Revvity (RVTY) 10-Q 2006 Q2 Quarterly report

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 July 3, 2005

or

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

Commission file number 001-5075

PerkinElmer, Inc.

(Exact name of registrant as specified in its charter)

Massachusetts	04-2052042
(State or other jurisdiction of incorporation or organization)	(I.R.S. employer identification no.)
45 William Street, Wellesley, Massachusetts	02481
(Address of principal executive offices)	(Zip Code)

(781) 237-5100

(Registrant’s telephone number, including area code)

NONE

(Former name, former address and former fiscal year, if changed since last report)

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.x Yes¨ No

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

x Yes¨ No

Number of shares outstanding of each of the issuer’s classes of common stock:

Class	Outstanding at August 8, 2005
Common Stock, $1 par value per share	130,253,974

TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	Consolidated Income Statements	3
	Consolidated Balance Sheets	4
	Consolidated Statements of Cash Flows	5
	Notes to Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
	Overview	27
	Consolidated Results of Continuing Operations	28
	Reporting Segment Results of Continuing Operations	36
	Liquidity and Capital Resources	38
	Off Balance Sheet Arrangements	41
	Application of Critical Accounting Policies and Estimates	41
	Forward-Looking Information and Factors Affecting Future Performance	44
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	47
Item 4.	Controls and Procedures	48
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	49
Item 4.	Submission of Matters to a Vote of Security Holders	49
Item 6.	Exhibits	50
Signature		51
Exhibit Index		52

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

PERKINELMER, INC. AND SUBSIDIARIES

CONSOLIDATED INCOME STATEMENTS

(Unaudited)

	Three Months Ended						Six Months Ended
	July 3, 2005			June 27, 2004			July 3, 2005			June 27, 2004
	(In thousands except per share data)						(In thousands except per share data)
Sales	$	425,546		$	412,080		$	841,433		$	804,346
Cost of sales		254,571			245,506			501,156			484,961
Research and development expenses		22,900			21,539			46,479			41,417
Selling, general and administrative expenses		97,673			97,214			199,880			192,535
Restructuring charges, net		14,935			—			14,935			—
Amortization of intangible assets		7,400			7,077			14,732			14,178
In-process research and development charge		—			—			194			—
Losses (gains) on dispositions, net		397			—			397			(363	)
Operating income from continuing operations		27,670			40,744			63,660			71,618
Interest expense, net		7,475			8,917			15,259			18,207
Extinguishment of debt		6,210			366			6,210			1,532
(Gains) losses on dispositions of investments and other, net		(5,794	)		578			(5,300	)		(342	)
Interest and other expense, net		7,891			9,861			16,169			19,397
Income from continuing operations before income taxes		19,779			30,883			47,491			52,221
(Benefit from) provision for income taxes		(14,330	)		8,704			(6,762	)		14,832
Income from continuing operations		34,109			22,179			54,253			37,389
Loss from discontinued operations, net of income taxes		(409	)		(1,344	)		(801	)		(3,085	)
Loss on disposition of discontinued operations, net of income taxes		(4,802	)		—			(4,725	)		(198	)
Net income	$	28,898		$	20,835		$	48,727		$	34,106
Basic earnings (loss) per share:
Continuing operations	$	0.26		$	0.17		$	0.42		$	0.29
Loss from discontinued operations, net of income tax		—			(0.01	)		(0.01	)		(0.02	)
Loss on disposition of discontinued operations, net of income tax		(0.04	)		—			(0.04	)		—
Net income	$	0.22		$	0.16		$	0.38		$	0.27
Diluted earnings (loss) per share:
Continuing operations	$	0.26		$	0.17		$	0.41		$	0.29
Loss from discontinued operations, net of income tax		—			(0.01	)		(0.01	)		(0.02	)
Loss on disposition of discontinued operations, net of income tax		(0.04	)		—			(0.04	)		—
Net income	$	0.22		$	0.16		$	0.37		$	0.26
Weighted average shares of common stock outstanding:
Basic		129,034			127,121			128,931			126,903
Diluted		130,718			129,362			130,887			129,148
Cash dividends per common share	$	0.07		$	0.07		$	0.14		$	0.14

The accompanying unaudited notes are an integral part of these consolidated financial statements.

3

PERKINELMER, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	July 3, 2005			January 2, 2005
	(In thousands except share and per share data)
Current assets:
Cash and cash equivalents	$	158,733		$	197,513
Accounts receivable, net		269,216			286,927
Inventories		192,919			192,518
Other current assets		74,623			68,874
Current assets of discontinued operations		552			1,798
Total current assets		696,043			747,630
Property, plant and equipment:
At cost		619,092			628,793
Accumulated depreciation		(403,611	)		(393,726	)
Net property, plant and equipment		215,481			235,067
Marketable securities and investments		9,220			10,479
Intangible assets, net		411,120			397,445
Goodwill		1,058,715			1,073,869
Other assets		101,847			110,016
Long-term assets of discontinued operations		—			1,001
Total assets	$	2,492,426		$	2,575,507
Current liabilities:
Short-term debt	$	5,887		$	9,714
Accounts payable		145,372			145,859
Accrued restructuring costs and integration costs		14,538			3,045
Accrued expenses		300,071			286,313
Current liabilities of discontinued operations		4,570			1,036
Total current liabilities		470,438			445,967
Long-term debt		268,334			364,874
Long-term liabilities		295,953			304,581
Total liabilities		1,034,725			1,115,422
Commitments and contingencies
Stockholders’ equity:
Preferred stock — $1 par value per share, authorized 1,000,000 shares; none issued or outstanding		—			—
Common stock — $1 par value per share, authorized 300,000,000 shares; issued and outstanding 129,924,000 and 129,059,000 at July 3, 2005 and January 2, 2005, respectively		129,924			129,059
Capital in excess of par value		557,041			545,000
Unearned compensation		(7,651	)		(4,202	)
Retained earnings		763,495			732,878
Accumulated other comprehensive income		14,892			57,350
Total stockholders’ equity		1,457,701			1,460,085
Total liabilities and stockholders’ equity	$	2,492,426		$	2,575,507

The accompanying unaudited notes are an integral part of these consolidated financial statements.

4

PERKINELMER, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months Ended
	July 3, 2005			June 27, 2004
	(In thousands)
Operating activities:
Net income	$	48,727		$	34,106
Add loss from discontinued operations, net of income taxes		801			3,085
Add loss on disposition of discontinued operations, net of income taxes		4,725			198
Net income from continuing operations		54,253			37,389
Adjustments to reconcile net income from continuing operations to net cash provided by continuing operations:
Stock-based compensation		5,481			5,095
Amortization of debt discount and issuance costs		3,721			3,561
Depreciation and amortization		37,983			38,088
In-process research and development		194			—
Losses (gains) on dispositions and sales of investments, net		397			(363	)
Changes in operating assets and liabilities which provided (used) cash, excluding effects from companies purchased and divested:
Accounts receivable		4,435			10,876
Inventories		(4,750	)		(1,910	)
Accounts payable		2,177			(24,436	)
Accrued restructuring costs		11,493			(2,903	)
Accrued expenses and other		(15,112	)		18,837
Net cash provided by operating activities from continuing operations		100,272			84,234
Net cash provided (used) by operating activities from discontinued operations		38			(1,151	)
Net cash provided by operating activities		100,310			83,083
Investing activities:
Capital expenditures		(11,944	)		(8,260	)
Proceeds from dispositions of property, plant and equipment, net		6,258			2,056
Proceeds from disposition or settlement of businesses, net		6,556			—
(Cash used) proceeds received for acquisitions, net of cash acquired		(13,138	)		2,765
Net cash used in continuing operations investing activities		(12,268	)		(3,439	)
Net cash provided by discontinued operations investing activities		395			306
Net cash used in investing activities		(11,873	)		(3,133	)
Financing activities:
Prepayment of senior subordinated debt		(34,125	)		—
Prepayment of term loan debt		(70,000	)		(60,000	)
Decrease in other credit facilities		(950	)		(456	)
Proceeds from issuance of common stock		3,976			5,361
Dividends paid		(18,110	)		(17,846	)
Net cash used in financing activities		(119,209	)		(72,941	)
Effect of exchange rate changes on cash and cash equivalents		(8,008	)		(1,780	)
Net (decrease) increase in cash and cash equivalents		(38,780	)		5,229
Cash and cash equivalents at beginning of period		197,513			191,499
Cash and cash equivalents at end of period	$	158,733		$	196,728

The accompanying unaudited notes are an integral part of these consolidated financial statements.

5

PERKINELMER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(1) Basis of Presentation

The consolidated financial statements included herein have been prepared by PerkinElmer, Inc. (the “Company”), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information in footnote disclosures normally included in financial statements has been condensed or omitted in accordance with the rules and regulations of the SEC. These statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended January 2, 2005, filed with the SEC (the “2004 Form 10-K”). The balance sheet amounts at January 2, 2005 in this report were derived from the Company’s audited 2004 financial statements included in the 2004 Form 10-K. Certain prior period amounts related to discontinued operations have been reclassified to conform to the current-year financial statement presentation. The financial statements reflect all adjustments that, in the opinion of management, are necessary to present fairly the Company’s results of operations, financial position and cash flows for the periods indicated. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and classifications of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The results of operations for the six months ended July 3, 2005 and June 27, 2004 are not necessarily indicative of the results for the entire fiscal year.

In June 2005, the Company approved a plan to shut down its Fiber Optics Test Equipment business. The Company has accounted for this business as a discontinued operation in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144,Accounting for the Impairment or Disposal of Long-Lived Assets(“SFAS No. 144”).

(2) Acquisitions

In February 2005, the Company acquired the capital stock of Elcos AG, a leading European designer and manufacturer of custom light emitting diode, or LED, solutions for biomedical and industrial applications. Consideration for the transaction was approximately $15.4 million in cash at the time of closing with deferred cash consideration of approximately $1.4 million due through fiscal 2007. In addition, potential cash earn out payments of up to approximately $8.4 million are expected to be made based on the future performance of the business. The Company has accrued for such payments due to the high likelihood that the payments will be made.

Elcos’ operations are reported within the results of the Company’s Optoelectronics reporting segment. The acquisition was accounted for in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 141, and the Company has accordingly allocated the purchase price of Elcos based upon the fair values of the assets acquired and liabilities assumed. In connection with the fair valuing of the assets acquired and liabilities assumed, management, assisted by valuation consultants, performed an assessment of intangible assets using customary valuation procedures and techniques. Identifiable intangible assets included $0.2 million in acquired in-process research and development for projects that had not yet reached technological feasibility as of the acquisition date and for which no future alternative use existed. These costs were expensed on the date of the acquisition.

6

PERKINELMER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The components of the preliminary purchase price and allocation are as follows (in thousands):

Consideration and acquisition costs:
Cash payments	$	15,429
Deferred consideration		1,444
Earnout liability		8,403
Transaction costs		402
Total consideration and acquisition costs	$	25,678
Allocation of purchase price
Current assets	$	5,769
Property, plant and equipment		2,094
Other assets		181
Identifiable intangible assets:
Core and completed technologies		2,836
Customer contracts		2,626
Customer relationships		1,838
Distributor network		880
Supplier network		552
Trade names and other		621
In-process research and development		194
Goodwill		13,666
Deferred taxes on identified intangibles		(3,640	)
Liabilities assumed		(1,939	)
Total	$	25,678

(3) Losses (Gains) on Dispositions, Net

The Company recorded a net loss of $0.4 million in the second quarter of 2005 for the write-off of software. During the six months ended July 3, 2005, the Company recorded a net loss of $0.4 million related to the write-off of software, compared to a net gain of $0.4 million during the six months ended June 27, 2004 related to the sale of a building.

(4) Restructuring Charges

The Company has undertaken a series of restructuring actions related to the impact of acquisitions, divestitures and the integration of its business units. Restructuring actions in 2001 and 2002 were recorded in accordance with Emerging Issues Task Force (“EITF”) 94-3,Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring). Restructuring actions taken since 2002 were recorded in accordance with SFAS No. 146,Accounting for Costs Associated with Exit or Disposal Activities(“SFAS No. 146”). In certain instances, specifically when governmental authorities are involved in setting severance levels, SFAS No. 112,Employers’ Accounting for Postemployment Benefits,is applied. The principal actions associated with these plans related to workforce reductions and overhead reductions resulting from reorganization activities, including the closure of certain manufacturing and selling facilities. Details of these plans are discussed more fully in the Company’s 2004 Form 10-K.

For the six-month period ended July 3, 2005, the Company recorded a pre-tax restructuring charge of $6.0 million relating to its Q4 2002 and Integration restructuring plans (each of which is further described below) due to higher than expected costs associated with the closure of facilities, primarily in Europe.

7

PERKINELMER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In addition, on June 15, 2005, the Company’s management approved a plan to terminate employees in several locations as the Company shifts resources into geographic regions and product lines that are more consistent with the Company’s growth strategy. The Company completed notifying affected employees on July 1, 2005. As a result of this plan of termination, the Company recorded a pre-tax restructuring charge of $8.9 million during the second quarter of 2005 (the “Q2 2005 Plan”). The principal actions within the Q2 2005 Plan related to a workforce reduction resulting from reorganization activities within the Life and Analytical Sciences, Optoelectronics and Fluid Sciences businesses.

A description of each of the restructuring plans and the activity recorded for the six-month period ended July 3, 2005 is as follows:

Q2 2005 Plan

During the second quarter of 2005, the Company recognized a $5.3 million restructuring charge in the Life and Analytical Sciences business, a $2.9 million restructuring charge in the Optoelectronics business and a $0.7 million restructuring charge in the Fluid Sciences business. The purpose of these restructuring actions was to shift resources into geographic regions and product lines that are more consistent with the Company’s growth strategy. The principal actions in the Q2 2005 Plan comprised headcount reductions resulting from reorganization activities.

The following table summarizes the components of the Q2 2005 Plan activity for the six-month period ended July 3, 2005:

	Headcount		Severance			Abandonment of Excess Facilities			Total
	(In thousands)
Balance at January 2, 2005	—		$	—		$	—		$	—
Provision	257			8,801			140			8,941
Amounts paid	(150	)		(1,664	)		(140	)		(1,804	)
Balance at July 3, 2005	107		$	7,137		$	—		$	7,137

The Company expects that all remaining Q2 2005 Plan actions will be completed by the end of the second quarter in 2006.

Q2 2003 Plan

During 2003, the Company recognized a $2.0 million restructuring charge in the Life and Analytical Sciences business and a $0.3 million restructuring charge in the Optoelectronics business (the “Q2 2003 Plan”). The purpose of the restructuring was to further improve performance and take advantage of synergies between the Company’s former Life Sciences and Analytical Instruments businesses. The principal actions in the Q2 2003 Plan included lower headcount due to the continued integration of the Life and Analytical Sciences business in a European manufacturing facility and a customer care center as well as a headcount reduction at one of the Optoelectronics manufacturing facilities to reflect recent declining demand for several product lines.

8

PERKINELMER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table summarizes the components of the Q2 2003 Plan activity for the six-month period ended July 3, 2005:

	Severance and Separation
	(In thousands)
Balance at January 2, 2005	$	202
Amounts paid		—
Balance at July 3, 2005	$	202

During 2004, the Company completed all actions under the Q2 2003 Plan, with the exception of a headcount reduction of one person that is expected to be complete by the end of 2005.

