringe patents owned by Inverness Medical Innovations (“IMI”) according to pleadings on file in the Federal District Court for Massachusetts. These tests include ones that Acon supplies to Beckman Coulter for use primarily in physician offices and clinics, and which generate approximately $6.0 million in sales and $2.0 million in net income per year for the Company. Beckman Coulter is not a party to the district court proceedings. The court has declined to enter a preliminary injunction against Acon, in favor of proceeding with a jury trial of the issues in the fourth quarter of 2004. Should IMI prevail, the Company believes that it has alternatives to the products currently purchased from Acon and does not anticipate a material impact on its results of operations, financial position or liquidity.

During the first quarter of 2003, the Company settled its claims against an escrow account created as part of the Beckman Instruments, Inc. 1997 acquisition of Coulter Corporation to cover contingent pre-acquisition liabilities. The Company recorded, in operating income, a non-taxable credit of $28.9 million, offset by related pretax expenses of $2.0 million ($1.2 million after taxes), resulting in a net credit of $27.7 million after taxes. 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.

In addition to the sales of certain receivables discussed in Note 7 “Sale of Assets,” the Company sells its instruments to a third party financing company who then leases the instruments to end users. The agreement underlying these sales indicates that the Company is responsible for up to 10% of end user customer defaults. Accordingly, the Company has accrued a reserve for the probable and reasonably estimable portion of these liabilities. These reserves were not material at September 30, 2004 or December 31, 2003.

12. Business Segment Information

The Company is engaged primarily in the design, manufacture and sale of laboratory instrument systems and related products. The Company’s two reportable segments are Clinical Diagnostics and Biomedical Research. The Clinical Diagnostics segment encompasses the detection and monitoring of disease by means of laboratory evaluation and analysis of bodily fluids, cells and other substances from patients. The Biomedical Research segment focuses on customers doing research in university and medical school laboratories, research institutes, government laboratories and biotechnology and pharmaceutical companies. 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.

	Three Months Ended September 30,								Nine Months Ended September 30,
	(unaudited)								(unaudited)
	2004				2003				2004			2003
	(in millions)
Net sales:
Clinical Diagnostics		$	420.0			$	381.1		$	1,236.4		$	1,103.1
Biomedical Research		161.2				153.7			478.9			450.8
Center		—				—			—			—
Consolidated		$	581.2			$	534.8		$	1,715.3		$	1,553.9
Operating income:
Clinical Diagnostics		$	80.2			$	81.3		$	240.2		$	217.0
Biomedical Research		20.6				21.9			68.4			59.7
Center		(20.4		)		(29.4		)	(66.1		)	(62.2		)
Consolidated		$	80.4			$	73.8		$	242.5		$	214.5
Interest income:
Clinical Diagnostics		$	(2.3	)		$	(1.5	)	$	(5.9	)	$	(4.7	)
Biomedical Research		—				—			—			—
Center		(1.1		)		(1.6		)	(3.4		)	(2.7		)
Consolidated		$	(3.4	)		$	(3.1	)	$	(9.3	)	$	(7.4	)
Interest expense:
Clinical Diagnostics		$	—			$	—		$	—		$	—
Biomedical Research		—				—			—			—
Center		9.1				10.6			25.7			31.6
Consolidated		$	9.1			$	10.6		$	25.7		$	31.6
Sales to external customers:
Americas
United States		$	322.7			$	307.7		$	955.3		$	889.6
Canada and Latin America		34.8				29.9			105.0			86.6
		357.5				337.6			1,060.3			976.2
Europe		151.8				131.0			452.7			394.9
Asia		71.9				66.2			202.3			182.8
Consolidated		$	581.2			$	534.8		$	1,715.3		$	1,553.9

	September 30, 2004			December 31, 2003
	(unaudited)
Long-lived assets:
Americas
United States		$	1,264.7		$	1,202.0
Canada and Latin America		27.8			25.2
		1,292.5			1,227.2
Europe		168.1			141.5
Asia		27.9			28.3
Consolidated		$	1,488.5		$	1,397.0
Total assets:
Clinical Diagnostics		$	1,622.6		$	1,543.9
Biomedical Research		582.5			564.6
Center		438.8			421.1
Consolidated		$	2,643.9		$	2,529.6

13. Stock Based Compensation

The Company accounts for stock-based compensation in accordance with Accounting Principles Board Opinion (“APB”) No. 25, “Accounting for Stock Issued to Employees.” Pursuant to APB No. 25, 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 Company also does not recognize compensation expense on stock issued to employees under its stock purchase plan. Compensation expense resulting from grants of restricted stock is recognized during the period in which the service is performed by the employee. The following table illustrates the effect on net income and earnings per share as if the fair value-based method provided by SFAS No. 123, “Accounting for Stock-Based Compensation,” had been applied for all outstanding and unvested awards each year (in millions, except amounts per share):

	Three months Ended September 30,								Nine months Ended September 30,
	2004				2003				2004				2003
Net earnings as reported		$	57.2			$	40.0			$	151.1			$	136.8
Stock-based employee compensation expense included in reported net earnings, net of tax		0.2				0.1				0.6				0.4
Pro forma compensation expense, net of tax		(3.4		)		(2.7		)		(18.0		)		(9.4		)
Pro forma net earnings		$	54.0			$	37.4			$	133.7			$	127.8
Earnings per share:
Basic—as reported		$	0.93			$	0.65			$	2.45			$	2.24
Basic—pro forma		$	0.88			$	0.61			$	2.17			$	2.10
Diluted—as reported		$	0.87			$	0.62			$	2.30			$	2.14
Diluted—pro forma		$	0.83			$	0.58			$	2.03			$	2.00

On April 1, 2004, the 2004 Long-Term Performance Plan was approved by the Company’s shareholders, authorizing the issuance of up to 6.5 million shares of the Company’s common stock. On the same date, the Company granted approximately 0.6 million immediately vesting stock options at an exercise price of $54.67 per share, equal to the market value of the Company’s common stock on April 1, 2004. These options were granted under an arrangement, entered into in 2001, whereby stock options

would be granted to certain executives after the Company’s stock price reached $53.00 per share by a certain date and maintained this price for 30 consecutive trading days.

14. Income Taxes

Income taxes as a percentage of pretax income was 15.0% for the three months ended September 30, 2004 and 23.6% for the nine months ended September 30, 2004, compared to 27% and 21.4% for the three and nine months ended September 30, 2003, respectively.

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 lab solutions used for pioneering medical research, clinical research 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 $38 billion in annual sales worldwide in 2003. We currently have products that address approximately half of that market.

Our products compete in the Clinical Diagnostics and Biomedical Research markets. Clinical Diagnostics and Biomedical Research generated approximately 70% and 30% of 2003 revenues, respectively. Our product lines include virtually 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. Our Clinical Diagnostic instruments are typically leased to customers under either operating-type lease or sales-type lease arrangements while our Biomedical Research products are typically cash sales. Approximately 64% of our 2003 revenues came from after-market customer purchases of operating supplies, chemistry kits and service. We market our products in more than 130 countries, with approximately 44% of revenues in 2003 coming from sales outside the United States. Our strategy is to expand our market share as a leading provider of laboratory systems by the continued rollout of new products, along with several planned entries into new markets such as forensics, bioterrorism and molecular pathology.

The Clinical Diagnostics market has recently enjoyed modest growth as diagnostic test volumes continue to increase as a result of factors such as an aging population and greater acceptance of Western medicine in emerging countries. In Clinical Diagnostics, our customers are faced with increasing volumes of testing and a shrinking skilled labor pool while under constant pressure to contain costs. Our SYNCHRON LXi^® 725 combined routine chemistry and immunoassay system, the UniCel^® DxI800 Access^® immunoassay systems and the Power Processor front-end automation system provide our customers with a means to increase efficiency through automation and workstation consolidation. We believe these industry leading, high-throughput platforms have positioned us to gain market share in the coming years. To further the potential of these systems we are developing new assays internally, collaborating with external parties and pursuing business and technology acquisitions. In 2003, we signed four assay development agreements one of which resulted in the introduction of a test for BNP (B-type natriuretic peptide), which is an indicator of congestive heart failure. In the first nine months of 2004, we signed a licensing agreement for iNOS (inducible nitric oxide) a new marker in blood that we plan to develop into a test to be used in the detection and management of patients at risk for developing sepsis, a potentially deadly medical condition. We have also begun shipping several assays for cancer, including pancreatic cancer and breast cancer. In hematology, we continue to automate more of the testing process with recently introduced platforms to serve high-volume hospital labs and small- to mid-sized labs.

The Biomedical Research market is dependent on academic research funding and capital spending in the biotechnology, pharmaceutical and clinical research markets. These Biomedical Research markets have struggled in recent years. However, spending on academic and government funded research is growing at a modest rate, differing country by country. In the U.S., National Institute of Health funding is up about 3% for 2004. We are seeing an increase in pharmaceutical and biotechnology research and development investment along with a growing need to simplify and automate testing in the clinical research market. These trends are starting to drive growth in certain areas of the Biomedical Research market. In Biomedical Research our strategy is focused on becoming a provider of solutions for our various customers. To serve customers researching proteins and their roles in the health of the human

body, we have a number of products useful in many phases of proteomic research including our ProteomeLab™ PF 2D fractionation system, which simplifies and automates this type of research, and the ProteomeLab™ A²™ MicroArray System, a medium-density testing array platform for therapeutic development and evaluation of biomarkers for disease diagnosis. We are also entering growing segments within the robotic automation market such as forensics, biological agent testing and molecular pathology. Our Cytomics FC 500 series of flow cytometers, which provide powerful cell analysis technology for disease and drug research, continue to be well accepted in the marketplace.

Our after-market sales of chemistry kits, supplies and service allow us to generate substantial operating cash flow. We continue to use this cash flow to facilitate growth in the business by developing, marketing and launching new products through internal development and business and technology acquisitions. Additionally, during 2004, we have used our operating cash flow, supplemented by a $65 million borrowing under our credit facility in the second quarter of 2004, to repurchase shares of our common stock and pay regular quarterly dividends. We plan to increase our quarterly dividend to a 15-20% payout ratio over time. In 2004, we also made a $40.0 million contribution to our U.S. pension plan. No further contributions are expected to be made in 2004.

We are subject to a number of risks and uncertainties that could hamper our efforts to successfully increase market share and expand into new markets including economic weakness, healthcare cost containment initiatives and constrained government funding. We believe we are addressing these risks by providing our customers automated and cost effective solutions. Additionally, in order to continue to grow the Company, gain market share and remain competitive, we must continue to introduce new instrument and reagent technologies, acquire and defend intellectual property and invest in research and development. Otherwise, our current products could become technologically obsolete over time. We believe that our strong cash flow will enable us to continue to fund these activities. A large number of our products require marketing authorizations from the U.S. Food & Drug Administration (“FDA”) and similar agencies in other countries. We have been successful in maintaining our compliance with these agencies in the past and obtaining the necessary clearances for our new products.

The Company is currently in the process of evaluating its internal controls as required under Section 404 of the Sarbanes-Oxley Act of 2002. The Company has a detailed plan in place and is currently on schedule to have this process completed by December 31, 2004, as required.