Q4 2002 Plan

In connection with the Company’s decision to combine the Life Sciences and Analytical Instruments businesses in order to reduce costs and achieve operational efficiencies, the Company recorded a pre-tax restructuring charge of $26.0 million during the fourth quarter of 2002 (the “Q4 2002 Plan”). The Q4 2002 Plan allowed the Company to combine many business functions worldwide, with the intention to better serve its customers and more fully capitalize on the strengths of the businesses’ sales, service and research and development organizations. The principal actions in the restructuring plan included workforce reductions, closure of facilities and disposal of underutilized assets.

In the six-month period ended July 3, 2005, the Company recorded an additional provision of $5.3 million for additional costs related to closed facilities due to soft sublease markets, primarily in Europe. The following table summarizes the components of the Q4 2002 Plan for the six-month period ended July 3, 2005:

	Severance			Abandonment of Excess Facilities			Total
	(In thousands)
Balance at January 2, 2005	$	463		$	507		$	970
Provision		—			5,430			5,430
Amounts paid		(432	)		(632	)		(1,064	)
Balance at July 3, 2005	$	31		$	5,305		$	5,336

The Q4 2002 Plan resulted in the integration of the United States’ Life and Analytical Sciences sales, service and customer care centers, the integration of European customer care and finance centers, the merging of a former Life Sciences European manufacturing facility with a former Analytical Instruments European manufacturing facility and the merging of a portion of a former Life Sciences research and development European facility with a former Analytical Instruments European facility.

The Company expects to settle the remaining severance liability under the Q4 2002 Plan by the end of 2005. The Company’s current estimates of its lease commitments on unoccupied buildings under the Q4 2002 Plan extend until 2014.

Q4 2001 Plan

During the fourth quarter of 2001, in connection with the integration of Packard BioScience Company (“Packard”), which the Company acquired that quarter, and a restructuring of sales offices in Europe, the

9

PERKINELMER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Company recorded a restructuring charge of $9.2 million in the Life and Analytical Sciences segment (the “Q4 2001 Plan”). The principal actions in the Q4 2001 Plan included the closing or consolidation of several leased sales and service offices in Europe, as well as costs associated with the closure of a manufacturing facility in Europe, the closure of leased manufacturing facilities in the United States and the disposal of related assets. These actions were designed to streamline the organization and take advantage of the synergies offered by the Packard acquisition as they relate to the legacy Life and Analytical Science segment.

The following table summarizes the components of the Q4 2001 Plan for the six-month period ended July 3, 2005:

	Severance
	(In thousands)
Balance at January 2, 2005	$	1,506
Amounts paid		(259	)
Balance at July 3, 2005	$	1,247

The remaining liability under the Q4 2001 Plan relates to European severance obligations and is expected to be paid during 2005.

Integration Charges

As discussed in the Company’s 2004 Form 10-K, the Company established integration reserves relating primarily to the acquisition of Packard. In the six-month period ended July 3, 2005, the Company recorded an additional provision of $0.7 million for additional costs related to closed facilities due to soft sublease markets, primarily in Europe. While the initial accounting was contemplated in the original purchase price allocation under EITF 95-3,Recognition of Liabilities in Connection with a Purchase Business Combination,the change in estimate in the second quarter of 2005 was charged directly to restructuring.

The following table summarizes the activity in the reserves for the six-month period ended July 3, 2005:

	(In thousands)
Accrued integration costs at January 2, 2005	$	367
Provision		564
Amounts paid		(315	)
Accrued integration costs at July 3, 2005	$	616

The integration activities were completed in 2003 with the exception of payments due on leased facilities exited in 2001. The Company’s current estimates of its lease commitments extend through 2009.

(5) Inventories

Inventories consisted of the following:

	July 3, 2005		January 2, 2005
	(In thousands)
Raw materials	$	83,207	$	83,240
Work in progress		19,041		17,397
Finished goods		90,671		91,881
Total Inventories	$	192,919	$	192,518

10

PERKINELMER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(6) Debt

In December 2002, the Company entered into a senior credit facility. This facility is comprised of a six-year term loan in the amount of $315.0 million and a $100.0 million five-year revolving credit facility. This senior credit facility is secured primarily by a substantial portion of the Company’s and its subsidiaries’ domestic assets. During the second quarter, the remaining balance of $70 million was repaid under the term loan, eliminating the term loan facility. Accelerated amortization of term loan issuance fees of $1.4 million was recorded as a result of the repayment. There was no outstanding principal balance under the remaining revolving credit facility at July 3, 2005 or at any other time during the second quarter of 2005.

In January 2004, the Company entered into interest rate swap agreements (the “Swaps”) that effectively converted the fixed interest rate on $100.0 million of the Company’s 8 ⁷/8% senior subordinated notes due 2013 (the “8 ⁷/8% Notes”) to a variable interest rate which is reset semi-annually in arrears based upon six-month USD LIBOR plus 427 basis points. In January 2005, the Company swapped an additional $100.0 million of notional value at similar terms, however, the variable interest rate is based upon six-month USD LIBOR plus 412 basis points. Accordingly, the Company now pays the applicable six-month USD LIBOR rate, plus the applicable spread, on $200.0 million of its obligations represented by these notes. The Swaps have the economic effect of modifying the interest obligations associated with these notes so that the interest payable on the 8 ⁷/8% Notes effectively becomes variable. The Swaps reduced the annualized interest rate on the 8 ⁷/8% Notes by approximately 80 basis points during the six months ended July 3, 2005. The Swaps have been designated as fair value hedges and have been marked to market in the Company’s consolidated financial statements. The fair value of the Swaps as of July 3, 2005 was a loss of $0.5 million. The fair value movements in the Swaps have offset the fair value movements in the debt they have been designated to hedge.

During the second quarter of 2005, the Company repurchased a principal amount of $30 million of the 8 ⁷/8% Notes in a privately negotiated transaction. The total cost to the Company was $34.1 million which included a 13.75% premium of $4.1 million. Accelerated amortization of note discounts and issuance fees of $0.7 million was recorded as a result of the repurchase. The face value of the remaining outstanding notes as of July 3, 2005 is $270 million.

(7) Earnings Per Share

Basic earnings per share was computed by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted earnings per share was computed by dividing net income by the weighted-average number of common shares outstanding plus all potentially dilutive common stock equivalents, primarily shares issuable upon the exercise of stock options using the treasury stock method:

	Three Months Ended		Six Months Ended
	July 3, 2005	June 27, 2004	July 3, 2005	June 27, 2004
	(In thousands)		(In thousands)
Number of common shares — basic	129,034	127,121	128,931	126,903
Effect of dilutive securities
Stock options and employee stock purchase plan	1,442	1,919	1,702	1,923
Restricted stock	242	322	254	322
Number of common shares — diluted	130,718	129,362	130,887	129,148
Number of potentially dilutive securities excluded from calculation due to antidilution	9,891	5,955	8,354	6,352

11

PERKINELMER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(8) Comprehensive Income

Comprehensive income consisted of the following:

	Three Months Ended						Six Months Ended
	July 3, 2005			June 27, 2004			July 3, 2005			June 27, 2004
	(In thousands)						(In thousands)
Net income	$	28,898		$	20,835		$	48,727		$	34,106
Other comprehensive income (loss):
Foreign currency translation adjustments		(28,963	)		(5,420	)		(42,313	)		(8,234	)
Unrealized gains (losses) on securities, net of tax		16			(186	)		(145	)		(308	)
		(28,947	)		(5,606	)		(42,458	)		(8,542	)
Comprehensive income	$	(49	)	$	15,229		$	6,269		$	25,564

The components of accumulated other comprehensive income were as follows:

	July 3, 2005			January 2, 2005
	(In thousands)
Foreign currency translation adjustments	$	39,945		$	82,258
Minimum pension liability		(25,025	)		(25,025	)
Unrealized (losses) gains on securities		(28	)		117
Accumulated other comprehensive income	$	14,892		$	57,350

(9) Industry Segment Information

The accounting policies of the Company’s reportable segments are the same as those described in Note 1 of the Notes to Consolidated Financial Statements in the 2004 Form 10-K. The Company evaluates the performance of its operating segments based on operating profit. Intersegment sales and transfers are not significant. The operating segments and their principal products and services are:

• Life and Analytical Sciences.The Company is a leading provider of drug discovery, genetic screening, and environmental and chemical analysis tools, including instruments, reagents, consumables, and services.

• Optoelectronics.The Company provides a broad range of digital imaging, sensor and specialty lighting components used in the biomedical, consumer products and other specialty end markets.

• Fluid Sciences.The Company provides a variety of precision valves, seals, bellows and pneumatic joints for critical fluid control and containment systems for highly demanding environments such as turbine engines and semiconductor fabrication equipment.

12

PERKINELMER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Sales and operating profit by segment are shown in the table below:

	Three Months Ended						Six Months Ended
	July 3, 2005			June 27, 2004			July 3, 2005			June 27, 2004
	(In thousands)						(In thousands)
Life & Analytical Sciences
Sales	$	270,777		$	257,869		$	535,551		$	507,116
Operating profit		15,667			22,135			37,625			38,118
Optoelectronics
Sales		98,425			94,147			194,818			179,679
Operating profit		12,318			14,530			25,546			26,154
Fluid Sciences
Sales		56,344			60,064			111,064			117,551
Operating profit		5,761			9,181			12,573			17,490
Other
Sales		—			—			—			—
Operating loss		(6,076	)		(5,102	)		(12,084	)		(10,144	)
Continuing Operations
Sales	$	425,546		$	412,080		$	841,433		$	804,346
Operating profit		27,670			40,744			63,660			71,618

(10) Discontinued Operations

As part of its continued efforts to focus on higher growth opportunities, the Company has discontinued certain businesses. In June 2005, senior management approved a plan to shut down the Company’s Fiber Optics Test Equipment business. The results of this business were previously reported as part of the Optoelectronics reporting segment. The shut-down of this business resulted in a $5.2 million loss related to lease and severance costs and the reduction of fixed assets and inventory to net realizable value. The loss is recognized in the loss on dispositions in the three and six months ended July 3, 2005.

In September 2004, the Company’s Board of Directors approved a plan to shut down its Computer-To-Plate business. In June 2004, the Company’s Board of Directors approved a plan to shut down its Electroformed Products business and sell its Ultraviolet Lighting business. The results of these businesses were previously reported as part of the Optoelectronics reporting segment. The Company has accounted for these businesses as discontinued operations in accordance with SFAS No. 144 and, accordingly, has presented the results of operations and related cash flows as discontinued operations for all periods presented. The assets and liabilities of these businesses have been presented separately and are reflected within the assets and liabilities from discontinued operations in the accompanying balance sheets as of July 3, 2005 and January 2, 2005. During the second quarter of 2005, the Electroformed Products business recorded a gain of $0.1 million related to the sale of previously written-off assets. During the six month periods ended July 3, 2005 and June 27, 2004, the Electroformed Products business recorded losses of $0.1 million and $1.2 million, respectively, related to the write-off of certain machinery and equipment. The activity has been included in gain (loss) on dispositions of discontinued operations.

During June 2002, the Company’s Board of Directors approved separate plans to shut down its Telecommunications Component and sell its Entertainment Lighting businesses. During the six month period ended July 3, 2005, the Telecommunications Component business recorded activity related to the sale of previously written-off assets. This activity resulted in a gain of $0.1 million that was recognized in the second

13

PERKINELMER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

quarter of 2005, for a total gain of $0.3 million for the six month period ended July 3, 2005. During the first quarter of 2004, the Entertainment Lighting business recorded activity related to the sale of previously written-off assets of $0.3 million. These amounts have been included in gain (loss) on dispositions of discontinued operations.

During the six month periods ended July 3, 2005 and June 27, 2004, the Company settled various claims under certain long-term contracts with the Company’s former Technical Services business, which was sold in August 1999. The net settlements resulted in gains of $0.4 million and $0.8 million that were recognized in the second quarter of 2005 and the first quarter of 2004, respectively. These amounts have been included in gain (loss) on dispositions of discontinued operations.

The table below summarizes the gains and losses on dispositions of discontinued operations, as discussed above:

	Three Months Ended					Six Months Ended
	July 3, 2005			June 27, 2004		July 3, 2005			June 27, 2004
	(In thousands)					(In thousands)
Loss on Fiber Optics Test Equipment business	$	(5,151	)	$	—	$	(5,151	)	$	—
Gain on contract settlements associated with the Technical Services business		400			—		400			757
Gain (loss) on Telecommunications Component business		106			—		346			(184	)
Gain (loss) on Electroformed Products business		63			—		(84	)		(1,160	)
Loss on Entertainment Lighting business		—			—		30			255
Net loss on dispositions of discontinued operations before income taxes		(4,582	)		—		(4,459	)		(332	)
Provision (benefit) for income taxes		220			—		266			(134	)
Loss on dispositions of discontinued operations, net of income taxes	$	(4,802	)	$	—	$	(4,725	)	$	(198	)

Summary operating results of the discontinued operations of the Electroformed Products, Ultraviolet Lighting, Computer-To-Plate and Fiber Optics Test Equipment businesses for the periods prior to disposition were as follows:

	Three Months Ended						Six Months Ended
	July 3, 2005			June 27, 2004			July 3, 2005			June 27, 2004
	(In thousands)						(In thousands)
Sales	$	298		$	2,561		$	741		$	3,991
Costs and expenses		714			4,371			1,553			7,979
Operating loss from discontinued operations		(416	)		(1,810	)		(812	)		(3,988	)
Other income, net		7			95			11			91
Operating loss from discontinued operations before income taxes		(409	)		(1,715	)		(801	)		(3,897	)
Benefit for income taxes		—			(371	)		—			(812	)
Loss from discontinued operations, net of taxes	$	(409	)	$	(1,344	)	$	(801	)	$	(3,085	)

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PERKINELMER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(11) Stock-Based Compensation

As allowed by SFAS No. 123,Accounting for Stock-Based Compensation, the Company has elected to account for stock-based compensation at intrinsic value with disclosure of the effects of fair value accounting on net income and earnings per share on a pro forma basis. The Company accounts for these plans under the recognition and measurement principles of APB Opinion No. 25,Accounting for Stock Issued to Employees (“APB No. 25)and related interpretations. No stock-based employee compensation cost related to stock options is reflected in net income, as all options granted under those plans had an exercise price at least equal to the market value of the underlying common stock on the date of grant.

The Company has issued restricted stock to certain employees that vests over time and has reflected the fair value of these awards as unearned compensation until the restrictions are released and the compensation is earned. In addition, the Company has awarded performance-contingent restricted stock to certain executive officers that vests only upon achievement of specific performance targets within three years. If the performance targets are not achieved within the three-year period, the shares are forfeited. These shares were awarded under the Company’s 2001 Incentive Plan. Under APB No. 25, the compensation expense associated with the fair market value of these awards is variable; that is, the expense is determined based on the then-current stock price at the end of each quarter and is recognized over the period that the performance targets are expected to be achieved.

The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123.

	Three Months Ended						Six Months Ended
	July 3, 2005			June 27, 2004			July 3, 2005			June 27, 2004
	(In thousands, except per share)						(In thousands, except per share)
Net income as reported	$	28,898		$	20,835		$	48,727		$	34,106
Add: Stock-based employee compensation expense included in net income, net of related tax effects		693			526			1,136			897
Deduct: Total stock-based employee compensation expense determined under fair market value method for all awards, net of related tax effects		(3,339	)		(4,376	)		(6,881	)		(8,696	)
Pro forma net income	$	26,252		$	16,985		$	42,982		$	26,307
Earnings per share:
Basic — as reported	$	0.22		$	0.16		$	0.38		$	0.27
Basic — pro forma	$	0.20		$	0.13		$	0.33		$	0.21
Diluted — as reported	$	0.22		$	0.16		$	0.37		$	0.26
Diluted — pro forma	$	0.20		$	0.13		$	0.33		$	0.20

In December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 123R,Share-Based Payment (“SFAS No. 123R”). This Statement is a revision of SFAS No. 123, and supersedes ABP No. 25, and its related implementation guidance. SFAS No. 123R focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. SFAS 123R requires entities to recognize stock compensation expense for awards of equity instruments to employees based on the grant-date fair value of those awards (with limited exceptions). SFAS No. 123R is effective for the Company’s first quarter of 2006.

15

PERKINELMER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Company expects to adopt SFAS No. 123R using the Statement’s modified prospective application method. Adoption of SFAS No. 123R is expected to increase stock compensation expense, and the Company is currently evaluating the impact that the adoption of SFAS No. 123R will have on its financial results.

(12) Goodwill and Intangible Assets

In accordance with SFAS No. 142,Goodwill and other Intangible Assets, the Company is required to test goodwill for impairment at the reporting unit level upon initial adoption and at least annually thereafter. As part of the Company’s on-going compliance with SFAS No. 142, the Company, assisted by valuation consultants, completed its annual assessment of goodwill using a measurement date of January 3, 2005. The results of this annual assessment resulted in no impairment charge.

The changes in the carrying amount of goodwill for the period ended July 3, 2005 from January 2, 2005 are as follows:

	Life and Analytical Sciences			Optoelectronics			Fluid Sciences		Consolidated
	(In thousands)
Balance, January 2, 2005	$	1,005,224		$	37,803		$	30,842	$	1,073,869
Foreign currency translation		(27,135	)		(1,516	)		—		(28,651	)
Elcos acquisition		—			13,666			—		13,666
Purchasing accounting adjustment		(169	)					—		(169	)
Balance, July 3, 2005	$	977,920		$	49,953		$	30,842	$	1,058,715

Intangible asset balances at July 3, 2005 and January 2, 2005 were as follows:

	July 3, 2005			January 2, 2005
	(In thousands)
Patents	$	95,578		$	95,779
Less: Accumulated depreciation		(41,675	)		(37,390	)
Net patents		53,903			58,389
Licenses		68,900			49,439
Less: Accumulated depreciation		(20,399	)		(17,809	)
Net licenses		48,501			31,630
Core technology		217,383			208,692
Less: Accumulated depreciation		(67,832	)		(60,299	)
Net core technology		149,551			148,393
Net amortizable intangible assets		251,955			238,412
Non-amortizing intangible assets, primarily trademarks and trade names		159,165			159,033
TOTALS	$	411,120		$	397,445

During the second quarter of 2005, the Company entered into two revenue sharing program agreements with a major aerospace customer under which the Company will supply component parts for two aircraft engine

16

PERKINELMER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

programs to the customer and will earn revenue on spare-parts sales over the life of the programs. The Company paid participation fees to the customer which have been recorded as licenses in long-lived intangible assets.

(13) Warranty Reserves

The Company provides warranty protection for certain products for periods ranging from one to three years beyond the date of sale. The majority of costs associated with warranty obligations include the replacement of parts and the time of service personnel to respond to repair and replacement requests. A warranty reserve is recorded based upon historical results, supplemented by management’s expectations of future costs. A summary of warranty reserve activity for the three and six months ended July 3, 2005 and June 27, 2004 is as follows:

	Three Months Ended						Six Months Ended
	July 3, 2005			June 27, 2004			July 3, 2005			June 27, 2004
	(In thousands)						(In thousands)
Balance beginning of period	$	9,987		$	10,036		$	10,021		$	9,796
Provision		3,362			3,358			6,632			6,637
Charges		(3,463	)		(3,349	)		(6,688	)		(6,382	)
Other		(201	)		(93	)		(280	)		(99	)
Balance end of period	$	9,685		$	9,952		$	9,685		$	9,952

(14) Employee Benefit Plans

Net periodic benefit cost (credit) included the following components for the three and six months ended July 3, 2005 and June 27, 2004:

	Defined Benefit Pension Benefits						Post-Retirement Medical Benefits
	Three Months Ended
	July 3, 2005			June 27, 2004			July 3, 2005			June 27, 2004
	(In thousands)
Service cost	$	1,637		$	1,647		$	34		$	35
Interest cost		5,727			5,405			125			128
Expected return on plan assets		(5,636	)		(5,553	)		(197	)		(178	)
Net amortization and deferral		1,161			394			(123	)		(118	)
Net periodic benefit cost (credit)	$	2,889		$	1,893		$	(161	)	$	(133	)

	Defined Benefit Pension Benefits						Post-Retirement Medical Benefits
	Six Months Ended
	July 3, 2005			June 27, 2004			July 3, 2005			June 27, 2004
	(In thousands)
Service cost	$	3,334		$	3,050		$	68		$	69
Interest cost		11,473			10,932			250			256
Expected return on plan assets		(11,311	)		(11,153	)		(394	)		(355	)
Net amortization and deferral		2,230			961			(246	)		(235	)
Net periodic benefit cost (credit)	$	5,726		$	3,790		$	(322	)	$	(265	)

17

PERKINELMER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(15) Guarantor Financial Information

The Company has outstanding $270 million in aggregate principal amount of the 8 ⁷/8% Notes. The Company’s payment obligations under the 8 ⁷/8% Notes are guaranteed by some of the Company’s domestic subsidiaries (the “Guarantor Subsidiaries”). Such guarantee is full and unconditional. Separate financial statements of the Guarantor Subsidiaries are not presented because the Company’s management has determined that they would not be material to investors. The following supplemental financial information sets forth, on an unconsolidated basis, income statement, balance sheet and statement of cash flow information for the Company (“Parent Company Only”), for the Guarantor Subsidiaries and for the Company’s other subsidiaries (the “Non-Guarantor Subsidiaries”). The supplemental financial information reflects the investments of the Company and the Guarantor Subsidiaries in the Guarantor and Non-Guarantor Subsidiaries using the equity method of accounting.

Consolidating Income Statement

Three months ended July 3, 2005

(Unaudited)

(In thousands)

	Parent Company Only			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Sales	$	68,737		$	188,401		$	219,021		$	(50,613	)	$	425,546
Cost of sales		53,074			124,721			127,389			(50,613	)		254,571
Research and development expenses		1,456			9,390			12,054			—			22,900
Selling, general and administrative expenses		14,167			40,348			43,158			—			97,673
Other operating expense, net		678			7,277			14,777			—			22,732
Operating (loss) income from continuing operations		(638	)		6,665			21,643			—			27,670
Other expenses (income) net		13,332			(1,245	)		(4,196	)		—			7,891
(Loss) income from continuing operations before income taxes		(13,970	)		7,910			25,839			—			19,779
(Benefit) provision for income taxes		(23,727	)		2,192			7,205			—			(14,330	)
Income from continuing operations		9,757			5,718			18,634			—			34,109
Equity earnings (loss) from subsidiaries, net of tax		24,352			18,634			—			(42,986	)		—
Income (loss) from continuing operations		34,109			24,352			18,634			(42,986	)		34,109
Loss from discontinued operations, net of income taxes		(5,211	)		—			—			—			(5,211	)
Net income (loss)	$	28,898		$	24,352		$	18,634		$	(42,986	)	$	28,898

18

PERKINELMER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Consolidating Income Statement

Six months ended July 3, 2005

(Unaudited)

(In thousands)

	Parent Company Only			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Sales	$	136,947		$	370,360		$	435,118		$	(100,992	)	$	841,433
Cost of sales		104,089			244,643			253,416			(100,992	)		501,156
Research and development expenses		2,882			21,627			21,970			—			46,479
Selling, general and administrative expenses		31,929			79,175			88,776			—			199,880
Other operating expense, net		678			13,696			15,884			—			30,258
Operating (loss) income from continuing operations		(2,631	)		11,219			55,072			—			63,660
Other expenses (income) net		23,395			(2,099	)		(5,127	)		—			16,169
(Loss) income from continuing operations before income taxes		(26,026	)		13,318			60,199			—			47,491
(Benefit) provision for income taxes		(27,020	)		3,669			16,589			—			(6,762	)
Income from continuing operations		994			9,649			43,610			—			54,253
Equity earnings (loss) from subsidiaries, net of tax		53,259			43,610			—			(96,869	)		—
Income (loss) from continuing operations		54,253			53,259			43,610			(96,869	)		54,253
Loss from discontinued operations, net of income taxes		(5,526	)		—			—			—			(5,526	)
Net income (loss)	$	48,727		$	53,259		$	43,610		$	(96,869	)	$	48,727

19

PERKINELMER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Consolidating Income Statement

Three months ended June 27, 2004

(Unaudited)

(In thousands)

	Parent Company Only			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Sales	$	69,884		$	185,145		$	200,611		$	(43,560	)	$	412,080
Cost of sales		52,680			121,532			114,854			(43,560	)		245,506
Research and development expenses		614			12,099			8,826			—			21,539
Selling, general and administrative expenses		15,473			40,621			41,120			—			97,214
Other operating expense (income), net		1,146			6,399			(468	)		—			7,077
Operating (loss) income from continuing operations		(29	)		4,494			36,279			—			40,744
Other expenses (income) net		10,003			(240	)		98			—			9,861
(Loss) income from continuing operations before income taxes		(10,032	)		4,734			36,181			—			30,883
(Benefit) provision for income taxes		(2,829	)		1,356			10,177			—			8,704
(Loss) Income from continuing operations		(7,203	)		3,378			26,004						22,179
Equity earnings (loss) from subsidiaries, net of tax		29,382			26,004			—			(55,386	)		—
Income (loss) from continuing operations		22,179			29,382			26,004			(55,386	)		22,179
Loss from discontinued operations, net of income taxes		(1,344	)		—			—			—			(1,344	)
Net income (loss)	$	20,835		$	29,382		$	26,004		$	(55,386	)	$	20,835

Consolidating Income Statement

Six months ended June 27, 2004

(Unaudited)

(In thousands)

	Parent Company Only			Guarantor Subsidiaries			Non-Guarantor Subsidiaries		Eliminations			Consolidated
Sales	$	137,021		$	355,156		$	398,693	$	(86,524	)	$	804,346
Cost of sales		104,184			238,638			228,663		(86,524	)		484,961
Research and development expenses		1,224			23,428			16,765		—			41,417
Selling, general and administrative expenses		27,674			80,432			84,429		—			192,535
Other operating expense, net		891			11,796			1,128		—			13,815
Operating income from continuing operations		3,048			862			67,708		—			71,618
Other expenses (income) net		19,658			(459	)		198		—			19,397
(Loss) income from continuing operations before income taxes		(16,610	)		1,321			67,510		—			52,221
(Benefit) provision for income taxes		(4,718	)		376			19,174		—			14,832
(Loss) Income from continuing operations		(11,892	)		945			48,336		—			37,389
Equity earnings (loss) from subsidiaries, net of tax		49,281			48,336			—		(97,617	)		—
Income (loss) from continuing operations		37,389			49,281			48,336		(97,617	)		37,389
Loss from discontinued operations, net of income taxes		(3,283	)		—			—		—			(3,283	)
Net income (loss)	$	34,106		$	49,281		$	48,336	$	(97,617	)	$	34,106

20

PERKINELMER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Consolidating Balance Sheet

July 3, 2005

(Unaudited)

(In thousands)

	Parent Company Only			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated
Current assets:
Cash and cash equivalents	$	29,627		$	—	$	129,106	$	—		$	158,733
Accounts receivable, net		34,449			40,678		194,089		—			269,216
Inventories		23,971			77,600		91,348		—			192,919
Other current assets		29,244			16,959		28,420		—			74,623
Current assets of discontinued operations		552			—		—		—			552
Total current assets		117,843			135,237		442,963		—			696,043
Property, plant and equipment, net		26,641			122,048		66,792		—			215,481
Investments		7,170			1,150		900		—			9,220
Goodwill and intangible assets, net		55,295			1,069,552		344,988		—			1,469,835
Intercompany (payable) receivable, net		(1,358,473	)		1,085,091		273,382		—			—
Investment in subsidiary		2,974,662			779,412		—		(3,754,074	)		—
Other assets		74,066			10,216		17,565		—			101,847
Total assets	$	1,897,204		$	3,202,706	$	1,146,590	$	(3,754,074	)	$	2,492,426
Current liabilities:
Short-term debt	$	4,681		$	—	$	1,206	$	—		$	5,887
Accounts payable		21,865			55,772		67,735		—			145,372
Accrued restructuring and integration costs		657			1,377		12,504		—			14,538
Accrued expenses		93,010			87,497		119,564		—			300,071
Current liabilities of discontinued operations		4,570			—		—		—			4,570
Total current liabilities		124,783			144,646		201,009		—			470,438
Long-term debt		268,334			—		—		—			268,334
Long-term liabilities		46,386			83,398		166,169		—			295,953
Total liabilities		439,503			228,044		367,178		—			1,034,725
Total stockholders’ equity		1,457,701			2,974,662		779,412		(3,754,074	)		1,457,701
Total liabilities and stockholders’ equity	$	1,897,204		$	3,202,706	$	1,146,590	$	(3,754,074	)	$	2,492,426

21

PERKINELMER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Consolidating Balance Sheet

January 2, 2005

(Unaudited)

(In thousands)

	Parent Company Only			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated
Current assets:
Cash and cash equivalents	$	19,654		$	—	$	177,859	$	—		$	197,513
Accounts receivable, net		30,497			42,957		213,473		—			286,927
Inventories		23,371			75,741		93,406		—			192,518
Other current assets		20,572			14,394		33,908		—			68,874
Current assets of discontinued operations		1,798			—		—		—			1,798
Total current assets		95,892			133,092		518,646		—			747,630
Property, plant and equipment, net		27,463			133,258		74,346		—			235,067
Investments		8,444			1,150		885		—			10,479
Goodwill and intangible assets, net		34,709			1,080,327		356,278		—			1,471,314
Intercompany (payable) receivable, net		(1,213,588	)		892,422		321,166		—			—
Investment in subsidiary		2,966,834			932,379		—		(3,899,213	)		—
Other assets		80,623			8,974		20,419		—			110,016
Long-term assets of discontinued operations		1,001			—		—		—			1,001
Total assets	$	2,001,378		$	3,181,602	$	1,291,740	$	(3,899,213	)	$	2,575,507
Current liabilities:
Short-term debt	$	7,831		$	—	$	1,883	$	—		$	9,714
Accounts payable		17,635			58,048		70,176		—			145,859
Accrued restructuring and integration costs		—			593		2,452		—			3,045
Accrued expenses		105,817			71,876		108,620		—			286,313
Current liabilities of discontinued operations		1,036			—		—		—			1,036
Total current liabilities		132,319			130,517		183,131		—			445,967
Long-term debt		364,874			—		—		—			364,874
Long-term liabilities		44,100			84,251		176,230		—			304,581
Total liabilities		541,293			214,768		359,361		—			1,115,422
Total stockholders’ equity		1,460,085			2,966,834		932,379		(3,899,213	)		1,460,085
Total liabilities and stockholders’ equity	$	2,001,378		$	3,181,602	$	1,291,740	$	(3,899,213	)	$	2,575,507