Results of Operations

Revenues

The following provides key product and geographical sales information (dollar amounts in millions):

	Three months Ended September 30,				Reported			Constant Currency
	2004		2003		Growth %			Growth %*
Routine Chemistry	$	166.8	$	150.3		11.0			9.6
Immunodiagnostics	128.3		104.5			22.8			21.0
Total Chemistry	295.1		254.8			15.8			14.2
Hematology	124.9		126.3			(1.1	)		(2.9	)
Total Clinical Diagnostics	420.0		381.1			10.2			8.6
Robotic Automation/Genetic Analysis	38.3		35.5			7.9			4.8
Centrifuge/Analytical Systems	65.7		65.4			0.5			(1.7	)
Total Specialty Testing	57.2		52.8			8.3			5.5
Total Biomedical Research	161.2		153.7			4.9			2.3
Total	$	581.2	$	534.8		8.7			6.8
Americas
United States	322.7		307.7			4.9			4.9
Canada and Latin America	34.8		29.9			16.4			15.1
Total Americas	357.5		337.6			5.9			5.8
Europe	151.8		131.0			15.9			10.1
Asia	71.9		66.2			8.6			5.1
Total	$	581.2	$	534.8		8.7			6.8

	Nine months Ended September 30,				Reported		Constant Currency
	2004		2003		Growth %		Growth %*
Routine Chemistry	$	499.3	$	445.9		12.0		9.6
Immunodiagnostics	361.1		303.6			18.9		15.7
Total Chemistry	860.4		749.5			14.8		12.1
Hematology	376.0		353.6			6.3		3.3
Total Clinical Diagnostics	1,236.4		1,103.1			12.1		9.3
Robotic Automation/Genetic Analysis	108.4		105.6			2.7		(1.6	)
Centrifuge/Analytical Systems	200.3		190.6			5.1		1.2
Total Specialty Testing	170.2		154.6			10.1		5.3
Total Biomedical Research	478.9		450.8			6.2		2.0
Total	$	1,715.3	$	1,553.9		10.4		7.2
Americas
United States	955.3		889.6			7.4		7.4
Canada and Latin America	105.0		86.6			21.2		16.7
Total Americas	1,060.3		976.2			8.6		8.2
Europe	452.7		394.9			14.6		5.7
Asia	202.3		182.8			10.7		4.7
Total	$	1,715.3	$	1,553.9		10.4		7.2

* 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 us 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.

The increase in sales, 8.7% and 10.4% for the three and nine months ended September 30, 2004, respectively, was due primarily to increases in clinical diagnostic system sales and our new product flow. The strengthening of foreign currencies, primarily the Euro and Yen, versus the U.S. dollar, also contributed to the Company’s reported growth rates, adding 1.9% and 3.2% for the three and nine months ended September 30, 2004, respectively.

Growth in Clinical Diagnostics of 10.2% and 12.1%, or 8.6% and 9.3% in constant currency, for the three and nine months ended September 30, 2004, respectively, was driven by strength in Routine Chemistry and Immunodiagnostics. Routine Chemistry sales grew 11.0% and 12.0% for the three and nine months ended September 30, 2004, respectively, primarily as a result of increased sales of the SYNCHRON LXi^®725 combined routine chemistry and immunoassay system. Immunodiagnostics sales grew 22.8% and 18.9% for the three and nine months ended September 30, 2004, respectively, due largely to increased sales of the UniCel^® DxI 800 Access^® system and immunoassay reagents. Hematology sales decreased 1.1% for the three months ended September 30, 2004 but grew 6.3% for the nine months ended September 30, 2004. The decrease in sales for the quarter ended September 30, 2004 was due to significant placements of hematology instruments with large reference labs in the U.S. and increased sales in Asia as a result of the SARS epidemic in the prior year quarter. The growth in Hematology for the nine months ended September 30, 2004 resulted primarily from sales of the COULTER^® LH 500 mid-range and the COULTER^® LH 750 high-throughput hematology systems as these products continue to enjoy market acceptance. These and other new products are contributing to our growth rate in Clinical Diagnostics and we expect them to continue to drive revenue growth.

Biomedical Research revenues grew 4.9% and 6.2% for the three and nine months ended September 30, 2004, respectively, and in constant currency grew 2.3% and 2.0% for the three and nine months ended September 30, 2004, respectively. Contributing to the growth rates of Biomedical Research sales were increased sales of the Cytomics FC 500 series of flow cytometers and related reagents, the Allegra™ X-12 series of bench top centrifuges and the ProteomeLab™PF 2D and PA 800 systems. Partially offsetting these increases for the nine month period ending September 30, 2004 was the sale of the Laboratory Automation Operations (“LAO”) product line that took place in the second quarter of 2003. This product line generated $5.9 million of revenues in the nine months ended September 30, 2003 that did not recur in 2004.

Sales in Europe, in constant currency, increased 10.1% and 5.7% for the three and nine months ended September 30, 2004 compared to the prior year led by sales of Immunodiagnostics and Specialty Testing product lines throughout the region. Sales in Asia, in constant currency, increased 5.1% and 4.7% for the quarter and nine months ended September 30, 2004 compared to the prior year as a result of increased sales in Clinical Chemistry, Immunodiagnostics and the Robotic Automation / Genetic Analysis product lines. China and South East Asia sales growth was particularly strong as our products continue to be well received in these regions. Sales in Germany and Japan continue to depress overall sales growth in their respective regions as both of these countries continue to restructure their healthcare reimbursement policies.

Gross Profit

Gross profit as a percentage of sales (“gross margin”) was 48.1% and 49.1% for the three months ended September 30, 2004 and 2003, respectively. The decrease in gross margin was due to the following:

· Higher service costs to support new product introductions, which unfavorably impacted gross margin by 1.0 percentage points; and

· increased freight and manufacturing costs, which unfavorably impacted gross margin by 0.6 percentage points; partially offset by

· foreign currency exchange rates, which favorably impacted gross margin by 0.5 percentage points; and

· favorable product type mix, partially offset by unfavorable geographical sales mix, resulted in a 0.1 percentage point favorable impact to gross margin.

Gross margin was 47.9% and 47.8% for the nine months ended September 30, 2004 and 2003, respectively. The increase in gross margin was due to the following:

· Foreign currency exchange rates favorably impacted gross margin by 0.7 percentage points; and

· improved manufacturing efficiencies impacted gross margin by 0.2 percentage points; partially offset by

· unfavorable geographical sales mix, which offset favorable product type mix, resulted in a 0.5 percentage point unfavorable impact to gross margin; and

· increased freight costs, which unfavorably impacted gross margin by 0.3 percentage points.

Operating Expenses

Selling, general and administrative (“SG&A”) expenses increased $5.6 million to $148.1 million or 25.5% of sales for the three months ended September 30, 2004 from $142.5 million or 26.6% of sales for the three months ended September 30, 2003. SG&A expenses increased $35.1 million to $432.9 million or 25.2% of sales for the nine months ended September 30, 2004 from $397.8 million or 25.6% of sales for the nine months ended September 30, 2003. The dollar increase in SG&A spending was a result of increased sales volume, a weaker U.S. dollar, the Company’s increased investments in selling and marketing activities related to our Immunoassay and other product offerings and new product training programs.

Research and development (“R&D”) expenses increased $5.0 million to $51.5 million or 8.9% of sales for the three months ended September 30, 2004 from $46.5 million or 8.7% of sales for the three months ended September 30, 2003 and increased $6.8 million to $146.2 million or 8.5% of sales for the nine months ended September 30, 2004 from $139.4 million or 9.0% of sales for the nine months ended September 30, 2003. Changes in R&D as a percentage of sales are due primarily to the timing of certain projects and the impact of a weaker U.S. dollar on revenue. For instance, in 2003, we were incurring substantial R&D costs on the launch of several new products, such as the UniCel^® DxI 800 Access^® system. In 2004, the costs for supporting this and other recently launched products have transitioned to manufacturing and are classified in cost of goods sold. This project and the transitioning of its costs impacted the decrease in R&D as a percentage of sales for the nine months ended September 30, 2004. 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.

In the first quarter of 2003, the Company recorded a restructure charge of $18.5 million which represented 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 related employee termination costs were paid through the third quarter of 2004. In the three and nine months ended September 30, 2004, approximately $0.3 million and $0.7 million, respectively, of restructuring charges were reversed as it was determined that these amounts were not going to be utilized. See Note 3 “Provision for Restructuring Operations” of the Condensed Consolidated Financial Statements for more information.

As indicated in Note 12 “Business Segment Information,” of the Condensed Consolidated Financial Statements, all corporate activities are captured in a central service “Center,” including costs incurred at the corporate level which significantly benefit the operations of each segment. Because these segment related costs remain in the “Center,” a discussion of our operating profit by segment is not meaningful.

Non Operating Income and Expenses

Interest income includes income from sales-type lease receivables. Interest income increased $0.3 million to $3.4 million in the third quarter of 2004 from $3.1 million in the third quarter of 2003 and increased $1.9 million to $9.3 million in the nine months ended September 30, 2004 from $7.4 million in the nine months ended September 30, 2003, due primarily to retention of more sales-type lease receivables.

Interest expense declined $1.5 million to $9.1 million in the third quarter of 2004 from $10.6 million in the third quarter of 2003 and decreased $5.9 million to $25.7 million in the nine months ended September 30, 2004 from $31.6 million in the nine months ended September 30, 2003 due primarily to the successful resolution of certain segments of the Internal Revenue Service audit of the tax years ending in 1998 through 2002, which resulted in the elimination of approximately $1.0 million and $3.0 million of related interest accruals during the three and nine months ended September 30, 2004. Also contributing to reduced interest expense in the nine months ended September 30, 2004 were lower average debt balances and lower interest rates on the variable portion of our borrowings.

Other non-operating (income) and expense includes the following (in millions):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2004			2003			2004			2003
Gain on sale of the assets of LAO	$	—		$	—		$	(1.4	)	$	(3.6	)
Gain on sales of sales-type lease receivables	—			(0.6		)	—			(3.0		)
Foreign exchange and related derivative activity	8.0			11.6			29.9			19.4
Other	(0.6		)	0.5			(0.1		)	3.5
Total	$	7.4		$	11.5		$	28.4		$	16.3

The assets of LAO were sold in the second quarter of 2003 and resulted in a $3.6 million gain. The $1.4 million gain in the nine months ended September 30, 2004 relates to the expiration and reversal of an accrual for certain contingencies recorded pursuant to the asset sale agreement.

Income Taxes

The decrease in income taxes as a percentage of pretax income to 15.0% and 23.6% for the quarter and nine months ended September 30, 2004, respectively, was primarily a result of the resolution of certain segments of the Internal Revenue Service audit of the tax years ending in 1998 through 2002. Excluding the impact of these items, income taxes as a percentage of pretax income for the nine months ended September 30, 2004 would have been approximately 28%.