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PERKINELMER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Consolidating Cash Flow Statement

Six months ended July 3, 2005

(Unaudited)

(In thousands)

	Parent Company Only			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations		Consolidated
Operating Activities
Net cash provided by (used in) continuing operations	$	130,284		$	6,945		$	(36,957	)	$	—	$	100,272
Net cash provided by discontinued operations		38			—			—			—		38
Net cash provided by (used in) operating activities		130,322			6,945			(36,957	)		—		100,310
Investing Activities
Capital expenditures		(1,888	)		(6,945	)		(3,111	)		—		(11,944	)
Proceeds from disposition of property, plant and equipment, net		6,258			—			—			—		6,258
Proceeds from disposition or settlement of business, net		6,556			—			—			—		6,556
Cash used related to acquisitions, net of cash acquired		(13,138	)		—			—			—		(13,138	)
Net cash used in continuing operations		(2,212	)		(6,945	)		(3,111	)		—		(12,268	)
Net cash provided by discontinued operations		395			—			—			—		395
Net cash used in investing activities		(1,817	)		(6,945	)		(3,111	)		—		(11,873	)
Financing Activities
Prepayment of senior subordinated debt		(34,125	)		—			—			—		(34,125	)
Prepayment of term loan debt		(70,000	)		—			—			—		(70,000	)
Decrease in other credit facilities		(273	)		—			(677	)		—		(950	)
Proceeds from issuance of common stock		3,976			—			—			—		3,976
Cash dividends		(18,110	)		—			—			—		(18,110	)
Net cash used in financing activities		(118,532	)		—			(677	)		—		(119,209	)
Effect of exchange rate changes on cash and cash equivalents		—			—			(8,008	)		—		(8,008	)
Net increase (decrease) in cash and cash equivalents		9,973			—			(48,753	)		—		(38,780	)
Cash and cash equivalents, beginning of period		19,654			—			177,859			—		197,513
Cash and cash equivalents, end of period	$	29,627		$	—		$	129,106		$	—	$	158,733

23

PERKINELMER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Consolidating Cash Flow Statement

Six months ended June 27, 2004

(Unaudited)

(In thousands)

	Parent Company Only			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations		Consolidated
Operating Activities
Net cash provided by continuing operations	$	61,287		$	4,253		$	18,694		$	—	$	84,234
Net cash used in discontinued operations		(1,151	)		—			—			—		(1,151	)
Net cash provided by operating activities		60,136			4,253			18,694			—		83,083
Investing Activities
Capital expenditures		(1,004	)		(4,253	)		(3,003	)		—		(8,260	)
Proceeds from disposition of property, plant and equipment, net		2,056			—			—			—		2,056
Proceeds received related to acquisitions, net of cash acquired		2,765			—			—			—		2,765
Net cash provided by (used in) continuing operations		3,817			(4,253	)		(3,003	)		—		(3,439	)
Net cash provided by discontinued operations		306			—			—			—		306
Net cash provided by (used in) investing activities		4,123			(4,253	)		(3,003	)		—		(3,133	)
Financing Activities
Prepayment of term loan debt		(60,000	)		—			—			—		(60,000	)
Decrease in other credit facilities		(234	)		—			(222	)		—		(456	)
Proceeds from issuance of common stock		5,361			—			—			—		5,361
Cash dividends		(17,846	)		—			—			—		(17,846	)
Net cash used in financing activities		(72,719	)		—			(222	)		—		(72,941	)
Effect of exchange rate changes on cash and cash equivalents		—			—			(1,780	)		—		(1,780	)
Net (decrease) increase in cash and cash equivalents		(8,460	)		—			13,689			—		5,229
Cash and cash equivalents, beginning of period		39,360			—			152,139			—		191,499
Cash and cash equivalents, end of period	$	30,900		$	—		$	165,828		$	—	$	196,728

(16) Contingencies

The Company is conducting a number of environmental investigations and remedial actions at current and former Company locations and, along with other companies, has been named a potentially responsible party (“PRP”) for certain waste disposal sites. The Company accrues for environmental issues in the accounting period that the Company’s responsibility is established and when the cost can be reasonably estimated. The Company has accrued $3.7 million as of July 3, 2005, representing management’s estimate of the total cost of ultimate

24

PERKINELMER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

disposition of known environmental matters. Such amount is not discounted and does not reflect the recovery of any amounts through insurance or indemnification arrangements. These cost estimates are subject to a number of variables, including the stage of the environmental investigations, the magnitude of the possible contamination, the nature of the potential remedies, possible joint and several liability, the timeframe over which remediation may occur and the possible effects of changing laws and regulations. For sites where the Company has been named a PRP, management does not currently anticipate any additional liability to result from the inability of other significant named parties to contribute. The Company expects that such accrued amounts could be paid out over a period of up to ten years. As assessments and remediation activities progress at each individual site, these liabilities are reviewed and adjusted to reflect additional information as it becomes available. There have been no environmental problems to date that have had or are expected to have a material adverse effect on the Company’s financial position, results of operations or cash flows. While it is reasonably possible that a material loss exceeding the amounts recorded may be incurred, the potential exposure is not expected to be materially different than the amounts recorded.

In papers dated October 23, 2002, Enzo Biochem, Inc. and Enzo Life Sciences, Inc. (“Enzo”) filed a complaint in the United States District Court for the Southern District of New York, Civil Action No. 02-8448, against Amersham PLC, Amersham BioSciences, PerkinElmer, Inc., PerkinElmer Life Sciences, Inc., Sigma-Aldrich Corporation, Sigma Chemical Company, Inc., Molecular Probes, Inc., and Orchid BioSciences, Inc. The six count complaint alleges that the Company has breached its distributorship and settlement agreements with Enzo, infringed Enzo’s patents, engaged in unfair competition and fraud, and committed torts against Enzo by, among other things, engaging in commercial development and exploitation of Enzo’s patented products and technology, separately and together with the other defendants. Enzo seeks injunctive and monetary relief. On May 28, 2003, the court severed the lawsuit and ordered Enzo to serve individual complaints against the five defendants. Enzo served its new complaint on July 16, 2003, and the Company subsequently filed an answer denying the substantive allegations and including a counterclaim alleging that Enzo’s patents are invalid.

On October 17, 2003, Amersham Biosciences Corp. filed a complaint, which was subsequently amended, in the United States District Court for New Jersey, Civil Action No. 03-4901, against a subsidiary of the Company, alleging that the Company’s ViewLux^™ and certain of its Image FlashPlates^™ infringe three of Amersham’s patents related to high-throughput screening. On August 18, 2004, Amersham Plc filed a complaint against two of the Company’s United Kingdom based subsidiaries in the Patent Court of the English High Court of Justice, Case No. 04C02688, alleging that the Company’s same products infringe Amersham’s European (United Kingdom) patent granted in August 2004. Amersham seeks injunctive and monetary relief in both cases. The Company subsequently filed answers in both cases denying the substantive allegations and including affirmative defenses and counterclaims. On October 29, 2003, the Company filed a complaint, which was subsequently amended, against Amersham Biosciences Corp. in the United States District Court for Massachusetts, Civil Action No. 03-12098, alleging that Amersham’s IN Cell Analyzer, and LEADseeker^™ Multimodality Imaging system and certain Cyclic AMP and IP3 assays infringe two of the Company’s patents related to high-throughput screening. The Company seeks injunctive and monetary relief. Amersham subsequently filed an answer denying the substantive allegations and including affirmative defenses and counterclaims.

The Company and certain of its officers have been named as defendants in a purported class action lawsuit filed in July 2002, and the Company and certain of its officers and directors have been named as defendants in purported derivative lawsuits filed in June and July 2004. The plaintiffs in both the class action and the derivative suits have alleged, among other things, various statements made by the Company and management, during the same time period, were misleading with respect to its prospects and future operating results. Further information with respect to these lawsuits is contained inPart II, Item I. Legal Proceedings of this quarterly report.

25

PERKINELMER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Company believes it has meritorious defenses to these lawsuits and other proceedings, and is contesting the actions vigorously. The Company is currently unable, however, to reasonably estimate the amount of the loss, if any, that may result from the resolution of these matters or to determine whether resolution of any of these matters will have a material adverse impact on its consolidated financial statements.

The Company is under regular examination by tax authorities in the United States and other countries in which it has significant business operations. The tax years under examination vary by jurisdiction. The Company regularly assesses the likelihood of additional assessments in each of the taxing jurisdictions resulting from these and subsequent years’ examinations. Tax reserves have been established, which the Company believes to be adequate in relation to the potential for additional assessments. Once established, reserves are adjusted as information becomes available and when an event occurs requiring a change to the reserves. The resolution of tax matters is not expected to have a material effect on the Company’s consolidated financial condition, although such settlement could have a material impact on the Company’s effective tax rate and consolidated statement of income for a particular future period. In particular, in the second quarter of 2005, identified reserves for prior year taxes of $26.5 million were released based on the settlement of certain foreign and domestic tax audits.

The Company is subject to various other claims, legal proceedings and investigations covering a wide range of matters that arise in the ordinary course of its business activities. Each of these matters is subject to uncertainties, and it is possible that some of these matters may be resolved unfavorably to the Company. In the opinion of the Company’s management, based on its review of the information available at this time, the total cost of resolving these other contingencies at July 3, 2005, should not have a material adverse effect on the Company’s consolidated financial statements.

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

This quarterly report on Form 10-Q, including the following management’s discussion and analysis, contains forward-looking information that you should read in conjunction with the consolidated financial statements and notes to consolidated financial statements that we have included elsewhere in this quarterly report on Form 10-Q. For this purpose, any statements contained in this report that are not statements of historical fact may be deemed to be forward-looking statements. Words such as “believes,” “plans,” “anticipates,” “expects,” “will” and similar expressions are intended to identify forward-looking statements. Our actual results may differ materially from the plans, intentions or expectations we disclose in the forward-looking statements we make. We have included important factors below under the heading “Forward-Looking Information and Factors Affecting Future Performance” that we believe could cause actual results to differ materially from the forward-looking statements we make. We are not obligated to update any forward-looking statements, whether as a result of new information, future events or otherwise.

Overview

We are a leading provider of scientific instruments, consumables and services to the pharmaceutical, biomedical, environmental testing and general industrial markets, commonly referred to as the health sciences and industrial sciences markets. We design, manufacture, market and service products and systems within three businesses, each constituting one reporting segment:

• Life and Analytical Sciences.We are a leading provider of drug discovery, genetic screening, and environmental and chemical analysis tools, including instruments, reagents, consumables, and services.

• Optoelectronics.We provide a broad range of digital imaging, sensor and specialty lighting components used in the biomedical, consumer products and other specialty end markets.

• Fluid Sciences.We provide a variety of precision valves, seals, bellows and pneumatic joints for critical fluid control and containment systems for highly demanding environments such as turbine engines and semiconductor fabrication equipment.

The health sciences markets include genetic screening, environmental, service, biopharma, and medical imaging. The industrial sciences markets include military/aerospace, semiconductor, consumer electronics, safety and security, and other.

Significant Developments

Restructuring. During the second quarter of 2005, our management approved a plan to terminate employees in several locations as we shift resources into geographic regions and product lines that are more consistent with our growth strategy. As a result of this plan of termination, we incurred a pre-tax restructuring charge of approximately $8.9 million during the fiscal quarter ended July 3, 2005. Substantially all of this pre-tax restructuring charge will result in future cash expenditures which we expect will be paid within the next 12 months. In addition, due to a soft sublease market, we increased our reserves for our financial obligations under several leases associated with previous restructurings in 2001 and 2002. As a result, we recorded an additional pre-tax restructuring charge during the fiscal quarter ended July 3, 2005 of approximately $6.0 million which is expected to be paid though 2014.

Taxation.Significant tax events in the fiscal quarter ended July 3, 2005 resulted in a net tax benefit of $19.9 million. The homeland investment provisions of the American Jobs Creation Act enacted October 22, 2004 provides us with the opportunity to repatriate earnings from our foreign subsidiaries at a substantially reduced tax cost and to increase the amount of cash available to fund our operations in the United States. During the fiscal quarter ended July 3, 2005, we recorded tax expense of $6.6 million for expected repatriation. In addition, we settled audits of certain prior year tax returns. As a result, we adjusted previous tax estimates generating a tax benefit of $26.5 million in the fiscal quarter ended July 3, 2005.

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Acquisition of Elcos AG.In February 2005, we acquired the capital stock of Elcos AG, a leading European designer and manufacturer of custom light emitting diode, or LED, solutions for biomedical and industrial applications. Consideration for the transaction was approximately $15.4 million in cash at the time of closing with deferred cash consideration of approximately $1.4 million due through fiscal 2007. In addition, potential cash earn out payments of up to approximately $8.4 million are expected to be made based on the future performance of the business. We have accrued for such payments due to the high likelihood that the payments will be made.

Consolidated Results of Continuing Operations

Sales

Sales for the second quarter of 2005 were $425.5 million, versus $412.1 million for the second quarter of 2004, an increase of $13.4 million, or 3%. Changes in foreign exchange rates, primarily the Euro, increased sales by approximately $6.5 million in the second quarter of 2005, as compared to the second quarter of 2004. This increase in sales reflects a $12.9 million, or 5%, increase in our Life and Analytical Sciences segment sales, which includes approximately $5.5 million in sales attributable to favorable changes in foreign exchange rates compared to the second quarter of 2004. Our Optoelectronics segment sales grew $4.3 million, or 5%, including approximately $0.8 million in sales attributable to favorable changes in foreign exchange rates compared to the second quarter of 2004 as well as $3.9 million resulting from the acquisition of Elcos. Our Fluid Sciences segment sales decreased $3.8 million, or 6%, and include a minimal impact from foreign exchange rate changes.

Sales for the six-month period ended July 3, 2005 were $841.4 million, versus $804.3 million for the six-month period ended June 27, 2004, an increase of $37.1 million, or 5%. Changes in foreign exchange rates, primarily the Euro, increased sales by approximately $13.2 million in the six-month period ended July 3, 2005, as compared to the six-month period ended June 27, 2004. This increase in sales reflects a $28.5 million, or 6%, increase in our Life and Analytical Sciences segment sales, which includes approximately $11.2 million in sales attributable to favorable changes in foreign exchange rates compared to the six-month period ended June 27, 2004. Our Optoelectronics segment sales grew $15.1 million, or 8%, including approximately $1.6 million in sales attributable to favorable changes in foreign exchange rates compared to the six-month period ended June 27, 2004 as well as $6.4 million resulting from the acquisition of Elcos. Our Fluid Sciences segment sales decreased $6.5 million, or 6%, and include a minimal impact from foreign exchange rate changes.

Cost of Sales

Cost of sales for the second quarter of 2005 was $254.6 million, versus $245.5 million for the second quarter of 2004, an increase of $9.1 million, or 4%. As a percentage of sales, cost of sales increased to 59.8% in the second quarter of 2005 from 59.6% in the second quarter of 2004, resulting in a decrease in gross margin of 20 basis points from 40.4% in the second quarter of 2004 to 40.2% in the second quarter of 2005. The decrease in gross margin percentage was primarily attributable to decreases in gross margins at our Fluid Sciences segment driven by lower sales volume and less fixed cost leverage. This decrease more than offset increases in gross margins at our Life and Analytical Sciences and Optoelectronics segments driven by higher volume, productivity improvements and site closures.

Cost of sales for the six-month period ended July 3, 2005 was $501.2 million, versus $485.0 million for the six-month period ended June 27, 2004, an increase of $16.2 million, or 3%. As a percentage of sales, cost of sales decreased to 59.6% in the six-month period ended July 3, 2005 from 60.3% in the six-month period ended June 27, 2004, resulting in an increase in gross margin of 70 basis points from 39.7% in the six-month period ended June 27, 2004, to 40.4% in the six-month period ended July 3, 2005. The increase in gross margin was primarily attributable to increases in gross margins in our Life and Analytical Sciences and Optoelectronics driven by increased volume and productivity improvements, offset by decreased gross margins at the company’s Fluid Sciences segment driven by lower sales volume and less fixed cost leverage.

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Research and Development Expenses

Research and development expenses for the second quarter of 2005 were $22.9 million versus $21.5 million for the second quarter of 2004, an increase of $1.4 million, or 6.5%. As a percentage of sales, research and development expenses increased to 5.4% in the second quarter of 2005 from 5.2% in the second quarter of 2004, resulting from increased expenditures to support the company’s growth platforms. We expect our research and development efforts to continue to emphasize the health sciences end markets.

Research and development expenses for the six-month period ended July 3, 2005 were $46.5 million versus $41.4 million for the six-month period ended June 27, 2004, an increase of $5.1 million, or 12.3%. As a percentage of sales, research and development expenses increased to 5.5% in the six-month period ended July 3, 2005, from 5.1% in the six-month period ended June 27, 2004, resulting from increased expenditures to support the company’s growth platforms.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the second quarter of 2005 were $97.7 million versus $97.2 million for the second quarter of 2004, an increase of $0.5 million. As a percentage of sales, selling, general and administrative expenses decreased 60 basis points from 23.6% in the second quarter of 2004 to 23.0% in the second quarter of 2005. The decrease as a percentage of sales of 60 basis points in the second quarter of 2005, as compared to the second quarter of 2004, was primarily the result of increased fixed cost leverage and cost controls.

Selling, general and administrative expenses for the six-month period ended July 3, 2005 were $199.9 million versus $192.5 million for the six-month period ended June 27, 2004, an increase of $7.4 million, or 3.9%. As a percentage of sales, selling, general and administrative expenses decreased 10 basis points from 23.9% in the six-month period ended June 27, 2004 to 23.8% in the six-month period ended July 3, 2005. The decrease as a percentage of sales of 10 basis points in the six-month period ended July 3, 2005, as compared to the six-month period ended June 27, 2004, was the result of increased fixed cost leverage and cost controls, offset in part by an increase in the number of sales and service people in both higher growth regions of the world and higher growth product lines.

Restructuring, Net

We have undertaken a series of restructuring actions related to the impact of acquisitions, divestitures and the integration of its business units. Restructuring actions in 2001 and 2002 were recorded in accordance with Emerging Issues Task Force (“EITF”) 94-3,Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring). Restructuring actions taken since 2002 were recorded in accordance with SFAS No. 146,Accounting for Costs Associated with Exit or Disposal Activities(“SFAS No. 146”). The principal actions associated with these plans related to workforce reductions and overhead reductions resulting from reorganization activities, including the closure of certain manufacturing and selling facilities. Details of these plans are discussed more fully in our 2004 Form 10-K.

For the six-month period ended July 3, 2005, we recorded a pre-tax restructuring charge of $6.0 million relating to our Q4 2002 and Integration restructuring plans (each of which is further described below) due to higher than expected costs associated with the closure of facilities, primarily in Europe.

In addition, on June 15, 2005, management approved a plan to terminate employees in several locations as we shift resources into geographic regions and product lines that are more consistent with our growth strategy. We completed notifying affected employees on July 1, 2005. As a result of this plan of termination, we recorded a pre-tax restructuring charge of $8.9 million during the second quarter of 2005 (the “Q2 2005 Plan”). The principal actions within the Q2 2005 Plan related to a workforce reduction resulting from reorganization activities within the Life and Analytical Sciences, Optoelectronics and Fluid Sciences businesses.

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A description of each of the restructuring plans and the activity recorded for the six-month period ended July 3, 2005 is as follows:

Q2 2005 Plan

During the second quarter of 2005, we recognized a $5.3 million restructuring charge in the Life and Analytical Sciences business, a $2.9 million restructuring charge in the Optoelectronics business and a $0.7 million restructuring charge in the Fluid Sciences business. The purpose of these restructuring actions was to shift resources into geographic regions and product lines that are more consistent with our growth strategy. The principal actions in the Q2 2005 Plan comprised headcount reductions resulting from reorganization activities.

The following table summarizes the components of the Q2 2005 Plan activity for the six-month period ended July 3, 2005:

	Headcount		Severance			Abandonment of Excess Facilities			Total
			(In thousands)
Balance at January 2, 2005	—		$	—		$	—		$	—
Provision	257			8,801			140			8,941
Amounts paid	(150	)		(1,664	)		(140	)		(1,804	)
Balance at July 3, 2005	107		$	7,137		$	—		$	7,137

We expect that all remaining Q2 2005 Plan actions will be completed by the end of the second quarter in 2006.

Q2 2003 Plan

During 2003, we recognized a $2.0 million restructuring charge in the Life and Analytical Sciences business and a $0.3 million restructuring charge in the Optoelectronics business (the “Q2 2003 Plan”). The purpose of the restructuring was to further improve performance and take advantage of synergies between our former Life Sciences and Analytical Instruments businesses. The principal actions in the Q2 2003 Plan included lower headcount due to the continued integration of the Life and Analytical Sciences business in a European manufacturing facility and a customer care center as well as a headcount reduction at one of the Optoelectronics manufacturing facilities to reflect recent declining demand for several product lines.

The following table summarizes the components of the Q2 2003 Plan activity for the six-month period ended July 3, 2005:

	Severance and Separation
	(In thousands)
Balance at January 2, 2005	$	202
Amounts paid		—
Balance at July 3, 2005	$	202

During 2004, we completed all actions under the Q2 2003 Plan, with the exception of a headcount reduction of one person that is expected to be complete by the end of 2005.

Q4 2002 Plan

In connection with our decision to combine the Life Sciences and Analytical Instruments businesses in order to reduce costs and achieve operational efficiencies, we recorded a pre-tax restructuring charge of $26.0 million

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during the fourth quarter of 2002 (the “Q4 2002 Plan”). The Q4 2002 Plan allowed us to combine many business functions worldwide, with the intention to better serve its customers and more fully capitalize on the strengths of the businesses’ sales, service and research and development organizations. The principal actions in the restructuring plan included workforce reductions, closure of facilities and disposal of underutilized assets.

In the six-month period ended July 3, 2005, we recorded an additional provision of $5.3 million for additional costs related to closed facilities due to soft sublease markets, primarily in Europe. The following table summarizes the components of the Q4 2002 Plan for the six-month period ended July 3, 2005:

	Severance			Abandonment of Excess Facilities			Total
	(In thousands)
Balance at January 2, 2005	$	463		$	507		$	970
Provision		—			5,430			5,430
Amounts paid		(432	)		(632	)		(1,064	)
Balance at July 3, 2005	$	31		$	5,305		$	5,336

The Q4 2002 Plan resulted in the integration of the United States’ Life and Analytical Sciences sales, service and customer care centers, the integration of European customer care and finance centers, the merging of a former Life Sciences European manufacturing facility with a former Analytical Instruments European manufacturing facility and the merging of a portion of a former Life Sciences research and development European facility with a former Analytical Instruments European facility.

We expect to settle the remaining severance liability under the Q4 2002 Plan by the end of 2005. Our current estimate of our lease commitments on unoccupied buildings under the Q4 2002 Plan extend until 2014.

Q4 2001 Plan

During the fourth quarter of 2001, in connection with the integration of Packard BioScience Company (“Packard”), which we acquired that quarter, and a restructuring of sales offices in Europe, we recorded a restructuring charge of $9.2 million in the Life and Analytical Sciences segment (the “Q4 2001 Plan”). The principal actions in the Q4 2001 Plan included the closing or consolidation of several leased sales and service offices in Europe, as well as costs associated with the closure of a manufacturing facility in Europe, the closure of leased manufacturing facilities in the United States and the disposal of related assets. These actions were designed to streamline the organization and take advantage of the synergies offered by the Packard acquisition as they relate to the legacy Life and Analytical Science segment.

The following table summarizes the components of the Q4 2001 Plan for the six-month period ended July 3, 2005:

	Severance
	(In thousands)
Balance at January 2, 2005	$	1,506
Amounts paid		(259	)
Balance at July 3, 2005	$	1,247

The remaining liability under the Q4 2001 Plan relates to European severance obligations and is expected to be paid during 2005.

Integration Charges

As discussed in our 2004 Form 10-K, in the fourth quarter of 2001, we established integration reserves relating primarily to the acquisition of Packard. In the six-month period ended July 3, 2005, we recorded an

31

additional provision of $0.7 million for additional costs related to closed facilities due to soft sublease markets, primarily in Europe. While the initial accounting was contemplated in the original purchase price allocation under EITF 95-3,Recognition of Liabilities in Connection with a Purchase Business Combination, the change in estimate in the second quarter of 2005 was charged directly to restructuring.

The following table summarizes the activity in the reserves for the six-month period ended July 3, 2005:

	(In thousands)
Accrued integration costs at January 2, 2005	$	367
Provision		564
Amounts paid		(315	)
Accrued integration costs at July 3, 2005	$	616

The integration activities were completed in 2003 with the exception of payments due on leased facilities exited in 2001. Our current estimates of our lease commitments extend through 2009.

Losses (Gains) on Dispositions

We recognized a net loss of $0.4 million in the second quarter of 2005 for the write-off of software.

During the six months ended July 3, 2005, we recorded a net loss of $0.4 million related to the write-off of software, compared to a net gain of $0.4 million during the six months ended June 27, 2004 related to the sale of a building.

Amortization of Intangible Assets

Amortization of intangible assets was $7.4 million for the second quarter of 2005, versus $7.1 million for the second quarter of 2004. The $0.3 million increase in the second quarter of 2005 compared to the second quarter of 2004 primarily related to increased amortization in our Optoelectronics segment as a result of our acquisition of Elcos in the first quarter of 2005.

Amortization of intangible assets was $14.7 million for the six months ended July 3, 2005, versus $14.2 million for the six months ended June 27, 2004. The $0.5 million increase for the first half of 2005 compared to the first half of 2004 primarily related to increased amortization in our Optoelectronics segment as a result of our acquisition of Elcos in the first quarter of 2005.

Interest and Other Expense, Net

Interest and other expense, net consisted of the following:

	Three Months Ended						Six Months Ended
	July 3, 2005			June 27, 2004			July 3, 2005			June 27, 2004
	(In thousands)						(In thousands)
Interest Income	$	(625	)	$	(355	)	$	(1,297	)	$	(840	)
Interest Expense		8,100			9,272			16,556			19,047
Extinguishment of Debt		6,210			366			6,210			1,532
Gains on Dispositions of Investments		(5,444	)		—			(5,444	)		—
Other		(350	)		578			144			(342	)
	$	7,891		$	9,861		$	16,169		$	19,397

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Interest and other expense, net for the three months ended July 3, 2005 was $7.9 million, versus $9.9 million for the three months ended June 27, 2004, a decrease of $2.0 million, or 20%. The decrease in interest and other expense, net in the second quarter of 2005 as compared to the second quarter of 2004, was due primarily to lower interest expense from lower average outstanding term loan balances coupled with more favorable foreign exchange results. Fixed to floating interest rate swaps that we entered into in January 2004 and January 2005 applicable to $200 million of our outstanding fixed rate debt further decreased our effective interest rate. Debt extinguishment costs increased $5.8 million due to accelerated amortization of debt issuance costs resulting from prepayment of our term debt and the repurchase of some of our 8 ⁷/8% Notes, and the premium associated with that repurchase of the 8 ⁷/8% Notes. Gains on dispositions of investments increased $5.4 million due to the sale of an investment in Agencourt Personal Genomics. For the six months ended July 3, 2005, interest and other expense, net was $16.2 million versus $19.4 million for the comparable period in 2004, a decrease of $3.2 million, or 16%. The decrease primarily relates to the lower average outstanding term loan balances, favorable foreign exchange results, fixed to floating interest rate swaps and the gain on sale of Agencourt Personal Genomics sale, offset in part by an increase of $4.7 million in accelerated amortization of debt issuance costs resulting from prepayments of our term debt and repurchase of some of our 8 ⁷/8% Notes and the related premium during the six months ended July 3, 2005. A discussion of our liquidity and our prospective borrowing costs is set forth below under the heading “Liquidity and Capital Resources.”

Provision/Benefit for Income Taxes

The second quarter 2005 benefit from income taxes was $14.3 million, versus a provision of $8.7 million for the second quarter of 2004. The benefit from income taxes was $6.8 million for the six-month period ended July 3, 2005, compared to a provision for income taxes of $14.8 million for the six-month period ended June 27, 2004. During the second quarter of 2005, our continuing operations effective tax rate was reduced, in aggregate, by discrete items totaling approximately $19.9 million. During the quarter, our settlement of income tax audits for the fiscal years 1999 through 2002 resulted in a reduction of tax exposures which yielded a benefit from income taxes of approximately $26.5 million. Also during the quarter, our tax provision was increased by approximately $6.6 million to account for the U.S. tax cost on another $225 million of earnings expected to be repatriated in accordance with the Homeland Investment provisions of the American Jobs Creation Act of 2004 (“HIA”), as well as IRS clarification of the U.S. tax calculation related to repatriated earnings.

Without the impact of these second quarter discrete items, our continuing operations effective tax rates for the second quarter of 2005 and six months ended July 3, 2005 were 28.3% and 27.5%, respectively. The reported benefit from income taxes for the second quarter of 2005 was $14.3 million and was affected by a benefit from the settlement of income tax audits of $26.5 million and the provision for HIA repatriated earnings of $6.6 million, resulting in a provision before the effect of discrete items of $5.6 million. The reported benefit from income taxes for the six months ended July 3, 2005 was $6.8 million and was affected by a benefit from the settlement of income tax audits of $26.5 million and the provision for HIA repatriated earnings of $6.6 million, resulting in a provision before the effect of discrete items of $13.1 million. The lower provision and continuing operations effective tax rate before discrete items for the first half of 2005 are due mainly to our geographic pattern of earnings and statutory rate reductions in several profitable foreign jurisdictions.

We believe that the inclusion of these non-GAAP financial measures helps investors to gain a meaningful understanding of our tax provision and effective tax rate and their effect on our core operating results and future prospects, consistent with how management measures and forecasts our performance, especially when comparing such results to previous periods or forecasts. Our management uses these non-GAAP measures, in addition to GAAP financial measures, as the basis for measuring our tax provision and effective tax rate and their effect on our core operating results and future prospects and comparing such performance to that of prior periods and to the performance of our competitors. These measures are also used by management in their financial and operating decision making.

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Discontinued Operations

In June 2005, our senior management approved a plan to shut down our Fiber Optics Test Equipment business. The shut-down of this business resulted in a $5.2 million loss related to lease and severance costs and fixed asset and inventory write-offs. The loss is recognized in the loss on dispositions in the three and six months ended July 3, 2005.