The Company is reviewing the various provisions of the American Jobs Creation Act of 2004 which contains significant changes to the U.S. corporate tax structure. If the Company elects to repatriate foreign earnings under the Homeland Investment provisions of the Act in the fourth quarter of 2004, the Company would expect that the full year 2004 forecasted effective tax rate would not be more than 26%. Otherwise, the forecasted full year effective tax rate for 2004 is expected to remain at 23.6%.

Income taxes as a percentage of pretax income for the nine months ended September 30, 2003 was impacted by the $28.9 million non-taxable credit received in settlement of the escrow account dispute and the $18.5 million restructure charge recorded in the first quarter of 2003. Excluding the impact of these items, income taxes as a percentage of pretax income for the nine months ended September 30, 2003 would have been approximately 27%.

Liquidity and Capital Resources

Liquidity is our ability to generate sufficient cash flows from operating activities to meet our obligations and commitments. In addition, liquidity includes the ability to obtain appropriate financing and to convert those assets that are no longer required in meeting existing strategic objectives into cash. Therefore, liquidity cannot be considered separately from capital resources that consist of current and potentially available funds for use in achieving long-range business objectives and meeting our commitments.

Our business model, in particular sales from after-market kits, supplies and service, allows us to generate substantial operating cash flows. We anticipate our operating cash flows will continue to satisfy our working capital requirements without the need for additional indebtedness. Additionally, we currently do not have plans to significantly reduce our long-term debt levels in the next twelve months due to the long-term maturities of our Senior Notes. This flexibility allows us to invest in areas that will help meet our strategic objectives. During the next twelve months, we anticipate using our operating cash flows:

· To facilitate growth in the business by developing, marketing and launching new products. New product offerings will come from existing R&D projects, business acquisitions and by gaining access to new technologies through license arrangements.

· To paydown the $65.0 million in outstanding borrowings that were drawn on our revolving Credit Facility in the second quarter of 2004. Borrowings on the Credit Facility were primarily used to repurchase shares of the Company’s common stock. These repurchases were made under our stock repurchase plan, whereby we were permitted to repurchase up to 5.0 million shares of our common stock to pre-fund our stock-based employee benefit programs. As of September 30, 2004, we have repurchased all of the 5.0 million shares authorized. During the nine months ended September 30, 2004, 2.5 million shares were repurchased for $138.3 million.

· To raise and maintain our quarterly dividend to our historical 15-20% annual payout ratio over time. Our dividend paid in the third quarter was $0.13 per share. In October 2004, the Company’s

Board of Directors declared a quarterly cash dividend of $0.13 per share, payable on November 5, 2004 to stockholders of record on October 18, 2004. This dividend represents the 62nd consecutive quarterly payout in the Company’s history.

· To continue to contribute to our pension plans as needed in order to meet the minimum funding requirements. During the nine months ended September 30, 2004 we contributed approximately $40 million to our US pension plans. We have no plans to contribute any additional amounts to our US pension plans in the remainder of 2004, as we are now in a prepaid pension asset position.

Cash flows provided by operating activities were $131.5 million in the first nine months of 2004 and $197.5 million in the first nine months of 2003. The decrease in operating cash flows is due primarily to an increase in inventory, year over year, as a result of our continuing introduction of new products, the retention of more company financed sales-type lease receivables and a decrease in accounts payable and accrued liabilities resulting from larger payments of performance-based compensation in 2004 versus 2003 that had been accrued at December 31, 2003 and 2002, respectively. Also contributing to the decrease was the impact of items in 2003 that did not recur in 2004, such as the Coulter escrow account litigation settlement, which provided a $28.9 million cash inflow and a $27.7 million impact to net earnings in 2003.

Investing activities used cash of $114.9 and $103.4 million in the first nine months of 2004 and 2003, respectively. Capital expenditures increased $11.2 million, from $95.4 million in 2003 to $106.6 million in 2004 primarily as a result of increased customer operating type leases, which are carried as fixed assets on our consolidated balance sheet. Payments during 2004 for business acquisitions and technology licenses were to acquire exclusive rights to a) the iNOS marker from Research & Diagnostic Antibodies, LLC for use in the detection and management of sepsis, b) a second-generation rapid, postmortem test for bovine spongiform encephalapothy (BSE), commonly known as mad cow disease from InPro Biotechnology, c) proprietary eXpress Profiling technology from Althea Technologies, Inc. and d) distribution rights to a flow cytometry instrument from NPE Systems, Inc., which we will market to clinical diagnostics laboratories as the Cell Lab Quanta. Payments during 2003 for business acquisitions consist primarily of additional consideration to purchase substantially all of the remaining minority interest in a majority-owned foreign entity.

Financing activities used cash of $62.0 million and $126.9 million in the first nine months of 2004 and 2003, respectively. The net decrease in cash outflows in 2004 is primarily due to a significant reduction in debt repayments as compared to 2003. In 2004, we had net borrowings of $51.7 million, mostly due to the $65.0 million draw from our Credit Facility; whereas in 2003, we had a $105.6 million net reduction in debt primarily due to $130.4 million in repayments on our long term debt. Cash proceeds from the issuance of stock under certain employee stock-based benefit plans increased to $45.6 million in 2004 from $35.9 million in 2003. We also increased the amount of common stock repurchased for treasury to $138.3 million in 2004 from $41.9 million in 2003. During 2004, we also paid three quarterly cash dividends totaling $22.6 million, up from $17.9 million paid during each of the first three quarters in 2003.

We are in the process of implementing an ERP system in order to achieve a single, globally integrated infrastructure. This includes functionality for Finance, Human Resources, Supply Chain, Order Management, Finished Goods Inventory Management and Sales and Service to replace or complement existing legacy systems and business processes. Since the inception of the program in 2000 through September 30, 2004, we have capitalized approximately $118.2 million of costs associated with this ERP system, which includes approximately $40.4 million of capitalized internal labor costs. Based on our geographic rollout strategy, as of September 30, 2004, 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. Systems for finished goods inventory and physical distribution have been implemented for Europe, including the deployment of systems for Sales, Service and Order Management in most entities in Europe. In 2003, we

revised the originally scheduled deployment dates of certain systems and we expect that the majority of the work required to complete global implementation of the new systems will take place through 2005. External costs are expected to approximate those originally anticipated while internal costs, consisting primarily of internal labor and benefits, are expected to increase as a result of the revised schedule. If we are unable to implement and effectively manage the transition to these new systems, our future consolidated operating results could be adversely affected.

The Company maintains a $400 million unsecured Credit Facility. This facility enables us to borrow up to $400 million (and can be increased up to $600 million upon the satisfaction of certain conditions), matures in July 2005 and is not subject to any scheduled principal payments. Borrowings under the $400 million Credit Facility generally bear interest at LIBOR plus a margin (0.45% to 1.50%) based upon our senior unsecured debt rating. We must also pay a quarterly facility fee of 0.15% per annum on the $400 million Credit Facility commitment. As of September 30, 2004, there was $65.0 million drawn on the $400 million Credit Facility and no amount drawn as of December 31, 2003.

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 and other sources of liquidity 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. 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.

At September 30, 2004, there have been no material changes in the Company’s significant contractual obligations and commitments as disclosed in its Annual Report on Form 10-K for the year ended December 31, 2003.

Critical Accounting Policies

The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States which require the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and revenues and expenses during the periods reported. Actual results could differ from those estimates. Information with respect to the Company’s critical accounting policies which the Company believes could have the most significant effect on the Company’s reported results and require subjective or complex judgments by management is contained on pages 33 to 36 in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of the Company’s Annual Report on Form 10-K for the year ended December 31, 2003. Management believes that at September 30, 2004, there has been no material change to this information.

Recent Accounting Developments

See Note 2 of the Condensed Consolidated Financial Statements for information regarding recent accounting developments.

Forward-Looking Statements

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

· the schedule for completion of our ERP program;

· 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;

· sources of new products and anticipated development activities;

· earnings and sales growth;

· anticipated contribution to the Company’s pension plan during the remainder of 2004;

· effects of the patent infringement action between Acon Laboratories, Beckman Coulter’s supplier and Inverness Medical Innovations;

· anticipated dividend payout ratios;

· our anticipated use of operating cash flows; and

· our completion of our internal controls evaluation pursuant to Section 404 of the Sarbanes-Oxley Act of 2002.

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 diagnostics and biomedical research markets;

· delays in obtaining necessary product clearances from regulatory agencies;

· 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 and the outcomes of tax examinations;

· future effects of current world pandemic health issues;

· other factors that cannot be identified at this time; and

· potential delays or difficulties in completing our internal controls evaluation.

Although we believe we have the product offerings and resources required to achieve our objectives, actual results could differ materially from those anticipated by these forward-looking statements. There can be no assurance that events anticipated by these forward-looking statements will in fact transpire as expected.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Securities and Exchange Commission requires that registrants include information about potential effects of changes in currency exchange and interest rates in their Form 10-K 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 and Canadian Dollar. As of September 30, 2004 and December 31, 2003, the notional amounts of all derivative foreign exchange contracts was $403.7 million and $339.4 million, respectively. Notional amounts are stated in U.S. dollar equivalents at spot exchange rates at the respective dates. The net fair value of all these contracts as of September 30, 2004 and December 31, 2003 was a net liability of $4.9 million and $36.4 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, 2004. The analysis showed that a 10% strengthening of the U.S. dollar would result in a gain from a fair value change of $29.5 million and a 10% weakening of the U.S. dollar would result in a loss from a fair value change of $20.9 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, 2004 were not materially different than those at December 31, 2003.

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 this year’s pre-tax earnings by $0.6 million based on the amount of variable rate debt outstanding at September 30, 2004. This analysis includes the effect of our reverse interest rate swap derivatives which change the character of the interest rate on our long-term debt by effectively converting a fixed rate to a variable rate.

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

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, 2004, 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.

Part II. Other Information

Item 1. Legal Proceedings

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

In October 2002, the Company’s Board of Directors authorized the repurchase of up to 5.0 million shares of the Company’s common stock to pre-fund its stock-based employee benefit programs. The stock repurchase program was authorized to continue through October 2005. The following table provides information about the Company’s purchases of shares of the Company’s common stock during the quarter pursuant to this repurchase program:

ISSUER PURCHASES OF EQUITY SECURITIES

	(a)	(b)			(c)		(d)
Period	Total Number of Shares Purchased	Average Price Paid per Share			Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum(or Appropriate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
July 1 through 31, 2004	183		$	60.90		—		679,300
August 1 through 31, 2004	679,300		$	53.41		679,300		—
September 1 through 30, 2004	—		—			—		—
Total	679,483		$	53.41		679,300		—

679,300 of the shares above were repurchased pursuant to our stock repurchase plan authorized by the Company’s Board of Directors in October 2002. This plan authorized the repurchase of up to 5.0 million shares of the Company’s common stock. The plan was authorized to continue through October 2005. All of the shares authorized under the plan have been repurchased.

183 of the shares above were repurchased pursuant to the Company’s restricted stock plan whereby upon vesting of the restricted shares the Company was reimbursed, in the form of Company common stock, for the payment of taxes on the employees’ behalf.

Item 6. Exhibits

10.1		Beckman Coulter, Inc. Benefit Equity Trust Agreement, Dated as of October 5, 2004.
15		Report of Independent Registered Public Accounting Firm, October 29, 2004
15.1		Letter of Acknowledgement of Use of Report on Unaudited Interim Financial Information, October 29, 2004
31		Rule 13a-14(a)/15d-14(a) Certifications
32		Section 1350 Certifications

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	BECKMAN COULTER, INC.
	(Registrant)
Date: November 2, 2004	By	/s/ JOHN P. WAREHAM
	John P. Wareham
	Chairman of the Board and Chief Executive Officer
Date: November 2, 2004	By	/s/ JAMES T. GLOVER
	James T. Glover
	Vice President and Chief Financial Officer

INDEX TO EXHIBITS

Exhibit No.		Description
10.1		Beckman Coulter, Inc. Benefit Equity Trust Agreement, Dated as of October 5, 2004.
15		Report of Independent Registered Public Accounting Firm, October 29, 2004
15.1		Letter of Acknowledgement of Use of Report on Unaudited Interim Financial Information, October 29, 2004
31		Rule 13a-14(a)/15d-14(a) Certifications
32		Section 1350 Certifications

EX-10.1 2 a04-12398_1ex10d1.htm EX-10.1

Exhibit 10.1

BECKMAN COULTER, INC.
BENEFIT EQUITY TRUST AGREEMENT
Dated as of October 5, 2004
between
Beckman Coulter, Inc.
and
Wells Fargo Bank, N.A.

TABLE OF CONTENTS

SECTION 1.	Definitions

SECTION 2.	Establishment of the Trust
	2.1.	Trust Fund
	2.2.	Irrevocability
	2.3.	Claims of Creditors

SECTION 3.	Acceptance by the Trustee

SECTION 4.	Investment of the Trust
	4.1.	General Duty of the Trustee
	4.2.	Additional Powers of the Trustee

SECTION 5.	Establishment and Maintenance of Participant Schedule
	5.1.	Form of Participant Schedule
	5.2.	Maintaining the Participant Schedule

SECTION 6.	Maintenance of Trust
	6.1.	Trust Assets and Allocation to Plans
	6.2.	Valuation of Trust and Accounts
	6.3.	Relationship to Plans

SECTION 7.	Voting and Tender of Company Stock Held in Trust
	7.1.	Voting Rights
	7.2.	Tender Rights
	7.3.	Notices and Information Statements

SECTION 8.	Distributions from the Trust
	8.1.	Distributions from the Trust
	8.2.	Significant Event
	8.3.	Protection of the Trustee
	8.4.	Company Obligations
	8.5.	Trustee as Holder of Legal Title to Trust Assets
	8.6.	Federal Income Tax Consequences of the Trust
	8.7.	Reversion to the Company

SECTION 9.	Expenses, Compensation and Indemnification
	9.1.	Compensation
	9.2.	Charge on Trust Fund
	9.3.	Indemnification
	9.4.	Force Majeure
	9.5.	Payment from Trust Fund

SECTION 10.	Administration and Records
	10.1.	Records
	10.2.	Settlement of Accounts
	10.3.	Audit
	10.4.	Judicial Settlement
	10.5.	Delivery of Records to Successor
	10.6.	Tax Filings

SECTION 11.	Removal or Resignation of the Trustee and Designation of Successor Trustee
	11.1.	Removal
	11.2.	Resignation
	11.3.	Successor Trustee

SECTION 12.	Enforcement of Trust Agreement
	12.1.	Rights of Parties to Enforce the Trust Agreement
	12.2.	Limitation on Rights of Participants and Beneficiaries

SECTION 13.	Termination
	13.1.	Termination upon Specific Events
	13.2.	Termination in Other Events
	13.3.	Limitation on Trustee Liability Upon Total Distribution; Continuation of Trustee Powers
	13.4.	Nonapplicability of ERISA
	13.5.	Reversion to the Company

SECTION 14.	Amendment
	14.1.	Amendments in General
	14.2.	Nonapplicability of ERISA; Preventing Current Taxation

SECTION 15.	Nonalienation
	15.1.	Prohibition Against Certain Transfers, Pledges, Etc

SECTION 16.	Communications
	16.1.	To the Company, Board of Directors and Committee
	16.2.	To the Trustee
	16.3.	To a Participant
	16.4.	Binding upon Receipt
	16.5.	Authority to Act
	16.6.	Authenticity of Instruments

SECTION 17.	Claims of the Company’s Bankruptcy Creditors
	17.1.	Bankruptcy Creditors
	17.2.	Resumption of Benefits; Restoration of Accounts

SECTION 18.	Consolidation, Merger or Sale of the Company
	18.1.	Consolidation, Merger or Sale of the Company

SECTION 19.	Miscellaneous Provisions
	19.1.	Binding Effect
	19.2.	Inquiry as to Authority
	19.3.	Responsibility for Company Action
	19.4.	Successor to Trustee
	19.5.	Intercompany Agreements
	19.6.	Titles Not to Control
	19.7.	Laws of the State of California to Govern
	19.8.	Fractional Shares
	19.9.	Entire Agreement

iii

THE BECKMAN COULTER, INC. BENEFIT EQUITY TRUST AGREEMENT (“Trust Agreement”), made and entered into as of , 2004 by and between Beckman Coulter, Inc., a corporation organized under the laws of the State of Delaware (the “Company”), and Wells Fargo Bank, N.A., a national banking association, organized under the law of the United States of America (the “Trustee”),

W I T N E S S E T H:

WHEREAS, the Company has in place various qualified and non-qualified employee benefit plans and arrangements for the benefit of some or all of the employees of the Company and certain of its subsidiaries and affiliates and may from time to time adopt one or more additional plans or arrangements;

WHEREAS, the Company and its subsidiaries or affiliates have and will have certain legal obligations under these employee benefit plans or arrangements;

WHEREAS, the Company desires to establish a trust and to enter into this Trust Agreement to assist it in meeting certain of these obligations and intends to make contributions to such trust at such time or times and in such amount or amounts as it may determine;

WHEREAS, the Company intends that such contributions shall be held by the Trustee and invested and reinvested primarily in common stock of the Company, all in accordance with the provisions of this Trust Agreement;

WHEREAS, inasmuch as the income and corpus of such trust may and will be applied in discharge of the Company’s legal obligations, such trust is intended to be a “grantor trust” within the meaning of Section 671 of the Internal Revenue Code of 1986;

WHEREAS, the Company intends that the assets of such trust at all times shall be subject to the claims of bankruptcy and other general creditors of the Company and its subsidiaries and affiliates that maintain the employee benefit plans and arrangements as provided in Section 17 of this Trust Agreement; and

WHEREAS, the Company desires to appoint the Trustee to serve as Trustee of such trust and the Trustee accepts such appointment.

NOW, THEREFORE, in consideration of the mutual covenants herein contained, the Company and the Trustee declare and agree as follows:

SECTION 1. Definitions.

As used in this Trust Agreement, the following definitions apply to the terms indicated below:

1.1 “Administrator” or “Administrators” shall refer to the committee, person or persons charged with responsibility for overseeing and administering the Plans.

1.2 “Affiliate” shall mean (i) any corporation, other than the Company, which is included in a controlled group of corporations (within the meaning of Code Section 414(b)) of which the Company is a member, (ii) any trade or business, other than the Company, which is under common control (within the meaning of Code Section 414(c)) with the Company, (iii) any entity or organization, other than the Company, which is a member of an affiliated service group (within the meaning of Code Section 414(m)) of which the Company is a member, and (iv) any entity or organization, other than the Company, which is affiliated with the Company under Code Section 414(o). An entity shall be considered an Affiliate only during the period of time in which such entity has the required relationship with the Company under clauses (i), (ii), (iii) or (iv) above following the execution of this Trust Agreement.

1.3 “Authorized Administrator” shall mean an Administrator to whom the Committee has delegated authority to initiate distributions of Company Stock in accordance with Section 8.1.

1.4 “Authorized Employee” shall mean an employee of the Company to whom the Committee has delegated authority to initiate distributions of Company Stock in accordance with Section 8.1.

1.5 “Beneficiary” shall mean any person entitled to receive benefits under any Plan on the death of a Participant.

1.6 “Benefits” shall mean amounts that the Company or an Affiliate has an obligation pursuant to any Plan to (i) pay from its general assets, (ii) provide for the payment of by making contributions from its general assets, or (iii) deliver in shares of Company Stock.

1.7 “Board of Directors” shall mean the Board of Directors of the Company.

1.8 “Change in Control” shall be deemed to occur if the secretary of the Company certifies to the Trustee that any of the following events has occurred:

1.8.1 Any “person”, as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), other than an employee benefit plan of the Company, or a trustee or other fiduciary holding securities under an employee benefit plan of the Company, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company’s then outstanding voting securities. Notwithstanding the preceding sentence, a Change in Control shall not be deemed to have occurred if the “person” described in the preceding sentence is an underwriting syndicate which has acquired the ownership of 20% or more of the combined voting power of the Company’s then outstanding voting securities solely in connection with a public offering of the Company’s securities; or

1.8.2 The Company consummates a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of assets of another entity, other than (A) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior

thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of another entity) more than 50% of the combined voting power of the voting securities of the Company or such other entity outstanding immediately after such merger or consolidation or (B) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no person acquires 20% or more of the combined voting power of the Company’s then outstanding voting securities; or

1.8.3 The stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets.

1.9 “Code” shall mean the Internal Revenue Code of 1986, as it may be amended from time to time.

1.10 “Committee” shall mean such committee as the Board of Directors shall appoint from time to time to administer the Trust. The Committee shall consist of three or more persons. The members of the Committee will be certified to the Trustee by the secretary or assistant secretary of the Board of Directors.

1.11 “Company Stock” shall mean the common stock of the Company, par value $.10 per share.

1.12 “Daily Value” shall mean, with respect to a share of Company Stock, the closing reported sales price per share of Company Stock on the New York Stock Exchange Composite Tape, or if Company Stock is not traded on such stock exchange, the principal national securities exchange on which Company Stock is traded, or if not so traded, the mean between the highest bid and lowest asked quotation on the over-the-counter market as reported by the National Quotations Bureau, or any similar organization, on any relevant date, or if not so reported, as determined by the Committee in a manner consistently applied.

1.13 “Eligible Participant” shall mean a Participant who is an Employee and who, during the 6-month period preceding the date as of which Eligible Participants are to be determined for purposes of this Trust Agreement, purchased Common Stock pursuant to the Beckman Coulter, Inc. Employees’ Stock Purchase Plan, other than a Participant who is a member of the Board of Directors.

1.14 “Employee” shall mean any individual who is actively employed by the Company or an Affiliate.

1.15 “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as it may be amended from time to time.

1.16 “Exchange Act” shall mean the Securities Exchange Act of 1934, as it may be amended from time to time.

1.17 “Minimum Distribution Schedule” shall mean the schedule (or schedules) set forth in Schedule B.

1.18 “Other Assets” shall mean any asset or investment aside from cash held by the Trust that is not Company Stock.

1.19 “Participant Schedule” shall mean the schedule prepared by the Company pursuant to Section 5.1.