In September 2004, our Board of Directors approved a plan to shut down its Computer-To-Plate business. In June 2004, our Board of Directors approved a plan to shut down its Electroformed Products business and sell its Ultraviolet Lighting business. The results of these businesses were previously reported as part of the Optoelectronics reporting segment. We have accounted for these businesses as discontinued operations in accordance with SFAS No. 144 and, accordingly, have presented the results of operations and related cash flows as discontinued operations for all periods presented. The assets and liabilities of these businesses have been presented separately and are reflected within the assets and liabilities from discontinued operations in the accompanying balance sheets as of July 3, 2005 and January 2, 2005. During the second quarter of 2005, the Electroformed Products business recorded a gain of $0.1 million related to the sale of previously written-off assets. During the six month periods ended July 3, 2005 and June 27, 2004, our Electroformed Products business recorded charges of $0.1 million and $1.2 million, respectively, related to the write-off of certain machinery and equipment. The activity has been included in gain (loss) on dispositions of discontinued operations.

During June 2002, our Board of Directors approved separate plans to shut down our Telecommunications Component and sell our Entertainment Lighting businesses. During the six-month period ended July 3, 2005, our Telecommunications Component business recorded activity related to the sale of previously written-off assets. This activity resulted in a pre-tax gain of $0.1 million that was recognized in the second quarter of 2005, for a total pre-tax gain of $0.3 million for the six-month period ended July 3, 2005. During the first quarter of 2004, our Entertainment Lighting business recorded activity related to the sale of previously written-off assets of $0.3 million. These amounts have been included in gain (loss) on dispositions of discontinued operations.

During the six month periods ended July 3, 2005 and June 27, 2004, we settled various claims under certain long-term contracts with our former Technical Services business, which was sold in August 1999. The net settlements resulted in pre-tax gains of $0.4 million and $0.8 million that were recognized in the second quarter of 2005 and the first quarter of 2004, respectively. These amounts have been included in gain (loss) on dispositions of discontinued operations.

The table below summarizes the gains and losses on dispositions of discontinued operations, as discussed above:

	Three Months Ended					Six Months Ended
	July 3, 2005			June 27, 2004		July 3, 2005			June 27, 2004
	(In thousands)					(In thousands)
Loss on Fiber Optics Test Equipment business	$	(5,151	)	$	—	$	(5,151	)	$	—
Gain on contract settlements associated with the Technical Services business		400			—		400			757
Gain (loss) on Telecommunications Component business		106			—		346			(184	)
Gain (loss) on Electroformed Products business		63			—		(84	)		(1,160	)
Loss on Entertainment Lighting business		—			—		30			255
Net loss on dispositions of discontinued operations before income taxes		(4,582	)		—		(4,459	)		(332	)
Provision (benefit) for income taxes		220			—		266			(134	)
Loss on dispositions of discontinued operations, net of income taxes	$	(4,802	)	$	—	$	(4,725	)	$	(198	)

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Summary operating results of the discontinued operations of the Electroformed Products, Ultraviolet Lighting, Computer-To-Plate and Fiber Optics Test Equipment businesses for the periods prior to disposition were as follows:

	Three Months Ended						Six Months Ended
	July 3, 2005			June 27, 2004			July 3, 2005			June 27, 2004
	(In thousands)						(In thousands)
Sales	$	298		$	2,561		$	741		$	3,991
Costs and expenses		714			4,371			1,553			7,979
Operating loss from discontinued operations		(416	)		(1,810	)		(812	)		(3,988	)
Other income, net		7			95			11			91
Operating loss from discontinued operations before income taxes		(409	)		(1,715	)		(801	)		(3,897	)
Benefit for income taxes		—			(371	)		—			(812	)
Loss from discontinued operations, net of taxes	$	(409	)	$	(1,344	)	$	(801	)	$	(3,085	)

Contingencies

We are conducting a number of environmental investigations and remedial actions at our current and former locations and, along with other companies, have been named a potentially responsible party for certain waste disposal sites. We accrue for environmental issues in the accounting period that our responsibility is established and when the cost can be reasonably estimated. We have accrued $3.7 million as of July 3, 2005, representing our management’s estimate of the total cost of ultimate disposition of known environmental matters. This amount is not discounted and does not reflect any recovery of any amounts through insurance or indemnification arrangements. These cost estimates are subject to a number of variables, including the stage of the environmental investigations, the magnitude of the possible contamination, the nature of the potential remedies, possible joint and several liability, the timeframe over which remediation may occur, and the possible effects of changing laws and regulations. For sites where we have been named a potentially responsible party, our management does not currently anticipate any additional liability to result from the inability of other significant named parties to contribute. We expect that such accrued amounts could be paid out over a period of up to ten years. As assessment and remediation activities progress at each individual site, these liabilities are reviewed and adjusted to reflect additional information as it becomes available. There have been no environmental problems to date that have had or are expected to have a material adverse effect on our financial position, results of operations or cash flows. While it is reasonably possible that a material loss exceeding the amounts recorded may be incurred, we do not expect the potential exposure to be materially different from the amounts we recorded.

In papers dated October 23, 2002, Enzo Biochem, Inc. and Enzo Life Sciences, Inc. (“Enzo”) filed a complaint in the United States District Court for the Southern District of New York, Civil Action No. 02-8448, against Amersham PLC, Amersham BioSciences, PerkinElmer, Inc., PerkinElmer Life Sciences, Inc., Sigma- Aldrich Corporation, Sigma Chemical Company, Inc., Molecular Probes, Inc., and Orchid BioSciences, Inc. The six count complaint alleges that we have breached our distributorship and settlement agreements with Enzo, infringed Enzo’s patents, engaged in unfair competition and fraud, and committed torts against Enzo by, among other things, engaging in commercial development and exploitation of Enzo’s patented products and technology, separately and together with the other defendants. Enzo seeks injunctive and monetary relief. On May 28, 2003, the court severed the lawsuit and ordered Enzo to serve individual complaints against the five defendants. Enzo served its new complaint on July 16, 2003, and we subsequently filed an answer denying the substantive allegations and including a counterclaim alleging that Enzo’s patents are invalid.

On October 17, 2003, Amersham Biosciences Corp. filed a complaint, which was subsequently amended, in the United States District Court for New Jersey, Civil Action No. 03-4901, against one of our subsidiaries alleging that our ViewLux^™ and certain of our Image FlashPlates^™ infringe three of Amersham’s patents related to high-throughput screening. On August 18, 2004, Amersham Plc filed a complaint against two of our United Kingdom based subsidiaries in the Patent Court of the English High Court of Justice, Case No. 04C02688,

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alleging that the same products infringe Amersham’s European (United Kingdom) patent granted in August 2004. Amersham seeks injunctive and monetary relief in both cases. We subsequently filed answers in both cases denying the substantive allegations and including affirmative defenses and counterclaims. On October 29, 2003, we filed a complaint, which was subsequently amended, against Amersham Biosciences Corp. in the United States District Court for Massachusetts, Civil Action No. 03-12098, alleging that Amersham’s IN Cell Analyzer, and LEADseeker^™ Multimodality Imaging system and certain Cyclic AMP and IP3 assays infringe two of our patents related to high-throughput screening. We seek injunctive and monetary relief. Amersham subsequently filed an answer denying the substantive allegations and including affirmative defenses and counterclaims.

We and certain of our officers have been named as defendants in a purported class action lawsuit filed in July 2002, and we and certain of our officers and directors have been named as defendants in purported derivative lawsuits filed in June and July 2004. The plaintiffs in both the class action and the derivative suits have alleged, among other things, various statements made by us and our management, during the same time period, were misleading with respect to our prospects and future operating results. Further information with respect to these lawsuits is contained inPart II, Item 1. Legal Proceedingsof this quarterly report.

We believe we have meritorious defenses to these lawsuits and other proceedings, and are contesting the actions vigorously. We are currently unable, however, to reasonably estimate the amount of the loss, if any, that may result from the resolution of these matters or to determine whether resolution of any of these matters will have a material adverse impact on our consolidated financial statements.

We are under regular examination by tax authorities in the United States and other countries in which we have significant business operations. The tax years under examination vary by jurisdiction. We regularly assess the likelihood of additional assessments in each of the taxing jurisdictions resulting from these and subsequent years’ examinations. Tax reserves have been established, which we believe to be adequate in relation to the potential for additional assessments. Once established, reserves are adjusted as information becomes available and when an event occurs requiring a change to the reserves. The resolution of tax matters is not expected to have a material effect on our consolidated financial condition, although such settlement could have a material impact on our effective tax rate and consolidated statement of income for a particular future period. In particular, in the second quarter of 2005, identified reserves for prior year taxes of $26.5 million were released based on the settlement of certain foreign and domestic tax audits.

We are subject to various other claims, legal proceedings and investigations covering a wide range of matters that arise in the ordinary course of our business activities. Each of these matters is subject to uncertainties, and it is possible that some of these matters may be resolved unfavorably to us. In the opinion of our management, based on its review of the information available at this time, the total cost of resolving these other contingencies at July 3, 2005, should not have a material adverse effect on our consolidated financial statements.

Reporting Segment Results of Continuing Operations

Life and Analytical Sciences

Sales for the second quarter of 2005 were $270.8 million, versus $257.9 million for the second quarter of 2004, an increase of $12.9 million, or 5%. Changes in foreign exchange rates, primarily the Euro, increased sales by approximately $5.5 million in the second quarter of 2005, as compared to the second quarter of 2004. The analysis in the remainder of this paragraph compares selected sales by market and product type for the second quarter of 2005, as compared to the second quarter of 2004, and includes the effect of foreign exchange rate fluctuations. Our OneSource^™ laboratory service sales increased by $6.1 million, sales to genetic screening customers increased $5.6 million and sales to chemical analysis customers increased $3.9 million. These increases were offset by decreases in sales to biopharmaceutical customers which decreased $2.7 million. Sales by type of product included increases in sales of service of $6.1 million, instruments of $5.0 million and consumables of $1.8 million.

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Sales for the six-month period ended July 3, 2005 were $535.6 million, versus $507.1 million for the six-month period ended June 27, 2004, an increase of $28.5 million, or 6%. Changes in foreign exchange rates, primarily the Euro, increased sales by approximately $11.2 million in the six-month period ended July 3, 2005, as compared to the six-month period ended June 27, 2004. The following analysis in the remainder of this paragraph compares selected sales by market and product type for the six-month period ended July 3, 2005, as compared to the six-month period ended June 27, 2004, and includes the effect of foreign exchange rate fluctuations. Our OneSource^™ laboratory service sales increased by $11.4 million, sales to genetic screening customers increased $8.5 million, sales to chemical analysis customers increased $8.3 million and sales to biopharmaceutical customers increased $0.3 million. Sales by type of product included increases in sales of instruments of $11.5 million, service of $11.4 million and consumables of $5.6 million.

Operating profit for the second quarter of 2005 was $15.7 million, versus $22.1 million for the second quarter of 2004, a decrease of $6.4 million. The decrease in operating profit in the second quarter of 2005 as compared to the second quarter of 2004 was primarily the result of an $11.0 million restructuring charge in the second quarter of 2005, partially offset by increases in operating profit from increased sales volume, productivity improvements, and savings from site closures. Amortization of intangible assets was $6.5 million for the second quarter of 2005 and $6.6 million for the second quarter of 2004.

Operating profit for the six-month period ended July 3, 2005 was $37.6 million, versus $38.1 million for the six-month period ended June 27, 2004, a decrease of $0.5 million. The decrease in operating profit in the six-month period ended July 3, 2005 as compared to the six-month period ended June 27, 2004 was primarily the result of an $11.0 million restructuring charge in the six-month period ended July 3, 2005 offset in part by operating profit increases from increased sales volume, productivity improvements and site closures. Amortization of intangible assets was $13.1 million for both the six-month period ended July 3, 2005 and the six-month period ended June 27, 2004.

Optoelectronics

Sales for the second quarter of 2005 were $98.4 million, versus $94.1 million for the second quarter of 2004, an increase of $4.3 million, or 5%. Changes in foreign exchange rates increased sales by approximately $0.8 million in the second quarter of 2005, as compared to the second quarter of 2004. The acquisition of Elcos increased sales by approximately $3.9 million in the second quarter of 2005, as compared to the second quarter of 2004. The analysis in the remainder of this paragraph compares selected sales by product type for the second quarter of 2005, as compared to the second quarter of 2004, and includes the effect of foreign exchange fluctuations. Sales of digital imaging products increased by $3.4 million, sales within our sensors product line increased $3.1 million and sales within our specialty lighting product line increased $1.4 million, offset primarily by decreases within our lithography product line of $3.6 million.

Sales for the six-month period ended July 3, 2005 were $194.8 million, versus $179.7 million for the six-month period ended June 27, 2004, an increase of $15.1 million, or 8%. Changes in foreign exchange rates increased sales by approximately $1.6 million in the six-month period ended July 3, 2005, as compared to the six-month period ended June 27, 2004. The acquisition of Elcos increased sales by approximately $6.4 million in the six-month period ended July 3, 2005, as compared to the six-month period ended June 27, 2004. The following analysis in the remainder of this paragraph compares selected sales by product type for the six-month period ended July 3, 2005, as compared to the six-month period ended June 27, 2004, and includes the effect of foreign exchange fluctuations. Sales of digital imaging products increased by $8.6 million, sales within our sensors product line increased $5.5 million and sales within our specialty lighting product line increased $5.2 million, offset by decreases within our lithography product line of $3.6 million and other sales decreases of $0.6 million.

Operating profit for the second quarter of 2005 was $12.3 million, versus $14.5 million for the second quarter of 2004, a decrease of $2.2 million. The decrease in operating profit in the second quarter of 2005, as compared to the second quarter of 2004, was primarily the result of a $3.2 million restructuring charge in the

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second quarter of 2005 and increased investments in research and development of $1.0 million, offset in part by increased sales volume and net productivity improvements. Amortization of intangible assets was $0.6 million for the second quarter of 2005 and $0.3 million for the second quarter of 2004.

Operating profit for the six-month period ended July 3, 2005 was $25.5 million, versus $26.2 million for the six-month period ended June 27, 2004, a decrease of $0.7 million. The decrease in operating profit in the six-month period ended July 3, 2005, as compared to the six-month period ended June 27, 2004, was primarily the result of a $3.2 million restructuring charge in the second quarter of 2005 and increased investments in research and development of $2.9 million, offset in part by increased sales volume and net productivity improvements. Amortization of intangible assets was $1.4 million for the six-month period ended July 3, 2005 and $0.6 million for the six-month period ended June 27, 2004. The six-month period ended July 3, 2005 also included a $0.2 million charge for in-process research and development related to the Elcos acquisition.

Fluid Sciences

Sales for the second quarter of 2005 were $56.3 million, versus $60.1 million for the second quarter of 2004, a decrease of $3.8 million, or 6%. The analysis in the remainder of this paragraph compares sales by product line for the second quarter of 2005, as compared to the second quarter of 2004, and includes the effects of changes in foreign exchange rates. Sales within our aerospace business increased $1.7 million and sales within our energy technology business increased $1.1 million, offset by a $6.6 million decrease in sales in our semiconductor and fluid testing businesses.

Sales for the six-month period ended July 3, 2005 were $111.1 million, versus $117.6 million for the six-month period ended June 27, 2004, a decrease of $6.5 million, or 6%. The analysis in the remainder of this paragraph compares sales by product line for the six-month period ended July 3, 2005 as compared to the six-month period ended June 27, 2004, and includes the effects of changes in foreign exchange rates. Sales within our aerospace business increased $4.2 million and sales within our energy technology business increased $1.2 million, offset by a $11.9 million decrease in sales in our semiconductor and fluid testing businesses.