1.20 “Participants” shall mean those individuals who participate in one or more of the Plans described in Schedule A.

1.21 “Plans” shall mean the plans or arrangements referred to in Schedule A, as it may be amended from time to time.

1.22 “Trust” shall mean the trust established pursuant to this Trust Agreement.

1.23 “Trust Fund” shall mean all Company Stock, money and Other Assets from time to time contributed to the Trust and all investments and reinvestments made therewith or proceeds thereof and all earnings and profits thereon, less all payments and charges as authorized herein.

SECTION 2. Establishment of the Trust.

2.1. Trust Fund. The Company hereby establishes the Trust. The Trust Fund shall consist of such sums of Company Stock, other securities of the Company, money and other property acceptable to the Trustee as are from time to time paid or delivered to the Trustee. The Company shall have no duty or obligation to make any contribution to the Trust and the Trustee shall have no duty or obligation to require the Company to make any contribution to the Trust. The Trust Fund shall be held by the Trustee in trust and shall be dealt with in accordance with the provisions of this Trust Agreement. The Trustee, and any successor Trustee appointed pursuant to Section 11 hereof or resulting under Section 19.4 hereof shall at all times be a bank and trust company or other national banking association that is neither a subsidiary of nor other firm related by direct or indirect beneficial stock ownership to the Company.

2.2. Irrevocability. Except as provided in Section 17 hereof, the Trust shall be for the exclusive purpose of assisting the Company in providing Benefits and defraying expenses of the Trust in accordance with the provisions of this Trust Agreement. No part of the income or corpus of the Trust Fund shall be recoverable by the Company prior to a termination of the Trust in accordance with Section 13.2; provided, however, that the Trust Fund shall be applied in discharge of the Company’s legal obligations as provided in this Trust Agreement.

2.3. Claims of Creditors. Notwithstanding anything in this Trust Agreement or the Plans to the contrary, the Trust Fund shall at all times be subject to the claims of bankruptcy and other general creditors of the Company and its Affiliates, as provided in Section 17 hereof. No Participant or Plan shall have any claim against the Trust Fund other than as a general unsecured creditor of the Company.

SECTION 3. Acceptance by the Trustee.

The Trustee accepts the Trust established under this Trust Agreement on the terms and subject to the provisions set forth herein. The Trustee agrees to discharge and perform fully and faithfully all of the duties and obligations imposed upon it under this Trust Agreement.

SECTION 4. Investment of the Trust.

4.1. General Duty of the Trustee. Except as otherwise directed in writing by the Committee pursuant to this Section 4.1, and except as otherwise expressly provided in this Trust Agreement, all assets received by the Trustee other than Company Stock shall be invested as soon as practicable in, and remain invested in, Company Stock. The Trustee shall acquire shares of Company Stock in the open market or through the method of purchase and sales which is used by the Trustee in the normal course of its security transactions, including transactions with the Company. The Committee may direct in writing that cash or Other Assets received by the Trustee may be retained and invested in Other Assets.

4.1.1. Upon any purchase by or contribution to the Trust of Company Stock pursuant to this Section 4, the Trustee shall promptly take such steps as are necessary to register such Company Stock on the books of the Company in accordance with Section 4.2.13 hereof.

4.1.2. In the event a Change in Control occurs, it is the intention of the Company that the Trustee’s duties under this Trust Agreement will not change other than expressly stated herein. The Board of Directors shall inform the Trustee in writing of a Change in Control in accordance with Section 1.8 herein. The original Company will require the successor Company to provide the Trustee with an interim procedure or default as to who will instruct the Trustee after the Change in Control but before the successor Company has named a successor Committee (if a Committee is named as the successor Company’s delegate and is the one who instructs the Trustee.) The successor Company shall continue to have all the rights, duties, responsibilities and obligations as the original Company with regard to this Trust Agreement.

4.2. Additional Powers of the Trustee. Subject to the provisions of Section 4.1, the Trustee shall have the right, power and authority to take any action and to enter into and carry out every agreement with respect to the Trust Fund that may be necessary or advisable to discharge its responsibilities hereunder, and without limiting the generality of the foregoing and in addition to all other powers and authorities herein elsewhere specifically granted to the Trustee, the Trustee shall have the following powers and authorities, except as otherwise expressly provided herein, with respect to all property constituting a part of the Trust Fund:

4.2.1. Subject to Section 7 hereof, to sell, exchange or transfer any such property at public or private sale for cash or on credit and grant options for the purchase or exchange thereof, solely as directed by the Committee.

4.2.2. Subject to Section 7 hereof, to participate in any plan of reorganization, consolidation, merger, combination, liquidation or other similar plan relating to any such property, and to consent to or oppose any such plan or any action thereunder, or any contract, lease, mortgage, purchase, sale or other action by any corporation or other entity any of the securities of which may at any time be held in the Trust Fund, and to do any act with reference thereto, to the extent that a holder of such property has any such rights, solely as directed by the Committee.

4.2.3. Pursuant to the direction of the Committee, to deposit cash or any Other Assets with any protective, reorganization or similar committee; to delegate discretionary power to any such committee; and to pay part of the expenses and compensation of any such committee and any assessments levied with respect to any property so deposited.

4.2.4. Pursuant to the direction of the Committee, to exercise any conversion privilege or subscription right available in connection with any such property, and to do any act with reference thereto, including the exercise of options, the making of agreements or subscriptions and the payment of expenses, assessments or subscriptions, which may be deemed necessary or advisable in connection therewith, and to hold and retain any securities or other property which it may so acquire.

4.2.5. To commence or defend suits or legal proceedings and to represent the Trust in all suits or legal proceedings; to settle, compromise or submit to arbitration any claims, debts or damages, due or owing to or from the Trust.

4.2.6. Subject to Section 7 hereof, to exercise, personally or by general or limited power of attorney, any right, including the right to vote, appurtenant to any securities or other such property, solely as directed by the Committee.

4.2.7. To hold cash awaiting investment uninvested, and to maintain such additional cash balances as it shall deem reasonable or necessary to meet anticipated cash distributions from or administrative costs of the Trust, notwithstanding that the Trustee or a related entity may directly or indirectly benefit from any “float” that accrues during such period.

4.2.8. To hold cash uninvested, in such amounts and for such times as the Trustee in its discretion deems reasonable or necessary under the circumstances, during any period in which an investment or distribution transaction or any comparable transaction is pending, without incurring liability for payment of interest thereon, and to invest cash or Other Assets at Wells Fargo Bank, N.A., or another bank and trust company or national banking association in any type of interest-bearing investment, including, without limitation, deposit accounts, certificates of deposit and repurchase agreements, notwithstanding that the Trustee or a related entity may directly or indirectly benefit from any “float” that accrues during such period.

4.2.9. To form corporations or partnerships and to create trusts to hold title to any cash or Other Assets constituting the Trust Fund, upon such terms and conditions as may be deemed advisable.

4.2.10. To engage legal counsel, including (except following the occurrence of a Change in Control) counsel to the Company, or any other suitable agents, to consult with such counsel or agents with respect to the implementation or construction of this Trust Agreement, the duties of the Trustee hereunder, the transactions contemplated by this Trust Agreement or any act which the Trustee proposes to take or omit, to rely upon the advice of such counsel or agents, and to pay any such counsel’s or agent’s reasonable fees, expenses and compensation.

4.2.11. To register or hold any securities or other property held by it in its own name or of its nominee or in the name of any affiliate or of its nominee or in the name of any custodian of such property or of its nominee, including the nominee of any system for the central handling of securities, with or without the addition of words indicating that such securities are held in a fiduciary capacity, to deposit or arrange for the deposit of any such securities with such a system and to hold any securities in bearer form.

4.2.12. To make, execute and deliver, as Trustee, any and all deeds, leases, notes, bonds, guarantees, mortgages, conveyances, contracts, waivers, releases or other instruments in writing that are necessary or proper for the accomplishment of any of the foregoing powers.

4.2.13. To take all action necessary to settle authorized transactions, including exercising the power to borrow or raise money from any lender, which may be the Trustee in its corporate capacity or any affiliate or agent of the Trustee, upon such terms and conditions as are necessary to settle security purchases and/or foreign exchange or contracts for foreign exchange and to secure the repayments thereof by pledging all or any part of the Trust Fund.

SECTION 5. Establishment and Maintenance of Participant Schedule.

5.1. Form of Participant Schedule. Upon request by the Trustee, the Company shall prepare, and shall deliver to the Trustee in accordance with Section 5.2 hereof, a schedule that sets forth the name of each Participant entitled to receive a Benefit under a Plan or describes the classes of Participants entitled to receive Benefits under the Plans. Such Participant Schedule shall also include a list of Eligible Participants.

5.2. Maintaining the Participant Schedule. As soon as practicable after execution of this Trust Agreement, the Company shall deliver to the Trustee the Participant Schedule. The Company shall from time to time update the Participant Schedule, as may be required under this Trust Agreement. Each Participant Schedule shall state the date as of which it applies, and the Trustee shall be entitled to rely upon such Participant Schedule, without a duty of further inquiry, until it receives an updated Participant Schedule bearing a later date. Each Participant Schedule shall contain all information concerning a Participant which the Trustee will need to complete its responsibilities under this Trust Agreement.

SECTION 6. Maintenance of Trust.

6.1. Trust Assets and Allocation to Plans. The Trustee shall hold all assets contributed or otherwise obtained by the Trust and shall distribute such contributions and any earnings thereon to such Administrators, Employees or Participants as the Committee may from time to time direct pursuant to Section 8 hereof or as may be required pursuant to Section 8 hereof.

6.2. Valuation of Trust and Accounts. The Trustee shall revalue the Trust Fund as of the last business day of each calendar quarter. Shares of Company Stock shall be valued at the Daily Value of Company Stock as of such date.

6.3. Relationship to Plans. The list of Plans shall include at all times at least one plan which is not a “pension plan” or “welfare plan” within the meaning of ERISA. Benefits available under any of the Plans shall not be limited or governed in any way by the amount of contributions to the Trust. No contributions from any Participant under any of the Plans shall be made to the Trust.

SECTION 7. Voting and Tender of Company Stock Held in Trust.

7.1. Voting Rights. The Trustee shall vote the shares of Company Stock held by the Trust in accordance with directions received from Eligible Participants determined as of the record date. As soon as practicable following the record date in question, the Company shall deliver to the Trustee a Participant Schedule listing Eligible Participants determined as of such record date. Each Eligible Participant listed on such Participant Schedule shall have the right to direct the vote with respect to that number of shares of Company Stock held by the Trust as is equal to the total number of shares of Company Stock held by the Trust as of such record date divided by the number of Eligible Participants listed on the Participant Schedule who submit such voting directions. All actions taken by Eligible Participants pursuant to this Section 7.1 shall be held confidential by the Trustee and shall not be divulged or released to any person, other than (i) agents of the Trustee who are not affiliated

with the Company or its Affiliates, (ii) by virtue of the execution by the Trustee of any proxy, consent or letter of transmittal for the shares of Company Stock held in the Trust, or (iii) as may be required by court order.