Operating profit for the second quarter of 2005 was $5.8 million, versus $9.2 million for the second quarter of 2004, a decrease of $3.4 million. The decrease in operating profit in the second quarter of 2005, as compared to the second quarter of 2004, was primarily the result of decreased sales volume resulting in less leveraging of fixed costs as well as a $0.7 million restructuring charge in the second quarter of 2005. Amortization of intangible assets was $0.2 million for both the second quarter of 2005 and the second quarter of 2004.

Operating profit for the six-month period ended July 3, 2005 was $12.6 million, versus $17.5 million for the six-month period ended June 27, 2004, a decrease of $4.9 million. The decrease in operating profit in the six-month period ended July 3, 2005, as compared to the six-month period ended June 27, 2004, was primarily the result of decreased sales volume resulting in less leveraging of fixed costs as well as a $0.7 million restructuring charge in the second quarter of 2005. Amortization of intangible assets was $0.4 million for both the six-month period ended July 3, 2005 and the six-month period ended June 27, 2004.

Liquidity and Capital Resources

We require cash to pay our operating expenses, make capital expenditures, service our debt and other long-term liabilities and pay dividends on our common stock. Our principal sources of funds are from our operations and the capital markets, particularly the debt markets. In the near term, we anticipate that our operations will generate sufficient cash to fund our operating expenses, capital expenditures, interest payments on our debt and dividends on our common stock. In the long-term, we expect to use internally generated funds and external sources to satisfy our debt and other long-term liabilities.

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Principal factors that could affect the availability of our internally generated funds include:

• deterioration of sales due to weakness in markets in which we sell our products and services,

• changes in our working capital requirements, and

• our ability to successfully repatriate cash balances from our foreign subsidiaries for use in settling domestic obligations.

Principal factors that could affect our ability to obtain cash from external sources include:

• financial covenants contained in our borrowings that limit our total borrowing capacity,

• increases in interest rates applicable to our outstanding variable rate debt,

• a ratings downgrade that would limit our ability to borrow under our accounts receivable facility and our overall access to the corporate debt market,

• volatility in the markets for corporate debt,

• a decrease in the market price for our common stock, and

• volatility in the public equity markets.

Cash Flows

Operating Activities. Net cash generated by continuing operations operating activities was $100.3 million for the six months ended July 3, 2005, compared to $84.2 million for the six months ended June 27, 2004. Principal contributors to the generation of cash from operating activities during the six months ended July 3, 2005 was net income from continuing operations of $54.3 million and depreciation and amortization of $38.0 million. In addition, working capital contributed $1.8 million to operating cash flow. Contributing to the net decrease in working capital in the first half of 2005 was a decrease in accounts receivable of $4.4 million and an increase in accounts payable of $2.2 million, offset in part by a $4.8 million increase in inventory. There was no incremental use of our accounts receivable securitization facility during the first half of 2005, which totaled $45.0 million at both July 3, 2005 and January 2, 2005. Net cash provided for changes in accrued expenses, restructuring, other assets and liabilities and other items totaled $6.2 million during the first half of 2005, and primarily relate to timing of salary and benefit related payments, offset in part by a reduction in tax-related accruals.

Investing Activities. Investing activities used $12.3 million of cash in the first half of 2005, compared to $3.4 million of cash used in the first half of 2004. Included in the first half of 2005 was $13.1 million of net cash used for the purchase of Elcos AG, and capital expenditures of $11.9 million, mainly in the areas of tooling and productivity improvements. These cash outflows were partially offset by $6.2 million received from the sale of buildings, $6.3 for the sale of our investment in Agencourt Personal Genomics, and $0.2 million from the sale of a business.

Financing Activities. In the first half of 2005, we used $119.2 million of net cash in financing activities, compared to $72.9 million of cash used in the first half of 2004. Debt reductions during the first half of 2005 totaled $105.1 million, whereas reductions in the first half of 2004 totaled $60.5 million.

Borrowing Arrangements

Senior Secured Credit Facility. In December 2002, we entered into a senior credit facility. This facility is comprised of a six-year term loan in the amount of $315.0 million and a $100.0 million five-year revolving credit facility. During the second quarter, we repaid the remaining balance of $70 million under the term loan, eliminating the term loan facility. Accelerated amortization of term loan issuance fees of $1.4 million was recorded as a result of the repayment. We also had no outstanding principal balance under our revolving credit facility at July 3, 2005 or at any other time during the second quarter of 2005. This senior credit facility is secured primarily by a substantial portion of our and our subsidiaries’ domestic assets.

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Interest rates under the senior credit facility applicable to the term loan and to the revolving credit facility are determined as a margin over either the Eurodollar rate or the base rate and are reset on a one month, three month or six month basis at our option. The base rate is the higher of (1) the corporate base rate announced from time to time by Bank of America, N.A. and (2) the Federal Funds rate plus 50 basis points. The applicable margin as of July 3, 2005 for the term loan was 200 basis points for the Eurodollar rate and 100 basis points for the base rate. We may allocate all or a portion of our indebtedness under the senior credit facility to interest based upon the margin over the Eurodollar rate or the base rate. At July 3, 2005, the Eurodollar rate was 309 basis points and the base rate was 600 basis points, resulting in a Eurodollar interest rate on the credit facility of 509 basis points and a base rate on the credit facility of 700 basis points.

The term loan was repaid in full during the second quarter of 2005, while the revolving credit facility is available to us through December 2007 for our working capital needs. At no point during the three months ended July 3, 2005 did we have any outstanding principal balance under the revolving credit facility.

Our senior credit facility contains covenants that require us to maintain specific financial ratios, including:

• a minimum interest coverage ratio,

• a minimum fixed charge coverage ratio,

• a maximum senior leverage ratio, and

• a maximum total leverage ratio.

As of July 3, 2005, and at all other times during the second quarter of 2005, we were in compliance with all applicable covenants.

8 ⁷/8% Notes. In December 2002, we issued and sold ten-year senior subordinated notes at a rate of 8 ⁷/8% with a face value of $300.0 million. We received $297.5 million in gross proceeds from the issuance. We recorded deferred issuance costs of $7.0 million as a non-current asset. The debt, which matures in January 2013, is unsecured but is guaranteed by substantially all of our domestic subsidiaries. In the second quarter of 2005, we repurchased and retired $30 million of principal on these notes in a privately negotiated transaction. The cost to repurchase these securities was $34.1 million, which includes principal plus a 13.75% premium. We may from time to time repurchase outstanding 8 ⁷/8% Notes through open market purchases, privately negotiated transactions or otherwise. Interest on our 8 ⁷/8% Notes is payable semi-annually on January 15 and July 15. Interest payments began on July 15, 2003. In January 2004, we swapped the fixed rate on $100.0 million of these notes to a floating rate using swap instruments which reset semi-annually in arrears based upon six-month USD LIBOR plus a spread of 427 basis points. In January 2005, we swapped an additional $100.0 million of these notes from fixed to floating rate at similar terms to the January 2004 swaps, however, the variable rate is based upon six-month USD LIBOR plus a spread of 412 basis points. Accordingly, we now pay the applicable six month USD LIBOR rate, plus the applicable spread, on $200.0 million of our obligations represented by these notes. The swap instruments reduced the annualized interest rate on the 8 ⁷/8% Notes by approximately 80 basis points during the three months ended July 3, 2005.

If a change of control occurs, each holder of 8 ⁷/8% Notes may require us to repurchase some or all of its notes at a purchase price equal to 101% of the principal amount of the notes, plus accrued interest. Before January 15, 2006, we may redeem up to 35% of the aggregate principal amount of our 8 ⁷/8% Notes with the net proceeds of specified public equity offerings at 108.875% of the principal amount of the notes, plus accrued interest, if at least 65% of the aggregate principal amount of the notes remains outstanding after the redemption. We may redeem some or all of our 8 ⁷/8% Notes at any time on or after January 15, 2008, at a redemption price of 104.438%. The redemption price decreases to 102.958% on January 15, 2009, to 101.479% on January 15, 2010 and to 100% on January 15, 2011. The 8 ⁷/8% Notes are subordinated to our senior credit facility. Our 8 ⁷/8% Notes contain financial and other covenants. Most of these covenants terminate if the notes obtain an investment grade rating by Standard & Poor’s Rating Services and Moody’s Investors Service. At July 3, 2005, we were in compliance with all applicable covenants.

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6.8% Notes. In December 2002, we initiated a tender offer for all of our outstanding 6.8% notes. We completed the tender offer and repurchased all but $4.7 million of these notes as of December 26, 2002. We may from time to time repurchase outstanding 6.8% notes through open market purchases, privately negotiated transactions or otherwise. These notes are due to be paid in the fourth quarter of 2005.

Off-Balance Sheet Arrangements

Receivables Securitization Facility

In December 2001, we established a wholly owned consolidated subsidiary to purchase, on a revolving basis, certain of our accounts receivable balances and simultaneously sell an undivided interest in this pool of receivables to a financial institution. In September 2003, we amended the facility to increase total funding capacity from $50.0 million to $65.0 million to expand our sources of liquidity. Amounts funded under this facility were $45.0 million at July 3, 2005 and $45.0 million at January 2, 2005. As of July 3, 2005, we had approximately $20.0 million of un-drawn capacity available under the facility. The facility had an effective interest rate of approximately LIBOR plus 58 basis points as of July 3, 2005. The facility includes conditions that require us to maintain a senior unsecured credit rating of BB or above, as defined by Standard & Poor’s Rating Services, and Ba2 or above, as defined by Moody’s Investors Service. At July 3, 2005, we had a senior unsecured credit rating of BB+ with a positive outlook from Standard & Poor’s Rating Services, and of Ba1 with a positive outlook from Moody’s Investors Service. In January 2005, we entered into an agreement to extend the term of our accounts receivable securitization facility to January 27, 2006.

Dividends

Our Board of Directors declared regular quarterly cash dividends of seven cents per share in the first and second quarter of 2005 and in each quarter of 2004. Our senior credit facility and the indenture governing our outstanding 8 ⁷/8% Notes contain restrictions that may limit our ability to pay our regular quarterly cash dividend in the future.

Application of Critical Accounting Policies and Estimates

The preparation of consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, sales and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to bad debts, inventories, intangible assets, income taxes, restructuring, pensions and other post-retirement benefits, contingencies and litigation. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Critical accounting policies are those policies that affect our more significant judgments and estimates used in preparation of our consolidated financial statements. We believe our critical accounting policies include our policies regarding revenue recognition, allowances for doubtful accounts, inventory valuation, value of long-lived assets, including intangibles, employee compensation and benefits, restructuring activities, gains or losses on dispositions and income taxes. For a more detailed discussion of our critical accounting policies, please refer to our annual report on Form 10-K for the fiscal year ended January 2, 2005.

Forward-Looking Information and Factors Affecting Future Performance

The following important factors affect our business and operations generally or affect multiple segments of our business and operations:

Economic, political and other risks associated with foreign operations could adversely affect our international sales.

Because we sell our products worldwide, our businesses are subject to risks associated with doing business internationally. Our sales originating outside the United States represented more than 50% of our total sales in

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both the fiscal year ended January 2, 2005 and the first half of 2005. We anticipate that sales from international operations will continue to represent a substantial portion of our total sales. In addition, many of our manufacturing facilities, employees and suppliers are located outside the United States. Accordingly, our future results could be harmed by a variety of factors, including:

• changes in foreign currency exchange rates,

• changes in a country’s or region’s political or economic conditions, particularly in developing or emerging markets,

• longer payment cycles of foreign customers and difficulty of collecting receivables in foreign jurisdictions,

• trade protection measures and import or export licensing requirements,

• differing tax laws and changes in those laws,

• difficulty in staffing and managing widespread operations,

• differing labor laws and changes in those laws,

• differing protection of intellectual property and changes in that protection, and

• differing regulatory requirements and changes in those requirements.

If we do not introduce new products in a timely manner, our products could become obsolete and our operating results would suffer.

We sell many of our products in industries characterized by rapid technological change, frequent new product and service introductions, and evolving industry standards. Without the timely introduction of new products and enhancements, our products could become technologically obsolete over time, in which case our sales and operating results would suffer. The success of our new product offerings will depend upon several factors, including our ability to:

• accurately anticipate customer needs,

• innovate and develop new technologies and applications,

• successfully commercialize new technologies in a timely manner,

• price our products competitively and manufacture and deliver our products in sufficient volumes and on time, and

• differentiate our offerings from our competitors’ offerings.

Many of our products are used by our customers to develop, test and manufacture their products. Therefore, we must anticipate industry trends and develop products in advance of the commercialization of our customers’ products. In developing new products, we may be required to make significant investments before we can determine the commercial viability of the new product. If we fail to accurately foresee our customers’ needs and future activities, we may invest heavily in research and development of products that do not lead to significant sales.

In addition, some of our licensed technology is subject to contractual restrictions, which may limit our ability to develop or commercialize products for some applications. For example, some of our license agreements are limited to the field of life sciences research, and exclude clinical diagnostics applications.

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Restrictions in our senior credit facility and the indenture governing our 8 ⁷/8% Notes may limit our activities.

Our senior credit facility and the indenture relating to our 8 ⁷/8% Notes contain, and future debt instruments to which we may become subject may contain, restrictive covenants that limit our ability to engage in activities that could otherwise benefit our company, including restrictions on our ability and the ability of our subsidiaries to:

• pay dividends on, redeem or repurchase our capital stock,

• sell assets,

• in the case of our restricted subsidiaries, incur obligations that restrict their ability to make dividend or other payments to us,

• in the case of our restricted subsidiaries, guarantee or secure indebtedness,

• enter into transactions with affiliates,

• create unrestricted subsidiaries, and

• consolidate, merge or transfer all or substantially all of our assets and the assets of our subsidiaries on a consolidated basis.

We are also required to meet specified financial ratios under the terms of our senior credit facility. Our ability to comply with these financial restrictions and covenants is dependent on our future performance, which is subject to prevailing economic conditions and other factors, including factors that are beyond our control such as foreign exchange rates, interest rates, changes in technology and changes in the level of competition.

Our failure to comply with any of these restrictions or covenants may result in an event of default under the applicable debt instrument, which could permit acceleration of the debt under that instrument and require us to prepay that debt before its scheduled due date. Also, an acceleration of the debt under our senior credit facility would trigger an event of default under our 8 ⁷/8% Notes, and a default under our 8 ⁷/8% Notes would trigger an event of default under the senior credit facility and possibly other debt.

If an event of default occurs, we may not have sufficient funds available to make the required payments under our indebtedness. If we are unable to repay amounts owed under our senior credit facility, those lenders may be entitled to foreclose on and sell the collateral that secures our borrowings under that agreement. Our inability to repay amounts owed under our senior credit facility may also cause a default under other of our obligations including our accounts receivable securitization facility.

Our debt may adversely affect our cash flow and may restrict our investment opportunities.

As of July 3, 2005, we had approximately $274.2 million in outstanding indebtedness, of which $5.9 million was classified as short-term and $268.3 was classified as long-term. The principal balance related to this long-term debt is due in 2013.

Our ability to satisfy our obligations and to reduce our total debt depends on our future operating performance and on economic, financial, competitive and other factors beyond our control. Our business may not generate sufficient cash flow to meet these obligations or to successfully execute our business strategy. If we are unable to service our debt and fund our business, we may be forced to reduce or delay capital expenditures or research and development expenditures, seek additional financing or equity capital, restructure or refinance our debt or sell assets. We may not be able to obtain additional financing or refinance existing debt or sell assets on terms acceptable to us or at all.

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Our operating results could be harmed by cyclical downturns affecting several of the industries into which we sell our products.

Some of the industries and markets into which we sell our products are cyclical. Industry downturns are often characterized by reduced product demand, excess manufacturing capacity and erosion of average selling prices and profits. In the past, significant downturns in our customers’ markets and in general economic conditions have resulted in a reduced demand for several of our products and have hurt our operating results. For example, during 2002, our operating results were adversely affected by downturns in many of the markets we serve, including the pharmaceutical, biomedical, semiconductor and aerospace markets.

Our quarterly operating results could be subject to significant fluctuation, and we may not be able to adjust our operations to effectively address changes we do not anticipate.

Given the nature of the markets in which we participate, we cannot reliably predict future sales and profitability. Changes in competitive, market and economic conditions may require us to adjust our operations, and we may not be able to make those adjustments or to make them quickly enough to adapt to changing conditions. A high proportion of our costs are fixed, due in part to our significant sales, research and development and manufacturing costs. Thus, small declines in sales could disproportionately affect our operating results in a quarter. Factors that may affect our quarterly operating results include:

• demand for and market acceptance of our products,

• competitive pressures resulting in lower selling prices,

• adverse changes in the level of economic activity in regions in which we do business,

• adverse changes in industries, such as pharmaceutical, biomedical, semiconductors and aerospace, on which we are particularly dependent,

• changes in the portions of our sales represented by our various products and customers,

• delays or problems in the introduction of new products,

• our competitors’ announcement or introduction of new products, services or technological innovations,

• increased costs of raw materials or supplies, and

• changes in the volume or timing of product orders.

We may not be able to successfully execute acquisitions or license technologies, integrate acquired businesses or licensed technologies into our existing business or make acquired businesses or licensed technologies profitable.

We have in the past, and may in the future, supplement our internal growth by acquiring businesses and licensing technologies that complement or augment our existing product lines, such as our acquisition of Elcos AG in February 2005. However, we may be unable to identify, complete promising acquisitions or license transactions for many reasons, including:

• competition among buyers and licensees,

• the need for regulatory and other approvals,

• our inability to raise capital to fund these acquisitions,

• the high valuations of businesses and technologies, and

• restrictions in the instruments governing our indebtedness, including the indenture governing our 8 ⁷/8% Notes and our new senior credit facility.

Some of the businesses we may seek to acquire may be unprofitable or marginally profitable. Accordingly, the earnings or losses of acquired businesses may dilute our earnings. For these acquired businesses to achieve

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acceptable levels of profitability, we must improve their management, operations, products and market penetration. We may not be successful in this regard and may encounter other difficulties in integrating acquired businesses into our existing operations, such as incompatible management, information or other systems or cultural differences.

To finance our acquisitions, we may have to raise additional funds, either through public or private financings. We may be unable to obtain such funds or may be able to do so only on terms unacceptable to us.

If we are unable to renew our licenses or otherwise lose our licensed rights, we may have to stop selling products or we may lose competitive advantage.

We may not be able to renew our existing licenses or licenses we may obtain in the future on terms acceptable to us, or at all. If we lose the rights to a patented or other proprietary technology, we may need to stop selling products incorporating that technology and possibly other products, redesign our products or lose a competitive advantage. Potential competitors could in-license technologies that we fail to license and potentially erode our market share.

Our licenses typically subject us to various economic and commercialization obligations. If we fail to comply with these obligations we could lose important rights under a license, such as the right to exclusivity in a market. In some cases, we could lose all rights under the license. In addition, rights granted under the license could be lost for reasons out of our control. For example, the licensor could lose patent protection for a number of reasons, including invalidity of the licensed patent, or a third party could obtain a patent that curtails our freedom to operate under one or more licenses.

If we do not compete effectively, our business will be harmed.

We encounter aggressive competition from numerous competitors in many areas of our business. We may not be able to compete effectively with all of these competitors. To remain competitive, we must develop new products and periodically enhance our existing products. We anticipate that we may also have to adjust the prices of many of our products to stay competitive. In addition, new competitors, technologies or market trends may emerge to threaten or reduce the value of entire product lines.

If we fail to maintain satisfactory compliance with the regulations of the United States Food and Drug Administration and other governmental agencies, we may be forced to recall products and cease their manufacture and distribution, and we could be subject to civil or criminal penalties.

Some of the products produced by our Life and Analytical Sciences business unit are subject to regulation by the United States Food and Drug Administration and similar international agencies. In addition, some of the activities of our Fluid Sciences business unit are subject to regulation by the United States Federal Aviation Administration. These regulations govern a wide variety of product activities, from design and development to labeling, manufacturing, promotion, sales, resales and distribution. If we fail to comply with those regulations or those of similar international agencies, we may have to recall products and cease their manufacture and distribution. We had to do this on a temporary basis in 2004 in response to an FDA action at one of our Life and Analytical Sciences locations until we were able to address the matter by implementing additional testing and labeling conditions on the relevant product. In addition, we could be subject to fines or criminal prosecution.

Changes in governmental regulations may reduce demand for our products or increase our expenses.

We compete in markets in which we or our customers must comply with federal, state, local and foreign regulations, such as environmental, health and safety, and food and drug regulations. We develop, configure and market our products to meet customer needs created by these regulations. Any significant change in these regulations could reduce demand for our products or increase our costs of producing these products.

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Obtaining and enforcing patent protection for our proprietary products, processes and technologies may be difficult and expensive; we may infringe intellectual property rights of third parties.

Patent and trade secret protection is important to us because developing and marketing new technologies and products is time-consuming and expensive. We own many United States and foreign patents and intend to apply for additional patents to cover our products. We may not obtain issued patents from any pending or future patent applications owned by or licensed to us. The claims allowed under any issued patents may not be broad enough to protect our technology.

Third parties may seek to challenge, invalidate or circumvent issued patents owned by or licensed to us or claim that our products and operations infringe their patent or other intellectual property rights.

In addition to our patents, we possess an array of unpatented proprietary technology and know-how and we license intellectual property rights to and from third parties. The measures that we employ to protect this technology and these rights may not be adequate. Moreover, in some cases, the licensor can terminate a license or convert it to a non-exclusive arrangement if we fail to meet specified performance targets.

We may incur significant expense in any legal proceedings to protect our proprietary rights or to defend infringement claims by third parties. In addition, claims of third parties against us, such as the pending actions by Enzo Biochem, Inc. and Enzo Life Sciences, Inc., and by Amersham Biosciences Corp. and Amersham Plc, could result in awards of substantial damages or court orders that could effectively prevent us from manufacturing, using, importing or selling our products in the United States or abroad.

Our results of operations will be adversely affected if we fail to realize the full value of our intangible assets.

As of July 3, 2005, our total assets included $1.5 billion of net intangible assets. Net intangible assets consist principally of goodwill associated with acquisitions and costs associated with securing patent rights, trademark rights and technology licenses, net of accumulated amortization. We test these items on an annual basis for potential impairment by comparing the carrying value to the fair market value of the reporting unit to which they are assigned.

Adverse changes in our business or the failure to grow our Life and Analytical Sciences business may result in impairment of our intangible assets which could adversely affect our results of operations.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market Risk

We are exposed to market risks, relating to both currency exchange rates and interest rates. On occasion, in order to manage the volatility relating to these exposures, we may enter into various derivative transactions pursuant to our policies to hedge against known or forecasted market exposures. We briefly describe several of the market risks we face below. The following disclosure supplements the disclosure provided under the heading, “Item 7A. Quantitative and Qualitative Disclosure About Market Risk,” in our annual report on Form 10-K for the fiscal year ended January 2, 2005.

Foreign Exchange Risk.As a multinational corporation, we are exposed to changes in foreign exchange rates:

(1) Because a significant portion of our sales are international, volatility in exchange rates could have a material impact on our financial results. Reported sales made in foreign currencies by our international subsidiaries, when translated into U.S. dollars for financial reporting purposes, can fluctuate due to exchange rate movements. While exchange rate fluctuations can impact reported revenues and earnings, the impacts are purely a result of the translation effect and generally do not materially impact our short-term cash flows.

(2) Our foreign subsidiaries, on occasion, invoice third-party customers in foreign currencies other than the functional currency in which they primarily conduct business. Movements in the invoiced currency, as compared to the functional currency, result in both realized and unrealized transaction gains or losses that directly impact our cash flows and our results of operations.

(3) Our manufacturing and distribution organization is multi-national in nature. Accordingly, inventories may be manufactured in one location, stored in another, and distributed in a third location. This can result in a variety of intercompany transactions that are billed and paid in many different currencies. Our cash flows and our results of operations are therefore directly impacted by fluctuations in these currencies.

(4) The cash flow needs of each of our foreign subsidiaries vary through time. Accordingly, there may be times when a subsidiary is on the receiving side or the lending side of a short-term advance from either the parent company or another subsidiary. These advances, again being denominated in currencies other than a particular entity’s functional currency, can expose us to fluctuations in exchange rates that can impact both our cash flows and results of operations.

(5) In order to repay debt or take advantage of tax saving opportunities, we may remit cash from our foreign locations to the United States. When this occurs, we are liquidating foreign currency net asset positions and converting them into U.S. dollars. Our cash flows and our results of operations are therefore also impacted by these transactions.

We currently do not have outstanding any foreign exchange transactions to hedge translation exposures; however, from time to time, we enter into various financial instruments to hedge exposures to foreign currencies. The principal currencies hedged are the British Pound, Canadian Dollar, Euro, Japanese Yen, and Singapore Dollar.

Foreign Currency Risk — Value-at-Risk Disclosure — We continue to measure foreign currency risk using the Value-at Risk model described in our annual report on Form 10-K for the fiscal year ended January 2, 2005. These measures continue to approximate our risks.

Interest Rate Risk.Our debt portfolio includes both fixed rate and variable rate instruments. Fluctuations in interest rates can therefore have a direct impact on both our short-term cash flows (as they relate to interest) and our earnings. In January 2004, we entered into interest rate swap agreements that effectively converted the fixed interest rate on $100.0 million of our 8 ⁷/8% Notes to a variable interest rate which is reset semi-annually in arrears based upon six-month USD LIBOR plus 427 basis points. In January 2005, we swapped an additional

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$100.0 million of these notes from fixed rate to floating rate at similar terms to the January 2004 swaps, however, the variable interest rate is based upon six-month USD LIBOR plus 412 basis points. Accordingly, we now pay the applicable six month USD LIBOR rate, plus the applicable spread, on $200.0 million of our obligations represented by these notes. The swaps have the economic effect of modifying the interest obligations associated with these notes so that the interest payable on the notes effectively becomes variable. These swaps have been designated as fair value hedges. These swaps will be marked to market in our consolidated financial statements so that fair value movements in these swaps will be offset by the fair value movement in the debt.

Interest Rate Risk — Sensitivity — Our annual report on Form 10-K for the fiscal year ended January 2, 2005 presents sensitivity measures for our interest rate risk. We refer to the annual report on Form 10-K for the fiscal year ended January 2, 2005 for our sensitivity disclosure.

Item 4. Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of July 3, 2005. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on their evaluation of our disclosure controls and procedures as of July 3, 2005, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended July 3, 2005 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We and certain of our officers were named as defendants in a purported class action lawsuit filed in July 2002 in the United States District Court for the District of Massachusetts,In re PerkinElmer, Inc. Securities Litigation, Civil Action No. 02-11314 GAO, on behalf of purchasers of our common stock between July 15, 2001 and April 11, 2002. The lawsuit seeks an unspecified amount of damages and claims violations of Sections 10(b) and 20(a) of, and Rule 10b-5 under, the Securities Exchange Act of 1934, alleging various statements made during the putative class period by us and our management were misleading with respect to our prospects and future operating results. The Court consolidated this case with other similar cases and the plaintiffs filed a consolidated amended complaint in January 2003. We and the other defendants filed a motion to dismiss the lawsuit, which was denied by the Court in October 2003, and filed a motion for reconsideration or, in the alternative, for an order allowing immediate appeal of several issues of law to the appellate court, which was denied by the Court in September 2004. In June 2005, the plaintiffs filed a motion for class certification, and in July 2005, the defendants filed a motion for summary judgment, both of which are pending before the Court. The case is currently in discovery relating to class certification, and plaintiffs are seeking discovery from the defendants and non-parties. A hearing on pending motions is scheduled during September 2005.

A purported derivative action was filed in June 2004 in the United States District Court for the District of Massachusetts,Jaroslawicz v. Summe et al., Civil Action No. 04-cv-11469-GAO, against certain of our officers and four of our directors, and nominal defendant PerkinElmer, seeking unspecified damages and purporting to make claims of breach of fiduciary duty, gross negligence, breach of contract, breach of duty of loyalty and unjust enrichment. One virtually identical derivative action was subsequently filed in the United States District Court for the District of Massachusetts. The derivative complaints contain allegations similar to those included in the purported class action lawsuit described above, in addition to claims that certain defendants engaged in insider trading and that members of the audit committee of our Board of Directors breached their duties by failing to establish and maintain an adequate system of internal controls to assure that proper revenue recognition practices were being followed. The Court consolidated the cases in March 2005, and the plaintiffs filed a consolidated complaint in June 2005.

We believe we have meritorious defenses to these lawsuits and other proceedings, and to the other lawsuits described in Note 16 to our consolidated financial statements, and are contesting the actions vigorously. We are currently unable, however, to reasonably estimate the amount of the loss, if any, that may result from the resolution of these matters or to determine whether resolution of any of these matters will have a material adverse impact on our consolidated financial statements.

We are also subject to various other claims, legal proceedings and investigations covering a wide range of matters that arise in the ordinary course of our business activities. Each of these matters is subject to uncertainties, and it is possible that some of these matters may be resolved unfavorably to the Company. In the opinion of our management, based on its review of the information available at this time, the total cost of resolving these other contingencies at July 3, 2005 should not have a material adverse effect on our consolidated financial statements.

Item 4. Submission of Matters to a Vote of Security Holders

Information regarding matters submitted to a vote of security holders during the quarter ended July 3, 2005 is set forth under the heading “Item 4. Submission of Matters to a Vote of Security Holders” in our quarterly report on Form 10-Q for the quarter ended April 3, 2005.

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Item 6. Exhibits

3.2	PerkinElmer, Inc.’s Amended and Restated By-laws were filed with the Commission on April 29, 2005, as Exhibit 3.2 to our current report on Form 8-K dated April 26, 2005, and are herein incorporated by reference.
10.1	Amendment to the PerkinElmer, Inc. 1998 Employee Stock Purchase Plan.
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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SIGNATURE

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.

PERKINELMER, INC.
By:	/s/    ROBERT F. FRIEL
	Robert F. Friel
	Executive Vice President and Chief Financial Officer (Principal Financial Officer)

August 12, 2005

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EXHIBIT INDEX

Exhibit Number	Exhibit Name
3.2	PerkinElmer, Inc.’s Amended and Restated By-laws were filed with the Commission on April 29, 2005, as Exhibit 3.2 to our current report on Form 8-K dated April 26, 2005, and are herein incorporated by reference.
10.1	Amendment to the PerkinElmer, Inc. 1998 Employee Stock Purchase Plan.
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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