7.2. Tender Rights. If any person shall commence a tender or exchange offer or any similar transaction with respect to the Company Stock, the Trustee shall pass through tender or exchange rights to Eligible Participants determined as of the commencement of such tender or exchange offer. As soon as practicable following the commencement of such tender or exchange offer, the Company shall deliver to the Trustee a Participant Schedule listing the Eligible Participants determined as of the commencement of such tender or exchange offer. Each Eligible Participant listed on such Participant Schedule shall have the right to direct the tender or exchange of that number of shares of Company Stock held by the Trust as is equal to the total number of shares of Company Stock held by the Trust divided by the number of Eligible Participants listed on the Participant Schedule who submit such tender or exchange directions. The Trustee shall devise and implement a procedure to assure the confidentiality of any directions given by Eligible Participants in response to such offers. All actions taken by Eligible Participants pursuant to this Section 7.2 shall be held confidential by the Trustee and shall not be divulged or released to any person, other than (i) agents of the Trustee who are not affiliated with the Company or its Affiliates, (ii) by virtue of the execution by the Trustee of any proxy, consent or letter of transmittal for the shares of Company Stock held in the Trust, or (iii) as may be required by court order.

7.3. Notices and Information Statements. The Company shall provide the Trustee in a timely manner with notices and information statements (including proxy statements) when voting rights are to be exercised, and with respect to tender, exchange or similar offers, at the same time and in the same manner (except to the extent the Exchange Act requires otherwise) as such notices and information statements (including proxy statements) are provided to shareholders of the Company generally. The Trustee shall, in turn, at no expense to itself, provide all material received by the Company pursuant to this Section 7.3 to Eligible Participants described in Sections 7.1 and 7.2.

SECTION 8. Distributions from the Trust.

8.1. Distributions from the Trust. Subject to Section 8.1.3 below, the particular Plan with respect to which any distribution from the Trust is made and the timing of any distribution will be determined by the Committee in accordance with the following directions: (a) to the extent available, shares of Company Stock sufficient to meet the obligations of the Beckman Coulter, Inc. Employees’ Stock Purchase Plan shall first be allocated to the Administrator of such Plan, and (b) remaining shares of Company Stock (if any) shall be allocated to the Administrators of other Plans or directly to Participants in such other Plans or Employees, as determined by the Committee in good faith taking into account the best interests of a broad cross-section of Participants. Distributions from the Trust shall not be subject to the consent or approval of any adverse party within the meaning of Code Section 672(a).

8.1.1. Reliance Upon Written Instructions. The Committee, an Authorized Administrator or an Authorized Employee shall inform the Trustee in writing of how

many shares are required to fund distributions under Section 8.1(a). The Trustee may rely upon written instructions received from the Committee, Authorized Administrator or Authorized Employee to carry out the instructions contained in this Section 8.1 and shall have no responsibility to verify or monitor the determinations made by the Committee, Authorized Administrator or Authorized Employee. Notwithstanding the foregoing, in the event the Trustee receives a distribution request it knows or should reasonably know to be fraudulent, the Trustee shall promptly notify the Committee of such request and its concerns therewith. No shares of Company Stock shall be released in satisfaction of any such request unless and until the Committee confirms the authenticity of such request and provides written notification to the Trustee of such determination.

8.1.2. Delegation to Administrators. Notwithstanding anything to the contrary in this Section 8.1, the Committee may authorize one or more Administrators and/or employees of the Company to initiate distributions from the Trust under this Section 8.1, subject to such limitations as the Committee deems advisable. The Committee shall provide the Trustee with written notification of any such delegation of authority (including any limitations thereon). Following the Trustee’s receipt of such written notification, the Trustee shall be entitled to rely on written distribution requests received from an Authorized Administrator or Authorized Employee as if such requests had been submitted by the Committee; provided that such distribution requests do not exceed the authority delegated to the Authorized Administrator or Authorized Employee submitting the request. The Board shall have complete and exclusive power and authority to modify or terminate the ability of an Authorized Administrator or Authorized Employee to initiate distributions at any time. The Committee shall provide written notification of any such modification or termination to the Trustee.

8.1.3. Minimum Distribution. At the end of each full calendar year prior to the termination of the Trust, the Trustee shall determine whether the total number of shares distributed pursuant to requests submitted by the Committee, all Authorized Administrators and all Authorized Employees exceeds the minimum distribution for such year, as set forth in the Minimum Distribution Schedule. If the number of shares of Company Stock distributed does not exceed the specified minimum distribution, the Trustee shall distribute such additional shares of Company Stock as may be necessary to satisfy such requirements. All distributions of Company Stock pursuant to this Section 8.1.3 shall be allocated among the various Administrators of the Plans pursuant to written instructions provided by the Committee that are designed to ensure that such shares are promptly distributed pro rata to all Participants employed by the Company at the end of the relevant calendar year on a uniform and non-discriminatory basis.

8.1.4. Acceleration. Notwithstanding anything herein to the contrary, the Committee may direct that the number of shares distributed in any year exceed the number of shares required to be distributed under the Minimum Distribution Schedule and/or that shares be distributed prior to the date specified in such schedule. If the number of shares distributed in any year exceeds the number of shares required to be distributed in such year pursuant to the Minimum Distribution Schedule, the minimum

distribution amount for each subsequent year shall automatically be reduced by a pro rata amount of the excess shares distributed.

8.1.5. Final Distribution of Company Stock. In the event the total number of shares of Company Stock requested for distribution by the Committee, all Authorized Administrators and all Authorized Employees exceeds the number of shares of Company Stock then remaining available for distribution, the Trustee shall promptly provide written notification to the Committee and the final distribution of shares shall be determined by the Committee in accordance with Section 8.1 above.

8.2. Significant Event. If an event occurs that causes 30 percent or more of the Participants to cease to be Employees within a 12-month period, as certified by the Committee, then all remaining distribution amounts under the Minimum Distribution Schedule will be reduced in direct proportion to such reduction and the Minimum Distribution Schedule will be correspondingly extended.

8.3. Protection of the Trustee. The Trustee shall, to the maximum extent permitted by applicable law, be fully protected in acting upon the Participant Schedule and any written statement, affidavit or certification referred to in this Trust Agreement. The Trustee shall at all times, to the maximum extent permitted by applicable law, be fully protected in making distributions pursuant to Sections 4.1, 8, 13 and 17 hereof.

8.4. Company Obligations. Notwithstanding the provisions of this Trust Agreement, the Company and its Affiliates shall remain obligated with respect to the Benefits attributable to their respective employees. Nothing in this Trust Agreement shall relieve the Company or any of its Affiliates of their respective liabilities with respect to the Benefits except to the extent such amounts are paid to a Plan or a Participant from the Trust, it nevertheless being the Company’s intent that the Trust Fund shall be applied in discharge of the Company’s legal obligations as provided in this Trust Agreement.

8.5. Trustee as Holder of Legal Title to Trust Assets. Subject to Section 17 hereof, the Trustee shall hold legal title to all assets in the Trust for the benefit of the Participants and Employees.

8.6. Federal Income Tax Consequences of the Trust. The Trust Fund may be applied in the discharge of legal obligations of the Company as provided herein. Accordingly, the Company shall take into account in computing its tax liability, those items of income, deductions and credits against tax attributable to assets held in the Trust to which the Company would have been entitled had the Trust not been in existence. The Trustee shall notify the Company promptly after it becomes aware of any tax liability assessed against, or imposed upon, the Trust or the Trustee in its capacity as Trustee of the Trust. The Company shall be responsible for all matters in respect of such assessment or imposition, and shall have sole responsibility for any defense in connection therewith. Payments in respect of any tax liability of the Company arising in connection with earnings, gains or activities relating to the Trust, including, without limitation, interest and penalties, shall be made from the Trust Fund after a final determination of such liability, unless the Company promptly pays such liability.

In the event the assets of the Trust are insufficient to pay such liability, any deficit shall be paid promptly by the Company.

8.7. Reversion to the Company. Notwithstanding the foregoing provisions of this Section 8, to the extent that Company Stock held by the Trust has not been transferred to Participants in accordance with the terms of this Trust Agreement, such Company Stock shall revert to the Company upon the termination of the Trust.

SECTION 9. Expenses, Compensation and Indemnification.

9.1. Compensation. The Company shall pay the Trustee compensation in such amount as is mutually agreed upon from time to time between the Company and the Trustee and documented in one or more written agreements. The Company acknowledges that, as part of the Trustee’s compensation, the Trustee will earn interest on balances, including disbursement balances and balances arising from purchase and sale transactions. To the extent the Trustee advances funds to the Trust Fund for disbursements or to effect the settlement of purchase transactions, the Trustee shall be entitled to collect from the Trust Fund an amount equal to what would have been earned on the sums advanced (an amount approximating the “federal funds” interest rate). The Trustee shall not be reimbursed by the Company for any expenses incurred in connection with the implementation, management or administration of the Trust.

9.2. Charge on Trust Fund. All compensation referred to in Section 9.1 hereof shall be a charge on the Trust Fund and shall constitute a lien on the Trust Fund in favor of the Trustee and shall be payable from the Trust Fund unless paid when due by the Company.

9.3. Indemnification. The Company hereby agrees to indemnify and hold harmless the Trustee from and against any losses, costs, damages, claims or expenses, including, without limitation, reasonable attorneys’ fees, which the Trustee may incur or pay out in connection with, or otherwise arising out of:

9.3.1. The performance by the Trustee of its duties hereunder, unless any such loss, cost, damage, claim or expense is a result of negligence or willful misconduct by the Trustee or the breach by the Trustee of its fiduciary duties hereunder; or

9.3.2. Any action taken by the Trustee in good faith pursuant to the written direction of the Company, any Participant or any Participant’s beneficiaries or any action omitted to be taken by the Trustee because any direction required by the Trust Agreement to be given to the Trustee by the Company, any Participant or any Participant’s beneficiaries has not been given to the Trustee.

In the event that any action or regulatory proceeding shall be commenced or claim asserted which may entitle the Trustee to be indemnified hereunder, the Trustee shall give the Company written notice of such action or claim promptly after becoming aware of such commencement or assertion unless the Company has otherwise received notice of such action or claim. The Company shall be entitled to participate in and, upon notice to the Trustee, assume the defense of, any such action or claim using counsel reasonably acceptable to the Trustee. The Trustee shall cooperate with the Company in connection with the defense

of any such action or claim. Subject to Section 17, the Trustee shall have no claim on the assets of the Trust Fund in respect of amounts payable to the Trustee under this Section 9.3.

9.4. Force Majeure. The Trustee shall not be responsible or liable for any losses to the Trust Fund resulting from nationalization, expropriation, devaluation, seizure or similar action by any governmental authority, de facto or de jure; or enactment, promulgation, imposition or enforcement by any such governmental authority of currency restrictions, exchange controls, levies or other charges affecting the property; or acts of war, terrorism, insurrection or revolution; or acts of God; or any other similar event beyond the control of the Trustee or its agents. This Section 9.4 shall survive the termination of this Trust Agreement.

9.5. Payment from Trust Fund. All payments of compensation referred to in Sections 9.1 hereof may be made without approval or direction of the Company.

SECTION 10. Administration and Records.

10.1. Records. Subject to Sections 7.1 and 7.2, the Trustee shall keep or cause to be kept accurate and detailed accounts of any investments, receipts, disbursements and other transactions hereunder and all accounts, books and records relating thereto shall be open to inspection and audit at all reasonable times by any person designated by the Company. The Trustee shall preserve all such accounts, books and records, in original form or on microfilm, magnetic tape or any other similar process, for such period as the Trustee may determine, but the Trustee may destroy such accounts, books and records only after first notifying the Company in writing of its intention to do so and transferring to the Company, subject to Sections 7.1 and 7.2 hereof, any of such accounts, books and records that the Company shall request.

10.2. Settlement of Accounts. Subject to Sections 7.1 and 7.2 hereof, within 60 days after the close of each calendar year, and within 60 days after the removal or resignation of the Trustee or the termination of the Trust (or any portion thereof), the Trustee shall file with the Company a written account setting forth all investments, receipts, disbursements and other transactions effected by it with respect to the Trust during the preceding calendar year or during the period from the close of the preceding calendar year to the date of such removal, resignation or termination, including a description of all investments and securities purchased and sold, with the cost or net proceeds of such purchases or sales, and showing all cash, securities and other property held at the end of such calendar year or other period.

It shall be the duty of the Company to review such written account promptly within 90 days from the date of filing any such account and if, within such 90-day period, the Company does not file with the Trustee a written notice of objection to any of the Trustee’s acts or transactions, the initial account shall become an account stated between the Trustee and the Company. If the Company files a written notice of objection with the Trustee, the Trustee may file with the adjusted account, in which case it shall be the duty of the Company to review such adjusted account promptly within 30 days from the date of its filing. If, within such 30-day period, the Company fails to file a written notice of objection to any of the Trustee’s acts or transactions as so adjusted with the Trustee, the adjusted account shall become an account

stated between the Trustee and the Company. Unless an account is fraudulent, when it becomes an account stated it shall be finally settled, and the Trustee shall, to the maximum extent permitted by applicable law, be forever released and discharged from all liability and accountability with respect to the propriety of its acts and transactions shown in such account.

10.3. Audit. The Trustee shall from time to time permit an independent public accountant selected by the Company to have access during ordinary business hours to such records as may be necessary to audit the Trustee’s accounts.

10.4. Judicial Settlement. Nothing contained in this Trust Agreement shall be construed as depriving the Trustee or the Company of the right to have a judicial settlement of the Trustee’s accounts. Upon any proceeding for a judicial settlement of the Trustee’s accounts or for instructions, the only necessary party thereto in addition to the Trustee shall be the Company.

10.5. Delivery of Records to Successor. In the event of the removal or resignation of the Trustee, the Trustee shall deliver to the successor Trustee all records which shall be required by the successor Trustee to enable it to carry out the provisions of this Trust Agreement.

10.6. Tax Filings. In addition to any returns required of the Trustee by law (e.g., any information return required to be filed on IRS Form 1041), the Trustee shall prepare and file such tax reports and other returns as the Company and the Trustee may from time to time agree.

SECTION 11. Removal or Resignation of the Trustee and Designation of Successor Trustee.

11.1. Removal. At any time prior to the occurrence of a Change in Control, the Company may remove the Trustee with or without cause upon at least 60 days’ notice in writing to the Trustee. At any time after the occurrence of a Change in Control, the Trustee may not be removed except by order of a court of competent jurisdiction. No removal of the Trustee shall be effective until the Company has appointed in writing a successor Trustee, and such successor Trustee has accepted the appointment in writing.

11.2. Resignation. The Trustee may resign at any time upon at least 90 days’ notice in writing to the Company, except that any such resignation shall not be effective until the Company has appointed in writing a successor Trustee, and such successor Trustee has accepted the appointment in writing. At any time after 60 days following the sending of such notice of resignation, if the Company is unable to appoint a successor Trustee or if a successor Trustee has not accepted an appointment, the Trustee shall be entitled, at the expense of the Company, to petition a United States District Court or any of the courts of the State of California or other court having jurisdiction to appoint its successor.

11.3. Successor Trustee. Subject to Section 2.1 hereof, each successor Trustee, during such period as it shall act as such, shall have the powers and duties herein conferred upon the Trustee, and the word “Trustee” wherever used herein, except where the context otherwise requires, shall be deemed to include any successor Trustee. Upon

designation of a successor Trustee and delivery to the resigned or removed Trustee of written acceptance by the successor Trustee of such designation, such resigned or removed Trustee shall promptly assign, transfer, deliver and pay over to such Trustee, in conformity with the requirements of applicable law, the funds and properties in its control or possession then constituting the Trust Fund.

SECTION 12. Enforcement of Trust Agreement.

12.1. Rights of Parties to Enforce the Trust Agreement. The Company and the Trustee shall have the right to enforce any provision of this Trust Agreement. In any action or proceeding affecting the Trust, the only necessary parties shall be the Company and the Trustee and, except as otherwise required by applicable law, no other person shall be entitled to any notice or service of process. Any judgment entered in such an action or proceeding shall, to the maximum extent permitted by applicable law, be binding and conclusive on all persons having or claiming to have any interest in the Trust or any Plan.

12.2. Limitation on Rights of Participants and Beneficiaries. Neither the Plans nor any Participant or Beneficiary shall have any rights with respect to the Trust Fund, no Plan shall be deemed to have any beneficial interest in the Trust Fund and no Employee shall be deemed to have any beneficial interest in the Trust Fund arising from his participation in any particular Plan.

SECTION 13. Termination.

13.1. Termination upon Specific Events. The Trust shall be terminated as soon as practicable after the Trustee has received written notice from the Committee that one or more of the following events has occurred:

13.1.1. In the Committee’s sole discretion, the Department of Labor or a court of competent jurisdiction has determined or would be likely to determine that the assets of the Trust are subject to Part 4 of Subtitle B of Title I of ERISA, or

13.1.2. In the Committee’s sole discretion, the Internal Revenue Service or a court of competent jurisdiction has determined or would be likely to determine that any portion of the Trust Fund is presently taxable to any Participant or Beneficiary.

In the event of a termination pursuant to this Section 13.1, the Company shall provide the Trustee with a Participant Schedule and the addresses of all Participants, and the Trustee shall distribute all assets then constituting the Trust Fund to all Participants listed on the Participant Schedule in an equal amount per Participant.

13.2. Termination in Other Events. Notwithstanding anything herein to the contrary, the Trust shall terminate on the earliest of (a) 21 years following the death of the youngest Participant included on the Participant Schedule received by the Trustee in 2004, (b) the date on which the Committee informs the Trustee in writing that the Company and its Affiliates have no obligations under any Plans (or the date on which there are no Plans), or (c) the date on which the Trust contains no assets and retains no claims to recover assets from the Company and its Affiliates pursuant to any provision hereof. In the event of a termination

described in clauses (a) or (b) of this Section 13.2, the Trustee shall distribute the assets remaining in the Trust Fund to all Participants listed on the Participant Schedule in an equal amount per Participant.

13.3. Limitation on Trustee Liability Upon Total Distribution; Continuation of Trustee Powers. Upon a total distribution of the Trust assets pursuant to Sections 8 or 13, the Trustee shall be relieved from all further liability. The powers of the Trustee hereunder shall continue so long as any assets of the Trust remain in its hands.

13.4. Nonapplicability of ERISA. Notwithstanding anything herein to the contrary, no amount shall be distributed to any Participant pursuant to this Section 13 if such distribution could, in the opinion of independent counsel, cause the Trust to be subject to ERISA (other than as an unfunded plan described in Section 201(2) of ERISA). Prior to a distribution pursuant to this Section, the Committee shall provide the Trustee with a Participant Schedule (taking into account this Section 13.4).

13.5. Reversion to the Company. Notwithstanding anything in this Trust Agreement to the contrary, if an event of termination has occurred and Company Stock held by the Trust has not been transferred to Participants in accordance with the terms of this Trust Agreement, such Company Stock shall revert to the Company.

SECTION 14. Amendment.

14.1. Amendments in General. The Company may, in its sole discretion, from time to time amend, in whole or in part, any or all of the provisions of this Trust Agreement, including, without limitation, by adding to, or subtracting from, Schedule A hereto one or more “pension plans” or “welfare plans” (within the meaning of ERISA) or plans or arrangements that are not “pension plans” or “welfare plans” (within the meaning of ERISA); provided that, (a) in making any modification to Schedule A hereto, the Company shall act in good faith taking into account the best interests of a broad cross-section of employees, and (b) the Company shall ensure that at all times Schedule A shall include at least one Plan that is not a “pension plan” or “welfare plan” within the meaning of ERISA. No amendment to this Trust Agreement or the Plans shall be made that would (a) purport to alter the irrevocable character of the Trust, (b) without the Trustee’s prior written consent, adversely affect the Trustee’s rights, increase the Trustee’s duties or responsibilities or decrease the Trustee’s compensation hereunder, (c) without the prior written consent of a majority of the Participants, adversely affect the Participants’ rights under the Plan, or (d) decrease the Trustee’s compensation hereunder or alter Sections 1.8, 2, 4, 6, 7, 8, 13 or 14.1.

14.2. Nonapplicability of ERISA; Preventing Current Taxation. Notwithstanding Section 14.1, the Company may amend this Trust Agreement from time to time in such a manner as may be necessary, in the opinion of independent counsel, to prevent this Trust Agreement or the Trust from becoming subject to ERISA and to prevent the current taxation of the Trust Fund to Participants.

SECTION 15. Nonalienation.

15.1. Prohibition Against Certain Transfers, Pledges, Etc. Except as otherwise provided by this Trust Agreement and except as otherwise may be required by applicable law, (a) no amount payable to or in respect of any Plan, Participant or Employee at any time under the Trust shall be subject in any manner to alienation by anticipation, sale, transfer, assignment, bankruptcy, pledge, attachment, charge, or encumbrance of any kind, and any attempt to so alienate, sell, transfer, assign, pledge, attach, charge, or otherwise encumber any such amount, whether presently or thereafter payable, shall be void, and (b) the Trust Fund shall in no manner be liable for or subject to the debts or liabilities of any Participant.

SECTION 16. Communications.

16.1. To the Company, Board of Directors and Committee. Communications to the Company, the Board of Directors and the Committee shall be addressed to:

Beckman Coulter, Inc.

4300 North Harbor Boulevard

Fullerton, CA 92835

Attention: Treasurer

with a copy to:

Beckman Coulter, Inc.

4300 North Harbor Boulevard

Fullerton, CA 92835

Attention: Office of General Counsel

provided, however, that upon the Company’s written request, such communications shall be sent to such other address as the Company may specify.

16.2. To the Trustee. Communications to the Trustee shall be addressed to:

Wells Fargo Bank, N.A.

Institutional Trust Operations

P.O. Box 63050

San Francisco, CA 94163

with a copy to:

Wells Fargo Bank, N.A.

Institutional Trust Services

4365 Executive Drive, 17^th Floor

San Diego, CA 92121

provided, however, that upon the Trustee’s written request, such communications shall be sent to such other address as the Trustee may specify.

16.3. To a Participant. Communications to a Participant or to his Beneficiaries shall be addressed to the Participant or his Beneficiaries, respectively, at the address indicated on the Company’s records as in effect at the time of the communication, which the Company shall provide to the Trustee upon the Trustee’s request.

16.4. Binding upon Receipt. No communication shall be binding on the Trustee until it is received by the Trustee, and no communication shall be binding on the Company, the Board of Directors or the Committee until it is received by the Company, the Board of Directors or the Committee, respectively, and no communication shall be binding on a Participant or the Participant’s Beneficiaries until it is received by the Participant or the Participant’s Beneficiaries, respectively.

16.5. Authority to Act. The secretary of the Company shall from time to time certify to the Trustee the person or persons authorized to act for the Company, the Committee and the Board of Directors, and shall provide the Trustee with such information regarding the Company as the Trustee may reasonably request. The Trustee may continue to rely on any such certification until notified to the contrary.

16.6. Authenticity of Instruments. The Trustee shall be fully protected in acting upon any instrument, certificate or paper reasonably believed by it to be genuine and to be signed or presented by the proper person or persons, and the Trustee shall be under no duty to make any investigation or inquiry as to any statement contained in any such writing but may accept the same as conclusive evidence of the truth and accuracy of the statements therein contained.

SECTION 17. Claims of the Company’s Bankruptcy Creditors.

17.1. Bankruptcy Creditors. In the event of the Company’s “insolvency,” the assets of the Trust shall be available to pay the claims of any creditor of the Company to whom a distribution may be made in accordance with state and federal bankruptcy laws. The Company shall be deemed to be “insolvent” if it is either (a) unable to pay its debts and liabilities as they become due, or (b) subject to a pending proceeding as a debtor under the federal bankruptcy code (or any successor federal statute) or any state bankruptcy code. In the event the Company becomes insolvent, the Board of Directors and the Chief Executive Officer of the Company shall notify the Trustee of the event as soon as practicable. Upon receipt of such notice, or if the Trustee receives other written allegations of the Company’s insolvency from a third party considered by the Trustee to be reliable and responsible, the Trustee shall cease making any distributions from the assets of the Trust, shall hold the assets in the Trust for the benefit of the Company’s creditors and shall take such steps as are necessary to determine within a reasonable period of time whether the Company is insolvent. In making such determination, the Trustee may rely upon a certificate of the Board of Directors and the Chief Executive Officer of the Company or a determination by a court of competent jurisdiction that the Company is or is not insolvent. In the case of the Trustee’s determination of the Company’s insolvency, the Trustee will deliver assets of the Trust to satisfy claims of the Company’s creditors as directed pursuant to a final order of a court of competent jurisdiction.

17.2. Resumption of Benefits; Restoration of Accounts. In the event the Trustee ceases making distributions by reason of Section 17.1, the Trustee shall resume making distributions pursuant to Sections 4 or 13 of this Agreement only after the Trustee has determined that the Company is no longer insolvent or upon receipt of an order of a court of competent jurisdiction requiring such distributions. In making any determination under this Section 17, the Trustee may rely upon a certificate of the Board of Directors and the Chief Executive Officer of the Company.

SECTION 18. Consolidation, Merger or Sale of the Company.

18.1. Consolidation, Merger or Sale of the Company. Effective upon consolidation of the Company with, or merger of the Company into, any corporation or corporations, or any sale or conveyance of all or substantially all of the assets of the Company, the Trustee shall deal with the corporation formed by such consolidation, or with or into which the Company is merged, or the person that acquires the assets of the Company, on the same basis as it dealt with the Company prior to such transactions and, in such event, the term “Company” within this Agreement shall mean such corporation or person.

SECTION 19. Miscellaneous Provisions.

19.1. Binding Effect. This Trust Agreement shall be binding on the Company and the Trustee and their respective successors and assigns.

19.2. Inquiry as to Authority. A third party dealing with the Trustee shall not be required to make inquiry as to the authority of the Trustee to take any action nor be under any obligation to follow the proper application by the Trustee of the proceeds of sale of any property sold by the Trustee or to inquire into the validity or propriety of any act of the Trustee.

19.3. Responsibility for Company Action. The Trustee assumes no obligation or responsibility with respect to any action required by this Trust Agreement on the part of the Company, the Board of Directors, the Committee, any Affiliate, the Participants or any Beneficiaries. The Trustee shall be under no duties except such duties as are specifically set forth as such in this Trust Agreement or under applicable law, and no implied covenant or obligation shall be read into this Trust Agreement against the Trustee.

19.4. Successor to Trustee. Subject to Section 2.1, any corporation into which the Trustee may be merged or with which it may be consolidated, or any corporation resulting from any merger, reorganization or consolidation to which the Trustee may be a party, or any corporation to which all or substantially all the trust business of the Trustee may be transferred shall be the successor of the Trustee hereunder without the execution or filing of any instrument or the performance of any act.

19.5. Intercompany Agreements. The Company may require any Affiliate to enter into such other agreement or agreements as it shall deem necessary to obligate such Affiliate to reimburse the Company for any other amounts paid by the Company hereunder, directly or indirectly, in respect of such Affiliate’s employees.

19.6. Titles Not to Control. Titles to the Sections of this Trust Agreement are included for convenience only and shall not control the meaning or interpretation of any provision of this Trust Agreement.

19.7. Laws of the State of California to Govern. This Trust Agreement and the Trust established hereunder shall be governed by and construed, enforced and administered in accordance with the laws of the State of California, without reference to the principles of conflicts of law thereof.

19.8. Fractional Shares. Notwithstanding anything herein to the contrary, the Trustee may distribute any fractional share otherwise required to be distributed to Administrators or Participants pursuant to Sections 8 or 13, in cash in an amount equal to the Daily Value, multiplied by such fraction.

19.9. Entire Agreement. This Trust Agreement sets forth the entire agreement and understanding of the Company and the Trustee with respect to the subject matter hereof and supersedes all prior oral or written agreements, understandings, negotiations, discussions and commitments related to the subject matter hereof. In the event the Company and the Trustee enter into one or more additional agreements in the future and one or more provisions of such future agreements conflicts with the terms of this Trust Agreement, the provisions of this Trust Agreement shall be controlling unless expressly provided otherwise.

IN WITNESS WHEREOF, this Trust Agreement has been duty executed by the parties hereto as of the day and year first above written.

		BECKMAN COULTER, INC.


		By:		/s/ James J. Glover
Attest:	/s/ William H. May


		WELLS FARGO BANK, N.A., as Trustee


		By:	/s/ Marianne Nelson
Attest:	/s/ Chris Gold

SCHEDULE A

BECKMAN COULTER, INC.
BENEFIT EQUITY FUND
WELLS FARGO BANK, N.A. TRUSTEE

LIST OF PLANS

Beckman Coulter, Inc. Incentive Compensation Plan of 1990

Beckman Coulter, Inc. Stock Option Plan for Non-Employee Directors

Beckman Coulter, Inc. 1998 Incentive Compensation Plan

Beckman Coulter, Inc. 2004 Long-Term Performance Plan

Beckman Coulter, Inc. Employees’ Stock Purchase Plan (U.S. and Canada)

Beckman Coulter, Inc. Savings Plan

Beckman Coulter, Inc. Option Gain Deferral Program

SCHEDULE B

BECKMAN COULTER, INC.
BENEFIT EQUITY FUND
WELLS FARGO BANK, N.A., TRUSTEE

MINIMUM DISTRIBUTION SCHEDULE
AS OF OCTOBER 5, 2004

YEAR	SHARES REMAINING BEGINNING OF YEAR	SHARES DEPOSITED	MINIMUM DISTRIBUTION	SHARES REMAINING END OF YEAR
2004	5,000,000	5,000,000	—	5,000,000
2005	4,800,000	—	200,000	4,600,000
2006	4,600,000	—	200,000	4,400,000
2007	4,400,000	—	200,000	4,200,000
2008	4,200,000	—	200,000	4,000,000
2009	4,000,000	—	200,000	3,800,000
2010	3,800,000	—	200,000	3,600,000
2011	3,600,000	—	200,000	3,400,000
2012	3,400,000	—	200,000	3,200,000
2013	3,200,000	—	200,000	3,000,000
2014	3,000,000	—	200,000	2,800,000
2015	2,800,000	—	200,000	2,600,000
2016	2,600,000	—	200,000	2,400,000
2017	2,400,000	—	200,000	2,200,000
2018	2,200,000	—	200,000	2,000,000
2019	2,000,000	—	200,000	1,800,000
2020	1,800,000	—	200,000	1,600,000
2021	1,600,000	—	200,000	1,400,000
2022	1,400,000	—	200,000	1,200,000
2023	1,200,000	—	200,000	1,000,000
2024	1,000,000	—	200,000	800,000
2025	800,000	—	200,000	600,000
2026	600,000	—	200,000	400,000
2027	400,000	—	200,000	200,000
2028	200,000	—	200,000	—

EX-15 3 a04-12398_1ex15.htm EX-15

Exhibit 15

Report of Independent Registered Public Accounting Firm

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, 2004, the related condensed consolidated statements of operations for the three-month and nine-month periods ended September 30, 2004 and 2003, and the condensed consolidated statements of cash flows for the nine-month periods ended September 30, 2004 and 2003. These condensed consolidated financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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 standards of the Public Company Accounting Oversight Board (United States), 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 reviews, 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 U.S. generally accepted accounting principles.

We have previously audited, in accordance with standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Beckman Coulter, Inc. and subsidiaries as of December 31, 2003 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 29, 2004, 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, 2003, 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 29, 2004

EX-15.1 4 a04-12398_1ex15d1.htm EX-15.1

Exhibit 15.1

October 29, 2004

Beckman Coulter, Inc.
4300 N. Harbor Boulevard
Fullerton, CA 92834-3100

Re: Registration Statement No. 333-114457, 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 29, 2004 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 5 a04-12398_1ex31.htm EX-31

Exhibit 31

Rule 13a-14(a)/15d-14(a) Certifications
Chief Executive Officer

I, John P. Wareham, certify that:

1. I have reviewed this quarterly report on Form 10-Q 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) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) 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

(d) 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: November 2, 2004		/s/ JOHN P. WAREHAM
		John P. Wareham
		Chairman of the Board and Chief Executive Officer

Chief Financial Officer

I, James T. Glover, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Beckman Coulter, Inc.

(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: November 2, 2004		/s/ JAMES T. GLOVER
		James T. Glover
		Vice President and Chief Financial Officer

EX-32 6 a04-12398_1ex32.htm EX-32

Exhibit 32

Section 1350 Certifications
Chief 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, 2004 (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.

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.

Date: November 2, 2004		/s/ JOHN P. WAREHAM
		John P. Wareham
		Chairman of the Board and Chief Executive Officer

Chief Financial Officer

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

Date: November 2, 2004		/s/ JAMES T. GLOVER
		James T. Glover
		Vice President and Chief Financial Officer